KOL365 | Guest Lecture on IP for Walter Block’s Law and Economics Class

Kinsella on Liberty Podcast, Episode 365. My friend Walter Block, economics professor at Loyola University-New Orleans, asked me to give a guest lecture today (Dec. 8, 2021) for his Law and Economics course, on the topics of intellectual property. This is it. Transcript below. Youtube: https://youtu.be/PclRRN6podw TRANSCRIPT "Intellectual Property: Law and Economics: Guest Lecture Walter Block’s Law and Economics Class" Loyola University-New Orleans, Dec. 8, 2021 by Stephan Kinsella 00:00:00 WALTER BLOCK: Okay, it’s 12:37.  We usually start the class with a moment of silence, so we’ll start the class with a moment of silence. 00:00:09 [moment of silence] 00:00:12 Okay, students, let me introduce you to my friend, Stephan Kinsella who is a lawyer in Houston, working in Houston, and he is, I would say, one of the preeminent libertarian theoreticians.  So without any further ado, you’ve all read his paper, and he’ll go over it a bit and have a nice dialogue with you.  So Stephan, start. 00:00:36 STEPHAN KINSELLA: Okay, can everybody hear me okay?  What is this course?  What’s the name of the course? 00:00:43 WALTER BLOCK: Law and Economics. 00:00:44 STEPHAN KINSELLA: Okay, Law and Economics.  Okay, so I can touch on both.  I think what I’ll do is I’ll try to speak around 25-30 minutes, and then open it up for questions.  And if you guys have any questions while I’m speaking, I don’t mind if you interrupt me if there’s something I said that needs clarification or if I’m not clear.  So feel free to interrupt me during it.  Otherwise, you can wait until I’m done. 00:01:08 So I think what I’d like to do is kind of maybe explain how I got to my views and where the paper came from.  Basically, I started practicing law and patent law around 1993-94, and I had been a libertarian for a long time, and I had been thinking about the intellectual property issue because I was not satisfied with the arguments in favor of it by Ayn Rand and others partly because these rights terminate at a certain time, and it just didn’t make sense to me.  Like if it’s a natural right or real property right, why would it terminate?  And then how do you know what the right length of time is?  All those issues. 00:01:45 So I searched for a better argument thinking I’m a libertarian, and I’m a patent lawyer.  I’d know more about it than anyone else.  I’ll figure this thing out.  And finally I came to conclusion right around the time that I started practicing patent law that all of intellectual property law is totally unjustified.  And so I ended up writing that paper in 1999 or so, which is over 26 years now.  In the meantime, I’ve come across other arguments, other data, other ways of presenting it, and although I think the original argument is still sound.  So that’s where we are. 00:02:23 I think what I’d like to do is focus on two types of intellectual property just because of the time constraint, and those are the two most important and the two most damaging in my view, which is patent and copyright.  The other types are trademark and trade secret, and then there are some other more recent types like mask work protection for semi-conductors and database rights in some countries and boat hull designs.  And I would also include defamation law as a type of intellectual property because the arguments for it are the same, although in the law it’s not usually considered that way. 00:02:57 So let me first talk about the term.  I do think the term intellectual property is a loaded term, and it’s as misnomer, but we’re stuck with it for now and what we want to talk about it because that’s the way it’s gone.  Originally, the four main types of intellectual property, which are patent law, copyright law, trademark law, and trade secret law.  They were all separate types of all.  They had different origins.  Trade secret originated in the common law.  Trademark originated in the common law, although statutes have sort of replaced it.  Patent and copyright purely originated in the statutes and legislation, and they all have different domains. 00:03:38 I’m going to give a quick history of patent and copyright.  So you had a rough version of a proto-free market in Europe back in the 1500s, 1600s, some semblance of free trade, some semblance of property rights.  Then – and at the time, the king and the church, in cahoots with each other, could control what their scribes – what books they would print by hand.  So they could control what thought could be put down on paper and disseminated to the masses, so they had the practical ability to control thought. 00:04:19 When the printing press came around in the 1500s or whenever it was, Gutenberg’s printing press, that threatened this easy control by the state and the church of what could be printed.  So the first thing the government did was, in England, they started the Stationers Company as a monopolistic guild, which had the monopoly on printing.  