Intellectual property, fair use, and taxation

(HT: Helen Dale)

In the interest of full disclosure I should declare that Tim Watts is my Member of Parliament. It is a good speech and makes a nice change from when ALP MPs were demonising Hayek.

A couple of thoughts – I have known otherwise sensible people to hold views of IP that range from “All IP is sacrosanct” to “All IP is theft”. My view is that the current IP regime over-protects IP – as I wrote in this 2004 piece joint with my RMIT colleague Jonathan Boymal.

Tim Watts makes the argument that he’d like to see IP firms starting up in Australia. Well he needs to talk to both Joe Hockey and Andrew Leigh – both of whom, for much the same reason – tax greed, are doing all they can to sabotage innovative business opening in Australia or coming to Australia. Here is Hockey’s latest idea:

FOREIGN investors face a new hurdle as Joe Hockey declares he will take their tax affairs into account when considering their Australian deals amid a global crackdown on corporate tax avoidance.

Alarmed at the potential loss of federal revenue, the Treasurer warned that tax arrangements would become a major factor in foreign investment approvals, given their growing impact on the national interest.

Mr Hockey, who has the final say on all big foreign investments, took the new stance as he stepped up the case for global action on the “significant risk” to revenue from profit-shifting by large companies.

Here is Leigh saying Hockey is being too soft:

Since coming to office, the Abbott government has talked a big game on multinational profit-shifting. Unfortunately, all it’s done is water down Labor’s sensible reforms to ensure that multinationals pay their fair share.

To be fair – that was last week.

Here is the thing; IP is vulnerable to expropriation by government through excessive taxation, or simple outright theft. Look no further than what happened to the tobacco companies. Now many of my lawyer friends tell me that the tobacco business wasn’t really an expropriation because the High Court ruled in the government’s favour. How reassuring is that to IP owners – not only does the government take your property, but the courts rule in favour of it?

So while everyone is worrying about private expropriation of IP, nobody is worrying about public expropriation. Google, Apple, Starbucks etc. are holding their IP in low-tax regimes because they know that their IP won’t be expropriated through excessive taxation in those jurisdictions. The fact that those firms – and others like them – won’t register their IP in Australia is an indictment of out IP policies. It is too hard on private usage and too soft public expropriation.

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20 Responses to Intellectual property, fair use, and taxation

  1. Infidel Tiger

    His maiden speech was pretty good. He still has many leftist delusions that will no doubt become far worse from hanging out with the human trash in Canberra.

  2. Sabby Phelps

    You’re absolutely right in saying that IP laws in this country are far too over reaching.
    Why else would we be one of the few western countries in the world without a fair use provision?

  3. Monkey's Uncle

    Intellectual property is not really property so much as it is government granted monopoly rights and restriction on competition. All a patent or copyright amounts to is essentially the government saying ‘because you thought of it first, we will stop others from copying you for a while’. This does not mean that all intellectual property is bad or should be done away with. It just means that excessive veneration of intellectual property leads to perverse outcomes.

    It is also nonsense to suggest that intellectual property has equal moral standing with physical property, or that using an illegal download of software or music is somehow equivalent to stealing a car. Stealing physical property permanently deprives the owner of the entire benefit of that property, while infringing intellectual property does not prevent the owner from continuing to sell copies of that property to willing buyers. It may deprive IP owners of some revenue, but even this is exaggerated if it assumes that everyone that obtains illegal copies would have purchased the legal product at full price if they were not able to obtain an illegal version.

  4. Bruce of Newcastle

    I do think IP needs to be monetised so that writers will write stuff I want to read, programmers will develop games I want to play and drug developers develop pharmaceuticals that make my life better.

    Creators will only create if they don’t starve by doing so.

    But the idea of copyright extending after the death of an author is stupid and rapacious on the part of the undeserving heirs. The IP producer should earn from their work, but no genetic hangers on.

  5. johanna

    When IP laws (such as in the US) get to the point of giving the heirs ownership for 70 years after the death of the creator, you know that something seriously shonky is going on.

    The upside is, in a free market, people will just pay a talented new artist rather than be extorted by the heirs of an old one, thereby depriving the heirs of revenue.

    A few years ago, I attended a meeting organised by DFAT about international IP issues. They were gung-ho about “aligning” us even more strongly with nonsensical regimes like the US one, without a hint of countervailing fair use and free speech provisions.

    Yikes! I wonder if they are still running that agenda?

  6. Joe

    Intellectual property is an oxymoron foisted on the rest of us by the “credentialed” classes to protect their phoney baloney jobs.

  7. Demosthenes

    Intellectual property is not really property so much as it is government granted monopoly rights and restriction on competition. All a patent or copyright amounts to is essentially the government saying ‘because you thought of it first, we will stop others from copying you for a while’. This does not mean that all intellectual property is bad or should be done away with. It just means that excessive veneration of intellectual property leads to perverse outcomes.

    Well said. Now we need people in leadership positions to realise this, an unlikely outcome given their incentives to turn a dear ear.

