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Title: “Intellectual Property”
Author: Kevin Carson
Date: May 14, 2009
Language: en
Topics: intellectual property, critique, economics, c4ss
Source: Retrieved on 30th August 2021 from https://c4ss.org/content/521

Kevin Carson

“Intellectual Property”

I. The Ethics of “Intellectual Property”

“Intellectual property” is a contentious issue among libertarians. Among

the individualist anarchists alone, Lysander Spooner took an absolutist

position in favor of patents and copyrights, defending them as binding

in perpetuity, [1] whereas Benjamin Tucker classified them as one of his

Four Monopolies.

Fourth, the patent monopoly, which consists in protecting inventors and

authors against competition for a period long enough to enable them to

extort from the people a reward enormously in excess of the labor

measure of their services, — in other words, in giving certain people a

right of property for a term of years in laws and facts of Nature, and

the power to exact tribute from others for the use of this natural

wealth, which should be open to all. The abolition of this monopoly

would fill its beneficiaries with a wholesome fear of competition which

would cause them to be satisfied with pay for their services equal to

that which other laborers get for theirs, and to secure it by placing

their products and works on the market at the outset at prices so low

that their lines of business would be no more tempting to competitors

than any other lines. [2]

Although Tucker relegated “intellectual property” to last place among

the Four Monopolies, he considered them entirely in terms of their

effect on individual exchange, rather than of their effect on industrial

structure, or of the structural and institutional relationships between

business and the state. This problem of emphasis was a general failing

of Tucker’s. After 1900, for example, when he finally began to recognize

the trusts as a problem, he assumed they had grown beyond the point at

which eliminating the money, landlord, and other monopolies would do any

good in reining them in; he ignored entirely the great extent of their

dependence, as institutions, on direct subsidies and other structural

ties to the state. But in fairness to Tucker, at the time he wrote the

passage quoted above the corporate transformation of the economy was

just getting well underway, and the effect of “intellectual property”

still fell primarily at the level of individual exchange.

Ayn Rand regarded patents and copyrights as “the legal implementation of

the base of all property rights: a man’s right to the product of his

mind.”

What the patent and copyright laws acknowledge is the paramount role of

mental effort in the production of material values; these laws protect

the mind’s contribution in its purest form: the origination of an idea.

The subject of patents and copyrights is intellectual property.

An idea as such cannot be protected until it has been given a material

form. An invention has to be embodied in a physical model before it can

be patented; a story has to be written or printed. But what the patent

or copyright protects is not the physical object as such, but the idea

which it embodies. By forbidding an unauthorized reproduction of the

object, the law declares, in effect, that the physical labor of copying

is not the source of the object’s value, that that value is created by

the originator of the idea and may not be used without his consent; thus

the law establishes the property right of a mind to that which it has

brought into existence. [3]

Despite her defense of “intellectual property” as a property right

rooted in natural law, interestingly, Rand did not pursue the principle

consistently to the same logical conclusion as Spooner. Rather than

treating it as a right in perpetuity comparable to tangible property

rights, to devolve to one’s heirs and assigns without limits, she

dismissed perpetual duration as an obvious impossibility. Instead, she

considered the positive law’s provisions for copyright and patent

duration as “the most rational solution….” [4]

Perhaps the most absurd development of “intellectual property”

absolutism was that of Andrew Galambos. As Stephan Kinsella notes, “[i]t

is difficult to find published discussions of Galambos’s idea,

apparently because his own theories bizarrely restrict the ability of

his supporters to disseminate them”; [5] students attending his classes

were required to sign non-disclosure agreements promising not to

circulate his ideas outside the circle of paying customers [6] (a rule

which would seem to doom a movement to extinction about as effectively

as the Shakers’ ban on sexual intercourse). Galambos reputedly dropped a

nickel in a box for the heirs of Thomas Paine every time he used the

word “liberty,” and juxtaposed his first and middle names to avoid

infringing on his father’s “intellectual property” rights in his name.

[7] If he paid royalties on the alphabet to the Tyre Chamber of

Commerce, there is no record of it.

Among the Austrians, Ludwig von Mises, no market anarchist, took a

largely agnostic attitude toward the legitimacy of patents. As a purely

utilitarian assessment of their effect, he argued that they enabled

sellers to charge a monopoly price for goods that might not have been

offered at all without the use of patents to recoup the cost of

development. [8]

Murray Rothbard, on the other hand, was not shy in his denunciation of

patents as a fundamental violation of free market principles:

Patents prevent a man from using his invention even though all the

property is his and he has not stolen the invention, either explicitly

or implicitly, from the first inventor. Patents, therefore, are grants

of exclusive monopoly privilege by the State and are invasive of

property rights on the market. [9]

Rothbard dismissed utilitarian arguments for patents, based on claims

that they are socially necessary to promote innovation, with the

contempt they deserved:

The most popular argument for patents among economists is the

utilitarian one that a patent for a certain number of years is necessary

to encourage a sufficient amount of research expenditure for inventions

and innovations in processes and products.

This is a curious argument, because the question immediately arises: By

what standard do you judge that research expenditures are “too much,”

“too little,” or just about enough? This is a problem faced by every

governmental intervention in the market’s production. Resources — the

better lands, laborers, capital goods, time — in society are limited,

and they may be used for countless alternative ends. By what standard

does someone assert that certain uses are “excessive,” that certain uses

are “insufficient,” etc.?…

Many advocates of patents believe that the ordinary competitive

conditions of the market do not sufficiently encourage the adoption of

new processes and that therefore innovations must be coercively promoted

by the government. But the market decides on the rate of introduction of

new processes just as it decides on the rate of industrialization of a

new geographic area. In fact, this argument for patents is very similar

to the infant-industry argument for tariffs — that market processes are

not sufficient to permit the introduction of worthwhile new processes.

And the answer to both these arguments is the same: that people must

balance the superior productivity of the new processes against the cost

of installing them, i.e., against the advantage possessed by the old

process in being already built and in existence. Coercively privileging

innovation would needlessly scrap valuable plants already in existence

and impose an excessive burden upon consumers. For consumers’ desires

would not be satisfied in the most economic manner. [10]

This is, incidentally, the same sort of argument used for eminent

domain, when property is seized for the use of a business that will be

“more valuable” to the local economy.

If Rothbard rejected patents in principle, he considered copyright to be

perfectly tenable and legitimate, on the assumption that it could be

achieved through voluntary contract alone.

A man writes a book or composes music. When he publishes the book or

sheet of music, he imprints on the first page the word “copyright.” This

indicates that any man who agrees to purchase this product also agrees

as part of the exchange not to recopy or reproduce this work for sale.

In other words, the author does not sell his property outright to the

buyer; he sells it on condition that the buyer not reproduce it for

sale. Since the buyer does not buy the property outright, but only on

this condition, any infringement of the contract by him or a subsequent

buyer is implicit theft and would be treated accordingly on the free

market. The copyright is therefore a logical device of property right on

the free market. [11]

But the sort of contractual copyright regime Rothbard envisioned would,

in fact, be practically untenable.

First, as Kinsella points out, contracts are only binding against the

actual parties, so contractual copyright would be unenforceable against

third parties who came into possession of copyrighted material. [12]

Second, there are serious practical questions about the legal

enforceability of contractual copyright — so-called “shrink wrap”

contracts — even against the accepting party. Pseudonymous blogger

“quasibill,” of The Bell Tower, writes of the serious problems the

common law “meeting of the minds” requirement entails for contract

enforcement in general.

As an initial matter, it is important to clarify that a contract is not

a written document. For reasons that should become more apparent as you

read on, the written document is nothing more than very good evidence

regarding the terms of the contract. It is the agreement of the parties,

or to use Anglo-American common law terminology, the “meeting of the

minds” that is the actual contract. As such, the contract is a

subjective creature by nature, as it requires reading the minds of at

least two people.

….The words written on a document do not constitute the agreement – they

are merely evidence of what the parties intended the agreement to be….

In particular, he mentions that courts generally recur to external

evidence like standard market practices (“course of industry”) to

ascertain subjective understanding or intent, in determining whether a

“meeting of minds” took place and an enforceable contractual obligation

therefore exists. [13]

By this line of reasoning, both the seller’s and the buyer’s reasonable

expectations in regard to enforceability will play a large role in

determining whether the buyer did, indeed, assume contractual copyright

obligations by the mere act of purchase. In an environment where

verifying compliance is costly and the risks of detection and sanction

are low, it is unlikely that either a buyer, or a court after the fact,

will take any such contract seriously.

By way of analogy, some employers may demand, as a condition of

employment, that their employees not smoke even in their own homes, that

they refrain from barroom discussions prejudicial to the employer’s

reputation, or that they not park on company premises with a weapon

concealed in the trunk. In most such cases, the employee is likely to

sign an acknowledgement form and accept the job with his fingers

crossed, and with the mental reservation that it’s “none of their damned

business.” If a job application asks questions that the prospective

employee considers inappropriately nosy or intrusive (i.e. about

political sympathies, social affiliations, and the like), he is likely

to take the attitude that it’s the prospective employer’s problem to

find out such things at his own effort and expense if he wants to know

them badly enough; he is under no obligation to incriminate himself.

Kinsella has expressed skepticism, on similar grounds, regarding the

enforceability of shrink-wrap and click-wrap contracts:

….[T]here is often no meeting of the minds on the fine print. If the

customers routinely just click the “I have read and agree to these

terms” box but never do read it, and the vendor knows this, then it’s a

sort of fiction to assume both sides have actually agreed on these

terms…. [14]

….I believe two consenting parties have the right to enter into whatever

terms they want, even if they are stricter and more draconian than those

set by modern IP law. …[But] I do not believe that something is part of

the agreement merely because it is written down in the fine print of a

click-wrap or similar type agreement; there needs to be true meeting of

the minds (for example, suppose I sneak into the last clause of a long

click-wrap agreement, “And the purchaser hereby agrees to give me half

his income for the rest of his life.” Well, I know that you are just

gonna click “yes” without reading, so I am aware that you are NOT

consenting to this term, so there is no meeting of the minds; that

should not be enforceable, and arguably neither should boilerplate,

“unreasonable” terms in fine print that the publisher knows the customer

is not even really aware of). [15]

Third, the enforcement of contractual copyright, even if enforceable in

law, would present enormous problems for verification of compliance. The

enormous and draconian body of copyright legislation over the past

twenty years should indicate that enforcement of copyright requires an

intrusive regulatory and surveillance state, and that copyright is

virtually unenforceable without such a mechanism.

