In his 1991 paper ‘Self-Ownership, Equality, and the Structure of Property Rights’, John Christman argues that to analyse property rights, it is necessary to split these rights into two distinct categories of rights (1991:28ff). In one category are what he calls control rights, and in the other the bundle of income rights.^[1] Control rights includes the “rights to use, possess, manage property, and the right to the capital (rights to transmit, alienate, or destroy),” whereas income rights concern the right to the income from the asset (Christman, 1991:29). I will show in this chapter first that the income in Christman’s sense which can be generated from a transaction has nothing to do with the labour which someone has put into a product, and therefore monopoly rights to generate a higher income from a market cannot be justified by the natural law argument; and second that control rights do not make sense for abstract objects because they are not scarce.

Christman brings up the control/income rights distinction as an answer to the intriguing self-ownership argument, which claims that every person owns herself, and therefore also owns – with the meaning of having all the property rights over – the results of her own body, skills and labour (Christman, 1991:28). The conceptual distinction between these two groups of rights lies in the nature of the environmental differences which are necessary for a person to be able to execute these rights. In simple words, to execute control rights, the existence of someone else is not needed, but I cannot execute my income rights without at least one other person who is involved in the transaction. We could also say there is no income from property without society. It is important to understand the character of income in Christman’s argument. He does not count the consumption of capital among income rights; rather it is part of the control rights. Income is the surplus of a transaction, which can only be realised because markets exist and because they are in reality never perfect. In a perfect market, the realised prices would not be higher than the production costs, and there would therefore be no income in Christman’s sense, only asset liquidation. For example, if I plant an apple-tree on my own property with my own labour and then eat the apples from my tree, I do not realise income rights but rights from the capital of my tree. Only if I am going to sell some of my apples in the market do I realise a surplus, with the difference between my investment, or costs, and what I get, being counted as “income” in Christman’s sense. The main reason for Christman making this distinction is to support the left-libertarian view that redistribution of income can be compatible with self-ownership concepts.^[2] I am not discussing whether it is just to redistribute income here, but I will use Christman’s model to show that the income which may be realised from intellectual property rights has no logical connection to the labour which has been put into a creative work or an invention. This is important because labour is a basic component of the natural law justification, as we have seen in Chapter One. Another relevant aspect of Christman’s proposition is that he does not discuss whether private property as such can be justified, but says that we have to look at the concept of private property in a more complex way than is usually done:

“Instead of asking whether private property per se can be justified, we should ask whether, on one hand, control rights can be justified (and what scope they should have and what objects they should cover) and, on the other, whether and what sort of income rights can be defended” (Christman, 1991:37)

There are no property rights as such; there are control rights and income rights as we have seen above.^[3] In most cases, the principal protagonists in both current and historical political debates about intellectual property in general, and copyright laws in particular, claim total control and total income rights for the creator.^[4] In fact, the whole body of international copyright law is based on this assumption.^[5] There are a few limitations and exceptions in copyright law, such as fair use in the United States, but even these are based on the assumption that the creator shall in principle have full control and income rights on his intellectual property. The intellectual property rights restrictions are seen as a necessary evil.

Income Rights

Let us first examine the income rights claim from intellectual property owners, especially from the proponents^[6] of the current international copyright law legal framework. Later in this section we will analyse control rights. As we have seen in the section about the classical arguments for intellectual property rights above, it is posited as being almost common sense that the creator of any cultural piece of work deserves monopoly rights over the exploitation of his work. This means that the author shall have full income rights from his ‘intellectual property.’ This claim is usually based on the natural law justification with reference to John Locke as outlined in Chapter One, and therefore it is bound mainly to the idea that the creator has put labour into his work for which he deserves to be the exclusive beneficiary. What Christman shows is that an ‘income’ from the surplus can only be realised if there exists a market infrastructure. This means that the possibility of an income has less to do with the creator’s work than the proponents of intellectual property rights usually claim. If there is no market, or at the very least one other person who is willing to be part of a transaction, there is no income to be realised. The actual real-world market situation works like this: most of the surplus that can be realised on a market transaction is allocated to the seller of the good.^[7] But without the social infrastructure which makes it possible to find a buyer for the transaction to take place, no income could be generated. It would seem absurd to most of us to demand that the surplus shall go to the buyer; we accept that it is fully transferred to the seller. In both situations, the income is concentrated on only one side, even if it is indisputable that both sides are equally necessary to make it happen. Again it is important to keep in mind that we are only talking about the surplus here, not about the capital.

