Americas Quarterly - Winter 2009

The United States and Brazil Aaron Shaw

businesses, states and citizens in the developing world. In non-OECD countries, the consumption of informational goods comes at a high cost. Not only is the price paid for licenses and royalties worth more per capita in real terms, but the resulting profits flow to the multinational firms that dominate these sectors, the majority of which are based in developed countries.

Since 2000, worldwide revenue from licenses and royalties has doubled to almost $140 billion last year. However, the distribution of that revenue is skewed. Wealthy OECD countries accounted for approximately $97 of every $100 earned. Just over

$50 of every $100 went to the United States alone. By contrast, Latin American and Caribbean countries combined accounted for $0.005 (one half of one cent) out of every $100, according to the 2008 World Bank Development Indicators database. Such a vast income gap in some of the world’s most dynamic industries has only fed the frustration of developing-country governments and entrepreneurs.

Unanticipated challenges to exclusive, or “maximalist” forms of intellectual property have also emerged from within developed countries. During the past 20 years, the spread of personal computers and the Internet has radically reduced the cost of reproducing and distributing informational goods and is giving rise to a thriving economy based on access and sharing. This transformation has undermined the logic of exclusion at the foundation of much intellectual property regulation.

The situation poses a threat to companies in a number of industries—such as entertainment and pharmaceuticals—which continue to rely on maximalist IP to guarantee stable revenues. Aggressive tactics by these industries’ lobby groups and lawyers have succeeded in preserving a strong voice in the U.S. Congress and among the appointed officials in charge of trade, commerce and IP law enforcement. These victories may prove Pyrrhic: they have come at a steep cost in terms of public relations, and criminalize behavior that has already become commonplace.

Open Innovation and Access-Oriented Business Models

Within the private sector, support has grown for a more flexible approach that can accommodate enhanced opportunities for information sharing and reproduction. Nevertheless, the entrenched interests behind the strict-enforce-ment agenda show no signs of backing down.

The increasing acceptance of research and successful experiences with techniques of “open innovation”—essentially information-sharing and collaborative approaches to solving complex problems—

has facilitated once unthinkable alliances in support of less restrictive forms of IP. A growing number of companies in research and development-(R&D) intensive sectors now participate in pat-ent-sharing pools or outsource their product development through open online competitions such as those managed by InnoCentive (http://www. innocentive.com/).

More than any other sector, information technology firms have led this charge toward openness and shar-

ing—in particular, IBM, Sun Microsystems, Intel, Nokia, and Google. Having already invested massively in sites and services that depend on freely reusable information goods, these firms find it in their best interests to resist the sort of rigid enforcement agenda proffered by the industry groups in the music and film industry. The tech companies have also been joined by Procter & Gamble, which recently embraced research competitions and IP-sharing as a means of distributing the risks and costs of basic research and new product development.

In addition, the number of start-ups that incorporate sharing, remix and flexible IP into their business models continues to grow. For example, the California-based Magnatune offers subscription-based access to unrestricted, freely reusable and, in some cases, redis-tributable music. The Magnatune business model not