Software Feature

Slugging it out over software

Software patent controversies have put intellectual property onto the front pages of newspapers across the world. A supporter of such patents tries to convince an opponent of their worth

made. Patents have never been intended to By Craig Opperman and Jason Schultz be an alternative to first to-market-incentives and many innovation-incentives exist: first-to- There is probably no more vehement IP debate market, patents and others. than whether software should be patentable. Even so, there is plenty of evidence that While proponents argue that protection is vital software patents induce innovation. Many to incentivise innovation and protect those that software start-ups would not have been invest in R&D, opponents believe that it harms financed without patent filings. Without funding, competition and prevents smaller players from they would not have brought products to market, competing with established operators. and would instead have languished with nothing In order to get a closer understanding of more than ideas. Thus, patents are linked to what is involved, we invited two prominent capital, which in turn funds innovation. figures – one from each side of the argument – A classic example is Priceline.com, which to discuss some of the major issues. Jason was founded around patents from a highly Schultz currently leads the San Francisco-based innovative think-tank called Walker Digital. Electronic Frontier Foundation’s (EFF) Patent Priceline was apparently copied by Microsoft’s Busting Project; while Craig Opperman is in Expedia leading to litigation that ultimately private practice in Silicon Valley and has more settled in Priceline’s favour and a license to than 15 years experience as a lawyer and Expedia. But, without its software patents, corporate C-level executive. Priceline may have been put out of business. Under the debate format agreed, Schultz Instead, patents helped increase competition. and then Opperman asks a series of questions, Additional examples are companies that and comments on each of the answers he innovate to develop software products receives. Schultz’s contributions are in red complementary to those of a larger company. throughout the article, Opperman’s are in black. These innovations are then patented, making the company an attractive acquisition target or giving its products an edge in the market. SCHULTZ TO OPPERMAN When faced with a build-or-buy decision, the larger company buys the innovative, patent- protected company or its products rather than Jason Schultz: In theory, patents should be just copying the innovative company. granted only as needed to induce inventions Which brings me to the final comment on that would otherwise not be made. What this question. It is precisely because software concrete evidence do we have that any of is so easily reproducible that software the advances in the software field are due to innovations should be patented. If they were patents as opposed to normal first-to-market not, the software giants would relentlessly incentives? copy young, innovative companies and, because of their substantial resources, would Craig Opperman: I am not sure that underlying squelch them. Survival of the fittest would patent philosophy is to grant patents only to become survival of the fattest and, without induce inventions that would otherwise not be software patents, few would compete in

