1 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Rethinking Intellectual Property: History, Theory, and Economics: PRELIMINARY INFORMATION► _► _

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2 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Stephan KinsellaC4SIF.org, Mises.org

Mises AcademyNovember 29, 2010

Rethinking Intellectual Property: History, Theory, and Economics

Lecture 4: IP Statutes and Treaties; Overview of Justifications for IP; Property, Scarcity, and Ideas

3 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Course news

► Optional mid-term test to be posted shortly

4 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Outrages of the Week

► See recent C4SIF.org posts► Hershey Claims Ownership of Orange, Brown and Tan Candy Wr

appings (trademark)

► UK High Court Ruling Implies Headlines Are Copyright Some German publishers have lobbied for this too

► Universities attacking high schools over trademarks (Gators)► EFF rescues ASL Ally’s sign-language YouTube music videos

videos that interpret song lyrics in American Sign Language for deaf and hard-of-hearing people yanked after complaints by Warner and Universal

► Gibson sues WowWee, retailers over Paper Jamz toy guitars; would rather some other company get all that free advertising Trademark

5 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Outrages of the Week► Judge Bars ‘Fair Use’ Defense in Xbox Modding Trial

DMCA► Going Toe To Toe With Medical Device Giants

Forbes: about the plight of smaller companies who can be bankrupted by patent lawsuits and threats from the medical device giants

► Jury Rules SAP Owes Oracle $1.3 Billion Copyright

► Hollywood Backs State Thuggery Over Free Speech COICA

► Copywrong: copyright as censorship 2005 LRC post: a grocery store in Canada mistakenly sells 14 copies of the

new Harry Potter book a few days before its official release this Saturday, July 16. So last week a British Columbia Supreme Court judge “ordered customers not to talk about the book, copy it, sell it or even read it before it is officially released at 12:01 a.m. July 16.”

6 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Other News

► See recent C4SIF.org posts► The Effects of Patent and Copyright on Hollywood Movies► Doctorow: What do we want copyright to do?

“creators (and, notably, their industrial investors) are notoriously resistant to new media. The composers damned the record companies as pirates; the record labels damned the radio for its piracy; broadcasters vilified the cable companies for taking their signals; cable companies fought the VCR for its recording “theft.” Big entertainment tried to kill FM radio, TV remote controls (which made it easy to switch away from adverts), jukeboxes, and so on, all the way back to the protestant reformation’s fight over who got to read the Bible.”

► Copyright Troll Backs Down

7 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Other News

► Patent Litigation Facts $10 million: Cost to defend a high-stakes patent suit

$3.8 million: Median damages awarded in patent infringement cases from 2001-07482,871: Patent applications filed in 2009191,927: Patents issued in 20092,700: Average number of patent-infringement lawsuits filed per year$1,000: Hourly rate charged by top patent litigators100: Average number of patent cases that go to trial each year57%: Percentage of trials won by patent holders34.6: Average number of months to secure a patent

► Ideas are Free: The Case Against Intellectual Property: or, How Libertarians Went Wrong

► Don’t Fall for False Copyright Claims

8 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Where we left off…

► Overview of arguments for IP Rights based (deontological, creation-based, natural law, principled) Wealth-maximization (utilitarian, consequentialist)

9 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Today’s Lecture► Law Continued:

Photography Key IP Statutes and Treaties

► Overview of Justifications for IP► Property, Scarcity, and Ideas

the nature of property rights, role of scarcity, and the function of the market

10 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Law Continued: Photography

► See Photography and the law (Wikipedia)► The owner of the copyright in the photograph is the

photographer--the person who creates it Watermarks Amateur issues (printing etc.) Copyright-protected works in the scene

► Music► Sculptures► Home videos—children dancing

11 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Law Continued: Key IP Statutes and Treaties► Historically

1624: Statute of Monopolies 1623 (England): key patent statute 1710: Statute of Anne 1709 (England): key copyright statute 1691: South Carolina enacts first "general" patent law

► as distinguished from authorization to the Crown to make patent grants

12 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Law Continued: Key IP Statutes and Treaties

► Modern IP (US) Patent: Constitution; Patent Act of 1790; Patent Act of 1952; now

Title 35, USC► USPTO (Dept. of Commerce)

Copyright: Constitution; Copyright Act of 1790; now Title 17, USC► Copyright Office (Library of Congress)

Trademark: state law, plus federal► Lanham Act of 1946: Title 15, Ch. 22 of USC► USPTO

Trade Secret: mostly state law► Restatement (Second) of Torts §757 and Uniform Trade Secrets Act (UTSA)

(1979)

13 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Law: Key IP Statutes and Treaties (cont.)

► Modern IP Additions (US) Copyright

► No Electronic Theft Act (NET Act) (1997) criminal prosecution for copyright infringement Up to five years in prison and up to $250,000 in fines.

► Sonny Bono Copyright Term Extension Act (CTEA) (1998) Sonny Bono Act, or “Mickey Mouse Protection Act” Extended copyright term by 20 years (life of author plus 70 years, or 95/120)

► Digital Millennium Copyright Act (DMCA) (1998) criminalizes use of DRM anti-circumvention technology Key “safe harbor” for OSPs and ISPs for copyright liability

► Online Copyright Infringement Liability Limitation Act ("OCILLA”) DMCA added “Vessel Hull Design Protection Act”--protection for boat hull designs

14 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Law: Key IP Statutes and Treaties (cont.)

