Efforts At Collaboration Without Open Source Licensing

Consortia used to be the standard means of collaborating between companies upon software development. Closed consortium software (gated communities) has a record of titanic failures (Taligent and Monterey intended to create a replacement for Unix, but Linux replaced them) and it is the wrong structure for the development of non-differentiating software. A consortium costs more because there are fewer members to share cost and risk than with an open source project and more structure and overhead as well.

Digital economy

Money management in the creative and conventional economies does not substantially differ. Thinking and creating are not free. Research represents a long and strenuous process of investment (time and money). The cost of operating a business with intellectual assets only is lower than the cost of starting a conventional business which uses both physical and intellectual assets. The former also has the advantage that it can delay paying for the intellectual assets, or pay them with equity. But the insubstantial nature of these assets deters would-be investors, and even those who have a stake in the business have problems in valuing it and their share. That is why patents, copyrights and trademarks have seldom been used as collateral for loans and, when they are, their value is underplayed.

One of the fields where more intellectual assets are used is the digital economy. With regard to the research in software industries, I shall further develop a separate chapter in which I shall describe the main types of innovation and the impact of open source.

The economics of creativity

The economics of creativity differs from Adam Smith’s conventional economics. The latter revolves around the firm, which is considered more efficient than the individual in identifying and using resources. In the economics of creativity, creative people are not dependent on organizations to the same extent. They do not need large resources of capital and equipment. They often have low transaction costs. The law of diminishing returns, first formulated by David Ricardo, hardly applies. It states that each additional input factor of production becomes harder or more expensive to acquire and that therefore at some point the cost of producing one more unit exceeds the revenue obtained from selling it. The point at which marginal cost meets marginal revenue is called the equilibrium point. This holds true if resources are limited and under price competition. But in an economy based on intangible and often immeasurable resources the costs of production are less important.

In the creative economy, individuals and firms use resources which are not rare, over which they assert intellectual property rights, which may be short-run, and which do not compete primarily on price. The world of diminishing returns and scarcity of physical objects is being replaced by a world of increasing returns based on the infinity of possible ideas and people’s genius for using those ideas to generate new products and transactions. Control of product and price (performed by the company) become less relevant if production resources are freely available, if products are intangible, if price competition is negligible, and if the market is driven by demand not by supply. In the knowledge economy, firms either charge prices well in excess of marginal costs, or they give their products away for free (the case of free software and its mechanism will be approached in the next part of the paper).

The Recognition, Protection and Classification of Creative Products - Part 3

Human beings are called homo creator, but creativity does not always lead to a creative product. The creative equation deals only in creative products, not creativity, and differentiates between a creative product and a transaction. It states that the creative economy (CE) is equivalent to the value of creative products (CP) multiplied by the number of transactions (T); that is, CE=CPxT. Creativity itself cannot be quantified. The number of creative products can be quantified, but the multiplicity of products and the confidentiality of many deals may hamper the process of making an accurate account.(1)

Apart from the creative products and the transactions incurred which come to a fore when talking about creative economy, management plays an important role in the deployment of the creative activity. Thus, a creative and innovative management system best suits a creative and innovative activity.

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(1) HOWKINS, John, “The Creative Economy. How people make money from ides”, London Allen Lane, The Penguin Press, London, 2001, p. xi-xiv

Copyright, patent, trademark and design

Copyright law covers an individual’s creative expression. It accrues automatically to any qualifying work and does not need to be registered. It normally lasts for the author’s lifetime plus seventy years. Patent law originated in the need to protect inventions of new industrial products and processes. It gives the inventor a monopoly in the making of the new product, typically for twenty years. Whereas copyright accrues automatically, a patent has to pass stringent tests before being approved. It must be novel, non-obvious and useful. None of these tests applies to copyright. Once registered, a patent gives stronger protection than does copyright. A trademark does not require any artistic or creative expression or any expert skill. It is a mark or symbol that represents an organization or trade. Trademarks are registered, they have to be actively traded and to pass tests of type and uniqueness. A design is a shape or symbol that, like a trademark, has the character of being distinctive and unusual. Legally, it is a hybrid. It often qualifies for copyright; it may also qualify for a special design right (as in Britain); and it is usually registered like a trademark.

