Kinsella on Liberty Podcast: Episode 022.
This is lecture 5 (of 6) of my 2011 Mises Academy course “Libertarian Legal Theory: Property, Conflict, and Society.” The remaining lectures follow in subsequent podcast episodes.
Video, Transcript and Slides below.
SEE ALSO Lecture 5b: Q&A [KOL022b].
This lecture’s topic is “Intellectual Property and Related,” and discusses:
- Overview of types of IP
- Origins of IP
- The nature of property rights, role of scarcity, and the function of the market.
- Pro-IP arguments: utilitarian and deontological
- Free Speech and Property Rights (Rothbard)
- Proposed Reforms
- Imagining a post-IP world
For slides for all six lectures, plus extensive hyperlinked suggested reading material, see this Libertarian Standard post. For a listing of the syllabus and topics covered in each lecture, see this Mises Academy Course Page (archived).
For more information, see my Mises Daily article “Introduction to Libertarian Legal Theory,” and Danny Sanchez’s post Study Libertarian Legal Theory Online with Stephan Kinsella.)
The videos of all six lectures are also available on this playlist.
Libertarian Legal Theory: Property, Conflict, and Society: Lecture 5: Intellectual Property and Related
Mises Academy, Feb. 28, 2011
STEPHAN KINSELLA: I’m glad to be here, everybody. I just flew in from Colorado about an hour ago, so I was worried I wouldn’t make it here, but I did, so very good, and I broke no bones skiing in Telluride, so glad to be here. And we have about 21 people here, and thank you, Danny.
So today we’re going to talk about IP, intellectual property. And remember, this is something we covered in the six weeks in detail in another course, so I’m going to cover kind of the main points here but obviously not everything, and I will also cover some things we left off last. So last time – let’s go ahead and get into it because every class I think I’m going to finish in 60 minutes, and we go almost 90 minutes. So where we left off: We were talking about causation, aggression, and responsibility. And we talked about how you can be liable for inciting a crime and then also limitations on property versus limitations on action and why the fact that you can’t commit aggression doesn’t mean that rights are limited. It means that your actions are limited, not property rights. We also talked about strict liability, and we’re going to continue a little bit of that here.
So today we’ll talk about strict liability, and then we’ll get into IP, so I’ll just kind of finish off where we left off on the strict liability issues. So the concept of strict liability is one of these things. It’s a term that’s thrown around a lot by theorists and non-lawyers and just libertarians sort of casually, almost like the word fraud, which we talked about last time, and people don’t really give it a lot of thought.
Now, if you remember from our talk about causation and responsibility, you have to distinguish between behavior and action. So behavior would be something mechanical that you’re not responsible for like an epileptic fit or if someone picks up your arm and throws it at – or strikes someone else in the face with it, you didn’t do it. They used your arm to do it, but you didn’t do it. So we have to distinguish between mere behavior and intentional action, and this is actually why there’s a spectrum from first-degree murder and other crimes and down to mere torts, which are just negligence and things like this, all the way down to no responsibility whatsoever.
So the idea of strict liability is that you should be responsible, for example, for your property. So – and this is usually used in tort law, so if you sell a product that causes damage to the user, even if you weren’t negligent – so under the old law, you would have to show the manufacturer of the product was somehow negligent in making the product. But under strict liability, they don’t have to show negligence. They just have to show causation.
Now, I think this is a nebulous idea. It’s sort of un-libertarian and not really grounded in libertarian principles. If you think about it, the general idea is that we should be responsible for our actions. If you want to attribute responsibility to a person for something he didn’t directly do, you have to have a good reason for it. So that’s called vicarious responsibility or vicarious liability. And one example of that is respondeat superior, which I have listed at the bottom of the page here. Let me turn on my pointer.
So respondeat superior is one type of vicarious liability. What that means is I’m responsible for the wrongs that someone else commits, in this case, the wrongs of my employee. So if I have an employee and he commits a negligent action in the course of his performing his duties for my company, then the corporation or the company that employs him is responsible for his liability. He’s responsible too. So the victim can sue him, and they can sue his employer under respondeat superior.
Now, whether that is libertarian or not is debatable because this idea of respondeat superior is just taken for granted. Some libertarians like Rothbard have some hesitations about whether this is libertarian. After all, usually you’re not ordering the employee to commit a tort. You’re telling him drive carefully, etc. So if you have a driver who runs over someone and hurts them, why am I responsible for that? I mean you have to have a good reason for that if I didn’t order him to do it or cause him to do it.
And in fact, if you think about it, let’s suppose he’s driving – the FedEx driver takes his truck home for lunch and has lunch with his wife, and on the way home, he hits someone. Now, why would that be FedEx’s responsibility? In fact, in the law, that’s called going off on a frolic, F-R-O-L-I-C, a frolic. It’s like basically something unrelated to his job. But even if it’s related to his job, he’s not told to be negligent.
So you have to have a good reason to attribute responsibility. Otherwise, you would have results like we have now where the tobacco manufacturers are sued for the damages that occur to smokers even though they voluntarily smoke. Or if someone is killed with a gun, then the gun manufacturer is sued for that, or all they did was sell someone a gun, and a gun can be used for good or evil purposes, and as long as they didn’t intend it to be used for a good purpose – I’m sorry, an evil purpose, and they weren’t conspiring with someone like in a bank robbery, it’s not clear why they should be responsible.
Also consider this, and this goes back to what I talked about last time about how you’re responsible for your actions and there are limitations on your actions. Other people’s rights impose limitations on your actions, not on your property. So, for example, you can’t say property rights are limited because you can’t use your knife to stab someone. Well, the problem with that formulation is you can’t use anyone’s knife to stab someone without provocation. It has nothing to do with whether you own the knife or not. It has to do with whether you use some causally efficacious means to achieve an illicit end. That’s the structure of human action.
So the means could be a gun or a knife or your fist or hiring a hitman. Whatever means you employ to achieve this end, that is what’s prohibited. So it’s not a limitation on ownership rights. It’s a limitation on what you can do with any means whatsoever, whether you own the means or whether you don’t own the means. So, for example, let’s go to this example I have right here in the middle of a page. If someone steals your knife and then they use that to commit a crime, are you responsible for that?
