Why Non Commercial Licences are Bad


Brendan Scott, September 2008

In this post I work through one example in an attempt to illustrate why purpose based restrictions in “open” licences are a Bad Thing(tm).  Let me state here that “bad” is meant as “less than optimal”, not bad in any absolute sense.  An otherwise open licence with a non commercial restriction will generally be “good” compared with closed licences for example.

Example – The Cure for Cancer

Let’s say that one night (while doing the washing up) you stumble across the cure for cancer (the Cure).   Being a relatively normal human being, you want to share this with the world to save people.  Let’s say you get a monopoly from the State over the Cure and you now need to think about how to licence it.  If  you are a mercenary type, you would start charging money for the use of the Cure.  All else being equal, the imposition of a licence fee will exclude some part of the community from being able to access the Cure (ie those people who can’t afford the fee).

Let’s assume instead that you chose to licence it at no cost, but on some licence terms.  In this scenario there may still be people who can’t afford a cure (if, for example there are other costs in delivering the Cure to them).   The people who will receive the Cure in this scenario are those who are determined by the licence terms.  If you were to chose licence terms which prohibited commercial use then you would limit the people who get the Cure.   I can’t see any reason why someone would do this, except to be able to charge extra to that group of people who would otherwise gain access through commercial means.* Anyone who can see another a reason please add a comment below!

“NC” does not Promote Philanthropy

You might not be interested so much in licensing for a fee, but might want to encourage other people to provide the Cure to others for free.  Alternatively, you might not want to see third parties profiting from something that you have decided to give away for free.  By adding a non-commercial restriction in these cases you would exclude those people who might provide the Cure to others in the course of commerce.  This would, for example, cover medical practitioners, the vast majority of whom charge for their services.  A non commercial restriction would eliminate from the distribution chain exactly the people who would be most important to delivery of the Cure to the general citizenry.

Any delivery of the Cure will have a cost.  At the very least there is an opportunity cost involved when someone chooses to provide the Cure to others in preference to doing something else.  If a person is prohibited from being compensated for their cost, then their provision of the Cure to others will actually cause them a loss.**  Regardless of whether the cost is large or small, this will restrict the scope of the people to whom the Cure will be provided (some people may shoulder a small cost for a small number of recipients, but as the number of recipients grows even small per unit costs will become unsustainable).  A non-commercial restriction doesn’t encourage others to participate in philanthropy. Rather, it simply limits the number of people who will be willing to distribute the Cure.  By trying to prevent third party intermediaries from benefiting from the Cure, a non-commercial licence throws the baby out with the bathwater.  The only thing that can be said for it is that it is self defeating.

Somewhat counter-intuitively, the way you prevent third parties from gaining an unconscionable profit from your invention is to adopt something along the lines of an open source licence.  An open source licence would permit commercial entities to sell the Cure (and probably make a profit in the short term) but the licence terms preserve a free market for the Cure.  Over time other commercial entities would also begin selling it.  Economic theory says that, in these conditions, the price that they charge will (over time) be the cost to them of selling the Cure.  This is the ideal solution – distributors have the opportunity to make a profit in the short term so they start distributing the Cure.  Over time however, price pressure from other distributors forces their prices down.  In the long run distributors are still able to cover their costs and the number of distributors is maximised.  Indeed, in this case the only time a distributor can charge above their cost is where they are providing some added value (until others start competing on that value add).  In this case the choice of a share-alike style licence will work to preserve the same market dynamics in respect of the incremental improvements.

It is also important to note that those involved in commercial activity are the ones most likely to be able to identify what needs improvement (through feedback from their customers) and to pay for incremental improvements to be made.  By excluding them you not only have a direct impact on distribution and implementation of the Cure, you also destroy a good part of future innovations based on it.

Reasoning Applies to All Purpose Based Restrictions

I have focussed on non-commercial restrictions as they seem to be inordinately popular and also seem to be the most wide reaching in their effect.  However, the same reasoning applies to any purpose based restriction.  The effects of the restriction will be determined by the restriction itself.  For example, a prohibition on “use for celebrating the 4th of July in the year 2075” may have little practical impact on uptake in the short term (but may have some unexpected consequences around July 4, 2075).

Conclusion

I chose the title of the post, not because non-commercial licences are absolutely bad, but rather to draw attention to the fact that licences with purpose based restrictions will generally restrict the scope of the distribution of the content licensed.  I have chosen the example of a cure for cancer, because it is something which ought unequivocally be distributed among as many people as possible.   The two reasons I can see for a purpose based restriction are:

(a) to charge money for the use of the thing; and

(b) because the person has an ethical objection to the purpose (raised in note *)

I do not want to suggest that these reasons are illegitimate.  I suspect, however, that (a) is a pipe dream in the vast majority of cases.  The publishing industry promotes the idea to authors that untold riches await them if they are as covetous as possible of their “intellectual property”.  The reality though is that for every successful creator there are thousands (if not millions) of unsuccessful ones.  The probabilities are very much against any particular person (authors’ associations the world over consistently report below average income for authors).  In coveting their “intellectual property” authors consign themselves to a lifetime of anonymity – one of the worst punishments for a voice which wants to be heard.  Moreover, they miss the opportunity to make the world a better place by giving others access to their creativity.  This ideology which inspires non-commercial restrictions is an ideology in which everyone (except the owners of a distribution channel) loses.

