 In addition to defense and security education, money in banking, scientific research, providing for the poor, space exploration, food and drug safety, roads to transportation, the definition of marriage, immigration and border control, unemployment insurance, health care, all of which have been monopolized, co-opted or corrupted by the state, the state also monopolizes dispute resolution, the court system, the production of law, and both by government courts and primarily by state legislation and rules promulgated by state agencies. And the state's legal system and thus most aspects of economic life is permeated by what is called intellectual property law. Intellectual property law consists primarily of patent, copyright, trade secret and trade mark law, and also other more modern innovations such as semiconductor mass works, databases, moral rights, boat hole designs, and reputation rights even, such as defamation, libel and slander law. To take one example of a modern patent system out of all the patent systems of the roughly 200 countries in the world, consider the United States patent system. U.S. patents are granted by the United States Patent and Trade Mark Agency, Office, or called PTO or USPTO. It's an agency of the Department of Commerce. It has about 10,000 employees, most of them are called patent examiners. In 2008, about 485,000 patents were filed in the United States. About 185,000 were issued or granted or approved. And as at the end of 2008, there were about 1.2 million patent applications pending for examination of patent laws. And there are about 2.5 million live U.S. patents right now, patents that are in force that can be infringed. IBM, for example, one of the largest patent procures, was awarded over 4,000 U.S. patents in 2008, and they hold about 40,000 or 50,000 live patents at present. Patents are classified by class and subclass and group. They're divided into four main groups. Number one is chemical and related items. Two is communications, gradient energy, and so on. There are about 1,000 classes and thousands of sub and sub-sub classes. The PTO grants issued patents after reviewing patent applications filed by individuals and corporations. Corporations have invention disclosure programs. They tell their engineers, file, submit an idea to us, we'll pay you $1,000, $5,000. A patent committee usually reviews these ideas and decides which one's to file. Patent attorney files the application, the cost is $10,000 to $20,000, for example. And the end result is an issued patent, which is issued after a couple of years of what's called prosecution of the patent office, which is the going back and forth by the patent attorney. The end result is called a red ribbon copy. And I brought one with me. I'm holding pure evil in my hands. In fact, I'll pass this around if anyone wants to take a look. I just need it back because it's my employers. So that becomes part of the company's patent portfolio, which can be used to sue or to counter sue or to license for profit. Now, what are the results of the patent system itself? The result is distorted research, protectionism, well-transfers, and enrichment of the patent bar. Large companies such as IBM amass hundreds of giant patent portfolios, and they license them. IBM, for example, makes hundreds of millions of dollars every year off of licensing. It's also used for cross-licensing, larger companies engaging cross-licensing agreements, which makes it difficult for smaller companies to enter. So it sets up barriers. Let me give some examples of some patents. There's Amazon's one-click patent, which is a patent on clicking once to purchase something instead of twice, which they used to sue Barnes & Noble, the dawn of e-commerce. There was a company called Sentence Assertion that Amazon had violated their patent monopoly on recommending books to customers. There was an attempt by Dustin Stamper, who was President Bush's top economist, to get a patent on an application for a system and method for multi-state tax analysis. Apple has filed a patent application for digital karaoke. Facebook was sued by someone who had a patent on a system for creating a community of users with common interests to interrupt in. There was an absurdly broad patent issued to a company called Blackboard for the common use of technology that is employed in education and in online encyclopedias. Carfax has a patent on a method for perusing selected vehicles having a clean, idle history. And then there's the fund patent covering swinging on the swings sideways. That's a method patent. And another result of the patent system is patent lawsuits. Many patents are granted that are ridiculous, such as some of the ones I read. This is true, but that problem with the patent system is not ridiculous patents. It's valid patents. They can be used for suing. Kodak, for example, pursued Apple for violating their imaging patents. And now Apple sues Kodak before the United States International Trade Commission over digital camera technology. I'm going to put up a slide here in a second. There's some Android-related patent lawsuits going on right now in the smartphone industry. Apple suing HTC suing Kodak suing Nokia. This is just an example. This is the patent nettle in the smartphone industry right now. All these suits going back and forth. This is what these companies deal with and engage in. HTC signed an agreement with Microsoft providing rights to use Microsoft on mobile phones, one of their patents. And what happened was Microsoft got a royalty on every Android phone