Now, under an extreme strict liability theory you would be because you own the knife. But we have to keep clear in mind that ownership is the right to control, the right to control. It doesn’t mean necessarily the responsibility to control or to prevent it from being stolen even. I mean sometimes crimes happen. So if you keep in mind that a property right is a right to control but doesn’t necessarily imply any obligations, that will sort of get you out of this conundrum where people say, well, your knife was used to kill someone, or your dog bit someone or your child hit someone, or you have an epileptic fit and your arm slapped someone unintentionally, which is mere behavior.
It’s not clear that that’s an action that you should be responsible for. So the general point is you’re responsible for intentional action regardless of the ownership status of the means that you employ, regardless of whether the means is another person or not. And if you want to hold someone liable or responsible for the actions of another person, you have to have a good reason for it. Now, in the causality lecture last time, as I pointed out, I think there is a good reason in the case of a conspiracy or a joint crime where you’re cooperating to commit a crime.
In that case, you use means, which is your fellow co-conspirators and whatever other means you employ, to achieve a criminal end. So that’s the structure of human action applied to show why that would count as giving me responsibility for the crimes committed by my fellow bank robbers in the course of the robbery. That makes perfect sense. But other cases, you have to have a good reason for it.
Alexis: Does it matter what means are used to secure the knife? Could it be negligent if I don’t secure it properly? Well, I think it could be in some cases, but that’s highly fact-specific and contextual. I mean this is one of these cases where, in my view, it’s hard to answer from your armchair. But we can’t say in general that you’re always responsible for what happens with your knife. I mean, look. If that was the case, if someone stole my knife, even if I was as careful as could be, I would just abandon the knife. I’d say, look – I’d get rid of my ownership of it, so I don’t have any responsibility for it, but that’s just a stupid formality. It doesn’t make any sense why you would have to do that.
Matt says it can be in some cases. Well, I do know, for example, that there is an analogous situation where you – if you – like take the case of promissory notes, which are checks and negotiable instruments we call these in the law. Normally, if you don’t sign the check, then you’re not responsible for the check because you actually didn’t sign it. So if someone forges your signature, then you’re not on the hook for the check. But if you leave the check out in a negligent way, like there’s a bunch of strangers milling around your house, you leave the checks out, in some cases I think the law in some jurisdictions says that you should be responsible because you’re more negligent than the bank who couldn’t tell whether your signature was forged or not.
Now, I don’t want to go too far on this because I want to get to IP in about five or ten minutes at the most, but let me just say on this case, in different jurisdictions, there is thing called the duty-risk analysis, which is how the positive legal system analyzes negligence. So what they say is did you have a duty that you breached by some negligent action where the risk of what was going to happen or what did happen was contemplated within the scope of your duty? It’s this kind of complicated legal test. So what they would do in the handgun case is they would say, well, if you own something dangerous and it’s around children and it’s on your property and you have the right to control it, then you have the responsibility to use it prudently.
So you have a duty to not leave it in full view of a 3-year-old kid or something like that where they might accidentally shoot someone. So it would be encompassed under that. And I think that a libertarian system, if it was being developed, could draw on some of those ideas, but they would have to look at them really closely and make sure that they are fully compatible with libertarian principles.
Okay, Julian: One thing which I don’t understand is this. If I plan with three friends to rob a bank and one of the guys gets nervous and kills someone, why should I be in any way responsible for his killing? Well, I think the law here is correct, and this is my view, and I think most libertarian theorists would agree with this. The law is correct in this case, and the reasoning is this. If you have to choose between the victim and one of the three bank robbers, who would you side with?
I mean this is the basic libertarian point. We side with victims. We oppose aggression. And in this case, I would say that the – you are the one who helped to initiate this crime, which had the danger and the possibility of harm being occasioned to innocent people. So you’re much more responsible for it than the victim is, and so basically, they’re all attributed with the responsibility of what all their co-conspirators commit, and I think that’s a perfectly libertarian rule. Well, not only did you know there was a possibility, you helped to cause the possibility to arise, and you basically put fellow – you enabled and assisted – aided and abetted fellow dangerous criminal people to get into a position where they might do this. So it’s more – I think it’s more than negligent. It’s actually during the commission of an intentional crime.
Julian, you’re different people, but again, I would just think about this. Collective action is possible. Joint action is possible. Cooperative action is possible. And that’s what you guys are doing. You are cooperating in the commission of a violent felony, which could well lead to serious death to an innocent person, and you are enabling that to happen. You are helping it to happen, and you are on the side of the bad guys there. Well, it might give some incentives, Julian, but I mean I think we have to be careful about basing what the right libertarian policy and rule should be based upon incentives.
That can be sort of a way to think about it, but we have to be careful about that. I mean sometimes justice is justice, and if someone is a co-conspirator of a bank robbery and someone is murdered during it, I mean it’s hard to imagine many libertarian jurists feeling sorry for this guy. And there’s a related doctrine called transferred intent, so in transferred intent, let’s say you have what’s called a specific-intent crime where, like manslaughter is not specific intent, or maybe second-degree murder is not specific intent.
But for the really most severe crimes like first-degree murder, it has to be premeditated, and specific intent means you have to specifically intend to kill that person in a certain way, and then you do it. But there’s sort of an exception to that doctrine called transferred intent, and you might want to Google that on Wikipedia. It’s kind of an interesting doctrine and which I’m not too opposed to as a libertarian. And what it says is, let’s say you are shooting at Person A. You’re aiming at Person A, and you want to kill them. But you miss, and the bullet strikes Person B standing right behind them.
Well, the law will sometimes make an exception and say, well, we’re going to transfer your intent from killing A to killing B, and we’re going to call that first-degree, premeditated, specific-intent murder of B even though you really didn’t, in actual reality, specifically intend to kill B because it’s really irrelevant whether you wanted to kill A or B. So we take out that distinction as being an irrelevant distinction.
Okay, page – slide five. Good. Okay, before we go to IP, and what I want to do is I think I’ll talk about 35 or 40 minutes, and hopefully we will finish the main lecture at 9, and then we can have questions. And I’ve said that every lecture, so I may be unintentionally lying, so I apologize, but I will try to finish in 45 minutes. But before we go to IP, does anyone have any questions to date about anything we discussed or before we get to IP? I’d be happy to take it now for a couple of minutes. Otherwise, I’ll go on to IP.
