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KOL174 | “Rethinking Intellectual Property: History, Theory, and Economics: Lecture 3: Examining the Utilitarian Case for IP” (Mises Academy, 2011)


Kinsella on Liberty Podcast, Episode 174.

This is the third of six lectures of my 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics” (originally presented Tuesdays, Mar. 22-April 26, 2011). The first lecture may be found in KOL172.

Youtube and slides for this lecture are provided below. The course and other matters are discussed in further detail at KOL172. The “suggested readings” for the entire course are provided in the notes for KOL172.

Transcript below.



See the notes for KOL172.


Rethinking Intellectual Property: History, Theory, and Economics—Lecture 3: Examining the Utilitarian Case for IP

Stephan Kinsella

Mises Academy, April 5, 2011


STEPHAN KINSELLA: Okay, where we left off.  We talked the first two lectures about the different types of IP, basically the law, what the law is, the positive law.  And I explained that this course will and why it will focus on patent and copyright.  Also, we had a good deal of discussion about the historical origins of patent and copyright, how copyright arose from government censorship and patents from monopoly privilege.



So today’s lecture – I’m going to go over the – a little bit more about what this history has resulted in, the entire overview of the kind of modern web of treaties and statutes, legislation that defines and governs all of these different IP rights just to give you a good overview of what it’s like.  Then we’re going to basically discuss the main two justifications offered for intellectual property, which is the – basically the principled case, which is rights-based or deontological or natural law-based, and the more practical wealth-maximization-based, which you could call utilitarian or consequentialist.


[indiscernible_00:01:15] are sort of all over the map, and they don’t really label themselves very clearly.  Hello, test, test.  Can you hear me?  My microphone level is not going up.  Okay.  And I would like to spend a little time going over – I mean I find it astonishing how many – I was just picking through the posts I posted in just the last week alone since the last course, the last seven days on C4SIF.


Now, I do post a lot there, and I think I put about one-third of those posts here to summarize, to discuss.  And there’s just so much news on a daily basis of trademark, trade secret, patent, especially patent and copyright news, usually completely outrageous cases of abuse and injustice.  Okay, so I’m going to go over here a few of those just to give you a flavor of what’s going on.  Jock says the Death of ACTA song was taken down in a copyright claim today.  I did not know that.  I’m curious what the – who claimed copyright in – oh my God, yeah.  Techdirt – that was on Techdirt.  I might post that later.  Thanks for posting that.


Mike Masnick is the guy at Techdirt, and he’s a friend, and he’s actually on the board of my C4SIF.  And he is so prolific.  I can’t keep up with the guy.  He posts more anti-IP stuff than I can ever hope to.  I’ll put this microphone right in front of me, see if that works a little bit better.


So here’s one here.  Lawmakers are pushing for a rogue websites bill.  So this is just I think last week.  Some congressmen vowed to pass legislation to give the justice department new authority to go after foreign and domestic websites that sell pirated music and movies and counterfeit goods.  So now we have rogue websites.  I did a post called “Patent Defendants Aren’t Copycats.  So Who’s the Real Inventor Here?”


By the way, almost all these are live links in the PowerPoint file that you can click on to go to the – you might be able to do it right now actually – to go to the link.  They’re all on C4SIF.org highlighted at the top there.  So in this post here, this is actually an older post, which I had never posted on this blog, but I posted somewhere else.  It’s just based upon – I think this actually might be a link to a post by Joe Mullin, a pretty good IP reporter.


And basically he reported this study that showed that in, say, a typical class of patent infringement lawsuits, for the computer and software ones, less than 3% of these lawsuits had even alleged that there was copying, and only 1% had proof of copying.  What that means is, in a patent lawsuit, most people lump copyright and patent together.  And it is true that one element of a copyright infringement claim is some kind of access to the original of the copyright holder and some kind of copying of it, reproduction of it, or making a derivative work based upon it.  So that is true.  So most people that are guilty of copyright infringement have done something based upon the original author’s work, not that there’s anything wrong with it, but they have.  In patent, it’s not the same thing.



Jock is asking a question here.  I’m not sure if that’s for me.  I don’t understand the question about me not sitting in a court.  Anyway, if you ask a concrete question I’ll be happy to answer it, but I don’t follow what you were asking there or what that relates to.  Maybe I missed a conversation.  Anyway, let me go ahead on.


The point of – the point here that’s relevant – the point that’s relevant is most people say don’t steal my invention.  They’ll say that this guy ripped off my invention, or all these patent infringers are ripping off someone’s ideas.  But the truth is, in most cases, I mean I don’t know the actual numbers.  I’ve been involved in a lot of patent infringement lawsuits, and every time I’ve been involved, the defendant or the person accused of patent infringement never did even – they weren’t even aware of the other company’s invention or patent.


They were just making their own products.  They have engineers working on designing things to solve different problems to come up with a workable design.  And as they do that, they stumble across different ideas and ways of arranging.  Later on usually, someone will say, hey, I just read this patent.  It looks like we might be doing something kind of close to that.  Or they’ll just get a letter out of the blue from some patent holder saying your product that you’re selling is infringing my patent.


And that’s the first that they ever heard of this patent.  The point is, these are basically independent inventions, but they’re being sued because they happen to step on something someone else also independently invented before, which is similar.  You do not need to allege copying to show patent infringement.  You only need to show that the accused infringer is making, using, selling, or importing a device that basically has all of the elements that are in the claims of this other patent.  It’s got nothing to do with access, nothing to do with copying.  It’s got nothing to do with it.


Now, if you could show blatant copying from a patent, you could maybe get enhanced damages.  That would be called willful infringement, willful.  But infringement doesn’t have to be willful.  Anyway, Erik Smith asks for my job, do I have to send out those letters?  Well, I’m a general counsel for a small high-tech company, so I do all of their law.  I do corporate law, commercial law, employment law, fundraising, SEC-type stuff, securities work, all that kind of stuff, NNA.


Also, I handle a patent acquisition, but we do not sue people for patent infringement.  That’s not the reason we have patents.  We acquire patents just to have an arsenal of patents to dissuade people from suing us.  We just want freedom to innovate, which is exactly – this is a good segue to – so no, I’ve never sent out a letter, and I wouldn’t do it because I think it’s immoral and wrong.  If I had to do it for my job, I would have a conflict, and I just wouldn’t be involved with it.


Now, I have responded to such letters, and I’ve examined patents of competitors and others when there’s a potential concern that we might be infringing or an allegation or something like that.  Then what you’ll quite often do is you’ll do an opinion or hire an outside attorney to do a non-infringement opinion we call it or an invalidity opinion.  And you just put that in your drawer so that, if you’re ever sued and you lose, then you can hope not to get woeful infringement damages, trouble damages.  Hopefully you’ll only pay regular damages because you can show, well, my infringement wasn’t willful because I was relying upon the advice of an attorney who told me I wasn’t infringing, and that was reasonable advice.


I mean there’s all kinds of crazy things you have to go through.  Those opinions can cost $20-30,000, more than it takes to get a patent.  And if you get sued, of course, that could cost millions to litigate.  So the costs are extreme.  But speaking of our acquisition of patents, I mean we only have 40 or something like that.  If you look down here at the bottom of page five, slide five, Google’s Defensive Patent Acquisition, so this was just in the news this week.


Google – they have this comment that they think there’s a lot of junk patents out there.  They think patents impede innovation in a lot of cases.  They’re in favor of patent reform, but they said that there’s a company in named Nortel that’s in bankruptcy, and they’re going to make a bid for that company, for Nortel’s patent portfolio.  And they explicitly explain in their press release why they’re doing this.  They’re doing it just to protect themselves from being sued.  They say they’re bidding to create a disincentive for others to sue Google, so they can continue to innovate.  So they just want freedom to operate and innovate.


