The tragedy of the commons is the name economists use to describe the abuse of common property. For example, overfishing in international waters. Someone who owns a lake will not over fish his own lake because he knows he will benefit in the future from restraining his fishing now. But in international waters, no individual has an incentive to restrain fishing. Mankind as a whole certainly benefits from restraint, but single fishermen do not.
Michael Heller discusses an opposite effect, the tragedy of the anti-commons, on the EconTalk podcast. The tragedy of the commons describes the over-use of a resource nobody owns. The tragedy of the anti-commons describes the under-use of resources with many owners. For example, suppose an acre of land belongs to 43,560 individuals who each own one square foot. The land will never be used for anything as long as thousands of people have to agree on what to do.
The example of land being divided into tiny plots is a artificial. A more realistic example is the ownership of patents. Building a DVD player requires using hundreds of patented inventions. No company could ever build a DVD player if it had to negotiate with all patent holders and obtain their unanimous consent. These patents would be worthless due to gridlock. Fortunately, the owners of the patents used in building DVD players have formed a single entity authorized to negotiate on their behalf. But if you’re creating something new that does not have an organized group of patent holders, there are real problems.
According to Michael Heller, it is simply impossible to create a high-tech product these days without infringing on patents. A new drug or a new electronic device may use thousands of patents. It may not be practical even to discover all the possible patents involved, and it is certainly not possible to negotiate with thousands of patent holders individually.
Small companies can get away with patent violations because the companies may not be worth suing. But companies with deep pockets such as Microsoft are worth suing. These companies develop their own arsenal of patents so they can threaten counter suits against potential attackers. This keeps the big companies from suing each other, but it doesn’t prevent lawsuits from tiny companies that may only have one product.
Listen to the EconTalk interview for some ideas of how to get around the tragedy of the anti-commons, particularly in regard to patents.