 There exists within the realm of music a place where conventions are challenged Sacred cows are tipped and the art of reinvention is not lost on anyone to get to this place You need to go outside the music box. It's a podcast about people centered on music and it begins now Hello everyone and welcome to outside the music box. My name is James Newcomb, and I will be your master of ceremonies in this episode Today we're talking the ins and outs of intellectual property and according to my guest Stefan Kinsella Intellectual property should definitely be out Stefan is a legal theorist. He is a patent attorney in Houston, Texas And he's also the author of a book called against intellectual property in his book Stefan takes the view that intellectual property is not property at all and to consider things such as ideas songs recipes code to be property actually hinders the value of Real property property meaning things that we can physically own such as real estate cars houses, etc Now people listening to this will probably object saying well We have to have intellectual property if we didn't have intellectual property then anyone could take my Idea and profit from it. So therefore I must protect myself so that other people don't use my own ideas for profit Stefan can obviously articulate his Points and his positions better than I can so I'm going to leave that to him The reason I brought him on is I simply want people to think a little more broadly Maybe look at this issue in a different light than you may have heard in the past So we're going to get into my interview with Stefan Kinsella in just a moment but I want to read an article that I found on Facebook and It is related to David Bowie who sadly passed away just this past week And it's interesting that I found it because it perfectly ties in with our topic of intellectual property Bowie was actually a bit of a forward thinker as far as How he saw the music industry was going to turn in the future And I'm just going to read this short article. It's by Anthony Fisher and It's titled David Bowie foresaw the collapse of the music industry and adjusted accordingly The late great David Bowie wasn't just a gender-bending shape-shifter and a persona generator He was the rare rock star who not only survived the ravages of drug addiction But also had enough sense of self-preservation to diversify his economic portfolio Before the music industry imploded In 1997 under the guidance of banker David Pullman the creation of Bowie bonds allowed the musician to sell the royalty rights to the 25 albums he recorded before 1990 for a lump sum of $55 million with the buyer of the bonds receiving all future revenue brought in by Bowie's back catalog plus 8% interest Seems like a good deal At the time Moody's blessed the bonds with quality a rating From Bowie's point of view his financial future was too dependent on the vagaries of his popularity By selling some of his royalty income to others Bowie was able to diversify his investments He reduced the risk that a major shift in the public's musical taste would leave him a popper Meanwhile investors who had not previously had any stake in the sales of Ziggy Stardust Could diversify into that area and earned a decent interest rate while doing so In 2002 the erstwhile Bowie presciently told the New York Times Quote the absolute transformation of everything that we ever thought about music will take place within 10 years And nothing is going to be able to stop it. I see absolutely no point in pretending that it's not going to happen I'm fully confident that copyright for instance will no longer exist in 10 years and authorship and intellectual property is in for such a bashing Music itself is going to become like running water or electricity So it's like just take advantage of these last few years because none of this is ever going to happen again You'd better be prepared for doing a lot of touring because that's really the only unique situation that's going to be left It's terribly exciting, but on the other hand it doesn't matter if you think it's exciting or not It's what's going to happen David Bowie saw the handwriting on the wall so to speak He had the ability to see that the music industry as he knew it and the way that he made a fortune was In for a very rapid change So it's a very interesting timing for that article to be to come to the surface Right when this episode is releasing So before we move into my interview with Stefan allow me to take just a moment to tell you about a gift That I would like to give you There's no obligation. There is no email list to sign up for I simply want you to have it It's called the go-getter and it's a very short story written by Peter Kahn in the 1920s and it's indispensable for Salesmen entrepreneurs anyone with ambition in any facet of life It is my gift to you go to outside the music book Com and while you're at outside the music book calm consider a trial run of audible You can have an audio book of your choice Delivered straight to your device your computer and even if you cancel your membership before the 30-day trial ends You get to keep that book for free go to outside the music book calm for more information So ladies and gentlemen here is my conversation on intellectual property with Stefan Kinsella Well Stefan for the benefit of people listening to this. Let's just get a working definition of property and I'm referring to a statement that you made in your book Doing business without intellectual property more of a pamphlet than a book But you said that intellectual property is a blatant infringement of property rights So before we Get into that. Let's just get a working definition for purposes of this interview What exactly is property in your view? Property rights Is the legal respect That gives someone the exclusive right to control a given resource So, you