I mean imagine if there were no patent system.  All these companies wouldn’t have to waste all these hundreds of millions of dollars changing their product design to get around patents, being afraid to go into a given line to be – out of fear of being sued wasting money on patent lawsuits and insurance and patent attorney fees.  Let me put my phone in airplane mode so no one can bug me during this thing.


Okay, so that’s a good example, and I don’t know how much they’re going to pay, but they’re bidding for a big patent portfolio.  I didn’t do a search on it.  I bet you they have hundreds of patents, so I wouldn’t be surprised if they pay tens or hundreds of millions of dollars for this portfolio of patents just so they can keep innovating, just to make people afraid to sue them.  The reason that – and by the way, the reason that works is let’s suppose some company wants to sue Google for infringing one of their patents.


Now, if they’re a big company with their own products and technology, Google could pour through their own patent portfolio and try to find one that they’re – that the other company is violating so they can counter-sue them.  So it’s sort of like an uneasy standoff.  Sometimes I refer to this as a porcupine defense.  You basically are acquiring these patents to make people afraid to sue you.  I might have mentioned this last time.  What this leads to is either an unofficial or even an explicit agreement between companies not to sue each other, a cross-license in other words.


So Intel might sue Amazon or – I can’t even keep track of who’s suing who nowadays.  Apple might sue Amazon for patent infringement or for trademark infringement right now for the App Store idea name.  But anyway, let’s say Apple sues Amazon, and Amazon counter sues Apple, and they both reach a settlement where they cross-license to each other the use of their own patents, so they just go back to business.  Or they might do this sort of – without an official agreement, just – they just don’t sue each other in the first place because they’re afraid of a counter sue.


What this does is it makes it hard for the little companies to enter this arena.  Basically it’s like a – there’s all these companies with hundreds and maybe thousands of patents.  And someone without any patents of their own or without many patents, they could – they’re vulnerable to being sued.  And they have no patents to counter sue with, you see, so they’re defenseless.  So basically patents create barriers to entry to smaller companies and independent inventors and people like that.  So it basically tends to cause concentration in larger companies.


Jock asks if Google decides to do no evil and not sue someone using an [indiscernible_00:12:56] idea, is there a limit to the time they could sue, presumably the entire life of the patent?  Well, there actually is a doctrine in US law.  It’s called laches, L-A-C-H-E-S.  And I’m actually – I’ve never been quite clear on how that works exactly in the case of patents.  Laches is sort of like an equitable defense.  It’s like estoppel in the time sense.  What it means is you waited too long to assert your rights, so now it’s unfair.  But in the past, a lot of people have actually done this on purpose and they’ve gotten away with it.  This guy, Jerome Lemelson, this famous, prolific inventor, he had hundreds of patents.  And he would let them pend for decades in prosecution.  Hold on a second.  Let me shut this dog up.  I’ll be right back.



Okay, sorry about that.  So what he did – this was before the patent law was reformed in the ‘90s to prevent what’s called submarine patents.  Under the current law, as I mentioned before, the term of a patent is 20 years from the date you file it, but the term doesn’t start until it issues.  So typically it takes about three years for the patent to issue, so you have about – that’s called the prosecution phase.  When you file it, then the patent attorney prosecutes it with the patent office.  He goes back and forth with the PTO until it gets issued, if it does.  When it issues, then you have the remainder of that 20-year period that you can enforce it.


So if you take ten years to prosecute it, you only have ten left, so there’s a penalty to you.  Plus it’s published at 18 months now.   It didn’t used to be.  Patents are now published at 18 months in most cases, which means people are at least aware that these patents are pending at the patent office.  But under the old law, the terms of the patent were 17 years from the date it issued, and they were secret when they were pending.  So this guy, Lemelson, would keep filing what’s called a continuation application.  It’s like when you get to the end of the prosecution, say, two or three years, you just pay another fee and you start over again.


But it’s all secret.  He kept doing that and doing that sometimes for 30, 40 years.  And he did it on purpose because, in the meantime, his ideas were independently invented by others and adopted like an auto industry.  I may be thinking of the wrong guy.  He – I forget – he was the intermittent windshield wiper guy, or he had other ideas.


But anyway, when he died, he was worth, like, $500 million from all these patent license fees.  So what happens is the patent will just emerge all of a sudden like a submarine.  That’s why it’s called submarine patents, in the middle of an established market.  And he’s got 17 years left to sue, so he would just sue people left and right or send out letters, and everyone has got to pay because this invention is already built into all the products.


Now, back to your question, Jock, about waiting, I think once the patent issues, and if you actually know of a given person who’s infringing and you don’t do anything about it, after some period of time, there may be an argument on their side that they could argue laches, L-A-C-H-E-S.  But actually, I haven’t researched that issue in a while.  I started to research it, to be honest, a few years ago because we were wondering at my company about that issue.  But we don’t intend to sue anyone, so I don’t care.  I don’t really are if that right to sue lapses.


I don’t think it would be used against you in a countersuit.  Now, if you just hauled off and sued someone, you could be in trouble.  But if someone sues you and you counter sue them, I think they’d have to have a lot of chutzpah to use an equitable doctrine of laches against their victim, but I’m actually not sure about that.  The bottom line is there may be some danger in not forcing your right.  You might – somebody might find this doctrine interesting, L-A-C-H-E-S.  I’ll type it here.



Okay, oh, here’s another recent one.  I’m from Louisiana, and so the New Orleans Saints is the professional American football team in New Orleans, and so they’re popular in Louisiana.  And there was an interesting story about – so some guy – he’s a descendant of some families, founding families of New Orleans, but he now lives in Vermont.  So he filed a lawsuit against the Saints and the NFL for using the fleur de lis symbol.  I mean this is crazy.  I don’t even know if the Saints own the fleur de lis.  They might own their particular drawing of it, but fleur de lis are all over the world, France, everywhere.


Okay, there – this next link – I’m on slide six, by the way.  The next link, everything is a remix.  I just – someone sent me this.  It’s two videos, and I think it’s part of a project.  There’s more coming.  Some filmmaker did a great sort of, we’ll call it amateur.  It’s a really good job showing how the idea of remixing is just all over the place in art.  I mean it’s just part of what artists do.  They take others’ ideas.



Jock says the guy is going to do four videos.  I think that’s right.  So the first two are superb.  There’s another one I’ve seen before about some kind of beat jazz.  I blogged about it before how – so one kind of beat that is drum beat or some kind of beat rhythm in jazz has been around for decades and has morphed over time.  And also Nina Paley has a good related one.  It’s called one of her minute memes.  If you go to questioncopyright.org, you can find that one.  She’s done two or three now, and it’s about how all art is imitation or something like that.  It’s a really cool video she did too, Nina Paley.


Okay, next one, RIM.  If you remember, RIM is the one who makes the Blackberry phone, and they already were extorted by NCP, this patent troll company basically.  Jock just posted the link to the drum beat.  That’s true.  That’s right.  That’s looks like it.  Anyway, so Blackberry was already sued for patent infringement by NCP, and they ended up having to pay $612 million to settle it.


Well, now they’re under attack again.  So Intellectual Ventures is this big patent acquisition company founded by I wanted to say Nathan Myhrvold.  I think he was a former CTO for Microsoft.  So what they do is they go around buying up people’s patents, and then they use them to extort money from people basically.  So I don’t know if they extorted money from RIM or if RIM approached them, but it’s the same thing.  It’s a threat one way or the other, but anyway, so RIM made a deal with them to get the right to be covered by 30,000 of their patents.


