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Intellectual Property: An Abolitionist Case

This blogpost ist the transcribed, translated and slightly updated version of “Steal This Talk”, which I gave in June 2012 at GPN12 (hacker conference in Karlsruhe, highly recommended).

Abstract

In the past months, the conflict around monopolies on immaterial goods (aka copyright, patents) has gained momentum. The beneficiaries of these monopoly privileges speak of “piracy” and the “theft of intellectual property”, charging the debate with a drastic rhetoric. It’s time for a course in intellectual self-defense, and a look at the technology, history, economy and politics of copying. Since when has creativity and innovation beeen regulated through instruments of artificial scarcity? To what success? What are the reactions to disruptive technologies? A conflict clearly emerges: More and more wealth is created in immaterial form. A market in copies requires (artificial) scarcity. At the same time, we create machines and networks, which are increasingly efficient at copying – to the point of doing it for free. So what kind of future are we heading for?

Intellectual Disobedience

In July 2011 a torrent file hit the internet and quickly attracted thousands of up- and downloaders. Its content were 18 000 scientific articles from the Philosophical Transactions of the Royal Society, practically the first scientific journal in history. The collection of articles reached back into the 17th century, so at least a part of the articles were in the public domain – theoretically. In fact, they came from the commercial database JSTOR, where they could be accessed for a substantial fee. The torrent was accompanied by a text titled “Guerilla Open Access Manifesto”. Here is a quote:

Sharing isn’t immoral — it’s a moral imperative. Only those blinded by greed would refuse to let a friend make a copy. [...] It’s time to come into the light and, in the grand tradition of civil disobedience, declare our opposition to this private theft of public culture.

For this attempt at liberating scientific papers, internet activist Aaron Swartz was arrested in the US on charges of computer fraud and threatened with a maximum sentence of 35 years in prison. Prosecution of the case continues. In response, JSTOR released the public-domain content of its archives for public viewing. One thing is clear: We live in interesting and strange times, in which filesharing can be an act of civil disobedience.

Certainly, I am not the only person currently writing about intellectual property, nor the most expert. But I have tried to collect some thoughts which I miss in the current debate. I am asking the question whether it makes sense to regulate our creativity and innovation with instruments of artificial scarcity. Copyright and patents: Did it ever work? Can it still work in the future? I am not an economist or historian. As a computer scientist, I deal with computers and their networks. If we may believe what is said by some in this debate, these machines and their networking are to blame for a grave crisis of our civilization. Our capacity to do creative work and innovate is threatened, because these computers and networks are just too efficient at copying and distributing digital goods. Now, all kinds of people distribute copies of all kinds of works over the internet, and they even do it for free. According to some, we have to increase control, manage digital rights, and put an end to unregulated copying. The question is: May we believe their version of the story?

Momentum

I started to prepare this material because I was under the impression that in last 12 months, the conflict about ‘intellectual property’ has gained momentum. Let us look at some milestones:

The US draft laws SOPA and PIPA were the attempt to deliver a concerted attack on filesharing websites – to cut off their funding, to cleanse them from search engine results, and to commit ISPs to censor them with DNS blocking. And again, internet censorship was on the agenda in the free and democratic world. This time, in the United States, and openly against copyright infringement. However, a wave of protest rolled over the internet in January 2012. Several high-profile websites, e.g. Wikipedia, went symbolically offline. A strong lobby against SOPA/PIPA formed, which included Google and Facebook. Quickly, the drafts were shelved.

At the same time, the ACTA issue came to a kind of showdown. With the international trade agreement ACTA, multiple states were trying to craft a large care package for the intellectual property industry – intended to solve a variety of their problems, from counterfeit branded goods to generic medicine to filesharing. For years, critics had warned about ACTA as a threat to civil liberties and economic development. Yet many of them seemed to have resigned to the fact that the problems with ACTA were difficult to communicate to the general public, and that ACTA would remain a topic for an activist niche on the web. Then suddenly, 20 000 people took to the streets of Poland in protest against ACTA. And while hardened internet activists round here wondered how the hell they had managed to pull this off over there, the protests started in 2000 cities all over Europe.

