1. 1 | The Problem with IPStephan Kinsella | Feb. 18, 2011 “Intellectual Property Law and Policy” Panel, Symposium: “Plain Meaning in Context: Can Law Survive its Own Language?” Symposium: “Plain Meaning in Context: Can Law Survive its Own Language?” New York University School of LawNew York University School of Law/Journal of Law and LibertyJournal of Law and Liberty February 18, 2011 The Problem with IP Stephan Kinsella Libertarian PapersLibertarian Papers, C4SIF.org, Mises.orgC4SIF.orgMises.org1

2. 2 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Sordid Origins ► “The monopolies now understood as copyrights and patents were originally created by royal decree, bestowed as a form of favoritism and control. As the power of the monarchy dwindled, these chartered monopolies were reformed, and essentially by default, they wound up in the hands of authors and inventors.”  Eric E. Johnson, “Intellectual Property’s Great Fallacy” (2011)Intellectual Property’s Great Fallacy ► Copyright: Queen Mary creates the Stationer’s Company in 1557, with the exclusive franchise over book publishing  monarchy’s desire to control the press  Charter expired; publishers asked for statute  Statute of Anne 1710: gave copyright to authors instead  Authors happy to be partially freed from state censorship

3. 3 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Sordid Origins: Patent ► English Parliament enacts the Statute of Monopolies 1624  reaction against monarch’s issuing of “letters patent” granting monopolies to court favorites in goods or businesses which had long before been enjoyed by the public ► Other notorious uses ► Piracy authorized for Sir Francis Drake by Letter Patent, 1587 ► Real piracy, not file sharing  Statute banned letters patent generally but carved out an exception for novel inventions

4. 4 |The Problem with IPStephan Kinsella | Feb. 18, 2011 IP in America ► Patent and copyright clause included in Constitution, 1789 ► Not based in natural law  Tom W. Bell, Intellectual Privilege: A Libertarian View of CopyrightIntellectual Privilege: A Libertarian View of Copyright ► Based on assumption that it’s “necessary” or generates net innovation/creativity/wealth ► Studies since cannot verify this or conclude otherwise  Kinsella, Yet Another Study Finds Patents Do Not Encourage InnovationYet Another Study Finds Patents Do Not Encourage Innovation  “No economist, on the basis of present knowledge, could possibly state with certainty that the patent system, as it now operates, confers a net benefit or a net loss upon society. The best he can do is to state assumptions and make guesses about the extent to which reality corresponds to these assumptions. … If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one.” ► Fritz Machlup, An Economic Review of the Patent System (1958)An Economic Review of the Patent System

5. 5 |The Problem with IPStephan Kinsella | Feb. 18, 2011 IP in America ► In the meantime becomes part of fabric of western capitalism  Starts being called a “property right”  “Those who started using the word property in connection with inventions had a very definite purpose in mind: they wanted to substitute a word with a respectable connotation, “property”, for a word that had an unpleasant ring, “privilege”.” ► Fritz Machlup & Edith Penrose, The Patent Controversy in the Nineteenth Century (1950)The Patent Controversy in the Nineteenth Century ► See Kinsella, “Intellectual Properganda”Intellectual Properganda ► IP justified now on grounds that it is a natural right (despite original purpose) or empirical grounds (despite evidence)  Similar to minimum wage: economists universally recognize it is counterproductive but hard to kill politically

6. 6 |The Problem with IPStephan Kinsella | Feb. 18, 2011 IP in the Constitution ► Libertarians and propertarians now assume “intellectual property” is part of a property rights system ► After all, the Constitution permits IP  But then the Constitution was a centralizing, power-grabbing coupcentralizing, power-grabbing coup  It also condoned or permitted slavery, paper money (and inflation and the business cycle), judicial supremacy, taxation, conscription, war, drug prohibition ► Ayn Rand a big influence  “Patents are the heart and core of property rights.”  But then, she initially favored eminent domain because the Constitution endorses it. ► Rothbard’s correspondence

7. 7 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Intellectual Monopoly ► Despite propaganda patent and copyright are still artificial state monopolies ► The goal of law is justice and property rights, not tweaking incentives to produce innovation or maximize wealth ► The purpose of property rights is to fairly assign owners to scarce resources so that they may be used peacefully and productively instead of being fought over  To reduce conflict ► Human action uses scarce means to achieve ends, but it guided by ideas  knowledge, information, recipes  Property is necessary in the scarce means for productive use and cooperation  Not in information (cake example)

8. 8 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Intellectual Monopoly ► Patent and copyright are ultimately enforced against scarce goods  Money, bodies ► IP rights are merely disguised transfers of wealth from owners to innovators and others who receive a state privilege  Who did not homestead the others’ property or make a contract with them ► IP undermines legitimate property rights  Propertarians are anti-IP just as they are anti-tax and anti-redistribution

