Category: IP in the Digital Age

Patent Trolling 2.0 – by “Benjamin G”

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According to this NPR article, 86% of wild canola plants in North Dakota contain genetically modified genes. This isn’t a problem for the environment; the pesticide-resistant plants are no more fit in the wild. They basically behave like normal canola unless someone sprays pesticides on them. On the other hand, it is a huge problem for patent law.

Monsanto, the company that developed Roundup Ready Canola, holds a patent on it, and 86% of North Dakota’s wild canola fields are infringing that patent. Patent liability doesn’t require intent, or even knowledge; if you are using a composition of matter that someone else patented, you can be sued. Percy Schmeiser found that out the hard way when Monsanto took him to court for planting Roundup Ready Canola on his farm in 1998.

In 1997 Schmeiser found that some of his crops were resistant to Roundup. He didn’t intentionally plant Monsanto’s product – some seeds might have fallen off a truck or blown on to his property from a neighboring farm. Discovering this happy accident, Schmeiser saved the seeds from those plants and replanted his fields the following year using the resistant seeds. Monsanto sued him for patent infringement and won; luckily for Schmeiser the court found that, since he hadn’t used Roundup on his crops he had received no benefit from the infringement and so owed no damages.

The specific facts of the Schmeiser case are a bit more complicated than that and it happened in Canada, so the legal details of the decision are not important. The main issue, however, is very relevant. U.S. statute and case law explicitly permits patenting living things. And it is one of the defining attributes of a living thing that it can reproduce itself. What happens when a patented organism comes into your posession literally on its own volition? As I said, it’s no defense to show you didn’t know you were infringing a copyright.

Monsanto is certainly not a nice company, but they seem to be just protecting their core business. There are other people out there who are not so benevolent, and the current patent law presents a serious liability issue. We have patent trolls in the tech industry- is it so far fetched to imagine one of them patenting a computer virus? Suppose it actually helps your computer run more efficiently, but is impossible to detect. The troll could come in and sue you for copyright infringement and collect damages for all the benefits you gained from his program.

If it can happen in software, why not in biology? Surely someone could create and patent a new organism whose main goal was to spread itself as widely as possible and implicate as many people as possible in patent infringement. He would of course have to be clever about how he worded his patent application, but I have no doubt it could be done. Depending on how good his organism was, pretty soon he could sue anyone he wanted.

Patents grant their owners a temporary monopoly on their inventions. When we allow patents on things that you can “use” without your knowledge, though, we open the door to people forcing you to pay for goods you didn’t want in the first place. I’m not really sure what the best solution to this problem is. I do think organisms should be patentable, so I guess I would have to take a look at the strict liability aspect of the law. In copyright, for example, if you can prove you never knew about the copyrighted work then you are not liable for infringement. There may be a good reason why patent law is different, though – I just don’t know what it is.

Drug Patents Stifling Innovation by Financially Straining Pharmaceutical Companies – by “Kendall W”

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New York Times article

Generally speaking, patents were established to foster innovation and to incentivize creativity.  With most people financially benefiting from patents, this reasoning still holds true.  A patent allows the creator to be the sole seller and profiteer of their product.  A patent allows a company to edge out its competition.  And in the case of biotechnology, a patent allows a biotech company to reap massive financial rewards.  In one year alone, Pfizer yields $10 billion dollars from a single patented drug – Lipitor.  Yet unique to this industry, virtually every dollar made on these mega-brand drugs goes back into research and development to produce other life-saving pharmaceuticals.  Although these drugs are expensive for consumers, this industry as a whole perfectly exemplifies the aforementioned rationale behind establishing patents.  But, with more than 10 drugs, from various pharmaceutical companies, with a combined annual revenue of $50 billion losing their patents this year, the productive cycle may come to a halt.  The Director of the Center for the Study of Drug Development at Tufts University, Kenneth Kaitin, said, “I don’t think there’s a company out there that doesn’t realize they don’t have enough products in the pipeline or the portfolio, don’t have enough revenue to sustain their research and development.”  Without the funds for research and development, pharmaceutical companies can’t test cancer-curing drugs or reduce the symptoms of heart disease.  Some are even going so far as to engage in mergers and acquisitions with smaller companies, which have patents lasting for a few more years, in order to attempt to fund their research and development endeavors.  Even these M&A transactions stifle creativity and the development of new pharmaceuticals by drastically decreasing the number of companies in the industry.