Okay, audio and video quality, we have had no freeze-ups yet so far for 22 minutes, so that’s pretty good. It’s a record. Maybe Dimdim is improving. I don’t believe in bad luck, so sorry. I’ll knock on my computer. All right, what is IP? Now, let me just explain briefly. Okay, hands are off. Hands are off. Sorry. There’s a gremlin in there, the homunculus. All right, I’m back now. Still don’t believe it. As my son would say, it’s just a coincidence.
Okay, so what I was saying was this topic is important because it sort of illustrates a – what I think has been a big mistake made in libertarian thinking for a long time. And it’s finally coming to a head in part with the rise of the internet, etc. Oh, Julian, the joke was that I said we haven’t had a freeze yet. It’s been 20 minutes, and Jock said don’t say that. You’re going to jinx it, and I said I don’t believe in bad luck, and then it happened, so I guess I was proven wrong.
Anyway, so just to remind you guys, I’m a patent attorney, and I’ve been doing it for about 18 years. And I’ve been a libertarian for 25-30 years, something like that, and what happened was I kind of believed IP was valid because I read Ayn Rand and other people, and it’s called intellectual property, and you’re strongly in favor of property and the western American capitalist system, so you sort of assume that IP is valid, and then you read people like Ayn Rand, which are supposed to be arch property rights advocates, and they’re really in favor of it.
So – but it never made a lot of sense to me. In law school, it always puzzled me because her argument for IP is full of holes. I mean she pretends to be a principled, deontological-type libertarian. But her arguments for IP are full of sort of utilitarian concerns. For example, patents last 17 or so years. Copyright lasts, I don’t know, 50-70 years, and she was in favor of something like that. I mean she was in favor of it not being zero, not being infinity. Well, I mean regular property lasts forever, so there’s already something different about that.
And then even if it’s not going to last forever, where do you draw the line? How do you pick – is a patent going to be 15 years, 17, two years, 21 years? How do you know what the right number is? So she obviously had no clue, so it bothered me. So I started practicing patent law in ’93, and about that year I finally came to the conclusion simultaneously that this is nonsense, and I’ll go through my reasons why, and I’ve believed that ever since, and I’ve honed my reasons over the last several years. And a lot of libertarians are coming this way too now, but this is not my argument, and it’s not a new argument.
I mean there was actually a whole debate about this in the late 1800s, and there were early libertarians like Benjamin Tucker and others who were against it, and then there were sort of fairly recent libertarians like a generation ago like Wendy McElroy, Tom Palmer, and Murray Rothbard even who noticed some problems with IP. But they gave it some attention, but then it kind of faded away, in part because the battle has been lost and IP is entrenched and in part because it just wasn’t that big of an issue.
It was bad, but it wasn’t like the war on drugs or taxes or war or public education, government education, etc. But I think what’s happened is with the advent of the internet and with the increasing speed of commerce and worldwide communication, there are a lot more outrageous patent lawsuits and copyright suits. They are more frequent. They are applied to evermore areas because of the ability of digital information, for people to be infringers more easily, pirating software and music and file sharing and copying and all this.
And the cases where it does happen are transmitted around the world instantly by blogs and RSS feeds on the internet, so people are aware of these things. So it’s become more of a hot-button issue with everyone really, and libertarians, in my impression, the more principled, more radical, more Austrian type libertarians are almost universally against IP now and with really good arguments.
Okay, yeah, it was fun. So this is why this topic is important. I started writing on it because I practice patent law, and I saw some ineptness in some of the arguments because people just didn’t understand the law. And I was just trying to gather my thoughts on it, and to be honest, this topic never was and still is not my most interesting topic to me. I like the other things we’ve talked about so far better, but this one is so important to talk about, and it’s become increasingly important, and I can talk about it because I know something about IP.
And I’ve seen that it actually supplements and increases our understanding of different areas of Austrian economics and other areas of property rights itself, so it’s an important topic. As for, Jock, your comment about Tucker, yeah, I agree. Of course, the problem in my view with Tucker, one of his four great monopolies, was also land. Now, to an extent, I think he had a point to the extent he was talking about the systems of property rights that had been created by state privilege. But it wasn’t clear that it was that – that was his only criticism. It was sort of anti-property or anti-land-rights focus.
And also, I recently discovered, by the way – I posted on this recently. Proudhon, the famous, I guess, left anarchist, left libertarian, darling of the left libertarians who – the guy who said property is theft who also said property is wonderful. Proudhon actually was in favor of state-granted patents and copyrights as long as they weren’t – that’s great. I posted on this on Facebook the other day. I don’t know if I did it on my blog. But I think it’s on the C4SIF.org blog. Just go there and search for Proudhon, and it was incredible to me.
I mean – yes, Jock, I do agree. This is what’s really good about a lot of the left, especially the modern left libertarians but even the old left. They were quite good on IP except for some exceptions like Spooner. Now, I don’t know if I’d call him a lefty, but Spooner was completely crankish on IP. I mean kind of like Rand or Galambos or someone. And by the way, the greatest cranks on IP in my view are Rand, Galambos, and maybe Spooner, but I don’t give him too much grief because he was so early. Rand should have known better. Galambos should have known better I guess, but he was an engineer and infected with the scientistic mentality.
Okay, so let’s talk about what this is. I’m just going to give a quick overview of what IP is. Intellectual property is the term we use now to include a group of state-granted rights. They didn’t used to be called property rights. They used to be called monopoly or whatever they were. So it includes four main types of legal rights and some other more recent ones, but they’re not that important. But the main ones are patent, copyright – excuse me – trademark, and trade secret. And you will notice that people who talk about IP like libertarians, especially those who are in favor of it, often don’t know what they’re talking about. I mean they’ll mix up patent and copyright.
Now, I don’t blame them for mixing it up. It’s a highly specialized field. I mean most people don’t know a lot about brain surgery either. But they don’t have a lot of opinions on the best brain surgery technique, but for some reason, laymen feel compelled to weigh in on why we need to have patent, copyright, trademark, and trade secret, and when they don’t even know really the difference between them. And then they can’t explain why we don’t have to have fashion designs or maybe we should have them or database rights or moral rights, and etc.
So the main types of IP is patent and copyright, trademark, and trade secret, and then there are other things that are not traditionally called IP, which I think should be included in IP. That would include things like reputation rights, which is sometimes called defamation or libel or slander. That’s very similar to IP, also publicity rights. I think there’s a recent controversy about whether J.R.R. Tolkien can be a character in a novel, and his estate is suing for the right to publicity, which is, of course, censorship and absurd.
