“Why ‘Intellectual Property’ is not Genuine Property,” Adam Smith Forum, Moscow

As I noted in a previous post, the 3^rd Adam Smith Forum was held earlier this month (Nov. 12, 2011) in Moscow. This event was organized by the Center for the Philosophy of Freedom, the Libertarian Party of Russia, and others. The Chairman of the ASF Steering Committee was economist Pavel Usanov, head of the Hayek Institute for Economy and Law, and Andrey Shal’nev, head of the federal committee of the Libertarian Party of Russia, was its co-chairman. I was invited to speak but could not attend in person, so my 47-minute speech “Why Intellectual Property is not Genuine Property” was presented remotely, with Russian subtitles. It is below, along with the original version and the English transcript plus the Russian translation, which was prepared by Maxim Tulenin, head of the Moscow branch of the Libertarian Party of Russia. Pictures from the event are here. The program with the list of speakers and topics is here (English translation).

Tulenin told me after the event:

I’m head of the Moscow branch of the Libertarian Party of Russia and I did the translation of your very consistent and convincing video lecture into Russian. Let me thank you, on behalf of the steering committee, Andrey Shal’nev and the participants for your contribution to the Forum, it was a great success with the audience, especially with the younger generation. I also tip my hat to you for the analytic case you’ve made against “intellectual property” because it has provided me with a pattern of argumentation suitable for my own Internet debates.

One of the participants in the Forum provided a brief overview of my talk (rough English translation). The Forum’s promo video excerpt, with Russian subtitles, is below, followed by the subtitled version presented at the Forum; the original version of my speech (without subtitles) follows these. The audio file is here. The English transcript is below, as is the Russian translation which was used for subtitles for the version presented at the Forum. The powerpoint presentation I used is also streamed below.

Stephan Kinsella speech at IIIrd Adam Smith Forum from ivangoe on Vimeo.

Why “Intellectual Property” is not Genuine Property

Stephan Kinsella

Libertarian Papers, C4SIF.org

Adam Smith Forum

Moscow

November 12, 2011

(Edited transcript)

Abstract: Intellectual property rights, or IP—primarily patent and copyright—has long been viewed as a legitimate type of property right by libertarians and other defenders of capitalism and free markets. I argue that IP rights are not genuine property rights, and that these laws should be abolished. This issue is relevant to Russia and Adam Smith Forum members because of the pressure by the US on Russia and other countries to adopt western-style patent and copyright law. But the west has attempted to export many other laws and policies to other nations, many of which are not compatible with a free market, such as antitrust (competition), antibribery, tax, narcotics, and central banking laws and practices.

In this talk I provide an overview of the nature of patent and copyright, followed by a discussion of the nature and purpose of law and property rights in a world of scarcity. I argue that property rights apply to scarce resources only, to permit such resources to be used peacefully, productively, and cooperatively as a means of action. However, property rights make no sense are in fact perverse and undermine genuine property rights when the law attempt to apply them to information, ideas, and knowledge. Property rights must be granted in scarce resources and only in scarce resources if we are to have prosperity, freedom, and progress in science.

In fact, state IP rights are not genuine property rights, but are instead neo-mercantilist monopoly grants of privilege that protect favored recipients from competition. This enriches the patentees and copyright holders, and the state, but at the expense of consumers and competitors.

I also provide an overview of the history of opposition to IP law, identifying four key historical phases beginning around 1850.

I conclude the talk by observing that IP reform cannot work; the only solution is complete abolition of patent and copyright.

 

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Good evening.

This is Stephan Kinsella. I am speaking from Houston. I would like to say good evening, or good morning, in Moscow at the Adam Smith Forum. I would like to thank Andrey Shalnev, the head of the steering committee, for this invitation to speak remotely. I am sorry I cannot be there in person, but I hope that you will find this video presentation and speech of interest.

My name is Stephan Kinsella. I am a patent attorney and a libertarian writer in Houston, Texas, in the United States, and editor of the journal Libertarian Papers.

I have been a practicing patent attorney since 1994. I have been writing in opposition to patent and copyright law since about 1995. The topic of my speech today is “Why Intellectual Property is not Genuine Property”.

