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Kinsella on Liberty Podcast, Episode 365.
My friend Walter Block, economics professor at Loyola University-New Orleans, asked me to give a guest lecture today (Dec. 8, 2021) for his Law and Economics course, on the topics of intellectual property. This is it.
Transcript below.
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TRANSCRIPT
“Intellectual Property: Law and Economics: Guest Lecture Walter Block’s Law and Economics Class”
Loyola University-New Orleans, Dec. 8, 2021
by Stephan Kinsella
00:00:00
WALTER BLOCK: Okay, it’s 12:37. We usually start the class with a moment of silence, so we’ll start the class with a moment of silence.
00:00:09
[moment of silence]
00:00:12
Okay, students, let me introduce you to my friend, Stephan Kinsella who is a lawyer in Houston, working in Houston, and he is, I would say, one of the preeminent libertarian theoreticians. So without any further ado, you’ve all read his paper, and he’ll go over it a bit and have a nice dialogue with you. So Stephan, start.
00:00:36
STEPHAN KINSELLA: Okay, can everybody hear me okay? What is this course? What’s the name of the course?
00:00:43
WALTER BLOCK: Law and Economics.
00:00:44
STEPHAN KINSELLA: Okay, Law and Economics. Okay, so I can touch on both. I think what I’ll do is I’ll try to speak around 25-30 minutes, and then open it up for questions. And if you guys have any questions while I’m speaking, I don’t mind if you interrupt me if there’s something I said that needs clarification or if I’m not clear. So feel free to interrupt me during it. Otherwise, you can wait until I’m done.
00:01:08
So I think what I’d like to do is kind of maybe explain how I got to my views and where the paper came from. Basically, I started practicing law and patent law around 1993-94, and I had been a libertarian for a long time, and I had been thinking about the intellectual property issue because I was not satisfied with the arguments in favor of it by Ayn Rand and others partly because these rights terminate at a certain time, and it just didn’t make sense to me. Like if it’s a natural right or real property right, why would it terminate? And then how do you know what the right length of time is? All those issues.
00:01:45
So I searched for a better argument thinking I’m a libertarian, and I’m a patent lawyer. I’d know more about it than anyone else. I’ll figure this thing out. And finally I came to conclusion right around the time that I started practicing patent law that all of intellectual property law is totally unjustified. And so I ended up writing that paper in 1999 or so, which is over 26 years now. In the meantime, I’ve come across other arguments, other data, other ways of presenting it, and although I think the original argument is still sound. So that’s where we are.
00:02:23
I think what I’d like to do is focus on two types of intellectual property just because of the time constraint, and those are the two most important and the two most damaging in my view, which is patent and copyright. The other types are trademark and trade secret, and then there are some other more recent types like mask work protection for semi-conductors and database rights in some countries and boat hull designs. And I would also include defamation law as a type of intellectual property because the arguments for it are the same, although in the law it’s not usually considered that way.
00:02:57
So let me first talk about the term. I do think the term intellectual property is a loaded term, and it’s as misnomer, but we’re stuck with it for now and what we want to talk about it because that’s the way it’s gone. Originally, the four main types of intellectual property, which are patent law, copyright law, trademark law, and trade secret law. They were all separate types of all. They had different origins. Trade secret originated in the common law. Trademark originated in the common law, although statutes have sort of replaced it. Patent and copyright purely originated in the statutes and legislation, and they all have different domains.
00:03:38
I’m going to give a quick history of patent and copyright. So you had a rough version of a proto-free market in Europe back in the 1500s, 1600s, some semblance of free trade, some semblance of property rights. Then – and at the time, the king and the church, in cahoots with each other, could control what their scribes – what books they would print by hand. So they could control what thought could be put down on paper and disseminated to the masses, so they had the practical ability to control thought.
00:04:19
When the printing press came around in the 1500s or whenever it was, Gutenberg’s printing press, that threatened this easy control by the state and the church of what could be printed. So the first thing the government did was, in England, they started the Stationers Company as a monopolistic guild, which had the monopoly on printing. So the government still could control what could be printed.
00:04:44
When the monopoly on that – when the charter ran out about 100 years later, the question was what to do now. And so the Statute of Anne was enacted in response to that in 1709, which basically is the origin of our modern copyright law. So they basically gave the copyright, instead of giving it to the publishers or to the printing guilds, they gave it to the authors. But as a practical matter, the authors had to, right away, turn around and assign their copyrights to the publishers to get it published. So it ended up – the rights still stayed with the publishers, and that model lasted until about 15 years ago when the internet and Amazon and self-publishing started disrupting everything.
00:05:29
So you had all these gatekeepers. I mean we’re all familiar with the RIAA, the music industry, and the publishing industry, record labels, Hollywood, book publishing. There’s this gatekeeper function. All the publishers maintain control. The authors usually have to assign their rights, and then they’re subject to the whims of these gatekeepers, which act as sort of like a modern version of the old gatekeeper function of the Stationers Company and the church and the crown, which was censorship basically. So just until recently, we’ve had that model that was perpetuated.
