KOL458 | Patent and Copyright versus Innovation, Competition, and Property Rights (APEE Guatemala 2025)

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Introduction by Julio Cole

[Applause] Stephan Kinsella is the next.

0:05

I’m Stephan Kinsella. I’m a patent attorney. Well, kind of retired patent attorney from Houston.

This presentation will be based on a forthcoming book called Copy This Book and a chapter I have in a forthcoming book called “The Problem with Intellectual Property” in the Handbook of Philosophical Foundations of Business Ethics. My editor at Springer is Robert Bob McGee. So let’s see how much damage I can do in 15 minutes.

Topical Heading: Kinsella’s Background and Anti-IP Stance

0:35

I’ve been a patent attorney for over 30 years and have prosecuted hundreds of high-tech patents over that time for Intel, GE, Lucent, UPS, Applied Optoelectronics, and a variety of technologies.

And also about 30 years ago, right when I passed the patent bar, I concluded that all forms of intellectual property law or intellectual property or IP should be abolished. During my career I published many articles and even books on pure IP law — patents in the oil and gas industry, trademark treatise.

At the same time I was also publishing articles and books critical of IP law as a policy matter including my book Against Intellectual Property. As I said I’m working on a new book which will be everything I’ve written combined into one.

So I’m here to argue that everyone who favors peace, prosperity, justice, property rights, free markets, and innovation, and this should especially include libertarians and free market economists such as people here, should oppose IP law in all of its forms. All of it.

Topical Heading: Ranking IP Laws by Harm and Critique of Pro-IP Arguments

2:19

The four classical types, the so-called classical IP rights are considered to be patents, copyrights, trademarks, and trade secrets, right? Now in my opinion the worst of these from beginning to end — and by the way this should also include defamation rights which are not typically considered to be IP rights but they should be because the arguments for them and their effect is very similar — and they should be abolished.

The worst to least bad would be patents are the worst. They do the most harm to the human race. Next would be copyright. Third would be defamation law. And fourth would be trademarks and finally trade secrets.

Now the reason is because IP law especially patents and copyrights impede and distort innovation, impoverishes the human race, reduces competition, gives rise to monopolies and monopoly prices, censors free speech and freedom of the press, threatens freedom on the internet and enables bullying by large corporations. Other than that it is just great and just compatible with a free society.

In my opinion, and I’ve studied this for 30 years, all arguments for IP are bad, including the five given by Professor Moore. And many are absurd and dishonest and self-serving. Most people who favor or argue for IP cannot even explain the difference between patents, copyrights, and trademarks.

In fact, Dr. Orbach here today used the example of patents to protect a book. That’s copyright that protects books. So, I think when you’re advocating for an intrusive state regulation, you should at least know what the law is.

Now, of course, most patent lawyers do know the difference and they’re in favor of IP. Big surprise. So are Disney, Hollywood, and big pharma. They’re in favor of IP. So, I wonder why.

And you ever notice that congressmen who attack big pharma for charging monopoly prices, they talk about price caps or using the bargaining power for Medicare and Medicaid to negotiate for lower prices, but they never mention the obvious elephant in the room: eliminate pharmaceutical patents which are the cause of these high prices. Even Bernie Sanders doesn’t do that. In fact, the very purpose of the patent system is to enable sellers to charge high prices, monopoly prices since the patent allows them not to face competition.

Topical Heading: Examples of Absurd Pro-IP Arguments

4:50

And when a patent proponent responds that, well, the pharma companies need to charge monopoly prices to recoup the cost imposed on it by the FDA process, the congressman doesn’t say, well, why don’t we get rid of the patent system and the FDA system so the drug cost is lower and the prices are lower, too.

As far as absurd arguments for IP, I’ll just give you a few samples. I’ve encountered them all over the years. Here’s one from patent attorney Gene Quinn of Patent IP Watchdog: “Thank goodness the Swiss did have a patent office. That is where Albert Einstein worked during his time as a patent examiner to come up with the theory of relativity.” That’s a really good argument for IP.

This is William Shughart and a so-called free market economist, writing for the Independent Institute, a so-called free market think tank. It is true that other means exist for creative people to profit from their effort. In the case of copyright, authors can charge fees for reading their works to paying audiences. Charles Dickens did this, but his heavy schedule of public performances in the United States, which at the time did not protect copyright of foreign authors, arguably contributed to his untimely death.

