Intellectual property

Intellectual property (IP) is a broad concept that covers several types of legally recognized rights arising from some type of intellectual creativity, or that are otherwise related to ideas. IP rights are rights to intangible things—to ideas, as expressed (copyrights), or as embodied in a practical implementation (patents).

Intellectual property laws grant monopolies to originators of ideas, giving them a legal right to initiate force (through the state) against anyone making use of the idea without the permission of the originator of that idea.

Modern libertarians, such as Stephan Kinsella and Jeffrey Tucker, consider the term to be self-contradictory, because ideas and patterns are not scarce or rivalrous, so logically cannot be owned.

Types of intellectual property
In today’s legal systems, IP typically includes at least copyrights, trademarks, patents, and trade secrets.

Copyright consists of legal rights over literary, musical, dramatic, or artistic works, such as novels, music, and so on. A concept central to modern IP law is that of the "idea-expression dichotomy"; that a copyright holder has rights not over the ideas per se, but rather in his expression of those ideas. For example, a historian may write a book about the history of the Austrian school, based on a number of historical facts. Another author may use the same facts, but write his own book in his own, different words. There would be no copyright violation. The concept of the idea-expression dichotomy has been criticised by some anti-IP writers. Although it depends on the medium, such copyright typically lasts for the life of the author plus a number of years- often as much as 70.

Patents are monopoly rights over the use and distribution of inventions. Unlike copyright, which is automatically granted (although some jurisdictions give additional legal rights to registered works), patents must be applied for and approved of.

In a similar vein of thought, a commonly held belief is in a right to one's reputation, and that speech can be restricted if it is libel or slander.

History
Patents emerged as a form of protection for mercantiles. Copyrights are rooted in control and censorship of ideas.

Historically, very few ideas and innovations have been rewarded with government protected monopolies. Although the Venetians introduced limited patent protection in 1474, this was an exceptional provision aimed at attracting particularly skilful artisans and merchants from other states. Such it remained for about a century and a half, with kings, princes and dogi giving or taking away exclusive privileges as they saw fit either to promote the economic vigor of the state or, more often, to promote the financial well being of their purse.

It was the English Parliament that, in 1623, pioneered patent law in its modern version with the aptly named Statute of Monopolies. The act of Parliament introducing the Statute did not create a new monopoly. It took the power of granting monopoly away from the monarchy (represented at the time by King James I) and lodged it instead with the Parliament. Before the Statute was enacted, the royal power to sell monopolies (on either new or old products, it did not matter: think of the salt monopoly) went completely unchecked and its use aimed at maximizing royal revenues. The economic incentives of innovators or, more generally, of entrepreneurs was nobody’s concern in issuing letters of patent.

The Statute did not replace intellectual competition with intellectual monopoly, but an indefinite and broad government monopoly with a definite and restricted private monopoly. This, no doubt, represented progress in terms of private property rights and incentives to private economic initiative. Further, the range of products to which patent protection could and would be given was greatly reduced, as it was restricted to actual inventions.

Effects and costs of IP
Three things stand out in the case of arguments in favor of intellectual monopoly. First, all other things are never equal. A system of intellectual monopoly may well increase the amount of money that an innovator can make by selling his idea – but it also raises the cost of producing that idea. The innovator must pay all the other monopolists more to use their ideas in creating his own. The system also creates a variety of other costs – innovators must engage in costly patent searches to make sure they are not infringing existing patents – and the substantial legal and court fees earned by lawyers are all part of the cost of operating a system of intellectual monopoly. Because of all these costs, a system of intellectual monopoly may well lead to less innovation than a competitive system. Second, monopoly is not widely viewed as the friend of innovation – the Eastern European state monopolies being only the most extreme of many examples. So we may well wonder if creating monopolies is really a good way to increase innovation. Finally – if intellectual monopoly is a good idea then it must be because it increases innovation – and given all its costs, it must increase innovation substantially over the competitive system. There seems to be no evidence it does so.

