 Sure remind me what we're um it's just you and I chatting for a little bit um how long did you need to talk um well probably only about uh seven or eight minutes of this we'll go into the project right but in order to cover all the ground I want to maybe 25 minutes or so that's fine just want to understand the timing yeah that'll work yeah okay that's that's no problem at all were you calling from uh i'm an austin right now right now oh austin okay are you ut or what yeah yeah i'm at ut okay what are you studying there uh i'll have a double major with computer science and history so oh cool this goes into the computer science uh degree one of the courses there uh and then the history degree was sort of uh just added in lieu of taking elective courses were you involved with the uh those libertarian groups there are the austrian groups or any of those that ut to some degree uh i have some scheduling conflicts with that this semester but i'm in i'm involved in the libertarian longhorns to an extent and uh i've been to a couple of the mesas circle events on campus isn't there a uh liberty on the rocks group there i don't know there's one in houston i don't know if it's there yet um there may be i i don't know of it do you know norman horn uh i do know him yes yeah yeah he's a piece of friend of mine he's a good guy yeah um yeah i haven't had uh too much of a chance to interact with him since he's uh he's since i got here he hasn't been around as much right right from talking to him he seemed like a very nice knowledgeable person yeah all right so what's this computer science course that we're doing this for what's the um what's the person uh the name of the course is contemporary issues in computer science oh god it's okay there's a section on intellectual property as part of the course um okay so this assignment uh is not necessarily focused on uh intellectual property within software and within the tech world although a lot of the way it's being covered in the course is but this is more just uh sort of what is it and uh what have the effects been of these laws and okay having this notion of intellectual property got it got it um okay all right so this should be recording and um i guess we'll jump right in done sure uh okay so let's just start out uh if you wouldn't mind telling me what is property how how would you describe property well so i actually this is something i've been focusing on in recent months um i think actually the the very concept of property the word property is often misused or used in a misleading way um so the way you just asked it is probably the contemporary way um of identifying ownable things and you call them property so like you say what's your property like so that car is your property um i think that's potentially misleading i don't mind using it i use it myself sometimes it's potentially misleading because the idea of property is just a characteristic right it's a feature of something and it was originally used to refer more to the property right between the human actor the human being the owner and something that he has the right under the law to control a legal right to control some resource so really the way i think of it is property rights or ownership relations between human beings and certain resources as recognized by other human beings in society which is why it's a law or a legal institution um the word property is used ambiguously sometimes to refer to the thing that's owned and sometimes to refer to the relationship between the person and the thing but if you're like a scientist describing the the nature of an entity or a feature of reality you might talk about its properties right or its features or its characteristics and i think that's originally how property was used the idea was that we observe that human beings um act we we move around the world we do things we have purposes we have ends we have aims and goals and we do certain actions we perform certain actions to achieve these ends or goals um the actions we perform or an attempt to apply our knowledge of the way the world works combined with the things we can physically actually control to change the course of events to achieve our ends okay so the entire idea of human action is that um you employ certain what Mises the Austrian economist Ludwig von Mises called scarce means you employ these scarce means or you could think of the material resources or scarce resources you employ them to change the events of the world and those means include your human body and effort that you put out combined with things that you use like tools right or objects and because these things extend the range of your effort they are a property of you that's why we started using the word property so the first thing i would say is let's be careful about the word property because if you use it a little bit indiscriminately then the question starts becoming is that property is that property is that property and then who owns it without first asking is that the thing you're referring to the type of entity or object that ought to be the subject of property rights in the first place so for example if you see a runaway black man in 1825 in the us your question might be whose property is that right but you know the first question would be there's a human being who owns his body presumptively um who's the owner of that person it's it's him why should someone else be the property uh the owner of that property now i would say that property rights refer to exclusive rights of control recognized by an established legal system in a given society and the legal system does not have to be um a state or government based legal system it can be just conventional or customary or anarchistic um just in general terms theoretically um it's the recognized right to control a scarce resource which is a means of action so property really in the economic sense refers to anything that is a scarce means of action something that we need as human actors to to to employ to get what we want so typically that would include our human bodies which is one special type of scarce resource or property some people would say and any other external resource in the world that is usable to accomplish an end and that was previously unowned and if it was previously unowned then someone can be the first one to use it and thereby establish a prior claim or a better claim than anyone else who comes after except for someone that they contractually transfer that thing to so in a way with this very simple question um it impacts a lot of the the essence and elements of libertarianism and the austrian political theory okay um now for more of a uh historical perspective i guess how did these notions relating to property rights uh begin to transfer over into uh creative works and into a more uh intellectual sense i guess how did that develop you have a way of asking extremely short simple questions that would take three hours to answer um it's a good question um here's my and by the way what i'm telling you is my particular perspective on things and that's why you asked me but i don't pretend that i am stating the uniform or the universal view that everyone holds this is my perspective on things so i'll be upfront about that um if there's something that's generally accepted i'll let i'll i'll i'll try to to indicate that okay yeah and i want your personal view on on these things so my and this is my personal view that i've developed after about 30 years of thinking about this and and uh having an initial set of views and they refine and then you think about where they came from and what makes sense and then why did people go astray why did they come up with these terms so this is what what i've kind of come to um first of all i think property rights as a system is a natural institution of human society um it's even natural and non-humans i mean even a dog will growl when if you