How Knowledge becomes Property

In Economics, knowledge is a public good.  Such goods have two defining characteristics: (i) they are non-excludable; and, (ii) they are non-rivalrous in consumption.

First, knowledge is non- excludable in that once published one cannot be easily excluded from knowing.  In fact, the word ‘publish’ derives from the Anglo-Norman meaning “to make public’ or “to make known” which, in turn, derives from the Classical Latin publicre meaning to make public property or to place at the disposal of the community (OED, publish, v, etymology).

Second, knowledge is also a non-rivalrous good, i.e., your consumption does not reduce the quantity available to me.  Excludability and rivalrousness are necessary conditions to internalize economic costs and benefits into market price – the idealized outcome.  But how can something be exchanged in a market, i.e., bought and sold, if one cannot stop others from taking it for nothing and, if they do take it one’s inventory is not thereby reduced? 

The answer is intellectual property rights like copyrights, patents, trademarks and registered industrial designs.  Such rights, however, must be imposed by the State thereby breaking one of the implicit tenets of the standard model of market economics – no government involvement in the economy.  In fact without government there can be no knowledge-based economy.

In economic theory, IPRs are justified by market failure, e.g., when market price does not reflect all benefits to consumers and all costs to producers such as when market price does not include pollution costs.  These are known as external costs and benefits, i.e., external to market price.

IPRs, in this view, are created by the State as a protection of, and incentive to, the production of new knowledge which otherwise could be used freely by others (the so-called free-rider problem).  In return, the State expects creators to make new knowledge available and that a market will be created in which it can be bought and sold.  But while the State wishes to encourage creativity, it does not want to foster harmful market power.  Accordingly, it builds in limitations to the rights granted to creators.  Such limitations embrace both Time and Space.  They are generally granted only with full disclosure of the new knowledge, and

·         only for a fixed period of time, i.e., either a specified number of years and/or the life of the creator plus a fixed number of years; and,

·         only for the fixation of new knowledge in material form, i.e., it is not ideas but rather their fixation or expression in material form (a matrix) that receives protection. 

Eventually, however, all intellectual property (all knowledge) enters the public domain where it may be used by anyone without charge or limitation.  In other words a public good first transformed by Law into private property is transformed back into a public good.  Growth of the public domain is, in fact, the historical justification of the short-run monopoly granted to creators of intellectual property.

Even while IPRs are in force there are exceptions such as ‘free use’, ‘fair use’ or ‘fair dealing’ under copyright.  Similarly, national statutes and international conventions permit certain types of research using patented products and processes.  And, the Nation-State retains the sovereign right to waive all IPRs in “situations of national emergency or other circumstances of extreme urgency” (WTO/TRIPS 1994, Article 31b), e.g., following the anthrax terrorist attacks in 2001 the U.S. government threatened to revoke Bayer’s pharmaceutical patent on the drug Cipro (BBC News October 24, 2001). 

Forms of Knowledge

In a knowledge-based economy knowledge takes three primary forms – codified, tooled and personal (Chartrand 2007).  The nature of the matrix into which knowledge must be fixed to receive protection (legally called ‘fixation’) differs between them.  Just as utility in economics is reified as the dollars and cents a consumer is willing to pay, knowledge is reified into legal property when it is fixed in a material matrix.

Codified knowledge is fixed in an extra-somatic (Sagan 1977), i.e., out-of-body, matrix as meaning.  Sender and receiver must both know the code if the message is to convey meaning from one human mind to another. [i]  Furthermore, the communications media into which codified knowledge is fixed in order to receive copyright protection has no function except to communicate meaning, i.e., the matrix is non-utilitarian.  For example, a book may be a good read but makes a poor door jam, or similarly, a CD may yield beautiful music but serves as a second-rate coaster for a coffee cup.

Codified contrasts with tooled knowledge that is also fixed in an extra-somatic matrix but as function and is generally protected by patent.  Unlike a work of art that is appreciated for what it is, a patented device or process is valued for what it can do, i.e., the matrix into which knowledge is fixed has a utilitarian function. 

Tooled knowledge takes two forms – hard and soft.  Hard tooled is the physical instrument or process that manipulates matter/energy.  As a scientific instrument tooled knowledge extends the human reach and grasp far beyond the meso-scopic level of daily life to the micro- and macro-scopics of electrons, quarks, galaxies, the genomic blueprint of life, et al.  To see and manipulate matter/energy in such unseen, unreachable spaces and places our tools must go where no human can.  They generally report back in numbers (digital) converted into graphics (analogue) to be red by the human eye.  Scientific observation, in effect, involves a cyborg-like relationship between a Natural Person and an instrument.  This constitutes what is called ‘Instrumental Realism’ (Idhe 1991).  Soft tooled knowledge, on the other hand, refers to the standards, e.g., 110 vs. 220 volt, embedded in a device as well as its programming such as software, operating instructions and techniques to optimize its performance. 