00:06:08
So copyright covers the right to copy an original work of creation like a book, a novel, anything that’s creative. Things that are functional, practical things like inventions, which are machines or processes, ways of doing things, those are what patent law covers. And just briefly, trademark covers marks and signs that you use to indicate the source of goods like Coca-Cola or Nike. And trade secret covers what rights you have when you try to keep information proprietary and secret, and someone leaks it. Can you go to court to stop someone from leaking it further? That’s what trade secret law covers.
00:06:57
So even earlier than the Statute of Anne of 1709, which covers copyright, you had the practice of kings granting monopolies called letters patent because the patent in Latin means – or patente means open. So it was an open letter, which means it’s like the king writes on a piece of paper to someone who’s a court crony. He says here’s a letter you can show to the world. I, then king, hereby grant the bearer of this letter the exclusive right to sell this product in this region. So he would grant monopolies, which would protect them from competition. So one guy would have the exclusive right to sell playing cards or sheepskin or something in a given region. And of course that means they could make a lot of money because no one could compete with them, so they could charge quasi-monopolistic prices.
00:07:48
If you’re protected from competition, you could sell products at a higher price than you could in the race of competition. That was the whole purpose of it. And the king would do this to get a kickback in the form of taxes or to induce these guys to collect taxes or to buy their loyalty. So this process got out of hand, and parliament got sick of it, and parliament enacted, in 1623, a statute trying to limit the king’s discretion to grant all these crazy mercantilist, anti-competitive, protectionist, monopoly privilege grants called letters patent.
00:08:23
And they passed a law called the Statute of Monopolies, so it was intended to restrict the ability of the king to grant these monopolies, which interfere with the free market and restrict competition and make the average consumer worse off because they have less diversity of products, they have higher prices they have to pay, and so on. But in the Statute of Monopolies, the statute retained the ability of the government to grant these monopolies, these letters patent, for original inventions. So they eliminated most of these monopoly grants of privilege, but they kept it for inventions, and so the modern practice of granting patents for inventions emerged there.
00:09:07
And then in the United States in 1789 when the Constitution was enacted, there’s a clause called the copyright clause and section 1 – I’m sorry, article 1, section 8, which gives Congress the power to promote the progress of science and the useful arts by securing, for limited times to inventors and authors an exclusive right to their inventions and discoveries – their writings and discoveries. So that’s the basis for copyright and patent law in modern American law is that copyright clause.
00:09:39
And by the way, just as a point of interest, most people now, when they read that, they think that the word science corresponds to the patent grant, and the useful arts corresponds to copyright because they think copyright covers artistic creation. However, the way language was used at the time, the word science was more general. It just meant knowledge. So that was what referred to writings. Science is knowledge. And useful arts meant the product of artisans like manufacturers and laborers and workmen who came up with machines as labor-saving devices. So actually, it’s the opposite of what most people think on a first reading. Useful arts corresponds to inventions, and science corresponds to copyright.
00:10:20
In any case, soon thereafter, the patent and copyright acts were enacted, and they – so they basically are successors to these earlier Statute of Anne in England, which was rooted in censorship, and the Statute of Monopolies, which was rooted in protectionism and mercantilism. So that’s how we have these laws. Now, in the 1800s, there was a sort of resurgence of free market economic thinking. And all the free market economists started criticizing patent and copyright law saying what the hell is the government doing granting protectionist monopoly privileges that distort the free market and restrict supply and raise prices and all this stuff?
00:11:01
So they started criticizing it, but by then, there had been entrenched industries that had grown dependent upon these monopoly grants like the publishing industry for books and then various manufacturing industries, which were getting patents to protect themselves from competition on their products like the electrical devices and the airplane and plows and things like that. So they mounted a propaganda effort to keep their laws in force, to keep them from being abolished. And what they said was these are not monopoly privileges. They’re property rights.
00:11:38
And everyone said, well, how can they be a property right if they expire after 20 years or whatever? Because it doesn’t seem like a natural property right. And the response was, well, they’re a special type of property right. They’re a – they protect the products of the mind because inventors use their mind and their creativity to invent new machines, and artists use their creativity to invent – I mean to write novels and to write books. So these are intellectual affairs, so it’s a special type of property. It’s intellectual property. So that term stuck. So it’s an umbrella term, which was used as propaganda to save the systems, and it succeeded unfortunately.
00:12:20
And nowadays, everyone things intellectual property is legitimate because it’s necessary, and it’s part of the capitalist free market order, and because America was so prosperous from 1800 to now and because we had patent and copyright law from around the same time to now, they confused causation – they confused correlation with causation, and they assumed that patent and copyright law are the cause of America’s success when there’s no evidence for this whatsoever. It would be like arguing that the business cycle or having a war every ten years is the cause of America’ success or tariffs.
