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SubjectRe: business models [was patent stuff]
On Mon, May 27, 2002 at 03:24:52PM -0700, Larry McVoy wrote:
> If the free software community is ever going to really compete with the
> non-free software community, they simply have to come up with a better
> business model than giving it away and trying to make money on support.

Why? Users are always in the need of support. They just don't
like to pay for it. That's why they ask the UseNet, Webforums and
the like.

> It's economics 101 - a free market will go to whomever can provide the
> needed service most cheaply. With no barrier to entry, that means as
> soon as the price gets high enough, someone will resell the product for
> less. Which results in razor thin profits, if any at all.

The barrier of entry is building up a support (and testing) group for the
intended audience. That's not easy, so many companies fail to
offer it at a reasonable price and thus with those razor thin
profits. But it is still being tried.

Selling knowlegde works better, then selling IP and leads to
more innovation, because you ALWAYS have to think and rebuild
your knowledge and cannot just develop (or buy) sth. and be done
with it.

> Whether you like it or not, the patent ploy works and there
> isn't a damn thing you can do about it if it is a legit patent.

This stuff works only for lawyers revenues, not for getting
something done. Attacking other and defending a your own property
is important and effective in the short run, but your army will
be out of food soon, if you have more soldiers then farmers
getting sth. done.

Look at the hold times of patents and look at the things you can
do with it. You are not forced to market it, you will not loose
it in a reasonable timeframe (which would be 2-3 years for all
software) or at reasonable events (>70% market share) and you
might even not be forced to license it.

Patents are intellectual property, where intellectual property
can be copied without limits (only the intellectual capacity of
people ;-)) without loosing its public value.

Even now IP doesn't matter that much, because on the biggest
market (the consumer one) it depends on marketing, how big your
revenues are and not really on the superiority of your IP.

And now lets check, what revenue streams Patents create:
- If you have an idea, you must check whether it's patented and
a reasonably new idea
-> revenue stream from creator to a lawyer doing the patent research
-> revenue stream from creator to a expert checking the idea
whether its new
-> revenue stream from creator to the patent office for
registering it

While you own it:
- Defending it
-> revenue stream from owner to a lawyer for defending you on court

- Using it
-> revenue stream from owner to laboratory to develop it further
-> revenue stream from owner to factory to produce it
-> revenue stream from owner to marketing dept. to market it
-> revenue stream to owner from sales dept. for selling it

- License it
-> revenue stream to owner from licensee for using it

Getting rid of it:
- Selling it:
-> revenue stream from new owner to old owner

- Trading it for another one:
-> no revenues involved or only involved on one side

While you not own it anymore:
- If you encounter the same problem again
+ you have to license your old patent again
-> revenue stream from creator to owner (stupid laws?)

+ you can think hard, to solve it better this time
-> creation of new patent, revenue streams as described there

+ you can think not so hard, to solve it just different enough
to not violate your old patent (common practise)
-> creation of new patent, revenue streams as described there

- If you want to use a product with your patent included
+ You have to pay the license like everyone else
-> revenue stream from creator to owner (stupid laws?)

So you can easily see, how much the creator who PROVIDED the IP
for the patent will get.

Patents where intended to protect the creators, but are in fact
protecting the owners and make the creators replacable with
cheaper engineers (doing the testing and further development)
after they wrote down the idea and the patent is filed.

This is not very motivating for doing real in depth research or
basic research and leads to the things we see now with OS
development: We benchmark a lot, tune a lot but real ideas are
rare, because they are expensive and nobody pays them.

Analyzing the revenue streams without patents or with more limited
patents (xref: s.a.) is left as an exercise for you to better
defend your arguments ;-)

> If you hold the "It's GPL or bugger off" position, people will figure out
> how to work around it and it is virtually certain you won't like what they
> do. If you offer them some sort of reasonable compromise, I'll bet they
> take it. If you don't, you get to live with whatever their nasty evil
> business minds dream up.

The FSF is fighting against software patents. Better would be to
fight for reasonable adopting software patents to the life cycle
of software and fighting for more revenues to the creators (who
actually getting the work done).

> Ask yourself - how much open source is a reimplementation of what has
> already been designed and implemented, and how much is fundamentally new?

Reimplementation from specification is needed to improve the
quality of the implementation itself. Software reimplementation
is an important part of its life cycle. Also new variants of an
interface and behavior description (which can be patented) are
needed to provide the user with more options and the programmer
with more practise.

Thats the quest of free and open source: Trying to be better.
Trying to be new is the quest of the commercial development,
because new things are the only thing the consumer buys and they
will simply not pay for you correcting your mistakes.

> That new stuff costs huge dollars, not because of the cost of building it,
> but because of the cost of building all the crap that turned out bad
> but provided the insight that lead to the new stuff.

Right. So please make this patented crap (not marketed) and also
the new stuff (marketed) public knowlegde after 1 year and 3 years.

> It's really not
> that hard to reimplement something, open source has proven that beyond
> all doubt. What it hasn't proven is that open source leads to new ideas,
> products, and markets. So far, open source follows, it doesn't lead.

It merely collects and implements public knowledge, that is
scattered everywhere in the world. I look at it as a source code
library for my own (or my employers) needs.

> A reasonable business model might change that. There may be other ways
> to change it, but something needs to change or 20 years from now there
> will be open source versions of all the current popular apps, but still
> playing catch up on the next generation.

Do we want to change that? I don't.

I have no problems paying for bleeding edge and paying nearly
zero for being 2 years behind. People that need bleeding edge are
enough and willing to pay. But I'm also willing to pay for decent
support ;-)


Ingo Oeser
Science is what we can tell a computer. Art is everything else. --- D.E.Knuth
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