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markets dominated by the behemoths and otherwise have, then the regulation does not innovation would be reduced substantially serve any public interest. Which brings me to your VC investment JS: Let me start with your last point first. point. There is no doubt that many VCs Protection is a funny thing. When you are the require patent portfolios as escrow before one with it, it seems perfectly reasonable. But investing. But this may be because they want when you are the one it is being used against, to maximise their return, not because they it can seem quite different. For example, one want to maximise overall innovation or public could say that the monopoly that US railroad good. Sure, if one looks at progress from the barons had on cross-country freight transit perspective of a single software company that was the only protection they had against wants patents, there may appear to be a net competition from others who also wanted to gain in profit for that one company. But one Jason Schultz: carry freight. Some of these companies were company’s success might also lead to a It is generally agreed that quite small when they first started but, as dozen companies going out of business or patents are granted as incentives they grew bigger, they were able to exploit being prohibited from offering cheaper and to increase the rate of innovation their monopolies to gouge competitors and higher quality alternatives to the public. For and artistic progress, not simply customers alike. Thus, protection against example, how do we know that, because of as protection schemes to prevent competition is not necessarily a universal Priceline.com’s patents, 10 other innovative larger competitors from entering good. It often depends on the purpose to companies weren’t driven out of business or marketplaces of smaller which the protection is put. under funded? How do we know that companies That said, I can certainly see why a small Priceline.com is offering consumers the best company would want such protection against quality service at the lowest competitive large competitors in a crowded market. But price? We hope these things are true, but protection is not the only option. Innovation is because Priceline.com has a monopoly on its another. Branding is another. Look at a method, we have no assurance that the public company like Google. It has patents, sure. But is not losing out in some way. have they asserted any of them against their Consider a somewhat exaggerated wealthy competitors? No. They compete with example. I want to buy one of two baseball Yahoo! and Microsoft although they are much teams. One team uses steroids; the other smaller (even after their IPO). They do not rest does not. I know the one using steroids will on their patents and other IP. They innovate. probably win more games. Which should I They build customer loyalty and enhanced the invest in? Obviously, from a winning customer experience. perspective, I should invest in the steroid- And how about open source projects? Why taking team. But is this beneficial to the public has Linux become successful when it has no interest? Am I really investing in the best team patent IP? How is Apache the fastest growing in terms of natural talent? Won’t my actions web server product on the market without any drive other owners to invest in steroid-taking patents to its name? What about the Mozilla teams and, ultimately, in all players taking Firefox browser? These are examples of steroids? From the perspective of the owner of alternatives to patents. These projects a non-steroid-using team, it might well seem innovate because they know that innovation that the only way to protect oneself in the will help them more in the long term than marketplace is to also use steroids. My point relying on lawyers, litigation and licensing. here is that while there may be certain small In the United States, the power to grant benefits to individual software companies in patents comes from the US Constitution, specific situations, the drive to patent every which states that Congress shall grant patents single software feature known to man may and copyrights to: “Promote the Progress of have grander consequences that are overall Science and the Useful Arts”. Thus, it is bad for the innovation environment – for generally agreed that patents are granted as example, what many in the patent world have incentives to increase the rate of innovation called patent thickets. and artistic progress, not simply as protection Sure, Priceline filed for and received schemes to prevent larger competitors from patents on its auction system. Sure it was entering marketplaces of smaller companies. able to go IPO. Sure it made its investors and Thus, the central question for any patent executives incredibly wealthy. But the policy discussion, at least in the US, is this: fundamental question to ask is not whether does the particular patent regulation in Priceline.com benefited, but rather, did we as question give us additional innovation and a society benefit? If even a single company social benefit that the public would not (say Microsoft) were to have offered the same otherwise enjoy without the regulation? If the service to the public without needing the amount of innovation is the same as we would incentives of a patent, then the public would

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have received the same benefit that Priceline and the public interest. Thus, even some offers without any of the associated social marginal increase in burden on small costs to competition. It is this question that I companies would still benefit society more than think remains to be answered with empirical no burden on any company to search. evidence before we know whether software patents are truly serving their purpose. JS: Under a property rights theory, it makes sense to think of patents as fungible assets, JS: Why don’t we impose an affirmative but how does it promote innovation to allow search duty on patent applicants? Aren’t them to be bought and sold by companies they in the best position to know where prior that do not actually innovate themselves? art might be? CO: It absolutely does promote innovation to CO: I am a strong supporter of an affirmative allow patents to be bought and sold. duty for patent applicants to supply the Patent An example is a company wanting to move Office with all known prior art. But imposing an into a field and wanting to protect itself against affirmative search duty is more complex. patent positions of competitors. One technique Different companies will have different is to acquire patents for that field. Especially if a resources and an affirmative search duty could late entrant, the acquired portfolio shields and place a proportionately far greater burden on gives leverage to the new company. That new smaller companies and individual patent company often ends up being very innovative to applicants. This would tip the scale in the favour catch up and compete. Thus, the third party of the larger companies even more. Note too, patents are directly tied to innovation. Another that no patent system in the world, not even in example is in companies that license third party Europe, imposes an affirmative search burden. shelf technology and acquire the associated I strongly support much greater funding for patent rights. Here, the patents are tremendous patent offices. Thus, I would much rather see incentives for out-licensing, funding and the anti-software patent lobby work with Patent innovation. This is foundational to the Offices to enhance their capabilities rather technology spin-outs from places such as than to criticise them continually for granting universities and government labs. overly broad patents. Finally, the question of an affirmative JS: This is an example of a company moving search is one for all patents and not into a space where it wants to make or specifically for software patents. distribute a product that could potentially infringe other people’s patents. However, JS: I’m glad to see that you’re supportive of an increasingly, we are seeing patents auctioned affirmative search duty. I, too, would be off to so-called patent trolls who have no concerned that we not overburden small products to sell and provide no research or companies. But one could imagine imposing a innovation of their own but instead merely reasonable search duty where what is want to extract a tax on those already reasonable would depend on the resources of invested in a widely adopted technology. the patent applicant. For example, a small inventor or small company might only have to do some small web searching, look through the JS: The price of defending against patent main industry journals, and verify that their main infringement continues to increase in the competitors have not implemented the software field while the price of procuring invention. A larger software company might have patents is decreasing. Won’t this trend lead to do more, such as hiring a prior art search to more frivolous litigation, especially in the agent to scour through the more common US where attorney’s fees are not even databases in the field. There is already some guaranteed for a winning defendant? requirement for this kind of searching whenever a US patent applicant files a petition to make CO: This is going to be a self-correcting trend. special, which asks the USPTO to accelerate its First, a patent plaintiff also bears significant application so that it can go after a known legal costs in part because they have the infringer. It would not take much to extend such burden to prove infringement. Merely because a requirement to all patent applicants and build a patent is presumed valid doesn’t mean it is in a reasonableness gauge for compliance. presumed infringed. Thus, increased patent Regardless of how the burden is imposed, litigation costs will decrease the tendency to however, we must recognise that any improperly litigate. The exception is contingency fee granted patent is a de facto burden on society litigation, which is one way under-funded

