At its most basic level, intellectual property refers to ideas or information that rooted from a person’s mind. Such know-how is necessary for research, for artistic and creative endeavors, for basic activities most of us engage in, and for operating business enterprises. The importance of such intangible property creates a conundrum, however. Proponents of broad legal protection for intellectual property generally argue that such protection is necessary to incentivize investment in creative and innovative activities that ultimately benefit society. In a capitalist economic system, this argument has merit. Failure to provide property protection may negatively impact the ability to generate a return on investment and hence substantial capital outlays for such activities might be diminished. In contrast, proponents of more limited intellectual property rights argue that in a free society any state granted property rights in intellectual creations should be minimized. This will enable the free flow of ideas and information for the benefit of society. This argument has merit because allowing private parties to own ideas and information can interfere with marketplace competition and with public access to intellectual property. Such access is important to enhance creative and innovative advances, which tend to build on what has gone before. The free flow of information and ideas is also necessary for a robust free society to flourish.


Over several decades, intellectual property law has developed legal rules that carefully balance the above competing interests. The goal has long been to provide enough legal

protection to maximize incentives to engage in creative and innovative activities while also providing rules and doctrines that minimize the effect on the commercial marketplace and minimize interference with the free flow of ideas generally. In short, the law has developed a careful balance between competing interests.


Over the last few decades legislative enactments and judicial decisions have adopted an expansive view of intellectual property. The subject matter eligible for protection has continued to expand significantly in recent years. This expansion has erased the clear delineation between patent, copyright, and trademark law. It has also led to overprotection of intellectual property in the form of overlaps that allow multiple bodies of intellectual property law to simultaneously protect the same subject matter. Such overlapping protection is problematic because it interferes with the carefully developed doctrines that have evolved over time to balance the private property rights in intellectual creations against public access to such creations.


The existence and recognition of property is a fundamental aspect of a free market economy. Allowing private ownership of property enables societal members to engage in capitalistic market. Generally, the question of whether land and tangible items things should be designated as property rarely arises. In most cases, it is self-evident from a utilitarian perspective that such

things should be designated as property in a free market economy. The accumulating, buying, selling, and transferring of land and tangible assets is endemic to a free market economic system. Such activities would be difficult to engage in absent the attachment of private property rights. Hence, it can be presumed that land and tangible items things will be designated as property.


Intellectual property rights, like property in general, are based on a utilitarian theory rather than a natural rights or labor theory. Pursuant to a utilitarian theory, underlying policy concerns determine whether something is legally designated as property. Once a property label is attached, the law gives the property owner control over the property. This control is a enforceable rights  but usually subject to restrictions necessary to further the public interest.


Intellectual property (IP) protection is not absolute; rather, in various aspects, it is limited. The exclusivity IP rights entail is typically curtailed by conditions for protection, the scope of protection, exceptions and limitations as well as a limited duration of such rights. These different forms of limits can be referred to as ceilings of IP protection. The motives for ceilings can, on the one hand, be considerations inherent to the IP system. For example, the objective of promoting innovation through patents demands a limited duration of these rights, so that the invention encourages further innovation in an efficient manner. A functional analysis of ceilings can, in this respect, offer insights as to whether current IP law protects too little or too much.


The difficulty of extending property protection to intellectual property lies in striking a proper balance between granting enough protection to spur innovation while not impinging too greatly on the public benefits arising from the creation of intellectual property. Development of creative and innovative products will occur even in the absence of any property protection for intellectual property. However, absent such legal protection, less investment in creative and innovative development will occur because a lack of economic benefits will create a disincentive to engage in certain types of creative and innovative activities. This can be a detrimental to the public by reducing the public pool of knowledge. Conversely, if the creator of intellectual property controls its use and dissemination via the granting of property status, an anticompetitive effect may result. The creator (owner) can restrict distribution of the property and may be able to charge a higher price for its use by third parties as a consequence of being insulated from some degree of competition.


The goal of any legal protection is therefore must to find the optimum balance such that enough protection is provided by the law to maximize investment of time, energy, and capital in creative

Endeavors while minimizing any restriction on the public’s freedom to use products resulting from such creativity.


