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

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”

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”

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.

Interview with a Patent Lawyer – by “Daniel P”

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”

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.

Ready, Set, File! – by “Reynolds H”

On March 4th, United States Senate Judiciary Committee bipartisan leaders released the details of legislation aimed at reforming US patent laws. The new bill makes significant steps toward resolving longstanding conflict in efforts to revamp US law for patent quality and efficiency, and make it more compatible with international laws. The new bill, referred to as the “managers’ amendment“, is being said to provide a much needed boost to innovation. However, the bill must go to the full Senate for a vote, and must be passed in the House of Representatives as well.

The “Managers’ Amendment”  includes nearly all of the improvements to the patent laws that were part of the  Patent Reform Act of 2009, and contains changes to greater balance all users of the patent system. One of the reforms is particularly intriguing, the transition to a first-to-file system. 

Currently, the USPTO runs under a “first-to-invent” system, which as the name suggest, gives rightful ownership of the patent to the first inventor of the innovation.  Under this system there is the potential for the person who invented the innovation first, but failed to file it with the USPTO to be retroactively awarded the patent, thereby possibly leaving the person who filed the patent first to be stripped of it.  This system creates many situations where patents must be disputed between two parties (or more).  The complications of the first-to-invent system are outlined in this example provided by Wikipedia:

Assume Tom conceives of a new mousetrap on January 1, 2006. Tom works diligently from January 1, 2006, to February 1, 2006, to prepare a patent application, and Tom files his patent application on February 1, 2006. Thus, Tom constructively reduced his invention to practice on February 1, 2006. Assume Jerry conceives of the same mousetrap on January 10, 2006, and diligently files a patent application on the new mousetrap on January 20, 2006. Under the first-to-invent system, Tom is entitled to the patent on the mousetrap, because he conceived the mousetrap before Jerry and still worked diligently to reduce it to practice by filing. Actual and constructive reduction to practice should be distinguished. Filing a diligently prepared application constitutes constructive reduction to practice only and can be antedated by evidence of an actual reduction to practice.  If both Tom and Jerry claimed the same invention, the USPTO would institute an interference proceeding between Tom and Jerry to review evidence of conception, reduction to practice and diligence.

As a further extension of the example, assume Tweety conceived of the same mousetrap on December 31, 1990. Tweety never told anyone about the mousetrap and did not work on reducing the mousetrap to practice for many years due to financial reasons. Tweety finally actually reduced the mousetrap to practice on February 15, 2006. Because Tweety did not diligently work to reduce the invention to practice in the period before others’ conception of the same invention, he is not entitled to a patent over Tom or Jerry.

Proponents believe that this transition will serve to rid the confusions of patent ownership leading to interference proceeding, which take away from both USPTO funds as well as degrade the overall efficiency of the US patent system.  Under this first-to-file system, the argument of who initially invented the innovation is moot, thereby allowing USPTO funds and time to be diverted towards further review of the influx of patents. The trainstion also enters the US into the same system that many of the worlds leading nations (UK and Japan), which relieves a major complication to a transition to a more internationalized patent system.  

However, there are plenty of potential drawbacks to this system transition.  Having a firs-to-file system gives incentive for inventors to file patents for innovations which may not be at a quality high enough to deserve a patent.  From a practical standpoint, if emphasis is placed on the speed at which a patent can be filed, the overall quality of the innovation may decrease as a factor of speed. The bill has not been passed yet, so only time will tell if the pros outweigh the cons, hopefully it doesnt turn patent seeking into one big rat race.

