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Source link: http://archive.mises.org/13442/leveraging-ip/

Leveraging IP

August 1, 2010 by

Watch Importation, Copyright, and the First-Sale Doctrine

The "Omega Seamaster Ploprof 1200m" wristwatch.

In Cutting edges, blogger Peter Gordon relates a fascinating case where Swiss watchmaker Omega found a brilliantly evil trick using IP law to crack down on innocent market activity. Omega

sells its watches for far less money in some countries than in others, a common enough practice known to economists as “geographical price discrimination.” The U.S. market will generally bear more than the market in a Latin American republic, and so Omega offers its goods to distributors in places such as Paraguay for less than it does to American distributors.

The difference in prices creates “a tempting arbitrage opportunity in importing Omega watches from Paraguay to the U.S. It is just such watches that Costco bought from a stateside importer, allowing the warehouse store to offer an Omega Seamaster for $1,299 when the brand preferred them sold in the U.S. for $1,999.”

Omega doesn’t like this. However, they “couldn’t complain that Costco was peddling fakes—the watches were authentic goods.” And there was not trademark infringement either since the goods were genuine. So what they did was find a way to use copyright. “They fashioned a small globe logo and copyrighted the device in the U.S.” Then they sued Costco for copyright infringement–using Omega’s copyright without its permission. One would think the copyright law “First Sale Doctrine” would not permit this cause of action. The idea is that when the owner of a copyright sells a copy to a buyer, the buyer is free to resell that particular copy. The seller is said to have “exhausted” his rights in the copyright in the first sale. The buyer cannot make extra copies, but he can re-sell his copy. This is why the used book sales do not infringe the author or publisher’s copyright. But, “[t]he appeals judges decided that, since the first sale of the Omega watches in question happened outside of the U.S., America’s first-sale doctrine doesn’t apply.”

As the WSJ article quoted by Gordon observes, this is

is a small technicality that, in a global economy, could have large implications. … Constrain the first-sale doctrine and you throw a wrench into the business of used-book stores, garage sales (including the electronic garage sale that is eBay), and any and every sort of secondhand shop. And yes, even public libraries might find themselves facing the challenge of figuring out which books on the stacks were first sold in the U.S., and which were first sold abroad.

This is just an example of how IP law is insidious because it can leech into other areas of law that are not protected by copyright. Here, Omega used copyright to stop otherwise legal price arbitrage.

Printer Cartridge Patents

Other examples abound.

For example, it’s well known that Hewlett-Packard (HP) makes more money selling replacement ink cartridges for its printers, than on the printers themselves. You might say they sell printers so that they can then sell cartridges to the users. But how to prevent third parties from making cheaper or competing cartridges compatible with HP printers? Just put some kind of mechanism in the printer that requires a special mating circuit in the cartridge before the printer will function with the cartridge–and then patent the mating circuit. Even if competitors could duplicate the mating circuit so that the generic cartridge would work with the printer, this would infringe HP’s patent in the mating circuit in the cartridge. A superfluous, extra complication is added to the printer and cartridges on purpose just so that they can be patented, to prevent competition. (See HP settles inkjet cartridge patent complaints; HP sues four ink cartridge companies.) Without the mercantilist protection afforded by patent law, HP would be unable to use the law to stop owners of HP printers from buying cheaper cartridges from third parties, any more than Ford can prevent a Mustang owner from using whatever brand of gasoline he prefers. This, of course, allows a monopoly price to be charged for HP cartridges, thus gouging the consumer.

Drug Reimportation

Another example of how patent threatens free trade is found in the drug reimportation controversy. I discuss this in some posts collected at Drug Reimportation, in particular Cato on Drug Reimportation. Here’s what happens. Pharmaceutical companies charge exorbitant prices for drugs, because of the patent monopoly and also because of various FDA “exclusivity” monopolies given to them. When they sell these drugs in other countries, these governments often impose price controls. (Now normally we libertarians oppose price controls, but perhaps a limited case for them can be made in these cases–see my post Patents, Prescription Drugs, and Price Controls. But this is not relevant here.) The point is Big Pharma sells its patented drugs in Canada at a reduced price compared to sales in the US market, but obviously still at a profit. This gives rise to arbitrage opportunities, as in the Omega watch case–leading to drugs being imported into the US from Canada and sold at a cheaper price. As with copyright, the analogous “patent exhaustion” doctrine prevents the seller from claiming patent infringement: they already sold the patented pills to some buyer in Canada, so can’t claim patent infringement. “Luckily” for Big Pharma, the FDA blocks the reimportation for various made-up reasons such as consumer safety, etc. So, in 2003, a bill, H.R. 2427, was introduced in Congress, “The Pharmaceutical Market Access Act of 2003,” to force the FDA to allow so-called drug reimportation. Of course, Big Pharma fought it tooth and nail–as did, sadly, some free market advocates, primarily because of their false belief that patent rights are a legitimate type of property right. Sadly, the bill didn’t pass.

