Albert Esplugas Boter, “The Monopoly of Ideas: Against Intellectual Property,” Libertarian Alliance (UK) (9 Nov. 2025)

The Monopoly of Ideas: Against Intellectual Property

Libertarian Alliance (UK)

9 Nov. 2025

by Albert Esplugas Boter Translated by Juan I. Núñez

This article was originally published in liberalismo.org, on July 11th, 2005, and a revised version was later featured on Procesos de mercado: revista europea de economía política, N°. 1, 2006 (pp 47-104).

“[T]he attempt to generate profit opportunities by legislatively limiting access to certain ideal goods, and therefore to mimic the market processes governing the allocation of tangible goods, contains a fatal contradiction: It violates the rights to tangible goods, the very rights that provide the legal foundations with which markets begin.”

— Tom G. Palmer[1]

“[W]hile ownership of material goods guides the use of scarce means to their most important uses, in the case of immaterial goods such as literary productions and technological inventions the ability to produce them is also limited, yet once they have come into existence, they can be indefinitely multiplied and can be made scarce only by law in order to create an inducement to produce such ideas. Yet it is not obvious that such forced scarcity is the most effective way to stimulate the human creative process.”

— Friedrich Hayek[2]

Introduction

Intellectual property, in its Anglo-Saxon sense, is a broad term that encompasses different categories of legal rights derived from some form of intellectual creativity. More succinctly, and in other words: intellectual property is a right over ideal, intangible, immaterial objects; it is a property right over ideas.[3] Understood in this manner, intellectual property refers to concepts such as patents, copyrights, trademarks, and trade secrets.[4] We will not deal with the latter two here, as they are less problematic and perhaps have a more marginal relationship to the central topic at hand. The term “intellectual property” in this essay will refer, in general, to patents and copyrights, closely related concepts that will be examined together.[5]

This here paper will develop a critique of intellectual property, challenging both its ethical-philosophical foundations and its utilitarian justification, which is economic in nature.

From an ethical perspective, this critique will take an approach consistent with natural law, or the theory of natural rights exclusive to classical liberalism or libertarianism.[6] The focus of our attention will therefore be individual rights, individual freedom, and property as the core of an ethic consistent with the rational nature of man, who seeks to achieve multiple and varied ends in life. It is significant to note that perhaps the most solid ethical justifications for the concept of intellectual property also come from this field (or are based on the same principles), by which the dialectical battle will take place with identical or similar weapons, and the contenders will share the cause of a free society.[7]

On the economic side, this critique will question the utilitarian plea in defense of intellectual property, casting doubt on whether legal monopolies on ideas constitute an incentive for creation and whether, without this kind of support, progress would suffer to a greater or lesser extent. We will see how the benefits derived from intellectual property are perhaps not as substantial as its advocates argue, and how, on the other hand, the intangible costs (the foregone gains, or opportunity cost) prove to be considerable, to the point that they may possibly overshadow the alleged tangible benefits of these policies.

Patents and Copyrights

First, let us define the concept of intellectual property: intellectual property is a right over intangible, immaterial objects, a property right over ideas. In the words of economist Julio Cole: “Patents and copyrights are forms of intangible ‘property’ that guarantee their owners exclusive control over the production and sale of a specific good—a literary work in the case of copyrights, an invention or production process in the case of patents.”[8] Cole introduces the primary distinction between patents and copyrights, which we will now concretize:

Patent: A property right over inventions; over artifacts, devices, processes, etc. that perform a useful function. The laws of nature, natural phenomena, and abstract ideas are not patentable, but rather the embodiment of ideas in “practical applications.” The patent grants the creator-inventor a legal monopoly over the manufacture, use, or sale of said invention.[9]

Copyright: Rights assigned to the authors of original artistic, literary, or scientific works: books, articles, films, musical compositions, software, etc. Not unlike patents, copyright gives the author-creator an exclusive right (legal monopoly) to reproduce the work, exploit it commercially, present it to the public, etc.