Now, they – RIM may be doing this defensively.  They may be basically getting some kind of right to be protected from some of the huge number of patents IV has acquired to use defensively or to keep people from suing them.  I don’t know.  But it’s kind of interesting.  Intellectual Ventures made $700 million last year on licensing revenue from licensing all these patents it has.  Some of you may have seen this.  The band, Men At Work, had this famous song in the ‘80s, I Come From a Land Down Under.  I think that’s the name of the song, Down Under.


And they were sued for copyright infringement by some company that owns the right to some little children’s ditty, Kookaburra Sits in the Old Gum Tree.  And I actually have heard that as a child.  Someone hummed that to me.  It’s some old folk tune or something.  And apparently there’s one little part of the flute sound or something in the Men At Work song that sounds similar to the Kookaburra song.  And so now they lost, and they appealed it, and they lost their appeal.  So they’re potentially liable and the individual singers and the company – Colin Hay I think is now still a singer – for millions of dollars because this was a very popular song in the ‘80s.  So they’re now potentially liable for millions of dollars to this – for this, which is absurd.


Slide seven I’m on now.  I posted this one this morning I believe.  I posted two or three times already on this Fabrazyme issue.  I get emails occasionally from the lawyer named C. Allen Black.  He’s actually a patent attorney up in – somewhere in the Northeast.  And he’s representing these two poor people pro bono.  This is an outrageous case.  Basically, there’s a company.  I think it’s called Genzyme.  They make this drug called Fabrazyme, which treats this genetic illness called Fabry disease.


And they’re the only ones who make it.  It’s in short supply because there’s only one company making it, and they just can’t make enough, and no one else makes it because – well, no one else has been licensed to by the FDA.  And Fabrazyme – Genzyme has a patent, so no one can make it, and so no one has tried to gear up to make it.  No one’s applied to the FDA for permission I guess.  And a lot of this drug is being exported to Europe, and so there’s not enough for Americans here or something like that.  And the point is that there are people actually – some of them might have died already, but this is – we’re ruining these people’s lives.


So the attorney for them has been trying whatever he could to get drugs to these people somehow, to get a competitor authorized by the FDA or to get the NIH – that’s part of the federal government – to issue a compulsory license.  The federal government has the authority to do that.  You see, the federal government issues these patent monopoly grants.  So they have the right to authorize some other company to grant a license.  So if the patent holder won’t grant a license, the government has the right to do that instead of them.  And then they can compensate the companies.  It’s sort of like an – almost like an imminent domain thing.


The federal government threatened to do this, by the way, in the anthrax scare about eight or so years ago in the US when after – in the wake of 9/11 and terrorism and all this stuff.  There was some anthrax received in some envelopes, and there’s this drug called Cipro, which treats it, and it was in short supply, or the company that makes it – I can’t remember.  Is it Bayer or someone?  Whoever makes Cipro was charging outrageous – like $200 a pill or something.  It was crazy.  And so Congress or some agency of the federal government threatened to issue a compulsory license if they didn’t charge a more reasonable fee.  And so they kind of backed off and lowered their price I believe to keep the federal government from busting their patent monopoly on the anthrax drug, Cipro.


But what was I thought just pathetic about the most recent action in this Fabrazyme case, I’ve got it here on slide seven.  So he – this guy, Allen Black, has tried – he’s sued.  He’s applied for a compulsory license, and he keeps losing.  And the latest thing he’s tried, he went to the NIH, and he tried something called a march-in request.  It’s another type of petition basically beginning them to issue a compulsory license.


And they denied it, and one reason they gave is that, because of the administrative delays of the sister agency, the FDA make it impossible to make the drug in time.  In other words, they say it wouldn’t do any good to authorize a competitor to make this drug because the other part of the federal government is slowing things down so much that it wouldn’t get out in time anyway.  In other words, I guess by the time competitors would gear up, Genzyme may have their production geared up as well.  So in the meantime, these guys are screwed, so it’s almost like the FDA and the patent office together are causing basically people to suffer.  Jock just posted – hold on a second.  Ethan, get out please.  Jock just posted that Fabrazyme is being paid $250,000 per patient per year, or not Fabrazyme, Genzyme for the Fabrazyme drug.  So they’re making $250,000 a year, which is obscene.  Excuse me for just 15 seconds.



Okay, so that’s some good news.  I think it’s important to have a – to see this stuff every week to have a feel for what’s really going on out there.  In the last course I gave for IP, someone asked this question, which I answered because I had not really addressed it in the preceding lecture.  And again, it’s good to have a foundation – an understanding of what the law is before we get to arguments about it and policy questions.


So they were asking what exactly are trolls.  And you might have heard the term of patent trolls.  There’s even copyright trolls out there now.  The Intellectual Ventures company in a way is a patent troll.  A patent troll is someone who – well, they use the metaphor because they can extract the toll for crossing a bridge, right?  Basically, they can make you pay a fine or a license fee to use your own product.  And the reason they’re different than other patent holders is they usually don’t make the product that’s covered by their patent.


So I think it’s a strange category because they’re really not different than other patentees.  So, for example, if I make laser printers like HP and let’s say they sue Brother, another laser printer maker, for infringing one of the laser printer patents on HP’s laser printers.  Well, there’s a good chance that Brother has its own arsenal of patents and can counter sue HP, so they might be able to fight back.  So neither one is a troll because they both have patents that cover their inventions, but so what?


I mean what if HP, among its huge patent arsenal, has a patent on ink technology and they sue some ink company that has nothing to do with laser printers?  Or they sue some other company, I don’t know, a lamination company or car company.  That company may not have any laser printer patents, but they can counter sue HP with.  So their defense was just as if HP was a troll, so I don’t see – it’s a weird category.  The problem is not that they’re a troll.  The problem is that people have patents that they can sue people for, so it’s sort of a bizarre criticism.


Now, the patent law has – does not require – at least in the US doesn’t have what’s called a working requirement.  In other words, you don’t have to make a device that practices your patent to have a patent.  You don’t even have to ever, ever make one and prove it can work.  Now, the law requires you to reduce your idea to practice.  You have to reduce it to practice.  But they make an exception, and they say that if you file a patent application that has a written description of how your idea would work, which the patent application has to have that.  You have to have a written description.  Then that’s a called a constructive reduction of practice.


So in other words, filing a document that – I can sit down and in one hour have an idea and write it on a – type it up on a piece of paper, file it, and I’ve now made this thing in the eyes of the law constructively.  So you never do have to make it.  So the point is the law has never required that, so people that complain about patent trolls – it’s like complaining that some people get on welfare.  Well, if you put a saucer of milk out, a cat is going to come up and drink from it, right?


I mean if you create a patent system that gives someone a legally enforceable right that they can get by following through the certain hoops, jumping through certain hoops, people are going to do it.  And to blame them for doing what you set up a legal incentive for makes no sense whatsoever.  They’re not abusing the system at all.  Now, it is true there are junk patents out there, but that’s not what patent trolls are accused of.


Their patents may be just as good as anyone else’s.  A junk patent is a patent that should not have been issued even by the standards of the patent office.  Now, of course, the patent office is totally incompetent, and the standards are vague and arbitrary anyway.  So there’s no objective way to know when a patent should be issued or should not be in a lot of cases.



