Below is an unedited (raw) transcript of my Yale speech “Balancing Intellectual Property Rights and Civil Liberties: A Libertarian Perspective,” available at KOL151.
Thanks a lot. And since we have a cozy group, I may sit if you guys don’t mind. I’ve never given a presentation sitting down except at home doing a podcast or something. I may stand up and pace in a little bit.
But that was an impressive introduction without notes. It makes me feel bad for having notes for mine. But just to help me keep on track. I think I’ll talk for a little while. I think I have a couple of maybe libertarian friends in the audience. Probably everyone else here isn’t. So I’m going to try to explain my probably non-standard views as clearly as I can so that at least you understand where I’m coming from. If you don’t like them or don’t agree, just realize you’ve pretty much won already. I’m not really a threat.
I’ll probably talk for maybe half an hour and then we can do Q&A. I don’t mind if people ask questions during this if I say something that makes no sense or needs clarification. We have a small group. So let’s do that.
The talk is “Balancing Intellectual Property Rights and Civil Liberties: A Libertarian Perspective”. Most of the time I speak, it is to a free market, libertarian or economics type audience. So I can take certain things for granted. And usually, lately, in the last five or ten years, I speak mostly on intellectual property for a couple of reasons. I’m an IP attorney. That’s what I do for a living. And I’ve also, for a long time, been involved with the Ludwig von Mises and other free market organizations. It’s sort of the hobby on the side. So I’ve always been a libertarian thinker and writer and interested in topics like rights theory, epistemology, economics, economics and law, those types of issues.
I started getting interested in intellectual property as a policy matter as a libertarian because I was starting to practice it in my profession around 1993. And something about IP bugged me. A lot of libertarians, the standard view of IP…let me just define what IP is.
IP means intellectual property. That’s a term that is used now to describe about four main types of law in the west. Patent and copyright are the two big ones. Trademark and trade secret are the two other standard ones. There are others as well like mask work protection for semiconductor works which is fairly new. It’s like a copyright. There’s boat hold designs for some strange reason. And in my view defamation laws should be regarded as a type of intellectual property. It’s not normally but it should be because it’s got a similar basis and a similar flaw.
So I started writing on this and researching it, trying to satisfy what was nagging me about IP as a free market, pro property rights advocate. The standard justification is that we need these laws to stimulate innovation, to protect our ideas. People have ideas that are valuable and because they created them with the fruits of their labor, they should own those ideas. That’s kind of the rough way people think about the reason you should own the rights to a novel that you wrote. You wrote it. You created it. Or you could have a utilitarian basis like if we don’t have a patent to protect your innovations or you don’t have a copyright to protect artistic works, then those things will be under-produced because people will be afraid of imitators and competitors as soon as they start producing the product or selling their novel..
And right off the bat, the way I’m characterizing this, you can probably start getting a sense of what I think is wrong with it. It’s basically protectionist and it’s against competition and there’s something wrong with that. So I looked at it and I finally came to the conclusion, after a few years of doing a lot of study, that the reason I couldn’t, and others had not come up with a satisfactory justification is that it is not justifiable. It’s actually a bad idea.
So I became fairly well known in some free market circles for some material I had written reviving this topic when it had laid dormant because, in 1985 when the internet arose, all these issues started happening again. We started seeing piracy and attempts by companies to sue people. It stopped being the domain of just specialists that you’d never heard of before, a few lawyers behind the scene, a few corporations. Until 1995, most people didn’t give much thought to these things, regular people or just non-specialists.
So the issue started getting attention. And when I wrote on it as an IP attorney I had some credibility. Plus I kind of have a radical position which I’ll get to. So that’s why I’ve spoken a lot on this topic. It’s never been my favorite topic. I don’t love IP law and I don’t love the topic but I spoke on it because not many other people could, I felt, and they hadn’t gotten it right yet.
So that’s a summary of how we got here. But what I found is that in sorting out the IP issue as an economist and as a legal theorist forced me to rethink a lot of other issues and made them fall into place and it made the whole system more cohesive and it helps provide a more solid foundation. So IP is an important topic. It’s not the only topic but it does have a bearing upon property rights theory, etcetera.
So, for this group, the idea was to talk about how do we balance IP versus civil liberties, by civil liberties and other freedoms: freedom of speech, freedom to own property rights, freedom to make a profit, freedom to compete? Why do we say we need to have a balance? Because this is the conversation you hear all the time in the media, by politicians. We have to have a balance. This is just a common language. We can’t get rid of IP but we can’t have it be much stronger because that’s going to start invading civil liberties too much, for example. Or it’s going to reduce innovation in the market too much. The patent troll problem, which some of you may have heard about, is getting out of hand. So it’s this idea that you have to have both but they’re kind of in tension with each other.
This idea of a tension between things is very common. It’s not just IP versus civil liberties. It’s like anti-trust versus patent law is one because anti-trust is the attempt by the state to reduce so-called monopolies. And yet a patent is the grant by the government of a temporary protection of your business which is like a monopoly. So the courts have these conflicting policies to reconcile. So they try to balance them. And they try to say, well, you can use your patent to exclude competition but you can’t abuse it because then you’re going to get into anti-trust territory.
So you see this all the time. You see it with things like the drug war and the draft. On their face, prima facie, these things seem like they restrict individual freedom. Right? But then people say we need these things to defend the nation or to stop people from having the scourge of drugs. So, again, competing interests or competing tensions.
And there are lots of examples we could go into. Freedom of speech vs. the desire to control corporate campaign finance contributions. If you prevent someone from advertising or publishing something right before an election or donating money to a campaign, you’re restricting their freedom for some allegedly higher goal. So, again, we have First Amendment freedoms versus others.
So we’re used to thinking in terms of tensions in the law. Now to show just…I want to give you some illustrative examples. You may have heard some of these. That’s why I have my list here. So I don’t forget. And I’ve got ten times this on some of the websites I publish on. And that’s only a tenth of what I’ve seen. I can’t even keep track of all the horror stories we see every couple of days about copyright abuse, patent abuse, trademark abuse, etcetera. So I’m just going to run through a few examples. These are just to illustrate that we at least have a reason to see a tension. We at least have a reason to believe that there’s at least some infringement upon private property rights, the free market, capitalism, individual freedom and free speech.
