Software patent

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One possible definition of a Software patent, supported by the Foundation for a Free Information Infrastructure (FFII), is that it is a patent on any performance of a computer realised by means of a computer program.<ref name="ffii"></ref> However, the term does not have a commonly recognised meaning. (See Scope of software patentability, below).

A related term is Computer-implemented invention (CII), which is used by the European Patent Office (EPO). Although the term is again not well defined, One EPO definition of a CII is "an invention whose implementation involves the use of a computer, computer network or other programmable apparatus, the invention having one or more features which are realised wholly or partly by means of a computer program." <ref></ref>

There is intense debate as to what extent either software patents or patents on computer-implemented inventions should be granted, if at all.


[edit] Patents in general

A patent is a set of exclusive rights granted by a state to a patentee (the inventor or assignee) for a limited period of time.

To obtain a patent, inventors must file patent applications in each and every country that they want protection in, such as Japan, China, the US or India. Some regional offices exist, such as the European Patent Office (EPO), which act as supranational bodies with the power to grant patents which can then be brought into effect in the member states.

Patent applications also have one or more claims which set out the boundaries of the invention that the inventor asserts is his/her original and non-obvious invention. The claims also describe what third parties are not allowed to do without permission from the patent proprietor. A patent claim is a one sentence definition of a given invention. For software inventions, such claims are often in the form of a computer-implemented method or a system for implementing the invention.

Patents are not granted automatically in most countries but must usually undergo an examination process in which a patent examiner determines if the applicant is entitled to the patent claims they are requesting. If so, then the claims are allowed and a patent issues, often only on payment of a grant or issue fee.

Once a patent issues in a given country, the patent owner can prevent others from making, using or selling the claimed invention in that country. Patents are generally enforceable for up to 20 years. Different countries have different standards for allowing patents. This is particularly true of software or computer-implemented inventions. Thus a particular computer based patent application may be granted a patent in one country, such as the US or Australia where such applications are more likely to be accepted, but be deemed unpatentable by other patent offices such as the EPO.

[edit] History

Image:Software patents2.JPG
Growth of Software Patents in US

The first software patent ever granted is probably a patent for a "computer having slow and quick access storage, when programmed to solve a linear programming problem by an iterative algorithm, the iterative algorithm being such that (...)" applied for in 1962 by British Petroleum Company<ref>, see end of page 3</ref>. The patent relates to solving simultaneous linear equations.

The USPTO (the American patent office) has traditionally not considered software to be patentable because by statute patents can only be granted to "processes, machines, articles of manufacture, and compositions of matter". In particular patents cannot be granted to "scientific truths" or "mathematical expressions" of them. This means that most of the fundamental techniques of software engineering have never been patented.

The USPTO maintained this position, that software was in effect a mathematical algorithm, and therefore not patentable into the 1980's. The position of the USPTO was challenged with a landmark 1981 Supreme Court case, Diamond v. Diehr. The case involved a device that used computer software to ensure the correct timing when heating, or curing, rubber. Although the software was the integral part of the device, it also had other functions that related to real world manipulation. The court then ruled that as a device to mold rubber, it was a patentable object. The court essentially ruled that while algorithms themselves could not be patented, devices that utilized them could. This ruling wasn't as straightforward as many would have liked, forcing many electronic device makers into the courts to establish that their inventions were in fact patentable.<ref></ref>

Due to different treatment of federal patent rights in different parts of the country, in 1982 the U.S. Congress created a new court (the Federal Circuit) to hear patent cases. The new circuit rejected rulings from some parts of the country, and nationalized others. For example, the court made patents generally easier to uphold by presuming patents were valid unless proven invalid and weakening the defense of non-obviousness. This court allowed issues, such as patentability of software, to be treated uniformly throughout the US. Due to a few landmark cases in this court, by the early 1990s the patentability of software was well established, and in 1996 the USPTO issued Final Computer Related Examination Guidelines<ref>Final Computer Related Examination Guidelines</ref>. See Software patents under United States patent law.

Within European Union member states, the EPO and other national patent offices have issued many granted patents for inventions involving software since the European Patent Convention (EPC) came into force in the late 1970s. Article 52 of the EPC excludes "programs for computers" from patentability (Art. 52(2)) to the extent that a patent application relates to a computer program "as such" (Art. 52(3)). This has been interpreted to mean that any invention which makes a non-obvious "technical contribution" or solves a "technical problem" in a non-obvious way is patentable even if a computer program is used in the invention. See Software patents under the European Patent Convention.

In India, a clause to include software patents was quashed by the Indian Parliament in April 2005.

