KOL421 | The Local Maximum with Max Sklar: Ep. 297 – The Fallacy of Intellectual Property

Transcript

Max Sklar: You’re listening to the Local Maximum episode 297.

Narration: Time to expand your perspective. Welcome to the Local Maximum. Now here’s your host, Max Sklar.

Max: Welcome everyone, welcome, you have reached another Local Maximum. We are going to get a really interesting perspective on intellectual property today from Stephan Kinsella. He is an intellectual property lawyer who is actually against the whole concept of intellectual property that includes patents, copyright, the whole thing. Now, for those of us on the outside, there’s still a lot that we need to learn about IP, like, what are all these different concepts? Why are they considered necessary by the mainstream?

So we go back to basics a little bit, go over what patent and copyright is and why you still need to use it and think about it even if you don’t agree with it. And then we’re going to take a turn into the issues of the day with generative AI models and how copyright law may end up getting applied to these processes, by the authorities, by the powers that be and the harm that this could possibly do.

All right. My next guest is a libertarian writer and registered patent attorney in Houston. He has spoken, lectured and published widely on various areas of libertarian legal theory and on legal topics, such as intellectual property law and international law. Stephan Kinsella, you’ve reached the Local Maximum, welcome to the show.

Stephan Kinsella:

Thank you, glad to be here.

Max: Yeah, really glad to have you and your work on intellectual property and copyright. First of all, that’s a topic that, you know, not everyone can make it interesting for me, whenever I listen to your stuff on it, I always I always find it’s more interesting. So I appreciate that. And I agree with you on a lot of things. So that’s it. I just appreciate the way you present it.

You’ve been opposed to IP for quite a while. When did you come to this kind of full? Well, what is your full position? I think it’s like, you know, no patent, no copyright? Is this your full position? And when did you come to this position? Was it before after going into IP law?

Stephan:

About the same time I was a, I was a libertarian and college and in law school, but I was always unsatisfied with the arguments for IP that I had heard by Ayn Rand and others, I assumed it was a legitimate type of property right because it was in the Constitution, and it’s part of so-called capitalism, and everyone was in favor of it.

But their arguments didn’t make sense to me, because, you know, most of the arguments were either well, they’re either utilitarian or incentive based, or they’re kind of a deontological, or principle based, like have a natural rights argument. And the natural rights argument just makes no sense because the patent and copyright expire after a certain number of years, which, which is not how other property rights work.

So it seems to me like if you’re trying to do a natural rights argument, which Ayn Rand did, and then you say, but that copyright should expire in 100 years, and patent should expire in 17 years. It’s weird that you just have this arbitrary number, which, of course, the government would have to make up and they have no basis for it. And if you do a utilitarian argument, then I just don’t think that you never hear any evidence, you just hear anecdotes and the same old arguments, so I was dissatisfied with it.

And when I started practicing law in 1992, I was doing oil and gas law at first in Houston. But then I decided to switch to patent law. So I could move around the country because it’s a national field. So I started learning patent law, studying, taking the Patent Bar Exam. At the same time, I redouble my efforts to try to figure out from a libertarian point of view, like, I thought I was going to be the one to come up with the right argument for IP to explain it. So I kept searching and searching and trying and trying and one argument after the other and I kept failing.

And finally I realized, well, the reason I’m failing is because this is not justifiable. And as my understanding of property rights got clearer — which I had to sort out to figure this out — I realized that patents are totally illegitimate. Probably around ‘93 or ‘94 right? Right around the time I passed the Patent Bar. So at the moment, I became a patent lawyer, I also realized that all intellectual property rights, I would say every intellectual property rights, illegitimate patent, copyright, trademark trade secret law, all of it.

And not just those but any any type of right in an intangible or an immaterial object is an invalid right because it always ends up stealing property rights from existing owners of tangible objects. So I came to that conclusion. I was cautious about admitting that in public at first because I thought it might hurt me in my career to be a patent lawyer who thinks the whole patent system should be abolished.

But over time I gradually let my opinions out there and I realized no one cares. No one in the business world cares what my private opinions are. In fact, it helped me get clients because they figured I must know what I’m talking about, if I’m so passionate about this topic to write on it, so it never hurt me in my career that I noticed.

Max: So I, yeah, I found that interesting, you get your patent, you become a patent attorney, you come to the conclusion that all of these laws shouldn’t be there. And yet you stay in that field. You know I feel like your experience in this role must have been so different from every other patent lawyer out there.

Stephan: Most of them either don’t care to think about these issues, or they have self serving arguments, you know? For me, now, if you understand — I actually don’t think you need to know IP law on the detail level, like a professional like me does to understand the case against it. So I don’t think that I came to my anti-IP conclusions, because I knew the law.

I think that because I was going into the law, it made me turn my attention as a libertarian to it. And that’s what made me figure it out. Now, knowing the law does help a little bit, because it helps me communicate precisely. A lot of people that talk about IP, either pro or con mangle the terms, they confuse copyright and trademark and patents because they don’t get it.

