That's What I Thought...
columnist: Gene DeNardo

Topic: Government Regulation
Proper Intellectual Property

---

Our coercive system of patent and copyright protection is monopolistic in nature. Could this system be improved utilizing principles of the free market?

---

by Gene DeNardo
(libertarian)
Thursday, September 3, 2009

As it stands today, Intellectual Property Laws, those laws that govern patents and copyrights, are laws that ensure monopoly. They are blatant laws forbidding competition once the "creator" of the idea or the subsequent manufacturer performs certain required tasks and pays fees and costs involved to obtain the patent or copyright.

Obviously, such a system is not free market. Is it possible to deal with the complexities of Intellectual Property in a completely free market manner and not enable the "theft" of intellectual product?

To address the simpler aspects of Intellectual Property first, we should deal with "theft" of title and right to copy separately. Title to a new intellectual idea or product should always be protected. In other words, if an author writes an original book and registers his name as creator, his name should always be connected to the work. Registration should be simple, with very low to zero cost and can as basic as registering the work on a recognized webpage.

Any claims that the work is not original should be settled between the conflicting parties within the court system. Certainly, firms could offer products that "screen" the work for originality, but to involve the government at this entry level is an imposition of a public "agency" into the realm of the courts and an intrusion into what can be accomplished within the private sector; not to mention inefficient and unnecessary.

Any claim by another that the registered work is their own, might be grounds for legal action. The severity of the issue would be related to the amount of damage that was incurred and would be the realm of the courts. This should protect actual title. Trademarks could be considered in a similar fashion.

The act of "copying" itself is by no means illegal. If it were, we would need to lock all humans up for good. The repetitive act of "locking up" humans might also be considered copying, so the "locker upper" would also need to be locked up!

It is also defies logic to view the "act" of copying as theft, as whatever it is that is copied must be made available in order for a "copy" to be produced. The copier must have access to the property that is to be copied in order to copy. As long as the copier follows the laws in appropriating the item or idea, there is no act of theft.

Prohibiting by law or regulation the copying of something that was acquired in a legal manner is restricting the use of one's own property by the force of government. The copying of any type of "property" is never a crime, but instead is simply part of the manufacturing and production process. We constantly copy and reproduce in order to utilize what we believe is useful.

Keeping in mind the difference between what we refer to as "Intellectual Property" and property that exists in the material world maintains the separation that must survive to avoid confusion. Intellectual Property is an idea and has "potential" that can be realized, whereas "property" is the material reality.

So, the real question is how does the creator obtain the "potential value" of his idea? Do we need laws, rules or regulations in order for this to be realized or can the market supply this value? For the market to be free, all actions in relation to the Intellectual Property must be consensual. This is in direct contrast to the forced monopoly rule of government, that is the case at present. Can the free market provide the creator with value and avoid the pitfalls and favoritism of government imposed monopoly?

Since the creator is origin of the idea, he has some fundamental choices. He can always choose to "give" the idea in its totality. In that case, the idea may be used by anyone in anyway without restriction other than the laws that apply to all activity.

He can also choose to "keep" the idea. Since the idea is of no use to anyone but himself as long as it doesn't leave his mind, he can "hoard" the idea. In this way, no one can utilize it, until it is thought by another who may choose a different option.

More likely, he can "sell" the idea. He can ask whatever he wants from whoever he wants and receive whatever someone will pay.

If he chooses to sell the idea, he has several options. He could sell it outright to one buyer or many. Or, he could "contract" the idea.

In this manner, there is no reason monopoly use or production of an idea cannot be contracted. If the creator desired monopoly contract, he could sell to one producer and require that all reproduction also be contracted to prohibit copy. Any purchase of the idea product from the selected producer would be accompanied with a contract that prohibited the copy of the good by the new owner. The creator could receive a lump sum for his creation or a remittance each time the item was reproduced by the contracted producer or some combination. .

