Application
NPOs in the commons environment produce various public goods, which are provided neither by the government nor by the market. Therefore, Weisbrod’s theory may explain why many of these NPOs exist at all.
According to Weisbrod’s theory, to satisfy diverse societal demands, NPOs have emerged as a private response, not only to market failures, but also to government failures. In this sense, Weisbrod’s theory can explain some of the circumstances associated with government activities that are not mentioned in the contract failure theory. Weisbrod’s insight into government failure is especially useful in analyzing NPOs in the commons environment, many of which were established as responses to government copyright laws. As Hunter (2005) indicates, a number of public-interest groups, including the CC, the Center for the Public Domain, and the Open Knowledge Network, emerged in the aftermath of the Digital Millennium Copyright Act (“DMCA”) and the Sonny Bono Copyright Term Extension Act (“CTEA”). Other commentators also indicate that DMCA and CTEA engendered the free culture movement (Lasica, 2005).
The most common government failure associated with copyright laws is that the legislative process was captured by powerful copyright industries (Bohannan, 2006).
Litman (2001) vividly describes how, in the past century, the legislative process has evolved into an industry-negotiated and industry-drafted process. The industry-drafted copyright legislation tends to tilt copyright law in the direction of increasingly stronger protection. Litman (2001) suggests that the resulting copyright legislation is due to the industries’ generous campaign contributions and the government’s intrinsic incompetence. Examples given by Litman (2001) include the DMCA legislative process, where established players, such as the sound recording and movie industries, exercised their considerable influence.
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Similarly, the CTEA reflects Disney’s intense lobbying for an extension of copyrights that would protect Disney’s copyright on Mickey Mouse. Although CTEA was once challenged in the U.S. Supreme Court in the Eldred v. Ashcroft case, the court ruled that it was Congress’ decision to make. The consequence of this decision is to foster further collective action in cultural environmentalism (Kapczynski, 2008).
Market failure in the commons discourse has been the focus of many NPOs.
According to Weisbrod’s theory, for-profits fail to provide certain public goods due to the free-rider problem (Weisbrod, 1977). Since for-profits have difficulties in profiting from producing these public goods, they will have no incentive to provide them in the marketplace. Because these public goods are crucial to certain creative activities, market failure occurs as a result of for-profits’ incapability of supplying these goods. This hypothesis resonates with the commons scenario in which NPOs play an increasingly important role in producing public goods.
Because contract failure is a type of market failure, the above-mentioned contract failures pertaining to commons can also exemplify market failures when we apply Weisbrod’s theory to the NPOs studied here. In addition to contract failure, Richard Steinberg (2006) identifies two types of market failures that NPOs aim to correct: under-provision and over-exclusion. In fact, sometimes contract failure may take place in the form of under-provision or over-exclusion. For example, access failure, which is a new type of contract failure identified in this chapter, occurs as a result of proprietary publishers or other enterprises’ over-exclusion of information. Collaborative failure takes places when the market fails to provide sufficient resources for large-scale peer-production and other collective activities. Licensing failure, resulting from the significant transaction costs imposed by the default rules in copyright law, leads to the under-provision of intellectual resources for building culture upon the past. Moreover, the NPOs studied in this chapter produce certain public goods that both the government and the market have failed to provide in the first place. The society’s extensive consumption of these public goods thereafter indicates that an under-provision problem existed prior to the NPOs’ efforts, regardless of whether the function of these goods is to cure contract failure or the over-exclusion problem.
Since copyright law and its captured legislative process are the primary causes for government and market failure in the information society, it is no surprise that some NPOs exist to influence copyright legislation. For example, PK was established as a response to copyright lobbying activities. This organization seeks to preserve the intellectual commons and expose related market failures by documenting which segments of the general public are trying to influence specific legislation. Since the government is not always perfectly informed regarding its policymaking, it may fail due to the significant information costs in the decision-making process. PK may correct such failure, to some extent, by providing important information to the government regarding certain legislation, which would otherwise be unavailable. To this end, PK also
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collaborates with other NPOs, such as the EFF. As PK’s President Sohn explained in an interview with the author: "What we try to do is…to work with those organizations like the EFF…and move on. They have grassroots. So we provide the content and they’ll provide the network. We’ll seek out organizations that have grassroots presence and we’ll activate them."
To this end, several NPOs function as common platforms for collaborations between different groups. For instance, PK, KEI, and the Open Society Institute, has invested significant resources in coalition building to integrate voices from individuals, business, and other NPOs that share similar ideas of an ideal copyright system.
Nonetheless, the impact of NPOs’ advocacy efforts is often difficult to evaluate.
Given the obvious difficulty of convincing Congress to pass ideal legislation, litigation has emerged as an alternative to prevent the overexpansion of IP rights.
Therefore, NPOs, such as the EFF and the SFLC, have sought remedies for the public in court. Other NPOs, such as the FSF and CC, are involved in enacting private law. By providing creators with non-exclusive licenses, these organizations are building a broader scope of commons for creative activities. The FSF-designed GPL has acquired a reputation as a contractual mechanism “cutting back” the scope of background IP rights (Radin & Wagner, 1998). Similarly, CC, established in the aftermath of Eldred v. Ashcroft, is a more obvious example of a private response to the imperfect copyright system. CC deems current copyright law to be a major obstacle to creative activities and seeks to change the default rule that it created (Lessig, 2008).