approach them when they're munching at their meal right they're sort of an innate sense of of possession and not only possession of this material object this means this scarce resource but the kind of right to control it like the the first dog there there's an assumption that he has the better control over it that's why the others back off um now that's not a perfect analogy but humans i think because we're social creatures because of the way we've evolved in human cultures developed um our natural values are very social we value each other we have empathy for each other um there's a value to being part of society there's also a value to participating in the division of labor and in being recognized socially as having a reputation for being someone who um is going to be a reciprocator right someone who respects rights as long as people respect their rights now you could say well why not just be a cheater the problem is we we have minds and we live by concepts and we live by principles and it's not easy to live in an ad hoc fashion all the time and people do tend to know each other's characters and and they that's why reputations matter and are useful and develop and therefore there is an incentive or a reason why actually just adhering to certain principles and having certain integrity and have a certain character um makes sense which is why I think overall most people tend to be civilized and respect rights and and want to have some kind of system of rules that are socially recognized that we can all agree to and abide by that allows society to function and allows us to all be better off so I think that's the general context of why these property rules arise yes they have arisen primarily and largely in a governmental context um and I don't think that's necessary but that's just the the way it's it's happened they've also arisen in a context where there's always a small number of people who will who will deviate and will be criminals um and we accept that that's like it's almost like an insurance type of of calculation we recognize that um there are going to be some cheaters some malefactors some bad guys and then we come up with institutions to deal with them as well so then the question is what rules are going to naturally emerge and that people would adopt and I think it's basically the ones we've mentioned already it's the first possession because that's the natural way to figure out who owns something or actually current possession whoever currently owns something is sort of like initially presumed to have the default right to control it uh unless you could show that they had taken it from someone else in which case then it goes back to a more deeper question who who had first acquired it and then had been robbed of the item with some supplementary rules about contract and things like that so that is the basic underpinning of the entire western and indeed universal reason around the world and in human history why there's always been a prohibition against theft and there's always been some kind of dim recognition of self-ownership rights at least for certain people and why murder has always been considered to be a crime and wrong the basic notion is that we need rules that allow us to live in peace with each other and cooperatively and use these resources that are scarce productively without having to fight over them all the time and the rules that people tend to adopt or the Lockean rules the rules that are laid out at John Locke now you asked about creativity and ideas so here's where I think how we've arrived at the current situation the current situation just in brief is that we have an overly legalistic understanding of what rights are it's overly legally positivistic that is everyone thinks of law now is what the government legislature decrees in statutory form so if you say show me the law you want to see a written law issued by a legislature now this is one type of law it didn't used to be the dominant type of law and I don't think it's a legitimate type of law at all but the point is that everyone now thinks of law as as the the decrees of a branch of a government and today a democratic socialist kind of western type government right with a part of the parliament or a congress an executive branch you know a legislative branch and judiciary that's how people think of what law and what it is okay now so so back to Locke Locke was trying to come up with a justification for this kind of basic natural state of laws the basic idea that you know if you acquire a resource that was previously unknown you have a better claim to than someone else that's sort of the essence of the western property idea the essence of libertarianism the essence of all legal systems I mean the details are interesting but that's the basic idea now Locke was responding to a guy named Filmer who was sort of defending the the feudalist system and Filmer was trying to argue that look God and everyone had to agree with God because this was you know two 300 years ago so even so even Locke didn't deny that premise but so Filmer was like God owns the world and he gave it to his creation which was Adam the first man and Adam owned the entire world and was able to transfer it to his descendants which justified the monarchies or the feudalistic system you see and so Locke wanted to get away from that he wanted to defend a more individualist decentralized perspective so he said no no God gave the world to man in commons which to our mind means unowned okay in commons unowned sort of the same idea and therefore as long as it's unowned or unused the first guy that comes along and starts using it is the owner now why because he owns himself now he bases this upon you know God gives everyone a propriety in their their own body again the word propriety is used as a relationship or right between the person and the material resource of his body the body is not his property it's a property of himself or there's a proprietary relationship okay so you own your body according to Locke or yourself as he calls it somewhat metaphorically and therefore you own your labor things that you do with your body and therefore you own unowned things or things in the commons that are not previously used by someone else that you mix your labor with so this is where the labor idea comes into the picture it comes into the picture with Locke's kind of metaphorical quasi-religious argument in defense of or in response to feudalism okay now I think that's where the that was a mistake and that's where the mistake set in now what it and I'll explain in a second why I think it's a mistake but what the mistake led to was this modern notion of intellectual property okay basically it it unmoored the question of property from the simple question of if we find a scarce resource that is something that two or more people can have a conflict over okay if we find a resource like that and there's a conflict and we need to decide who owns it we can we can answer that question by resort to the basic questions of first possession contract maybe tort but very simple questions okay so the question is always for the libertarian for the properitarian libertarian identify a scarce resource that is possibly in dispute and then answer the question who has the property right in it that's the question question is not what is property or is that property but from the locking point of view you got you we were unmoored from that anchor because of this labor issue so then it became an analogy type of argument or an overly metaphorical argument so the analogy is well we all sort of know intuitively you know our concepts aren't really well developed we all we know intuitively that if I build a farm or an unused piece of ground that I am the owner of that and if I have bred these cows I'm the owner of that or if I've raised these crops I'm the owner of that or if I've made an axe out