The Great Debate on Intellectual Property

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The Great Debate on Intellectual Property
      n November 14 the Cato Institute           ment, to bring forth new knowledge.”                ty runs little risk of convincing contem-

O     and Forbes ASAP cosponsored the
      Fifth Annual Technology and Soci-
      ety Conference, “The Future of Intel-
lectual Property in the Information Age.”
Among the featured speakers were Tom W.
                                                    Of course libertarians often disagree
                                                 with the Supreme Court. Some argue that
                                                 copyrights and patents rely on a Lockean
                                                 theory—that creators mix their efforts with
                                                 their creations and thereby enjoy natural
                                                                                                     porary legislators or courts to forsake the
                                                                                                     prevailing utilitarian view of copyright and
                                                                                                     patent. The language of the Constitution’s
                                                                                                     Copyright and Patent Clause settles the
                                                                                                     issue. That language speaks in a utilitari-
Bell of Chapman University School of Law         rights to their intellectual properties. That       an voice, justifying the exercise of state
and James V. DeLong of the Competitive           facially plausible extension of Locke’s the-        power as necessary “to promote the progress
Enterprise Institute. Excerpts from their        ory does not withstand close scrutiny, how-         of science and useful arts.”
remarks follow.                                  ever. Locke’s justification gives a creator             The Copyright and Patent Acts, though
                                                 clear title to only the particular tangible         designed to counteract market failure, have
Tom W. Bell: Arguments about intellectual        item in which he or she fixes his or her cre-       themselves fallen into statutory failure. We
property ultimately turn on questions of         ative work.                                         thus need to encourage market-based alter-
values, not merely questions of fact or quan-       So the author, sitting in his garret writ-       natives to copyrights and patents.
titative measures.                               ing, wins clear title to only the piece of              Copyright and patent law provides emer-
    However, since copyright and patent law                                                          gency shelter to creations that but for these
purportedly aims to strike a “delicate bal-                                                          special statutory protections would have
ance” between public and private interests,                                                          fallen through the cracks of common law
the relevant quantitative data matter. The                                                           and been left wandering homeless through
rationale for copyright and patent protec-                                                           the market economy.
tion relies on a showing that lawmakers                                                                  Just as commentators call the special
have at least roughly approximated such a                                                            treatment afforded influential commercial
balance. But copyright and patent law has                                                            interests “corporate welfare,” we might
not struck, and indeed cannot strike, a del-                                                         call copyright and patent law “creators’
icate balance of public and private inter-                                                           welfare.” We ought to withdraw copyright
ests. Lawmakers can, at best, achieve only                                                           and patent protection when and if it proves
a rather indelicate imbalance of those pri-                                                          redundant. It’s an emergency measure.
vate interests that get a spot at the legisla-   Tom W. Bell: “Copyrights and patents function as
                                                                                                         Clearly, however, copyright and patent
tive table.                                      a federal welfare program of sorts for creators.”   law can lay just claim to being a fairly effi-
    We need to reconsider state action pro-                                                          cient means of giving creators incentives.
tecting copyrights and patents. Copyrights       paper and pen with which he has mixed his           The creation of fungible and divisible rights
and patents function as a federal welfare        labor. It does not follow that the author           by statute law does tackle a difficult prob-
program of sorts for creators. As are oth-       can walk out into the street and say, “Shut         lem, one important enough that the Founders
er welfare programs, copyrights and patents      down the presses; that’s my work you’re             thought it worthy of being addressed in the
are necessary evils at best, and thus subject    copying.”                                           Constitution.
to reform efforts.                                   Locke himself did not try to justify intan-         Yet if we don’t need those protections,
    Some people might object to the char-        gible property rights. More pointedly, copy-        they become not necessary evils but just
acterization of copyrights and patents as        right and patent protections contradict             plain old evils, and therefore unjustified.
purely utilitarian devices for maximizing        Locke’s justification of property. By invok-            Copyright and patent policy almost cer-
social utility and argue instead that those      ing state power, a copyright or patent own-         tainly fails at striking a delicate balance
intellectual properties represent natural        er can impose prior restraint, fines, impris-       between public and private rights. Politi-
rights that vest in creators.                    onment, and confiscation on others. Were            cal authorities cannot measure all the rel-
    Cases, legislation, and commentary on        I now to start singing a copyrighted song,          evant economic, legal, technological, and
copyright and patent law leave little room       for instance, I would thereby infringe on           cultural factors that go into a calculation
for natural rights, however. The Supreme         someone’s intellectual property rights. But         of the optimal level of protection. And even
Court has, for instance, described copy-         it’s my throat; it’s your ears. Where does          if they could, politicians could not balance
right as “the creature of the Federal            anyone get the power to tell us we can’t do         those incommensurable values.
statute”—the Copyright Act—and observed          that? It comes from the Copyright Act—                  Furthermore, even if such a balancing
that “Congress did not sanction an exist-        not natural law.                                    act were possible, politicians would listen
ing right but created a new one.” In anoth-          Because they gag our voices, tie our            most to the parties closest at hand. We thus
er case, the Supreme Court observed: “The        hands, and shut down our presses and our            see in the Copyright and Patent Acts not
patent monopoly was not designed to secure       machine shops, copyrights and patents vio-          so much a delicate balance of public and
to the inventor his natural right in his dis-    late the very rights that Locke defended.           private interests as an indelicate imbalance
coveries. Rather, it was a reward, an induce-        At any rate, Locke’s theory of proper-          that reflects bare-knuckled politics and spe-

