The Fallacy of Intellectual Property
by Daniel Krawisz
http://mises.org/story/3631

Intellectual property is the principle that the creator of an idea has a right to certain controls over all the physical forms in which his idea is recorded. The extent of this control may be different depending on whether the idea is considered copyrighted, patented, or trademarked, but the essential principle is the same in all cases.[1] This presumed right of the creator of an idea is often believed to be similar to the right that a homesteader has to land he has settled, but the analogy is false. Intellectual property is necessarily a statist doctrine.
The Nature of Property

People cannot be expected to agree unanimously on what the world ought to be like and what each person should do, nor are people necessarily coordinated and patient enough to arrive at a consensus through deliberation. Instead they will tend to be apart from one another, desiring immediate action and lacking established procedures of efficiently coming to decisions.

When people disagree and are unwilling to deliberate, one person's decision must prevail without regard to the others' desires. Whose decision prevails may be determined in two ways: physical conflict, or deferral to a system of property. With a system of property in place, it is necessary only to ask who owns a thing, rather than to endure the costs of deliberation or to resort to violence.

Without the possibility of two persons attempting to control any one thing, defining property rights would be a mere psychological game without any consequences for human action. If persons were bodiless ghosts able to pass through one another without interacting, or if everyone lived in his own universe without being able to move from one to another, all disagreements about what to do with the world would be irrelevant. The purpose of property rights is the prevention of physical conflict. An essential characteristic of property is exclusivity, meaning that the use of an object by one person prevents it from being used by another.[2]

In addition to property rights, political theorists have proposed many other kinds of rights. All such rights must resolve into rights over physical things. When we speak of a right to free speech or a right to one's labor, for example, we really mean a right over one's own physical body. All rights, therefore, are ultimately property rights.

Ultimately, though we might speak of ownership over abstract things, it is only physical things, which can actually be fought over, that are owned. This we must keep in mind, for it is possible to sound reasonable and humane when discussing in abstract terms rights that would sound monstrous if they were described in terms of property.

Libertarians have often noted, for example, that the "right" to health care, a job, or a minimum income implies a property right over the people capable of providing such things and is therefore really a form of slavery. Similarly, the right to a vote is really a joint ownership between all citizens over the people, land, and everything else within a particular jurisdiction.

Libertarians themselves are at times confused over this issue. For example, they sometimes claim that in a free market broadcast industry, broadcasters would own certain frequencies in a given region and would therefore have the right to broadcast without interference by a pirate radio station on the same frequency.

Yet it is clearly not the frequency that is owned, because a frequency is not a physical object but rather an abstract property of all waves. It is the land over which that frequency is broadcast that is owned, albeit only for the purposes of broadcasting that frequency. Ownership of a radio frequency is ultimately a property right over a region of space, which allows someone to broadcast at a given frequency over it.[3]

This example demonstrates that ownership is not necessarily over entire objects but rather over decisions to be made with regard to them. An object can be owned by many different people because there are many kinds of decisions that can be made about it. Since different frequencies of radio waves can pass through one another without interfering, the same territory can be owned separately for the purposes of broadcasting at each frequency without leading to a conflict.[4]

Ideas cannot themselves be controlled with physical force, but instead must be controlled by way of other things — paper, printing presses, computers, and people. It is therefore in these things that intellectual property consists. To own a patent in a given invention is to have rights over everything in the universe that might be used to replicate that invention. This ownership is limited; one only owns things to the extent of being able to prevent others from arranging them in a particular way.

Similarly, to have a copyright in a song or a book is to have a property right over all paper, printing presses, computers — even over all people — everywhere. The owner may prevent the copying or public performance of his work by them all. Intellectual property is, like socialism, a kind of slavery, albeit a limited kind. Unlike socialism, however, intellectual property does not limit itself to the people and property in a given town or nation, or even the entire world. Since most matter in the universe could be used to encode an idea, intellectual property is a claim over the entire universe.
"Intellectual property is necessarily a statist doctrine."