The recent expansion of the Internet and e-commerce has led to many patents being applied for and being granted for business methods implemented in software. There have been several successful enforcement trials in the USA. In Europe, in contrast, computer-implemented inventions which only solve a business problem using a computer, rather than a technical problem, are considered unpatentable as lacking an inventive step (see T 258/03). Nevertheless, the fact that an invention is useful in business does not mean it is not patentable if it also solves a technical problem. This fine line has led the EPO to reject Amazon's 1-click patent, but to grant related patent number EP0927945 claiming a method of obtaining a mailing address for sending a gift. This patent is currently being opposed.

In Australia, pure or abstract methods of doing business are not considered to be patentable, but if the method is implemented using a computer, it avoids the exclusion for business methods <ref></ref>.

[edit] Software patent vs CII

A microsite of the EPO website<ref></ref> states that a generally accepted and widely used definition of a CII is "an invention whose implementation involves the use of a computer, computer network or other programmable apparatus, the invention having one or more features which are realised wholly or partly by means of a computer program."

The Guidelines for Examination at the EPO<ref></ref> state that CII is "an expression intended to cover claims which involve computers, computer networks or other conventional programmable apparatus whereby prima facie the novel features of the claimed invention are realised by means of a program or programs."

Numerous further definitions were proposed during the debate over the European Community's proposed directive on the patentability of computer-implemented inventions. None of these were found acceptable by the various interest groups involved in the debate, and the directive was ultimately abandoned.

Lobbyists, such as Florian Müller, suggest<ref></ref> that the terms "Software patent" and "Computer-implemented invention" are synonymous. The term has also been criticized as a politically motived obfuscation manoeuver<ref></ref>.

The EPO, in contrast, deny that they grant software patents<ref></ref>. They further argue that the term "Software patent" is itself a misleading concept since it could imply that an invention must be in the form of software to count as a CII. The case law of the EPO<ref></ref> and various national courts in Europe<ref></ref> states that a computer program cannot be patented in the guise of an object or as hardware if the underlying invention is still a computer program as such.

[edit] Software patents vs copyright

Software patents are not the same as software copyright. Under international agreements, such as the WTO's TRIPs Agreement, any software written is automatically covered by copyright. This allows the owner to prevent another entity from directly copying the source code and there is generally no need to register code in order to get copyright protection.

Copyleft (that include several open source and free software licences) is an informal term used to describe license agreements that uses copyright in an unconventional manner to encourage the public disclosure of improved versions of a particular piece of software. The license agreements prevent third parties from copying a given piece of source code unless said third parties agree to make their improvements to the source code available to the public under similar open source terms when they distribute the program.

Patents, on the other hand, give their owners the right to prevent others from using a claimed invention, even if there was no copying involved.

Patents and copyright form complementary means for protecting software innovations. Patents cover the underlying methodologies embodied in a given piece of software, or the function that the software is intended to serve, independent of the particular language or code that the software is written in. Copyright protects against the direct copying of some or all of a particular version of a given piece of software, but do not prevent other authors from writing their own embodiments of the underlying methodologies. Copyright can also be used to protect a given proprietary set of data from being copied while still allowing the author to keep the contents of said set of data a trade secret.

[edit] Objections to software patents

Some of the arguments against software patents surround the fact that the basis of patent laws in most countries was developed prior to the invention of the computer. Granting a patent monopoly to a software-based invention, it is argued, therefore has unexpected and undesirable effects.

[edit] Patents against compatibility

For example, there are a number of high profile examples where the patenting of a data exchange standards forced another programming group to introduce an alternative format. For instance, the PNG format was introduced to avoid the GIF patent problems, and the Ogg Vorbis format was introduced to avoid the MP3 patent problems. If it is discovered that these new suggested formats are themselves covered by existing patents, the final result may be a large number of incompatible formats. Creating such formats and supporting them costs money, creates inconvenience to users and even threatens to split the Internet into several partially incompatible sub-networks (ASF and non-ASF, for instance).

[edit] Defensive patents

As another example, many software companies are of the opinion that copyrights and trade secrets provide adequate protection against unauthorized copying of their innovations<ref></ref>. Companies such as Oracle Corporation, a proprietary software firm, and Red Hat, an open source software firm, are therefore generally opposed to the patenting of software<ref></ref>.

Nonetheless, these companies do file and receive patents. As of September 2006, for example, Red Hat has 8 issued US patents and Oracle has about 350 issued US patents. Their stated rationale is that since their competitors get patents, they must get patents as well for defensive purposes. Microsoft, for example, has about 7,500 issued US patents. In the event that they get sued for patent infringement by a competitor they can counter sue using their own patents. The net result is that both companies often cross license each others' patents at little or no out-of-pocket expense for either party.

This strategy, however, is not effective against software companies whose primary business is licensing their patents. These companies are often referred to by the pejorative patent troll. In this situation an infringing company must either license the patents, design around them, or fight them in court. Oracle, for example, recently sued EpicRealm to have one of their patents covering a method for delivery of dynamic Web pages declared invalid. EpicRealm asserted this patent against one of Oracle's licensees and Oracle anticipated that the patent would be asserted against them in the near future<ref>,1895,1988264,00.asp</ref>.

