The patent system - SWOT

1.1 Strength

”The patent system added the fuel of interest to the fire of genius” Abraham Lincoln, 1860

The primary benefit of protecting computer software through the patent system is the strength of protection provided by the patent laws. An owner of a patent may prevent all others from making, using, or selling the patented invention In connection with software, an issued patent may prevent others from utilizing a certain algorithm (such as the GIF image compression algorithm) without permission, or may prevent others from creating software programs that perform a function in a certain way.

The primary strength provided through patenting computer software is protection. It gives the scope for the owner to prevent it from being used, remake or being used for any other purpose.

In contrast, copyright law can only prevent the copying of a particular expression of an idea. In connection with computer software, copyright law can be used to prevent the total duplication of a software program, as well as the copying of a portion of software code (both of which are examples of "literal infringement"). In addition, copyright does provide some protection against non literal infringement, such as the creation of "cloned" software. However, courts have recently been reluctant to interpret copyright protection of computer software in a broad manner. In addition, the basic tenet of copyright law is that copyright will protect only the expression of an idea, and not the idea itself. Consequently, copyright law will not prevent the creation of a competing program that utilizes the same ideas as an existing program.
As a result, software patents can provide much greater protection to software developers than copyright law. The benefits of obtaining patent protection can be extraordinary, as shown by Stac Electronics' $120 million patent infringement award against Microsoft based on a data compression patent. As more developers understand the potential of software patents, more patents are being issued. According to the Software Patent Institute, thousands of "true software patents" are issued every year, covering such areas as business software, expert systems, compiling functions, operating system techniques, and editing functions.

Of course, a patent can only be issued when an invention is new, useful, and no obvious (see the discussion on patent requirements). In addition, obtaining a patent on computer software can be an expensive process, costing five to ten thousand dollars, or more. The choice of whether to pursue patent protection for a software invention should be made by comparing the value of the program (the potential revenue from its distribution) to the cost of the patent application process and the likelihood of obtaining significant patent protection.

Addressing the large company patent strength…

From an emerging growth company perspective, we can play defense and offense. Both are important:

1. Defensive strategy

is all about making sure that you know the patents in your field and trying to understand them in enough detail so that you develop your latform in a way that does not conflict with the patents

2. Offensive strategy

is all about getting your own patents. Some experts have told me that this is a more important strategy than the defensive strategy. There are three possible benefits for having your own patents:

• Make sure that you have protection that allows you some defense of your approach (it will be harder for others to attack),
• Be in a position to use your patents as a negotiation tool if a large company claims you have violated their patents (that is, the large company violating one or more of your patents will give you a better negotiation position when they come calling).
• Be in a position to monetize your ideas through royalty, and agreements (you can make money beyond your product market sales, if you want to play this game).

The patent system is in really bad shape and the use of patents really disrupts innovation these days (Steven Vaughan Nichols article as an example). That said, we are living under the current system, so we need to develop approaches to maximize our position within the system. Unfortunately, we need to deal with the patent issue as part of this, as you can’t opt out because someone is likely to come knocking on your door if you are successful. If you take the right steps to address these issues, you will at least minimize the large company’s patent strength and potentially gain an edge. And, hopefully, in the longer term the patent system will be fixed!

1.2 weakness

The problems presented by software patents are numerous and must be addressed on many levels. Standards setting organizations can partially resolve this problem by following the W3C’s model in which the intellectual property policy is clearly stated and members are required to adhere to that policy. New legislation providing protection from patent farming and submarine patents is necessary. In addition, governments should recognize the importance of interoperability to any free market for computer software, and should legislate to allow the royalty free use of patented principles for interoperability purposes. Developers can perform due diligence, but no strategy is available to a software developer that will be fully protective against the risk of patent prosecution. Thus, developers should investigate whether adequate insurance coverage is available, and should continue to agitate for protective legislation.

Worldwide government organizations can also impact this problem by scrutinizing the purpose and process of software patenting. Is software patenting really promoting innovation and contributing to the vigor of free markets? If governments are to award software patents at all, they must drastically increase the diligence carried out before those patents are awarded, and the opportunity to challenge those patents both pre and post award.

The Open Source community faces a particular challenge in the area of software patents and standards. Since many Open Source developers are non profit, they don’t have the ability to pass on royalty payments to consumers. Yet, the Open Source community is now the predominant provider of software for many applications. Standards setting organizations should help the Open Source community to at least partially avoid the patent minefield. To accomplish this, the two communities must work together to develop policies that meet both of their needs in a way that continues to fulfill the ultimate goal of standardization: interoperability.