of steel that I found or iron ore that I found I'm the owner of that and that's all true but what the reasoning was was well why are these things more valuable than they were before well because I labored on them and I own myself and I own my labor so it's sort of this combination and that's not actually incorrect I think it's just overly metaphorical not precise and it can lead you into error as I'm about to try to demonstrate so the idea is that I own my body I own my labor whatever that means and I I therefore own the increased value of these natural resources that I homesteaded okay so then they said well by analogy or or maybe by induction they said well the general principle here is that you own the fruits of your labor you'll hear this expression a lot the fruits of your labor now on the law the word fruit simply means the result of something in fact in the civil law the second grade legal system in the world if you make interest on a loan it's called civil fruits a natural fruit would be you know the calf of a cow or the actual fruit falling from a tree and the idea is that if you own the tree you own the fruit falling from it natural fruit if you own a cow you own the calf that comes from the cow natural fruit if you have a piece of capital that you can invest and get rent on or interest on the interest is the civil fruits and you own that because you own the resource and I think that's all true but the reasoning is not correct the reason that I own the the fruit from the tree is because I own the tree it's not because there's a general principle that you own the results of things that you own but if you if you make that inductive argument then you get to the point that we've gotten to now then you get to the argument that well just as I labor on the fields to produce crops and I quote therefore own the results of my labor there's a general principle at work here and that's that I own the results of my labor and in fact John Locke said that we own our bodies and we own our labor therefore we own the results of our labor now fast forward to the modern world where we have technology high technology now software computers international commerce and trade and a widespread recognition of the value of commerce free markets international trade technology and so on and a widespread understanding that labor is not just physical labor labor can be intellectual and it can be mental and you can produce great things with your mind or with mental efforts so all these ideas blend together to lead people to assume that just as the product of your labor in a physical sense like a farmer owning a field ought to be subject to property rights therefore the product of your labor in a mental sense ought to be subject to property rights and this has resulted in being this has been used as a justification for various intellectual property regimes most of which have been legislated the two primary ones are patent and copyright trademark and trade secret are also important for the software context I think probably copyright is the most important patent is probably number two and trade secret is is is somewhat used as well so that's what has happened actually in fact I think that these legal systems especially patent and copyright originated for totally different reasons that we understand now and these justifications were given after the fact so copyright arose out of the desire of the church and the state in their unholy alliance to control thought to censor speech to prevent the unauthorized spread of ideas by the Gutenberg printing press that the church and state didn't want spread so this was originated from a system of state control it's basically control of thought and censorship and it still results in that today by the way after the fact it became regularized and institutionalized and co-opted by the stationers guild and the publishing monopolies and all this and then when people start criticizing it then they say well we know that their natural rights based upon labor and all this so they kind of come up with an ad after the fact justification patents were similarly not the result of anything like Locke's original theory in fact Locke did not agree that his homesteading idea justified intellectual property rights he he agreed that they were just temporary civil measures the government could undertake to to promote some kind of activity in the economy so he didn't think there were natural rights nor did the american founders by the way they were not viewed as property rights which is why they only last a finite amount of time right patents last roughly 17 years copyrights around 100 plus years if they were real natural property rights they would last forever right so the patent monopoly originated back in the practice of the monarchs the king the crown granting basically protectionist monopolies to various favored court cronies and other people so one guy gets the right to sell playing cards or export sheepskin or whatever in a given region and in exchange he grants loyalty or maybe even helps to the king or maybe even helps the king collect taxes so it was basically a grant of protectionism and monopolies which is why the very first patent statute 1723 in england is called the statute of monopolies i mean no one this is really not disputed it was the statute of monopolies okay so and then after the fact you know the people trying to justify these provisions so basically 1700s this was becoming more regular in england and when the us was founded 1789 the the framers put copyright and patent into the constitution as powers congress had okay they didn't really give a lot of thought they didn't give i mean i think they were going by mostly by inertia and partly by self-interest a lot of them had you know these are the most educated people at the time so these are going to be the guys that are the authors so they have some interest they were the most intelligent guys some of them are going to be the most prolific inventors jefferson you know ben franklin et cetera so you could see why they would put that provision in the constitution um they didn't have any empirical study showing it was legitimate um they didn't have a theory that of why it was legitimate um but so these systems got started and then then you have copyright and patent battles start happening in the ensuing decades the economists becoming increasingly free market in europe and the us start going these are protectionist measures by the state which are contrary to the free market and to individual property rights and human freedom so there was a huge backlash and a huge battle and in response by now there had been vested interests who had risen up who were dependent upon copyright like the publishing industry and patent like various centralized corporations and um you know companies like this so they start mounting a rearguard defense and their defense is well it's really a natural right is a type of property right it's part of commerce it's part of capitalism how dare you what you're are you against innovation are you against creativity et cetera you know forgetting the fact that patent law originally stifled innovation it still does and forgetting that copyright originated in the attempt to stifle free thought and free freedom of expression um so i think that's what happened i think the fundamental mistake was and i don't blame block for this he did a great job at the time but i think i do think it was a misstep um david hume who came later himself recognized that lock's argument is good and sufficient without that unnecessary step and by that step i mean this the the step that you own your body therefore you own your labor therefore you own what you mix it with um first of all as as hume pointed out saying that you own your labor is is overly metaphorical it's vague um you might as well say you own your action which is what mesas would call