OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: Harnessing the Benefits of Openness

A REPORT BY THE DIGITAL CONNECTIONS COUNCIL OF THE COMMITTEE FOR ECONOMIC DEVELOPMENT

APRIL 2006 Open Standards, Open Source, and Open Innovation: Harnessing the Benefits of Openness

Includes bibliographic references ISBN: 0-87186-182-8

First printing in bound-book form: 2006 Printed in the United States of America

COMMITTEE FOR ECONOMIC DEVELOPMENT 2000 L Street, N.W., Suite 700, Washington, D.C., 20036 (202)-296-5860 www.ced.org

ii CONTENTS

RESPONSIBILITY FOR CED STATEMENTS ON NATIONAL POLICY iv

PREFACE BY THE CED RESEARCH AND POLICY COMMITTEE vii

EXECUTIVE SUMMARY 1

INTRODUCTION 6

I. THE MEANING OF OPENNESS 8

II. OPEN STANDARDS 10

III. POLICY RECOMMENDATIONS REGARDING OPEN STANDARDS 17

IV. THE MAINSTREAMING OF OPEN-SOURCE SOFTWARE (OR THE MARCH OF THE PENGUIN) 18

V. PUBLIC POLICY ISSUES RELATING TO OPEN-SOURCE SOFTWARE 29

VI. PUBLIC POLICY RECOMMENDATIONS REGARDING OPEN-SOURCE SOFTWARE 32

VII. OPEN INNOVATION 33

VIII.PUBLIC POLICY ISSUES REGARDING OPEN INNOVATION 41

IX. PUBLIC POLICY RECOMMENDATIONS REGARDING OPEN INNOVATION 43

X. CONCLUSION 44

ENDNOTES 45

iii RESPONSIBILITY FOR CED STATEMENTS ON NATIONAL POLICY

The Committee for Economic ing specific legislative proposals; its purpose Development is an independent research is to urge careful consideration of the objec- and policy organization of over 200 business tives set forth in this statement and of the leaders and educators. CED is non-profit, best means of accomplishing those objectives. non-partisan, and non-political. Its purpose Each statement is preceded by extensive is to propose policies that bring about discussions, meetings, and exchange of steady economic growth at high employ- memoranda. The research is undertaken by ment and reasonably stable prices, increased a subcommittee, assisted by advisors chosen productivity and living standards, greater for their competence in the field under and more equal opportunity for every citi- study. zen, and an improved quality of life for all. The full Research and Policy Committee All CED policy recommendations must participates in the drafting of recommenda- have the approval of trustees on the tions. Likewise, the trustees on the drafting Research and Policy Committee. This com- subcommittee vote to approve or disapprove mittee is directed under the bylaws, which a policy statement, and they share with the emphasize that “all research is to be thor- Research and Policy Committee the privi- oughly objective in character, and the lege of submitting individual comments for approach in each instance is to be from the publication. standpoint of the general welfare and not The recommendations presented herein from that of any special political or econom- are those of the trustee members of the ic group.” The committee is aided by a Research and Policy Committee and the Research Advisory Board of leading social responsible subcommittee. They are not scientists and by a small permanent profes- necessarily endorsed by other trustees or by sional staff. non-trustee subcommittee members, advi- The Research and Policy Committee does sors, contributors, staff members, or others not attempt to pass judgment on any pend- associated with CED.

iv RESEARCH AND POLICY COMMITTEE

Co-Chairmen RICHARD H. DAVIS LENNY MENDONCA Partner Chairman, McKinsey Global PATRICK W. GROSS Davis Manafort, Inc. Institute Chairman, The Lovell Group McKinsey & Company, Inc. Founder, AMS RICHARD J. DAVIS Senior Partner NICHOLAS G. MOORE WILLIAM W. LEWIS Weil, Gotschal & Manges LLP Director Director Emeritus, McKinsey Global Bechtel Group, Inc. Institute FRANK P. DOYLE McKinsey & Company, Inc. Retired Executive Vice President DONNA MOREA General Electric President CGI-AMS, Inc. Vice Chairman W. D. EBERLE IAN ARNOF Chairman STEFFEN E. PALKO Chairman Manchester Associates, Ltd. Retired Vice Chairman and Arnof Family Foundation President MATTHEW FINK XTO Energy Inc. REX D. ADAMS President (Retired) Professor of Business Investment Company Institute CAROL J. PARRY Administration President The Fuqua School of Business EDMUND B. FITZGERALD Corporate Social Responsibility Duke University Managing Director Associates Woodmont Associates ALAN BELZER PETER G. PETERSON Retired President and HARRY L. FREEMAN Senior Chairman Chief Operating Officer Chair The Blackstone Group Allied-Signal Inc. The Mark Twain Institute HUGH B. PRICE LEE C. BOLLINGER CONO R. FUSCO Former President and Chief President Managing Partner-Strategic Executive Officer Columbia University Relationships National Urban League Grant Thornton ROY J. BOSTOCK NED REGAN Chairman GERALD GREENWALD University Professor Sealedge Investments Chairman The City University of New York Greenbriar Equity Group JOHN BRADEMAS JAMES Q. RIORDAN President Emeritus BARBARA B. GROGAN Chairman New York University President Quentin Partners Co. Western Industrial Contractors DONALD R. CALDWELL LANDON H. ROWLAND Chairman and Chief RICHARD W. HANSELMAN Chairman Executive Officer Former Chairman Everglades Financial Cross Atlantic Capital Partners Health Net Inc. GEORGE RUPP DAVID A. CAPUTO RODERICK M. HILLS President President Partner, Hills Stern & Morley LLP International Rescue Committee Pace University EDWARD A. KANGAS ROCCO C. SICILIANO MICHAEL CHESSER Chairman and Chief Executive Beverly Hills, California Chairman, President and Chief Officer, Retired Executive Officer Deloitte Touche Tohmatsu SARAH G. SMITH Great Plains Energy Services Chief Accounting Officer CHARLES E.M. KOLB Goldman Sachs Group Inc. CAROLYN CHIN President Chairman and Chief Committee for Economic MATTHEW J. STOVER Executive Officer Development Chairman Cebiz LKM Ventures BRUCE K. MACLAURY RONALD R. DAVENPORT President Emeritus JOSH S. WESTON Chairman of the Board The Brookings Institution Honorary Chairman Sheridan Broadcasting Corporation Automatic Data Processing, Inc.

v DIGITAL CONNECTIONS COUNCIL

Council Chair MR. CHARLES E.M. KOLB MS. DEBORAH TRASKELL President Vice President - Enterprise MR. PAUL M. HORN Committee for Economic Technology Office Senior Vice President, Research Development State Farm Insurance Companies IBM Corporation MR. JOHN KOLB MR. COLIN WATSON Chief Information Officer Senior Vice President, e-business Council Members Rensselaer Polytechnic Institute KeySpan Energy MS. CAROLYN CHIN Chairman & CEO MR. CAMPBELL LANGDON MR. ALAN YOUNG Cebiz Corporate VP, Strategic Corporate Technology Officer Development Citigroup Inc. MR. IRWIN DORROS Automatic Data Processing, Inc. President Dorros Associates MR. JOHN LEE Project Director Director of IT Nektar Therapeutics MR. ELLIOT MAXWELL MR. WILLIAM EBERLE Chief Strategist Chairman eMaxwell and Associates Manchester Associates MR. TARIQ K. MUHAMMAD Interactive Media Director Earl G. Graves Publishing Co., Inc. MR. ANDY ELLIS CED Project Managers Chief Security Officer Akamai MR. ROBERT W. OBEE DR. JOSEPH J. MINARIK Vice President and CIO Senior V.P. & Director of Research MR. REGINALD C. FOSTER Roadway Corporation Committee for Economic Chairman Development PC Harvest LLP MR. WILLIAM B. PLUMMER Vice President, Strategic & MR. ELLIOT SCHWARTZ MR. JOSEPH GANTZ External Affairs Vice President & Director, Partner Nokia Economic Studies GG Capital, LLC Committee for Economic MR. LARS RABBE Development MR. PATRICK W. GROSS Chief Information Officer Chairman, The Lovell Group Yahoo! Founder, AMS Project Associate MR. LOUIS L. RANA MR. EDWARD HOROWITZ Vice President CAROLYN CADEI Chairman Consolidated Edison Co. of NY, Inc. Research Associate EdsLink LLC Committee for Economic MR. MATTHEW J. STOVER Development MR. RICHARD HOWARD Chairman Program Manager (Retired) LKM Ventures, LLC Lucent Technologies Inc. MR. ANDREW STRICKER MR. LARRY JACKEL Associate Provost - Innovation Progam Manager, DAPRA through Technology Research Manager, Retired Vanderbilt University AT&T Labs

vi PREFACE BY THE CED RESEARCH AND POLICY COMMITTEE

CED’s Digital Connections Council This report is the work of the DCC and is (DCC), a group of information technology endorsed by CED’s Research and Policy experts from CED trustee-affiliated compa- Committee. We welcome this report and rec- nies, was established to advise CED on the ommend it to readers as an excellent analysis policy issues associated with cutting-edge of how the U.S. economy can benefit from technologies. This report, concerning “open- greater openness in technological standards, ness” in the digital economy, is the second software development, and innovation. of its products. CED appreciates greatly the efforts of the members of the Council, and Patrick W. Gross, Co-Chair in particular, the work of Paul Horn, Senior Research and Policy Committee Vice President for Research of IBM Chairman, The Lovell Group Corporation and Chair of the DCC, for his Founder, AMS, Inc. leadership in bringing this report to comple- tion. Special thanks are also due to Elliot William W. Lewis, Co-Chair Maxwell, CED’s project director and consult- Research and Policy Committee ant, and to Carolyn Cadei for assistance with Director Emeritus, McKinsey research, editing, and publication. Global Institute McKinsey and Company, Inc.

vii

EXECUTIVE SUMMARY

In its most recent report, the Digital copy, distribute, or modify it. This right to Connections Council examined the digital “exclude” fit neatly into an economic frame- economy and the special case of digital intel- work where it was difficult and costly to cre- lectual property. That report highlighted the ate and distribute a physical good, such as a benefits of making information widely avail- book or a recording on a physical medium, able through the Internet for the encourage- such as vinyl, tape, or compact disc, and ment of innovation and the stimulation of where allowing one person to have access economic growth. The Council recognized and control of that good precluded others the importance of protecting the interests from having the same rights at the same of initial creators—authors, songwriters, time. Just as with a physical space, only one inventors—but also saw a critical role in the person could use it at any given point in historically balanced intellectual property time. The legal regime was also consistent scheme for the vast number of potential “fol- with the centralized economic processes that low-on innovators,” who build upon earlier had emerged from the Industrial Revolution. innovation by standing on the “shoulders But this model is under considerable pres- of giants.” sure. Digital works require no less creativity In this report, the Council further than non-digital works but are dramatically explores this theme by examining the easier to copy, modify, and distribute. At the phenomenon of “openness,” which the same time, these works can be shared by mil- Organisation for Economic Co-operation and lions of users without any other potential Development (OECD) calls “an underlying user being prevented access; they are, as technical and philosophical tenet of the economists say, non-rivalrous. These charac- expansion of electronic commerce” that teristics are creating opportunities for differ- will “cause transformations, for better (e.g. ent models of production and distribution increased transparency, competition) or that are decentralized, collaborative, and worse (e.g. potential invasion of privacy), global. Digitization of information and the in the economy and society.” Internet have profoundly expanded the But what is “openness” in the context of capacity for openness, and the Council today’s digital economy? There are many sought to understand the consequences of potential definitions. Works and processes these changes. are usually neither open nor closed but The Council examined three areas—open somewhere on a spectrum between the two. standards, open-source software, and open One key attribute of openness is accessibility. innovation—to study the impact of openness The more accessible a work is to anyone, the in specific circumstances, to gauge its impor- more open it is. Another attribute of open- tance, and to determine whether public policy ness involves responsiveness—as the degree should encourage it, restrict it, or be neutral. to which a work can be modified by anyone increases, so too does the work’s level of OPEN STANDARDS openness. The very best example of open standards Intellectual property law in the United is the Internet itself. Built on a set of stan- States has provided a means by which the dards available to anyone, that were created holder of intellectual property rights may in a process that allowed participation by any- “close” off an information product, control- one, the Internet’s open standards enable ling access to it and charging for the rights to any network to interconnect and any applica-

1 tion to be made available to everyone. At the (W3C), inhibit the process of developing same time, the very connectivity that the standards. Internet provides has become the vehicle for Providing technology essential for the the expansion of “open innovation”—the implementation of a standard under a royal- collaboration of parties separated in time ty-free (RF) license may prevent a company and distance but united through their contri- from maximizing its royalty revenues, but it butions to projects as diverse as mapping the does not eliminate the benefits the company human genome and building new on-line may obtain. The more the standard draws on encyclopedias. a company’s technology, the more likely it is Proprietary standards—those controlled the standard will validate the technology, by a particular party—can provide substantial expand the market for it, and provide advan- benefits, as anyone knows who has ever been tages to the firm that created the technology prevented from sharing an electronic docu- and, thus, knows it best. ment with an individual using different soft- However, RF licensing by firms involved in ware. Moreover, such standards have the the development of an open standard does advantage of being validated by the market- not preclude a firm that has not participated place. But open standards prevent a single, in the process from asserting an intellectual self-interested party from controlling a stan- property claim after the standard has been dard, facilitate competition by lowering the adopted and implemented. Perversely, there cost of entry, and stimulate innovation is even an incentive for such a firm to wait beyond the standard by companies that seek until the standard is widely utilized before to differentiate themselves. Customers value challenging it, so as to maximize revenues the interoperability that open standards pro- from licensing or from damages. The Council, vide and generally benefit from not being therefore, recommends that incentives be created locked into a particular supplier. Because of the to induce the early disclosure of intellectual prop- advantages of open standards, the Council recom- erty claims and that consideration be given to mends that governments encourage the develop- progressively limiting recovery by a firm asserting ment and use of open standards through processes infringement, as time elapses from the adoption as open to participation and contribution as pos- of a standard. sible. The Council believes that the participation of civil society would be beneficial in the forma- OPEN-SOURCE SOFTWARE tion of standards with important social conse- The second form of openness examined quences. The Council also recommends that the was open-source software. In proprietary soft- results of government-supported research be readi- ware, the “source code” comprehensible by a ly available for inclusion in open standards, as programmer is not “open” and available for they have been in areas such as grid computing. study, modification, and redistribution; the Support for open standards has grown software is licensed for use under conditions dramatically in recent years. But as the set by the rights holder. In contrast, open- National Innovation Initiative has pointed source software is governed by a license out, issues surrounding intellectual property under which anyone can access, modify, and claims threaten the development of open further distribute the source code. It is the standards. Companies involved in standards mirror image of the manner in which intel- development that believe their technology to lectual property law has operated in the phys- be essential for the implementation of an ical world; rather than excluding others and open standard may insist on licensing terms seeking compensation for creative activity that inhibit broad adoption. Even providing through licensing access, open source uses for “reasonable and non-discriminatory intellectual property law to guarantee the licensing” (RAND) may, according to groups widest possible distribution of the source such as the World Wide Web Consortium

2 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

code in order to stimulate its improvement does not provide the economic incentives and to add value. necessary for someone to choose to devote As Steven Weber points out in The Success his or her time and effort to solving a particu- of Open Source, unrestricted distribution and lar problem. But there are many reasons why modification are central to the open-source programmers contribute to open-source software system, as development requires a efforts—the culture of sharing, the desire to programming task be separated into small contribute to a communal effort, the sheer modules. These modules encourage contri- joy of creation, the feeling of accomplish- butions by interested parties but, at the same ment for solving a difficult problem, the rep- time, do not overwhelm the individual partic- utational gains from a highly regarded piece ipants with the enormity of the entire proj- of work, and the expectation of reciprocity ect. Among the many who can access the from helping those who might later help you. code because of the broad distribution, there Complementing these incentives, major is a smaller group who self-select to take part players in the information technology indus- in any given open-source project; within this try are paying for software development that group, there is likely to be at least one indi- is, at least in part, contributed to the open- vidual with the skill, experience, insight, and software “commons.” interest to improve the software. There have been initiatives in a number This model of sharing is not new. It is key of countries, particularly in the developing to the practice of science and is rooted in the world, to mandate that governments purchase academic system of creating and sharing. only open-source software. Proponents of Although the open software model is vast- such a requirement argue that it would save ly different from the dominant model of pro- much-needed governmental funds, encour- prietary software based on controlling access, age the development of local programming it is becoming increasingly important in resources, and reduce dependence on today’s environment. The Internet itself foreign software firms. runs on open-source software, and a growing The Council believes that, rather than replac- number of large commercial firms are sup- ing one another, proprietary software and open- porting open-source software as part of their source software will co-exist, with each playing an commercial strategies. Just as the Internet appropriate role in the information and commu- has facilitated the development of global nication technologies (ICT) environment. The open standards, it has also made global col- Council opposes any requirement forcing govern- laboration on open software development ments to make purchasing decisions based on the possible. licensing system used. It recommends that the U.S. Some proprietary software firms have criti- government not advocate purchases based on any cized open-source software by suggesting that particular licensing scheme—proprietary or open. it undercuts, or even destroys, the economic But the debate over such mandates has incentives necessary for the software industry highlighted the importance of interoperabili- to continue to create quality products by ty and the negative impacts that result when making them compete with “free” software. it is not achieved. In a striking example, sur- Supporters of open software point to its role vivors of Hurricane Katrina could only apply in competitive markets such as Web-server to the Federal Emergency Management technology (Apache) or database systems Agency (FEMA) using a particular vendor’s (MySQL), and its growing strength in mar- proprietary browser—another burden on kets with dominant players such as Web those already battered by the storm. In its browsers (Mozilla’s Firefox) and operating 2004 report calling for an interoperable sys- systems (Linux). tem of health care records, the Bush Critics of open software also argue that Administration recognized the power of the open-source model is unsustainable, as it interoperability and made it a centerpiece of

3 the Administration’s efforts to reduce the and subject to successive modification, but it cost and improve the provision of medical is not completely open, as there are evalua- care in the United States. The Council believes tive mechanisms in place to ensure the stabil- there are certain critical functions of government ity and quality of the product (mechanisms that should be conducted solely with interoperable that have also been adopted in many other technology; in these critical areas, no citizen forms of open innovation). should be required to use the hardware or soft- It is relatively easy to see how software ware of any particular vendor. This does not could be developed collaboratively, and why mean that only open-source software would more and more producers of physical goods be available. Proprietary software vendors are seeking improvements through collabora- choosing to sell in these markets, however, tive efforts. Open innovation can be seen in would be required to provide sufficiently the growing use of digital software tools tied open interfaces, so as to allow others to inter- to computer-controlled fabrication devices operate with their product. The use of open that allow users to design an object and then standards and royalty-free licensing are par- produce it physically. As the costs of these ticularly important in these areas. The Council digital design tools decrease, users are able recommends that the United States support such to innovate, breaking the model of manufac- interoperability requirements in international turers being the source of innovation and procurement as well. The Council also recom- customers simply consuming them. The mends that international agreements entered into openness model, the antithesis of a “not by the United States regarding intellectual proper- invented here” attitude, encompasses not ty should reflect the nation’s historically balanced only manufacturers and users, but suppliers intellectual property regime reflecting the interests whose innovations should be welcomed by of both first and follow on innovators. the companies they supply. Perhaps most striking is the extraordinary OPEN INNOVATION increase in “peer production” of digital infor- mation products. Many, if not most, of the The combination of the Internet and the pages accessible on the World Wide Web are growing importance of digital information posted by individuals with no expectation of products is changing even the organization monetary gain. Similarly, the on-line encyclo- of creative enterprises and enabling new pedia Wikipedia is the result of contributions processes of innovation. The firm, as an eco- from thousands of individuals, as are the nomic unit, was, in part, a response to the buyer’s recommendations on Amazon.com, problems of organizing work by dispersed and the buyer and seller reviews on eBay. parties. Information was difficult and expen- Just as major information technology (IT) sive to gather and share, and coordination of companies see benefits in seeding the open- diverse efforts was hard to achieve. But the source commons, sophisticated commercial Internet is changing these conditions, as it firms are harvesting the benefits of openness. has changed so many other areas. The podcasting capability of Apple’s iPod was Communication is cheaper, and coordination developed by users, who function as an exter- far easier than in the past. Rather than seeing nal research and development unit; Eli Lilly’s the firm as the only model for organizing e-research subsidiary turns to a network of innovation and production, we are seeing thousands of independent researchers for new collaborative models of open innovation. assistance in solving pharmaceutical problems. The emerging result is what Tim O’Reilly has “Open science” is making scientific infor- called an “architecture of participation.” mation available well beyond the subscribers Open-source software is only one example of traditional scientific journals. The of the open innovation model. It is open National Institutes of Health (NIH) are because the source code is broadly available encouraging widespread publication within

4 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

12 months of the results of the research that funded, unclassified research should be made they fund. Open courseware is providing broadly available. Consistent with the position self-directed students around the world with it has taken in its earlier reports, the Council the syllabi and course readings of great uni- recommends that any legislation or regulation versity teachers. All of these efforts rest on regarding intellectual property rights be weighed the assumption that society benefits by with a presumption against the granting of new increasing access to information and allowing rights. The burden of proof should be on propo- more people to contribute their special skills nents of new rights to demonstrate with rigorous and experiences. Advocates for more open- analysis the necessity of such an extension, ness contend that openness will result in because of the benefits to society of further innova- greater innovation than would be achieved tion through greater access to technology. Finally, by restricting access to information or allow- the Council suggests that the National Science ing first creators to exert greater control over Foundation (NSF) fund research into alternative it. Such a belief in the value of tapping the compensation methods, similar to those created to collective wisdom is profoundly democratic. facilitate the growth of radio, to reward creators In order to foster open innovation, the Council of digital information products and accommodate recommends not only that the NIH should contin- the changes brought about by the digitization and ue their efforts to expand the dissemination of the growth of the Internet. research they support, but also that other federally