Rather than seeing intellectual property as a particularly expansive kind of physical property, many people see it as a separate, analogous, and equally fundamental construction. To copy an intellectual work is therefore a form of theft analogous to burglary; however, I insist that there is no analogy.

Intellectual property and physical property cannot exist side-by-side as logically independent legal constructions. Anything that gives control over physical things necessarily limits others' control of those things, and therefore acts exactly like a physical property right. If you have an intellectual property right to your monograph, you may prevent me from copying it, thereby limiting the physical property right I have in my ink, pen, and paper.
Coordination and Communication

To serve this function of preventing physical conflict, it is not enough that everything controllable should be owned; in addition, what is owned must be controllable by its owner, at least to the extent of preventing others from appropriating it for their own purposes. This involves not only providing for some defense of the owner's property, whether on his own or by engaging police to help, but also communicating his ownership to other people and watching his property closely enough to know if it is being misused.

Of course, this is not to say that people can be forced to write their name on everything they own, or to register all their property with some central authority. People have a right to conceal their ownership of something; but if they do so they really have no cause to complain if someone else should claim it for himself. If a system of property is to maintain itself, it is necessary that it should not be difficult to learn who owns a given thing.

If the costs of discovering who owns what are too great, then the system of property cannot persist as it is. This is not a moral point, but simply an economic fact: if the system of property rights is too complicated for anybody to figure out, then in practice. the property rights will necessarily unravel.

A man who claims to own a piece of land so far away that he cannot communicate with anyone around it will be unable to derive any use from his land. Even if his wish is that it should remain fallow, he cannot know if it has been stolen and used in some other way. Those near his land and wishing to use it may be perfectly willing to trade with the owner for his permission but, being unable to communicate with him, may simply steal it instead. Such a system of property, therefore, would fail to prevent physical conflict.

An exchange may be consensual, but if the result is too confusing for people to understand, the exchange is impossible even in a libertarian society. People cannot expect to maintain their property if it is too difficult for others to figure out whose property it is. Therefore, some kinds of rights cannot be sustained, at least without a certain degree of capitalization in a society.

In a primitive society, rights would tend to come in the form of complete ownership of physical objects rather than as shared stakes in large enterprises, and of relatively few things kept close to the owner himself rather than many things dispersed over great distances. It would also be difficult to own property that is far away because of the expense of communicating over distances.

In such a society, it would also be difficult to own property collectively, and for the same reason: people must communicate with one another over the distance separating them, and they must deliberate on the procedures that they will use to make decisions about their shared property. A certain degree of wealth is necessary before a given organization is worthwhile; otherwise the effort to create and maintain an organization will divert people from more important activities.

The cost of communication in any society requires that there be some dispersion of authority. It cannot be that one man or organization owns everything. Instead, everyone should own something. This is not to say that property should be redistributed to those most capable of controlling it; to do so would require a giant organization that attempts to control everything, the very thing that needs to be avoided! Rather, under a system of private property, owners have an incentive to sell to those more capable of controlling a given property because it will tend to be worth more to those most capable of controlling it.

As the creation of wealth progresses, coordination and communication will become easier, and thus shared and dispersed ownership will become more feasible. However, there will always be limits to the kinds of coordination and communication that are supported in any economy. This is the Hayekian problem of knowledge.[5]

Thus, the doctrine of intellectual property is extremely impractical. It grants people property rights which are unlimited in their distribution, and which extend over things in other peoples' homes, e.g., their computers, their paper, and whatever other materials might be used to encode an idea. The degree of communication and coordination necessary to control such a property would be enormous. Although intellectual property holders will wish only to maintain control over people who actually have access to their idea, in most cases this now includes the entire world.
"Ownership is not necessarily over entire objects but rather over decisions to be made with regard to them."

