To: [email protected] Subject: Cato's TechKnowledge - The Case against Literary (and Software) Patents Date: Fri, 28 Aug 2009 07:02:01 -0700 From: [email protected] The Case against Literary (and Software) Patents Issue #125, August 28, 2009 by Timothy B. Lee Imagine the outcry if the courts were to legalize patents on English prose. Suddenly, you could get a "literary patent" on novels employing a particular kind of plot twist, on news stories using a particular interview technique, or on legal briefs using a particular style of argumentation. Publishing books, papers, or articles would expose authors to potential liability for patent infringement. To protect themselves, writers would be forced to send their work to a patent lawyer before publication and to re-write passages found to be infringing a literary patent. Most writers would regard this as an outrageous attack on their freedom. Some people might argue that such patents would promote innovation in the production of literary techniques, but most writers would find that beside the point. It's simply an intolerable burden to expect writers to become experts on the patent system, or to hire someone who is, before communicating their thoughts in written form. Over the last 15 years, computer programmers have increasingly faced a similar predicament. We use programming languages to express mathematical concepts in much the same way that authors use the English language to express other types of ideas. Unfortunately, the recent proliferation of patents on software has made the development and use of software legally hazardous. That's why many of us are hoping the Supreme Court definitively rules out patents on software when it hears the case of Bilski v. Doll this coming term. Patent protection was first extended to software in the 1980s, and the practice accelerated in the 1990s. As a result, it is now difficult to create any significant software without infringing a patent. With tens of thousands of software patents granted every year, and no effective indexing method for software patents, there is no cost-effective way to determine which patents cover any piece of software. Stanford law professor Mark Lemley has documented the unsurprising result: most firms in the IT industry have simply given up trying to avoid patent infringement. Instead, larger firms stockpile patents to use as ammunition when they are inevitably sued for infringement. They also sign broad cross-licensing agreements with other large firms promising not to sue one another. This has prevented patents from bringing the software industry to a standstill, but it's hard to see how the practice promotes innovation. Even worse, software patents tilt the playing field against smaller and more innovative software firms. Most small firms develop their technology independently of their larger competitors, but this isn't enough to prevent liability; incumbents have so many broad software patents that it's impossible to enter many software markets without infringing some of them. Small firms don�t have the large patent arsenals they need to negotiate for cross-licensing agreements with their rivals. As a consequence, incumbents can use their patent portfolios to drive smaller competitors out of business. Other small firms are forced to pay stiff licensing fees as a cost of entering the software industry. The result is to limit competition rather than promote innovation. The Supreme Court has been taking steps to rein in the patent bar in recent decisions such as KSR v. Teleflex. But the Court hasn't directly addressed the patentability of software since 1981, when it ruled (as it had on two previous occasions) that software is ineligible for patent protection. In the intervening years, the United States Court of Appeals for the Federal Circuit, which hears all patent appeals, has seemed to stray far from that principle. But the Supremes have not reviewed any of its key decisions. The patent at issue in Bilski is not a software patent; it is a "business method" patent that claims a strategy for hedging against financial risk. But the case is being closely watched for its effects on the software patent issue. Patented business methods are often implemented in software; for example, a key decision on the patentability of software, State Street Bank v. Signature Financial Group, involved a software-implemented business method. And the standard articulated by the Federal Circuit in Bilski, known as the �machine-or-transformation test� has been used by the Patent Office in recent months to invalidate several software patents. The Supreme Court could ratify the Federal Circuit's mildly restrictive standard, or it could articulate its own standard that is either more or less restrictive of patents on software. Reiterating that software cannot be patented would be a dramatic step, but it would be the right one. Supporters of software patents insist that barring software patents would be throwing the baby out with the bathwater. But it's not clear there was a baby in there to begin with. Empirical research suggests that software patents are dramatically less effective at promoting innovation than other categories of patents, producing more litigation and smaller revenues for innovators. Software developers already enjoy strong copyright protections for their work, rendering patent protection largely redundant. Copyrights have several key advantages. The process for obtaining them is much simpler, as are the rules for determining when infringement has occurred. Most important, copyright law, unlike patent law, allows independent invention as a defense to infringement claims. The writing of software, like writing in English, is a creative activity practiced on a vastly wider scale than other activities commonly afforded patent protection. Small businesses and nonprofit organizations far removed from the traditional software industry have IT departments producing potentially infringing software. The Brookings Institution's Ben Klemens has documented that this is not a theoretical problem. Entities as diverse as the Green Bay Packers, Oprah Winfrey, Kraft Foods, and J. Crew have been sued for developing or using ordinary business software. Regulations that work well when applied to a handful of large, capital-intensive firms can become an intolerable burden when applied to millions of small organizations and individuals. It's not reasonable to expect hundreds of thousands of small businesses to vet the software they produce for patent infringement, any more than it would be fair for them to face liability for publishing a brochure with an infringing turn of phrase. The high overhead of the patent system demands that it be limited to relatively concentrated and capital-intensive industries in which most participants have the means to comply with the requirements of patent law. Patents on English writing would not meet this requirement. Neither do patents on software. Timothy B. Lee is an adjunct scholar at the Cato Institute in Washington, DC. To subscribe or see a list of all previous TechKnowledge articles, visit www.cato.org/tech/tk-index.html. To unsubscribe, click here [Non-text portions of this message have been removed]
