The rise of the Private Commons

By Joren De Watcher

1. What is a Private Commons?

A growing number of my clients are asking me to advise them on a new way of using Intellectual Property (“IP”).

The question typically arises from a request to address business value that is under-used, insufficiently captured, or both. Very often, this business value is the value of interaction and co-creation between a technology provider and its users, but also between users who share the same provider or platform. It is created as a result of the scaling of the business to new users, and can therefore lead to new benefits of scale that both the business and its users wants to capitalise on.

Take, as an example, a business that provides an IT-platform for data analysis, workflow management, or other aspects of content or process used or created by a business. Such systems have the ability to significantly increase productivity, and are one of the most important advantages of Information Technology in general. Microsoft’s Sharepoint product could be a good example. The value and success of such a system depends on a number of aspects and parameters. Many of these are technical or business-specific, so they will not be addressed here.

However, there is one aspect that always comes back: it is the value of what is created by and shared between the users.

Users can create many things, and often such platforms will have different degrees of interaction with and between users, and ask or allow users to create different things. Users are asked to create content (e.g. a template document), or a specific workflow, or even aspects that come close to adding or modifying bits of the platform itself (e.g, adding elements to a library that is used within the platform). And users create that value in their different interactions on the platform – it is created in interactions with the provider, but also in interactions between the users themselves.

All those user-created contributions have value. Value, not just for the specific user that creates them, but also for other users, and therefore also for the platform as a whole, and for the provider of the platform. Users can re-use or share each other’s contributions, and save costs. Users can come up with new parameters, or new ways of using other users’ contributions. The provider will also be interested to re-use and scale certain contributions.

This leads to the emergence of a platform- or environment- specific community of users; a “private commons”.

Arguably, every technology that sees itself as a platform, or that is interested in scaling its usability (and therefore value) for its users, may want to establish such a private commons. Why? Because everyone who contributes to the private commons adds value, and that value then becomes available to share with other users within the community. It is an obvious way of scaling the value of the platform and the technology itself, to the benefit of both the users and the provider.

2. Why are Private Commons on the rise?

Private Commons capture value that other models struggle to capture. That value is the result of the blurring of lines traditionally distinguishing economic operators.

It used to be simple: one party is a provider, the other is a customer. One seller, one buyer. But things are no longer that simple. As innovation and technology become more open, the interactions between providers and customers become much more diverse.

Users no longer just use, they also create, co-create and contribute. Providers do more than just providing a technology, they enable users to interact, and want to scale much more rapidly, in order to offer new users the value co-created by existing users.

Users become part-providers, providers become part-users. Lines are blurred, and different actors take on aspects of each other’s roles. Because of this, the value they all add and gain from the interaction grows much faster than if they stay in their traditional one-dimensional role.

As a result, Private Commons systems have the ability to grow much faster than closed or strictly supervised systems of information exchange and recombination.

And in today’s world, growth is a (the?) key component of investment value.

3. The problem with Intellectual Property

But Private Commons does not easily fit in with traditional ways of looking at Intellectual Property. Most IP focusses on protection and ownership. These are concepts that tend to be negative, which means that they aim at blocking others from using, re-using or re-combining the IP, except to the extent not covered by a specific (and typically narrowly interpreted) authorization – eg a license.

But that approach misses out on two key aspects of the Private Commons value.

The first aspect is the ability to use IP in ways that are unforeseen by or unknown to the IP holder. Yet, all techniques and methodologies of innovation and creativity will point out that allowing the unknown or unforeseen is key to enabling the creation of new value. The more ideas are given the ability to recombine, in different ways, the more additional value can be created. Often, such value is initially quite low, and difficult to quantify.

But IP rights, and their licenses, focus on the opposite of allowing such value to emerge: their typical function is to block, avoid or charge for unforeseen or unknown ways of use. But when the value of unknown developments cannot be assessed beforehand, very few people will, understandably, be willing to pay for the right to engage in them.

The classical IP approach very often prevents the potential value creation that a Private Commons can generate.

The second aspect is the recombinative and collaborative aspect of value created in a Private Commons. Most value created in such communities or ecosystems will not be created by one person or one business – it will be the result of close co-operation, exchange of views, copying and recombining aspects of what others have done, often to the point that it becomes impossible to identify who has contributed, or who has contributed most.

Yet, Intellectual Property demands that it is clear who “owns” the exclusive rights that can be attached to expressions of inventiveness or creativity. At most, IP will allow co-ownership – a system, not of mutual rights of exploitation, but of mutual rights of exclusion to exploitation. A mutual veto; the opposite of enabling. While it is, in theory, possible to allocate any new aspect to an “inventor” or “creator”, managing this kind of meta-complexity is expensive, both in terms of information management and process management. It will almost often put a very high administrative cost or burden on the whole process, or, in practice, be ignored; thereby making a bad situation worse.

4. How Private Commons solves these problems.

Private Commons solve the problems caused by the exclusive nature of IP rights by focusing on two key aspects.

The first is that a Private Commons will have a strong focus on the use, and increased use, of any Intellectual Capital existing or created within its boundaries.

This means that use, re-use, recombination, development of derivative technology, will all be actively encouraged, and considered as assets creating or increasing value, rather than as risks or activities to be restricted or avoided.

These new developments or contributions will then be made available to all participants of the Private Commons, to be used as part of the Private Commons, in order to allow further use, and development of follow-on innovation and re-use. In this way, cycles of innovation and development can become much shorter, and also benefit from input from more involved parties, leading to higher quality and additional value creation.

It is through this reversion of the traditional approach of Intellectual Property that a Private Commons system is able to capture potentially significant amounts of business value, which a traditional IP approach is unable to capture (and indeed, would block from coming into existence).

