Open Source Eats Patents
19 Oct 2018 •OPEN-SOURCE TWEETSTORM @asynchio postulates that every patent-heavy industry will be dis-intermediated by open source. A thread on why this prediction could turn out to be true. 1/N
— Sujith Jay Nair (@suj1th) October 19, 2018
Demsetz' Theory on Property Rights models the emergence of property around a resource as a function of the cost of implementing & enforcing property rights.
— Sujith Jay Nair (@suj1th) October 19, 2018
A resource, managed as property, could evolve into commons when the implementation cost of property rights exceeds the value of the increase in the efficiency of utilisation of the resource caused by adoption of property rights.
— Sujith Jay Nair (@suj1th) October 19, 2018
The effective implementation cost of property for a resource in a patent-heavy industry is a combination of two factors:
— Sujith Jay Nair (@suj1th) October 19, 2018
1. the (nominal) cost of a patent.
2. the opportunity cost of losing out on innovation that could have been garnered by the resource as a commons.
OTOH, the efficiency of utilisation of a resource for a firm in a patent-heavy industry = the share of the value created by the resource which the firm can capture. This is lower for a commons resource vs a patented resource.
— Sujith Jay Nair (@suj1th) October 19, 2018
How much lower? And, is this loss covered for by relinquishing the cost of property implementation? A traditional view on this would answer NO.
— Sujith Jay Nair (@suj1th) October 19, 2018
The emergence & continued flourish of the COSS industry, however, is a proof to the contrary. We can draw parallels between proprietary software & patents (both are moats around information resources with the abject intent of increasing an entity's share of resource utilisation).
— Sujith Jay Nair (@suj1th) October 19, 2018
I believe a drift from patents to commons will result as the realisation of the high hidden cost to implementation of patents offsets the scepticism to the commercial viability of open source. (N/N)
— Sujith Jay Nair (@suj1th) October 19, 2018
I believe an important caveat exists to this postulate: the physical capital necessary for the production & innovation of the resource should have low-cost access & wide distribution. I will try & explore this caveat a bit. https://t.co/p57V70PiCr
— Sujith Jay Nair (@suj1th) October 20, 2018
I will use the case of the Pharmaceutical industry. Modern drug discovery is a patent-heavy process, which should make it a ripe candidate for open source disruption. But this has not been the case, yet.
— Sujith Jay Nair (@suj1th) October 20, 2018
My argument for why this is so is the concentrated nature of the physical asset (lab infrastructure, capital for clinical trials) needed for innovation in drug discovery - it is limited to large pharmaceutical firms and some university departments.
— Sujith Jay Nair (@suj1th) October 20, 2018
The concentrated nature of the physical asset ensures the opportunity cost of losing out on innovation that could have been garnered by the resource as a commons, is very low. This, in turn, reduces the effective implementation cost of property for the resource. Hence, patents!
— Sujith Jay Nair (@suj1th) October 20, 2018