Attendees of the Foresight Spring 2000 Gathering should also take a look at

Are "Intellectual Property Rights" Justified?

v. 1.1
available at
Markus Krummenacker


Economic activity is based increasingly on information and intellectual products. Currently, legal restrictions exist that limit the free flow and re-use of information. Recently, these restrictions, in form of copyright and patents, have become dramatically more severe, set by many ugly legal precedents in costly lawsuits. The situation will deteriorate further, if the trends are not reversed, and will take a heavy toll on technology development, contrary to the rationale for implementing these legal restrictions in the first place. My opinion is that most of these government-enforced knowledge-monopolies need to disappear, and I will try to present the case why this would be beneficial. I will outline some economic alternatives, which do not need the enforcement of such severe restrictions on our freedom, which only hinder technological progress. I feel that it is high time for action that can change the current system. Otherwise, if we continue like this and don't fight back for our freedom, the knowledge-intense future will not look too rosy and will develop at a well-retarded pace, in stark contrast to Extropian interests and ideals. While this article here does not cover all that needs to be said, it is at least a small start.


First of all, I would like to acknowledge my appreciation for Tom Palmer, who has written two excellent papers [Pal89] [Pal90] on exactly this topic, which were kindly brought to my attention by Max More. Thank you. To some extent, I am wondering why I am undertaking my own effort here, as I essentially agree with all of Palmer's conclusions. However, I believe the topic is sufficiently important to warrant much more discussion, and finally, action.
I feared that the topic "Intellectual Property Rights" would have not received enough discussion at the EXTRO-2 conference, unless I would do something myself. I also have to admit that one reason for pursuing this presentation is the increasingly vocal presence of "Intellectual Property Right" lawyers, and the seeming lack of an audible opposition. The utterances of some of these lawyers and the direction in which they are trying to push society makes me very angry, and so in part this is my effort to defend my freedom against the outrageous demands from a particular sector of the legal community.
What I will do in the following:
I will give a quick outline of what copyrights and patents are, and what their historical origin is. Then I will proceed to argue why these institutions are not a good idea, and why humanity should get rid of them again as soon as possible. I will then try to sketch out a view of an alternative information economy, flourishing without the burden of copyrights and patents. I will also quickly mention the League for Programming Freedom (LPF), the only organization I currently know of, which is openly opposing at least a well-defined subdomain of these restrictive institutions.
What is currently understood by "Intellectual Property Rights"?
In the USA, close to the end of this millennium, four different flavors of legal frameworks are commonly lumped together under the term "Intellectual Property Rights". They are:
< copyright
< patents
< trademarks
< trade secret
Upon closer examination, one will notice that these flavors divide into two very different categories. Copyright and patents are in one, and they will be examined in detail in the remainder of this discussion. These are two clearly non-contractual institutions, enforced against parties who never have given their consent towards accepting any particular obligations.
In the other category we have trade secret, which in principle is unobtrusive and based on contract law. Simply put, it involves multiple parties voluntarily agreeing to keep crucial information in secret, and it is very important in an industrial context.
The remaining flavor, trademarks, is somewhere in between, in my opinion. It is a bit of a grey zone, and seems currently in flux. On one hand, it is desirable for companies and products to bear unique labels to avoid confusion in the name space. On the other hand, there has been quite some abuse with over-broad claims, and it is one of the so-called "rights" which can aggressively interfere with other people's freedom. Elsewhere at this EXTRO-2 conference, Tom Morrow is devoting a presentation to this entire topic. I will not comment on it further.
Copyright is the means for prohibiting unauthorized production of literal copies of published works. It is very easy to obtain copyright protection. The procedure used to be simply filing a form and paying a small administrative fee. Nowadays, it is even easier. Merely fixing a work in a tangible form is enough to invoke copyright protection, and it lasts for on the order of fifty years and more. To balance this extremely long duration and the ease by which it is obtained, copyright does not cover any abstract ideas or schemes that may appear in the content of a published work. It is limited to covering only their specific form of literal expression as the published work.
Patents, on the other hand, are much more powerful, and can prevent anybody from using an idea, manufacturing procedure, or invention, unless prior authorization by the patent holder is obtained. Later independent re-invention or ignorance regarding the existence of patents are not good excuses under the current system. The patents can be enforced regardless. These are very powerful "rights" conferred to a patent holder. To balance the sweeping powers granted, a much more formal procedure has to be followed to obtain a patent, which usually costs minimally $10,000, and the patent duration is temporally restricted to about twenty years. To ensure that such powerful protection cannot be granted for just about anything, a qualifying patent application needs to fulfill a number of tests, set up by the patent office. An idea needs to be novel, useful, and cannot be "obvious ... to a person having ordinary skill in the art", in order to receive patent protection. Needless to say that these tests are subject to differing interpretations, and have received substantial heated debate. The rather weak formulation of the obviousness criterion has led to flood of trivial and broad patents. Law suits precipitate regularly by attempts trying to stretch the interpretation as far as it will go.

