IPFrontline.com IP & Technology Magazine
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The Return of the Public Domain
Mon, Feb 1, 2010
Joren De Wachter

We are observing an important change in the way Intellectual Property Rights are used in business models

Introduction

A fundamental change is taking place before our eyes, but most businesses are not taking any notice. For the first time since the the transition towards the increased use of new technology at the onset of the Industrial Revolution a couple of centuries ago, the paradigm that more and stronger Intellectual Property Rights (IPR) will be beneficial to innovation is being seriously challenged, not just in theory but also through behaviour patterns across a multitude of economic activities. I call this “the Return of the Public Domain”.

One of the most fundamental principles of the capitalist economy is the “right to copy”. Why is this right to copy and its realm (the Public Domain) not very well known or popular? Because of the existence of Intellectual Property Rights and the high profile attached to IPR enforcement. Nobody defends the Public Domain because everybody owns it.

Intellectual Property Rights are legally imposed monopolies, which limit the fundamental right to copy if certain conditions are met, and they all have the same effect: to exclude a bit of knowledge or invention from the Public Domain. Specifically-identified pieces of information, expression, software code, technical invention and other bits of hard- and software are excluded from the Public Domain for a certain amount of time, in a certain country, and under certain conditions.

Everything else, though – and that’s an awful lot – is in the Public Domain. All the great classics are in the Public Domain. From Homer to Beethoven, from Shakespeare to Van Gogh, from Leonardo Da Vinci to the Wright Brothers, from the Diesel engine to the chemical compound of Aspirin, you are completely free to copy, edit, distribute and sell them as much as you like. Nobody can stop you.

But although the Public Domain has been around for a very long time (indeed, much longer than any Intellectual Property Right), it is amazing how little it is understood and how many business models dealing with innovation fail to take it into account.

All that is about to change – and the reason is the Return of the Public Domain. What do I mean by “Return”? It is the evolution where innovation, new inventions and creativity are being brought into the economic realm and market without the use of Intellectual Property Rights to legally restrict or regulate the right to copy them.

We can see all around us the signs that Intellectual Property Right is failing, and that the Public Domain is coming back. Not because of the inherent weaknesses of IPR (though there are many), or because legislators are diminishing the scope or strength of IPR (quite the contrary, actually). And not because of a lack of interest in enforcement – as the founders of Napster, Pirate Bay and many others will confirm. We are witnessing the Return of the Public Domain because of a number of other factors.

Before I go into details about these other factors I need to make a clear disclaimer. I’m not interested from a policy point of view whether the Return of the Public Domain is a “good” or a “bad” thing, and I do not want to take a position in the age-old discussion of whether or not Intellectual Property Rights in their current form, or as a matter of principle, actually enhance or restrict innovation. You will find many people with very strong opinions on these matters, but the jury is still out; I have never found a totally convincing argument from either side.

Indicators: The Return of the Public Domain

The Music Industry
Let’s have a look at the facts. In 2008, according to the International Federation of the Phonographic Industry (IFPI), 95% of music downloads were illegal. It was estimated that in total this represents at least 40 billion songs. And worse is to follow: programs like Muziic allow you to listen without copying, and are only the first in a new wave. Apple has abandoned its DRM system for iTunes; Nokia is offering free downloads as a marketing incentive for mobile phones. A whole generation is growing up that will never have paid for downloading songs or listening online to music, and the Pirate Bay conviction is probably just another Napster Pyrrhic victory.

Microsoft has produced an interesting piece of software called Songsmith that does the most amazing thing: it creates completely new arrangements of existing songs, typically by retaining only the original melody line and lyrics (listen on YouTube to the horrifying but exhilarating versions of such old hits as Roxanne by The Police and Wonderwall by Oasis).

So who owns these versions? The original author? Microsoft? The dude who pressed the “go” button on the Songsmith user interface? Or nobody (and consequently everybody), which puts that particular version of the song – and anything else written by Songsmith – in the Public Domain? A lot of music composition is already done with the assistance of software. Soon, software will produce full songs, including lyrics and arrangements.

The really amazing observation in music, though, is the apparent lack of innovation in its business models. Other than redirecting some of the revenue sourcing to live performances, the music industry seems to have been unable to come up with a good answer to the rise of the Public Domain.

