"Intellectual property" is a legal fiction ...
... which violates the natural rights of man.
verba ita sunt intelligenda ut res magis valeat quam pereat
"Words are to be understood such that the subject matter may be more effective than wasted."
The concept of "property" originates from a state of nature, namely the state of having exclusive control over a physical object or land. In recent history, the concept has been extended to include services, employees under contract, and ideas themselves.
Libertarians (should) reject outright the concept of "intellectual property" because the nature of an idea is completely different from the nature of a physical object or an economic good. To be an economic good, the object must be scarce in nature, it must serve some human end, and it must be controlled by a person. This applies to all the common objects you consider to be your property; your house, your car, your food, your land et cetera. Ideas do not meet these criteria.
Admirers of Ayn Rand are generally pro-IP because they think that ideas have value due to being a product of human intellectual labor and by virtue of this, the author "deserves" remuneration. In doing so, they essentially rely upon Adam Smith's (and Ricardo's and Marx's) "labor theory of value". The gentle reader is invited to savor the sweet irony of a plank of Randian philosophy depending on a communist economic fallacy....
The labor theory of value was shown to be false by Ludwig von Mises and other Austrian economists. Value is an attribute ascribed to a specific economic good by the consumer at the time of purchase: "I want that thing now, and I'm willing to exchange these things for it." For proof of this, imagine yourself facing imminent death by starvation and meeting someone trying to sell a diamond that he laboriously dug up, ground and polished. That diamond will be of little value to you at that moment because in your ordinal ranking of goals, fending-off death by acquiring food is vastly more important than acquiring the pretty stone. By contrast, the diamond might be of great value to a plump duchess riding-by. Or imagine you and I standing in the Garden of Eden and you offer to sell me an apple. It has no value to me because I can reach out and pick as many apples as I want. Thus the economic value of a good is always subjective, individual and situation-dependent, and to even qualify as a "good" it must have a non-zero value by virtue of being scarce in that time and place. Value is not defined by the effort expended to produce the good, nor can it be determined by some abstract calculation of social utility.
Taken to its logical conclusion, the Randian position on "intellectual property" claims that I have the right to go into a marketplace, perform an interprative dance involving jumping jacks and push-ups, then demand (using state force) money from passerby for having witnessed the spectacle -- simply because I broke a sweat.
(Thanks to Walter Block for this reductio ad absurdum).
Even if people choose to watch what I have placed into the public arena (public-ation), even if they have walked out of the stores to watch and appreciate my dance, my idea broadcast via public performance does not qualify as an economic good; because I do not control who watches it, I can not charge for it. Because I can not restrict others from dancing like I do without violating their right to self ownership, I have sacrificed ownership in presenting it.
So ideas are not property because by their nature they can be freely copied and spread without diminishment. An idea, once released into the modern world, exists in effective superabundance because the natural opportunity cost of obtaining it is as close to zero as picking an apple in Eden. We therefore can not accept the term "intellectual property" to describe ideas; it is an incorrect and fundamentally misleading term.
Now let us consider circumstances in which scarcity is imposed upon ideas. We can distinguish between two forms of attempts to turn ideas into goods: One is to create a consumption good: "I want many people to pay to hear my song". The other is to create a production good: "I want only selected associates to be able to use my innovative process to gain a competitive advantage in producing some goods". The former is usually the domain of copyright, the latter of patents or trade secrets. Are these legal institutions consistent with supporting natural human rights?
Before the existence of government-created patent monopoly, the profit-seeking innovator kept his cards close and only shared the innovation with associates who agreed to not divulge it. It should be emphasized that such an arrangement falls purely within the right to contract and violates no rights of third parties.
The modern patent regime claims to improve upon this natural situation by the utilitarian argument that it fosters innovation and increases social wealth. Although this claim is contested by experts, it is not an argument we need to consider if we understand that the proper role of government in a free society is limited to protecting individual rights. If one person has an idea and claims patent on it, another might independently get the same idea, publish or implement it, then find himself forced by the state to pay fines to a stranger half-way around the world. Patents thus raise an artificial monopolistic profit privilege over the right of individual self-ownership (to think and create). This is unjust since natural rights trump privileges.
The current copyright regime for 'consumption media' is also illegitimate and violates rights. Data once released to the public is not property because it is no-longer scarce or under the unique control of an individual. Any attempt to imbue it with the attributes of property in the modern age inevitably requires a control regime consisting of continual invasive spying into private communications and personal effects (storage media). Here too, the right to speak (anonymously and privately) and the right to be secure in one's person and effects trump profit privilege - no contest.
Thus we arrive at the final question; "In the absence of patent or copyright law, what form of restriction of ideas is compatible with liberty, justice and natural rights?"
The answer is simply enforcement of mutually consensual contract. An inventor has the right to make contracts with others which stipulate that they may not further sell or divulge the invention. If such a party breaks contract, the inventor has the right to seek redress according to the terms of the agreement.
Voluntary contractual restriction can also be a functional replacement for copyright (at least with music and film) since algorithmic means are available to individually mark or sign each copy of a work. The person who wishes to consume video or audio works simply enters into a contract with the producer/distributor to not redistribute the work, or pay an agreed-upon fine. If a particular watermarked copy is discovered 'loose' in the wild, the origin can be traced to the buyer and legal redress can be obtained.
Voluntary contract also allows for consumer media to be funded by a subscription model. Content producers would submit ideas (album ideas, movie plots) to a subscription service. Members of the service could subscribe to a project and bindingly pledge some money amount to the project. For example Jane pledges $10 to Steve Jackson's next movie and John pledges $5 to Madonna's next album. If the project receives enough subscription pledge dollars, it gets produced and Jane or John are debited their pledged amount upon delivery of the media to them. To be sure, this model does not eliminate the free rider 'problem' of non-payers being able to consume the product, but neither does the current system. And again, it is not the function of law in a free society to guarantee that a certain class of producers be compensated at a particular rate, or that a business model for multi-million dollar films be propped-up. Rather it is to guarantee our individual rights as human beings.
In a just (libertarian) society, no-one would have the privilege to claim a published or leaked idea as his own "property" and thereby seek redress from any and all parties who acquire the idea either by invention or discovery. If Bayer were to to invent an improved process for synthesizing aspirin and keep it secret, then I later independently discover the same idea, Bayer would not have an artificial government-granted privilege to harm me for the act of creative thinking. Likewise, if I were to find a copy of a book, song or movie on the Internet, no-one would have the privilege of appropriating my real property in retribution for viewing or sharing something that does not belong to them as a uniquely held piece of property.
Ideas are not property, and to legally define them as such is to deny their nature and violate the rights of man. Any (non-retributive) claim by you against my real property begins and ends with the terms specified in a contract formed by mutual consent.
