Mises blog post. See archived comments below.
This is a good post by John Wiley Spiers about why he thinks intellectual property rights (IPR) are not needed for business to succeed.
Why No IPR
At 22 in 1977 I de-trained at Lo Wu to walk, as required, from Hong Kong territory into Red China to alight a Communist train for business in Canton. From day into night, from Hong Kong to Maoist China. How could cousins, on each side of the border, end up as those with no resources (Hong Kong side) wealthier than their colonial masters, but the communist side with limitless resources, were dirt poor? It took a while to find out, but it was merely ideas, and the most advance explication of the ideas was the Austrian school. Thirty years later I was in Auburn for the week long “university,” hearing what any Cantonese businessman would tell you was just so. It is not lawlessness that explains Chinese uninterest in “intellectual property rights,” it is common sense.
We all know in natural law property rights form when labor is mixed with material, whether land or tools, each according to his abilities. Private property may yield an artichoke or a lawnmower for sale. But a product is the result of ideas mixed with ideas: my own predilections, customers’ ideas and designers’ input. Material, whether land or tools, are limited to one person at a time, given physical limitations. Ideas, like candle light, can be used at once by all within sight, and are endlessly replicable at no cost to the source. In a neat trick, IPR mocks natural law, but is grounded in positive law. Free candle light defies monopoly, hence the pretense of “rights” must be backed up with violence.
How does a free market work? A premise is small businesses are innovators and large businesses are conservators (following Drucker); small introduces innovation, subsequent iterations routinize and commoditize, and eventually conservators (big biz) “steal” the idea, apply the economies of scale (manufacturing, logistics, finance) to the item, and make material goods and services available to the widest possible demographics. Innovators bring out (relatively) few, poor, expensive, and slow… but desirable by enough people to launch a going concern… conservators apply economies’ of scale and make the innovators’ product more better cheaper faster. The free market at once introduces what is needed and then conservator gets the price down to where everyone has access to material goods and services, a symbiotic relationship between the innovator and conservator. See the cell phone, 1980-2010.
In the measure a market is deregulated, the relative freedom produces the benefit. Recall Jimmy Carter deregulating telephony, beer, transportation and normalizing trade with China.
This process generates division of labor, a real source of well being (following Dr. North, contra arch-anarchist Prince Kropotkin.)
In practice those who thrive in small business have not the slightest interest in IPR. If someone “knocks off” my design, necessarily they are using 2nd rate factories, selling to 2nd rate customers… literally none of my business. My first rate customers are not interested in 2nd rate product. I find 2nd rate customers not worth serving. IPR solves a problem that does not exist, in relation to shoddy knock-offs.
Along these lines, when a conservator makes an excellent knock-off of my idea, and lowers the price through superior economies of scale, here again someone is using their factories, capital, etc, to reach customers I never could. Where is the theft? Where is the violation of my rights? This is the flip side of Rothbard’s argument regarding who has the right to control my use of my photocopy machine? What right do I have to complain of Big, Inc using their resources to reach customers I could not?
Marketing is the key to business, not control. In essence, my relationship, is built on the degree to which I listen (oboedire) or obey, my customers. That is marketing, that is what makes or breaks me. My customers judge me and then tell me how I might best serve them. I redesign accordingly, if I want a raise.
Something left out of IPR discussion is we innovators are constantly dropping items in favor of more profitable new items. If I cannot increase sales by improving an item further, or someone has made my product irrelevant with a superior alternative, then I am on to something new, again in deference to customer feedback. It is all about the customer.
Now, say my product gets to the point, after years of profitable iterations on my part, a conservator decides to “steal” my idea. This is not done lightly. The conservator has done the multimillion dollar MIT-expert statistics phd market study necessary to warrant knocking off my product. If it pencils out, Big, Inc knocks me off, lowering the cost, and making my product available to everyone. But Big, Inc runs a risk. Having carefully proved the obvious, that is I have a viable mass market item, I can simply do an IPO, raise the money to be the conservator, and become my conservator’s competitor. See Apple IPO 1980, vs IBM (and everyone else).
After introduction, but before IPO (or not, the vast majority of innovators have not the slightest interest in becoming bigger than a few million per year in sales, life is too short, family is too important to spend it at the office) it is not uncommon for my peers around the world to see my product in the factory overseas. For example a German may desire to try out my USA-proven item in the German market. By prior agreement with the factory, the German will be charged a slight premium, which is paid to me by the factory, deposited locally in my account. I have bank accounts in Canada and Hong Kong for this purpose. In this way, I am compensated for my designs selling worldwide. It is not intellectual property rights, it’s just business. Rockefeller did it with the railroads, I do it with my USA based critical suppliers as well to assure they do not serve my competitors without me being pleased.
IPR poses a false dilemma and solves solves a problem that does not exist. Business challenges, in practice, are addressed in contract, not intellectual property rights. IPR inhibits justice in the distribution of goods and services. It keeps the pie small, leaves ameliorants of wants and needs unavailable or nonexistent. The world would be better off without IPR, but the entrepreneur has an advantage in the marketplace knowing IPR is spurious. Business objectives come faster and easier ignoring IPR.
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Posted in intellectual property by John Wiley Spiers
December 13, 2010 at 8:37 pm
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I’m sorry, I literally could not get past the first few paragraphs because of the mediocre (at best) English. Any chance at a cleanup job?
December 14, 2010 at 4:39 am
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The following seemed counter intuitive to me,
“If someone “knocks off” my design, necessarily they are using 2nd rate factories, selling to 2nd rate customers… literally none of my business. My first rate customers are not interested in 2nd rate product. I find 2nd rate customers not worth serving. IPR solves a problem that does not exist, in relation to shoddy knock-offs.”
If I take the example of Burberry, a high priced fashion label with a very distinctive tartan design icon. It was as easily replicable as it was distinctive and cheap knock-offs became commonplace, particularly amongs consumers that Burberry’s high priced products did not serve. The tartan design became associated in its home market in Britain with the underclass, football hooligans and welfare queens. This reputational loss damaged sales to those first rate customers who had been paying high prices for up-market Burberry products.
December 14, 2010 at 5:34 am
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Interesting.