5 INTRODUCTION

Fostering economic growth has long been In its earlier report, the Council’s atten- at the heart of the mission of the Committee tion was focused on the many proposals for for Economic Development (CED). As the laws and regulations that were introduced to “digital economy” became a reality, CED deal with the unauthorized access and use of established the Digital Connections Council digital information products. The proposals to help it better understand the implications shared a common aim: to make it easier for of this new economic frontier. rights holders to enforce their rights through In 2004, the Digital Connections Council the courts in order to prevent or punish mis- issued a report addressing the “special prob- appropriation, and to provide rights holders lem” of digital intellectual property and its greater control of digital information prod- impact on innovation and economic growth. ucts. Some of the proposals sought to protect The report noted three important trends: the the rights of creators by providing them with increasing digitization of all forms of infor- control over the design and operation of mation; the growing importance of intangi- technologies for recording, modifying, dis- ble property; and the replacement of the sale playing, or distributing digital information of digital information in its many forms by products. various licensing agreements made between The Council recognizes the critical the rights holder and the consumer. The importance of creative activity. The nation’s three trends, coupled with the dramatic rise founders did as well. The founders generally of the Internet, led to what the National opposed monopolies, but they offered cre- Academy of Sciences labeled the “digital ators what amounted to limited-term, govern- dilemma:” While a digital information ment-sanctioned monopolies of control over product can be created, modified, perfectly their creations, subject to certain conditions. duplicated in innumerable quantities, and The founders knew that these monopolies, distributed to millions of people around the like any monopolies, had a cost to society— world at little or no cost, it can also be locked but in the case of patents and copyrights, down, made inaccessible, or controlled the cost was thought to be justified because completely, at least temporarily. the incentives they provided would increase This paradox is visible in two different creative activity. They recognized that society and contradictory phenomena. The rise of benefited if all these creations eventually Napster led to the creation of the world’s became part of an ever-expanding “com- largest file sharing network, with millions of mons” available for anyone to use as the participants downloading billions of files, basis for their own follow-on innovation. many of which were being shared without the Because the most recent proposals for authorization of the rights holders. At the changes in intellectual property law focused same time, rights holders were using licenses on protecting the rights of first creators (or and digital rights management systems to dic- those who now controlled those rights), they tate the conditions under which consumers tended to ignore the creative contributions could use and manipulate digital information of follow-on innovators. The Council, on the products. This led to conflict, as many con- other hand, recognizes that innovation is sumers believed that they were being prevent- almost always a cumulative and unending ed from engaging in activities that they had process, with every creator, in Newton’s long undertaken and that they considered to words, “standing on the shoulders of giants.” be well within their rights. In order for intellectual property law to

6 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

achieve its aim—the stimulation of the great- technology is better understood and the full est possible innovation for the benefit of range of solutions examined is highly likely society—it must balance the interests of to result in unforeseen consequences. As the “first” creators and against those of creators Council pointed out, some of the proposals who follow them. To provide too great an for change had clearly foreseeable negative incentive to either first creators or follow-on implications for the high technology indus- creators would unbalance the system. tries that have been critical to recent eco- Incentives are necessary for those cre- nomic growth in the United States. Some ations that would not have been made with- proposed laws or regulations seemed out them. But if the incentives are too designed to protect existing distribution sys- strong—giving the first creator too much tems or business models rather than to foster control or control for too long—there would increased innovation; these could prevent be little opportunity for follow-on creators. the emergence of new business models based The result, in economic terms, would be on the specific characteristics of digital infor- “under-production” of follow-on innovation. mation products that are distinctly different On the other hand, if follow-on innovators than those of physical goods. They could also were aided by eliminating incentives that dampen the positive benefits of expanded were necessary to generate first creations, the access to digital information. A better way to result would be the “under-production” of protect the works of creators and stimulate first creations. The policymaker’s aim should greater innovation, the Council concluded, be the most innovation, not the enrichment was to encourage the development of new of any particular group of creators. As the business models and to continue the search Federal Trade Commission wrote in its recent for solutions within an intellectual property report on the patent system, “[P]atent policy regime that balances the interests of first is for the benefit of the public, not patent creators and follow-on innovators. Such a holders. The ultimate point of granting a regime has proved capable of adapting to patent is not to reward inventors, but rather other profound technological changes in the to create incentives for actions—invention, past and can accommodate the recent disclosure and commercial development— changes in digital works. that will further the public interest and thus The Council’s interest in maximizing inno- benefit consumers over time.”1 vation has led to this second report, focusing The Council made several recommenda- on the phenomenon of “openness.” This tions in its earlier report. The first was that openness is challenging the conventional lawmakers and regulators should remember view of intellectual property and providing a the Hippocratic injunction and seek to do no springboard for unprecedented global collab- harm. Hurriedly passing new laws or regula- oration. As it does, it is leading to dramatic tions before the impact of the new digital changes in the very process of innovation.

7 I. THE MEANING OF OPENNESS

Even after the collapse of the Internet One key attribute that determines the bubble, the Internet continues to change the degree of openness of a work is its availability way we live and work. It is ushering in a new and accessibility. The creator of a work pro- age of “collaborative” or “participatory” or tected by intellectual property laws has the “democratized” or “globalized” innovation, right to “exclude” others from its use— different in fundamental ways from the cen- potentially to exclude all others and preclude tralized processes that emerged from the virtually all uses until the “limited” term of Industrial Revolution. “Openness” is what protection ends. Such a work would be con- marks these new processes. “Openness” is sidered largely closed, although some limited what distinguishes the Internet from other access to the work may be permitted under networks. At the same time, it is the Internet exceptions to intellectual property protec- that enables openness. tion. Eventually, after many years, the work In a 1999 study, the Organisation for would become open as it passes into the pub- Economic Co-operation and Development lic domain. In the latter case, the work is (OECD) noted the phenomenon of open- almost entirely open, available to anyone ness in the growth of electronic commerce. interested in it. Due to the increasing pene- “Openness is an underlying technical and tration of information and communications philosophical tenet of the expansion of elec- technologies (ICT), including the Internet, tronic commerce. The widespread adoption being open now means that a digital informa- of the Internet as a platform for business is tion product is potentially available to a bil- due to its non-proprietary standards and lion Internet users without its availability to open nature as well as the huge industry that any single person being diminished. has evolved to support it…More importantly, Such openness is of great societal value. openness has emerged as a strategy…An Economists tell us that the widespread avail- expectation of openness is building…which ability of information provides significant will cause transformations, for better (e.g. economic benefit. If information can be increased transparency, competition) or shared without cost, any withholding of worse (e.g. potential invasion of privacy), in access results in a loss to society. Given this the economy and society.”2 loss, restricting access to information, via the But what is this technical and philosophi- limited-term monopolies of patent and copy- cal tenet of “openness?” There are many right, can be justified only if the incentives potential definitions. Moreover, works and they are designed to produce are necessary processes are not simply open or closed. to spur creative acts that would not occur They need to be placed on a continuum that without them.3 ranges from closed to open and encompasses The degree of openness of a work varying degrees of openness.† depends on more than its accessibility and availability. It also depends on its responsive- † The spectrum of openness is very broad. If a person creates a ness, in other words on the potential for work but does not share it with anyone, the work is completely closed. Less closed is a work that is made public, even if the modifying it based on contributions from rights holder for the work does not allow access, as some others, potentially from an almost unlimited access might be possible under exceptions to intellectual prop- number of interested people around the erty protections. On the other end of the spectrum are works 4 made available to and modifiable by all. Linux, an open-source world. computer operating system, falls short of this extreme version That digital goods can be copied and dis- of openness (see pages 20 and 27). It is open to all, but modifi- cations to the software must undergo an evaluation process tributed virtually without cost increases their prior to inclusion in the next official release.

8 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

openness. That they can be similarly manipu- With this in mind, the Council decided to lated and modified increases their openness examine three manifestations of openness— yet further. Among the billion people who open standards, open-source software, and now have access to a digital work, one or open innovation—and to focus on their more should be able to manipulate it, mak- effects and the policy questions they raise. ing a notable improvement, or use it as the The Council was not seeking to choose basis for a singularly new creation. Without between closed, proprietary models or open minimizing the potentially enormous impact models; it is convinced that they will contin- of inventive geniuses—think Edison or ue to co-exist and that both provide impor- Gutenberg—society can benefit substantially tant opportunities for innovation. Each is from the cumulative, often small, contribu- likely to be more appropriate than the other tions by the millions of people who now have in particular circumstances. access to digital works, upon which they can But openness needs to be better under- exercise their own creativity. Openness, thus, stood. It seems to run counter to the tradi- becomes the measure of the ability to benefit tional view of intellectual property and the from the “collective intelligence” of our incentives that lead to innovation. It has only world. recently become more prominent due to There is a conflict between openness and technological advances such as the Internet the right to exclude. There is a tension and the digitization of information. The between the claim that incentives, which can Council, therefore, decided that a closer be used to restrict information availability examination of the phenomenon of open- and prevent modification, are necessary to ness might help to determine where encour- spur innovation and the emerging potential aging openness could produce the greatest for innovation from allowing millions of peo- societal value. ple with differing experiences, skills, and interests to access and manipulate a work.

9 II. OPEN STANDARDS

The growth of the Internet and the World competition among information technology Wide Web are perhaps the most obvious firms makes it very likely that progress, if it examples of the attractiveness of open and had occurred at all, would have been much unrestricted standards. Cheap and easy com- slower. munication across this network of intercon- The degree of openness of an “open” nected networks would have been impossible standard can be determined by examining without universal access to, and use of, the several key questions: TCP/IP protocols that enable users to trans- How open is the process of choosing to mit and receive any form of content regard- develop, and ultimately developing, the less of the network, device, or software used. standard? Who can participate and under While network operators could have main- what terms? tained their own unique standards, the value of compatibility for everyone outweighed the Does the process ensure the ability of all advantages to each of maintaining their own participants to affect the standard? Is the “walled network.”5 Similarly, the growth of process well documented? the World Wide Web was based, in part, on Is the standard publicly disclosed in its the universal availability and use of Hypertext entirety? Is it readily available? What terms Markup Language (HTML), which allowed and conditions govern its implementation? disparate devices to recognize a Web page’s display characteristics. The millions of Web Does the standard contain proprietary contributors who have voluntarily created technology that must be licensed? Will roy- this extraordinary repository of billions of alties be charged and on what basis will pages of information by posting their own they be determined? contributions (many, but not all, without any How will the standard be maintained expectation of monetary reward) have vali- and by whom? What rules apply after dated the utility of this open standard; the adoption?8 richness of the Web is proof that, as The Economist noted, “open standards allow and The more open the process and the promote unexpected forms of innovation.”6 greater the participation by firms, the more The Internet Engineering Task Force likely it is that the standard will not reflect (IETF), which establishes standards for the the interests of any single firm or group of Internet infrastructure, mirrors the openness firms. This is important because companies of the Internet. Its processes for creating might seek to disadvantage competitors by standards are open to all. Among the IETF’s excluding them or denying them informa- requirements for adoption of a new standard tion needed to apply the standard. The is that it be accessible and available to all; it greater the participation, particularly by pur- must also be capable of implementation on chasers of technology, the more likely it is disparate hardware and software.7 Though that the standard will spur competition. The theoretically it would have been possible for greater the participation by representatives of the Internet and the World Wide Web to civil society, particularly where policy ques- have developed as they have using only pro- tions such as privacy and security are prietary standards, or those developed by involved, the more likely it is that the stan- individuals or small groups without an open dards will reflect the needs of consumers.9 process for receiving comments, the fierce The greater the requirements for procedural

10 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

“due process” (such as the need to document example, the emergence of Microsoft Word and respond to objections or require consen- as a de facto standard facilitated the easy sus), the more likely it is that the standard exchange of digital documents—something will meet the needs of a broader group. It is that users found to be very valuable. The de noteworthy that all of these attributes can be facto standard reflected Word’s success in the facilitated by the Internet. The development consumer word-processing market; moreover, of global open standards is now much easier competition in adjacent markets that could because global distribution of proposed build upon the de facto standard was stimu- standards and global participation in their lated. Participants in these markets, however, development is cheaper and easier. had to remain wary of the possibility that the All of the characteristics that reflect de facto standard could be exploited to favor greater openness, however, greatly increase Microsoft if it entered those same markets.† the possibilities of delay in reaching agree- Even where standards are putatively open, ment. This tradeoff between openness of there are temptations for firms to “extend” process and the time required to reach them if they believe that doing so would agreement is particularly troublesome in allow their company to establish a more prof- periods of rapid technological change, where itable proprietary version of the standard.12 standards “set by consensus may be obsolete At other times, a firm’s corporate strategy before they are implemented.”10 Many of may be to resist creating an open standard the leading innovations in the information that would allow interoperability if the firm technology (IT) area, such as Sun’s Java or believes that doing so would threaten its mar- Microsoft’s C#, were not brought to the for- ket leadership or reduce its “customer con- mal U.S. standards processes because of the trol.” For example, while the IETF has been “arcane and potentially obstructionist working for several years on an open stan- processes that the formal process insists are dard for instant messaging that would allow its strength.”11 interoperability of all instant messaging sys- Open standards facilitate competition tems, it appears that some of the delay in among a multitude of suppliers by reducing reaching agreement reflects the strategic barriers to entry. They are often favored by interests of individual firms rather than customers who want to avoid being locked disagreement about technical issues. into obtaining goods and services from a par- A key benefit of open standards is that ticular firm that controls a proprietary tech- they foster interoperability, allowing disparate nology; such a firm may eventually choose devices, applications and networks to com- not to support the technology or may even municate. Such interoperability is critical to go out of business. Competition among tech- the development of network effects and the nology suppliers encourages the spread of operation of Metcalfe’s law.13 Metcalfe’s law the technology and stimulates further innova- demonstrates that the value of a network tion by suppliers anxious to differentiate increases as users are added to it; interoper- themselves. On the other hand, technology vendors have traditionally been attracted to † The arguments about whether to prefer open standards to standards based on proprietary technology, defacto standards based on proprietary technology are closer in the area of software applications than in the area of infra- especially if they believe that a standard structural technologies. The present debates in Massachusetts based on their own proprietary technology over the proposed mandate requiring the use of open stan- will be adopted in the marketplace and allow dards for electronic documents (see endnote 94) illuminate the complexity of a situation where a defacto standard for them to garner significant economic returns. electronic documents exists, but where a new, more open De facto standards based on proprietary standard tied to the Web is emerging, supported by a number technology provide substantial benefits and of major players. Questions also have been raised about the openness of various standards bodies. We discuss the have the attractive characteristic of having interoperability issues surrounding critical governmental been validated by market processes. For applications later in this paper (see pages 30-32).

11 ability allows the full benefits of each addi- able to foster competition and interoperabili- tion to be realized. In some cases, the bene- ty. But, as the National Innovation Initiative fits can be enormous. The National Institute noted, issues surrounding intellectual proper- of Standards and Technology (NIST) has esti- ty claims are threatening the development mated that the lack of interoperability in of open standards.16 These issues include information systems costs the construction whether patented technology should be industry more than $15 billion dollars each included in open standards, and if so, how year; the lack of interoperability in the supply these elements will be treated. In standards chains of the automobile and electronics groups ranging from the World Wide Web industries costs an additional, combined Consortium (W3C), based at Massachusetts $8.9 billion annually.14 Institute of Technology (MIT) and led by There are those who argue that open stan- Tim Berners-Lee, to the IETF and others, dards reduce the efficiencies that may be debates over these issues have been intense. gained by using proprietary technology to Many open standards include material bind together complex systems.† Others have that has been patented but has either been argued that innovation may be reduced “donated” or is made available on a royalty- because of open standards. What is lost, they free (RF) basis. Microsoft, for example, argue, is the innovation that results from hav- agreed to forgo royalties on its style sheets so ing to “design around” a standard based on that the W3C could reach agreement on Web proprietary technology—having to develop a standards. The fear that firms owning the truly different mousetrap (if it is even called a patents might try to skew standards for their mousetrap). But, supporters of open stan- own benefit has led some to argue against dards argue that they don’t reduce innovation including any patented technology in an but “focus” it “on where the real value lies, open standard because it “can imbue the which is usually everything you can add above technology with market power that it previ- and around the standard.”15 Reaching agree- ously lacked. Thus there is a potential for ment on the standard provides a base; firms monopolization…through the conjunction of can compete via innovation above and beyond an adopted standard and a proprietary tech- that standard. And, those innovations may nology.”17 Others argue that any standards later form the basis for new open standards on containing patented technology would be which to build even further innovation. resisted by competitors and users fearful of The success of the Internet has reinforced abuse by the rights holder and, therefore, the the contention that open standards are desir- value of the standard itself would be reduced. But, the most strenuous disagreements have † This argument was made forcefully by Microsoft in its defense been about the terms and conditions for in recent anti-trust cases, when it argued for the integration of access to proprietary technology included in new functionality into the Windows Operating System. It argued that tight integration, available using proprietary tech- an open standard and the rights retained by nology, provides a performance advantage in comparison to the proprietary technology’s owner. what results from the cobbling-together of technologies based The recent debate within W3C on its upon open public standards. In another example, Apple’s con- tinued use of its proprietary technology, as opposed to technol- patent policy examined the full range of ogy based on open standards, is considered to be one reason issues.18 W3C standards had, in the past, for the seamless integration of its various components and its included patented technology, but there was ease of use. Opponents have conceded the potential value of such integration but have pointed to the pro competitive argu- a de facto RF regime for the core technical ments in favor of open standards—more players, lower costs, standards that defined the Web architecture. lack of customer lock-in, and greater potential innovation from Even though there had been no serious a multitude of players. They have also noted that the rapid improvement in the basic components of information technol- issues involving patents in Web standards in ogy systems—computing power, memory etc. —allow compet- its early years, W3C set up a Patent Policy ing vendors using open standards to compensate for any efficiency losses resulting from a lack of integration by a single Working Group to review its patent policy vendor utilizing proprietary technology. due to 1) the development of convergence

12 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

and, thus, a whole range of patent policies in To maintain flexibility, the policy provides the telecommunications, broadcast media a mechanism for exceptions to the RF licens- and consumer electronics industries with ing policy. It also makes clear that the RF which W3C was becoming involved; 2) the licensing policy does not require a partici- rise of patent issuance, including European pant to give up its entire patent portfolio but consideration of software patentability, and only to commit to RF licensing of “essential” the popularity in the United States of busi- claims—patents that would block interoper- ness-method patents; and 3) the experience ability—for the implementation of the spe- of Internet-related standards bodies that had cific standard. (The patents could be licensed “encountered potential barriers to accept- under other regimes for other purposes by ance of standards because of licensing the patent holder.) Moreover, the policy requirements perceived as onerous.”19 allows the licensor to: “require a royalty fee The W3C Patent Policy Working Group grant back” or reciprocal licenses “either to first recommended a two-track approach, the original patent holder or to all other with patents being licensed RF or under rea- implementers;” or to suspend the license “if sonable and non-discriminatory (RAND) the licensee sues the licensor.” In addition, licenses, which require a payment be made the policy prohibits the licensor from impos- to the rights holder. There was a mixed reac- ing “any other material conditions, such as tion to the proposal, particularly the sugges- requirements to use other technologies.”22 tion that a royalty could be charged for those The policy was adopted by W3C, although who implemented a W3C recommendation. there were still substantial objections. Some Not surprisingly, the strongest opposition argued that RAND licensing had been suc- was from open-source software developers. cessful in other settings (such as in compact Since they distribute their products for free, disc and telecommunications standards) they have no way of recovering any royalties and that some business models were based that they might have to pay under a RAND on royalty income; others argued that license. They argued that “a RAND approach companies would forgo participation in the would cause open-source developers to stop W3C standards processes, or not bring new using W3C standards [and] impel some to technologies to it, if they were not allowed form alternate Web standards, thus to require payments for licenses (the exact Balkanizing the Web.”20 opposite of the open-source developers’ After considerable debate, W3C adopted a objections). policy requiring that: In his decision, as head of W3C, to adopt the proposed patent policy, Tim Berners-Lee All parties that participate in the develop- wrote: ment of a W3C recommendation must agree to license essential claims (that is, The Policy affirms and strengthens patents that block interoperability) on a the basic business model that had RF basis; driven innovation on the Web from Any patents specifically identified to be its inception. The availability of an excluded from the RF licensing require- interoperable, unencumbered Web ment must be identified by the patent infrastructure provides an expand- holder shortly after publication of the first ing foundation for innovative appli- public working draft so as to minimize any cations, profitable commerce, and uncertainty about licensing requirements; the free flow of information and ideas on a commercial and non- Patents essential to the implementation of commercial basis. a standard held by W3C members must be disclosed.21 This decision on the W3C Patent Policy coincides almost exactly with

13 the tenth anniversary of CERN’s although inclusion of proprietary technology decision to provide unencumbered under RAND licensing is still allowed.26 access to the basic Web protocols Overall, open standards with RF licensing and software developed there even of any proprietary technology seem more before the creation of the W3C. In likely to stimulate innovation, particularly fact the success of technical work at where infrastructural technologies are the World Wide Web Consortium involved and where the benefits of interoper- depended significantly on that deci- ability are greatest.27 RF licensing should sion by CERN. The decision to base reduce contentions over intellectual property the Web on royalty-free standards claims and encourage the greatest possible from the beginning has been vital use of the standard. This is particularly to its success until now. The open important when standards are being created platform enabled software compa- to develop a new market, such as that for nies to profit by selling new prod- grid computing. Without standards, the ucts with powerful features, enabled new market would be slow to develop; an e-commerce companies to profit open standard under RF rules should lead from services that built on this to the participation of the largest number of foundation, and brought social ben- relevant players and stimulate the market’s efits in the non-commercial realm growth. beyond simple economic valuation. Companies that provide proprietary tech- By adopting the Patent Policy with nology for the implementation of standards its commitment to royalty-free stan- under RF licenses still retain important dards for the future, we are laying advantages with respect to their technology. the foundation for another decade They are not barred from exercising their of technical innovation, economic intellectual property rights regarding their growth, and social advancement.23 technology except for use in implementing the standard. Moreover, their familiarity with Two other important standard-setting the technology can be employed in develop- organizations have recently addressed the ing other applications; as Carl Cargill, same questions. The IETF was asked to begin Director of Standards at Sun Microsystems, a process that would re-examine its policy of explained, they don’t have to change their allowing proprietary technology in IETF stan- architecture or engineering, “while others dards and RAND licensing. The Task Force have to grow extra teeth and learn how to decided not to do so, based on a lack of con- use it.”28 In fact, the more proprietary tech- sensus on the need for such a reconsidera- nology that they contribute, the more likely it tion and because IETF had not had major is that the standard will serve their interests. difficulties in dealing with patents in forming In addition, adoption of the technology for a Internet standards.24 (The IETF may face this standard provides validation of the technolo- question again, as recent efforts to establish gy’s utility, making customers more likely to an IETF standard to reduce spam foundered be comfortable in using it.29 on the issue of use of proprietary Support for greater openness in standards technology.25) and RF licensing may become the preferred The Organization for the Advancement of strategic choice for firms as it facilitates Structured Information Standards (OASIS), the speedier development of new markets another Web-oriented software standards and the expansion of existing markets. body, has also recently reconsidered its Companies with major intellectual property patent policy. It adjusted the requirements to holdings may decide that the revenues make them more hospitable for open-source from more rapidly growing markets and developers by allowing RF licensing, the increased participation of firms with

