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Newsbyteblog: the blog of newsbyte regarding all things IT, free speech, copyright and patents and other things deemed interesting.

Tuesday, July 12, 2005

The EU and the software patent directive


*additional note*


It seems the FFII has run in some trouble, very recently, of a legal/financial kind. More can be read at http://www.nutzwerk.de/media/releases/05_07_29_ffii.html (german). Mind that it's an article written by 'the other side', and probably pretty biased. Currently, the servers of the FFII seem to have been cut off, by order of a german court - which seems a bit like an overreaction for a small delay in payment of the fine by Holger (admin of the FFII), who has been overburdened these last weeks, and, admittendly, made a minor mistake in getting the fine payed on time. (Note that this claim of nutzwerk has been doubted by the FFII, who thinks it rather might be a DNS problem). He has offered his resignation, but it is unclear at the moment if it will be accepted. Human errors are understandable, after all, and Holger has, in general, done a great job in fighting against software-patents. One FFII-member commented:

"It seems, the Nutzwerk GmbH is trying already for some time to shut our mouths. And as Holger was over-burdened, a payment to a German court was delayed with ridiculous consequences (believe me - you don't want to live in Germany, I know these problems very well). So in my opinion, it's nothing serious, but the people being directly involved (Holger & Hartmut) are of course very stressed.

IMHO the FFII-core-team needs holidays - at least for me holidays are the only effective cure against burn-outs.

Finally, I want to emphasise that Holger did a really great job the last years. And what has happened was - as far as I understand it - only a minor mistake that could have happened to everyone of us."

10/08 : More on this latest development can be found at http://wiki.ffii.de/NutzwerkDns050729En.


As anyone even remotely interested in the subject will know by now, the 'Computer Implemented Invention directive (CIID) was defeated in the EU parliament. This means, basically, that nothing changes in this respect - and that after a battle-of-wills and hard-core lobbying for four years!

The funny thing is, BOTH sides (the pro- and con- lobbyists) consider this as a victory, both claiming it is a good thing it didn't pass through. While this may seem absurd and uncomprehensable, it is, in fact, only the former. Pro-CIID groups, like EICTA, can say little else, after having thrown millions of euro's for lawyers and lobbyists into it. Acknowledging defeat is 'not done'; it's in their general marketing strategy, after all: always portray things as if it were a succes, even if it isn't. So, now they claim 'software inventions remain under the patent protection they already have', which is true, but which amounts, in effect, to having no software patents, seen article 52 EPC of the rules to which the EPO has to hold itself too (but doesn't, leading to the mess we're in now).

The reality is, the directive was thrown out with such a never-seen-before huge majority, because BOTH sides decided to throw it out. The pro-patent MEPS because they were afraid that the amendments proposed by the anti-party (which would bring the CIID in compliance with article 52) could muster enough votes, and the anti-patent group because they weren't sure if they *could* muster enough votes (and even thereafter, if it wouldn't be watered down again by the 'conciliatory' process with the EC). So both sides played it safe, and thus the rejection vote was deemed the second best for both parties. All by all though, one can say this is more a victory for those that are against software patents then for the pro-directive (pro-directive meaning the directive without amandements, obviously). Why? For the simple reason that it were the pro-patent lobbyists that have tried to push this new directive through by all means for the last 4 years, and they failed. If they consider 'no CIID' to be a true succes, they could have saved the trouble and money, and just never initiated and lobbied for the CIID. When, after all those years of political struggling, you fail to get a directive passed you pushed for the past 4 years, it smells like hypocrisy to call the defeat of the CIID a succes by any stretch of the imagination.

As a libertarian (and european citizen at that), I'm also very much AGAINST software patents, and thus the CIID, and I have, in my modest way, campaigned against it too. This campaign could have been much bigger, if I had had a little bit more help from some groups, like the FFII. Because, while I don't want to whine, and I certainly respect the effort they have done to get the CIID thrown away, I must confess I'm rather dissapointed in the reaction I got from the FFII. More then once, I have offered an alliance that would have been mutual beneficial, but to no avail. For instance, I had made a manifesto about the CIID (see below) which I would have like to give to ALL the MEPS (in print, not in email). But seen the fact that that would be more then 700 times 15 pages, this would be too expensive for me alone. So I asked for help, financially or otherwise, to reach that goal. Mind you, I *did* offer my help too; since I don't live all that far away from Brussels, I offered to do their biddings for several days and help them out, as a counter-favour. To no avail, alas.

While they all were pretty enthousiastic in the beginning, things always sizzled out, once they noticed I was talking about mutual beneficial help, but *not* me becomming part of or being directly affiliated with the FFII. An attitude I can't really understand; one would imagine all help is welcome, and if it is mutual beneficial, then what is the problem? If they deemed me helping them out for a copple of days wasn't worth distributing my letters (which were anti-patents after all, and not bad, even if I say so myself), then they could have suggested something else for it. But they didn't. Which annoys me the most, frankly. If they didn't want to help, they should have just said so, and preferably why, or worked womething out we both found was to our (and the cause') benefit. But they didn't. I have send several emails (after their first positive responses), but then they never returned any emails anymore, even when I was open to all suggestions. Maybe they should look into this, in the future, because I don't think it's reasonable to just *not* respond; then even a clear 'no' is better then a wall of silence, IMHO. That said, I'm sure it's mostly a matter of being over-burdened, nothing more, and once they'll get a more adequate management of commuications during peak-moments, I'm confident the FFII will resolve this type of problems, and continue their good work even better then before. In the end, we can consider this outcome a succes for all swpat-opponents, because, when I and a lot of others first began contacting and lobbying MEPs in 2003 for the first reading, things looked pretty bleak.

