CEU eTD Collection Hungary 1051 Budapest, Nador utca9 Central EuropeanUniversity PROFESSOR: Caterina Sganga COURSE: International andComparative Law LL.M. SHORTTHESIS In partialfulfillment ofthe requirements forthedegree of Master of Laws PROTECTION BETWEEN PATENTS AND : A AND COPYRIGHT: PATENTS BETWEEN PROTECTION SOFTWARE CENTRAL EUROPEAN UNIVERSITY COMPARATIVE ANALYSIS COMPARATIVE Legal StudiesDepartment by Anna Mychka Anna by © Central European© Central University March 30, 2012 CEU eTD Collection specifically meet theneeds ofthis modern phenomenon. copyright-patent conflict andinsteadproduce a unique however balanced provisions to unconventionalsolutions. It is suggested that legislators should abandon traditional equipped tocombat unfairuse.Software unconventional is matter therefore it requires On theotherhand, copyright limitation to“written” elements ofsoftware also is ill- no proofthat traditional incentive theory behind works forsoftware sector. practical resultsof provisionslegal andhow they affecteconomysociety. and There is The proper solution lies inthe realm of economicanalysis of law. Itoffers aninsight into choose apropermeans toassesswhich is is more beneficialto all interested parties. software enjoys protection from both copyright and patent. The most effective way to copyright or switch topatentability. The legal uncertainty has led to the situation when more tothe inherent U.S. Europe while hesitates if it should remainwith customary interests ofdevelopers, businesses and public.Atpresent, patentability ofsoftware is Somewhere between in stands law. Ithasto walkthe tightrope, balancing between and versatile businesses while complexity multiplicityand fascinated academia. few decades. Its novelty, dynamics andcommercialapplication hasattracted numerous for software programs. Software has industry been intensively developing over the past The purposeof this paper is toidentify whether patentorcopyright protection isbetter EXECUTIVE SUMMARY EXECUTIVE i CEU eTD Collection ilorpy...... 43 Bibliography...... 40 Conclusion...... Chapter IV -37 Software protection and its impact ...... from economic perspective Chapter III - Protection ofsoftware 26 programs under copyright...... Chapter II - Software protection 16 under patent. Experience and prospects...... 7 Chapter I - Software within legal framework...... 1 ...... Introduction Table of Contents V1Mnpl n otaedvlpet...... 37 IV.1.Monopoly and software ...... development 33 ...... III.4. andOpen Source III.3.Judicial interpretationcopyright of 29 protection. Idea, process ...... and tangible effect. 27 III.2.Reverse engineering...... 26 III.1.Scope ofprotection ...... software of under copyright. Background II.5.European patent office and battle against 24 patentability of software in Europe...... 21 II.4.Prior art research...... 20 II.3.Defensive patents and patent thicket...... II.2.Origin of patentability softwareof 18 in the U.S. Judicial Interpretation...... 16 II.1.Scope of protection. Background...... I.2.Structural 13 components ofsoftware andclassification...... 7 I.1Brief historical overview...... Dvlpeti uoe...... 10 I.1.2. Development in Europe...... 7 ...... I.1.1Development in the U.S. ii CEU eTD Collection 2 1 software: theoriginally codedprogram against direct copying.– “Patents protect of time. exclude othersfrom making, usingor selling the patented inventionfor acertain period and display thework. Patent, on theother hand, isgovernment-granted legal rightto therefore giving author rightsexclusive right to reproduce, adapt, distribute, perform, protection isgranted automatically atthemomentof ofcreation literary or artistic work, “work” shouldmeet certainrequirements setoutinrelevant legalprovisions. Copyright secrets -offer different scope and nature ofprotection and,in order to qualify for any, a The protection regimes forintellectual property rights - copyright, patent and trade industry. by courtsandEuropean PatentOffice (EPO) majorcause uncertainties thesoftwarein the globalmarket ofsoftware products,thediversity of regulations, their interpretations effective. Sincethere is no harmonized lawin Europe, which the is important player on contemplating financial matters, time costsandthenature ofprotection shedeemsmost patent and copyright. A software developer may opttooneof them or undertake both, implemented inventions. An extensive umbrella protection may begrantedbothby software hasbeen raging inEurope due to thedualform foravailable computer- Throughout the last decade, a heated debate overthe means of legal protection for Introduction Invention - A patentable device or process created through independent effort and characterized by an characterized and effort independent through created process or device A patentable - Invention Existence of software industry as such isdisputable; it is more a diverse industry involving individuals and small extraordinary degree of orskill ingenuity B elements of software or both. or ofsoftware elements include that goods or programs software separate ether offer They companies. multinational as aswell firms 2 Therefore,copyright protects‘original expression’ –inthecase ofcomputer 1 LACK ’ S L AW 1 D ICTIONARY (Wested) 9th (2009) CEU eTD Collection 5 “ 4 3 relies on the principlethat even through software program is notpatentable assuch, if it contribution orprocess). so-called “computer-implemented inventions” that atechnicalinvolve effect(or and treaties, practice andcase law inEurope haveallowed thelimited patentability of patentability ofsoftware programmes. provisions Despite clear oftheaboveagreements However, indue course of EPO practice, theOffice has allowed certain degree of Convention, TRIPS agreement. been classified as literary work, hereby eligible for copyright protection under Berne emphasizing the written form of “” ofsource code, software programs have copyright, patents, both, trade secrets or even as mathematicalof algorithm or invention. Commentators havesought to classify itunder property protection byvirtueofitsbinary nature isdebated –it if itrepresents avariation has beendifficult toclassify in order to assign toacertainit category ofintellectual Since becoming commercially attractive and used thewidely in middle80’s, software the European Patent Treaty (EPT), TRIPS agreement, Berne andParis conventions. European countries regulate intellectual property issues byfollowing theprovisions of the idea.” inventive ideas–inthecaseofasoftware relatedinvention: theexclusive right toapply Andre´s Guadamuz Gonza´lez, Guadamuz Andre´s “T 11, 2(2006), http://www.wipo.int/edocs/mdocs/copyright/en/wipo_ip_cm_07/wipo_ip_cm_07_www_82574.pdf 2012) http://www.europarl.europa.eu/meetdocs/committees/juri/20020619/SoftwarePatent.pub.pdf (last visited Mar 27, PATENTS FOR SOFTWARE HE PROGRAMMES PATENTABILITY OF COMPUTER VICOM” 3 (1987) 2 EPOR 74; , E UROPEAN The debate 5 Theterm was the coinedin judicial practice andbasically Merrill Lynch's Application P ARLIAMENT . D . PDF ISCUSSION OF ISCUSSION 2 5, , J NL (1989) RPCC 561; . I NTELLECTUAL E sui generis UROPEAN LEVEL LEGISLATION IN THE FIELD OF FIELD THE IN LEGISLATION LEVEL UROPEAN P Gale ROPERTY software right. (1991) RPC 305 L AW AND P RACTICE 4 Finally, 1– CEU eTD Collection 9 8 7 6 from distinguished scholars inlaw and economy, concentratedon US tostudy the effect Consequently, theabove reports, aswell asnumerous academic originating opinions “inspiration” forsoftware patentability came to EU from the UnitedStates. economic impact ofPatentability programs ofComputer Discussion ofEuropean level legislationin field the ofpatents forsoftware” software needs,most industry “ notably, European Commission andParliament toclarify how efficient would patentaddress recognizing patentability of software EU. in Anumber ofreportshavebeen delivered to programs. claims2005 thatuntil theEPO issuedfrom 20,000 to30,000patentsfor software EPO doesnothave a separate category in its system, however some data statistical It isnotoriously complicated to estimate the number ofissued patents for software as that theway apatentclaim wordedis isoften decisive” intheoutcome ofpatentclaim. effect, nearly all programsmay getpatent. Therefore, it contributes to the “[I]mpression application isdrafted “smartly” and able to convince patent reviewer that there is such “tangible” effect, such wording renders most of programs patentable.Ifpatent be patentable. Since,practically all, software programs demonstrate, tosome extend, provides forcertain “tangible” effect, technical advance orindustrial applicabilitymay it R T E Ibid 2 at 8 HE PATENTABILITY PROGRAMMES COMPUTER OF UROPEAN OBERT http://ec.europa.eu/internal_market/indprop/docs/comp/study_en.pdf E http://www.europarl.europa.eu/meetdocs/committees/juri/20020619/SoftwarePatent.pub.pdf PATENTS FOR SOFTWARE http://eupat.ffii.org/patents/stats/index.en.html (last visited 29,Mar 2012) UROPEAN H ART ET AL ET ART S 7 OFTWAR Atcertain point, theEuropean Commission considered to formally C OMMISSION ., T P ATENT HE , . (Intellectual Property Institute), E CONOMIC S TATISTICS I MPACT OF F OUNDATION FOROUNDATION . P D ATENTABILITY OF ATENTABILITY ISCUSSION OF ISCUSSION The patentability of computer programmes. 