And now, there are modern rights too, of IP rights like boat hull designs, which is sort of a subset of copyright, and semi-conductor mask work protection, which covers the way you lay out an integrated circuit like what Intel does. And there are different types of patents. There is – so patents cover – the main two I’m going to focus on here is patent and copyright. These are the two worst in my opinion, the two most egregious.
Now, I think it’s helpful to go back and think about – okay, this slide here, six, is just a listing of the different types of rights. And by the way, fashion rights are being proposed as we speak right now. They’re being fought, but who knows? It’s important to understand how these things came about and why – I think it helps to get your mind wrapped around that there’s been a mistake made all along by libertarians, for example, and why we would have done that.
So let’s just start chronologically. Let’s go back in history and think what happened. So the origins of copyright and patent, and let me just briefly say copyright is a monopoly right granted by the state in the expression of an idea, the way it’s expressed. So that would include like a novel or a painting or a song or lyrics to a song or even software nowadays.
And a patent covers an invention, which is a practically useful design of a machine, for example, that does something useful or of a series of steps, a process to make something useful, which you could think of as a recipe. Okay, so the origins of things – now, these things actually were hundreds of years even before their kind of modern origin in England in the 15-1600s, back in the mercantilist times and even before that.
But sort of the kind of modern origins of this was in England and Europe. So here’s what happened with copyright. Queen Mary created the Stationer’s Company, 1557, and she gave them exclusive rights over book publishing, and the purpose was to control thought and to censor thought and to prevent the wrong ideas from being published, so they were afraid of the printing press. The church and the state were afraid of the printing press and the power of ideas.
So when the charter for this guild or this company expired 150 or so years later, the publishers said, hey, we kind of liked having the monopoly of this, and they asked parliament for a statute. And instead of giving it to the publishers, they gave it to the authors. So they gave the authors this copyright. So its origins lie in censorship, but one reason that the authors were in favor of it was because they were glad that they had the right to decide to release their work.
In other words, it released the power of the Stationer’s Company or the state to control their work. They had the power. So in a way, the reason they wanted copyright was they were now free of state censorship. It was up to them. It wasn’t this modern mentality that, hey, I’ve got this copyright. I can now go around extorting people. They were primarily glad that they were able to release their works from the control of the state. So that was 1710, the Statute of Anne, the first modern copyright statute.
Okay, now, in England was happened was you had the monarchs granting all these patents, letters patent they called them. It was basically an authorization by the crown, which gave someone the exclusive right to do something. It usually had nothing to do with inventions. It was just you get the right to export this commodity. You get the right to sell horseshoes in this town, something like that. And they did this for favoritism, to gain loyalty among these people, and of course the consumer suffered, and the competitor suffered. So you had this practice of monopolies being granted, explicitly called monopolies.
And what happened was – and by the way, one of the most famous examples was Sir Francis Drake who had a letter patent which authorized him to engage in piracy, real piracy. Okay, so there was an uproar against this, and so parliament passed the Statute of Monopolies in 1624, and they said, look. We’ve had enough of this. We’re going to ban all these patents that are being issued by the crown except we’ll still allow them to be granted for novel inventions. So they made an exception for this, so this is how patents that we have now squeak through.
So fast-forward to America, 1789. By the 17—I think it was ’69, ’67, ’61—the first modern patent statute was for South Carolina actually, 17—I think—61. In any case, so the founders of the American Constitution included the patent and copyright clause in the Constitution, 1789, because they were used to it, and they sort of were buying into this then-being-passed-around idea that, well, we need to have some kind of temporary monopoly for writers and artists and inventors and scientists to give them an incentive to create and to give scientists an incentive to disclose.
Actually, I think a lot of those were – Jock, the East India Company, I think that was a patent. A lot of these companies, these old companies that had the monopoly on these trade routes, they were actually granted by letters patent. The Bank of England – and I think that’s a different situation. That’s a state monopoly itself. But yeah, and what happened was – in fact, a lot of the land grants, Jock, were granted this way by these – the king would authorize some company in America [no audio_00:30:47].
Am I back? Am I back? Okay, sorry. Oh, what I was saying was a lot of these – I was reading today, an 1823 or something US Supreme Court case about some of the original disputes about land grants in America. And there was a dispute about whether – who had title to this piece of land. And sometimes they would trace it back to this grant by a company that was authorized by a letter patent by the king in England to make land grants.
And so, of course, this ties into a lot of left libertarian opposition to property titles, and you can understand why. But this is tied up with the whole idea of a patent that the crown or the state grants someone an exclusive right to do something that no one else can do. Now, the bottom line is the original incorporation of the copyright and patent clause in the modern western systems like the American Constitution, was not based on natural law.
Thomas Jefferson, James Madison—these guys did not believe it was a natural right. They explicitly put it in there as like a utilitarian thing. Barry, I believe it. I’d be curious to see exactly more about that. Anyway, even John Locke didn’t believe that patent was – and copyright were natural rights that could be justified under his homesteading theory.
So nowadays you’ll hear people call it a natural right, but that’s just another attempt to reverse engineer or to justify it after the fact. It was put in there for utilitarian reasons. This is without doubt in my opinion. So it was based upon the assumption – now, remember, this is 1789. There was no data, no empirical science, no empirical economic studies, no econometrics. They just assumed that, hey, we can make things a little bit better in society if we grant these temporary rights.
But the truth is that studies cannot verify this at all, and in fact, most studies show that, if they’re conclusive, most of these empirical studies conclude that patents and copyrights actually reduce overall innovation and distort the market and cost a lot more than they’re worth. And so this is – this was what Fritz Machlup, who was a quasi-Austrian economist who was hired by Congress to do a study in 1958 of the patent system, he concluded – now, this was a mainstream study, one of the best, most thorough studies I’ve ever read.
And he said here, you see what I’ve got bolded. No scientist – no economist on the basis of present knowledge could possibly state with certainty that the patent system, as it now operates, confers a net benefit or net loss on society. And then he says, if we didn’t have a patent system, it would be irresponsible to recommend instituting one.
