The Crowdsell Mechanism and Intellectual Property

Our system of intellectual property law is extremely arbitrary and easy to manipulate, and slows progress by disguising upfront labor costs (research, engineering, design) as marginal costs (increased prices on goods). Patents are granted for arbitrary amounts of time, and are frequently abused by corporations to maximize profits even when obvious harm is caused to society. Many innovations end up locked in patents and take much longer than necessary to fulfill their social potential. Value from innovations is diverted by corporations or other bodies who add little value, but have the legal resources to enforce patents. Through these machinations immense public good is lost.

For many technical and creative works, the value to society is quite clear even before the work is distributed, and can be paid for directly without the need to involve complex legal machinery.

Description

The Crowdsell Mechanism is essentially a variant of an innovation prize combined with assurance contracts, directly and immediately rewarding thought workers for making contributions to our commons of public domain work.

The simplest general statement of the mechanism is this: at any time some group can offer to society some intellectual creation and a price, and then society can use systems like Persistent Funding to purchase that creation and place it permanently in the public domain.

This can unfold in several ways.

Already finished private work

  • When a person or group has finished some valuable work in private, they can submit to the mechanism a full description of their idea and what makes it valuable, a list of guarantees about its nature, and a price they wish to be paid to reveal the idea and grant it immediately into the public domain. They also submit encrypted files representing the full content of the innovation.
  • The submission is public to all, and any interested parties can make payments to be held in escrow towards the project price. Pledges are matched by a quadratic funding pool.
  • When the matched total reaches the project price, the creators can decrypt and reveal the details of the project for some period while the pledgers are allowed to inspect the revealed information and ensure it fulfills the project guarantees. Pledgers can participate in a democratic commitment to decide if the project fulfills the guarantees.
  • If the project is found to fulfill the guarantees, the funds are released to the project creators. Otherwise, the money is returned to pledgers.

This form would be best to reward and purchase work done by groups with private funding such as venture capital or subsidization from an existing company.

Proposed future work

  • A group wants to complete some work they believe will be valuable to society, so they submit to the mechanism a proposal for the project, its value, and their qualifications.
  • They also submit a monthly budget and schedule they intend to follow while the project is running, commitments about project updates and transparency, a definition of project completion, and a final lumpsum prize amount they wish to receive once the project has been completed.
  • The public can similarly make quadratically matched pledges to raise the entire project budget and the prize amount. When that whole amount has been raised, the budget amount for the first month is released to creators and the project begins.
  • Every month the pledgers can participate in a democratic commitment to assert the project creators aren't following their promises and should not continue to be funded. If pledgers decide the creators aren't following their promises, the continued project is canceled and the remaining money is refunded in a prorated way.
  • However if the creators are able to submit work they believe meets the project completion criteria and the pledgers don't assert otherwise, then the work is released into the public domain and the creators are paid the remaining funds, including any potentially remaining budgetary amount.
  • If the project goes overschedule then the project will continue to be funded from the lumpsum prize amount. Once all the funds are exhausted, no more will be released and the creators must pitch their project again for another funding cycle if they wish to continue.

This form is similar to existing crowdfunding models, but with more structure and accountability.

Publicly initiated work

  • Anyone in the public can submit desired projects they hope someone could achieve. These projects can be pledged to as before, but matching amounts won't actually be produced, merely calculated.
  • Creators can then simply submit either of the two above proposal types to fulfill these publicly initiated projects. Creators could set their prices to exactly match the existing pledge amounts and thereby immediately begin the project if the pledgers accept it, or state higher prices and then wait for more pledges.

This form is much like existing innovation prizes, the only distinction being that anyone can submit desired projects and the prize amounts aren't fixed.

Could this change intellectual property law?

I honestly believe the crowdsell mechanism could completely replace our existing systems of intellectual property. I believe this is necessary and fair and beneficial, but also acknowledge it could be difficult to unseat our existing assumptions, and describe how a Common Resource Tax could be used to bridge the gap.

I won't discuss Trademarks at all, since they simply prevent fraudulent impersonation and can largely remain as they are.

Intellectual Property allows unfair and inefficient capture.

Our concept of intellectual property is quite difficult to justify from a rights perspective. There is a difference between having the right to be recognized as the creator of work you labored to produce and having the right to own or control all commercially valuable manifestations of that work. Granting anyone the right to be recognized for their labors is equivalent to granting all members of society the right to not be defrauded in a material way, and is absolutely defensible as a right.

In stark contrast, granting anyone a right of intellectual property allows them to own something that doesn't really exist, and requires all other members of society to abstain from many potential actions. When we grant anyone a right of intellectual property we give them monopoly of a specific domain of information, and information is merely abstract patterns that can manifest in infinite ways. This creates a huge disruption of the public commons and the rights of all people.