know, we live in the world. We're physical beings There are things that we need to control and use in our daily lives and as we Produce and live we need control over those things Those things have a nature that we call in economics scarcity or sometimes economists call it rivalrous Which just means there's a type of resource that can only be used by one person at a time And if you don't have a set of rules that determine who the owner is Then you could have conflict or physical fighting over these things Okay, so if you build a house, then you get the right to use it and control it So the word property Technically means a property right in a resource. It just identifies who the owner of a resource is Sometimes people use the word property to also refer to the thing owned. So they'll say that house is my property But technically speaking, I would say you're the owner of the resource You're the owner of the house. You have a property right in the house I think the word property is used because We recognize that when we act in the world We extend our influence in the world by using these other means of action, you know, like houses and food and tools it helps extend us into the world so it becomes a property of yourself in a sense it sort of Extends the identity of what and who you are. So I think that's why the word property is used But really it's the question is who has a proprietary interest that is an ownership interest in a given resource So property rights really is just a system where we can identify who owns a thing So that we can all respect that right and so that they can be used peacefully and in trade Without us having to physically fight and clash over those things Very good. Now, how would What is the difference between in your view? Property as you just defined it and intellectual property such as ideas Songs that are written. What is the difference between? Like a tune that I that I come up with in my head and that I write down on a piece of paper How is that not property in your view? Yeah, yeah, and I wouldn't say that it's not property What I would say is it's not the type of thing which can be the subject of property rights It's not something that's ownable a tune is a pattern of information, right? It's just knowledge It's it's a pattern that Tells you how you can manipulate an instrument or your vocal chords to create a sound that might be pleasing Or useful or whatever A software program is just a pattern of information The design of a new automobile Engine or component is just information that people can use so if you understand What human action is and this is sort of an economics concept that the austrian economist school Um talks about a lot, but it's very common sense When we when we work in the world when we act in the world, we have to employ these scarce resources We have to use our body, which is a scarce resource and other things like I mentioned earlier tools food land Lumber or things like that you have to use those things to get things done However, you also have to make a decision about what to do In other words your action your use of these scarce means The things that are subject to property rights and that are owned Your action is guided by knowledge or information that we have in our brains and our minds So there are two important aspects to human action One is the ability to employ these scarce resources But also the knowledge that you have In your head that that helps you choose what to do and to hopefully have more successful rather than unsuccessful action The domain of scarce resources that we have to use is subject to property rights because there's the possibility of conflict over them Things like tunes like songs like poetry like novels Like inventions or knowledge that guides what we do But these things are not subject to conflict and they cannot be owned actually Um, it's possible for a billion people to use the idea that Cooking food with fire makes it safer and more tasty than eating raw meat Everyone can use that idea at the same time They don't have to conflict with each other to use that idea the same thing with the song Everyone can sing the same song in their own house at the same time Um without conflicting with each other So the idea of property rules Which is designed to avoid conflict makes no sense when it comes to things that are infinitely Once they infinitely abundant, but they're infinitely copyable and they're usable by many people at the same time So the problem is when the law treats tries to treat things like songs and books As being ownable or property rights What it really does because it's like literally impossible to own a song What the law really does is it uses that as an excuse To give the owner of the song the right to take money from someone else now the money is what they really own Okay, so basically An artist can use copyright for example, which is one type of intellectual property law to Sue someone To prohibit them from singing a song or publishing an album or publishing a book or selling a book Unless they pay a fee To the owner of the copyright So it's really just a disguised way of giving ownership in other people's resources like their money To these to the holders of copyright I was wondering if you could give a brief history of intellectual property Here in the united states because in my preparation for this interview. I was reading a book called Uh against intellectual monopoly. I believe it's the name of it by bolder than the being. Yes. Yes. I don't have it right in front of me It's online actually against monopoly.org. It's a it's a great book. It's from an empirical point of view more than my view which is more uh libertarian Properitarian principled base, but it is a very good book Well in this book they were describing a little bit about How intellectual property in the means of copyright