Ironically, one stated purpose of the proposed federal law was to “To reverse the perverse economics of the American pharmaceutical markets.” Ironic because the “perverse economics” comes from other federal law: patent law, the FDA, and other laws such as taxes and regulations which make things more expensive in general. A better approach would have been to repeal patent law and abolish the FDA, thus solving the problem in one stroke. Of course, Big Pharma, and pro-IP libertarians (even if they are, thankfully, a dwindling breed), would strenuously oppose patent abolition.

Louis Vuitton Handbag

Trademark and Fashion

In addition to patent and copyright, trademark can also be leveraged for anticompetitive purposes. As mentioned in Johanna Blakley: Lessons from fashion’s free culture, there is little IP protection in the fashion industry, which thrives despite–probably because of–this. Knockoffs of others’ fashion designs are rampant and legal. This is one reason some designers work their trademark itself into the very design of items such as purses and even some clothing. Then, a knockoff of such an item is a trademark infringement, and the designer can now sue the copier. So here we have trademark law being used to thwart otherwise-legal competition in the fashion industry.

This is also an example of how IP law–in this case, trademark law–distorts the economy and the market: who knows if this bizarre phenomenon of the trademark of the designer being plastered all over and integrated into the very appearance and style of the designer’s products would have ever arisen, absent trademark law.

Update: see Supreme Court lets ban on “gray market” imports stand.

{ 76 comments }

jl August 1, 2010 at 7:14 pm

This just shows how ridiculously arbitrary IP laws are. One agency busts companies for engaging in monopolistic practices, as determined by that agency of course; while another agency enforces monopolistic practices by allowing companies to sue anyone trying to offer an alternative. How is it that Microsoft is a monopolist for bundling a browser with its OS, but HP is not a monopolist for “bundling” a certain type of cartridges with its printers?

Stephan Kinsella August 1, 2010 at 9:19 pm

Well that is the arbitrariness and incoherence of antitrust law, I think.

What is more interesting in the IP context is the interplay of IP and antitrust law. The state grants IP monopolies, then declares the use of these is “in tension” with its own antitrust law, so then it penalizes those it grants private monopoly privileges to if they “abuse” (i.e., use “too much”) these very monopolies.

For more on this see When Antitrust and Patents Collide (Rambus v. FTC) http://blog.mises.org/8200/when-antitrust-and-patents-collide-rambus-v-ftc/ and The Schizo Feds: Patent Monopolies and the FTC, http://blog.mises.org/archives/004559.asp ; also
http://www.lewrockwell.com/blog/lewrw/archives/3060.html, http://blog.mises.org/10272/are-patents-monopolies/,

Bogart August 1, 2010 at 8:53 pm

This just goes to show you that people can not depend on courts to make them free. They are employees of the state.

Dave Narby August 1, 2010 at 9:59 pm

While the Omega example clearly seems abusive, the rest is hard for me to get behind.

Using HP printers for example, I shop printers based on the availability and price of cartridges, and whether or not they are available aftermarket and/or are refillable (I occasionally have to do mid-sized volumes of photo printing). This is why I bought Canon over HP, and would never buy HP. Any consumer who cares will do a little research before buying, and purchase accordingly.

If I could wave a magic wand, I would remove large corporation’s legal advantage in screwing over smaller inventors but I do not see the advantage of discouraging small companies/individuals from building a better mousetrap and profiting by it.

If there are no IP rights, then IMO innovation is stifled. Invention will be relegated to only large multinational corporations which are able to get to market ‘firstest’, fastest and cheapest, which minimizes any advantage from churning out cheaper knock-offs.

I’m not sure I’m on board with this one.

Seattle August 1, 2010 at 10:59 pm

This is built on the assumption that people only come up with new ideas in the hopes of selling them. You also forget the innovation that is destroyed by IP law due to its restrictions on derivation. Even from a utilitarian standpoint (which is not popular ’round these parts), it’s far from obvious, even absurd, that the innovation spurred by the additional profit incentive is greater than that which is stunted by the restrictions.

Dave Narby August 2, 2010 at 10:11 am

So we abandon IP just because some people want to make a profit from the fruits of their mental labor?!

Silas Barta August 2, 2010 at 11:49 am

This is built on the assumption that people only produce things in the hopes of selling them. You also forget the production that is destroyed by property law due to its restrictions on squatters and fences. Even from a utilitarian standpoint (which is not popular ’round these parts), it’s far rom obvious, even absurd, that the production spurred by the additional profit incentive is greater than that which is stunted by the restrictions on property that isn’t even being used at that time.

How do you get an anti-IP libertarian to generate arguments for socialism? Ask them about IP infringements and do a word swapout.

Beefcake the Mighty August 2, 2010 at 12:25 pm

Narby: If there are no IP rights, then IMO innovation is stifled.
Seattle: You also forget the innovation that is destroyed by IP law due to its restrictions on derivation.

Silas: You also forget the production that is destroyed by property law due to its restrictions on squatters and fences.

Clearly, Seattle is responding to a *specific* claim with his argument, namely that IP laws are required to facilitate innovation. What argument do you think *you’re* replying to, Silas? That without property rights there would be little or no production? It doesn’t seem that way, since you go on to claim that such alteration of words can be used to support socialism, which is NOT a system without property rights, but rather a system without PRIVATE property rights (and even then only certain kinds of property, namely factors of production). Your silly little word games do nothing to contribute to intelligent discourse. Quite the opposite, in fact. You are one dumb fucking monkey, I have to say.

