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KOL172 | “Rethinking Intellectual Property: History, Theory, and Economics: Lecture 1: History and Law” (Mises Academy, 2011)


Kinsella on Liberty Podcast, Episode 172.

This is the first of six lectures of my 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics” (Tuesdays, Mar. 22–April 26, 2011), which was a reprise of a similar Mises Academy course in October 2010. The slides and video for this lecture, as well as the “suggested readings” for all six lectures of the course are provided below. The other five lectures follow in subsequent podcast episodes KOL173–177. (Discussed in Rethinking IP; and on the Mises Blog in Study with Kinsella Online and in Rethinking Intellectual Property: Kinsella’s Mises Academy Online Course. See also “Rethinking IP,” Mises Daily (Feb. 10, 2011).)

See my article “Rethinking IP,” Mises Daily (Feb. 10, 2011).)

Transcript below.

Related Material

Introductory video from the Mises Blog post Kinsella Can Be Your Professor:



The “suggested readings” for each lecture are appended below. The links were internal Mises Academy links so would not work here, so until I find time to code in the links, most of these materials can be found on stephankinsella.com/publications, c4sif.org/resources, mises.org, hanshoppe.com/publications, or on Wikipedia or by google search. (If there is a particular link you cannot find online, email me or add to the comments, and I’ll try to find it and update the post with that link.)

Main Texts



  • Legal Background:

  • AIP, pp. 9-14


  • URL Copyright Basics (US Copyright Office) URL
  • URL Copyright overview (LII/Cornell) URL
  • URL Patent law overview (LII/Cornell) URL
  • URL Patent introductory information (Ladas & Parry) URL
  • URL US Patent law information (USPTO) URL


  • AIM, ch. 2, pp. 33-35 (“World Before Copyright” section); ch. 3, pp. 48-51 (“World Without Patent” section).

  • AIP, pp. 9-14
  • URL Statute of Anne (Wikipedia) URL
  • URL Stationers’ Company (Wikipedia) URL
  • URL History of patent law (Wikipedia) URL
  • URL Letters Patent (Wikipedia) URL
  • URL Statute of Monopolies 1624 (Wikipedia) URL





  • Defamation (Wikipedia)–beginning to Section 5 only
  • Uniform Domain-Name Dispute-Resolution Policy



Economic and Utilitarian Arguments

  • AIP, pp. 19-23


  • AIM, ch. 7, esp. pp. 176-201
  • Kinsella, There’s No Such Thing as a Free Patent
  • Machlup, “An Economic Review of the Patent System” [pp. 19-26 et seq., et pass.]
  • Machlup & Edith Penrose, “The Patent Controversy in the Nineteenth Century,” pp. 7-28
  • Hurt & Schuchman, “The Economic Rationale of Copyright

Deontological/Natural Rights-Based Arguments

  • AIP, pp. 23-28

  • URL Ayn Rand Lexicon-Patents and Copyrights URL
  • URL Ayn Rand Lexicon-Production URL


  • URL Dale Halling, Ayn Rand on Intellectual Property URL
  • URL Kinsella, Comment to “Galambos and Other Nuts” URL
  • URL Machlup & Edith Penrose, “The Patent Controversy in the Nineteenth Century,” pp. 7-28 URL
  • URL Greg Perkins, Don’t Steal This Article! URL
  • URL Kinsella, Inventors are Like Unto … GODS … URL
  • URL Hurt & Schuchman, “The Economic Rationale of Copyright” URL

Property, Scarcity, Ideas




***Note: Use same readings as for Lecture 2 starting with “History”–PLUS the new material re patent trolls linked below***


  • Page Patent Troll email response Page
  • URL Hidden from students: Patent Troll email response URL
  • URL Patent Trolls and Empirical Thinking URL
  • URL Facebook Threatened by a Non-Patent Troll URL


  • URL Once Again, the Copyright/Trademark Tail Tries to Wag the Internet Dog




***Note: Use same readings as for Lecture 2 starting with “Economic and Utilitarian Arguments”–PLUS the new material linked below***

Recent News & Outrages

  • URL Outrages: See following recent C4SIF entries: Hershey Claims Ownership of Orange, Brown and Tan Candy Wrappings; UK High Court Ruling Implies Headlines Are Copyright; Universities attacking high schools over trademarks; EFF rescues ASL Ally’s sign-langu URL


  • URL Photography and the law URL
  • URL Key IP Statutes and Treaties



***read the material from Week 2 starting with “Deontological/Natural Rights-Based Arguments”***



Outrages of the Week/Recent News

  • URL See recent postings on C4SIF.org (since Dec. 8) URL

Austrian Economics and IP

  • URL Kinsella, “Mises on Intellectual Property“ URL
  • URL Hayek and Rothbard references in “Other Publications and Resources” section URL

Libertarianism and IP

  • URL A Libertarian Theory of Contract: Title Transfer, Binding Promises, and Inalienability, pp. 30-33 URL
  • URL Kinsella, “Locke on IP; Mises, Rothbard, and Rand on Creation, Production, and “Rearranging”” URL

IP as Contract

  • AIP, pp. 45-55 (IP as Contract)

Reputation, Trademark, and Communication

  • URL Kinsella, “Reply to Van Dun: Non-Aggression and Title Transfer,” pp. 59-63 URL

Proposed Reforms

  • URL Kinsella, “Reducing the Cost of IP Law,” URL

Innovation in a Post-IP World

  • URL Kinsella, “Innovations that Thrive without IP URL
  • URL Kinsella, “Funding for Creation and Innovation in an IP-Free World ” URL
  • URL Kinsella, “The Creator-Endorsed Mark as an Alternative to Copyright” URL


  • URL Property Title Records and Insurance in a Free Society


Rethinking Intellectual Property: History, Theory, and Economics—Lecture 1: History and Law

Stephan Kinsella

Mises Academy, March 22, 2011


STEPHAN KINSELLA: Recording is enabled.  Hello everybody.  We are starting now.  Can everyone hear me now?  We only have a few people online.  That’s fine.  I assume the rest will watch later.  Danny, Gwendolyn, Karl, can everyone hear me all right?  Awesome, good.  Oh good.  Okay, I had the wrong window open.  Hold on one second.  This is our first time using this Webex, and you guys are guinea pigs, but I think you’ll benefit from it because I think that we’ll have no crashes and dropouts like we’ve had in the past.  Ethan, turn that other light on in here please.  Turn the other bright light off.  Donald Koss says he cannot hear.  Let me see if I can add you, Donald.  Okay, Donald, can you hear me now?  Can everyone hear me now?



Donald, can you hear?  Restart audio – I’ll restart audio conference.  Hold on a second.  Okay, I restarted.  Now, Donald, can you hear me?  Can everyone hear me now?  I see a little – okay, now I see the earphone symbol.  And Donald, can you hear now?  Donald, hello.  Oh good, good.  Okay, Danny, if you see anyone join that I’m not noticing, we have – that I need to add as a panelist let me know because I might not notice it.


Welcome everybody, glad to have you all online.  This course is – I think we have about 17-18 students.  We may have a few more join during the week.  This is a smaller course, so this may give us more time to address questions, which is perfectly fine with me.  We had around 70 or 80 the first go-round for this course, and my last course, Libertarian Legal Theory, which just ended a couple weeks ago, we had 100-something students.  So this is a smaller course, so maybe we’ll have a more intimate setting, and we had some technical problems with the previous service we use, Dimdim.  We’re trying something new this time.  This is the first time we’ve used it, so in the chat session I’m going to say hello right now.


Hold on just a second.  You’ll see that my name shows as Danny Sanchez and so does Danny, so we’ll get that fixed for next time.  But Danny is our sort of technical host supporter here.  He’s a TA kind of guy and runs the whole Mises Academy, so you’ll see he’s here, and so am I.  Anyway, it’s good to be here.  Since we have such a small class this time, I’d be glad to answer questions as we go if they are on point.  I will stop and read them for people that are listening later or in audio only.


Okay, so tonight is lecture one of the course, and tonight’s topic is history and the law, the law of IP and the history of IP.  And we’ll see if I can figure this new system.  Go to slide one.  Just a brief introduction of myself.  Some of you already know me from the previous course.  Jock Coates who’s not here now – I guess Jock will listen remotely later.  Two of the students are friends of mine.  Jock, who did the audio narration for my Against Intellectual Property book, and John McGinnis, who I’ve known for maybe 15-20 years.  He was a professor at a local economics college in Pennsylvania when I used to live in Philadelphia, so I’ll be glad to interact with John too.