Let us assume a creator has put an effort c into the creation of his work and wants to realise a surplus S from it, which means selling it on the market for c+S. We have to make clear that c is the capital value of his artwork, which means the labour he has put into his work is part of his production costs^[8], and S the surplus which he may be able to realise in a market. He can consume c exclusively because of the control rights which are – for the sake of the argument here – granted to him. Even if he lived alone on an island, he would be able to create and to consume his piece of art as long as he wishes. But if he wanted to realise more than the capital value, he would have to make a transaction in an imperfect market, and therefore a market infrastructure is needed to make this transaction possible. From this moment on he is not solely responsible for the realisation of this surplus S and therefore cannot claim that he deserves S because of the labour he needed to create his work. We could also say that the amount of the surplus S he may realise in the market is not logically connected to the labour he has put into his product. Only the market mechanism can create a price above his production costs. But how much above his production costs that price is, has no connection at all to the amount of labour that he has put into the work. Even if this price is the result of the consent of free market participants it is still true that the only reason the seller can realise his surplus S is because the market is not perfect, and not because he has deserved it according to his labour. The surplus which can be realised depends only on the mere chance that a particular market situation exists. The labour is included in the capital, which is not governed by income rights, but by control rights. I agree that there may be other reasons, like the fact that he takes the risk to bring the product to the market, which can act as justifications for his profit, but these reasons do not justify monopolies as we will see shortly. And we have to keep in mind that bringing a product into existence is not the same as bringing it to the market. I can buy apples instead of planting a tree, which means I did not put my labour into the apples, but still be able to bring them to the market. The natural law justification of intellectual property rights claims that the creator has deserved the granted monopoly not because he brings the product to the market, but because he brings it into existence by his own labour.

Assume that a baker operates in a market which has only one bakery and 100 customers for bread, and that the production cost including his labour for one loaf is 1 unit. Further assume that the 100 customers are able to spend 3 units per day for one loaf. As long as there is only this one baker in the market he would be able to sell the bread for 3 units and make a profit of 2 units per loaf. He does not realise this profit because he deserves it according to the labour he put into the 100 loaves of bread, but only because the imperfect market situation allows him to do so. As soon as other bakers enter the market, the profit will fall until the ‘deserved’ price, which is equal to production costs, is realised. We can easily see here that not only for intellectual property but for all kinds of products, a surplus does not depend on the labour or other production costs but only on the particular market situation.

There are several possible objections to the view that the seller does not deserve the surplus from market transactions. First, one could say that it is equally true for creative work that no surplus could be generated if the author did not create it. Second, even if we accept the fact that without a market there would be no surplus, it is not evident how that surplus should be distributed. We could postulate that the creator should still have a bigger share. Third, if the surplus ought to be distributed in some other way, it is not even clear who should be included in this distribution: only the parties of the particular transaction, all participants in the market, or all members of the society which provides the marketplace? It is right that there would be no surplus if the author did not create his work. One could even say that if there is nothing to sell there is no marketplace at all. Obviously, markets and goods are both equally necessary for it to be possible to generate a surplus.