I would like to emphasize that intellectual property has been viewed as a type of property right for over a century now, as part of the western or capitalist free market system.

Now, I did mention that I am a libertarian. And in particular, I am a Rothbardian Austrian economist following libertarian principles, and an anarcho-capitalist. And as a libertarian and an Austrian, I am in favor of property rights and in free markets and in capitalism, if it is rightly understood. I will say I am not in favor of capitalism in the sense of corporatism or the type of cozying up between Western big corporations and the state as we see here in the United States in the West nowadays. That is a corruption of the ideal form of the free market economy or capitalism. But I am in favor of property rights.

So the first question might be: why is someone who is in favor of free markets and property rights, and a patent attorney himself, which is me, oppose patent and copyright law, so-called intellectual property law? In this talk, I would like to explain why I believe that intellectual property, primarily patent and copyright law, are not genuine property rights and why these laws actually should be abolished and why the Western style, the American type, of patent and copyright should not be adopted in China, Russia, India, and other countries in the world.

By the way, I have a presentation which I have done which I will have sent to the Forum. I don’t know if they will show it along with this speech, but you are free to access it from my website at C4SIF.org (Center for the Study of Innovative Freedom), the site for my research center. Or at my personal site: StephanKinsella.com.

Let me explain quickly one reason why I think this is particularly relevant–this topic of justifying or discussing the legitimacy of intellectual property law–to Russia and the Adam Smith Forum itself. These issues are of particular interest to the Adam Smith Forum because the members of the Adam Smith Forum are also advocates, like Austrians, of free markets and property rights. Also because the Western powers, led by the United States, are continually pushing emerging powers in the former socialist countries, like Russia, to adopt United States or Western style IP law, particularly patent and copyright. They have done this through the WIPO, through the WTO (World Trade Organization), the United Nations, and also through recent and continuing copyright and patent treaties and trade agreements, like the recently signed ACTA (Anti-Counterfeiting Trade Agreement).

So let me make it clear. As a libertarian, as a free market and a property rights advocate, we should not make the mistake of equating the American government’s laws and policies with a free market order. And therefore we should not believe that just because the American state, our government, proposes or pushes a given law or policy and tries to urge other countries to adopt it, does not mean this is actually a capitalist or a free market or a libertarian property right. In fact, it is a mistake to equate the American state with the American economy.

The American economy is at least somewhat free market even though it is a mixed economy, but the state itself, like all states, is inherently socialistic. In fact, you can think of many examples of policies and laws that the West has paternalistically pushed on other countries. We have tried to export our own laws and policies to other countries. We have been somewhat successful in doing this, unfortunately. These policies would include income tax withholding–which actually was adopted during World War II in the United States at the urging of the “free market” economist Milton Friedman, which I believe he admitted later was a mistake–the American version of anti-trust law, or so called competition law, anti-bribery laws… The American state pushed this law called the Foreign Corrupt Practices Act onto the economy in the 1980s, I believe, which prohibited private bribes by American companies to private companies overseas; this is an un-libertarian and illiberal law, but it hurt American businesses compared to their European and other counterparts who were not prohibited from engaging in these customary local bribes. In fact, in some countries you can even deduct that from your taxes as a legitimate business expense. Instead of withdrawing this harmful law, the United States has twisted the arms of other countries into adopting a world-wide treaty on corruption and bribery to get other countries to impose similar restrictions on their citizens.

Also, the American style of central banking, the Federal Reserve, was pushed on Canada in the 1930s and even Russia after the fall of the USSR.

The United States has exported its policy on how we own natural resources, say to Iraq. In the domestic United States, private land owners are the owners of the minerals and oil and gas under their land. In most of the rest of the world and in the federal government’s territories in the offshore Continental Shelf (OCS), the federal government–the state–assumes ownership of these natural resources and then grants leases to companies that come in and explore. The state, of course, takes its cut. In the BP oil disaster in the Gulf of Mexico in the last year, the federal government was the actual landlord and BP was just a lessee. But you don’t hear that pointed out. You hear BP being blamed. In any case, in the so-called “liberation” of Iraq, of course, the Iraqi government assumes ownership of the minerals, just like the federal government here does on our Offshore Continental Shelf.