This article and the scenario as a whole raises the question, in the field of biotechnology, are patents hindering what they are supposed to foster, innovation?

 

America doesn’t run on Dunkin. – by “Sarah C”

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We run on Monsanto. Soon, the world probably will too unless government finally gets out of bed with them. Monsanto is a biotech company specializing in genetically modified organisms, or GMOs as they have come to be known. Lately, Monsanto has been credited with ruining the lives of farmers and developing a practical monopoly on most corn, soybean, cotton, wheat, canola and sugar cane crops. Recent statistics show that about 80% of all genetically modified foods originate from Monsanto.

Here’s a little background information on Monsanto and an introduction to their “mission and accomplishments.” Monsanto has a patent on their genetically modified crops that they tout as factors in saving world hunger and making our world “greener.” Monsanto and many other big agriculture companies use bacillus thuringiensis (BT) in their crops, which is a biological alternative to pesticide and insecticide , thus preventing creatures from destroying a large portion of the crop. BT also increases the crops’ stress tolerance to acidity, drought, etc. Monsanto’s BT cotton saves 2 million gallons of pesticides annually in the US alone. As a result of all biotech crops combines, nearly 300,000 metric tons of pesticides have been avoided and 15 billion kilograms of carbon dioxide saved.

Another example: rice-dependent cultures face major problems with their diets because milled rice has virtually no vitamin A. Hello, “golden rice.” Golden rice is a genetically modified species of rice that includes vitamin A and could potentially save the lives of 200 million people who have deficiencies and over 500,000 victims of blindness each year. So this evidence suggest that agribusiness companies like Monsanto couldn’t be all that bad, right? Especially when you have people like Bill Gates as a member of the support crew.

But, now that I’ve at least mentioned the potential benefits of Monsanto’s efforts, I can begin discussing the much longer list of problems that these efforts are causing. A court case that received huge media attention was Monsanto vs. Schmeiser. Percy Schmeiser was an organic Canadian farmer against GMO crops. However, his neighbor was growing Monsanto’s GMO crops and wind, water, or something swept some of his neighbor’s seeds into his crop. The seeds cross-pollinated and on one of Monsanto’s routine spying sessions, they discovered Schmeiser’s farm contained their patented seeds and Monsanto sued Schmeiser. Schmeiser had no idea this was happening, not did he want it to happen Though Monsanto seeds contaminated his crop, he was sued for patent violation. The court initially ruled that the seed was Monsanto’s property and it did not matter how it ended up on Schmeiser’s farm. In the end, Monsanto paid for clean up on Schmeiser’s farm, but he had already gone practically bankrupt spending his life savings on litigation.

Since this case, over 2000 Canadian farmers have been sued by Monsanto and over 1000 have filed suit against them for contaminating their crops. The seed patent prevents anyone from making, saving, using, or developing the patented product. Monsanto requires that farmers buy seeds each year and forbids the saving of seeds. A farmer saving seed is treated as an intellectual property thief even if his land is unknowingly contaminated. So, basically Monsanto has control of the seed through patents, and control of the rest of the food through contamination.

Fun Fact: Monsanto sets aside $510 million a year to pay for investigations and suits against farmers who aren’t paying their patent royalties. The company literally sends detectives to collect samples from farms and have helicopters that roam over farmers’ land to inspect.

If what Monsanto is doing to small farmers is legal, what does this say about our patent system? Despite not knowing about their accused infringement, farmers are charged and prosecuted for something that was entirely out of their control. It appears that companies like Monsanto are simply using the patent system to acquire monopoly control of products that we have used for hundreds of years. Who would have thought we would actually start patenting our food? And when a corporation clearly in search of profit is controlling something necessary to sustain human life, this becomes a much more serious issue than patenting software, etc.