The new digital copyright regime has done away with many traditional

limitations on copyright from the days when it affected mainly the print

medium, like the “first sale” and “fair use” doctrines. We can thank the

traditional exceptions to copyright, for example, for the public library

and for free access to photocopiers.

Charles Johnson gives, as an example of the fair use exception, the

common university practice of making course reserves available for

photocopying, rather than expecting every student to buy a scholarly

book at the academic publishing houses’ steep rates. (I myself have

numerous photocopies of books ordered through Interlibrary Loan, which

would otherwise have cost me $70 or more, often for slim volumes of

under two hundred pages.) But, he says,

as soon as the University eliminates the paper medium, and facilitates

exactly the same thing through an non-commercial, internal University

course pack website — which does nothing at all more than what the xerox

packets did, except that it delivers the information to pixels on a

monitor instead of toner on a page — the publishers’ racket can run to

court, throw up its arms, and start hollering Computers! Internet!, send

their lawyers to try to shake down have a discussion with the University

administration for new tribute to their monopoly business model, and

then, failing that, utterly uncontroversial decades-old practices of

sharing knowledge among colleagues and students suddenly become a legal

case raising core issues like the future of the business model for

academic publishers, while even the most absurd protectionist arguments

are dutifully repeated by legal flacks on behalf of sustaining the

racket…. [16]

In the case of digital content, especially, copyright would be virtually

unenforceable without not only DRM, but the criminalization of technical

means for circumventing it. Imagine buying a car on the contractual

understanding that you wouldn’t drive it to certain places that the

dealership disapproved. In the real world, such a contract would be a

dead letter because of the high cost of verifying compliance. But if the

contract were governed by the legal regime prevailing in the digital

content industries, the car would be designed with built-in blocks

against driving the car to forbidden places. And not only that, such

blocks would be mandated by law, and developing and selling means to

circumvent them would be criminal acts. Doesn’t sound very libertarian,

does it?

In “The Right to Read,” Richard Stallman depicted the inevitable logic

of such principles, as depicted in a late 21^(st) century society under

total copyright lockdown.

if he lent her his computer, she might read his books. Aside from the

fact that you could go to prison for many years for letting someone else

read your books, the very idea shocked him at first. Like everyone, he

had been taught since elementary school that sharing books was nasty and

wrong — something that only pirates would do.

And there wasn’t much chance that the SPA — the Software Protection

Authority — would fail to catch him. In his software class, Dan had

learned that each book had a copyright monitor that reported when and

where it was read, and by whom, to Central Licensing. (They used this

information to catch reading pirates, but also to sell personal interest

profiles to retailers.)…

Of course, Lissa did not necessarily intend to read his books. She might

want the computer only to write her midterm. But Dan knew she came from

a middle-class family and could hardly afford the tuition, let alone her

reading fees. Reading his books might be the only way she could

graduate. He understood this situation; he himself had had to borrow to

pay for all the research papers he read….

Later on, Dan would learn there was a time when anyone could go to the

library and read journal articles, and even books, without having to

pay. There were independent scholars who read thousands of pages without

government library grants. But in the 1990s, both commercial and

nonprofit journal publishers had begun charging fees for access. By

2047, libraries offering free public access to scholarly literature were

a dim memory.

There were ways, of course, to get around the SPA and Central Licensing.

They were themselves illegal. Dan had had a classmate in software, Frank

Martucci, who had obtained an illicit debugging tool, and used it to

skip over the copyright monitor code when reading books. But he had told

too many friends about it, and one of them turned him in to the SPA for

a reward (students deep in debt were easily tempted into betrayal). In

2047, Frank was in prison, not for pirate reading, but for possessing a

debugger.

Dan would later learn that there was a time when anyone could have

debugging tools. There were even free debugging tools available on CD or

downloadable over the net. But ordinary users started using them to

bypass copyright monitors, and eventually a judge ruled that this had

become their principal use in actual practice. This meant they were

illegal; the debuggers’ developers were sent to prison.

Programmers still needed debugging tools, of course, but debugger

vendors in 2047 distributed numbered copies only, and only to officially

licensed and bonded programmers. The debugger Dan used in software class

was kept behind a special firewall so that it could be used only for

class exercises.

It was also possible to bypass the copyright monitors by installing a

modified system kernel. Dan would eventually find out about the free

kernels, even entire free operating systems, that had existed around the

turn of the century. But not only were they illegal, like debuggers —

you could not install one if you had one, without knowing your

computer’s root password. And neither the FBI nor Microsoft Support

would tell you that. [17]

There’s a reason for such draconian controls. As described by Michel

Bauwens of the Foundation for Peer-to-Peer Alternatives, the corporate

economy faces a growing crisis of realization, in monetizing and

capturing profits from use-value created in the immaterial realm. It is

becoming increasingly impossible to capture value from the ownership of

ideas, designs, and technique — all the “ephemera” and “intellect” that

Tom Peters writes about as a component of commodity price — leading to a

crisis of sustainability for capitalism.

Recall the following: the thesis of cognitive capitalism says that we

have entered a new phase of capitalism based on the accumulation of

knowledge assets, rather than physical production tools. [McKenzie

Wark’s] vectoralist thesis says that a new class has arisen which

controls the vectors of information, i.e. the means through which

information and creative products have to pass, for them to realize

their exchange value. They both describe the processes of the last 40

years, say the post-1968 period, which saw a furious competition through

knowledge-based competition and for the acquisition of knowledge assets,

which led to the extraordinary weakening of the scientific and technical

commons. And they do this rather well.

But in my opinion, both theses fail to account for the newest of the

new, i.e. to take into account the emergence of peer to peer as social

format. What is happening?

In terms of knowledge creation, a vast new information commons is being

created, which is increasingly out of the control of cognitive

capitalism. [18]

In a later blog post for the P2P Foundation, Bauwens elaborated on the

nature of cognitive capitalism as a response to the limits on

accumulation in the finite physical realm, attempting a new form of

accumulation based on ownership of the cognitive realm. But this attempt

is doomed to fail because of the increasing untenability of property

rights in the information realm. Various resource and input crises like

Peak Oil, he wrote, are creating new limits to growth based on extensive

expansion in the physical realm. He compares the imperative for

capitalism to switch from extensive to intensive development to the

parallel crisis of the chattel slave economy.

This is no trivial affair, as the failure of extensive development is

what brought down earlier civilizations and modes of production. For

example, slavery was not only marked by low productivity, but could not

extend this productivity as that would require making the slaves more

autonomous, so slave-based empires had to grow in space, but at a

certain point in that growth, the cost of expansion exceeded the

benefits. This is why feudalism finally emerged, a system which

refocused on the local, and allowed productivity growth as serfs had a

self-interest in growing and ameliorating the tools of production.

The alternative to extensive development is intensive development, as

happened in the transition from slavery to feudalism. But notice that to

do this, the system had to change, the core logic was no longer the

same. The dream of our current economy is therefore one of intensive

development, to grow in the immaterial field, and this is basically what

the experience economy means. The hope that it expresses is that

business can simply continue to grow in the immaterial field of

experience.

However, Bauwens writes, this is not feasible. The emergence of the peer

model of production, based on the non-rivalrous nature and virtually

non-existent marginal cost of reproduction of digital information, and

coupled with the increasing unenforceability of “intellectual property”

laws, means that capital is incapable of realizing returns on ownership

in the cognitive realm.

The creation of non-monetary value is exponential.

The monetization of such value is linear

In other words, we have a growing discrepancy between the direct

creation of use value through social relationships and collective

intelligence…, but only a fraction of that value can actually be

captured by business and money. Innovation is becoming… an emergent

property of the networks rather than an internal R & D affair within

corporations; capital is becoming an a posteriori intervention in the

realization of innovation, rather than a condition for its occurrence….

What this announces is a crisis of value…, but also essentially a crisis

of accumulation of capital. Furthermore, we lack a mechanism for the

existing institutional world to re-fund what it receives from the social

world. So on top of all of that, we have a crisis of social

reproduction…. [19]

Corporations rely on increasingly authoritarian government legislation

to capture value from proprietary information. Johann Soderberg compares

the way photocopiers were monitored in the old USSR, to protect the

power of elites in that country, to the way the means of digital

reproduction are monitored in this country to protect corporate power.

[20]

The good news in all this is that, even with the upward ratcheting of

“intellectual property” law and of the mandated electronic surveillance

technologies for enforcing it, it is still becoming unenforceable. In an

age of bittorrent, strong encryption, and proxy servers hosted in

international anti-copyright havens, the DMCA is a dead letter for

anyone who cares enough to take even minimal trouble to circumvent it.

A good example is the so-called “DeCSS uprising,” which followed from an

attempt to suppress public discussion of means for circumventing DVD

encryption.

Journalist Eric Corley — better known as Emmanuel Goldstein, a nom de

plume borrowed from Orwell’s 1984 — posted the code for DeCSS (so called

because it decrypts the Content Scrambling System that encrypts DVDs) as

a part of a story he wrote in November for the well-known hacker journal

2600. The Motion Picture Association of America (MPAA) claims that

Corley defied anticircumvention provisions of the Digital Millennium

The whole affair began when teenager Jon Johansen wrote DeCSS in order

to view DVDs on a Linux machine. The MPAA has since brought suit against

him in his native Norway as well. Johansen testified on Thursday that he

announced the successful reverse engineering of a DVD on the mailing

list of the Linux Video and DVD Project (LiViD), a user resource center

for video- and DVD- related work for Linux….

The judge in the case, the honorable Lewis Kaplan of the US District

Court in southern New York, issued a preliminary injunction against

posting DeCSS. Corley duly took down the code, but did not help his

defense by defiantly linking to myriad sites which post DeCSS….

True to their hacker beliefs, Corley supporters came to the trial

wearing the DeCSS code on t-shirts. There are also over 300 Websites

that still link to the decryption code, many beyond the reach of the

MPAA. [21]

This incident, and the humiliating failure of so many other corporate

attempts — starting with the “McLibel” case in the UK — to suppress the

free circulation of proprietary information or supposedly libelous

statements, [22] should demonstrate this beyond the shadow of a doubt.

