 Welcome to Nothing Exempt. I am Nick Partini and I'm here with Brian Piotter and we have a special guest today, Stefan Kinsella. Before we get to our guests, just like to mention for those who have been listening, we've got a lot of new listeners since the Mark Fawber show a couple days ago. The best way to find us is on nothingexempt.com or on the Reddit Nothing Exempt or on Twitter at nothingexempt. Please review us on iTunes and spread the word of the show and we'll continue to bring on good quality guests and make this more engaging conversation. And also a quick note from our sponsor is the Cause and Effect Report. It's a way to learn more about the markets and macro trading from the direct perspective of a hedge fund trader. It kind of just helps you figure out like some of the big picture trends and how to position your risk in the right way and pick the right companies to profit off that. However, the Cause and Effect Report on the loan is not investment advice. You still need to do your own research, but it might be a good way to just make you think a little bit differently about financial markets. Now, Brian will introduce our guest. Well, Nick, you already did that, but Stefan here is a patent attorney in this great state of Texas. And he is also a libertarian, which seems like quite the contradiction. And Stefan, I haven't introduced myself. My name is Brian and I am a mechanical engineer. I happen to have my name on a patent and I've attempted another one and I've become very disillusioned by the whole system and know that it is a giant big waste of money and a way to go after small guys with lawyers. So I wanted to hear from you. What's it like trying to run into the patent system as a libertarian? Do you feel like you're making a big difference every day you go to work? Or does it feel like it's a making a myth that is going to win in the end? Oh, that's a good question. I mean, it's not a career path I would necessarily recommend. It's a career that would not exist in a free market where there wasn't patent copyright law. It's like being an oncologist, a cancer doctor in a world where there's cancer. You hope that you can have a world where there's not cancer, but so long that there's cancer, there's a need for cancer doctors. Or so long as there's the state prosecuting people for tax violations or for drug crimes, you need defense attorneys. So they do a useful service given the system that exists. And that's what patent lawyers do. So given that the system exists, they perform a useful function for companies who have to navigate and respond to the system. But ultimately, everything we do is a wasted, is a waste on society because every dollar that's been on us could have been spent on something peaceful or productive or, you know, it's a total waste. It's hard to get motivated to do it. And then you also have to make decisions about, am I going to help people use patents aggressively or just in one way? And that's hard to do in a career in this world. So I've tried in my career to just say, listen, I'm going to put my foot down and say, I will help people obtain patents for defensive purposes and defend themselves, but I will not participate in aggressive use of patents. But not everyone has that luxury. So the whole system corrupts everything and the whole legal system. Okay, Nick, what's your first question for them? Okay. I'm probably on the other side of this debate versus both of you in terms of the idea of intellectual property patents, because I think they have value. And especially in a knowledge economy where people are paid based on their intellectual property and their expertise, you need some way to protect that. First of all, my first question is say if you're like an author or if you are a financial expert or a person who has something that is unique that you do not want to be copied, but you want it to be distributed. Like a good example of this is writing a novel. And if there's no copyright protection, anybody, especially in the age of print on demand and e-books and just to make a free copy or cheaper copy of your book and sell it and you don't get any of the rights for it. I know there's piracy now, but what would the legal framework to reward creative people for their talent? Or say like, for example, with like Disney, if they make like a cartoon series, but without copyright or intellectual property, somebody can make the exact same one and mess up the story came in or to damage their brand or dilute their product. Like how do you protect creative people without intellectual property? Well, so you understand, you just asked me about 10 questions and you had about 10 presuppositions and you didn't clarify any terms. So you're kind of just hitting me with a barrage of things, which presuppose a lot of status ideas. So let me ask you, are you a libertarian? It's a really simple question. I would not consider this a libertarian podcast. I mean, my views are more about 80%. Yeah, I would say you're libertarian on most things, but then you run up against these really weird parts like intellectual property. I'm asking because if you're a status and you're in favor of the government using coercion against people and hurting people, taking their property without their permission, then of course you'd be in favor of intellectual property because that's what that is. So if you don't have a principle basis for favoring peace and freedom and property rights and the non-aggression principle, then we don't really have a common basis to have a discussion. It'd be like if I was a Jew and you are not the concentration camp guard and you wanted to put me in my cage and I was trying to explain to you why you