Stuart K. Hayashi
The following is an essay that comes in four different versions, differing mostly by length. I think that the longest version, which is below, is the most convincing.
My concern is that often when a complex point is made the first time around, the words will be read just fine but readers might go past that point without all of the important ramifications of the point registering completely. When this happens, I think the true dimensions of the argument can be made clearer if the point is later rephrased using a different sort of framework — one that might be more amenable to the reader.
Moreover, the essay goes over some points that are in anticipation of some readers’ objections, but which other readers might judge to be digressing too far from the main topic of discussion, which is intellectual property rights. This would be an example: I write of how the quantity of economic resources at a person’s disposal is reflective of the quantity of economic value that the person has created. That point is very pertinent to my discussion of intellectual property rights. I anticipate the rejoinder that my point about a person’s fortune being largely self-created is discredited by the fact that many people inherit their wealth. I try to explain how the earlier principle I explicated still applies. I understand that some readers will judge the discussion of inherited wealth to be too tangential.
For readers who might be bored by the rephrasings and the side discussions, I have produced shorter versions of the essay. The shorter the version, the more points and rephrasings were edited out of it. But, again, the longest version, below, is still the one I recommend most.
Longest Version:
Here‘s to all the artists working their butts of everyday to improve and make their dreams become reality. @aaroncarter and others may think we shake these off our sleeves in no time, but noone gets to see the tears and sweat we put into our passion. #ArtTheftIsAbuse pic.twitter.com/FlUY54d3TK— Jonas Jödicke (@JoJoesArt) January 18, 2020
That implicit understanding is threefold.
- When Justine puts her motion picture on the market, those who access this artwork contractually agree to pay her the price she sets.
- This remuneration helps cover the costs of the scarce resources that Justine inputted in the process of bringing this creation into being. Important to observe here is not only the fact that Justine made an investment per se, but also the series of particular choices of which that investment is comprised. Such choices include which crew members to hire and what set to rent out. In the end, these choices coming from Justine give her work its identity. The identity is tied to the economic value created from Justine’s specific choices.
- Justine put the product of her creative choices on the market on the condition that those who accessed that product would remunerate her, at the price she set, for the choices of hers that produced the product. Those who access Justine’s work and refuse to compensate her are stealing the value of the choices by which Justine made that work a reality. Yes, it is true that those who pirate Justine’s work are depriving her of her ability to defray the expenses specific to her product. Yes, it is true that insofar as pirates refuse to pay Justine for accessing the value her choices created, it will be more difficult for Justine and other aspiring artists and inventors to put out additional original works in the future. But the desecration goes deeper than that. When someone such as Justine sets a price for the economic value that is properly identified with the choices of hers that brought it into being, and then would-be customers access that value while reneging on payment, those would-be customers plunder not just the economic value itself but the very choices of the individual who produced it. That principle applies to every form of productive work. And it is especially pertinent to the designs that are to be protected as intellectual property (IP).
If I Profit From Pirating the Original Design in Which You Invested, I’m Just a Vendor in Legitimate Intra-Industry Competition Against You?
Libertarian lawyer and IP detractor Timothy Sandefur scoffs at the understanding that “if a man copies the new mousetrap idea and goes into competition with the inventor, the copier is obtaining market premiums in the form of not having to pay for research and development, which is ‘stolen’ [Sandefur’s sarcastic scare quotes] from the inventor.” The reason nothing was actually stolen, Sandefur continues, is that intra-industry “competition is not a crime, and if a competitor sees that another person has implemented a successful business model, it does not harm anyone for the competitor to implement that model himself so as to more successfully [split infinitive] compete.”
Sandefur’s argument is in a long tradition of libertarian anarchists influenced by Murray N. Rothbard; Roy A. Childs, Jr.; and Samuel Edward Konkin III. It is the party line of the Ludwig von Mises Institute and Liberty International. The Reason Foundation and the Cato Institute do not go so far in an official capacity. But when there is any high-profile court case that may set a precedent that weakens the enforceability of IP, the Reason Foundation and Cato Institute reliably produce written materials biased in favor of that weakening.
The libertarian anarchists’ party line goes ever father than Rothbard — it applies Rothbard’s misconceptions about patents alone to copyrights as well, the latter of which Rothbard was less willing to denounce. But because it takes Rothbard’s fallacies to their logical conclusion, I refer to the party line against IP as the Rothbardian position.
Note that Sandefur here conflates a copyrighted work or patented design with a “business model.” A business model is a generalized idea of a method for conducting business. An example of a business model is TV networks showing TV programs free to audiences and charging advertisers money for airtime. I will give another example. If McDonald’s sold only hamburgers, it would not profit much. For that reason, McDonald’s markets French fries as a complement to these burgers. The fries are where the impressive profit margins are found.
The conflation of “business model” with a patent is misleading — and it is misleading in a fashion that is convenient for Sandefur’s case. A business model can be explained in a few sentences. The design codified in a patent is much more particular and therefore requires more specifics. As a result, a patent usually looks like this:
Because a patent has to be so specific in elaborating which aspects of the design are original, diagrams and schematics normally accompany it. In the diagram, each component is labeled and its role is explained. As I have mentioned before, when distinguishing a patentable design from a vague general idea for a product, this is not a mere difference in degree, but a difference in kind.
Yet the implication in Sandefur’s statement is that a copyrighted work or patented design is no more than a similarly vague idea or general strategy. The reality, as I have written in the past, and as can be observed in the U.S. patent diagram above, is that copyrights and patents apply to specific original designs that are distinct from a vague general idea for a product category or industry.
According to the interpretation that Sandefur articulates, it is the case that when another party tries to profit from bootlegging your design, that bootlegger is not robbing you. Rather, that bootlegger is simply another vendor who is competing against you in the same industry for the same customers that you target. In infringing your IP, the bootlegger is not appropriating any valuable commodity that rightfully belongs to you alone. No, the bootlegger observed the example you set as a role model, and is incorporating these lessons in producing merchandise that is harmlessly similar to your own. Furthermore, goes this interpretation, if you file suit against the parties profiting from these bootlegs, you are wrongfully using government force to monopolize this industry. Filing suit against those who have pirated your design is simply siccing government regulation against your intra-industry competitors.
Sandefur would therefore misidentify governmental protection of your IP as a type of protectionism. In this protectionism, we are to believe, you can gouge on your prices because you had the government thwart your intra-industry competitors who otherwise would have offered your desired customers a better deal than the one you offer. Insofar as the bootleggers are vanquished, the designer can be a government-protected monopolist charging whatever price she wants for her design. This price will be much higher than it would be if the bootleggers operated unfettered. That profit margin is, in this interpretation, the equivalent of a tariff or duty imposed on the customer.
Perhaps we can have a better understanding of Sandefur’s interpretation if we examine the phenomenon of bootlegging in the late 1980s and early 1990s. Imagine Justine made her low-budget movie when most middle-class households had VCRs and hardly anyone heard of a DVD, let alone a Blu-Ray. There were several methods for bootlegging movies. One of the crudest methods was to sneak a camcorder into a movie theater and use the camcorder to tape a theatrical showing. The quality of such bootlegs was usually poor.
But there were more sophisticated strategies for bootlegging. When movies came out on home video, these copies often contained some modification so that, if someone connected two VCRs to make additional copies, the new copies would come out distorted. A series of annoying horizontal lines appeared across the onscreen image when the bootleg copy played. Yet bootleggers developed equipment that circumvented the distortion. Thus, copies from official VHS releases were usually the highest-quality bootlegs.
Now imagine I produce bootleg copies of Justine’s movie on VHS and sell each unit for a price much lower than what Justine charges. Running this bootleg operation has its own costs. But this cost is no more than $10,000 over the course of four years. The operation’s cost will never be more than a fraction of what Justine invested to make her motion picture. Yet there is an inequality more important than the value, measured strictly in terms of monetary units, of the respective investments of Justine and me. More dramatically unequal are the degrees of initiative and conscientiousness Justine and I each employed in the specific choices that culminated in our respective investments. We will revisit that distinction later in this essay. Following the train of thought from Sandefur’s comments, we can discern how this is interpreted by those under the sway of Rothbard-Childs-Konkin.
According to this Rothbardian interpretation, I am not some parasite who has appropriated wrongful control over someone else’s creation. Nay, Justine and I are just competing vendors in the same industry. Granted, Justine’s movie would exist without my bootleg operation. Also granted, the existence of my low-cost bootlegs is filched from Justine’s efforts. Justine’s original work would continue in the bootlegger’s absence. On the converse, had Justine not been in the picture, the bootlegger would be powerless.
But Sandefur dismisses what I did to Justine as just a regular cost of doing business. In the Rothbardian interpretation, Justine should have expected and accepted this cost as legit if she bothered to heed any common sense.
As Sandefur rationalizes it, the bootlegger “is also taking the economic risk in this circumstance...” And, continues Sandefur’s argument, if Justine sent the government to stop customers from purchasing the bootlegs, Justine would be the actual parasite and looter who is trying to micromanage what her intra-industry competition and her intended customers are doing peaceably with their property.
Bootleg VHS tapes are an institution rather unfamiliar to the younger people reading this blog entry. Therefore, it may be helpful to consider a more recent case. Ten years ago, people would upload unauthorized copies of movies using a website and peer-to-peer file-sharing program, both known as the Pirate Bay. People could access Justine’s movie through Bittorrent. And they would do it from parties who, unlike the bootleg videotape dealers before them, charged nothing at all. The Pirate Bay, hosting this service, made money because it displayed advertisements from its paying clients to users as they torrented copies of the movies onto their own drives. According to the Rothbardian interpretation, the parties making unauthorized uploads of Justine’s movie would be Justine’s intra-industry competitors, even though they, unlike she, were not charging money. The Pirate Bay itself would not be Justine’s intra-industry competitor but a middleman that provided a platform to her intra-industry competition.
There is something that must be said about those who insist that a bootlegger is in legitimate intra-industry competition against the originator. It is this: these detractors against IP obfuscate the division of intra-industry competition from identity theft.
Most Intellectuals Who Discuss Private Property Rights Need to Give Them a Closer Look
The Rothbardians’ case against IPRs is able to bamboozle many people. The reason is that the people who buy into this argument against IP hold, at least on an implicit level, three misconceptions about private property rights. The misconceptions are as follows.
Many philosophers from the Renaissance onward have had some implicit understanding of how private property rights are of greater moral significance than just a tentative method for dispute resolution. However, those philosophers have not articulated this significance adequately. Not even those from the Age of Enlightenment have explained it as well as they should have. Hence, I have to try to continue the job they left unfinished.
First I will describe the conventional interpretation of private property rights as just a means of dispute resolution. Once I have done that, I will try to explain how the essence of private property rights is more complex. Following that, I will go over how this greater significance of private property rights in general necessarily applies to the legitimacy of IPRs.
Are Private Property Rights For Nothing Better Than Stopping Fights?
Though it is not often phrased in this manner, there is an implication buried in economists’ conventional explanations for the origin of the concept of private property rights. The implication is that the main purpose of private property rights is to resolve disputes over competing claims over who should be able to control and consume which resources. This has much to do with the conventional proclamation by economists that the basis of economics in general and private property rights in particular is “scarcity.”
“Scarcity,” in this context, refers to the fact that, at any given moment, there is a specific total quantity of units of a good on the market. That there is this specific total quantity means that if, at this very moment, I gain and consume 50 units of this good, those are 50 fewer units available for anyone else at any given moment. My accessing and consuming more units at this moment means fewer units available for everyone else.
That principle applies even under all of the following three conditions.
Conventional economists are largely silent on this issue. Even economists who have reputations for defending laissez-faire enterprise have been lackluster on this. That is ironic. The issue of why a particular person is right to own and control a particular resource was touched upon by two founding fathers of the discipline, John Locke and Adam Smith, though they didn’t write essays that explored this idea to the point where they would take it to its logical conclusion. This essay you are reading is part of my attempt to expand upon the logic of their argument.
Imagine you’re a homesteader. You go onto wilderness land that was not claimed by anyone. If you were a hunter-gatherer, you might be satisfied with this land in its default condition. But that the hunter-gatherers mostly gain their food from foraging and hunting and otherwise do not change the land much is the reason why the infant mortality rate among them is 25 percent. As you want the chances for mortality to be much lower for yourself and the children you intend to bring into the world, you know that this wilderness is not satisfactory for your habitation. For the land to be truly hospitable, you need to change it.
You choose which crops to plant. You irrigate the land so that the crops receive water with greater regularity. Although Karl Marx mischaracterizes this process as if it were manual labor and nothing else, the process actually involves the exercise of a body part other than the arms and shoulders: the brain. You improve the land and make it livable mostly through the plans you devise for it. And, as John Locke points out, the new livability of the land is economic value that was not inherent to the land. No, the net increase in the land’s economic value was something that your creative choices had put into it. It is for this reason, note John Locke and Adam Smith, that the homestead has rightfully become yours. As Locke and Smith laid the foundation for this interpretation, I call it the Locke-Smith (“Locksmith”) Theory. When other people come and homestead their own plots, it is proper that they respect that your own plot is rightfully yours to control exclusively.
Although I call this principle “Locke-Smith” after the two British men who pioneered the idea (pun very much intended), their French successor, Jean-Baptiste Say, understood it as well. In his words, “...the land only returns what is put into it; but returns it after an elaboration,” that elaboration being an improvement by conscious human effort. Say thought of it as “the productive service of the field” (emphasis Say’s).
In fact, Say understood this principle better than Locke and Smith did. Locke and Smith worded their arguments in such a manner that someone like Karl Marx could come along later and misconstrue their talk of “labour” on the land as their attributing the improvement of land to physical muscle movements more than to intellectual planning. By contrast, as we shall see in this essay’s conclusion, Say was unambiguous that the land’s improvement came mostly from the homesteader’s intellectual planning.
Additionally, it was Say and his mentor Antoine-Louis-Claude Destutt de Tracy who pointed out how the Industrial Revolution demonstrated that wealth came not merely from natural resources and the improvement of land but the application of discoveries and ingenuity to making each unit of natural resources more useful to humans than it had been prior to that application. Rather than embrace these insights, though, most people fall back on the primitive and superficial impressions of the societies that came before these Enlightenment thinkers.
Throughout history, many societies have considered any conflict between neighbors to be inherently bad. These societies are unable to cope with intra-neighborhood conflict. Their intolerance of intra-community conflict goes to the point that they would rather there be an unjust resolution to the conflict than for the squabble to go on longer. That applies even if the intra-community conflict extending for a much longer period of time would increase the likelihood of a just resolution. That is, a speedy end to conflict has priority over the attainment of justice.
Here is an example you might have witnessed. Two children begin fighting. An adult authority figure steps between them and breaks it up. One child points to the other and yells, “He started it!” Then the (so-called) adult authority figure immediately snaps, “I don’t care who started it!” Speaking personally, this attitude seems common among my fellow persons of Japanese descent who reside in Hawaii. Ever since childhood, when I have stood up for myself verbally, some elderly person would say, “Quiet! Nobody cares if you were right or not earlier. We’d rather you just shut up and spare us all this noise!”
Yet when justice is prioritized above conflict resolution, it necessarily matters who started it. If you immediately come upon a woman stabbing a man with a knife, the context that led to this outcome certainly matters. It may be the case that the man started it — he was trying to rape this woman, and she stabbed him in self-defense. On the other hand, it may be the case that this man did nothing to her other than write her into his will. Maybe she had planned to stab him, dispose of the body in secret, and have him declared legally dead after a period of his having been reported missing. It would be for the purpose of inheriting his fortune. In that case, she would be the one who “started” it. In criminal justice, who “started it” is the difference between assault and self-defense.
If a woman stabs a male assailant in self-defense, I don’t think there would be much controversy over who is morally in the right. We do find that there is a lot of controversy over who is right in disputes over private property.
Let us examine the scenario where you have improved a plot of land and therefore gained legal ownership over it. I have contributed nothing to your improvement over the land. But once I see the improvements you have made on it, I decide that that is where I need to stay. I try to squat on your land. You accuse me of trespassing and call the police on me. I then proclaim that you are a greedy overlord trying to deprive me of the amenities I need and therefore deserve. You and I go to court to settle this.
Throughout most Western and even central Asian history, most courts would side with you. But it would not necessarily be because these courts concede that moral right and righteousness are on your side. As I have written before, throughout most of history it was that most societies regarded your private control over your land as nothing better than as a stewardship tentatively assigned to you by society-as-a-whole or by the gods and wilderness spirits. Pertinent to this discussion, it was not until the arrival of Enlightenment philosophers such as Locke that intellectuals began to recognize that the economic value of your land did not come primarily from the land’s default state or from the gods. It was not until Enlightenment philosophers such as Locke that intellectuals began to consider that the economic value of your land comes from your choices in what to do with the land. It was when people began to entertain the realization that economic value and wealth are created by such intellectual and entrepreneurial effort.
But, generally, the courts would side with you for a different reason: they see the precedent of previously-established private ownership as the easiest, quickest, and most convenient method for settling the dispute. The courts ruling in favor of the private property holder is indeed the morally just ruling. But very few people, even judges who rule on the side of the property holder, understand that. In the scenario where the courts must settle the dispute between you, the homesteader, and me, the trespassing squatter, the courts come down on the side of right largely by accident. In many instances where people side with the property holder, they do so grudgingly.
To the degree that most people are more sympathetic to the property holder than the trespasser, it has less to do with the fact that the property holder earned her property, and more to do with the property holder being seen as more predictable and reliable — and therefore less dangerous to the community. Contrariwise, the trespasser is regarded as inherently more disruptive and therefore likelier to instigate future intra-neighborhood conflict. Again, the very emergence of strife is considered worse than any injustice that might be inflicted within the squabble or in attempt to end it.
For instance, the same Garrett Hardin who coined the tragedy of the commons writes in the journal Science that the most effective route for settling disputes over who gets what resources is “the institution of private property coupled with legal inheritance.” Immediately upon saying that, Hardin qualifies that, like many other people, he believes that the court coming down on the side of you, the property holder, is the lesser evil, the greater evil being any continuation of our squabble. Hardin goes on,
Sandefur exemplifies that approach. Consistent with that approach, he writes that legitimate private property “is naturally exclusive, meaning that if I have it, you simply cannot; if I take it, you no longer have it — you have been ‘disseised.’ Intellectual property, however, is not like this. I can ‘take’ it from you, and yet you still have it” (emphasis his).
Sandefur presents private property as, more than anything, that form of dispute resolution, and simultaneously fails to address who exactly should be recognized by the law as the default owner of a newly created economic value. A proper addressing of the second point not only would undermine Sandefur’s first point, but would also undermine his overall case against IP.
There is an argument, to which an old Facebook group and Facebook page allude, that states it more simply. It is this: If I steal your car, you no longer have access to your car. By contrast, if I pirate Justine’s movie, she still has access to her master copy. Therefore, concludes the argument, Justine actually lost nothing.
The idea in trying to discredit IP is that economic “scarcity” does not apply to the designs that are to be protected in copyrights and patents. In reality, economic “scarcity” does apply to them. IP is for a practicable original design. It is a practicable original design if units produced according to the design’s specifications will, upon reaching the market, solve our problems much better than do the older technologies that these new units are meant to replace. In effect, units produced from the practicable new design will satisfy marketplace demand more adequately than does the technology that this new design aims to supplant. As with any other economically “scarce” good, there are only so many such practicable original designs that can be available at any given moment.