And or course US drug laws are exported around the world. We have created a horrible situation in Mexico because of this, which has exacerbated immigration problems. There have been tens of thousands of murders. If Mexico or some other smaller country were to legalize drugs–as they should–then the U.S. would no doubt crack down on them for that.

 

There is the idea of managed trade. Instead of just having free trade, we have “managed trade” through NAFTA and other trade agreements, which perpetuates the idea of mercantilism.

And we had the Marshall Plan after World War II which exported some of our policies and laws onto Europe.

Finally, we have the American ideal of democracy itself which is not so good of an idea if you would just read some of the writings of Hans Herman Hoppe, such as his book, Democracy: The God that Failed.

The point here is you cannot assume that just because the supposedly capitalist United States government is advocating a law—such as patent and copyright–that it is really compatible with capitalism or private property rights or the free market. If we are going to step back and take another look at patent and copyright … And we should because there are obvious abuses and excesses and outrages that we see on a day to day basis; if you just turn on the Internet you will see Android and Apple smartphone and Microsoft suing each other in patent lawsuits; you will hear of hundred billion law suits awarded to patent trolls. You will see people being shut down in their attempts to make new music because of copyright. There seems to be something wrong. We have to ask: Are these rights legitimate? We just need to increase the enforcement mechanisms to make enforcement more efficient, maybe increase penalties, maybe put more people in jail for violating copyright and patent law. Or: Do we need to reevaluate these policies and maybe tone down their strength or maybe even abolish them altogether?

To do that, what we would need to do, especially as liberal economists and as liberals in favor of free markets, individual rights, due process of law–we need to ask whether patent and copyright are legitimate types of property rights. To do this, we need to understand what is the purpose and function of property rights in general? We need to understand what patent and copyright are, and then what property rights should be.

So let’s talk briefly about the nature of patent and copyright. There are many types of so called intellectual property, in addition to patent and copyright. These are just two types. They are the main two types, the most evil two types, the most costly and harmful two types. They are the focus of my talk and I believe should be the main focus of libertarian opposition to these types of laws, but there are other types of intellectual property as well. The other two traditional types would be trade secret and trademark. Both of those types of laws are more legitimate than patent and copyright, but we don’t have time to discuss that today. There are also other, newer types of IP, such as moral rights, and semi-conductor mask work rights which protect the way integrated circuits are laid out. There are also some newer ones like boat hull designs. Also, the entire law of defamation, which includes libel and slander, basically protects what is called reputation rights. That should also be viewed as a type of intellectual property, I believe, and it is also illegitimate.

But today, let me focus on patent and copyright. A patent is a state grant of a monopoly privilege to a patentee, somebody who applies for it, that gives them exclusive rights in an invention. An invention is a useful and new and non-obvious machine or composition of matter or process or method, for example, a mousetrap, having a useful new design, or a computer, or the functional aspects of software. Think of it on the flowchart level, a method, how you do something, where software performs a set of steps or pharmaceuticals which are compositions of matter. All these things are types of practical devices or processes. When you apply for this, the government grants you a monopoly privilege. You are the only one who can perform this invention, and make or use or sell it, for about 17 years, roughly 17 years.

 

But it has to be applied for. You don’t get a patent unless you apply for it. It is important to recognize that independent invention is not a defense. What that means is you can be sued for infringing someone’s patent even if you didn’t copy it from them, even if you didn’t learn about it from them, even if you independently invented the idea yourself. What this patent right does is: it gives the patentee the right to go to court to extract money damages, sometimes called “royalties,” from an infringer or they can even get the court to issue an injunction forcing the competitor not to make or use a given product or process. Basically, it protects a patentee from competition by making it more difficult for others to easily copy its product. The example I gave earlier is the smartphone wars where Apple and Microsoft are suing a lot of Android manufacturers, like Samsung. And now Samsung is countersuing Apple for infringing its patents with the iPhone. They are getting various injunctions in Australia and Europe and other countries to try to stop each other from even introducing their own competing product.