14 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

complementary products outweigh whatever have less incentive to facilitate production by royalties they might have obtained from cross licensing their intellectual property. If RAND licensing.† And, the old saying would their object is to maximize their licensing rev- again prove true: “Nobody makes money off enue or the damages they may obtain from standards but everyone makes money firms that they sue, they may have a perverse because of standards.”30 incentive to delay disclosure of their intellec- But, while the use of RF licensing should tual property claims until firms implement minimize the costly process of discovery and the standard. They can then seek injunctive disclosure for participants in the standards relief and increased damages. development process, and eliminate the need Thus, disclosure of such claims regarding to determine what would be a “reasonable” standards, and the timing of such disclosures, royalty under a RAND licensing scheme, are important issues. It would be desirable to there remains the problem of outsiders and create incentives for firms that are not part of “hold up.” Participants in the W3C process a particular standards development process may agree to the rules regarding RF licens- to disclose any relevant intellectual property ing, but companies outside the process are claims at the earliest possible moment. not bound to follow the same practices. If a Reducing the economic returns that they can company that has not participated in the achieve or diminishing the damages that they process claims to control intellectual proper- can claim based on the length of the delay in ty essential to the implementation of the asserting their claims might work to encour- standard, and is prepared to assert its claims age earlier disclosure of claims. This would and seek licensing revenue or injunctive decrease the possibility of hold up, provide relief, it can “hold up” those companies greater certainty to those who would imple- implementing the standard. The entire stan- ment a standard, and generally strengthen dards development process might have to the standards development process. begin again, in order to work around the As a general proposition, effective disclo- claims. The longer the outside firm delays sure of intellectual property claims seems the disclosure of its intellectual property more likely to aid innovation, particularly fol- claims, the more likely it is that companies low-on innovation. But the law can work in would have already implemented the stan- mysterious ways. Companies may actually dis- dard based on a belief that all relevant intel- courage researchers from trying to identify lectual property claims had been considered existing intellectual property claims in an during the development process. And, the area of interest. A search may lead to discov- longer the delay, the greater the potential ery of existing intellectual property, and such costs that they will face.31 knowledge could dramatically increase The problem is now complicated by the potential liability. A company could be increasing number of well-funded firms accused of willful infringement if it proceeds engaged in acquiring intellectual property into, or already has been working, in an area without plans to use that intellectual property where it is cognizant of existing intellectual for the production of goods or services. property. It seems ironic that the legal system These firms may provide a useful service in should provide benefits for such a lack of identifying valuable intellectual property, but effort. Ignorance becomes bliss. they may also hinder the development and The problems relating to proprietary tech- implementation of standards. Because they nology in open standards are particularly dif- are not producing goods or services, they ficult for small and medium-sized firms. Large firms often have constructed patent † This strategic choice may be attractive to manufacturers. portfolios that generate income from licens- Firms providing services or those that have built their business models on royalty income would be unlikely to make the ing, but which also are useful for obtaining same choice. cross-licensing agreements and responding to

15 infringement claims. (Some observers have strengthening information security and, thus, argued that the drive to accumulate patents have an interest in the social implications of for these purposes may even reduce research standards. Governments also are major sup- and development spending, although others porters of research that underlies standards; have challenged this view.32) The sheer vol- the emerging field of grid computing, for ume of patents from the incremental innova- example, has greatly benefited from work at tions common in software development can the Argonne National Laboratory. easily lead to the creation of patent thickets, Governments are not well suited to setting where it is hard to discover and expensive to technology standards by themselves. They are license all of the necessary rights for a partic- not organized for this purpose, have relatively ular development path. Large firms are more limited technical resources, and are subject to likely to have the capacity for dealing with conflicting political pressures. They can, how- these problems; because of their limited rev- ever, foster the development of open stan- enues and patent portfolios, smaller firms dards for information technology upon which may find it more difficult to emerge from software and hardware can be built.33 They these thickets unharmed. They are, there- can use the specialized resources of govern- fore, more vulnerable to hold up and more ment, such as The National Institute of likely to cease research and development in Standards and Technology, to help other gov- the face of uncertainty. ernment agencies determine which standards Governments have important interests in processes are sufficiently open to merit sup- standards development. As major customers port and to devise test procedures for stan- for information and communications dards compliance.34 NIST can also analyze technologies, they have a large stake in the effect of interoperability (or its absence) fostering competitive markets in this area. on particular sectors of the economy and Governments are inherently involved in “develop (or at least evaluate) technology that social issues such as protecting privacy and may facilitate interoperability.”35

16 III. POLICY RECOMMENDATIONS REGARDING OPEN STANDARDS

Governments should not dictate stan- This role is increasingly important and dards, particularly in fast-developing areas should be funded accordingly. of technology. But, governments should The National Science Foundation (NSF) strongly encourage the development of has, in the past, funded participation by civil open standards, especially with regard to society groups with both technological and infrastructural technologies, because of the policy expertise in certain standards-making substantial benefits of open standards in fos- processes for standards with critical social tering competition and promoting economic policy dimensions. Funding for such groups development. that otherwise would be unable to participate The results of government-funded would likely improve the standards and research should be readily accessible and increase the probability of their adoption. As freely available to be used in standards the Council’s earlier report on digital intel- development. lectual property pointed out, there are many Governments should advocate for the efforts to develop standards in the area of greatest possible openness in standards- digital-rights management where a voice for making processes. consumers of digital information products Government should encourage the effec- would usefully supplement the voices of tive disclosure of intellectual property claims content providers and technology vendors. in order to facilitate follow-on innovation. Private-sector parties involved in standards Incentives for the earliest possible disclosure development with important policy aspects of relevant intellectual property claims involv- should consider providing support for the ing standards should be part of reforms of participation of competent civil-society inter- the patent system. Incentives might include ests in relevant proceedings in order to reducing access to economic returns or limit- obtain their perspectives and encourage the ing damages by claimants and increasing pro- adoption of the standards. tections for unwitting implementers with the NSF should provide seed funding for new reductions, limits, and protections increasing open-standards efforts, such as occurred with as delays in disclosure of claims mount. the World Wide Web Consortium, particular- The National Institute of Standards and ly those related to critical governmental activ- Technology has played, and is continuing to ities such as standards regarding file formats play, a valuable role in representing U.S. gov- for communications with the citizenry. ernment interests in standards development.

17 IV. THE MAINSTREAMING OF OPEN-SOURCE SOFTWARE (OR THE MARCH OF THE PENGUIN)

THE GROWTH OF domain name system. The open-source PERL OPEN-SOURCE SOFTWARE programming language has been called the “duct tape” of the Internet.39 Other than the Internet, the example of Not only has the open-source community openness likely to be most familiar to the grown—from 200,000 registered participants general public is the open-source software on SourceForge in 2001 to 1,200,000 regis- movement. Relying on the basic attributes of trants in 2006 working on over 110,000 proj- openness—making information widely avail- ects—but well-accepted open-source prod- able and receiving comments and modifica- ucts have extended beyond the operating sys- tions from the broadest possible range of tem (Linux) into databases (My SQL), appli- people—the open-source software move- cations servers (J-Boss), customer relations ment has migrated from a technically sophis- management (Sugar CRM), and even TiVo.40 ticated corner of the software business into And the prospects for open-source software the mainstream of the information and com- are bright, with its incorporation in leading- munications industries. A study by Forrester edge research activities such as those of Research analyzing the corporate market Internet2.41 indicates that 60 percent of major businesses plan some implementation of open-source software in the coming years.36 International OPEN-SOURCE SOFTWARE Data Corporation (IDC) projects that the IS NOT A NEW PHENOMENON open-source Linux operating system will While the phrase “open-source software” is grow 26 percent annually between 2005 and relatively new, open-source software’s roots in 2008.37 Today’s fastest growing Internet information technology are deep. They reach browser is Mozilla’s highly rated open-source back to the 1950s and 1960s, when the num- Firefox which has garnered more than ber of people engaged in software develop- 10 percent of the browser market.38 ment was a tiny fraction of those participat- Major information technology companies ing in today’s global software industry. Many such as IBM, Hewlett Packard, Sun of those who did produce software were in Microsystems, Novell, Computer Associates academic settings, where the sharing of soft- and others have now integrated open-source ware was part of the free exchange of infor- software into their core strategies. Google mation that has traditionally marked scientif- uses open-source software for its core busi- ic and academic pursuits. The norm was ness of searches; Yahoo! employs open-source sharing, and anyone was free to modify the software in its core business of directories. code. Software was neither patented, nor Just as the growth of open source depends considered patentable, but it was the commu- on the Internet to facilitate the worldwide nity’s norms that controlled how it was treat- collaboration of thousands of programmers, ed, not legal requirements. the Internet itself depends on open-source In the relatively early days of computing, software. Roughly 70 percent of the servers there was, as Steven Levy has pointed out, that seek out Web pages use open-source a “hacker ethic.” †42 The hacker ethic rein- Apache software. Open-source Sendmail is used in 80 percent of e-mail servers. Open- † Then, as now, the computing community used the term “hacker” as a sign of respect and competence; MIT Professor source BIND software under girds the Joseph Weizenbaum characterized a hacker as a “compulsive programmer.”

18 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

forced the sense of community and the access to software and to profit from selling ethos of sharing among the relatively small access to it.45 Stallman believed that because and close-knit group of programmers. It was, of its very nature, software, and specifically its in its own way, anti-establishment, but its source code, should be accessible to any- enemy was the limited amount of computer one.46 Anyone should be able to study it, cycles, memory, and bandwidth available to modify it, use it in any way they choose, and programmers. further redistribute it with or without modifi- The ethic supported not only the sharing cations, without permission from the original of one’s programming, but access to comput- author; doing so did not reduce its availabili- ing resources for everyone. Information ty to anyone else. Software was a form of would be free. (As Stewart Brand noted, expression, and expression was meant to be information wants to be free while at the free and uncontrolled. Free software was the same time information wants to be expen- motto: “‘free’ as in ‘free speech,’ not as in sive—thereby defining the two poles of intel- ‘free beer.’”47 lectual property debates to this day.43) The Free Software Foundation was estab- Control of information technology would be lished under Stallman’s leadership, and the decentralized and brought closer to the General Public License (GPL) was created, in user—or, to paraphrase a more modern the words of Tim O’Reilly, to “preserve a cul- description of the Internet, intelligence and ture of sharing” (emphasis added).48 The control would move to the edges of the net- GPL provided a licensing scheme based on work to be controlled by the end user, not be intellectual property law for “free software,” placed at the network’s center to be con- utilizing what was coyly called “copyleft” (as trolled by the network operator as in opposed to copyright). Any software that telecommunications. incorporated any code licensed under the This culture of sharing, founded in GPL would, as if infected by a virus, automati- academic computing, was also present in cally become subject to the GPL, which corporate research labs like AT&T’s Bell would allow others to have unlimited access Laboratories, and was the norm for the soft- to, and the absolute right to modify and fur- ware development community in the 1950s, ther redistribute, the entire program. 1960s and 1970s. Steven Weber’s The Success Stallman and the Free Software Foundation of Open Source brilliantly details the history remain strong advocates of the political and operation of open source, beginning and moral arguments in favor of absolute with the development of Unix at Bell Labs, openness in software. the University of California at Berkeley and By the 1990s, the free-software movement elsewhere; he also describes the transition, as had found other voices to articulate a ration- the ethos of sharing was slowly replaced by ale and process that would encourage the attempts to control and “own” the software.44 growth of shared software production and At the same time that the culture of own- unencumbered distribution. Eric S. ership and control was becoming stronger in Raymond, author of The Cathedral and the the software field and the proprietary soft- Bazaar, Bruce Perens, John “maddog” Hall, ware universe was growing, computational Larry Augustin and others founded the power was following Moore’s Law and Open Software Initiative and gave “open- becoming more broadly available. During source” software its now more common this era, those who supported openness and name. The supporters of the Open Software sharing found a powerful voice in Richard Initiative, like those of the Free Software Stallman, a gifted programmer at MIT. In the Foundation, believed in the importance of early 1980s, Stallman argued the case for having full access to source code and being “free software,” taking a strong stand that it able to modify and redistribute it without was morally and politically wrong to control restrictions; but they tended to be, in the

19 view of most observers, more pragmatic and Whether or not incentives are needed, and if flexible and less ideological and confronta- they are, how strong they need to be to gen- tional than “free software” advocates. In par- erate innovations that would otherwise not ticular, supporters of the Open Software take place, are hotly debated questions. Initiative were willing to acknowledge a role Undisputed is that intellectual property rules for proprietary software and unwilling to ban have traditionally focused on the first creator any link between open-source software and and the rights holder’s control of the cre- proprietary software. Richard Stallman aptly ation for some period of time before the characterized the differences—“We disagree work becomes part of the public domain and on the basic principles but agree more or less available for all to use. on the practical recommendations.”49 This view reflects an earlier time when The early 1990s also marked the begin- there were substantial costs involved in the nings of what is now Linux.† Linus Torvalds production and distribution of most, if not began to program an open-source operating all, creative works. It seemed obvious that few system based on UNIX in 1991 and, by 1994, people would expend the effort and make released it to the public.50 During that same the investment necessary to create, produce period, Tim Berners-Lee created the architec- and distribute a work if someone else could ture for the World Wide Web and published simply copy and distribute it at a much lower the first browser; the first graphical Web cost, thereby profiting from its sale without browser was built at the University of Illinois; making any of the substantial investment and more and more personal computers were required for its creation and production. being purchased for use in the office and the In a proprietary software model, the con- home. The Internet, the World Wide Web, trol over access and use is exercised through and the open-source software movement were control over the source code—the form of coming of age together. instructions for the computing device that programmers can most easily understand and INTELLECTUAL PROPERTY— alter. The code that is broadly available—the machine-readable code—is virtually unintelli- THE TRADITIONAL VIEW AND gible to humans (and even, apparently, some- THE VIEW UNDERLYING times to machines).51 Control over access to OPEN-SOURCE SOFTWARE the source code is, thus, synonymous with control over access to the software itself. The basic method employed by today’s Open-source software turns the idea of intellectual property regime to provide incen- control on its head, or rather provides a mir- tives for innovation is to give a creator a limit- ror image of the control traditionally exer- ed period of time during which he or she can cised by rights holders. Rather than focusing exercise control over who has access to the on the rights of creators, it focuses on the creation and how it is used. With this right to rights of users—the right to have access to exclude, the rights holder is able to sell or the software, the right to study and modify it, lease the various rights of access to and use of and the right to share it and redistribute it the creation, and therefore, be rewarded for further without any authorization. Rather his or her creative efforts and investment. than closing it, all the various open-source † Linux is a computer operating system and its kernel. It is one software licenses, of which there are dozens, of the most prominent examples of free software and open- require that the source code be open.52 source development. Unlike proprietary operating systems, In order to recoup their investments in such as Windows and Mac OS, all of Linux’s underlying source code is available to the public and anyone can freely use, modi- creating, producing, and distributing works, fy, improve, and redistribute it. Initially, Linux was primarily traditional intellectual property rules allow developed and used by individual enthusiasts. Since then, rights holders to limit access and to charge Linux has gained the support of major corporations such as IBM, Sun Microsystems, Hewlett-Packard, and Novell for use in for access to the work; the open-source servers and is gaining popularity in the desktop market. model aims at ensuring the widest possible

20 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS distribution of the software by prohibiting A CRITIQUE OF OPEN-SOURCE restrictions on its distribution. The tradition- SOFTWARE BASED ON al intellectual property model matched the economic characteristics of the Industrial TRADITIONAL INTELLECTUAL Age and physical goods, where use by one PROPERTY CONCEPTS individual precluded use by others. The Advocates of proprietary software argue open-source model, on the other hand, that open-source software reduces the matches the defining characteristics of the incentives for creation essential for new soft- Internet and digital information goods. ware development; the most fervent oppo- Digital information products can be created, nents have described the open-software modified, and widely distributed at virtually movement as a “cancer” on the entire intel- no cost without diminishing their availability lectual property system and an “intellectual to others. property destroyer.”53 The core of the argu- Traditional intellectual property systems ment is that by making software available emphasize the rights of the first creator and without charge in competition with propri- are based on creating incentives for the first etary software, the open-source movement creator to innovate. Follow-on innovation is will ultimately drive out proprietary software achieved primarily by limiting the term and producers. These producers will not make scope of control and providing for eventual the necessary investments to create propri- placement of the work in the public domain. etary software because they know they will Open-source software, in comparison, is not be able to compete with a similar oriented toward follow-on innovation. product that is available for free.† Encouraging the widest possible distribution This argument against open-source soft- aims to provide the largest number of people ware closely resembles one of the arguments with the opportunity to study, test, improve against file sharing that the Council exam- and extend the original creation, thereby ined in its earlier report on digital intellectu- generating the greatest number of improve- al property.54 Rights holders of music and ments at the lowest possible cost. movies and videos argued that the incentives This is not to say that the traditional intel- to create will be destroyed because “you can’t lectual property model or proprietary soft- compete with free.” No one would write a ware is inappropriate or out of place with song or a poem if they could not recapture today’s economy or that the incentive system their investment in time and effort by selling it relies upon is mistaken or misguided. It is the work—something not possible if pirated not to say that society has to choose between copies are readily available for free. proprietary or open models. It is instead to But as the Council noted, the choice is not say that there is nothing inherently inconsis- simply between proprietary and free. In tent with intellectual property law in a soft- many cases, it may be between “cheap and ware development system that seeks to maxi- great” as opposed to “free and crummy.” mize distribution as opposed to controlling While it is wrong for someone to appropriate access. Both systems can and will coexist. another’s work without permission, rights Both can and will produce excellent prod- holders may give permission in order to ucts. But, open-source licensing systems have build audiences for performances or to whet different aims and make different assump- the appetite of fans for other works. Society, tions about the nature and process of innova- tion and the incentives that encourage it † Some free software advocates are ideologically opposed to anyone profiting from proprietary software development. But from those traditionally associated with pro- that hardly describes the open-source software movement in prietary software. The latter focuses on the its entirety, ranging as it does from independent programmers who contribute code intermittently to the full-time employees first creator, while the former sees the poten- of some of high tech’s biggest names who are developing tial for creation in everyone. open-source software full time for their firms.

21 in specific circumstances such as with fair ers, have addressed in great depth the ques- use, has recognized the value in allowing lim- tions of why people develop and share soft- ited access as part of the government’s grant ware they create.55 All have suggested answers, of exclusive rights. mixing pro-social arguments with those based Perhaps most important, it is likely that on more narrow conceptions of individual new models of compensation for creators will benefits. The reasons are complex and obvi- be developed, consistent with the characteris- ously vary from person to person, but based tics of the digital environment, as occurred in on both theoretical and empirical work, it is response to earlier technological challenges clear that there are multiple reasons for indi- such as those posed by the arrival of radio. It viduals to participate in these efforts that do may be that the business models of those who not directly reward them monetarily. create proprietary software will evolve as a result of the rise of the Internet and the spe- ALTRUISM cial characteristics of digital information Some have argued that the open-source products, just as the business models for dis- process is unsustainable because it depends tribution of music, video and movies are on voluntary action. And many open-source evolving. But, these changes are not the result participants acknowledge that they are of an inherent conflict between intellectual motivated by altruism. property rights and open-source software. Eric Raymond’s writings on open-source The charge that open-source software software noted the existence of a “gift econo- undercuts the incentive system that drives the my” in which contributors were rewarded pri- creation of proprietary software may be, at its marily via the personal satisfaction they expe- core, a different statement—or rather a dif- rienced due to their sharing.56 Certainly ferent question. Proprietary software among the factors animating voluntary con- depends on investments of time and energy tributions is the desire to be helpful to a in the creation of a digital information prod- broader community of which they are a part, uct, which is licensed to provide a return on in this case the open-source community with that investment. Talented software producers its norm of sharing. and the companies that employ them or that The rewards for altruism are substantial distribute their work can be rewarded hand- and deep-seated. As David Bollinger and somely under this model. So, why would John Clippinger have pointed out, some someone invest the time and effort required comparative anthropologists and evolution- to develop software, or alternatively why ary psychologists are suggesting that “as a would they incur the opportunity cost of not species we are neurologically hard-wired to doing something else, without being able to be empathetic and cooperative.”57 Richard obtain a return on their investment? Why Stallman has invoked the golden rule as a would anyone give away their work to a sys- guiding principle for free software: “If I like a tem where it will be broadly available for free program I must share it with other people without any restrictions on its modification or who like it.”58 redistribution? Why would they join a system We are all taught early that “it is better to that prevents them from receiving any direct give than to receive.” (Some of that teaching monetary reward for their work? In other may even take root.) As Yochai Benkler words, why do they create and share? notes, “Anyone who sits in a New York City playground can only marvel at the paradoxi- SHARING AND THE cal phenomenon of Wall Street traders OPEN-SOURCE MOVEMENT admonishing their children to ‘share nicely,’ Richard Stallman, Eric Raymond, Josh and will appreciate our deep cultural 59 Lerner and Jean Tirole, Steven Weber, Eric commitment to sharing.” von Hippel and Yochai Benkler, among oth-

22 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

Everyone knows someone who relies less Jack Kilby, the much honored inventor of on financial rewards than on the positive the integrated circuit, wrote of such feelings: feelings that they get from helping others. “I’m motivated by a need to solve prob- There is even a category of workers—the lems, to make something work. For guys like helping professions—many of whose mem- me, the prize is seeing a successful solu- bers have chosen to accept fewer financial tion…It’s quite satisfying—hell, it’s incredi- rewards in exchange for other, less tangible, bly satisfying—to face some important rewards. But, although altruism is part of the problem and find a solution that works.” 61 motivation for many open-source partici- The development of the open-source pants, it provides only a partial answer as to Apache Web-server software is a clear exam- why they act, just as monetary rewards pro- ple of how an individual addressing a prob- vide only a partial answer as to why people lem resulted in a widely used open-source create new works. software program.62 In the early days of the Web, there was little industrial-strength soft- THE JOY OF CREATING, ware available to IT center managers for run- ning servers that would retrieve Web pages. THE EXCITEMENT OF In response, an IT center manager wrote a PROBLEM SOLVING program to address this problem and, follow- Many programmers get the same feeling ing the norm of his community, shared it. of excitement and accomplishment from Others responded with improvements and so writing a program or solving a difficult prob- on and so on until Apache became the domi- lem that they choose to address as others get nant Web-server program—a position it from similar acts of creativity, whether it be retains today in the face of many proprietary completing a sketch, writing a poem, or software challenges. It began, however, with a forming a tune on a musical instrument. problem faced by many people and one per- Most artists never offer their work for sale; son motivated enough to attempt to solve most poets go on writing poetry even though it—and also willing to share the solution. As they never publish; most people who play an Eric Raymond noted, “Your program doesn’t instrument never play for pay. Everyone have to work particularly well. It can be experiences, at one time or another, the crude, buggy, incomplete, and poorly docu- excitement and pleasure of creating. mented. What it must not fail to do is (a) run That the joy and excitement of creation and (b) convince potential co-developers that plays a part in the motivation of open-source it can be evolved into something really neat participants is not surprising. What other rea- in the foreseeable future.”63 sons might contributors have for investing But why share the solution? In part, altru- their time and energy to create and to share? ism. In part, community norms. And then there is the prospect for “reciprocity.” SOLVING A PROBLEM THAT RECIPROCITY: GIVE A BRICK YOU HAVE TO OVERCOME 64 A central reason given for working to pro- AND GET BACK A BUILDING duce a piece of shared software is that the If an individual shares code that provides programmer is attempting to solve his or her benefits to others, that individual may receive own technical problem. He or she is, as Eric code and benefits in return, both now and in Raymond put it, “scratching a…personal the future. Perhaps others will share pro- itch,” such as a problem for which there is no grams they have written that will help solve a available solution.60 The personal benefit current problem. If someone shares a prob- from solving a problem that is obstructing lem or a solution with a large-enough group, one’s progress is immediate and tangible. he or she increases the number of people

23 who might be able to help solve a problem in a result, the programmer has an opportunity the future. to hone skills and potentially to gain in repu- tation and prestige, all while working on a INCREASING STATURE problem that he or she finds worth pursuing. AND REPUTATION THE COSTS OF, AND THE AND PROFESSIONAL BARRIERS TO, SHARING HAVE OPPORTUNITIES BECOME SO LOW THAT THE Another reason for people to participate in open-source development is increased rep- BENEFITS OF PARTICIPATING utation among one’s peers. If someone finds NEED NOT BE VERY GREAT TO an elegant solution to a difficult problem and OUTWEIGH THE COSTS does not share it, he or she may be gratified by the act of creation and satisfied by solving On the most mundane level, the actual the problem. But, if someone finds an ele- costs of sharing have been dramatically gant solution to a difficult problem and reduced by improvements in information shares it with peers, his or her reputation as a technology. To share digital information products, whether by e-mail or peer-to-peer programmer will be enhanced. Competitive 66 programmers may also enjoy beating other systems, requires increasingly less effort. programmers to the solution. Moreover, the effort required to make a As Lerner and Tirole have written, a gain contribution has been dramatically reduced in reputation may have additional private due to the organization of most open-source benefits. A programmer or project leader development projects. The core design prin- may get a promotion or better job offers ciple that allows widespread collaboration based on their enhanced reputation, or calls for modular solutions that can commu- have better access to venture capitalists for a nicate easily with other modules through new venture.65 well-defined interfaces. A potential contribu- tor self-selects a project (limited in size due to modularity) that is consistent with the con- IMPROVING tributor’s self-identified skills and experience, PROGRAMMING SKILLS and matches the resources that he or she is 67 Another reason for participating is simply willing to expend. to improve one’s programming skills. One of But, what of the monetary rewards for- the most attractive aspects of the open-source gone by sharing what is created? It is not process is that it allows an individual to clear whether the limited contributions choose the problem or problems on which to described above would be worth much if work and the amount of time and effort to offered directly in the marketplace or would invest. He or she can then attempt to find a be worth protecting via the intellectual prop- solution and be reasonably sure to receive erty system. Although the contribution might feedback. The feedback will not necessarily well be of high quality, it is likely to be much be supportive—harsh criticism and “flaming” more valuable as a part of the larger whole are common—but it will be forthcoming. As than in its own right.