3 F REE E I NFORMATION UROPEAN C OMPUTER - LEVEL LEGISLATION IN THE FIELD OF FIELD THE IN LEGISLATION LEVEL ”. I P NFRASTRUCTURE 9 ROGRAMS Themajor sourceof . R EPORT TO THE EPORT TO (FFII), 8 , and “ The 6 CEU eTD Collection 12 11 both supporters andopponents of patentability ofsoftware, thus fuelling further debate Directive onPatentability ofComputer-Implemented Inventions. Itwas alsorejected by major failure.In 2005, the European Parliament voted by a large majority to reject the to enactEU Directive with regards to patentability ofsoftware butitturnedouttobe In viewof EPO practiceandinattempt toharmonize law European Commission offered an entirefield which softwareits covers. simultaneously available intheUSand allows software creatortopotentially monopolize investment intothefield. However itistroublingthatcopyright protection is at itsdisposal and this greatly promoted andenhanced research and development leading position oftheUS in software industry evolvedbecause it had software patent 10 softwarepatents annually. jurisdiction. Today estimated itis thattheUS PatentOffice issues about20,000 software throughjudicial interpretation and precedents principle ofcommon law Nevertheless, in thecourse of time, U.S. turnedintomore patent-friendly jurisdiction for majortools usedto legal protect intellectual property rights of software developers. It should bepointed out that thein United States, copyright and patent are also two effect onsoftware industry than copyright protection. practice donot provide the answer whether patentability of software wouldhave better adapted for EU.Theconclusions ofreports as scholarsas well areinconsistent andin of patents softwarein industry. They posed the question whether USapproach could be James E. Bessen& Robert M. Hunt, Andrew Nieh, Andrew http://papers.ssrn.com/sol3/papers.cfm?abstract_id=461701&rec=1&srcabs=886905 (last visited Mar 29,2012) Feist Publ'ns, Inc. v. Rural Tel.Ser. Co Software Wars: ThePatent Menace 11 Supporters ofpatentability for software argue that the An Empirical Look at Software Patents ., 499 U.S. 340 (1991) , 55 N 12 4 EW Y ORK L AW S CHOOL , SSRN , L AW E L R IBRARY EVIEW 296 ,3(2004), 10 CEU eTD Collection requirements ofeconomic andsocial beneficial effects of software development for This thesisseeksto identify which approach ismore andmeets reasonable run. software developers, ensure innovation andprogress andbenefit societythe in long provideclarity andguidelines for those involved theinto field, safeguard incentive for trivial elements ofsoftware. vital Itis toestablish which legalvehicle ismoreto suitable hardly find today everyday things like the phone orthe stove that run without at least Softwarestrongly against it. has practically infiltratedevery aspect ofmodernlife. We medium coupledbusinesses with academics, scholars and independent developers are urgent. big While internationalcompanies support patentability of software,and small The realm of patentability prospects forsoftware inEU is viewed ascontemporary and patentability ofsoftware. that thebattle isnotoverand soon therebe another will attempt toagreeon over thisissuemainly ledtoDirective’s downfall. However, most commentators suggest technical effectasthey arerun onhardware that produces tangible results. Thedebate Moreover, it was argued that all computer programs, inthatway or another, have some potentially allow to patentsoftware assuch without anytechnical ortangible effect. Directive defined computer-implemented inventory in such a fashion thatwould latter but remain software invention that technicalinvolves effect asthe Directive offeredtoallow patentstothe to agreewas thedefinition ofwhat software and is what iscomputer-implemented over the The issue. stumbling blockwhere participants todiscussionDirective of failed per se under copyright protection. Article 5ofproposed 5 CEU eTD Collection maintenance ofpublic interest aswell aslifespan ofsoftware products. account economic efficiency and impact, supportofinnovative incentive and solution for EU dilemma totailor is provisions specifically for software taking into as none offers proper balance between private incentive and public good. Theproper The conclusions from this thesis identify thatbothcopyright and patents are disputable performance. of economic efficiency of various legal modes available for software andevaluates their deliberates on the issue of software. Finally, Chapter IV explores the area software protection, extend of protection and impactthe in industry. In addition, it standpoint. Chapter IIIexamines copyright and suitability its toaccommodate needsfor requirements, scopeof protectionunder this legal tooland its impact from economic Chapter IIdiscusses patents, eligibility ofsoftware components topatentability the generaloverview elementsof thestructural its classification. ofsoftwarewell as as understandingof the nature ofconflict andinconsistency existing today. Also, itprovides Chapter Ireview historical development oflegalframework inthefieldtoensurebasic particular legal vehicle. approachesthis in thesisfocused is on theconsequences ofprotection granted by a programmers, businesses and public. Comparative analysis of U.S. and European 6 CEU eTD Collection 13 which neededcustomized solutions totackle specific problem. Software firms were able hardware manufacturers. However, theindustry targeted mainly specialized customers customized and/or generalpurpose software thuscoming intocompetition with innovation. separately because patent protection forcomputer hardware adequately rewarded the hardware. There was orno little interest protectingin software technology industry most computer software was provided bycomputer manufacturers along with As it was explained byProfessor M. Lemley, duringthe early stages ofcomputer I.1.1Development in the U.S. accrue to them. Thereforeconcise insight encompasses onlyEUandthe U.S. of thefactthat majority ofcutting edgeprogramsdeveloped forthepast few decades, earlier, thethesis isconcentrated on US and EUjurisdictions. It is notunusual, inview history ofsoftware evolutionwith focusonregulations applied toit.Asitwas pointedout For thesake full comprehension ofthe topic, it isuseful todevote some attention tothe I.1Brief overview. historical characterize typesof software. timeline ofsoftware development and applicable legislation as well asgenerally should be regulated in acertainway. In the following subsections Ibriefly explain the Behind legalconcept there should bean understanding ofwhat is regulated and why it Chapter I - Softwarewithin legal framework. S OFTWARE AND 13 With computerWith evolution, appeared specialty software firms tooffer I NTERNET L AW 33(AspenPublishers 3rd ed) (2006) 7 CEU eTD Collection 16 15 the definition of ‘literary works’. indirectly inacomputer inorder tobring about acertain result” and envelopedit is by “‘[C]omputer program’ is asetofstatements orinstructions tobeused directly or enshrined the relevant provisions in Copyright Act.Under thescope ofthis Acta recommendations, Congress approved copyright protection for computer programs and computer programs shouldbequalified forcopyright protection. Following Copyrighted (CONTU),Works created byCongress, suggested initsfinal report that technologies inthe U.S. TheNational Commission OnNew Technological Usesof The Copyright Act of1976was introduced to addressthe issue ofnew emerging embrace ofthe theneeds industry. mass marketmatured, it wasevident that existing legal framework was notable to 14 inventions and processes that fall under the statutory subject matter, thusclaims canbe On theotherhand, thePatent Act of1952 defined thatpatents areonly granted to subject tocopyrightprotection as originalexpressions.” object code,as wellas thecodefor operation systemswere allliterary works […] and application programs toawider market. Finally, became it profitablesoftware for companies tooffersystemsand particular execution. to draftcontracts for individualcustomersexercise and control over their proper Nieh 301 at C Id. OPYRIGHT at33 L AW OF THE AW OF U NITED S TATES 15 2,4, 2,4, http://www.copyright.gov/title17/circ92.pdf “Itwas soon established that both source code and 14 8 Atthe point when self-sufficient software 16 CEU eTD Collection 20 19 18 patents battles ofMicrosoft, Apple, Motorola, HP, Oracle,etc. the