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Software patents need shelter from the storm

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John Carroll ZDNet.com

Published: 17 Sep 2003 16:35 BST

Regarding SME revenue from patents
If small to medium-sized businesses were creating patents in large numbers, then such businesses might benefit from the value inherent in the grant of a patent. Unfortunately, the primary actors on the patent stage are large companies. A number of the studies I read for this article recommended doing more to educate small to medium-sized businesses of the benefits of patents, in hopes that this would spur them to patent more.

This won't have much effect, in my opinion, as there are a number of reasons why smaller companies will still choose to avoid the patent process.

"..., SMEs relative lack of interest in the patent system might have a more rational explanation. Possibly, SMEs make conscious decisions to stay away from patents, for a variety of reasons -- costs and effort being important factors. Typically, patenting (or defensive action against patent claims) will take time from the same few people that are the creative brains behind the inventions. In practice, many SMEs tend to rely on copyright protection for software, which is readily available and may provide all the protection SMEs really need." (The patentability of computer programs)

Likewise, consider that SMEs will never acquire patents in numbers comparable to large companies. This gives large companies a stronger hand in negotiations, and reduces the revenue-generating power of the handful of patents SMEs have in their possession. More often than not, SMEs will be forced to effect patent trades with large companies rather than manage licensing arrangements which would serve to bolster their bottom line.

Another reason small companies avoid the patent race is cost. The application process is expensive enough, but it is the legal costs associated with defending a claim in court which is the real burden. Of course, defending against an external patent claim can be just as expensive, but in future, there may be no way to avoid such patent suits, even with large, defensive patent libraries.

I base this on the growth of American companies composed of nothing more than a handful of patents and a team of lawyers to defend them. Such "litigation enterprises", such as Eolas, owner of a patent on generic plug-in technology with which they have extracted large fees from Microsoft, and PanIP, a group that is suing small e-commerce sites over its claim to own the "technology" of online sales, are free of the need to trade for patents, as they have no product to speak of which would require access to technology patented by large companies.

They are free, therefore, to pursue the full revenue potential that patent-derived monopoly power grants them. These companies produce no new ideas, and serve as a tax on software companies oriented around creation of tangible product and the new ideas that go along with them.

Regarding information dissemination through patents
Few in the software industry cull the patent library to find algorithms or business methods. For the most part, patents are a legal instrument to be used in software competition, not a source of information.

"It is, however, doubtful whether the information function actually plays an important role in the software industry. German research shows that patent archives are primarly valued as a source of information for legal purposes, and only to a lesser extent as a source of technical information." (The patentability of computer programs)