24 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

THE FUNDAMENTAL It also helps to reduce the “free rider” PRINCIPLE OF OPEN-SOURCE problem associated with the open-source soft- ware movement. There is a temptation for SOFTWARE’S LICENSING individuals to take advantage of the benefits SYSTEM—PREVENTING offered by access to open-source software RESTRICTIONS ON FURTHER without contributing anything meaningful in return. Increasing the number of potential DISTRIBUTION—IS CRITICAL contributors improves the odds that among TO THE SUCCESS OF THE the group will be individuals who find that OPEN-SOURCE SOFTWARE their own personal cost/benefit calculations lead them to participate. DEVELOPMENT PROCESS All of these private benefits support partic- The central tenet of open-source software ipation in the open-source software develop- licenses—preventing further restrictions on ment process. And in pursuing these private distribution—buttresses the central process benefits, the contributors add to the societal of open-source creation. It encourages the value of the collective product.70 widest possible distribution of the software to the largest number of potential contributors. THE INCREASING There is an important characteristic of software that increases the potential benefits IMPORTANCE OF from sharing a problem or solution with the CORPORATE largest possible group. About one-half the CONTRIBUTIONS TO cost of creating and maintaining software is in debugging and maintenance.68 The larger OPEN-SOURCE SOFTWARE the group of people engaged in debugging DEVELOPMENT and maintenance, the more likely that there In an increasing number of cases, the pro- will be a match between the talents and inter- duction of open-source software is a job, not ests in the group and the problems to be a volunteer activity. detected. Eric Raymond encapsulated this More and more companies that plan to idea in the phrase, “given enough eyes, all use open-source software in their businesses bugs are shallow.”69 Open-source software, or that have made open-source software part with its emphasis on expanding distribution, of their strategy are directly supporting open- increases the chances that the group avail- software development rather than relying able to engage with the problem will be larg- completely on volunteer labor. They are pay- er and more heterogeneous. The larger and ing open-source developers or are assigning more heterogeneous the group of program- their own programmers to open-source proj- mers, the more likely that it will have the ects. This enables them to ensure that their right “eyes,” the right experiences, the right particular problems are addressed and that talents, and the right interests to find and fix they will benefit from the efforts of the the bugs. broader open-source community. A recent Increasing the number of potential con- survey indicated that as many as a third of tributors has other benefits. It enhances the participants in open-source projects are potential reciprocal benefits for each contrib- being paid directly by their employers for utor, provides a larger audience for those their open-source work.71 seeking reputational benefits, and allows Many software programmers are not problems to be broken into smaller and employed by companies that produce and smaller packages, reducing even further the license proprietary software. They work for costs associated with participation. corporations developing, testing, installing

25 and maintaining in-house software or over- This increasing corporate production of seeing the functioning of software licensed open-source software is helping to build the from others. If a firm can increase the value “commons” created by the totality of open- of the work of its own employees by leverag- source software development efforts. Like the ing the efforts of others outside the firm, it is work on UNIX at AT&T’s Bell Laboratories, clearly in its economic interest to do so. which provided a foundation for Linux and IBM, for example, has analyzed the poten- which was indirectly supported by the fees tial benefits from using open-source software paid to AT&T by local telephone companies, and from directing its own employees to this growing commons will provide an work on open-source projects. It calculated increasingly rich legacy for future open- that it costs approximately $500 million source developers.73 annually to maintain an industrial-strength operating system such as Linux. If IBM OPEN-SOURCE SOFTWARE invests $100 million dollars in support of Linux, it stands to benefit (as do all other DEVELOPMENT IS PROVIDING Linux supporters) from hundreds of millions A TESTING GROUND FOR of dollars worth of contributions from THE ORGANIZATION OF around the world. The calculation was clear to IBM; a growing number of other firms are MASSIVE, DISTRIBUTED coming to the same conclusion. COLLABORATION BY There are many different reasons why cor- VOLUNTEERS WHO ARE porations are providing support for open- SUBJECT TO NEITHER source development.72 Major hardware com- panies are packaging open-source software AUTHORITY FROM WITHIN on their hardware and offering support for A HIERARCHICAL FIRM it, reducing the licensing fees they pay to NOR TO THE MARKET’S PRICE proprietary software companies and strength- ening their own consulting offerings. SIGNALS Companies like Google are wooing open- Proprietary software is produced by firms source developers in order to improve their much like firms produce physical goods. own products. New open-source-software- How is it possible to organize collective based companies are contributing to develop- action by volunteer collaborators separated ment efforts, while selling support, installa- by time and distance without the authority tion assistance, documentation, code man- found within a firm or without using agement services, and customization, as well monetary rewards? as branded versions of basic programs with The Internet is the answer, reducing trans- increased functionality. Non-IT firms are sup- action costs by reducing the costs of commu- porting development, as they recognize the nications and coordination enormously. The importance of customized, extensible, thor- difficult job of assigning tasks in a project, oughly debugged solutions to their own par- which within the firm requires a division of ticular needs. They appreciate not being labor, knowledge of the resources available, locked into a potentially crippling reliance and the assignment of resources, is greatly on a proprietary software vendor for reduced in the open-source environment. upgrades and support. They see the same The potential labor pool has been greatly benefit that motivates some individuals to expanded via unrestricted distribution. contribute—the open-source process poten- Individuals in the pool self-select their tasks tially marshals a much larger, more heteroge- based on their own interests, skills and will- neous group of collaborators able to find the ingness to invest resources. The downside is best solution to their particular problem. that there may be substantial duplication of

26 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

effort, something that proprietary software out, the open-source development process firms seek to avoid, so the open-source cannot succeed without well-respected lead- software development process needs to ership and a strong set of cultural norms.77 carefully and efficiently evaluate proposed What is particularly interesting is that the contributions. nature of the development process provides Linux and Apache, like other successful incentives for a leadership style that appears open-source projects, have addressed this to be consistent with the norms of the evaluation problem, the task of determining open-source community. what contributions should be included in the Every open-source project has a leader. next software release.74 Linux has two pro- That leader does not have the authority over duction streams overseen by hierarchically the volunteers that is possible in a hierarchi- organized, trusted veterans of the Linux cal firm. At the same time, the leader development process. One group of experts requires a strong relationship with potential evaluates code that has been well-tested and contributors, who can stop work at any time. debugged to determine if it is sufficiently Contributors can also choose to follow anoth- mature and stable to be included in the next er path in the software (there are an infinite regular Linux release. The other stream is number of possible development paths in more experimental, allowing for new ways of software) and establish a new project—what attacking problems or new areas of work. It is is known as “forking” the code. The leader here that revolutionary rather than evolution- has incentives to maintain or increase the ary progress might emerge. Although it has a number of volunteers working on the project slightly different structure, Apache too has in order to get the work done, and to organized itself using experienced Apache increase reputational gains. The volunteers’ program managers to screen contributions ability to quit or to fork provides a strong and evaluate their readiness for “prime time.” incentive for the leader to work to obtain the By providing a process to evaluate contri- trust of his or her followers by setting realistic butions—and to reject many—these open- goals and listening to and responding to source development organizations have limit- criticism. The very absence of authority ed the “openness” of the software, although encourages the leader to lead. anyone can still submit a contribution. But The absence of traditional authority does while reducing the openness, they have provide challenges. There is no easy way to improved the quality and reliability of the set and enforce priorities or to ensure that software. Thus, the level of openness of any resources are directed toward unmet product or process will likely reflect the needs—a problem not inherent in propri- underlying needs of the system. There is little etary software development.78 One strength likelihood of building a community to use of the open-source development system is and improve a software program that has a task self-selection, but self-selection may million different versions, with a new one result in critical work being left undone. As appearing whenever anyone proposes any Linus Torvalds has admitted, sometimes he change. The pace of improvement, however, may have to suggest areas that need attention generally remains faster than in the propri- or even start a project and lead it until it etary world, with a model of “release early becomes self-sustaining.79 and release often.”75 Open-source software Similarly, it is not surprising that open- has, in fact, been described as being in a per- source software products have been criticized petual “beta” test, albeit with an unlimited for a lack of quality documentation and sup- number of testers/contributors.76 port and consumer-oriented usability. It is But, will volunteers accept this level of hard to imagine that the “itch” that wants to screening and control? Will they defer to the be scratched, and that animates a talented judgments of the veterans? As Weber points programmer, would be to write documenta-

27 tion—taking on a cutting-edge problem with proprietary software that is not particu- would be more attractive. An analogous prob- larly admirable in this regard.80 As commer- lem may exist in producing high-quality user cial firms play an increasing role in open- interfaces for open-source software; the source software development, these chal- intrinsic rewards in this area may not animate lenges are likely to be faced directly, while the most gifted programmers. Open-source the advantages of open-source software devel- software has drawn particular criticism for opment for customization, extensibility, and this lack of “fit and finish,” even compared debugging are maintained.

28 V. PUBLIC POLICY ISSUES RELATING TO OPEN-SOURCE SOFTWARE

Currently, two subject areas—the struc- availability of the Linux program that they ture of the current patent system and govern- might want to implement. Proprietary soft- ment procurement of both open-source and ware providers have emphasized this in sug- proprietary software—dominate public gesting to customers that they consider policy concerns and debates regarding open- “intellectual property risk” in making their source software. software choices.83 Open-source supporters have attempted to THE PATENT WARS: counter this issue in several ways. A recently launched company is providing insurance THE ARMED VERSUS THE against infringement claims.84 Another is CONCIENTIOUS OBJECTORS selling a product that will enable developers One sign of the success of open-source and users to screen open-source code for software has been the increasing threat of proprietary code that might inadvertently be intellectual property challenges raised against included.85 Some open-source developers are Linux and other open-source offerings by requiring contributors to certify that they proprietary software providers and others. have the right to provide the code, either Patent infringement actions are certainly because they wrote it, own the copyright, or not rare in the IT arena. But, software have all the necessary licenses for its use. patents have a fairly short history. Until rela- Potentially even more important have tively recently, the very idea of patenting soft- been the actions of a number of leading IT ware was hotly debated in the United States; firms in contributing their own patents to the it is being debated still in Europe, where open-source software development process. open-source software advocates have been Novell, Computer Associates and IBM, among the leaders opposing it. among others, have helped to create a In the United States, SCO has sued “patent commons” by contributing thousands IBM for misappropriation and copyright of patents from their own large patent arse- infringement regarding certain Linux-related nals—arsenals that were created to generate patents. IBM has countersued.81 (Given the revenues from licensing and provide either openness of open-source software, it is easier offensive or defensive weapons in intellectual to scrutinize its source code for infringing property battles.86 Some of the same large code than it is to obtain and analyze firms have pledged not to challenge open- proprietary source code.82) source projects based on their own patents or A successful infringement action by SCO to indemnify and defend against patent against IBM could provide SCO with a strong infringement claims that are based on open- basis for claims against Linux and other source software that they provide.87 It is yet Linux-related projects. Because these pro- to be seen whether open-source software grams are distributed without charge, the developers can achieve a “mutually assured open-software developers have no revenue destruction” stalemate with proprietary soft- stream from which to draw royalties or pay ware producers based on patents donated by damages. Even the filing of the infringement open-source software’s patent-rich corporate actions has a potentially powerful negative supporters. effect, as prospective users have to weigh No company, large or small, has been will- their potential liability and the long-term ing to generally indemnify Linux and, thus,

29 risk potentially enormous liability; some pro- mandates based on claims that they would prietary software companies are highlighting lower overall IT expenditures, improve secu- the absence of this indemnification, as well as rity, reduce dependence upon foreign propri- the general lack of warranties in open-source etary software providers, help to stimulate software, as they compete with open-source indigenous software development capabilities products. In the absence of general indemni- and foster economic development.90 fication, open-source advocates and potential This push to require governments to pro- users are likely to continue facing “fear, cure open-source software is particularly uncertainty, and doubt.”88 threatening to proprietary software compa- Open-source software providers, propri- nies because of its strength in the developing etary software providers, indeed any innova- markets in Asia and Latin America that are tor that faces intellectual property challenges likely to have the highest growth rates in the has to rely on the ability of the U. S. Patent future. Lower costs are particularly important and Trademark Office (PTO) to issue quality to governments in these markets because of patents based on a thorough scrutiny of prior their lower income; moreover, arguments for art and an informed view of non-obviousness, economic independence resonate in many and on the wisdom and speediness of the of these countries based on their colonial U.S. judicial system in reviewing them. histories.† To counter this trend, proprietary Recent studies by the National Academy of software companies have actively sought Sciences and the Federal Trade Commission U.S. government support in opposing open- and the Department of Justice make clear source purchasing mandates in countries the need for a thorough review of the where they have been raised. system.89 Problems with patents in the infor- The arguments over mandating govern- mation processing and communications tech- mental purchases of open-source software nologies sectors, in particular, suggest that a recently reached into the heart of Silicon system that works reasonably well in regard to Valley. A proposal was made by the California pharmaceuticals may need substantial adjust- Performance Review Commission to require ment to reflect a process of innovation in dig- the California state government to acquire ital information products that is marked by only open-source software where it was avail- numerous incremental improvements and able.91 With advocates for and against the extensive cross-licensing arrangements. proposals actively lobbying, Bruce Perens, one of the founders of the Open Software GOVERNMENT Initiative, proposed a requirement focused on interoperability.92 PROCUREMENT: SHOULD He argued that the issue was not whether GOVERNMENTAL USE OF to require government to acquire open- OPEN-SOURCE SOFTWARE source software but rather whether a govern- ment should require that any software it BE MANDATED? acquired for a critical governmental function Patent infringement challenges may stall be interoperable across various platforms. In the growth of the open-source movement. other words, should a citizen be required to But, a strong source of support is coming from the developing world, where proposals † One factor seen as legitimating the purchase of open-source calling for governments to utilize only open- software by governments is its acceptance by a growing num- source software have proliferated. From the ber of governmental agencies in the developed world— including in the United States, where open-source software is Peruvian legislature to the Indian Ministry used by the Department of Defense, the Federal Aviation of Defense, governmental bodies have been Administration, the National Oceanic and Atmospheric deliberating whether to impose such Administration, the Department of Energy and the Federal Emergency Management Agency, among others.

30 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

purchase a particular vendor’s hardware or funding for test beds and pilot programs to software to engage in a critical interaction develop and evaluate interoperable solutions. with his or her own government? The consequences of a lack of interoper- Perens suggested that governments should ability in telecommunications were evident not be required to purchase open-source soft- during the 9/11 rescue events and during ware but should identify critical governmental the recent hurricanes in the Gulf Coast. functions and the capabilities required to pro- Hurricane Katrina provided a particularly vide interoperability across various platforms dramatic example of the lack of interoper- such as open file or data formats. Any soft- ability for citizens involved in critical interac- ware that the government acquired for a criti- tions with their government. People seeking cal governmental function would have to to obtain assistance from the Federal include these capabilities. Proprietary soft- Emergency Management Agency (FEMA) ware vendors could meet the conditions with- were unable to fill out the required forms out disclosure of source code if there were unless they used one specific proprietary Web sufficiently open interfaces that could be used browser.97 While this may simply be due to a to provide interoperability.93 (De facto propri- lack of resources at FEMA, a drawn-out Web etary standards have provided a more limited implementation process, or a lack of recogni- interoperability in the past.) tion of the problem, it created yet another The State of Massachusetts has recently obstacle for those in desperate need.† attempted to address the issue of interoperabil- At the same time that the virtues of inter- ity in critical communications with its citizens operability in health care information systems by requiring the use of Open Data Standards are being stressed by the Administration, the by vendors with which it deals. The proposal United States is on record as questioning has generated considerable controversy.94 interoperability requirements proposed as The importance of interoperability with part of the European Commission’s intellectu- respect to critical governmental functions is al property policies. During consultations even clearer than the general benefits of between the U.S. government and the interoperability provided by open standards. European Union, the United States raised The competition enabled by interoperability objections to governmental interoperability lowers costs, increases the number of ven- requirements on the basis that they might vio- dors, reduces lock-in, and encourages innova- late governmental procurement requirements tion by broadening the potential market for under the World Trade Organization agree- new applications. In particular areas such as ments as well as the Trade-Related Aspects of health care, interoperability can provide the Intellectual Property Rights (TRIPS) agree- basis for improved care for the chronically ill, ment regarding intellectual property.98 In a fewer medical errors, and dramatically related area, U.S. proposals regarding intel- reduced administrative costs. According to lectual property in several bilateral trade one study, fully standardized and integrated negotiations with other countries include health care information system could save intellectual property protections based on the the nation $77.8 billion annually.96 Digital Millennium Copyright Act (DMCA) The Bush Administration recognized the but do not include protections for consumers attraction of interoperability in its 2004 contained in that Act, including provisions report “The Decade of Health Information that promote interoperability.99 Technology,” which seeks to create an inter- operable system for electronic health care † 96 Internet users needed Microsoft Internet Explorer 6 in records within 10 years. The system would order to apply on-line for aid from FEMA. Although Internet allow the storage and sharing of electronic Explorer is now available for download free of charge, this was health records while maintaining security not always the case. More importantly, citizens and govern- ment agencies should not depend on a company’s independ- and patient confidentiality. Under this ent business decisions to ensure interoperability in critical proposal, the government would provide interactions.

31 VI. PUBLIC POLICY RECOMMENDATIONS REGARDING OPEN-SOURCE SOFTWARE

The Council recognizes that serious issues homeland security, where the lack of interop- have been raised over the last several years erability of first responder data and commu- about the operation of the present patent sys- nications systems on September 11th provid- tem in the area of software and business ed a lesson in what not to do. The National methods patents. (In a report released in Institute of Standards and Technology has an 2001, CED recommended that automated exemplary record in such studies and should business methods should not be patentable; continue to expand the areas under review. rather, copyright should be used to protect The U.S. government should not be an software that implements a business advocate in the international arena for any process.100) The Council is encouraged that particular type of software licensing or devel- Congress is engaging in such a review with opment and should oppose mandates for the the goal of fulfilling the Constitution’s aim to utilization of any particular type of software provide the highest possible level of innova- licensing or development. tion within the United States, recognizing the The U.S. government should review its importance of both initial and follow-on cre- policies regarding interoperability mandates ators. Such a review should reexamine the to determine whether such mandates, partic- premise that today’s unitary system continues ularly regarding interoperability in the IT to serve all industrial sectors well, especially arena with respect to critical governmental given the proliferation of problems regarding functions, can be accomplished in a manner software patents. consistent with treaty obligations. The Council opposes any mandate that The Digital Millennium Copyright Act’s would require any governmental agency to provisions regarding interoperability are an utilize only a particular form of software important check on the control that can be license or development process, be it propri- exercised by rights holders and should be etary or open source. Procurement decisions included in any international agreements should be based on identifying and obtaining made by the United States in the area. Such the software that best meets the needs of the agreements should reflect the balanced particular governmental activity involved. nature of U.S. intellectual property law. The Council recommends that govern- The Patent and Trademark Office should ments at all levels should identify critical gov- make increased use of the Internet in seek- ernmental functions, particularly as they ing to document “prior art,” particularly in involve citizen-government interactions, and the area of information technology, where place a high priority on requiring interoper- the Internet provides new capabilities to ability across various platforms for any soft- reach the most knowledgeable commenta- ware that is acquired related to performing tors. A “Slashdot for prior art” should be these critical functions. the goal. † 101 The government should advocate open Given the proliferation of patent applica- standards and interoperability in critical areas tions, the Congress should consider additional of governmental function and should support funding for the PTO. royalty-free licensing of any intellectual prop- erty required to implement such standards † Slashdot is a popular website that features short summaries of technology-related news articles from a wide variety of The government should consider addi- other websites. Readers are provided with a link to the origi- tional areas in which interoperability would nal website, should they wish to read the article in its entirety, provide significant improvements in govern- and can also post their comments regarding the article on the Slashdot website. The editors of Slashdot are responsible for mental performance, such as in the area of accepting or rejecting news articles, which are generally sub- mitted by Slashdot readers. 32 VII. OPEN INNOVATION