Numerous other NPOs have built architecture to preserve the commons environment. For example, the PLoS, MIT, and other academic institutions have provided access to valuable scholarly information. Internet Archive and similar organizations have created digital artifacts that preclude cultural memory from fading.
Moreover, through the production of licenses and architecture, NPOs have reshaped the market for online information. In the past, the use of information was constrained by considerable legal costs and uncertainties. In summary, these NPOs help to correct under-provision and over-exclusion failures through “a model of property based more on amplification than scarcity” (Harold, 2007, p. 149).
Theoretical Implications
Based on NPOs’ response to government and market failures, it is apparent that some NPOs provide resources for social experimentation. Since governments are discouraged from using taxpayer money to make new policies on the basis of trial and error, NPOs can help fill the role of experimenters for future policymaking. More often than not, governments then implement new policies that imitate successful NPO programs (Frumkin, 2006).
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Historically, it is not uncommon for NPOs to financially support such social experimentation. For example, the Rockefeller Foundation sponsored remedial social and economic sciences in England during the interwar years, because it believed that the levels of poverty and unemployment were misinterpreted (Douglass, 1987). Likewise, the NPOs that use their funds to stimulate commons development recognize that there is something fundamentally wrong or insufficient with government policy concerning creative activities. For example, the Open Society Institute has aimed to influence policy by the funding of a series of experiments. The PLoS has successfully influenced the funding policy of National Institutes of Health (“NIH”) through its experiment on open access publishing. Starting in 2005, the NIH, the largest funder of science research in the U.S. federal government, began requiring every scientist who receives an NIH research grant, and who publishes the result in a peer-review journal, to deposit a digital copy of the article in PubMed Central (“PMC”). PMC then provides free online access to its copy some time after the article is published in a journal.
Many other NPOs also aim to influence government policy through their social experimentation. For example, after their own experience with a digital archive, the Internet Archive began assisting governments in preserving digital culture. In order to avoid the threat to the collaborative process that produces the F/OSS, the FSF has advocated a top-down legal change regarding software patents. Through the anti-software-patent campaign, the FSF aims to demonstrate to policymakers the potential innovation opportunities arising in the absence of software patents via its free software experiment.
The Hewlett Foundation has invested substantially in open textbooks for K-12 students and other OER projects. By making OER grants, the Foundation is attempting to force the government to recognize OER’s value from a policy perspective. Therefore, the way that Hewlett Foundation responds to government failure is to prove OER’s value through a set of social experiments. The organization believes that the result of these experiments will provide policymakers with essential information that is unavailable through the traditional and formal policymaking process.
The most ambitious NPO project in the commons environment with the goal of changing the law through social experimentation is probably Creative Commons (CC), which aims to help IP policymakers understand authors’ desire to control their creative works as well as the importance of the public domain to various types of creative genres (Lessig, 2004). As CC’s founder, Lessig (2006a, p.199) states: “[the] lesson [from CC]
may help policy makers recraft copyright law in the future.” Through the private reform initiated by CC, Lessig (2006b, p.74) desires to “awake recognition of the need for [public] reform.” He envisioned that, only when the free culture movement promoted by
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CC has gained significant public support will Congress be more likely to engage in copyright legislative reform to protect the freedom of the general public.
Conclusion
NPOs studied in this Book have formed an unprecedented ecosystem that makes various commons-related activities possible. Without NPOs, the commons environment might be much less vigorous than it now is. Currently-prevailing NPO theories aid our understanding of NPOs’
role and behavior in the commons environment. Nevertheless, neither contract failure theory nor government and market failure theory provides a complete picture of NPOs’ role in the commons realm. Given the diversity of various NPOs, a theory about one type of NPOs does not translate easily to other types. Therefore, these theories may be regarded, to a large extent, as complementary rather than mutually exclusive, efforts to understand a heterogeneous sector operating in diverse economies.
This chapter has identified access failure, collaborative failure, licensing failure as the three major types of contract failure in the commons economy. NPOs have played a critical role in various commons activities. Some of these problems may be ameliorated significantly by good governance structures. By clarifying the role of NPOs in correcting contract failures in the digitally-networked world, this chapter illustrated how trust provided by NPOs is indispensable for commons governance. Diverging from the conventional wisdom associated with the Internet’s disintermediation effect, this chapter usse NPOs in the commons arena to argue that formal organizations are still necessary for decentralized production activities in cyberspace. The organizational and governance form of NPOs is appropriate to coordinate contributions and mediate between the interests of participants and sponsors.
Moreover, NPOs are a private response to various market and government failures. These failures include the captured copyright legislation, the copyright law itself, contract failure, and the under-provision and over-exclusion of intellectual resources. Through the lens of market and government failure theory, we can both understand the role of NPOs in conducting social experimentation and empowering individuals in our intellectual ecology. Moreover, NPOs occasionally act as independent innovators that harness individual values and that direct them toward significant collective ends. NPOs can, therefore, be analyzed as an organizational form able to correct various failures in our society.
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