Actually helped authors in the united states actually British authors would have their books published in the united states And they had far more success selling their books because there were no copyright laws in the united states So when exactly did Copyright and patent and trademarks and all of that become so Engrained in the american uh, just the psyche the way of doing business No, that's a good question. Um Uh, there's another very it's a pretty short essay. It's by um Carl Fogel, he's got a site called question copyright dot org And he's got an article on there where he goes into the history of copyright, which is pretty interesting But I can just quickly summarize here Um, most people now we have a very capitalist commercialized society where all these legal rights are traded back and forth and You know, we have stock markets and authors selling their rights Assigning their rights to others, you know, jk rolling making lots of money by doing movie deals So we think in terms now Of copyright and patent is just being part and parcel of a free market advanced capitalist society copyright and patent Uh, originated in the practice. Uh, well patent originated patent is a type of legal right that protects the right and inventions useful processes or machines, let's say Um copyright protects the works in artistic creations. Okay original works of of of expression Copyright arose when the printing press Started threatening the monopoly the stranglehold that the church and the crown Had on what thought could be disseminated, right? Because it was easy to control that by just having the scribes Hand hand copy only the books that the church would permit them to to copy etc when the printing press originated I think in the 1500s or something like that Well, then you had the the threat of just books being produced on a wide-scale basis without the control of the authorities And so the the the government established in england the the stationers company Which was like about a hundred-year guild system Which was like a monopoly system which protected It was like the only way to get a book published through the stationers company When their monopoly ran out the publishing industry was used to this situation and lobbied for a renewal of the Charter which was not granted, but instead the statute of and was passed in 1709 Which was sort of the first modern copyright? It granted the copyright to the authors instead of to the publishers, but the authors as a practical matter Had to assign their rights over to the publishing house just to get their works published anyways So it it it ended up We ended up with the system Which we see the relics of even today where you have a large publishing industry for novels for songs for software Where they have a lot of control and the authors often make very little money because the publisher has a lot of upfront costs Etc that model is being eroded a little bit because of the advent of e-publishing and amazon and things like that And you know just the ability for artists to put their music online to get to get customers Etc, but that is why we had that industry emerge patents emerged In the phenomena of kings granting monopoly privileges to court favorites In a certain area just saying you're the only person who can make playing cards You're the only person who can export sheepskin They would just give them this monopoly because it gave them a competitive advantage And in return they would get favors back from these people like they would they would become tax collectors for the government or something like that This got to be abused by the king and so the parliament england Enacted the statute of monopolies in 1623 To reign this in but they kept the right to grant monopolies for inventions so patents emerged arose historically in the practice of the state granting monopoly privileges to people And copyrights arose in the practice of basically censorship And they've evolved they've evolved over time and to in the u.s. Constitution when it was ratified in 1789 Had a provision that gave congress the ability to Protect the works of writers and artists and inventors And the very next year the congress enacted the first patent and copyright statutes So that's how we got to where we are now Well, I want to talk a little bit about your uh, you take a very hard-line stance against intellectual property Obviously as your as your title as the title of your book suggests But I want to get a little bit More detail as to how Do you view? intellectual property actually hindering progress for example, uh someone patents uh some invention How does that hinder innovation and how does that hinder progress? Okay, so here's the way I look at it. Let me just uh explain I am a libertarian. I'm in favor of free markets. I'm in favor of capitalism I'm a favor of knowledge and progress and innovation. I'm also a patent attorney. So I know a good deal about it I've been doing it for over 22 years now um So I have a lot of experience with the way the legal system works the patent system the copyright system trademarks and the other types of intellectual property um The the argument that is given for patent and copyright Nowadays is usually not really a natural rights when it's not really you deserve The ownership of these things because if you did then they wouldn't expire after a certain time patents expire after about 17 years and copyrights expire Like say 70 years after the author dies, but they're both finite terms if this was a natural right It would last forever just like if you own a house or a watch you could pass it on forever to your heirs It wouldn't expire in a certain time So most people that defend intellectual property now have a utilitarian justification what they say is that We need to grant to artists and authors and creators um Movie producers, you know songwriters singers