In short, intellectual property is a property right over ideas, embodied in a practical application (in the case of patents) or expressed (in the case of copyrights).[10]

Private Property Over Tangible Assets

Following the 17th-century philosopher John Locke, one of the first authors to systematize a liberal ethic of natural rights, it is now necessary to develop the concept of traditional property. The passage transcribed below is from his Second Treatise of Government, and refers to the classical right of property, the act of original appropriation by which the “unoccupied” goods offered by nature are taken from their source by man and converted into private property:

“[E]very man has a property in his own person. This nobody has any right to but himself. The labour of his body and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature placed it in, it hath by this Iabour something annexed to it that excludes the common right of other men. For this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to….”[11]

Then the individual appropriates a good in the common state of nature when he imprints his particular mark on it, when through his action he separates it from nature, when he mixes his labor with the object, when he uses or occupies it, in short, for the first time. For the individual is, above all, the owner of himself, and therefore, by extension, he is also the owner of that which, not previously belonging to anyone, receives the influence of his particular action.[12] There then exists a link between this good and the individual who has made it useful that does not exist between that good and anyone else. And such is the objective basis of private property, understood as the right to exclusive control of a particular good, item, or object. The individual thus has the right to decide on his property, to use it as he sees fit in accordance with his particular purposes, without any interference from third parties, and with the sole limitation of not invading or attacking the property of others. To the extent that this control of a person over their legitimately acquired possessions is not respected, their right to property will be violated.

In what sense does intellectual property tie in with the concept of traditional private property outlined above? For natural law advocates[13] of intellectual property, both intellectual property and traditional property are the product of an individual’s labor and thought. In line with Locke, it is argued that “one has a natural law right to the fruit of one’s labor. Under this view, just as one has a right to the crops one plants, so one has a right to the ideas one generates and the art one produces.”[14] In the words of the 19th-century thinker Lysander Spooner, an ardent defender of intellectual property, “he who does discover, or first take possession of, an idea, thereby becomes its lawful and rightful proprietor; on the same principle that he, who first takes possession of any material production of nature, thereby makes himself its rightful owner. (…) If ideas be considered, not as productions of nature, or as things existing in nature, and merely discovered by man, but as entirely new wealth, created by his labor—the labor of his mind—then the right of property in them belongs to him, whose labor created them“[15] Indeed, this reasoning appears impeccably Lockean. The similarity, however, is only apparent.

Against Intellectual Property: An Ethical Perspective

Two ethical arguments can be raised against the concept of intellectual property, essentially attacking its justification at its root, and highlighting the contradictions and inconsistencies of the concept. This is not, by any means, a matter of appealing to any kind of “social right” to the dissemination of ideas or to their supposed collective nature. As Spooner points out, “[An idea] originates in the mind of a single individual. It can leave his mind only in obedience to his will. It dies with him, if he so elect.”[16]

Intellectual Property, or Rights Over the Property of Others

Locke explains how individuals become owners of that particular tangible matter on which they have left their distinctive mark, on which they have expressed their creativity, rather than of the idea itself, which as such can be embodied in other tangible objects. As Tom Bell graphically points out, “[Locke] speaks only to the ownership of atoms, not to the ownership of bits.”[17]

Intellectual property (copyrights and patents) is a right over intangible objects, over ideas. This means that the owner of intellectual property is granted a right over all physical manifestations of the protected idea, i.e., the creator-inventor retains a right of control over the property of others with regard to the manifestation of the protected idea. No one can embody this idea in their tangible property without the consent of the creator-inventor, so the creator-inventor has a partial right of control over the tangible property of third parties, since they have the power to decide, with regard to the embodiment of the idea, on the use of this tangible property.

The author of a book, by virtue of copyright, not only has ownership rights over the copy he has written—which no one denies3, but also has partial ownership rights over all the ink and blank pages owned by third parties, since they cannot use their ink and their pages to reproduce the ideas expressed by the original author.