The open-source software movement is an OPEN INNOVATION HAS A exemplar of a broader movement, that of BROAD AND RICH HISTORY “open innovation.” While the dramatic growth of open-source Open innovation is hardly a new phe- software is recent, tracking the growth of the nomenon. Adam Smith wrote about innova- Internet, today’s open-source movement is tions by working men in the Wealth of 103 directly related to the sharing practices of Nations. Lawrence Lessig has pointed out academic computer scientists dating back that the Oxford English Dictionary began fifty years and more. with a call for volunteers to send in exam- 104 In a profound way, open-source software ples of vernacular word usage. “Yankee reflects practices that have produced much tinkerers” went from village to village mend- of the innovation in America. These innova- ing tools while passing along what today tions took place in factories and offices, might be called “upgrades” shared with farms and hospitals, homes and laboratories them by earlier customers. Competitively but often lay outside the formal system of valuable innovations were passed around innovation marked by patents, copyrights, among the early iron makers in America and trade secrets. directly, through shared contractors or via 105 These innovations have, over time, been workers switching employers. labeled “reactive” or “collective” or “distrib- Nor has open innovation slowed as tech- uted” or “cumulative” innovation. Eric von nology has become more complex. As von Hippel of MIT has recently written an impor- Hippel points out, the mountain bike indus- tant book, Democratizing Innovation, which try came into being based on the knobby- focuses on user-led innovations.102 This form tired, shock-absorber-enabled bicycles cob- of innovation can be seen as part of a bled together by enthusiasts before there 106 broader phenomenon that might be called was any such thing as a “mountain bike.” “open innovation.” The legendary Homebrew Computing Club Open innovation involves the collabora- was a forum for sharing that led to the first 107 tion of manufacturers, suppliers, customers, successful personal computer. or the simply inventive, which leads to the creation or modification of both tangible and OPEN INNOVATION IS intangible goods and services. The defining LIKELY TO BECOME MORE characteristics of open innovation are collab- oration and sharing, often without economic IMPORTANT GIVEN reward. Open innovation should not be DEVELOPMENTS IN equated with the absence of intellectual INFORMATION AND property or the absence of compensation. But, much open innovation has not been COMMUNICATIONS protected under our intellectual property TECHNOLOGIES laws, and much has been done without any Software, potentially infinitely malleable prospect of payment. by programmers—if open or “openable”— is playing an ever growing role in economic activity in general. More specifically, it is becoming increasingly important in the

33 performance of hardware devices, from tradi- something new or to share an innovation— tional computers to portable entertainment has plummeted. The Internet, improved and devices to scientific instruments and machine more available digital tools, and new applica- tools to toys. The history of information and tions such as social software and wikis†† have communications technologies is filled with produced what Timothy O’Reilly called a examples of capabilities originally manifest in new “architecture for participation.”113 hardware—the crystals in radios for exam- ple—eventually being transformed into THE CONVENTIONAL software—the software of software-defined radios.108 WISDOM PORTRAYS Given its characteristics, software is partic- MANUFACTURERS, AND ularly hospitable to the workings of open HEROIC INVENTORS, AS innovation, as can be seen from the open- source software movement. But, all digital THE SOURCE OF information products can benefit as can be INNOVATIONS THAT ARE seen in recent developments based on the PASSIVELY CONSUMED BY “repurposing of data,” such as the Google THEIR CUSTOMERS Maps that are “mashed” together with hous- ing lists, or incidents of avian flu, or whatever Americans are in love with the idea of the 114 data set someone believes will provides a use- lone inventor. Edison is revered as a ful source of information when combined genius, responsible for the light bulb, the with a map.109 phonograph and countless other inventions. The ever increasing availability of comput- He could, however, be as well remembered as ing power, combined with cheaper memory, a master of collaboration who collected tal- has decreased the costs of digital tools, fur- ented associates, instructed them to test what- ther lowering the barriers to the “democrati- ever they thought best to solve a particular zation of innovation.” The greater availability problem (such as the optimal material for a of these tools permits a larger number of light bulb filament), and created a virtual 115 users to create designs and even prototypes “invention factory” at Menlo Park. for new physical products; open innovation, Americans argue about who was (or laugh thus, is being extended further and further over who claims to be) the father of the into the physical world. New companies are Internet, rather than appreciating the many offering design tools linked to fabricators acts of inventiveness that cumulatively led to that can produce a physical copy of almost its creation and development. anything that can be represented digitally.110 Discussions about innovation often reflect Neil Gershenfeld of MIT’s Center for Bits a view that producers of goods and services and Atoms calls this the “fab revolution;” as are the sources of innovation and customers the Internet and personal computers made passively consume the innovations embodied bits flexible, digitally driven fabrication will in the goods and services they acquire. But as do the same things for atoms.112 Some fab von Hippel demonstrates, there are more enthusiasts are even applying open-source useful ways of thinking about the process principles to the new arena, creating an open than manufacturers innovating and cus- 116 database of interesting fabrication projects tomers consuming. and fab techniques “like a Wikipedia for Customers usually know more than any- making stuff.” † 112 one else about their own needs and, in many At the same time the cost of communicat- cases, are capable of identifying actions that ing to collaborate—whether to produce †† A wiki is a type of website that allows users to easily modify † Wikipedia is a free, online encyclopedia with entries created content. The term is also used to identify the collaborative entirely by Internet users (see page 36). software that makes possible the operation of these websites.

34 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS can be taken to meet them. While they know OPEN INNOVATION EXTENDS their needs, that knowledge can be “sticky,” WELL BEYOND LEAD USERS tacit, and hard to communicate precisely. Customer needs, moreover, can be quite het- Von Hippel makes a strong case for the erogeneous, varying by locality, gender, age importance of lead-users in the “democratiza- cohort, etc. A subset of customers—von tion” of innovation, particularly customers Hippel calls them “lead-users”—experience with substantial expertise, resources and significant needs before other customers in incentives, who have made substantial contri- the marketplace, have the resources and butions in areas such as scientific instru- incentives to create their own solutions, and ments. In the field of kite sailing, users have are, therefore, a particularly important employed digital tools to evaluate kite source of innovation.117 designs and either make their own kites or 118 Customers, by and large, don’t care how turn the designs over to a manufacturer. their needs are met. They simply want the But, there is a broader set of potential “optimal” solution. As a general rule, they innovators that need to be considered to prefer solutions that increase competition to understand open innovation. serve them, provide them with greater Several years ago Henry Chesbrough, now choice, and reduce their costs. Increasingly, at the University of California at Berkeley, they have access to tools, particularly digital used the term “open innovation” in calling tools, that enable them to create their own for companies to look beyond their own solutions. research and development organizations for Manufacturers might be thought of as ideas and practices that they could profitably being in the business of providing solutions employ. Firms, he noted, needed to be 119 to customer needs. They are most knowl- “open” to innovations from elsewhere. In edgeable about the subset of solutions (in the last few years, new institutions and prac- the universe of solutions) in their area of spe- tices have emerged that provide firms with a cialization. Steel manufacturers are most much wider choice of innovations from a knowledgeable about the range of available much broader set of innovators. steel solutions, chemical manufacturers For example, Procter and Gamble now about chemical solutions that might work, obtains 35 percent of its new products from and so forth. To sell solutions, they need to outside the company, compared to 20 per- understand customer needs, and they try cent in 2002, and aims to increase this num- hard to do so. To be most profitable, they ber to over 50 percent. It uses outside prefer to provide “acceptable” solutions that experts, such as the 80,000 online independ- meet the needs of the largest number of cus- ent self-selected experts who address research tomers in order to have the largest possible problems for many different firms under the market over which to spread development auspices of InnoCentive Inc., and connects and marketing costs. They seek to minimize with other sources of innovation through its 120 development costs by relying on solutions “Connect and Develop” strategy. that they have already created and under- As the vice president of Eli Lilly’s e.Lilly stand. They are further motivated to utilize research unit stated, in words that could have proprietary solutions to maximize profits. come from the mouth of any open-source Customers are specialists in their own software advocate, “If I can tap into a million needs with a growing ability to create solu- minds simultaneously, I may run into one 121 tions. Manufacturers are specialists in the that’s uniquely prepared.” The same solution sets with which they have experi- strategy of supporting the broadest possible ence. The relationship between the two distribution of problems utilized by the open- groups is changing in an increasingly digital source software movement and underpinned networked world. by open-source licenses is being profitably

35 employed in the industry sector that has gather together three people, you have a benefited most from today’s patent system. genius.” John Seely Brown and John Hagel III have recently made the case for the importance of OPEN INNOVATION AND suppliers as sources of innovation.122 “Productive friction” with their suppliers MASS COLLABORATION helps firms to continually upgrade their own As Yochai Benkler wrote, the Internet has capabilities, enabling them to succeed in rap- facilitated the rise of “peer production,” idly changing markets. Brown and Hagel which extends open innovation beyond tradi- point to Toyota and contrast its relationship tional commercial or academic settings and with its suppliers with those of its American allows everyone to contribute. This form of competitors. Toyota seeks long-term relation- open innovation, where anyone can partici- ships with its suppliers and works with them pate electronically in creative activities, has to upgrade their capabilities. It engages them also been called mass collaboration. Among in a “deep dialogue” about what functionality the best known examples is Wikipedia. Toyota needs, but does not rigidly define Wikipedia is an online encyclopedia creat- the means to achieve the enhancements, ed over the last five years. As its founder leaving ample room for supplier creativity. Jimmy Wales explained, “The goal is to give a In contrast, according to Brown and Hagel, free encyclopedia to every person in the American car makers more often choose sup- world in their own language…Not just in a pliers on the basis of the lowest price to pro- ‘free beer’ kind of way, but also in a free duce a design that the car makers specify, speech kind of way.”125 Wikipedia now boasts with little room for supplier input and less over 900,000 English language entries, more attention to improving a supplier’s perform- than seven times as many as that of the ance over the long term.123 (Ford’s recent Encyclopedia Britannica. These entries were announcement of its plans to revamp its sup- generated using a process even more open plier relationships seems aimed squarely at than that of Linux or Apache, with every pro- emulating the Toyota model.124) posed entry being logged and without an Brown and Hagel’s choice of Toyota sug- elaborate review processes. Earlier versions of gests yet another category of participants an entry are available and can be restored beyond customers and suppliers. The well- should there be a breakdown in the “culture known implementation of quality control of neutrality” that Wikipedia seeks to foster. 126 principles and continuous improvement As a result of its openness, Wikipedia must technologies by Japanese firms such as depend on a group of people who care to an Toyota depends on contributions from every- unusual degree about its success and who one in the workforce, from the executive have enough leverage that they can roll back suite to the factory floor. Business school graffiti or inflammatory entries.127 classes since the 1980’s have taught that any Overall, the quality of Wikipedia entries is worker can shut down the Toyota production high. A recent study in the publication Nature line upon detecting a defect. While Brown of Wikipedia’s scientific entries found that and Hagel make the point that stopping the they rivaled those of Britannica.128 † production line when a problem is encoun- The book reviews at Amazon.com are also tered has the virtue of freezing the context the results of voluntary actions by thousands and, thus, facilitating problem identification, of interested readers.129 The World Wide the very nature of so empowering the work- Web is, in effect, the product of millions of force is built on a fundamental respect for individuals and institutions that posted pages. everyone’s potential to contribute. There is † In March 2006, Encyclopedia Britannica issued a twenty even a Japanese phrase that captures this page report challenging the methodolgy and the findings of belief in the value of every worker: “If you the study conducted by Nature.

36 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

Every one who uploaded files to KaZaa or raised about software programmers in the who rated a buyer or seller for eBAY or who open-source movement. commented on one of the millions of blogs In cases of a small but useful cumulative that now exist was engaged in peer produc- innovation, the creator might conclude that tion and has helped create value with neither it is not worth the time and effort to obtain a conventional corporate oversight nor pay- patent—perhaps thousands of dollars and ment. And supplementing these voluntary years of waiting. Or, the creator might con- contributions are business processes designed clude that intellectual property mechanisms to generate new data that become more might not effectively protect the innovation, and more valuable as they are automatically for example where many others have similar collected—such as purchase data at information, where it would be difficult to Amazon.com that help create Amazon’s keep the development a secret, and where recommendations about books or music the development can be easily replicated.134 that may be of interest to a customer. The private interests that animated shar- The photo site Flickr.com provides a dif- ing in the open-source movement might also ferent example of peer production or mass apply here, such as the potential gains in rep- collaboration—what The Economist has called utation and prestige. This is certainly true in a “website of mass description.”130 Flickr does academic settings, where sharing is the norm not assume that existing hierarchical organi- and the rewards—tenure, other employment zational structures (such as the Dewey prospects—depend on disclosure. Or, it Decimal System) necessarily provide the best might simply be the desire to create that way of organizing data. Flickr allows anyone inspires poets and songwriters. to “tag” an image, creating a wealth of differ- There are also incentives for commercial ent categories and paths through the photo firms to share broadly. Sharing might help archive; others can then search using whatev- get a new product to market more quickly, er tags they choose and serendipitously gaining a first-mover advantage. Sharing may benefit from the organization that others lead to the establishment of a de facto stan- have created.131 dard or the generation of network effects. In The Wisdom of Crowds, James Surowiecki Sharing might help build a community of describes the seemingly perplexing results users that will support a new product or that demonstrate that large numbers of process; it might stimulate the sales of related independent people are better at solving cer- products.135 McAfee security software was tain problems than even the brightest indi- initially given away in order to build a market viduals or the best-known experts.132 This for the product; Netscape released its same insight, that “everybody knows more browser on the Net for free, triggering the than anybody,” guides Google’s Page Rank browser wars. system, which ranks Web pages to be retrieved Sharing as a strategy may be particularly based on links established by previous users. useful to a platform producer. If, as Eric This is yet another example of utilizing Raymond has written, users are treated as what Business Week has called “the power co-developers, they can create new features, of us.”133 such as videogame “mods,” that make plat- forms more valuable.136 This expanded WHY ARE THESE role of active and inventive consumers may lead to new systems of compensation for INNOVATIONS SHARED? user-created innovations. If these innovations are so valuable, why One of the characteristics of hackers is are they shared? It is the same question that they have traditionally pushed platforms to their limits, for the pleasure of the accom-

37 plishment, for the benefit of other users, and superhighway, as one commentator put it, for bragging rights among their peers. These goes through some very bad neighborhoods. hacker/customers have, in some cases, served Controversy has erupted recently over as unofficial research and development asso- the reliability of several Wikipedia entries, ciates for new machines and applications.137 with individuals accused of posting false New capabilities in the iPod such as the abili- information to further personal and political ty to podcast were the results of hacking interests. One intern in Washington, D.C. and have led to a new form of commercial was given the task of removing old campaign broadcasting.138 The ability to control a promises from a senator’s profile on TiVo over the Internet was created by a Wikipedia that the senator since had violated. hacker/customer.139 Another senator’s profile erroneously listed Platform producers do not always welcome him as having been voted “most annoying such assistance. They may conclude that senator by his peers in Congress.”142 opening a platform might negatively affect its These problems stretch well beyond the functionality or threaten their relationship political sphere. A Wikipedia entry falsely with a broader base of customers. SONY, suggested that John Seigenthaler, a former whose robot dancing dog AIBO was a hit assistant to Robert Kennedy, may have been with hackers, did not want to lose control involved in the assassination of Robert F. over the software that dictated the dog’s Kennedy. Other Wikipedia users have com- dances, even though hackers had created plained that podcasting pioneer Adam Curry and shared dozens of new dances that anonymously deleted references to other arguably made the AIBO more functional individuals’ seminal podcasting work. These and valuable. SONY threatened to void the claims have led to changes in Wikipedia pro- warranties for hacked AIBOs and continuous- cedures, including preventing anonymous, ly issued new software releases to frustrate unregistered users from posting new articles, potential hackers.140 While TiVo embraced thus moving Wikipedia closer to its open- the capacity for remote control over the source software relatives.143 Questions of Internet, it refused, not surprisingly, to reviews and evaluation are likely to continue support a hacker/customer development to be central to determining where a particu- that allowed TiVo customers to avoid its lar activity falls on the range of openness. subscription fee.141 The mass collaboration in peer-to-peer Rather than speeding up releases of new networks that created the world’s largest software that create barriers to hackers or repository of music also resulted in the mas- voiding the warranties of devices with hacker- sive appropriation of copyrighted creative modified software, it might be better for plat- works. Sharing music on KaZaa was possible form providers to welcome the potentially not only with friends and family, but with larger co-development community. They 60 million strangers. Attempts to create could learn from, and appropriate mecha- open editorial blogs have triggered hostile nisms developed in, the open-source world to and hate-filled submissions.144 SONY may evaluate proposed modifications and to have a justified concern that it customers decide whether to include them. † Posing as a legitimate, and often well-known, person or busi- ness, individuals engaged in phishing use seemingly official SOME IMPLICATIONS electronic communications in an attempt to fraudulently OF OPENNESS obtain sensitive information, including passwords, and credit card, bank account and social security numbers, from unsus- Openness clearly has its downsides. The pecting Internet users. The term malware is a fusion of two openness of the Internet, which so powerful- words—malicious and software—and describes software that is designed to infiltrate or damage a computer system, without ly facilitates communication and collabora- the owner’s consent. Malware is commonly taken to include tion, has also opened the way for spam, computer viruses, Trojan horses, and spyware. phishing, and malware.† The information

38 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

would react badly to an AIBO programmed New licensing mechanisms such as the to attack them. Creative Commons are providing these cre- Part of the answer may lie in using the ators with different choices about how they same digital technologies to facilitate evalua- want their creations treated under intellectu- tion of proposed contributions. Similarly, al property law.147 New businesses are being these technologies may facilitate new systems born that attempt to provide order in this for compensating creators/co-developers for explosion of creation by evaluating and their works. William Fisher III and others aggregating digital information products or have suggested various means to provide for by arranging for their delivery based on the compensation in the peer-to-peer world, but individual preferences of a consumer. And more rigorous analytic studies and broad as Chris Anderson described in “The Long dialogue will be necessary if new incentive- Tail,” the unlimited capacity of the Internet based compensation systems are to replace is allowing cultural products with relatively today’s expensive litigation and high-priced small audiences to compete economically lobbying.145 with the “blockbusters” that have dominated Developing new compensation systems, more centralized “mass markets.”148 analogous to the payment mechanisms creat- The Internet is even leading to a re-evalua- ed in the past to accommodate radio broad- tion of the idea of “the firm.” The economist casts of music or cable television companies’ Ronald Coase saw the vertically integrated use of broadcaster’s transmissions, may prove firm as an institution created to respond to more efficient and valuable economically the complex and expensive problems of than legislation or regulation aimed at con- transaction costs incurred in coordination trolling the development of information and among economic entities.149 Now that the communications technologies.146 They would Internet has brought communications and provide a means to ensure that creators will coordination costs close to zero, the process still have the incentive of being rewarded for of rethinking the relationships among firms their work, and ease the transition from sys- and their partners, suppliers, and customers tems that distribute physical products to in the digital economy is just beginning. potentially more capable and robust on-line Openness seems to touch every corner of marketplaces for digital information prod- our world. The means of doing science are ucts. And, they should be able to accomplish changing as “open science” seeks to broaden this without imposing legal restrictions on the channels of distribution of knowledge technological development. beyond the traditional publisher-controlled The centralized systems that produced journals. The Public Library of Science is and distributed music, video, movies and creating a collection of scientific journals other cultural products are being challenged that will be available under an open-content not only by peer-to-peer networks, but by license, while the National Library of new creators equipped with personal com- Medicine (NLM) is providing health care puters and broadband Internet connections, information to those previously unable to who can create podcasts, blogs or vlogs, or access or afford relevant journals.150 The can make the music or videos or movies that National Institutes of Health (NIH) are they create available to global audiences.† asking grant recipients to make their work available voluntarily to the general public † Vlogs, or video blogs, are similar to regular blogs in which within twelve months of publication.151 The Internet users post entries on a regular basis. However, instead of simply typing their thoughts, video bloggers use video as astounding collaborative success in mapping the primary medium of expression. The advent of video blog- the human genome has spawned dozens of ging has been made possible by rapid technological advances, efforts that are accelerating the development which have increased the available bandwidth and decreased 152 the cost of high-speed Internet connections. Vlogs are now of genomics. “Open courseware” is chang- being produced and made available on the Internet by every- ing the academy by allowing millions of one from reputable news organizations such as MSNBC to lone teenagers with a Web camera and Internet access. teachers and self-directed learners around

39 the world to see, compare, and potentially ative activity in the unlicensed “junk bands” improve the syllabi offered by leading univer- of the radio frequency spectrum and the rise sities.153 Publishing is facing challenges from of Wi-Fi. †† 157 Proponents of “open access and self-appointed journalist/bloggers and what network neutrality” in broadband telecom- The Wall Street Journal calls “do it yourself munications seek to ensure customer access media.”154 Google’s proposal to scan entire to the broadest possible sources of informa- libraries has triggered a profound debate tion and applications, and oppose a “gate- about the relative importance of access versus keeper” role for cable television or telephone control. † 155 Advertisers and marketers are companies.158 The creators of “mesh net- trying to adjust to an environment where works” have overturned traditional ideas of TiVo viewers fast forward through advertise- congestion in telecommunications by demon- ments and Web sites discuss the merits and strating communications systems in which demerits of countless products.156 Just as a each additional communicator enhances the string of Federal Communications capability of the network rather than burden- Commission (FCC) decisions allowing the ing it. From the prize offering that led to attachment of non-AT&T telephones and Lindburgh’s historic flight to the Department accessories to the AT&T network triggered a of Defense “Grand Challenge” aimed at the wave of innovation in the customer tele- creators of autonomous vehicles, institutions phone market, advocates of “open spectrum” are seeing the benefits of allowing a much are pointing to the remarkable degree of cre- broader range of participants to contribute their talents and efforts to benefit society.159 † Google is developing two different services: Google Book Search Partner Program and Google Book Search Library Each of these “open” works or processes Program. The Partner Program, which is currently up and differs in its degree of openness. Each has running, features works only from copyright holders who have characteristics dependent on the particular opted into the service and is not controversial. However, in the Library Program, copyright holders must opt out, mean- domain. But, each rests on the joint ideas ing they must contact Google if they do not wish their works that providing more access to information to be included. Internet users will then be able to search and allowing more people to contribute Google’s database of copyrighted materials and will receive several sentences from copyrighted works that correspond to their special skills and experiences will result their query. in greater innovation than is achieved by restricting access to information or extending †† These unlicensed bands represent a significant change from licensed bands, which historically have been allocated for par- greater control over it. Such attempts to ticular services with stringent rules and a limited number of “harness the collective wisdom” are licenses assigned to specific users. profoundly democratic.

