KOL217 | Intellectual Property is the Bastard Child of the Gatekeepers

[0:00] Introduction and Episode Topic

[0:01]

Newcomb: Music. Hello, this is James Newcomb and welcome to episode number 14 of Music Preneur: Making Money Making Music.

[0:15]

Today’s topic is intellectual property, and I’m going to warn you right now: if you think that intellectual property is imperative for civilization to survive, if you think that artists cannot survive or thrive without intellectual property, well, you’re not going to like this episode at all. In fact, you may as well just press stop right now.

But hopefully it will give you at least a little bit of clarity on what is at best a confusing topic, especially in this day and age. So let’s get to it with my guest, Stephan Kinsella. Welcome to the program.

[1:01]

Kinsella: Thanks. Glad to be here.

[1:00] Host’s Position on IP as a Barrier for Musicians

Newcomb: All right. This is Music Preneur: Making Money Making Music, and this is a topic that I have wrestled with over the years.

[1:15]

I’ve come to the conclusion that intellectual property is a huge barrier to musicians monetizing their efforts. It creates a lot of problems for musicians. And I realize that by saying this that a lot of people disagree with me, or maybe I’ve turned them off already.

But you know what? I’m not going to beat around the bush anymore. I tried to deal with this sort of at a back door way, and I say screw it.

[2:02]

The best person that I thought of to tackle this issue and tell us why intellectual property is a hindrance to progress and innovation is Stephan Kinsella. He is the author of Against Intellectual Property as well as a free PDF called Doing Business Without Intellectual Property, and you can get that PDF at musicpreneur.com/resources.

[2:30] IP’s Incompatibility with Traditional Property Concepts

Newcomb: So Stephan, I want to start out with—I guess the major problem with intellectual property is that it really does not fit in with the traditional concept of property as we know it. Do I have that correct?

[2:43]

Kinsella: Yeah, that’s part of the way to look at the problems with it. I am actually a practicing patent attorney, and I’ve done this for 24-something years as my career. I’m also a libertarian, and I’ve always been very interested in property rights and justice and individual rights and also in the creative works—the creations of scientists and philosophers and artists and singers.

It’s not like I’m opposed to these things, but just from what I’ve seen in my career and in my studies of individual rights and property rights and learning a little bit more about the history of how these systems actually work—patent and copyright in particular—I’ve come to the conclusion, and I came to this conclusion twenty-something years ago, that these laws are completely incompatible with justice, with property rights. They should be completely abolished, and they do not achieve the purported functions that most people believe.

[3:59]

People are so used to these ideas—artists are so used to a system that is dominated by and influenced by copyright, especially copyright (we’ll talk about for musicians and for these kind of entrepreneurs, novelists, writers, movie makers, people like that)—that they feel hostile when they hear a criticism of these. They basically think you’re insulting the creative enterprise itself. They think you’re saying they’re not worthy of having property rights—a businessman can have property rights in their land, in their factories and buildings, but artists are not entitled to because they’re not as important. That’s how they take that.

But when you start pointing out all the problems that IP as a practical matter causes the average typical creative person, they start to see yeah, maybe this bargain is not such a good idea.

[5:00] Why Ideas and Patterns Are Not Scarce Property

Newcomb: Well, let’s talk about how intellectual property is not property. The way that I understand it from what you say is that like here I’m holding a pencil right now that I’m taking notes with—this no one else can own this pencil; only I can have possession of it at one particular time—whereas the words that I’m saying right now, well, how can I say that I own those words or how can I say that I own this combination of words? And that’s I guess that’s where we have to start to understand how the concept of intellectual property is problematic.

[5:38]

Kinsella: Yeah, and look, the way I look at it—the way I’ve come to describe it over the years—it’s I sometimes rely upon some of the concepts of basic law (you don’t have to be a lawyer to understand this) and also some of the concepts of Austrian economics. I don’t know if we need to get into Austrian economics here too much—you don’t need to know the works of Hayek or Mises to really understand this; it’s pretty common sensical.

But if you just understand the purpose—like step back and think about man in society, why we have laws, why we have rights, what the function of these things are, what the function of property rights are—you’ll see why patent and copyright are completely incompatible. Just as a patent is like a grant by the state that gives you basically a monopoly over the use of a given invention for roughly 17 years, copyright is a monopoly granted by the state to be the only one who can reproduce and broadcast and copy a creative work like a novel or a song or even software (which was not clear for a while because software has functional aspects, but finally the court said yeah, software is actually subject to both patents and copyrights and trademarks). So it kind of hits all the bases.

[7:02]

The fundamental thing is we live in this world—a world of scarcity. Now by scarcity it’s an economic term; it just means there are things we want to use and we need to use to live: tools, land, food, lumber, things like that, even your body. This just means that only one person can use these things at a time; there’s a possibility of conflict.

But when humans in society see these kind of violent conflicts, some of us prefer to live in a peaceful society or cooperative one where we don’t have these violent conflicts. And the only way to avoid that problem is for people to choose not to do it—which means if there’s a resource or a good that could be used by only one person at a time like your pencil, we have to assign an owner to that thing so we have a rule that everyone in society respects which identifies the person who has the right to use that resource. So that’s just property rights.

