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KOL238 | Libertopia 2012 IP Panel with Charles Johnson and Butler Shaffer

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Kinsella on Liberty Podcast, Episode 238.

At Libertopia Oct. 12, 2012, I participated in an hour-long IP panel with Charles Johnson, moderated by Butler Shaffer.

Transcript below.

For my other presentation, and for more details, see KOL236 | Intellectual Nonsense: Fallacious Arguments for IP (Libertopia 2012).

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Libertopia 2012 IP Panel

Stephan Kinsella, Charles Johnson, and Butler Shaffer

Oct. 12, 2012

Transcript

00:00:00

M: Butler, Shaffer with his Gandalf stick [indiscernible_00:00:03], the great Stephan Kinsella [indiscernible_00:00:10] is he up?  Jeffy Jeff, Jeffy B.

00:00:15

STEPHAN KINSELLA: No.  Charles Johnson.

00:00:17

M: Charles?  Check.

00:00:19

M: Charles.

00:00:21

M: Charles Johnson [indiscernible_00:00:24] so if you guys want to have a seat.  Our general format is, as you imagine, rules free.  So it just – I’ll make statements and take your turns as you see fit.

00:00:36

STEPHAN KINSELLA: I think we need a third chair.

00:00:38

M: Did you want to – are we just going to use the podium?

00:00:41

M: Oh, I see.

00:00:42

M: We can bring out three chairs if you’d like.

00:00:43

M: I think three chairs is – that’s what we did yesterday.  I think everyone sat down, and remember the first three rows must heckle.  That is the rule.  You must heckle and, in fact, under your seat a bucket of fruit, fairly old, and [indiscernible_00:00:59].  You can skip them.

00:01:02

00:01:12

STEPHAN KINSELLA: Sorry.

00:01:13

M: No problem.  It just comes with the territory.

00:01:16

00:01:28

M: All right, Mr. Butler, if you’d like to take it away I will have a seat [indiscernible_00:01:32]

00:01:34

BUTLER SHAFFER: Are we all set?

00:01:35

STEPHAN KINSELLA: We’re set.

00:01:36

BUTLER SHAFFER: Is this all turned on?  I assume.  All right.  Our panel has to do with the personal significance of intellectual property [indiscernible_00:01:53] faces out there [indiscernible_00:01:57].  I’m doing the moderating I guess, and leave it up to these two fine people to do all the substantive stuff.  I would like to at least start this off with one question in which maybe we can get some responses to get this one thing started [indiscernible_00:02:29].  And that has to do with whether or not, in a state-less society, would we have patents or copyrights.  And be careful how you answer that question.  I don’t know if it’s either a yes-or-no answer [indiscernible_00:02:47].  What do you think?

00:02:51

STEPHAN KINSELLA: Charles, do you want to start since I had a shot at this yesterday?

00:02:54

CHARLES JOHNSON: Sure.  So my position is no, there’s not going to be copyright or patent protections that look anything like the bundle of legal protections that go along with those today.

00:03:06

00:03:09

STEPHAN KINSELLA: Of course I agree.  I actually think there wouldn’t be trademark, trade secret, or any other type of IP as well.

00:03:16

BUTLER SHAFFER: We’re set.  Why don’t we go home?

00:03:19

[laughter]

00:03:23

BUTLER SHAFFER: The reason I ask that and the reason I ask it in the form of a question for which yes or no might not be a complete answer is here we see a problem with copyright or patent arising out of contract between two parties.

00:03:43

CHARLES JOHNSON: Well, so the first thing I’d want to do here is draw a line for a moment between copyrights and patents when it comes to potential trying to kluge around through a contractual mechanism.  In the case of patents, of course, you have – discoveries are held to be patentable and the monopoly enforceable against other discoverers even if there’s no prior relationship whatever.  So if you have independent discoveries, the patent is still held to give a monopoly privilege to the initial discoverer.  And it seems that there’s – it’s not only that people would be unlikely to come up with contracts to try and recreate this sort of thing, but there’s no possible contract you could come up with because it’s perfectly possible for people to produce the innovation without having contact.

00:04:39

Now, I think it’s true that if you buy a manuscript for someone, say, you’re perfectly entitled to sign a contract with them that restricts your right to copy what you bought, sort of property can be entailed under contractual obligations.  But again, that’s not going to look much – in practice that’s not going to look much of anything like the bundle of privileges that goes along with existing copyrights because the contracts that you sign are binding on you and not on third parties.  And so there’s not going to be sort of an independent right to the idea that you can assert against anyone who happens to get their hands on it or who happens to be distributing it unless you can point to the specific contract that they signed with the original seller.

00:05:40

STEPHAN KINSELLA: I agree completely with that.  Some might say you could have a clickwrap agreement.  But I’m even skeptical of the validity of those types of agreements because they often contain fine print that people don’t read, and the seller knows they’re not being read.  So I would even be hesitant to say that that’s evidence of the terms of the actual contract.

00:06:03

Further, I think that it’s unlikely anyone would sign such a contract.  To buy a $12 book, you’re potentially obligating yourself to pay millions of dollars of damages if you use the information you learn from the book in the wrong way.  And it’s just not worth the risk to most people.  So almost no one would sign these books.  You would go on to the next publisher that had more reasonable terms, and if the terms are a very small amount of penalty, then it’s not going to have any kind of disincentive effect anyway on people breaching the contract.  They’ll just make a copy and pay their $20 fine, and they don’t care.