shouldn't do it. You think Jews are inferior and should be killed and I don't know where we can go from there. You just kill me or maybe I kill you. So if you're not a libertarian, we really have no, I can explain to the libertarian case like for people that prefer peace and private property rights and freedom and a principled case against the state, I can explain why intellectual property is bad. But if you just hit me with a barrage of questions like, hey, tell me, dude, how can I make my novel make money, dude? I mean, I guess the answer is, I don't know. It's not my job to tell you how you can make money publishing a novel. I mean, it's just using as a hypothetical example. I just think of intellectual property as any sort of other private property. Yeah, but I asked you a question, are you a libertarian or not? You can't even answer that question. So are you a libertarian or not? I'm probably not, I'm not stated. You don't even know. I mean, I don't know how to answer this question. If you're not a libertarian. I lean libertarian on most things but on this issue. So you're against aggression usually, but sometimes you're in favor of the government using aggression against innocent people. Is that right? I like you, Stefan. I should have you on as much as you're willing because this is fun to see Nick painted into a corner. Well, it's just you have to know who your audience is and someone, you know, someone is a status and they want, they want me to tell them. I mean, I just want to know, are you against aggression or not? Are you in favor of private property rights or not? Yes, I'm in favor of private property rights and I just think intellectual property to be one of those private property out there. Well, then why don't you define for me what you think intellectual property means? Intellectual property is either through patent or a copyright. It's a creation that somebody makes that you have as your exclusive right to sell, which is that you don't know what it is and that's not a definition. But you think the word I heard in there was the word creation. So you have in your head this idea that if you create something, you have a property right in that thing that you create, right? So you kind of probably think that if you use your intellectual creativity or your labor and you work hard at something, then whatever results from that you have a property right in. That's kind of your basic thing here, is that correct? Yeah, that's correct. Well, that's totally wrong because you don't own your labor, first of all, and you don't have a property right in the fruits of your labor. All we own is scarce resources in the world. This is the entire purpose of property rights. Property rights are a solution to the problem that we live in a world of scarce resources where there are things out there that we want to use to accomplish things in the world, but they are scarce, which means that only one person can use them at a time. So there can be conflict over these things. And people that are interested in peace and cooperation want rules to say, okay, for this resource, A owns it instead of B. And that's the solution to the problem. And then they go about their business and they use it and that we have a division of labor economy specialization of labor. And everyone can trade with each other and everything is fine. Okay, so that's basically the roots of libertarianism, which I thought this is libertarian podcast, and that you guys would understand what it means to have free market principles and protection of private property rights. Okay, now you can't just make up a word like, Oh, yeah, I believe in intellectual property to I mean you might as well say you believe in property rights to freedom from fear and freedom from wants and freedom from deprivation and that your social security payments are some kind of property right to me what's the difference really, or you have a right to health care or right to an education or housing or closing or whatever. These are all positive rights that always take away from the negative property rights in cash resources that the legal libertarian system would always protect. So, I don't know what to tell you but there is no right to get rewarded for your intellectual creations. All you have the right to is the physical integrity of a piece of physical property that you own by one of the rules and there's only really two rules. One is, if you find something in the world that is unowned, you can appropriate it. Okay, that's called homesteading, or you can acquire it by contract from previous owner. So, contract and homesteading are really the only ways to come to own things. Okay, so there's a piece of land or a car or a stick or whatever, and the person who finds it or buys it from someone else can sell it to you in commerce. Right, and those are the only two legitimate ways there are also illegitimate ways theft, bribery and extortion. So, there's a political means and there's economic means. One is productive, one is expropriated. So, one is unlibertarian, one is libertarian. I am actually what we call, with quotes, a libertarian. So, I'm against stealing things from people, and that's what an awful property does. Patents and copyrights mean that the government tells some person they can use the government courts to prevent, to prevent a person who owns property from using it as they see fit. And to my mind that's theft. So now, let's go back to your question. Your question was, if I'm a novelist, how can I make money, right? Something like that. Well, let me ask you a question. How can you make money today in today's world where there is copyright? How do you make money with a novel? You write a