[8:00]

So if you wanted to be precise, you wouldn’t say the pencil is property—what you really would say is the pencil is a resource and you have a property right in that resource, or basically you are the owner of that resource. The reason the word property is used is a property sort of means a characteristic right. So when you use a pencil it’s an extension of yourself—you’re closing extent; it helps you extend your influence out into the world.

And for some things that you use all the time it might become very intimately associated with your very being, like your pair of glasses maybe. So you would say these things are a property of that person, and then people start over time calling it his property. And when they say it’s his property what they really mean is this is his characteristic, but they tend to think of property as describing the object itself.

Technically, it’s a resource that’s owned. So the entire property rights system—which is what the whole legal system ultimately is about—simply is there to answer the question: when there’s a dispute between two or more people over who gets to use a type of resource over which there can be disputes, there’s some object, some thing that multiple people want to control (whether it’s someone’s body or someone’s home or someone’s pencil). The property system simply gives us an answer to that question: it says who the owner is, and then we identify the owner and everyone goes away, and the owner gets to use it as he sees fit, and anyone else who interferes with that is then seen as a trespasser or as a criminal.

[9:35]

Okay, so that’s how property rights work. But you’ll notice that that applies only to things that there can be conflict over—these scarce resources. Something like a pattern of information or knowledge that’s in your head is not the same kind of resource.

And this is where a bit of Austrian economics comes into it.

[9:54] Austrian Economics and Human Action Framework

Newcomb: Under the Austrian—I’ll just say one little thing about Austrian economics, not to turn off your guests, although I find Austrian economics fascinating.

[10:06]

Well, I’d like to talk about Austrian economics because if we’re going to tackle this issue then let’s just dive into the woods. First of all, let’s describe Austrian economics and how this more or less leads to this conclusion that we’re talking about.

Kinsella: So Austrian economics has nothing to do with the economics of Austria or Australia—even I think Tom Woods once had a debate about seven, eight years ago with the CEO of AIG, the big insurance company, and about that—it was about the crash or something—and this guy says I don’t know why Woods keeps talking about Austrian economics; Austria has got such a small economy compared to the US. So it’s just one school of economics, like there’s a Chicago School which is associated with Milton Friedman and the monetarists.

There was a number of thinkers and philosophers—they came out of Vienna, Austria, at the turn of the well around the 1900s—and they developed a distinct school of economics. It was started by people like Carl Menger and Friedrich von Wieser and then Ludwig von Mises and Hayek. So it’s just a different type of economics—a little bit different than the Chicago School.

[11:16]

And one strand of that is the school founded and perfected by Mises, and Mises had a unique way of looking at the problems of economics, and that is he calls it human action—human action. And all he did was he carried—in for our purposes we don’t have to get the technical economics but more of the framework of it or the methodology—which is that Mises recognized that humans act, and that there are certain logical implications of that, and that’s how he deduces his body of economic laws.

But what it means to act is for a human being to look around the world and to have some conception of where he is and what the future is—what future is coming—and he anticipates some future that’s coming that will happen without his intervention. In other words, something is coming, something’s going to happen, and I don’t like that—I’m dissatisfied by that—and I am aware enough of the way tools operate, the way my arms can move, the way we can intervene in the physical processes of the world, that I could take an action and change things for the better. So that’s all human action is in general terms.

[12:30]

So if I start feeling hunger, I realize that if I don’t procure some food in about an hour I’m going to be very hungry or maybe I’ll die—I’ll be weak. Right, so that thought frightens me or makes me uncomfortable. So I think well how can I satisfy this? Well, I’ve eaten before so I know I need to eat. Well, how do I eat? I have to find food. Well, how do I get food? I have to maybe make a spear and go spear some fish.

So you think of things like that. Those thoughts are informed by your knowledge of the world, your knowledge of what’s possible, your knowledge of what might be coming, your knowledge of what tools are available that you could possibly manipulate. And then you go out, you make a choice, and you do it.

[13:20]

So you can see there’s two fundamental components to human action—all human action. Number one involves the employment of the scarce resources or means, and number two it’s guided by knowledge. So you have information or knowledge about what you think might happen in the future and about how the laws of physics work—right, how if you sharpen a spear and throw it in the water gravity will take it down and if it hits the fish it will kill the fish and you can catch the fish and you can use fire to cook the fish etc.

So you see all human action—especially successful human action that is an action that achieves what you wanted to achieve—is a combination of knowledge and employment of scarce resources. Now the scarce resources are these things that we talked about before that there could be conflict over those—like only I can eat that fish, only I can use that spear.

So if there’s another person around who wants that spear or wants that fish and he physically takes it from me, I’ve been deprived of the use of it and we might have to fight over it—so that’s violent conflict. Right, so a property rights system emerges among people who prefer cooperation, and it emerges to settle disputes about those resources that we use in action.

[14:39]

But you see that’s only one part of human action. The other part again is the knowledge that you possess. It makes no sense to have property rights for the knowledge because the knowledge is not something people can fight over. My knowledge of how to use a sharp rock to make a spear tip, my knowledge of how to throw the spear at a fish and kill it, is knowledge that anyone else can use at the same time.

