"Fair use is certainly a concept compatible with markets. Given the difficulty of working out some deals due to high transaction costs and the low amount of value at stake, copyright law needed an exemption. If one wanted to quote an author briefly in another work, for example, and one was told one needed to negotiate a license to do so, one would be more likely to give up the effort than pursue a license. Thus, fair use."

Copyright is a special case exception to the freedom of speech, and as such, fair use is not the 'exception' to the rule. Rather copyright is the special exception to the general rule of freedom.

Thus, fair use exists for reasons outside of the market, i.e., as part of fundamental human liberty and rights. Your economic arguments are based on a fundamental informational exclusion of human rights.

"c) Fair use law is pretty complicated."

All the more reason to simplify it, and most proposals for simplification focus on broadening, not narrowing.

Opponents of the unchecked expansion of copyright do rely on fair use a little too much, because it is a flexible concept. But that flexibility also means it's expensive and risky to establish that a new type of use is fair. As Larry Lessig says, fair use is "the right to hire a lawyer."

On the other hand, fair use is in many cases the only way to defend uses which in the pre-digital era were completely outside the realm of copyright (eg, reading a book) and are now nominal copyright infringements (eg, reading a web page, which can't be done without causing a copy to be made). In the digital world, where just about every possible use of a creative work involves making a copy of it, the scope of copyright has expanded greatly, and fair use is often the only defense that could possibly apply. That suggests a reason for expanding, or at least preserving, fair use - unless you believe that the act of reading is one of those things that was unregulated only because we hadn't yet found a way to charge for it.

So I agree that fair use is a clumsy mechanism for defining the outer limits of copyright in many situations, but in many cases right now it's all we have. A good step towards easing this reliance on fair use would be a law that broadly exempts RAM and buffer copies from the scope of copyright. The current exemption for RAM copies is interpreted so narrowly as to be meaningless.

Enigma is right, by the way - fair use was never simply a fix in cases of high transaction costs or other market failure. Even the Supreme Court has said that fair use is what keeps the Copyright Act consistent with the First Amendment (Eldred v. Ashcroft).

How anyone can use a free speech argument against the creators of copyrighted works is beyond me.

Since this thread is discussing Supreme Court cases, let's look at what Sandra Day O'Connor wrote in the Harper & Row case: "In our haste to disseminate news, it should not be forgotten that the Framers intended copyright itself to be the engine of free expression. By establishing a marketable right to the use of one's expression, copyright supplies the economic incentive to create and disseminate ideas."

I fail to see how a creator's "right" to keep others from criticizing their work is consistent with free speech principles. But that's exactly what would occur should we formalize the notion of replacing fair use with paid use. Paid use assumes a right to exclude regardless of price (unless you support a compulsory licensing scheme!), meaning criticism and similar cornerstones of free speech are destroyed (it's kind of hard to criticize without quoting!). Fair use ensures the right to exclude is not abused.

Patrick, free speech is a right against the government, not "against the creators of copyrighted works." ("Congress shall make no law...") Are you implying that any speech making use of a copyrighted work has no First Amendment protection?

There's no inconsistency in asserting that copyright law provides an incentive for free expression, but overbroad copyright law can suppress free expression in a way that violates the First Amendment. O'Connor certainly didn't say otherwise.

"How anyone can use a free speech argument against the creators of copyrighted works is beyond me."

Another straw man. No wonder no one at IP Central can address criticism of their strong IP views, since they are incapable of understanding them.

No one ever suggested that freedom of speech arguments should be used against creators of copyrighted works, just against those, such as IPCentral, who want to partially erase the First Amendment by handing overbroad copyright protection to those copyright holders.

Recall that the Constitution said:

"The Congress shall have Power

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;"

Note the limited time and the declaration of the reason for this exception to the normative Freedom of Speech.

A hypothetical business plan which relies on a non-existent right is apparently the price IPCentral places on the First Amendment.

I would observe the price paid to maintain the First Amendment has been much higher, and therefore its value should be much greater.