Currency Of Ideas

THE CURRENCY OF IDEAS

Rahul Matthan, 2002 Currency of Ideas, NIAS

Thomas Jefferson

“He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.”

Thomas Jefferson


Outline

OWNERSHIP OF IDEAS

LEGAL PROTECTION OF IDEAS


THE NATURE OF IDEAS

CONCLUSIONS


THE NATURE OF REAL PROPERTY

• PHYSICAL NATURE OF REAL PROPERTY.

– Real property is physical and therefore tangible.

– It is determined in the context of spatial determinants.

• TRANSFER AND OWNERSHIP.

– Real Property is capable of ownership and absolute transfer.

• ECONOMIC DETERMINANTS.

– The sum total of all real assets are finite and their consumption leads to scarcity.

– Real property values increase with scarcity.

– To achieve economic growth scarce resources have to be re-allocated among alternate uses.


THE NATURE OF IDEAS

• NON-PHYSICAL NATURE OF IDEAS

– Ideas are intangible though by themselves they are of little use without physical manifestation.

– Ideas are defined better in the context of time than space.

• TRANSFER AND OWNERSHIP

– Ideas are experienced and therefore incapable of being truly possessed.

– Ideas are propagated and not distributed.

• ECONOMIC DETERMINANTS

– Ideas are limitless and by their nature do not create scarcity.

– Unlike tangible objects, therefore, ideas do not necessarily increase in value with scarcity.


IDEAS IN THE DIGITAL WORLD

• IMPLICATIONS OF DIGITAL TECHNOLOGY

– Technology completes the detachment of ideas from the physical, spatial plane.

– It creates newer and more efficient distribution/ propagation mechanisms.

• ALTERNATE RESOURCE AVAILABILITY

– Digital networks open up large reservoirs of ideas for large groups of people.

– They allow for unique collaboration in the creation of new ideas. (ThinkCycle, Wikipedia, SETI@Home)


Outline

OWNERSHIP OF IDEAS

THE LEGAL PROTECTION OF IDEAS


THE NATURE OF IDEAS

CONCLUSIONS


Outline

OWNERSHIP OF IDEAS



THE NATURE OF IDEAS

CONCLUSIONS


OWNERSHIP

• ORIGIN AND EVOLUTION OF THE CONCEPT.

– Pre-Industrial concepts of “ownership” revolved around Real Property.

Acquisition of property was originally militaristic.

Merchant Societies forced the development of ethical rules for acquisition of Property.

– In the Industrial Age, the value of ideas began to be felt.

Need for protection of ideas was considered.

Protection was carefully granted to the physical manifestations of the ideas and not to the ideas themselves.


WHY WE WANT TO OWN IDEAS

• A NATURAL PROGRESSION

– The Industrial Age was focused on the ownership of property as an indicator of wealth.

– The Information Age has clung to the same indicators.

• COMMERCIAL MANDATES

– Financial investors demanded the application of the best protection mechanisms to secure their investment.


OWNERSHIP OF IDEAS

• CAN IDEAS BE OWNED?

– Historically ideas never needed to be owned.

Sophocles, Dante, Da Vinci, Michaelangelo, Aryabhatta

– Modern thinkers also manage without ownership.

Linus Torvalds, Benoit Mandelbrot

• TECHNOLOGICAL IMPERATIVES

– Creators of ideas have always been threatened by technological advances.

– The economics of information call for greater protection of ideas.


Outline

OWNERSHIP OF IDEAS



THE NATURE OF IDEAS

CONCLUSIONS


LEGALISING OWNERSHIP

• PROTECTION AGAINST TECHNOLOGY

– The Creator of the works needed incentive to keep creating these works for the public benefit.

– The ideas themselves were always thought of as being common property of man over which the creator had a limited monopoly of use.

• CREATION OF AN ECONOMIC MODEL

– Statutory recognition of royalties and remuneration for use.


STRUCTURE OF LEGAL PROTECTION

• THE GRANT OF OWNERSHIP– The owner of the IP is identified and vested with the

ownership of the intellectual property

– Ownership may or may not require to be registered

• RIGHTS OF OWNERS– All owners of IP are entitled to exercise certain rights

over the intellectual property they create.

– These usually take the form of the right to prohibit others from doing certain acts.

• TERM– The ownership is for a limited period of time after which

the IP enters the public domain.


LEGALLY RECOGNISED IP

• PATENTS

– Protection for inventions.

– Requirements include novelty, non-obviousness and industrial application.

• COPYRIGHTS

– Protection for artistic and literary works

– Strict protection for form and substance only

• TRADEMARKS

– Protection for brand names used for identification of goods and services.


EVOLUTION OF LEGAL PROTECTION

• GLOBAL STANDARDISATION

– International trade obligations have been made increasingly dependant on IP commitments.

• SYSTEMIC EVOLUTION

– The scope of the subject matter that is entitled to protection has constantly grown.

• STATUTORY EVOLUTION

– The rights available to owners have steadily increased to match evolving technologies.


SOME STATUTORY EVOLUTIONS

• RENTAL RIGHTS

– Resale of legitimately purchased software.

• ANTI-CIRCUMVENTION

– Technological measures of copy protection statutorily recognised.

• EXTENSION OF TENURE

– Commercial Interests vs. The Common Property of Man.


THE REALITY OF IP PROTECTION

• LITIGATION

– Legal protection is only as good as the ability of the owner of the IP to enforce it.

– Huge costs and time make protection measures based on litigation, the preserve of the elite.