The only reason we've historically allowed this kind of disruption is because we needed some way to incentivize private contribution to the public commons. A critical component of both patent and copyright law is their time limit and requirement for public submission. The purpose of these mechanisms is to give private actors a reason to make contributions that would eventually be completely public domain. Temporary private goods eventually become public goods.

After fully describing the crowdsell mechanism and pairing it with Persistent Funding, I find it difficult to justify this continued tradeoff. Without a robust market-like system for funding public goods, the only way to incentivize expensive creative labor was with a guarantee of temporary market monopoly allowing profitable sale of excludable products. But with such a funding system we can simply compensate that labor directly.

There are a few silly objections to this idea:

  • Intellectual work sometimes must be validated and tested before we can be sure it's truly valuable. This is of course true, but crowdsell projects can obviously include documentation and schematics of successful prototypes or production methods. Intellectual property deeds don't offer any distinct advantages here, since patents already require actually useful and complete specifications.
  • There is an asymmetry of knowledge between creators and experts, and the public won't properly understand the value of very technical innovations and so won't properly pledge toward these projects. This is a silly consideration once we remember that "the public" includes many more types than just average consumers. Private companies, government agencies, consumer-owned cooperatives, all potentially advised or controlled by domain experts are all examples of groups that might choose to make contributions toward projects, and can make much larger contributions than individuals. Groups like these have traditionally been willing to pay for non-exclusive patent licenses, and it's difficult to see how such an arrangement is dissimilar from those same firms contributing quadratically matched funds to a crowdsell project. In both cases the licensing firm hasn't gained a strict competitive advantage, since other firms can also buy licenses. They are willing to buy licenses despite non-exclusivity in a wager they can combine the potential innovation with their distinct organizational strengths to create a competitive advantage.
  • Not all intellectual advancements have an obvious social or practical use, so despite their potential for eventual use they won't be properly supported. This is already true, and basic research is almost always pursued by publicly funded researchers. The crowdsell mechanism doesn't allow us to avoid directly funding basic research, and persistent democracy makes it easier for us to do so. It goes without saying that all publicly funded research should be immediately and irrevocably public domain.

In general most creators' issues with the crowdsell mechanism can be solved with one or more of these solutions:

  • Including in their submissions prototypes of interesting and useful applications of their work, rather than simply research.
  • Pursuing the "proposed future work" variant of the system when there are still important unknowns, using existing work and prototypes to demonstrate ability and promise.
  • Selling incremental versions of their work or adjacent applications as they approach some central target work.
  • Setting their desired price higher than they expect to achieve and lowering the price in subsequent submissions.

A crowdsell-oriented system would almost certainly produce smaller but more frequent innovations. I conjecture the overall velocity of progress would speed up, since every useful innovation could immediately be built upon and fully used. Useful research and applications wouldn't need to wait for expiration dates or clear legal or financial hurdles.

The only interesting objection is this one:

  • Patents and copyrights allow creators to capture the true value of their contributions rather than their projected value. This properly incentivizes their contributions.

This is somewhat true, but there are two gaps:

  • They don't capture the true value of their contributions, they capture the true value of the deed. Someone can capture a concept they didn't actually do much work to advance, and then steal value from society when others recognize the value. Patent trolls do exactly this, and create immense waste and harm.
  • If we really could guarantee someone could capture the full value of their contributions, what happens to consumer surplus? We've never been attempting to fully maximize value capture, as evidenced by the use of expiration dates. We've merely been attempting to give innovators sufficient support and incentive to make it worth their effort. The entire idea of trade is to create surplus by setting prices such that each party more highly values the thing they're getting than the thing they're giving away. We only have to incentivize innovation enough for innovators to more highly value the reward they will gain than the time they spend. Since in the crowdsell mechanism creators state their own desired prices their willingness to make that trade is necessarily implied.

I call the above objection a Lottery Fallacy, the idea that we should allow any creative work to gain arbitrary upside from any potentially random fluctuations in markets or culture. We want to incentivize labor and innovation, not legal staff and corporate structures. It doesn't make sense to incentivize stockpiling of potential lottery tickets, but instead a stable and predictable labor-oriented trade between creators and society.

We have to remember that the market and social dynamics produced by intellectual property are entirely artificial. We shouldn't cling to these dynamics simply because we're used to them. If we have rigorous reason to believe a different system would create equal or greater contributions to the public domain with less market perversion and social harm then we ought to pursue such a system.

But if we insist on keeping the concept...