book and you sell it, either self-publishing or through a publisher, and you collect royalties on every sale. I've written several books and this is how I've gone, paid on it. Right. And why is that impossible if there's no copyright? Because right now, people can copyright, they can pirate your book, right? They can copy your book. Yeah. Yeah. There's probably priority copies on the internet of your book if it's at all popular, correct? And if it's not popular, then we're not talking about a lot of money anyway. Yeah. But if the thing is, if it was legal to just copy and pirate books, everybody would do it and therefore basically the value is all. Wait, wait, wait, wait, wait, wait. Why do you think everybody would do it? Let me ask you a question. It's not legal now, but it is possible, right? It's easy to pirate books, correct? Yeah. I mean, let me ask you a question. Do you think that the Bible or Shakespeare's plays are covered by copyright? No. Okay. Well, why don't people publish Shakespeare or the Bible under their own name on Amazon now? Because there's no legal prohibition against that. Because the publishing company, it's the lowest marginal cost will do that. That was real. The thing is, it's not illegal. That's why. Because you as an individual cannot polish it as low marginal cost as a big distributor. That's why these classic books sell for a fraction of the price of newer books because the author does not need to be compensated. Yeah, but this doesn't happen. So you can't go on Amazon right now and find a pirated version of as you like it by Shakespeare or the Bible. It just doesn't exist. It doesn't happen, even though there's no legal prohibition against it. Well, that's because you can get it for free anyway on Project Gutenberg. There's no need to pirate it. Yeah, but that's my point is that if you write novels, you always face people that can compete with it, okay? And so let me give you the example. Let's suppose you started a new business, like you want to sell new circuits or new widgets or new bicycle chains or new circuit boards or whatever you want to do or new pizza restaurants. You know that if you're successful, then there are going to be people to compete with you, right? You will face competition, right? Yeah. Okay. So as soon as you make a profit and people see that you're profitable, you will face competition. And that will start making it harder for you to keep to maintain your profit levels. Now, is that a, from a free market perspective, is that a good thing or a bad thing? I think it's a good thing. I think free market competition is a good thing. Yeah, that is generally a good thing. The other thing is, in the place of intellectual property and patents, especially in the area we have with a lot of tech oligopolies right now, if you invent a new, say, technological software application at Silicon Valley and you have no intellectual property protection, what's going to stop Facebook or Amazon from putting out a business in like a week? Okay, Nick, can I answer that one? First of all, nothing. Okay. And they'll do it even if you have intellectual property and they'll stall you in court until you run out of money and you probably won't win. I think that the average American has this really misconceived notion of what the patent system is. It's about like the little man protecting himself against the big man and his mousetrap is going to be protected because he's a good inventor and now he'll be able to be rich. The big corporations won't put him down and make him poor by copying and stealing his inventions. But that's not how the patent system works. That's not my experience with it anyways. My experience with it is it's slow, it's convoluted, and your patent isn't worth very much at the end when you have it. And if somebody steals your stuff, you have to actually sue them and win a judgment against them in court, which can cost you millions of dollars, which you probably can't come up with. No, and that's all correct, but Nick basically is asking what to stop people from competing with me. And he's actually being inadvertently honest, I think by admitting that the entire impetus behind the patent system is to have the government come in and to interfere with competition. That is protectionism. You know, we call that in libertarianism and economics, we call that protectionism is protecting people from competitors. That's what mercantilism is. That's what protectionism is. And why would you be worried about the fact that if you make a product, people can easily compete with you. I understand as an entrepreneur, your job is to try to figure out how I can make a profit and keep the profit going. And what competitors what I say. Okay, but the fact that it's easier for someone to compete with you because they can just copy your novel or your or your design. If a lot of value of your product is embodied and things that are intellectual in nature and design oriented in nature and easy to copy. I understand why as a entrepreneur, you will be worried about the threat of competition. But that's the free market. The free market is that you face the threat of competition and people can copy and emulate you and do what you're doing. You know, if you build a log cabin and people have been living in caves before, everyone will see, oh, this guy built a log cabin. That's a possible thing to do. And because you've made this feature of the world public by doing it in public in a way that people can see, you've taught them something inadvertently or inadvertently. I don't know. It doesn't matter. But you revealed information to people and they are totally free to use this information to make their own log cabins