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Source link: http://archive.mises.org/9998/should-you-give-away-your-precious-ip/

Should you give away your precious IP?

May 21, 2009 by

I’m trying to be sympathetic to a person who would fail to give permission for a reprint of grandfather’s book, and hence keep good literature out of circulation, possibly forever. I’m trying but it is hard.

Here is a scenario.

Let’s say I get a phonecall from the company “Simply Asia” and they inform me that my grandfather invented a unique noodle shape and that the patent on it passed to me in probate. Now, until this moment my life had been perfectly normal, flowing by day by day like every other life, but now I am aware of a long-hidden treasure in my family history.

What do I think? I think: $$$$

You might too.

You would want to know more about this company, how many noodles they expect to sell, how much money you are going to get per noodle, how big a house you will be able to buy, how fast your new Maserati will drive on the autobahn, and what date you can retire from your day job.

So it is. Not that you had anything to do with the stupid noodle design. It is an accident of fate that the patent happened to fall into your hands. But you don’t think about that fact. All you can think about is your new-found wealth. You are imagining a scene from the opening of Beverly Hillbillies. Black gold, Texas tea.

Sadly, the company that wants to put the noodle in production informs me that they want to give me $500 and be done with it forever. I’m thinking: who do these people think they are? What a ripoff. They must think I’m stupid. My family’s noodle design is fantastically valuable! Maybe I will produce it myself and not let these robbers in on the deal. The gears in my wild imagination start turning and turning and turning.

However, it turns out that I really don’t know anything about the noodle market. I don’t know how to make them, package them, sell them, or anything else. A month or two goes by and I lose interest in the whole noodle thing. Having turned down the company, I’m no worse off than I was before. But I won’t call them back and take the $500 because who knows? Maybe next year I can get into the whole noodle-making thing. I’m going to keep my IP in this little box of here and let it appreciate in value.

We know the end of the story. Nothing happens. The noodle stays out of production. The noodle company is sad but not devastated. There’s always another shape of noodle it can sell.

That’s the story of hundreds of books. Thousands of books. Tens of thousands of books. Thanks to horribly egregious copyright legislation, books published from the late sixties onward are typically under copyright for 100 years, meaning that someone besides the author is charged with administering rights. That person is usually completely ignorant of book publishing and the content of the book or why it matters. All he wants is money that is not there. More often than not, this person will refuse to make a deal. And book stays out of print, for the rest of our lifetimes at least.

This is what copyright extensions have amounted to: great impediments to printing books and preserving literary legacies. Already, provisions of the law have burned more books than most despots in human history. And this has only just begun. We are going to be seeing this nonsense for another 100 years at least. We can look forward to a century of book burning.

Sad to say, many of the books that will fail to be printed are great books. But they might as well have never been written. The author is in no position to protest because he or she is six feet in the ground. His or her legacy, about which the heir cares nothing, is buried too.

The problem here in such negotiations is that within the structure of IP there is no rational way to price anything. The property is made scarce only by the state and its stupid laws. The scarcity is otherwise wholly artificial. The function of prices is to rational allocate scarce goods but when goods are infinitely reproducible and made scarce only by the state, pricing too becomes akin to pricing under socialism. You just end up making things up in the face of radical information asymmetries.

If I were offering to buy this guy’s planter on his porch–a scarce good with replacement possibilities and involving real expenditure–he could make rational price based on real market conditions and I could decide to meet it or not. But when offering to buy someone’s IP, both parties to the exchange are completely blind as to the value in question. He imagines infinite value and hence price. I imagine some value (maybe, maybe, depending on many uncertain factors) and a small price. There are no objective considerations to resolve the differences in our outlooks.

Now, what of the justice of this situation? There is no justice. The “heir” is a fake who, under a free market, would own no more than you or me. He would be in no position to keep a book published 30 years ago from coming back into print. He wouldn’t be owed one thin dime, and he would never know the difference anyway.

But under an interventionist system in which the state makes up this preposterous idea of “intellectual property rights” and arbitrarily assigns power to individuals to coerce others into failing to make profitable exchanges possible, enterprise is seriously hampered. Companies that want to print books can’t and people who want to buy them can’t do so. Society is made worse off.

There is a way out for the wise few who are on the receiving end of a call about one’s IP. Think of the greater good. Ideally you would be fair and wise and liberate the idea and give it back to the world to which is rightly belongs. If you aren’t that high minded, fine, take the moderate amount and money and move on.

Whatever you do, don’t join the state, don’t join the bookburners, pretend as if your business savvy is going to net you millions, or otherwise behave like a jerk. Have some respect for your family legacy and say yes to reprints. The state, through its IP laws, is bringing out the worst in most people. You can refuse to go along.