 

Copyright is another state granted monopoly which is granted to someone. It covers their original expressions or creative works like novels or paintings or movies or music or even software code. I mentioned patent covers the functional aspects of software like the block diagram, flow chart level, whereas copyright would cover the written code because that is like writing a novel or poem. It has an expressive element.

Copyright lasts nowadays much longer. It used to last only about 14 years which, coincidentally was two times the term of a seven-year apprentice. The idea was that the artisan could be protected for the term of two of his apprentices, to train them in making his new idea. Then he would face competition. But before then he was protected. That 14 year period has been extended gradually over the last 200 years to the point now where it is 70 years after the life of the author. If you write a novel today, then it will last until your death and then 70 years later. Usually they last more than 100 years. We have an extremely long copyright term.

And unlike patent, copyright is automatic. That is, you get it just by writing down your idea on a sheet of paper. The second you do that you have a copyright on that, at least in the United States system, and I believe it is similar in most other systems in the world because of treaties that we have all agreed to that require us to have similar basic provisions that are similar in our patent and copyright laws.

Contrary to popular assumption, you cannot “copyright” something. Copyright is not a verb. It is a noun. In other words, you can’t take an affirmative step to get a copyright. You don’t have to apply for it. You do not have to put a copyright notice on your work to have a copyright. You don’t have to register the copyright to have a copyright. Most people do not realize this.

 

So it is unlike patent in that way. When people say, well, if you are against copyright why did you copyright your article? Well, I didn’t copyright my article or my book. The government gave me a copyright and there is nothing I can do about it. The patent system is an “opt in” system. You only get a patent if you file for a patent application. A copyright is not opt in. It would be better if it was opt in where you had to affirmatively file the registration application to get a copyright. But it is not even opt out. In other words, you can’t even sign something that gets rid of your copyright. The government will not let you get rid of your copyright. So I am going to have a copyright in my novel for the remainder of my life no matter what I do, even if I write on the front of it, “I hereby get rid of my copyright”. That simply is not effective. It may serve as permission for others to use it without me suing them, but the fact is I still own a copyright.

 

What copyright does is, like patent, it allows someone to be free of certain types of competition. It lets you censor other people or charge them a fee to make songs or movies based upon your novel or sequels of your novel or a painting based upon your novel and so on. This is what these laws do. They are grants of monopoly privilege by the state that allow you to petition the state courts to use force against people who are doing things with their property that you do not like.

 

Let’s step back and talk about the purpose of property and rights and laws and even government.

 

As an anarchist, I think government is inherently illegitimate, but even in a private free society with no state you would have laws, but only certain legitimate justified laws. If we have a state, then the question is which types of laws promulgated and enforced by the state are legitimate? Let’s step back and think about what in the world is it that gives rise to the need for laws and property rights?

 

There is something some of you may have heard about. It is called the Land of Cockaigne. This is a mythical land of milk and honey or infinite abundance or plenty, theorized by the Middle Age poets. It was just an idea of a land where you could have anything you wanted at any time with no effort. There was no scarcity, no shortages. Life is perfect and idyllic and there is infinite abundance and the ability to satisfy any desire at any time.

 

Obviously, we don’t live in the land of milk and honey, or the Land of Cockaigne. In our world, in the real world that we all live in, there is scarcity. What this means is you can’t just have what you want by wishing for it. It also means that if you obtain one of these scarce resources in the world–a banana, a stick, an apple, a tract of land, a log, a bucket of water–then other people cannot use that item at the same time as you. That would give rise to conflict. My use of a scarce resource excludes your use.

 

This is where we get into the Austrian or Misesean, Ludwig von Mises’s conception of Austrian economics. His view of looking at the basic concept of economics is what he calls praxeology.

That is the science and the logic, the study of human action and the implications of human action. He looks at human action in a fundamental way. What does it mean for humans to act in this world of scarcity?

