Notes on Open Standards, Open Source, and Open Innovation: Harnessing the Benefits of Openness

I recently came across Open Standards, Open Source, and Open Innovation: Harnessing the Benefits of Openness (pdf), a balanced and well-researched study on open standards, open-source and openness in general that was released in April 2006.

The report comes from the Committee for Economic Development (CED), an “independent research and policy group of over 200 business leaders and educators,” and is thus written for policy makers and leaders. Though much of my prior writing has been for those with some knowledge of open-source, in part to encourage folks with open-source skills to volunteer, I also want to provide education about open-source to educators. And open-source is more accessible and comprehensible if approached not in insolation but in how it relates to open standards and the new forms of collaborative innovation that have been enabled by the Internet.

(By the way, I just checked the CED web site and see they have had a conference on March 7, Building the Economic Case for Investments in Children. I’m sure it’s well worth a look.)

The openness study is long, with close to 50 pages if you include the extensive citations. It certainly deserves more than a casual summary, so let me present a set of rough, informal notes based on reading the report and some of the ideas that came to mind as I went through it. In the notes I assume knowledge of open-source, so I won’t spend much time on that part of the report, as it is the role of open-source in the context of open standards and open innovation that is important.
Executive Summary(Page 1)

This study follows up on a earlier CED report on “the digital economy and the special case of digital intellectual property.” It dealt with protecting the rights of original authors but also recognized the importance of “follow-on innovators,” who build upon earlier innovations. This is the first mention I’ve seen of the notion of “follow-on” innovatiion. The conventional view is rooted in innovation in isolation, exemplified the lone scientist working in the lab. The reality in today’s internet world is much different.

The report looks as the notion of “openness,” which is a broad concept in that many works and activities are neither completely open or closed, but somewhere in between. Open work is accessible and responsive. More accessible means more open, and being responsive, by allowing change, also makes a work more open.

The report looks at three areas: open standards, open-source software, and open innovation.

The Internet itself is perhaps the best example of all these areas. It was built on a set of open standards created using an open process that allowed networks to interconnect and applications to be shared. (We tend to forget that the Internet was meant not just as a single network, but as a network of networks, glued together using open standards.) These open standards, implemented in open-source, fueled the growth of the Internet.

Not all standards are open. The report recommends that governments encourage the creation and use of open standards in an open process, especially in the formation of standards with “important social consequences.”

The report notes that one of the problems with the current system for creating standards is flawed in that it provides an incentive for a party holding intellectual property that applies to a standard to withhold knowledge, so they can asssert an intellectual property claim after the standard has been adopted, and so recommends incentives to encourage early disclosure.

The report contains a brief summary of open-source, and has several recommendations: open-source and commercial software will co-exist so don’t dictate purchasing polciies; recognize that some functions are so critical that they can’t require a single solution and so must support interoperability; such interoperability should be promoted both at home and abroad.

The rest of this section has a fairly detailed and informative overview of the intellectual property issues related to open standards; for example, to make such property available in donated or “royalty free” when used as part of a standard, and also a requirement for RAND (reasonable and non-disrcriminatory) payments in some cases.

Open-source is an example of open innovation, which is the collaboration driven in part by the reduced cost of communication over the Internet that now allows parties separated in space and time to communicate rapidly. Examples of such innovation are wikipedia, the user comments and ratings that can be found at such sites as Amazon, Ebay and Newegg. Noteworthy is that most of this digital content is freely available.

Introduction (6).

The CDC issued a prior report on digital intellectual property that noted the increasing digitization of all forms of information; the growing importance of intangible property; change from sale of digital content (such as on CD) by licensing agreements. This results in “digital dilemma:” digitial content is easy to copy and share, but is also be can be controlled and made inaccessible.

Recognize that innovation is cumulative, so need to balance rights of “first” creators with the “follow-on” creators who extend that work.

Openness (8). Openness involves accessibility, availability, responsiveness. In open-source terms, accessible if can get to it,, available if can distribute, responsive if can change it. Digital goods can be distributed at near-zero cost.