same time,evidenced thepastdecade atruesurge oflaw suits involving software results inabout20,000 software patents granted annually thecuriousin US.It is that, at related inventions” decisions gradually relaxed the subject matter that restricted the patenting of software- legal treatment ofsoftware programs. Instead,“anumber ofcourt and administrative Since the Patent Act and theCopyright Act, Congress has not addressed the issue of “transformationand reduction of an article into a different state orthing”. granted to computer programs asthedecisive test is whether the invention involves Diehr, mathematicalalgorithm, therefore notpatentable. where theSupreme Courtheldthatthe computer program in question, assuch, was The firstCourt decision onthematter was issuedback1972in in andusefulness.that isnovelty patentability if theymeet requirements setout forpatentability ofanyother invention, programs may bedefinedas “process” and therefore, potentially qualified for protected bythe Patent Act, courts have eventually construedthat some computer 17 composition of matter. patented if theyfall under one of four categories: process, machine, manufacture and Bessen & Hunt at 3 Diamond v.Diehr Gottschalk v.Benson Id. at303 theSupreme Courtheld that under certainconditions patent could, indeed, be , 450 U.S. at 175 , 409 U.S.63. 20 andthusestablished patentability for computer programs which 17 Thoughcomputer programswere not, initially, intended to be 9 18 Yet, already in 1981, in in1981, Yet, already Gottschack v.Benson 19 Diamond v. CEU eTD Collection 21 protection had always beenaccepted as unquestionable benefitto the society.” elaborated onthetopic to“[D]ispel the widespread American misconception thatpatent software patentsandtheir impact inthefield.EdithPenrose and FritzMachlup Economists andlawyers launched a nation-wide discussion as to economic efficiency of of software, nations adopted their own diverse approaches to patentability ofsoftware. widecopyright regime,fact that duetothe it doesnotexplicitly address the legalstatus copyright protection underBerneConvention. Thought BerneConvention offersworld– Computer programs were assigned to literary works, therefore considered eligiblefor Convention fortheProtection ofIndustrial Property(Paris Convention) forpatents. Protectionof Literary andArtistic (BerneWorks Convention) forcopyright andParis The mainscope of IPrights inEurope was enshrined inBerne Convention forthe I.1.2. Development inEurope because ofrecent increase inlitigationcost and ofpatents. Nevertheless, today lawyers, economist, andscholars questionpatentability “blessing” industry andmany assignedthe success to affordable patentable patents. therefore eligible forpatentability. It was followed bydynamic development ofthe court decisions gradually relaxed requirements for software, accepted as it process and Despite thefact that initially software was intendedto beprotected under copyright, timeabolishing and now it wouldbe irresponsible. authors suggested to‘to muddle through’ patents. Patent system has existed foralong Fritz Machlup & EdithPenrose, E CONOMIC H ISTORY 1–29(1950) The Patent Controversy in theNineteenth Century 10 , 10 T 10 , HE J OURNAL OF 21 The CEU eTD Collection 24 23 22 excluded software from patentable inventions, itsArt.53(2) was invokedto aseries of Moreover, despite thefactthatEuropean Patent Convention Art.52 (EPC) inits other software elements based on functional or behavioural aspects of the program. by copyright, TRIPS has enabled software developers to attain patent protection for programs tosource and object code as “literature” parts that are automatically protected granted them protection under Berne Convention. Thus, limiting definition ofcomputer TRIPS addresses computer programs withrespecttoobject andsource codeand step andare capable of industrial application”. of processes,all fieldsin of technology, provided thatthey are new, involve aninventive Art.27 has defined thescopein it ofpatentability “[F]orany inventions, whether products Rights (TRIPS Agreement) brought someof clarity degree astoduration ofpatent. Also, The advance ofglobal Agreement onTrade-Related Aspects of Intellectual Property patentability, moreover itdidnot address the issue ofduration for patent. On theotherhand, Paris convention didnotspecifically define what isexcluded from Charfoos at 13 TRIPS: Aaron D. Charfoos, http://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5 School%20of%20Law.pdf http://www.kirkland.com/siteFiles/kirkexp/publications/2499/Document1/Charfoos_Northwestern%20Univ%20 B Software Protection Under The TRIPS Agreement USINESS AGREEMENT 1–39,5(2002), state ofuncertainty”. protection generally, and computer software protection specifically, in a what isactually patentable, theParis Convention leftglobalpatent “By failing toestablish suchminimum standards, especially with regard to How Far HaveWe Come, And Where Do We Go From Here: The Status Of Global Computer ON TRADE-RELATED 22 ASPECTS , N ORTHWESTERN 11 23 OF Initscopyright section, namely Art.10, INTELLECTUAL J OURNAL OF OURNAL I PROPERTY NTERNATIONAL RIGHTS, L AW AND 24 CEU eTD Collection network or other programmable apparatus; with features realized wholly or partly by means of a computer program; computer a of means by partly or wholly FORPATENTS realized features with apparatus; programmable other or network 27 26 25 exclusive right to applythe idea.” coded programme direct copying. against Patents protect inventive […]the ideas complementary regimes. Copyright protects “original expression” […]theoriginally According toBakels, “[C]opyright andpatent protection ofcomputer software are as such cases (IBM 1999, Phillips 2000) to argue that software was excluded from patentability Directive. Amyriad ofterms suchascomputer program, software, computer- supporters failed even to come upawith single definition of the subject matter ofthe which protection legal shouldsoftware beassigned to.Moreover, both opponents and inventions. The debate,that followed, demonstrated thatthere isno clear understanding drafting of a Directive with respect to the patentability of computer-implemented In anattempt toharmonize law ofsoftware,in thefield European Commission initiated trivial orobvious patent claims contributesto this impression. for patent. Lack ofextensive prior art information atdisposal patent of examiner toreject for computer program patent may besatisfied depending onwording ofan application invention” from patentability underArt. 52ofEPT defined if it is as“computer-implemented Recent practice ofEuropean Patent Office (EPO) shows thatsoftware is not excluded Computer-implemented invention - an inventionwhose implementation involves the use of a computer, computer Bakels at 5 T1173/97,“IBM 1999” also known as Structure product/PHILIPS however softwareif hadtechnical effectitcouldobtain patent. S 27 OFTWARE .The main criticism of suchpractice stems thatfrom aclaim the impression &, http://www.epo.org/news-issues/issues/computers/software.html Computer program product/IBM, 26 Thussoftware enjoys thebest of‘two worlds’. 12 T 1194/97, “Phillips 2000” also Data 25 CEU eTD Collection whichstructural element and/ortype ofcomputer program should betaken into account. element thatshouldbe taken intoaccount whiledefining which legalprotectionand for view throughout patent-copyright debate. There aremultiple suggestions astosoftware To attain some certainty, Idefine principalelements ofsoftware that came into legal patent issimilarly insufficient. program on manufacturing process with tangible effect. It wouldbecomplicated totreat every process formere cooperation between elementsof hardware oroperatesophisticated algorithmswhich canbetrivial orresemble ‘artistic expression’, software may controla monsterwith thebody parts from numerous ‘animals’. Software contains mathematical understand the nature of software programs.In its own way itresembles Chimera –a theOne of reasons of legaluncertainty in the softwarethat fieldis legislators struggle to I.2.Structural components ofsoftware and classification every-dayour life. advancement ofsoftware industry, its globalnature anditsincreasingomnipresence in a needfor clear-cut and distinct provisions is pressing, especially viewin ofthefast This shortdescription ofthe situation inthefield inmajorjurisdiction indeed, shows that increase of trivial patents and accumulation of patent thickets onthe other. confusionwithin legal framework assignedto regulate software onehand and benefit to program, especially under circumstancesnature ofglobal ofindustry,causes general implemented invention etc.circulatethe field. Lackofclarity indefining software ad hoc basis butitisalsoobvious thatuniformity offeredbycopyrightor 13 CEU eTD Collection