Intellectual Property: Piracy, Competition, and Free Markets

The Claim

The abolish intellectual property crowd occasionally attempts to claim:

• Violations of intellectual property are little more than engaging in normal acts of free market economic competition.
• Intellectual property is anti-competition, and in direct opposition to free market principles.

This argument takes advantage of equivocation, continuum fallacy, and weak semantics.

State-IP

Lets briefly acknowledge¹ that portions of modern state-enforced intellectual property mandates are used as a means² to promote and enforce anti-competitive practices. This is however only "damning" of the statist model, or portions of the statist model as it presently exists³, but has limited implications towards other possible intangible ownership models.

Non State Intangible Ownership

Given the intent to use this argument as a means of damning all intangible ownership (state, or otherwise), let us restructure the previous assertions as questions directed at other possible norms regarding intangible ownership:

• "Are violations of (all) intangible ownership norms equivalent to the actions and values of free market competition."
• "Are (all) intangible ownership norms anti-competitive and in direct opposition to free market values."

The author also wishes to note that the pursuit of competition is a valuable consideration in the development and analysis of balanced ownership norms for intangibles that reflect and promote libertarian and free-market values.

Virtues of the Free Market

According to Rothbard:

• The free market is the voluntary exchange of two economic goods, in which both parties expect to gain from that transaction.⁴
• A market is free if choices at each step are made freely and voluntarily.⁵
• The key to the existence and flourishing of the free market is a society in which the rights and titles of private property are respected, defended, and kept secure.⁶
• The free market is in opposition to coercion, theft, and parasitism.⁷

The author also notes:

• Free Market Entry: The ability to freely enter a market, and produce a competing product or service without restriction.

Comparison of Piracy and Free Market

In order to avoid distraction, let us examine a specific scenario:

Scenario Person-A produces unique software-X, which he then digital copies with a use-license attached for a fee. Person-B acquires software-X (through purchase or piracy), and then proceeds to distribute and sell software-Xb at a lower price (to Person-C). Software-Xb is an identical (or near identical) digital copy produced by copying the bits of software-X.
Norm Given the previous scenario and no extraordinary circumstances, it is considered a violation if intangible property norms for person-B to redistribute software-Xb without person-A's consent. Person-B is, however, free to produce, sell, and distribute a competing software-Y⁸ using his own resources⁹.

• Exchange of Economic Goods If the exchange between Person-B and Person-C is a market transaction, then software-Xb (and software-X) must be considered an economic good. If software-Xb is not an economic good, then Person-B and Person-C are engaging in a transaction, but not a market transaction¹⁰.
• Choices at Each Step Made Freely: Given the recognition of software as an economic good, the means by which Person-B acquires software-X cannot be said to be the result of a free choice by person-A. It is impossible for Person-B to redistribute software-X without somehow violating the choice of person-A to not transact distribution rights.
  • (a) Purchase: Person-A only voluntarily agrees to exchange digital copies of softare-X with purchasers (i.e. person-B) who agree to refrain from distributing software-X and derivatives of that. For transaction A-B¹¹ to be voluntary, person-B must have agreed to refrain from distribution. Absent that agreement, Person-A would have never voluntarily engaged in transaction A-B. Thefore given Person-B's redistribution, this transaction is fraudulent and involuntary.
  • (b) Piracy: Given Person-B gains software-X through piracy, this implies a person-P acquired the software through purchase¹². Per the previous bullet-point, transaction A-P is fraudulent and involuntary. While one may argue transaction P-B and B-C are voluntary, one cannot say transactions at all step were made freely¹³.
• Private Property Given market transactions are part of this "free market is a society in which the rights and titles of private property are respected, defended, and kept secure", Person-B's actions in no way reflect norms that respect titles of private property.
• Parasitism The relationship between Person-B and Person-A is highly parasitic, whereas Person-B produces little value and gains almost entirely at the expense of Person-A.

Per author notes:

• Person-A's exclusive ownership of distribution rights of software-X in no way inhibits Person-B from independently producing competing software-Y by means of free market activites.

Core Questions Revisited

Reviewing our earlier core questions:

• "Are violations of intangible ownership norms equivalent to the actions and values of free market competition."

Violations of balanced intangible ownership norms trend towards a heavily contrast to the values and pursuits of free markets, and often rely on involuntary exchanges and parasitism.

• "Are intangible ownership norms anti-competitive and in direct opposition to free market values."

Given the example norms proposed, and libertarian-styled intangible property norms, the claim that intangible property norms are anti-competitive and anti-free market are weak in comparison to claims that the abolishment of intangible property norms enables parasitism and undermines free market values.

Conclusions:

The above article is only intended to counter and demonstrate weaknesses of specific claims used to advocate for the abolishment of IP. Broadly speaking, the author sees this general topic as a distraction, which is not productive in the pursuit of libertarian values or norms.

The author also does not seek to make any objective ethics claims (see: "Objective Statements") and finds this general topic distracting in the pursuit of constructive balanced intangible ownership norms. The only constructive or assertive aspect of this article is the recognition that respect for competition is valuable in the pursuit of developing balanced intangible ownership norms.

Footnotes

1. For the purposes of saving valuable time of all parties involved.

2. While on an intuitive level, a person may understand the importance of intangible ownership norms, the state often abuses the weak understanding of IP as a means to pursue other ends.

3. If categorical "damnation" were realistic, then libertarians should also abandon their defense of property, as property concepts have been historically used to subjugate masses.

4. The Free market is a summary term for an array of exchanges that take place in society. Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or nontangible services. … Both parties undertake the exchange because each expects to gain from it. Also, each will repeat the exchange next time (or refuse to) because his expectation has proved correct (or incorrect) in the recent past. Trade, or exchange, is engaged in precisely because both parties benefit; if they did not expect to gain, they would not agree to the exchange. - "What Is the Free Market?" by Murray N. Rothbard

5. Production begins with natural resources, and then various forms of machines and capital goods, until finally, goods are sold to the consumer. At each stage of production from natural resource to consumer good, money is voluntarily exchanged for capital goods, labor services, and land resources. At each step of the way, terms of exchanges, or prices, are determined by the voluntary interactions of suppliers and demanders. This market is "free" because choices, at each step, are made freely and voluntarily. - "What Is the Free Market?" by Murray N. Rothbard

6. This means that the key to the existence and flourishing of the free market is a society in which the rights and titles of private property are respected, defended, and kept secure. … Some critics of the free-market argue that property rights are in conflict with "human" rights. But the critics fail to realize that in a free-market system, every person has a property right over his own person and his own labor, and that he can make free contracts for those services. - "What Is the Free Market?" by Murray N. Rothbard

7. A common charge against the free-market society is that it institutes "the law of the jungle," of "dog eat dog," that it spurns human cooperation for competition, and that it exalts material success as opposed to spiritual values, philosophy, or leisure activities. On the contrary, the jungle is precisely a society of coercion, theft, and parasitism, a society that demolishes lives and living standards. - "What Is the Free Market?" by Murray N. Rothbard

8. software which performs a similar function or fulfills a similar need

9. through his own property, labor, investments, and trades

10. This would invalidate claims that the B-C transaction is a free market transaction.

11. software-X from person-A to person-B.

12. Or perhaps through other shady means of deception, hacking, raw theft, etc - but lets stay focused.

13. One may also note that a thief selling stolen goods is indeed engaging in a voluntary transaction with his customer, but the same cannot be said for his victim.