This is a good example of one evil fostering another. Presumably neither the utility nor the beauty of a product is affected by the design icon. This leaves only the marketability of elitist pretensions, which is all the intellectual property law provides for here. The snob is able to feel superior because of a design icon he and no one else, can get. It’s clear this was the case with Burberry because once it became available to everyone, it lost its value as an elitist symbol.This dovetails well with advertising. The moral purpose of advertising is to inform the public of the availability of a product and its suitability for some particular use.
As currently practiced, the purpose of advertising is to manipulate the public through deception. One deception for example is that I need “exclusive product x” in order to be happy, superior, etc.IPR may support an entire web of immoral activity such as this.
December 14, 2010 at 3:52 pm
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But those who oppose IP in fashion and fashion trademarks tout it as a _good thing_ that the absence of IP forces people to go through the new-fashion treadmill a lot more quickly, spending a lot more money to signal the same level of wealth.
Which, incidentally, is just what you accused advertisers of imposing upon people. So it looks like you have it reversed — it’s the absence of IP, if anything, that forces people into the kind of wasteful consumption you hate.
December 14, 2010 at 2:10 pm
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With all due respect, if this is a good argument against IP, I would hate to see a bad one.
December 14, 2010 at 2:23 pm
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the burden is on those who say we need a criminal state to enact positivist artificial law that creates huge zombie bureaucracies to grant ad hoc monopoly privileges to favored supplicants in the name of free enterprise, innovation, private property, and competititon.
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Then why do you support the statist private property system?
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I don’t, Silas. I’m a principled anarchist, rather than a sellout, scientistic, amateur, engineer-gadfly confused utilitarian, like… some.
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Just trying to impress upon you how your comments appear to me…
December 14, 2010 at 3:23 pm
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Hey Silas, if I steal some factors of production and use them to create something, instantiate an idea, whatever you want to call it, am I then justified in preventing someone else from copying my idea?
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Beefcake,
Far be it for me to interfer in the conversation between you and Silas, but I thought I might take a stab at this just to keep the conversation going. In return, I have a question for you. Fair?
If you steal some factors of production, and us them to create something that would be copyrightable (and you understand “ideas” are not sufficient to meet this burden), then you would be justified in preventing someone from copying your copyrighted property, within the meannig of current copyright laws.
If you call that copyrightable property “ideas” you are misstating the definition of what is copyrightable.
The fact that you stole something, whether they be factors of production used to produce something legal, or something illegal, you woud have incurred liability from the rightful owners of those factors. Your liability to them would have nothing whatsoever to do wtih the copyrighted material.
OK, my turn.
If I require your production to serve only an external economy, meaning that your output does not equal your income, would it be fair to call that slavery?
If I couldn’t require you to do this, meaning you could “sesceed” from such an arrangement, would it be fair to call that “voluntary slavery”?
Would a rational human choose slavery over other alternatives?
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“Fair?”
Of course.
“If you steal some factors of production, and us them to create something that would be copyrightable (and you understand “ideas” are not sufficient to meet this burden), then you would be justified in preventing someone from copying your
copyrighted property, within the meannig of current copyright laws.”I don’t know if this is correct or not; perhaps Kinsella can comment. If true, it’s another good argument against such laws. However, my point wasn’t really how the current law operates. Let me rephrase the question to you: what rights, if any, do I retain if I perform actions with illegitemately acquired means?
“If I require your production to serve only an external economy, meaning that your output does not equal your income, would it be fair to call that slavery?”
I’m sorry, I don’t know where you’re going with this.
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Beefcake,
“If true, it’s another good argument against such laws.”
I know you believe this, but I don’t understand the connection you are trying to make.
If I steal a bat, and then find myself in a position to use it to defend myself, is my defense negated because the bat I used was stolen?
“I’m sorry, I don’t know where you’re going with this.”
This is probably true, but I’m just asking. I’m not sure it needs a context. If it does, the the context is within the meaning of “Austrian Economic Theory” which defines (at least according to Mises) “external economies”, “output” and “income”.
In general, is it a reasonable definition?
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“If I steal a bat, and then find myself in a position to use it to defend myself, is my defense negated because the bat I used was stolen?”
OK, good point. Let me ask you then: is this really what is happening if I try to use force to prevent someone from copying a creation I make with stolen goods?
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Beefcake,
“is this really what is happening if I try to use force to prevent someone from copying a creation I make with stolen goods?”
Well, I’m not sure what you mean by “copying a creation”. In order to use force against someone (i.e. enforcement), they have to violate your rights, presumably you are asking about property rights.
To have property rights violated, you have to have them first. If I have them, for example by way of copyright law, then that law gives the holder of the property the right to enforce against infringement.
This is similar to real property laws. In fact, copyright laws enjoy the advantage of the “fixation” requirement, because then the copyrighted material can be treated just like tangible property, and can depend on the body of laws in property and contracts.
However, not all property is equally susceptible to copying. (i.e. can be easily/cheaply replicated). For example, land cannot be copied, and therefore copyrights are not relevant, so it is not surprising that replication rights are not protected under the law.
Other things are easily copied, but are also not protected under the law. This seems to be widely misunderstood in many discussions here, but ideas themselves are never protected by copyright law. You cannot protect the “idea” you have for a book. Even if you copy the ideas in my book and write your book around them, unless it was so similar that copying was the only reasonable explanation for your book, copyright does not protect them, and you are free to copy them.
Even if it is copyrighted material, you still have certain “fair uses” that are not protected. You can lift a whole chapter from my book, copy them, distribute them to your class, and that would probably be a fair use.
So, yes, I think it makes little difference if the computer you used to write a book, for example, was stolen. You have to deal with that under computer theft. The copyright is a completely different issue.
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“Does he have a right to act on this information, or not? If you say yes, then basically Silas’s case explodes, because this is what it amounts to.”
Right, which is why I suspect Silas won’t respond. If he says I can prevent someone from copying a pattern I make with stolen goods, then he’s saying aggression should be rewarded. However, if he says I cannot, then he is effectively acknowledging that before a creator can legitimately use force against “unauthorized” copiers, HIS (the creator’s) own acquisition and use of factors must be first established as legitimate. In other words, he must first put forth a theory of property rights, something he has gone to great lengths to avoid throughout.
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Beefcake and Stephan,
I have asked politely, and I’ve played along. You criticized Silas for not responding to your questions, so I’m just asking again, as I’ve now asked you both this same question.
