Kinsella on Liberty Podcast, Episode 177.
This is the final of six lectures of my 2011 Mises Academy course “Rethinking Intellectual Property: History, Theory, and Economics” (originally presented Tuesdays, Mar. 22-April 26, 2011). The first lecture may be found in KOL172.
Youtube and slides for the this lecture are provided below. The course and other matters are discussed in further detail at KOL172. The “suggested readings” for the entire course are provided in the notes for KOL172.
Lecture 6: THE FUTURE; INTEGRATING IP THEORY WITH AUSTRIAN ECONOMICS AND LIBERTARIAN THEORY; PROPOSED REFORMS; IMAGINING A POST-IP WORLD; THE FUTURE OF OPEN VS. CLOSED
SUGGESTED READING MATERIAL
See the notes for KOL172.
Rethinking Intellectual Property: History, Theory, and Economics—Lecture 6: The Future; Integrating IP Theory With Austrian Economics and Libertarian Theory; Proposed Reforms; Imagining A Post-IP World; The Future of Open Vs. Closed
Mises Academy, April 12, 2011
STEPHAN KINSELLA: … last lecture for tonight. I thought what I would do – I have several things planned for tonight to discuss. Some of them are more optional than others, so I thought I would find out whether anyone has any questions. And if there’s any questions from the lectures to date we could discuss those, say, in the first 10-15 minutes, and then I can adjust the rest of the lecture as necessary. So if anyone has any questions you’d like to discuss now, I’d be happy to take them. I’ll go ahead and start until I see any, and I’ll pause here in the first few minutes if anyone has any questions. And if at any time the video has a problem or the sound has a problem, just let me know.
Okay, so tonight I’m going to do some review and cover a few things in a little bit more detail, and then we’ll go on to the sort of meat of the lecture in the last 30-45 minutes. So a couple of pieces of news and some – just some news of the week. Okay, so Jock does have a question. I read in B&L – Boldrin and Levine – that’s the Against Intellectual Monopoly book – that financial instruments became patentable in the early ‘90s. Is there any evidence that they contributed to the financial meltdown?
Oh, I think that’s a little bit beyond my expertise, Jock. You mean the patentability of them or just the financial instruments? I mean my view as an Austrian is that the financial meltdown was just the inevitable result of the Fed inflation-caused boom and that just something is going to pop it. And I don’t think the financial instruments got more popular because of patents. It was a pretty rarely used thing from what I understand.
Okay, so John, I agree with you. John McGinnis, the Fed called it the meltdown. And I don’t think – I haven’t seen much abuse from these financial patents. I think people know they’re a little bit odd, and they would be hard to enforce, and they might not hold up. Okay, if you have any others just type them in here. Otherwise, let’s just go ahead and proceed. And again, I would suggest you guys, if you want to keep up with this stuff on a daily basis or weekly basis, check out my C4SIF.org website.
And just in the last seven days alone I think I had 15 or so posts, some of which I’ve got here. Some of these are actually older. Let me just go through some of these, and if you’re curious about any of these you can click on these links or go to C4SIF and look at them in more detail. So these are some older ones actually. All the ones on this page are from about six months ago, five months ago maybe.
So there was one case where a Brazilian newspaper sued a parody blog for making fun of it. So I mean that’s a little bit ironic that they’re being made fun of and then they get – then they actually sue them even though parody is typically protected by copyright. So this just is an example of how absurd the results of some of these laws can be.
Now, this is – what I call an inverse outrage is kind of a poetic justice. There were some copyright attorneys, and they were actually turned around and sued by the people that were accused of infringement. So that was kind of nice justice there. I actually don’t remember the details offhand, but I remember it was kind of a funny case. There is something – I touched on it here, and I’d be happy to touch on it a little bit more. I have a post from about six months ago where I talked about common misconceptions about plagiarism and patents and a call for an independent inventor defense. What that’s about is just pointing out that most people don’t have a very good understanding of the way IP law works.
And they often confuse them, and copyright does require the infringer to actually copy or perform some of the action with access to the copyrighted work. But patents do not actually. Now, most people sort of think that it does require that, but it does not. So they’ll call someone who is sued for patent infringement a plagiarist or they ripped off someone’s idea or a thief.
In pharma there may be a lot of attempts to knock off drugs. It’s just not – the point is in most – it’s not required as the cause of action, as part of a patent infringement cause of action. All the patent owner has to show is that the person they’re suing or targeting is actually making, using, or selling something that is described in the claims of the patent. It doesn’t matter if they independently invented it, and it doesn’t matter if they invented it even first. So the point is most patent lawsuits – there’s even no allegation of copying. But you’ll see this described in blogs.
They’ll say Apple is suing Samsung for ripping off – or in fact I heard it on TWiT I think this week, This Week in Tech the guys were discussing. And you could see these – you might want to take a listen to this week’s TWiT, T-W-I-T.tv. It’s a podcast I listen to. And these hosts are – you can see they’re clueless because they’re without any moorings whatsoever. They confuse patent and copyright all the time, but they were talking about the Apple/Samsung lawsuits, which we’ll get to in a minute and how they’re kind of arguing whether or not Samsung had the right to copy Apple’s iPhone product.
And they’re kind of going back and forth. Are the consumers defrauded? They’re probably not. But was it sufficiently different? But the implicit assumption of their entire argument is that if it’s an exact copy there’s something wrong with that. But I mean that’s what competition is, right? You see someone making something, and you emulate what they’re doing. So it’s funny to listen to them having no sort of principles to ground their – you see their intuitions are – what’s really wrong with this? They never stop to think, well, copying is what the free market is about. Emulation and learning is a good thing.
In any case, I thought that was kind of interesting. There was an interesting post I had about some of these – I think it was a former federal judge, former patent judge was proposing ending the recession by a patent stimulus. That’s funding the patent office and changing the standards to have a ton of patents issued because that would cause a bunch of innovation, which – and innovation leads to wealth and investment. Of course it’s completely ridiculous. Just the idea of inflation, if you print more money, the idea that you have more wealth, but of course you don’t.
I mean even if there was normally a correlation between innovation and patents, if you just increase the number of patents being granted by lowering the threshold, that doesn’t cause there to be more innovation. It’s just ridiculous. So click on those posts. You’ll see some truly outrageous, absurd things some of these guys say.
I have a post from awhile back. It collects some other posts. I get accused all the time of being a hypocrite for being a patent attorney even though I’m anti-IP. And of course the first reply to that is so what? What’s the relevance of being a hypocrite? I mean does it prove that I’m wrong? I mean let’s say you prove I’m a hypocrite. Is that the justification for patent law, that there’s a patent attorney in Houston, Texas who’s a hypocrite. I mean that makes no sense whatsoever. Does that mean before I was born, patent law wasn’t justified?
I mean it’s ridiculous. And furthermore it’s not hypocritical anymore than it’s hypocritical to be a libertarian opposing roads and driving on the roads and living in most countries and opposing socialized medicine but utilizing it so you don’t die. So you can take a look at that if you’re interested too. Let’s go to some newer posts.
These are in the last few weeks. By the way, I believe today is World Intellectual Property Day, which is strange because just a couple days ago it was – you’ll see the little symbol there. It was World Book and Copyright Day. So that’s the link in the middle of the page. I’m on slide three now. There’s a most – this is the most recent thing. There’s a councilwoman I believe in New York City who’s proposing a law to make it a crime to buy knockoffs like knockoff purses and things like this.