Both codified and tooled [ii], in turn, contrast with personal knowledge fixed in a Natural Person as neuronal bundles of memory and the  trained reflexes of nerve and muscle, e.g., of an athlete, brain surgeon, dancer, sculptor or technician.  In this case, the matrix is a Natural Person.  Some can be codified; some tooled; but some personal knowledge, however, inevitably remains ‘tacit’, i.e. inexpressible in codified terms but sometimes visible in performance.  Personal knowledge is legally protected as the know-how of a Natural or, by legal fiction, a Legal Person under Common Law. [iii]

Ultimately, however, all knowledge is personal because without a Natural Person to decode or push the right buttons codified and tooled knowledge remain a meaningless or functionless artifact.  This means that ‘know-how’ resides in people and their ability to code and decode meaning and machine function into and out of matter/energy.  This is one gauge of the competitiveness of nations in a global knowledge-based economy. 

Arguably other IPRs such as industrial designs, trademarks and trade secrets as well as one-of-a-kind or sui generis rights are variations on these themes – meaning, function and know-how or ‘can do’.  In this regard it is important to note that the English verb ‘to know’ shares the same old English root, cnaw, as the verb ‘can’.  In this sense a knowledge-based economy is a ‘can do’ economy, not an economy of the mind.  

Intellectual & Cultural Property

Traditionally the relationship between intellectual and cultural property is Time.  In this view, cultural property is private intellectual property that has, over time, fallen into the public domain and then, in effect, been ‘nationalized’.  Of course, some is originally produced as and remains a publicly-owned good.

At the extreme, cultural property includes all the artifacts of daily national life.  Usually however, it is restricted to a limited range of things distinguishable from the ordinary by their special cultural significance and/or rarity.  This is called a nation’s ‘patrimony’ which forms part of its national knowledge-base along with private intellectual property and the public domain.  Cultural property is subject to differing national retention policies restricting international trade.  As property such artifacts – artworks, books, buildings of architectural merit, et al –may be bought and sold domestically but not necessarily internationally.  The traditional cultural property economy is populated by artists, collectors, dealers and auction houses, museums, art historians, archaeologists, ethnographers and, of course, national cultural officials (Merryman 2005).

Within the 1947 General Agreement on Tariffs and Trade (GATT), there are four provisions making a distinction between cultural and other goods and services in international trade.  First, quotas are protectionist measures that run counter to the free circulation of goods under Article XI.  However, an exemption is granted with respect to cinema exhibition.  Article III (10) makes reference to the exemption.  Second, Article IV is entirely devoted to special arrangements for fixing quotas in the film industry.  This provision represented a compromise between the USA film industry and the Europeans keen to maintain quotas first established between 1919 and 1939.  They have since been extended to television and other so-called ‘cultural industries’. 

This clause found renewed support with the 2005 UNESCO Convention on the Protection and Promotion of the Diversity of Cultural Expressions which came into force in 2008.  At the conference, one hundred and forty-eight countries approved; the United States and Israel voted against; and, four abstained.

Third, under Article XX (a), restrictions on free trade are permitted to protect public morals. To the degree public morals are part of national culture then foreign cultural goods threatening public morals may be restricted. The most obvious example is Islamic societies which hold fundamentally different values from the West about the image of women.  Similarly, controversy about sex and violence in books, film, video and TV has also traditionally been used to justify restrictions on cultural goods imported from more 'liberal' countries.  The classic example was ‘kiddie porn’ once exported from Scandinavian countries.  Social science research in those countries, at the time, suggested no harm flowing from such products.  Under international pressure, however, the trade has since ceased.  Multilateral instruments dealing with trade in obscene materials and artifacts in fact form part of the contemporary multilateral intellectual & cultural property rights regime (see Annex A).

Fourth, under Article XX (f) of GATT, exceptions to free trade allow protection of artistic, historic and archaeological treasures.  Similarly, Article 36 of the Treaty of Rome, which created the European Union, exempts cultural treasures from the general prohibition on quantitative restrictions on trade.

Intellectual Property

Traditionally, intellectual property breaks out into two classes: industrial property and literary & artistic works.  Industrial property includes patents, registered industrial designs and trademarks (inclusive of marks of origin).  These were the subject of the first multilateral IPR agreement: the Paris Convention for the Protection of Industrial Property of 1883.  Literary & artistic works were the subject of the second multilateral agreement: the Berne Convention for the Protection of Literary & Artistic Works of 1883.  Protection of literary & artistic works under Common Law is called copyright; under the Civil Code, ‘rights of the author’.  They are not the same.

