Category Archives: IP

Cultural Appreciation

A dress is once again in the news (prior ones being Monica’s blue dress and the “what color is this dress” internet meme). In this case it is a red dress, or more precisely a red cheongsam or traditional Chinese qipao, worn by an 18-year-old (Keziah Daum) to her prom. Daum set off a Twitter-storm after posting photos of herself in it. Why the fuss? Well, she’s not Chinese so obviously has no right to wear Chinese clothing (at least according to someone going by the name of “Jeremy Lam” who tweeted at her “For it simply to be subject to American consumerism and cater to a white audience is parallel to colonial ideology.” Fortunately some sanity was injected into the brouhaha wherein other self-identified Asian-Americans thought his criticism was silly. Likewise many in China and Taiwan proper saw nothing wrong with it whatsoever and saw it as a sign of cultural appreciation.

Sadly, opinion’s like Lam are not isolated. This politically correct ideology of so-called “cultural appropriation” has been around for a few years, most notably rearing its ugly head each Halloween wherein little children are made to feel guilty for wanting to dress up as Indians (take your pick) or Eskimos. But even big kids can’t play; last year at Princeton University a Cinco de Mayo party was shut down over concerns about cultural appropriation (can’t have white people wearing sombreros you know!).

Proponents of this concept will deploy terms like “imbalance of power” or “form of colonialism” in their rhetoric to provide a veneer of intellectualism. But this is all just nonsense; this fact being underscored by their claim of it being a violation of “collective intellectual property rights.” Collective intellectual property rights can’t exist because intellectual property is a fallacious concept. You can’t own an idea any more than you can own another human being. Sure one can “legally” do these things; slavery used to be legal and was enforced by the state just as today intellectual property (trademark, copyright, patents) are made legal and enforced by the state – but that doesn’t make them real rights or forms of property. The state could make it legal to own a star. That’s right, you sir can own Betelgeuse! Here’s a piece of paper that gives you title to it. So the law can say one thing but logic dictates the true reality of things.

So it is with intellectual property. The only reason property rights exist is to eliminate (or at least minimize) conflict over (1) scarce, (2) rivalrous, and (3) alienable resources. There are only two options when two people are in conflict over the same object: agree on a set of uniformly applied rules that clarify who owns what, or, bash each other’s heads in until one person is dead and the other takes control of the item in dispute. Even though thieves and the state practice the latter, most sane people prefer the former.

All attributes must be true for something to be categorized as property. The air we breathe satisfies 2 and 3, but not 1 (air is basically super-abundant), therefore we don’t own air, what would be the point? A physical object, say a car, is scarce (they aren’t falling out of the sky), it is rivalrous because if I’m using it you can’t use it at the same time and alienable (if I give it to you then I no longer have control over it). This is why ownership of another is not a real property right: a person may be scarce and rivalrous, but they are not alienable in the sense that you, the slave, can choose to do something other than what the “master” wishes (so that is why we don’t own our children or pets per se, we provide custodial care, but they own themselves).

Likewise ideas can’t be owned because they satisfy neither 1,2 or 3 above. If I have an idea and I tell you, now you have the idea, but I still have it; it is not rivalrous or alienable because we can both have it at the same time. So in the same way when someone “appropriates” the trappings of another cultural (fashion, food, language, music) they are not taking from that cultural, rather they are augmenting it by spreading those ideas to a further audience. Although it is not a rights violation, there is still good and bad cultural “appropriation”, so Keziah Daum = good, but Justin Trudeau = bad (google images of him in India recently, dude, please just stop).

P.S. To head off the obvious objections borne out of the pragmatic “but how would X work without IP…?” please see this page.

It’s A Wonderful Life (Without Copyright)

This holiday season I exited what is I imagine a rather exclusive club – those who have never seen “It’s A Wonderful Life.” Yes, I was always somewhat aware of its existence, what with the numerous cultural references, homages, and satirical spoofs one encounters in modern media. However I had never bothered to take the time to watch it until this past week. While this is no movie review, it was indeed endearing in a nostalgic/quaint sort of way; I can see why it is cherished and loved.