00:06:35

Now, that said, I would say that I think that, in a free market, there would be more scope for cartel-like arrangements to arise that could have some kind of dampening effect on types of piracy.  For example, in the fashion industry, there used to be like a guild or cartel system where they would police themselves, and anyone who was knocking off new designs was ostracized and shunned.  But then if I recall, this was shut down by the federal government under violation of anti-trust law.  So of course that law wouldn’t exist in a free society, so companies would have more flexibility to try to enter into arrangements to try to deal with this sort of free rider problem and knockoff problem.

00:07:19

BUTLER SHAFFER: I was thinking that the old common law [indiscernible_00:07:23] not just the old common law, the common law system.  There was something called a common law copyright, and what this meant was that if I write what I consider a great American novel or a great American piece of poetry or whatever and put it in my desk drawer and you come along and discover that and you run off with it and publish it, the common law [indiscernible_00:07:52] action [indiscernible_00:07:55] violation of a common law copyright.

00:07:59

But that common law copyright ended at the point at which I took what I had written and published it.  But the common law published does not mean [indiscernible_00:08:12] confused there [indiscernible_00:08:13].  To publish something means you send it to someone who sets up in typeface and prints copies of it and distributes it.  But to publish something in order to make it public, and once I had done that, I had lost my ownership [indiscernible_00:08:33] common law primarily because of the failure to satisfy one of the essential elements of property ownership.  And that is control.  How can I own something if I no longer control it, if I have put that out into the market, out into the world so to speak?

00:08:58

In what way can it be said that I’m still the owner of it, use it as sort of an analogy, the idea of some way enabled to put oxygen into a canister?  And as long as the oxygen is in the canister, you would say they own it.  They own the oxygen.  If somebody else comes along and wants to take a whiff of that oxygen, I would sell it to them, $0.50 a whiff or whatever.  But suppose the valve leaks on my canister of oxygen and some of my oxygen gets out into the atmosphere, and you run up and you notice that and you take a strong breath and you breathe in some of my oxygen.  Do you owe me any money for that?  What do you think?

00:09:45

STEPHAN KINSELLA: The common law copyright, which I believe has been superseded by the copyright act.

00:09:52

BUTLER SHAFFER: [indiscernible_00:09:52]

00:09:54

STEPHAN KINSELLA: It’s really similar to trade secret laws.  Under trade secret law, the idea is that if you diligently work to keep private information private, that gives you a competitive advantage over your customers so long as they don’t have the information.  Then if one of your employees, let’s say, leaves and is telling this secret to a competitor or threatening to reveal it to a newspaper, then the employer can run to the courts, get an injunction against the leaking employee and the third parties who have learned about it so long as it’s not generally public yet.

00:10:33

And actually this is why I oppose trade secret law as well.  I think it’s totally unjustified to have court force used against a third party with no contractual relationship with the original secret holder.  Common law copyright seems a little bit more justifiable.  It seems like it’s a measure of damages of basically an act of trespass.  So I could see it being justified on those grounds, but that’s about it, and that won’t get you anywhere near to modern copyright or patent-type legal systems.

00:11:03

CHARLES JOHNSON: I agree entirely, and I think that it seems to me that insofar as there’s a case for damages in the kind of case envisioned in common law copyright, it is going to be dependent on there being an identifiable sort of violation of concrete property.  So if you leave your manuscript on the bench and I find that, it’s hard for me to see, given that I haven’t broken into your desk, given that this is sort of presumptively abandoned property, it’s hard for me to see where the damage to tangible property occurs that would justify inflicting damages on the [indiscernible_00:11:44] and publisher.

00:11:46

BUTLER SHAFFER: Well, the reason I asked the question is that apart from a common law copyright, it seems to me that the only copyright and patent protection that people have in modern society is something that arises out of the state.  In other words, the state creates it.  And I think this raises some very serious questions about whether or not the state is in a position to really create anything.  It’s a little bit like the question [indiscernible_00:12:22] any question whether or not the state and the corporations, for example, which are also creatures of the state, can be looked upon as persons.

00:12:34

I saw a bumper sticker [indiscernible_00:12:41] that said I would believe that the corporation is a person when they execute one in the electric chair.  It’s hard to imagine that something that has an artificial creation, is not created in the same genetic fashion that we think of another person [indiscernible_00:13:07] an artificial person.  The idea that these bodies can have the kinds of interests that we attribute to a sense of personhood I find very troublesome, particularly if we are going to consider the possibility of altering or abolishing the [indiscernible_00:13:34] system or doing away with appropriation.

00:13:39

Can we do that?  If these are questions, do we ever decide to do away with a corporation [indiscernible_00:13:47].  We can’t do this with our children [indiscernible_00:13:50] probably accepted the idea that [indiscernible_00:13:54] children then [indiscernible_00:13:44] can destroy them.  Could we destroy these other organizations?  And these are the organizations, the state, that creates these patent and copyrights [indiscernible_00:14:06]. I find that troublesome.  What are your thoughts on that?

00:14:13

CHARLES JOHNSON: So I think that the state origin of copyright privileges, patent privileges, and other things classed under intellectual property is very important to track and that these ought to be considered by libertarian economists to be treated as part of the same analysis of other forms, of course monopoly, and some other forms of protectionism of behalf of incumbent interests that [indiscernible_00:14:40].