And you can see that this – and actually she has this ridiculous argument that we need to target these activities because it’s correlated with terrorism and child labor abuse. I mean it’s incredible that they’re trodding out the terrorism boogieman to justify enforcing intellectual property rights on behalf of the big purse makers and high-fashion companies. It’s absurd. But my point here is that most people will say it’s just trademark laws seizing all these knockoff purses and things like that. It’s just trademark law, and that’s just to prevent consumer confusion, to prevent defrauding the public.
Well, here’s a case where you’re actually threatening to put someone in jail who buys a purse. Now, if they’re being defrauded and they’re a victim of these horrible knockoff people, why would you put them in jail? I mean obviously they’re not being defrauded. That’s why you’re punishing them for doing something wrong. So that just undermines that whole argument. And our own Jock Coates had a great post, really well written. Jock, you’re very eloquent, a great post on the Adam Smith blog.
I was curious, Jock, how you were invited to do that. Do you have a connection to the Adam Smith blog or what? It was a really good post, so click on that. It’s called “Intellectual Property: An Unnecessary Evil.” I haven’t checked it since it first came up this morning. So I’m not sure if there’s been comments or if there’s – is there going to be a rebuttal blog post, Jock, or one taking the other side? I didn’t see one on there this morning. I’d be curious to see.
Okay. I actually blogged just – I reprinted a comment in one of the threads on one of the Mises blog discussions by some guy named Nate M. It’s just a really nice summary of the whole actual evil way that – I mean he says even if you’re not against IP in principle, look at the actual laws that are in place right now. And he just goes through and summarizes all the horrible things that they’re doing. That’s a nice summary.
One of the most recent things, I think this is copyright. There’s some guy who invented some – I’m actually not a huge sports fan, so some of you may know this. I bet you do, John, right? John McGinnis, this da-da-da-da-da-da CHARGE thing that apparently they play at some sporting events in the US. I figured so, John. Anyway, so there’s some composer saying he composed this tune, and he’s going to sue all these sports teams to just play that. It’s just ridiculous.
This – the last one on this page, “Copyrights as Incentives: Did We Just Imagine That?” by Diane Zimmerman. She’s got some study which shows that, as just a practical matter of fact, most artists do not create artistic works because of copyright incentive. I mean they have other reasons that they do these things. I’m glad you liked it, Jock. There was another one on incentives I blogged a few weeks ago, and it seemed to have similar arguments, but I don’t remember where that one is. It was a different author I believe. All right, I’m on slide four.
I also had a post, “Cordato and Kirzner on Intellectual Property.” That’s Roy Cordato and Israel Kirzner. The reason I posted that was – I’m trying to remember how I find out about it now. Someone told me something about Cordato, and I checked and he has this book in 1992, and he has some fairly skeptical comments about the coherence from an Austrian point of view and a free market point of view of patent and copyright. I mean he wasn’t too hardcore against it. I spoke with him since this. He admitted to me he’s gotten a little bit more radical since then, which is good.
Oh, I know. He was the one on the panel, the APEE panel I mentioned, that Mossoff was at and Sheldon Richman and Roderick Long. And I remember Sheldon mentioned to me that Roy Cordato had some searching questions of Adam Mossoff’s pro-IP views. So I looked up Cordato, and sure enough, he’s anti-IP. And then he had some comments about Kirzner, and I looked some of those up, and Kirzner never comes out on it exactly except he has one little comment that patents are a type of monopoly that derogates from the free market. But a lot of his other reasoning about the structure of human action, the nature of means and ends, implies that he would be against IP as well if he had applied his theories to it. So – and Cordato agreed with me on that, that interpretation of Kirzner.
So we have Hayek, Hoppe, Rothbard, even Mises was skeptical. All the Austrians that have kind of looked at this are pretty much anti-IP. Some of the others, like I’ve talked to Steve Horowitz, and they kind of seem not to want to – they say they haven’t thought about the issue, which is astounding to me. But I think they’re skeptical, but they don’t want to say it for some reason. That’s my guess.
I’ve blogged about this case before. There’s a – Jock said Friedman is pro. I assume you mean David Friedman. I don’t remember. He’s very utilitarian, but he’s an anarchist, so I would think he would be skeptical. I think I’ve read some stuff from him before, but he approaches it like from incentives and all this stuff, so I don’t think he has a very hardcore, principled approach. But he may be against it just because it’s legislation.
Okay, so there’s an upcoming – well, it was actually argued already I think. There’s a Microsoft v. i4i case, and I blogged about this before. My suspicion is Microsoft may win, and if they win, that means the Supreme Court of the US will change one of the standards for overturning a patent in court if you’re sued for infringing it. So instead of having to prove that it shouldn’t have been granted, that is, that it’s invalid by clear and convincing evidence, which is hard to do, you just have to prove by preponderance. So that’s sort of a symmetrical and rational and sort of equitable-seeming result, so I suspect they may do that. So it would basically weaken patent law a little bit and make it a little bit easier to defend yourself from patents.
Now, there’s another case where I mentioned Apple has sued Samsung over the Galaxy products, which are like – they look similar to an iPod – or to an iPhone, excuse me. And the interesting thing is Samsung supplies their – I believe their A4 and A5 processors, so they make it so they’re actually suing their own supplier. But my understanding is that Samsung is one of these huge – is it Korean? Huge sort of corporate structure with lots of divisions that are not really related to each other. They buy parts from each other, and they bid it out, stuff like that. So probably Apple sued one division that makes the phones where they can still keep buying their processors from the other division.
And so then Samsung turned around and they have now sued Apple in several countries I believe with ten patent infringement claims of their own. And it’s just going to be a big mess, and first of all, this shows why it’s important unfortunately for companies to acquire an arsenal of patents. If Samsung didn’t have their own patents, they would be defenseless now. They would just have to give in. Now probably what’s going to happen is they will – I suspect they’ll settle because it seems unlikely to me that all of the patents on either side are invalid.
I would assume that there are some patents on each side that have a good chance of holding up in court. And probably if that happens, that would not be acceptable to either target of those patents. So I suspect what they’ll do is they’ll end up settling, so they’ll make a settlement agreement, probably be confidential. We won’t know what happens, and this is another example of how patents help to keep companies larger, help to establish effectively cartels and set up barriers to entry, which I think, Jock, you mentioned in your – something like that in your blog post today. So I mean people wonder why companies are so big and it’s so hard to break into an established industry. It’s largely patents are a reason.
Okay, 8:20, we’re doing all right. Let’s just briefly go over the structure of the course, and if this jogs anyone’s memory, anyone has any questions, again feel free to ask me. So we talked about in this course the history and the origins of IP law and the historical origins of grants of monopoly privilege and mercantilism and favoritism and censorship as well and thought control. We talked about sort of the libertarian Austrian approach to property rights and the functioning of the market, how the purpose of property rights is to help allocate control rights to scarce goods that would otherwise be – you couldn’t use them productively as a means to successful action because you couldn’t be secure in your ownership of it because someone might fight with you over it.
So it’s a way of allowing peaceful, prosperous, cooperative, civilized, productive use of scarce resources but that ideas don’t have the feature of scarcity. And they are not means of action, but they’re more like the general conditions or they are information that guides action. And these things do not need to be owned because they can be used and taught and learned and communicated. And as the body of knowledge in society grows, it benefits everyone. We shouldn’t try to restrict it. It makes no sense to do that.