Silas Barta August 2, 2010 at 1:21 pm

I’m replying to the argument that there are good consequences from permitting private property in the means of production. If this holds, the same holds for the intellectual means of production. To the extent that consequentialist concerns are relevant at all, they apply just as well in favor of IP. Sure, socialism may not be the right term to use here. But

1) It still lacks the *relevant* property rights for private citicizens in their own means of production, and

2) if you replace it with the right label for a no-Lockean-property-rights situation (such as a “left-anarchy”), the same points still apply, as it’s just a relabeling.

And does Jeff Tucker ever enforce the civility rules anymore?

Beefcake the Mighty August 2, 2010 at 1:26 pm

“I’m replying to the argument that there are good consequences from permitting private property in the means of production. ”

Horseshit. You’re engaged in your usual stunt of taking someone’s argument, divorcing that argument from the context in which it originated, altering some words, and declaring, “voila, you can defend socialism this way.” It’s gone beyond annoying.

“And does Jeff Tucker ever enforce the civility rules anymore?”

Well, if he did, you’d be banned here.

Peter Surda August 2, 2010 at 1:43 pm

Stop dodging and answer my questions, coward.

Silas Barta August 2, 2010 at 2:26 pm

@Peter_Surda: Not continuing to argue the same things in circles with you =/= dodging your questions

Peter Surda August 2, 2010 at 3:21 pm

Ah, so you admit your arguments are circular.

Stephan Kinsella August 2, 2010 at 4:41 pm

Peter, Silas is not serious enough to be a coward here. He seems to enjoy being a bit of a nihilistic gadfly.

Silas Barta August 3, 2010 at 10:34 am

That’s actually the strongest argument Stephan_Kinsella has made against my position in a long time. It’s even better than his reply to my IP calculation argument!

Russ August 3, 2010 at 10:52 am

“He seems to enjoy being a bit of a nihilistic gadfly.”

Silas may be a bit of a gadfly, but I don’t think he’s being nihilistic. And what’s so wrong with being a gadfly? Socrates was a gadfly, too. Granted, I don’t think Silas lives up to Socrates’ level. And I still think that some of his arguments (his “color” argument, his “EM=IP” argument) are wrong. But in trying to come up with a good refutation for these “obviously” silly arguments, I’ve had to actually think. And in the process, I have had to come to conclusions that I didn’t think I would; for instance, I have come to the conclusion that there is more similarity between EM rights and IP rights than I initially thought. So his gadflying has served a useful purpose.

Curt Howland August 2, 2010 at 9:32 am

Dave,

“If there are no IP rights, then IMO innovation is stifled.”

Ok, I have exactly the opposite opinion. Since the vast majority of “innovation” is building upon the work of others, without the fear of being prosecuted for “copying”, individuals and firms would be able to differentiate themselves on price and “minor” features.

Those “minor” features build upon each other, and quickly become variety that chases even the smallest niche market in search of profits.

This already happens, but each “imitator” is forced by law to be less efficient, slower to market, etc, all to avoid the legal claims of artificial monopoly.

Kleenex still charges more than Puffs, demonstrating the fact that there are profits to be made even in a market like nose-blowing, without I.P. protection.

Dave Narby August 2, 2010 at 10:09 am

Thank you – You made my point in referencing the brands of two huge corporations, Kimberly-Clark Worldwide, Inc, and Procter & Gamble.

IP’s purpose should be to protect small companies and individuals from large corporations.

Seattle August 3, 2010 at 2:06 am

I smell the usual “perfect competition” mess here.

Alpheus March 9, 2011 at 5:02 pm

I’m so glad IP is there to protect us little innovators. Because without patents, how could we produce things without being sued?

Just think of what would have happened if Farnsworth could have patented the TV. He would have been able to run a business without fearing RCA would steal his idea, and sue him into oblivion!

Oh, wait. Farnsworth *did* have a patent for the TV. RCA *still* sued him into oblivion. While he wouldn’t have had the resources of a large company, without patents, he could have pursued his TV business without worrying about what RCA could have done to him. He could have been a little gadfly in the TV market–and, who knows? Perhaps he would have been able to expand to become a *real* RCA competitor?

Silas Barta August 2, 2010 at 1:21 pm

List the minor improvements that get you a fully-tested, new drug.

Sovy Kurosei August 1, 2010 at 10:19 pm

Stephen Kinsella

Now normally we libertarians oppose price controls, but perhaps a limited case for them can be made in these cases

Wait, what? Am I reading this right?

Russ August 1, 2010 at 10:23 pm

Uh oh. I feel a scene from “Invasion of the Body Snatchers” coming on, where all the ancaps start pointing at Stevo and making horrific screeching noises. *grin*

mpolzkill August 1, 2010 at 10:45 pm

Yawn. Lame.