IP rights, at least for patents and copyrights, may be considered rights in ideal objects. The ownership of an idea, or ideal object, effectively gives the IP owners a property right in every physical embodiment of that work or invention. Consider a copyrighted book. If A writes a novel, he has a copyright in this "work." If he sells a physical copy of the novel to B, in book form, then B owns only that one physical copy of the novel; B does not own the "novel" itself, and is not entitled to make a copy of the novel, even using his own paper and ink. Thus, even if B owns the material property of paper and printing press, he cannot use his own property to create another copy of A’s book. Only A has the right to copy the book (hence, "copyright").

Likewise, A’s ownership of a patent gives him the right to prevent a third party from using or practicing the patented invention, even if the third party only uses his own property. In this way, A’s ownership of ideal rights gives him some degree of control—ownership—over the tangible property of innumerable others. Patent and copyright invariably transfer partial ownership of tangible property from its natural owner to innovators, inventors, and artists.

Patents can be obtained only for "practical" applications of ideas, but not for more abstract or theoretical ideas. This skews resources away from theoretical R&D. It is not clear that society is better off with relatively more practical invention and relatively less theoretical research and development. Additionally, many inventions are patented for defensive reasons, resulting in patent lawyers’ salaries and patent office fees. This large overhead would be unnecessary if there were no patents. In the absence of patent laws, for example, companies would not spend money obtaining or defending against ridiculous patents.

In the US, authors have a copyright in their original works of authorship as soon as they write them, automatically, courtesy of federal law. No copyright notice is required. No copyright registration is required. The right is there, independently of the wishes of the author. There is also no clear and good way to dedicate a work to the public domain. In an attempt to address this problem, the Creative Commons created a CC0, or "No Rights Reserved" designation.

Views
Intellectual property is a regularly debated subject among libertarians. Most of the debate about IP concerns patent and copyright.

Wendy McElroy is opposed to IP and has written several articles countering the Rothbardian view of copyright by contract and the natural rights view of IP. These articles can be found at the Daily Anarchist
 * Stephan Kinsella and Jeffrey Tucker are two of the most prominent strong opponents of all forms of intellectual property.
 * Murray Rothbard was opposed to patents, but he believed that a weak form of copyrights could be enforced through contracts.
 * Ludwig von Mises and F. A. Hayek were largely opposed to intellectual property.
 * Ayn Rand was an enthusiastic supporter of intellectual property, although she admitted that it would, if held in perpetuity, lead to the "unearned support of parasitism."
 * Morris and Linda Tannehill supported intellectual property.

Benjamin Tucker also opposed IP.

Ethical and natural rights arguments
Some libertarians advocated IP on moral or natural-rights grounds. According to this view, creations of the mind are entitled to protection just as tangible property is. Both are the product of one’s labor and one’s mind. Just as one has a right to the crops one plants, so one has a right to the ideas one generates and the art one produces.

This theory depends on the notion that one owns one’s body and labor, and therefore, its fruits, including intellectual "creations." An individual creates a sonnet, a song, a sculpture, by employing his own labor and body. He is thus entitled to "own" these creations, because they result from other things he "owns."

Ayn Rand argued that, since ideas must originate from the mental effort of an individual (or group of individuals), that originator holds the exclusive property rights to the product(s) of his labor. While one cannot copyright theoretical knowledge - discoveries of facts or truths of reality not previously known - he can claim the right to an invention, the practical application of that knowledge. Since the object that is patented might not have existed without the inventor, and the object copyrighted would not have existed without the creator, the ideas behind such created objects are the property of their originators.

Utilitarian arguments
The utilitarian argument presupposes that we should choose laws and policies that maximize "wealth" or "utility." With respect to copyright and patent, the idea is that more artistic and inventive "innovation" corresponds with, or leads to, more wealth. Public goods and free-rider effects reduce the amount of such wealth below its optimal level, i.e., lower than the level we would achieve if there were adequate IP laws on the books. Thus, wealth is optimized, or at least increased, by granting copyright and patent monopolies that encourage authors and inventors to innovate and create.