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A fair use defence?

Jason Schultz: Is there any reason there among non-commercial users – schools, litigation, a plaintiff need only present their should not be a fair use exemption for students, families, libraries, etc. These users patent certificate at trial while a defendant patent infringement? In copyright, we allow have traditionally been spared the worry of must present documented, corroborated this to cover situations where it would be threats from copyright owners by courts evidence of prior invention or publication. While inequitable to impose injunctions and recognising that fair use allows them generally it is true that after such evidence is presented, damages against socially beneficial uses. to make personal non-commercial use of a plaintiff must spend money to rebut such copyrighted materials without fear of litigation. evidence, the initial financial burden on the Craig Opperman: I think a case can be made However, in patent law, there is no such defendant often leads to settlement, even with for limited fair use exceptions. In the United protection. As a result, we are seeing a patents that are very likely invalid. States, there already is such a fair use disturbing trend developing in the equivalent limiting medical procedure enforcement of patents against such non- patents from being asserted against doctors commercial parties. For instance, a company JS: Many open source projects cannot afford and hospitals. Similarly, Europe has a called Acacia claims to have five patents to hire patent lawyers every time they prohibition on patents for methods of covering so-called Digital Media Transmission receive a patent threat for either an opinion treating the human body. – the process of streaming audio and video letter or defence. What should they do? But one should be careful of the fair use over a network. As part of its efforts to exception. It is clearly a slippery slope and it enforce these patents, it has not only CO: Once again, this is a balance and not a pure is unclear why it should apply carte blanche targeted large media companies but also black and white issue as the question implies. to the software industry. Thus, this is a small mom-and-pop websites, many of whom While I have some sympathy for companies and question for patent law in general and not a do not charge anything for their streaming businesses that are subject to unfounded question for software patents specifically. content. Acacia has also gone after over demands by patentees, I have no sympathy for 4,000 educational institutions for streaming organisations that flagrantly copy and violate JS: I agree that any fair use exception classroom lectures, including numerous third parties’ rights. In addition, I see the risk of should apply to all patent law and not just community colleges that charge less than potential threats of patent litigation or patent software patents. However, it may be most US$50 per semester for enrollment. Many of shakedowns in the same light as I see potential useful and, indeed, necessary for software these small and non-commercial users cannot claims for “slip-and-fall” accidents and sexual patents. As we have seen in recent years, afford to hire a patent lawyer to advise them harassment. These are facts of the modern there has been a tremendous explosion in the on the validity of these patents, let alone business environment and those claims must be use of software and network technology defend them in negotiations or the courtroom. evaluated on an individual basis. Clearly, some will have no merit at all and could be based on actions that were neither intended nor existed. It companies can enforce rights against large happens every day and one cannot single out organisations. patents as being the only evil. In European As for the cost of software patents jurisdictions, where losers pay winners’ fees, this decreasing, this will lead to more patents will be much less of a problem than in the US. being found invalid. We have already seen Moreover, as with other types of claims, indications in the US courts that the costs of businesses can take actions to reduce the risks patenting must be borne by the patentee not of frivolous patent lawsuits. Having a good prior the public. A beautiful example is the Federal art database is one example. Developing a Circuit’s comment: “Given the choice of “don’t mess with us” reputation is another. imposing the higher costs of careful prosecution on patentees, or imposing the JS: Ah, but one of the key differences between costs of foreclosed business activity on the sexual harassment, privacy rights and public at large, this court believes the costs discrimination claims, and patent threats is that are properly imposed on ... the patentees.” If the former almost always involve some kind of this trend continues, companies that really knowledge or intent component. In other words, care about protecting their major software companies rarely have to worry about claims of innovations will spend a lot more time, effort accidental or innocent conduct in harassment and money preparing their patent applications, or discrimination situations but most certainly as well as possibly doing the searches that have to worry about it in the patent context. you propose. This will be good for the patent Moreover, companies that release private system and very good for software patents. information or condone sexual harassment can often control these costs by education, training JS: Yes, but the problem is who will pay to find and policing their companies. There are no these patents invalid? Even though plaintiffs similar preventative measures that software do bear some sizeable costs in litigation, the companies can take to reduce their risk of costs are dramatically disproportionate to being shaken down by patent claims except to those of the defendant. For example, because stop innovating or producing technology a patent is presumed to be valid and requires altogether. This seems like an untenable clear and convincing evidence to invalidate in system to me. Finally, violations of privacy