But the problem with the patent system is not that there are bad patents issued.  The problem with the patent system is not that people abuse it.  The problem is that good patents are issued, and the problem is when people follow the rules and use these legal rights that the government gives them.  This is the problem.  Now, I would be in favor of, and I’ve written articles on it.  I would be in favor of reforming the law to require a working requirement if only because that would tend to make it harder to get a patent.  And it would tend to reduce the number of total patents out there.  But that’s my only motivation for that.  I mean patent trolls are not a problem in my opinion.



In my last course, someone had asked this question.  I will just mention it briefly here.  Someone asked a question about photography.  Who owns the copyright in the photograph?  And it is actually the photographer, and one strange thing about that is that most people don’t think about.  Let’s say you’re on vacation and you hand your camera to a stranger to take a – snap a picture of you and your spouse.


I mean theoretically you have a photograph in your camera that you own, your own camera of yourself on your own vacation that you don’t own the copyright to.  Some stranger owns it, and you don’t even know who he is.  So I mean this is how – no one makes a big deal about it because he’s a stranger.  But theoretically you don’t even have that copyright, so copyright law has lots of weird aspects to it.


Okay, now let’s do this.  I talked historically about some of the key things in history – the key things in history that led to patent and copyright.  I want to just summarize for you, go over with you just so you get a feel for this monstrous, arcane, complicated web of IP-related laws around the world that form the current national and international patent system.  So I’ll talk about the international aspects and also in the US case primarily and plus the English in terms of the history here.


So let’s just start historically again.  Remember, 1624 was the Statute of Monopolies of 1623.  Actually, I could never find the right way to cite this thing.  Everyone cites it differently.  I think it’s called the Statute of Monopolies of 1623 because that’s when it was probably introduced into parliament or something.  But it was approved in 1624, so I’ve seen it both ways, same thing with the Statute of Anne, 1709 and 1710.


Anyway, so one of the original key statutes for patents was 1624 Statute of Monopolies in England.  One of the original copyright statutes was 1710 in England, the Statute of Anne.  Then actually one of the first modern so-called general patent laws was 1691, South Carolina.  Now, I’m going to go to slide 11 now.  Now, let’s get to the modern system and use the US as the – as a good example.  And actually I think we have one of the oldest in the world, constitutions and IP systems strangely enough give that we’re – US is a relatively young country.


Anyway, on photographs, Jock asks isn’t it the subject in France like that photograph of the kiss?  I’m actually not sure.  I would doubt it would be a different result in France, but if you know differently, let me know.  Okay, so in the modern US, I have mentioned the four main types of IP are patent, copyright, trademark, and trade secret.  So just – I want to give you a feel for where these laws come from right now, what their source is, what governs them.


So in the US, the patent – patent and copyright both are authorized by the Constitution.  So I don’t think they’re unconstitutional, although some people say that they are because there is a clause that says to promote the progress of science and the useful arts Congress can give authors and inventors these limited monopolies.  And what they say is there’s no proof that patent and copyright laws do promote the progress of science and the useful arts.   And actually I agree that they don’t promote it.  They actually impede it, so they say that it does not fulfill the constitutional purpose.


Therefore, it’s unconstitutional.  I’d be happy if the court would strike it down on that ground, but I don’t think that’s a good argument.  I think that that language is what’s called merely precatory.  It’s just explaining why they’re giving Congress this power.  But the power is actually not limited by that purpose.  There’s a similar argument in the second amendment for gun rights, to provide for national – whatever it says, the right – the freedom to bear arms shall not be infringed.


And we gun rights advocates say that that’s an individual right to bear arms, and the clause before it is not a limiting clause.  It’s just explaining one reason that that power is in there, that right is in there in this case.  Anyway, patent and copyright are authorized by the Constitution, which was ratified in 1789, 1789.  So soon after, the very next year, there was the Patent Act of 1790 and the Copyright Act of 1790.  It might have been 1791.  I’ve seen different reports, but it was around that time.


Now, patents are governed by the Patent Act of 1952, a more modern one, and of course it’s been modified since then.  It’s in Title 35 of the US Code, USC.  Copyright – and by the way, it’s administered by the US PTO, United States Patent and Trademark Office, which is part of the Department of Commerce.  Okay, now I don’t really – okay, so let’s go on.  Copyright is governed by Title 17 of the United States Code, and it’s administered by the Copyright Office, which is part of the Library of Congress.


So these actually are governed by different parts of the federal government.  I’m not sure why or how that happened.  Now, strangely enough, trademark law, the federal aspect of it, which is the Lanham Act, which was passed in 1946, that’s also administered by the US PTO.  That’s why it’s called a PTO, Patent and Trademark Office.  Gwen just quoted the second amendment: A well-regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed.


So gun opponents have argued that that first expression limits the second, in other words, saying the right is only for the purpose of having a militia.  So then that’s subject to regulation by the states because they control militias.  But the court actually, I think strangely and correctly, rejected that in that fairly recent – was it Heller?  I think the Heller case that recognized the right to bear arms is a personal individual right.


Anyway, trademark is mostly – well, it used to be mostly state law, based in state law, common law and then state statutes.  The government – the federal government passed the Lanham Act in ’46.  Now, I believe it’s unconstitutional because there is no authorization in the Constitution for the federal government to regulate trademark.  They based it on the Interstate Commerce Clause, which says that the government – the federal government can regulate commerce between the states, which they have taken over the years to use as basically an authorization to do anything they want because they just say as long as it has an – some activity has an effect on interstate commerce, the federal government can regulate it.


The famous case, by the way, if you want to read a case that will just make you go crazy is Wickard v. Filburn, W-I-C-K-A-R-D v. Filburn.  I think it’s F-I-L-B-U-R-N.  In that case – this is back in the New Deal era under FDR, Franklin Roosevelt.  The federal government is issuing all these quasi-socialist decrees, and they were telling this wheat farmer who grew wheat – if I remember the facts right, he grew wheat on his own farm, not even to sell it, which arguably enters the stream of commerce and affects interstate commerce.


But he sold wheat just to feed his own pigs or something like that.  But that violated all these controls over wheat growth, and he fought it.  And the court sided with the federal government, and his argument was that this law is unconstitutional because the federal government has no authority to tell me what to do with my own property.  There’s no enumerated power, but the court said, well, if this guy grows his own wheat and feeds his own pigs, if he’s allowed to do that – and notice this word allow – this is how they view us, giving us permission to live.


If he’s allowed to do that, then he won’t buy wheat on the market to feed his pigs, and that will affect how much wheat is purchased on the market.  So in a cumulative effect, if everyone did this, then it would affect the interstate commerce between the states.  I mean it’s insane.  They’ve used this to justify everything.  Not until the ‘80s I think or the ‘90s did – some Clarence Thomas-related decisions did they start choking back a little bit.


I think the US v. Lopez case was a school gun – it was – the federal government tried to regulate how close guns could be to a school.  And finally the court said, look, that’s got nothing to do with interstate commerce, mid ‘90s.  So – and they’ve done that a few times, but there hesitant to go too far with that because if they go too far, reigning in the power of the feds to use this broad interpretation of the Interstate Commerce Clause, then half the federal government would just be unconstitutional.


Now, trade secret is mostly state-law-based.  It still is, but even here the feds have gotten into the act.  They passed this Uniform Trade Secrets Act in ’79, which makes it, if I recall, a federal criminal crime in some cases I think when interstate commerce is involved, to steal a trade secret.