Before we go on, Danny, I see that there’s an X next to Karl Fielding’s name.  I’m not sure what that means.  Karl, can you hear me okay?  You there all right?  Hello?  Okay, I don’t know what the X means.  Grab daddy another one.


ETHAN: That’s the second one.


STEPHAN KINSELLA: So I just want to explain who I am.  I’m a patent attorney.  Now, this course is not about me, but just to give you an idea who your professor is and where I’m coming from.  I’m a patent lawyer.  I’m also a libertarian scholar and writer, and I’ve been influenced heavily by Ayn Rand initially in my thinking and then later on by more Austrian and anarchist thinkers like Rothbard and others.


As I said, I’m a lawyer, and I’ve had about an 18-year law firm career with law firms in Houston and Philadelphia, practicing intellectual property law including patent law – thank you – my main influences, and I’ll draw on these a lot in this course, are going to be the Austro-Misesian Rothbardians primarily Mises, Rothbard, and Hoppe.  And you’ll see as we go on how I draw on them.  Going to slide four.


A brief overview of the course, and I’ve done this once already, so I – and I actually re-listened today to my first lecture that I’m giving now.  So some of this I may streamline a bit because I realize now some of it I can speed up.  I tended to go over my time and have less time for Q&A.  I think we can streamline it a little bit better this time.  But just a quick overview of the course.  We’re going to have six lectures, and today’s lecture, number one, is the history and law of IP and an overview of modern IP law.


I’m going to talk about its historical origins and actually what the types of IP are and give an overview of the justifications with the reasons people have given to explain why they think we should have IP law.  Now, just to be clear, I’m not going to go into IP law in enough legal detail to enable you guys to practice this.  This is not a law school course, and that would be kind of boring anyway.  Danny, Donald has lost the video window.  I’m not sure how he gets it back.  Maybe you can advise Donald Koss how to get his video window back.  He emailed privately about that.  Donald, I’m not sure.  Ethan, you’ve got to be quiet.



Okay, so next week’s lecture we’ll talk about property, scarcity, and ideas, sort of a general overview of this aspect of IP.  And then number three, we’ll talk about the utilitarian case for IP.  Number five, we’re going to talk about how to – number four, we’re going to examine rights-based arguments for intellectual property.  Number five, we’re going to try to integrate intellectual property theory with Austrian economics and libertarian theory.  And then in the final lecture of the course, we’re going to talk about different reforms that are proposed, what’s coming up, things we can do, and how a non-IP world would work and also the future of open versus closed.

So let’s go in and jump right into lecture one.


Let me just – I’m going to emphasize here there are two books – resources that we’ll refer to a lot in this course.  Excuse me.  Let’s just hold on a second.  Donald Koss is having a little bit of a problem here.  Let’s take a quick break.  Hey, let’s just take a two-minute break while Donald and Danny try to get Donald back online. I’ll be right back.  I’m going to grab some more water.



Okay, let’s resume, and I’m hoping Donald can catch up and you guys get your problems solved, but let’s keep going to avoid delaying the lecture too much.  So the two main texts for the course will be my monograph, Against Intellectual Property, which I’m going to call AIP here, which is available online, and there’s links on the course materials for this, also, the book, Against Intellectual Monopoly by Boldrin and Levine.  So my book is more of an Austrian-Libertarian principled approach, and the book by Boldrin and Levine is more of an economic empirical approach.  They complement each other well, I believe.


Anyway, I have here on slide five sort of the – a list of the resources that are relevant to today’s lecture, and you can look at that later or on the resources for the course page for today.  Okay, so what we’re going to talk about first is the main question for – I’m going to minimize this chat session because this is distracting me for right now.


Okay, so the main question that we have to face is what is intellectual property, and is it a type of property?  So we all – we’re aware that there’s a type of property called real property, and this is in the common law system.  Real property is land.  In the civil law systems of the world, which is the second major legal system of the world, which is most of Europe, Quebec and Canada, and Louisiana and America, Puerto Rico, etc. this is civil law systems.  We would call this immovable property.  So that’s one type of property.


Then a second type of property is personal property.  These are movable things, which is what you call them in civil law systems, movable things—cars, apples, or gold, or even your body, although your body is held to be a special type of property.  So then the question is, is intellectual property a legitimate type of property.  So then the question is what is intellectual property?



Okay, I’m going on to slide seven now.  So here – let me just give a definition.  I’m going to try to have a calm just – don’t freak out about this because IP is hard to understand at first.  In a way, it’s hard to understand because of purposeful sort of overly complex ways of describing the law by lawyers and specialists.  It’s sort of our domain, and so we have our own jargon.  We have our own lexicon, etc.  So it seems alienating or highly technical, but basically the word IP is a fairly modern concept, which actually was adopted for propaganda purposes, which we’ll learn later.


But it basically is a term that covers several types of – excuse me – legally recognized rights.  They all – they’re all lumped together.  They’re all different.  They have some things in common.  They’re lumped together.  It’s what’s called an umbrella term, so it’s a concept that covers several different types of legal rights, and they all have something to do with intellectual creativity or something that’s valuable that’s not really a material, scarce thing, something that’s valuable because of what your mind has done.  So IP rights are rights to intangible or what you could say immaterial things, that is, to ideas as expressed or as embodied in practical implementations.


Now, Tom Palmer, who’s one of the intellectual property philosophers who has influenced me, he refers to intellectual property as being a right to ideal objects.  So in other words, if you imagine you have a certain type of idea, then the right to an IP is not just to the particular thing that that’s instantiated in, but it’s a right to the idea itself.  And therefore, it’s a right to everything it’s instantiated in.  So, for example, a copyright is a right to a novel, for example.  But the novel is not just a physical book that you might be holding.  It’s a right to that ideal object.  Gwendolyn says is it like a platonic ideal.


I think it actually is like a platonic ideal, and as we’ll see later as we look at this, at the implications of this, you can’t really protect legally a right to a platonic ideal.  The only way you can protect it is to actually resolve that in terms of some kind of rights in material goods in the real world.  So really the entire idea of property rights in ideal objects or in intellectual property always amounts to some kind of assignment of property rights to material goods or to scarce goods in the real world, which is one problem with them, which we’ll get to in more detail later.


Okay, so what exactly do we mean by intellectual property?  And by the way, a lot of the IP abolitionists, of which I’m one, some of them oppose even using the idea of IP, intellectual property.  They think that you’re giving too much away by using the term of the proponents.  I understand that complaint, but I think we also have to communicate with people that we’re arguing and disagreeing with and trying to persuade.  And the term that’s used now is intellectual property.  I mean there’s lots of other terms that have been proposed like intellectual pooperty or intellectual poverty or intellectual monopoly or pattern privileges.  But for now I think we’re going to use the word intellectual property, but it covers disparate sets of legal rights.


Now, there are four traditional types of IP, and I’ve got patent and copyright listed here, and I’ve got them bolded because those are the two biggest ones that are the two biggest problems, and that’s the ones we’re going to focus on in this course.  So patent and copyright, also trademark and trade secrets – now, as a subset of copyright, I have moral rights and common law copyright.  And as a subset of trademark, I have domain name implications.  So we have different ways of breaking these things down.  So let me briefly explain what they are.


A patent right is basically a monopoly privilege granted by the state.  It’s the right to exclude someone else from making or using or selling the practical invention that you have a property right in.  Okay, so it can be a gizmo or a process or something like that.  So patents cover functional, practical, useful inventions.


Copyright protects the original expression of an idea, so this is what covers artistic creations like novels, paintings, and even the way you write a software program, not the way it works, but the way it’s expressed when you actually write it.  Like you think of it like a novel.  Moral rights, which is more of a European concept, is sort of the idea that there’s an inalienable right to be recognized as the author of something even if you don’t own the rights to – the copyrights to it anymore.  And it’s called – it’s said to be inalienable because you can’t give it away.  So someone has to recognize you as the author of a given painting, for example, or movie even if you have no copyright in it anymore.  Common law copyright is talked about on occasion.  Most people don’t understand it.  I don’t even understand it quite completely because it’s not really in effect anymore, and it’s not described very well.



Give me a second.  There are some newer people that have added.  I’m going to add you guys as panelists.  Okay, everyone is a panelist now.  All right, so common law copyright, the original idea of common law copyright was a very limited doctrine under the common law which said if you are the author of an unpublished manuscript, so let’s say you wrote a novel or a book and it’s in your desk drawer and you’ve never published it.