9. 9 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Competition, Learning, Emulation ► The market creates abundance in the face of scarcity of resources  Tries to reduce scarcity of material things ► The body of human knowledge grows  Widens the universe of choices of means AND ends  It is non-scarce ► Artificially imposing scarcity on learning, emulation, knowledge is suicidal  Kinsella, Intellectual Freedom and Learning Versus Patent and CopyrightIntellectual Freedom and Learning Versus Patent and Copyright

10. 10 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Legislation and Law ► In 1884 James C. Carter wrote an attack on David Dudley Field’s attempt to (legislatively) codify New York’s common law.wrote an attack  Carter opposed replacing case law with centralized legislation.  caselaw precedents are flexible and allow the judge to do justice, while statutes are applied literally, even where injustice is done or the legislator did not contemplate this result.  one of the worst effects of legislatively codifying law–replacing organically developed law with artificial statutes–is that it changes the role of courts and judges from one in which the judge searches for justice into mere squabbles over definitions of words found in statutes.

11. 11 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Legislation and Law  “At present, when any doubt arises in any particular case as to what the true rule of the unwritten law is, it is at once assumed that the rule most in accordance with justice and sound policy is the one which must be declared to be the law. The search is for that rule. The appeal is squarely made to the highest considerations of morality and justice. These are the rallying points of the struggle. … But when the law is conceded to be written down in a statute, and the only question is what the statute means, a contention unspeakably inferior is substituted. The dispute is about words. The question of what is right or wrong, just or unjust, is irrelevant and out of place. The only question is what has been written. What a wretched exchange for the manly encounter upon the elevated plane of principle!” ► James C. Carter, 1884, The Proposed Codification of Our Common Law: A Paper Prepared at the Request of The Committee of the Bar Association of the City of New York, Appointed to Oppose the MeasureThe Proposed Codification of Our Common Law: A Paper Prepared at the Request of The Committee of the Bar Association of the City of New York, Appointed to Oppose the Measure

12. 12 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Legislation vs. Law ► Bruno Leoni: there is much more certainty in a decentralized legal system than in a centralized, legislation-based system. ► When the legislature has the ability to change the law from day to day, we can never be sure what rules will apply tomorrow. ► By contrast, judicial decisions are much less able to reduce legal certainty than is legislation.  the position of common-law or decentralized judges is fundamentally different from that of legislators in three respects. ► 1 judges can only make decisions when asked to do so by the parties concerned. ► 2 the judge's decision is less far-reaching than legislation because it primarily affects the parties to the dispute, and only occasionally affects third parties or others with no connection to the parties involved. ► 3 a judge's discretion is limited by the necessity of referring to similar precedents.

13. 13 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Legislation and Legal Certainty ► Legal certainty is more attainable in a relatively decentralized law-finding system like the common law, Roman law, or customary law, than in centralized law-making systems where legislation is the primary source of law.

14. 14 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Negative Effects of Uncertainty ► Legislation tends to interfere with agreements that courts would otherwise have enforced and thereby makes parties to contracts less certain that the contract will ultimately be enforced.  Thus, individuals tend to rely less on contracts, leading them to develop costly alternatives such as structuring companies, transactions, or production processes differently than they otherwise would have. ► increased uncertainty in legislation-based systems also increases overall time preference.  When time preferences are lower, individuals are more willing to forgo immediate benefits such as consumption, and invest their time and capital in more indirect (i.e., more roundabout, lengthier) production processes, which yield more or better goods for consumption or for further production.

15. 15 |The Problem with IPStephan Kinsella | Feb. 18, 2011 Negative Effects of Uncertainty ► Any artificial raising of the general time-preference rate tends to impoverish society by pushing us away from production and long-term investments. ► Yet increased uncertainty, which is brought about by a legislation-based system, causes an increase in time-preference rates because if the future is less certain, it is relatively less valuable compared to the present. ► higher time-preference rates also lead to increased crime ► As a person becomes more present oriented, immediate (criminal) gratifications become relatively more attractive, and future, uncertain punishment becomes less of a deterrent.

16. 16 |The Problem with IPStephan Kinsella | Feb. 18, 2011 The Proliferation of Laws ► A continual outpouring of artificial laws has many insidious effects.  special-interest groups become successful, and others become necessary for self-defense.  Soon a legal war of all against all begins to emerge. Thus we are led into conflict rather than cooperation.  With so many laws, it becomes impossible for each citizen to avoid being a lawbreaker — especially given the perverse rule that "ignorance of the law is no excuse.”  We are all lawbreakers  Discredits the law  Allows the state to selectively and arbitrarily enforce whatever law is convenient against any "troublemaker."

17. 17 |The Problem with IPStephan Kinsella | Feb. 18, 2011 The Proliferation of Laws ► Italian legal theorist Giovanni Sartori pointed out that when legislation is thought of as the primary source of law, citizens become more accustomed to following orders  They become more docile, servile, and less independent.  Once people lose their rebellious spirit, it is easier and more likely for the government to become tyrannical. ► The Role of Commentators and Codes  Private codification  Blackstone, Coke, ALI Restatements