The 3^rd Adam Smith Forum is being held Nov. 12, 2011 in Moscow. This is an impressive event, organized by the Center for the Philosophy of Freedom, the Libertarian Party of Russia, and others. The Chairman of the ASF Steering Committee is economist Pavel Usanov, head of the Hayek Institute for Economy and Law; Andrey Shalnev, head of the Center for the Philosophy of Freedom Moscow, is its co-chairman. I was invited to speak but cannot attend in person, so my speech “Why Intellectual Property is not Genuine Property” will be presented remotely, with Russian subtitles.

Other speakers at the upcoming ASF are expected to include: Spanish economist, Professor at Rey Juan Carlos University Jesús Huerta de Soto; economist Slavisa Tasic; Atlas Economic Research Foundation executive vice-president Tom G. Palmer; economist, 2009 Nobel laureate Elinor Ostrom; Hernando de Soto; José Piñera; Kakha Bendukidze; Walter Block; Raimondo Cubeddu, Andrei Illarionov, Alexander Nikonov, Alexander Auzan, Pavel Usanov, Vladimir Chetvernin, Konstantin Ksenofontov, Dmitry Balkovsky, Stepan Demura, Alexander Dolgin, Yaroslav Romanchuk, Sergei Zhavoronkov and others.

The Abstract of my speech is below:

Intellectual property rights, or IP—primarily patent and copyright—has long been viewed as a legitimate type of property right by libertarians and other defenders of capitalism and free markets. I argue that IP rights are not genuine property rights, and that these laws should be abolished. This issue is relevant to Russia and Adam Smith Forum members because of the pressure by the US on Russia and other countries to adopt western-style patent and copyright law. But the west has attempted to export many other laws and policies to other nations, many of which are not compatible with a free market, such as antitrust (competition), antibribery, tax, narcotics, and central banking laws and practices.

In this talk I provide an overview of the nature of patent and copyright, followed by a discussion of the nature and purpose of law and property rights in a world of scarcity. I argue that property rights apply to scarce resources only, to permit such resources to be used peacefully, productively, and cooperatively as a means of action. However, property rights make no sense are in fact perverse and undermine genuine property rights when the law attempt to apply them to information, ideas, and knowledge. Property rights must be granted in scarce resources and only in scarce resources if we are to have prosperity, freedom, and progress in science.

In fact, state IP rights are not genuine property rights, but are instead neo-mercantilist monopoly grants of privilege that protect favored recipients from competition. This enriches the patentees and copyright holders, and the state, but at the expense of consumers and competitors.

I also provide an overview of the history of opposition to IP law, identifying four key historical phases beginning around 1850.

I conclude the talk by observing that IP reform cannot work; the only solution is complete abolition of patent and copyright.

I’ve written before about the quirky scientistic California libertarian guru Andrew J. Galambos, and his extreme, crazy IP ideas. ((See Galambos and Other Nuts; also Galambosian IP Recursion; “Ideas Are Free: The Case Against Intellectual Property.”)) Galambos believed that man has property rights in his own life (primordial property) and in all “non-procreative derivatives of his life”—the “first derivatives” of a man’s life are his thoughts and ideas—these are “primary property.” Since action is based on primary property (ideas), actions are owned as well; this is referred to as “liberty.” Secondary derivatives, such as land, televisions, and other tangible goods, are produced by ideas and action. ((See also On Andrew Galambos and His Primary Property Ideas, by Alvin Lowi, Jr.))

In other words, man has “primary” property rights in his thoughts and ideas, and secondary property rights in tangible goods. Thus, as ideas are the primary form of property, Galambos claimed a property right in his own ideas, and required his students to agree not to repeat them. In Against Intellectual Property I note that Galambos

took his own ideas to ridiculous lengths dropping a nickel in a fund box every time he used the word “liberty” as a royalty to the descendants of Thomas Paine, the alleged “inventor” of the word “liberty”; and changing his original name from Joseph Andrew Galambos (Jr., presumably) to Andrew Joseph Galambos, to avoid infringing his identically-named father’s rights to the name.

A version of this “primary property” idea–elevating property rights in ideas to an even higher and more fundamental status that in scarce resources–is espoused by Ayn Rand, who incredibly said, “Patents are the heart and core of property rights.” Likewise, Objectivist IP attorney Murray Franck approvingly repeated the following quote: “intellectual property is after all the only absolute possession in the world,” and Objectivist law professor Adam Mossoff argues that “All Property is Intellectual Property.” ((See Kinsella, Objectivists: “All Property is Intellectual Property”; also my “Ideas Are Free: The Case Against Intellectual Property” and IP Needs A World of Scarcity.)) And my friend and neo-Objectivist libertarian philosopher Tibor Machan has said: “it would seem that so called intellectual stuff is an even better candidate for qualifying as private property than is, say, a tree or mountain.” ((See my post Owning Thoughts and Labor; also New Working Paper: Machan on IP.))

So it is interesting that I came across a much earlier use of the phrase “primary property” in a very similar context, in a 1950 article about the patent controversy by Machlup & Penrose. ((See Fritz Machlup & Edith Penrose, “The Patent Controversy in the Nineteenth Century,” Journal of Economic History 10 (1950), p. p. 11, and n. 35.)) As they note, in the debate about patent and copyright in the late 1700s:

others went as far as to say that a man’s property in his ideas was more sacred than his property in things material …

This was one of the main arguments Stanislas de Bouffler used in presenting the patent bill to the Constitutional Assembly in December 1790:”If there is for man any genuine property it is thought, … and the tree which grows on a field does not so incontrovertibly belong to the owner of the field as the idea which springs from a man’s mind belongs to author. Invention, the source of the arts, is also the source of property: it is primary property, while all other property is merely conventional ….”–Augustin-Charles Renouard, Traité des brevets d’invention (3d ed.; Paris, 1865), pp. 89-90 (first published, 1825).

It seems to me that not only are Galambosians prevented from spreading their own views because of their bizarre self-imposed IP restrictions–now they cannot even claim credit for these bizarre ideas, leading to an infinite recursive Galambosian loop.

As noted in prevoius posts, ((Open Science Summit Streaming Live; Kinsella on Panel at Open Science Summit.)) I spoke this past weekend on a panel at the Open Science Summit, held at the Computer History Museum in Mountain View, California. My panel’s topic was “The Future (the End?) of ‘Intellectual Property.’” The video for our panel is now up, here and here, and below. My talk, “IP and the New Mercantilism,” is first, and lasts about the first 19 minutes. The slideshow I used (but did not show the audience) is also below.

My original title was “IP and the New Mercantilism,” but I think a better title is “Property and Science: The Twin Pillars of Prosperity and Civilization–versus Patent and Copyright.”

The Future (the End?) of “Intellectual Property” from Open Science Summit on FORA.tv

As I noted in previous posts (Open Science versus Intellectual Property and Kinsella on Panel at Open Science Summit), this is a fascinating and promising movement/group that is devoting a great deal of attention to how IP affects science (for more on the OSS, see The Open Science Shift, Xconomy; Open science: a future shaped by shared experience, The Guardian; footage from last year’s summit is available on the OSS Youtube channel).

In fact a good deal of the Opening Session of the 2010 Open Science Summit was devoted to IP horror stories and ways in which it interferes with science and the spread of knowledge (go to about 8:20 for the beginning of this discussion).

For a related talk, “Science is a Private Good – Or: Why Government Science is Wasteful” (video; audio; and below) delivered at the Fifth Annual Meeting of the Property and Freedom Society in Bodrum, Turkey, ((See my Bodrum Days and Nights: The Fifth Annual Meeting of the Property and Freedom Society: A Partial Report.)) by Terence Kealey, a biochemist at the University of Buckingham and author of Sex, Science and Profits and The Economic Laws of Scientific Research.

Hoppe has explained how Marx was “essentially correct” in his theory of history and class analysis. His main mistake was his understanding of exploitation, which was based on a flawed understanding of the labor theory of value. As Hoppe argues, drawing on Rothbardian libertarian and Austrian insights, the only meaningful exploitation is aggression against private property. Once you understand exploitation in this light, a Marxian style class analysis and understanding of history makes sense.

And Marx was also right about some of his views about capitalism. In the comments section on a recent Mises post, Chartier: Markets Not Capitalism, left-libertarian Charles Johnson perceptively writes:

The term “capitalism” was introduced by anti-capitalists but not by Marx. Its most notable early appearance is in Louis Blanc’s Organisation du Travail (1840), published while Marx was still a grad student in Berlin.

Fun fact: Marx himself actually hardly ever uses the word — “capitalism” (Kapitalismus) appears all of about 2 or 3 times in the whole three volumes of Das Kapital, and hardly anywhere else in all of his work. But he does talk about “capitalists” and the “capitalistic mode of production” all over the place, and when later Marxist writers took up the term “capitalism” from Blanc, Proudhon, and other early adopters (mostly French), it was fairly straightforward to treat the term as more or less equivalent in meaning to Marx’s “capitalistic mode of production” (i.e. a mode of production based on concentrated absentee ownership of capital and the hiring of employees to work it).

None of these folks, incidentally, understood the term to mean “a free market in land and means of production.” Some (Blanc, Marx) believed that a free market in land and the means of production would inevitably tend to produce capitalistic patterns of ownership and control. Others (Proudhon, Warren, Tucker) dissented, and argued explicitly that a free market in land and the means of production could possibly, or even would naturally tend to, undermine capitalistic patterns of ownership and control (in the sense that large-scale inequalities of wealth would tend to dissipate, absolute poverty would largely disappear, and the working class would become the owning class, no longer subject to perpetual rent or debt, and no longer dependent on relationships with absentee owners of capital in order to make a living); hence (they held) if you were serious about being an anti-capitalist, then you ought to be serious about freeing markets and abolishing the state. On this one, I side with the Anarchists.

I side with Marx, not the “Anarchists,” here: in their belief “that a free market in land and the means of production would inevitably tend to produce capitalistic patterns of ownership and control.” I believe that if you respect private property rights (which the (good) left-libertarians do) then you will end up with a productive, advanced industrialized and “capitalist” society with differences in wealth, widespread use of firms, concentration of capitalism, employers and employees and employment, and inequalities in income. And there is nothing wrong with these features, assuming they do not arise due to state intervention or property theft. This does not mean that the capitalist order that would characterize a key aspect of the economy of a free society would be exactly like the one we see today. There may well be more self-employment, more localism, more self-sufficiency, and at the same time even more international trade, more billionaires, more wealth disparities (who can say?), more specialization and division of labor, and even larger “companies” (formerly known as “corporations”) and multi-national enterprises (MNE’s; well as nation-states would not exist, maybe they would be called multi-country firms, or multi-continent-firms) than we see now.