But knowing the field really well, like I do, helps me understand that there are ways to engage in the practice of that law that are not incompatible with opposing it on moral grounds, because, so I look at my job, I help people acquire patents. So to me that’s analogous to selling guns to someone, or weapons or bullets maybe. And guns and ammunition has a good, you know, has a justifiable purpose, and it has a bad purpose, you can use it aggressively or you can use it defensively.

So merely selling someone a bullet, or a gun, per se doesn’t mean that you endorse using it aggressively. And in fact, most people acquire patents for defensive purposes. Like given that the system exists. If you don’t have patents, you’re vulnerable to attack and a patent infringement attack by someone else. So it’s a waste, it’s a huge waste of society. But given that the system exists, obtaining patents is a little bit like buying insurance.

And I have never helped in litigation with the aggressive side, I’ve only helped with the defense side, which I think is perfectly legitimate. Or in a countersuit like I would have no problem using one of my clients patents to, to countersue someone if they sue me first, you know, it’s like once you open that door.

So that’s how I started to justify it. I steered clear of being part of the aggression. And I only provided the patents to people. Now that said, I still didn’t enjoy it, because I knew that what I was doing was, in a sense, a waste on society. But given that it’s there as sort of like a, the way I analogize is like an oncologist, a doctor who tries to he gets paid a good salary to help people fight cancer. But if he’s a decent human being, he would like there to be a world where cancer was cured and abolished, even though that would put him out of a job maybe right?

Or put it this way, defense attorney, a libertarian defense attorney who gets paid to defend people from drug charges. He would prefer there to be a world where drugs are not illegal, which means he would be put out of business, but it’s not hypocritical or unethical of him to defend people who are attacked by the state for drug charges given that the system exists. So I think that’s the best way to look at the best positive spin to put on being a patent practitioner like I’ve been.

Max: Yeah, that I almost had a flashback for I you know, I worked at Foursquare for many years. And it wasn’t, you know, I was an engineer. I wasn’t on the legal side or anything. But I remember we were always having these like, kind of patent trolls come after us. And it was like, Well, what did they say we copy? He’s like, Oh, he claims he has a patent on all online commerce that takes place based on latitude longitude. It was like that, that sounds — I didn’t get into the details. But I’m like that, that sounds a little crazy.

Stephan: That’s the thing about patent trolls is, everyone says patent. People say we need to reform the patent system because it’s broken. And they’ll say something like, there’s too many bad patents issued. And there’s all these patent trolls or what we call non practicing entities. So they say, well, they have a patent and they’re not even making anything.

Well, the patent law doesn’t require you to make anything, it just gives you a right to exclude an invention that’s claimed in a patent whether you make it or not. And also, this defensive strategy I’m talking about doesn’t work against trolls because you can’t countersue them because they’re not making anything themselves.

Normally if you’re a competitor or who’s making something in the same sphere of activity as you, if you have 100 patents, and they have 100 patents, and they see you for one of their patents, you might be able to find something to sue them with in your stack of patents. But if a patent troll, you’re totally defenseless. On the other hand, a patent troll never wants to shut you down, they just want a cut, they want a taste, they’re like the mafia, you know, like, just, they just want to wet their beak a little bit.

So patent trolls, which are annoying and a nuisance. They’re just like a little tax on your business, they don’t want to put you out of business, they want to kill the goose that lays the golden egg, right, they want to keep getting royalty from you. Whereas your competitor wants to shut you down. And they will if they can.

So in a sense, what everyone complains about, which is patents that are weak patents like that shouldn’t have been granted, or patents because you have bad examiners, or unobjective patent law or bad database searching system, or patent trolls, those are the actually the least harmful because a weak patent, you could theoretically go to trial and beat it. Right?

The problem in a patent troll, you can buy him off with a little tat, with a little royalty fee. But the problem is really strong patents issued to your competitors who are practicing entities. That’s the problem because you can’t defeat a strong patent. And they want to get an injunction to make you stop making your product. That’s the real damage. So the one type of patent everyone thinks is illegitimate is the worst one of all, in my opinion.

Max: Interesting, interesting that you mentioned that, and I didn’t have this in my notes. But you mentioned something that was interesting to me. You mentioned trade secret law before. And that’s something that I guess I’m a little less familiar with, I almost think of that as oh, just something that we do at our company that outsiders don’t know about. What is that? What’s going on there?

Stephan: So you notice I didn’t I didn’t criticize trade secrets. I criticize trade secret law. There’s nothing wrong keeping things secret or proprietary or confidential. Just like there’s nothing wrong with you having some private memories or ideas in your head, which you don’t tell anyone. There’s nothing. But you don’t need a law to do that.

All you need is self ownership rights. So that you’re, you’re not a slave and compelled to say things. As long as you own your body or you own your company, you have the right to and the ability to keep things secret. And people do that all the time. Your customer list or whatever.

What trade secret law does is, trade secret laws gives you a right. So what trade secret law says is that if you have a trade secret, which is basically some information that is not publicly, not widely and publicly known, that gives you some kind of competitive advantage over others. So it doesn’t have to be something that could be patented like an invention, it could be, but it could be just like a customer list, right? Or, or it could be a totally obvious way of mixing chemicals. But no one knows exactly, or like the Coca Cola formula that’s not patentable, because it’s not an invention.

