SHOULD SOFTWARE PATENTS EXIST?

Should Software Patents Exist?

Sanida Saliovski IMS 3310. 0E1. Take A Stand- 1st Paper 10/24/12

SHOULD SOFTWARE PATENTS EXIST? Alongside the impressive technological advances in the past few decades, the value of intellectual property has shifted primarily from tangible assets to intangible assets. Today, the value in a company lies in their technology and ability to innovate. For more than two decades the American patent laws have supported the innovation and technology in the Software industry. Many companies are concerned about patent systems and how well they really protect their business. Due to recent legal activities between various global companies, the discussion of abolishing tech patents has been a hot topic. The debates are about how necessary software patents really are, if they obstruct innovation rather than promote it, and whether these patents do more harm than good. So what is a patent? A patent is an intellectual property right granted by the Government of United States of America to inventors to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States (United States PTO, 2012) for a limited time for exchange of public disclosure of the invention. This limited time of protection is twenty years. It is argued that patents are more useful for physical, more mechanical things. Something humans create; as long as its new, useful, and passes obviousness test. If every designer these days knows how to make a website, then websites are not a new idea anymore. Within the group of professional designers, no one can patent that idea, because its now obvious. (Kosner, 2012). The basic principles of patent law were developed before computers were invented and have served societies for centuries. In 1965, the first software patent was filed, and in 1990, the Supreme Court ruled that software was undoubtedly patentable as long as it was in context of some mechanical entity, whether it be a computer system, a disc or in medical machinery. (Kosner, 2012). In principle, what this means is that in order to patent a software idea, it has to

SHOULD SOFTWARE PATENTS EXIST? be embedded into some sort of hardware. Because the software is a form of idea rather than mechanical structure, it is not strictly restricted to the original implementation but can be used in other hardware entities. This entitles companies to license their software ideas, complicating the matters even further by restricting the use of their patents and charging enormous fees for use of their ideas. This brings back the debate question companies seem to be asking themselves nowadays; are software patents really necessary for innovation? During the Industrial Revolution, the most profitable investments were based out of production. Innovation and technology flourished during this century, and in the knowledgebased economy patents became essential. Today, for small businesses and start-up companies, patents may be important to obtain financial support or to access technologies needed to conduct business. Companies recognize the benefits of patents and their core technology. Patents on core technologies protect from competition and infringers. However, many argue that existing software patent system is not the right system for innovation. "One thing that we are very seriously taking a look at is the question of software patents, and whether in fact the patent system as it currently exists is the right system to incent innovation and really promote consumer-friendly policies," said Pablo Chavez, Google's public policy director. (McCullagh, 2012). Regardless whether software patents should be eliminated or reformed, the argument is that one-size-fits-all patent system doesnt make sense and that software patents should be treated differently from other types of patents. The software patent system is to broad and to vague to apply to software ideas and should be treated as a separate entity. Given the global competition and the rapid development of technology, the software patent system is necessary for market competition, but should be reformed to a separate entity and designed to fit the marketplace. Pablo Chavez, Googles public policy director states that these patent wars are

SHOULD SOFTWARE PATENTS EXIST? not helpful to consumers, they're not helpful to the marketplace and they're not helpful to innovation." (McCullagh, 2012). According to Mr. Chavezs statement the software patents obstruct innovation and technology development rather than promoting it. They produce the opposite effect of what patents are designed to do. Patents were supposed to protect innovation. Now they risk throttling it. .software patents have provided no net benefit to the software industry, let alone to society as a whole.. (Guardian, 2011). Successful innovations are achieves by research and development (R&D). This source of innovation has lead to productive growth in areas such as software industry, medicine, IT, and government. But many companies are spending more money on patents and patent related lawsuits than on R&D. This has become a very controversial subject in technology circles. Patents are now a multibillion-dollar industry in which companies find it more attractive to make money suing each other for infringement than actually making things.. (Guardian, 2011). A great example is the Apple/Samsung lawsuit over productcopying allegations. Two of the biggest smartphone companies in the world are battling over several dozen cases; in more than a dozen countries, over allegations of illegally copying technical features and designs of the Apples iPhone and Samsungs Galaxy S. In its court filing, Apple said it is seeking $2.525 billion in damages from Samsung. That is about 15% of the $17 billion operating profit from Samsung's telecom division in the two years since it released the first version of the smartphone Apple says infringes on its designand about 8% of all of Samsung's operating profits in that time. (Ramstad, 2012). Samsungs response to these allegations was that "Apple seeks to exclude Samsung from the market, based on its complaints that Samsung has used the very same public-domain design concepts that Apple borrowed from other competitors," reads the Samsung brief. "Apple, which sold its first iPhone nearly 20 years