Contrary to Arnold Plant, the economist whom Sandefur and other IP detractors routinely cite, IP protections themselves are not the major source of the “scarcity” in practicable original designs. The economic “scarcity” in such practicable original designs arises from the very nature of what is entailed in the task of formulating an original design that fulfills its mission. And if not for IP protections, practicable original designs would be “scarcer” still, as they were in historical time periods and places wherein IP were not institutionally codified.
The reason is that producing such a practicable original design itself requires that the designer make choices in using up “scarce” resources in experimenting on and refining that design to ensure that it works as intended. Practicable original designs are themselves economically “scarce” for the reason that the resources that must be used up to create such designs are already economically “scarce.”
That is the problem with the argument that you are deprived of nothing if the pirating of your art still leaves you with access to the master copy. That argument is a straw man. No defender of intellectual property claimed that pirating of Justine’s movie causes her to lose the master copy. It is other values that are snatched. Through her specific choices, Justine invested time and other scarce resources into creating her original movie. The quality of her specific choices in allocating the resources invested directly affected the quality of her movie. The wiser Justine was in her choices in how to invest her resources to produce the movie, the more valuable a viewing experience the movie was to filmgoers.
Likewise, through his specific choices, an inventor invests his time and other specific scarce resources into the R-and-D that are necessary to ensure that his invention operates as planned. The quality of his specific choices in allocating the resources for this process had a direct effect on the quality of his design. The wiser the inventor was in his choices in how to invest resources in the R-and-D stage, the more valuable the units of his invention will be to customers.
The filmmaker and inventor put the result of the specific choices comprising their investments — the result being the original design — onto the market on the condition that parties that use this design directly shall contribute to the designer recouping her investment. Those who pirate the design are swiping part of the value of the choices in resources that the designer inputted in the process of making the design a reality. The defenders of IP have always pointed out that that is what the IP infringer swipes.
Rightful Ownership As Identification
Ayn Rand said, “Existence is Identity, Consciousness is Identification.” That has a two-part meaning. First is that every entity that exists has its own identity, its own specific nature. That means that insofar as an entity can be distinguished as such, it possesses traits that make it stand out from other entities. “Consciousness is Identification” refers to how it is by use of your reasoning mind that you discern the attributes that distinguish one entity from others. To translate, an entity has its own identity and it is through your rational faculty that you gain knowledge of its identity. To gain knowledge of something’s identity is to identify it. That is the identification. And an important application of this faculty for identification of anything is the identification of a piece of property with its owner.
Here we find that the notions about private property that I have described above — property as a tentative method for dispute resolution — is, at best, woefully incomplete. To identify a property with its owner is about so much more than identifying who currently has the legal authority to control which resources. We return to the previously imagined scenario of a dispute concerning you, the homesteader, versus me, the trespassing squatter. Here, to identify the property owner is about so much more than identifying which of the disputing parties is the safer, more reliable party who is less prone to initiate social discord. Nay. To a large extent, to identify a form of wealth with its rightful owner is to identify that wealth with the party that created it. That is a fundamental distinction.
There is an important observation about ownership and commerce that is made even by purported free-market economists who favorably cite the spurious argument against IPRs delivered by Arnold Plant of the University of Chicago. I am referring to Rothbardians and to some Chicago-school economists. I mean their observation that changes in prices of items on the market are important signals of information, and that the freer the market is, the more reliable the information.
Ludwig von Mises points out that price change are important information in this regard. He notes that, insofar as markets are free, the change in average price of a particular commodity indicates to vendors who deal in that commodity that there have been changes in supply or demand for this commodity. That, in turn, signals to vendors whether they would profit more by selling more of this commodity or fewer, by selling more of some other commodity or fewer. And Mises goes on that governmental price controls, setting maximum or minimum prices for this commodity that are far different from what the average price would be in laissez faire, interfere with the important information that free-market price changes signal to vendors. The interferences contribute to shortages in some areas of the economy and wastefulness in other areas. I have elaborated further on that idea over here.
That is why it is fitting that the Greco-Roman messenger god Hermes/Mercury was associated not only with the long-distance relaying of information but also with commerce. Acts of commerce not only rely on information but transmit it.
What I have written above about price changes is very basic economics-related knowledge to the Rothbardians and the Chicago-school haters of IP. But these alleged free-marketers have been overlooking an even more basic type of information in the market. More than that, the far-more-basic information these alleged free-marketers overlook is information that serves as the foundation enabling customers to find vendors and negotiate free-market prices in the first place.
That blind spot on the Rothbardians’ part reminds me of the confusion I long had had about the relationship between mathematics and formal logic. The first time I heard of formal logic, I asked someone what that was, and he replied to me that it was a type of mathematics. From then on, that inaccurate definition stuck with me. Then one day I said to Reid Ginoza, “Isn’t formal logic a branch of mathematics?” He pointed out to me, “It’s the reverse. Logic came first, and it’s the basis of mathematics. You can do formal logic without math. You cannot do math without using logic.”
Likewise, people don’t truly understand the information conveyed in changes in the price of a property on the market until they understand a much-more-basic form of information. This bit of information is specific to the property itself.
Let us return to the hypothetical dispute concerning you, the homesteader who bothered to improve the land, versus me, the mooching squatter who contributed nothing to your improvement of the land but tries to benefit from it. Many judges would say that they rule in your favor because that is just the law. For them, that is the end of it. At least, for them that is the most direct and substantial reason why it is you who should have ownership control over your homestead. It is on account of official legal documents saying so. Judges who are more philosophically inclined, but who tend to be molded by the conventional philosophic consensus, may cite, as their reason for siding with the property holder, that it is the tradition that accords with the big priority that is ending conflicts per se.
In court, we establish that I am the one who trespassed on the plot that you improved. You point out that you were rightfully minding your own business, whereas I took the initiative to intrude upon your life. We get into a fight. Here, “I don’t care who started it!” is the perfect retort from a judge who believes that private property rights are merely about settling disputes over scarce tangible resources. Such a person sure doesn’t care that the economic value over which we are fighting is a value that was started by you and your choices.
In actuality, the most direct and substantial reason why you are the one who should have ownership control over the economic value of your homestead is that you are the one who created that economic value. The law’s formal observance of you as the homestead’s owner is no more than secondary to that fact. And the law’s formal recognition of you as the owner is merely the law acknowledging, always implicitly though seldom explicitly, that the party that should have default claim of ownership control over an economic value is the party that fashioned it.
Ownership is the means of identifying an economic value with its creator. This identification is what helps the law ensure that, in controlling and enjoying the economic value she took the initiative in producing, a person experiences the logical consequences of her peaceful chosen actions. That identification helps prevent thieves from wrestling away control of the effect (the economic value) from its cause (the value’s creator). This especially applies to intellectual property rights.
Note that an extension of the right of the homesteader to the land he improved is his right to sell that land. Thus, the homesteader’s right to the land he improved is applied in the homesteader’s ability to transfer ownership of it to someone else. That does not change the fact that, by default, the first rightful claim of ownership over improved land goes to the homesteader whose planning choices improved it.
That principle applies to manual labor. An extension of the Locke-Smith Principle is the laborer’s right to transfer ownership of his labor. For that reason, it is consistent with the worker’s rights that the worker may forge an agreement with an employer. The worker implicitly agrees that, in exchange for the employer’s remuneration, the employer gains ownership over the product of the worker’s physical labor as that labor is being performed. That does not change the principle that, by default, the first rightful claim of ownership over one’s efforts goes to the person who is performing that effort.
And that principle applies to intellectual property. An extension of the right to intellectual property is the designer’s right to transfer ownership of that design. For that reason, it is consistent with the designer’s rights that the designer may forge an agreement with an investor. The designer may rightfully agree that, in exchange for the investor’s financial assistance, the investor may gain partial or total ownership over the design once it is patented, copyrighted, or trademarked. That does not change the principle that, by default, the first rightful claim of ownership over a design goes to the designer whose creative choices produced that design.
This principle — that insofar as people are free, the wealth a person enjoys happens to be the very same economic value she created — is not mitigated by the fact that a particular unit’s rightful owner is seldom the same party that produced the unit directly. There is a corollary to a person’s right to trade away the units she produced directly. That corollary is this: once she trades away the units she produced directly, she still maintains the economic value of those directly-produced units. She still holds onto the economic value she produced. It’s just now in a different form: the goods or services she obtained in exchange for the units she produced directly.
In most instances where someone resolutely trades away the units she produced directly, she thus maintains the economic value she had created in the direct production of the units. The economic value she previously had in those units is what she now has stored in whatever good or service she obtained in exchange for the units. Indeed, insofar as this party first produced those units with the intention of trading them away later, she did so for the purpose of maintaining the units’ economic value in the form of good or service she gained in exchange for the units.
When you improve your land, the improvements are what you have produced directly. But when you sell the land for $500,000, you retain the economic value of the improvements. The economic value you produced is now stored in the $500,000. When you exchange the $500,000 for Y, the Y itself was assembled directly by other parties, but the economic value you produced is now in the Y.
Due to natural circumstances, that economic value might depreciate on its own. Machinery can wear down. Food items will rot. The depreciation can also be imposed from government forces, such as in the national government’s treasury and the central bank devaluing the monetary units you saved up. But if the material units you produced directly were traded away for Y, whatever economic value remains with Y is the same economic value created from your production of the original material units.
Many readers balk at my idea that one’s personal fortune is commensurate with the economic value that one has produced. Such balkers retort that most of the wealth a person has was not created by she herself, but was what she inherited from elder relatives. They say that especially applies in instances of the heiresses of multi-million-dollar fortunes. The consideration that a lot of people start with inheritances, reply my detractors, demonstrates that most of the economic value a person possesses is not what she created herself.
More specifically, the proclamation goes that the $300 million that Paris Hilton inherited cannot be the result of her own creative choices. No, goes the proclamation, she is known for being a flaky socialite who made no wise investment other than having been born to the most convenient set of parents. As Garrett Hardin says it, “An idiot can inherit millions... We must admit that our legal system of private property plus inheritance is unjust...”
I have refuted that argument at greater length over here. The short version is that Paris Hilton inheriting $300 million from her great-grandfather Conrad Hilton is not a reward to Paris for having been born. Rather, it is a reward to hotel mogul Conrad Hilton for the economic value that he created. He provided lodging services to lodgers. Each lodger valued his service more than the monetary sum she paid him for it. Were it otherwise, that lodger would not have patronized Conrad. The total of what the lodgers paid Conrad added up to $300 million. A corollary to the right of controlling the economic value one has created is the right to transfer ownership of that value to any other peaceful person of one’s own choosing, such as one’s heirs.
The fact that an allegedly flaky heir might inherit a vast fortune is often cited by cynics such as Hardin as proof that free enterprise is the opposite of meritocratic. In actuality, the very freedom of a self-made wealth-creator such as Conrad to will his economic value to others of his choosing is itself a reward for merit.
As for heirs such as Paris, whether they are able to engage in their own economic productivity to maintain those vast fortunes is up to them. Elsewhere I have given case studies of heirs who, complacent about their inheritances and uncaring about their own productiveness, have lost their multi-million- and billion-dollar fortunes.
Thus, indeed, insofar as anyone acquired it through choices made in freedom and peace, the amount of wealth that someone owns, inherited or otherwise, is the quantity of economic value that he or she created through her choices. And these choices are an important portion of one’s identity. Concordantly, identifying someone’s ownership over wealth that is the result of such choices is a method of identifying important aspects of the owner herself.
Yes, your private ownership over the economic value you created identifies you with the creative actions you chose to bring that economic value into existence. As I have written earlier, I find so much of “Identity Politics” to be tragic. I feel sorry for political activists talking about one’s race, sex, gender, sexual orientation, or another trait with which someone was born beyond her control, as if those unchosen traits are the main ones that provide someone with an identity. Someone’s identity is most specifically at the individual level. Identity is most specifically that which distinguishes a single person from everyone else, including from many other people that have superficially similar qualities.
My ethnic origin hardly identifies me in separation from the 1.4 million other Americans of Japanese ancestry. It definitely does not identify me among the 130 million other people of Japanese descent. Were it that my identity could be no more specific than my ethnicity, that would hardly narrow it down. And that is just fine for many political activists who try to exalt the social collective over the individual. In the end, what actually identifies me from everyone else is what renders me unique. What makes me unique is the sum total of choices I have made throughout my life.
Point to any one innocuous, whimsical decision I made in my life — such as eating a hamburger at McDonald’s today — and probably millions or even billions of other people probably made that very same choice for themselves. However, the specific choices add up over a lifetime. Looking at the entire series of choices a single person has made over his or her lifetime, it is not exactly like anyone else’s series of lifetime choices. To reclaim a noble term that internet trolls have tried to make into a slur, the identity that comes from the sum of your lifetime choices is of a uniqueness comparable to a snowflake.
Many of the more general, more superficial —literally surface-level — aspects of someone’s identity are outside of his or her control, such as the aforementioned ethnic origin or sex-related traits. But the most substantial and specific attributes that distinguish someone are the choices in his or her control. Hence, those choices are the most substantial source of one’s identity, and, well into adulthood, your identity ultimately consists of the results of the choices pertaining to what you have made of it. As noted by Amazon founder Jeff Bezos, “We are our choices.”
And among the choices that make up our identity are those pertaining to finance and economics. I hold no doubt that many people recoil at such a thought. It is a common refrain, “I hate people being materialistic and trying to wrap up their identity in what they own. If the bank forecloses me and I lose my stuff, it doesn’t erase my personality; I don’t stop being who I was before the foreclosure.” I readily acknowledge that you are not the belongings that are external to you. You have an identity separate from such objects. Were you to lose a significant portion of your fortune from some unforeseen traumatic event, that loss of money, by itself, would not stop you from being you. Still, the steps you chose to take to acquire anything with which you were not already born do display facets of your personality and are thus part of your identity. These aspects of your identity are your financial identity.
I here summarize the first major point of this essay. Your identity consists of your creative choices. Your creative choices produce economic value. When the economic value you produce is respected as your private property, that ownership identifies the economic value with its creator. That is, respectively, to identify the effect with its cause. Rightful ownership is thus a form of identification. For someone to steal the economic value you produced is for that person to steal the logical effects of your choices, choices that are part of your identity. On a broad level, all theft is a sort of identity theft.
According to the interpretation that Sandefur articulates, it is the case that when another party tries to profit from bootlegging your design, that bootlegger is not robbing you. Rather, that bootlegger is simply another vendor who is competing against you in the same industry for the same customers that you target. In infringing your IP, the bootlegger is not appropriating any valuable commodity that rightfully belongs to you alone. No, the bootlegger observed the example you set as a role model, and is incorporating these lessons in producing merchandise that is harmlessly similar to your own. Furthermore, goes this interpretation, if you file suit against the parties profiting from these bootlegs, you are wrongfully using government force to monopolize this industry. Filing suit against those who have pirated your design is simply siccing government regulation against your intra-industry competitors.
Sandefur would therefore misidentify governmental protection of your IP as a type of protectionism. In this protectionism, we are to believe, you can gouge on your prices because you had the government thwart your intra-industry competitors who otherwise would have offered your desired customers a better deal than the one you offer. Insofar as the bootleggers are vanquished, the designer can be a government-protected monopolist charging whatever price she wants for her design. This price will be much higher than it would be if the bootleggers operated unfettered. That profit margin is, in this interpretation, the equivalent of a tariff or duty imposed on the customer.
Perhaps we can have a better understanding of Sandefur’s interpretation if we examine the phenomenon of bootlegging in the late 1980s and early 1990s. Imagine Justine made her low-budget movie when most middle-class households had VCRs and hardly anyone heard of a DVD, let alone a Blu-Ray. There were several methods for bootlegging movies. One of the crudest methods was to sneak a camcorder into a movie theater and use the camcorder to tape a theatrical showing. The quality of such bootlegs was usually poor.
But there were more sophisticated strategies for bootlegging. When movies came out on home video, these copies often contained some modification so that, if someone connected two VCRs to make additional copies, the new copies would come out distorted. A series of annoying horizontal lines appeared across the onscreen image when the bootleg copy played. Yet bootleggers developed equipment that circumvented the distortion. Thus, copies from official VHS releases were usually the highest-quality bootlegs.
Now imagine I produce bootleg copies of Justine’s movie on VHS and sell each unit for a price much lower than what Justine charges. Running this bootleg operation has its own costs. But this cost is no more than $10,000 over the course of four years. The operation’s cost will never be more than a fraction of what Justine invested to make her motion picture. Yet there is an inequality more important than the value, measured strictly in terms of monetary units, of the respective investments of Justine and me. More dramatically unequal are the degrees of initiative and conscientiousness Justine and I each employed in the specific choices that culminated in our respective investments. We will revisit that distinction later in this essay. Following the train of thought from Sandefur’s comments, we can discern how this is interpreted by those under the sway of Rothbard-Childs-Konkin.
According to this Rothbardian interpretation, I am not some parasite who has appropriated wrongful control over someone else’s creation. Nay, Justine and I are just competing vendors in the same industry. Granted, Justine’s movie would exist without my bootleg operation. Also granted, the existence of my low-cost bootlegs is filched from Justine’s efforts. Justine’s original work would continue in the bootlegger’s absence. On the converse, had Justine not been in the picture, the bootlegger would be powerless.
But Sandefur dismisses what I did to Justine as just a regular cost of doing business. In the Rothbardian interpretation, Justine should have expected and accepted this cost as legit if she bothered to heed any common sense.
As Sandefur rationalizes it, the bootlegger “is also taking the economic risk in this circumstance...” And, continues Sandefur’s argument, if Justine sent the government to stop customers from purchasing the bootlegs, Justine would be the actual parasite and looter who is trying to micromanage what her intra-industry competition and her intended customers are doing peaceably with their property.
Bootleg VHS tapes are an institution rather unfamiliar to the younger people reading this blog entry. Therefore, it may be helpful to consider a more recent case. Ten years ago, people would upload unauthorized copies of movies using a website and peer-to-peer file-sharing program, both known as the Pirate Bay. People could access Justine’s movie through Bittorrent. And they would do it from parties who, unlike the bootleg videotape dealers before them, charged nothing at all. The Pirate Bay, hosting this service, made money because it displayed advertisements from its paying clients to users as they torrented copies of the movies onto their own drives. According to the Rothbardian interpretation, the parties making unauthorized uploads of Justine’s movie would be Justine’s intra-industry competitors, even though they, unlike she, were not charging money. The Pirate Bay itself would not be Justine’s intra-industry competitor but a middleman that provided a platform to her intra-industry competition.
There is something that must be said about those who insist that a bootlegger is in legitimate intra-industry competition against the originator. It is this: these detractors against IP obfuscate the division of intra-industry competition from identity theft.
Most Intellectuals Who Discuss Private Property Rights Need to Give Them a Closer Look
The Rothbardians’ case against IPRs is able to bamboozle many people. The reason is that the people who buy into this argument against IP hold, at least on an implicit level, three misconceptions about private property rights. The misconceptions are as follows.
- Private property rights can only apply legitimately to physical objects.
- This relates to the first misconception. It is that because IPRs are intangible, no sort of economic “scarcity” applies to them. Hence, IPRs are imaginary at best. I have already written of how those misconceptions fail to make the point they intend.
