1 | Rethinking Intellectual Property – Lecture 1: History and LawStephan Kinsella | Mises Academy 2011 Stephan Kinsella C4SIF.orgC4SIF.org, Mises.orgMises.org

1 | Rethinking Intellectual Property – Lecture 1: History and Law Stephan Kinsella | Mises Academy 2011

Stephan KinsellaC4SIF.org, Mises.org

Mises AcademyMarch 22, 2011

Rethinking Intellectual Property: History, Theory, and Economics

History and Law

11


How I got here

► It usually begins with Ayn Rand…► Law school…► The Firm


How I got here (cont.)

► Mises► Rothbard► Hoppe


Overview of Course1. History and Law: overview of modern IP law. Historical Origins

of copyright and patent. Overview of justifications for IP2. Property, Scarcity, and Ideas (the nature of property rights, role

of scarcity, and the function of the market)3. Examining the Utilitarian Case for IP4. Examining Rights-Based Arguments for IP: creation as a source

of rights5. Integrating IP Theory with Austrian Economics and Libertarian

Theory6. FUTURE: Proposed Reforms; Imagining a post-IP world; the

future of open vs. closed


Readings

► AIP = Kinsella, Against Intellectual Property► AIM = Boldrin & Levine, Against Intellectual Monopoly

Both available at http://c4sif.org/resources/ ► This week

Legal Background: AIP, pp. 9-14; Various optional readings History

► AIM, ch. 2, pp. 33-35 ("World Before Copyright" section); ch. 3, pp. 48-51 ("World Without Patent" section)

► AIP, pp. 9-14► Various online articles on patent and copyright history► Various optional readings


Law: Intellectual Property: A Type of Property?

► Real property (land)► Personal property (cars, apples, gold)► Intellectual “Property”?


Law: What is Intellectual Property?

► Intellectual property is a broad concept that covers several types of legally recognized rights arising from some type of intellectual creativity, or that are otherwise related to ideas.

► IP rights are rights to intangible things—to ideas, as expressed (copyrights), or as embodied in a practical implementation (patents).

► IP rights are rights in ideal objects, “which are distinguished from the material substrata in which they are instantiated.”


Law: What is Intellectual Property? (cont.)► Four traditional types

Patent Copyright

► Moral Rights► Common law copyright

Trade secret Trademark

► Domain name implications

► Reputation rights Defamation (libel and slander)

► Newer IP “innovations” Database rights Semiconductor maskworks Boat hull designs Fashion designs?


What is a Copyright?

► a right given to authors of “original works,” such as books, articles, movies, and computer programs.

► Copyright gives the exclusive right to reproduce the work, prepare derivative works, or to perform or present the work publicly.

► Copyrights protect only the form or expression of ideas, not the underlying ideas themselves.

► Basically: a legal right granted by a state agency to allow the holder to petition state courts to penalize people “infringing” the copyright



► Protects “original works of authorship” that are fixed in a tangible form of expression Examples: song lyrics, novels, paintings

► Author given the exclusive rights to: reproduce the work prepare derivative works, or to perform or present the work publicly

► Term: life of the author plus seventy years, or 95 years if a work for hire.



► Copyright Secured Automatically upon Creation No publication, registration, or “copyright notice” is necessary Common misconception


I have a copyright in this page.

► And a self-referential one at that!► You can’t copy me and I can’t be “copyrighted”

(Copyright is a noun, not a verb)



What is a Patent?

► a property right in inventions in devices or processes that perform a “useful” function. grants the inventor a limited monopoly on the

manufacture, use, or sale of the invention. patent actually only grants to the patentee the right to exclude (i.e., to

prevent others from practicing the patented invention); it does not actually grant to the patentee the right to use the patented invention.

Prosecution and “red ribbon copy” (above right)► three categories of subject matter that are unpatentable: “laws

of nature, natural phenomena, and abstract ideas.”► Since 1995, patents last from the date of issuance until twenty

years from the original filing date of the patent application (the previous term was seventeen years from date of issue)


What is a Patent?(cont.)