The second key aspect of a Private Commons is that the focus on multiple party collaboration introduces a different quid pro quo, a different reason for participants to contribute.

As the Private Commons grows, and captures value from its participants, the Private Commons, and access and use thereof and all of its contributions, becomes more valuable for all involved. Each contributor gains from the increased value of the Private Commons, and the Private Commons gains from the use of each contributor. Because of the existence of the platform (the Private Commons), contributors are less confronted by the question “who gains?” when interacting with aspects of contributions made by other contributors. Since the value exchange is done between all potential contributors, the threshold for any participant to contribute drops significantly – the “return” of a contributory value occurs at three moments. First, by becoming a member of the Private Commons. Second, by the knowledge that the value of a contribution remains at all times available to a contributor (in other words, it is not possible to “steal” a contribution from another contributor), and third, because spin-offs or derivative developments also become available to the original contributor under the same conditions.

It is the existence of the platform, the Private Commons, that causes this quid pro quo to be based on a multilateral principle of contribution, leading to a much more evident win-win-win. This stands in contrast to traditional two-party collaborations, where the risk of a zero-sum approach is much more prevalent.

This also solves the potential free-rider problem. While, in theory, it is of course possible that a participant will not participate in any value creation, and only use the contributions made by other participants, it should not be forgotten that access to the Private Commons is not “free”. In other words, because it is a Private Commons, any participant will have a clear incentive to increase the value of the Private Commons, since it will be in its own self-interest to do so.

The role of the technology platform is very important in this respect – the technology serves as a combining factor, ensuring that contributions become effectively usable and interchangeable between participants – allowing for what could be called “liquidity” of innovations within the compound of the Private Commons.

5. Characteristics of a good Private Commons

The considerations above allow us to sketch what would be the characteristics of a well functioning Private Commons.

a) Information exchange inside the Private Commons should be as easy as possible.

The creation or adaptation of contributions requires the unfettered exchange of information. A key aspect of a Private Commons is to allow for the creation of additional innovation and contributions, without central planning.

As a result of the free flow of information within the Private Commons, more recombination of information becomes possible, leading to more innovation and more contributions.

Therefore, the rules of the Private Commons should make it clear that information has to flow freely within the Private Commons.

b) Free use of contributions within the Private Commons

The most important value created by a Private Commons is the ability to share contributions, re-use and build on the contributions of others.

This is not because “sharing is cool”, it is driven by evident business self-interest. The value of the platform is increased by every contribution, and the cost of using it decreases with every contribution. It is this combination of very real cost savings and access to value created by others, within an environment that prevents any participant from keeping their contributions away from others (i.e. using the classical IP exclusivity approach), that provides the key value of the Private Commons.

Therefore, the threshold of using contributions of others should be as low as possible. No centralized depositing of “ideas”, no centralised management of “ownership”, no layers of complexity that would act as a significant brake on the ability to re-use and recombine contributions of other participants.

c) Enforceable commitment by participants not to block others’ use of contributions.

This is a key consideration. The default IP approach is that no-one is entitled to use a contribution unless the contributor agrees. Enforceable rules of the Private Commons must ensure that this ability to block others no longer applies – free re-use is the rule, blocking others is no longer allowed.

It is the translation into the Private Commons of the open source approach, which has been so tremendously successful in software development: by ensuring the consistent open character of contributions, users gain an important incentive to contribute.

d) Clear borders between the Private Commons and the outside world.

It is obvious that a Private Commons is not the same as a Public Commons. Typically, a Private Commons will be based on a platform or other technological environment, although that is not strictly necessary. A non-open Facebook group, one that requires an invitation to join, could qualify as a Private Commons.

What is necessary, though, is a clear distinction between a member of the Private Commons, and a non-member (everyone else). This distinction can be technology based, or it can be rule-based, through a contract, membership agreement, or license. Access to the Private Commons, in other words, must be regulated to some extent, and it must be clear a) whether someone, or an organization, is a member, and b) when they act as member of the Private Commons, or when not.

This requires clear rules on membership, access, exit and behaviour. It also implies that some membership management, and the cost related thereto, will be necessary.

e) Clear rules about use of Private Commons contributions outside the Commons

A final, important, characteristic of a good Private Commons is the existence of clear rules on what its members can do with the Private Commons contributions outside the Commons.

Here, inspiration should be found in the different varieties of rules available under the different open source or creative commons licenses.

It is not clear which system would be the best – that will differentiate between different Private Commons, depending on what they actually do, and what those contributions are.

Just like the choice for one or the other creative commons license depends on what the author(s) of the work want to achieve, the rules on use of Private Commons contributions by its members outside the Commons will have to be established based on what the Private Commons wants to achieve.

Sometimes, use of contributions outside will be limited or even banned altogether, sometimes use of contributions outside will be an important part of the added value of the Private Commons – it depends on what the purpose of the Private Commons will be. That, in turn, will depend on the business model or other goals of the party setting up or managing the Private Commons.

6. Conclusion

In a way, a Private Commons is like a social media community, but with a more specific goal, a clear understanding of how the value created by that community needs to be handled, and clear rules about how to go about it.

It is broader than social media, in the sense that a Private Commons can be much more business focused or non-public in its setup and functioning.

And it is different from social media, in the sense that the value creation, and the way that value is used both between the members of the Private Commons and the outside world, is less defined by the specific social media business model (“if it’s free, that means you’re the product” does not have to apply), but can be done in much more different and varied ways.

Which brings us back to the key point about Private Commons: it is only relevant to the extent it is a useful tool to capture value that, today, without the clear rules of the Private Commons, risks to be underused or undervalued. Which means that Private Commons, as a system, will interest not just businesses and their customers, but also investors, who may find it an additional way to capture value and obtain a return on investment.

[This post originally appeared at JorenDeWachter.com.]