So this is what the report to Congress concluded. So in my opinion, this is arguably one reason why the current patent and copyright law could even be argued to be unconstitutional, even though there’s a patent and copyright clause, because that clause says that the purpose of these laws is to encourage – to promote the progress of the arts and the sciences. But if actually doesn’t promote it but actually hinders it, which I believe it does, then it seems like it’s arguably not even authorized by the Constitution.
Anyway, so the point is, because it’s part of this constitution of this capitalist, property rights, quasi-libertarian society, America, and the growing western countries too – oh, Karl, good. Was he an Austrian or quasi-Austrian or what? I always assumed he was a quasi-Austrian, but I’ve wondered if I’m describing him right. Let me know. Anyway, I’ll check back with you in a second, but the point is what happened was, first of all, it started being called the property right.
This was done – as Machlup noted, they started doing this – yeah, but he was at least Austrian sympathetic, at least that. Anyway, as Machlup concluded with Penrose, the reason that they called it property was instead of using the word privilege or monopoly. So they were doing it for completely propagandistic reasons. So what happens is everyone assumes that this is a type of property right, type of a capitalist system.
And here’s what’s ironic. So nowadays, we have this situation. Right, I agree, Karl. So now we have people saying, well, I’m in favor of IP because it’s a natural right, totally oblivious to its origin in utilitarian grounds, and before that, in complete state censorship and monopoly privilege control. Or they’ll defend it on empirical grounds, but they never give any evidence. They just say, well, we need it to incentivize inventions. Well, how do you know? And what’s the net benefit that we’re getting from this system? And what’s the cost of it? And how bad is the distortion it effects on the economy and the scientific research and industry?
So they – it’s sort of like they just say, well, theoretically it’s justified, but we don’t know if it is, and we don’t really care. And this is one of these things where most economists seem to realize that IP is not justifiable on economic grounds like the minimum wage, which is also hard to kill even though most economists realize that the minimum wage cannot be justified economically. So then you have Ayn Rand who’s a big influence on early-modern libertarianism who comes over here, and she sees this system, and she loves the American system because, to her, it’s a breath of fresh air.
She’s coming from Soviet Russia, and I can’t blame her. I mean the America that she came to in the early 1900s was a libertarian paradise compared to Soviet Russia. So she starts reading all this classical liberal thought and the Constitution, and she’s impressed by it. And there’s even a story. It’s in Rothbard’s unpublished correspondence that she originally actually supported eminent domain, which is the state’s ability to seize private property for public use if you pay adequate compensation to the person, which is un-libertarian.
She accepted that initially because it’s in the Constitution. The Constitution authorizes eminent domain. It just says if you take someone’s property, you have to pay them a fair fee for it. She dropped that later because she became more radical, but the point is she was enamored of this constitution, and she really took to the patent and copyright idea. In fact, she’s even said patents are the heart and core of property rights, and some of her followers say that all property is intellectual property.
And what their thinking is this Randian or objectivist idea that we have rights because we need them to prosper in life, and to prosper in life, we have to be able to create things, and to create things, we have to have property rights in these things that we create. I mean it’s sort of that kind of argument. But it kind of gets crankish because she says if you create a value, you own that value, so we create values. Well, that’s actually not true. We don’t create values. That’s a crankish understanding of what values are.
If you have a good understanding of Austrian economics, say, values don’t exist as independent things out there in the world. A value is more of a relationship between a valuer or an actor and a scarce resource in the world or some end state that you want to happen. So if I have an apple, it’s not a value, and it doesn’t even have a value. It’s that I value it, and I demonstrate that value in my action.
Okay, if I decide to part with a dollar to obtain the apple, then I’m demonstrating that I value that apple more than the dollar, so that’s all value means. And let me go to the next page. So Rand – I don’t have it in this slide here, but Rand even recognized this. I have a post up at – I mean Rand, Rothbard, others – they’re pretty good on this. They actually – well, Rothbard is really good on it. Rand is good here, but she’s inconsistent with this later. What they say is we don’t really create anything in the world because the universe is fully of matter, all we do is rearrange it. And that’s true.
Now, that’s not trivializing the role of knowledge or innovation or creativity or thinking. It’s just explaining what we do with it. In other words, this is the correct view of how we act. We, human actors, face a world of scarcity, and we face a world of a certain understanding of what’s going to unfold in the future and what’s happening right now. And we have desires and values, things that we want to happen differently. So I have a certain thing I want to happen in a year, in a month, tomorrow, five minutes that wouldn’t otherwise happen if I didn’t take some action to intervene in the state of affairs.
So that is why we act. That is what action is. Action is an intervention to try to change what’s going to happen. Okay, so what you do is you use your understanding, your knowledge, information about the world to figure out what’s possible, to decide what would make you happiest, and to go for that and to select certain means to accomplish it. So that’s the role of information. The role of means is causally efficacious means that help you achieve your end. That’s what an action is. But deciding what end to pursue, deciding what means to use is informed by or guided by knowledge that you have.
So the greater your universe of knowledge – or sorry, the greater the amount of knowledge that you have, the greater the universe of possible ends you could think of, and the greater the universe of means you can think of to accomplish it. So, for example, if I know that I can make a chocolate pie or a lemon pie, I might prefer the lemon pie. And then I might – I can think of three means to achieve that. I could make it myself, I could hire someone, or I could go to a store. That’s three means. Or I could rob someone. I mean that’s another means. If I learn more information and the body of information grows throughout human history, then I might realize, hey, there’s a coconut pie. That’s possible too, so now I might choose that.
So now I have a wider universe of ends, and I might realize, well, there’s a different machine that can make pies too. I mean so there’s – or there’s a more efficient technique for making pies. So knowledge is what informs human action, helps guide our decisions, helps guide the means we choose, helps guides the ends that we pursue with these means. The reason that there are property rights in the means is because they are scarce. I couldn’t achieve my end if I’m not able to employ this means.
But because the means is necessarily scarce, as Mises points out, because the means is necessarily scarce, if I don’t have a property right to use that, if other people can try to use it too and fight with me over it, then they might get it from me, we might destroy it, or we might kill each other. In any event, we’re not being productive – using our time productively, and we’re not using the means productively to achieve the end. This is the very reason why there must be property rights in scarce resources, as we discussed in the first one or two lectures.
And this is why it makes no sense to have property rights in knowledge because knowledge is what guides your action, and there is no reason why multiple people couldn’t use the same recipe for pie at the same time. But they can’t use the same ingredients and mixing bowl and oven and kitchen at the same time. This is the fundamental difference.