8 • Cato Policy Report January/February 2002
cial interests’ jockeying. Those who lob-                                                                that discussions of property since the
by for greater copyright and patent pro-                                                                 time of Plato have involved four themes:
tection benefit from the rhetoric of prop-                                                               morality, economics, politics, and psy-
erty, asserting that they aim only to pro-                                                               chology.
tect authors and inventors from theft.                                                                       First, morality: the general concept of
    So, what should libertarians and classi-                                                             Lockean justice is that ownership is derived
cal liberals do about the overextension of                                                               from labor, because each person has the
copyrights and patents? They should first                                                                right to the fruits of his industry. There seems
of all take care to conserve their rhetorical                                                            to me a strong argument that the creativi-
resources. As more and more rights win the                                                               ty that goes into an intellectual product does
label “property,” property risks losing all                                                              indeed create Lockean title, not simply to
significance.                                      James V. DeLong: “It is difficult to see why intel-   the particular paper and ink with which one
    We also need to keep a lookout for clear       lectual property should be regarded as funda-         expresses an idea, but to the idea.
imbalances in intellectual property. Not           mentally different from physical property.”               A second line of justification for prop-
withstanding the impossibility of delicate                                                               erty involves the utilitarian or incentive
balances, we can tell when copyright and           erty. In both academia and law practice,              argument that Tom mentioned. People work
patent fall seriously out of whack. Just as        there appears to be little cross-fertilization        hardest and produce the most when they
Soviet planners surely knew that one kopek         between people involved in the two areas.             produce for themselves; money matters.
for a tractor was too low a price, for instance,   I was recently at a gathering where a bunch           This is as true for artistic expression as it
we can be sure that if Congress passes a bill      of Hollywood types were bemoaning Nap-                is for shoemakers.
mandating that people making copies of             ster and kids with no respect for intellec-               Economic historian Douglass North has
DVDs will suffer death and dismember-              tual property. After a while, unable to restrain      commented that the great leap of the Indus-
ment, it has gone too far.                         myself any longer, I said: “Well, in every            trial Revolution was caused by societies’
    Finally, we need to think harder about         environmental context, such as wetlands or            developing ways to protect interests in inno-
“exit” options that can privatize intellec-        endangered species, you guys in Hollywood             vation—not just property rights but con-
tual property protections. If private mar-         have favored looting private property. Don’t          tract rights—so as to provide ways to make
kets can provide adequate incentives for           you think maybe these people are just prac-           innovation pay and to create incentives.
the creation of expressive works and nov-          ticing what you taught them?” The Holly-              Property is necessary to produce investment.
el inventions, after all, we want to move          wood people were utterly baffled.                     Who would forgo his current consumption
toward those markets.                                  My own interest in intellectual property          unless he got some future benefit?
    Thus framing the problem properly is           evolved from an interest in tangible prop-                That leads to the third theme, the polit-
crucial. It is not a problem of natural rights.    erty, particularly in connection with                 ical. Property diffuses power and rewards
It is today a problem of devising an effi-         environmental issues. The core of many                efficient administration. Ownership is a
cient welfare program that gives creators          environmental disputes—over wetlands,                 way of decentralizing decisions rather than
sufficient incentives and leaves the door          endangered species, zoning, and land preser-          depending on planning authorities. If resources
open to market-based reforms.                      vation—involves property. Governments                 are not owned, they will be allocated not
                                                   are quick to take property without com-               only inefficiently in an economic sense but
James V. DeLong: Here’s a good way to liv-         pensation as long as they can call it envi-           politically.
en up a dull day: walk down the hall at the        ronmental protection.                                     Property ownership is also an impor-
Competitive Enterprise Institute or Cato               Although there are important differ-              tant component of a democratic republic.
and ask, “So, what do you think about              ences, the reasons for recognizing intellec-          People do need a stake in society to ensure
Napster?” Instantly, you will have a fight         tual property really parallel the reasons for         that its politics does not run off the rails.
on your hands.                                     recognizing the more tangible forms of                    Pipes’s last theme is psychology. He says
    I especially recommend that this be done       property.                                             that property enhances people’s sense of
at lunchtime, for reasons that those of you            Property is a fundamental part of all cul-        identity and self-esteem. I would say that
who recall the food fight scene in Animal          tures. Occasionally one hears of noble sav-           property enhances not just the sense but
House will quickly understand. And I might         ages who share freely. But I do not know              also the reality of personal autonomy and
add that if you do not remember that scene,        of any of those anthropological legends               power, an important function of any social
you can rent the film for $3 at your local         that have survived real analysis. The gen-            order
Blockbuster, thanks to our wonderful sys-          eral rule seems to be that if a resource is               Whether based on natural rights or on
tem of intellectual property.                      scarce, or requires labor to create or con-           utilitarian concepts, Pipes’s arguments
    An interesting dimension of discus-            vert it into a useful state, then humans will         are deeply conservative in the sense that
sions of intellectual property is that they are    attach property rights to it.                         they have evolved over several millennia in
divorced from thought about tangible prop-             Harvard professor Richard Pipes notes                                       Continued on page 12