In general, industrial property involves utilitarian goods and services (knowledge tooled as function) while:   

[t]hough copyright is expressed in terms of property, it is not directly analogous to industrial property (patents, trademarks and industrial designs), where the major concern is with the circulation of goods that have economic value apart from their intellectual content.  As it deals with purely intellectual matter, copyright can never interfere with a person’s physical well-being.  (Keyes & Brunet 1977, 3)

Under the multilateral intellectual property regime, States provide only ‘national treatment’ to citizens of other States, i.e., the same rights are extended as if they were nationals but the rights so extended are defined by each national legislature.  This means, for example, that Canada must extend to foreign authors and copyright owners the same rights as granted to Canadian nationals.  These rights, however, need not and are generally not the same between countries.  The term of copyright in Canada is life of the artist plus fifty years.  In the U.S., it is life of the artist plus seventy years.  This means that the work of an American artist will enter the Canadian public domain twenty years earlier than in the U.S.  While a subject of controversy this treatment contrasts with ‘harmonization’ characteristic of other WTO efforts, e.g., the definition of subsidies.

The Panda's Thumb

In Cultural Economics, Law is not a technical subject but rather a cultural artifact arising from the unique historical experience of a specific culture with its distinctive pattern of custom, habit and life ways (Schlicht 1998).  More to the point, each system of Law has its own definition of what can be bought and sold, i.e., what is property?  When one moves to the multilateral level one must therefore accept that: “Law has become nation-specific; lawyers no longer form an international community” (Merryman 1981, 359).  

With respect to intellectual & cultural property rights (ICPR’s -- Annex A-D), Law must look outside itself for guidance and understanding.  Yet when Law looks outside itself the result can be unfortunate because “the human mind tends toward fusion rather than discrimination, and the result is confusion” (Dewey 1926, 670). 

Law in fact looks out at intellectual property rights (IPR’s) with three-faces: one faces trade regulation of a State sponsored monopoly; the second faces the natural or ‘human’ rights of a creator or, alternatively, the rights of a Legal Person or body corporate; and, the third faces an ever growing public domain and the learning it engenders.

Law, in all Nation-States, however, operates in four dimensions: international, statutory, regulatory and case law.  International law is made by Nation-States and International Organizations through the treaty-making process.  For our purposes what is important is that to ratify a multilateral instrument often requires adjusting domestic laws. 

Statutory law is made by domestic legislators in parliaments, legislatures, congresses, etc., while regulatory is made by bureaucrats – domestic and international - interpreting and implementing a statute or treaty.  Case law is made by judges – domestic and international - interpreting and enforcing international, statutory and/or regulatory law.   

Complicating matters, however, is that when judges “make” Law it is by setting precedent.  In the Anglosphere this body of precedent is called the “Common Law”.  If a similar case was resolved in the past, a current court is bound to follow the reasoning of that prior decision under the principle of stare decisis.  The process is called casuistry or case-based reasoning.

If, however, a current case is different then a judge may set a precedent binding future courts in similar cases.  Sometimes such precedents also compel legislators and bureaucrats to change statutory and regulatory law.  This is especially true with respect to intellectual property rights. 

Rapidly evolving technology, among other things, increasingly brings novel cases before the courts forcing legislators and bureaucrats to keep up or allow casuistry to run its course.  The problem is that a court decision in a specific case can, for better or worse, establish ‘path-dependency’ for emerging techno-economic regimes (David 1990), e.g., in biotechnology, software, etc.  This reflects the more general psychological Law of Primacy: That which comes first affects all that comes after.  In Law it is called precedent; in Economics ‘path dependency’. 

Furthermore, precedent established in one jurisdiction may ‘spill-over’ into others.  This is especially true of IPR precedents set by courts in the United States influencing other Common Law countries such as Canada.  The sheer scale of the American economy assures that case law will be more rapidly, if not better, developed than in smaller jurisdictions.  This has, for example, been the path followed by software copyright and software patent in Canada, i.e., U.S. case law set the ball in motion (Chartrand 2008).

The resulting complex body of law, judicial interpretation, and administrative practice constituting the IPR regime – national and multilateral – was therefore not created by “any rational, consistent, social welfare-maximizing public agency”.  Rather it is ‘a Panda’s thumb’, i.e., “a striking example of evolutionary improvisation yielding an appendage that is inelegant yet serviceable” (David 1992).

Endnotes