So I’m just going to quote from this recent New York Times article. I’m going to talk about some copyright examples first.
“Early in the morning of June 30th, 2010, Hana Beshara awoke to a sharp rapping on the door of her condo in East Brunswick, New Jersey. ‘I heard a bang, bang, bang’, she said. ‘I’m thinking it’s Amazon’.
It wasn’t a delivery. It was a team of federal agents from the Department of Homeland Security wearing bullet proof jackets and carrying guns. She sank to her couch and watched as they went through her belongings, confiscating files, her flat screen TV, several computers, cell phones, her Playstation 3, anything with a hard drive”.
Ms. Beshara was one of the founders of a site called Ninja Video which at the time was one of the most popular places online to illegally stream and download TV shows and movies. You might take the side of the law that allows this but you can at least see that it’s causing a search and seizure, a very invasive one, in the name of protecting copyright.
Some of you might remember Napster which was shut down by copyright around 2000.
And recently Aereo has pretty much been driven out of business because of a copyright ruling at the Supreme Court.
And just a couple of days ago Grooveshark got some bad news from a court. So it looks like they’re probably going to go under as well.
And by the way, most of you might remember VCRs. But VCRs were almost outlawed by copyright. They were saved in 1984 in the Sony decision by one vote on the Supreme Court. If it had gone the other way, the entire way that we consume video and television and movies would have been changed. It would have totally changed the entire industry.
Some of you might know about the copyright alert system which is the result of a negotiation between the Feds and the ISPs to implement a six strikes and you’re out system which has no real legal due process and could basically get you kicked off of the internet for life if you pirate or are accused of pirating the wrong type of content.
In Denmark, there’s a statue called The Little Mermaid which, if you take a photograph, you can’t sell it or give it away because it’s copyrighted by the government.
I was quoted just the other day in an interview in an Oregon newspaper about a statue called Portlandia which is in Oregon. The state of Oregon paid for a sculptor to make this sculpture. You can’t take a photograph of that without permission of the government, well of the guy actually, the sculptor.
The U.S. Forest Service is now threatening to fine photographers for photographing nature in the national wilderness area, this was just in the news the other day, if they don’t pay a $1500 fee. Otherwise, they’ll be fined for $1,000. So I guess it’s cheaper to pay the fine.
The New York Port Authority is now claiming to own the New York City skyline. They’re telling stores to destroy skyline themed plates and things like that. (link) [See also Sculptor Awarded $685,000 After Photo of Korean War Memorial Used on Stamp]
I could go through a lot of other examples but you get the idea. A couple more notorious ones that seem more clearly like censorship or thought control. [See“The Patent, Copyright, Trademark, and Trade Secret Horror Files”] There was a case in Canada, when one of the Harry Potter books came out, it was stockpiled at a bookstore and some copies were sold early on accident. And the publisher went to a Canadian judge and he sent an injunction out to the customers who had bought the books, ordering them not even to read the books until the official release date. Or don’t talk about it either.
The German film, Nosferatu, which was sort of based upon the Dracula story, was ordered destroyed by courts because it was a derivative work.
There was a sequel to the famous novel Catcher in the Rye that a judge in the U.S. banned from publication because it was a derivative work. So this is literally book banning by the state in the name of copyright.
And the latest figures I’ve heard, Google is now processing a million take down notices every day for Youtube. There’s been estimates that for the standard activity that most people that use the internet, sending emails to each other, or copying things, not even heavy duty pirating, the way copyright law works, we are all individually liable for about $4.5 billion every year in damages for the copyright infringement that we all engage in every year. So there’s some heavy costs from that.
In the case of patents, people are literally dying because of patents. There is a case where there’s some people that have Fabry Disease and they’re unable to get one of the few drugs that can treat it called Fabrazyme because it’s in short supply and because the manufacturer has a patent on it and has not licensed anyone else to do it.
There were shortages of the Cipro drug in the anthrax scare about a decade ago because of patents. And there’s rumors now that the Ebola problem could be worse because of shortages in the drug, possibly because of patents. I’m not sure about that yet.
Patents probably cost the economy about $100 billion at least in the U.S. alone in terms of just dead weight cost and reduced innovation. And patent trolling has cost the economy half a trillion dollars in the last twenty years by some estimates.
One study that looked at the effect of software patents on the software industry would be that if you were to hire enough patent attorneys, all the software companies, to protect themselves from software infringement, they would have to hire six million patent attorneys and it would cost them $2.7 trillion a year to do this which is more than the software industry is even worth.
Patent and copyright are the two worst but trademark and trade secret, there’s bad examples there, too. There’s the Eat More Kale guy somewhere here in New England who’s being sued by Chick-fil-A because it sounds like Eat More Chicken.
The San Diego Comic Con is now threatening to sue the Salt Lake City Comic Con over the words Comic Con, for comic book convention.
Apple used trade secret to get the police to break into the apartment of a guy in San Francisco a couple years ago when the iPhone was left on a barstool by an Apple employee.
So trade secret, trademark, copyright, they have costs. That’s why there is a tension, at least. So the question is do we solve the tension by balancing these things? Or do we solve it by increasing the protection of IP? Or do we solve it by getting rid of it? That’s basically the fundamental policy question.
Just let me give a quick history of how patent and copyright emerged so you will understand why it’s not really surprising that these laws have costs. One of the earliest examples of patents that we know of is the Greek city state of Siverus back around 500 BC when there was like an annual cooking competition. And whoever won the prize would get a monopoly over that dish for the next year. So that’s like an early instance of this kind of protectionism.
It reared its head in different ways in Italy during the times of the law merchant. And it really started gaining steam in England and parts of Europe, say the 14, 1500s in the form of the crown granting monopoly protection to different court cronies and favorites. You’re the only guy that can sell sheep skin in this town. You’re the only guy that can sell playing cards.
And, of course, sometimes, if there was a knock-off, or not even a knock-off, just someone else was selling playing cards, the guy that had the monopoly would get the police to go into the store and ransack it, just like we do now with pirated CDs and things like that.