A musician who listens to a symphony composed by someone else at home and records it, or simply memorizes it, cannot then reproduce it with his instruments at his venue without the consent of the original author. He cannot, therefore, use his instruments and his venue as he sees fit.

The inventor of a new carburetor, by virtue of his patent, not only has ownership rights over the materials in which he has embodied his idea, i.e., *his *carburetor, but also partial control over all existing carburetors, whose owners cannot apply that innovation to their carburetors without the inventor’s consent.[18] The owners of old carburetors cannot do whatever they want with their carburetors, as they cannot apply this invention. They cannot decide exclusively how they will use their carburetors, as it is the inventor who decides whether or not they can use their property for that specific purpose. All individuals who own the parts to assemble the new carburetor cannot use them for that purpose without the inventor’s consent. The inventor, therefore, also has a partial right of control over all those parts, since their owners cannot do whatever they want with them; in particular, they cannot reproduce that carburetor. Thus, if, as we said before, “to the extent that this control of a person over their legitimately acquired possessions is not respected, their right to property will be violated,” the holders of these legal monopolies (copyrights and patents)—who hold a right of partial control over the property of others with respect to protected ideas—violate the property rights of the legitimate owners. The copyright holder of the book we referred to is, hence, violating the property rights of those who own the ink and paper, as they cannot do with their property as they see fit in accordance with their particular purposes, they cannot devote their ink and their paper to the specific use of reproducing the original author’s work, and thus their property rights over their ink and paper are being restricted and violated.

To take a clear example from Stephan Kinsella: “by inventing a new technique for digging a well, the inventor can prevent all others in the world from digging wells in this manner,* even on their own property**.*”[19] Or, as Tom Palmer writes, “[e]nforcement of a property right in a dance, for example, means that force can be used against another to stop him from taking certain steps with his body (…) [or] from using his hands in certain ways.”[20]

Thus, in Kinsella’s words: “by merely thinking of and recording some original pattern of information, or by finding a new way to use his own property (recipe), the IP creator instantly, magically becomes a partial owner of others’ property.”[21] In this way, patents and copyrights partially transfer property rights from the natural owners of tangible assets to inventors, creators, and artists, which constitutes a violation of the property rights of the former.[22]

On the other hand, as Professor Roderick Long points out, it is not possible to appropriate something you cannot control, and you cannot control what is in the minds of others.[23] Consequently, it makes no sense to try to appropriate an idea that is already in someone else’s mind. If an individual sees how a third party’s invention works—how their new carburetor works, for example—, that idea is already in their head, and it is absurd to claim that it belongs to the original creator of the carburetor. It follows that this individual can translate the idea that now resides in their mind into tangible matter that is their property by manufacturing another carburetor with the same characteristics.

In the words of Professor Tom Bell, “[b]y invoking state power, a copyright or patent owner can impose prior restraint, fines, imprisonment, and confiscation on those engaged in peaceful expression and the quiet enjoyment of their tangible property. Because it thus gags our voices, ties our hands, and demolishes our presses, the law of copyrights and patents violates the very rights that Locke defended.”[24]

Intellectual Property, or Rights Over Non-Scarce Goods

This second argument is closely linked to economics. In economics, goods are considered scarce when the use of a good by one individual excludes or limits the use of that good by another individual or for another purpose.[25] An apple, for example, is a scarce good because if I eat it, neither I nor any other individual can use it for another purpose. Therefore, a good is scarce when there may be conflict over its use by multiple human actors. Air is an example of a non-scarce good at present, because the fact that I breathe does not exclude or limit the use that another person may make of the air.

The possibility of conflict gives rise to the need to establish an ethic that is consistent with human nature and that provides rules on the use of these scarce goods. Such is the foundation of Lockean property rights. Thus, to avoid conflict, property rights must be ascertainable and just.[26] The boundaries of property must be *ascertainable *in order to clearly distinguish between what is mine and what belongs to others, otherwise it is obvious that conflicts will not be avoided, since no one will know where their property ends and that of others begins. At the same time, property rights must be just, that is, there must be an objective (intersubjectively recognized) reason for establishing that this is mine and that belongs to someone else.

