Contract vs. Reserved Rights

Third parties, then, who are not parties to the contract and are not in privity with the contractual obligor and obligee, are not bound by the contractual relationship. For this reason, although an innovator can use contract to stop specified individuals from freely using his ideas, it is difficult to use standard contract law to prevent third parties from using ideas they glean from others. Perhaps sensing this problem, some quasi-IP advocates shift from a purely contractual approach to a “reservation of rights” approach in which property rights in tangible resources are seen as a divisible bundle of rights.
For example, under the standard bundle-of-rights view, a landowner can sell the mineral estate to an oil company while retaining all rights to the surface, except for an easement (servitude) granting passage to a neighbor and a life estate (usufruct) granting use of the surface estate to his mother. Drawing on the bundle-of-rights notion, the “reservation of rights” approach holds that a type of “private” IP can be privately generated by creatively “reserving rights” to reproduce tangible items sold to purchasers.
Rothbard, for example, argues that one can grant conditional “ownership” (of “knowledge”) to another, while “retaining the ownership power to disseminate the knowledge of the invention.” Or, Brown, the inventor of an improved mousetrap, can stamp it “copyright” and thereby sell the right to each mousetrap except for the right to reproduce it. Like the real rights accompanying statutory IP, such “reservations” allegedly bind everyone, not just those who have contracted with the original seller. Thus, third parties who become aware of, purchase, or otherwise come into possession of the restricted item also cannot reproduce it—not because they have entered into a contract with Brown, but because “no one can acquire a greater property title in something than has already been given away or sold.” In other words, the third party acquires a tangible thing—a book or a mousetrap, say—but it is somehow “missing” the “right-to-copy” part of the bundle of rights that “normally” constitutes all rights to the thing. Or, the third party acquires “ownership” of information, from a person who did not own the information and, thus, was not entitled to transmit it to others.85
But surely something is amiss here. Suppose that A writes a novel and sells a first copy, BOOK1, without restriction (i.e., without a reservation of rights) to B1; and a second copy, BOOK2, to B2 —but “reserving” the book’s inherent “right to copy.” The two books, BOOK1 and BOOK2, appear to third parties to be otherwise identical. Yet they are not: one is incomplete; the other somehow contains more mystical “rights-essence” within its covers. Suppose B1 and B2 leave these books on a park bench, where they are discovered by third party T. According to Rothbard, BOOK2 is “missing” the “right to copy,” much like an electronic toy that is sold “batteries not included.” It is as if there is an invisible, mystical tendril of “reproduction-ownership” stretching from BOOK2 back to its true owner A, wherever he may be. Thus, even if T finds and homesteads the abandoned BOOK2, this book simply does not contain “within itself” the right to permit the owner to copy it. It is being continually siphoned away by a rights wormhole which connects the item to owner A. Thus, if T homesteads the book, he still homesteads no more than he acquires. T homesteads only a book without a right to copy “built in,” and, thus, does not have the right to copy BOOK2. The same is true for subsequent third parties who come to possess the book.
Is such a view really tenable? Can we conceive of property rights working this way? Even if we can, would it really achieve the desired result here—preventing third parties from using the protected ideas? It is difficult to maintain that rights can be reserved in this manner. One function of property rights, after all, is to prevent conflict and to put third parties on notice as to the property’s boundaries. The borders of property must necessarily be objective and intersubjectively ascertainable; they must be visible. Only if borders are visible can they be respected and property rights serve their function of permitting conflict-avoidance. Only if these borders are both visible and objectively just (justifiable in discourse) can they be expected to be adopted and followed. But think of the two books, BOOK1 and BOOK2. How could one tell the difference between them? How could one see the rights-tendril connected to the latter but not to the former? How can third parties be expected to respect an amorphous, invisible, mystical, spooky, possibly unknown and unknowable property border?
The implications of such a view are troubling. Palmer writes:
The separation and retention of the right to copy from the bundle of rights that we call property is problematic. Could one reserve the right, for example, to remember something? Suppose that I wrote a book and offered it to you to read, but I had retained one right: the right to remember it. Would I be justified in taking you to court if I could prove that you had remembered the name of the lead character in the book?86
But third parties still pose a problem for this theory. Even if a seller of an object could somehow “reserve” certain use-rights with respect to the sold object, how does this prevent third parties from using information apparent from or conveyed in that object? Reserved rights proponents say more than that the immediate buyer B1 is bound not to reproduce the book; for this result could be obtained by pointing to the implicit contract between seller A and buyer B1. Let us consider a third party, T1, who finds and reads the abandoned book, thus learning the information in it. Alternatively, consider third party T2, who never has possession of or even sees the book; he merely learns of the information in the book from gossip, graffiti, unsolicited e-mail, and so forth. Neither T1 nor T2 has a contract with A, but both now possess certain knowledge. Even if the book somehow does not contain within it a “right to reproduce,” how can this prevent T1 and T2 from using their own knowledge? And even if we say that T1 is somehow “bound” by a contractual copyright notice printed on the book (an untenable view of contract), how is T2 bound by any contract or reserved right?
