Republished from Tiberius Brastaviceanu:

Why I still don’t believe in the p2p license

A license for a technology is a limitation of use of that technology. A newly created technology is not a scare city by nature, because it is something that lives in the realm of knowledge, which has very low distribution costs. It is only scarce in terms to the number of individuals who can understand it and to put it into practice. A license creates artificial scarcity, it is in some way going against the nature of the thing.

So why do we have licenses and patents then? They exist because they play a role, because it is more advantageous to have them than not to have them.

The reason for their existence is actually economical. In a world deprived of information technology, the costs of innovation are quite high, because developing a new technology requires putting people with specific technical skills together, under the same roof, and having them use their own intellectual resources and existing knowledge, which in not easy to come by, use specialized equipment, not to mention addressing their human needs. It makes sense to restrict the use of the new technology in order to allow those who invest in it to recover their sunk costs and to make some profit, which in return represents an incentive to innovate more.

But we must note that patents have an expiry date. There is a reason for that too. The full potential of innovation for a society is only developed when it is opened. Therefore, the duration of patents is a compromise between encouraging innovation at the individual level and benefit from it at the social level.

In today’s world, the costs of innovation has dropped dramatically, because more and more people are able to exchange ideas online and use computer programs for design and simulation. Moreover, open source communities allow a wider distribution of costs, and a wider sharing of risks. Furthermore, the speed of innovation is also higher within open communities, who make extensive use of digital technology. This partially explains why we are seeing the emergence of open source products.

Since the cost of innovation has dropped, limiting access to a technology makes less sense. By opening a technology one can lose market share, but this disadvantage is offset by the higher innovation speed that we observe within open communities. The predominant strategy becomes ”first to market” and we’re transitioning from a ”knowledge economy” to a ”know low economy”, which means to offer the newest thing first, of high quality and with a good service around it. Scarcity doesn’t apply to innovation, but to the means to put it practice.

One might argue that this doesn’t apply in all areas. For example, innovation in the medical field is still very expensive and risky, because of the high costs of research and because of all the regulations around it.

The argument for the p2p license is to insure that value flows predominantly towards the new economy, which is based on commons and open innovation. It is in fact a defensive or protective mechanism, that implies a weakness of the new economy. Value flows in all directions, but it generally flows predominantly from the economically weak to the economically strong. It is the economically weak who needs protective measures. The economically strong is generally interested in not adding barriers to value flows. This is why the USA goes around and signs free trade agreements, which are very disruptive for smaller economies, because the deal ends up displacing local economic agents, disturbing the local ecosystem.

I actually believe that the p2p economy, once its infrastructure will be in place, will be stronger than the actual economy, therefore I don’t see the need for protective measures. We should be the ones to advocate total openness.

One of the most common argument I hear for protective measures, for the p2p license, is that a classical corporation can reduce its costs by feeding on open innovation created by open communities, and can use its market potential to distribute products based on that open innovation, without giving something back to the open community. There are a few implied assumptions in this argument.

The first one is that open communities that produce open innovation have no capability to market products. They are not capable of large scale production, they don’t have distribution channels, etc. This is in fact largely true today. Corporations do have these capabilities and they normally fill in the gap, praying open open source, and this upsets a lot of people. That frustration blinds some us from seeing a bit further. But others are turning it into positive action. SENSORICA is evolving to solve that problem. It is a market-oriented open community, integrating manufacturing and distribution capabilities.

The second implied assumption is that a corporation can actually market open source products. Our experience tells us that open products are not always compatible with the corporate business model. The corporation, if interested in an open product, will sell it as a closed product. That puts it at a disadvantage, assuming that it is competing with entities like SENSORICA, because the open product is superior to the closed product. The value structure of open products is really different from closed products. They are usually modular, allow greater compatibility and interoperability, have a longer life, are customizable, are supported by a community, are transparent and cannot be programmed for obsolescence or ”milked” for consumables, which usually comprise patented features, etc. Not to mention the fact that open innovation doesn’t guarantee a competitive advantage to corporations, against other corporations, because it can be immediately copied by others. An open value network like SENSORICA can offer all that value and turn all these features into an advantage. .

The third implied assumption is that copying technology is actually easy. This is true for low tech stuff. When the level of complexity increases know how becomes important. So it takes some effort to develop effective in house processes to produce and service the product. By the time that becomes a given, the open value network is working on the next generation of products.

If we believe that open value networks can evolve into an economically superior organization, we then have an incentive to allow corporations to integrate open innovation into their products, as long as that open innovation has transitive properties, i.e. if someone builds on top of it the entire thing would become open. This is in fact a subversive tactic to extract value from the present/old economy. Corporations spend their own resources to add on top of the open innovation, they must open the entire thing, they most probably do a bad job marketing the open product, which is after picked up by an entity like SENSORICA, further improved and marketed successfully. I actually see open innovation as a Trojan horse into the old economy. We actually want corporations to take the bate.

Another important but largely unnoticed problem with the p2p license is that it assumes that corporations actually want open innovation. Our practice/experience tell us that open innovation is actually not valued highly by corporations, because open products usually don’t match their business model and don’t offer a competitive advantage, within their business paradigm. Therefore, corporations are not ready to pay a lot money to license open technology. They would rather copy it subversively, and present it as proprietary, which would give them a competitive advantage. But that is not very legal. Most of them prefer to continue old practices, which is to innovate internally or to import IP through licensing or acquisitions.