There may be thousands of other people who also know how to do this, or they might have learned it from you from observing you. Right, the fact that they copied what you did or learned from what you did doesn’t take anything from you whatsoever—there’s no conflict there. They’re not taking the knowledge from you because you still have that knowledge.

[15:24]

So this is fundamentally why intellectual property rights are incompatible with real property rights—because they attempt to assign property rights in the knowledge part of human action as well as in the scarce resources part of human action. But this literally cannot work.

[15:48] IP as State-Enforced Redistribution, Not True Property

Kinsella: No, look—see, I personally believe as a libertarian that patent law and copyright law should be abolished. I think these laws should not be laws. Okay, so that’s just a normative position.

But I also state as a lawyer and just as an analyst of this kind of a legal system it is literally impossible to have a property right in an idea. So the copyright system doesn’t really grant property rights in ideas—what it really does, and the reason is because all law is backed up by force—that’s physical force. Physical force is always applied to physical things in the world—that is to the scarce resources in the world.

[16:26]

So for example, if a publisher sues a pirate for knocking off one of their author’s books, what they really want is the use of force issued by a state court against the defendant which either takes his money from him (right, and turns it in the form of damages) or maybe puts him in jail—even so puts his body in jail—or issues an order from the court compelling him not to print this book using his printing press. So all of these results are always basically the same as the end result of a dispute over those resources.

So what you could say is that a copyright is really a transfer of money from one person to another—right—so it’s always really a dispute over a resource; it’s just a disguised way of doing it because we call it a property right in ideas. And if you breach that copyright in ideas then the damages would be a payment of money—right—when really we could just reword the copyright law and it could say everyone owns their money unless someone does the following action, in which case they have to give their money to someone else.

So you see it’s just a basis for an excuse to transfer money—it’s really redistribution of wealth which basically socialistic. So it takes property from its legitimate previous natural owner and it transfers it to someone else, just like taxes would do, for example. So in a sense it’s no different than a tax.

[18:02]

Newcomb: Okay, so by having Stephan on this program you’re sort of guessing my political leanings—I tend to be libertarian as well. Tend to be—I am a libertarian. Okay, so I want to play the role of the ignorant plebeian here because I’m more or less am.

[18:25] Addressing Extension of Self and Creator Powerlessness Arguments

Newcomb: You said that—let’s break down what you just said. So you’re saying that the pencil is an extension of myself—it allows me to express myself. Okay, a lot of people will say well that is why we need intellectual property law in the first place—is because well my song that I just wrote, that is an extension of myself. And it is.

[18:57]

But look—and then now let’s take what you said later in your argument: the only way that IP law—how do I want to say this—you sort of assumed that the content creator has absolutely—is completely powerless to do anything to circumvent this. Like you use the example of JK Rowling in another article that you wrote, and in this example like JK Rowling she has—I don’t—I’m trying to find the right words to say this—but you just have this idea that the content creator is absolutely powerless and the only way that they can protect their own content is through this law. But you say that if the content creator takes some pro action they can actually flourish in—in ways that the IP law ensnares them from doing so.

Kinsella: Yep. Well, let’s say—I think I know where you’re heading with some of this. So let’s go back to the pencil for a second. Okay, my argument is not that you have a property right in the pencil because it’s an extension of yourself—what I was trying to explain there is the reason the word property is misused is because we come up with the word—I mean the word propriety just means you’re the proprietor or owner of something—so or who’s the one who properly should be able to use this thing.

So I’m just explaining why the word property has morphed over time and ends up being used to refer to the thing owned itself. The reason you have the right to the pencil is not because it’s an extension of yourself—because you could imagine other extensions of yourself that you don’t have a property right to.

[20:46]

So for example—or characteristics—so let’s say for example you have a certain weight right now—yeah—right—and you have a certain color, maybe you have a certain age—right—and you might have a certain style of laughing. There are many characteristics of you that help define what your nature and identity is, but you don’t own those characteristics. If you owned your weight—I don’t know what it is—but let’s say it’s 173 pounds, that means you would own everyone else in the world that weighs 173 pounds.

So the problem is you can’t own universals or characteristics of things. So it is true the pencil can be considered to be an extension of yourself and that’s why we like to say it’s your property—it’s a property of you. But the reason that you own it is because you have a better claim to it and it’s the type of thing that can be owned.

[21:31]

So one thing I didn’t mention was how we assign these property rights—it’s not just arbitrary. If we want to have a voluntary society that’s cooperative and peaceful and productive and everyone can get along at least possibly, we come up with these property rights to assign the ownership of these possibly disputed things. But those property rights have to be assigned based upon some fair rules—some kind of objective rules that everyone could recognize as being fair.

And those turn out to be only two rules—okay—and creation by the way is not one of them, which I’ll get to. Those two rules are: number one, if it’s an unowned thing just sitting out there—no one’s using it—there is no owner of it, like something in the virgin wilderness—if you are the first person to start using it and do it in a demonstrable way where there’s property boundaries or borders set up around it (you know, you put a fence up around a little hut), now you’ve homesteaded this land—so we call that homesteading or you could call it original appropriation.

