Journal of Information, Law and Technology
The Scarcity of Intellectual Property
Tony Ciro
Barrister and Senior Lecturer, School of Law, La Trobe University
This is a refereed article published on: 30 July 2005.
Citation: Ciro, 'The Scarcity of Intellectual Property’, 2005 (1) The Journal of Information, Law and Technology (JILT). http://www2.warwick.ac.uk/fac/soc/law2/elj/jilt/2005_1/ciro/>.
Abstract
It has long been argued that intellectual property is justified on a number of alternative bases. Economic, labour and spiritual theories have been advanced to justify propertising intellectual creations. The thesis of this article is that justifications used for tangible property cannot be used to support the propertising of intellectual property. Intellectual property differs to tangible property because tangible creations are physically scarce. Intellectual property does not suffer from the same scarcity problem because it makes use of a plentiful commodity in the form of information. Intellectual property becomes scarce because of artificial constraints which are imposed by a legal framework that restricts access to public dissemination and use of the intellectual work that is created. It is, therefore, argued that justifications used to support the propertising of tangible property cannot be used to justify the propertising of intangible creations. Instead, an explanation founded upon the creation and protection of investor value can be advanced to explain, but not justify, the enforcement of intellectual property rights as they currently exist.
Keywords: Intellectual property, John Locke, Hegel, Kant, market instrumentalism, personality theory, pareto equilibrium, resource allocations, commercial information, trade secrets, government secrets, confidential information, Australian Competition and Consumer Commission (ACCC).
1. Introduction
The justifications advanced for intellectual property law have been many and varied.[1] It is has been suggested that intellectual property is analogous to tangible property and justifications used to support the propertisation of physical creations can be advanced for intellectual ones as well.[2] A common assertion used to justify propertising intellectual works is that intangible creations require property protection because they are economically valuable works worthy of protection in their own right. This is essentially an economic justification, one premised upon overcoming market failure and market imperfections.[3] Economic justification for propertising creative work is premised on the very foundation that without proper protection authors would have insufficient incentives to write new works unless they are compensated with property rights.[4]
Similar justifications are advanced from other sources, most notably labour rights. It is argued under the pretext of the theory advanced by John Locke that once labour is mixed with property the labourer obtains a natural right to the property that is created.[5] It is argued that when one labours over intellectual endeavours the author of the work obtains a natural right to the intellectual creation.[6] Locke’s “mixing theory” is a justification which commonly arises with the creation of tangible property and has been conveniently borrowed by owners of intellectual property.
Justifications in the form of spiritual rights have been advanced to support propertising intellectual works. Support for this proposition has principally arisen from the writings of Hegel[7] and Kant.[8] According to Hegel and Kant creations are the embodiment of one’s personality where human spirit and creative endeavour are inextricable linked. The intellectual work becomes part of the creator because it represents an extension of one’s self. The spiritual embodiment between the creator and the work justifies the recognition of a natural property right vesting in the author.[9]
The aim of this article is to argue that there is no natural right to intellectual property. It will be argued that justifications used to support a natural property right in tangible property cannot be used to justify the propertisation of intellectual creations because the two types of property are intrinsically different.[10] The main difference lies in the relative scarcity of each forms of property. Tangible creations suffer from a scarcity problem because the resources used to create are finite and physically scarce. With tangible property both the physical raw material and the end product that is created are scarce.
In contrast, creators of intellectual property use a non-scarce resource in the form of ideas and information express it in some original form to justify propertising the intellectual expression. Importantly, neither the idea (the raw material) nor its expression (the end product) in the absence of intellectual property laws is scarce. This begs the question:-Are current intellectual property rules justified in adopting a private property system to allocate non-scarce resources? The article will argue that private property cannot be justified when it is applied to intellectual creations. Further, the article argues that intellectual property rules can be anti-competitive because it can give rise to the creation of artificial monopolies. The recent decisions in the United States in the Microsoft anti-trust suit[11] and the Sony[12] decision in Australia highlights the tension between private property laws which protect intellectual works on the one hand, and competition laws that are designed to promote competition and consumer choice on the other.
2. The Justifications of Intellectual Property
(a) Locke & Labour Theory of Property Rights
The philosopher John Locke argued that a labourer has a natural property right to an item that is created with his/her labour. Writing in the early 18th Century, Locke sought to justify the expropriation of native American land to white colonialists through a simple but powerful theory premised upon labour. In Chapter Five of the Second Treatise of Government Locke wrote the following, much quoted passage:
every man has a property in his own person: this nobody has any right to but himself. The labour of his own body and the work of his own hands we may say are properly his.[13]
Underlying Locke's labour theory of property is the assumption that if one is not a slave one must therefore own oneself including one's labour. It follows from Locke’s proposition that labour can be used to justify the creation of a natural right to private property if one “mixes” their labour with the land. Thus, the mere act of “mixing” one's labour with land or any other item of tangible property is sufficient to give rise to a “natural right” to property and private ownership.
Ownership in one's self provides the conceptual underpinning for Locke's labour theory. Self-ownership is the necessarily conclusion if one is not a slave. Professor Harris has queried whether Locke’s conclusion that an individual who is not a slave and who “owns” and mixes their labour should obtain a natural property right to the item that has been created is correct.[14] As Harris points out the very fact that one is not a slave does not make them an “owner” of their labour, neither does it make an individual an owner of themselves.[15]
According to Professor Harris, simply because one is not a slave does not necessarily mean that they “own” their labour.[16] If one is not a slave then the only correct conclusion to reach is that no-one else owns them. However, it does not mean that a non-slave individual must therefore own their body and their mind. If one cannot own themselves or the contents of their brain then labour on its own cannot be used to justify a natural property right in any creation. It is irrelevant whether one “mixes” their labour with a resource, tangible or intangible, the conclusion is the same. Labour alone cannot justify a natural property right to the item that is created.
