Public IP ownership creates a virtuous cycle of publicly owned innovations built to maximize social goods
McCann 20, researcher at the New Economics Foundation interested in systemic and radical reform of the economy and the creation of a twenty-first century commons. He is co- author (with Stewart Lansley and Steve Schifferes) of Remodelling Capitalism: How social wealth funds can transform Britain. He is also part of the movements to reform money, author of Scotpound: A digital currency for the common good and co- author of the book People Powered Money; to reform land, writing about Common Ground Trusts and a founder of the Land Justice Network; and the digital economy, with recent publications including Blocking the Data Stalkers and Digital Self Control. (Duncan, “Commoning Intellectual Property: Public funding and the creation of a knowledge commons,” Common Wealth, https://assets-global.website-files.com/62306a0b42f386df612fe5b9/637dfe77345b29128b30d9e0_Commoning%20Intellectual%20Property.pdf)//BB
Total public sector spending on R&D, both directly and through tax relief, was £14.4bn in 2017-18, and yet receives no direct return.13 Given the scale of this investment of public resources, it is therefore important to look at the value that the public sector gets in return. Unlike when the private sector invests in R&D - whereby it would seek direct monetary returns either by monetising the specific product or service that had been created or improved through the investment, or by licensing the IP itself to others - the public sector currently expects to receive its return indirectly, through increased tax receipts and employment. As well as making sense to seek more direct returns, albeit not always financial, for the public from the state’s spending on R&D the changing scale and nature of the public investment in R&D outlined in the previous sections re-enforces the reason why we should also rethink the way in which the state shares in the upside of its risky investments.
— Indirect Value Capture not enough
Many economists believe that the state already receives a satisfactory return on its investment in R&D through economic growth, the creation of new jobs and the corporate and private tax that this leads to. The reality, however, is more complex. Many large companies are very good at minimising their local tax bills by creatively structuring their multinational businesses in order to record as much profit as possible in low tax jurisdictions. Google, for example, whose game-changing search algorithm was developed with funding from the National Science Foundation,14 is a master at this tactic. The employment benefit is also somewhat questionable, especially around tech driven automation businesses none of which are mass scale employers. Earnings per employee are often wildly higher in modern business that they have been in the past. NESTA’s Stian Westlake argues in a direct response to these arguments that the corporation tax system still raises a considerable amount of money, totalling £54.4bn in 2018/19. He asserts that ‘[t] his isn’t the Late Roman Empire. The tax system raises a lot of money, enough to fund generous innovation investment.’15 Such commentators also raise the point that if tax collection from large multinationals is the core of the problem, we should focus on fixing that system, which already employs many thousands of people, rather than create an entirely new mechanism to reward the state for its investment. Enacting country by country accounting systems16, which force multinational companies to report on revenue and profit by country thereby enabling local tax collection, or revenue-based taxes (as opposed to profit-based taxes), such as the proposed Digital Services tax,17 would be good examples of potential solutions. A clear counter argument to ‘fixing’ the corporate tax system is that since capital and business is now so mobile, even the threat of additional taxes could result in the company moving staff and operations abroad. This risk has had a massive chilling effect on the national and global tax regime, therefore reinforcing the need to tackle the ownership of the IP rather than attempting to recoup public benefits solely through fixes to the tax system. Although reforming the tax system is, separately, necessary and important, this need for reform is not an argument against the public sector, as the direct funder of R&D, having the right to own the IP output of the research it funds. This is especially the case if the ultimate aim of any reform, as in this paper, is to maximise innovation by making the IP as available as possible at as low a licensing cost as possible while ensuring that those companies who profit from the usage of IP generated through public funds also pay back into the pot, thereby enabling more R&D to be funded and/or release funds for frontline services and other uses.