It means that we have some dissatisfaction or we expect some dissatisfied state that will come to occur in the future if we don’t do something to change it, if we don’t interfere with the state of things. In other words, every human action is an attempt to achieve an end, to achieve greater satisfaction, but the action is the employing or the use of these scarce means to achieve that end. So we have to select a means that will causally achieve our end. This is exactly why we have to use these scarce means. This is why knowledge is important, or science, which is the systematic acquisition and categorization of knowledge. We need to have both property and knowledge to have successful human action. You need property because you have to employ these means. If you are not going to be fighting over the means with some other contestant, some other person, who wants the means, the property rules say who gets to use that means so that the means can be used by one person, the owner, productively to achieve their ends.

 

We also need knowledge to tell us what ends are possible, what things we should strive for, what might make us more satisfied and also to tell us what types of means will achieve our ends. This is knowledge of causal laws. This is why we need to have causal or scientific knowledge. It informs our actions. We need property rights so we can use these means that our knowledge has told us we need to use.

 

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The basic view of the libertarian and the free market advocate is that we have to have both science and property. They are like the twin pillars of human prosperity and civilized, peaceful, cooperative life. We need property to let resources be used peacefully and productively. We have to assign owners to things. This is the essence of the free market order. We, of course need science and the right to learn from each other and to discover new things and to add to our base of knowledge so that we can act efficiently and choose the right means as part of our action. This is actually the libertarian vision of the free society. It is one where property rights permit men to use resources productively and cooperatively without conflict and where science informs us how to use it.

Let’s think about how we acquire knowledge as part of human life because this acquisition of knowledge is crucial. We start out, more or less, with a tabula rasa, with a blank slate. There are many ways that human beings acquire knowledge, the knowledge that informs our human actions, that guides our human actions, the knowledge that tells us about causality and causal laws, the knowledge that we use to choose what actions to perform, what means to employ to achieve our given ends. From just experience in living, from observation of others, just from being immersed in a culture and learning from what has been developed, what has gone before. There is, of course, education and teaching informally by parents or even formally by formal education and instruction and by apprenticeships and even by employment. We learn from our jobs and also, of course, in a systematic way by the scientific method and empirical testing.

 

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The free market is also a source of knowledge. Entrepreneurs are always incentivized and motivated to try to learn better ways to use resources to lower their costs and to have better products and to attract customers to make a profit. When they do this, the consumers learn from this and benefit from it and their competitors learn, too. The competitors then try to emulate and copy and compete and sometimes improve. Then the original innovator has to improve even more. Everyone is better off. There is an unceasing striving for an ever increasing innovation, in improvement, in the desire to get profit, but in the face of always lowered profit because of competition, the threat of competition. A free society, a free market, a private property based order, has competition and it has learning and it has emulation. These are good things, not bad things.

Let’s now return to patent and copyright. The basic problem with patent and copyright, as state granted monopoly privileges, is they are explicitly designed to protect people and companies from competition. As I mentioned, the holder of the patent or copyright can use state force against potential competitors. It is basically a completely confused notion which is an outgrowth of the mercantilist idea–which were anti-competitive–of the last several hundred years.

It is also based upon the confused idea that it is sometimes wrong to learn or to actually use information in deciding how you want to use your own property, that is your own scarce resources that you have property rights in, that it is wrong to copy or emulate or to compete in some context.

 

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What it does is it uses the language of property rights in trying to say there are property rights by virtue of these laws in information, in patterns, and in designs. But remember: the entire function of property, the purpose of property, is to address the problem of natural scarcity in the real world that we live in, not the world of Cockaigne. Ideas and knowledge and recipes and designs are just knowledge that we have. Unlike scarce resources, they are not scarce. They can be used over and over and over again, infinitely, and they can be used at the same time by an infinite number of people without diminishing the other people’s ability to do the same.

 

For example, if my neighbor and I both want to make a chocolate cake, then we cannot use the same mixing bowl and wooden spoon and eggs and flour and ingredients. These are scarce resources and we each need to own our own separate ingredients and capital facilities to make the cake in.

But we can both use the exact same recipe at the same time, even if one of us learned it from observing the other. There is no conflict in the use of knowledge. Patent and copyright try to impose scarcity on things that are non-scarce. It tries to make them more scarce.

