KOL216 | Morehouse Interview: Why Intellectual Property Sucks

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today I am very excited to have on the show stephan kinsella this is actually

when I first launched the podcast when I made my first list of potential guests I wanted to have Stefan was on that very

first list that it’s taken over a year for whatever reason to just get him on

the show and do an episode about intellectual property so Stefan welcome

to the podcast thanks a lot glad to be here so briefly introducing you and I know your bio is

much more deep in why’d Stefan is a patent lawyer interestingly enough has

been for almost 25 years now he also has a podcast he is a scholar has written

many both sort of popular and scholarly articles on everything from intellectual

property which is our subject today to you know all kinds of legal theory the

philosophy of Liberty many many more he’s he’s kind of the foremost expert on intellectual property certainly from a

free-market standpoint he’s the founder and director of the Center for hold on

I’m gonna get the name wrong let me make sure I get it right the the Center for the study of innovative freedom which is

really focused on the intellectual property topic so Stefan what did I miss

in your bio that’s important you got it right I am a quick summary of my path

was an 82 I became a libertarian through reading Rand in high school and around 88 in law school I became an anarchist

after reading Rothbard and the others and around 1992 or so 1993 I started

practicing patent law and that’s right when I became anti IP at the same time so right when I learned enough about IP

law to start practicing it I also learned enough to realize that it was completely incompatible with libertarian

property rights yeah so let’s let’s jump right in there because as that was one of the first things I want to ask you

how did you get into you know the issue they’re interested in the issue of the

intellectual property and and how have you sort of maintained a career a patent attorney well you’ve had this

philosophical position in opposition to IP so how did it start yeah well you’re just reading reading

the basics of libertarian theory like when I was younger in college and even earlier Iran’s defense of intellectual

property you know they never quite made sense to me like the other stuff did because she’s like in favor of this

patent system which gives you a monopoly over in addition but for 17 years and

copyright gives you a monopoly over an idea but for you know 60 or 70 years but it’s it’s like an arbitrary time frame

and that doesn’t see didn’t seem like to me I said there’s something wrong with this because natural rights lasts forever if they’re justified so I I just

put it on the back burner and I figured I figured they knew more than I did about it and I kept thinking about it

and when I went to law school I thought more when I started practicing in a different field in an international law

and oil and gas or energy law but I finally switched over to patents because the the tech field was really good at

the time in law the patent law field so I switched over and at that time I just

started thinking more and more about it and I started doing a lot more reading I read works by Wendy McIlroy who I really

think is basically the pioneer in libertarian theory in intellectual property I really think she’s the first

one who basically got it right she didn’t flesh it out completely but she

she was there with Sam Konkan and Benjamin Tucker before her who she’d

studied but Benjamin Tucker’s reasoning was not exactly right he was sort of

against monopoly for the same reason he was against monopolies and land so you can see that his reasoning wasn’t quite

pure libertarian on this but Sam Konkan and Wendy Mack award really got it right

I think especially Wendy and and then Tom Palmer sort of writing some really good more advanced stuff in the 90s so I

read all that and some other people’s works and I finally came to the conclusion oh the reason I’m having trouble justifying this because I

thought you know I know more about IP than most libertarians because I’m practicing it I can be the one who finally figured this out and explains

why it’s why it is justified after all why yeah have a better explanation than ran did which by the way is what her chief sort

of a legal disciple right now Adam Moss off has been trying to do for a dozen years now or so he he keeps promising to

come up with some kind of defensive IP that is I guess better than rands but he just keeps repeating what she said as

far as I can tell and mixing it in with like utilitarian arguments like those of Richard Epstein so but I on the other

hand finally concluded that the reason I was having trouble finding a good argument for IP was because the same

reason I would have trouble finding an argument for slavery it’s because it can’t be justified so that was that was

my path and the the the basic reasoning I came to was not really utilitarian although I think empirical arguments or

the fact the factual evidence about the effectiveness of patent and copyright is

overwhelmingly negative it shows that these systems are very dangerous to

innovation and to culture and to freedom and to prosperity as well because

patents suppress innovation and make us poor literally because we have less technological achievements in

innovations now that we otherwise would if patents weren’t slowing down the whole process but that’s not the primary

argument against that the primary argument is just understanding what these rights are and how they work and if you understand the basics just the

simple basics of libertarian property rights you’ll see that there’s a complete conflict between those two so

let’s let’s start with a brief definition of because you’ve mentioned patents and copyrights we haven’t

mentioned trademarks which is something that people bring up a lot to me you know like well oh you’ve got to have a

you know you can’t just say that you’re representing Nike and you don’t really represent Nike whatever and they kind of

get all these things confuse so yeah could you give me a brief definition first of trademark which seems a little simpler to be and then copyright and

patent so you have these there’s there’s there’s four classically defined types

of intellectual property or IP and they are copyright and patent and trademark

and also trade secret you could loosely group a few other legal rights under

this rubric too if you wanted to like reputation rights or defamation law and a few others well there’s and

there’s some newer ones like mass court protection for integrated circuits which is sort of like a a hybrid of copyright