In the case of patents, this led to a lot of abuses. In 1623, the Statue of Monopolies was passed in England which got rid of most of those monopoly grants but it retained the ability to grant monopoly grants for inventions. So patents came out of that. Patents are the remnant of the protectionist acts of monarchs and kings in Europe. And then in the U.S. it was part of the Constitution in 1789.
Copyright came about because of the advent of the printing press. It started threatening the religious and state interest because people could now read things that the government and the church didn’t want them to read. So they established these monopolies like the Stationer’s Company which is like a guild system where you had to go through them to publish something. And of course only the government would permit them to publish what they wanted them to publish. When the monopoly for that thing lapsed, a new statue, called the Statue of Ann, was enacted in 1709 which kind of entrenched the idea of a copyright which came out of this system of censorship.
So this is the history of copyright and patent. In the U.S., 1789, the Constitution is ratified. There is a clause that authorizes Congress to protect the works of writers and innovators, basically, for a limited period of time. And the very next year, as soon as the Constitution was ratified, Congress passed the Patent Act and the Copyright Act. So they came out of legislation and that’s where the situation stands today although the term was much lower. Copyright was fourteen years originally. Now it’s about 150. So the term goes up every year.
Now, as a libertarian, I would say the problem with trying to find a balance between these types of laws, there are two fundamental problems with it. Number one, there is a famous political scientist named Hillel Steiner. And he pointed out that all genuine rights have to be what he called compossible, that means compatible with each other. If you have rights that the state is enforcing or grants that are in so-called tension with each other or that contradict each other, then there’s something wrong because they’re not genuine rights then. All genuine rights have to be compatible with each other or compossible as he would say.
Now I would say that this comes out of the fact that laws are decreed by states, in terms of causative law, as legislation. Legislation is what we think of now as the way to make law. But law didn’t originate that way. Law originated in a decentralized process. There is a lot of work on this. This is a whole lecture topic in and of itself. Bruno Leoni, the Italian theorist, Frederich Hayek has written on this, lots of other thinkers: Giovanni Sartori. But the idea is that we’ve gotten so used to legislation as the way of making law that nowadays people think of there ought be a law, they think of a law as something printed on a piece of paper that the legislature has decreed. This leads to this positivist mindset and it leads to a jumble of laws created by the state which don’t have any necessary compatibility with each other. So then the courts are faced with this tension between them.
Let me read one more quote here. This is one of my favorite quotes. This is from 1884, a guy named James Carter who was a New York lawyer. There was an attempt to codify New York law which is common law which is the decentralized, non-legislative type of law. The common law lawyers lover their common law. There was an attempt to impose, I think by David Dudley Field, it was called the Field Code. It was actually enacted in Montana or somewhere I think later. It was an attempt to codify New York common law which means to turn it into a piece of legislation. It turns into a big statute.
And what he pointed out was that when you make law like that then the job of the court, the job of the judge is not to do justice anymore because normally that’s what a judge does. Two people have a dispute. They go to the judge and they say I think he owes me money. Or he did this to me. Or I think I own that object. And the judge tries to figure out a fair answer to the rule. He takes evidence. He thinks about established principles of fairness and of all the rules of the common law and comes up with a decision. He might make a mistake but at least he’s trying to do justice.
When the job of the judge becomes to interpret legislation, his job is just to interpret words. He’s like a dictionary reader. And the result could be totally incompatible with justice. So this is the quote by Carter:
“At present, when any doubt arises in any particular case as to what the true rule of the unwritten rule, the common law, the law is, it’s at once assumed that the rule most in accordance with justice and sound policy is the one that must be declared to be the law. The search is for that rule. The appeal is squarely made to the highest considerations of morality and justice. These are the rallying points of the struggle. The contention is ennobling and beneficial to the advocates, to the judges, to the parties, and to the auditors and so, indirectly, to the whole community. The decision then made records another step in the advance of human reason towards that perfection after which it forever aspires.
But when the law is conceded to be written down in the statue and the only question is what the statue means, a contention unspeakably inferior is substituted. The dispute is about words. The question of what is right or wrong, just or unjust is irrelevant and out of place. The only question is what has been written? What a wretched exchange for the manly encounter upon the elevated plain of principles”.
So he won the day that time, anyway. So, to circle back, patent and copyright are creatures of legislation, the kind of brief history shows. So it’s no surprise that there’s a conflict between freedom of speech, freedom of commerce, freedom in your internal security and the results of these laws. So that’s the first thing to note.
And by the way, there’s a good argument, in my view, that patent and copyright and trademark, on the federal level, are all unconstitutional. I seem to be the only one advancing this argument but the argument, in brief, is…does anyone here…can you tell me why you’re allowed to drink alcohol right now? Not in this room but why is it legal?
Right. So it was the 21st Amendment, 1933. But the 18th Amendment, 1920, says alcohol is illegal. So if you read in the Constitution right now, it says alcohol is prohibited. Yet we can drink it. Why? Because there are two amendments; they are in conflict. Which one governs? The later one. This is the standard principle of constitutional and statutory interpretation is that the later principle overrides the earlier. And that’s why the state can change the law from time to time. If the chronology didn’t matter, you could never change the law because you would have statues in conflict with each other. One was passed one year, one the other year. They’re both equally valid and the law would be a mess. So this is a standard principle.
Now 1789 is when the Constitution was ratified with the power granted to Congress to enact patent and copyright laws. Not trademark laws, by the way. The reason trademark law is unconstitutional is because there’s no authorization to Congress in the Constitution. They enacted it under the Interstate Commerce Clause which, I think, is a bogus doctrine.
1791, two years later, the Bill of Rights was ratified which has freedom of speech in the First Amendment, has a right to be secure in your person, papers, and possessions. And the Fourth Amendment has a prohibition on cruel and unusual punishment. And the Eighth Amendment has a prohibition on not providing someone due process of law. And the Fifth Amendment….every one of these is violated by the copyright and some of them are violated by the patent system as well.