A couple of related points: even to the extent some current property holdings have arisen by unlibertarian acts in the past, as Rothbard explains:

It might be charged that our theory of justice in property titles is deficient because in the real world most landed (and even other) property has a past history so tangled that it becomes impossible to identify who or what has committed coercion and therefore who the current just owner may be. But the point of the “homestead principle” is that if we don’t know what crimes have been committed in acquiring the property in the past, or if we don’t know the victims or their heirs, then the current owner becomes the legitimate and just owner on homestead grounds. In short, if Jones owns a piece of land at the present time, and we don’t know what crimes were committed to arrive at the current title, then Jones, as the current owner, becomes as fully legitimate a property owner of this land as he does over his own person. Overthrow of existing property title only becomes legitimate if the victims or their heirs can present an authenticated, demonstrable, and specific claim to the property. Failing such conditions, existing landowners possess a fully moral right to their property. (See my post Justice and Property Rights: Rothbard on Scarcity, Property, Contracts….)

Also, note that Johnson mentions that the Anarchists he sides with think that in a free market the “working class” would “no longer dependent on relationships with absentee owners of capital in order to make a living.” The left-libertarians variously criticize several phenomenon, sometimes lumped together. I think they should be treated separately:

1. Unowned land claimed by the state. Truly “unowned” land: this is land not yet really improved or homesteaded but fenced off and claimed by the state–such as the vast interior of national parks and forests and other lands controlled e.g. by the Bureau of Land Management, and other untransformed areas such as the deep sea bed (subject to the Law of the Sea Treaty), antarctica, the moon, and so on. The libertarian position here is that upon dissolution of the state these resources are subject to homesteading, as they are not yet truly owned.
2. Property legally owned by the state. Other property that is legally owned by the state, such as roads and government buildings and military bases. It is crankish to regard these as “unowned”, as some libertarians do. This property has been homesteaded, either by the state; or by some private owner that the state either expropriated or purchased from. These should be regarded, in my view, as assets legally owned by the state but morally owned by the state’s victims and subject to claims of restitution by them. For specific pieces of property expropriated from an owner by the state, that victim ought to reclaim his property. For the rest, it should be subject to a pro-rata claim by all the various creditors of the state–e.g., auctioned off and then the proceeds split among the claimants. Consider a piece of property that the state acquire by sale: the previous owner has no specific claim since he sold his land to the state. He was already compensated. Likewise, someone who had their property taken by eminent domain but then received a payment of “fair market value” has (mostly) been compensated already–and with money stolen from taxpayers at large. Thus, for condemned or purchased property where the state paid the previous owner, this should be an asset available for restitution to the state’s victims at large.
3. Unimproved property legally owned by a private owner. Land that is unimproved but held by a nominally private owner under color of title granted by the state. This land is arguably similar to class 1 above, and the current legal/nominal owner perhaps ought not have his state-granted title recognized. Perhaps such unimproved property should be subject to homesteading if the state were to wither away. I am not sure of this, but I grant that it is arguable.
4. Land owned by “absentee” owners. Land that was at one point homesteaded, but which is occupied on a day to day basis by tenants or employees of an “absentee” or “distant” owner. Now the comment above implies that this is illegitimate. I disagree completely, as I argue in A Critique of Mutualist Occupancy. Contrary to the claims of some mutualists and left-libertarians, absentee ownership is not unlibertarian. It cannot be plausibly argued that the absentee owner has “abandoned” the property. In fact, even if you argue that property that is never improved, or that is not kept in a state of active use, is to be regarded as unowned, in the landlord or employer situation the property is actively used, and the tenants or employees keep the property in a state of use on behalf of the (absentee) owner, as his agent, by contract. To hold otherwise is to undercut property rights by denying the right of free individuals to enter into property contracts.

As noted previously, I was on the IP panel of the Open Science Summit last weekend. I was please to meet co-panelist Andrew Torrance, a law professor at the University of Kansas School of Law. My presentation was libertarian and theoretical, while his was empirical. He presented the results of a complicated and detailed simulation he did to test the effect of patent law on innovation.

The results of his study are fascinating. They are presented in his 2009 paper Patents and the Regress of Useful Arts. Abstract:

Patent systems are often justified by an assumption that innovation will be spurred by the prospect of patent protection, leading to the accrual of greater societal benefits than would be possible under non-patent systems. However, little empirical evidence exists to support this assumption. One way to test the hypothesis that a patent system promotes innovation is experimentally to simulate the behavior of inventors and competitors under conditions approximating patent and non-patent systems. Employing a multi-user interactive simulation of patent and non-patent (commons and open source) systems (“The Patent Game”), this study compares rates of innovation, productivity, and societal utility. The Patent Game uses an abstracted and cumulative model of potential innovations, a database of potential innovations, an interactive interface that allows users to invent, make, and sell these innovations, and a network over which users may interact with one another to license, assign, infringe, and enforce patents. Initial data generated using The Patent Game suggest that a system combining patent and open source protection for inventions (that is, similar to modern patent systems) generates significantly lower rates of innovation (p<0.05), productivity (p<0.001), and societal utility (p<0.002) than does a commons system. These data also indicate that there is no statistical difference in innovation, productivity, or societal utility between a pure patent system and a system combining patent and open source protection.

He describe this also in his Google TechTalk, “The Patent Game: Experiments in the Cathedral of Law”:

Torrance’s simulation indicates that a society with no patent law would have more innovation than one with patent law. What is interesting is Torrance said that when he began this project he fully expected the simulation to show the opposite: to vindicate the legitimacy of patent law. In this, he is similar to Boldrin and Levine, authors of Against Intellectual Monopoly, who began their empirical study of patent law expecting it justify it, but ended up completely opposing patent and copyright law (Boldrin discusses their change of heart in the podcast mentioned in EconTalk Podcast on IP with Michele Boldrin).

Yet another nail in the IP coffin. (See also my post Yet Another Study Finds Patents Do Not Encourage Innovation.)

Addendum: I explain in There’s No Such Thing as a Free Patent, to justify the patent system on such wealth maximization grounds, first you must show that it (a) stimulates an overall increase in innovation: that is, that the value of the extra innovation that it gives rise to (innovation we would not otherwise have, absent the patent system, or innovation that comes earlier than it otherwise would have) exceeds the value of innovation that is lost because of the patent system. It seems to me that it is impossible to know any of these things, much less value them. How can you know when at a given innovation that you posit came earlier than otherwise, “would have come” absent the patent system? How can you know what innovations were lost due to the patent system?

In any event, even if you somehow posit or establish that the patent system does generate net innovation, you still need to show (b) that the value of this net innovation is greater than the cost of the patent system to the economy or to society.

For example, let us assume that the patent system costs the economy $500B a year. And let us assume that once in place, $200B of extra innovation exists or comes early, and $50B of innovation is lost. This means that a $500B cost is imposed on the economy, to yield $150B of net innovation. This is an overall loss of $350B.

From studies I am aware of, no one has succeeded in showing even (a) yet, much less (b). That is, it appears that overall innovation is diminished due to the patent system. So taking the example above, that would mean something like this: A $500B cost is imposed on the economy by the patent system, and the result of this is that $50B of extra innovation is stimulated, and $200B innovation is lost, meaning a net innovation loss of $150B, for a cumulative loss of $650B. I.e. we impose costs on the economy only to decrease overall innovation. In Costs of the Patent System Revisited, use a similar structural calculation but with more realistic assumptions to estimate that the patent system imposes an overall cost of at least $42B a year (on the US economy alone). And as noted in Patent Trolls Cost The Economy Half A Trillion Dollars since 1990, even more recent patent troll cost studies have led me to revise my estimate of annual patent losses from $42B to $100B a year–and that’s still conservative.

It appears to me that Torrance’s conclusion about a patent system stimulating less innovation than a “commons” system would indicate that in point (a) above, there is not overall net innovation in a patent system. He also concludes there is less “societal utility” in a patent system, compared to a non-patent system, which, if I understand his methodology, more or less corresponds with point (b) above, i.e. it indicates that the social cost of patents, minus the value of the net innovation it spurs, is overall negative–which is what one would expect if the patent system actually decreases overall innovation.

Further, as I argue in Against Intellectual Property (pp. 19-23), there are inescapable methodological and ethical problems with any empirical defense of a patent system, and with empirical studies such as Torrance’s.

Ethical Problems with Utilitarianism

First, the ethical problem:

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.

For example, imagine A has a $10M estate that he earned from a business he created on the free market. The utilitarian could argue that taking $1M from him and distributing it in $10k chunks to 100 needy people increases social utility, since those 100 recipients each “really value” the $10k, and the sum of their utility increases is far greater than the loss of $1M to the millionaire, since he still has $9M left. Yet the taking of $1M is still theft. The fact that the recipients value it “more” than he does, does not change this. Or, as I pointed out in The Trouble with Libertarian Activism, “the utilitarian standard would permit, for example, a very desperate rapist to rape a woman of loose morals, since the damage to her is arguably small (by utilitarian standards) and the benefit to him great, providing a net benefit to society.”

Of course this is the problem with the entire utilitarian, law and economics, wealth-maximization mentality. It just assumes that the purpose of law is to be tweaked to maximize certain values, or to “incentivize” behavior. It is really a statist, central planning type mentality. It even trips up the analysis of anarchist libertarian David Friedman. For example, in his Law’s Order, ch. 11, he writes:

Property rights serve two related functions: They provide both a way of deciding who gets to use what when and an incentive for creating things.

In the case of intellectual property, the first function is not merely unnecessary but perverse. We cannot both drive the same car to different places, which is an argument for property rights in cars. But we can both use the same idea to build different machines, or simultaneously read different copies of the same book, which is an argument against property rights in ideas or writings.

Having one more person choose to read a book does not increase the cost of writing it; that must be paid in full in order for there to be any readers at all. Hence when we include in the price of a book a royalty payment to the author, we are, from the standpoint of efficiency, overcharging. If the price of an eleven dollar book represents a ten dollar production cost plus a dollar in royalties to the author, an additional copy produces a net benefit as long as the purchaser values it at more than ten dollars. But if he values it at more than ten and less than eleven, he will not buy it, which is an inefficient outcome. The same is true for the potential user of an idea who values it at more than zero but less than the license fee set by the patentholder. On the dimension of how many people use an idea or a writing private property gives an inefficiently low result, commons an efficiently high one.

There remains the second function of property. It is hard to read a book if nobody has written it, and authors may choose not to write books if they cannot collect royalties on them. Similarly for inventions. So the protection of intellectual property does provide some benefit. But the case for treating ideas as property is, economically speaking, weaker than the case for propertizing many other things, which may help explain why intellectual property is a relatively recent institution.