Okay, now, let’s look at some modern additions to these four basic rights.  In 1997 – let’s look at copyright first; 1997, the No Electronic Theft Act, the NET Act was passed.  That provides criminal prosecution for copyright infringement, up to five years in prison, 250K in fines.  Now, 1998, the Sonny Bono Copyright Term Extension Act, you guys might remember Sonny Bono.  He was the other half of Sonny and Cher, the singing duo from the ‘60s, and he was a Republican congressman later.  And he went skiing without a helmet and ran into a tree in Colorado I think and killed himself – or California I guess in the ‘90s probably right around this time.


Anyway, this act is called the Sonny Bono Act.  That’s what extended copyright term by 20 years to the current term, life of the author plus 70 years or for what’s called a work-for-hire where a corporation is the owner of the copyright and the author of it because it was a work-for-hire.  In that case, it lasts for 120 years from creation I think or 95 years from publication, whichever is shorter.


And it’s always shorter; 95 is almost always the number.  So basically it’s roughly a 100-year term.  It was – so 20 years, it used to be 50 and 75.  It’s also called the Mickey Mouse Protection Act because Disney lobbied for this to keep Mickey Mouse from going into the public domain.  And let’s see.  That was 1998, so it’s – maybe in five or so years we’ll see Mickey Mouse Protection Act number two, and maybe copyright will be life of the author plus 90 years or 115 years in the case of a work-for hire so that Mickey Mouse will be spared being released into the public domain yet again.


Now this is a big one that is really bad, the DMCA, Digital Millennium Copyright Act.  You’ll see there was a lot of activity in the ‘90s.  There is a lot going on right now too, by the way.  1998, the DMCA, Digital Millennium Copyright Act made it a crime to possess I believe or to use or sell at least a piece of technology if it could circumvent DRM basically.  So in my mind, basically every computer is – everyone is a criminal for having a computer because a computer could be – can be used to crack – to hack and crack and unencrypt, right?  It’s crazy.  The DMCA also added this protection for boat-hole design, so now you have this subset of copyright law, which protects the way that boat holes look.  I mean I don’t know. I guess a boat hole – the boat lobby, the yachting lobby had a friend in Congress or something.


I mean it’s crazy.  Now, one interesting thing about the DMCA, now this is at the dawn of the internet.  I mean I was practicing patent law back then.  I remember when this came out.  We were studying exactly what this would do.  They put in there this safe harbor for what they called at the time OSPs and ISPs, internet service providers.  And they were thinking back then of companies like, oh, I don’t know, America Online.  And what they did was they provided a safe harbor, which said that we’re not going to regard an ISP like America Online at the time.


Now I guess it would whoever your ISP is.  We’re not going to regard them as a publisher of the information that goes through their system and is put on websites, let’s say, that they’re hosted through their systems.  So they’re not going to be responsible legally for the information that some user puts up there like if it’s a copyright infringement or if it’s defamation, for example.  We’re not going to make the ISP be the publisher of that if they don’t actively get involved with it and if they respond to these takedown notices.  So at the time, no one knew – none of us – no one knew who was going to be liable for copyright infringement.


And a lot of ISPs at the beginning used to be sued for all this stuff, so they were afraid of liability.  So Congress put that in there.  Now, that has turned out to be a big deal.  I mean some of you may have heard of the DMCA takedown process.  This is where it came from, and it’s used all the time now, and it’s – I mean I hate the DMCA and I hate the copyright law.  But that part of the DMCA I think has helped freedom on the internet because it’s made it kind of clear that a large number of service providers are not responsible for what users put up there.


Okay, and I actually don’t think Congress would have put that in there if they would have understood how it would have been used because this has been used in a lot of creative ways by a lot of companies that maybe weren’t quite contemplated because they didn’t know how the internet was going to develop, so this safe harbor is important.



Trademark law, as I mentioned, is 1940-something with the Lanham Act, which federalized a large part of trademark law in the US.  Something called antidilution was added in 1995 and revised again a couple years ago.  This made – see, up until then I mean trademark law has problems too in my opinion from a libertarian point of view.  But the basic standard was kind of like a fraud standard because it was – is someone using a mark in a way that is likely to cause consumer confusion?  That was the standard.  And that’s similar to a fraud standard, which I think is the only good basis of trademark law.


It could be based upon fraud if something like it could be based on fraud.  So if you’re confusing the consumer because you have a mark too similar to a competitor’s, they could be deceived or defrauded, so consumer confusion.  Well, that wasn’t good enough for a lot of these guys.  So they got Congress to add antidilution, so now you can be in trouble even if the mark – even if the way you have a mark on your products is not even likely to cause consumer confusion.


That’s right.  So you got that it’s not confusing to the consumer.  But it might dilute the value of the other guy’s mark because it tarnishes it or it associates it with the wrong ideas.  So it’s got nothing to do with trademark infringement actually now, so that’s terrible, causes lots of mischief.  I’ve got lots of horror stories about the antidilution act – antidilution cause of action being used.


I think I misspoke earlier when I talked about the – that trade secret law.  This is the one here that I mentioned on this page, the Economic Espionage Act of ’96.  See, another law in the ‘90s.  This is a federal law that makes the theft of a trade secret – again, I think it’s one in interstate commerce, but it makes it a federal crime.


Now, let’s talk about the international system.  The major international bodies that govern all this is the WTO, the World Trade Organization.  So their basic goal is to liberalize international trade, but of course it’s everyone who’s been deluded with the idea that western-style IP rights are part of a capitalist free trade, property right system.  This is used to push developing and backward countries, as they might think of them, to adopt our type of IP.


And then you have the United Nations agency that’s devoted to IP protection, the World Intellectual Property Organization, or WIPO, which is like the Darth Vader of – or the Death Star of IP.  Now, as for treaties, there’s lots of treaties that govern trademark, patent, and copyright around the world.  Some of them require nations to respect other’s rights or rights of citizens in their country like copyright.  Some require minimum standards that countries that are members to these treaties should meet.


So one of the earliest ones is the Paris Convention in 1883.  By the way, you’ll notice it was called for the Protection – I’m on slide 14 right now, by the way.  Paris Convention for the Protection of Industrial Property – in the US we call it intellectual property.  It’s called industrial property quite often in other countries.  In any case, this basically allows you to file a patent in one country, and then within, I don’t know, six months or a year depending on the country, file a second application in another country and claim priority back to that date.


So you’ve got the filing date.  Filing dates matter too when it comes to a battle with someone else or when it comes to what counts as prior art.  I mean if I file on day one and someone publishes an article the next day, that’s not prior art for me.  If I file it on day one and the article published two years ago, it is prior art.  Prior art means what is publicly known and what my patent has to be novel in view of.  Is that clear?  But since the PCT, or Patent Cooperation Treaty, in 1970, this provided a more unified procedure, and this is what is used mostly nowadays.


I use this quite often to file a PCT application for example.  I don’t think I’ve ever used the Paris Convention because you only need to use that when there’s a member of the Paris Convention that’s not a member of the PCT.  And there are fewer and fewer of those.  China, for example, used to be a member of the first I think but not the second, but now they’re a member of the PCT as well.  Then we had the Berne Convention, 1886, also the WIPO Copyright Treaty of 1996.  These both set international standards for copyright.


Now, by the way – so here’s an interesting point about it, the Berne one.  So the US is part of the Berne now.  And one thing the Berne and I think the WIPO treaty too – one thing they required was that there be no formalities to acquire copyright protection.  This is why it’s automatic now.  It used to not be.  In the US, to obtain a copyright, I think you had to put a copyright notice on your work, and maybe you had to even actively register it with the copyright office.  I can’t remember if it was active registration.  I think it was active registration was required to have a copyright, similar to the patent system where you don’t get a patent unless you apply for it.


