The patent system is “a real chaos”. Its faults were laid bare yesterday in an extensive New York Times article, which quickly reached the “most emailed list” (The Patent, Used as a Sword; and see Melissa Schilling’s review). But the same article also hedged by reminding us “patents are vitally important to protecting intellectual property”. But is intellectual property really essential for innovation? For an answer, look just a little past commercial software and you will see vast open collaboration without patents or copyright. Wikipedia, an open initiative, answers many of our questions. Open source software such as Linux and Android power most commercial websites and mobile devices, respectively. In myriad forums, mailing lists and online communities, users contribute reviews, provide solutions, and share tips with others. Science has been progressing by enlisting thousands of volunteers to classify celestial objects and decipher planetary images. Innovation without patents is real. Researchers estimate that open collaboration and user innovation bring more innovation than than the patented kind. Our legal and commercial system can do more to encourage it.
A great New York Times article this morning (link below) details ways in which the patent system gets used as both an offensive and defensive weapon, with billions of dollars of collateral damage to start-ups, consumers (see the “patent tax”), and innovation in general. The victim in the opening Vignette (Vlingo, a voice-recognition software start-up) might have been saved by a simple change in the rules: make the losers of patent lawsuits pay the legal costs of the winner. It turns out that it’s rather easy to kill small firms (or force them to sell to you) by launching a patent lawsuit against them that bleeds them dry with legal fees. You don’t have to win — you just have to force them to fight until they no longer have any money. Vlingo ultimately won the patent lawsuit that had been filed by a much larger rival, but had to loot its own meager coffers to pay the legal fees of doing so. Vlingo slumped home with its patent lawsuit victory and shut its doors for good. If losers of such battles paid the legal fees of winners, such fights might both be less common, and less likely to be fatal.
The article also points out that software patents have proven particularly dangerous because they are prone to protecting vague claims like “a software algorithm for calculating online prices,” thereby granting the patent holder vast tracks of technological real estate. An interesting talk by Tilo Peters at the Strategic Management Society conference yesterday points to another useful tool for rationalizing some of this misuse of the patent system: Strategic disclosure. If, for example, you decided to publish a manifesto about all of the things you might do with software in the reasonable future (remember patents have a “usefulness” condition so you’re not allowed to claim something deemed non-feasible), you might be able to essentially proclaim that technological territory as unpatentable. It wouldn’t prevent competitors from developing in those areas, but it could keep them from patenting in those areas. In essence, it transforms a space in which property rights may be allocated into one in which property rights may not. I’ve left out some details but you get the idea.
Now it occurs to me that a fair amount of strategic disclosure in the smart phone space took place in the form of Star Trek episodes. I’m going to go look for references to prior art…
Alex Tabarrok’s pictorial commentary on patent policy, drawn on a napkin, posits that the current patent system is somewhat too strong and thereby decreases innovation (the link to his original post is below). I have to say, however, that I don’t think patent strength is the problem. The problem is that the growth in patent applications over the last two decades has vastly exceeded the growth in resources available to the patent office, resulting in 1) long delays between patent application and granting (which can render patents completely pointless in fast moving industries), and 2) inadequate ability to examine the patent applications for novelty, usefulness and non-obviousness. This lowers the value of good patents (because they aren’t granted quick enough or may be fallaciously challenged) and increases the likelihood of bad patents being granted. As a result, for many individuals and firms, the expected net gains from manipulating the patent system for the purposes of extortion (hostage taking, patent trolling) now exceeds the expected net gains from using the patent system to actually innovate.
It’s difficult to assess how patent strength affects innovation without first making sure that patents are being granted and used the way the system had originally intended.
Alex Tabarrok’s original post can be found here: http://marginalrevolution.com/marginalrevolution/2012/09/patent-theory-on-the-back-of-a-napkin.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+marginalrevolution%2Ffeed+%28Marginal+Revolution%29
The current issue of McKinsey Quarterly features an interesting article on firms crowd-sourcing strategy formulation. This is another way that technology may shake up the strategy field (See also Mike’s discussion of the MBA bubble). The article describes examples in a variety of companies. Some, like Wikimedia and Redhat aren’t much of a surprise given their open innovation focus. However, we should probably take notice when more traditional companies (like 3M, HCL Technologies, and Rite-Solutions) use social media in this way. For example, Rite-Solutions, a software provider for the US Navy, defense contractors and fire departments, created an internal market for strategic initiatives:
Would-be entrepreneurs at Rite-Solutions can launch “IPOs” by preparing an Expect-Us (rather than a prospectus)—a document that outlines the value creation potential of the new idea … Each new stock debuts at $10, and every employee gets $10,000 in play money to invest in the virtual idea market and thereby establish a personal intellectual portfolio Read the rest of this entry »
The drumbeat continues: MIT launches free onine “fully automated” course. Aside from the fact that these innovations have major implications for the livelihoods of my friends and I, the economics are interesting per se.
With the elimination of capacity constraints on the distribution side, will brick-and-mortar education providers go the way of Blockbuster and Borders? The market does not like brick-and-morter. It is inefficient – costly and inconvenient.
What happens when one professor can serve the entire market? Will superstars play an even larger role in academia? Will there be a market for top researchers (scarce) or good teachers (less so)? The same question holds at the institution level. Will everyone get a degree (and work for) HBS one day?
UPDATE: Megan McArdle provides a more thoughtful essay on this event at the Atlantic.
The title of this post is from the opening line of this article: McGowan, D. 2011. The Tory Anarchism of F/OSS Licensing. University of Chicago Law Review.