Friedman recognizes the need for property rights as a response to scarcity in his first “function,” but assumes that the “incentive” effect of property rights is an independent justification for property rights. For normal property, like scarce resources, assigning property rights in the scarce resources, so that peaceful, productive, conflict-free use may be made of these resources, also happens to give owners “incentives” to use the property efficiently, and to transform the property into more valuable arrangements, i.e. to “create things”–actually, to create wealth, not things (see my post Locke on IP; Mises, Rothbard, and Rand on Creation, Production, and “Rearranging”). But this does not mean that property rights in non-scarce things can be justified simply to try to incentivize “creating things.” But thinking of property as having “two functions” leads to the bizarre conclusion by an anarchist that legal protection in ideas might be justified–that is, the right of one person who did not do anything to produce or homestead someone else’s property, to veto that other person’s uses of his property. As I explain elsewhere, such IP rights may be viewed as negative servitudes, a type of property right in the IP holder, in someone else’s property. But negative servitudes are justified only if granted contractually by the owner of the servient (burdened) estate. Legally giving such a right to the IP holder without the owner’s consent is a form of theft, or redistribution of property. (See also my post David Friedman on Copyright, and Hoppe’s criticism of the similar “Coasean” type reasoning in the Chicago Diversions section of this article.)

Methodological Problems with Utilitarianism

Second,

Advocates of IP often justify it on utilitarian grounds. 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. But there are three fundamental problems with justifying any right or law on strictly utilitarian grounds.

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.[39] 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.

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.[40] 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.

From my C4SIF post:

Ideally law ought to be developed in a decentralized fashion by judges, juries, arbitral tribunals applying developed legal principles based on libertarian ideas about justice and property rights, to new disputes and fact situations. ((See my articles “Legislation and Law in a Free Society” and “Legislation and the Discovery of Law in a Free Society.”)) This was the basic model of the two grand legal systems in history: the Roman law, and the English common law. Better yet if the state were not involved, but in any case, an decentralized, caselaw, organic system is to be preferred.

But we have a system now dominated by legislation, by statutory law. The Roman law was codified legislatively by Napoleon and others, resulting at first in elegant civil codes enacted by legislation and backed by the force of the state. This enshrined legislation as the supreme source of law–legal positivism. ((See my post Logical and Legal Positivism.)) These are the continental legal systems, the so-called civil law. In the meantime even the relatively propertarian and elegant civil codes have been swamped by a deluge of inelegant artificial and special-interest favoring legislation. Meanwhile the English common law has also been gradually submerged in a flood of English statutes. The US English-influenced common law system has also become steadily dominated by state and federal statutes. This should be no surprise given that the fount of our law is the Constitution, itself nothing but a statute, a piece of legislation. Sure, the Constitution as legislation is broader and more general and aspirational than most modern specialized statutes, which means that it is vague and ambiguous and subject to arbitrary interpretation–and since it is the state’s courts that interpret it, this means that it will be construed over time to grant more and more power to the state. ((See John Hasnas, The Myth of the Rule of Law.)) Don’t fool yourself: the Constitution is nothing special, and is not libertarian. It’s just a cover for a centralizing power grab. ((See Rockwell on Hoppe on the Constitution as Expansion of Government Power.))

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I’m here at the amazing Computer History Museum in Mountain View, to speak on a panel at the Open Science Summit. My panel is on intellectual property and science, and starts at 10:00 a.m. PST. The panels are streaming live here.

As I noted in previous posts (Open Science versus Intellectual Property and Kinsella on Panel at Open Science Summit), this is a fascinating and promising movement/group that is devoting a great deal of attention to how IP affects science (for more on the OSS, see The Open Science Shift, Xconomy; Open science: a future shaped by shared experience, The Guardian; footage from last year’s summit is available on the OSS Youtube channel).

In fact a good deal of the Opening Session of the 2010 Open Science Summit was devoted to IP horror stories and ways in which it interferes with science and the spread of knowledge (go to about 8:20 for the beginning of this discussion).

For a related talk, “Science is a Private Good – Or: Why Government Science is Wasteful” (video; audio; and below) delivered at the Fifth Annual Meeting of the Property and Freedom Society in Bodrum, Turkey, ((See my Bodrum Days and Nights: The Fifth Annual Meeting of the Property and Freedom Society: A Partial Report.)) by Terence Kealey, a biochemist at the University of Buckingham and author of Sex, Science and Profits and The Economic Laws of Scientific Research.

From Roderick Long’s blog post: A new book has been released by editors Gary Chartier and Charles Johnson, Markets Not Capitalism, that may be of interest to some here, especially as they heroically released a free scribd and PDF version. Chartier is the author of the excellent Conscience of an Anarchist. (my praise). As Long notes, “Incidentally, the official release date is – the Vth of November. Dismember, dismember.”

I have a long, fairly detailed and systematic blog post up at The Libertarian Standard discussing the demands of the Occupy Wall Street (OWS) movement for an end to “corporate personhood,” and a host of related issues:

The politics of the left-oriented Occupy Wall Street (OWS) movement, like that of the right-oriented modern Tea Party movement, is not very well defined. But one of the things some of the OWS participants are calling for in their list of “demands” is an end to “corporate personhood.” In this they echo the views of left-libertarians who contend that state-chartered “corporations” are the source of grave social ills.

Some of these issues were recently debated on the pages of Roderick Long’s blog, in the comments to his post “Double Standard.” Left-libertarians who oppose incorporation, and usually also “capitalism,” argue that firms derive some great benefit from the state by the privilege of incorporation. The standard leftist critique of the corporation is the “concession” theory outlined by Robert Hessen in his seminal study In Defense of the Corporation (see a key excerpt from pp. 18-21). They argue that the state grants to corporations three features: entity status, perpetual duration, and limited liability to shareholders, all of which are artificial and would not exist absent state intervention. Left-libertarians maintain that these privileges grant corporations more power than they otherwise would have, which distorts the market, nay, society in general. This gives rise to more “hierarchy” and “authoritarianism” than would prevail in what Hans-Hermann Hoppe calls a private law society, and indeed, to “exploitation” of the workers by the bourgeoisie.

The Alleged “Privileges” of Incorporation

Labor Theory of Value

There are several problems with the left-libertarian and leftist critiques of corporations. One is the acceptance of a Marxian-type labor theory of value—the idea that employers per se “steal” or exploit from workers the “social surplus product”—a discredited, hoary, unscientific view based on deeply flawed economics.

Entity Status

And as Hessen has pointed out,

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Last week I was a Guest panelist on This Week in Law, Episode 133, entitled “Beyonce, Bad Laws, and Breastaurants.” The two hosts and fellow guest panelist were all lawyers. We had a wide-ranging two-hour discussion about a variety of legal and policy matters, including a number of IP problems covering patent, copyright, trademark, and even trade secret. We also discussed the Occupy Wall Street movement, Apple’s use of IP to squelch clones and competition, copyright threats against Beyonce for her dance moves, and many others as indicated by the links on the episode’s show notes.

The video is below; it’s also on the TWiL page for this episode; you can also subscribe to the audio or video podcast for this show; here’s their FaceBook page.

A few more backup links and points below about some of the issues discussed.

• At one point we got into a discussion of Obama’s use of a signing statement to approve ACTA as an “executive agreement” (see ACTA, Executive Agreements, and the Bricker Amendment), I noted that under international law, violation by a host state of the citizen of another state gave rise to a right for the violated citizen’s home state to use military force against the host state. I remarked that one danger of internationalizing intellectual property by means of executive agreements and treaties is that it could give western nations an excuse to military force against countries that allow piracy. However, this was a bit of an overstatement since, as I explain in International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide (see this excerpt), this type of “gunboat diplomacy” is ostensibly no longer permitted since the founding of the UN in 1945: “Today, some investors hailing from militarily and politically powerful States might favor the threat or use of force to obtain restitution or compensation for expropriated property. Such an option is no longer available, however, due to fundamental changes in international law and politics. In particular, the United Nations Charter has since 1945 prohibited the use of force to resolve disputes, except in the case of self-defence. Today, it is generally accepted that a State may not use force against another State in response to a taking of the property of one of its nationals.”
• The quote I mentioned about the problem with making law by legislation is by James Carter, who wrote, in 1884, in opposing the attempt to codify New York’s common law:
  

  At present, when any doubt arises in any particular case as to what the true rule of the unwritten [i.e., judge-found, common-law developed] 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. The contention is ennobling and beneficial to the advocates, to the judges, to the parties, to the auditors, and so indirectly to the whole community. The decision then made records another step in the advance of human reason towards that perfection after which it forever aspires. 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!

• I mentioned the tension between antitrust and patent/copyright law; more discussion of this issue can be found in endnote 1 here;
• We discussed the America Invents Act; I’ve since completed a detailed writeup about this: The American Invents Act and Patent Reform: The Good, the Meh, and the Ugly;
• Concerning our discussion of the copyright lawsuit against Beyonce based on her dance moves in a music video, see also my posts: Copyrights and Dancing, Copyrighting Dance Steps–The Death of Choreography, and others at The Patent, Copyright, Trademark, and Trade Secret Horror Files. On the show we briefly discussed also Pro wrestler sues rapper over hand gesture: Yet Another Example of how Intellectual Property is Partial Enslavement.

For months now we’ve warned that the Anti-Counterfeiting Trade Agreement (ACTA) was on its way to being approved. This agreement is intended to strengthen international patent and copyright protection and to fight piracy and counterfeiting–for example, by imposing on other countries American DMCA-style provisions that prohibit technology that can be used to “circumvent” DRM technologies. As science fiction author Corey Doctorow observed, ACTA is a “radical rewriting of the world’s Internet laws taking place in secret without public input.” ((For more information see various C4SIF posts on ACTA.))

As noted in my post Progress on ACTA, Public Knowledge president Gigi Sohn’s has some eye-opening remarks about ACTA in a Federalist Society panel discussion, Federalist Society’s Intellectual Property Practice Group National Lawyers Convention Panel Online, from 1:20:10-end. Sohn explains that normally the subject matter of ACTA would be negotiated in an open manner under the auspices of WIPO; but it was negotiated instead by the USTR as a trade agreement so that it could be done more quickly, and in secret.

In any case, the US and several countries signed the agreement earlier this month. ((See various Techdirt and other posts including Brazil Drafts An ‘Anti-ACTA’: A Civil Rights-Based Framework For The Internet; What Does Japan Need To Do To Deal With The Aftermath Of The Devastating Earthquake? Apparently Pass ACTA!; As Countries Sign ACTA, Many Finally Admit Their Copyright Laws Will Need To Change; Obama Administration To Use ACTA Signing Statement To Defend Why It Can Ignore The Constitution In Signing ACTA; US, EU, Canada, Japan, Australia & Others To Sign ACTA This Weekend, Despite Legal Concerns.)) Also President Obama signed the agreement on behalf of the US, there are no plans to submit it to Congress for congressional approval. ((ACTA to Be Signed – But Can it Enter into Force?.)) The Obama administration has long argued that the President has the authority to “implement” ACTA by “Executive Agreement” alone, and that Congress’s ratification is not needed, because ACTA is already fully consistent with current US law and would not require Congress to enact implementing legislation.