Anyway, this is the 'manifesto' on the directive I made and send as a petition to the EU parliament (note: this manifesto and the appendixes A & B fall under the Creative Commons, attribution - and thus can be freely used and distributed).

Monday, July 11, 2005

The software patents manifesto

(Note: for further coverage of this topic, see also this and this)

Manifesto on the directive of “computer implemented inventions”

Dear MEP,

As you are probably well aware, soon the EU parliament will have a 'second reading' of the directive for allowing patents on “computer implemented inventions”, which, as I will show below, actually amount to allowing software patents (swpat), though this is heavily disputed and denied by the proponents of the directive, including the European Commission (EC).

The way in which this directive has gone through the EU Council of ministers is mind boggling and shows exactly how much the EU has a democratic deficit. Despite the fact there was no real majority for the draft any more (the change in vote-weight after the enlargement alone accomplished that, apart from a lot of change of minds of some other countries), despite the fact that stringent motions of national parliaments were passed to oblige the national ministers to redraw the proposal as an A-item so that it may be further discussed, despite the fact that the EU parliament and their JURY-commission asked for a new first (re)reading with almost unanimity, the EC chose to ignore and disregard all this, while giving no explanation, apart from "for institutional reasons as to not create a precedent". In other words, the "common position" had to be followed, even though there was no common position any more, because, apparently, the form is more important then the facts.

This is a stupefying prime example of absurd bureaucratic reasoning and mentality; to give more importance to formality, and to place appearances before the changing facts. Bureaucracy abhors changes, even to the detriment of real democratic values. But then again, maybe this shouldn't surprise us, as the EC is exactly that: bureaucrats, whom were never voted into the position they occupy, yet create laws that could potentially influence millions of EU citizens (to whom they do not have to answer). The EU constitution leaves this democratic deficit as it is, alas. And as seen by the handling of this directive, the deficit is pretty huge.[1]

I will not go further into the procedural mess and the apparent disrespect of the EC for the EU parliament, but rather concentrate on the different aspects of the directive itself (content). I will do this by stating, and then debunking, the rather dubious claims and arguments made by the pro-directive camp, which, alas, also include some misguided MEPs – though I haste myself to say the large majority of the EU parliament is well aware of the facts, as can be readily seen by the amendments made in the first reading.

The following statements for why it is necessary to have the (current) directive is as follows:

1)It is necessary for the stimulation and development of new software, so that IT-companies can be innovative to the fullest of their potential.

2)It is necessary for the stimulation of EU software business, so we can effectively compete on the world-market.

3)It is needed for the harmonization of the internal market, and to retain the status quo. (Similar as the “we do not change the current practice” or the “it will avoid drifting towards US-style patentability” -argument).

I will now debunk all these arguments (sources mentioned at the end of the document) in a rational and clear way, instead of all the misinformation currently being made by many of the softwarepatents (swpat) proponents.

/1)It is necessary for the stimulation and development of new software, so that IT-companies can be innovative to the fullest of their potential./

First of all, we have to ask ourselves, what, exactly, a patent is. A lot of pro-swpat advocates use terms as Intellectual Property (IP) rights, while those encompass a lot of different concepts, such as copyright (which is already used for software). We can find the following definition:

A patent is a set of exclusive rights granted by a government to an inventor or applicant for a limited amount of time (normally 20 years from the filing date)... Per the word's original definition, the theory of patent legislation is to induce the inventor to disclose knowledge for the advancement of society in exchange for a limited period of exclusivity. Since a patent grants the right to exclude others from practicing the invention, it gives the owner a monopoly in the economic sense. There is an ongoing debate about whether the benefits of patents outweigh the costs, particularly with respect to software patents.

A patent, thus, is not meant as an inherent right for financial compensation for the inventor. A patent is a state-ordained monopoly, that excludes others of exploiting or using similar ideas, even when they have come up with those ideas independently by themselves, for a certain time-period. Now, this seems rather unfair (in copyright this is not the case), but apart from that, why does the state give a monopoly to someone, while we all know monopolies are generally not good for the economy, nor for the consumers? This is why: a patent is a monopoly, given by the state, because it (is supposed to) promote innovation. It follows that, if it doesn't achieve its goal of promoting innovation, it should not be granted, period.

Now, while to some extend this may apply to patents in general (as a study done in the 80ies by the Australian government has shown), seen the particular incremental nature of software, and the more intensive studies done on them, it has become ever more clear that softwarepatents DO NOT promote innovation, on the contrary. It logically follows there is no compelling reason in respect to 'stimulating innovation' to grant patents on software.

Some swpat-proponents point to the USA, and claim there the evidence is shown: “the USA has swpat, and look at all those big, mighty IT-corporations!” This, however, is a complete fallacy: they 'forget' to mention that all those big foreign IT-companies were founded and grew to the behemoths they are today, in the ABSENCE of softwarepatents (which, in the USA, only started in earnest after 1991). So, it is not “thanks to” softwarepatents, but rather the reverse. Actually, it could be argued that the IT-business in the USA bloomed, exactly because they weren't patents around, back then. And in fact, this is well known by anyone working in the business of IT, and exactly what a well-known USA CEO has said in the early 90ies, someone who can know it.

Bill Gates said it best, in one of his internal memos:

"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.”

Mind you, this has been said by one of the most prominent IT-CEO on the planet, acknowledging exactly what softwarepatents actually lead too. Not surprisingly, since swpat are allowed in the USA, his solution to the problem was “patenting as much as we can” so he could go for “patent exchanges with [other] large companies”. Of course, Bill had the means to gather together a multi-million dollar software patent portfolio to defend his company (and thus did.) Most of the SME's (Small and Medium-sized Enterprises), let alone the individual developer, don't have such means and allowing swpat can only spell hardship for small businesses and open source software in Europe. Already there are over 30,000 patents that have been granted in the EU, waiting for this bill to pass so that they can be enforced.
Even Bruce Chizen, chief executive of Adobe Systems Inc. and chairman of the Business Software Alliance, which is leading the charge for the technology industry in the USA, acknowledges that allowing software patents in the 1990s was a bad idea.