But, just as George Bailey got to glimpse the world had he never existed, I will ask you to ponder how your life might have been different had you never seen or heard of this film. Why? Because, but for a typographical error, it was nearly wiped from existence in 1974. Although the film premiered in 1946 it was not the box office success one might assume it was based on its current wide appeal. It actually did so poorly it drove Frank Capra’s (the director) production company into bankruptcy. And there it languished for the next 28 years (the automatic copyright period under the then governing 1909 Copyright act). But in 1974 a miracle happened: the filing for the additional 28-year extension was typographically botched in some way and it was not renewed.

At that point it was in the public domain. That meant that any network, TV studio, or local station could play it royalty free. We, the viewing public, were then inundated every Christmas for nearly the next 20 years with round the clock showings of “It’s a Wonderful Life.” This forgotten tome became a cherished classic within a few short years, as permanent a fixture at Christmastime as Mistletoe or Eggnog.

Sadly in 1993 the copyright owner of the book (“The Greatest Gift”) the movie was based on was able to manipulate the court system and IP (Intellectual property) law to reestablish copyright over the movie. Some might argue this is only fair; they should be permitted to reap the rewards of their great grandfather’s efforts 50 years later. It is perhaps the definition of irony to use copyright law to establish ownership over something that derives its value solely from the lack of copyright.

So the moral of this story is that all our lives would be richer if some things (copyright, and all IP) had never existed. Consider the unseen harm of copyright: all of the otherwise obscure creative output locked away behind copyright never to be experienced by anyone. What, dear reader, are you missing out on?

(No, this is not a call for “free” stuff – without the artificial state imposed constructs of intellectual property laws other, non-coercive, models to artistic remuneration would emerge (as many have already today in response to online piracy)). If your business model requires the threat of violence to protect only the value of what you produce then there is something wrong with your model; violence is never the answer to getting what we want.


There is a type of parasite known as “zombie” parasites. They alter the brain chemistry of their host and cause them to engage in behavior that they would normally never undertake. Naturally these behaviors benefit the parasite at the expense of the host. For example the Nematomorph hairworm targets grasshoppers and will compel them to dive directly into bodies of water – an apparent suicide. To someone unaware of the parasitical influence this behavior would be truly baffling. Humankind will also engage in similarly baffling behavior due to the influence of its parasite: the state. Likewise, to those unaware of the state’s infection of society, human behavior can be sometimes baffling. For example, just this week there was much moral outrage over the revelation that a Martin Shkreli (owner of Turing Pharmaceuticals) purchased the rights to manufacturer the drug pyrimethamine (brand name Daraprim) and promptly raised the price from $13.50 to $750 per pill. How can this be?! This is horrible; obviously this is an example of “market failure” that must be remedied by state intervention to ensure such greedy bastards can’t get away with such imprudent behavior. Oh, there is greed in play here, but it is not entirely of Shkreli’s doing, he has a good friend helping him out: the state. Acting like a zombie parasite injecting poison into its victim’s brain, the state distorts natural market incentives to such a degree that we are left with nothing but head-scratching outcomes such as this.

The first clue that the state is involved in this mess was the phrase “bought the rights” peppered throughout every new report on this matter. How does one buy the right to make something? Any reasonably competent organic chemist could look at the structure of that drug and figure out how to make it.* What is preventing someone from doing that and eschewing the need to buy the “rights” to make it? The state. Acting under the auspices of the patent office and the FDA the state creates an artificial monopoly barrier for the production of goods as well as their importation into this country. In essence the state acts as the hired goons of Company A that holds a patent or a licenses to produce Drug B. If anyone else tries to produce or import Drug B, those hired goons will take them down. Don’t believe me? Here are the facts: The FDA bans the importation of this drug (for example, a company in India currently makes it for 10¢ a pill) – so Shkreli is safe from that sort of competition. And because he has bought the “right” to make it in the US, that means no one else can make it unless they go through an onerous and expensive FDA approval process. And he didn’t just buy the rights for a song, no, he spent $55 million to acquire those “rights.” So from a strictly economic standpoint the price increase makes sense. The value of a capital acquisition is driven by the price its products can command on the market. Clearly under a monopoly situation (only made possible by the state) it can command a very high price indeed. Absent such monopoly rights, the recipe for the production of that drug would have had some value but certainly no where near $55 million worth.

