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.
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 version in English, French, German, Dutch and Italian.
- 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.
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).
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?
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? (new!)
- You are a Member of the European Parliament:
- The European Parliament already voted for a GREAT version of the directive in its plenary session of 24th September 2003. Our sincere thanks go out to all MEPs that helped to make this happen, which came from all countries and political groups. We'll keep this in mind when voting during the European elections!
- FFII is now fighting to defend the spirit of the amendments voted by the European Parliament. You can show your support by allowing us to list you publicly in the Call for Action II (mail to).
- Convince your colleagues at the national level to support the European Parliament's position.
You are a national politician (a member of parliament, a minister, a civil servant):
- Have your government support the position of the European Parliament in the EU-Council of Ministers. They are the next political body that must decide about this directive. Their working party is currently proposing to simply throw out all amendments that would prevent software patents and to introduce some new amendments that even go further than the original Commission proposal.
- The current position of most governments in the Council is to either support software patents, or to take a waiting attitude (sometimes together with the support of a few, although important, amendments from the EP). Active support for the EP-amendments from national governments in the Council is required for this directive to conclude successfully, otherwise it risks to be simply abandoned due to the inability of the Council to come to a common position.
- You are a scientist or have an important position at a company (this can be a very small company as well!): support FFII's Call for Action II by having your name added to the public list (mail to).
- Sign the Eurolinux
- Join the online demonstration against software patents from 5 till 15 April 2004.
- Join us on 14 April 2004 for a demonstration in the streets of Brussels. In August 2003, we got over 500 participants. This time, we are aiming for over a 1000 people, so be there!
- Try to mobilise the members of your national parliament to tell the government to support the democratic decision of the European Parliament (supported by over 300,000 individuals, over 2,000,000 SME's and lots of economists and scientists), instead of following the advice of a single working party which mainly consists of patent lawyers (note however that there are also patent lawyers supporting our position). To influence the responsible minister directly, mobilising SME-organisations and possibly also unions is the most effective way (though not always very easy).
- Underwrite FFII's Call for Action II.
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 top 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!
As the European Parliament showed in September 2004, democracy and common sense are still very much alive in Europe. Almost nobody believed that we could change a thing, yet here we are. Our next task, convincing the Council to support our position, may be even more difficult, but we are convinced we can again make a significant difference. Europe has the chance here to show the world it can be a leader concerning drafting an patent policy that's adapted to the world we live in today. Make sure that we in Europe get a patent policy that Alan Greenspan would want for the US.