but anyway a trademark is simply a mark used to identify the source of goods or

services in commerce and the law gives certain rights to the user of that mark okay it’s like I think of a brand name

like coca-cola or the name Apple Apple Computer company or Exxon those are

examples of trademarks so it’s just a mark copyright is the right of an author

of an original creative work like a novel or a painting or software code

nowadays and it lasts over a century in most cases a patent is limited monopoly

to be the exclusive person who can practice an invention that’s a creative

I’m sorry that’s an inventive useful process or machine basically and then

the trade secret is just some information you have this that that that is useful to you to keep secret now that

you do keep secret for the most part like a customer list or even a process

for making a chemical that you don’t reveal to the public publicly like you would if you were selling say a

mousetrap with the new design you reveal that to the public when you sell it so you wouldn’t be able to keep a trade

secret on that because it’s just not secret so those are the four classic types of intellectual property they were

never called intellectual property originally until fairly recently they were force a distinct rights trademark

did arise partly on the common law so did trade secret patent and copyright were rooted in like executive action of

the monarchs or statutes so copyright arose in the statute of Anne of 1709 in

England and some previous statutes before that and patents arose in what’s

called a statute of monopolies in 1623 in England which was a statute by the

Parliament which was meant to crack down on the egregious habit of the monarch in

granting monopolies to favored cronies and tax collectors and people like that

different town saying you’re the only one who can make playing cards in this town you’re the in exchange for you know you’ve given me

some of your bit for helping me collect taxes or being protected from competition etc and this practice got to

be so egregious and it was such a mercantilist and protectionist thing that the Parliament passed a statute

called the statute of monopolies basically restricting the Kings ability to grant these monopolies except they

made an exception for they said well you you can keep granting them for innovative inventions basically so they

made an exception for invention so they were the king retained the ability to grant these monopolies for inventions

for inventive processes so that’s the sort of the roots of these of these

legal regimes and in the 1800s of patents especially patents and copyright

especially patents were coming under attack by free-market economists worldwide I mean a lot of countries

abolished it for a good 50 years like then I think Switzerland or the Netherlands because they were just

obviously ways to protect someone from competition the government literally

grants you a monopoly for 17 years or something saying no one else can compete with you in this field because the

government has approved your application process and so some so they these this

practice is clearly anti-free market and anti competition and pro monopolies and

so the free market economists were like universally condemning it they’re saying what the hell is going on here and so

the defenders the entrenched interests who were relying upon these monopolies you know the car industry etc the

printing industry the publishing industry they started saying no no no no

it’s it’s not a monopoly it’s a property right it’s just a different type of property right it’s this type of

property that comes from the intellect so let’s call it intellectual property and we’re all in favor of property

rights right and so it’s really a natural right admittedly it doesn’t last

forever like other types of natural rights that’s because it’s special so the defenders of the these special

legal privileges came up with the term IP to make people think of it like it’s a

normal type of property and so know most people who don’t think about these matters and who are naturally favor of

property rights like in their cars and in their homes and in their farms you know they’re thinking well I guess if

I’m in favor of property rights I should be in favor of this type of property right – yeah that’s why it’s called IP

that’s exactly how I started out you know it reminds me of the way that you can sort of do that sleight of hand and

turn something into a right a taxi driver recently telling me that you know

he’s offended by uber because he bought this medallion and that’s his prop he

has a property right and uber is undermining the value of that and that somehow is or people back up in the

housing crisis they felt like they actually had a right to the value of their home increasing like you know no

you own the property but you don’t have a right to command a specific price on the market but it’s a it’s an easy

sleight of hand one more thing that you mentioned that I wanted to just highlight was in the origin of these

this is something that comes up on this podcast a lot the difference between emergent sort of common law or

institutions that emerge naturally from people interacting with each other over time as a way to produce harmony versus

sort of imposed from on high centralized you know dick Tots that are you know using force to impose something that is

not really creating harmony and peace and the difference you know trademark and trade secrets I can see very easily

how if you’re lying and pretending to be Isaac Morehouse or you’re claiming that

you know your product is you know made by my company and it’s not or you’ve stolen you worked for me and you stole

something that you agreed not to share and then you go share it it makes me total sense that the common law tradition would sort of evolve such that

I could come and say no no you you owe me damages for lying and claiming to be me and that seems very natural to me

whereas these other things I can’t really see any natural way that they

would emerge in the common law you have to have some central force saying no one is allowed to produce this except for

you it just the origin alone should make us be suspect of the copyright and

patent no IP laws I agree on your previous point just for a second about these

these artificial rights and rights and value and it just reminds me a little

bit of these these Tea Partiers a few years ago if you remember they were saying something like we want the government to keep their cotton pickin

hands off of our social security it’s like wait a second it’s like you understand this social security comes

from the government taxing me so here I actually I’m totally opposed to

trademark law as well and I can explain why if we have time to get into it it’s in my original book I wrote in 2000 and