00:12:52
Just because we have them – I mean I would argue that these laws – that we were prosperous despite these laws, and we would have been more prosperous without them, but that’s a counterfactual. It’s hard to prove. So that’s where we are now. Now, what are the two main arguments given for patent and copyright law? Because the arguments are similar because the proponents of these regimes have lumped them together under the same rubric of intellectual property law.
00:13:20
So they – they’re different laws, but they have similar justifications trodded out for both of them. So there’s an economic justification, and there’s a more propertarian or juristic or legal justification. So – and the economist justification is far more prevalent because today’s world is mired in econometric and utilitarian thinking. That’s how everyone thinks about things. They don’t really think in principles anymore.
00:13:47
But from a principle point of view, there’s a small subset of advocates of intellectual property, mostly libertarians who are confused like Ayn Rand and Galambos, Andrew Galambos, J. Neil Schulman, even Lysander Spooner, by the way. Lysander Spooner who was heroic and great on anarchy and the Constitution was completely statist and horrible on intellectual property. I give him a break because he was early, and so he – I actually think that the entire mistaken argument for intellectual property is rooted in a fallacious interpretation of John Locke’s homesteading argument where he says that if you own yourself because God gave you your body, you own your labor, which I think is the mistake. You don’t own your labor.
00:14:35
Labor is just an action. An action is what you do with an owned resource like your body. To say you own your labor is double counting, and it’s confused. But anyway, he believed you owned your labor, and therefore, when you mix your labor with an unowned resource, because you owned your labor and now it’s inextricably bound up with this resource that was unowned before, you have to own the resource because you would lose ownership to your labor if you didn’t.
00:14:59
So – and therefore – but I think what happened was this step in Locke’s argument is an unnecessary step. You don’t need to say you own your labor for Locke’s homesteading argument to work, which even David Hume pointed out, by the way, one time. You could just cut that step out, and it would still work, but because he used that step, everyone thinks of labor as an ownable thing. They think you own your actions. You own your labor, which is just conceptual nonsense. You don’t own your actions or your labor. Actions and labor are what you do with things that you own like your body.
00:15:29
But in any case, because he believed that, that idea, which we call the labor theory of property, it eventually was morphed into the labor theory of value, which – by Adam Smith and then eventually by Marx. So in a sense, the underlying idea behind intellectual property is the labor theory of property and the labor theory of value, which is essentially proto-Marxian or even Marxian. So when people criticize people like me for opposing intellectual property, they sometimes call us communists because we believe in – they think that we believe in common ownership of ideas.
00:16:09
We don’t. We just think that ownership is a property rights principle that applies to scarce resources in the world, which is something I emphasize in my original paper that you were assigned for today, and I’ll get back to that in a second. But anyway, this is what the mistake was, I believe. So the primary natural rights or propertarian argument for intellectual property is that, when you create something, you’re the owner.
00:16:40
And of course, if you have a useful idea, which is just a pattern of information, so if you write a novel, it’s a pattern of information. It’s the way that letters are arranged on the page, or if you draw a map or make a painting or make a movie, or if you come up with a new invention, you have a recipe or a formula for how to rearrange matter so that it’s more useful. You can make an iPhone, or you can make a plow, or you can make binoculars or bifocal lenses or have electricity, a generator, all kinds of things like that.
00:17:14
The idea is that if you own what you create, which they think is the essence of Locke’s homesteading argument, then you, of course, would own useful ideas that you create because they wouldn’t have existed without the intellectual to come up with them and to create them. So the mistake here is that they believe that under natural and Lockian property theory, that creation is a source of ownership.
00:17:39
Now, this is a common mistake, and it’s tied up with the mistake that Locke made in the first place that labor is ownable. You don’t own what you create. That was never a source of property rights. There is only really one source of property rights or two. The main source of property rights is using a scarce resource that’s unowned. So when you take that scarce resource out of the state of nature and start using it and claim it as your own, you’ve now taken it out of the state of ownership – state of nature, and you’ve established an objective link between you and that thing, so you have a better claim to it than anyone else.
00:18:16
So if anyone else wants to take the thing from you, now they’re a second or a late-comer, as Hans-Hermann Hoppe explains in his book, A Theory of Socialism and Capitalism, chapters one and two. You’re a late-comer, and you’re a thief. So ownership derives from the first person to use an unowned scarce resource. That’s a material physical object in the real world, the type of things that can be conflicted over.
00:18:42
And the second way to own it is if you get it from a previous owner by contract, so if I homestead this plot of land or this apple tree or the apples from a tree, or I catch some fish, or I cut some lumber down, if I come to own things like that because I’m the homesteader, the first user, because I’m the owner, I can consent to giving it to you. That’s what contract is. So there are two ways and only two ways to obtain ownership of resources. You acquire it when it’s unowned, or you buy it from someone else who already owned it for the same reason. That’s it. So creation never enters the thing. And the reason you can – the way you can see this is to imagine that your neighbor has a big hunk of granite in his front yard. And at night, you sneak over there, and you carve a statue into it without his permission.