00:14:41

The exercise of state privilege in order to create these artificially rigged markets is something that’s not sort of a – not an instantiation of property rights but rather the – sort of the profound violation of them in something that really needs to be treated in the same kind of breath as we treat government monopolies on energy, government monopolies on roads, and other sort of vital services.

00:15:11

STEPHAN KINSELLA: I would actually agree that the course of the state in corporation statutes should be nullified.  Legal personhood should be given up as a fiction, and I would even eliminate the state’s grant of limited liability for shareholders.  But that doesn’t mean that an organization that has passive investors, the passive investors would be vicariously liable for the torts of employees of the corporation that they’ve invested in.  So I don’t even know if limited liability is a privilege because I don’t know if it’s needed to prevent shareholders from being liable in the first place.  But I would say that the effective of IP, for example, is one effect that gives rise to these huge, dominant oligopolies and monopolies.

00:15:57

I mean just take Microsoft and Apple.  Microsoft made billions of dollars in extra monopolistic profits because of the copyright monopoly the state gives it.  Then it uses these extra profits to pay patent lawyers to file patents, and then they use the patents to squelch competition as well and keep their oligopoly or their monopoly up.  Maybe they could be defended from a lawsuit from Apple.  Maybe Apple can defend itself from a lawsuit from Samsung and Google maybe and Microsoft, and then they all just settle.  They pay each other a few million dollars or billion dollars, and they go on their way.

00:16:37

And they have – meanwhile they’re erecting a walled garden of protectionism where smaller companies on the outside can’t even compete with them because they’re violating one of the patents of the companies in there or the copyright.  And if they get sued, they can’t defend themselves because they never made the money in the first place to acquire a big arsenal of patents.  So IP clearly has a monopolizing, oligopolizing effect and makes the evil – what evil corporations have, it exacerbates.  It makes it much worse.

00:17:08

CHARLES JOHNSON: I think that – there’s one thing that I want to add to that is that given the increasing role that intellectual property restrictions are playing in propping up the business models of – as sort of a number of key technology companies also, of course, other Fortune 500 companies like Time Warner, Disney, and so on that it’s important to – it’s important I think to complexify some of the discussion of, for example, international trade agreements that libertarians have engaged in thus far because these are sold as – so agreements such as NAFTA, CAFTA, KORUS FTA and so on, which have been sold as roots-to-market liberalization and liberalizations of international trade.

00:18:02

And they do genuinely reduce overall tariff levels, which is a genuine benefit to sort of everybody affected by them.  But simultaneously, these same agreements have included, bundled within them, massive synchronized increases among the participants in the multilateral agreements to the extension of copyright terms, also the implementation of much more draconian enforcement mechanisms.  So like the US government standardly bundles into its multilateral trade agreements that the other signers adopt technology control measures like the US’s Digital Millennium Copyright Act, which restricts technologies that might possibly be used to crack encryption.

00:18:46

STEPHAN KINSELLA: Which we call computers.

00:18:47

CHARLES JOHNSON: Yeah.  And so in one sense, these agreements offer significant reductions of one kind of protectionism.  But simultaneously they involve massive synchronized increases in another form of protectionism and I think precisely because, as we’ve moved into more of an information economy, monopolistic control over tangible goods and services has become less central to maintaining monopolistic privileges.  And control over information has become more central and more lucrative, and so the shift of – the focus of state power has shifted more and more towards the new areas that are sort of the most important for them to control.

00:19:30

BUTLER SHAFFER: Well, we’re all in [indiscernible_00:19:34] agreement up here as to our disaffection with copyrights and patents and so forth.  Now, suppose – I’ll play the devil’s advocate and offer narratives the defenders of copyright would have [indiscernible_00:19:50] and that is that without them, without the protection that’s afforded to these discoveries and inventions and so forth, companies or individuals might not have an incentive to incur all of the costs associated with the creation of these new works.

00:20:12

And as soon as they were created, a competitor who had not incurred these costs could come along, take advantage of those investments who created the item, and copy them at the expense of those who had created it.  How do we respond to that?

00:20:29

00:20:34

CHARLES JOHNSON: So I guess there is – so that’s a concern that I think is a serious concern, so a concern that’s worth taking seriously in the following sense that I think – so I don’t think that it actually worries about levels of production of intellectual products actually can have much reason to cut for or against the fundamental reasons for opposing intellectual property.  As I see it, the fundamental reasons for opposing intellectual property are moral reasons having to do with the right to dispose of your own property and the right to control the contents of your own mind and to speak freely.  And even if it turned out that we got no decent level of pharmaceuticals, even if it turned out that art and literature simply collapsed, that that would be very bad.  But I think people have a right to let them to lapse if that’s what the exercise of their liberty rights leads to.

00:21:39

Now, that said, I think that the worry about these kind of cases is I think best answered in terms of trying to think about market mechanisms for resolving the problem.  So it’s true that there are potential problems with determining a sort of – determining good ways to ensure that artists are able to make a decent living off of their labor.  There’s problems with figuring out good business models for making profits from pharmaceutical research, although of course there, there’s a large regulatory structure through the FDA and through a number of other controls that make that a harder problem than it should be.  But these are problems that I think have to be addressed through entrepreneurial means.  And so to take an example of something that – so it actually is restricted to copyright law, but at the time, copyright…

00:22:44

M: Louder.