and feel”aspects of program,as aswell its structure, sequence and organization. code isabinary code readableby machines onlyand GUImay beinterpretedas“look 28 account. documentation drafted prior to creation of a program should also betaken into Additionally, though itisnotdirectly incorporated into program structure, program Fig.1 [Fig.1]. outlined as unity of source code, object codeand Generated User Interface (GUI) Summarized byProf. Lipton,the “anatomy”of software forlegal purposes could be 29 Jacqueline D. Lipton, Lemley, at 39 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=901604 (last visited Mar 29,2012) documentation 28 Program Sourcecode a“literary”is component and is readable byhumans, object IP’s Problem Child: Shifting the Paradigms for Software Protection Source code Source Object code Object Software 14 Generated User Generated Interface , SSRN E L IBRARY 29 , CEU eTD Collection 32 31 30 generalstructure ofsoftware anditsclassification. software protection concentrating onEUand the U.S.jurisdictions as wellas provided In conclusion, Chapter Ioffered a briefreview of thecurrentsituation the fieldin of final objective ofthewhole program. perform certainfunctions aswell asnew and inventive codeparts, depending onthe Every typeofsoftware trivial mayparts involve ofsourcecode customary appliedto computer-related issues. Thus, In similar vein, Idefine typesof programs. developed Software is totackle anumber of A S PROGRAMMING SOFTWARE YSTEM PPLICATION SOFTWARE x x x perform on computers (e.g.word processors, web browsers). Application software platform (e.g. Microsoft Linux),Windows, units aswell astoallow different application programs operatewithin single System software assemblers); software Programming S OFTWARE IT D 30 IT EFINITIONS IT DEFINITIONS IT D EFINITIONS isusedtorunhardware andensurecooperation between its , http://www.defit.org/2012/01/system-software.html is used to carry out various tasks which users want users to which outvarioustasks usedtocarry is isused to develop other programs (e.g.debuggers, , http://www.defit.org/2012/01/application-software.html , http://www.defit.org/2012/02/programming-software.html 15 31 32 CEU eTD Collection time forproduction, saleand use oftheinvention. Along, an inventor obtains a requirements forpatentability, thegovernment grantsan inventor a monopoly limited in . less likely to contribute to progressive endeavours that ultimatelyto add theinventory of principles, ifinventors donotreceive patent protectionfor their invention,they will be reward inventors. Patents are basedon utilitarian theory. 35 orderin to stimulate furthercreativity; Black's Law Dictionary ed. 2009)(9th 34 33 competitiveness andeconomic general. welfare in Patents are designated to stimulate innovative activity which is assumed todevelop II.1.Scope of protection. Background. European Union. thepracticeinto ofEuropeanPatent Officeand against battle patentability of software in is made todefensive patents and patent thickets. Finally, having our focus on EU,I look Office (USPTO) with regardsto prior art research conductedby it. Thirdly,the reference judicial practice. It is necessary to look into practice of U.S. Patent and Trademark provided theU.S., in Istudy factors that have justified this approach, in particular that most profoundprotection underpatent umbrella forsoftware, sofar,hasbeen chapter, first, Ianalyze limits ofpatentability for software. Secondly, inview of thefact In ordertoprovide comprehensive review ofthescope ofsoftware protection inthis Chapter II - Softwareprotection under patent. Experience andprospects. Nieh 308 at See also incentive theory, the propositionthat society grants creators exclusive rights to theirintellectual property Patent is the governmental grant of a right, privilege, or authority. Black's Law Dictionary (9th ed. 2009) 35 Inotherwords, should the claim for patentmeet specific 16 33 Governments usepatentsto 34 According toutilitarian CEU eTD Collection 39 38 1996. Available atSSRN: http://ssrn.com/abstract=44458 or http://dx.doi.org/10.2139/ssrn.44458 37 36 failure, promote progressandspur innovation. Software patents,however purportedly solve this public goodsproblem, preventmarket products on the market andeventually software development wouldcome tothehalt. It isarguedthatifsoftware the U.S.in couldnotobtain patent,there wouldbe fewer disclose invention andmake acontributionto prior artand public domain. bargaining power his invention tolicence forfinancial gain.Inreturn, inventor should important oreffective inprotectingone’s innovations. surveys also show that in many other industries patentsare notregarded as either very importance ofpatentsfor U.S.chemicaland pharmaceutical industries. and explain thewillingness to invest in R&D. Anumber ofsurveysestablished There is empirical evidence that for certain industries, patents are an important factor incentive for further development. therefore ensure financial gainsfor invested time andresources,and,potentially, create invention (make, sell,use, license and preclude others from withoutdoing it licences), promote technologicalprogress through early disclosure; give inventor controlover his twenty shorterthen years)andsuchtime is that ofcopyright (from toseventy); fifty James Bessen & Robert M. Hunt, See generally Richard Levin et al (1987) and Cohen et al (2000). Using data from the lattersurvey, Arora et al Lemley, Mark A., Antitrust and the Internet Standardization Problem. Connecticut Law Review, Vol. 28, p. 1041, See also Ordinary Skill in the Art, the level of technical knowledge, experience, and expertise possessed by a by possessed expertise and experience, knowledge, technical of level the Art, the in Skill Ordinary Seealso http://www.researchoninnovation.org/softpat.pdf (2003) find that firms who rate patents as both more important and more effective and tend to do more R&D (9th ed.(9th 2009) typical engineer, scientist, designer, etc. in a technology that is relevant to an invention; Black's Law Dictionary Software Patent Experiment 17 37 . Patentsare limited intime (seventeen- , 1 (2004), 39 36 38 Butthese CEU eTD Collection 43 42 41 40 different types of inventions differently. obvious extension ofprior art.Asageneral rule,U.S.patent system does nottreat requirement basically means thatinvention should bemore thenjust conventional or Patents U.S.in are granted if inventions are useful,new and non-obvious. The third II.2.Origin patentability of ofsoftware intheU.S.JudicialInterpretation and preventing suits. advantages, includingadvantages innegotiations, cross-licensing, blocking competitors, suggested that firms inthese industries may patent heavily inorder to obtain strategic accumulate largepatent portfolios andto pursue patentsfor strategic reasons.” software. Most ofpatents are purchased by “[F]irms inindustries thatare known to mostlymanufacturing in businessanddo not, directly,deal withdevelopment of obtained mainly by larger U.S. firms ratherthen individuals. Moreover, these firms are According to Prof. Bessen, compared with otherpatents, software patents tend to be programs inbecame aresultofmultiple changes inthepatent policy. Arrival ofUnified literary works underCopyright Actof1972. Subject matter exception for computer As itwas indicated Chapterin I,software programs assuchareprotected in theU.S. as man.” 1952, itwas statedthat thenew to“everythinglaw was toapply under thesunmade by W Bessen & Hunt at 3 Bessen & Hunt at 3–4 Id. http://ipmall.info/hosted_resources/lipa/patents/Senate_Report_No_1979.pdf ILEY at 7 43 , 19 U.S. S ENATE R 41 EPORT 5(U.S.Senate, Committee the onJudiciary) (1952), 42 When Congresspassed the Patent Act of 18 40 It was CEU eTD Collection 50 Diehr However, already1981 in Supreme Court changed itsapproach andin was excluded from patentability. Court ruled thatcomputer program at handwasamathematicalalgorithm and, assuch, 49 48 47 46 45 44 for Congress, programs underscope ofcopyright protection, therewas extensive research conducted court was also more willing to grant preliminary injunctions to patentees evaluatingwhether ornot an invention obviousis topractitioners skilled intheart. to broadenthe interpretationof patent scope. court raised the evidentiary standards required to challenge patent validity and tended Appeals Court for patentsuits in 1982setup forbroaderchanges patentin law. The Act of 1976andexcluded from patentability As it was elaboratedearlier, computer programs wereencompassed by US. Copyright “cheaper”the in meaning thatone hadtospend lesseffort togain it. large damage awards. 409 U.S.63 (1972) U Bessen & Hunt Merges 1997, Kortum and Lerner 1999 Cunningham 1995, Lanjouw Lernerand 2001 Cooley 1994, Dunneret al. 1995, Hunt 1999, Lunney 2001 Rai2003, Merges 1997 PRINT NITED ruled that“[A]n ruled invention incorporating computer program could bepatentedas ...85-2 ...85-2 (1958) S TATES . 