“If I require your production to serve only an external economy, meaning that your output does not equal your income, would it be fair to call that “slavery”?
“If I couldn’t require you to do this, meaning you could “secede” from such an arrangement, would it be fair to call that “voluntary slavery”?
“Would a rational human choose slavery over other alternatives?”
Regards,
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Wildberry,
“If I require your production to serve only an external economy, meaning that your output does not equal your income, would it be fair to call that “slavery”?
I’m sorry, I still don’t understand what you mean here. What is an “external” economy? What do you mean by “requiring” my production to “serve” it?
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Beefcake and Stephan,
Allow me to explain.
In one of my screeds, I had earlier(as have others) referred to Mises, HA p. 658, where he said this:
“It is beyond the scope of catallactics to enter into an examination of the arguments brought forward for and against the institution of copyrights and patents. It has merely to stress the point that this is a problem of delimitation of property rights and that with the abolition of patents and copyrights authors and inventors would for the most part be producers of external economies.”
I said this, here:
http://blog.mises.org/14914/intellectual-properganda/comment-page-1/#comment-744664I agree that an act of homesteading, as conceptualized by Rothbard, would establish “better title” than anyone else. However, I have also demonstrated that title can be established by contract, and 100% coverage of all parties is equivalent to a law. It does not require royal decree. If homesteading is not present, property rights can still exist, and the issue remains one of “better title”.
Therefore, the ultimate challenge is to argue why IP should be subjected to a different property ethics than any other property. I think this is impossible, and in fact to do so by any means would be to create an ethics which endorses production for external markets. Without appeal to morality or utility, I have simply stated that production for external markets is in fact, slavery.
Therefore, as ironic as this may sound, IP opponents find themselves in the curious position of advocating slavery.”
Then Stephan said this here:
http://blog.mises.org/14914/intellectual-properganda/comment-page-1/#comment-744696“Well, that’s better than pedophilia, I guess. (See Absurd Arguments for IP.)”
So I’m simply asking what you call a property ethics that requires that a roducer transfer his output to an external market?
Output equals income is fundamental to the concept of economic calculation, right?
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Wildberry:
OK, so you’re referring to externalities and using Mises’ somewhat antiquated terminology. Fine.
“Without appeal to morality or utility, I have simply stated that production for external markets is in fact, slavery.”
As far as I can tell, in the current context what you mean by this is that producers of goods which require substantial intellectual input create benefits that are widely reaped and that the producer cannot be compensated for unless there are institutions like IP law. Furthermore you find something morally objectionable about this state of affairs (otherwise why use loaded terms like “slavery”?). Apologies if I’ve misunderstood, but my response is, so what? Many actions have positive spill-over effects, it doesn’t follow that the recipeients of such spill-over have violated any property right of the spiller.
“Output equals income is fundamental to the concept of economic calculation, right?”
Not really, no.
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Beefcake,
Thanks for the reply. Perhaps we can get back on track.“OK, so you’re referring to externalities and using Mises’ somewhat antiquated terminology. Fine.”
Antiquated or not, (I find them surprisingly useful and quite relevant to the contemporary world) I am making a simple point about the relationship between property rights, and economic calculation.
“As far as I can tell, in the current context what you mean by this is that producers of goods which require substantial intellectual input create benefits that are widely reaped and that the producer cannot be compensated for unless there are institutions like IP law.”
Not at all. You are referring to a secondary effect which Mises also discusses. I am referring to a direct analysis of human action, and the rational process that precedes an act. This involves an economic calculation that weighs the subjective value of a potential transaction which is, in the final analysis, a cost/benefit analysis.
It is relevant to understand what factors are taken into account during that calculation, especially with regard to external markets (and costs).
If I own a factory and the air pollution I create is not attribute back to me, then that cost is externalized, and I treat it as such in my economic calculation of cost/benefit of running a factory. This is bad (i.e. contrary to free market operations), because it does not attribute to me the real costs of running that factory. This makes my profits greater at someone else’s expense.
It also works in the other direction. If I own a factory and all of the costs are internalized (meaning there is no externality I can attribute them to), and my output is not attributable to me (that is, it is attributed to an externality, i.e. external market; someone benefits other than me), then I am producing for an external market. My output does not equal my income. This fact must be integrated into my economic calculation of cost/benefit.
Mises is simply saying that these are economic factors, and affects the economic calculations, and as such have economic effects. This is reflected in the praxeology of examining human action, and the catallactics of examining economic exchange.
In this analysis, he makes a direct reference to how this affects the IP problem. That is a very interesting section as it relates to this discussion of IP, property rights, and the catallactics in looking at the impact with and without IP laws which assign property rights to protected works.
“Furthermore you find something morally objectionable about this state of affairs (otherwise why use loaded terms like “slavery”?).
If you are calling it a cheap trick, I agree, I am guilty.
I was reading a section of Touchstone discussing negative and positive rights. She refers to external markets by another term; “unilateral transfer”. When a producer puts his “output” into the market, without “income” coming back, (like a charitable donation), he is making a unilateral transfer.
She made the comment that it is a practical definition of slavery. I borrowed the argument, and applied it to the Mises terminology of producing for external markets. I used the term for its shock value.
It worked, I guess, because Kinsella jumped in right away and attempted to ridicule me without even reading anything that led up to that statement, by adding me to a list of absurd IP arguments. Oh well, live and learn.
“Many actions have positive spill-over effects, it doesn’t follow that the recipeients of such spill-over have violated any property right of the spiller.”
I agree. It is possible that an output, for which I am compensated in the market in a normal way, also has external benefits to those who do not compensate me. That is part of the cost/benefit analysis. Maybe you can think of this as “leakage”, in the sense that if everyone paid somebody for the benefits they received, there would be 100% accounting for everything.
But in reality, if I write a great book that changes the world for the better somehow, I don’t own a piece of this general improvement, even though there is clearly a benefit and it can be somehow attributed to my book.
To be clear, I am not saying that IP laws should seek to capture any and all “leakage”. I am just saying that if I had no market mechanism to be compensated for my output, (i.e. despite the fact that I wrote a book that changed the world, anyone could freely copy it from the first copy sold, thus externalizing the income coming back to me, the author) it would have an effect on the economic calculations of all concerned.