But ideas—and this is the key point—are not scarce goods. Intangible objects are not for exclusive use; there can be no conflict over their use. If I use an idea, that does not prevent someone else from using that same idea simultaneously. My use of a particular idea does not exclude or limit anyone else’s use of that idea. If I sing a song, that does not prevent someone else from singing it. The song is not worn out by how many voices sing it, or by how often they do so. My use of an invention does not prevent someone else from physically embodying the same innovative idea and making use of it as well. My use of a cooking recipe does not prevent someone else from taking advantage of it too. My writing a book does not prevent someone else from expressing the same words on a piece of paper. Ideas are, therefore, not a scarce commodity. Hence, it makes no sense to establish ethical rules to avoid conflict, since there can be no conflict regarding their use.

Private property, in its traditional sense, arises from scarcity: only scarce goods are appropriable, since conflicts can only arise with regard to their use. Intellectual property, on the contrary, does not arise from scarcity but rather generates it artificially. As economist Julio Cole points out, “[its] purpose is to create scarcity, thereby generating a monopoly rent for holders of such rights.”[27] By establishing a legal monopoly—an exclusive right—over an idea, something that was not previously scarce becomes scarce. An idea is not a scarce good by nature, but becomes a scarce good as a result of intellectual property. Thus, intellectual property does not arise to avoid conflicts, since in the absence of scarcity, conflicts do not exist; conflict arises unnaturally by granting exclusive rights over something that cannot be the object of an exclusive right: ideas.

Arbitrary Limits

From a natural rights perspective, it is entirely arbitrary to distinguish between non-patentable discoveries and patentable inventions. It is argued, as we pointed out in the definition of a patent, that scientific or philosophical discovery, the identification of something that exists in nature, is not a creation and therefore is not patentable.[28] But in this sense, nothing is a creation, since every object is the rearrangement of already existing matter in accordance with natural laws that we discover and apply.[29]

According to Roderick Long, the laws of nature have varying degrees of generality and specificity. “if it is a law of nature that copper conducts electricity, it is no less a law of nature that this much copper, arranged in this configuration, with these other materials arranged so, makes a workable battery.”[30]

On the other hand, the time limits on intellectual property are equally arbitrary. In the United States, copyright lasts for the author’s lifetime plus 70 years after their death;[31] patents last for 20 years.[32] In Spain, copyright also lasts for 70 years after the author’s passing.[33] Why 70 years after death and not 50? Why not 20 years from the registration of authorship? Or five years from the registration of the invention? Where can the appropriate time limit be logically deduced from? The arbitrariness of the duration of intellectual property is obvious, so in any case it can only obey ostensibly utilitarian criteria. In reality, it is more in line with partisan criteria. Over the last two centuries in the United States, the time limits on copyright have been gradually extended: from 14 years in 1790 (renewable for another 14) to 1998, after successive amendments to copyright law, to the author’s lifetime plus 70 years (95 years in the case of corporate copyright), such that the time limit prescribed by the US Constitution has become a mere formality.[34] Clearly, the purpose of these successive revisions has not been to encourage progress, but to prolong highly profitable legal monopolies for certain companies.[35]

One final consideration, relevant in the case of patents: what happens if two individuals independently invent the same device at different points in time?[36] Why is the first inventor granted exclusive rights over the use of that object if the second inventor, even though they created it later, did so completely independently, without knowing of the existence of the first? If what justifies a patent is the act of genuine, original creation, what makes the first inventor be granted a legal monopoly on the invention and the second be denied all rights? Consistent legislation in this regard should allow for as many patent or copyright holders as there are independent authors (which in practical terms can be problematic and can undermine the creation of legal monopolies to encourage innovation).