  8. incoherent rambler

    In one area of IP, software.
    The primary complaints seem to come from those who have priced a product at such a high level that consumers will seek alternatives because of the price.
    The market place has demonstrated (over a long period) that moderately priced software a) does not get pirated (it is easier to buy it) and b) sales are an order magnitude higher and c) makes more money.

    The unaddressed issue with software is that the nature of software changes much faster than legislators can write new laws. Whatever law you propose will be obsoleted before the first reading.

  9. .

    We don’t need IP.

    For the following reasons, I don’t want it:

    https://en.wikipedia.org/wiki/Eric_Maskin#Software_patents

    Maskin suggested that software patents inhibit innovation rather than stimulate progress. Software, semiconductor, and computer industries have been innovative despite historically weak patent protection, he argued. Innovation in those industries has been sequential and complementary, so competition can increase firms’ future profits. In such a dynamic industry, “patent protection may reduce overall innovation and social welfare”. A natural experiment occurred in the 1980s when patent protection was extended to software”, wrote Maskin with co-author James Bessen. “Standard arguments would predict that R&D intensity and productivity should have increased among patenting firms. Consistent with our model, however, these increases did not occur”. Other evidence supporting this model includes a distinctive pattern of cross-licensing and a positive relationship between rates of innovation and firm entry.[6]

  10. Alex Davidson

    What irritates me highly in all of this discussion about protecting so-called intellectual “property” rights is the complete trampling of real property rights in Australia, particularly in relation to ownership of land.

    Landowners, (disclaimer – I am one), are subjected to so many finely-detailed rules over the uses to which they may put their land that they are no longer the actual owners in any real sense of the word. In recent decades state and local governments have effectively seized ownership of private land in Australia, but do we ever hear any debate on it?

    This glaring double standard is a sure sign that so-called intellectual “property” law is simply another protection racket run to benefit rent-seekers.

  11. Rococo Liberal

    Not all IP protection is statutory. There are a few equitable and common law protections too. Passing off is one tortios action that comes to mind. Also there are some forms of IP that aren’t really subject to statute law at all, such as know how or confidential information.

  12. Rococo Liberal

    BTW
    Sinc the Government didn’t approriate the tobacco company’s property, they rendered it useless. Unfortunately the Constitution only allows for compensation when the Commonwealth actually takes the property.

  13. Driftforge

    Landowners, (disclaimer – I am one), are subjected to so many finely-detailed rules over the uses to which they may put their land that they are no longer the actual owners in any real sense of the word. In recent decades state and local governments have effectively seized ownership of private land in Australia, but do we ever hear any debate on it?

    Too many rules and not enough land tax.

    Set the land tax at a fixed proportion of the cost of capital for the land (say 40-50%), allow only that to fund council budgets, and watch the regulations drop away.

  14. Sinclair Davidson

    Government didn’t approriate the tobacco company’s property, they rendered it useless.

    That is a such a relief – investors can relax. :)

  15. Empire Strikes Back

    Company tax leakage problem Joe? Easy, spend less and you won’t miss it.

    As for IP, well yes, the current protections are clear overkill. That said, nothing will change any time soon due to the myriad of conventions that Australia has adopted in the interests of serving special interests.

    A clear brake on change is the AUS/USA FTA. We are locked into the US model for the foreseeable future.

    Arguably, the most valuable IP ever created is the recipe for Coke. This IP is not protected by government fiat. It is a trade secret.

  16. Nuke Gray

    Well, as an inventor, I am in favour of IP. I hope to make millions, since my idea is one that most people would appreciate. I have invented a better clothing button- no sewing needed. I won’t go into details, but it has many uses.
    I would not have bothered without IP, because I don’t know any people in the button industry, and would have had no legal protection against them just taking it, once I showed it to them.

  17. James B

    “Intellectual” property is a statist delusion.

    It needs to be dismantled.

  18. Tel

    Here is the thing; IP is vulnerable to expropriation by government through excessive taxation, or simple outright theft. Look no further than what happened to the tobacco companies. Now many of my lawyer friends tell me that the tobacco business wasn’t really an expropriation because the High Court ruled in the government’s favour. How reassuring is that to IP owners – not only does the government take your property, but the courts rule in favour of it?

    The tobacco companies have operated under a license system for centuries. The system ensures that prices stay artificially high since any bozo can grow tobacco plants, and would do cheaply, but they aren’t allowed to (i.e. government repression of supply to the benefit of a few). Given that the whole edifice was based on a government mandated bounty, it’s very hard to feel sorry for them.

    Mind you, if government really kills tobacco, they will also destroy their own tax cash cow, so I doubt they evereill do it.

  19. Demosthenes

    A clear brake on change is the AUS/USA FTA. We are locked into the US model for the foreseeable future.

    The TPP is the next lock. Media conglomerates have seen the future, and they are not happy.

  20. A H

    Why are you conflating IP law with tax jurisdiction?

    The goal here is to have no tax and no IP.

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