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Dealing with the patent trolls

rights, sexual harassment and discrimination amount of money and resources, one can Jason Schultz: What should we do about cause actual personal harm to individuals and overcome these barriers. But again, the so-called patent trolls? serve no social benefit. Competition in the question for society is whether spending technology field, on the other hand, does not resources on these costs is worth the benefit Craig Opperman: Nothing. Firstly, there are inflict personal harm in the same way and does we receive. Every dollar or euro spent organisations that could qualify as trolls serve a social benefit. While we may ultimately acquiring or fighting patents is one less spent and who are beneficial to society. If it were feel that competition violating intellectual investing in R&D, hiring new workers or not for MPEG LA, for example, different property rights should be banned, we must also offering new products. When assessing this patent holders could individually hold to recognise that there is a social benefit (more balance, one has to recognise that barriers ransom or entirely put out of business options, lower prices) that is being sacrificed. that are too high and overprotect an industry companies wishing to deploy MPEG will ultimately lead to less investment, less technology. Imagine having to negotiate with competition and less innovation. What we each of the original patent holders! JS: Doesn’t the explosion of patenting in the want is the right balance of protections and Other so-called patent trolls are no software field make it more difficult for competition. So, are these high barriers to different to real estate developers. If a companies to enter markets with heavy entry socially useful? Do they create developer invests in land, waits for patenting? Why would a VC want to fund a opportunities and bring innovations to market development to reach it and then offers to start-up company in such circumstances if the faster than otherwise would occur? How often license or lease the land to third parties, costs of getting all the appropriate licences do they do this, as opposed to how often do none of us would have any objections. Why for the underlying technology outweighed any they deny new entrants who might offer the should it be any different for patent potential profit? same, or delay new products that could give owners? These are people who either us higher quality at a lower price? bought patents or developed them CO: Some VCs will be more reluctant to invest themselves. They took significant risks in heavily patented fields. This is no different during the patenting acquisition process from being cautious when investing in, for OPPERMAN TO SCHULTZ and incurred significant costs. At the risk- example, a heavily regulated technology. But, taking time, the statistical chance of them VCs do invest as long as companies can deal being successful was extremely low. But, with the risk and uncertainty. I have spent the Craig Opperman: The foundation of the anti- they had the patience, foresight and, some better part of my career helping companies software patent lobby’s argument is that all would say, luck to own patents for and VCs do this. So, I know it happens all the software – irrespective of where it is used – something that later becomes valuable. I do time. Basically, companies, whether software is somehow different to other technologies not see why they should be vilified for that. or other, entering heavily patented fields must and should therefore be exempt from have an appropriate patent strategy and story patents. How can it be different from other to allay the fear of their investors and succeed industrial endeavours? The biotech industry – in the face of the patents. which is now very patent favourable – raised After all, that is exactly the point of almost identical arguments two decades ago. patents: to grant a limited time exclusionary rights. To argue that anyone should be able Jason Schultz: Patents have a proven social to enter any software field unimpeded, cost – they are anti-competitive monopolies including one developed and expanded by that keep other companies and people from others, runs the risk of tarring the anti- making, using, and disseminating technology; software patent lobby with the view that: “We what we hope – but don’t know – is that don’t care about other people’s rights, and patents have a greater social benefit than we want to be able to do whatever we want, their costs. But until we have empirical whenever we want to do it.” Isn’t this just evidence that the benefits outweigh the costs anarchy by another name? in the software industry, we should be careful about adopting such regimes. JS: I don’t think being pro-innovation or even In the biotech industry, by contrast, there anti-patent means you are anarchistic. was serious empirical evidence that protection Software companies have numerous other was needed: R&D costs were immense, rights and regulations to deal with. What we’re copying was easy, product cycles were long. In talking about here is what affect a particular software, however, only one of these factors right/regulation, ie, a patent, should have on seems the same: copying is easy. On the such companies. Just because we may other hand, R&D costs can range from low to ultimately choose to make a patent harder to high and either way, are generally fixed. The get or less available doesn’t mean the rest of same software team that develops one those rights and regulations will disappear. feature tends to develop all features. So the That said, your answer demonstrates per-feature investment tends to be low even exactly what I am saying. Patents are barriers for companies that spend significant R&D on to entry. In heavily patented areas, they are development. By contrast, in industries like high barriers to entry. Of course, with any biotech and semiconductor manufacturing, the