These systems can overlap. An artist’s working sketch for a trade-mark qualifies as an artistic work and merits copyright protection quite separately from the trademark itself being registered as a trademark or a design. Computer programs which automatically qualify for copyright may in some countries also be awarded a patent.

The copyright industries consist of all industries that create copyright or related works as their primary product – advertising, computer software, design, photography, film, music (publishing, recording and performing), performing arts, publishing, radio and TV, and video games. The International Intellectual Property Alliance (IIPA) distinguishes between the “core” copyright industries and the total copyrights industries, which also include the manufacturing of products which depend upon copyright goods (computers, TV receivers).

The patent industries consist of all industries that produce or deal with patents. The dominant ones are the pharmaceuticals, electronics, information technology, industrial design, materials, chemicals, engineering, space and vehicles. The dominant activity is scientific research and development which is carried out by commercial companies, technical laboratories and universities. The US, Japan, Germany, France and UK are only some of the most prolific countries in this field. Patents registered by the US and UK Patent Office by country of applicant in 1999 can be found in the appendix section

The trademark and design industries are more widespread, and their size and diversity make them less distinctive. It is possible to identify the creativity involved in the creation of a trademark, but it is less easy to calculate its economic value or to identify the economic gains attributable to the trademark in the total product mix.

Together, these four industries constitute the creative industries and the creative economy. The creative economy consists of the transactions in these creative products. Each transaction may have two complementary values: the value of the intangible, intellectual property and the value of the physical career or platform. This creative economy covers a wide range of branches, and money made out of them reach significant figures. To have an idea, the market size of the creative economy in 1999 is depicted in the appendix section.

Perspectives on creativity - part 2

Innovation, which can mean a new idea, method or invention used in order to improve the current activity or the introduction of new ideas or methods(1), is a concept closely related to creativity. Innovation has become a lot more important to corporate leaders, in the last decade in particular, because of changes in the business environment, brought on by increased technological capabilities, speed, hyper competition, and faster rates of diffusion enabled by greater connectivity. The second part of my paper refers – inter alia – to innovation opportunities. But while many companies say they are making innovation happen, for most of them innovation is based on old ideas, principles and processes. At best, their innovations are incremental-miniscule improvements in products and services. While there is nothing wrong in achieving small gains, this view of innovation shuts out the truly startling cases of leap innovations.

Leap innovations occur when someone discovers an entirely new approach to a problem, an approach that changes life in some significant way. The leap innovation emphasizes the act of moving into the unknown or unexplored rather than just breaking with predictable patterns of innovation.(2)

Creativity and innovation are present at all levels of business from the management of a company to the development, branding and shape of each product.(3) Companies change at a great speed, due to the fact that competition is increasing and they have to maintain their position on the market. The fruits of creativity are what make them more appealing to their clients and partners. Briefly, their future and profitability largely depend on how creative they are.

Despite the fact that arts and creativity are allegedly treated as one and the same concept, not only pieces of art are the result of creative work. Creativity is also present in all other fields, such as sciences (especially in research and development). Both arts and sciences use the same thinking and creating processes, but the difference consists in the reasons why they do so. Also, the way how they protect its economic value differs. So, creativity is common to both arts and sciences, the creative products are different.

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(1) “Dictionary of Contemporary English – The Complete Guide to Written and Spoken English”, Longman 1999

(2) WHITE, Shira P.  with WRIGHT, G.  Patton, “New Ideas About New Ideas”, Pretince Hall, Financial Times, London 2002, p. 8

(3) HOWKINS, John, “The Creative Economy. How people make money from ides”, London Allen Lane, The Penguin Press, London, 2001, p. xi