and inventors. We need to give them a temporary monopoly To protect them from competition So that they would have the adequate incentive to produce these works and that without these laws We would have fewer works and an underproduction of creative works That is the basic argument that's given So my my main objection to that argument Is that they simply don't fulfill their their argument. They don't have any evidence to back this up It's just it's said over and over again But every study that you can find that's been done over the last 200 years and most of them in the last 50 to 60 to 70 years When we finally started looking into this all the empirical studies all the economic studies Keep concluding that it looks like There's no clear evidence that patent or copyright Stimulate any increase in production of what it's supposed to stimulate and in fact It has a severe distorting effect on the culture and on what's done and it's causes lots of costs which reduce innovation um in the case of uh technical innovation, which the patent field is supposed to cover granting someone a patent On a product can reduce innovation but for in several ways number one let's say you have a company like Apple or other some of the other big smartphone companies motorola My uh even microsoft now, uh google okay, they have Hundreds or thousands of patents which they paid lots of lawyers to get And they are willing to defend those patents in extremely expensive lawsuits So if you're like a new upstart innovator on the outside and you wanted to come up with a brand new smartphone design You would be sued out of existence if you tried to compete because you wouldn't have the resources to Come up with 10 million dollars to defend yourself in several patent lawsuits that you're going to be hit with From the big guys and even if you did have the money you'd probably lose because they do actually have patents And some of them are actually valid and they would actually win their cases and put you out of business or by your company So that dissuades or discourages innovation um in cases like that and just as a general matter um companies are aware of Of what they call patent thickets where there are areas that are heavily patented And they just steer clear of innovating in those areas because they know that it's pointless to innovate in that area Because they wouldn't be able to sell their product anyway So they just don't even engage in r&d in an area where they wouldn't be able to sell a product So that's just one example. Um, the other example or another reason is that The patent system itself imposes extremely immense costs on the economy and on businesses um salaries for lawyers like myself insurance costs defending themselves in litigation uh Really does take away from the bottom line and causes the prices of products to go up. It makes the consumer worse off It's basically like a huge Let's say trillion dollar a year global tax on On technology and that tax reduces the amount of resources that companies would have left over to engage in r&d in the first place um another example is If you have a patent or a series of patents covering a product You have basically a 17 year monopoly window where you're not going to have any competition So you don't have a big incentive to keep innovating. You don't need to you can just rest on your laurels And you don't need to keep improving your product a lot because you have patents In fact, the only reason they're going to keep improving their products is to get a few more patents to extend their monopoly But it's a game at this point So there's lots of common sense examples and reasons you can point to As to why the patent system impedes innovation But even if it didn't impede innovation even if the patent system Even if you could come up with a study that showed that there's more innovation With a patent system than without it that still doesn't show that it's justified because there's still a big cost to the patent system Like let's say it's only order of a trillion dollars a year. I've done studies other people have done studies. It's a big cost Well, if the innovation that's stimulated is only worth 200 billion dollars a year But you're calling it's costing the economy a trillion. It's still a net loss for the economy. It's still not worth it. So the advocates of patent It's been 200 plus years They really need to come up with a study showing that their system does what they say it does and they have not and they cannot Well, I want to turn the focus Back to music because this is a music based podcast outside the music box But you mentioned the the printing press a little while ago and the internet is very much Like the printing press Has very much the same effect as the printing press had in the 1500s where now you can Duplicate songs you can duplicate text Just at the click of a mouse button. It's so easy. Yes It's I mean compared to 20 years ago. It's it's so different I want to get Your sense of what is it like For musicians now just real world application. For example, I have a lot of musician guests on this podcast and a lot of them are promoting an album And I will ask them to Send me a file that because I like to play their music. I want to feature them as much as possible So they'll send me a file and I play it on the episode What rights do I have and I'm not just talking about theory. I'm talking about real world application At to what extent do I own? That file that they have sent me so For example, if someone sends me something to play on one particular episode Do I have The legal protection to play that on any episode of this podcast that I want Just for example Yeah, so it's not clear and this is part of the problem with copyright Um Under my system the way I would look at it theoretically is we wouldn't have copyright And patent and songs wouldn't have an