- This follows from the misconception that private property rights are no more than a means of allocating scarce physical objects. It is that private property rights are nothing better than a tentative method for resolving disputes between separate parties that are each proclaiming themselves to be the party most deserving of control over the same physical object.
Many philosophers from the Renaissance onward have had some implicit understanding of how private property rights are of greater moral significance than just a tentative method for dispute resolution. However, those philosophers have not articulated this significance adequately. Not even those from the Age of Enlightenment have explained it as well as they should have. Hence, I have to try to continue the job they left unfinished.
First I will describe the conventional interpretation of private property rights as just a means of dispute resolution. Once I have done that, I will try to explain how the essence of private property rights is more complex. Following that, I will go over how this greater significance of private property rights in general necessarily applies to the legitimacy of IPRs.
Are Private Property Rights For Nothing Better Than Stopping Fights?
Though it is not often phrased in this manner, there is an implication buried in economists’ conventional explanations for the origin of the concept of private property rights. The implication is that the main purpose of private property rights is to resolve disputes over competing claims over who should be able to control and consume which resources. This has much to do with the conventional proclamation by economists that the basis of economics in general and private property rights in particular is “scarcity.”
“Scarcity,” in this context, refers to the fact that, at any given moment, there is a specific total quantity of units of a good on the market. That there is this specific total quantity means that if, at this very moment, I gain and consume 50 units of this good, those are 50 fewer units available for anyone else at any given moment. My accessing and consuming more units at this moment means fewer units available for everyone else.
That principle applies even under all of the following three conditions.
- More units of this good can easily be produced in the near future.
- There is no danger of any long-term shortage in units of the good.
- My ravenous consumption of units correctly signals to producers of the units to produce even greater numbers of units in the near future.
- Without establishing who privately owns what, a society lacking in recognition of property rights of any sort would devolve into chaos where everyone fights everyone else for “scarce” units of what they need. Insofar as people accept the institution of private ownership, that helps reduce the squabbling.
- The proper value and free-market price of a good are at the intersection of demand and supply, where vendor and buyer agree on how much of the buyer’s own wealth the buyer will give up in exchange for the good.
Conventional economists are largely silent on this issue. Even economists who have reputations for defending laissez-faire enterprise have been lackluster on this. That is ironic. The issue of why a particular person is right to own and control a particular resource was touched upon by two founding fathers of the discipline, John Locke and Adam Smith, though they didn’t write essays that explored this idea to the point where they would take it to its logical conclusion. This essay you are reading is part of my attempt to expand upon the logic of their argument.
Imagine you’re a homesteader. You go onto wilderness land that was not claimed by anyone. If you were a hunter-gatherer, you might be satisfied with this land in its default condition. But that the hunter-gatherers mostly gain their food from foraging and hunting and otherwise do not change the land much is the reason why the infant mortality rate among them is 25 percent. As you want the chances for mortality to be much lower for yourself and the children you intend to bring into the world, you know that this wilderness is not satisfactory for your habitation. For the land to be truly hospitable, you need to change it.
You choose which crops to plant. You irrigate the land so that the crops receive water with greater regularity. Although Karl Marx mischaracterizes this process as if it were manual labor and nothing else, the process actually involves the exercise of a body part other than the arms and shoulders: the brain. You improve the land and make it livable mostly through the plans you devise for it. And, as John Locke points out, the new livability of the land is economic value that was not inherent to the land. No, the net increase in the land’s economic value was something that your creative choices had put into it. It is for this reason, note John Locke and Adam Smith, that the homestead has rightfully become yours. As Locke and Smith laid the foundation for this interpretation, I call it the Locke-Smith (“Locksmith”) Theory. When other people come and homestead their own plots, it is proper that they respect that your own plot is rightfully yours to control exclusively.
Although I call this principle “Locke-Smith” after the two British men who pioneered the idea (pun very much intended), their French successor, Jean-Baptiste Say, understood it as well. In his words, “...the land only returns what is put into it; but returns it after an elaboration,” that elaboration being an improvement by conscious human effort. Say thought of it as “the productive service of the field” (emphasis Say’s).
In fact, Say understood this principle better than Locke and Smith did. Locke and Smith worded their arguments in such a manner that someone like Karl Marx could come along later and misconstrue their talk of “labour” on the land as their attributing the improvement of land to physical muscle movements more than to intellectual planning. By contrast, as we shall see in this essay’s conclusion, Say was unambiguous that the land’s improvement came mostly from the homesteader’s intellectual planning.
Additionally, it was Say and his mentor Antoine-Louis-Claude Destutt de Tracy who pointed out how the Industrial Revolution demonstrated that wealth came not merely from natural resources and the improvement of land but the application of discoveries and ingenuity to making each unit of natural resources more useful to humans than it had been prior to that application. Rather than embrace these insights, though, most people fall back on the primitive and superficial impressions of the societies that came before these Enlightenment thinkers.
Throughout history, many societies have considered any conflict between neighbors to be inherently bad. These societies are unable to cope with intra-neighborhood conflict. Their intolerance of intra-community conflict goes to the point that they would rather there be an unjust resolution to the conflict than for the squabble to go on longer. That applies even if the intra-community conflict extending for a much longer period of time would increase the likelihood of a just resolution. That is, a speedy end to conflict has priority over the attainment of justice.
Here is an example you might have witnessed. Two children begin fighting. An adult authority figure steps between them and breaks it up. One child points to the other and yells, “He started it!” Then the (so-called) adult authority figure immediately snaps, “I don’t care who started it!” Speaking personally, this attitude seems common among my fellow persons of Japanese descent who reside in Hawaii. Ever since childhood, when I have stood up for myself verbally, some elderly person would say, “Quiet! Nobody cares if you were right or not earlier. We’d rather you just shut up and spare us all this noise!”
Yet when justice is prioritized above conflict resolution, it necessarily matters who started it. If you immediately come upon a woman stabbing a man with a knife, the context that led to this outcome certainly matters. It may be the case that the man started it — he was trying to rape this woman, and she stabbed him in self-defense. On the other hand, it may be the case that this man did nothing to her other than write her into his will. Maybe she had planned to stab him, dispose of the body in secret, and have him declared legally dead after a period of his having been reported missing. It would be for the purpose of inheriting his fortune. In that case, she would be the one who “started” it. In criminal justice, who “started it” is the difference between assault and self-defense.
If a woman stabs a male assailant in self-defense, I don’t think there would be much controversy over who is morally in the right. We do find that there is a lot of controversy over who is right in disputes over private property.
Let us examine the scenario where you have improved a plot of land and therefore gained legal ownership over it. I have contributed nothing to your improvement over the land. But once I see the improvements you have made on it, I decide that that is where I need to stay. I try to squat on your land. You accuse me of trespassing and call the police on me. I then proclaim that you are a greedy overlord trying to deprive me of the amenities I need and therefore deserve. You and I go to court to settle this.
Throughout most Western and even central Asian history, most courts would side with you. But it would not necessarily be because these courts concede that moral right and righteousness are on your side. As I have written before, throughout most of history it was that most societies regarded your private control over your land as nothing better than as a stewardship tentatively assigned to you by society-as-a-whole or by the gods and wilderness spirits. Pertinent to this discussion, it was not until the arrival of Enlightenment philosophers such as Locke that intellectuals began to recognize that the economic value of your land did not come primarily from the land’s default state or from the gods. It was not until Enlightenment philosophers such as Locke that intellectuals began to consider that the economic value of your land comes from your choices in what to do with the land. It was when people began to entertain the realization that economic value and wealth are created by such intellectual and entrepreneurial effort.
But, generally, the courts would side with you for a different reason: they see the precedent of previously-established private ownership as the easiest, quickest, and most convenient method for settling the dispute. The courts ruling in favor of the private property holder is indeed the morally just ruling. But very few people, even judges who rule on the side of the property holder, understand that. In the scenario where the courts must settle the dispute between you, the homesteader, and me, the trespassing squatter, the courts come down on the side of right largely by accident. In many instances where people side with the property holder, they do so grudgingly.
To the degree that most people are more sympathetic to the property holder than the trespasser, it has less to do with the fact that the property holder earned her property, and more to do with the property holder being seen as more predictable and reliable — and therefore less dangerous to the community. Contrariwise, the trespasser is regarded as inherently more disruptive and therefore likelier to instigate future intra-neighborhood conflict. Again, the very emergence of strife is considered worse than any injustice that might be inflicted within the squabble or in attempt to end it.
For instance, the same Garrett Hardin who coined the tragedy of the commons writes in the journal Science that the most effective route for settling disputes over who gets what resources is “the institution of private property coupled with legal inheritance.” Immediately upon saying that, Hardin qualifies that, like many other people, he believes that the court coming down on the side of you, the property holder, is the lesser evil, the greater evil being any continuation of our squabble. Hardin goes on,
We must admit that our legal system of private property plus inheritance is unjust — but we put up with it because we are not convinced, at the moment, that anyone has invented a better system. The alternative...is too horrifying to contemplate. Injustice is preferable to total ruin.That is the attitude of most people in the West, including alleged defenders of laissez-faire capitalism such as Thomas Sowell. The notion is that for a society to put up with the institution of capitalist private property is rather crass and cynical, but humans are too grubby and “fallen” to be able to manage something of higher aims, such as socialism. That is why Sowell says,
If everyone were sweetness and light, socialism would be the way to go. . . . Maybe some day we will discover creatures in some other galaxy who can operate a whole society that way. But the history of human beings shows that a nation with millions of people cannot operate like one big family. . . .
While my desires for a better life for ordinary people have not changed from the days of my youthful Marxism, experience has taught the bitter lesson that the way to get there is the opposite of what I once thought.This notion that the institution of private property is nothing better than a begrudging recourse for resolving disputes over the distribution of resources is also found in the arguments of many libertarians. That is visible when libertarians argue that all resources that can be privately owned, such as forests and even rivers, should be. Their main rationale for this privatization that the differing incentives between private profiteers versus tax-funded government employees often result in the privately owned resources being better-conserved and better-managed. Libertarians who advance that point are not wrong on it. Still, when that is presented as the main argument for private property, it overlooks the implicit role played by private property which is of far greater psychological significance.
Sandefur exemplifies that approach. Consistent with that approach, he writes that legitimate private property “is naturally exclusive, meaning that if I have it, you simply cannot; if I take it, you no longer have it — you have been ‘disseised.’ Intellectual property, however, is not like this. I can ‘take’ it from you, and yet you still have it” (emphasis his).
Sandefur presents private property as, more than anything, that form of dispute resolution, and simultaneously fails to address who exactly should be recognized by the law as the default owner of a newly created economic value. A proper addressing of the second point not only would undermine Sandefur’s first point, but would also undermine his overall case against IP.
There is an argument, to which an old Facebook group and Facebook page allude, that states it more simply. It is this: If I steal your car, you no longer have access to your car. By contrast, if I pirate Justine’s movie, she still has access to her master copy. Therefore, concludes the argument, Justine actually lost nothing.
The idea in trying to discredit IP is that economic “scarcity” does not apply to the designs that are to be protected in copyrights and patents. In reality, economic “scarcity” does apply to them. IP is for a practicable original design. It is a practicable original design if units produced according to the design’s specifications will, upon reaching the market, solve our problems much better than do the older technologies that these new units are meant to replace. In effect, units produced from the practicable new design will satisfy marketplace demand more adequately than does the technology that this new design aims to supplant. As with any other economically “scarce” good, there are only so many such practicable original designs that can be available at any given moment.
Contrary to Arnold Plant, the economist whom Sandefur and other IP detractors routinely cite, IP protections themselves are not the major source of the “scarcity” in practicable original designs. The economic “scarcity” in such practicable original designs arises from the very nature of what is entailed in the task of formulating an original design that fulfills its mission. And if not for IP protections, practicable original designs would be “scarcer” still, as they were in historical time periods and places wherein IP were not institutionally codified.
The reason is that producing such a practicable original design itself requires that the designer make choices in using up “scarce” resources in experimenting on and refining that design to ensure that it works as intended. Practicable original designs are themselves economically “scarce” for the reason that the resources that must be used up to create such designs are already economically “scarce.”
That is the problem with the argument that you are deprived of nothing if the pirating of your art still leaves you with access to the master copy. That argument is a straw man. No defender of intellectual property claimed that pirating of Justine’s movie causes her to lose the master copy. It is other values that are snatched. Through her specific choices, Justine invested time and other scarce resources into creating her original movie. The quality of her specific choices in allocating the resources invested directly affected the quality of her movie. The wiser Justine was in her choices in how to invest her resources to produce the movie, the more valuable a viewing experience the movie was to filmgoers.
Likewise, through his specific choices, an inventor invests his time and other specific scarce resources into the R-and-D that are necessary to ensure that his invention operates as planned. The quality of his specific choices in allocating the resources for this process had a direct effect on the quality of his design. The wiser the inventor was in his choices in how to invest resources in the R-and-D stage, the more valuable the units of his invention will be to customers.
The filmmaker and inventor put the result of the specific choices comprising their investments — the result being the original design — onto the market on the condition that parties that use this design directly shall contribute to the designer recouping her investment. Those who pirate the design are swiping part of the value of the choices in resources that the designer inputted in the process of making the design a reality. The defenders of IP have always pointed out that that is what the IP infringer swipes.
Rightful Ownership As Identification
Ayn Rand said, “Existence is Identity, Consciousness is Identification.” That has a two-part meaning. First is that every entity that exists has its own identity, its own specific nature. That means that insofar as an entity can be distinguished as such, it possesses traits that make it stand out from other entities. “Consciousness is Identification” refers to how it is by use of your reasoning mind that you discern the attributes that distinguish one entity from others. To translate, an entity has its own identity and it is through your rational faculty that you gain knowledge of its identity. To gain knowledge of something’s identity is to identify it. That is the identification. And an important application of this faculty for identification of anything is the identification of a piece of property with its owner.
Here we find that the notions about private property that I have described above — property as a tentative method for dispute resolution — is, at best, woefully incomplete. To identify a property with its owner is about so much more than identifying who currently has the legal authority to control which resources. We return to the previously imagined scenario of a dispute concerning you, the homesteader, versus me, the trespassing squatter. Here, to identify the property owner is about so much more than identifying which of the disputing parties is the safer, more reliable party who is less prone to initiate social discord. Nay. To a large extent, to identify a form of wealth with its rightful owner is to identify that wealth with the party that created it. That is a fundamental distinction.
There is an important observation about ownership and commerce that is made even by purported free-market economists who favorably cite the spurious argument against IPRs delivered by Arnold Plant of the University of Chicago. I am referring to Rothbardians and to some Chicago-school economists. I mean their observation that changes in prices of items on the market are important signals of information, and that the freer the market is, the more reliable the information.
Ludwig von Mises points out that price change are important information in this regard. He notes that, insofar as markets are free, the change in average price of a particular commodity indicates to vendors who deal in that commodity that there have been changes in supply or demand for this commodity. That, in turn, signals to vendors whether they would profit more by selling more of this commodity or fewer, by selling more of some other commodity or fewer. And Mises goes on that governmental price controls, setting maximum or minimum prices for this commodity that are far different from what the average price would be in laissez faire, interfere with the important information that free-market price changes signal to vendors. The interferences contribute to shortages in some areas of the economy and wastefulness in other areas. I have elaborated further on that idea over here.
That is why it is fitting that the Greco-Roman messenger god Hermes/Mercury was associated not only with the long-distance relaying of information but also with commerce. Acts of commerce not only rely on information but transmit it.
What I have written above about price changes is very basic economics-related knowledge to the Rothbardians and the Chicago-school haters of IP. But these alleged free-marketers have been overlooking an even more basic type of information in the market. More than that, the far-more-basic information these alleged free-marketers overlook is information that serves as the foundation enabling customers to find vendors and negotiate free-market prices in the first place.
That blind spot on the Rothbardians’ part reminds me of the confusion I long had had about the relationship between mathematics and formal logic. The first time I heard of formal logic, I asked someone what that was, and he replied to me that it was a type of mathematics. From then on, that inaccurate definition stuck with me. Then one day I said to Reid Ginoza, “Isn’t formal logic a branch of mathematics?” He pointed out to me, “It’s the reverse. Logic came first, and it’s the basis of mathematics. You can do formal logic without math. You cannot do math without using logic.”
Likewise, people don’t truly understand the information conveyed in changes in the price of a property on the market until they understand a much-more-basic form of information. This bit of information is specific to the property itself.
Let us return to the hypothetical dispute concerning you, the homesteader who bothered to improve the land, versus me, the mooching squatter who contributed nothing to your improvement of the land but tries to benefit from it. Many judges would say that they rule in your favor because that is just the law. For them, that is the end of it. At least, for them that is the most direct and substantial reason why it is you who should have ownership control over your homestead. It is on account of official legal documents saying so. Judges who are more philosophically inclined, but who tend to be molded by the conventional philosophic consensus, may cite, as their reason for siding with the property holder, that it is the tradition that accords with the big priority that is ending conflicts per se.
In court, we establish that I am the one who trespassed on the plot that you improved. You point out that you were rightfully minding your own business, whereas I took the initiative to intrude upon your life. We get into a fight. Here, “I don’t care who started it!” is the perfect retort from a judge who believes that private property rights are merely about settling disputes over scarce tangible resources. Such a person sure doesn’t care that the economic value over which we are fighting is a value that was started by you and your choices.
In actuality, the most direct and substantial reason why you are the one who should have ownership control over the economic value of your homestead is that you are the one who created that economic value. The law’s formal observance of you as the homestead’s owner is no more than secondary to that fact. And the law’s formal recognition of you as the owner is merely the law acknowledging, always implicitly though seldom explicitly, that the party that should have default claim of ownership control over an economic value is the party that fashioned it.
Ownership is the means of identifying an economic value with its creator. This identification is what helps the law ensure that, in controlling and enjoying the economic value she took the initiative in producing, a person experiences the logical consequences of her peaceful chosen actions. That identification helps prevent thieves from wrestling away control of the effect (the economic value) from its cause (the value’s creator). This especially applies to intellectual property rights.
Note that an extension of the right of the homesteader to the land he improved is his right to sell that land. Thus, the homesteader’s right to the land he improved is applied in the homesteader’s ability to transfer ownership of it to someone else. That does not change the fact that, by default, the first rightful claim of ownership over improved land goes to the homesteader whose planning choices improved it.
That principle applies to manual labor. An extension of the Locke-Smith Principle is the laborer’s right to transfer ownership of his labor. For that reason, it is consistent with the worker’s rights that the worker may forge an agreement with an employer. The worker implicitly agrees that, in exchange for the employer’s remuneration, the employer gains ownership over the product of the worker’s physical labor as that labor is being performed. That does not change the principle that, by default, the first rightful claim of ownership over one’s efforts goes to the person who is performing that effort.
And that principle applies to intellectual property. An extension of the right to intellectual property is the designer’s right to transfer ownership of that design. For that reason, it is consistent with the designer’s rights that the designer may forge an agreement with an investor. The designer may rightfully agree that, in exchange for the investor’s financial assistance, the investor may gain partial or total ownership over the design once it is patented, copyrighted, or trademarked. That does not change the principle that, by default, the first rightful claim of ownership over a design goes to the designer whose creative choices produced that design.