Every such attempt, inevitably, results in the rapid transfer of files

of prohibited information around the Worldwide Web, and the

proliferation of mirror sites, orders of magnitude faster than content

owners can suppress any particular violator. The would-be corporate

proprietors of information find themselves playing whack-a-mole.

And in the offensive-defensive arms race between the statist

surveillance technologies required to enforce proprietary content, and

the circumvention technologies needed to trade such content freely, the

defensive side will always be a step ahead. Ultimately, the legal

suppression of “piracy” by the surveillance state depends on the same

sort of people who are responsible for delivering your mail to the

correct address — which means things don’t look very hopeful for the

enemies of freedom.

If the DMCA is unenforceable even with state-mandated DRM and

criminalization of technical means of circumvention, and even with

taxpayer subsidy to the legal cost of enforcement, what would become of

such extensive copyright claims in a free market regime? In a free

market regime, where enforcement of such claims is a private good

provided at cost, the payment of contractual copyright enforcement would

be endogenous — i.e., the cost would be borne by the beneficiary of

enforcement.

“Intellectual property” is a form of privilege, just one example of a

broader category of artificial property rights.

Like all forms of coercion, artificial property rights create a zero-sum

situation in which one party benefits at the other’s expense. There is a

symmetrical relationship between one party’s benefit and the other’s

loss. While natural property rights benefit everyone by securing the

individual’s claim to the product of his own effort, artificial property

rights enable the holder to collect tribute from the efforts of others.

Natural property rights are a way of dealing with scarcity; artificial

property rights create scarcity.

The distinction between natural and artificial property rights is

analogous to that of Albert Jay Nock between “labor-made” and “law-made”

property. [23] Were it not for the legal appropriation of the land, Nock

argued — i.e., the engrossment of vacant and unimproved land to a

favored class which did not appropriate it by its own labor, but was

enabled to collect tribute from those who did — economic exploitation

would be impossible. Historically, so long as wage employers have to

compete with easy access to self-employment, there is a floor under the

wages people are willing to work for and a ceiling on the rate of

profit. As Kropotkin asked:

If every peasant-farmer had a piece of land, free from rent and taxes,

if he had in addition the tools and the stock necessary for farm labour

— Who would plough the lands of the baron? Everyone would look after his

own….

If all the men and women in the countryside had their daily bread

assured, and their daily needs already satisfied, who would work for our

capitalist at a wage of half a crown a day, while the commodities one

produces in a day sell in the market for a crown or more? [24]

Defenders of “intellectual property” argue that the innovator deserves

the scarcity rents, as a reward for the net contribution to consumers’

utility. If the consumer does not consider the innovation a benefit even

at the patented price, he is free not to buy it. Reason magazine’s

Ronald Bailey, an enthusiastic supporter of the drug and biotech

industries, is a good exemplar of this line of argument. Citing a study

that compared the overall economic value to consumers from increased

life expectancy to the cost paid for drugs, he argued (in the words of

his title) that “drug companies don’t get enough money… for the

life-saving benefits they give us….” [25]

There’s a word for someone who’s able to price a good according to the

consumer’s benefit from it: a monopolist. The normal effect of market

competition is for the productivity benefits of new technology to

translate directly into lower consumer prices. It is only through

artificial property rights that privileged sellers can charge the

consumer in proportion to his increased utility, regardless of the cost

of supplying the good. Patents impede the normal process of market

competition by which technological innovation translates directly into

lower consumer cost. They enable the privileged to appropriate

productivity gains for themselves, rather than allowing their benefits

to be socialized through market competition.

But they do more than that: they make it possible to collect tribute for

the “service” of not obstructing production. As John R. Commons

observed, the alleged “service” performed by the holder of artificial

property rights, in “contributing” some “factor” to production, is

defined entirely by his ability to obstruct access to it. As I wrote in

Studies in Mutualist Political Economy, marginalist economics

treated the existing structure of property rights over “factors” as a

given, and proceeded to show how the product would be distributed among

these “factors” according to their marginal contribution. By this

method, if slavery were still extant, a marginalist might with a

straight face write of the marginal contribution of the slave to the

product (imputed, of course, to the slaveowner), and of the “opportunity

cost” involved in committing the slave to one or another use. [26]

Such privileges, Maurice Dobb argued, were analogous to a state grant of

authority to collect tolls, (much like the medieval robber barons who

obstructed commerce between their petty principalities):

Suppose that tollgates were a general institution, rooted in custom or

ancient legal right. Could it reasonably be denied that there would be

an important sense in which the income of the tollowning class

represented “an appropriation of goods produced by others” and not

payment for an “activity directed to the production or transformation of

economic goods?” Yet tollcharges would be fixed in competition with

alternative roadways, and hence would, presumably, represent prices

fixed “in an open market….” Would not the opening and shutting of

tollgates become an essential factor of production, according to most

current definitions of a factor of production, with as much reason at

any rate as many of the functions of the capitalist entrepreneur are so

classed today? This factor, like others, could then be said to have a

“marginal productivity” and its price be regarded as the measure and

equivalent of the service it rendered. At any rate, where is a logical

line to be drawn between tollgates and propertyrights over scarce

resources in general? [27]

Thorstein Veblen made a similar distinction between property as

capitalized serviceability, versus capitalized disserviceability. The

latter consisted of power advantages over rivals and the public which

enabled owners to obstruct production. [28]

It is sometimes argued, in response to attacks on patents as monopolies,

that “all property is a monopoly.” True, as far as it goes; but tangible

property is a monopoly by the nature of the case. A parcel of land can

only be occupied and used by one owner at a time, because it is finite.

By nature, two people cannot occupy the same physical space at the same

time. “Intellectual property,” in contrast, is an artificial monopoly

where scarcity would not otherwise exist. And unlike property in

tangible goods and land, the defense of which is a necessary outgrowth

of the attempt to maintain possession, enforcement of “property rights”

in ideas requires the invasion of someone else’s space. “Patents… invade

rather than defend property rights.” [29]

Kinsella describes the way that socalled “intellectual property” rights

give the holder a right in other people’s real — tangible — property. An

“intellectual property” right implies that

“A person who comes up with some useful or creative idea which can guide

or direct an actor in the use of his own tangible property thereby

instantly gains a right to control all other tangible property in the

world, with respect to that property’s similar use.” This new-fangled

homesteading technique is so powerful that it gives the creator rights

in third parties’ already owned tangible property.

For example, by inventing a new technique for digging a well, the

inventor can prevent all others in the world from digging wells in this

manner, even on their own property. To take another example, imagine the

time when men lived in caves. One bright guy — let’s call him GaltMagnon

— decides to build a log cabin on an open field, near his crops. To be

sure, this is a good idea, and others notice it. They naturally imitate

GaltMagnon, and they start building their own cabins. But the first man

to invent a house, according to IP advocates, would have a right to

prevent others from building houses on their own land, with their own

logs, or to charge them a fee if they do build houses. It is plain that

the innovator in these examples becomes a partial owner of the tangible

property (e.g., land and logs) of others, due not to first occupation

and use of that property (for it is already owned), but due to his

coming up with an idea.

Dilbert creator Scott Adams, in a rather feeble attempt to defend

Let me give you an analogy. Let’s say your neighbor sneaks into your

house while you are gone and borrows your underpants. After wearing your

underpants all day, the neighbor launders them, folds them neatly, and

returns them to your house in perfect condition, all while you are gone.

He tells himself that he will say good things to people about your

business — whatever business that is — so this arrangement is good

publicity for you. The next time he sees you, he tells you about the

underpants because he figures you’ll thank him for saying nice things

about his business. He informs you that it’s a win-win scenario.

Given that you have full use of your property (the underpants), is it a

victimless crime? I would say the owner of the underpants lost something

even though his property is physically the same. [30]

This is a remarkably poor analogy. Underpants are a physical object that

can only be in one place at a time. When the neighbor borrows my

underpants, I no longer have that particular pair in my possession any

more. His use of them logically precludes my being able to use them.

Physical property is a zero-sum game, in which one person’s possession

necessarily comes at the expense of everyone else’s possession. That is

exactly why property rights are a logical conflict avoidance mechanism

for physical property: given the fact that a physical object can only be

possessed by one person at a time, property rules establish who the

rightful owner is and prevent conflict between multiple claimants trying

to possess the same thing at the same time. For underpants to be a good

analogy, they would have to be reproducible at zero marginal cost so

that the same identical pair of underpants could be in ten million

dresser drawers at the same time, without the original owner ever losing

physical possession of his pair of underpants.

A more accurate analogy would be to suppose that I could cause an exact

duplicate of Adams’ underpants, created from atoms in my own house, to

appear in my own underwear drawer entirely through publicly available

knowledge of the configuration of atoms in the original pair, without

ever trespassing in Adams’ home or disturbing his particular pair of

underpants in any way.

Adams’ real objection, obviously, is not to the deprivation of the thing

itself or its use in any sense, but to loss of the economic value of

artistic creations that would result from his sole legal right to sell

them. But as Kinsella argues, “one cannot have a right to the value of

one’s property, but only in its physical integrity.” [31] One cannot

argue otherwise without accepting the premises of local zoning laws and

assorted aesthetic ordinances (against outbuildings, compost piles,

clotheslines, solar panels, front yard gardens, cars parked on lawns,

etc., etc.) designed to protect homeowners from a decline in their

“property values.” One’s primary right in a property is to its

unfettered use, not to cooperation by others in the maintenance of its

resale value. A law that restrains one’s use and enjoyment of one’s own

property, in order to maintain the market value of someone else’s

property — and all in the name of “property rights,” no less — is

fundamentally perverse.

Blogger Mark Poncelet, incidentally, came up with a hilarious parody of

Adams’ underpants analogy:

Let’s not forget that you never actually own your underpants (unless you

crochet them yourself. Just be very careful that you don’t make a pair

that looks like someone else’s. You could be liable for damages). Most

underpants makers only give you a license to wear them. When you “buy”

these underpants, some of that money goes to the person who designed

them. The rest goes to the company that massproduced them and the

company that shipped them. Some of that money finds its way to entities

who are preparing to sue you for wearing your underpants improperly.

