 Good afternoon, I'm going to go ahead and get started. My name is Von Schoen, I'm the president of the Moritz Federal Society. On behalf of the Moritz Federal Society and the Ivy Law Society here at Moritz, I want to welcome you to today's event titled, Is Intellectual Property Even Roman Anymore? We're proud to have the John Templeton Foundation sponsoring us for this event. They've got the excellent catered food we hope you're enjoying. I want to mention just a few things before we get going. The first is that elections for the Moritz Federal Society is coming up at the end of this month. There'll be an email out on the twin of this service, so if you're on twin and you're on our site, you'll be able to get the updates for that, the voting, and if you want to run that sort of thing. Next, I'll explain the format, and then I'll get started with the brief introduction of speakers and we'll get going here. First, the format as usual is going to allow for a debate, so we're going to have four main introductions by each speaker, starting with our guest speaker, which is Stefan Poncella, and we'll have a 10-minute rebuttal in the same order. Finally, we'll have a question and answer session with you, the members of the audience. So, let's start with Professor Steven Grant, practices with the Stanley Law Group in Dublin in the field of financial properties. His most particular expertise is the prosecution of U.S. patent applications that originated in foreign patent offices. He's been admitted to practice for more than 20 years in the U.S. Patent and Trademark Office, the Supreme Court of Ohio, the Northern Ohio Federal District Court and the Federal Circuit Court of Appeals. He's been a frequent speaker continually of education courses, as well as at general education presentations for inventors, writers, and artists. He's a regular contributor to the newsletter of the Ohio State Bar Association in the Electric Property Law section. He's done a number of law schools around the country, including Air Morse, and he's there for his teaching ability. And Stefan Poncella is a registered patent attorney and general counsel for applied after-law charms incorporated. For a partner with Duane Morris, he's prosecuted hundreds of patent applications by high-tech clients including Intel, GE, and others. He's a senior felon, lived upon this season's tune, and has heard of libertarian papers and director of the Center for the Study of Innovative Freedom. He's published numerous articles and focused on IP law, international law, and application of libertarian principles and legal topics, including international investment, political risk, and dispute resolution, and practitioner's guide. Louisiana's law dictionary and against intellectual property published by the incident student in 2008. To former adjunct law professor South Texas College of Law, he currently teaches at the online visit academy on intellectual property and libertarian legal theory. Would that please join me in welcoming first Stefan Poncella. Okay. Got my PowerPoint here. It's good to be here. Thank you, Amon. I'm going to start out with some sort of Austrian economics type observations. Human beings in this world are largely dissatisfied creatures. This is why we act. Humans employ means that are causally efficacious a changing state of affairs that would otherwise occur so as to achieve ends they have to ameliorate their felt uneasiness. This is a Misesian idea. These means, which in our bodies are necessarily scarce or rivalous, this means that there's a possibility of violent conflict when two people struggle over a given scarce resource. As the Austrian libertarian philosopher and economist Hans Hermann Hoppe says only because scarcity exists is there even a problem of formulating moral laws. Insofar as goods are super abundant or free goods, no conflict over the use of goods is possible and no action coordination is needed. Hence it follows that any ethic correctly conceived must be formulated as a theory of property, i.e. a theory of the assignment of property rights of exclusive control over scarce means, because only then does it become possible to avoid otherwise inescapable and irresolvable conflict. So in other words, what libertarians favor is peace, cooperation and prosperity, and therefore we favor the assignment of property rights so that resources that are scarce can be used peacefully and productively and cooperatively. And in particular what we favor is the assignment of property rights each person owns his own body. And he also owns resources that he homesteads or that he acquires by contract from a previous owner. This is exactly why a growing number of libertarians, including myself, oppose patent and copyright. We view the grant of such artificial rights by the state as statist, socialist and theft. This is because these rights grant to third parties, say inventors, artists and creators, a veto right over how owners use their own property. In effect, patent and copyright makes innovators and creators a co-owner with the original owner of the owner's property. And this is just theft. It's the redistribution of wealth. It's really that simple. This is the problem with patent and copyright. So for example, a patentee acquires partial ownership rights in other people's property. But he did not homestead the property. He has no contract with the owner and the owner has never committed any kind of tort or crime that justifies weakening his property rights or redistributing them to the patentee. Now the question arises how could libertarians who favor property rights and other advocates of capitalism in the free market, how could they have been bamboozled into thinking that in any competitive monopolistic grant of state privilege by a criminal state be justified? So let's just take a quick look at the history of the sordid origins of patent and copyright. As Eric Johnson, a law professor, writes an upcoming study, the monopolies now understood as copyrights and patents were originally created by royal decree bestowed as a form of favoritism and control. As the power of the monarchy dwindled, these chartered monopolies were reformed and essentially by default they wound up in the hands of authors and inventors. So let's think about copyright. Copyright in a modern sense originated when Queen Mary created the stationers company in 1557 which had the exclusive franchise of her book publishing. So this was based upon the monarchy's desire to control the press and to control this the use of the printing press which was emerging into censor ideas and to have only approved ideas spread. In 1710 the Statue of Anne formalized this idea of copyright and gave authors a copyright and one reason authors were happy to have this copyright was now they had the right to control their