Intellectual Property and Creativity in Ancapistan

K

K

I am dedicated to an ideologically pure form of anarcho-capitalist thought in the libertarian style, following the mold of great thinkers like Murray Rothbard.

A frequent complaint leveled against libertarians—and Austro-libertarian anarcho-capitalists in particular—is that our opposition to intellectual property rights is at odds with the creative functions of artists and innovators.

I will refute this.

I am also ignoring anecdotal and certain other elements. For instance, I engage in most of my creative efforts with little or no expectation of direct profit, instead aiming to raise my profile. Since the lion’s share of my writing income, and certainly all of my highly profitable enterprises, have involved freelancing (for clients who have given my writing away for free, though this is incidental) I am an atypical example here.

Likewise, I will ignore people who object to intellectual property but still create things for fun. There are communities of people who create derivative works that they cannot license (such as video game modders) and who choose to license their work under public domain or other general licenses that reduce their ability to commercialize their work. I will only mention people who create intellectual property for profit and openly license it.

In short, I will not use the ars gratia artis argument or the “working for exposure” argument, though both have real-world evidence to support them.

I am not a world-leading expert on intellectual property. I sat in at Dennis Karjala’s copyright law course at Sandra Day O’Connor (as part of my honors undergrad program) before he passed away, but my understanding of other fields of IP law is less systematic and I’ve never practiced law (or had a license to) in any form.

However, a knowledge of the minutiae is irrelevant to understanding the anarcho-capitalist point.

As a small business owner who specializes in producing IP and as someone with an interest in the subject, I am familiar enough with the structure of the various IP laws and how they operate to explore the Austro-libertarian schemes involved if we transitioned to a full anarcho-capitalist society with absolute ideological purity.

Let us begin.

The Ancapistani Objection to Intellectual Property

The reason anarcho-capitalists do not support the defense of intellectual property is that it defies the understanding of property rights as understood by Austrian economics.

The particular distinction we draw between ordinary property and intellectual property is that intellectual property is not scarce.

Property represents a legal claim to a scarce resource. Scarcity means that something is not available except because of deliberate economic action. For instance, air is not scarce in the usual economic context. There are exceptions to this, such as deep underground, underwater, or in space, but this simply represents conditions under which air is scarce.

The automatic reflex of breathing is not a deliberate action, nor is it economic because one person’s breathing does not (in the usual situation) reduce other peoples’ ability to breathe within prevailing conditions.

Intellectual property is at odds with the Austro-libertarian concept of property because we can have it for the price of thinking. Although this is a deliberate action, it is not economic action, because it does not reduce other peoples’ ability to think.

Since thought is not a limited commodity (despite what social media may lead us to conclude), it is not scarce.

Further, protecting intellectual property is at odds with protecting ordinary property rights. It involves restricting the use of one person’s legally owned assets because it applies a technical or theoretical concept.

Intellectual property conflicts with protecting actual property. We can try to argue that first principles contain magic contradictions because of an interaction between the worlds of material and mental things, or we can accept that intellectual property actually lacks the qualities that warrant defense under a libertarian ethical code.

Anarcho-capitalists choose the latter.

Trademarks in Ancapistan

The first and most similar form of intellectual property law is trademark law. This was a pre-existing part of common law even before its modern legislative descendents.

Anarcho-capitalist thought doesn’t have the same objection to trademarks that it has to other intellectual property, but we still do not view them as property.

Societies traditionally understood the trademark as a m0onopoly to produce goods bearing certain trade dress.

This might involve a particular appearance, label, or name, depending on how the jurisdiction in question.

A trademark must be distinctive in most cases (e.g. yellow cheese does not qualify for a trademark), but must be a distinctive and deliberate sign or mark, hence the “mark” part of trademark. For instance, red Solo cups have a trademark under the Solo brand, and visually identical cups that do not bear their brand name do not violate their trademark (though since cups need not be red, they may have a stronger case against potential infringers who color their own cups red).

Unlike other intellectual property, trademark has no statutory limitation and no requirement to register in most jurisdictions. While legislators have inflated copyright to be functionally unlimited in a fashion that remains controversial, everyone agrees that the legal viability of trademarks lasts so long as they are in use.

When a trademark’s owner ceases to operate in the industry, others may use the trademark after enough time has passed. Further, someone who never defends their trademarks may lose the right to exercise them. These restrictions hint at important purposes behind trademarks.