                                                                                                             January/February 2002 Cato Policy Report • 9
FORUM Continued from page 9                     one can make limited copies without pay-         CHINA Continued from page 3
                                                ing or permission. That doctrine arose large-
the context of many different societies.        ly because of transaction costs. If the dig-     ating fully funded private retirement accounts.
    Of course, identifying the basic justifi-   ital revolution reduces transaction costs so         Guo Shuqing, deputy governor of the
cation for property does not answer all the     that permission can be obtained and copies       People’s Bank of China, agreed that Chi-
questions, even in the context of tangible      made cheaply, then the need for the doc-         na should move toward fully funded indi-
property. There are questions of public         trine shrinks. (It does not disappear because    vidual private accounts to create a stable
facilities, technology, and infrastructure.     there are still problems of parodies and         pension system.
And there are commons problems, spillovers      other uses for which one might not want              Mao Yushi, director of the private Uni-
and externalities, and issues of technolog-     to require permission.)                          rule Institute in Beijing, argued for “a
ical change. For example, tangible prop-            Of course, one problem with the trans-       return from social security to individual
erty is regularly redefined because of tech-    action cost approach is the lack of any cur-     security.” In the heart of the Middle King-
nological change. A prime example is the        rent system for micropayments, neces-            dom’s communist stronghold, he declared,
old doctrine that if you own property on        sary if providers of intellectual property       “The contributor himself should have the
a waterfront you can build a pier. But if       are to make available their wares at prices      right of choice to determine in which
technological change makes it possible to       that seem fair to the users. For example, it     financial institution to apply his contri-
build a square mile’s worth of structures       would be nice if songs could be made avail-      bution.”
on pilings, suddenly your rights change.        able for 25 cents a track.                           Without clearly defined private prop-
You can’t fill up San Francisco Bay. Peo-           But the most important point is that         erty rights—and thus stock shares that are
ple used to own their property from the         technological change does not eliminate          fully transferable—there can be no real cap-
center of the earth to the top of the sky.      the need to recognize the claims of intel-       ital markets in China, said Dorn, vice pres-
Then the airplane was invented. Property        lectual property, and it is difficult to see     ident for academic affairs at Cato. Eco-
rights are subject to some reasonable lim-      why intellectual property should be regard-      nomic reform must come first, but, as Dorn
its, and to revision as technology changes.     ed as fundamentally different from physi-        reminded the audience, former Chinese
    The same revision in the light of tech-     cal property.                                    leader Deng Xiaoping said in 1987, “With-
nological change should and will occur              For all those reasons, I really think that   out political reform, economic reform can-
with respect to intellectual property rights.   intellectual property is a sound institution,    not succeed.”
    For example, many current copyright         not a necessary evil but a necessary good,           Tanner, director of Cato’s Project on
issues involve fair use, the doctrine that      and it needs protection.                    ■    Social Security Privatization, gave an
                                                                                                 update on the privatization effort in the
                                                                                                 United States and why that effort is so
                                                                                                 important for the future of freedom and
                                                               Cato’s Mencken Research
                                                                                                     China’s capital markets can benefit
                                                               Fellow P. J. O’Rourke, author
                                                               most recently of The CEO
                                                                                                 from pension reform, said Fred Hu, man-
                                                               of the Sofa, spoke at Cato        aging director of Asia Pacific economics
                                                               seminars in Chicago, Austin,      research at Goldman Sachs in Hong Kong.
                                                               Los Angeles, San Francisco,       Creating individual accounts and allow-
                                                               Denver, Houston, and Boston       ing a range of investment options will
                                                               in October and November.          increase investment returns and strength-
                                                               Host for the Los Angeles          en China’s capital markets. The elderly
                                                               seminar was the Ronald            will have a higher standard of living as a
                                                               Reagan Presidential Library.      result.
                                                               At every stop Cato Sponsors
                                                                                                     Other speakers at the conference (fund-
                                                               and other attendees lined
                                                                                                 ed, in part, by American Skandia Inc. and
                                                               up to get their books signed.
                                                               O’Rourke is now writing a         Aegon) included Ling Li of the Hong Kong
                                                               column for Regulation             Polytechnic University; Wang Yan, senior
                                                               magazine, alternating with        economist at the World Bank; David Hat-
                                                               magician-commentator              ton of the ING Pension Trust; John Green-
                                                               Penn Jillette and occasional      wood, chief economist at Invesco Asia, Ltd.;
                                                               guest columnists.                 and Francis T. Lui, director of the Center
                                                                                                 for Economic Development at the Hong
                                                                                                 Kong University of Science and Technol-
                                                                                                 ogy.                                        ■

12 • Cato Policy Report January/February 2002

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