00:19:39
Now, you created the statue, but do you own it? No, because you don’t own the underlying material, right? Or if I’m a worker on Henry Ford’s assembly line and I’m helping make cars, I do create the car, but I’m creating it with someone else’s raw materials, and by contract, I don’t own the car. So creation is not a sufficient condition for ownership because if you create something, it doesn’t mean you own it, which, by the way, Marx would say you do because he would say that the worker is being stolen of the surplus value of his labor by the capitalist employer making a profit at all. So you could see how the IP mistake dovetails with the Marxian labor theory of value.
00:20:25
And by the same token, if I find some – an apple on a tree, an unowned tree in the middle of the woods and I pluck the apple, now I own the apple, but I didn’t create it. So creation is not necessary for ownership. So creation has nothing to do with ownership. The mistake here is in confusing juristic or legal terms, which is what ownership has to do with. Ownership is the legally recognized right to possess or control a resource. Technically, it’s the right to exclude, but it amounts to the right to use a resource.
00:21:00
But economically, that’s a different realm of analysis. One is prescriptive. Law is prescriptive. It has to do with shoulds and oughts and norms, rules that tell you what you should do or you may not do or what you must do, and economic analysis, which is descriptive. Economic analysis describes things. Now, if you understand praxeology and Mises’ approach to things, he analyzes human action in terms of an individual human actor, that is, a person. It’s a legal person or a person who has a will who is associated with a given body, which is a scarce resource.
00:21:38
And he has the ability to manipulate that body and use that body to manipulate other scarce resources in the world to achieve ends. So that’s what all action is. All action is the human being looking at the future that’s coming, being unsatisfied with what he imagines is coming, and using his knowledge about the world, that is, the knowledge of the facts around the land, what resources are available, what ends are possible, and what causal laws happen in the world so that he can decide.
00:22:07
He can choose resources and tools to help him get something changed about the future that’s coming. That’s what all action is. All action is a human actor employing or using a scarce resource, guided by his knowledge of cause and effect, laws of cause and effect, to change the future, that is, to create a new universe. But what that means is when we describe what humans do, we characterize their actions, assuming that – we all know that – we now apodictically, as Austrian economists, we know apodictically from the inside that we are actors.
00:22:44
We know that we have values, and we assume that other people are not some kind of phantasms or illusions or robots because they look like us and they seem to have the same biological basis. So when we see another human being running around doing things, when we want to understand their behavior and predict it and maybe communicate with them to engage in intercourse and trade with them, we characterize their actions as actions as well, not as behavior, as deterministically causally caused behavior.
00:23:16
But we characterize it as an action. What that means is we try to guess what their end is, what their purpose or goal is because we can see what means they chose to achieve something. So we characterize other people’s actions in the means and framework. And this is what economic analysis is. When we characterize what people do, we’re trying to explain what they did. So when I see someone transform an input factor or resource into a different factor, we call that production because he is transforming an input resource into something more valuable to him or to his potential customers, and that’s when he’s more wealthy because he can sell this thing for a higher value than he got it for. That’s what production and transformation are.
00:24:03
So intellectual effort and creation in that sense is a part of the creation of wealth, but that’s an economic category. Creation of wealth simply means you rearrange the things that you own or that you have possession of into a better configuration that makes it more valuable. But it doesn’t give rise to more property rights. So if I take a piece of wood and metal and I rearrange these factors and transform them into a spear so I can go fishing with it, now I’ve increased my wealth because I have a more useful tool. But I don’t acquire any extra ownership because I already owned the wood, and I already owned the metal. So that’s the fundamental mistake with the natural law argument.
00:24:46
The natural law argument assumes that creation is a source of property rights, and it’s simply not. And this is because of a vast confusion in the entire literature ever since John Locke and the confusing way he put the labor theory of property in his homesteading argument.
00:25:02
Now, I have just a few minutes left before I’ll stop, so let me just briefly address the main argument, which is the utilitarian argument. The utilitarian argument comes from the more Chicago-type or Coasian-type approach to economics, which basically says the free market is basically good. But it’s not perfect, and there can be market failures. There can be market failures in certain cases where, for example, there’s a holdout problem or a free-rider problem, which is why the government needs the power to seize property to make a road sometimes.
00:25:36
So they’ll take someone’s property, pay them compensation, which they get from taxes from everyone else. They make a road, which makes everyone better off, and the guy is compensated, so he’s not any worse off, and all the taxpayers are better off because their taxes solved this blockage in the free market. So they try to identify market failures and have government intervention on occasion to fix them.
00:25:58
Now, of course, this is riddled with corruption and error, and it actually never verifiably works, but that’s the theory. And the theory with intellectual property is that you need to have the government grant these limited monopolies to creators of intellectual types of products because otherwise, they won’t be able to recoup the cost of inventing or creating them in the first place because of the special nature of intellectually valuable goods and services like a book, a novel, or an invention. They’re easy to copy. The primary value of this product is in its design, and once you sell it on the free market, everyone can see the design, and then they can very easily compete with you.
