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Wednesday, 11 August 2010

Software Patents as Stalking Horses for the Patent System

For those of you who like your discussion about the intersection between IP and innovation/ commercialization/ entrepeneurship laden with rhetorical spice, you cannot beat the commentary of Vivek Wadhwa. Just his current set of affiliations is enough to grab your attention (Visiting Scholar at the School of Information at UC-Berkeley; Senior Research Associate at Harvard Law School; and Director of Research at the Center for Entreneurship and Research Commercialization at Duke University). If credentials were a tradable currency, then this set of affiliations would certainly be the gold standard.

A good example of the Wadhwa-way of writing about these issues can be found in his recent post in the August 7 issue of TechCrunch. Entitled "Why We Need to Abolish Software Patents" here, Wadhwa makes an impassioned plea in favour of abolishing that most maligned of IP rights, the software patent. He makes the following main points in support of his position:
1. Software patents "don't foster innovation, they inhibit it. That is because things change rapidly in this industry. Speed and technological obsolescence are the only protections that matter."

2. Left to their own devices, software companies (especially start-ups) would more likely than not eschew software patents. In support of this, he summarizes the findings of a 2009 article by Stuart Graham, Robert Merges, Pamela Samuelson and Ted Sichelman, "High Technology Entrepeneurs and the Patent System: Results of the 2008 Berkeley Patent Survey". The article concluded, inter alia, that only 24% of startups filed for patent protection, compared with 76% in medical devices and 75% in biotech.

3. He recalled his own experience in connection with a startup, where he was involved in four patents. "I didn't really expect them to give me any advantage ... [b]ut I needed to raise financing, and VCs wouldn't give me the time of day unless I could tell a convincing story about how we we, alone, owned the intellectual property for our secret sauce."

4. Further referring to the Berkeley report, he made the following additional points:

a. "Venture-backed companies also file more patents than others that file patents. They file, on average, 5.9 patents as against the all-company average of 1.7."

b. "Software executives consider patents to be the least important factor for competitiveness". More important are first mover advantage, followed by complementary assets, copyright. trademarks, secrecy, and making reverse engineering difficult.

c. Patents are filed to: (i) prevent competitor copying; (ii) improve the chances for funding: (iii) enhance a company's reputation; and (iv) obtain a bargaiing chip with others. Even venture capitalists are skeptical that patents lead to greater innovation.

5. The conclusion: software patents serve mainly "patent lawyers and patent trolls, not entrpeneurs."
I have several thoughts about Wadhwa's observations:
1. It really does not come as any surprise that patents are less important in software than in other fields. After all, patent protection came later, after copyright and trade secrets had been well-established as the primary forms of legal protection, and software patents have always been uneasily viewed. Because of this, there is a bit of straw-man feel to his argument.

2. Wadhwa's real target is the patent system more broadly, with software patents providing a convenient rhetorical platform to promote his position.

3. If, as summarized in the Berkeley study, venture-backed companies file more patents (no matter what the field!), then the more interesting question is why the apparent disconnect between venture capitalists and other types of companies with respect to patents? Wadhwa suggests that they may not be acting in their own best interests with respect to patents.

4. Maybe yes, maybe no. I would give more credit to those who are putting their (or their client's) money on the line. At the least, more analysis is needed to convince me that venture-backed companies are involved in patent activities for mostly the wrong reasons.

5. Innovation is not equivalent to patenting. There can be innovation without patents; patents without innovation; competition with patents; and competition without patents. The creative, inventive world is complicated, and the multi-faceted role of patents merely reflects that complexity. Accordingly, there is nothing inherently repugnant about any of the motivations for patenting described in 4(c) above.
At the end of the day, Wadhwa's observations are like my last visit to a Chinese food restaurant, tasty but unsatisfying.

13 comments:

Anonymous said...

It's always amazed me that people go around software patent bashing with arguments that are not confined to the software domain. E.g. how do software patents "stifle innovation" (which, it has to be said, is a view not shared by everyone), yet patents in other areas of technology don't "stifle innovation"?

Pardon the pun, but does not compute.

I'm a patent attorney. I do a lot of work in software and consider it something of a speciality. I've acquired that speciality in response to demand. That is, software and ICT companies of all shapes and sizes have come to me with a view to obtaining patents for their computer-related inventions. I didn't force them to engage me. And I'm not the only patent attorney I know who does a lot of work in software. While of course there are software companies that don't wish to obtain patents - something which could be said in any field of endeavour - statements such as "Left to their own devices, software companies (especially start-ups) would more likely than not eschew software patents" should be taken with a very large bag of salt.

I'm not saying software patents are a good thing. I'm not saying they are a bad thing. I'm saying they are. Fact. And there are plenty of companies, from start-ups through to mega corporations, who want them.

Gentoo said...

"I'm not saying software patents are a good thing. I'm not saying they are a bad thing. I'm saying they are. Fact."

A lawyer (apparently) speaks (?)

It turns out that in this bar room brawl being august, a world expert and armed with facts and information can be trumped by such eloquence.

The arguments against software patents (if pure software is actually patentable) are carefully restricted to software. I have always taken that to mean that what we know about is software. We don't understand the rest of the world quite so comprehensively.

The arguments contra sweep in wider issues ("Wadhwa's real target is the patent system more broadly") until the topic is sufficiently diffuse and the point is lost.

People working in software for the most part, as the litany, latest case Wadhwa document, don't want software patents.

They have been forced into a system in which it costs $4 million table stake money (as now doubt "a lawyer writes" above appreciates in so many ways).

Amusingly IP litigation companies disguised as software companies are as often bitten as bit (and just as amusingly can have Epiphany moments albeit temporarily).

But lets try sticking to the point. Why is it so difficult for lawyers actually saying anything at all to restrict the argument to a discussion of software?