How comes, when Bill and Bruce can see it so clearly, that the EC is unable to see the apparent disastrous consequences of allowing swpat (or a badly written directive that leads to the same)? Luckily, the EU parliament (you) can re mediate this.

Contrary to the pro-swpat camp, it is also possible to refer you to several independent studies and research-papers, which show, time and again, that softwarepatents do not stimulate, but rather inhibit innovation. See appendix A for more info about these studies, some of which clearly indicate that a large part of the money and investment that used to go to R&D, now goes to the legal departments of the companies (in the USA), to fend of lawsuits or to sue others.

/2)It is necessary for the stimulation of EU software business, so we can effectively compete on the world-market./

Alas, this also isn't true. First of all, this isn't true in a broad sense: since innovation isn't stimulated by swpat, one can hardly claim the economy, in the long term, will not suffer also. This is also shown in some of the studies in appendix A, to give a quote:

“Bessen & Hunt show that strategic, anticompetitive and defensive use of patents tends to concentrate in software patents, because they are easier to obtain (they don't require experimentation or prototyping, not even writing a program). They are also broader, because software is not subject to physical constraints and can therefore be composed into more complex systems, potentially infringing on hundreds of patents per program. This causes a patent buildup similar to a cold war arms race that discourages innovation and competition, and instead of bringing new products to consumers, reduces their choice and their access to information society, resulting in significant costs and less productivity for businesses. “

This also hints at the common practize of using softwarepatents: they serve no innovative purpose, but are 'stockpiled' by companies in a defensive manner. These are called portfolios, and big foreign companies like Microsoft and IBM now have tenthousands of swpat in their portfolio, which they use for 'swapping' with each other if they have to come to an agreement, and blocking new players on the market by smothering them with patent-infringements. Obviously, SME's and individual sw-developers do not possess the money, nor the legal strength to compete with the already established, huge swpat-portfolios. Since more then 80% of the workforce in Europe comes from SME's, and not from monolithic companies as in the USA and Japan, it is not difficult to understand what is most beneficial for Europe. This is reflected in the 30.000 patents the EPO already illegally granted (and which this directive would effectively legalise); more of 70% of those patents are of foreign companies, directly, or by proxy. The ones most benefiting from swpat, thus, are huge (mostly foreign) mega-corporations, so-called 'leech-corporations' (corporations who produce nothing, design nothing, contribute nothing, but amass swpat without any intent of actually doing something with it except suing others and profit from continuous litigiousness), and patent lawyers (for the obvious reason). [2]

The big companies using software patents will be constantly trying to increase the size of their software patent empire, so the only way to compete with this is for other giant companies to enter a cold-war style arms race with other companies from which only super-powers will emerge victorious. This is a very anti-competitive environment and very destructive to innovation and small business.

But also in a more strict sense, it makes no sense for Europe (specifically) to allow softwarepatents in Europe to have a competitive edge on the world-market (which is one of the goals of the Lisbon-agenda). This is a fallacy where many, even MEPs who have studied the matter like Maria Allessandra Rossi - though she also made some valuable suggestions - fall for on face value and think it is an advantage for Europe.

However – and I can't stress this enough:

Patents are NOT applied to where the invention is made, but where the patent is filed.

Logic dictates, thus, that EU-corporations *CAN ALREADY* file and 'protect' their IP on the world-market: the only thing for that to happen is that they file their patent abroad, in countries where they have been stupid enough to allow them, such as the USA and Japan. But EU companies *are* protected in the EU (if swpat remain invalid here) against the typical smothering of big foreign companies with huge portfolios.

In every sense, and even only speaking economically without looking at the other reasons not to allow swpat, thus, the EU has a clear economic advantage. WE can sue others, but we can't be sued by others over swpat. For the EU as whole, it becomes apparent that this is very beneficial, maybe to the point where other countries will be forced to abandon their swpat-mentality too, because otherwise they will be in a inherent disadvantage.

Now, it remains puzzling why many people don't seem to get this. A lot of IP-proponents seem to go the way of 'our IP has to be protected' , but – ignoring all other valid considerations not to allow swpat - the irony is, even purely focusing on the economics, the EU is better off NOT having them in the EU, but still being able to apply them abroad.

It seems strange the EU (at least the EC), which in first instance has to look at the best interest of Europe and its citizens, would try to pass a law to “level the playing field” (as some US patent-lawyers have said) in the world-market, so as to allow foreign mega-corporations to sue SMEs into oblivion here too and eliminating the economical advantage we currently have on the international market, compared to those countries that DO allow swpat. So because the USA made the mistake to allow swpat, we should make the same mistake, and loose the economic advantage we currently have compared to them?

/3)It is needed for the harmonization of the internal market, and to retain the status quo. (Similar as the “we do not change the current practice” or the “it will avoid drifting towards US-style patentability” -argument)./

The need for harmonization was actually the first and foremost reason offered by the EC for the directive. This is a noble goal, but one has to ask oneself why it is not possible to harmonize equally as well with a law that explicitly forbids softwarepatents and clearly restricts the applicability (as with the amendments you - the EU parliament - did in first reading), then when using an ambiguous directive like the current one. Harmonization is as well served (if not better) with a clear no, then with an ambiguous “no, but actually yes”.