00:26:45
And because they can easily compete with you, unlike a normal brick-and-mortar or analogue business like a restaurant or a factory where, if someone wants to compete with you, they have to invest in another factory, and they have to do all this kind of stuff, so competition comes slowly. And you can make kind of an extra profit for a few years until competition catches up with you, and that allows you to recoup the cost of doing it. But these Chicago guys are afraid of competition that’s too easy. So they’re okay with competition as long as it’s difficult.
00:27:14
But when it’s an intellectual product, which is easy to knock off, like if I sell a novel, it’s very easy for someone to talk that novel and copy it and sell copies. So right away, I’m going to face immense competition, and my prices will drop. I won’t be able to charge my – that kind of – that temporary monopoly price. I’m instantly going to charge a bare-bottom price, and I won’t be able to make as much money as I otherwise would have.
00:27:35
Therefore, there’s not enough incentive ahead of time for me to invest in writing the book in the first place. So we will have an underproduction of intellectual goods, an underproduction of technical innovation, that is, inventions, and an underproduction of artistic works. Therefore, the government needs to fix this market failure by granting these monopolies.
00:27:53
Now, there are so many problems with this argument. Number one, utilitarianism is morally and ethically bankrupt because, even if you could take money from Bill Gates and give it to poor people and make them better off, it’s still theft, so it’s still wrong. And number two, as Austrians point out, value is interpersonally incomparable and is cardinal, not ordinal, which means you can’t compare value between people.
00:28:16
So you can never know that if you hurt one person by taking his property to give it to someone else, you can never know if you’ve increased the sum total of wealth – or utility in the society anyway. You can never know. And, in fact, all reason and evidence shows that, as far as we can tell, it reduces overall utility because these systems are inherently corrupt and inefficient, extremely costly, and they basically impede innovation because if I invent something and I have a patent on it, I don’t need to innovate for 17 years because I have a monopoly.
00:28:47
And my competitors can’t innovate because they won’t bother to innovate because if they make a similar product or an improvement on my product, half the time it’s covered by my patent, and so they won’t be able to sell it, so they don’t bother to innovate. So patents clearly impede innovation. There’s no doubt about it. They slow down innovation. And as for books, we live in the internet age where there’s encryption and torrenting, and piracy is widespread.
00:29:13
Any of us, I’m sure, could download any song, any photograph, any movie that we want – any novel that we want for free. There’s tons of piracy sites. So basically copyright is almost a dead letter anyway except for the big institutional industries. So in today’s world, we actually don’t really have copyright except it’s arbitrarily enforced selectively on occasion, capriciously against a few unlucky victims.
00:29:41
But basically, if you sell a novel, there’s going to be pirated copies the very next day or the same day even, and the same is true with movies. So right now, people that produce these goods are subject to massive instant copying, and yet, we don’t see a decline in the output of these goods. In fact, I would say today, as we stand here this year and last year, probably if you look at the last 30 years, there’s been an ever increasing output.
00:30:11
The number of books published, the number of movies made, the number of songs and music made is ever increasing and shows no sign of abating even though people can copy. So the empirical argument that without copyright law you wouldn’t have people write novels is just ridiculous because they’re writing them right now even though they can be pirated. So that’s the basic case against it.
00:30:36
Let me mention one more thing before I close. Legally, in my view, and this is not how the law treats it, but I’ve thought about it for a long time, and I’ve studied the Roman law, which is the civil law in continental Europe and Roman law is modern instantiation and – which is the law of your state, Louisiana, my home state, and the common law, which is the law of the other 49 states and of England and the Commonwealth countries, the two great legal systems of the world.
00:31:02
I believe the proper way to characterize intellectual property law, especially patent and copyright, is as a negative servitude. We would call that a negative servitude in Louisiana, and we call it a negative easement in the other states. A negative servitude is when the owner of a real resource, typically a tract of land, but it could be something else, a factory or something else. It could be personal to you. The owner of a resource contractually grants a partial ownership right to someone else, and that partial ownership right is not a right to use it, but it’s a right to block my use of it. It’s a purely negative right. This is what restrictive covenants and homeowner’s associations are.
00:31:42
So, for example, if you live in a neighborhood with 100 homes, they’ve all agreed to this homeowner’s association restrictive covenant agreement, which means they’ve contractually agreed that every one of their neighbors has a property right in their own home. And that property right is the right to prevent me from doing certain things with my house. Like I can’t paint my home bright orange, or I can’t knock my home down and build a pig farm on it.
00:32:09
So we grant these negative easements to people by contract, and there’s nothing wrong with it as long as it’s contractually consented to. Just like sexual relations between people is fine as long as both parties consent, but if one of them doesn’t consent, it’s assault and battery. It’s a crime. So consent is the key here. And the problem with intellectual property law is that when the government grants a copyright to someone or when they grant a patent to someone, they’re granting that person a negative servitude over other people’s real resources that they already owned.