I pay a subscription fee to a company that sends me underpants on

demand. I can wear them, but they get to choose how often I wear them,

and I can’t wear similar underpants too many times in a row. When I’m

done, I have to send the underpants back. This is a whole lot better

than some other methods of getting underpants….

Buy your underpants from iTunes? At least you get to keep them! Yet be

prepared to have someone from Apple watch you put them on and take them

off….

Regardless of how you get your underpants, there are some brutal

realities to consider before you put them on. Like I mentioned above,

you don’t own these underpants. Someone else does. They’re just giving

you permission to wear them. In return for this permission, they get to

decide a lot. [32]

II. Privilege as Economic Irrationality

Artificial property rights create irrationality by holding productive

resources out of use and creating maldistribution of purchasing power.

In the 1830s Thomas Hodgskin, writing in The Natural and Artificial

Right of Property Contrasted, noted the effect of artificial property

rights in land in holding productive land out of use and denying

opportunities to labor. When land is made artificially scarce to labor

by political appropriation of land, so that land owners are able to hold

vacant and unimproved land out of use, the landlord will not allow it to

come into use unless is is productive enough to support not only the

laborer himself but also the rentier. Projects like the draining of

marshes and cultivation of waste land, if homesteading were free, would

have amply repaid the laborer for his own labor, were not undertaken

because labor sufficient to support the laborer and his family in

comfort could not “obtain from them a sufficiency to pay profit, tithes,

rent, and taxes.” [33]

“Intellectual property,” likewise, enables the owner to hold productive

techniques out of use unless the would-be user is able to use them

productively enough to provide an acceptable return to the patent or

And as we shall see below, “intellectual property” is responsible for a

phenomenon Tom Peters celebrated: the growing portion of the price of

goods comprised of “intellect” and “ephemera.” This is part of a larger

phenomenon, by which artificial scarcities, rents on artificial property

rights, and the inflated overhead costs imposed those things and by

other licensing and regulatory schemes, together erect barriers between

effort and subsistence.

By simultaneously increasing the threshold of labor required for

comfortable subsistence, and enabling the owners of artificial property

rights to derive unearned rentier incomes unrelated to any legitimate

effort, “intellectual property” divorces effort from consumption and

creates a maldistribution of purchasing power. Regardless of one’s views

of the operation of Say’s Law in a free market, it is clear that

maldistribution of purchasing power is a very real problem under state

capitalism. Hodgskin anticipated this phenomenon almost a century before

J.A. Hobson or Keynes.

The wants of individuals which labour is intended to gratify, are the

natural guide to their exertions. The instant they are compelled to

labour for others, this guide forsakes them, and their exertions are

dictated by the greed and avarice, and false hopes of their masters. The

wants springing from our organization, and accompanying the power to

labour, being created by the same hand which creates and fashions the

whole universe, including the course of the seasons, and what the earth

brings forth, it is fair to suppose that they would at all times guide

the exertions of the labourer, so as fully to ensure a supply of

necessaries and conveniences, and nothing more. They have, as it were, a

prototype in nature, agreeing with other phenomena, but the avarice and

greed of masters have no such prototype…. By this system the hand is

dissevered from the mouth, and labour is put in motion to gratify vanity

and ambition, not the natural wants of animal existence. When we look at

the commercial history of our country, and see the false hopes of our

merchants and manufacturers leading to periodical commercial

convulsions, we are compelled to conclude, that they have not the same

source as the regular and harmonious external world. [34]

III. “Intellectual Property” and the Structure of the American

Domestic Economy

Patents promoted the stable control of markets by oligopoly firms

through the control, exchange and pooling of patents.

According to David Noble, two essentially new science-based industries

(those that “grew out of the soil of scientific rather than traditional

craft knowledge”) emerged in the late 19^(th) century: the electrical

and chemical industries. [35]

In the electric industry, General Electric had its origins first in a

merger between Edison Electric (which controlled all of Edison’s

electrical patents) and the Sprague Electric Railway and Motor Company,

and then in an 1892 merger between Edison General Electric and

Thomas-Houston — both of them motivated primarily by patent

considerations. In the latter case, in particular, Edison General

Electric and Thomas-Houston each needed patents owned by the others and

could not “develop lighting, railway or power equipment without fear of

infringement suits and injunctions.” [36] From the 1890s on, the

electrical industry was dominated by two large firms: GE and

Westinghouse, both of which owed their market shares largely to patent

control. In addition to the patents which they originally owned, they

acquired control over patents (and hence over much of the electrical

manufacturing market) through “acquisition of the patent rights of

individual inventors, acquisition of competing firms, mergers with

competitors, and the systematic and strategic development of their own

patentable inventions. As GE and Westinghouse together secured a

deadlock on the electrical industry through patent acquisition,

competition between them became increasingly intense and disruptive. By

1896 the litigation cost from some three hundred pending patent suits

was enormous, and the two companies agreed to form a joint Board of

Patent Control. General Electric and Westinghouse pooled their patents,

with GE handling 62.5% of the combined business. [37]

The structure of the telephone industry had similar origins, with the

Bell Patent Association forming “the nucleus of the first Bell

industrial organization” (and eventually of AT&T) The National Bell

Telephone Company, from the 1880s on, fought vigorously to “occupy the

field” (in the words of general manager Theodore N. Vail) through patent

control. As Vail described the process, the company surrounded itself

with everything that would protect the business, that is the knowledge

of the business, all the auxiliary apparatus; a thousand and one little

patents and inventions with which to do the business which was

necessary, that is what we wanted to control and get possession of.

To achieve this, the company early on established an engineering

department

whose business it was to study the patents, study the development and

study these devices that either were originated by our own people or

came in to us from the outside. Then early in 1879 we started our patent

department, whose business was entirely to study the question of patents

that came out with a view to acquiring them, because… we recognized that

if we did not control these devices, somebody else would. [38]

This approach strengthened the company’s position of control over the

market not only during the seventeen year period of the main patents,

but (as Frederick Fish put it in an address to the American Institute of

Electrical Engineers) during the subsequent seventeen years of

each and every one of the patents taken out on subsidiary methods and

devices invented during the progress of commercial development.

[Therefore] one of the first steps taken was to organize a corps of

inventive engineers to perfect and improve the telephone system in all

directions …that by securing accessory inventions, possession of the

field might be retained as far as possible and for as long a time as

possible. [39]

This method, preemptive occupation of the market through strategic

patent acquisition and control, was also used by GE and Westinghouse.

Even with the intensified competition resulting from the expiration of

the original Bell patents in 1894, and before government favoritism in

the grants of rights-of-way and regulated monopoly status, the legacy

effect of AT&T’s control of the secondary patents was sufficient to

secure them half the telephone market thirteen years later, in 1907.

[40] AT&T, anticipating the expiration of its original patents, had (to

quote Vail again) “surrounded the business with all the auxiliary

protection that was possible.” For example, the company in 1900

purchased Michael Pupin’s patent on loading coils and in 1907 acquired

exclusive domestic rights for Cooper-Hewitt’s patents on the mercury-arc

repeater — essential technologies underlying AT&T’s monopoly on

long-distance telephony. [41]

By the time the FCC was formed in 1935, the Bell System had acquired

patents to “some of the most important inventions in telephony and

radio,” and “through various radio-patent pool agreements in the 1920s…

had effectively consolidated its position relative to the other giants

in the industry.” In so doing, according to an FCC investigation, AT&T

had gained control of “the exploitation of potentially competitive and

emerging forms of communication” and “pre-empt[ed] for itself new

frontiers of technology for exploitation in the future….” [42]

The radio-patent pools included AT&T, GE and Westinghouse, RCA (itself

formed as a subsidiary of GE after the latter acquired American

Marconi), and American Marconi.43 Alfred Chandler’s history of the

origins of the consumer electronics industry is little more than an

extended account of which patents were held, and subsequently acquired,

by which companies. This should give us some indication, by the way, of

what he meant by “organizational capability,” a term of his that will

come under more scrutiny in the next chapter. In an age where the

required capital outlays for actual physical plant and equipment are

rapidly diminishing in many forms of manufacturing, one of the chief

functions of “intellectual property” is to create artificial

“comparative advantage” by giving a particular firm a monopoly on

technologies and techniques, and prevent their diffusion throughout the

market.

The American chemical industry, in its modern form, was made possible by

the Justice Department’s seizure of German chemical patents in WWI.

Until the war, some 98% of patent applications in chemical industry came

from German firms, and were never worked in the U.S. As a result the

American chemical industry was technically second-rate, largely limited

to final processing of intermediate goods imported from Germany.

Attorney General A. Mitchell Palmer, as “Alien Property Custodian”

during the war, held the patents in trust and licensed 735 of them to

American firms; Du Pont alone received three hundred. [43]

More generally, “intellectual property” is an effective tool for

cartelizing markets in industry at large. They were used in the

automobile and steel industries among others, according to Noble. [44]

In a 1906 article, mechanical engineer and patent lawyer Edwin Prindle

described patents as “the best and most effective means of controlling

competition.”

Patents are the only legal form of absolute monopoly. In a recent court

decision the court said, “within his domain, the patentee is czar….

cries of restraint of trade and impairment of the freedom of sales are

unavailing, because for the promotion of the useful arts the

constitution and statutes authorize this very monopoly.”

The power which a patentee has to dictate the conditions under which his

monopoly may be exercised has been used to form trade agreements

throughout practically entire industries, and if the purpose of the

combination is primarily to secure benefit from the patent monopoly, the

combination is legitimate. Under such combinations there can be

effective agreements as to prices to be maintained…; the output for each

member of the combination can be specified and enforced… and many other

benefits which were sought to be secured by trade combinations made by

simple agreements can be added. Such trade combinations under patents

are the only valid and enforceable trade combinations that can be made

in the United States. [45]

And unlike purely private cartels, which tend toward defection and

instability, patent control cartels — being based on a state-granted

privilege — carry a credible and effective punishment for defection.

Through their “Napoleonic concept of industrial warfare, with inventions

and patents as the soldiers of fortune,” and through “the research arm

of the ‘patent offensive,’” manufacturing corporations were able to

secure stable control of markets in their respective industries. [46]

Today, “intellectual property” serves as a structural support for

corporate boundaries, at a time when the desktop revolution has

undermined control of physical capital as their primary justification.