As we mentioned, to achieve a full monopoly, those who purchase the product from the selected producer could be contracted to prohibit any "copying" of the product. But, they could also be allowed to copy, as long as they paid a remittance or fixed amount back through the contract to the creator or producer or both. If it were a fixed amount, it would in effect set two prices for the item, a price for the item with restriction on copy and a higher price with no restrictions. The key is that although the contract calls for restrictions that encourage monopoly and restrict the use of private property by its owner, all parties have given their consent to the agreement.

There are two great differences in "contractual monopoly" and "legal monopoly". The first is the lack of coercion. No one is restricted by law in the use of their legal property. They have consented to any restrictions that might apply. The second is the transactional costs that the "contract monopoly" instills in the product. The cost of limiting the right to copy becomes a part of the cost of the product, reducing its competitiveness against products without restrictions. The true cost of monopoly is no longer an externality paid by taxpayers and consumers through the institution of government agencies and market monopoly.

With enforced monopoly eliminated, market factors fall into place. For example, the copy production cost of a CD, case and descriptive cover together run around a dollar or less, depending on the size of the production run. Yet, due to monopoly laws, Britney Spears is able to get $18 or more for her artistically beyond measure, new releases. What if Britney still had this monopoly choice through consensual contract rather than enforced law, but other artists might choose different routes?

Some artists might choose to directly market their unrestricted CD at a cost of $4 or $5, with the thought that no one would bother to copy at that price. Others might contract to several manufacturers with no contract restrictions on the purchase, obtaining a similar price due to competition between manufacturers, again limiting people willing to copy at such a low price. Some might contract to a couple of manufacturers to keep them honest and require a purchase contract and attempt to obtain a medium retail price. Some artists might sell the CD idea outright and let someone else deal with the choices. The choices are extremely diverse and control is back in the hands of those who create, produce or consume, rather than government agencies and whomever the government decides should benefit from the enforced monopoly.

Would innovation and new ideas be limited? Why? All options are available. We could guess that today's ridiculous payouts wouldn't occur except for exceptional ideas, but the overall payout would probably become much more balanced and equitable. The creator would have the option of marketing in any manner he sees fit, rather than the all or nothing choice that is available now.

This should encourage more innovation and creation, rather than less. The new idea wouldn't have to be world changing or earth shattering, it could be just a decent new idea that today might not even be looked at by the few monopoly players that run the show. It is hard to determine what consumers would really choose when they are given real choices rather than predetermined government approved corporate programs.

The question arises, as this new system is implemented, should any of the old monopoly rights be honored? The answer is no, with one exception: the idea for the new system itself.

I have completed all the necessary arrangements and coordinated efforts with all the appropriate government agencies. Approval has been granted and payoffs have been tendered.

I will soon receive a tax free payment of one billion dollars. It will be sent directly from Comrade Bernanke, in order to avoid disruption of our existing markets. I am not entirely certain that our government will utilize the new system, as there was some talk about, "waiting for the right time." But, they did assure me that they would, "take care of things". And hey, like all those who benefit greatly from a controlled market, "I got mine"!

To be honest, there is a very small chance that these ideas are completely original. Thoughts like this have been floating around forever. But, that is unimportant due to my newfound fortune. It will be relatively easy to "litigate" the originality of the idea and fight off any challenges. After all, those with good original ideas rarely have the money to develop or protect them! I also plan to "incorporate" in order to protect myself with State chartered limited liability.

You just gotta love the "free market"!

Did you like this article?
If you did, Thumb It!
3 thumbs so far

©2009 Gene DeNardo, all rights reserved. You must have written permission from the author in order to republish this work.
Published: Thursday, September 3, 2009
Last modified: Thursday, September 3, 2009

The views expressed in this article are those of Gene DeNardo only and do not represent the views of Nolan Chart, LLC or its affiliates. Gene DeNardo is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.

Report violation by Gene DeNardo of Nolan Chart LLC's terms of use policy.