2001 on this I kind of said well trademark as currently written is problematic but in the core of it you

could defend maybe on fraud grounds or something like that but now I’ve come I’ve come even further against trademark

but I don’t focus on it as much because in my mind if you rank the harm done by

these laws clearly patent and copyright are the worst by far by far now I go

back and forth over which one is more evil I actually think patent law is the worst

in terms of the look the tangible damage it does to society because it I would I

would look at the patent system is like a ten trillion dollar a year tax on on the world economy or something maybe

even worse it basically is a huge barrier to innovation and therefore to

to actual wealth and progress though as software is is taking over everything I

suspect that that may be copyright is quickly catching up yes however because

of some unique differences between patent and copyright no copyright lasts longer however it only protects it only

stops you from copying so it’s theoretically possible to have a similar product as long as it wasn’t copied

whereas in patents even if you in independently invent something you still can’t practice it so and not only that

there has been the rise of this open software of we call it free software movement right we’re so the I would say

the bulk of innovation in software now is done under the rubric of all these

free software licenses so they BAE simply in effect opted out of the copyright system which it’s not as easy

to do in the patent world anyway so copyright is less of a threat to software development I think the problem

is while copyright doesn’t do as much financial or or tangible harm it does it

is more insidious in the in the sense that it number one it distorts culture heavily because it distorts the type of

movies that are made songs that are sung remix in all this stuff it makes people think twice about publishing or gauging

in projects because they know that certain things are not permitted by copyright and it also lasts much longer

well over a century and it’s also being used by the government to increasingly

ratchet up controls over the Internet to like shut sites down which in since I

regard the Internet as a key tool in the battle against the state copyright is

more more insidious and more dangerous in a sense than than patent so if I if I

were given the choice to abolish one I probably would abolish patents just because it’s hurting people so much in

terms of their daily lives how much wealth we have but copyright would be up

there if you want to talk in a minute or now about trademark I can explain what is really yeah go for it so everyone

says like like you sort of say there’s something wrong with lying and taking

your identity and what you’re getting there at is that libertarians sort of

have this vague and when I say vague a lot of people don’t really define it or they all define it sort of differently

but we’re usually we usually say we’re against aggression which is the initiation of force against your body or

your property and then we’ll just throw in or the threat of that okay which I

think takes some work to justify people just assume that or fraud see they’ll

just say or fraud like it’s obvious what that means now what they have in mind is some kind of some kind of way of using

deception to take advantage of someone and basically cheat them somehow in some

kind of measurable way and so that instinct is right I think ultimately fraud is a none libertarian thing is a

type of a great because it’s basically what I would call theft by trick which is what the common

law does call one type of fraud theft by trick so you’re basically gaining possession of someone else’s owned

resources by deceiving them about the nature of what you’re giving them so it’s a way of getting unjust or unfair

title to their property which you shouldn’t have so the type of conversion or theft you can think of it that way

the problem is fraud it’s already illegal so if you say well we need trademarks because fraud should be illegal I think wait a sec we already

have contract law and we already have fraud law those two things together already cover the cases where a consumer

is deceived by someone like someone pretending to be Isaac Morehouse you

know it that’s gonna catch up with the deceiver one way or the other they’re gonna have a bad reputation they’re gonna get fired when they get caught out

they’re gonna lose their customers they’re gonna get sued for fraud they’re not gonna get credit from someone because they think they’re shady or

they’re gonna get sued for breach of contract so in other words trademark law is either just redundant with those

things in which case why do we need it or it’s something else and I believe it’s something else because number one

if a consumer if a consumer is defrauded by someone the person that has been

defrauded is the victim which is the consumer and that person should have the the right of action right to sue the

person who deceived them the defrauder and that is how fraud law and contract law work under trademark law the

plaintiff is the person who holds the trademark so not the deceived customer

okay so for example if if if someone sells a knockoff Chanel bag to a

customer Chanel can sue that that knockoff manufacturer not the customer under

under trademark law so that’s one problem with it the other problem is you don’t have to show fraud you just have to show likelihood of consumer confusion

but in in the case of the Chanel knockoff bags the people buying these

bags are twenty dollars instead of for two thousand dollars they’re not defrauded at all they know they’re buying a knockoff bag so they’re like

literally is no fraud in those cases I bought a Nike bag and in quotes in Mexico one time and you know that the

swoosh was like out of proportion and I really you know it’s like your it was just I

was just doing it to be funny clearly buying it was funny because it was obviously not a Nike bag there was

no you know yeah it’s interesting so and so so and then one more thing in the in recent years about twenty thirty years

ago the trademark law was amended to add this anti-dilution cause of action which is if the owner of a so-called famous

mark can prove that someone is using it in a way that tarnishes or dilutes the value of their mark even if there’s not

likelihood of consumer confusion they can still get an injunction and go seize the bags and crush them and that goes to

what you mentioned earlier which is this belief that property rights are property rights in value as opposed to the

property right in the physical integrity of a physical owned resource because so

you have Nike or someone or Chanel they claim that they have a certain goodwill

or some other kind of intangible accounting type concept value in their

reputation and therefore if someone else does something to dilute that then

they’re damaging them by reducing the value of their property of their of their reputation and the eyes of consumers and therefore they should have

a cause of action against that that interloper which is very similar if you notice to defamation law which is the