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The number of patents that get trolled to hold up. With real property, I know when proof and there seems to be no logical reason is very, very small relative to the number of I’m on someone else’s land and how often. why software should receive special patents; in addition, patent trolling is not In terms of purchasing, I also know ahead treatment. Plus, the danger of waiting for such unique to software patents; finally, trolling of time what the market will bear and what evidence is clear. One of the main reasons we is more of a US phenomenon because US my other options are before I have to pay. have arguably over broad software patents lawsuit-losers don’t have to pay winner’s With patent trolls, I invest in a technology, and are engaged in this debate at all, is legal fees. Still, I do not think we should bring a product to market and then one day because for years many software industry frame the debate about European software receive a letter out of the blue informing executives believed there was no such thing patents by pointing to patent trolls. me that some company I’ve never heard of as a software patent. When it became clear wants 3% of my gross revenue because that there were very many patents that JS: Of course, it is easy to get all of the they acquired a patent on technology I’ve applied to software, some dating back rights from MPEG LA – you have no other never copied from a now-defunct company. decades, these executives were very upset at choice. In other words, if you want to make Instead of your scenario, I would say being blindsided. Let us not exacerbate that a fully functional video tool for the web, you the more proper analogy would be a real situation by waiting. either negotiate with MPEG LA or you can’t estate developer who comes to your house You also indicate that somehow software make your tool. While some may not object and says: “Hello. Thank you for living in my is different because the cost per feature is to their prices or tactics, it seems a little house for the past 10 years. Even though lower. From both a practical and a legal disturbing to me that, but for MPEG LA’s you innocently bought this house in good sense, this argument cannot stand up. There benevolence, we are beholden to them. faith or built it yourself, I have a deed that is no cost-per-innovation test for patents. We The fact that the alternative would be says I own it. You now owe me 10 years of know from experience that many major individual patent holders ransoming back rent. So hand over the money innovations have required neither large effort technology companies further supports my immediately or I will evict you and your nor cost. Similarly, I am certain that a lot of point. At least with individual patent family.” Your choices are: pay; move out; or inventors would raise a howl of protest if you holders, you would have some opportunity challenge the deed. And that challenge can suggested that patents should only be granted to innovate or design around one or two cost upwards of US$500,000 to for innovations on which large amounts of bad actors and their patents. With MPEG US$8,000,000. I think most of us would money have to be spent. LA, however, there is no way to design consider such a situation quite unfair – The main problem with the software industry around the entire portfolio. unless, of course, you are the developer being different argument is that technologies Your real estate developer analogy fails with the patent in your pocket. migrate from hardware (patentable) to software (not patentable) and back to patentable hardware! Fundamentally, there can be no per-feature investment is significantly higher, reason why one would want to grant patent as are the manufacturing/production costs. In protection to a method implemented in addition, the development cycles in software hardware, while not granting protection if are shorter, which means that companies can implemented in software. use innovation more easily to keep a market Incidentally, if one does, this will entrench advantage. Google is an excellent example of “gaming” of the system, with patent attorneys this approach. drafting patent applications to look like hardware implementations despite the fact CO: It is incorrect to categorise patents as that their patent claims can read on software anti-competitive or monopolies. There are implementations. A classic example of this is many examples where patents have enhanced IBM’s 1971 spreadsheet patent drafted in competition and helped companies survive. A circuit diagram form. It is rumoured that monopoly is associated with massive market VisiCalc, the predecessor of Lotus 1-2-3 and power and the ability to bring products to Excel, had to take a license under this patent. market. In contrast, patents do not give the It applied to software, no question about it. right to sell something. Instead, they only give So, it is much better for everyone to someone the right to exclude others from recognise that software patents exist and that selling the product. This is a hugely important they should be dealt with. Rather to have it distinction because there are many examples this way than to attempt to hide behind some – semiconductors, MPEG, etc – where theory that software is not patentable and companies with patents have been able to then get blindsided down the line. cross-license each other. This opened up competition and allowed more people to sell products. But the existence of the patents CO: Anti-software patent lobbyists suggest never gave one individual company the that software should not be patentable monopoly with associated market power. because it takes very little effort to produce As far as needing evidence to support the a new software innovation. How does this societal benefit of software patents, I do not position fit with the reality that there is no agree. No other industry has required such effort test for patentability? Moreover, how is