We talked about the utilitarian case for IP and how there are flaws with the – just the ethical flaws and methodological flaws with this entire approach. And they just simply don’t have any evidence to back up their claims, and all the evidence that we can see from sort of common sense and from studies and attempts to get at this pretty much overwhelmingly supports the idea that patent and copyright harm society on the whole or can’t be proved to help it.
So Jock says on the Adam Smith blog, one of the comments said intellectual property is the foremost property right because you can’t put real property to any good use without intellectual faculties. And of course this is – sounds like the Randian argument. This is pretty much what Mossoff says. And Sheldon Richman and Roderick Long and I have replied to this guy. That blog post is in the slides from last week, slide five, or just go to the C4SIF blog and search for the word Mossoff. You’ll see a kind of summary there.
It’s a weird argument. He says that all property is intellectual property. And as best I can make out, his argument is that you need to use – excuse me – your intellect to homestead things. I mean that makes no sense whatsoever to me. I mean the mind is important, and these IP proponents act like we IP opponents don’t value the mind or intellectual creativity or even labor or work. And of course that’s not true. We just understand its role differently in human action.
And then we talked about the fundamental flaw of the more principled case for IP is that it doesn’t distinguish between the sources of property rights and the sources of wealth. The source of property rights, the origin of property rights is someone having a claim to some scarce resource. We don’t create these resources. We appropriate them from nature, or we acquire them from a previous owner.
So that’s basically the only two ways you can come to own something. You find an unowned thing and you make it yours, or you purchase or get it as a gift from someone who already owned. That’s it. Creation is not a source of wealth. Producing is not – I’m sorry. Creation is not a source of property rights. Producing is not a source of property rights. What – we don’t metaphysically create any object. We transform them. We don’t produce a new object. We produce more valuable configurations of things. We make them more valuable and more serviceable to us or to customers, which means we’ve increased wealth. So that’s the role of creation and labor and intellect is to make your own things more valuable.
Eric has a follow-up question. Continuing Jock’s discussion, do recipes become general conditions when they’re replicated and owned by every individual? I think you could classify them that way or – I think you could. Or you could call them a free good or a non-scarce good. I wouldn’t say they’re owned by every individual, and I think I know what you mean. They’re possessed by every individual or by so many people. It’s generally known. You have possession of the idea sufficient to use it, which means to consult it in your decisions and allow it to guide your action.
So if you want to call that owned, that’s fine, but owned sort of implies that you have a property right in some ownable thing. And I would say that you don’t, that recipes are not ownable things in the first place. And lecture five – I actually saved some of that for tonight, although we’ve kind of touched on most of these points already, integrating IP theory with Austrian economics and libertarian theory. I think pretty much you’ve seen how we do that.
You’ve seen how all these things blend together and how a solid Austrian economics-informed understanding of the nature of means, that is, the nature of scarce resources in the world, gives rise to the need for property. And the structure of human action distinguishes the role of ideas and the role of scarce means in human action. And that has implications for which one has property rights and which one doesn’t. So these things sort of all blend together. Now, there are more concrete implications of this sort of view of things, which we can turn to in a minute, maybe next slide. I forgot.
Let me go ahead. And tonight we’ll also talk about topic six, some proposed reforms, what’s coming, laws that are coming, and how can you deal with the fact that piracy now or with an IP-free world in the future where there would be unlimited piracy but it wouldn’t be considered to be piracy. It would just be free competition—emulation, copying, and competition.
Let’s talk – let’s look at the cartoon first because everyone is going to look at this first. This was – some guy is in a library. He’s looking at book. He says he thinks he’s going to buy it, so he’s reading it. A little bit of time passes, and he says, oops, I read the whole thing, so I’ll just put it back on the shelf and go. So he walks out of the exit of the library or bookstore, and there’s a sensor there which goes off, says beep, beep. Hey, your brain set off a sensor. And he says, I. It says you have a book in there don’t you? And the guy says crap. I mean it shows that if you have copyright, it really would amount to slavery in a sense.
You would have to have the right to own other people’s bodies, their heads, their brains, because it would have content in it. And if they just say, well, we wouldn’t apply copyright laws that way, well, then there’s an artificial, arbitrary distinction that makes no sense. This is what IP advocates do. They will make ad hoc exceptions to the application of their rules when the result would be especially obviously heinous or unjust or ridiculous. So it’s like there’s this thing they’ve created, which has these sharp edges, and they just file the sharp edges down so that it’s less objectionable. But they can keep the censored part that is not as obviously objectionable, although the whole thing is the same principle. So they’re trying to hide the fact that they have a built-in reductio ad absurdum.
Now, I think I’ve touched on this already, but let me just quickly mention this. I did touch on this, but I’ll just – the first point here on slide six: perversity of artificial scarcity of information and knowledge. This is just the perverse idea that the market is always seeking to help us produce in abundance material goods that we need to live and to have good lives. It basically tries to fight scarcity. It deals with the fact of scarcity and tries to create abundance despite the difficulty of doing so because of scarcity.
And luckily we have information, which is already this sort of free good, and IP laws would seek to impose scarcity on that to make it more like the scarce things that the market is trying to make less scarce. We should want these scarce things to become less scarce, and we should want already non-scarce things to stay non-scarce, and that’s a good thing. It’s not a bad thing. So it’s just perverse. You could also think of this analogy. Advocates of IP, they’ll say, well, I’m in favor of property rights, but I’m also in favor of intellectual property rights.
I’m in favor of it all. David Kelley explicitly says this in a little debate with me in 1995. It’s on my website. It’s a letter to IOS. It’s on StephanKinsella.com/publications. It’s somewhere on that page under the IP section. But in any case, he says scarcity is one reason we need to have property rights, but it’s not the only reason. If you create something of value or create a value, then you can own that too. But you can’t just own that too. This is just – this is very similar to the arguments of socialists and lefties who advocate all these positive rights like a right to welfare or a right to a job or a right to social security or a right to healthcare or a right to an education. They just – they say, well, we’re just adding rights, the more rights, the better.
But of course every one of these rights is enforced in terms of the physical world by taking someone else’s physical money or property from them or forcing them to work to support this. So all these rights always come at the expense of real rights in scarce resources, so they can’t have it both ways. They have to choose, and I’m afraid they’re choosing when they say all rights are – all property rights are intellectual property rights. They’re choosing the IP side, and that way madness lies. You have people like Galambos who say that’s the primary property. If they have their way and they would extend property rights on every aspect of every idea, all information, and it was made perpetual, then none of us could move. We would just all die. We would all starve to death. We would strangle the world in a nettle of IP sort of tendrils or something.
An analogy – the Four Freedoms on here I think is Roosevelt’s Four Freedoms, Franklin Roosevelt’s Four Freedoms where he talks about freedom from fear, freedom from want. So these are not freedoms. These are positive rights, which mean positive obligations on the part of your fellow citizens to provide you with this right you have supposedly. It’s similar to inflating the money supply by just printing more dollars. When you inflate the money supply, you dilute the value of existing dollars. Similarly, if you create more rights, you weaken – excuse me – the existing property rights in scarce resources.
All right let’s go on – excuse me – to slide seven. So let’s talk about some implications of this approach for libertarianism and Austrian economics. Oh, there’s a question here from Karl Fielding. Wouldn’t you say that the issue isn’t scarcity of ideas as such but the non-contractual nature of the scarcity? Well, I would say that because ideas are scarce, you actually can – you simply cannot have a property right in ideas. I mean you – if the legislature said someone owns the number four or owns circles, that you actually cannot own these things.