TJ said...

@Anonymous 4:56. I'm not sure anyone denies that software patents exist. The question is "are they a good thing?".

Mr Wadhwa seems to believe that the fact that companies file patents "to improve their chances of securing an investment" is evidence that patents don't stimulate innovation. How curious.

Joeri Beetz said...

Before starting a discussion on the patentability of software, it is important to agree on the definition of 'software'.
The web browser I am using now will be considered as software by many. But is a chip in my TV which is capable of processing incoming video data in a clever way (e.g. to improve image quality) also software?

Anonymous said...

Re: 1 on not fostering inovation. Well, how can he tell? One alternative is total market dominance as only the likes of Google can afford where they will put 100 top engineers on a problem and deliver a solution long before a start-up could.

Another alternative is trade secret, and one place I worked we used this extensively to protect an invention that now is about 20 years on with many more years of useful life left. Since it is secret, others cannot extend the invention and build upon it. That too is inhibiting innovation.


Re: 1 "That is because things change rapidly in this industry", this was an argument Nokia once used to explain why they did not patent much. Then Motorola took them to the cleaners for patent infringement and had Nokia down on their knees. While much changes there are still a few cornerstones that have a longer life.

Norman said...

It is wrong to conflate the software industry, which is the focus of the Berkeley Patent Survey, with software patents. The software industry as defined in that survey means companies with SIC codes 7371, 7372, 7373, and 7379. Many software patents are held outside the software industry. Symbian and Benson would probably fall within the software industry under that definition, but Aerotel, Macrossan, Diehr, Arrhythmia and Flook, for example, would not. I find it not very surprising that firms specializing in custom software development (SIC 7371) would not rely primarily on patent protection. This does not mean that a synthetic rubber company (Diehr, SIC 2822 - not addressed in the Survey) does not. Even if we were to accept that patents are a bad thing for the software industry as defined by the Berkeley Survey, that does not mean that software patents generally should be abolished.

Anonymous said...

1. Things also change rapidly in industries other than the software industry. Also, Wadhwa doesn't explain the connection between patents, innovation inhibition and speed of change in certain industries. Maybe if he took the bother to discuss it we could have an argument. As it stands, it rather looks like a "non sequitur".

2. It is unsurprising that patents are not really that important for software companies (especially start-ups). Unless the patent is essential to a standard, proving patent infringement without access to the source code of the allegedly infringing software (and even with access to it) is usually rather difficult, to say the least. But this also begs the question of why so many in the software world are so anxious about patents.

3. This is a fair point. The insistence of VC firms on patents, even in the field of software, is also a great mistery to me. Unfortunately, he doesn't provide an answer either.

4. a) Even if it is far less so in software, in other fields (biotech, electronics, materials, etc.) the patents may represent much of the value of a start-up. It is thus unsurprising that venture-backed firms file more patents than others.

b) Certainly! This is why I always tell my clients not to put all their eggs in the patent basket! They're just another tool, not a panacea, and pretty much worthless if nobody wants to buy your product.

c) If improved funding and bargaining power are not positive for innovation, I don't know what will be...

5. Yet another "non sequitur". Patents can be extremely useful for entrepreneurs. But no entrepreneur should rely entirely on them, especially not software entrepreneurs. They are a tool that should be used carefully and appropriatedly.

Anonymous said...

@Joeri Beetz

"But is a chip in my TV which is capable of processing incoming video data in a clever way (e.g. to improve image quality) also software?"

The difference between software and hardware is well known.

Only pro-software patent advocates try to blur the border.

Michael Kay said...

>It's always amazed me that people go around software patent bashing with arguments that are not confined to the software domain.

I've thought about that one a bit, because I've found myself using arguments against software patents that aren't specific to software. Well, I don't know much about pharmaceuticals, so my usual response is: let others decide whether the same logic applies there; I have no idea whether it does or not. The fact that some of the arguments against software patents might also apply against other kinds of patent does not diminish the strength of the arguments (unless, of course, you are American and believe the guys who wrote your constitution benefited from papal infallibility). I think software is different, because of the sheer pace of innovation and the amount of independent reinvention that goes on, but if you want to use the arguments to conclude that perhaps giving Edison a monopoly on light-bulbs wasn't fair on his competitors who invented the same thing at the same time, and had invested just as much in innovation, then by all means use them that way.

Anonymous said...

"The difference between software and hardware is well known. Only pro-software patent advocates try to blur the border."

Remind me - what is the difference? What was it again Alan Turing said....?

Norman said...

I think Michael Kay is right to say that the fact that the logic of arguments against software patent is also applicable in other fields. But the real difficulties are not in the logic, but in the empirical evidence. Patents are good in some ways and bad in others. The ways in which they are good or bad are the same in every field. The degree to which they are good or bad depends on the economic structure of the industry, and varies widely. There is a consensus that good outweighs the bad in pharma, but so far as I can tell, there is not much agreement otherwise. It’s ultimately an empirical question, and in most fields the evidence is lacking. (I vaguely recall have read quite a persuasive argument that patents are “a bad thing” in the automotive industry. Not as topical as software, but the logic is the same.)

Fred said...

@Anonymous 11.22 pm. Thank you for your comment. I'd thought I was broadly agnostic about software patents (if only because I'm not quite sure what the term includes), but your rule says I must be in favour of them. Are you right? The chip is hardware, agreed? But it's different from known chips because it has new software embedded in it. The EPO reckons this can make it patentable (if the software has a technical function). You agree? My guess would be that you don't agree, because you think that novelty based on software shouldn't be patentable. But then isn't it you that's blurring the distinction between hardware and software?

TR said...

http://www.groklaw.net/article.php?story=20091111151305785 - if someone wants to discuss "software patents"...

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