This case gives rise to the question: Should Napster be shut down by force of law? The answer can be yes only if Napster is violating the individual rights property rights of others. To determine this we can ask a two-pronged question: (1) Is Napster violating any positive law?, and (2) If so, is the law legitimate? The second question is necessary because, even if Napster is technically in violation of a legal prohibition, we can only say that Napster “should” be subject to the law’s punishments, if the law is itself legitimate. To hold otherwise is to adopt legal positivism and the moral relativism from which it springs. Let us, then, take each of these two questions in turn.
Likewise, Napster’s service is capable of numerous commercially significant noninfringing uses, such as promotion and distribution of songs from independent record labels or new artists, and free (authorized) distribution of songs, in addition to sampling and “space-shifting” (the process of sharing files between hard drives and players). Thus, because Napster can be used for these and other significant noninfringing uses, it is not a contributory infringer.
As for vicarious infringement, there is only liability if Napster has both (1) the right and ability to supervise the infringing activities of its users; and (2) a direct financial interest in the infringing activities. However, despite the District Court’s ruling, there is no way for Napster to distinguish between legitimate and illegal copying by its users. Thus, it does not have the “ability” to supervise any infringing activities.
Second, under the Audio Home Recording Act (AHRA), consumers have a right to create and transfer digital music for noncommercial purposes.(4) Because Napster users typically share files for free, the copying is arguably for a “noncommercial purpose.” Thus, either due to a fair use defense or the AHRA, Napster users are not direct infringers, meaning that there is no direct infringement to which Napster can contribute or be vicariously liable for.
Legitimacy of Copyright Law Redistribution of Property Utilitarianism
First, even if a given policy could increase “net” wealth by redistributing property from A to B, that does not justify the policy. The goal of law is justice, not wealth maximization. B may be helped “more” than A is harmed by redistribution, but how does this justify the harm done to A? By the reasoning of utilitarians, we could not condemn every act of theft, rape, or murder; we would have to weigh the benefit to the thief, rapist, or murderer against the harm suffered by the victim, to determine whether or not the crime should be permitted. In cases where the aggressor enjoys his crime “more” than it harms the victim, it is not a crime at all, and should be permitted, since net wealth is increased. Clearly, this is a wholly immoral and unprincipled view.
Utilitarian analysis is thoroughly confused and bankrupt: talk about increasing the size of the pie is methodologically flawed; there is no clear evidence that the pie size is increased by IP rights; and in any event pie growth simply does not justify the use of force against the otherwise-legitimate property of others. For these reasons, utilitarian defenses of IP are not persuasive.
Natural Law and the Second Homesteading Principle
It is scarcity that is the hallmark of ownable property, and it is by first possession that one comes to own such ownable property. This can be seen by examining the purpose and nature of property rights. Were things in infinite abundance, there would be no need for property rights. But in the real world, there are scarce resources. These things can be used and controlled by only a single person.
Because of this fact of scarcity, there is always the possibility of interpersonal conflict over scarce resources. If I take your lawnmower, you no longer have it. If I take over your house and your land, you lose control of it. These tangible goods are scarce. Property rights exist to allocate ownership in scarce resources to a specified owner, thereby permitting conflicts over the use of these scarce resources to be avoided (and resolved). Thus, it is only things that are scarce, in the economic sense, that can be property. This is why, for example, there can be ownership of tangible, scarce resources such as land, cars, printing press, paper, and ink. Moreover, in the libertarian and conservative view, these property rights in scarce resources are allocated in accordance the Lockean homesteading rule, in which unowned scarce resources are homesteaded by the first possessor.(9)
1. Further information about the Napster lawsuit may be found at: http://www.riaa.com/napster_legal.cfm and http://www.napster.com/pressroom/. See, e.g., the RIAA’s motion for preliminary injunction and Napster’s brief appealing the district court’s preliminary injunction.
6. On the defects of utilitarianism and interpersonal utility comparisons, see Ludwig von Mises, Human Action, 3d. rev. ed., Chicago: H. Regnery; Murray N. Rothbard, “Praxeology, Value Judgments, and Public Policy,” esp. pp. 9099, and “Toward a Reconstruction of Utility and Welfare Economics,” in The Logic of Action One (Cheltenham, UK: Edward Elgar, 1997), esp. pp. 9099; idem, Man, Economy and State (Auburn AL: Mises Institute, 1993); Jeffrey M. Herbener, “The Pareto Rule and Welfare Economics,” Review of Austrian Economics, v. 10, no. 1, 1997: pp. 79106; Anthony de Jasay, Against Politics: On Government, Anarchy, and Order (London and New York: Routledge, 1997), pp. 8182, 92, 98, 144, 149151. On scientism and empiricism, see Rothbard, “The Mantle of Science,” in The Logic of Action One; Hans-Hermann Hoppe, “In Defense of Extreme Rationalism: Thoughts on Donald McCloskey’s The Rhetoric of Economics,” Review of Austrian Economics 3 (1989): 179. On epistemological dualism, see Luwdig von Mises, The Ultimate Foundation of Economic Science: An Essay on Method, 2d ed. (Kansas City: Sheed Andrews & McMeel, 1962); idem, Epistemological Problems of Economics, George Reisman, trans. (New York: New York University Press, 1981); Hans-Hermann Hoppe, Economic Science and the Austrian Method (Auburn, Alabama: Ludwig von Mises Institute, 1995); idem, “In Defense of Extreme Rationalism.”
7. It is not merely that all costs do not have a market price. As Mises showed, even for goods that do have a market price, the price does not serve as a measure of the good’s value. As Mises states: “Although it is usual to speak of money as a measure of value and prices, the notion is entirely fallacious. So long as the subjective theory of value is accepted, this question of measurement cannot arise.” Ludwig von Mises, The Theory of Money and Credit, H.E. Batson, trans. (Indianapolis: Liberty Fund,  1980), p. 51 (in chapter 2,”On the Measurement of Value”). Also: “Money is neither a yardstick of value nor of prices. Money does not measure value. Nor are prices measured in money: they are amounts of money.” Ludwig von Mises, Socialism: An Economic and Sociological Analysis, 3d rev. ed., J. Kahane, trans. (Indianapolis: Liberty Press, 1981), p. 99); see also Mises, Human Action, pp. 96, 122, 204, 210, 217, 289.
9. On ethical justifications of the libertarian conception of individual rights, including private property rights and the Lockean homesteading rule, see Hans-Hermann Hoppe, A Theory of Socialism and Capitalism (Boston: Kluwer Academic Publishers, 1989), ch. 7; idem, The Economics and Ethics of Private Property (Boston: Kluwer Academic Publishers, 1993); Murray N. Rothbard, The Ethics of Liberty (New York and London: New York University Press, 1998 ); idem, “Justice and Property Rights,” in The Logic of Action One (Cheltenham, UK: Edward Elgar, 1997); N. Stephan Kinsella, “A Libertarian Theory of Punishment and Rights” 30 Loyola of Los Angeles Law Review 607 (Spring 1996) (previous version); idem, “New Rationalist Directions in Libertarian Rights Theory,” Journal of Libertarian Studies 12, no. 2 (Fall 1996): 313326.
10. This assumes that Arthur does not have a contract with Brown which prohibits Brown from making a copy of Arthur’s book-pattern. For further discussion of this matter, see my monograph Against Intellectual Property.