So really it’s a disguised way of declaring ownership of existing real property. So the fact of – the fact that ideas are not scarce means that attempts to protect them really result in transfer of ownership of scarce things. There’s just no other way to do it. I’m not sure what you mean by the non-contractual nature of the scarcity. You say we can contractually limit access to ideas. Yeah, you could contractually limit – well, okay, so one way to contractually limit access to ideas would be to impose some kind of non-copying obligation or even a nondisclosure agreement like a trade secret type relationship on people you deal with like if you sold someone a book.
Theoretically you could have an agreement with them where they agree not to copy it or sell it or disclose it to anyone else, and if they breach that, then they would have to pay you some money. And that’s perfectly fine, although I don’t think people would spend $15 on a book if it’s going to possibly make them liable for a million dollars of damages. They would just go to another book – another author who didn’t have such crazy terms for the same reason that iTunes dropped DRM on its songs a couple years ago, and Amazon did too.
People just don’t want DRM. They also don’t want a million-dollar liability hanging over their head for just a little small book. It’s ridiculous. And Jock has a good point. Why would you read a book if you couldn’t tell someone about it? I mean the purpose of a book presumably is to learn from it, and the purpose of learning is to acquire information that you want to use. And why should you be limited to how you can use it? I mean there’s any number of ways knowledge can be integrated with other knowledge in your head and applied to action. So I just think it’s contrary to the whole purpose. Now, a trade secret is a different matter.
You could have a company that has secret methods and ways of doing things or maybe a list of customers or – and you could impose obligations on the employees to keep this secret. It’s sort of the nature of this company. There’s nothing wrong with privacy in that regard. There’s a limit to it. But the point is, if the information becomes known somehow, like if someone independently invents your technique, they’re free to use it. Or if someone figures out what you’re doing by reverse engineering your products and this information becomes known, again, the knowledge has been acquired by people at large. It can be used. The knowledge itself is not ownable. There is no contract with society at large.
I think monitoring is not only difficult. I think it’s – you have two classes of people, one that’s contractually obligated and one that’s not. So among the second set, they’re free to do what they want with information that they somehow got. And I just think by some kind of competition effect that that second class would grow larger and swamp the first one because people wouldn’t want to be in the first group. So they wouldn’t buy a movie ticket from the movie chain that made me agree to join this contractual regime, this IP regime for life. I mean I just – it’s not worth the $7 ticket or $15 ticket to see a movie to restrict my freedom or obligate me to pay damages in the millions of dollars for the rest of my life. So I think these things are unworkable, these contractual schemes. People want to try them, that’s fine with me.
Now, let’s talk about some of the implications of the view of IP we worked out in the course for Austrian economics. Okay, I do have some links here to sort of what Mises thought about it, what Hayek said about it. Hayek was very skeptical of it. Mises sort of tried to be value-free and not really say. He just said there’s externalities, and if you don’t protect this property, ideas as property, recipes, inventions, then it’s going to be harder to make a profit because you’re going to be competing with people. So you see he sort of glimpsed that it’s really a derogation of the market, but it was an existing type of property right at the time he wrote. So I think he was trying to incorporate it and deal with it.
Now, Rothbard has a view in his “Knowledge, True and False” chapter in The Ethics if Liberty about, for example, reputation rights. And his reasoning there is very good. He basically rejects the idea of reputation rights, and those are enforced by defamation law. That’s libel and slander law. You maybe should remember that too. Defamation is a general thing, this harming someone’s reputation with a falsehood. And the written form is libel, that is, if you do it in a writing. But if you do it orally in speaking with other people, that’s slander.
So slander and libel are the two types of defamation, and as I’ve noticed – as I’ve mentioned in the course here, I regard reputation rights as just another type of IP. Like patent, copyright, trademark, trade secret, reputation rights are one as well because it’s based on the same idea that you created something that has value, and therefore you own it. But as Rothbard points out, what that means is you would have the property right in other people’s heads like in that cartoon a couple slides ago because a reputation is just what other people think about you.
How can you have a right that they think certain things about you? So Rothbard was right here. And if he had applied that same reasoning to the case of patent and copyright, he would have realized that his sort of halting attempt to find some way to justify sort of one narrow type of contractual copyright, that couldn’t work either. We’ll get to that in a minute. Also, this helps you envision three essential aspects of the free market.
So one would be cooperation, people cooperating with each other. Having property rights in scarce resources permits this. And since people have different abilities and different circumstances and different property rights, it would lead to the division and specialization of labor. So there’s cooperation. There’s also competition, which is an aspect of the free market. People compete with each other for customers.
But competition requires and involves emulation and also learning. You have to acquire knowledge. That’s part of human action. That’s part of the goal of human action is to acquire knowledge because it’s useful. It helps to guide action. So this shows the importance – as I’ve mentioned already, it shows the importance of recipes and knowledge as guides to action. So basically it helps clarify how to look at the structure of human action, which is an important concept in praxeology and economics, Austrian economics.
Now, what about libertarianism? Well, as I mentioned, you should view reputation rights as a type of IP. In fact, Jeff Tucker called me last night, and he wanted to know if I agreed with him that money, modern money, could be viewed as a type of IP because the state you can see is cracking down. Well, they already will put you in jail if you counterfeit or copy their money, but even if you try to come up with another kind of money, they’ll penalize you.
So it’s similar to IP in that the state is saying only we can print more of these dollars, but if you print more dollars, we’ll put you in jail for counterfeiting. So they’re claiming like an IP-type copyright or monopoly right to print this pattern that’s similar. So you can see this stuff everywhere, sort of like the little kid in The Sixth Sense where he says – is it called The Sixth Sense? That Bruce Willis movie, the M. Night Shyamalan movie where the little kid says I see dead people everywhere. So sometimes I say I see IP everywhere because it’s just all around us.
Anyway, so – oh interesting, Jock. Jock says Selgin said the money monopoly was the only one excluded from the 1624 Act. Well, and also inventions, right? You’re talking about the Statute of Monopolies? 1623-24? I didn’t remember that he excluded money monopoly, but that’s a good point. I remember it specifically excluded inventions, which is why we still have patents on inventions. It excluded the other types of patents because they were being abused. Maybe you could email me later, Jock, where he said that, where Selgin said that. I’m curious.
But let’s go on here for a second. So I’ve mentioned that a careful understanding of Rothbard’s concept of the title-transfer theory of contract. And you have to work it out this way to understand why the contract idea he wants to use for copyright doesn’t work. Once you clear up all this, then it has implications. I’m probably not going to go into them here too much. This is more general libertarianism, but it does have implications for this debate among libertarians about inalienability, which is basically whether you could sign yourself away into slavery.
Now, if you view contract as a transfer of title to property and not a binding promise, then it’s not an enforceable promise if you agree to perform a service or if you agree to be someone’s slave. But then the question is, well, what about your body? Can you sell your body? And my view is the body is a categorically different type of property thing that you own. It’s a scarce resource, but it’s different than other things that you acquire. I talk about this in my article, “How We Come to Own Ourselves,” which is on my site, but that’s a little bit far afield. It also has implications for debtor’s prison, but let’s skip that here because it’s not too directly relevant to IP.
But I think a clear understanding of IP and a clear understanding of the structure of human action, the nature of contracts and property rights helps clear up these issues is what I’m saying. Let me just quickly go through this slide nine—other implications for libertarianism. Well, as I mentioned already, it clears up the nature of homesteading and distinguishes it from acquisition of wealth, so we’ve talked about this already.
