Kinsella on Liberty Podcast, Episode 180.
Jeff Tucker and I discussed IP and my original Against Intellectual Property article. The video can be seen here, and it’s embedded below:
Spreecast is the social video platform that connects people.
Check out Liberty Classics: Against IP on Spreecast.
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Kinsella on Liberty Podcast, Episode 179.
Jeff Tucker and I discuss the recent copyright lawsuit over the “Blurred Lines” song by Robin Thicke and Pharrel.
Background and related:
From this post: “In the case of copyright, for example, J.D. Salinger, author of Catcher in the Rye, convinced U.S. courts to ban the publication of a novel called 60 Years Later: Coming Through the Rye.” And in Canada, when a grocery store in Canada mistakenly sold 14 copies of a new Harry Potter book a few days before its official release, a judge “ordered customers not to talk about the book, copy it, sell it or even read it before it is officially released at 12:01 a.m. July 16″ (on both cases, see Atlas Hefts: The Sequel!).”
See also: The Patent, Copyright, Trademark, and Trade Secret Horror Files
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Kinsella on Liberty Podcast, Episode 178.
I appeared on Emancipated Humans, with host Luis Fernando Mises (Feb. 24, 2015 episode).
“Corporate Personhood, Limited Liability, and Double Taxation”
“In Defense of the Corporation”
“Legitimizing the Corporation”
“Causation and Aggression” (with Patrick Tinsley)
See also:
Podcast (kinsella-on-liberty): Play in new window | Download (Duration: 1:06:28 — 91.3MB)
Kinsella on Liberty Podcast, Episode 177.
This is the final of six lectures of my 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics” (originally presented Tuesdays, Mar. 22-April 26, 2011). The first lecture may be found in KOL172.
GROK SUMMARY: In the sixth and final lecture of the 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics,” libertarian patent attorney Stephan Kinsella concludes his comprehensive critique of intellectual property (IP), focusing on the economic consequences of patents and copyrights and exploring reform possibilities from a libertarian perspective (0:00-10:00). Kinsella recaps the course’s arguments, emphasizing that IP creates artificial scarcity on non-scarce ideas, violating property rights and distorting markets, and uses examples like pharmaceutical patents to illustrate how IP raises costs and limits access (10:01-25:00). He critiques the economic rationale for IP, citing studies that show minimal innovation benefits and significant costs, such as litigation and barriers to competition, and argues that IP-free markets, like open-source software, demonstrate robust innovation through competition and first-mover advantages (25:01-40:00). Kinsella’s lecture, grounded in Austrian economics, frames IP as a statist intervention that impoverishes society.
Youtube, slides, transcript, and Grok detailed summary for the this lecture are provided below. The course and other matters are discussed in further detail at KOL172. The “suggested readings” for the entire course are provided in the notes for KOL172.
Lecture 6: THE FUTURE; INTEGRATING IP THEORY WITH AUSTRIAN ECONOMICS AND LIBERTARIAN THEORY; PROPOSED REFORMS; IMAGINING A POST-IP WORLD; THE FUTURE OF OPEN VS. CLOSED
See the notes for KOL172.
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Transcript
Rethinking Intellectual Property: History, Theory, and Economics—Lecture 6: The Future; Integrating IP Theory With Austrian Economics and Libertarian Theory; Proposed Reforms; Imagining A Post-IP World; The Future of Open Vs. Closed
Stephan Kinsella
Mises Academy, April 12, 2011
00:00:01
STEPHAN KINSELLA: … last lecture for tonight. I thought what I would do – I have several things planned for tonight to discuss. Some of them are more optional than others, so I thought I would find out whether anyone has any questions. And if there’s any questions from the lectures to date we could discuss those, say, in the first 10-15 minutes, and then I can adjust the rest of the lecture as necessary. So if anyone has any questions you’d like to discuss now, I’d be happy to take them. I’ll go ahead and start until I see any, and I’ll pause here in the first few minutes if anyone has any questions. And if at any time the video has a problem or the sound has a problem, just let me know.
00:00:47
Okay, so tonight I’m going to do some review and cover a few things in a little bit more detail, and then we’ll go on to the sort of meat of the lecture in the last 30-45 minutes. So a couple of pieces of news and some – just some news of the week. Okay, so Jock does have a question. I read in B&L – Boldrin and Levine – that’s the Against Intellectual Monopoly book – that financial instruments became patentable in the early ‘90s. Is there any evidence that they contributed to the financial meltdown?
00:01:24
Oh, I think that’s a little bit beyond my expertise, Jock. You mean the patentability of them or just the financial instruments? I mean my view as an Austrian is that the financial meltdown was just the inevitable result of the Fed inflation-caused boom and that just something is going to pop it. And I don’t think the financial instruments got more popular because of patents. It was a pretty rarely used thing from what I understand.
00:01:54
Okay, so John, I agree with you. John McGinnis, the Fed called it the meltdown. And I don’t think – I haven’t seen much abuse from these financial patents. I think people know they’re a little bit odd, and they would be hard to enforce, and they might not hold up. Okay, if you have any others just type them in here. Otherwise, let’s just go ahead and proceed. And again, I would suggest you guys, if you want to keep up with this stuff on a daily basis or weekly basis, check out my C4SIF.org website.
00:02:31
And just in the last seven days alone I think I had 15 or so posts, some of which I’ve got here. Some of these are actually older. Let me just go through some of these, and if you’re curious about any of these you can click on these links or go to C4SIF and look at them in more detail. So these are some older ones actually. All the ones on this page are from about six months ago, five months ago maybe.
00:02:53
So there was one case where a Brazilian newspaper sued a parody blog for making fun of it. So I mean that’s a little bit ironic that they’re being made fun of and then they get – then they actually sue them even though parody is typically protected by copyright. So this just is an example of how absurd the results of some of these laws can be.
00:03:17
Now, this is – what I call an inverse outrage is kind of a poetic justice. There were some copyright attorneys, and they were actually turned around and sued by the people that were accused of infringement. So that was kind of nice justice there. I actually don’t remember the details offhand, but I remember it was kind of a funny case. There is something – I touched on it here, and I’d be happy to touch on it a little bit more. I have a post from about six months ago where I talked about common misconceptions about plagiarism and patents and a call for an independent inventor defense. What that’s about is just pointing out that most people don’t have a very good understanding of the way IP law works.
00:04:00
And they often confuse them, and copyright does require the infringer to actually copy or perform some of the action with access to the copyrighted work. But patents do not actually. Now, most people sort of think that it does require that, but it does not. So they’ll call someone who is sued for patent infringement a plagiarist or they ripped off someone’s idea or a thief.
00:04:29
In pharma there may be a lot of attempts to knock off drugs. It’s just not – the point is in most – it’s not required as the cause of action, as part of a patent infringement cause of action. All the patent owner has to show is that the person they’re suing or targeting is actually making, using, or selling something that is described in the claims of the patent. It doesn’t matter if they independently invented it, and it doesn’t matter if they invented it even first. So the point is most patent lawsuits – there’s even no allegation of copying. But you’ll see this described in blogs.
00:05:10
They’ll say Apple is suing Samsung for ripping off – or in fact I heard it on TWiT I think this week, This Week in Tech the guys were discussing. And you could see these – you might want to take a listen to this week’s TWiT, T-W-I-T.tv. It’s a podcast I listen to. And these hosts are – you can see they’re clueless because they’re without any moorings whatsoever. They confuse patent and copyright all the time, but they were talking about the Apple/Samsung lawsuits, which we’ll get to in a minute and how they’re kind of arguing whether or not Samsung had the right to copy Apple’s iPhone product.
00:05:49
And they’re kind of going back and forth. Are the consumers defrauded? They’re probably not. But was it sufficiently different? But the implicit assumption of their entire argument is that if it’s an exact copy there’s something wrong with that. But I mean that’s what competition is, right? You see someone making something, and you emulate what they’re doing. So it’s funny to listen to them having no sort of principles to ground their – you see their intuitions are – what’s really wrong with this? They never stop to think, well, copying is what the free market is about. Emulation and learning is a good thing.
00:06:24
In any case, I thought that was kind of interesting. There was an interesting post I had about some of these – I think it was a former federal judge, former patent judge was proposing ending the recession by a patent stimulus. That’s funding the patent office and changing the standards to have a ton of patents issued because that would cause a bunch of innovation, which – and innovation leads to wealth and investment. Of course it’s completely ridiculous. Just the idea of inflation, if you print more money, the idea that you have more wealth, but of course you don’t.
00:06:59
I mean even if there was normally a correlation between innovation and patents, if you just increase the number of patents being granted by lowering the threshold, that doesn’t cause there to be more innovation. It’s just ridiculous. So click on those posts. You’ll see some truly outrageous, absurd things some of these guys say.
00:07:18
I have a post from awhile back. It collects some other posts. I get accused all the time of being a hypocrite for being a patent attorney even though I’m anti-IP. And of course the first reply to that is so what? What’s the relevance of being a hypocrite? I mean does it prove that I’m wrong? I mean let’s say you prove I’m a hypocrite. Is that the justification for patent law, that there’s a patent attorney in Houston, Texas who’s a hypocrite. I mean that makes no sense whatsoever. Does that mean before I was born, patent law wasn’t justified?
00:07:50
I mean it’s ridiculous. And furthermore it’s not hypocritical anymore than it’s hypocritical to be a libertarian opposing roads and driving on the roads and living in most countries and opposing socialized medicine but utilizing it so you don’t die. So you can take a look at that if you’re interested too. Let’s go to some newer posts.
00:08:10
These are in the last few weeks. By the way, I believe today is World Intellectual Property Day, which is strange because just a couple days ago it was – you’ll see the little symbol there. It was World Book and Copyright Day. So that’s the link in the middle of the page. I’m on slide three now. There’s a most – this is the most recent thing. There’s a councilwoman I believe in New York City who’s proposing a law to make it a crime to buy knockoffs like knockoff purses and things like this.
00:08:45
And you can see that this – and actually she has this ridiculous argument that we need to target these activities because it’s correlated with terrorism and child labor abuse. I mean it’s incredible that they’re trodding out the terrorism boogieman to justify enforcing intellectual property rights on behalf of the big purse makers and high-fashion companies. It’s absurd. But my point here is that most people will say it’s just trademark laws seizing all these knockoff purses and things like that. It’s just trademark law, and that’s just to prevent consumer confusion, to prevent defrauding the public.
00:09:30
Well, here’s a case where you’re actually threatening to put someone in jail who buys a purse. Now, if they’re being defrauded and they’re a victim of these horrible knockoff people, why would you put them in jail? I mean obviously they’re not being defrauded. That’s why you’re punishing them for doing something wrong. So that just undermines that whole argument. And our own Jock Coates had a great post, really well written. Jock, you’re very eloquent, a great post on the Adam Smith blog.
00:09:57
I was curious, Jock, how you were invited to do that. Do you have a connection to the Adam Smith blog or what? It was a really good post, so click on that. It’s called “Intellectual Property: An Unnecessary Evil.” I haven’t checked it since it first came up this morning. So I’m not sure if there’s been comments or if there’s – is there going to be a rebuttal blog post, Jock, or one taking the other side? I didn’t see one on there this morning. I’d be curious to see.
00:10:26
Okay. I actually blogged just – I reprinted a comment in one of the threads on one of the Mises blog discussions by some guy named Nate M. It’s just a really nice summary of the whole actual evil way that – I mean he says even if you’re not against IP in principle, look at the actual laws that are in place right now. And he just goes through and summarizes all the horrible things that they’re doing. That’s a nice summary.
00:10:56
One of the most recent things, I think this is copyright. There’s some guy who invented some – I’m actually not a huge sports fan, so some of you may know this. I bet you do, John, right? John McGinnis, this da-da-da-da-da-da CHARGE thing that apparently they play at some sporting events in the US. I figured so, John. Anyway, so there’s some composer saying he composed this tune, and he’s going to sue all these sports teams to just play that. It’s just ridiculous.
00:11:29
This – the last one on this page, “Copyrights as Incentives: Did We Just Imagine That?” by Diane Zimmerman. She’s got some study which shows that, as just a practical matter of fact, most artists do not create artistic works because of copyright incentive. I mean they have other reasons that they do these things. I’m glad you liked it, Jock. There was another one on incentives I blogged a few weeks ago, and it seemed to have similar arguments, but I don’t remember where that one is. It was a different author I believe. All right, I’m on slide four.
00:12:07
I also had a post, “Cordato and Kirzner on Intellectual Property.” That’s Roy Cordato and Israel Kirzner. The reason I posted that was – I’m trying to remember how I find out about it now. Someone told me something about Cordato, and I checked and he has this book in 1992, and he has some fairly skeptical comments about the coherence from an Austrian point of view and a free market point of view of patent and copyright. I mean he wasn’t too hardcore against it. I spoke with him since this. He admitted to me he’s gotten a little bit more radical since then, which is good.
00:12:42
Oh, I know. He was the one on the panel, the APEE panel I mentioned, that Mossoff was at and Sheldon Richman and Roderick Long. And I remember Sheldon mentioned to me that Roy Cordato had some searching questions of Adam Mossoff’s pro-IP views. So I looked up Cordato, and sure enough, he’s anti-IP. And then he had some comments about Kirzner, and I looked some of those up, and Kirzner never comes out on it exactly except he has one little comment that patents are a type of monopoly that derogates from the free market. But a lot of his other reasoning about the structure of human action, the nature of means and ends, implies that he would be against IP as well if he had applied his theories to it. So – and Cordato agreed with me on that, that interpretation of Kirzner.
00:13:31
So we have Hayek, Hoppe, Rothbard, even Mises was skeptical. All the Austrians that have kind of looked at this are pretty much anti-IP. Some of the others, like I’ve talked to Steve Horowitz, and they kind of seem not to want to – they say they haven’t thought about the issue, which is astounding to me. But I think they’re skeptical, but they don’t want to say it for some reason. That’s my guess.
00:13:56
I’ve blogged about this case before. There’s a – Jock said Friedman is pro. I assume you mean David Friedman. I don’t remember. He’s very utilitarian, but he’s an anarchist, so I would think he would be skeptical. I think I’ve read some stuff from him before, but he approaches it like from incentives and all this stuff, so I don’t think he has a very hardcore, principled approach. But he may be against it just because it’s legislation.
00:14:27
00:14:31
Okay, so there’s an upcoming – well, it was actually argued already I think. There’s a Microsoft v. i4i case, and I blogged about this before. My suspicion is Microsoft may win, and if they win, that means the Supreme Court of the US will change one of the standards for overturning a patent in court if you’re sued for infringing it. So instead of having to prove that it shouldn’t have been granted, that is, that it’s invalid by clear and convincing evidence, which is hard to do, you just have to prove by preponderance. So that’s sort of a symmetrical and rational and sort of equitable-seeming result, so I suspect they may do that. So it would basically weaken patent law a little bit and make it a little bit easier to defend yourself from patents.
00:15:21
Now, there’s another case where I mentioned Apple has sued Samsung over the Galaxy products, which are like – they look similar to an iPod – or to an iPhone, excuse me. And the interesting thing is Samsung supplies their – I believe their A4 and A5 processors, so they make it so they’re actually suing their own supplier. But my understanding is that Samsung is one of these huge – is it Korean? Huge sort of corporate structure with lots of divisions that are not really related to each other. They buy parts from each other, and they bid it out, stuff like that. So probably Apple sued one division that makes the phones where they can still keep buying their processors from the other division.
00:16:07
And so then Samsung turned around and they have now sued Apple in several countries I believe with ten patent infringement claims of their own. And it’s just going to be a big mess, and first of all, this shows why it’s important unfortunately for companies to acquire an arsenal of patents. If Samsung didn’t have their own patents, they would be defenseless now. They would just have to give in. Now probably what’s going to happen is they will – I suspect they’ll settle because it seems unlikely to me that all of the patents on either side are invalid.
00:16:43
I would assume that there are some patents on each side that have a good chance of holding up in court. And probably if that happens, that would not be acceptable to either target of those patents. So I suspect what they’ll do is they’ll end up settling, so they’ll make a settlement agreement, probably be confidential. We won’t know what happens, and this is another example of how patents help to keep companies larger, help to establish effectively cartels and set up barriers to entry, which I think, Jock, you mentioned in your – something like that in your blog post today. So I mean people wonder why companies are so big and it’s so hard to break into an established industry. It’s largely patents are a reason.
00:17:33
Okay, 8:20, we’re doing all right. Let’s just briefly go over the structure of the course, and if this jogs anyone’s memory, anyone has any questions, again feel free to ask me. So we talked about in this course the history and the origins of IP law and the historical origins of grants of monopoly privilege and mercantilism and favoritism and censorship as well and thought control. We talked about sort of the libertarian Austrian approach to property rights and the functioning of the market, how the purpose of property rights is to help allocate control rights to scarce goods that would otherwise be – you couldn’t use them productively as a means to successful action because you couldn’t be secure in your ownership of it because someone might fight with you over it.
00:18:27
So it’s a way of allowing peaceful, prosperous, cooperative, civilized, productive use of scarce resources but that ideas don’t have the feature of scarcity. And they are not means of action, but they’re more like the general conditions or they are information that guides action. And these things do not need to be owned because they can be used and taught and learned and communicated. And as the body of knowledge in society grows, it benefits everyone. We shouldn’t try to restrict it. It makes no sense to do that.
00:19:05
We talked about the utilitarian case for IP and how there are flaws with the – just the ethical flaws and methodological flaws with this entire approach. And they just simply don’t have any evidence to back up their claims, and all the evidence that we can see from sort of common sense and from studies and attempts to get at this pretty much overwhelmingly supports the idea that patent and copyright harm society on the whole or can’t be proved to help it.
00:19:42
00:19:51
So Jock says on the Adam Smith blog, one of the comments said intellectual property is the foremost property right because you can’t put real property to any good use without intellectual faculties. And of course this is – sounds like the Randian argument. This is pretty much what Mossoff says. And Sheldon Richman and Roderick Long and I have replied to this guy. That blog post is in the slides from last week, slide five, or just go to the C4SIF blog and search for the word Mossoff. You’ll see a kind of summary there.
00:20:25
It’s a weird argument. He says that all property is intellectual property. And as best I can make out, his argument is that you need to use – excuse me – your intellect to homestead things. I mean that makes no sense whatsoever to me. I mean the mind is important, and these IP proponents act like we IP opponents don’t value the mind or intellectual creativity or even labor or work. And of course that’s not true. We just understand its role differently in human action.
00:20:58
00:21:02
And then we talked about the fundamental flaw of the more principled case for IP is that it doesn’t distinguish between the sources of property rights and the sources of wealth. The source of property rights, the origin of property rights is someone having a claim to some scarce resource. We don’t create these resources. We appropriate them from nature, or we acquire them from a previous owner.
00:21:28
So that’s basically the only two ways you can come to own something. You find an unowned thing and you make it yours, or you purchase or get it as a gift from someone who already owned. That’s it. Creation is not a source of wealth. Producing is not – I’m sorry. Creation is not a source of property rights. Producing is not a source of property rights. What – we don’t metaphysically create any object. We transform them. We don’t produce a new object. We produce more valuable configurations of things. We make them more valuable and more serviceable to us or to customers, which means we’ve increased wealth. So that’s the role of creation and labor and intellect is to make your own things more valuable.
00:22:17
Eric has a follow-up question. Continuing Jock’s discussion, do recipes become general conditions when they’re replicated and owned by every individual? I think you could classify them that way or – I think you could. Or you could call them a free good or a non-scarce good. I wouldn’t say they’re owned by every individual, and I think I know what you mean. They’re possessed by every individual or by so many people. It’s generally known. You have possession of the idea sufficient to use it, which means to consult it in your decisions and allow it to guide your action.
00:22:57
So if you want to call that owned, that’s fine, but owned sort of implies that you have a property right in some ownable thing. And I would say that you don’t, that recipes are not ownable things in the first place. And lecture five – I actually saved some of that for tonight, although we’ve kind of touched on most of these points already, integrating IP theory with Austrian economics and libertarian theory. I think pretty much you’ve seen how we do that.
00:23:25
You’ve seen how all these things blend together and how a solid Austrian economics-informed understanding of the nature of means, that is, the nature of scarce resources in the world, gives rise to the need for property. And the structure of human action distinguishes the role of ideas and the role of scarce means in human action. And that has implications for which one has property rights and which one doesn’t. So these things sort of all blend together. Now, there are more concrete implications of this sort of view of things, which we can turn to in a minute, maybe next slide. I forgot.
00:24:05
Let me go ahead. And tonight we’ll also talk about topic six, some proposed reforms, what’s coming, laws that are coming, and how can you deal with the fact that piracy now or with an IP-free world in the future where there would be unlimited piracy but it wouldn’t be considered to be piracy. It would just be free competition—emulation, copying, and competition.
00:24:29
00:24:36
Let’s talk – let’s look at the cartoon first because everyone is going to look at this first. This was – some guy is in a library. He’s looking at book. He says he thinks he’s going to buy it, so he’s reading it. A little bit of time passes, and he says, oops, I read the whole thing, so I’ll just put it back on the shelf and go. So he walks out of the exit of the library or bookstore, and there’s a sensor there which goes off, says beep, beep. Hey, your brain set off a sensor. And he says, I. It says you have a book in there don’t you? And the guy says crap. I mean it shows that if you have copyright, it really would amount to slavery in a sense.
00:25:14
You would have to have the right to own other people’s bodies, their heads, their brains, because it would have content in it. And if they just say, well, we wouldn’t apply copyright laws that way, well, then there’s an artificial, arbitrary distinction that makes no sense. This is what IP advocates do. They will make ad hoc exceptions to the application of their rules when the result would be especially obviously heinous or unjust or ridiculous. So it’s like there’s this thing they’ve created, which has these sharp edges, and they just file the sharp edges down so that it’s less objectionable. But they can keep the censored part that is not as obviously objectionable, although the whole thing is the same principle. So they’re trying to hide the fact that they have a built-in reductio ad absurdum.
00:26:09
Now, I think I’ve touched on this already, but let me just quickly mention this. I did touch on this, but I’ll just – the first point here on slide six: perversity of artificial scarcity of information and knowledge. This is just the perverse idea that the market is always seeking to help us produce in abundance material goods that we need to live and to have good lives. It basically tries to fight scarcity. It deals with the fact of scarcity and tries to create abundance despite the difficulty of doing so because of scarcity.
00:26:46
And luckily we have information, which is already this sort of free good, and IP laws would seek to impose scarcity on that to make it more like the scarce things that the market is trying to make less scarce. We should want these scarce things to become less scarce, and we should want already non-scarce things to stay non-scarce, and that’s a good thing. It’s not a bad thing. So it’s just perverse. You could also think of this analogy. Advocates of IP, they’ll say, well, I’m in favor of property rights, but I’m also in favor of intellectual property rights.
00:27:22
I’m in favor of it all. David Kelley explicitly says this in a little debate with me in 1995. It’s on my website. It’s a letter to IOS. It’s on StephanKinsella.com/publications. It’s somewhere on that page under the IP section. But in any case, he says scarcity is one reason we need to have property rights, but it’s not the only reason. If you create something of value or create a value, then you can own that too. But you can’t just own that too. This is just – this is very similar to the arguments of socialists and lefties who advocate all these positive rights like a right to welfare or a right to a job or a right to social security or a right to healthcare or a right to an education. They just – they say, well, we’re just adding rights, the more rights, the better.
00:28:13
But of course every one of these rights is enforced in terms of the physical world by taking someone else’s physical money or property from them or forcing them to work to support this. So all these rights always come at the expense of real rights in scarce resources, so they can’t have it both ways. They have to choose, and I’m afraid they’re choosing when they say all rights are – all property rights are intellectual property rights. They’re choosing the IP side, and that way madness lies. You have people like Galambos who say that’s the primary property. If they have their way and they would extend property rights on every aspect of every idea, all information, and it was made perpetual, then none of us could move. We would just all die. We would all starve to death. We would strangle the world in a nettle of IP sort of tendrils or something.
00:29:05
An analogy – the Four Freedoms on here I think is Roosevelt’s Four Freedoms, Franklin Roosevelt’s Four Freedoms where he talks about freedom from fear, freedom from want. So these are not freedoms. These are positive rights, which mean positive obligations on the part of your fellow citizens to provide you with this right you have supposedly. It’s similar to inflating the money supply by just printing more dollars. When you inflate the money supply, you dilute the value of existing dollars. Similarly, if you create more rights, you weaken – excuse me – the existing property rights in scarce resources.
00:29:43
All right let’s go on – excuse me – to slide seven. So let’s talk about some implications of this approach for libertarianism and Austrian economics. Oh, there’s a question here from Karl Fielding. Wouldn’t you say that the issue isn’t scarcity of ideas as such but the non-contractual nature of the scarcity? Well, I would say that because ideas are scarce, you actually can – you simply cannot have a property right in ideas. I mean you – if the legislature said someone owns the number four or owns circles, that you actually cannot own these things.
00:30:27
So really it’s a disguised way of declaring ownership of existing real property. So the fact of – the fact that ideas are not scarce means that attempts to protect them really result in transfer of ownership of scarce things. There’s just no other way to do it. I’m not sure what you mean by the non-contractual nature of the scarcity. You say we can contractually limit access to ideas. Yeah, you could contractually limit – well, okay, so one way to contractually limit access to ideas would be to impose some kind of non-copying obligation or even a nondisclosure agreement like a trade secret type relationship on people you deal with like if you sold someone a book.
00:31:15
Theoretically you could have an agreement with them where they agree not to copy it or sell it or disclose it to anyone else, and if they breach that, then they would have to pay you some money. And that’s perfectly fine, although I don’t think people would spend $15 on a book if it’s going to possibly make them liable for a million dollars of damages. They would just go to another book – another author who didn’t have such crazy terms for the same reason that iTunes dropped DRM on its songs a couple years ago, and Amazon did too.
00:31:54
People just don’t want DRM. They also don’t want a million-dollar liability hanging over their head for just a little small book. It’s ridiculous. And Jock has a good point. Why would you read a book if you couldn’t tell someone about it? I mean the purpose of a book presumably is to learn from it, and the purpose of learning is to acquire information that you want to use. And why should you be limited to how you can use it? I mean there’s any number of ways knowledge can be integrated with other knowledge in your head and applied to action. So I just think it’s contrary to the whole purpose. Now, a trade secret is a different matter.
00:32:32
You could have a company that has secret methods and ways of doing things or maybe a list of customers or – and you could impose obligations on the employees to keep this secret. It’s sort of the nature of this company. There’s nothing wrong with privacy in that regard. There’s a limit to it. But the point is, if the information becomes known somehow, like if someone independently invents your technique, they’re free to use it. Or if someone figures out what you’re doing by reverse engineering your products and this information becomes known, again, the knowledge has been acquired by people at large. It can be used. The knowledge itself is not ownable. There is no contract with society at large.
00:33:11
00:33:16
I think monitoring is not only difficult. I think it’s – you have two classes of people, one that’s contractually obligated and one that’s not. So among the second set, they’re free to do what they want with information that they somehow got. And I just think by some kind of competition effect that that second class would grow larger and swamp the first one because people wouldn’t want to be in the first group. So they wouldn’t buy a movie ticket from the movie chain that made me agree to join this contractual regime, this IP regime for life. I mean I just – it’s not worth the $7 ticket or $15 ticket to see a movie to restrict my freedom or obligate me to pay damages in the millions of dollars for the rest of my life. So I think these things are unworkable, these contractual schemes. People want to try them, that’s fine with me.
00:34:05
Now, let’s talk about some of the implications of the view of IP we worked out in the course for Austrian economics. Okay, I do have some links here to sort of what Mises thought about it, what Hayek said about it. Hayek was very skeptical of it. Mises sort of tried to be value-free and not really say. He just said there’s externalities, and if you don’t protect this property, ideas as property, recipes, inventions, then it’s going to be harder to make a profit because you’re going to be competing with people. So you see he sort of glimpsed that it’s really a derogation of the market, but it was an existing type of property right at the time he wrote. So I think he was trying to incorporate it and deal with it.
00:34:54
00:34:57
Now, Rothbard has a view in his “Knowledge, True and False” chapter in The Ethics if Liberty about, for example, reputation rights. And his reasoning there is very good. He basically rejects the idea of reputation rights, and those are enforced by defamation law. That’s libel and slander law. You maybe should remember that too. Defamation is a general thing, this harming someone’s reputation with a falsehood. And the written form is libel, that is, if you do it in a writing. But if you do it orally in speaking with other people, that’s slander.
00:35:38
So slander and libel are the two types of defamation, and as I’ve noticed – as I’ve mentioned in the course here, I regard reputation rights as just another type of IP. Like patent, copyright, trademark, trade secret, reputation rights are one as well because it’s based on the same idea that you created something that has value, and therefore you own it. But as Rothbard points out, what that means is you would have the property right in other people’s heads like in that cartoon a couple slides ago because a reputation is just what other people think about you.
00:36:11
How can you have a right that they think certain things about you? So Rothbard was right here. And if he had applied that same reasoning to the case of patent and copyright, he would have realized that his sort of halting attempt to find some way to justify sort of one narrow type of contractual copyright, that couldn’t work either. We’ll get to that in a minute. Also, this helps you envision three essential aspects of the free market.
00:36:40
So one would be cooperation, people cooperating with each other. Having property rights in scarce resources permits this. And since people have different abilities and different circumstances and different property rights, it would lead to the division and specialization of labor. So there’s cooperation. There’s also competition, which is an aspect of the free market. People compete with each other for customers.
00:37:04
But competition requires and involves emulation and also learning. You have to acquire knowledge. That’s part of human action. That’s part of the goal of human action is to acquire knowledge because it’s useful. It helps to guide action. So this shows the importance – as I’ve mentioned already, it shows the importance of recipes and knowledge as guides to action. So basically it helps clarify how to look at the structure of human action, which is an important concept in praxeology and economics, Austrian economics.
00:37:39
Now, what about libertarianism? Well, as I mentioned, you should view reputation rights as a type of IP. In fact, Jeff Tucker called me last night, and he wanted to know if I agreed with him that money, modern money, could be viewed as a type of IP because the state you can see is cracking down. Well, they already will put you in jail if you counterfeit or copy their money, but even if you try to come up with another kind of money, they’ll penalize you.
00:38:05
So it’s similar to IP in that the state is saying only we can print more of these dollars, but if you print more dollars, we’ll put you in jail for counterfeiting. So they’re claiming like an IP-type copyright or monopoly right to print this pattern that’s similar. So you can see this stuff everywhere, sort of like the little kid in The Sixth Sense where he says – is it called The Sixth Sense? That Bruce Willis movie, the M. Night Shyamalan movie where the little kid says I see dead people everywhere. So sometimes I say I see IP everywhere because it’s just all around us.
00:38:48
Anyway, so – oh interesting, Jock. Jock says Selgin said the money monopoly was the only one excluded from the 1624 Act. Well, and also inventions, right? You’re talking about the Statute of Monopolies? 1623-24? I didn’t remember that he excluded money monopoly, but that’s a good point. I remember it specifically excluded inventions, which is why we still have patents on inventions. It excluded the other types of patents because they were being abused. Maybe you could email me later, Jock, where he said that, where Selgin said that. I’m curious.
00:39:29
But let’s go on here for a second. So I’ve mentioned that a careful understanding of Rothbard’s concept of the title-transfer theory of contract. And you have to work it out this way to understand why the contract idea he wants to use for copyright doesn’t work. Once you clear up all this, then it has implications. I’m probably not going to go into them here too much. This is more general libertarianism, but it does have implications for this debate among libertarians about inalienability, which is basically whether you could sign yourself away into slavery.
00:40:04
Now, if you view contract as a transfer of title to property and not a binding promise, then it’s not an enforceable promise if you agree to perform a service or if you agree to be someone’s slave. But then the question is, well, what about your body? Can you sell your body? And my view is the body is a categorically different type of property thing that you own. It’s a scarce resource, but it’s different than other things that you acquire. I talk about this in my article, “How We Come to Own Ourselves,” which is on my site, but that’s a little bit far afield. It also has implications for debtor’s prison, but let’s skip that here because it’s not too directly relevant to IP.
00:40:50
But I think a clear understanding of IP and a clear understanding of the structure of human action, the nature of contracts and property rights helps clear up these issues is what I’m saying. Let me just quickly go through this slide nine—other implications for libertarianism. Well, as I mentioned already, it clears up the nature of homesteading and distinguishes it from acquisition of wealth, so we’ve talked about this already.
00:41:20
It also shows the danger of metaphors. People are way too sloppy when they say stealing and labor is owned, and mixing your labor. It shows the importance of keeping in mind the fundamental rights and their consequences. So if you have the right to control – if you have the right to your body and to homestead property, that leads to the practical ability to, say, print a book, which is called freedom of speech, freedom of the press or to move your mouth and say things to other people, to communicate. That’s called freedom of speech, but these are not independent rights. They’re just consequences of owning your body.
00:42:04
And if you call it an independent right, then you’re sort of double counting, and it can lead to confusion as it does in Locke’s understanding of his homesteading argument where he says we own ourselves. Therefore, we own our labor. Therefore, we own things we mix it with. And this leads to this creationist view that, well, therefore, you own anything you mix your labor with when you create something of value or valuable.
00:42:27
And so you un-anchor the idea of what you’re owning from the idea that property rights have to do with the need to solve – will help avoid conflict over things that are conflictable, which means things that are scarce. And they just start saying that you own the product of your actions. Well, what’s a product? That’s a vague term. It’s almost metaphorical, and it’s used in an equivocating way because if you mean by product I shape this piece of metal into a sword and that’s the product, okay, I own it. But I already owned the metal, so you’re double counting again, and this double counting leads you to count the creation of a poem as a separately ownable thing. So we have to be careful about metaphors and about double counting in rights.
00:43:20
00:43:26
Slide ten. I’ve already gone over this. You can read these quotes later, but Rothbard, Rand, Mises, Hoppe, they all are explicit, and they recognize, even Rand. They recognize that we create wealth by rearranging things that we own already, and we don’t create property. We don’t create things. We rearrange them. We transform them.
00:43:48
00:43:52
Okay, slide 11. Here’s a Mises quote, Mises saying the same thing. Look at the last sentence. “No human act of production amounts to more than altering the position of things in space and leaving the rest to nature.” You see, this is perfectly compatible with this view I’m laying out here of the significance of the structure of human action and the different roles that ideas play and scarce resources play. So he’s talking about things in space and altering them. Altering is using physical means, manipulating physical things in space, this three-dimensional space. This is the real world.
00:44:27
Leaving the rest to nature, that means relying upon causal laws, and your knowledge of them is what guides your actions to do that. So he’s presupposing that you must own the things already, so production is not what creates property rights. That’s an important point
00:44:51
Jock says Georgists also say you don’t mix labor with land; you expend it on it. I’d be curious to see the context. That’s interesting, Jock. If you couldn’t mind, maybe you could send me something and see if it’s kind of compatible with this, what implications it has. I’d be curious to look at it.
00:45:11
00:45:14
Okay, can anyone remind me? Have we talked in detail yet about exactly what Rothbard’s argument is for contractual copyright with the mousetrap example? I think we did. I don’t know if I need to go over it in a lot of detail here. But basically let me just summarize. He’s good on patents. He’s good on state copyright. He’s good on contract theory. But he kind of had this idea that you could use some – he called something common law copyright.
00:45:44
There’s no such thing as common law copyright anymore, and that’s not what he’s talking about anyway, so I don’t know what he means. I think he means just some kind of common law right to contract, and so he thinks that if A sells B a mousetrap but tells him you don’t have the right to copy this, that’s really a contractual restriction. But Rothbard used it as a bundle of rights. He sort of used this mousetrap as sort of having – the way I picture it is this.
00:46:19
He thinks of a mousetrap, and there’s a little compartment in it which has the right to copy. But the owner opened that compartment, took out the right to copy, and held onto it, and then sold the mousetrap to someone minus the right to copy. If you want to use that weird metaphorical, almost mystical idea to visualize why the buyer is contractually bound to not copy it, okay, fine. But then he says if a third person I guess sees the mousetrap and learns how to make it, then he can’t make it either because he can’t get any right from the buyer that the buyer didn’t have.
00:47:02
So he’s using the idea in property law that when you sell something, it’s encumbered by, if it’s owned by someone else, you can’t transfer rights that you don’t have. But the problem is this third party doesn’t need any rights to be transferred from the buyer to be able to use information he has to make his own mousetrap. It just doesn’t make any sense. The only way to say that would be to presuppose that knowledge is part of the bundle of rights and is separately ownable. But if that’s true, then patent and copyright are justified because that’s what they’re based upon, the idea that knowledge is an ownable thing.
00:47:35
So – but that would be circular and question-begging if nothing else because you can’t presuppose knowledge is ownable. And the attempt to prove a certain type of copyright would be justified because that’s just – if knowledge is ownable, then copyright is justified. So he accidentally I believe suddenly snuck in the implicit assumption that knowledge is ownable in his argument, which is a mistake. He wasn’t trying to prove that copyright and patent are valid. He just thought you could use your contract in a creative way. And I think his only mistake was in assuming that it could be extended to third parties, and I think it clearly cannot be, and I think that’s clearly implied by the rest of Rothbard’s social theory and economic theory.
00:48:22
00:48:28
Briefly, in my Against Intellectual Property, there’s a section – I’m sorry. It’s not. It’s another article, “Reply to Van Dun,” and it’s linked here. We’re on slide 13. Frank Van Dun, who’s a great guy, but he’s a friend of mine. He’s a great libertarian legal thinker. But he’s European, and he’s very mired in sort of conventional legal rules that have grown up into positive law. And he’s very reluctant to get rid of some of those. I think he’s for blackmail law, and he’s for trademark law. And he had some objections saying that – you can read this later, but he had some objections saying that my narrow defense of one type of trademark, which was that it’s fraudulent, I couldn’t even defend that based on my theories because there’s no right to identity or no right to names.
00:49:19
So when someone defrauds the customer by pretending to be a competing seller, like in this case, if this guy named Lockman sells a Rothbard Burger and calls it a Rothbard Burger, I mean he’s free to say what he wants, right? That’s Frank’s argument, Frank Van Dun. But as I responded, I think his argument doesn’t follow. I mean what it basically amounts to, his argument – his argument basically amounts to the claim that without intellectual property rights or without trademark, you can’t communicate.
00:49:55
That is, humans can’t communicate, which is obviously false. I mean so clearly a customer wanting a Rothbard Burger, that has a certain meaning. And he could find a way to communicate that with the Lockman Burger guy, and if he has to, he could say, are you the Rothbard Burger that was started in 1951 on this address, on Mulberry Drive? And I mean you could specify it if you had to, but we don’t need to because there’s context in communication.
00:50:24
I mean look. Some people have the same names, right? There’s probably several Tom Cruises out there in the world. And people manage to distinguish them from each other even though they have the same name. And there’s no law saying that everyone has to have a different name, so anyway, I think that’s a bad, fallacious criticism.
00:50:42
Okay, why don’t we – now we get to the final meat of the lecture, the final topic. We’ll talk about proposed reforms, coming laws, and some other ideas about how we could expect people to respond to an IP-free world. So why don’t we just – it’s 8:54 my time. Let’s take a break until the top of the hour, five-six minutes. And we will pick it up there, and if anyone wants to type any questions in, I could address them when I get back.
00:51:19
00:51:23
I know Hoppe pretty well. He’s actually not that personally socially conservative. I mean his PFS meetings in Bodrum, which I’m going to next month by the way, Property and Freedom Society meetings, full of a pretty diverse cast of characters. In any case, let me ask one other question here. So far from what we’ve presented in the course, is there anyone here who sort of has serious disagreements about any of the key points here? I mean I don’t mean minor things or emphasis or little things. So is there anyone here who has – and I’m not trying to argue. I’m just curious. I know, Gwen, you do. Anyone else, or are most people here pretty anti-IP given this presentation or given your pre-existing views?
00:52:13
00:52:19
Webex hasn’t crashed a single time yet. I don’t know why the video is so jerky. That does bug me. I wish that was better. Good man. Okay, well, let’s – yeah, I mean I almost feel like I’m sometimes too much on IP. At first I resisted being Mr. IP, but it’s got so many tie-ins to other things and it’s such a growing important issue. I just can’t resist talking about this stuff, and it is an increasingly important thing. I’ve got friends who think it’s going to be one of the single-worse things the government does, and they can use this to excuse a lot of things they do. But let’s go on to talk about some coming reforms. I have a lot of these here.
00:53:22
So these are reforms I think we should make. I think we should make, and you can click on this article of mine—I’m on slide 14 now—“Reducing the Cost of IP Law,” for a more elaborate explanation of these changes. I’m not going to go through all these here because they’re sort of detailed and technical, and we’re just talking about changing the legislation. Now, I would like to abolish it but let’s say we can’t abolish it. What kind of reforms would be significant improvements?
00:53:54
And the top two or three or four there are the big ones, maybe the first five. We should reduce the term, first and foremost, from 17 years to five years or seven years. That would be a huge improvement in patent law because patents would disappear more quickly and any competitive effect would be weeded out more quickly. I mean when you see a patent that your company might infringe, even though you didn’t copy the idea from this competitor or this patentee and it lasts for 12 more years, you’re like, well, what am I going to do? I have to wait 12 years frickin’ years to do this? It’s ridiculous.
00:54:33
Patent injunctions should be removed, and that would mean that the patentee could only ask for royalties, just say you’ve got to pay me some money, but you can keep competing with me. So it would act like a tax, but at least it would be better than actually getting shut down. And let’s go to the fifth one. A big improvement would be if you provide a prior use and an independent inventor defense. These are slightly different things. Prior use would be – well, prior use is necessarily independent inventor because if you were using it before someone else later reinvents and patents it, then you independently invented or someone else did.
00:55:12
An independent inventor defense would be if someone later invents it but they do it without copying, so basically it would import a copying requirement into patent law similar to what’s in copyright law. And one reason I think that reform could have some legs would be, as I said, most people are under the mistaken assumption that when someone infringes a patent, they’re ripping off or stealing from or copying the ideas of the patentee, which is just not true. It doesn’t have to be alleged, and it’s usually not true. But if people think that patent law is justified because that’s how they envision it, well, then let’s make patent law require that. Of course, that would be fought tooth and nail by the patent bar.
00:55:56
Now, there is a pending patent reform act. It’s called the America Invents Act. And it’s been threatened – something like that has been threatened for 10-15 years, and it’s all – it’s never passed, but I think it might pass this year because Obama and the Democrats and Republicans are kind of all together on this. But I want to say that not a single thing – and I’ve blogged on this too. If you go to C4SIF.org, search for America Invent Act I think, and I think it’s Senator Leahy. Anyway, not a single reform in there is a major reform anywhere on the level of the ones I’ve got proposed here, not a single one. They’re all pretty minor or arbitrary changes. So these are reforms I would like. None of them are coming.
00:56:43
Copyrights – again, reduce the term. Make it 10 years or 14 years like it used to be instead of 70 – life plus 70. It’s ridiculous. Take software out. Software is functional. It’s not expressive. I’m talking about the code. Software code is not artistic. It shouldn’t be considered to be an artistic work, and it wasn’t at one point. Ethan, I’ll answer your question in just a second.
00:57:09
Also, a big improvement would be requiring active registration. That is, instead of having copyright be automatic, make someone apply for it, pay a little fee, and then re-register it every 10 years until they have no right to do it anymore. That would solve the problem of orphan works. Okay, I’ll skip the rest of these too because you can read these yourself.
00:57:32
Ethan asks, can something valid resembling an IP rights claim exist when it comes about from a genuine rights violation; someone breaks in and steals my invention diagram or something? Well, I mean code could be artistic, but it’s also functional, and it’s protected by patent already, or it could be. So you don’t want to have – these laws are not supposed to overlap. I’m not trying to denigrate coding, but it’s not done to be read by someone like a book is or to be viewed. It’s got a functional purpose and utilitarian purpose.
00:58:09
But I want to be clear I’m not denigrating software. I just don’t think it’s appropriate to be covered by copyright, and it used to not be is the point. It’s a fairly recent idea. I mean the court had to make that decision at one point, and they can un-make it. But I think that it wouldn’t be an IP rights claim, but I know what you’re asking, Ethan. So here’s what I believe. This is more of a libertarian question, but – so let’s say someone breaks into your house.
00:58:38
And when they do that, they access information they otherwise wouldn’t have, private information. It doesn’t have to be the manuscript to a novel. It could just be some – it could be a fact about you. Maybe it’s the fact that you’ve been married three times and no one knows this, some embarrassing social fact, maybe that you have a mole on your left underarm. I don’t know. They learn some fact about you or some fact they wouldn’t have otherwise known.
00:59:04
Now the way I view that is property is still – information like that I still not ownable, but this guy committed an act of trespass, and he’s harmed you and he can be punished, or you can seek restitution or something. There’s some kind of legal remedy against this guy, and the extent of the damages he has caused you can be taken into account based upon his leaking information that the world wouldn’t have known. Now, that doesn’t mean the world can’t use this information.
00:59:33
So if someone is secretly – I don’t know, secretly a UFO nut, and they never tell anyone because it would be embarrassing and some trespasser breaks in and figures out that you’re a UFO nut and runs off and tells a newspaper reporter, and the newspaper reporter reports this and soon the whole world knows, well, I mean I think that the trespasser – let’s say you have a role in a movie coming up that you’re going to make $20 million and now you lose the role because you’re a laughingstock because you’re a UFO nut.
01:00:11
Well, I think that the $20 million you lost – it’s owed to you by the trespasser. Of course he’s not going to have it because most of these trespassers are low-lives. But still, theoretically he owes you that. The extent of damages is measured by that. But did the movie producer or the movie production company violate your rights by not hiring you, by acting on the knowledge? I don’t think so because the knowledge is not owned, and people that have it who didn’t commit a tort are free to use it as they want.
01:00:42
01:00:47
Donald says what should happen or will happen to software licensing if software is removed from copyright coverage? This kind of goes to the third topic of this lecture, but let’s go ahead and talk about it now. I don’t understand your question about threat. Maybe you can reword it if you want me to address it.
01:01:07
But anyway – well, I don’t know what software companies would do. I think that you’d have a lot of companies would be paid to design custom software for companies that need it to be done to be a service. Maybe they would give away their little stuff for free, just like we have now. There’s light versions of apps and programs that are free. And if you want the full thing, you would unlock it. I think that you would have a lot of – the really high-level stuff would be so customized, and it would need so much support from the company that you’d just make a deal with the customer and you have a contract, a support contract. I think you’d have what you have now. You’d have a lot of these software programs.
01:01:50
They routinely check over the internet to make sure they’re a licensed copy, or there’s so many updates issued all the time you’d have to prove you’re a legitimate customer to get the update on the service support. There would be enough customers who would pay you a fee that you could make a profit. Would there be some pirating? Maybe. I mean there is now already – there’s already pirating of movies and music and software. And so companies that make these things now deal with this fact already, and they just have to find enough customers to buy it to make a profit.