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this reconciled with the many software behemoths, to name a few. Layer onto that the innovations that have required a significant fact that software and, accordingly, software amount of effort and development? patents apply to all kinds of industries. There simply is no way of quantifying which areas of JS: While patent law may have no technical endeavour derive greater or less benefit from effort requirements, patent policy does. There the software patent. are costs and benefits to society from the As to whether companies would have patent system. We, as a society, want to invested effort and development with or maximise benefits and minimise costs. Thus, without patents, it is unclear to me that this if the benefits are low and the costs are high, should be a gating question specifically for patents on software may not make sense. In software. Instead, it is a question for patents other industries where benefits are high and in general and, because software applies to costs are low, they might. Thus, I think you so many different industries, one cannot Craig Opperman: can make a distinction between software answer that question for software in isolation. IBM may be in the patent patents and other patents on those grounds. Also, there is nothing in patent law or policy everything mode, but it has An innovation that takes little effort to that suggests an either/or test for patenting: also come to realise that not accomplish is likely to occur without the need one cannot point to companies that succeeded everyone is into the cross- for any patent-based incentives. Thus, society without patents as proof that all innovation will licensing patents by the will still benefit without the costs of issuing a happen without patents and, therefore, that pound game. This is where patent on that innovation. patents should not be allowed. Instead, one has innovative software As to whether there are a large number of to go back the fundamental question of whether companies can really get software innovations that require a significant patents encourage and/or reward innovation. leverage amount of effort and development, I think that Pointing to situations where patents appear to is exactly where the contentions and have been irrelevant initially is not an disagreement lie. Do we know this for sure? appropriate approach. This is particularly the Can we prove it? Would these companies have case with the companies that you cite. When still invested in this effort and development many of these companies were founded, they without patents? One may surmise no, but incorrectly believed that patents were not consider some of the most innovative software granted for software and so they would not have companies in the world: Apple, Microsoft, applied for them anyway. Since discovering that Adobe, SAP, Oracle, for example. Many of these software is patentable, they have now chosen, companies have recently entered into the patent among other things, to protect their innovations everything mentality, yet for decades they with patents. invested billions of dollars in non-patented Finally, even if you have an effort test for features of their software. Were these patentability, this would mean that for companies stupid? Are they failures? Should software innovations that require significant they not have invested in new software because efforts, there should be patents. I am not they didn’t patent it? I think the evidence shows sure that this is the position taken by the anti- that their investments paid off quite software patent lobbyists. handsomely, even without patent protection. These kinds of counter-examples exist in abundance. Until we see more examples of CO: How do you define a software patent? patents creating the same benefits on the other I’ve been doing software both as an engineer side of the equation, we have every right to be and as an attorney for nearly two decades sceptical of patenting in this area. now, and I find it hard to draw a bright line between what is or is not a software patent. CO: I don’t believe patent policy requires an If one cannot accurately define what is or is effort hurdle for patenting. If it did, surely not a software patent, how can one legislate patent legislation would clearly define that against it? hurdle. Also, as in copyright, there is no sweat-of-the-brow reward for innovation. For JS: Obviously there will be disagreement here. In example, the dressmaker’s pin, the hula-hoop some sense, it’s a rather metaphysical and the application of a failed adhesive to question, even to the extent of whether one can Post-It® paper are great examples of low effort really invent software. All software depends at but high value innovations. some level on mathematical algorithms. Many Moreover, there is no evidence that patents mathematicians and computer scientists believe on software have a low benefit and a high cost that maths is not invented but rather discovered for society. For starters, it is an incredibly – that natural mathematical laws exist and we complex analysis encompassing funding, cross- are just slowly learning to recognise them. If we licensing, ability to compete against create a machine to implement these laws, we