And the courts recognize this by the way. This is another tension. The courts recognize there is a tension between the chilling effect and the literal censorship and the blocking of people from publishing essays or publishing books or reading books, like in the Harry Potter case, or selling a movie, like the Nosferatu case, or writing a sequel to a novel. These things are clearly violative of the First Amendment, for example.
The statutory fines that the copyright system imposes are so high, $150,000 per act, they bear no relation to actual damage whatsoever. So you could argue that they are in conflict with the Eighth Amendment’s ban on excessive fines.
And yet the courts recognize that there’s a tension and they say, well, we have to balance them. Why do they have to balance them if the Bill of Rights was enacted in 1791, two years later? And the courts have had that brought up and they just say, well, they were enacted about the same time, two years apart, two different Congresses. So I think there’s a good argument that patent and copyright are unconstitutional in that regard.
But what’s the real reason to oppose patent and copyright? You could argue that, as a libertarian, which I would, the state is basically an illegitimate criminal organization and you can’t have legislation or patent and copyright laws without a state. That’s one reason to be opposed to patent and copyright. Many of you may not share that but that’s one reason.
Another is if you oppose legislation as a means of making law, which I do, because you can’t have patent and copyright without legislation.
Another is that it’s been shown to impose cost on an economy. In the last 200+ plus years since we enacted these laws, ostensibly to stimulate original works and creativity and innovation, no advocate of these laws has ever been able to provide an empirical study proving that these laws are necessary or that they promote innovation or creativity. [0:27:30.4 Not transcribed] all the studies seem to indicate they are a huge drag on innovation and a distortion of the culture. There’s basically not a single good thing in favor of these laws.
But the fundamental reason to oppose these laws, even if you are not an anarchist, even if you are not a libertarian, even if you are not an opponent of legislation, even if you don’t care about the Constitutional argument, is fundamentally that these laws are completely incompatible with common sense property rights and civil liberties. To understand that, you need to just try to appreciate the libertarian case for what man’s rights are.
Basically our view is that we live in a world of scarcity, that is things that we get in conflict over, things that are in short supply. There’s a possibility for disputes for that reason. If there was no possibility of dispute or conflict, the entire idea of law and rights would not exist. It would be impossible. You wouldn’t need it. There would be no possibility of anyone being dissatisfied.
But because we live in a world that is not like that, we come up with rules that specify, in the case of a dispute, who gets to control the object. Who gets the money in your bank account? If I sue you for damaging me or for insulting me or whatever, who’s entitled to the $10,000 in your bank account? Are you entitled to it or have you done something that triggers a transfer of ownership of the money to me? That’s what the common law searches for.
Every dispute is always a property rights dispute. Every right is always a property right. Every law is always about property, property meaning scarce resources in the world including our bodies. Our bodies are one type of property.
So the libertarian view is just a more consistent view of the classical liberal kind of Lockean tradition and it’s very simple. Whenever there’s a dispute over any scarce resource in the world, whether it be someone’s body or an external resource in the world, we have three simple rules that we consult to make the determination of who gets to own the thing.
Number one, we look at original appropriation, the Lockean idea of homesteading; whoever had the thing first. Number two, was there a contract? So consent. Did someone transfer it by contract? Or, number three, principles of rectification which means if I commit a tort to you, I owe you something. Other than that, the owner of the resource is the one that had it first or got it by contract or got it from an award, like a restitution award if someone had harmed them. That answers the question in every single possible dispute you can imagine. Those three principles are what we consult to make the decision.
The problem with intellectual property is that it undermines this rule. What intellectual property says ultimately is that the state is granting to a person either a copyright or a patent which gives that person a veto right over how I can use my own resources which I’ve acquired justly. Either I have homesteaded it myself or I have acquired it by contract from someone.
In the law we call this a negative servitude or, in the common law, a negative easement. A common example would be a restrictive covenant in the community. You have a neighborhood. You have houses. All the neighbors come together. They make a unanimous agreement that from this day forward you cannot use your house for certain purposes without everyone else’s permission or without two-thirds permission or something like that. You specify some rule. This is a negative servitude. It’s perfectly legitimate because it’s a contractual arrangement.
So, for example, we all agree you can’t paint your house orange because we think that’s going to drive property rights down in the neighborhood. So your neighbor has, effectively, a veto right over how you may use your home but it’s because you gave it to them. It’s like a co-ownership arrangement. It’s not even. It’s lopsided. But it’s a co-ownership arrangement.
What patent and copyright do is you have the state granting such a right to the patent and the copyright holder because they have the right to tell you, you may not make a car according to this process. You can’t make a tablet with rounded corners unless you get my permission or you pay me a fee. Or you can’t publish that book without getting my permission.
Now the problem is that if the owner of the property, the burden to state we call in the law, had granted by contract, consensually, voluntarily, had granted a negative servitude to the publisher or had granted it to the innovator of the automobile design or the tablet design, nothing wrong with that. That’s pure contract law.
The problem with patent and copyright ultimately is that it’s a taking of property rights. It’s a restriction on freedom by the state. The state is doing what Rothbard, Murray Rothbard, a famous Austrian libertarian economist, would call a triangular intervention. It’s not a binary. It’s a triangular. So the government is basically giving to someone a right they can enforce in government courts to basically own or control parts of other people’s property even though the patent and the copyright holder didn’t appropriate the resource, didn’t acquire it by contract and they didn’t have kind of tort performed against them by the victim of the patent or copyright suit.
So ultimately that is the reason and that’s why you can see these concepts blend together. You have to have an understanding of the nature of property rights, the purpose of property rights, why it arose, what scarcity is, what the nature of law is and then you can see clearly…and also the history of copyright and patent is being mired in censorship, thought control and economic protectionism and mercantilism. So you can see clearly why the way to balance the tension between patent and copyright law and other types of IP law and regular property rights is to totally get rid of patent and copyright. So I will conclude there but that is my kind of overview of the Rothbardian Austrian Economic principled take on IP.