[22:36]

So the first way to come to own a resource is to be the first one to own it when it was previously unowned. The only other way to come to own a resource is to acquire one that’s already owned from someone else voluntarily from them—that is by contract or gift or donation. So those are the only two ways to come to own something.

Most people think that creation is mixed in with this or as part or is another way of coming to own resources—like if you make something you should own it. But that—and then they analogize from that—they say well if I make a new horseshoe and I own that new horseshoe, what if I make a new song—like why shouldn’t I own the song? Because you’ve already agreed that people that make things own them.

[23:23]

The problem is that’s actually not true—it is not true that people that make things own them. And let me explain why. Making something just means transforming it or producing a new arrangement of that thing. So to make a horseshoe I need to have some iron or some metal—I also need to have an anvil and a hammer and a fire and some place to make the horseshoes—right—so I already own some kind of resource like iron ore or whatever you’re going to make a horseshoe out of.

Yeah—okay—so I already own this hunk of metal—I don’t know if I found it, I’d mined it myself, or if I purchased it from someone—but I acquired ownership of this ore, and then I used my labor, my effort, my intellect, my ideas, my time to transform it into something that’s better—better for me, maybe better for customers or whatever. When you do that you increase your wealth because the things you have are more valuable now, but you don’t increase your property rights—you don’t add new property rights to the world.

[24:26]

It’s not like you didn’t own the horseshoe before and now you own it—it’s like you own this metal arranged in a certain way and now you still own the metal even though it’s arranged in a different way. So creation is actually not a source of ownership. And this can also be seen if you imagine a thief or an employee—someone who transforms a resource, the raw materials owned by someone else.

So let’s say I sneak into your house at night and I take your stash of iron ore and I make a bunch of horseshoes out of them—does that mean I own the horseshoes? No, because I actually would be a trespasser and you might not have wanted them to become horseshoes—so I might actually owe you damages for trespassing on and ruining your iron ore. Or if you’re an employee working for someone and look—I have a horseshoe factory—I have a thousand employees making horseshoes—I’m just paying them a wage to make the horseshoes; that’s the deal—they’re using my metal, transforming it into horseshoes which I own.

[25:26]

So just because you transform or create something doesn’t mean you own it. And in the cases where it does, it’s not because you transformed it—it’s because you already owned the raw materials that went into it. So this is the reason why the creator of a song doesn’t own the song—because owning the song would mean owning other people’s bodies basically.

Jeez—you could prevent them from singing the song or typing it out on paper. So that’s one way to look at it.

[26:02] Historical Roots of Copyright in Censorship

Kinsella: The other thing is if you realize the nature and the history of these rules—I mean look, copyright came about when the printing press started emerging and the ruling classes—you know, the religion, the church and the state—started getting nervous. Because before they had control over these scribes—these people that had to hand copy everything one by one—and they had control over this through the church.

[26:15]

But now the printing press started threatening this and started threatening to allow mass-produced works to get out into the hands of the people—even if the church and the state didn’t want them to read this stuff—or it wasn’t the approved version. So for a few centuries the state used various mechanisms to keep control of this—it was a type of thought control or censorship.

They had the Stationers’ Company which is the official printing guild in England, and then when that monopoly—that lasted about a hundred something years—started to expire, by then you had the printing industry had built up but they were all in cahoots with the state because they would only print things the government and the church would allow them to print. And if you had to print a book you had to go through the official printing company to do it.

[27:05]

So you see the government and the church kept control of what books were printed using this mechanism. And when the Stationers’ Company’s monopolies started to expire, Parliament established the Statute of Anne—basically started modern copyright. So copyright comes out of the state and the church’s ability to control what could be printed.

So you can see that the roots of copyright lie in censorship, and you can see that it operates this way today. Imagine you’re some artist and you want—you rewrite a new poem, you make a new painting, you photograph a certain scene—even if you photograph it independently and originally—but you stand in the same location that some other photographer did—you take a picture of the same natural items—you could be sued for copyright infringement.

[28:09]

If you post a song on YouTube someone can send a DMCA takedown notice claiming that they own a copyright in some aspect of it and they will be taken down. So if you have a documentary—you want to produce a documentary—it’s almost impossible to do documentaries now without stripping them of lots of content because you can’t get permission from people that have bits and pieces of things you wanted to use in your documentary. So there’s a tremendous hampering of artistic freedom under the copyright system.

[28:49] Boldrin and Levine’s “Against Intellectual Monopoly”

Newcomb: One of one resource that I found very helpful was Against Intellectual Monopoly by Boldrin and Levine—a couple of professors I believe in St. Louis—is it?

[29:01]

Yes—and from what I understand they set out to disprove what you’re saying right now and they were going to I guess prove that intellectual property—the whole concept of intellectual property—is legitimate. And they in their studies—their research—they ended up completely changing course, completely disagreeing with themselves what they had at the outset, and wrote this book called Against Intellectual Monopoly. Do I have that right?