00:22:45

CHARLES JOHNSON: Louder?  So to take an example, there’s a basic problem about how you can make money from broadcast TV given that you’re sending it out into the air for free.  Anyone who picks it up can watch it without having any contact with you, and in principle, anyone who picks it up can just as easily record it and pass it along to other people.  And the – there’s sort of a couple ways that you could try and solve this problem.  One is that you can try and solve the public goods problems involved with making money from broadcasting by imposing coercive measures through the state.  You can sort of require that people who buy a television pay a certain tax, which goes to the content producers.  It’s actually something similar to what they’ve imposed on the audio recording market.

00:23:40

On the other hand, you could leave it open to competitive processes onto entrepreneurial experimentation because I think this is actually ultimately a public goods problem to be solved like any number of other public goods problems.  If you have trouble figuring out how shippers can pay for lighthouses, the solution is to shift business models and actually to get consensual payments from the nearby barter.

00:24:10

Similarly, if you have a problem figuring out how broadcasters can make money from their watchers, well, one way you can do that is by selling ads to advertising space, to advertisers, in which case, the more people watch it for free, the better a position you’re in rather than a worse position.  And so I think in all of these cases – so an advertising-based model is, in many ways, reaching the end of its lifetime as a usable model for trying to make money because people are getting more control over the sequence they watch things in and so on.  But the solution is always going to be to try and engage in an entrepreneurial and competitive discovery process so that you can find out the sort of market pricing mechanism that will make these sustainable enterprises rather than trying to figure – rather than trying to bypass economic calculations by means of a state measurement.

00:25:16

STEPHAN KINSELLA: I agree with all that, and I believe in parts of Europe they actually do impose a tax on every television, and then the government sends these trucks around with this sensing equipment like around studio and dorms looking for TV signals, at least from the CRT days.  And if they catch you having an unlicensed television you’re in trouble.  I would also say that the state imposes so many costs on companies, large and small, maybe disproportionately on small, but an absolute cost on everyone.  The FDA process is extremely expensive, time-consuming, taxes alone, pro-union legislation, tariffs, other types of regulations, minimum wage, all impose huge costs on business.

00:26:04

And if you get rid of that, instead of trusting the same state that imposed all this on the economy, to add another measure to try to make up a little bit of the damage they’ve done to the companies by giving them the right to charge a monopoly price for awhile.  Just get the state out of the way.  Everyone would be so much more wealthy.  With the extra money, there would be a lot more money for research and development right off the bat.  So that would be my response to that.  As far as your original question, the way you posed it is really not fundamentally different than the case any business faces.

00:26:38

That is, you come up with an idea that you think can make profit.  You engage in the business.  If you make a profit, after awhile, people will notice, and they’ve learned something from what you’ve done.  They’ve learned that you have found something that satisfies consumers, and if you have a profit that’s obvious and health enough, you’re going to attract competition.  And they’re going to come in and compete with you, and gradually your unnatural, temporary profit is going to fall, as the free market is designed to do – well, not designed, but as it does.

00:27:12

And so the fact that in some types of businesses it’s somewhat easier for people to compete, or if they can compete quicker because a large part of what you’re doing with consumers is selling some easily copiable pattern of information, well, then it’s just a little bit harder to compete.  But you have to figure that out.  It’s the entrepreneur’s job to figure that out, not to go to the government and ask for a legal monopoly to protect him from competition.

00:27:39

CHARLES JOHNSON: And – I’m sorry.  Go ahead.

00:27:42

BUTLER SHAFFER: I think that the public goods argument too often begs the question or begs a lot of questions that sort of presume to be answerable in terms of generating monetary profit.  And I think that so many things that individuals do that promote some public good or some public interest without any interest empirically in wanting to make money out of it.  I’m thinking, for example, of the early turnpike movement in this country when turnpikes were being built by privately owned turnpike companies.

00:28:26

And these companies were invested in by private parties and not the state even though it was understood [indiscernible_00:28:35] that these companies almost never made money.  They were almost always a losing proposition, and apparently there were objectives here or other purposes in mind for creating these turnpikes [indiscernible_00:28:54] social in nature or opening up markets in a general sense between Town A and Town B.

00:29:03

But whatever it was, the people who were invested in the turnpike companies very often, and in fact, it might even be said more often than not, lost money on it.  They didn’t take any money, yet they kept investing in it.  And I think about this in relation to language [indiscernible_00:29:20] the greatest invention that we humans managed to ever create was language.  Language is by far a far greater invention than the automobile or the airplane or anything else.

00:29:40

And yet who created this language?  Or if you want to put it in terms of agricultural products, who created the products that we more or less take for granted as part of some cornucopia if you will of goods that are available to people? Central American Indians who kind of played around with various grasses and at some point came up with what we now call sweet corn.  I’m not aware of any particular group that claimed a patent right [indiscernible_00:30:22] or sort of traditional treatments that people came up with using natural herbs and [indiscernible_00:30:33] took care of various ailments.

00:30:37

I’m not aware that there [indiscernible_00:30:39] or anyone else would have claimed an exclusive right to the use of this particular substance.  And yet we presume that a pharmaceutical company or in the case of food, that food-producing companies, the Monsantos of the world, somehow or other can and take that particular creation and modify it in some fashion and then claim a property interest in that.  And I am [indiscernible_00:31:19] to be convinced about anything [indiscernible_00:31:23] but it is something you can imagine including [indiscernible_00:31:28] so if somebody wants to try to convince me how Monsanto [indiscernible_00:31:33] somehow or other have a rightful claim to the modification of products which they themselves inherited from some sort of a [indiscernible_00:31:43] I’d like to hear it.  But think of all the great writings.  Who would [indiscernible_00:31:50] the most famous writer of all [indiscernible_00:31:52] if you go back and take a look at the books of quotations and such?  Who created at least as much as anybody else?