In anarcho-capitalist society, trademarks are not the intellectual property of their owners. They are not owned, so their users may not transfer them, but there are still restrictions on who can use them. Further, the users of a trademark cannot sue other users of a trademark.

But anyone who infringes on a trademark leaves themselves open to legal jeopardy.

How does this occur?

In the Austro-libertarian perspective, trademarks are a way for consumers to protect themselves against fraud. The user of a trademark is making a promise—that this is a Solo cup, as opposed to a Smith’s Knock-off Brand cup.

There is a key market function here. A counterfeit of sufficient quality may escape prosecution.

This may seem undesirable, but it is actually valuable.

A trademark serves as a guarantee of quality, an automatic form of market standardization. Anyone who receives a good that is sold under a trademark but is below the level of quality promised may sue the producer for fraud, and since these qualities are subjective, the only way to avoid infringement is to produce identical or substantively equivalent products.

However, this does not mean that we are likely to see infringement go unpunished because of quality alone, because trademarks also imply that you are doing business with someone.

The counterfeiter must face potential scrutiny for deceiving the customer on this front, because the penalty for fraud is due to coercing an exchange, not because of the actual damage involved (we may factor material damage in as an additional criminal penalty, but this is not required).

The result is that it will be safer for any businessperson to use their own trademarks. However, there won’t be any penalty for deliberately or accidentally displaying the likeness of other works so long as no consumer can claim fraud, preventing massive litigation from one creator to another over the possibility of confusion and limiting such claims to harmed consumers.

We’ve seen this a lot in the creative industries, where a major player may bring in a registered trademark (with no market dominance) to uproot a smaller company’s use claim to a trademark.

Here, using a word like “Scrolls” in the title of a video game can lead to multi-million dollar litigation with the owner of a well-known trademark like “The Elder Scrolls,” even if the two products have sufficiently distinct trade dress that no consumer would suffer harms.

Further, it protects the smaller player from the force of law, since the current registration scheme, although optional, lets a company secure investments in intellectual property that are not yet otherwise in the public consciousness.

This puts the onus of researching trademark status on small businesses and individuals prior to action, while the traditional application of trademark law requires public awareness of a brand before protection applies.

Patents in Ancapistan

The common defense for patents is that they encourage people to engage in research and technical improvements that they would otherwise not invest in.

It would also be nice to encourage people to engage in charitable giving that they would otherwise not invest in, but it is immoral to use a gun to force people to do so.

Patent law does exactly this—it creates countless coercive monopolies in the name of fostering innovation.

I will examine the technical consequences of this shortly, but patents are outside acceptable intellectual property even among many of those who would recognize copyrights or trademarks as belonging to an owner.

The reason for this is that patent enforcement does not require deliberate infringement. One can accidentally infringe trademark or copyright, especially simple trademarks, but this is exceptionally difficult. But if someone finds and patents a special application for a five-legged chair, all other prospective five-legged chair makers cannot use their property to make five-legged chairs.

They may claim some protection if they’ve previously manufactured five-legged chairs, but they will still have to defend their use of the technique in court.

This alone is an immoral infringement, even if we were to recognize the validity of patents in truly novel and groundbreaking products. Patent advocates reference medicine and electronics up as fields where patents protect producers and encourage research investment.

However, this is also where the most vociferous opposition to patents occurs precisely because there are distinct anti-consumer effects that come from these patents.

The price of medicine has increased tremendously. Not all of this is because of patents—there are other regulatory, supply, and monetary issues at play here—but patents are worth looking at in this field.

Here, the argument arises that medical research would cease to function without patents. After all, the costly regulatory schemes make it so that few people would invest in manufacturing new products without having a guarantee that they could manufacture them.

However, all industries have research and development. In the pharmaceutical sector, we see massive public investment in research, which usually then winds up being patented by a private partner of the government—this is theft from the taxpayer even from a perspective that does not consider all taxation theft.

The free market still requires investment into research because the maker of a medical device that cannot do what it claims commits fraud by selling it. There could still be trade secrets governing the distribution of production methods, letting people maintain proprietary formulas and entitling them to financial damages from anyone who violates the trade secret.

Because such a field of production will still yield profits—imagine the reward to be reaped by curing cancer—they are likely to use the trade secret method to prevent their production methods from becoming widely known. This lets people maintain proprietary formulas and entitles them to financial damages from anyone who violates the trade secret.

Anyone who openly violates trade secrets sets themselves up for reputational damage and ostracism from other market entities, even if they consider the risk worth it. And they do not have the same ability to verify the accuracy of their information that the original producer did, giving at least a period of effective natural monopoly to the first creator if they consider it necessary.