So I’m happy to discuss further or open the floor to any questions. Everyone agree?!
|Audience Member:||I came in late so I’m not exactly sure what all you covered but in terms of patenting what do you think about private patents of genes? Some companies are trying to patent certain sequencing of certain genes that can result in certain diseases. I’m just curious what your view on that is.|
|Kinsella:||Well, as you can tell, I think the entire patent system should be completely abolished. So that’s just a special application of that. Now, I mean, you could say that genetic patenting is especially morally offensive because you’re basically patenting life. I mean you’re not really even really the inventor. The people that patent these gene markers didn’t create the genes even. Evolution or God or whatever you think but the patentee didn’t invent it. He just identified the gene. He found information.|
|Audience Member:||Because I think in a certain case the Supreme Court ruled about this law being passed, they changed a couple things about a certain gene. Or if a company constructs something or adds on an extra…I don’t know.|
|So there are different types of gene patents. So I think it was the Harvard mouse case. I forget the name of the case. Technically you cannot get a patent on human life. But there are ways to get…patent lawyers are very crafty and creative and they will find ways to patent aspects of the genetic information that they have identified so that it effectively gives them control over some of these genetic treatments, for example. But if you create a new kind of gene, if it’s an animal, I think you can still get patents on that but not human genes per se.So it’s a messy field but, again, you have the Supreme Court interpreting legislation which is not objective law. It’s just words written on a page by Congress. And the Supreme Court has to try to make some rules and figure this stuff out. Like they’ve come up with a rule that you can’t get a patent on an abstract idea like . It’s a law of physics but you could get one on its application to a nuclear reactor or something like that. So they make these arbitrary lines.They have to draw lines because if you don’t draw any lines then basically everything is patentable and the world would just close down. No one would be able to move. We would all be stuck in molasses because you would have to get permission for everything you did in life ever.That’s another reason why patents only last 17 or so years. If they lasted forever, which some advocates want them to do, we’d be paying royalties to the descendants of the cave man who came up with fire. It would be like an unending nettle of permissions we’d have to get all the time.
|Audience Member:||If you want to abolish the current system of patent and copyright, what would you like in its place?|
|Kinsella:||Just property rights and contract. I mean nothing.|
|Audience Member:||Assign each thing its individual contract?|
|Yeah. I mean, it’s like, to my mind, it’s like if we have slavery. You want to abolish slavery. What do you want to put in its place? Well, nothing. It’s like the draft. If you want to get rid of the draft, what do you want to replace it with? I guess you could say a voluntary army but that’s just a natural consequence. Maybe peace. Maybe we don’t have an army. I don’t know.I don’t think you need patent and copyright at all. I think if we got rid of patent and copyright, innovation would soar. The price of products would fall. The creative culture would flourish because people would be free to remix and to have sequels and derivatives, derivative works that are all prohibited right now. I mean in a way the whole cultural arena is very sterile. The way Hollywood does things, the way it kind of does these sequel mills. all this is because of the influence of patent and copyright.I’ll give you another example. In the fashion industry, there is as of yet no patent or copyright type rule that applies to fashion designs like handbags although the fashion industry is lobbying right now for a copyright type law that would cover that because they don’t like knockoffs, right.So because they couldn’t protect their fashion designs, like the way clothes are made or the way purses are made, they started putting their logo on there because a logo, like the Louis Vitton bags, it’s kind of odd when you think about it. Why would you have your logo splashed all over the product? If I buy a Mercedes, I don’t have the Mercedes sign, 100, 5000 of them all over the car. It’s crazy. They did that because then they can use trademark laws to stop knockoffs.
Now, I’m not saying it’s a good or a bad thing but it is a distortion of the culture in the fashion industry because of copyright and patent and trademark law.
There’s any number of examples of things like this. There’s a convoluted story about how Hollywood became Hollywood because the movie industry was starting in New York. And there was a patent by either Edison or somebody like that threatened. So these guys fled to California to escape the patent law suit. So the whole movie industry has been affected by this. Anyway…
|Audience Member:||Not transcribed.|
|Every country should abolish the copyright law. Patents are domestic. Every patent is operational only in its own country. But there are patent treaties that countries have agreed to over the years that obligate each country that signs the treaty to have a certain minimum standard of protection for patents.Copyright is more of a universal thing. It’s enforced in each county but there is sort of a universal copyright law. Like if I want a patent in France or Europe, I have to apply in Europe. If I get one in the U.S., it is not effective in Europe. If I write a book in America, I’ve got a copyright in every country that recognizes copyright. So it is international in that sense.The problematic international aspect is that you have the Berne Convention which is an international treaty that requires every signatory to have minimum copyright standards, like at least 50 years after the death of the author and automatic copyright rights applied instead of having to register.In the old days, before 1980-something, you had to have a copyright notice on the work which is why you’ll still see copyright notices but they’re not actually necessary anymore because that’s called a formality. You had to register your copyright and you had to put a copyright notice on it. If you didn’t do that, it was public domain. Something like that. So that was an affirmative act you had to take.
Well, the Berne Convention basically outlawed that practice or it prohibited countries from requiring what they call formalities. So copyright has to become automatic. That is, if you write something, if you send me an email right now you have a copyright on what you sent me, whether you want it or not and there’s really no way to get rid of it. It doesn’t matter if you say copyrighted. It doesn’t matter if you registered it. You have a copyright.
So there have been proposals to modify U.S. law to reduce the copyright term from 70 years after death to a lower standard or go back to what they call the founder’s copyright which is 14 years, renewable once for another 14; something more reasonable. But if we did that we would be in violation of the Berne Convention. So we’ve tied our own hands by entering into these treaties.