Historical Origins

It seems that nowadays the romantic notion is very widespread and in-grained in the general population, that the creators of intellectual products somehow deserve to be rewarded by society for their special efforts. Furthermore, in order to ensure that this reward can be collected, it seems to be justifiable to rely on the machinery of copyright and patent protection, mechanisms which intrinsically rely on the presence of an all-powerful government, which can enforce these institutions. Surprisingly, there even seems to be a branch of libertarianism that seems to strongly promote and favor such "Intellectual Property Rights". This is quite a puzzle to me, as this is in direct contradiction to much more basic and fundamental rights, as Tom Palmer has already argued in detail [Pal90], and which, by the way, is quite obvious, in my opinion.
However, if this popular romantic notion is analyzed in any historic depth, it evaporates rather quickly, and the true and unsavory origin of these institutions surfaces. The U.S. system of copyrights and patents goes back to the English system, which in turn is rooted in old practices of the kingdom. In mediaeval times, the English Crown granted patents in order to raise funds and to secure control over industries that were considered to be of political importance. Copyright was granted as a measure for ensuring government control over the printing press, in a time of great religious and political dissent. The historical root for "Intellectual Property Rights" is monopoly privilege and censorship.
The grants of monopoly covered a variety of industries, including everyday items such as production of salt and leather. The processes protected needed not be novel. Furthermore, there was only a weak differentiation between production monopolies and import franchises. This shows the purely political origin of these monopolies. Protecting the interests of inventors and other intellectual workers seems to not have been an important concern of the kingdom.
Understandably, the restrictions of this pervasive monopoly system eventually became so intolerably broad and burdensome that they resulted in widespread dissatisfaction and unrest in the population. This situation finally led to the prohibition of the old system, a change formulated in the "Statute of Monopolies" of 1624. However, there remained notable exceptions, activities over which the Crown continued to exert control, claiming national security concerns as an excuse. Among these domains were production of munitions, gunpowder, saltpeter, glass, alum, and the printing press. It is particularly noteworthy that the authorities continued to censor religious and political dissenters.
The current patent system, and more broadly "Intellectual Property Rights" in general, are remnants of monopoly privilege. Rather than spontaneously evolving to meet new needs, as real property rights do, they go back to a deliberate creation of scarcity through heavy-handed state action. Machlup and Penrose [MacPen50] make the following, illuminating point:
Those who started using the word property in connection with inventions had a very definite purpose in mind: they wanted to substitute a word with a respectable connotation, 'property', for a word that had an unpleasant ring, 'privilege'.
Copyright likewise emerged from the exercise of state power, rather than from a concern for the rights of authors. Barbara Ringer has commented in the following manner on the confusion about the real origin of copyright [Rin76]:
The pro-copyright theologians argue that copyright as a natural property right emerged from the mists of the common law and took definite form as the result of the invention of the printing press and the increase in potential and actual piracy after 1450. They dismiss the historical ties between copyright and the Crown's grants of printing monopolies, its efforts to suppress heretical or seditious writing, and to exercise censorship control over all publications. This line of argument tends to infuriate the anti-copyright scholars who point out that the first copyright statute in history, the Statute of Anne of 1710, was a direct outgrowth of an elaborate series of monopoly grants, Star Chamber decrees, licensing acts, and a system involving mandatory registration of titles with the Stationers' Company.
This was a time of new technologies; the printing press was relatively new, and it is clear that the powers in place were threatened by the fast technological change. An additional goal was suppression of Protestantism, which was furthered by swift transmission of memes through the new medium. In 1637, the Company of Stationers was authorized by a Star Chamber decree to seize and destroy any unauthorized books and printing presses. However in 1641, the Star Chamber was finally abolished, and there was a short period of freedom. Lots of interesting books were probably printed during the temporary lapse of control. The first official and significant mentioning of rights for actual authors, as opposed to merely the Crown and obedient printers, came shortly thereafter, when the Company of Stationers was facing all this unregulated competition. So they presented a petition to the parliament for renewal of their monopoly privileges. More weight was now being placed on the compensation that authors, as well as publishers, should obtain for their uniquely valuable efforts. Thus as government control faded away somewhat, we see a shift in the focus for the justification of copyrights. In 1710, the Statute of Anne was passed, initiating an additional shift of emphasis from the rights of publishers towards the rights of authors. Publishers saw it as a tactical advantage to push for authors' rights as well as for their own. It is from here where the myths emerged that copyright originated to secure authors' rights. One of the arguments presented, even back in the those days, was that a copyright system is needed as an incentive to produce something valuable that otherwise would be a public good, which would thus be supposedly under-produced on a free market.
In the U.S. there was a similar tendency: copyright, at first, only covered the rights of publishers, not authors. Publishers, of course, had a vested interest in copyright and had enough power to lobby for obtaining these rights and restrictions. It seems like authors were only added later as an afterthought to make it sound better. In the U.S. constitution, it is made clear that originators of intellectual products have no natural rights per se. Article I, Section 8, Clause 8 of the U.S. Constitution states:
"The Congress shall have power ...To promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries;..."
As the granting of such exclusive rights was instantiated for a purely political purpose, an analysis should be made of whether or not enforcing these restrictive laws indeed has benefited society over all (not just some special interest parties), as was intended by the above quote from the U.S. Constitution.