Then if someone takes it from you and tries to publish it, you could use your common law copyright to stop him.  So it’s a very limited right pretty much unrelated to what the modern copyright law does.  In a way, it was more similar to trade secret, which we’ll get to next.  So trade secret is the right – simply recognizes the fact that sometimes, let’s say, a company or a businessman has information that he has secret, that he keeps proprietary to himself, which gives him some kind of competitive advantage.


It could be something that could have been copyrightable.  It could have been something that could have been patentable or maybe not.  But it’s basically something that he keeps secret that gives him an advantage in competition.  Trade secret law says if you make reasonable efforts to keep this information secret, then you can go to court and prevent someone else from leaking the information to the world so long as it’s not generally public yet.


Now, trademark just means a mark that you use in trade or in commerce to identify the source of your goods or your services.  Okay, so basically the root of trademark is in consumer confusion or fraud.  So in a way, you can see that trade secret and trademark are not as problematic in their origins as patent and copyright, which we haven’t gotten to yet.  But the point is you can see already that trade secret basically says you can keep something secret that you’re trying to keep secret, and you can stop someone from revealing these secrets who has no right to.  Trademark just says you shouldn’t deceive consumers about the source of goods.



Now, there – so these are big four type of IP rights: patent, copyright, trademark, and trade secret.  Now, there’s another classical right called defamation.  Well, it’s actually called reputation rights, but it’s protected by what’s called defamation, which is the cause of action.  Now, you’ve probably heard of libel, slander, defamation.  Let me just give you a quick primer on what these words mean.


Defamation means publicizing some kind of communication about someone that is false and that damages their reputation.  Now, libel is a type of defamation, and so is slander.  Libel is the written form of defamation.  And you can remember that because libel and written both have an I in them.  Slander is the oral form of defamation, so basically they’re defamation.  So defamation – the defamation cause of action is based upon the idea of a right in your reputation.  You build up your reputation.  It has value, and you can protect it from being diminished.


Now, in my view, this should be classified as a type of IP because it’s got the same motivation, and it’s got the same problems as well.  It’s not usually called a type of IP, but I think it should be.  Now, there are newer types of IP that have come about, let’s say, in the last 50, 30, 40 years.  One is database rights, which is not a law in the US yet, but it could be at some point.  Database rights – let me explain how that arose.  Under the copyright law, you have a copyright in original works of authorship, that is, in the original way an idea is expressed.


The problem was there was a Supreme Court case called Feist, F-E-I-S-T maybe 15, 20 years ago, which said that you cannot have copyright in factual compilations of data like a database or a map, for example, or a telephone book because these are just pure collections of data that have nothing original about them.  Now, until the Feist case, there was a doctrine under US law called sweat of the brow, sweat of the brow.  And what that said was if you put a lot of effort into collecting data that is valuable, then – which is called sweat of the brow.  You put a lot of work into it.


Then the fact that you labored on it would substitute for the originality requirement.  In other words, even though it wasn’t really original in the copyright sense, we would count that as original, and it could be subject to copyright.  Well, the Feist case, the Supreme Court said, well, you really shouldn’t do that.  Sweat of the brow might be worth rewarding, but the copyright law doesn’t reward it because it has to be born of originality, and there’s really nothing original in a map because a map is a factual depiction of what the surface of the Earth and roads look like.


So it’s not original.  Excuse me.  And this is why some countries – some people had advocated for us to implement a database right, which would actually give a legislative protection to the things that are not any longer protected in the US anyway by copyright law like maps and databases and phone books and things like that.  I haven’t seen much agitation for this lately.  It was around ten years ago.  I believe there are database rights in some countries.


Okay, some other types of newer IP innovations would include semiconductor maskwork protection, which is a unique US law maybe 30 years old, which protects the way a circuit is laid out in a semiconductor maskwork for these integrated circuits that are made by companies like Intel, MI Company, which is a laser company.  There was an amendment to the copyright law I think about 15 years ago, which added boat hull or vessel hull designs.  So you could actually get a protection in the way the front of a boat hull looks or something like that.  So it’s a very narrow, specialized type of IP right, which obviously was passed at the behest of some special interests.


And there’s continual agitation to add new IP laws like right now there’s agitation to add rights to protect fashion designs.  Sometimes some bartenders are asking for a copyright in recipes for bar drinks.  Chefs are asking for copyrights in recipes and so on.  So this is what the four main types of IP are.  Any questions at this point that I can address?  I’ll go into some of these in detail right now.


If you have any questions, feel free to chat them right now for the session.  I’ll be happy to address them right now.  Let me check and see.  I think that there’s some that have joined.  Let me make sure.  I need to see if there’s any I need to add.  Okay.  John just added.  Welcome John and Matt.  Glad to see you guys here.  Okay, so we’re just discussing the types of IP, a sort of legal overview of what IP consists of.


Now, copyright is a statutory – so there s a huge statutory scheme in the US and in almost every other country, and they’re all largely compatible with each other because of what’s called the Berne Convention, B-E-R-N-E, the Berne Convention.  So a copyright is a legal that’s given to authors, and the author is the one who writes it or creates it, of an original work like a book or an article or a movie or computer program or painting.


Okay.  It’s given to you automatically as soon as you fix it.  It’s called fixing it in a tangible medium of expression.  Let me see if I have that covered on the next slide.  If not, I’ll go into it in detail here.  Yeah, I do.  Okay, so just – I’ll deal with that on slide 11.  Now, what rights are you given as the author of a copyright, the holder of a copyright?


Well, you’re given the exclusive right to reproduce the work, but also another set of rights called – to prepare derivative works and to perform or present the work publicly.  So it’s not just the right to reproduce it, which is what copy means.  So copyright is more than just the right to authorize the copying of work.  So copying or reproducing means the literal reproduction of a work, like if you take an MP3 file and you make an exact duplicate.  That would be literal reproduction.  But if you look at the Mona Lisa and you paint it yourself and you try to duplicate it and it’s close but it’s not exact, that would be a reproduction but not exactly a reproduction.  But that would also be copyright infringement if the Mona Lisa were still in copyright.


Now, if you made Mona Lisa’s brother, sort of another painting based upon that one, that would be a derivative work.  Now, you’re entitled to do that now because that work is in the public domain.  But if it were copyrighted you couldn’t without permission of the owner or to perform the work publicly.  And that’s a complicated one that depends upon the situation whether it’s digital or whether it’s broadcast or whether it’s live, etc.


Now, you have to remember that copyright protects only the form or the expression of an idea, not the underlying idea.  The functionality or way something works, is protected by, say, patent perhaps.  But the way it’s expressed is what copyright protects and the way it looks.  And what this right does is it basically gives you the right to go to the courts and to ask the court to issue an injunction or to get damages from someone.  Basically, it lets you stop someone else from using their own property in a certain way.  They’re so-called infringing your copyright, like if they’re rearranging their own property with your pattern or if they’re making a derivative work with your property.


So that’s what a copyright is, and again, as I said, it protects original works of authorship that are fixed in a tangible form of expression.  So, for example, if I think of a new song and I sing it to an audience for the first time but it’s not recorded, there’s no copyright yet in that song.  It’s got to be recorded or fixed in some medium.  You’ve got to write it down, record it or something like that.  As I said, it’s a bundle of rights including primarily the right to reproduce, which includes literal reproduction and non-literal reproduction.  That’s reproduction that’s not varied too much, the right to prepare derivative works and the right to present the work publicly.


Now, copyright lasts at this current time for the life of the author plus 70 years.  Okay, so if you write a novel when you’re 30 and you die when you’re 90 so that would be 60 years of term and then another 70, so 130 years of term.  If it’s a work-for-hire, then it lasts 95 years.  Now, a work-for-hire basically means – it’s a statutory category of copyright.  What this means is if the creator of a work makes a written contract with someone else – typically their employer – by which the employer pays them to create these types of works and the contract specifically says in writing that this is a work-for-hire – it actually has to say it’s a work-for-hire.


In that case then, not only does the employer own the copyright, which you could do by assignment.  For example, I have copyrights in materials I’ve written.  I could assign them to someone else tomorrow with an assignment, but I’m just transferring ownership.  I’m still the author, but I’ve assigned the ownership of the copyright to someone else, but the term is the same.  It would be my life plus 70 years.  In a work-for-hire, if you have a contract ahead of time which says it’s a work-for-hire, then the company that basically is the one paying for it is legally the author.


Legally they are the author, and in that case the term is 95 years total, usually because it’s a corporation which doesn’t have a life.  But basically you could think of a copyright as having about 100 years’ life, so it’s a very long time.  It’s the longest of all the IP except – well trade secret can last forever, and trademarks can be renewed indefinitely.