1.2.1 Why industry leaders stay silent or support patents

Many find it surprising that more of the top people in the industry do not speak out against patents, that cases like the Sun Kodak settlement, the Forgent JPEG patent claim or the Microsoft Eolas case should awaken these companies and their leaders to the dangers that software patents pose to their ability to innovate and develop new software. But if you look at it from their viewpoint its becomes quite clear why its hard to speak out against patents.

They are hired to represent the interest of their shareholders and the main interest of their shareholders in getting a higher share price. The people deciding what the share price should be is Wall Street. Wall Street when they try to figure out the value of a company they look at many factors, among them the amount of patents and other assets a company own. If all software patents where dissolved over night then Wall Street's probable reaction would be to cut the valuation of most of the big tech companies. Which of course would make share holders rather upset and they would not be to pleased with the CEO who argued for doing away with software patents. So it is not primarily Steve Jobs, Steve Ballmer, Sam Palmisano or Scott McNeally we need to convince that software patents are not an asset to the industry, I think they already know it, but are in a position where it would be self destructive to say so.

The job we need to do here is make sure Wall Street realizes that with the new generation of companies doing nothing but filing and buying patents, mostly of dubious quality and correctness, followed by going after the people with big pockets, software patents are a liability for the companies in the software industry, not an asset.

The day we make Wall Street see the true effect of software patents, that is the day they will start punishing the share price of software companies. And that is the day I think we will see a lot of industry leaders feeling much more free to join us in our struggle to get software patents dissolved.

1.2.2 The big versus the small

Even with Wall Street seeing the truth we can not be sure that the big business will come out supporting the complete removal of software patents. An example here is IBM who recently came out requesting reform rather than full abolishment, funny enough stating that the reason they don't want all patents invalidated is because they worry about customer backlash if all the patents the customers are now forced to pay to license where found not to be valid anymore.

The big software companies rarely use patents against eachother because using patents against the other giants will lead to them hitting back with their own patent portfolios. Which is also why most of these companies have extensive cross licensing deals between eachother.

But using patents to kill of small and mid size competitors who have not had the resources to build up a patent pool yet is a different matter of course. Luckily some of the big players like IBM and Microsoft don't dare to do this as they are or have been in the antitrust spotlight for monopolistic practices and market share abuse. But the fear, uncertainty and doubt generated in the marketplace due to all these subsisting patent mines can be damaging enough. And of course there is nothing stopping someone like Microsoft to sell some patents to a patent litigation company, including licensing the patents back to Microsoft as part of the deal, then letting that patent litigation company loose upon their competitors. Microsofts eager willingness to throw money SCO's way to help fund their ongoing legal battle with IBM and the worlds Linux developers only shows that such tactics are not below them.

1.3 Opportunity

As an IP intensive industry, IT is facing a unique challenge. We’re in a state of IP flux. There is intense debate over how we define and allocate the assets of an industry generating well over US$3 trillion revenue globally.

Our biggest concern with software and business methods patents. Specifically, that we can somehow discuss their validity as though they exist in a vacuum that they’re not connected to other intellectual property vehicles such as copyright and trade secrets.

From a legal point of view that’s a valid perspective. From an economic point of view that’s a definite mistake. I would put it to you that the single biggest factor driving the increased use of software and business method patents are economic decisions resulting from the evolution of copyright.

It is critical to understand that copyright is in the middle of a transition in information technology. It is becoming primarily a mechanism to support community owned assets. It is of rapidly diminishing value in protecting entity specific assets. And that can be put done to one simple factor Open Source Software!
What’s been happening over the last decade is simply a re alignment of asset classes to mirror that reality. If you hope to have a viable, long term commercial IT concern you had better be able to protect your ideas from being copied, not just the specific codification of them. Patents do that. Copyright doesn’t.

So, how do we allow entity specific assets to be protected? That’s really what’s being debated here. The copyright horse has bolted and will never return. What then happens if software and business method patents are removed as an option? It will be like trying to burst a balloon by stomping on it only to watch the air shift out to the ends? All the focus on IP protection will move to the only option left. Trade secrets.

All IT providers are focused today on managing their trade secrets. But what deeply worries me is how they’ll respond if wholly reliant on it. I feel pretty confident in predicting that the growing lobby power of the IT industry will shift, like Sauron’s all seeing eye, towards trade secret legislation. They’ll want it beefed up and armor plated just like the media industry did with the DMCA. And they’ll do this because there is serious money at stake. The market capitalization of these organizations is tied in no small part to their IP, and if its at risk, tech CEOs will do what it takes to protect it.

A trade secret obsessed IT industry will be focused on one thing controlling the flow of labor between organizations. I could well imagine lobbying efforts to assure the universal enforcement of non compete clauses in employment contracts. I think we’d see a lot more cases like Mark Papermaster and Kai Fu Lee. Of course, if you’re not top talent you can forget about your hiring employer footing the legal bills. Who knows IT could end up like the FIFA governed football (soccer) industry which requires transfer fees to be paid when contracted players move between clubs.

