May 21, 2001

Do Patents and Copyrights Undermine Private Property?
by Ilana Mercer
and N. Stephan Kinsella

Property and liberty are intricately linked. In fact, property, not representative government or majority rule, exemplifies freedom. Property is a sphere in which the individual can be free of government; the historical role of private property as countervailing to the power of the state cannot be overstated. Equally strong is the relationship between strong private property rights and prosperity. If nothing else, the dismal economic failure of socialism has demonstrated what transpires when private ownership of the means of production is abolished.

The insidious and persistent encroachment on property by the modern welfare state has, however, resulted in a complete confusion about the nature of ownership. By undermining the ethical foundations upon which property rests, the welfare state has made it morally acceptable to give people access to property they don't own. Property grabs run the gamut from taxation, welfare programs, forfeitures, and environmental and anti-trust legislation, to the more subtle interference with freedom of contract inherent in minimum wage laws and affirmative hiring.

Copyright and patent grants of privilege are another form of property infringement courtesy of the state. While they have their origins in a much earlier privilege given to Friends of the Crown, in their modern incarnation they blend in with the welfare state's wealth distributing impetus. Far from being "natural" property rights grounded in the common law, patent and copyright are monopoly privileges granted solely by state legislation.

Copyright gives authors of original works (e.g. books) the exclusive rights to copy the work or to prepare "derivative works" based on the original.  A patent gives an inventor the right to stop others from making, using, or selling the patented invention.  In both cases, the holder of this right is given legal control over how others use their property. As the author of a differently hued "Gone with the Wind" recently found out, the copyright holder can stop you from using your own paper and ink to publish a novel reproducing the copyrighted work or one based on its plot. The estate of Margaret Mitchell, author of "Gone with the Wind", is suing Alice Randall to block her from publishing the parody "The Wind Done Gone." Randall tells the famous tale from the perspective of black slaves.

The mere act of creation: composing a song, penning a novel or inventing a mousetrap gives the creator control over the tangible property of others. In addition to allowing the author to partially control the paper, ink, computer, and photocopier of others, copyright in particular restricts not only our rights to our property, but to our very bodies. Consider the choreographer of a dance who gets the right to stop another from moving his body in a certain fashion.

First Amendment rights to freedom of speech are also compromised. A recent court order obtained by factions of the entertainment industry decreed that source code (a computer program) is not protected free speech, and the studios have a right to suppress it. What next? Do we unleash the force of the law against a devotee who recites computer code on a street corner?

It gets worse. You don't have to be guilty of copyright violation to be constrained; doing something that might result in some third party making prohibited copies will suffice. A particularly rank example of prior restraint legislation is the Audio Home Recording Act of 1992. Manufacturers of digital recording devices are compelled by law to incorporate technology that prevents copying; they are penalized in anticipation of possible infractions. Manufacturers are also made to pony up in royalties in lieu of each device of blank media sold. Ditto for consumers who pay through excise taxes.

Patents, however, take the cake. The patent holder can prevent others from practicing the invention even if, as is quite common, they arrive at the process quite independently.  Happen to think of a new way to tune your car engine to get better gas mileage?  Better hope someone else does not have a patent on that technique; he could stop you from twiddling with your own '67 Mustang in your own garage.

Thinking of dashing off a quick software-filing program to streamline your business, think again. "Software-driven, multi-host storage solutions for powering advanced business applications," are being patented at a furious rate. Stripped of bafflegab, this mouthful means that for the privilege of filing, albeit electronically, you will have to pay extortion money to a patent holder. It gets scarier when you consider that twenty thousand software patents issue annually.

Price-inflating patent monopolies have grave consequences for undeveloped nations, as the latest patent imbroglio unfurling in South Africa suggests. The government of South Africa enacted legislation to allow parallel importing of and domestic production of generic AIDS drugs to help deal with the AIDS crisis. The multinational pharmaceutical kingpins moved in to enforce their patent monopolies, plunging South Africa into a life and death battle.

South African firms presumably have not stolen their equipment. Neither have they trespassed or broken an entry to obtain the molecular combinations for AZT, 3TC or ddI. These are in the public domain. So why should South Africans be prohibited from making these drugs?

Given that it's generally a bad thing to, through legislation, transfer control of property from owner to non-owner---what possibly is the justification for such laws?

Most proponents view Intellectual Property (IP) as a matter of utility. Without such laws, the argument goes, we would be deprived of clever inventions and beautiful works of art. To utilitarians, the "costs" of monopoly privileges, not least the violation of property rights, are outweighed by their benefits.

