\documentclass[a4paper]{article}
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\title{Comments on the study \textit{The Economic Impact of
Patentability of Computer Programs}}
\author{Ed Avis, 48 Trinity Rise, SW2 2QR, UK.  \textit{epa98@doc.ic.ac.uk}}
\begin{document}
\maketitle
\begin{abstract}
These are comments I would like to submit to the Commission about its
study on software patentability.  The order of the comments follows
the order in which the study is presented, which means that comments
on the study's conclusions come first.

At the end are some more general comments on whether it is useful to
grant patents on computer programs.
\end{abstract}
\section{Section I}
\subsection{Open source development}
I feel that the authors of the report have misunderstood the position of open 
source developers summed up in the quotation from one open source 
developer.  This developer points out that while the platform itself is open, 
individuals are free to create proprietary products based on that platform.  
This is usually true. and it is what copyright achieves.  But I know that most 
open source developers would not support the idea that a particular use of 
their platform could be patented by one company which then prevents others 
from making their own implementation---in effect making the platform itself 
proprietary, since it no longer provides an open base for competing 
developers to build on.

The anonymous developer comments: `The goal of open source is to make 
sure that IP rights or other proprietary rights do not interfere with that 
platform'.  This is the case for copyright on software, but software patents 
often do interfere with a previously open platform and limit choice.  This is 
particularly true given the broadness and triviality of many software patents 
currently being granted.

Actually, I feel that the emphasis given to open source developers is 
misleading.  Certainly the individual developer is vulnerable to software 
patents, but then so are all development groups not big enough to fight back.  
It just happens that unpaid open source developers are at one end of the 
scale.  (They are also more vulnerable because they cannot keep their 
development secret, a point I'll mention again later.)

\subsection{Software patents necessary for American SMEs}
Commenting on the situation in the United States, the authors write: `On the 
one hand there is abounding evidence that the profitability and growth of 
independent and SME software developers in the States has often been to a 
significant extent dependent on possession of patent rights'.

It should be clear that this does not imply that the existence of software 
patents helps small and medium-sized developers to grow.  It could just as 
well be true that the legal climate is such that a small company without 
sufficient patents to use defensively is vulnerable to attacks from large 
patent-holding corporations, and thus it is necessary for small companies to 
acquire patents if they are to attract investment and grow.  In fact I believe 
that this is the case.  The fact that, in the present US legal climate, it is 
necessary for small firms to hire patent lawyers and start acquiring patents 
does not mean that small firms in Europe would be helped by the 
introduction of a similar system.  It might just be a burden they would rather 
do without.

Also remember that a fast-growing, highly profitable company which
holds many patents does not necessarily indicate a healthy
marketplace.  It could be that this company is doing well through
blocking competitors from entering the market and through demanding
licence money from other firms.  Such behaviour does not usually help
consumers, who would prefer an open and competitive market.  It might
be better to have several companies, not quite as fast-growing or as
profitable, who are competing freely and growing the total size of
this market segment faster than a single monopolistic firm.

It is jumping to conclusions to say, as the report does, that patentability of 
computer programs has helped the growth of SMEs in the US.  All one can 
conclude is that in a market where your competitors are filing for patents, 
you need to do the same yourself if you expect to grow.

\subsection{Do software patents help small companies?}
The authors claim that lack of software patents in the early days of the 
computer industry made it easier for large companies to copy the ideas of 
smaller developers.  But is there any evidence that widespread software 
patentability has stopped this trend?  A small developer holding one or two 
patents on a key idea will not stand a chance in a legal battle with a large 
developer holding thousands of patents, many of them vague or extremely 
broad but nonetheless granted.  Software patents certainly do not level the 
playing field in favour of the small developer---except perhaps for the 
company which does no development work itself (thus not infringing on 
anyone else's patents) but distorts the market by accumulating patents on 
whole classes of computer programs.

(There is also the implicit assumption that it's a bad thing for other
companies to market their own products based on a particular idea.
But in order for competition in software to exist at all, this must be
allowed.  The advantage of being first to market is particularly great
in the software industry, there's no reason to create extra barriers
to entry for those who are trying to bring competing products to
market.)

\subsection{Invalid patents}
The report acknowledges that many software patents granted in the US are 
invalid, but doesn't consider this important: `Their existence\dots is hardly a 
significant barrier to software developers.'.  This is to seriously 
underestimate the problem.