Software
In the software industry, the return of the Public Domain has taken a different form, and is more about “Open” movements. The open source movement effectively operates from the principle of “if you can’t beat them, join them,” by using the tools of copyright to enforce community members and society at large to share their development efforts back with the community (the copyleft principle). As a result, open source software is not, technically, actually in the Public Domain. However, it clearly aims to be, and the technique of copyleft may be more efficient in ensuring the open character of open source than simply throwing code into the Public Domain, where it could in theory be taken over, slightly modified, and then copyrighted.

But open source is not the full story when it comes to the

rise of the Public Domain in software. Recent developments point to software that really will fall into the Public Domain. Increasingly, software is being generated automatically. The automatic generation of code is no longer limited to specific tools like compilers but is becoming a core functionality of “developer programs”, where the user provides the underlying algorithm but the code of the software program is generated automatically.

The question as to who actually owns copyright, or whether copyright can actually exist on code generated by software programs, does not seem to be the focus of much attention, yet the practice is growing (XML code is a prime example).

In any case it is clear that, contrary to some of the perceptions non-technical users may have, the Public Domain has a significant presence in the software industry (one of the reasons appearing to be that open source is, under certain conditions, safer and more efficient than proprietary software), and the software industry is actually one of most inventive in trying to come up with an answer as to how the Public Domain can fit into business models.

Audiovisual (TV, film, video)
As band-width and other technological restrictions are removed, the audiovisual industry is fast becoming the next victim of those same market attitudes that so haunted the music industry. Ripping technology, YouTube and developments like Applian will make it more and more difficult for IPR owners to protect their investment from copying, whether legal or illegal. The scope of the Public Domain is set to grow at one of the fastest rates in this industry, which is also likely to see many changes to its business model.

The audiovisual industry has one advantage: it has already experienced a number of disruptive technology and business model changes (the video standard battles, DVD, Blue Ray, the internet itself), so it is possible that there will be more flexibility in the business models available in trying to deal with the rise of the Public Domain. However, one thing seems certain: the technical restrictions per “region” currently applied to DVDs, and similar technical or legal protection systems, are most likely doomed to fail.

Content (creative commons, wikis, crowdsourcing)
In the publishing world, the rise of the Public Domain seems to have had an accelerator effect. The publishing industry has some experience of exploiting the Public Domain – after all, people still buy the complete works of William Shakespeare, not to mention the Bible – but what we are seeing is that the rise of the Public Domain vastly accelerates the amount of information freely or technically available without any regard to copyright.

The clearest indication of the rise of the Public Domain is the behaviour of big players such as Google, who show an interesting disregard of copyright and seem to get away with what is technically illegal copying. Another interesting development is the attitude of Facebook. Although Facebook had to back down when it wanted to change its terms of use, its current (and previous) terms still give it very great powers over the content posted by its users. In short, Facebook gets unlimited rights to whatever you post, as long as you have an account (the fury was over the last bit, where Facebook wanted to keep those rights even after you close your account). While not putting your stuff in the Public Domain, Facebook does force you to relinquish control of your IPR of whatever you post on Facebook.

One of the main causes of the rise of the Public Domain here is the enormous power of networks made possible by the rise of the Internet, and more specifically Web 2.0. People share their content and knowledge freely and, as freely as they copy without thinking twice, they share stuff that can under the old business models be protected by a legal monopoly.

Other points of interest are literature and poetry written by software – as with music, the question is: who owns them? – and the increasingly lower cost of producing physical copies of books (even those that are “out of print”). That lower cost is likely to induce piracy, just as with music.

Hardware – the next stop on the horizon
The first tentative signs of the rise of the Public Domain are clearly visible. There are the many examples of collaborative design, exemplified by projects like the Open Source Car (OSCar). The idea of sharing IPR for designing manufactured products is not limited to cars, however. In many industries, there are signs of collaborative communities copying the open source software approach to sharing innovation and, ultimately, pushing it into the Public Domain.

There is one obvious factor slowing down the rise of the Public Domain in manufacturing. It is not, as you might think, the existence of the patent system, but rather the fact that copying hardware is not as cheap as copying information or software. However, there are certain developments that will cause the Public Domain to enter even this field.