that's made by HTC. So Microsoft might prefer to make its own phones, but if they can get a royalty from every Android phone sold, that's pretty good too. And this here is called right now the smartphone nuclear war, the patent industry right now. And there's just lawsuits going back and forth. One patent litigator was quoted saying, we've seen this in the tech industry with the LCD industry, and it goes all the way back to semiconductors. Patents aren't a barrier to entry so much as a patent holder wants people to pay. If you can tax your competitors with your royalty, then you set yourself up for profits. In a low-margin business, that's important. Just for an example, some more recent patent suits. In a stent case, Boston Scientific agreed to pay Johnson and Johnson $1.7 billion to settle three patent cases. There was a $1.6 billion patent infringement verdict in favor of Johnson and Johnson against Abbott. A $400 billion settlement paid to Abbott by Metronik, again regarding stents. The company Qualcomm has been enjoined from importing chips into America that help conserve power and cell engines. One New Jersey doctor was awarded $432 million against Boston Scientific as a reasonable royalty for infringing his method in apparatus for managing macro-molecular distribution. Even though the practice of saving seeds after a harvest to plant the next season is as old as farming itself, patents prevent farmers from saving their patented seeds. Abbott was sued over a caller idea idea on the iPhone. Blackberry's manufacturer, RIM, was forced to pay $612 million after the patents of NTP were asserted against him and threatened to shut down the Blackberry. Microsoft was on the receiving end of a $1.5 billion jury verdict for infringing an MP3 patent held by Alcatel Lucent. It's also used in connection with IPOs, initial public offerings of private companies. Quite often, when a competitor will hold on to his patent, wait till their competitor files their S1 to go public, and then they'll hit them with a patent lawsuit because this has to be disclosed in the IPO. And it can damage or scuttle the IPO. For example, the company called Optium went public in late 2006 and the company M4 sued them as soon as they found their S1 for patent infringement. In another very recent case that's ongoing now, a company called Neo Photonics, which has recently filed its S1, they're not public yet, they've been sued along with three other companies, three other defendants by Fennison for patent infringement. Now what's interesting about this is one of the patent claims, I've reviewed these, one of the patent claims that's being asserted covers a system and method for protecting eye safety during operation of a fiber optic transceiver. So in other words, so that the engineers working with lasers don't get their eyes burned, there's an alarm set if you have too much power going into it, which has been used for years. It's a common idea. Patents are supposed to be non-obvious, by the way. This is not. And of course, each of these defendants has countersued Fennison and with their own patents. So now you have literally millions of dollars being spent by these five companies on legal fees because of this patent lawsuit. Now what about copyright? Copyright is also bad. It lasts a lot longer than patents, for example, over a hundred years usually. And they can even lead quite literally to censorship and thought control. So if there's a case where the seminal German silent film Nostraatu was deemed a derivative work of Dracula and the courts ordered all copies destroyed. In addition, shortly after his death, the Arthur J.D. Salinger, author of Catching the Rye, courts banned the publication of a novel called 60 Years Later Coming Through the Rye. Banned it, based upon copyright. Some get lucky, though, and they say that the work is a fair use. There was a parody called The Wind Done Gone, which is an unauthorized rewrite of Gone with the Wind from another character's point of view. And another interesting case, fantasy author Marion Zimmer Bradley, who actually encouraged and allowed her fans to write fan fiction without suing them to copyright infringement, came across an idea that a fan had submitted to her that resembled the one she was using herself in a novel that she was writing. So she wrote to the fan and told her what was going on and even offered to pay her a little bit of money and to acknowledge in the book that they had come up with the same idea. But the fan replied she wanted full co-operation of the book and half the money or she would sue. So Marion Zimmer Bradley scrapped the novel and rather than risked her lawsuit, never written. Sometimes lawyers who send cease and desist letters claim copyright in the letter and threaten to sue you if you republish it on the web. The Australian band Minute Work was recently found guilty of plagiarizing a children's duty Cuckaburra from their 1980s hit Down Under. The judge held that a food rift in Down Under bore an unmistakable resemblance to Cuckaburra sits in the old gum tree. A folk tune talked to Australian school children for 75 million years. I'm 75 years. RIAA wants to impose a law that once a law passed that would impose a penalty $1.5 million per CD copied. Ford Motor Company has attacked Ford enthusiasts claiming that they hold the rights to any image of a Ford vehicle even if it's a picture you took of your own car. The NFL has prohibited churches from holding Super Bowl parties on TV sets larger than 5,500. And of course, there are recent extensions