I have two replies against these objections. First, my statement is not that the seller does not deserve any potential surplus at all. My point is that one cannot say that a seller deserves his surplus simply because of the labour he has put into a product. Let us remind ourselves that full self-ownership means that one has full property rights over his body, skills, talents and the results of his labour.^[9] This concept of self-ownership is what natural law justification relies on. It is based on the assumption that it is not ideas that are owned by the creator, but expressions, which need labour to bring them to the world. Opponents of my view could say then that sellers deserve their surplus because they take the risk or burden of bringing a product to market. I do not object to this point. But this does not serve as a justification of monopoly rights, because monopolies do not create markets. They hinder competition, and having competition is considered to be a main feature of a free market. A person who enters a market does deserve his profit for being a market participant as long as he is not hindering competition. If there are, in an imagined world without intellectual property rights, thousands of shops on the Internet selling products or services based on the newest Harry Potter novel, each of them may create a surplus on their particular markets. The ones who are just trying to sell a copy of the text will probably gain no profit at all as the cost for distribution is near zero nowadays and competition will most probably lead to zero profit. But those who are able to create additional value can use the text and create new market situations where they can gain their profits. The author could create a website for example, where subscribed members can get new chapters earlier than anyone else, or could buy special editions of physical objects she has created based on her story. Or she could provide live sessions online, where the fans of the novel can discuss questions about the contents of the actual and future stories with her. Of course, others could do so as well, but it is likely that the author would get more attention than just another random seller. Still, competition will exist not only over copies of the text, but also over its content. It is possible that other authors would also write new stories based on some or all of the characters and locations from the Harry Potter series, and we can easily imagine that some of these authors or stories would be even more successful than the ones from the ‘original’ author. But all this innovation only happens when a competitive market situation is created. Intellectual property rights don’t assist this, they hinder it.

Second, when I question the justification for intellectual property rights, I am not arguing for the redistribution of a potential surplus. The abolition of intellectual property rights does not mean that profits get redistributed. It is not that something is taken away from the creator or innovator in a world without intellectual property. It is only that he would face competition and therefore probably less profit and a higher pressure to innovate constantly. Of course from the point of view of a creator in our actual political situation, it looks like an attempt to redistribute his potential income. But again, as we have seen above and will discuss more deeply later in the text, it is not that he has morally deserved his de jure monopoly; it is just a privilege for which an industry sector has successfully fought. This situation is comparable to the time when the old guild systems came under pressure. For guild members, it felt like redistribution, but in fact it was the termination of a distributive system which was unjust^[10] in the first place.

It is also said by proponents of the current regime that only with copyright protection is it possible to bring a book into the book market for example, or a movie into the movie market. However, intellectual property rights do not create markets as we have seen. Rather they create monopolies where the parties are not free to choose, as there is only one seller of a particular creative work or an industrial invention. If I need one specific paper from a particular scientist to cite in my work, I cannot choose to buy another one. I am not ‘free to choose’^[11] because books are not apples. Intellectual property rights create de jure monopoly markets for the respective works. While it is true that there is also some competition between different cultural works or inventions it is also undeniable that there would be much more competition if monopoly rights were not granted, which is one of the main reasons why creators and inventors insist on these rights.

Intellectual property rights proponents could argue that without these rights creators and inventors would also not be able to realise the capital value from their works, as the competition would be so high that the prices would be zero at the end. For example, if the production costs of a book text (not the book copies) were 100,000 units and the production costs for a digital copy were zero and there were no copyright protection, which means everyone could sell the copy without paying a share of the production costs of the first text, the market price for a copy would be zero as well, and the author of the book would not be able to generate the 100,000-unit capital value from the market, which he has deserved according to the natural law justification. Temporary monopoly rights are needed to give the creator and inventor a chance to generate at least the capital value on the market. It is not about the surplus, they would say.