Notes

* Actually, there is one other reason, which is that you have some ethical objection to the particular purpose.  In the case of commercial purposes most people would have trouble living in practice by such an objection (eg they would need to live in a gift economy).

** In practice a distributor will produce a number of units of the Cure in advance and must take the risk of not being able to sell them all.  In this case, even limiting them to their cost of sale will cause them a loss – if not all of the inventory is sold.

10 Responses to “Why Non Commercial Licences are Bad”


  1. 1 steven 11 September 2008 at 8:58 am

    No comment other than to say the essay was quite thought-provoking and an eye-opener to a person like myself who works in open source software. Many thanks for sharing your thoughts.

  2. 2 brendanscott 11 September 2008 at 11:59 pm

    Thanks Steven
    This article was submitted to a couple of places but no one wanted to run it. If you thought the article was helpful please try to get it some coverage.

  3. 3 Andrew Katz 14 October 2008 at 6:20 pm

    Hi Brendan

    That’s a very interesting point – and I think that most of the time you are right. But there may be circumstances where this doesn’t work too well. Imagine you have written a novel, and a publisher is happy to publish it, using the traditional model. You may be able to negotiate terms with them to retain rights to publish under a NC CC licence, but think it extremely unlikely that they would be prepared to allow you to license under a free licence which allowed commercial reuse.

    You may see this as a tension between two aims: one is to maximise revenue, and the other is to maximise distribution and use. It’s possible that these aims aren’t necessarily in conflict: it may be that giving the publisher a limited monopoly to publish commercially gives it the incentive to pursue the usual distribution channels and promote the book, whereas allowing it to be distributed under a CC-NC licence promotes wide distribution, which is, also likely to promote book sales.

    Your example clearly makes one think of the “maximise distribution” model, but I’m not sure this is universally applicable.

  4. 4 brendanscott 21 October 2008 at 9:02 pm

    Hi Andrew

    Sorry for taking a while to respond.

    I’m not really clear what your argument is. If you have written a novel and all publishers bar one have refused to publish it and that one will only publish it if you agree to a -NC licence then you have the choice to accept that and publish with them, or to vanity publish on the web or via Lulu or similar. So I don’t see that the circumstances will ever require an author to publish on any particular terms. It will always be their choice.

    I don’t see how what you’ve argued is inconsistent with the article.

    cheers

    Brendan

  5. 5 Andrew Katz 23 October 2008 at 9:38 pm

    Yes – the author always has a choice. But if the publisher is offering her an advance + royalties, plus the ability for the work to be available under a CC-NC licence, I don’t see that as particularly being a “bad thing”. Agreed, if commercial reuse is permitted, this may have the effect of making the work more widely available (because more commercial publishers will put effort into marketing it), but equally it may not (because a commercial publisher may be prepared to put more effort into marketing where they have an exclusive through particular channels). We really into the area of economics here, which I have to admit I know virtually nothing about.

    We are really arguing about what is a “bad thing”, I suspect. You are saying that maximal dissemination is the overwhelming “good thing” (which I generally agree with), but I am saying that in some corcumstances, it may be the case that allowing the author to choose restricted commercial distribution may allow a similar range of distribution, but also allow the author some direct financial benefit.

    I reiterate: I think that your argument almost always works. However, you’ve stated an absolute position, and the laws of logic dictate that I only have to come up with one counterexample to demonstrate you are wrong…now if you’d said “why non-commercial licences are *almost always* bad” then I wouldn’t be arguing with you :-)

    – Andrew

  6. 6 brendanscott 23 October 2008 at 10:24 pm

    I think you’re paying too much attention to the word “bad”.
    I said bad means less than optimal, not bad in some absolute sense. It is also judged by reference to the person who is doing the licensing and by reference to likelihood, not logical necessity. In the majority of cases, if they choose a -NC licence I believe they will get reduced distribution and reduced $$ (this is certainly what author’s bodies report, incidentally, stupidly using it as an argument in support of copyright – https://brendanscott.wordpress.com/2008/01/09/revoke-copyright-for-poorly-paid-authors/). The paper concedes that in some cases the reverse will be true.

  7. 7 Paul 24 April 2011 at 1:58 am

    Sorry that I only came across this after 3 years, but are you telling me that an individual who creates content deserves less of a right to make profit than an individual who distributes it? In other words, if I were to create the cure, I would receive nothing, while a “blogger equivalent” would receive money for spreading what I have created? Because that appears to be what you are stating here:

    “By adding a non-commercial restriction in these cases you would exclude those people who might provide the Cure to others in the course of commerce. This would, for example, cover medical practitioners, the vast majority of whom charge for their services. A non commercial restriction would eliminate from the distribution chain exactly the people who would be most important to delivery of the Cure to the general citizenry.”