owner. It's just information if someone sends you a song Then you have access to that information you can use it however you see fit if you have a contract with that person Either an implied contract or or expressly a negotiated contract where you agree Not to use the music in a certain way or you agree to keep it private Then that's a private contract and that's fine But we know these these things can only work so far because once information gets out it's out, right? Once knowledge is public it's public and you can't put the genie back in the bottle under today's system The way it works is um, whenever you whenever you create Uh an original work of expression and it's fixed what we call fixed in the tangible medium That means you write it down or it's recorded somehow It's not just a song you sing at a party that no one records You don't have a copyright in that because it just disappears as soon as you're done It's got to be fixed somewhere written down on paper stored in a medium something like that which it usually is When that act happens, but the way the copyright work law the works now since the 1980s is that copyright is automatic You don't have to apply for copyright. You don't have to put a copyright notice on there You can't even say no you have the artist the author Has a copyright in that work whether they want it or not and it's almost impossible to get rid of now When you when someone sends you this file It's similar to sending an article to a magazine for them to consider for publication and if they publish it You really can't sue them from copyright infringement because you gave that you you implicitly gave them license or permission to use it That was the purpose of sending it to them. That's usually how that's works Um, you know the more careful publications would send you a release or something to sign to make it clear But even if they don't then, you know, it's just like if I if I publish a letter Or a comment on a blog that someone else owns I'm giving that blog owner permission to post my My copyrighted comment. It's just the way it works. So if someone sends you a song In the context that you described, I would say that they're at least giving you implied permission to use it at least the first time Um for the for the purpose that you were you were both contemplating But the nature of the internet is such that your podcast will be up Maybe forever and it's easily copyable by others So whether you can use it down the down the road I suppose if you try to use it over and over and you started having a commercially successful podcast And we're making money off of it You could imagine getting a letter from the attorney from one of these early artists saying I hereby revoke my permission for you to use this now If you want to keep using it you need to pay me Money and then either whether the right or wrong you would have to take the risk of a big copyright liability So you you probably would just comply. You'd either pay them some money or you just quit using it Um as for the internet you're right. There are parallels actually to the situation I explained earlier with the printing press I think Cory Doctorow who's a well-known tech advocate and and author himself He pointed out that the internet is the world's greatest copying machine and it's never going to get harder to copy than it Is now it's only going to get easier and easier And this bugs it drives people nuts that are used to a model From the 60s and 50s and 70s where copying was hard Okay, they they built up publishing models and and business models based on that And they don't like the fact that it's easy to copy But actually the fact that it's easy to copy is technologically a good thing. It's a great thing This is how we communicate with each other. It's how we learn. It's how we spread information But it will affect some business models um So artists have to be aware That the world we live in now is a world of copying and if you keep your stuff under lock and key and you use um DRM and make it harder for people to use they're just going to go on to the next guy and you're going to be obscure and unnoticed So my impression is that You know the LP era is pretty much dead except for you know Eclectic collectors the cd era is basically dead the dvd era is basically dead And people aren't even buying songs on on itunes in mp3 format. Everyone's doing streaming now, right or piracy That's what people are doing And the streaming models are great for the consumer My impression is that the artists are not going to make as much money From the little payments they receive from apple music and spotify than they would from sales back in the 80s Or or whatever. I think that that era Has changed So artists are going to have to get compensated in other ways. They'll have to do it as a hobby Or they're like they've always done to some extent or they'll have to perform At concerts and you know, the more popular they are the more the more fans they'll get and the more they can charge And they get popular by people knowing their music So it's actually I think in artists and singers benefit That people can easily have access to their songs Well, that's a great segue into and you've been very generous with your time, but before I let you go Stefan I want to just get some Practical advice from you because you're an expert in this field Because a lot of uh complaints that I hear from musicians is exactly what you've just talked about They view the Music that is so easily So easy to be copied as a bad thing, but right how how should a musician who is You know, they're not they're not Led zeppelin. They don't have a big name, but they're trying to make a name for themselves in whatever niche that they find How can they use the current? Model or the current technology as it as it exists today to their advantage Well, and let me mention