My first reply to this objection is that it is true that where copying and distribution costs are zero, it is possible that not even the capital costs would be recovered from selling copies. But selling copies is just one possibility to let people pay for creative works or industrial products. In a world where copy and distribution costs are zero it may just not be possible anymore to make a profit from selling copies, like it was not possible at the time when the technical inventions to create copies had not arisen. Before the invention of sound recording, for example, it was just not possible to make a profit with recorded music, and now it appears that this situation is returning. As technical inventions evolve market possibilities change. Just as it is no longer possible to make a living as a movie theater musician who plays along with silent movies, it may not be possible anymore to make a living from selling CD’s. But this did not mean then and does not mean today that one cannot make a living anymore from playing music. It is just that one has to innovate and find new ways to generate value for potential buyers, as the value for copies of cultural artefacts for music lovers has vanished the same way as the value for play-along musicians for movie theatres.

The second answer is that there is no evidence that the creator or inventor cannot realise his capital value when he faces competition in every case. He may have the advantage of being the first mover, or he may be able to create additional value which cannot be copied. We can see this for example in the fashion design industry where no intellectual property rights exist and famous designers can sell their clothing articles for high prices and generate a high income even if at the same time fashion companies copy their work and sell the copies for a much lower price to the masses in their outlets.^[12]

The third answer is that economic theory shows that in most cases it makes sense not to grant monopoly rights to ensure that the capital value can be generated. There is always the risk that no market will exist because no one is looking for the particular product, or that not even the capital value can be realised because there is an oversupply of a particular product. If we grant monopoly rights to the creator or inventor then why not as well to the baker and the butcher? De jure monopolies hinder innovation because monopoly holders usually follow a rent-seeking strategy. This is one reason why we have abandoned feudal and guild systems in favour of free market systems.

Control Rights

Let us now have a closer look at control rights for intellectual property. Christman does not justify control rights in his paper; he just mentions that the execution of these rights is not dependent on the consent of other persons. It is possible that they can be defended, and for the sake of our argument we assume here that they are justified. One important aspect, though, is that everything that is said about private property and control rights makes perfect sense for physical goods, as they are so-called rival goods, which means control rights can only be executed exclusively by one person at a time. In fact the assertion of such rights only makes sense because of this characteristic of rivalry of such goods. If physical goods were not scarce goods we would not need to think about ownership and property. This may seem like a triviality, but it is a very important point when we analyse the character of intellectual property.

A text in a book or a painting on a canvas are only rival-goods in the sense that the physical manifestation of the expression cannot be consumed more than once at any given time. The expression itself is non-rival. It can be consumed by many people at the same time as long as sufficient copies of the expression exist. The proponents of the current copyright system argue that the justification of intellectual property shares the same moral grounds as the justification of physical property.^[13] But only the physical medium has a rivalry character comparable to the physical goods by which control rights may be justified. As soon as the copying of the expression, which is what copyright law protects, does not need a physical medium anymore, which means that it can be done at zero or near zero cost, it loses its rivalry character. In other words, copying is not stealing, as the proponents of intellectual property rights try to convince us. A printed book for example can only be read by one person at a time.^[14] If someone takes the book away from its owner, he can now read it and the original owner cannot. What we have here are the typical characteristics of a rival-good where the postulation of control rights may make some sense. But this changes completely as soon as a digital representation of the expression is available. In this case this would be an E-Book file or a website with the same text on it. If I possess an E-Book or have access to text on the World Wide Web, I am not limited in my enjoyment of the expression when someone else makes a copy and reads the text as well. As soon as the expression is no longer bound to a physical medium, and its manifestation is realised in a digital representation, the marginal costs for the second and subsequent copies are nearly zero and therefore it loses its rivalry character and its scarcity.

Against this argument it is said that if the non-rivalry character of a creative work allows its use without the consent of the creator as long as it does not hinder someone else using it at the same time, it could also be said that a physical good can be used by anybody for free as long as no one else needs to use it.

“… that principle as clearly requires that a hammer should be free to different persons at different times, and that a road, or canal should be free to as many persons at once, as can use it without collision, as it does that an idea should be free to as many persons at once as choose to use it” (Spooner 1855, cited in Palmer 1990:824)

Spooner’s argument may seem convincing at first glance, but the non-rivalry character of digital objects does not derive from the fact that they can be used by more than one person at the same time, but from the fact that they will not be consumed when used. Every time someone uses a hammer or any other physical object it wears down a little bit. This is not the case with digital representations. There is no consumption of content or cultural artefacts in the way that causes them to be diminished by being used. What is consumed is the physical medium. A printed book gets dog-eared and its cover becomes worn; not so the E-Book.