own works. So in a way the reason that they approved and wanted copyright was to remove the state's control over their own works. It wasn't to be able to extort money from people using their works. As for patent excuse me the English Parliament enacted the Statue of Monopolies in 1624 and this was aimed at stopping the grants of letters patent by the Parliament, by the Crown which was being notoriously misused even it was used to authorize Sir Francis Drake to be an actual pirate on the seas in 1587 but there was a carve out for letters patent were generally banned in the Statue of Monopolies except there was a carve out for novel inventions. So this is the origins of patent and copyright. So it ends up being included in the American Constitution in the Patent and Copyright Clause in 1789. Nowadays some people say that it's a natural right to have patent and copyright. It was never regarded as this. It was done for purely utilitarian purposes to induce innovation and invention and creativity. John Locke was mildly favor of patent and copyright but never thought his homesteading theory covered it. The founding fathers also did not believe patent and copyright were natural rights. It was put in there purely for potential reasons to encourage innovation. So basically it was based upon some assumption at the time that it's necessary or that it's necessary to generate wealth and creativity. The problem is studies since then have not been able to verify this utilitarian assumption. In 1958, Fritz Machlub a quasi-Austrian economist was commissioned by Congress to write a study on the IP system. Anyone interested in this field should really read his study. He wrote in 1958 in a study to Congress, no economist on the basis of present knowledge could possibly state with certainty that the patent system, as it now operates, confers a net benefit or a net loss upon society. The best he can do is state assumptions and make guesses about the extent to which the reality corresponds to these assumptions. If we did not have a patent system it would be irresponsible on the basis of our present knowledge of its economic consequences to recommend Institute 1. And I have done an estimate myself because you will find that the advocates of intellectual property who claim that this system is justified because it generates net wealth in the form of extra innovation they never bother to even attempt to try to figure out what these numbers are. So I've done it myself and I've come up with a conservative estimate that the patent system in America alone just the patent system imposes a net loss on the economy of at least $42 billion. That's a complete net loss. And it probably reduces innovation on the net in the bargain. So we lose money to have worse innovation. The point is the burden is on proponents of the IP system to justify it. They need to tell us what is the cost of the patent system? What is the value of the extra innovation that it allegedly induces? What's the cost of the innovation that it suppresses? And what's the net number? I'd like to know. And in my view, because of these empirical facts, IP is arguably unconstitutional because the Copyright and Patent Clause states that the purpose of the grant of this power to Congress is to promote the progress of the science and the arts. But there's no showing that it actually does promote the progress of science and the arts. At the same time, this idea of intellectual property becomes part of the fabric of Western capitalism. It starts being called the property right. This was done intentionally, as Maklub says, those who started using the word property in connection with inventions had a very definite purpose in mind. They wanted to substitute a word with a respectable connotation property for a word that had an unpleasant brain privileges. So basically, intellectual propaganda, as I call it, has been used to cover up the monopolistic character of these grants. So now you have people saying, well, IP is a natural right. Even though its original purpose was monopoly, censorship, and control and then a utilitarian ground. Or they'll say it's justified on empirical grounds, but they never give any evidence for this. In a way, it's similar to the minimum wage, which economists routinely and universally regard as being harmful to the economy and yet it's hard to kill politically. It's very similar in regard to intellectual property. Economists are uniform in their view that there's no proof that a patent system is worth it. But what happens is, because it's in the Constitution and part of the American system, libertarians and properitarians and others who favor the free market, now they've sort of bought into this mentality that, well, it's a property right, we're in favor of property rights. So after all, it's in the Constitution, right? Well, I'm not so sure that being in the Constitution is a good endorsement. The Constitution was nothing but a centralizing power grabbing coup. The Constitution also committed or condemned slavery, paper money and inflation of the business cycle. Judicial supremacy, taxation, tariffs, capital punishment, conscription, war, corruption, domination, drug prohibition, mass murder, war crimes, torture, Guantanamo, Waco, Ruby Ridge, the evil Abraham Lincoln, suspension of habeas corpus, imperialism, eminent domain, state enforced bigotry, racism and misogyny. As Lysander Spooner, the famous anarchist said, the Constitution has either authorized such a government as we have had, or it has been powerless to prevent it. In either case, it is unfit to exist. In my view, the Constitution is utterly un-libertarian and we libertarians have to wake up and stop worshiping the Constitution as quasi-libertarian and the early America as proto-libertarian, they weren't. As Ein Rand might say, wishing doesn't make it so. And speaking of Ein Rand, one reason I believe for the strong pro-IP view among libertarians until the present day was her influence. So, she was part of the movement to help start and describe patent and copyright as property rights. She even said, ridiculously, patents are the heart and core of property rights. And some of her modern acolytes say things like all property rights are, all property rights are intellectual property rights. By the way, Ein Rand actually initially favored eminent domain because it was in the Constitution. But then she changed her mind later when she thought about it. So, she had this Constitution fetish and worship because it was better than the Russia she came from. But the point is, despite the propaganda about classifying patent and copyright as property rights, there are still artificial state monopolies. The goal of the law is justice and property rights, not tweaking incentives by the state to produce innovation or to maximize wealth. The