Now, what’s important to recognize is that ever since 19 – I think it was ’82, or maybe ’78. I can’t remember the date when the US exceeded to the Berne Convention and we changed our copyright law to comply with the Berne Convention, which is an international treaty, which has copyright standards which every signatory nation is supposed to comply with.


Let me see if we have any more attendants now I need to add.  Excuse me.  Oh no, there’s no new ones.  Okay, so what’s important to notice is that copyright is automatic.  We need to think about this because you will hear people over and over and over again misstate the law.  They’ll say – for example, you’ll hear people criticize the Mises Institute or me for hypocrisy.  They’ll say, well, you’re against copyright, and yet you copyrighted your article or your book.  Well, this is a complete confusion.  No one copyrights their book.  Everyone that writes a book has a copyright in it whether they want it or not.  This is completely automatic.  It has absolutely nothing to do with whether you put a copyright notice in your book or not.


It has nothing to do with whether you file a copyright registration.  Under the Berne Convention, it eliminated what’s called formalities.  That is, in other words, countries may not require formalities before copyright attaches.  They can’t require you to pay a fee.  They can’t require you to put a notice on your work.  They can’t require you to register it actively.  It has to be automatic.  So basically all these charges that you – why did you copyright your book?


Well, I didn’t copyright my book.  What they’re saying is I see a copyright notice in your book, so therefore you’re hypocritical.  Well, but it’s true that I have a copyright in my book.  The state gives me a copyright in my book whether I want it or not.  Whether I say it or not, it’s there.  So I’m just stating the truth, and putting the date in there is useful for some purpose, and stating that I’m the copyright holder is useful because now people know who to come to, to ask permission to reprint it.  So you have to remember that copyright is automatic.  It’s a very important point that is widely misunderstood by advocates of IP.


As I say in one of my blog posts, it’s sticky.  It’s really hard to get rid of.  Some people say why don’t you just put a notice on the front of your book saying I hereby get rid of my copyright?  Well, you could put the notice, but it wouldn’t actually have the effect.  I mean what if you put a notice on your body saying I hereby get rid of my human rights?  I mean does that mean you’ve actually given up your human rights?  No.  It wouldn’t be effective to do that.  So unfortunately the law doesn’t even allow you to have an easy way to get rid of your copyrights.



Okay, I’m going to skip slide 12.  That’s kind of a joke here.  But the point here is on slide 12 it’s not a – don’t think of it as a verb.  Think of it as a noun.  You have a copyright, but you cannot copyright something.



Kevin asks a question privately.  Kevin, I don’t know if you meant that as privately.  It seems like a public question.  Maybe you should try to change your setting to address everyone.  But Kevin asks does copyright automatically apply to formulations of combination medicines and nutritionals?  I’m not quite sure what you’re asking, but I don’t think so.  I think what you’re talking about is what would be covered by a patent.  Copyright covers – think of it like artistic expression, originality.  When you formulate medications and nutritionals, that’s a functional thing.  Okay, it has a functional purpose.  So that probably would not be covered by copyright.  Copyright covers things like novels, lyrics to a song, or the song itself, a painting, a sculpture, photographs, software.


We have another question here.  Gwendolyn asks when an author claims that their world in which a story takes place is copyright instead of just the words and that you can’t write anything authentic, are they speaking to derivation or trying to assert something that they don’t actually have?  That’s a good question.  I think – well, they might not understand copyright law when they talk like this.  But I think they’re talking derivative works.  So in other words, if you use the same background world that they created, that would probably – so do a sequel, let’s say.  That would probably be a derivative work.  Now, as the copyright holder, they are the ones who have the right to authorize or to prohibit people making derivative works.  So that’s what they’re talking about.  It could also be a trademark issue, but probably it’s the derivative work of copyright.


Matt asks what about covers of song?  Would they be a violation of copyright law if the cover artist did not ask for permission?  Yes because it would be – that would probably be a – it could be either a reproduction or a derivative work.  If it was like an attempt to reproduce the song, even though it’s not a literal reproduction, it’s close to it.  It’s a reproduction of the song, or either that or it’s a derivative work.  Either way, you have to get permission.


Now, let me just say that there is this legislative thing in the US called ASCAP.  I forgot what it stands for.  It’s A-S-C-A-P.  It’s sort of like a legislative intermediary agency that has established royalty rates for using music, commercial music.  So you can actually someone’s song if you just pay the established rate in the ASCAP manual or something.  I really don’t understand it.  But it’s based on copyright in the first place.  Ethan, another one please.  Get me a regular water this time.


ETHAN: Okay because they’re bigger.


STEPHAN KINSELLA: Yeah, that’s right, Gwendolyn.  Okay, so let’s go on to slide 13.  This – by the way, I won’t test you guys on this, but just take a look at slide 13.  This is a flowchart that allows you to determine whether – or when the copyright expires in a work.  You can see it’s very complicated.  It’s even more complicated than this.  This just shows you how arcane these statutory legislative systems are.


Donald asks when is copyright obtained?  It’s certainly when it’s published by a publisher, but what about works like blogs?  Well, if you look at the statute, it says you have a copyright as soon as an original work of authorship is fixed in a tangible medium of expression.  So that’s when you have it.  As soon as you write it down, you have copyright, so as soon as you publish a blog, that minute you have copyright.  And, in fact, you probably had it before that when you were drafting it.  It would be hard to prove it, but you have it as soon as you do that.



Okay, and if you think about it, it doesn’t really matter when you have it because it lasts until 70 years after your death.  So the starting point is only going to matter once you’ve made it public really.  Now, a patent is a little bit different than copyright because, number one, you have to apply for it.  You have to actually file at the patent application with the United States Patent Office.  What the patent covers is it gives you a property right in inventions.  That is, a device or a process or a combination of materials like a new drug that performs some useful function.  What it does, it gives you a limited monopoly on the manufacture, use, sale, or import of that invention.


Now, this is another thing that’s hard for non-patent attorneys to understand, but patents do not give you the right to practice your invention.  They do not.  It only gives you the right to stop someone else from practicing your invention.  And I’ll give an example in a minute of how that works.  Now, to get a patent, you have to, as I said, file a patent application, and it has to qualify by the rules.  And the rules say, number one, it has to be the type of thing that you can get a patent for.  That’s called patentable subject matter.  Patentable subject matter, which would be useful inventions basically but excluded are things like laws of nature, natural phenomena, and abstract ideas.  So you cannot get a patent on E=MC2.  You cannot get a patent on a pure mathematical algorithm.


And as of probably next month when this new patent law passes, you can’t get a patent on a business method or a tax reduction strategy, things like this.  What is the term of patents?  Well, they used to be 17 years from the date of issuance.  So you file a patent on day one.  It might take one year or two years, three years, five years, sometimes 50 years to issue.  The period between when you file it and when it issues as a patent or when you give up on it, which is called abandonment, it’s called prosecution.  It’s a weird word, but it’s called prosecution.  That’s why patent attorneys like me are called patent prosecutors.  That means we deal with the patent office to prosecute a patent application.


So until 1995, the law was that once the patent finally issued, you had 17 years of term.  It was – the law was changed in 1995 pursuant to something called GATT, another international treaty, G-A-T-T, and the WTO negotiations.  It was changed to the current system, which is the patent lasts for 20 years from date of filing.  Okay, but it doesn’t come into force until it issues.  So if you take three years for it to prosecute, then you have 17 years left.  If you take five years to prosecute it, you have 15 years left.  If you only take one year to prosecute it, you have 19 years of term.  So basically it’s still approximately 17 because most patents take about three years to prosecute.


One of the reasons for this change was the phenomena you might have heard of called submarine patents.  A submarine patent – that was a metaphor used to explain the effect of some of these patents that – so you would file a patent, and then you would keep churning it.  You could re-file it over and over again for years, and in the old law, it was secret.  It was kept secret during prosecution.  It wasn’t published until it was issued.  So you would file a patent on day one.  Let’s say 1950.  Let’s say it’s an intermittent windshield wiper idea or something like that, right?


In the meantime, ten years later, someone else invents the same idea, and it starts being used widely in the industry, and you’ve got this patent going secretly the whole time.  And you keep it churning the whole time, so the market gets bigger and bigger so that when you finally let your patent issue, you’ve got a lot of people you could sue.  So the idea was 50 years later, 20 years later all of a sudden this patent would emerge like a submarine that had been hidden and that emerges.  They were called submarine patents.  And it would just totally floor the entire industry because now this guy could go and extort or strike the patent royalties from the entire industry like windshield – intermittent windshield wipers or lots of cases like this.