 

This is perverse, because the free market is doing the opposite when it comes to actual scarce goods. Things that are in short supply, or not in sufficiently abundant supply, like food and energy and houses and shelter and clothing, are in natural short supply or scarce supply, but the free market strives to make them more abundant in the face of scarcity. We are trying to

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overcome this unfortunate fact of scarcity. But we don’t have this problem with knowledge. In fact, we have a growing base of knowledge in society and civilization which we can draw on. In fact, it is good that we have this. It is good that we have a growing base of knowledge.

So the fundamental problem with IP is that because you really cannot have property rights in non-scarce things, they are always actually enforced against scarce things. IP is just a disguised way of undercutting real property rights. Remember, these real property rights were put in place as the civilized mechanism to permit productive, peaceful and fair and just and efficient use of these scarce resources. When IP rights are introduced, it undercuts these rights.

What do I mean by that? An IP right really gives a third party who holds the IP the right to control other people’s scarce resources. For example, in the recent case, the American singer Beyonce’ has been sued by a Belgian dancer because Beyonce’ used dance moves in a music video that are similar to the ones that were shown in an earlier video by the Belgian dancer and the Belgian dancer’s group. If the Belgian dancer prevails, then she will either get a court order telling Beyonce’ that you cannot use your body in this way, or that will take some of the money from Beyonce’s bank account, which she owns, and give it to the Belgians.

Similarly, Apple, just the other day, got a patent on using a gesture to unlock the iPhone or smartphones. If this patent is upheld and if they are successful in suing someone, they can prevent other makers from making their own smartphones with that gesture. Basically, it gives Apple a veto over how other people use their own property. A veto right is a type of property

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right. It is called a negative servitude in the civil law. What this means is that the government, by the law, has given some third party a property right in someone else’s property. That is a redistribution of property rights.

 

This is actually the reason that libertarians usually use to object to many laws like the minimum wage or drug laws or taxation or conscription or censorship or pornography laws. There we have the government stepping in and telling you that you cannot use your own body or property in certain ways. We object by saying what business is it of yours how I use my property? You have no right to veto a use of my own property. You have no right to penalize me, either monetarily or with a jail sentence, for doing something with my property that is not harming anyone else. Yet, this is exactly what patent and copyright do.

Patent and copyright also undermine science, the very endeavor of science, in a lot of ways because it restricts the flow of information. It restricts how people can use information. It distorts the structure of research and development by making companies find it more profitable to engage research and development dollars in patentable areas as opposed to unpatentable areas. Fundamental physic equations cannot be patented because they are too abstract. So you have more research, than otherwise would be, flowing into practical gizmos and devices.

Patent law also discourages innovation and research in areas that are heavily patented because the newcomer to the market, for example, is afraid that if he makes a new product in this area, like smartphones,

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he will be unable to even sell his smartphone because he will be sued by the dominant patent holding companies. So he doesn’t even go into that line of business, so, of course, he doesn’t invest in research and development in it.

Copyright also leads to distortions of the whole publishing industry: closed business models, difficult to find books and papers online. They are locked up by these publishing houses that rely upon the copyright model.

None of this should be surprising because the origin of patent and copyright actually lies with mercantilism, going back to the Statue of Anne in 1710 which was one of the early major copyright statues and the Statute of Monopolies in 1624, both in England, which was one of the early patent laws. At the height of mercantilism, in the 1500s, in England, almost every good you could imagine was covered by a monopoly that the monarch had granted to different guilds or companies in exchange for favors and maybe helping to collect taxes, such as monopolies on playing cards, leather, iron, soap, coal, books, and wine.

These companies did not invent these things. They were just granted the privilege to be the only one who could sell these things. They even enlisted the state to perform warrantless searches and seizures of their competitors to make sure that they were not violating these monopolies. In other words, along with these state monopolies during the height of mercantilism, came a lot of intrusive searches and seizures and the collaboration between the state and the industries that had the monopolies. It harmed the consumers and it harmed the competitors. France even tortured

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and executed people. They “broke on the wheel” people who had pirated fabric designs that the state had granted monopolies in. The wool exporters had the monopoly on wool exporting in England. They would collect the taxes for the king in exchange for this monopoly.