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The copyright alternative

CO: Opponents of software patents often to stop thinking like lawyers and think more One may wish to argue that these patents liken software to an art form and so argue like engineers. The best way to beat out the are also based on algorithms, but if one were that it should be protected by copyright. competition is to stay one step ahead of to do that, one would have to argue that, for What does the anti-software lobby suggest them. If they are busy copying your example, any hardware implemented circuit should be done about protecting the functionality, you should be busy improving it switching mechanism is also an algorithm- functionality of software products from being with a better, faster, more enjoyable version. based technology and, therefore, also not ripped off by others? Copyright cannot do it. patentable. Clearly, no-one in the anti-software CO: My point still remains. Copyright cannot lobby is making that argument. JS: Well, why some may argue this, but I’m protect functionality and a huge amount of Finally, I do not believe the anti-software not sure it’s the main thrust of those software innovation is in function, not only patent lobby would be prepared to accept opposing software patents. However, as I look and feel. Your search engine example is exclusion only for software patents that apply understand it, their point is that the real a case in point. Yes, there are many search to algorithms. My sense is that the attempt is creativity in software is not in the engines. But, it’s the way things actually to squash anything that applies to software, functionality but rather in the specific happen behind the scenes that makes for a irrespective of the industry. implementation. Look at search engines, for powerful search engine – the functionality, example. Both Google and Yahoo! function in therefore. And this functionality (indexing, many similar ways: you type in your request, etc) didn’t just happen. It required huge CO: I find it interesting that those lobbying they search and display the results. But the amounts of effort. Why can Google and against software patents, especially in particular way they do it, how it makes the Yahoo! and others not protect that Europe, cite the threat posed by large customer feel, how easy it is to use, etc, is functionality with patents? Surely, they would companies with large patent portfolios. Why what makes each company unique. The not want someone to copy their does no-one recognise that a well-positioned same could be said about word processing functionality? This is not what anti-software software patent, costing say Euros 15,000 or programs or email providers. It’s often not groups are advocating, is it? less, will be far more successful in protecting the functionality but the presentation and I see nothing in any copyright texts that their innovations against the industrial interface that make the most difference. suggest copyright is for protecting technology. behemoths than their current marketing and Those can and often are protected by Software is a form of technology and analogy product development budgets? copyright and trademark laws. As to the with art and a symphony is both wrong and, functionality itself, I think folks like us have to be quite honest, rather misleading. JS: Because these people have real-world experience as software developers and do not see that scenario actually playing out. Small call it a computer. If we create a program that companies that have fast innovation cycles and carries out some of these laws, we call it strict budgets cannot depend on lawyers and software. On the other hand, if we hard-wire a litigation to maintain their market advantage computer or device to do it, we call it hardware. over larger software companies; instead, they Such distinctions are tricky, for sure, and must innovate, build brand loyalty and stay people far more knowledgeable than I will ahead of the curve. While it is true that a single disagree on the right definition. However, I well-positioned patent might give them some think software patents are patents on the leverage, more often than not any sizeable pure method of implementing an algorithm of company you accuse of infringement has some kind where the innovation is the hundreds, if not thousands, of its own patents algorithm and not the mechanism for that it will use against you in retaliation. While implementation. Thus, if someone were to many of those may be invalid or non-infringed, create a faster processor where the innovation the time, energy, and cost of responding to was the speed of the circuits running the these counter-threats can put many small software, that would be a hardware patent. On companies out of business within months. For the other hand, if someone created a faster example, in the US to get invalidity and non- processor, where the innovation was a faster infringement opinions on a single patent alone formula for processing instructions, that would can cost up to US$15,000. Multiply that times be covered by a software patent. the 2,000 patents per year Microsoft is acquiring or the 3,000 patents per year IBM is CO: I am not sure that it is correct to say that acquiring and your company will soon be awash all software depends to some level on in legal bills, not profits. It’s simply not a game mathematical algorithms. Some patents do, most small software companies can or want to but many do not. The Priceline.com patent is play. Quite frankly, they would rather take their among these. In that patent, the patent claims chances in the open competitive market. are directed to a way of establishing a communication and subsequent transaction CO: I hear this concern – about having to between buyers and sellers of airline tickets. analyse 2,000 or 3,000 patents – expressed The early IBM spreadsheet patent (US patent every now and then, but I think it is totally no 3,610,902) is another. overblown. For starters, any company that

