File Sharing and Legal Highs Johan Söderberg

6. Comparing two cases of outlaw innovation: file sharing and legal highs Johan Söderberg 6.1 INTRODUCTION The opening up of innovation processes to users attracts a lot of interest, notably from policy makers and corporate actors. For a long time, studies of innovation scholars treated users and firms as mutually benefiting parties in a collective innovation process. Recently, however, this consensual bias has come under scrutiny. In numerous case studies, scholars have investigated user innovations unfolding on the ‘wrong’ side of the law. The term ‘outlaw innovation’ has been coined to describe those cases. Interest in outlaw innovation among studies of innovation scholars coincides with the recognition that firms can profit from innovations irrespective of the legal status of users’ practices (Flowers, 2008). This observation is highly suggestive and invites us to ask more in-depth research questions about outlaw innovation. To do so, I draw on a sociologically informed reinter- pretation of innovation, here understood as a form of (normative) social action. It follows that innovation processes are inseparable from norms, value conflicts and contested claims about norm-breaking, or, put dif- ferently, deviance (Hellström, 2004). The advantage of such a theoretical vantage point is clear when discussing outlaw innovation, where innovation is framed by conflictual relations. Indeed, conflict is the driver of the innovation process. Although this is evident in the special case of ‘outlaw innovation’, the same claim can be made for innovation tout court. This argument is advanced by a comparison of the empirical field the ‘outlaw innovation’ literature has centred on until now – computer hacking and file sharing – with a field where outlaw innovation is flour- ishing but which has not been considered in those terms, the creation of Novel Psychoactive Substances (NPS). The differences between these two empirical fields outweigh their similarities. Differences include the type of control measures and enforcement regimes that are applicable, public 115 GODIN TEXT.indd 115 28/02/2017 15:10 116 Critical studies of innovation perception of transgressions in one compared to legality in the other, and variations in market structures, for instance, the pharmaceutical industry is more dependent on public regulations than the computer industry. What they have in common is the presence of a minority of devoted users of the respective industry’s products who do not confer the right to companies to define approved uses, and, furthermore, by defying this right, come up against the law. The confrontation with law enforcement is what compels these users to innovate. Hackers design file sharing protocols and other software tools in order to render intellectual property law enforecement ineffective. This is analogous to how controlled drugs and substance laws are made obsolete through the creation of new, hence unclassified, psychoactive substances. The street name for NPS is ‘legal highs’. The rate of innovation of, respectively, file sharing protocols and NPS substances is faster than legislators can cope with. The contribution of studies of innovation scholars is to demonstrate that, at least as far as the computer industry is concerned, unlawful uses of that industry’s products (that is, hacking, file sharing) can be harnessed by legitimate businesses. In this chapter I argue that the same reasoning holds for the pharmaceutical industry. Of course, the innovation process looks different in the drug market compared to the software market. However, the pharmaceutical industry just like the computer industry tries to involve the users (that is, patients) in the process of drug discovery. It is in this light that one should see the strategic importance of users who experi- ment with the industry’s products without regard for approved uses and controlled substance laws. With this comparison I seek to substantiate a general claim: industries across the board are structurally dependent on the legal grey zone as an incubator for innovation. By making this claim, I depart from the focus on individual firm strategies that is dominant in studies of innovation literature. The case with legal highs serves my argument because, as often described in relation to drug markets and altered states of consciousness, it throws new light on white markets and normal states of being (Smith and Land, 2013). From such a vantage point, we are invited to ask different research questions about outlaw innovation. For instance: what changes in law are acceptable or necessary if we are to maintain existing levels of regulation and control over innovations and markets stemming from heterogeneous, non-firm actors? I do not aspire to give an answer to this question here. For my purpose it suffices to demonstrate that such questions cannot even be raised if the inquiry starts from a hypothetical firm looking for investment opportunities, that is, the default starting point of most studies of innovation research. The chapter focuses on outlaw innovation to call for more sociologically grounded research on innovation GODIN TEXT.indd 116 28/02/2017 15:10 Comparing two cases of outlaw innovation 117 that, because attuned to social conflict, do a better job at grasping conflict- driven innovation processes. 6.2 THEORIES ON OPEN AND OUTLAW INNOVATION As interest in innovation soars, the meaning of the word has become narrower. Originally understood to designate organizational change in a sociological and anthropological sense, it has become associated with technological and commercial improvements (Godin, 2012a). This is not surprising, given that the study of innovation is concentrated to engineering and economic departments. Studies of innovation arose in opposition to neoclassical theory, in which technological change was treated as a residual factor of market exchanges. In its place, studies of innovation scholars build on the heritage of Schumpeter’s evolution- ary economics. Emphasis shifted from markets to institutional change, corporate research and development (R&D) policy and national innovation systems (Fagerberg and Verspagen, 2009). No less than neoclassical economists, however, are studies of innovation scholars geared to the commercial applicability of their findings. The institutional and social aspects of innovation are often treated as residuals, studied solely for their contribution to the innovative performance of firms (Godin, 2012b, p. 412). Over the years, studies of innovation have branched into many niched research communities suh as user involvement in open innovation processes. The key terms, ‘open innovation’ and ‘user innovation’, were coined by Henry Chesbrough (2003) and Eric von Hippel (2005), respectively. In this chapter I use the two concepts interchangeably. The meaning of ‘the user’ differs from case to case. Indeed, the heterogeneity of the actors involved in open innovation processes is the key message of this literature. This point is often asserted against the orthodox innovation studies tra- dition and its preoccupation with states and corporations as sources of innovation (but see Trott et al., 2013). The stress put on the opening up of the innovation process to heterogeneous actors is portrayed as subversive, even emancipatory. It gives this niche area of innovation studies an activist air, at least when compared to the main body of literature of the field. Although said to be subversive, this trend is also supposed to benefit everyone: users, firms and society at large. Chesbrough emphasises how firms can profit from a diversification of innovation processes and a lowering of in-house incumbents. Eric von Hippel foregrounds how users are empowered to invent products that better approximate their consumer GODIN TEXT.indd 117 28/02/2017 15:10 118 Critical studies of innovation needs. Both scholars assume, however, that the relation between users and firms is mutually beneficial. The consensual bias has come under scrutiny from within the field (West and Lakhani, 2008). Cases where users and firms are indifferent or even hostile to each other are being investigated. The new direction in research coincides with the recognition that a trustful relation between the firm and its customers/users is not a precondition for the former to extract market- able ideas from the latter (Dahlander and Magnusson, 2005; Schulz and Wagner, 2008). This point has been made most strongly by a group of researchers studying ‘outlaw innovation’. The term was coined by Stephen Flowers. It designates a subset of innovations stemming from unlawful practices by users. Characteristic of such users is, firstly, their hostility towards the supplier’s constraints on the approved methods of product use, and, secondly, that this brings them in conflict with the law (Flowers, 2008). The inspiration to investigate such cases comes from debates among economists about the unintended economic side effects of file sharing. Contra the claims of the media content industry, many economists have argued that unauthorized copying of information can generate revenues for rights holders. For instance, increased exposure of a work of art due to piracy has been shown to increase revenues from secondary markets, such as product placement, advertising and licensing (Montgomery and Fitzgerald, 2006). If firms anticipate piracy in their business models from the outset, secondary markets can be made into more important sources of revenue than the intended market (Bekir et

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