Okay, so if you don’t have copyright, you’re going to kill Charles Dickens. Some rando on the internet: If you’re not for IP, you must be in favor of pedophilia. Song piracy and file sharing are the cause of stage collapses at concerts. And finally, if IP isn’t legitimate, it would be okay to steal other people’s babies. This is just stupid arguments for IP. All the others are equally bad.

Topical Heading: What IP Is and Its Historical Origins

6:01

So, what is IP? It’s an artificial category cobbled together by defenders of monopoly privilege to hide its true nature. Trade secret started out in the common law innocently enough based upon the right to keep secrets. But then the law added a cause of action to keep the secret from leaking which is the problem with it.

Trademark is used to distinguish goods as we saw earlier and services and is commonly justified on the idea that it’s wrong to confuse or defraud customers which is true. But trademark law goes beyond that. For example, it stops the sale of a knockoff Chanel purse to a buyer even though the buyer knows that it’s a knockoff. So, no one’s defrauded.

So, the basis of trademark law. So, we should just abolish trademark law and replace it with fraud law which we already have. So, there are many problems with both of these laws, but I’ll move on.

So, copyright though — copyright and patent the two most damaging forms of IP. Copyright originated with the church and the crown using as a monopoly on scribes who copied books by hand to control what could be published. They were like the original gatekeepers.

But when the printing press threatened the control, the Stationers’ Company was chartered to monopolize this function. And when its charter expired a century or two later, the Statute of Anne in England in 1710 gave copyright to authors and thus to publishers. So they became the new gatekeepers who held their monopoly until just about 15 years ago when Amazon and the Kindle started threatening that with the self-publishing model.

Now, patents originated in the practice of monarchs granting monopolies in the form of letters patent or open letters which protect the holder from competition in exchange for various favors like loyalty to the king or tax collecting for the king. An abuse of this practice led to the Statute of Monopolies of 1623, not 1624 Mr. Orbach, which permitted only patents for inventions and then the US Constitution in 1787 ratified in 1788 authorized Congress to enact copyright and patent law to protect the works of authors and inventors and surprise surprise most of the founders were authors and inventors and the first copyright and patent acts were enacted a year later in 1790 and then soon European countries followed.

Now surprisingly not surprisingly backlash against these were not called IP rights in the beginning. Backlash by the free market economists in the 1800s in the mid 1800s against these monopoly privilege grants which is what they are led to some countries to repeal or delay adopting their patent laws like Italy and the Netherlands and Switzerland and the primary criticism of the free market economists of patent rights was that it was a protectionist patent grant that was incompatible with free trade which is actually correct however a period in history intervened and the Long Depression of 1873 turned public opinion against free trade and then the anti-patent movement collapsed and then patents became dominant worldwide as we have today.

So the origin of these two systems has nothing to do with private property rights or natural rights. They’re totally granted in control of speech in the case of copyright and the press and any competitive practices by the crown.

Topical Heading: The Creation of the “Intellectual Property” Category

9:34

But in response to the criticism during this period, the defenders of these monopoly privilege grants, the industries that had grown accustomed to these protections, inventing industries, book publishing industries, they responded with the response that well these are not artificial grants of monopoly privilege. They’re a special type of property right and the reason that they expire early is because they’re special. They’re creations of the mind. They’re intellectual property rights.

And what they did was they lumped them up with trademark and trade secret which are already types of rights and they lumped them all together although there’s debate among people even today in Europe they don’t consider trademarks should be industrial property rights and there’s been debate about whether trade secrets should be part of that so it’s just an artificial category that people came up with as a purely propaganda term to justify this practice of granting monopoly privileges.

Topical Heading: Main Arguments for IP and Critique of Natural Rights / Lockean Creationism

10:29

Now there are I would say there are three main arguments for intellectual property. There’s a natural rights argument, there’s a utilitarian argument, and then there’s this personality theory attributed to Hegel, which I believe Professor Moore went into a little bit, which usually no one trots that one out, and most people don’t even understand it or how it’s supposed to apply.

The most common argument is more of a Lockean natural rights argument or the utilitarian argument. And the natural rights theory of IP is based upon a very confused notion. It’s what I call Lockean creationism or libertarian creationism. It’s the mistaken notion that creation is the source of rights.

Now, this is caused by a confused aspect of Locke’s argument where Locke assumed that the reason the first user of an unowned resource was the owner by his action of homesteading was because God gave him ownership of himself, which I guess is his body, and therefore gave him ownership of what he did with his body, which is motion or action or labor, and therefore he owned his labor, which is some kind of substance floating around out there that you have a property right in. And if you mix it with some unowned thing, then you own that unowned thing.