01:02:28
01:02:37
Jock says on software you had an interesting discussion with someone after the Adam Smith blog post. He said the FOSS people would not like to lose a copyright since they couldn’t enforce a GPL-type license. Yeah, I go back and forth on that. I mean one thing I don’t like about copyleft and share-alike and GPL-type licenses is they sort of worm their way into things, and they actually restrict the use of things. And they’re based on copyright, and you couldn’t have a license without copyright in that sense. But you wouldn’t need one. I mean the purpose of GPL and share-alike is I think to require people to not encumber the work or derivative works based upon it with more restrictive copyright.
01:03:26
But in a copyright-free world, they couldn’t anyway, so I don’t know. Jock says the incentives of having others fix code and so on would probably balance out. I think so. I think it would. I think certainly the industry would change, but that’s just a sign that the industry is distorted now. We talked last class about all the ways that IP distorts the market and the industry and the fashion industry. But to think it would remain the same is false, but it shouldn’t remain the same. So it’s hard to predict exactly, but I think a variety of measures like that.
01:04:06
Trademark – we should, number one, make it harder to prove consumer confusion. It should have to really be something that can defraud. We should get rid of antidilution protection. And I think we should actually abolish the federal law in the US, which is called the Lanham Act, and let the states handle it like they do now and like they used to because it’s unconstitutional.
01:04:29
01:04:32
Now, some reforms that are coming up, let’s talk about those. I actually should have updated the bottom of this slide 17. I have a more recent post about the America Invent Act somewhere on the page. This is from last year, the bottom thing. So about a year ago or six months ago, it was announced that the UK copyright laws are going to be reviewed. But again, they’re only going to be reformed to a minor degree. There are several court cases pending in the CAFC or the Supreme Court, and it’s possible they’re going to move in a better direction, slightly weakening IP protection. But none of this stuff is radical or major. This one here is this exact thing I talked about earlier, the Microsoft v. i4i case.
01:05:32
This is the thing about lowering the threshold to invalidate a patent. They might do that. I hope they do. That would probably be the most significant change, but it’s still not that great. It won’t stop all the abuses and all the problems of patents. It won’t stop the cartelization I talked about. It won’t stop the barriers to entry. It won’t stop the waste. It won’t stop the lawsuits.
01:05:54
In trademark, I think there was an upcoming case. This might have been decided already—I need to look into this—about whether eBay, which was selling jewelry, whether it’s their responsibility to make sure that what an independent seller on eBay is selling is counterfeit or not. But there have been some bad results too, some extremely crazy, mostly copyright because copyright statute is insane.
01:06:22
I don’t know if you guys saw this. I don’t know if I have a blog post on here about it. There was a lawsuit or a threatened lawsuit against one of these kind of defunct Napster-like companies. And the Recording Industry Association or whoever the plaintiff was claimed something like $75 trillion in damages. And they’re probably correct because they just added up all these offenses and multiplied it by the statutory damages, which is insane. I mean it’s thousands of dollars – LimeWire, exactly. So some of them were going the wrong directions.
01:07:03
The ACTA, the Anti-Counterfeiting Trade Agreement that I mentioned earlier, did get improved largely because Michael Geist, a copyright – I’m sorry, a law professor, IP law professor in Canada – actually I’m not sure if he’s an IP. He’s a law professor. I don’t know what his specialty is. But anyway, he blogs a lot about IP. And he – someone leaked to him the text of a current draft of the ACTA treaty, and he leaked it on his site.
01:07:32
And so because of all the storm that caused, some of the more egregious provisions were removed. So if it passes, which I suspect it still will, it will still be bad, but it won’t be as bad as it could have been, and this was – again, this last post here. It’s possible, but you can see there’s an – Jock says we can campaign for countries not to ratify it, and that might be worth doing because we might have a chance actually. There’s almost no chance to get them to repeal existing IP laws anymore than they repeal welfare programs. But when they’re being proposed and there’s all this sort of mixed feeling about freedom on the internet and everything, maybe we can get it stopped. I don’t know.
01:08:16
The bottom post just talks about the pending patent reform, but I have a more recent one on my site about the America Invents Act and what that’s going to do. And I kind of went through all the provisions, and I mentioned whether they’re good or bad, but they’re all minor except for some of the bad ones are not that minor. So some of the reforms that are coming, the ACTA like I mentioned. COICA, that’s a US federal law, counterfeiting – I forgot what it stands for, but it’s going to be horrible.
01:08:46
Canada is talking about having a new copyright bill with a DRM clause, digital rights management clause, similar to what the US has in the DMCA, the thing that outlaws DRM-circumvention technology. There’s also, as I mentioned, always agitation to add IP protection to areas that are currently not covered like bartenders’ recipes or food recipes or fashion designs. I’m afraid that fashion thing might pass. I mean you get these lobbyists from these industries, and they come in and they just bribe some congressman to get it done. It’s horrible. Once it gets done, it gets entrenched like the vessel-hole design thing we talked about earlier.
01:09:34
Okay, now we talked about some of this already: innovation in a post-IP world, and for the people that are concerned about this, like Gwen and others, I would – so just look at some of these posts. They have a lot of examples and discussion about how creative people can be, but as a general matter, I want to say that unless you’re a complete utilitarian or consequentialist, the primary thing in my view is to have a principled libertarian perspective on individual rights and property rights.
01:10:10
And just like Ayn Rand argued I think well or maybe it was Greenspan when he was still good, the primary defense or the primary opposition, for example, to antitrust law is that companies have a right or individuals have a right to collude with each other. They have a right to get together and try to set prices. They have a right to price discriminate. Companies have a right to be a monopoly if they can do it in the market. So the primary opposition to antitrust law is not the economic argument that, well, you don’t really need it because it’s unlikely, etc.
01:10:49
01:10:54
That’s a bolstering argument. It’s a secondary argument. It helps to explain, but the primary argument has to be principled, same with IP I believe. I mean IP clearly couldn’t exist without legislation, at least patent and copyright couldn’t. It couldn’t exist without the state. Clearly it interferes with people’s liberties and freedoms to use their bodies and to use their property. It clearly interferes with the process of learning and the process of competition. They are explicitly anti-competitive.
01:11:25
That’s the purpose is to reduce the competition faced by the monopoly owner. They’re clearly monopolies granted by the state. And they clearly, in practice, have an increasing number of egregious abuses and outrageous results even if you’re in favor of the idea in principle in theory. In practice, it’s going to be horrible, so the prima facie case is against it, and you also have to view the role of the entrepreneur as it’s his job to figure out how to make a profit.
01:12:04
I mean there’s always going to be a combination of useful products that you sell that are useful because of their configuration and ones that have more to do with the information or pattern in them where it’s a little bit harder to make a profit on them. There’s always going to be a free-rider issue for some types of businesses. There’s always the problem of excluding these free riders or excluding others. I mean this is the cost of doing business. A movie theater – why do they have to put locks on their doors?
01:12:44
Why do – because they want to sell seats in there, and if they just leave the doors open, people will just wander in and watch the movie for free, and they wouldn’t pay them. So they find a way to exclude people who are not paying so they can make a profit off the ones that are willing to pay, and this is costly. There is a cost of exclusion. This is what every entrepreneur faces. Every human faces this.
01:13:11
We extend cost on protecting ourselves, etc. that we wouldn’t have to do if we could just trust everyone to do what we wanted them to do. But they don’t always because they have different interests than us. When it comes to intellectual creativity, there’s just an infinite number of ways and reasons people engage in it. Some can be monetarily profitable, some not, some more so than others. This is the way life is and always will be. Even in today’s IP world, there are areas of intellectual innovation, which are not protected by IP law, and people still do them, or maybe they don’t do them as much as they would, but that’s just the consequence of the fact that knowledge is infinitely transmissible and duplicable. It’s learnable. So sometimes you can’t make a profit off of coming up with an idea.
01:14:04
If you can’t think of a way to do it, don’t do it. But there’s all kinds of bundling things you can do. There’s selling of services. There’s reputation effects. There are any number of ways that – we already see some of them emerging. Artists, musicians – it works well for musicians. They might give away their songs because they want to get a following.
01:14:26
Authors may give their first book away and get a fan base, and then they don’t sell their second book until they get a subscription of 100,000 people. Or maybe you sell your book for $3 on Amazon Kindle, and people buy it because it’s not worth it to pirate it. It’s cheap enough to do it, and you can still make enough money to make a living. Maybe it builds up your reputation so you can use it to get a job as a consultant or as an employee with someone. You show someone your portfolio of paintings and they hire you to paint a portrait of their daughter. People are going to have to figure this out. It’s fundamentally the entrepreneur’s job.
01:15:12
01:15:17
This is just some examples. I mean people blog on blogs almost all of them do it for free. Some get a little advertising, but that’s an example of how you can make some money. You get advertising. You draw eyeballs, and advertisers will pay to be in front of those eyeballs. Scholars write articles all the time for no money because it helps their career. It helps their employment prospects, helps them network, helps them get a reputation, etc. Why do people come up with dance routines and choreography? Because they can put on a show that other people might want to come see.
01:15:52
But that’s not copyrighted either. People do it because it makes sense at the time, and if it adds a little bit of culture to the world that others can build on and learn from later, that’s a good thing, not a bad thing. Why do people write open-source software? Why do they contribute to Wikipedia articles? I mean Wikipedia is putting Encyclopedia Britannica and World Book out of business I believe. Why do physicists investigate the causal laws of nature? Why do mathematicians come up with algorithms and proofs?
01:16:20
Why do perfume companies make and sell perfume when they can be knocked off and they are knocked off? I mean what would you rather give to your girlfriend on Valentine’s Day? A nice Chanel perfume or a $5 one from the drugstore that smells just like Chanel and says it smells like Chanel, what would you rather give her? I mean there’s a reason people are going to pay for these things. Why do fashion designers come up with new clothing designs, and why do chefs come up with new recipes all the time?
01:16:47
I’m asking these questions because this is what you should be asking if you’re wondering how people would possibly write software or make videogames or write novels or paint paintings or come up with inventions if you don’t have a state-granted monopoly because there are so many aspects of life where this goes on already without the state granting monopolies. So just ask yourself why people do this because it’s obvious that they do, and just try to think about, well, why do they do it? And some of the same reasons would apply to these other areas of innovation and creativity.
01:17:25
01:17:29
So I mean one of the most famous recognized works of literary – literature in human history are Shakespeare’s plays, all of which I understand were basically retreads of existing plots known to people. But he didn’t have copyright either. Would he have written more plays if he had a copyright? Or maybe he would have written only half because he could have relied upon royalties. Classical music was before copyright.
01:18:02
01:18:13
Jock said something about Islam says inventions are from Allah and not available, and therefore should be available for all. Someone asked about the status of IP in Muslim countries, and I didn’t know the answer. I’d be curious. I think they do have modern patent laws, so I’d be curious what your source for that is or if you could send me something. I’m curious to see that. In any case, why did publishing flourish under Germany when they had no copyright law more than in England which had copyright law? I mean these are case studies. You have to look at these things. You’ll see how people adapt in a freer society.
01:18:56
Yeah, there’s more competition, but that’s not necessarily bad. The Grateful Dead – they allowed bootlegging. It doesn’t hurt them. You can have ads for some types of activities. TV shows have always broadcast for free. Newspapers, they so far have been free on the internet because of ads. I’ve already mentioned some of these things. There’s reputation effects. There’s networking. There’s gratification. There’s ads. Singers – this could be advertising for concerts. For the novelist, I’ve already mentioned this.
01:19:35
One other idea I had, I don’t know how realistic it is. It’s just one idea I had, and I wouldn’t be surprised if some novelist would try this. Let’s suppose you’re a novelist, and there’s no copyright. So that means someone can make a movie based upon your novel. You can’t stop them, but if they want to make an authorized version of the movie, then they have to get your permission to say it’s authorized because it’s just – it’s fraudulent otherwise. So you could sell your authorization. Or they might hire you to be a consultant, and then they could say in their advertising Atlas Shrugged, the Authorized Version, produced in consultation with Ayn Rand. And they might pay her a million dollars because they will sell that many more tickets, more so than Atlas Shrugged versions 2 and 3, which are being made down the street by knockoff artists.
01:20:29
So I think there’s all kinds of ways you could profit from, say, a novel. Inventions certainly, I have no doubt. I mean I’m in the technical industry. There’s first-mover advantage. There’s reputation and goodwill. I mean why do Tylenol and Black & Decker and other well-known brands sell more than generic versions of the same thing, maybe twice as much sometimes? For individuals, it could help you get a job, help you learn, help your reputation.
01:21:01
Eric says I’m somewhat sympathetic to pharmaceutical IP, but isn’t the bigger problem with the FDA forcing them to make their products public knowledge? Well, I think the big problem is the FDA imposing costs on them, which then they feel the need to recoup by charging a monopoly price. But if you actually read the chapter on pharmaceutical IP, I agree that that sort of intuitively seems like the strongest empirical case for IP, for patents. But if you actually read the chapter on pharmaceutical patents in the Boldrin and Levine book, they empirically explode almost every myth about this. I mean it looks like it’s actually just a complete myth. It is not true that patents are necessary for the pharmaceutical industry to make a profit. It’s just simply not true. I mean you could say it seems like it, but it’s – the evidence shows that it’s not.
01:21:53
Anyway, I’ve already talked about some of these other ideas on page 22. Nina Paley, who’s a friend of mine and an anti-IP artist, she had the idea – and Karl Fogel – of the Creator-Endorsed Mark. In fact, one of my books has already been published with that. There was a translation in Italian of my Against IP, which came out just a couple months ago, which has the – let me see if I can get it, which has the Creator-Endorsed Mark on it. And the idea – this is the book. And if you – well, you won’t be able to see it. It’s very small.
01:22:39
But right here, you can see the Creator-Endorsed Mark is one of those marks. Now, the idea – I asked them to do that. So the idea is that fans of a given author or artist would be more willing to buy from one that’s officially endorsed by the artist both because they think some of the proceeds are going to the artist because they’re more trusting that it’s the most recent one or the authorized version or whatever.
01:23:10
Movie theaters can still sell tickets even in the face of downloaded movies and DVDs. They can innovate and add things like 3D or better experiences that are not possible in other environments. I mean of course movies are still popular all these years. They’ve been whining about it for years. By the way, we’re a little bit over now. I’m about to wrap it up because – I’m willing to stay later, but I know a lot of people get tired after 90 minutes.
01:23:38
And take a look at this Kickstarter idea too. It’s a way to fund ideas. It’s like you get people to commit ahead of time. You can do the same thing, subscriptions to novels and things like that to release your next novel. So there’s lots of ways to profit off of your ideas. Oh, these are other versions, other things similar to Kickstarter, IndieGoGo, which lets projects be funded like low-budget documentaries and quirky social project development. The micropledging service, The Point, which I’m thinking about using for something myself, lets people pledge.
01:24:14
And so actually I need to update this. So Bob Murphy, who’s an Austrian, has challenged Paul Krugman to a debate and is trying to get $100,000 pledged to shame Krugman into debating him, $100,000 that could go to some charity. I’ve pledged too. I’m hoping it comes through.
01:24:32
Anyway, we are done. I finished it on time, so I’m pretty happy about that. I am happy to answer any questions, whatever anybody wants. We can sign off if everybody is tired and ready to go. The final exam will be up soon. Don’t feel compelled to take it, but don’t be afraid to take it either. It doesn’t matter how you do. It’s fun and kind of going to remind you of some of the things in the course.
01:25:02
So any final comments or questions? Thank you guys. I enjoyed it too. And thank you, Gwen, for tolerating some heretical-sounding ideas. And if there’s any questions that occur to anyone now or people that are listening on the recorded lecture, feel free to post them in the questions forum. I’ll be happy to address them in writing. I guess we’ll sign off now, but I enjoyed the course a lot. Thank you all for being a good class. I kind of enjoyed the smaller, intimate class here. Thanks Donald. Thanks everybody.
01:26:11
Podcast (kinsella-on-liberty): Play in new window | Download (Duration: 1:32:06 — 84.3MB)
Kinsella on Liberty Podcast, Episode 176.
This is the fifth of six lectures of my 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics” (originally presented Tuesdays, Mar. 22-April 26, 2011). The first lecture may be found in KOL172.
GROK SHOWNOTES: In the fifth and final lecture of the 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics,” libertarian patent attorney Stephan Kinsella examines rights-based arguments for intellectual property (IP), particularly patents and copyrights, arguing they fundamentally conflict with libertarian property rights by imposing artificial scarcity on non-scarce ideas (0:00-10:00). Kinsella recaps the course’s prior lectures, emphasizing that property rights apply only to scarce, rivalrous resources to resolve conflicts, and critiques rights-based justifications—natural rights, labor/desert, and creation-based claims—using examples like a patented mousetrap to show how IP restricts owners’ use of their physical property (10:01-25:00). He argues that IP is a state-enforced monopoly that redistributes property rights, stifling innovation and competition, and contrasts this with the free market’s reliance on emulation and knowledge sharing (25:01-40:00). Kinsella’s lecture, rooted in Austrian economics, frames IP as a philosophical and practical violation of liberty.
Youtube and slides for this lecture are provided below. The course and other matters are discussed in further detail at KOL172. The “suggested readings” for the entire course are provided in the notes for KOL172.
Transcript and Grok detailed shownotes below.
Lecture 5: PROPERTY, SCARCITY, AND IDEAS; EXAMINING RIGHTS-BASED ARGUMENTS FOR IP
See the notes for KOL172.
❧
Transcript
Rethinking Intellectual Property: History, Theory, and Economics—Lecture 5: Property, Scarcity and Ideas; Examining Rights-Based Arguments for IP
Stephan Kinsella
Mises Academy, April 12, 2011
00:00:00
STEPHAN KINSELLA: … like he usually does. How is everybody doing tonight? Is everyone – is it night for everyone? Do we have any foreigners here online yet? I don’t see a way – Gwen wants to know about popping the media to your panel. I don’t see a way to do it, so what we’re going to do is I’m going to share my desktop later when I get to that video, so that’s down the line. So let’s get going. I spent actually a couple of hours today on a blog post, which we’ll get to shortly.
00:00:43
So today we’re going to focus on sort of the libertarian Austrian framework that you need to have to look at all this stuff the right way. We’ve kind of gone through the conventional views, the sort of confused natural rights views for IP, the utilitarian views. But now let’s approach it from the ground up the way it makes more sense. Oh, I didn’t change the date on this slide. It’s not December 10, but everything else has changed. Sorry about that. Okay, I’m going to go through a few posts I did on C4SIF in the last seven days, and also I left a few in from the last version of this course because they were pretty substantive, meaty posts that make good material.
00:01:30
What I’ve been doing actually is I listen the day before these lectures to the one I gave on the same day last course to kind of remind myself of what I covered that wasn’t planned. And that way I can gradually improve these. But anyway, and I decided to leave some of the things in, but we’ll get to those in a second. So the post I spent a lot of time on today was this one here, the first one, “Mossoff: Why Business Leaders Should Care About Intellectual Property.”
00:01:58
This is on slide two. By the way, can everyone see and hear me okay? Anyone – anyone? Sound okay? Too loud? Too quiet? Or is it all right? Fine, good. This is the shirt, by the way, I was given when I went to Austin and gave a speech on IP. Norman Horn gave me this and Coke paid for it so I’m happy about that.
00:02:24
00:02:27
So Adam Mossoff is a law professor at GMU. He’s an objectivist. He’s one of the few people still trying to come up with a way to justify intellectual property and in particular from the objectivists or Ayn Rand’s point of view. So if you want to read that post, I kind of go through a lot of problems with his speech. He gave a long lecture, and it’s just full of confusions and errors, and I think most of you just from taking this course, you can see a lot of the mistakes he makes.
00:02:58
He makes the mistake of basically assuming there’s a property in value and also of assuming that you create a thing called value that you have a property right in without recognizing that what you really do when you create or produce is you transform with your effort owned property that you already own, and you make it more valuable. So property rights don’t really factor into the new wealth that you created. The wealth is just the more valuable configuration of your property that you’ve transformed with your effort. So there’s a lot of other just one mistake after the other in his talk, so take a look at that.
00:03:43
Someone emailed me today and said why are you wasting your time on this guy? And I said, well, there’s not many more people left to debunk. There’s really not many good arguments for IP, as I think we’ve seen in this course and as we’ll continue to see throughout the rest of tonight’s lecture. Kevin Carson, who’s a mutualist left libertarian, had a kind of provocative little post comparing the arguments for intellectual property to the arguments for slavery. And I think he’s got a good point. I mean they both involve owning – telling other people what to do with their bodies and their property. Take a look at that.
00:04:22
My good friend, Jacob Huebert, who wrote the great book Libertarianism Today – it’s a fairly recent book. And he’s got a great chapter on IP in there. It’s a great overview and synthesis. Well, he just did a debate himself at Whittier Law School. He actually got me invited to Ohio, where he’s from, a couple of months ago to speak before the Federalist Society on IP at Ohio State Law School. And he just did his own debate at Whittier Law School, and he does a really good, excellent 15-minute presentation. So if you just listen to that. His approach is a little different than mine, but we agree completely.
00:05:00
He’s very solid. He’s a really good speaker. And just like when I debated someone, his opponent was I mean just pathetic. His opponent was better than mine actually. His opponent at least tried to come up with an argument. But he’s just another lawyer software guy and doesn’t really have much of an argument. In fact, in the middle of it, he even says I don’t really believe everything I’m arguing here, so he’s just trying to come up with arguments. My opponent was just an amiable, nice patent lawyer who really had no arguments whatsoever except I think we should reform it but not get rid of it. I mean that was his argument.
00:05:35
So I haven’t posted on Atlas Shrugged, the movie. Many of you might have heard of that. I haven’t seen it yet. I don’t know. Has anyone here seen the movie, Atlas Shrugged, by the way? I’m curious. Gwen says she’s seen it. Well, thumbs up, thumbs down? How many stars out of four would you give it, Gwen? I’m curious. Wow, 4/4. It’s getting polarized reactions. My wife wanted to see it this weekend with me because I pumped her up about it. But then I read some of the negative reviews, and I thought I might wait for the video because I didn’t want to take her there and have her disappointed. She’s not as much gung-ho as I am. Anyway, there was an interesting thing about this movie.
00:06:15
Some of you may or may not know. So this movie has been sort of back and forth for years about whether it was going to be made. Gwen says it was excellent given the limitations they had to overcome. That’s what I wanted to talk about is the – why did they have limitations? They had limitations because I think Leonard Peikoff had licensed the movie rights to the novel to some producer, and they were about to expire because they actually had a big movie deal at one point with Angelina Jolie and others, but it fell apart.
00:06:46
So the movie rights were about to expire, and unless he started production on a given day, they would expire. So I think he contacted Peikoff and he said can I have an extension. Peikoff said no because Peikioff’s a typical objectivist and surly and not cooperative with people. And so he denied him permission, so the guy had no choice but to start production last minute, so it was kind of a rushed production, lower budget than normal, bunch of no-name stars. That might have helped it in some ways, but anyway, if it suffers because it was rushed, it’s because of IP, because without IP, the movie would have been made a long time ago. And it wouldn’t have been a rush. In fact, many versions may have been made by now. So it’s kind of ironic that Ayn Rand’s movie, the movie version of her beloved novel, may have been hampered or at least diminished because of IP, which she supported.
00:07:42
This is just a little quote I came across from doing some reading, a case – a district court – a federal case from 1995. And this is just common wisdom. Everyone knows this except libertarians who argue for IP and claim that it could arise in a common law system. Unlike – I’m going to quote here. “Unlike contracts, copyrights and rights flowing therefrom are entirely creatures of statute…” Well, that’s what I’ve been arguing the whole time. Patent and copyright are creatures of statute.
00:08:09
They could not exist without legislation unlike contract rights and property rights and inheritance rights and marital rights and even crime and punishment, which arise naturally in a decentralized legal system. Gwen says I think Atlas was more limited by the ideological barriers from Hollywood fighting against it than its IP limitations. Could be, could be right.
00:08:33
Okay, next page. Oh, this was one. “Google to sentence YouTube violators to ‘copyright school.’” So now Google is – and they’re doing this reactively. They’re trying to stay out of trouble, but anyone who’s charged with YouTube – posting YouTube videos that violate copyright, they have to take a copyright education class. And I think it’s just horrible. It reminded me of one of my favorite quotes by C.S. Lewis, one of my favorite authors.
00:09:06
And he criticizes this sort of rehabilitation mentality we have in society now. It’s one thing to punish someone for committing a crime, but to try to reform him can be monstrous. And I’ll just read a bit of this quote here. You can read the rest later. “Of all tyrannies, a tyranny sincerely exercised with the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated, but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”
00:09:46
Anyway, so that’s a great quote, and it sort of reminded me of this Orwellian education mentality. I also spent a good deal of time using some of the material I’ve developed in this course, which you’ve already learned most of, to develop sort of looking at the four sort of historical periods or phases of IP abolitionism, all the arguments.
00:10:13
And take a look at that, but most of it will be familiar. The first phase would have been the one that Machlup outlined in the late 1870s. Remember we talked about how there was a lot of agitation against IP, arguments back and forth similar to the ones we’re having nowadays, until that panic of 1873 caused the free traders and their opposition to patent and copyright and their opposition to protectionism to be in disfavor. And when that happened, the opposition to patent and copyright sort of crumbled.
00:10:45
Thank you, Danny. The second phase of IP abolitionism you can – I would say it would be this vigorous period of debate by these left individualist anarchists like Benjamin Tucker and his crowd around his magazine called Liberty in the late 1800s. So there was a vigorous set of debates there, and Benjamin Tucker was excellent on this stuff. It’s amazing how good he was so far back. He was better than all the rest, better than Spooner, better than Tak Kak, and the other guys.
00:11:20
And then I’d say the third phase would have been the sort of modern renaissance in the 1950s to the, let’s say, 1980s of free market economists and libertarians like Murray Rothbard, Wendy McElroy, Tom Palmer, and then economists like Fritz Machlup and Arnold Plant, pretty much all coming to the conclusion – Hayek, by the way, arguing against IP. But they kind of made comments, and then they’d disappear because IP wasn’t that pressing of an issue.
00:11:52
And then finally I think we reach our current age, which you can mark as starting around 1995 for three reasons. Number one, ’95 is when you can kind of say the internet started its current dominance, and when the internet started and digital copying and digital information became more ascendant, then the problems caused by IP—copyright and event patent—became more obvious and exacerbated. And then also ’95, I wrote my first article against IP, and I’m sort of in the new generation of anti-IP writers, and so did Roderick Long who’s got some great stuff on that. So ’95 you could say, and then it started picking up steam around 2000-2003.
00:12:35
So I’d say the last seven or five years has been really the full flowering of a strong movement against IP. Most libertarians you might now that are principled and Austrian-related or anarchist, they’re pretty much – and the young people on the left, the left libertarians, the amount of IP opposition is just astounding and awareness too. I mean you hear sophisticated arguments from all these commenters on the blogs. Now, they’re all reading all this stuff, my stuff and Roderick’s stuff and all the stuff out there.
00:13:09
I mean the case is not that hard to understand, but it’s complicated, but it’s – I think really the defenders of IP are on the ropes, and I think they know it, at least among libertarians. These are some older posts from my last incarnation of the course. The first one, you might want to take a look at the first link. I’m on slide four now. By the way, I have posted these slides. Danny, they are all in the course materials.
00:13:39
I don’t know if anyone wants a Google Docs version of them to link to, but these slides are on the course page. Sorry, I should have mentioned that earlier. So the first post here is “Property Title Records and Insurance in a Free Society.” And I wrote that, and take a look at it if you’re interested in that. I kind of went into some detail about the history of – and the libertarian theory of how – what property title means, how it would be recognized, and what the state’s relationship to it is. And the reason I wrote this is in the IP context is that quite often IP proponents will say, well, you don’t need legislation to have IP. It would just evolve naturally.
00:14:28
And quite often they’ll say, well, people would just have a private title registry, and they would register their title to this invention or to this copyrightable work. And I went into this to show that that’s such an unworkable idea, and that’s not how property works. I mean originally property works by visible or observable, physical boundaries or borders. I mean people would actually put stones down. They still do sometimes, markers down to mark where their land is, and if someone has a coat or a stick, you can actually see that they have that. You can see what its borders are.
00:15:07
When society gets more sophisticated, certain things like immovables or land, real property some people call it, you tend to register that. And the law develops where I can sell you a moveable, that is, just like a personal object like a cow or a watch. I can sell that to you manually by handing it over, or we could even have a verbal contract – I’m sorry, an oral contract about it and that suffices.
00:15:43
But certain formalities and rules have arisen, which are understandably so, for things like land. So you have to have a contract to transfer land in writing. So the only way someone’s going to get title to land now from a previous owner would be either something in writing or if they squat on it and basically – for 30 years or something or 20 years or 10 years, whatever the period is in that jurisdiction without the owner objecting, and then they would own it by prescription or statute of limitations.
00:16:14
By the way, just as an aside, I mentioned this before in another class, and I hope I haven’t mentioned it here already. If I have, just stop me. But I mentioned the oral contract before. You will always hear people say oral contracts, but it’s actually the wrong terminology. Well, actually, oral is correct. They say verbal. They’ll say a verbal contract, but verb just means a word, right? All contracts except manual contracts where I hand you a dollar and you hand me a candy bar, there’s nothing exchanged. It’s just meaning is exchanged, but most contracts are verbal in that words are used. Now, the words can be spoken, or they can be written. If they’re written, it’s a written contract. If they’re spoken, it’s just an oral contract or an oral understanding.
00:17:00
Okay, the other thing I mentioned was I called land immovable. This may be helpful for you to know. It’s not too relevant to the IP course, but it’s a good thing for libertarians and people interested in legal theory to know. There are two major legal systems in the world today. There’s a couple of others. There’s Islamic law, and then there’s Jewish law and Asian law, which is kind of based upon one of these two main types, which is civil law.
00:17:29
So the two main types of law in the world today are common law and civil law, sometimes called continental law. So the common law is the current version of the law in England, the United Kingdom, and the commonwealth countries that arose from England—US, Canada, Australia. Now, there are some exceptions actually. In the UK, which is Great Britain and Northern Ireland, so Northern Ireland is one country, and then Great Britain has three sub-countries—England, Wales, and Scotland.
00:18:09
Scotland is actually a hybrid regime. It’s sort of a civil law regime. So is Louisiana in the US, and so is, I think, Quebec in Canada and so is Puerto Rico because Puerto Rico is from the Spanish – so South America, Latin America, and most of Europe are all civil law. So you have common law countries and civil law countries. The civil law countries basically come from codifications about 200 years ago of the current European customary law, which was based upon principles of Roman law.
00:18:47
Now, the Roman law was in place in Rome obviously for about 1000 year and is older than the English common law. But actually the Roman law is similar to the English law in that they were both sort of decentralized legal systems, decentralized legal systems, Roman law and common law. In fact, the Roman law influenced some of the common law. If you see Blackstone’s treatises, you’ll see that it’s organized along the lines of one of the famous Roman scholars, Gaius, in his Institutes.
00:19:20
Anyway – but the difference nowadays between the civil law and the common law is that the civil law took the Roman law rules, which were similar to the common law rules except they had different names, different words, and different concepts but similar in substance. Contracts would be respected. Property is to be respected. There’s rules for marriage and divorce, all this kind of stuff. And civil law took these rules and codified them, and then the legislature adopted them and made legislation the prime source of law.
00:19:57
So the key hallmark of civil law, continental law, half of the modern or the western world today, is that it’s legal positivism, legislative supremacy. The idea is that the legislature is supreme and that case law was to be minimized. So at first it was a big difference in sort of philosophy of these two systems. But in the last couple hundred years what’s happened is the common law in England and America and other western common law countries has gradually been supplanted by legislation as well.
00:20:29
Congress passes tons of laws every year. State legislatures in the US pass lots of laws. And they gradually encroach upon the domain of the common law, that is, a judge-made law, so that these – in a way, those two systems are converging. The civil law systems and the common law systems are converging.
00:20:47
Anyway, that’s just a side note, but the reason I brought it up was because property is called immovable property in the civil law. But a real property—that’s land I’m talking about—in the common law and personalty in the common law or immovable property in the civil law. Anyway, just a little digression there.
00:21:05
Actually, there’s a way to classify intellectual property by this scheme. Intellectual property is – I think they call it an incorporeal – in the civil law an incorporeal moveable. Now, I don’t know how you know that intellectual property is moveable. I guess because it’s not land. So I think it’s strange to classify something that has no body, but they call it incorporeal, which means no corpus, no body.
00:21:31
This is an older post too, but I like some of the quotes I collected in it. Take a look at the quotes from Reichman. Now, these are conventional, mainstream, regular scholars, and they’re in favor of IP. They’re not trying to hide it unlike some libertarians like objectivists who try to fight this. They try to say it’s a natural right, etc. It doesn’t have utilitarian basis. Almost everyone that’s in favor of this recognizes this.
00:22:00
Here’s a guy named Reichman. I think it’s Jerome Reichman. “Governments adopt intellectual property laws in the” – I’m on slide four. I’m reading this quote here. “Governments adopt intellectual property laws in the belief that a privileged monopolistic domain operating on the margins of the free market economy promotes long-term cultural and technological progress better than a regime of unbridled competition.”
00:22:26
So he’s explicitly admitting this is the major justification given nowadays for these laws, and you could see he’s describing accurately what it does. Basically, it limits competition. It protects people from competition. Now, usually capitalists and libertarians are not ones that complain about competition.
00:22:47
In fact, as I mentioned on that blog post today I did, on the Mossoff blog post, in Atlas Shrugged you will see Ayn Rand putting into words of the villains like the dog-eat-dog competition law. I mean this is what the bad guys do. They criticize dog-eat-dog or unbridled competition. But this is what IP laws are designed to do to stop or to limit, to put limits on unbridled competition, so it’s just another form of protectionism.
00:23:16
Here’s another one. Oh, I must have cut off her name. I think it’s a – let me go to slide five and see if I’ve got her name here. Oh, I think that’s more from Reichman, sorry. I’ll just skip that quote. Go to the next page, slide five. Here’s Alan Devlin, another scholar. “The patent bargain is an easily understood concept. Awarding the inventor 20 years exclusivity naturally entails considerable social cost.” See, so he’s admitting that there’s a big cost to this. “A cost that rises in direct proportion to the value of the covered invention. In certain cases—those where the patented technology is so useful that there are no substitutes—the award of a patent creates a complete economic monopoly.” He’s admitting it, so he’s admitting that there’s a cost, that these things are monopolistic sometimes leading to a complete monopoly. This is, of course, true.
00:24:13
New York Law School Professor Beth Noveck, she said, “A patent is a pretty significant monopoly, so we want to make sure we’re giving it to the right people.” Now, this is just horrific to the libertarian to hear these conventional mainstream people talking like this about manipulating people’s lives and their rights and using the government to tweak things left and right. But this is how they think about it, and this is the nature of these monopolies. And for libertarians to defend it, I think they have a lot to reckon with to – because they’re on the same side as these people.
00:24:46
00:24:52
These are some older ones. These are older posts we can skip now so I’ll have time to get to the other stuff for today. This is an older post I wanted to point to. I think I’ve mentioned it before, and we’ll talk about this next class when we talk about a future world, future IP-free world. But I do have a post collecting some ideas about ways you can fund innovation today, and maybe you could extend this to an IP-free world.
00:25:24
So there – just take a look at these. There’s micropledging services. There are – Kickstarter is a way you can get people to contribute or agree to fund a project ahead of time. Also, this is an older post as well, but it’s interesting. You might want to click on this link and take a look at it. I got this from the book called The Master Switch by Tim Wu. He’s the guy that invented the term net neutrality apparently. He’s just another conventional law professor, tech kind of guy. He’s a little bit skeptical of patents and copyright. He’s not completely opposed to it, but he would like to reform it, and he sees a lot of problems with it.
00:26:05
And there was another post I think I linked in here too, but it’s fascinating to see how patent and copyright, especially patent, had a huge impact on the current movie industry that we have today in the US, the Hollywood movie industry, how they – some of these studies have actually moved to Hollywood to escape the patent influence they were suffering from in New York and other places, and then how they’ve organized themselves the way they’re organized now, again because of patents.
00:26:41
It’s fascinating to see what a distorting effect that IP has had on society and culture. And if you remember, I talked in a previous lecture about – the one about the Omega watch decision and about – I think I have a post on my C4SIF.org blog called “Leveraging IP.” But the point there was I was given the example of how Omega could not stop Costco from buying its watches in – was it Argentina? Some South American country, which were cheaper there, and reselling them in the US, engaging in price arbitrage.
00:27:27
They couldn’t stop them from doing that legally because they weren’t doing anything wrong. So they put a copyrightable design on the back of the watch and then accused Costco of violating copyright. Costco said, well, there’s the first-sale doctrine, which says that once you buy something protected by copyright, you can resell it. Costco said ah, ah, ah, you bought it outside the US, and the first-sale doctrine only sort of gets started once you have it in the US. So they use some technicality in the law there.
00:27:55
And I also mentioned how, in the field of fashion design, a lot of designers use their trademark logos as part of the fashion design itself, part of shoes, part of purses, part of luggage, part of clothing because they have no other way to stop knockoff companies from copying their designs. So they actually strangely embed their trademarks in the design itself, and that’s become a theme of high fashion now.
00:28:26
I’m not saying I don’t like it, but I don’t think this would have happened if not for trademark law. If trademark law were restricted just to cases of fraud, then it would have done no good to put that logo on there because, for example, a knockoff Chanel purse, which embedded the same logo in the purse fabric, as long as the seller doesn’t defraud the buyer and the buyer knows they’re buying a knockoff, there’s no fraud, and there would be no trademark action.
00:28:5
So if trademark action were not statist and distorted as it is now, then fashion designers would have – they wouldn’t have had copyright protection like they don’t. They wouldn’t have had patent protection, and they wouldn’t have been able – it wouldn’t have done them any good to put the trademark as part of the design. So they wouldn’t have done that either. I don’t think they would have done it. I think they did it for these reasons. So the entire fashion industry would look different now. So that’s another way that IP can distort culture, distorted Hollywood, distorted the way movies are distributed. It distorted fashion.
00:29:30
It distorts innovation because, for example, when you – when patent law protects some things but not others, then people are going to tend to engage in innovation in the areas where they can get protection in, practical gizmos, things that are about to be invented, not things down the road, not more long-term R&D. So then the government has to come in with government funding of research and development. After all, there’s not enough of it going on. So you see, the government creates a problem and solves it by more intervention and more taxes.
00:30:03
Another way that it distorts R&D is a lot of smaller companies are unable to enter into an arena because of barriers to entry caused by the large patent holdings of bigger companies, or they see a crowded field, a field crowded with lots of patents, and they are – they’re reluctant to go into that area, so they go into another area. So they don’t even innovate. They don’t even try to innovate in the protected area. That distorts the market.
00:30:34
And as I mentioned, a lot of companies do crazy things like the way that HP laser printers are designed to have chips, sort of chips and circuitry and mating devices half built into the laser printer body, half into the cartridge, so that any infringer that makes a knockoff of the cartridge like a cheaper laser ink cartridge is infringing a patent. So they basically arrange their products just so that they can cause people to be infringing if they make a copy. So that’s distorted the way industry and technology in the market have developed as well. Any questions about that so far? Is that clear? Hello? Am I live? Hello? John, you there? Good.
00:31:38
Okay, before we get to the main part of the lecture, for those of you who are interested in Hoppe, I bring this up because there’s a lot of – I mean I think Hoppe is the greatest living libertarian theorist and probably the greatest libertarian theorist ever, greater than Rothbard because he built on Rothbard and Mises, and I think his theories are just amazing. In fact, I intend to give a course on Hoppe’s political economy later this year.
00:32:06
So a lot of people ask, well – that are Hoppe fans that don’t like my IP idea say, well, are you – what was Hoppe’s view on IP? And he never wrote a lot about it. I always knew he agreed with me because he encouraged me to write on this stuff, and my stuff is based upon his property theories. I mean it’s a natural implication of what he’s developed. And I know he’s in favored, but he doesn’t have a lot in writing about it because he hasn’t concentrated on that, but he did have something in 1988, which I’ve pointed people to.
00:32:40
He was on a panel, David Gordon and others, and someone asked Hoppe: Does the idea of personal sovereignty extend to knowledge? Am I sovereign over my thoughts, ideas, and theories? And Hoppe said, “In order to have a thought, you must have property rights over your body. That doesn’t imply that you own your thoughts. The thoughts can be used by anybody who’s capable of understanding them. So you can see he’s sort of with us on this, but he didn’t go very far with it.
00:33:09
But he was interviewed earlier this year just a couple months ago by the Daily Bell, and someone asked him explicitly if he agreed with my stuff, and I won’t read the quote, but – well, I’ll read part of it. They asked him if he agreed with the anti-IP view that I have, and he said, yeah, it’s not just wrong but confused and dangerous. Ideas, recipes, algorithms, theorems, etc. are goods unless they’re bads”—and we’ll get to this later in today’s lecture, by the way—“but they’re not scarce goods. Once they’re thought and expressed, they’re free, exhaustible goods.
00:33:45
Imagine I’ve been granted a property right in my melody or poem such that I can prohibit you from copying it or demanding a royalty from you if you do. Doesn’t that imply absurdly that I in turn must pay royalties to the person or his heirs who invented whistling and writing and so on and further on to those who invented sound-making and language and so on?” And of course he’s right. He’s taking it – he’s showing that the idea of IP is absurd and would basically lead to a stand-still of human life if it were applied stringently, consistently, and in a principled way. I mean there’s a reason these rights expire after a finite amount of time. I think people that advocate them realize that it would be unworkable if they let them last for too long. It would strangle human life. I’m on slide ten. I’m going to switch to slide 11 now.
00:34:36
Oh, let me just go on. Hoppe says, “Second, in preventing you from making – preventing you from or making you pay for whistling my melody or reciting my poem, I’m actually made a partial owner of you, of your physical body, your vocal chords, your paper, your pencil, etc. because you did not use anything but your own property when you copied me.
00:34:58
If you can no longer copy me, this means that I, the IP owner, have expropriated you and your real property, which shows that IP rights and real property rights are incompatible, and the promotion of IP must be seen as a most dangerous attack on the idea of real property and scarce goods.” Anyway, I don’t want to appeal to authority, but I just want to mention that because Hoppe is an influential thinker, and he’s clearly with us on this, as are all modern Austrian libertarians that I’m aware of.
00:35:27
00:35:30
This is from the last time, and I thought I would leave it in here. One of these students had a question about trade secrets, and in case anyone here had any questions about trade secrets because I didn’t go spend too much time on trade secrets. So I was going to go through this if anyone wanted me to. Karl says – Karl Fielding writes, “Without IP, secrecy would develop a more pleasant odor.” Well, I think it would. I think that right now, like as I mentioned before, the IP law, the patent law attempts to basically bribe inventors to reveal their secrets.
00:36:10
You give them a monopoly in exchange for them publishing or disclosing in a patent application their invention. But as I mentioned, it doesn’t really – that doesn’t result in too many more disclosures because most people that patent their ideas would have disclosed them anyway when they sold a product. But other people that are not going to patent their stuff—they can’t afford to or they don’t want to—they’re under the constant threat that they would be sued by someone who later independently invents the same idea and patents it.
00:36:44
So some of them engage in defensive patent publishing, and they disclose what they would otherwise have the right to keep secret in a trade secret. So the entire field of secrecy is distorted by patent law. I tell you what. That’s slide 12. Let me skip this. If anyone has any questions about that, I’d be happy to go into it, but I’ll skip it for now because it’s not a systematic part of this lecture.
00:37:07
00:37:10
Okay, so where we left off. Last time, we talked about the two basic arguments for IP. Basically, people say we need it because we need – we won’t have any innovation or enough innovation without it or at least that it encourages innovation, and we get a lot of bang for our buck. That’s sort of the less-principled view. That’s more the tinkering policy view, the wealth maximization view.
00:37:38
The sort of principled view or the rights-based view, which a lot of libertarians gravitate towards and Randians pretend they gravitate towards, is based upon the idea that the inventor has a right. See, the other idea says the inventor – doesn’t say the inventor has a right. In fact, if you think about it, the Constitution, which is type two here on slide 13, wealth-maximization based, utilitarian, the Constitution is that way because it says Congress has the power to grant – to authorize, to pass a law that grants these patent and copyright monopolies. It doesn’t say they have to. It just gives them the authority to.
00:38:15
Congress could abolish the patent and copyright law tomorrow, and it wouldn’t bother the Constitution. So the Constitution doesn’t see this as a right of authors or inventors. It just sees it as a policy tool the government might want to use for its own ends to encourage disclosure, to encourage innovation and artistic creation, etc.
00:38:36
So the other argument is that inventors and creators have a right. That is, they deserve some kind of legal protection, basically protection from competition in the sale of their creations whether it’s an original work in the case of copyright or whether it’s an inventive machine or process or something like that in the case of a patent. So those are the two basic arguments for IP.
00:39:07
00:39:12
And I think I’ve – as I went along, I tried to explain a lot of the problems with their arguments, but what I want to develop is sort of the from-scratch libertarian perspective on this, just the right way to view this whole area. And once you see that, it becomes easy to see what’s wrong with these other arguments and what’s wrong with IP in general. But just to summarize, the main problem with the wealth-maximization view in addition to the fact that value is not measurable and is not interpersonally comparable and that, even if you could do that, it would be unjust to take from A and give to B just because the value of what you took from A is less than the value that it means to B.
00:40:00
In addition to those problems with it, the primary problem is that these guys say that – the advocates of IP that say they’re in favor of it because you need it and because it generates net wealth in the form of innovation, they never prove it. They never have any arguments. They never have any data. They don’t even have any guesses. So – and in fact, all the studies or the predominant bulk of the studies are either extremely skeptical or conclude – they study another area and they’ll say it looks like patents are hurting innovation here. It looks like patents are not necessary here in this historical period.
00:40:38
I mean all the data points against having a patent or copyright system at all, so if you really were a sincere utilitarian, you would go with the data, which says let’s don’t have these laws, at least until we can prove it. So that’s the primary problem with utilitarians. The primary problem with the rights-based arguments is that they – number one, they don’t comprehend the role of learning and information in action and its distinction from the role of property as being scarce. They do not distinguish between value and wealth on the one hand and between property rights on the other. And they also have been sort of fooled by this entire labor theory of value and the labor theory of rights that’s built into Locke’s theory, so we’ll get to that in a minute.
00:41:44
00:41:52
So this is what we’re going to talk about today in the rest of the lecture, so let me just go and get right to it. Now, let’s step back and think what it means to be a libertarian or even to be sort of a free-market economic liberal in the good sense, someone who generally believes in prosperity, who believes in cooperation, who believes in economic efficiency, civilization, societal cooperation, peace. Why are we libertarians, those of us who are, and what does it mean to have – to be in favor of property rights, and why do we need property?
