Tragedy of the anticommons
In Heller's 1998 Harvard Law Review article, he noted that after the fall of Communism, in many Eastern European cities there were a lot of open air kiosks, but also a lot of empty stores. Upon investigation, he concluded that because many different agencies and private parties had rights over the use of store space, it was difficult or even impossible for a startup retailer to successfully negotiate for the use of that space. Even though all the persons with ownership rights were losing money with the empty stores, and stores were in great demand, their competing interests got in the way of the effective use of space.
Patents often are cited as examples of the tragedy of the anticommons because a patent owner has exclusive rights over the use of the patented technology. If the creation of a certain product involves the use of many techniques and components patented by different people or different companies, then it can be very difficult to negotiate effectively with all the patent holders at once, and the result may be that one has to pay so many license fees that it becomes too expensive to create the desired product. Thus, a product that is in great demand may not be produced because costs associated with patents are too high.
Would-be manufacturers lose, the patent holders lose, and consumers in need who could have benefited from the technology lose. If medical technology is involved, people can lose their lives. And since the ones responsible for this (the patent holders) are also consumers, they lose twice. Paradoxically, when the patent holders act "rationally" to maximize their self-interest, they win nothing, everyone else loses, and they lose more than everyone else.
For many products, a manufacturer must negotiate to use several patents. For example, a DVD player contains about a dozen devices that are patented by different companies. A single microchip can contain over 5,000 different patents. As such, no one can create a DVD player or a microchip unless every one of the patent holders agrees to license their patents. In many industries, patent holders either agree to cross-license their patents (i.e., you can use ours if we can use yours) or work out a common licensing agreement that makes products affordable. This generally means that for DVD players, computer components and other consumer electronics, the cost of licensing the patents is rarely much more than the manufacturing costs. For example, the license costs for the patents of a DVD player are about $20.00 (U.S.) for the cheapest models.
Due to the ease of patenting biological discoveries, it is likely that anyone working in biomedical research will have to use several patented procedures to create a marketable product. However, since those patents are short-lived and only a few patents result in a marketable product, those developing new treatments or processes often find that negotiating a licensing agreement with the patent holders is prohibitively expensive and will result in the product being unmarketable. In fact, a patent holder can often say that mere research is an infringing use, and demand a license fee, even though the chance of developing a marketable product is slim.
However, even one questionable patent can make marketing a product legally impossible. The recent dispute between Research In Motion and NTP, Inc. is over a single disputed wireless e-mail patent that is a key element of the BlackBerry. This resulted in an injunction that would have prevented sales of the BlackBerry in the United States if it had not been stayed on appeal.
In the same way, competing use of copyrights can prevent a product from coming to the marketplace at a reasonable price, resulting in lost royalty income for the copyright holders. For example, WKRP in Cincinnati was one of the most popular syndicated sitcoms of all time, and many television shows from that era have been successfully released on DVD. However, for many years, WKRP was not available on DVD. When it was a television program, an agreement was in place between television producers and music licensing organizations such as ASCAP and BMI wherein a standard licensing fee was paid for each song that was played on a television show. As such, the producers could determine how much money would be paid for their use of music clips and budget accordingly. However, there is no similar standard agreement for use of music on DVDs (which ASCAP and BMI do not control), and producers of programs from that era (and into the present) are now faced with the prospect of negotiating individually with several dozen composers. The current owner of the show, 20th Century Fox, released the show on DVD starting in the first half of 2007, using "soundalike" versions of music for which they could not obtain rights.
To construct roads, railroads, and similar transportation arteries, eminent domain has long been considered necessary. Although the benefit to society from the transportation route may be substantial, without eminent domain, every single property owner along the way must agree for the route to be built. This provides conditions for the tragedy of the anticommons, as even if hundreds agree, a single landowner can stop the road or railroad. The ability for one person to veto the construction drastically increases the transaction costs for such projects.
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