{ 18 comments }

DixieFlatline May 21, 2009 at 12:35 pm

Brilliant. Well said. I cannot imagine claiming IP protection for anything I do in the future, and I certainly wish to hold no title on the past.

go jeffrey May 21, 2009 at 1:00 pm

great cri du coeur Jeffrey ! very convincing.

Matt_R.L. May 21, 2009 at 1:13 pm

Wow! Incredibly eloquently put!

Stephan Kinsella May 21, 2009 at 1:51 pm

Here’s my idea: I start the Kinsella Libertarian IP Law Firm. If you are approached like this, for a flat $1000 fee, I’ll give you the libertarian advice Jeff suggests above: you demand a mere $500 one-time fee, plus reimbursement of your $1000 legal fees, of course. Heh hehhh.

jdavidb May 21, 2009 at 2:07 pm

I like Stephan’s idea, as long as it will bring us more books!

Personally, I’d want to get my grandfather’s stuff republished under a Creative Commons license or similar terms. :)

Mark Ennis May 21, 2009 at 2:53 pm

As someone still getting their sea legs as to all of the implications of truly being devoted to liberty, intellectual property is one of those areas that’s likely last to go. This was very helpful and clear.

BK Marcus May 21, 2009 at 3:31 pm

“Having turned down the company, I’m no worse off than I was before. But I won’t call them back and take the $500 because who knows? Maybe next year I can get into the whole noodle-making thing.”

I think this is a critical point. For you as the IP heir, your opportunity costs are entirely abstract: you have no storage costs, no capital depreciation, no impact on any other scarce resources.

Andras May 21, 2009 at 10:20 pm

Noodles,
Wait a few years till the patent expires and you can freely multiply.
Mr. Tucker, your current example is again irrelevant as ever.

Sasha Radeta May 22, 2009 at 2:26 am

Here’s another great idea:

just purchase co-ownership rights from rightful owners (regardless if these owners are authors or their children who rightly inherit their parents’ property) — and you will be able to reproduce and publish these books all you want. Just pay the real market price, like any honest publisher does.

Peter Surda May 22, 2009 at 6:48 am

It saddens me that instead of presenting logical and well argued articles that explain why IP is bad, what we see is an increasing amount of emotionally loaded anecdotal evidence. Especially confusing because they appear to(*) propagate the idea that people wanting to get rich is bad, on a website that is supposed to promote free market.

This does not help convincing others.

I think regular people have a highly skewed idea about IP. They typically think that IP is the only way to make money out of immaterial goods, and that the “market value” of IP is usually huge. Such image is presented by the popular media. As I pointed out several times in the comments, and as Boldrin&Levine document plentifully, both of these propositions are incorrect. There is an infinite number of options for making money with immaterial goods, and their market value is only as good as what type of consumer goods and services they can help to produce in the long run. If there is no business plan or a lame one, or if the cost of IP as inputs are too high as a result of IP laws, then the market value is zero, the rest is just a bubble.

What we should concentrate upon is to debunk these fallacies instead. An enormous undertaking indeed, but more likely to bring about results.

(*) appear to, because the parts were it explains that it’s not are small and not prominent.

Sasha Radeta May 22, 2009 at 7:12 am

Peter,

What if I’m not interested in “making money with immaterial goods” and instead I want to focus on providing limited access to my property (such as books) through “terms of use” contracts? What force should prevent me from making money in such fashion? Do we need the Soviet-style mob that would make my own property “public” with limitless access, without my approval?

If there were no restrictions to access of all scarce goods in this world, the market price would go down to zero (and you would have enormous scarcity and starvation). However, prices formed by legal restrictions in access to scarce goods do not imply that these market prices are “bubble” or something evil.

I agree: some business models do not rely on “terms of use” or restrictions in access to one’s property. However, some business models require such restrictions and as long as we have any private property rights, copyright will be justifiable.

Peter Surda May 22, 2009 at 8:27 am

@Sasha
In order to better understand where IP stands with regards to markets and rights, kindly consult a diagram I made a while ago: http://shurdeek.shurdix.org/tmp/ip.png . A lot of people, and parts of your argument, assume that cell #3 is IP. It isn’t.

In other words, if you are talking about
> providing limited access to my property (such as
> books) through “terms of use” contracts
then by the very use of the term “contract” you indicate that you are talking about cell #3. Contracts and IP are mutually exclusive sets of rights, they cannot apply to the same situation at the same time. Or to look at it from the opposite point of view: you cannot at the same time claim that a contract was violated and that IP was violated. IP is only applicable if there is no underlying contract present.