Kinsella: Yeah, that’s right. Let me put this—their work—into context. The way that some of us—probably yourself and me—would approach these type of issues is from more of a rights-based or a principled approach.

[29:40]

So we sometimes talk about what natural human rights are, and this is connected with property rights. And so most of the argument I’ve given is practical, but that’s because property is a practical institution. But we’re explaining basically that a copyright or a patent basically violates someone’s rights—because a copyright prevents me from using my property as I see fit; a patent prevents me from using my property as I see fit.

So that’s a violation of my natural right to property—my natural ownership of my body and myself. That’s one way to look at it. Okay—the prevailing way that most people nowadays look at things is more pragmatic or utilitarian or consequentialist you could say.

[30:27]

Basically people look at the effects of laws and they say well—I mean you and I would say the purpose of law is to do justice and you do justice by protecting people’s rights—you protect people’s rights by identifying what those rights are and all rights are property rights and they should be identified according to the first user principle and contract like I mentioned earlier. So that’s sort of the libertarian analytical approach to this.

But nowadays everything is sort of all soupy and not as precise—people say well we need a law here because we need this effect. So people say well we don’t have enough stimulation of arts so therefore we need the government to have the National Endowment for the Arts and take some money from some people in the form of taxes and then have a government agency that distributes its money to needy artists—right—who otherwise would not have enough money to engage in their projects.

[31:15]

So the argument there is there’s some optimal amount of artistic production in society and we’re below that optimum and the government can use its laws to tweak things to achieve this optimal result. And a similar argument is used nowadays for copyright—even though copyright arose as a method of censorship and thought control—now its defenders who are entrenched in various industries—right—they use these utilitarian justifications.

And so the argument for copyright would be that if you don’t have copyright then it would be hard for some artists to make money because someone could just knock off their work—it would be hard for me to license my music—right—without copyright. Now Boldrin and Levine approach it from that point of view—they’re just utilitarians who look at the law like economists do and they say does this law have the optimal effects that it claims or does it not?

[32:15]

And they were under the assumption—like everyone else is—that you need copyright and patent—they’re like a normal part of a capitalist Western property rights system—that you need that to stimulate the arts and innovation—maybe we can improve it, maybe we can tweak it—but let’s just do a study; let’s see—we should be able to prove that the existence of copyright and patent have benefited society enormously—we should be able to show this.

So they started doing empirical studies—looking for evidence, looking for example, looking for data—and over time they both realized oh my god—patent, copyright—actually deter innovation and they distort the cultural fields and they hamper innovation and they reduce the content and they cause bullying and they extract money from consumers and XYZ. So they basically concluded in their book that copyright and patents should basically—they’re not quite as radical libertarians as you and I are—but they ultimately conclude that patent and copyright do not do what they claim to do and that we’d be better off without them.

[33:32] Practical Advice for Musicians in the Current System

Newcomb: Well, we mentioned earlier JK Rowling and I want to talk a little bit about practical application of how musicians—MusicPreneurs—can work within the system in which we are currently.

[33:46]

And I was just about to say something—well let’s get—well I could take off from what you just said though—I like your description of MusicPreneur because it recognizes the entrepreneurial aspect—right—and what—okay I got it—what I was saying is that people who are still listening to this—they’re—I’m gonna assume that you’re into what we’re saying—may not totally agree quite yet—may you probably want to listen to this again—I’m gonna have several resources for you to read more about it.

But I’m gonna assume that people still listening to this—they want to—they’re here because they want to make some money with their music. And I want to talk about how can we work within the system that we’re currently in—yeah—because copyright—it’s good if you are a major publishing source—not so good if you’re an independent.

[34:40]

So what are some avenues that people can pursue so that they can ensure maximum exposure for their music but at the same time protect their integrity?

Kinsella: Yeah, and here’s where some of the advice and things I’ve seen and come up with—you know—half of it as my lawyer hat and what I’ve seen assisting clients and talking to people who are creators of different types. We have—we have two separate—patents and copyright—let’s stick with copyright here. The way you respond to the patent system is different than the way you respond to the copyright system.

My view is that patents damage us materially more than copyrights do—my estimate is patents probably cost us a trillion dollars or more a year in lost innovation and cost on a worldwide basis. Copyrights don’t cause as much say measurable material harm but I think copyright is even worse than patents because number one the terms last a lot longer—they last over a hundred years in most cases—and it’s being used—it’s used by copyright bullies and by states to restrict like Internet freedom.

[36:12]

If you remember SOPA almost passed a couple years ago and it’s probably gonna pass in some form eventually—piecemeal form—in fact there was the treaty that was the TPP that Trump is apparently against—it Hillary claimed to be against at the last minute—had some SOPA-like provisions in it which would have put them into a treaty with countries that have amounted to forty percent of the world so far.

SOPA was the Stop Online Piracy Act—if that would have been a federal law that made it much easier for companies to basically kick you off the internet for life as a punishment for engaging in piracy—so it would basically restrict Internet freedom or take people’s websites down if there’s an allegation of copyright infringement. So basically in the name of copyright—which is allegedly a property right of creators—you have this being used as an excuse by the state to increase state control and big corporate control of the internet and restrict Internet freedom—which is very dangerous of course.

