A discussion of hybrid open source and proprietary licensing models.

[Rob Myers <robmyers AT mac.com>]

On 22 Aug 2004, at 16:02, Marshall Van Alstyne wrote:

> Whoa! Who said anything about 'software' patents?

Software was the point of origin for the discussion, and software 
patents demonstrate the (potential) disadvantages of the patent system 
very clearly, particularly with regard to electronic media, which 
software and Open Content share.

> They do make for a good straw man to attack though :)

I'm sorry if I've tarred the entire patent system with the brush of 
software patents. ;-)

> Rather, I was referring to the "patent system," the constitutionally 
> granted authority of congress to promote progress in science and the 
> useful arts.  The sheer universality of these systems across the globe 
> and across generations suggests they do perform a valuable role in 
> innovation.

OK. I'll think about this.

> OK some disagreement here.  Most of these benefits are real; but I 
> also know several sophisticated programmers who choose proprietary 
> packages over their open counterparts either for GUI reasons, 
> compatibility, or for enhanced functionality (especially in the area 
> of security).

I'm writing this on MacOSX, not Linux. Linux's GUI options are about as 
good as Windows 3.1 at the moment. But there's Linux software I can't 
get, or get reliably, on MacOSX, or Windows for that matter. And I 
really should have done a recent project in Struts or PHP rather than 
WebObjects. The proprietary system that was once world-beating has not 
had the same evolutionary capability as Free Software.

> If we accept that such users exist, can we understand what reasoning 
> would make their choices rational?  I'm not a big fan of the "this or 
> that party needs education" school of thought because intelligent 
> people, when presented with the same facts, frequently disagree.  If 
> we can understand why their choices make sense, we're more likely to 
> find grounds for mutual gain.

I accept that we need to understand the context in which conclusions 
are reached. I am interested in this.

> So, is there any reason why paying for software makes sense?

Patronage (getting something made that wouldn't be otherwise).
Direction (making sure what's made includes one's needs).
Continuity (making sure something one relies on continues to remain 
current).

You *always* pay for software. Even if you only give your ISP a few 
pennies for download time or buy a friend a drink for a CD, you pay. 
Then we get to whether that payment reaches the authors.

> The best reason I've heard is that one package offers some benefit not 
> available from another package (and this applies to many things other 
> than software).  But, I'm eager to hear other reasons...

Assembly.
Support.
Accountability (this is MASSIVE for IT departments).
Erm...

> > The separation of the interests of these groups is a product of
> > Proprietary methods. Open Source (at least Copyleft) redresses this.
>
> Now who's assuming these groups have to collide?!?

Not "have to". :-)

> The SUV example, however, doesn't seem to hold up.  As a rival good, 
> it can't be perfectly copied so the person with physical possession is 
> the only one who gets to sell it.

How perfect a copy is isn't always important. In conventional wisdom, 
pirate copies are often very low quality (I mean analogue media and 
physical products), yet they impact on sales of the originals.

Whoever came up with the idea of an SUV has seen it copied and has to 
compete against the copies.

> My point is different.  Suppose we were to make all intellectual 
> property suddenly free in the liberty sense -- whatever it is, you 
> have the right to take it, modify it, use it, and redistribute it -- 
> and so does everyone else.  Then it necessarily also becomes free in 
> the pricing sense.  You could never charge expressly for the value of 
> a new idea per se.

IIRC the patent system doesn't support the value of ideas per se: it 
supports the value of realising that idea. This is a useful distinction 
for FOSS and Open Content, as having the code, or even the binary, 
isn't the same as having the software running to your satisfaction.

> If this were to happen, could Pfizer afford to invest in developing 
> Lipitor or Glaxo invest in antiretrovirals? Could Intel invest 
> billions in next generation chips?  Society loses if these investments 
> in forward innovation don't happen.

However society may lose with the (coarse) granularity and (profit-led) 
direction of research undertaken by such large organisations and with 
their need to recoup such large costs. *Failed* corporate innovation 
can also have a negative value for societies.

> The problem seems one of balance.  What's the best way to reward 
> innovation?  What's the best way diffusion innovation once it's 
> occurred?   The answers to these questions seem frequently in tension.

There's also the question of how relevant innovation is as a primary 
criterion:

http://www.lessig.org/blog/archives/002106.shtml

IMHO there are very few companies who genuinely innovate and who aren't 
just commodifying other people's ideas.

> These aren't inconsistent with other motives.  Diff people just give 
> them diff relative weight.

Agreed. I make my living writing software...

> Disagree with the 1st claim based on the last.  When derivative works 
> can remain proprietary for long periods of time, they fork.

Possibly this is simply a problem with my terminology: a fork is an 
Open Source project, ergo a proprietary "fork" ain't a fork. :-)

> > But this is how Open Source works anyway! The XFree86 forks weren't
> > easy to set up, and are competing in an open market on comparative
> > value proposition.
>
> This is a good thing.

Yes.

> Actually, there are other ways to make forks seem economically 
> unattractive and these forces need to be understood in the 
> marketplace.
>
> Here are three articles using information economics that show how 
> packaging can make life tough for competing products.  One is mine 
> with a colleague, the others are by Bakos & BrynjolfssonNalebuff, and 
> by Nalebuff:
>
> 1) on how free information can be profit maximizing and create 
> barriers to entry for other products:
>     http://papers.ssrn.com/sol3/papers.cfm?abstract_id=249585
> 2) on how bundling can be profit maximizing
>     http://papers.ssrn.com/sol3/papers.cfm?abstract_id=231598
> 3) on how bundling creates barriers to entry for other products
>     http://papers.ssrn.com/sol3/papers.cfm?abstract_id=185193

Thank you for these references, I'll take a look.

> All hail the GPL!  Is there anything it can't do? :)

It doesn't handle patents, and it refuses to make my tea. :-)

> > Under BSD, the *future* of the commons is not ensured. Code goes
> > stale, technology moves on. If code gets taken from a BSD project and
> > improved but not released by a proprietary project, the tragedy of the
> > commons has occurred in all but name. That does not happen under the
> > GPL. This is an important point quite separate from zero marginals.
>
> Yes, this is like the forking problem earlier.  Here's why expiration 
> of the proprietary period makes sense.

Eventual release may be better than non-release.
Unless it is gamed to affect competition.
Or it is considered in terms of efficiency.

> > Atomicity and lock-in. Even if the original author remains benign,
> > this reduces the creation of value.  This is why the GPL applies to 
> > entire
> > codebases. It's also one of the complaints against the OGL (atomicity)
> > and the KDE project (lock-in).
>
> Doesn't seem correct.  It's true that this reduces 3rd party creation 
> of value.  It can, however, motivate the original author to have 
> something to sell.

Every original author is someone else's third party.

> Again, this seems like a question of balance.  If it's a tiny project, 
> then maybe 3rd party contributions aren't critical.  If it's a major 
> project then maybe 3rd parties are essential.

IMHO the opposite is usually true. For a project to be worthwhile to a 
company it has to be of a reasonable size. To dual-license it they have 
to own the source. So 3rd party contributors aren't a bonus. This is 
part of the distorting effect of dual-sourcing.

- Rob.