A Kind of Debate

Thanks in no small part to these protests, a kind of public debate about copyright emerges – or at least there were some very visible PR statements. In Germany, we saw a wave of media appearances of alleged victims of filesharing, including appeals in the name of the so called ‘creatives’. My impression was that artists and their audience were antagonized against each other, while the content industry which exists between producers and consumers of creative works was let off the hook. The crisis of copyright is primarily a crisis of the content industry as an intermediary and gatekeeper. Certainly, some content creators disagree. Their claim: Whoever demands access to culture without paying for it is lacking respect for culture and those doing the creative work behind it. A statement by a number of prominent authors called copyright a “historical achievement of bourgeois liberty against feudal dependence.” Well, I am inclined to agree. What I fail to see is why we should stop at this bourgeois liberty, which has long passed its historical zenith. The crisis of intellectual property is turning out as an opportunity for a new and improved liberty. One thing these authors are right about: Yes, this conflict is about liberty. And it becomes increasingly clear how badly the old models of ‘intellectual property’ get along with liberty in the 21st century.

Thankfully, there are other voices from the artist community. Amanda Palmer, of the Dresden Dolls fame, who recently collected 1 million dollars of crowdfunding for the production of her solo album, said in an interview:

I think once people can share art, they should share art. And trying to stop people from sharing art when that’s all they want to do is almost brutal.

Imaginary Property

Before I criticize the concept of ‘intellectual property’, a definition is in order: The term ‘intellectual property’ comprises many different legal constructs. I will firstly consider copyright and secondly patents. Patents and copyright are, of course, legal instruments with certain differences. However, I will concentrate on the essential commonality: When invoking ‘intellectual property’, one claims ‘ownership’ of an immaterial good as the right to exclude others from certain kinds of usage. The immaterial good may be widely known, so it is not a secret. An intellectual property claim is made with the intention to dictate to others how to use and distribute it. Copyright covers a specific expression of an idea – patents cover a technical idea itself.

I’d like to start with the argument that the notion of property is quite out of place here. Let’s look at the following quote:

If you have an apple and I have an apple and we exchange apples, then you and I will still each have one apple. But if you have an idea and I have one idea and we exchange these ideas, then each of us will have two ideas.
– George Bernard Shaw, Autor, 1856 – 1950

This nicely illustrates how immaterial goods are non-rival goods: My usage of the resource does not exclude your usage of the resource at the same time (if we understand usage concretely as putting the object or idea to use). Not only that: Immaterial goods proliferate when they are passed on. (They even proliferate when they are ‘stolen’.) This difference compared to material objects is not trivial. And this is where claiming property rights is becoming difficult.

An honest debate will, in my opinion, sooner or later abandon the notion of ‘intellectual property’. Instead, we should speak about monopoly.  So called intellectual property is all about monopolies on immaterial goods. The creator of such a good is granted a monopoly on its exploitation. The justification for this goes as follows: Would we not grant this monopoly, the creator could not compete with others who only copy and do not have to bear the cost for the production of the good. Therefore, we have to set up a system of monopolies on immaterial goods, which allows the author or inventor to demand a significantly higher price, in economist’s terms, to earn a monopoly rent. For the consumer, who wants, for example, a specific book, the price becomes significantly higher than under free market conditions. A free market would imply that everybody can sell everything, including copies of every idea. For the time being, the individual consumer is thus at a disadvantage. But proponents of intellectual monopolies claim that they result in an advantage for the consumers collectively, namely an increased supply. Would we not grant the monopoly, there would not be enough incentive to do creative and innovative work. Culture and technology would stagnate, which we all want to avoid. This is the standard justification for ‘intellectual property’ as I understand it.

One point should already be clear by now: ‘Intellectual property’ is not a right, but a privilege. The state creates artificial scarcity intended to set financial incentives. It is an indirect government subsidy – a public policy and therefore has to be subject to public debate. All members of a society should have a say in whether to set up such a system.

The question that follows is: Does this system of incentives actually work? Do these monopolies have the claimed positive effects? Let us look at some historical evidence in the following sections.

Copyright in the Land of Poets and Thinkers

The theories of intellectual property are backed by little empirical data. This prompted economic historian Eckhard Höffner to conduct a comparative study over the past three centuries, comparing the economies of Great Britain and Germany.