There’s a guy named Jerome Lemelson who did this.  He was notorious.  He was an inventor.  He had like 100-200 patents when he died, and he was worth like $500 million when he died from all the royalties he had extorted from companies.  I think his patent attorney was worth $100 or $200 million himself.  I mean there’s the Lemelson Foundation out there.  I mean everyone thinks it’s great, but it’s really kind of disgusting in my view.


Now, if you play that game, the longer you wait during prosecution, you’re eating into your patent term.  So if you take ten years to prosecute your patent, then you only have ten years left.  Furthermore, under the new law, most patents are now published 18 months after they’re filed.  So even if you file it on day one and you keep it prosecuting for ten years, it’s going to be public for most of that time.  So people are aware that it might be coming.


Okay, so patents are about 17 years.  You can think about it, 17-20 years.  Now, a patent is similar to a copyright.  It allows you to go to the court.  Well, it allows you to go to a state agency and petition for this monopoly grant, and then you can sue competitors in the states courts.  And again, you can penalize people for infringing your IP right.  You can get an injunction from the courts to make them stop, or you can get an award from the court making them pay damages, some of their money to you for violating your so-called IP rights.


Now, there are different types of patents.  In the US, there are utility patents, plant patents, and design patents.  Now, almost every patent you’ve probably ever heard of is a utility patent.  That means it has useful or function.  That’s just a regular type of patent, what we call the utility patents.  There are also plant patents for asexually reproduced plants.  And design patents are these weird hybrid of patents, which covers the ornamental aspect of a design.  It’s kind of like a hybrid between a patent and a copyright, and to be honest, not many people understand how they work.


I don’t quite understand how they work.  I’ve never filed a design patent in my life.  But the basic patent you’re going to hear about is a utility patent.  And by the way, design patents have a – and I think plant patents too have a different term.  They don’t last as long as utility patents.  They have a shorter term.  But the utility patent, let’s focus on that because that’s the primary type of patent that is granted.  You get the patent by filing a patent application with a government agency.


In America, it’s the US Patent Office, and most countries have their own patent office.  By the way, in some of the countries, there’s a utility model type of patent application, which has a shorter term.  It’s a technical difference, so let’s not go into it.  But there is a UN, or a utility model patent in other countries.  But anyway, so if you want to get a patent, you file a patent application with the agency, and an examiner examines it, and then he issues if he thinks it satisfies all the requirements.


It has to be patentable subject matter.  You have to be the inventor, has to be new or novel, has to be non-obvious or what’s called has to have an inventive step in European countries, and it has to have utility.  That means it has to actually work.  So, for example, a patent for a perpetual motion machine would be denied automatically because modern science doesn’t believe perpetual motion machines can work.  You couldn’t get a patent on the car because the car is known already.  It’s not new.  You couldn’t get a patent on a car with five wheels because that would be just a non-obvious change to a current four-wheeled car, for example.


So you have to have all these things.  And I already mentioned what rights it gives the holder, the right to exclude others from making this device.  I don’t know if I have a slide on this in this – in today’s lecture, so let me explain what I said earlier that why the patent does not give you the right to make your invention but only the right to stop others.


Let’s imagine you were the first person to think of a stool, so you invent a stool, which is a four-legged structure having four legs mounted to a seat member for allowing a person to sit on it.  Okay, so you get a patent on the stool.  Now, I see the stool and I see people sitting on it, and I think, hmm, I could make this stool better if I put a back on it.  So I get a patent on a chair, which is a four – a structure having a seat member connected to four legs and with a back member attached to the seat member.  Okay, so basically it’s a stool with a back.  Now, I can probably get a patent on that, but I couldn’t use it because it would still be a stool.  It would still be a device with a seat and four legs.


So I wouldn’t be able to use the stool or sell the stool, and the guy that sells the stool wouldn’t be able to make a chair out of his stool.  He wouldn’t be able to add a back to it because I have the patent on a device with a seat, four legs, and a back.  He wouldn’t be able to do that.  So in that case, we would probably make a deal with each other and cross-license to each other.  We would make – I’m going to give him permission to make mine.  He’s going to give me permission to make his or something like that, or one of us would buy the other out.


Does that make sense to everybody?  You have to realize that basically having a patent is not permission to do something because having a patent doesn’t guarantee that your device doesn’t infringe on someone else’s patent because it’s not examined for that.  The examiner doesn’t look at every patent out there to make sure you’re not infringing.  His job is to make sure your patent is new, not that it’s not infringing.  And if you think about it, if there’s a stool known out there and there’s a patent on the stool, adding a back to it could be a new idea, but it doesn’t mean that it doesn’t – it’s not covered by the stool patent.


Okay.  I’m going to skip over this.  This is a little bit of inside baseball, but the patent itself has certain parts.  It has a title.  It tells who the inventor is, who the owner is if it’s different from the inventor, has a description of how you make this thing and drawings to illustrate it, and then finally it terminates in claim, which is what you have a property right in.


I have an example here on slide 18 of what a patent looks like – what are the claims of a patent.  Patent claims are always one sentence.  It starts with a number and with the letter A or the, with the word A or the, and then it ends with a period.  It just lays out the elements that you have to have if you want to infringe this patent claim.


Now, one thing that may be counterintuitive is the longer the patent claim is, the narrower it is because the more elements it has that you have to meet to infringe that claim.  A really short patent, like if I have a four-word patent or a short – like if I had a patent claim on – I hereby claim a device having a body.  I mean that would cover almost everything anyone ever sells.  So the shorter it is, the broader it is.  The less words, the less elements, the broader it is, so every element in a claim has to be present in an accused device that is accused to be infringing for it to be infringing.


There is such a thing as dependent claims, which I’ll skip over here too because this is kind of technical detail which you really don’t need to know.  This is the front page of a patent – slide 20 I’m on now.  This is the front page of a patent, which I actually wrote for my company, and this is on a laser.  And you can see it’s got – the front page has the abstract.  Let me see if I can my laser pointer going here.  No, I’ll give up on it.  Anyway, that’s what the front of a patent looks like.  This is some of the drawings that come after the front page, some of the figures, which illustrate how the device operates.  Okay, and then this is the detailed description with the background and then the detailed description and then the other claims.


This is a chart.  It’s kind of a funny chart called Patents Progress based upon, oh, I got this wrong last time.  Not Milton – who is it that did patent – the Pilgrim’s Regress?  Someone tell me.  Anyway, there’s a – it was either Milton or one of those guys.  Anyway, this shows the – was it Bunyan?  It might have been Bunyan.  Anyway, you can’t see the details here, but it kind of shows from the beginning all the way to it’s like heaven at the top there when you finally get a patent issued.  So this is a patent lawyer’s sort of way of looking at things.  This is a flowchart that shows just one minor aspect of the patent prosecution process.


Okay, and then this is another flowchart.  I actually read Lewis’ Pilgrim’s Regress.  I’m trying to remember who did Pilgrim’s – was it Pilgrim’s Progress?  Okay.  So I can’t remember.  Anyway, this is a chart here on slide 27.  It’s a flowchart showing how you evaluate when a computer-implemented invention is patentable or not.  I mean so I’m just showing you how detailed and arcane this whole body of law is.


I’m going to give you a few examples now, and I think we’ll take a break in about five minutes at the hour, and then we’ll come back and do a few more slides, and I’ll deal with some questions.  This is – I think this is a design patent, but I’m not sure, but basically it’s like a bumper guard that’s shaped like a Holy Bible, and I guess the idea is you dissuade someone from hitting your – the rear of your vehicle because they would see the Bible there.  This is a toe puppet.  I’m on slide 29 now.  Someone got a patent on actually a toe puppet.  This is basically a peanut butter and jelly sandwich without a crust.  Someone obtained a utility patent on this.



Slide 31.  Someone came up with a patent on pumpkin – or jack o’lantern I guess, looking garbage bags, so I guess they figure that there’s a functional advantage to having a garbage bag looking like a jack o’lantern around Halloween time, right?  You can put your trimmings or trash outside, and you can decorate your yard at the same time.


This one is a patent on a Christmas tree stand shaped like Santa Claus so that you sit it by your tree, Christmas tree and you can water your tree at the same time.  This is an initiation apparatus for a pledge for a fraternity.  This is an old one from 1905 if I can read the numbers right.


Now, this is a patent, a famous one here, an infamous one, using a laser pointer to exercise your cat.  This would be a method patent.  And this is a pat-on-the-back apparatus, so if you’re feeling down or need your self-esteem boosted, you just pat yourself on the back with this apparatus.  Someone actually has a patent on that.  Well, I guess it’s expired by now.  It’s ’86, ’96, ’06.  Yeah, it’s expired by now.  I’m going to skip this one here.  This is a pooper scooper.  I’ll skip.