labor is the type of action and to say you own your action is sort of a weird expression it's in my view it's double counting it's double counting because you're saying that you have the right to own your body and you have the right to own your action but my thinking is that if you own your body that gives you the right to act as you please um it's like saying you have a right to your body and a right to privacy and a right to free speech like well there's not just thing as a right to free speech per se there's a right to do as you please as long as you're not committing aggression and if you have the right to own private property like a home or a venue you can say whatever you want within that venue or you could own a printing press private property rights give you the right to own a printing press which gives you the right to sell a book but it would be double counting to say you have a right to own a printing press and the right to sell books it's like well one the first one is sufficient to cover the second okay it's okay to look at the benefits of these rights um so i think that this this sort of imprecision in thinking um so to get back to Hume so Hume said that Locke's argument works if you take out that step and i agree with that if you basically say yes i own my body now why do i own my body well you can believe you own your body because god gave it to you i guess that means you're really god slave but compared to everyone else you own your body or you could believe you own your body because you are the one that directly controls it you have a better claim to it than anyone else unless you commit a crime which might change the presumption but the default state is you own your body now why would i be who would be the owner of some object some external resource it's not a human body and not a living actor with with a with a property right in itself it would have to be the first user because if it wasn't the first user you could never have a first user in other words no one would ever be able to go use a resource as an owned if if if they weren't going to have the the best claim to it if if the first guy that uses a resource is not the best claimant then the second guy who takes it from him doesn't have the right to keep a third person from taking it from him which means we don't have property rights at all which mean we're living which means we're living by a tooth and claw we're living by the law of the jungle we're living in a mites makes a right situation and we're not talking about ethics and norms and rules anymore at all anyway if you're going to have rules and norms as far as i can see but the only justified set would be the lock Ian the lock Ian set so i do think that there was a big misstep there i think lock did not need to say that we own our labor and he didn't need to say that we own things because we mixed we mixed our labor with them that we own he just needed to say that the first user of a resource has a presumptive better claim than anyone else and that would have avoided this entire false direction we've taken with defamation law reputation rights that is trademark patent copyright and even some aspects of trade secret law okay now one of the the things you mentioned in there was how these laws stifle innovation and creativity yes obviously you explain that you explain why that is to to an extent in there but i think the the general consensus seems to be that these laws are necessary yes for creativity and innovation yes so how how did that consensus arise and what are some uh i guess examples of of that okay flying out the way i just think it does so what i think happened is first of all i think in the luxury property especially nowadays patent patent and copyright um which i think have gotten to be a more significant part of the economy since the internet okay and since the international trade the couple decades before that um it's highly arcane highly specialized highly controlled by bureaucrats judges and lawyers and special interest groups who understand its workings and it's extremely complicated um so first of all i think most people don't understand it so they they um they accept the common wisdom they they they're in favor of innovation and they're in favor of property rights which is to their credit i'm talking about like the average intelligently sure and they have heard that um intellectual property is a type of property right well number one it's called a property right it's called interluxual property it wasn't called that originally it was called patent monopolies and statutes but then in defense in response to the the attacks by free market economists the the special interest groups started calling it intellectual property so it was just a propaganda move um so i think that the reason people believe this is because it's very complicated very detailed it requires a lot of economic understanding as well and they have accepted the propaganda that's been perpetrated by the by the state um and by the special interest that do benefit um at least temporarily from these government granted um monopolies um now there are two main defenses of intellectual property given by its defenders the primary one which is rife nowadays is a more of utilitarian or empirical argument which is the argument along the lines you suggested that um innovation as a general thing which would include artistic creation and um technical findings innovation discovery or either necessary i'm sorry intellectual property is either necessary for this or at least that we we have a lot more of it we would have a deficit of it without the law the second argument is more of a natural rights one no which is that you because you create something you have the right to own it now as i've mentioned i think that the second argument is pretty easily dispatched with um it's too many of these arguments of the latter type are almost semantic it's almost like saying it's arguing by possessives uh if if i have if that's my wife well i must own her because the word mine is possessive you know i mean you you can you can make these simplistic arguments and they do this all the time and the the proponents of ip i think are pretty much um um pretty much unprincipled and dishonest and they will switch back and forth um you take your typical patent lawyer which i'm a patent lawyer and most of my fellow ilk or favorite in favor of patent law a big surprise but almost none of them have a good argument for it right one reason that there's no good argument for it number two is they don't they don't care they just want to keep the money flowing so they will just say what they need to say to shut the argument you know to stop any kind of measure blocking them and to keep things going um the first argument is empirical and i don't want to be too critical of empiricism and utilitarianism um if there's a pragmatic aspect to it a consequentialist aspect the idea is that in general property rights laws that we favor have good consequences and there's nothing wrong with that that's a good thing um so let's just break the argument down into two types number one the argument which you kind of summarized earlier um innovation is impossible without intellectual property law or there would be no innovations without ip law it's really hard to make that argument and no one seriously tries to make it um you know you really cannot argue that if we abolish patent law tomorrow there would never be any more innovation in the history of mankind no one no one really believes that there would still be some right so instead their argument is that we would have less okay so what that means is they're imagining that there's some optimal or higher amount of innovation that we could have if we just change the law in this way so they really are just tinkering in the economy right they're their social policy um thinkers they want to adjust the levers