► Basically, patent law allows someone to petition one state agency for a monopoly privilege,

► Which can be used to sue competitors in the state’s courts► Like copyright, it’s a state-granted right that allows the holder to

petition state courts to penalize people “infringing” the patent grant


What is a Patent? (cont.)

► Utility, plant, and design patents► Utility patents: for inventions► Obtain by filing a “patent application” with a government

agency It’s examined by an “Examiner” and then later “issues” as an issued

patent► Gives patentee “the right to exclude others from making, using,

offering for sale, or selling” the invention in the United States or “importing” the invention into the United States. What is granted is not the right to make, use, offer for sale, sell or

import, but the right to exclude others from making, using, offering for sale, selling or importing the invention.


What is a Patent? (cont.)

► Utility patent has parts: Abstract, Title, Inventors, Assignee (owner) Detailed Description Drawings Claims: the “metes and bounds”—the claimed “property”


Sample Independent Patent “Claim”

► Pat No. 6,560,259: Independent claim 1: “1. A unipolar surface emitting semiconductor laser having a wide lasing

region for producing a spatially coherent output beam comprising:► [a] a semiconductor resonance cavity for producing a laser mode of

diverging counter-propagating traveling wave beams of light derived from unipolar inter-subband transitions within the wide lasing region of the semiconductor laser;

► [b] a diffraction grating for resonantly coupling the diverging counter-propagating traveling wave beams while also coupling a portion of the traveling wave beams into an output beam transverse to the wide lasing region; and

► [c] a semiconductor layer for coacting with the traveling wave beams of the resonance cavity and having an effective index of refraction that varies quadratically in a direction transverse to the traveling wave beams of light with the lowest values thereof at centralized portions of the laser and higher values thereof at noncentralized portions of the laser.”


Sample Dependent Patent “Claims”

► Pat No. 6,560,259: Dependent claims: “2. The laser of claim 1, wherein the diffraction grating comprises a

second order Bragg grating.” “3. The laser of claim 1, further comprising a reflecting surface spaced

from the grating such that a portion of the output beam that is reflected from the reflecting surface before being combined with other portions of the output beam remains in-phase with the other portions of the output beam.”









Outline of § 101 Evaluation Process for Computer-Implemented Inventions

Determine What the Applicant Has Invented and Claimed

Classify the Claimed Invention

Information (e.g., data structure per se, computer program per se, music, literary work, mere data)

A natural phenomenon (e.g., energy or magnetism)

A specific machine or

manufacture?

A series of steps to be

performed on a computer?

Manipulates Abstract Ideas?

Merely Solves a Purely Mathematical

Problem?

Transforms physical material, or data representing physical phenomena,

into different state or thing, to achieve a practical application ?

Statutory Product

Statutory Process

Non-Statutory Process

Non-Statutory Product

or

Evaluate process to determine if it...

No* Yes

* Claim encompasses any machine or manufacture embodiment of process



Toe puppet


Sealed Crustless Sandwich


Pumpkin Garbage Bag













Patent & IP Myths

► Small inventors Don’t usually benefit--wallpaper Mostly corporate wars

► First to invent Rand

► Poor Man’s Patent And poor man’s copyright

► Big Oil and 100 mpg Carburetors Patents are public—if they are bought up, where are they?

► Right to practice Patents only give right to stop others (to destroy) 3-legged stool example Cross-licensing

► Barrier to entry/small firms excluded


Patent & IP Myths (cont.)

► Lone genius/towering genius All stand on others shoulders Use the inherited body of human knowledge Simultaneous invention

► Patents and copying No copying requirement, no “theft” Independent invention not a defense Prior invention not a defense Copying not usually alleged and not usually present in IP lawsuits Does not aid innovators with a little monopoly


Patent & IP Myths (cont.)

► Copyright existed at common law Lord Camden (vs. London booksellers): claims that copyright arose in common

law are “founded on patents, privileges, Star-chamber decrees, and the by laws of the Stationers’ Company; all of them the effects of the grossest tyranny and userpation; the very last places in which I would have dreamt of finding the least trace of the common law.”