But knowing it gives you an advantage over your competitors, because they don’t know exactly how to make it right. They can’t claim that they can’t assure their customers that they know that it’s exactly the same, they can say we think it’s the same, but we don’t know. So it’s just some information that you have that gives you a competitive advantage. So what the law says is that if you have that, and if you are diligent in trying to keep it secret, then if it leaks, you can get a court order to enjoin the people that have it from using it or spreading it further. As long as it’s not- if it’s publicly known, then the trade secret is, is no longer a secret. So it’s just just evaporates.

But so let’s suppose you have an employee who signs an agreement to keep your proprietary company information, you know, confidential and secret. So that’s one of the ways you can prove to the court that you’re being diligent and trying to keep a secret, you have a contract with all your employees.

And then if that employee, say, let’s say, he leaves and he starts another company, using the trade secret, well, you don’t need trade secret law to stop him from using it because you have a contract with him. But let’s suppose he tells this information to one of your competitors. And now your competitor knows your formula. Now, they haven’t released it to the world yet, because they don’t want anyone else to know it. But they know it. You can go to court under trade secret law, and you can get an injunction against your competitor to tell them they can’t use this information. Because you own the trade secret. And because it’s not yet public. And because you took double just steps to keep it secret. So you can basically shut down the leak.

And the problem with that from a libertarian point of view is that the third party doesn’t have a contract with you. And they didn’t violate your rights to get the information, at least not per se. They might have if they colluded with the other guy, but not necessarily right. So that’s the problem I have a trade secret law. I don’t think you should be able to get an injunction from a court against a third party that you have no contract with.

You can sue your ex-employee for breaching contract. But you can’t go off to the third party. It’s the same thing with copyright. If you have a contract with your customer who buys your who, who buys a copy of your book or your song, and they promised not to upload it to the internet, and they do, then you could sue them for breach of contract. But but once it’s out there, you can’t sue third parties who download the information because they don’t have a contract with you.

And by the way, those contracts are totally unworkable. Practically no customer is going to sign such a contract, which is what a lot of people that argue for IP say, “Well, Kinsella, you’re against contracts, because you can easily recreate copyright with contracts.” It’s like, well, no, you can’t. Because contracts are in rem rights or real property rights. I’m sorry, copyright are real property rights and contracts are only personal as between the parties, you can never generate a system that binds everyone with contracts, which are always between concrete individuals in privity contract with each other.

And not only that, no one would ever sign such a contract, because they’re already giving you money to buy your pattern of information. Why would they incur a possible future potential large liability for using the information that they’ve just paid you for? They would instead just go pirate it if you’re going to impose these onerous stupid constraints on them. So these contract models are totally unworkable, which people don’t understand when they say this or worse, they don’t really care. They’re just throwing it out as a makeweight argument. They’re not really serious. It’s just tendentious. Anyway.

Max: Yeah, what’s interesting about copyright is yes, like, once something gets out on the internet, you know, it’s out the stuff he could do. But it seems like there are ways to, like, restrict the ability to get something easily.

Stephan: There’s DRM, you’re going to, you know, technological restrictions, DRM, which there’s nothing wrong with that. But of course, that can be hacked and broken. But the other way is just, you know, like, if you, if you buy software, license software from a company, you need their updates and their tech support.

So you’re not going to go get a pirated copy of a $10,000 software program, need to run your company, and you need tech support for. So there are ways to do it. But that’s, that’s what the entrepreneurial the entrepreneur has to figure out. As with any business model, you have to figure out a way to make it financially feasible, you have to find a way to make a profit in the face of possible competition. And you have to be creative to figure out these ways.

When the thing you’re selling is something that’s easily replicable like information, like a book, or a music. So if you’re an artist, you might get performances, if you’re a or you might sell swag, or you might, you know, do autographed copies of your book, there’s, there’s different things that you can do. Or you might give a preview, you know, to a sneak preview of the next book or something like that.

Or you do a crowdfunding campaign saying, hey, Harry Potter number one is out there. And I have Harry Potter number two written. And as soon as I get a million people that pre order a copy of book number two for $10 each, which is $10 million. I’ll release it. And then as soon as I release it, there’s going to be pirated copies out there, but I’ve got my 10 million bucks already, you know, so there are things you can do.

Max: Yeah, well, I mean, it seems like people buy books anyway, even if it’s out there. But I mean, that’s that that is I mean, you already kind of answered this question. But like, you know, there’s been a lot of interest in copyright recently. And every time you go into an article, it always has quotes from authors and creators who are like, oh, you know, I write this stuff. And I’m very concerned about my IP, and what am I gonna do?

And like, a lot of these people, you know, they’re not economists, they’re not political thinkers. They’re not even, you know, they’re not, like, in some sense, they’re entrepreneurs. But but, you know, but but really, they’re, they’re kind of creatives. And so they kind of think in a certain way, what would you say to kind of like, an author who is just very concerned about this and very concerned about, you know, people stealing their book and all that.