When the pundits and critics blame the “free” market for this sort of ridiculous outcome I am left to ponder what an odd definition they must have for the word “free”. Does “free” mean to be influenced and controlled by an implicitly violent cartel of bureaucrats that restricts, regulates, licenses, subsidizes, and outlaws in favor of the few at the expense of the many? If so, then I’d like less freedom please. Like the unfortunate grasshopper most of society is willfully ignorant of the parasitical influence in our midst and so, like the grasshopper, we blindly leap into the abyss.

* please see this page for a discussion of the inevitable “but without IP no one will innovate” objection

Blind Lines

Last week a Los Angeles jury awarded the estate of Marvin Gaye a $7.3 million verdict against songwriters Robin Thicke and Pharell Williams for their 2013 chart topping hit “Blurred Lines.”  The plaintiffs claimed that “Blurred Lines” copied several key elements of Gaye’s 1977 song “Got to Give It Up.”  There are many parts that contribute to what we call music: melody, harmony, key, time, rhythm, note patterns, chords, instrumentation, lyrics, and so on. The degree of similarity or dissimilarity of any one of these components is not an objectively measurable property. One’s judgment of similarity is a subjective assessment that depends on our unique set of experiences and preferences. For some a song’s rhythm may be the most striking characteristic, whereas others may find the key or melody to be more noteworthy (bah-bump). To underscore this point one need only to do a cursory Internet search on this topic to witness the broad range of opinions: some say it was a blatant “rip-off” whereas others assert only a superficial similarity (the cowbell). So if the degree of similarity in such a case can be so dependent upon a mere cross section of opinion, how can it be said “justice has been done”? Try this case 10 more times and you’ll get a random array of “thumbs up/thumbs down” decisions. Using the result of one coin toss is hardly just.

But the arbitrariness of the outcome, insofar as it rests solely upon the subjective opinion of 12 jurors, is not a failure of the judicial system itself or of the jurors. Jurors in such a case are tasked with the intellectual equivalent of deciding if that now infamous Internet dress is gold and white or black and blue. The failure is in the legislative system. Ambiguity and arbitrariness in law breads ambiguity and arbitrariness in outcomes. Copyright (and by extension all intellectual property law) is nothing if not arbitrary and that fact betrays the invalidity of IP laws in their specious claims to be protecting “property.” Laws protecting actual property (that is scarce, rivalrous physical goods) do not have expiration dates. The title to your house or car doesn’t simply expire after some set time period; but not so for copyright (or patents, etc.). In fact the fingerprints of crony-capitalism are all over the recent extensions of the copyright term (life of author + 50 years in 1976 and then extended to life of author + 70 years in 1998).  Every time some particularly lucrative piece of copyright material would otherwise fall into the public domain (yes Disney, I’m looking at you) there is mysteriously a push in Congress to extend the copyright term just a bit further out.

Surprisingly there are still some areas of human creativity that are not protected by copyright and yet, despite pro-IP arguments to the contrary, innovation and creativity have flourished. Yes, the utilitarian argument for IP laws is superficially plausible – unfortunately the empirical data indicates IP laws inhibit innovation whereas a lack of them fosters innovation. For example, food recipes are not copyrighted (can you imagine the state of affairs if McDonalds had copyrighted the hamburger and fries – it would be a CRIMINAL offense for any other firm to make such a meal). Clothing design/fashion is not covered by copyright. Designs are copied, altered, and tweaked into a dizzying array of choices. Fashion trends twist and turn and change so quickly as each firm tries to distinguish themselves and stay one step ahead of the competition. Imagine that, people can still actually be creative without the “protection” of a state granted monopoly.