This is a buttocks-cleavage-revealing feature of some jeans, so basically having a hole in the back of your jeans.  Someone had a patent on that idea.  This is an older one.  It was a coffin attached to a little mechanism where if you wake up inside the coffin, if you were actually buried – accidentally buried, you could alert people that you weren’t really dead yet.  This is like from 1891 when people were buried before they were embalmed, and on occasion people would be buried when they were actually still alive.


This is a method for concealing baldness.  Here’s a method of putting in golf, so anyone – any golfer who uses this grip when they’re putting would actually infringe this patent.  Well, let’s see, ’97, ’07.  Yeah, it’s still – it’s probably still in force.  This was a way of determining breast size by directly measuring the breasts instead of by, I don’t know, whatever the other method is.  Okay, so let’s take a pause here.  Let’s take a five-minute break.  It’s 9:01 my time, 10:01 New York time.  And let’s come back in about five or six minutes past the hour.  We will resume shortly.


[Five-minute break]


Okay, while we’re waiting, is anyone on line right now that has a microphone?  I could test the passing-the-mic feature, which Webex has, which we didn’t have on the other, see how that would go.  Anyone here have a microphone?  You want to try the pass-the-mic feature?  Let me know if you’d like to try it, and we’ll try to pass the mic to you.  Okay, let me see Karl here.  I’m just – Karl, I’m just going to pass the mic to you.  Hello, hello, hello, hello.  Karl, can you hear me?  Can you say something?  Oh, hold on.  Let me unmute you.  No, he’s not muted.  He has the mic, and he’s not muted.  Karl, are you speaking?  Because I can’t hear you.  Maybe Karl’s muted himself.  I don’t hear it.  Who else wanted to try?  Lloyd – let me try someone else.  Let me try Lloyd.  Lloyd – I’m trying Lloyd right now.


LLOYD: Hello?




LLOYD: Can you hear me?  Hey.






STEPHAN KINSELLA: Maybe Karl had his own mic muted or something.  I’m not sure.  This is a good feature.  We may use this in some of the Q&A sessions to have brief interchanges between – or questions or comments from some of the participants.  Good.  So this sounds okay.  Can everyone else hear Lloyd?


LLOYD: Hello.  It’s Lloyd.


STEPHAN KINSELLA: Oh cool, very good.



STEPHAN KINSELLA: Okay, well, we’re ready to go.  Let me pass the mic back to myself or see how this works.  Okay, excuse me a sec.  Okay.  Okay, can everyone hear me?  I think we should – okay, so we’ll start in just a second.  I think what we’ll do is this.  We have – I’m happy to go a little bit beyond time.  I don’t want to go too far beyond time because I’m conscious of the strange time zones of some people here or the late time zones for them.  So let’s do this.  I’m happy to answer questions for the next half an hour or so, but unless a lot start rolling in, what I’ll do is I’ll keep going on the lectures, but you can give me your questions at any time, and I’ll stop and answer them.


We’ll just see how far we get on the slides.  So I’m monitoring the chat.  If you have questions, put them in the chat or interrupt me.  Otherwise, I’m going to just keep going.  I’m going to talk about a few – okay, here’s the first question from Lloyd.  Can you enforce a US patent outside the US?  No.  Patents are geographical.  They’re state-based or nation-based.  So if you want to – if you have an invention, you – if you want a patent in China, you need to file a patent in China.


If you want one in the US, you have to file one in the US.  Typically what you do is, if you have an important idea, you file it.  Let’s say, if you’re an American inventor and you file an American patent application, and then within the first year you file a PCT—that’s patent cooperation treaty—application, which is sort of like a placeholder.  And that gives you like 30 months of time to decide whether you want to file in other countries claiming the priority through the PCT filing back to the US filing.


So, for example, on day one I file in the US.  Six months later I file a PCT application.  A year and a half later when I realize the US patent is going great, or the invention – I’m going to sell it now and it’s doing well on the market.  It’s worth for me to file it in China and Japan and Canada and Europe and Brazil or wherever.  So then I might file three or four or five other national or regional applications, so I might file a European, Japanese, and Chinese application for example.


Those can be expensive because you have to use a local law firm.  You have to pay a local filing fee, and you usually have to pay translation fees, especially for Japan and China, which can be more expensive than the filing itself.  So you’re talking on the order of, say, roughly $10,000-$20,000 per country per filing for prosecution.


If you wanted to cover half the globe, it can cost you half a million dollars just for one patent application.  Max says drugs and medical devices are approved by the FDA, but are they also patented?  They can be, and they usually are, so yeah.  Usually you’ll get a patent, and then you – but like I said, a patent doesn’t give you permission to do something, only to stop other people.  So you have to – if it’s covered by the FDA, you have to get FDA permission too.  Now, there’s a process that’s built into the patent law, which says if you have an administrative delay caused by the US government, then you can extend your patent term.


Now, there’s a limit on it, so let’s say that you have a patent on your drug, but the FDA takes three years to approve it.  Well, then you can tack three years onto your patent term because they figure that it’s been wasted during the time you’re waiting for approval.  Go Olivo – you might be wrong, but do you remember seeing a video where I mentioned IPs aren’t compatible with capitalism?  Can I elaborate?


Well, I think I’ll go into this in other – the further lectures.  We have six whole lectures to go.  The first lecture is more to familiarize you with the – what IP is and to the extent we can get to it and some of the history, which we can cover briefly next time.  But it’s not compatible with capitalism because basically they’re monopoly grants by the state, which allow you to tell other people how to use their own property rights.  It’s that simple really.  This is the basic problem with patent rights and copyrights.


Lloyd says when people complain about drug patents in Africa, are they actually filing patents in Africa?  Well, I’m not sure what complaints you’re talking about.  What you may be – I’m not sure what complaints or what people you mean.  Are you saying that the people that are in favor of the western-style drug patents are complaining that the drugs can be sold or knocked off really cheaply in Africa?  That may be what you’re talking about.  That’s only the case because they didn’t take the time to apply for a patent application in those African countries, for example.


Well, you said – Lloyd said AIDS drugs, but again, I’m not sure what you mean.  I mean I think the main complaint is that a lot of other countries don’t protect patent rights as much.  So they can knock off drugs and other things more easily.  Eric Smith – trade secrets – does the government enforce these, or are they just secrets?  I thought these were forms of IP consistent with market principles and didn’t require state – special state privileges.


Well, you would think so.  Actually no, they’re not just secrets.  If they were just secrets, you wouldn’t need a doctrine of law.  What they are is – it’s a legal right to get the court to stop someone from releasing your secret so long as it’s not widely made public yet.  So, for example, let’s say that – this is probably a bad example because Coca-Cola’s formula is apparently not a secret anymore.  It’s – I think it’s apparently a myth that the Coca-Cola secret is a trade secret.  Apparently it’s been known for a long time.  It’s just people don’t want to use it.  They want to use their own formulas.  But anyway, let’s assume the Coca-Cola secret was a trade secret.


All that means is they’ve taken reasonable steps to keep it secret.  It doesn’t mean they can guarantee that it’s going to remain secret.  So let’s say one in – let’s say someone finds out the secret somehow.  Now, if they reveal it to the world, they publish it on the internet, then it’s no longer a secret.  So Coca-Cola can do nothing except possibly sue that person for some kind of breach of contract or something like that.  Let’s say they’re a former employee.  But let’s say that they haven’t yet revealed it to the world, but they’re about to reveal it to a competitor like Pepsi Cola.  Coca-Cola could go to court and get the court to issue an injunction, and the court would tell Pepsi and the former employee or whoever this person was you may not reveal this secret to anyone else.  So as long as it’s still a secret, the court will help Coca-Cola try to keep it contained, and they’ll help them with the threat of injunctions.



Okay, is that clear?  Okay, ask away anything else.  In the meantime, I will go on with slide 43.  Just talking about a few common misconceptions and myths about patents and IP.  Number one, you’ll hear all the time that if we get rid of patents we’re going to hurt the small inventor, or that’s the primary motivation of the patent system is to help small inventors.


Well, most patents don’t benefit anyone.  They’re just wallpaper, especially small inventors.  So they’ll spend $10-, $15,- $20,000 on a patent attorney to get a piece of paper they can put in a frame and show their friends, but they never use it.  They’re used primarily by large corporations to amass – excuse me – patent arsenals, which they assemble for defensive purposes.  So all these large companies have hundreds of thousands of patents, which they use sort of like as a picket fence or a porcupine defense.  They have them to prevent their competitors or other people from suing them.