Open Standards (10). Internet based on open standards, TCP/IP protocol, form of e-mail addresses, domain names, hypertext (HTTP) format for web pages. Internet Engineering Task Force (IETF) responsible for most of these standards. Standard is open if open process for choosing participants in the process; process is well-docmented and all participate on same level; publicly disclosed; no proprietary technology to implement the standard, or need to pay license fees; process for maintaining standard.

Open standards increase competition by reducing barriers to entry. Good for customers as they have more options and so avoid vendor “lock-in.” Open standards promote interoperability and so exploit advantage of the network effect – the value of a network increases as it gets more users.

Technologies can also become so pervasive that they constitue accepted standards. An example of a proprietary standard is Microsoft Word’s binary format for documents.

Open-source Software (18). Good short explanation of open-source. Provides background for discussion of licensing by noting that traditionally intellectual property in form of copyrights and patents has given creator limited period during which work can be licensed or sold, after which work becomes available to all, or in “public domain.” Open-source is new model, allowing unlimited distribution and modification of the work. Open-source enables “follow-on” innovation that builds on the original work.

Sharing and Open-Source (22). Those new to open-source always wonder why it’s free. It one sense it doesn’t matter — the code speaks for itself — but this report does a good job summarizing the usual explanations. There’s one I hadn’t seen before: “The costs of, and the barriers to, sharing have become so low that the benefits of participating need not be very great to outweigh the costs.” A contribution is much more valuable as part of a larger work.

Key point is that, whatever motivates them, the contributions increase the societal value of the collective product.

Report also notes one of reasons corporations invest in projects like Linux. Open-source allows a model of shared development in which every participant sees the work of all the others because of the requirements of the open-source license. In effect, all the contributions become pooled, providing a collective investment greater than any single firm would be willing to contribute.

There is even a good short description of forking. “The very absence of authority encourages the leader to lead.”

Open-Source recommendations (29). Discussion of patent issues and whether governmental use of open-source should be mandated. There is good discussion around second point about importance of interoperability (IOP). Example used is post-Katrina where only one, proprietary, browser could be used to request certain aid forms. This is instance of critical government function where interoperability should be supported. IOP in reporting could reduce costs in healthcare.

The recommendations are to avoid forcing the use of open-source, but also to require IOB for “critical government functions.”

Open Innovation (33). This section based on work of Eric von Hippel of MIT, Democratizing Innovation. How much so is unclear as I haven’t read Eric’s work. Argument that shared innovation has long tradition, such as the “Yankee tinkerers” of days gone by. Good example based on mountain bikes; enthusiasts added shock-absorbers to bikes before notion of “mountain bike” even existed, and that evolved into industry.

Open innovation will become more important due to changes in information and communication technologies. See for example, maturation of open-source, declining cost of hardware, new collaboration technologies such as wiki’s and blogs. Development of mass collaboration such as shown by wikipedia. Several other examples included.

Implications of openness (38). Both good and bad sides to openness. Bad sides include spam, phishing and malware. “The information highway goes through some very bad neighborhoods.” There is a brief discussion of wikipedia, peer-to-peer networks and the Creative Licensing efforts for different kinds of digital content, and the impact on communicating advances in science. The report also notes the attempts to harness “collective wisdom” a shown in the customer reviews at eBay and Amazon. Open courseware is example in the education area.

“One of the ironies of today’s intellectual property system is that companies are motivated to ignore suggestions for new products or product improvements due to fear of later ligitation. Many just destroy incoming communications to protect themselves or route them to their legal departments for polite rejections.”

Suggestion that new legislation should establish presumption on expanding intellectual property rights, requiring justficiation for potential impact on the rights of larger society and the desire for economic growth.

Conclusion (44). Benefits of openness becoming more apparent and will continue to do so. But they challenge current notions and suggest new ways of doing business, especially in new thinking about the digital “commons.” Need to pursure opportunities without prematurely ruling them out based on current practice.

The report cites over 160 sources in the Endnotes. These many references, placed in context by the well-written supporting text, are a good starting for investigating in mor detail the important issues raised by the report.

While the report is over a year old, it remains timely. All in all it is well worth a read, and I hope these rough notes will encourage others to do so.


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