idea that you have a reputation right and if someone lies about you in a way that harms your reputation which makes

you you lose value in your reputation that you have a right to sue too which

is why I personally classify defamation rights as a type of IP even though most

IP lawyers don’t an interesting Rothbart in his ethics of Liberty had a kind of

bizarre he he attacked the patent system on somewhat reasonable grounds he

attacked defamation law on good grounds he noted that if you have a right to your reputation it means you own other

people’s brains because you’re owning what people think about you right and so he understood that that’s wrong but he

didn’t quite see that that’s almost the same argument you would use against trademark law because it’s also a reputation right type system and then he

had this weird contract based defense of copyright which doesn’t work if you just trace it

out and that’s another reason I think some people are confused on some libertarians are confused on RP is

because no one up until maybe the late 90s really started sorting this stuff out clearly it seems to be an area where

and I did this myself for many years where you know once you arrive at a very logically consistent either from a moral

standpoint or a consequentialist standpoint or both a principled understanding of why liberty and

property rights and free markets and all these things matter you can you come to the issue of IP and every thinker just

sort of like does these weird gymnastics to say like well maybe this isn’t quite right but then this is good but then

like it’s like everyone’s afraid to just fully let it go as I was because I won I just wasn’t that interested in it so I

don’t want to put in the time but I was just sort of like well I did it just it just kind of has to exist I was I was

afraid to because I was a budding patent lawyer and I was I would write these little articles very cautiously like

maybe we could look at it this way or maybe we should think about discussions and because I was afraid it would hurt

my career and the more radical I got and the more I realized that my clients am I and my colleagues don’t care about this

they don’t care about normative theory and they’re not read anyway and I just started getting more I would like I

started getting more brash a little bit over the years I like I just would you know clients hire you because of how

good you are at your craft that in fact if you have a very articulate strong opinion against the patent system people

want to hire me more because they say well he must know he must know the system really well so he it never hurt me in my career but what what you just

mentioned reminded me of something I learned of a couple of years ago you know Mises has these kind of bizarre

cryptic comments in human action on the patent system where he basically admitted as a monopoly and he sort of

gives the pros and cons of it but he doesn’t really Polly says well if you don’t have a monopoly on ideas then

you’re gonna have this economic effect but if you do you’re gonna have this effect and then he just sort of trails off and lets it go and Israel Kerzner

who actually has some tantalizingly good comments on

on IP and he had a comment in a Q&A

session some lecture a couple years ago someone asked him about IP and ‘yes’ or something he said you know Mises was one

of these really rigid logical of guys that always had an opinion right and he

said the only thing he never had enough or that the only thing that that he was not like Mises on was IP people would

say Mises what do you think about IP and he would say well on the one hand this on the other hand that Mises would never

do that on any other topic he’s like socialism is wrong you know or property

rights are great but IP was like the one hand this on the other hand that so it

trips up a lot of people it’s in in some ways I almost feel like at least for me it was it was a fundamentally it was a

lack of imagination an inability to sort of it’s like well I don’t I can’t

theoretically explain in any consistent way any theory of intellectual property that makes sense but I also can’t

imagine a world without it because I’ve been so conditioned to believe that no innovation would happen without these

legal monopoly grants that you know I guess we’d still be living at subsistence level and that doesn’t sound

you know I think is just a lack of imagination and really understanding of history because that’s not at all yeah I

think way that works yeah I’m really the libertarian movement is relatively young let’s say the modern movement is about 6070 years old and we

all came of age in a world where IP law had already existed in the Western capitalist or more or less capitalist

systems and where our sort of progenitors and forebears either didn’t talk about IP very much or they were

kind of for it because they all assume that you know it’s part of a private property order it’s in the US

Constitution it must be sort of one weird specialized arcane aspect of a capitalist order and

we’re used to it and it’s hard to imagine what it’s like without it but on

a more principled or theoretical level I think I think the mistake to be honest

came from from Locke and we inherited a lot of our thinking from Lockean type

style analysis and his principled view of the nature and role of property and man’s rights in limited government or

government it’s and he’s got this framework where he

talks about homesteading things and mixing your labor and the way he argues is that the reason you own say a feel

that you if you find unknown in the state of nature and you transform it into a farm you know or a house or

something the reason you own that is because number one you own yourself because God owned the earth God gave the

earth to mankind in common and he gave every person ownership of themselves and

if you own yourself you own your labor because you generate your labor now you

can see already this is getting to be kind of metaphorical and shaky not really rigorous and if you own your labor you know so like there’s this

picture of these labor substance already emanating from your body and then if you mix your labor with some unknown thing

it gets so into intertwined with it that for you to keep ownership of your labor you have to keep ownership of all these

molecules that your labor sort of mixed in with okay so his argument is this kind of complicated almost overly

metaphorical almost mystical argument where you just picture us as owning our labor and then owning the fruits of

labor or whatever that’s another metaphor the fruits of labor it’s not really literally fruit I mean you do own the fruits of a tree that you own but to

extend that to the fruits of your labor just means whatever results from your labor because you owned it and then that