We clearly see this as not compatible with the free market and with competition and with private property rights and with capitalism; but this is exactly the situation we have now. We have mercantilism under another name: intellectual property. We have the movie industry and the music industry in the United States for example, the RIAA and the MPAA, demanding warrantless searches to stop DVD and CD counterfeiting or “piracy,” as they call it. We have private companies helping the Immigration and Custom Enforcement agency in the U.S., the ICE, seize domain names accused of cybersquatting. We have ISPs collaborating with the Obama administration and with content providers to do the same things. So we have a lot of the same things happening now as a result of copyright and patent.

 

We also have an unholy alliance between patent holders and copyright monopoly holders and the state. Microsoft, to take an example, is a profitable, successful company which has provided valuable services and products to people, but its profits are undoubtedly much, much higher than they would have been in a free market without copyright because of their ability to use copyright to stop competition or pirating or counterfeiting of their operating system which has allowed them to charge monopoly prices for this. So Microsoft, over the last few decades, has

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accumulated hundreds of billions of dollars of profits that they wouldn’t have otherwise had. Then they are able to use these profits to, number one, pay politicians in Congress in the form of bribes—“campaign contributions”–or even in the form of collected taxes. The government benefits from this by legal bribes and by taxes. They grant a monopoly to Microsoft. Microsoft makes higher than normal profits. Some of that is returned back to the state in the form of bribes and taxes. The state and its monopoly grantees benefit. The consumers don’t, the competitors don’t, and the free market suffers.

 

Also, Microsoft uses these profits to acquire patents which is another form of monopoly. So it uses its copyright profits to accumulate a huge patent war chest. Then they use that patent war chest to make even more monopolistic profits by suing competitors like Android smartphone makers, like Samsun. They are already extracting several dollars from every sale of a competing Android handset because of their patent threats.

This system just feeds back on these entrenched, oligopolistic industries. The state laws actually create oligopolies because it makes it harder for smaller companies to compete. Then the state perversely comes in and introduces anti-trust law, claiming it needs to be our savior to make sure there is competition in the market, to prevent monopolies or oligopolies from forming in the free market–even though the very reason that these oligopolies form, the very reason that we have a lack of competition on the market, is because of monopolies the state gave to these companies in the first place in the form of patent law, and other state regulations. So we still have mercantilism. It is just institutionalized

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and democratized now and it is not called mercantilism anymore.

Let’s make it clear. There are some people who oppose IP from the left, or from an anti-property point of view. They are mistakenly accepting the same mistaken package deal or notion that the pro IP people do. Both IP advocates and leftist opponents of property accept the idea that intellectual property is a legitimate type of property. Now this is their mistake. They are both wrong. The people that are in favor of patents on capitalist grounds are wrong to think that we should have IP because it is a type of property right. It is not a type of property right. The people who are opposed to IP because they are opposed to property rights are wrong to oppose property rights.

The correct point of view, the libertarian point of view, the free market and Austrian point of view, is to favor property rights, but to recognize that state granted monopolies, like patent and copyright, are not property rights. IP rights undercut property rights.

Let me mention quickly where the libertarian landscape is when it comes to this issue. There has always been opposition to these monopolies of course. In fact, this is one thing that led to the Statute of Monopolies of 1624 in England because of these abuses that I pointed out earlier. The Crown was granting so many patent monopolies to the guilds and to merchants and to supplicants and to court cronies that it just got obviously out of hand. So Parliament banned most of these patents with the Statue of Monopolies; but they made an exception for patents of novel inventions. This is why we still have patents today on inventions because Parliament only banned 95% of monopolies and left one small type in place. Unfortunately, that has grown into the patent system we have now.

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In the modern era, after most of the industrialized world has finally adopted sort of an American style patent and copyright system, since the early 1800s let’s say, we can identify four historical phases or movements to abolish patent and copyright.

