The institutional economics of sharing biological resources and information An introduction to the economics of the life science commons Tom Dedeurwaerdere (FNRS/UCL) Director of research at Centre for the Philosophy of Law Professor of Philosophy at Université catholique de Louvain 18th may ESNIE Cargèse

1.1. Introducing the concepts

1.2. Introducing the field of investigation : global public goods The intrinsic properties of goods: a conventional approach to public goods ExcludableExcludable NonrivalRival PRIVATE GOODS Examples: Milk Land Education CLUB GOODS Examples: Noncommercial knowledge (such as the Phytagorean theorem) Norms and standards Property rights regimes Respect for human rights COMMONS PUBLIC DOMAIN PURE PUBLIC GOODS Examples: Moonlight Peace & security/conflict Efficient/inefficient markets COMMON POOL RESOURCES Examples: Atmosphere Wildlife NonexcludableNonexcludable

The economics of the life science commons Tom Dedeurwaerdere 2. Dynamic efficiency for biodiversity governance Focus of this section: critical evaluation of alternative mechanisms of regulation proposed in the ongoing negotiations on ABS Current mechanism Incentive for innovation through intellectual property rights for the users of the genetic resources in the plant breeders and pharmaceutical industry Protection of the provider’s right through clauses of Prior Informed Consent and Access and Benefit Sharing in the contract Hypothesis : Double innovation in the proposed measures ( reference : Institute of Advanced Studies of United Nations University, 2003) Developing an action on the innovation potential of the whole production chain Developing an action on the maximization of future options of development, beyond the question of allocation of existing resources.

The economics of the life science commons Tom Dedeurwaerdere Static efficiency : Reducing opportunistic behaviour through an appropriate institutional environment (Oliver Williamson, Douglas North) Example of Merck-InBIO (Costa Rica) (-) low direct financial incentives (-) high transaction costs establishing the InBIO research agency (+) helps building dynamics of confidence and reputation, within a nexus of agreements : bio- prospecting, dept-for nature swaps, reform of park agency in conformity with UNESCO’s man and biosphere program (+) centralisation of information (InBIO), which facilitates definition of the contractual relation Governance attributes Incentive IntensityAdministrative ControlContract Law Regime (Direct incentives)(Indirect incentives) Governance Structures Spot Market Hybrid Hierarchy

2.2. Towards dynamic efficiency Documenting the flow of resources through the entire innovation chain Product Development Genetic screening Local users communities Ecosystems that produce diversity

Evolutionary character of the biological resources Tom Dedeurwaerdere

Evolutionary character of the biological resources Tom Dedeurwaerdere Susceptibility of Wheat Varieties as a Function of Usetime AUD Observed Linear Source: Singh and Rajaram 1991 Years Years

2.3. Examples of institutions for enhancing dynamic efficiency Tom Dedeurwaerdere a. The problems with static efficiency Autonomous dynamics of natural evolution of the genetic resources Incremental character of the decision process b. The reaction of the law From a simple adaptation within the existing static conception shortening the patents multiplication of specific regimes for each sector of activity To a dynamic conception liability rules (Reichman) conservation funds (Swanson)

The economics of the life science commons Tom Dedeurwaerdere C. Dynamic efficiency of norms of cooperation ethical codes of conduct MOSAICC : Microorganism Sustainable Use and Access Regulation Royal Kew Gardens London Glaxo Welcome, Novo Nordisk, Xenova, Shaman Pharma, Bristo-Myers Squibb voluntary mechanisms of benefit sharing

d. Dynamic efficiency of generation of knowledge International system for the monitoring of the flow of genetic resources Harmonisation of procedures of prior informed consent and mutually agreed terms

3. Dynamic efficiency for the life science knowledge commons Flow of ideas ExampleParticipation to a global biological information archive Positive incentives Visibility, public recognition, instant publication Perverse incentives Under-use Flow of artefacts Participation to the exchange of tumour tissue data Access to first hand high quality info related to the data Misuse : use of the data for commercial purposes Facility (info system) Common web server for storing images On line verification of the diagnosis Pollution : storing redundant information without appropriate checking Components of the microbiological information commons

Well-defined property rights help to reinforce a long term perspective in the management of a resource help to stimulate investment in the design of new institutional rules that can cope with these problems Reference : Schlager and Ostrom, North, Demsetz 3.1. Static approach to intellectual property rights a) Role of property rights regimes

However : Well-defined property rights do not necessarily imply full ownership, nor a fortiori private ownership : Bundle of Use and Decision rights Use rights Collective choice rights