If we were to keep some system intellectual deeds, it would be imperative we both prevent abusive or inefficient ones from being granted, and insist any holder of a deed compensates society in some reasonable way for the obstruction. This means any system must fit these criterion:

  • Creators must pay a Common Resource Tax on deeds. This is fairly straightforward, but with one interesting twist. With common resource taxes on land the public can purchase land and then control it democratically, but private entities can repurchase it if the democratic will to maintain it wanes. For intellectual property, this private repurchasing isn't allowed, and if the public purchases a patent or copyright then it becomes public domain permanently. This also shows us a good transition strategy if we were to move away from intellectual property, since we could simply require all current deeds granted by the old system to begin paying a Common Resource Tax.
  • Any work granted an intellectual property deed must be structurally impossible to support through any kind of crowdsell mechanism or public funding. A monopoly must be necessary for the innovation to reach its potential.
  • The creators must be qualified to use the monopoly to realize the full value of the innovation.
  • The creators must be uniquely entitled to and deserving of the deed.

I simply cannot think of a system that meets those criterion, which reflects the fact that it's already largely impossible to grant deeds in a principled manner. Distinguising between different intellectual property claims is already a pointlessly ambiguous and subjective task, and not merely as a result of preferences between people but because of the ambiguity of informational structure. Even a fully democratic mechanism can only hope to offload that pointless ambiguity onto many more people, which does nothing to improve the matter. We must remember that our existing system for granting deeds is rife with inefficiency, missteps, graft, and abuse.

Since the risk of granting abusive deeds is so high, and the value uniquely gainable through deeds is so low, I really can't justify continuing the practice. So instead of thrashing around in search for a means to clearly distinguish between different claims, let's imagine who would do creative work in a crowsell-oriented ecosystem.

  • Entrepreneurs. Startups and individuals already pursue targeted ideas in hope of success, and that wouldn't change. Small groups would pursue both "already finished" or "proposed future" projects depending on the nature of their work and their relative ability to persuade public or private funders. Arguably this group would expand and flourish the most, since necessarily their contributions would be incremental and realistic, a perfect fit for crowdsell projects.
  • Federated Labs. It might be profitable to create a company offering centralized resources and stable salaries to smaller creator groups in exchange for some cut of crowdsell prizes they earn. These centralized resources could be laboratory equipment, a staff of complementary full-time consultants with specific skills, and office infrastructure of all kinds.
  • Product/Service Companies. Existing companies who create non-intellectual products would also sometimes pursue innovative work for internal reasons, and when they find themselves with something uniquely valuable choose to crowdsell it into the world. I conjecture they would choose to do this rather than keep the innovation secret both because keeping secrets becomes more difficult as time goes on, and they would know eventually some other group would produce an equivalent innovation. In most situations it would make most sense for them to financially capture the value of the work to prevent some competitor from doing the same.

As you can see this is basically the same as it already is, and probably more empowering to small groups.

The most interesting way creative work would change is in artistic realms. I can't overemphasize though that disruption of these markets has already dramatically accelerated in the internet age, and many creators have already abandoned copyright-dependent commercial strategies simply out of necessity. Moving to a crowdsell-oriented system would simply finalize these trends.

Benefits

  • The myriad inefficiencies of intellectual property all disappear. Patent office resources can be reallocated, infringement court cases are a historical oddity, and patent trolls become powerless.
  • No one can any longer steal value from the public domain. Corporations can't copyright previously public domain stories or characters or lobby legislators to unfairly skew the law in their favor or game the system to control innovations that should be free.
  • We still maintain efficient incentive for private entities to contribute to the public commons.
  • The crowdsell mechanism allows innovators to be directly compensated for their contributions, avoiding any capture by various rent-seekers.
  • Valuable thought work is correctly priced as an upfront labor cost that only must be paid once, allowing society to reap the benefits of reduced marginal costs.
  • The value of a contribution is determined by the market, and overpriced projects will struggle to reach their funding price.

Open Questions

Is it possible to create some principled way to grant intellectual property deeds? I will probably keep trying to come up with one, but so far haven't made any interesting progress.


Table of Contents

Introduction
In Defense of Pure Logic
Persistent Voting
Quadratic Range Voting
Persistent Documents
Persistent Prioritization
Persistent Endorsement
Persistent Commitments
Persistent Funding
A Theory of Minimum Necessary Rights
Markets and Rights
Common Resource Taxes
The Crowdsell Mechanism and Intellectual Property
Democratic Districts
Free Borders
Persistent Logistics
Democratic Adjudication
Misinformation Trials
Member Cooperatives and Economic Activism
Coda
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