This is my first blog post for the UVA class LPPS 4720.
While Intellectual Property (IP) has been a useful tool in the past to foster entrepreneurship, it has many underlying issues. An Open Source philosophy is a great alternative to IP which solves many of its issues, but still is not a silver bullet. To understand the advantages of Open Source when applied to innovation and product development, it is important to first understand IP. According to the World Intellectual Property Organization, “Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.” The primary purpose of Intellectual Property is to encourage innovation by providing financial incentives and/or competitive advantages to those who create new products or ideas—this is done via Copyright, Patents, Trademarks, Trade Secrets, etc. In essence, it allows entrepreneurs to protect their work by preventing others from profiting off it.
The Open Source philosophy offers a different approach. Instead of incentivizing innovation through extrinsic motivation like money, it relies on intrinsically motivated innovators to make products for fun and release the designs to the public. Open Source does not mean that these products are not copyrighted—the creator of the product can choose whether to keep a copyright or to release their work into the public domain, or sometimes the license is beyond the creator’s control and is dictated by which other products the product is using or extending (especially in the case of copyleft licenses). Examples of Open Source products include Arduino microchips, furniture designs, prosthetics, and the world’s most widely-used operating system.
Benefits of IP:
- Over 800,000 patents are granted every year around the world, providing invaluable information on the status of competitors and allowing companies to save money on R&D costs [1].
- VC firms and other investors often require that businesses register for patents in order to protect their ideas and help ensure its profitability [1].
- Trademarks can help distinguish products from similar competitors which also helps with marketing. They also make it easier and less risky for brands to develop products for new markets [1].
Drawbacks of IP:
- IP law can be complicated to navigate and expensive to enforce, with basic patent filing fees adding up to over $2,000 according to the USPTO.
- “Patent trolls” can obtain the rights to patents and then enforce them far beyond their original scope, stifling innovation by making it difficult to avoid infringing on the patents’ protections. In the United States, this can lead to costly legal fees because of the American rule.
- The economics of IP-based product development can discourage companies from taking risks and spending time and money to develop a unique and innovative product [2].
Benefits of Open Source:
- Open designs make it easy for anyone to extend another person or company’s ideas, encouraging collaborative innovation. These types of innovations are often driven by passion instead of profit (intrinsic as opposed to extrinsic motivation), leading to higher quality products [2].
- The collaborative nature of open source products gives people a sense of community where the consumers of a product can also directly contribute back to it.
- Copyleft applies copyright principles to Open Source, making it difficult for proprietary (non-open) products to take advantage of work that others have been doing for free and have released into the public domain under an open license. It also encourages the viral spread of Open Source.
Drawbacks of Open Source:
- While it is still possible to make money off Open Source, it is sometimes more difficult to profit off an open product.
- Companies can take advantage of products using non-copyleft open licenses (such as BSD, MIT, etc.) by integrating them into their own proprietary products. However, this is not an issue for some Open Source developers and is often a conscious choice to increase adoption.
- Companies will often avoid using copyleft products because of the potential legal issues which can hurt their widespread adoption.
These days, there is little reason to keep making proprietary software in my opinion—the benefits of the Open Source development model far outweigh the minor potential losses in revenue. Companies like Red Hat and ElasticSearch thrive on a primarily Open Source business model and are still profitable. There is an important distinction between BSD-style Open Source and GNU-style Free Software which I won’t go into in this post, but I think the BSD license model works well for enterprise software since it allows companies to develop proprietary extensions to their core Open Source technologies if needed. Open Source can still play an important role in the hardware space since companies can make money by selling physical products, whereas it’s more difficult to charge money for Open Source software.
While I certainly think that Open Source is a great idea and should be the default choice for most new products, there are also important benefits for using traditional IP in the product development process. In some cases it is easier to justify using traditional IP to protect certain products, especially when starting a venture with high up-front costs that requires VC, Angel, or other forms of investment. For most other types of ventures, entrepreneurs should strongly consider using an Open Source model.
Last modified on 2/19/2021.