[37:25]

So the point is copyright—the good thing about copyright is that you don’t have to participate in the system—you do get a copyright automatically—you can’t help it—under federal law and international law as soon as you produce any kind of creative work you have a copyright. But you don’t have to register it, you don’t have to enforce it, and in fact you can use Creative Commons licenses or other mechanisms. In the field of software you can use the software-type licenses and you can participate in a system of open sourcing things.

And I really think—and the other thing you can do is try not to assign your copyrights away to a music studio or one of these publishers—because then you lose control of it—okay—and then they’re gonna use it like bullies and they’re gonna charge crazy prices for your book—they’re gonna make it hard for your name to get out there because piracy is going to be more limited.

[38:22]

So unless you’re really in it solely for the money right now and you have the capacity to make so much money as a legit—as a regular sort of mainstream artist—that even getting only 15% of the royalties—because the movie and the music studios and the book publishers are going to take the bulk of it—right—then I think you’re better off being independent. So my next book I’m going to self-publish—I’m not gonna go to a publisher—because they’re gonna—it would delay me by a year—they’re gonna insist on some changes which I don’t want to make—right—and then they’re gonna publish it for way higher price than I want to—they’re not going to consent to me putting a free PDF online let’s say for marketing purposes or to get my name out there.

There’s just so much liberty and freedom that you have—and especially with the technology now—right—I mean we all heard stories of these guys that are publishing—well if you talk about music itself of course I think we all know by now that a lot of musicians make their money from gigs—right—from concerts. But who’s gonna pay you to do a gig or for a concert if they’ve never heard of you—I mean it’s gonna be a smaller deal.

[39:32]

So I mean most concerts that go to—the musicians have a stack of CDs and yeah they’re selling them—I don’t think they’re making their money off the CD—sometimes they give them away—they want people to know their music—right. So I think it was Cory Doctorow—a science fiction author—who said the real danger that a budding artist faces is not piracy—it’s obscurity.

So it just makes no sense to try to restrict a budding fanbase. So of course these are practical things that you can do—you could also be careful not to assign away your works unknowingly—and then there are practical things you can do—you can use open source music as sort of backgrounds in your podcasts and things like that instead of using a 20-second cut from a popular artist—risking getting shut down or sued by their studio etc.

[40:29]

Newcomb: Yeah—the music that I use for this podcast I just—I know the guy that produced it and I just sent him a message and said hey can I use your song for my podcast—he said sure no problem.

[40:48] Public Domain, Future Abundance, and Distortions

Newcomb: Well you know one interesting thought experiment—it’s a little bit on a tangent here—but it’s a present time you can just use public domain work—which is basically work that’s say more than 70 years old—so a lot of times people use old cartoons and old advertisements and old book manuscripts and classical music from 100 plus years ago because they know that that’s safe—right.

[41:05]

Right—in a way this distorts the culture because we have the last 50 years worth of stuff is like not on the shelf of the tools you can use—so it distorts the culture a little bit. But imagine the world in ten thousand years—okay—let’s just go way into the future. The body—the body of human artistic output that is going to exist on Peta drives—you know—in people’s pockets—it’s gonna be immense.

And even if we still have copyright law which blocks the last 70 years—70 years of music—you’re gonna have 10,000 more years of great music to draw from—so like 99.9% of all human artistic output would be available in the public domain. And so it won’t be as big of a barrier to creative freedom in 10,000 years—right—just the fraction of new stuff will be so much smaller.

[42:00]

Newcomb: You know when I started this business Music Preneur I registered the word Music Preneur along with the tag line “Making Money Making Music” and I didn’t do that because I wanted to prevent anyone else from using that word—if anything the more people that use it the better it is for me because that—the name of my business—and more brand recognition the better as far as I’m concerned.

But the reason that I registered it and register—put in the paperwork in July—here it is January—still haven’t heard from the government—they move at their own special speed—but that’s another story—but the reason that I did it is because I didn’t want someone else to profit off of my success. And what I mean by that is let’s say that this business takes off and it’s worth five million dollars two years from now three years from now whatever—someone could register the word Music Preneur and then contact me and say hey you can’t use that word anymore—if you want to use it you have to pay me seventy thousand dollars a year or a month or something.

[42:59]

Kinsella: Yes—and now you’re getting to—when you say register you’re talking about trademark—which is yet another type of intellectual property right which we haven’t even touched on. Well maybe—maybe we’ll talk about that in the future—yeah we can. And I can just say briefly here that I’m opposed to trademark as well but for other reasons.

I think in today’s climate it makes total sense to register your trademark—but again what you can do with that is trademark—it’s a little bit different than copyright and patent—you don’t have to enforce a patent or a copyright but trademark has the feature where if you don’t enforce it then you could lose it over time. And then again you’re facing the danger that you think you might face before—which is someone else might register that as a trademark and then prevent you from using your own name.

[43:43]

So what you can do is trademark it and then whenever you see someone else using it you just send them a letter and you say you’re using my trademark—I’m happy to give you permission to do so for a dollar a year—you know—or some marginal fee—so that you have an official license—they recognize your trademark but they’re in the clear—you’re not threatening them—and you keep your trademark alive that way. So there are little tips and tricks like that that you can do to navigate within the existing system—right.

