Wednesday, August 15, 2007

Slightly Shorter Philanthropy for Hoopleheads

The intellectual property policy of the Digital Media and Learning Competition creates a situation where the future value to the grant recipient of the content created in the grant is roughly 50% of its value to anyone else, thus creating a strong incentive to sell the work at the end of the grant under distressed circumstances. The creator of the work is disempowered by this scheme.

For example, let's say a entrepreneurial young 21st century innovator like Vicki gets a $100,000 to take a sabbatical and create the wiki of her dreams, and at the end she's created something wonderful and valuable. She skypes Will and David and they advise her that through book sales, speaking engagments and website ads related to her wiki, she can make $120,000 a year over three years. Except the only problem is that half of her (did we mention that's pre-tax?) profit has to go back to the Collaboratorium, meaning she'll make something south of $60,000, without benefits. That might even be less than a school teacher in the South makes!

So at the big end of the project presentation Pearson offers her $25,000 for the rights to her wiki, of which she'll get to keep $12,500 (before taxes), which seems like a big discount, but she chalks it up as a windfall and accepts. They have one of those big checks; everyone poses behind, grinning. It is $12,500 for work someone else already paid her to do, and it'll pay for half a semester of Vicki Jr.'s tuition. Pearson would love to hire her to promote and expand the wiki, but all the kings laywers can't figure out whether this would constitute further "profit" from the original work on her part, thus triggering the Collabababatorial taking 50% of her wages, so they hire Steve Hargadon instead.

Get the picture?


Vicki Davis @coolcatteacher said...

Except for one thing, Vicki Davis is going to leave teaching because she loves it and also because she has two children with learning disabilities who would not survive without her presence at the school. Also, I'm a private school teacher in the south so I take home half of what you assume I make.

There are ways to make money out there, but if I wanted money I would have remained as General Manager for Verizon for my local area -- no school teacher I know could ever make enough to compensate for things.

Actually, my dream for the money is to create funding for virtual classroom space to help other classrooms do flat classrooms and manage sign ups via wiki.

Such things do happen but I think the rewards intrinsic in teaching make so much up for the lack of monetary benefit. Unfortunately, the type that may get this grant may be the bureaucratic types who take a trip to the beach, perhaps that is what you were insinuating -- not sure.

Thanks for putting an interesting spin on things, always.

Kevin Prentiss said...

Yes. And I couldn't agree more. I was excited about this until I got to the fine print.

I sent an e-mail to Erin Ennis, project manager right away.

A snippet:

Our challenge, and question, comes from the Intellectual Property Rights Policy. We don't have a problem with Creative Commons (we hope to go open source as soon as feasible) but the clause about 50 percent profit sharing seems to rule out both entrepreneurs and corporations, despite statements to the contrary.
. . .
From this, it seems that we would be giving up a perpetual 50 percent stake of our current business profits (from the last two years investment) to take a grant for future development. I do not see how we would untangle revenue from a grant funded product feature extension from the basic product. Giving up 50 percent of all future profits for 10-20% of the money we have already invested would not make sense for us or any other business in our potential situation (i.e. people with a good idea that is working or near working).

I ended proposing other structures without money.

Erin replied they were "checking with their legal department".

I don't think capitalism is the only way to innovate, but if they are going act like a VC they should be clear about that (and give similar terms.)

I don't think (smart) businesses would take this deal and I agree that any academic with a good idea that won may find themselves in a tight corner.

Doesn't seem like a recipe for fostering innovation to me.

Tom Hoffman said...

Yes, I know you wouldn't leave teaching, Vicki. ;-)

Unknown said...

I emailed them to ask for a clarification, too, and got a similar response to Kevin. Now, they've posted this on the IP page:

"Potential applicants have raised a number of excellent questions about intellectual property as pertains to this competition. These questions are being discussed right now. Thanks for checking back to this page in the days to come for clarification of the policy. --Posted August 17, 2007"

cat said...

Pls revisit the site for the updated IP policy. Thanks to comments such as those in this blog and those by early potential applicants, we reworked the policy. The issue is that, as a philanthropic foundation, the MacArthur Foundation's tax status requires that their funding not be used for profit. Given that, we have tried to work out a better system. Please read the new IP policy, and, if you have questions, contact our Competition leader via the Contact box on the site. She will get back to you shortly. Thanks for your interest and your smart discussions that prompted an updating of the policy. And do let anyone who might be interested in the Digital Media and Learning Competition know about the updated IP rules. Thanks!