The way we have traditionally handled this problem is by declaring a property right in that book. Once that step is taken, it is handled in the market consistently with how other property is handled, i.e. torts, property law and contracts.
“Not really, no.”
I am a baker, I produce bread. That is my output. Eating the bread is my income. If I eat it all, there is not profit. If I make more than I eat, I may sell it. If I sell it, to who should the income of my output be attributed?
If I contemplate a business plan whereby I will be able to produce 100 loaves of bread, but there is no way that I can enforce my property rights in that output (just go with me here), how would I conclude that baking bread is going to improve my satisfaction beyond what I can eat?
This is the fundamental purpose of property rights. This is why they exist. If they existed for the wrong reason, even, they would still be necessary for a free market in bread to operate. Mises also makes this point clear in his section on property.
If I went ahead and produced bread anyway, for whatever reason, it would be for the service of an external market, it would be a unilateral transfer, it would be charity.
If I was forced to make bread for an external market, I would be, for all practical purposes, a slave to an external market.
If I developed an ethics which declared that bakers must be willing to bake bread for external markets, I would be advocating slavery.
That word has strong emotional content. Why? Nobody in their right mind would agree to be a slave.
Does this reasoning seem absurd to you?
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Wildberry,
Sure, a particular allocation of property rights will affect the market for things delimited by those rights, and thus any profit-and-loss calculations to evaluate actions with those things. I didn’t think that was really the issue here?
“If I was forced to make bread for an external market, I would be, for all practical purposes, a slave to an external market.
If I developed an ethics which declared that bakers must be willing to bake bread for external markets, I would be advocating slavery.”
I’m sorry, but this is hyperbole and pretty sloppy. Who’s talking about “forcing” anyone to do anything? How is that relevant? At any rate, why don’t you simply say, “if the baker is forced to make bread, he is a slave?” That would be an accurate statement (if still irrelevant). Why do you want to keep introducing externalities? I suspect it’s because you ultimately want to appeal to a utilitarian defense of IP but you’re aware of the problems there. Hence the introduction of market “inefficiencies” that can be “corrected” with suitable legislation, etc.
Bottom line is this: let’s say the system of ethics under consideration says that a producer has no right to reap all of the benefits that his product brings to the world. There’s only one question that has to be answered: is that system legitimate, or not? If it is, then these questions about external economies are of no relevance.
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Beefcake,
Thank you.“I didn’t think that was really the issue here?”
The IP debate has been characterized by a discussion of whether or not property rights in IP is justifiable, based on the Rothbardian/Kensillian notion of homesteading as the only legitimate means for establishing legitimate ownership.
Second, there has been a general distinction made regarding the scarcity of ideas, and how the properties of replication affect scarcity. This argument presumes notions concerning the relationship of ideas and IP law which does not exits. Ideas are specifically excluded from protection.
So, the means of establishing property rights and the issue of how IP differs from other property is relevant. If it is relevant, it should also be relevant economically. That is what we have been talking about; how the delineation of property rights impacts the economic calculation, relative to allocating cost/income to internal/external markets.
“I’m sorry, but this is hyperbole and pretty sloppy.”
Perhaps, but I’m just trying to explore this with you. Bear with me a minute.
“Who’s talking about “forcing” anyone to do anything? How is that relevant?”
I am not suggesting that anyone is actually going to force anyone to do anything. I’m just trying to illustrate the point that if I tried to force you, you would recognize it as coercion of a particular kind.
The real issue I am raising is what would be the impact on your own calculations if I tried? If you could choose, you would not choose this course of action, one that leads to coercive production.
“At any rate, why don’t you simply say, “if the baker is forced to make bread, he is a slave?”
OK, that works for me.
“Why do you want to keep introducing externalities? I suspect it’s because you ultimately want to appeal to a utilitarian defense of IP but you’re aware of the problems there.”
You got me. I am testing whether the objection is supportable, in the way I am making it. It is easy to say, “I am making a utilitarian argument”, and pigeonhole me in the “absurd” category.
However, I am asking, what is absurd about an argument that shows that, given the choice, a person would not use his means of production to produce for an external market. That is the result of a failure (refusal, rejection) of recognizing property rights in IP. This is precisely what Mises said as well. His argument makes sense to me.
I am open to understanding where I’m wrong, but I don’t see it. That is why I value this discussion, and for your interest I am grateful.
“Hence the introduction of market “inefficiencies” that can be “corrected” with suitable legislation, etc.”
Please observe that I am saying the exact opposite. Denying property rights in what by any other measure would be treated as property, intervenes in the free operation of the market by creating an externality for the producer; one which doesn’t exist in any other domain of property. This is reflected by the position for say copyrighted material, by the nature of IP (involving somehow an argument that “ideas” are involved), it cannot be property.
I am asking you (or anyone) to make an argument showing me, based on the point of departure I am offering, why not?
I am not departing from a position which assumes Rothbard’s ethics of property. I am not saying that “society requires it”. I am approaching the problem by looking at ALL property based on Roth bard’s ethics of property, and finding that it doesn’t even apply to real property, (meaning land). It is not a workable ethics for how property rights are established. Furthermore, how they are established is not nearly as important as establishing them such that the free market can operate.
“a producer has no right to reap all of the benefits that his product brings to the world.”
As I said before, I agree with this statement. Even if I didn’t, I have no idea how a system of ethics could possibly account for all benefits to everyone. That is unrealistic and unnecessary.
In law, there is a concept of “proximate causation”, which I discussed somewhere on this blog. It is the traditional way that the law deals with this problem. It is assumed that any act has causal links that stretch infinitely into the past and future. The question that is asked is, what specific acts were proximate (near and closely related to) to injury? Something like this is what I’m talking about.
To continue the baker analogy, if I sell bread, the children may be better nourished, learn better, and live longer. It would be ridiculous for me to claim a percentage of every person’s income that ate my bread. It is enough to establish that I have property rights in the bread up until the moment that I receive payment. From then on, the benefits accrue to the person who paid.
But this analogy cannot be extended to IP without further analysis. The ease and cost of replication becomes a factor in how the property rights are designed and how they operate. Land cannot be replicated. Cars can, but it is very expensive. Books are cheap to copy, especially today. Ideas are free. An ethics of property rights must comprehend this factors.