This principle — that insofar as people are free, the wealth a person enjoys happens to be the very same economic value she created — is not mitigated by the fact that a particular unit’s rightful owner is seldom the same party that produced the unit directly. There is a corollary to a person’s right to trade away the units she produced directly. That corollary is this: once she trades away the units she produced directly, she still maintains the economic value of those directly-produced units. She still holds onto the economic value she produced. It’s just now in a different form: the goods or services she obtained in exchange for the units she produced directly.
In most instances where someone resolutely trades away the units she produced directly, she thus maintains the economic value she had created in the direct production of the units. The economic value she previously had in those units is what she now has stored in whatever good or service she obtained in exchange for the units. Indeed, insofar as this party first produced those units with the intention of trading them away later, she did so for the purpose of maintaining the units’ economic value in the form of good or service she gained in exchange for the units.
When you improve your land, the improvements are what you have produced directly. But when you sell the land for $500,000, you retain the economic value of the improvements. The economic value you produced is now stored in the $500,000. When you exchange the $500,000 for Y, the Y itself was assembled directly by other parties, but the economic value you produced is now in the Y.
Due to natural circumstances, that economic value might depreciate on its own. Machinery can wear down. Food items will rot. The depreciation can also be imposed from government forces, such as in the national government’s treasury and the central bank devaluing the monetary units you saved up. But if the material units you produced directly were traded away for Y, whatever economic value remains with Y is the same economic value created from your production of the original material units.
Many readers balk at my idea that one’s personal fortune is commensurate with the economic value that one has produced. Such balkers retort that most of the wealth a person has was not created by she herself, but was what she inherited from elder relatives. They say that especially applies in instances of the heiresses of multi-million-dollar fortunes. The consideration that a lot of people start with inheritances, reply my detractors, demonstrates that most of the economic value a person possesses is not what she created herself.
More specifically, the proclamation goes that the $300 million that Paris Hilton inherited cannot be the result of her own creative choices. No, goes the proclamation, she is known for being a flaky socialite who made no wise investment other than having been born to the most convenient set of parents. As Garrett Hardin says it, “An idiot can inherit millions... We must admit that our legal system of private property plus inheritance is unjust...”
I have refuted that argument at greater length over here. The short version is that Paris Hilton inheriting $300 million from her great-grandfather Conrad Hilton is not a reward to Paris for having been born. Rather, it is a reward to hotel mogul Conrad Hilton for the economic value that he created. He provided lodging services to lodgers. Each lodger valued his service more than the monetary sum she paid him for it. Were it otherwise, that lodger would not have patronized Conrad. The total of what the lodgers paid Conrad added up to $300 million. A corollary to the right of controlling the economic value one has created is the right to transfer ownership of that value to any other peaceful person of one’s own choosing, such as one’s heirs.
The fact that an allegedly flaky heir might inherit a vast fortune is often cited by cynics such as Hardin as proof that free enterprise is the opposite of meritocratic. In actuality, the very freedom of a self-made wealth-creator such as Conrad to will his economic value to others of his choosing is itself a reward for merit.
As for heirs such as Paris, whether they are able to engage in their own economic productivity to maintain those vast fortunes is up to them. Elsewhere I have given case studies of heirs who, complacent about their inheritances and uncaring about their own productiveness, have lost their multi-million- and billion-dollar fortunes.
Thus, indeed, insofar as anyone acquired it through choices made in freedom and peace, the amount of wealth that someone owns, inherited or otherwise, is the quantity of economic value that he or she created through her choices. And these choices are an important portion of one’s identity. Concordantly, identifying someone’s ownership over wealth that is the result of such choices is a method of identifying important aspects of the owner herself.
Yes, your private ownership over the economic value you created identifies you with the creative actions you chose to bring that economic value into existence. As I have written earlier, I find so much of “Identity Politics” to be tragic. I feel sorry for political activists talking about one’s race, sex, gender, sexual orientation, or another trait with which someone was born beyond her control, as if those unchosen traits are the main ones that provide someone with an identity. Someone’s identity is most specifically at the individual level. Identity is most specifically that which distinguishes a single person from everyone else, including from many other people that have superficially similar qualities.
My ethnic origin hardly identifies me in separation from the 1.4 million other Americans of Japanese ancestry. It definitely does not identify me among the 130 million other people of Japanese descent. Were it that my identity could be no more specific than my ethnicity, that would hardly narrow it down. And that is just fine for many political activists who try to exalt the social collective over the individual. In the end, what actually identifies me from everyone else is what renders me unique. What makes me unique is the sum total of choices I have made throughout my life.
Point to any one innocuous, whimsical decision I made in my life — such as eating a hamburger at McDonald’s today — and probably millions or even billions of other people probably made that very same choice for themselves. However, the specific choices add up over a lifetime. Looking at the entire series of choices a single person has made over his or her lifetime, it is not exactly like anyone else’s series of lifetime choices. To reclaim a noble term that internet trolls have tried to make into a slur, the identity that comes from the sum of your lifetime choices is of a uniqueness comparable to a snowflake.
My skin color might help others in identifying me, but only superficially . . . literally (“superficial” means “of the surface”). My identity is more specific than that: it is the totality of the sequence of choices I have made throughout my life. https://t.co/LLWXnFhAhT— $tuart K. Hayashi🌎💱 (@legendre007) May 18, 2019
Many of the more general, more superficial —
And among the choices that make up our identity are those pertaining to finance and economics. I hold no doubt that many people recoil at such a thought. It is a common refrain, “I hate people being materialistic and trying to wrap up their identity in what they own. If the bank forecloses me and I lose my stuff, it doesn’t erase my personality; I don’t stop being who I was before the foreclosure.” I readily acknowledge that you are not the belongings that are external to you. You have an identity separate from such objects. Were you to lose a significant portion of your fortune from some unforeseen traumatic event, that loss of money, by itself, would not stop you from being you. Still, the steps you chose to take to acquire anything with which you were not already born do display facets of your personality and are thus part of your identity. These aspects of your identity are your financial identity.
I here summarize the first major point of this essay. Your identity consists of your creative choices. Your creative choices produce economic value. When the economic value you produce is respected as your private property, that ownership identifies the economic value with its creator. That is, respectively, to identify the effect with its cause. Rightful ownership is thus a form of identification. For someone to steal the economic value you produced is for that person to steal the logical effects of your choices, choices that are part of your identity. On a broad level, all theft is a sort of identity theft.
This is why, although millions or billions of people can opt for joint ownership in a single corporate asset, it goes noticed that capitalism is individualistic by its nature. The institution of private property follows from the fact that a particular quantity of economic value was created not by everyone-in-general but by the choices of a specific person.
Much of what I am arguing, I think has not been verbalized or phrased adequately enough throughout history. That is the very reason why I have written this essay. However, I think that since ancient times, there have been people who have understood parts of it on some implicit level. For that implicit reason, ancient peoples in such places as Egypt and Rome took significant actions hinting at their having some understanding of fundamental aspects to it.
As an institution that is supposed to be helpful in safeguarding you against theft, a document of rightful ownership is a document of identification. It is an identification in several important respects. The deed to your homestead, for instance, is such a document for identification. Consistent with what I have been saying, the deed identifies you with the property you control because it identifies the economic value with its creator.
A Form of IP Older Than Patents and Copyrights That Is a Method for Identification of a Person With the Economic Value She Created
Sadly, legal documents such as deeds are notoriously wordy, filled with phraseology that is difficult for most citizens to penetrate. Hence, human beings have long needed to use symbols, or a shorthand, to ease comprehension over the documents’ meaning. These symbols are identifying marks that are understood more easily and readily than any lengthy document. These symbols, which are associated with pictograms and writing, are conventionally regarded as the oldest form of IPR recognition, though, as I shall explain at this essay’s conclusion, there might be an older form of IP still.
But these, the earliest written symbolic notations of intellectual property, are an institution pertaining to intellectual property that Rothbardians normally overlook. In diatribes that purport to expose the invalidity of intellectual property rights per se, Rothbardians almost always cite only patents and copyrights. They miss the newest type of IPR, which are plant variety protections — a horticulturalist’s ownership over the sexually bred cultivar she produced. And they also miss the older type that is almost directly associated with written language.
I am speaking of trademarks, which are more colloquially called “brands.” The latter term comes from the literal practice of branding. Ranchers had their names carved into a branding iron and used it on the livestock so that anyone coming upon a live cow could look at the brand and identify it as the property of a particular rancher. It makes sense; cattle-ranching requires the use of one’s mind just as drawing up plans for one’s homestead does. Ranchers have long used their minds in the selective breeding of cattle to possess the phenotypes most suitable for their commercial purposes. In selectively-bred cattle being identified with their owner, the owner is properly recognized throughout the community as the specific creator of this particular form of wealth. Branding goes at least as far back as the Indus River Valley and ancient Egypt in 2700 BCE.
What are more specifically known as trademarks date at least as early as ancient Rome. There, customers and clients noticed that some blacksmiths made choices that demonstrated more competence and care than others. As blacksmiths competed against one another, customers and clients needed a method to identify a blacksmith who was remarkably consistent in high-quality services resulting from the blacksmith’s wise choices. That blacksmith identified himself — specifically, his wise choices — with the wares he produced by placing his trademark on those wares. Upon gradually coming out of the overall economic stagnation of the early Middle Ages, which were indeed dark, European governments began to codify into law the formal recognition of such trademarks in the 1200s. The timing here was not accidental. It was, by relation, the very same time period when, finally studying Aristotle as in Antiquity, European scholastics encouraged and participated in the trend of Westerners reembracing practical reason. The formal recognition of trademarks was just one particular in this re-embracing of practical reason that helped the West transition from the high Middle Ages to the Renaissance and then the Scientific Revolution, Age of Enlightenment, and Industrial Revolution.
The identification and uniqueness acknowledged in trademarks is found even in markets where at first glance all the units, no matter the vendor, seem identical. Most apples on the market are clones. Every apple tree has its own unique DNA, but long ago, someone took a cutting of a branch that grew particularly marketable apples. Apple growers take cuttings from the original branch and graft the new branches onto trees. Hence, most apples at the store are genetically identical. Yet, even here, unique individual vendors can differentiate themselves. This differentiation merits the differentiated vendor’s choice in identifying herself as such.
Whereas many apples on the market are the size of softballs, there are brands that sell apples that are almost uniformly smaller, the size of tennis balls. These brands include Jazz Apple and Envy Apples from New Zealand. These are also often sweeter than other brands’. Any shopper who wants these smaller, sweeter apples needs a quick and ready method for identifying them. That is the purpose served by the respective trademarks of Jazz Apple and Envy Apples. All of this is IP.
Brand names are written, but often in a stylized format that gives them a picturesque quality. A logo is usually more of a picture than it is a written character, but the logo is not art enjoyed for art’s sake, as the Mona Lisa would be. Although the Starbucks logo is a picture, its main purpose is not aesthetic as much as it is that the logo’s placement on Starbucks products gets the chain’s patrons to form a mental association between Starbucks and its products. Again, that associates the economic value with the team of entrepreneurs that produced it.
The brand name and logo of a firm are symbols developed for the precise purpose of identifying a specific entrepreneurial party with the value it created, but this system of identification is so vital that it has more generalized symbols as well. These generalized symbols are TM, ® (registered trademark), and ©. Licensed merchandise featuring Godzilla’s likeness, for instance, assign the ® directly to the right of Godzilla’s name, followed by the two sentences “Godzilla is a registered trademark of Toho Co., Ltd. All rights reserved.” These symbols are no less essential to signaling important information to market participants than are the numeric figures indicating price drops and spikes or the debits and credits in a firm’s accounting ledgers.
It is therefore sad that too many libertarians who cite Mises’s discussion on price changes happen to overlook what amounts to an even more important form of market-related information. This information, documented in the identification of an economic value with its creator, is what enables the intra-industry competition in which these price changes happen. Suppose the price of apples climbs, whether due to an increase in marketplace demand or a decrease in supply. Firms J and E each look at that and consider becoming apple vendors. If they do so, they want to distinguish themselves, offering apples that no one else does. Suppose, like Jazz and Envy, these two other firms do offer sweeter apples. However, imagine a law passed that forbade trademarks and brands. Even if the apples from Firms J and E were sweeter than the competitors’, it would not be of advantage to them. An abolition of trademarks would discourage would-be vendors from entering this market to satisfy marketplace demand and bring the average price back down. And the same would happen if anyone could appropriate any other vendor’s identity, in this case appropriating a vendor’s trademarks.
Let us imagine two brands — Beth’s Restaurant and Malcolm’s Apparel. Beth’s Restaurant is a whole chain by the titular owner, specializing in a particular ethnic cuisine. Not only does the chain have a reputation for tasty food, but also holding its chefs and waiters to high standards of cleanliness. Inspectors can find no fault with its kitchens. Beth’s Restaurant has a gained a reputation for all this, and they are selling points that attract patrons. Malcolm’s Apparel has likewise earned a good reputation all its own. Not only are Malcolm’s designs eye-catching, but the garments are long-lasting, and those who wear this apparel come to notice that. Investments in these particular details are the result of the respective owners’ many choices to commit to such. The investments are about more than their respective dollar amounts. They are about the specific choices in effort and resources for which the monetary units are exchanged. Here, those specific investment choices refer to Beth’s concern about sanitation and Malcolm’s about durability. Those choices are part of the brand’s identity, and that identity is readily recognized in the trademark — that is, in the IP.
Now let us imagine that I decide to appropriate Beth’s and Malcolm’s brands against their authorization. I set up my own restaurants calling them “Beth’s Restaurant,” using her logo and having my “Beth’s Restaurant” signs be very accurate reproductions of hers. The interiors of my restaurant mimic her aesthetic. I even have my cooks use Beth’s recipes and serve the same ethnic cuisine.
There is but one crucial difference — I make no investment in cleanliness. When I notice employees using the restroom without washing their hands, I take no action against them. Mice scurry around openly and I ignore it. Eventually patrons get food poisoning. Aside from this consideration, it is difficult for casual diners to tell real outlets of Beth’s from those of my knockoff operation. Would-be patrons have heard vaguely of the poor sanitation at knockoff outlets. They decide the safest course is to avoid any restaurant calling itself Beth’s. For several months I made much more money than I otherwise would have. And it is on account of my copying Beth and using her trademarks. Beth is not so fortunate. Her sales plunge.
I do something similar with Malcolm’s brand. I sell my own apparel with his label, a label that closely reproduces his own. I am able to duplicate his aesthetic as well. At first glance, my garments seem just as elegant as Malcolm’s. There is, here as well, a great weakness that starts out as subtle: in places that are well-hidden, the stitching is of poor quality. I didn’t want to shell out the extra dollars on quality sewing that Malcolm did. The garments fall apart within months. As with Beth’s Restaurant, would-be customers learn of the knockoffs and start to avoid anything that claims to come from Malcolm. As earlier, for several months I make more money than I otherwise would have made. It is once again on account of my appropriating someone else’s brand. Predictably, the real brand suffers here as well.
Identifying the Designer With Her Investment Choices — Investments She Seeks to Recoup — Goes Beyond Knowing Merely the Total Dollar Value of Her Cost Inputs
Here I should make a special note about the fact that the trademark owner usually invests a much larger sum than the infringer does. Indeed, the infringer usually infringes on other’s IP for the purpose of cutting his own costs. Timothy Sandefur thus whacks at a straw man. He would have his readers believe that the defenders of IP are defending IP on a particular false premise. That false premise is that a firm making any investment of a large monetary sum in producing units of a particular design is sufficient to entitle that firm to ownership over that design. And, continues the straw man, the reason why an inventor rightfully owns his design, whereas a pirate does not, is that the pirate does not invest a comparable monetary sum. Then Sandefur points out that even IP infringers usually have to invest a lot of money into their own IP-infringing operations. Having rebutted the idea that only inventors invest money whereas pirates do not, Sandefur declares victory against IP defenders for having refuted a premise on which the validity of IP does not depend.
For that reason, Sandefur says that the bootlegger
Tom Palmer of the Cato Institute is among those who falsely accuse IP’s defenders of justifying intellectual property rights solely on some basis that the designer invested a lot of hard work and other cost inputs into her design. Palmer thereafter derides IP’s defenders for having what he dubs a “‘just deserts’ theory” of ownership.
Contradicting the assumption of Sandefur and Palmer and IP’s other detractors, the economics of supply-and-demand does not negate my point. The correctness of my point does not hinge on the idea that a good’s economic value is most directly influenced by the input costs incurred by the good’s supplier. Of course the economic value of a good is most directly influenced by the intersection of demand with supply. That applies to the designs within patents and copyrights themselves. There is a supply of such designs, and there is demand for them. They are bought and sold. None of this changes what I have pointed out.
The quantity and supply of practicable original designs is directly influenced by the fact that economically “scarce” resources must be inputted to produce any quantity or supply of these designs at all. True, this fact does not directly influence the economic value of the design. But because this fact directly influences the supply curve, the fact does indirectly influence the point where the supply curve and demand curve converge.
The same principle applies to the designs that we devise. Once a design is trademarked or copyrighted or patented, the market still puts it on trial. Most designs turn out to be duds, and hence units produced from those designs will likewise be duds. That is why no more than 2 percent of U.S. patents yield a profit for their owner. Conversely, a few designs were devised in such a manner that consumers’ concerns and demand were well-anticipated. Those designs are wise, and, hence, units produced from these wise designs happen to satisfy marketplace demand.
Notwithstanding the misreading by Palmer and Sandefur, the IP defender’s argument is not that the devotion of a lot of time and expense should necessarily be followed by some reward. The argument is that wise and rational choices lead to productive land improvements and productive designs. And the wealth that results from producing a net increase in economic value should go to the specific party whose specific choices originated that net increase. There thus must be a legal mechanism for identifying that party. That identification of ownership — be it in land improvement or a design — helps consumers identify the new economic value they seek with the party that originated that new economic value.
All Theft, Speaking Broadly and Unconventionally, Is Identity Theft; IP Theft Is Even Closer to the Conventional Understanding of ID Theft
I have previously argued that the economic value someone possesses is the same economic value that she has created. And I continued that because someone’s choices are part of her identity, to steal the economic value her choices produced is to steal part of her identity, her financial identity. Hence, I concluded that on a general level, every theft is a sort of identity theft. However, the argument is deeper than that. As intellectual property rights are a very specific documentation to identify someone’s valuable design with the financial choices of hers that produced it, theft of intellectual property comes even closer than other forms of theft in matching “identity theft” in the more conventional understanding of that term.
Identity theft is generally thought of as follows. Someone appropriates information that is properly used to identify you in commercial activity. Taking on your identity, the identity thief manipulates the parties that otherwise would be doing business with you. In so doing, the identity thief receives from those other parties the payments that those parties would otherwise be sending properly to you.
You normally work for your employer. The time and labor you put into your work is the economic value you create. When you exchange your time and labor for payments, you retain the economic value you created. It is now stored in the money that your debtors now owe to you, their creditor. Now suppose an identity thief impersonates you to those indebted to you. The theft of your identity takes place in moments besides the very ones in which the thief poses as you.