Ignoring this simple balancing concept can lead to either over-protection or under-protection of intellectual property. The favoring strong intellectual property protection reflects a unitary focus on maximizing the incentive for investment in innovation. This focus is sometimes expressed under the rubric of rewarding creators for their efforts. Conversely, the favoring weak intellectual property protection tends to reflect a unitary focus on the need for the public to have unrestricted access to all innovations.



Academic Insights


In academic legal literature, advocates of strong intellectual property rights argue that intellectual property rights are necessary incentives for promoting innovation. For example, intellectual property rights advocates argue that strong patent rights promote innovation in drug development. Similarly, they argue for the need to defend copyright owners to promote innovation in the area of computer software. Academics raise similar arguments in the international trade context. In the General Agreement on Tariffs and Trade (GATT), intellectual property rights advocates explained that “to encourage innovation, facilitate progress and expedite improvement in standards of living around the globe, intellectual property needs to be protected from current widespread piracy. Without the limited periods of market exclusivity afforded by patent, copyright, trademarks and so on, to encourage innovation the wheels of progress would turn far too slowly.


At the same time, opponents of strong intellectual property rights reject the assumption underlying the proprietary model that intellectual property creates incentives for innovation. Instead, they argue that intellectual property protection is not the main catalyst in promoting innovation and that innovation would be achieved without it.


Moreover, these scholars posit that intellectual property rights inhibit innovation because they raise the costs of future innovations. They explain that a large public domain is necessary for the promotion of subsequent innovations, as innovations do not rise from scratch but are based on existing creations and inventions. If the public domain shrinks and many of these materials are no longer in the public realm, future innovation will be curtailed.



Actual property rights are the means by which scarce resources are being managed, such that a compromise can be worked out which is as optimal as possible, given the existing constraints. This applies to things such as usage of land and to the distribution of tangible goods, which are complicated to manufacture and thus have a non-zero price, and are not as freely available as the air that we breath.
However, the current system of so-called “Intellectual Property Rights” tries to enforce artificial barriers upon the free flow and use of information, thus creating scarcity where it is most damaging to all of humanity and where a rich bounty of wealth could exist instead. These barriers can only be upheld by a rigorous legal system, under application of draconian enforcement measures. We all know of the difficulty of preventing the free flow of information, and we all have heard the cries for help from mighty publishing empires, alleging that “pirates” are supposedly stealing large chunks of their “rightfully deserved” revenues. The difficulty of enforcing these “rights” shows how unnatural and artificial they are.
The most obvious argument against upholding such barriers is that transfer of information can not be called theft, as is often loudly proclaimed. If somebody copies a piece of information or idea that I hold, then I have not lost it. I still have it, I am able to derive the same utility from it, and in addition, somebody else is able to now benefit from it too. As the cost of copying is so low and still going down, it would be foolish to prohibit the obvious ease of information transfer. It is essentially suicidal to establish barriers here, instead of utilizing the great technological capabilities to the fullest extent. 


I believe once the information has been created, the widest possible use should be encouraged, not prohibited. Every intellectual product that reaches only half its potential audience has been half wasted.
As a side remark, one can observe that artificial scarcity has been often created by vested interest groups before, in other contexts. This does not make it any better, of course. The business of setting up arbitrary, inconveniencing, and artificial barriers is an activity that invites many parasites, and many governments have been rather good at such things. It has happened more than once in history, that a city-state was founded right at a strategic bottle-neck, such as a naturally destined river-crossing, and has set up an enforced system to collect a bridge toll, without which humanity arguably would have been better off. Control of import and export, and slapping toll on goods transferred over national borders, is another favorite activity of governments, no doubt justifiable by various “worthy” political pseudo reasons.
Something that has not happened yet, but has been proposed occasionally, is that programmers ought to be licensed to be able to practice their trade. Their product is of such importance, that it cannot possibly be left to the hands of hobbyists. Just think of the safety implications and the horrible accidents that could happen due to software malfunctioning in a flight control system or nuclear power plant! That the possibility of forcibly restricting programming activities to only a government-licensed elite is not entirely absurd, is demonstrated by the fact that at least two job categories already require such licenses, namely the medical and law professions. It might well be possible to recruit many vocal proponents who will argue how the higher salaries available for this elite will induce more people to become qualified and licensed programmers, thus benefiting society enormously. As we see from this (still) hypothetical and absurd example, by creating artificial scarcity where none would be necessary, more harm can be done than good.