Now, of course, the EC till now has claimed their form of the directive is as clear as it needs to be - even when it is plain obvious that the restrictions they place are purely for the form (as, as I have said, is typical of bureaucrats and the system they work in). The claim that it maintains the 'status quo' of the guideline of 1973 which said “software as such can not be patented” is ludicrous; in the current proposal, it comes down to:

[A] is not patentable, unless [B] is met.

where [B] is (upon close scrutiny) always met

In this case, it is claimed that software can not be patented, unless there is a technical effect...but what is a technical effect? According to the EC, a technical effect is an effect of a technical nature... this is a tautology and does not explain a thing, rather leaves it to be interpreted as one wishes, much as the EPO “creatively” interpreted the “software as such” clause of 1973. The absence of a real physical effect that involves the laws of nature (as proposed in the amendments of the parliament) were and are detrimental, yet the EC chooses to ignore that. Instead the EC prefers to play with words as in; swpat are not allowed for "normal physical interaction between a program and the computer" - but this means absolutely nothing and is legally nonsensical. It is a magic formula whose usage can be inferred only from recent decisions of the EPO, in which it served to justify the granting of patents on geometrical calculation rules to IBM. In the present case, according to the EPO, the "further technical effect beyond ..." consisted in the economization of space on a computer screen. As can be seen by that example, it is trivially easy to portray any program as a 'process' with some sort of “technical effect”, if the technical effect can be almost anything. It is akin to saying “music can't be patented, unless it is played on instruments or devices”: in every practical sense, you DO make music patentable, then.

There is need (a vital one) for a more restrictive meaning to the EPO wording, for instance based on a recent German court decision which held that economization of computing resources does not constitute a “technical contribution", because otherwise practically all computer-implemented business methods would become patentable subject matter. Since the EC refuses to do this, it is clear that the EC wants to make "computer-implemented" algorithms and business methods patentable in accordance with recent EPO practice, even though they refute it as a lip-service. In any case, when passed as it is now, it WILL have that effect, as is easily demonstrated by the fact that all patent-lawyers actually agree it will allow softwarepatents and one is hard-pressed to find a swpat that would not be allowed and granted, with the current wording. In fact, when the Polish government had the text examined by their legal departments, these confessed it would, in practice, lead to the allowance of all sorts of software, including business-methods portrayed as processes. Yet, somehow, the EC still seems to think they know it better, and hold on to their misplaced dogmatic viewpoint that it provides adequate limitations, where there are, in reality, none.


To allow the directive as it stands now to become law, would be disastrous for the innovation of the IT-sector in the long term, and for the economy of the EU, which exist largely of SME's. It would seriously undermine the ability of SME's and individual developers to actually produce anything, without the lingering threat and danger of a large foreign company with thousands of patents, ready to sue. These effects are denied by the swpat proponents, and are refuted by saying it's only doomsday-talk of Open Source extremists, but in fact, it is based on scientific research, as can be seen in Appendix A.

It also makes no sense to allow swpat in Europe, with the excuse of making them more competitive on the world-market, since patents can already be asked and granted in those countries that have been foolish enough to allow them. Foreign countries can not sue for swpat here: this gives an inherent economical advantage to European corporations, and especially SME's, which don't have the resources and financial possibilities to ward off legal attacks, and – due to the high legal costs - would probably be bankrupt (even when being fully in their right), long before the courts would make a final decision. As a whole, our ability to compete on the world market will not become stronger, but weaker, when softwarepatents are allowed in our internal market, since those profiting the most of such a law are big (foreign) companies with huge portfolios. More then 80% of EU businesses are SME's however – thus, one fails to see any logic in allowing swpat. SME's, btw, overwhelmingly are against softwarepatents. (polls indicate 70-80% of EU IT businesses are against it, which makes one wonder who it is when proponents say 'industry wants it').

Finally, the current proposal does nothing for harmonization or preventing a drift towards USA-style patents, as is claimed by the EC. Instead, it excels in ambiguity and doubletalk, while creatively playing with terminology that must insinuate there are clear limitations, when there are, in fact, none. In fact, it amounts to nothing more then a thinly disguised attempt to make all software patentable.
Claiming that it will merely consolidate the 'status quo' is equally bogus; the current status is, that software patents are not allowed; but because of the ambiguity in the 'as such' clause, the interpretations of some national courts were contradictory, and the EPO (and now the EC) is apparently of the opinion it is 'following current practice' to allow softwarepatents (even when, at the same time, maintaining it doesn't).

For all those reasons, I ask you, a MEP and therefore – regardless of political color or nationality - the direct (and, I may add, in the EU only) representative of its citizens, to amend the proposal of the EC in the same lines as the EU parliament already did in the first reading. [3] That amended proposal was the strict minimum to assure that we have a good directive, therefore, if it ever gets to the 'conciliation procedure' with the EC, and the basic tenets (such as the technical effect) is watered down again, it is better to outright reject the proposal. Better no law then a bad law, after all. And there are more then enough reasons not to allow the standing draft.[4]

I know not all MEPs do their work with the same vigor, but I implore you, since this is of the utmost importance to get it right, and seen the fact there is a high majority needed in the second reading to amend or reject the EC proposal, to go and vote on the matter, even when it is difficult within your agenda to find time. I assure you, this is worth all the effort and time it needs; even if it were only to show that democracy and not bureaucracy has the final word in the EU legislative process, it would still be worthwhile.

I hope you found this manifest interesting and enlightening, and that it conveyed the importance of amending the draft directive in line with the earlier amended version of the parliament.


Appendix A
Only a handful of several studies indicating the disastrous effects of swpat on the economy and innovation at large:

An Empirical Look at Software Patents -- James Bessen (Research on Innovation and MIT), Robert M. Hunt (Federal Reserve Bank of Philadelphia), May 2003
James Bessen (Research on Innovation and MIT) and Robert M. Hunt (Federal Reserve Bank of Philadelphia) in a study published in May 2003 present extensive statistical data and analysis to corroborate their hypothesis that software patenting has substituted rather than promoted R&D investments. Software patents are serving as cheap alternatives to real innovation.