Stephan:Well, it’s impossible to steal a book, you can only copy it.

Max: Well, right, I think they use the term steal my book when it’s just copying the book.

Stephan: Yeah, but they use the word least they used euphemisms or incorrect words like stealing or theft, or piracy. I mean, piracy, is when you know, a ship comes up to you, and they rob you and kill you and take your stuff. And stealing and theft have a legal definition in the law. It means when you physically take someone’s own resource so that they don’t have it anymore. I mean, that’s not what happens when you copy. And in fact, even in the law, even under copyright law and pet patent law, the courts, if pressed will say well, yes, it’s not theft to copy someone’s invention, patented invention or their copyrighted work, it’s infringement. Like is that’s what it legally is called.

It’s just a made-up legal offense called infringement. It’s not theft, because it doesn’t meet the criteria for theft, because the person still has their whatever you stole from them, they still have it. So what kind of theft? Is that? Right? So it’s not that number one. And I would say that the fact that they’re concerned still doesn’t, it’s not an argument that there should be copyright law. And in fact, I would say the copyright law doesn’t stop it from being stolen anyway.

Because there’s piracy, because we have the internet and digital information and torrents. Pirates, so called piracy is widespread. So as soon as you sell a book, it’s going to be pirated. Even though there’s copyright law making that illegal, it’s just like, you know, the drug war doesn’t stop people from doing drugs either. And, copyright law doesn’t stop people from doing it.

So anyone writing a book, if they want to make money off of it, they have to find a business model where they can make money in the face of piracy, because piracy exists. So that’s just the fact of the world. And if there was no copyright law, there would probably be more piracy. But they would still have to find a way to deal with that. And I would say also, that most authors don’t make any money anyway, because the copyright system has made the publishing industry the gatekeeper. And they get most of it.

I mean, if you’re, if you’re a professor or an academic, you don’t get paid for your journal articles, but you have to assign copyright to some journal. Or if you write a book, you have to get an academic press to publish it. They get all the copyright, and they get all the royalties, they sell it for $180 to libraries, because the libraries, because the professors need it for tenure. Right. And the libraries have a big budget, because they have a captive student audience that’s supported by governments guaranteed government loans.

I mean, the whole thing is a racket because you have the taxpayer, basically, in effect, giving money to these libraries, which buy the books at inflated prices from these academic publishers who make a fat royalty off of it, the professors get nothing except they get tenure, which means they get paid again by the taxpayer. And then the average reader can’t get the book because they’re they don’t have a library card to the to Harvard Library. And they can’t afford $158 book.

So the whole thing is just ridiculous. It’s just the whole system is a mess. And so the point is, most authors don’t make any money off of books, even novelists, you know, they sell a book on, they self publish a book on Amazon, they’re not making no money, because they don’t have good copyright. They’re not making money, because there’s millions of books published every year, and most people just aren’t that good.

So if you happen to be an author who is actually good, like, like JK Rowling, you could do what I said, you could have, oh, I’ve got seven Harry Potter books in mind, I’m gonna sell the first one, make a lot of make a decent amount of money before the pirated copies start hitting the shelves, but then I have a built in fan base, and I can use that fan base to make money. There’s all kinds of ways people can think of to make money.

Max: You don’t have to be you could be a niche author to that, that makes money as well, for this very specific, you know.

Stephan: Yeah, there’s, there’s lots of nice authors on Amazon that self published and they make millions of dollars a year. And it’s not because of copyright. It’s because they have an audience. Look, if, let’s suppose we have no copyright and Amazon, let’s say has no standards whatsoever, and they will publish the author’s book, but they will also publish a copy of it, that someone pirates the next day that it comes up there. So I go to Amazon, looking for Harry Potter number two, by JK Rowling, and I find 17 versions of it. And I mean, why would I? I would probably want to buy the one from the author because I know that it’s going to be hers and I’ve already given her some of the money. And not only that-

Max: Yeah, it could be like a seal of authenticity or something.

Stephan: Well, that, yeah, that and also, also, Amazon would have an interest. Why would Amazon want to put 17 copies up and confuse their audience they might put up to copy, they might put up the originally authorized copy for $25. And they might put up a pirated copy from a legitimate pirating press for $15 if someone wants to recopy. Okay, well, then maybe Harry, maybe JK Rowling is selling her copy too much? I don’t know.

I just think that this really wouldn’t be a real problem in the real world. Not only that, there are literally millions of books published every year and CDs, albums, digital albums and movies, but you can’t have a pirate press that sits out there and they can’t copy everything the moment hits the shelves because that would cost too much money.

So they have to wait to see which ones are popular and they’re worth copying. So you’re gonna have to wait six months. Oh, that’s a brand new author, and oh, you’re down the road. Oh, look at this new JK Rowling, we never heard of her before. But this Harry Potter thing, I think she may be onto something, let’s pirate that one.

But by the time they know that they should pirate it, it’s been a year. And so she’s already made, like kind of inflated royalty prices and all that. So there’s always a lead time before piracy happens. But if you think about it, this is not this is no different than the way the free market always works.