SHOULD SOFTWARE PATENTS EXIST? after Samsung started developing mobile phone technology, could not have sold a single iPhone without the benefit of Samsung's patented technology."(Ramstad, 2012 ). In response to this case, there has been a decline in SME innovation because many are scared to invest in R&D and risk a lawsuit. While weak patent systems may mildly increase innovation with limited sideeffects, strong patent systems retard innovation with many negative side-effects (Lee, 2011). The Apple/Samsung case is a great example of how these patent wars are negatively impacting companies, and costing them millions of dollars in lawsuits; something that small and up-andcoming businesses cannot afford to pay. It has been proven in many cases that software patents are doing more harm than good in the tech world. The tech giants that formerly opposed software patents have now joined the patent system. In the smartphone industry alone, according to a Stanford University analysis, as much as $20 billion was spent on patent litigation and patent purchases in the last two years(Duhigg & Lohr, 2012). This year, Apple and Google spent more money on patent lawsuits and unusually big-dollar patent purchases exceeding their spending on research and development of new products. Joining them are so called troll companies, mainly formed to buy up patents, sue companies and developers for disintegration of intellectual property, knowing that most would settle rather than face the huge costs of lawsuits. In order to protect themselves the big corporations are spending billions of dollars buying patent portfolios and concentrating on licensing agreements instead of investing in innovation and technology. Besides the threat of lawsuits and troll companies, obtaining software patents take a long time and cost a lot of money. Smaller businesses dont have a chance in competing with the giant tech companies, and in the long run very few would benefit from software patents.

SHOULD SOFTWARE PATENTS EXIST? In the past few decades, the technological advances have been very impressive. In the early days of innovation it can be concluded that the patents have been very beneficial, to the consumer as well as the inventor, by creating comparative advantage in the marketplace. Alongside the technological advances and innovation success, many companies felt apprehensive about patent systems and how well these patents really protected them. Over time, it has been proven in many cases that patents have many negative consequences. The idea of protecting innovations and gaining economical advantage from that innovation has gone beyond the basic software system patent. Companies have gone so far that they will sue over allegations of product copying over minor elements in a gadget, and they wont stop until they eliminate the competition. The logical process would be to introduce a logical reform to this issue. The system that has worked so far is not very effective and it is creating more problems than solutions. To eliminate the software patent system would be chaotic just because this is an industry that is potentially worth billions of dollars, simply because of the existing patent information enclosed within. Instead, a rational reform should take effect. A separate system, which would contain a shorter time limit on the patent; maximum of five years depending on the patent, and specified information on patent application. This strategy would encourage large changes in digital technology where innovation and R&D motivates for protection of patent laws and not by monetary gains.

SHOULD SOFTWARE PATENTS EXIST? Work Cited: The united states patent and trademark office, an agency of the department of commerce. (2012, January 21). Retrieved from http://www.uspto.gov/patents/index.jsp Kosner, A. (2012, October 21). The big fix, Forbes, Retrieved from http://www.forbes.com/sites/anthonykosner/2012/10/21/the-big-fix-3-how-to-untanglethe-mess-with-software-patents/ Lee, T. (2011, July 28). Forbes. Retrieved from http://www.forbes.com/sites/timothylee/2011/07/28/the-supreme-court-should-invalidatesoftware-patents/ McCullagh, D. (2012, August 20). Google: Time to ditch our current software patent system? [Web log message]. Retrieved from http://news.cnet.com/8301-13578_3-5749674738/google-time-to-ditch-our-current-software-patent-system/ Editorial. (2011, August 21). The guardian. Retrieved from http://www.guardian.co.uk/commentisfree/2011/aug/21/editorial-software-patentsfoolish-business Duhigg, C., & Lohr, S. (2012, October 12). The patent, used as a sword. . Retrieved from http://www.nytimes.com/2012/10/08/technology/patent-wars-among-tech-giants-canstifle-competition.html?pagewanted=all&_r=0 Ramstad, E. (2012, July 30). Big stakes in patent war. . Retrieved from http://online.wsj.com/article/SB10000872396390444130304577556711972764558.html