3D printing is an evolution that is very likely to have devastating effects on the potential to protect industrial design across a swathe of manufacturing sectors. Secondly, the possible development of a “universal machine” (I know, it sounds like science fiction) capable of producing pretty much any conceivable piece of hardware is actually not that remote. It is certainly an ongoing process in a lot of industries, each of which are designing more and more automated machines to manufacture their kind of product. The cost of translating design into an actual product will continue to drop, and it will lead to the point where copying becomes so cheap that the market will turn away from the “quality” original.

Another precursor to this effect is of course the entire counterfeiting industry, of everything from handbags to perfume, which is doing as well as ever.

Open or Collaborative Innovation Models

One of the most interesting recent developments is the rise of open or collaborative innovation models across all industries and economic activities. It is currently estimated that less than 20% of all R&D is done by businesses’

internal R&D departments (“closed” or traditional innovation, the kind that typically leads to a classical application of IPR and is kept out of the Public Domain). More than 60% of innovation today occurs in open, semi-open or collaborative models, using more or less of the Public Domain, and about 20% comes from what is called “mass innovation”, from the consumer market or using crowdsourcing, relying almost completely on the Public Domain.

This amazing phenomenon clearly shows how the strong rise of the Public Domain is not something that is caused by weak or insufficient IPR or its inefficient enforcement, but has become an essential part of any innovative business. Not only business models but innovation itself are quickly becoming dependent upon the Public Domain – and are, in return, contributing hugely to it.

Business Models

The ultimate question is, of course: how will businesses adapt to this rise of the Public Domain? The answer is not as simple as we would like, but it can probably be broken down into a number of factors. I see six approaches that can help businesses deal with the rise of the Public Domain.

1: Strengthening existing IPR does not seem to be the answer
There are a number of legislative and other initiatives that are trying to strengthen existing IPR, or ensure their enforcement. Some of these extend the duration of copyright or neighbouring rights. Others try to develop more efficient tools to enforce IPR (e.g. cross-border mutual recognition), or raise awareness of the importance of IPR to innovation and public policy. It is no surprise that at this level the failure of the nation-state in enforcing its laws and policies is reflected in attempts to make private actors responsible for upholding the law (the initiatives to make ISPs responsible for their customers’ use of their services are an obvious example).

However, none of these initiatives has the ring of credibility or legitimacy around them. In general, it is remarkable how the concepts of strengthening the law and improving policing of IPR are patently failing to make a dent in practices that the market endorses. The conclusion seems to be that business models relying solely on legal enforcement against the Public Domain have an evolutionary handicap.

2: Knowledge and expertise are essential
Intellectual Property Rights don’t protect ideas or knowledge, they only protect specific expressions of ideas or knowledge. Actual knowledge and expertise will remain important, and their importance will grow as a result of the Return of the Public Domain.

While it may be true that a particular expression of your knowledge or expertise may no longer be as protectable through a legal monopoly, the value of that knowledge or expertise, applied properly, still has tremendous value in the marketplace. What needs to change is the approach of the business model towards the use of that expertise and knowledge; it is in changes like this that the impact of the Public Domain will be felt most acutely.

Knowledge and expertise can no longer exist in isolation. Almost all knowledge and expertise will need to connect to outside knowledge and expertise in order to have an impact. Knowledge in isolation will quickly lose value, and the only way to retain and increase the value of research, development and innovation is to open it up to the world. That can only be done through business models that will accept and anticipate working with the Public Domain.

3: Being cost-effective will become ever more important
All monopolies come at a price; that price is mostly paid by the customer. A monopoly typically allows the provider to avoid cutting costs. IPR theory states that the legal monopolies imposed by Intellectual Property Rights are justified by the reward they give to innovation, and the fact that they allow investments in innovation that would not otherwise be made. That may or may not be true. However, what is certain is that the Return of the Public Domain will reduce the possibility for businesses to avoid becoming more cost-efficient. The most immediate effect will probably be that businesses confronted with the Public Domain will have to move or re-allocate costs and investments.

While costs will have to be addressed, the competitive value of any offering will on the other hand be more obvious to the market, and it should become easier for businesses to position themselves as a result of the Return of the Public Domain. In other words, being more cost-effective should also mean being more focused on your target market. Any business that wants to deal efficiently with the Return of the Public Domain will have to take a good, hard look at the way its costs are structured.