The question I am asking is this: why should the fundamental nature of property be adjusted according to the ease by which property can be copied? It seems to me that the attributes of property (definition, enforcement) must be adjusted where such replication costs are an issue. Copyrights and patents are such a case. Land is not. All of these categories are still property by all meanings of the concept.
Tucker and Kinsella used the “magic bagel” analogy to make their case about scarcity and property for things that can be easily copied. This is wrong.
“is that system legitimate, or not?”
Yes, that is the question, but I am asking it backwards. I am asking, what is the justification for excluding certain tangible goods from the category of property, given that such exclusion creates external markets, which undermines the normal functioning of a free market?
This has nothing to do with what the “cure” is, legislation or otherwise. I have looked at this problem from a variety of angles, and no matter where I start, I keep ending up at the same conclusion; there is no rational basis for making an exception to IP relative to property rights.
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Stephan,
For an IP guy, you sure raise a lot of IP questions that don’t seem to wash. I’ll defer to your expertise, but I don’t get it.
Isn’t this where the phone was left in a restaurant and it got in the hands of Gizmod (they actually paid $5,000 for “abandoned” property, right?) and they released information and Apple took action against them?
This would be a trade secret action, right? The issue would turn on improper means. I’m sure Gizmod argued proper means, and it seems they would have a good case. They published information. From that point anyone who acquired the information would have done so by proper means. Also, since you can’t put the genie back in the bottle, the damage resulting from publication would be on Gizmod, if they lost their case.
I can see no implications for the general public. It would be hard to imagine how such a finding by a judge would not be an abuse of discretion. There would have to be a court order against “all potential iPhone consumers now and forever” It would be impossible to issue a court order against parties that were not afforded due process, right? This did not happen, did it?
Plus, the order would have to be based on a legal finding against the parties so ordered. It would have to be a finding that supported a legal conclusion that “a class” of consumers violated trade secret laws. That didn’t happen, right?
In any case, let’s say he did. How could that possibly be enforced? Apple may be able to give some circumstantial evidence to show abruptly falling sales, but that evidence would go to damages against Gizmod, not individual consumers. Such an order, if it existed, would be meaningless in actuality. Unenforceable court orders are rarely (ever?) issued.
So, did the judge order any consumers to do as you suggest? Could he? Would he? I fail to see how this argues against trade secret laws. They don’t and didn’t operate as you suggested, so what is the value of using this example to show how the logic of IP works?
The article does imply that the Feds overstepped their constitutional search and seizure powers, but there is the problem with the supremacy of federal laws v. state shield laws.
Finally, you argue in your cited article that this is an issue of contract, when is in fact not. Of course you know that third parties not in privity are not bound by a contact between principals. Therefore “title” cannot pass to them under any circumstances. How could it?
How can parties not privy to a contract be swept up into terms of a contract? Only if the contract terms become law. Laws, in practical terms, are duties which automatically apply to all “qualified” actors uniformly and inclusively. The operate within a “jurisdiction”. (I know you know all this, but for clarity sake…)
While it is true that IP laws grant property rights in intangible goods (what you imprecisely call “ideas”), they are only enforceable as to the tangible goods into which they are “affixed”. The fair use doctrine permits certain uses, and prohibits certain others, especially copying and commercial publication or use.
So for a practical matter, if someone acquired a trade secret through proper means, including reverse engineering, there is no protection for the trade secret rights holder. If it was a patent, it cannot be acquired in this way, as it is an absolute, limited monopoly. So a judge would probably issue an injunction against any further commercial use.
Parties without malicious intent would probably just have to surrender something, or desist from further commercial use of the patented work on the theory that they don’t own it.
How would they? Homesteading theory? So what’s the problem, again?
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Stephan,
Sorry it took me a couple of days to respond.
“I don’t konw what you mean by ‘wash.” Be clear.”
Sometimes your descriptions of how the law operates and my understanding don’t match up; i.e they don’t “wash”.
“This squishy type of talk is typical of IP advocates”
Although perhaps imprecise, in a layperson’s sort of way, it seems inconsistent to claim experience and knowledge on the one hand, and to deny any presumption of logic within existing law, on the other. As an attorney, I’m sure it gets tiresome to constantly address the uninformed use of legal terms and concepts, but this is a site involved in the enterprise of education. That is an opportunity, perhaps, for someone as knowledgeable as you to educate the rest of us. Perhaps that is your intention, after all?
Also, it would be more in keeping with the spirit of my postings if you would consider me not so much as an adversary “IP proponent”, but rather as a person advocating a position for the purpose of discussion. I give you and others ample opportunity to contrast your “precise” reasoning for my “squishy talk”. Why not take advantage of that opportunity?
Instead, I somehow get the feeling that you are shouting at me, and others. Any way to ask you to take a slightly more friendly tone?
“That said, to advocate IP you better know what the hell you are advocating, which most IP advocates do not.”
That said, it seems reasonable that we begin our various debates concerning the merits of IP law by first establishing a common, accurate understanding of what it IS, and how it is SUPPOSED to operate as designed. If that understanding is misrepresented by obfuscation, intentional or otherwise, it casts some doubt on the validity of arguments on one side or the other; that is, arguments for or against IP sharpen their knives merely for a straw man.
I get the impression that your zeal against IP might be causing you to take liberty with the explanation of how the law actually operates which in turn is read and comprehended by mostly laypeople who likely have never read the law. They depend upon your explanation, somewhat, as to what the law actually says and does. After all, you are the expert, and people rightfully grant you a certain amount of trust that you will be fair.
That would be, it seems to me, the intellectually honest way to begin a criticism of IP. However, it seems on occasion, if not a consistent mark of your style, that you cast your “opponent” in the most negative light first, by creating impressions of what the law does that are at the least biased and at worse a misrepresentation of the facts, in order to make your “client” look more reasonable; understandable in the courtroom context, but hardly useful in an academic one. It is reason, not advocacy that matters most here, IMHO.
One of the most blatant examples of what I’m talking about is all the effort you and Tucker have put out to create the impression that “Ideas are free, so why should IP create property rights in ideas?” You know quite well that ideas are specifically excluded from copyrights and patents, and very tightly limited in trade secrets, which completely legitimizes the conduct of reverse engineering. To represent otherwise is misleading at best and deceptive misrepresentation at worst.