49 C aswellas decision in ONGRESS 47 . S . As a result,patents became stronger,more cost-effective and ENATE . J UDICIARY 50 , A Gottschalk v.Benson N ECONOMIC REVIEW OF THE PATENT SYSTEM 19 44 per se Thecourt relaxed thestandards for . Before assigning ofcomputer in 1972, where Supreme 48 46 and to sustain : C Diamond v. OMMITTEE 45 The CEU eTD Collection 52 51 able to get support from venture capitalists and accesstoprivate equity market. market for inventions similar toventure capital market. Smallsoftware firms wouldbe example ofpatent holding company, argues that what they are trying to create a capital withsimilartechnology, and then sue them. Onthe other hand, Intellectual Ventures, an intentionof using, themain purpose is towait forsomeone to become else successful “Patent trolls”. Theterm describes companies orpeople who gain patents they have no Hippel, a professor oftechnological innovation atM.I.T.’s Sloan Schoolof Management, Intensive growth oftheindustryalso attracts “derivative” players, called byEric Von defence means orasexchange object toobtain across-license from competitors. Furthermore, big companies tendto sustain and increase their patent portfolios asa protection against biggercompetitors ordeemedan assettoattract as investors. increase portfolio ofpatents develops when business grows. Patentmay beusedfor additionalcosts, consume time andefforts of the“brains” ofacompany. Thetrend to protection anddeems enoughtosecure it theirrights because pursuingpatents incur then individuals. Moreover, smalland medium business preferstostick tocopyright In comparison withpatents otherin fields, software patentsmore oftenacquired by firms II.3.Defensive patents and patent thicket. software.” long asthenew and non-obvious aspects of theinventiondidnot consist entirely in 450 U.S.175 (1981) The Big Idea: Funding Eureka! eureka/ar/1 (last visited Mar 29, 2012) 51 This decision This wasinterpreted to sustain patentability ofsoftware. , H ARVARD B USINESS R 20 EVIEW , , , http://hbr.org/2010/03/the-big-idea-funding- 52 CEU eTD Collection results oftheresearch-firms,which optedtopatentingtheirsoftware, invest lessinto that obtainsuch patents and identify if itwas beneficialfor the industry. According to the Further thedata was applied tofindouthow software patents influence R&D the firmsin granted byUSPTO torevealsoftware patents. implemented stored instructions.” via own definition that software patent involves “logic algorithm for processing data that is struggledto come with up techniquesto identify suchpatents. For example, adopttheir applications it isdifficult todetermine which patents were granted for software. Scholars In absence of classification within system of USPTOandvague language of patents, that is,that invention fullyis allocated in software. do not look like patents for software Attorneys avoid draining claims for“pure”software decision in USPTO assignssoftware tocategories designated for hardware inventions. Since definition ofsoftware patent and in there areno patentclasses for software 54 53 the underlying technology is softwaresomething or else.” fact thatUSPTO hasasystem for classifying patents“itdoesnot distinguish whether To obtain apatent,inventor hastofile anapplication with thepatentoffice. Despite the II.4.Prior art research Bessen & Hunt at 7 Id. at 8 Diamond v. Diehr, patent applications are drafted suchin amanner thatthey 54 Theresearches basically readthrough patents 21 53 Thereforethere noofficial is per se . CEU eTD Collection a program tooperateis designed conjunction;in (3)computer manufacturer’s design program is intended torun; (2)compatibility requirements ofother programswhich with mechanicalsuch as(1)the specifications ofthecomputer onwhich theparticular Programmer’s freedom choiceof design isoften restricted byoutsideconsiderations trivial patents for standard, customary, open-sourced or obvious software. Given these obstacles, scholars are convinced that USPTO hasgranted numerous challenges: theprior artin field. respect tosoftware,With apatentofficemay number encountera of One oftheconventionaltechniques toprevent issuance oftrivialpatents toresearch is smaller developers. Theysimply lackfundsto question patent validity in court. then involve into expensive and lengthy litigation. Strong patent portfolioscares off similar orcompetitive software. Small businesses prefer to abandon development rather patents, but also threat smaller businesses with litigationshould such business develop Not onlyfirms spendfundsfor increase their patent thickets, quite probably, withtrivial to lead industry decline. their R&D. Theconclusion isthatpatents consume firm’s resourcesandmay eventually x x x x x Global nature of software programs Vague language of applications Absence of classification within patent system Lack of expertise Novelty of the field 22 CEU eTD Collection 56 55 programmingpractices within computer industry. standards; (4)demandsindustry ofthe being services; (5) widelyaccepted in thefield raise thequestion ofpossible decline due tostrong patentability practice. Despite the fact that the U.S. is example ofsuccessfulsoftware industry, many experts the PatentOffice aboutthere if isclaim for priorart. knowledge, especially open source movement andenthusiastically undertakes to notify programmers’ community distinguished is as very active indefending free sharing of competitive environment thefieldandeffectively in eliminate trivial patents.Independent standards. patent examinermakes adecision relying on thesubmitted information andlegal contributes with relevant information aboutpriorart regarding apending patentand public. Outsideexperts are invited tosubmit priorartreferences. Thus, community claims pendingfor patent. USPTO has opened patent examination process to the projecthelp USPTO is improve system of patentissuance through assessment of has launched aPeertopatent joint project withNew York law School. Theaim of the Being aware ofweakart prior research and growingnumber oftrivial patents, USPTO from using it,though mayit becustomary the field. in such solution was patented due to poor prior art research, adeveloper is precluded sometimes is an exhaustive there number ofsolutionstoperform certain operations. If Lemley, at 49 http://peertopatent.org/ 56 Indeed, canit contribute greatly tocreation ofhealthier andmore 23 55 As aresult of such restrictions CEU eTD Collection 57 patents are being granted by EPO. Europe in Thought theDirective was rejected, thediscussion continuous andmore Official recognition ofsoftware patentability would be very much welcomed bybig firms limited patentability ofsoftware under toconcept of‘computer-implemented invention’. As itwasmentioned above,the European Patent Office hasalready engaged into came upwithaconclusion that: U.S. However, itshouldbenoted thatFritz Machlup inaReportdelivered toCongress, patent behindstrong motivation to engage in inventive activity asdemonstrated bythe granting strong protection and enforcementits underpatent law. Firms argue that it is approach isthat patents provide businesses and individualswith more incentive mainly attributed toavailability ofpatents for computer programs. Conventional U.S. hasexperienced accelerated growth in software and industry such success was II.5.European patent office and battle against patentability of software inEurope withthe public toavoid issuance of trivial patents. Even Patent Office hasbecome concernedwith theirpractice andinitiated collaboration J UDICIARY , Aneconomic review of the patent system: Committee print...85-2 productivity of theeconomy.” system has promoted theprogress ofthe technicalarts and the arguments presentedeither confirms orconfutesthe belief thatthepatent “None ofthe empiricalevidence atourdisposaland noneofthetheoretical 57 24 CEU eTD Collection attraction ofinvestors. or togaindominantposition onthemarket, to threaten competitors orasanasset for innovation, depending mainly onhow patents areused,whether fordefensive purposes of theChapter isthat patents andthe patent system or will will nothalt development and 58 “production” render twenty years as highly unnecessary. that with fast and dynamic development, coupled with relatively cheap means of mightto findoutifsoftware beuseful needtwenty yearsofprotection. Onewould say elements ofthecodearestillpresent from “dawn”the times oftheindustry,however it available toanalyze how does softwarelong program It “lives”. is truethatparticular Patents are granted fortwenty years. There is littledata from authoritative source other hand. One of considerations to be taken into account is life cycle ofaprogram. developers. Theyjustify by