Illustration: Kerrie Leishman.

Illustration: Kerrie Leishman.

On December 17, 1903, after years of tinkering with his brother Wilbur, Orville Wright took to the skies at Kitty Hawk, North Carolina. But the new age of aviation was born into a legal regime going back to Ancient Rome. Land owners held property rights to the infinite corridor of space ''up to heaven'' above their property and ''down to hell'' beneath it.

Aviators muddled through this legal minefield and most property holders didn't care as they were suffering no harm. Incredibly, it took until 1942 for things to change, when a landholder sued the US military for overflying his farm and upsetting his chickens.

Australia is suffering a similar kind of legal obsolescence today - with the US having made much more progress. In 1710, Queen Anne's statute established copyright, which vouchsafed creators' ability to economically exploit their work by requiring anyone who sought to copy it to obtain the creator's permission. Meanwhile vehicles, warehouses and shops distributing and selling the book were not copying it, and so remained unentangled in the copyright regime as they assisted in the sale of the work.

This worked until, late in the 20th century, copyright law had its own Wright moment. Today virtually every operation of the internet triggers copyright liability like aviators tripped over chicken farmers' property rights. If you're reading this article on a digital device, a vast litany of copies were made to get it to you, from the search engine or feed from which you discovered it, to Fairfax's server, to each router carrying the signal on every stage of its journey to and from your ISP (which also made digital copies) to the memory and screen on your own device.

Each copy plays the role of the delivery vehicle or the bookshop in the analogue world. Far from undermining the copyright holders' position, all the ''copies'' actually assist them distribute and so economically exploit their work. Yet at least in principle, to be legally secure, the owners of each bit of digital infrastructure that you used to learn of and download this article needs the copyright owner's explicit permission to copy their work.

Indeed, in Lateral Economics' research for the Australian Digital Alliance - an organisation comprising libraries, research and educational associations and internet infrastructure providers - we've shown that complying with all the red tape required to play it by the book would cost trillions, more than the Australian economy produces.

Lawmakers are forever seeking to fix this. But rather than systematic, principled change, our lawmakers have finessed the politics of the situation with a blizzard of ad hoc exceptions and accommodations. In 2005 our parliamentarians learned that they and their families had been copyright pirates every time they ''time-shifted'' the footy for later viewing. So they made it legal in 2006. Americans had been happily format-shifting songs from their CDs to their computers and iPods, but it was illegal for Australians until 2006.

You can now format-shift video tape and broadcast radio but not internet audio or video downloads. And our Copyright Act is an impenetrable tangle of red tape. For instance, the 1600 words of Section 49 allow libraries and archives to supply copies of documents to researchers but also requires each scan to be destroyed after use so it must be rescanned afresh next time.

Where we've erected a copyright ''nanny state'', the US doctrine of ''fair use'' establishes a framework within which the right judgments can be made in each circumstance. Among other things it looks to:

■the purpose of use (was it commercial, or competing with the copyright holder?);

■the extent of the use; and critically,

■the effect of the use on the copyright holder's market.

Without a flexible exception like this, needless obstacles remain in the way of investment and innovation in our copyright industries and to industries that are inextricable parts of the copyright ecosystem, like education, professional services and internet infrastructure. If a flexible exception improved such industries' productivity growth by just a fraction, Lateral Economics simulations suggest that, the gains would start small, but over a decade would grow to about $600 million annually.

Businesses such as Apple, Facebook, Dropbox, Yahoo!, Linked in, Google, Amazon and eBay all depend on the US test of ''fair use'' to defend their many innovations against unreasonable claims against them for inadvertent copyright breaches. Together those businesses are worth over a trillion dollars.

No wonder other countries with an eye to increasing their digital economies - such as Singapore - have got with the program and replaced much of their birds nest of copyright exceptions with ''fair use''.