The only way to overcome these arbitrarinesses is, of course, to erase artificial boundaries and make legal monopoly unlimited; unlimited in terms of the type of ideas it can cover and unlimited in terms of its duration. Thus, any idea could be patentable or subject to copyright, and the exclusive right would be perpetual. The price of this superficial consistency would be the paralysis of progress; if every time we turned on a light bulb we had to ask permission or pay royalties to Edison’s heirs, if every time we used an idea (from a scientific formula to a new technique for harvesting fruit or building houses) we had to ask for authorization and pay for it, then all development would stop and humanity would starve to death. An ethic that produced this result would clearly be flawed in some way, as rules that prevent man from overcoming his natural state of poverty do not seem to be in line with human nature.[37]

Against Intellectual Property: An Economic Perspective

Utilitarianism aims to maximize social welfare or social utility, that is, the greatest welfare for the greatest number of people.[38] Policies are therefore prescribed based on whether or not they will bring more utility to society, rather than on whether or not they are in line with some abstract natural rights of man. For utilitarianism, rights are rather ad hoc constructs that are convenient for achieving that desired maximization of welfare.[39]

It is hence argued that wealth and progress will be optimized (or increased) if copyright and patents are guaranteed to incentivize the work of authors and inventors. No consideration is given to whether creators actually have an exclusive natural right to their works. From a utilitarian point of view, this is irrelevant; the only thing that matters is whether intellectual property promotes progress. Two general criticisms can be made of this approach:

Firstly, it is unacceptable for utilitarianism to prevail over the ethics of natural rights, since in the interests of maximizing the well-being of the majority, the obscenest of abuses against individuals and minorities can be committed. If no rights protect people a priori, we are all at the mercy of what is presumed to be useful and beneficial to others. If the majority takes pleasure in seeing us suffer, utilitarianism can do nothing but endorse our torture in order to “maximize the welfare of society.” Conclusions of this kind would be doubtfully accepted by utilitarians themselves.[40]

Secondly, utilitarianism is in a sense a scientific error, as it is based on economic propositions that do not correspond to reality. It is impossible to calculate utility, as it is not measurable. It is not possible to determine when a policy maximizes well-being or to what extent, as utility is strictly subjective and cannot be quantified or compared. Any interpersonal comparison of utility is scientifically illegitimate; there is no way to determine that society benefits more from my torture than I suffer from it, since perhaps my pain is infinite and each individual derives very little satisfaction from seeing me tortured. There is no way to establish how much some “benefit” and how much others “lose”; there is no way to compare the utilities of some and others and thus calculate whether there has been an increase in overall utility, in the well-being of the whole, or a decrease. My “benefit” or my “loss” is impossible to measure and compare with the “benefits” and “losses” of third parties, as it is totally subjective and consists of a more or less intense psychological assessment to which no cardinal number can be assigned. We feel very satisfied, or not very satisfied, but we do not know how much, nor is there any way to scientifically compare our satisfaction with the satisfaction of others.[41] In this context, it is not rigorous to specify whether patents and copyrights benefit some more than they harm others, whether the welfare resulting from innovations promoted by intellectual property compensates for the harm resulting from restrictions on the dissemination of these innovations.[42]

Having set out these preliminary considerations, let us now tackle the core of the utilitarian-economic argument in favor of patents and copyright. As we have seen, it is asserted that intellectual property promotes progress. The economic argument is as follows: warranting authors and inventors exclusive rights over their works encourages creation, that is, authors and inventors have incentives to create because only they will reap the benefits of exploiting their work. If they were not granted this legal monopoly, if they were not assured of obtaining income from the commercialization of their work, then they would lack incentives to create; an author who was going to write a book would have no guarantee that only he could exploit it commercially, so he might not write it; an inventor who was going to design a new carburetor would have no guarantee that only he could use it, others could pick up his idea and compete with him in the market, so he might not invent it. Therefore, without intellectual property, incentives would be reduced and, as a result, progress would suffer greatly. There would be fewer works and fewer inventions. The utilitarian conclusion is that intellectual property establishes incentives to encourage progress and maximize wealth, and that for this reason they are justified.[43]