So the government still could control what could be printed. 00:04:44 When the monopoly on that – when the charter ran out about 100 years later, the question was what to do now.  And so the Statute of Anne was enacted in response to that in 1709, which basically is the origin of our modern copyright law.  So they basically gave the copyright, instead of giving it to the publishers or to the printing guilds, they gave it to the authors.  But as a practical matter, the authors had to, right away, turn around and assign their copyrights to the publishers to get it published.  So it ended up – the rights still stayed with the publishers, and that model lasted until about 15 years ago when the internet and Amazon and self-publishing started disrupting everything. 00:05:29 So you had all these gatekeepers.  I mean we’re all familiar with the RIAA, the music industry, and the publishing industry, record labels, Hollywood, book publishing.  There’s this gatekeeper function.  All the publishers maintain control.  The authors usually have to assign their rights, and then they’re subject to the whims of these gatekeepers, which act as sort of like a modern version of the old gatekeeper function of the Stationers Company and the church and the crown, which was censorship basically.  So just until recently, we’ve had that model that was perpetuated. 00:06:08 So copyright covers the right to copy an original work of creation like a book, a novel, anything that’s creative.  Things that are functional, practical things like inventions, which are machines or processes, ways of doing things, those are what patent law covers.  And just briefly, trademark covers marks and signs that you use to indicate the source of goods like Coca-Cola or Nike.  And trade secret covers what rights you have when you try to keep information proprietary and secret, and someone leaks it.  Can you go to court to stop someone from leaking it further?  That’s what trade secret law covers. 00:06:57 So even earlier than the Statute of Anne of 1709, which covers copyright, you had the practice of kings granting monopolies called letters patent because the patent in Latin means – or patente means open.  So it was an open letter, which means it’s like the king writes on a piece of paper to someone who’s a court crony.  He says here’s a letter you can show to the world.  I, then king, hereby grant the bearer of this letter the exclusive right to sell this product in this region.  So he would grant monopolies, which would protect them from competition.  So one guy would have the exclusive right to sell playing cards or sheepskin or something in a given region.  And of course that means they could make a lot of money because no one could compete with them, so they could charge quasi-monopolistic prices. 00:07:48 If you’re protected from competition, you could sell products at a higher price than you could in the race of competition.  That was the whole purpose of it.  And the king would do this to get a kickback in the form of taxes or to induce these guys to collect taxes or to buy their loyalty.  So this process got out of hand, and parliament got sick of it, and parliament enacted, in 1623, a statute trying to limit the king’s discretion to grant all these crazy mercantilist, anti-competitive, protectionist, monopoly privilege grants called letters patent. 00:08:23 And they passed a law called the Statute of Monopolies, so it was intended to restrict the ability of the king to grant these monopolies, which interfere with the free market and restrict competition and make the average consumer worse off because they have less diversity of products, they have higher prices they have to pay, and so on.  But in the Statute of Monopolies, the statute retained the ability of the government to grant these monopolies, these letters patent, for original inventions.  So they eliminated most of these monopoly grants of privilege, but they kept it for inventions, and so the modern practice of granting patents for inventions emerged there. 00:09:07 And then in the United States in 1789 when the Constitution was enacted, there’s a clause called the copyright clause and section 1 – I’m sorry, article 1, section 8, which gives Congress the power to promote the progress of science and the useful arts by securing, for limited times to inventors and authors an exclusive right to their inventions and discoveries – their writings and discoveries.  So that’s the basis for copyright and patent law in modern American law is that copyright clause. 00:09:39 And by the way, just as a point of interest, most people now, when they read that, they think that the word science corresponds to the patent grant, and the useful arts corresponds to copyright because they think copyright covers artistic creation.  However, the way language was used at the time, the word science was more general.