And despite the scale of this issue, government has yet to take action and has left it up to small farmers to try and make any changes. Obviously, small farmers do not have the deep pockets to litigate against big corporations like Monsanto and are forced back into submission. Hopefully now that Monsanto’s patent abuse is on the national and international radar and their patent term is coming to a close, the government may be more willing to reform.

As more bad media attention targets Monsanto, people have hope that they might actually get a slap in the face. In 2009, Forbes named Monsanto Company of the Year. After America had a collective aneurism, Forbes retracted their selection and admitted its mistake. Regardless, Monsanto is currently encouraging farmers to commit to planting their second version of soybeans, because its existing patent on the first version will expire in 2014. We’ll see what happens there.

Patents: Essential, if flawed – by “Brian S”

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The patent system purports to encourage innovation, but it is unclear whether it successfully does so. The idea is that if an inventor gets credit for his work, there is greater reward for invention, thus a greater incentive to invest time and effort into inventing. Patents can have the counter-productive effect, however, of inhibiting innovation, perhaps due to fear of infringing; this potential ramification is supported by at least one interesting study. But does the good outweigh the bad?

One major use of patents – to deter competition – seems problematic in light of the existence of anti-trust laws and prohibitions on monopolies. Shouldn’t we want everyone to have access to a new invention, and leave it to the forces of the market to decide who makes the best use of it? Well, perhaps not. If one company spends millions in research and development and another company simply steals the idea as soon as it comes out, the second company saves the millions and gleans an advantage by refusing to innovate. In some sense, we have a version of the prisoner’s dilemma wherein both companies are individually better off by refusing to innovate, yet both suffer if neither innovates. Patents are, then, the theoretical solution to this: if a company innovates, it alone can reap the rewards of the new invention.

In the case of Amazon’s 1-Click, however, it is unclear whether Amazon truly invested a great deal of resources in what many consider to be an “obvious” (and thus unpatentable) development. If they did invest a great deal, and the technology is non-obvious, Amazon is righteously defending itself against moochers (in the form of Barnes and Noble). If not, Amazon has devised a cheap ploy meant to unjustly hurt a rival business. The line between these two poles is sufficiently blurred so as to be a cause for concern.

Another difficulty is that the financial cost of applying for a patent, while likely trivial for a corporation, presents a barrier to the everyman – the one arguably most likely to actually need a patent, as he may have great post-hoc difficulty, should a company quickly grab his idea, in proving prior invention. In other countries, where patents are a matter of first-to-file rather than first-to-invent, obtaining a patent becomes even more indispensable. Yet at the same time it is difficult to do away with or significantly lessen the fees, lest we encourage spam (and, after all, there is a labor cost in processing each application).

Ultimately, a patent is proof, of sorts, that one actually invented something. This can translate to confidence among investors, market-share among consumers, or an extra footnote in the history books. While there are certainly valid concerns about the implementation of the current patent system, the idea behind it is highly sensible: we want to give credit for an invention where credit is due. Until we can invent a better system to do this (and patent it, of course), we have to live with the one we’ve got.

(And finally, although software patents seem to be especially problematic, there is at least one paper arguing that the negative impact of software patents has been negligible.)

Multi-jurisdictional Patents…Easier said than done. – by “Misbah U”

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Today, the internet, media and telecommunications in general have not only allowed for instant collaboration worldwide, but have also accelerated the process of breaking down cultural barriers. Just as the back of my iPhone says “Designed by Apple in California. Assembled in China,” software products, too, are often designed and architected in one country, further developed in another, and then available for sale worldwide. Hence, being able to have patents filed in multiple jurisdictions has become increasingly useful and crucial for companies.