What are the Problems?

The key problems with these "Intellectual Property Right" concepts have already been uncovered and examined by Tom Palmer [Pal89][Pal90]. There are at least three glaring types of problems:

Collision with Actual Property Rights

As we have seen, copyrights and patents cannot be considered intrinsic, "natural" rights which people have possessed from time immemorial. On the contrary, they are very artificial constructs, erected by powerful governments for very particular political purposes. However, these artificial "rights" happen to collide head-on with more fundamental basic rights, namely actual property rights.
If I have bought a machine, an appliance, a book, or a floppy disk that contains some piece of software, I now own it, and it has become my property, because I paid for it. I should have the freedom to do with it whatever I please, including using it for its intended purpose, storing it untouched in the cellar, reselling it, giving it to somebody else, throwing it away, destroying it, making copies if it, modifying it, or breaking it open to analyze its internal workings. With copyright protection, I am prevented from doing some of these things. Although I own the object I bought, I am being kept on a leash, with a remote power restraining my freedom over my justly acquired property. This situation is similar in absurdity as if a hammer bought in a hardware store were tied to the restriction that it would only be legal to use on a particular brand of nails, but illegal for any other brand or purpose. (That this is not common practice today just demonstrates that the hammer manufacturing industry was not very sophisticated with regard to lobbying the legislators !)
With patents, it is even worse. Nobody is forced to buy hammers or books. You might be able to get along without them, and there is always the possibility of crafting your own. However, patents restrain supposedly free individuals precisely at their most important resource: the free use of their brain power. People are not allowed to harvest the fruits of their own creativity, intellectual efforts and inventions, if such intellectual products happen to have been patented previously by somebody else.
Most people who try to solve problems, e.g. in order to design and engineer a product, do not do so by consulting a patent database, to see if somebody else might have already found a solution for their problem, which they would only need to license. Instead, most engineers will sit down, think about the problem, and develop a workable solution on their own. It is only later, in retrospect, when they are sued, that they find out that somebody has already come up with the same solution as well.
If real property rights mean anything at all, then people should especially have the right to use the very body and brain they own, to solve problems, create products, and subsequently sell them, unrestrained by monopoly powers which some other entities are trying to exercise.
Many simultaneously thinking humans exist on this planet. It should come as no surprise that the same ideas will present themselves to different minds, sometimes even almost at the same time. That one of these persons can obtain a license to block all other co-inventors from using their own conclusions, just by virtue of having gone to the patent office one day earlier, contradicts the principle "freedom of thought" directly, and is outrageous.