It is argued then, by proponents of the current copyright system, that when someone buys a book or a painting he does not buy the content but only the medium and the license to consume the content, which means the creator of the expression continues to be the owner of his work. The ownership which is protected by the copyright law is that of the expression, not the medium. This is also in line with the so-called first sale doctrine from the copyright legal framework, which means that the buyer of a medium like a book or a CD can execute all the private property rights on that medium as with any other physical product, the control rights and the income rights, but he has no property rights on the creative work itself. So we should not analyse the justification of intellectual property rights based on the physical medium, but only on the expression itself. I absolutely agree with this claim and because it is the expression, in other words the abstract object, which is the subject matter of intellectual property law, it is not very useful to refer to concepts from the physical world. If control rights are justified for physical goods like a hammer, because controlling or using them can only be exclusive, it does not follow that they are justified for abstract objects as well. It rather looks like there is little ground for its justification as no exclusivity is needed to enjoy the benefits which are granted by control rights.

There is one open question remaining. This concerns the rights to the capital of the asset, which are part of the control rights. As I have mentioned above, the abstract good does not diminish from its consumption; in fact it cannot be consumed in such a way, like an apple or a hammer can be consumed. As long as it gets copied, it continues to exist, and as we are living in a world where, through digital representation, copying is done at zero or near zero costs, it will probably get copied. But what intellectual property law creates is not primarily the possibility of gaining an income from the capital of my book, but from its consumption. This is comparable to gaining an income from the fruits of my apple tree. As we have seen above, I can use the apples from my tree not because of income rights, but because of control rights. So why should I not be able to use the “fruits” of my intellectual works in, for example, the form of licence fees? We have to make again a clear distinction between rights to the capital, which are part of the control rights, and rights for profit, which are in fact income rights. The fruits from my apple tree are mine in the sense that I am the one who has the right to use, to possess and to control them. I can also eat them, give them away, sell them or let them decay. But the right to the surplus, if I am going to sell them on a market, is not part of the granted control rights; these are the concerns of the income rights and these are, in the case of intellectual property, contested as we have seen above and will see further below. So it is important not to mix up these different aspects of property rights. The fruits of my apple trees are finite and they are part of the capital; the ‘fruits’ of my creative work are infinite as there is no consumption in the way that something diminishes with its use. There is no comparable concept like trees with fruits for cultural artefacts and inventions. Or in other words, there are no apples growing from creative works. This does not hinder the creator, by the way, in generating an income from creative works, as I have mentioned in the income rights section with the fashion industry example. In fact it does not hinder anyone: as they do not get used up, they can be exploited by everyone without limitations. We will discuss the implications of this aspect in detail in Chapter Four.

Where have now reached? We have seen in this section that the surplus which can be generated in a market is not related to the labour someone has put into his work. As intellectual property justification is often based on a natural law argument which refers to Locke’s labour-mixing metaphor and the concept of self-ownership, it is important to point out that it cannot be argued that the creator has deserved the surplus from his de jure monopoly rights because of his labour. A seller in a market may deserve his profit, however, but this desert is not what is considered to be the grounds for the natural law justification of intellectual property rights. We have further seen that one cannot justify these rights from the control rights bundle as these rights do not make much sense for abstract objects which do not diminish through use. They are non-rival, as the economist says. I do expect that one could still argue that although the creator does not deserve his monopoly rights solely because he has put his labour into his work and the natural law justification does not hold, he may nevertheless deserve it because he is the creator or the inventor, the person who has realised himself and the cultural expression or the invention through his creativity. We will tackle this challenge in the next chapter, which concerns personality-based justifications of intellectual property rights.

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