The article goes against current academic wisdom (Lessig et al) and argues that freedom actually gets restricted in open source licensing — specifically the freedom of authors (rather than users). An interesting piece, worth reading. Here’s the abstract:
This Article uses the example of free and open-source software licenses to show that granting authors relatively strong control over the modification of their work can increase rather than impede both the creation of future work and the variety of that work. Such licenses show that form agreements that enable authors to condition use of their work on the terms that matter most to them may give authors the incentive and assurance they need to produce work and make it available to others. Such licenses may therefore increase both the amount of expression available for use and the variety of that expression, even if enforcement limits the freedom of downstream users. These facts give reason to oppose recent decisions that make license terms harder to enforce through preliminary or permanent injunctive relief.
I’ve been skimming/reading through Michael Nielsen’s (pioneer in quantum computing) new (2012) book Reinventing discovery: the new era of networked science, Princeton University Press. The book chronicles the various open science and open innovation initiatives from the past and present: Torvalds and Linux, Tim Gowers’ polymath project (see his post: is massively collaborative mathematics possible), the failed quantum wiki (qwiki) effort, Galaxy Zoo, collaborative fiction, Sloan Digital Sky Survey (SDSS), Open Architecture Network, Foldit, SPIRES, Paul Ginsbarg’s arXiv, the Public Library of Science (PLoS), of course Innocentive, etc, etc.
My quick take on the book – it is a nice review of the existing forms that open innovation and open science are taking. I’ve read or followed most of the above projects over the years so the book doesn’t cover too much new territory from that perspective. The language in the book isn’t too precise –e.g., “network” isn’t very specific (I suppose in this case it simply means internet, broadly, and more general openness). But then again, this isn’t really an academic book (lots of great footnotes though). But the book is a great review of some of the existing efforts in open innovation and open science.
But beyond detailing the many instances of increased openness in science, the book touches more generally on the possibilities of “citizen science” (David Kirsch posted about citizen science on orgtheory.net, see here). I think there are lots of interesting possibilities: funding, tapping into cognitive ‘surplus,’ perhaps gamification, and many other forms of collaboration. And the book leaves off with some important problems for and questions about open science. How do you get the incentives right for openness? Who should be the gatekeepers? What institutions are needed to support openness? Etc.
Here’s the author speaking at Google a few weeks ago:
Here is the WIRED link: EV Startup Aptera Motors Pulls the Plug: “The company that brought us a three-wheeled sperm-shaped two-wheeler shuts its doors after four years.” More here: The 190 MPG Aptera electric care that never was.
No kidding. My faith in government bureaucrats to make successful commercialization picks is, as we used to say in Nevada, lower than a snakes belly in a wagon rut. How many Department of Something-or-Other types do you think have the slightest idea of what Porter’s Five Forces are? And that’s a 30-year-old framework in strategy. Don’t even get me started on the open invitation to political corruption that these policies tend to create.
Those who worry about our dependence on foreign oil – a worry I share, by the way – often cite historic examples of government projects that successfully developed new technologies that would never have seen the light of day (or, at best, would have seen it decades later) had the country relied on the private sector to do it. The Manhattan Project to develop the nuclear bomb during WWII is a favorite citation.
The problem we are seeing today is that the government is presently throwing money at firms claiming they can commercialize green technologies that, in reality, have not yet passed the basic development stage. You can’t get private investors to ante up when taxpayers are shouldering half the risk? That’s a very strong signal that those who spend their lives evaluating such things believe your technology is not ready for prime time. There is a big difference between government involvement in basic technology and government involvement in its commercialization.
Now, if folks are really serious about a Manhattan Project-style effort to, say, develop an efficient electric car, then let’s do it right! Get the smartest scientists from the top schools, fence them in at a top-secret facility in the middle of some desert, and don’t let them out until they succeed. I think that might work. And, I’m pretty sure the scientists’ home institutions would go for it.
Then, turn the technology over to the VCs to compete in the commercialization stage.
The most recent issue of Harvard Law Review has an interesting piece on open source and technology strategy – “The host’s dilemma: strategic forfeiture in platform markets for informational goods.”
Voluntary forfeiture of intellectual assets — often, exceptionally valuable assets — is surprisingly widespread in information technology markets. A simple economic rationale can account for these practices. By giving away access to core technologies, a platform holder commits against expropriating (and thereby induces) user investments that support platform value. To generate revenues that cover development and maintenance costs, the platform holder must regulate access to other goods and services within the total consumption bundle. The trade-off between forfeiting access (to induce adoption) and regulating access (to recover costs) anticipates the substantial convergence of open and closed innovation models. Organizational patterns in certain software and operating system markets are consistent with this hypothesis: open and closed structures substantially converge across a broad range of historical and contemporary settings and commercial and noncommercial environments. In particular, this Article shows that (i) contrary to standard characterizations in the legal literature, leading “open source” software projects are now primarily funded and substantially governed and staffed by corporate sponsors, and (ii) proprietary firms have formed nonprofit consortia and other cooperative arrangements and adopted “open source” licensing strategies in order to develop operating systems for the smartphone market.
I was just thumbing through various Innocentive projects (readers are probably familiar with their open innovation/crowdsourcing model). Here’s a project that is extremely relevant to strategy “Quantitative Model to Aid Strategy Decisions When Applying Open Innovation.” I’m quite eager to see the types of solutions people come up with. Details about the project below (or, just click the link above). Read the rest of this entry »