Also, if you say
> Do we need the Soviet-style mob that would
> make my own property “public” with limitless
> access, without my approval?
you seem to think that I am promoting the elimination of rights in cell #3. I’m not, as they are not IP.

There are some limited cases where IP re-asserts rights which are already covered by (classical) contracts. I’m ignoring those to make the argument simpler.

Cheers,
Peter

Sasha Radeta May 22, 2009 at 8:50 am

Peter,

I think your diagram is only confusing you. IP falls within the property right to exclude others from unwanted use of your scarce physical good, such as book or other work of authorship.

You say: “IP is only applicable if there is no underlying contract present” — but that really makes no sense. IP applies when a rightful owner allows a limited use of their works of authorship (scarce goods) through market transactions (contracts in which property title of buyer’s money is transferred for that particular service).

If you advocate the elimination of the author’s right to only sell a certain use of their property (personal, non-commercial), while retaining all other property rights for himself- you are in fact advocating the elimination of market for rent, labor, and all other services.

Like Rothbard, I’m strongly opposed to patents, but copyright always protects rightful owner from trespasses that occur from violations of contracts (terms of use).

Peter Surda May 22, 2009 at 11:17 am

@Sasha
I think I need to add some commentary to my picture, just didn’t have time yet. I think you are misrepresenting what I meant.

The diagram divides “property” rights into four categories, depending on whether the underlying good is rival or not, and depending on the target group of the right. It does not say whether such rights are good or bad or to what extent they are currently enforced by the law (although I think it reflects current law fairly well). It merely categorises them.

The right to use includes e.g. the right to consume the good yourself, the right to sell, the right to delegate, the right to rent and in general any type of transaction where another party to the contract is granted some sort of consumption with regards to the underlying good. It obviously also includes any sort of restrictions you may put into the contract.

The right to exclude third parties refers to the right to deny consumption without an underlying contract. For example, the right to deny other people the entrance to your house is such right. Also, the right to deny other people selling self-made copies of your books is such right. You’ll notice that in none of the examples mentioned there is an underlying contract. If there was an underlying contract that was violated, it would be the right to use. For example, if you agreed to pay for being on my property, or agreed to pay for being a distributor for my books, but failed to do so.

With rival goods, these rights are logically inseparable. You cannot grant the right to use without the right to exclude third parties, because consumption alters the good (in economic terms, the supply decreases). If you didn’t have the right to exclude, your right to use would be incomplete.

With non-rival goods, consumption does not alter the good (supply doesn’t decrease). It might affect the market price, but the market price is not an internal feature of the good. These rights are logically separable (can be granted to separate entities without problems), and you can even fully utilise your right to use without the right to exclude to exist at all.

If you still do not agree, try to think of an example, hypothetical or real, where a violation of IP can happen while there is an underlying contract with regards to the same good, and this case is not already covered by the (classical) property rights. I claim that there is no such case.

jc butte May 23, 2009 at 9:46 pm

Patents and Copyrights…apples and oranges.
Utility patents last 20 years and that only if you pay periodic maintenance fees. Sometimes they can be extended by filing additional patents based on subsequent modifications to the original. Then there is an international patent window that once closed is closed for good…

Could it be that part of the reason the US has excelled in innovation is because IP is protected? Perhaps a Russian could shed light on that question…

Andrew May 24, 2009 at 2:38 am

jc butte: as a Russian I wonder if it was because private-property rights and contracts were well protected. But do we really have an example of a capitalist country overlooking IP rights while otherwise providing decent protection of property? If yes, does it lag in innovation?
And then, the Soviet Union had rudimentary IP of its own (signatory to the Berne convention since 1973, using the © symbol in printed matter as early as 1980, and maintaining a system of “authorship certificates” for inventors). IP apologists, take note: communist countries do recognize IP in a way. It’s just impossible to sell licenses freely, nor infringe copyrights when the gov’t controls reproducing equipment. But maybe the latter is a prerequisite of sound IPR enforcement?
Personally I’m leaning toward anti-IP because I fail to see the merits of “incentivizing innovation”. Again, the Soviet Union did precisely that: it had some centrally-planned innovation (rip-offs of Western inventions notwithstanding), overstressing progress at the cost of underproducing mundane consumer goods.

Sasha Radeta May 25, 2009 at 12:14 pm

In other words, not even Soviets were foolish enough to nationalize all works of authorship, by making them a public domain. In a truly free society owners can restrict certain use of their property, while allowing (selling) other kinds of use…

Gumnaam May 25, 2009 at 5:01 pm

Mr. Tucker makes a lot of sense. Frankly, this article is an eye-opener for me.

Brilliant and workable idea by Sasha to buy co-ownership.

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