www.iam-magazine.com Intellectual Asset Management April/May 2005 39 Software

feels compelled to analyse every one of IBM’s overall negative costs that such a system patents is either another IBM or very badly would ultimately impose. advised. IBM’s technical endeavours stretch far and wide and I’m sure any company that CO: I cannot agree with the contention that wishes to compete with them is only picking a patents are inherently flawed when applied to very narrow, specific area. They shouldn’t be software. There is no logical reason for this. analysing all the patents. So, I believe the Part of the hysteria around software patents multiplier is an exaggeration. has been generated by totally unprepared Now, back to the few well-positioned members of the software industry who have patents are better than a host of patents for years developed a head-in-the-sand argument. IBM may be in the patent approach to software patents. We saw this in everything mode, but it has also come to the US a decade ago and now we see it again realise that not everyone is into the cross- in Europe. When people suddenly realise that licensing patents by the pound game. This is software is patentable, it’s the unprepared where innovative software companies can ones who are like the captain of the ship you really get leverage. If they focus on getting a mention. Maybe the ship’s captain is to blame few broad, powerful patents for their major for not being prepared when bad weather innovations, these patents will be forced the leaks to appear? extraordinarily helpful in defusing others’ The US is a great case study. Even with patent portfolios – thus levelling the playing the alleged massive increase in software field with respect to the behemoths much patents, and the increase in litigation, and better than simply being innovative. There are contingency fee litigation, and the fact losers plenty examples of how this can be done. do not pay winners’ legal fees, the US Which brings me to the comment about software industry is doing just fine. In fact, it winning because you are innovative. I think is thriving, despite the massive blow it did to that’s a great idea. But the reality is that itself by over-hyping its promise during the innovation doesn’t always win. Neither does dotcom bubble. The bottom line is that reality the best product. Smart companies and well- has not meshed with the hysteria. Looking funded companies do. I can assure you that a across the Atlantic: surely the European few well-placed patents would be a much software industry does not consider itself better playing field-leveller than just being less capable? innovative. I think that if software companies were really so innovative they would have great technology and would be copied if it were not for patents. Maybe they could spend some of their innovative talents on being innovative with their IP protection!

CO: Why does the anti-software patent lobby not rather spend its resources on trying to improve the patent examining system by lobbying for increased funding for patent offices, increased training for patent examiners and for better facilities and resources for these organisations that are clearly over-burdened and under-funded?

JS: Efforts are improving patent quality are admirable, and certainly improving patent quality will help rid us of some individual invalid patents. But to opponents of software Jason Schultz is an EFF staff attorney patents, your question is much like asking the specialising in intellectual property and captain of a sinking ship why he doesn’t reverse engineering. spend more effort bailing water out of his hull Craig Opperman is an intellectual property since that’s where the leaks are. Those attorney in Silicon Valley, California. opposed to software patents see the patent The views expressed in the debate are system as inherently flawed when applied to those of Schultz and Opperman as individuals, the world of software. Small fixes like and are not necessarily those of either the improving patent quality will not negate the EFF or its clients.

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