In a perfect world, one would be able to draft a patent with one set of claims, regardless of the jurisdiction of where it was submitted. In reality, however, it’s not so easy. This approach usually leads to nothing more than confusion and frustration. For example, claims drafted according to the United States’ best practice guidelines will usually have a difficult time evading step objections present with the European Patent Office (EPO), while those drafted for the EPO will also have difficulties with the United States when it comes to nuances surrounding patentable subject matter or language. As for Canada, I don’t think it’s quite clear yet as to which of these approaches (if either) would serve best, simply because of the uncertainties around what is even patentable there (i.e. recently, while Bilski v. Kappos reaffirmed software patentability in the States, while Amazon v. Canada raised questions around whether a “business method is patentable”).

Technically, software and business methods aren’t unpatentable in the United States. Originally the process was required to pass the following test (2008) of either being 1) “tied to a particular machine or apparatus”, or 2) “[transforming] a particular machine or apparatus.” However, in rejecting this “machine or transformation test” as the sole criterion, the Supreme Court (Bilski) opened room for interpretation in terms of defining “process” and what counted as an unpatentable “abstract idea.”

Interestingly, in Europe, the EPO has a stricter approach (based on the European Patent Convention, or EPC) when it comes to software and business patents. According to them, claims must:

  1. Have technical character and solve a technical problem.
  2. Be new.
  3. Involve an inventive technical contribution to the prior art.

For the “inventive step” specifically, the claim should solve “a technical problem using technical means” (epo.org source). Because of this, they also usually prefer that applications be written in a problem-and-solution approach, whereas United States applications want people to focus less on extraneous details.  Furthermore, although in Article 52(2) the EPC explicitly excludes “programs for computers, and presentations of information,” Article 52(3) serves as an exception to this exception (“the patentability of the subject-matter or activities referred to therein only to the extent to which a European patent application or European patent relates to such subject-matter or activities as such.”) and has therefore allowed thousands of software patents (and software-related business patents) to have been passed (source).

In Canada, as mentioned above, the Canadian Patent Act generally outlines the criteria for the claim to be “any new and useful art, process, machine, manufacture, or composition of matter…or any improvement thereof” (source). In Amazon v. Canada, the claim at issue was Amazon’s “1-click” ordering system and the CIPO’s Patent Appeal Board had upheld its initial rejection of this. Ultimately, they had applied a machine or transformation like approach in forming their decision deeming it unpatentable. The Canadian Federal Court, upon review, however, disagreed with this and cited the United States’ Supreme Court’s decision in Bilski—essentially conveying that Canada’s Patent Act had too restrictive of a view.

Thus, for the time being, I think it’s important for companies to a) have an extensive background on the various nuances for patent applications based on which jurisdiction(s) they are looking into applying for, and b) therefore draft multiple sets of claims in order to obtain multi-directional patent protection. Based on whichever application is filed first (United States or EPO, for example), the applicant would be able to prioritize filing U.S. style claims, and later EPO, or vice versa. Because of the disparity between United States and EPO criteria, having separate claims for each jurisdiction makes the most sense if one wants to avoid issues associated with having submitted one set of potential patent claims in multiple jurisdictions. Moreover, I think if Canadian law changes anytime soon, then showing support from both the US Patent Office, and the EPO can only help.

A Startup View of Business Method Patents – by “Victor W”

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Business method patents create a tax or at the very least, an unnecessary cost on doing businesses in the Internet economy.  Many investors in technology or technology-enabled businesses have come to expect companies to file for patent protection and  assume eligibility on the basis that the idea involves a novel implementation and some computer code.  While not every  business will get a patent nor do investors expect companies to always get them, this market expectation forces many  businesses to at least file for patents even when they have a trivial chance of obtaining the patents.  The very act of filing at least gives possible competitors pause because they may now have to worry about building an entire business around  a model that may be owned by their competition.  They may also force competitors to start filing patents for some derivative  works or models to create a bargaining chip with the original innovator or build up a defensive patent portfolio for future  usage in lawsuits.

All these consequences impact small businesses and individual innovators the most.  They get hit by patent infringement  lawsuits first because they are less likely to have the financial resources to defend themselves.  They will settle quickly and the volume of settlements will give weight to the the claims of the patent holders to pursue larger targets.  The cost of  patent filing and defense relative to total financial resources is much higher for smaller companies.  Just how expensive is  it?