Now, I think I’m going to get to this in a minute, but let me backtrack, and let’s go back to where I left off. What are some of the arguments – well, actually, I’m going to skip this page. This is just kind of silly. These are silly arguments given for IP; 8:44. I will go briefly over this. Some of the key intellectual property statutes and treaties—just to give you a flavor for how bound up this is in statism and legislation and interference with the market.
So like I said – well, you had stuff earlier – you had stuff as early as 500 B.C. There was some monopoly given to the winner of a cooking competition. They had the right for one year to be the only one who could make that recipe, so you had stuff way back. But sort of the modern development: 1624, the Statute of Monopolies. It’s called the Statute of Monopolies of 1623, but I think it was enacted the next year, same thing with the next statute. Anyway, that’s a key patent statute. 1710, the Statute of Anne—that was copyright. And as I said, 1691, South Carolina enacted the first general patent law.
Okay, so then modern IP. I think the US Patent Act is the oldest or one of the oldest 1790. It’s authorized by the Constitution. It’s administered by the US Patent and Trademark Office or US PTO. Copyright is also authorized by the American Constitution, and it was initiated in the Copyright Act of 1790, and it’s administered by the Copyright Office, which is part of the Library of Congress. Then you have trademark law, which is governed by state laws. Plus there’s federal Lanham Act, which has a federal aspect to it. That’s also governed by the US PTO.
Jock: What were things like Watt steam engines cited by Boldrin patented under? That’s a good question. I’m – it had to be the US patent system for sure, and I don’t know. Maybe the British patent system too. I’m not sure. I can’t remember which system it was patented under. It’s covered in detail in the early chapter of Michele Boldrin and David Levine book, Against Intellectual Monopoly. But I’m forgetting which patent system covered it, but it was one of these modern systems. That’s a good point. This was written, wasn’t it? I can’t remember. I have to look it up. That’s a good question.
Anyway, let’s go on to the next issue. Okay, so there’s modern changes to copyright. There was a No Electronic Theft Act, or the NET Act. There’s the Sonny Bono Copyright Term Extension, sometimes called the Mickey Mouse Protection Act. That’s 1998. The extension added 20 more years to copyright. Digital Millenium Copyright Act, DMCA, which is one of the worst, which has these criminal penalties for use of technology that could circumvent DRM even if you have the right to do it under exceptions to copyright law. And this is what boat hull or vessel hull design came from, the DMCA.
The DMCA is one of the worst, and the problem is the ACTA, this treaty – I think I have it on a page or two. Let me do this quickly. Trademarks added something called anti-dilution rights in 1995, which made trademark law much worse. And there’s a federal aspect to trade secret law in the Economic Espionage Act, which could make it a federal crime to misappropriate a trade secret. The major international bodies that govern the international sort of treaties and international standards is the World Trade Organization and the WIPO, the UN’s world intellectual property organization.
So you don’t have to know all these details, but this is – it just gives you an overview of this horrible internationalized and statist legislated network for laws that govern all this. As for treaties, we have the Paris Convention, which has to do with patents, 1883, the Patent Cooperation Treaty in 1970, the Berne Convention, which covered – and the WIPO Copyright Treaty of 1996, and the other one is 1886. This has – this requires us to have international copyright standards.
Now, the problem with these treaties is let’s say we had a movement right now to radically change copyright or patent law. We actually could – Congress couldn’t do it because they would be actually in violation of international law. They’d be in breach of international treaties, which they actually pushed on the world. It must have been a British patent, Jock. I just think they weren’t quite as systematic then, but they were being granted, but I don’t remember the procedure.
Am I still there? Okay, there’s also something called the Madrid System, which is what covers international trademarks, and then there’s the GATT, General Agreement on Tariffs and Trade, and they have something called TRIPS. Anyway, there’s all these international things that give rise to the modern system. Now, what do we have pending, coming down the pike? We have the Anti-Counterfeiting Trade Agreement, or ACTA, which will impose DMCA-type controls on every country. It’s horrible.
We have the COICA, the Combating Online Infringement and Counterfeits Act, which would allow domain names of websites accused of piracy to be blocked. ACTA was negotiated in secret. What happened with ACTA was it was done as a trade agreement, which is usually like a bilateral or maybe multi-lateral agreement between countries to have trade, and those are usually done in secret. These IP treaties are treaties that are usually done openly, so this was done on purpose as a trade agreement so that it could be done in secret.
But this heroic law professor, Michael Geist, in Canada helped to expose this. Someone leaked to him the ACTA drafts, and a lot of attention got shone on it, and actually it’s been diluted a little bit. So if it gets passed, it won’t be as bad as it was before, but it’s still pretty bad. And there’s also currently agitation to add IP laws for fashion rights, fashion design rights, and I’ve blogged a lot about that on C4SIF. If you just go to C4SIF.org and just search the word fashion, you’ll see two or three posts about this.
Julian: Can one invent something and then release it? Oh, quickly, by the way, anything that Schumer or Orrin Hatch has to do with on IP, especially Hatch – he’s horrible. He’s nothing but a shill for these companies that want stronger IP protection. He’s horrible. Anyway, can someone – Julian says, can someone invent something and then release it under the GNU software license so that someone else can’t patent it first and then sue you for – okay. This is – the GNU software licenses have to do with copyright, so it’s a way of licensing your copyright in the way that code is expressed.
There is a – I wish I could remember the post. I posted on C4SIF.org recently about this. There is – there are two or three companies out there that allow you to publish your idea. I think I put this on the Mises blog too in the last month or two. So here’s what happens. Under patent systems around the world, you are entitled to a patent on a novel and non-obvious inventive idea if you invented it and if it’s not already known in what’s called a prior art.
So let’s say you come up with some great idea, but three years ago someone else came up with the same idea, and they sold a product that embodied this invention, or they published an article on it, but they never did get a patent themselves. Well, if it’s been known for three years already, it’s part of the prior art and would block you from getting a patent. Well, it actually might not block you because the patent office might not find it. If they found it, they shouldn’t give you a patent.
Sometimes they make mistakes, and they grant these patents anyway, but at least you have some chance of preventing the patent from being issued, or if it does issue and it shouldn’t have, then if they try to enforce if against you or someone else, the victim of their patent suit could find the prior art because they have a much greater incentive when they’re sued for patent infringement for millions of dollars. They have a greater incentive to do a $20- or $50,000 search and find that prior art when the patent office doesn’t and doesn’t really care too much.