Russ August 1, 2010 at 10:57 pm

Stuff it, Buzzkill. You’re just pissed off because I’m not towing the ancap line on Israel.

mpolzkill August 1, 2010 at 11:02 pm

Hitting the bottle a bit tonight, Russ? I’m always bemused by your lame and pointless attempts to battle anarchists. What would I care what line you tow, as long as it’s always made clear how your “libertarianism” doesn’t make room for most of the world.

Russ August 2, 2010 at 10:34 am

“I’m always bemused by your lame and pointless attempts to battle anarchists.”

I’m always bemused by your lame and pointless attempts to pester non-anarchists to the point where they won’t want to post here anymore. This site doesn’t need purity police like you always on the look-out for deviationists. It is lop-sided enough towards anarchism as it is.

“What would I care what line you tow, as long as it’s always made clear how your “libertarianism” doesn’t make room for most of the world.”

My libertarianism has room for anybody who wants to be libertarian. Unfortunately, there are many cultures in the world that don’t like libertarian values. When those cultures fight against cultures that are more considerably more libertarian, call me crazy, I root for the more libertarian people. I don’t go all multi-culti and assume that they’re all equally good and valid cultures.

Like I said before, it comes down to this: If all Muslims in the Middle East unilaterally disarmed, there would be peace in the Middle East. If all Jews in the Middle East unilaterally disarmed, there would soon be no Jews in the Middle East; and after that, there would still be no peace. That tells a person all he needs to know about which culture is more libertarian.

mpolzkill August 2, 2010 at 11:24 am

A typically hilarious jag on my mockery of *your* original (and very old and tired) harrassment of anarchists. The site doesn’t need your respectability policing either. Let’s both quit, I’m down with that, and *that* tells a person all they need to know about our very old, very dumb battle.

Your strawmen only rate sardonic laughter. And I’m sure they would get a good laugh about your concept of liberty in Afghanistan and Iraq if most of them didn’t have dead friends or relatives due to your “liberty troops.” Now comes more of your confusion over 9/11, I know, I know.

“If all Muslims in the…blah blah, kindergarten-level rationalizations”

Lovely, I call your “philosophy”, “The Mr. Blonde” Philosophy:

http://www.youtube.com/watch?v=fYFmDclNDDU

“If they hadn’t a done, what I told them not to do, they’d still be alive.” Your “libertarian” allies in Israel are mad about this “philosophy” in Gaza. Democracy!

mpolzkill August 2, 2010 at 11:38 am

And I guess one could call it “chasing off the alarmed Burghers”, I call it “destroying Statist memes.”

You consistently have your PR ideas backwards. The world hates compromised, self-serving libertarians even more than they do pure ones.

Oh, yeah, and man do I suck at chasing you out of here. What a whiner.

Seattle August 1, 2010 at 10:53 pm

In this case, the price control is actually lessening the harmful effects of another state intervention. Of course the best course to take is to remove the interventions altogether.

Daniel August 2, 2010 at 1:06 am

But when you’re a positivist two wrongs make a right!

Amanojack August 2, 2010 at 3:34 am

If libertarians were forced to avoid “two wrongs make a right,” they’d have to never use state roads, never pay taxes and never use anything that is subsidized – such as electric power.

james b. longacre August 2, 2010 at 6:01 am

or use them by not paying for them or using an underground means of payment that they felt was just.

Curt Howland August 2, 2010 at 9:36 am

“But when you’re a positivist two wrongs make a right!”

Are you positive about that?

Ohhh Henry August 1, 2010 at 11:30 pm

Stephan KinsellaWell that is the arbitrariness and incoherence of antitrust law, I think.

State law must be arbitrary and incoherent. What if it was the opposite – based on natural law which everyone could understand and obey. Then there would be no role for the state as the Big, Expensive, Intelligent, Highly-Trained, Hyper-Violent, Supreme Judge.

Arbitrary and incoherent law is in fact the intellectual basis for the existence of the state. “If it wasn’t for us and our laws and our arbitration services, you people could never get along. You should get down on your knees and give thanks that we’re here to help you navigate through the shoals of arbitrary and incoherent law, and to put a gun to the head of anyone who (in our arbitrary opinion) defies the law.”

Even in branches of the law which start out following the concepts of natural law, the state will soon pervert them by making their enforcement arbitrary and incoherent. The state must divorce the law from common sense and decency because the state’s own existence is a contradiction of those qualities.

Daniel August 2, 2010 at 1:09 am

Which makes democracy even more tasteless, since an autocracy created to “protect us” from ourselves, such as a monarchy or dictatorship, is more internally consistent than a system designed to protect us from ourselves where we get to “run it”

It’s like a slap to my logical face :(

Amanojack August 2, 2010 at 3:36 am

All written law is arbitrary and incoherent. There is a reason for this. See The Myth of the Rule of Law: http://faculty.msb.edu/hasnasj/gtwebsite/MythWeb.htm

Rod August 1, 2010 at 11:50 pm

I guess DVD region codes are a similar example of this although I’m not sure what laws surround them and if they are protected by more than just the technical limitations placed upon DVD playing hardware.

Seattle August 1, 2010 at 11:52 pm

They’re given a very weak encryption known as CSS. Playing the DVD outside of an approved player counts as hacking under the DMCA.

