The End of Ownership: Personal Property in the Digital Economy

The End of Ownership: Personal Property in the Digital Economy Nearly 180 years after Proudhon declared that ‘property is theft!’, corporate lawyers in the digital age have taken up the idea and stood it on its head: personal property is theft—from corporate holders of intellectual property rights. In this decade, the question of whether individuals own or merely license on unfavorable terms the digital books, films, music, and software we pay for is far more unsettled—and unsettling—than is popularly assumed. That uncertainty over our personal property rights is spreading to physical goods too as Internet-connected software is insinuated into a growing range of everyday consumer products. Perzanowski and Schultz explore the legal mechanics and social consequences of this corporate assault on personal property rights in The End of Ownership: Personal Property in the Digital Economy. Property rights do not secure tangible things, the authors argue, but rather ensure our ability to deploy or withhold those things in social relationships. That is to say that owning a book means being able to choose whether or not to share it with a friend, to give it as a gift, or re-sell it as you see fit. When we own something, Perzanowski and Schultz write, we ‘don’t control the thing, but the ways in which others interact with it’ (p. 22). When you are the sole owner of a book, nobody can prevent you from reading or even altering it any way you want, in any country you desire. When we buy something, the seller relinquishes their rights to govern our use of that thing. The legal term for this is the ‘exhaustion principle’. It protects producers of intellectual property by restricting the rights of people to create and sell unauthorized copies. But it also protects consumers, since once the work is sold, the buyer can re-sell it or use it at will, so long as no unauthorized copies are made along the way. The exhaustion principle is vital to commerce, since it allows for secondary markets and, even more importantly, allows consumers to purchase goods with certainty as to what they are getting for their money. Digital goods, because they can be copied and distributed effortlessly and without degradation from use, upset the assumptions of scarcity on which the exhaustion principle is based. The rise of the digital economy in the nineties temporarily shifted power from large institutional owners of intellectual property to smaller institutional and individual consumers. Since the turn of the millennium, those large institutional actors have fought back, waging court battles over the nature of ownership and wherever possible substituting ownership transactions with licensing transactions, which confer fewer rights to consumers. The first half of The End of Ownership establishes the basic terms and legal machinery necessary for understanding the current battle over property. Chapter 2 introduces bedrock ideas about property and the exhaustion principle. Chapter 3 shows how the advent of digital goods and particularly the shift to cloud storage and media streaming scrambled the assumptions on which intellectual property laws were based and how powerful institutional actors fought back to protect and expand their rights. Chapters 4 and 5 focus on End-User License Agreements (EULAs), the lengthy and intentionally unreadable contracts used by IP owners to extend their control over consumer behavior. The second half of the book moves past individual property rights to examine what impact the battle over ownership is having on institutions like public libraries, and how the rise of the Internet of Things brought the destabilization around digital goods to physical goods. Finally, the authors offer some recommendations on how to protect individual rights in the digital economy. This is an important book for understanding recent fundamental shifts in the relative power of individuals and private corporate actors wrought by the digital economy. While it concerns legal issues, and the authors are both professors of law, the book is quite accessible to general readers. Its abstract arguments are anchored with concrete examples of recent public legal battles and sprinkled with adroit references to pop culture. Readers in the social sciences will appreciate how relational the authors are in their understanding of technological objects and the concept of property more generally. This reader wishes that the authors had gone further in exploring the implications of the ‘end of ownership’ on wealth and power inequality in society. They do note with concern the ways in which EULAs and restrictive Digital Rights Management have been used to ‘replace courts and due process with code and license terms’ (p. 123). It is not difficult to imagine a future in which wealthy consumers pay a premium to own, rather than license, digital and digitally-enabled physical products, creating a tiered society in which the economically disadvantaged find their rights to their own belongings systematically subject to the whims of corporate intellectual property holders. In an especially grim passage, the authors describe how digital technology enables corporate actors to engage in evermore finely-tuned price discrimination, as ‘a strategy for maximizing the seller’s profit at the expense of buyers’ (p. 80). In a market where everyone pays exactly the same price, some buyers inevitably pay less for a product than what it is personally worth to them. From this, consumers realize a small surplus. Collectively, consumer surplus is worth trillions of dollars, which is seen in the corporate world as an enormous pool of untapped revenue. Eroding the consumer surplus through price discrimination is a way of extracting ever more capital from consumers, without giving them any additional use value in return. Since the poor have far smaller discretionary spending budgets than the wealthy, eliminating the consumer surplus disproportionately impacts those on the lower end of the socioeconomic spectrum, and has the potential to contribute to inequality. In the 1980s, James Coleman argued that we inhabited an asymmetric society in which individuals were routinely dominated by corporate actors with essentially limitless resources. In a conflict between individuals and corporate actors, an individual Internet user, for example, is hopelessly overmatched by the resources available to Facebook or Google. ‘The end result’, Coleman wrote, ‘is that two parties beginning with nominally equal rights in a relation, but coming to it with vastly different resources, end with very different actual rights in the relation’ (Coleman 1982, p. 22). Individuals, according to Coleman, have three asymmetric advantages over corporate actors that slightly rebalance this power relationship: their relative anonymity, their choice of alternate transaction partners, and state intervention in the form of legislation that privileges the rights of buyers over sellers. What The End of Ownership demonstrates is a concerted assault on each of those advantages: digital surveillance sharply restricts individual anonymity; mergers sharply restrict the number of alternate transaction partners available to consumers; and the legal system is being remade to structurally advantage corporate sellers over individual consumers. In their closing chapter, Perzanowski and Schultz are optimistic that the end of ownership is not a foregone conclusion. For any prospect of a just society, we should hope they are right. Reference Coleman J. S. ( 1982) The Asymmetric Society . Syracuse, NY. Syracuse University Press. © The Author 2017. Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oup.com http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Science and Public Policy Oxford University Press