Utilitarians turn a blind eye to the staggering sums that companies spend on the fees of patent attorneys, on preparing, filing, and defending patent applications, mostly for defensive purposes.  Litigation costs millions. Mergers between companies often occur for no other reason than to settle patent disputes or to allow the merging parties to compete with a rival with a large patent armory. Submarine patents can emerge at any time, only to sink a high tech company.  The threat of patents increases overall business risk, and can torpedo marginal or start-up companies.

If patents and copyright are essential to innovation as the mantra goes, how is it that day dawns and the perfume maker who has no odor-rights is still marketing high-end perfume that can be knocked off?  Philosophers persist in writing their tomes, mathematicians toil at solving age-old riddles, and physicists don't tire from probing the universe.  How does all this creativity continue without the reward of a monopolistic ownership in the ensuing ideas? And why is it fair for the law to protect practical gizmos but not more abstract ideas like Einstein's E=mc2.

So far we've highlighted how intellectual property rights "interfere with the freedom of others to use their own bodies or their justly acquired property in certain ways." But why should they not be accorded this right? Why should tangible goods be the proper objects of property rights, but not intangibles such as the ideas IP laws protect? Here we arrive at the nub of the issue.

"He who receives an idea from me," wrote Thomas Jefferson, himself an inventor, "receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me." Jefferson was very definitely not articulating the fatuous "information-wants-to-be-free" argument made by the Left regarding IP. He was, however, enunciating what is the essence of ownable property.

Ownable property is only that which is economically scarce. And by economic scarcity we mean that, absent clear demarcation, conflict will arise as to who owns the resource. Land, cars, printing press, paper and ink are scarce in the sense that if we remove them from you, you no longer have them. Our use of an item conflicts with your use of it. While an abundance of computers can be had on the market, our use of this particular PC excludes your use of it. If we could conjure computers with a genie gesture, they would be abundant, not scarce, and it would be immaterial if this one were removed.

However valuable, ideas are not economically scarce: Our listening to a piece of music doesn't conflict with or exclude your doing the same. A copy made of a book doesn't remove from its author the configuration of ideas that is the book. Ideas, very plainly, can be jointly consumed without dissipating.

Of course, the end product of an idea, to wit, a book or a CD, is very definitely scarce. True to John Locke, we say that if you purchase the book or buy the CD, you are its rightful sole owner. Proponents of IP, however, say that some distant author or musician may partially colonize your book and CD and tell you how to use them.

How do we allay the fear that absent patent and copyright we would all perish?

Consider this: How many tears would you shed if Bill Gates were worth only several--not dozens of--billions? Since Microsoft owes a good portion of its wealth to the copyright monopoly, this would be the upshot of its removal. If the company relied only on profits from initial sales and from support services, would that be so bad?

Being "first on the market" is its own reward. The various spin-offs and short-term advantages that accrue to innovators who develop new products provide sufficient incentive and profit to render patent protection unnecessary. Removal of patent protection can often accelerate R&D efforts. No sooner had Elli Lilly been stripped of its patent protection for Prozac than the company pledged a renewed commitment to innovation. This was reflected in investor confidence and climbing stock prices.

Innovators can and do "fence" their products. As IP scholar Tom Palmer pints out, concerts and circuses are fenced in events with "tickets sold and checked at the door". There are already assorted blank recording media on the market that scramble signals beyond recognition, making reproduction impossible.

Bundling of products is a viable option as are Tie-Ins: these arrangements wed a product to a service. Television broadcasts are already "tied" to advertising, as are so many other goods. Computer programs are bundled with manuals or service features. The customer would rather purchase the product and get access to free maintenance than resort to copying. If companies actually enjoyed strong private property rights, then antitrust restrictions, the kind that prohibit many forms of bundling, would fall by the way. Imagine the myriad creative tying arrangements industry could devise then to protect inventions and original works.

Contracts are of course immanently free market friendly. Unlike IP rights, they are voluntary and bind only parties to the agreement. There are leasing arrangements too. Companies can enforce their property rights in the end product of the idea, the tangible good. They then lend the thing out subject to conditions specified in a contract."

Patent and copyright clearly undermine private property. A staunch defense of private property must lead to anti-intellectual property conclusions.

Intellectual Property Rights Symposium
Insight Magazine, May 21, 2001

© 2001 Ilana Mercer and N. Stephan Kinsella