Sequential Innovation, Patents, and Imitation - MIT Department of Economics Working Paper by James Bessen and Eric Maskin 2000
This article is written by two researcher from MIT and concludes, after giving mathematical models and experimental evidence, that in a dynamic world such as the software industry or consulting industry, firms may have plenty of incentive to innovate without patents and patents may constrict complementary innovation. It concludes that copyright protection for software programs (which has gone through its own evolution over the last decade) may have achieved a better balance than patent protection. This new model suggests another, different rationale for narrow patent breadth than the recent economic literature on this subject.

Deepak Somaya & David J. Teece 2000-11-30: Combining Inventions in Multi-invention Products: Organizational Choices, Patents, and Public Policy
Detailed study of the transfer costs generated by the patent system under various conditions, written by Deepak Somaya, economist at the University of Maryland, and David Teece, senior colleague at Univ of California in Berkely. The study estimates the (very high) transfer costs that are caused by patents in complex systems and examines various strategies for reducing these costs at the micro- and macro-economic (public policy) level.

Robert M. Hunt: You can patent that?
Article by an economist about the effects of Software and Business method patents in the USA and their history, including statistics, shows the role of the Court of Appeal of the Federal Circuit (CAFC), installed in the 1980s, lowered all barriers to patentability and made increasingly difficult to have patents revoked.

Waterson & Ireland: An Auction Model of Intellectual Property Protection: Patent vs Copyright
Michael Waterson and Norman Ireland, economists from the University of Warwick, constructs a parametrised game model to simulate the innovation game under a regime of pharma patents, plant variety protection, software patents and software copyright as well as many other situations. The model contains some simplifications that work in favor of patents. E.g. it does not consider monopoly-based welfare losses, which are at the center of many economic analyses of the patent system. Instead its social welfare is simply the aggretation of the potential players expected utilities. Also it does not consider the need for modularity and interoperability in the software world. Yet, the model depicts many observable phenomena quite well, and it leads to the conclusion that software patents have a negative effect on innovation while pharma patents and software copyright has a positive effect.

Stimuler la concurrence et l'innovation dans la Société d'Information
A systematic introduction to intellectual property rights, software economics and the interaction of the two. The beginning chapters provide very good introductory reading, the final chapters present proposals to European politics. The website contains links to many studies.

J.P. Smets 1999: Software Useright: Solving Inconsistencies of Software Patents
A mathematical model describing the economic effects of sofware patents and a concept for solving some of the problems: the distinction between copyright and useright.

Tang, Adams, Paré 2000: Patent Protection of Computer Programs
Study on Software Patents carried out by British researchers at the order of the European Commission's General Directorate for Enterprises. The findings of this study are partially based on the ESRCIP project (see above). It's purpose is to find out how software SMEs deal with Intellectual Property Rights in general and patents in particular, how useful patents are for them and what can be done to raise patent awareness. The study finds that we are not in a "pro-patent era" but rather in a "pro ipr area", and that software patents are not very much appreciated by software SMEs and probably not very helpful for them.

Intellectual Property Initiative 2000
A large british research project which concludes that the patent system as it stands in the year 2000 is in general less than helpful an instrument for fostering research and development in small and medium enterprises.

Commissariat Général du Plan 2002/10/17: Rapport sur l'Économie du Logiciel
A report of the French State Commission on Economic Planning published on 2002/10/17 gives figures about the software industry in France (270000 employees, 31,6 bn eur turnover in 1999), sees France's software economy handicapped by proprietary standards and patent dangers and recommends that algorithms and business methods should not be patentable, formats and standards should be exempted and patents for technical inventions that use software should be limited in duration to 3-5 years.

Studie von Fraunhofer und MPI über die wirtschaftlichen Auswirkungen von Softwarepatenten
In 2001-01, the German Federal Ministery of Economy and Technology (BMWi) ordered a study on the economic effects of software patentability from well known think tanks with close affinity to the German patent establishment: the Fraunhofer Institute for Innovation Research (ISI.fhg.de), the Fraunhofer Patent Agency (PST.fhg.de) and the Max Planck Institute for Foreign and International Patent, Copyright and Competition Law (MPI = intellecprop.mpg.de). The study was largely concluded in 2001-06 and preliminary results were presented to a selected audience. The final report was published by the BMWi on 2001-11-15. The study is based on an opinion poll answered by several hundred software company representatives and independent software developpers, conducted by Fraunhofer ISI. Most respondents have had little experience with software patents and don't want software patents to become a daily reality like in the US. The poll also investigated the significance of open source software for these companies and found it to be of substantial importance as a common infrastructure. Based on these findings, the Fraunhofer authors predict that an increase in the use of software patents will put many software companies out of business and slow down innovation in the software field. The study then jumps to conclude that software patents must be legalised and SMEs must be better informed about them. This surprising conclusion is drawn by the patent law scholars from MPI. The MPI's legal study does not explore any ways to redraw the borders between patents and copyright but just takes the EPO and USPTO practise as an inevitable reality. They find that the EPO's caselaw is contradictory and chaotic and blame this on Art 52.2c EPC, which they say has failed to provide clear guidance and should therefore be deleted. Business related algorithms are, they say, less likely to be patented at the EPO than algorithms that "stand in a tradition of engineering". The MPI writers however do not try to provide a clear rule for distinguishing the two, and they oppose the idea of drawing a line between the physical and the logical ("technical inventions" vs "rules of organisation and calculation") as done by lawcourts in the 70s and 80s, asserting that information is also a physical phenomenon. They propose that all legislative power concerning the limits of patentability be handed over to the EPO, which should then, at its discretion and as far as Art 27 TRIPs allows, consult experts of interested parties for regular rewriting of its Examination Guidelines. Art 27 TRIPs demands that patents be "available in all fields of technology", and the MPI understands "technology" as "the useful arts" and is careful not to mention Kolle and other European theoreticians of the concept of technical invention. Summarily the study can be summarised as "Fraunhofer: software patents are unpopular in the software industry and dangerous to innovation and competition. MPI: Fine, so let's legalise them quickly."