Like Intel may be afraid to sue Microsoft not only because they do business but because if Intel sues Microsoft for patent infringement, for infringing one of Intel’s patents, then Microsoft is going to look through their tens of thousands of patents and try to find one that Intel might infringe and counter-sue them.  So companies with lots of patents either – they tend to avoid each other.  So they basically have freedom to act because they have these patents.  Now, smaller companies don’t have a defensive weapon they can use, so the companies with patents feel comfortable suing them because they’re defenseless.  So basically patents erect barriers to entry and protect the larger companies compared to the smaller companies.


Another myth about the patent system is that it’s a first to invent.  Now, this is actually true in my understanding of most of the patent systems around the world but not of the US system.  The US system, ever since the beginning, has been based upon a first-to-file.  In other words, if two people have the same idea and they each file a patent application on it, the one that would win in the dispute, which is called an interference proceeding, an interference proceeding.  The one who would win is the one who invented it first if he could prove that even if he filed second.


Now, that actually is about to change apparently.  I think just a couple of days ago Senate Bill 93 – I’m going to blog about this later today or tomorrow probably on the Mises blog and also on – I’ll prep it here – my blog.  You might want to follow this during the course, c4sif.org.  That’s my Center for the Study of Innovative Freedom, and I put a lot of regular material on there about intellectual property happenings.


Anyway, there is a patent reform bill that’s pending in Congress right now, which I think it passed before the Senate 95-5.  So I suspect it will pass in the House and Obama will sign it, and it will actually change for the first time the US system to the first to – first-to-file system.



So the funny story about this is Ayn Rand, if you read Ayn Rand’s defense of patent rights in her – I think it was in Capitalism: The Unknown Ideal.  She tries to defend the first-to-file system.  She tries to explain why America is justified in having a first-to-file patent system, which we did not have.  We had a first-to-invent system.  So she actually didn’t understand what the law was.  She thought it was first to file.  It was really first to invent.  She thought it was first to file, and she tried to explain why that was the best way to go.  So you can see she was trying to reverse engineer or justify what the American system was.



There’s another myth out there about poor man’s patent and poor man’s copyright.  This sort of idea, I get asked about this about every six months from someone.  And they say, well, can’t you just put your idea in a sealed envelope and mail it to yourself and hold onto that as proof about when you came up with it?  I mean this is a crazy idea that – I mean I’ve been practicing patent law and IP law for 18 years, and I’ve never seen anyone do this in a serious way.  This is some kind of urban legend, and this is not the way to go.  I don’t think it would do any good at all.  You wouldn’t be able to prove that it was legitimate.


This is a common – you’ll hear this over and over again.  Some people actually do it, but I don’t think they’re doing any good.  They think they’re doing good, but they’re not because what are you going to do?  Go to court and prove that you invented this on this date?  I mean first of all, if you understand copyright and patent law, you have to understand why you would even ever need to prove this.


First of all, first invention is not a defense to patent infringement.  Second of all, copyright attaches as soon as you have it fixed in a medium of expression, so as long as you can prove you authored it – I mean that’s not the best way to prove you authored it.  Now, it could be theoretically a way to prove when you conceded the idea for purpose of a battle with another patent key in an interference proceeding that I mentioned when you’re trying to prove you invented the idea first.  But if the law changes next month to where it’s first to file, then that’s going to be irrelevant too, so this is a weird myth of patent law.


A lot of you may have heard this idea too, these kind of conspiracy theorists, and they’ll say things like all the big oil companies or the big car companies or whatever have – they’ve bought up all the patents to these great ideas that would give you 100-mile-per-gallon fuel injector or carburetor ideas.  The problem with this is that patents are public.  I mean they’re all published.  So even if Exxon or whoever has bought up the 10 or 15 genius ideas that would allow you to get 100 miles per gallon, I mean those ideas are still published.  So the proponent of this conspiracy theory should be able to do a pre-patent search on usppo.gov and show us the patents that were bought.  And you could even search for who’s assigned – who owns these patents.  I mean if it’s been assigned to Exxon, then it would show that Exxon or someone owns it.  I mean – so these are crazy allegations.  I mentioned earlier already.  I knew I had this in a slide somewhere.  I’ve already mentioned the bottom thing on slide 43 about the right to practice.  Again, for copyright, remember you can’t copyright something.  It’s automatic.


Number two, for patents, they do not give the right to do what you have a patent on, only the right to stop other people.  Now, you can use this right to your advantage quite often, and quite often you do have a right to make your invention because you’re not infringing someone’s patent.  But having a patent doesn’t guarantee that you don’t infringe other people’s patents, and I already gave you the stool example, the stool/chair example.


Another kind of common myth about the patent system is this sort of mythology about the loan genius or the towering genius, this guy that’s in his garage toiling for years, and he comes up with a eureka moment and comes up with something that benefits mankind.  The truth is that most innovation, if not virtually – excuse me – virtually all innovation is part of a cooperative collaborative process, and usually it’s incremental in nature.  And of course, virtually every innovation is an improvement on the current state of knowledge.  So even Einstein or – of course Einstein couldn’t get a patent on his inventions or his formulas because they were abstract ideas.


So he wouldn’t be rewarded for his relatively or photon discovery or E=MC2, which he didn’t come up with anyway.  But anyway, so this is another problem with patent law, by the way.  It’s selective and arbitrary in what it covers.  It would reward practical gizmo making but not fundamental physics and scientific research.  And by the way, simultaneous innovation is very common.  In the history of patents, most of the famous inventions you’ve heard of, there were other people that invented this either before or at the same time as the inventor who’s given credit for it in history.


So simultaneous invention is a very common thing.  And the point of this is that it’s often said that if you don’t grant someone a monopoly in their inventions, then they would never have been created in the first place.  Well, this is just factually false.  I mean first of all, it would be invented eventually probably, maybe soon after or long after, but it’s going to be invented by someone eventually.


When technology gets to a certain stage, then it becomes ripe for all these creative people to use it and take it to the next level.  I mean the light bulb would eventually have been invented even if Edison hadn’t done it, for example.  And not only that, like I said, quite often there’s other people working on it at the same time.  There are three or four people that came up with the calculus at the same time.  Three or four people were working on the transistor at the same time.  It wasn’t just Shockley.


Okay.  There’s another misunderstanding about patents, and that is that patent infringers are just someone who copied your idea from you.  In fact, you’ll see people like J. Neil Schulman will say, well, if you don’t want to – if you don’t believe in copy and patent and copyright, just don’t copy my damn invention.  Well, but that assumes that patent infringement has to do with copy, but of course it doesn’t.  Copyright does.  Patent does not.  Remember, to infringe someone’s patent, all you have to do is make, use, or sell the device that is covered by the claims of their patent.  That’s it.


Even if you independently invented it, that’s not a defense.  It’s not an excuse.  Even if you invented it first but had it secret, kept it private and someone else independently invented it and patented it later, they can stop you from using your own ideas.  In fact, most patent lawsuits, the plaintiff never even alleges that the defendant copied what they did, and in fact, from the statistics I’ve seen and from my own experience in the lawsuits I’ve been involved with – I have never in my experience seen a case where the client that I’m talking to who was accused of infringing a patent or who’s worried about infringing a patent – they never did learn about it from the other company’s patent or even their product.


Usually they’re just toiling away, making their own products, and they’re coming up with different designs to make their products work.  And as they’re doing this, someone says, hey, the way that our circuit is configured I’m afraid it might look too much like claim 17, the patent numbers 6 million, 221, and 512, so they go study.  They get a patent lawyer.  They study the claims, and they go, I’m not sure.  I mean I don’t know if it’s the same thing.  It looks kind of the same, but I’m not sure.  But they point is they didn’t get it from the patent.  They didn’t copy it.  They came up with it themselves, but now they’re in danger of infringing the patent, and this is the common way patents are enforced.  You just allege that someone infringes your claim.  You never allege they copied it because they usually didn’t.



Okay.  Let’s go to slide 45.  And by the way, any questions are welcome now.  We’re getting close to – I’d be happy to go another, say, ten minutes or so or more if we need to.  Another – as I mentioned, there’s another myth that we had copyrighted common law, but that was what’s called common law copyright.  As I mentioned, that was more like a trade secret right.  That was just a very narrow right to prevent publication of an unpublished manuscript.


There’s a good quote here by Lord Camden, and he said that claims that copyright arose in common law – I’m reading my quote here on page 45 – they are founded on patents, privilege, Star-chamber decrees, and the bylaws of the Stationers’ Company.  And by the way, we’ll get to the Stationers’ Company in the history session later next class.  And all of them, the effects of the grossest tyranny and usurpation; the very last places in which I would have dreamt of finding the last trace of the common law.  So disabuse yourselves of the myth that copyright as we now know it existed at common law.