Rothbard attempts to address this point as follows:
A common objection runs as follows: all right, it would be criminal for Green [the buyer] to produce and sell the Brown mousetrap; but suppose that someone else, Black, who had not made a contract with Brown, happens to see Green’s mousetrap and then goes ahead and produces and sells the replica? Why should he be prosecuted? The answer is that ... no one can acquire a greater property title in something than has already been given away or sold. Green did not own the total property right in his mousetrap, in accordance with his contract with Brown—but only all rights except to sell ... a replica. But therefore Black’s title in the mousetrap, the ownership of the ideas in Black’s head, can be no greater than Green’s, and therefore he too would be a violator of Brown’s property even though he himself had not made the actual contract.87
There are several problems with this reasoning. First of all, Black merely sees Green’s mousetrap. He does not see or have access to ideas in Green’s head. Nor does he need to have such access in order to duplicate evident features of the mousetrap.
Further, ideas in one’s head are not “owned” any more than labor is owned. Only scarce resources are owned. By losing sight of scarcity as a necessary aspect of a homesteadable thing, and of the first occupancy homesteading rule as the way to own such things, Rothbard and others are sidetracked into the mistaken notion that ideas and labor can be owned. If we recognize that ideas cannot be owned (they are not scarce resources), that creation is neither necessary nor sufficient for ownership (first occupancy is), and that labor need not be “owned” in order to be a homesteader, then the trouble caused by these confused notions disappears.
If Black somehow comes into possession of the ideas implicit in an item which Brown invented (in Rothbard’s example, he “happens to see” it), it is irrelevant that the mousetrap may not have had a “right to copy” built into it. For Black does not need such permission to use his own property as he sees fit. How does “happening to see” the mousetrap make Black a trespasser or violator of Brown’s rights?
All action, including action which employs owned scarce means (property), involves the use of technical knowledge.88 Some of this knowledge may be gained from things we see, including the property of others. We do not have to have a “right to copy” as part of a bundle of rights to have a right to impose a known pattern or form on an object we own. Rather, we have a right to do anything at all with and on our own property, provided only that we do not invade others’ property borders. We must not lose sight of this crucial libertarian point. If I own a 100-acres of land, I can prance around naked on it, not because the land is imbued with some “right-to-prance-naked,” but because I own the land and it does not (necessarily) violate the property rights of others for me to use my property in this fashion.
Similarly, I am entitled to do what I want with my own property—my car, my paper, my word processor—including improving my car’s carburetor or using my ink to print words on my paper. That is, unless I have contractually obligated myself to someone else to restrict my actions with respect to my use of this knowledge. I do not have to first find in my property a right-to-use-in-a-certain-way, for all ways of using it, except those that cause invasions of others’ property borders, are already encompassed within the general right to use my property. In libertarianism, we live by right, not permission. We do not need to find permission to take actions with our own property. Contrary to practice in totalitarian societies, all things that are not forbidden are permitted. The reservation-of-rights view would reverse this by assuming that every use of property is valid only if that particular use-right can be somehow found or located in the property.
Consider the following analogy. Farmer Jed discovers oil under his land. No one for miles around knows about the black gold. Jed plans to buy his neighbors’ property for a song; they’ll sell it cheap, too, since they don’t know about the oil. In the middle of the night, his nosy neighbor Cooter, suspicious over Jed’s recent good spirits, sneaks onto Jed’s land and discovers the truth. The next morning, at Floyd’s barbershop, Cooter spills his guts to Clem and the boys. One of them promptly runs to a pay phone and gives a tip to a reporter at the Wall Street Journal (who happens to be his nephew). Soon, it is common knowledge that there is oil in the vicinity. The neighbors now demand exorbitant prices for their land, thus spoiling Jed’s plans.
Let us grant that Cooter can be prosecuted for trespass and harms flowing therefrom. The question is, can Jed’s neighbors be prevented from acting on their knowledge? That is, may they be forced to somehow pretend that they do not know about the oil, and sell their land to Jed for what they “would have” sold it when in ignorance? Of course they may not be so forced. They own their land, and are entitled to use it as they see fit. Unlike tangible property, information is not ownable; it is not property. The possessor of a stolen watch may have to return it, but so long as the acquirer of knowledge does not obtain that knowledge illicitly or in violation of a contract, he is free to act upon it.
Note, however, that according to the reservation-of-rights view, the neighbors would not be permitted to act upon their knowledge because they obtained it ultimately from Cooter, a trespasser who had no “title” to that knowledge. Thus, they could not have obtained “greater title” to it than Cooter himself had. Note also that others, such as geological surveyors mapping oil deposits, cannot include this information in their maps. They must feign ignorance until given permission by Jed. This imposed ignorance correlates with the unnatural scarcity imposed by IP. There is clearly no warrant for the view that reserved rights can somehow prohibit third parties from using knowledge they acquire.
It is simply not legitimate to restrict the use to which an owner of property can put it unless that owner has contractually obligated himself or has otherwise acquired the information by a violation of the information-holder’s rights. Talk of reserving the right to copy is merely a way to avoid the contractual notion that only parties to a contract are bound by it.89