Below, we will see why it is debatable whether the benefits of intellectual property are actually as high as its advocates claim, and, on the other hand, why it is possible that the enormous costs of intellectual property (those benefits that have been foregone by instituting intellectual property) may even outweigh the supposed benefits of this regulation.[44]

Putting the benefits into perspective:

• In the first place, not all productivity gains are the result of inventions; they are also the product of economies of scale, improvements in the quality of the workforce, demographic changes, etc. Furthermore, not all technical progress attributable to inventions is the result of patented inventions. These account for only a fraction of inventions (and a fraction of a fraction of overall productivity).[45] Various types of ideal objects are not covered by patent and copyright legislation, yet constant innovations are also produced in these areas (in fashion, for example, or in marketing strategies, or in magic tricks, or in scientific principles and mathematical formulas).[46]
• Many inventions and creations would have been produced even if intellectual property had not existed. In the field of patents, the empirical studies conducted by Edwin Mansfield are illustrative. A first study concludes that, with the exception of pharmaceuticals, the absence of patent protection would have affected less than a quarter of the innovations sampled (i.e., most would have been produced anyway). In a second study, based on a sample of 100 companies from 12 different industries, patents were considered essential for one-third or more of their innovations in only two industries. In seven industries, on the other hand, companies estimated that patents were essential for the development of less than 10% of their inventions. In some of these industries, patents were even considered unnecessary for the development of any of their innovations.[47] According to historian Thomas Ashton, the Industrial Revolution would have happened even in the absence of intellectual property. In fact, Ashton points out that it began when Watt’s patent on the steam engine expired.[48] Similarly, in 19th-century America, foreign authors did not enjoy copyright protection, yet there was a market for foreign works. Publishers and authors devised voluntary and contractual mechanisms to enable lucrative enterprises.[49]

Considering the costs:

• Superfluous expenses: expenses inherent to intellectual property in terms of registrations, procedures, consulting, courts, lawyers, etc. This is an expense that would not exist in a scenario without patents and copyrights, so the money spent here would then be allocated to other more productive purposes.[50]
• Restriction of competition: the establishment of barriers to entry (legal monopolies) restricts competition, which can lead to less innovation. Henry Ford was initially prevented from developing his automobiles because ALAM retained the patents on gasoline-powered cars. Something similar happened in the field of aviation: the Wright brothers patented a special mechanism for airplane wings and sued anyone who tried to apply similar innovations.[51]
• Inventions around the patent: to circumvent a patent, many companies invent around it, offering a product that is sufficiently different so as not to conflict with it. Thus, in order not to infringe a third party’s patent, unnecessary expenditure is incurred and, on occasions, an invention is produced which, because it is different, is inferior to the original.[52] This can also affect the compatibility between manufactured goods (differentiation can make them incompatible).[53] Likewise, those who hold the patent often incur unnecessary expenses by also inventing around it, to shield themselves from competition and prevent others from circumventing their patent. IBM, for example, spent millions of dollars inventing around Xerox’s patents so that every aspect of its technology would be protected. 25% of IBM’s budget went to patent advice, not research and development.[54]
• Legal monopolies as disincentives: copyrights and patents can be viewed from a different angle, namely, what incentives does an author or inventor have to continue creating if they already enjoy a monopoly income from their work for a very long period of time? If an author is guaranteed a monopoly income for a long period of time, will their incentives to continue creating during that period not be reduced? In contrast, if they lack a legal monopoly and aspire to receive a steady stream of income, they may be compelled to create without interruption. The case of Eastman Kodak is illustrative: in order to maintain its leadership, it pursued a strategy of continuous innovation. Had it been able to effectively protect its patents, it might have devoted fewer resources to research and development.[55] It may be pertinent to quote here the words of Michael Tiemann, vice president of Red Hat: “Every time a software patent blooms, it’s a promise to cease innovation in that space for 20 years.”[56]
• Distortion of incentives: it should be considered that patents may not encourage greater progress in general, but rather promote innovation in one specific area to the detriment of another. In the words of economist Milton Friedman, “there are many “inventions” that are not patentable. The “inventor” of the supermarket, for example, conferred great benefits on his fellowmen for which he could not charge them. Insofar as the same kind of ability is required for the one kind of invention as for the other, the existence of patents tends to divert activity to patentable inventions.“[57] Ergo, patents would distort the incentive structure, shifting activity from non-patentable areas to patentable areas. Patents would affect not progress in general, but the type of research that is carried out. As economist Murray Rothbard points out: “Nor is it by any means self-evident even that patents encourage an increase in the absolute quantity of research expenditures. But certainly we can say that patents distort the allocation of factors on the type of research being conducted. For while it is true that the first discoverer benefits from the privilege, it is also true that his competitors are excluded from production in the area of the patent for many years. And since a later patent can build on an earlier, related one in the same field, competitors can often be discouraged indefinitely from further research expenditures in the general area covered by the patent. More-over, the patentee himself is discouraged from engaging in further research in this field, for the privilege permits him to rest on his laurels for the entire period of the patent, with the assurance that no competitor can trespass on his domain. The competitive spur to further research is eliminated. Research expenditures, therefore, are overstimulated in the early stages before anyone has a patent and unduly restricted in the period after the patent is received. In addition, some inventions are considered patentable, while others are not. The patent system thus has the further effect of artificially stimulating research expenditures in the patentable areas, while artificially restricting research in the nonpatentable areas.”[58]In short, as Julio Cole concludes, perhaps there would be no fewer inventions in a context without intellectual property, but simply different kinds of inventions.[59]

Contractual Protection vs. Reserved Rights

Inventions and artistic works can, to a certain extent, be legitimately protected by contractual means. This market solution consists of establishing commitments voluntarily accepted by the parties, rather than privileges granted by the State in the form of legal monopolies that are binding on everyone.

According to the theory of contracts on transferable property titles,[60] a property X belonging to individual B becomes the property of individual C if an agreement between the two stipulates that X becomes, upon signing, the possession of C. In this way, property titles are transferred contractually. X becomes the property of C as soon as B and C so determine and formalize it. The contract is thus the formalized will of the parties involved, and the transfer is the expression of that will. That said, title transfers can also be conditional: imagine, for example, that the contract stipulates that B only transfers ownership of 1,000 euros to C if C performs a certain task. If C does not undertake this task, he will have no right to the 1,000 euros; but if he performs the task, he will be entitled to the 1,000 euros from B. In other words, if the contract stipulates that X becomes the property of C if condition Z is fulfilled, as soon as condition Z is fulfilled, X becomes the property of C. If condition Z is not fulfilled, then C is not in possession of X. On the other hand, if condition Z is met and an individual B retains X, B will be unlawfully retaining C’s possession (since, remember, X became C’s property if condition Z was met, and it has been met).

Thereby, the author of a book or the creator of an invention can draw up a contract whereby they agree with buyers to a conditional transfer of their work, so that the latter may be contractually obliged not to make copies of the book, film, or new carburetor. Contracts can, therefore, prevent third parties from making copies to a certain extent, although it is obviously not possible to reproduce the same structure of guarantees that results from intellectual property.