00:32:45
But those people who own what’s now called the burden to state did not consent to it, so it’s a taking of property. So, for example, if I own a copyright, I can use that copyright to prevent you from using your printing press to print a book, which is what a negative servitude is. But I never consented to that servitude. So my rights and my property are being limited. They’re being subjected to an involuntary negative servitude. This is ultimately the analytical problem with intellectual property law. It is a taking of property rights because it’s a grant of a negative servitude over real owned resources that other people owned justly and legitimately, and they did not consent to be burdened by this negative servitude. So I will stop there, and I’m open to any questions about anything related to any of this.
00:33:31
00:33:35
MYLES: I have a question.
00:33:36
STEPHAN KINSELLA: Yeah.
00:33:37
MYLES: So you mentioned previously that property is when you take scarce resources and how – and that is the creation of that ownership, relationship. And so I was curious as to, say we get rid of all legal protections for copyrights. People are going to start investing in more security for their – maybe their intellectual property on digital assets or whatnot. Take, for example, people are creating cryptographic assets like Bitcoin [indiscernible_00:34:10]. That’s the big trendy craze right now, I guess. In a way, those are cryptographically unique items. Would that count as something that’s scarce in your opinion?
00:34:21
STEPHAN KINSELLA: No, because I think economic scarcity has to do with – the reason is information is not an independently existing thing. Information is just how we interpret patterns, and a pattern has to be observed to be a pattern. So that means a pattern is always recorded on some, what we call, a media or a carrier or a substrate. So a pattern is always impatterning of something, and that something itself has to be a real thing, and that real thing is a scarce resource, which is already owned.
00:34:55
So, for example, Bitcoin is – Bitcoin has features of ownership, but they’re technological metaphors. They’re not really real ownership. Bitcoin is just information because Bitcoin is just how we understand and categorize the way a database called the blockchain is arranged. So we interpret those entries on there as Satoshis or Bitcoins, but the spreadsheet is just a database, which is just information, and it’s stored in identical form on 10,000 people’s computers around the world, everyone who runs a node or who’s a miner, right? And that’s updated every ten minutes. So the spreadsheet is just information, but the information is just the way that different people’s hard drives are impatterned.
00:35:46
Now, if I’m running a node on this computer I’m talking to you on right now, I have a bunch of RAM cards in there, which are transistors and circuits, which are physical property that I own, and they’re arranged in a certain way. Now, I own that resource. No one owns the way it’s arranged. The way something is arranged is just a feature of it. It would be like if you own a red car. It doesn’t mean you own red, and you don’t own redness. If you did, you could – that means you own everything in the world that’s red, right? So we have to be careful with identifying what’s owned.
00:36:20
So to own Bitcoin would mean you would have to own other people’s computers, but you don’t. They own their computers. So information cannot be owned. This is why the negative servitude analysis comes out. People describe intellectual property law as ownership of information or ideas or intellectual creations. But that’s not actually true because law is always the implementation of a right, a property right.
00:36:44
Law is always backed by force. Force is physical force. Physical force can only be applied to physical things in the world. So the only recipient of a law can only be a physical thing. That’s why, when you sue someone in court for copyright, you’re not awarded a pattern of information. You’re awarded money, right? The government comes in and takes money from you, or there’s an injunction issued against you using your printing press in a certain way.
00:37:07
The application of law is always, always, always against physical things, which is why Ayn Rand recognized that all rights are individual rights. All human rights – all rights are human rights. All human rights are individual rights, and Rothbard recognized that all human rights are property rights. That’s all rights can be because rights are enforced by force, and force can only be used against physical things.
00:37:29
00:37:34
MYLES: Thank you. That answered my question.
00:37:35
KATIE HEAVEY: I would like to ask what you think of the Nissan.com case. It’s where this businessman had the last name Nissan, and he used that website to – for his own business, and then Nissan, the car company, comes along and says, hey, we have intellectual property for the phrase, Nissan, so you can’t use this website. And there’s been this whole big dispute and lawsuits over it.
00:38:01
STEPHAN KINSELLA: Right, and I didn’t touch on trademark. That’s a trademark issue. I’ll briefly explain the problem with trademark. Now, the reason I didn’t touch on it is its origins are a little bit different, and it’s not quite as harmful as patent and copyright, although it’s harmful. I think patent law is the most harmful, by the way, because it impedes the advance of technical knowledge, which is what the human race requires to keep surviving and prospering. We don’t find more resources in the ground really, and we’re not getting smarter. We’re just getting more recipes, more knowledge. That’s why we’re richer than the Romans is because of the knowledge we have.
00:38:40
So anything that slows down the development of technical knowledge, that is, how to make things, how to use cause and effect, that’s what impoverishes the human race. Copyright is second in its damage because it distorts culture, it restricts free speech, and it lasts a lot longer, and it has criminal penalties, and it threatens internet freedom, which is really dangerous because we need the internet to fight the government.
00:39:02
So I would rank patent and copyright as the two worst, patent the worst, copyright a close second, trademark a close third or a distant third. Trademark law – the problem with trademark law is that people say that it’s there to prevent fraud. Well, that’s a complete misunderstanding, and it’s false. We already have laws against fraud. They’re called fraud law, and we already have laws against contractual breach, which is called contract law.