40 VIII. PUBLIC POLICY ISSUES REGARDING OPEN INNOVATION

Because much of open innovation takes Millennium Copyright Act on innovation. place outside of the formal system of innova- In addition to the concerns the Council tion, we have little information about how expressed about the DMCA’s impact on much there is, how important it is, how it access to digital information under the tradi- takes place, and what can be done to foster tional Fair Use doctrine, and the way it is it. Even though empirical studies have upsetting the traditional balance of intellectu- demonstrated its value in a number of differ- al property rules, the DMCA may well discour- ent industries and its dominance in others, it age customers from improving products that is not counted in any governmental measures they thought they had bought (but which of innovation.160 they might have, according to the manufac- Because we have overlooked or underap- turers, merely licensed for a limited number preciated open innovation by equating inno- of permitted uses). For example, customers vation with those actions covered by the for- who modified digital printer cartridges to mal systems of innovation, we should consid- allow them to be used for decorating cakes er whether there is a governmental role in have been subject to litigation under the encouraging it. Under the tax system, the DMCA.163 To the list of DMCA complaints, government provides a tax credit for research therefore, should be added the fact that it and development. Should the “development” may be inhibiting creative users from adding that takes place in other settings be eligible value to products, particularly platform and for such subsidies?161 Are there ways in which other software-controlled products. manufacturers, particularly small- and medi- Finally, the impact on open innovation of um-sized manufacturers, can be shown how legislative or judicial decisions aimed at prob- to profit from open innovation? Are there lems regarding digital information products governmental incentives that would foster needs to be considered. For example, legisla- open innovation, such as decreased patent tive or regulatory actions that would restrict fees for intellectual property made available peer-to-peer technology would eliminate the via royalty-free licensing? most efficient means of distributing new One of the ironies of today’s intellectual releases of open-source software and remove property system is that companies are moti- one of the key mechanisms for collaboration vated to ignore suggestions for new products to achieve open innovation and for distribu- or product improvements due to fear of later tion of its results. Similarly, the Supreme litigation. Many just destroy incoming com- Court’s recent decision in the Grokster case munications to protect themselves or route is likely to add uncertainty for creators and them to their legal departments for polite investors, who may hesitate to bring products rejections.162 Should public policy suggest to the market for fear of litigation based on that a company’s response to the potential their potential uses to infringe intellectual for increased innovation based on the contri- property rights.164 While the Court sought to butions of outsiders be larger recycling bins provide some assurances that only products in the mailroom? aimed specifically at fostering infringement The Council’s earlier report on digital would be liable for infringement, the deci- intellectual property raised a number of sion may make it much more difficult for questions about the effect of the Digital innovators to obtain summary judgments

41 against plaintiffs who accuse them of foster- the majority of people use their increased ing infringement and who seek extensive and access to information to benefit society, a expensive discovery. small group will use this same information A recent policy statement, entitled the for destructive purposes, including terror- Adelphi Charter, by a group of artists, scien- ism). Other effects are far from clear, but tists, lawyers, business executive, and other may have profound effects in the longer experts from around the world provides a term. While the Internet connects more and useful starting point in considering changes more people, it is not the direct connection in intellectual property rules.165 The charter of meeting physically that shaped our social suggests a test to be employed by lawmakers practices—how will new forms of social inter- before new laws or regulations regarding action develop and change everything from intellectual property are passed. The test greetings to geopolitics? Will our wider con- would establish a presumption against nections increase understanding and toler- expanding intellectual property rights, plac- ance or exaggerate differences? How will the ing the burden for justifying expansion on decentralization of creative activity affect the those who would advocate change, and role of cultural products that have helped would require a rigorous analysis of the shape the ideas and images of every society? impact of the change on people’s basic rights Will there be a cultural “Balkanization” of and economic well-being. society with individuals retreating to their There are a wide range of effects of open- “information warrens?”166 ness that this report does not address— There are dozens of questions such as perhaps most prominent among them the these, which are beyond the scope of this impact on personal privacy (increasingly report. However, public policy can address large amounts of personal information widely some issues that are already clear and can distributed or available to groups such as help promote openness and the innovation businesses or the government and potentially that it supports. maintained in perpetuity) and security (while

42 IX. PUBLIC POLICY RECOMMENDATIONS REGARDING OPEN INNOVATION

The statistical agencies of the government The National Institutes of Health program should consider definitions for open innova- for open publication of research results tion and methods for gathering relevant data. should be reviewed within twenty-four The Digital Millennium Copyright Act months and should be made mandatory if should be reviewed with the aim of guaran- researchers are not publishing results volun- teeing access under the Fair Use doctrine to tarily. All unclassified government research digital information that has been the subject support should be governed by similar of some form of access control and of foster- requirements. ing open innovation and interoperability The Telecommunications Act of 1996 involving products subject to the Act’s should be amended to prevent unreasonable protection. discrimination by cable and telephone com- Proposed legislation or regulations regard- panies in providing access to information ing intellectual property rights should be sources or applications via the Internet. A subject to the Adelphi Charter test, which similar ban on unreasonable discrimination establishes a presumption against the grant against the attachment of devices that do not of any new rights, requires that proponents harm the network, imposed via terms of of new rights bear the burden of proof, and service, should also be enacted. calls for rigorous analysis of the impact of the The Patent and Trademark Office should proposed changes. consider whether there are workable systems The National Science Foundation should that would reward intellectual property support research into alternative compensa- rights holders for increasing access to the tion systems for creators of digital information intellectual property they control. products.

43 X. CONCLUSION

The benefits of openness are becoming that used it. Thus, the actions of a few could more apparent and are likely to grow as we harm the interests of many, and of society as learn to utilize the new capabilities enabled a whole. by information and communications tech- The digital world provides an opportunity nologies. These benefits are challenging our to think of the commons differently. The use conventional wisdom about innovation and of the digital commons by everyone does not the incentives needed to stimulate it. And, necessarily exclude its use by anyone. To the they are suggesting new ways of acting based extent that new information and communica- on the special characteristics of the digital tions technologies allow more and more peo- world, which are far different than those that ple to contribute their own genius, the digital developed based on what we knew of the world offers new opportunities from the physical world. commons and for the commons. Years ago, the theory of the tragedy of the Openness is not an overriding moral value commons was developed in economic litera- that must prevail in every circumstance. But, ture. It argued that users of a commons its extraordinary capability to harness the (such as a grazing field shared by an entire collective intelligence of our world requires community), who had no particular or indi- us to consider its implications carefully, nur- vidual stake in the success of the commons, ture it where possible, and avoid efforts to might act in such a way as to maximize their foreclose it without compelling reason. We own short-term interests at the long-term should not miss the opportunity to harvest expense of the commons and the community the benefits openness might bring.

44 ENDNOTES

1. Federal Trade Commission, To Promote Innovation: The 13. Wikipedia, “Network Effect,” available at Proper Balance of Competition and Patent Law and Policy (October . A network effect 2003), chapter 6, p. 4. causes a good or service to have a value to potential customers dependent on the number of customers already possessing 2. Andrew Wyckoff and Alessandra Colecchia, The Economic or using that good or service. Metcalfe’s law states that the and Social Impact of Electronic Commerce (Organisation for total value of a good or service that possesses a network effect Economic Co-Operation and Development (OECD), 1999), is roughly proportional to the square of the number of p. 11. customers already owning that good or using that service. 3. Herbert Hovenkamp, Mark D. Janis, and Mark A. Lemley, 14. Michael P. Gallaher, Alan C. O’Connor, John L. Dettbarn, IP and Antitrust: An Analysis of Antitrust Principles Applied to Jr., and Linda T. Gilday, Cost Analysis of Inadequate Intellectual Property Law (New York: Aspen Law & Business, Interoperability in the U.S. Capital Facilities Industry, NIST GCR 2002), section 1.3a. The book notes, “Because intellectual 04-867 (U.S. Department of Commerce, Technology property rights impose costs on the public, the intellectual Administration, National Institute of Standards and property laws can be justified by the public goods argument Technology, August 2004), p. iv; William J. White, Alan C. only to the extent that the laws on balance encourage enough O’Connor, and Brent R. Rowe, Economic Impact of Inadequate creation and dissemination of new works to offset those costs.” Infrastructure for Supply Chain Integration, Planning Report 04-2 4. “Public Sector Modernisation: Open Government,” OECD (RTI International, June 2004), p. 8. Policy Brief (February 2005), p. 2. 15. Friedman, The World is Flat, p. 76. 5. Thomas L. Friedman, The World is Flat: A Brief History of the 16. The Council on Competitiveness, Innovate America: Twenty-First Century (New York: Farrar, Straus and Giroux, Thriving in a World of Challenge and Change, The National 2005), p. 62. Innovation Initiative Interim Report (July 23, 2004), p. 10. 6. “Mashing the Web,” Economist, Technology Quarterly, 17. David Balto, “Standard Setting in a Network Economy.” September 17, 2005. For more information, see: Sherrie Bolin, ed., The Standards 7. Wikipedia, “Internet Engineering Task Force,” available at Edge (Ann Arbor, MI: Sheridan Books). ; Wikipedia, “Request for 18. Daniel J. Weitzner, Standards, Patents and the Dynamics of Comments,” available at ; Tim O’Reilly, “Open Source November 1, 2004). Paradigm Shift,” June 2004, available at html>. 19. Weitzner, Standards, Patents and the Dynamics of Innovation, The Internet Engineering Task Force (IETF) develops and Section II. promotes Internet standards; in particular those of the TCP/IP protocol suite. It is an open, all-volunteer standards 20. Weitzner, Standards, Patents and the Dynamics of Innovation, organization, with no formal membership or membership Section IIIA. requirements. 21. Weitzner, Standards, Patents and the Dynamics of Innovation, 8. Andrew Updegrove, “The Many Faces of ‘Open’,” Section IIIB. Consortium Standards Bulletin, vol. IV, no. 3 (March 2005), 22. Weitzner, Standards, Patents and the Dynamics of Innovation, available at . 23. Weitzner, Standards, Patents and the Dynamics of Innovation, 9. Wikipedia, “P3P,” available at . The Platform for Privacy Preferences, or P3P, was designed to give users more control 24. Paul Festa, “Standards Group Beats Back Patent Foes,” of their personal information when browsing. CNET News.com, April 10, 2003, available at . 10. David Balto, “Standard Setting in a Network Economy” (address given at Cutting Edge Antitrust Law Seminars 25. Bill Thompson, “Keeping How the Net Works Open to International, New York, February 17, 2000), available at All,” BBC News, September 3, 2004, available at . . 11. Statement of Carl Cargill, Director of Standards, Sun 26. Paul Festa, “Warming Up to Open Source,” CNET Microsystems, before the Subcommittee on Technology of the News.com, February 9, 2005, available at . The Organization for Advancement of Structured Information Standards (OASIS) 12. David Bollier, The Power of Openness: Why Citizens, Education, released its updated intellectual property policy, which was Government and Business Should Care About the Coming Revolution revised “to enhance support for open standards development.” in Open Source Code Software, research publication no. 1999-02 The revised policy accommodates, but does not require, (Berkman Center for Internet & Society at Harvard Law royalty-free licenses. School, 1999) p. 9.

45 27. Gordon Bell, “A Time and Place for Standards,” VoIP, 40. “SourceForge.net,” available at , vol. 2, no. 6 (September 2004), p. 2, available at accessed February 16, 2006. . Bell contends “that a standard has a 41. Wikipedia, “Internet2,” available at . Internet2 or UCAID (University charged to those who employ it. You’d think this would go Corporation for Advanced Internet Development) is a non- without saying, but sadly, it doesn’t. For example, the fact that profit consortium that develops and deploys advanced net- Xerox was willing to provide a royalty-free license for its work technologies and applications, primarily for high-speed Ethernet technology proved to be a significant factor con- data transfer. Its members include more than 200 U.S. univer- tributing to the general adoption of 802.11. In contrast, IBM sities and partners from the networking (Cisco Systems), pub- paid an inventor for the Token Ring patent, and ultimately lishing (Prous Science) and technology industries (such as that royalty worked to erode support for the ring’s adoption.” Comcast, Intel, Sun Microsystems). 28. Paul Festa, “Patent Holders on the Ropes,” CNET 42. Steven Levy, Hackers: Heroes of the Computer Revolution News.com, December 2, 2002, available at . Garfinkel, “Hack License: Recent Books Struggle to Define Hacking and its Economic and Social Legitimacy,” Technology 29. David Balto, “Standard Setting in a Network Economy.” Review (March 2005), p. 75; Joseph Weizenbaum, “Science and the Compulsive Programmer,” in Weizenbaum, Computer Power 30. Alex Soojung-Kim Pang, “The Economist on the Digital and Human Reason (San Francisco, CA: W. H. Freeman, 1976). Home,” The Institute for the Future, September 2, 2005, avail- able at . 43. Stewart Brand and Matt Herron, “1984 Ad,” Whole Earth Review (May 1985), p. 49. At the first Hacker’s Conference in 31. W3C, W3C Patent Policy (working draft, February 5, 2004), 1984, Stewart Brand famously said, “On the one hand infor- available at ; Festa, “Patent Holders on the Ropes.” right information in the right place changes your life. On the 32. James Bessen and Eric Maskin, Sequential Innovation, other hand, information wants to be free, because the cost of Patents, and Imitation, Working Paper 00-01 (Massachusetts getting it out is getting lower and lower all the time. So you Institute of Technology (MIT), January 2001). have these two fighting against each other.” A slightly amend- ed version of this statement can be found in Brand’s book, 33. Roadmap for Open ICT Ecosystems (Berkman Center for The Media Lab. Internet & Society at Harvard Law School, September 9, 2005), available at pdf>. Harvard University Press, 2004). 34. Statement of Carl Cargill, Director of Standards, Sun 45. Andrew Leonard, “Code Free or Die,” Salon.com, April 2, Microsystem, in U.S. House of Representatives, Standards- 2002, available at . Subcommittee on Environment, Technology and Standards of 46. Wikipedia, “Source Code,” available at the House Committee on Science (June 28, 2001). ; Lawrence 35. Martin C. Libicki, James Schneider, Dave Frelinger, and Lessig, “The Limits in Open Code: Regulatory Standards and Anna Slomovic, Scaffolding the New Web: Standards and Standards the Future of the Net,” Berkeley Technology Law Journal, vol. 14 Policy for the Digital Economy (Santa Monica, CA: Rand, 2000), (1999), pp. 759, 764-765. Source code is any series of state- pp. 24-25. ments written in a human-readable computer programming language. A computer program’s source code is the collection of 36. Martin LaMonica, “Open Source Reshaping Services files that can be converted from human-readable form to an Market,” CNET News.com, January 10, 2005, available at equivalent computer-executable form. As Lessig writes, “It is . software project and see what makes it tick. By being able to see what makes it tick, open-source software makes transparent 37. “Open Invention Network Formed to Promote Linux and any control that the code may carry…Closed code functions Spur Innovation Globally Through Access to Key Patents; differently…hidden under a hood that won’t open.” Investors Include IBM, Novell, Philips, Red Hat, and Sony,” Business Wire, Inc., November 10, 2005. 47. Free Software Foundation (FSF), “The Free Software Definition,” available at . Remains Stable According to OneStat.com” (press release, Amsterdam, Netherlands, January 31, 2006), available at 48. O’Reilly, “Open Source Paradigm Shift,” June 2004. . 39. Jon Udell, “Strategic Developer: Automation is like Riding a Bike,” InfoWorld, vol. 27, no. 6 (February 4, 2005); Linda Seebach, “Open Source Evolved after Tinkering with its ‘Memes’,” Rocky Mountain News, September 20, 2003, p. 13C; “ActiveState Releases ActivePerl 5.6 to the Community; Now Available for Linux and Solaris,” Business Wire, Inc., March 28, 2000.

46 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

49. Wikipedia, “Open Source Movement,” available at 57. John Clippinger and David Bollier, A Renaissance of the ; Garfinkel, Commons: How the New Sciences and Internet are Framing a New “Hack License,” p. 77. Since its inception, the open-source Global Identity and Order (2003), p. 12. See also: Ernst Fehr and movement has been a matter of controversy within the hacker Urs Fischbacher, “The Nature of Human Altruism,” Nature, community. Richard Stallman, speaking on behalf of the Free vol. 425 (October 23, 2003), pp. 785-791. Software Foundation, has attacked the motivation of the open- source movement. He asserts that the pragmatic focus of the 58. Garfinkel, “Hack License,” p. 76. movement diverts users from the central moral issues and free- 59. Benkler, “’Sharing Nicely’,” p. 305. doms offered by free software. Stallman characterizes the free software and the open-source movements as separate “political 60. Eric Steven Raymond, “The Mail Must Get Through,” in camps” within the same free-software community, however, The Cathedral and the Bazaar, last modified September 11, 2000, and says: “We disagree on the basic principles, but agree more available at . or less on the practical recommendations. So we can and do work together on many specific projects.” 61. T.R. Reid, “Jack Kilby, Touching Lives on Micro and Macro Scales,” Washington Post, June 22, 2005, p. C1. 50. Steve Hamm, “Linus Torvalds’ Benevolent Dictatorship; The Creator of Linux Says ‘I Can’t Be Nasty’ When Leading 62. Friedman, The World is Flat, pp. 82-92. the Open-Source Movement,” Business Week Online, 63. Raymond, “Necessary Preconditions for the Bazaar Style,” August 18, 2004. in The Cathedral and the Bazaar. 51. Wikipedia, “Machine Code,” available at 64. Ganesh Prasad, “Open Source-onomics: Examining Some . The “words” of Pseudo-Economic Arguments About Open Source,” Linux a machine language or code are called instructions, each of Today, p. 4, available at . unit (CPU), such as reading from a memory location. Unlike source code, machine code is virtually unreadable by human 65. Lerner and Tirole, The Simple Economics of Open Source. programmers. Every CPU model has its own machine code, Some of the most important open-source projects do not or instruction set, although there is considerable overlap acknowledge the contributions of particular programmers between some. and, thus, this benefit is not available; however, this is not the case with all projects and does not affect the benefits to one’s 52. Martin Fink, The Business and Economics of Linux and reputation that word of mouth can bring. Open Source (Upper Saddle River, NJ: Prentice Hall PTR, 2003); Ingrid Marson, “Defender of the Linux Faith,” CNET 66. Wikipedia, “BitTorrent,” available at ; Tim O’Reilly, “What is Web 2.0: Design Defender+of+the+Linux+faith/2100-7344_3-5625667.html>. Patterns and Business Models for the Next Generation of For more information on the various licenses of open-source Software,” September 30, 2005, p. 2, available at and 20.html?page=1>. BitTorrent is the name of a client applica- . tion for the torrent peer-to-peer (P2P) file distribution protocol created by programmer Bram Cohen. In discussing 53. Stephen Shankland, “Microsoft, Red Hat Argue Open BitTorrent, Tim O’Reilly stated, “the service automatically gets Source,” CNET News.com, July 26, 2001, available at better the more people use it.” . 67. Weber, The Success of Open Source, pp. 172-173. 54. Digital Connections Council (DCC), Committee for 68. Weber, The Success of Open Source, p. 154. Economic Development (CED), Promoting Innovation and Economic Growth: The Special Problem of Digital Intellectual Property 69. Raymond, “Release Early, Release Often,” in The Cathedral (Washington, D.C.: CED, March 2004). and the Bazaar. 55. Josh Lerner and Jean Tirole, The Simple Economics of Open 70. Tim O’Reilly, Tim O’Reilly in a Nutshell (O’Reilly Media, Source, Working Paper No. 7600 (Cambridge, MA: National Inc., 2004), p. 38, available at . “Innovation by User Communities: Learning From Open- 71. Berlecon Research, Free/Libre Open Source Software: Survey Source Software,” MIT Sloan Management Review, vol. 42, no. 4 and Study—Firms’ Open Source Activities: Motivations and Policy (Summer 2001), pp. 82-86; Yochai Benkler, “’Sharing Nicely’: Implications, FLOSS Final Report—Part 2 (prepared for the On Shareable Goods and the Emergence of Sharing as a Information Society Technologies of the European Modality of Economic Production,” Yale Law Journal, vol. 114 Commission, Berlin, Germany, July 2002), p. 7. (2004), pp. 273-358; Yochai Benkler, “Coase’s Penguin, or Linux and the Nature of the Firm,” Yale Law Journal, 72. Open letter from Joel Spolsky, “Strategy Letter V,” June 12, vol. 112 (2002), pp. 369-446. 2002, available at . 56. Eric Steven Raymond, “The Many Faces of Reputation,” in Homesteading the Noosphere, last modified August 24, 2000, 73. O’Reilly, “Open Source Paradigm Shift.” available at . 74. Weber, The Success of Open Source, pp. 91-93. 75. O’Reilly, “What is Web 2.0,” p. 4.

47 76. O’Reilly, “What is Web 2.0,” p. 4; Raymond, “Release Early, 90. Henry Chu, Mark Magnier, and Joseph Menn, “Developing Release Often,” in The Cathedral and the Bazaar. Nations See Linux as a Savior From Microsoft’s Grip,” Los Angeles Times, August 9, 2004, p. A4; Ina Fried, “Microsoft 77. Weber, The Success of Open Source, pp. 166-171. Struggles in Emerging Markets,” CNET News.com, May 7, 78. Weber, The Success of Open Source, pp. 126-127. 2004, available at ; Steve Lohr, “An Alternative to Microsoft Gains Support in 79. Hamm, “Linus Torvalds’ Benevolent Dictatorship.” High Places,” New York Times, September 5, 2002, p. C1; Todd Benson, “Brazil: Free Software’s Biggest and Best Friend,” New 80. Dan Gillmor, “Still Some Way to Go on Usability,” York Times, March 29, 2005, p. C1; Renata De Freitas and Financial Times, September 21, 2005, p. 2; Alorie Gilbert, “Tech Alberto Alerigi Jr., “Microsoft Brazil Decries Government Use Firms to Tackle Linux Desktop Standards,” CNET News.com, of Linux,” Reuters, June 4, 2004; Janet Paterson and Pamela October 17, 2005, available at ; David S. Evans, “Is Free Software Into the Information Technology Big Leagues,” Technology the Wave of the Future?,” Milken Institute Review, 4th quarter Review (April 2005), p. 50. (2001); Tim O’Reilly, “Why Open Source Doesn’t Suck for the Consumer,” available at . CNET News.com, August 27, 2004, available at . 81. Stephen Shankland, “SCO Sues Big Blue Over Unix, Linux,” CNET News.com, March 6, 2003, available at 92. Bruce Perens, “MS ‘Software Choice’ Scheme a ; Stephen Shankland, “Big Blue . For more information, please visit the website 2003, available at . claims+against+SCO/2100-1016_3-5060965.html>. 93. Jerry Fishenden, Oliver Bell, and Alan Grose, Government 82. Weber, The Success of Open Source, p. 215. Interoperability: Enabling the Delivery of E-Services, version 1.1 RTM, a white paper (Microsoft, April 2005); K.D. Simon, 83. Randall Stross, “Why Bill Gates Wants 3,000 New Patents,” “The Value of Open Standards and Open-Source Software in New York Times, July 31, 2005, section 3, p. 3. Government Environments,” IBM Systems Journal, vol. 44, no. 2 84. Stephen Shankland, “Group: Linux Potentially Infringes (July 2005), pp. 227-238. 283 Patents,” CNET News.com, August 1, 2004, available at 94. Commonwealth of Massachusetts, Executive Office for . Division, “Enterprise Open Standards Policy,” ITD-APP-01 85. Robert A. Guth, “Start-Up Hires Open-Source Ally,” (January 13, 2004), available at ; Eric Kriss, Software’s website at . Secretary, Executive Office for Administration and Finance, Commonwealth of Massachusetts, “Informal Comments on 86. Steve Lohr, “I.B.M. to Give Free Access to 500 Patents,” Open Formats” (edited and condensed from transcription New York Times, January 11, 2005, p. C1; Steve Lohr, “Sharing of original oral comments at the Massachusetts Software the Wealth at I.B.M.,” New York Times, April 11, 2005, p. C1. Council annual meeting, January 15, 2005), available at ; 87. Ed Scannell, “IBM Says it Won’t Assert Patents Against Martin LaMonica, “Microsoft Commits to XML Docs for Long Linux Kernel,” InfoWorld Daily News, August 4, 2004. Term,” CNET News.com, November 5, 2004, available at 88. Robert A. Guth, “Microsoft Extends Legal Protections,” . “How Open? That’s the Big Patent Question,” CNET 95. Jan Walker, Eric Pan, Douglas Johnston, Julia Adler- News.com, September 25, 2005, available at . Interoperability,” Health Affairs, Web exclusive (January 19, 89. Stephen A. Merrill, Richard C. Levin, and Mark B. Myers, 2005), p. 10. eds., Committee on Intellectual Property Rights in the 96. David J. Brailer, The Decade of Health Information Technology: Knowledge-Based Economy, Board on Science, Technology, Delivering Consumer-centric and Information-Rich Health Care (U.S. and Economic Policy, Policy and Global Affairs Division, Department of Health & Human Services, July 21, 2004). National Research Council, A Patent System for the 21st Century (Washington, D.C.: National Academies Press, 2004); Federal 97. Linda Rosencrance, “To Apply For FEMA Aid Online, Trade Commission, To Promote Innovation: The Proper Balance of Katrina Survivors Will Need IE 6: Mac and Linux Users Will Competition and Patent Law and Policy (October 2003). Have to Seek FEMA Help By Phone,” Computer World, September 7, 2005, available at ; Jeffrey H. Birnbaum, “Lobbyists Tangled in a Paperless Pursuit,” Washington Post, October 31, 2005, p. D1.