As others have pointed out, however, there are several problems with this argument. First,

The regulation of intellectual property and of foreign trade through international agreements is an “Article 1” Congressional power. That means that the executive cannot bind the US to agreements in this area without congressional consent. The President lacks the authority to enter a “sole executive agreement” in this area, even if the agreement does no more that require the US to continue follow the contours of current US law. That is because the agreement purports to bind the US not to change its law, and changing US law in this area is a congressional power. This point has been made repeatedly by US law professors with no effective rebuttal. ((ACTA to Be Signed – But Can it Enter into Force?, citing Submission to USTR of 30 Law Professors, Sean Flynn, ACTA’s Constitutional Problem, editorial by Creative Commons founder Lawrence Lessig and Bush AAG Jack Goldsmith, article by Yale Law Professor Oona Hathaway and Berkeley Law Professor Amy Kapczynski, and Mike Masnick’s apt description of the issue.))

Second, if ACTA gets the minimal six ratifications it needs, then it is a treaty that could bind the US under international law to have its municipal law (e.g. intellectual property and foreign trade) comply with ACTA’s terms. “This triggers the possibility of trade sanctions for non-compliance with ACTA, even though Congress never entered into the agreement.”

Further, it appears that ACTA is not completely consistent with US law anyway. ((See A report to Senator Wyden, and an analysis by 75 U.S. law professors.))

We are seeing the danger here of the use by the President of “executive agreements” as a substitute for treaties, but in a way that binds the US under international law and that might even effectively amend the Constitution via the Supremacy Clause, which reads:

This Constitution, and the Laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the constitution or laws of any state to the contrary notwithstanding.

The treaty clause to the Constitution ostensibly requires the approval of a two thirds vote in the Senate, but executive agreements have been used as a way around this–to enter into commitments binding under international law–treaties–without getting Congressional approval. And because treaties are “the supreme law of the land,” the fear is that the President could in effect amend the Constitution by simply signing an executive agreement with terms contrary to other parts of the Constitution. This is one reason the Bricker Amendment was debated and almost passed in the 1950s. ((See also Re: Gun Control Through Democratic Executive Legislation?; and Tom Woods’ article Globalism and Sovereignty: A Short History of the Bricker Amendment.)) Too bad it failed.

It’s widely recognized that the American patent system is “broken” and needs to be “fixed.” ((See Chorus Of Mainstream Press Saying The Patent System Is Broken Gets Louder; Bill Gates’ 1991 Comments on Patents ; Even The OECD Is Noting How Dreadful Patent Quality Is Negatively Impacting Innovation.)) And so various alleged “patent reform” measures have been bandied about for years now.

And so, after about six years of gestation and special-interest wrangling, the America Invents Act was signed into law on Sept. 16 by President Obama. Below I summarize my take on this law. (For elaboration, see the slides and audio I presented in Mises Academy Webinar a week after its signing, appended below; see also my Mises Daily article, Obama’s Patent Reform: Improvement or Continuing Calamity?)

1. Patent Law versus Private Property and the Free Market

Despite the received wisdom that patent rights are a type of property right, they are in fact simply state-granted monopoly privileges that allow patentees to use state force to squelch competition. See, e.g.:

• Intellectual Property Advocates Hate Competition
• The Case Against IP: A Concise Guide
• Kinsella, Against Intellectual Property
• and others at C4SIF Resources

Patent law should be repealed completely and immediately. That is the optimal, pro-property, pro-capitalist, libertarian solution.

2. What Real Patent Reform would Look Like

Real patent reform is repeal of the US patent law. Short of that, any legislative, executive, or judicial reform that significantly reduces the scope and impact–and thus cost–of patent law, is to be welcome. As I laid out in Radical Patent Reform Is Not on the Way and How to Improve Patent, Copyright, and Trademark Law, significant reform would include things like:

• Reducing the Patent Term
• Removing Patent Injunctions/Providing Compulsory Royalties
• Adding a Royalty Cap/Safe Harbor
• Reducing the Scope of Patentable Subject Matter
• Providing for Prior-Use and Independent-Inventor Defenses

The reasons for these reforms, and others, are explained in the preceding linked articles.

So the question before us is: Does the AIA achieve any such significant reform?

3. The AIA: Good, Meh, and Ugly

In what was a surprise to me, one of the improvements I have advocated has been adopted: a version of the prior-user defense (discussed below). Other than this, the AIA does not significantly reduce the overall cost of the patent system. Almost all of the changes are minor, and some make a horrible system even worse. Let’s review them.

The Good

Prior Commercial User Defense. Under previous US patent law, if someone is using a device or process in secret, and someone else independently discovers or invents it later and then patents it, the second inventor can stop the earlier user from using their time-tested machines or processes. For example if a chemical company uses a given innovative nozzle or mixing technique to make a product more efficiently, and keeps this as a trade secret, then if a second company independently re-invents and patents this technique, they could stop the first user from using their own machine or process. In 1998 a narrow exception was added to give “prior users” of business methods a defense against those who later patent the same method. Subsequent caselaw weakened business method patents so that this defense was even more rarely needed (see the Bilski case in 2008). The AIA’s one significant improvement–probably the first real improvement to US patent law since 1790–was to adopt a fairly broad prior user right, one not restricted to business methods.

So now, for example, a patentee seeking to sue a competitor for patent infringement may fail if that competitor was already practicing the patented idea. This can weaken the ability to use patents for legal extortion, at least in some circumstances. This is good. A thin reed–but good. There are special-interest exceptions to this defense, and there is still no general independent inventor defense, but the expansion of this defense is nontrivial and good.

Other positive, albeit minor, changes to US patent law in the AIA, include:

• It’s now somewhat easier to challenge “bad” patents and submit prior art to be considered by Patent and Trademark Office (PTO);
• Joinder law has been revised to make it more difficult for patent trolls to join defendants for forum-shopping purposes (this is good, as patent trolls cost economy $80 billion a year ((See Patent Trolls Cost The Economy Half A Trillion Dollars since 1990.))
• Patent filing fees are slightly higher; some have whined about this and complained that it helps large corporations, but on balance, this is good, because it makes it more difficult to apply for patents–but bad in that it gives the PTO more revenue. Some have claimed this gives large companies an advantage over smaller ones, but on the other hand, small companies (those with less than 500 or fewer employees) already get a 50% fee reduction, and the AIA adds a new category for “micro-entities”–small entities with up to 4 patents or universities–who get a 75% fee reduction; and
• Tax strategies and some financial methods are now declared unpatentable; this is an improvement, albeit arbitrary: this exception appears to be the result of special-interest lobbying by the banks against Claudio Ballard and his company Data Treasury who used patents to extract royalties from banks who “violated” its check image capture and storage technology (see Banksters versus Patent Monopolists).

The Meh

First-to-File Priority System. The big hub-bub about the AIA is that it changed the US patent system from a first-to-invent priority system to a first-to-file priority system (more like other countries’ patent systems). ((See Ayn Rand Finally Right about the First-to-File US Patent System.)) Patent lawyers and others complain about this, but in reality it makes little difference (and why they whine about patent reform in either direction is a mystery; any change only generates work for them–see Mike Masnick, New Patent Reform Law Already A Good Thing… For Patent Attorneys). First, of hundreds of thousands of patents filed annually, less than a hundred are contested in so-called “interference proceedings,” the previous method of settling who gets the patent between two independent inventors who both file similar patent applications. I.e., this problem is rare, and fairly irrelevant.  Second, and most importantly, the victim of patent aggression does not care whether he are being sued or extorted or put out of business by a patentee who is the first inventor or the first filer. What difference does this make to him?

And a third point about the debate over what is better, a first to file, or first to invent, patent priority system. But note that in cases where this question even arises there is nearly simultaneous, independent invention of the same thing by different people. As I and others have suggested, not only should there be a broad independent inventor defense (that is, even when the accused infringer is not a “prior user,” but a later, but independent, inventor), ((Prior User Rights and Patent Reform.)) but the fact of independent invention should mean the invention is obvious and thus unpatentable. ((See Mike Masnick, The Economist Notices That The Patent System Is Hindering Innovation And Needs To Be Fixed.))

Boring Miscellany. Other changes that I rate as “meh” include repeal of the residency requirement for Federal Circuit judges, giving the USPTO authority to establish satellite offices, and the creation of a USPTO ombudsman. Who cares? There is also complaining about PTO “fee diversion,” but this is completely confused complaints, as I noted in Patent Fee Diversion and Patent Reform Whining.

The Ugly

• The AIA adds a new category for “micro-entities”–small entities with up to 4 patents or universities–who get a 75% fee reduction. This is bad, as it lower the burden to acquire patents;
• The best mode defense has been virtually eliminated. Previously the law required that a patent application (a) include a detailed written description; (b) the written description had to enable someone skilled in the art to make the described invention; and (c) the description had to disclose the “best mode” so that the patentee can’t get a broad patent claim that covers, by its language, the best mode known to the inventor but that is withheld from the written description. The latter requirement is part of the “patent bargain” that grants a temporary monopoly privilege “in exchange” for revealing to the public information that would otherwise be kept as a trade secret. This is a bizarre dilution of the “bargain” and makes it easier to get a monopoly while keeping key aspects of the monopolized idea secret, in effect letting patentees having their cake while eating it. It removes one possible defense that can be used against patentees who game the system or flout the best-mode disclosure requirements. Bad.
• The PTO can now prioritize examination of inventions of national importance or for a high fee. This is bad for two reasons: first, it will result in some patents issuing sooner than otherwise (and with a longer term, since the term is 20 years from the filing date); second, it will result in extra funds for the PTO (the state).
• The penalties for “false marking” have been drastically reduced. This is another inexplicable change. Previously it was considered an antitrust issue and “patent abuse” to falsely mark a product as patented or patent pending and private lawsuits could be brought against those engaged in false marking. Some have even unfairly besmirched these plaintiffs as “false marking trolls,” in an analogy to patent trolls, even though it is the party using a false patent claim to squelch competition who is in the wrong. If you don’t want an unfair marking suit, you simply don’t go around threatening people with patents. You don’t have to mark your products with “Patented” even if it is–failure to mark simply made it harder to recover past damages before the infringer was put on actual notice. Now it’s harder for private parties to file such suits. It’s bad enough that patenting something can be used to scare off competition; now it’s easier to do this by falsely claiming there is a patent on the product.
• Further, now it’s easier to use “virtual marking” by putting a web address on a product, to satisfy the marking requirements, making it easier to qualify for a greater damages award in patent infringement. Anything that makes it easier to extract more resources from targes of patent aggression is bad.
• The patent law permits companies to apply for an extension of their patent term when a patented pharmaceutical was delayed from reaching the market due to FDA regulatory delays. The AIA includes a provision “clarifying” how much time pharmaceutical companies have to apply for patent extensions that can provide extra years of protection from generic competition. This is a case of favoritism/special interest legislation, which critics have labeled “The Dog Ate My Homework Act.” The critics say this provision is really a special fix for one drug manufacturer, the Medicines Company, and its powerful law firm, WilmerHale. The company and its law firm, with hundreds of millions of dollars in drug sales at stake, lobbied Congress heavily for several years to get the patent laws changed. … The provision would guarantee that the Medicines Company got the extra patent protection, and it would relieve WilmerHale, which was hired to file the application, of a possible malpractice payment to its client.” ((See also Patent Bill Viewed as Bailout for a Law Firm, Andrew Pollack, NY Times.))