Copyright by contract
According to Murray Rothbard, only activities which are not consonant with the free market would be outlawed by the market. In terms of copyright, when a person writes a work and imprints "copyright" on it, he sells it on condition that the buyer not reproduce the work for sale. By buying the copyrighted work, the buyer implicitly agrees to this condition and is contractually obligated to uphold it. Patents that go beyond this restriction of the copyright contract to prevent people who independently arrive at the same invention from using and selling that invention are punishing an act that is not implicit theft, and hence would not be outlawed by the free market; thus, patents become a state grant of exclusive monopoly privilege, incompatible with the free market.

Intellectual property opponents claim that this form of copyright only binds the party who is subject to the original sale and not any third party who comes across the information independently or subsequently. This argument, however, ignores Rothbard's primary ethical test in the free market, namely of whether a situation is explicit or implicit theft. If the author has sold every copy of his work with the copyright contract, then any third party who obtains the work outside of the contract has obtained it due to a violation of the contract. Therefore the use of and the ownership of the work by the third party is illegitimate, in the same way that a person's claim on a stolen watch purchased from a thief is illegitimate. In each scenario, implicit theft has occurred.

Furthermore, an individual who purchases the work under the contract of copyright may transfer his limited ownership to a third party, if allowable in the original contract, but this does not give the third party free reign over the use of the work, because as Rothbard brings to our attention, no individual or group may legitimately transfer a greater right of ownership than they currently possess. If an individual is leasing a house, he cannot legitimately sell the house to a third party without the consent of the homeowner.

Ethical and natural rights arguments
Stephan Kinsella's seminal article, Against Intellectual Property outlines the modern libertarian case against all forms of intellectual property. Kinsella's paper focuses on the unethical nature of intellectual property rights. They are always in opposition to real material property rights. They are a straightforward government grant of monopoly to a favored producer.

Some libertarian proponents of IP argue that certain ideas deserve protection as property rights because they are created. Rand supported patents and copyrights as "the legal implementation of the base of all property rights: a man’s right to the product of his mind." For Rand, IP rights are, in a sense, the reward for productive work. It is only fair that a creator reap the benefits of others using his creation. For this reason, in part, she opposes perpetual patent and copyright—because future, unborn heirs of the original creator are not themselves responsible for the creation of their ancestors’ work.

One problem with the creation-based approach is that it almost invariably protects only certain types of creations. But the distinction between the protectable and the unprotectable is necessarily arbitrary. For example, philosophical or mathematical or scientific truths cannot be protected under current law on the grounds that commerce and social intercourse would grind to a halt were every new phrase, philosophical truth, and the like considered the exclusive property of its creator. For this reason, patents can be obtained only for so-called "practical applications" of ideas, but not for more abstract or theoretical ideas.

But the distinction between creation and discovery is not clearcut or rigorous. Nor is it clear why such a distinction, even if clear, is ethically relevant in defining property rights. No one creates matter; they just manipulate and grapple with it according to physical laws. In this sense, no one really creates anything. They merely rearrange matter into new arrangements and patterns.

It is arbitrary and unfair to reward more practical inventors and entertainment providers, such as the engineer and songwriter, and to leave more theoretical science and math researchers and philosophers unrewarded. The distinction is inherently vague, arbitrary, and unjust.

Moreover, adopting a limited term for IP rights, as opposed to a perpetual right, also requires arbitrary rules. For example, patents last for twenty years from the filing date, while copyrights last, in the case of individual authors, for seventy years past the author’s death. No one can seriously maintain that nineteen years for a patent is too short, and twenty-one years too long, any more than the current price for a gallon of milk can be objectively classified as too low or too high.

