Bickering About Software Patents Misses the Point About Innovation

On Thursday 16 May 2012, IP Australia held an ‘IP Forum’ event in Sydney, on the subject of ‘software patents’.

Regrettably, being located in Melbourne, Patentology was unable to attend in person.  However, past events have been recorded and made available via YouTube, so we are hopeful that this will also be the case for the software patent forum.  Especially because, by all accounts, it was a fairly spirited occasion.

In the pro-software-patent corner was Australian inventor Ric Richardson, whose company Uniloc has recently reached a substantial settlement with Microsoft over Richardson’s patent covering anti-piracy technology, including Microsoft’s online activation system.  The history of Uniloc’s battle with Microsoft has been covered by two episodes of the ABC television program Australian Story: ‘A Done Deal’ in April 2012, and ‘The Big Deal’ in August 2009.

For the anti-software-patent side, IP Australia invited Ben Sturmfels, principal of free software developer Sturm.  Sturmfels is also the Melbourne discussion group organiser for the Australian Free Software Association, which in 2010 gathered over 1000 signatures on a letter to (then) Innovation Minister Senator Kim Carr calling for the abolition of software patents in Australia.

IP Australia was represented by Deputy Commissioner Phil Spann, who is perhaps not especially averse to software patents, unless they happen to involve ‘business methods’.  His most recent decisions as a Hearing Officer include Network Solutions, First Principles, Iowa Lottery, and Invention Pathways.

So the stage was certainly set for a lively discussion.  But is all this energy really being well-directed?  What actual impact are software patents having on innovation?  And is the question of whether of not software should be patentable really the most important issue to which we should be drawing politicians’ attention, or are there greater barriers to the successful commercialisation of innovative technologies on which to be focussing?

THE PARTICIPANTS’ POSITIONS

The IP Forum has been well-reported by ITNews.com.au (IP Australia debates software patents), ZDNet Australia (The world needs patents: Uniloc founder), CIO.com.au (Do software patents stifle innovation?) and by Ric Richardson himself, on his blog.

Phil Spann

As reported, Deputy Commissioner Spann had the task of delivering facts and figures.  According to Spann:

1. computing-related patent applications have increased moderately since 2003;
2. this increase has been consistent with an increase in patent applications in general;
3. computing-related applications account for six per cent of Australian patent applications; and
4. this compares with four per cent in Germany, six per cent in China and Japan, and ten per cent in the US.

These figures are broadly consistent with the approach to the patenting of software in these various jurisdictions.  Europe and China, in particular, limit patentable computer-implemented inventions to those which use technical means to solve a technical problem.  This effectively excludes much software which addresses, e.g., business or social needs, rather than a specifically technical requirement, such as making a device or network function more effectively. 

Japan is a little more liberal, requiring a patentable invention to be an application of a law of nature. 

The US, as many are aware, has perhaps the world’s most liberal approach to patenting of computer-implemented inventions, as well as being a large market for the associated products.  It is therefore not surprising that the largest proportion of software-related patent applications are filed in that country.

Ric Richardson

Software patents – one in particular – have made Ric Richardson a wealthy man.  Unsurprisingly, then, Richardson spoke in favour of software patents.  Based on the various reports of the event, his points included:

1. that he did not see cases of software patents being used by large companies to repress innovation by smaller companies;
2. on the contrary, a patent may be the only protection the ‘little guy’ has against ‘open slather’ on ideas being stolen by large companies with the means to put them into large-scale production and distribution;
3. furthermore, patents add value to a small company which makes it a more valuable acquisition target for larger companies; and
4. regarding copying, Richardson is quoted by CIO.com.au as saying ‘no one who’s a fair thinker thinks that’s an honest way to treat somebody who has come up with a good idea ... Looking back at that whole process, I am so grateful for the patent system.’

Ben Sturmfels

Ben Sturmfels apparently took more of a ‘social policy’ view of the patent system, saying (according to CIO.com.au):

The patent system isn’t to give individual wealth to inventors – it might seem like it is, but that’s misinformation. It’s actually to benefit society, so we need to evaluate the patent system on whether it is actually benefiting society overall in whether it’s a success or not.

Also, Ric’s success generally isn’t feasible for software companies. Large companies have a standard defence against this. They have a truckload of patents and they can bury anyone in endless litigation about this sort of stuff.

According to Sturmfels:

1. building on other people’s ideas is best practice, and software patents stifle this;
2. smaller companies cannot compete with big companies which have large patent portfolios, and thus have the capacity to bury the competition in patents;
3. small and medium companies are the ‘losers’ in the system; and
4. the software patent ‘minefield’ is restricting the willingness of investors to become involved with small software companies.

COMMENT

The first point to note is that the relatively low percentages of computing-related patent filings (between four and ten percent) reported by Spann suggest that the level of controversy which tends to surround software patents on the internet (i.e. among those with a particular personal interest in the issue) may be somewhat disproportionate to the actual issue.