00:32:05

W: Shakespeare.

00:32:05

BUTLER SHAFFER: No [indiscernible_00:32:07] it was a Greek writer by the name of Anonymous.  You can go [indiscernible_00:32:15] Anonymous, Anonymous, Anonymous.  Why is he [indiscernible_00:32:18] of a copyright?  This particular writer had the exclusive right to use [indiscernible_00:32:30] that particular quotation or that poem or whatever it is.  Anonymous did this.  I’ve had [indiscernible_00:32:37] my own writings, I copyright them for one reason.

00:32:44

I copyright my stuff purely defensively, so if I just put it out there and somebody – without a copyright, and somebody else found it and [indiscernible_00:32:53] I like that [indiscernible_00:32:55] copyright that.  Now if [indiscernible_00:32:56] wants to reproduce that themselves, then they might be violating my copyright.

00:33:02

So I’ve done that [indiscernible_00:33:04] in my own writings, but [indiscernible_00:33:07] anybody else [indiscernible_00:33:10] any of the works that I [indiscernible_00:33:12] and reproduce them, reprint them, send them out to millions and millions of people without paying me anything.  Please, please, please be my guest.  Do it.  I would love it.  It’s [indiscernible_00:33:27] other reasons than just making money out of it.  So I don’t know if any of that…

00:33:33

STEPHAN KINSELLA: Let me just go back to what you mentioned earlier on the question of if someone – some company sells a good that’s easily copiable, what their incentive to do it if they’re going to face competition.  And I know you’re playing devil’s advocate, and you’re right.  That is the devil’s side, right?  But the purpose of law and rights is not to make sure we have the right incentives in place to achieve some predetermined, optimum output of some preordained goal like X, like this many movies or whatever.

00:34:03

The purpose of law and rights is justice, protection of property rights, reduction of conflict, permission – permitting people to live in peace and prosperity and harmony with each other.  It’s got nothing to do with incentives.  And I would also say that if you say what’s their incentive for innovating in pharmaceuticals or producing movies, etc., then the IP advocate can argue one of two things.  He can argue that there would be no – if we don’t have patent and copyright, there’s going to be no invention, no innovation.

00:34:36

No one’s ever going to write a novel again ever.  And some of them actually do argue this.  But that’s obviously completely absurd.  No one in their right mind can believe that there would be none.  At best, they can argue that we have this level of innovation and copyright.  I mean on creative works now.  And without copyright and patent, it’s going to be lower, and it’s lower than some ideal, which they inherently know is higher.

00:35:00

They have no proof that IP laws even increase this number.  In fact, I believe it reduces it, at least distorts it and skews it to different types of works, different types of innovation and invention and research.  So at most, their argument can be used to argue that we need to change the law to increase the amount of innovation.  Well, it comes with some cost.  How do they know that this – the value of this extra innovation is greater than the cost?  And where’s the stopping point?  Why are copyrights limited to 150 years roughly and patents 17?

00:35:33

Why don’t we impose the death penalty and make it last a million years?  That would surely incentivize some inventions that are not happening right now that are just beyond the margin of what’s feasible now, or we could even go further than that.  What if the strongest monopoly protection in the world is just not enough to get people to buy enough of this product to give enough profit motive to give an incentive to people to do research and development?

00:35:56

We need more and more works.  We always need more innovation, right?  So the natural result next, which some people have advocated such as Bernie Sanders, the socialist from Vermont, and even Alex Tabarrok, a libertarian.  They say, well, let’s either replace the patent system or augment it with a taxpayer-funded prize system that a government-appointed panel of experts doles out every year to reward new recipients.  And the last proposal I saw was from an $80 billion-a-year, taxpayer-funded prize fund for medical innovations alone.

00:36:37

Now, in the patent universe, medical innovation is one little, narrow slice of the pie.  You have pharmaceuticals.  You have medical – well, that’s medical devices.  You have chemicals, gene patents, mechanical, electrical, software, business methods, tons of other types of patents.  So if you’re going to apply this to logic and scale it up to the entire innovative space of the patent office, you’re going to need probably $10 trillion a year or something.  I mean literally just to do this insane idea of theirs, so we bankrupt the entire country.  So the entire idea that we don’t have enough innovation is just like saying the price of milk is too high.  It’s trying to centrally plan the economy and prices and the amount of activity that it’s engaged in, and we need to stand back and let the free market operate.

00:37:23

CHARLES JOHNSON: To come back to something that you said earlier about roads and in particular the development of roads by companies that ultimately weren’t necessarily even expected to make any money in the end, I think that that’s a very important observation.  And it’s sort of – it helps to indicate a way in which the current discourse about intellectual property, so the political debates about that, often involve claims from the advocates of intellectual property that are increasingly divorced from any kind of reality on the ground about how people actually produce creative works simply because in – whatever problems there may have been in the past, and I think those were also problems that are perfectly solvable through consensual social means.