"But the book cost them money

That's true. But it cost them a pretty small amount of money. You probably cost them more if you leave a mess in their public bathrooms, or mumble your latte order so that the clerk gets it wrong and has to do it over, but we don't give Barnes and Noble property rights in those things.

More to the point, this doesn't have anything to do with whether a good is rivalrous or not. It has to do with whether the good has a low marginal cost. Making records costs money too.

But not for the individual copy. Electronic files have zero marginal costs.

But hotel rooms and airplane seats also have near-zero marginal costs. Is it therefore okay to sneak into a hotel room, as long as you make the bed perfectly before you leave?

This brings us to the issue of trespass, which--despite the fact that it is often, maybe even usually, non-rivalrous, most libertarians don't support. If you own a cabin in a snowy and distant mountain, and I know for a fact that you cannot leave town for the weekend, is it okay to pick the lock and use my house?

You might break things.

Is it okay if I am very careful, or only occupy a small portion of the home filled with things that are not breakable?

I might change my mind and want to come.

The partners said everyone in your group has to work all weekend. Your wife is dying in a hospital bed, surrounded by all your friends and family. For whatever reason, I can be reasonably quite sure that you are not going to use this property this weekend. Is it okay, morally, for me to use it? Should you have legal rights against me if you find out? How about camping on a part of your property that you haven't trod in ten years?

Even if you clean up, you'll change things.

Seriously? We're arguing for a system of property rights because I disturbed some leaves on your property?

You might frighten away deer I hunt. You can't know whether you're damaging my property, or whether I might want to use it, which is why I should be able to decide whether I want you to change things.

But this is the argument of publishing houses, and increasingly, artists: they should be able to decide whether you get to make non-rivalrous use of what they created, and whether your use damages them.

Also, you could make the law clear that you had to be really, really sure that they wouldn't come, or you wouldn't break things, before you could use peoples' stuff. Law makes fine distinctions like this all the time.

(For that matter, as I understand it, the law actually does give me a right to trespass if, say, I am lost in a storm and am clearly going to freeze to death unless I break into your cabin. I may have to pay you for any damage I do, but I'm not legally in the wrong simply for entering your property.)

On the other hand, there are plenty of rivalrous uses that do not have clearly defined property rights, like how loud parties can be, how much smell or visual blight can be inflicted on a neighbor, how much care I have to take to keep the rat population down, how to allocate responsibilities and rights over common resources like ponds and trees that span property lines, and so forth. These questions are adjudicated differently in different jurisdictions, or by negotiation between neighbors, because no one has a particularly well developed theory of how such rivalrous uses should be allocated.

Now go back to those accounting entries at our bank. They do not take up any meaningful physical space, and they're non-rivalrous: if I copy them and pretend they're mine, you can still use yours."