The ultimate goal of the identity theft is to steal the effects of your chosen actions. You chose to perform creative efforts for parties who are thus indebted to you. As stated earlier, those creative choices are part of your identity, as are the consequences of your creative choices. For someone to wrestle away from you the control you had over the effects of your choices is to wrestle away from you the choices themselves. Your choices are your identity. Thus, for someone to steal your choices is to steal parts of your life that are your identity. The identity theft is therefore not in the impersonation alone. The theft is in the very appropriation of the economic value in which you invested your identity when your choices produced it.
Should we say that the identity thief is a businessperson in your industry who is trying to engage in honest competition against you? Should we say that in impersonating you to your debtors, the identity thief is simply your intra-industry competitor trying to lure away your debtors so that they will make future contracts with him instead of those debtors making additional contracts with you in the future?
No, the identity thief is not engaging in any sort of intra-industry competition. Rather, the identity thief is mimicking you to benefit financially from the economic value produced from the creative choices in which you invested your identity. These are creative choices specific to you; choices made by you, not he. And the identity thief does this without having contributed any creative choices himself to help you create that economic value.
And that is exactly what I did in the aforementioned scenarios of me profiting more than I otherwise would have, on account of my appropriating the trademarks of Beth’s Restaurant and Malcolm’s Apparel.
I mimicked Beth and Malcolm to benefit financially from the economic value produced from the creative choices in which they invested their identities. I mean the reputations they earned. And I did this without having contributed any creative choices myself to help them create that economic value.
Yes, your financial identity refers to there being documentation of your economic choices. Your being identified in this manner allows for your economic effects, the wealth you created, to be attributed properly to their cause, you. Thus able to identify you properly, you can be sought and remunerated properly by those who benefit from the economic value you have created. That is the whole point in trademarks. Hence, your brand identity is part of your financial identity.
On the converse, for someone to appropriate some of your financial identity — identity theft in the more conventional understanding of the term — is for him to cut his own costs by shifting those costs onto you. And that is what happens when someone appropriates the brand identity into which you invested your creative choices, including your choices in using up scarce resources.
Deliberate infringement of someone else’s brand or other intellectual property is identity theft. This also applies to violating copyrights in the form of pirating someone’s artwork. And this applies even if the amount of money an infringer invests in equal to, or greater than, the amount of money invested by the designer from whom the infringer pilfers.
One PIRATI Against Another: Drawing InsPIRATIon Versus PIRATIng
We should dispel a misconception that confuses many laymen about copyrights and patents. It is a misconception that, convenient for Sandefur’s argument, goes conspicuously uncorrected in two of his blog posts on IPRs. Too many people are under the misapprehension that a copyright over a story claims exclusive ownership over its general premise or its basic plot. Likewise, many of these same people presume that to be awarded a patent is to claim exclusive ownership over the general idea of a whole product category, such as “paperclip.” According to the fable against IP, to have a patent is to be granted a government-enforced monopoly over an entire industry.
We can recall what Timothy Sandefur said about this. Using the term “business model” as his stand-in for “general idea,” Sandefur writes that it is sheer bullying for an IP holder to sue an infringer who copies her. As he puts it, “if a competitor sees that another person has implemented a successful business model, it does not harm anyone for the competitor to implement that model himself so as to more successfully [split infinitive] compete.”
From that passage, a layman would likely infer that copyright lawsuits commonly happen in this fashion. Mr. Kentolk conceives of a story taking place in the Middle Ages but with wizards, magic, and dragons. Miss Yaffrey reads Mr. Kentolk’s work and is entranced by it. It inspires her to write her own sword-and-sorcery epic in homage to Mr. Kentolk. She writes of her own characters with dissimilar names and dissimilar personality traits. She makes many specific choices unlike the protagonists of Mr. Kentolk’s tale. Yet Miss Yaffrey’s protagonists do share in the same spirit of chivalry and fair dealings. This enrages Mr. Kentolk, as his copyright was to ensure his government-enforced monopoly on this genre. Thanks to copyrights, Mr. Kentolk successfully sues Miss Yaffrey. That is how the narrative goes, according to the logic of propaganda against IP.
Now let us consider the truth. Copyrights do not forbid or even discourage artists from creating works of their own that are obviously inspired by the works of others. What copyrights do forbid is another party from financially profiting off of an exact duplicate of the artist’s work against the artist’s consent. Aside from both words having the six-letter sequence pirati in them, there is a thick line of demarcation between drawing inspiration from someone else’s design versus pirating it.
It is a common Hollywood practice to have two competing movies — both with a similar premise — coming out from different studios within months of one another. The year 2013 saw the release of Olympus Has Fallen and White House Down, both about terrorists taking over the White House. In 1997, there were both Volcano and Dante’s Peak. Both pics featured a geographic formation erupting lava and endangering human beings.
In August 1928, the author Philip Francis Nowlan came out with his novel Armageddon 2419 A.D. This work introduced Buck Rogers, a space-faring adventurer in the far-flung future. Four months later, Nowlan adapted this premise to a newspaper comic strip of the same title. Five years later, Alex Raymond introduced the comic strip Flash Gordon, which had mostly the same premise. The stories had different characters with different names. One big difference was that Buck Rogers began as a man in the twentieth century. Buck had entered suspended animation in a freak accident, only to awaken finding himself in the twenty-fifth century. Flash Gordon, by contrast, was born into his own era.
Alex Raymond being inspired by Philip Francis Nowlan is not the grounds for any successful copyright suit. By contrast, it would be copyright violation if, in 1928, someone made unauthorized copies of Armageddon 2419 A.D., duplicating the work’s prose exactly, and sold each unit at a price lower than what Nowlan and his publisher charged.
As for patents, it is not the case that your gaining a patent for your paperclip design grants you a government-enforced monopoly on the production of paperclips. Between the years 1867 and 1957, the U.S. Patent-and-Trademark Office issued 17 U.S. patents relating to paperclips. Every new paperclip patent arrived within an interval shorter than 17 years. That is, each of these patents was granted prior to the expiration of the previous paperclip patent. The reason is that a patent does not claim ownership over a general idea for a product category such as “paperclip.” Instead, enshrined in a patent is recognition of a party’s rightful ownership over the specifics of its design.
A utility patent protects the design with respect to its main functionality and operation. By contrast, a design patent protects the design with respect to its aesthetic qualities and how every component of the device contributes to an integrated whole. For more information on the distinction between utility patents and design patents, and on how neither is a government-enforced monopoly on a general product category, go here. The reason that so many patents were granted on the same type of device is that a patent has to be more specific than “object that temporarily fastens papers together without making any punctures in the sheets.” The patents themselves were varied in the shape of the fastener, its exact size, and the material with which it was to be made.
Nor is there validity to another myth. This other myth is that multiple parties, each unknown to the others, each independently arrive at the exact same patentable design at the exact same time. So goes the myth, only one of these parties is able to win the patent. The result of this, we are told, is that one victorious party shall now exercise patent law to ban the other independent parties from producing or licensing units from their own unique design. The reality is that multiple parties, each unknown to the others, can hit upon the same general idea within relatively short times from one another. The different parties’ designs are not exactly alike. There are still legal disputes between these parties insofar as there is an “overlap” where functional attributes of the design are very similar.
That is what happened when Robert Noyce of Fairchild Semiconductor and Jack Kilby of Texas Instruments each arrived at the same general idea for the Integrated Circuit. Kilby’s patent focused on the body of the device itself, whereas Noyce’s patent put more emphasis on the arrangement in which the Integrated Circuit was to be wired. Insofar as separate parties’ patents are similar, they can do what Fairchild and Texas Instruments did. Their mutual solution is a common practice. They pooled their patents jointly in a single trust. Such situations do not discredit patents. Nor do such situations exonerate any cribber who would duplicate the design of either Noyce or Kilby while refusing to contribute any financing of the R-and-D that enabled Noyce and Kilby to come upon the breakthroughs that they did.
Your patent on the paperclip design you originated is an acknowledgment of your ownership over your choices to invest your time, efforts, and scarce resources as you did. That is not a government-enforced monopoly on the production of paperclips. Your patent monopolizes nothing more than the specific original details explained and diagrammed in your patent. This is just as your deed over your homestead does not monopolize all real estate but nothing more than the specific plot you improved. This is just as Beth trademarking her restaurant is not a government-enforced monopoly on eateries that serve cuisine of the same ethnicity. It is just as Malcolm trademarking his clothing styles is not a government-enforced monopoly on garments.
Philip Francis Nowlan’s copyright is not a government-enforced monopoly on the space-opera genre of fiction. Nor is the copyright of our fictitious filmmaker Justine a government-enforced monopoly on movies about haunted houses. The copyrights of these respective artists are on the respective artworks that the artist directly brought into being.
To pay someone homage is to observe general principles in someone else’s work and then apply them in producing one’s original work that still displays its own unique spin. By contrast, to infringe on a trademark, copyright, or patent is to appropriate someone’s original work directly, all the while refraining from reimbursing the designer or choosing to partake in any comparable investment in innovation.
Thus, we observe the fallacy in conflating IP infringement with merely applying the lessons one has learned from someone else’s general “business model.” To observe someone else’s business model and apply its grand lessons is to do the following.
I envy that my cousin is much more successful in his career than I am. I decide to look into what he does differently from me that puts him at an advantage. His “business model” is the example that he sets for me and everyone else. I notice that he does a lot more networking than I do, which puts him into contact with more people who can alert him to clients who need his services. I reach work exactly at the time I am supposed to start, and I leave exactly when my shift ends. By contrast, my cousin is the first at the office and the last to leave. I decide that to increase my likelihood of professional success, I will try to be more like my cousin in these respects.
Such is a far cry from me simply impersonating my cousin at the bank and withdrawing from his savings account. Likewise, Alex Raymond can pay homage to Philip Francis Nowlan in his own creations. That is not the same as someone printing and selling bootleg copies of Nowlan’s work and sharing none of the proceeds with Nowlan and his publisher.
Your having possession of the trademark, copyright, or patent on the productive design you originated is the law’s proper identification of the association between (1) the productive design’s economic value and (2) the person whose choices in time, efforts, and investments brought that new value into being. That is just as a deed identifies a homestead’s economic value with the settler whose choices in time, efforts, and investments created new value from that plot of land. A patent, as with a deed on an improved plot of land, identifies the new value with its creator so that, in legal matters, she will have control over the value that resulted from her choices. This identification — and the subsequently respected legal control that the value’s creator is to exercise over her creation — safeguards the ability of the value’s creator to experience the logical consequences of such choices.
Thus, we find that infringement on someone’s copyright of her artwork is similar in principle to what happened in the aforementioned scenario of my setting out to infringe on the trademarks of Beth’s Restaurant and Malcolm’s Apparel.
Is IP a Form of Protectionism to Force Customers to Make Contracts With the IP Holder in the Future? Or Did the Customers Already Contract With the IP Holder Upon Accessing the IP?
Let us revisit the two scenarios in which people could have bootlegged Justine’s low-budget independent movie. The first involved the sort of situation from the 1980s and early 1990s, in which bootleggers record unauthorized copies of Justine’s movie and sell them at prices much lower than those of the official copies. Is such a bootlegger an honest intra-industry “competitor” to Justine in the vending of her movie? Is the bootlegger’s appropriation of her IP simply an effort to “implement” her “business model” out of a desire to engage in intra-industry “competition” with her?
In the second scenario, from the two first two decades of the twenty-first century, people could produce unauthorized digital copies of the movie and torrent them over file-sharing services such as the Pirate Bay.
In the former instance, no, anyone who genuinely wanted to learn from Justine’s business model and apply it himself would watch her movie and then produce his own movie that pays homage to hers. By contrast, what the videotape bootlegger takes from her is not a lesson on how to “implement” her “business model,” but her product directly, the productive design resulting from the committed investments, much of her identity. That is just as someone impersonating you to your debtors is an act that directly takes from you the economic value that resulted from choices of yours that were committed investments, much of your identity. There is financial gain in this for the videotape bootlegger, at least in the short run.
And this is what happens in the instance where people swap unauthorized digital copies of Justine’s movie, over the World Wide Web, through a file-sharing service. Recall that Justine made the difficult and committed choice to invest, purchase, use up, depreciate, and expend scarce resources — tangible and otherwise — in order to bring her movie into existence. These choices imposed enormous costs upon her. These choices, and with them the control of the economic value that is the product of these choices, are to be regarded rightfully as part of her identity.
When commercializing any units produced from her IP, or making available any access to her artwork at all, every IP holder does so on the implicit contractual condition that those who access this IP will meet her at the price for which she will grant that access. Payments to Justine will help cover her expenses. This is a defraying of expenses without which Justine will be in no position to produce any further original designs in the future. True, those who access Justine’s artwork through unauthorized digital copies might not be selling anything. But by accessing the art while reneging on any fulfillment of the condition on which that access was granted, these consumers of Justine’s work are benefiting financially. In taking Justine’s service and failing to deliver the payments they owe for it, the people consuming these unauthorized downloads are trying to cut their own costs by imposing them on Justine. The principle would be the same if you performed a service I hired you to provide me and then I conveniently “forgot” to turn over the money I owe you.
At this juncture, we can revisit the cliché comparison, consistent with Sandefur’s verbiage, of IP enforcement with protectionism. Again, in talking as if (1) filmmaker Justine and (2) those who bootleg her movie are equally legitimate vendors in intra-industry competition for the same customers, Sandefur frames the situation in such a manner that an incautious reader would interpret it as follows. Justine wants her potential customers to contract with her, but instead these customers are contracting with her intra-industry competition, the bootleggers, as those competitors offer a better deal with their own, similar merchandise.
This, we are to believe, is comparable to an incompetent American automaker pining for American consumers to contract with it as these American consumers instead purchased much-more-attractive Japanese imports. When the managers of the American automaker lobby the U.S. federal government to impose tariffs or import quotas against the Japanese cars, it is the American automaker being a protectionist would-be monopolist employing government-enforced action to impede on the ability to potential customers to contract with the American automaker’s intra-industry competitors. This manipulates the potential customers into having to resort to entering a contract with the American automaker instead. Entering into contracts with the American automaker is something American consumers would not have done if not for the tariffs. After all, the American automaker invested a lot of fixed costs in establishing its operations. The absence of tariffs or quotas against the foreign competitors would render it difficult for the American automaker to recoup its investment.
It is in principle the same, we are to think, when Justine seeks enforcement of her copyright. Supposedly, Justine seeking governmental protection of her work against bootleggers is her being a protectionist would-be monopolist employing government-enforced action to impede on the ability of potential customers to contract with her intra-industry competition, the parties that are making available pirated copies of her movie. Enforcement of Justine’s copyright, ostensibly, manipulates potential customers into having to resort to entering a contract directly with Justine instead. Entering directly into contracts with Justine is something these movie viewers otherwise would not have done. After all, Justine invested a lot in the production in her movie. The absence of copyright protection would render it difficult for Justine to recoup her investment.
Sandefur misleads his readers in depicting this as a matter of Justine invoking her copyright to pressure her intended audience into contracting with her instead of with what Sandefur calls her intra-industry “competitors.” Sandefur’s approach reflects a misunderstanding of when exactly the contract is made. It is not that in suing bootleggers and websites like the Pirate Bay that facilitate pirating of her movie, Justine is using the State to manipulate her desired customers into forming contracts with her in the future. It is that when they accessed Justine’s artwork, those customers had already implicitly entered into their contract with her.
When a designer puts her design on the market, the default is for her to do so on the implicit contractual understanding I verbalized at the start of this essay. The copyright © symbol attached to her work is not the source of this implicit contractual agreement, but is the explicit acknowledgment of the implicit contractual terms that were offered beforehand.
Among the implicit contractual terms is that when the designer makes her design accessible to the market, those who access it do so on the condition that they pay the designer the price she sets for that access, thereby helping her cover her costs. This is the same as a store making an item available to shoppers on the agreement that the shopper pay for the item, thereby covering the store’s costs.
By now, it should be apparent that when people make unauthorized downloads of Justine’s movie, they are not accessing some intra-industry “competitor’s” merchandise that just happens to be similar to Justine’s. The unauthorized download is the nonconsensual accessing — and thus appropriation — of Justine’s work directly. Should I facilitate your ability to access a pirated copy of Justine’s movie, I am not some intra-industry competitor to Justine, and I am not peddling to you some substitute that is merely similar to Justine’s product. I am instead usurping control of Justine’s own product directly and against her consent.
The same is true of firms that sell units that pirate an inventor’s patent. Those firms are not “competitors” to the inventor selling merchandise that is merely similar to the inventor’s. This is not Pepsi selling a beverage that is similar to Coca-Cola but sweeter. No, the infringing firms are accessing the inventor’s effort directly and flaking out on the payment that is agreed-on implicitly in the accessing.
I will now state that discrepancy more simply:
If the absence of tariffs is the main reason why Chrysler goes bankrupt, it is because motorists rebuffed Chrysler’s product and therefore didn’t obligate themselves to pay Chrysler anything.
Conversely, if the absence of copyright enforcement is the main reason filmmaker Justine goes bankrupt, it is because movie fans used Justine’s product and then still stiffed her on the bill.
A Patent As a Document For Identifying a Person With Her Productive Actions
When you deal with financial institutions, they often want documents officially confirming that you are who you say you are, thereby identifying you with the deposited earnings that are the product of your creative choices. Also related to money and career, there are type of awards that identify you with the product of your actions. Your university degree is supposed to identify you with your training and diligent study of the discipline in which you majored. A patent is a similarly official document identifying you with the particular, detailed, diagrammed, and productive original design that is the product of your creative choices. A patent thus serves to confirm the productive choices in research, development, experimentation, and engineering that you have exercised. The patent is in a category that is at least similar to those of the other aforementioned documents of identification. As with a brand or trademark, so does a patent identify a specific economic value with the creative party whose choices produced that very value.
With acknowledgment of your IP comes documentation recognizing your work as the product of your creative choices, those choices being unalienable from your identity. IP is an institutional method for documenting and protecting your identity.
That understood, one can cite a case study that more closely resembles IP infringement than does any intra-industry competition.
An identity thief withdraws money from your accounts in order to co-opt the economic value you created as a worker. Parties are indebted to you, but the identity thief manipulates these debtors into paying him instead. The identity thief redirects to himself the money that you earned. He does this by blurring the distinction between his own work and yours.
An infringer on your intellectual property attempts to co-opt the economic value you created as a designer. Parties that willfully benefit from your design are parties that willingly chose to be customers indebted to you, but by selling your work as if it his own to sell, the infringer manipulates these debtors into paying him instead. The infringer redirects to himself the money that you earned. He does this by blurring the distinction between his own work and yours.
In short, upon your dedicating your choices to producing a practicable original design, the parties that benefit from making direct use of your original design owe it to you that they follow the terms you set for such use of your design. That includes the payment for which you ask. For me to usurp control of your design directly, and then for me to benefit financially by distributing your design to other users, is for me to usurp control over the choices and work of the actual party to whom those users owe their payments.
There is no intra-industry competition here. The matter is simpler and worse than that. Trademarks, copyrights, and patents are documentations of someone’s financial identity. IP theft is ID theft.
That is a misunderstanding among IP’s libertarian detractors that must be cleared up, among others.
