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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

This is not to say that patents can't serve as a decent source of information. Unfortunately, patents are barely readable unless a programmer happens to be versed in the verbal acrobatics of legal documents. Patents are written to enhance the appearance of innovation in order to enhance the application's chances of being approved. Simple concepts that can be described in a sentence somehow get expanded into three or four paragraphs. This makes them poor sources of information, and partly explains why developers don't tend to explore patent libraries.

On the other hand, if you replace the "pull" model wherein developers go hunting for technology found in patent databases for the "push" model, wherein companies go out and educate developers about their patented technology, the claim appears more credible. For instance, RSA Security had a vested interest in educating as many developers as possible about their patented technology (now lapsed), as more users implied more licensing revenue.

If software patents offer any benefits, it would be through the incentives created to market properly an idea. If the net effect of software patents is, as I've claimed, to reduce R&D and new idea creation in general, then this incentive is of dubious benefit.

A realistic appraisal of the American patent experiment
It is often suggested that America's success in Information Technology is causally linked to a liberal patent regime. A consideration of the history of American software patents would suggest otherwise.

The foundation of America's current patent framework was laid by court cases in the 1980s and 1990s. Patents on algorithms were granted in the 1970s, though these were usually tied to a hardware process wherein the software was intimately associated with the operation of that hardware. Even so, these patents were legally dubious until 1981, when the Supreme Court ruled in Diamond v. Diehr that algorithms were patentable under certain limited circumstances.

This did not result in an explosion of algorithm patents, as the ruling was sufficiently vague as to require subsequent rulings to clarify matters further. The most important clarification came in 1994 with the In re Alappat case, where the court of appeal for the federal circuit ruled that the standard by which algorithm patents would be judged was that the result must be "useful, concrete and tangible".

The doors to business method patents were opened in 1998, in the case State Street Bank and Trust v. Signature Financial Group. As Nicholas Godici explained, "(t)he Federal Circuit in State Street explicitly rejected the notion that a "business method" exception exists in United States patent law, thereby ending any notion that inventions deemed to be business methods, by whatever criteria, would be excluded from patentability on that basis alone. Thus, the State Street decision clarifies that an invention deemed to be a "business method" will be treated in the same manner as any other method or processs invention" (Nicholas P. Godici, Acting Undersecretary of Commerce for Intellectual Property).

There are a number of reasons I might suggest for America's success in Information Technology, such as an entrepreneurial culture, a relatively hands-off approach to business, a flexible labour market, a personal responsibility approach to business organisation (something I should write about in a future article) and low-cost computer products (relative to other places in the world) which leads to more consumers who can use software products. Software patents, however, simply played no role in the success of American IT companies. They became popular too late to have much of an effect.