Utilitarian
Utilitarians hold that the "end" of encouraging more innovation and creativity justifies the seemingly immoral "means" of restricting the freedom of individuals to use their physical property as they see fit.

Kinsella points out three fundamental problems with justifying any right or law on strictly utilitarian grounds:


 * 1) First, let us suppose that wealth or utility could be maximized by adopting certain legal rules; the "size of the pie" is increased. Even then, this does not show that these rules are justified. For example, one could argue that net utility is enhanced by redistributing half of the wealth of society’s richest one percent to its poorest ten percent. But even if stealing some of A’s property and giving it to B increases B’s welfare "more" than it diminishes A’s (if such a comparison could, somehow, be made), this does not establish that the theft of A’s property is justified. Wealth maximization is not the goal of law; rather, the goal is justice—giving each man his due. Even if overall wealth is increased due to IP laws, it does not follow that this allegedly desirable result justifies the unethical violation of some individuals’ rights to use their own property as they see fit.
 * 2) In addition to ethical problems, utilitarianism is not coherent. It necessarily involves making illegitimate interpersonal utility comparisons, as when the "costs" of IP laws are subtracted from the "benefits" to determine whether such laws are a net benefit. But not all values have a market price; in fact, none of them do. Mises showed that even for goods that have a market price, the price does not serve as a measure of the good’s value.
 * 3) Finally, even if the other problems are set aside, it is not at all clear that IP laws lead to any change—either an increase or a decrease—in overall wealth. It is debatable whether copyrights and patents really are necessary to encourage the production of creative works and inventions, or that the incremental gains in innovation outweigh the immense costs of an IP system. Econometric studies do not conclusively show net gains in wealth. Perhaps there would even be more innovation if there were no patent laws; maybe more money for research and development (R&D) would be available if it were not being spent on patents and lawsuits. It is possible that companies would have an even greater incentive to innovate if they could not rely on a near twenty-year monopoly.

Since advocates of intellectual property generally appeal to utilitarianism (that 'nothing will be created' if creators are not granted a monopoly over their creation), Michele Boldrin and David Levine have examined, in their book Against Intellectual Monopoly, the empirical evidence for this claim. They find that, rather than stimulating creativity and innovation, intellectual property laws - especially patent laws - usually inhibit creativity and innovation.

Copyright by contract
Many opponents of IP rights support only contractual arrangements to protect ideas and innovations — private contracts between property owners. But private contract cannot be used to recreate the same type of protection afforded by modern IP rights.

A contract binds only parties to the contract. Patent and copyright, by contrast, bind all third parties, regardless of their consent to a contract. Thus, if the book purchaser B relates to third parties T the plot of a purchased novel, these third parties T are not bound, in general, by the original contractual obligation between A and B.

Thus, the use of contract only goes so far. A book publisher may be able to contractually obligate his purchasers to not copy his book, but he cannot prevent third parties from publishing and selling it, unless some contract prohibits this action.

Argument from scarcity
Libertarians believe in property rights in tangible goods. But why? As Kinsella notes, it is these goods’ scarcity — the fact that there can be conflict over these goods by multiple human actors. The very possibility of conflict over a resource renders it scarce, giving rise to the need for ethical rules to govern its use. Thus, the fundamental social and ethical function of property rights is to prevent interpersonal conflict over scarce resources. To perform this function, property rights must be both visible and just.

As libertarians recognize, following Locke, it is only the first occupier or user of such property that can be its natural owner. Only the first-occupier homesteading rule provides an objective, ethical, and nonarbitrary allocation of ownership in scarce resources.

The problem with IP rights is that the ideal objects protected by IP rights are not scarce; and, further, that such property rights are not, and cannot be, allocated in accordance with the firstoccupier homesteading rule.