Creation of Artificial Scarcity is Obviously Unreasonable

Actual property rights are the means by which scarce resources are being managed, such that a compromise can be worked out which is as optimal as possible, given the existing constraints. This applies to things such as usage of land and to the distribution of tangible goods, which are complicated to manufacture and thus have a non-zero price, and are not as freely available as the air that we breath.
However, the current system of so-called "Intellectual Property Rights" tries to enforce artificial barriers upon the free flow and use of information, thus creating scarcity where it is most damaging to all of humanity and where a rich bounty of wealth could exist instead. These barriers can only be upheld by a rigorous legal system, under application of draconian enforcement measures. We all know of the difficulty of preventing the free flow of information, and we all have heard the cries for help from mighty publishing empires, alleging that "pirates" are supposedly stealing large chunks of their "rightfully deserved" revenues. The difficulty of enforcing these "rights" shows how unnatural and artificial they are.
The most obvious argument against upholding such barriers is that transfer of information can not be called theft, as is often loudly proclaimed. If somebody copies a piece of information or idea that I hold, then I have not lost it. I still have it, I am able to derive the same utility from it, and in addition, somebody else is able to now benefit from it too. As the cost of copying is so low and still going down, it would be foolish to prohibit the obvious ease of information transfer. It is essentially suicidal to establish barriers here, instead of utilizing the great technological capabilities to the fullest extent. We heard of the requirement that "spoilers" be built into Digital Audio Tape (DAT) machines. This is just perverse. The cost of copying is so low, that the dispersal of intellectual products can be considered to be very close to free, and creating an artificial scarcity here is a very bad idea.
Note that the creation of intellectual products does of course carry a cost, which is often significant. Ways to recuperate such an investment will be addressed later. However, once the information has been created, the widest possible use should be encouraged, not prohibited. Every intellectual product that reaches only half its potential audience has been half wasted.
As a side remark, one can observe that artificial scarcity has been often created by vested interest groups before, in other contexts. This does not make it any better, of course. The business of setting up arbitrary, inconveniencing, and artificial barriers is an activity that invites many parasites, and many governments have been rather good at such things. It has happened more than once in history, that a city-state was founded right at a strategic bottle-neck, such as a naturally destined river-crossing, and has set up an enforced system to collect a bridge toll, without which humanity arguably would have been better off. Control of import and export, and slapping toll on goods transferred over national borders, is another favorite activity of governments, no doubt justifiable by various "worthy" political pseudo reasons.
Something that has not happened yet, but has been proposed occasionally, is that programmers ought to be licensed to be able to practice their trade. Their product is of such importance, that it can not possibly be left to the hands of hobbyists. Just think of the safety implications and the horrible accidents that could happen due to software malfunctioning in a flight control system or nuclear power plant! That the possibility of forcibly restricting programming activities to only a government-licensed elite is not entirely absurd, is demonstrated by the fact that at least two job categories already require such licenses, namely the medical and law professions. It might well be possible to recruit many vocal proponents who will argue how the higher salaries available for this elite will induce more people to become qualified and licensed programmers, thus benefiting society enormously. As we see from this (still) hypothetical and absurd example, by creating artificial scarcity where none would be necessary, more harm can be done than good.

The real "Job" of Government

One key problem is the wide-spread perception that governments should proactively do "good" and "useful" things, to benefit society. This is very popular, and politicians try to always cast whatever they happen to be doing in this light. So it has been argued that governments should pursue policies which foster the economic strength and competitiveness of their nation. This is usually accomplished by enacting fairly arbitrary decisions on which activities to encourage and which to prohibit, instead of just having faith that a free market economy will flourish on its own, without government control.
Unfortunately, almost all government interventions have undesired side-effects, which are often difficult to foresee, and often end up being worse than the "problem" that was supposed to be fixed in the first place.
Regarding "Intellectual Property Rights", the usual justification for promoting this system is that companies supposedly need a specially protected time span during which they can recuperate their investment for developing a new product. Thus, with this system, companies ought to have an incentive to innovate more than they would otherwise. However, is this really true?
An analysis ought to have been made of the trade-off inherent in such legislation. As copyrights and patent protection involve such a severe restriction of public freedom, they are only justifiable if it can be conclusively proven that instantiating such drastic measures does more good than harm. Otherwise, even if the effect turns out to be just neutral and not damaging, one might as well live without all the bureaucracy. The proof that this legislation is beneficial to the general public has not yet been provided. It is certainly quite difficult to perform such an analysis, as we have no experimental control available, i.e. a technology-intense society without any such restrictions. There have been some studies on this question, e.g. [Man86], which have found that there is a very mixed reception of patents in the industry.
There do however exist some vocal companies and their lawyers, which proclaim that copyrights and patents are absolutely essential for their business. However, as the government's purpose is not to serve special interest groups, it ought to evaluate whether all of the public will be better off on the whole, not just certain industries or companies.
A common claim advanced to promote "Intellectual Property Rights" is the necessity to encourage creativity. This is also given as the justification in the constitution of the USA. Quite possibly, once upon a time, this might have made sense, in a time when technological progress was much slower, and might have needed stimulation. However nowadays, progress is so rapid that it does not need further encouragement by such restrictive measures.
On the contrary, now the really negative side-effects are kicking in, with the effect of slowing down innovation and progress. As modern technologies are so densely interlocked and mutually co-dependent, it is now often the case that progress in entire fields can be blocked by crucially important patents. The duration time of about twenty years is now much too long, because many technology generations are becoming obsolete within a few years. Many lawsuits are precipitating leading to a sour and aggressive climate.
Nowhere is this more apparent than in the field of software. Everybody has heard of the important public key encryption patents that are locked up in a scandal and several law suits, blocking progress for everybody. These patents resulted from tax payer funded research performed at universities, and now the public is not allowed to use what they have paid for. I consider this to be quite outrageous. Software is an especially rapid-moving field of technology, and so the clash with something as inadequate as the patent system is particularly noticeable. Until the early 1980s, software patents essentially did not exist, and the software industry did just fine in the preceding two decades, and did not seem to need any encouragement at all. It grew wildly on its own. This quite possibly is one of the best illustrations of how an industry could once upon a time get along fine without patents. Now that they have been introduced, there is a big mess.
There is one organization, the League for Programming Freedom [LPF], which advocates abolishing software patents and over-broad extension of copyright to interfaces. These legal developments are endangering the freedom of programmers to write the best programs they know how, entangling them in weird legal restrictions instead. I encourage people to join the LPF. Without more coordinated grass roots activity, programmers will increasingly fall victim to the lawyers, who are pushing their cause while making a living, whereas most programmers have to defend their freedom in their spare time.
So what is the job of the government supposed to be? Encouraging specific outcomes, such as promoting economic strength and thereby installing incentives to increase creativity through "Intellectual Property Rights" is very prone to backfiring. Manipulating the economy is especially problematic as nobody has a clue nor the necessary data to demonstrate clearly what the effects of such measures will be, and whether they will be beneficial to the public, all things considered. The issues of fostering a healthy economy are so complex that it is quite preposterous to claim that such severely freedom-restricting measures as patents, for example, would be actually increasing wealth. On the contrary, such measures sound rather absurd and the negative side effects are very visible.
Instead, the real job of the government should be to merely provide a minimalist framework of justice, within which the economy can unfold freely. Nothing more is needed. Technological progress is such a lucrative topic to pursue, it will develop on its own, unrestricted. Creative new ways to make money are and will be invented again, every time when entirely new technologies have changed the landscape, and have displaced old and outdated technologies and business models. As we have seen, current "Intellectual Property Rights" are very unjust and unfair, directly interfering with real property rights. If the government wants to do something beneficial, it should remove this injustice completely. However, because such a reasonable action cannot be expected to occur automatically in a government driven by special interest lobbying by lawyers, this needs the action and broad support of the public, to bring about the change for a better system.