leads to this idea that that one of the sources of ownership now this is very common among libertarians if you ask a

principle diehard libertarian what are the sources of ownership they will they will say well number one you can have a

contract where you acquire the resource from a previous owner that’s correct right

or you could homestead some unknown thing because you makes your labor with it and then you become the first owner by original appropriation or by creation

or production they’ll say so if you produce something or you create something then you own it now if you

believe that that’s a those three things are the three sources of property rights then you start thinking of creation as a

source of property so if you create something of value like an idea or a

recipe or a song well if anyone owns it shouldn’t it be the creator right so you’re already

thinking in your mind that creation is one of the three sources of ownership and that’s the fundamental mistake that

comes from this Lockean concept that you own your body therefore you own your labor that’s the mistake right there you

don’t own your labor labor is just an action you don’t own your actions your actions are what you do with your body which you do own to say that you own

your body and your actions is like double counting and it gets you into all these errors and it also gets you to

this idea that you own value of your resources like we said earlier so all the stuff that’s mixed in together the

mistake is is in thinking that creation is an independent source of ownership it is actually not only contract and only

original appropriation that is the only two legitimate ways to acquire ownership to a resource creation is really what

creation means is in by the way Mises and rothbard and even Iran recognized

this in their various writings creation is simply production which means rearranging or transforming an already

owned resource into a new arrangement that’s more useful or more wealthy to you or more valuable but it doesn’t mean

you come up with a new property right so if you take a big piece of marble and

you carve a statue out of it now you have a more valuable piece of marble but you own the statute not because you

created it but because you already owned the big hunk of marble if you didn’t own the big hunk of marble you wouldn’t have

the right to to chip away statue it there’s no additional right that you’ve now added to the ownership of the marble

because you did something new to it you’ve created wealth you know you haven’t created you haven’t created

property you know for me I had I had come to the theoretical position of like

okay first I don’t think there’s any coherent way to define intellectual property certainly not in a way that

doesn’t also at least sometimes violate physical property you know if I’m not allowed to you know mix two chemicals

that I own in a certain way and sell them because somebody else already did it that’s that’s a violation of my sort

of physical property right so I I was sort of on board that this is theoretically bankrupt it’s it consists

in its and it’s you know it’s unethical it’s got problems but I still have this sort like yeah but it it kind of like has to

exist otherwise why they shouldn’t want to Korea and what opened my eyes was this is by the way a similar sort of

very simple argument that John has this makes for anarchy in the obvious news of Anarchy which is look around it’s

actually already here we don’t need to imagine what the world would look like it actually is already here and when I

found out that the fashion industry the cooking industry in terms of recipes and things like that I started thinking

about football and great coaches who make up innovative plays and schemes none of those things have any

intellectual property protection and yet there’s some of the most innovative dynamic areas of any industry and it was

sort of like you don’t have to imagine what the world would be like and then I started looking back in history baldra

and Levine’s book yeah and started realizing very recent history as well as

even today there are examples everywhere of no IP protections and innovation that’s not curbed in fact it’s stronger

in those areas yeah in fact if you point this out to people well of course the the IP diehards are always advocating

for more IP rights so there is a movement of course to get a fashion fashion industry I type IP rights

enacted as if we don’t have enough passion innovation already right and then you know of course in Europe right

now they’re trying to get this special copyright which is a copyright in newspaper headlines so that Google would

have to pay to have snippets of just the title of an article too so there there’s

always a movement towards more of this and of course if you view it as IP you’re thinking what more properties

good you know but of course the truth is the real property rights can never conflict with each other and if you add

positive rights which is what these are it always comes to be expensive little legitimate rights and by the way I has

nests of one of these guys who doesn’t write a lot but he writes some things that are so classic his other one is the

myth of the rule of law yes those are two classic powerful articles there’s another one that’s similar by Alfred

Kazan in early jail general libertarian studies called do we ever really escape yes he’s a libertarian but this is such

a great article he points out that we already have anarchy among the governments of the world and even within

a government there’s like you know Obama doesn’t have guns pointed at the people that obey his orders as an internal

order in the state itself that works for some reason doesn’t work well but as for

Bolger and Levine they’re your great book is against intellectual monopoly that’s probably the strongest

free-market case against IP that’s not really on a principled libertarian I

mean it’s just purely empirical but it’s it’s I believe they started the book thinking they would find all kinds of

evidence for a patent and copyright but they they ended up realizing that it’s there’s like no evidence for it and the

evidence goes the other way so they ended up changing their conclusions you know to their credit oh wow but you did

mention something earlier I didn’t I think I fail to to answer and that was about the common law and natural rights

and it is true that triquid secret and trademark law arose mostly on the common

law and originally the function of trademark was consumer protection so you can see a route to fraud there it’s just

going out it’s gotten out of the bounds of that and trade secret had some rough

justification too although I’m against trade secret law and I can explain why there although it’s such a small area it

sounds like it seems like contract law would would cover anything you needed covered if you have made a agreement

with me that you will not you know a nondisclosure agreement would cover it yeah and the way trade secret law works