Human creative efforts invariably must draw on the work of those who have come before. If one objects to truth of this statement, then they would see no downside in not educating their children, destroying all books and technology, and depositing babies in the forest so that each new generation must start from scratch. Since such a scenario is obviously absurd then we can agree that it’s not “copying” that is “bad” but rather “too much” copying that is bad. Ok, so where shall we draw this arbitrary line in the sand between “just right” and “too much”?

Let’s erase that line and allow the full flourishing of human creativity in all arenas. Where is the harm in that? If the “copy” is more successful than the original what has the original lost? What has been stolen? The right to limit the choices of others to your inferior product? If your business model necessitates the deployment of armed goons of the state to influence the peaceful behavior of others, then it’s time to rethink your business model.

Restoring Freedom?

Following the President’s recent signing of the cellphone unlock bill (“Unlocking Consumer Choice and Wireless Competition Act”) the White House issued a press release extolling the benefits of the bill. Amidst the usual self-serving propaganda (“democracy at its best”, “broke through gridlock”, etc.) we find two telling phrases that betray the consequences of accepting dominion of the state over our lives: loss of freedom.

The first is found here, “The story of how we broke through Washington gridlock to restore the freedom of consumers…” and the second here, “…consumer will now be able to enjoy the freedom…”. The unspoken but obvious question here is, How exactly did consumers lose these freedoms in the first place? Oh, that’s right, it was due to the very institution now taking credit for “restoring” those freedoms. The state exhibits the character traits of a thief with self-esteem issues: he robs you but then returns your stolen goods in order to bask in the ego trip of being praised for having done the right thing.

The story of how these freedoms were lost has its genesis in the most basic function of the state: interventionist protectionism for the few at the expense of the many. It started with a bit of intellectual property crony capitalism known as the Digital Millennium Copyright Act. Under the DMCA it is a crime to duplicate digital intellectual “property” (music, movies, books, etc) as this is considered theft. Of course it is not really theft since IP is not intellectual property but rather imaginary property; a business model that necessitates state intervention to succeed is necessarily defective and thus invalid (more of my thoughts on this here and here). Sometimes digital IP is secured with digital locks (digital rights management or DRM) and thus just as it is considered a crime to defeat someone’s padlock in the real world, it is also considered a crime under the DMCA to defeat a digital lock, even if no duplication of the unlocked software ensues. So this is where we get to cellphones; cellphones are locked by the carriers with digital locks, thus breaking those locks is likewise considered a crime under the DMCA. For many years the Librarian of Congress (no idea why it would fall to that department) had issued waivers to the DMCA for phone unlocking, however those waivers ended as of January 1, 2013 due to the increasing availability of unlocked phones directly from carriers. There soon followed a consumer backlash, which manifested itself in a “We the People” petition at, which garnered over 100,000 signatures. Congress and the White House soon worked out a bill to permanently restore this exception to the DMCA and the rest is history.

Many are now touting this series of events as a model for how democracy should work: the people spoke, the government listened, case closed. Not so fast. This is yet another lesson in the political slight of hand that hopes to misdirect a gullible public into forgetting some recent history. To be fair we need to review the whole trip, not just the last 5 minutes. The bigger picture of this “democracy in action” includes: the passage of a bad bill that provided for aggression backed support of crony capitalist imaginary property rights, that had obviously foreseeable unintended consequences which could only be avoided with a regular legislative Band-Aids, and that took 16 years to permanently fix, that whole process, that is a model of democracy in action? No wonder the state must exert monopoly control over governmental duties because I can’t imagine anyone voluntarily choosing to pay for the service of these clowns.

With a subtle edit I think this quote by Harry Browne (1996 and 2000 Libertarian Party candidate for President) captures the essence of what has transpired here: “[The State] is good at one thing: It knows how to break your legs, hand you a crutch, and say, “See, if it weren’t for the [state], you wouldn’t be able to walk.”