In Whose Interest is the Current System?

If there are so many problems with "Intellectual Property Rights", it is amazing that supposedly free humans have allowed the establishment of such a system in the first place. Some of the reasons have been given in the discussion of the historic origins. More important today is the question how such a system can stay alive. There must be vested interests at work, which actively maintain such an unjust system. Uncovering these mechanisms is important if we want to change the system.
I will advance my personal hypothesis here, and I hope it does not sound too paranoid. I will single out one particular profession, which I believe is largely responsible for the mess. It may sound as if this profession was actively conspiring against the rest of us. However, probably a substantial fraction of this activity is usually not explicitly or consciously articulated. On the other hand, I have heard reckless and irresponsible statements from some representatives of this profession, which only confirmed my suspicion. At the same time, I will try to describe the system-inherent problems with patents which make them economically unattractive, in addition to being unjust.
As far as I can tell, the only party in this copyright and patent game, which consistently benefits from the current situation, are the "Intellectual Property" lawyers. To begin with, such lawyers are actively trying to promote their "services", strongly encouraging companies to patent as much as they possibly can, arguing that this is necessary because everybody else is doing the same thing. This is easily extended to a full scale scare tactic, painting dark pictures of other companies plastering the landscape with patents, disabling technology access for the client company, unless the client launches a pre-emptive strike first. It is also certainly the case that whenever a company or inventor asks a lawyer whether one of their inventions might be patentable, the lawyer is of course never going to respond "No, it is not." The only way lawyers get business and can charge hourly rates is when they accept the "invention" claims, no matter how dubious and trivial. It is even better for the lawyer if it is quite difficult to sneak the patent through the patent office, because as this process drags on, more hours can be charged to the client. Because the cost for filing a patent is not usually prohibitive, this first step is often relatively easy to take for a business.
However, once the patent has been successfully filed, the worries are far from over. On the contrary, then the problems just have started. Brochures of law firms explain the next steps. Getting a patent only makes sense if the intention is to block other people from using the invention. This means that the market needs to be policed for potential infringers, which need to be reprimanded, and sued if they do not respond favourably. It is necessary to constantly pursue this policing and to relentlessly enforce the patent, because otherwise, the validity of the claim could be lost. This policing activity is also still fairly low cost, if one does not mind regular legal bills.
The big problem arises when an alleged infringer does not agree to stop using a technology, and is not willing to enter a licensing agreement. It is then necessary to sue the infringer. This situation is almost certainly reached automatically at some point. Littering the landscape with patents has as a necessary consequence the precipitation of many law suits. After the lawyers have carefully prepared the ground with landmines, they can relish a rich harvest. Needless to say that getting sucked into such an ordeal is extremely expensive, for both sides of the law suit. But again, the only party here that will consistently and always be paid fat fees are the lawyers. Everybody else pays their bills.
Duane Northcutt has remarked [personal communication, 1995] that "... a unique situation makes this possible -- the fact that lawyers are the only group that provide both supply and demand for a service. To my way of thinking, this allows this positive-feedback effect to take place, where the very presence of lawyers demands additional lawyers to be there, and so on, without any counterbalancing force to limit it." On top of that, one can observe that they shape the law too. No wonder is the legal scene totally out of control.
Does the current scheme make much sense for companies, and for the economy as a whole ?