Commissariat Général du Plan 2002/10/17: Rapport sur l'Économie du Logiciel
A report of the French State Commission on Economic Planning published on 2002/10/17 gives figures about the software industry in France (270000 employees, 31,6 bn eur turnover in 1999), sees France's software economy handicapped by proprietary standards and patent dangers and recommends that algorithms and business methods should not be patentable, formats and standards should be exempted and patents for technical inventions that use software should be limited in duration to 3-5 years.

The Economic Impact of Patentability of Computer Programs
A patent advocacy text by the London Intellectual Property Institute, ordered by the Industrial Property Unit at the European Commission (CEC Indprop), finished in spring 2000, held back until Oct 2000. The name is misleading: this is not an economic study. There is only one chapter which deals with economics but even this chapter only roughly summarises third parties's works. Basically this pseudo-study only restates well-known beliefs of civil servants from the british patent establishment who at the time were in charge of the European Commission's Industrial Property Unit at DG Markt (Directorate General for the Internal Market). Yet, while main author Robert Hart is a well known patent lawyer and lobbyist, the economics chapter was written by an outsider, Peter Holmes. It provides evidence to show that software patents have damaging effects on economic development and tries to balance this by adding some unreasoned statements in favor of software patents. Holmes later explained that he had no other choice in view of the "convictions" of his partners. Yet the CEC Indrop people did not like the study: they locked it away for half a year. During this time the European patent establishment was preparing to rewrite Art 52 EPC so as to remove all limits of patentability. In October 2000, after the plans been dropped, CEC/Indprop suddenly published the IPI treatise and used it as a basis for a "consultation exercise". From then on, various pro software patent proposals from Brussels have again and again relied on this "economic study" for justification.

Daniel Probst: Software-Patentability from a macro-economic point of view
Dr. Probst forscht an der Universität Mannheim über die Ökonomie des Patentwesens. In diesem für eine Anhörung dem Deutschen Bundestages am 2001-06-21 eingereichten Papier argumentiert er, dass Patentmonopole aus volkswirtschaftlicher Sicht immer als je nach ihrem Anwendungsgebiet mehr oder weniger notwendige Übel angesehen werden. Wobei im Bereich der Software wenig Notwendigkeit und viel Übel zu erkennen ist. Viele der herkömmlich von Patentexperten propagierten Glaubenssätze sind aus volkswirtschaftlicher Sicht falsch, da auf simplistischen Modellen beruhend. Bisherige Erkenntnisse deuten darauf hin, dass Softwarepatente die gesamte Produktivität und Innovationskraft der betroffenen Branchen mindern. In einem Bereich wie der Software sollte der Staat, wenn ihm an der Vitalität der Softwarebranche gelegen ist, in öffentliche Infrastrukturen wie z.B. Bildung, Forschung und Netzwerk-Hardware investieren.

Bronwyn H. Hall & Rose Marie Ham: The Patent Paradox Revisited
Research work done at Univ. of California, Berkely, published 1999 by National Bureau of Economic Research Inc. Finds that the surge in patents in the semiconductor industry in the 1980-90s does not reflect a surge in R&D activity.

Kortum & Lerner 1998: What is behind the recent surge in patenting
Since the late 1980s, the number of patents granted to US companies by the USPTO has sharply risen. Many people believe that this is due to a more patent-friendly policy created by political changes in the early 80s such as the Bayh-Dole act and the institution of the Court of Appeal for the Federal Circuit (CAFC). This study collects statistical data to suggest that a surge in patentable innovation and an improvement in patent-oriented innovation managment may be more important causes. It also shows that software and biotech, while considered to be the most important areas of innovation, still amount for a total of only about 5% of the US patents. While patent-oriented innovation was on the rise, R&D investments on the whole dropped. This is one of a series of studies by Samuel Kortum and Josh Lerner from the Department of Economics of Boston University.

Lester C. Thurow 1997: Needed: A New System of Intellectual Property Rights: Squeezing today's innovations into yesterday's system simply won't work

US National Research Council 2000: The Digital Dilemma
According to this report by the US National Research Council, software patents were introduced by lawcourt decisions without support from the legislature, and it seems doubtful whether the patent expansion is promoting the progress of science and the useful arts, as Congress intended. The Court of Appeal of the Federal Circuit (CAFC) has taken the patent system into "unchartered waters", and the experience of the software industry suggests that this decision is urgently awaiting legislative review.

Mandeville et al 1982: Economic Effects of the Australian Patent System
A Commissioned Report to the Industrial Property Advisory Committee. Contains statistics about the use of the patent system as a source of information and as a source of revenues. Its general reasoning and conclusions are similar to those of most economists, especially Fritz Machlup.


Appendix B

[1] The democratic deficit of the EU institutions in general, and the undemocratic way of the EC in particular, have already led to several commentaries in the press, as this article from The Register shows:

“DO A SEARCH on "banana republic" in Google and the second entry is the Council of the European Union.
Why? Presumably because so many news sites have been describing the Council's recent action over software patents as the kind of action only a non-accountable banana republic would take.
The only accountable unit in our vast €urocracy is the European Parliament. And only by overturning the EC's dictat will the members of that parliament overturn the decision by the Council, lobbied as it is by some of the biggest multinational vested interests in the world.”