Common law copyright was right of author to prevent publication of an unpublished manuscript

► Natural law ahistorical

► Evidence It’s against IP

► Benevolent state/FDA State taxes, regulates, distorts, penalizes, destroys, incarcerates, bombs Not out for the little guy Does not aid innovators with a little monopoly


Other IP: Trademarks

► Trademark A trademark is a word, phrase, symbol, or design used to identify the

source of goods or services sold, and to distinguish them from the goods or services of others.

For example, the Coca-Cola® mark and the design that appears on their soft drink cans identifies them as products of that company, distinguishing them from competitors such as Pepsi®.

Prohibits use of “confusingly similar” marks to identify their own goods and services.

Unlike copyrights and patents, trademark rights can last indefinitely if the owner continues to use the mark.

► The term of a federal trademark registration lasts ten years, with ten-year renewal terms being available.


Other IP: Trade Secrets

► Trade Secret any confidential formula, device, or piece of information which gives its

holder a competitive advantage so long as it remains secret. E.g., the formula for Coca-Cola Trade secrets can include information that is not novel enough to be

subject to patent protection, or not original enough to be protected by copyright (e.g., a database of seismic data or customer lists)

Protected under state law► Some federal law too

The trade secret theoretically may last indefinitely, although disclosure, reverse-engineering, or independent invention may destroy it

One disadvantage of relying on trade secret protection is that a competitor who independently invents the subject of another’s trade secret can obtain a patent on the device or process and actually prevent the original inventor (the trade secret holder) from using the invention.


Focus► The focus here will be patent and

copyright Hard to say which is worse

► Reputation rights and publicity/media rights also unlibertarian

► Aspects of trademark law unlibertarian Wrong plaintiff Fraud not required Antidilution rights

► Aspects of trade secret law unlibertarian Injunctions Third parties

► All newer IP rights unlibertarian► Once problems with copyright and patent are understood, easy to see how to view the other IP rights.


History: The Immaculate Conception of IP► Rothbard, Robert Nozick and the Immaculate Conception of

the State “Beginning with a free-market anarchist state of nature, Nozick

portrays the State as emerging, by an invisible hand process that violates no one's rights, first as a dominant protective agency, then to an "ultraminimal state," and then finally to a minimal state…”

“for every State where the facts are available originated by a process of violence, conquest, and exploitation: in short, in a manner which Nozick himself would have to admit violated individual rights.”


History: The Immaculate Conception of IP (cont.)

► Conventional account The libertarian Founding Fathers enshrined it as a natural right in the

Constitution Article I, Section 8, Clause 8 of the Constitution grants Congress the power

“to promote the progress of science and useful arts”► Science = copyright► Useful arts = patent► Trademark: IC clause for federal; state law still persists► Trade secret: mostly state law

Confusion: both utilitarian and a natural right► Utilitarian: we “need” it to “encourage innovation”

Search for the right “balance”► Natural: Locke; Constitution; modern descriptions;

“Creationism” As we shall see, Locke and Founders didn’t regard it as natural

► Just a policy tool (utilitarian)


Real Origins of IP► Patents and copyrights originated in

monopoly and censorship.► "Rationality ex post facto.— Whatever lives

long is gradually so saturated with reason that its irrational origins become improbable. Does not almost every accurate history of the origin of something sound paradoxical and sacrilegious to our feelings? Doesn’t the good historian contradict all the time?” Nietzsche, Dawn, Book 1


Real Origins of IP► Patent

sovereigns or monarchs issued monopolies to favored people to get them indebted to the sovereign, to raise fees

exclusive monopolies that protected various goods and services for a limited period of time

comes from the Latin patente, signifying open, as distinct to closed letters or private letters. “Open letters” granted by the monarch that gave someone authorization to do something like to be the only person to sell a certain good in a certain area


Real Origins of IP (cont.)► 1st statute: England’s Statute of Monopolies of 1623: 14 year

terms. Took power of granting monopolies away from King and gave to

Parliament Reduced royal power and set strict criteria for patents Replaced indefinite and broad with definite and restricted monopoly

► At time of Statute of Monopolies, patents were not yet called “intellectual property”

► later propaganda ploy► “Those who started using the word property in connection with

inventions had a very definite purpose in mind: they wanted to substitute a word with a respectable connotation, 'property', for a word that had an unpleasant ring, 'privilege'.” --F. Machlup and E. Penrose: "The Patent Controversy in the Nineteenth

Century." J. Econ. Hist. 10 (1950), p.1, 16


Patents and Piracy

► An early use of the letters patent in the 1500’s was granting authority to pirates gave them a monopoly over the spoils of their

piracy for some certain period of time. Francis Drake given a Letter Patent on March

15, 1587 authorizing him to engage in piracy He attacked Spanish ships sailing back from South America laden with

silver. He brought the treasures back home to the Queen. He was famous for this.