Don Lloyd August 2, 2010 at 12:14 am

Stephen,

Under present conditions, the problem with your take on the reimportation of drugs into the US is that it is not necessarily a question of patents or intellectual property at all.

At present, the US drugmaker makes the large majority of his profits in the US market, can add marginal profits by selling at low prices to the Canadian and European governments, and can give away drugs to Africa. As long as drugs cannot be reimported, the drugmaker has not acted against his own self-interest.

However, if drugs were allowed to be reimported and to fill legal drug prescriptions, then the drugmakers would be acting against self-interest to allow any drugs outside the country without paying an approximate US price.

As long as prescription drugs need substantial testing and FDA approval, the drugmakers should be able to employ secret and dummy processing as needed to make any competitors go through the full nine yards of the FDA even without explicit patents on the drugs themselves.

Anyone who believes that the reimportation of drugs will benefit anyone is seriously mistaken. The US prices aren’t going to come down because there aren’t going to be any drugs to reimport. Only the rich in Canada, Europe, Africa etc., will get benefits from drugs if they can import or smuggle them from the US.

Ultimately, the main causes of high drug prices are the costs of drug development/testing failures and the third-party medical payment system in the US.

Regards, Don

Seattle August 2, 2010 at 12:30 am

Because, obviously, the prices of drugs falling is impossible.

Stephan Kinsella August 2, 2010 at 12:45 am

Don, even if all of this is correct–how does this justify the state preventing American citizens from buying drugs from Canadian suppliers? Liberty is the issue, as always. Not all these consequential considerations.

Don Lloyd August 2, 2010 at 2:02 am

Stephan,

The reimportation is a side issue. At present, the question is whether a drugstore can fill a prescription with pills I make in my garage? Or are prescriptions to be required at all?

We can get rid of the FDA, but a private replacement is needed. If imported Chinese tires are defective, the importer will run into trouble before too long. If one of my prescriptions has a manufacturing defect, it as likely as not to never be discovered.

Regards, Don

Stephan Kinsella August 2, 2010 at 10:34 am

Don, it’s not a side issue for me. My point here was to show that IP, as bad as it is, is not confined to its borders; that it can be used to taint and invade other domains of law, and the drug reimportation is just an example of this. The FDA’s limitations on importations of foreign drugs is unjust, and people’s endorsement of it is base in part on IP law. So it’s really irrelevant how useful the drug reimportation would be in practice. Likewise, maybe few people would smoke pot if it were legalized–but it should still be legalized and its criminalization is monstrous–as is the FDA’s limitations on drug freedom and drug imports.

Silas Barta August 2, 2010 at 2:24 pm

Stephan_Kinsella, it’s not a side issue for me. My point here was to show that property law, as bad as it is, is not confined to its borders; that it can be used to taint and invade other domains of law, and the stolen good re-importation is just an example of this. The FTC’s limitations on importations of foreign fenced goods is unjust, and people’s endorsement of it is based in part on property law. So it’s really irrelevant how useful the stolen good re-importation would be in practice. Likewise, maybe few people would smoke pot if it were legalized-but it should still be legalized and its criminalization is monstrous-as is the FTC’s limitations on stolen good freedom and stolen good imports.

(Because it’s sometimes not clear why I do this, the point is that your arguments are completely unhelpful, because they all assume IP is unjust, and that all observed injustices are necessarily due to the nature of IP, rather than state enforcement of it. Your post here does not provide any reason for someone to agree with you, unless they already do.)

Beefcake the Mighty August 2, 2010 at 4:05 pm

Classic example of what I was referring to earlier. You take Kinsella’s words, strip them of their context, and play some games by changing words.

“Because it’s sometimes not clear why I do this, the point is that your arguments are completely unhelpful, because they all assume IP is unjust, and that all observed injustices are necessarily due to the nature of IP, rather than state enforcement of it. ”

Are you so dense that you fail to notice that nowhere in the response you’re butchering does Kinsella claim that these various “injustices” are “necessarily” due to IP? He’s simply explaining (to Don Lloyd) his motivations in discussing the particular matter (eg, reimportation). Or are you simply dishonest?

Silas Barta August 3, 2010 at 10:33 am

@Beefcake_the_Mighty: If Stephan_Kinsella believes these instances count as critiques of IP, which is exactly how he’s presenting them, the implicit premise is that these are inherent aspects of IP. Otherwise, he’s just criticizing the State for botching something. Ho hum.

Let me put it this way: if I criticized property rights by pointing out the example of how farmers use them to justify gunning down aircraft 30,000 feet above their land (very close to an actual historical case), what would be your reply? Got it? Okay, that’s my argument against what Stephan_Kinsella is trying to do here.

Beefcake the Mighty August 3, 2010 at 10:46 am

“Let me put it this way: if I criticized property rights by pointing out the example of how farmers use them to justify gunning down aircraft 30,000 feet above their land (very close to an actual historical case), what would be your reply? Got it? Okay, that’s my argument against what Stephan_Kinsella is trying to do here.”