of copyright such as the Digital Millennium Copyright Act or DMCA, which criminalize even the mere possession of technology that could be used to circumvent digital protection systems. But I say DVD ripping devices don't steal, people do. Trademark is also bad. Subway has claimed the trademark on the word footlong to describe their sandwiches and they've threatened a hot dog seller who's been selling footlongs for decades. Accord has said that the University of Southern California is the only one who can use USC. Sorry, University of South Carolina. Houdat, American National Football League, has sued over this expression being put on t-shirts. And there are modern extensions of trademark law that are even worse such as rights against trademark dilution, which don't even require consumer confusion, which is required in normal trademark suits and cyber squatting. Even trade secret, which is the least objectionable of the four main types of IP, has been corrupted by the state. For example, when information about the then secret iPad was leaked back in January of this year, Apple's law firm threatened new publications such as Valley Rag and Galker to stop publishing information based upon trade secret law. Even though Valley Rag and Galker have never signed a non-disclosure agreement or contract with Apple. Now, Western IP laws are bad enough, but the US-led Western countries have long tried to extend the reach of their mercantilist IP laws to countries like Russia, India, and China to use the World Trade Organization, WTO, to twist the arms of other countries. And now we have the dreaded ACTA, anti-counterfeiting trade agreement coming down the pike, and I suspect it will be ratified. It is a worldwide treaty which will impose draconian Western-style patent and copyright protection on every country, including DMCA-type anti-circumvention rules. And it will also provide for the legal authority for the surveillance of internet file transfers in search of the personal property. As one science fiction author Corey Dockrow notes, the ACTA is a radical rewriting of the world's internet laws, taking place in secret without public input. Now, these IP laws are quite obviously unlibertarian. They're nothing but grants of privilege by the state, leading to protectionism, market distortion and inefficiencies, wealth transfers from consumers and smaller companies to big media, big pharma, and so on, with the state taking a handsome handling charge. In our state that's war, we have taxation, we have regulation, incarceration for victimless crimes, and war. So the existence of IP law should come as no surprise. The question is not why we have IP law. We have IP law because we have the state. The question is, why in the world would any libertarians support IPs? But some of them do support it. There are, of course, utilitarian arguments that favor IP law, but these are hardly worth mentioning. First of all, there's no evidence at all that IP creates net wealth, and there are incoherent standards in even determining this. It leads to crazy schemes advocated even by some libertarians and people such as Joseph Stiglitz and Forbes, who openly endorse the idea of, say, a $30 billion or $80 billion tax-funded medical innovation prize fund or innovation contracts, either to replace the patent system or to supplement it. On a debate on Kato's website, one Dean Baker argued that copyright and patent should be abolished and replaced with such a tax-funded innovation prize. Kato's Tim Lee opposed this idea. He says, I can't agree with Baker that all copyright and patent protection monopolies are illegitimate. Copyright and patent protections have existed since the beginning of the Republic, and if properly calibrated, they can promote the progress of science and the useful arts. Like any government intervention in the economy, they need to be carefully constrained. But if they are so limited, they can be a positive force in the American economy. Well, that's really a relief. We just need to calibrate. As for purported rights-based offenses of IP, Galambos believed that man hears his defense. He believed man has property rights in his own life, which he called primordial property, and then, thus, in all non-appropriative derivatives of his life. You don't own your children, I guess. The first derivatives of a man's life are his thoughts and ideas, according to Galambos. These are primary property. And since action is based on primary property, you own your actions, too. This is liberty. Second derivatives, such as land, televisions, other tangible goods, are produced by ideas and action. So in other words, in Galambos' hierarchy, primary property is your thoughts, ideas, and actions. Secondary property is lowly things like this. Now, sometimes I start to speak for the joke. I didn't do so today. I couldn't think of a good idea or a joke. But I have one now. I ran incredibly set patents for the hard and poor of property rights. That's a joke. It's so positive to I ran. I suppose we had no property rights in existence until 1790, the First Patent Act, or perhaps in 1623, the England's Statute of Monopolies. And by the way, many patent advocates, libertarian advocates of the patent system, deny that patents are monopolies, even though they're created by the Statute of Monopolies. Libertarians, or statists, used to be much more honest. We used to have the Department of War. In 1949, it was changed to the Department of Defense. Advocates of patents used to call them monopolies. Now, they've denied it, they're monopolies. Recently, I