Well, for the two software patent applications I have filed, the total legal and filing cost was $40,000.  This number includes roughly $10,000 for provisional patents and $30,000 for the final patent filings.  This cost also overlooks the time spent by the inventor in preparing the filing and not working on the business.  These figures don’t capture all the effort exerted in searching for prior art and examples of business methods.  The total hours associated working with lawyers and preparing patent filings was well over two hundred man hours.

To put it in context, the average American income is about $50,000 and the typical work week is forty hours.  So, if the lonely  individual inventor or small business owner was like the average American, he or she would be expending significant cost and time towards legal and regulatory overhead rather than capital  investment in their business.

Disallowing business method patents (which would require a definition people can agree on) would likely not disincentivize  Internet entrepreneurs from starting companies.  They rely chiefly on execution of ideas rather than the ideas themselves to  succeed; the execution produces new types of advantages like network effects that exist for information goods and largely  doesn’t exist for physical goods.  Creating an artificial monopoly for coming up with an idea could have made sense in the  industrial age and even for certain modern industries like pharmaceuticals which cannot produce natural monopolies or protection for perfecting  the implementation of the idea; however, in the information age most businesses do not need patent protection to achieve defensibility or be incentivized to innovate.

Removing the cost of associated with business method patents would be a boon to startups.  True technological advantages  should be given protection.  Admittedly, defining what constitutes a business method and what constitutes true technology  is very hard.  However, raising the requirement for protection, as In re Bilski has done, is a step in the right direction.  Startups face enough problems as it is, and business method patents shouldn’t be one of them.

The non-obviousness of the non-obvious clause – by “Lynn W”

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In critiquing patent law, it helps to return to the original rationale for protection. As Merrill and Elliott’s patent primer states, “A utility patent is an exclusive right of limited duration over a new, non-obvious invention capable of practical application…The right—to prevent others from making, using, selling, offering for sale, or importing the patent holder’s invention—is granted in return for publication of the invention.”

Unfortunately, it is not exactly obvious what constitutes new, non-obvious, and useful. In addition to reading about the “absurdity” of headline-making patents such as Google Doodles and Amazon’s one-click payment feature, I did a quick search through Google Patents and found countless other inventions that not only seem bafflingly unoriginal, but also appear to be useless. Here are some of my favorites (with existing patents that inspired their creation following in parenthesis):

Kissing shield game for “teaching safe affection” (inspired by the “plastic garbage bag holder and sealer,” “sanitary face mask,” “inflatable art frame,” “arrangement for separating an area of operation or treatment in the oral cavity,” and “surgical face mask”)

Rock, paper, scissors card game (inspired by “board game,” “game comprising a pack of cards,” “card game,” and “card game deck and methods of play”)

Giant gummy bear whose “primary object is to provide a giant gummy bear that will overcome the shortcomings of prior art devices” (inspired by 16 patents including “life-like toy animal” and “toy ball”)

Nose pick offering a novel “ornamental design” (inspired by “novelty trophy and base,” “combined lottery ticket scraper and key ring,” “nasal cleaning insert”)

Generally, I think these examples of un-new and un-non-obvious patented items can be separated into two categories, both of which would be better off without the patent.

The first category is that of patents that are not particularly innovative, but are widely useful. I would put Amazon’s one-click payment system into this category. Amazon CEO Jeff Bezos claims that the patent was a necessity because “We don’t want to be another Netscape.” When Barnes & Nobles tried to use the same system, Amazon sued it for infringement. But – would a one-click Barnes & Nobles really have stolen market share from Amazon when Amazon’s main competitive advantage against the book retailer is price? And even if Walmart – the ultimate low-price retailer – were to copy the one-click model, would that have stopped Amazon from creating the system in the first place?