Patents create monopolies in all fields of technology, but there are few in which objections are raised quite so vocally as in the domain of computer-implemented inventions.

But are software patents really so controversial?

We would hazard a guess that the level of actual concern amongst the wider population is far greater in relation to the controversial issue of gene patents than it is with respect to software.  The gene patent debate has had a great deal of mainstream media coverage, whereas the software patent debate is almost entirely confined to the technology press and various online sites and forums.  And if you were to pick a person at random on the streets, the chance that they would have an opinion about whether or not genes should be patentable would be very much greater than the possibility that they are even aware there is a debate around software patents.

Furthermore, as with genetic technologies, those who actually have experience and expertise in development and commercialisation of software are far from being in agreement about the merits, or evils, of software patents.  If all software developers were opposed to patents – as Sturmfels suggests they should be – patent attorneys would not be contracted multiple times per week by people enquiring about how they can protect their computer-implemented innovations against copying by larger competitors.  Any attorney working in the field will tell you that there are numerous small companies in this country, and elsewhere, which see patents as the only viable protection they have against some larger established player simply ripping off their idea as soon as the web site goes live!

Perhaps it’s just political differences?

As for the diametrically-opposed views of Sturmfels and Richardson, it would be tempting to suggest a division along political lines.  Perhaps Richardson is simply the arch-capitalist, supporting a system that can help the individual get rich, while Sturmfels is of a more socialist bent, concerning himself with the betterment of society as a whole?

In fact, however, the patent system (and intellectual property more broadly) is one area in which division rarely occurs along party lines.  The Raising the Bar Act passed in Australia with bipartisan support in both houses of Parliament, as did the America Invents Act in the US last year.

There is ambivalence about intellectual property on both sides of politics.  Capitalists abhor a monopoly, but wish to ensure that those individuals willing to take risks and create businesses are able to succeed.  Socialists have fewer problems with monopolies as a general proposition, if they produce social benefit, but are less keen on the idea that they should be controlled by private individuals or corporations.

So IP laws are inevitably a compromise, on whichever side of the political fence you sit.

But aren’t patent monopolies supposed to provide social benefit?

In a sense, both Richardson and Sturmfels are correct.  The patent system was created – as Sturmfels essentially asserts – in the belief that it would provide a net benefit to society, by ensuring that there is an incentive for innovation and investment in new ideas and technology in the form of a temporary, limited monopoly to enable a return on that investment to be obtained. 

However, the way in which the net benefit is achieved is – as Richardson argues – by rewarding individuals for their efforts and risk-taking.  The specific wider benefits of this are new products and services for all consumers, and the development and growth of businesses which employ people and help grow the national economy.

There is no doubt that patents work more effectively in some areas of endeavour than others.  However, there are no clear lines dividing the ‘better’ fields from the ‘worse’.  Legislative divisions have been considered, but no solution which would provide an improvement in practice has been devised.  The patent system may be a blunt instrument, which provides a net benefit across the whole economy while performing differently in specific sectors, but to date it is the best instrument we have for the purpose.

Do software patents stifle innovation?

There is, to the best of our knowledge, little factual basis for Sturmfels’ contention that patents are stifling innovation and preventing small companies from succeeding.  A recent article on Delimiter – Australia’s IT startup scene: Blooming, not dying – paints a very different picture of the fortunes of new tech businesses in Australia.  The intelligent, informed comments are well-worth reading, too, with one commenter providing a summary of the tech startup scene in Australia and the US (where, remember, the proportion of software patent applications is far higher):

1. venture capital funding investments in Australia totalling an estimated $13.2 million, in 14 reported funding events spanning the six-month period from November 2011 to April 2012; and
2. for the same period in the US, total funding of $5.3 billion over 781 deals.

These figures say far more about conservative, risk-averse Australian investors than they do about the impact of software patents on innovation.

At the same time, it certainly seems that open source software continues to exist side-by-side with proprietary products, while both ‘free’ and ‘commercial’ activity benefits from intellectual property protections.  After all, how would the GNU General Public License (GPL) operate to compel developers to make their own contributions free were it not for the copyrights which give legal teeth to the license terms?  Claims that software developers are being prevented from building on other people’s ideas certainly seem to be lacking in substantive evidentiary support.

Conclusion – we need better incentives for investment, not fewer patents!

While the patent system is not perfect, its flaws are not technology-specific, and there is no clear basis for treating software as ‘special’.  As ITNews.com.au reported Richardson saying, ‘everything is digital these days’.  Any attempt to exclude ‘software inventions’ from patentability is therefore likely to have wide-ranging and unintended consequences, all to solve what seems largely to be a non-problem outside the minds and writings of a vocal minority.

It would be good to see the same level of effort going into lobbying the Australian government to legislate to create a more supportive environment for early-stage investment in technology startups.  Per capita, there is around 16 times the level of investment activity in the US as there is in Australia.  Now there is an issue that really needs to be addressed!

Tags: Business processes, Computer programs, Economics, Innovation policy, Law reform, Patentable subject matter, Politics