00:38:14

But in the age of Kickstarter and in the age of millions of independent comics artists and writers and musicians and any number of people doing their work through the internet and being funded through a very impressive sort of array of creative ways of scratching together small amounts of money for lots of people in order to help them make an independent living that sort of the protectionist worries about how are we going to keep industries sustainable and profitable without intellectual property monopolies just seems I guess sort of increasingly divorced from any kind of actual market reality, that these are problems that not only can be solved but already are being solved.

00:39:06

It’s obvious how these things pose a problem to Warner Bros.’ bottom line, but there’s no reason – there’s no sort of – there’s no a priori reason why the creative landscape has to involve giant corporations like Warner Bros. or Disney or any of the others.  And similarly, when it comes to things like – when it comes to worries about pharmaceutical patents, I’m not at all convinced by the standard protectionist arguments that there’s no way to have sustainable R&D outside of – to have sustainable R&D for pharmaceuticals on a for-profit basis without patents.  But let’s just grant for the moment that that’s true, if that’s true.  Then other conditions of freedom, simply the nonprofits will have to do the research and development.  And fortunately we have a long history of nonprofit institutions like universities and sort of independent research organizations that already have existing models about how you do fundamental research and try to make new innovations available without demanding a monetary profit at the end of the day.

00:40:14

STEPHAN KINSELLA: I absolutely agree.  Maybe we can mention one other thing.  We talk a lot about patent and copyright.  Those are the two bad ones.  But maybe I can just mention we should also be concerned about trademark and trade secret, although they’re not as big of a deal.  Trade secret was used fairly recently by Apple to bust down some guy’s door when the iPhone 4S had leaked a year or two ago.  Trademark law is increasingly bad.  It’s used for suppressing free speech.  It’s used to suppress competition.

00:40:47

It’s used to outlaw cheap knockoff goods like designer purses and things like this.  There is a part of trademark law that you could argue is justifiable, that is, to the extent it’s rooted in some kind of fraud on the consumer.  But if that’s the case, we have fraud law already.  So I say just completely get rid of trademark and just rely on fraud law.  That’s all you need, and that would give the cause of action to the defrauded consumer, not to the competitor.  And it would also give a cause of action only when there’s only actual fraud, unlike in the current case where you only have to show a likelihood of confusion, which is this trademark standard, which is used, for example, when a consumer buys a fake – a designer purse for $20 or a Rolex watch for $20 he’s not defrauded.  He actually knows he’s buying a knockoff and wants the knockoff.  It’s cheaper.  So he wouldn’t be able to sue in that case.

00:41:42

And as far as trade secret, you don’t need the law to keep things secret.  All you need is to have your house and your body protected, standard property law, and you can use contracts with employees.  And if they leak, then you can sue them for damages.  But the injunction part of trade secret law is totally unjustified.  So get rid of trade secret law.  Rely on contract and property rights, and get rid of trademark and rely on fraud law only.

00:42:10

BUTLER SHAFFER: I think the assumption that creative people needing this kind of protection in order to have an incentive to continue to create is questionable.  And I think in the words of Edison, for example, I suspect [indiscernible_00:42:25] obviously there’s [indiscernible_00:42:26] high school.  But I suspect that there’s a lot of work that he did that he did solely for the purpose of finding out how to [indiscernible_00:42:37] various inventions of his [indiscernible_00:42:41] afterwards [indiscernible_00:42:44] there’s no monetary value to this [indiscernible_00:42:48] about the only [indiscernible_00:42:50]

00:42:51

And I also think there are so many people who are doing this [indiscernible_00:42:55] creative work in the area of drug research.  And these are people who, in the face of the drug war, have come up with alternative kinds of drugs put together [indiscernible_00:43:11].  And I think maybe it’s [indiscernible_00:43:15] I suspect that they probably weren’t as interested in just getting around the problems with the drug war as much as they were anything else.  And [indiscernible_00:43:26] multimillion-dollar sum of money that is dispersed by the government [indiscernible_00:43:35] medical research.

00:43:39

Who’s going to evaluate that?  I suspect the people who are going to evaluate that are those who already have a vested interest in [indiscernible_00:43:47] the goods and the machinery and the drugs and so forth as they already are.  Somebody can go to a [indiscernible_00:43:57] midnight knock on the door and [indiscernible_00:44:18] in the lab [indiscernible_00:44:21].  So we’ve got [indiscernible_00:44:27] fundamentally do research.  In the case of [indiscernible_00:44:38] benefited by and who does [indiscernible_00:44:44] research would make that [indiscernible_00:44:46].

00:44:50

STEPHAN KINSELLA: On the pharmaceutical issue, I would also point out that you could argue that, although a lot of the pharmaceuticals that have been produced are wonderful drugs, that there is a distorting effect of the patent system in pharmaceuticals in that companies use the government to push onto the medical system, which the government controls, and the prescription system, which the government controls more expensive, newer patented drugs instead of older natural remedies that may work just as well or for a lot lower price, not to say that that’s always the case.  But I do believe that there’s an effect of over-medicalizing the nation because there’s the financial incentive on the part of the companies that they would rather sell a patented good than one that’s not patented because they can sell it for a higher price.

00:45:48

BUTLER SHAFFER: So sell it for $200.  It must be good.

00:45:50

STEPHAN KINSELLA: It must be good.  And one other addendum to what I had mentioned earlier, defamation, which is libel and slander law, which is basically based upon this idea of a right to your reputation, is not traditionally considered to be a type of intellectual property right.  But it’s – I believe it should be.  It’s very similar in the arguments for it and in the way it works.  And we ought to lump defamation law in with the – say, the big five evil IP laws that need to be completely repealed, and defamation law, like copyright, has a tremendously stifling effect on freedom of the press and freedom of speech.

