Software Patents: who pays and who plays?
(or why software patents may lead to another tragedy of the anti-commons)
This page tries to give a fairly concise overview of who will be harmed by software patents (and why), who will profit from them and what you can do about it.
(and that's enough headlines starting with a W)
Why are software patents bad for e-commerce?
The basic principles of doing business over the internet are already patented in Europe. If such software and business method patents are legalised, every e-commerce website approached by the owners of these patents will either have to pay for a license, or quit their business.
- EP803105: a European patent on the mere principle of doing business over the internet via computers. Every e-tailer that sells products on a website and that has its payments handled via a computer as well (e.g., he accepts credit cards), infringes on this patent.
- EP807891: a European patent on the principle of an electronic shopping cart. Every e-tailer that offers a way for his customers to first select all the products (s)he wants to buy and then pay for them all at once, violates this patent.
We have made an illustration of a webshop which infringes on more than 20 granted European software patents. It's also available as a high quality PDF versions in English, French, German, Dutch and Italian.
Why are software patents bad for SME's and individual developers?
- One computer program can be covered by hundreds of patents. A computer program is a combination of numerous algorithms, data structures and interface paradigms. Since each and every one of those can be covered by a patent, software development becomes a legal minefield. One will have do a thorough patent search with regard to every design decision, as someone else may have already patented your idea. Currently, two-thirds of such European software patents are owned by US and Japanese companies.
- IBM owns thousands of software patents. Most programs infringe on at least one of those patents (see point three in the list below). In the US, IBM uses its patent portfolio for three purposes:
- Litigation bargaining tokens. Almost every software company in the US, even companies that are firmly opposed to software patents such as Red Hat, have such a legal defense cache used to force cross-licensing deals in case of alleged patent violations. This means a small company can almost never get any money out of IBM with its own patents, at best they will get "free" usage of IBM's patents.
- Obtain free access to technologies from other companies. When IBM notices a patented technique it wants to get access to, it researches which of IBM's patents the innovating company violates and then forces this company into a cross-licensing deal (second paragraph of the linked article).
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Collect taxes. As the author of an article in Business Week says: Indeed, some folks in the computer and software businesses fear that the whole industry could wind up paying a 1% to 5% tax to IBM.
- Allvoice: this company is often mentioned by proponents as one of the prime examples as to why software patents are good for small companies. It managed to force IBM to pay large licensing fees for its patents. The only reason it could do this, was because software patents are not valid in Europe. If they were, IBM could probably have forced it into a cross-licensing deal.
Why do software patents chill innovation?
Patents are intended to encourage innovation by guaranteeing inventors that they will be able to recoup their investments. In software development, the largest cost factor is not coming up with an idea, but programming, testing and debugging (correcting errors in) the implementation. The result of this hard work is already protected by copyright, but the used ideas may be encumbered by software patents.
This means that software patents in fact reduce the chances of getting a good return-on-investment, as after the development phase is finished and the product is brought to market, a patent holder may pop-up, claim infringement and refuse to license his patents. Software patents will make development also even more expensive, as every design decision will have to be researched and declared legally secure.
The practical upshot is that software patents encourage litigation companies (companies with just a patent portfolio interested in forcing licensing deals) and penalise the real software development companies. Finally, they also impede sequential and complementary innovation, the corner stone of the entire software development industry. This shows us that software patents can easily lead us to a Tragedy of the anti-commons, if we consider ideas as commons.
Who does benefit from software patents?
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IPR (Intellectual Property Rights) specialists and IP-lawyers. Legalising software patents requires companies to obtain more patents (even if only to defend themselves), which pretty much have to be written by a lawyer to be accepted by the European Patent Office. Additionally, lawsuits will be filed and cross-licensing deals will be inked between companies, requiring more legal advice.
- The European Patent Office gets its income from the companies that pay for obtaining patents.
- Large/huge companies that also develop software. Examples are IBM (as shown above) and Microsoft. They can use their huge patent portfolio to extract extra income from smaller companies that do not have enough patents to force a cross-licensing deal. On the other hand, they are not hindered much by patents held by other companies, as they can almost always force cross-licensing deals.
- Litigation companies. These are companies that do not do any software development (anymore), they just own a portfolio of (software and/or other) patents. They cannot be forced into cross-licensing deals, as they have no products that can infringe on anyone else's patents. This renders defensive patent portfolio's from real software development companies useless and can force almost anyone to pay. Recent examples of such cases are Pinpoint vs. Amazon and Eolas vs. Microsoft.
What can you do? (updated!)
- You are a Member of the European Parliament:
- FFII will prepare a voting list for the plenary vote on September 1st, 2003. It will give you information about where the pitfalls are and which amendments are absolutely crucial to avoid unlimited patentability. Note that some of the amendments accepted by JURI that supposedly limit the directive, are in fact not limiting at all.
- FFII also has a full counterproposal for the directive on its website, which you can use when drafting a voting list or when deciding which amendments to support.
- There is also an analysis of all amendments tabled in the JURI committee. The introduction on that page explains the rationale behind FFII's opinion on said amendments and what you should be wary of when deciding on which amendments to support.
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You are a politician, but not a MEP: inform your peers at the European Parliament and at the national level about the dangers of software patents. Also support FFII's Call for Action by having your name added to the public list.
- You are a scientist or have an important position at a company: support FFII's Call for Action by having your name added to the public list.
- Everyone:
Where can you find more information?
I've written two more documents on this topic which you can find here:
Additionally, the website on software patents of the FFII (Foundation for a Free Information Infrastructure) is the definitive information resource on this topic. Unfortunately, due to the huge amounts of information you can find there, it is often very difficult to find exactly what you need. Therefore, you can find a Google box at the bottom of every page with which you can search their entire site. Use it! Finally, if you have some more questions, don't hesitate to contact me.
We do stand a chance!
There is not a single faction in the European Parliament that stands unanimously behind the proposed directive. Although many MEPs are against trivial software and business method patents, a lot of them are misguided by their local experts into thinking that the "limitations" referred to above will prevent abuse and "fix" the directive. Please try to convince them of the fact that this is not the case and make them aware of the huge problems with the proposed directive.