of policy to maximize um innovation or to at least improve innovation a significantly large amount that the value of which to society is much greater than the cost because i think if you're an honest empirical advocate of ip which i think most people are they just don't know what they're talking about i think that's their their motivation i think if you said listen if patent law cost a trillion dollars a year in cost on innovation but it only resulted in 200 billion dollars more additional innovation it's not worth it right they would agree with that so their implicit assumption is the opposite of the case okay now as i mentioned earlier when the founders of the us in 1789 adopted the patent and copyright clause they didn't have any empirical studies demonstrating anything okay so it was sort of a hunch let's just say it was a hunch let's give them the benefit of the doubt but we've had 200 plus years of fancy econometrics and empirical studies especially in the last 70 years and you would think by now if they're right there would be some kind of clear empirical evidence showing that patent laws massively benefit the economy so my first response to your question about the empirical claim is that the burden of proof is on them to show it and by now they should have been able to show it right but they haven't all the studies are either or either they say we can't figure it out it's too messy which is not surprising because value is not really measurable um um or they conclude that from what we can tell in this sector of the economy copyright law or patent law causes a huge multi-billion dollar deadweight loss okay i'm just talking about what the studies show right so even in 2014 today right 120 or so 220 or so years after the founding we still don't have any kind of clear um showing um that the empirical case for IP is justified now you will hear dishonest disingenuous offhand arguments like well the US has been the most prosperous and most technologically advanced country for the last 200 years and we've had IP rights since the beginning so therefore IP rights must be the cause of that now in my view that's just a very simplistic argument which confuses causation correlation or vice versa you could you could also argue that because we've had tariffs or a war about every decade since 1789 uh or slavery for the first hundred years that's why we succeeded i mean these are they're correlations but they're not causation in fact i view i believe that it's the other way around so now why would why would patents cause um retard innovation well one reason patents would retard innovation um is that anyone seeking to compete with someone to make a similar product let's say samsung wanting to make in something like an iphone if they make it too similar which is what it means to compete um they're going to get sued for patent infringement and they know this okay and so a lot of companies never even do it in the first place which means they never engage in the innovative activities um that they would have engaged in to improve the product or to morph it so there's lost innovation there you know bostia and haslet talked about the scene and the unseen we can see the benefits of some policies if there's a food stamp program we see someone who can buy food now but we don't see the harm that's done to someone who had to pay the taxes for the food stamp and so that the cost of that policy is unseen and i think that's largely the case with innovation um you know people can point people who are advocates of government funding of innovation can point to tang you know they can say well you know we have billions of dollars spent by nasa on moon missions and one result was tang you know tang might be fine might be a great innovation it was popular for about three years i remember in the 70s but that doesn't show that the money that was spent as a developing tang and other things for astronauts um couldn't have been invested better better elsewhere another example is that a lot of companies have to engage in a lot of money to what they call design around a patent so if you are if you're aware of a patent out there which takes money to be aware of in the first place you have to hire patent lawyers like me just to research this and search it and educate you on this then you have to make a decision about what kind of product can we make that's going to be popular that's different enough from this other product that we don't get sued which means you put features into your product that you wouldn't naturally have done okay which means it's less efficient than it would have otherwise been which means there's a cost which means there's a waste um and when there's a waste there's less innovation right um because there's less resources around to stimulate the innovation that's another example so patents actually distort the entire process of innovation and research and development um in various ways so one way is that patents are awarded for practical applications of abstract ideas but not for the abstract ideas themselves so for example Einstein could not have gotten the patent on equals mc squared okay but someone who took that formula and used it to develop a transistor or maybe you know something else could have gotten a patent on it so what this does is it leads to a distorting effect in in science and industry where the more abstract fields are less rewarded and the more practical applications are more rewarded so what you have is a government pushing one over the other now you could argue that one is better than the other but there's no reason to believe that the government's decision is right and the government artificially distorting the economy and the you know the technology arena um is a good thing government distortion usually means government is destroying value so those are just a couple of examples there are um another example is if you think about the samsung say apple patent wars okay what you have is you have a cup a few very small of a small number of large players like apple samsung um Motorola and others and they're the manufacturers of say smartphones there's other examples in other industries like chemicals or laser printers or whatever but the reason there's only a small number of players the reason it's like a cart cartel or cartelized industry is because only these big players have the resources to acquire vast arsenals of patents that they can use as the bargaining chips with each other when they sue each other so you know if um apple sues um samsung or motorola or google the other guys can fight back with their own patents they can spend 50 million dollars a year on their lawyer's fees and eventually they come to a settlement which the shareholders suffer in the cost of uh you know reduced returns and the price of cell phones goes up by a few percent and the customers have no choice but to buy an apple or a motorola or a samsung but the price is five dollars ten dollars higher so they're paying these fees in effect but they have a limited choice because you have an oligopoly or a cartel because small players can't enter the field if you wanted to start a mobile smartphone start up tomorrow you're invariably bound to violate some of the patents of these big players and you won't be able to defend yourself you won't be able to afford three million dollars of patent lawyer fees just to defend yourself especially when you'd probably lose because patents are legitimate i mean they actually will be enforced quite often so the results in reduced competition cartelized oligopolized industries which have a lower incentive to innovate because they don't have as many people to compete with they can rest on their laurels so there's lots of reasons to believe that any reduction of wealth which is a result of any government program or action or any reduction in competition which is the reduction of a lot of