00:39:27
So whenever someone commits an act of fraud or breach of contract by misrepresentation, then the victim of that can sue the perpetrator under fraud law or contract law. So trademark law must add something, and it does. What trademark law does is it says if you use a mark to identify your company or your product, you use that in commerce, and you’re the first to use it in a certain region, then you have a property right in that mark, meaning that if any competitor uses a mark that is confusingly similar—now, what that means is if there’s a likelihood of consumer confusion—then you can stop them from using that mark.
00:40:13
Now, there are so many problems with this. Number one, consumer confusion is not fraud. It’s a different standard. And likelihood of consumer confusion doesn’t even prove that there is consumer confusion. It just means there’s a likelihood. And if the consumers are defrauded or confused, they’re the victims, not the owner of the mark, but trademark law gives the right to sue to the person using the mark.
00:40:35
In my view, trademark law should be completely abolished, even the common law and the statutes based around it. And we should just have trademark – I’m sorry, fraud and contract law. So in the case of this guy using the word Nissan, look, if he’s using the word Nissan in a way, and let’s say it’s a famous mark. It’s called a famous mark. Everyone knows what Nissan is. They associate it with the car company because they built up their brand. They have a reputational value in it. I don’t deny that.
00:41:00
By the way, this is why I consider defamation to be a type of IP because the argument for defamation law, which Professor Block also opposes along with me, is the same as the argument for trademark law. Basically, it’s that you have a reputational right that’s of value, so then you have a property right in it. That’s why defamation law I think is a type of IP and is also unjust.
00:41:22
You don’t own your reputation because reputation is a subjective appraisal of your company or yourself by other people, and you don’t own their brains. You don’t own what they think. They have a right to their opinion even if their opinion is wrong and even if their opinion is informed by people lying to them. If they want to take the word of an unreputable person, it’s their right to do that.
00:41:43
So anyway – so if this guy is using Nissan, if he’s using it in a shady way to make people think he’s Nissan to draw traffic or something like that, and if he’s selling cars and claiming they’re Nissan but they’re not really Nissan, well, I think at a certain point there could be a case that he’s defrauding his customers. And they would sue him, and he would go out of business. And because of this prospect, he would never get a lot of financial backing because who’s going to back a guy who’s probably going to be sued into oblivion?
00:42:11
I mean so this never happens. This is really not a real problem. When McDonald’s became a popular fast food chain, Burger King emerged, but they didn’t want to call themselves McDonald’s. They called themselves Burger King, and then Wendy’s came around, right? When the Ford Motor Company was popular, General Motors didn’t call themselves Ford. They came up with their own name. Tesla didn’t try to pretend like they were Ford, and it’s not because of trademark law. It’s because they want to do their own thing, and they want to distinguish themselves and say we’re better.
00:42:39
So it’s not even really a real problem in society. But I think it’s totally unjust, and that’s an example of how trademark law is inherently unjust, and also it could be abused and will be abused because the power to enforce these trademark, patent, and copyright laws and even trade secret laws is always in the hands of large corporations with deep coffers, and they’re partly large because they have intellectual property, which allows them to get larger than they otherwise would. I mean maybe Microsoft and Apple and these other companies wouldn’t be such huge conglomerates without the assistance of IP law.
00:43:16
So when lefties attack us for favoring large corporations, they ought to join us in opposing intellectual property law because that’s one of the reasons why they’re so big in the first place. But they can use that to bully people into submission, which is totally unjust. I mean there’s a famous battle for years.
00:43:32
There was this – Chick-Fil-A has a slogan—Eat Mor Chikin, kind of misspelled because it’s like a cow did it, M-O-R for more or something like that and chicken misspelled with a K. There’s some guy up in New Hampshire somewhere or in Maine or somewhere in the Northeast who was promoting eating kale, so he was selling Eat More Kale shirts. It wasn’t even misspelled. It just said Eat More Kale. For years he was hounded and sued by Chick-Fil-A for violating their trademark. It’s ridiculous. He finally won, but he was – his life was upended. He spent untold amounts of money. Why should he have to go through that? It’s just censorship, and it’s anti-competitive.
00:44:14
AJ CESARIO: Hi. I have a quick question. When it comes to kind of the economics of intellectual property or kind of the utilitarian case against intellectual property, I know you have some concerns and critiques about it and focus more on a principle side. But one of the things that we kind of hear in some of our econ classes is this idea of property rights helping the economy and helping the market, and the more you can have strict property rights, the better you can be.
00:44:39
And one of the ideas behind intellectual property is having property rights in ideas, and even if you don’t believe that ideas are something that are valid property rights, if you can have the same structure of property rights in ideas, you can facilitate kind of the production of more ideas and better ideas and kind of have a similar kind of benefit and that we would see property rights with land and other raw materials in intellectual. How would you respond to something like that?