Bottom Line

The AIA makes only minor changes, and does little to diminish the escalating cost of patents. The only significant improvement is prior commercial user defense, and it makes some things worse. The AIA does nothing to stop:

• ~17 year patent terms; ((see Optimal Patent and Copyright Term Length))
• Patent injunctions;
• Grants of state monopoly privileges, which are used to suppress competition;
• money wasted on defensive patenting;
• The Evil of Patenting Food and Seeds;
• Gene patents;
• Smartphone and other patent wars; and
• Oligopolies and big-business favoring rules.

Under the post-AIA system, stupid patents will continue to be granted (Obama Signs Patent ‘Reform’ Bill — ‘Crustless Sandwich’ Still Patented, David Kravets, Wired).

The complaints that the AIA helps big corporations at the expense of the small guy are misguided. Neither large corporations nor independent inventors should be able to obtain state-granted anti-competitive patent monopoly privileges.

Appendix

The audio of the webinar is available at: Kinsella Webinar: Obama’s Patent Reform (mp3), and the slides used are provided below as well.

[Previous post: My Webinar on the America Invents Act; Mises cross-post]

In my post The Patent Defense League and Defensive Patent Pooling, I suggested that some companies or industries might be able to form a “patent defense league” where patents are pooled and made available to members for defensive reasons–for example, to ward off patent aggression from competitors.

It appears that Taiwan is now considering a variant on this approach, by means of quasi-governmental “patent banks” to help defend Taiwanese companies from patent suits by foreign companies and patent trolls:

The quasi-government agency, the Industrial Technology Research Institute (ITRI), announced plans for the IP bank on 1 September, saying that it could be similar to existing defensive patent aggregators such as RPX Corp. and Allied Security Trust. Such patent-aggregation companies aim to buy out all the patents that might be asserted against their members.

According to Xiangsheng Xie, director of ITRI, the IP bank will assist Taiwanese manufacturers with the creation of patent portfolios and patenting strategies during the manufacturers’ R&D periods and later assist in defending them from suits and in expanding their market share. Should a Taiwanese firm face a patent-infringement lawsuit filed by its competitor or a patent troll, it can turn to the IP bank for either useful patents for its defensive actions or other strategies. In addition, the company, by way of the ITRI, can use other funds to tap into the intellectual property of Taiwan’s universities and research institutes as the industry’s backup.

This approach was inspired by similar

actions of other Asian nations. Intellectual Discovery, in South Korea, was established in 2010 to help protect domestic manufacturers against foreign patent trolls. Intellectual Discovery buys out patents that might be asserted against Korean firms, and it is creating a fund to help universities and research institutes generate patents and file patent applications overseas. ITRI also looked to Japan, which formed the Innovation Network Corporation of Japan (INCJ), a public-private partnership, in 2009 to provide similar services to Japanese firms.

It is unclear to me how such a patent bank can help defend local firms from suits by trolls, since usually the troll cannot be hit with a patent infringement countersuit since it does not manufacture any products. As I noted in my previous post:

One problem is that the PDL’s pool would be useless against patent trolls. However, patent trolls usually just want money. So they just serve as a kind of tax. But competitors often want to get an injunction to shut down the product lines of their competitors. Having to pay a “tax” to a troll is usually less of an existential threat to a company than is the patent injunction threat from a competitor. So if the PDL deters this kind of patent injunction threat, that is a huge benefit.

The IEEE post says “Should a Taiwanese firm face a patent-infringement lawsuit filed by its competitor or a patent troll, it can turn to the IP bank for either useful patents for its defensive actions or other strategies”–it is not clear what the “other strategies” could be in responding to the troll–perhaps the idea is that if a troll threatens a Taiwanese company and tries to shake the company down for royalties, it could be offered licenses to some patents in the “patent bank” to reduce or offset those royalties, but this strategy doesn’t make much sense for me. Still, even if the patent bank mainly deters anti-competitive patent aggression from competitors, it could serve some useful purpose. Of course, this is all so wasteful. Why do we have patents, again?

In recent papers, two pro-intellectual property libertarians, Richard Epstein and Objectivist Adam Mossoff, try to defend IP by arguing that it “can” be treated like property by a legal system.

In Epstein’s case, see his The Structural Unity of Real and Intellectual Property (video) (discussed here) and his The Disintegration of Intellectual Property? A Classical Liberal Response to a Premature Obituary. From the abstract of the latter piece:

The title of this paper plays off the title of Thomas Grey’s well known article, The Disintegration of Property, which argued in part that the ceaseless consensual fragmentation and recombination of property rights revealed some inner incoherence of private property institutions. I take the opposite position and treat this supposed disintegration as evidence of the robust nature of private property rights, not only for land but for all forms of intellectual property.

From the text of the former article:

My historical path influences the way I think about intellectual property. While others might look first to the statutes or the case law, I take a step back from these particulars. I first try to understand something about the general configuration of property rights as it works for various kinds of material objects. So armed, I then asked how intellectual property fits into the general framework. I did not start with the question of why intellectual property in its various forms is unique and distinct. To me the key question is how much of basic understanding about property rights carries over into intellectual property.

… The next question is how do these four elements [for treatment of physical resources]—exclusion, disposition, fragmentation and concentration—combine when the task is to examine the universe of intellectual property? And the answer is, it translates amazingly well.

Mossoff, in his draft chapter “Commercializing Property Rights in Inventions: Lessons for Modern Patent Theory from Classic Patent Doctrine,” ((George Mason Law & Economics Research Paper No. 11-27; forthcoming in Competition Policy and Patent Law Under Uncertainty: Regulating Innovation, Geoffrey A. Manne, Joshua D. Wright, eds., Cambridge University Press, 2011.)) argues (from Abstract):

At the start of the Industrial Revolution, patentees created many novel and complex transactions to commercialize their property: they maximized their profits through sophisticated agreements that imposed restrictions on manufacturing, sales, and other uses of their inventions. When these restrictions were challenged as invalid restraints on property, courts consistently upheld them. They did so by employing the same concepts and doctrines used by common law courts to validate the creation of lesser estates or restrictive covenants for real property. In sum, early American courts incorporated into patent law the same legal doctrines governing conveyances of real estate, even going so far as adopting the common law property concepts of “assignments” and “licenses.” Given widespread confusion today concerning patent conveyance doctrines, this chapter explains the structure and content of this now-forgotten doctrinal framework.

This analysis is descriptive (or positive, in economic parlance), but patent theorists today can draw at least two important lessons from it. First, it reveals how traditional property theory is determinative in patent law. Early American courts secured to patentees the same conveyance rights as owners of real estate because patents were “property.” Thus, by definition, patentees enjoyed the same rights as those of landowners – the exclusive rights of use, enjoyment and disposal. Courts applied to patentees the same legal rules for conveying estates, and thereby permitted patent-owners to sue downstream infringers if there was a properly created reversionary interest. Second, patents are now defined as securing only a right to exclude, and this has unhinged patent conveyance doctrines from their firm conceptual grounding in property law. When novel issues are presented to courts concerning complex conveyances of patent rights, the result is indeterminacy and confusion in both the Federal Circuit’s and the Supreme Court’s decisions. Perhaps it is time to rethink how the hoary concept of property was essential to the successful commercialization of property rights in inventions in the nineteenth century.

In other words, both authors are highlighting the fact that a modern property-rights-oriented legal system “can” treat IP rights under some of the same legal rules, as a property right. Well sure, I agree with them. But then so what? This is a fairly trivial observation, in terms of policy (as opposed to legal theory), unless it is supposed to imply that this somehow helps to legitimize–or maybe rehabilitate–IP law. But of course it does not. There is a distinction between positive law (and the legal rights corresponding to these laws), and what we libertarians sometimes call “natural law” or libertarian law (and the natural rights or libertarian rights corresponding thereto). ((See my post Logical and Legal Positivism.)) The criminal gang called the state, through its law-creating legislature, can create any number of arbitrary positive rights or laws that contravene libertarian rights and justice. ((See my “Legislation and Law in a Free Society.”)) The right to receive social security payments could be viewed as an annuity. Another human could be viewed as property, and bought and sold as such. So what?

Calling something property, or fitting it into the state’s property law legal framework, does not mean it is legitimate property. ((See my post Intellectual Properganda.)) To the contrary, just as the fed printing money dilutes the purchasing power of money, legislatively granting the status “property” to privileges granted by the state can only dilute the value of property itself. As Professor Tom Bell artices, in his witty Copyright Erodes Property℠, “Calling copyright property risks eroding that valuable service mark.” To quote at greater length, Bell argues:

Copyrights and patents differ from tangible property in fundamental ways. Economically speaking, copyrights and patents are not rivalrous in consumption; whereas all the world can sing the same beautiful song, for instance, only one person can swallow a cool gulp of iced tea. Legally speaking, copyrights and patents exist only thanks to the express terms of the U.S. Constitution and various statutory enactments. In contrast, we enjoy tangible property thanks to common law, customary practices, and nature itself. Even birds recognize property rights in nests. They do not, however, copyright their songs.

Those represent but some of the reasons I have argued that we should call copyright an intellectual privilege, reserving property for things that deserve the label. Another, related reason: Calling copyright property risks eroding that valuable service mark.

Property as a service mark, like FedEx or Hooters? Yes. Thanks to long use, property has come to represent a distinct set of legal relations, including hard and fast rules relating to exclusion, use, alienation, and so forth. Copyright embodies those characteristics imperfectly, if at all. To call it intellectual property risks confusing consumers of legal services—citizens, attorneys, academics, judges, and lawmakers—about the nature of copyright. Worse yet, it confuses them about the nature of property. The property service mark suffers not merely dilution from copyright’s infringing use, but tarnishment, too.