The first one we can identify is roughly the second half of the 1800s, from 1850 to 1873. At that point in time, some countries still had not adopted patent systems, like Switzerland. There was opposition to this by the free trade people, people that were in favor of free markets and free trade saw these policies and laws as monopolies and they opposed them. What happened was in 1873 there was a depression caused by the Panic of 1873, a large global depression. This caused an increase in nationalism and a reduced opposition to tariffs and protectionism: free trade became less popular because of the emergency of the depression. This made the opposition to patents evaporate because it was part of the free trade movement. In other words, a government-caused recession caused free trade to go out of favor for a while which caused opposition to patents to evaporate. So the final holdout nations, like the Netherlands–which had previously abolished patents, because of people seeing what a disaster it was–caved in, and Switzerland never had a patent system and they went ahead and adopted patent systems. The whole world joined on the bandwagon. So the first movement was against, but a depression ended it.

Then in the late 1800s, after this, there was vigorous debate among the individualist anarchists like Lysander Spooner and Benjamin Tucker. Lysander Spooner was in favor of intellectual property, but Benjamin Tucker rejected IP, based on similar arguments I have given now. He

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had a very clear vision on this. But this was a small group of individualist anarchists, so that opposition didn’t go very far.

In the meantime, during this debate by the free market economists, the defenders of these patent and copyright laws, such as in France in the late 1700s, right before the turn of the century, started using the language of property rights to describe these monopoly privileges because they knew that the concept of monopoly was not popular with economists and even with the public. They started calling them property as basically a propaganda ploy, even though, of course, they are not property.

In the third stage of opposition, roughly from the 1930s to 1995 (the dawn of the Internet), there was an increasing amount of skepticism about IP by libertarians and proto-libertarians and free market economists. Arnold Plant, an economist in 1934, and Fritz Machlup, an Austrian economist in the 1950s, had serious reservations about the empirical claims made for IP: that it stimulates innovation and creativity. There was a great deal of skepticism of the empirical case for IP by these and other free market economists.

 

Then in the latter half of the twentieth century, more of the explicit libertarian thinkers like Hayek in 1948, Murray Rothbard in the 60s, Leonard Read, the founder of the Foundation for Economic Education in the United States, and others like Wendy McElroy, Sam Konkin, and Tom Palmer in the 80s started seriously questioning the compatibility of patent and copyright with libertarian

 

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property rights. They made great arguments. A lot of their arguments are the type I have repeated today, but they did not have a certain urgency because this was the pre-Internet age.

Around 1995, when the Internet arrived on the scene, a lot of the patent and especially copyright abuses became much more exacerbated and more common. It started getting really out of hand and everyone is more aware of this now because we can see news stories on the Internet on a daily basis almost of one crazy patent or copyright outrage.

In the last fifteen years there has been an increasing recognition among modern libertarians, especially principled libertarians, more radical types, Austrian types, and the anarchist types, who are almost completely against intellectual property. You can see a lot of this on the resources page of my website, C4SIF.org/resources. In fact, I would venture to say that most libertarians of this type now are anti-IP. The ones that are pro IP tend to be minarchist, or worse, classical liberals and usually utilitarians who are not very principled. The funny thing is the utilitarians have yet to prove their case. They have yet to show that evidence does back up the empirical case made for IP.

I am getting close to my conclusion. In getting close to that, let me say that we should not say that the patent or copyright system is broken or in need of reform. It is not broken. It is not in need of reform. It is need of abolition. It is not really broken. It is doing exactly what it is designed to do. It is giving competitive advantages to government-favored applicants and holders. So the problem is not software patents. Getting

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rid of software patents won’t solve the problem. The problem is not big corporations. The problem is not junk patents. Nor are patent trolls the problem. The problem is not that the copyright term is too long. It is too long, but even it it were 30 years, it would be too long, it would be a problem.

 

We have to recognize, as libertarians, as principled advocates of freedom, of science, of human knowledge, of information, of competition on the free market, of justice and private property rights, that patent and copyright are completely, 100%, antithetical to the purpose of property rights. It undercuts property rights. It impedes science and it impedes learning and free expression. Science and knowledge and property are designed to overcome the problem of scarcity and to permit human prosperity. So to favor something that undercuts these is to oppose human prosperity and human freedom and human learning and ideas. I would say don’t mend it, end it.

Thank you very much. I hope you have enjoyed this. Feel free to email me with any questions. As I said, you can download the slides for this from my website, www.stephankinsella.com. Thank you and good afternoon.

 

Russian translation: see here.

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