Even an infringement suit for an invalid patent requires hiring a patent 
lawyer and a trip to court.  Even if you win, the process can be cripplingly 
expensive for a small software developer, impossible for an individual or 
start-up.  (This is true even under a loser-pays system, since it can never be 
absolutely certain who will win.)  Multiply that by the sheer number of 
vague, possibly invalid patents held by many large companies, each one of 
them the subject of infringement proceedings, and you will see that invalid 
patents are just as much a problem as valid ones.

The overheads of software development are much lower than those in most 
industries where patents are used; so the costs of fighting patent lawsuits are 
proportionally much higher.  Any patents, invalid or otherwise, represent a 
real risk for the small software developer.  Large companies can usually 
countersue with their own collection of patents and reach a cross-licensing 
agreement, so invalid patents aren't so much a problem for them.

\subsection{Current quality of software patents}
The report concludes that we need to make sure European patent offices 
(national and EPO) do not fall into the same trap as the USA, to make sure 
they do not grant `obvious' patents.  (It's not clear whether this means 
obvious to a software developer, or obvious to a patent examiner, which in 
practice is rather different.)  There's no evidence that this is happening.  If 
patentability is to be extended, it would be prudent to clean up the patent 
examination procedure before such an extension, rather than afterwards.

\subsection{Antitrust law}
Anti-trust regimes are not an effective way to stop companies 
abusing their software patent portfolio.  The speed at which the courts work, 
and the speed at which the software industry works, mean that any possible 
action would come far too late and take far too long.  It is not good to 
introduce one layer of litigation through software patentability, and then try 
to fix it with another legal process.  Better to allow companies to write 
software without the threat of legal action hanging over them, and let them 
respond quickly to market demand without waiting for courts to make 
decisions.

\subsection{Options presented for changing the law}

On aims II and III, the report presents three options.  I feel that
these options are misleading and do not show the whole story.

\noindent
\textbf{Option 1}: The report tries to present the status quo as being that computer 
programs are patentable, and suggests that the `computer programs as
such' exception be removed from the EPC.  But this is not maintaining
the status quo at all.  The EPO has very cleverly managed to
reinterpret the law to make an arbitrary and unclear distinction
between `computer programs as such' and `computer programs not as
such'.  This happened very recently in the lifetime of the EPC; if it
were really the intention of the EPC's authors, surely it would not
take several decades for this new, enlightened interpretation to
appear?

Since the EPO's decision was not based on any economic criteria or any 
research of its effect on the software market, there is no reason to suppose 
that it represents any improvement on the previous, clear position that 
computer programs were not patentable.

The criterion of `technical effect', which is supposed to distinguish between 
software as such and software not as such, does not have any clear meaning.  
Patents have been granted for purely abstract, mathematical algorithms such 
as data compression on the basis that this has a technical effect---the effect 
being that you might use such an algorithm to encode data travelling across 
a network, for example.  But the same could be said of any algorithm to 
translate data from one format into another, so at a stroke all network 
protocols and file formats become patentable.  Patents have been granted on 
user interfaces, so we can assume that any software whose purpose is user 
interaction is not software as such.  So already all means of input and output 
are considered as having a technical effect; and for any other software 
patent application it is not difficult for a computer programmer to think up a 
possible technical effect which gets round the `software as such' exclusion.  
For example, the EPC rejected a patent application for a homophone 
checker on the grounds that it did not have a technical effect---but 
conceivably one could use such a program to get more efficient data 
compression, thus putting it into the ever-expanding category of software 
not as such.

I'm sure you have seen the software patent `horror gallery' listing
very broad patents granted by the EPO on setting prices in a Website
(WO9615505), dynamically generating web pages from a database
(EP0747840), printing ingredients required for a recipe (WO9529453)
and many others.  Apart from the serious implications for competition,
these should be sufficient proof that the notion `technical effect' is
in practice just used as an excuse to grant patents on as wide a range
of programs as possible.

It's hard to imagine the EPC ever ruling that something previously 
considered a technical effect is no longer to be counted as one---the border 
between patentable software and excluded software would move in one 
direction only.  For these reasons, there is no real difference
between Option 1 and Option 2.

But there is an option left out:

\noindent
\textbf{Option 0}: Uphold the status quo as clearly defined by the EPC, making it 
clear that computer programs are not patentable, just as methods for
playing games and methods for doing business are not patentable.  This
would not stifle competition and innovation in the software market; it
would not expose small developers to legal threats; it would mean that
companies can get on with writing software and not fighting court
battles.

I urge you to consider this option too, and to recognize that the
EPO's fig-leaf of `technical effect' has no real meaning when applied
to software.