There was an interesting exchange recently between a left-libertarian (I think that’s what he is) who goes by Divide by Zer0, and anarcho-libertarian Stefan Molyneaux. “dbzer0″ argued against property rights and the non-aggression principle in his post Why the Non-Aggression Principle is useless as a moral guideline. Molyneux replied on Youtube; dbzer0 replied in Responding to Stefan Molyneux: “Theft of time”, NAP, and common sense.

Molyneux’s response is good, though I might quibble about some of his metaphor usage–saying that stealing someone’s improved/transformed property is a theft of the “time” he put into improving/transforming the item. Such metaphors can be helpful to picturing and really grokking the nature of the crime. But one has to be careful not to take this particular metaphor too literally, as it lead to various confusions that result from the labor theory of value, which has itself partly corrupted even Lockean and classical liberal thought, not to mention the errors of Marxism, and can lead to the confused idea of intellectual property. ((See my post On the Danger of Metaphors in Scientific Discourse; also Locke, Smith, Marx and the Labor Theory of Value; Rand on IP, Owning “Values”, and “Rearrangement Rights”; Locke on IP; Mises, Rothbard, and Rand on Creation, Production, and “Rearranging”; Libertarian Creationism; this comment to “Trademark and Fraud”; Elaborations on Randian IP; Objectivists on IP.))

I think dbzer0′s criticism is unfounded, but it is based on some confusions about the nature of libertarianism and the interrelationship between the non-aggression principle and property rights. This confusion is understandable as even many libertarians mangle this.

Many libertarians focus on the non-aggression principle as the essence of our political philosophy. Ayn Rand formulated a version of it in Atlas Shrugged: “So long as men desire to live together, no man may initiate — do you hear me? No man may start — the use of physical force against others.” ((Ayn Rand (Galt’s Speech, Atlas Shrugged, 1957).)) Some, such as Rothbard, have even called it the non-aggression “axiom”:

The libertarian creed rests upon one central axiom: that no man or group of men may aggress against the person or property of anyone else. This may be called the ‘nonaggression axiom.’ ‘Aggression’ is defined as the initiation of the use or threat of physical violence against the person or property of anyone else. Aggression is therefore synonymous with invasion. ((Rothbard, For A New Liberty, p. 23; see also Rothbard, Ethics of Liberty, p. 45. See also Hoppe, A Theory of Socialism and Capitalism, pp. 12, 7.))

Now the word “axiom” has different meanings (see wikipedia axiom entry). In math and logic it can refer to an assumed starting point, such as the presuppositions of Euclidean geometry; ((But see my post Hoppe on Falsificationism, Empiricism, and Apriorism and Protophysics, arguing that some basic tenets of physics, such as Euclidean geometry, may be apriori.)) or, as Rand uses the term, to truths that are self-evident because denying the claim leads to self-contradiction. Ayn Rand used the word “axiom” in this way:

An axiom is a statement that identifies the base of knowledge and of any further statement pertaining to that knowledge, a statement necessarily contained in all others, whether any particular speaker chooses to identify it or not. An axiom is a proposition that defeats its opponents by the fact that they have to accept it and use it in the process of any attempt to deny it.

In this sense, Rand’s “axioms” resemble Misesian/Kantian “apriori” concepts the denial of which leads to self-contradiction. ((See my post Mises and Rand (and Rothbard).)) For this reason alone, it’s better to refer to the non-aggression principle instead of the non-aggression axiom.

Another reason is that it’s not clear that “non-aggression” is really the most fundamental libertarian principle. In fact, I think it’s not. I think the libertarian conception of property rights is more fundamental than aggression. If I use force to take an apple from your hand, is it aggression? Is it trespass? Well, that depends on who owns the apple. If it is my apple, and you have just stolen it from me, then it is not trespass. If it is your apple, then it is trespass, or aggression. Classifying an action as aggression or not requires knowing who owns what.

Confusion has arisen, I believe, because of failure to treat separately self-ownership and ownership of external objects. Self-ownership means one owns one’s body. As Hoppe writes, “Every person is the private (exclusive) owner of his own physical body.” ((Hoppe, State or Private-Law Society.)) And as I have written previously, “each person is prima facie the owner of his own body.” ((Kinsella, What Libertarianism Is.)) Why prima facie? Because these rights can be alienated or forfeited by committing aggression. ((See Kinsella, Punishment and Proportionality: The Estoppel Approach.)) Though some object to the notion of self-ownership on the grounds that it is incoherent or implies religious or mystical views, this objection is without foundation. The body is a scarce resource, and to avoid conflict over its use, either the person whose body it is owns it, or someone else does. The choice is self-ownership, versus other-ownership, i.e. slavery. The quintessential libertarian view is self-ownership. And this common sense, natural, intuitive notion is not new or hard to appreciate. As Richard Overton wrote in 1646, in An arrow Against all Tyrants: “To every individuals in nature, is given an individual property by nature, not to be invaded or usurped by any ; for every one as he is himself, so he hath a selfe propriety, else he not be himselfe”. And Locke, in 1690: “Though the Earth, and all inferior Creatures be common to all Men, yet every Man has a Property in his own Person. This no Body has any Right to  but himself.” ((John Locke, Second Treatise of government (1690), chap V, 27.))

When we speak of interpersonal conflict between human agents, that is, interpersonal violence involving their bodies, the idea of “aggression” and “self-ownership” express the same idea. To oppose the “initiation of force”, to oppose aggression, is merely another way of stating self-ownership. They each directly imply the other. This is one things dbzer0 glimpses.

But, as noted previously, when we speak of externally owned resources, a theory of property becomes primary. One first has to identify who the owner of a good is, to determine whether an action attempting to causally control the object is aggression, or just the exercise of ownership. In the case of the body, the agent, the person, himself, is the default owner of the body, so the answer is immediate and obvious (assuming he is not an aggressor). This is why in the case of interpersonal conflict, it makes sense to describe the libertarian anti-slavery, self-ownership principle by saying we oppose “initiation of force” or “aggression” (as Rand does in Galt’s speech).

And this is also why people get tripped up when they try to use the “initiation of force” language to describe why trespass–use of someone’s (non-bodily) property without their consent–is aggression. And again, this is what dbzer0 senses in his criticism of the coherence of treating external property the same as bodily-property.

The mistake lies in thinking property rights in one’s body are acquired in the same way and for the same reasons as property rights in external resources. Though they are linked, and though self-ownership is in a sense more fundamental, they are not the same. But it is a confusion to think of the basis of self-ownership as the same as the basis for ownership of external objects. We are used to thinking of Lockean homesteading–original appropriation, or initial use–as the basis for ownership of the latter. Thinking that all ownership must be of the same character and even origin, the assumption is also made that we own our bodies because we were the first users of our bodies. We try to fit self-ownership into the same framework we use to justify rights to inanimate, external objects.

As I explain in What Libertarianism Is, ownership of one’s body, and ownership of external objects, do have something in common, but it is not “first use.” It is rather that in each case, the resource in question is assigned to the person with the best link to the resource so as to avoid conflict and permit peaceful, productive use of the resource in question. This analysis draws on that the pioneering work of Hans-Hermann Hoppe, in his monumental treatise A Theory of Socialism and Capitalism (esp. chs. 1, 2, 7). The institution of property arises only because of the fundamental fact of scarcity, or rivalrousness, in the world. This makes violent conflict over the use of various scarce resources–Misesian means to action–possible. For those living in society who prefer peace, prosperity, and productive use of resources instead of violent conflict, it is obvious that it is desirable to assign an owner to each such contestable resource. These resources include our bodies, and other means we use in action to causally bring about our ends. Such rules, to suffice as social rules, must be objective and fair to ever be accepted by individuals and as an improvement over a world of might makes right. Thus, the search among civilized people in society is always for objective (what Hoppe calls intersubjectively ascertainable) property assignment rules. Human bodies and other resources share in common that they are both scarce resources, and property rules are needed for each.

In the case of one’s body, the libertarian position is simply that each person is the prima facie owner of his body–not because he first used it, but because he has a better claim to it, because he has an objective link to his body: namely, his ability to directly control it, not to mention the intimate connection between each “person” or “agent” in a legal personality sense, and “his” body. It is not first use that matters here; otherwise each person would be a slave of, owned by, his mother, who had the first use. It is not “appropriation” or homesteading, since the act of homesteading property presupposes features that are simply not present in the case of body-ownership. Consider: for A to homestead an object, A already has to have and own his body; and the object is previously unowned. That is, to be a homesteader presupposes one is already a self-owner. For this reason it makes no sense to speak of homesteading one’s body and becoming a self-owner that way.

So, in my view, and in the Hoppean framework (which extends and builds on that of Mises and Rothbard), all ownership is based on the fundamental fact of scarcity, and the consequent possibility of conflict. Property in one’s body is based on the fact that each person has the best link to his body, because of his direct control over his body. Property in external objects is based on Lockean homesteading, where first use, or original appropriation (“embordering,” as Hoppe refers to it), serves as the link between agent and resource. (And the reason first use gives the first user a better link to the resource is because ownership is based on the prior-later distinction, as Hoppe explains; if the first user did not have a better claim than the second claimant, who is a latecomer with respect to him, then the second claimant would not have a better claim than a third claimant, i.e., property rights evaporate and we have only possession and might makes right, which is contrary to the entire endeavor of property allocation rules in the first place.)

But once this relationship between assignment of body rights, and of rights to previously unowned resources, is understood, along with their connection to the libertarian project of finding objectively fair rules that permit peace, prosperity, and productive, conflict-free use of resources, the confusion of what it means to “initiate force” against someone by stepping on their land disappears.

With this perspective, we can see that criticism such as that leveled by dbzer0 is simply mired in confusion. To address just a few of his comments:

“Anarcho”-Capitalists, and assorted propertarians very frequently cite the Non-Aggression principle or Zero Aggression principle (Commonly called NAP or ZAP) as a core tenet of their ideology.

First, I think it’s better, as a rule, to call ourselves anarcho-libertarians than anarcho-capitalists. Not that I agree with condemnations of “capitalism” by modern left-libertarians (I agree with their criticism of crony-capitalism, but not with the capitalist aspect of the type of advanced economic order that would doubtlessly arise in a free society), but capitalism only describes one part of the economy of a free society. Second, the scare-quotes around “anarcho” imply doubt as to whether anarcho-libertarians are genuine anarchists. To the contrary; I would say that all consistent, principled libertarians are anarchist; and any genuine anarchist has to be a libertarian–if you are not a libertarian then you are in favor of abrogations of property rights that invariably require institutional force, i.e. a state. Third, dbzer0 here assumes the NAP is the “core tenet” of libertarianism; yet as I have explained, the NAP is merely a compressed way of re-stating self-ownership, and in the case of external property it is indeed a dependent concept on the more fundamental concept of the libertarian-Lockean first-use-first-own property rights allocation rule.