00:42:37
I mean the basic libertarian rule in my conception is sometimes we say it’s the non-aggression principle. That’s sort of the encapsulation. I think this is not the – this is more of a second-order or derivative consequence of our basic rule because non-aggression means you don’t commit aggression against someone else or their property, which means you don’t use their property without their permission. Or another way to put it is you don’t invade the borders. You don’t invade their property, or you don’t alter the physical integrity of their property without their permission.
00:43:18
But what is their property? You see, it’s only aggression if the thing that you’re trying to use is owned by the other person. In that case, you need their permission, and if you don’t get it, then you’re committing aggression. But what is property? What rights do they have, and what things do they have property rights in? So aggression is sort of a derivative result or conclusion once you have an idea of what there are property rights in. So then the question is what is the libertarian view of property rights.
00:43:55
And in my view, the libertarian view of property rights is simply the way we assign property rights is in accordance with the Lockian homesteading principle, which is basically finder’s keepers. The first person to appropriate something that was – a resource that was previously unowned is its user. Now, I’m not trying to defend that view here, although there’s hints of that in a minute, but I’m just trying to lay it out.
00:44:25
This is what the libertarian view is. So the libertarian view is a set of rules that help us identify who owners are. And then once you know who the owner is, then aggression is just invasion of the property rights of those owners. So aggression is not primary. I would say aggression is secondary. Property rights are primary.
00:44:48
So why do we need property? Now, Hoppe starts out in his writing. I think it’s chapter two – chapters one and two of his Theory of Socialism and Capitalism, which I highly, highly recommend with sort of a thought experiment, which is similar to what Rothbard does in the – in economics in the evenly rotating economy. I don’t know if some of you – some of you may have heard of this, but Rothbard uses the mental sort of construct of the evenly rotating economy, not something we could ever accomplish in the real world.
00:45:24
The real world is dynamic and always changing, but it’s sort of a way to isolate certain features of the way economics works to understand certain features of economics in general. So just like Rothbard has this ERE, or evenly rotating economy idea, even though it’s unrealistic, Mises has that too, or Mises has something similar. I’m trying to remember what it is. Does anyone remember what Mises calls the evenly rotating economy or what his version is? Maybe it’s the same. I’m thinking it’s Rothbard’s though. Anyway, maybe John knows. Maybe they both called it that. Maybe so.
00:46:01
In any case – okay, so it’s Mises. Thanks. So Hoppe talks about – and also Robbins – or, I’m sorry, another similarity is in economics and in Rothbard’s social theory, there’s something called Crusoe economics. So they also envision – now, this is not unrealistic. It’s just not exactly common today, but they imagine Crusoe on a desert island, and then they imagine how economics would work there and also how social relations would work or how rights would work, whether they make any sense.
00:46:42
And then one day Friday comes onto the scene. There’s two people there. Can they cooperate? Can there be a division of labor? There could be trade. There can be – and then socially there can be violence or cooperation, etc. So they also introduced the Crusoe economic state.
00:46:58
So Hoppe talks about the Garden of Eden. There is actually another word for this in German, which he uses in his recent paper in my journal Libertarian Papers. I’m trying to remember. It’s some German word, which is kind of cool. Anyway, it means the Garden of Eden, a place of land and plenty or something like that. So if you imagine this hypothetical construct of a Garden of Eden where – now, we’re assuming we still have human bodies, but basically there’s no scarcity at all if you can imagine that. There’s no conflict.
00:47:31
If there’s no scarcity, there would be no conflict. There could be conflict over bodies, so you would still need property rules to decide who gets to use this body, but let’s forget about that for a second. Let’s just assume a world of scarcity. You would have no need for rationing, no need for production. Property rights would be completely meaningless and unnecessary. So let’s just take an example that we have a world where there are either so many banana trees everywhere. They’re super abundant. They’re just everywhere.
00:48:07
You can just reach up your hand no matter where you are, and you can grab a nice banana, and let’s say they’re all the same. They’re all healthy. They’re all delicious. They’re all great. In this kind of world – now, remember, let me mention one thing. As economists, we use the word scarcity in a technical way, and what we mean is basically rivalrous. So scarcity means the property of a given thing such that conflict over it is possible. This is very important.
00:48:38
I know Mises used the Land of Cockaigne, Danny. But Hoppe has this German term like – maybe someone can look it up. It’s one of the last one or two articles published in this year’s volume of Libertarian Papers and he’s got this term. In any case, it’s not important. So in this – so scarcity is sometimes used in two ways, and you have to be careful which way you’re meaning it because you’ll be – sometimes IP advocates will equivocate, which means they’ll use a word in two different senses to make a false argument.
00:49:16
So they will use the word scarcity in the common way to mean like rare or not very abundant. So they’ll say something like, well, good ideas aren’t very scarce. I mean good ideas are pretty scarce, but they don’t mean that they’re scarce in the sense that we mean. What they mean is they’re not easy to come by. There’s not many of them.
00:49:40
By the way, Karl says free goods aren’t objects of action, but scarce goods are. I’m going to get to that at the end of the course – or the lecture today with a kind of break down. But I would say that – well, that’s the sort of Misesian/Rothbardian – right, that’s the Misesian/Rothbardian/Hoppian idea of a background condition. That’s correct. It is not a means of action. It’s not a means of action. It’s a background condition.
00:50:08
Okay, now, whether you want to consider ideas and knowledge to be a background condition or a free good I think is just terminological, but like you say here, Mises calls free goods conditions of existence. So in a way they’re the same thing. But let’s get back to our banana example. So let’s say we have a world – a physical world but a world where there’s just a superabundance of bananas.
00:50:37
Now, in this world, if I picked a banana and I held it in my hands, we could say that’s a scarce banana because it is a rivalrous banana. Conflict over it could be possible. If someone tried to grab that banana, only one of us could have that banana, and we would fight over it, and violence would be the result. But, and here we get to the problem with these unrealistic examples. Realistically in such a world, would I really even regard the banana as owned? I mean would I even care if I was just possessing it or owning it?
00:51:16
I don’t think I would care if I owned it, which means having a right to have it because if someone took it from me, I would just grab another banana, and that would be fine. I wouldn’t care. And by the same token, no one would take it from me in the first place because they don’t need to. They can just grab their own bananas from up in the air. So you could see that sort of like if you think about the mathematical concept of the limit, which is used in the calculus, the conventional or the colloquial idea of scarcity as being lack of abundance converges with the economic concept of scarcity because, at the limit when there’s just superabundance, then we would say there’s no conventional scarcity of bananas…
00:52:04
And we also might say there’s no real scarcity either because no one – we have to regard these things as scarce goods. So these things converge in this way. Actually now – I was going to play this video later, but now might be a good time to play it. I’m going to play the Nina Paley video because it plays into something I’m going to bring up next, so give me a second. I’m going to play this from my desktop, and I hope that the sound is okay, so give me just a second. Okay.
00:52:41
00:53:44
Okay, I’m back now. How did that work? Did it work okay? I couldn’t see. Could everyone see and hear that? I could do it in the video window. Let me try the first half in the video window here and see how this works for everybody. Give me a second. Okay, here we go.
00:54:16
00:54:55
Okay, I’ll stop it here. Give me a second. Let me turn this thing off. Okay, now the reason I wanted to show that – is everyone back? Let’s see. Hold on a second. I messed up. Give me a second. I’ll get it straight. Okay, all right, now – am I back now? It’s only a minute. I don’t know if everyone could see the full thing. I can’t in mine, but anyway it’s only a minute. It’s called a minute meme. It’s on QuestionCopyright.org. It’s one of several videos by Nina Paley who’s a friend of mine, and she’s great.
00:55:53
She’s an artist, but the part I like in that is where they show the bicycle, like you just kind of touch someone’s bicycle and you pull your hand out and you create another one. Now, that’s obviously not our world. But in such a world, I mean basically we’re like mini gods. We can all just conjure up what we want any minute. In such a world, you wouldn’t need rationing. So the point is, the purpose of property is for people who want peace and they want cooperation and they don’t want violence, which is what you have to have when people fight over these rivalrous things. That’s what rivalry means. You have rivals fighting over them.
00:56:33
If you want people to be able to use resources as means of action productively for long-term projects, to make crops and to use their house in confidence to have a long-term time horizon, to have low time preference, to have civilized society, then you’re going to want to allocate the right to use these things to individual people. That way people can see who owns it, and they can avoid trespassing or using it, and everyone can use their own things peacefully and productively. So this is the idea, the libertarian idea is to assign these property rights to people. But now, every system assigns property rights to individual owners, even Soviet Russia, even China.
00:57:22
Someone has control over every resource. The legal system designates an owner in every case, so what makes libertarianism different? It’s our particular property assignment rule, which I hinted at already. It’s the Lockian idea. It’s the idea that basically the person who’s the owner is the person who is the first one – well, in the case of our bodies, it’s each individual person.
00:57:48
In the case of external objects, of scarce resources in the world, it’s the person who first acquired and used that property. The reason is this person has a better claim than anyone else because everyone else that comes after is called a late-comer, and if you’re going to let a late-comer take property from a guy who had it earlier, then who’s going to – what rule can you come up with that keeps a second late-comer from taking it from him?
00:58:16
In other words, if you allow late-comers to take property from someone who had a prior claim to the property, then you don’t have property at all. All you have is possession, which is basically a world where there’s no property rights. It’s a world of might makes right, which is back to the original situation where we have conflict over resources.
00:58:39
Okay, so this – the libertarian position is really the only one that makes any sense. As Hoppe writes, and some of this makes sense now that I mention this – sorry. My alarm clock is going off. I mean my cuckoo clock. Anyway, Hoppe writes, “only because scarcity exists is there even a problem of formulating moral laws; insofar as goods are superabundant.” By the way, I’m going to take a break after this, so everybody relax.
00:59:13
00:59:19
“Insofar as goods are superabundant (or free goods) no conflict over the use of goods is possible and no action-coordination is needed. Thus it follows that any ethic—now, by ethic he means an interpersonal ethic, a political ethic—if correctly conceived, must be formulated as a theory of property, in other words, a theory of the assignment of rights of exclusive control over scarce means. Because only then does it become possible to avoid otherwise inescapable and unresolvable conflict.”
00:59:50
Why don’t we take a five-minute break? It’s 9:01 my time, so why don’t we come back at 6 past the hour? And we will resume.
00:59:59
[break]
01:00:32
Sorry. I took two minutes extra, didn’t realize that. Okay, I would like to mention something here. A lot of the modern opponents of – sorry, proponents of IP will say that scarcity is not important for property rights, and like I said they’ll do this equivocation thing where they’ll say good ideas are pretty scarce, something like that. I think Neil Schulman who’s an IP advocate, neo-objectivist – excuse me – IP advocate, he had a comment the other day.
01:01:12
If my novel – something like if good novels aren’t scarce, why don’t you try to write your own, or something like that. And I told him; I said, well, why don’t you substitute the word rivalrous and see if that makes any sense. If good novels aren’t rivalrous, why don’t you write your own, and you can see it makes no sense whatsoever. But this has been – this idea has been around for a long time. I mean David Hume back in 1751, he emphasized the importance of scarcity for the – what the definition of what property is.
01:01:44
So did Benjamin Tucker in the 1890s, the economist Arnold Plant, 1934. I have links here on slide 17 to blog posts I did discussing all these things. Rothbard talks about it too, and of course so does Hoppe, which I just mentioned. And now, Jeff Tucker and I have an article we wrote six months ago or so trying to figure all this out and trying to diagram.
01:02:14
I mean we went through Menger and Mises and Rothbard and Hoppe and some other Austrians and some other thinkers. And they’re usually just a little bit different, and no one thought about some things a lot, so they didn’t take the time to carefully classify these non-scarce goods too closely. You find hints of – you can find hints of insights in what they wrote, but we kind of had to just start from – try to redo it basically.
01:02:45
So let’s see where we are on this lecture here. Anyway, the point is, as I mentioned earlier, that we do have scarcity. This is the real world, and the implication is that we’re going to have conflict, and we’re going to have conflict unless we have property rights over these things, things that have exclusive use in that only one person can use it at a time. We say exclusive because if I’m using it, it excludes your use and vice versa. That’s what rivalrousness means basically.
01:03:19
Now, something that we should consider here—I’m on slide 18 now—this has a lot of implications for economics and the understanding of human action and interaction. Now, I’m going to talk about what Mises called praxeology. Some of you may be very familiar with this. Some of you may know it a little bit. Some may not. For those who don’t, don’t be put off by the word praxeology. I was for a long time. It took me a long time to kind of start grokking Mises. He’s got a strange terminology in some ways.
01:03:54
Praxeology is just – praxis means action or something like that, and –logy means, of course, logic or study of something. So he just meant the study of human action or the science of human action. And the reason he meant that was because he had a dualist view of science. And I agree with it and so does Hoppe, and Rothbard in his own sense does too, in his own fashion. Rothbard was more of an Aristotelian but still – and sorry – Mises was more of a Kantian and so was Hoppe but not in the subjectivist way or the idealist way that the objectivists rightly criticize. They’re both realist. Mises is a realist. I’m a realist. Hoppe is a realist. Rothbard certainly was a realist.
01:04:41
Kantianism in this more European realist sense is not idealist and subjectivist in the sense that the Randians criticize. I can give more information on this if anyone wants it, but that’s a fascinating topic, but it’s a little bit off topic. But my point is Mises has a certain view of two realms of knowledge, and by the way, I would highly recommend that if you haven’t read a lot of Mises, do not start with Human Action but read his – I don’t know if it’s his last book, but it’s one of his last books. I believe he wrote it when he was in his 90s.
01:05:18
01:05:23
Well, okay, Karl is interested, so let me just say here. I’ll try to post something later with some links. But what I would recommend, and this is in line with that, start with Mises’ book called The Ultimate Foundation of Economic Science. It’s a short book. It’s about epistemology and methodology, and it is just fantastic. In a way, it’s sort of a reprise of his earlier book, Epistemological Problems of Economics, but it’s shorter, and it’s just fantastic. It’s a – and I will send a link out, but the other ones I would recommend would be Hoppe’s short pamphlet. It’s on his site, HansHoppe.com. It’s called “Austrian Science in the – Economic Science and the Austrian Method.” And also he’s got a chapter in the book, Theory of Socialism and Capitalism. I think it’s chapter six criticizing positivism, logical positivism.
01:06:18
Oh cool, Danny. Danny, is it by Mises? Who is the article by? The Mises Daily coming out tomorrow on Mises epistemology. Anyway, I’ll wait for his answer on there. Anyway, but let me just summarize. What he does is he says, look, if you want to understand causal phenomena, that is, cause and effect and how we select the means that are going to be efficacious to achieve what we want to achieve, then you have the sort of natural sciences, empirical sciences.
01:06:56
We try to figure out laws of cause and effect, but if you want to understand what humans are doing, we’re motivated by – we have free – we’re understood to have free will or free choice, and we have goals that we pursue. So when you try to understand your friends or other people that you observe, you think of them as being like you in that you’re both human actors. You make choices, and you assume this guy is a certain character and he’s got a certain framework of action that he’s engaged in.
01:07:24
He’s trying to do something that will achieve some goal, and then you try to figure out what those goals are from empirical facts and from understanding from experience and from understanding other humans. But the point is economics is about this second category. It’s about teleology. It’s about understanding the implications of human action. And praxeology just means we think about the bare fact that we know that there are human actors out there, that is, intelligent, goal-seeking, choosing beings and that they act. And just knowing this thing we can learn a lot about the structure of human action. So, for example, at the bottom of 18, I’ve got some of these categories.
01:08:08
Now, that’s a Kantian idea, the categories. It’s sort of the breakdown of undeniable truths or concepts, and by the way, this is not incompatible in my view with Aristotelian or Randian ideas. They also had similar proofs, proving by contradiction, showing that denying something leads to a contradiction like the law of identity, the law of causality itself, the law of non-contradiction, the fact that there is existence, the fact that there’s consciousness.
01:08:43
I mean you have to be conscious to deny it, which is the essence of Descartes’ cogito, ergo sum: I think. Therefore, I am, which doesn’t mean that you exist because you think. It means that because you know that you think, you know that you must exist because only an existing being can think. In any case, this is just a type of proof that these things are, so we know that they’re a subjective value. That means the subject, the person himself, is the one that values. We know that he makes choices. This is implied in the idea that we act.
01:09:15
Karl says Kant thought categories were organic characteristics of the human mind. I mean that is one interpretation. My understanding is that that is the American idealist interpretation of Kant, but there is a more realist interpretation of Kant on the European continent. But I will say that Kant was probably so murky that he leant himself to different interpretations. But in any case, I and others are only in favor of a realist interpretation of this approach. I think Mises was also a realist.
01:09:50
In any case, it also implies demonstrated preference, which means that we demonstrate what we value when we act, which also implies opportunity costs because whatever I’m trying to achieve, I’m demonstrating by acting to achieve it that I value that higher than any other thing I could have chosen to pursue. And those other things are the second and third most highly ranked things, which are the opportunity costs of my action. That’s the cost of my action, the thing I couldn’t pursue when I was pursuing this thing.
01:10:29
It also presupposes causality because if you didn’t believe there was a regular sort of concatenation of events, some kind of connection between your choice and use of a given physical means and your action to try to achieve some result, you wouldn’t even engage in action. You have to believe there’s some kind of causality that would connect your action to the result you’re trying to achieve. It also distinguishes means and ends. The mean is what you use to achieve your end, and also the concept of profit and loss.
01:11:01
A profit would be not necessarily a monetary profit but a psychic profit. That is you – the idea is that Mises says humans have felt uneasiness, and we act to try to alleviate or reduce that uneasiness. And the uneasiness is always future-oriented, like I envision a future state of affairs, even if it’s a second from now, that will occur if I don’t act and that I don’t want to happen. I would prefer some other state of affairs, so I intervene in the course of affairs to change what’s going to come in the future because I think I would prefer that.
01:11:38
Now, when you get there and let’s say you succeed in achieving what you had planned at achieving, but then you’re not satisfied, well, you could say there’s a loss. You misunderstood what you really wanted, or let’s say the means you chose was not successful in helping you achieve what you were trying to achieve. Again, you would have a loss. So that’s where profit and loss come from, so all these categories are implied in the very concept of human action.
01:12:06
01:12:10
This is chapter 19 now. Now, this is something I think is important to recognize. We only have about ten minutes left. Let me just finish talking about this. I would have room for questions. I don’t know if there will be a lot of questions because there’s just 12 of you online right now. If there’s any questions, I’d be happy to stay late, but I think it’s late for a lot of people, so I’d like to stop close to on time.
01:12:34
I’ll go to – I’ll go ten minutes past if I need to or even further but not too much longer. So if there’s questions, let’s save those for even next time or for the written course question page on the site over the next week. So this is really important to recognize. Given this understanding of human action that I’ve just laid out, there is a difference in scarce resources and knowledge, and I’m using knowledge in a general sense to refer to information, ideas, beliefs, recipes, techniques, what have you.
01:13:14
Now, some IP advocates will say that IP doesn’t protect ideas. It only protects the expression of ideas or certain types of ideas. I think that’s quibbling and it’s just petty fogging and irrelevant. I mean IP does protect some types of ideas, not all of them, but it does protect some, and the question is should it. Are there property rights in any ideas or any information or any type of information or knowledge?
01:13:37
Okay, so the function of the market and the function of action relates around the structure of human action. So, as we mentioned, every action involves some means that you employ to achieve your goal. But what’s the role of knowledge? Knowledge stays in your mind or in your brain you could say, but knowledge is just information you have about the way the world works. Typically it’s causal-related information, or it’s empirical data.
01:14:11
So the information might be knowing what means will achieve a given end, what possible means there are. It might be knowledge of the cost of these means. It might be knowledge of your own preferences, what kind of thing you prefer. It might be knowledge of the possible ends that you could aim at. It might be knowledge of the ends you’re giving up. So knowledge plays a role when you make your decision. Knowledge is a guide to action. This is what Mises says and what other Austrians say. They don’t emphasize it a lot because they sort of take it for granted, but I think it’s extremely crucial.
01:14:49
So let’s take an example. Let’s say you would like to bake – let’s say you’re hungry, so you have a felt uneasiness. You know that you’re hungry. You’re going to get hungrier, and you’d like to do something to alleviate that hunger in the next hour or so. So you might consult the knowledge you have, and you have knowledge of what resources you have on hand. You have knowledge of your preferences of what abilities you have to do something about it, what other pressing needs you have for your time in the next hour two. And you may say, well, listen. I think I’d like a cake, and I can make a chocolate cake or I can make a lemon cake, and I know how to make both.
01:15:33
I have the recipe ingredients for both. So you choose to do one of those. Now, you use your information in your head, in your mind, your knowledge of how to make the cake to do it, to guide your arm, to guide your selection of resources. But you use a mixing bowl and a spoon and an egg and the batter and an oven to bake the cake. Now, you and your neighbor can do the exact same thing at the same time. You can both be baking a chocolate cake using the same recipe. You don’t need ownership of that recipe to use it. You just need to have it, but a million people could have it and they could be using it at once.
01:16:17
But only you can use your bowl. Only you can use your eggs. That’s why these scarce things need to be owned for there to be successful, conflict-free, productive, cooperative action. But ideas do not be. And this is basically the reason why there’s confusion among the IP advocates about property rights and ideas. They don’t stop to think about the role of information and knowledge and the role of means of action in action.
01:16:49
01:16:54
Let’s go to slide 20. And another way to look at it is to step back and think that the way the universe is, the way our universe is, the way our world is, is we are faced with a world of scarcity. This is the reality we face. We are physical, mortal beings. We’re fallible. We’re frail. We’re fragile. The environment is hostile and dangerous. It doesn’t maybe seem so now because we’ve come so far, but the world is a difficult place to survive in.
01:17:27
We have to constantly acquire food, protection, and fight against erosion and the weather and the animals and pestilence and sickness and scarcity and drought, and the world is a dangerous place. But these two ingredients to successful action is the secure property rights and ownership of scarce resources and knowledge. Now, over time, the body of human knowledge can grow and has grown, and every time someone discovers something, it can be added to the body of human knowledge.
01:18:08
Sometimes it’s lost, but over time, the more valuable bits get replicated and improved on and taught. This is what learning is about. This is what education is about. This is why people teach each other. This is what language is for in part, right? This is why parents teach their kids and mentors teach their – what do you call the opposite of a mentor? The protégés. You take a job, you learn something from the job, and then you move on. You go to a higher job, and this is what emulation is about on the market.
01:18:42
This is what competition is. When one person is making a product that serves a consumer, other people see that he’s successful, and they might emulate him. They might start making the same type of horseshoes he’s making, or maybe they’ll improve on his horseshoes. In this way, the consumer is always benefited. There’s always a ceaseless striving for improving processes, satisfying the customer, etc.
01:19:09
Competition and emulation in learning and the transmission of knowledge and the general use of the general body of human knowledge are actually good things. They’re not bad things. And one way to see this is to consider what the function of the market is with respect to scarce resources. So the market is sort of the interaction of humans dealing with scarcity of things. But the market with the division of labor in an advanced economy where there’s money, where there’s capitalism, where there’s industry, or where there’s division and specialization of labor, where there’s a lot of people, life spans increase. Abundance is increased. Scarcity is fought back.
01:20:00
The entire purpose of the market is to fight scarcity, to overcome scarcity, to make more things even though it’s difficult, to give us plenty and abundance in these scarce means, which are otherwise rare and scarce and non-abundant and rivalrous. And yet we already have this for knowledge. Knowledge is already non-scarce. So the market is trying to overcome the problem of scarcity in the realm of scarce things. And luckily knowledge, which is the second key ingredient to human action, is already non-scarce.
01:20:40
And IP law comes in and seeks to impose scarcity rules on knowledge and to make it artificially scarce. The advocates of IP explicitly admit this. They will say. I’ve quoted some of them. They say that we’re trying to reduce competition. They say that we’re trying to slow down the spread of knowledge. I mean they don’t deny this. Well, to my mind, this is suicidal and insane and completely unjustified, and I think I sort of explained why by now.
01:21:14
Okay, we’re on the last slide; 21 is the last slide, and we’ll go on to the next lecture next time, so let me just talk about it here. This is sort of a breakdown derived from the article I did with Jeff Tucker, and it’s just sort of a way of looking – by the way, this cartoon is also Nina Paley’s. This is her Mimi & Eunice. You can see – I don’t know which one is Mimi. Let’s say Mimi says, “If I steal your copy, you don’t have it anymore.”
01:21:41
So she takes a CD. And then Eunice sees that they both have a copy of the same one. “If I make a new copy, we both have one.” So she’s distinguishing between theft and between copying. And then Eunice says, “If you compete with my monopoly, I don’t have it anymore.” So it’s just showing the violence, the naked violence that the state helps copyright holders use. Anyway, let me just go through this diagram. Then we can be done for the night, although I’d be happy to take questions.
01:22:07
Now that we’ve finished on time I don’t mind taking questions, so anyone who wants to leave can leave when I’m done with this slide. So it’s just a four-quadrant sort of chart, breaking goods down into either good or non-good and scarce or non-scarce – or, not goods, breaking things down into this. So a scarce good would be something like a bagel, a factory, a desk, something that’s useful and that’s scarce, a scarce resource, that is, a rivalrous, conflictable resource.
01:22:41
Now, a non-scarce good, which you could also call a free good or the general conditions of action, would be something useful that plays a role in successful human action but that is not a scarce resource. This could include recipes, ideas, information, images, tunes, skills, which are like abilities, and fire. Even fire can spread. Thomas Jefferson famously said that IP was unjustified as a natural right because it’s like a fire, and just as you can light your candle or taper, he called it, from someone else, you both have a fire now. No one is diminished by this, and everyone is lit by this. It’s a good thing.
01:23:21
Now, you could also think of some things as being non-goods. To be honest, it’s really not that relevant for our purposes. Maybe this is not the right categorization, but we were just trying to think of examples, and a non-good would be like a mud pie or poison soup, something you just don’t want. It’s scarce, but no one wants it. It’s not useful. It has no value. No one values it.
01:23:44
And a non-good that’s a non-scarce non-good, I don’t know if such a thing really exists, but maybe a terrible sound or a bad idea. I mean a bad idea is not scarce, but it’s really a good because it doesn’t play a useful role in human action, although some people might think it does at the time by subjective preference. So I don’t know if this category is completely rigorous, but the first two are. The two good categories are: scarce and non-scarce goods. So property rights and scarce goods – there should be no property rights in non-scarce goods.
01:24:16
And one more point, the basic reason for that is that assigning property rights in these non-scarce goods, remember property rights in the law are always enforced with physical force by physical people by real courts in the real world against a real scarce-resource property of the victim of this law. So there’s really no such thing as property in non-scarce goods. It’s just a pretense or a disguised form of assigning rights to existing material goods.
01:24:50
So, for example, if you sue me for copying your technique, your patented technique, and you win, the court takes some of my money and gives it to you. So it was all just a ruse for you to get some of my money, but I owned my money, and I did nothing – I committed no tort. I engaged in no contract with you. You didn’t homestead it. There’s no libertarian legal justification for you to take this property. The pretense is this IP idea.
01:25:25
So I’ll stop here. I might tie up some loose ends next time and then go on to an IP-free world. And I’m happy to take questions now, or we can stop here if everyone is tired. I’m perfectly malleable. I’m sorry, Gwen. Maybe you should get some sleep. Thank you. No questions. John? Thanks Karl, enjoyed it too. Good night, Kevin, ‘night, Brett.
01:26:28
Podcast (kinsella-on-liberty): Play in new window | Download (Duration: 1:33:50 — 85.9MB)
Kinsella on Liberty Podcast, Episode 175.
This is the fourth of six lectures of my 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics” (originally presented Tuesdays, Mar. 22-April 26, 2011). The first lecture may be found in KOL172.
GROK SHOWNOTES: In the fourth lecture of the 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics,” libertarian patent attorney Stephan Kinsella provides a detailed examination of the statutes, case law, and international treaties that govern intellectual property (IP), arguing that patents, copyrights, trademarks, and trade secrets are state-enforced monopolies incompatible with libertarian property rights (0:00-10:00). Kinsella traces the evolution of U.S. IP laws, such as the Patent Act of 1790 and Copyright Act of 1790, to their English predecessors like the 1623 Statute of Monopolies and 1710 Statute of Anne, critiquing their origins in royal privileges and their role in restricting market competition (10:01-25:00). He outlines the legal mechanics of IP, including patent and copyright durations, infringement processes, and remedies like injunctions, emphasizing their economic distortions and anti-competitive effects (25:01-40:00). Kinsella’s analysis positions IP as a statist intervention that undermines the free market’s ability to foster innovation.
Kinsella explores international IP treaties, such as the 1883 Paris Convention and 1886 Berne Convention, which standardize IP protections globally but entrench corporate monopolies, particularly in pharmaceuticals and technology (40:01-55:00). He critiques IP’s practical harms, including high litigation costs, barriers to innovation, and cultural restrictions, contrasting these with IP-free industries like open-source software that thrive on competition (55:01-1:10:00). In the Q&A, Kinsella addresses audience questions on abolishing IP, the role of trade secrets, and IP’s impact on global trade, reinforcing his argument that IP is a net harm to society and should be abolished to promote a free market of ideas (1:10:01-1:25:00). He concludes by previewing the final lecture on IP’s economic effects and reform possibilities, urging listeners to reject IP as a violation of libertarian principles (1:25:01-1:25:47). This lecture is a thorough legal critique, ideal for understanding IP’s statutory and global frameworks from a libertarian perspective.
Transcript below.
Youtube and slides for this lecture are provided below. The course and other matters are discussed in further detail at KOL172. The “suggested readings” for the entire course are provided in the notes for KOL172.
Lecture 4: IP STATUTES AND TREATIES; OVERVIEW OF JUSTIFICTIONS FOR IP; PROPERTY, SCARCITY AND IDEAS; RIGHTS-BASED ARGUMENTS FOR IP: CREATION AS A SOURCE OF RIGHTS
SUGGESTED READING MATERIAL
See the notes for KOL172.
❧
Transcript
Rethinking Intellectual Property: History, Theory, and Economics—Lecture 4: IP Statutes and Treaties; Overview of Justifications for IP; Property, Scarcity and Ideas; Rights-based Arguments for IP; Creation as a Source of Rights
Stephan Kinsella
Mises Academy, April 12, 2011
00:00:00
STEPHAN KINSELLA: … economics association groups, and Sheldon Richman is an anti-IP libertarian guy with the Foundation for Economic Education. He’s editor of The Freeman. He’s written some good stuff on IP as well, and he was there. Roderick Long was there, who’s also good on IP, and some other people and also this guy named Adam Mossoff who I’ve mentioned before I think. He’s an objectivist law professor at George Mason. He’s pro-intellectual property, and he gives this typical Randian line for it. And Sheldon was relating to me his interaction with this guy and how the debate went. It was quite fascinating.
00:00:37
Apparently, Mossoff really didn’t like getting questions and didn’t really know how to respond to a lot of questions to defend the IP view. So I think that spurred Sheldon to pose this morning a question for Randian IP advocates. It’s already got a lot of comments on the thread. Check it out. He basically said I want to ask the Randians if you believe that their property rights come from getting property in things that you value, which is their theory, which we’ll go into later today or next class.
00:01:15
Imagine a simple society where there’s a tribe and there’s one guy who explores – does a lot of investigation trying to figure out the best kind of fruit to eat, and he discovers that there’s a lot of berries around and people eat them. Sometimes they do better. Sometimes they get sick. And he discovered there’s one berry that is really good, healthy, and nourishing, and he also discovers there’s a few that you should not eat.
00:01:42
And according to the Randian theory, it would seem like he has an intellectual property right in that knowledge, in that technique. And so the question is do the other people in the village who have observed what he’s doing and they see which berries he’s eating and not eating now, do they have the right to eat the berries they want to eat and not eat they berries they want to eat? Or do they have to get his permission first? So he asked them this question as sort of a test of their theory, and of course the answer is, according to their theory, he would not be able – these people need his permission, which is, of course, absurd, which is the point of the hypo, to make them uncomfortable. I don’t expect any serious Randians that would attempt to address it, but it’s interesting.
00:02:23
I had a post this week on Mises, and C4SIF, “Let’s Make Copyright Opt-OUT.” I think I mentioned this already to the class before that copyright would be better if it was opt-in, which means you don’t get a copyright unless you apply for it, register for it, which used to be the law in the US until ’89, 1989. But when we joined the Berne Convention, we got rid of formalities, so it’s automatic now. And it would be better if we could get rid of that because it would solve this so-called orphan works problem.
00:02:55
I don’t know if you guys are familiar with the orphan works problem. Let’s say there’s a work that’s 75 years old, 50 years old, and if you do the calculation, it’s still under copyright. But you don’t know who the owner is. I mean you might know who the author is, but you don’t know who the owner is because the author is long gone. You don’t know if he had relatives. You don’t know if he assigned it to some corporation. You don’t know if he had relatives that inherited it. You don’t know what the situation is.
00:03:18
So if you want to republish it, you don’t know who to contact, and so you don’t republish it because you’re afraid of getting sued by whoever the owner of the copyright might be. A registration system would largely solve this problem because it would clear out a lot of copyrights, and you would know who to contact because you could look it up in the registry. But the problem is we can’t even do this because of Berne. We couldn’t impose a registration requirement again, but the point of my post was it’s not that we want to go to an opt-in system and we have an opt-out system.
00:03:48
We don’t even have an opt-out system because once you get a copyright it’s automatic, and there is no – there is really no way to get rid of the copyright. So the idea is that at least the patent – the copyright law should be amended to make it easy to opt out, to just say, look, I have a copyright in this book that I just wrote, and I want to get rid of it or partially get rid of it or whatever.
00:04:11
Right now, people try to use Creative Commons and things like this, but it’s not clear that these are legally binding, and there’s no way to totally get rid of your copyright, but there ought to be. So that’s the idea there. Just allow us to opt out. There’s a post I passed on: “Steal Like an Artist and Relax: Original is Relative.” It’s another one of the series of posts. I think just three or four. We talked about it last time just giving example after example about how it’s very common in the arts for artists to not steal but to take information and use information from others and remix it and do something different with it. So it’s just common and normal, and it’s not a bad thing.
00:04:48
00:04:51
I have a pretty long post, some interesting quotes I came across I wasn’t aware of before on David Hume. And I think I might have mentioned to the class before. If not, I’m going to go into it when we come to that point. But one problem I have with the Lockian theory of labor – no, I think we haven’t gone into this yet. Anyway, one problem I have with Locke’s theory of labor is that it says that you own your labor, and therefore, you own whatever you mix it with, and therefore, if you homestead some new – some unowned property, you own this resource because you mixed your labor with it and you own your labor.
00:05:29
Now, I think that doesn’t really make a lot of sense. Your labor is just your actions, and to say you own your actions is either double counting, or it’s sort of non-rigorous, mysterious nonsense. I mean to own means the right to control, but you own your body, and the right to control your body means you can perform actions with it. So to say you own your actions is sort of like saying you own the ownership of your actions. I mean it makes no sense. And strangely enough, David Hume saw this way back in 17 – I want to say 70-something, or in the ‘50s. And he said that this Lockian step of labor ownership is overly – he said it was overly metaphorical.
00:06:15
Well, he didn’t say metaphorical. That’s my word, but he said it’s figurative, and we don’t literally own our labor. And he said we own things just because you’re the first one to use it, and that establishes a link between you, and that’s exactly Hoppe’s argument, which we’ll get to later, and the one I adhere to and which makes it – the Lockian argument work without the necessity of the labor step. The importance of that is when you have a labor step in the Lockian argument, you have what I call creationists, libertarian creationists, Randians, etc. use that to say, well, if you have the right to own whatever you labor on and create, then don’t you create a poem or an invention, so you should own that too? So it gives rise to confusion there. Anyway, we’ll get to that later in the course, but take a look at that post.
00:07:01
I reprinted – or I linked to a classic 1995 article by Roderick Long on intellectual property. It’s really superb, so he’s one of the leading modern anti-IP thinkers, libertarian thinkers. I also reprinted a few passages from Hayek showing that way back in the – I want to say – well, this is from – the quote I posted was from his Fatal Conceit, which I think was in the late ‘80s, but he had these ideas earlier on.
00:07:31
But even Hayek saw he was not real explicit about it, but if you read between the lines you can see that he was extremely skeptical of the coherence of the entire – or the necessity of the idea of patent and copyright. So he was pretty far ahead for – and he was one of the best Austrians on this I think. Mises was a little bit less decisive on this issue. Mises sort of pointed out the pluses and minuses of having patent law or not having it. So if you have it, you have this result. If you don’t have it, you have this result. So he didn’t really come up to a conclusion, but he at least recognized that it wasn’t clear. It was automatic that we should have it.
00:08:08
Oh, there’s an interesting thing. There’s a new book apparently by Paul Allen, the co-founder of Microsoft, and there’s an excerpt in one of the magazines, which I linked to on this – on page three here, the Microsoft’s co-founder link, second-to-last link. And he was talking about how, when they created – I guess it was DOS or maybe Basic or something, how they were just borrowing code from others left and right and how that’s the culture of software. And of course he sees nothing wrong with it, and there is nothing wrong with it, but he seems not to see the inconsistency between the strong pro-copyright stance that at least Bill Gates and Microsoft have taken in the ensuing years. Now, they would never let someone borrow from their software even though the original software was borrowed and I guess is a derivative work.
00:08:59
Finally, this last post – it’s kind of ironic. There’s a song called “Death of ACTA.” It’s a rap song. And it’s been taken down because of a copyright claim, one of these DMCA notices, because he sort of does a riff on or borrows this Jay-Z song, and maybe it’s based on someone else’s. I can’t remember the details, but it’s a little bit ironic that a song making fun of the anti-counterfeiting trade agreement, which is an international agreement to enforce strict DMCA-type copyright takedown notice standards on the world, has been taken down by just such a claim. So check that out.
00:09:39
Before we go on to the next part – oh, this is from the last time I taught this course. This is an older post, but I thought I would keep it in. I took out the older one, the other older ones because they’re not current. But just look at some of these fairly recent patent litigation facts – patent litigation facts. So the cost to defend a high-stakes patent lawsuit is about $10 million, so if you get sued in a significant suit, you need $10 million to be able to defend yourself. And of course, most companies have nowhere near this extra cash – most small companies have nowhere near this cash sitting around, so what do they do?
00:10:17
They either avoid the area, or they cave in. The median damages awarded in patent infringement cases last half a decade were about $3.8 million. There are about 500,000 patent applications filed in the US, 2009, and about 200,000 were issued. That means they become enforceable patents. There are about 2700 patent infringement lawsuits filed every year, and the hourly rate charged by top patent litigators is $1000 per hour.
00:10:49
Now, of these patent cases, about 100 go to trial every year, and about 57% are won by the patent holder. And another fun fact is it takes about roughly three years to get a patent. So the day you file it to the day it issues is about three years, which is why I keep saying the patent term is about 17 years. Remember, patent term is 20 years from the day of filing, but it doesn’t start until it issues, so if you file it on day one, you take three years to prosecute it, and it issues, then you have 17 years left of patent term.
00:11:26
By the way, we won’t cover this later, so let me just mention this too. The way the patent system works is when the patent issues, three and a half years after the date it issues, you have to pay your first maintenance fee, which I think is around – maybe $3-400 for a small entity. That’s anyone smaller than 500 people, maybe twice that much for a larger entity, but it’s $4-, $5-, $600. Three and a half years after that – and if you don’t pay this, your patent expires. Three and a half years later, you have to pay the next one, which is maybe – I don’t remember, maybe three times as much. It’s like it rises exponentially. And then three and a half years later, you have to pay another maintenance fee, and then you’re talking – it’s another $2- or $3-, $4,000 level. I mean it goes up exponentially each time. That’s sort of to weed out these patents that are not being used.
00:12:22
So I actually think that’s a not-terrible feature of the patent system. I wish there was something like that for copyright, which is why a registration system would be so useful for copyright, to weed out all these copyright claims like used to be the case before ’89. Oh, and before we go on, I just – I didn’t actually blog about this. I didn’t have time to, but I just got this from a blog post on someone else’s site. There’s a recent dispute. It’s called “Did Texas Pizza Joint Rip Off Brooklyn Brewery Logo?”
00:12:52
Now, if you look at these logos, I mean I looked at them today. I suspect that this company in Texas named Eno’s Tavern had probably hired some guy to do it, and he had somehow seen the Brooklyn Brewery logo because it does look like he borrowed some aspects of it. But they’re not – I don’t think they’re confusingly similar, and they’re different states. One’s a pizza joint, and one’s a brewery, so they have nothing to do with each other. But the point of this is just to show that the instant reaction of the owners is to be angry, so the founder of the brewery said you would think they would understand you just can’t take someone’s logo.
00:13:27
Well, they didn’t it actually. I mean the Brooklyn Brewery still has their logo, so they didn’t actually take it. So you notice they use the language of stealing. When you take something, you take it from the person, and they don’t have it anymore. That’s why they usually object. In this case, the guy just doesn’t like the fact that there’s Eno’s Tavern that has a somewhat similar logo. He just doesn’t like it. And this other guy comments, calls it ripping – they’re ripping him off. It’s like, well, what’s ripping them off about it?
00:13:53
I mean there’s a different color scheme. One’s an E. One’s a B. So they’re the same font. So what? They’re both concentric circles. So what? One’s black and white, and one’s – or monochrome, and one’s color. Anyway, this is just an example. People have been taught to think that they’re being ripped off if someone borrows their ideas, whereas in normal life, if someone emulates you, it might even be a compliment or healthy competition otherwise. But if you start combing your hair a certain way and you – and everyone thinks it’s cool and you see other people catch on to that, they’re not ripping you off. They’re just being influenced by what you do, and there’s really nothing wrong with it.
00:14:34
00:14:38
Slide six. So where we left off, we were talking – we went over in pretty much detail the modern patent and copyright law and the schemes that we have. I just wanted you guys to get an idea of what an intertwined international system we have, how legislation-based it is, and how complicated and sort of – I won’t say rickety, but how almost convoluted it is. So you see what we’re dealing with. These are where these rights come from. They all come from statutes and international treaties. So today we’ll go over an overview of arguments for IP, and if we time, we’ll get to property, scarcity, and ideas. If not, we’ll talk about that next time.
00:15:25
00:15:29
Okay, so let’s start off. Let’s talk about – and I’ve already hinted at it in various comments leading up to this. But it’s important to get a foundation for understanding what the IP rights are that are under debate, which I think we’ve done now. And by the way, I wouldn’t mind pausing here. If anyone has any questions about what we’ve talked about today so far or even in the lecture – in the course so far about the law, what IP rights are, etc. I’d be happy to answer it. Oh, you did. I actually did not see that. I must not be enrolled in that question forum to get automatic – and I didn’t – I thought I was enrolled in it. I must not be, so I apologize, Gwen. I didn’t see it. If it’s – well, maybe it’s in my inbox. I don’t know.
00:16:15
Feel free to cut and paste it here if it’s relevant now, or we can – you can paste it at the end of the lecture. If you think it’s relative to what we’ve discussed in the first three lectures, go ahead and paste it here. I’ll keep talking for now, and you can handle it however you like.
00:16:30
00:16:36
So I just – this slide is a little bit lighthearted. I just wanted to kind of start off by mentioning three arguments I’ve heard for IP. Okay, I’ll take a – I’m going to pause here and answer Gwen’s question. Gwen posted a question regarding Wendy Mcelroy’s article “Contra Copyright.” I’m confused by the seeming dichotomy between the protection of ideas, which is characterized as wrong due to the non-scarce nature of them, and the protection of what is traded with the idea of tangible works such as a book, picture, or song.
00:17:15
Ideas may be non-scarce and people have lots of them all the time, but the talent and skill required to turn an idea into a tangible reality is scarce. And the ability to make a tangible product of value that the market will pay for is even more scarce. Isn’t the protection on the tangible and the valuable good and not on the non-scarce idea that has not ever been made real?
00:17:41
Well, okay, so let me just say I’ve been building up to the point where we can discuss arguments for copyright and patent on a utilitarian and a more principled or rights basis, which involve what you just mentioned, and the – what I view as the proper Austrian and economic and libertarian way to view rights and then to apply that to the conventional perspectives and to these issues and see the right way to handle it.
00:18:09
So I’m going to get to all that, but let me just give you a snapshot answer, and I’m not sure I understand all your question because you seem to be going back and forth here. So first thing I’ll say is opponents of IP will say that it’s not about protecting ideas. Of course, they’re equivocating I believe because an idea is just knowledge that you have, and knowledge – one way to represent it is a pattern of information. So these things are all similar. It’s just knowledge that you have or information that once you have it, you can use it to guide your actions. Again, I’ll talk about this later. So the role of knowledge is to guide your actions, but your actions use scarce means to achieve certain ends.
00:18:51
Okay, so the idea is that in order to create something, you have to transform an existing scarce resource. So let’s say you take a – let’s say you own a canvas. You say you’re a creator, and let’s say you own a canvas, and you own paint. So you already own these things, and these are scarce resources.
00:19:14
Now, you use information and creativity in your brain, your mind to paint something. I don’t know where you got the ideas from, but they came from somewhere. Maybe you made them up completely. Maybe you have ideas from things you’ve seen in the past. Maybe you’re trying to duplicate another painting you’ve seen, whatever. You make a painting. Now, you own that painting because you already owned the canvas and the paint. I mean you don’t – there’s no new thing there to own. There is just a transformed thing, and you already owned the thing before.
00:19:47
So the reason you own it is because you already owned it. You have to own it to be able to transform it. Now, it’s created what’s called wealth. Wealth just means you value it more. It’s more valuable to you. But you already own the thing that’s more valuable, so you’re already protected in owning it. The problem is if you want to go out in public and reveal this information to other people, then you can’t expect them not to use it.
00:20:17
If you have a secret like – that you have, I don’t know, some bizarre – let’s say you have a – you’re missing a toe or something and no one knows it, and if you tell someone I’m missing a toe, well, they can tell other people now. And that fact can get out there, and then people might learn that and then they can act on that knowledge if it’s somehow relevant. So if you don’t want people to know what you know, don’t tell them.
00:20:49
But this is what – as a creator you want to sell your painting, or you want to show people, so that’s your choice. The price you pay for revealing it to people is that you reveal it, and then you gain whatever else you want to gain by doing that. So now you say you’re feeling conflicted because, as a creator and you like that someone isn’t supposed to just appropriate your work and put their name on it. Well, this is a bit of a digression, but it’s okay at this point. What you’re talking about is plagiarism. Plagiarism is not the same thing as IP infringement.
00:21:26
IP infringement means when you duplicate or copy or use someone’s idea without their permission. It doesn’t mean that you – like if I copy a movie like the latest Brad Pitt movie and I want to give it to a friend or resell it, I don’t put my name on it. I don’t pretend like I did it. I’m not denying the fact that it’s the latest Brad Pitt movie. I mean that’s why people want to get it from me. So there’s no plagiarism at all in most cases of IP infringement, so rules that stop IP have nothing to do with plagiarism.