Individual Companies

In technology companies, management has a number of options available to build a healthy position in the market place. Given limitations in the resources, trade-off decisions have to be made regarding allocation of money, so that the best results are yielded, in terms of earnings. An important investment is in research and development, to develop new technologies and products. Constant innovation is a necessity in high tech companies.
When that effort has successfully yielded valuable results, the question arises whether it is worthwhile to patent them, in order to exclude other people from using or reinventing the same techniques. This is commonly called "protecting the investment in research", to gain an unfair advantage over the competition. An alternative option would be to not bother with all this legal stuff, and to ensure by other means that the product can obtain a large market share. This would involve a combination of rapid product development to ensure being first to market, creating a really well-done and superior product, and using well-thought out marketing strategies to satisfy the needs of a large potential customer base.
Which of these two approaches makes more sense ?
The legalese way would be to try to corner the field by filing as many patents as one possibly can, carpet-bombing with claims as broad as one can get away with. This requires a substantial expenditure of legal fees. Afterwards, to get a return on this "investment" in patents, it will be necessary to recklessly pursue potential infringers. This will tie up many key researchers in court rooms (and in helping to write patent applications in the first place), instead of letting them pursue what they are best at, namely research and development.
Companies should stop wasting precious money on patent attorneys, and instead use the resources to make a technically superior product and to build a stronger presence in the market. To stake out a firm position early in the market, it is not necessary to have patents; on the contrary, that is a drain of valuable resources better invested in a more fruit-bearing fashion. Innovate, don't litigate ! To protect your original ideas as prior art, the best way is to openly publish them in research journals. This additionally is terrific advertisement, if you can point out that your company and products are at the forefront of innovative research, as opposed to being backed mainly by a lot of legal restrictions that hinder the users in every conceivable fashion. Note that a few key technical innovations are not going to be the only or even major part of your product. So much work is necessary to get all the little details right, to make the product intuitive and easy to use, to have good customer service, etc. Publishing the main key innovations in no way "gives away" your advantage if you give care to all the other implementation and business issues, which are necessary anyway for a successful product.

The Whole Economy

If the patent system were abolished, in the long term, the following beneficial effect would occur. Interested parties will pay individuals or teams to solve particular problems, because they need the solution for a product or the like. Because of the increased accessibility and fluidity of information that the lifting of the restrictions would imply, this would mean essentially to solve the problem once and for all, and not only for funder's own (monetary) benefit, but for all of humanity. This makes much more efficient use of the capital of brains that we have available on this planet. There are too many important problems that are in desperate need of good solutions that it is utterly wasteful to dabble around aimlessly by repeating the same, already solved work. This repetition is mandated if one has to work around patents in order not to infringe upon them.
This scenario will possibly provoke a response similar in flavor to the exclamations and fears of workers in manufacturing, that their jobs become useless and get replaced by automated machinery, which would lead to wide-spread unemployment. Yet nowadays, in the age of fully automated mass-production, many more jobs have been created in other fields under healthier working conditions. It is certainly true that many software providers may get laid off if their useless service of reinventing the wheel over and over is no longer needed. But it will free their minds to be put to use for working on yet unsolved problems. And the overall benefit to humanity will more than outweigh the temporary friction.
Today's protectionist situation feels like over-grazing the same old grasslands to squeeze out that last little juice-droplet while innovating as little as possible. This mindset is rather counter-productive and results in a stagnation of progress, despite pressing global problems. What is needed more are incentives to discover new grass-lands, to search for pathways where whole new and fertile territories open up, that contain a lot of exciting possibilities. These opportunities are constantly present in front of our noses, just waiting to be discovered, if we are actually on the lookout. There is a long way to go until we have reached the final, ultimate, and non-improvable limits to complexity (which would render us all terminally jobless :-).
For a number of reasons, patents benefit mainly large companies with huge patent portfolios. These corporations actively use them to build up "high barriers to entry" for potential competitors. This affects small companies much more negatively than larger companies. Small companies are almost certain to require licensing somebody else's patents, which adds complications to the tricky business of starting a new company in the first place. This reduces significant and revolutionary innovation substantially, which usually happens at small start-up companies. This is one of the reasons why the government's patent system does not achieve its intended goal of truly increasing innovation.
So, in conclusion, whatever resources are drained off by the "Intellectual Property" system, which could have been put to better use for research, development, and marketing, do not produce useful results and products, and are lost and wasted, not contributing constructively to the wealth of humanity.
How is the current system being reinforced ? The only party that really benefits from the current situation has a strong incentive to maintain it. And so lawyers are vocally promoting their views. For everybody else, the issue is a nuisance, and vocally defending freedom takes away precious time from real work, just to fend off something unpleasant. If one takes a look at who writes the legal columns in computer magazines, it is always lawyers, for whom this is good advertisement opportunity, and they never question the validity of the current "Intellectual Property" system.