with their own logs. As long as they don't burn your house down or take your logs to make their own cabin, they're not violating your property rights. And there's no distinction between that and between someone competing with you. If you open up the first Taco Bell in a neighborhood or the first pizza restaurant or the first hardware store or the first general store. Or if you start selling, you know, jumbo jets, or if you start selling smartphones that have rounded corners with the touchscreen, or if you sell a novel called Great Expectations by Charles Dickens. As soon as you release this information into the public, you have people learn from this and they're free to compete with you as they see fit as long as they don't violate the borders of your property rights. That is as long as they don't trespass against you. And if I copy your novel, it does not trespass against you because it doesn't take anything from you that you own. You still have that pattern. You still have the ability to print these novels. You still have the ability to sell them. You might not be able to sell them for as high a price, but you don't own the right to buy, to sell things to customers at that price. And Stefan, can I move into a different question but on the same topic? I've always thought that bringing the patent system down from the inside would be a little bit difficult, to say the least. But now that I've seen different people on the internet at Alibaba or Amazon and many other sites openly selling copies of things, I realize it has become almost impossible to shut down what is a thousand copycats. You're finally at the stage where it's not one or two or ten law-abiding companies in the United States that you're stopping from copying you and violating patents. It's a thousand little guys from all around the world selling globally on the internet. Do you think this could be the final, like, destruction of the patent system that keeps people from filing patents in the first place and going through the process anymore? Well, I think that the advent of the internet has severely damaged the copyright model. In other words, it's easy to copy things now, like books and design, things that are covered by copyright. And so I don't really think that things will ever be harder to copyright things in the future. It will be only easier because the internet is the world's greatest copying machine. So people can easily use encryption and BitTorrents and things like that. Some drives, whatever they want to do, they will get around these things. That's why only a small percentage of movies and music is now sold, so to speak. So the question is, what about patents? So patents cover the production of physical goods that have a certain design implemented inside of them. And because it's anchored in the physical world, it's fairly easy so far for the legal system of our status court system to enforce patent rights. But I believe that in the future, as the 3D printing type technologies and things like that become more advanced. And I'm talking decades down the road, when you can imagine a home printer or a community printer that could print an iPhone or something that advanced. Let's say 50, 60, 80 years down the road. At that point in time, it will become almost impossible to enforce patent laws just like it's almost impossible to enforce copyright laws right now. And I think that's a good thing. And I am hopeful that the advent of Bitcoin and other technologies will make it impossible for the state to enforce drug laws and tax laws and things like that. Every one of these illegitimate government laws, drug laws, tax laws, transcription laws, patent and copyright, state monopolized education. Every time we have a technological revolution that makes it easier for people to obey these laws is a good thing. I won't encourage people to evade the law in the open right now, but I think that in a societal perspective, the easier it is for people to evade these laws, the better. And the government will become more and more impotent and it will just wither away. That's my goal. That's my hope in the state. This leads me to another question. One of the benefits, I think at least side benefits of intellectual property. And I'd like to have your answer on this because I may be completely off base, but just based on like my observation of technological advancement, it really started to accelerate around the industrial revolution, which is also the time where you got the first development of intellectual property law as patents became kind of an incentive to push innovation forward. I mean, what do you think, like on the pace of technological change, how would that be impacted in a society that intellectual property. So, let's take patent law. So patent law was rooted in the practice of monarchs in England and Europe in the, in centuries ago of granting just monopoly so that they would write on a piece of paper. John Jones has the sole exclusive right to sell sheepskin or wine or playing games or playing cards in this town. And that was a monopoly privilege that he grants to them and usually an exchange for some kind of payment. Like he would say, I'll give you the monopoly to be the only one who can do this in this town. I don't have to give me taxes or help me collect taxes or something like that. So there's always some kind of arrangement. And it got out of hand. And so parliament passed the statute of monopolies in 1623. And they prescribed or limited what the monarch could do, but they retained his ability to keep granting these monopolies for technical innovations. So basically, it arose out of the practice of granting monopoly privileges, which is protectionism because