is that you need Donne disclosure agreements just to prove to the court that you were trying to keep something

secret making a diligent effort so that if one of you let’s say one of your employees leaves and he goes to work for

another company you can get an injunction against the other company not just your employee but you so like if he

reveals the secret to some third parties who didn’t sign the NDA and who weren’t bound by contract as long as they have

it publicly revealed the secret because once it’s made public it’s not a secret anymore and you have no trade secret

protection you can’t you can’t put the genie back in the bottle but if it’s still possible to put the genie back in the bottle like like your former

employee has told you know five people at this new company the government will come in and they will issue an

injunction against these five people and they will say you are for to use or think about or discuss or

reveal this information under penalty of contempt of court which means going to

jail so the problem I have with trade secret law is that it is not basing contract it is basically the threat of

jail physical force against third parties who did not have a contract with the original holder of the so-called

secret okay so that’s the problem with trade secret law although it’s again not as dangerous or bad trade secret law

probably does the least damage of all although I mean if you remember when that Apple iPhone 4 was left on a bar

somewhere on a barstool about half Apple Apple employees with the local police or

maybe it’s federal police I can’t remember they showed up at the apartment of the guy that had found the iPhone

okay using trade secret law as their justification burst into his home and they forced him to turn it over now this

guy didn’t have a contract it was an Apple employee who lost the phone now I could see recovering your property I

would say Apple still owned the property I wouldn’t argue they had abandoned it they lost it but if the guy learned

something from the phone in the brief duration that he had possession of it you know he’s he’s free to use that information however he wants but he’s

not under trade secret law so that’s my problem with that but let me go back one step what I was gonna say about the

common law was those two rights did emerge gradually under under common law

and there was also something called common law copyright now what that was it was very much like trade secret all

it said was if and this is back in the days before the internet of course and if if you’re like an author and you have

a manuscript of an unpublished work in your desk drawer like you’re a professor somewhere and someone steals sneaks into

your office steals that manuscript and goes to a printer and tries to publish it you can get you could you could

prevent them from publishing it first because you have the right to publish it first because you’re the author and they

had to obtain the manuscript basically by it by theft so that’s what common law

copyright is and it’s been superseded by the modern copyright law so there was a current but you can see that that’s really rooted more in trade secret type

law and in property law itself it doesn’t justify at all what modern copyright law has become and rothbard

actually uses he makes up the term common law copyright in his contract based arguing for copyright and he calls

at common law copyright apparently not even aware that there was such a thing as common law copyright which is different than what he’s talking about

and the common law copyright he’s describing what he really means is copyright by contract I still wouldn’t

justify modern copyright because copyright is not based on contract at all it that’s the problem with it is

that it’s not based on contract just like this trade secret law is not based upon contract so but but anyway I keep

getting derail what I was gonna say is you don’t have to be an anarchist and you don’t even have to be a libertarian

and you don’t even really have to be a principled libertarian to oppose IP all you have to do is realize that every

justification given for it is wrong if you’re a consequentialist or an empiricist or utilitarian if you just

look at the evidence you will you have to at least admit that there are prima facie violations on liberty and they’re

restraints of trade and they’re monopolies and they’re special privileges and if your argument is that

they they’re necessary to to incentivize authorship or creative works or they’re

necessary to stimulate innovation then the burden of proof would be on you to

prove it and the fact that the framers of the Constitution in 1789 didn’t have

any proof of this they just as they assumed it because they were used to the crude systems in England so and in the

hundred 200 plus years since no one’s been able to prove this if all the studies we started doing empirically

prove the otherwise right you know they were sort of when I started when I really came to it was like okay I have

to I have to actually decide if there’s anything left in IP that’s that’s at all

justifiable and there’s sort of three questions that I think all have to have yes as the answer and I think all of them clearly have no as the answer one

is just at a very practical level can it actually be enforced in any meaningful

way like you know there’s just so many how do you prove that you know you didn’t you weren’t just independently

inspired and produce something similar to me like the enforcement is scary in some ways and then to should it be

enforced it philosophically sound is it just whatever it seems very clear to me that’s no and then number three is what

does it look like if we try to enforce it are there and this is sort of the consequence ones are they’re actually

more benefits than cost cuz it’s not enough to say oh look here’s a case where innovation happened because

someone was granted monopoly if you’re gonna be a true sort of consequentialist or utilitarian you have to say what are

the benefits and the costs give it everything we know about public choice theory and regulatory capture all the

same arguments we make for why occupational licensing is bad and the granting of monopoly – you know the

producer of any good is that you know is bad in in the free market all those

economic arguments there’s there’s nothing that changes there that’s special about IP so you have a

tremendous burden of proof to prove that whatever benefit you imagine is gonna happen in in terms of innovation that’s

all sort of speculative is not only going to occur not only are there going to be benefits but it’s going to exceed

all of the known costs which are closing you know shutting out competition patent

trolls and all these you know all these unintended regulatory capture those are

known negatives so you’ve got to have a lot of evidence to prove that whatever good is gonna come supersedes all this

which is just impossible to do I think yeah there’s also the mindset kind of

issue that you alluded to earlier which took even me a while and probably Jeff Tucker and my in you know endless