But since the – I think the ‘80s when we acceded to Berne if I remember my timing right, we changed the copyright law to comply with it.  And we got rid of those requirements.  So most people will say, Kinsella, you’re a hypocrite because you copyright your works.  Or, Kinsella, you’re a hypocrite.  Why don’t you just make your work public domain?


Well, first of all, I don’t copyright anything.  No one copyrights anything.  People receive a copyright or they have a copyright automatically.  Just by writing – just by publishing an article or writing it on paper, the government grants you a copyright in it.  You can’t stop it.  You can’t even get rid of it.  There’s no way to make it public domain.  You can’t just put a notice on it saying I hereby make this public domain.  That’s just – it doesn’t – it’s not true.  It’s not public domain.


So even if we wanted to modify our copyright law and to, say, require active registration, which I think we should, we couldn’t do it without violating international law.  So I was talking with Karl Fogel who’s the head of QuestionCopyright.org not too long ago.  And we were discussing this, how even if we could somehow get a movement in Congress to make the copyright system registration active registration, which would solve the orphan works problem.  There’s an orphan works problem now where there’s tons of works out there in the last 50 years, and no one knows who the author is or you can’t find them, or no one knows who the owner is.


And you can’t get permission to make it, so they’re just dying, or these books are not being republished because of the orphan work problem.  If you require an active registration, you could go to some registry.  You could see who the author was, whether it was copyrighted or not, and then you would know.  Anyway, we actually couldn’t do that.  In other words, it would be better to make copyright opt-in instead of opt-out.


But as I mentioned to Karl, it’s not even opt out because you can’t opt out of it.  I mean there is no way to get rid of copyright that I’m aware of, no reliable way.  Creative commons licenses can help somewhat, but it still doesn’t get rid of the copyright, and I’m not quite sure that they’re completely enforceable.  The CC Zero would be the closest to public domain, but there is doubt about whether that one’s legally enforceable because of these treaties and because of local laws.



Jock asks what is this about author asserts his moral rights.  I’m not sure where you read that from or what you’re talking about.  I think that word is used a little bit ambiguously or in different ways.  Moral rights refers primarily – okay, he said it’s on the front matter of books.  I don’t remember seeing it that much before.  But it – I think it’s more of a European thing.  I know like in France, for example, there’s a moral right, which is the right – it’s sort of like an adjunct to copyright.


It’s the right to be attributed as the author of a work, and if I understand how the law works in countries that have this, I don’t think we have the same thing in the US.  I think the moral right is said to be and inalienable right.  I mean literally they call it inalienable.  So you cannot contract out of it.  You cannot get rid of it.  I seem to recall studying some cases as long time ago where, for example – I think it also has to do with preventing your work from being defaced.


So I think there was a case where some artist had a – I want to say he had a refrigerator and he had painted something on the refrigerator.  And then he left his apartment and someone else moved in, and they were going to throw the refrigerator away.  And he got an injunction and stopped them from doing it, or there may be cases where you have a mural on a building, and the artist doesn’t own the building anymore.  But he gets an injunction from the court to stop the current owner from painting over it or demolishing a house because it would deface his work.


I think that’s a type of moral right too.  So I’m actually not sure if it means anything other than that.  So I’m assuming that the authors are doing that.  They’re saying I have to be attributed as the author of this no matter what, something like that.  Glenn asks am I familiar with some of the open-source characters like Jenny Everywhere that have a permissive license, and then you have a link here.  No, I never heard of that.  I do know there’s a movement among a lot of open-source types to have open licenses and things.


But a lot of them do noncommercial, which I think is terrible.  I mean Nina Paley is an artist, and she explains – I mean she does copyleft, which I understand why.  I don’t like copyleft because it still imposes a requirement on the user to impose another copyleft on anyone they – any derivative work they’d make.  I tend to prefer creative commons attribution only.  I figure that’s the closest enforceable license to public domain because all you’re requiring them to do is put your name on it, which they would do in most cases anyway.


I mean attribution is commonly done anyway, so I figure you’re not imposing any really onerous requirement on people.  I mean I would love to do CC Zero on my stuff, but I’m afraid it won’t work, and that’s to the detriment of the user.  If they can’t rely on it, then they’re – maybe I’ve changed my mind and will try to sue them some day, so they need to be able to count on the license.



Gwen says it’s all rights reversed.  Yeah, I think that’s one of these cutesy, artsy things that’s supposed to mean something like copyleft, which is – I don’t know if it’s legally enforceable because it’s not really that carefully defined.  Maybe it is somewhere.  It might be interpreted to be copyleft or CC BY.  Creative commons by is attribution only.


It’s 9 p.m. my time.  Why don’t we do this?  Let’s take a five-minute break.  It’s 9:02.  We’ll resume at 9:07, and maybe I’ll talk for 15 more minutes, and then I’ll stop and see if there’s any more questions.  Someone asks – I thought I saw another question.  Oh, Donald says are there countries that are resisting or partially resisting current patent and copyright agreements?  Well, I mean I think there are some countries that have never signed up.  I mean I think they regard it as not very important in the countries.


What happens is the western countries are always twisting the arms of the holdouts that are significant like Russia and, I don’t know, China and India.  And they all finally come along, but now they’re working on getting them to actually comply with the laws.  I mean outside of the US – my general impression is outside of maybe Canada and the US – well, I was going to say piracy is widespread.  IP is respected here.  And I think that probably used to be the case until the internet and Pirate Bay type stuff, so now that’s not even the case.


But you’re not going to find a bizarre, some guy on the street selling bootleg CDs over here.  I mean I’ve never seen that, but I’ve been overseas and you see it all the time in the – generally the poorer and the more developing the country is, the more you see that – Italy and Turkey and China I’m sure.  So piracy is more rampant over there.



So I think right now they’re just trying to get China and Russia – primarily China and India to really comply and to enforce these laws and have a better court system for lawsuits.  It’s actually stop piracy, not just have it on the books but enforce the law.  Oh, Jock is putting a link up to some report on international piracy.  That’s the one that came up just the other day.


It’s some huge report by some group – I forgot the group.  There was actually an interchange between him and Mike Masnick on Techdirt between the guy that was behind that study.  He was kind of fussing at them for charging, I don’t know, $8 to get the report if you’re from the US or some rich country.  But it was free in other countries and had some kind of copyright warning on there.  He kind of fussed at him, and the guy said, well, it was tongue-in-cheek, and we’re not really going to enforce it.


If you want to bootleg it, it’s okay with us, but I mean you can find it if you’d look.  I mean it was kind of weird, the interchange.  In any case, let’s continue on here.  I’m not going to finish tonight’s – everything I had planned, but that’s okay.  It can spill over to next time, which is fine, but I would like to finish the overview of the legal system.


On treaties, there’s a Madrid system too.  The Madrid system is based in Madrid, Spain just like the European Patent Office is in Munich.  I mean – and the United Nations is in New York.  I mean all these countries lobby for these huge new bureaucracies to be centered there, so they’ll create jobs and business and spending, etc.  So this permits international registration of trademarks.  It’s administered by WIPO.  Now, there’s also a treaty called GATT, the General Agreement of Tariffs and Trade.


And 1994’s so-called Uruguay Round covers IP.  Finally, the TRIPS, the agreement on trade-relates aspects of intellectual property rights are called TRIPS.  This is an international agreement administered by the WTO.  I told you earlier it’s two of the big agencies are the WIPO and the WTO, and this sets minimum standards.