► modern-day IP “pirates” don’t kill people, break things, murder Ironic that one of the original uses of patents was to authorize real piracy


IP as Monopoly

► Libertarians get indignant if you call IP a monopoly► Statists much less honest nowadays.

Dept. of War until 1947, then the Dept. of Army of the “New Military Establishment,” and in 1949, the Department of Defense.

► It’s widely recognized that patents are state-granted monopolies: Richard Epstein; U.S. Supreme Court; Arnold Plant; Rothbard. U.S. courts routinely note the “Historic Tension Between Patent And

Antitrust Law”—because patent is a monopoly grant, yet antitrust law is opposed to private monopolies.

First modern patent statute, England’s Statute of Monopolies of 1623. Purpose: to provide monopoly profit to inventors so as to incentivize

them to innovate and file for patents


Copyright as Censorship► Before the printing press books were manually

copied elaborate system of censorship and control over scribes Church: Index Expurgatorius, or List of Prohibited Books Stationer’s Company (1557) given monopoly over

approving printed books (to suppress Protestantism)► Copyright law in Europe arose from efforts by the church and

governments to regulate and control the output of printers B&L: “Galileo’s trial was, in an important way, an exercise in copyright

enforcement by the Pope of Rome.” 1637, Stationer’s Company seized and destroyed unauthorized books and presses

► So the roots of copyright are in censorship No wonder it still leads to censorship today Movies burned, books banned (literally)


Copyright as Censorship (cont.)

► One of the first full fledged copyright statute: Statue of Anne 1709 (England) Only 14 year terms, compared to >100 today

► B&L: “Around the time of the French Revolution, and under the label of propriete litteraire, the idea that the works of art, literature and music belonged to their authors who could sell or reproduce them at will, without royal authorization, became popular. The fight for propriete litteraire was not a fight for

monopoly but, instead, a request to abolish a particularly hideous royal monopoly: that over ideas and their expression.”


History: The Immaculate Conception of IP (cont.)

► “The pro-copyright theologians argue that copyright as a natural property right emerged from the mists of the common law and took definite form as the result of the invention of the printing press and the increase in potential and actual piracy after 1450. They dismiss the historical ties between copyright and the Crown's grants of printing monopolies, its efforts to suppress heretical or seditious writing, and to exercise censorship control over all publications. This line of argument tends to infuriate the anti-copyright scholars who point out that the first copyright statute in history, the Statute of Anne of 1710, was a direct outgrowth of an elaborate series of monopoly grants, Star Chamber decrees, licensing acts, and a system involving mandatory registration of titles with the Stationers' Company.” B. Ringer: "The Demonology of Copyright." in "Perspectives on

Publishing" edited by P. Altbach and S. McVey (1976)


Arguments for IP

► Free market economist: IP opponents want to murder Charles Dickens He had to make money by giving public

readings of his works for a fee because of lack of copyright

Same guy: “patents and copyrights slow down the diffusion of new ideas for a reason, to insure there will be more new ideas to diffuse”

► The Swiss Patent Office gave Einstein a job as a patent examiner

► If you’re not for IP, you’re for pedophilia


Natural Law and Utilitarian

► Utilitarian Various problems

► Methodologically Incoherent (Austrian subjectivism and utility)► Ethical problems► Evidence problems► Sincerity problems

► Natural Law Locke, Founding fathers did not agree Creationism and labor confusion Inconsistency: mix with utilitarian rationales

► Rand etc.

Documents

1 | Rethinking Intellectual Property – Lecture 1: History and LawStephan Kinsella | Mises Academy 2011 Stephan Kinsella C4SIF.orgC4SIF.org, Mises.orgMises.org