“Wrong. The first person may have. NOt those down the chain.”
To be precise, you are right. The actual issues are ones of accidental disclosure, notice and continued disclosure. “Improper purpose”, as a term of art, is reserved for conduct that would be illegal or otherwise professionally unethical, and is defined in the Trade Secret section of the California Civil Code under §3426.1.(a) I’m sure Texas has a similar statute, given that the source of the language is the Restatement, and it reads as follows:
“(a) “Improper means” includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. Reverse engineering or independent derivation alone shall not be considered improper means.”
Since it is a term of art, I guessed you would recognize its use, even if improper and squishy. When responding to you in the future, I will be more legally precise, promise.
Anyway, no doubt the guy who “lost” the phone probably lost some other things too. I presume you mean that the first finder of the phone may not have had notice, but then again he sold it for $5,000. Next, Gizmod paid it, so it would be hard for them to deny notice. Then people read it in the publication. What happens to them under current law? I think the answer is NOTHING, just as would be the case in the absence of IP laws.
“Anyway libertarianism is about justice and property rights, not about making sure people acquire information by “proper means” (whatever that means).”
Oddly, a point that you seem to purposefully overlook, or at least refuse to acknowledge, is that I have never argued against justice or property rights. What could you possibly mean by this comment other than 1) I must think libertarianism is about “proper means” of acquiring information (whatever that means), or 2) I am not qualified to be a libertarian, because I don’t support property rights or justice. Does that seem fair and just representation of what I’ve contributed to these discussions, if you even consider that a contribution of any kind.
“Same, then, with patents: if third parties have the information, they can use it.”
You saw the chance so you took it. Of course I wasn’t commenting on the legitimacy of property rights in IP, I was saying that the existing law has something already worked out to assign liability for injury, presumably to Apple. Findings of liability here, under no result from these facts, would likely reach readers of Gizmod, correct? Yet you implied they would. Wouldn’t they be free to use what they learned to make purchasing decisions under current IP laws, just as they would under a no-IP legal system?
“If the information was released by the inventor (say, by selling a product in which inventive designs are obvious) then it’s his “fault.” If an employee reveals it, it’s his fault, as in the trade secret case. In both situations the third parties are out of it and should not be enjoined or liable.”
Are you saying that the person who found it and Gizmod (not inventor or employees) are excused from any liability? What about notice and continued disclosure? We agree about the readers, they are out if it under all circumstances.
“Then you are completley ignorant of the implications of the very law you seem to be trying to defend. This is an outrage. Know what you are talking about, or stay out of it until you have learned. Have a bit of humility. Why would you weigh in on a serious political topic in an opinionated way when you admit you are utterly newbish and ignorant? O! this movement of ours!”
Well, thank you for pointing it out with such knowledge, clarity, and humility!
Of course there are implications of the existence of trade secret laws IN GENERAL. If they didn’t exist, there would have been no court case. We wouldn’t need to have this discussion. But this conclusion is not fairly advocated from a position of reporting that an outcome was produced from existing law that DID NOT ACTUALLY HAPPEN.
“HELLOoo! THIS IS WHAT PATENT LAW DOES!!! Do you not get my point??”
Is your point that such a lawsuit never should have happened in the first place? Is it that the public would be better served if it didn’t? That sounds like a utilitarian argument that favors the non-inventors over the inventors. Is that your point, inventors require no protection at all, have not rights under any circumstances? If they can’t figure out a way to protect their economic interests in the absence of IP law, too bad? Then yes, I think I get your point.
My point is to ask this question: Is it possible, under any circumstances, giving the existing law a fair reading, that a fair and just result can be obtained? It seems to me that the answer is generally yes. However in some instances, the answer may actually be no. It would be useful to identify those cases.
You make it very difficult to separate the “we have IP because we have the State” argument from those which identify specific outcomes of current law that are specifically unfair or unjust. That is what I’m interested in understanding. That is why I push back; to learn.
Regards, and Merry Christmas.
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Stephan,
“Now, Balph sneaks into Galt’s house and steals his computer, and later he discovers all the gay porn on Galt’s computer.”As I’m sure you know, counselor, at this point Balph has liability to Galt as to the computer, and as to the use of the information on that computer. It doesn’t really matter whether it is porn or Galt’s bank accounts. If the scenario ended here, civil remedy would be limited to damages calculated on the basis of simple property law and torts, in addition to any criminal charges, which may be brought against Balph by the state.
“So he sends it to Wikileaks and soon everyone knows Galt is gay.”
As you also know, this act brings defamation laws into play. Given the nature of Wikileaks, this would probably be sufficient to establish malicious intent as to Balph, entitling Galt, a public figure, to punitive damages. This also falls under tort law.
If Wikileaks publishes it knowing that it was defamatory, they are implicated as well. So far, this has nothing to do with IP laws. If you are thinking of moral rights in IP law, that only applies to visual arts, which are not in play in your scenario.
“Soon the movie parts for hetero leading man that he was getting dries up. He loses tens of millions as his price plummets.”
This would figure into past and projected damages. As you know, damage to reputation is a bigger factor when your reputation has a large role in your employment opportunities. For example, a banker who has his honesty and trustworthiness slandered suffers greater damages than say, a garbage collector, where it is a lesser factor in future employment opportunities.
“Without this “illegally obtained” evidence, he would have hired Galt. But now he doesn’t. He bases his actions on information he has, that is the result of a crime.”
One cannot “un-possess” information once obtained. The best that can happen is that its use can be constrained by way of applicable laws, for example discrimination laws. In this case, if the producer can be shown by Galt to be discriminating on the basis of sexual preferences, he would have a civil rights action. Also, especially in today’s social climate of diversity and political correctness, the producer would likely suffer other impacts (boycotts, etc) for his discriminatory practices.
Therefore, the producer would find himself constrained for taking overt action against Galt based on the information that he was gay, both legally and economically.
What, pray tell, does any of this have to do with IP?
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Stephan,
“This is irrelevant; the revealed information could be anything useful”
OK, but it was your scenario. What is relevant includes what the “information” is, how it was obtained, and what use it is put to by the person who has it.
For example, if your scenario was an insider trading fact pattern, it would follow a securities law theory. If it was a trade secret fact pattern, it would follow trade secret legal theory. Facts matter, otherwise we would need only one law: “Thou shall not steal”, for example.