Whereas a physical property right establishes a set of boundaries with other people, an intellectual property right is like a series of tendrils extending beyond the boundaries of everyone else's property. It becomes necessary to keep track of each of these tendrils, because any one of them can seed an unlimited number of pirate copies.

The free market is characterized by widely dispersed management, rather than top-down control, so there is no reason to expect that the free market will support such an enormous and invasive system of monitoring.

Even during the stone age, trade routes connected North Africa and China, but obviously the people on each end of the route had no knowledge of the other. Such trade routes were not created by any hierarchical, deliberate organization, but rather arose out of the interactions of traders along the way. Many inventions that originated in China, such as the compass and gunpowder, appeared in Europe before Marco Polo made his journey to Asia. Obviously, no claim to intellectual property in such a society could be sustained; such claims would truly be nothing more than 'nonsense on stilts.'

In our society, controlling widely dispersed property is much easier, but this does not mean that intellectual property makes any more sense. Although an empire of a given size might be easier to control now, the advances in communication that made this possible have also made it far easier for a given intellectual property to expand beyond the boundaries intended for it. It is now possible to produce more information in a week than in the entire history of medieval Europe.

The owner of an intellectual property, particularly a popular one, cannot expect to retain control over his work. A work that has spread over the globe, having been enjoyed by thousands or millions of people, is simply too big. Imagine that someone were to lend out thousands of small trinkets all over the world to people he has never met, knows nothing about, and cannot keep track of. Can he, by any stretch of the imagination, believe that these will be returned to him?

Owning an intellectual property is similar to having built a fortress with a practically infinite boundary that cannot be defended, patrolled, or even charted. Anyone can get in or out without being observed. Can the residents of such a fortress expect not to be vandalized, burglarized, and overrun?

Physical property can be fenced in, defended, and forcibly retrieved if it is stolen. The only way to control an idea, on the other hand, is never to think of it in the first place. Once it is put into practice, one may try to keep the idea secret, but once it escapes, it cannot be retrieved. A piece of physical property is only in one place at a time, and one can chase after it if it is stolen, but an idea can disperse in an unlimited number of directions at once. An idea can be everywhere on the planet in a matter of minutes.

The type of infrastructure necessary to maintain such an empire is such that it could never be supported on the free market. Millions of objects would have to be monitored — in peoples' houses, on their computers, in their business affairs, and wherever the idea might be put to use. It is only by way of the state and its eagerness to employ any excuse to wield power that intellectual property might plausibly be enforced.
"Backed by the doctrine of intellectual property, every popular author and every inventor of a useful device claims an empire on which the sun never sets."

Backed by the doctrine of intellectual property, every popular author and every inventor of a useful device claims an empire on which the sun never sets. In a free market, this doctrine could not survive long, for creators must bear the cost of patrolling their empires; but with the state on their side, authors are willing to cling to intellectual property rights to their logical extreme.

Whereas on the free market the costs of defending a property are as relevant as anything else in the decision to own it, the doctrine of intellectual property, backed by the extravagant monopoly power of the state, encourages people to lay claims to properties that are inherently indefensible.

As Boldrine and Levine say in Against Intellectual Monopoly, being a monopolist seems to be akin to going on drugs or joining some strange religious sect. It seems to lead to complete loss of any sense of what profitable opportunities are and of how free markets function.

Monopolists, apparently, can conceive of only one way of making money, which is bullying consumers and competitors to put up and shut up. Furthermore, it also appears to mean that past mistakes have to be repeated at a larger, and ever more ridiculous, scale.[6]

Unlike ordinary property, intellectual property cannot be defended on the free market, because of the vastly greater resources that would be required to maintain control over it. It is only to the extent that customers willingly obeyed the wishes of the author that there could be anything like intellectual property on the free market. For this reason, the doctrine of intellectual property should be seen as inherently statist. Intellectual property is nothing but a trick that the ruling class employs to increase their power, and the rulers are entirely willing to impose the degree of invasive monitoring necessary to enforce it.
Natural Property

The free market may not support intellectual property, but can one nonetheless make a moral argument for it? Though intellectual property may be so costly to defend that only the state might even attempt such a task, might it still be theft to violate a copyright or patent? To evaluate this possibility, I will now discuss the justification of property rights in general and test the doctrine of intellectual property against the general theory.