Anyway, the point is there’s a good chance that it would be found then, and the patent would be invalidated, and they would lose the suit. So companies do this quite often. They will do – it’s called defensive patent publishing, and in fact, if you’re interested in this, go to C4SIF.org or Mises.org and search for my name, Stephan Kinsella, and defensive patent publishing in quotes, and you’ll find this blog post I had up recently, which discusses just this. So what you would want to do is if you’re using an idea and you don’t want to patent it but you don’t want to be sued by someone else who later patents it, you just need to make sure the idea is public.
Now, if it’s part of software or if it’s embodied in some product that you’re selling, it’s already public in a sense. But you could also publish an article on it somehow to try to make it part of the public prior art record. That’s it, Jock. Thank you. All right, make sense, Julian? Okay. This page here – I’ve already kind of talked about this with – the point is that libertarians believe that the purpose of the law is to do justice, to protect property rights.
The fundamental problem with IP is that it gives someone a veto right over other people’s use of their own property. This is the fundamental problem with it. And the problem with that is that it’s a transfer of wealth or it’s a transfer of property rights. So today, I have the right to use my car in any way I see fit as long as I don’t commit aggression. Tomorrow, Joe Blow gets a patent on a way to tune a carburetor of a car engine because he figured out a way to tune his own carburetor of his car to get better mileage, let’s say, gasoline mileage.
So the government gives him this patent, which gives him the right to use the state’s courts to issue force against me to tell me I can’t use my own screwdriver and driveway and car and hands to tune my own car in a certain way, even if I thought of it myself. So basically it gives him a veto right over how I can use my property. This is a partial ownership right. He is now a co-owner of my property with me. And of course, this is inconsistent with the libertarian idea that the owner is the person who homesteads this property from the unowned state of the world, not someone who thinks of a way to use their own property. This is just an excuse to rationalize or justify the monopoly that’s granted by the state to this guy. It’s really granted to him to help prevent him from having to compete.
Okay, I’ve already discussed all this. I’m going to go on so I try to stay on track here. I’ve written an article with Jeff Tucker, and we tried to break goods down into scarce and non-scarce and also whether they’re goods or not goods. It’s not too important for this. It’s just as a way to try to categorize this and understand what’s going on here. You can look up that article if you like. It’s Jeff Tucker and Stephan Kinsella. It’s “Goods: Scarce and Non-Scarce.” I think that’s a hyperlinked title there in the slide.
And I’ve already talked about this – some of this. The entire purpose of the market – think about this. The free market helps us produce abundance in the face of a world of scarcity. So we’re dealt with a world where things are scarce. We can’t all have what we want all the time. There’s not enough – maybe not enough food, not enough scarce resources to make houses, riches, clothing, whatever. But despite that, when you unleash people’s energy with a property rights system and respect for individual rights and the free market, we have tremendous abundance that is possible in the face of scarcity.
So the free market and libertarian ideas being implemented this way helps us to see that the market and human society and activity is trying to overcome scarcity. Scarcity – I won’t say it’s a bad thing because that’s part of the way the world is, but at least it’s a challenge to the way we have to live. But as I mentioned, knowledge and information also plays an important role in human action. But it already has a characteristic that is already not scarce. It could be multiplied to infinity. It can be shared. This is why there’s human progress is because the body of human knowledge grows all the time.
So there’s more of these recipes and knowledge and information that people can draw on to make action – to make human action more efficient, to make there be more production. So to actually impose scarcity on it, when the free market is trying to reduce scarcity in material things, and luckily, we already have non-scarcity in ideas. To try to impose scarcity on that is absolutely insane and suicidal and is completely un-libertarian in my view. I’m going to skip this page here, although you might want to look at the cartoon. It’s kind of funny.
I’ve got some blog posts here that you might find of interest, what Mises’ views on IP were. Mises was sort of agnostic on this. He treated that – he looked on it like an economist. He said, well, if you don’t have IP, you’re going to have underproduction of some things, but if you have it, there’s other problems. I think he was a little bit ambivalent, but he was pretty good in some ways. Hayek was a little bit better. Rothbard was very good, although he gave a little bit – he thought there was more scope to what’s called contractual copyright than I think that really could work.
I don’t have time to go into that tonight. I discuss that in detail in my article – my monograph, Against Intellectual Property. But as Jeff Tucker pointed out in one of his talks, and I sort of talked with him about this and learned from this, you can look at the market as having three essential aspects. I won’t say this is all the three aspects, but one is cooperation and the division of labor, and one is emulation and learning, and one is competition, and these things all go together. I mean we cooperate because we have property rights in scarce resources.
But we have competition. This is part of the market. But competition requires that companies have the right to emulate each other. You see a competitor doing something. They’re getting customers, and you emulate what they’re doing, or you do it better. This is why the market is always improving. This is why there’s progress. This is why the consumers are always benefitted, and this is why prices would always rise and there would always be constant innovation on the part of producers to try to attract customers. There’s nothing wrong with emulation and learning. Remember, we talked about the importance of recipes and the knowledge as a guide to human action. So this is just the aspects of the economy. Emulation is part of it, and patent and copyright seek to block that part. This distorts the market in addition to violating individual property rights.
Let me quickly mention something here. So as I mentioned earlier, reputation rights are part of IP, although they’re not typically classified by lawyers or legal scholars as part of intellectual property, but they are because it’s the same idea. You created something of value with your effort, and therefore, you have a property right to it. But of course, the problem is a reputation is just what other people think of you.
So if you have a property right in that, that mean you have a property right in other people’s brains, which again, is just like IP in that you have a property right, a partial veto right in what other people do with their bodies and their property. I’m going to skip this part here because we’ve already talked about debtors’ prison in the other lecture.
I’m going to skip this too. I’ve already actually mentioned this that Rothbard, Rand, Mises, and Hoppe – they all recognized that – well, let me go into this. This is an important point to mention too here. So one common mistake that’s made is people will sort of say, well, there’s three ways that you can acquire property. You can find – you can appropriate it, something unowned, Lockian homesteading, you can purchase it from someone by a contract, or you can create it. And so then they’ll say, well, the things that you create like your reputation or like a recipe or an invention, well, these things “have value” too.