In 1836, a literary critic called the Germans a ‘people of thinkers and poets’, a phrase which is still often heard today, but regularly misunderstood. The quote did not at all refer to individual geniuses like Schiller or Goethe. It referred to the extraordinary quantity of reading material available to the populace. In Germany, reading was not a privilege of the upper class or the intellectuals, and this was obviously noteworthy.

As a matter of fact, Germany had no modern copyright law back then. ‘Piracy’ of books was practically unrestricted. Prussia had inded introduced a copyright law, but the fragmentation of the country into countless petty states made a national enforcement impossible. England, on the other hand, had introduced the first state-enforced copyright in 1710 with the Statute of Anne. The copyright term was up to 28 years from the date of publication. England was a pioneer, while the rest of Europe were late to the game. Thereby, history has set up a kind of experiment – with revealing results:

In 1843, England had 1000 new publications per year, while Germany had 14 000. English books appeared in limited editions, and a book cost the weekly salary of a worker. In Germany, the competition from pirate publishers was so strong that the original publishers had to create low-priced editions for a mass market: Not only pulp novels, but non-fiction books, technical literature, guidebooks and more. This lead to an ‘explosion of science’ and resulted in the culture of technical and scientific publishing we know today all over the world.

And this is why, according to Höffner, this backward agrarian country could catch up with Great Britain, the cradle of the industrial revolution, in terms of industrial development by the year 1900. From the 1840s onward, Germany gradually introduced modern copyright law. This did not lead to a collapse of the popular book market, yet there was a significant rise in prices and a dent in the number of new publications.

Höffner’s most surprising result: Without copyright, authors in general collected higher royalties. How is this possible? The economist’s explanation: If I have a limited budget for books, and I have to pay high monopoly prices, I will buy few books. Accordingly, few authors profit. If books are cheap and there is a mass market, then this market provides space for many authors. The copyright monopoly does lead to higher prices, yet only few authors reap the benefit.

James Watt’s Patent

The other major component of ‘intellectual property’ is the patent system, which in its current form also originated in Britain during the 18th century. Two critics of ‘intellectual property’, libertarian economists Boldrin and Levine, start their book “Against Intellectual Monopoly” with the case of James Watt:

In late 1764, while repairing a small Newcomen steam engine, the idea of allowing steam to expand and condense in separate containers sprang into the mind of James Watt. He spent the next few months in unceasing labor building a model of the new engine. In 1768, after a series of improvements and substantial borrowing, he applied for a patent on the idea. […]
Once Watt’s patents were secured and production started, a substantial portion of his energy was devoted to fending off rival inventors. […] [I]n the 1790s, when the superior and independently designed Hornblower engine was put into production, Boulton and Watt went after him with the full force of the legal system. In contrast to Watt, who died a rich man, the inventor Jonathan Hornblower was not only forced to close shop, but found himself ruined and in jail. […] The Fuel efficiency of steam engines is not thought to have changed at all during the period of Watt’s patent; while between 1810 and 1835 it is estimated to have increased by a factor of five. After the expiration of the patents in 1800, not only was there an explosion in the production of engines, but steam power finally came into its own as the driving force of the industrial revolution.

Of course, an anecdote is not a proof of anything. However, the story provides an interesting illustration of the defects of the patent system which remain today: Rather than being a motor of innovation, the patent becomes a weapon against competitors, which often blocks the technically optimal solution. Competition exist not only between individuals, but between states. Todays leading industrial nations developed by shamelessly copying foreign technology, with little regard for patents. Had these states respected the rules which they are trying to impose on third world countries, this would have made their industrial development very difficult. This strategy is called “kicking away the ladder”: Use something to get to the top, then ensure that nobody else follows you using the same means. Much more could be said about patents and development, especially about patents on pharmaceutical innovations. However, it should already be clear that the trouble with the patent system is not limited to the appearance of the endearing creatures called patent trolls.