Frivolous Patents and Open-Source Research: Patent Law in India – by “Jacob A”

On April 11th, leading Indian drug makers banded under the collective “Indian Pharmaceutical Alliance” (IPA) to challenge 25 frivolous patent applications filed by several multinationals. For the past five years, since a massive transformation in Indian patent law (effectuated in 2005) that finally allowed the filing of pharmaceutical patents (before 2005, most pharmaceuticals were actually nonpatentable), the vast majority of drug patents have been granted to foreign multinationals. Until the IPA demanded its review of pharmaceutical patent grants, neither the names of the drugs for which patents had been awarded, nor the identity of their makers/patent holders, were known to the public public. With the recent disclosure by the Indian Patent Office, it was revealed that Novartis, AG, and Eli Lilly won roughly a third of the 81 contentious drug patents. Aside from these 25 challenged patents, another 51 were granted to other foreign drug makers (La Roche, Shering Corp., Merck, F. Hoffmann, etc…). Only five of the 81 pharmaceutical patents were given to local Indian drug makers.

http://www.livemint.com/images/C811828E-BD27-4EB5-8254-8EE5B65D0BF2ArtVPF.gif

The IPA alleges that the 25 contentious patents held by Novartis, AG and Lilly don’t merit patent protection under domestic law because they don’t enhance the efficacy of previously known drugs. The tactic, the IPA alleges, has been to “evergreen,” to extend the lifespan of an existing patent (for an indefinite period of time, à la copyright-extension) by tweaking the drug’s molecules a bit, without enhancing the drug’s function whatsoever. We’ll see how the suits play out, and whether the IPA will be successful in challenging the big multinationals’ patent extension efforts.

A large part of the problem with IP enforcement and practice in India, especially with regards to patent granting and infringement, has been the lack of transparency of patent records, which, for all the charges of corruption being thrown about, was really just due to a poor infrastructure.

http://img.funtasticus.com/2007/sept/pharmacy220907/pharmacy003.jpg

It was only last year that extant patent records were finally digitized and uploaded to a central server, and only a few months ago, in October 2009, that the records were finally searchable online. In the same vein, a lack of patent examiners has hindered the patent-granting process (in the past) or, as is the precarious case today, granted patents when there was no justification for doing so.

But if “evergreening” patents was certainly aided by the poor IP oversight, it did not depend entirely on bad infrastructure to carry out its nefarious aims. Evergreening is symptomatic of the egregious overstep of patent granting, but is not its only occurrence. The massive 2005 change in Indian law that finally permitted for the patenting of pharmaceuticals was carefully to include a restriction on traditional and commons-based medicines, a section labeled 3(d), “which restricts protection being granted to already known and long-ago patented drugs and their combinations.” Even despite the new presence of pharma patents, Indian scientists are urging people to infringe on drug patents. Beyond that, on the more constructive end of things, a few scientists have recently mapped out the tuberculosis genome, and are refusing to patent the genome and freeing up future research through an open search approach: “Anyone can take advantage and develop a drug based on our research. The aim here is not patents but drug discovery for a neglected disease.” Open access to the tuberculosis genome will be useful for researchers working on solutions for combatting the disease. Anyone across the world is free to join the effort.

The restriction on the new patent law highlights the enormous frequency (and problematic nature) of patents on traditional drugs. In 1995, the US Patent Office (not the Indian one) granted a patent to the University of Mississipi’s Medical Center for the “Use of Turmeric in Wound Healing.” Since then, patents have been granted to US firms for Basmati rice and yoga postures. When pressed by the Indian government for explanations as to their ludicrous patent grants, the US’ answer was that “’India has not yet made available product patent protection for pharmaceuticals and agricultural chemicals, and thus has chosen to take advantage of at least part of the exclusive marketing rights.”

For Indians in India, the impact of an American patent on Turmeric use is much less significant than for Americans, especially considering that international enforcement and standardization of IP laws (under bodies like the WIPO) is far less strict than domestic enforcement by the US. But consider the case of an Indian émigré in the United States using Turmeric to heal scrapes and wounds – she would be violating the patent. Although it has been revoked, the US patent on Turmeric nonetheless highlights what seems to be the dominant (and quite problematic) strategy of the US Patent Office (which has since, sadly, been adapted by the Indian Patent Office as well), to grant patents, regardless of whether they meets the necessary standards, flaunting left and right the non-obviousness clause, or the efficacy-clause, and to revoke them only when under pressure to do so from external parties.