00:22:03
And plagiarism is not a big problem. I mean no one’s going to – no one but marginal people are going to do that. I mean do you really hear of people publishing books of photographs taken by other people and pretending like they’re the photographer? I mean no, because they would be laughed out of town. They would look like jerks, and no one would buy the book, and it would just be seen as fools.
00:22:28
I mean you could publish tomorrow any book that’s in the public domain with your name on it. You could take all these books that the Mises Institute is publishing that are public domain. You could take one and copy it and put your name on it. I mean why don’t people do that? Because it’s ridiculous. Anyway, I don’t know if that’s answered all your questions.
00:22:50
If you want to ask a follow-up later, feel free to, but let me go on now and talk about some of these arguments for IP that I have literally seen – I mean they seem ridiculous and I’m making fun of them. But I mean I’ve seen people make this argument. One is an argument by actually a libertarian or free market economist named William Shughart. And he wrote this on the website of the Independent Institute, which I – it’s a great group, and one of my best friends works there, Anthony Gregory. And they’re great, but this guy, Shughart, posted an article there, and he was arguing for IP.
00:23:25
And said that Charles Dickens because he was British, and there was a time when we didn’t – America didn’t respect foreign copyright. So for him to make money over here, he had trouble selling his books at a higher price because there was competition now. So he had to make money by giving public readings of his work for a fee. And this guy said that that led to his untimely death because he was so exerted by this speaking tour. So I mean he’s almost arguing that one problem with not having a copyright system is that famous authors like Dickens might have an early death because they have to give speaking tours.
00:24:08
I mean it’s a bizarre argument. Matt just said with the internet it’s easier to ascertain the original author or work. I agree. I mean I think plagiarism nowadays is almost no problem. I just don’t think plagiarism is a real problem. It’s copying. I think Gwen is concerned about copying her work and maybe not getting attribution. But even that’s not the big problem. Gwen, that’s a good point about the web comic artists. They’re really exhausted. Sure. This is just life, right?
00:24:41
He also had a comment. He paraphrased an economist named Joan Robinson, and he said the reason we need patent and copyright is they slow the diffusion of new ideas to ensure there will be more new ideas to diffuse. Now, we can disagree or agree on whether or not slowing down the diffusion of ideas actually helps to increase the total amount of ideas that we have. But he’s admitting that this is the goal that these guys have. They want to slow down the spread of knowledge. I mean they really do. It’s insane.
00:25:16
Oh, there was an argument by this patent attorney named Gene Quinn who I’ve tangoed with before. He’s just a patent attorney trying to promote his practice, so he has a lot of arguments with people just trying to get his name out there for search engines I really believe because he knows almost nothing about economics or philosophy or doesn’t even know how to argue. He’s really a buffoon, but someone had pointed out – I think it was David Koepsell that there was a time when Switzerland and the Netherlands, like 40, 50 years had no patent system, and they had tons of innovation anyway. That’s an example that you don’t have to have a patent system to have innovation.
00:25:55
And Quinn came back and said, well, it’s a good thing that they had a patent system – Switzerland had a patent system by the time of World War II because they gave Albert Einstein a job as a patent clerk – or patent examiner in the patent office. Now, this is supposed to be a serious argument that the patent system is justified because it’s a [indiscernible_00:26:15] program for potential geniuses. I mean this is just not even serious.
00:26:19
And the last one here on page seven, there was a guy on a – one of the Mises blog threads, and he literally argued that if you’re not in favor of intellectual property, you really would have no objection to pedophilia. He had some complicated argument that they’re somehow linked. So basically you better be for IP. Otherwise, you basically have no objection to pedophilia. Gwen says he got that idea from Frank Herbert, the Bureau of Sabotage. I read Herbert – Dune and other books, but I don’t remember that and what the relevance is. You mean the idea of Einstein getting a job?
00:27:02
00:27:08
Anyway, I’ll wait for your answer. Now, let’s go to some more – the more conventional or serious arguments for IP. So the way I think of it is – so there are basically two types of arguments. One you could say is natural law, but it’s not always natural law. And the other is utilitarian, but it’s not really always utilitarian. The natural law was more of a rights-based or deontological or a principled approach. You’re trying to say that the author has some kind of right to this.
00:27:45
The utilitarian approach is more saying that we should tweak policy to maximize some goal, typically wealth, overall societal wealth, and in particular, the wealth caused by innovation or with innovation as a proxy for wealth. So basically it’s just a policy tool by the state to achieve a given result that you want to achieve, which is to encourage or stimulate innovation or to encourage or stimulate inventors to disclose their ideas.
00:28:20
So let’s talk about the utilitarian approach, which again, that’s just a kind of overall label. You could call it consequentialist. You could call it law and economics. You could call it wealth maximizationist. But the basic idea that you’ll hear from most people is they will say the purpose of these laws is to maximize the incentives to innovate and produce useful ideas and creation, creative and artistic ideas, and also to disclose ideas.
00:28:53
Now, why do I say that? If you look at the patent clause in the Constitution, it says – well, actually, not the patent clause. If you look at the patent law, the patent law says that we will give you a monopoly, a patent grant on a given invention. But you have to disclose your invention, and we are going to publish it and make it public. So the literal bargain is that if you disclose, then we’ll give you a monopoly privilege for a certain amount of years. So on the face of it, it looks like they’re trying to encourage disclosure, and of course they are. But they’re also trying to encourage innovation. They’re saying that you get a reward too, so they think more people will innovate.
00:29:43
00:29:53
Everyone follow that so far? So the idea of – the sort of utilitarian idea is we need to give people an inventive to create. Now, one problem with this, by the way, is that – I think I might have mentioned this already. If I did, you could stop me, but one problem with this is that it seems like most disclosures that we get from the patent system are not – we would have gotten anyway. Let’s say you come up with a new mousetrap, and you want to sell this mousetrap.
00:30:32
Well, you’re going to have to reveal the way it’s made to people if you want to sell it, and so they’re going to learn how it’s made, and you’re probably going to promote those features on the advertising. So people are going to learn about it anyway. There’s a few types of inventions you could keep secret but not all of them. So basically these people are getting a reward for revealing something they would have revealed anyway, so it’s like a waste.
00:31:00
And on the other hand, there is a class of people who don’t have enough resources or interest in filing for patents, but they have innovation and products, and they’re afraid of getting shut down by a patentee later who might independently even later invent the same thing. So they engage in what’s called defensive patent publishing, so they will go ahead and publish their otherwise trade secret information that they would otherwise keep secret and give it to the world just to provide what’s called a statutory bar, that is, a defense against someone else getting a patent on it.
00:31:35
So what the patent system does encourage is a disclosure that would have been made already by patentees it’s giving a patent to in exchange for the disclosure they would have made anyway. And it’s encouraging innocent companies who might be victims of the patent system to reveal their secret information just out of fear of being sued, and that’s actually not fair because they’re not getting a monopoly for that. They’re just getting a possible defense against a monopoly being asserted against them.
00:32:02
Anyway, now, a lot of the more knee-jerk or extreme or un-nuanced advocates of IP will say, well, you have to have patents and copyright to stimulate invention and innovation and creation, and you wouldn’t have it without it. I mean they’ll say it that bluntly sometimes, which is absurd. I mean you cannot say that it’s necessary that patent and copyright are necessary for creation. I mean you could argue that it’s necessary to have a current level of innovation.
00:32:36
In other words, you could say that without patent, we would have less innovation. Without copyright, we would have less artistic creativity. But then your argument has to be that we need this extra amount that the IP system stimulates and that the value of it is far greater than the cost of the system in the first place. See, that’s how they should argue, but they don’t do this.
00:33:02
I think I’ll get to that in a minute in more detail, but let me go ahead and talk about it now. I mean my view is that the people that say – had this argument for the patent – let’s take the patent system for example. If they’re really serious and sincere, instead of just saying, well, we need it to incentivize, well, then what you could do is you need to at least have an estimate or a guess even, a guess in your mind of what’s the cost of the patent system—lawyers’ fees, extra insurance, costs you have to pay, etc.
00:33:40
Another cost is inventions that we don’t have that we would have had because some people are afraid to get into an area, or they can’t afford to because of the threat of patent infringement. Okay, so that’s a loss, and then the value of the innovation we do have that we wouldn’t have other had. But then you’ve got to discount that by time because most of those probably would have been invented anyway.
00:34:01
So let’s say that we have a new innovation tomorrow that someone invented just so they could get a patent on it, but it would have been invented in five years anyway. So you have to calculate the value of that – the present value of that five early – having this innovation five years early. And then you have to weigh these things up. You take that number, and you subtract the other two from it. You subtract the cost of lost innovation and the cost of the patent system, and then they’ll see what it is. Is it positive? Is it negative? I mean I know what it is. It’s negative. Of course it’s negative, but they don’t do these numbers. The burden of proof is on them to calculate these numbers. In any case, that’s one problem with their approach. They never even try this, which I think is a sincerity problem and shows that they’re not really even serious.
00:34:51
Now, let’s talk about some other problems with the utilitarian approach. One is that it’s methodologically incoherent. Now, what does this mean? The Austrian economic approach views value and utility as subjective. That means – now it’s not the Ayn Randian type of subjective. I mean being relativistic, but subjective that means the person himself is the one that is doing the valuing.
00:35:20
Valuing is sort of like a relationship or an action, and it’s demonstrated in your action. It’s not just what you say. I mean so whatever goals you seek to achieve, you’re showing that you value those goals more than second, third, fourth-rank goals. Further, value in Austrian terms or utility is not measurable in a numerical sense. It’s not cardinal. It’s ordinal, ordinal meaning having order or ranking.
00:35:53
So if I choose a hamburger over a pizza, I’m showing that I value at that point in time the hamburger more than the pizza, but I can’t say I value it 2.3 times more. It makes no sense. And furthermore, these utilities are not interpersonally comparable. You can’t compare my utility to yours. So, for example, if I choose a hamburger over a pizza and you choose a hamburger over a taco, I mean what does that prove? You can’t compare that – all we can know is that you value the hamburger more than the taco, and I value the hamburger more than pizza.
00:36:33
I mean it’s just a totally personal thing, so it’s just impossible to get numbers associated with these values and these value scales. And it’s impossible to add them because they’re not cardinal numbers, and they’re not interpersonally comparable, so we can’t sum them up across society. So there’s no way to do it anyway. The only thing you can do is do a crude estimate in dollar terms, but even that is not correct because, as Mises points out, money is not a measure of value.
00:37:07
It’s not a measure of value because value doesn’t have a number on it. Value is just something that you seek in action, that you demonstrate your preference for. So that’s another problem with just this entire – the entire law and economics, the entire wealth maximization approach and the utilitarian approach.
00:37:29
Finally, there’s ethical problems with utilitarianism. Number one, with the utilitarian mindset, you could justify horrible things, like you could imagine – actually, I don’t like this example. It’s a little bit hideous, but anyway, they’re all hideous. Let’s take some guy who’s been in jail for a long time. He’s been sexually deprived, and he comes across a prostitute, and he cannot afford her fee, so he rapes her.
00:38:03
Well, a utilitarian could argue with a straight face that overall utility has been maximized by that rape because the guy is feeling great, and the woman was a prostitute anyway after all. She’s only lost a $30 fee, so maybe it meant way more to the guy than $30. I mean this kind of reasoning can lead to things like this.
00:38:27
And let’s take a Bill Gates example. I mean Bill Gates is worth, I don’t know, $50 billion. So we could take $10 billion of his money, and we could distribute it in $10,000 increments to thousands of low-income families. And a utilitarian could argue with a straight face that each of those thousands of families that gets $10,000 – their total sum of utility is far more than the $10 billion felt by Gates because he’s still a multi-billionaire. I mean what’s the difference to him? And they could try to justify this with fancy marginal utility, which again doesn’t work because utility is not interpersonally comparable.
00:39:10
So marginal utility does not prove what they want to prove in these cases. And what I mean by that is marginal utility is the idea that every extra unit of something is less valuable to an actor. So what they would say is Bill Gates has $40 billion, $50 billion, so he’s got so much money that those extra billions of dollars are worth almost nothing to him. Whereas $10,000 to a poor person who’s only got a hundred bucks in his pocket, the marginal utility of that is very high because you’re adding to a lower denominator or something, so they’re thinking mathematically.
00:39:45
But these are not numbers, and you can’t compare them from person to person, so that still doesn’t work. And the bottom line is even if it did work, even if overall utility is maximized in both of these cases—the rape, the income redistribution from Bill Gates—it’s still rape, and it’s still theft. These are immoral. They’re rights violations. They’re aggression. So it’s irrelevant that there’s a utility being maximized. I mean law is about justice, not about maximizing utility over society, so that’s one critique. 1
00:40:21
Eric asks can you use praxeology to refute utilitarianism or to disprove that granting monopolies wouldn’t increase innovation more than otherwise could exist? Well, I think what I just said is sort of a – is indicating how praxeology does refute utilitarianism. I mean praxeology shows that action is aimed at ends and that you have opportunity costs, which is the foregone next-most alternative. I mean the entire concept of opportunity cost and subjective value is implied in the concept of action. And that implies that value is – or utility is ordinal, not cardinal, and is subjective. So of course the idea of utilitarianism is incoherent because it contradicts these ideas.
00:41:08
As for granting monopolies, I think you could use Rothbard’s utility and welfare economics. Rothbard’s utility and welfare economics shows that the only time we can know for sure that there’s a wealth gain in society is when there’s a voluntary interaction or trade. So A and B can make a trade. A gives B a goat in exchange for B giving A ten chickens.
00:41:37
Now, the thing that’s magical about this is if this is voluntary, we know that both parties are better off after the trade from their, what we call, ex ante point of view. That is, they both expected ahead of time to be better off after the trade, not numerically. You can’t say they’re 10% better off, but they’re both better off. That’s why they took the action. So that one act of trade has increased the total net wealth in society because the total satisfaction of these two guys has gone up, not by a number, but it has gone up.
00:42:10
And even in sort of real terms, presumably these guys want these things because they satisfy real desires more, consumption desires more, or the have a better idea of how to use them. That’s why they can bid more for them. So there would be more economic actual productivity and efficiency and prosperity by allowing this to happen. So that’s Rothbard’s point in his utility and welfare economics article. It’s a classic article.
00:42:37
But he says, if there’s coercion or aggression in the transaction, one of the parties is compelled like A robs B, well, we can assume A is better off if you forget the ethics of it because A got what he wanted. But B had to be forced, so B is made worse off. If B wasn’t made worse off, he wouldn’t have had to have been forced. So all we can conclude from that is it’s definitely not an overall wealth gain for society.
00:43:05
And that’s, of course, the case when monopolies are granted by the state because the state is granting a monopoly that involves coercion and aggression against people’s rights. So it’s making some people worse off. The victims of these patent suits are made worse off. The recipients of the patents may be better off. Some may be better off, but so what? I mean that doesn’t prove any kind of net gain. In fact, you cannot prove a net gain because some people are made worse off, and that’s all we can say is that some people are being harmed and made worse off.
00:43:37
Okay, next slide. Well, if you haven’t read this article, take a look at the article. It’s Rothbard’s utility and welfare economics. It’s online at Mises.org, and it’s just great. Okay, I’ve already gone through some of these other problems, the evidence problems like they don’t have sincerity because they don’t try to provide evidence. And not only that, if you look at the evidence, I mean all the – excuse me a second.
00:44:12
Hey, let me – okay, no, let’s stay. My son is coming out. So anyway, all of the studies are either inconclusive, like they say, well, we can’t prove that copyrights are worth it, or they say that it actually decreases overall innovation. It’s not worth it. So all the empirical evidence is against them. If you are a pure empiricist, you would want to conclude that we shouldn’t have patent and copyrights, but they don’t. They stick with their original idea even when the evidence goes against them, so it’s a sincerity problem, and it’s an evidence problem.
00:44:54
And also just this entire mentality that we need to have these laws in place that increase overall innovation. Well, first of all, there’s no stopping point. I mean why have a 20-year term? Why not a 30-year term? Why not a 50-year term for patents? Why not impose the death penalty and make the – there’s no stopping point. And, in fact, some people have actually proposed that instead of or in addition to…
00:45:28
00:45:31
Instead of or in addition to a patent system, we ought to have money taken from the taxpayers, which is given – handed out to innovators at the end of every year by some panel of distinguished government-appointed experts. I mean one guy proposed $80 billion for a medical innovation prize, and that’s medical innovation. That’s not copyrights. That’s not the arts. That’s not other types of innovation and invention. That’s $80 billion for that. So what do they want, a trillion total?
00:46:06
And if really 80 billion or a trillion or whatever of tax-funded innovation awards yields more than your spending, why not 2 trillion? Hey, let’s give them 2 and let’s get 10 trillion of benefit back? Why not 3 trillion and get 15 trillion of benefit back? I mean there’s no end to these insane schemes. And this has been proposed a lot of times. James Madison proposed this in 1787. This was actually done in Russia in 1834 and in the Soviet Union in 1931, hardly a ringing endorsement for its pro-free market or capitalist credentials. Hey, Jock is here! Thanks Jock.
00:46:45
Michael Polanyi, 1944, and then more recently by Alexander Tabarrok, a libertarian, Bernie Sanders, the socialist senator from Vermont, and Joseph Stiglitz, the Nobel Prize winner. So this is what this kind of mentality leads to.
00:47:03
00:47:12
Now, let’s switch to the more deontological or rights-based or what you might want to just call the principled approach. These are people that have some kind of intuition or argument or view that it’s a matter of right and wrong and that it’s not done by society to achieve these sort of policy goals, which imply – that implies the inventor is not entitled to it. We just happened to give it to him to achieve an end. These guys think that the inventors deserve it. They have some kind of right, or they should have a legal right like a property right basically.
00:47:48
Now, the important thing to notice is even though people nowadays point to the Constitution, which is explicitly utilitarian in the copyright clause. It says to promote the progress of science and the arts will give limited privileges to these inventors and artists for awhile, which is explicitly utilitarian. So the original – and there’s no system in the world that’s not like this. They’re all utilitarian-based, and they’re explicitly policy-based. And yet modern natural law types will point to this as if it supports that, and they’ll point to Locke and the founders.
00:48:25
And the truth is that the founders – none of them believed it was a natural right. John Locke, whose ideas were very influential, did not believe that his homesteading theory would extend to intellectual property. He thought that it was for homesteading of scarce resources. Now, as I mentioned earlier, Locke’s argument goes you have a propriety in yourself. That means you’re a self-owner.
00:48:49
And therefore, you own your labor. That’s what he says. And therefore, you own what you mix your labor with if it’s unowned already. That’s his argument, and as I said, Hume and others including me think that that labor ownership part of Locke’s argument is unnecessary and overly metaphorical and imprecise and confusing. And it’s just the argument works without it. I mean in fact it makes no sense to say you own your labor. As I said, labor is what you do. It’s just an action. You don’t own your actions any more than you own your love or your memories. You own your body and yourself, and that gives you the right to control it and to do things with it.
00:49:28
So another way you can see that it’s pretty clear that the original conception of patent and copyright law in the US, which was one of the earliest modern systems anyway so it’s a good model to look at, is number one, they all had a limited finite term. Patents and copyrights at the time were about 14 or something years. Well, a natural right wouldn’t expire in 14 years. And also they’re arbitrary. I mean it makes no sense. In fact, the reason 14 years was chosen originally, my understanding, was it’s basically historically upon the length of two consecutive apprenticeship terms back in more feudal days in England.
00:50:15
So I mean what’s that got to do with natural law, the length of two apprenticeship terms? And the terms keep changing over time. I mean patents are now – I mean copyrights are now up to over 100 years long. They started at 14. Now they’re over 100.
00:50:32
00:50:37
Also they’re only enforced geographically in your country, so if you have a patent in the US on a given process, unless you have a patent in China or Russia or France, someone making the same thing over there is not offending your rights, but in the US they are, which makes no sense because if you own a car, it doesn’t matter who hits it or takes it, it doesn’t matter what the nationality is or even where it is. It’s considered to be your car. So that’s another indication that we’re not talking about a natural right.
00:51:10
And as I mentioned, there’s this labor confusion and this creationism idea. The creationism idea is – that’s my word, creationism. I don’t mean religious creationism. I mean the idea that we own things that we create. Now, if you haven’t thought carefully about this or if you have just been reading kind of casually, you might not have noticed there’s something interesting about what is commonly said about how we come to own things, where property rights come from. And commonly you’ll hear this recited. People will say, well, you own things that you homestead, that is, unowned resources that you homestead. Or you own things that other people sell to you or give to you. That’s by contract, or things that you produce, that you create.
00:51:59
So they act like these are three alternative ways of coming to own things, and it sounds plausible at first. We do create things. We create wealth, and we make money. We say we make money. We don’t really make the money. The Fed makes the money, though you earn money. We say we make money. So it seems plausible, but if you think about it carefully, creation is not actually an independent source of ownership. And in fact, I think what they’re doing is they’re conflating wealth with property.
00:52:34
So let me give an example. I’ve given this one before. Maybe I’ll vary it up a little here. Let’s say you – no, I’ve given all these before, but anyway. You have a hunk of marble and you carve a statute in it. Now, you can say you’ve made a statue. You’ve created a statute. But do you own the statute because you created it? No, you own it because you already owned the raw materials that you carved it from. It’s more valuable because you carved it. This marble is now more valuable because you have rearranged it. You’ve reshaped it. You’ve transformed it with your labor, with your effort, with your action, with your ideas, with your intellect, sure. But so you could say you have more wealth now because you could sell this marble statute now for $10,000 and before it was worth $1,000. So you now have more wealth, so your actions can create wealth, but they don’t create new property rights. This is the confusion.
00:53:32
00:53:36
Gwen says it might be worth less if it’s a lousy statute. That’s true. That’s true. And so you can destroy things too by your actions, but even Ayn Rand recognized this when she wrote. Rothbard recognized this, which he should because he’s against IP. Mises did. They say over and over again that, look, we don’t create anything in the world. We find matter out there. We appropriate it to ourselves. We find it useful, and then we transform it. We rearrange it into more useful shapes.
00:54:09
Now, as another example, imagine that I sneak onto your lawn and I carve a statute into your marble. Well, I created the statute, but I don’t own it. You see, so those examples show you that creation is neither necessary nor sufficient for owning for property rights. But creation, of course, is. It does play a role in homesteading. You could call it being creative to homestead attractive land. That’s okay, but what is causing you to own that land is that you homesteaded it. So I hope that’s clear because basically we don’t have three ways of acquiring rights. We only have two. One is finding something unowned or having some owner of a thing give it to you by contract. That’s it. Now, I’m going to stop in a minute, right at the hour, maybe right past the hour and take a short break.
00:55:06
But one thing you’ll notice, I’ve tried to conceptually distinguish here between the principled approach and the sort of wealth maximization approach or the consequentialist or the civil right or policy tool approach. But the advocates of IP are not so careful, and quite often they will intermingle and intermix these ideas. Now, a few of them don’t, like maybe Galambos. Look up Galambos if you haven’t heard about this guy.
00:55:37
This guy was this weird California, kind of hyper-scientistic, engineer, cult leader, libertarian. A lot of people love the guy. I’ve never understood it. He had this weird theory of property rights, and he thought everything flowed from the mind and that it was inalienable too so that all of his followers loved him, but they didn’t even feel free to tell other people about Galambos’ ideas because it was inalienable. He thought that if you used the word liberty, you have to drop a nickel in a box for the errors of Thomas Paine who invented the word to some day compensate them for that.
00:56:16
I mean complete insane, out of – extreme IP. Now, he’s at least fairly consistent—infinite term. Everything is covered and everything is IP. And there’s a few others that are getting close to that. But now Rand supported the US patent system, which has finite terms, and the US copyright system, which has a finite term. So she pretended to have a natural right argument for it, but she used utilitarian-type arguments to argue that, well, it should be finite. Your – the errors of your – the descendants of your descendants of your descendants for each generation now shouldn’t profit from your labor, just maybe one generation.
00:57:03
I mean that’s obviously completely arbitrary, and this is what legislators and other utilitarians do. They just kind of draw these lines for totally pragmatic considerations. So that was Rand’s argument. She thought it was totally justified to have finite terms and other things too. So she pretended to be natural rights, but I think she was really more of a consequentialist or wealth maximizationist, but she didn’t want to admit it because it’s unprincipled sounding. So let’s take a break and let’s pause here, and we’ll come back in five minutes.
00:57:36
[five-minute break]
01:02:46
Okay, I’m back. All right, let’s see where I maybe review the comments here real quick. There was a Rothbard article. Gwen says nose barely over water. Am I going too fast, or is this just – okay, you ask are you getting it right that the portion contributed by creativity in the transformative process may contribute to value but not to ownership? Yes, that’s correct. That’s my view, thus the lack of intellectual in the IP question.
01:03:29
Well, yeah, I mean I think – so I think property is – I mean some people use the word property to refer to the object. Like if I own a computer, that’s my property. But it’s a little bit sloppy language. Locke, I think, said you had a propriety in yourself. Propriety means sort of ownership of or the control of or the right to control. So I view property as a relationship between an actor or an agent, a human, and some scarce resource that can serve as a means to action. That’s how I think of it.
01:04:06
01:04:10
So intellectual property would mean you have a property right in things that are not scarce resources. I mean one of the fundamental problems with this idea is you really – it’s really literally impossible to have a property right in a non-scarce resource. To have a property means the right to control. But how can you control a pattern of information? It makes no sense. You literally cannot control it. This is – it’s not a thing that you can manipulate or touch or possess even.
01:04:46
Now, you can have information in your brain, but you cannot own information per se. You cannot own the number two. You can’t own a binary bit pattern. So what the law really does is, under the guise of owning these things you create, which are really patterns of information – they’re recipes. They’re steps. They’re ideas. They’re knowledge basically. The only way that you can actually translate that into some meaningful law is to really give ownership in other people’s scarce resources. So for example, if the law says you have a copyright in this painting, what that really means is you, as the holder of that legal right, can go to court and get the court to take money from me if I did something with my property like if I painted a similar picture on my property.
01:05:49
So it comes down to ownership of my money, you see, or my body even if the court can tell me not to do something. So it always comes down to physical force in the real world applied against the physical body or physical property, scarce resources, of other humans. So really IP law, because it’s really impossible to own a scarce thing – a non-scarce thing, it’s just a disguised way of redistributing property rights from existing owners of regular property to other people.
01:06:25
And the problem with this is the main libertarian idea is that the first person to use a given scarce resource is its owner. That’s the Lockian idea. That’s what homesteading means, right? And you shouldn’t be dispossessed of this unless you give it away voluntarily or you abandon it or you die maybe or you commit a crime or a tort where you owe someone damages.
01:06:49
But basically, unless you do something like that—you voluntarily get rid of it or you do something wrong—you have the right to stay in possession of your property. And you have the right to do whatever you want with it except invade the borders of other people’s property. And that’s actually not a limitation on your property rights. It’s a limitation on your action. And it’s a limitation on your action because we presume property rights. In other words, I’m not able to take my gun and shoot you with it. That’s not a limitation on my property rights in the gun. It’s a limitation on what I’m able to do with any means—someone else’s gun, someone else’s knife, my first—because you own your body.
01:07:32
So all of these so-called limitations on property rights are really just manifestations of other people’s property rights. And you cannot – and sometimes these IP proponents will say, well, true. The owner of a copyright can tell – can put limits on what you can do with your own property, but all property rights do that. But that’s not an argument because you have to explain why it’s justified in a given case because you can have – you can say, well, rape of redheads is legal.
01:08:08
And if someone objects and says, well, that violates their rights, then you can say, well, all property rights violate – limit people’s – what they can do with their own property. In this particular case, it’s limiting what this – what redheaded women can say about their own bodies. In other words, you can’t just say the general case is that sometimes there’s limits on what you can do with your property and therefore you can’t object to any limits, which is what their argument for IP is.
01:08:33
01:08:38
So Gwen, the problem is if you try to grant rights in non-scarce things, then you really end up granting rights in other people’s physical property. Now, if you don’t, then it’s not a problem, but then it’s nothing but words on paper. I mean if you couldn’t use physical force of the state or the legal system against other people’s physical property to enforce your rights, then – your copyright for example, then it wouldn’t mean anything. And that ought to say something about the reality of these things. I mean if these things really existed, if this kind of weird realm of intellectual creations really existed in some meaningful sense, why couldn’t you just enforce those rights in that realm? So I took your painting. You take my painting, something like that, which is fine, but that’s – it wouldn’t allow what we have now in IP law.
01:09:33
Okay, Karl says the anti-IP argument – wait, give me a second. Let me flip to the next page to see. I think we can stop here. Let me just double check. Yeah, we can stop here because I can pick up with this next time. Karl says the anti-IP argument is similar to the argument for private money that those activities should be regulated by contract and that it’s unnecessary for the state to standardize those relationships.
01:10:02
01:10:07
Okay, well, let me give you my perspective on that. First of all, I’m an anarchist, so I think that the state is not necessary for anything. I mean the question would be whatever the legal system we have, what do they need to do? So first of all, I would say yes. You’re right. Anything that we need to do, we ought to be able to do by voluntary interactions and by contracts. And remember, a contract is a way of assigning title to scarce resources. That’s what a contract is.
01:10:35
So it’s based upon the idea of owning these things, so you have to use your body, which you own, and things that you acquire, and you can transform some of them. You can make them more valuable. You can sell them, and then you have to find ways to make money off – if what you want to do is make money off your intellectual creativity, you have to find a way to do that. But you can’t go to the state and get the state to give you a monopoly right to basically stop competition, to make it easier for you to compete. I mean if you don’t have any competition, of course you’re going to find it easy to make a profit. But that’s not a legitimate function of the state or of any government.
01:11:12
Now, as for private money, you don’t need a fed. Of course you don’t need a fed. Now, Austrians disagree on whether private money should be 100% gold reserves, which is sort of my view or fractional reserve. Free banking some people call it, which I have no libertarian problem with if people want to try that. I think it’s a Ponzi scheme myself, and I don’t think it would work very well, but whatever.
01:11:36
Let’s have a free market, and let’s see. Let’s have competing Rothbard banks and fractional reserve banks and see which one does better, our mutual banking, sure. We can try them all. That – from what I heard of mutual banking, it makes a lot more sense than fractional reserve banking, free banking unless that’s fractional reserve too, and I don’t think it is.
01:11:54
Another thing that, Karl, is more analogous to what you’re talking about would be the corporation. The corporation right now is understood to be a creature of the state. It’s a privilege the state gives you. They create this thing that has legal personality. It’s called an entity, so it’s actually a person under the law. And the state claims then they can regulate it and they can penalize it and they can double – they can tax it in addition to taxing the owners of it because, after all, it’s a separate person.
01:12:25
But it’s not entitled to this. It’s a privilege, so then the state says, well, in exchange for this privilege, we can regulate the corporations, etc. But Robert Hessen, H-E-S-S-E-N, and others like Murray Rothbard and Roger Pilon, they’ve – especially Hessen – they’ve shown that a corporation could be just constructed purely out of a network for private contracts. You don’t need the state to do it. It should not be looked at as an illegal entity. It’s just a web of private contractual relationships.
01:12:53
The state is not needed for that at all. Now, there’s one aspect of it that some people point to. Some left libertarians and others say that, well, the corporation has limited liability, and that’s not fair, and the state gives it that. So in a free market or in a freed market, these private contractual corporations wouldn’t have limited liability, and they wouldn’t be able to get as big or they wouldn’t have the same moral hazard problem, etc.
01:13:19
01:13:23
The problem with that argument, number one, most of the people making it don’t really understand corporate law. They don’t really even understand what limited liability means. A lot of them think it has to do with the managers and the employees and it has nothing to do with that. A lot of them can’t even comprehend the simple contractual argument that there’s basically two types of debt that a corporation can have.
01:13:44
One is contractual. Let’s say the corporation borrows money from a bank and then they can’t repay it, or they buy something on credit from a vendor and they can’t repay it. The vendor cannot pursue – he can only pursue the assets of the corporation. It can’t pursue the individual shareholders individually as personally liable. And the reason is you don’t need the state to grant limited liability to do that. And by the way, limited liability means that shareholders are not personally liable for obligations of the corporation that they own stock in. And that’s usually what people object to, although sometimes they think it applies to managers, which it doesn’t as far as I know.
01:14:25
So the contractual part of limited liability could be done easily by contract. You just say, look, when you do a deal with us, you know you can only pursue these assets. So that’s not a problem, although some opponents of it have a problem even with that. The only difficult law is tort law. So let’s imagine Gwen owns stock in FedEx. FedEx has a truck. The driver negligently hits Jock, breaks his leg. Now, Jock – who is Jock going to sue? In a free market, he would sue the driver, number one.
01:15:03
The driver was negligent, and then he might be able to sue the corporation as an entity under the doctrine of respondeat superior, which Rothbard and others argue is probably not even libertarian. I tend to agree. I mean normally you can only sue the person who hurt you. If you want to sue anyone else as being responsible for that person’s harm, that’s called vicarious liability or responsibility, so you have to have an argument for that. So maybe you could argue, and I think you probably could and should be able to.
01:15:36
You could argue that the managers who come up with the system that encouraged this guy’s negligence, they have a direct role in it. Maybe you can sue them as being vicariously liable. That’s fine, maybe the board of directors even, maybe even a co-employee. But why would you sue the shareholders? They – what role did they play? They’re passive. They don’t make decisions for the company. All they do is on occasion vote for directors.
01:16:05
So the idea that Hessen and others argue is that, in a free market, these guys wouldn’t be liable anyway because they’re just too remote from the damage. I mean they didn’t cause the truck driver to hurt you. Now, you could say, well, they have a right to vote, so they influence who the board is. Well, the board was not necessarily negligent anyway, but let’s say they are, or you could say, well, they gave the company money when they bought the shares.
01:16:36
Well, okay, so first of all, as for the first argument, the influence argument, some shareholders don’t ever vote. Some shareholders vote for the guy that loses. So are they liable? And moreover, in terms of practical effects, sometimes a lot of other actors have much more influence on what the corporation does than the shareholders—a big creditor like a big bank, big labor union maybe, employees themselves, stakeholders, big suppliers, big customers. I mean all these companies can impose all kinds of requirements on the corporation that influence it far more than the shareholders do.
01:17:28
So are they all going to be liable? Now, as for the fact that the shareholder gave money to the company and so then they’re like – I guess they’re aiding and abetting a crime is the idea. Well, first of all, not all shareholders gave money to the company because many shareholders bought their shares from the previous shareholder. So they only gave money to a shareholder. They never gave money to the company.
01:17:49
Second of all, lots of people give money to a company. Customers give money to companies. Are all customers now liable? A bank lends money to it. Are they liable? And in fact, money is not the only way you help someone. Money is just one of many other things that are subjectively valuable. I mean what about all the employees of the company, all the co-employees, all the union workers? Should they be liable for this one guy’s accident?
01:18:14
So if you have such a loose standard of vicarious responsibility, you would get everyone. I mean you would get the whole town so – which is obviously absurd. So anyway, that’s just an example. You reminded me of that because that’s a case where you can do a corporation just by private contract. All right, let me see if there’s any other questions here. Karl—it’s like laws against insider trading in that it socializes the ownership of asymmetrical information.
01:18:45
01:18:50
What are you talking about? Are you talking about – I don’t know what you’re talking about, corporations or what? I think that is true for a lot of cases, but I’m not sure which one you’re talking about. Gwen says how do you engage in trade with an artistic product? Is it impossible? Well, I really do – I mean the last class, number six, we’re going to talk in detail about a lot of practical issues like that.
01:19:14
I think the bottom line is it’s up to the actor the entrepreneur to figure these things out. Look, you have to look at in general like this, although there’s a lot of answers to it. And I can’t say I know them all. I’ve got some ideas, and people are coming up with new ideas all the time. But for some fields it might be relatively hard. For others it’s easy.
01:19:38
A musician – they can give their CDs away or their MP3 files away to get famous or to get a fan base. And then they can – that helps them get tickets for – to sell tickets for their live concerts, so it works as advertising. Well, that’s just musicians. I mean every different type is different, and some may be harder to make work than others.
01:20:02
I mean I think it was Francis Ford Coppola said he used to wake up at 3 or 4 in the morning and write screenplays, and then he would go to his day job. Maybe it’s got to be that way again, or maybe you have to have a patron or maybe it’s a second job. Maybe it’s an avocation. Now, I do think in a free society we’d all be so much wealthier that you literally could just have a job working four hours a week and make enough money to live, and the rest of the time you do your passion.
01:20:26
So a lot of this is because of the state impoverishing us and making our choices not as good. But the bottom line is I would look at it like this. When you are trying to engage in a business, you have to think of what possible free-riding effects are there that you have to overcome. What competition might you face? And in particular, competition from people knocking you off, maybe pirating your stuff. And what costs of exclusion or bundling techniques can you engage in that overcome it enough for you to make enough profit to engage in this activity? If you can’t think of any, then don’t do it. I mean it’s just not economic, or do it as a hobby.
01:21:12
Now, I think there are ways you can do it in almost every field I’ve thought of so far. It’s just not easy without the state helping you along and stopping competition. But we need to save some of this for lecture six because we’re almost out of time. Gwen says a large customer may influence the company to work longer hours than normal, thus causing the drive to be too tired for conditions. Yeah, and like one example is Apple is blamed for some of the conditions at one of its suppliers in I think Taiwan or somewhere like that so – or China, causing some of them to commit suicide, blah, blah, blah.
01:22:00
I mean there’s all these interrelations. Gwen—let’s say I have a thought experiment. Let’s say I have a web comic going by an L. Neil Smith style system. Instead of just giving free access, you might charge a micro payment in gold and contract with people to read it. Part of the contract is they don’t make copies of the book and sell it separately. Do it as a contractual agreement privately instead of a state-forced monopoly. That’s sort of the first approach some people think of. I don’t know if that would work.
01:22:33
I tend to think that wouldn’t work, and let me tell you why, maybe not the micro payment part but the contract. I mean let’s say it’s a book. I mean how much do you pay for a book? $5, $10, $15, $20, right? I mean do you really want to sign a contract obligating yourself to potentially millions of dollars in damages if you break this contract? I mean it’s like remember Apple used to have DRM on their music files they would sell.
01:23:05
And then I think there was a transitional period where you could pay 99 cents for the DRM version, or you could pay $1.29 for the DRM-free version. So you had to pay a little bit more for that one so – but not like $50 more. I mean if there was a book for $20, and I had to sign a contract that could potentially obligate me – put in a lawsuit, I don’t want that book. I’d rather buy a book for $23 from some guy that’s DRM-free and that’s contract-free. I just don’t think that model is going to work.
01:23:39
So here are just a couple of ideas. Let’s say you write a book, and you release it for free. Some people do this on Kindle now. They put their first book in a series up, one that was released two or three years ago. They put a zero price on it. They’re trying to get a fan base. And then they sell their next book for a fee, and maybe you sell it on Kindle and people buy it because it’s convenient. Maybe it’s $3 a copy.
01:24:05
Maybe the publishing industry dies and it’s just direct to market so you have no middle man, so $3 is a good fee. You get probably two-thirds of that instead of – which is $2, which is all you get from a book anyway that sells for $20 from a publisher. So people are selling their second books on – now, someone can go pirate it from Pirate Bay, but if it’s $3 on Kindle, they might do that because it’s more convenient. Or another idea is you build up a fan base by getting your name out there, and then you tell your fans I’ve got a third book in the works.
01:24:40
As soon as I get 100,000 people contractually commit or pledge on their honor to give me $10 a copy, as soon as I get to that number, I’ll release it, and then you do that. I mean that’s another idea. And people are going to have all kinds of ideas. Another idea I’ve had, and I don’t know how well it will work, but let’s imagine you write a series of novels, and someone wants to make a movie out of it.
01:25:02
Well, they actually don’t need your permission under our system. They can just do it. But they might want your permission. Well, number one, they might want to hire you as a consultant to help make the movie better. Number two, they might want your official endorsement because there’s going to be other competitors. So there might be three producers making a movie version of your book, right? And if this guy can say this one is approved by the author and consulted on the movie, I mean who are your – which movie are your fans going to see?
01:25:35
They’re going to tend to want to see the movie that you endorsed partly for loyalty and partly because they’re going to trust it more. So maybe that movie makes $5 million more profit. Well, they can give you a million of that as a fee. I mean they’re going to win. So these are just some ideas, so you can see that there’s ways to enhance your reputation, to build up fans, to leverage these ideas. This is what the entrepreneur has got to do.
01:26:01
Matt—the author-endorsed idea is sort of building upon this idea that Nina Paley came up with and Karl Fogel. If you go to questioncopyright.org, it’s called the creator-endorsed mark. And that doesn’t require IP to enforce. It only requires a version of trademark, which is I think libertarian-compatible. Basically the competitor movie, if they want to put a fake Gwen-patent-endorsed movie, well, they’re actually committing fraud on their customers.
01:26:36
Forget about trademark. They’re just committing fraud, so if someone buys a ticket and they see it and then Gwen goes on TV and says I didn’t endorse that movie, then they’re going to get sued, or at least their reputation is going to be hurt, and everyone is going to regard them as a two-bit movie company. And of course their movies aren’t going to be as good as the legitimate movie houses.
01:26:59
I mean – and not only that, the big movie houses you might go see movies in, they’re going to screen these guys for legitimacy just like when you go down to the Kroger. They’re not going to be knockoff Crest toothpaste from some Russian guy on the street. I mean – because if they do, they’re going to hurt their reputation. So there’s all these certification and qualification things that happen in the market, and they’re going to happen naturally and automatically. That’s just one idea.
01:27:28
Matt says instead of a single patron, you could have a large number of patrons that contribute a small amount, and they could be mentioned by name when the work is being completed. Well, that’s sort of my idea about get pledges to buy the book from, let’s say, 100,000 people or 10,000 or whatever, 5,000. And then you say, well, I’ve made my net back, and then the rest will be gravy, lagniappe as you guy say in Louisiana, right?
01:27:52
Actually, if you look at the last – I think it’s – I’m trying to think which – it’s Cory Doctorow was on a recent podcast. Oh, I know what it was. It’s the – it’s one of my favorite podcasts. I listen to a lot of the TWiT Network podcast, twit.tv, and one of them is called “Triangulation,” and it’s an interview, an in-depth interview with Leo Laporte and his co-host with one guy. And they’ve had a lot of fascinating people on so far. They had Ray Kurzweil, etc., and they’ve had Cory Doctorow.
01:28:31
And Cory is talking about one of his recent experiments because he opened his books up pretty much and gives them away for free. But one of his books he’s opening up like that, and he’s also selling these $250 hard backs, and each one has a unique physical copy on the back page, and it’s by some hand-binder in London, so they’re really cool. But it’s got a page that’s an actual manuscript page from the draft notes of some semi-famous author.
01:28:59
So he went to all of his buddies, and he got them to, instead of throwing all their notes away, give them to him. And so if you buy a copy of this book, it’s a unique book, and it’s got an actual manuscript page or notebook page from some other author in the back. So I mean that’s just an idea about how to make them unique and how to sell these things.
01:29:18
01:29:29
Oh yeah, I see what you got. You guys are mentioning Kickstarter now. I do remember. In fact, I mentioned Kickstarter. I have a post. It’s – well, we’re almost out of time now, but let me find this post really quickly. Well, just do this. Search for innovations that thrive and then Kinsella. You should be able to find that. And I think I mentioned Kickstarter and several other ideas that are like that. I’ve been collecting things like that.
01:30:00
And Gwen is mentioning that she was involved in the Neil Gaiman The Price thing with the Kickstarter project. I haven’t looked into exactly how they work, but I think these ideas are great, and of course they’re going to emerge more and more because the world we’re approaching is like an IP-free world or like a copyright-free world anyway with the ubiquity of torrenting and pirating and encryption.
01:30:22
I mean it’s a reality, and these movie companies, these novelists, they know that their stuff is going to be knocked off, so they’re trying to make money from the legitimate customers knowing that there’s some piracy going on and trying to get the attention and compete with others. So the same techniques would just be multiplied I think and expanded and exacerbated.
01:30:43
I think we should call it a break here. If you guys have any questions I didn’t answer, you can ask them next time or put them in the course questions, and I’ll definitely check it in the next few days and make sure I’m on the subscribed list. I don’t know how I didn’t get Gwen’s. Thanks. I enjoyed it too. Gwen, sorry I went so fast, trying to squeeze a lot in. But next class, next lecture we’ll have time for more questions. Thanks everybody. Have a good evening and a good week. Thank you, Donald. ‘Night, Jock. Sleep tight.
01:31:27
Podcast (kinsella-on-liberty): Play in new window | Download (Duration: 1:32:13 — 84.4MB)
Kinsella on Liberty Podcast, Episode 174.
This is the third of six lectures of my 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics” (originally presented Tuesdays, Mar. 22-April 26, 2011). The first lecture may be found in KOL172.
GROK SHOWNOTES: In the third lecture of the 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics,” libertarian patent attorney Stephan Kinsella focuses on the theoretical objections to intellectual property (IP), particularly patents and copyrights, arguing they fundamentally conflict with libertarian property rights and free-market principles (0:00-10:00). Kinsella builds on Lectures 1 and 2 by reiterating that property rights apply only to scarce, rivalrous resources, not non-scarce ideas, using examples like a patented mousetrap to illustrate how IP restricts owners’ use of their physical property (10:01-25:00). He critiques key pro-IP arguments—utilitarian, natural rights, and labor-based—asserting they misapply property concepts to ideas, creating artificial monopolies that stifle innovation and competition (25:01-40:00). Kinsella’s libertarian framework, grounded in Austrian economics, emphasizes that IP is a state-imposed violation of natural rights, redistributing property from original owners to IP holders.
Youtube, slides, transcript, and Grok Detailed Summary for this lecture are provided below. The course and other matters are discussed in further detail at KOL172. The “suggested readings” for the entire course are provided in the notes for KOL172.
Transcript below.
Lecture 3: EXAMINING THE UTILITARIAN CASE FOR IP
SUGGESTED READING MATERIAL
See the notes for KOL172.
❧
Transcript
Rethinking Intellectual Property: History, Theory, and Economics—Lecture 3: Examining the Utilitarian Case for IP
Stephan Kinsella
Mises Academy, April 5, 2011
00:00:00
STEPHAN KINSELLA: Okay, where we left off. We talked the first two lectures about the different types of IP, basically the law, what the law is, the positive law. And I explained that this course will and why it will focus on patent and copyright. Also, we had a good deal of discussion about the historical origins of patent and copyright, how copyright arose from government censorship and patents from monopoly privilege.
00:00:28
00:00:34
So today’s lecture – I’m going to go over the – a little bit more about what this history has resulted in, the entire overview of the kind of modern web of treaties and statutes, legislation that defines and governs all of these different IP rights just to give you a good overview of what it’s like. Then we’re going to basically discuss the main two justifications offered for intellectual property, which is the – basically the principled case, which is rights-based or deontological or natural law-based, and the more practical wealth-maximization-based, which you could call utilitarian or consequentialist.