“Further, truthfully revealing someone is gay is not defamation, since truth is a defense.”
Of course you are right. I wasn’t attempting to try your hypothetical case. I also didn’t use other possible theories of prosecution. I was just simplifying. Sorry.
***“If you are thinking of moral rights in IP law, that only applies to visual arts, which are not in play in your scenario.”
***““Soon the movie parts for hetero leading man that he was getting dries up. He loses tens of millions as his price plummets.”I think you are confusing the point, (not that you are confused) but it’s not really important. The IP moral rights here would go to attribution to Galt for his roles in movies, whose rights are probably held by the studio or producer, etc. They are not a factor in your scenario. Your scenario goes to Galt’s damaged reputation and damages to his livelihood. IP moral rights are not relevant.
“Yes. So this affects how much Balph owes Galt. Balph. The trespasser.:
Yes.
“BINGO. This is why if I have information I can use it.”
Sorry. Possession of information does not equal right to use it. If you don’t have the right to possess information because it belongs to someone else, such use is a misappropriation. Insider trader laws are one of the most commonly understood examples of this.
“Red herring. Take the oil example I gave in AIP.”
With all due respect, I think you are conflating causalities and therefore your conclusions are wrong.
Cooter trespasses as to Jed. He has liability for damages to Jed. Let’s leave the issues of how those would be calculated and whether they might exceed Cooter’s ability to pay aside. However, the damages associated with trespass would be nominal. They mainly go to prove illegal access. He also improperly acquired something of value to Jed; information about the oil. His acquisition of that information was unlawful. Therefore his use of that information is illegal, and goes to damages as to Jed, not the neighbors.
Had Cooter acquired this same information through legitimate means, i.e. he hired his own geologist, nothing in this scenario would be illegal. Jed would be screwed and would have to pay a fair price. One could argue that Jed could not expect to keep this a secret forever; there is an argument for “inevitable discovery”, to borrow the term.
I can’t think of any basis by which Jed could copyright this information, can you ? Trade secret? I don’t think so. Patent? Certainly not. The analogy is lost on me.
The case for the neighbors would turn on the issue of whether they obtained their information by improper means. Reading it in the newspaper was certainly not improper, and so they are free to act on this information until such time as they sell, or refuse to sell to Jed. Until they sell, they are the masters of the price. No court would direct them as to the value of their property in the absence of an imminent domain action, which is not relevant here.
“By the logic of IP they could be compelled to sell at the lower price they *would* have sold for absent the “stolen” information”
This sounds like a remedy in contracts; putting someone in the position they would have been, in the absence of breach. I don’t think that applies here. The neighbors were not in contract, were they? Since there was no privity with Jed, there would be no remedy for breach.
“the producer can be compelled to pretend he doesn’t know Galt is gay and hire him as he originally would have.”
The produce cannot be compelled to know or not know something. It is not about knowing. It is about using what you know. Had the producer found out through proper means, he would have been in the same boat. His ability to act on that knowledge would be limited by discrimination and employment laws, as well as public opinion.
“thisi s what patent law does.”
Galt, the producer, nor Jed patented anything. I’m confused.
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Stephan,
Thank you for this thoughtful and helpful post.
“I think those who advocate IP or oppose its abolition have the burden of knowing what they are talking about and of having an argument for it.”
I couldn’t agree more. I would add that there ought to be, within a context of this discussion thread at least, the freedom to explore that understanding. This might be accomplished by asking questions requiring an advocate to defend their positions, or making statements and inviting others to challenge them on some reasonable grounds. Both are conceivably legitimate forms of inquiry.
Fundamental to this process of inquiry and relative to IP laws, it seems reasonable to start out with a fair reading and understanding of what the law says and how it operates. Without that foundation of common understanding, advocacy for or against its legitimacy is rendered less meaningful. I think it would be helpful to clarify the distinction between arguing about what the law says, and arguing that it should stay, go, or be modified. I think this is important, and so I will do my part to make sure this distinction is clear.
“I became anti-IP because I was pro-IP and a libertarian and an IP attorney. Why would I misstate the law? I tried to find a way to justify IP law. To do that I had to know what it was, and try out the various attempts to justify it.”
I hope you can accept my statement that this is precisely the process I am engaged in. To confess some personal information about myself, I am interested in libertarian thought that examines the intersection and interactions of economic policy and laws. I am not entirely a lay person in this regard, as I have some experience in the study of general law. I am not a practicing attorney however, so I only mean to suggest that I hope that one dimension of our conversation might include legal arguments, as well as ethical and libertarian ones.
I am only taking the advocate position because there seems to be less enthusiasm for arguing that side of the debate, with some notable exceptions. I am taking on the client named “proponent”, while you represent “opponent”. Perhaps I will tell what I actually believe at the end of the debate, but at the outset it is not relevant.
It would be helpful if we could include in our debate legal concepts like “unjust enrichment” or “foreseeable reliance” as a rational for “equitable estoppel” without having to explain to each other what that means. That would enrich the debate, in my opinion. If we are going to debate the law, it seems only reasonable to be able to depend on existing legal concepts as one useful tool of analysis. Do you think that is possible, even if you considered my knowledge to be incomplete or inaccurate? I would hope so, and that your reaction would one of offering a correction to my misuse rather than to reject any use at all.
This legal concept is of particular interest to me, for example, because it intersects with Mises’s treatment of “external markets” in an economic context, and Touchstone’s use of “unilateral transfer” in an ethical context.
“Libertarians who are unclear about how IP operates should for this reason alone be skeptical of it.”
I agree; however skepticism cuts both ways. If I hold certain beliefs about liberty and property which we might agree are consistent with libertarian thought, it seems proper for me to be skeptical of both the wisdom of a law, and the wisdom of criticisms of it. I suppose it is ultimately a matter of style, but my style is more akin to a scientific method of inquiry. Assertions are theories, upon which evidence and reasoning are applied and evaluated as either supportive or non-supportive of the theory. Any system of human knowledge is enriched and expanded by exposing it to this process of inquiry and justification. IP is no exception.