00:46:23

BUTLER SHAFFER: I think [indiscernible_00:46:24] in all of these [indiscernible_00:46:27] is that once you have something out there – defamation is a good example – you don’t have control over your reputation.  Once it’s out [indiscernible_00:46:43] written work or an invention or whatever [indiscernible_00:46:48] you no longer have control over that.  It’s really impossible to make sense of the whole conflict of privately owned property in the absence of the ability to control, the ability to exclude.  And you don’t have that with these types of government-created and government-enforced so-called property.

00:47:12

Defamation is a perfect example of [indiscernible_00:47:16] do I own property interest in my reputation?  Can I control that?  No.  Who controls their reputation?  You do.  I can try all kinds of gimmicks to make you think that you should like me for some particular reason [indiscernible_00:47:35].  But whether I [indiscernible_00:47:44] or not is really up to you.  There’s nothing I can do to get you to alter your opinion.  If you think I’m an SOB from the start, at the end I’m still going to be an SOB.  So how can I [indiscernible_00:47:59] in my reputation [indiscernible_00:48:04] saw a hand go up, and I don’t know.  Do we have a microphone [indiscernible_00:48:14] to people?  If you can yell loudly, I’ll try to repeat it.

00:48:24

M: I was going to ask if all of these laws are done away with [indiscernible_00:48:30] something like a license agreement [indiscernible_00:48:34] don’t pass it on to another party and then you do, does the third party have any moral responsibility not to receive it?

00:48:57

BUTLER SHAFFER: That’s an excellent question, and it ties in with – it’s called restricted coverage in the buying and selling of real estate.  I sell you a piece of [indiscernible_00:49:06].

00:49:07

00:49:10

STEPHAN KINSELLA: Oh, repeat the question, Butler.

00:49:11

00:49:16

BUTLER SHAFFER: Whether or not a licensing agreement that might be binding between the two of us, could that be binding upon a third person who is not a party to it, is that basically…

00:49:26

M: On moral [indiscernible_00:49:27]

00:49:27

BUTLER SHAFFER: On moral, legal, or any kind of grounds.  And [indiscernible_00:49:31] the courts are trouble by that [indiscernible_00:49:33] the idea that you – that some third person could be bound on what you can I agree to.  And so for the longest period of time, it took – they had difficulty with enforcing these so-called restrictive covenants.  And the rationality that if you and I agree that we’re not going to raise sheep on a piece of property that I sell to you, how can we make that binding upon some third person?  They [indiscernible_00:50:07].

00:50:08

M: Isn’t that how government works altogether?

00:50:11

BUTLER SHAFFER: Well, all together or [indiscernible_00:50:14] but how can we – as a philosophic proposition, how can we justify that?  If Stephan and I agree to do something and then all of a sudden you, by his interest in [indiscernible_00:50:31] why should you be bound by the promise that he and I made?

00:50:37

STEPHAN KINSELLA: Let me – I don’t want to take us too far afield here.  I have some thoughts on this.  I haven’t written about it much yet, but I think the restrictive covenant situation is not actually analogous to your hypo.  I’ll explain why.  But the way restrictive covenants can be made to work I believe is just to treat all the adjacent plots of land as co-owners of all the land but each one having a different ownership right.  So the resident of one tract is, say, the 99% owner, and everyone else is a 1% owner in the sense that they have a veto right over certain uses of your property.

00:51:08

So it’s actually not even a contract.  It’s more of a division of property among people, and I think you could find ways that that could run with the land in the sense that you’re not – one of the veto rights is I can’t sell my tract of land to a new buyer unless he agrees to these terms too.  So that way, you could prevent someone from getting out of the regime.  But in your case, I think I would look at the licensing thing.  Well, first of all, the word license means permission.  So in the law, you don’t need a license or permission unless someone has the right to stop you unless a property right.

00:51:46

So if IP goes away, probably 95% of all the licensing activity will just disappear because people don’t need permission.  They don’t need a license.  In your case, you’re talking about a contract between a bookseller and a buyer, which we discussed earlier already.  Now, there is one possible argument you could make that the third party is somehow a bad guy.  Whether he’s immoral or not, I don’t now.  I’ll let Charles do that.  He’s the philosopher.

00:52:09

But the argument is, in the law there’s something called tortious interference with contracts or inducing someone to breach their contract.  And if you look at a contractual arrangement between bookseller and book buyer as a type of property right, then this third party is sort of aiding and abetting one guy and breaching someone else’s rights.  But I think under Rothbard’s title-transfer theory of contract, a contract is not that kind of property right, and there’s no such thing as contract breach.

00:52:39

There’s only a prearranged penalty provision provided for that is triggered by certain specified actions of the buyer.  So if the buyer copies the book, he’s not in breach of the contract as he would be said to be under today’s law, which I think is conceptually confused.  Under a Rothbardian system, he simply is doing something that triggers a payment of money.  And the hope on the part of the seller is the prospect of that will incentivize him not to do it because he’s going to incur a cost.

00:53:09

But if he does that, he simply owes money to the bookseller, but the third party who induced him to do it, I don’t see how it’s really libertarian to uphold the current legal theory of tortious interference with contract, which is all you could really rely upon I think to get the third party invocated, which is also an argument for the injunction against the third party in the trade secret case.  But again, I’m thinking that that argument doesn’t quite work.