it incentive theory andmotivation to invest into R&D. Onthe Patents do offerdesirable degreeofprotection forsoftware soughtbyfirms and Note of author’s opinion anyone to be programmer. Availability of “production means” to common people is considered to be one ofthe beone to reasons that softwareconsidered developed is so quickly.people common to means” “production of Availability be programmer. to anyone - access to open source and access to relatively cheap hardware empowers practically empowers hardware cheap relatively to access and source open to access 25 58 Oneofthe major conclusions CEU eTD Collection program readable by computersee ,Lemley at 1115 60 59 program – copytheidea. protected undercopyright, impossible itis toprohibit someone fromdeveloping similar at themoment awork is fixed onatangible medium. isonly As expression it thatis it will beassigned for protection under copyright as literary work. The written nature ofthesource codeandthe fact thatitishuman-readable defined that III.1.Scope ofprotection of software under copyright. Background programs hadbeen developed thus contributing toprior art. poses commercial interest law had to step in. At that point a considerable number of freelyfor or nominal price among developers. itbecameWhen obviousthatsoftware created firstalgorithms functions. toperformsimple First source codeswere shared environments. Students andteachers toyed with programming basic and languages Initiative todevelop programming mainly flourished in academic anduniversity hand inwith cumbersome hardware andconsidered tobeitsintegral part. involved parties. Software emerged asexclusive andhighly limited phenomena. Itwent they alreadycame intoexistenceandrequire provisions tocoordinate relations ofall Legislation usually maintains a “reactive” position and enters to regulate issues when Chapter III - Protection of software programs under copyright software’s sourcecodeand object code. themselves, entitled are tocopyright protection, it is prohibited tomake anexactcopy of principle underlying copyright law is thatonly expression oftheideas,and nottheideas Source code -written instructions for aprogram readable by humans; objectcode -written instructions for a Berne Convention, TRIPS agreement, U.S. Copyright Act 60 Copyrightprotection is granted automatically 26 59 Sincea fundamental . CEU eTD Collection 62 61 code was . Apple vFranklin method bywhich it was developed, engineering that is, bystarting with theknown product and working backward tofind the through reverse engineering, modifications orinterpretations. Discovery byreverse only machine-readable, therefore prevent oratleast limit independentdevelopment Mostsoftware commercial developersprovide object codetotheircustomers, which is As sourcecode is human-readable, enablesit programmers andmodify tointerpret it. III.2.Reverse engineering alternative thatcould becheaper. customers hadanoptionwhether topurchase software ofmanufacturers oruse run ontheplatform of computers butwas writteninadifferent code.Consequently, developing alternativesoftware. Such software performed similar functions and could special programs. Howeverwith copyright, they could not prevent programmers from sell itfor additionalrevenues byaddressing needs of individual customers, who required Manufacturers realized that development ofsoftware was profitable because they could manufacturers ofcomputers who questioned appropriateness of copyright protection. Due tothe factthat initially software was soldaspart of hardware, itwas the similar programs. the sourcecode butrather employing theidea, programmers couldaffordtodevelop Lemley at 27 714 F.2d 1240 (3d Cir. 1983), Lemley 39.at Computer Corp. 61 established that exact copyingofcomputer program Nevertheless, without resorting to direct copying of 62 is is one of the techniques used to‘clone’ the idea. 27 CEU eTD Collection UK ,(2011)at40 64 63 defence and its experimental usedefenceis only amirage. of expression andsocio-political marketplace of ideas. USpatentlaw has nofairuse trademark havefair usedefence and in theUS standshoulder to shoulder with freedom provides fairuse defence if there is nodirect copying involved. Both copyright and the patented invention –strictly speaking theresult ofthework, Patent prohibits reverse engineering itinvolvesif subsequent making, using orselling of produce the same result.Reverse engineering istreated differently byIP regimes. different programming orusesdifferent language combination ofalgorithm sequence to Programmer reveals how a program functions and then writes a clone program in a competitors to developsoftware that would behaveto runontheir platform, e.g. programs ofotherdevelopers. Such other software developersmay seektoprevent developers write application programs forusersthatarerunonplatforms ofsystem software. Sincetodaysoftware isnotnecessarily integralpart ofhardware, independent They offered customers hardware thancan function properly onlywith their own software ratherthensolely software developers seektogainpatents fortheir inventions. Mainly firms thatareengaged manufacturingin of goods containing elements of enough to satisfy revenue expectations of developers and motivate them. developed programs andcontributetofurther innovation, whilecopyingprohibition is claim that thefairuse defence provides for opportunity tobenefit from ideas of Id. The structure of intellectual property law: canonesize fit all at125 HE S TRUCTURE OF I NTELLECTUAL P ROPERTY 28 L AW : C ? Ed.Annette Kur, Published Cheltenham, AN O NE S IZEFIT 64 Supporters ofcopyright A LL ? (Edward Elgar) (2011) Elgar) ? (Edward 63 while copyright while CEU eTD Collection 65 and “amorphous” conceptas“general structure” coupled witheasily obtained copyright demonstrated similar outputs,menus, screendisplays, etc.Suchoverbroad inclusion “organization” asthe two programmeswere writtenindifferent languages however object codeandincludedcomputer programme’s ‘structure”, “sequence” and Dental Laboratory software andwhich elements ofitcould becopied. In thein U.S.Forjudicial interpretation itwas particularly complicated to distinguishwhat is wasAs it pointedout Chapter in II, copyright available is also asprotection forsoftware effect. III.3.Judicial interpretation ofcopyright protection. Idea, process and tangible closernature itis to inventions thentoliterary works copyright opponentsto statethatthere is little artistic expression insoftwareby its and set boundaries to ‘artistic’ expression ofprogrammer. range ofexpression. Predetermined aspects of program’s design,structure and code requirements forparticular software solutions therefore theydonotalways haveawide on whichsoftware shouldrun, other softwarewhich withshould it interact and Firms orindividuals involved solely intosoftware development areboundbycomputer players (application programs)then thoseoffered by Windows platform. Microsoft which sought to limitcustomers in using other Internet browsers ormedia D International AVID N IMMER , C ; Sold and distributed in North, Central and SouthAmerica by AspenPublishers) (2008) OPYRIGHT thecourt has extended copyright protection beyond source and I LLUMINATED : R EFOCUSING THE 29 D IFFUSE 65 US These limitations are used by Whelan Associates v.Jaslow S TATUTE 508(KluwerLaw CEU eTD Collection 66 account severalaspects. First, thereis amerger doctrine, when anditsexpression idea While identifying thereif iscopyright infringement courts involved, havetotake into [Fig.2] steps [fig.2] to come upwithnecessary software program: notspontaneous.work, Usually, itis software developerwould undertake asequence of establish copyright infringement. Developing software nothinglikewritinga is literary Professor Nimer court analyzed decisions to identify teststhat were usedbycourtsto extensive interpretationat itsdisposal. Therefore, it isarguable copyrightif does not render amonopolistic position with such and nodisclosure requirement causesadegreeofconcernstiffening inthefield. Id. at507-509, General description of the function to perform, outline of the app Whelan Associates v. Jaslow Dental Laboratory Draf problem, study of the needs of end user t of the outline of the program Breaking down of problem modu into ofproblem down Breaking overall programming problem and breaking down of those modules into modules down of those breaking and problem programming overall Writing of a specific source code to perfo 30 well as to coordinate interaction between modules itself, data structures and to be used 797 F.2d 1222, 230USPQ 481 smaller modules roach to solve les addressing particular element of the rm the function of each module ofeach the function rm 66 as CEU eTD Collection 70 69 68 67 International available totheprogrammer.” “[P]ractical consideration[that] considerably