Let’s remember something patents are a trade off. An inventor gets an exclusive right in exchange for the public disclosure of her idea. A functioning patent system (which we don’t have) supports the proliferation of innovation. Trade secrets, on the other hand, don’t. Software patents aren’t perfect. There are serious issues which must be sorted out. But in a world where copyright is evaporating as a way protecting anything other than community owned assets, software patents are a whole lot less dangerous than the alternative aggressively pursued trade secret protection muscled up through political deal making.
I would much rather we embrace software patents and water down trade secret legislation than the other way around.

1.4 Threat

Many companies believe that software patents in general are bad for them and the rest of the industry, but feel compelled to seek patents so as to press for cross licenses when threatened by other companies with patents.

Software developers can protect themselves more effectively from patents by explicitly adopting a nonaggression or mutual defense policy. This means promising in a binding fashion to use their patents only to protect themselves and others from patents.

Let's define an "aggressive" software patent suit as a suit for patent infringement by software against a defendant who is not pursuing or profiting from any aggressive software patent suits. In other words, it is wrong to harm one who has done nothing to deserve it. (Note that we do not try to classify patents into software and non software; but we do classify the lawsuits as software or not.)

Thus, suing a defendant that has no patents, or has never threatened to sue anyone, is certainly aggressive. Suing an aggressor is not aggressive. A developer that has sued only aggressors is not an aggressor, so suing that developer is aggressive. And so on.

A nonaggression policy means a policy of never pursuing or profiting from aggressive software patent suits. In order to give aggressors an incentive to reform, anyone who has in the past behaved aggressively should be forgiven on dropping any pending lawsuits and waiving royalties from those previously threatened.

By following this policy, developers will both state their disapproval of software patents and avoid threatening those who mean them no harm. Yet they can still obtain patents to use for defense against other patents.

More than that, this policy provides for mutual defense, because all the developers that practice it combine to place pressure on a potential aggressor. Any software developer that tries to use patents for attack will immediately become fair game for all.

Mutual defense could be made binding by means of an organization which is open to anyone at little or no cost. On joining, a new member would agree to cross license all present and future patents (for software uses only) to the organization, and thus to all its members. This organization would strive to be universal, so it would be well publicized and easy to join. Once the organization becomes large enough, most software developers will find membership essential, which will assure continued success. Of course, the challenge is to get it going.

Most kinds of cross licensing pools are prohibited by anti trust laws. This organization, however, will probably be lawful because it will admit anyone as a member on the same terms, including those who have no patents of their own. A membership fee of $25 should suffice to run the organization. Perhaps a higher fee, such as $200, would be desirable to enable the organization to fund plausible software patent applications by its members, and thus increase the organization's strength. Any successful software developer can afford such fees.

How does this issue affect individual employees of companies? It could make a difference if the question arises of whether you should help apply for a software patent. Ordinarily, it is best for you to avoid participating in patent applications. But if the company adopts a nonaggression policy, then you can help them apply for patents with a clear conscience. But do insist on a contract in writing promising nonaggression, since otherwise they could alter the policy after you sign the patent application.
How does this affect companies? Using patents as a protection against other patents is a haphazard affair: any particular patent you might have has little chance of being relevant to the aggressor who threatens you. IBM states that even their 9000 patents are not enough to make a reliable defense (Think, number 5, 1990). An ordinary developer who tries to "go it alone" with a handful of patents for defense will not get far. Except for an IBM, mutual defense is the only defense.

Mutual defense is only a partial solution to the problem of software patents. Some patents are held by companies that have no business except to squeeze money out of developers; some developers may by luck have software patents that others need, while having no need themselves for the patents available for mutual defense. The only way to eliminate the harm that software patents do is to eliminate patents entirely from the field of software.

However, mutual defense and political activity can complement each other. While we organize to eliminate software patents, we can practice mutual defense as a temporary partial solution. Participation in mutual defense will raise public awareness of the software patent problem, which will stimulate support for a change in the law.
http://www.quickmba.com/strategy/swot/

Get A Free Essay Quote Order Your Custom Essay

FREE OSCOLA Referencing Generator

Need help with referencing your OSCOLA citations? Our free OSCOLA reference generator will do it all for you!

Do you need to translate this page?

To translate this page into another language, please select the correct language from the box below.

Subscribe below and get new essay/resource uploads direct to your inbox

LOOKING FOR SPECIFIC HELP? We can help you in many law areas!

Did you know that we also provide a service that can help you in other law areas such as:

Want to see what our customers say about us? Click here to watch our video.

Want to become a writer for Law Teacher and earn up to £4,000 per month? Click here now!

Secure your law degree, order your family law essay right now!