Rights may be protected by Contracts


One of the main, deeply disconcerting features of the current system are the broad restrictions placed on third parties (besides producers and customers), which have never directly entered into any sort of an agreement with the primary producer. This is both unfair and is preventing a free economy to work in its most efficient and innovative mode.
The solution thus is to get rid of the sweeping “Intellectual Property Rights” in current use, and to revert to a more traditional way of doing business, relying more on contracts between mutually consenting parties. This can take a variety of different forms, from a system of intellectual product distribution very similar in appearance to the one we have today, all the way to very different and unconventional models. This change will also open up experimentation with possibly much more attractive business models, which have not yet been thought of.
Much of what will follow will take software distribution as an example, because its relative importance in the economy will only grow in the future, as we progress to a world where general purpose agile manufacturing is becoming more wide-spread, and where progress in product design and design capabilities will make the real difference. I will consider manufacturing recipes for products to be software in the widest sense.

Currently, most software is distributed to end customers in shrink-wrapped boxes, with associated shrink-wrap licenses. I believe they have not yet been tested in court, but quite likely such licenses would not be enforceable anyway, and they are a farce. One party, the customer, never signs a contract, and so a valid contract is never established. Instead, and because these shrink-wrap licenses are not particularly binding, software publishers today are using the usual scare tactics by demanding draconian enforcement measures, as is embodied by the Software Publisher’s Association (SPA), which has launched witch hunts to eradicate “illicit copying”. Instead of bashing the principle of making copies, and making people feel guilty when they do copy, one should encourage making free copies of anything that can be copied. One should never cripple technological capabilities. On the contrary, one should make use of them to the fullest extent.

Software publishers that would like to retain the current system of selling boxed software, would need to adapt and make the software licenses more directly enforceable, if copyright restrictions were dropped. This means essentially that producers and customers both would need to sign a binding contract to transfer a software license. This is a bit more cumbersome, but then at least all parties are made explicitly aware of what is going on and what is at stake, instead of the murky implicit assumptions for which there is no real legal handle for enforcement, thus encouraging a guerrilla warfare against users and other bystanders. In such a contract, it could be specified that the user will obtain the benefit of using the software, if they are responsible for making sure that no copies are passed on. Any other kinds of restrictions might also be specified in such contracts, but both parties need to agree. When a customer violates a contract by passing on a copy, then the producer really does have a handle to enforce their agreed-to rights relentlessly. Presumably, the software sold under such contracts will have unique signatures, making copies traceable to whoever leaked them. However, any other people out there, who have never signed such a contract, should be free to copy whatever they can get their hands on. Even if they get a piece of software for which other people have entered a contract agreement, they as a third parties should be able to freely copy it, without getting prosecuted. Only the person bound by contract, who originally leaked a copy, should be prosecutable, but in that case even more so. Quite possibly, this kind of a system would mainly be used to distribute very expensive high-end software, where the cost is more of a dominant factor than the legal overhead.
Different variations of this still very classical distribution scheme can be implemented. A significant variation is distribution of information products over the Internet. With strong end-to-end encryption, monetary transactions and delivery of software modules are becoming possible. This system seems to be best suited for selling many small modules that are priced low, so that the damage done by somebody distributing the software to non-paying persons is relatively small. Part of the electronic transaction could include a simple “contract” that disallows such further distribution, and if a customer violates the agreement, the producer can cut off that customer from obtaining future products.


It is important that we remedy this dreadful legal situation as quickly as possible, because modern life is becoming information to an ever larger extent, which is a great opportunity for personal empowerment and enrichment of our lives. But we can loose all the advantage if we do not watch out and let the corporate lawyers and other vested interest groups take our freedom away. Emerging technologies such as molecular nanotechnology, which will have a dominant impact on our lives starting early in the next millennium, is based on information to an even larger extent than any of today’s technologies. It is essentially guaranteed that the development of nanotechnology will be retarded by one order of magnitude, if we continue to let the legal situation spin out of control to the current degree. I personally do not want to live in a world that is so thoroughly screwed up with restrictive legalese that it robs from individuals the personal incentive to do wonderful and creative things.

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