The growing importance of human capital, and the implosion of capital

outlay costs required to enter the market, have had revolutionary

implications for production in the immaterial sphere.

In the old days, the immense value of physical assets was the primary

basis for the corporate hierarchy’s power, and in particular for its

control over human capital and other intangible assets.

As Luigi Zingales observes, the declining importance of physical assets

relative to human capital has changed this. Physical assets, “which used

to be the major source of rents, have become less unique and are not

commanding large rents anymore.” And “the demand for process innovation

and quality improvement… can only be generated by talented employees,”

which increases the importance of human capital.48 This is even more

true since Zingales wrote, with the rise of what has been variously

called the Wikified firm, the hyperlinked organization, Enterprise 2.0,

etc.

Tom Peters remarked in quite similar language, some six years earlier in

The Tom Peters Seminar, on the changing balance of physical and human

capital. Of Inc. magazine’s 500 top-growth companies, which include a

good number of information, computer technology and biotech firms, 34%

were launched on initial capital of less than $10,000, 59% on less than

$50,000, and 75% on less than $100,000. [47]

In many industries, the initial outlay for entering the market was in

the hundreds of thousands of dollars or more. The old electronic mass

media, for instance, were “typified by high-cost hubs and cheap,

ubiquitous, reception-only systems at the end. This led to a limited

range of organizational models for production: those that could collect

sufficient funds to set up a hub.” [48] The same was true of print

periodicals, with the increasing cost of printing equipment from the

mid-nineteenth century on serving as the main entry barrier for

organizing the hubs. Between 1835 and 1850, the typical startup cost of

a newspaper increased from $500 to $100,000 — or from roughly $10,000 to

$2.38 million in 2005 dollars. [49]

The networked economy, in contrast, is distinguished by “network

architecture and the [low] cost of becoming a speaker.”

The first element is the shift from a hub-and-spoke architecture with

unidirectional links to the end points in the mass media, to distributed

architecture with multidirectional connections among all nodes in the

networked information environment. The second is the practical

elimination of communications costs as a barrier to speaking across

associational boundaries. Together, these characteristics have

fundamentally altered the capacity of individuals, acting alone or with

others, to be active participants in the public sphere as opposed to its

passive readers, listeners, or viewers. [50]

The central change that makes this possible is that “the basic physical

capital necessary to express and communicate human meaning is the

connected personal computer.”

The core functionalities of processing, storage, and communications are

widely owned throughout the population of users…. The high capital costs

that were a prerequisite to gathering, working, and communicating

information, knowledge, and culture, have now been widely distributed in

the society. The entry barrier they posed no longer offers a

condensation point for the large organizations that once dominated the

information environment. [51]

The desktop revolution and the Internet mean that the minimum capital

outlay for entering most of the entertainment and information industry

has fallen to a few thousand dollars, and the marginal cost of

reproduction is zero. If anything that overstates the cost of entry in

many cases, considering how rapidly computer value depreciates and the

relatively miniscule cost of buying a five-year-old computer and adding

RAM. The networked environment, combined with endless varieties of cheap

software for creating and editing content, makes it possible for the

amateur to produce output of a quality once associated with giant

publishing houses and recording companies. [52] That is true of the

software industry, the music industry (thanks to cheap equipment and

software for high quality recording and sound editing), desktop

publishing, and to a certain extent even to film (as witnessed by

affordable editing technology and the success of Sky Captain).

Podcasting makes it possible to distribute “radio” and “television”

programming, at virtually no cost, to anyone with a broadband

connection. A network of amateur contributors have peer-produced an

encyclopedia, Wikipedia, which Britannica sees as a rival. As Tom Coates

put it, “the gap between what can be accomplished at home and what can

be accomplished in a work environment has narrowed dramatically over the

last ten to fifteen years.” [53]

It’s also true of news, with ever-expanding networks of amateurs in

venues like Indymedia, alternative new operations like Robert Parry’s

and Greg Palast’s, and natives and American troops blogging news

firsthand from Iraq, at the very same time the traditional broadcasting

networks are shutting down.

This has profoundly weakened corporate hierarchies in the information

and entertainment industries, and created enormous agency problems as

well. As the value of human capital increases, and the cost of physical

capital investments needed for independent production by human capital

decreases, the power of corporate hierarchies becomes less and less

relevant. As the value of human relative to physical capital increases,

the entry barriers become progressively lower for workers to take their

human capital outside the firm and start new firms under their own

control. Zingales gives the example of the Saatchi and Saatchi

advertising agency. The largest block of shareholders, U.S. fund

managers who controlled 30% of stock, thought that gave them effective

control of the firm. They attempted to exercise this perceived control

by voting down Maurice Saatchi’s proposed increased option package for

himself. In response, the Saatchi brothers took their human capital (in

actuality the lion’s share of the firm’s value) elsewhere to start a new

firm, and left a hollow shell owned by the shareholders. [54]

Interestingly, in 1994 a firm like Saatchi and Saatchi, with few

physical assets and a lot of human capital, could have been considered

an exception. Not any more. The wave of initial public offerings of

purely human capital firms, such as consultant firms, and even

technology firms whose main assets are the key employees, is changing

the very nature of the firm. Employees are not merely automata in charge

of operating valuable assets but valuable assets themselves, operating

with commodity-like physical assets. [55]

In another, similar example, the former head of Salomon Brothers’ bond

trading group formed a new group with former Salomon traders responsible

for 87% of the firm’s profits.

…if we take the standpoint that the boundary of the firm is the point up

to which top management has the ability to exercise power…, the group

was not an integral part of Salomon. It merely rented space, Salomon’s

name, and capital, and turned over some share of its profits as rent.

[56]

Marjorie Kelly gave the breakup of the Chiat/Day ad agency, in 1995, as

an example of the same phenomenon.

…What is a corporation worth without its employees?

This question was acted out… in London, with the revolutionary birth of

St. Luke’s ad agency, which was formerly the London office of Chiat/Day.

In 1995, the owners of Chiat/Day decided to sell the company to Omnicon

— which meant layoffs were looming and Andy Law in the London office

wanted none of it. He and his fellow employees decided to rebel. They

phoned clients and found them happy to join the rebellion. And so at one

blow, London employees and clients were leaving.

Thus arose a fascinating question: What exactly did the “owners” of the

London office now own? A few desks and files? Without employees and

clients, what was the London branch worth? One dollar, it turned out.

That was the purchase price — plus a percentage of profits for seven

years — when Omnicon sold the London branch to Law and his cohorts after

the merger. They renamed it St. Luke’s…. All employees became equal

owners… Every year now the company is re-valued, with new shares awarded

equally to all. [57]

David Prychitko remarked on the same phenomenon in the tech industry,

the so-called “break-away” firms, as far back as 1991:

Old firms act as embryos for new firms. If a worker or group of workers

is not satisfied with the existing firm, each has a skill which he or

she controls, and can leave the firm with those skills and establish a

new one. In the information age it is becoming more evident that a boss

cannot control the workers as one did in the days when the assembly line

was dominant. People cannot be treated as workhorses any longer, for the

value of the production process is becoming increasingly embodied in the

intellectual skills of the worker. This poses a new threat to the

traditional firm if it denies participatory organization.

The appearance of break-away computer firms leads one to question the

extent to which our existing system of property rights in ideas and

information actually protects bosses in other industries against the

countervailing power of workers. Perhaps our current system of patents,

copyrights, and other intellectual property rights not only impedes

competition and fosters monopoly, as some Austrians argue. Intellectual

property rights may also reduce the likelihood of break-away firms in

general, and discourage the shift to more participatory, cooperative

formats. [58]

In this environment, the only thing standing between the old information

and media dinosaurs and their total collapse is their so-called

“intellectual property” rights — at least to the extent they’re still

enforceable. Ownership of “intellectual property” becomes the new basis

for the power of institutional hierarchies, and the primary structural

bulwark for corporate boundaries. Even corporate apologists like Bill

Gates and Tom Peters celebrate the network revolution and flattening of

hierarchies: they just favor domesticating the process within a

corporate framework enforced by ownership of “intellectual property.”

But the networked designers within Microsoft are doing essentially the

same thing that teams of Linux programmers are doing outside the

corporate walls. “Intellectual property” is the only thing that prevents

the walls from dissolving, and the Microsoft programmers becoming part

of a larger environment of loose peer design networks, with the firm

replaced by self-organized, project-based teams — with teams constantly

gaining members from and losing them to other teams, projects

discontinuing or forking, etc., on the Linux model.

Without “intellectual property,” in any industry where the basic

production equipment is affordable to all, and bottom-up networking

renders management obsolete, it is likely that self-managed, cooperative

production will replace the old managerial hierarchies. The network

revolution, if its full potential is realized,

will lead to substantial redistribution of power and money from the

twentieth century industrial producers of information, culture, and

communications — like Hollywood, the recording industry, and perhaps the

broadcasters and some of the telecommunications giants — to a

combination of widely diffuse populations around the globe, and the

market actors that will build the tools that make this population better

able to produce its own information environment rather than buying it

ready-made.” [59]

Another effect of the shift in importance from tangible to intangible

assets is that a growing portion of product prices consists of embedded

rents on “intellectual property” and other artificial property rights

rather than the material costs of production. Tom Peters cited former 3M

strategic planner George Hegg on the increasing portion of product

“value” made up of “intellectual property” (i.e., the amount of final

price consisting of tribute to the owners of “intellectual property”):

“We are trying to sell more and more intellect and less and less

materials.” Peters produces a long string of such examples:

…My new Minolta 9xi is a lumpy object, but I suspect I paid about $10

for its plastic casing, another $50 for the fine-ground optical glass,

and the rest, about $640, for its intellect… [60]

It is a soft world…. Nike contracts for the production of its spiffy

footwear in factories around the globe, but it creates the enormous

stock value via superb design and, above all, marketing skills. Tom

Silverman, founder of upstart Tommy Boy Records, says Nike was the first

company to understand that it was in the lifestyle business…. Shoes?