India is the greatest IP paradox. For all its notorious flouting of IP rights,l India is one of the preferred locations for the R&D labs of those same multinationals pressuring India to strengthen its IP policy and enforcement. IT giants Microsoft, Intel and Motorola have immense R&D operations in India, and pharmaceutical companies are beginning to establish research centers there as well. India is the ideal innovation center because of its sheer mass of low-cost, high-skilled knowledge workers. The average salary of a scientist or engineer in India is $20,000, a figure that pales compared to the $90,000 average in the United States. Whether IP maximization drives India’s stunning knowledge culture, or rather, whether the commons-based approach to knowledge that prevailed until recently is instead responsible for providing IP maximizers such as Microsoft with the R&D they need to function, is a question here left unanswered.

A Broken Policy – by “Logan M”

Companies and individuals, in our capitalist society, get ahead and make their existences better (again, in the capitalist sense), through innovation. The government’s obligation to help the individual, and, especially now after the decision in Citizens United, the company, means that the government should assist those entities in their innovating. This is a conclusion derived from simple logic and a fairly well-accepted view on the purpose of government, but one which our government has unfortunately forgotten.

Perhaps that’s a bit mean. Out government has not forgotten its obligation to help us to innovate, it simply has no idea how to do so, at least in the realm of patent law.

Patents were started and continue to be issued in order to promote innovation in two ways: first, because it allows the holder of a patent to gain a unique monetary advantage; and second, because it encourages others to use the public information provided and to improve on existing designs. However, the law as it stands allows for the holder of the patent to seek damages from an “infringer” who has simply, by chance, created something that has already been patented.

This means that if I were to come up with a great idea off the top of my head tomorrow about how to best sell items online, say allowing people to type a list of all the things they want to buy and have my program auto-search the web to purchase them, I could be sued for creating and utilizing such a program if someone else had come up with the same thing and could prove they did so before me. There is no necessary exchange of information – the company does not even need to have released the application before I had my idea. The simple fact is that if a company gains a patent, they can sue anyone for “infringing” it, even if they never intended to do so.

But how does this apply to my original point about the government being clueless about how to help us innovate? The connection here is fear. Anything that I create may have already been patented, unbeknownst to me. That possibility opens up the path for a lawsuit and for my having to pay the holder of the patent. Unless I have some truly and utterly unique idea that I do not believe anyone else could ever conceive of, and unless that idea could make me enough money to justify the risk, it seems like it would be in my best interest to never invent anything. Any invention runs the risk of “infringing” on someone else’s patent, and because of this, innovation is stifled. If the government were to adjust its policy and require the holder of a patent to prove prior knowledge of their product or process on the part of the alleged “infringer” when filing a suit, this fear would be removed and individuals and companies would be in a better place to innovate. This would prevent both my concern above and horror stories such as the one laid out by Gary L. Reback eight years ago. Unfortunately, the law is the same now as it was then, at least in this aspect.

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Lockhorns Comic Strip

The reason Leroy is sad is that he just thought up a grand new method of transmitting data over the internet, but fears it may be already owned by Comcast. Either that or he’s depressed that he didn’t patent his wonderfully “non-obvious” idea for internet sales:

Software Patents are for the Lawyers – by “Matthew C”

In 1991 Bill Gates said “Some large company will patent some obvious thing” and use the patent to “take as much of our profits as they want.” http://www.nytimes.com/2007/06/09/opinion/09lee.html.  Soon the shoe would be on the other foot – and Microsoft would use that shoe to kick the little  guy with big fat lawsuits!  But, though he would later fail to heed his own advice, Gates also understood the consequences of over-patenting, saying:  “If people had understood how patents would be granted when most of today’s ideas were invented, and had taken out patents, the industry would be at a complete standstill today.”

Patents, like copyright, exist to spur new creations.

