Knowledge Capitalism gone wrong

Article published by The Guardian on 18 Dec 2012

Written by Professor Birgitte Andersen, CEO, Big Innovation Centre

Featuring: Big Innovation Centre’s CEO argues why reform so urgently needed

Overzealous protection of IP threatens to hobble innovation, and government reform is urgently needed, argues Birgitte Andersen.

Intellectual property is increasingly the cornerstone of the contemporary knowledge-based economy, yet overzealous protection of intellectual property rights (IPR) threatens to hobble it. Apple’s recent winning of $1 billion from Samsung in American courts by way of compensation for alleged theft of its intellectual property was a landmark moment. It demonstrated something all too common – dramatising how innovation is potentially being stifled and intellectual property rights used to protect incumbents and insiders.

Yesterday (17 Dec), the Business Secretary, Vince Cable, briefed key players from industry and government on his vision for developing the UK’s intellectual property landscape to encourage growth. The speech was a welcome first step and demonstrated where some urgent action is needed. The speeding up of patent processing services and faster trademark examination services were helpful measures. The government also demonstrated an innovative approach by committing to reach out to innovative businesses, young people, consumers and creators to promote progressive management of IP and integrity in IP communities. Yet this commitment must be translated into an agenda for reforming the IP system so that it truly reflects the driving forces of the modern global economy.

But why is reform so urgently needed?

The current rules of the game for IPR are about securing a share of the pie, rather than growing it. It is about how those with the deepest pockets can use the courts to bully or defend their IPR position; business ethics and integrity have collapsed. The regime now works nakedly to protect existing power relationships rather than to promote the tumult, churn and zest of innovation and experimentation. The IPR system has become a drag on growth and progress.

The theoretical nonsense from the faculties of law and economics on patent and copyright are ruling our court rooms: without patents or copyright, runs the argument, markets would not exist; thus, instead of entrepreneurial search engines and online registers being celebrated for their frontier thinking, they are hounded for upsetting the dominant position of existing market actors. Examples include the private prosecution pursued by the lobby group Federation Against Copyright Theft (FACT) against Surfthechannel, in which the owner was sentenced to four years in prison; or the case of the Oink music site, which successfully defended itself from prosecution but never reopened; and more recently, the case of the Sheffield University student who paid an out of court settlement over the link site TVShack after being faced with extradition and a potential 10 year sentence. On top of the usual risks associated with start-up companies, today’s digital entrepreneurs also face the personal tragedy of all prosecuted inventors — divorce, financial ruin, job loss, exile from the internet, and more.

The courtrooms calculate losses for firms and society on the nonsensical illusion that knowledge does not have a social origin and is wholly the result of individual effort – contrary to all we know about the march of science and technology. Every truly great inventor has acknowledged that his or her achievement is built on the achievements of others, and recognises that often similar breakthroughs would have happened elsewhere because science has an ineluctable logic. Its findings at any moment are available to all. In reality, lookalikes are always likely to happen — as in the touch screen panel dispute of Apple and Samsung – despite the court room logic and IPR economics that declare the opposite.

At its worst, the current patent and copyright system ignores how knowledge and ideas are truly generated. It does not incentivise co-creation and collaborative effort, wherein a multitude of firms participate in common spheres of knowledge, creativity, development, and commercialisation, which tend to be multidisciplinary and global.

Yet what is a patent worth on the real market, outside the judgements of the court room?

Almost half of firms trading patents in the pharmaceutical, ICT and University sector report not being able to assessing the degree of novelty of the inventions they trade. They cannot assess the value and true price.

Nor are patents and copyright superior ‘stimulus policies’ for achieving entrepreneurial growth. In fact, firms that exchange formal patents do not perform better financially (measured as turnover per employee) compared to firms that exchange non-patented technology or open source solutions. We must find ways to more strongly enforce open source and creative commerce licences, along with safeguarding technological solutions with no patents. Almost half of firms currently active in the open source community experience their ideas patented by their co-participants after slight development. It is the rape of the entrepreneurial commons.

What is driving this agenda is not economics but power – both corporate and political. The US is intent on extending its own dysfunctional regime internationally – so that international trade is now ruled by international minimum standards of IPR protection (such as The Trade Related Aspects of Intellectual Property Section – TRIPS — of the World Trade Organisation).

Samsung will be chased worldwide for their infringement: and it was important that South Korean courts tried to offer resistance.

The increased enforcement has also resulted in new areas of protection of basic knowledge, such as business method patents, gene-related patents on humans or crops, and some mathematics. Many countries are following the US lead and encouraging public universities to patent their publicly funded basic research output, which used to form part of the public domain. The law has also increased the length and breadth of patents and copyright in most countries. Whether they concern file-sharing in the developed world or access to medicines in the less developed world, intellectual property rights are casting a long dark shadow around the globe.

Currently, and after several hearings, the UK government is beginning to declare independence from this charter to protect incumbents. It is essential that the government now pushes ahead with plans to implement exceptions and limitations to IPR ownership rights, a move which has the potential to unleash a new wave of digital entrepreneurship.

The Coalition government has promised a ‘bonfire of red-tape’ to get the economy moving.

Yet real action on IPR in the form of backing more inclusive and flexible IP reforms would be a far more effective route to growth than further dismantling Britain’s employment laws and already minimal welfare state. Maybe then others around the world would make common cause in the creation of a global open innovation hub.

Birgitte Andersen is director of the Big Innovation Centre, an initiative of The Work Foundation and Lancaster University

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