Is having "open" IP a necessary constraint of a FairShares Association?

The Clause under discussion is reproduced below. There is no specific mention of Open Source (although that is what AnyShare Society chose to do in the US - alongside permission to patent software prior to release as Open Source). Note that IP created while employed as a member carries with it an exclusive commercialisation right for the host coop (at least until the member leaves).

As to motives - very simple. Workers bargaining rights with their employer are SEVERELY skewed by employment law (which means that IP created by employees is automatically transferred to their employer - even a cooperative employer). Members lose access to THEIR OWN IP when they leave unless they retain either copyright over it, or the IP is licensed using something like Creative Commons. We found this a good solution for creative arts (specifically music, where copyright over compositions can remain with the artist, even though a marketing cooperative organises commercial sales of the compositions).

The transfer of the idea to Platform Coops is because of interest by them in the idea - it is a good fit where many people are labouring to produce an Open Source product, and value is only created if a sufficient number of users commit to using the product. FairShares was not designed for Platform Coops, but has been of interest to them because meets both their needs and aspiration for 'commons'-based IP.

1. Intellectual Property (IP). The Company shall record which members have created and contributed intellectual property (IP) to further company objects, and ensure that ownership of all IP remains vested in its creator(s). For the avoidance of doubt, the Company shall not own IP created by members before, during or after their period of membership unless ownership is freely and voluntarily transferred by those members to the Company.

   a. All IP created by members while working for the Company will be vested in them individually and/or collectively.

   b. As a condition of membership and/or employment, all IP created by members during their work for the Company shall be licensed to the Company under a Creative Commons Licence for both noncommercial and commercial trading, with permission to adapt, share and re-use the IP in product and service development. Any product or service offered will use the same Creative Commons licence unless a variation of this is negotiated with the creator(s) of the IP.

   i.  Where a member creates (or members create) IP for the Company during their period of membership, the Company shall have an exclusive right to use and commercialise the IP while they remain a member. If the member leaves the Company, upon termination of their membership, the Company shall retain a non-exclusive right to continue using and adapting their IP in both non-commercial and commercial ventures.
   
   ii. Members who leave the Company retain a non-exclusive right to use IP they created for the Company in both non-commercial and commercial ventures.
   

   c. IP transferred to the Company by members, and IP bought by the Company from third parties, shall be owned collectively by all members and made freely available to them for non-commercial use and private study.

   d. The Company shall use its best endeavours to manage IP as if it were an ‘intellectual commons’ for the benefit of Company members.

Thank you for your response. If we ask investors to put in cash, why shouldn't employees put in copyrights? As someone who wishes to build a platform cooperative, I'm less interested in the rights of the software developers who engage in it and more interested in the rights of the users of the platform. Building a product businesses using an open source license is exceptionally hard (I've tried). In the end, the marketplace is filled with competitors who are not so constrained and most paying customers simply don't care about the license; in some cases it's seen as a problem. My thoughts go this way: what practical problem does the open IP requirement solve? Why are the other aspects of FairShares insufficient to solve that problem? Are there other ways to address the concern?

On your first point, you make the case for FairShares. If financial investors put in cash, they expect to get that cash out (plus a return). So, if employees are to put in copyrights, they should get copyrights out (i.e. respected), and also get a return. To do otherwise is to privilege one group over the other (i.e. see their investment as more fundmental and important than the other). It is the only fair way to do it - whatever the nature of the capital, the contributor should reasonably expect to exit with it, plus a return on it, if the economic system is fair.

On your second point, FairShares is based on Creative Commons (not Open Source), and the graduation of its licences allows for better protection of commercial rights (at least, that is the way it appears to me).

This line of argumentation would work if employees didn't take a salary. But they do. So, the asymmetry is there. Early on, the asymmetry is even more profound -- if the business fails, the investor loses their cash, while the employee keeps their copyrights and their salary? Even among idealistic, socially minded investors, this is a very tough proposition.

That old chestnut! I'm afraid the argument does not even being to work. Wages are for labour effort, not the capital created by labour (IP). I have to point out the asymmetry that you have missed. Financial investors take out dividends, and still have the expectation of recovering their original capital in full plus any capital gains (from a rise in the share price). So the parallel I offer holds good. The dividend payments for financial investors are similar to the wages for labour (they are compensation for access to capital, as wages are compensation for access to labour). However, whereas labour gets nothing more (usually), financial investors would still expect to get their capital back, plus a return on their capital (in the form of a capital gain from a rise in the share price).

Before you argue "but financial investors capital is at risk....", let me preempt that argument by countering that Patterson's work during the Company Law Review 2001 showed that labour shares risk equally. The loss of income from wages resulting from the collapse of companies matches the loss of financial capital suffered by financial investors. On average, workers in a company lose 25% of their wages after a company collapse because they have to accept lower paid jobs (or have no job at all). When you multiply those losses across the workforce, it is comparable to the losses that are suffered by financial investors.

(Patterson, J. (2001) Corporate Governance, The Limits of Rationality and Proceduralisation, Cambridge: ESRC Centre for Business Research, Working Paper No 198.)

Intellectually, there is no way to win the argument you are making because the 'facts of the case' are that both law and culture are structured to enable investors receive dividends, the return of their capital contribution plus capital gains. The law is not structured (unless you implement it through a company constitution like FairShares) to enable labour to get their capital contributes back (IP) plus a meaningful capital gain beyond their wages.

Incidentally, 15 years ago I did go through a company collapse - and lost a £17k investment. I've experienced first hand the alleged asymmetry you allude to. It was awful, but with hindsight I can see that the capital I still had at my disposal (my contacts (social capital) skills/abilities (human capital) and the intellectual capital (IP) I had created) all enabled me to weather the storm better than other members of the workforce. (That experience was the first of many to reshape my understanding of the nature and value of capital). While most former employees got jobs quickly, some did not - one took four years to find a permanent job even though they already had a Masters degree.

Thanks for your response. Even so, for a technology startup, an investor sees the software being developed as the capital asset that the company wishes to get a return from, even if this might be the wrong perspective. I think it's possible (albeit hard) to find investors that are willing to limit their return, such as Stocksy.Com, however, in this case even the founders and employees benefit from the source code to this system being held private. If a competitor could easily scoop up the work (perhaps even with the help of a disgruntled staff person) then it makes the investment look far less attractive.

Now, unlike other visions for cooperatives, FairShares seems to be offering the investors an equity position to share in the profits with other stake holders. Perhaps this changes things.

Yes - that is intended to create an alignment of interests.

Perhaps I'm mis-understanding the level of protection offered (as compared to open source). The creative commons has a "no commercial" variant, with the clause you quoted permitting the company to take commercial advantage of the work (regardless of the variant chosen)? However, it also says that any product or service offered will use the same permutation. Which is it then? This latter clause would seems to imply that this is symmetric (non-discriminatory) treatment with regard to those outside the organization who happen to obtain access to the source code of the product. Hence, I don't see how the graduation of the licenses permits for a better protection of commercial rights.

As such, while I believe I understand the rationale, I think it puts the organization at a strict disadvantage in highly competitive markets. Having open source code even leads to reduced sales in many contexts: "If it's free software, why do you need me to pay?", "Oh, yea, we tried open source software, and it's hard to maintain, we're switching back to supported commercial works!", "Wait, you want me to pay for it, and other businesses like mine don't have to pay?". These are all real customer concerns brought up in a real sales of an actual open source work in a competitive market.

On levels of protection - I've responded separately by email. Can repost here if any other member would find it useful. I've not worked on Open Source products as I think there needs to be a level of protection for core IP required to make a livelihood, unless the project is a genuinely public interest project from the outset.