An Alternative Information Economy

One of the main, deeply disconcerting features of the current system are the broad restrictions placed on third parties (besides producers and customers), which have never directly entered into any sort of an agreement with the primary producer. This is both unfair and is preventing a free economy to work in its most efficient and innovative mode.
The solution thus is to get rid of the sweeping "Intellectual Property Rights" in current use, and to revert to a more traditional way of doing business, relying more on contracts between mutually consenting parties. This can take a variety of different forms, from a system of intellectual product distribution very similar in appearance to the one we have today, all the way to very different and unconventional models. This change will also open up experimentation with possibly much more attractive business models, which have not yet been thought of.
Much of what will follow will take software distribution as an example, because its relative importance in the economy will only grow in the future, as we progress to a world where general purpose agile manufacturing is becoming more wide-spread, and where progress in product design and design capabilities will make the real difference. I will consider manufacturing recipes for products to be software in the widest sense.
Currently, most software is distributed to end customers in shrink-wrapped boxes, with associated shrink-wrap licenses. I believe they have not yet been tested in court, but quite likely such licenses would not be enforceable anyway, and they are a farce. One party, the customer, never signs a contract, and so a valid contract is never established. Instead, and because these shrink-wrap licenses are not particularly binding, software publishers today are using the usual scare tactics by demanding draconian enforcement measures, as is embodied by the Software Publisher's Association (SPA), which has launched witch hunts to eradicate "illicit copying". Instead of bashing the principle of making copies, and making people feel guilty when they do copy, one should encourage making free copies of anything that can be copied. One should never cripple technological capabilities. On the contrary, one should make use of them to the fullest extent.
Software publishers that would like to retain the current system of selling boxed software, would need to adapt and make the software licenses more directly enforceable, if copyright restrictions were dropped. This means essentially that producers and customers both would need to sign a binding contract to transfer a software license. This is a bit more cumbersome, but then at least all parties are made explicitly aware of what is going on and what is at stake, instead of the murky implicit assumptions for which there is no real legal handle for enforcement, thus encouraging a guerrilla warfare against users and other bystanders. In such a contract, it could be specified that the user will obtain the benefit of using the software, if they are responsible for making sure that no copies are passed on. Any other kinds of restrictions might also be specified in such contracts, but both parties need to agree. When a customer violates a contract by passing on a copy, then the producer really does have a handle to enforce their agreed-to rights relentlessly. Presumably, the software sold under such contracts will have unique signatures, making copies traceable to whoever leaked them. However, any other people out there, who have never signed such a contract, should be free to copy whatever they can get their hands on. Even if they get a piece of software for which other people have entered a contract agreement, they as a third parties should be able to freely copy it, without getting prosecuted. Only the person bound by contract, who originally leaked a copy, should be prosecutable, but in that case even more so. Quite possibly, this kind of a system would mainly be used to distribute very expensive high-end software, where the cost is more of a dominant factor than the legal overhead.
Different variations of this still very classical distribution scheme can be implemented. A significant variation is distribution of information products over the Internet. With strong end-to-end encryption, monetary transactions and delivery of software modules are becoming possible. This system seems to be best suited for selling many small modules that are priced low, so that the damage done by somebody distributing the software to non-paying persons is relatively small. Part of the electronic transaction could include a simple "contract" that disallows such further distribution, and if a customer violates the agreement, the producer can cut off that customer from obtaining future products.
For a producer, an important part of the overall strategy will become building up the image of a technology leader, as opposed to some entity that is trailing behind by making cheap copies of other companies' products, without adding anything interesting new. Many customers like to support the innovators, if the price is not too unreasonably high. An additional service that producers are selling along with their software is the right for paying customers to receive technical support, patches for bug fixes, and frequent updates.
Another more radical option would be an Agorics [MilDre88] approach. Instead of selling a program, an agoric system would charge for usage of a program as a service. This would allow a much more fine grained assessment of what actual value and utility was obtained by the customer while using the software for a given task, without having to pay for the bundle deal that is common nowadays. Many of the features in bundled software might not be needed by many customers, and yet they have to pay for them currently. Agoric systems would resemble more a consulting service. In order to solve a problem, a piece of software could be rented or "hired" for some amount of time. Specialized compute servers could even run compute-intensive jobs, and the price could be calculated by also taking into account how many CPU cycles, and other resources such as memory, were consumed. This could give rise to an exciting new information-economy. Initially, human service providers could write the software that customers use, and as time goes on, evolving agoric systems could be blended smoothly with intelligent machinery that increasingly will be able to provide solutions to design problems without much human assistance.
An important type of intellectual product is the timely delivery of information, such as news, weather reports, and stock trading information. One of the key values of this type of product, or rather service, is speed. Such information decays relatively rapidly with time, so that there is often not much of a point of copyrighting it. In order to make money with this type of service, it is important for a provider to build up a stable and large base of subscribing customers, who would like to use the service on a regular basis.
The argument can be brought forward that certain information, like accurate descriptions in an encyclopedium, are timeless and of continued value, thus rendering them not very protectable through a time-depreciation mechanism. It seems from the physics of information distribution, that there just are areas of activity which do not lend themselves for doing business in the usual sense, and which are only really the domain of charity. It is unreasonable to enforce by draconian measures sufficient barriers in an area that does not lend itself easily to such a treatment, only to be able to put up business transactions which benefit merely a small minority and impede with the freedom and convenience of the majority of the public. On these grounds, one could easily propose other non-sensical measures, such as declaring that the charitable donation of used clothing to the needy should be forbidden, because it is "anti-business". After all, every piece of clothing donated, instead of thrown away, "robs" companies the sale of an additional new piece.
Of increasing importance are very different schemes for making money with intellectual products. It is becoming common practice nowadays to launch new software products by providing free copies of the program, possibly in an early beta test version. Often, full-fledged versions are available as well. In this case, the freely offered product usually serves as an attention getter for additional services that a producer would like to sell, such as consulting, or additional, more complex software systems. Free software can serve excellently as advertising for the company producing it. Many more interesting and new ways of making money with intellectual products are possible, without needing restrictive copyrights and patents.