How IP Infringement Initiates the Use of Force
Libertarian writers are often confused on how to explain the manner in which indirect uses of force — such as contract breach and fraud — count as initiations of the use of physical force that violate a person’s rights. And these libertarians are usually in the dark — too often seemingly by choice — about how physical force is applied in IP infringement. Hence, Rothbardian apologetics for IP infringement often goes as follows:
Intellectual historian and inventor John P. McCaskey provides a good explanation of the damage done by indirect uses of force. As noted in the Locke-Smith argument, you need to be able to control objects outside of your own body in order to sustain yourself and be free to live. Hence, for someone else to come along and physically manipulate your possessions, against your consent, is an initiation of the use of force that harms you. The physical force involved is in that other person’s physical manipulation of your possessions.
When someone else in debt to you, the economic value that the debtor owes to you is already your rightful property. This principle applies even prior to the payment’s due date. It is simply that, per your contractual agreement, the debtor is yet to deliver your own rightful property to you.
Now McCaskey has us consider contract breaches. You agree to sell me your used car. It is on the agreement that I make the down payment and then pay off the rest in monthly installments. The down payment goes through and you hand me the key to your vehicle. Afterward, I don’t make any more payments. You relinquished control of your possession only on the condition that your terms be met. I have declined to meet your terms. Hence, I have taken control of your possession against your consent. As McCaskey notes, this is a situation in which I have manipulated you into using force against yourself. The physical force used against you was the very act in which you, having been manipulated by me, handed me the car’s key.
Had I planned, before the fact, never to complete my payments to you, then this is a matter worse than contract breach. It is fraud. Fraud is in the act of manipulating people to ruin contracts. Here, I manipulated you into a contract I had every intention of reneging on.
Consider Chester, who is a victim of identity theft in its conventional meaning. Identity theft disrupts the execution of contracts between the victim and those indebted to him. For the debtors to fulfill their contractual obligation to Chester, they must complete their payments to him. By posing as him, the conventional identity-thief dupes the debtors into paying him instead of Chester. The debtors thus fail to honor their contract with Chester. And, in the process, the conventional identity-thief gains financially.
What if an inventor produces a new design for an appliance, and then I rip off the inventor, manufacturing units directly from his design? And I refuse to remunerate the inventor. Perhaps customers purchase the units of my knockoffs without knowing that patent infringement is involved. Because they make use of the inventor’s design, those customers are actually indebted to the inventor. In appropriating the inventor’s design, I appropriate the inventor’s financial identity. By doing so, I dupe those customers, so indebted to the inventor, into paying me instead of him. The debtors thus fail to honor their contract with the inventor. And, in the process, I gain financially.
In trying to apply McCaskey’s interpretation to this particular issue, I think I can speak on where the physical force takes place.
As you do in selling your used car, filmmaker Justine puts her product on the market on the contractual condition that a party that uses it shall meet her terms. The pirate accesses Justine’s product and refuses to satisfy the condition of access. All the physical actions that go into this — the typing of computer keys, the movement of electrons — are physical force that does damage to Justine.
Physical force also does damage to an innocent party when customers unwittingly purchase units ripped off from an uncompensated designer. We know that the customers are indebted to the inventor. We also know that the payments that the customers owe the inventor are instead diverted to the infringer. The force is in the customers being manipulated into transferring this money to the infringer instead of to the inventor.
IP infringement thus has a stronger likeness to conventional ID theft than the other misdeeds I mentioned. Still, the implications go even wider than that. Not only is all theft a form of ID theft, but all theft is ultimately a form of IP theft.
Conclusion: What Intellectual Property Is in Relation to Every Other Form of Rightful Property
Note my point from the essay’s beginning. I wrote that even in earl human history, economic value has always come from the application of the human mind, rather than every unit of natural resource already possessing an obvious economic value. That is why, although the homesteader did not create the plot on which she settled, it was through her choices in improving the land that she created the plot’s economic value, thereby rendering her the rightful owner. The deed, like a patent, is a document of identification, identifying an economic value with the person who, through choices that are also part of her identity, brought that economic value into being. And this Locke-Smith principle, wherein it is the application of practical reasoning that converts wilderness into useful economic units, is behind most economic value that exists today.
Here we can revisit Ayn Rand having noted, “Existence is Identity, Consciousness is Identification.” Continuing our revisit, there is a specific instance of employing one’s consciousness in rationally identifying something importance in existence. That is the institution of private property — especially the intellectual sort — in identifying the relationship between (1) the economic value that is now the property and (2) the person whose creative choices, the person whose identity, brought forth that economic value. We start out broadly, “Existence is Identity, Consciousness is Identification.” We then apply that principle to a context that is more specific: consciousness of rightful Ownership is Identification. It is dentification of someone with wealth his implemented reasoning produced from a wilderness where it had not earlier been.
I concede there are some instances of some natural resources already possessing economic value as a default. I address that issue over here. But, for the most part, most economic value comes from market participants applying scientific knowledge to convert objects from the wilderness into an environment more suited to human habitation. The Indus River Valley civilization and ancient Egypt pioneered in branding. The ancient Greek architect Hippodamus of Miletus proposed a legal institution that can be called an early conception of patenting. Aristotle alluded to this though he did not entirely approve. The writings of Athenaeus suggest to modern scholars that one ancient Greek city-state implemented something like this. And as these peoples developed trademarks, jurist William Blackstone also noted that the ancient Romans likewise developed a precursor to copyright recognition. Sadly, devaluing much of the achievements of antiquity, the Dark Ages devalued intellectual property. Then, since the Renaissance era, modern patents have emerged to protect very specific, detailed, and rare formulae on how to convert harsh wilderness into economic value. Ultimately, all nonviolent production of economic value, from the Stone Age, came from at least a generalized version of this approach. Insofar as people could be free to do so, all this wealth-creation required free intellectual efforts.
To recall what I wrote earlier about the homesteader’s improvement of land, even more imperative than the physical motions the homesteader undertakes to improve the land are the creative plans she chose to devise and which she had to check against the scientific laws of nature. Locke and Adam Smith presented the homesteader’s choices in improving the land as the most basic example of a particular principle. The principle is that when someone’s choices produce a net increase in economic value on the market, the default in assigning rightful ownership over the value is that the first claim on ownership over the value must go to the party whose choices created it. To apply that principle to designs in artwork, tools, industrial processes, plant varieties, and engineered life forms is to take this Locke-Smith principle to its logical conclusion.
The creation of economic value from one’s homestead, rightfully to be taken as one’s private property, was always the intellectual efforts in one’s choices, just as in the economic value in one’s patent. Like a specific innovative and productive original design to be patented, the improving of one’s land — even if on a more primitive level — was the rightful creation of property through the exercise of one’s intellect. In that more abstract respect, the homestead and all other human-made goods are a form of intellectual property at least as old as the first selectively and intelligently-bred livestock to be branded and the first metal wares that blacksmiths trademarked.
Concordant with all theft ultimately being ID theft, all theft is theft of intellectual property. That is so, as all rightful property is ultimately, at least on some broad level, a sort of intellectual property.
It is therefore tempting for me to ponder the reason why IP-hating Rothbardians are so insistent on the establishment of private property rights being about dispute resolution but not about the conversion of previously unhelpful wilderness into economic value. It apparently has to do with their not bothering to contemplate too much the role that is played by the free human mind in this matter. That is, they have not put enough of their property in thought to the property in thought.
Both the IP-hating Rothbardians and I agree that when people are squabbling over who gets to control which economic value that comes in a finite quantity, private property rights play an important role in the dispute resolution. But if we think of the property rights as being justified for the purpose of dispute resolution and not much else, then we care only that somebody owns and controls X; not who gets to do so or why. That approach ignores the crucial role of the initiative-taking human mind in producing economic value where it wasn’t before. Poverty is the default. I say:
When, in previous centuries, farmers found oil on their land, they were horrified. The glop ruined crops and no one knew of how the glop could be put to good use. It took scientists, engineers, inventors, and entrepreneurs to recognize petroleum as a versatile fuel source. Nor was it obvious to cavemen that petrified tree sap would be useful in telegraphs. Stirring in the Renaissance and coming to full force in the Industrial Revolution, this was the application of scientific discovery to finding previously-unknown uses for materials from the wild. And this produced a net increase in economic value even more consistently than was the homesteaders’ improvement over their land. The more we look at how the usefulness of the units we consume results from the units being produced according to specifications from specific clever designs, the more we see evidence for two considerations.
What too many Rothbardian libertarians have tragically chosen to overlook is how those practicable inventive designs, so instrumental in producing every other form of economic value recognized as private property, are far scarcer in quantity than all the units of products produced from those designs.
There is something even more essential to human flourishing, in enabling an individual to reap the logical consequences of her creative choices, than recognition of private ownership over units of goods produced from practicable designs. More important is the recognition of private ownership over those very same designs by their designer. What is (1) anyone’s ability to have abundant ownership in many economically valuable industrial units is, in the end, enabled by (2) a designer’s ability to own, and thereby profit from, the very design that her private choices produced, the very design from which those industrial units were assembled. The former is dependent on the latter.
Intellectual property provides to us the other forms of property. To understand this is to understand the central role that the active use of one’s free mind plays in producing all the wealth we enjoy.
I am not alone in pondering this. Anticipating the Rothbardian assertion that anything intangible should not be considered wealth or private property, Jean-Baptiste Say and his mentor Antoine-Louis-Claude Destutt de Tracy pointed out that the intangible designs of the entrepreneurial human mind — what Say called immaterial production — proved itself to be the foundation for the wealth that arose from industrialization. Say and Tracy thus applied the Locke-Smith Principle farther than even the principle’s two namesakes did.
Say starts off by pointing out that “the mass of matter, of which this globe consists,” is not “capable of increase or diminution.” This is for the reason that entrepreneurial humans “neither create nor destroy a single atom.” Thus, what make the difference in enriching human beings beyond Stone-Age subsistence, Say realizes, are, first, the rational mind’s understanding of nature, and, second, the rational person’s practical application of that comprehension: “What is the whole of our industry, but the employment of the laws of nature? It is by obeying nature, says [Sir Francis] Bacon, that we learn to command her.”
Rather than produce a net increase in matter in the universe, what entrepreneurial creativity does is apply practical original designs to “re-produce existing materials under another form, which may give them a utility they did not before possess, or merely enlarge one they may have before presented.” The entrepreneurial implementation of practical original designs, then, “is a creation, not of matter, but of utility; and this I call production of wealth” (all of the emphases were Say’s).
Antoine-Louis-Claude Destutt de Tracy was cognizant of this as well:
These intangible designs, so appreciated by Say, are codified in patents. On account of this, despite his falling prey to several fallacies I debunked in the above essay, Say acknowledges that patents are something “no one can reasonably object to...” In the end, patents are something from which consumers in particular and human beings in general “derive prodigious advantage.”
It is therefore ironic that libertarian anarchy, in the tradition of Rothbard and Childs and Konkin and in opposition to intellectual property, is thought to be associated with individualism. There is an internal contradiction in advocating that everything be privately owned, while failing to admit that anything that can be rightfully owned was made into an own-able value by the same volitional intellectual efforts of individuals, the efforts that go into the unique and practicable designs enshrined in IP. Any wealth to own that goes beyond Stone Age subsistence owes its existence to the specific, practical, and costly plans and instructions detailed in patents, the plans and instructions produced by the choices of dedicated individuals.
Libertarians seem to grasp that there is no ownership without an owner. But, more than that, there are no improved models for tangible units to own if not for both (a) the inventor who produced those units’ improved design and (b) the inventor’s ability to secure the improved design that his choices brought forth. Any property, especially intellectual property, must go by default to the individual whose free choices produced it.
Much of what I am arguing, I think has not been verbalized or phrased adequately enough throughout history. That is the very reason why I have written this essay. However, I think that since ancient times, there have been people who have understood parts of it on some implicit level. For that implicit reason, ancient peoples in such places as Egypt and Rome took significant actions hinting at their having some understanding of fundamental aspects to it.
As an institution that is supposed to be helpful in safeguarding you against theft, a document of rightful ownership is a document of identification. It is an identification in several important respects. The deed to your homestead, for instance, is such a document for identification. Consistent with what I have been saying, the deed identifies you with the property you control because it identifies the economic value with its creator.
A Form of IP Older Than Patents and Copyrights That Is a Method for Identification of a Person With the Economic Value She Created
Sadly, legal documents such as deeds are notoriously wordy, filled with phraseology that is difficult for most citizens to penetrate. Hence, human beings have long needed to use symbols, or a shorthand, to ease comprehension over the documents’ meaning. These symbols are identifying marks that are understood more easily and readily than any lengthy document. These symbols, which are associated with pictograms and writing, are conventionally regarded as the oldest form of IPR recognition, though, as I shall explain at this essay’s conclusion, there might be an older form of IP still.
But these, the earliest written symbolic notations of intellectual property, are an institution pertaining to intellectual property that Rothbardians normally overlook. In diatribes that purport to expose the invalidity of intellectual property rights per se, Rothbardians almost always cite only patents and copyrights. They miss the newest type of IPR, which are plant variety protections — a horticulturalist’s ownership over the sexually bred cultivar she produced. And they also miss the older type that is almost directly associated with written language.
I am speaking of trademarks, which are more colloquially called “brands.” The latter term comes from the literal practice of branding. Ranchers had their names carved into a branding iron and used it on the livestock so that anyone coming upon a live cow could look at the brand and identify it as the property of a particular rancher. It makes sense; cattle-ranching requires the use of one’s mind just as drawing up plans for one’s homestead does. Ranchers have long used their minds in the selective breeding of cattle to possess the phenotypes most suitable for their commercial purposes. In selectively-bred cattle being identified with their owner, the owner is properly recognized throughout the community as the specific creator of this particular form of wealth. Branding goes at least as far back as the Indus River Valley and ancient Egypt in 2700 BCE.
What are more specifically known as trademarks date at least as early as ancient Rome. There, customers and clients noticed that some blacksmiths made choices that demonstrated more competence and care than others. As blacksmiths competed against one another, customers and clients needed a method to identify a blacksmith who was remarkably consistent in high-quality services resulting from the blacksmith’s wise choices. That blacksmith identified himself — specifically, his wise choices — with the wares he produced by placing his trademark on those wares. Upon gradually coming out of the overall economic stagnation of the early Middle Ages, which were indeed dark, European governments began to codify into law the formal recognition of such trademarks in the 1200s. The timing here was not accidental. It was, by relation, the very same time period when, finally studying Aristotle as in Antiquity, European scholastics encouraged and participated in the trend of Westerners reembracing practical reason. The formal recognition of trademarks was just one particular in this re-embracing of practical reason that helped the West transition from the high Middle Ages to the Renaissance and then the Scientific Revolution, Age of Enlightenment, and Industrial Revolution.
The identification and uniqueness acknowledged in trademarks is found even in markets where at first glance all the units, no matter the vendor, seem identical. Most apples on the market are clones. Every apple tree has its own unique DNA, but long ago, someone took a cutting of a branch that grew particularly marketable apples. Apple growers take cuttings from the original branch and graft the new branches onto trees. Hence, most apples at the store are genetically identical. Yet, even here, unique individual vendors can differentiate themselves. This differentiation merits the differentiated vendor’s choice in identifying herself as such.
Whereas many apples on the market are the size of softballs, there are brands that sell apples that are almost uniformly smaller, the size of tennis balls. These brands include Jazz Apple and Envy Apples from New Zealand. These are also often sweeter than other brands’. Any shopper who wants these smaller, sweeter apples needs a quick and ready method for identifying them. That is the purpose served by the respective trademarks of Jazz Apple and Envy Apples. All of this is IP.
Brand names are written, but often in a stylized format that gives them a picturesque quality. A logo is usually more of a picture than it is a written character, but the logo is not art enjoyed for art’s sake, as the Mona Lisa would be. Although the Starbucks logo is a picture, its main purpose is not aesthetic as much as it is that the logo’s placement on Starbucks products gets the chain’s patrons to form a mental association between Starbucks and its products. Again, that associates the economic value with the team of entrepreneurs that produced it.
The brand name and logo of a firm are symbols developed for the precise purpose of identifying a specific entrepreneurial party with the value it created, but this system of identification is so vital that it has more generalized symbols as well. These generalized symbols are TM, ® (registered trademark), and ©. Licensed merchandise featuring Godzilla’s likeness, for instance, assign the ® directly to the right of Godzilla’s name, followed by the two sentences “Godzilla is a registered trademark of Toho Co., Ltd. All rights reserved.” These symbols are no less essential to signaling important information to market participants than are the numeric figures indicating price drops and spikes or the debits and credits in a firm’s accounting ledgers.
It is therefore sad that too many libertarians who cite Mises’s discussion on price changes happen to overlook what amounts to an even more important form of market-related information. This information, documented in the identification of an economic value with its creator, is what enables the intra-industry competition in which these price changes happen. Suppose the price of apples climbs, whether due to an increase in marketplace demand or a decrease in supply. Firms J and E each look at that and consider becoming apple vendors. If they do so, they want to distinguish themselves, offering apples that no one else does. Suppose, like Jazz and Envy, these two other firms do offer sweeter apples. However, imagine a law passed that forbade trademarks and brands. Even if the apples from Firms J and E were sweeter than the competitors’, it would not be of advantage to them. An abolition of trademarks would discourage would-be vendors from entering this market to satisfy marketplace demand and bring the average price back down. And the same would happen if anyone could appropriate any other vendor’s identity, in this case appropriating a vendor’s trademarks.
Let us imagine two brands — Beth’s Restaurant and Malcolm’s Apparel. Beth’s Restaurant is a whole chain by the titular owner, specializing in a particular ethnic cuisine. Not only does the chain have a reputation for tasty food, but also holding its chefs and waiters to high standards of cleanliness. Inspectors can find no fault with its kitchens. Beth’s Restaurant has a gained a reputation for all this, and they are selling points that attract patrons. Malcolm’s Apparel has likewise earned a good reputation all its own. Not only are Malcolm’s designs eye-catching, but the garments are long-lasting, and those who wear this apparel come to notice that. Investments in these particular details are the result of the respective owners’ many choices to commit to such. The investments are about more than their respective dollar amounts. They are about the specific choices in effort and resources for which the monetary units are exchanged. Here, those specific investment choices refer to Beth’s concern about sanitation and Malcolm’s about durability. Those choices are part of the brand’s identity, and that identity is readily recognized in the trademark — that is, in the IP.
Now let us imagine that I decide to appropriate Beth’s and Malcolm’s brands against their authorization. I set up my own restaurants calling them “Beth’s Restaurant,” using her logo and having my “Beth’s Restaurant” signs be very accurate reproductions of hers. The interiors of my restaurant mimic her aesthetic. I even have my cooks use Beth’s recipes and serve the same ethnic cuisine.
There is but one crucial difference — I make no investment in cleanliness. When I notice employees using the restroom without washing their hands, I take no action against them. Mice scurry around openly and I ignore it. Eventually patrons get food poisoning. Aside from this consideration, it is difficult for casual diners to tell real outlets of Beth’s from those of my knockoff operation. Would-be patrons have heard vaguely of the poor sanitation at knockoff outlets. They decide the safest course is to avoid any restaurant calling itself Beth’s. For several months I made much more money than I otherwise would have. And it is on account of my copying Beth and using her trademarks. Beth is not so fortunate. Her sales plunge.