limit thenumber ofchoicesexpression Despite the fact that there may benumerous ways toaddressthesame problem the it is elements whose inclusion into structure was dictated purely byefficiency concerns. progresses bystepping stone improvement process,with each innovation building on without employing standard techniques.” write aprogram to perform particular functions a in specific computing environment particularly to computer programs becauseinmany “[V]irtually is casesit impossibleto recognized the in context of software in copyright claims anexhaustive is listofways ifthere to express Itwas something. Another doctrine, thatissimilar tomerger doctrine, is development. infringement claims ifthereisonly onesolution toaparticularproblem softwarein D providea monopoly overthe idea itself.” one fashion, thatexpression isnotprotected bycopyright, astheresult would beto merge one.Under into themerger doctrine, “[W]hen anidea canbeexpressed onlyin N 625 F.Supp. 608 (S.D.N.Y. 1985) Copyright illuminated p 518 AVID Id. IMMER at509 N IMMER at 13–65 at ; Sold and distributed in North, Central and SouthAmerica by AspenPublishers) (2008) , C OPYRIGHT I LLUMINATED 70 : R Asindicated, “[T]hecomputer software industry EFOCUSING THE EFOCUSING Q-Co Indus. V.Hoffman 69 Itisinvoked to deny protection toprogram 31 67 Therefore, courtsshould deny copyright D IFFUSE US S scenes afaire TATUTE 508(KluwerLaw . 68 Thisdoctrine applies , which prevents CEU eTD Collection 72 71 and past innovations toproduce […]an improved product”. program’s design It isundisputable that hardware-imposed constrains may extend tonumerous aspectsof overbroad interpretationfrom elements that became customarythe in field. Itwould remedy toa certainextend N Howard Root, Howard 68 MINN L. REV. 1264, 1292 (1984). IMMER scenes a faire at 522–525 at Copyright Infringement of Computer Programs: AModification of the Substantial Similarity Test 72 – – – – : Target Industry practices: Computer industry programming Computer manufacturers’ design Standards: consistent familiar system, operating with compatibility standards: Software Hardware standards (a number of available function key on doctrines courtsmay narrow copyright protection and exclude traditional solutions toaddressinga problem in programming; traditional use softwarein industry andrely onanumber of practices (programmingpractices and techniques that came into layout onthe screen,color schemes etc.); and mainframes which specifies such details asinformation ensure compatibility between personal computers, minicomputers interface (e.g. IBM’s Common UserAccess SAA Manual) to compatibility with other programs runonthesame hardware; keyboard, etc); Whelan AssociatesWhelan v.JaslowDental Laboratory. 32 71 Therefore, referring tomerger , CEU eTD Collection 75 74 73 first steps to formalize the rules behind collaborative software development. Richard started enforcing its intellectual property rights. In response opensource society took LaboratoriesBellsuccessfulUnixwhichhighly wasdeveloped AT&T, in 1980’s In commonplace. evolved within academic andresearch facilities and sharing source code was dramatically with thewidespread diffusion of the Internet.” “[B]ut in recent years,both thescale andformalization oftheactivity have expanded Tradition ofsharing andcooperationexists insoftware development foralongtime now, III.4.Public domain and Open Source down toconcentration ofwhat should becopyrighted in aparticular program. practices from copyright protection wouldallow softwareto filter elements andboil them Merger and E revised; be freely can and code source human-readable includes that software to related or -Of Source Open E CONOMICS OF CONOMICS OF CONOMICS scenes a faire I charge.” then installed across institutions,being transferred freelyor foranominal “Many ofthecooperative efforts in 1970focused onthedevelopment ofan I NTELLECTUAL NTELLECTUAL 74 – Elements taken from public domain (programmers will often build 75 existing existing public domain software intotheir works. P P ROPERTY ROPERTY doctrines, as well as exclusion of standards and customary L L AW AT AW AW at 257 256(Edward Elgar) (2007) 33 73 Open sourcemovement CEU eTD Collection 77 78 76 drives open source developers. However, asitwasreviewedbyLernerand there Tirole is ‘signalling incentive’ that commercial project orbedisadvantageous to academicor student output and results. missed anopportunity togain financial benefit from their workshould theyundertook to opensource.Programmersnumber ofcosts. beara The time costs incorporate To acertain extend,itisstill unclearwhich factors motivate programmers tocontribute contributors tothe field to preventpatenting of freely accessible codes. movement tosecure open source community rights evidences strong motivation of the website,there areninepopular andwidely used open source licences. licensing restrictions on others. Today, according to the data on Open Source initiative their source codefreely available (or forsome nominalcost) aswell asnotto impose one couldmodify and/or distribute open source software andin exchange had to make software.” aimed toprecludetheassertion ofpatentrights concerning cooperatively developed charge. thisFor purpose thefoundation introduced “[F]ormallicensing procedure that The purpose oftheFoundation was to developandspread avariety ofsoftware freeof Foundation. Stallman from MIT Artificial Intelligence Laboratory established Free Software Tirole, Jean and Lerner, Josh, The Scope of Open Source Licensing (November 2002). Harvard NOM Working NOM Harvard 2002). (November Licensing Source Open of Scope The Josh, Lerner, and Jean Tirole, E http://www.opensource.org/licenses/alphabetical Paper No.02-42. Available at SSRN: http://ssrn.com/abstract=354220 or http://dx.doi.org/10.2139/ssrn.354220 CONOMICS OF 76 Pursuanttoprovisions of theGeneralPublic Licence(GNL)or “” I NTELLECTUAL P ROPERTY 78 Itincludes full initiative and opportunity todemonstrate L AW Id. at257 34 77 Such CEU eTD Collection Linux, Perl, Sendmail provethat open source andfreesharing donotposethreat to developers and no capital investment. Successful open source projects such as Apache considerable capitalcosts asopposed to individualcontribution from open source Development ofindividual application programs requirelargeteam work and commercial software developer (e.g. Mozilla project ofNetscape). venture capital, help launch independent project orinvolve intoopen source project of Among others,itisworthmentioning thatopensource may assistinattainment of of software customization. Therefore, software firms maymoney orindividuals from solely raise services rendering to botherwiththis activity. Ifitisnottheir core business, they turn todevelopers. business couldextend for its it individualbusiness purposes, most firms arenotinclined meet specific their business needs. Whilst code isindeed opensource, and any namely: installation, customization andenhancement toindividualclients services to The revenue modelfor opensource is based on service provision rather then licensing by opensource tools, andrun on open source software can becombined withcommercial software. Commercialprograms canbedeveloped against commercialapplication, and anti-‘lock-in’.instead is it Open-source software delayed time.in Opensource licensing does notpreclude commercial use,itis not Facts evidence that open source provides commercial opportunities, though may be credit forthe performedwork. talent andskill, gainrespect and recognition among peersaswell asreputation and 35 CEU eTD Collection stringent but shorter protection tosoftware. that it isfrom five toseven years. Perhaps a good solution would beto grant more leaves mewiththe same – question is thelife-spanWhat ofthe program? Someargue software assuchhashardly existed for more then seventy years. This observation monopolistic aspects. Also, itisgrantedfor fifty-seventy years. Ifwe countback, long run. Nevertheless, it should bepointed out that copyright is notentirely freefrom and though not particularly welcomed bysome developersbenefit tothesociety thein defence and reverse engineering areinvoked tojustify building on previous programs time-efficient. Itdoes not require registration as opposedto patent. Copyright fairuse them to enforcetheir rights without considerable costs. Copyright is automatic therefore To conclude, copyright is beneficial forstart-ups and small firms aseffectively helps fix various application programming interfaces. issues. Before commercialrelease of the operation system takesit about three years to expenses. For example, Windows programmer devotealotof time toremedy these 80 79 compatibility. open source)will want synchronized upgrades andefficient of backwardslevel incentive forfurther creation. Auser