purpose of property rights is to fairly assign owners to scarce resources so they can maybe use peacefully and productively instead of being fought over. The purpose of property rights is to reduce conflict. And as I mentioned in the beginning, human action uses scarce means to achieve ends, but it's guided by ideas. So the role of information and ideas is different than the role of scarce resources and means in human action. So take, imagine the idea of making a cake. To make a cake, you need a recipe. But you also need scarce resources, ingredients, a bowl, an oven, your body. You and your neighbor can both make the same type of cake at the same time, as long as you have property rights in your own resources. But you can use the same recipe. This is exactly why there are property rights in scarce resources, but not in non-scarce resources like ideas. And if you think about it this way, patent and copyright are always ultimately enforced against scarce resources, money, your body. So for example, if I assert my patent right against you, I take you to court. I get the state court to issue state force against you to force you to cough up some money from your bank account or to force you to physically stop under threat of an injunction, using your body in a certain way. So it always comes down to control of scarce resources. And these patent and copyright laws serve as nothing but an excuse to assign resources from one person to another. They are merely disguised transfers of wealth from owners to innovators and others to receive state privilege that protects them from competition. So the problem with IP is that it undermines legitimate property rights. So the reason properitarians like me or anti-IP is for the same reason we're against taxes and redistribution of wealth in the first place. One more way to think about it is this. How much time do I have in mind? One more way to think about it is this. The free market, we live in a world of scarcity. You can't say this is a bad thing because it's natural, but it certainly is a challenge to living. We all have to find resources that are efficacious and satisfy our needs, food, shelter, tools. And with a free market where property rights are respected and competition is possible, by the way competition requires emulation, seeing what someone's doing and emulating it or doing better, or learning from the body of human knowledge. When this is possible, the free market generates amazing prosperity in the face of scarcity. So you can think of scarcity as the enemy that the free market is trying to overcome and does a good job of overcoming it. And yet we already have non-scarcity in ideas. The body of human knowledge grows over time. This is what makes progress possible. We can always dip into the body of human knowledge and add to it and learn of new alternatives, things we can do. For example, I may know of two types of pie. Chocolate pie and human pie. So I choose one of those as my favorite. And then I may know of two ways to achieve that pie. I can cook it, I can hire someone, or I can buy it, or I can steal it. Well, if I learn more information, I might learn of a coconut pie. Now my universe of ends has been expanded. Or I might learn of another technique to make the pie. Maybe a bifrozen pie. So my universe of means has expanded. So the more knowledge we have, the richer is our universal information that we can use to guide our actions. So it's a good thing that the body of human knowledge is always expanding. Learning is a good thing, emulation is a good thing, competition is a good thing. And these ideas are already luckily non-scarcity. Infinitely reusable, transmittable, learnable. And to impose artificial scarcity on this, in the name of a free market, in the name of property rights, which operates to fight poverty in the physical realm, is suicidal and absurd, and frankly obscene. And I will stop here. The same areas that Mr. Consola was telling us about because one of the principle bases that our country has been around for 225 years now, 35 years I guess is the constitutional system. And although I think we all can admit that the Constitution may not have been written exactly the way everybody would have wanted it to be today. When it was written, we've been able to accommodate that. We've been able to make changes. And the important thing that we have in the United States is that we do have a constitutional authorization to Congress and let me read your work on Article 1 our article 1 clause 8 section 8 says it says that to promote the progress of science and useful arts by securing four limited times, and that's the important word four limited times to authors and inventors, and those are really important words to the exclusive right to their respective writings and discoveries. Now an author or an inventor has given us something that we didn't have before. They've taken goods or they've taken a view of the world and they put it through their mind and something has come out that did not exist before. To give you a few examples certainly we would all agree that if I were to build a table I would have right to sell the table to someone who wants to buy. But are we going to deny during the time of the copyright Melville's right to the character Captain Ahab and the story that didn't exist before he put it down on paper would we deny Harper Lee the story to kill a walking bird are we going to say that that book never had an influence on anybody and that she should have to put it into the public domain and let everybody take the story and print copies of it without having to pay her you know we would do that and in the area of patents would we say that we're not going to give some sort of compensation to the inventor of Penicillin and the number of lives that were saved after Penicillin was introduced because of the people that died previously because there wasn't a good way to get on the audit. I heard a lot of good things and some things I agree with from Mr. Consuelo but one of the things that I have to point out to you is that in the world today okay we have a convention an international convention called the Bern Convention which to be truthful with the United States for many years did not join they only joined about 20 years ago over 20 years ago but we have in the United or in the world today we have 164 countries that are parties to the Bern Convention in other words they have copyright systems we have in the world intellectual property organization and the ability to get priority on your patent applications by filing your own country we have like 184 countries I don't know of any developed country in the world that does not have a copyright and or patent system and they have a both I don't think that anybody would want to be the first one to jettison their system one