one thing too. You say that they don't like how easy it is to copy However, how many of those people have themselves copied and benefited from the ease of copying How many of these people have learned from the greats from the, you know, uh from from From history and even from recent days. I mean, it's been a great boon to them as well to have a wealth of material to draw from to to get inspired by to sing to cover at their own concerts So it's a there's a little hypocrisy in this desire to Be to benefit from the ability to copy others And uh wanting to, you know, close the door to heaven behind you once you get into the gate And as far as practical advice, I did write a pamphlet which you mentioned it's called doing business without ip and There's sort of two parts to that one is like more of a theoretical thing imagining How life would be like in a copyright free world. We don't live in that world So let's talk about today's world. Well, there's a moral aspect to it. I would say number one On the politics front just as a person you should Advocate for the abolition of patenting copyright. That's just what we should do as a correct policy position and number two I would say it's immoral Once you have a copyright and you can't help having copyrights It's immoral to use it to sue people who are innocent people You just shouldn't threaten that you shouldn't do it. The government gives you this right It's wrong. The government shouldn't give anyone that right and it's wrong to use it against an innocent person So I think you should not threaten to sue people But using your patents or your copyrights. So I think that's a personal ethical thing In terms of how you actually make it given and navigate the the actual system out there You need to be aware of what the rules are. You need to be aware of the danger of copyright Infringement you might get in trouble for You know, if you sample the wrong things if you if you put something on youtube that has a clip of someone else's song You could be in trouble. So you need to be aware of what to avoid doing, right? um And I think you also need to be aware that no matter what your your copyright rights are That the piracy is a real thing now and it's just going to happen Even even if we have the most draconian copyright laws, you can imagine which we pretty much already do Right. I mean, there are criminal penalties can be subjected for piracy This is why Aaron Swartz committed suicide because he was facing Years in prison a young kid facing years in prison for copying some academic articles from From from from an ivy league school. It was it was crazy um You know, you need to be aware that piracy is just the thing now the internet makes it possible to copy So you have to be aware that you might make some money from some of the legitimate avenues like apple music or spotify um But I think it's to the benefit of an artist who's not lady gaga or someone like that to book to get well Known, right? I think quarry doctor had another good line You know the the the threat any author or musician has Is not that people are going to pirate your work. It's that you're going to be obscure and no one's going to know who you are That's the real threat. So I think you should people should encourage If you have a concert don't get upset that people are taking photographs or recording a few minutes with their iPhones You know be happy about that Make money from satisfying your fans in ways you can charge for which is basically concerts or specialty gigs or producing music for um for someone's uh documentary or for their movie Or for their daughter's bar mitzvah, you know, there's lots of things people can do Ultimately you have to view yourself as an entrepreneur and it's it's the job of the entrepreneur to figure out how to make money and that is you have to look you have to be creative and We maybe have to be more creative now because of the challenges of easy copying and the internet But it's also a great new world out there. I mean you can be known um You know, there's there's some people on youtube that are making millions of dollars a year because they're popular They figured out how to be popular. They're not doing it because of copyright. They're doing it because they do They're doing something that makes them popular so ultimately I would say produce excellent quality music and Then then it's going to be a good problem to have to figure out how to monetize that Well, you have uh opened a lot of cans of worms in my own mind And I probably side with you more than a lot of people listening to this. So Stefan, how can people uh get in touch with you if they want to know more A little bit more about what you've had to say today I have a podcast which is on my website StefanCancella.com And I write a lot about the intellectual property issues on another blog which is linked from there But it's c4sif.org which stands for center for the study of innovativefreedom.org c4sif.org All right. Well, we're certainly going to post links to that on the show notes Which you can find at outsidethemusicbox.com But StefanCancella it has been a true pleasure to speak with you and I thank you for sharing your insights with us Thanks much. I enjoyed it And that'll do it for yet another episode of outside the music box My thanks to my guest StefanCancella and my thanks to you the listeners for tuning in As Bob Dylan said the times they are a change in And it's time for us as musicians as people To think about things differently and intellectual property is one of those things that Definitely requires us to take a different look Next week on outside the music box is going to feature Landau Murphy Jr. Who is the winner of the 2010 season of America's Got Talent? He has an amazing story and I can't wait to share it with you So be sure to tune in next week on outside the music box. Thank you