Forever Less One Day

In 1998, the United States once again extended copyright terms. In the debate around the Copyright Term Extension Act, it was noted that unlimited copyright terms would violate the US constitution, which explicitly permits the government to grant ‘limited’ copyright terms. Proponents of copyright extension went on record with the proposal that perhaps -  in compliance with the constitution – copyright terms should last ‘forever less one day’. Actually, this is not mathematically correct. However, it nicely shows the guiding principle behind ‘intellectual property’ legislation. (This figure from Wikipedia illustrates how monopoly has been extended in US law time and time again.) A similar movement has happened worldwide. By now, the signatories of the TRIPS accord have agreed to a minimum copyright term of 50 years following the death of the author. ‘Intellectual property’ law is governed by the logic of escalation: If protection of ‘intellectual property’ is good, then more protection must be better.

In contrast, several economists critical of the current regulations have tried to calculate optimal monopoly term lenghts: In a 2007 paper, Rufus Pollock argues for a copyright term of 14 years. He also advises that the term should become shorter over time, due to continually falling costs for production and distribution. Eckhard Höffner’s proposal distinguishes between publishers, who should be able to buy an exclusive right of 6 months duration, and authors, who should be able to sell such a right for 5 to 10 years. Boldrin and Levine propose a term of two years, assuming that certain negative effects on future creation do not occurr. In the end, they reject these assumptions and advocate abolishing copyright alltogether. Similarly, they calculate an optimum of 5-10 years of patent protection, under favorable assumptions which they later reject.

We can see that there is a marked difference between theory and reality. The continual extension of monopolies on immaterial goods is a prime example for what economists call rent-seeking. A rent-seeker derives profits not from creating and selling things of value, but by manipulating the regulatory environment, such as laws and other social frameworks. ‘Intellectual property’ has a clear tendency towards escalation, in the form of continual extension and toughening. In response to this, many people would probably agree that the current terms are counterproductive. Intellectual property, they would say, which is in principle a good idea, has gotten out of hand. I doubt that an idea which has consistently gotten out of hand is really that good, but let’s be optimistic: What if reform could succeed in curbing rent seeking – against the resistance of economic agents with plenty of money and power – and reduce monopoly terms to a length deemed healthy – say, 10, 5 or 2 years?

While this would certainly be a step in the right direction, a serious problem remains: Of course, it is easier to wait a few years for a Bittorrent download to become legal, but it is still a long time. Some people will not wait. And this would still be illegal. This means: If we are serious about enforcing monopolies on immaterial goods, we would have to scan all the acts of copying that take place in the vastness of digital space for legality, and prevent or punish them where necessary. In the worst case, we would get the same interference with our data networks, the same instruments of surveillance, censorship and coercion, which are on the agenda today – maybe blocking of websites, maybe data retention, maybe deep packet inspection violating network neutrality, maybe three-strikes internet bans. Such structures of surveillance, censorship and coercion should not exist. But: Monopolies on immaterial goods call for such structures. Activists for internet freedom will have to deal with such encroachments as long as the current notion of ‘intellectual property’ exists. The whole concept is profoundly at odds with free digital networks.

Marginal Cost Revolution

The internet changes the economics of immaterial goods drastically. Some have called this the marginal cost revolution. Marginal cost is the cost that one has to incurr to produce one additional unit of a product. If it does not matter for one’s total cost whether one produces one unit or ten units, then marginal cost of a unit is zero. If, however, one would have to build an additional factory to raise the number of units produced any further, then marginal cost of the additional units is very high. Keep in mind that marginal cost, the cost of an additional unit, is different from average cost, the total production cost divided by the number of units.

With the arrival of the printing press, copying a book became cheaper by orders of magnitude. But the cost of copying an distribution was still roughly proportional to the number of copies. Therefore, marginal cost was not zero. Aditionally, a significant investment was necessary before production could commence and anything could be earned. With digital technology and the internet, copies again became cheaper by orders of magnitude, and this time, marginal costs rapidly moved towards zero. Zero marginal cost is what makes the sharing of digital goods for free possible. The economy has changed, and new questions arise: Does it still make sense to run business models which are based on the sale of copies? Is it still a good idea to demand payment per copy, and otherwise exclude consumers?