[2] Recently, EICTA lobbyists in Brussels have said to several MEPs that they have made a poll which shows that 97% of the software companies want patents. The basis for this is a poll made by Bitkom which in fact says that 52% of the respondents said that they wanted to "preserve the status quo or reduce patentability". We have not yet found out how the poll was made, but it is clear that at Bitkom the patent question is in the hands of IBM's patent lawyer Fritz Teufel, and it is likely that these 52% were from a population of corporate lawyers. Hardly a basis for EICTA's lobbying, let alone their bogus claim.

But, one may ask, who is EICTA, and what is their relationship with swpat in Europe? As it turns out, while they themselves claim to speak for the entire software industry, they are actually representing exactly the companies that one would expect to lobby for swpat, and that gain the most, to the detriment of SME's: it is largely a group of patentlawyers and big foreign companies, with the occasional big European one (Nokia, for instance). No wonder they are lobbying, but every MEP should smell it is fishy that the “best interest of Europe” is promoted by such an organisation. Megacorporations only focus on one thing: that what is best for their own profits, and for their shareholders, not what is best for Europe and its citizens. Luckily, the day has not yet come that we let CEO's decide on the future, public interest, and well-being of a nation or the EU, or we would quickly find ourselves back in the rampant, extreme darwinistic-capitalism of the 19th century.

In contrast, while the EICTA represents only the big, mostly foreign, companies, yet claims they speak for “the IT-industry”, the reality is different. Apart from the worldwide Open Source movement and the thousands of persons (for instance, almost 400000 people signed in support for the amended directive on the eurolinuxsite), many of whom are individual developers (some even of great fame, like Linus Torvalds (Linux) and R.Stallman (GNU/GPL)) , the current swpat draft of the EC is also being opposed by UEAPME, representing more than 11 million enterprises, which in turn employ around 50 million people in the whole of Europe. It seems rather hypocritical, then, that the EICTA (and even some MEPs, like McCarthy) claim they agree to the swpat-directive in the interest of the EU and SME's, when those are clearly in majority against it.

European Parliament legislative resolution on the proposal for a directive of the European Parliament and of the Council on the patentability of computer-implemented inventions (COM(2002) 92 - C5-0082/2002 - 2002/0047(COD))

[4] Apart from the reasons I elaborated on in this paper, there are myriads of other reasons. A small summary of the 'top ten reasons' was made by ISFO:

1. There are currently no costs, waiting periods, or application forms required for software development. Patentability would radically change this and would invalidate many development and business models.
2. Software already has "ownership rights" via the copyright system. Copyright is instant, costs nothing, and doesn't interfere with independent development.
3. If companies could purchase exclusive rights to the use of techniques required by their de facto standards, they could choose their competitors. "Competition" would become an inside joke, and preventing competition would be completely legal and above board.
4. Small and medium enterprises can't afford patents, they can't spare time for patent searches and they can't risk the cost of contesting an accusation in court.
5. The patent term (20 years) is absurdly long in terms of the software industry.
6. Innovation in software is incremental, new ideas build on the old. To advance the state of the art, developers must be permitted to build on top of the state of the art.
7. Software is abstract, like maths. Software ideas can be described in any number of ways, so searches for software patents would be hit-and-miss. Reliably avoiding patent infringement would be impossible.
8. Engineering, manufacturing, and pharmaceutical patents are industrial regulations. Software idea patents would place restrictions on what all businesses and all individual computer owners can do with their computer.
9. In the USA, to get around the burden of software idea patents, the Big Players of the software industry have formed cartel-like patent sharing agreements. Small and medium enterprises cannot afford to join these agreements, and NONE of the Big Players are European companies.
10. For Europe to develop it's own software industry, we must retain the right to write our own software - without having to ask permission or pay royalties to current (foreign) market leaders.

Note that, while the benefits of patents as a whole can be doubted to a certain degree depending on the field it is applied to, software is particularly affected. The reasons are being mentioned in the different points, and also summarised by R.Stallman (http://www.cl.cam.ac.uk/~mgk25/stallman-patents.html ):

“The result is that even when you write a program yourself, you are using lots of different ideas, and any one of them might be patented by somebody. A pair of them may be patented as a combination by somebody. There might be several different ways of describing one idea which might be patented by various different people. So there are possibly thousands of things, thousands of points of vulnerability in your program, which might be patented by somebody else already. This is why software patents tend to obstruct the progress of software- the work of software development. If it were one patent-one product, then these patents wouldn't obstruct the development of products because if you developed a new product, it wouldn't be patented by somebody else already. But when one product corresponds to many different ideas combined, it becomes very likely your new product is going to be patented by somebody else already. In fact, there is economic research now showing just how imposing a patent system on a field where there is incremental innovation, can retard progress. You see, the advocates of software patents say "well yes, there may be problems but more important than any problems, the patents must promote innovation and that is so important it doesn't matter what problems you cause". Of course, they don't say that out loud because it is ridiculous but implicitly they want you to believe that as long as it promotes progress, that outweighs any possible cost. But actually, there is no reason to believe it does promote progress. We now have a model showing precisely how patents can retard progress. The case where that model can fit describes the software field pretty well; Incremental innovation.”

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Tuesday, July 05, 2005

Gazing the future

Recently, I (re)stumbled upon an article called "Environmental Heresies". A good and interesting read for sure, but, like with all these kind of articles, the author (futurologists, they are called, I believe) makes the same basic mistakes as all his predecessors. I'll give some rebutal and critcism:

His first point, about slowing demographics, is not very much disputable: it is as it is, and if it's in decline, it's in decline. However, whether we will level out completely, or go down, or up again, is not as clear cut as he seems to portray. The author gives as main reason that people go to cities, but I think this explanation is inadequate, and certainly not enough to explain the changing demographics.