Unicorns Attack Free TV

Ever heard of a company called Aereo? Yeah, didn’t think so. Up until last week I had never heard of it either, but this little company may be forging the way toward increased competition, lower prices, and more consumer choice in the oligopolistic televised media industry. That is assuming of course the nine kings and queens of the royal court (aka the US Supreme Court) consider the interests of 300 million consumers when they reflect upon the merits of a case as old as the republic itself: who shall receive the court’s tip of the hat, the protectionist rent-seekers or the upstart innovator?

In this 21st century replay of Gibbons v. Ogden, Aereo plays the role of the audacious entrepreneur challenging the state chartered monopolies (played here by NBC, ABC, & CBS). In Gibbons v. Ogden it was about who had the right to navigate the river-waves, now it concerns tapping the air-waves and surfing the web. Aereo is providing a service to consumers who prefer to watch their local TV stations over the more convenient medium of web-attached devices (thereby foregoing the hassle of dealing with antennas and converter boxes). Consumers are in essence renting antenna time from Aereo and having this content directed to their device. You’d think the big three media companies would be pleased – Aereo is expanding their viewership! But alas that is not the case. Because Aereo is redirecting these free over-the-air transmissions they have not been paying a tribute to the big three for the content. This stands in stark contrast to the hefty sums forked over each year by cable and satellite providers (and which are naturally passed on to the consumer). If Aereo is permitted to exist it might set a precedent that would allow an unwinding of the decades old law that made an arbitrary distinction between “public” vs. “private” broadcast (which is why cable companies must pay rebroadcast fees but we are free to record and time-shift content while enduring scary FBI warnings on our DVDs.).

The justification used against Aereo is that they are violating the copyright of the big three – rebroadcast without consent. This would be fine if copyright were an actual real form of property – the only problem is, it is not. Copyright, patent, & trademark are all artificial creatures of the state; they are the unicorns of rights. They are a state grant of monopoly privilege. Utilitarian opinions built upon notions of “encouraging” certain types of behavior by such monopolistic grants are as wrong-headed as any “ends justify the means” arguments. Whereas IP cannot exist absent state enforcement, true property rights, not being an invention of the state, can. The recognition of rights in property is the only alternative to violence when settling a conflict over the control of scarce and rivalrous material. Two parties resolving such a dispute do not necessarily rely on a state. Enforcement of IP, however, is impossible without state violence.

Ideas, assemblages of words or sounds, are neither scarce nor rivalrous; therefore, it is nonsensical to claim property rights in them (akin to claiming such a right in one’s name). A state enforced fiat decree to the contrary is no more legitimate than the decree that a man may be property. Indeed, man as property fails on the rivalrous test; rivalrous goods can be conveyed, a man’s soul cannot. If someone copies your creative work and that upsets you, beat them at their own game by copying the manner in which they are employing it. That’s how competition in a free market works, no state necessary. If your business model necessitates men with guns then there is something wrong with your business model.

Now, given that even the supposed champion-of-the-little-guy-mr-progressive-democrat-Obama has come down on the side of the big media conglomerates, my feeling is that Aereo will likely lose this case. There is just too much money at stake, and in the crony-capitalist cesspool that is Washington DC, “we the people” have allowed the growth of a dystopian system that enables moneyed interests (warfare, welfare, and cronyisms) to rule us all.

Ideas are not Property, on dismantling IP

The US Supreme Court ruled unanimously this past week that human genes may not be patented. That was a good decision. However those in support of this ruling are by and large hypocrites. They vociferously decried the negative consequences of upholding such patents (limiting research, higher costs, limited choice) but then fail to acknowledge these same deleterious consequences occur for ALL patents. It’s not like these bad things don’t occur for “legitimate” patents but do occur for “illegitimate” ones. Patents are the problem, not their “legitimacy.”

So what are patents (and copyright) (aka Intellectual Property or IP)? Quite simply they are a state granted monopoly for a fixed period of time during which the presumed creator has an exclusive right to do with their creations as they see fit. The hope is that in providing, as a reward, a period of monopolous profits such entities will be incentivized to expend resources in creation and thereby benefit mankind. This unquestioningly presumes that risk should be subsidized by the state. Risk the right way and the state will support you, risk the wrong way and you’re out in the cold. But that’s ok, because IP helps the “little guy” right? Wrong. The IP holder must enforce their IP. This necessitates enormous financial resources to legally pursue IP violations. Only the “big boys” can afford this and thus it becomes clear for whom the IP system was created. The IP system is nothing more than a symptom of state and business cronyism. One of the hallmarks of cronyism is the arbitrariness of the rules and regulations supporting it and IP is nothing if not arbitrary. IP terms have changed over the years, often in concert with the needs of the large corporations whose IP is threatened by expiration.

