Generating value from the public domain

August 2015

By Kristofer Erickson, Lord Kelvin Adam Smith Research Fellow, CREATe, School of Law, University of Glasgow, UK

The public domain consists of a vast reservoir of creative works and ideas that are available for uptake and consumption by all. It includes works for which the copyright term has expired as well as stories and myths pre-dating modern copyright law. It also includes materials freely placed in the public domain by their creators, such as via certain types of Creative Commons licenses. But what role does it play in fostering new innovation and creativity?

A study entitled Copyright and the Value of the Public Domain recently published by the UK Intellectual Property Office and cofunded by the Economic and Social Research Council (ESRC) highlights the huge value of the public domain for both consumers and innovators.

Puzzlingly, there has been little scrutiny of the role of the public domain in fostering innovation. This new research is one of the first empirical attempts to map the process of value creation from public domain inputs for the creative industries, although much work remains to be done.

My co-authors (Paul Heald, Fabian Homberg, Martin Kretschmer and Dinusha Mendis) and I argue that rather than focusing only on the economic benefits generated by the traditionally understood “copyright industries”, we ought to consider the innovative potential and value generated by inputs which originate not only from copyright-protected material, but from material residing in the public domain. Doing so reveals a rich and dynamic interchange between privately held intellectual property (IP) rights and the public culture within which creative goods are produced.

Mapping the value of the public domain

To generate empirical evidence about the size and value of the public domain, we turned to the online encyclopedia resource Wikipedia. With lead author Professor Paul Heald of the University of Illinois, USA, we examined the biographical pages of some 1,700 musical composers and literary authors from the 19th and 20th centuries. We were interested to know whether the availability of public-domain images of historical figures meant that pages about them were more likely to feature photographs of them.

We found that, counterintuitively, the earlier an author or musician was born, the more likely their page was to be accompanied by an image. Although camera technology became widespread during the twentieth century, authors and musicians born in the last 80 years are far less likely to be accompanied by a photograph. This is due to the effect of the public domain – pictures taken of famous people from the twentieth century are likely to be still in copyright and most cannot be used on a website like Wikipedia without permission.

This is more than a mere annoyance to Wikipedia editors and visitors. The missing images represent a loss of value to society. To illustrate this, we calculated the advertising revenue that a commercial website would expect to earn from individual pages where the presence of an image attracted a higher number of visitors. Increased traffic to websites with images is expected for two reasons. Firstly, illustrated materials increase the overall utility of the page to visitors, prompting them to link to the resource and share it with their social networks. Secondly, it is widely accepted in web development practice that search engines such as Google reward pages that contain more information and media such as photographs. Indeed, Google image search enables visitors to find web pages precisely on the basis of the images they contain.

We found that the presence of images in our sample of authors and musicians did, in fact, increase the number of visitors to Wikipedia entries. By using a technique to match creators of similar status and popularity, we found that those with an image on their Wikipedia page benefitted from an increase of between 17 and 19 percent in traffic compared to those with no image, depending on whether they were an author, a lyricist or a composer.

This increase in traffic not only represents added utility for society gained from access to information, but also gives a sense of the economic contribution of public domain images elsewhere on the Internet. Based on the commercial estimate that a single visitor to a website is expected to generate USD0.0053 in advertising revenue, and estimating the density of pages across the entire English-language Wikipedia, we calculated that public domain imagery represents a total commercial value of USD33,896,638 per year.

Wikipedia was a useful field site to investigate questions about the public domain because it is a major user of public domain materials – the Wikimedia Commons hosts millions of Creative Commons and other public domain works. But Wikipedia is also a source of inputs into the public domain.

Insofar as editors’ contributions are offered on a free and open basis, and supplementary materials, such as images, are determined to be freely available in the public domain, downstream users are free to make further commercial and non-commercial use of Wikipedia content. Although our research does not consider the downstream value of derivative use of Wikipedia pages enabled by their public domain status, we believe this represents an additional and far-reaching source of value for creators and innovators.

Generating and capturing value from the public domain

To address the question of how such public domain inputs are used to generate value by commercial users, we interviewed 24 creative firms in the UK that have previously used public domain materials in a commercial product. These included companies like Inkle, developers of a mobile app based on the work of Jules Verne, and Onilo, a technology company that offers animated children’s story books to schools, some of which are adapted from the public domain. Interviewees were asked about their decision to invest in public domain-inspired products and the strategies they employed to maintain competitive advantage when using non-excludable creative inputs (i.e. those not covered by IP rights).