4: Innovation in business models has always been in the Public Domain, and “first-to-market” will continue to be a very important differentiator
From Henry Ford to Dell, from Kaizen to the shift to services by IBM under Louis Gerstner, important innovations in business models have always been in the Public Domain.

As the Public Domain becomes more important, occupying market space by being first to market and effectively applying innovation in your business model will likewise become ever more important. Innovation will no longer be able to rely on the duration of a legal monopoly, but will have to deal with the shifting boundaries of the Public Domain. Product and business cycles will change, and innovation in products and services will have to be accompanied by innovation in business models in order to gain or retain competitive advantage.

The Return of the Public Domain will increase the importance of innovation in business models rather than reduce it, and will probably have a very positive effect on the amount of innovation we will see applied in business models that will properly take the Return of the Public Domain into account.

5: Networking is essential
Web 2.0 is one of the most important recent networking phenomena, one which both supports and stimulates the development of the Public Domain. Innovation today needs to be exposed in order to create additional value, and only through networking will businesses be able to

tap into the vast knowledge available through Web 2.0. This necessarily means that any business that innovates will have to allow part of its innovation to fall into the Public Domain, either as a teaser, as marketing, or as an investment.

In this model, a business allowing significant parts of its know-how and expertise to become part of the Public Domain will place itself in a much better position to obtain, in return, other useful and necessary expertise and know-how from the Public Domain. It will then be able to use this as a competitive advantage when combining this public information with its own expertise, in order to develop further its niche store of knowledge, expertise and relations that no other provider will be able to offer in the same manner. Networking will become a core skill and business method for any business dealing with the Return of the Public Domain.

6: Innovation never stops
One of the great effects of the Return of the Public Domain is the increase in available information for any business involved in innovation. As stated before, innovation today requires an open and collaborative approach in order to be successful. At the same time, proper use of the Public Domain will require businesses to continue to invest in innovation, in order to preserve their unique selling proposition.

Only an ever-growing interoperation between an innovative business and the Public Domain will allow a business to reap the ever-increasing benefit of the Public Domain, and integrate it into its business model. That means constant innovation, and interaction with the Public Domain.

Relevance for Industrial and Service Design

At first glance, the Return of the Public Domain may seem like a very threatening phenomenon to professionals in industrial and service design (Professional Idea Generators). They are already under threat from the fact that much of what they do may not fall within the scope of currently existing IPR. To the extent that technological development pushes back the boundaries of the legal monopolies established by IPR, and short of inventing a new class of IPR that would specifically target their contribution, their scope for protection would diminish, potentially putting their occupation and relevance at risk.

However, there is also a very clear positive side to the new developments described above for Professional Idea Generators. The new business models that become necessary will clearly provide them with significant competitive advantages for doing business in an environment where the Public Domain is important. Knowledge and expertise, cost effectiveness, continued innovation and networking are key competences of Professional Idea Generators. This puts them in a very strong position in respect of the new developments.

The key to unlocking that potential will be the development of effective business models, where the efforts of Professional Idea Generators can be presented and rewarded in line with the value they add to their customers.

Conclusion

So, what have we seen? First, we have established the Return of the Public Domain across a number of industries and economic activities. Second, we have seen how business models already use the Public Domain, and how they will need to adapt in order to be successful in an environment where the Public Domain is increasingly present.

What does that mean in practice, and why is the Return of the Public Domain important?

It means that any business dealing with innovation, IPR or other aspects of the creative economy will have to integrate a strategy for working with the Public Domain into its business model. It also means that any business that does not anticipate doing so will very likely suffer a severe competitive disadvantage.

And it means that when your business is wholly or partly based on an Intellectual Property Right, you have to think about how the disappearance or unenforceability of all or part of that IPR will affect your business. Reflecting on the loss of your IPR will be necessary regardless of whether it is due to market pressure, piracy, political change or your own marketing and business needs. You will then have to make sure you are prepared for this change.

The Return of the Public Domain will affect each business differently, at different times and with different effects, but you ignore it at your peril.

© Joren De Wachter, 2009