My guess is no, simply because like any rational retailer, Amazon strives to improve user experience in any way possible to drive up sales. The competitive advantage exists the moment that Amazon adds a new feature for its users, and it continues to improve the customer’s Amazon experience even when the same feature gets adopted by other retailers. The patent simply reinforces and strengthens the competitive advantage – but at a cost to the user, who can only enjoy an expedited shopping experience with one Internet retailer. Besides, all Barnes & Nobles had to do to avoid infringement was to use a two-click system, which hardly seems different from the one-click innovation. It thus remains questionable whether or not the patent really helped Amazon sustain a competitive advantage in the online shopping checkout domain.

The second category is that of patents that are not particularly innovative or useful. Like the kissing shield game. Is this invention really worth the time and labor that goes toward filing and processing a patent? The costs are even greater when you consider the hefty legal fees that many naive inventors are pay in order to patent products that have no profit potential. Of course, once in a while you get an idea like the Pet Rock that generates millions in revenue, but as of 2005, only 3,000 patents in the U.S. were commercially viable out of a total of 1.5 million. There must be a better way to filter out the excess.

At the end of the day, it’s important to remember that the ultimate purpose of a patent is to benefit the public by fostering greater creativity through the means of benefiting the inventor. A study by Bessen & Hunt in 2004 found that software patents have actually resulted in lower R&D intensity and thereby, less creativity. Meanwhile, the vast majority of patents are clearly not providing any monetary benefit to the inventor. Bezos was right when he called for “fewer patents, of higher average quality, with shorter lifetimes.” One way to begin is to offer a better definition of the new, non-obvious, and useful.

Interview with a Patent Lawyer – by “Daniel P”

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Last summer in Austin, TX , I was working on an iPhone app concept for a smart grocery list. The idea was to create an algorithm that determined what you were most likely to buy at a grocery on any given day by analyzing your past purchase history. App users wouldn’t have to worry about brainstorming lists anymore and grocery stores, which would be able to access the application, would have the opportunity to market to users as they shopped.
I had a written five page “business outline” of the idea, tentatively called MyShopper, and was trying to figure out what to do next. I didn’t know how to code, and I was unlikely to meet any developers until I got back to school, so I decided to look into getting a patent.
A quick Google search told me that I couldn’t patent an idea or software. But I wasn’t really sure what that meant. It made sense that the average Joe wouldn’t be given the exclusive rights to every idea that popped into his head. But how could it be that cutting edge software wasn’t protected by patent in the same way that the most recent nanofiber is.
To figure things out, I called a patent lawyer that my Dad is friends with.

“Hey Steve, I’m Mike Petkevich’s son. I’ve got this idea for an iPhone app and I’m thinking about patenting it. The app automatically generates a shopping list by –“

“Daniel, I’d love to help you, but don’t tell me about your idea! I can’t give you specific legal advice if you’re not my client.”

“Oh. Ok. I have a few questions – if you don’t feel comfortable answering some of them, just don’t. First, I’ve got an idea for a smartphone app, and a vague high-level plan for how it will function. Can I patent it?

“Sure.”

“How does that work? Is code generally patentable”

“Code itself can be protected by copyright, but its useless to. The copyright only keeps people other people from using the exact same code as you. It doesn’t prevent them from writing different code that does the same thing, which is pretty easy to do. That’s why people patent software. Patents protect a machine or process, either of which can be argued to be software.”

“Wait, but software isn’t a physical thing.”

“Think of it this way. New software gives your computer new capabilities that can be patented in the same way as a gear that improves the performance of a drill. You’re patenting the added capability the software provides to a computer.”

“Make sense. How specifically should I describe my app in a patent application? Do I need to include any code?”

“You don’t need to include any code. You need a list of technical specs that someone who knows how to code could use to build the software.

“Ok. How should I word the application?”

“That’s complicated. Remember to be as vague as possible. In the legal world, you always want to be able to explain yourself later. Also, I’m charging your Dad $100 for this call.”

“What?”

“Just kidding. Give me a call if you need anything.”

“Bye Steve.”

“Bye.”