The End of Ownership: Personal Property in the Digital Economy

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Publisher
Oxford University Press
Copyright
© The Author 2017. Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oup.com
ISSN
0302-3427
eISSN
1471-5430
D.O.I.
10.1093/scipol/scx033
Publisher site
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Abstract

Nearly 180 years after Proudhon declared that ‘property is theft!’, corporate lawyers in the digital age have taken up the idea and stood it on its head: personal property is theft—from corporate holders of intellectual property rights. In this decade, the question of whether individuals own or merely license on unfavorable terms the digital books, films, music, and software we pay for is far more unsettled—and unsettling—than is popularly assumed. That uncertainty over our personal property rights is spreading to physical goods too as Internet-connected software is insinuated into a growing range of everyday consumer products. Perzanowski and Schultz explore the legal mechanics and social consequences of this corporate assault on personal property rights in The End of Ownership: Personal Property in the Digital Economy. Property rights do not secure tangible things, the authors argue, but rather ensure our ability to deploy or withhold those things in social relationships. That is to say that owning a book means being able to choose whether or not to share it with a friend, to give it as a gift, or re-sell it as you see fit. When we own something, Perzanowski and Schultz write, we ‘don’t control the thing, but the ways in which others interact with it’ (p. 22). When you are the sole owner of a book, nobody can prevent you from reading or even altering it any way you want, in any country you desire. When we buy something, the seller relinquishes their rights to govern our use of that thing. The legal term for this is the ‘exhaustion principle’. It protects producers of intellectual property by restricting the rights of people to create and sell unauthorized copies. But it also protects consumers, since once the work is sold, the buyer can re-sell it or use it at will, so long as no unauthorized copies are made along the way. The exhaustion principle is vital to commerce, since it allows for secondary markets and, even more importantly, allows consumers to purchase goods with certainty as to what they are getting for their money. Digital goods, because they can be copied and distributed effortlessly and without degradation from use, upset the assumptions of scarcity on which the exhaustion principle is based. The rise of the digital economy in the nineties temporarily shifted power from large institutional owners of intellectual property to smaller institutional and individual consumers. Since the turn of the millennium, those large institutional actors have fought back, waging court battles over the nature of ownership and wherever possible substituting ownership transactions with licensing transactions, which confer fewer rights to consumers. The first half of The End of Ownership establishes the basic terms and legal machinery necessary for understanding the current battle over property. Chapter 2 introduces bedrock ideas about property and the exhaustion principle. Chapter 3 shows how the advent of digital goods and particularly the shift to cloud storage and media streaming scrambled the assumptions on which intellectual property laws were based and how powerful institutional actors fought back to protect and expand their rights. Chapters 4 and 5 focus on End-User License Agreements (EULAs), the lengthy and intentionally unreadable contracts used by IP owners to extend their control over consumer behavior. The second half of the book moves past individual property rights to examine what impact the battle over ownership is having on institutions like public libraries, and how the rise of the Internet of Things brought the destabilization around digital goods to physical goods. Finally, the authors offer some recommendations on how to