► Modern IP Additions (US) Trademark: Antidilution

► Federal Trademark Dilution Act of 1995 Trademark Dilution Revision Act of 2006

Trade Secret► Federal Economic Espionage Act of 1996 (18 U.S.C. § 1831–1839)

makes the theft or misappropriation of a trade secret a federal crime

► Major International Bodies World Trade Organization (WTO)

► Organization for liberalizing international trade World Intellectual Property Organisation (WIPO)

► UN agency for IP protection

15 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Law: Key IP Statutes and Treaties (cont.)

► IP Treaties Paris Convention for the Protection of Industrial Property (1883)

► Permits patent filing date in first country to be relied on in others Patent Cooperation Treaty (PCT) (1970)

► Unified procedure to file international or “PCT” applications can be filed► Still examined separately and result in national or regional patents

Regional: European Patent Convention (EPC) of 1973► European patents granted by European Patent Office not unitary► Side by side with national patents

Berne Convention for the Protection of Literary and Artistic Works (1886) and WIPO Copyright Treaty of 1996► International standard for and recognition of copyright of other countries

16 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Law: Key IP Statutes and Treaties (cont.)

► IP Treaties Madrid System

► international registration of trademarks► administered by the International Bureau of WIPO

General Agreement on Tariffs and Trade (GATT)► 1994 Uruguay Round covers IP

The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the WTO that sets down minimum standards for many forms of intellectual property regulation as applied to nationals of other WTO Members

17 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Law: Key IP Statutes and Treaties (cont.)

► Pending IP Laws and Treaties Anti-Counterfeiting Trade Agreement (ACTA)

► See http://c4sif.org/tag/acta/ ► Proposed agreement for the purpose of establishing international standards

on intellectual property rights enforcement► would create its own governing body outside existing international

institutions such as the WTO and WIPO► Designed to protect copyright and patent (and trademark?)► Copyright: Anti-circumvention prohibition as with DMCA

Combating Online Infringement and Counterfeits Act (COICA)► See http://c4sif.org/tag/coica/ ► Proposed in United States Senate► allows the blocking the domain names of web sites accused of piracy

Agitation to add IP laws for fashion, database rights, etc.

18 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Natural Law and Utilitarian: Overview (revisit)► Utilitarian

To “maximize” incentives► To innovate and produce new ideas► To disclose ideas

“Necessary” for Innovation and Creation► Obviously false

Other Problems► Methodologically Incoherent (Austrian subjectivism and utility)► Ethical problems

Implications: ► justify redistribution► rape

19 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Natural Law and Utilitarian: Overview (cont.)► Utilitarian

Other Problems► Evidence problems

Sincerity problems should be against IP based on evidence

► Implications: taxpayer funded innovation prizes Madison 1787 Russia 1834 Soviet Union 1931 Michael Polanyi 1944 (views on tacit knowledge and spontaneous order

influenced Hayek) Recently: $80B medical innovation prize fund: Stiglitz, Bernie Sanders, Tabarrok

(libertarian)

20 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Natural Law and Utilitarian: Overview

► Natural Law Locke, Founding Fathers not on board

► Purely civil right► State constitutions and laws used natural law to mask monopoly privilege

grants to special interests Arbitrary scope and term Geographic enforcement Creationism and labor confusion Inconsistency: mix with utilitarian rationales

► Rand, limited terms etc.

21 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Property, Rights, Scarcity

► Why do we need property?► Imagine Garden of Eden

No scarcity No conflict No need for production No need for rationing Property rights unnecessary

► Property rights meaningless

22 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Property, Rights, Scarcity (cont.)

► “only because scarcity exists is there even a problem of formulating moral laws; insofar as goods are superabundant (“free” goods) no conflict over the use of goods is possible and no action-coordination is needed. Hence, it follows that any ethic, correctly conceived, must be formulated as a theory of property, i.e., a theory of the assignment of rights of exclusive control over scarce means. Because only then does it become possible to avoid otherwise inescapable and unresolvable conflict.” Hoppe, TSC, p.158n120

23 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

The nature of property rights, role of scarcity, and the function of the market► We do have scarcity► Implications of scarcity

Conflict Exclusive use

► Nature of action: praxeology Purposeful use of a (scarce) means to achieve a desired end or goal Presuppose categories of action

► Subjective value► Choice► Demonstrated preference► Causality► Means and ends► Opportunity cost► Profit and loss

24 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

The nature of property rights, role of scarcity, and the function of the market► Role of scarce resource in action

Means of action► Role of knowledge

Guide to action Enriches universe of ends and means

► Recipe/cake examples

► Role of property rights Assign owners to scarce resources to permit productive and cooperative

use► Spoon in cake example: need ownership (control)

Ideas are non-scarce► No ownership needed► Many can use same recipe

25 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

The nature of property rights, role of scarcity, and the function of the market► Acquisition of knowledge

Accumulation of human knowledge Informal and formal learning Emulation on the market

► Key aspects of free market Property rights permit competition Property rights allow competition

► Competition benefits consumer Competition requires emulation

► Iterative process

26 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Goods, Scarce and Non-scarce

► Ideas, information, knowledge are non-scarce goods Recipe, Idea, Tune, Image, Skill, Fire

► Scarce goods Bagel, Factory, Shoes, People, Desk

► Scarce non-goods Mud Pie, Poison Soup, Slug, Road Kill

► Non-scarce, non-goods Bad Idea, Awful Sound, Gibberish Text

27 | Rethinking IP – Lecture 4: IP Justifications; Property, Scarcity, Ideas Stephan Kinsella | Mises Academy 2010

Upcoming Topics…

► Market vs. scarcity► Perversity of artificial scarcity of information and knowledge► Diluting effect of new rights

Negative and positive rights► Welfare rights as trespass

Four Freedoms Inflation analogy IP rights as positive right

► Redistribution of rights► Recall origin in monopoly privilege and censorship

► The basis of libertarian rights and norms Big topic