So now Congress can throw their hands up and say, well, I’d love to change the law but unfortunately it would be a violation of international law and we want to be good stewards of international law. But they’re the ones who actually pushed this treaty onto the world at the behest of Hollywood and the music industry and the pharmaceutical industry and the software industry. So they said let’s just put property rights back in treaty. Let’s all agree to a free trade agreement. And, of course, stuck into the free trade agreements are always an IP provision requiring the other country to respect U.S. held IP law. So the entire international aspect is a mess. And it has made it almost impossible to reform domestically or municipally IP law.
|Audience Member:||Not transcribed.|
|Like Wikipedia and Wikicommons? I think they’re good but they’re…they’re only a slight approximation of what we would see if we didn’t have copyright law in the first place. Same thing with open source software, the copy left licenses, the GNU license.All those things wouldn’t exist in a copyright free world because they’re based upon the idea of copyright because what they’re saying is we’re going to grant you permission to use this however you want but we’re still granting you permission. You don’t have the right to grant permission if you don’t own the copyright in the first place.Creative Commons, I think, is a good thing but it’s only a very small step I believe.|
|Audience Member:||So if you got rid of copyright, would I, as an artist, not have any recourse if someone over here took my novel that I worked on and changed like one character and then sold it as is. Would I not have any legal recourse?|
|Kinsella:||I think that’s correct. But I would say he’s not taking it…and first of all he wouldn’t even have to change a word or even put his name on it. He could just make a copy of your work and sell it.|
|Audience Member:||Would you have to sue him?|
|Kinsella:||You wouldn’t be able to sue him because he hasn’t harmed you.|
|Audience Member:||How has he not harmed me if he’s taken my work and changed the name of one character?|
|Kinsella:||What do you not have now that you had before?|
|Audience Member:||Something I spent a considerable amount of time…|
|Kinsella: 0:44:16.3||Well, you still have your files. You still have the books you printed. So what exactly was taken from you?|
|Audience Member:||Potential market.|
|Kinsella:||Okay. Exactly. So what you think was taken from you was money that is in the hands of future potential customers.|
|Kinsella:||But who owns that money? You don’t own it. You don’t have a right to a profit, do you?|
|Audience Member:||But isn’t the potential to a profit worth protecting?|
|Kinsella:||But you don’t have a right to a potential to profit.|
|Audience Member:||I understand that.|
|If you believe that then you get into this mercantilist, protectionist idea. Well, we have to protect the U.S. steel industry from these Japanese steel companies because they’re infant industry, the infant industry argument, all that stuff. It’s going to be too hard for them to compete with the Chinese or whatever.So it all comes down to competition. People say, well, free market competition is okay as long as it’s not too easy for people to compete with me, basically.It’s like, yeah, I’m willing to compete but not if I have to work too hard. I mean, look, entrepreneurs have to find ways to profit given the fact that competition in a free market is possible. They can be very creative if they have to. In today’s world, piracy is illegal but it happens. So when you sell a book or a song or a movie, you know that it’s going to be pirated right away. So they have to come up with ways to make money despite piracy. Same thing in a copyright free world. There may be more piracy. I don’t know. Maybe there would be less.In the 50s in the U.S. when drive-in movie theaters were popular, they had what’s called a free riding problem which was people would park on the hills around it and watch and listen to the movie for free because the loudspeaker’s behind the screen, just like indoor theaters now. So they came up with the little speakers that you put by the cars. That was a cost of exclusion. It was a way to exclude free riders. It cost them something to do it.
I mean the movie theater has to have a teller at the window and locks on the doors. Otherwise people would just walk in. That’s a cost of exclusion. Every businessman faces costs of exclusion to face the free rider problem or competition problems. Some rely more on their reputation. Some bundle it with other things. Songwriters, they want people to get their music so they become popular. Then they can sell tickets to their concerts.
The problem is when you come up with examples like this, to the stubborn copyright proponent, and they say, well, how would songwriters make a living? I say, well, maybe they would do this. Then they’ll say, okay, well, how will poets make a living? It’s like they have a non-ending litany of questions. They will never be satisfied.
But what they’re asking is something similar to someone demanding of an opponent of communism during the heyday of Soviet communism, well, you want to get rid of the state monopoly over everything. Well, who’s going to make toothpaste?
I don’t know. I guess someone trying to make a profit selling toothpaste.
Well, how many brands would there be?
It’s like I don’t know. I can’t tell you.
Well, if you don’t know then why do you expect me to leap into the dark and try this crazy thing called the free market?
It’s like, well, I’m not really telling you to try that. I’m telling you to get rid of these unjust, abominable controls that you’re imposing on society. You’re snuffing out the experiments that would have happened that would have shown us what’s possible in a free society. It’s no excuse to keep the controls going because you don’t know what their absence would have looked like.
|Audience Member:||Not transcribed.|
|Kinsella:||I would say that if a certain possible entrepreneurial endeavor has such high costs of exclusion that it’s not going to be profitable then it probably should not be engaged in because it’s not economically feasible. Some things are just not economically feasible projects.|
|Audience Member: 0:48:57.4
|So to bring up another type of medical example. What about companies that specialize in making, let’s say, antibiotics where these companies can’t make any type of profit without having their medicine patented in some way because the costs are just so high for making this product even though it’s a product many people think will…we should be making this because it will help people who are sick and it seems to have some kind of value outside of just some kind of economic profit. So what about companies that are engaged…|
|So that’s a common argument given for patents and the pharmaceutical industry is supposed to be the strongest case for it.First of all, let’s not delude ourselves that in 1789 when the founders wrote this down that they had anything like the pharmaceutical industry in mind. So it’s just kind of a makeweight argument that they’re using now.The costs to the pharmaceutical industry are high. One reason for that is the FDA which is another federal agency…so you have the federal government coming in and raising costs on companies with any number of federal interventions. So the FDA is a hugely expensive and time consuming process. Not only that, just taxes and the general tariffs, minimum wage laws, all these things impoverish the consumer, make them poorer, make the companies have to pay higher wages. They have less money because of all these things that the federal government does.And yet, the solution to this is for the federal government to come in and add another program which is a monopoly granted to these companies. One reason the pharmaceutical companies say that they need the patents is because they’re forced to do the FDA process and during that process they’re forced to reveal their secret sauce. They have to make that public.
So by the time they sell this drug, all their competitors already know what’s in it because they were forced by the government to reveal the information. So now they say, well, now my competitors are going to be tooled up and ready to compete the day this comes out. So we need a patent.
Well, if there wasn’t a patent system and there wasn’t an FDA system, then the companies could keep their information as secret as they liked. And on the first day, they’re going to have a first mover advantage. And if the government didn’t impose so many costs on them with other policies, the consumers would be richer. Their costs would be lower. Their profits would be higher. They have a lot more money in the first place to invest anyway.