The author of the book may stipulate that he only transfers ownership of his material work, of his copies, on the condition that the buyer does not reproduce them. The moment the buyer makes a copy, they are violating the terms of the contract and their possession of the book becomes illegitimate: the author only transferred ownership if the buyer refrained from making copies; since the buyer makes copies, the property title has not been transferred, and the buyer is now in possession of a book that does not belong to them. However—and this is fundamental—the contract only binds the signing parties, not third parties. Buyers of the book are contractually compelled not to make copies, but a third party who finds an abandoned copy has no contractual obligation whatsoever. One can attempt to protect a music CD contractually (binding all purchasers of the CD), but an individual who listens to and records the songs without having entered into any contract is not bound by anything. The contractual route, hence, is by no means a substitute for the “reserved rights” inherent in copyright.[61] Intellectual property rights bind everyone, regardless of whether or not they have formally given their consent. There is no conditional transfer of title voluntarily consented to by the affected parties. The State banishes contractual relationships by establishing legal monopolies.

It should be noted, in any case, that the contractual route has certain practical limitations; it may be difficult or even impossible to enforce, depending on the legitimate contracts involved. For example, the author of a book may stipulate that individuals must not tear out any of the pages, and if a buyer were to tear out a page, they would indeed be in breach of the terms of the contract. But how can the author know if someone has torn a page from his work? How can he ensure that buyers are complying with the terms of the contract? Thus, in addition to the limitations imposed by its very nature (it is only binding on the signatory parties, not on third parties), the contractual approach also has practical limitations that restrict its applicability.

Market Solutions

Let us now consider, without attempting to be exhaustive, the possible voluntary alternatives to patents and copyrights; market solutions that could arise in a context without intellectual property. What formulas could authors and inventors use to monetize their creations in the absence of legal monopolies? How and to what extent could they protect themselves from competition from non-original products? First of all, it should be emphasized that we can only point out some alternatives that seem feasible; in a free market, entrepreneurs are constantly looking for new opportunities for profit and new ways to take advantage of them, which is why initiatives could be undertaken that we are not even capable of imagining today:

• Contractual arrangements: in order to address the risks of investing substantial resources in research and development, and lacking the legal monopoly that ensures revenue, companies could enter into contracts in which they mutually recognize exclusivity over a specific product for a specified period of time. As Gil Guillory points out, pharmaceutical companies, for example, could mutually recognize exclusivity over the exploitation of a particular product for X years. The agreement would be effective to the extent that it was adopted by a large number of pharmaceutical companies.[62] Another type of arrangement that could proliferate is exclusivity contracts: company A would grant exclusive marketing rights for its product to seller B in a specific geographical area on the condition that B does not distribute any copies or generics of said product.[63] Publishers could establish contracts of this type with individual bookstores or bookstore chains.[64] As explained above, it would be possible to protect works and inventions directly from copying by means of contracts, but the contracts would only be binding on the purchasers of the original copies, not on third parties. Another formula would be unanimous contracts between consumers, which would be contracts between potential purchasers that would not come into force until there were a number of signatories sufficient to cover the cost of the product.[65]
• Trade secrets: in the absence of intellectual property, trade secrets can still be maintained. Coca-Cola has never patented its formula, and had it done so, it would have entered the public domain 17 years after registration, instead of remaining protected for decades as a trade secret.[66]
• Price discrimination: companies may practice temporary price discrimination, for example by offering DVDs at a high price when they are first released (for enthusiasts) and at a lower price after a few months. Currently, price discrimination also occurs in the sale of hardcover editions of books or special editions on DVD, differentiated prices for magazines for individuals or bookstores, or reduced prices for schoolchildren, retirees, etc. in theaters, museums, cinemas, etc.[67]
• Manufacturer financing: The first radio broadcasters were financed by radio manufacturers, who thereby stimulated demand for their products. Julio Cole suggests that hardware industries might do the same with regard to software: develop software to stimulate demand for their hardware products.[68]
• Advertising: most television stations, radio stations, magazines, and newspapers are financed primarily through advertising. Here, the absence of mechanisms to exclude non-purchasers is not a problem, since they are not the ones paying for the good or service. In a scenario without intellectual property, advertising would perhaps play a more prominent role.[69]
• Encryption and copy restriction systems: entrepreneurs have incentives to find mechanisms that exclude free-riders (non-paying consumers).