The UK public sector spends over £14.4bn every year, directly and indirectly, funding research and development (R&D) to address some of the major challenges we face as a society today. Often, these are challenges that the market is either the primary driver of, or unable to address, such as climate change, youth unemployment, obesity, ageing, and inequality.

However, any intellectual property that results from publicly funded research does not belong to the public, who paid for it, but instead is available for the private sector to enclose and profit from. Indeed, the state does not recoup anything directly for that investment. The state is left to cross its fingers and hope that it 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. However, what historically may have been true is today highly contested. Many companies are very good at minimising their local tax bills by creatively structuring their businesses while the innovative new companies, especially the tech-based ones, do not generally create mass employment opportunities. We contend that this needs to change, with the public sector taking more direct ownership of the resulting IP in order to share more broadly in the rewards, rather than just the risks.

The idea that the state should just facilitate, administer and regulate the economy, rather than engage in more direct directing and management, started gaining wide acceptance in the 1970s. This is now changing.

Probably the most important piece of intellectual property (IP) being worked on now is the search for a vaccine to Covid-19. This discovery, which could probably be written on a small piece of paper, would be one of the most valuable assets on the planet, both socially and economically. This IP could have been generated in broadly three different ways. Firstly, it could have been developed using purely public sector money, including the fundamental research as well as testing and trials. Secondly, it could have been created purely through private endeavour (although actual cases of this are rare). Finally, and most likely, it could have been created through a mix of private and public sector money. Although each of these three cases differs in the contribution that public money played in generating the result, they also share some things in common, notably that the public sector would not own any part of the resulting IP. All the profit would flow to the private sector owner of the IP and that should the public sector wish to use the IP it would need to pay for it. This makes no sense economically and does not represent good value for public money.

We urgently need a new system that allows the public sector to leverage the investment that it makes in R&D. The goal of any new system should be to recognise the role of the state as a major funder of R&D by changing the ownership regime, maximise innovation,  license that IP from publicly funded R&D with purpose in mind and ensure that the non-monetary value of IP can be leveraged.

We proposed the creation of a Public IP Commons that would change the way that the IP from publicly funded R&D is owned and managed. We propose that the public should retain ownership of the IP that results from publicly funded R&D. The public sector also contributes significantly to private R&D by offering substantial tax credits, through R&D tax credits, or relief, through the Patent Box relief scheme, to companies and there is a strong rationale for the public sector should retain some ownership of the IP covered by these subsidies.

We then propose that all public IP should be managed by the IP Commons Management Body. The body would operate a licensing regime that would need to avoid the problems of being too exclusionary and too open, learning from the management of other commons. Just like all successful commons, we must ensure that there are proper rules and mechanism to govern and manage access to this new IP commons.

Although these arrangements would be novel with regard to the distribution of public funds for R&D these arrangements are commonplace in any private sector organisation where the output of the work that one is paid to do, either as an employee or consultant, becomes the property of your employer. The government would merely be adapting and improving on existing practice within the private sector.

Our proposal has several benefits over the existing model. It clearly acknowledges the nature and significance of the investment of public money into R&D and ensures that any resulting IP is owned collectively. The proposal for the Public IP commons also aligns the public sector’s risk and reward when funding R&D. At present the state certainly takes its share of the risk, often investing in early stage innovation, with its hyper speculative returns. The public sector should be able to reap direct returns. A system where the IPCMB retains direct ownership and control of the IP offers an opportunity for the public sector to set different targets for the use of its IP. We believe that this will ensure that the IP is utilised to maximise potential innovation, since it will be available for all to use, while ensuring a return for those using the IP commercially, all the while retaining the power to provide special licenses when there is a real social return.

When companies are required to pay for licenses the IPCMB should allow for that payment to be made in money or equity. Being able to pay for the license in equity reduces any potential pressure on company balance sheets while also further increasing the sharing of risk and reward in the innovation process. Another benefit of the proposed IP Commons is that it does not necessitate any reform of the national and international IP regime, which is complex and difficult to change, but merely seeks to align the private sector regime to the public sector.

We need to urgently need to change from the status quo. We hope that this paper will be part of the important discussion that needs to take place about how best to recognise the new role of the state and how to ensure that the IP that we the public fund delivers most benefit to us. The Public IP commons will radically change the domestic R&D sector and enable a large quantity of IP to be accessed by more companies and individuals fostering a more innovative economy.