And, finally, I would just say if you are really interested in this topic, I would refer you to, I think it’s chapter 9 of a book called Against Intellectual Monopoly. It’s for free on their site, called againstmonopoly.org by two economists, Boldrin and Levine. And they go through the numbers about the pharmaceutical industry and they show that it’s all just a myth. Patents really aren’t necessary for them.
|Audience Member:||So this is very related to these last two questions. I’m sorry to press you on the medical issue. I just think it’s really interesting.So there’s a certain category of drugs called orphan drugs. And the philosophy we have now is that these are drugs that are never going to be able to reap a profit but impact a certain portion of the population such that they would be a benefit to society for producing them but there’s no inherent economic advantage.So the two arguments used to justify this sort of thing: one is from the patent perspective with the idea that we are going to grant them a patent so they can charge a very high rate that the insurance company will pick up or two, that the government is going to step in and subsidize this.So, in a world without intellectual laws or without a government power, what is the recourse here? Is there any option besides letting these people with these diseases just suffer from it?
|It’s hard to predict. You can envision…first of all, we could be entering a world of 3-D printers that can just make drugs for people. A lot of things are going to change. Look at it this way. Even by his argument, you could say that even now, even under our current system of strong patent rights, there is a thriving pharmaceutical industry, right? But there are some drugs that are not being made now because they can’t make quite enough profit on those. There’s some at the margin. So maybe we have this many drugs in a free market. With the patent system, we have this many drugs. That’s their argument, right?Well, what if we could have this many? Maybe the government needs to subsidize them even more because we could get even more drugs. What is the cost of another trillion dollars of cost? I mean there’s no stopping point to these arguments. Or we could increase the patent term to 50 years. Or we could increase the penalties from statutory damages to capital punishment. I mean we could do lots of things to increase the patent system and make it even stronger than it is now. So where’s the stopping point?The only stopping point, even by that empirical argument would be here’s our data, here’s our evidence about what would happen in a free market. Here’s what would happen with a patent system of different levels of protection. And here’s what it costs the economy to have the patent system. And the only that has done that is like Boldrin and Levine and other economists who all conclude that it’s the other way around. So the advocates of the system just don’t have the evidence that justifies that whole approach.Bernie Sanders from Vermont, the Socialist representative, and some free market guys have advocated like $80 billion a year medical innovation prize fund. So they want to take $80 billion a year from the taxpayers, give it to a panel of experts that the government selects and let them just award the money to people that come up with good medical innovations, either to augment the patent system or instead of the patent system.
But that’s only medical devices. If you extend this across the whole field of innovation that the patent system covers: biomedical, mechanical devices, processes, software. That $80 billion a year would turn into $3 trillion or something. I mean where’s the stopping point?
I think actually the patent system is a way of hiding the fact that that’s really what it is. It’s really a subsidy from the consumer, or the taxpayer, but it’s not done by clean, honest taxation and subsidy. If we would actually do it that way we would at least see what we’re doing. People would start going, “Are we really getting our money’s worth for that $500 billion a year we’re spending to incentivize innovation”?
|Audience Member: 0:55:19.0||So this isn’t so much about patents. It’s just about something you said earlier. Maybe in practice it is, but do you really not think there should be an organization like the FDA? Something that at least checks that products going out…|
|Kinsella:||No, I do think there should be an organization.|
|Audience Member:||Okay, you just think it’s incredibly…|
|Kinsella:||It should be private.|
|Audience Member:||Oh, it should be private.|
|Yeah, like we have Underwriters Laboratories now. If there’s a company making drugs…would you buy a drug from a company that said, “Ah, we don’t have any safety standards at all. We don’t let anyone inspect our books”.Or a competitor that says, “Listen. We submit ourselves to this outside panel of…..”.It’s a good business seal of approval type of thing. And if a company harms someone and deceives the customers about the ingredients in the drug, they’re going to get sued for fraud or something like that and soon they’ll be out of business.Right now you have people dying because the FDA has an incentive to block drugs early because it’s the problem of the unseen costs of the system. You don’t see all the people that would have lived longer if the government had approved some kind of experimental drug or approved it a few years earlier.
But if they approve a drug that turns out to harm people, then they’re going to get in trouble for it. They’re going to get a lot of bad press. So they have an incentive to just say no to everything because you don’t see the people that died because you said no but you see the people that died if they say yes to the wrong drug.
|Audience Member:||So you clearly spoke a lot about anti-patent law. What do you think is the most convincing argument for patents?|
|Kinsella:||I said I don’t think there is one. Maybe I’m biased. People ask me all the time…|
|Audience Member:||Like the closest thing that comes to maybe….|
|The closest one is a contractual argument, the argument that in a free market you could have contracts. So the publisher of a book could sell a book and he could make every buyer of that book sign a contract promising not to learn from it, basically. You can’t remember it. You can’t ever write anything in your life that is remotely similar to this. You can’t loan it to your friend. You can’t copy it. And if you do, and if I can prove it, then you have to pay me a million dollars. And so, then the argument would be to save us the negotiating costs of having to do that every time the government just comes in and simulates that with the copyright system. That’s probably the best argument.But it’s fallacious because this whole thing wouldn’t work, obviously. If the fine you have to pay is $1, it’s not a significant disincentive. So the fine has to be a million dollars. Now who’s going to buy a book when they are subjecting themselves to a million dollar liability if they learn from the book? They’re just going to go down the street and buy a pirated copy where they don’t have to sign a contract. So that’s probably the closest argument you can think of.Another argument which I think has seduced people and confused people is based upon, which is why I think we have it now, I think it all comes down to a mistake made by John Locke. It was John Locke’s emphasis on labor and his metaphorical use of words when he said here’s how we have property rights. Here’s why you can homestead that apple. So he said you own yourself because I guess God gave you yourself. And therefore you own your labor – which right there is his mistake. I don’t think that makes any sense. Labor is just an action. You don’t own actions. You only own material resources. So there’s his mistake. And therefore you own what you mix the labor with.Therefore if you take an un-owned piece of property and you mix your labor with it, there’s a connection between you and the labor, and you have the better claim to it than anyone else. So that actually led, in my view, to the labor theory of value of the communists and caused Communism and tens of millions of deaths in the 20th century. And it has also led to the labor theory of property in property theory which has led to intellectual property which has also caused untold millions of damage.