you're protecting someone from competition. That's explicitly the purpose. And, you know, even your arguments earlier, you were saying like, how are you going to make a profit? I mean, the idea is that if the government gives you a monopoly privilege grant to make this invention, you can sell these things without competition. And so you can sell them at a higher price. You can make a higher profit and therefore you're incentivized to put R&D research and development dollars into it, right? So implicit in all these arguments is that you can sell things at a higher price. There was a monopoly price, which means you're ripping off the consumers, right? And that was the original argument hundreds of years ago for the whole patent system. And it was rained in and then at the beginning of the Industrial Revolution right around the time the United States succeeded from Britain. We put that under constitution. The Congress passed patent copyright laws and we started having these laws and then Europe, Europe followed suit. So for the last 200, 240 years, we've had an institutionalized, democratized data diversion of patent copyright laws. And everyone assumes that because they accompanied the rise of industrial progress in the West and the U.S., they are a type of copyright that goes hand in hand with incentivize the innovation and promoting progress and promoting wealth. That's the assumption, but there's no proof of this. In fact, all the econometric studies of this prove the opposite. You know, they showed that the patent system is a drag on innovation. It's a cost. It distorts innovation. It makes people not invest resources in a given field because they know that they can't compete in this field. Because if I compete in this field, I'll be sued into oblivion by Apple. Like if I want to make a new smartphone right now, I don't have any patents to defend myself. I'm a small guy. I might have a new, a good idea for a new smartphone. But Apple and Samsung and Motorola and Google are going to sue me into oblivion with their treasure chest of huge patent portfolios. So what happens is the patent system results in oligopolies that wouldn't exist without the patent system in the first place. Because without the patent system, there would be no barriers to entry, no legal barriers to entry. People could easily compete and they would be able to make a duplicate of a smartphone if they wanted to. A duplicate of the iPhone as long as they didn't defraud people. And that's a fraud law case. So the patent system hinders innovation and distorts the entire scientific culture and it makes us poor. I mean, I literally believe that we are, the human race has been retarded by centuries because of the patent system. The last 240 years have been an amazing period of industrial advance, but it's been despite the patent system, not because of it. And that's not to mention millions of people who may have died due to protected drugs, patents, who couldn't afford drugs. Maybe not millions, maybe hundreds of thousands, but if your drug would have been $200 without the patent system, but it's $5,000 a month, then maybe it's a bad thing. But hey, that's just me. I totally agree. So before we go, is there something that's on your mind that you've been reading about these days that you want to talk about or any other questions that's on your mind right now? Nick, sorry, talking to Stefan. No, I'm open to any questions you guys want to ask, but I talked about property rights, IP, anything that people are interested in and I try to answer it. Bitcoin, of course, is one interesting topic and the question of whether Bitcoin can be owned and legal issues like that, but that's a little bit esoteric for some people, depends on who's interested in it. Well, actually that leads me to two questions. The first one is how would you have, how would a service economy, or not a service economy, like an innovation economy work without intellectual property if a lot of creative people are compensated? Like how would you design your, like how would people legally, maybe not have a patent, but what would the alternative be in your non-patent world? Nick, no, let's just go over it. So you're asking what would people do to protect, to have trade secrets? Is that what you're asking? Yeah, so, yeah, that trade secrets without having their product be reverse engineered. Like, I mean, I'm not an expert in patent law, but that's a general question. Well, I have a little monograph which Jeff Tucker published at Lucifer Books a couple of years ago. It's something like doing business without intellectual property. And it's basically like kind of quasi-practical, quasi-libertarian advice for if you want to try to avoid using intellectual property, here's how you can understand it and do it. And it's on my website, c4sis.org. I don't necessarily recommend that people pretend like patent and copyright and trade secret law don't exist. It does exist for now. I hope it will be abolished eventually, but in the meantime, you have to use it. I think you can use it judiciously and morally and try to use it only defensively and not aggressively. So, for example, trade secret is like everyone thinks that trade secret means that you should have the right to keep things secret, but you already have that right. If you have the right to protect your property rights and your body, like your factory, your house, your body, your printer, you have the right to keep things secret. No one's going to compel you to make things public. So you don't really need a separate right called a trade secret right to keep things secret. It just means you keep things secret. Just like if you keep a secret from your friends, you