of the things that has happened and I certainly can agree with professor with Mr. Gonzalez that we need to maybe make some changes in the very specific language that we have one of them being one of the problems that we all see with our copyright system for example is that the term of copyright is much much longer than it is than just the term of patent originally in the United States they were about the same however it all just becomes a joke when I end up saying to people like I did last semester in my copyright class here if I was a lobbyist for a drug company I would be going down to congress and suggesting they should be giving me 90 year patents for my drugs the important thing is the way we encourage innovation is to make people innovative to basically put something out there to give you a right in a limited time and at the end of that and this is where the limited times comes in our system requires that at the end of the patent term that invention belongs to the public there's no way you can renew that patent forever at some point in time the contribution the novel contribution is going to belong to all of us and what we need to do is to encourage that I'm not necessarily the biggest supporter of president Obama but one of the things I hope you've heard in his state of the union address is the need to get American innovation started and to get it going that is where we have moved ahead of many other developing countries from when we were a developing country one of the things we can see today in China is a very strong effort in that country to encourage innovation and their patent system has made tremendous strides for 20 years and so I think that we need to have intellectual property protection and it is not as you might have had suggested to you a system that the government is involved in there is no copyrighted police or there shouldn't be there isn't a patent police but if somebody takes something out of my pocket I should have the opportunity to go to court and to stop taking what is mine and that's what our patent system provides it provides a civil remedy to people and one of the things that's really important with the intellectual property system and this becomes real important when you deal with a client if somebody trespasses on my real property and I go to court and I sue them for trespass chances are extremely good that when I walk out of that court whether I've been the trespass sooner or not I will still own my house but that's not true in the intellectual property community because if I go to court and I say that somebody is infringing my patent just as much as that court has the right to enjoy the other party from stopping me from their infringing the court also has the ability to determine that if the patent office was wrong in giving me a patent because my invention is not useful or not novel or is obvious I may well leave that court without a patent to walk in with property and to walk out having had it taken away from me and that is a valuable part of the system I think that American progress and progress around a lot of the world is attributable to the patent copyright systems and I think that we need to keep it in place is it totally perfect? No is it better to have it than to allow the issue? Yes you said that inventors and innovators give us something we didn't have before in copyright that's somewhat true although even Shakespeare borrowed from previous plays and works of others so all creators borrow from others and if you weren't free to do that and as Benjamin Tucker famous anarchist said if you want your invention to yourself then keep it to yourself now as for inventors I don't think it's true that in many cases they give us something that we wouldn't otherwise have the history of patents is right for example for simultaneous or near-simultaneous invention in fact I would wonder if you would support a independent inventor in prior years of defense and to have them all which would help to ameliorate this injustice a little bit in fact you mentioned pharmaceuticals I would commend everyone here take a look at the very good book against intellectual monopoly by McKellar Boldrin and David Levine which is free online on my site c4sif.org the resources page he's got a great chapter there and one of this trotted out over and over and over again showed that pharmaceuticals in the strongest case for patent protection most of the top 10 wonder drugs of the last century were not patented at all had nothing to do with patents and he shows that almost all the common assumptions comparatively speaking about pharmaceuticals are just completely false as for being the first country not to have a patent system well I mean the patent system is relatively new about 200 years old so countries had innovation before them and had artistic creation before the copyright law the Netherlands and Switzerland have a 50 or 70 year period in the 1800s when they had no patent protection and innovation thrived and increased there's a recent story out about how Germany had almost no copyright protection for a period of time in the 1800s and during that period of time the publishing industry thrived orders of magnitude more than the more controlled systems in Britain so if you want to talk about empirical studies there's lots of reason to believe that it's just simply unnecessary and I'd like to know what is the proof that the benefit, I mean we all can admit that there's a cost to the patent system and the copyright system it clearly imposes cause on society the question is what's the net benefit that results and is it greater than this cost I'd like to know how we know that the system is worth it as for promoting innovation it's not the job of the state to promote innovation the state does a terrible thing everything it does except kill, destroy and propagate about us it does a bad job at everything else if you want to improve innovation you know what causes innovation strong system of property rights and wealth and this is what the state ruins and undermines every day taxes over half of our wealth ruins another half another half of that half with the cost of regulations causes the business cycle with inflation imposes crazy regulations on companies with the FDA pro union legislation environmental regulations basically it is doing everything it can to kill private enterprise and the free market so if you want to promote innovation get the state out of the way have it reduce the tax rate regulations don't go with this criminal penalizing monster that is hurting our lives and our economy putting people in jail for smoking marijuana killing people in Iraq don't trust this thing that is destroying our economy to add a monopoly right on top of it for people to make up a little bit for the harm it's doing to the economy in the first