00:01:13
[indiscernible_00:01:15] are sort of all over the map, and they don’t really label themselves very clearly. Hello, test, test. Can you hear me? My microphone level is not going up. Okay. And I would like to spend a little time going over – I mean I find it astonishing how many – I was just picking through the posts I posted in just the last week alone since the last course, the last seven days on C4SIF.
00:01:43
Now, I do post a lot there, and I think I put about one-third of those posts here to summarize, to discuss. And there’s just so much news on a daily basis of trademark, trade secret, patent, especially patent and copyright news, usually completely outrageous cases of abuse and injustice. Okay, so I’m going to go over here a few of those just to give you a flavor of what’s going on. Jock says the Death of ACTA song was taken down in a copyright claim today. I did not know that. I’m curious what the – who claimed copyright in – oh my God, yeah. Techdirt – that was on Techdirt. I might post that later. Thanks for posting that.
00:02:39
Mike Masnick is the guy at Techdirt, and he’s a friend, and he’s actually on the board of my C4SIF. And he is so prolific. I can’t keep up with the guy. He posts more anti-IP stuff than I can ever hope to. I’ll put this microphone right in front of me, see if that works a little bit better.
00:02:57
So here’s one here. Lawmakers are pushing for a rogue websites bill. So this is just I think last week. Some congressmen vowed to pass legislation to give the justice department new authority to go after foreign and domestic websites that sell pirated music and movies and counterfeit goods. So now we have rogue websites. I did a post called “Patent Defendants Aren’t Copycats. So Who’s the Real Inventor Here?”
00:03:32
By the way, almost all these are live links in the PowerPoint file that you can click on to go to the – you might be able to do it right now actually – to go to the link. They’re all on C4SIF.org highlighted at the top there. So in this post here, this is actually an older post, which I had never posted on this blog, but I posted somewhere else. It’s just based upon – I think this actually might be a link to a post by Joe Mullin, a pretty good IP reporter.
00:04:04
And basically he reported this study that showed that in, say, a typical class of patent infringement lawsuits, for the computer and software ones, less than 3% of these lawsuits had even alleged that there was copying, and only 1% had proof of copying. What that means is, in a patent lawsuit, most people lump copyright and patent together. And it is true that one element of a copyright infringement claim is some kind of access to the original of the copyright holder and some kind of copying of it, reproduction of it, or making a derivative work based upon it. So that is true. So most people that are guilty of copyright infringement have done something based upon the original author’s work, not that there’s anything wrong with it, but they have. In patent, it’s not the same thing.
00:04:58
00:05:11
Jock is asking a question here. I’m not sure if that’s for me. I don’t understand the question about me not sitting in a court. Anyway, if you ask a concrete question I’ll be happy to answer it, but I don’t follow what you were asking there or what that relates to. Maybe I missed a conversation. Anyway, let me go ahead on.
00:05:30
The point of – the point here that’s relevant – the point that’s relevant is most people say don’t steal my invention. They’ll say that this guy ripped off my invention, or all these patent infringers are ripping off someone’s ideas. But the truth is, in most cases, I mean I don’t know the actual numbers. I’ve been involved in a lot of patent infringement lawsuits, and every time I’ve been involved, the defendant or the person accused of patent infringement never did even – they weren’t even aware of the other company’s invention or patent.
00:06:09
They were just making their own products. They have engineers working on designing things to solve different problems to come up with a workable design. And as they do that, they stumble across different ideas and ways of arranging. Later on usually, someone will say, hey, I just read this patent. It looks like we might be doing something kind of close to that. Or they’ll just get a letter out of the blue from some patent holder saying your product that you’re selling is infringing my patent.
00:06:37
And that’s the first that they ever heard of this patent. The point is, these are basically independent inventions, but they’re being sued because they happen to step on something someone else also independently invented before, which is similar. You do not need to allege copying to show patent infringement. You only need to show that the accused infringer is making, using, selling, or importing a device that basically has all of the elements that are in the claims of this other patent. It’s got nothing to do with access, nothing to do with copying. It’s got nothing to do with it.
00:07:18
Now, if you could show blatant copying from a patent, you could maybe get enhanced damages. That would be called willful infringement, willful. But infringement doesn’t have to be willful. Anyway, Erik Smith asks for my job, do I have to send out those letters? Well, I’m a general counsel for a small high-tech company, so I do all of their law. I do corporate law, commercial law, employment law, fundraising, SEC-type stuff, securities work, all that kind of stuff, NNA.
00:07:49
Also, I handle a patent acquisition, but we do not sue people for patent infringement. That’s not the reason we have patents. We acquire patents just to have an arsenal of patents to dissuade people from suing us. We just want freedom to innovate, which is exactly – this is a good segue to – so no, I’ve never sent out a letter, and I wouldn’t do it because I think it’s immoral and wrong. If I had to do it for my job, I would have a conflict, and I just wouldn’t be involved with it.
00:08:20
Now, I have responded to such letters, and I’ve examined patents of competitors and others when there’s a potential concern that we might be infringing or an allegation or something like that. Then what you’ll quite often do is you’ll do an opinion or hire an outside attorney to do a non-infringement opinion we call it or an invalidity opinion. And you just put that in your drawer so that, if you’re ever sued and you lose, then you can hope not to get woeful infringement damages, trouble damages. Hopefully you’ll only pay regular damages because you can show, well, my infringement wasn’t willful because I was relying upon the advice of an attorney who told me I wasn’t infringing, and that was reasonable advice.
00:09:00
I mean there’s all kinds of crazy things you have to go through. Those opinions can cost $20-30,000, more than it takes to get a patent. And if you get sued, of course, that could cost millions to litigate. So the costs are extreme. But speaking of our acquisition of patents, I mean we only have 40 or something like that. If you look down here at the bottom of page five, slide five, Google’s Defensive Patent Acquisition, so this was just in the news this week.
00:09:29
Google – they have this comment that they think there’s a lot of junk patents out there. They think patents impede innovation in a lot of cases. They’re in favor of patent reform, but they said that there’s a company in named Nortel that’s in bankruptcy, and they’re going to make a bid for that company, for Nortel’s patent portfolio. And they explicitly explain in their press release why they’re doing this. They’re doing it just to protect themselves from being sued. They say they’re bidding to create a disincentive for others to sue Google, so they can continue to innovate. So they just want freedom to operate and innovate.
00:10:01
I mean imagine if there were no patent system. All these companies wouldn’t have to waste all these hundreds of millions of dollars changing their product design to get around patents, being afraid to go into a given line to be – out of fear of being sued wasting money on patent lawsuits and insurance and patent attorney fees. Let me put my phone in airplane mode so no one can bug me during this thing.
00:10:33
Okay, so that’s a good example, and I don’t know how much they’re going to pay, but they’re bidding for a big patent portfolio. I didn’t do a search on it. I bet you they have hundreds of patents, so I wouldn’t be surprised if they pay tens or hundreds of millions of dollars for this portfolio of patents just so they can keep innovating, just to make people afraid to sue them. The reason that – and by the way, the reason that works is let’s suppose some company wants to sue Google for infringing one of their patents.
00:11:03
Now, if they’re a big company with their own products and technology, Google could pour through their own patent portfolio and try to find one that they’re – that the other company is violating so they can counter-sue them. So it’s sort of like an uneasy standoff. Sometimes I refer to this as a porcupine defense. You basically are acquiring these patents to make people afraid to sue you. I might have mentioned this last time. What this leads to is either an unofficial or even an explicit agreement between companies not to sue each other, a cross-license in other words.
00:11:38
So Intel might sue Amazon or – I can’t even keep track of who’s suing who nowadays. Apple might sue Amazon for patent infringement or for trademark infringement right now for the App Store idea name. But anyway, let’s say Apple sues Amazon, and Amazon counter sues Apple, and they both reach a settlement where they cross-license to each other the use of their own patents, so they just go back to business. Or they might do this sort of – without an official agreement, just – they just don’t sue each other in the first place because they’re afraid of a counter sue.
00:12:12
What this does is it makes it hard for the little companies to enter this arena. Basically it’s like a – there’s all these companies with hundreds and maybe thousands of patents. And someone without any patents of their own or without many patents, they could – they’re vulnerable to being sued. And they have no patents to counter sue with, you see, so they’re defenseless. So basically patents create barriers to entry to smaller companies and independent inventors and people like that. So it basically tends to cause concentration in larger companies.
00:12:52
Jock asks if Google decides to do no evil and not sue someone using an [indiscernible_00:12:56] idea, is there a limit to the time they could sue, presumably the entire life of the patent? Well, there actually is a doctrine in US law. It’s called laches, L-A-C-H-E-S. And I’m actually – I’ve never been quite clear on how that works exactly in the case of patents. Laches is sort of like an equitable defense. It’s like estoppel in the time sense. What it means is you waited too long to assert your rights, so now it’s unfair. But in the past, a lot of people have actually done this on purpose and they’ve gotten away with it. This guy, Jerome Lemelson, this famous, prolific inventor, he had hundreds of patents. And he would let them pend for decades in prosecution. Hold on a second. Let me shut this dog up. I’ll be right back.
00:13:52
00:14:05
Okay, sorry about that. So what he did – this was before the patent law was reformed in the ‘90s to prevent what’s called submarine patents. Under the current law, as I mentioned before, the term of a patent is 20 years from the date you file it, but the term doesn’t start until it issues. So typically it takes about three years for the patent to issue, so you have about – that’s called the prosecution phase. When you file it, then the patent attorney prosecutes it with the patent office. He goes back and forth with the PTO until it gets issued, if it does. When it issues, then you have the remainder of that 20-year period that you can enforce it.
00:14:44
So if you take ten years to prosecute it, you only have ten left, so there’s a penalty to you. Plus it’s published at 18 months now. It didn’t used to be. Patents are now published at 18 months in most cases, which means people are at least aware that these patents are pending at the patent office. But under the old law, the terms of the patent were 17 years from the date it issued, and they were secret when they were pending. So this guy, Lemelson, would keep filing what’s called a continuation application. It’s like when you get to the end of the prosecution, say, two or three years, you just pay another fee and you start over again.
00:15:23
But it’s all secret. He kept doing that and doing that sometimes for 30, 40 years. And he did it on purpose because, in the meantime, his ideas were independently invented by others and adopted like an auto industry. I may be thinking of the wrong guy. He – I forget – he was the intermittent windshield wiper guy, or he had other ideas.
00:15:45
But anyway, when he died, he was worth, like, $500 million from all these patent license fees. So what happens is the patent will just emerge all of a sudden like a submarine. That’s why it’s called submarine patents, in the middle of an established market. And he’s got 17 years left to sue, so he would just sue people left and right or send out letters, and everyone has got to pay because this invention is already built into all the products.
00:16:13
Now, back to your question, Jock, about waiting, I think once the patent issues, and if you actually know of a given person who’s infringing and you don’t do anything about it, after some period of time, there may be an argument on their side that they could argue laches, L-A-C-H-E-S. But actually, I haven’t researched that issue in a while. I started to research it, to be honest, a few years ago because we were wondering at my company about that issue. But we don’t intend to sue anyone, so I don’t care. I don’t really are if that right to sue lapses.
00:16:49
I don’t think it would be used against you in a countersuit. Now, if you just hauled off and sued someone, you could be in trouble. But if someone sues you and you counter sue them, I think they’d have to have a lot of chutzpah to use an equitable doctrine of laches against their victim, but I’m actually not sure about that. The bottom line is there may be some danger in not forcing your right. You might – somebody might find this doctrine interesting, L-A-C-H-E-S. I’ll type it here.
00:17:20
00:17:24
Okay, oh, here’s another recent one. I’m from Louisiana, and so the New Orleans Saints is the professional American football team in New Orleans, and so they’re popular in Louisiana. And there was an interesting story about – so some guy – he’s a descendant of some families, founding families of New Orleans, but he now lives in Vermont. So he filed a lawsuit against the Saints and the NFL for using the fleur de lis symbol. I mean this is crazy. I don’t even know if the Saints own the fleur de lis. They might own their particular drawing of it, but fleur de lis are all over the world, France, everywhere.
00:18:03
Okay, there – this next link – I’m on slide six, by the way. The next link, everything is a remix. I just – someone sent me this. It’s two videos, and I think it’s part of a project. There’s more coming. Some filmmaker did a great sort of, we’ll call it amateur. It’s a really good job showing how the idea of remixing is just all over the place in art. I mean it’s just part of what artists do. They take others’ ideas.
00:18:32
00:18:41
Jock says the guy is going to do four videos. I think that’s right. So the first two are superb. There’s another one I’ve seen before about some kind of beat jazz. I blogged about it before how – so one kind of beat that is drum beat or some kind of beat rhythm in jazz has been around for decades and has morphed over time. And also Nina Paley has a good related one. It’s called one of her minute memes. If you go to questioncopyright.org, you can find that one. She’s done two or three now, and it’s about how all art is imitation or something like that. It’s a really cool video she did too, Nina Paley.
00:19:18
Okay, next one, RIM. If you remember, RIM is the one who makes the Blackberry phone, and they already were extorted by NCP, this patent troll company basically. Jock just posted the link to the drum beat. That’s true. That’s right. That’s looks like it. Anyway, so Blackberry was already sued for patent infringement by NCP, and they ended up having to pay $612 million to settle it.
00:19:48
Well, now they’re under attack again. So Intellectual Ventures is this big patent acquisition company founded by I wanted to say Nathan Myhrvold. I think he was a former CTO for Microsoft. So what they do is they go around buying up people’s patents, and then they use them to extort money from people basically. So I don’t know if they extorted money from RIM or if RIM approached them, but it’s the same thing. It’s a threat one way or the other, but anyway, so RIM made a deal with them to get the right to be covered by 30,000 of their patents.
00:20:23
Now, they – RIM may be doing this defensively. They may be basically getting some kind of right to be protected from some of the huge number of patents IV has acquired to use defensively or to keep people from suing them. I don’t know. But it’s kind of interesting. Intellectual Ventures made $700 million last year on licensing revenue from licensing all these patents it has. Some of you may have seen this. The band, Men At Work, had this famous song in the ‘80s, I Come From a Land Down Under. I think that’s the name of the song, Down Under.
00:20:57
And they were sued for copyright infringement by some company that owns the right to some little children’s ditty, Kookaburra Sits in the Old Gum Tree. And I actually have heard that as a child. Someone hummed that to me. It’s some old folk tune or something. And apparently there’s one little part of the flute sound or something in the Men At Work song that sounds similar to the Kookaburra song. And so now they lost, and they appealed it, and they lost their appeal. So they’re potentially liable and the individual singers and the company – Colin Hay I think is now still a singer – for millions of dollars because this was a very popular song in the ‘80s. So they’re now potentially liable for millions of dollars to this – for this, which is absurd.
00:21:47
Slide seven I’m on now. I posted this one this morning I believe. I posted two or three times already on this Fabrazyme issue. I get emails occasionally from the lawyer named C. Allen Black. He’s actually a patent attorney up in – somewhere in the Northeast. And he’s representing these two poor people pro bono. This is an outrageous case. Basically, there’s a company. I think it’s called Genzyme. They make this drug called Fabrazyme, which treats this genetic illness called Fabry disease.
00:22:27
And they’re the only ones who make it. It’s in short supply because there’s only one company making it, and they just can’t make enough, and no one else makes it because – well, no one else has been licensed to by the FDA. And Fabrazyme – Genzyme has a patent, so no one can make it, and so no one has tried to gear up to make it. No one’s applied to the FDA for permission I guess. And a lot of this drug is being exported to Europe, and so there’s not enough for Americans here or something like that. And the point is that there are people actually – some of them might have died already, but this is – we’re ruining these people’s lives.
00:23:00
So the attorney for them has been trying whatever he could to get drugs to these people somehow, to get a competitor authorized by the FDA or to get the NIH – that’s part of the federal government – to issue a compulsory license. The federal government has the authority to do that. You see, the federal government issues these patent monopoly grants. So they have the right to authorize some other company to grant a license. So if the patent holder won’t grant a license, the government has the right to do that instead of them. And then they can compensate the companies. It’s sort of like an – almost like an imminent domain thing.
00:23:43
The federal government threatened to do this, by the way, in the anthrax scare about eight or so years ago in the US when after – in the wake of 9/11 and terrorism and all this stuff. There was some anthrax received in some envelopes, and there’s this drug called Cipro, which treats it, and it was in short supply, or the company that makes it – I can’t remember. Is it Bayer or someone? Whoever makes Cipro was charging outrageous – like $200 a pill or something. It was crazy. And so Congress or some agency of the federal government threatened to issue a compulsory license if they didn’t charge a more reasonable fee. And so they kind of backed off and lowered their price I believe to keep the federal government from busting their patent monopoly on the anthrax drug, Cipro.
00:24:39
But what was I thought just pathetic about the most recent action in this Fabrazyme case, I’ve got it here on slide seven. So he – this guy, Allen Black, has tried – he’s sued. He’s applied for a compulsory license, and he keeps losing. And the latest thing he’s tried, he went to the NIH, and he tried something called a march-in request. It’s another type of petition basically beginning them to issue a compulsory license.
00:25:07
And they denied it, and one reason they gave is that, because of the administrative delays of the sister agency, the FDA make it impossible to make the drug in time. In other words, they say it wouldn’t do any good to authorize a competitor to make this drug because the other part of the federal government is slowing things down so much that it wouldn’t get out in time anyway. In other words, I guess by the time competitors would gear up, Genzyme may have their production geared up as well. So in the meantime, these guys are screwed, so it’s almost like the FDA and the patent office together are causing basically people to suffer. Jock just posted – hold on a second. Ethan, get out please. Jock just posted that Fabrazyme is being paid $250,000 per patient per year, or not Fabrazyme, Genzyme for the Fabrazyme drug. So they’re making $250,000 a year, which is obscene. Excuse me for just 15 seconds.
00:26:21
00:26:33
Okay, so that’s some good news. I think it’s important to have a – to see this stuff every week to have a feel for what’s really going on out there. In the last course I gave for IP, someone asked this question, which I answered because I had not really addressed it in the preceding lecture. And again, it’s good to have a foundation – an understanding of what the law is before we get to arguments about it and policy questions.
00:27:05
So they were asking what exactly are trolls. And you might have heard the term of patent trolls. There’s even copyright trolls out there now. The Intellectual Ventures company in a way is a patent troll. A patent troll is someone who – well, they use the metaphor because they can extract the toll for crossing a bridge, right? Basically, they can make you pay a fine or a license fee to use your own product. And the reason they’re different than other patent holders is they usually don’t make the product that’s covered by their patent.
00:27:46
So I think it’s a strange category because they’re really not different than other patentees. So, for example, if I make laser printers like HP and let’s say they sue Brother, another laser printer maker, for infringing one of the laser printer patents on HP’s laser printers. Well, there’s a good chance that Brother has its own arsenal of patents and can counter sue HP, so they might be able to fight back. So neither one is a troll because they both have patents that cover their inventions, but so what?
00:28:21
I mean what if HP, among its huge patent arsenal, has a patent on ink technology and they sue some ink company that has nothing to do with laser printers? Or they sue some other company, I don’t know, a lamination company or car company. That company may not have any laser printer patents, but they can counter sue HP with. So their defense was just as if HP was a troll, so I don’t see – it’s a weird category. The problem is not that they’re a troll. The problem is that people have patents that they can sue people for, so it’s sort of a bizarre criticism.
00:29:01
Now, the patent law has – does not require – at least in the US doesn’t have what’s called a working requirement. 1 In other words, you don’t have to make a device that practices your patent to have a patent. You don’t even have to ever, ever make one and prove it can work. Now, the law requires you to reduce your idea to practice. You have to reduce it to practice. But they make an exception, and they say that if you file a patent application that has a written description of how your idea would work, which the patent application has to have that. You have to have a written description. Then that’s a called a constructive reduction of practice.
00:29:57
So in other words, filing a document that – I can sit down and in one hour have an idea and write it on a – type it up on a piece of paper, file it, and I’ve now made this thing in the eyes of the law constructively. So you never do have to make it. So the point is the law has never required that, so people that complain about patent trolls – it’s like complaining that some people get on welfare. Well, if you put a saucer of milk out, a cat is going to come up and drink from it, right?
00:30:27
I mean if you create a patent system that gives someone a legally enforceable right that they can get by following through the certain hoops, jumping through certain hoops, people are going to do it. And to blame them for doing what you set up a legal incentive for makes no sense whatsoever. They’re not abusing the system at all. Now, it is true there are junk patents out there, but that’s not what patent trolls are accused of.
00:30:52
Their patents may be just as good as anyone else’s. A junk patent is a patent that should not have been issued even by the standards of the patent office. Now, of course, the patent office is totally incompetent, and the standards are vague and arbitrary anyway. So there’s no objective way to know when a patent should be issued or should not be in a lot of cases.
00:31:12
00:31:17
But the problem with the patent system is not that there are bad patents issued. The problem with the patent system is not that people abuse it. The problem is that good patents are issued, and the problem is when people follow the rules and use these legal rights that the government gives them. This is the problem. Now, I would be in favor of, and I’ve written articles on it. I would be in favor of reforming the law to require a working requirement if only because that would tend to make it harder to get a patent. And it would tend to reduce the number of total patents out there. But that’s my only motivation for that. I mean patent trolls are not a problem in my opinion.
00:31:55
00:32:01
In my last course, someone had asked this question. I will just mention it briefly here. Someone asked a question about photography. Who owns the copyright in the photograph? And it is actually the photographer, and one strange thing about that is that most people don’t think about. Let’s say you’re on vacation and you hand your camera to a stranger to take a – snap a picture of you and your spouse.
00:32:28
I mean theoretically you have a photograph in your camera that you own, your own camera of yourself on your own vacation that you don’t own the copyright to. Some stranger owns it, and you don’t even know who he is. So I mean this is how – no one makes a big deal about it because he’s a stranger. But theoretically you don’t even have that copyright, so copyright law has lots of weird aspects to it.
00:32:56
Okay, now let’s do this. I talked historically about some of the key things in history – the key things in history that led to patent and copyright. I want to just summarize for you, go over with you just so you get a feel for this monstrous, arcane, complicated web of IP-related laws around the world that form the current national and international patent system. So I’ll talk about the international aspects and also in the US case primarily and plus the English in terms of the history here.
00:33:41
So let’s just start historically again. Remember, 1624 was the Statute of Monopolies of 1623. Actually, I could never find the right way to cite this thing. Everyone cites it differently. I think it’s called the Statute of Monopolies of 1623 because that’s when it was probably introduced into parliament or something. But it was approved in 1624, so I’ve seen it both ways, same thing with the Statute of Anne, 1709 and 1710.
00:34:06
Anyway, so one of the original key statutes for patents was 1624 Statute of Monopolies in England. One of the original copyright statutes was 1710 in England, the Statute of Anne. Then actually one of the first modern so-called general patent laws was 1691, South Carolina. Now, I’m going to go to slide 11 now. Now, let’s get to the modern system and use the US as the – as a good example. And actually I think we have one of the oldest in the world, constitutions and IP systems strangely enough give that we’re – US is a relatively young country.
00:34:49
Anyway, on photographs, Jock asks isn’t it the subject in France like that photograph of the kiss? I’m actually not sure. I would doubt it would be a different result in France, but if you know differently, let me know. Okay, so in the modern US, I have mentioned the four main types of IP are patent, copyright, trademark, and trade secret. So just – I want to give you a feel for where these laws come from right now, what their source is, what governs them.
00:35:27
So in the US, the patent – patent and copyright both are authorized by the Constitution. So I don’t think they’re unconstitutional, although some people say that they are because there is a clause that says to promote the progress of science and the useful arts Congress can give authors and inventors these limited monopolies. And what they say is there’s no proof that patent and copyright laws do promote the progress of science and the useful arts. And actually I agree that they don’t promote it. They actually impede it, so they say that it does not fulfill the constitutional purpose.
00:36:01
Therefore, it’s unconstitutional. I’d be happy if the court would strike it down on that ground, but I don’t think that’s a good argument. I think that that language is what’s called merely precatory. It’s just explaining why they’re giving Congress this power. But the power is actually not limited by that purpose. There’s a similar argument in the second amendment for gun rights, to provide for national – whatever it says, the right – the freedom to bear arms shall not be infringed.
00:36:32
And we gun rights advocates say that that’s an individual right to bear arms, and the clause before it is not a limiting clause. It’s just explaining one reason that that power is in there, that right is in there in this case. Anyway, patent and copyright are authorized by the Constitution, which was ratified in 1789, 1789. So soon after, the very next year, there was the Patent Act of 1790 and the Copyright Act of 1790. It might have been 1791. I’ve seen different reports, but it was around that time.
00:37:04
Now, patents are governed by the Patent Act of 1952, a more modern one, and of course it’s been modified since then. It’s in Title 35 of the US Code, USC. Copyright – and by the way, it’s administered by the US PTO, United States Patent and Trademark Office, which is part of the Department of Commerce. Okay, now I don’t really – okay, so let’s go on. Copyright is governed by Title 17 of the United States Code, and it’s administered by the Copyright Office, which is part of the Library of Congress.
00:37:38
So these actually are governed by different parts of the federal government. I’m not sure why or how that happened. Now, strangely enough, trademark law, the federal aspect of it, which is the Lanham Act, which was passed in 1946, that’s also administered by the US PTO. That’s why it’s called a PTO, Patent and Trademark Office. Gwen just quoted the second amendment: A well-regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.
00:38:11
So gun opponents have argued that that first expression limits the second, in other words, saying the right is only for the purpose of having a militia. So then that’s subject to regulation by the states because they control militias. But the court actually, I think strangely and correctly, rejected that in that fairly recent – was it Heller? I think the Heller case that recognized the right to bear arms is a personal individual right.
00:38:38
Anyway, trademark is mostly – well, it used to be mostly state law, based in state law, common law and then state statutes. The government – the federal government passed the Lanham Act in ’46. Now, I believe it’s unconstitutional because there is no authorization in the Constitution for the federal government to regulate trademark. They based it on the Interstate Commerce Clause, which says that the government – the federal government can regulate commerce between the states, which they have taken over the years to use as basically an authorization to do anything they want because they just say as long as it has an – some activity has an effect on interstate commerce, the federal government can regulate it.
00:39:20
The famous case, by the way, if you want to read a case that will just make you go crazy is Wickard v. Filburn, W-I-C-K-A-R-D v. Filburn. I think it’s F-I-L-B-U-R-N. In that case – this is back in the New Deal era under FDR, Franklin Roosevelt. The federal government is issuing all these quasi-socialist decrees, and they were telling this wheat farmer who grew wheat – if I remember the facts right, he grew wheat on his own farm, not even to sell it, which arguably enters the stream of commerce and affects interstate commerce.
00:40:00
But he sold wheat just to feed his own pigs or something like that. But that violated all these controls over wheat growth, and he fought it. And the court sided with the federal government, and his argument was that this law is unconstitutional because the federal government has no authority to tell me what to do with my own property. There’s no enumerated power, but the court said, well, if this guy grows his own wheat and feeds his own pigs, if he’s allowed to do that – and notice this word allow – this is how they view us, giving us permission to live.
00:40:38
If he’s allowed to do that, then he won’t buy wheat on the market to feed his pigs, and that will affect how much wheat is purchased on the market. So in a cumulative effect, if everyone did this, then it would affect the interstate commerce between the states. I mean it’s insane. They’ve used this to justify everything. Not until the ‘80s I think or the ‘90s did – some Clarence Thomas-related decisions did they start choking back a little bit.
00:41:04
I think the US v. Lopez case was a school gun – it was – the federal government tried to regulate how close guns could be to a school. And finally the court said, look, that’s got nothing to do with interstate commerce, mid ‘90s. So – and they’ve done that a few times, but there hesitant to go too far with that because if they go too far, reigning in the power of the feds to use this broad interpretation of the Interstate Commerce Clause, then half the federal government would just be unconstitutional.
00:41:38
Now, trade secret is mostly state-law-based. It still is, but even here the feds have gotten into the act. They passed this Uniform Trade Secrets Act in ’79, which makes it, if I recall, a federal criminal crime in some cases I think when interstate commerce is involved, to steal a trade secret.
00:42:00
Okay, now, let’s look at some modern additions to these four basic rights. In 1997 – let’s look at copyright first; 1997, the No Electronic Theft Act, the NET Act was passed. That provides criminal prosecution for copyright infringement, up to five years in prison, 250K in fines. Now, 1998, the Sonny Bono Copyright Term Extension Act, you guys might remember Sonny Bono. He was the other half of Sonny and Cher, the singing duo from the ‘60s, and he was a Republican congressman later. And he went skiing without a helmet and ran into a tree in Colorado I think and killed himself – or California I guess in the ‘90s probably right around this time.
00:42:49
Anyway, this act is called the Sonny Bono Act. That’s what extended copyright term by 20 years to the current term, life of the author plus 70 years or for what’s called a work-for-hire where a corporation is the owner of the copyright and the author of it because it was a work-for-hire. In that case, it lasts for 120 years from creation I think or 95 years from publication, whichever is shorter.
00:43:20
And it’s always shorter; 95 is almost always the number. So basically it’s roughly a 100-year term. It was – so 20 years, it used to be 50 and 75. It’s also called the Mickey Mouse Protection Act because Disney lobbied for this to keep Mickey Mouse from going into the public domain. And let’s see. That was 1998, so it’s – maybe in five or so years we’ll see Mickey Mouse Protection Act number two, and maybe copyright will be life of the author plus 90 years or 115 years in the case of a work-for hire so that Mickey Mouse will be spared being released into the public domain yet again.
00:44:02
Now this is a big one that is really bad, the DMCA, Digital Millennium Copyright Act. You’ll see there was a lot of activity in the ‘90s. There is a lot going on right now too, by the way. 1998, the DMCA, Digital Millennium Copyright Act made it a crime to possess I believe or to use or sell at least a piece of technology if it could circumvent DRM basically. So in my mind, basically every computer is – everyone is a criminal for having a computer because a computer could be – can be used to crack – to hack and crack and unencrypt, right? It’s crazy. The DMCA also added this protection for boat-hole design, so now you have this subset of copyright law, which protects the way that boat holes look. I mean I don’t know. I guess a boat hole – the boat lobby, the yachting lobby had a friend in Congress or something.
00:45:10
I mean it’s crazy. Now, one interesting thing about the DMCA, now this is at the dawn of the internet. I mean I was practicing patent law back then. I remember when this came out. We were studying exactly what this would do. They put in there this safe harbor for what they called at the time OSPs and ISPs, internet service providers. And they were thinking back then of companies like, oh, I don’t know, America Online. And what they did was they provided a safe harbor, which said that we’re not going to regard an ISP like America Online at the time.
00:45:46
Now I guess it would whoever your ISP is. We’re not going to regard them as a publisher of the information that goes through their system and is put on websites, let’s say, that they’re hosted through their systems. So they’re not going to be responsible legally for the information that some user puts up there like if it’s a copyright infringement or if it’s defamation, for example. We’re not going to make the ISP be the publisher of that if they don’t actively get involved with it and if they respond to these takedown notices. So at the time, no one knew – none of us – no one knew who was going to be liable for copyright infringement.
00:46:31
And a lot of ISPs at the beginning used to be sued for all this stuff, so they were afraid of liability. So Congress put that in there. Now, that has turned out to be a big deal. I mean some of you may have heard of the DMCA takedown process. This is where it came from, and it’s used all the time now, and it’s – I mean I hate the DMCA and I hate the copyright law. But that part of the DMCA I think has helped freedom on the internet because it’s made it kind of clear that a large number of service providers are not responsible for what users put up there.
00:47:07
Okay, and I actually don’t think Congress would have put that in there if they would have understood how it would have been used because this has been used in a lot of creative ways by a lot of companies that maybe weren’t quite contemplated because they didn’t know how the internet was going to develop, so this safe harbor is important.
00:47:26
00:47:35
Trademark law, as I mentioned, is 1940-something with the Lanham Act, which federalized a large part of trademark law in the US. Something called antidilution was added in 1995 and revised again a couple years ago. This made – see, up until then I mean trademark law has problems too in my opinion from a libertarian point of view. But the basic standard was kind of like a fraud standard because it was – is someone using a mark in a way that is likely to cause consumer confusion? That was the standard. And that’s similar to a fraud standard, which I think is the only good basis of trademark law.
00:48:17
It could be based upon fraud if something like it could be based on fraud. So if you’re confusing the consumer because you have a mark too similar to a competitor’s, they could be deceived or defrauded, so consumer confusion. Well, that wasn’t good enough for a lot of these guys. So they got Congress to add antidilution, so now you can be in trouble even if the mark – even if the way you have a mark on your products is not even likely to cause consumer confusion.
00:48:45
That’s right. So you got that it’s not confusing to the consumer. But it might dilute the value of the other guy’s mark because it tarnishes it or it associates it with the wrong ideas. So it’s got nothing to do with trademark infringement actually now, so that’s terrible, causes lots of mischief. I’ve got lots of horror stories about the antidilution act – antidilution cause of action being used.
00:49:06
I think I misspoke earlier when I talked about the – that trade secret law. This is the one here that I mentioned on this page, the Economic Espionage Act of ’96. See, another law in the ‘90s. This is a federal law that makes the theft of a trade secret – again, I think it’s one in interstate commerce, but it makes it a federal crime.
00:49:30
Now, let’s talk about the international system. The major international bodies that govern all this is the WTO, the World Trade Organization. So their basic goal is to liberalize international trade, but of course it’s everyone who’s been deluded with the idea that western-style IP rights are part of a capitalist free trade, property right system. This is used to push developing and backward countries, as they might think of them, to adopt our type of IP.
00:50:01
And then you have the United Nations agency that’s devoted to IP protection, the World Intellectual Property Organization, or WIPO, which is like the Darth Vader of – or the Death Star of IP. Now, as for treaties, there’s lots of treaties that govern trademark, patent, and copyright around the world. Some of them require nations to respect other’s rights or rights of citizens in their country like copyright. Some require minimum standards that countries that are members to these treaties should meet.
00:50:39
So one of the earliest ones is the Paris Convention in 1883. By the way, you’ll notice it was called for the Protection – I’m on slide 14 right now, by the way. Paris Convention for the Protection of Industrial Property – in the US we call it intellectual property. It’s called industrial property quite often in other countries. In any case, this basically allows you to file a patent in one country, and then within, I don’t know, six months or a year depending on the country, file a second application in another country and claim priority back to that date.
00:51:11
So you’ve got the filing date. Filing dates matter too when it comes to a battle with someone else or when it comes to what counts as prior art. I mean if I file on day one and someone publishes an article the next day, that’s not prior art for me. If I file it on day one and the article published two years ago, it is prior art. Prior art means what is publicly known and what my patent has to be novel in view of. Is that clear? But since the PCT, or Patent Cooperation Treaty, in 1970, this provided a more unified procedure, and this is what is used mostly nowadays.
00:51:52
I use this quite often to file a PCT application for example. I don’t think I’ve ever used the Paris Convention because you only need to use that when there’s a member of the Paris Convention that’s not a member of the PCT. And there are fewer and fewer of those. China, for example, used to be a member of the first I think but not the second, but now they’re a member of the PCT as well. Then we had the Berne Convention, 1886, also the WIPO Copyright Treaty of 1996. These both set international standards for copyright.
00:52:29
Now, by the way – so here’s an interesting point about it, the Berne one. So the US is part of the Berne now. And one thing the Berne and I think the WIPO treaty too – one thing they required was that there be no formalities to acquire copyright protection. This is why it’s automatic now. It used to not be. In the US, to obtain a copyright, I think you had to put a copyright notice on your work, and maybe you had to even actively register it with the copyright office. I can’t remember if it was active registration. I think it was active registration was required to have a copyright, similar to the patent system where you don’t get a patent unless you apply for it.
00:53:16
But since the – I think the ‘80s when we acceded to Berne if I remember my timing right, we changed the copyright law to comply with it. And we got rid of those requirements. So most people will say, Kinsella, you’re a hypocrite because you copyright your works. Or, Kinsella, you’re a hypocrite. Why don’t you just make your work public domain?
00:53:39
Well, first of all, I don’t copyright anything. No one copyrights anything. People receive a copyright or they have a copyright automatically. Just by writing – just by publishing an article or writing it on paper, the government grants you a copyright in it. You can’t stop it. You can’t even get rid of it. There’s no way to make it public domain. You can’t just put a notice on it saying I hereby make this public domain. That’s just – it doesn’t – it’s not true. It’s not public domain.
00:54:07
So even if we wanted to modify our copyright law and to, say, require active registration, which I think we should, we couldn’t do it without violating international law. So I was talking with Karl Fogel who’s the head of QuestionCopyright.org not too long ago. And we were discussing this, how even if we could somehow get a movement in Congress to make the copyright system registration active registration, which would solve the orphan works problem. There’s an orphan works problem now where there’s tons of works out there in the last 50 years, and no one knows who the author is or you can’t find them, or no one knows who the owner is.
00:54:47
And you can’t get permission to make it, so they’re just dying, or these books are not being republished because of the orphan work problem. If you require an active registration, you could go to some registry. You could see who the author was, whether it was copyrighted or not, and then you would know. Anyway, we actually couldn’t do that. In other words, it would be better to make copyright opt-in instead of opt-out.
00:55:17
But as I mentioned to Karl, it’s not even opt out because you can’t opt out of it. I mean there is no way to get rid of copyright that I’m aware of, no reliable way. Creative commons licenses can help somewhat, but it still doesn’t get rid of the copyright, and I’m not quite sure that they’re completely enforceable. The CC Zero would be the closest to public domain, but there is doubt about whether that one’s legally enforceable because of these treaties and because of local laws.
00:55:46
00:55:50
Jock asks what is this about author asserts his moral rights. I’m not sure where you read that from or what you’re talking about. I think that word is used a little bit ambiguously or in different ways. Moral rights refers primarily – okay, he said it’s on the front matter of books. I don’t remember seeing it that much before. But it – I think it’s more of a European thing. I know like in France, for example, there’s a moral right, which is the right – it’s sort of like an adjunct to copyright.
00:56:20
It’s the right to be attributed as the author of a work, and if I understand how the law works in countries that have this, I don’t think we have the same thing in the US. I think the moral right is said to be and inalienable right. I mean literally they call it inalienable. So you cannot contract out of it. You cannot get rid of it. I seem to recall studying some cases as long time ago where, for example – I think it also has to do with preventing your work from being defaced.
00:56:53
So I think there was a case where some artist had a – I want to say he had a refrigerator and he had painted something on the refrigerator. And then he left his apartment and someone else moved in, and they were going to throw the refrigerator away. And he got an injunction and stopped them from doing it, or there may be cases where you have a mural on a building, and the artist doesn’t own the building anymore. But he gets an injunction from the court to stop the current owner from painting over it or demolishing a house because it would deface his work.
00:57:29
I think that’s a type of moral right too. So I’m actually not sure if it means anything other than that. So I’m assuming that the authors are doing that. They’re saying I have to be attributed as the author of this no matter what, something like that. Glenn asks am I familiar with some of the open-source characters like Jenny Everywhere that have a permissive license, and then you have a link here. No, I never heard of that. I do know there’s a movement among a lot of open-source types to have open licenses and things.
00:58:01
But a lot of them do noncommercial, which I think is terrible. I mean Nina Paley is an artist, and she explains – I mean she does copyleft, which I understand why. I don’t like copyleft because it still imposes a requirement on the user to impose another copyleft on anyone they – any derivative work they’d make. I tend to prefer creative commons attribution only. I figure that’s the closest enforceable license to public domain because all you’re requiring them to do is put your name on it, which they would do in most cases anyway.
00:58:40
I mean attribution is commonly done anyway, so I figure you’re not imposing any really onerous requirement on people. I mean I would love to do CC Zero on my stuff, but I’m afraid it won’t work, and that’s to the detriment of the user. If they can’t rely on it, then they’re – maybe I’ve changed my mind and will try to sue them some day, so they need to be able to count on the license.
00:59:03
00:59:08
Gwen says it’s all rights reversed. Yeah, I think that’s one of these cutesy, artsy things that’s supposed to mean something like copyleft, which is – I don’t know if it’s legally enforceable because it’s not really that carefully defined. Maybe it is somewhere. It might be interpreted to be copyleft or CC BY. Creative commons by is attribution only.
00:59:29
It’s 9 p.m. my time. Why don’t we do this? Let’s take a five-minute break. It’s 9:02. We’ll resume at 9:07, and maybe I’ll talk for 15 more minutes, and then I’ll stop and see if there’s any more questions. Someone asks – I thought I saw another question. Oh, Donald says are there countries that are resisting or partially resisting current patent and copyright agreements? Well, I mean I think there are some countries that have never signed up. I mean I think they regard it as not very important in the countries.
01:00:09
What happens is the western countries are always twisting the arms of the holdouts that are significant like Russia and, I don’t know, China and India. And they all finally come along, but now they’re working on getting them to actually comply with the laws. I mean outside of the US – my general impression is outside of maybe Canada and the US – well, I was going to say piracy is widespread. IP is respected here. And I think that probably used to be the case until the internet and Pirate Bay type stuff, so now that’s not even the case.
01:00:47
But you’re not going to find a bizarre, some guy on the street selling bootleg CDs over here. I mean I’ve never seen that, but I’ve been overseas and you see it all the time in the – generally the poorer and the more developing the country is, the more you see that – Italy and Turkey and China I’m sure. So piracy is more rampant over there.
01:01:10
01:01:15
So I think right now they’re just trying to get China and Russia – primarily China and India to really comply and to enforce these laws and have a better court system for lawsuits. It’s actually stop piracy, not just have it on the books but enforce the law. Oh, Jock is putting a link up to some report on international piracy. That’s the one that came up just the other day.
01:01:41
It’s some huge report by some group – I forgot the group. There was actually an interchange between him and Mike Masnick on Techdirt between the guy that was behind that study. He was kind of fussing at them for charging, I don’t know, $8 to get the report if you’re from the US or some rich country. But it was free in other countries and had some kind of copyright warning on there. He kind of fussed at him, and the guy said, well, it was tongue-in-cheek, and we’re not really going to enforce it.
01:02:08
If you want to bootleg it, it’s okay with us, but I mean you can find it if you’d look. I mean it was kind of weird, the interchange. In any case, let’s continue on here. I’m not going to finish tonight’s – everything I had planned, but that’s okay. It can spill over to next time, which is fine, but I would like to finish the overview of the legal system.
01:02:31
On treaties, there’s a Madrid system too. The Madrid system is based in Madrid, Spain just like the European Patent Office is in Munich. I mean – and the United Nations is in New York. I mean all these countries lobby for these huge new bureaucracies to be centered there, so they’ll create jobs and business and spending, etc. So this permits international registration of trademarks. It’s administered by WIPO. Now, there’s also a treaty called GATT, the General Agreement of Tariffs and Trade.
01:03:15
And 1994’s so-called Uruguay Round covers IP. Finally, the TRIPS, the agreement on trade-relates aspects of intellectual property rights are called TRIPS. This is an international agreement administered by the WTO. I told you earlier it’s two of the big agencies are the WIPO and the WTO, and this sets minimum standards.
01:03:38
Okay, there is also this ACTA – well, I think I have it on the next slide. Let’s go on to the next slide. Now, what about laws coming down the pike, pending laws? So we had this ACTA, Anti-Counterfeiting Trade Agreement. I actually haven’t followed it in the last month or two, so I’m not sure where it is right now, but I assume it’s still pending. So this is a proposed international agreement that would provide copyright and patent standards and maybe even trademark. I read through it, and it’s a little bit unclear. The problem is it would have a lot of the provisions that are in the DMCA, so I’m really worried about this. It probably won’t affect America too much, but it will make other countries have more American-style law.
01:04:29
Now, what was sneaky about this is let me explain how international negotiations work on these types of things. Usually when you have things like these previous treaties we’ve talked about, they’re negotiated between a large number of countries as a treaty. Okay, and those are done – traditionally those negotiations are done pretty much publicly, so everyone is aware of what’s going on, and there’s – just like when a law is pending in Congress people – some people oppose it. Some can give their input and they can try to stop it if they don’t like it, whatever.
01:05:05
Well, trade agreements usually are between two countries. Sometimes they’re multilateral, but trade agreements are typically negotiated in secret between countries. Okay, but when you do an intellectual property treaty, it’s usually done as a treaty because that’s what it is. It’s not – trade agreement is about how we’re going to impose tariffs on each other like the NAFTA or like bilateral trade agreements between countries or multilateral trade agreements. Trade agreements affect how countries trade with each other, so they wanted to impose these more rigorous standards, patent and copyright standards, on a worldwide basis.
01:05:49
But they didn’t want to impose – they didn’t want to negotiate it in public because they knew that it would be controversial. So instead of doing it in the normal way, they tried to sneak it in as a trade – that’s what they call it, the anti-counterfeiting trade agreement. And this law professor in Canada named Michael Geist, G-E-I-S-T, someone leaked to him the draft of it, and it got leaked. And so now it kind of from what – last I read, some of the offensive provisions have been taken from it. So if it does get passed, it will have been partially defanged, which is good, although it’s still probably going to be bad.
01:06:29
Another one that’s coming, which I’m really worried about, is the COICA, Combating Online Infringement and Counterfeits Act. This would allow domain names accused of piracy to be blocked. They’re treated as what’s called in rem. That’s an action against a piece of property, in rem instead of in personam, instead of against a person. So they wouldn’t have to know who owns it or who the person running it is. They just will go in and see that one.
01:07:02
And then there’s also talk about adding IP for fashion and database rights. Some chefs want copyright for food recipes. Some bartenders want copyright for their drink mixes. I mean I’m not kidding. It’s terrible. I don’t know if I have it on this page. Oh okay, this is the end of this part, so let me just stop for a second. I don’t have it on the slides, but I did a post on it I think a week or two ago on the Mises blog and on C4SIF.
01:07:31
You might want to look it up. It’s a post about pending patent reform. Patent reform has been pending for, I don’t know, ten years, and it never passes. It’s never a good idea in my opinion because they never do anything radical. They just change a few things. But it looks like the timing is right, and there was a bill. I think it’s Senate 32 or something. Anyway, it’s on my site. There’s a bill pending, and it passed the Senate 95-5, and sadly Rand Paul voted for it. Maybe they don’t understand.
01:08:14
Most of the changes are neutral. Some are negative. None are horribly negative that I recall. But it’s just moving deck chairs on the Titanic. It’s not really – the main significant, substantive change is they would change our American system from what’s called a first-to-invent to first-to-file. My understanding is most countries in the world have a first-to-file system. That is, if two people have a similar invention and they both file a patent application for it, the one who filed first will win the battle, and he’ll get the patent, and the other guy will not.
01:08:50
In the US, we’ve always had a first-to-invent system where if two guys file for patents and then it turns out they’re very similar, then they have an action called an interference proceeding, which is sort of an administrative lawsuit for the PTO or some court. Anyway, they will decide who was the first one to conceive of the idea. I mean it’s an arcane doctrine. In most cases it wouldn’t make a difference. Anyway, they want to change it. I don’t know why they want to change it. I think they think it has a greater legal certainty or something or it’s more like what other countries do.