government laws especially any government meddling with the technological sector of the economy is always going to reduce innovation and overall consumer welfare and wealth and freedom and this is exactly what the patent system has done and the copyright system has resulted in reduction of freedom and wealth in other ways as well okay now i have the trademark or trade secret systems had similar effects i guess those are more done at a state level right than a federal level in the united states well here here's how i'd rank them i think that the copyright system i think the patent system is the worst in terms of dollar amounts my suspicion is the patent system probably imposes half a trillion dollars a year or more on the worldwide economy or maybe more because of reduced innovation and related effects it's primarily it's like a huge tax on growth and technology the copyright system probably doesn't impose that much in dollar terms but it has heavily distorted the culture um the way we think about consuming music and media um and but it's it's it's even worse than patent i believe because it's the biggest threat to internet freedom because it's being used by the state as an excuse to increase controls on how people uh trade information on the internet because of copyright piracy so you have the stop online piracy act you have upcoming treaties like the transit living uh transit lending pacific partnership tpp right um things like this that are coming that that are serious threats serious challenges to internet freedom and i think that's so important because internet freedom is so important for liberty and to fight the state and and so copyright to me is one of the biggest threats um we have out there um it's being used along with pornography terrorism um gambling money laundering all these state regulations which are excuses the state uses to shut websites down or to go after people for just exchanging information on the internet bitcoin now but copyright's one of the biggest probably the biggest in my view so those are the two big looming problems um um i would say so if you want to put like copyright here you know patent here and then trademark way down here and trade secret way down here um trade secret is largely state in the us state level law it's developed out the common law but to my mind even that's unjust because you don't really need the government to give you permission to keep something secret right you can just keep it secret right the only part of trade secret law that is goes beyond that is that the government says that if you can prove you made a diligent effort to keep something secret and someone still leaks the information then you can go to a government court and get a court order an injunction against third parties people who had no contract with you whatsoever and the government can the government court can tell them um on pain of being in jail for contempt of court that they have to keep secret and not use this information so i think it's totally unjust i think that um if you have no contract with someone and you didn't steal the information or you didn't break into someone's property to get the information if you stumble across information then the government has no right to tell you not to use it um the person that has the secret should have been more careful with it and they're not too bad but it's not a big problem there's a couple of notorious examples i think apple uh remember when the iphone 4 s or something was left accidentally on a bar stool in silicon valley by one of the employees testing it when it was still secret and someone found it and started posting photos about it on the internet well apple's lawyers and the police showed up at this guy's house the next day um under the guise of trade secret law demanding to search the apartment and to take this iphone okay um so to my mind even trade secret law can lead to sort of quasi police state protectionist tactics although i don't think it's a big a big problem or a big factor trademark law is in between trademark law used to be a common law state law based thing primarily and it was said to be based upon a combination of two things number one the right to your reputation which i think is a type of ip right based on this locky and labor idea if you build up your reputation with the consumers you have a right to it and this is linked in with this economic or financial concept of goodwill you know they always kind of put this factor in the gap charts about how much of your business is this this where's the rest well it's in goodwill whatever that is um okay so that's one part of it which i think is wrong but gain it's not that harmful um and the second part is um they say that well it's it's a way of preventing consumers from being defrauded so if if one of my competitors starts using my logo in a deceptive manner it could defraud consumers and we all agree that's bad and i agree that's bad because i'm a libertarian and fraud is one thing that we agree is a species or type of aggression you you can't defraud someone however the trademark law even in the common law system even in the state law system uh and it's much worse now by the way but even in the original system never required the plaintiff in a trademark suit to prove fraud of a consumer so it wasn't a part of the cause of action you didn't have to show that the defendant was defrauding any actual person but yet they used this fraud argument to justify why we have these laws so they're having it both ways what they had to show was a likelihood of consumer confusion okay fine i could live with that if i had to it wouldn't be the worst thing in the world it's like fraud it's not exactly fraud it's just sleazy but okay but number one even that kind of trademark law has been in today's increasingly used um to stifle free speech it's used all the time by these companies they will use trademark law they'll throw that into their complaint letter they'll get sites taken down or they'll sue people they'll say what your complaint about my product was a violation of my trademark rights even though you're not really confusing any consumers or committing any kind of fraud the worst thing about trademark law is that it has become federalized there's something called the Lanham act i think it's passed in the 50s it was a federal version of trademark um because trademark is not in the that constitutional clause i mentioned earlier patent and copyright are the federal government had to find another source of authority to justify legislating in the realm of of trademark and by the way they've also legislated in the realm of trade secret there's the there's a theft of trade secrets provision which is a federal law which makes it a federal crime to commit certain types of trade secret theft but anyway the Lanham act basically only federalizes trademark law to the extent that we're talking about a mark used in interstate commerce so that's why there's still now there's a system of state trademark systems in in harmony with the federal system in europe there's a similar thing with the european union and it's all of the map whereas there's no really state patent or or copyright law systems that i'm aware of it's all federal so the state the state federal trademark act originally was just a federal version of this common law version but in the meantime they've added um anti in the 1990s i think under under clinton they added the um anti-dilution requirement which says that there's a new trademark right which is that you not only have the right as the owner of a trademark to have someone not infringe your trademark by using the mark in a way that's likely to just to to confuse consumers you also have a right not to have your mark tarnished or diluted the value of it diluted so you see it goes back to this locket stuff the so the idea is that you have the right to the value of the mark