Lumps? Forget it! Lifestyle. Image. Speed. Value via intellect and

pizazz. [61]

“Microsoft’s only factory asset is the human imagination,” observed The

New York Times Magazine writer Fred Moody. In seminars I’ve used the

slide on which those words appear at least a hundred times, yet every

time that simple sentence comes into view on the screen I feel the hairs

on the back of my neck bristle. [62]

A few years back, Philip Morris purchased Kraft for $12.9 billion, a

fair price in view of its subsequent performance. When the accountants

finished their work, it turned out that Philip Morris had bought $1.3

billion worth of “stuff” (tangible assets) and $11.6 billion of “Other.”

What’s the other, the 116/129?

….Call it intangibles, good-will (the U.S. accountants’ term), brand

equity, or the ideas in the heads of thousands of Kraft employees around

the world. [63]

Regarding Peters’ Minolta example, as Benkler points out the marginal

cost of reproducing “its intellect” is virtually zero. So about 90% of

the price of that new Minolta comes from tolls to corporate gatekeepers,

who have been granted control of that “intellect.” In an economy where

software and product design were the product of peer networks,

unrestricted by the “intellectual property” of old corporate dinosaurs,

90% of the product’s price would evaporate overnight. To quote Michael

Perelman,

the so-called weightless economy has more to do with the legislated

powers of intellectual property that the government granted to powerful

corporations. For example, companies such as Nike, Microsoft, and Pfizer

sell stuff that has high value relative to its weight only because their

intellectual property rights insulate them from competition. [64]

The same goes for Nike’s sneakers. I suspect the amortization cost of

the physical capital used to manufacture the shoes in those Asian

sweatshops, plus the cost of the sweatshop labor, is less than 10% of

the price of the shoes. The wages of the workers could be tripled or

quadrupled with negligible impact on the retail price.

How many extra hours does the average person work each week to pay

tribute to the owners of the “human imagination”?

The good news is that, as “intellectual property” becomes increasingly

unenforceable, we can expect two things: first, for the ownership of

proprietary content to become untenable as a basis for corporate

institutional power; and second, for the portion of commodity price

reflecting embedded rents on artificial property rights to implode.

“Intellectual property” also serves as a bulwark to planned obsolescence

and high-overhead production. It’s an example of a general law stated by

Thomas Hodgskin: Social regulations and commercial prohibitions “compel

us to employ more labour than is necessary to obtain the prohibited

commodity,” or “to give a greater quantity of labour to obtain it than

nature requires,” and put the difference into the pockets of privileged

classes. [65]

A major component of the business model that prevails under existing

corporate capitalism is the offer of platforms below-cost, coupled with

the sale of patented or copyrighted spare parts, accessories, etc., at

an enormous markup. So one buys a cell phone for little or nothing, with

the contractual obligation to use only a specified service package for

so many years; one buys a fairly cheap printer, which uses enormously

expensive ink cartridges; one buys a cheap glucometer, with glucose

testing strips that cost $100 a box. And to hack one’s phone to use a

different service plan, or to manufacture generic ink cartridges or

glucose testing strips in competition with the proprietary version, is

illegal. To manufacture generic replacement parts for a car or

appliance, in competition with the corporate dealership, is likewise

illegal.

As it is now, appliances are generally designed to thwart repair. When

the Maytag repairman tells you it would cost more that it’s worth to

repair your washing machine, he’s telling the truth. But he fails to add

that that state of affairs reflects deliberate design: the washing

machine could have been designed on a modular basis, had the company so

chosen, so that the defective part might have been cheaply and easily

replaced.

Absent legal constraints, it would be profitable to offer competing

generic replacements and accessories for other companies’ platforms. And

in the face of such market competition, there would be strong pressure

toward modular product designs that were amenable to repair, and

interoperable with other the modular components and accessories of other

companies’ platforms. Absent the legal constraints presented by patents,

an appliance which was designed to thwart ease of repair through

incompatibility with other companies’ platforms would suffer a

competitive disadvantage.

IV. “Intellectual Property” and the Global Economy

In the contemporary global economy, “intellectual property” plays the

same protectionist role for TNCs that tariffs performed in the old

national economies. Michael Perelman argues that the upsurge in

“intellectual property” protection since the late 1960s has been an

integral part of the neoliberal revolution.

Although many old line industries could no longer compete effectively in

world markets, exports of intellectual property in the form of royalties

and copyright fees soared.

I have not seen hard data regarding the effect of intellectual property

rights on the rate of profit, but I am convinced that it is substantial.

Just think about Microsoft and the pharmaceutical industry with their

low marginal costs relative to their market prices. For example,

Microsoft reported that it makes 85 percent margin on its Windows

system…. [66]

Elsewhere he cites figures showing that revenues on “intellectual

property” rose, between 1947 and the early 1990s, from ten percent to

over half of all American exports. In 1999 export revenues from

royalties and licensing revenue reached $37 billion, exceeding the

revenue from aircraft export ($29 billion). [67]

It’s hardly coincidental that the dominant industrial sectors in the

global corporate economy are all heavily dependent on “intellectual

property”: software, entertainment, biotech, pharmaceuticals, and

electronics. And the central focus of the neoliberal regime, which has

been falsely identified with “free trade” and “free markets,” is on

strengthening corporate control over “intellectual property” in the face

of the threats we saw described by Michel Bauwens earlier in this paper.

This is the Nike business model, simultaneously celebrated by Tom Peters

and condemned by Naomi Klein: outsource production to networked supply

chains, with the corporate headquarters retaining control over

trademarks and other “intellectual property,” finance, and marketing.

In addition, patents are used on a global scale to lock transnational

manufacturing corporations into a permanent monopoly of productive

technology. The single most totalitarian provision of the Uruguay Round

is probably its “industrial property” provisions. [68] The developed

world has pushed particularly hard to protect industries relying on or

producing “generic technologies,” and to restrict diffusion of “dual

use” technologies. The U. S.-Japanese trade agreement on

semi-conductors, for example, is a “cartel-like, ‘managed trade’

agreement.” So much for “free trade.” [69]

The central motivation in the GATT intellectual property regime,

however, is to permanently lock in the collective monopoly of advanced

technology by TNCs, and prevent independent competition from ever

arising in the Third World. It would, as Martin Khor Kok Peng writes,

“effectively prevent the diffusion of technology to the Third World, and

would tremendously increase monopoly royalties of the TNCs whilst

curbing the potential development of Third World technology.” [70]

Raghavan summed up nicely the effect on the Third World:

Given the vast outlays in R and D and investments, as well as the short

life cycle of some of these products, the leading Industrial Nations are

trying to prevent emergence of competition by controlling… the flows of

technology to others. The Uruguay round is being sought to be used to

create export monopolies for the products of Industrial Nations, and

block or slow down the rise of competitive rivals, particularly in the

newly industrializing Third World countries. At the same time the

technologies of senescent industries of the north are sought to be

exported to the South under conditions of assured rentier income. [71]

But to repeat once again: the good news is that, in both the domestic

and global economies, this business model is doomed. As argued by a wide

range of authors, it sows the seeds of its own destruction.

The shift from physical to human capital as the primary source of

productive capacity in so many industries, along with the imploding

price and widespread dispersion of ownership of capital equipment in so

many industries, means that corporate employers are increasingly

hollowed out and only maintain control over the physical production

process through legal fictions. When so much of actual physical

production is outsourced to the small sweatshop or the home shop, the

corporation becomes a redundant “node” that can be bypassed; the worker

can simply switch to independent production, cut out the middleman, and

deal directly with suppliers and outlets.

David Pollard, writing from the imaginary perspective of 2015, remarked

on the vulnerability of corporations that follow the Nike model of

hollowing themselves out and outsourcing everything:

In the early 2000s, large corporations that were once hierarchical

end-to-end business enterprises began shedding everything that was not

deemed ‘core competency’, in some cases to the point where the only

things left were business acumen, market knowledge, experience,

decision-making ability, brand name, and aggregation skills. This

‘hollowing out’ allowed multinationals to achieve enormous leverage and

margin. It also made them enormously vulnerable and potentially

dispensable.

As outsourcing accelerated, some small companies discovered how to

exploit this very vulnerability. When, for example, they identified

North American manufacturers outsourcing domestic production to third

world plants in the interest of ‘increasing productivity’, they went

directly to the third world manufacturers, offered them a bit more, and

then went directly to the North American retailers, and offered to

charge them less. The expensive outsourcers quickly found themselves

unnecessary middlemen…. The large corporations, having shed everything

they thought was non ‘core competency’, learned to their chagrin that in

the connected, information economy, the value of their core competency

was much less than the inflated value of their stock, and they have lost

much of their market share to new federations of small entrepreneurial

businesses. [72]

To take the example of Nike shoes themselves, the larger the percentage

that brand-name markup contributes to total retail price, over and above

actual costs of production, the greater the incentives will become for

the factories producing the actual shoes to defect from the

international “intellectual property” regime. By producing identical

shoes (perhaps with the Swoosh in a red circle-and-slashbar) and cutting

Nike out of the loop, the factories can eliminate the brand-name markup,

raise wages by several hundred percent, and lower prices sufficiently to

market their shoes domestically instead of for export to Western

consumers. Likewise, the small, networked flexible manufacturing firms

in industrial districts like Emilia-Romagna, to the extent that they

still participate in the supply chains of transnational manufacturing

corporations, by simply ignoring “intellectual property” laws can bypass

the large manufacturers and offer better, cheaper competing versions of

their own products.

One of the greatest services libertarians can render to the cause of

freedom is to agitate for mass defection from international

“intellectual property” agreements like WIPO and TRIPS, and at the same

time to promote the development of technical means of circumventing

enforcement of copyright law.

V. “Intellectual Property,” Business Models and Product Design

Earlier, we quoted Murray Rothbard’s observation that the enforcement of

“intellectual property” rights requires the violation of genuine rights

to tangible property. As Cory Doctorow argues, this becomes even more

true given the business model required by proprietary digital

information:

It’s funny that in the name of protecting “intellectual property,” big

media companies are willing to do such violence to the idea of real

property arguing that since everything we own, from our t-shirts to our

cars to our ebooks, embody someone’s copyright, patent and trademark,

that we’re basically just tenant farmers, living on the land of our

gracious masters who’ve seen fit to give us a lease on our homes. [73]

All-pervasive DRM prevents the easy transfer of content between

platforms, even when it’s simply a matter of the person who purchased a

CD or DVD wanting to play it somewhere more convenient. And the DMCA

legally prohibits circumventing such DRM, even when — again — the

purchaser of the content simply wants to facilitate his own use on a

wider and more convenient variety of platforms.