Okay, there is also this ACTA – well, I think I have it on the next slide.  Let’s go on to the next slide.  Now, what about laws coming down the pike, pending laws?  So we had this ACTA, Anti-Counterfeiting Trade Agreement.  I actually haven’t followed it in the last month or two, so I’m not sure where it is right now, but I assume it’s still pending.  So this is a proposed international agreement that would provide copyright and patent standards and maybe even trademark.  I read through it, and it’s a little bit unclear.  The problem is it would have a lot of the provisions that are in the DMCA, so I’m really worried about this.  It probably won’t affect America too much, but it will make other countries have more American-style law.


Now, what was sneaky about this is let me explain how international negotiations work on these types of things.  Usually when you have things like these previous treaties we’ve talked about, they’re negotiated between a large number of countries as a treaty.  Okay, and those are done – traditionally those negotiations are done pretty much publicly, so everyone is aware of what’s going on, and there’s – just like when a law is pending in Congress people – some people oppose it.  Some can give their input and they can try to stop it if they don’t like it, whatever.


Well, trade agreements usually are between two countries.  Sometimes they’re multilateral, but trade agreements are typically negotiated in secret between countries.  Okay, but when you do an intellectual property treaty, it’s usually done as a treaty because that’s what it is.  It’s not – trade agreement is about how we’re going to impose tariffs on each other like the NAFTA or like bilateral trade agreements between countries or multilateral trade agreements.  Trade agreements affect how countries trade with each other, so they wanted to impose these more rigorous standards, patent and copyright standards, on a worldwide basis.


But they didn’t want to impose – they didn’t want to negotiate it in public because they knew that it would be controversial.  So instead of doing it in the normal way, they tried to sneak it in as a trade – that’s what they call it, the anti-counterfeiting trade agreement.  And this law professor in Canada named Michael Geist, G-E-I-S-T, someone leaked to him the draft of it, and it got leaked.  And so now it kind of from what – last I read, some of the offensive provisions have been taken from it.  So if it does get passed, it will have been partially defanged, which is good, although it’s still probably going to be bad.


Another one that’s coming, which I’m really worried about, is the COICA, Combating Online Infringement and Counterfeits Act.  This would allow domain names accused of piracy to be blocked.  They’re treated as what’s called in rem.  That’s an action against a piece of property, in rem instead of in personam, instead of against a person.  So they wouldn’t have to know who owns it or who the person running it is.  They just will go in and see that one.


And then there’s also talk about adding IP for fashion and database rights.  Some chefs want copyright for food recipes.  Some bartenders want copyright for their drink mixes.  I mean I’m not kidding.  It’s terrible.  I don’t know if I have it on this page.  Oh okay, this is the end of this part, so let me just stop for a second.  I don’t have it on the slides, but I did a post on it I think a week or two ago on the Mises blog and on C4SIF.


You might want to look it up.  It’s a post about pending patent reform.  Patent reform has been pending for, I don’t know, ten years, and it never passes.  It’s never a good idea in my opinion because they never do anything radical.  They just change a few things.  But it looks like the timing is right, and there was a bill.  I think it’s Senate 32 or something.  Anyway, it’s on my site.  There’s a bill pending, and it passed the Senate 95-5, and sadly Rand Paul voted for it.  Maybe they don’t understand.


Most of the changes are neutral.  Some are negative.  None are horribly negative that I recall.  But it’s just moving deck chairs on the Titanic.  It’s not really – the main significant, substantive change is they would change our American system from what’s called a first-to-invent to first-to-file.  My understanding is most countries in the world have a first-to-file system.  That is, if two people have a similar invention and they both file a patent application for it, the one who filed first will win the battle, and he’ll get the patent, and the other guy will not.


In the US, we’ve always had a first-to-invent system where if two guys file for patents and then it turns out they’re very similar, then they have an action called an interference proceeding, which is sort of an administrative lawsuit for the PTO or some court.  Anyway, they will decide who was the first one to conceive of the idea.  I mean it’s an arcane doctrine.  In most cases it wouldn’t make a difference.  Anyway, they want to change it.  I don’t know why they want to change it.  I think they think it has a greater legal certainty or something or it’s more like what other countries do.


And of course a lot of people are up in arms about it, but honestly I don’t think it makes a difference.  It only makes a difference to patent lawyers because it makes them nervous that now they might have a greater chance of malpractice liability because, under the current law, it doesn’t matter if I filed a patent a month late because – I mean it matters a little bit, but it doesn’t matter too much because I could still win.


I could beat someone in an interference proceeding if I could just show my client invented it first, and that’s not going to change based upon when I file it.  But if they change to first-to-file, if I’m a week late and someone else filed a week – two days before me, then my one-week delay could cause my client his patent rights.  And so I might get sued for malpractice, so some patent lawyers don’t like it, but they’re just a bunch of whiners.  They don’t want to learn the new law.  I mean law is changing all the time.  I really think none of it matters, so I’m against it because, well, first of all, anything Orrin Hatch and Leahy are for – they are the horrible IP sort of whores of the Senate, horrible, horrible.


They’re always bad on IP, so anything they’re in favor I’m against it.  Anyway, I have a little summary on the C4SIF blog about that patent reform law.  I think it’s called the America Invents Act.  I mean they have these Orwellian propaganda names for their laws.  So that’s kind of an overview of the legal landscape that we’re dealing with here.



Let me just – I won’t go on to – let’s see.  I’m on slide 17, 18.  I will stop at slide 19.  I won’t go there.  I’ll save that for next time.  But let me just quickly mention on the monopoly thing, I just want to make clear.  I think I mentioned this already.  The reason – Senate 23.  I had it wrong.  It’s not 32.  It’s 23.  First of all, some IP proponents get upset if you call patent and copyright monopolies.


Well, I mean, of course they are monopolies.  They might not give you monopoly power in every case that would count as monopoly power under the antitrust law, but they are little monopolies, privileges.  I mean they were called the Statute of Monopolies originally.  This was never originally called intellectual property, and it wasn’t regarded as intellectual property.  It was regarded as a policy tool by the state to reach a certain desired end, to encourage innovation or whatever.  It was called property later on when people started attacking it.  So they were saying, oh no, this is a property right.  So they were trying to lump it in with other property rights that people respected.


This – I mean, Fritz Machlup concluded this in the ‘50s.  He said that those who started using the word property connected with inventions had a very definite purpose in mind.  They wanted to substitute a word with a respectable connotation of property for a word that had an unpleasant ring: privilege or monopoly as well.


Let me go to slide 18 now.  Anyway, that’s just more of the same from Machlup.  So I could go on further.  I’ll tell you what.  I will pause here and see if anyone has any questions.  I’d be happy to answer questions for the remainder of the time, and if there are no questions, I could cover another slide or two.  Any questions?  Any comments?  Anyone want to discuss anything?



Jock is reading Boldrin and Levine.  It’s a great book.  I mean it’s – the pharmaceutical chapter is really good because it just hits tons of great empirical analysis of the traditional arguments for pharmaceutical patents.  Now, I just – and Boldrin and Levine, by the way, they’re great.  The book is wonderful.  But they’re not – actually, they’ve become more libertarian and even more anti-IP since this book has been out.  I’ve been blogging on his blog, AgainstMonopoly.org, on Levine’s blog, and – but there’s a part in there where they say something like they would prefer – instead of a patent, they would prefer the government to subsidize federal research or something like that.


So they sort of – they’re not pure libertarians, but they’re pretty damn good.  Jock says I don’t know how the world still functions.  I don’t – you mean with all these laws?  I think it gums up the works.  I mean I’ve done estimates.  I think that the patent system alone in the US alone has got to cost at least $40-50 billion of just pure damage, pure deadweight.  I think it’s really more than that.  This whole IP mentality affects everything.