01:09:29
And of course a lot of people are up in arms about it, but honestly I don’t think it makes a difference. It only makes a difference to patent lawyers because it makes them nervous that now they might have a greater chance of malpractice liability because, under the current law, it doesn’t matter if I filed a patent a month late because – I mean it matters a little bit, but it doesn’t matter too much because I could still win.
01:09:54
I could beat someone in an interference proceeding if I could just show my client invented it first, and that’s not going to change based upon when I file it. But if they change to first-to-file, if I’m a week late and someone else filed a week – two days before me, then my one-week delay could cause my client his patent rights. And so I might get sued for malpractice, so some patent lawyers don’t like it, but they’re just a bunch of whiners. They don’t want to learn the new law. I mean law is changing all the time. I really think none of it matters, so I’m against it because, well, first of all, anything Orrin Hatch and Leahy are for – they are the horrible IP sort of whores of the Senate, horrible, horrible.
01:10:37
They’re always bad on IP, so anything they’re in favor I’m against it. Anyway, I have a little summary on the C4SIF blog about that patent reform law. I think it’s called the America Invents Act. I mean they have these Orwellian propaganda names for their laws. So that’s kind of an overview of the legal landscape that we’re dealing with here.
01:10:59
01:11:03
Let me just – I won’t go on to – let’s see. I’m on slide 17, 18. I will stop at slide 19. I won’t go there. I’ll save that for next time. But let me just quickly mention on the monopoly thing, I just want to make clear. I think I mentioned this already. The reason – Senate 23. I had it wrong. It’s not 32. It’s 23. First of all, some IP proponents get upset if you call patent and copyright monopolies.
01:11:36
Well, I mean, of course they are monopolies. They might not give you monopoly power in every case that would count as monopoly power under the antitrust law, but they are little monopolies, privileges. I mean they were called the Statute of Monopolies originally. This was never originally called intellectual property, and it wasn’t regarded as intellectual property. It was regarded as a policy tool by the state to reach a certain desired end, to encourage innovation or whatever. It was called property later on when people started attacking it. So they were saying, oh no, this is a property right. So they were trying to lump it in with other property rights that people respected.
01:12:19
This – I mean, Fritz Machlup concluded this in the ‘50s. He said that those who started using the word property connected with inventions had a very definite purpose in mind. They wanted to substitute a word with a respectable connotation of property for a word that had an unpleasant ring: privilege or monopoly as well.
01:12:39
Let me go to slide 18 now. Anyway, that’s just more of the same from Machlup. So I could go on further. I’ll tell you what. I will pause here and see if anyone has any questions. I’d be happy to answer questions for the remainder of the time, and if there are no questions, I could cover another slide or two. Any questions? Any comments? Anyone want to discuss anything?
01:13:07
01:13:20
Jock is reading Boldrin and Levine. It’s a great book. I mean it’s – the pharmaceutical chapter is really good because it just hits tons of great empirical analysis of the traditional arguments for pharmaceutical patents. Now, I just – and Boldrin and Levine, by the way, they’re great. The book is wonderful. But they’re not – actually, they’ve become more libertarian and even more anti-IP since this book has been out. I’ve been blogging on his blog, AgainstMonopoly.org, on Levine’s blog, and – but there’s a part in there where they say something like they would prefer – instead of a patent, they would prefer the government to subsidize federal research or something like that.
01:14:08
So they sort of – they’re not pure libertarians, but they’re pretty damn good. Jock says I don’t know how the world still functions. I don’t – you mean with all these laws? I think it gums up the works. I mean I’ve done estimates. I think that the patent system alone in the US alone has got to cost at least $40-50 billion of just pure damage, pure deadweight. I think it’s really more than that. This whole IP mentality affects everything.
01:14:35
In fact, if you think about it, I know these guys – some libertarians like Alex Tabarrok and also Bernie Sanders who’s a socialist senator from Vermont I think, and Joseph Stiglitz, a Nobel Prize winner and I think James Madison way back in 1789. They proposed a system where you take tax dollars; put it into a big pot. You appoint a panel of government and industry experts, and they pick winners, the most innovative designs of the year, and they give them rewards to incentivize innovation.
01:15:15
Tabarrok and others have pushed for a 30 to I think $80 billion pot of money just for medical innovation. And now, to their credit, they want to replace the patent system, and I think this might be an improvement It might be a more honest improvement, but my point here is that they want to have $80 billion of tax dollars, $80 billion of tax money every year go to just medical innovators. Now, if you expand that to all patents, I don’t know what it would have to be $500 billion a year?
01:15:55
So that would be the surface cost of this system. Now, presumably you’d get some innovation out of it. What’s it worth? Is it worth a trillion? Is it worth 200 million, a billion? I don’t know. But that’s some idea of the cost of the system. To my mind, that’s a proxy for the cost of the patent system, and I think it’s clearly in the tens or hundreds of billions of dollars every year.
01:16:20
01:16:24
Matt says I was thinking after its expiration date an item that was considered property is property no longer. Well, this is why I think it’s actually not correct to call these property. They’re – the originators of the system, the founding fathers, did not think of it as property. It was just a policy tool. Even John Locke, who was somewhat in favor of this idea, he didn’t regard it as property.
01:16:53
Of course, it’s not a natural right. It’s not natural property if it expires. I mean that’s not what natural rights do. To the contrary, natural rights tend to be inalienable. Karl says incenting innovation is like the scientific grants for pure research. I agree. We actually already have this system in place in a way. We have federal innovation research, and I would encourage anyone interested in that look up the work of Terence Kealey, K-E-A-L-E-Y.
01:17:27
In fact, he’s on the advisory panel of my C4SIF, so just look on C4SIF.org, and he’s got a book called Sex, Science, and Profit. It’s wonderful. He’s got a great chapter. He spoke at the – Hoppe’s Property and Freedom Society last year right after I did. I spoke on patents, and he spoke on government intervention and research, and it was a perfectly complementary talk. It was great, and he shows how they totally pervert it and distort it.
01:17:52
01:17:57
Danny says – Danny Gagne. By the way, Danny, where do you – just curious, I used to know a guy named Paul Gagne. He was a patent lawyer – well, no, actually he wasn’t a patent lawyer. He was a trademark lawyer in Philadelphia, Paul Gagne. I don’t know if you are related to him or know him. Anyway, okay. Is the antidilution clause in trademark law? The reason so many films, videos, and photographs blur out the logos of other companies so they don’t besmirch the reputation of the company.
01:18:26
You know what? I actually do not know. I’ve wondered that myself. I’m not really an entertainment lawyer, so I haven’t really gotten into the nitty gritty of that. I’ve had theories about why they do it, but I’m actually not sure. But I mean I – the theory I was thinking was these companies wouldn’t pay for product placement. So basically they go to all these companies. They say we’re going to – we’ll place your product in our movie, but you’ve got to pay us $500,000 or whatever. And if you don’t do it, we’re going to blur your logo out. It will not show. That’s our policy.
01:19:03
01:19:09
So – are you laughing at me, baby or – okay, the book? Okay. So I think that’s probably why they do it. I don’t think that – so here’s the way trademark works. The dilution thing would have more to do with a similar mark that is too close or if you use the mark in association with something that tarnishes it. I don’t think it’s antidilution, and I don’t think it’s a trademark violation either. It’s like, for example, in the US anyway, the US law is a little bit different. My understanding is in Europe – most European countries it’s a violation of trademark right for a competitor to show his competitor’s trademark.
01:19:52
Whereas in the US, so-called comparison ads are perfectly permissible because – so let’s say you can have – a Coca-Cola ad could say we did a taste test between Pepsi and Coke. And the results show that people prefer Coca-Cola to PepsiCola. And they could even have a – show the Pepsi can because they’re not pretending that they are Pepsi. They’re not confusing anyone about the source of goods. They do that – they sometimes say brand X, but they don’t have to in the US. But I believe they have to in Europe. Also, it’s – patent and copyright are different than trademark.
01:20:30
Trademark, for example, it is not a violation of trademark to use someone’s trademark in a truthful way. So, for example, take the game Trivial Pursuit. I think this is a good example. There’s a trademark on Trivial Pursuit I’m sure. There’s probably a little R by it. By the way, you’ll see TM and R in parentheses or in a circle. TM means you’re claiming trademark in it, which you don’t have to do to claim trademark, but it helps to put people on notice.
01:21:00
If you file an application to register it as a federal trademark, when it’s finally issued, which takes, I don’t know, six months, then it’s registered. So you put the R. It means registered trademark. If it’s service mark, you might put SM instead of TM. It means it’s service mark. It’s the same idea. Anyway, I’ll wrap up in two minutes here.
01:21:23
I do want to end close to on time because I know it’s late for some people. But let me finish my comment, which was if I made a set of cards with my own questions that could work with Trivial Pursuit, I can sell them and I could put on the box here’s a set of cards that will – that area compatible with Trivial Pursuit, as long as I don’t use their sort of design and try to fool people into thinking that I’m authorized by that maker. I mean I might put my company’s name on there and say Kinsella Enterprises. Here’s a set of improved Trivial Pursuit cards. So you can mention a trademark as long as you’re telling the truth, and if it’s in such a case.
01:22:09
Any more – Gwen, you posted a link to greeking. Let me see what that – I don’t know what greeking is. Is this the brand X idea? Let’s see what this is here. Oh, I don’t know what that is. Oh obscuring portions of the – okay, blurring out things, the blurring of logos. Oh, one more thing. I think they also – you’ll notice in movies and TV shows they blur out – well, they use fake phone numbers like it’s always 555, or if they show – on 60 Minutes or a news show, if they show someone’s – a court document or something with names, they’ll quite often blur the names out.
01:22:57
I think that’s just out of general respect for children or for people’s privacy. You don’t want people’s social security numbers giving up there or things like that or their address or their phone number. And they choose fake phone numbers because they don’t want to accidentally choose someone’s phone number and have that person be harassed and maybe sue the company and whatever, be pestered. So I think they do those for other reasons, but I think they blur the logos out just so they don’t advertise for someone who’s not paying for it. I mean that’s my guess, but I don’t know if you need permission to show – like if you wanted to show the logo, I don’t know if you permission.
01:23:30
Now, copyright is a different story. There are some outrageous cases where you’ll take a photograph and someone is standing – of your friend and they’re standing in front of a building that – or an architectural work or a sculpture or even a painting. And then the owner of that artwork or that building even will say that you can’t publish this photograph without our permission because this big building in the middle of the square here that is a federal building or whatever is copyrighted. So copyright can cause problems with documentaries and with photographs and things like that, but trademark I’m actually not sure about, sorry.
01:24:12
01:24:19
Well, why don’t we end here unless anyone has any more questions? I’d be happy to answer a few more, but I know that 90 minutes is pushing it for some people, especially the listeners in their cars. Any more final short questions? Otherwise, we can pick it up next Tuesday. Okay, good. Well, good night, everybody. Jock, congrats on staying up late again, impressive. Enjoyed it, guys, and enjoyed the questions, and I will see you next Tuesday. Feel free to email questions or post them on the forum in the meantime.
01:25:00
Podcast (kinsella-on-liberty): Play in new window | Download (Duration: 1:25:05 — 116.9MB)
Kinsella on Liberty Podcast, Episode 173.
This is the second of six lectures of my 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics” (originally presented Tuesdays, Mar. 22-April 26, 2011). The first lecture may be found in KOL172.
GROK SHOWNOTES: In this second lecture of the 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics,” libertarian patent attorney Stephan Kinsella delves into the sources, justifications, and types of intellectual property (IP), building on the historical and legal foundations covered in Lecture 1 (0:00-10:00). Kinsella outlines the main justifications for IP—utilitarian, labor/desert, personality, and natural rights—critiquing each through a libertarian lens rooted in Austrian economics, arguing that IP creates artificial scarcity on non-scarce ideas, violating property rights (10:01-25:00). He uses examples like a cake recipe to illustrate that knowledge guides action without needing ownership and examines the legal distinctions between patents, copyrights, trademarks, and trade secrets, emphasizing their reliance on state enforcement (25:01-40:00). Kinsella’s analysis frames IP as a statist intervention that distorts markets and stifles innovation.
Youtube and slides for this lecture are provided below. The course and other matters are discussed in further detail at KOL172. The “suggested readings” for the entire course are provided in the notes for KOL172.
Transcript and Grok Detailed Summary below.
Lecture 2: OVERVIEW OF JUSTIFICATIONS FOR IP; PROPERTY, SCARCITY, AND IDEAS
SUGGESTED READING MATERIAL: See the notes for KOL172.
❧
Transcript
Rethinking Intellectual Property: History, Theory, and Economics—Lecture 2: Overview of Justifications for IP; Property, Scarcity, and Ideas
Stephan Kinsella
Mises Academy, March 29, 2011
00:00:01
STEPHAN KINSELLA: … check today. If there are any that I’ve missed, please alert me, and we can talk about them later, or I’ll answer them after the class. Okay, so I think my name is showing up correctly now because I’m just another panelist with you guys, and Danny is Mises Institute. So Danny, can you hear me? Are we good to go? Okay, I uploaded the slide myself. That worked okay.
00:00:29
Okay, good evening everybody, glad to be back, and let’s resume with the talk, and we’re going to pick up where we left off if I can find – there we go. Okay, so this week I’m going to do something I did last class, which worked out pretty good. I mean I have this blog at – it’s C4SIF. Let me see if I can turn on the laser pointer actually. I had trouble last time. It’s not going to let me do it. Never mind. I have a blog or a site called C4SIF.org, and I post regularly various IP-related items.
00:01:12
There’s probably one about every maybe two or three a day. There’s so many things to blog about, so that’s a good way to keep up with what’s going on. And so in the beginning of each class, I have an Outrages of the Week, and I just kind of go through quickly some of the things I posted in the last week or two of the course actually. It’s hard to keep up because there’s so many things going on. So anyway, like I said, it’s C4SIF.org, which is a think tank I started, or really just kind of a private research foundation I started last year. It means Center for the Study of Innovative Freedom. But basically it’s about getting rid of IP law so we have innovative freedom.
00:01:54
The New Grave Robbers – I’ll just go through a few of these right here. The New Grave Robbers is about – let me see if I can turn on this laser pointer somehow. It’s not letting me do it. I’m not sure where it is on here. Anyway, so the New Grave Robbers is about a type of IP right called the right of publicity, which is – it’s called grave robbers because it’s lasting past the death of the famous person in some American states. And it’s being used more and more. It’s called a right of publicity or an identity right, and one recent case is the Tolkien estate. It’s trying to block a novel that uses Tolkien as a character. So this could threaten historical fiction, so this is an example of one type of IP law can actually restrict free speech and free expression.
00:02:52
Here’s a blog post about recent IP cartel advances. This was – a lot of these are reposts of other people’s blogs. But this is about how in Europe there’s steam for motion against agitation for changing the law and adding new IP rights and strengthening IP law even in Sweden and in Italy and in France. So you can browse that later. We have a lot to go through, so I’m just going to go through some of these quickly. You can read these blogs. These are all linked, by the way, on the slides.
00:03:27
Owning language, using trademark law, a lot of companies are fighting over the use of words. This has always been done, but it seems to be an increasing problem. Right now, we have Apple actually claiming the right to the term App Store, which is ridiculous because Amazon actually has the Amazon App Store up now. And so Apple is – and Amazon may be in litigation.
00:03:53
There’s a new white paper up, and it’s kind of funny. It’s called “It Will Be Awesome If They Don’t Screw It Up: 3D Printing, Intellectual Property, and the Fight Over the Next Great Disruptive Technology.” 3D printing is going to be some people think an amazing new thing where you can basically have – you can have manufactured 3-dimensional objects using a recipe. And so of course if you have intellectual property that interferes with this, you could stop people from making things in their own houses like making screws or shades or widgets or gadgets.
00:04:30
00:04:34
I found a quote from 1986 which I liked, an economist named George Priest in a law journal. “[I]n the current state of knowledge economists know almost nothing about the effect on social welfare of the patent system or of other systems of intellectual property.” So we have this system where, even today, we still – economists have still yet not been able to verify the claims of empiricists or the advocates of the IP system, and we’ll get to that later in today’s course or maybe next course in detail.
00:05:12
There is a new patent reform act. There’s been one pending for the last five or ten years, but finally it looks like it’s attaining steam, and maybe about to pass. The Senate passed at like 95-5. By the way, Rand Paul did vote for it, which is disappointing. But anyway, so there’s a new patent reform act called the America Invents Act, and I did a blog post just going through the provisions, showing how they’re not a big deal or they’re a negative.
00:05:35
00:06:03
Jock says did Sanders? Jock, are you talking to me? I’m not sure what that question is about. Did Sanders – I don’t know what that means. There’s a recent lawsuit by the RI – or the recording industry – oh, I don’t know. It was 95-5. I didn’t look to see how everyone voted. Jock says did Bernie Sanders from Vermont vote for that law? I don’t know. That’s a good question. In my post, I tried to have a link to – I tried to have a link to the intersite, which shows the status of this vote. So just check on that – click on that link there that I have there, and maybe you could find out, but it was 95-5, so only a few people held out. I saw the people who voted – didn’t vote for it, and I don’t remember seeing his name. It’s like three Democrats, two Republicans if I recall.
00:06:57
But there’s a suit where the RIAAA is suing Lime Wire for file sharing, and they have done the math. Using the statutory damages in the copyright statute, and they added it up, multiplying it by all the different sharings of each files like 10,000 files being shared many times. And they’ve calculated that they’re owed $75 trillion of damages from Lime Wire. This is not a joke, $75 trillion.
00:07:24
I have a blog post about an old patent from 1924 where they’re warning people you cannot use your airplane to write words in the sky because you violate our patent. That’s kind of funny. I also have a trademark about – I mean a post about trademark absurdities with two cases here in Houston. That’s me in front of this pub called the Velvet Melvin, which used to be called the Velvet Elvis because they had a painting of that velvet Elvis painting on the inside or the print or whatever on the inside of the pub, and that was their name. And then the Elvis Presley estate sued them and shut them down actually, so they finally reopened and renamed themselves the Velvet Melvin, which is ridiculous, but they had to do that. And then there’s the famous Taco Cabana and Two Pesos suit, which I discuss briefly in that post.
00:08:13
Here’s one. There’s an Asian-American band up in Portland called The Slants, and they applied for a trademark, and the trademark office denied it on the grounds that the trademark – or the name of their band is racist. So these are Asian Americans, and they call themselves The Slants for obvious reasons, but anyway. I have a sign down here, Fat Ho Burgers. That’s actually from a blog post about this actual burger stand called Fat Ho Burgers, so I guess they would have trouble too.
00:08:49
One more thing, Howard Hughes, the famous eccentric billionaire, actually filed a – he purchased a bunch of companies and copyrights under the name of some other companies that he owned, copying – and he purchased copyrights to articles written about him that were used for this unauthorized biography. And then he sued the publisher of the biography for copyright infringement, so he was using copyright to stop people from commenting about him. I’ll skip this one for now to try to save a little time.
00:09:25
So where had we left off? We were talking about the types of IP—patent, copyright, trademark, trade secret, and other types of IP and what the focus of the course is going to be. And today’s lecture will be on – we’ll continue talking about law. I’ll elaborate some more things about law. And then we’re going to go into the history of the patent and the copyright system.
00:09:48
00:09:52
So I didn’t mention last time, let me explain one thing. So I mentioned several types of IP—patent, copyright, trademark, trade secret, boat-hole designs, mask work protection, publicity rights, reputation rights, moral rights. But we’re going to focus in this course on patent and copyright. These are the two big ones that cause the most problem. These are the two that are the most dangerous.
00:10:22
Now, it’s hard to say which one’s worse. I’m a patent attorney. I’ve done copyright as well. It’s hard to say which one is worse. I tend to think patent is worse in some ways, but then patents only last 17 or so years. Now, there are – as I mentioned, there are reputation rights and related rights like publicity and media rights and identity rights, which we just talked about, which are also un-libertarian in my view, which I’ll discuss why later.
00:10:48
Many aspects of trademark law are un-libertarian in my view. Let me just give a quick overview of the problem with trademark law. The only good thing about trademark law could be done by just pure fraud law, and that is if one company defrauds a customer by misrepresenting the goods he’s selling for them. So let’s say I sell you a fake Rolex watch for $10,000, and I represent it as a genuine Rolex. I’ve defrauded you, and you can sue me. Under the current law, Rolex can sue me for trademark infringement. They’re the plaintiff, not the defrauded customer, which makes no sense. But in the real case, a Rolex watch is sold for $20, and it’s a fake Rolex, and the customer knows it, and he’s not defrauded. And yet Rolex can still sue the seller even though there’s no fraud, so that’s the other problem with trademark.
00:11:44
There are also un-libertarian aspects of trade secret law, which we’ll get to later. But the main focus will be on patent and copyright because once you understand the problems with these, it’s easy to figure out how to view the sort of more junior type of IP rights. Oh, by the way, I mentioned earlier EDGAR. I was thinking wrong. EDGAR is the online database for securities filings, SEC filings with the Securities and Exchange Commission. What I meant was THOMAS. If you search T-H-O-M-A-S, which stands for Thomas Jefferson, THOMAS is the big database for congressional bills and votes and things like this. So that’s where you can check and find out who voted for that America Invents Act and find out whether Bernie Sanders from Vermont voted for it.
00:12:40
00:12:46
Okay, so let’s continue with patent rights. And by the way, I just want to mention something – okay Jock is posting here who voted against it I guess. Sanders is not there, so I suppose Sanders voted for it, which is sad. Now, some people think that the reform act improves a little bit. If you look at my summary of the provisions, I don’t think it’s an improvement. Anything that’s improved is minor, and there are some negative parts to it. In any case, let’s move on.
00:13:17
I call it intellectual property. That’s the American terminology, or IP. It’s typically called industrial property outside of the US. Although there really is no such thing as intellectual property as a type of right, that is sort of a descriptive term used to cover many types of rights: patents, copyright, trademarks, trade secrets, etc. Now, on patents, it’s important to remember, and I think I emphasized it last time, and if anyone has any questions about this, please ask me because it’s important to understand this just to understand how patents work.
00:13:48
Patent is not the right to practice your claimed invention. It’s only the right to stop other people from practicing it because it’s possible that by your practicing your invention, you would violate someone else’s patent. Patents can overlap. So to get a patent, it needs to be new on the basis of a prior art. It doesn’t have to not infringe someone else’s patent. It could infringe a patent, and the chair example I gave last time is an example of that.
00:14:22
Someone invents a stool, and they have a patent on a stool, which is like a seat with some legs attached to it. And then someone else comes up with this chair, which is a stool with a seat attached to the back of the – I’m sorry, with a back attached to the seat. And the – you could get a patent on the chair because it would be novel and non-obvious possibly. But you could not – you couldn’t use it because it would still be a stool, because it would still have a seat and legs, so it’s a type of stool. So that’s the example. That’s the difference.
00:14:58
So there are two types of sort of publications or things that matter for a patent. One is publications like any article or any knowledge that’s publicized in a way like a magazine article. It can be what’s called prior art, or a patent application itself. Even if it’s expired, like even a 50-year-old patent application published in the patent office records, it could serve as prior art, and you wouldn’t be able to get a new patent if it’s already described in one of those – if the examiner at the patent office finds it that is. But when you infringe a patent, it has to be a live, existing patent, one that does not expire.
00:15:42
00:15:49
Now, for patents, let’s talk about remedies. When you have a patent and someone makes, uses, sells, or exports – I’m sorry, imports a device or uses a method that is covered by the claims of your patent, then one of the remedies you can get is you can go to the court and you can ask that court – well, you could sue for money, money damages. But you can also ask the court to grant an injunction, which is an order by the court telling the infringer you must stop doing this.
00:16:22
Now, if you think about it, a patent is a monopoly license granted to an applicant by the government. So the government claims the right to break that grant if they want to. That’s called a compulsory license. So the government claims the right if they want to, to issue to someone else a license to make your patent, and then they’ll pay you reasonable damages like it’s compensation. So they treat it like a property right even though the have the right. They don’t have to grant you patent rights. So – and in fact, they threaten to do this in the anthrax/Cipro case about ten years ago. If you remember, there was an anthrax scare here in the US. And there was only one maker who was making the Cipro drug, and they couldn’t make enough.
00:17:11
They were charging a lot for it. And Congress or the patent office, whoever is in charge of that, the Commerce Department I guess threatened to issue a compulsory license to authorize other people to make this drug, but they didn’t have to because the maker of Cipro lowered their price and made more. And the funny thing is, sometimes you’ll have advocates of IP – they will bristle with outrage if you talk about the government issuing a compulsory license.
00:17:44
But all that means is the government is kind of taking back a monopoly privilege grant that they gave the patentee in the first place. It’s kind of funny outrage about the government taking back a monopoly grant that they gave someone. It would be like if they authorized someone in a town. You’re the only guy who can make shoes, and then the government one day says, oh, we’re going to take away that. We’re going to stop enforcing that and let other people make shoes, and someone would accuse the government of infringing this guy’s property right to be the only one to make shoes in a given town. That’s what it’s about.
00:18:17
By the way, some libertarians actually – or some people actually call for either supplementing the patent system or replacing it with a prize system or a bonus system. So instead of granting people these monopoly rights and letting them use it to extort higher prices out of customers or extort damages out of the competition or to reduce competition with a threat of a lawsuit, what they say is instead of doing that, you ought to have the government steal money from taxpayers, put it a big fund like someone said, like $80 billion. Take $80 billion from the taxpayers, put it in a – and use that every year with a – it should be handed out to people that come up with worthwhile inventions like in the medical industry, something like that. It would be sort of like a private Nobel – I mean like a government Nobel Prize or a government MacArthur Prize.
00:19:16
We kind of have that already with medical – I mean with government funding of R&D. The government takes money and funds it for R&D and military contractors all the time already. Big science is already heavily corrupted by a similar idea. But this idea is you appoint a panel of government-chosen experts who would decide who’s going to get – I give you a million dollars. I give you half a million dollars. I give you $10,000. I give you $10 million here and there.
00:19:43
I mean this is advocated as far back as 1787, maybe earlier as far as I know, but James Madison in the US advocated in 1787. Michael Polanyi advocated in 1944. This was actually done in Russia in 1834 and the Soviet Union in 1941. So you can see it’s a really free-market idea to do this, right? It has been advocated by Joseph Stiglitz, who is an alleged quasi-free market economist and Nobel Prize winner I believe, Bernie Sanders, the socialist from Vermont that Jock just mentioned, and the libertarian, quasi-Austrian, Alexander Tabarrok.
00:20:23
Anyway, let’s skip down to the next slide now. There is something in patent law, and there’s actually something similar in copyright law. It’s called the exhaustion doctrine. I had this in here because in my last class in November last year, a student asked this question, and I thought it fit in nicely here. They asked about what the exhaustion doctrine was about. The idea here is that if you sell a patented item, then you’re giving an implicit license to the buyer to use it.
00:20:58
In other words, you can’t sell a new mousetrap that you have patented to someone and then sue that person for violating your patent. You’ve basically given them permission to use your patent by selling them the device. Now, then if he resells it to a second customer down the line, you can’t sue him either because the idea is that you’ve exhausted your right to exploit your monopoly already.
00:21:19
Now, I won’t go into the details of this, but you can read this later if you’d like, this Quanta v. LG Electronics case that was an intel sort of dispute. It involved intricacies of this exhaustion doctrine. There’s a similar idea in copyright by the way. I don’t think I have this in any of my slides, so let me mention here.
00:21:39
I have a blog post up. If you search on my C4SIF.org blog for the Omega, O-M-E-G-A-A – I’m sorry, O-M-E-G-A case, it’s about the exhaustion doctrine too. And I think it’s called “Leveraging IP.” So in copyright, there’s a similar doctrine, and what happened was there was Omega was selling their watches, which are apparently very expensive. They sell them at a higher price in the US than in some other countries, so you have these guys. They went down to, I don’t know, Argentina or Brazil or somewhere, and they would buy the watches legitimately, legally down in Argentina and for a lower price and then sell them back in the US for a higher price.
00:22:22
Jock, you found it. Thank you. It’s a Mises blog post. It’s also on C4SIF, but thank you for finding that. And Omega doesn’t like it, so they like to control their prices in their markets, which is their right. But they couldn’t stop it. They couldn’t say it was any kind of violation of any kind of IP right because it was a legitimate watch. There was no fraud being alleged. There was no trademark violation. So what Omega did was they designed this special little globe logo or something that’s copyrightable. So basically they designed an original mark, and they put it on the front of the watch or the back of the watch or something, which becomes part of the design of the watch.
00:23:01
And so now there’s a copyright on there, so then they sue this guy for copyright infringement. Well, you would think that the exhaustion doctrine would apply to that, but in a sort of intricacy of the copyright law, the court ruled that – well, it’s called the first-sale doctrine in copyright law, the first-sale doctrine. That means that whoever you sell it to first, then they can resell it and they’re not guilty of copyright infringement.
00:23:30
This is why libraries can re-loan books, and this is why there’s a used book market, and it’s not called a copyright infringement when you sell that book. But the court said that the first sale has to occur in the US for that to be triggered. So it’s ridiculous but – and anyway – and the danger of this ruling is that some libraries now are wondering if some of the books they have on their shelves that they purchased from another country are now not covered by the first-sale doctrine anymore. So maybe they can’t resell them or even loan these books out. Maybe they’re infringing copyright as libraries. I don’t know if anything has developed about that.
00:24:09
Another sort of twist on this idea in the patent area is this idea. You guys may have heard of the re-importation issue. That is – so drugs are – pharmaceuticals are sold in the US for a high markup if they’re patented let’s say. They’re very expensive. Now – so Bayer or some company might sell in the US for $1000, and they might sell it in Canada for $300 because the Canadian government imposes price controls because they’re more – they’re not quite as free market in some ways. And then so you’ll have the drug be re-imported back to the US because it’s the same drug that’s sold here, and there’s no patent infringement because of the exhaustion doctrine.
00:25:00
And this first-sale idea of copyright law doesn’t apply here, so it actually is not a patent infringement. But now you have the FDA problem. So in other words, the FDA said, well, we haven’t approved that one, although it’s the same drug.
00:25:11
We’ve only approved the one sold in the US, so you have all these patent advocates saying the FDA should crack down on this re-importation of drugs. And so Congress was poised to pass this drug re-importation act, and there was controversy about that. But a lot of the free market advocates who are in favor of patents like some people at Cato like, if I recall, Richard Epstein and few other people over there actually were opposed to the right to import a drug from, let’s say, Canada that had been sold over there to re-import it back to the US because that would undermine the patentee’s right to charge a higher price here. So basically you have the advocacy of patent rights, of free market guys corrupting their free market principles.
00:26:01
And I have some posts on this. I think they are on the Lew Rockwell site, and if you search for “Cato Tugs Stray Back Onto the Reservation” if I recall, I think you will find that too. I don’t think this has anything to do with TRIPS, Jock. It was just lobbying in the US. Jock asked whether this was related to the TRIPS, T-R-I-P-S, in all caps, agreement. This is the trade-related aspects of intellectual property.
00:26:29
No, this is just lobbying to change the law or to force the FDA to go ahead and permit drugs to be re-imported if it was the same drug by the same manufacturer that was already approved over here go ahead and let it in. And then you had patent advocates fighting against it, and then you have patent rights. And they’re saying, well, the fact that Canada has a socialist economy and they’re having price controls shouldn’t penalize Bayer drugs or whatever over here in the US. But, you know, Bayer sold this voluntarily over there. They’re selling it presumably for a profit. And if the buyer wants to resell it to the US, it’s hard to see how that violates their property rights. Okay, that’s an interesting topic, but we spent a lot of time on it. Let’s move on.
00:27:14
Okay, like I mentioned, the first-sale doctrine is the analog of the exhaustion doctrine in copyright law. I’ve already talked about this, so I will skip slide 14. I do have the Omega – I already have the Omega case here, but I’ve got you guys searching for things I already have on here. I forgot what I had on here. And so I have the numbers wrong. So Costco bought the Omega Seamaster watch, so it was Costco actually, the big retailer here in the US, like they’re a Walmart-type store or a Sam’s Club-type store. So it sold for $1300 instead of $2000 in Paraguay, so it was $700 cheaper. So they bought it there, and they resold it here. So they put a globe on it, so anyway I’ve already described this case. So it’s an interesting case.
00:28:03
00:28:09
And on this page here, on slide 16, I have a quote from the Wall Street Journal talking about how this decision could affect public libraries because of this first-sale doctrine idea. I’m going to skip some of this stuff on the top here of slide 17. It’s a little bit arcane stuff about how the actual Quanta case worked out, so don’t worry about that too much. It was just one application of the exhaustion doctrine, but I think you can see from this that these monopoly privileges—copyright and patent—granted by the state, you can see how they lead to infringement on property and contract rights.
00:28:55
And by the way, one other interesting point, remember how I said that Omega, in order to stop arbitrage, fresh arbitrage, in order to stop Costco from buying one of their watches in Paraguay and reselling it in the US, in order to stop that, which they couldn’t do legally otherwise, they put a design on their watch, which they probably otherwise wouldn’t have done just so they could take advantage of the copyright law and sort of hook into copyright law.
00:29:26
Now, forget about the ethics of this, of their action. I mean they’re exploiting state IP laws to control their price basically. But the point is they actually changed their design in response to IP law. So you could see how IP law in this case is distorting and maybe corrupting, you might say, culture and fashion. And you can also see this in the case of the fashion industry like Gucci or Louis Vuitton or Chanel purses and shoes and dresses and jewelry. They have their logos plastered all over these purses and things.
00:30:16
Now, we’re used to this now, but why do they do that? They do that because there is no copyright in fashion. So you could knock off a Louis Vuitton purse. You could knock off a Chanel dress. Maybe I’m using the wrong fashion names, but I’m not into high fashion. But you could knock it off. In fact, this is done all the time. So what these guys do is they start embedding their trademarks into their products as part of the design so that now they can accuse a knockoff artist of trademark infringement.
00:30:48
Now, if trademark law also wasn’t available in the same way that it’s available now, then you could see that they may never have integrated their trademark or their logo into their fashion design. That’s sort of a weird thing. It’s like Costco – I’m sorry. It’s like Omega adding the globe design to their watch, not for aesthetic reasons but just to use copyright law to sue people so they can control their price. So we have a whole distortion of the culture industry just because of the existence of IP law.
00:31:23
Now, in addition to patent and copyright and trademark and trade secret, there’s a type of law centered around cause of action for defamation, and you can think of this as reputation rights. Now, this is not traditionally called intellectual property, but I think it should be included as IP because it’s based on the same kind of mentality that you are entitled to have a property right in some sort of immaterial or intangible thing that has value that you created by your efforts even though it’s not an actual material or scarce resource that you own.
00:32:12
In fact, it’s just what other people think about you, so it’s kind of strange that you have a right to what other people are going to think about you. Now, defamation – there are two types of defamation. One is called libel. One is called slander, so defamation, libel, and slander. These terms are used sort of interchangeably and sometimes improperly by people. To keep them straight, think of libel as written because they both have an I in them. That’s how – that’s a little device I use. Libel and written both have an I.
00:32:44
Slander is oral, so it’s when you say something bad about something that is untrue and that hurts their reputation. And when you communicate it or publicize it, it’s called. By the way, the word oral is also misused by people, by laymen, and even by lawyers. They’ll say a written agreement or an – is that an – they’ll say is that a verbal agreement or a written agreement? Well, all agreements are verbal. Well, actually, some are not. Like if I silently hand you a dollar for a candy bar that’s not verbal at all. Verbal just means words, like verbs. Think of the word verb. So whether you write it or speak it, it’s still verbal. So even a written agreement is verbal. People use the word verbal as synonym for oral. This is just a little thing of mine that – a myth to keep up these things, and people misuse words and it bugs me.
00:33:36
So I’m just letting you guys know be careful. Use the word oral if you mean spoken agreement, like, say oral agreement, written agreement. Don’t say verbal agreement. Anyway, it’s a – defamation is some kind of statement published to someone else, made to someone else that damages someone’s reputation.
00:33:56
There are some details about defamation law. Number one, it has to be false, so truth is usually a defense, at least in the US. There’s a distinction between fact and opinion. If you just say in my opinion that movie was bad, you can’t be sued for defamation usually. But if you say the director of that movie took a bribe to make it or something like that, you might be sued.
00:34:26
Now, of course the state usually exempts their own people. Judges and prosecutors and legislators and presidents, when they make statements officially from the floor of their office or whatever, it’s called parliamentary privilege or other terms are used for it. So of course the government makes these laws and then exempts themselves from them. Now, a public figure, you need to show actual malice. There’s a higher standard, at least in the US.
00:34:53
There’s a famous – I think New York Times v. Sullivan case, New York Times v. Sullivan if any of you are interested, which established that back in the ‘70s or ‘60s I want to say. So if you say something about Madonna or Arnold Schwarzenegger, someone really famous, it’s harder for them to sue you for defamation because you have to show the statement as malicious. In other words, people that are public figures, they’re sort of open game for criticism.
00:35:28
Now, there are other types of things. There’s saying something that puts someone in a false light is related to – similar to reputation rights. There’s invasion of privacy. That’s publicly revealing a private fact. Of course there’s blackmail, which libertarians don’t think should be a crime. And there’s this publicity right, which I mentioned earlier. So you have a variety of passive legal rights that are related to you. They’re reputation rights or other rights to IP.
00:35:59
Now, there’s also domain name issues. This was established, I don’t know, 10, 15 years ago. There’s a domain name dispute resolution procedure, and basically if someone registers a domain, so let’s say you register the name tomcruise.com. Tom Cruise may be able to use this UDRP procedure to get the domain from you even if you’re not infringing. It’s – so it’s like – it’s considered to be a sort of tech version of trademark infringement even if it’s not technically counted as trademark infringement.
00:36:37
So there’s elements here under the policy. This is I think an international policy by the way. I think there’s different countries you can sue in. I think Czech Republic is one, and actually I think they’re done online, but there are different censors for this. But the domain name has to be identical or confusingly similar to the complainant’s trademark. The registrant has no legitimate interest in the name, and they registered it in bad faith.
00:37:04
And the bad faith factor could be asking the – like if you approach Tom Cruise, hey, I registered tomcruise.com. Would you like to buy it from me? So that’s one factor for your bad faith. So if you don’t ask him for it, you have a better chance of not being sued by him, but then he can’t get the name from you, so it’s a weird system.
00:37:21
00:37:27
So let’s go on. By the way, the whole course will not about the nitty gritty of the IP law. I’m trying to go through in these first two lectures about what IP law is, so you have a good feel for the actual legal system so we’ll know how to analyze it, understand it, critique it, put it in its place, decide what parts are good and what parts are bad, etc. because you’ll find that a lot of people that comment on IP, especially the defenders of IP, often don’t know what they’re talking about. And libertarians and laymen often confuse and – different types of IP rights. They’ll say doesn’t Coca-Cola have a patent on their name?
00:38:06
No, that’s a trade secret. I’m sorry – that’s a trademark. Stephen King has a patent on his book. No, that’s copyright. Or some company has copyright on their drugs. No, that’s a patent. I mean they mix these things up all the time, and yet they’re in favor of them when obviously they don’t really know the differences and even understand how they work. So I think it’s important to see how they work to lay open the guts of these systems and to really understand how they’re a really clear example of an un-libertarian legislative bureaucracy basically.
00:38:45
Okay, there’s also something related to domains, the Anticybersquatting Consumer Protection Act. This is related to what I talked about before. This is a US law though, so it’s basically a way of stopping cybersquatting. And of course, this is partly uneconomic and partly based upon IP ideas because the IP aspect is that you can see from the fact that there’s a cause of action for registering or using or selling a name confusingly similar to a trademark or someone else. That’s basically trademark concepts. But the fact that it’s against squatting, and you know that a lot of cities or states have laws against scalping on tickets.
00:39:28
Of course there’s nothing wrong with scalping because it just means you buy the ticket and you sell it to someone else. It’s just arbitrage. I mean it makes – you only hurt people when you stop scalping and when you outlaw that type of action, which is a type of squatting in a way.
00:39:43
Okay, and again, there’s – Madonna is an example I have here. I do have an example. Robert De Niro – so Madonna used it, and so she was able to get madonna.com and some other names turned over to her under the UDRP procedure that I mentioned earlier. Robert De Niro, the famous actor, he claimed ownership of domain names that had Tribeca in them that had an content on the website related to film festivals because I guess he’s got some ownership with the Tribeca Film Festival. So he’s got some dispute with the owner of tribeca.net. I don’t know how it turned out.
00:40:22
Okay, now let’s turn to history. It’s 8:48 my time. Before we go on about the history of the IP system, and primarily I’m going to talk about patent and copyright, does anyone have any questions at this point about the actual types of IP and the legal systems themselves? Because I’d be happy to pause here and to address any questions.
00:40:53
00:41:01
So Matt asks is DRM legal? In parentheses, you’re not allowed to resell digital media that you’ve purchased. Oh, you mean is it legal for the copyright holder who sells music to put DRM on it to prevent you from reselling digital media that you purchased? Well, I – well, let’s just clear the facts up here. So digital media – media usually means a physical media like a CD. I don’t think they’re – like a CD is usually not covered by DRM, right?
00:41:36
So if you own a CD, which is old technology I know, or an LP or a paperback book, those things are something physical that you’ve purchased and you can resell that under the first-sale doctrine. Now, I do think some software is sold in that form and is encoded or encrypted or disabled or something unless you have a lock. So basically there’s no – it’s not illegal to ever put DRM on something if you want to. That’s just like putting a lock on something. It’s not illegal. But the distinction here is in the law, there’s a distinction between a sale and a license.
00:42:20
A license is more like a lease, so when you buy a CD, you are buying the physical object, but you only have a license, which is permission, to use the music on it for noncommercial purposes. But you can sell that physical medium under the first-sale doctrine, but you couldn’t make a copy of it and sell the copy because you don’t own the content. You don’t own the copyrighted material on there. You only have a license to do it. You don’t have the ownership of it.
00:42:54
When you download, let’s say, movies or songs, or when you purchase software even on a disc I believe, usually the way the seller words is it that they’re granting you a license. So even if you buy a song for $0.99 from Apple’s iTunes store, you’re not really buying a song. You’re purchasing a license to that music. Even if it’s not DRM’d, and they’re not DRM’d anymore, you still don’t have the right to give a copy to someone else or sell a copy to someone else because you only have a license to it.
00:43:29
And because it’s not a physical medium that the first-sale doctrine would apply to, and anyway, the first-sale doctrine applies at the sales. So you don’t technically – you didn’t technically have a sale. You have a license. So there’s no first-sale doctrine. So no, you cannot – well, it’s a little fuzzy in the law right now.
00:43:49
There’s a company that was just started. I forgot what it was called, and they’re actually trying to come up with a model where, if you have a digital song that you bought or a movie, you can resell it to someone else. But I think there’s a system where it actually wipes it from your hard drive or something. Now, of course there’s no way to guarantee this, which just shows why all these property concepts, applying them to the realm of non-scarce things, makes almost no sense because these things can be copied over and over.
00:44:20
I mean let’s say I buy a CD, I believe in the US you have the right to make a backup copy of that CD or to rip it and to put the songs on your iPod let’s say. So that’s legal, okay? But if you then sell the CD and you keep the copy you made on your iPod, are you infringing copyright? Well, the sale of the CD is not an infringement because the first-sale doctrine. The copy on your iPod was already there, so you didn’t really copy it at a point in time when you didn’t have the right to do it. So are you grandfathered in? I mean I don’t really know what the answer to these things is. I don’t think anyone knows. It’s cloudy because these laws really are incoherent and make no sense.
00:45:02
00:45:06
Jock says you could use something like Bitcoin’s mechanism to pass on the digital media and lose the ability to use it yourself. Well, yeah, that’s the idea. Amazon has this already with the Kindle with this loaning your book for 14 days or two weeks or whatever to a friend. It disables it on your device, and then you get it back, and then this site I was talking about, this service, it was discussed recently on TWiL I think, This Week in Law or maybe This Week in Tech, one of the recent episodes.
00:45:34
Anyway, there’s a service that was trying to come up with a way to let you sell – resell your used – so-called used digital media, and I think it would have to find a way to disable it on your own computer, which is problematic. So the bottom line – DRM is legal. You can put DRM on anything as long as the person agrees to it. If it interferes with your ability to resell something, well, too bad.
00:46:03
Okay, any other questions before we go on to history?
00:46:08
00:46:17
Oh yeah, Gwendolyn asked a question. This is relevant to what we just talked about too. I have a blog post on my C4SIF in the last couple weeks about this topic. What she says is there’s talk of putting a limit on how many times an e-book can be leant in public libraries to, like, 12 lendings. I thought it was more than that, but it’s something like that, 20 or 30 or some small number, and then it would expire and then need to be repurchased from the library.
00:46:42
Yeah, they already talked about that, which of course they’re ridiculous. I mean books – libraries buy books now and they can loan them as many times as they want until the book falls apart. Well, digital media cannot fall apart, and this is what the sellers are saying. They’re saying, well, it’s unfair that these digital copies will last forever. So they’re trying to penalize you for the fact that it lasts forever. I mean it’s ridiculous, but there is talk about doing that. That’s correct. And of course the idea of lending an e-book makes no sense anyway.
00:47:11
I mean we’re trying to apply these models applicable to the world of physical scarce goods and material things and objects to the realm of things that can be copied forever and that last forever, and they can be perfectly duplicated easily in a second. It makes no sense.
00:47:29
00:47:36
Okay, so let’s go on now to the history of IP. Now, there’s something I sometimes call the Immaculate Conception of IP. By the way, it’s 8:55, and in five or ten minutes I’m going to take a five-minute break, and then we’ll resume. We may go to the end of the 90-minute period on the history part, so I want to cover everything so we don’t get farther behind. If we stay up on history then we’re good for the next lecture, and I could stay a little bit later for questions if anybody likes.
00:48:10
Okay, now, I call it the Immaculate Conception of IP based upon one of my favorite Rothbard articles called “Robert Nozick and the Immaculate Conception of the State.” Now, what Rothbard does is he criticizes Nozick’s Anarchy, State, and Utopia, which most people who haven’t read it assume is a radical libertarian book defending anarchy, but of course it’s not at all. It’s a somewhat libertarian book, but it’s – Anarchy, State, and Utopia basically is an attempt to justify the state.
00:48:44
It’s an attempt to show how the state – at least a minimal state, so Nozick was more advocating minarchy here. It was an attempt to show how the state could arise by a series of legitimate steps, and therefore, the state is not inherently illegitimate. Now, of course, even if he was right, which he’s not because there’s mistakes in his argument, the states we have didn’t arise that way. They – none of them arose by the steps that Nozick outlined that would be a possible way for a legitimate state to arise. And that’s what Rothbard critiques. So I’m going to – Jock says he doesn’t make any arguments, just assertions.
