CONTRACT THEORY

Basic Theory

We have explained contract theory to some length in our article Contracts Are The Key To Coexistence. We won't repeat that information in here. What we will do is to emphasize contract theory elements that are relevant to IPs.

Our definition of contract is, again: A contract is a voluntary permission given to a party in an agreement to commit infringement against the other party's property.

The elements of a contract are a "voluntary" "offer" and "acceptance" by emancipated people who represent themselves or are bound by contract to represent others. These people may exchange "consideration" to create "mutual obligations".

We must now take a look at a classification of contracts that we would prefer not to use (since it is irrelevant) but which in this case is of educational value. The notion that contracts can be classified as Bilateral or Unilateral.

Bilateral contracts are your standard contracts. Bilateral means that both parties to the contract promised something to each other. Quid pro quo.

Unilateral contracts are not so common, however they do exist. Unilateral means that only one party promised something to the other. Quid.

For example if I take my old CRT TV to the curb and place a sign on it that reads "Free - Please Take It", I am in fact creating a Unilateral "offer". This offer is not yet a contract because it was not executed. Up to the very moment at which it is executed, the TV is still my property and I may do with it as I wish, including smashing it to pieces with a sledge hammer. However, the very instant somebody "accepts" my Unilateral offer, the TV ceases to be my property. In that instant the TV is the property of the person who accepted my offer. The Unilateral contract was executed and it is now a fully valid contract.

Implied Contracts

These types of contracts are the ones a person enters into through a certain behavior that entails either an offer or an acceptance.  For example by simply leaving the TV on my curb (without a note) I am signaling other people that the TV is there to be taken. For my Unilateral contract to be valid I don't need a sign, although it helps to clarify the situation.

Contractual Failures

Contracts are human endeavors and as such they are not perfect. Contract theory does not demand that contracts be perfect because as Absolute Austro-Libertarians we are free to contract absolutely (i.e. anything and everything we wish without any limitations of any kind).

It is up to the people creating contracts and the ones accepting them to make sure the contents of such contracts are clear and agreeable enough so that there won't be any issues.

This fact carries with it the notion that contracts can be flawed. This is absolutely correct. A flaw in a contract can carry devastating consequences and as a contract is nothing more than a subjective economic transaction; once the flaw has been executed no party in the contract has any superior rights to determine the fix (unless the contract stipulates otherwise - we will assume it does not).

What this means is that once the flaw is visible, the only way to resolve the issue is through a new contract among the parties of the original contract. This means that if one of the parties simply refuses to negotiate, the other party is stuck. No negotiated fix is possible. This will become a critical notion for IPs and it is important to keep it in mind.

INTELLECTUAL PROPERTY

With the ground work laid, we can now begin to tackle the issue of Intellectual Property or IP.

What is IP?
By definition IP is intangible property. This is so because it was created in somebody's brain, which is somebody's property (i.e. because of self-ownership).

Is IP a true property?

No. IP is not a true property because it cannot be obtained by homesteading.

We can manufacture an idea in our brain through the process of expending energy and we can certainly obtain an idea by purchasing it. But we cannot "find" an un-used idea in nature in the same manner as we can find land or gold or a river. We do not find in nature a piece of paper created by nature with the recipe for chocolate cookies. Such things simply do not exist.

Therefore IP is not a true property but a deficient one. This conclusion alone highlights the problem in dealing with IP and one of the sources of much confusion.

If IP is not a true property, then it is to be expected that not all its other characteristics will be the same any other true property. This tells us that we need to thread carefully because straight comparisons with true property may be invalid.

The origins of IP

As we have stated before, IP originates in our brain. However, without our brain to exist in, IP is meaningless. There is no such thing as a non-corporeal idea. Information does not simply float around in absolute empty space (and we do mean absolutely empty). Information requires some material medium to exist.

As such when we conceive an idea it is conceived in the medium called "brain". It is clear that for as long as ideas remain in this medium, they are indisputably ours because they are stored in our property, our body.

Types of ownership

IP is unique in the sense that is difference from a "normal" property. A normal property cannot be owned in its entirety more than once but IP can. In other words, I can own 100% of a car or my friends and I we can all own 20% each (there are five of us). However, what we cannot do is own 100% each since there is only one car. IP is different. We can all own 100% of the total without any consequence in terms of ownership for anybody else. This ownership is not breaking any physical laws and therefore it is not breaking any biological laws or imperatives on which the Master Contract is built upon.

When we speak of absolute IP ownership what we are referring to is the notion that only one person in the entire planet owns said IP. This could be because it exists only in this person's mind or because this person has Non-Disclosure Agreements (contracts) with other people preventing them from using the IP in a valid manner.

When we speak of IP ownership we are referring to the notion that several people have acquired the same IP in a valid manner and it now resides in its entirety in each of their respective brains. They each own 100% of the IP. As such, the IP is now their property and they are entitled to do whatever suits them with it without any interference from anybody else (assuming no other voluntary contractual limitations exist).

Interacting with IP

As IPs are properties, we can interact with them. Most of the time, the manner in which we do so is simple: we place the idea onto a different medium and we give this medium to somebody else. This person then retrieves this idea from the medium and store it in their brain. For example, we write our idea on a piece of paper and give it to Xin. Xin in turn reads the paper and stores the idea in his brain. But the concept of "placing" and "retrieving" an idea into a different medium has a name: transmission.

This means that the only manner in which we can interact with ideas (IPs) is through transmission.

Think about it. If an idea is locked in our brain, nobody in the universe knows it exists. It is our property but nobody can interact with it.

In other words, ideas are meaningless in practice without the means and will to transmit them. This is yet another characteristic of IPs that "normal" property does not exhibit. We cannot "transmit" a pack of cigarettes, or a tree; furthermore, we do not need to do so. If we wish to purchase a pack of cigarettes or a tree, we simply exchange Titles of Property which are ideas being transmitted as part of the transaction.

Normal properties do not require physical means to exist because their nature is physical; they exist independently of other physical entities. A rock exists whether or not the river exists. Their existence is independent from each other. Not so with IPs. If we wish to interact with IPs we need physical means to transmit them. Interactive IPs are dependent upon physical means.

One of the primary purposes of the existence of the notion of property is so that we can own it but also exchange it. In other words, without the notion of property there cannot be contracts and without contracts there cannot be a working economy. Therefore if we wish to use our IP in an economic manner (i.e. through contracts) we must make use of physical means to transmit it. Without such physical means IPs are economically irrelevant because they cannot be contracted upon.