So that entire step by Locke as others have argued like Hume is totally unnecessary and confuses his argument and it’s just wrong. You don’t own your labor. You don’t own your actions. Labor is not a thing that you can own. It’s an action that you perform with your body which you do own.

Anyway, this confusion in Locke’s theory has led to today the confused idea that creation is a source of property rights which is not. The source of property rights is occupation of an unowned resource being the first to claim it or acquiring it by contract from someone else. So contract and occupation are the only two sources of property rights.

Creation is a source of wealth. It’s useful, but wealth just means you have something that you own that’s more useful to you and more valuable to you because you owned the input factors and you rearranged it with your own labor and mental effort to make it more valuable to you. But you had to own it first to do that. So, you already own the way you shape the metal into a plow. Making metal that you own into a plow doesn’t mean that you own the plow because you created it. It means you own it because you own the metal that went into it.

Just like the worker on Henry Ford’s factory line who helps make cars creates the cars, but he doesn’t own them because he didn’t own the raw materials that went into it. So, creation has nothing to do with ownership at all. That’s the first mistake.

Topical Heading: Property Rights, Scarcity, and IP as Non-Consensual Negative Easements

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In fact, the best way to classify this, and I thought about this for a long time, being an attorney, a property rights attorney, an intellectual property attorney, a libertarian legal theorist, and an Austrian economist, is to understand that all property rights are necessarily physical control rights protected by the law to control the exclusive use of a scarce resource. That’s what property rights are.

It’s impossible to have a property right in information or patterns of information. Information is stuff that guides human action. Human action always requires the availability of a scarce means that’s causally efficacious in getting the result that you want and information that guides your actions. Scarce resources can have conflict over them which is why property rights emerge to allocate and rationalize them according to the first two principles of occupation and contract.

Whereas information is just a guide to action and cannot be owned and is not owned. In fact, when the law attempts to give property rights in information, which is what patent and copyright do, it is really a disguised attempt to transfer to the holder of the patent or the copyright a control right over other people’s property. And that is actually what we call in the law a negative easement or a negative servitude.

Now, there’s nothing wrong with negative easements and negative servitudes if they’re consensually granted, just like there’s nothing wrong with having sex with a woman if she consents. But if you have sex with a woman and she doesn’t consent, it’s what we call rape. Right? So when the law grants a negative easement over someone’s property by fiat by the means of granting a patent or copyright, it’s granting a non-consensual negative easement or negative servitude to the holder even though the owner of the burdened estate never consented to it.

Essentially, that’s the problem with all forms of IP, especially patent and copyright. They’re basically non-consensual negative easements which result in a taking of property rights.

Topical Heading: Utilitarian Argument, Empirical Evidence, and Conclusion

15:06

Now contrary to the assertions of modern advocates of IP who call it a natural right or a property right and it was never called a property right in the beginning was always recognized as a temporary expedient for utilitarian purposes. Even Locke didn’t view IP as a natural right contrary to the claims of Adam Mossoff and others.

Basically patents and copyrights were thought of as based upon the founders’ hunch. Okay. Their hunch that patent and copyright law would stimulate more innovation and artistic creation and that the value of this additional output would be greater than the cost of the system. That’s the essential argument for IP.

The founders did not have econometrics at their disposal in 1787 when they came up with this. And in fact, as I mentioned, many of them were inventors and authors who stood to benefit from the system. So it’s no surprise that they did this. But even granting them good intentions the idea of IP was based upon a hunch. Okay.

So isn’t it about time that we see if their hunch was right? Someone maybe should do a study to find out whether patents and copyrights do produce more innovation and artistic creativity. Right? So the idea is this. It’s basically a market failure argument.

The idea is that for normal goods it takes some effort and some cost to build your factory to hire workers and so it’s not so easy to compete with a new restaurant chain down the corner. If McDonald’s is popular it takes a while for Burger King to become a competitor. So McDonald’s can have monopoly prices for a while but eventually their monopoly price gets eroded by competition.

But for certain other industries where the primary value to the consumer of the sold service or good like a book or an invention lies in the way it’s arranged where it’s easier for a competitor to make a copy and therefore compete with them. It’s too easy for there to be competition and therefore there would be an underproduction of these goods because the incentive to make the goods in the first place would be reduced because the cost would be harder to recoup. Right? So that’s the argument.