This is just one way of creating things. I’m sorry—this is just one way of acquiring property rights to things, so you should have property rights in these things too. And I agree that if you can correctly describe an innovative and creative activity as creating something that is ownable, well, the creator is the one who should own it, sure. The problem is this is double counting, and it’s confused thinking.
Creation is not a source of property rights. Creation is a source of wealth, but wealth is just how you value or regard the usefulness of things that you own, that is, scarce resources. So, for example, if I transform property that I already own into something more valuable, a new shape, then I have increased wealth, but I don’t have a new property right. I already owned the thing, the raw factors and the materials. Like if I have metal that I own and I transform it into a sword, well, I have a more valuable thing now than an unshaped mass of metal. But I don’t have a new property right. It’s just the metal that I owned is now in the shape of a sword.
So you can see there’s this confusion between the role of labor and creativity and the intellect and ideas and making things more valuable by rearranging them, which is another way of saying creating wealth or creating value if you’re not being too precise. But you’re not creating a new thing that we have to find an owner for. We already know the owner. The owner if the owner of the factors that went into it. So this is the entire mistake made by advocates of IP.
These are some quotes here on slide 28, some quotes along the lines of what I’ve already talked about, so you might want to read those yourself later, but let me go on so I don’t get too far behind today. I don’t need to go into this in too much detail. If anyone has questions about this, about exactly why I think Rothbard sort of is wrong in his idea that we could create a type of IP right by his contract example with a mousetrap, I can discuss that later. It’s also discussed in detail in my Against Intellectual Property article on pages 45-55, so you can take a look at that, or you can ask me in the questions session, which I hope to start shortly.
Let me zip through these here. As for patent reforms, I’m not going to go into this in detail. I’ll just tell you. We should abolish patent law and copyright law. Short of that, probably the biggest two or three reforms would be the top two or three I have here: reduce the patent term from 17 years now to, like five years. That would be a big improvement.
Remove the ability to get an injunction and only have the right to get money damages. That would be the biggest improvement I would propose for patents. As for copyright, again, the term for copyright is insane. It’s over 100 years for most things. I would go down to ten years, five years. And probably the second biggest improvement would be the third one I have listed here. Require active registration. Right now, copyright is automatic, and you cannot get rid of it. It’s almost impossible to get rid of it. So what we have to do is make it be active registration.
Now, the problem is, like I mentioned earlier, the existence of the Berne Convention itself would arguably prevent us from getting rid of – from requiring active registration because the Berne Convention requires there to be no formalities, which is why don’t have to put a copyright notice or have active registration to have a copyright. So we would have to change international laws to do this. I’d also get rid of the DMCA. It’s just an abomination. And reduce the statutory damages [no audio_01:05:06].
Okay, let me – am I back? I was just thinking for copyright, like these reforms here on this page, I would say the first one, reduce the term, and require active registration and also get rid of the DMCA, which is an abomination. Those would be huge improvements to the copyright law.
Now, as for these other questions here, first acquisition in the foundation of homesteading and Locke, I don’t understand what the question – Julian, what’s the relationship to – maybe you’re talking to someone else. You can ask the question later in the question session if I’m missing it here. Sorry about that. I’m going to skip trademark because that’s too arcane.
There are some possible reforms being proposed, by the way, and you guys can skim through these links if you like. In the UK, there is talk about, yes, changing the fair use laws to make them more like the US I guess. The Supreme Court has been moving in the right direction, but it’s minor. There are some patent reform bills proposed, but Orrin Hatch is behind it, and apparently it might pass this year, so I am not confident at all. I read parts of it today. It looks like it’s sort of a grab bag. I mean there are some things that are minor improvements, some that are – it’s technical, so I don’t have any hope for it being significant reform at all.
I’m going to skip this. We’ve already talked about some of this. Well, I have some posts about ideas about how we can have innovation without IP. It’s not my obligation. It’s not our obligation to predict what a free world would look like, but there are some ideas. Let me just mention – I’ll stop in a couple of minutes after I get done with this. Then we’ll come back for questions.
The basic idea is this. People will say, well, if you get rid of IP, how am I going to make money selling my ideas? Well, I don’t know. It depends. And why is it my job to tell you, as an entrepreneur, how to profit in society? You have to figure it out. I mean this is the job of every entrepreneur. They have to figure out how to come up to satisfy customers and make a profit in a world where there’s competition, and they can be emulated right away and where they’re going to have to have cost of exclusion.
Think about this. Almost every business has varying cost of exclusion. For example, if you have a movie theater, I mean you have to pay a salary to the ushers and the clerk who takes your money in the beginning. And you have to put locks on the doors. Otherwise, you might have free riders come in, and they wouldn’t pay. So you have to hire someone to make sure people pay. Well, that’s a cost of exclusion. Drive-in movie theaters in the States in the ‘50s, whatever, used to have these loudspeakers, and they had some technical problems with them, but also people could free ride.
They could sit on neighboring hills in their cars or just on the grass and watch the movie because it was outside and listen to it because it was on loudspeakers, and they could free ride. So one thing that the drive-in theaters was they installed these little speakers next to each car at considerable expense. So that cost them money, and yet they figured that that was worth it as a way to capture more of a market of customers and to exclude free riders.
But if they couldn’t have found a way to do that, then they would have either had lower profit, or they just shouldn’t have been in that business. I mean this is the way life is and reality is. So the bottom line is people have to think of ways, and if they don’t have the crutch of a copyright and patent to lean on, they of course would think of different ways to make money as some companies are doing now because even with these laws, there’s piracy. And they have to find a way to make money in the face of piracy.
Okay, I’ve just got some more thoughts here, but I’ll skip over this because it’s not that essential. We’ve already talked about a lot of this, skipping this. You can read this later. It’s pretty self-explanatory. These are just some different ideas people have had about ways you could respond to a non-copyright world.
And upcoming topics: We’re going to talk next class about defensive corporations, which is a fascinating – I love this topic. And then I’m going to go through a bunch of somewhat related, somewhat unrelated just common libertarian mistakes. Some are based upon what we’ve already talked about, and some are not. So let’s take a break here. It’s 11 past the hour. Let’s take a five-minute break. I’ll be back at 16 past the hour, and we’ll talk for 20 minutes, 30 minutes, as long as people like to, about IP or other things. So I’ll be back shortly.