The problem is that you don’t own labor. Labor is just what you can do with something that you do own, your body. I think that’s the essential mistake but that’s the other argument given. The argument is that just like if I labor on the property, I own the property because I own my labor. Just like that, if I use my labor to create a useful mental creation like a new way of threshing hay or a novel that pleases people or a painting, I own that intellectual product. That’s the other argument that’s not terrible except it’s based upon this flawed labor theory of property. So I guess those two would be the two that…that’s the two you always hear anyway.
|Audience Member:||So then how do you protect a true work of art from somebody who’s a genius and it can only be replicated by copying? How do we value, as a society, value somebody’s work which is deemed to be this amazing thing, but as soon as he creates it, somebody else can knock it off right away? These things lose their luster, I guess, if you…|
|Kinsella:||I don’t see that it would. I think things can be copied. Why does it harm the integrity of the information just because more people have it now?|
|Audience Member:||I feel like as a society we value these kinds of things, you know, like a work of art that…|
|Kinsella:||Well, what about Einstein’s E=mc²? How does he get value for that? He couldn’t own it. Crick and Watson, the guys that discovered the double helix for genes didn’t even attempt to get a patent on that. They recoiled in horror from the idea. They’re given credit still.|
|Audience Member:||Well, those are so revolutionary that…|
|Audience Member:||But I mean for the average thing, I think, if I have a block of wood in front of me and I spend a lot of time turning it into something I think is beautiful. I do think…|
|Kinsella:||Do you see where the labor theory of value is coming into this though? In your mind you’re thinking…that’s Marxist. I put time into this. I own…it’s got to be worth the time I put into it.|
|Audience Member:||I think it’s somewhat convincing that we do feel like there’s some connection, that there should be some connection.|
|I think the connection probably, and the most reasonable one, is because people are not thinking clearly about a lot of these concepts. So they mix some things together. Like they mix together plagiarism, attribution and fraud and even contract to a degree which are all distinct concepts and they mix them all together. You’ll hear this all the time. If you have no problem with piracy or you think copyright should be abolished, they’ll say, “Well, I guess you’re in favor of plagiarism”.It’s like, well, plagiarism really has nothing to do with copyright. They think that there is some kind of dishonesty or fraud involved or contract breach involved if someone were to just copy someone else’s idea. But we forget that this is the beauty and genius of the west and civilizations. We have inherited this huge corpus of knowledge that has been developed by unknown people for thousands of years and we’re all better off for it.No one can take full credit for any of their ideas. We build upon a base of ideas we’ve inherited from others and yet we want to close the door to paradise behind us, you know? We want to use all this body of knowledge for free. Public domain, everything is public domain: calculus, you know, science, physics, chemistry, the great works of art, Shakespeare’s plays (which were copies of existing ideas). There would be copyright infringement if he published those today because he was copying plots and ideas that were already publicly known.|
|Audience Member:||That’s probably a good place to stop.|
|Kinsella:||Okay. Alright. Thank you.|
|Audience Member:||If anyone would like to join us for dinner….|
|Audience Member: 1:03:50.5||Thank you very much. He is always trying to convince me on the whole IP argument.|
|Kinsella:||Some people see it right away and some people just struggle with it. I know.|
|Audience Member:||It was very nice to meet you.|
|Audience Member:||I can’t tell you how many times I sided with you, particularly the things you brought up about the Fourteenth Amendment. That really resonated strongly with me.|
|Kinsella:||Where did you go?|
|Kinsella:||Did you go to law school too? You went to the same school? You guys going to join us for dinner?|
|Audience Member:||I think we’re going to be on our way.|
|Kinsella:||Okay. Alright, well, it’s nice meeting you. Stay in touch. We’re friends on Facebook, right? And are you?|
|Audience Member:||I am not.|
|Kinsella:||Feel free to daisy chain over.So do you guys get a lot of anarchist libertarians here?|
|Audience Member:||No! It’s interesting though.|
|Kinsella:||I’m still not sure why I got invited!|
|Audience Member:||I’m writing a paper about originality and authorship.|
|Audience Member:||And in it I have this theory that people value originality because it means that they’re not replaceable. So they would like to keep that part of themselves so to insure that life is worth living.|
|Kinsella:||That’s interesting. I’m not a philosopher but I could see something to that.|
|Audience Member:1:05:31.1||And that’s why I think people want authorship because they really want to have that part of themselves to be recognized as a part of themselves.|
|Kinsella:||I think that’s partly true. That’s maybe an explanation.|
|Audience Member:||So I guess it’s like I’m wondering what you would say is the reason that people listen to you and still don’t agree with you? Why does….|
|Well, a lot of people do. I have made a good deal of progress over the last fifteen years on this. I mean almost the entire libertarian movement is anti-IP now and they really weren’t until about fifteen years ago.Maybe because my argument is rooted in property rights and principles and kind of libertarian logic. So it tends to work with people that already accept that. Most people aren’t either consistent libertarians or they have an empirical, utilitarian approach and they believe that here’s how we figure out policy. The government has to kind of tweak rules to try to get these advantages. And then they accept the experts. They just believe the experts. So I think that’s probably the reason. Plus there’s inertia.I mean, another reason is probably because there are industries that benefit from IP: the pharmaceutical industry, Hollywood. And they basically have a lot of sway over Congress because they can basically bribe them, you know, by campaign contributions, things like that. And everyone else only has a diffused cost. It’s the public choice problem. So the average person doesn’t really see that the costs of movies is higher than it would be. So they don’t fight it that strongly.Plus it’s called intellectual property. It didn’t used to be. It used to be called monopoly and patents. The free market economists in the 1800s started saying this is a horrible idea. This is restricting the free market. And so, in response, the entrenched interests started calling it intellectual property to make it fall under the word property which was a good word at the time, right? They said, oh, it’s just another type of property. So they have succeeded in this massive propaganda campaign. Everyone calls it intellectual property now.|
|Audience Member:||Thank you.|