    So in this case, I would make no profit from the cure, and if I were to not to declare a non-commercial restriction, allow others to sell my cure at a profit. And as per the phrasing of the rest of your article, they (the doctors) would not only receive the money (monetary gain), but also the credit (fame/praise etc…) for spreading the cure. Whereas I simply go and rot away in some dank chemistry lab hoping to come across something else? Sure they may mention my name but what’s that really worth? When’s the last time anyone thanked or linked Penicillin to Flemming in a doctor’s office?

    But that’s an issue using non-commercial restrictions… so you then go on to claim that an open-source type license would be best, and certainly we can’t ignore the Linux model which as worked out quite well as a prime example for this model. But lets take a look at what you stated regarding this:

    (A)
    “An open source licence would permit commercial entities to sell the Cure (and probably make a profit in the short term) but the licence terms preserve a free market for the Cure. Over time other commercial entities would also begin selling it.”

    (B)
    “Economic theory says that, in these conditions, the price that they charge will (over time) be the cost to them of selling the Cure. This is the ideal solution – distributors have the opportunity to make a profit in the short term so they start distributing the Cure. Over time however, price pressure from other distributors forces their prices down. In the long run distributors are still able to cover their costs and the number of distributors is maximised.”

    (C)
    “Indeed, in this case the only time a distributor can charge above their cost is where they are providing some added value (until others start competing on that value add). In this case the choice of a share-alike style licence will work to preserve the same market dynamics in respect of the incremental improvements.”

    The last part of your comment (C) you state something to the effect that if a company were to add a specific value, e.g. the cure in Mint flavor, then it too must allow everyone to know what is added in The Cure for others to do so (By the Share-Like license, erm Copyleft). And as you admit, this will result in additional competition, which according to your statement in (B)would result in the cheapest/lowest pricing possible to the extent, that all companies would be the same in distributing the cure. So patient X can freely choose between Doctors A – Z without fear of paying more than if they had gone with a different doctor.

    So things are great for the buyer. Now what about the doctors? Well presumably they have an unlimited number of patients and can divide them evenly so they all make the same profit, sounds fair. The buyers get the most out of their money, and the sellers do not have to worry about competition, and they have a stable income. But the sellers realize that they can now relax, do nothing, and simply sit back and watch the money flow in because they know, that if one company makes improvements, then they can have that same improvement on their product the same day (via derivatives on the share license). So then they say, “who am I kidding, why am I going to develop anything to make the cure better, if the company next to me will get it without spending any money for it.” So with no competition, and with stagnation comes no improvements. But they’re happy, they can feed their families with the money they make and they can continue to live their lives. …. But you know I think we’re forgetting someone here.

    Oh yeah, that’s right. Me. The guy who made the cure is still just toiling away in a dank chem lab in his basement having earned or gained nothing is also still in the same boat. He has generated an ENTIRE industry, employed hundreds if not thousands of people, and sees nothing. There’s your philanthropist, your idealist, your selfless egoist, your free thinker, your hungry thinker, your barely able to stand idealist unable to eat the fruits of nothingness.

    The issue with non-commercial licenses is that it’s good. For the creator, its bad for the distributor, and its “slightly bad” for the consumer. We now live in an age where nothing is kept secret. Trust me, if anyone finds the cure for cancer we’ll know about it within a tweet. As far as distribution goes, worldwide distribution of anything is made possible through China. Not a big worry. So in the scenario of non-commercial licenses, who wins? The innovator and his audience. Who looses? The mindless, self righteous, soul sucking losers who do nothing but sit on their butts and make millions.

    And I believe we all know who the doctors represent in this case… the bloggers, the talkers, the youtube casters who simply hash and rehash ideas created by others to generate their own cash through google while doing nothing, leaving nothing for the creator. Claiming, open source this and that so that they can share it to the world while lining their pockets. And what does the inventor get… what did Linus Torvalds get, nothing, but he wanted it that way. Linux was a gift, and he was a true philanthropist. But what you and a lot of others are asking are gifts, gifts from struggling individuals trying to make a living. The entire “open source” community is just asking for handouts, just claiming “If you let us have it, we can get it to the word!!! and make a buck or two, oh and you, well I’ll put your name on my site.” So in the end, when people realize this, And following the “market rules” and the common economic belief that we all work for incentives, open source will crumble on its own head. You cannot generate enough free and open ideas forever. Even going on websites with free plans and free projects are actually non-commercial plans. Those are the MAJORITY of information spreading based sites. true open source, here is my work and go make money sites, really don’t exist. You may find 1 out of every million, but in the end those guys are fairly rare and truly philanthropists. And perhaps 1 out of every million is exaggeration, perhaps its 1 out of ever billion.


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