new economy

The world is changing fast, with the advent of revolutionary new technology and economic models; we believe that IPR must keep up as well. The new world economy is a truly international system with the advent of globalization and international trade. As stated in his book “high noon” J.F Rischard outlines how existing hierarchy based governmental systems are lagging behind the revolutionary new economies they are attempting to manage. The Internet has created a whole new market space and avenue for business revenue. Along with these new economic changes, an interesting new system has emerged, namely “open source”. In this model, co-creators collaborate together to develop new products, software and systems, of their own volition and usually not for income. Mass collaboration has become extremely effective due to the Internet, which allows masses of data to be shared with thousands of individuals all over the world. This enables thousands of brilliant minds to work on a problem / product collectively and find solutions rapidly and cheaply. Some companies have realized the potential of tapping into this vast arena such as “Goldcorp” a mining company, which offered a reward for people to analyze the geological data from one of their gold mining sites and provide possible gold deposit locations on the site. Companies can now publish their Research and Development work on the web and allow access to many people all over the world to refine and add on to this research. Monetary rewards have been offered to motivate people to contribute to the research and development data banks.

“Open sourcing” can also allow companies to create a strong connection with their customers. By publishing the skeleton of say a design of a shoe on a Web site, a shoe manufacturer can ask the customers to design the entire shoe. This would allow for a strong connection to be formed between the producer and consumer. Even though the shoe manufacture might have revealed “sensitive trade secrets” they are more than compensated for by the market they have captured, as they are now producing exactly what the consumer desires. The consumer has become part of the design process and thus feels included and this goes a long way in creating brand loyalty. The consumer has turned into a “prosumer” and has been integrated into the company. This ability to integrate with the customer is the aim of many businesses as it increases loyal market share.

The idea of “open source” is synonymous with innovation, and rapid progress. If companies don’t have to rely on protecting and monopolizing their products through patents, they can continuously adapt and evolve their products freely, creating new ideas to capture the imagination of the market. If products are not protected, than we enter the vista of truly massive collaboration, as ideas spread will spread like wild fire through industries. In such a situation it is vital to constantly evolve and at the same time cultivate brand loyalty. Companies can learn from each other freely in such a scenario and instead of worrying about their products being copied, they should focus their attention on setting a brand landmark in the market through quality and innovation.

This “open source” model can be used to integrate consumers and businesses in industries, which rely on constant innovation, change, and exciting branding but do not rely on critical intellectual property rights such as drug formulas. Examples of these could include civil society movements, education, health care systems {not just pharmaceuticals}, and fashion and accessories industries [such as shoes, enabling mass customization of products {prosumers}]. Where IP is not exclusive people can still compete by creating a unique experience around delivering the service or product. This allows them to differentiate themselves and thus compete.

It can be argued that such a model can only work in specific niche areas of the global economy {which do not rely on critical intellectual property rights} since we probably have a long way to go before such a radical concept truly revolutionizes our businesses and economies creating viable revenue models.

One of the main problems with applying this “open source” idea to patent intensive industries, which rely heavily on “critical intellectual property rights” {such as a drug company} - is the free rider factor; wherein one company invests a large sum of money into say the development of a drug and then another company copies the drug in a matter of days and sells it for a much cheaper price, thus destroying the hopes of the former company as it tries to recover its costs. Traditionally patents have protected the interests of companies like the one mentioned above, but patents allow the company to have a complete monopoly on the idea / product which hampers innovation and progress. The idea / product is no longer open to anyone else to build open. Furthermore, the company can demand extremely high prices for their products, especially if it is in great demand.

Problem:
- Without patents companies do not have the incentive to pour billions of dollars into research and development
- But patents create monopolies as the idea / product cannot be used by anyone else
- Such a monopoly can lead to extremely high prices, which in the case of say a cure for aids could be disastrous, as developing countries could not afford it.

Solution:
Our model is simple and effective in order to decrease prices. We propose the separation of research and development from large companies and the setting up of many individual companies that deal solely with R & D.

Why this is viable: By creating an independent supplier, we can in effect, open a market for R &D. This will cost companies much less, since it takes millions for a shoe company (for example) to set up labs and get scientists, but in a company focused on research, economies of scale applies and work is done more efficiently.

The set up of independent R& D centers (market forces will ensure that they specialize and work very efficiently) will provide multiple suppliers of ideas – thus reducing price.

These ideas will be worked on a group of top scientists (all of whom are being paid huge amounts because the companies will be competing for their skills) -This will keep the scientists motivated and probably increase the rate at which new ideas are created since the incentive is very direct. A scientist will be paid for the productive work he does and will be driven to work more. Right now (in India) scientists receive very little income and it is not considered a mainstream job –this can change that.

Once the R&D firms come up with ideas they WILL sell them multiple times (to increase remuneration (profit)). This over comes the problems of a monopoly since many companies will be able to buy the rights to use the ideas and could develop these ideas further. Healthy competition would be established between these firms keeping the prices in check, in accordance to market phenomenon, thus the problem of exploitation and excruciatingly high prices are resolved.

Prices of licenses will be kept in control by demand and supply forces (competition). It WILL now be sold at developing countries for cheaper prices (since this will open new markets for the companies who bought the idea.