We've been noticing a trend in recent years of companies that sell physical goods trying to figure out ways to have those goods get some of the "advantages" of digital goods. For example, with physical products, once you sell it, in theory, the seller no longer owns a piece of the good. But with digital goods, they still hold the copyright, and often try to limit what you can do with the product even though you thought you "bought" it. So we've been disturbed by the rise of things like artist resale rights
, which take away the right of first sale on artwork, and require you to pay the original artist every time you sell the product.
We've pointed out how this really only benefits wealthy artists
, while harming
up and coming artists -- despite those who support such laws claiming exactly the opposite. Their argument is that if a poor artist sells a piece of artwork on the cheap, and it later appreciates in value, he should get a cut of that increase in value. That argument fundamentally misunderstands economics, however. By adding that, you are effectively taking away the potential benefit to a buyer. You are lowering the possible return, making it less likely for them to invest in the first place. And we already have better
mechanisms to help artists capture value if their older (cheaply sold) artwork becomes more valuable: it's called creating and selling newer artwork for much more money.
When Australia moved forward with just such a plan for artist resale rights at the end of last year, we asked mockingly
, why not apply the same thing to every product, so that any time you sold it, you had to pay everyone else who owned it. In fact, we noted:
Imagine if that were the case with cars or houses as well? Who would ever think that was reasonable?
Well, apparently some financial firm in Texas think it's reasonable. As a few people have submitted, they're trying to convince developers to set up a system where they get paid every time a house gets sold and resold
Freehold Capital Partners, a company started in Texas, is selling developers across the country on a plan that would attach a private transfer fee to homes, allowing developers to profit for generations.
The fee, written into neighborhood restrictions, would encumber the property for 99 years and throw 1 percent of the sale price back to the developer -- or his or her estate or another investor -- and Freehold each time the home changes hands.
My apologies for thinking that such a scenario was an "obviously ridiculous" one. Not surprisingly, Freehold is using intellectual property as the basis for its plan:
"Just like authors who write books and musicians who write songs that will be enjoyed for generations to come, those who improve property are also engaged in the creative process, and the economics of the transaction should reflect that reality," a Freehold brochure says.
Thankfully, people are protesting this, noting that it will drive down the price of homes, make it harder to sell them, harm neighborhoods and greatly "muddy" questions of ownership. Of course, all of that applies to copyright as well, but we won't go there just yet.