It also shows the danger of metaphors. People are way too sloppy when they say stealing and labor is owned, and mixing your labor. It shows the importance of keeping in mind the fundamental rights and their consequences. So if you have the right to control – if you have the right to your body and to homestead property, that leads to the practical ability to, say, print a book, which is called freedom of speech, freedom of the press or to move your mouth and say things to other people, to communicate. That’s called freedom of speech, but these are not independent rights. They’re just consequences of owning your body.
And if you call it an independent right, then you’re sort of double counting, and it can lead to confusion as it does in Locke’s understanding of his homesteading argument where he says we own ourselves. Therefore, we own our labor. Therefore, we own things we mix it with. And this leads to this creationist view that, well, therefore, you own anything you mix your labor with when you create something of value or valuable.
And so you un-anchor the idea of what you’re owning from the idea that property rights have to do with the need to solve – will help avoid conflict over things that are conflictable, which means things that are scarce. And they just start saying that you own the product of your actions. Well, what’s a product? That’s a vague term. It’s almost metaphorical, and it’s used in an equivocating way because if you mean by product I shape this piece of metal into a sword and that’s the product, okay, I own it. But I already owned the metal, so you’re double counting again, and this double counting leads you to count the creation of a poem as a separately ownable thing. So we have to be careful about metaphors and about double counting in rights.
Slide ten. I’ve already gone over this. You can read these quotes later, but Rothbard, Rand, Mises, Hoppe, they all are explicit, and they recognize, even Rand. They recognize that we create wealth by rearranging things that we own already, and we don’t create property. We don’t create things. We rearrange them. We transform them.
Okay, slide 11. Here’s a Mises quote, Mises saying the same thing. Look at the last sentence. “No human act of production amounts to more than altering the position of things in space and leaving the rest to nature.” You see, this is perfectly compatible with this view I’m laying out here of the significance of the structure of human action and the different roles that ideas play and scarce resources play. So he’s talking about things in space and altering them. Altering is using physical means, manipulating physical things in space, this three-dimensional space. This is the real world.
Leaving the rest to nature, that means relying upon causal laws, and your knowledge of them is what guides your actions to do that. So he’s presupposing that you must own the things already, so production is not what creates property rights. That’s an important point
Jock says Georgists also say you don’t mix labor with land; you expend it on it. I’d be curious to see the context. That’s interesting, Jock. If you couldn’t mind, maybe you could send me something and see if it’s kind of compatible with this, what implications it has. I’d be curious to look at it.
Okay, can anyone remind me? Have we talked in detail yet about exactly what Rothbard’s argument is for contractual copyright with the mousetrap example? I think we did. I don’t know if I need to go over it in a lot of detail here. But basically let me just summarize. He’s good on patents. He’s good on state copyright. He’s good on contract theory. But he kind of had this idea that you could use some – he called something common law copyright.
There’s no such thing as common law copyright anymore, and that’s not what he’s talking about anyway, so I don’t know what he means. I think he means just some kind of common law right to contract, and so he thinks that if A sells B a mousetrap but tells him you don’t have the right to copy this, that’s really a contractual restriction. But Rothbard used it as a bundle of rights. He sort of used this mousetrap as sort of having – the way I picture it is this.
He thinks of a mousetrap, and there’s a little compartment in it which has the right to copy. But the owner opened that compartment, took out the right to copy, and held onto it, and then sold the mousetrap to someone minus the right to copy. If you want to use that weird metaphorical, almost mystical idea to visualize why the buyer is contractually bound to not copy it, okay, fine. But then he says if a third person I guess sees the mousetrap and learns how to make it, then he can’t make it either because he can’t get any right from the buyer that the buyer didn’t have.
So he’s using the idea in property law that when you sell something, it’s encumbered by, if it’s owned by someone else, you can’t transfer rights that you don’t have. But the problem is this third party doesn’t need any rights to be transferred from the buyer to be able to use information he has to make his own mousetrap. It just doesn’t make any sense. The only way to say that would be to presuppose that knowledge is part of the bundle of rights and is separately ownable. But if that’s true, then patent and copyright are justified because that’s what they’re based upon, the idea that knowledge is an ownable thing.
So – but that would be circular and question-begging if nothing else because you can’t presuppose knowledge is ownable. And the attempt to prove a certain type of copyright would be justified because that’s just – if knowledge is ownable, then copyright is justified. So he accidentally I believe suddenly snuck in the implicit assumption that knowledge is ownable in his argument, which is a mistake. He wasn’t trying to prove that copyright and patent are valid. He just thought you could use your contract in a creative way. And I think his only mistake was in assuming that it could be extended to third parties, and I think it clearly cannot be, and I think that’s clearly implied by the rest of Rothbard’s social theory and economic theory.
Briefly, in my Against Intellectual Property, there’s a section – I’m sorry. It’s not. It’s another article, “Reply to Van Dun,” and it’s linked here. We’re on slide 13. Frank Van Dun, who’s a great guy, but he’s a friend of mine. He’s a great libertarian legal thinker. But he’s European, and he’s very mired in sort of conventional legal rules that have grown up into positive law. And he’s very reluctant to get rid of some of those. I think he’s for blackmail law, and he’s for trademark law. And he had some objections saying that – you can read this later, but he had some objections saying that my narrow defense of one type of trademark, which was that it’s fraudulent, I couldn’t even defend that based on my theories because there’s no right to identity or no right to names.
So when someone defrauds the customer by pretending to be a competing seller, like in this case, if this guy named Lockman sells a Rothbard Burger and calls it a Rothbard Burger, I mean he’s free to say what he wants, right? That’s Frank’s argument, Frank Van Dun. But as I responded, I think his argument doesn’t follow. I mean what it basically amounts to, his argument – his argument basically amounts to the claim that without intellectual property rights or without trademark, you can’t communicate.
That is, humans can’t communicate, which is obviously false. I mean so clearly a customer wanting a Rothbard Burger, that has a certain meaning. And he could find a way to communicate that with the Lockman Burger guy, and if he has to, he could say, are you the Rothbard Burger that was started in 1951 on this address, on Mulberry Drive? And I mean you could specify it if you had to, but we don’t need to because there’s context in communication.
I mean look. Some people have the same names, right? There’s probably several Tom Cruises out there in the world. And people manage to distinguish them from each other even though they have the same name. And there’s no law saying that everyone has to have a different name, so anyway, I think that’s a bad, fallacious criticism.
Okay, why don’t we – now we get to the final meat of the lecture, the final topic. We’ll talk about proposed reforms, coming laws, and some other ideas about how we could expect people to respond to an IP-free world. So why don’t we just – it’s 8:54 my time. Let’s take a break until the top of the hour, five-six minutes. And we will pick it up there, and if anyone wants to type any questions in, I could address them when I get back.
I know Hoppe pretty well. He’s actually not that personally socially conservative. I mean his PFS meetings in Bodrum, which I’m going to next month by the way, Property and Freedom Society meetings, full of a pretty diverse cast of characters. In any case, let me ask one other question here. So far from what we’ve presented in the course, is there anyone here who sort of has serious disagreements about any of the key points here? I mean I don’t mean minor things or emphasis or little things. So is there anyone here who has – and I’m not trying to argue. I’m just curious. I know, Gwen, you do. Anyone else, or are most people here pretty anti-IP given this presentation or given your pre-existing views?