Except, if you’d actually read what Kinsella posted here, you’d see that he’s talking about the objectionable effects of IP *law.* Since you’re too lazy to read (being charitable here), let me help you:

“In Cutting edges, blogger Peter Gordon relates a fascinating case where Swiss watchmaker Omega found a brilliantly evil trick using IP law to crack down on innocent market activity.”

“This is just an example of how IP law is insidious because it can leech into other areas of law that are not protected by copyright. Here, Omega used copyright to stop otherwise legal price arbitrage.”

“Without the mercantilist protection afforded by patent law, HP would be unable to use the law to stop owners of HP printers from buying cheaper cartridges from third parties, any more than Ford can prevent a Mustang owner from using whatever brand of gasoline he prefers.”

“So here we have trademark law being used to thwart otherwise-legal competition in the fashion industry.”

Now, we know *why* Kinsella opposes IP (well, supposing one actually reads his work in the area with the intent of at least trying to understand), but clearly what’s he’s doing here is demonstrating the baleful of effects of IP *law*. Your “analogy” (again being charitable) only works if Kinsella ever made the argument that IP is illegitimate *because* IP law has given rise to abuses like these. As far as I know, he never made such an argument.

Do you understand the difference?

Stephan Kinsella August 3, 2010 at 12:15 pm

Beefcake: no, Silas doesn’t, or refuses to, get it.

Silas/Person/John Sharp/Richard Harding:

Mighty: If Stephan_Kinsella believes these instances count as critiques of IP, which is exactly how he’s presenting them, the implicit premise is that these are inherent aspects of IP. Otherwise, he’s just criticizing the State for botching something. Ho hum.

The state always botches everythign. Given that IP is a creature of the state… it’s no surprise this is inherently “botched.”

Let me put it this way: if I criticized property rights by pointing out the example of how farmers use them to justify gunning down aircraft 30,000 feet above their land (very close to an actual historical case), what would be your reply? Got it? Okay, that’s my argument against what Stephan_Kinsella is trying to do here.

No. I have already shown elsewhere IP is illegitimate. Some peopel are saying “well what’s the big deal. there are bigger fish to fry. this is not a big problem.” I am showing how it’s bigger than it appears–it leaks beyond its borders. I’m assuming it’s illegitimate and showing how the wrongness is magnified. MOreover these examples help to demonstrate *that* it’s illegitimate. No legitimate property right would be used to undercut free trade, say, like this.

Silas Barta August 3, 2010 at 1:41 pm

Given that IP is a creature of the state…

What about the strong negative moral judgment most people, including libertarians, have against (many instances of) ripping off someone’s ideas, and the resulting shunning, etc. that they practice against such people? Is that a creature of the state, too?

I am showing how it’s bigger than it appears–it leaks beyond its borders. I’m assuming it’s illegitimate and showing how the wrongness is magnified. MOreover these examples help to demonstrate *that* it’s illegitimate. No legitimate property right would be used to undercut free trade, say, like this.

Assertion, assertion, assertion. The farmers “leaked” their absolute vision of property rights beyond its borders. They just as well “demonstrated *that*” property rights are illegitimate. (Wait, I thought you were supposed to say “unjustified” … whatever.)

mpolzkill August 3, 2010 at 2:15 pm

“What about the strong negative moral judgment most people, including libertarians, have against (many instances of) ripping off someone’s ideas, and the resulting shunning, etc. that they practice against such people? Is that a creature of the state, too?”

Nope, and beyond that, the State is a lousy way to remedy these natural irritations, as it is in all things.

Stephan Kinsella August 3, 2010 at 2:20 pm

Silas,

“Given that IP is a creature of the state…”

What about the strong negative moral judgment most people, including libertarians, have against (many instances of) ripping off someone’s ideas, and the resulting shunning, etc. that they practice against such people? Is that a creature of the state, too?

There are not widely held, coherent, uniform moral intuitions out there about: how long the term should be for patent or copyright; how to distingish the types of protection available (or not) for various thing such as inventions (patent), designs (design patents), fashion (none), perfume smells (none), abstract ideas, theories, math equations (none), novels (copyrihgt), paintings (copyright), software (patent and copyrihgt), secrets (trade secret), reputation (defamation law), hybrid plants (plant patents), business methods (limited or no protection), surgical methods (much more limited patent rights), and so on.

there are no uniform moral intuitions about extending copyright to non-literal copying, or derivative works. Nor for whether patent should protect only novel and non-obvious inventions or just novel ones, nor for what these standards are, nor for what consitututes prior art.

Assuming a private version of any set of rules could arise that bears a real resemblance ot IP law, simply shows ignorance of waht the IP system is really like. How about the common sentiments about taxation, the draft, eminent domain, public school, drugs being bad, etc.–would all those result in judges issuing private versions of the drug war, public schooling, and the like? Hey, maybe judges would “rule” that a public road should be built too!

Russ the Apostate August 3, 2010 at 2:31 pm

“There are not widely held, coherent, uniform moral intuitions out there about: ”

What should be the term of punishment for murder, rape, robbery, theft, etc.? Should capital punishment be allowed or not? What should the prison term be? Should murder motivated by racial hatred be given a stronger punishment? Should abortion be considered murder? Should that be only partial-birth, or any abortion? Should there be a three-strikes-you’re-out rule for violent crime? Non-violent theft?