The proponents of intellectual property propose that creators be granted control over their works as an incentive to continue to innovate. However, like all utilitarian arguments about law, this justification presupposes our ability to shape the rules of society to our whims. To say that creators should have control over their work is one thing, but it is impossible to grant this control unless some particular king or senate actually has the right to do so.

The justification of any system of property rights must always refer to an earlier state of society, because it must show that the present system justly transitioned out of the prior one. An argument that a system of property rights is just in and of itself, without reference to how they came to be, is nonsensical.

The material substances in the world are heterogeneous, each having their own disadvantages and advantages for any given purpose. The same is true of people: each person has different skills and merits. It is subjective to compare these different merits of persons or objects with one another, so each person may have different ideas about what arrangement of property is the best. What sort of merits and needs might grant a person a first floor apartment rather than one on the third floor? Clearly, such questions are impossible to answer objectively.

Therefore, an attempt to justify an arrangement of property based on fairness rather than on a history of just actions requires that the problem of subjectivity must be averted: this can only be done by granting some organization a superior opinion to all other organizations and ordinary persons. The extreme power of such an organization would obviously be unfair, so it itself must somehow be excluded from the question of fairness entirely. Therefore, this organization, which by now the reader has certainly identified as the state, must be justified historically.
"Since most matter in the universe could be used to encode an idea, intellectual property is a claim over the entire universe."

An argument that property should be distributed fairly depends on the justness of the historical circumstances under which the state (which would effect this distribution) was created. If a person should attempt a redistribution of property in the name of an organization not already believed to have the right to reorganize all property, he would have no legitimacy regardless of how fair his redistribution was.

All utilitarian arguments about how society should be structured involve some kind of historical assumption, often unspoken, in the form of a preexisting state with the right to do whatever it is they propose. When people advance utilitarian arguments for the state, there is a logical gap between promoting such an organization in the abstract and identifying the actual existing state as the very monopolist to which we all must pledge our allegiance.

It is entirely arbitrary that this particular organization, rather than any other one, should rule. Even if it could be established that there should be a ruler, it does not follow that we should therefore obey the present one, whose 'right' arose only from having defeated the other contenders in a physical conflict.

Since any system of property requires a historical justification, it is necessary that the rules of any theory of justice can be taken back to the state of humanity before society — to a state before the question of justice can arise. This is why the state of nature is so important in political theory. Humans do not seem to have ever lived without society, which evolved from the societies of our hominid ancestors, but it is not necessary that the system of property we have today actually arose from people originally in the state of nature (without society); the purpose of the state of nature is merely to consider the simplest cases of human interaction, unencumbered by history.

Those who justify the state often do so by the trick of defining the state of nature as a situation in which people are at odds with one another, and lack recourse to a third party to resolve disputes. However, such a situation clearly has a history to it; why should people find themselves so close together that there is a great need for an institution of justice, without their having already created one? Surely they would stop moving closer to one another before they became involved in a 'war of all against all.' This situation is more plausible as a society resulting from the collapse of a prior state that had monopolized all justice.

The proper state of nature is one in which people are so far apart that they do not yet know of one another's existence. Here there is no universal war and, since people will come into contact gradually, there is no reason to expect that they will automatically start fighting. Natural law theories are those which begin with this state of nature, and natural property is the system of property that arises from the application of natural law.

This version of the state of nature constrains the possible rules of justice considerably. It is not the case that law can simply be whatever the rulers desire or what some group considers most beneficial. Any system of property that cannot be explained as having been created out of natural law ultimately rests, not on any real justification, but simply on the result of force.