[44:18] Property Philosophy: Locke vs. Hobbes, and IP Origins

Newcomb: Well you know you’re the Austrian system of economics and I know I know that this is a music podcast but you know we’re entrepreneurs too—so you have to understand the way things work with economics as well—so that’s why I want to—that’s why I’m not bashful about having Stephan Kinsella on here too because you just have to understand the world if you want to be an entrepreneur.

[44:48]

But the system of property that you’re describing that’s very much in the tradition of John Locke versus like a Hobbes—what’s it—Thomas Hobbes. So where do you think the philosophy behind this intellectual property comes from—is not definitely not John Locke and the founding of America—that’s type of—where does it have its foundation?

Kinsella: Well I think the historical foundation is—in for copyright—was really in this thought-control censorship and in patents it was more protectionism—like the king granting a monopoly to one of his cronies in a given town—like the only guy who could export cheap skins or something—so he just did that to get loyalty from this guy and maybe the guy would give him kickbacks—help him collect taxes—things like that.

But something that Boldrin and Levine were saying—they said that England had these copyright laws but then English/British authors would sell their books in the US or in the colonies where there was no law and they would flourish—whereas in Britain they didn’t do as well.

[45:48]

Well yeah—what happened was—well now we have more of an internationalist system where we have these treaties like the Berne Convention—so all these countries—most of the countries in the world—agree to abide by certain minimum standards—but which is how the US and the copyright—the music industry—Hollywood and the software industry have sort of—in the end the pharmaceutical industry especially—have exported our copyright and patent laws to the rest of the world for the benefit of big American corporations.

But in the beginning—in the beginning of the Industrial Revolution—in the beginning of the United States—we had a copyright and patent system but there were no international treaties—and so we had copyright here but it didn’t extend to foreign authors. So some foreign author—Charles Dickens—his book could be knocked off in the US because he was a foreign author—but it turned out that they did better in markets over here than local authors did because their works were easy to knock off and spread and they could become popular and they gave speaking tours and things like that.

[46:57]

So yeah—and musicians these days—they shouldn’t be worried about people knocking off their music—it’s if anything it’s help—it helps bolster their brand—it helps them sell tickets. I would look at it like this—you know—in a copyright-free world people can copy your stuff without your permission—but they can do that now. I think there is piracy going on right—so we’ve reached a point where it’s not going to ever get harder to copy things—the Internet’s the world’s biggest copying machine and it’s only gonna get easier from here on out to copy.

So authors of works that are easy to copy—someone who makes a movie, someone who does photography, a painting, writes novels—whatever—they’re—they face—they face the fact that it’s easy for people to copy what they’re doing—so that’s a fact—no matter how draconian we make the laws trying to make a few examples out of the few people that we can catch—that’s happening. So they have to face that reality already.

[48:02]

You know I would say that in—in a world—look—artists thrive on freedom—they’re about freedom—they should be for freedom—they should be for justice—right—and just as they have learned from others and always will learn from others and borrow from others—they’re part of an incremental process—they’ve added their small piece to advance whatever they’re doing in their field—but they stand on the shoulders of others and others are gonna stand on their shoulders—this is part of the—you know—the way the world works.

[48:35] Entrepreneurship, Competition, and Profit in a Copyable World

Kinsella: I would also say this—look—an entrepreneur is someone who sees some kind of gap in the market or some kind of way to make money—he invests his time and resources hoping to make a profit. Now in a sense this is an economics insight—profit is an unnatural thing—in other words the more profit you’re making the more you’re going to attract competitors and they’re gonna come in and start competing with you and whittle your profit away down to basically the natural rate of interest in society.

[49:02]

So profit is always an unnatural thing that happens because an entrepreneur spots some anomaly in the market that he can temporarily exploit. So every entrepreneur in the world faces the prospect of competition—they just try to become better or have a better reputation or get there first.

So as a simple example if you know if I notice there’s this craze of taco restaurants spreading around the country—right—like up until now it’s been pizza and hamburgers—but notice that you know hey Arizona they really like those tacos there—so I start a little chain of taco restaurants in—in Texas let’s say—and they’re popular—now I might be the first one and I can charge a lot for the tacos at first—but soon you know someone’s down the street’s gonna—who’s looking for a way to park their money or something to do—they’re gonna say well I’ll start Joe’s Taco Stand—I’ll start competing with this guy—and they start taking some of the business away.

So it’s only a matter of time before there’s lots of them and it’s harder for the original guy to make the same profit he used to—so he’s got to keep innovating or maybe he goes out of business eventually—right. So you have McDonald’s and Burger King in the hamburger industry and you have Taco Bell and Taco Cabana in the taco industry.

[50:15]

The point is every entrepreneur faces the challenge of figuring out how to make a profit even though he’s going to eventually face competition. So in abstract terms that’s exactly the situation of some musician who wants to profit from their work—the only difference is one of degree not of kind—that is it seems to them like it’s easier for people to compete because their product is purely digital and easy to copy—unlike a taco stand where you have to buy a building and it might take a few years to get some investors and build the—you know—hire some employees and start making competing tacos—so it’s not as easy to compete in certain fields where the key aspect of the product is an easily copyable pattern of information on a disc.