It’s basically that the free market is flawed and that if you don’t have the government step in and fix this market failure you’re going to have an underproduction of goods. Right? So that’s the argument and therefore patents and copyrights do this although no one seems to know what the proper term is supposed to be. It was 14 years for copyrights in the beginning. Now it’s 100 to 150 years. And no one seems to know what the optimal term is.

Now Congress finally got around to trying to figure this out. In 1958 they commissioned Fritz Machlup who was actually a student of Mises kind of an Austrian guy in the US. He was commissioned by Congress to do a comprehensive study of the US patent system to find out whether it really did incentivize and create innovation. His conclusion: “No economist on the basis of present knowledge could possibly state with certainty that the patent system as it now operates confers a net benefit or net loss on society. If we did not have a patent system, it would be irresponsible on the basis of our present knowledge of its economic consequences to recommend instituting one.”

Now, have we learned anything since then? Here’s what they keep coming up with. George Priest in 1986: in the current state of knowledge, economists know almost nothing about the effect on social welfare of the patent system or of other systems on intellectual property. Cohen and Merrill, 2003: There are theoretical as well as empirical reasons to question whether patent rights advance innovation in a substantial way. In most industries, the literature on the impact of patents on innovation must be considered emergent.

Francois Leveque and Yan Minier 2004: an economic analysis of the cost and benefits of intellectual property is no more within our reach today than it was in Machlup’s day in the 50s. Boston University law school professors Michael Meurer and Jim Bessen in 2008: It seems unlikely that patents today are an effective policy instrument to encourage innovation overall. Instead, patents place a drag on innovation and the patent system fails on its own terms.

2009, Andrew Torrance: Little empirical evidence exists to support the assumption that patent system spurs innovation. Economists Michele Boldrin and David Levine in their book Against Intellectual Monopoly followed up by a paper in 2013: There is no empirical evidence that they serve to increase innovation and productivity. And my final quote Heidi Williams in 2017: evidence from patent law changes has provided little evidence that stronger patent rights encourage research investments.

And then Dr. Cole has presented his own paper which shows that although music revenues fell sharply output has not decreased. So I’ll conclude by saying this. IP rights distort and impede innovation and they harm humanity. IP is not a natural right. It was never thought of as a natural right.

But it’s a monopoly privilege based on the confused Lockean labor theory of property or on the idea of Lockean creationism or on the flawed notion of market failure and on the groundless assumption that IP rights lead to additional innovation and artistic creation and to the additional assumption that this additional innovation is worth the immense costs of the patent system and the copyright system which run to the uncountable billions of dollars a year.

So I would say down with patents, down with copyrights, down with my patent law career. So one thing, one more thing. Is it so surprising that a patent attorney like me wants to get rid of patents? Well, what about an oncologist who is paid to fight cancer, but he still hopes for a world where we can get rid of cancer and put himself out of a job?

In fact, I’m from Houston, Texas, and we have something called the MD Anderson Cancer Center. It’s one of the best top cancer centers in the world and its slogan is making cancer history. So I would say together let’s make IP history. And one more thing, ironically, if I use that slogan, MD Anderson might sue me for trademark infringement. Thank you.

22:29

As a threat looking forward. I mean, do you think we’re still getting rid of them in the digital age? Or do you think you’re still a threat to some industry and in that case?

Topical Heading: Q&A – Feasibility of Abolishing IP in the Digital Age

22:44

Yeah, that’s a good question. So, I think luckily copyright as Julio mentioned, copyright is getting easier and easier to evade because the nature of it is that you just copy a file or distribute it and they could be encrypted and sent over Tor and over the internet. So copyright has been largely eviscerated, thank God, although the penalties are draconian. They include prison sentences, which is outrageous.

Patents, my hope is that 3D printing technology will eventually mature. I mean, I’m talking 30 years in the future. And you could combine that with encrypted information and people will be able to print whatever they want in their basement or on the neighborhood underground thing and that way evade IP law.

So I don’t see any chance of IP law ever being gotten rid of legislatively because the interests are too strong and everyone is too confused about it. But hopefully technology will help us work around it.

Now the one thing I do think is it’s becoming clearer and clearer that this new technology of artificial intelligence which is becoming very useful and everyone’s seeing the promise in it is being severely distorted and hampered by copyright and probably patent law to an extent as well. Is gimped already. It’s already Grok is prevented from making certain copies of things or giving you summaries of novels because it’s afraid that Meta will get sued for copyright infringement.