But what exactly is the NAP? The specific details might differ depending on the encompassing ideology, but the central point generally seems to be that no human should aggress over another human. This is meant to mean the initial use of coercive force as well as the threat of such.

As argued above, this is a way of restating self-ownership; but in the case of acquired objects, it is a consequence, not primary.

Now, if left to this end, this is not a half-bad principle, basically saying that people shouldn’t attack or threaten to attack others. However at this stage, it is also pretty much unnecessary to be given an explicit existence as a “principle” as the generic principle of freedom already encompasses this (i.e. attacking another person would violate their freedom). Other moral theories, particularly the utilitarian variants already encompass such rules (with stipulation) as a natural consequence of their suggestions.

“Freedom” here is a murky, ill-defined concept. It is the fact that opposing interpersonal, violent, bodily aggression necessarily implies self-ownership, whether anti-propertarians want to use the correct labels, words, and concepts, or not.

But propertarians do not generally leave it at just that but rather try to sneakily expand it by linking it with private property rights. You see, the NAP is frequently derived directly from the Self-Ownership “axiom” and thus the wrongly derived property rights are treated as an extension of the self. Therefore one can then treat violation of private property rights as an act of “initated force”, even though no actual violence or threat of violence has been perpetuated. This is turn is used as a cause to use actual violence or threat of violence on the violator of property rights.

He has somewhat of a point here, as I have explained above; except that it is not “sneaky.” Rather, libertarians who favor self-ownership as well as ownership of homesteaded resources use the word “aggression” to describe not only the former, but the latter, since there are analogies and similarities. But failure to treat body and external resource ownership separately and clearly, in the context of a social theory designed to permit cooperation and productive, conflict-free use of resources, has led to some confusion, which has been adopted, or seized on, by libertarian opponents. (Not that they have any better or more coherent theory in the first place.)

While it’s easy to understand that someone “aggresses” when they steal something from another person (which is why most other moral systems do not require a NAP to label theft as wrong), things get pretty murky when one goes beyond that. Do I “initiate force” when I use a productive machine without paying rent? How about if I pay only enough rent to cover the cost of the machine? Do I “initiate force” when I toil the unused land that is owned by someone else? How about when I trespass?

A given scarce resource that is the subject of a possible contest or conflict–as the machine noted above–has an owner. It is either the worker seizing it, or the homesteader (or his contractual transferee), or the state or some collective. And this is the crux of the matter. No one, even dbzer0, can deny argumentatively the value and desirability of property rules. Argumentation is itself a civilized, conflict-free activity, and arguing about who should get to use the resource is itself a search for fair, universalizable property allocation rules (again: even if the left-libertarian stubbornly abjures the term “property rules,” that is what he is arguing for). So the only real argument people like dbzer0 can have is that they think some property assignment rule other than first-use is more objectively just, that it establishes a better link between claimant and resource. And this, he has not done, or even tried to do. He has sidestepped this problem. The other possible property assignment rules would include some type of communism, a world of everyone-owns-everyone, which, as Rothbard has shown, is of course unethical and unworkable; ((See note 1 of my “Argumentation Ethics and Liberty: A Concise Guide”.)) might-makes-right, which is no property rule at all; or some kind of rule, inspired by the deeply flawed labor theory of value and muddled Marxian notions of “exploitation,” that ridiculously rests on the notion that employers/capitalists “exploit” the worker by “stealing” the “social surplus product”–the difference the employer’s revenues and the value of the worker’s labor, i.e. to the extent there is capitalist profit there is exploitation. ((See Hoppe’s “Marxist and Austrian Class Analysis,” in  The Economics and Ethics of Private Property; Kinsella, Hoppe: Marx was “Essentially Correct”; also see my post A Critique of Mutualist Occupancy.)) Of course, no coherent property assignment rule can rest on hoary, severely flawed economics and social analysis.

My view is that no non-libertarian property rule can be justified, precisely for the reasons that the libertarian, Lockean property appropriation rule is valid: only it recognizes man’s nature as an acting being that needs to employ external, previously-unowned scarce resources to act productively and successfully. For man to be able to ever use a previously unowned resource at all, much less peacefully or productively, it must be used first. Someone has to be the first to emborder it, transform it, employ it as a means. But those seeking peaceful, conflict-avoiding property assignment rules that permit such productive use of resources cannot deny the right of the first user to use the resource–otherwise it would never be employed at all. I.e., the first user has to have an ownership right. But if the first user has an ownership right, then that means latecomers have a worse claim–and that is, after all, what theft is: A owns a thing; B, a latecomer, takes it from A by violent force. To deny the importance of the prior-later distinction is to obliterate property rules, for anyone can take things from others, even if they come later, meaning we have a war of all against all, and right devolves into might–which is contrary to the very endeavor of searching for civilized norms in the first place.

In Austrian economics program denied at Loyola New Orleans, I noted that an attempt by Austrian professors at Loyola New Orleans to establish an Austrian economics master’s program had been rejected by the “Standing Council for Academic Planning.” The program was proposed by the heroic Bill Barnett and Dan D’Amico; Walter Block is also a professor there, making this one of the strongest Austrian econ departments in the world.

The Loyola-N.O. paper The Maroon today, in Where Do Austrian Economics Fit in a Jesuit Education, reports that “The College of Business is working on a second proposal for a master’s program in Austrian economics after the first proposal was denied last spring.” Unfortunately, some Catholic factions are coming out in opposition to Austrian economics, as can be seen in the excerpts below. (h/t Michael Barnett)

“The Austrian economics master’s program would in part support the mission of Loyola, but it would undercut the mission at the same time,” said Thomas Ryan, director of the Loyola Institute for Ministry.

According to the proposal, the master’s program would follow Loyola’s mission by adhering to the analysis and importance of individuals within economics. Ryan said that the master’s program gets that part of the mission correct but leaves out Loyola’s commitment to social justice.

Daniel D’Amico, assistant professor of economics, said that focusing on individual decision making is nothing unique to Austrian economics.

“All economists attempt to adhere to methodological individualism wherein the individual is the central focus of decision making,” he said.

The Rev. Fred Kammer, S.J., executive director of the Jesuit Social Research Institute, agreed that the program does not align with Loyola’s mission and values.

According to Kammer, Catholic social teaching takes the position of a market framed by justice and not the free market the Austrian economists propose.

There are also specific conflicts, he said, between Catholic social teaching and the Austrian view of government, unions, taxations, human life and the place of Christianity in the public sector.

Kammer said he also found problems in the Austrian economics master’s program’s funding. He said he believes Loyola would make a mistake by letting the Koch Foundation, the charitable organization derived from Koch Industries, donate such a large sum of money for the master’s program. Koch Industries is one of the largest private companies in the United States and owns operations such as pipelines and chemical refineries.

It would be a mistake, Kammer said, because of the Koch brothers’ controversial political values, which often conflict with the values of Catholic social teaching.

Amazon introduced a new tablet today, the Kindle Fire, which uses the “Silk” browser, which is discussed here, and in the video below. One smart thing Silk does to speed up web browsing as seen by the user of the Kindle Fire by “pre-loading” content into Amazon’s “cache” in its own “Amazon computer cloud” (i.e. Amazon’s servers)–and to optimize them for the Kindle Fire (e.g., a 3MB image is scaled down maybe to 50k because that would look the same on the Kindle Fire as a 3MB image, but could be transmitted more quickly). But to do this Amazon’s servers have to store copies of files obtained from other websites, including images (as explicitly stated at 3:07 to 3:26) and other files which, of course, are covered by copyright. At 3:54, it’s explained that if Amazon’s computing cloud sees you looking at the New York Times home page, and it predicts, based on other user statistics, that you are somewhat likely to next click on some NY Times subpage link, then the Amazon servers will go ahead and download that next link, and cache it, in case you do click on it next, so that it can serve it up more quickly.

Now this makes sense technically, but what it really means is Amazon’s servers are making copies of other people’s copyright-protected content: images, files, NYTimes web pages, and serving them up to Kindle Fire users as if the Amazon computer cloud servers are the host of those images. It is a bit like if Amazon ran a site called NYTimes2.com, and had its servers constantly copying content from NYtimes.com and duplicating it on NYTimes2.com, and serving up the content on NYTimes2.com (which was copied from NYTimes.com) to browsers. And who can think that would not summon a lawsuit?

Now, does the idea make technical sense? Yeah. It’s brilliant. Does it infringe copyright? Well, I guess we’ll see! But thank God copyright is there to promote innovation!

Update: In comments on Facebook and elsewhere, several people have asked whether this isn’t just “temporary” or “ephemeral” caching that somehow does not “count” as copyright infringement. I’m of course aware of various provisions of the 1998 Digital Millenium Copyright Act (DMCA) (I taught this in a computer/Internet law class for two years at a local law school in 1998-99 and have written in this general area) ((See my articles “Copyright Infringement and Internet Service Providers,” “Are You Liable and What Can You Do About It” Colloquium for Internet Service Providers, June 11, 1996); “Whither Copyright Law? A Roadmap to Recent Changes in Copyright Law,”The Legal Intelligencer [Philadelphia], Sept. 4, 1997.)) There is a provision of the DMCA that purports to limit ISP liability for the purposes of caching (see 17 U.S.C. § 512(b); and Wikipedia articles on on this section and on web caching). For example, in the 2006 case Field v. Google (discussed here), a federal court ruled for Google when it was accused of copyright infringement because it was caching the plaintiff’s website and making a copy of it available on its search engine.

However, it is not immediately clear to me that the “caching” Amazon plans to do is the same as that done by Google or, in any case, that the “caching” is protected under the statute. Google is providing search results; it is not serving up web pages in place of the original host. And Section 512(b) of the DMCA, which concerns the practice of caching, specifies that “A service provider shall not be liable … for infringement of copyright by reason of the intermediate and temporary storage of material … ” It also provides conditions that must be met for this limitation of copyright liability to apply, including “the material … is transmitted to the subsequent users … without modification to its content….” What is “temporary”? The way I understand the amazon cloud working, it could store sites, pages, and files for months, or even longer. Is that temporary? And if a 50k version of an image is sent to the user instead of a 3MB version, is that a modification of the content? It seems to me that there is enough uncertainty here in the statutory language that some content provider or copyright troll wanting to cause trouble could make an argument against Amazon’s caching practices. Professor Tushnet in the comments below says that Amazon needs to “follow any rules that the originating website has about refreshing content” [which is in Sec. 512(b)(2)(B)] and observes that there is no reason to think Amazon will cache the files “forever.” It’s not clear to me that satisfying the rules for refreshing implies that “temporary” in the statute means “not forever.” If the files for a relatively static site, that changes rarely, are downloaded by the Amazon server, it could be serving up the files for a whole website or web page for months or more. This is compliant with the originating site’s rules on refreshing, perhaps, but is it “temporary”?