was re-listening to a 1991 lecture by an Objectivist IP attorney, Murray Frank. And I'm going to play a little bit of a hero. In the words of Thothwold Solberg, a former register of copyright, when we come to weigh the rights of the several sorts of property which can be held by man, and in this judgment take into consideration only the absolute question of justice, leaving out the limitations of expediency and prejudice, it will be clearly seen that intellectual property is, after all, the only absolute possession in the world, the man who brings out of the nothingness some child of his voice. His rights therein which cannot belong to any other sort of property. The inventor of a book or other contrivance holds his property as a godhold by right of creation. So this is how the Objectivists look at it. We're gods, and we create things, and we own these things that we create. In fact, Frank recounts that when he met Einran, when she learned he was an IP lawyer, she says, intellectual property is the most important field of law. Now, what about the fact that IP is necessarily based upon legislation? No problem, according to Murray Frank. Just as the common law evolved to recognize trespass by barbecue smoke, it would have evolved to recognize property in intellectual creations. But even if it could be somehow established that common law would never recognize IP rights, this would not be an argument against these rights. The common law often requires legislation to correct it. For example, recognizing the rights of women. Indeed, it is a myth that the common law evolves to reflect in that legislation is always in conflict with the requirements of human nature. The same minds that employ induction and deduction to decide a particular case in these judges making common law can employ those methods to legislate universal law. Some of the arguments for IP made by defenders of the system are so unbelievable they seem like they must be made in jest. For example, on a recent online debate, any patent philosopher and ontologist, if there's such a term, David Kepsel had mentioned in the 19th century and early 20th century, two of the most innovative countries on earth, the Netherlands and Switzerland, had no patent systems at all. In response, a patent attorney who was defending the system says, thank goodness the Swiss did have a patent office. That is where Albert Einstein worked and during his time as a patent examiner came up with a series of relativity. Free market economist William Sugar, a senior fellow with the Independent Institute, recently argued, it is true that other means exist for creative people to profit from their effort. In the case of copyright, authors can charge fees for reading their works to paying audiences. Charles Dickens did this, but his heavy work schedule of public performances in the United States where his works were not protected by copyright all arguably contributing to his untimely death. So in other words, we need IP law because Charles Dickens died early. Support for IP rights even leads some libertarian thinkers, such as Cato's Doug Bandau, Richard Epstein, and Michael Cross, to oppose free trade, in particular to oppose drug re-importation, because this permits consumers to partially date the patent monopoly tax. Now what is the reason these libertarians make this mistake? I think it could be traced to three big causes. Locke, America, and land. Plus legislation in the libertarianism. But John Locke unnecessarily assumed the ownership of labor in his theory of homesteading. You don't need to assume that we own our labor to have the best plan to a homesteaded resource. You have the best plan to a homesteaded resource because you have a better connection to it because you were the first user of it. There is no need to assume the ownership of labor. But this assumption has transformed into the Randian and other libertarian idea that we own our creations because we mix our labor with creations, such as intellectual ideas as well. I believe America also is part of a problem. America instituted a patent system on utilitarian grounds in the beginning. And since the modern libertarian movement arose in America and because early America is naively seen as a total libertarian paradise, state-patented copyright laws get a pass. And this is compounded with the influence of Iran, who in her desire to adopt the values of the superior United States over the communist Russia that she escaped and despised, she became too pro-American. I've even been told that Murray Rothbard's correspondence indicates around 1954 that someone convinced Iran to oppose imminent domains, the state's ability to take property. She had previously favored imminent domain because the Constitution endorses it. So she's taking too much, giving too much preview to the Constitution, the American Constitution. I think two other contributions, there are two other contributing causes related to the others. One is the rise of legislation as a means of lawmaking. Recall, Objectives Murray Frank's approval of legislation as a means of making law. But of course, legislation implies a state. And also the rise of utilitarianism and wealth machinization as justifications for law. Now the founders may be forgiven for their hubris and assumptions, but today's, not today's, econometricians, the evidence is against them. But like the left-lurbal do-gooders of Thomas Solve, the vision of the anointed, the humanitarians of the guillotine, they persevere in claiming IP law generates net wealth without a shred