And as I said with the internet and with digital technology and with storage becoming cheaper and cheaper and cheaper—copying is just very very easy now—right. So what that means is it’s simply easier for people to compete with you in certain fields if you have a certain business model.

[51:20]

So all this means is it’s up to the musical entrepreneur to recognize this and to try to find a way to make a profit despite the fact that he’s going to have competition. So you know you can—you can sing at a concert and that’s not something anyone else can do—if you’re famous for a given—with a given group of fans—you are the only one they want to hear—right—so you can charge—you could charge a reasonable amount for a concert or for a bar mitzvah or to—to make a song for someone you know for their kid’s birthday—I don’t know—help them do a music video—like Rebecca Black—yeah good luck—yeah.

So the point is it’s not the job of the law and it’s not the job of economists either to tell entrepreneurs how to make money—that’s the entrepreneur’s job—they have to be aware of how different business models can be easily copied or competed with and take that into account—and some business models might not be viable because they’re just too hard to maintain a profit—but that’s always been true in human history.

[52:31] Closing Thoughts: Future of IP in 10 Years

Newcomb: Well Stephan we’re running short on time and but I want to close with just a couple of thoughts from you—we you mentioned earlier ten thousand years—imagine the world ten thousand years from now—this may be a little difficult to do that—but I’d like to imagine you’re well versed in this and judging on what you’ve seen in the past—where do you see the world in ten years from now in the realm of intellectual property?

[52:58]

Kinsella: I don’t see any statutory or legal progress that’s significant in patents or copyrights coming anytime soon—and that’s because the interests are so entrenched. But the good thing is it’s becoming easier and easier to get around these laws. So in the field of copyright number one like I said it’s getting easier and easier to pirate—and that is putting a lot of pressure on publishers to act more like they would have to act in a free market anyway.

It’s also getting easier to encrypt things so that you’re not going to be caught as easily—right—to use VPNs for your dial-up so that you don’t get caught torrenting as easily. And also the spread of—in the software field we saw this earlier—we saw that I’m not really—I don’t really know what percentage—but I would guess maybe half of the software in the US let’s say is probably generated by some kind of open model—it’s not trivial—it’s a lot—it could be even more than half.

[54:03]

That has led to the widespread sort of basically doing an end run around copyright—without copyright the model would still be different—you wouldn’t need a license at all—but you’re emulating more what a copyright-free system would look like. Now in the field of books and music I think you’re seeing in the last 10 or 15 years a similar phenomena slowly starting to happen with the increasing use of Creative Commons to sort of partly open up your work—surf photographers, people’s paintings you know—and the rise of self-publishing which helps get around this—the publishing industry and the gatekeepers—which really are a relic of the old censorship and copyright system.

So I think that the publishing industries are going to start kind of crumbling more and more and you’re gonna have more and more independent artists—so that’s—I see copyright becoming more and more irrelevant because fewer people choose to use it and more people can get around it and evade it.

[55:00]

Newcomb: I put a note saying “forcing the establishment to act like entrepreneurs”—I love that.

[55:06] Episode Wrap-Up and Resources

Newcomb: All right—Stephan—is it stephankinsella.com is the website—great—read if you are interested at all in what he said—I promised that I didn’t get any—I didn’t understand more than 40%—I have to listen to this again myself—so it’s not something that you can just listen to and understand in one take—it takes in some cases many many years to really grasp what we’re talking about here.

[55:37]

So Stephan I want to say thank you for being on the show—hopefully we can do it again if people have some questions that they wanted some clarification on—but really appreciate it—thanks again.

Kinsella: You’re welcome—happy to—good luck with the show.

[55:59]

Newcomb: The show notes for this episode can be found at musicpreneur.com/IP—very easy to remember—musicpreneur.com/IP—it’s going to have an outline of the conversation with Stephan Kinsella and myself and I’m also going to make the PDF Doing Business Without Intellectual Property available right there on that show notes page.

So I hope you enjoyed it—I hope that it at least gave you a bit of a balanced perspective on this topic—I learned quite a bit just listening to Stephan in this interview and I had—and I’ve studied this topic for several years now—so there is always something to learn.

[56:44]

And you know what—if you have questions—if you need clarification on something that Stephan said—send me an email—send him an email—he responds to—he responds to every email I’ve sent him—so I don’t see any reason why he wouldn’t respond to you—I’ll just say that you heard his interview on this podcast and he is more than happy to share his knowledge and provide any clarification.

So I don’t know if—if there’s enough questions then maybe we can have him back on and do a little Q&A on the topic of intellectual property—so that does it for today—I’ve got an exciting announcement that I’m going to share on this Friday’s episode—it’s not quite ready for public consumption yet—but come this Friday it’s going to be ready to go—and it involves a free ebook for you and even an opportunity for you to make a little money as an affiliate with a product—so this is James Newcomb signing off—thank you for listening and look forward to seeing you next time.