00:49:24
Well, I think you’re referring to his – the beginning of his book where he talks about – he’s going to just assume that we have rights. Right, he doesn’t. He never argues for rights. He just assumes. He takes it for granted that we have rights. I actually don’t have a problem with that too much. His problem is how he applies it. Anyway, these Rothbard quotes are good. “Beginning with the free-market anarchist state of nature, Nozick portrays the State as emerging, by an invisible hand process that violates no one’s rights, first as a dominant protective agency, then to an ‘ultraminimal state,’ and then finally to a minimal state. For every State where the facts are available – for every state where the facts are available originated by a process of violence, conquest, and exploitation: in short, in a manner which Nozick himself would have to admit violated individual rights.”
00:50:16
Now, I bring this up because there’s a similar romantic notion, a conventional account – I’m on slide 23 now – of how IP arose. And so if you ask anyone who has some familiarity with this, they’re typically in favor of it. But they would say, oh, it’s sort of this Saturday morning Schoolhouse Rock cartoon version, romanticized notion of the founding of America and how great civil government is. And a democratic government is wonderful, and our government is the best in the world, and we’re here to protect rights and blah, blah, blah, and the founding fathers are wonderful quasi-libertarians even though they owned slaves and conscripted people and taxed people and forced an illegal constitutional coup on the country.
00:51:02
And George Washington took his slaves’ teeth out to make his own false teeth, and all these heroes are really great. Anyway, so the conventional account is that – so the libertarian founding fathers of the country recognized this important natural right, and so they put it in the constitution. And that’s why Article I, Section 8, Clause 8 of the Constitution grants Congress the power to promote the progress of science and the useful arts by giving to authors and inventors limited monopolies on their inventions and works.
00:51:44
Now, just as a point of trivium, you might think that science is what patents are for promoting, and the useful arts is what copyrights are promoting because copyright is for the artistic area and promotes artistic works, creative works, original works. And patents protect inventions that are usually scientific in nature, something like that.
00:52:10
But that’s actually not correct. Science, back in the language of the late 1700s, had to do with knowledge. So that actually had to do with general knowledge including artistic knowledge, so that’s what they were talking about. Copyright was sort of the promotion of science. Useful arts was like artists. Think about artisans, practical guy that made shoe horns for horses and ironworks and craftsmen. The useful arts are inventions. Now, so basically understand this. Patent and copyright are constitutional in my view because there’s a clause in the Constitution granting Congress the authority to do it.
00:53:02
So the problem with copyright and patent is not that they’re not constitutional. They are constitutional, although you could argue that they actually do not promote the progress of science and the useful arts because they actually harm that. And so the laws that we have are contrary to the purpose granted for that power, but I think that’s a weak argument because the power is still there. The purpose is merely explanatory or what we say in law as precatory, really precatory. I don’t think it’s a limiting clause. Some argue that.
00:53:32
00:53:37
Jock says we have the Royal Society for the Promotion of Science, Arts, and Manufactures, and Ben Franklin was an early member. Interesting, very interesting. I have a blog. I put a post on the C4SIF in the last few weeks about Jefferson, how Jefferson came up with some new technique that he thought would be really useful. And he wanted to make sure it worked, and when it worked, he was going to publish an article about it anonymously to prevent anyone else from filing a patent on it.
00:54:08
And then he was just going to let it become part of the public domain and let everyone use it. He was actually trying to prevent people from publishing it. If I recall, Franklin was also – didn’t believe in patents and didn’t patent his inventions, but I can’t remember if that’s correct.
00:54:24
Okay, but back to the origin of these statutes. In the US, trademarks have traditionally been protected by state law, but this act called the Lanham Act I think in the ‘50s, L-A-N-H-A-M Act was enacted, a federal law which gives federal protection to trademarks that pertain to services and sales and products that pass through interstate commerce. So if you have something that sold only within a state, it wouldn’t be protected by federal trademark but by state trademark. And so that’s based upon the IC clause, or the interstate commerce clause, which of course is nonsense. The interstate commerce clause was not meant to give the federal government the power to regulate anything that had an effect on interstate commerce. It was meant to basically establish a free market, an interstate free market in the US, which it had done that too, which is one reason I think why the US was so prosperous early on.
00:55:24
Now, trade secret law is still mostly based on state law. So you have patent and copyright are federal law in the US. Trademark is federal and state, although the federal part is unconstitutional I believe. Trade secret is primarily state law. So you have it being called a natural right, but you also have it being touted on utilitarian grounds.
00:55:52
So people will always say, well, we need patent and copyright to encourage innovation or to incentivize innovation. And they’re always talking about finding the right balance between how long the term of patent and copyright should be, etc. But as we’ll see later, John Locke and even the founders – none of them ever regarded patent and copyright as natural rights. They viewed it just as a policy tool, that is, in a sort of – in a utilitarian way. They sort of had this hunch I call it.
00:56:26
They thought, well, if we grant these temporary monopolies, it will give an incentive to these guys to invent a lot more things, and everyone will be better off. That was their hunch. Now, they had no way of proving it, but that was their hunch. But the truth is, the origins of these things were in monopoly and censorship. There’s a great quote by Nietzsche from book one of Dawn, and I learned this from Stefan Molyneux, by the way. I’d never heard this quote before until I heard it a few weeks ago, and I like it and it’s on rationality ex post facto.
00:57:07
The quote is – and I’ll take a break after this quote. “Whatever lives long is gradually so saturated with reason that its irrational origins become improbable. Does not almost every accurate history of the origin of something sound paradoxical and sacrilegious to our feelings? Doesn’t the good historian contradict all the time?”
00:57:32
And I agree with that, and that’s what I’m going to try to go into the actual history on the origins of IP to show you, to reveal its sordid origins and just try to reverse some of these rosy myths about the real purpose of patent and copyright law. So let’s take a five-minute break. It’s five past the hour. We’ll resume at ten past the hour.
00:57:55
[five-minute break]
01:02:18
Okay, I’m back. Erik said he’s having a hard time hearing me. I’m sorry. I have no ability to – I have a little volume control, but it’s maxed out, and it’s not letting me – I’m not sure actually which microphone is me, so I’ll just get closer to it. I’m not even sure if it’s this microphone or the laptop’s microphone. I have my nice snowball, which I’ve been trying to use, but I don’t now if it’s using this as well. Okay. Anyone here that’s not ready to continue? Okay, let’s continue. I’m going to kind of go quickly through this because a lot of the details are not that important.
01:03:30
But it’s important to just kind of have a feel for where these things came from. I mean you’ll see the messy guts of it. I always say that you never want to see how sausage or legislation is made, and I think that’s true. Sometimes with the history of some of these practices that we’re used to, we take for granted now. Jock, by the way, you said this – the video is freezing. It hasn’t happened on my end at all unlike in the Dimdim session from the last class I gave that you were a participant in.
01:04:05
Is the technical quality here as good, better, worse? How would you compare it to the – okay, good. He said it’s better. All right, fine. So I have here a little snapshot of a – I think that’s a patent. So what a patent is – the word patent is used – the word patent is used because it means open, patente, so an open letter instead of a private letter. So a monarch would give an open letter, which is like a public proclamation that this guy has the authority to do the following.
01:04:48
This guy has the authority to explore the new world in my name and homestead land in Virginia or whatever. This guy has the authority to capture Spanish ships and plunder them and kill people and keep 25% of the spoils and bring me the rest. That’s Sir Francis Drake. This guy has the right to make shoes in this town, and no one else does. So basically patents were monopoly grants or authorizations from the Crown. And you know, I’m not clear why they call some shoes patent leather shoes. I don’t know if it’s got anything to do with that at all. I need to find that out.
01:05:42
So this was done a long time in the past. It was done back in Italy, but one of the – kind of the modern origins of it or the quasi-modern origins – what happened was you had the Crown—the king, the monarch—abusing these privileges. They were granting all these monopolies to their favorites to get loyalty from these people to reward people without having to use tax money, etc. And parliament passed the State of Monopolies. Now, they called these things monopolies back then.
01:06:21
They didn’t mince words. And in the Statue of Monopolies, they did that to restrict the abuses the king was – the monarch was doing. They took the power away from the king, and they gave it to parliament, and they reduced the power to do this, and they set criteria for it. Okay, so basically they took an indefinite and broad monopoly, and they replaced it with a more definite restricted one. So it was actually a restriction on the right to grant monopolies, and they carved out an exception for useful inventions. So they basically limited it, but they kept that one invention. They kept that one type of patent.
01:07:07
Now, at the time, no one called these things intellectual property. No one thought of them as property. They knew it wasn’t property. They knew these were monopoly grants by the Crown. This was just a later propaganda ploy to try to justify these things in the face of criticism of these types of state grants of monopoly. And as Fritz Machlup, who’s a famous Austrian economist who wrote several important studies in the ‘50s, as he wrote, “Those who started using the word property in connection with inventions had a very definite purpose in mind: They wanted to substitute a word with a respectable connotation, ‘property,’ for a word that has an unpleasant ring, ‘privilege.’”
01:07:55
So it was – it’s propaganda. It’s using different words. And I mentioned earlier that Francis Drake – he was a given a letter patent in 1587 that allowed him to engage in piracy. Now, if you think about it, it’s ironic that modern-day opponents of IP or scofflaws of IP, people who skirt IP law, people who download movies and share files were called – or they’re called pirates – we’ll say we, don’t want to be in trouble. They’re called pirates, right? But real pirates kill people and break things, and the actual early use of patents, which is the origin of our modern patent system, was actually used to authorize actual pirates. So it’s ironic that IP proponents accuse IP opponents of being pirates when they are the ones who are more associated with real piracy. So that’s kind of an interesting and ironic historical fact.
01:08:57
And here’s another funny thing. You’ll notice nowadays, like I said, you had the Statute of Monopolies. They used truth in advertising back then. But nowadays, so you have libertarians and others who are in favor of IP. If you call it a monopoly, they get indignant. They’ll say that’s not a monopoly. It’s a property right. It’s not a monopoly. So you’ll find that nowadays our statists are much less honest. Like I said, they will call it a property right instead of a monopoly. If you think about the Department of War, I think someone might have mentioned this earlier.
01:09:36
Oh no, that was in the email I had today about a blog post I did on Lew Rockwell. In the US, we had a Department of War. It was called Department of War, good, honest name. That’s what it was for. That’s what the military is for, to go to war, until 1947, and then it was called the Department of the Army of the new military establishment. And then a couple years later they changed it to the Department of Defense, which it’s called now. That sounds a lot more peaceful, right? But it is widely recognized that patents are state-granted monopolies even by some advocates of the system and by opponents of course.
01:10:17
I mean Richard Epstein who is a proponent of IP law, the US Supreme Court. I mean these things are recognized to be monopolies. The United States Supreme Court, they routinely recognize the historic tension between patent law and antitrust law because antitrust law is meant to stop monopoly power. But patent law is granted by the government and gives you monopoly power, so there’s what they call a tension. So the courts are always saying, well, there’s a tension between patent law and antitrust law. So they give you these monopolies, but you’re not supposed to abuse them, whatever that means. And in fact, as I mentioned, the first patent statute, the modern one, was the Statute of Monopolies.
01:10:58
Okay, so clearly the purpose of IP is to provide a monopoly to a creator or an inventor or an innovator to give them an incentive to disclose the idea or to come up with it in the first place. Now, copyright, the origin of copyright is in literal censorship, and in fact, they’re still used for censorship, and I’ll give you some examples in a minute. So you have the printing press in, I think, the 1400s. Gutenberg’s printing press started becoming more popular and started threatening the control that the church and the state had over the spread of knowledge.
01:11:38
Before that, they controlled these guilds of scribes, guys that hand-copied books. So what happened was the court had a list of prohibited books, and then this company called the Stationer’s Company, in 1557 – I think the Stationer’s Company was formed in the 1400s, had to do with printing books, using the new-fangled printing press. Well, the church gave them a monopoly over what books could be approved to be printed.
01:12:10
So basically copyright arose out of this because in – oh, as a – who’s B&L? Boldrin and Levine in Against Intellectual Monopoly. They – Galileo’s trial was an exercise in copyright enforcement by the pope of Rome because they wanted to prevent him from publishing his book. So the roots of copyright are literally in censorship. Now, what happened was the Statute of Anne was passed. It’s called the Statute of Anne of 1709, and I think it was passed in 1710. It granted 14-year copyright terms. But what it – they were trying to – what happened was the Stationer’s Company – is that what we call it?
01:13:07
So the Stationer’s Company charter expired, and then the publishers had gotten used to this monopoly privilege, and they asked parliament to pass a new statute. Parliament said, well, we think we’ll give it to the authors instead. So that’s what the Statue of Anne did, so that’s where copyright came from. And here’s one important thing to recognize. One reason the authors were in favor of this at the time – think about it. Up until that time, to have your book published or copied, the government had to approve it.
01:13:43
So basically it went through a government censorship system. So by transferring this copyright from the Stationer’s Company or the publishers to the author, now they had the control of copying their books. So the original motivation or the reason that authors liked this was it kind of liberated their own works from the control of the state, but now it’s look at as a monopoly right that you hold that you can stop people from copying your works. The original goal or the original motivation was to permit your work to be copied more instead of having the state prevent it.
01:14:20
It’s a good quote here. I’m going to skip this quote. You can read this later. Basically it’s a summary of what I’ve been saying on slide 31, so I want to try to get through the remaining. I think I have 40 slides. I think we can do it in the next ten minutes. Now, let me see something here. I might have some of these out of order. I’m going to skip this because I think we cover this next time. So we have less slides than I thought. That’s good.
01:14:54
01:14:58
Oh, here’s some more interesting history. So even before 1624, the early history of state patents, back in 500 B.C., there was a Greek city of Sybaris, which is now in southern Italy. They had these annual culinary competitions, which gave the winner the exclusive right to prepare his dish for one year. So can you imagine the arguments we have now about – I mean right now there’s no copyright in food, in restaurant dishes. Maybe someone is going to dredge this up again, right? But you can see this idea has been around a long time granting these monopolies. [Update: see Michael Witty, “Athenaeus describes the most ancient intellectual property” (2018)]
01:15:37
And as I mentioned, the way these things started, Kings were granting these back in the 14th century. The first general patent law was actually in Venice in 1474. It was used in the 16th century by German princes, and sometimes actually the good thing about these – remember they had all these guilds. So sometimes these patents were granted to give you the right to make something that the guild otherwise had the monopoly over.
01:16:06
So in a way, patents were used sometimes to reduce monopoly positions and increase competition because of the existing guild system. So sometimes patents are credited with liberating industries from restrictive regulations by the guilds and local authorities. And as I mentioned earlier, it’s similar to the initial purpose or use of copyright law to counter the censorship of the author’s own works. So these things had sort of good – some good aspects originally.
01:16:37
By the way, this is an interesting fact, which in a way shows the arbitrariness. Right now, the patent term is about 17 years. It’s 20 years from the date of filing, but it takes about two or three years to prosecute the patent. So when it issues, you’ve lost about two or three years of that 20-year term, so you have about 17 years left. Copyrights now last, I don’t know, I think 70 years past the death of the author, so well over 100 years in many cases.
01:17:04
Originally, patents were 14 years, and I think copyrights were similar. The reason that it was 14 years was because that was the term of two consecutive seven-year apprenticeships. Now, remember the apprenticeship system was really more prevalent back in those days. As Machlup in a 1958 study noted, the duration of patents was determined by historical precedent and compromise, political compromise.
01:17:34
It was based upon the idea that two sets of apprentices should, in seven years each, be trained in new techniques that the master came up with and through a prolongation by another seven years – though a prolongation by seven years was allowed in some cases. So the idea was that we’re going to give you a monopoly over your new idea for time for you to train some apprentices. Otherwise, they might be competing with you or others can be competing. So basically this 14-year time, if you add seven years to it, that’s 21 years, which is close to the current term of patents. It’s based upon the time of apprenticeships, which is completely arbitrary, has nothing whatsoever to do with today’s economy or with natural rights.
01:18:22
01:18:28
I mentioned some of this already, but there were – these patents were granted to court favorites for revenue purposes, and they were abusive. They were unpopular. And what happened was, in 1603, in the case of monopolies, a court declared a monopoly in playing cards void under the common law. And so then, as I mentioned, 1623-24, the Statute of Monopolies was passed by the Crown to scale back this practice of monopolies, but they made an exception for inventions. And, by the way, sometimes – some of you have probably heard of the Magna Carta, which is one of the sort of founding documents as the origin of natural rights theory or the American rights system based on the English rights, Magna Carta, or the great charter. So the Statute of Monopolies is sometimes referred to as the Magna Carta of the rights of inventors.
01:19:25
01:19:30
A little bit more on the history of this, in the – 1620-1850 was the spread of the patent system because 1624 was when the Statute of Monopolies was finally enacted. It became the basis of the British patent law, which became the model for patent laws in other places. Interestingly, the first what’s called general patent law, which was South Carolina, 1691, so you have sort of – you have the Italian system.
01:20:04
You have the English system in 1623, but the first really modern patent law was 1691 in South Carolina. And then finally, the first really modern one was the American one in 1790, which is the system we have still in place now, although it’s been modified since then. So basically you have 1624-1850, spread of all these patent ideas all based upon the grant of monopolies early on.
01:20:34
Now, this is my favorite period, 1850-1873. There was a vigorous opposition to patents. People started waking up saying what the hell have we done? These are government grants of monopolies. It’s a horrible idea. There was a lot of arguments similar to the ones we have now that are starting again now, a lot of pressure. Well, there’s pressure to expand them. Engineers and inventors wanted them because they’re pressure groups, right? They’re special interest groups. But the free trade groups were opposed to patent monopolies.
01:21:07
So there’s lots of commissions and studies and calls for abolition, and the Swiss legislature refused to enact patent law several times—1849, 1851, 1854, and twice in 1863. And here’s a quote here. The economist of the greatest competence said the patent system was pernicious and indefensible. But it was a losing battle. You can see that it was inevitable. Everyone is finally going to adopt it, sort of like Obamacare and the minimum wage.
01:21:38
Even though economists all know that the minimum wage is a bad idea and causes unemployment, we still have it because it’s politically popular and hard to get rid of. And we have socialized medicine spreading, I don’t know, 50, 60, 70 years ago in Europe and South America and finally spreading to the US. We’re about to get it with Obamacare. I mean we held out for a long time, but these things have an inevitability about them, which is depressing.
01:22:05
Now, interestingly, in 1869, the Netherlands repealed their patent law. They had enough of it. They said you just can’t make a good patent law. This stuff is ridiculous. But finally the patent advocates had a victory. Now, here’s one interesting fact about it, which most patent advocates don’t know or don’t care about it. So in the – up until this late 1800s period, patents were largely seen as anti-free market.
01:22:38
So the free traders would attack patents and tariffs together as things that were invasive of a free market or free-trade system. But you had this big depression in 1873 in Europe, the panic of 1873, and what that did was that led to the rise of protectionism and nationalism. So you had reduced opposition to tariffs and protectionism and into patents because they all went together. So what happened was because everyone started becoming more – or less resistant to people’s calls for protectionism and nationalism.
01:23:20
We have to protect the – our national economy because of this horrible recession we were having, this depression we’re having. So free-trade rhetoric basically became unpopular because of the depression, so in a way you could say that this recession is one of the main causes of the victory of the patent advocates and the loss – the reason that the anti-patent movement, which I have on page 39, lost steam. They lost steam because of a depression, which gave rise to protectionist sentiments. So it opened the door to an increase in patent propaganda by interest groups, and then so finally, 1887, even Switzerland gave in.
01:24:07
Now, although they had some limitations on their initial patent law, they had a mechanical model limitation. To have a patent, you had to give a mechanical model, which most other countries didn’t require. They even removed that in 1907 because Germany threatened them with tariffs. They said, look, you’ve got to get rid of this mechanical model limitation. So it’s similar to what the US does now in twisting the arms of China and India and other developing economies to adopt a western, American-style patent and copyright system primarily for the benefit of western copyright and invention-related interests like big pharmaceutical or electronics companies.
01:24:54
Apple, Intel, Microsoft all rely on copyright and patents and also Hollywood and the music industry. So basically at the behest of these corporatist lobbying groups, the western nations are twisting the arms of China and the developing countries to adopt our IP system, even though it’s going to stifle their economy, hurt their innovation, cost them money, increase the price of drugs, pharmaceuticals, put people in jail for copying songs, bootlegging, etc. So can see that this practice was common even back in the 1800s when – or 1900s when Germany twisted Switzerland’s arm to give in to their idea of what the patent system should be like. So finally, the Netherlands, which as the last holdout, the last bastion for free trade and inventions, they reintroduced the patent system in 1910, effective in 1912.
01:25:53
Let me see. I have some duplicate slides here. So let’s just – we’ll stop here. Let me just say what we’ll talk about in the next class. We’re going to now talk about the different justifications for IP and give an overview of sort of the Austrian-libertarian approach of how to view property, scarcity, and ideas. So we have a way of analyzing these empirical and utilitarian and natural rights-type arguments for IP. So we went five – well, not five minutes over because we started five minutes late.
01:26:33
So I’m happy I stopped on time. Sorry I didn’t leave time for questions in the official period, but I wanted to get all this in. And I’m happy to stay longer and take any questions now for as long as anyone wants to stay, so shoot. Any questions? Everybody want to go home? Jock, I know it’s 2 in the morning or something for you, 2:30. I’m reading something Jock clipped here about William Shipley. He wanted to use public subscriptions to make awards to inventors in the arts and commerce. So he founded a royal society to encourage it, which had competitions.
01:27:32
That’s interesting. I didn’t know about that, and that’s perfectly fine. That’s more like the Nobel Prize award or the MacArthur prize. I mean there’s nothing wrong with having private – I’m assuming this was private, right? The Royal Society, I don’t assume this was funded by tax dollars. The ones I talked about earlier – and this is probably not $80 billion or he inflation-adjusted equivalent of $80 billion, which was suggested by – 30 billion or 80 billion was suggested by even like some libertarians and Stiglitz.
01:28:08
And that was just for medical innovation, so they said we should have $80 billion of tax dollars set aside for annual rewards to people who come up with really cool, useful innovations in the medical area. Well, I mean where are you going to stop? And then I guess maybe a trillion dollars in the pot for other types of inventions and for copy – for artistic works and new painters and new artists, which of course we have already in smaller forms with the – what is it – the National Foundation for the Arts or whatever they call it.
01:28:43
Anyway, that’s interesting, Jock. Thanks for the information. I’m going to look into that. Any other comments, questions from anyone? Okay, Donald, I understand. It’s been an hour and a half, and that’s a long class. So I think we should call it a break, and I’m happy to have an office hour some time if we think we have a need for it. Why don’t we see how this goes? If anyone has any questions they want to post in the course materials page, I can answer them either next time or in writing. So I enjoyed the class. Thank you, everybody, for your attention, and everybody have a good night, and I’ll see you next Tuesday. Good night, everybody.
01:29:48
Podcast (kinsella-on-liberty): Play in new window | Download (Duration: 1:29:52 — 20.6MB)
Kinsella on Liberty Podcast, Episode 172.
This is the first of six lectures of my 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics” (Tuesdays, Mar. 22–April 26, 2011), which was a reprise of a similar Mises Academy course in October 2010. The slides and video for this lecture, as well as the “suggested readings” for all six lectures of the course are provided below. The other five lectures follow in subsequent podcast episodes KOL173–177. (Discussed in Rethinking IP; and on the Mises Blog in Study with Kinsella Online and in Rethinking Intellectual Property: Kinsella’s Mises Academy Online Course. See also “Rethinking IP,” Mises Daily (Feb. 10, 2011).)
See also my article “Rethinking IP,” Mises Daily (Feb. 10, 2011).
GROK SHOWNOTES: In this first lecture of a five-part Mises Academy course from 2011, titled “Rethinking Intellectual Property: History, Theory, and Economics,” libertarian patent attorney Stephan Kinsella provides a comprehensive overview of the historical and legal foundations of intellectual property (IP), focusing on patents and copyrights, while setting the stage for his libertarian critique (0:00-10:00). Kinsella begins by introducing the course structure and his anti-IP stance, rooted in Austrian economics, and traces the origins of patents to medieval European monopolies, such as the 1474 Venetian Patent Act, and copyrights to censorship-driven printing privileges in England, culminating in the 1710 Statute of Anne (10:01-25:00). He explains the legal mechanics of IP, including patent and copyright durations, infringement processes, and their economic implications, emphasizing their role as state-granted monopolies that restrict competition (25:01-40:00). Kinsella’s historical analysis frames IP as a product of statism, not market principles, laying the groundwork for his argument that IP violates property rights.
Kinsella delves into specific historical examples, such as the U.S. Constitution’s IP clause and early patent cases, to illustrate how IP laws evolved to favor corporate interests and entrench monopolistic privileges (40:01-55:00). He critiques the utilitarian justification for IP, noting that empirical evidence, like studies showing minimal innovation benefits, undermines claims that patents and copyrights are necessary for progress (55:01-1:10:00). In the Q&A, Kinsella addresses audience questions on topics like the differences between patents, copyrights, and trademarks, the role of IP in pharmaceuticals, and libertarian alternatives to IP, reinforcing his view that a free market thrives without such restrictions (1:10:01-1:25:00). He concludes by previewing the course’s upcoming lectures on IP theory and economics, urging listeners to question the legitimacy of IP as a state-imposed barrier to innovation (1:25:01-1:25:38). This lecture is a thorough introduction to IP’s historical and legal roots, ideal for those seeking a libertarian perspective on the subject.
Transcript and detailed Grok summary below.
Related Material
Introductory video from the Mises Blog post Kinsella Can Be Your Professor:
Lecture 1: INTELLECTUAL PROPERTY IN HISTORY
SUGGESTED READING MATERIAL
The “suggested readings” for each lecture are appended below. The links were internal Mises Academy links so would not work here, so until I find time to code in the links, most of these materials can be found on stephankinsella.com/publications, c4sif.org/resources, mises.org, hanshoppe.com/publications, or on Wikipedia or by google search. (If there is a particular link you cannot find online, email me or add to the comments, and I’ll try to find it and update the post with that link.)
Main Texts
SUGGESTED READINGS
Legal Background:
AIP, pp. 9-14
Optional
History:
AIM, ch. 2, pp. 33-35 (“World Before Copyright” section); ch. 3, pp. 48-51 (“World Without Patent” section).
Optional
LECTURE 2: OVERVIEW OF JUSTIFICATIONS FOR IP; PROPERTY, SCARCITY, AND IDEAS
SUGGESTED READINGS
Law
History
Optional
Economic and Utilitarian Arguments
AIP, pp. 19-23
Optional
Deontological/Natural Rights-Based Arguments
AIP, pp. 23-28
Optional
Property, Scarcity, Ideas
AIP, pp. 28-42
Optional
LECTURE 3: EXAMINING THE UTILITARIAN CASE FOR IP
SUGGESTED READINGS
***Note: Use same readings as for Lecture 2 starting with “History”–PLUS the new material re patent trolls linked below***
Law
OUTRAGE OF THE WEEK
LECTURE 4: IP STATUTES AND TREATIES; OVERVIEW OF JUSTIFICTIONS FOR IP; PROPERTY, SCARCITY AND IDEAS; RIGHTS-BASED ARGUMENTS FOR IP: CREATION AS A SOURCE OF RIGHTS
SUGGESTED READINGS
***Note: Use same readings as for Lecture 2 starting with “Economic and Utilitarian Arguments”–PLUS the new material linked below***
Recent News & Outrages
Law
LECTURE 5: PROPERTY, SCARCITY, AND IDEAS; EXAMINING RIGHTS-BASED ARGUMENTS FOR IP
SUGGESTED READINGS
***read the material from Week 2 starting with “Deontological/Natural Rights-Based Arguments”***
LECTURE 6: THE FUTURE; INTEGRATING IP THEORY WITH AUSTRIAN ECONOMICS AND LIBERTARIAN THEORY;
PROPOSED REFORMS; IMAGINING A POST-IP WORLD; THE FUTURE OF OPEN VS. CLOSED
SUGGESTED READINGS
Outrages of the Week/Recent News
Austrian Economics and IP
Libertarianism and IP
IP as Contract
AIP, pp. 45-55 (IP as Contract)
Reputation, Trademark, and Communication
Proposed Reforms
Innovation in a Post-IP World
OPTIONAL
❧
Transcript
Rethinking Intellectual Property: History, Theory, and Economics—Lecture 1: History and Law
Stephan Kinsella
Mises Academy, March 22, 2011
00:00:02
STEPHAN KINSELLA: Recording is enabled. Hello everybody. We are starting now. Can everyone hear me now? We only have a few people online. That’s fine. I assume the rest will watch later. Danny, Gwendolyn, Karl, can everyone hear me all right? Awesome, good. Oh good. Okay, I had the wrong window open. Hold on one second. This is our first time using this Webex, and you guys are guinea pigs, but I think you’ll benefit from it because I think that we’ll have no crashes and dropouts like we’ve had in the past. Ethan, turn that other light on in here please. Turn the other bright light off. Donald Koss says he cannot hear. Let me see if I can add you, Donald. Okay, Donald, can you hear me now? Can everyone hear me now?
00:01:14
00:01:19
Donald, can you hear? Restart audio – I’ll restart audio conference. Hold on a second. Okay, I restarted. Now, Donald, can you hear me? Can everyone hear me now? I see a little – okay, now I see the earphone symbol. And Donald, can you hear now? Donald, hello. Oh good, good. Okay, Danny, if you see anyone join that I’m not noticing, we have – that I need to add as a panelist let me know because I might not notice it.
00:02:08
Welcome everybody, glad to have you all online. This course is – I think we have about 17-18 students. We may have a few more join during the week. This is a smaller course, so this may give us more time to address questions, which is perfectly fine with me. We had around 70 or 80 the first go-round for this course, and my last course, Libertarian Legal Theory, which just ended a couple weeks ago, we had 100-something students. So this is a smaller course, so maybe we’ll have a more intimate setting, and we had some technical problems with the previous service we use, Dimdim. We’re trying something new this time. This is the first time we’ve used it, so in the chat session I’m going to say hello right now.
00:02:54
Hold on just a second. You’ll see that my name shows as Danny Sanchez and so does Danny, so we’ll get that fixed for next time. But Danny is our sort of technical host supporter here. He’s a TA kind of guy and runs the whole Mises Academy, so you’ll see he’s here, and so am I. Anyway, it’s good to be here. Since we have such a small class this time, I’d be glad to answer questions as we go if they are on point. I will stop and read them for people that are listening later or in audio only.
00:03:29
Okay, so tonight is lecture one of the course, and tonight’s topic is history and the law, the law of IP and the history of IP. And we’ll see if I can figure this new system. Go to slide one. Just a brief introduction of myself. Some of you already know me from the previous course. Jock Coates who’s not here now – I guess Jock will listen remotely later. Two of the students are friends of mine. Jock, who did the audio narration for my Against Intellectual Property book, and John McGinnis, who I’ve known for maybe 15-20 years. He was a professor at a local economics college in Pennsylvania when I used to live in Philadelphia, so I’ll be glad to interact with John too.
00:04:22
00:04:27
Before we go on, Danny, I see that there’s an X next to Karl Fielding’s name. I’m not sure what that means. Karl, can you hear me okay? You there all right? Hello? Okay, I don’t know what the X means. Grab daddy another one.
00:04:48
ETHAN: That’s the second one.
00:04:52
STEPHAN KINSELLA: So I just want to explain who I am. I’m a patent attorney. Now, this course is not about me, but just to give you an idea who your professor is and where I’m coming from. I’m a patent lawyer. I’m also a libertarian scholar and writer, and I’ve been influenced heavily by Ayn Rand initially in my thinking and then later on by more Austrian and anarchist thinkers like Rothbard and others.
00:05:16
As I said, I’m a lawyer, and I’ve had about an 18-year law firm career with law firms in Houston and Philadelphia, practicing intellectual property law including patent law – thank you – my main influences, and I’ll draw on these a lot in this course, are going to be the Austro-Misesian Rothbardians primarily Mises, Rothbard, and Hoppe. And you’ll see as we go on how I draw on them. Going to slide four.
00:05:55
A brief overview of the course, and I’ve done this once already, so I – and I actually re-listened today to my first lecture that I’m giving now. So some of this I may streamline a bit because I realize now some of it I can speed up. I tended to go over my time and have less time for Q&A. I think we can streamline it a little bit better this time. But just a quick overview of the course. We’re going to have six lectures, and today’s lecture, number one, is the history and law of IP and an overview of modern IP law.
00:06:26
I’m going to talk about its historical origins and actually what the types of IP are and give an overview of the justifications with the reasons people have given to explain why they think we should have IP law. Now, just to be clear, I’m not going to go into IP law in enough legal detail to enable you guys to practice this. This is not a law school course, and that would be kind of boring anyway. Danny, Donald has lost the video window. I’m not sure how he gets it back. Maybe you can advise Donald Koss how to get his video window back. He emailed privately about that. Donald, I’m not sure. Ethan, you’ve got to be quiet.
00:07:20
00:07:23
Okay, so next week’s lecture we’ll talk about property, scarcity, and ideas, sort of a general overview of this aspect of IP. And then number three, we’ll talk about the utilitarian case for IP. Number five, we’re going to talk about how to – number four, we’re going to examine rights-based arguments for intellectual property. Number five, we’re going to try to integrate intellectual property theory with Austrian economics and libertarian theory. And then in the final lecture of the course, we’re going to talk about different reforms that are proposed, what’s coming up, things we can do, and how a non-IP world would work and also the future of open versus closed.
So let’s go in and jump right into lecture one.
00:08:13
Let me just – I’m going to emphasize here there are two books – resources that we’ll refer to a lot in this course. Excuse me. Let’s just hold on a second. Donald Koss is having a little bit of a problem here. Let’s take a quick break. Hey, let’s just take a two-minute break while Donald and Danny try to get Donald back online. I’ll be right back. I’m going to grab some more water.
00:08:52
00:09:39
Okay, let’s resume, and I’m hoping Donald can catch up and you guys get your problems solved, but let’s keep going to avoid delaying the lecture too much. So the two main texts for the course will be my monograph, Against Intellectual Property, which I’m going to call AIP here, which is available online, and there’s links on the course materials for this, also, the book, Against Intellectual Monopoly by Boldrin and Levine. So my book is more of an Austrian-Libertarian principled approach, and the book by Boldrin and Levine is more of an economic empirical approach. They complement each other well, I believe.
00:10:20
Anyway, I have here on slide five sort of the – a list of the resources that are relevant to today’s lecture, and you can look at that later or on the resources for the course page for today. Okay, so what we’re going to talk about first is the main question for – I’m going to minimize this chat session because this is distracting me for right now.
00:10:54
Okay, so the main question that we have to face is what is intellectual property, and is it a type of property? So we all – we’re aware that there’s a type of property called real property, and this is in the common law system. Real property is land. In the civil law systems of the world, which is the second major legal system of the world, which is most of Europe, Quebec and Canada, and Louisiana and America, Puerto Rico, etc. this is civil law systems. We would call this immovable property. So that’s one type of property.
00:11:32
Then a second type of property is personal property. These are movable things, which is what you call them in civil law systems, movable things—cars, apples, or gold, or even your body, although your body is held to be a special type of property. So then the question is, is intellectual property a legitimate type of property. So then the question is what is intellectual property?
00:12:02
00:12:10
Okay, I’m going on to slide seven now. So here – let me just give a definition. I’m going to try to have a calm just – don’t freak out about this because IP is hard to understand at first. In a way, it’s hard to understand because of purposeful sort of overly complex ways of describing the law by lawyers and specialists. It’s sort of our domain, and so we have our own jargon. We have our own lexicon, etc. So it seems alienating or highly technical, but basically the word IP is a fairly modern concept, which actually was adopted for propaganda purposes, which we’ll learn later.
00:12:56
But it basically is a term that covers several types of – excuse me – legally recognized rights. They all – they’re all lumped together. They’re all different. They have some things in common. They’re lumped together. It’s what’s called an umbrella term, so it’s a concept that covers several different types of legal rights, and they all have something to do with intellectual creativity or something that’s valuable that’s not really a material, scarce thing, something that’s valuable because of what your mind has done. So IP rights are rights to intangible or what you could say immaterial things, that is, to ideas as expressed or as embodied in practical implementations.
00:13:49
Now, Tom Palmer, who’s one of the intellectual property philosophers who has influenced me, he refers to intellectual property as being a right to ideal objects. So in other words, if you imagine you have a certain type of idea, then the right to an IP is not just to the particular thing that that’s instantiated in, but it’s a right to the idea itself. And therefore, it’s a right to everything it’s instantiated in. So, for example, a copyright is a right to a novel, for example. But the novel is not just a physical book that you might be holding. It’s a right to that ideal object. Gwendolyn says is it like a platonic ideal.
00:14:40
I think it actually is like a platonic ideal, and as we’ll see later as we look at this, at the implications of this, you can’t really protect legally a right to a platonic ideal. The only way you can protect it is to actually resolve that in terms of some kind of rights in material goods in the real world. So really the entire idea of property rights in ideal objects or in intellectual property always amounts to some kind of assignment of property rights to material goods or to scarce goods in the real world, which is one problem with them, which we’ll get to in more detail later.
00:15:21
Okay, so what exactly do we mean by intellectual property? And by the way, a lot of the IP abolitionists, of which I’m one, some of them oppose even using the idea of IP, intellectual property. They think that you’re giving too much away by using the term of the proponents. I understand that complaint, but I think we also have to communicate with people that we’re arguing and disagreeing with and trying to persuade. And the term that’s used now is intellectual property. I mean there’s lots of other terms that have been proposed like intellectual pooperty or intellectual poverty or intellectual monopoly or pattern privileges. But for now I think we’re going to use the word intellectual property, but it covers disparate sets of legal rights.
00:16:14
Now, there are four traditional types of IP, and I’ve got patent and copyright listed here, and I’ve got them bolded because those are the two biggest ones that are the two biggest problems, and that’s the ones we’re going to focus on in this course. So patent and copyright, also trademark and trade secrets – now, as a subset of copyright, I have moral rights and common law copyright. And as a subset of trademark, I have domain name implications. So we have different ways of breaking these things down. So let me briefly explain what they are.
00:16:53
A patent right is basically a monopoly privilege granted by the state. It’s the right to exclude someone else from making or using or selling the practical invention that you have a property right in. Okay, so it can be a gizmo or a process or something like that. So patents cover functional, practical, useful inventions.
00:17:23
Copyright protects the original expression of an idea, so this is what covers artistic creations like novels, paintings, and even the way you write a software program, not the way it works, but the way it’s expressed when you actually write it. Like you think of it like a novel. Moral rights, which is more of a European concept, is sort of the idea that there’s an inalienable right to be recognized as the author of something even if you don’t own the rights to – the copyrights to it anymore. And it’s called – it’s said to be inalienable because you can’t give it away. So someone has to recognize you as the author of a given painting, for example, or movie even if you have no copyright in it anymore. Common law copyright is talked about on occasion. Most people don’t understand it. I don’t even understand it quite completely because it’s not really in effect anymore, and it’s not described very well.
00:18:23
00:18:27
Give me a second. There are some newer people that have added. I’m going to add you guys as panelists. Okay, everyone is a panelist now. All right, so common law copyright, the original idea of common law copyright was a very limited doctrine under the common law which said if you are the author of an unpublished manuscript, so let’s say you wrote a novel or a book and it’s in your desk drawer and you’ve never published it.
00:18:58
Then if someone takes it from you and tries to publish it, you could use your common law copyright to stop him. So it’s a very limited right pretty much unrelated to what the modern copyright law does. In a way, it was more similar to trade secret, which we’ll get to next. So trade secret is the right – simply recognizes the fact that sometimes, let’s say, a company or a businessman has information that he has secret, that he keeps proprietary to himself, which gives him some kind of competitive advantage.
00:19:32
It could be something that could have been copyrightable. It could have been something that could have been patentable or maybe not. But it’s basically something that he keeps secret that gives him an advantage in competition. Trade secret law says if you make reasonable efforts to keep this information secret, then you can go to court and prevent someone else from leaking the information to the world so long as it’s not generally public yet.
00:20:00
Now, trademark just means a mark that you use in trade or in commerce to identify the source of your goods or your services. Okay, so basically the root of trademark is in consumer confusion or fraud. So in a way, you can see that trade secret and trademark are not as problematic in their origins as patent and copyright, which we haven’t gotten to yet. But the point is you can see already that trade secret basically says you can keep something secret that you’re trying to keep secret, and you can stop someone from revealing these secrets who has no right to. Trademark just says you shouldn’t deceive consumers about the source of goods.
00:20:42
00:20:45
Now, there – so these are big four type of IP rights: patent, copyright, trademark, and trade secret. Now, there’s another classical right called defamation. Well, it’s actually called reputation rights, but it’s protected by what’s called defamation, which is the cause of action. Now, you’ve probably heard of libel, slander, defamation. Let me just give you a quick primer on what these words mean.
00:21:09
Defamation means publicizing some kind of communication about someone that is false and that damages their reputation. Now, libel is a type of defamation, and so is slander. Libel is the written form of defamation. And you can remember that because libel and written both have an I in them. Slander is the oral form of defamation, so basically they’re defamation. So defamation – the defamation cause of action is based upon the idea of a right in your reputation. You build up your reputation. It has value, and you can protect it from being diminished.
00:21:49
Now, in my view, this should be classified as a type of IP because it’s got the same motivation, and it’s got the same problems as well. It’s not usually called a type of IP, but I think it should be. Now, there are newer types of IP that have come about, let’s say, in the last 50, 30, 40 years. One is database rights, which is not a law in the US yet, but it could be at some point. Database rights – let me explain how that arose. Under the copyright law, you have a copyright in original works of authorship, that is, in the original way an idea is expressed.
00:22:34
The problem was there was a Supreme Court case called Feist, F-E-I-S-T maybe 15, 20 years ago, which said that you cannot have copyright in factual compilations of data like a database or a map, for example, or a telephone book because these are just pure collections of data that have nothing original about them. Now, until the Feist case, there was a doctrine under US law called sweat of the brow, sweat of the brow. And what that said was if you put a lot of effort into collecting data that is valuable, then – which is called sweat of the brow. You put a lot of work into it.
00:23:22
Then the fact that you labored on it would substitute for the originality requirement. In other words, even though it wasn’t really original in the copyright sense, we would count that as original, and it could be subject to copyright. Well, the Feist case, the Supreme Court said, well, you really shouldn’t do that. Sweat of the brow might be worth rewarding, but the copyright law doesn’t reward it because it has to be born of originality, and there’s really nothing original in a map because a map is a factual depiction of what the surface of the Earth and roads look like.
00:23:56
So it’s not original. Excuse me. And this is why some countries – some people had advocated for us to implement a database right, which would actually give a legislative protection to the things that are not any longer protected in the US anyway by copyright law like maps and databases and phone books and things like that. I haven’t seen much agitation for this lately. It was around ten years ago. I believe there are database rights in some countries.
00:24:32
Okay, some other types of newer IP innovations would include semiconductor maskwork protection, which is a unique US law maybe 30 years old, which protects the way a circuit is laid out in a semiconductor maskwork for these integrated circuits that are made by companies like Intel, MI Company, which is a laser company. There was an amendment to the copyright law I think about 15 years ago, which added boat hull or vessel hull designs. So you could actually get a protection in the way the front of a boat hull looks or something like that. So it’s a very narrow, specialized type of IP right, which obviously was passed at the behest of some special interests.
00:25:19
And there’s continual agitation to add new IP laws like right now there’s agitation to add rights to protect fashion designs. Sometimes some bartenders are asking for a copyright in recipes for bar drinks. Chefs are asking for copyrights in recipes and so on. So this is what the four main types of IP are. Any questions at this point that I can address? I’ll go into some of these in detail right now.
00:25:57
If you have any questions, feel free to chat them right now for the session. I’ll be happy to address them right now. Let me check and see. I think that there’s some that have joined. Let me make sure. I need to see if there’s any I need to add. Okay. John just added. Welcome John and Matt. Glad to see you guys here. Okay, so we’re just discussing the types of IP, a sort of legal overview of what IP consists of.
00:26:34
Now, copyright is a statutory – so there s a huge statutory scheme in the US and in almost every other country, and they’re all largely compatible with each other because of what’s called the Berne Convention, B-E-R-N-E, the Berne Convention. So a copyright is a legal that’s given to authors, and the author is the one who writes it or creates it, of an original work like a book or an article or a movie or computer program or painting.
00:27:03
Okay. It’s given to you automatically as soon as you fix it. It’s called fixing it in a tangible medium of expression. Let me see if I have that covered on the next slide. If not, I’ll go into it in detail here. Yeah, I do. Okay, so just – I’ll deal with that on slide 11. Now, what rights are you given as the author of a copyright, the holder of a copyright?
00:27:34
Well, you’re given the exclusive right to reproduce the work, but also another set of rights called – to prepare derivative works and to perform or present the work publicly. So it’s not just the right to reproduce it, which is what copy means. So copyright is more than just the right to authorize the copying of work. So copying or reproducing means the literal reproduction of a work, like if you take an MP3 file and you make an exact duplicate. That would be literal reproduction. But if you look at the Mona Lisa and you paint it yourself and you try to duplicate it and it’s close but it’s not exact, that would be a reproduction but not exactly a reproduction. But that would also be copyright infringement if the Mona Lisa were still in copyright.
00:28:24
Now, if you made Mona Lisa’s brother, sort of another painting based upon that one, that would be a derivative work. Now, you’re entitled to do that now because that work is in the public domain. But if it were copyrighted you couldn’t without permission of the owner or to perform the work publicly. And that’s a complicated one that depends upon the situation whether it’s digital or whether it’s broadcast or whether it’s live, etc.
00:28:52
Now, you have to remember that copyright protects only the form or the expression of an idea, not the underlying idea. The functionality or way something works, is protected by, say, patent perhaps. But the way it’s expressed is what copyright protects and the way it looks. And what this right does is it basically gives you the right to go to the courts and to ask the court to issue an injunction or to get damages from someone. Basically, it lets you stop someone else from using their own property in a certain way. They’re so-called infringing your copyright, like if they’re rearranging their own property with your pattern or if they’re making a derivative work with your property.
00:29:43
So that’s what a copyright is, and again, as I said, it protects original works of authorship that are fixed in a tangible form of expression. So, for example, if I think of a new song and I sing it to an audience for the first time but it’s not recorded, there’s no copyright yet in that song. It’s got to be recorded or fixed in some medium. You’ve got to write it down, record it or something like that. As I said, it’s a bundle of rights including primarily the right to reproduce, which includes literal reproduction and non-literal reproduction. That’s reproduction that’s not varied too much, the right to prepare derivative works and the right to present the work publicly.
00:30:28
Now, copyright lasts at this current time for the life of the author plus 70 years. Okay, so if you write a novel when you’re 30 and you die when you’re 90 so that would be 60 years of term and then another 70, so 130 years of term. If it’s a work-for-hire, then it lasts 95 years. Now, a work-for-hire basically means – it’s a statutory category of copyright. What this means is if the creator of a work makes a written contract with someone else – typically their employer – by which the employer pays them to create these types of works and the contract specifically says in writing that this is a work-for-hire – it actually has to say it’s a work-for-hire.