Professor Tushnet also says that that “automatic conversion for convenience into a different format or resolution is fine,” i.e., that there is no concern about modifying files, pointing to the case IO Group, Inc. v. Veoh Networks, Inc. Again, she may be right; but that case dealt with Sec. 512(c), not (b), so it’s not clear to me that Amazon’s scaling and optimizing of the stored files satisfies the “without modification” requirement of Sec. 512(b).

Professor Tushnet also says, “You could say that anything is uncertain until specifically litigated. But I don’t think that’s true, and I don’t think people should behave as if it is true; that just lets copyright expand ever further.” I appreciate this, but the problem with legislation as a general matter is that it is almost always inherently vague ((See John Hasnas, The Myth of the Rule of Law.)) and its provisions self-contradictory or contrary to those in other statutes or natural rights. When we have copyright trolls suing left and right, is it possible someone might sue Amazon for copyright infringement despite Amazon having good arguments that they qualify for the DMCA’s caching safe harbor rules? Sure. Is it possible Amazon would lose? I could be wrong, but it seems to me they could.

Now, I suspect Amazon’s lawyers have gone through this and think they have good arguments that their caching is not copyright infringement. But who knows? My point in this post was not that this is definitely copyright infringement–just that there is legal uncertainty, and it “could” be–that’s why I concluded the original post, “Does it infringe copyright? Well, I guess we’ll see!” If it turns out that it is, this just shows another problem with copyright: that it would prevent this kind of great technology. And even if it doesn’t prevent it, until we know for sure, there is legal uncertainty. And, of course, one problem with legislation is that it increases uncertainty (see my “Legislation and Law in a Free Society”).

As Mises explained, controls breed controls. ((“interventionism cannot work as a permanent system of society’s economic organization. The various measures recommended must necessarily bring about results which—from the point of view of their own advocates and the governments resorting to them—are more unsatisfactory than the previous state of affairs which they were designed to alter. If the government neither acquiesces in this outcome nor derives from it the conclusion that it is advisable to abstain from all such measures, it is forced to supplement its first steps by more and more interference until it has abolished private control of the means of production entirely and thus established socialism. The conduct of economic affairs, i.e., the determination of the purposes for which the factors of production should be employed, can ultimately be directed either by buying and abstention from buying on the part of consumers, or by government decrees. There is no middle way. Control is indivisible.” Mises, Economic Freedom and Interventionism, ch. 10.)) But monopolies also breed monopolies.

First the state is granted arrogates to itself a monopoly in dispensing justice. ((Hoppe defines the state as: “What must an agent be able to do to qualify as a state? This agent must be able to insist that all conflicts among the inhabitants of a given territory be brought to him for ultimate decision-making or be subject to his final review. In particular, this agent must be able to insist that all conflicts involving himself be adjudicated by him or his agent. And implied in the power to exclude all others from acting as ultimate judge, as the second defining characteristic of a state, is the agent’s power to tax: to unilaterally determine the price that justice seekers must pay for his services. Based on this definition of a state, it is easy to understand why a desire to control a state might exist. For whoever is a monopolist of final arbitration within a given territory can make laws. And he who can legislate can also tax. Surely, this is an enviable position.” See The Nature of the State and Why Libertarians Hate It.)) Then, it uses this position to grant monopolies, such as patent and copyright, to favored recipients. These recipients are thus able to charge monopoly prices, and to establish oligopolized industries relatively immune from competition. This allows them to afford the purchase of more state monopolies (such as expensive patents) that smaller upstarts, newcomers, and competitors cannot, further entrenching their monopoly position. ((See, e.g., my posts The Schizo Feds: Patent Monopolies and the FTC.)) Barriers to entry are maintained, allowing the entrenched, established firms to reap monopoly profits. A portion of these profits are returned to the state in the form of legal bribes (campaign contributions) which keep the legislators from rocking the boat. And so the cycle continues.

This is not too surprising to libertarians used to seeing state corruption. What is surprising is the spectacle of some libertarians bending over backward to try to justify this, in the name of intellectual “property.”

The following article was published yesterday in Libertarian Papers:

25. “Varieties of Austrian Price Theory: Rothbard Reviews Kirzner”

In Sheldon Richman’s excellent Freeman column Elizabeth Warren’s Non Sequitur, he rightly criticizes the abysmal logic expressed by Elizabeth Warren, the demonrat who’s running for the U.S. Senate in Massachusetts. In her remarks in this video (see below) she says:

There is nobody in this country who got rich on his own. Nobody. You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

Now this is statist and abysmal, of course. By claiming the right to tax, the state claims to own us. After all, as Supreme Court Justice John Marshall admitted in 1819, “the power to tax involves the power to destroy.” (Someone on Facebook posted some funny parodies of Warren’s comments, which are appended below.)

Now notice in Warren’s argument is the assumption that because the state provides benefits to people, then is justified letting you keep only an uspecified “hunk” of your profits. Because she is a statist, and views the state as legitimate, it is no different in kind than private entities, like a shopping mall. If I set up a shopping mall, to permit a store to set up a storefront there I can require him to agree to give me a percentage of his sales or profits–I let him keep a hunk, I take a hunk. I am providing him with infrastructure and access to customers, after all. We can negotiate the relative size of the respective hunks we are entitled to. But in principle I could demand most or all of his profit–he can take it or leave it.

If you view the state as legitimate, then there is really no reason the state has to let you keep even a majority of your property. In the eyes of statists, the state is analogous to the shopping mall, which provides infrastructure and other benefits for its tenants; likewise, the state provides all these infrastructural “benefits” Warren mentions–safety, defense, protection, roads, an educated workforce. Given these assumptions, what possible principled argument can the opponent of confiscatory taxation make? What argument is there, indeed, for limited government at all? If the state really provides useful services, why shouldn’t it, rationally, simply take whatever payment it wants from us, as the shopping mall owner does? Once you make Warren’s assumptions, then the successful businessman has no natural right whatsoever to any of the profit he’s earned–the state’s infrastructure was necessary for this. The state’s choice as to much of “his” profit he ought to be allowed to keep–a “big hunk”–is totally arbitrary and up to the state. Sure, the state does not want to kill the goose that lays the golden egg. If the mall owner charges too much to the tenants, they won’t be able to make a afford to open up the storefront. So it’s a practical matter. The mall owner’s goal is to maximize his own profit; to do so, he has to permit the tenant to keep some profit, but only enough to keep him as a successful tenant. The mall owner’s goal is not to have a “limited government”, or to “minimize” the “taxes” it collects. It’s rather to maximize them. How it does so it just a pragmatic question. Likewise, why should the state try to be a “minimal” state? Why should it try to cut its spending as much as possible and reduce taxes as much as possible? No: it is offering a huge set of benefits and infrastructure to a large population over a large region that it has jurisdiction over–it is the benefactor of all these people. They get to make profit in the market because the state makes this possible; so why shouldn’t the state try to make a tidy profit from the wonderful services it provides to these ingrates? Why, if the state allows them to keep even 10% of their profits, they should be grateful–it’s still a good deal for them, for without the state these poor serfs would be living in poverty.

Now notice also that this argument applies not only to statists like Warren, but even to minarchists. Minarchists also think we need a state, that a state is both necessary and good, and provides essential services like law and order and justice. Given this view of the state, as argued above, it’s hard to see exactly why those in charge of the state ought to try to “limit” its spending, activities, regulations, and taxing. Rather it ought to use its position as the benefactor of society to enrich itself. If I come up with a wonderful and necessary service that others need, why shouldn’t I charge as much as the market will bear? But even minarchists claim that this is what the state does: it provides an invaluable service. Okay–so why shouldn’t the agency that provides this amazing service charge what the market will bear? That is, it ought to increase its income–both psychic income that state agents get from dominating and controlling people via regulations and laws and wars and prisons, and monetary income from taxes? The only limit is a practical one: you don’t want to raise taxes so high that overall tax revenues go down. So maybe 70% marginal rate is fine, but 99% would kill the goose that lays the golden egg. But there is no reason for the state to scrimp and restrict its actions just so it can charge a minimal tax like 5%.

This, ultimately, is a serious problem with any minarchist thinking. Minarchist libertarians say they are in favor of limited government, of minimal government. But they are in favor of an agency that purportedly is providing an essential service to all its citizens; like any other market actor, the state of course ought to use its position as a provider of a desired service to sell it for as high a price as it can get away with.

Of course, this is exactly why there are no limited states, why they always expand. (See Higgs, Crisis and Leviathan; Hoppe’s work on democracy.) This is why limited government is a pipedream. Those advocating limited states are really just advocating the (unlimited) state, since limited states are not possible–just as those misguided libertarians who advocate “replacing” the income tax with a sales or consumption tax are, in effect, really advocating adding a sales tax on top of the income tax, because it’s utterly unrealistic to expect the state to abolish the income tax (see my Say No To Tax Reform).

I made a similar argument before, in my post An Objectivist IP Argument for Taxation, where I noted:

Objectivists say they are against taxation; they say that you can fund a state by some kind of contract fee or lottery system. Obviously, you can’t, not without the state compelling membership or outlawing competitors, which permits them to charge monopoly prices which amounts to a tax.

But Objectivists are strongly pro-intellectual property (see Why Objectivists Hate Anarchy; IP: The Objectivists Strike Back!). They believe you deserve to be rewarded for creative, innovative, inventive action. But note that they also are extremely fond of the American Constitution and Founders; they believe the Constitution is a great achievement of the intellect–this corresponds with their belief that a proper state, such as the original American state, is a great value to man. Well, put two and two together: the Founders gave us a great creation: the Constitution, and our system of government. We all benefit from it. It’s only fair that the Founders charge us a royalty for our use of their creation–and naturally, the state itself is the agency as the natural successor to its parent-creators, the Framers and Founders, to inherit and manage this royalty-collecting right. Don’t call it a tax–call it a royalty.

And as above: the royalty need not be a “minimal” one of, say, 5%. It could be whatever the market will bear.

So:  states, if they exist, will not be and can never be limited, and those who say a minimal state is legitimate really have no good arguments that it ought to be limited. For them, the state is analogous to a mall. For anarchists, it’s not: the mall is private and peaceful, while the state is a criminal gang. Libertarians should not support even a minimal state, because it’s unrealistic and even contradictory to say it should be “limited”.