In fact, if you think about it, I know these guys – some libertarians like Alex Tabarrok and also Bernie Sanders who’s a socialist senator from Vermont I think, and Joseph Stiglitz, a Nobel Prize winner and I think James Madison way back in 1789.  They proposed a system where you take tax dollars; put it into a big pot.  You appoint a panel of government and industry experts, and they pick winners, the most innovative designs of the year, and they give them rewards to incentivize innovation.


Tabarrok and others have pushed for a 30 to I think $80 billion pot of money just for medical innovation.  And now, to their credit, they want to replace the patent system, and I think this might be an improvement  It might be a more honest improvement, but my point here is that they want to have $80 billion of tax dollars, $80 billion of tax money every year go to just medical innovators.  Now, if you expand that to all patents, I don’t know what it would have to be $500 billion a year?


So that would be the surface cost of this system.  Now, presumably you’d get some innovation out of it.  What’s it worth?  Is it worth a trillion?  Is it worth 200 million, a billion?  I don’t know.  But that’s some idea of the cost of the system.  To my mind, that’s a proxy for the cost of the patent system, and I think it’s clearly in the tens or hundreds of billions of dollars every year.



Matt says I was thinking after its expiration date an item that was considered property is property no longer.  Well, this is why I think it’s actually not correct to call these property.  They’re – the originators of the system, the founding fathers, did not think of it as property.  It was just a policy tool.  Even John Locke, who was somewhat in favor of this idea, he didn’t regard it as property.


Of course, it’s not a natural right.  It’s not natural property if it expires.  I mean that’s not what natural rights do.  To the contrary, natural rights tend to be inalienable.  Karl says incenting innovation is like the scientific grants for pure research.  I agree.  We actually already have this system in place in a way.  We have federal innovation research, and I would encourage anyone interested in that look up the work of Terence Kealey, K-E-A-L-E-Y.


In fact, he’s on the advisory panel of my C4SIF, so just look on C4SIF.org, and he’s got a book called Sex, Science, and Profit.  It’s wonderful.  He’s got a great chapter.  He spoke at the – Hoppe’s Property and Freedom Society last year right after I did.  I spoke on patents, and he spoke on government intervention and research, and it was a perfectly complementary talk.  It was great, and he shows how they totally pervert it and distort it.



Danny says – Danny Gagne.  By the way, Danny, where do you – just curious, I used to know a guy named Paul Gagne.  He was a patent lawyer – well, no, actually he wasn’t a patent lawyer.  He was a trademark lawyer in Philadelphia, Paul Gagne.  I don’t know if you are related to him or know him.  Anyway, okay.  Is the antidilution clause in trademark law?  The reason so many films, videos, and photographs blur out the logos of other companies so they don’t besmirch the reputation of the company.


You know what?  I actually do not know.  I’ve wondered that myself.  I’m not really an entertainment lawyer, so I haven’t really gotten into the nitty gritty of that.  I’ve had theories about why they do it, but I’m actually not sure.  But I mean I – the theory I was thinking was these companies wouldn’t pay for product placement.  So basically they go to all these companies.  They say we’re going to – we’ll place your product in our movie, but you’ve got to pay us $500,000 or whatever.  And if you don’t do it, we’re going to blur your logo out.  It will not show.  That’s our policy.



So – are you laughing at me, baby or – okay, the book?  Okay.  So I think that’s probably why they do it.  I don’t think that – so here’s the way trademark works.  The dilution thing would have more to do with a similar mark that is too close or if you use the mark in association with something that tarnishes it.  I don’t think it’s antidilution, and I don’t think it’s a trademark violation either.  It’s like, for example, in the US anyway, the US law is a little bit different.  My understanding is in Europe – most European countries it’s a violation of trademark right for a competitor to show his competitor’s trademark.


Whereas in the US, so-called comparison ads are perfectly permissible because – so let’s say you can have – a Coca-Cola ad could say we did a taste test between Pepsi and Coke.  And the results show that people prefer Coca-Cola to PepsiCola.  And they could even have a – show the Pepsi can because they’re not pretending that they are Pepsi.  They’re not confusing anyone about the source of goods.  They do that – they sometimes say brand X, but they don’t have to in the US.  But I believe they have to in Europe.  Also, it’s – patent and copyright are different than trademark.


Trademark, for example, it is not a violation of trademark to use someone’s trademark in a truthful way.  So, for example, take the game Trivial Pursuit.  I think this is a good example.  There’s a trademark on Trivial Pursuit I’m sure.  There’s probably a little R by it.  By the way, you’ll see TM and R in parentheses or in a circle.  TM means you’re claiming trademark in it, which you don’t have to do to claim trademark, but it helps to put people on notice.


If you file an application to register it as a federal trademark, when it’s finally issued, which takes, I don’t know, six months, then it’s registered.  So you put the R.  It means registered trademark.  If it’s service mark, you might put SM instead of TM.  It means it’s service mark.  It’s the same idea.  Anyway, I’ll wrap up in two minutes here.


I do want to end close to on time because I know it’s late for some people.  But let me finish my comment, which was if I made a set of cards with my own questions that could work with Trivial Pursuit, I can sell them and I could put on the box here’s a set of cards that will – that area compatible with Trivial Pursuit, as long as I don’t use their sort of design and try to fool people into thinking that I’m authorized by that maker.  I mean I might put my company’s name on there and say Kinsella Enterprises.  Here’s a set of improved Trivial Pursuit cards.  So you can mention a trademark as long as you’re telling the truth, and if it’s in such a case.


Any more – Gwen, you posted a link to greeking.  Let me see what that – I don’t know what greeking is.  Is this the brand X idea?  Let’s see what this is here.  Oh, I don’t know what that is.  Oh obscuring portions of the – okay, blurring out things, the blurring of logos.  Oh, one more thing.  I think they also – you’ll notice in movies and TV shows they blur out – well, they use fake phone numbers like it’s always 555, or if they show – on 60 Minutes or a news show, if they show someone’s – a court document or something with names, they’ll quite often blur the names out.


I think that’s just out of general respect for children or for people’s privacy.  You don’t want people’s social security numbers giving up there or things like that or their address or their phone number.  And they choose fake phone numbers because they don’t want to accidentally choose someone’s phone number and have that person be harassed and maybe sue the company and whatever, be pestered.  So I think they do those for other reasons, but I think they blur the logos out just so they don’t advertise for someone who’s not paying for it.  I mean that’s my guess, but I don’t know if you need permission to show – like if you wanted to show the logo, I don’t know if you permission.


Now, copyright is a different story.  There are some outrageous cases where you’ll take a photograph and someone is standing – of your friend and they’re standing in front of a building that – or an architectural work or a sculpture or even a painting.  And then the owner of that artwork or that building even will say that you can’t publish this photograph without our permission because this big building in the middle of the square here that is a federal building or whatever is copyrighted.  So copyright can cause problems with documentaries and with photographs and things like that, but trademark I’m actually not sure about, sorry.



Well, why don’t we end here unless anyone has any more questions?  I’d be happy to answer a few more, but I know that 90 minutes is pushing it for some people, especially the listeners in their cars.  Any more final short questions?  Otherwise, we can pick it up next Tuesday.  Okay, good.  Well, good night, everybody.  Jock, congrats on staying up late again, impressive.  Enjoyed it, guys, and enjoyed the questions, and I will see you next Tuesday.  Feel free to email questions or post them on the forum in the meantime.


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