Nonetheless, most people agree that people have the right to not be murdered, raped, robbed, or stolen from.

The fact that there are no “widely held, coherent, uniform moral intuitions” about the legal niceties does not mean that the supposed rights involved do not in fact exist.

mpolzkill August 3, 2010 at 2:42 pm

Russ the Noisy Child,

Don’t forget the “right to a decent living” and the “right to free medical services”

Russ the Apostate August 3, 2010 at 3:18 pm

Matt the Noisy Attack Dog,

So, Matt, you don’t agree that people have the right to not be murdered, raped, robbed, or stolen from?

mpolzkill August 3, 2010 at 3:35 pm

Not the point, and you know it, dishonest Republican attack dog.

Russ the Apostate August 3, 2010 at 3:44 pm

Sorry, Matthew, but I’m afraid I have no idea what your point was. You know how it is with us brainwashed slaves. We’re just so darned stupid. Well, I’d love to stay and chat, but it’s time for the two-minute hate, and missing that would be double-plus-ungood. *sigh* I love Big Brother!

mpolzkill August 3, 2010 at 3:48 pm

You know that I’ve never called you stupid except when you’re in the heat of thinking about Muslim bogey men. You’re dishonest Russ, dishonest.

The fact that there are no “widely held, coherent, uniform moral intuitions” about the legal niceties does not mean that the supposed rights involved do in fact exist. It was a simple little joke.

Aside: I don’t care what SK thinks, he might push too hard on some of this stuff, at any rate, there is no way for the State to enforce “IP” in any sensible way and you are such an embarrassing clown harrassing him and Surda.

mpolzkill August 3, 2010 at 3:57 pm

“it’s time for the two-minute hate, and missing that would be double-plus-ungood. *sigh* I love Big Brother!”

What a bizarre tactic. Dollars to donuts he watches Faux News.

Russ the Apostate August 3, 2010 at 4:34 pm

Faux News? (google search…) Oh, Fox News! No, I don’t watch any mainstream news programs. Or Fox’s commentary shows. O’Reilly and Beck are just (and I mean just) smart enough to be dangerous.

Russ the Apostate August 3, 2010 at 4:43 pm

“You know that I’ve never called you stupid except when you’re in the heat of thinking about Muslim bogey men. You’re dishonest Russ, dishonest.”

Like my momma always says, stupid is as stupid does. And since I can’t seem to pull myself out of these threads with you…

“The fact that there are no “widely held, coherent, uniform moral intuitions” about the legal niceties does not mean that the supposed rights involved do in fact exist. It was a simple little joke.”

Yes. But SK was apparently saying that since there are no “widely held, coherent, uniform moral intuitions” about the legal niceties of IP, IP rights do not exist. At least, that’s the way I understood him. I was merely pointing out that if that argument were valid, then it proves that regular rights don’t exist either. It was a simple little reductio ad absurdem argument.

“…you are such an embarrassing clown harrassing him and Surda.”

If I am an embarrassing clown for harrassing them, then what is a person who goes to such trouble to harrass an embarrassing clown?

mpolzkill August 3, 2010 at 5:00 pm

Hm, beats me then how you get your sick ideas about Muslims that sound just like one of their broadcasts. Great minds think alike I guess.

I understand, you being a liar, you think I am too, but I told you, I talk to you to show how unlibertarian you are so that we may distance ourselves from Republicans. Now, please tell us more about how you love the Tea Party.

Oh, and I just realized why you would use 1984 as a joke despite the fact its damned near prophesy (with a lot of Brave New World thrown in): Orwell was a socialist and therefore an idiot in your cartoon world. Please, not with the come back: a lot of what you say is of value outside of your childish campaign against anarchists and begging for and getting a surveillance state.

Beefcake the Mighty August 3, 2010 at 9:54 pm

Russ’ analogy fails because he confuses disagreement over punishment with disagreement over the nature of the right that calls forth punishment. E.g., the fact that IP law grants “rights” for certain periods of time which are generally arbitrary (at best) already indicates that we’re talking about something quite different from a right not to be murdered.

Russ the Apostate August 3, 2010 at 10:16 pm

Beefcake,

Thanks for addressing my argument in a civil fashion, instead of addressing me in an uncivil fashion.

“Russ’ analogy fails because he confuses disagreement over punishment with disagreement over the nature of the right that calls forth punishment. E.g., the fact that IP law grants “rights” for certain periods of time which are generally arbitrary (at best) already indicates that we’re talking about something quite different from a right not to be murdered.”

I don’t think you’re correct here. For instance, what about statutes of limitations? A case against many crimes cannot be filed more than 7 years, I think, after the crime has allegedly taken place. So, under a statute of limitations, if you don’t have the right to pursue justice pursuant to some other right, then you effectively don’t have said right, since legally a right amounts to the right to pursue justice if the right has been violated. So, the law effectively grants many regular rights for only an arbitary amount of time. (There is no statute of limitations on murder, I believe, but that difference is also arbitary.)