Rules of justice cannot depend on a society having a supply of wealth already at its disposal. Natural law cannot require people to spend time and energy they do not have to coordinate themselves into a centralized decision-making body. Natural property, therefore, necessarily begins as a system of dispersed authority and individual property, without any joint ownership.

In the state of nature there is no place for intellectual property. When one creates a work or invention, one does not 'homestead' the idea in a manner analogous to that of the land homesteader. To claim property in an idea is to make a claim over all material in the entire universe, including material of which one has no knowledge. This is never possible, even in an advanced society, and its impossibility in the state of nature demonstrates that intellectual property is not a kind of natural property.

As society progresses people will become capable of creating more complicated rights. However, these rights are still created and therefore not natural. They are built out of the consent of everyone involved, and they do not give anyone the right to involve other people without their consent.

On the free market, therefore, any kind of intellectual property must be created by the agreement of creator and consumer alike. Intellectual property, where it arises by consent, would be an arrangement beneficial to everyone, not simply to the creator alone.

Here I should bring up Rothbard's attempted justification of libertarian intellectual property. According to his model, someone writes a book and sells rights to the book other than the right to copy it. All subsequent possessors of the book do not own the right to copy the book because this right has been continually retained by the author.[7] This construction would make sense if the book had the ability to reproduce itself on command, but ordinarily, copying a book does not involve using it any differently than one would to read it. The buyer certainly must have the right to open it up, and the writer certainly cannot retain the exclusive right to aim cameras or Xerox machines at its pages.
"As long as people believe that they have a right that requires a huge concentration of power to enforce, they will be most eager to rely on the state to protect it."

Copyright is not a natural right that the author can retain, but he might effectively reserve a copyright in his work by selling it with a contractual agreement that the buyer will not distribute copies himself and must require the same of anyone to whom he later resells the book. The initial pirate then is guilty of a breach of contract and may owe the author restitution, but third parties who obtain pirated copies still could not be bound by such a contract.

No matter how the author attempts to word the contract, the pirate need only create copies out of material that does not belong to the author, and the author would have no say over those copies at all. This would be the case, for example, if people created copies for themselves by downloading a file onto their computers. No property is transferred; the hard drives have simply rearranged their internal state.[8]

Suppose that a creator is somehow able to retain rights to his creation such that one cannot copy it without violating the creator's property rights. Perhaps an inventor of a machine could do this by selling only the right to possess his machine and turn it on and off but not to open it up or tamper with the inside. As long as the machine cannot be probed with X-rays, he would have effectively 'patented' his device.

However, he would find his property — in many sets of machine innards — to be an extremely inconvenient thing to own. He does not know where his property is, what is being done with it, or who holds it presently; he cannot control it in any way from where he sits. His property is also difficult to alienate: who would buy property that cannot be altered?

Suppose, however, that the buyer of the invention has no desire to act in bad faith and is interested to pay to look inside the machine, but he finds that the original inventor no longer owns the inside of the machine — he may have sold it or died and passed it on to an heir. It may quickly become extremely difficult for someone who encounters the invention to figure out who owns it. Under these circumstances, the invention should simply be regarded as unowned; anyone may look inside and claim the interior.

The conclusion is quite clear: on the free market, intellectual property requires the consent of the consumer because attempts to retain control of all instances of a work are too easily circumvented and too inconvenient to maintain, especially in the state of nature. Unfortunately, in our world, 'orphaned works' like the invention I described above are not regarded as unowned, but are simply abandoned out of fear that the owner will suddenly show up again.
Conclusion

Intellectual property violates the libertarian principles of homesteading and exchange, and it makes no sense as a right at all without the assumption of an omniscient and omnipotent organization willing to enforce it. Unlike homesteading and exchange, intellectual property is not something that anyone can reasonably expect to be able to defend and control.

It therefore serves the state well to promote such a doctrine; as long as people believe that they have a right that requires a huge concentration of power to enforce, they will be most eager to rely on the state to protect it.