Mises Wire

IP Means you MUST Buy that iPhone

IP Means you MUST Buy that iPhone

The recent case of the lost next-generation iPhone prototype can help illustrate the absurdity of intellectual property rights. The basic idea of IP is that information can be owned–patterns, recipes, methods, designs, and so on. Even Rothbard, in The Ethics of Liberty, makes this assumption in arguing for a type of contractual copyright:

A common objection runs as follows: all right, it would be criminal for Green to produce and sell the Brown mousetrap; but suppose that someone else, Black, who had not made a contract with Brown, happens to see Green’s mousetrap and then goes ahead and produces and sells the replica? Why should he be prosecuted? The answer is that, as in the case of our critique of negotiable instruments, no one can acquire a greater property title in something than has already been given away or sold. Green did not own the total property right in his mousetrap, in accordance with his contract with Brown—but only all rights except to sell it or a replica. But, therefore Black’s title in the mousetrap, the ownership of the ideas in Black’s head, can be no greater than Green’s, and therefore he too would be a violator of Brown’s property even though he himself had not made the actual contract.

Note how Rothbard, in order to defend a type of copyright that “contractually” ensnares third parties (which is essential if there is to be anything like IP), has to assume that ideas are separable from things they are embodied in and somehow separately ownable. I discuss this interesting and uncharastic mistake of Rothbard’s at pp. 47- of Against Intellectual Property. The “Farmer Jed” example on pp. 54- provides an illustration of the obvious absurdity of ownership of knowledge:

Farmer Jed discovers oil under his land. No one for miles around knows about the black gold. Jed plans to buy his neighbors’ property for a song; they’ll sell it cheap, too, since they don’t know about the oil. In the middle of the night, his nosy neighbor Cooter, suspicious over Jed’s recent good spirits, sneaks onto Jed’s land and discovers the truth. The next morning, at Floyd’s barbershop, Cooter spills his guts to Clem and the boys. One of them promptly runs to a pay phone and gives a tip to a reporter at the Wall Street Journal (who happens to be his nephew). Soon, it is common knowledge that there is oil in the vicinity. The neighbors now demand exorbitant prices for their land, thus spoiling Jed’s plans.

Let us grant that Cooter can be prosecuted for trespass and harms flowing therefrom. The question is, can Jed’s neighbors be prevented from acting on their knowledge? That is, may they be forced to somehow pretend that they do not know about the oil, and sell their land to Jed for what they “would have” sold it when in ignorance? Of course they may not be so forced. They own their land, and are entitled to use it as they see fit. Unlike tangible property, information is not ownable; it is not property. The possessor of a stolen watch may have to return it, but so long as the acquirer of knowledge does not obtain that knowledge illicitly or in violation of a contract, he is free to act upon it.

Note, however, that according to the reservation-of-rights view, the neighbors would not be permitted to act upon their knowledge because they obtained it ultimately from Cooter, a trespasser who had no “title” to that knowledge. Thus, they could not have obtained “greater title” to it than Cooter himself had. Note also that others, such as geological surveyors mapping oil deposits, cannot include this information in their maps. They must feign ignorance until given permission by Jed. This imposed ignorance correlates with the unnatural scarcity imposed by IP. There is clearly no warrant for the view that reserved rights can somehow prohibit third parties from using knowledge they acquire.

I was reminded of this by the recent lost iPhone story. Surely there are first-gen iPhone and iPhone 3G owners who have been planning to buy the iPhone 3GS, the current top of the line iPhone model. And surely there are some people out there who were planning to buy their first iPhone in the next few weeks or month. There can be no doubt that a number of these people will hold off on that purchase, now that they know a new iPhone model is going to come out probably in the upcoming months. They’ll wait for the new iPhone instead. This means Apple will lose sales, or at the very least that sales will be delayed.

According to IP advocates, Apple owned the lost iPhone and also its IP–the designs, the trade secrets, the very information that a new iPhone was coming out. If you take IP seriously, then the Gizmodo employees had no right to the “knowledge” they gleaned from the iPhone prototype (we can safely assume here that they were aware it was Apple’s property and that they were dissecting and using this device without Apple’s consent–a form of trespass). Gizmodo had no “title” to these ideas. And, as Rothbard argues in the case of the mousetrap, we masses who have heard about this incident have no title to these ideas either–after all, we got the ideas from Gizmodo, but it’s a well known legal maxim, as Rothbard relies on, that you cannot receive greater title than the person you receive the thing from. Thus we have no title to these ideas either. That means we have no right to use this information. If I was going to buy an iPhone 3GS next week, I must still go through with it. If I don’t, I am committing trespass against Apple by using their property (the information about the existence of the new iPhone prototype) without Apple’s consent. No, Apple is entitled to that sale. As Jeff Tucker remarked to me, in discussing this, I’d be committing “insider refraining from buying” if I acted on information I don’t own. (Note that the idea of being entitled to a sale underlies the notion of defamation law and also trademark law. If Big Burger spreads lies about Giant Burger then Giant Burger sues because it “lost business”–business it was presumably entitled to. Same thing if Big Burger uses a mark too similar to Giant Burger’s trademark.)

But no worries that I’ll buy the new iPhone and feel bad about my purchase–even doing this would be using the information, and I have no right to do this. So I must be glad about my new purchase. To fail to do so violates Apple’s proprietary rights in patterns and information.

This is all nonsense, of course. But it’s one of the many absurd results you get if you treat information as ownable. As I discuss in Intellectual Property and the Structure of Human Action, human action employs means to achieve ends. Action is guided by knowledge and information–your knowledge about what means are suitable to achieve your ends, say. To take a simple example, suppose you and I each want to bake a cake. We can both make a cake at the same time using the same recipe (ideas), but not using the same eggs (scarce means). That’s precisely why there are property rights in scarce resources and only in scarce resources. Where there is scarcity, the things have to be rationed and assigned to particular owners so that these things can be successfully employed as means in action. If eggs were in infinite abundance at the snap of a finger no one would need to take anyone else’s eggs, and if they did, it would not matter. You could conjure up eggs and make your cake, or if you take my eggs I can just conjure up more and make my cake. There’s no scarcity problem to solve. When there is scarcity, we assign property rights so that there can be peaceful and prosperous use of these things in action. But for things that are not scarce, such as information, the question of property rights does not arise, and makes no sense.

In other words, for scarce things, property rights are assigned so that these scarce things can be used. Property rights help address a limitation of things in the real world. For ideas, IP assigns property rights in something that is infinitely abundant, in a bizarre attempt to make these things scarce, or less abundant. In the case of scarce things, property rights are a response to the problem of scarcity. In IP, property rights are assigned to create a problem of scarcity that did not exist before. The goal should not be to make abundant things limited and scarce; but, if anything, to make valuable scarce things as abundant as possible.

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