So this is what I learned from my talk with Steve the patent lawyer:

– Software is patentable as something that adds capability to a machine
– Code isn’t patentable
– Patent applications for software require guidelines that a software engineer could use to develop the software.
– Wording a patent application correctly is really tough.

I was pretty happy with what Steve told me because it meant that I could patent my app without writing any of the code for it. Then I could develop it without worrying that someone would come up with a similar app first.

I didn’t end up patenting the app because the process just seemed to complicated. And come to think of it, the only part of the app I could have patented was the algorithm that trawled your past purchase history to determine what you needed or wanted on any given day. The rest of the application was pretty simple.

Now I’m wondering if I would have even been justified in patenting the algorithm if I had developed it.  I couldn’t do it on grounds of protecting me from competition because no one would have access to it. The algorithm would process data on my servers and users would only see the resulting shopping list from this process. Competitors could develop algorithms that did the same thing as mine, but they wouldn’t see the specific logic behind it.

As more software becomes web-based, maybe the relevance of software patents will decrease. Online software has a separate front end for users, and it keeps its guts, in a backend that only its creators have access too. You could patent the guts, but why bother if no one else is going to see them. And you probably couldn’t patent what the guts do, because it would obviously retard the progress of software development. Imagine if Facebook and Twitter were patented and no one else could develop social networking sites. That would be ridiculous.

Here’s to the end of patents in software.

Innovation Impediment: Out of Control Business Method Patents – by “Robert C”

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The debate over software patents has now raged for decades, with no sign of slowing down. Last June, the eyes of the software industry were trained squarely on the Supreme Court when they handed down the decision in Bilski v. Kappos, a case with significant implications for the patentability of software. To the disappointment of many anti-software patent crusaders, the Court found against Bilski but failed to set a wider precedent and strike down business method or software patents in general. Proponents of software patents claim that legal protection encourages economic growth, job creation, and protection for innovators. However, more and more entrepreneurs, investors, and even large corporations have come to disagree with this view, realizing that software patents often impede invention, result in costly legal battles, and are used as bully sticks by competitors or non-practicing patent trolls to extract expensive licensing fees and concessions.

Property rights are a vital component of modern society that allow markets to function and economies to flourish. Intellectual property rights lend legal protection and recourse for ideas, designs, art, and writing and their owners, and are particularly important to foster a culture of innovation. Time and again, studies have demonstrated that stability and predictability in legal systems encourage economic growth. Few countries in the world have been as entrepreneur friendly than the United States ove the course of the last century. However, as the rate of technological innovation has increased, our nation’s legal framework has not kept pace. The U.S. Patent system is sadly outdated, and ill designed and poorly equipped to handle the inventions of a software age.

The idea of patenting “one-click” checkout on an e-commerce site or a means of “determining and displaying relationships between individuals who have entered personal information” seems ridiculous, yet Amazon and Friendster hold patents for these particular online functions. The 2008 Berkeley Patent Survey, which interviewed over thirteen hundred startups (more than seven hundred of which were software companies) showed staggering results that run counter to traditional academic beliefs regarding patents. The study reported “in general, the technology startup executives responding to our survey report that patents offer relatively mixed to weak incentives to engage in innovation.” Surprisingly, the study found that only 24% of software firms had even bothered to file a patent, and showed that many industry executives saw little value in spending time and money for what amounts to minimal defensibility.

While the benefits of software patents are disputed and somewhat unclear, the costs are certainly quantifiable. According to a 2008 report from an insurance industry trade organization, software firms bear major costs of litigation associated with securing and defending intellectual property – amounting to over $11 billion per year, which vastly exceeds the profits from the products disputed in those patent cases (see figure below for profits vs. litigation costs for software patents).

The United States Patent system is not adequately coping with the realities of modern innovation, resulting in uncertainty, long delays, and high cost litigation. While the United States has long been the world leader in innovation, in order to remain so patent law will need to adapt for modern inventions and developments in software. While there has been talk for many years about a major patent reform bill, and in recent days both the House and the Senate have put forward versions of the “Patent Reform Act of 2011”, neither draft of legislation takes a real crack at better defining business method or software patents. While there are certainly flaws in the patent process that merit attention (the long delays in patent reviews, first to file vs. first use, and the lack of funding for the USPTO), any true patent reform act will alter patent rules to better accommodate software inventions rather than only addressing the mechanics by which patents are reviewed and approved.