00:45:05
STEPHAN KINSELLA: Well, I would say that because of the way the Constitution is written, it says to promote the progress of science and the useful arts Congress can do these things. So I believe it’s actually unconstitutional to have copyright and patent law if they don’t promote the progress. That is, if they don’t actually create more works and make us all better off. And there’s – so I think the burden of proof is on them to prove it, and they’ve had 200+ years to do it, and they’ve never done it. They didn’t do studies in the beginning. They just did it because it was inertia from the English system.
00:45:34
And in the late 1800s – in the mid 1900s, around 1950s, studies started to be done by Fritz Machlup who’s an Austrian economist who actually got his PhD under Mises. He was commissioned by Congress to do this mammoth study in the 1950s about the effects of patent and copyright law, and he did a deep dive on empirical, and he concluded that you just simply can’t prove that these things do benefit us at all.
00:46:02
So there’s no evidence for it. And since then, every economist or legal scholar who looks at it in any kind of empirical way, they either conclude we just can’t tell, or they conclude that it looks like it actually harms. It distorts culture. It restricts output. It censors free speech, and it reduces innovation. So the evidence seems to be against it, and if anyone is interested, I would just recommend you look at – go to my website, C4SIF.org/AIP. That means against intellectual property. And on there, I have a study about empirical – the empirical argument against it. I collect a bunch of studies.
00:46:37
And also if you read – take a look at the book. It’s online, AgainstMonopoly.org. It’s called Against Intellectual Monopoly by economists Boldrin and Levine. And they exhaustively go through all this stuff, and there simply is no evidence. I just did a debate in New York at the Soho Forum where I debated Richard Epstein who is a law and economics Chicago-type guy. And I trodded out a dozen studies showing that his empirical case fails, and he didn’t have any rebuttal at all except, well, hypothetically if, if, if. But he has no studies because there is simply no evidence on that side.
00:47:19
WALTER BLOCK: Stephan, we have two more minutes, so we have time for one more question. Somebody take advantage, one of the leading theoreticians of libertarian theory.
00:47:31
LEITH EDGAR: Thanks for coming to us. Could you comment maybe on the homesteading of animals and how one can produce animals? And it would seem to me that the way things are now, the government has a stranglehold over their production and maybe claims in intellectual property and production of animals, particularly animals that are scarce?
00:47:55
STEPHAN KINSELLA: What do you mean intellectual property? How does the government have a stranglehold over the production of animals?
00:48:02
LEITH EDGAR: Well, if I want to produce a grizzly bear, I’m going to be violating federal law, but if the government wants to produce more grizzly bears, they do so without any competition.
00:48:14
STEPHAN KINSELLA: Well, I don’t think that’s really an IP issue, although it’s – it kind of illustrates the general principle of the nature of government harm. So if you just take the state of nature, I think we can own animals if we assume, from moral theory and moral philosophy and political philosophy, if we assume animals don’t have rights.
00:48:37
And there are scarce resources, and they can be owned. But because they’re animals, meaning they’re animated—they move—they’re owned in a different fashion than other things. Just like lots of resources have special characteristics, and we own them according to their nature. So ranchers brand their horses – or their cows because they roam. There are ways of owning things that have unique natures.
00:49:00
So I think there’s nothing wrong with homesteading animals. And if you own a cow and it has a calf, you own the calf because it comes from the body that you own. So in the law, that’s called the fruits. In the civil law in Louisiana, it’s called the fruit. The calf is a fruit of the cow. Now, basically, every unjust government law could be viewed through the IP lens of a negative servitude.
00:49:26
So you could say that when you throw people in prison for selling cocaine or for refusing to fight in a war or for not paying taxes, well, you could either call it a form of slavery, but it’s also like a type of negative servitude because the government is asserting a veto over your body. They’re saying we have the right to veto your use of your body to ingest cocaine. So a lot of government laws that are unjust can be viewed as a type of negative servitude, and again, the problem is they’re involuntarily – they’re not consented to. They’re involuntarily negative servitudes.
00:50:02
WALTER BLOCK: Stephan, Stephan, I’m sorry. If we keep going, we’ll be violating contractual rights.
00:50:07
STEPHAN KINSELLA: Okay.
00:50:08
WALTER BLOCK: Because I’m supposed to end at 1:20, and it’s 1:21. So how about a quick round of applause for our speaker?
00:50:14
STEPHAN KINSELLA: Thank you guys.
00:50:16
WALTER BLOCK: Thank you. Thank you very much.
00:50:18
STEPHAN KINSELLA: Thank you so much.
00:50:20
WALTER BLOCK: I’ll see you people on Friday, and remember your homework assignment. You have to come up with a question or a comment. Take care, and thanks again, Stephan.
00:50:27
STEPHAN KINSELLA: Thank you.
00:50:28
M: Thank you so much.
00:50:29
STEPHAN KINSELLA: Thanks guys.
00:50:30
CHRISTIAN HANSON: Thank you, professor. Thank you.
00:50:32