Although its cronyist roots are reason enough to withdraw support from the IP system, we find that upon closer inspection the whole raison d’être of IP is actually quite absurd. IP rests on the idea that mere ideas can be considered property. For a proper claim (title) to be made, the material in question must be “scarce.” “Scarcity” means there is some marginal cost of production, e.g. clothing is commonly available but it is scarce because it does not simply pop into existence; obtaining it requires some non-trivial expenditure of resources. Where there is scarcity there exists the potential for rivalry or conflict over some particular good. There are two ways to prevent such conflict: 1) invent a way to make the good non-scarce or (2) establish property rights in such objects.  Property rights are the civilized, non-violent alternative to killing each other in order to determine ownership/possession. But when it comes to ideas or non-scarce goods there can be no conflict because both parties can simultaneously possess the thing in question. Therefore without conflict there is no reason to have property rights. Such rights are entirely absurd – you might as well attempt to establish property rights in looking at the moon or the right to whistle. The only possible conflict is over who can legitimately say they thought or did something “first”. Fine, fight over that if you wish. But that is not a property right; just because you had the name “Greg” before me doesn’t preclude me from also using that name.

The idea of scrapping the entire IP system will raise the ire of those who have fallen sway to the false choice paradigm we are propagandized with our whole lives, namely that without such “protections” people will simply stop being creative and all new literature, music and inventions would dry up. Seriously. Now doesn’t that sound pretty stupid when you say it out loud. Do you really think there are NO other possible ways creators might get remunerated for their work? Do you truly believe that patents and copyright are the ONLY possible way this could work? These types of objections are about as imaginative as the “but who will pick the cotton?” rejoinders thrown at those that desired to end slavery. In other words, one’s lack of imagination does not invalidate my argument. End the shackles of IP and let loose the entirety of human creativity. (For a more in depth discussion please see the godfather of anti-IP, Stephen Kinsella’s “Against Intellectual Property” which can be downloaded, for free.

