Sunday, October 14, 2012

Against Intellectual Property

Intellectual property is one of those things that many of us are wrong about.  Patents, copyrights, and trademarks are not essential for our society.  Nor are they necessary for inventors to make profits off of their invetions.

One goal of my blog is to get as many people as possible to read, either: Bourbon for Breakfast and/ or Its A Jetson's World, both by Jeffery Tucker.  (Read them for free at the links' locations.  Read them to see why the author has made them free.)  In my attempt to convince you to read those two books I will now copy and paste chapter 27 from Bourbon for Breakfast.  This chapter argues against intellectual property laws and may make you rethink your whole position on the issue.

In an interview on CSPAN's BookTV, Jeffery Tucker says that it took him about 6 years to arrive at the conclusion that intellectual property laws are bad.  After reading the following chapter, and the preceding two in his book, it did not take me that long to see that he is right.

Is Intellectual Property the Key to Success? (page 124)

One of the greatest tragedies of intellectual property law is how it
generates intellectual confusion among successful businesspeople.
Many are under the impression, even when it is not true, that they
owe their wealth to copyrights, trademarks, and patents, and not necessarily
to their business savvy.

For this reason, they defend intellectual property as if it were the very
lifeblood of their business operations. They fail to give primary credit where
it is due: to their own ingenuity, willingness to take a risk, and their market-
based activities generally. This is often an empirically incorrect judgment
on their part, and it carries with it the tragedy of crediting the state
for the accomplishments that are actually due to their own entrepreneurial

Certainly there is no shortage of narratives ready to back up this misimpression.
Countless business histories of the U.S. observe how profits come
in the wake of patents, and thereby assume a causal relationship. Under this
assumption, the history of American enterprise is less a story of heroic risk
and reward and more a story of the decisions of patent clerks and copyright

As a result, many people think that the reason the United States grew so
quickly in the 19th century was due to its intellectual property protection,
and they assume that protecting ideas is no different from protecting real
property (which, in fact, is completely different).
A clue to the copyright fallacy should be obvious from wandering
through a typical bookstore chain. You will see racks and racks of classic
books, presented with beautiful covers, fancy bindings, and in a variety of
sizes and shapes. The texts therein are “public domain,” which isn’t a legal
category as such: it only means the absence of copyright protection.
But they sell. They sell well. And no, the authors are not misidentified
on them. The Brontë sisters are still the authors of Jane Eyre and Wuthering
Heights. Victor Hugo still wrote Les Miserables. Mark Twain wrote Tom
Sawyer. The much-predicted disaster of an anti-IP world is nowhere in
evidence: there are still profits, gains from trade, and credit is given where
credit is due.
Why is this? Quite simply, the bookstore has gone to the trouble of
bringing the book to market. It paid the producer for the book and made an
entrepreneurial decision to take a risk that people will buy it. Sure, anyone
could have done it, but the fact is that not everyone has: the company made
the good available in a manner that suits consumer tastes. In other words,
with enterprise comes success. It is no more or less simple than that. IP has
nothing to do with it.

So it would be in a completely free market, which is to say, a world without
IP. But sometimes businessmen themselves get confused.

Let’s consider the case of an ice-cream entrepreneur with a hypothetical
brand name Georgia Cream. The company enjoys some degree of success
and then decides to trademark its brand name, meaning that it now
enjoys the monopoly on the use of the name Georgia Cream. And let’s say
that the company creates a flavor called Peach Pizzazz, which is a great success,
so it copyrights the recipe such so that no one can publish it without
the company’s permission. It then realizes that the special quality of its ice
cream is due to its mixing technique, so it applies for and recieves a patent
on that.

So this company now has three monopolies all sewn up. Is that enough
to ensure success? Of course not. It must do good business, meaning that it
must economize, innovate, distribute, and advertise. The company does all
these things and then goes from success to success.

If you suggest to the founder and CEO that we should get rid of intellectual
property law, you will elicit a sense of panic. “That would completely
destroy my business!” How so? “Anyone could just come along and claim
to be Georgia Cream, steal our recipe for Peach Pizzazz, duplicate our mixing
technique, and then we’d be sunk.”

Do you see what is happening here? A small change that would not
threaten the very life of the business is indirectly being credited, by implication,
for being the very life of the business. If that were true, then it would not be
business prowess that made this company, but government privilege, and that
is emphatically not true in this case. The repeal of intellectual property legislation would do nothing to remove from the business its capacity to create,
innovate, advertise, market, and distribute.

The repeal of IP might create for it an additional cost of doing business,
namely efforts to ensure that consumers are aware of the difference
between the genuine product and impersonators. This is a cost of business
that every enterprise has to bear. Patents and trademarks have done nothing
to keep Gucci and Prada and Rolex impersonators at bay. But neither have
the impersonators killed the main business. If anything, they might have
helped, since imitation is the best form of flattery.

In any case, the cost associated with keeping an eye on imitators exists
whether IP is legally protected or not. To be sure, some businesses owe
their existing profits to patents, which they then use to beat their competitors
over the head. But there are costs involved in this process as well, such
as millions in legal fees.

Big companies spend millions building up war chests of patents that
they use to fight off or forestall lawsuits from other companies, then agree to
back down and cross-license to each other after spending millions on attorneys.
And no surprise, just as with minimum wage or pro-union legislation,
the IP laws don’t really hurt the larger companies but rather the smaller
businesses, who can’t afford million-dollar patent suit defenses.

The Internet age has taught that it is ultimately impossible to enforce
IP. It is akin to the attempt to ban alcohol or tobacco. It can’t work. It only
succeeds in creating criminality where none really need exist. By granting
exclusive rights to the first firm to jump through the hoops, it ends up
harming rather than promoting competition.

But some may object that protecting IP is no different from protecting
regular property. That is not so. Real property is scarce. The subjects of IP
are not scarce, as Stephan Kinsella explains. Images, ideas, sounds, arrangements of letters on a page: these can be reproduced infinitely. For that reason,they can’t be considered to be owned.

Merchants are free to attempt to create artificial scarcity, and that is
what happens when a company keeps it codes private or photographers put
watermarks on their images online. Proprietary and “open-source” products
can live and prosper side-by-side, as we learn from any drug store that
offers both branded and generic goods inches apart on the shelves.

But what you are not permitted to do in a free market is use violence
in the attempt to create an artificial scarcity, which is all that IP legislation
really does. Benjamin Tucker said in the 19th century that if you want your
invention to yourself, the only way is to keep it off the market. That remains
true today.

So consider a world without trademark, copyright, or patents. It would
still be a world with innovation—perhaps far more of it. And yes, there would
still be profits due to those who are entrepreneurial. Perhaps there would be
a bit less profit for litigators and IP lawyers—but is this a bad thing?
 Another convincing article on the subject: Intellectual Property is Childish.

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