Anyway, I didn’t address the “nature of the right that calls forth punishment” because that was not part of the SK’s argument that I addressed. I simply applied his argument to another case, in an attempt at a reductio ad absurdem argument.

mpolzkill August 3, 2010 at 10:20 pm

Russ sure entered this forum in a civil way:

http://blog.mises.org/13442/leveraging-ip/#comment-707288

Please, no more whining about being attacked, nothing makes me more sad than a whining hypocrite.

Peter Surda August 4, 2010 at 6:40 am

What about the strong negative moral judgment most people, including libertarians, have against (many instances of) ripping off someone’s ideas, and the resulting shunning, etc. that they practice against such people?

No matter how you define property, externalities are unavoidable because causality extends to infinity. But you already know that, right? Just the inconvenience of cognitive dissonance is preventing you from facing reality.

Peter Surda August 4, 2010 at 10:31 am

What should be the term of punishment for murder, rape, robbery, theft, etc.? Should capital punishment be allowed or not?

Russ, hopefully you recognise that the following questions are distinct:
- does a specific set of facts match a criterion or not?
- what facts should we gather to determine whether a criterion is met?
- if a criterion is met, what should we do?

Peter Surda August 4, 2010 at 8:19 pm

Russ,

For instance, what about statutes of limitations? A case against many crimes cannot be filed more than 7 years, I think, after the crime has allegedly taken place.

If I remember correctly from the classes I took, even if it might be impossible to sue for stealing after a certain time, the thief does not gain ownership, merely he cannot be persecuted. If the actual owner somehow manages to get the stolen goods back, the thief cannot make any demands. Maybe in the US it is different. But the point is the same: it does not mean the crime didn’t happen, merely the options of resolving it become different.

bob August 2, 2010 at 3:10 am

I would remove large corporation’s legal advantage in screwing over smaller inventors but I do not see the advantage of discouraging small companies/individuals from building a better mousetrap and profiting by it.

Shay August 2, 2010 at 10:10 am

Please someone delete bob’s spam in this and the driver’s license thread. He copies and pastes part of another message, with a link to the same website each time.

Stephan Kinsella August 2, 2010 at 10:38 am

The fact that you “do not see the advantage” of something is not a justification for a state law infringing property rights.

Shay August 3, 2010 at 8:34 am

You just responded to a spammer’s copy-and-paste, BTW. This same guy spammed another thread, and it still hasn’t been deleted:

http://blog.mises.org/13446/dancing-for-the-state/#comments

See third post. Also the first one from “katrina halili” seems to be spam as well. I hate to see spam posts on here because search engines don’t look kindly on websites that have them.

Zorg August 2, 2010 at 12:32 pm

If judges were ever trustworthy enough to read and apply laws as
written, then you could add on to the end of every one of them:
“This shall not be construed to mean: A-Z, etc.” You could have a
team of lawyers write up every possible misuse of the law and put
it into the law as a misuse before it passed. Those who want it passed
would not be able to fight all those restrictions since they only
clarify for judges in the future how the law is meant to be taken.

I don’t believe in the magic of legislation or politicians or judges, mind you,
but it does hinder somewhat their ability to continually abuse the system.

I wish that the words “shall not be construed to mean” had been put into
every article (or sentence) of the Constitution. It would just make their
propaganda harder to push, that’s all. Not that it would be a cure-all for
defending us against the monopoly of power.

They could have added it to the commerce clause as “This shall not be
construed to mean that Congress has the power to regulate trade within
each state..” Yes, even though it says “interstate commerce,” the word
“interstate” was expanded to mean anything even remotely effecting or
touching on interstate commerce. But it would be nice to have more
monkey wrenches in these laws. More restrictions on restrictions and
“pre-judging” the cases that might arise, I’d guess you’d say. This would
take at least some power to “interpret” away from judges.

So for this existing IP stuff which we won’t be able to be rid of completely,
we should encourage reforms that strictly forbid the bleeding over of one
privilege in law into another as these examples demonstrate. So, “The grant
of copyright shall not be applied to patented items so as to gain any further
advantage than what the patent law grants,” or something like that.

Seattle August 3, 2010 at 2:20 am

It wouldn’t really matter, as they still wouldn’t be accountable to anything.

Perry Mason August 3, 2010 at 12:41 pm

I have done some work in this legal area, and I hope this ruling does not stick. Omega’s problem is with the “grey” market (importing US branded goods for foreign markets and selling them here), which up until presumably this case is more or less legal and not subject to IP lawsuits.

That said, I don’t see why the supplier couldn’t deliver the products to the United States and store them in a facility, and then have the “sale” occur on the US shores.

Capt Mike August 3, 2010 at 6:50 pm

We’re a small medical laser company. We spend more fighting IP suits from deep-pocketed “suits” than we do on R+D (and THAT’s MY budget, damnit!).

We follow the HP model (and Polaroid in the old days). Sell ‘em the laser cheapish and make it up on the optical fibers. The fibers are encoded and the laser system will not accept third party knockoffs. No IP protection needed there.

Now, are we “gouging” the consumers? Not a bit. We would have to charge MUCH more for the laser itself if we weren’t assured that we would enjoy a continuing cash flow from the “consumables”.
Win-Win.

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