Webex hasn’t crashed a single time yet. I don’t know why the video is so jerky. That does bug me. I wish that was better. Good man. Okay, well, let’s – yeah, I mean I almost feel like I’m sometimes too much on IP. At first I resisted being Mr. IP, but it’s got so many tie-ins to other things and it’s such a growing important issue. I just can’t resist talking about this stuff, and it is an increasingly important thing. I’ve got friends who think it’s going to be one of the single-worse things the government does, and they can use this to excuse a lot of things they do. But let’s go on to talk about some coming reforms. I have a lot of these here.
So these are reforms I think we should make. I think we should make, and you can click on this article of mine—I’m on slide 14 now—“Reducing the Cost of IP Law,” for a more elaborate explanation of these changes. I’m not going to go through all these here because they’re sort of detailed and technical, and we’re just talking about changing the legislation. Now, I would like to abolish it but let’s say we can’t abolish it. What kind of reforms would be significant improvements?
And the top two or three or four there are the big ones, maybe the first five. We should reduce the term, first and foremost, from 17 years to five years or seven years. That would be a huge improvement in patent law because patents would disappear more quickly and any competitive effect would be weeded out more quickly. I mean when you see a patent that your company might infringe, even though you didn’t copy the idea from this competitor or this patentee and it lasts for 12 more years, you’re like, well, what am I going to do? I have to wait 12 years frickin’ years to do this? It’s ridiculous.
Patent injunctions should be removed, and that would mean that the patentee could only ask for royalties, just say you’ve got to pay me some money, but you can keep competing with me. So it would act like a tax, but at least it would be better than actually getting shut down. And let’s go to the fifth one. A big improvement would be if you provide a prior use and an independent inventor defense. These are slightly different things. Prior use would be – well, prior use is necessarily independent inventor because if you were using it before someone else later reinvents and patents it, then you independently invented or someone else did.
An independent inventor defense would be if someone later invents it but they do it without copying, so basically it would import a copying requirement into patent law similar to what’s in copyright law. And one reason I think that reform could have some legs would be, as I said, most people are under the mistaken assumption that when someone infringes a patent, they’re ripping off or stealing from or copying the ideas of the patentee, which is just not true. It doesn’t have to be alleged, and it’s usually not true. But if people think that patent law is justified because that’s how they envision it, well, then let’s make patent law require that. Of course, that would be fought tooth and nail by the patent bar.
Now, there is a pending patent reform act. It’s called the America Invents Act. And it’s been threatened – something like that has been threatened for 10-15 years, and it’s all – it’s never passed, but I think it might pass this year because Obama and the Democrats and Republicans are kind of all together on this. But I want to say that not a single thing – and I’ve blogged on this too. If you go to C4SIF.org, search for America Invent Act I think, and I think it’s Senator Leahy. Anyway, not a single reform in there is a major reform anywhere on the level of the ones I’ve got proposed here, not a single one. They’re all pretty minor or arbitrary changes. So these are reforms I would like. None of them are coming.
Copyrights – again, reduce the term. Make it 10 years or 14 years like it used to be instead of 70 – life plus 70. It’s ridiculous. Take software out. Software is functional. It’s not expressive. I’m talking about the code. Software code is not artistic. It shouldn’t be considered to be an artistic work, and it wasn’t at one point. Ethan, I’ll answer your question in just a second.
Also, a big improvement would be requiring active registration. That is, instead of having copyright be automatic, make someone apply for it, pay a little fee, and then re-register it every 10 years until they have no right to do it anymore. That would solve the problem of orphan works. Okay, I’ll skip the rest of these too because you can read these yourself.
Ethan asks, can something valid resembling an IP rights claim exist when it comes about from a genuine rights violation; someone breaks in and steals my invention diagram or something? Well, I mean code could be artistic, but it’s also functional, and it’s protected by patent already, or it could be. So you don’t want to have – these laws are not supposed to overlap. I’m not trying to denigrate coding, but it’s not done to be read by someone like a book is or to be viewed. It’s got a functional purpose and utilitarian purpose.
But I want to be clear I’m not denigrating software. I just don’t think it’s appropriate to be covered by copyright, and it used to not be is the point. It’s a fairly recent idea. I mean the court had to make that decision at one point, and they can un-make it. But I think that it wouldn’t be an IP rights claim, but I know what you’re asking, Ethan. So here’s what I believe. This is more of a libertarian question, but – so let’s say someone breaks into your house.
And when they do that, they access information they otherwise wouldn’t have, private information. It doesn’t have to be the manuscript to a novel. It could just be some – it could be a fact about you. Maybe it’s the fact that you’ve been married three times and no one knows this, some embarrassing social fact, maybe that you have a mole on your left underarm. I don’t know. They learn some fact about you or some fact they wouldn’t have otherwise known.
Now the way I view that is property is still – information like that I still not ownable, but this guy committed an act of trespass, and he’s harmed you and he can be punished, or you can seek restitution or something. There’s some kind of legal remedy against this guy, and the extent of the damages he has caused you can be taken into account based upon his leaking information that the world wouldn’t have known. Now, that doesn’t mean the world can’t use this information.
So if someone is secretly – I don’t know, secretly a UFO nut, and they never tell anyone because it would be embarrassing and some trespasser breaks in and figures out that you’re a UFO nut and runs off and tells a newspaper reporter, and the newspaper reporter reports this and soon the whole world knows, well, I mean I think that the trespasser – let’s say you have a role in a movie coming up that you’re going to make $20 million and now you lose the role because you’re a laughingstock because you’re a UFO nut.
Well, I think that the $20 million you lost – it’s owed to you by the trespasser. Of course he’s not going to have it because most of these trespassers are low-lives. But still, theoretically he owes you that. The extent of damages is measured by that. But did the movie producer or the movie production company violate your rights by not hiring you, by acting on the knowledge? I don’t think so because the knowledge is not owned, and people that have it who didn’t commit a tort are free to use it as they want.
Donald says what should happen or will happen to software licensing if software is removed from copyright coverage? This kind of goes to the third topic of this lecture, but let’s go ahead and talk about it now. I don’t understand your question about threat. Maybe you can reword it if you want me to address it.
But anyway – well, I don’t know what software companies would do. I think that you’d have a lot of companies would be paid to design custom software for companies that need it to be done to be a service. Maybe they would give away their little stuff for free, just like we have now. There’s light versions of apps and programs that are free. And if you want the full thing, you would unlock it. I think that you would have a lot of – the really high-level stuff would be so customized, and it would need so much support from the company that you’d just make a deal with the customer and you have a contract, a support contract. I think you’d have what you have now. You’d have a lot of these software programs.
They routinely check over the internet to make sure they’re a licensed copy, or there’s so many updates issued all the time you’d have to prove you’re a legitimate customer to get the update on the service support. There would be enough customers who would pay you a fee that you could make a profit. Would there be some pirating? Maybe. I mean there is now already – there’s already pirating of movies and music and software. And so companies that make these things now deal with this fact already, and they just have to find enough customers to buy it to make a profit.
Jock says on software you had an interesting discussion with someone after the Adam Smith blog post. He said the FOSS people would not like to lose a copyright since they couldn’t enforce a GPL-type license. Yeah, I go back and forth on that. I mean one thing I don’t like about copyleft and share-alike and GPL-type licenses is they sort of worm their way into things, and they actually restrict the use of things. And they’re based on copyright, and you couldn’t have a license without copyright in that sense. But you wouldn’t need one. I mean the purpose of GPL and share-alike is I think to require people to not encumber the work or derivative works based upon it with more restrictive copyright.