place so if you want to if you want to promote innovation reduce the size of the state drastically more eliminated one final comment there being no copyright police well there was about 100 domain seizures a couple of weeks ago like ICE this fascist organization federal government largely on copyright grounds so there is a copyright police out there and it's a big problem thank you words that I heard in every bottle there were words like taxes monopoly and the copyright police and let me start with that last one I'm not familiar with the ICE situation but in general and certainly on the patent side of things there is no criminal procedure in place and to the extent that there is in copyright as I said I think the overall system is good at the edges it has things that are wrong and in fact the criminal infringement notice that you see at the beginning of a movie when you run a movie from blockbuster or Netflix or one of these places I would like to see that go away too I mean again it's it's assumed it should be a solution it's a personal property type issue it should be settled between people taxes I don't know that we impose any taxes on you for the copyright patent systems in the United States in fact my clients to go to the baton office pay a considerable amount of money to convince an examiner who is representing and watching an ex-parte proceeding between me and the examiner and that examiner is taking into the account the lives of the American people we don't want to give a patent to somebody and take away an ability they have to do something right now we don't want to give a patent and stop them from doing something that is in their public domain rights right now but again it's sort out those situations and on the word monopoly the Constitution talks about an exclusive right meaning the right to exclude and in fact it's been probably since the late 1930s when the courts have stopped talking about monopolies with regard to patents what economic finding has been in recent years in court buildings is that in most cases a patent holder does not really have a monopoly power we don't get involved in antitrust issues in most situations because there are enough non-infringing alternatives out there and in fact one of the benefits of our system is that in getting the patent I have disclosed to you how I do what I do and I've limited it to a set of claims and it is up to you if you can design around that and move progress on you're perfectly free to do it so I don't see that we've got a problem and as I said I certainly don't see any country that has succeeded without having these protections as for Germany in the 1800s and having very thriving publishing industry that's probably correct because they could publish books that they didn't have to pay royalties to people we had problems in the United States in that same time period we did not readily give copyright protection to authors from England for example because those people were writing the English language what publishers in the United States were doing was they were printing to the exclusion of American authors they were printing works by British authors because they didn't have to pay a royalty and although we had Henry Clay gave a famous speech in the Senate talking about how Walter Scott was almost penniless in Scotland because his books were being ripped off by American publishers one of these big argument is we have American authors who are not getting their work out because a publisher won't publish them because they would have to pay a royalty they're going on and they're giving preference to the first time you publish but great so I think that we had we had some distinct differences and we need to keep the system in place fix it but keep it at this time our speakers will take some questions from the audience yes I have a question you mentioned Germany and the study that our economy would be stronger and created for awarding the same protections we have now I guess I might understand the incentive what incentive would be that situation besides the personal need to create art or it seems like this pushes innovation more I wasn't really using that as an argument my personal argument for a positive argument to abolish copyright I was sort of just rebutting the comment by Mr. Grant that no countries had tried this before and just to show that there are counter examples that there are cases this is a pretty famous study that came out I think six months ago if you search just search for German publishing or something like that on C4SF.org you'll find the original newspaper article and study and it goes into detail about how it worked but I think basically what happened was it actually was not German publishers publishing works from other countries it was authors writing a lot of books and they did it to make a profiter to express themselves you can sell a book even though you don't have a copyright in it it's possible to do it you just sell it this happens even right now the Mises Institute where I do a lot of work has in part because of these ideas opened up everything free they published everything creative comments attribution only not even a non-commercial thing and they say take it do whatever you want with it free PDFs and EPUB versions online and their bookstore sales have tripled or quadrupled in the last two years people read these books they learn about them and they want to buy the physical copy sometimes or they donate more to the Mises Institute so I think the incentive is to sell books for profit just because there's competition doesn't mean it's impossible questions yes Matt do you want to like how would you like put them there there's no misappropriation but just copy somebody else's background I don't need it copyright law has a similar feature already because if you happen to have independent creation then you're not actually copying it almost never happens but it sometimes happens in software there's an approach called the clean room approach so what they'll do is they will intentionally develop it's not the intel kind of clean room with the guys dancing around in the suits it just means they set up an environment like a Chinese wall type thing where you can have proof from your procedures that these engineers had no access to the software code of a competitor so that if there's a similarity it had to have been an independent creation so if you added this if you think about it it's a travesty that the patent law doesn't have this or aren't aware of this and I'd be curious if Professor Grant would be in favor of such a change to the patent law you can even be the first inventor and still be stopped okay so let's say I have a chemical process where I'm a mixing process to make a chemical it's a novel process or a novel nozzle or something like that and I keep it