Back in the brick and mortar analog era, when everything was you know, you need a factory to make something or an office building to produce some service or whatever, which takes some real capital and some investment and you have to train your staff and hire people and all that. Still, if you if you come up with a new business model, like, I don’t know, fast food, hamburgers or drive thru windows for fast food restaurants, or wider aisles and supermarkets to, you know, whatever, or selling prepackaged meals in the supermarket, whatever idea you come up with to satisfy the consumer, your goal is to make a profit.

But a profit is always an artificial sort of temporary thing. Because whenever you make a profit, you’re sending a price signal into the free market, you’re telling everyone, Hey, I found something to satisfy consumers. So you attract competition, people go, Oh, this guy is making a 45% profit margin off of doing X. No one ever thought of doing X before. But now we know that that’s one way you make people happy consumers. So we’re going to enter that field too.

So you’re gonna have Domino’s Pizza delivering and then you’d have you know, another pizza chain delivering and they all started delivering. And the first guy’s monopoly prices he was able to charge he can’t charge us anymore, because now he has competition. So the profit goes down. This is what happens whenever you start making a profit. Competitors enter the field and your profit margins start declining.

So what do you have to do? You have to keep innovating to satisfy consumers. This is how the free market always pleases consumers. And that’s why it’s hard to make a profit. And it shouldn’t be hard to make a profit because you’re not entitled to people’s hard earned dollars. You know what I mean?

Max: You can’t just sit around and be like, I did something great 10 years ago. You have to keep on satisfying consumers.

Stephan: So this is why people say patent law, it stimulates innovation. No, it’s the other way around. Once you get a patent on your new invention, you can sit on it for 17 years, and no one can compete with you. So you don’t have any, you have a reduced incentive to innovate. And not only that your competitors have a reduced incentive to innovate, because why would they innovate, to improve your first product, because the improvement would probably still infringe your patent. So they wouldn’t be able to sell it.

So they sit back for 17 years, too. So for 17 years, there’s like a 17 year hole, where innovation is suppressed and reduced. So the whole point of patent law is to encourage innovation, but it actually reduces innovation. And by the way, no one ever invents something because of the patent system. People invent things, to improve their products and to make it work to satisfy consumers. And then once they’ve done that, because there’s a patent system, they go to their patent lawyer, their friendly neighborhood patent lawyer like me, and they say, Hey, we came up with this innovative technique to make this VCR work for our customers, we might as well get a patent on it and stop all the competition.

So would you give a patent? Would you help us get a patent? We’ll pay you $20,000. Everybody’s happy except for the consumer and our competitors. Right?

Max: Yeah, yeah. All right. I have two questions that are kind of like contemporary questions, because we’ve got to talk about generative AI today. You know, everyone’s using chat-GPT, Midjourney, all that generate images. I think the same principles apply to new technology, that’s fine. But like, I feel like there are two questions that come up around this that people are asking right now.

One is, can I copyright stuff that these things generate? And two is if I use training data that is copyrighted material, am I going to get in trouble for it? I think we already know what should happen, but what do you think, what might actually play out in our legal system? And how might that be harmful?

Stephan: Yeah, so yeah, in a copyright free world,

Max: We don’t have to worry about any of this.

Stephan: Well, you could have these large language models, or these datasets that are huge. That, you know, you could train these different AI things, whether they’re special purpose or general purpose or whatever. Image generating, language models, whatever, they could scour the internet because luckily, we have, you know, hundreds of millions of books worth of information on the internet. And by the way, without copyright, you’d have way more right because right now the whole, like, with the Google Print project or the Gutenberg, all these things are hampered by copyright. Like you can only do really old stuff. And the new stuff is sort of in a gray zone.

Max: Just aside, I hate when I search something on Google Books, and I find it and I click it, and it’s like, I can’t even have access to it. I can’t even pay.

Stephan: That’s because of copyright. Yes, you can’t even pay. And part of that’s because of the the orphan works problem, which is, there’s like a 67 year hole, from the mid 20th century, because of because the way copyright works is it’s automatic now, and you don’t always know who owns the copyright, because when it’s automatic, it means you don’t have to register it. Which means in the old days, you had to just like patents are not automatic, you have to actually prepare a patent application and file it to get a patent.

Copyright, you used to have to put a copyright notice on there, when you do that, you know the date of it. And you also know who the author is. So you potentially know who to contact to get permission. And also you have to register it with the copyright office. So then there’s official filing, so you know who to contact. Like, if there’s a book that’s been out of print for 50 years, and you really want to get it, you would know who to contact to get permission.

But right now, now that it’s automatic ever since 1980, I want to say 89, since the US joined the Berne Convention, which abolished what’s called formalities. So there’s no need to put a copyright notice anymore. And there’s no need to register. So when you said copyright as a verb earlier, that’s actually no longer accurate. You don’t, you don’t copyright something,

Max: Oh interesting.