But in a copyright-free world, they couldn’t anyway, so I don’t know. Jock says the incentives of having others fix code and so on would probably balance out. I think so. I think it would. I think certainly the industry would change, but that’s just a sign that the industry is distorted now. We talked last class about all the ways that IP distorts the market and the industry and the fashion industry. But to think it would remain the same is false, but it shouldn’t remain the same. So it’s hard to predict exactly, but I think a variety of measures like that.
Trademark – we should, number one, make it harder to prove consumer confusion. It should have to really be something that can defraud. We should get rid of antidilution protection. And I think we should actually abolish the federal law in the US, which is called the Lanham Act, and let the states handle it like they do now and like they used to because it’s unconstitutional.
Now, some reforms that are coming up, let’s talk about those. I actually should have updated the bottom of this slide 17. I have a more recent post about the America Invent Act somewhere on the page. This is from last year, the bottom thing. So about a year ago or six months ago, it was announced that the UK copyright laws are going to be reviewed. But again, they’re only going to be reformed to a minor degree. There are several court cases pending in the CAFC or the Supreme Court, and it’s possible they’re going to move in a better direction, slightly weakening IP protection. But none of this stuff is radical or major. This one here is this exact thing I talked about earlier, the Microsoft v. i4i case.
This is the thing about lowering the threshold to invalidate a patent. They might do that. I hope they do. That would probably be the most significant change, but it’s still not that great. It won’t stop all the abuses and all the problems of patents. It won’t stop the cartelization I talked about. It won’t stop the barriers to entry. It won’t stop the waste. It won’t stop the lawsuits.
In trademark, I think there was an upcoming case. This might have been decided already—I need to look into this—about whether eBay, which was selling jewelry, whether it’s their responsibility to make sure that what an independent seller on eBay is selling is counterfeit or not. But there have been some bad results too, some extremely crazy, mostly copyright because copyright statute is insane.
I don’t know if you guys saw this. I don’t know if I have a blog post on here about it. There was a lawsuit or a threatened lawsuit against one of these kind of defunct Napster-like companies. And the Recording Industry Association or whoever the plaintiff was claimed something like $75 trillion in damages. And they’re probably correct because they just added up all these offenses and multiplied it by the statutory damages, which is insane. I mean it’s thousands of dollars – LimeWire, exactly. So some of them were going the wrong directions.
The ACTA, the Anti-Counterfeiting Trade Agreement that I mentioned earlier, did get improved largely because Michael Geist, a copyright – I’m sorry, a law professor, IP law professor in Canada – actually I’m not sure if he’s an IP. He’s a law professor. I don’t know what his specialty is. But anyway, he blogs a lot about IP. And he – someone leaked to him the text of a current draft of the ACTA treaty, and he leaked it on his site.
And so because of all the storm that caused, some of the more egregious provisions were removed. So if it passes, which I suspect it still will, it will still be bad, but it won’t be as bad as it could have been, and this was – again, this last post here. It’s possible, but you can see there’s an – Jock says we can campaign for countries not to ratify it, and that might be worth doing because we might have a chance actually. There’s almost no chance to get them to repeal existing IP laws anymore than they repeal welfare programs. But when they’re being proposed and there’s all this sort of mixed feeling about freedom on the internet and everything, maybe we can get it stopped. I don’t know.
The bottom post just talks about the pending patent reform, but I have a more recent one on my site about the America Invents Act and what that’s going to do. And I kind of went through all the provisions, and I mentioned whether they’re good or bad, but they’re all minor except for some of the bad ones are not that minor. So some of the reforms that are coming, the ACTA like I mentioned. COICA, that’s a US federal law, counterfeiting – I forgot what it stands for, but it’s going to be horrible.
Canada is talking about having a new copyright bill with a DRM clause, digital rights management clause, similar to what the US has in the DMCA, the thing that outlaws DRM-circumvention technology. There’s also, as I mentioned, always agitation to add IP protection to areas that are currently not covered like bartenders’ recipes or food recipes or fashion designs. I’m afraid that fashion thing might pass. I mean you get these lobbyists from these industries, and they come in and they just bribe some congressman to get it done. It’s horrible. Once it gets done, it gets entrenched like the vessel-hole design thing we talked about earlier.
Okay, now we talked about some of this already: innovation in a post-IP world, and for the people that are concerned about this, like Gwen and others, I would – so just look at some of these posts. They have a lot of examples and discussion about how creative people can be, but as a general matter, I want to say that unless you’re a complete utilitarian or consequentialist, the primary thing in my view is to have a principled libertarian perspective on individual rights and property rights.
And just like Ayn Rand argued I think well or maybe it was Greenspan when he was still good, the primary defense or the primary opposition, for example, to antitrust law is that companies have a right or individuals have a right to collude with each other. They have a right to get together and try to set prices. They have a right to price discriminate. Companies have a right to be a monopoly if they can do it in the market. So the primary opposition to antitrust law is not the economic argument that, well, you don’t really need it because it’s unlikely, etc.
That’s a bolstering argument. It’s a secondary argument. It helps to explain, but the primary argument has to be principled, same with IP I believe. I mean IP clearly couldn’t exist without legislation, at least patent and copyright couldn’t. It couldn’t exist without the state. Clearly it interferes with people’s liberties and freedoms to use their bodies and to use their property. It clearly interferes with the process of learning and the process of competition. They are explicitly anti-competitive.
That’s the purpose is to reduce the competition faced by the monopoly owner. They’re clearly monopolies granted by the state. And they clearly, in practice, have an increasing number of egregious abuses and outrageous results even if you’re in favor of the idea in principle in theory. In practice, it’s going to be horrible, so the prima facie case is against it, and you also have to view the role of the entrepreneur as it’s his job to figure out how to make a profit.
I mean there’s always going to be a combination of useful products that you sell that are useful because of their configuration and ones that have more to do with the information or pattern in them where it’s a little bit harder to make a profit on them. There’s always going to be a free-rider issue for some types of businesses. There’s always the problem of excluding these free riders or excluding others. I mean this is the cost of doing business. A movie theater – why do they have to put locks on their doors?
Why do – because they want to sell seats in there, and if they just leave the doors open, people will just wander in and watch the movie for free, and they wouldn’t pay them. So they find a way to exclude people who are not paying so they can make a profit off the ones that are willing to pay, and this is costly. There is a cost of exclusion. This is what every entrepreneur faces. Every human faces this.
We extend cost on protecting ourselves, etc. that we wouldn’t have to do if we could just trust everyone to do what we wanted them to do. But they don’t always because they have different interests than us. When it comes to intellectual creativity, there’s just an infinite number of ways and reasons people engage in it. Some can be monetarily profitable, some not, some more so than others. This is the way life is and always will be. Even in today’s IP world, there are areas of intellectual innovation, which are not protected by IP law, and people still do them, or maybe they don’t do them as much as they would, but that’s just the consequence of the fact that knowledge is infinitely transmissible and duplicable. It’s learnable. So sometimes you can’t make a profit off of coming up with an idea.
If you can’t think of a way to do it, don’t do it. But there’s all kinds of bundling things you can do. There’s selling of services. There’s reputation effects. There are any number of ways that – we already see some of them emerging. Artists, musicians – it works well for musicians. They might give away their songs because they want to get a following.