and if someone reduces the value of your mark by their actions they violated your property rights um and dilution has nothing whatsoever to do um with with with consumer confusion or fraud whatsoever but you'll talk to libertarians or free market types and they'll say well you got if you're against trademark law you're against fraud even though the trademark law is not rooted in fraud um at all let me give give you one colorful interesting example um a few years ago this is more of a copyright case but it's an example of how companies will use these things um omega you know the watchmaker you know the one jane the one jane bonn likes um they um they sell these watches that are extremely expensive i can't remember the numbers but let's say it's a $15,000 watch in the u.s well they they sell it in other markets too and um um they were selling it in one of these south american countries um for a significantly smaller lower price because just a price discrimination right because they knew they couldn't get as much for let's say six thousand so you had some entrepreneur you know enterprising arbitrageur right he would go down there to to um to south america and he would buy the watch it's a legitimate watch it's not a bootleg it's not a knockoff and he would and actually it was costco doing this i don't remember if he sold it to costco or costco did it directly but anyway costco was selling these omega watches in their u.s stores for a significant discount from the from the local omega stores because they were getting them from the retailer in south america so what costco did was they they couldn't stop it because it wasn't a copyright or patent or trademark infringement because it was a legitimate sale it was it was it was a legitimately sold watch by them they really couldn't complain how the owner used it after that right and we have free trade so it can be sold here so what they did was they inscribed this little globe symbol they had they hired an artist to make a globe like a map and they put a little globe symbol on the back of it now guess what the globe is subject to copyright okay so then they took costco to court and they won on the grounds that the so-called first sale doctrine of copyright doesn't kick in if the first sale isn't within the territorial borders of the u.s because the u.s law is only domestic and all this kind of stuff so that's one example a more recent example was um this wiley and sun's case i don't know if you heard about this one um you had this so wiley is a big academic publisher so they sell textbooks here for you know to students for hundreds of bucks a book and they sell them in i can't remember some some asian country vietnam or somewhere for like maybe one fourth or one fifth as much and on cheaper paper too but it was the same book and you had this student who was over here an asian student and he would get his relatives to buy the books and send them over here and he would sell them over here he was making hundreds of thousands a year just on the arbitrage and he was not in violation of copyright well you would think he wasn't because these are not knockoffs they're not bootlegs same the same thing happened you know i think it's called curt saying this case so these are examples of how these laws will be used and have been used routinely um and trademark law and patent law are used like this all the time as well to stop free trade to impede progress uh in in the u.s case um i mean in the in the in the in the patent case um something similar happens with uh drug re-importation so you'll have Bayer one of these big companies big pharmaceutical companies sells a version of their drug in canada and they're sold at a much lower price mostly because canada imposes price controls because they're more socialist in some ways than we are well those are legitimate products and the owner can do what they want and they there's a practice of re-importing them down here so of course the big drug companies get the uh federal trade commission to intervene and say well you can't import this or maybe it's the fda i can't keep it straight even the fda to say that well you're selling a drug here that's not approved by the fda it's like well it is approved by the fba it's the same company it's approved in the u.s you're selling it in canada so then they say well it's an fdc issue it's a trade issue it's like well we have free trade so so so you had actually libertarian this is about 10 years ago eight eight nine years ago this dispute broke out you actually had libertarians at the cato institute which is normally free trade libertarian like roger uh i can't remember uh doug bandow of ritchard effstein arguing that the federal government in the u.s should not allow drug re-importation of of this kind of drugs because it's a way of doing an end run around the patents so you basically have the ip patent system being used even by proponents of free trade as an excuse to limit free trade so you can see the tension there the conflict you've gotten to really choose in my opinion you have to choose do you want competition do you want people to learn do you want them to be able to emulate what they learn and what they see um um and do you want private property rights and individual liberty or do you want a cartilized government manipulated and distorted system of protectionism and thought control and control of the internet and free speech i think that's the choice we have to make okay now um and this question i guess is more uh as an aside it's not directly related to uh what i was planning to discuss but you mentioned it in passing a little bit so i thought i i asked it anyways um you when you were discussing trademark you you talked about uh fraud and that argument that uh goes along with that as as being fraud uh when trademarks uh when trademark laws need to be enforced or or when when uh people are attempting to enforce them um so uh the term fraud seems to get get thrown around a lot uh without really uh and i'm sure i'm opening up a can of worms that that uh you know it's a on end for hours but yeah it's a pretty simple one it's uh it it's never really been uh but well at least i've never really heard it flushed out in in uh detail exactly what is fraud and what isn't fraud no you're completely right this is i i just had a tom woods podcast where i was trying to go through these things the other day yeah i i listened to that and i was really hoping that you would discuss fraud in particular and i don't think we i don't think we got into it i did have a couple of other longer talks i've given where i did go into it in more detail but quickly this is another one of those terms that can that you have to be try to be precise about it's used in a variety of ways most people think of fraud is some kind of deceitful activity or some kind of shadiness or dishonesty um another one on the side is the word plagiarism which they sometimes conflate with each other but you'll hear people say if you're not against cop if you're not for copyright then you're for plagiarism so they're doing exactly what for the copyright case um with the plagiarism idea what people do with trademark and the fraud idea they will get you to admit that as a human being you think there's something wrong with plagiarism and then they will um they'll they'll equate that with something that's embodied in the copyright statute and if you're against copyright law then you're you're for plagiarism but then they don't insist on plagiarism being part of the copyright standard um plagiarism and copyright have almost nothing to do with each other one's a type of dishonesty and taking credit for something you didn't do and the other is just reproducing patterns of information that you don't have the permission to reproduce um most cases of copyright infringement are not plagiarism at all if i sell you a bootleg copy of the latest