The following is an adjunct to the discussion above . The question “But how will this work?” is not a refutation of the principle that IP as a concept is invalid… however…it can be an interesting intellectual exercise to start from a priori free market principals and imagine how people might conduct themselves in order to accomplish the same goals absent a coercive state influence. I will go through some of the more common objections to dismantling IP.
The most common objection to ending IP is that businesses simply won’t innovate anymore because other businesses (the parasites) will just copy everything they do which in effect results in the innovating business subsidizing the parasitic businesses who have no R&D budget. There is just one problem with this. It only looks at one side of the equation (however in this case it reverses the usual paradigm of the “seen benefit and unseen harm” described by Bastiat into one of the “seen harm and the unseen benefit”).
These assertions always ignore the benefits to both society AND the business from whom the idea was stolen. Obviously society will benefit with lower prices and more choice (just as they do when drugs go off patent and can be made as generics). However all businesses will benefit because now it is “legal” for everyone to “steal” ideas from everyone else and improve upon them. So for every ten businesses “stealing” from Business A, Business A can in turn “steal” the ideas of ten other businesses themselves – often the same one that “stole” their idea to begin with. The playing field is leveled if everyone can participate. Rather than restricting R&D to just one company that happens to hold a patent, the creative R&D resources of thousands of companies can bang away at some idea, sowing improvements at each iteration, each company striving to outdo the others in either price, efficacy or quality.
As an aside here I would like to mention this is not an endorsement of industrial espionage. By that I mean businesses can have their employees sign non-disclosure agreements (contracts) and if such agreements are violated they have full legal grounds to pursue not only those employees but most likely the business they disclosed it to (tainted fruit as it were). Now some might object and say “well technically the business it is revealed to can’t be sued because they are not party to the contract”. True, however in a truly libertarian system (no employment law tying the hands of the employer or employee) any higher level employment situation (i.e. knowledge workers with the potential to bring innovation to the table) would be established under an employment contract and in such contracts only a fool of an employee would sign such a contract that did not stipulate that the employer will indemnify that employee in any lawsuit related to their actions in the course of employment (which would of course cover conveying ideas/processes learned at a former employer that could benefit the new employer). In that situation then the employer would be a fool to not make entirely sure all information they get from the employee is not covered by any sort of non-disclosure agreement since if it is, and they don’t check, the employer opens themselves up to an enormous amount of liability (indirectly via their employment agreement). This system would of course not stop such transfer of proprietary knowledge, but it would greatly mitigate the likelihood and even today’s system does not stop all of it either so to say that people might find a way around it and so therefore it can’t work is to say what we have today can’t work because people today find ways around our current system.
Now, back to trade secrets: If your process is truly novel and inventive then it will not be readily copied as no one will be able to figure it out (because without patents you would not need to disclose to the world how it works). If it is a secret, then keep it secret. However, if you are the inventor of something fairly obvious (i.e. one-click checkout, round edges on a phone) then it will be trivial for others to copy you. But because the invention was trivial you would not have had much invested it in anyway. Therefore in a free system those that invent truly novel things that are difficult to reverse engineer will naturally reap the most reward before competitors finally figure it out (if ever). “First to market” is still a powerful incentive to innovate. And even after others figure out an invention there is still much value in the reputation of being the seller of the “original” or “authentic” version of something.
Next common objection, “Ok Mr. Smarty pants, without IP you’d have even more firms like the Chinese just making cheap knock offs and putting the innovators out of business and since they aren’t innovating there is nothing to copy from in this iterative process you describe”. Think about what those “knock off” companies are doing. They are making stuff efficiently and inexpensively. They are making it less expensively than the makers of the “original” products. Now to the extent the knock offs are sub par in quality and function, there will be little market penetration beyond those who never would have bought the authentic product to begin with because of price – so no real loss there. But to the extent there are such manufacturers that actually are basically making “generics” of whatever product it is, that means they are of nearly equal quality and efficacy but for a lot less. In other words between the two such companies (the R&D company making it for a lot of money vs the Manufacturing company making it for little money) there is a stark difference in comparative advantage. One is really good at making stuff and one is really good at inventing stuff. That means each will tend to specialize and become better and better at what they do. Without a patent system we would tend to see more company specialization. For example today companies are more vertically integrated in that they invent things and then manufacture them and then waste time and resources going after those that copy them. In a system without patents the “inventor” companies would specialize in R&D and inventing things and then they would turn around and sell the information on how to make some hot new thing to the manufacturing companies. Basically it is contract manufacturing – which already exists today. The resources they formally spent fighting them with are now used to make improvements. The manufacturing firms are weak in R&D but great at manufacturing. It is a natural symbiosis where the strengths and weakness of each partner complement each other. So as companies specialize in this way we get better R&D and we get better manufacturing. It doesn’t mean that companies can’t still invent things and then make them and sell them, it just means that market pressures will tend to minimize the number of companies operating this way. Only companies whose products require enormous capital investment (e.g. auto manufacturing) would likely continue to exist in this arrangement or within markets that are too small to justify specialized manufacturing needs. Just because the structure of businesses today may not work under a no patent system does not mean there is not a different way to structure business that is just as good if not better in terms of net benefits for society in terms of total goods produced and the function of such goods. For example, perhaps without IP the variety and innovation in smart phone technology would be much more advanced than what we have today and there would be greater variety and lower prices, all because all parties could copy off each other, incorporating each new innovation.
