From Bits to Atoms: Does the Open Source Software Model Translate to Open Source Hardware?

Many believe that open source innovation works "faster, better and cheaper" than conventional, proprietary innovation. The success of open source innovation has been seen primarily in open source software (OSS), whose output is an intangible, digital product (bits). This paper asks whether the success of OSS can be replicated in an open source hardware (OSH) environment, which involves tangible products (atoms). Specifically, it considers whether the tangible nature of OSH products presents legal or practical obstacles to their successful commercial implementation, in an environment where no appropriable IP rights exist. To answer these questions, the paper follows the innovation knowledge flow generated by an OSH invention and examines the legal structure and enforceability of open hardware license. It further considers in what way the absence of IP rights impacts the choice of a business model for OSH. Review of OSS business models indicate that, despite the non-appropriability of IP, software products are being produced through a wide range of models, from pure open source, to hybrid operations, driven by large commercial firms. Hardware presents a more difficult business case than software, because the output of OSH is a tangible product. Implementation of the invention into an end-product requires materials, manufacturing, labor, distribution, etc., all of which are cost-intensive and require capital investment. Nonetheless, a few OSH initiatives successfully run self-funded or non-profit-funded operations, even absent exclusive IP rights. However, given the costs associated with producing a tangible product, future business models are more likely to be a hybrid between open source community and a commercial operator. Still, such operations would rely heavily on innovative input from the open source community.