(b) Market Instrumentalism
A justification that is advanced to support the propertisation of intellectual creation is one founded upon economic grounds.[17] In order to overcome some form of market failure creators need an economic incentive in the form of a property right to create. The argument is self-fulfilling. To provide the necessary incentive to create the author of the work needs to be compensated in the form of property interest.[18]
The legitimacy of this assertion has not been empirically tested but it would appear to be far-fetched to suggest that only property rights provide the sole incentive or for intellectual creation.[19] Intellectual creations have been created and continue to be created in the absence of any transfer of property rights. Academics produce large volumes of work not for property rights but for career advancement. Similarly, many artists, song writers and musicians produce works for a small token fee and are not the owners of copyright. Even if it can be legitimately said that property does provide incentive to create, how much compensation is required? Copyright for life of the author plus 50 years, sounds like a lot because it is. Life plus 70 years in continental Europe is worse and there have been moves to extend the duration of copyright to life plus 120 years in the US to cover the expiration of copyright on the Disney collection.[20]
(c) Personality Theory
Personality theory has been used to justify the granting of intellectual property rights. The theory has its genesis in the writings of Kant[21] and Hegel,[22] where both legal philosophers adhere to the view that an author’s personality, spirit and will cannot be free unless the author owns his/her work.[23]
Essentially, the theory relates to the metaphysical status of an individual’s spirit and will. The theory assumes that by granting a property right the author’s will is unrestricted because he/she has full control of their personality and spirit. The justification of granting a property right to the author of the work is that the work represents a spiritual embodiment of the author’s will. Hence, if an individual is to have complete control over their spirit and personality, property rights must be granted to the author of the work. Given, the metaphysical emphasis on the theory it is not surprising to find that Kantian personality theories have found popularity with artists and authors of works who often have a spiritual or metaphysical connection with their art.
3. Market Failure or Market Value?
The concept of property is central to most legal systems. Property forms the basis of much of the criminal and civil law in both common and civil law jurisdictions. In criminal law offences such as theft, obtaining property by deception, robbery, burglary and larceny involve criminality with another’s property rights.[24] Similarly, in civil law a number of torts including trespass, conversion and detinue involve unwarranted interference of property rights.
It is in respect of tangible and physically scarce items that property laws sit most comfortably with resource allocation and pareto equilibrium.[25] The institution of property has the role of providing an efficient response to the scarcity problem. It is by no means accidental that classical economists are supporters of legal systems with a strong emphasis on the protection of property rights. The system of private property ownership is the epitome of the interaction between law and economics.
The laws of property are used to allocate scarce resources among competing needs and provides the backdrop for a capitalist economy to properly function. As classical economists would assert prices provide the clearest and most transparent signal for efficient resource allocation to occur. Without contract and property laws there could be no equilibrium because there would be no security of tenure. Hence, even with potentially high prices and high profits suppliers would refrain from producing and supplying to the market in the absence of specific property protection.
The argument essentially draws on the evil caused by the free rider. The free rider is bad because they are opportunistic and seek to reap where they have not sown. If the free rider is given carte´ blanch nothing will be produced since there would be no incentive to invest time, skill and resources to create. The fallacy in this argument can be pointed out. Why should there be laws protecting the “reaping without sowing” when the resource, namely information that is used as a raw material to create intellectual property is plentiful and freely available.
Should the free rider be excluded from participating in information gathering and competing against the first producer at lower cost? The free rider would argue that he/she should not be locked out of the equation because without them competition and the consumer would be the loser. Free riders provide much needed competition and consumer choice to a marketplace that would otherwise be in the firm grips of the monopolist. Why else does the legislature allow limited access to the public to copyrighted works and imposes limits to the duration of trade marks, patents and other oppressive intellectual property rights?
The market failure justification cannot be used to support intellectual property because unlike tangible creations intellectual property is not inherently scarce. For intellectual creations their scarcity is a phenomenon of the legal system that protects intellectual property as property. Through intellectual property laws restrictions on the dissemination are imposed. Free use is no longer the norm. Instead, the law creates the scarcity problem and then seeks the assistance of the market’s invisible hand to allocate the resource in the most efficient manner. Market value is not only a product of market demand but also artificial scarcity imposed by intellectual property laws.
None of this is new to classical economists who are well versed in dealing with relative scarcity. Scarcity exists in many forms and affects many resources. Importantly, physical constraints alone cannot produce the scarcity problem confronting intellectual property. Why then do economists argue that a property system is the only viable alternative for the protection of intellectual property?
The typical answer to this question essentially involves a market instrumental justification. The production of intellectual creation can be costly and some may not be produced if property is not granted in return. At face value this would appear to be a strong justification for the creation and protection of intellectual creations through a property system.[26] The market failure argument is essentially a self-fulfilling prophecy. There is a need for intellectual property laws because without them there would be less incentive to produce valuable intellectual creations, which in the absence of the laws would remain scarce. The market failure argument necessarily begs the question- why do we have a scarcity problem in the first place? The answer can be simply stated. Intellectual property laws produce an artificial restriction that creates the scarcity problem and are then used to allocate scarce resources through a complex web of private property rights controlled by intellectual property owners.