https://rufuspollock.com/papers/value_of_the_public_domain.html
One of the first printed texts of which we have record is a copy of the Buddhist Diamond sutra produced in China around 868AD. In it can be found the dedication: "for universal free distribution". Clearly, the idea of public domain, that is open access to knowledge1, has been present since humanity first began to formally transmit and share ideas. It is also likely that the urge to keep ideas secret, particularly those that had 'commercial' value, is equally old.
With the development of trade and technology, particularly during the Renaissance in Europe, these parallel approaches of openness and secrecy continued to evolve but the tension between them also increased. With the introduction of formal monopoly rights such as patents and copyrights during the sixteenth and seventeenth century there was now a halfway house of sorts whereby the monopoly (and the associated profits) of secrecy was combined with openness in the form of the disclosure of the work.
These alternatives of openness, secrecy and state-sanctioned monopoly have stayed with us down to the present day; while most of our ideas, particularly cultural ones, are 'public domain', free for anyone to use and reuse, a significant portion of the intellectual works and products created by the economies of the world are protected either by some form of intellectual property rights or by secrecy – or by both, as is the case with most proprietary computer software for example.
However there have also been considerable changes. On the one hand there has been a large increase, particularly over the last thirty to forty years, in the scope and duration of intellectual property rights. On the other hand, and at the same time, especially in recent years, we have seen the rise of self-consciously open models of innovation, particularly in software where the 'copyleft' approach to knowledge licensing first arose in the 1980s2.
However the most significant of all changes underlies these others, for it is the change in the role of knowledge in society and the economy. Terms such as the 'information age' or the 'knowledge economy' are now commonplace and hard statistics point to the fact that in most western economies the information-based service sector is now more important than manufacturing. These changes in turn result from, or at least depend upon, a revolution in communication and computer technologies that has greatly reduced the cost of production, distribution and manipulation of knowledge. Whole industries which neither existed nor were imagined fifty, and possibly even twenty, years ago have grown up which exploit these new-found possibilities.
What do these vast changes mean for the production and dissemination of knowledge, as well as for their regulation and support by government? These are large questions and not ones that can be answered adequately here. Instead, we shall address a small part of this large picture by focusing on the public domain and its value to society, concentrating in particular on the way in which open, 'public domain', approaches can generate commercial as well as societal value.
Too often this value has been unarticulated and thereby left vulnerable. While those who promote stronger intellectual property rights point to the tangible benefits that these offer their businesses, the corresponding costs to the public domain and its users are invisible or ignored. This paper seeks to redress the imbalance and, in doing so, to spur a re-orientation of innovation and information policy. Our current paradigm represents a form of monomania in which monopoly rights, in the form of intellectual property, displace all else from our thinking on this subject. It binds us to a narrow, and erroneous, viewpoint in which innovation is central but access is peripheral. The system it has engendered is now so distorted that its social and commercial costs in several key areas have become large. It is therefore high time to restore balance, in particular by taking proper account of the public domain and open approaches to knowledge production. It is only by doing so that we will be able to take full advantage of the possibilities offered by this digital age.
We begin by making some general remarks which form a background for the set of case-studies and research which will follow.
When we talk of 'value' it is important to be clear about what we mean. In this essay when the term value is used it should be taken as social value (or welfare), which is the usual meaning attributed to the term value by economists. This value, be it of an apple or a piece of software, is the value derived by a user from its employment or enjoyment – often approximated in monetary terms by willingness-to-pay (WTP)3 – net of the costs of producing the good. For goods with an associated price, social value may in turn be divided into 'user value' (consumer surplus) – defined as the value to the user of the good net the price paid for it – and 'commercial value' (producer surplus) – defined as the price minus the cost of producing the good (the seller's profit).
Thus the value of a good may be quite different from the price paid for it. This is an important distinction to keep in mind, for it is not unusual to see the value of an activity being equated to its revenue rather than to the utility generated for society. To illustrate this difference consider the case of a novel that goes out of copyright and enters the public domain. Suppose before this occurred the novel was sold for £10 in bookshops but afterwards it is sold for £5 and is also available for free on the internet. Sometimes it is suggested that this results in a reduction in the value of that work for society since before the work was 'worth' £10 but now is 'worth' only £5 or even nothing.
From the above this can be seen to be completely false. The value of the work has not changed at all. All that has happened is that the price has dropped. A consumer who previously valued the book at, say, £15 and who paid £10 and was left with £5 of 'consumer surplus', now pays £5 (or £0) and is left with £10 (or £15) of 'surplus'.
Furthermore, the reduction in price means that consumers who valued the work at less than £10, and therefore did not buy at the original price, will now be able to purchase it. For each such consumer society gains the entire value they put upon the good (net of costs). Aggregating the valuations of all of these individuals who only get access at the lower price gives the total value to society of having this lower price. Conversely when a monopoly – or some other regulation – restricts access to a good there is a consequential loss to society (termed the deadweight loss).
To give a concrete example, consider the case of pharmaceuticals in India. Since 1973 India has not had patents for pharmaceutical products. However under the TRIPs agreement – to which India is a signatory – patent protection must be provided for pharmaceuticals. Patents are monopolies and therefore their introduction will result in a deadweight loss to society. A recent study (Chaudhuri et al.) sought to determine the magnitude of this loss. They estimated that this change will cost Indian society, via its effect on consumers and local manufacturers, between $350--500 million a year, but that the gain to the owners of the patents will be only $50 million a year. This implies a deadweight cost for these monopolies of $300--$450 million a year, a very significant sum.
Moreover in the case of monopolies for knowledge we must also take account of the costs arising not just from the loss of access but from the loss of reuse. Just as some users are restricted from getting the good so will some innovators be prevented from building upon the original to make new products. If the monopoly acts as a significant bar in this respect the result will most likely be a large loss to society. A classic example of exactly this outcome is afforded by Watt and his improvement to the steam engine. Watt in partnership with Boulton vigorously enforced his patent against both infringers and improvers. This held up new developments and it was only with the expiry of his patent in 1799 that the flood of pent up innovation was released4.