don't need a body of law to say that you have a right to keep things secret from your family or friends or whoever. You just do what you want to do. You reveal information you want to reveal or not. So I think that in today's world, most companies, like let's say some startup high tech companies, you probably should consider whether some of your innovations that your engineers come up with, you should file a patent for them. Now, whether you should rely on the ability to sue people and to extract settlements from them, basically to become a patent troll. As your business model, I think that's probably fun wise. On the other hand, some patent trolls have become fabulously wealthy. So the problem is not the way people respond to legal incentives to legal incentives themselves right. So, you know, it's like the typical critique of the welfare recipient of the Archie Bunker conservative who worked all his life and he stayed for his retirement. And he gets annoyed by the fact of some minority in the shopping line when Dixie getting a steak with welfare food stamps. And so he gets angry at her. But if you have a troll, pigs will come to it. If you give away free things, people will take the free things. That's the problem with doing that in the first place. The problem is not the people that respond to it, the problem is with the system itself. And the same thing is true with the patent and the copyright system and the trademark system. If you have such a system, people will have no choice but to take advantage of it. You know, if you're the board of directors of a company and your engineers come up with unique designs, you would be irresponsible not to file a patent on those designs because you could exploit them later either defensively or offensively. So once you set in motion a system, people will respond to the system. And the problem is not the people that respond naturally to these incentives that you set in place. The problem is the incentives that you set in place in the first place. So we should not have a patent system. We shouldn't have a copyright system and we wouldn't have these problems to worry about. Yeah, that also leads me to the question of cryptocurrencies versus gold. Whereas gold is a physical commodity and you can't, at least with current technology, replicate gold molecules at a cost-effective level. Whereas since there is no real intellectual property in the cryptocurrencies, you can make your own copy of a Bitcoin with the same exact properties, label it something else. And that kind of effectively dilutes the money supply. I mean, what is your view on gold versus cryptocurrencies? Does cryptocurrencies need intellectual property to be viable? So I think you have a point in that one defect of any real-world currency is that it's not ideal. In other words, gold is not perfectly scarce. It can be produced or found, right? So supply is limited, but it's not zero. It just takes more resources to find more gold or even to make gold. But it works good enough to be a currency, right, to be a medium of exchange. Bitcoin, if you look at Bitcoin itself, the one Bitcoin of all the other cryptocurrencies has a limited supply, $20 million, about the year 2040. And therefore, it's got advantages over something like gold, but it's got disadvantages. The disadvantages or legal ones, mainly like the government treats it as a commodity which is subject to capital gains and sales factors and things like that, which severely hamper and impede this adoption. But I think that's temporary. I mean, this is just temporary in the phase of human evolution. So no, I don't think intellectual property wouldn't help Bitcoin at all. I think Bitcoin just needs to be released from government restrictions like being classified as a commodity and being taxed. If the government would just have a hands-off approach and stand back and let it do what it's going to do, then we'll see what Bitcoin is going to do. And I think it probably would out-compete fiat currencies because it's got advantages in almost every way to these currencies. But it would take time. So classifying as intellectual property only reifies the intellectual property concept and intellectual property, as I believe it, is one of the biggest, the largest of ways the government creates destruction and harms human race. I mean, it's up there with war and the drug war and taxation and central banking and public education. So, you know, we don't want to extend the intellectual property idea to Bitcoin. We want to free it from government clutches. Okay, well, you have given us a lot of time today and I really appreciate it, Stefan. I know that you're a busy man and coming on this podcast is something you didn't have to do. So I just wanted to say thank you. And if there's any way that a listener to this podcast can find you, how would you prefer that they do that? Oh, just go to StefanKinfella.com and everything is findable from there. Okay. And I did want to remind you that we did a poll on who to invite on the podcast and you were number one, and that's how we found you. So I'm really thankful to everybody on Reddit who suggested you because I had a blast today and listening to you go after Nick on this is just made my week. Is there anything else? Hey, Nick, is there anything else you wanted to say before we close off? Well, no, thanks for coming on. I mean, I agree with libertarians are like 80% of issues that this is one that I have a different point of view and I like to see the other side and ask them questions about this. So thank you for taking my questions, Stefan, and I learned quite a bit from this podcast. You're welcome. Glad to do it, guys. Okay, until next time.