Power in contract law typically refers to the bargaining strength of each contracting party in relation to the other. In assessing the relative bargaining power of each party, courts and commentators often consider factors specific to the parties, such as socio-economic status and education level. In this Essay, I suggest another factor that affects the power of the parties in negotiating or modifying their agreement, one that I refer to as the “background law.” The background law is the substantive law that governs the subject matter of the contract. This Essay focuses specifically on the background law of copyrights and the way it alters and affects the allocation of power between contracting parties. In certain circumstances, the background law of copyright has the potential to create or exacerbate two kinds of power imbalance—knowledge power and market power.

In this Essay, “knowledge power” refers to the advantage that a superior understanding of the background law confers upon a contracting party. I use the term “market power” to refer to the ability of a contracting party to establish and dictate business norms in a particular segment of the economy or within a particular industry. This Essay focuses on three bargaining pairs in order to explore how copyright law as background law can create knowledge and market power imbalances:  (1) independent artist and hiring party, (2) employee and employer, and (3) software company and consumer. The first two bargaining pairs involve the work-made-for-hire doctrine. The third bargaining pair involves innovative contracting forms and the freedom to contract.

Part I examines knowledge power imbalances using as examples the first two bargaining pairs. Part II analyzes market power imbalances using as an example the third bargaining pair. A recent New York Times article discusses one of the bargaining pairs analyzed in my Essay, that of an academic employee and an educational institution employer. As the Internet provides a new marketplace for teaching materials that previously had no market value, it makes the issue of who owns academic work more important. As the NYT points out, “The marketplace for educational tips and tricks is too new to have generated policies or guidelines in most places.” The background law of copyright, however, may act as a contractual gap filler in favor of the school district employer.

Article Author: Nancy S. Kim

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