It should be noted, for instance, that, during the middle ages, the amount of children born in cities were no less then those on the countryside. What *did* change, though, is the empowerement of women (most notably in matters of procreation) and social and medical advancements. THOSE are the real reasons why demographics change. It also follows that, if, by some disaster or serious economic and scientific decline we would degrade into former levels of welfare and reduced possibility for women to control any family planning, demographics would go up again. It is therefor not an absolute certitude that the world-demographics will continue to decline...this is only true as an extrapolation, if everything remains more or less the same. However, it is exactly the danger of this sort of extrapolation that the author is (also) lamenting against.

As for genetically modified (GM) crops, I fear he really simplifies the subject too much to be useful in making a rational decision about the pro's and cons. Basically, he over-optimistically only conveys the pros, while barely mentionning any of the cons - as if they were unimportant.

It should be noted however, that with living organisms, you can not simply test it out in the wild, and then expect to be able to put the genie back in the bottle when things go wrong. Once you contaminated a natural area, and the contamination has a sufficiently advantage (in a darwinistic sense) to stay around in the genepool, there is no way in hell you can get rid of it completely, when it turns out it is damaging humans, or other species and ecological systems.

Now, his counterargument that those won't survive in the wild seems rather weak. In effect, some GM genes *already* have contaminated other 'wild' crops, and it didn't sizzle out in the wild, on the contrary (a prominent example of that are some strains of GM corn in south-america). So... it may be that some GMs will not survive in the wild, but you can bet some *will*, however. And he, nor anyone else, can garantuee that such GM or hybrid crops can't be damaging or unhealthy to the ecosystem or local species, including humans.

Also, the reductionistic view of "we're not doing anything else then what people have been doing for centuries" is somewhat misleading too. Yes, people have been breeding crops, and cultivated crops are not 'natural' in the sense that they occur in the wild...but it's an unfair analogy, because one is comparing oranges with apples. For instance, with GM, it is perfectly possible to make genemodifications between two completely different species of plants. In effect, this trans-species swapping of genes with GM, can be done between animals and plants. In all those centuries that "we have always done this" I would like to see any example where this has actually been done before.

No; this is a totally new technique, with new possibilities, certainly, but also new consequences (which we don't know anything about) and new dangers. You can't just shrug those of with claiming, falsely, that we've been using those techniques for millenia. And you can't just merrily test it out in the wild, and see if anything happens.

Apart from that, even purely economically, I doubt it has all those beneficial effects the author claims it has or will have - but more about that at the end.

About his weather and nuclear fission chapter... well, I agree with that part, mostly. I do think the greens are just dead wrong in their crusification of nuclear power. Sure, as the author says, it has problems of its own, but those are really minute compared to the far larger and imminent (and worldwide) threat of global warming (ok, I know, there is debate about that too, but I think not many will actually dispute humans HAVE an effect on the climate, though the extend may not be as clear cut). Fine if you shut those reactors down, IF YOU HAVE A VIABLE ALTERNATIVE - but, wishful thinking aside, there currently is *none*. The author correctly points out, that, even if you combine all other alternatives together, you still will only have a fraction of the energy-production needed. Thus, logic dictates that you continue to use nuclear fission, untill those alternatives can actually completely replace them (which is doubtful, and in some countries outright impossible), or a new energy-source can replace it (like nuclear fusion reactors).

In any case, the problem of 'global warming' forces us to make choices, and I'd prefer the new, inherently safer NG reactors with their very limited risks and their total lack of CO2, then 'buying clean air' (which doesn't make the air cleaner) or dreaming about alternative energies that can never, pragmatically, provide the energy needed. And it certainly beats the ONLY other viable option: to mass build classic energy-facilities, which use coal or petrol and would constitute an enormous increase in CO2 and extra global warming.

So, in conclusion; the author is fully right about some things, but a bit too simplistic (and, perhaps, biased) in other points. The nuclear/weather point is, indeed, logical. The world-demographics is correct, though there is a need for caution as to determine what is the cause, and if simple extrapolation is enough to make a conclusion. As for the GM-crops, I fear he is a bit misguided himself; this is obvious by the naive assumption of how much 'good' GM-crops will do - which is, I suspect, derived from an overly (and typical USA) optimistic viewpoint on capitalism, which I don't share.

GM-corporations do not care about worldhunger, nor about the living quality of poor farmers in third (or first, for that matter) worldcountries. What matters to them is maximising profit for their shareholders. In the authors' view, this is fully compatible with eachother, but I rather think that, in the end, you can't have both: if it's really about maximising profit, then it is about holding control of the market, and if it's about control, then it's not about the freedoms and abilities and rights of the farmer. This already can be seen by the fact many GM corporations have forbidden the 'seeds-keeping' right of farmers (=the right to keep seeds of one season to use for planting next year). It's an age-old right, giving farmers some independence - but if it were up to GM corps, it would be abolished as soon as possible, so farmers become fully dependend on THEIR seeds. Or they would create plants that don't have seeds anymore, like a lot of GM corps have already done.

No, rest assured, GM foods are not going to solve worldhunger (which is primarely a matter of distribution, not production; there currently *is* already an overproduction in the West of many foods, after all!), nor liberate farmers, on the contrary. Prime examples can be seen at http://www.percyschmeiser.com/conflict.htm and http://www.percyschmeiser.com/MonsantovsFarmers.htm.

This is apart from the equally fundamental objection that I raised earlier, namely that one can not rule out the possibility of (damaging) GM effects that DO survive and thrive in the wild...and which can't be put back into the bottle once released. I doubt many people would be happy if some corp said: "we've got a whole bunch of genetically modified but potentially beneficial viruses and microbes; let's bring them out in the wild!" There, the dangers are obvious to everyone - but with plants, they fail to realise that it is the same dangerous principle.

I leave it up to the readers to determine the worth of my criticism, but at least I think I made some valid points. Indeed, not only hystorical analysis, but also gazing the future should always been done while using critical glasses.