I have noted that one of the most important legislation in the United States history in the last 50 years was the Bayh-Dole legislation which makes it possible for recipients of federal grants to commercialize their research outputs. In other words, if one gets government funding, government would allow you to commercialize the outcome of that research with no restriction. So, instead of keeping the invention or outcome in the shelf for government which technically knows nothing it can do it with it, you are free to monetize it for personal gain. This legislation happened around 1980 and was pivotal to the overall growth of technology transfers from universities to markets. Google would not have been possible without this legislation as Google core research was originally funded by a federal grant.

In 1980, a United States legislation dealing with intellectual property emanating from federal government-funded research was implemented. The legislature called Bayh-Dole Act gave US universities, small businesses and non-profits intellectual property rights and control of their inventions, even though they were funded by government. Through this Act, these entities could pursue ownership of inventions in preference to the government. Though there are mixed records on the Act, at least, it provides clarity on many issues that could derail the process of taking ideas to market. Small businesses can nurture ideas and later get acquired by the big ones. Such ideas might have been overlooked by the MNCs.

“Computer Program” in U.S. Copyright Regulation

Another key legislation is the addition of “computer program” in the U.S. Copyright regulation. Before 1980, software or simply computer programs were not copyrightable. In other words, companies and individuals could not copyright computer software. But when that legislation was effected, many great things happened.

A “computer program” is a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result.

Without this legislation we may not necessarily have software companies in the way we have today. But with the law, the marginal cost advantage was put into effect where companies like Dropbox and SAP could build software and then distribute it to as many people as they can through subscription or licensing. This is possible as illegal copying is punishable by copyright laws. Yes, you cannot use your friend’s copy without running into problems if it was licensed only to your friend.

Simply, the Bayh-Dole provided the apparatus to unlock more great inventions from research institutions to the markets while the update of the U.S. Copyright law with “computer program” gave companies protection to pursue software innovation knowing that they have protection for their efforts.

Modern software licensing or subscription offers a huge advantage – you keep getting better product as companies keep improving the product. Yes, practically, online software have one version and unlike physical hardware do get better with time as they are updated by the makers. So, once you pay, you expect to have a better product going forward, flipping the physical construct of depreciation.

All Together

Across nations, these two legislation have shaped technology policies. And I consider the Bayh-Dole Act and the “Computer Program” inclusion in the U.S. Copyright regulation as the most catalytic policy tools in the advancement of modern tech, in the last 50 years, across the world.

NB: my earlier writing on Bayh-Dole and its impact was recognized by AUTM, an umbrella of technology managers in more than “800 universities, research centers, hospitals, businesses and government organizations around the globe.” Click for the quote in a piece I contributed as a Letter feedback to the Economist magazine but later published in Nkpuhe (“revelation” in Igbo language, Nigeria), the precursor to Tekedia.

Comment on LinkedIn Feed

Comment: How Bob Dole made Bill Gates a billionaire.

My response: Not really- I would have said the Google Boys, not Gates since Microsoft was largely funded by IBM, not federal grant as was the case in Stanford for Google. However, Microsoft and Bill Gates would not have succeeded at scale without including “computer program” in the U.S. Copyright law.  While in NYSC, I wrote an MS Access program for inventory management. I sold 20 CDs I burnt at Panshin street in Jos (their computer village then). Good money. Then, the next 2 days to supply more, I saw that the sellers had created 200 copies of the same CDs.

I called the police and the man reminded me that they were also doing same on MS Office, Windows. Right there, I knew NG was a jungle despite all the things they taught us on “Engineer Turns Manager” – Copyrights in FUTO. My point is this: if U.S. had not protected Microsoft code, the software giant might have struggled.

I have noted that technology brings disruption with massive value creation even though the companies that enable the value may not necessarily CAPTURE most of the value. I cited the challenge for tax agencies around Africa as Skype and Whatsapp enable great connectivity value for users even as they decimate the business models of telcos like MTN and Airtel which typically pay good taxes. Yes, as Skype and Whatsapp redesign the communication sector, the value they have created are not effectively captured by them monetarily.

Nigeria is not paying attention to the potential risks of value destruction to the economy which Internet will bring to the nation. We will continue to see the erosion of tax Naira as more industries are disrupted. The telcos are first, but our banks are not immune. If the banks face this problem and fail to compete, the tax Naira will go as more value will be destroyed.. The challenge is that value is destroyed, and our local digital companies do not actually drive the destroying process – most times, foreign firms do and get the value. I project that Internet will erode more than 17% of Nigeria’s total tax revenue over the next decade. This does not mean that the absolute tax revenue will drop, rather, some sectors where government makes money, via tax, will earn less. If the telcos earn less because of OTT, they will pay lesser tax. Period. But government can still get more artisans and farmers to pay tax (I want to make that clear – my prediction is not the absolute tax which can be compensated if more people join the tax paying base. I am focusing on taxes from those paying tax right now. While those paying now can drop, proportional to growth, the total absolute tax could be higher because of bringing more informal sector participants into formal sector).

Largely, if making an hour call from Nigeria to London with MTN costs you $25 and Whatsapp reduces that cost to $2 (your mobile broadband plan used), Whatsapp has not captured a lot of the value. Yes, out of $25, it captured only $0 since Whatsapp is free. However, it has destroyed $23 value for MTN and that $23 is dissipated from the enterprise side of the revenue equation. Sure, users get to keep their $23 and can use the same for other things. Of course, without Whatsapp, the person might not have even spoken for one hour which means the value creation and lack of capture may be activated by the very nature of the technology. Pre-Whatsapp, the user might have spoken for 2 minutes but with Whatsapp, that call is extended to 60 minutes.

Largely, my point is this: as you innovate, watch how you can CAPTURE parts of the value you create. If you unlock value and cannot capture much, you have  helped the ecosystem but your business long-term may not be great.

Some companies have used proprietary hardware with exclusive software to ensure they capture value (think of Apple), some put subscriptions, licensing and other kinds of things. Of course, when you begin to do those things, over relying on freemium or on-demand revenue model, your scalable advantage drops.

When Value Is Not Monetary

Sure, it is not every time we move to fix market frictions that we must be looking for value captured in terms of money; value captured on helping humanity is even more important. We can just make great products and help the world: the Volvo seat belt innovation is a reminder that value cannot be bounded by financial revenue.

In 1959, Nils Bohlin, an engineer at the carmaker, created the three-point seatbelt, which became the standard for safety across the auto industry. Instead of filing patents and keeping the life-saving design proprietary, Volvo chose to evangelize the innovation (Fortune newsletter).

Another example is Google noticing vulnerabilities in iPhone and alerting Apple to fix them. Typically, one would have expected that Google would rejoice that Apple was going to bleed to death. But note yet, Google does not need the small bounty fee Apple pays bounty white hackers; it simply wanted the internet to be clean.

Apple said … the attack “was narrowly focused” and affected “fewer than a dozen websites that focus on content related to the Uighur community” rather than the “en masse” hack of iPhone users described by Google researchers. Apple also said it fixed the issue in February, within 10 days of being notified by Google.

All Together

Get the balance – some technology nexus have challenges. You can help users but you may not survive because despite your capacity to create value for users, you have not captured enough to remain a going concern. It is important your game plan understands what drives the mission, as you would like to be around to keep serving the same users. That can only happen if you capture enough value – whatever it may be – to sustain the operations.