of proof. Some claim that the success of the United States shows that IP law generates wealth. They forget that correlation is not causation. And if they're right, we can also attribute Western prosperity to the income tax, anti-trust law, and war. So I guess we should export these policies to other nations too. Oh wait, at least Jefferson had the decency not to pretend that the temporary, artificial, state-granted, patent and copyright privileges were natural rights, unlike modern pro-IP libertarians. So what's the right way to view this? Let's think about property rights in the context of the nature of human action. There are various ways to explain what's wrong with IP. You can explain IP requires a state and legislation which are both necessarily legitimate. You can point out that there's no proof that IP generates net wealth. You can explain that IP grants rights in non-scarce things, which rights are necessarily enforced with physical force against tangible property. Thus supplanting already existing rights and scarce resources. But another way I believe to see the error in treating information, ideas and patterns as ownable property is to consider IP in the context of the structure of human action. Mises explains in the ultimate foundations of economic science that to act means to strive after ends, to choose a goal and to resort to means in order to attain the goalsaw. Now obviously the means have to be causally efficacious to attain your desired end. So as Mises observes, if there were not causality, men could not contrive any means for the attainment of any ends. Knowledge and information of course play a key role in action as well. It guides action. The actor is guided by his knowledge, information and bad information results in unsuccessful action or loss. As Mises puts it, action is purpose of conduct. It is not simply behavior, but behavior begot by judgments of value, aiming at a definite end and guided by ideas concerning the suitability or unsuitability of definite means. So all action employs means and all action is guided by knowledge and information. And as Mises says, means are necessarily scarce resources. He said, means are necessarily always limited, i.e. scarce with regard to the services for which man wants to use them. So in other words, to have successful action, you have to have knowledge about causal laws to know, which means to employ. And you have to have the ability to employ these means suitable for the goal that you're seeking. So the scarce resources that you need to use as means need to be owned by you. This is why there are property rights in these things. The nature of a scarce resource is that used by one person excludes used by another. But you don't need to own the information to guide your actions to have successful action. So for example, two people can make a cake at the same time, but they have to each have their own ingredients. But they can use the same recipe at the same time. Material progress is made over time in human society because information is not scarce and can be infinitely multiplied, learned, and taught and built on. The more patterned recipes, causal laws that are known add to the stock of knowledge available to all actors and acts as a greater and greater wealth multiplier by allowing actors to engage in ever more efficient and productive actions. It is a good thing that ideas are infinitely reducible, not a bad thing. There is no need to impose artificial scarcity on these things to make them more like scarce resources, which unfortunately are scarce. As Bastiat said, all innovation goes through three stages. One firm possesses unique knowledge and profits from it. Others demotate and share in profits. Finally, the knowledge is widely shared and no longer profitable on its own, which thereby inspires new knowledge. What patents do is artificially cologne the first stage at the expense of the others. As a recent example, a new story reports Acer is the latest PC maker to jump into the tablet PC market, which has been gaining increasing attention since Apple launches iPad in January. With more than one million units sold so far, the iPad's success has sent other PC makers scrambling to come up with similar devices. Now this market competition to make similar devices is not a bad thing, but IP advocates have to have mixed feelings about this imitation. Granting property rights and scarce resources, but not in ideas as to precisely what is needed to have permanent successful action as well as societal progress and prosperity. So we can see that an essential defect of IP is that it seeks to impede learning and to spread and the spread of ideas and knowledge. Honest or naive IP advocates even admit this. Recall above I quoted economist Sugart. He says, to paraphrase the late economist Joan Robinson, patents and copyrights slow down the diffusion of new ideas for a reason, to assure there will be more new ideas to diffuse. So they admit this. By the way, Professor Hopper realized this as far back as 1988. At a panel discussion on ethics with Rothbard, David Gordon and Leland Jaeger, it was there was the following exchange and I'll conclude with this. Question, I have a question for Professor Hopper. Does the idea of personal sovereignty extend to knowledge? Am I a sovereign over my thoughts, ideas and theories? Professor Hopper, in order to have a thought, you must have property rights over your body. That doesn't imply that you own your thoughts. The thoughts can be used by anybody who is capable of understanding them. Thank you.