Authors may give their first book away and get a fan base, and then they don’t sell their second book until they get a subscription of 100,000 people. Or maybe you sell your book for $3 on Amazon Kindle, and people buy it because it’s not worth it to pirate it. It’s cheap enough to do it, and you can still make enough money to make a living. Maybe it builds up your reputation so you can use it to get a job as a consultant or as an employee with someone. You show someone your portfolio of paintings and they hire you to paint a portrait of their daughter. People are going to have to figure this out. It’s fundamentally the entrepreneur’s job.
This is just some examples. I mean people blog on blogs almost all of them do it for free. Some get a little advertising, but that’s an example of how you can make some money. You get advertising. You draw eyeballs, and advertisers will pay to be in front of those eyeballs. Scholars write articles all the time for no money because it helps their career. It helps their employment prospects, helps them network, helps them get a reputation, etc. Why do people come up with dance routines and choreography? Because they can put on a show that other people might want to come see.
But that’s not copyrighted either. People do it because it makes sense at the time, and if it adds a little bit of culture to the world that others can build on and learn from later, that’s a good thing, not a bad thing. Why do people write open-source software? Why do they contribute to Wikipedia articles? I mean Wikipedia is putting Encyclopedia Britannica and World Book out of business I believe. Why do physicists investigate the causal laws of nature? Why do mathematicians come up with algorithms and proofs?
Why do perfume companies make and sell perfume when they can be knocked off and they are knocked off? I mean what would you rather give to your girlfriend on Valentine’s Day? A nice Chanel perfume or a $5 one from the drugstore that smells just like Chanel and says it smells like Chanel, what would you rather give her? I mean there’s a reason people are going to pay for these things. Why do fashion designers come up with new clothing designs, and why do chefs come up with new recipes all the time?
I’m asking these questions because this is what you should be asking if you’re wondering how people would possibly write software or make videogames or write novels or paint paintings or come up with inventions if you don’t have a state-granted monopoly because there are so many aspects of life where this goes on already without the state granting monopolies. So just ask yourself why people do this because it’s obvious that they do, and just try to think about, well, why do they do it? And some of the same reasons would apply to these other areas of innovation and creativity.
So I mean one of the most famous recognized works of literary – literature in human history are Shakespeare’s plays, all of which I understand were basically retreads of existing plots known to people. But he didn’t have copyright either. Would he have written more plays if he had a copyright? Or maybe he would have written only half because he could have relied upon royalties. Classical music was before copyright.
Jock said something about Islam says inventions are from Allah and not available, and therefore should be available for all. Someone asked about the status of IP in Muslim countries, and I didn’t know the answer. I’d be curious. I think they do have modern patent laws, so I’d be curious what your source for that is or if you could send me something. I’m curious to see that. In any case, why did publishing flourish under Germany when they had no copyright law more than in England which had copyright law? I mean these are case studies. You have to look at these things. You’ll see how people adapt in a freer society.
Yeah, there’s more competition, but that’s not necessarily bad. The Grateful Dead – they allowed bootlegging. It doesn’t hurt them. You can have ads for some types of activities. TV shows have always broadcast for free. Newspapers, they so far have been free on the internet because of ads. I’ve already mentioned some of these things. There’s reputation effects. There’s networking. There’s gratification. There’s ads. Singers – this could be advertising for concerts. For the novelist, I’ve already mentioned this.
One other idea I had, I don’t know how realistic it is. It’s just one idea I had, and I wouldn’t be surprised if some novelist would try this. Let’s suppose you’re a novelist, and there’s no copyright. So that means someone can make a movie based upon your novel. You can’t stop them, but if they want to make an authorized version of the movie, then they have to get your permission to say it’s authorized because it’s just – it’s fraudulent otherwise. So you could sell your authorization. Or they might hire you to be a consultant, and then they could say in their advertising Atlas Shrugged, the Authorized Version, produced in consultation with Ayn Rand. And they might pay her a million dollars because they will sell that many more tickets, more so than Atlas Shrugged versions 2 and 3, which are being made down the street by knockoff artists.
So I think there’s all kinds of ways you could profit from, say, a novel. Inventions certainly, I have no doubt. I mean I’m in the technical industry. There’s first-mover advantage. There’s reputation and goodwill. I mean why do Tylenol and Black & Decker and other well-known brands sell more than generic versions of the same thing, maybe twice as much sometimes? For individuals, it could help you get a job, help you learn, help your reputation.
Eric says I’m somewhat sympathetic to pharmaceutical IP, but isn’t the bigger problem with the FDA forcing them to make their products public knowledge? Well, I think the big problem is the FDA imposing costs on them, which then they feel the need to recoup by charging a monopoly price. But if you actually read the chapter on pharmaceutical IP, I agree that that sort of intuitively seems like the strongest empirical case for IP, for patents. But if you actually read the chapter on pharmaceutical patents in the Boldrin and Levine book, they empirically explode almost every myth about this. I mean it looks like it’s actually just a complete myth. It is not true that patents are necessary for the pharmaceutical industry to make a profit. It’s just simply not true. I mean you could say it seems like it, but it’s – the evidence shows that it’s not.
Anyway, I’ve already talked about some of these other ideas on page 22. Nina Paley, who’s a friend of mine and an anti-IP artist, she had the idea – and Karl Fogel – of the Creator-Endorsed Mark. In fact, one of my books has already been published with that. There was a translation in Italian of my Against IP, which came out just a couple months ago, which has the – let me see if I can get it, which has the Creator-Endorsed Mark on it. And the idea – this is the book. And if you – well, you won’t be able to see it. It’s very small.
But right here, you can see the Creator-Endorsed Mark is one of those marks. Now, the idea – I asked them to do that. So the idea is that fans of a given author or artist would be more willing to buy from one that’s officially endorsed by the artist both because they think some of the proceeds are going to the artist because they’re more trusting that it’s the most recent one or the authorized version or whatever.
Movie theaters can still sell tickets even in the face of downloaded movies and DVDs. They can innovate and add things like 3D or better experiences that are not possible in other environments. I mean of course movies are still popular all these years. They’ve been whining about it for years. By the way, we’re a little bit over now. I’m about to wrap it up because – I’m willing to stay later, but I know a lot of people get tired after 90 minutes.
And take a look at this Kickstarter idea too. It’s a way to fund ideas. It’s like you get people to commit ahead of time. You can do the same thing, subscriptions to novels and things like that to release your next novel. So there’s lots of ways to profit off of your ideas. Oh, these are other versions, other things similar to Kickstarter, IndieGoGo, which lets projects be funded like low-budget documentaries and quirky social project development. The micropledging service, The Point, which I’m thinking about using for something myself, lets people pledge.
And so actually I need to update this. So Bob Murphy, who’s an Austrian, has challenged Paul Krugman to a debate and is trying to get $100,000 pledged to shame Krugman into debating him, $100,000 that could go to some charity. I’ve pledged too. I’m hoping it comes through.
Anyway, we are done. I finished it on time, so I’m pretty happy about that. I am happy to answer any questions, whatever anybody wants. We can sign off if everybody is tired and ready to go. The final exam will be up soon. Don’t feel compelled to take it, but don’t be afraid to take it either. It doesn’t matter how you do. It’s fun and kind of going to remind you of some of the things in the course.
So any final comments or questions? Thank you guys. I enjoyed it too. And thank you, Gwen, for tolerating some heretical-sounding ideas. And if there’s any questions that occur to anyone now or people that are listening on the recorded lecture, feel free to post them in the questions forum. I’ll be happy to address them in writing. I guess we’ll sign off now, but I enjoyed the course a lot. Thank you all for being a good class. I kind of enjoyed the smaller, intimate class here. Thanks Donald. Thanks everybody.