Unlike you, I am not pursuing a career as an IP lawyer. I am finding, however, that it is an effective vehicle for examining the principles of libertarian thought, Austrian economics, and my understanding of the law. By engaging in this discussion, I am learning. If I am learning, I can suppose that those reading or otherwise participating in these discussions might be as well; so much the better.
“It’s a new right invented by state legislation, and no one really understands it; justifications for it are all over the map.”
I agree, except for the “new” part. For me, the fact that IP law is dealing with these weird fact patterns of software, derivative works, etc. is a phenomena of rapidly advancing technology. I have never taken the position that in every case, the legal system has always gotten it right.
On the other hand, if there is any ethical foundation for IP laws, it should be related in some consistent way to an expression of ethics that reaches far back into human history. The citations by Touchstone having to do with rights of attribution in ancient societies related to songs and stories would be such an example.
Ethics, in their nature, are as old as human society. Contemporary law cannot long survive if they place themselves in direct contradiction to reasonable, acceptable ethical principles. IP law is merely a modern expression, with distinctions relevant to contemporary fact patterns. There should be, if the ethical rule is likely to be legitimate, some sense of continuity with ancient systems for peacefully resolving human conflict among cooperating humans. One might even describe one’s sense of continuity with an accepted ethic, “common sense”. This is why, in my opinion, common sense is a legitimate indicator of where the “nonsense” might be hiding. It is the obligation of rational inquiry to prove it.
“Questions are fine but the proper stance for a laymen who do not undersatnd the law and who are confused about whether or if it is jsutified is a questioning humble stance.”
Fair enough. Again, this cuts both ways. If you are willing to engage in these discussions with laypersons, then you also have to be willing to deal with a certain amount of imprecision in the use of the language and in the understanding of subtle legal distinctions. If you are not willing to engage on that basis, then you have the right to withdraw. It does not seem reasonable to expect everyone who is interested in weighing in on this topic to have a perfect grasp of the subject, if there is actually such a thing.
“Nonsense.”
OK, here is my problem. You are asserting that ideas are non-scarce, their use and copying do not diminish or conflict with the original and therefore a law that establishes property rights in ideas is unjustifiable, because it interferes unjustly with the property rights of the copier, who owns those tangible goods which are themselves the means of copying. Because IP law, copyright for example, establishes property rights in ideas, this law is unjustifiable because it aggressively violates the legitimate rights of property ownership. This ownership is only legitimately established by the act of homesteading scarce resources, or by their legitimate transfer. I hope this is a fair representation of your position.
So, in order to evaluate your position, I go to the laws of copyright and find that §102 defines what is protectable are “original works of authorship”, and §102(b) says “In no case does copyright protection for an original work of authorship extend to any IDEA, PROCEDURE, PROCESS, SYSTEM, METHOD OF OPERATION, CONCEPT, PRINCIPLE, OR DISCOVERY…”
How is it that I should reconcile your position and what the law actually says and does?
It appears that copyright law makes an important distinction between “ideas” and “original works of authorship”. One cannot simply ignore that distinction in order to argue that IP laws should be abolished, on the basis that they are doing something which they clearly attempt to avoid.
Therefore I would suggest that as the proponent of an anti-IP position, you have the burden to show where and how this inconsistency between what you advocate relative to a law, and what that law actually says and attempts to accomplish, can be resolved. I am asking with utmost humility. Really.
Once accomplished, it seems that we would be in a better position to debate the law on the merits, but not before.
“I have no idea what you mean since you are leaving it up to implication”
That is true. In the future I’ll just depend on you saying what you mean, and if I don’t understand, I’ll ask you about it.
Thank you for your interest and patience. I do appreciate it.
December 22, 2010 at 6:49 pm
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Sorry, horribly backlogged. Maybe over the holidays.
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No problem.
Merry Chistmas to you both.
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Still waiting, Silas.
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For what? A better way to complete the sentence “Silas Barta is the intellectual equivalent of …”?
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No Silas, an answer to my question, which I’ll conveniently and considerately repost for you here:
If I steal some factors of production and use them to create something, instantiate an idea, whatever you want to call it, am I then justified in preventing someone else from copying my idea?
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Stephan,
“…those who say we need a criminal state to enact positivist artificial law that creates huge zombie bureaucracies to grant ad hoc monopoly privileges to favored supplicants in the name of free enterprise, innovation, private property, and competititon”
And who might “those” be? Certainly not me. I have no intention of defending such a position, even if I could sort it out.
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good, then I’ve flushed you out as being anti-IP. good to hear.
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Ha! Please don’t put words in my mouth.
I’m the guy that produces screed, remember? It’s already crowded in here without you stuffing them in from the outside!
December 14, 2010 at 6:52 pm
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>>What right do I have to complain of Big, Inc using their resources to reach customers I could not?
I assume the argument from the innovator’s point of view would be that Big Inc, by taking the idea and applying its inherent position of advantage to reach customers they could not, completely diminishes the chance for the innovator to ever develop their business to a point where they COULD reach those customers.
>>If I cannot increase sales by improving an item further, or someone has made my product irrelevant with a superior alternative, then I am on to something new, again in deference to customer feedback.
Part of the problem is that without IP laws the incentive to move on “to something new” is greatly reduced. An innovator who pours their sweat and blood into a project, only to find it hijacked by interests that maintain a pre-existing advantage due simply to their capital, may “move on” once, maybe even twice, but after a while, when they watch others grow rich off their work, why bother? May as well go to work for the company that steals the ideas.
>>Having carefully proved the obvious, that is I have a viable mass market item, I can simply do an IPO, raise the money to be the conservator, and become my conservator’s competitor.
It is MUCH more difficult for a start up operation to secure financing, when it lacks the proven synergies and economies of scale of an existing ‘conservator’, than it is for the ‘conservator’ to simply take the idea and convince investors to fund it. By the time the start up operation reached a level where it was able to produce the product on the scale that the ‘conservator’ is able to, the ‘conservator’ has already used its inherent position to secure market share and profit.
A start up is a much riskier investment, not just because of the product, but because of what is involved to build the business to make it available. The ‘conservator’ already has these in place.
As an investor, where would you be more likely to put your money?
In an individual who comes to you with only himself as the mode of production, an unproven track record regarding management, but a great idea and long term promises?
Or a multinational company with the infrastructure already in place, with the same idea, and the ability to make it happen almost immediately?
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