A good recent example of the phenomenon Doctorow commented on is the

Amazon Kindle. If Amazon suspends a Kindle account (say, because the

user returned too many books), the reader becomes an inert chunk of

plastic suitable for use as a doorstop or paperweight. All those e-books

already bought and paid for can no longer be read. If the reader falls

afoul of Amazon’s good graces, they’ll disable his reader by remote and

make the e-books he already “owns” utterly worthless. [74]

But to repeat once again, and for the last time, the laws on which the

enforcement of this business model depends are becoming unenforceable,

and the business model itself as a result untenable. According to the

(probably hyperbolic) claim of Johan Pouwelse, a scholarly analyst of

assessment of the timeline is overly optimistic, his analysis of the

causes of copyright’s obsolescence are on the mark. As file-sharing

platforms become more popular, they are simultaneously becoming more

robust and more secure. For a growing percentage of young people, all

the industry admonitions that “file-sharing is theft” fall on deaf ears.

Among those younger than thirty or so, file-sharing is simply something

that people do, and will continue to do. Any attempt to change this

cultural atmosphere will be a losing, rear-guard battle comparable to

that faced by the Religious Right. At the same time, file-sharing

networks are becoming increasingly user-friendly and attractive to

mainstream participants.

Most important of all is the prospect of anonymity and security against

the punitive efforts of the Copyright Nazis at MPAA and RIAA. According

to Pouwelse,

By 2010 darknets should be able to offer the same performance as

traditional P2P software by exploiting social networking,” the article

reads, referring to networks that allow file trading whithout revealing

the identity of its participants to outside entities. ? Just think what

would happen if those 72,866 YouTube friends were able to share

Hollywood movies within a P2P network that’s as easy to use as YouTube

but untraceable by Hollywood. Pouwelse and his colleagues think it’s

going to happen within the next two years. [75]

VI. Is “Intellectual Property” a Necessary Incentive?

Advocates for “intellectual property” defend it as necessary to

encourage innovation, asking what the incentive for innovation or

artistic creation would be without it. But in fact patents suppress

innovation as much as they encourage it, and many producers in the

cultural and information fields have demonstrated that value can be

captured without “intellectual property.”

Patents are a hindrance to progress because of the “shoulders of giants”

effect. Any new invention presupposes a wide variety of existing

technologies that are combined and reworked into a new configuration.

Patents on existing technologies may or may not marginally increase the

incentives to new invention, but they also increase the cost of doing so

by levying a tariff on the aggregation of existing knowledge to serve as

building blocks of a new invention.78 James Watt’s refusal to license

his patent on the steam engine, for example, prevented others from

improving the design until the patent expired in 1800. This delayed the

introduction of locomotives and steamboats. [76]

Rothbard pointed out that patents eliminate “the competitive spur for

further research” because incremental innovation based on others’

patents is hindered, and because the holder can “rest on his laurels for

the entire period of the patent,” with no fear of a competitor improving

his invention. And they hamper technical progress because “mechanical

inventions are discoveries of natural law rather than individual

creations, and hence similar independent inventions occur all the time.

The simultaneity of inventions is a familiar historical fact.” Patents

also distort whatever research and innovation does occur in artificial

directions—toward patentable research, at the expense of non-patentable

research. [77] Chakravarthi Raghavan argued, likewise, that patents and

industrial security programs prevent sharing of information, and

suppress competition in further improvement of patented inventions. [78]

And patents are not necessary as an incentive to innovate. According to

Rothbard, invention is motivated not only by the quasi-rents accruing to

the first firm to introduce an innovation, but by the threat of being

surpassed in product features or productivity by its competitors. He

cites Arnold Plant: “In active competition… no business can afford to

lag behind its competitors. The reputation of a firm depends upon its

ability to keep ahead, to be the first in the market with new

improvements in its products and new reductions in their prices.” [79]

This is borne out by F. M. Scherer’s testimony before the Federal Trade

Commission in 1995. [80] Scherer spoke of a survey of 91 companies in

which only seven “accorded high significance to patent protection as a

factor in their R & D investments.” Most of them described patents as

“the least important of considerations.” Most companies considered their

chief motivation in R & D decisions to be “the necessity of remaining

competitive, the desire for efficient production, and the desire to

expand and diversify their sales.” In another study, Scherer found no

negative effect on R & D spending as a result of compulsory licensing of

patents. A survey of U.S. firms found that 86% of inventions would have

been developed without patents. In the case of automobiles, office

equipment, rubber products, and textiles, the figure was 100%.

The one supposed exception was drugs, according to Scherer, of which 60%

would not have been invented. But it’s likely Scherer underestimated the

effect of drug patents in discouraging or distorting innovation. For one

thing, drug companies get an unusually high portion of their R & D

funding from the government, and many of their most lucrative products

were developed entirely at government expense. And Scherer himself cited

evidence to the contrary. The reputation advantage for being the first

into a market is considerable. For example in the late 1970s, the

structure of the industry and pricing behavior was found to be very

similar between drugs with and those without patents. Being the first

mover with a non-patented drug allowed a company to maintain a 30%

market share and to charge premium prices. We have already seen, in the

previous chapter, the extent to which the direction of innovation of

skewed by considerations of gaming the patent system and patent trolling

the competition. The majority of R & D expenditure is geared toward

developing “me, too” drugs: in essence slightly different versions of

existing drugs, tweaked just enough to justify repatenting. And of the

enormous R & D expenditures which patents are allegedly necessary to

allow the drug companies to recoup, a majority goes not to developing

the actual drug that goes to market, but to securing patent lockdown on

all the possible major variations of that drug.

The injustice is only compounded by government funding of research and

innovation, with private industry reaping monopoly profits from

technology it spent little or nothing to develop. The Government Patent

Policy Act of 1980, with 1984 and 1986 amendments, allowed private

industry to keep patents on products developed with government R & D

money–and then to charge ten, twenty, or forty times the cost of

production. For example, AZT was developed with government money, and

the patent subsequently given away to Burroughs Wellcome Corp.84 As if

the deck were not sufficiently stacked already, Congress has more than

once extended drug companies’ patents beyond the expiration of their

normal term under patent law; as just one example, the pharmaceutical

companies in 1999 lobbied Congress to extend certain patents by two

years by a special act of private law. [81]

Copyrights have also been granted arbitrary extension for certain

favored parties (e.g., copyright extension, sponsored by Sonny Bono, for

Disney’s “Mickey Mouse” trademark). This is in addition to the draconian

law. But copyright protection is no more necessary for artistic creation

than patents are necessary for invention. There are many businesses, in

the open-source world, that manage to make money from auxiliary services

even though their content itself is not proprietary. For example, even

though Red Hat cannot restrict the copying of the Linux software it

distributes, it does quite well customizing the software and offering

specialized customer support. Phish has actively encouraged fans to

share its music free of charge, while making money off of live

performances and concessions. Radiohead offered a recent album for free

download, collecting only voluntary contributions via what amounted to a

glorified PayPal tip jar.

The Radiohead model is especially interesting in its implications for

making a living off open-source production. Since, as we have already

seen, the cost of the physical capital necessary for recording and sound

editing has imploded, the overhead costs which must be serviced by an

open-source music distributor are miniscule. And since the listeners

themselves bear the cost of physical reproduction (i.e., they burn their

own CDs), whatever revenue stream comes in from voluntary

contributions—even it averages only a dollar or two per listener—belongs

to the artist free and clear. And even if the content provider charges a

price for the download, there is a significant rent entailed in the cost

of setting up a rival download service and selling the same content for

a lower price. So for all but the biggest blockbuster music groups and

publishers, if the content provider charges a low enough price, the

transaction costs involved in going through a file-sharing network, or

setting up a competing download service just to sell the content for

fifty cents instead of a dollar, probably exceed the likely returns.

Unless the content providers attempt to price gouge in the way that

record companies have done in recent years, or they are forced to

service the overhead costs from supporting corporate management and

shareholders, they are likely to benefit more than suffer from free

culture.

Since IP is not necessary to encourage innovation, this means that its

main practical effect is to cause economic inefficiency by levying a

monopoly charge on the use of existing technology.

In any case, for those whose libertarianism follows from the principles

of self-ownership and nonaggression, whether “intellectual property” is

necessary for those engaged in certain forms of economic activity to

profit is beside the point. The same argument is used by protectionists:

certain businesses would be unprofitable if the weren’t protected from

competition by tariffs. So what? No one has a right to profit at someone

else’s expense, through the use of force. In particular, no one has the

right to make a profit by using the state to prevent others from doing

as they please with their own pen and paper, hard drives, or CDs. A

business model that isn’t profitable without government intervention

should fail.

The following example is instructive, as a lesson in double standards.

David Noble, in Progress Without People, recounted an incident in the

early 1970s when the Washington Post was adopting computerized cold type

technology which rendered pressmen obsolete. The pressroom was invaded

after hours by pressmen who systematically took apart the machines with

the technical expertise of a Jack the Ripper. [82] So why is it bad for

“Luddites” to smash machines that put them out of a job, while

technology that puts capitalists out of a job (or out of profit, rather)

violates their “property” rights? If the same newspaper publishers whose

adoption of new technology rendered skilled workers obsolete, now find

themselves threatened by cutting and pasting and hyperlinks—well, it

couldn’t happen to a nicer bunch of guys. And if the record companies’

management and shareholders now find themselves redundant in the face of

home sound editing, filesharing, and other forms of new technology, then

let them eat cake. If workers don’t have a property right in their jobs

in the face of new technology, then neither do capitalists have a

property in the accrual of profits from a business model rendered

obsolete by new technology.

“Intellectual property,” finally, hinders innovation in another way we

have not yet considered: it increases the cost of putting and keeping

one’s own ideas in the public domain, for those who prefer to do so. The

content originator or inventor must take defensive measures to prevent

his idea, which he leaves in the public domain, from being copyrighted

by someone else with the intent of depriving him of its use.