who upgradesaprogram cheap(which is with the Tirole, Jean and Lerner, Josh, The Scope of Open Source Licensing (November 2002). Harvard NOM Working NOM Harvard 2002). (November Licensing Source Open of Scope The Josh, Lerner, and Jean Tirole, Tirole, Jean and Lerner, Josh, The Scope of Open Source Licensing (November 2002). Harvard NOM Working NOM Harvard 2002). (November Licensing Source Open of Scope The Josh, Lerner, and Jean Tirole, Paper No.02-42. Available at SSRN: http://ssrn.com/abstract=354220 or http://dx.doi.org/10.2139/ssrn.354220 Paper No.02-42. Available at SSRN: http://ssrn.com/abstract=354220 or http://dx.doi.org/10.2139/ssrn.354220 79 Forcommercial software upgrading and synchronizations means large 36 80 CEU eTD Collection 81 to invent. He arguesthat there isatrade-off between perfectcompetition andpatent Nobel Laureate KennethArrow examinedcorrelation between competition andincentive disclosure and longer protection. qualified experts and team work. Developers seektoretain theirposition with less within R&D inbigfirms involvesconsiderable financial andtimeas require costsaswell protection and precluding public access underlie private interest. Software development somedevelopers areinclined tofavour monopolistic approach.Enlarging patent importance ofthemonopoly-like position offered bythepatent. The historicaljustification ofthepatents system muchhas very centredonthe IV.1.Monopoly and software development development the in industry. public aswell associety that benefits from economic growth, innovation andspurred design itbutalso include otherdevelopers who buildoninformation disclosed thatis to problem, economic Iconsider valueofsoftware notonlywith respecttodevelopers who develop new products based on priorart. To expandthe economic aspectof the wider rangeofavailable products, access to informationto give opportunity toothers to incentive for further development. Society should benefit from increased innovation, of software programs andsociety. Developers shouldget reward forthe efforts and The ultimate objective view in of software programs istobalanceinterests of developers Chapter IV -Software protection and itsimpact from economic perspective Bessen& Hunt at 3–4, at 63, a generalization from Dam, Kenneth W. (1994), ‘The Economic Underpinnings of Patent Law’, 23(1) The Journal of LegalStudies, at 241-71. 37 81 It isnot unnatural that CEU eTD Collection 83 drug industryand perhaps chemicals.” factor ofthird or fourth order of importance to R&D decisions, with theexception ofthe conclusion that followed statesthat “[T]he prospect ofpatent protection was typically up with theanswerpatentsdomotivate if innovationand further investment. The senior executes thein R&Ddepartments of commercial firmswere evaluatedtocome input side, productivity gains, economic growth ontheoutput side, and surveys of from Interviews of corporate executives, measures ofR&D expenses, patentactivity onthe single sectors,individualacross-courtiersof patentsinto countriesand followed. 82 negative one. patent protection andR&Dinvestment, while another study 60into countries showed a are inconclusive. Onestudyof29countriesshowed thatpositivecorrelation inextended protection and freeaccesstouse. theory and resulted inseries ofjustified butdisputablearguments forbothpatent cluster ofscholars tocomewith up theirarguments infavouroragainst “trade-off” economic growth thatbenefitsociety most. discussion The thatunfolded attracted a incentives needed formore invention, and, with thetechnological it, progressand misallocates society’s resources. But the in long runthis higherprices create thevery protection. Inshort run, patent protection raises prices from competitive levelsthus and T See generally W See generally 30, 2012) AND University Press) (2003); Edmund W Kitch, HE L E AW AND CONOMICS E CONOMICS OF ILLIAM 265–90(1977), http://ideas.repec.org/a/ucp/jlawec/v20y1977i2p265-90.html (last visited Mar M L ANDES P ROGRESS , T HE : E IP CONOMIC 82 R Aconsiderable amount ofresearchprivate value The Nature and Function of thePatent System IGHTS ANDIGHTS 83 Onthe otherhand, surveys into public sector S TRUCTURE OF 38 C OMPETITION I NTELLECTUAL P OLICY 6 P ROPERTY , 20 J L AW OURNAL OF (Harvard L AW CEU eTD Collection while financialwhile investments arealothigher. howeversuch thereissimilarly no guarantee ofsuccesswith closed-source software situation today asthere isnoguarantee that developers will succeed withtheir product, supporters. OpenSource should notbedeemedas thepanaceatoremedy complex was arguedbefore, an open source phenomenon undermines incentive theory of patent In thiscontext is also it important tomention OpenSource software developers. As it 39 CEU eTD Collection software depending onthe side that argues. From the above it is deduced that both copyright and patent and beargued as good for but Patents: contra each legal vehicle Icome upwith thefollowing: to copyright orpatenthas proved inefficient. IfIsummarizemain argument proand up with effective solution. Time hasshown thatformalistic approach toassign software The uncertainty thein software industry has raged fortoo longand demands tocome Conclusion ƒ ƒ ƒ ƒ ƒ ƒ ƒ ƒ ƒ 9 9 9 9 9 9 9 High litigation costs Vague legal provision Less input into public domain Outflow of finance from R&D Patent thickets to leads Time-consuming Potentially Expensive to obtain Requires registration with patent Shorter in time Asset to attract investors Stringent control No defence Effective enforcement of “idea” forprotection Better Traditional incentive theory monopolisation office program 40 but Copyright: ƒ ƒ ƒ ƒ ƒ 9 9 9 9 9 Potentially easy to abuse and is interpretation Overbroad Unnecessary long protection Difficult to enforce Protection only for expression of Open source and public domain Monopoly is less likely Fair use defence Free of charge Automatic, no registration “copy” by reverse engineering possible idea benefits CEU eTD Collection copyrightprotection and patent offices, supported byjudicial interpretation, issue protection. As legal framework bothintheU.S. andEurope allow forstatutory automatic However, theworst scenariomay occur if developer argues both copyright andpatent undertake either time orfinancial costsor both. develop an independent program or purchase alicence from patent holder, therefore individual developer would have to “reinvent thewheel” every time itwouldwant to source and build onthe work of others. If software was strictly patentable, the firm or variety ofservices or customizing their product. Developers may benefit also from open Even if alternative software is developed, a firm may raisemoney from rendering a successful andgives immediately advantage over competitors togain many customers. automatically and freeofcharge.Ifastart-up develops asuccessfulproduct, becomesit Therefore, copyright is more appealing tothem. Copyrightgrants protection may takeuptothree years to get apatent, many start-ups do not live that long. willbe unable to bear. First of all financial costs to obtain patent, secondly time costs.It If we putourselves into shoes of start-up or small business, mightit encounter costs it successful. product so it ismore logicaltoenforceposition withthose products that are already better investment. One never knows ifR&D willcome upwith anew and successful power with competitors toobtaincross-licence. Patent would bealso considered as allows precluding othersfrom developing similar technology orensured bargaining appealing because developer can afford it. Patent gives stronger control over product, acommercialIf itis developer with strongeconomic position, patentwould bemore 41 CEU eTD Collection developers anddeprives society ofprospects for dynamic andeffective innovation. ineffective. Ill-fitting law putsextra burden of costsonthe shoulders ofsoftware However, easysolutions of complementaryuse ofpatent and copyright proved tobe to engage lawyers, economists, developers, scholars andexperts from fields.different It isunderno condition aneasysolution. Todevelop suchprovision, legislator will have developments byotherprogrammers, ensureeffective enforcement mechanism. question ofopensourceandprovide aform of fair use defencetomotivate future parts or elements should be protected, how long andhow exactly, should it address This legal provision shoulddefine what is software,classification, provide define which a separate legal provision outside ofpatentorcopyright umbrella. software industry andsafeguard benefit ofsociety from istodevelopinnovations forEU negative effects, Icomewith up aconclusion thatthe best way toaddressthe needof Therefore, upon analyzing scope ofpatentand copyright protection, theirpositive and innovation. patents. 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