discussion about this over the last ten years or so has even changed but we

change each other’s we both gotten more open-minded about it and that has been a result of just experimenting and seeing

just getting used to what we see around us and seeing how the internet and open models actually work and how they’re

better I mean in the beginning I was really writing well patent and copyright can’t be justified but you could

probably simulate a lot of their features with a complicated contractual so I was trying to find a way to use a

contract system to do some of that like trying to get some of these anticompetitive things done in a

permissible way but trying to do it or trying to explain it away yeah it looks like it’s like constant you know pay

walls and NDA’s things that basically make your customers hate you because you’re afraid that you won’t be able to make money

unless you can you know right so the people that believe that they say that

well maybe the current copyright system couldn’t be justified but you would get the same thing through a contractual

system anyway so what’s the big deal but the thing is if you if you really understand how contracts would and

should work and and do work the only way you could have something resembling this

would be basically for like let’s say Amazon under pressure from publishers would have to make every user of Amazon

click on a agreement before they bought a paper book or a Kindle book and they would have to agree I hereby agree never

to use the content or to learn from or to remember anything I buy from you

so I’m gonna pay you ten bucks for this book and I’m have to agree I have to

agree to basically go to jail or pay a million dollars if you ever find if if you can ever prove that I used the

content legitimately so that’s right by showing up on this podcast you have

implicitly agreed that everything said here actually is owned by the Isaac Morehouse podcast so if you go out and

profit from this information later I can sue you that’s the point that the few

people that are not pirates that are willing to pay you money to get your stuff because you made it easy for them to get it from you you’re gonna penalize

them the most by subjecting them to millions of dollars of damages um and if you say okay well then it only be $25

damages well then that’s not gonna deter copying so people would someone would just buy it and pay the $25 fine and

they would upload it to the internet and then it would be out so the point is customers would realize that you’re

demanding this huge onerous burden be placed on them just to give you money to buy a book from them they would say

screw it I’m gonna go get a pirated copy and not be subject to this so you have fewer and fewer customers who are your

real customers paying you money who you’re subjecting ever and ever owners burdens on to try to make them pay for

all the pirating going on out there and it just wouldn’t be a viable contract model there’s kind of a there’s

almost like an abundance mindset or a confidence in the value that you have to offer the market that lets you say look

I don’t have to try to charge for everything I mean this is all a smart in Marketing world it’s like you know they

call it whatever content marketing like create podcasts blogs articles books

give them away for free because if you have a devoted following they that

they’re willing to pay you for other things you know they’ll come to your concerts though whatever by your this

that and the other thing and just not being so afraid like oh I got I got to sit on this secret and patent it and

wait and wait till someone offers me ten million dollars for it instead of just like let’s put this out there into the

world you know well and that’s of course and if you open your eyes you’ll realize this has always been done in society

there’s always lost leaders and reputational effects and you know you you just have a hobby of painting things

and someone notices you and they hire you to paint their kids portrait and that becomes a business I mean there’s the problem is is the the mindset of the

person who is 4ip and they argue against abolishing it especially the libertarian kind of stick

it you know they’re so stubborn about this they they have an argument very similar to the liberal or the lefties argument

for welfare so for example if we if you and I say we should we should have a free society and it should be taxes and

there shouldn’t be a welfare system then the the liberal will say well who’s gonna take care of the poor and the iron

answer is usually well there wouldn’t be as much poor and the ones that would we would have would be subsist on charity

and then the typical response of liberal is that well can you guarantee that if

you guarantee that be enough charity and unless you give them a guarantee they will just dig their heels in and say

well and I’m not gonna support it even though course the government doesn’t have a guarantee you Social Security’s gonna go bankrupt so I mean there’s no

guarantee anyway but in the mindset of the IP advocate is similar because

they’ll say well how am I supposed to make money selling novels and I’ll say

I’ll say okay well let’s think about it I mean we don’t really know what would happen in a free society but because

it’s been distorted by IP law but we can guess that you know and I gave the example like JK Rowling was some mom on

welfare writing Harry Potter books on the train and cuz she loved it and to her surprise right the first Harry

Potter book became a huge bestseller and she didn’t wait till she had a guaranteed income stream to start crash she I don’t think she did

it to become in England’s richest woman our second rinse is woman after the Queen but but if there were no copyright

I mean she still would have written written that first book cuz she didn’t expect to make money anyway and she would let’s say she published it on

Kindle for $0.99 season all of a sudden it’s a runaway bestseller she makes a hundred thousand bucks and then then the

Pirates come in right star selling I guess 25 cent copy book yeah I don’t know yeah if being pirated is your

biggest concern you’ve already succeeded the Pirates can’t copy everything they have to sit back and wait to see what’s

popular enough to copy and by the time they recognize that the work that’s popular has already made at least some

first moved some first market mover money but the point is she would have

made some money and then she you know she had six more books in her head she could have done a Kickstarter or

something she could have said listen I’ve got number two and three written and as soon as I get a I don’t know five

hundred thousand people who pledge $5 each I’ll release it no that’s you know

that’s already to 5 million okay so that’s just for book number two so she’s already worth two million three million

dollars and then she if he goes on to the end she’s already worth 20 million or 30 million and in the meantime some

you know say three movie studios start coming up to they start making a movie based on the first book and they don’t

need her permission because there’s no copyright but one of them goes mmm I think I can get more more of her fans if