So that it’s already being gimped. But when we come to a point where society has to choose between having a really good useful life-saving humanity benefiting technology like AI and it’s in conflict with copyright maybe AI will win.

There’s already a dispute in the UK where there’s an attempt by the AI industry to get copyright law exceptions increased like their version of fair use. And of course all the idiot authors are fighting against it because they want their monopoly and they don’t care what it does to humanity. So I hope that the conflicts will highlight that you can’t have both. You can’t have IP and human life.

24:47

Audience member:

I find that you dismiss natural right ..  I think undeserved … yet you’re willing to make the statement that rape is wrong. Why is it wrong?

Kinsella: So I don’t dismiss natural rights. In fact I think that the primary problem…

Audience member: I didn’t finish my question!

Kinsella: All right. Go ahead.

Audience member: Okay. I’ll leave it there. I think other people want to ask.

Topical Heading: Q&A – Natural Rights Objection and Corporate Wealth Creation

25:26

Kinsella: I never dismissed natural rights. I said that IP is not a natural right. In fact, it’s in conflict with natural rights. The problem with IP is that it violates natural rights to property.

Audience member: You also stated that there’s no evidence. Why do we have, for example, even though you’re perhaps you’re talking about trademarks. You have … look at the wealth created by the five, six largest companies in the world. Trillions of dollars … based on what?

Kinsella: Well, the question is fine, but …

Audience member: do you think for example companies like Apple should have patents?

Kinsella: [laughs wryly] No, I think the patent system should be abolished. Of course, Apple shouldn’t have patents or copyrights. No. They should have to compete in the free market like other companies.

I mean, this is a free market group.

Audience member: I find it a little amazing that I look at the wealth created by the five, six, seven, eight, nine, ten largest companies in the world who have created trillions of dollars of wealth who employ millions of people. And then I have—excuse me for saying this—I have university professors saying, “No, no, no, no. This doesn’t create any wealth.” “No, no, this is like monopoly wealth.” I find that preposterous, right?

Kinsella: Well, first of all —,

Audience member: And I’d rather speak my mind.

Kinsella: Go ahead. I have to speak my mind to make this point out. I’m not a university professor. I’m just a patent lawyer.

Audience member: Okay, Okay, good.

Kinsella: And … to put it simply, the purpose of law is to do justice. And the way you do justice is you recognize property rights and you enforce them. The purpose of law is not to say “hmm, what kind of thing is underproduced and that we can stimulate with an innovation?”

Audience member: Well we believe in spontaneous orders for example. We don’t think that law has a purpose.

Kinsella: Correct. But patent and copyright law were not spontaneously generated on the free market. They were a legislative creation that came from the Statute of Monopolies and the Statute of Anne. So they’re not natural. They’re not common law. They’re not evolved. They’re not spontaneous whatsoever.

Audience member: I think that law for example … law is to incentivize good behavior, to disincentivize bad behavior.

Kinsella: All right.

Audience member: Thank you. Thank you.

Audience member 2: Something that you just said seems to me to highlight what the main argument is for patents. You said the purpose of law is to do justice.

Kinsella: Yes.

Audience member 2: I think the ordinary person who believes the patents are just they’re not doing it because they’ve read a lot of Locke or utilitarians or anything else. They see that when they buy corn from a farmer that the farmer they have to pay the farmer for the work that the farmer did to create the corn? And if it’s a musician who creates music, they feel it’s also just if you pay the farmer for the corn, you pay the musician for the music.

And it seems to me like the change in the system you’re talking about is just a different way of still having justice though, right? You kind of implied that the … isn’t musician still getting paid? but the streaming service is now paying a musician. Your example still is preserving the fundamental justice that the creator should be rewarded for their creation.

Cole/Audience members: Yes. And but there’s a fact musicians don’t make a lot of money from copyright. Most of the money they make is from live performances. That’s the big names. But most people are not Taylor Swift. Well, yeah. And so then they don’t get anything. The little person doesn’t get a lot of money from copyright either. But they should at least get something. But they don’t. Most musicians never made a lot of money from copyright. But they should get something. Well, I’m sure because they get money from other income sources.

Okay. Sorry, sorry, we have to be on time. Now we have another event. I recommend you to go to J room to see the John scholars. Okay. Thank you very much and applause for them.

30:08

I have several other ideas to test this topic empirically. I want to look at this industry level data maybe at this persistence of customer preference even in the absence of when patents already expired there are econometric techniques methods like differences in differences. I mentioned Gibson guitars here is a good example of one of those industries that we can look at.