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| Rethinking Intellectual Property |
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Dr Abdullah Robin looks at innovation and economic growth in a knowledge based economy and traces the development of the concept of intellectual property from its capitalist origins as a monopoly right through its transformation into an allegedly universal concept of property in ideas. He examines the integrity of the concept and argues that it is a brake rather than an engine for economic progress; a brake that Islam dispenses with for the betterment of humanity.
A generation that grew up in fear of 'Mutually Assured Destruction' leaving the survivors with the prospect of 'nuclear winter' witnessed the spread during the early 1990s, not of global communism or genetically engineered bubonic plague, but a highly contagious computer game from one of the Soviet Union's most esteemed academies. The game was called Tetris and it marked a turning point in the handheld and console games industry in the West. It nearly ended up on the agenda of Gorbachov's 1989 meeting with British PM Margaret Thatcher because of the grievance of Robert Maxwell at the loss of his 'MIRRORsoft' group's rights to the game. Eighteen months later Robert disappeared mysteriously from his luxury yacht into murky waters-along with the pension hopes of many-after the bubble burst on his pyramid style borrowing schemes.
Tetris was there at a turning point in world history as the civilisational clash between capitalism and communism came to a conclusion-and it was created by a man on a $200 a month job in the Moscow Academy of Science, Alexey Pajitnov. He conquered hearts and minds in the West where the might of the Red army had failed!
As the sun was setting over a nation that put the first man into space two heavyweight contenders-Atari and Nintendo-were lining up for the exclusive rights to the game. Atari seemed to have the early advantage in the larger console market but clever manoeuvring from Nintendo secured them the exclusive rights to the game. The deal knocked the teeth out of Atari who had spent millions of dollars on pre-launch advertising and had already produced hundreds of thousands of games cartridges in readiness for their expected launch. Their stock was worthless. Indeed they would have been sued if they had tried to sell their now 'pirate' copies of Tetris. Nintendo, with sole monopoly on the game, sold 40 million cartridges. As for the game's inventor, Alexey Pajitnov, he never received a penny in royalties till the original rights expired in 1996. This was because the rights to Tetris belonged to the Soviet State that paid his salary and which didn't recognize a private right in any property, let alone intangible intellectual property.
Monopoly Rights - a licence to print money and burn the competition.
As for the Capitalist West, the 'winner takes all' story of Tetris has provided a caricature of monopoly rights. These rights exclude competition for a limited period of time and are covered by copyright and patent law. Copyright law deals with original forms of expression such as the latest song by Britney Spears while patent law covers inventions such as genetically engineered rice or a new way to make toast.
These legal rights are often euphemistically bundled together under the term 'intellectual property' which gives them an unwarranted moral sense. These rights amount to monopoly in their historical conception and clearly fit the definition of monopoly in the Oxford English dictionary as, "exclusive possession of the selling of some commodity or service; this conferred as privilege by State…" For an economic textbook definition the following should suffice, "the impact of a patent is to effectively create monopoly rights to the commercial exploitation of an idea".i So it is simply a right to monopolize price by excluding competition-even if the competition goes up in smoke like Atari's copies of Tetris.
The burning of Atari's games cartridges illustrates a standard negative textbook characterization of monopoly; 'deadweight loss'. In Adam Smith's foundational treatment of free market economy an ideal called 'perfect competition' should lead to something beneficial for the economy known as consumer surplus. In our example, the games market suffers from an abnormality in the demand and supply curve resulting in 'lost consumer surplus' which economists call 'deadweight loss of monopoly' and that simply means that less of a product is produced (or even burned!) and what is produced costs more. That is why DVDs, CDs, videos and computer games seem to cost much more than they are worth.