And since I’m throwing out ideas about how things might work, let us now turn to how artists (musicians, authors, print, cinema, etc) could ensure remuneration under a no copyright system. One approach used today is the license, which I believe would work in many situations although it does not protect against copying from a non-license holder (e.g. occurring from loss or theft from a license holder) or violation of the license that can’t be tracked to the originator. But for most situations it would work.
Another approach is the pricing approach, i.e. make the product so cheap that the marginal cost of actually pirating is higher than just buying it (e.g. if songs were a nickel is it really worth your time to scour the web for some hack site trying to track down that song…is it really worth it for those people to maintain such a site? It does actually cost money to maintain such sites (domain fees, server hosting fees, etc). Maybe you spend just 5 minutes doing so but even at minimum wage you just wasted 60¢ of you’re your life away when with one click in 2 seconds you could have the song you want for a nickel.
In general, if people are pirating things that means they cost too much (the cost to pirate is lower than the cost of just buying) and if people are scalping things then they cost too little (i.e. you’re basically giving it away). The key is to find that sweet spot of price where the costs of pirating are higher than what it is sold for, but the sell price is not so low that someone can actually realize an arbitrage advantage by buying it at that level and reselling it at a higher level. For unknown artists this approach is already used today. Many simply give away their fares for free or for next to nothing. They simply want to become known. Once they are known and in demand, then they can slowly raise their price.
Another approach is one I call the “trickle down” approach. It is somewhat similar to the system we have of publishing houses or record labels although it is certainly not restricted to such entities (i.e. an artist could sell to whomever they wish at the initial high price). Here’s how it would work: The artist would be paid upfront a very high sum that would cover the total of what they want (the more well known they are, the more they can demand up front). So copying of works really doesn’t hurt them insofar as they have already received everything they expected to get for the work. But the basic idea is incentive driven copy protection. So for example lets say some artist comes out with some great new work and in order to ensure they get as much as they need based on the effort that went into it they would sell each copy of the work for say $200,000. So let’s say only 5 people want it at that price – the artist made a million bucks right off the bat, not over decades of trickling in royalties. Now each of those buyers at $200,000 has the right to resell it. They’ve spent $200,000 so they sure as heck are not going to just give it away, they have a great incentive to get back what they paid and possibly more. They are all competing against each other as well so the price they charge will tend to start out high but drop as they compete more and more in trying to squeeze out every bit of value from their investment. They might sell 200 copies at $1,000 each. If you spent $1000 on a book or CD would you just “share” it with your friends? No. But you might sell it to them or others at a level where you hope to perhaps break even or make a little.
At some point the price reaches a level where the marginal costs become low enough that people will start to trade or give away what they bought. So this system is not much different than from what we have with any hot new product that comes to market. The rich will pay exorbitant amounts to have bragging rights to be the first to have something and as more of them buy it, costs come down and then more and more can afford it until eventually all can afford it. Progressives should love this as the “rich” pay disproportionately more for something based on their income level, but they do so willingly. The “poor” end up getting things for next to nothing or for free. The only real penalty being that the “poor” must wait longer, but is it really a tragedy if those of limited means must wait a few months to enjoy the latest hot album or book or movie when compared to the rich that have access to it immediately? One objection might be this would not work for new or unknown artists. True, and I did not say this is the way it must work for everyone. This is just one idea. And that is the point, there could be dozens of different creative and inventive approach’s people will take up. Many artists today sell direct to their consumers and that works well for the small or unknown artists as they tend to have a loyal following and there is little market to pirate the works of unknowns.
So to ask “how would this work?” is a bit silly – obviously people would figure out ways to make it work. I’ve presented only a handful here. In order to answer this question the onus is shifted from the questioner (who can’t justify his position) and onto the questioned party to come up with the outcome of what will take the creative efforts of thousands or millions to come up with. The questioner presumes that if the answer provided might have even one tiny hole poked in it as to how there might be a problem with this approach or that, then the whole idea must be scrapped. Based on that reasoning we should dismantle the IP system as it has dozens of problems. It certainly hasn’t stopped “piracy” has it? The only fixes offered up amount to nothing more than greater and greater intrusions of state control in our lives (PIPA, SOPA, etc). Must we give up all semblances of privacy and private property in order that the state be enabled to guarantee IP “rights”?