Inkle, one of 24 creative firms that took part in recent research on the value of the public domain, uses public domain materials to create a mobile app based on the work of Jules Verne.

When analyzing the results of our survey, we drew on management theory about creative firms which suggests that companies face a “make or buy” decision when deciding whether to embark on work-for-hire or whether to develop their own original content. Firms that undertake work-for-hire for third party copyright owners report lower levels of creative satisfaction and greater uncertainty in the market because they are unable to retain a sustainable long-term stake in the content they produce. Designing original content may be more satisfying, but can be risky. It may take years of trial and error before generating a hit product. The public domain offers firms a third option; that of adapting or building upon a well-known work with a pre-existing audience, while also gaining the ability to commercially exploit the resultant IP in a variety of ways unencumbered by third-party rights holders.

Uptake and use of material from the public domain is similar to the phenomenon of user-led innovation, in which end consumers adapt and modify products, later sharing them with each other and with producing firms. In as much as enterprises are able to successfully capture value from the user innovation process, these activities are similar to using inspiration and material from the public domain to create new products. Limited empirical evidence from the software industry suggests that some companies that normally enjoy exclusive copyright in their products are beginning to promote user innovation as part of their business strategy, finding benefits in the practice (Haefliger et al., 2010). Such benefits might include community reputation as well as added utility from new users of a product due to network effects.

The presence of private benefits combined with the low cost of widely disseminating details of an innovation has led to a reassessment of the “free riding” problem in user communities. If the cost of freely revealing is lower than the expected private benefit of doing so, researchers Eric von Hippel and Georg von Krogh suggest that participants are likely to engage in a “private-collective” model of innovation.

Firms in our study exploited public domain inputs for many of the same reasons that user-innovators engage in private-collective innovation. In particular, they often bundled their public domain products with other complementary goods in order to appropriate the value associated with their own innovation practice. Managers also reported lower costs associated with using public domain materials as an incentive. Incorporating free and open-source inputs early in a new product helped some developers to “fulfill the credible promise” of a prototype, stimulating further contributions and investment. Some respondents actively engaged with communities of users, for example, fans of Sherlock Holmes or H.P. Lovecraft, to develop new adaptations of those public domain works. The openness of such works to collective remixing led to more innovative and more radically collaborative products.

Not all respondents reported positive experiences in working with public domain materials. Several firms reported significant costs in locating and incorporating appropriate sources of public domain materials. Some of these search costs relate to technical issues such as metadata and availability of digital reproductions. Other costs involved the time and effort needed to ascertain the legal status of a work. Beyond specific initiatives such as Wikimedia Commons and the British Library’s Mechanical Curator project, there are no central national databases of works available in the public domain. This means that managers with pre-existing knowledge of IP and rights clearance are better placed to locate and exploit such materials.

Broader relevance and policy implications

Some of the dynamics we observed among businesses working in the public domain are likely to be felt across other sectors where digitization is leading to a reduction of excludability. Traditionally, the value of an innovation could be packaged in a physical product, allowing firms selling the good to capture profits, even when the underlying innovation was not excludable, such as in the case of a broad scientific discovery.

Digitization has impacted some product-based business models because innovations freed from physical goods, such as software code, can circulate rapidly and freely. The disintegration of traditional value chains has also enabled new business models to emerge which challenge incumbents. Access to lower-cost distribution and marketing channels lowers the barriers to entry for newer firms and enables them to reach new consumers.

Overall, digitization has focused attention on new business models such as those identified in our study, and has amplified the effect of the free and open circulation of information (both about business models and product offerings), changing the dynamics of competition in many markets. In this context, IP becomes an increasingly important consideration for managers and researchers as firms seek ways to generate and capture value from their innovations.

The policy implications arising from our research point to the need to improve access to high-quality digital public domain materials for commercial and non-commercial users alike. Clarifying the legal status of works, such as legislative attempts to facilitate the digitization and circulation of orphan works (material where the original rights holder is unknown or cannot be located) is a welcome development. The demand for access to public domain works is high, and the innovative potential is vast.

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