Ideas are not scarce. If I invent a technique for harvesting cotton, your harvesting cotton in this way would not take away the technique from me. Your use does not exclude my use; we could both use my technique to harvest cotton. There is no economic scarcity, and no possibility of conflict over the use of a scarce resource. Thus, there is no need for exclusivity. Similarly, if you copy a book I have written, I still have the original (tangible) book, and I also still "have" the pattern of words that constitute the book. Thus, authored works are not scarce in the same sense that a piece of land or a car are scarce. Even Rand acknowledged that "intellectual property cannot be consumed."

By recognizing a right in an ideal object, one creates scarcity where none existed before. Only tangible, scarce resources are the possible object of interpersonal conflict, so it is only for them that property rules are applicable. Thus, patents and copyrights are unjustifiable monopolies granted by government legislation. It is not surprising that, as Palmer notes, "[m]onopoly privilege and censorship lie at the historical root of patent and copyright."

IP rights change the status quo by redistributing property from individuals of one class (tangible-property owners) to individuals of another (authors and inventors). The IP law therefore trespasses against or "takes" the property of tangible property owners, by transferring partial ownership to authors and inventors. It is this invasion and redistribution of property that must be justified in order for IP rights to be valid.

The IP rule that innovators homestead partial control of all others’ tangible resources, is arbitrary and unjustifiable. It conflicts with the only justifiable homesteading rule, first occupation. It doesn't establish fair, objective rules that avoid interpersonal conflict over scarce resources.

Enforceability and Innovation
Technological innovation is often stimulated precisely when patents are not effective. This was the case with Eastman Kodak, which adopted its well-known policy of permanent research and "continuous innovation" as a way to maintain its competitive leadership in view of the practical impossibility of enforcing all of its patents. Presumably, had they been able to enforce their patents, they might well have devoted fewer resources for research and development of new products, and technological development in this industry would have been less rapid.

Without Intellectual Property
How would the world look like without Intellectual Property? What are the current success stories and possible alternatives if some or all forms of IP were repealed (or became unenforceable)?

Counterfeiting and piracy
"Pirated copyright goods" refer to any goods that are copies made without the consent of the right holder or person duly authorized by the right holder. "Counterfeit goods" refer to any goods, including packaging or bearing without authorization, a trademark that is identical to a trademark validly registered for those goods, or that cannot be distinguished in its essential aspects from such a trademark, and that, thereby, infringes the rights of the owner of the trademark in question.

A 2010 study by United States Government Accountability Office summed up the opinions of experts that it is difficult, if not impossible, to quantify the net effect of counterfeiting and piracy on the U.S. economy as a whole. Few studies have been conducted on positive effects, and little is known about their impact on the economy. Although some literature and experts suggested that negative effects may be overstated, in general, literature and experts indicated the negative effects of counterfeiting and piracy on the U.S. economy outweigh the positive effects. Since there was an absence of data concerning these potential effects, the net effect could not be determined with any certainty.

Writings

 * The Mountain of IP Legislation by Stephan Kinsella, November 2010, a summary of US and international legislation
 * The Libertarian Case Against Intellectual Property Rights by Roderick T. Long, 1995
 * Böhm-Bawerk on Patent and Copyright by Stephan Kinsella, October 2013
 * The Mountain of IP Legislation by Stephan Kinsella, November 2010, a summary of US and international legislation
 * The Libertarian Case Against Intellectual Property Rights by Roderick T. Long, 1995
 * Böhm-Bawerk on Patent and Copyright by Stephan Kinsella, October 2013
 * Böhm-Bawerk on Patent and Copyright by Stephan Kinsella, October 2013

Other media

 * "Ideas Are Free: The Case Against Intellectual Property" lecture by Stephan Kinsella, June 2010 (transcribed as Mises Daily here)
 * Why Publishing Should Send Fruit-Baskets to Google by Cory Doctorow, February 2006

Related courses

 * Rethinking Intellectual Property: History, Theory, and Economics Mises Academy course by Stephan Kinsella
 * Obama's Patent Reform: Improvement or Continuing Calamity? Mises Academy course by Stephan Kinsella