secret for 30 years it's a trade secret someone else independently invents it they file a patent and they can sue me for using my own invention this is true Maron well I would generally agree with what you're saying except that what I would point out there is that the standard in copyright is originality and so to the extent that you independently create you've met the originality requirement the requirement in patent law is novelty and if the invention is known or used by others in this country for example for more than a year before you applied for your patent that person would not be entitled to a patent what would probably happen if you've been using that process for 30 years and you get sued you're probably going to have a very good excuse because you're going to show that if others knew the process and you've used it for that long then the invention is in the public domain likewise the inventor who invents and keeps it to himself hasn't undertaken the step that we asked for to get a patent you have to give us something you teach us something we didn't know how to do before okay so if you're selling a product and the ideas embodied in the product then you're right it would serve as a prior art of statutory bar but if it's in the case I gave it's secret and if you're selling just a regular chemical that has no novelty in it but it's just made by say this process which is trade secret it would not serve as a statutory bar and you could be stopped even if it's 30 years later furthermore if you independently event something at the same time or later it's you haven't filed a patent for it you can also be stopped there so it seems to be only fair that there should be an exception now someone asked about how you could prove this well right now in the patent system you have to be the inventor it has to be novel the invention has to be novel and non-obvious but it also has to be your invention which means you are the inventor so that's a statutory requirement and so when you file a patent application you have to swear under oath that you are the inventor which means you didn't learn about it from someone else so if you had this defense then the person who was using the defense could just make the same kind of proof he would have to prove that he was the an inventor of it on his own as well it would just be the same kind of standard of proof being used I want to make one comment about the Professor Grant is correct that one of the stated purposes of the patent system is to encourage disclosure and so that's the bargain we call it in other words to get a patent monopoly from the state and I realize it doesn't make you a monopolist always in the antitrust sense although there is always attention between antitrust law and patent law but it is a monopoly grant that allows you to charge a monopolistic price that's the whole purpose is to let you charge a greater price because you can squelch competition but you're right that one alleged benefit is that we get this disclosure of ideas the problem is most of these things are ideas that would have been disclosed anyway because they'd be embodied in the product and companies are going to keep some things trade secret still that they don't want to file a patent for so we're going to get disclosure of things that largely would have been disclosed anyway and furthermore the other pernicious impact of this is the patent system is very expensive and complicated and a lot of smaller companies and individuals cannot afford to file a patent application they don't want to so they're at risk of being shut down as I mentioned because they were the first inventor so what they do is they engage in defensive patent publishing they publish an article like in a journal they have to pay $100 or something like this there's websites that do this and they actually disclose their idea intentionally to set up a statutory bar so no one else can patent it later so you have these poor people who are not trying to get a monopoly they just want to practice their own invention and yet they're forced to reveal what they otherwise would have the right to keep the trade secret in a free society just to defend themselves from a potential patent suit so the disclosure that the patent system encourages is not from the inventors who get the patents because they're largely disclosing what they would have had to disclose anyway to market the product but it's causing potential victims of the patent system to disclose what they should have had the right to keep secret if they wanted to so let me address those points I'm not making the positive claim that there would be more innovation if you get rid of patent copyright although I think there would be but the other case has not been proven and I think it looks likely that the current system imposes a cost an overall net cost of at least 42 billion dollars on society if you remove that cost alone then you make people wealthier they have more money to engage in innovation by itself my point was that if we want to improve innovation we have to get rid of other government costs so that I wasn't saying the copyright system is a tax although it is a tax what I was talking about was regular taxes wealth and taxes corporations and it poses all these costs they basically reduce the amount of wealth that we have to use to engage in innovation and hire employees and things like that so we would improve innovation by lowering the tax rate for example or in other government innovations that was another point now when you ask basically you say and I don't want to I'm not trying to be cute here but you say you don't see how excellent it would happen I mean a question or confusion I mean it's okay that you have a confusion or a question but that's not an argument for an IP system just because you don't see how as long as you would have what happened now there are reasonable suppositions or ideas about how the free society would operate but you know if you ask the then as in Russia and Soviet Union in 1982 you told them we're going to abolish the state of monopoly over making toothpaste they might freak out and say well my god who's going to make the toothpaste how many free market toothpaste how many flavors would there be and how would I choose and it wouldn't be fair to put the burden of proof on the person advocating dismantling the oppressive state and the monopolistic communist system do I have to extrapolate improve exactly what the new free market is going to look like when we get rid of the state the state has ruined things by distorting everything it's hard to tell but I think we have some indications right now in the open source movement I mean this goes on all the time what you have right now is you have all these interoperability problems between technologies and standards precisely because