Stephan: You have a copyright automatically, in a creative work of authorship, as soon as it’s fixed in a tangible medium of expression. So basically, as soon as you record it, or write it down on a hard drive or on a piece of paper, as soon as you do that, in the privacy of your own home. Now you have a federal copyright in that work, whether anyone ever sees it or not, or whether you publish it, whether you register it, so you have a copyright whether you want or not so, so for copyright, the question is this. So copyright is supposed to apply to what’s called creative works of authorship.

Now creative means like artistic. One thing people get confused about as in the US Constitution, there’s a clause which authorized the Congress to enact patent and copyright laws, and is to call the copyright clause, and it says, Congress shall have the power to protect for limited times — again, it’s a finite artificial time — it says something like the works of authors and inventors have. Oh, for something like for the useful arts and the sciences, and most people think most people think the word sciences is the part that goes along with the inventor and patents because science and the arts, they think of that as the copyright, but it’s actually the other way around.

Because back in the 18th, and 1700s, the word science just meant knowledge. So science is actually for copyrights, creative works. and useful arts meant the products of artisans like you know, people that made plows.

Max: Oh, interesting. They have their uses.

Stephan: But my point is, to get a copyright, you’re supposed to be an author, which is can only be a human. And you’re supposed to be creative, or which means original. So. So that’s why there’s these recent cases, like with these, well, with monkeys, number one, I think some of these AI cases are starting to come out now. Like, you know, the monkey, the macaque picture, like someone handed a monkey, a camera to a monkey, and he took a bunch of photographs.

Max: Yeah, no, I know about this.

Stephan: Yeah. And the images kind of went viral? Because it’s kind of a cute little monkey looking at this camera.

Max: Oh, I think I’ve seen it.

Stephan: Yeah. And then and then the owner of the camera tried to get a try to register the copyright. And the question was, is he the author? Is he the photographer? Or is it the monkey? And if it’s the monkey, the monkey is not a human. So there, so there is no copyright? I think that was the resolution there is no copyright, which boggles people’s minds. They’re just so used to everything that’s a photograph.

But back in the day, when photography started becoming a thing in the 1900s, or whenever it was, there was a question: are photographs subject of copyright at all? Is there anything original about it? because, for example, cases say that you can’t get a copyright on mere facts, like a telephone book listing is useful and it takes work to assemble. That used to be called the sweat of the brow doctrine in copyright law. The sweat of the brow doctor was if you put a lot of effort into it, it’s creative enough to get copyright.

But then finally the courts in a case called Feist and other cases said, it doesn’t matter how much work you put into it, which by the way is the labor theory of value, which by the way is the problem with IP laws that is socialistic, it’s communistic. It’s the labor theory of property, and the labor theory of value combined. But in any case, the court said that, no, you can’t get a copyright. You don’t have a copyright in just a mere factual compilation, like a phonebook directory, or even a map.

So there was a time when maps were subject to copyright protection. But then finally, the the court said, a map is just a physical representation of the existing facts on the ground. So you know, what mapmakers started doing. In response to that, they started putting false things called copyright traps in maps. So like, there’ll be a little what do you call this, when you go into the turnaround? There’s a French term for it. But they put little

Max: Turnabouts? Or?

Stephan: When the road ends in a little circle, and there’s houses around?

Max: Oh, I don’t know. I just call those dead ends.

Stephan: There’s a word for it now. Yeah,

Max: I know. I know. I was thinking of a different story. But yeah.

Stephan: Anyway, so they put these they called copyright traps in these maps. So that if you copy their map, like literally, part of it is original, even though it’s misleading and fake information. And I’ve actually had that happen. So I’d be driving around Pennsylvania, and I’m like, looking for this thing. And like I say, well, there’s no road there. But the map shows there’s a road there. It’s like it’s all just, it’s all just because of copyright.

Max: I have to tell another story now from Foursquare, or at least, it wasn’t from Foursquare, but something that we would always talk about how like, one of the map makers, you know, mid 20th century probably put a fake town in upstate New York, you know, to catch people copying their maps, and then the people who live there, started naming things after that fake town on the map, and then it became a real town.

Stephan: Yeah, I’ve heard that. But the point is, without if there was no copyright law, people would not be distorting their map. No reason to do it. Yeah, it’s just, it’s just like, um, you seem like Louis Vuitton luggage or Chanel. And are purses and they have this LV all over it? It’s just weird. It’s like, if you buy a Mercedes car, it doesn’t have the Mercedes logo all over the frickin’ paint. Right? So why would a dress or a purse have that?

The reason is because there is no intellectual property in clothing or fashion designs. So what these manufacturers do is they try to leverage trademark law to get, so that they basically bring trademark law into their product design, so that they can sue people for trademark infringement. So without trademark law, which is another illegitimate type of IP law, you wouldn’t have this weird distorted I mean, I’m not saying I hate the fact that they do this. But if they might, they may have never done this as part of fashion or culture as this artificial thing.

So the point is, copyright, trademark, they heavily distort the American, the modern society and culture. And you know, when you distort things, that’s basically a government intervention. Anyway, we’re talking about AI. So my point is, there was a question about photographs, when photography became a thing, like people said, Well, is there really anything creative about photography, because you’re just recording factual information?