Also, it’s commonly said, especially by many libertarians who advocate IP, that it’s a natural right and that it’s based in the natural law.  This is actually not true.  It’s ahistorical, and we’ll get into this later in the history.  Also, it’s the evidence for those who have utilitarian approach to patents and copyrights and say that we need them because it encourages innovation.  It encourages creativity.  Without it, we would have less.  We would all be worse off.  Well, they just don’t have any evidence to back this up, and they never even try.  It’s also based upon this myth that we have a benevolent state.  We have a benevolent FDA.  But the truth is that the state taxes and regulates, extorts, penalizes, and incinerates and bombs things.  It’s really not out for the little guy, and giving them a tiny monopoly privilege they can use doesn’t overcome for all the damage the state does to them in other ways.  So we’ve got to get rid of this idea that the state is looking out for the little guy with these monopoly grants.


All right, let’s quickly go over the – in the remaining time we have over the other types of IP.  I already mentioned trademark, what it is.  Here’s kind of the more formal definition.  It’s a word, phrase, symbol, or design used to identify the source of goods or sources.  It’s sometimes called a service mark in that case, by the way, and to distinguish them from the goods or services of others.  And as I – Coca-Cola – I’ve got the little R in the circle there.  It means registered trademark, identifies their products as coming from them, Pepsi – as distinguished from Pepsi.


Okay, so what it does is it prohibits the use of confusing the similar marks to identifying your goods.  And every ten years you can register the trademark over and over again.  As long as the product and the company is in business theoretically they can last forever, okay, so every ten years.  And I’ve already mentioned what trade secrets are.  Some examples of trade secrets would be databases, customer lists.


Now, these are largely protected by state law, although there are federal aspects to it.  Now, let me mention one disadvantage of relying on trade secret is that, as I mentioned, it’s possible for someone else to independently invent the – let’s say you’re using as a secret some invention, some innovative process to make a chemical or a process, to make a chemical or something or a product.  If someone else comes up with this 30 years later and they file a patent on it, they can then stop you from using your own invention even though you were first because they have a patent.  You didn’t copy it.  In fact, you came up with it first, so this is one danger of trade secrets.


So this one problem of patent is that it makes people reluctant to actually use trade secrets.  And, in fact, there’s another – I just had a debate with a patent lawyer in Ohio about IP law.  And he pointed out that one advantage of the patent system is that it encourages disclosure of ideas that would otherwise be kept secret.


Thanks Danny.  I’m going to stop in about five minutes anyway, so you won’t miss too much.  Karl says doesn’t the FBI investigate violation of trade secrets?  Yeah, I didn’t mention that but – so trade secret is largely state law, but there is a federal – I think it’s the Espionage Act, and there’s another federal law which makes it a federal crime in some cases to steal trade secrets.  So they do investigate that sometimes.  That’s correct, although the body of the law is still largely state-based like trademark used to be.  Copyright and patent are completely federal-based in the US we’re talking about.  But let me just mention one thing and I’ll wrap it up here.


What I was going to say was the original idea, if you actually look at the Constitution and the patent act, what it actually literally says is that if you file a patent application, then we’ll give you a monopoly.  But if you think about it, this is like a bargain.  What they’re telling the public is – I’m sorry. What they’re telling the inventor is if you tell the world how to make your idea, so we’re going to publish this if you disclose it.  That’s why it’s called a disclosure or a detailed description.  Then we’ll give you a monopoly.  So the exchange is you get a temporary monopoly in exchange for telling the world about your idea.


Now, this also is said to work as an incentive to innovate, but the main literal incentive is to disclose your idea.  The theory is that without a patent system, companies would keep everything secret, and so you have less free disclosure and trading of ideas.  So the idea is that the patent system encourages disclosure of ideas earlier than otherwise.  Even if you can’t use the idea yet, you can start studying it and researching it, and as soon as the patent expires, then you’re free to compete with the company and use the ideas, etc.


The problem is, number one, this – companies still do keep some things secret.  So in other words, most products that are disclosed – I’m sorry.  Most products that are patented, the innovative aspect of the product would have been revealed to public anyway by the selling of the product.  In other words, if I have a new mousetrap design, if I start selling it, the public is going to see the new design.


So the patent system in that case, if I have a patent on that mousetrap design, the patent – the public is not benefited by the filing of the patent application because they would have known what the patent was like anyway.  So the disclosure that it encourages is superfluous to what would have been disclosed anyway.  So there’s very little new disclosure that the patent system encourages.  On the other hand, as I mentioned, many companies are afraid of being sued for practicing their own inventions, so they’re afraid to keep things secret.  So what a lot of these companies do, they cannot afford to file a patent application because it can be expensive.


So what they do is they publish their ideas in some journal or some publication service for a fairly minimal fee of $1- or $2- or $300.  They publish it on purpose to make their ideas public domain or prior art to prevent someone else from independently reinventing this idea later and filing a patent on it.  So the effect of the patent system is to force companies that are not getting a patent in exchange for this to reveal their secrets to the world defensively.  So basically it distorts the market and makes companies give up secrets that they otherwise would have had a right to maintain just to avoid being the victim of a patent lawsuit.


I think I will stop here.  If anyone else has any particular questions now, I’d be happy to answer them.  Otherwise – so I’ll wait a second to see if anyone has any questions, and otherwise I will see you all.  Let me ask.  Would anyone be interested – would anyone here be interested in an office-hours session?  Let’s say 1 o’clock p.m., 2 o’clock p.m. New York time on Thursdays.  I don’t know if we would do that yet.  I did that for my last course.  I don’t know if we’d need to do that yet.  I would do it if anyone wants to.  I think I won’t do it this week because I didn’t mention it or didn’t list it, but I’m happy to do it if there’s a demand for it and a need for it.



I could do it on the weekends too.  It’s hard to find the best time for office hours.  We can discuss this in the course discussion page.  Any further questions?  Go ahead, Gwendolyn, about Feist.  You can find Feist, by the way on the – just search it on Wikipedia, the Feist case.  So Gwendolyn has a question about Feist.  Go ahead.  I’m waiting.  Would the data in a wiki be considered a database under Feist?


Well, I guess that depends on whether it’s original.  I mean if it’s just – even if it’s a mere compilation of data, like mere facts – I means in the typical example it would be a database or a map or a phone book listing, something like that, maybe seismic data, something like that.  But I think a lot of wikis have original contributions, right?  Just take a look at the Feist case.  You’ll see how they formulate it, but it depends on what the wiki had, Gwendolyn.  I mean if there’s an actual article written by individuals, I think those are creative – those are original works of authorship.


Those are typically going to be protected by copyright.  Now, the wiki may attempt to have a creative commons license to make it somewhat open source.  Whether those licenses are effective or not is a different question.  I have some questions about that.  In any case, they’re still copyright.  They’re still protected by copyright.  Gwendolyn says the software itself with the data is a different issue.  I’m not sure what you mean.  I thought a wiki was an online way of having a collaboration of adding information to something.


So what I’m saying is it depends on the nature of the information whether it would be a database or not.  When will I cover – Donald says when will I cover “Questions for the Professor?”  I usually cover them as they come in.  If there’s some that I’ve missed, please point me to them.  I try to subscribe to all the forums.  Are there any that I’ve missed, Donald?  I usually answer them dynamically during the week as they come in, or sometimes I’ll save them for a Q&A session.  But as we may not have one at least this week I’ll answer them.


Gwendolyn says the software that runs the wiki might be under open source, but the data the wiki accesses is independent of the software.  That could be.  I mean we’d have to look at the particular case for the answer, but just basically think of original expressions of idea as protected by copyright.  Mere data is not.  Mere facts are not.


Matt said he read Against IP on his iPod and liked it and it didn’t take too long.  Thank you.  Thank you.  I’m glad, and there’s an audio version by one of our members here, Jock.  Lloyd talks about the Wikipedia has an explanation of the license they’re using.  I agree, but the point is you wouldn’t need a license if it wasn’t protected by copyright in the first place.  So whether there’s a license or not, I mean it sort of presupposes that there is a copyright in the data.  So the first question is whether there’s a copyright in the information or in the material.



Okay, guys, so I will be in contact with you during the week on the forum, and any of you feel free to email me any time.  I’ll type my email here.  Again, that’s my email, not Danny’s.  And otherwise, I will talk – I’ll see you on next Monday night.  Goodnight, everybody.  Enjoyed it.


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