as Professor Grant said when you're aware of a patent or a copyright of someone else you have to navigate around it or design around it so you have companies putting crazy coming up with different interlocking standards different connectors so you have all these standards that don't mesh together right now so that's a lot of societal waste right there I think you could expect to see a lot more uniformity interoperability and compatibility but in any case you can imagine any number of ways that you could have software being generated it's hard to argue that you would have no I don't know anyone who would seriously argue that in a copyright and patent free world you would have no innovation at all you can't say there would be no innovation you can't say there would be no software you cannot say there would be no artistic creativity novels, movies, etc the only argument you can have is that there would be less but then how much less would there be and how do you know that we have enough right now in fact there are some even libertarians who say that while the monopoly provided by copyright and patent is not enough extra incentive we still have a shortage of innovation so we have to have an 80 billion dollar funded medical prize award that a panel of government and industrial corporatist experts every year uses to hand out to well-serving recipients sort of government Nobel prize so there's no end to this we could have a trillion dollars in the pot we could increase the penalties to capital punishment and a million years of copyright term where's the end of this so basically it's a utilitarian idea that keeps piling on government controls to try to have a little bit more innovation stimulated when you don't even know how much it stimulates and there's like I say there is no proof that the copyright and patent system actually increases overall societal wealth on that question I just like to point out that we don't have a transcript here Mr. Kinsella just told us in the same answer that we need to get rid of the state but we also need more standards so that things have better interoperability than free market yes Jim so calculating the positive or negative impact of an IP regime seems difficult and I think you noted the difficulty in the fact that you didn't know if anyone else was really calculating that number except I think for yourself I was wondering how you came up with that 42 billion dollar negative economic impact number and whether or not you took into account all the major pharmaceutical, biotech and consumer product companies that rely on patents to try their innovation that brings their profits that brings their profit and creates jobs for millions of Americans there's a it was a back of the envelope calculation I mean I tried as best I could using data I could find and I've got a blog post on it where I went through my numbers it's if you search on my personal blog or some of the Mises blog I think it's called revisiting the cost of the patent system something like that and I I estimated using some studies I found how much the cost of litigation is other things like this and then so I came up with 31 billion actually is a net with my first number and then about a year later an actual study came out a really detailed study about the cost of patent litigation itself and this was based upon empirical studies of the number of suits filed how much lawyers are paid and they concluded 31 billion dollars was the cost of patent litigation now in my calculations I had assumed 20 billion so I was within an order of magnitude that I was off so they actually have 11 billion dollars more that's why I added 11 to my 31 to make it 42 but yeah I try to take into account everything I can and I honestly think that's a conservative number I mean I wouldn't be surprised if it's 100 billion yes sir the pharmaceutical industry itself spends more than that so I don't understand how you can take into account those numbers when you're arguing that this I'm just directing you to seriously read the chapters a short chapter well it's not a short chapter but it's a good chapter in Bolder and LeBene's book it's exactly on the pharmaceutical industry and their economists and their empiricists I'm not they go through this in detail and it's really odd I'm not they go through this in detail and it's really eye opening they just explode almost every single myth out there with hard numbers and they started writing their book to defend IP and then they discovered all the evidence was the other way so they became ardent IP opponents so I would take a look at that chapter and I think you'll see that there's really no support for these claims now you say they couldn't sell it they couldn't make a profit that's just an assumption that's just an assertion I mean as a simple example we all go down to the drug store right now they pay Tylenol next to the generic acetaminophen and it's about twice as expensive some people buy the generic some people buy Tylenol why is that? they pay twice as much for Tylenol still I mean if your argument was correct then there would be no way Tylenol could make a profit off of their their drug or they'd have to cut their costs down all the way down to the generic price in other words they face competition and they they have a reputation people I mean I think a lot of your assertions are just based upon they're just false I mean I would just direct you to also today or yesterday on the Mises blog Hubert who's here my friend Jacob Hubert his article or his chapter from his book on libertarianism today his chapter on intellectual property came out and he's actually got a short summary of that bolder new lead chapter and a list of all these wonder drugs that came about that had nothing to do with patent protection so I think if you actually see the facts you will see that a lot of the assumptions I mean I think you're repeating this sort of common wisdom and of course the pharmaceutical companies want protection from competition one reason they want it is because they're hampered by the FDA process and they're harmed by taxes and regulations so they're hoping to make it up a little bit that way so I mean given that earlier it was not a bolder money this boy so you're saying that we should not ban this so what is the solution to reducing the cost of drug use of the FDA well my solution is to have a free market and respect property rights and get the state out of the way and reduce taxes how to translate that into the specific saying small ecosystem of drugs I mean okay get your taxes or do you want to get into the FDA and see if I can well I'm an anarchist I think the state should be abolished of course and even if we don't do that I think we should have a minimal government like we had allegedly in the beginning of the country and I think