\section{Section II}
Since I am not a lawyer, I will not write much on Section II, but I
would like to say a few things about lawmaking:

Firstly there is the obvious point that there is a fundamental difference 
between a physical invention or process, and something which is purely 
information such as a picture or computer program.  Making a clear, legally 
enforceable distinction between the two has already been managed by 
copyright law, so there is no reason why patent law cannot do the same.

But more importantly, the patent system exists only to serve economic 
interests.  Any decision on what is patentable should be made on economic 
grounds and not by trying to carry across decisions made for a
different area.

So removing exemption of computer programs on the grounds of `technical 
effect' alone is not sensible, because having a technical effect and
being economically justified are two unrelated criteria.  What is
worthwhile for other industries may not be worthwhile for software,
and vice versa.

Finally, on the question of whether software is `technology', I would like to 
point out that while marketing departments often refer to software as 
`technology', you will not usually hear a programmer use this term.

\section{Section III}
Section III has a mixture of pro- and anti-swpat viewpoints.  But those 
which favour software patents, or at least suggest that the anticompetitive 
effects they cause would not be too great, tend to be founded on the 
assumption that `the system works properly'.  So large numbers of bad 
patents are not being issued, companies cross-license on reasonable terms, 
antitrust laws work swiftly and effectively, and so on.  But this idealized 
software patent world is not real.  The software patents being granted by the 
EPO are frequently of very poor quality, just as bad as those in the US if not 
worse.  And it only takes a single firm to start aggressively enforcing its 
software patents to cause serious trouble to every other firm which is not big 
enough to have its own defensive portfolio.

The claim that `the existence of a patent system\dots discourages business 
secrecy' may be true in other areas, but not for software.  Many companies 
cannot disclose their source code, even if customers want it, for fear that 
this would allow others to trawl through it for possible infringements.  On 
the other hand, the typical software patent will not disclose anything of 
value; either it is too broad and vague to give any details, or contains ideas 
which would occur to many programmers thinking about the same problem.  
(There are some software patents which contain descriptions of new 
algorithms, but in these cases the algorithm would have been disclosed 
anyway without a patent, if it is to become any sort of useful standard.)  So 
software patents actually encourage business secrecy and discourage 
disclosure.

\section{General comments on software patentability}
The hard work of software development is usually not in thinking up an
idea but in implementing that idea.  This is particularly true given
the obviousness of many of the ideas that the USPTO and EPO consider
patentable, in some cases simply because they involve a computer.  It
is not like (for example) the drug industry where many years and lots
of money must be expended to generate new patents.  Rather, thinking
up new ways to solve a problem is what a computer programmer does
every day, and the same idea will almost certainly have occurred to
many programmers in the past.  The expense comes in implementing and
testing code based on that idea.

The work of implementation is already protected by copyright, which
provides a good balance between incentives for development and a
competitive marketplace.  Software patents tip that balance too far
towards monopoly, and in any case it's unlikely that the first company
to file a patent actually `invented' the idea.

But even if, in theory, it were possible for the patent office to
examine all the millions of lines of program code currently in use and
grant patents only on genuinely new algorithms, the price would still
be too great.  The software market is unlike most others in its strong
requirement for compatibility; competing products need to read each
others' file formats, for example.  A patent on a file format, or on
an algorithm used to encode that format, allows one company to block
all competing products that might perform the same function as its
own.

Developers are expected to check every line of their code against
thousands of existing patents.  Consider that the USPTO has allowed
the same algorithm (LZW compression) to be patented twice, by Unisys
and by IBM.  If even the patent office cannot check an application
against previous patents, what hope is there for the developer
checking a 500,000 line program?  Copyright, on the other hand, does
not have this problem; you have legal certainty that if you have not
copied anyone else's work, you are not infringing.  Copyright works
well for computer software; patents do not.

In short, the possibility of infringing on thousands of software
patents is a serious burden for small companies, and patents on file
formats (or on business methods, which could effectively be granted if
the business method involves a computer) affect even large companies.
The result is reduced choice in the market and less software available
to the consumer.  And patents on file formats mean total monopoly with
no possibility of competing, compatible programs being written.

The fact that American firms are stuck in this mess is not a reason to
inflict it on European companies.  I urge you to recommend that the
existing wording of the EPC be upheld, so that computer programs
(along with methods for playing games, doing business, and so on) are
made explicitly not patentable.

Also, any change to the EPC which allows the EPO to decide for itself
on changes to the rules would be very unwise.  The patent office is
not equipped to make a proper economic analysis of changes to the
system.  Past experience has shown that the EPO would move the
frontier of patentability in one direction only.
\end{document}