48 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

98. U.S. Mission to the European Union, “U.S. Comments on 113. O’Reilly, “What is Web 2.0,” p. 3. O’Reilly notes, “This the Draft European Parliament Amendments Regarding the architectural insight may also be more central to the success Proposed European Union Directive on the Patentability of of open-source software than the more frequently cited appeal Computer-Implemented Inventions” (submitted following a to volunteerism. The architecture of the Internet, and the meeting between U.S. officials and Mr. Wim van Velzen, World Wide Web, as well as of open-source software projects member of the European Parliament, on August 21, 2003), like Linux, Apache, and Perl, is such that users pursuing their available at . byproduct…In other words, these technologies demonstrate network effects, simply through the way that they have been 99. Michael Geist, Canada Research Chair in Internet & designed…But as Amazon demonstrates, by consistent effort E-commerce Law, University of Ottawa, Faculty of Law, (as well as economic incentives such as the Associates pro- “Michael Geist,” available at . According to Geist, at least a system that would not normally seem to possess it.” dozen countries have signed trade agreements that include intellectual property provisions. However, there are substantial 114. “How Companies Turn Customers’ Big Ideas into questions about requirements that extend beyond the World Innovations,” strategy+business and Knowledge@Wharton, Intellectual Property Organization (WIPO) treaties and even January 15, 2005, available at . tiators have pushed for provisions that do not reflect U.S. law and that eliminate safety valves built into U.S. law such as the 115. Paul Israel, Edison: A Life of Invention (New York: John ability to have access to intellectual property in order to Wiley & Sons, 1998), p. 191; Michael Kanellos, “Building a ensure interoperability. New-Idea Factory,” CNET News.com, April 28, 2005, available at ; Henry William Chesbrough, Innovation, and Opportunity (Washington, D.C.: CED, 2001). “Reinventing R&D Through Open Innovation,” strategy+business and Knowledge@Wharton, April 30, 2003, 101. Anne Marie Squeo, “In Patent Disputes, a Scramble to available at . p. A1. 116. von Hippel, Democratizing Innovation, pp. 3, 45-61; Weber, 102. Eric von Hippel, Democratizing Innovation (Cambridge, The Success of Open Source, pp. 72-73. MA: MIT Press, 2005). 117. von Hippel, Democratizing Innovation, p. 4. 103. Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (Dublin, Ireland: Whiteston, 1776). 118. von Hippel, Democratizing Innovation, pp. 22, 103-104, 125-126. 104. Lawrence Lessig, “The March of the Web-Enabled Amateurs,” Financial Times, September 21, 2005, p. 2. 119. Henry William Chesbrough, Open Innovation: The New Imperative for Creating and Profiting From Technology (Boston, MA: 105. Robert C. Allen, “Collective Invention,” Journal of Harvard Business School Press, 2003). Economic Behavior and Organization, vol. 4, no. 1 (1983), pp. 1-24. 120. Robert D. Hof, “The Power of Us; Mass Collaboration on the Internet is Shaking Up Business,” Business Week, June 20, 106. von Hippel, Democratizing Innovation, pp. 72-76. 2005, pp. 77-79; NineSigma, Inc., “Procter & Gamble and 107. Roger Lowenstein, “Off the Shelf; Turn on, Tune In, NineSigma, Inc. Announce Strategic Relationship” (press Drop Out, Start the Computer Revolution,” New York Times, release, Cincinnati and Cleveland, OH, March 19, 2003), late ed., May 22, 2005, section 3, p. 7. available at . 108. Bell, “A Time and Place for Standards.” Bell notes, “Once a technology has been proven in a hardware implementation, 121. Hof, “The Power of Us,” p. 77. it proceeds to be implemented in software running on high- 122. John Hagel III and John Seely Brown, The Only Sustainable performance processors, which in turn continues to evolve at Edge: Why Business Strategy Depends on Productive Friction and an even faster rate until it can be finally be implemented as a Dynamic Specialization (Boston, MA: Harvard Business School zero-cost option on small areas of silicon and iron Press, 2005). oxide….Once a capability has been implemented as software, it essentially slips” from the patent holder’s grasp. 123. Interview of John Hagel III and John Seely Brown by Kevin Werbach, June 15, 2005, available at . During 110. Simon Hooper, “The Machine That Can Copy Anything,” the interview, Brown noted, “For example, we looked at how CNN Online, June 2, 2005, available online at . company has been able to turn these networks into sites of innovation. If you look at how any Detroit car company oper- 111. Clive Thompson, “The Dream Factory,” Wired Magazine, ates relative to Toyota, Detroit views suppliers as people who September 2005, pp. 128, 130. For a more detailed discussion, perform ‘to spec’ rather than as major sources of innovation see: Neil A. Gershenfeld, Fab: The Coming Revolution on in their own right.” Your Desktop—From Personal Computers to Personal Fabrication (New York: Basic Books, 2005). 112. Thompson, “The Dream Factory,” p. 132. Thompson interviews Saul Griffith of Squid Labs.

49 124. Jeffrey McCracken, “Ford Seeks Big Savings By 136. Eric Raymond, “The Importance of Having Users,” in The Overhauling Supply System,” Wall Street Journal, September 29, Cathedral and the Bazaar ; von Hippel, Democratizing Innovation, 2005, p. A1. According to McCracken, Ford Motor’s plan to p. 111. reform its supply system “makes Ford’s purchasing system more like that of Japanese auto maker Toyota Motor Corp., 137. Victoria Murphy Barret, “It’s a Mod, Mod Underworld,” which has emphasized longer-term contracts with its suppliers Forbes, December 12, 2005, p. 64; Leslie Walker, “Evolving in in return for receiving the best technology.” the Virtual World,” Washington Post, February 4, 2006, p. D1. 125. Yuki Noguchi, “On Capitol Hill, Playing WikiPolitics; 138. Oxford University Press, “’Podcast’ is the Word of the Partisanship Tests Web Site’s Policies,” Washington Post, Year” (press release, New York, January 11, 2006); Diane Brady, February 4, 2006, p. A1. ed., “Radio Dreams Come Alive in the Podcast,” Business Week, December 19, 2005, p. 82. A podcast is a “digital recording of 126. Wikipedia, “Wikipedia,” available at a radio broadcast or similar program, made available on the . Wikipedia is a multilin- Internet for downloading to a personal audio player.” As gual, Web-based, free-content encyclopedia. Wikipedia is writ- Business Week noted, “in July 2004 so-called podcasting soft- ten collaboratively by volunteers, allowing articles to be ware…democratized radio and let loose a wave of dormant changed by anyone with access to a Web browser. Established creativity. There are now more than 20,000 podcasts online.” in January 2001 as a complement to the expert-written Although Apple modified the iPod to include podcasting Nupedia, it is now operated by the non-profit Wikimedia capabilities, its general strategy has been to try to retain tight Foundation. Since its inception, Wikipedia has steadily risen in control over its carefully integrated software and hardware. popularity, and its success has spawned several sister projects. 139. Mike Musgrove, “Tapping Into Tinkering; Some Makers 127. Clay Shirky, “A Group is its Own Worst Enemy” (address of Electronics Benefit From Users’ Modification,” Washington given at the O’Reilly Emerging Technology Conference, Santa Post, July 12, 2005, p. D1. The article notes that “tinkerers Clara, CA, April 24, 2003), available at . and-development team, with innovations winding up as built-in features down the line.” 128. Jim Giles, “Internet Encyclopaedias Go Head to Head,” Nature, December 15, 2005, available at . Parker Woods, “Sony Sets Its Sights on Digital Books,” Wall Street Journal, February 16, 2006, p. B3; Joris Evers, 129. Laurie J. Flynn, “Like This? You’ll Hate That. (Not All “Sony Cracks Down on PSP Hacks,” CNET News.com, Web Recommendations are Welcome.),” New York Times, September 29, 2005, available at . Sony has stopped making the AIBO and, New York Times, late ed., November 2, 2005, p. G3. in releasing its new electronic book reader, is trying to be 130. “Websites of Mass Description,” Economist, Technology more flexible with regards to digital-rights management. Quarterly, September 17, 2005. 141. Musgrove, “Tapping Into Tinkering,” p. D1. 131. Bruce Sterling, “Order Out of Chaos: What’s the Best 142. Noguchi, “On Capitol Hill, Playing WikiPolitics,” p. A1; Way to Tag, Bag, and Sort Data? Give it to the Unorganized Daniel Terdiman, “Growing Pains for Wikipedia,” CNET Masses,” Wired Magazine, April 2005, p. 83; Stefanie Olsen, News.com, December 5, 2005, available at . 2005, available at . 143. Terdiman, “Growing Pains for Wikipedia”; Daniel As Peter Merholz, a founder at Adaptive Path, noted, “The Terdiman, “Wikipedia Alternative Aims to be ‘PBS of the future of folksnomies involves meshing these user-generated Web’,” CNET News.com, December 19, 2005, available at categorizations with more standardized categorizations, such ; Leslie Walker, “A names, so you could start to connect data to allow more of Universe of Good Intentions, a World of Practical Hurdles,” these associations to be made.” Washington Post, January 19, 2006, p. D1. 132. James Surowiecki, The Wisdom of Crowds: Why the Many are 144. Katharine Q. Seelye, “Paper Decides to Close Blog, Citing Smarter Than the Few and How Collective Wisdom Shapes Business, Vitriol,” New York Times, late ed., January 20, 2006, p. C2. Economies, Societies, and Nations (New York: Doubleday, 2004). 133. Hof, “The Power of Us,” p. 75. 134. von Hippel, Democratizing innovation, p. 10. 135. Martin LaMonica, “Software: No Longer Business as Usual,” CNET News.com, November 17, 2005, available at ; Martin LaMonica, “Microsoft Learns to Live With Open Source,” CNET News.com, July 11, 2005, available at .

50 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

145. William W. Fisher III, Promises to Keep: Technology, Law, 153. MIT, “MIT’s OpenCourseWare,” available at and the Future of Entertainment (Stanford, CA: Stanford ; MIT News Office, “MIT to University Press, 2004); Jessica Litman, Sharing and Stealing Make Nearly All Course Materials Available Free on the World (Wayne State University Law School, September 2004); Daniel Wide Web” (press release, Cambridge, MA, April 4, 2001). Gervais, Application of an Extended Collective Licensing Regime in Canada: Principles and Issues Related to Implementation (prepared 154. Christopher Lawton, “Made-By-Viewers TV,” Wall Street for the Department of Canadian Heritage, June 2003); Neil Journal, December 13, 2005, p. B1. W. Netanel, Market Hierarchy and Copyright in Our System of Free 155. Yuki Noguchi, “Google Delays Book Scanning; Copyright Expression, Public Law and Legal Theory Working Paper No. Concerns Slow Project,” Washington Post, August 13, 2005, 013 (University of Texas Law School, October 2000); Glynn S. p. D1. For more information on the changing dynamics of Lunney, Jr., “The Death of Copyright: Digital Technology, publishing, see: Leonor Ciarlone, ed., The Reality of Web 2.0: Private Copying, and the DMCA,” Virginia Law Review, vol. 87 O’Reilly Media’s SafariU Leads by Example (Bluebill Advisors, (September 2001); Raymond Shih Ray Ku, “The Creative Inc., 2006). Destruction of Copyright: Napster and the New Economics of Digital Technology,” University of Chicago Law Review 156. Bob Garfield, “Inside the New World of Listenomics: (forthcoming). How the Open Source Revolution Impacts Your Brands,” AdAge.com, Online Edition, October 11, 2005, available at 146. Jonathan Krim and Frank Ahrens, “FCC Approves First . Digital Anti-Piracy Measure; Computers, Other Consumer Electronic Devices to Comply With ‘Broadcast Flags’ by 2005,” 157. Mark Landler, “Investing It; A Plodding Ma Bell and Washington Post, November 5, 2003, p. E1; Jonathan Krim, Her Precocious Child,” New York Times, late ed., April 13, 1997, “Court Tosses FCC Rules on Copying, Sharing TV; section 3, p. 1. Commission Wanted to Encourage Digital Programs on Networks,” Washington Post, May 7, 2005, p. E1. 158. Statement written ex parte of Professor Mark A. Lemley and Professor Lawrence Lessig, before the Federal 147. PC Magazine, “Definition of: Creative Commons,” Communications Commission (FCC), in the matter of available at . Creative com- MediaOne Group, Inc. to AT&T Corp., CS Docket No. 99-251 mons is an organization that has defined an alternative to (December 15, 1999). copyrights by filling in the gap between full copyright, in which no use is permitted without permission, and public 159. For more information about the Department of Defense domain, where permission is not required at all. Creative Grand Challenge, please visit its website at Commons’ licenses let people copy and distribute the work . under specific conditions, and general descriptions, legal 160. von Hippel, Democratizing Innovation, pp. 111-112. clauses and HTML tags for search engines are provided for several license options. 161. von Hippel, Democratizing Innovation, pp. 118-119. 148. Chris Anderson, “The Long Tail,” Wired Magazine, 162. Steven Pearlstein, “Lawyers Scare Firms Away From Good October 2004, available at . 163. von Hippel, Democratizing Innovation, p. 117. 149. Ronald H. Coase, “The Nature of the Firm,” Economica, vol. 4, no. 16 (November 1937), pp. 386–405. 164. For more information about the case, MGM Studios, Inc. v. Grokster, Ltd., please see the website 150. Public Library of Science, “Announcing the Debut of a . (press release, San Francisco, CA, June 23, 2005), available at ; Bernard 165. For more information on the Adelphi Charter, adopted Wysocki Jr., “Scholarly Journals’ Premier Status is Diluted by October 31, 2005, please see the commission’s website at the Web,” Wall Street Journal, May 23, 2005, p. A1; “What Good . The Geneva Declaration on the Are Ideas if We Lock Them Up?,” Toronto Star, November 7, Future of World Intellectual Property Organization adopted in 2005, p. D3; National Library of Medicine, National Institutes late 2004 states, “At the same time, there are astoundingly of Health, “PubMed Reaches a Major Milestone” (press promising innovations in information, medical and other release, Bethesda, MD, September 14, 2004). essential technologies, as well as in social movements and busi- ness models. We are witnessing highly successful campaigns 151. Robert Steinbrook, M.D., “Public Access to NIH-Funded for access to drugs for AIDS, scientific journals, genomic Research,” New England Journal of Medicine, vol. 352:1739-1741, information and other databases, and hundreds of innovative no. 17 (April 28, 2005). collaborative efforts to create public goods, including the Internet, the World Wide Web, Wikipedia, the Creative 152. Nathanael Johnson, “Steal This Genome!,” East Bay Commons, GNU Linux and other free and open software Express, March 30, 2005; University of Maryland, Center for projects, as well as distance education tools and medical Bioinformatics and Computation Biology, The Institute for research tools.” Genomic Research, Karolinska Institutet, and Marine Biological Laboratory—Woods Hole, “AMOS: A Modular 166. Lee Rainie, Project Director, Pew Internet & American Open-Source Assembler,” available at Life Project, “Who Uses the Internet, What They Do, and . What It Means” (address given at Freedom to Connect Conference, March 30, 2005); John Horrigan, Kelly Garrett, and Paul Resnick, The Internet and Democratic Debate (Pew Internet & American Life Project, University of Michigan School of Information, October 27, 2004), pp. 2-3.

51 OBJECTIVES OF THE COMMITTEE FOR ECONOMIC DEVELOPMENT

For more than 60 years, the Committee is independent, nonprofit, nonpartisan, for Economic Development has been a and nonpolitical. respected influence on the formation of Through this business-academic partner- business and public policy. CED is devoted ship, CED endeavors to develop policy to these two objectives: statements and other research materials To develop, through objective research and that commend themselves as guides to informed discussion, findings and recommenda- public and business policy; that can be used tions for private and public policy that will as texts in college economics and political contribute to preserving and strengthening our free science courses and in management training society, achieving steady economic growth at high courses; that will be considered and dis- employment and reasonably stable prices, increasing cussed by newspaper and magazine editors, productivity and living standards, providing columnists, and commentators; and that are greater and more equal opportunity for every citizen, distributed abroad to promote better under- and improving the quality of life for all. standing of the American economic system. To bring about increasing understanding by CED believes that by enabling business present and future leaders in business, govern- leaders to demonstrate constructively their ment, and education, and among concerned concern for the general welfare, it is helping citizens, of the importance of these objectives and business to earn and maintain the national the ways in which they can be achieved. and community respect essential to the CED’s work is supported by private successful functioning of the free enterprise voluntary contributions from business and capitalist system. industry, foundations, and individuals. It

52 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

CED BOARD OF TRUSTEES

Co-Chairmen IAN ARNOF, Chairman ROBERT H. BRUININKS, President Arnoff Family Foundation University of Minnesota W. BOWMAN CUTTER, Managing Director EDWARD N. BASHA, JR., Chairman * FLETCHER L. BYROM, President Warburg Pineus LLC and Chief Executive Officer and Chief Executive Officer Bashas’ Inc. MICASU Corporation RODERICK M. HILLS, Partner Hills Stern & Morley LLP NADINE MATHIS BASHA, Chair DONALD R. CALDWELL, Arizona State School Readiness Chairman and Chief Executive Board Officer Vice Chairmen Cross Atlantic Capital Partners GEORGE H. CONRADES, THOMAS D. BELL, JR., Vice Chairman and Chief Executive Chairman, President and Chief DAVID A. CAPUTO, President Officer Executive Officer Pace University Akamai Technologies, Inc. Cousins Properties Inc. RAYMOND G. CHAMBERS, Retired JAMES A. JOHNSON, ALAN BELZER, Retired President Chairman of the Board Vice Chairman and Chief Operating Officer Amelior Foundation Perseus, LLC Allied-Signal Inc. ROBERT CHESS, Chairman ARTHUR F. RYAN, President, PETER A. BENOLIEL, Chairman Nektar Therapeutics Chairman, and Chief Executive Emeritus Officer Quaker Chemical Corporation MICHAEL CHESSER, President, The Prudential Insurance Company Chairman and Chief Executive of America MELVYN E. BERGSTEIN, Officer Chairman and Chief Executive Great Plains Energy Services FREDERICK W. TELLING, Vice Officer President, Corporate Strategic Diamond Cluster International, Inc. CAROLYN CHIN, Chairman and Planning and Policy Division Chief Executive Officer Pfizer Inc. DEREK BOK, Professor Cebiz Harvard University National Chair, Common Cause * JOHN L. CLENDENIN, Retired KENT M. ADAMS, President Chairman LEE C. BOLLINGER, President BellSouth Corporation Catepillar Financial Services Columbia University Corporation FERDINAND COLLOREDO-MANS- ROY J. BOSTOCK, Chairman FELD, Partner REX D. ADAMS, Professor of Sealedge Investments Cabot Properties, Inc. Business Administration The Fuqua School of Business STEPHEN W. BOSWORTH, Dean DAVID M. COTE, Chairman, Duke University Fletcher School of Law and President and Chief Executive Diplomacy Officer PAUL A. ALLAIRE, Retired Tufts University Honeywell International Inc. Chairman Xerox Corporation JACK O. BOVENDER, JR., DAVID CRANE, President and Chairman and Chief Executive Chief Executive Officer HERBERT M. ALLISON, JR. Officer NRG Energy, Inc. Chairman, President and CEO HCA Inc. TIAA-CREF STEPHEN A. CRANE, JOHN BRADEMAS, President New York, NY COUNTESS MARIA BEATRICE Emeritus ARCO, Chair New York University DENNIS C. CUNEO, Senior Vice American Asset Corporation President WILLIAM E. BROCK, Chairman Toyota North America, Inc Bridges Learning Systems, Inc.

* Life Trustee 53 PAUL DANOS, Dean ROBERT A. ESSNER, Chairman, EARL G. GRAVES, SR., Publisher The Amos Tuck School of Business President and Chief Executive and Chief Executive Officer Dartmouth College Officer Earl G. Graves Publishing Co., Inc. Wyeth RONALD R. DAVENPORT, GERALD GREENWALD, Chairman Chairman of the Board DIANA FARRELL, Director Greenbriar Equity Group Sheridan Broadcasting Corporation McKinsey Global Institute BARBARA B. GROGAN, President RICHARD H. DAVIS, Partner KATHLEEN FELDSTEIN, President Western Industrial Contractors Davis Manafort, Inc. Economics Studies, Inc. PATRICK W. GROSS, Chairman, RICHARD J. DAVIS, Senior Partner TREVOR FETTER, President and The Lovell Group Weil, Gotshal & Manges LLP Chief Executive Officer Founder, AMS Temet Healthcare Corporation JOHN J. DEGIOIA, President JEROME H. GROSSMAN, M.D., Georgetown University MATTHEW FINK, Retired Senior Fellow President John F. Kennedy School of CLARA DEL VILLAR, The Investment Company Institute Government Vice President Harvard University Nortel Networks Corporation *EDMUND B. FITZGERALD, Chairman, Lion Gate Corporation Managing Director JOHN DIEBOLD, Chairman Woodmont Associates RONALD GRZYWINSKI, Chairman The Diebold Institute ShoreBank Corporation HARRY L. FREEMAN, Chairman SAMUEL A. DIPIAZZA, Global The Mark Twain Institute STEVEN GUNBY, Chairman, Chief Executive The Americas & Senior PricewaterhouseCoopers LLP MITCHELL S. FROMSTEIN, Vice President Chairman Emeritus The Boston Consulting Group, Inc. LINDA M. DISTLERATH, Vice Manpower Inc. President, Global Health Policy JUDITH H. HAMILTON, Former Merck & Co., Inc. CONO R. FUSCO, Managing President and Chief Executive Partner-Strategic Relations Officer PATRICK DOLBERG, President and Grant Thornton Classroom Connect Chief Executive Officer Holcim (US) Inc. PAMELA B. GANN, President WILLIAM A. HASELTINE, Claremont McKenna College President IRWIN DORROS, President Haseltine Associates Dorros Associates JOSEPH GANTZ, Partner GG Capital, LLC RICHARD H. HERSH, Former * FRANK P. DOYLE, Retired President Executive Vice President E. GORDON GEE, Chancellor Trinity College General Electric Company Vanderbilt University HEATHER R. HIGGINS, President ROBERT H. DUGGER, Managing THOMAS P. GERRITY, Dean Randolph Foundation Director Emeritus Tudor Investment Corporation The Wharton School HAYNE HIPP, Chairman and Chief University of Pennsylvania Executive Officer T. J. DERMOT DUNPHY, Chairman The Liberty Corporation Kildare Enterprises, LLC ALAN B. GILMAN, Chairman The Steak n Shake Company JOHN HOFMEISTER, President CHRISTOPHER D. EARL, Shell Oil Company Managing Director CAROL R. GOLDBERG, Trustee Perseus, LLC The Goldberg Family Foundation PAUL M. HORN, Senior Vice President, Research W. D. EBERLE, Chairman ALFRED G. GOLDSTEIN, President IBM Corporation Manchester Associates, Ltd. and Chief Executive Officer AG Associates PHILIP K. HOWARD, Vice STUART E. EIZENSTAT, Partner & Chairman Head, International Practice JOSEPH T. GORMAN, Retired Covington & Burling Corington & Burling Chairman and Chief Executive Officer TRW Inc.