As a society, we trade the cost of a temporary monopoly for the benefit of incentivizing new and creative inventions. In the case of software, however, this goal seems to have fallen by the wayside.  Instead, software research and development has become like navigating through a field of landmines.  There are simply so many patents out there that everyone ends up infringing.  And it just does not make sense in this day and age to grant exclusive, legally enforceable rights to everyone (probably literally millions of people and potential patents) who comes up with a new (or not all that new) way to use a computer.

In their book Patent Failure authors Bessen and Meurer claim that the cost of patent litigation began to outstrip profits from patents in the mid 1990s.  Furthermore, two thirds of the profits are going to pharmaceutical and chemical companies.  In understanding the rising cost of patent litigation, it helps to know that a company like IBM has a patent department consisting of hundreds of lawyers.

The litigation is not just pervasive and costly, it is pernicious.    Most egregious are patent trolls, companies that collect portfolios of patents for the purpose of extorting expensive licensing fees with the threat of costly litigation.  Yet the litigation does not need to be so clearly exploitative to have negative effects.  DataTreasury recently won a $27 million victory against U.S. Bank for infringing a check imaging patent.

Apparently it didn’t particularly matter that the patent in question had originally been rejected by the patent office and accepted only after the “inventor” Claudio Ballard simply added a layer of encryption indicating from which ATM machine a check came.  What’s more the defense cited check scanning technology going back as far as 1981, albeit with different underlying mechanisms.

We can only hope that the Supreme Court recognizes the error in allowing business methods patents and rules accordingly.  (And by the way they questioned unfortunate Mr. Jakes during oral arguments, it seems they do) Until then, the cost of doing business will continue to include extravagant litigation, and business innovation will be held back.

Let’s just hope that when the Court finally decides the result is not like this quote from DataTreasury’s attorney Nelson Roach:

“Remember what Dr. [Jerry] Hausman, the defendants’ expert, told you would happen if we disregarded intellectual property rights?”  Roach continued. “That we’d end up like India and Egypt where people don’t invent things. Instead, they go around talking about ways they hate America and ways they want to fly airplanes into our buildings.”

IBM vs. open-source – by “Shirley B”

This past Tuesday, IBM sued a French software company called TurboHercules.  This would seem to be a relatively unimportant phenomenon: people get sued over patents all the time.  But here’s the twist: TurboHercules is an open-source software company.  IBM, in 2005, made a list of 500 patents over which they promised on good faith not to sue anyone.  Two of these patents are on the list of items IBM is suing TurboHercules over.

The fight seems to be over system emulators, and the issue of allowing users to get around using only IBM’s System Z to run the operating system.  IBM continues to make money with its hardware because you need its hardware to run the software.  Hercules was an open-source program that allowed you to emulate the System Z software onto common hardware, a program that IBM had no problem with, even though the licensing for it was vague.  TurboHercules offered Hercules to companies as a way to backup their systems, a venture that proved rather profitable.  While I don’t entirely understand the technology part of the controversy, the role that patents, profit, and open-source play in this, and will continue to play in software development, seems incredibly important.

Technologically Impaired Duck does not understand.

IBM has, for a long time, claimed to be an avid supporter of open-source software; this has been evident most prominently in its support of Linux.  Many are concerned that this new suit will pit IBM against open-source.  But what does this even mean in a world where most software is written in an open-source way?  Will it just be that the smaller software projects slip through the cracks, and IBM enforces its patents where it sees fit to support its business model, as it has done here with TurboHercules?

In a post on cnet, Matt Asay, a COO at Canonical, says that this lawsuit heralds the true “arrival” of open-source software into the world of legitimate software.  The fact that IBM is treating this open-source program as a legitimate one, which can be sued, taken to court, and is a veritable business concern to a huge company like IBM indicates the importance of open-source.  Perhaps this lawsuit is, in fact, IBM’s recognition of open-source as an important power in software, rather than their pledge to protect open-source by not enforcing patents.  Open-source can rival their business interests – it’s no longer a hobby for enthusiasts.  But will open-source’s efforts be hindered by this new enemy – patents?  That seems rather dramatic, but stepping on the toes of patent owners  certainly seems more likely.  Time will tell.