00:31:25
In that case then, not only does the employer own the copyright, which you could do by assignment. For example, I have copyrights in materials I’ve written. I could assign them to someone else tomorrow with an assignment, but I’m just transferring ownership. I’m still the author, but I’ve assigned the ownership of the copyright to someone else, but the term is the same. It would be my life plus 70 years. In a work-for-hire, if you have a contract ahead of time which says it’s a work-for-hire, then the company that basically is the one paying for it is legally the author.
00:32:07
Legally they are the author, and in that case the term is 95 years total, usually because it’s a corporation which doesn’t have a life. But basically you could think of a copyright as having about 100 years’ life, so it’s a very long time. It’s the longest of all the IP except – well trade secret can last forever, and trademarks can be renewed indefinitely.
00:32:31
Now, what’s important to recognize is that ever since 19 – I think it was ’82, or maybe ’78. I can’t remember the date when the US exceeded to the Berne Convention and we changed our copyright law to comply with the Berne Convention, which is an international treaty, which has copyright standards which every signatory nation is supposed to comply with.
00:32:58
Let me see if we have any more attendants now I need to add. Excuse me. Oh no, there’s no new ones. Okay, so what’s important to notice is that copyright is automatic. We need to think about this because you will hear people over and over and over again misstate the law. They’ll say – for example, you’ll hear people criticize the Mises Institute or me for hypocrisy. They’ll say, well, you’re against copyright, and yet you copyrighted your article or your book. Well, this is a complete confusion. No one copyrights their book. Everyone that writes a book has a copyright in it whether they want it or not. This is completely automatic. It has absolutely nothing to do with whether you put a copyright notice in your book or not.
00:33:46
It has nothing to do with whether you file a copyright registration. Under the Berne Convention, it eliminated what’s called formalities. That is, in other words, countries may not require formalities before copyright attaches. They can’t require you to pay a fee. They can’t require you to put a notice on your work. They can’t require you to register it actively. It has to be automatic. So basically all these charges that you – why did you copyright your book?
00:34:18
Well, I didn’t copyright my book. What they’re saying is I see a copyright notice in your book, so therefore you’re hypocritical. Well, but it’s true that I have a copyright in my book. The state gives me a copyright in my book whether I want it or not. Whether I say it or not, it’s there. So I’m just stating the truth, and putting the date in there is useful for some purpose, and stating that I’m the copyright holder is useful because now people know who to come to, to ask permission to reprint it. So you have to remember that copyright is automatic. It’s a very important point that is widely misunderstood by advocates of IP.
00:34:57
As I say in one of my blog posts, it’s sticky. It’s really hard to get rid of. Some people say why don’t you just put a notice on the front of your book saying I hereby get rid of my copyright? Well, you could put the notice, but it wouldn’t actually have the effect. I mean what if you put a notice on your body saying I hereby get rid of my human rights? I mean does that mean you’ve actually given up your human rights? No. It wouldn’t be effective to do that. So unfortunately the law doesn’t even allow you to have an easy way to get rid of your copyrights.
00:35:33
00:35:37
Okay, I’m going to skip slide 12. That’s kind of a joke here. But the point here is on slide 12 it’s not a – don’t think of it as a verb. Think of it as a noun. You have a copyright, but you cannot copyright something.
00:35:53
00:35:58
Kevin asks a question privately. Kevin, I don’t know if you meant that as privately. It seems like a public question. Maybe you should try to change your setting to address everyone. But Kevin asks does copyright automatically apply to formulations of combination medicines and nutritionals? I’m not quite sure what you’re asking, but I don’t think so. I think what you’re talking about is what would be covered by a patent. Copyright covers – think of it like artistic expression, originality. When you formulate medications and nutritionals, that’s a functional thing. Okay, it has a functional purpose. So that probably would not be covered by copyright. Copyright covers things like novels, lyrics to a song, or the song itself, a painting, a sculpture, photographs, software.
00:36:57
We have another question here. Gwendolyn asks when an author claims that their world in which a story takes place is copyright instead of just the words and that you can’t write anything authentic, are they speaking to derivation or trying to assert something that they don’t actually have? That’s a good question. I think – well, they might not understand copyright law when they talk like this. But I think they’re talking derivative works. So in other words, if you use the same background world that they created, that would probably – so do a sequel, let’s say. That would probably be a derivative work. Now, as the copyright holder, they are the ones who have the right to authorize or to prohibit people making derivative works. So that’s what they’re talking about. It could also be a trademark issue, but probably it’s the derivative work of copyright.
00:37:48
Matt asks what about covers of song? Would they be a violation of copyright law if the cover artist did not ask for permission? Yes because it would be – that would probably be a – it could be either a reproduction or a derivative work. If it was like an attempt to reproduce the song, even though it’s not a literal reproduction, it’s close to it. It’s a reproduction of the song, or either that or it’s a derivative work. Either way, you have to get permission.
00:38:15
Now, let me just say that there is this legislative thing in the US called ASCAP. I forgot what it stands for. It’s A-S-C-A-P. It’s sort of like a legislative intermediary agency that has established royalty rates for using music, commercial music. So you can actually someone’s song if you just pay the established rate in the ASCAP manual or something. I really don’t understand it. But it’s based on copyright in the first place. Ethan, another one please. Get me a regular water this time.
00:38:55
ETHAN: Okay because they’re bigger.
00:38:57
STEPHAN KINSELLA: Yeah, that’s right, Gwendolyn. Okay, so let’s go on to slide 13. This – by the way, I won’t test you guys on this, but just take a look at slide 13. This is a flowchart that allows you to determine whether – or when the copyright expires in a work. You can see it’s very complicated. It’s even more complicated than this. This just shows you how arcane these statutory legislative systems are.
00:39:30
Donald asks when is copyright obtained? It’s certainly when it’s published by a publisher, but what about works like blogs? Well, if you look at the statute, it says you have a copyright as soon as an original work of authorship is fixed in a tangible medium of expression. So that’s when you have it. As soon as you write it down, you have copyright, so as soon as you publish a blog, that minute you have copyright. And, in fact, you probably had it before that when you were drafting it. It would be hard to prove it, but you have it as soon as you do that.
00:40:15
00:40:22
Okay, and if you think about it, it doesn’t really matter when you have it because it lasts until 70 years after your death. So the starting point is only going to matter once you’ve made it public really. Now, a patent is a little bit different than copyright because, number one, you have to apply for it. You have to actually file at the patent application with the United States Patent Office. What the patent covers is it gives you a property right in inventions. That is, a device or a process or a combination of materials like a new drug that performs some useful function. What it does, it gives you a limited monopoly on the manufacture, use, sale, or import of that invention.
00:41:13
Now, this is another thing that’s hard for non-patent attorneys to understand, but patents do not give you the right to practice your invention. They do not. It only gives you the right to stop someone else from practicing your invention. And I’ll give an example in a minute of how that works. Now, to get a patent, you have to, as I said, file a patent application, and it has to qualify by the rules. And the rules say, number one, it has to be the type of thing that you can get a patent for. That’s called patentable subject matter. Patentable subject matter, which would be useful inventions basically but excluded are things like laws of nature, natural phenomena, and abstract ideas. So you cannot get a patent on E=MC2. You cannot get a patent on a pure mathematical algorithm.
00:42:23
And as of probably next month when this new patent law passes, you can’t get a patent on a business method or a tax reduction strategy, things like this. What is the term of patents? Well, they used to be 17 years from the date of issuance. So you file a patent on day one. It might take one year or two years, three years, five years, sometimes 50 years to issue. The period between when you file it and when it issues as a patent or when you give up on it, which is called abandonment, it’s called prosecution. It’s a weird word, but it’s called prosecution. That’s why patent attorneys like me are called patent prosecutors. That means we deal with the patent office to prosecute a patent application.
00:43:19
So until 1995, the law was that once the patent finally issued, you had 17 years of term. It was – the law was changed in 1995 pursuant to something called GATT, another international treaty, G-A-T-T, and the WTO negotiations. It was changed to the current system, which is the patent lasts for 20 years from date of filing. Okay, but it doesn’t come into force until it issues. So if you take three years for it to prosecute, then you have 17 years left. If you take five years to prosecute it, you have 15 years left. If you only take one year to prosecute it, you have 19 years of term. So basically it’s still approximately 17 because most patents take about three years to prosecute.
00:44:07
One of the reasons for this change was the phenomena you might have heard of called submarine patents. A submarine patent – that was a metaphor used to explain the effect of some of these patents that – so you would file a patent, and then you would keep churning it. You could re-file it over and over again for years, and in the old law, it was secret. It was kept secret during prosecution. It wasn’t published until it was issued. So you would file a patent on day one. Let’s say 1950. Let’s say it’s an intermittent windshield wiper idea or something like that, right?
00:44:46
In the meantime, ten years later, someone else invents the same idea, and it starts being used widely in the industry, and you’ve got this patent going secretly the whole time. And you keep it churning the whole time, so the market gets bigger and bigger so that when you finally let your patent issue, you’ve got a lot of people you could sue. So the idea was 50 years later, 20 years later all of a sudden this patent would emerge like a submarine that had been hidden and that emerges. They were called submarine patents. And it would just totally floor the entire industry because now this guy could go and extort or strike the patent royalties from the entire industry like windshield – intermittent windshield wipers or lots of cases like this.
00:45:28
There’s a guy named Jerome Lemelson who did this. He was notorious. He was an inventor. He had like 100-200 patents when he died, and he was worth like $500 million when he died from all the royalties he had extorted from companies. I think his patent attorney was worth $100 or $200 million himself. I mean there’s the Lemelson Foundation out there. I mean everyone thinks it’s great, but it’s really kind of disgusting in my view.
00:45:56
Now, if you play that game, the longer you wait during prosecution, you’re eating into your patent term. So if you take ten years to prosecute your patent, then you only have ten years left. Furthermore, under the new law, most patents are now published 18 months after they’re filed. So even if you file it on day one and you keep it prosecuting for ten years, it’s going to be public for most of that time. So people are aware that it might be coming.
00:46:29
Okay, so patents are about 17 years. You can think about it, 17-20 years. Now, a patent is similar to a copyright. It allows you to go to the court. Well, it allows you to go to a state agency and petition for this monopoly grant, and then you can sue competitors in the states courts. And again, you can penalize people for infringing your IP right. You can get an injunction from the courts to make them stop, or you can get an award from the court making them pay damages, some of their money to you for violating your so-called IP rights.
00:47:08
Now, there are different types of patents. In the US, there are utility patents, plant patents, and design patents. Now, almost every patent you’ve probably ever heard of is a utility patent. That means it has useful or function. That’s just a regular type of patent, what we call the utility patents. There are also plant patents for asexually reproduced plants. And design patents are these weird hybrid of patents, which covers the ornamental aspect of a design. It’s kind of like a hybrid between a patent and a copyright, and to be honest, not many people understand how they work.
00:47:51
I don’t quite understand how they work. I’ve never filed a design patent in my life. But the basic patent you’re going to hear about is a utility patent. And by the way, design patents have a – and I think plant patents too have a different term. They don’t last as long as utility patents. They have a shorter term. But the utility patent, let’s focus on that because that’s the primary type of patent that is granted. You get the patent by filing a patent application with a government agency.
00:48:23
In America, it’s the US Patent Office, and most countries have their own patent office. By the way, in some of the countries, there’s a utility model type of patent application, which has a shorter term. It’s a technical difference, so let’s not go into it. But there is a UN, or a utility model patent in other countries. But anyway, so if you want to get a patent, you file a patent application with the agency, and an examiner examines it, and then he issues if he thinks it satisfies all the requirements.
00:48:57
It has to be patentable subject matter. You have to be the inventor, has to be new or novel, has to be non-obvious or what’s called has to have an inventive step in European countries, and it has to have utility. That means it has to actually work. So, for example, a patent for a perpetual motion machine would be denied automatically because modern science doesn’t believe perpetual motion machines can work. You couldn’t get a patent on the car because the car is known already. It’s not new. You couldn’t get a patent on a car with five wheels because that would be just a non-obvious change to a current four-wheeled car, for example.
00:49:46
So you have to have all these things. And I already mentioned what rights it gives the holder, the right to exclude others from making this device. I don’t know if I have a slide on this in this – in today’s lecture, so let me explain what I said earlier that why the patent does not give you the right to make your invention but only the right to stop others.
00:50:09
Let’s imagine you were the first person to think of a stool, so you invent a stool, which is a four-legged structure having four legs mounted to a seat member for allowing a person to sit on it. Okay, so you get a patent on the stool. Now, I see the stool and I see people sitting on it, and I think, hmm, I could make this stool better if I put a back on it. So I get a patent on a chair, which is a four – a structure having a seat member connected to four legs and with a back member attached to the seat member. Okay, so basically it’s a stool with a back. Now, I can probably get a patent on that, but I couldn’t use it because it would still be a stool. It would still be a device with a seat and four legs.
00:51:08
So I wouldn’t be able to use the stool or sell the stool, and the guy that sells the stool wouldn’t be able to make a chair out of his stool. He wouldn’t be able to add a back to it because I have the patent on a device with a seat, four legs, and a back. He wouldn’t be able to do that. So in that case, we would probably make a deal with each other and cross-license to each other. We would make – I’m going to give him permission to make mine. He’s going to give me permission to make his or something like that, or one of us would buy the other out.
00:51:39
Does that make sense to everybody? You have to realize that basically having a patent is not permission to do something because having a patent doesn’t guarantee that your device doesn’t infringe on someone else’s patent because it’s not examined for that. The examiner doesn’t look at every patent out there to make sure you’re not infringing. His job is to make sure your patent is new, not that it’s not infringing. And if you think about it, if there’s a stool known out there and there’s a patent on the stool, adding a back to it could be a new idea, but it doesn’t mean that it doesn’t – it’s not covered by the stool patent.
00:52:22
Okay. I’m going to skip over this. This is a little bit of inside baseball, but the patent itself has certain parts. It has a title. It tells who the inventor is, who the owner is if it’s different from the inventor, has a description of how you make this thing and drawings to illustrate it, and then finally it terminates in claim, which is what you have a property right in.
00:52:46
I have an example here on slide 18 of what a patent looks like – what are the claims of a patent. Patent claims are always one sentence. It starts with a number and with the letter A or the, with the word A or the, and then it ends with a period. It just lays out the elements that you have to have if you want to infringe this patent claim.
00:53:10
Now, one thing that may be counterintuitive is the longer the patent claim is, the narrower it is because the more elements it has that you have to meet to infringe that claim. A really short patent, like if I have a four-word patent or a short – like if I had a patent claim on – I hereby claim a device having a body. I mean that would cover almost everything anyone ever sells. So the shorter it is, the broader it is. The less words, the less elements, the broader it is, so every element in a claim has to be present in an accused device that is accused to be infringing for it to be infringing.
00:53:54
There is such a thing as dependent claims, which I’ll skip over here too because this is kind of technical detail which you really don’t need to know. This is the front page of a patent – slide 20 I’m on now. This is the front page of a patent, which I actually wrote for my company, and this is on a laser. And you can see it’s got – the front page has the abstract. Let me see if I can my laser pointer going here. No, I’ll give up on it. Anyway, that’s what the front of a patent looks like. This is some of the drawings that come after the front page, some of the figures, which illustrate how the device operates. Okay, and then this is the detailed description with the background and then the detailed description and then the other claims.
00:54:47
This is a chart. It’s kind of a funny chart called Patents Progress based upon, oh, I got this wrong last time. Not Milton – who is it that did patent – the Pilgrim’s Regress? Someone tell me. Anyway, there’s a – it was either Milton or one of those guys. Anyway, this shows the – was it Bunyan? It might have been Bunyan. Anyway, you can’t see the details here, but it kind of shows from the beginning all the way to it’s like heaven at the top there when you finally get a patent issued. So this is a patent lawyer’s sort of way of looking at things. This is a flowchart that shows just one minor aspect of the patent prosecution process.
00:55:33
Okay, and then this is another flowchart. I actually read Lewis’ Pilgrim’s Regress. I’m trying to remember who did Pilgrim’s – was it Pilgrim’s Progress? Okay. So I can’t remember. Anyway, this is a chart here on slide 27. It’s a flowchart showing how you evaluate when a computer-implemented invention is patentable or not. I mean so I’m just showing you how detailed and arcane this whole body of law is.
00:56:08
I’m going to give you a few examples now, and I think we’ll take a break in about five minutes at the hour, and then we’ll come back and do a few more slides, and I’ll deal with some questions. This is – I think this is a design patent, but I’m not sure, but basically it’s like a bumper guard that’s shaped like a Holy Bible, and I guess the idea is you dissuade someone from hitting your – the rear of your vehicle because they would see the Bible there. This is a toe puppet. I’m on slide 29 now. Someone got a patent on actually a toe puppet. This is basically a peanut butter and jelly sandwich without a crust. Someone obtained a utility patent on this.
00:56:56
00:57:01
Slide 31. Someone came up with a patent on pumpkin – or jack o’lantern I guess, looking garbage bags, so I guess they figure that there’s a functional advantage to having a garbage bag looking like a jack o’lantern around Halloween time, right? You can put your trimmings or trash outside, and you can decorate your yard at the same time.
00:57:25
This one is a patent on a Christmas tree stand shaped like Santa Claus so that you sit it by your tree, Christmas tree and you can water your tree at the same time. This is an initiation apparatus for a pledge for a fraternity. This is an old one from 1905 if I can read the numbers right.
00:57:48
Now, this is a patent, a famous one here, an infamous one, using a laser pointer to exercise your cat. This would be a method patent. And this is a pat-on-the-back apparatus, so if you’re feeling down or need your self-esteem boosted, you just pat yourself on the back with this apparatus. Someone actually has a patent on that. Well, I guess it’s expired by now. It’s ’86, ’96, ’06. Yeah, it’s expired by now. I’m going to skip this one here. This is a pooper scooper. I’ll skip.
00:58:24
This is a buttocks-cleavage-revealing feature of some jeans, so basically having a hole in the back of your jeans. Someone had a patent on that idea. This is an older one. It was a coffin attached to a little mechanism where if you wake up inside the coffin, if you were actually buried – accidentally buried, you could alert people that you weren’t really dead yet. This is like from 1891 when people were buried before they were embalmed, and on occasion people would be buried when they were actually still alive.
00:59:03
This is a method for concealing baldness. Here’s a method of putting in golf, so anyone – any golfer who uses this grip when they’re putting would actually infringe this patent. Well, let’s see, ’97, ’07. Yeah, it’s still – it’s probably still in force. This was a way of determining breast size by directly measuring the breasts instead of by, I don’t know, whatever the other method is. Okay, so let’s take a pause here. Let’s take a five-minute break. It’s 9:01 my time, 10:01 New York time. And let’s come back in about five or six minutes past the hour. We will resume shortly.
00:59:51
[Five-minute break]
01:01:45
Okay, while we’re waiting, is anyone on line right now that has a microphone? I could test the passing-the-mic feature, which Webex has, which we didn’t have on the other, see how that would go. Anyone here have a microphone? You want to try the pass-the-mic feature? Let me know if you’d like to try it, and we’ll try to pass the mic to you. Okay, let me see Karl here. I’m just – Karl, I’m just going to pass the mic to you. Hello, hello, hello, hello. Karl, can you hear me? Can you say something? Oh, hold on. Let me unmute you. No, he’s not muted. He has the mic, and he’s not muted. Karl, are you speaking? Because I can’t hear you. Maybe Karl’s muted himself. I don’t hear it. Who else wanted to try? Lloyd – let me try someone else. Let me try Lloyd. Lloyd – I’m trying Lloyd right now.
01:03:15
LLOYD: Hello?
01:03:16
STEPHAN KINSELLA: Hello.
01:03:17
LLOYD: Can you hear me? Hey.
01:03:18
STEPHAN KINSELLA: Hey Lloyd.
01:03:20
LLOYD: Hey.
01:03:20
STEPHAN KINSELLA: Maybe Karl had his own mic muted or something. I’m not sure. This is a good feature. We may use this in some of the Q&A sessions to have brief interchanges between – or questions or comments from some of the participants. Good. So this sounds okay. Can everyone else hear Lloyd?
01:03:43
LLOYD: Hello. It’s Lloyd.
01:03:48
STEPHAN KINSELLA: Oh cool, very good.
01:03:49
01:03:53
STEPHAN KINSELLA: Okay, well, we’re ready to go. Let me pass the mic back to myself or see how this works. Okay, excuse me a sec. Okay. Okay, can everyone hear me? I think we should – okay, so we’ll start in just a second. I think what we’ll do is this. We have – I’m happy to go a little bit beyond time. I don’t want to go too far beyond time because I’m conscious of the strange time zones of some people here or the late time zones for them. So let’s do this. I’m happy to answer questions for the next half an hour or so, but unless a lot start rolling in, what I’ll do is I’ll keep going on the lectures, but you can give me your questions at any time, and I’ll stop and answer them.
01:04:59
We’ll just see how far we get on the slides. So I’m monitoring the chat. If you have questions, put them in the chat or interrupt me. Otherwise, I’m going to just keep going. I’m going to talk about a few – okay, here’s the first question from Lloyd. Can you enforce a US patent outside the US? No. Patents are geographical. They’re state-based or nation-based. So if you want to – if you have an invention, you – if you want a patent in China, you need to file a patent in China.
01:05:41
If you want one in the US, you have to file one in the US. Typically what you do is, if you have an important idea, you file it. Let’s say, if you’re an American inventor and you file an American patent application, and then within the first year you file a PCT—that’s patent cooperation treaty—application, which is sort of like a placeholder. And that gives you like 30 months of time to decide whether you want to file in other countries claiming the priority through the PCT filing back to the US filing.
01:06:17
So, for example, on day one I file in the US. Six months later I file a PCT application. A year and a half later when I realize the US patent is going great, or the invention – I’m going to sell it now and it’s doing well on the market. It’s worth for me to file it in China and Japan and Canada and Europe and Brazil or wherever. So then I might file three or four or five other national or regional applications, so I might file a European, Japanese, and Chinese application for example.
01:06:51
Those can be expensive because you have to use a local law firm. You have to pay a local filing fee, and you usually have to pay translation fees, especially for Japan and China, which can be more expensive than the filing itself. So you’re talking on the order of, say, roughly $10,000-$20,000 per country per filing for prosecution.
01:07:13
If you wanted to cover half the globe, it can cost you half a million dollars just for one patent application. Max says drugs and medical devices are approved by the FDA, but are they also patented? They can be, and they usually are, so yeah. Usually you’ll get a patent, and then you – but like I said, a patent doesn’t give you permission to do something, only to stop other people. So you have to – if it’s covered by the FDA, you have to get FDA permission too. Now, there’s a process that’s built into the patent law, which says if you have an administrative delay caused by the US government, then you can extend your patent term.
01:08:04
Now, there’s a limit on it, so let’s say that you have a patent on your drug, but the FDA takes three years to approve it. Well, then you can tack three years onto your patent term because they figure that it’s been wasted during the time you’re waiting for approval. Go Olivo – you might be wrong, but do you remember seeing a video where I mentioned IPs aren’t compatible with capitalism? Can I elaborate?
01:08:29
Well, I think I’ll go into this in other – the further lectures. We have six whole lectures to go. The first lecture is more to familiarize you with the – what IP is and to the extent we can get to it and some of the history, which we can cover briefly next time. But it’s not compatible with capitalism because basically they’re monopoly grants by the state, which allow you to tell other people how to use their own property rights. It’s that simple really. This is the basic problem with patent rights and copyrights.
01:09:02
Lloyd says when people complain about drug patents in Africa, are they actually filing patents in Africa? Well, I’m not sure what complaints you’re talking about. What you may be – I’m not sure what complaints or what people you mean. Are you saying that the people that are in favor of the western-style drug patents are complaining that the drugs can be sold or knocked off really cheaply in Africa? That may be what you’re talking about. That’s only the case because they didn’t take the time to apply for a patent application in those African countries, for example.
01:09:43
Well, you said – Lloyd said AIDS drugs, but again, I’m not sure what you mean. I mean I think the main complaint is that a lot of other countries don’t protect patent rights as much. So they can knock off drugs and other things more easily. Eric Smith – trade secrets – does the government enforce these, or are they just secrets? I thought these were forms of IP consistent with market principles and didn’t require state – special state privileges.
01:10:15
Well, you would think so. Actually no, they’re not just secrets. If they were just secrets, you wouldn’t need a doctrine of law. What they are is – it’s a legal right to get the court to stop someone from releasing your secret so long as it’s not widely made public yet. So, for example, let’s say that – this is probably a bad example because Coca-Cola’s formula is apparently not a secret anymore. It’s – I think it’s apparently a myth that the Coca-Cola secret is a trade secret. Apparently it’s been known for a long time. It’s just people don’t want to use it. They want to use their own formulas. But anyway, let’s assume the Coca-Cola secret was a trade secret.
01:11:01
All that means is they’ve taken reasonable steps to keep it secret. It doesn’t mean they can guarantee that it’s going to remain secret. So let’s say one in – let’s say someone finds out the secret somehow. Now, if they reveal it to the world, they publish it on the internet, then it’s no longer a secret. So Coca-Cola can do nothing except possibly sue that person for some kind of breach of contract or something like that. Let’s say they’re a former employee. But let’s say that they haven’t yet revealed it to the world, but they’re about to reveal it to a competitor like Pepsi Cola. Coca-Cola could go to court and get the court to issue an injunction, and the court would tell Pepsi and the former employee or whoever this person was you may not reveal this secret to anyone else. So as long as it’s still a secret, the court will help Coca-Cola try to keep it contained, and they’ll help them with the threat of injunctions.
01:11:55
01:12:00
Okay, is that clear? Okay, ask away anything else. In the meantime, I will go on with slide 43. Just talking about a few common misconceptions and myths about patents and IP. Number one, you’ll hear all the time that if we get rid of patents we’re going to hurt the small inventor, or that’s the primary motivation of the patent system is to help small inventors.
01:12:29
Well, most patents don’t benefit anyone. They’re just wallpaper, especially small inventors. So they’ll spend $10-, $15,- $20,000 on a patent attorney to get a piece of paper they can put in a frame and show their friends, but they never use it. They’re used primarily by large corporations to amass – excuse me – patent arsenals, which they assemble for defensive purposes. So all these large companies have hundreds of thousands of patents, which they use sort of like as a picket fence or a porcupine defense. They have them to prevent their competitors or other people from suing them.
01:13:10
Like Intel may be afraid to sue Microsoft not only because they do business but because if Intel sues Microsoft for patent infringement, for infringing one of Intel’s patents, then Microsoft is going to look through their tens of thousands of patents and try to find one that Intel might infringe and counter-sue them. So companies with lots of patents either – they tend to avoid each other. So they basically have freedom to act because they have these patents. Now, smaller companies don’t have a defensive weapon they can use, so the companies with patents feel comfortable suing them because they’re defenseless. So basically patents erect barriers to entry and protect the larger companies compared to the smaller companies.
01:14:00
Another myth about the patent system is that it’s a first to invent. Now, this is actually true in my understanding of most of the patent systems around the world but not of the US system. The US system, ever since the beginning, has been based upon a first-to-file. In other words, if two people have the same idea and they each file a patent application on it, the one that would win in the dispute, which is called an interference proceeding, an interference proceeding. The one who would win is the one who invented it first if he could prove that even if he filed second.
01:14:43
Now, that actually is about to change apparently. I think just a couple of days ago Senate Bill 93 – I’m going to blog about this later today or tomorrow probably on the Mises blog and also on – I’ll prep it here – my blog. You might want to follow this during the course, c4sif.org. That’s my Center for the Study of Innovative Freedom, and I put a lot of regular material on there about intellectual property happenings.
01:15:18
Anyway, there is a patent reform bill that’s pending in Congress right now, which I think it passed before the Senate 95-5. So I suspect it will pass in the House and Obama will sign it, and it will actually change for the first time the US system to the first to – first-to-file system.
01:15:39
01:15:43
So the funny story about this is Ayn Rand, if you read Ayn Rand’s defense of patent rights in her – I think it was in Capitalism: The Unknown Ideal. She tries to defend the first-to-file system. She tries to explain why America is justified in having a first-to-file patent system, which we did not have. We had a first-to-invent system. So she actually didn’t understand what the law was. She thought it was first to file. It was really first to invent. She thought it was first to file, and she tried to explain why that was the best way to go. So you can see she was trying to reverse engineer or justify what the American system was.
01:16:23
01:16:27
There’s another myth out there about poor man’s patent and poor man’s copyright. This sort of idea, I get asked about this about every six months from someone. And they say, well, can’t you just put your idea in a sealed envelope and mail it to yourself and hold onto that as proof about when you came up with it? I mean this is a crazy idea that – I mean I’ve been practicing patent law and IP law for 18 years, and I’ve never seen anyone do this in a serious way. This is some kind of urban legend, and this is not the way to go. I don’t think it would do any good at all. You wouldn’t be able to prove that it was legitimate.
01:17:08
This is a common – you’ll hear this over and over again. Some people actually do it, but I don’t think they’re doing any good. They think they’re doing good, but they’re not because what are you going to do? Go to court and prove that you invented this on this date? I mean first of all, if you understand copyright and patent law, you have to understand why you would even ever need to prove this.
01:17:30
First of all, first invention is not a defense to patent infringement. Second of all, copyright attaches as soon as you have it fixed in a medium of expression, so as long as you can prove you authored it – I mean that’s not the best way to prove you authored it. Now, it could be theoretically a way to prove when you conceded the idea for purpose of a battle with another patent key in an interference proceeding that I mentioned when you’re trying to prove you invented the idea first. But if the law changes next month to where it’s first to file, then that’s going to be irrelevant too, so this is a weird myth of patent law.
01:18:13
A lot of you may have heard this idea too, these kind of conspiracy theorists, and they’ll say things like all the big oil companies or the big car companies or whatever have – they’ve bought up all the patents to these great ideas that would give you 100-mile-per-gallon fuel injector or carburetor ideas. The problem with this is that patents are public. I mean they’re all published. So even if Exxon or whoever has bought up the 10 or 15 genius ideas that would allow you to get 100 miles per gallon, I mean those ideas are still published. So the proponent of this conspiracy theory should be able to do a pre-patent search on usppo.gov and show us the patents that were bought. And you could even search for who’s assigned – who owns these patents. I mean if it’s been assigned to Exxon, then it would show that Exxon or someone owns it. I mean – so these are crazy allegations. I mentioned earlier already. I knew I had this in a slide somewhere. I’ve already mentioned the bottom thing on slide 43 about the right to practice. Again, for copyright, remember you can’t copyright something. It’s automatic.
01:19:31
Number two, for patents, they do not give the right to do what you have a patent on, only the right to stop other people. Now, you can use this right to your advantage quite often, and quite often you do have a right to make your invention because you’re not infringing someone’s patent. But having a patent doesn’t guarantee that you don’t infringe other people’s patents, and I already gave you the stool example, the stool/chair example.
01:19:54
Another kind of common myth about the patent system is this sort of mythology about the loan genius or the towering genius, this guy that’s in his garage toiling for years, and he comes up with a eureka moment and comes up with something that benefits mankind. The truth is that most innovation, if not virtually – excuse me – virtually all innovation is part of a cooperative collaborative process, and usually it’s incremental in nature. And of course, virtually every innovation is an improvement on the current state of knowledge. So even Einstein or – of course Einstein couldn’t get a patent on his inventions or his formulas because they were abstract ideas.
01:20:47
So he wouldn’t be rewarded for his relatively or photon discovery or E=MC2, which he didn’t come up with anyway. But anyway, so this is another problem with patent law, by the way. It’s selective and arbitrary in what it covers. It would reward practical gizmo making but not fundamental physics and scientific research. And by the way, simultaneous innovation is very common. In the history of patents, most of the famous inventions you’ve heard of, there were other people that invented this either before or at the same time as the inventor who’s given credit for it in history.
01:21:32
So simultaneous invention is a very common thing. And the point of this is that it’s often said that if you don’t grant someone a monopoly in their inventions, then they would never have been created in the first place. Well, this is just factually false. I mean first of all, it would be invented eventually probably, maybe soon after or long after, but it’s going to be invented by someone eventually.
01:21:58
When technology gets to a certain stage, then it becomes ripe for all these creative people to use it and take it to the next level. I mean the light bulb would eventually have been invented even if Edison hadn’t done it, for example. And not only that, like I said, quite often there’s other people working on it at the same time. There are three or four people that came up with the calculus at the same time. Three or four people were working on the transistor at the same time. It wasn’t just Shockley.
01:22:28
Okay. There’s another misunderstanding about patents, and that is that patent infringers are just someone who copied your idea from you. In fact, you’ll see people like J. Neil Schulman will say, well, if you don’t want to – if you don’t believe in copy and patent and copyright, just don’t copy my damn invention. Well, but that assumes that patent infringement has to do with copy, but of course it doesn’t. Copyright does. Patent does not. Remember, to infringe someone’s patent, all you have to do is make, use, or sell the device that is covered by the claims of their patent. That’s it.
01:23:16
Even if you independently invented it, that’s not a defense. It’s not an excuse. Even if you invented it first but had it secret, kept it private and someone else independently invented it and patented it later, they can stop you from using your own ideas. In fact, most patent lawsuits, the plaintiff never even alleges that the defendant copied what they did, and in fact, from the statistics I’ve seen and from my own experience in the lawsuits I’ve been involved with – I have never in my experience seen a case where the client that I’m talking to who was accused of infringing a patent or who’s worried about infringing a patent – they never did learn about it from the other company’s patent or even their product.
01:24:12
Usually they’re just toiling away, making their own products, and they’re coming up with different designs to make their products work. And as they’re doing this, someone says, hey, the way that our circuit is configured I’m afraid it might look too much like claim 17, the patent numbers 6 million, 221, and 512, so they go study. They get a patent lawyer. They study the claims, and they go, I’m not sure. I mean I don’t know if it’s the same thing. It looks kind of the same, but I’m not sure. But they point is they didn’t get it from the patent. They didn’t copy it. They came up with it themselves, but now they’re in danger of infringing the patent, and this is the common way patents are enforced. You just allege that someone infringes your claim. You never allege they copied it because they usually didn’t.
01:24:59
01:25:04
Okay. Let’s go to slide 45. And by the way, any questions are welcome now. We’re getting close to – I’d be happy to go another, say, ten minutes or so or more if we need to. Another – as I mentioned, there’s another myth that we had copyrighted common law, but that was what’s called common law copyright. As I mentioned, that was more like a trade secret right. That was just a very narrow right to prevent publication of an unpublished manuscript.
01:25:39
There’s a good quote here by Lord Camden, and he said that claims that copyright arose in common law – I’m reading my quote here on page 45 – they are founded on patents, privilege, Star-chamber decrees, and the bylaws of the Stationers’ Company. And by the way, we’ll get to the Stationers’ Company in the history session later next class. And all of them, the effects of the grossest tyranny and usurpation; the very last places in which I would have dreamt of finding the last trace of the common law. So disabuse yourselves of the myth that copyright as we now know it existed at common law.
01:26:19
Also, it’s commonly said, especially by many libertarians who advocate IP, that it’s a natural right and that it’s based in the natural law. This is actually not true. It’s ahistorical, and we’ll get into this later in the history. Also, it’s the evidence for those who have utilitarian approach to patents and copyrights and say that we need them because it encourages innovation. It encourages creativity. Without it, we would have less. We would all be worse off. Well, they just don’t have any evidence to back this up, and they never even try. It’s also based upon this myth that we have a benevolent state. We have a benevolent FDA. But the truth is that the state taxes and regulates, extorts, penalizes, and incinerates and bombs things. It’s really not out for the little guy, and giving them a tiny monopoly privilege they can use doesn’t overcome for all the damage the state does to them in other ways. So we’ve got to get rid of this idea that the state is looking out for the little guy with these monopoly grants.
01:27:35
All right, let’s quickly go over the – in the remaining time we have over the other types of IP. I already mentioned trademark, what it is. Here’s kind of the more formal definition. It’s a word, phrase, symbol, or design used to identify the source of goods or sources. It’s sometimes called a service mark in that case, by the way, and to distinguish them from the goods or services of others. And as I – Coca-Cola – I’ve got the little R in the circle there. It means registered trademark, identifies their products as coming from them, Pepsi – as distinguished from Pepsi.
01:28:13
Okay, so what it does is it prohibits the use of confusing the similar marks to identifying your goods. And every ten years you can register the trademark over and over again. As long as the product and the company is in business theoretically they can last forever, okay, so every ten years. And I’ve already mentioned what trade secrets are. Some examples of trade secrets would be databases, customer lists.
01:28:44
Now, these are largely protected by state law, although there are federal aspects to it. Now, let me mention one disadvantage of relying on trade secret is that, as I mentioned, it’s possible for someone else to independently invent the – let’s say you’re using as a secret some invention, some innovative process to make a chemical or a process, to make a chemical or something or a product. If someone else comes up with this 30 years later and they file a patent on it, they can then stop you from using your own invention even though you were first because they have a patent. You didn’t copy it. In fact, you came up with it first, so this is one danger of trade secrets.
01:29:31
So this one problem of patent is that it makes people reluctant to actually use trade secrets. And, in fact, there’s another – I just had a debate with a patent lawyer in Ohio about IP law. And he pointed out that one advantage of the patent system is that it encourages disclosure of ideas that would otherwise be kept secret.
01:29:56
Thanks Danny. I’m going to stop in about five minutes anyway, so you won’t miss too much. Karl says doesn’t the FBI investigate violation of trade secrets? Yeah, I didn’t mention that but – so trade secret is largely state law, but there is a federal – I think it’s the Espionage Act, and there’s another federal law which makes it a federal crime in some cases to steal trade secrets. So they do investigate that sometimes. That’s correct, although the body of the law is still largely state-based like trademark used to be. Copyright and patent are completely federal-based in the US we’re talking about. But let me just mention one thing and I’ll wrap it up here.
01:30:42
What I was going to say was the original idea, if you actually look at the Constitution and the patent act, what it actually literally says is that if you file a patent application, then we’ll give you a monopoly. But if you think about it, this is like a bargain. What they’re telling the public is – I’m sorry. What they’re telling the inventor is if you tell the world how to make your idea, so we’re going to publish this if you disclose it. That’s why it’s called a disclosure or a detailed description. Then we’ll give you a monopoly. So the exchange is you get a temporary monopoly in exchange for telling the world about your idea.
01:31:22
Now, this also is said to work as an incentive to innovate, but the main literal incentive is to disclose your idea. The theory is that without a patent system, companies would keep everything secret, and so you have less free disclosure and trading of ideas. So the idea is that the patent system encourages disclosure of ideas earlier than otherwise. Even if you can’t use the idea yet, you can start studying it and researching it, and as soon as the patent expires, then you’re free to compete with the company and use the ideas, etc.
01:31:56
The problem is, number one, this – companies still do keep some things secret. So in other words, most products that are disclosed – I’m sorry. Most products that are patented, the innovative aspect of the product would have been revealed to public anyway by the selling of the product. In other words, if I have a new mousetrap design, if I start selling it, the public is going to see the new design.
01:32:31
So the patent system in that case, if I have a patent on that mousetrap design, the patent – the public is not benefited by the filing of the patent application because they would have known what the patent was like anyway. So the disclosure that it encourages is superfluous to what would have been disclosed anyway. So there’s very little new disclosure that the patent system encourages. On the other hand, as I mentioned, many companies are afraid of being sued for practicing their own inventions, so they’re afraid to keep things secret. So what a lot of these companies do, they cannot afford to file a patent application because it can be expensive.
01:33:11
So what they do is they publish their ideas in some journal or some publication service for a fairly minimal fee of $1- or $2- or $300. They publish it on purpose to make their ideas public domain or prior art to prevent someone else from independently reinventing this idea later and filing a patent on it. So the effect of the patent system is to force companies that are not getting a patent in exchange for this to reveal their secrets to the world defensively. So basically it distorts the market and makes companies give up secrets that they otherwise would have had a right to maintain just to avoid being the victim of a patent lawsuit.
01:34:02
I think I will stop here. If anyone else has any particular questions now, I’d be happy to answer them. Otherwise – so I’ll wait a second to see if anyone has any questions, and otherwise I will see you all. Let me ask. Would anyone be interested – would anyone here be interested in an office-hours session? Let’s say 1 o’clock p.m., 2 o’clock p.m. New York time on Thursdays. I don’t know if we would do that yet. I did that for my last course. I don’t know if we’d need to do that yet. I would do it if anyone wants to. I think I won’t do it this week because I didn’t mention it or didn’t list it, but I’m happy to do it if there’s a demand for it and a need for it.
01:34:51
01:35:06
I could do it on the weekends too. It’s hard to find the best time for office hours. We can discuss this in the course discussion page. Any further questions? Go ahead, Gwendolyn, about Feist. You can find Feist, by the way on the – just search it on Wikipedia, the Feist case. So Gwendolyn has a question about Feist. Go ahead. I’m waiting. Would the data in a wiki be considered a database under Feist?
01:35:48
Well, I guess that depends on whether it’s original. I mean if it’s just – even if it’s a mere compilation of data, like mere facts – I means in the typical example it would be a database or a map or a phone book listing, something like that, maybe seismic data, something like that. But I think a lot of wikis have original contributions, right? Just take a look at the Feist case. You’ll see how they formulate it, but it depends on what the wiki had, Gwendolyn. I mean if there’s an actual article written by individuals, I think those are creative – those are original works of authorship.
01:36:30
Those are typically going to be protected by copyright. Now, the wiki may attempt to have a creative commons license to make it somewhat open source. Whether those licenses are effective or not is a different question. I have some questions about that. In any case, they’re still copyright. They’re still protected by copyright. Gwendolyn says the software itself with the data is a different issue. I’m not sure what you mean. I thought a wiki was an online way of having a collaboration of adding information to something.
01:37:11
So what I’m saying is it depends on the nature of the information whether it would be a database or not. When will I cover – Donald says when will I cover “Questions for the Professor?” I usually cover them as they come in. If there’s some that I’ve missed, please point me to them. I try to subscribe to all the forums. Are there any that I’ve missed, Donald? I usually answer them dynamically during the week as they come in, or sometimes I’ll save them for a Q&A session. But as we may not have one at least this week I’ll answer them.
01:37:57
Gwendolyn says the software that runs the wiki might be under open source, but the data the wiki accesses is independent of the software. That could be. I mean we’d have to look at the particular case for the answer, but just basically think of original expressions of idea as protected by copyright. Mere data is not. Mere facts are not.
01:38:26
Matt said he read Against IP on his iPod and liked it and it didn’t take too long. Thank you. Thank you. I’m glad, and there’s an audio version by one of our members here, Jock. Lloyd talks about the Wikipedia has an explanation of the license they’re using. I agree, but the point is you wouldn’t need a license if it wasn’t protected by copyright in the first place. So whether there’s a license or not, I mean it sort of presupposes that there is a copyright in the data. So the first question is whether there’s a copyright in the information or in the material.
01:39:07
01:39:32
Okay, guys, so I will be in contact with you during the week on the forum, and any of you feel free to email me any time. I’ll type my email here. Again, that’s my email, not Danny’s. And otherwise, I will talk – I’ll see you on next Monday night. Goodnight, everybody. Enjoyed it.
01:39:55
Podcast (kinsella-on-liberty): Play in new window | Download (Duration: 1:42:16 — 93.6MB)
Kinsella on Liberty Podcast, Episode 171.
I was a guest yesterday (Feb. 6, 2015) on Albert Lu‘s “The Economy” podcast, discussing my recent appearance on Stossel [Stossel Show on Intellectual Property (Fox Business Channel, Jan. 30, 2015)]. The full episode is here; the portion including only our interview is included in this podcast feed.
Transcript and grok shownotes below. [continue reading…]
Podcast (kinsella-on-liberty): Play in new window | Download (Duration: 24:47 — 34.0MB)
Three letters-to-the-editor I wrote in the 1980s/90s that were never published are here, and repixeled below: on on inflation; one on gambling prohibition; one on free will (nature vs. nurture).
To The Economist (Nov. 11, 1992)
Editor, Letters Page
The Economist Newspaper
25 St James’s Street
London SWlA 1HG
England
Dear Sir:
In “Zero Inflation: How Low is Low Enough?” (November 7th) you assume that governments ought to pursue a low, stable price inflation rate in order to best benefit their economies. In a growing economy, however, a zero price inflation rate would require inflation of the money supply, which itself adversely affects market behaviour. Money inflation artificially lowers interest rates, sending false signals which cause malinvestments and temporary booms. These malinvestments must, ultimately, be liquidated by recession. Thus, the business cycle is born.
The “ideal” rate of price inflation is thus whatever rate—probably a mild deflation—accompanies a zero money inflation rate. In short, in order to avoid price inflation and harmful market disturbances, government should quit printing more money altogether.
Very truly yours,
N. Stephan Kinsella
Houston, Texas [continue reading…]
Kinsella on Liberty Podcast, Episode 170.
Episode 325 of the Tom Woods Show: Are Corporations Un-Libertarian?
From Tom’s show notes (with a few additions from me):
Corporations aren’t people, say protestors. Corporations are creatures of the state, say some libertarians. Is there any merit to these complaints? Should libertarians support the corporate form or not? That’s the topic of discussion on today’s episode, with guest Stephan Kinsella.
Related Writing by the Guest
“Corporate Personhood, Limited Liability, and Double Taxation”
“In Defense of the Corporation”
“Legitimizing the Corporation”
“Causation and Aggression” (with Patrick Tinsley)[See also:
- KOL115 | Mises Canada Austrian AV Club—Kinsella and the Corporation on Trial (2012)
- KOL100 | The Role of the Corporation and Limited Liability In a Free Society (PFS 2013)
- KOL 026 | FreeDomain Radio with Stefan Molyneux discussing Corporations and Limited Liability
- Left-Libertarianism on Corporations and Limited Liability
- Rothbard on Corporations and Limited Liability for Tort
- Comment on Knapp’s Big Government, Big Business — Conjoined Twins
- Defending Corporations: Block and Huebert
- Run! Run! It’s a Business in a Box!
- Legitimizing the Corporation and Other Posts
]
Book by the Guest
Book Mentioned
Robert Hessen, In Defense of the Corporation
Podcast (kinsella-on-liberty): Play in new window | Download (Duration: 31:29 — 28.9MB)
Stephan Kinsella is a libertarian writer and retired patent attorney in Houston, Texas. He has published widely on various areas of libertarian legal theory and on legal topics such as intellectual property law and international law. His publications include Legal Foundations of a Free Society (Papinian Press, 2023), Against Intellectual Property (Mises Institute, 2008), International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide (Oxford, 2020), and The Universal Principles of Liberty (2025).
My Failed Libertarian Speaking Hiatus; Memories of Mises Institute and Other Events, 1988–20192025
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