54 * Life Trustee OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

SHIRLEY ANN JACKSON, KURT M. LANDGRAF, President ALAN G. MERTEN, President President and Chief Executive Officer George Mason University Rensselaer Polytechnic Institute Educational Testing Service DEBORAH HICKS MIDANEK, WILLIAM C. JENNINGS, Chairman W. MARK LANIER, Partner President US Interactive, Inc. The Lanier Law Firm, P.C. Solon Group, Inc.

JEFFREY A. JOERRES, Chairman, PAUL LAUDICINA, Vice President HARVEY R. MILLER, Vice President and Chief Executive and Managing Director, Chairman Officer A.T. Kearney Inc. Greenhill & Co., LLC Manpower Inc. ENRICO A. LAZIO, Executive Vice ALFRED T. MOCKETT, Chairman L. OAKLEY JOHNSON, Senior Vice President, Global Government and Chief Executive Officer President, Corporate Affairs Relations and Public Policy Corinthian Capital LLC American International Group, Inc. JPMorgan Chase & Co NICHOLAS G. MOORE, Director VAN E. JOLISSAINT, Corporate WILLIAM W. LEWIS, Director Bechtel Group, Inc. Economist Emeritus DaimlerChrysler Corporation McKinsey Global Institute DONNA MOREA, President McKinsey & Company, Inc. CGI-AMS, Inc. ROBERT L. JOSS, Dean Graduate School of Business ROBERT G. LIBERATORE, Group IKUO MORI, Chairman and Chief Stanford University Senior Vice President, Global Executive Officer External Affairs Daiwa Securities America, Inc. PRES KABACOFF, Chief Executive DaimlerChrysler Corporation Officer JAMES C. MULLEN, Chief HRI Properties IRA A. LIPMAN, Chairman of the Executive Officer Board and President Biogen Inc. ROBERT KAHN, Director, Guardsmark, LLC Country Risk Management DIANA S. NATALICIO, President Citigroup Inc. JOHN LOOMIS, Vice President, The University of Texas at El Paso Human Resources EDWARD A. KANGAS, Retired General Electric Company MATTHEW NIMETZ, Partner Chairman and Chief Executive General Atlantic Partners Officer LI LU, President Deloitte Touche Tohmatsu Himalaya Management DEAN R. O’HARE, Retired Chairman and Chief Executive JOSEPH E. KASPUTYS, Chairman, BRUCE K. MACLAURY, President Officer President and Chief Executive Emeritus Chubb Corporation Officer The Brookings Institution Global Insight, Inc. RONALD L. OLSON, Partner COLETTE MAHONEY, President Munger, Tolles & Olson LLP WILLIAM E. KIRWAN, Chancellor Emeritus University System of Maryland Marymount Manhattan College NOBUHARU ONO, President and Chief Executive Officer THOMAS J. KLUTZNICK, T. ALLAN MCARTOR, Chairman NTT DoCoMo USA President Airbus of North America, Inc. Thomas J. Klutznick Company M. MICHEL ORBAN, Partner ALONZO L. MCDONALD, RRE Ventures CHARLES E.M. KOLB, President Chairman and Chief Executive Committee for Economic Officer HIDEAKI OTAKA, President and Development Avenir Group, Inc. Chief Executive Officer Toyota Motor North America, Inc. EDWARD M. KOPKO, Chairman, DAVID E. MCKINNEY, Vice Chair President, and Chief Executive Thomas J. Watson Foundation STEFFEN E. PALKO, Retired Vice Officer Chairman and President Butler International, Inc. LENNY MENDONCA, Chairman XTO Energy, Inc. McKinsey Global Institute THOMAS F. LAMB, JR., Senior Vice McKinsey & Company, Inc. JERRY PARROTT, Vice President, President, Government Affairs Corporate Communications & PNC Financial Services Group, Inc. Public Policy Human Genome Sciences, Inc.

* Life Trustee 55 CAROL J. PARRY, President JAMES E. ROHR, Chairman and JOHN F. SMITH, JR., Retired Corporate Social Responsibility Chief Executive Officer Chairman Associates PNC Financial Services Group, Inc. General Motors Corporation

VICTOR A. PELSON, Senior ROY ROMER, Former Governor of SARAH G. SMITH, Partner and Advisor Colorado Chief Accounting Officer UBS Securities LLC Superintendent, Los Angeles Goldman Sachs Group, Inc. Unified School District DONALD K. PETERSON, IAN SPATZ, Vice President, Public Chairman and Chief Executive DANIEL ROSE, Chairman Policy Officer Rose Associates, Inc. Merck & Co., Inc. Avaya Inc. LANDON H. ROWLAND, STEVEN SPECKER, Chairman and PETER G. PETERSON, Senior Chairman Chief Executive Officer Chairman Everglades Financial Electric Power Research Institute The Blackstone Group NEIL L. RUDENSTINE, Chair, ALAN G. SPOON, Managing RALPH R. PETERSON, President, ArtStor Advisory Board General Partner Chairman, and Chief Executive The Andrew W. Mellon Foundation Polaris Venture Partners Officer CH2M Hill Companies Ltd. GEORGE E. RUPP, President JAMES D. STALEY, President and International Rescue Committee Chief Executive Officer TODD E. PETZEL, President Roadway Corporation Azimuth Alternative Asset EDWARD B. RUST, JR., Chairman YRC Regional Transportation Management LLP and Chief Executive Officer State Farm Insurance Companies CHARLES R. STAMP, JR., Vice HUGH B. PRICE, Former President President, Public Affairs and Chief Executive Officer BERTRAM L. SCOTT, President Deere & Company National Urban League TIAA-CREF Life Insurance Company PAULA STERN, Chairwoman JAMES H. QUIGLEY, Chief TIAA-CREF The Stern Group, Inc. Executive Officer Deloitte & Touche WILLIAM S. SESSIONS, Partner DONALD M. STEWART, Visiting Holland & Knight LLP Professor, Harris School of GEORGE A. RANNEY, JR., Public Policy President and Chief Executive JOHN E. SEXTON, President University of Chicago Officer New York University Chicago Metropolis 2020 ROGER W. STONE, Director DONNA E. SHALALA, President Stone-Kaplan Investments, LLC NED REGAN, University Professor University of Miami The City University of New York MATTHEW J. STOVER, Chairman WALTER H. SHORENSTEIN, LKM Ventures, LLC J.W. RHODES, JR., Manager, Chairman of the Board Corporate Community Shorenstein Company LLC LAWRENCE H. SUMMERS, Involvement President Chevron Corporation * GEORGE P. SHULTZ, Harvard University Distinguished Fellow JAMES Q. RIORDAN, Chairman The Hoover Institution RICHARD F. SYRON, Chairman Quentin Partners Co. Stanford University and Chief Executive Officer Freddie Mac E. B. ROBINSON, Former JOHN C. SICILIANO, President Chairman and Chief Executive Officer HENRY TANG, Managing Partner Deposit Guaranty Corporation John A. Levin & Co., Inc. Committee of 100

JAMES D. ROBINSON, III, General RUTH J. SIMMONS, President JAMES A. THOMSON, President Partner and Co-Founder Brown University and Chief Executive Officer RRE Ventures RAND Chairman, Bristol-Myers Squibb FREDERICK W. SMITH, Chairman, Company President and Chief Executive STEPHEN JOEL TRACHTEN- Officer BERG, President FedEx Corporation The George Washington University

56 * Life Trustee OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

TALLMAN TRASK, III, Executive JOSH S. WESTON, Honorary NANCY WYSENSKI, President and Vice President Chairman Chief Executive Officer Duke University Automatic Data Processing, Inc. EMD Pharmaceuticals

ROBERT J. VILHAUER, Vice HAROLD WILLIAMS, President KURT E. YEAGER, Former President, Public Policy and Emeritus President and Chief Executive Analysis The J. Paul Getty Trust Officer The Boeing Company Electric Power Research Institute LINDA SMITH WILSON, President JAMES L. VINCENT, Retired Emerita RONALD L. ZARRELLA, Chairman Chairman Radcliffe College and Chief Executive Officer Biogen, Inc. Bausch & Lomb, Inc. MARGARET S. WILSON, Chairman FRANK VOGL, President and Chief Executive Officer STEVE V. ZATKIN, Senior Vice Vogl Communications Scarbroughs President, Government Relations DONALD C. WAITE, III, Director H. LAKE WISE, Executive Vice Kaiser Foundation Health Plan, Inc. McKinsey & Company, Inc. President and Chief Legal Officer EDWARD ZORE, President and JERRY D. WEAST, Superintendent Daiwa Securities America, Inc. Chief Executive Officer Montgomery County Public Schools Northwestern Mutual JACOB J. WORENKLEIN, President ARNOLD R. WEBER, President and Chief Executive Officer Emeritus US Power Generating Co., LLC Northwestern University

* Life Trustee 57 CED HONORARY TRUSTEES

RAY C. ADAM, Retired Chairman JOHN H. DANIELS, ROBERT S. HATFIELD, NL Industries Retired Chairman and Retired Chairman Chief Executive Officer The Continental Group, Inc. ROBERT O. ANDERSON, Archer-Daniels Midland Co. Retired Chairman PHILIP M. HAWLEY, Retired Hondo Oil & Gas Company RALPH P. DAVIDSON Chairman of the Board Washington, D.C. Carter Hawley Hale Stores, Inc. ROY L. ASH Los Angeles, California ALFRED C. DECRANE, JR., ROBERT C. HOLLAND, Retired Chairman and Senior Fellow ROBERT H. B. BALDWIN, Chief Executive Officer The Wharton School Retired Chairman Texaco, Inc. University of Pennsylvania Morgan Stanley Group Inc. ROBERT R. DOCKSON, LEON C. HOLT, JR., Retired GEORGE F. BENNETT, Chairman Chairman Emeritus Vice Chairman Emeritus CalFed, Inc. Air Products and Chemicals, Inc. State Street Investment Trust LYLE EVERINGHAM, SOL HURWITZ, Retired President HAROLD H. BENNETT Retired Chairman Committee for Economic Salt Lake City, Utah The Kroger Co. Development

JACK F. BENNETT, Retired THOMAS J. EYERMAN, DAVID KEARNS, Senior Vice President Retired Partner Chairman Emeritus Exxon Corporation Skidmore, Owings & Merrill New American Schools

HOWARD W. BLAUVELT DON C. FRISBEE, GEORGE M. KELLER, Retired Keswick, Virginia Chairman Emeritus Chairman of the Board PacifiCorp Chevron Corporation ALAN S. BOYD Lady Lake, Florida RICHARD L. GELB, FRANKLIN A. LINDSAY, Chairman Emeritus Retired Chairman ANDREW F. BRIMMER, President Bristol-Myers Squibb Company Itek Corporation Brimmer & Company, Inc. W. H. KROME GEORGE, ROBERT W. LUNDEEN, PHILIP CALDWELL, Retired Chairman Retired Chairman Retired Chairman ALCOA The Dow Chemical Company Ford Motor Company WALTER B. GERKEN, RICHARD B. MADDEN, HUGH M. CHAPMAN, Retired Chairman and Retired Chairman and Chief Retired Chairman Chief Executive Officer Executive Officer NationsBank South Pacific Life Insurance Company Potlatch Corporation

E. H. CLARK, JR., Chairman and LINCOLN GORDON, AUGUSTINE R. MARUSI Chief Executive Officer Guest Scholar Lake Wales, Florida The Friendship Group The Brookings Institution WILLIAM F. MAY, Chairman and A.W. CLAUSEN, Retired Chairman JOHN D. GRAY, Chairman Emeritus Chief Executive Officer and Chief Executive Officer Hartmarx Corporation Statue of Liberty-Ellis Island BankAmerica Corporation Foundation, Inc. JOHN R. HALL, Former Chairman DOUGLAS D. DANFORTH Ashland Inc. Executive Associates RICHARD W. HANSELMAN, Former Chairman Health Net Inc.

58 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

OSCAR G. MAYER, CHARLES W. PARRY, ROCCO C. SICILIANO Retired Chairman Retired Chairman Beverly Hills, California Oscar Mayer & Co. ALCOA ELMER B. STAATS, GEORGE C. MCGHEE, Former WILLIAM R. PEARCE, Director Former Controller U.S. Ambassador and Under American Express Mutual Funds General of the United States Secretary of State JOHN H. PERKINS, FRANK STANTON, JOHN F. MCGILLICUDDY, Former President Former President Retired Chairman and Continental Illinois National Bank CBS, Inc. Chief Executive Officer and Trust Company Chemical Banking Corporation EDGAR B. STERN, JR., DEAN P. PHYPERS Chairman of the Board JAMES W. MCKEE, JR., New Canaan, Connecticut Royal Street Corporation Retired Chairman CPC International, Inc. ROBERT M. PRICE, ALEXANDER L. STOTT Former Chairman and Fairfield, Connecticut CHAMPNEY A. MCNAIR, Chief Executive Officer Retired Vice Chairman Control Data Corporation WAYNE E. THOMPSON, Past Trust Company of Georgia Chairman JAMES J. RENIER Merritt Peralta Medical Center J. W. MCSWINEY, Retired Renier & Associates Chairman of the Board THOMAS A. VANDERSLICE The Mead Corporation IAN M. ROLLAND, TAV Associates Former Chairman and ROBERT E. MERCER, Chief Executive Officer SIDNEY J. WEINBERG, JR., Retired Chairman Lincoln National Corporation Senior Director The Goodyear Tire & Rubber Co. The Goldman Sachs Group, Inc. AXEL G. ROSIN, Retired Chairman RUBEN F. METTLER, Book-of-the-Month Club, Inc. CLIFTON R. WHARTON, JR., Retired Chairman and Former Chairman and Chief Chief Executive Officer WILLIAM M. ROTH Executive Officer TRW Inc. Princeton, New Jersey TIAA-CREF

LEE L. MORGAN, Former WILLIAM RUDER DOLORES D. WHARTON, Chairman of the Board William Ruder Incorporated Former Chairman and Caterpillar, Inc. Chief Executive Officer RALPH S. SAUL, Former Chairman The Fund for Corporate ROBERT R. NATHAN, Chairman of the Board Initiatives, Inc. Nathan Associates, Inc. CIGNA Companies ROBERT C. WINTERS, JAMES J. O’CONNOR, Former GEORGE A. SCHAEFER, Chairman Emeritus Chairman and Chief Executive Retired Chairman of the Board Prudential Insurance Company Officer Caterpillar, Inc. of America Unicom Corporation ROBERT G. SCHWARTZ RICHARD D. WOOD, Director LEIF H. OLSEN, President New York, New York Eli Lilly and Company LHO GROUP MARK SHEPHERD, JR., CHARLES J. ZWICK NORMA PACE, President Retired Chairman Coral Gables, Florida Paper Analytics Associates Texas Instruments, Inc.

59 CED RESEARCH ADVISORY BOARD

Chairman BENJAMIN M. FRIEDMAN WILLIAM D. NORDHAUS William Joseph Maier Professor of Sterling Professor of Economics JOHN PALMER Political Economy Cowles Foundation University Professor Harvard University Yale University Maxwell School of Citizenship and Public Affairs ROBERT W. HAHN RUDOLPH G. PENNER Syracuse University Resident Scholar Senior Fellow American Enterprise Institute The Urban Institute

RALPH D. CHRISTY HELEN F. LADD HAL VARIAN J. Thomas Clark Professor Professor of Public Policy Studies Class of 1944 Professor of Department of Applied Economics and Economics Information and and Management Sanford Institute of Public Policy Management Systems Cornell University Duke University Haas School of Business University of California, Berkeley ALAIN C. ENTHOVEN ZANNY MINTON-BEDDOES Marriner S. Eccles Professor of Washington Economics JOHN P. WHITE Public and Private Management Correspondent Lecturer in Public Policy Stanford University The Economist John F. Kennedy School of Graduate School of Business Government Harvard University

60 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

CED PROFESSIONAL AND ADMINISTRATIVE STAFF

CHARLES E.M. KOLB President

Research Communications/Government Relations Finance and Administration JOSEPH J. MINARIK MICHAEL J. PETRO LAURIE LEE Senior Vice President and Director Vice President and Director of Chief Financial Officer and of Research Business and Government Vice President of Finance Relations and Chief of Staff and Administration DONNA M. DESROCHERS Vice President and Director of MORGAN BROMAN ANDRINE COLEMAN Education Studies Director of Communications Senior Accountant

ELLIOT SCHWARTZ CHRIS DREIBELBIS JERI McLAUGHLIN Vice President and Director of Business and Government Executive Assistant to the President Economic Studies Policy Associate JEFFREY SKINNER VAN DOORN OOMS CHRISTINE RYAN Senior Accountant/ Senior Fellow Program Director Grants Administrator

CAROLYN CADEI ROBIN SAMERS AMANDA TURNER Research Associate Director of Trustee Relations Office Manager

RACHEL DUNSMOOR JENNIFER SEGAL JANVIER RICHARDS Research Associate Development Associate/ Membership and Grants Administrator Administrative Assistant JULIE KALISHMAN Research Associate RACHEL PILLIOD Communications and Outreach Associate Advisor on International Economic Policy Development ISAIAH FRANK MARTHA E. HOULE William L. Clayton Professor of Vice President for Development International Economics and Secretary of the Board The Johns Hopkins University of Trustees

RICHARD M. RODERO Director of Development

KATIE McCALLUM Development Associate/ Corporate Relations

61 STATEMENTS ON NATIONAL POLICY

Private Enterprise, Public Trust: The State of Corporate America After Sarbanes-Oxley (2006) Education for Global Leadership: The Importance of International Studies and Foreign Language Education for U.S. Economic and National Security (2006) A New Tax Framework: A Blueprint for Averting a Fiscal Crisis (2005) Cracks in the Education Pipeline: A Business Leader’s Guide to Higher Education Reform (2005) The Emerging Budget Crisis: Urgent Fiscal Choices (2005) Making Trade Work: Straight Talk on Jobs, Trade, and Adjustments (2005) Building on Reform: A Business Proposal to Strengthen Election Finance (2005) Developmental Education: The Value of High Quality Preschool Investments as Economic Tools (2004) A New Framework for Assessing the Benefits of Early Education (2004) Promoting Innovation and Economic Growth: The Special Problem of Digital Intellectual Property (2004) Investing in Learning: School Funding Policies to Foster High Performance (2004) Promoting U.S. Economic Growth and Security Through Expanding World Trade: A Call for Bold American Leadership (2003) Reducing Global Poverty: Engaging the Global Enterprise (2003) Reducing Global Poverty: The Role of Women in Development (2003) How Economies Grow: The CED Perspective on Raising the Long-Term Standard of Living (2003) Learning for the Future: Changing the Culture of Math and Science Education to Ensure a Competitive Workforce (2003) Exploding Deficits, Declining Growth: The Federal Budget and the Aging of America (2003) Justice for Hire: Improving Judicial Selection (2002) A Shared Future: Reducing Global Poverty (2002) A New Vision for Health Care: A Leadership Role for Business (2002) Preschool For All: Investing In a Productive and Just Society (2002) From Protest to Progress: Addressing Labor and Environmental Conditions Through Freer Trade (2001) The Digital Economy: Promoting Competition, Innovation, and Opportunity (2001) Reforming Immigration: Helping Meet America’s Need for a Skilled Workforce (2001) Measuring What Matters: Using Assessment and Accountability to Improve Student Learning (2001) Improving Global Financial Stability (2000) The Case for Permanent Normal Trade Relations with China (2000) Welfare Reform and Beyond: Making Work Work (2000) Breaking the Litigation Habit: Economic Incentives for Legal Reform (2000) New Opportunities for Older Workers (1999) Investing in the People’s Business: A Business Proposal for Campaign Finance Reform (1999) The Employer’s Role in Linking School and Work (1998) Employer Roles in Linking School and Work: Lessons from Four Urban Communities (1998) America’s Basic Research: Prosperity Through Discovery (1998) Modernizing Government Regulation: The Need For Action (1998) U.S. Economic Policy Toward The Asia-Pacific Region (1997) Connecting Inner-City Youth To The World of Work (1997) Fixing Social Security (1997) Growth With Opportunity (1997)

62 OPEN STANDARDS, OPEN SOURCE, AND OPEN INNOVATION: HARNESSING THE BENEFITS OF OPENNESS

CED COUNTERPART ORGANIZATIONS

Close relations exist between the Committee for Economic Development and independent, nonpolitical research organizations in other countries. Such counterpart groups are com- posed of business executives and scholars and have objectives similar to those of CED, which they pursue by similarly objective methods. CED cooperates with these organizations on research and study projects of common interest to the various countries concerned. This program has resulted in a number of joint policy statements involving such international matters as energy, assistance to developing countries, and the reduction of nontariff barriers to trade.

CE Circulo de Empresarios Madrid, Spain

CEAL Consejo Empresario de America Latina Buenos Aires, Argentina

CEDA Committee for Economic Development of Australia Sydney, Australia

CIRD China Institute for Reform and Development Hainan, People’s Republic of China

EVA Centre for Finnish Business and Policy Studies Helsinki, Finland

FAE Forum de Administradores de Empresas Lisbon, Portugal

IDEP Institut de l’Entreprise Paris, France

IW Institut der deutschen Wirtschaft Koeln Cologne, Germany

Keizai Doyukai Tokyo, Japan

SMO Stichting Maatschappij en Onderneming The Netherlands

SNS Studieförbundet Naringsliv och Samhälle Stockholm, Sweden

63