This is not such a problem for copyright. Copyleft, the GNU General

Public License and the Creative Commons license all presuppose strong

virtually unlimited reproduction and circulation of material under a

broad range of circumstances, on the condition that the secondary user

make his own use of the material publicly available under the terms of

the same license. Copyright protection is simply retained in

self-defense, to prevent material in the public domain from being

copyrighted by secondary users. Were there no copyright laws in

existence in the first place, there would be no need for the GPL or CC

license. Patents, however, raise far more difficult issues. Vinay

Gupta’s account of his experiences with the hexayurt, an open-source

form of cheap emergency housing for refugees living in shantytowns and

tent cities, is instructive in this regard.

Look, the problem is this: GPL enforceability rests on strong copyright

law.

Hardware, however, is typically not covered by copyright, leaving

patent.

Patents are expensive.

So you can patent-with-open-license if you can afford it, or you can

publish and it drops into the public domain (i.e. is no longer

patentable) and some other bastard can patent things around or enclosing

your invention, and then you’re an unhappy camper.

Been through this with the Hexayurt and there’s no good answer right

now. I strongly tend towards the public-domain-and-pray approach,

personally. [87]

One cannot simply choose not to patent an invention and entrust it

safely to the public domain. It is necessary to pay the enormous expense

of obtaining a patent in order to enforce the continued public domain

status of one’s own invention, and keep it from being stolen by

corporate pirates.

In Summary…

“Intellectual property” is theft. Smash the state.

[1] Lysander Spooner, The Law of Intellectual Property; or, An Essay on

the Right of Authors and Inventors to a Perpetual Property in Their

Ideas (Boston: Bela Marsh, 1855) <

www.lysanderspooner.org

[2] “State Socialism and Anarchism: How Far They Agree, and Wherein They

Differ,” in Benjamin R. Tucker, Instead of a Book, By a Man Too Busy to

Write One. Gordon Press facsimile (New York: 1973 [1897]), p. 13.

[3] Ayn Rand, Capitalism: The Unknown Ideal (New York: The New American

Library Inc., 1967), p. 130.

[4] Ibid., p. 132.

[5]

N. Stephan Kinsella, Against Intellectual Property (Ludwig von Mises

Institute, 2008), p. 16n. This monograph first appeared as an

article the symposium Applications of Libertarian Legal Theory,

published in the Journal of Libertarian Studies 15, no. 2 (Spring

2001).

[6] Ibid., p. 27.

[7] Ibid.

[8] Ludwig von Mises, Human Action (Chicago: Regnery, 1949, 1963, 1966),

pp. 385–386, 680–681.

[9] Murray N. Rothbard, Man, Economy, and State: A Treatise on Economic

Principles (Auburn, Ala.: The Ludwig von Mises Institute, 1962, 1970,

1993), p. 655.

[10] Ibid., pp. 657–658.

[11] Ibid., p. 654.

[12] Kinsella, Against Intellectual Property, p. 46.

[13] Quasibill, “Contract Enforcement Consolidation,” The Bell Tower,

December 20, 2007 <

the-bell-tower.blogspot.com

[14] Stephan Kinsella comment under Aheram, “The Validity of End User

Licesnse Agreements Redux,” Copyfascism Watch, December 2, 2008

mises.org

[15] Kinsella comment under David K. Levine, “Can You Contract Away Fair

Use?” Against Monopoly, April 13, 2009

www.againstmonopoly.org

[16] Charles Johnson, “How Intellectual Protectionism promotes the

progress of science and the useful arts,” Rad Geek People’s Daily, May

28, 2008 <

radgeek.com

[17] Richard Stallman, “The Right to Read” (updated 2007). It originally

appeared in the February 1997 issue of Communications of the ACM (Volume

40, Number 2) <

www.gnu.org

[18] Michel Bauwens, P2P and Human Evolution. Draft 1.994 (Foundation

for P2P Alternatives, June 15, 2005) <

integralvisioning.org

[19] Michel Bauwens, “Can the experience economy be capitalist?” P2P

Foundation Blog, September 27, 2007 <

blog.p2pfoundation.net

[20] Johan Soderberg, Hacking Capitalism: The Free and Open Source

Software Movement (New York and London: Routledge, 2008), , pp. 144–145.

[21] Deborah Durham-Vichr, “Focus on the DeCSS trial,” CNN.Com, July 27,

2000 <

archives.cnn.com

[22] Numerous examples—the Diebold corporate emails and Sinclair Media

boycott, the Alisher Usmanov libel case, the Wikileaks case, etc.—are

provided in the appendices to Chapter Nine (“Special Agency Problems of

Labor”) in Kevin Carson, Organization Theory: A Libertarian Perspective

(Booksurge, 2008). An earlier online draft of the chapter can be found

at <

members.tripod.com

[23] Albert Jay Nock, Our Enemy, the State (Delavan, Wisc.: Hallberg

Publishing Corp., 1983), p. 80

[24] Peter Kropotkin, The Conquest of Bread (New York: Vanguard Press,

1926), pp. 36–37.

[25] Ronald Bailey, “Drug Companies Don’t Get Enough Money …,” Reason

Hit&Run blog, February 22, 2006 <

www.reason.com

[26] Kevin Carson, Studies in Mutualist Political Economy (Blitzprint,

2004), p. 79.

[27] Maurice Dobb, Political Economy and Capitalism: Some Essays in

Economic Tradition, 2^(nd) rev. ed. (London: Routledge & Kegan Paul Ltd,

1940, 1960), p. 66.

[28] Veblen, The Place of Science in Modern Civilization and other

Essays, p. 352, quoted in John R. Commons, Institutional Economics (New

York: MacMillan, 1934), p. 664.

[29] Rothbard, Power and Market: Government and the Economy. (Kansas

City: Sheed Andrews and Mcmeel, Inc., 1970, 1977) , p. 71.

[30] Scott Adams, “Is Copyright Violation Stealing?” The Dilbert Blog,

April 7, 2007 <

dilbertblog.typepad.com

[31] Kinsella, Against Intellectual Property, p. 47.

[32] Mark A. Poncelet, “Leave my underpants alone,” poncelet, April 9,

2007 <

poncelet.livejournal.com

[33] Hodgskin, “Letter the Eighth: Evils of the Artificial Right of

Property,” The Natural and Artificial Right of Property Contrasted. A

Series of Letters, addressed without permission to H. Brougham, Esq.

M.P. F.R.S. (London: B. Steil, 1832).

oll.libertyfund.org

[34] Hodgskin, The Natural and Artificial Right of Property Contrasted.

A Series of Letters, addressed without permission to H. Brougham, Esq.

M.P. F.R.S. (London: B. Steil, 1832). Online Library of Liberty

oll.libertyfund.org

[35] David F. Noble, America by Design: Science, Technology, and the

Rise of Corporate Capitalism (New York: Alfred A. Knopf, 1977), p. 5.

[36] Ibid., p. 9.

[37] Ibid., pp. 9–10.

[38] Ibid., pp. 11–12.

[39] Ibid., p. 12.

[40] Ibid., p. 12.

[41] Ibid., p. 91.

[42] Ibid., p. 92.

[43] Ibid., p. 16.

[44] Ibid., p. 91.

[45] Ibid., p. 89.

[46] Ibid., p. 95.

[47] Tom Peters. The Tom Peters Seminar: Crazy Times Call for Crazy

Organizations (New York: Vintage Books, 1994), p. 35.

[48] Yochai Benkler, The Wealth of Networks: How Social Production

Transforms Markets and Freedom (New Haven and London: Yale University

Press, 2006), p. 179.

[49] Ibid., p. 188.

[50] Ibid., pp. 212–13.

[51] Ibid., pp. 32–33.

[52] Ibid., p. 54.

[53] Tom Coates, “(Weblogs and) The Mass Amateurisation of (Nearly)

Everything…” Plasticbag.org, September 3, 2003 <

www.plasticbag.org

amateurisation_of_nearly_everything>.

[54] Zingales, “In Search of New Foundations,” p. 1641.

[55] Ibid., p. 1641.

[56] Raghuram Rajan and Luigi Zingales, “The Governance of the New

Enterprise,” in Xavier Vives, ed., Corporate Governance: Theoretical and

Empirical Perspectives (Cambridge: Cambridge University Press, 2000),

pp. 211–212.

[57] Marjorie Kelly, “The Corporation as Feudal Estate” (an excerpt from

The Divine Right of Capital) Business Ethics, Summer 2001. Quoted in

GreenMoney Journal, Fall 2008 <

greenmoneyjournal.com

[58] David L Prychitko, Marxism and Workers’ Self-Management: The

Essential Tension ( New York; London; Westport, Conn.: Greenwood Press,

1991), p. 121n.

[59] James C. Bennett, “The End of Capitalism and the Triumph of the

Market Economy,” from Network Commonwealth: The Future of Nations in the

Internet Era (1998, 1999) <

www.pattern.com

[60] Tom Peters, The Tom Peters Seminar, p. 10.

[61] Ibid., pp. 10–11.

[62] Ibid., p. 11.

[63] Ibid. p. 12.

[64] Michael Perelman, “The Political Economy of Intellectual Property,”

Monthly Review, January 2003 <

www.monthlyreview.org

[65] Thomas Hodgskin, Popular Political Economy: Four Lectures Delivered

at the London Mechanics’ Institution (London: Printed for Charles and

William Tait, Edinburgh, 1827), pp. 3334.

[66] Michael Perelman, “Intellectual Property Rights and the Commodity

Form: New Dimensions in the Legislative Transfer of Surplus Value,”

Review of Radical Political Economics 35:3 (Summer 2003), pp. 307–308.

[67] Perelman, Steal This Idea: Intellectual Property Rights and the

Corporate Confiscation of Creativity (New York: Palgrave, 2002), p. 36.

[68] Chakravarthi Raghavan, Recolonization: GATT, the Uruguay Round &

the Third World (Penang, Malaysia: Third World Network, 1990), pp.

119–20.

[69] Dieter Ernst, Technology, Economic Security and Latecomer

Industrialization, quoted in Raghavan, Recolonization, pp. 39–40.

[70] Martin Khor Kok Peng, The Uruguay Round and Third World Sovereignty

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