Monopolists vigorously defend their right, in court, to make us pay more. Having destroyed Napster's 'fair use' defence for its online music file sharing system at the US Court of Appeals on 12th February 2001 they went after German media giant Bertelsmann for allegedly funding Napster. The British music group EMI filed a copyright infringement suit in June 2003 that followed a class-action case filed in February in pursuit of $17 billion in damages. A recent victim in their sights was another type of offender, a clever little import company called 'CD Wow'. CD Wow could not afford to fight their case in court against the powerful music industry barons so they made an out of court settlement which is now costing purchasers an extra £2 per CD. Not only is this another classic case of deadweight loss but it also illustrates a further textbook principle of monopoly, 'price discrimination'. It comes in three flavours and the CD-Wow case illustrates 'third degree price discrimination' which is charging different prices in different markets.ii The music and DVD industry does this by selling its products in Europe at a higher price than it does in non-European markets.iii One of the textbook conditions that must hold for a monopolist to exercise effective price discrimination is the prevention of 'arbitrage.' Arbitrage is where a consumer buys in one market where prices are low and resells in another market where prices are higher. CD-Wow was doing just this, nominally based in the Far East, it exported cheaper non-European CDs by post to customers in Britain via its website for just £8.99. The British Phonographic Industry managed to put a stop to CD-Wow's arbitrage. Consumers could be forgiven for feeling themselves victims of a 'third degree' rip off! How can this be justified?
Legitimisation of Monopoly Under the Pretext of Property Rights
In order to mask the uglier side of these monopoly rights the World Intellectual Property Organization (WIPO) is trying to give universal legitimacy to a relatively recent, and softer, alternative term-'intellectual property'. It: "believes that intellectual property is native to all nations and relevant in all cultures." That is a bold claim because while ideas are at least as old as the invention of the wheel the term 'intellectual property' itself can be traced back only as far as the French author A Nion who uses the term 'propriété intellectuelle' in his Droits civils des auters, artistes et inventeurs published in 1846.iv
Terminology can of course change with time, but what is important to note is where and how the concept of physical property was first applied to intangible ideas. The ownership of ideas came into British common law from the majority ruling in the case of Millar v. Taylor (1769)v and lasted just 5 years before being overturned by Parliament. The judiciary was divided from the beginning concerning this case, which was brought as a trespass against property. The property in question was the right to control the printing of a book that was not protected by the copyright Act of 1709. The act established the concept of a statutory limited monopoly, but not a right of property. While the majority of judges in the case decided to recognise a right of property there was a dissenting judge, Justice Yates, who said, "This claim of a perpetual monopoly is by no means warranted by the general principles of property". Argument continued until the House of Lords deliberated upon the issue in 1774 and ruled that any common law right of property was abrogated by the 1709 Act of Parliament that imposed an arbitrarily defined period of protection after which ownership of the exclusive right to publish would expire.vi
In this way, not as property proper but as a right, intellectual property found its way into Capitalist law, along with a host of other intangible opportunities to profit that set the legal basis for capitalism as a distinct political economy.
If ideas, once released to the world, held the legal status of property then by what right could the state limit this property for a fixed period of years? When Justice Mansfield ruled, with the majority, in the case of 1769 he appealed to the sense of justice as propounded by John Locke whose political philosophy began with individual property from which he concluded that "The great and chief end, therefore, of men's uniting into commonwealths, and putting themselves under government, is the preservation of their property".vii The parliamentary decision of 1774 undermined its own moral legitimacy by recognising a property right only to limit its duration to 28 years. Property rights precede government and are the reason for its legitimacy according to Locke.
If the logic of intellectual property is to be sustained then not only must it overcome the insult of being taken away by the state after a given period of time but those who steal it should be treated as the criminals that WIPO would have us to believe they are. The process of criminalisation has already begun so this contradiction may soon disappear-along with several freedoms that have hitherto been taken for granted.
The term 'intellectual property' is misleading because it gives the impression that ideas themselves are the subject of ownership! However, what Capitalism actually did for the law was to make the expectation of future profit from ideas the subject of ownership. What it did for ideas themselves was, arguably, to strangle them.
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