I do something similar with Malcolm’s brand. I sell my own apparel with his label, a label that closely reproduces his own. I am able to duplicate his aesthetic as well. At first glance, my garments seem just as elegant as Malcolm’s. There is, here as well, a great weakness that starts out as subtle: in places that are well-hidden, the stitching is of poor quality. I didn’t want to shell out the extra dollars on quality sewing that Malcolm did. The garments fall apart within months. As with Beth’s Restaurant, would-be customers learn of the knockoffs and start to avoid anything that claims to come from Malcolm. As earlier, for several months I make more money than I otherwise would have made. It is once again on account of my appropriating someone else’s brand. Predictably, the real brand suffers here as well.
Identifying the Designer With Her Investment Choices — Investments She Seeks to Recoup — Goes Beyond Knowing Merely the Total Dollar Value of Her Cost Inputs
Here I should make a special note about the fact that the trademark owner usually invests a much larger sum than the infringer does. Indeed, the infringer usually infringes on other’s IP for the purpose of cutting his own costs. Timothy Sandefur thus whacks at a straw man. He would have his readers believe that the defenders of IP are defending IP on a particular false premise. That false premise is that a firm making any investment of a large monetary sum in producing units of a particular design is sufficient to entitle that firm to ownership over that design. And, continues the straw man, the reason why an inventor rightfully owns his design, whereas a pirate does not, is that the pirate does not invest a comparable monetary sum. Then Sandefur points out that even IP infringers usually have to invest a lot of money into their own IP-infringing operations. Having rebutted the idea that only inventors invest money whereas pirates do not, Sandefur declares victory against IP defenders for having refuted a premise on which the validity of IP does not depend.
For that reason, Sandefur says that the bootlegger
is also taking the economic risk in this circumstance, and if his business failed, he certainly would have no right to sue the inventor for coming up with an unsuccessful idea. So it should not work the other way around.Sandefur is here implying an accusation that the enemies of IP frequently level against IP’s defenders. I have addressed that matter before, here. Sandefur’s implication is that a defense of IP relies upon a Labor Theory of Economic Value, one supported by David Ricardo but most famously popularized by Karl Marx. The notion is that the worth of any economic value is most directly proportional to the amount of labor and other inputs invested in its production. In reality, an economic value’s worth is most directly influenced by the point where the supply of that value intersects with marketplace demand for that value.
Tom Palmer of the Cato Institute is among those who falsely accuse IP’s defenders of justifying intellectual property rights solely on some basis that the designer invested a lot of hard work and other cost inputs into her design. Palmer thereafter derides IP’s defenders for having what he dubs a “‘just deserts’ theory” of ownership.
Contradicting the assumption of Sandefur and Palmer and IP’s other detractors, the economics of supply-and-demand does not negate my point. The correctness of my point does not hinge on the idea that a good’s economic value is most directly influenced by the input costs incurred by the good’s supplier. Of course the economic value of a good is most directly influenced by the intersection of demand with supply. That applies to the designs within patents and copyrights themselves. There is a supply of such designs, and there is demand for them. They are bought and sold. None of this changes what I have pointed out.
The quantity and supply of practicable original designs is directly influenced by the fact that economically “scarce” resources must be inputted to produce any quantity or supply of these designs at all. True, this fact does not directly influence the economic value of the design. But because this fact directly influences the supply curve, the fact does indirectly influence the point where the supply curve and demand curve converge.
The same principle applies to the designs that we devise. Once a design is trademarked or copyrighted or patented, the market still puts it on trial. Most designs turn out to be duds, and hence units produced from those designs will likewise be duds. That is why no more than 2 percent of U.S. patents yield a profit for their owner. Conversely, a few designs were devised in such a manner that consumers’ concerns and demand were well-anticipated. Those designs are wise, and, hence, units produced from these wise designs happen to satisfy marketplace demand.
Notwithstanding the misreading by Palmer and Sandefur, the IP defender’s argument is not that the devotion of a lot of time and expense should necessarily be followed by some reward. The argument is that wise and rational choices lead to productive land improvements and productive designs. And the wealth that results from producing a net increase in economic value should go to the specific party whose specific choices originated that net increase. There thus must be a legal mechanism for identifying that party. That identification of ownership — be it in land improvement or a design — helps consumers identify the new economic value they seek with the party that originated that new economic value.
All Theft, Speaking Broadly and Unconventionally, Is Identity Theft; IP Theft Is Even Closer to the Conventional Understanding of ID Theft
I have previously argued that the economic value someone possesses is the same economic value that she has created. And I continued that because someone’s choices are part of her identity, to steal the economic value her choices produced is to steal part of her identity, her financial identity. Hence, I concluded that on a general level, every theft is a sort of identity theft. However, the argument is deeper than that. As intellectual property rights are a very specific documentation to identify someone’s valuable design with the financial choices of hers that produced it, theft of intellectual property comes even closer than other forms of theft in matching “identity theft” in the more conventional understanding of that term.
Identity theft is generally thought of as follows. Someone appropriates information that is properly used to identify you in commercial activity. Taking on your identity, the identity thief manipulates the parties that otherwise would be doing business with you. In so doing, the identity thief receives from those other parties the payments that those parties would otherwise be sending properly to you.
You normally work for your employer. The time and labor you put into your work is the economic value you create. When you exchange your time and labor for payments, you retain the economic value you created. It is now stored in the money that your debtors now owe to you, their creditor. Now suppose an identity thief impersonates you to those indebted to you. The theft of your identity takes place in moments besides the very ones in which the thief poses as you.
The ultimate goal of the identity theft is to steal the effects of your chosen actions. You chose to perform creative efforts for parties who are thus indebted to you. As stated earlier, those creative choices are part of your identity, as are the consequences of your creative choices. For someone to wrestle away from you the control you had over the effects of your choices is to wrestle away from you the choices themselves. Your choices are your identity. Thus, for someone to steal your choices is to steal parts of your life that are your identity. The identity theft is therefore not in the impersonation alone. The theft is in the very appropriation of the economic value in which you invested your identity when your choices produced it.
Should we say that the identity thief is a businessperson in your industry who is trying to engage in honest competition against you? Should we say that in impersonating you to your debtors, the identity thief is simply your intra-industry competitor trying to lure away your debtors so that they will make future contracts with him instead of those debtors making additional contracts with you in the future?
No, the identity thief is not engaging in any sort of intra-industry competition. Rather, the identity thief is mimicking you to benefit financially from the economic value produced from the creative choices in which you invested your identity. These are creative choices specific to you; choices made by you, not he. And the identity thief does this without having contributed any creative choices himself to help you create that economic value.
And that is exactly what I did in the aforementioned scenarios of me profiting more than I otherwise would have, on account of my appropriating the trademarks of Beth’s Restaurant and Malcolm’s Apparel.
I mimicked Beth and Malcolm to benefit financially from the economic value produced from the creative choices in which they invested their identities. I mean the reputations they earned. And I did this without having contributed any creative choices myself to help them create that economic value.
Yes, your financial identity refers to there being documentation of your economic choices. Your being identified in this manner allows for your economic effects, the wealth you created, to be attributed properly to their cause, you. Thus able to identify you properly, you can be sought and remunerated properly by those who benefit from the economic value you have created. That is the whole point in trademarks. Hence, your brand identity is part of your financial identity.
On the converse, for someone to appropriate some of your financial identity — identity theft in the more conventional understanding of the term — is for him to cut his own costs by shifting those costs onto you. And that is what happens when someone appropriates the brand identity into which you invested your creative choices, including your choices in using up scarce resources.
Deliberate infringement of someone else’s brand or other intellectual property is identity theft. This also applies to violating copyrights in the form of pirating someone’s artwork. And this applies even if the amount of money an infringer invests in equal to, or greater than, the amount of money invested by the designer from whom the infringer pilfers.
One PIRATI Against Another: Drawing InsPIRATIon Versus PIRATIng
We should dispel a misconception that confuses many laymen about copyrights and patents. It is a misconception that, convenient for Sandefur’s argument, goes conspicuously uncorrected in two of his blog posts on IPRs. Too many people are under the misapprehension that a copyright over a story claims exclusive ownership over its general premise or its basic plot. Likewise, many of these same people presume that to be awarded a patent is to claim exclusive ownership over the general idea of a whole product category, such as “paperclip.” According to the fable against IP, to have a patent is to be granted a government-enforced monopoly over an entire industry.
We can recall what Timothy Sandefur said about this. Using the term “business model” as his stand-in for “general idea,” Sandefur writes that it is sheer bullying for an IP holder to sue an infringer who copies her. As he puts it, “if a competitor sees that another person has implemented a successful business model, it does not harm anyone for the competitor to implement that model himself so as to more successfully [split infinitive] compete.”
From that passage, a layman would likely infer that copyright lawsuits commonly happen in this fashion. Mr. Kentolk conceives of a story taking place in the Middle Ages but with wizards, magic, and dragons. Miss Yaffrey reads Mr. Kentolk’s work and is entranced by it. It inspires her to write her own sword-and-sorcery epic in homage to Mr. Kentolk. She writes of her own characters with dissimilar names and dissimilar personality traits. She makes many specific choices unlike the protagonists of Mr. Kentolk’s tale. Yet Miss Yaffrey’s protagonists do share in the same spirit of chivalry and fair dealings. This enrages Mr. Kentolk, as his copyright was to ensure his government-enforced monopoly on this genre. Thanks to copyrights, Mr. Kentolk successfully sues Miss Yaffrey. That is how the narrative goes, according to the logic of propaganda against IP.
Now let us consider the truth. Copyrights do not forbid or even discourage artists from creating works of their own that are obviously inspired by the works of others. What copyrights do forbid is another party from financially profiting off of an exact duplicate of the artist’s work against the artist’s consent. Aside from both words having the six-letter sequence pirati in them, there is a thick line of demarcation between drawing inspiration from someone else’s design versus pirating it.
It is a common Hollywood practice to have two competing movies — both with a similar premise — coming out from different studios within months of one another. The year 2013 saw the release of Olympus Has Fallen and White House Down, both about terrorists taking over the White House. In 1997, there were both Volcano and Dante’s Peak. Both pics featured a geographic formation erupting lava and endangering human beings.
In August 1928, the author Philip Francis Nowlan came out with his novel Armageddon 2419 A.D. This work introduced Buck Rogers, a space-faring adventurer in the far-flung future. Four months later, Nowlan adapted this premise to a newspaper comic strip of the same title. Five years later, Alex Raymond introduced the comic strip Flash Gordon, which had mostly the same premise. The stories had different characters with different names. One big difference was that Buck Rogers began as a man in the twentieth century. Buck had entered suspended animation in a freak accident, only to awaken finding himself in the twenty-fifth century. Flash Gordon, by contrast, was born into his own era.
Alex Raymond being inspired by Philip Francis Nowlan is not the grounds for any successful copyright suit. By contrast, it would be copyright violation if, in 1928, someone made unauthorized copies of Armageddon 2419 A.D., duplicating the work’s prose exactly, and sold each unit at a price lower than what Nowlan and his publisher charged.
As for patents, it is not the case that your gaining a patent for your paperclip design grants you a government-enforced monopoly on the production of paperclips. Between the years 1867 and 1957, the U.S. Patent-and-Trademark Office issued 17 U.S. patents relating to paperclips. Every new paperclip patent arrived within an interval shorter than 17 years. That is, each of these patents was granted prior to the expiration of the previous paperclip patent. The reason is that a patent does not claim ownership over a general idea for a product category such as “paperclip.” Instead, enshrined in a patent is recognition of a party’s rightful ownership over the specifics of its design.
A utility patent protects the design with respect to its main functionality and operation. By contrast, a design patent protects the design with respect to its aesthetic qualities and how every component of the device contributes to an integrated whole. For more information on the distinction between utility patents and design patents, and on how neither is a government-enforced monopoly on a general product category, go here. The reason that so many patents were granted on the same type of device is that a patent has to be more specific than “object that temporarily fastens papers together without making any punctures in the sheets.” The patents themselves were varied in the shape of the fastener, its exact size, and the material with which it was to be made.
Nor is there validity to another myth. This other myth is that multiple parties, each unknown to the others, each independently arrive at the exact same patentable design at the exact same time. So goes the myth, only one of these parties is able to win the patent. The result of this, we are told, is that one victorious party shall now exercise patent law to ban the other independent parties from producing or licensing units from their own unique design. The reality is that multiple parties, each unknown to the others, can hit upon the same general idea within relatively short times from one another. The different parties’ designs are not exactly alike. There are still legal disputes between these parties insofar as there is an “overlap” where functional attributes of the design are very similar.
That is what happened when Robert Noyce of Fairchild Semiconductor and Jack Kilby of Texas Instruments each arrived at the same general idea for the Integrated Circuit. Kilby’s patent focused on the body of the device itself, whereas Noyce’s patent put more emphasis on the arrangement in which the Integrated Circuit was to be wired. Insofar as separate parties’ patents are similar, they can do what Fairchild and Texas Instruments did. Their mutual solution is a common practice. They pooled their patents jointly in a single trust. Such situations do not discredit patents. Nor do such situations exonerate any cribber who would duplicate the design of either Noyce or Kilby while refusing to contribute any financing of the R-and-D that enabled Noyce and Kilby to come upon the breakthroughs that they did.
Your patent on the paperclip design you originated is an acknowledgment of your ownership over your choices to invest your time, efforts, and scarce resources as you did. That is not a government-enforced monopoly on the production of paperclips. Your patent monopolizes nothing more than the specific original details explained and diagrammed in your patent. This is just as your deed over your homestead does not monopolize all real estate but nothing more than the specific plot you improved. This is just as Beth trademarking her restaurant is not a government-enforced monopoly on eateries that serve cuisine of the same ethnicity. It is just as Malcolm trademarking his clothing styles is not a government-enforced monopoly on garments.
Philip Francis Nowlan’s copyright is not a government-enforced monopoly on the space-opera genre of fiction. Nor is the copyright of our fictitious filmmaker Justine a government-enforced monopoly on movies about haunted houses. The copyrights of these respective artists are on the respective artworks that the artist directly brought into being.
To pay someone homage is to observe general principles in someone else’s work and then apply them in producing one’s original work that still displays its own unique spin. By contrast, to infringe on a trademark, copyright, or patent is to appropriate someone’s original work directly, all the while refraining from reimbursing the designer or choosing to partake in any comparable investment in innovation.
Thus, we observe the fallacy in conflating IP infringement with merely applying the lessons one has learned from someone else’s general “business model.” To observe someone else’s business model and apply its grand lessons is to do the following.
I envy that my cousin is much more successful in his career than I am. I decide to look into what he does differently from me that puts him at an advantage. His “business model” is the example that he sets for me and everyone else. I notice that he does a lot more networking than I do, which puts him into contact with more people who can alert him to clients who need his services. I reach work exactly at the time I am supposed to start, and I leave exactly when my shift ends. By contrast, my cousin is the first at the office and the last to leave. I decide that to increase my likelihood of professional success, I will try to be more like my cousin in these respects.
Such is a far cry from me simply impersonating my cousin at the bank and withdrawing from his savings account. Likewise, Alex Raymond can pay homage to Philip Francis Nowlan in his own creations. That is not the same as someone printing and selling bootleg copies of Nowlan’s work and sharing none of the proceeds with Nowlan and his publisher.
Your having possession of the trademark, copyright, or patent on the productive design you originated is the law’s proper identification of the association between (1) the productive design’s economic value and (2) the person whose choices in time, efforts, and investments brought that new value into being. That is just as a deed identifies a homestead’s economic value with the settler whose choices in time, efforts, and investments created new value from that plot of land. A patent, as with a deed on an improved plot of land, identifies the new value with its creator so that, in legal matters, she will have control over the value that resulted from her choices. This identification — and the subsequently respected legal control that the value’s creator is to exercise over her creation — safeguards the ability of the value’s creator to experience the logical consequences of such choices.
Thus, we find that infringement on someone’s copyright of her artwork is similar in principle to what happened in the aforementioned scenario of my setting out to infringe on the trademarks of Beth’s Restaurant and Malcolm’s Apparel.
Is IP a Form of Protectionism to Force Customers to Make Contracts With the IP Holder in the Future? Or Did the Customers Already Contract With the IP Holder Upon Accessing the IP?
Let us revisit the two scenarios in which people could have bootlegged Justine’s low-budget independent movie. The first involved the sort of situation from the 1980s and early 1990s, in which bootleggers record unauthorized copies of Justine’s movie and sell them at prices much lower than those of the official copies. Is such a bootlegger an honest intra-industry “competitor” to Justine in the vending of her movie? Is the bootlegger’s appropriation of her IP simply an effort to “implement” her “business model” out of a desire to engage in intra-industry “competition” with her?
In the second scenario, from the two first two decades of the twenty-first century, people could produce unauthorized digital copies of the movie and torrent them over file-sharing services such as the Pirate Bay.
In the former instance, no, anyone who genuinely wanted to learn from Justine’s business model and apply it himself would watch her movie and then produce his own movie that pays homage to hers. By contrast, what the videotape bootlegger takes from her is not a lesson on how to “implement” her “business model,” but her product directly, the productive design resulting from the committed investments, much of her identity. That is just as someone impersonating you to your debtors is an act that directly takes from you the economic value that resulted from choices of yours that were committed investments, much of your identity. There is financial gain in this for the videotape bootlegger, at least in the short run.
And this is what happens in the instance where people swap unauthorized digital copies of Justine’s movie, over the World Wide Web, through a file-sharing service. Recall that Justine made the difficult and committed choice to invest, purchase, use up, depreciate, and expend scarce resources — tangible and otherwise — in order to bring her movie into existence. These choices imposed enormous costs upon her. These choices, and with them the control of the economic value that is the product of these choices, are to be regarded rightfully as part of her identity.
When commercializing any units produced from her IP, or making available any access to her artwork at all, every IP holder does so on the implicit contractual condition that those who access this IP will meet her at the price for which she will grant that access. Payments to Justine will help cover her expenses. This is a defraying of expenses without which Justine will be in no position to produce any further original designs in the future. True, those who access Justine’s artwork through unauthorized digital copies might not be selling anything. But by accessing the art while reneging on any fulfillment of the condition on which that access was granted, these consumers of Justine’s work are benefiting financially. In taking Justine’s service and failing to deliver the payments they owe for it, the people consuming these unauthorized downloads are trying to cut their own costs by imposing them on Justine. The principle would be the same if you performed a service I hired you to provide me and then I conveniently “forgot” to turn over the money I owe you.
At this juncture, we can revisit the cliché comparison, consistent with Sandefur’s verbiage, of IP enforcement with protectionism. Again, in talking as if (1) filmmaker Justine and (2) those who bootleg her movie are equally legitimate vendors in intra-industry competition for the same customers, Sandefur frames the situation in such a manner that an incautious reader would interpret it as follows. Justine wants her potential customers to contract with her, but instead these customers are contracting with her intra-industry competition, the bootleggers, as those competitors offer a better deal with their own, similar merchandise.
This, we are to believe, is comparable to an incompetent American automaker pining for American consumers to contract with it as these American consumers instead purchased much-more-attractive Japanese imports. When the managers of the American automaker lobby the U.S. federal government to impose tariffs or import quotas against the Japanese cars, it is the American automaker being a protectionist would-be monopolist employing government-enforced action to impede on the ability to potential customers to contract with the American automaker’s intra-industry competitors. This manipulates the potential customers into having to resort to entering a contract with the American automaker instead. Entering into contracts with the American automaker is something American consumers would not have done if not for the tariffs. After all, the American automaker invested a lot of fixed costs in establishing its operations. The absence of tariffs or quotas against the foreign competitors would render it difficult for the American automaker to recoup its investment.