Further, there is the natural advantage of the innovator, who benefits from new processes because they are more efficient. But few people defend patents on the idea that an assembly line revolutionizes production of the same old goods people love, and instead focus on the person who comes up with something entirely new.

We would not protect this under a truly free market, but the first innovator may have such a competitive advantage that it does not matter. They are the first to invest in a new line of production. If they truly create a superior method, the innovator reaps the rewards while competitors need to adapt or go out of business.

Here, however, there is still an advantage. The expertise required to create something truly novel will concentrate in certain individuals, where trade secrets can apply. Otherwise, if a patent was to be issued for something relatively obvious and simple to reproduce (like swiping right on a smartphone display to unlock a device) the only effect on the market is to damage the consumers of potential alternate producers and reward patent-holders an arbitrary and coercive monopoly.

The absence of patents may reduce some motivation to earn lucrative coercive monopolies, but this is a question of utility. The present benefits of abolishing patents may free up enough resources for investment to offset any relative changes, but it has the important moral effect of not depriving people of the rights to use their minds (part of their physical being from a legal perspective of self-ownership) as they see fit.

Copyright in Ancapistan

Copyright is inherently and perfectly incompatible with Austro-libertarian property rights theory. Unlike trademark or patent, copyright violations do not involve fraud, since the crime is usually precise duplication and violators rarely believe they are actually supporting the producers of a copyrighted right when they do so.

Of course, should someone copy someone else’s work and pretend that they are the creators or have an agreement to reproduce their work, this is fraud and consumers would be in their rights to sue, but it is enough simply not to claim ownership to avoid this legal claim.

Most people do not understand how copyright usually works.

It is trivially easy to violate copyright law. Special exemptions to the law exist in many forms. For instance, watching a movie on a computer does not violate the law, even though the computer must copy a work from a machine-readable format to the audio-visual representation the user sees.

Further, the piracy most people think of as the crime copyright law intends to stop is practically unenforceable. A key point here is that copyright claims brought to court do not automatically include legal fees.

A kid in their basement downloading a thousand MP3s off Napster back in the 90s would not be practically subject to prosecution, since the fees of tracking them down, bringing them to court, and making the case would exceed the thousands of dollars worth of files the teenager downloaded.

Remember that the property of the MP3 rights-holders has not suffered damage—they have simply lost out on a potential sale which might not have happened in the first place and people do not have a legal interest in future commercial interactions without a contract (contracts for future exchange are fraught with other concerns too complex to deal with here).

This is more akin, from a legal perspective, to me leaving a book on a park bench and someone else taking it. The original rights-holder is not harmed, and I do not have an actual complaint based on aggression (though I should add it is polite to return lost books to those of us with wandering minds).

Criminal copyright law, which involves massive damages, aims at those who deliberately reproduce works they do not have the rights to for commercial advantages. Although there are still prosecutions of many pirates who have not sought to profit (instead sharing works gratis with other pirates), the fundamental issue here is that even granting property rights it is not proportional.

We see that the vast majority of creative works, even those deliberately protected with digital rights management software, are trivially accessible through illicit channels.

So why are these endeavors still commercially viable?

Because consumers like supporting the creators of content they enjoy, deriving psychic profit from knowing that they are supporting people they like. Consumers also know that spending money on something increases the chance that the creator will make future products.

Also, creators can find payment through alternate models to the traditional retail method used to distribute creative works. People may subscribe for access to an entire catalog of content, as with film, books, comics, and video games, and save the effort and risk (which is not always of the legal variety) of finding it on sketchy pirate sites.

This may be in better formats or have interactive capabilities that aren’t available elsewhere. Video games often feature online components, for instance, but video and music streaming makes content available across all of a user’s devices with no technical expertise or manual file moving required.

Here, the legitimate providers have an advantage of reputation and prestige. Even without copyright protection, the experiences provided by the original creators can be superior to those of others.

Superior piracy might resolve this difference under the free market that doesn’t have to operate in the shadows, but even then there would be the psychic profit of supporting creators and day-one access with less risk of viruses or other interference.

The Knock-Offs

Another complaint is that without copyright law it would be possible for original and brilliant creative works to be superseded by low-quality knock-offs.

Let us say that George Lucas creates Star Wars and five other film-makers immediately set out to make their own Star Wars films and out-compete him in future Star Wars franchise entries. I have chosen Star Wars because I saw a complaint that used it as a basis for this argument against abolishing copyright. It is a poor choice given the franchise’s recent history, but I will not milk that for my own advantage.