But then, of course, the photographers and all the artsy fartsy types said oh, no, there’s all kinds of artistic decisions and in the lighting and the aperture.

Max: Well, they’re not wrong.

Stephan: I mean, well, they’re not wrong. But led to copyright being applied to photograph, which has led to crazy things like, like, there’s a famous photograph, I don’t know, some, like some guy, Ansel Adams or someone, they went to the Grand Canyon, and they took a certain photograph, and it’s like a famous print. So because that’s subject to copyright, and you can’t make a copy of the print without paying a crazy royalty, someone went to the same spot at the same time of the day, and they took a similar photograph, and that was held to be copyright infringement.

Now, that’s really that’s bizarre, like you’re using your own camera to duplicate a shot, granted, but you’re just factually recording what’s out there. Now, I’ve never been quite clear on what the law is for things like security cameras, or things that no humans are really involved in like their security camera footage or like your ring doorbell outside your house. You’re not really a photographer, you just set up a camera and you’re recording video, but let’s suppose there was a viral video and you want it to stop people from copying it. Would you have a copyright in there?

I don’t know if there’s been any law on that. I would think that they’re like the macaque or the monkey. Example the court might say there’s no copyright. Now that lead that comes to AI, I think AI is the same thing. I think AI. So the problem there is, you could argue that the person directing the what’s the what’s that photograph when you mentioned? Midjourney?

Max: Yeah, that’s one of them.

Stephan: So there’s a skill set to learning how to prompt author? Prompt engineers?

Max: Well, that’s what they say. But it’s kind of a, it’s more of a, I don’t think it’s going to be a profession. I think it’s going to be more like “Googler.” But yes.

Stephan: Yeah. But my point is, just like, if I have a camera, and I hold my iPhone up, but I take a picture. I mean, I’m doing minimal creative work, I’m just pushing a button, although I have a copyright in that photograph, because I’m the photographer. So I suppose you could argue that if you’re the one who set up the Midjourney specifications, and you told it to generate an image? Yeah. I don’t know. I suspect that the courts might go both ways on this.

But I think they would probably say there’s no copyright. But the more human involvement there is the cloudier it becomes, and this is part of the problem with copyright law is the law is totally non objective, it makes no sense. So you’re going to have these arbitrary just choices courts, or judges are going to have to make at some point. My suspicion is that AI there’ll be an uphill barrier to getting copyright and AI generated works.

Now, the other question is, does it violate copyright to do this? And I suspect that it does, because they do have to. I mean, the way computers operate is if they crawl the internet, and they scrape information. Whatever time you do that you’re making an eternal, temporary physical copy. And you’re using that to generate this index, or this database or something, right, that you use to then do your output, right?

Max: Here’s interesting idea, like, let’s say, I go to Midjourney, I upload a picture of myself, and I say, like, turn me into a Harry Potter character. Okay. And then, so obviously, it’s using all of the data from the Harry Potter universe in order to be able to make that, you know, make that jump.

Stephan: And, and so it’s, it’s clearly copying it, you have to copy it to do it. So the question is, do you have a license, which is permission from the author? Or do you have fair use? So that’s the only exception. So license, there is a license, because if something is online, if this bit of Harry Potter is online, in an authorized fashion, like, for example, the summary of the plot of the Harry Potter books is probably on Amazon, and with the permission of the author. So that’s legitimate content. So that means you have the limited right to copy it onto your computer to read it, because that’s the whole purpose of being up there.

So there are all these limited licenses. But the license is not for you to make a derivative work out of it. Right? Which means you just because you can, you can you can read a summary of what happened in Harry Potter one through seven, doesn’t mean you can write Harry Potter number eight, my own sequel to the series. That’s a derivative work, and that would be prohibited. So the license is limited. So then the question is so I don’t think you can say that information being on the internet, you have a license to use it as a training set for your AI engine.

Because of course, everyone’s going to want to charge you for that if they have the right to they’re going to want a cut of your new AI engine. So then the question is, is it fair use? And there’s four Fair Use factors which the courts have to consider; they’re notoriously vague, hard to determine. And they’re not exclusive to like, there could be others. But there’s four enumerated in the statute.

And my guess is that the way the four the four factors work out, there is no fair use defense to this. There should be, but I don’t think there is. So I think what’s going to happen is you’re going to have a Google or a large company, they’re going to do what Google tried to do with that Google Print thing. They’re gonna go make a big deal to compromise a bunch of lawsuits from different organizations that have a lot of content online, which is going to basically give them a quasi monopoly on the AI area, right?

So again, you’re going to have a result which causes concentration, centralization, oligopolies, cartels, monopolization of an industry. I mean, for example, the patent system, everyone says, Oh, what about the little guy? The patents protect the little, little guy and copyrights protect the little guy. Like, first of all, I don’t know why this little guy thing, but when did libertarianism become about the little guy?