It is in principle the same, we are to think, when Justine seeks enforcement of her copyright. Supposedly, Justine seeking governmental protection of her work against bootleggers is her being a protectionist would-be monopolist employing government-enforced action to impede on the ability of potential customers to contract with her intra-industry competition, the parties that are making available pirated copies of her movie. Enforcement of Justine’s copyright, ostensibly, manipulates potential customers into having to resort to entering a contract directly with Justine instead. Entering directly into contracts with Justine is something these movie viewers otherwise would not have done. After all, Justine invested a lot in the production in her movie. The absence of copyright protection would render it difficult for Justine to recoup her investment.
Sandefur misleads his readers in depicting this as a matter of Justine invoking her copyright to pressure her intended audience into contracting with her instead of with what Sandefur calls her intra-industry “competitors.” Sandefur’s approach reflects a misunderstanding of when exactly the contract is made. It is not that in suing bootleggers and websites like the Pirate Bay that facilitate pirating of her movie, Justine is using the State to manipulate her desired customers into forming contracts with her in the future. It is that when they accessed Justine’s artwork, those customers had already implicitly entered into their contract with her.
When a designer puts her design on the market, the default is for her to do so on the implicit contractual understanding I verbalized at the start of this essay. The copyright © symbol attached to her work is not the source of this implicit contractual agreement, but is the explicit acknowledgment of the implicit contractual terms that were offered beforehand.
Among the implicit contractual terms is that when the designer makes her design accessible to the market, those who access it do so on the condition that they pay the designer the price she sets for that access, thereby helping her cover her costs. This is the same as a store making an item available to shoppers on the agreement that the shopper pay for the item, thereby covering the store’s costs.
By now, it should be apparent that when people make unauthorized downloads of Justine’s movie, they are not accessing some intra-industry “competitor’s” merchandise that just happens to be similar to Justine’s. The unauthorized download is the nonconsensual accessing — and thus appropriation — of Justine’s work directly. Should I facilitate your ability to access a pirated copy of Justine’s movie, I am not some intra-industry competitor to Justine, and I am not peddling to you some substitute that is merely similar to Justine’s product. I am instead usurping control of Justine’s own product directly and against her consent.
The same is true of firms that sell units that pirate an inventor’s patent. Those firms are not “competitors” to the inventor selling merchandise that is merely similar to the inventor’s. This is not Pepsi selling a beverage that is similar to Coca-Cola but sweeter. No, the infringing firms are accessing the inventor’s effort directly and flaking out on the payment that is agreed-on implicitly in the accessing.
I will now state that discrepancy more simply:
If the absence of tariffs is the main reason why Chrysler goes bankrupt, it is because motorists rebuffed Chrysler’s product and therefore didn’t obligate themselves to pay Chrysler anything.
Conversely, if the absence of copyright enforcement is the main reason filmmaker Justine goes bankrupt, it is because movie fans used Justine’s product and then still stiffed her on the bill.
A Patent As a Document For Identifying a Person With Her Productive Actions
When you deal with financial institutions, they often want documents officially confirming that you are who you say you are, thereby identifying you with the deposited earnings that are the product of your creative choices. Also related to money and career, there are type of awards that identify you with the product of your actions. Your university degree is supposed to identify you with your training and diligent study of the discipline in which you majored. A patent is a similarly official document identifying you with the particular, detailed, diagrammed, and productive original design that is the product of your creative choices. A patent thus serves to confirm the productive choices in research, development, experimentation, and engineering that you have exercised. The patent is in a category that is at least similar to those of the other aforementioned documents of identification. As with a brand or trademark, so does a patent identify a specific economic value with the creative party whose choices produced that very value.
With acknowledgment of your IP comes documentation recognizing your work as the product of your creative choices, those choices being unalienable from your identity. IP is an institutional method for documenting and protecting your identity.
That understood, one can cite a case study that more closely resembles IP infringement than does any intra-industry competition.
An identity thief withdraws money from your accounts in order to co-opt the economic value you created as a worker. Parties are indebted to you, but the identity thief manipulates these debtors into paying him instead. The identity thief redirects to himself the money that you earned. He does this by blurring the distinction between his own work and yours.
An infringer on your intellectual property attempts to co-opt the economic value you created as a designer. Parties that willfully benefit from your design are parties that willingly chose to be customers indebted to you, but by selling your work as if it his own to sell, the infringer manipulates these debtors into paying him instead. The infringer redirects to himself the money that you earned. He does this by blurring the distinction between his own work and yours.
In short, upon your dedicating your choices to producing a practicable original design, the parties that benefit from making direct use of your original design owe it to you that they follow the terms you set for such use of your design. That includes the payment for which you ask. For me to usurp control of your design directly, and then for me to benefit financially by distributing your design to other users, is for me to usurp control over the choices and work of the actual party to whom those users owe their payments.
There is no intra-industry competition here. The matter is simpler and worse than that. Trademarks, copyrights, and patents are documentations of someone’s financial identity. IP theft is ID theft.
That is a misunderstanding among IP’s libertarian detractors that must be cleared up, among others.
How IP Infringement Initiates the Use of Force
Libertarian writers are often confused on how to explain the manner in which indirect uses of force — such as contract breach and fraud — count as initiations of the use of physical force that violate a person’s rights. And these libertarians are usually in the dark — too often seemingly by choice — about how physical force is applied in IP infringement. Hence, Rothbardian apologetics for IP infringement often goes as follows:
A violation of your private property rights involves me doing something forcefully to your belongings. I could, for instance, smash the window of your car, hotwire the vehicle, and then drive off with it. By contrast, when I illegally download your movie or song, I am sitting at home peaceably using my own private property. I am using the computer hardware and software I purchased myself. And, again, you haven’t lost the master copy.Should someone use his own computer hardware and software to pirate Justine’s movie, he will be using his own private property to harm the private property rights of another. Suppose I use my own hard-earned money to purchase a can of spray paint. The spray paint itself then becomes my own rightful belonging. Then I use my own rightful belonging to spray graffiti on the wall of your house. Am I just peacefully minding my own business with my own rightful property?
Intellectual historian and inventor John P. McCaskey provides a good explanation of the damage done by indirect uses of force. As noted in the Locke-Smith argument, you need to be able to control objects outside of your own body in order to sustain yourself and be free to live. Hence, for someone else to come along and physically manipulate your possessions, against your consent, is an initiation of the use of force that harms you. The physical force involved is in that other person’s physical manipulation of your possessions.
When someone else in debt to you, the economic value that the debtor owes to you is already your rightful property. This principle applies even prior to the payment’s due date. It is simply that, per your contractual agreement, the debtor is yet to deliver your own rightful property to you.
Now McCaskey has us consider contract breaches. You agree to sell me your used car. It is on the agreement that I make the down payment and then pay off the rest in monthly installments. The down payment goes through and you hand me the key to your vehicle. Afterward, I don’t make any more payments. You relinquished control of your possession only on the condition that your terms be met. I have declined to meet your terms. Hence, I have taken control of your possession against your consent. As McCaskey notes, this is a situation in which I have manipulated you into using force against yourself. The physical force used against you was the very act in which you, having been manipulated by me, handed me the car’s key.
Had I planned, before the fact, never to complete my payments to you, then this is a matter worse than contract breach. It is fraud. Fraud is in the act of manipulating people to ruin contracts. Here, I manipulated you into a contract I had every intention of reneging on.
Consider Chester, who is a victim of identity theft in its conventional meaning. Identity theft disrupts the execution of contracts between the victim and those indebted to him. For the debtors to fulfill their contractual obligation to Chester, they must complete their payments to him. By posing as him, the conventional identity-thief dupes the debtors into paying him instead of Chester. The debtors thus fail to honor their contract with Chester. And, in the process, the conventional identity-thief gains financially.
What if an inventor produces a new design for an appliance, and then I rip off the inventor, manufacturing units directly from his design? And I refuse to remunerate the inventor. Perhaps customers purchase the units of my knockoffs without knowing that patent infringement is involved. Because they make use of the inventor’s design, those customers are actually indebted to the inventor. In appropriating the inventor’s design, I appropriate the inventor’s financial identity. By doing so, I dupe those customers, so indebted to the inventor, into paying me instead of him. The debtors thus fail to honor their contract with the inventor. And, in the process, I gain financially.
In trying to apply McCaskey’s interpretation to this particular issue, I think I can speak on where the physical force takes place.
As you do in selling your used car, filmmaker Justine puts her product on the market on the contractual condition that a party that uses it shall meet her terms. The pirate accesses Justine’s product and refuses to satisfy the condition of access. All the physical actions that go into this — the typing of computer keys, the movement of electrons — are physical force that does damage to Justine.
Physical force also does damage to an innocent party when customers unwittingly purchase units ripped off from an uncompensated designer. We know that the customers are indebted to the inventor. We also know that the payments that the customers owe the inventor are instead diverted to the infringer. The force is in the customers being manipulated into transferring this money to the infringer instead of to the inventor.
IP infringement thus has a stronger likeness to conventional ID theft than the other misdeeds I mentioned. Still, the implications go even wider than that. Not only is all theft a form of ID theft, but all theft is ultimately a form of IP theft.
Conclusion: What Intellectual Property Is in Relation to Every Other Form of Rightful Property
Note my point from the essay’s beginning. I wrote that even in earl human history, economic value has always come from the application of the human mind, rather than every unit of natural resource already possessing an obvious economic value. That is why, although the homesteader did not create the plot on which she settled, it was through her choices in improving the land that she created the plot’s economic value, thereby rendering her the rightful owner. The deed, like a patent, is a document of identification, identifying an economic value with the person who, through choices that are also part of her identity, brought that economic value into being. And this Locke-Smith principle, wherein it is the application of practical reasoning that converts wilderness into useful economic units, is behind most economic value that exists today.
Here we can revisit Ayn Rand having noted, “Existence is Identity, Consciousness is Identification.” Continuing our revisit, there is a specific instance of employing one’s consciousness in rationally identifying something importance in existence. That is the institution of private property — especially the intellectual sort — in identifying the relationship between (1) the economic value that is now the property and (2) the person whose creative choices, the person whose identity, brought forth that economic value. We start out broadly, “Existence is Identity, Consciousness is Identification.” We then apply that principle to a context that is more specific: consciousness of rightful Ownership is Identification. It is dentification of someone with wealth his implemented reasoning produced from a wilderness where it had not earlier been.
I concede there are some instances of some natural resources already possessing economic value as a default. I address that issue over here. But, for the most part, most economic value comes from market participants applying scientific knowledge to convert objects from the wilderness into an environment more suited to human habitation. The Indus River Valley civilization and ancient Egypt pioneered in branding. The ancient Greek architect Hippodamus of Miletus proposed a legal institution that can be called an early conception of patenting. Aristotle alluded to this though he did not entirely approve. The writings of Athenaeus suggest to modern scholars that one ancient Greek city-state implemented something like this. And as these peoples developed trademarks, jurist William Blackstone also noted that the ancient Romans likewise developed a precursor to copyright recognition. Sadly, devaluing much of the achievements of antiquity, the Dark Ages devalued intellectual property. Then, since the Renaissance era, modern patents have emerged to protect very specific, detailed, and rare formulae on how to convert harsh wilderness into economic value. Ultimately, all nonviolent production of economic value, from the Stone Age, came from at least a generalized version of this approach. Insofar as people could be free to do so, all this wealth-creation required free intellectual efforts.
To recall what I wrote earlier about the homesteader’s improvement of land, even more imperative than the physical motions the homesteader undertakes to improve the land are the creative plans she chose to devise and which she had to check against the scientific laws of nature. Locke and Adam Smith presented the homesteader’s choices in improving the land as the most basic example of a particular principle. The principle is that when someone’s choices produce a net increase in economic value on the market, the default in assigning rightful ownership over the value is that the first claim on ownership over the value must go to the party whose choices created it. To apply that principle to designs in artwork, tools, industrial processes, plant varieties, and engineered life forms is to take this Locke-Smith principle to its logical conclusion.
The creation of economic value from one’s homestead, rightfully to be taken as one’s private property, was always the intellectual efforts in one’s choices, just as in the economic value in one’s patent. Like a specific innovative and productive original design to be patented, the improving of one’s land — even if on a more primitive level — was the rightful creation of property through the exercise of one’s intellect. In that more abstract respect, the homestead and all other human-made goods are a form of intellectual property at least as old as the first selectively and intelligently-bred livestock to be branded and the first metal wares that blacksmiths trademarked.
Concordant with all theft ultimately being ID theft, all theft is theft of intellectual property. That is so, as all rightful property is ultimately, at least on some broad level, a sort of intellectual property.
It is therefore tempting for me to ponder the reason why IP-hating Rothbardians are so insistent on the establishment of private property rights being about dispute resolution but not about the conversion of previously unhelpful wilderness into economic value. It apparently has to do with their not bothering to contemplate too much the role that is played by the free human mind in this matter. That is, they have not put enough of their property in thought to the property in thought.
Both the IP-hating Rothbardians and I agree that when people are squabbling over who gets to control which economic value that comes in a finite quantity, private property rights play an important role in the dispute resolution. But if we think of the property rights as being justified for the purpose of dispute resolution and not much else, then we care only that somebody owns and controls X; not who gets to do so or why. That approach ignores the crucial role of the initiative-taking human mind in producing economic value where it wasn’t before. Poverty is the default. I say:
To say that every natural resource should be owned by someone privately, but that it doesn’t matter who, would only make sense if the economic usefulness of every natural resource were immediately obvious. But it is not obvious.
- Economic value has to be created. Raw materials only become useful resources when the mind is applied to them. This is done using a productive original design.
- The default of ownership and control over the economic value must go to the one who created the value, meaning the designer.
When, in previous centuries, farmers found oil on their land, they were horrified. The glop ruined crops and no one knew of how the glop could be put to good use. It took scientists, engineers, inventors, and entrepreneurs to recognize petroleum as a versatile fuel source. Nor was it obvious to cavemen that petrified tree sap would be useful in telegraphs. Stirring in the Renaissance and coming to full force in the Industrial Revolution, this was the application of scientific discovery to finding previously-unknown uses for materials from the wild. And this produced a net increase in economic value even more consistently than was the homesteaders’ improvement over their land. The more we look at how the usefulness of the units we consume results from the units being produced according to specifications from specific clever designs, the more we see evidence for two considerations.
- There are costs and financial risks to producing those designs.
- This results in the default condition that the designs themselves are no less “scarce” in quantity than is the square footage of improved land.
What too many Rothbardian libertarians have tragically chosen to overlook is how those practicable inventive designs, so instrumental in producing every other form of economic value recognized as private property, are far scarcer in quantity than all the units of products produced from those designs.
There is something even more essential to human flourishing, in enabling an individual to reap the logical consequences of her creative choices, than recognition of private ownership over units of goods produced from practicable designs. More important is the recognition of private ownership over those very same designs by their designer. What is (1) anyone’s ability to have abundant ownership in many economically valuable industrial units is, in the end, enabled by (2) a designer’s ability to own, and thereby profit from, the very design that her private choices produced, the very design from which those industrial units were assembled. The former is dependent on the latter.
Intellectual property provides to us the other forms of property. To understand this is to understand the central role that the active use of one’s free mind plays in producing all the wealth we enjoy.
I am not alone in pondering this. Anticipating the Rothbardian assertion that anything intangible should not be considered wealth or private property, Jean-Baptiste Say and his mentor Antoine-Louis-Claude Destutt de Tracy pointed out that the intangible designs of the entrepreneurial human mind — what Say called immaterial production — proved itself to be the foundation for the wealth that arose from industrialization. Say and Tracy thus applied the Locke-Smith Principle farther than even the principle’s two namesakes did.
Say starts off by pointing out that “the mass of matter, of which this globe consists,” is not “capable of increase or diminution.” This is for the reason that entrepreneurial humans “neither create nor destroy a single atom.” Thus, what make the difference in enriching human beings beyond Stone-Age subsistence, Say realizes, are, first, the rational mind’s understanding of nature, and, second, the rational person’s practical application of that comprehension: “What is the whole of our industry, but the employment of the laws of nature? It is by obeying nature, says [Sir Francis] Bacon, that we learn to command her.”
Rather than produce a net increase in matter in the universe, what entrepreneurial creativity does is apply practical original designs to “re-produce existing materials under another form, which may give them a utility they did not before possess, or merely enlarge one they may have before presented.” The entrepreneurial implementation of practical original designs, then, “is a creation, not of matter, but of utility; and this I call production of wealth” (all of the emphases were Say’s).
Antoine-Louis-Claude Destutt de Tracy was cognizant of this as well:
...whence come all...goods? . . . It is from the just...employment, according to the laws of nature, which we make of our [rational] faculties. . . . We do not possess a good field or a good utensil, but because we have well recognised the properties of the first material, and rendered easy the manner of making it useful. We have no provision whatsoever, or even a shelter, but because we have simplified the operations necessary for forming the one, or for constructing the other. It is then always from the employment of our [rational] faculties that all these goods arise.And far from dismissing intangible designs as irrelevant to economic value, Say emphasizes them as integral:
You [Rev. T. Robert Malthus] assert that there are no immaterial productions [intangible, intellectual sources of wealth]. Why, Sir, originally there were no other. . . .In the process of converting natural resources to useful products, “all that we add” to the natural resources themselves “is immaterial.” And the result is a net increase in economic “VALUE...” (emphasis Say’s).
The service rendered by capital [machinery and equipment] in any undertaking whatever,...is...an immaterial product. He who consumes a capital unproductively destroys the capital itself; he who consumes it reproductively [meaning wisely and rationally, thereby getting the most economic value out of it], consumes the material capital, and also the service of that capital, which is an immaterial product [emphases Say’s].
These intangible designs, so appreciated by Say, are codified in patents. On account of this, despite his falling prey to several fallacies I debunked in the above essay, Say acknowledges that patents are something “no one can reasonably object to...” In the end, patents are something from which consumers in particular and human beings in general “derive prodigious advantage.”
It is therefore ironic that libertarian anarchy, in the tradition of Rothbard and Childs and Konkin and in opposition to intellectual property, is thought to be associated with individualism. There is an internal contradiction in advocating that everything be privately owned, while failing to admit that anything that can be rightfully owned was made into an own-able value by the same volitional intellectual efforts of individuals, the efforts that go into the unique and practicable designs enshrined in IP. Any wealth to own that goes beyond Stone Age subsistence owes its existence to the specific, practical, and costly plans and instructions detailed in patents, the plans and instructions produced by the choices of dedicated individuals.
Libertarians seem to grasp that there is no ownership without an owner. But, more than that, there are no improved models for tangible units to own if not for both (a) the inventor who produced those units’ improved design and (b) the inventor’s ability to secure the improved design that his choices brought forth. Any property, especially intellectual property, must go by default to the individual whose free choices produced it.
On Saturday, October 10, 2020, I added the sentences about Hippodamus of Miletus. On Wednesday, October 6, 2021, I added the image of the diagrams from John K. Northrop’s U.S. utility patent on his “all-wing” airplane design.. On Sunday, December 25, 2022, I made further grammatical changes.