JUSTIFICATION FOR HOLDING IP

Enforcement of IP Rights

Deterrence

Increasing valuations

• COMMERCIAL CONDITIONING

– Peer group dynamics.

– Increasing commercial pressures on ownership of IP


THE REALITY OF IP PROTECTION

• The ownership of ideas is enforced through stringent laws.

– However these laws are practically unenforceable and often broken.

– Scapegoats are singled out.

– Respect for law diminishes.

• Technology is faster than law

– Law cannot protect effectively

– Nor can it change soon enough

COST OF PIRACY

Middle East/ Africa $137 million

Eastern Europe $435 million

Latin America $865 million

North America $2.0 billion

Western Europe $2.7 billion

Asia Pacific $4.7 billion

Worldwide piracy rate has increased from 37% to 40%

Source: BSA, June 2002


Outline

OWNERSHIP OF IDEAS



THE NATURE OF IDEAS

CONCLUSIONS


FINANCING IDEAS

• TRADITIONAL MODEL

– Patrons of art and science paid for the sustenance of artists and scientists.

– Knowledge industries today still survive on service based revenue models for the provision of knowledge based services.

• THE INTELLECTUAL PROPERTY MODEL

– Monopoly rights ensure that owners of valuable IP are the sole source of a given idea.

– IP is therefore treated like a scarce commodity and priced accordingly.


REVENUE YIELD ON IDEAS

• ROYALTY REVENUES

– For the duration of validity of the IP, royalties can be claimed on use.

• ENFORCEMENT REVENUES

– Settlement revenues.

– Court awarded damages.

• INVESTMENT

– Valuations based on potential future earnings attract investors.


THE IDEA MARKETPLACE

• THE IDEA SILO

– Creation of an IP inventory.

– Consolidation of IP in the hands of the wealthy through acquisition and co-ercion.

– The extension of validity of expired IP through subtle modification of specifications.

• THE UNEVEN PLAYING FIELD

– Barter of IP only takes place between high net worth IP players.

– These corporations have seats on standards committees to further maximise their IP revenues.


CONSEQUENCES OF THE IP MODEL

• IMPACT ON INNOVATION

– Monopoly rights compel inventors to maximise returns before innovating further.

• IMPACT ON COSTS

– Basic cost of IP products remain high.

– Cost of IP derived products escalate due to the inclusion of royalty costs in the pricing.

– Cost of IP products necessarily include the cost of policing ownership of that product.


ECONOMIC DILEMMA OF IDEAS

• THE REWARD DILEMMA

– In an Idea Economy, it must be economically viable for creators of new ideas to continue to innovate.

– However the reward must not foster complacency

• THE INNOVATION DILEMMA

– Innovation grows out of past invention

– However overly broad protection of invention can cripple innovation.


FLAWS IN THE IP ECONOMY

• POSSESSION

– Ideas are incapable of being possessed. Hence protection models based on possession are flawed.

• DISTRIBUTION

– Ideas can be transferred without leaving the possession of the owner. Hence models that require excessive policing in order to ensure ownership are flawed.

• VALUATION

– The value of ideas is contextual. Hence traditional valuation models are flawed.


REACTIONS TO THE IP MODEL

• COST

– High cost of drugs, particularly in the context of life saving drugs are being strongly resisted.

• OWNERSHIP

– Rampant piracy has forced several software product companies to rethink sales and marketing strategies.

– Ease of distribution and file compression technologies has forced music companies to consider digital distribution alternatives.


THE OTHER IDEA ECONOMIES

• COLLABORATIVE RESEARCH

– Distributed computing (SETI@home)

– Collaborative design (ThinkCycle)

– Community Publishing (Weblogs)

• FREE ACCESS TO IP

– Free Software Foundation

– OpenCourseWare

– Creative Commons


THE OTHER IDEA ECONOMIES

• DRAWBACKS

– Non IP based models necessarily demand a basic level of philanthropy. This is not commercially feasible.

– Unsecured IP is liable to theft and appropriation. In a property based economy this is untenable.


Outline

OWNERSHIP OF IDEAS



THE NATURE OF IDEAS

CONCLUSIONS


THE CONTEXT OF IDEAS

• Information is fast replacing property as the primary commodity for trade.

• Information is still being dealt with in the same legal paradigm as property.

• In order to better structure the economy of the Information Age, it is essential to understand it in the context of the currency of ideas.


SOME THOUGHTS

• IDEAS CANNOT BE OWNED.

– The Information Economy cannot therefore be based on proprietary concepts of revenue.

– Thus the Information Economy must evolve rewards for idea generation rather than the ideas themselves.

• IDEAS ARE LIMITLESS

– Therefore the generation of wealth through the artificial creation of scarcity will, at best, have short lived success.

– The Information Economy must evolve rewards that are not based on the existence of a monopoly status.


SOME THOUGHTS

• IDEAS CANNOT BE TRANSFERRED

– The Information Economy should therefore cease to base economic yields on transfer pricing and royalties.

– Instead the focus should be to reward expertise in applying ideas to problems.

• IDEAS EXIST IN TIME NOT SPACE

– The Information Economy must cease to base revenues on products and versions.

– Instead the new economy should generate revenues from dynamic and real time transactions.


SOME THOUGHTS

• Ideas should be generated and propagated.

• The creator of the idea should be rewarded for his creation and for his expertise and knowledge of the idea but not based on any artificial monopoly right.

• Others skilled in the art should be free to innovate on the idea and enrich the domain with their innovations.

• In special circumstances where the research costs far exceed engineering costs limited monopoly protection may be offered.

Currency Of Ideas

Technology

Transcript of Currency Of Ideas