I get her to endorse this movie and to baby be a consultant on it cuz they’ll want they want to see the official so

they say we’ll give you 10% of the box office so now she’s got another 50 million I mean so I’ve given this

example it’s just someone who says well how our authors supposed to how our novel is supposed to make money and as

soon as you give them that answer they’ll say okay well what about poets it’s like every time you they have this

Buckshot unprincipled mindset where they want a guarantee for everything because

poets are doing so well currently in the system yeah I guess you’ve become my

Angelou the notin poet laureate of the country I guess that’s the only way I make money as a poet anyway so Stefan

let me ask you we got a wrap up here and man there’s so much more we might have to do a part two to this down

the road let me ask you one one last question so startups are huge right now especially tech startups software

startups and we’ve done some some several episodes here about startups and

raising venture capital etc one thing that almost every if somebody is gonna do a venture-backed startup let’s say

it’s a software company every pretty much every venture capitalist the first

thing they’re gonna look for is do you have any IP because they want they want some sort of at the end of the day it’s

it’s their equivalent of a hard asset in a industry that doesn’t have you know factories and physical capital they want

to know if everything goes to hell and this can’t be executed on is there at least some IP that can that is has some

value that can be sold or whatever how do you I feel like the incentives it’s

it’s really sad because the most innovative area in the economy is sort of in these venture-backed startups in

some ways but they are rather than breaking down this old horrible model of

IP they’re actually making it much stronger is there is there a way around that like if you want it to be a

principled entrepreneur and not and not going and you know copyright your protect your software you know can you

do that okay so it we probably have time to go into too much detail so I’ll give you a

brief answer but I did write a pamphlet for Jeff Tucker’s uh Liberty got me a

little booklet uh a couple years ago it’s called do business without IP it’s on my website

definite stephan kinsella dot-com so I kind of go into these different approaches to this in there it’s just

pretty concise and it covers as many things as I could think of but the bottom line is I do not believe people

should pretend like there’s not I pee there is IP in today’s world there’s

basically you know of course everyone need well for trademark you don’t really

need a trademark to use a trademark you just need a trademark to prevent someone else from getting a trademark so if you

get a trademark that means you file a trademark registration with the federal government to get recognition for your

trademark you know you’re free to use it and if anyone else wants to use it you

don’t have to make them stop you could simply write them a letter saying I’ll

give you you know you need to pay me 25 cents a year for a license if you want to do this because you need to actively try to enforce it so it doesn’t become

generic or you could just let it become generic and then know everyone can use it and you don’t care so that’s one way

with trade trademark but again the VCS aren’t gonna understand this stuff so you want to collect legit right and you

want to be able to answer them yeah we have IP here’s our trademarks copyrights automatic so anyone who writes software

code does already have copyright in their software but it’s become acceptable to open-source it if you want

to so as long as you follow the rules and do it that way that’s one thing you could do or you could just simply have a

copyright in it and just never never sue people that would be the principled stance to take ask for patents there’s

different things you could do you you probably do need to get patents on a few of your of your core ideas because the

VCS are gonna ask another thing you could do is you could simply make it

public and therefore they ever prevent other people from getting a patent on it because once it’s public that serves as a statutory bar oh I should call it so

you could just publish it publishing information because it’s gonna become public anyway probably because most most

patentable ideas are embodied in the product you end up selling so that’s

another technique you could use you could also join there’s a growing network of these consortiums where

companies agree they all come together in some consortium and they all agree to

never sue each other for patent infringement and to give each other a license that they need to defend

themselves against a patent troll it’s like the opposite of collusion well see

the problem is some of these things are possibly dangerous under antitrust laws so we here we have the antitrust law

another government diligent law which which makes it hard for companies to of

avoid the effects of another government granted monopoly which is so under the guise of stopping monopolies the

government removes some contractual means companies have to stop or to fight

off the effects of enough government with an actual government monopoly the patent system but there are ways that you can use some of these

taxes you’re a patient man to be waiting through this stuff on a regular basis this is the first time

I’ve ever spoken in public on IP Stefan there’s so much we scratch the surface

so I’m gonna have a lot in the show notes so stephan kinsella calm you can find all kinds of stuff there definitely

check out there’s actually a past episode we did with Harris Kenny from Aleph objects which is they they produce

3d printers and their entire company uses no IP nothing they do no process is

no software it’s all open source so there’s a really interesting case study you can also go to see for the letter C

the number for SIF gorg that’s the Center for the Study of innovative freedom which Stefan founded and directs

and I will link some other stuff that we’ve mentioned here though the book by Baldwin and Levine will link you’re

against intellectual property booklet as well so stephan kinsella thank you so

much again we might have to we might have to do a round two down the road happy together thanks so much have a

great one Thanks either [Music]

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