um um you know Steven Spielberg movie there's no plagiarism involved i'm not pretending i'm Steven Spielberg i don't put my name on the movie um and most cases of plagiarism are not necessarily copyright if i plagiarize um along excerpt from Aristotle in my class paper i may be committing plagiarism but there's no copyright involved because that's a public domain work so these things are actually not related in the fraud case um um most human beings would say that dishonesty is a general thing is bad honesty is a virtue i agree um also it's wrong to steal from people i agree it's wrong to murder or attack people um the only way you can make fraud a type of crime or call it a species of aggression or a type of aggression or the type of thing that the law is justified in prohibiting with the force of law is if you have a very clear understanding of the nature of property rights and the consequent nature of contract okay so property rights as we discussed earlier is means the legally recognized right to control a resource by a person who's seen as the owner and actually it could be defined more narrowly still the right to control is really not the right to control it's the right to exclude it's the only it's only the right to keep people from using this resource doesn't mean you have the right to use it in fact that's part of patent law too um if you have a patent on an invention it doesn't mean you have the right to use that invention it only means you can stop people from doing it um so the reason i say that is like let's say i own a gun if i'm the owner of that gun i can prevent you from using the gun if i want to or i can permit you to use it that's called license or permission um or i could so my permission could be temporary it could be conditional it could be limited it could be unopen it could be open i could give you the gun as a gift or i could sell you the gun in exchange for money so there's various things i can do um but i don't have the right to shoot you with the gun um if if you're not committing aggression against me so merely having the right to gun doesn't mean i have the right to use it it just means i have the right to do anything with it i would have the right to do with anything else so long as i'm respecting others rights okay so that's the basic idea of property rights contract flows from this contract is just the exercise of this right to grant permission or to deny permission of access um of the owner that's what a contract is a contract is some kind of communicated assent or consent to someone else's some type of use of an object that you have a property right in that's what a contract is okay contract is not a binding promise which is what most people think of it as and if you so you first have to get contract rights cleared rothboard mary rothboard wrote clearly on this and i think established a revolutionary new way of looking at contract rights so once you understand that contract is just an implication of property rights and property rights is the fundamental thing then the question of fraud comes in and to my mind fraud what people are getting at when they think of typical acts of fraud and the reason why it could be classified as a type of trespass or theft is because it's what i would call with what the what the law calls a theft by trick okay so imagine imagine you're going to have surgery and you give the doctor consent to take your appendix out okay now you wake up and your appendix is removed now can you sue him for a salt and battery no why because you consented right but let's say your your foot is missing now he chopped your foot off now did he commit aggression or salt and battery i would say yes because you didn't consent to it so then the question becomes what did you consent to this is where this communication aspect comes in it depends upon what a reasonable person thinks is actually being communicated between the parties you're the owner of your body what did you consent to i can send it to an appendicitis i did not consent to an amputation of my foot okay so it depends upon what the owner of a resource manifests as his consent to someone else and this is what happens in any kind of transaction between people in the free market a purchase a sale an exchange etc and this is where fraud can come in in my view fraud is analogous to the case of the surgeon removing your foot when you didn't consent to it or when you gave uninformed consent okay depending on the circumstances so an example of fraud would be i'm exchanging a basket of apples for your for your chickens okay now there's an implicit or maybe even explicit communication going there my communication to you is these are good apples they're regular apples you know they're not made of lead or poisoned or full of bombs or whatever to my knowledge and i will transfer my my ownership of them to you if and when you transfer ownership of your chickens to me and likewise are certain representations implicitly or explicitly be made by the chicken owner so if i'm giving you rotten apples for your chickens knowingly doing this then i know that you're saying you can have my chickens if you're giving me good apples so your consent is like the consent to the surgery it's like i said um i'm gonna have surgery and the doctor says well i'm gonna do an appendicitis but if i find a horribly cancerous legion on your heart while i'm in there okay not your heart you're somewhere else near there um do i have your permission to remove it and i say yes and those conditions yes but i specify certain conditions well you're doing the same with the chicken you're saying i'm giving you these chickens but only if you're giving me real apples you follow me yeah so if i give you bad apples for the chicken and i take the chicken now i've got possession of your property and i'm using it without your authorized consent without your informed because i know that really the condition hasn't been satisfied the condition was that i gave you good apples and i'm knowingly violating that so i'm basically taking your your property your your own resource without your consent that's why it's a type of trespass so fraud is simply a way of failing to meet a condition of a conditional transfer of property rights to an object okay it's so not every form of dishonesty can do that so let's say you meet a girl at a bar and you know you know she likes guys with black hair and your hair is really blonde but you haven't dyed black and you don't tell her that your hair is really blonde and you use that to seduce her is that rape no she can send it to the rape and there's no there's no exchange of title there actually right or other forms of fraud like where you deceive someone into doing something or you're just a deceitful dishonest person those are reprehensible bad actions but they're just dishonesty they're not in the context of a transfer of title to property where you could somehow characterize it as theft by trick so i think fraud has to be characterized as theft by some kind of theft by trick and if you think of it that way then it limits the scope of when fraud and it also shows why fraud is a type of of aggression it shows why and it limits when it can be applied okay all right well thank you for that explanation and thank you for all your time this went longer than i anticipated so thank you for being so generous in your help you're welcome you're welcome i enjoyed it i i uh i encourage you to keep thinking like this this is good it's it's good that you do this i commend you for that okay well thank you very much and there's definitely a lot i can use for for this assignment there's also a lot that i hadn't thought of before that i didn't know before so this is it's been very valuable on on both of those accounts so i i really am grateful so i enjoyed it and yep all right take care all right good luck in your course all right thank you bye