The consequences of a set of property rights will depend on the cost and the availability of institutional arrangement that specify the exercise of the rights PROPERTY RIGHT REGIME + INSTITUTIONAL ARRANGEMENT (Contracts, legal rules, administrative control) PROPERTY RIGHT REGIME + INSTITUTIONAL ARRANGEMENT (Contracts, legal rules, administrative control) OUTCOMES

a) Institutions for data sharing : from the GBIF model… Other open science users Data Providers and Data Participants Data User Agreement GBIF Collaborative database Data Sharing Agreement

b) to a two tiered system I : based on the transfer of property to a collective licensing organization (GBIF model and Free software model)

c) or a two tiered system II : based on a multilateral agreement on contractual templates (proposed in Reichman and Uhlir, 2003) Licensing negotiation Copyleft license Ex ante negotiation of the contractual template Third party Other open science users Commercial license Commercial firm Proprietary R&D Key Data

static conception of efficiency : optimal allocation of existing institutional resources under given transaction situation (e.g. uncertainty, frequency of transactions) dynamic conception of efficiency : acquisition of new knowledge and enforcement of norms of cooperation in order to maximize the future possibilities of development –design rules for creating a dynamic decision space : focus on enforcing informal norms as relational networks (Elinor Ostrom) –identifying deadlocks for creating permanent learning processes : focus on the organisation of a dynamic interaction between rules and beliefs (Douglas North, Peter Haas) Towards a dynamic framework

Comparing configurations of rules, norms and outcomes Case study on: * The Free Software Foundation (FSF) and *The Creative Commons (CC) Dynamic efficiency of cooperative norms as relational networks

I.Rules  Case of FSF : (1) The intellectual property is transferred to a collective actor (the free software foundation) or remains with the author (2) There is a restricted set of some agreed upon licenses that are used by the FSF or the author of the free software (mainly variants upon the GNU General Public License)  Case of CC : (1) a menu of license provisions, the copyright remaining with the authors (2) goes beyond current property rights practice, providing restrictions of use, not providing positive prescriptions, such as the share alike provision

II.Norms  Case of FSF : (1) a homogeneous group (2) a collaborative project creating a sense of community (through motivation) ; so reducing attempts to abuse and encouraging collaboration in enforcement reports  Case of CC: (2) a heterogeneous group (p. 61) (2) a social statement, but no sense of community using in a certain way a creative work

III.Outcomes  Case of FSF : (1) widespread international adoption (2) law suits already took place  Case of CC : (1) difficult to translate to the different national contexts (2) no legal enforcement up till now

Reference : Research Libraries Group and the Online Computer Library Center report (2001) (1) audibility, security, and communication; (2) compliance and conscientiousness; (3) certification, copying controls, and following rules; (4) backup policies and avoiding, detecting, and restoring lost/corrupted information; (5) reputation and performance; IV. Towards the definition of design rules for data sharing

(6) agreements between creators and providers; (7) open sharing of information about what it is preserving and for whom; (8) balanced risk, benefit, and cost; (9) complementarity, cost-effectiveness, scalability, and confidence; and (10) evaluation of system components.

Comparing interaction processes between rules and beliefs Case study on: *The Global Biodiversity Information Facility (GBIF) and *The Global Taxonomy Initiative (GTI) Dynamic efficiency of knowledge generation

I.Interaction between rules and beliefs  Case of GBIF (1) Developed common concepts amongst the bio-informatics and conservation community (2) Institutional mandate to the GBIF secretariat to elaborate new working programs (3) GBIF secretariat as an autonomous legal entity  Case of GTI (1) ad hoc learning process, no mandate for an overall evaluation of the new stakes (2) depends on the CBD secretariat

II.Outcomes  Case of GBIF (1) implementation of different action plans (2) enlargement of the type of actors : communicating data on bird counting in New-York and Berlin through GBIF  Case of GTI (1) no action plan has been defined (2) deadlocks of negotiations

Bottlenecks (Peter Haas, Douglas North) Absence of an institutional mandate for a learning process Dependency of the learning community from the policy making community Capture off the learning process by vested interests III. Towards the identification of deadlocks of the learning process

4. Conclusion : Towards a “two pillar” model: Enhanced data sharing in the microbiological commons Implementing optimal institutions in a static framework (allocative efficiency) Maximising future possibilities in a dynamic framework (dynamic efficiency)

EBRI : Institutional framing for information sharing in Microbiology Epistemic community mandate reporting Operational outcomes Project proposals Input to the policy process External collaborative schemes Stock taking Institutional analysis Stakeholder evaluation Reflexive outcomes Common knowledge base New concepts Enhanced capacity for self-governance … IUAP V/23