the FDA is completely unconstitutional as is the DMCA aspect of copyright as is the federal landmark trademark law they're completely unconstitutional because they're not authorizing the constitution and this idea that the interstate commerce clause justifies it as a general police power is absurd and ridiculous yes yes it should be just think about it this way approach it like this I mean I've had 10-15 years to think about this hard so this might seem shocking and radical but just think about it this way if you're going to propose the use of the state apparatus to establish this big bureaucratic legislative system which clearly is causes some problems if you're going to come up with an argument like you just did about the pharmaceutical industry I mean your argument is not good enough it's just short you know if if if you know or it seems to me I mean you really need to have the burden of proof I mean if you want to argue that these patents are necessary then you need to come up with some numbers and prove it and I mean from what I've seen if you actually look at it hard you actually see that all the assumptions are wrong it's just wrong now if you start asking well then how are they going to do this I mean you know it's not the job of a political economist to tell you how to run your business and how to make a profit you have to figure it out this is the cost this is what every entrepreneur faces they face the fact that they need to have cost of exclusion right a movie a drive-in movie theater if they have people that can watch the movie for free and listen to it for free because they have loudspeakers and the screens outside they could go lobby congress for some kind of right to put people in jail that are watching it for free or they can just put speakers in for each car like they did you know but even a regular business you have to have locks on the doors you have to have security guards you have to have a receptionist the movie you have to have someone that takes the ticket because if you don't people will just go in and watch it for free so you have to envision a business and try to imagine if you can make a profit with some reasonable or maybe creative cost of exclusion and sometimes it's a challenge sometimes you might have to bundle your intangible or your immaterial services that are hard to keep from being leaked out bundle it with something else reputation or vision of some kind of services something like that that's the entrepreneur's job not mine the problem with this tweaking idea I mean there's no stopping point I mean basically the argument is that without patents we could have X drugs and that's not enough we could have X plus Y if we have a patent system okay so now we have X plus Y allegedly although I think it's X minus Y but we have X plus Y now but why is X plus Y enough? we could have X plus Y plus Z if we just strengthen the protections a little bit more or if we have this bonus system like I'm talking about I mean it's only 80 billion dollars maybe we get 300 billion of benefit out of having this 80 billion dollar prize I don't know for example in utilitarian there's no reason to not propose that too but why not a trillion maybe we get 2 trillion of benefit out of that 1 trillion but where's the stopping point it's a completely unprincipled position and the way to make it principled is to stop making it seems to me arguments and thinking they're conclusive I mean if you're serious you have to make a real argument and get the data yeah I've commented on that before I mean it shows economic illiteracy of Gene Roddenberry and these guys in Hollywood money is one of the best inventions of all time money is going to always be necessary for rational economic calculation to occur and we will never reach a post scarcity society because we live in a world of scarce things we'll always have scarcity in terms of scarcity doesn't mean lack of abundance scarcity in this technical economic sense means a particular object can only be used by one person at a time used by me excludes your ability to use it so even if we had infinite bananas everywhere if I pick one you know this is a scarce banana and the only way you can use it is to take it from me we can't both use it at the same time now in such a world you almost have lack of abundance type scarcity merging with the economic idea of scarcity because in a world where there was infinite bananas and infinite food and everything even if each particular one scarce no one would really care if they took if no one would care if your banana was stolen because you could just get another and in fact no one would steal it because they don't need to steal it so in these sort of hypothetical scenarios economics breaks down so I don't think we're ever going to reach a post scarcity society and to the extent we have scarcity at all we have to have money to rationally calculate economic activity so I think Star Trek was just not sure the connection to IP but Star Trek was just absurd there Singapore most recently Japan back in the 1980s they had almost no investment in research and development and they revamped their IP regime and now they're I think the second biggest receiver of research and development for pharmaceuticals and violence and in 2004 China recognized the importance I believe of the strong IP regime because they put millions of dollars to revamp their cat and mouse as well so as far as your argument that the pharmaceutical and biotech industry doesn't need strong IP regimes or heavy research and development and innovation in those industries I was wondering if you could provide those facts well I think what you just said is more like a research proposal it's like it's observing sort of ad hoc some possible trends which would lead you to study it more seriously if you wanted to really make that argument I mean I hear this argument all the time from patent lawyers they'll say well America had a patent system since 1790 and we've been a great country ever since then but well we've also had taxation and antitrust and war about every 15 years in this country so I mean do you want to argue that's the cause of our prosperity I think probably what happens I mean it could be my personal views is all the way around correlation with causation I think that this idea of IP is entrenched and people have been sold the idea that it's part of a capitalist property rights system so when you start having a country start having stronger property rights they of course increase their IP protection too because they think that's part of it but the reason innovation is improving and increasing is because the country is getting richer because the property rights system is increasing at the same time so that would be my guess is what you would find if you actually looked into the details closely.