How does Firefox make money again? – by “Adam P”

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It’s a bit of a leap to make, picturing the three programmers sitting at their respective desks, ornamented with their respective bobbleheads, novelty coffee mugs, and other desktop clichés, each separated from one another, and yet they’re each contributing to a mutual project: one writes the source code, another, finds a bug, another fixes that bug.  They’re contributing to Richard Stallman’s revolutionary model of software development, free software.  It’s a simple, comprehensible example structure for Stallman’s model that leaves little to get confused about, but what if we scale up our example.  Take Mozilla, makers of the world’s most widely used web browser of the past 26 months (and remember, computer years are to dog years, what dog years are to people years).  How exactly does Mozilla, a non-profit organization making free software, procure the funds, the staff, and the initiative to create the world’s most prominent web browser? Well being an ignorant Chrome user, I’m not entirely sure. Time to investigate!

…

Well that didn’t take too long.  In short, the funds come from a few places.  In early 1998, Netscape funded the project that financed just three staff members and the support of hundreds of desktops and bobbleheads.  Soon AOL took over Netscape, but vowed and made good on continuing their support for the fledgling development company.  By 2003, they diverted their attention from the Netscape web browser and established the Mozilla Foundation.

Firefox was released in late 2004 and would procure funds by asking for support from it’s community through donations.  Soon enough Mozilla also secured rather lucrative deals with google and other popular search engines, such that whenever firefox provides a default search through these engines they get paid for the traffic generated, with the transactions monitored by the Mozilla Corporation. These deals account for over 80% of Mozilla’s funds.

 

It’s a fairly simple explanation really, barring those two little details: the Mozilla Foundation and the Mozilla Corporation.  What do those do exactly?  Well after a tad bit more investigation, my Chrome-addled mind managed to figure that out as well.

The Mozilla Foundation is “a small team of people [that] provide core services to Mozilla community and promote the values of an open Internet to the broader world.” The Mozilla Organization is a subsidiary of the Mozilla Foundation that monitors business transactions and assures that Mozilla is fulfilling its non-profit status. The two entities basically reenforce Mozilla’s status as a non-profit organization, both legally and spiritually.  You can here the blistering pride as they discuss an open Internet.  Am I being a bit overzealous in my word choice? Blistering? No, no I think it’s justified.

 

Blistering.

 

The imagery and the the advertising behind Mozilla looks revolutionary in ways  that Richard Stallman would love (although he’d rather call it a free internet).  The dark red of the background and the extended fists in the the foreground instantly register as a political protest.  It’s as if Mozilla is the voice of the populous. With the statement describing  the way the Web should be and discussing its impact on humanity highlight the company’s justifiable self-importance.  They sincerely believe in this right and encourage people join in not necessarily to develop technologies, but to contribute to a movement.

 

In fact, they wrote a Manifesto. So Stallman-esque.

The third goal on that list of goals is such a standout: “[to] make Mozilla contributors proud of what we’re doing and motivate us to continue.”

 

Donations come with a T-shirt and gratification

 

And while financially Google and the other search engines contribute more, this excitement over one’s implicit internet rights creates a community beyond Mozilla the organization that is equally excited.  Users generate banners that others are free to post, while others dress up as fire-y foxes at fan conventions.  While the default search deals account for most of the money, it’s the excitement  from internet users fighting for their internet rights that accounts for so many developing software, downloading the software, and encouraging its use from others.  While the vast majority of these people don’t donate a penny,  they contribute to the company and the product directly leading to the company generating money from these search engine deals, and all because the users are excited.  And the reason they’re so excited is because Mozilla takes such pride in itself.  Those zealous mission statements and total disregard of profit margins are perhaps the actual source of funds for the organization. How pleasantly ironic.