Currently, this revolution applies mainly to knowledge and culture. Matters will get even more interesting when digitalization and the marginal cost revolution encroach on goods which were previously unaffected. Recently, the media was fond of asking whether in the near future we will download and print out our everyday objects. Whether the current hype around the 3D printer is justified or not, we may justly be curious to see where this development leads. In my view, the 3D printer is just one instance of a cheap manufacturing machine, which is able to produce material objects from digital blueprints. We are likely to see more of this kind in the future. Today, material production is accessible mainly to those who can summon up large amounts of capital. This might change in the future – similar to the change we have seen in the media sector. And when this happens, the question of ‘intellectual property’ will pose itself with even more urgency. I am looking forward to the time when product piracy, like filesharing, becomes a mass phenomenon. To be on the safe side, The Pirate Bay has recently opened a category named ‘Physibles’ on their site. While current torrents like ‘Nerf Gun’ and ‘Zuckerberg Head’ might be ‘only’ nerd toys, objects for everyday practical use will probably arrive sooner or later.

Setting a Course for Anti-Star Trek

At the end of such thoughts, there is the vision of a universal copying machine, which fabricates practically everything out of digital blueprints. This device is known as the replicator to Star Trek fans, who are very familiar with its workings: Captain Jean-Luc Picard oders “Tea, Earl Gray, hot”, and energy is converted, according to a digital blueprint, into the desired beverage. In the world of Star Trek, this universal copying machine as well as an inexhaustible source of energy are at humanity’s disposal. Combined, they form a technology of abundance. The marginal cost revolution has encompassed all sectors of the economy. Poverty, hunger and want on earth are a thing of the past. And more: Humanity has advanced, not only technologically, but also economically.

The economics of the future is somewhat different. You see, money doesn’t exist in the 24th century. The acquisition of wealth is no longer the driving force in our lives. We work to better ourselves, and the rest of humanity.

Many people’s first reaction to this quote is roughly like this: Well, this might be a nice utopia, but in reality, people are rarely of such noble disposition. But let’s ask ourselves the following question: Suppose we had the replicator and a source of energy in abundance. How else should the economy of such a civilization work? Wouldn’t it be somewhat absurd if Captain Picard had to insert a coin before he gets his tea? Such a society has largely overcome scarcity. It has created wealth for all and solved the problem of allocating material and immaterial goods. Maybe, this is not about noble disposition, but about common sense. In a post-scarcity economy, the constraints and structures which we consider natural are obsolete and have lost their justification – assuming they ever had one. However, it is clear that such structures have an enormous inertia. They may be becoming obsolete, but they will not concede this without a struggle.

It may be a long time before we arrive at anything similar to a replicator. Still, humanity constantly tries to overcome scarcity through technology. Once in a while we succeed: With the internet, we are quickly moving towards post-scarcity in the realm of immaterial goods. But instead of welcoming this development, some depict it as a problem, because it constitutes the crisis of powerful political and economomic structures, which will try to stop or shape the development to perpetuate themselves.

If we follow this trend to its logical conclusion, we arive at a very different vision of the future: Sociologist and blogger Peter Frase has called it ‘Anti-Star Trek’. In his excellent blog post, he asks and answers the question: Given the technological means of the Star Trek civilization, how could we maintain a society based on the old model – a society in which money, commodity exchange and wage labor are still the central elements? Technologically, the rules of the game have changed. Material scarcity is practically obsolete. With a replicator in every household, owning the means of production is not a privilege anymore, and traditional property relations become less relevant. How does one maintain the familiar structures of capitalism under such conditions? Well, if not through material property, then through immaterial property.

Intellectual property is the central institution in the world of Anti-Star Trek. If Captain Picard of Anti-Star Trek wants a cup of tea, he has to pay a license fee each time he replicates “Earl Gray, hot”, to the corporation that owns the intellectual property. Unless Captain Picard became a ‘pirate’, and started replicating without paying. A risky endeavour, since there is probably a three-strikes replicator ban law in place.