I mean, we should be ambivalent as between the big guy and the little guy, unless you mean the individual right? But that’s just individualism. But the point is, it doesn’t protect the little guy. But so the patent system for example, back about 15 years ago, 10 years ago, there was these so called Smartphone patent wars, which you may recall between Google and Motorola, and some of the Android makers, and Apple, and they were all suing each other with their mountain of thousands of patents for patent infringement. And of course, because they can, each countersue each other, none is going to really win. So what they do is you have this lawsuit that drag, dozens of lawsuits that drag on for five years, patent lawyers and patent litigators get paid tens and hundreds of millions of dollars, to get expert witnesses, and to do pleadings, and trial prep and patent analysis and all this kind of stuff.

And finally, these guys just make a settlement with each other, right? So they go, Okay, we’re gonna license you our 75 patents that we think are relevant, you’re gonna cross license to us your 13 patents, and you’re gonna do this, and we’re gonna, because we have 75, you have 13 , we’re gonna pay you, you’re gonna pay us this much royalty, we’re gonna pay you this much, we’re gonna subtract the difference. And in the end, the three big companies go away, and they just, they pay each other a royalty and they go, they go back to their business, and they pass the cost down to the customer, right? But what that means is, there’s only three.

Max: Yeah, yeah, they’ve just monopolized it.

Stephan: The little guy on the outside can’t. He doesn’t have 1000 patents to countersue these other guys with or, or fifty million of cash sitting around to pay lawyers to even do it for him. So they just don’t even try, because they will be sued, sued out of existence immediately. So patents create cartels and oligopolies. They concentrate power.

And the same thing is going to happen, I think with AI, I believe, because you’re going to have a couple of companies that get the resources that are already monopolies because of IP law, probably. And they’re going to use their IP monopoly royalty money to make a deal. And they are going to become dominant in the AI industry, and it’s going to distort the way AI would have looked in a free market.

Max: Yeah, so do you have any advice for like, you know, new entrants in these markets or entrepreneurs in this space? I know we have some listening to the program, maybe they need to talk to you for consulting.

Stephan: That’s complicated. It depends. It depends upon the specific area, I guess, right now, sort of Wild West. So I think you can still make a stab at it. There’s no, there’s a few dominant ones already, but I don’t think they’re that dominant with IP. I think just try to, you know, pay attention to what’s going on with liability. For training datasets, if there becomes a model, you know, like, like people, you can get a subscription to Getty Images right now, if you want to use images to illustrate your, your blog post, right. That’s, it’s not nice that you have to do that. But that’s probably the safest thing to do.

And I suspect there will be licensing models emerge that you can use. So try to do it legally. And if over time, some dominant companies emerge, then I guess you have to go work for them, or, or hopefully hope they might buy out your little startup company. Yeah. And that’s a good strategy.

Sometimes, unfortunately, you can hire a guy like me and get a patent. Because if someone if some other company sees that you have a useful patent. Yeah, it’s not going to be that useful to you to defend yourself. Because, again, you don’t have $3 million in the bank to pay the lawyers to do it. However, some other company might want to buy you just to get your patent to add it to their treasure trove.

So that’s what the game is now; it’s an IP game. So I would, I would say, have hope, you know, it’s, I don’t think it’s totally closed down yet. But I have a little monograph called do business without- it’s on my website, c4sif.org. It’s called do business without intellectual property. It has some sort of practical tips about navigating this world that has IP when you don’t really want to get too dependent on it or get tripped up by it. So take a look at that.

Max: Interesting. What is that site?

Stephan: Okay, so my website is stephankinsella.com.

Max: Okay, yeah, I was gonna ask the whole thing I just. Okay, let’s go okay, stephankinsella.com.

Stephan: But that links to my, I have a subset, a sub site, or a separate site, which is specialized in IP related things and technology and innovation. It’s called C 4, like the number four, SIF, which stands for Center for the Study of Innovative Freedom, dot org. So c4sif.org.

All my IP related stuff is on there. And I had this little monograph I did about eight years ago, with laissez-faire books, I think called Do Business Without Intellectual Property. And that’s more practical. Most of my stuff is like the theory of why IP law is unjust and should be abolished. But this is more practical, like tips and tricks, things like that.

Max: Okay, fantastic. Anything else that people should check out to contact you? And any last thoughts for today before we forget,

Stephan: I have a my book that I’ve been working on for a long time. It’s coming out like next week.

Max: Oh, sweet.

Stephan: It’s called Legal Foundations of a Free Society. I’m sorry, Legal Foundations of a Free Society, so LFFS, legal foundations a free society. And it’s long, but it’s got a large section on IP but other stuff too, like libertarian property theory and basics and contract theory and stuff like that. And that will be available- well I’m getting the hard copies and in my hand on Friday, but then it’ll be on Amazon in probably a couple of weeks. So you can find that my website, stephankinsella.com.

Max: All right. Awesome. Looking forward to it. Stephan. Thanks for coming on the show today.

Stephan: Thanks, Max. All right.

Max: That was a really cool discussion. I hope you agree. I know I learned a ton. Up next, I’m hoping to get Aaron back on for a news update. And I’ve got a series of fascinating guests in the can. So tune in for next week’s Local Maximum. Have a great week everyone.

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