protect individual rights in the digital economy. This is an important book for understanding recent fundamental shifts in the relative power of individuals and private corporate actors wrought by the digital economy. While it concerns legal issues, and the authors are both professors of law, the book is quite accessible to general readers. Its abstract arguments are anchored with concrete examples of recent public legal battles and sprinkled with adroit references to pop culture. Readers in the social sciences will appreciate how relational the authors are in their understanding of technological objects and the concept of property more generally. This reader wishes that the authors had gone further in exploring the implications of the ‘end of ownership’ on wealth and power inequality in society. They do note with concern the ways in which EULAs and restrictive Digital Rights Management have been used to ‘replace courts and due process with code and license terms’ (p. 123). It is not difficult to imagine a future in which wealthy consumers pay a premium to own, rather than license, digital and digitally-enabled physical products, creating a tiered society in which the economically disadvantaged find their rights to their own belongings systematically subject to the whims of corporate intellectual property holders. In an especially grim passage, the authors describe how digital technology enables corporate actors to engage in evermore finely-tuned price discrimination, as ‘a strategy for maximizing the seller’s profit at the expense of buyers’ (p. 80). In a market where everyone pays exactly the same price, some buyers inevitably pay less for a product than what it is personally worth to them. From this, consumers realize a small surplus. Collectively, consumer surplus is worth trillions of dollars, which is seen in the corporate world as an enormous pool of untapped revenue. Eroding the consumer surplus through price discrimination is a way of extracting ever more capital from consumers, without giving them any additional use value in return. Since the poor have far smaller discretionary spending budgets than the wealthy, eliminating the consumer surplus disproportionately impacts those on the lower end of the socioeconomic spectrum, and has the potential to contribute to inequality. In the 1980s, James Coleman argued that we inhabited an asymmetric society in which individuals were routinely dominated by corporate actors with essentially limitless resources. In a conflict between individuals and corporate actors, an individual Internet user, for example, is hopelessly overmatched by the resources available to Facebook or Google. ‘The end result’, Coleman wrote, ‘is that two parties beginning with nominally equal rights in a relation, but coming to it with vastly different resources, end with very different actual rights in the relation’ (Coleman 1982, p. 22). Individuals, according to Coleman, have three asymmetric advantages over corporate actors that slightly rebalance this power relationship: their relative anonymity, their choice of alternate transaction partners, and state intervention in the form of legislation that privileges the rights of buyers over sellers. What The End of Ownership demonstrates is a concerted assault on each of those advantages: digital surveillance sharply restricts individual anonymity; mergers sharply restrict the number of alternate transaction partners available to consumers; and the legal system is being remade to structurally advantage corporate sellers over individual consumers. In their closing chapter, Perzanowski and Schultz are optimistic that the end of ownership is not a foregone conclusion. For any prospect of a just society, we should hope they are right. Reference Coleman J. S. ( 1982) The Asymmetric Society . Syracuse, NY. Syracuse University Press. © The Author 2017. Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oup.com

Journal

Science and Public PolicyOxford University Press

Published: Feb 1, 2018

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