00:53:37

CHARLES JOHNSON: I want to broadly agree with Stephan’s answer in terms of the – sort of the legal mechanisms for addressing the question of justice that’s involved here.  Now, there may be a question of ethics, right?  It’s perfectly possible to be a jerk about copying things.  And I think you shouldn’t be a jerk, but I think that that kind of question is a question that’s not answered simply by appeal to whether you had this pre-existing agreement between the bookseller and the person who bought it.

00:54:11

It’s also going to depend on things like what the relationship between the downstream buyer is and the copy is, and it’s also going to depend on things like just what the – sort of what the contract maker upstream has a reasonable claim to expect.  And I think it’s certainly true that we ought to adopt an ethic that people who are doing good work should generally be encouraged to be able to make a living at it, and we should respect the work of artists that you value and things like that.  But I see no – so I see no legal reason in either case, no reason of justice, and I see no ethical reason at all in the case of works that have been around for a very long time that the author no longer particularly depends upon.

00:55:09

There are a number of other considerations that can come into effect of sort of why it is that they should reasonably have a claim on expecting to make a lifetime perpetual income from that kind of work.  So in terms of the ethical question, I think there are ways to be more jerky and ways to be less jerky.  And part of that – a lot of that is going to depend on the concrete situation in the transaction.

00:55:36

STEPHAN KINSELLA: The ultimate solution to a lot of this idea of how artists get paid, maybe everyone should be their own benefactor.  And in a freed market, you work five hours a week.  You make $100,000 a year, and the rest of week you paint paintings.  So you’re your own benefactor.  I mean we’d be so much wealthier, or you retire at 21, and you become an artist for the rest of your life.  There’s no reason to think that that couldn’t happen.

00:56:01

M: [indiscernible_00:56:03]

00:56:07

STEPHAN KINSELLA: Can I tell you my definition of copyright?

00:56:10

M: No.  Property.

00:56:11

STEPHAN KINSELLA: Oh, property?  I would say a property right is a relationship between a human actor and a scarce resource.

00:56:19

M: Not a right [indiscernible_00:56:20] property.

00:56:21

STEPHAN KINSELLA: Define property?  Define property?

00:56:25

M: Yeah.

00:56:25

STEPHAN KINSELLA: Well, I don’t use the word property as a synonym for the object that is owned.  I think that’s a kind of mistake that a lot of people will say my property.  Property just means a feature of an entity, and it’s used to mean you have a propriety or a proprietary interest in something, which gets at exclusive legal control.  So I would just say property means the ownership of a human actor, by a human actor of a scarce resource for some reason, which we…

00:56:58

BUTLER SHAFFER: [indiscernible_00:56:58] it’s a social definition.  If I was the only person on the planet, I wouldn’t even talk about property.  And it probably goes to the Robinson Crusoe story.  As soon as Crusoe discovered the [indiscernible_00:57:12] all of a sudden property became an issue.  And so you get to the question of how people are going to assert claims to be a group of decision-makers over certain parts of the universe that they find themselves in?  And my own [indiscernible_00:57:32] thousand years.  I think that whatever property rights we have derive from the willingness of our neighbor to [indiscernible_00:57:44] support our claim.  It has nothing to do with sound reasoning or anything like that.

00:57:53

I assert the claim to be the exclusive owner of something that is [indiscernible_00:57:58] and then I call upon you to respect my claim.  In other words, if you allow also a certain claim of ownership, and if Stephan tries to take my claim of ownership over this item, that you would be willing to come to my defense.  And I think that’s part of where it comes from [indiscernible_00:58:19] this is not a – property is not a human invention.  Property interests are found throughout all life forms.  Plants, insects, fish, animals, all identify [indiscernible_00:58:33] property claims.

00:58:35

There are a number of books that are written on this [indiscernible_00:58:38] others who have taken the position based on good empirical research.  They find that all these other life forms engage in this activity because everything – it’s what I call the Shaffer Principle.  Everything has to be some place.  I don’t know what else you’d call it.  But to begin with, everything has to be some place, and for you to survive, you’re going to have to exercise exclusive decision-making over something to the exclusion of everybody on the planet.  You’ve got a hamburger, and either you’re going to eat that or you’re going to starve, and so you’re going to eat that despite the fact that there might be some poor, starving soul in front of you who just loves to have a hamburger.

00:59:30

STEPHAN KINSELLA: We need to wrap it up?

00:59:31

BUTLER SHAFFER: [indiscernible_00:59:31] and you can play around with that all you want [indiscernible_00:59:38] all kinds of funny [indiscernible_00:59:41].  Essentially it’s a [indiscernible_00:59:45] form of social metaphysics.  I think that’s the way I teach it in law school as [indiscernible_00:59:52] social relationships.  How are we – how do we decide who gets to make decisions about what [indiscernible_01:00:02] do you own yourself?  And if you do, well then [indiscernible_01:00:05].

01:00:07

CHARLES JOHNSON: I think we’re running up against the time limit for this session, but if anybody has any followup questions, I’ll be down at the [indiscernible_01:00:16] table over there.

01:00:18

STEPHAN KINSELLA: I’ll be available too.

01:00:19

BUTLER SHAFFER: Thank you all.

01:00:21

STEPHAN KINSELLA: Thank you very much.

01:00:22

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