Peter Frase further develops the utopia of Anti-Star Trek: Since license fees are due everywhere, acquisition of wealth is still the driving force in life. Gainfull employment is a nessesity, but there is a major problem: With the replicator and extensive automation, human labor has been driven from material production almost entirely. Where are all the full time jobs supposed to come from? Which kind of employment is still viable under these conditions? A few proposals: Lawyers, specialized on intellectual property law, might easily find work, since companies will constantly sue each other and also the consumers for infringement. There might be job opportunities in marketing and advertising, because constantly demand has to be created for the newest proprietary digital formulas.And we can be sure that there will be plenty of work for security and surveillance personell. But in the end, all this will probably not be sufficient, and so the society of Anti-Star Trek has an inherent tedency towards mass unemployment and economic crisis. A bleak vision of the future – fortunately, it’s all just science fiction.

Back from the Future

To me, Anti-Star Trek appears to be the vision behind ACTA. Anti-Star Trek is the future into which certain political and economic elites will steer us if we leave them alone. An excursion into the realm of science fiction helps to understand what the intellectual property debate is truly about. It is not actually about whether we are allowed to watch the latest Hollywood movie without paying. It is essentially about the question: How does this society handle a technology of abundance? Are we going to waste the potential of this technology, so that business models based on artificial scarcity continue to be profitable? With the internet, we have an elegant solution for the problem of distributing immaterial goods at our disposal. For a fraction of the previous cost, we can make the knowledge of humanity available to every person in the world. And not only that: The internet enables completely new models of coordinating our work on knowledge, technology and culture.

Four Principles

When debating ‘intellectual property’, the question of concrete alternatives for remunerating intellectual work is asked almost instantly. It is an important question, but it is almost always asked too early. Therefore, I will be deliberately disappointing: I will not present an alternative model, even less one single alternative model to fit all. Instead, I would like to conclude with proposing four principles or core ideas. Viable alternative models should incorporate and enhance these ideas.

Free Networks, not Increased Control

Surveillance, censorship and repression for the protection of ‘intellectual property’ is inacceptable. The freedom of our new technical and social networks is non-negotiable. Instead, what has to be renegotiated is the notion of ‘intellectual property’ and the task of enabling creativity without destroying freedom.

Decentralization, not Concentration of Power

No powerful gatekeeper between consumers and producers of immaterial goods should arise, neither state central control nor private concentration in the media and technology sector, as we increasingly see today. Consumers and producers should be able to interact as directly as possible and have maximum freedom of choice.

Abundance (copia), not Artificial Scarcity

We should note that “copy” derives from copia, which is Latin for abundance. Indeed, the free copying of immaterial goods offers the opportunity for post-scarcity conditions. Artificial scarcity of knowledge, culture and technology does not serve the common good and is ethically questionable. Where abundance is technically possible, it should be allowed.

Induction, not Incentives

We should start to conceptualize human creative action through the logic of induction, instead of the narrow economistic logic of incentives.

Let me conclude with an explanation of this last principle.

Intellectual Induction

The idea of induction comes from Eben Moglen of the Software Freedom Law Center, who writes that creativity in times of the internet works much like electromagnetic induction: If you move a conductor through a magnetic field, a current flows in it. The exact relation is described by Faraday’s law of induction. Moglen has his own version:

If you wrap the Internet around every person on the planet and spin the planet, software flows in the network.

– Moglen’s Metaphorical Corollary to Faraday’s Law

Under the term ‘software’, Moglen summarizes everything we called ‘immaterial goods’ so far. Creative work, Moglen writes, is “an emergent property of connected human minds that they create things for one another’s pleasure and to conquer their uneasy sense of being too alone.” And induction works so much better, the lower the resistance of the wire. Resistance is described by Ohm’s Law, and Moglen has his version of this law, too:

The resistance of the network is directly proportional to the field strength of the “intellectual property” system.

– Moglen’s Metaphorical Corollary to Ohm’s Law

So in this debate about human creativity and ingenuity, we have on the one side the logic of incentives, which reads as follows: Humans do creative work when financial incentives are set for them. Lack of these incentives results in a shortage. To ensure the production of immaterial goods, strong protection of ‘intellectual property’ is necessary.

On the other side, we find the logic of induction: The free flow of information promots (induces) innovative and creative work, better than any top-down system of incentives. The more people have access to the knowledge of the world, the more they can contribute to it. The lower the resistance to communication and sharing, the more efficient the production of immaterial goods.