Lucas is already the first to market and enjoys a competitive advantage, since creative endeavors require a significant time investment to come to fruition. Even the rapid competitors would likely not hit market until the original Star Wars buzz dies down.

But what of those disappointed film-goers who attend the non-Lucas Star Wars movies?

In the first case, all creators of derivative works cannot claim to be the original creator without defrauding audiences. Since fraud is criminal, the free market has a defense for this.

However, let us say that credit is given where credit is due.

If the derivative work is beneficial to consumers and represents good artistic expression, no harm is done. But what if it’s awful?

Something good has its own merits, while something bad will not be popular on a free market, except perhaps in the curious “it’s so bad it’s good” sense that we see in certain knock-off products that rarely get prosecuted for copyright violations.

Satire and parody enjoy statutory protection from copyright claims, so Mel Brooks is free to riff on Star Wars all he wants regardless of whether we consider it better or worse. The bad third-party Star Wars adaptations cannot use George Lucas’ name to market themselves, and consumers will rely on the producers’ reputations to determine whether the competitor’s Star Wars is worth going to.

The end-result is that there will be more Star Wars than before, which gives consumers a benefit. Those who want to support George Lucas can do so, and he is free to use others’ ideas in his own masterworks without the fear of reprisal that currently exists.

Further, this removal of the restriction on ideas is important in fostering creativity. Right now, creative industries are full of people who cannot solicit or even view unsolicited suggestions without worrying about potential future liability.

Here, copyright extends not to finished products, available to consumers for their enjoyment, but also to ideas not yet put together in a final product with no binding trade-secrets agreement!

Everyone suffers, except the occasional person who has ideas they cannot bring to fruition who successfully sues a major publisher or filmmaker—the people who invested all the resources to bring a vision that may not even represent the plaintiff’s ideas to light.

End User License Agreements

Murray Rothbard suggested the use of binding contracts as an alternative to copyright. While these would be unenforceable in situations most laypeople think of as the domain of copyright, and I have criticized the idea in the past, I think there is merit to this in commercial creative works. We do have these under the current system in the form of end user license agreements, which are most common with software but are applied to other protected works.

For instance, let us suppose a photographer sets out to create a collection of images. They resell these images to people looking to use them in marketing materials, video game textures, or other applications. To get their hands on the production-quality images, those working with the photographer must sign an agreement not make to the images available in a format that would permit easy duplication.

They can have the images but must alter them before redistributing them. For instance, they may use the image to make a magazine cover, but they can only publicly distribute the cover image once all the copy, visual adjustments, and other graphical elements obscure the original photo.

Here, the image is less useful for people who are not parties to the contract.

Further, by selling collections (as with video game textures, which are likely to be featured as-is in the final product) they may limit their loss of potential future clients, since a game designer is unlikely to use every texture in their collection on any game. It would be possible to reverse engineer the photographer’s catalog, but it would still likely not be a perfect substitute for purchasing it directly from the photographer.

Likewise, if I gave the text of one of my books to a publisher, I could enjoin them against using it in other ways. Even with technical advancements, it may be hard to reverse-engineer the text of a book via optical scanning, so a print run would limit access to my intellectual property to other people who might like to duplicate my property.

This is the equivalent of trade secrets, and is actually how many arrangements to use pre-made royalty-free (but not free in the gratis sense) photographs, music, and other creative products work under the current regime. Because there is a contractual arrangement between two parties, it is enforceable.

It is not, however, able to be enforced with third-parties. Software may attempt to enforce an EULA by popping up a notice and demanding that a user agree to it, but this is legally fraught.

Trade Secrets in Ancapistan

A quick note.

Trade secrets are not intellectual property. They result from a contractual agreement not to disclose information.

The violator of trade secrets does not infringe because they have reproduced information, they infringe because they are violating an agreement.

These contracts are basically a non-disclosure agreement, which is enforceable in most circumstances.

This is how end user license agreements in Ancapistan work, and also how patents are protected.

The violator of the agreement suffers whichever penalty (so far as it is enforceable) that the trade secrets carry.

Conclusion

Without relying on the human drive for innovation and expression or the patronage system, we have shown that all intellectual property laws have at least a stifling effect that easily equal or exceed the hypothetical nourishing effect they create.

Further, we have made the argument that they are based on dubious moral principles—the use of force on those who have ideas that may derive from or develop in parallel with other creative works and techniques.