What to do?

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


[LPF] see
[MacPen50] F. Machlup and E. Penrose: "The Patent Controversy in the Nineteenth Century." J. Econ. Hist. 10 (1950), p.1, 16 ???
[Man86] E. Mansfield: "Patents and innovation: An Empirical Study." Management Science 32 (1986), p.173-181
[MilDre88] M. S. Miller and K. E. Drexler: "Markets and Computation: Agoric Open Systems." The Ecology of Computation (1988), ed. by Bernardo Huberman, Elsevier Science Publishers/North-Holland
[Pal89] T. G. Palmer: "Intellectual Property: A Non-Posnerian Law and Economics Approach." Hamline Law Review 12 (1989), p.261-304
[Pal90] T. G. Palmer: "Are Patents and Copyrights Morally Justified ? The Philosophy of Property Rights and Ideal Objects." Harvard Journal of Law & Public Policy 13 (1990), p.817-865
[Rin76] B. Ringer: "The Demonology of Copyright." in "Perspectives on Publishing" edited by P. Altbach and S. McVey (1976), p.38 ???
Bureaucratic formalities
This article is (c) copyrighted 1995, which means that you are
explicitly in possession of the right to make as many copies of it as
you like, in any medium you desire, provided you copy it in its
entirety, including this notice. Quoting from the article is also allowed
if it is not mis-represented out of context, and if proper attribution
and detailed information concerning the source is included, which
will easily enable the retrieval of this full text.
If you believe that the issue of retaining personal freedom and
straightening out the current "Intellectual Property Right" situation is
important, I urge you to distribute this article to as many other
human beings as possible, and to consider sending a donation of any
kind, size, or smallness, to enable the writing of additional articles
and further action. All of this work has been done in the little spare
time I have been able to scratch together. Donations can be sent to:
Markus Krummenacker
P.O. Box 1073
Los Altos CA 94023-1073
I will also happily accept donations of any size through PayPal, at the eddress below.  
Comments, corrections, and other suggestions are welcome and can
be directed to