[edit] Law

[edit] Jurisdictions

Substantive law regarding the patentability of software and computer-implemented inventions, and case law interpreting the legal provisions, are different under different jurisdictions.

The national jurisdictions relating to software patents in Europe and in the European Union are not harmonized even though some harmonization has been brought into the national jurisdictions in the 1970s and 1980s. Interpretation of the substantive law varies to some extent from state to state. In 2002, in order to harmonize the national laws a step further, the EU Commission proposed a Directive on the patentability of computer-implemented inventions, but setting the exact terms of the Directive has been difficult. In 2003, the European Parliament deeply amended the original draft from the Commission. Two years later, the Council of the European Union (i.e. national government ministers) mostly reinstated the original text, but the text was eventually rejected by the Parliament on July 6, 2005. The proposed directive will not become law.

Software patents under multilateral treaties:

Software patents under national laws:

[edit] Scope of software patentability

As noted above both the EU and the US have traditionally restricted the ability to patent software. This has led to several proposals for some very narrow definitions of what software actually is. For example:

  • A piece of code not relating to "the use of controllable forces of nature to achieve predictable results". <ref>Amendment 23 introduced on September 2003 by the European Parliament to the proposed Directive on the patentability of computer-implemented inventions [1], "Dispositions program decision" (BGH 22/6/1976), Nordic Patent Law treaty.</ref>
  • A piece of code relating solely to the "processing, handling and presentation of information". <ref>Amendments 23, 24, 25, 39 and 40 introduced by the European Parliament to the proposed Directive on the Patentability of CII [2]</ref>
  • A piece of code with no "technical effect" (depending in turn on how one chooses to define "technical"). <ref>Decision T 59/93 of the Boards of Appeal of the European Patent Office, Reasons, point 3.4 [3]</ref>
  • A piece of code as an abstract listing, not actually running on a programmable device. <ref>i.e. "Software" that does not run on a computer. Used to be frequently argued before the EPO and other fora; this construction was explicitly rejected by the EU directive in article 4a.</ref>
  • A piece of code with merely literary merit, rather than any identifiable functional benefits. <ref>Because such functional benefits would be technical, and therefore should be patentable subject matter, according to supporters of broader definitions of CII patentability.</ref>

Ben Klemens, a Guest Scholar at the Brookings Institution, proposes that patents should be granted only to inventions that include a physical component that is by itself nonobvious. <ref>Wall Street Journal, 25 March 2006, p A9 WSJ link (subscription required)</ref> This is based on Justice William Rehnquist's ruling in the U.S. Supreme Court case of Diamond v. Diehr that stated that "... insignificant postsolution activity will not transform an unpatentable principle into a patentable process." By this rule, one would consider software loaded onto a stock PC to be an abstract algorithm with obvious postsolution activity, while a new circuit design implementing the logic would likely be a nonobvious physical device. Upholding an "insignificant postsolution activity" rule as per Justice Rehnquist's ruling would also eliminate most business method patents.

A further difficulty in drawing a clear boundary between software patents and other patents may come from the fact that a patent claim can be written so as to embrace many different implementations (some using purely mechanical or electrical means, others using software), for instance by using functional features under certain jurisdictions (for example, "means for controlling"). The expression "computer-implementable inventions" has been coined to refer to this reality.

Additionally, under the so-called doctrine of equivalents and its analogues, a patent that on its face does not appear to require software can be infringed in certain circumstances if software is used as an equivalent of (that is, a substitute for) a non-software element, making it even more difficult to draw the boundary. However, no U.S. court has yet ruled that a physical device violates a software patent via the doctrine of equivalents or vice versa.

[edit] Litigation

Several successful litigations show that software patents are enforceable in the USA. For example, Eolas was awarded $565 million from Microsoft. See List of software patents for more examples.

Similarly in Japan, software patents have been successfully enforced. In 2005, for example, Matsushita won a court order barring Justsystem from infringing Matsuhita's Japanese patent 2,803,236 covering word processing software. A Tokyo court ordered Justsystem to pull their product from the market. This order has been stayed pending an appeal<ref></ref>.

So far there does not appear to have been any case before a European Court where infringement of a software patent has been proved and damages have been awarded. In 2003, for example, Netzwerk sued Cobion for patent infringement in Germany, but the patents were held invalid<ref></ref>. Also, in Menashe vs. William Hill<ref></ref>, heard by the UK Court of Appeal, a patent for a computer-implemented gaming system was found to be infringed but the question of validity was not considered by the court.

There have, however, been a few court cases where the validity of a patent involving software has been the question, where in some European countries a national court has ruled either that a particular patent is valid (eg Germany); or that other patents involving software could be (eg UK). See Software patents under the European Patent Convention for details.

[edit] Licensing of software patents

Total US software patents by class of invention as of 2004
Patenting software is widespread in the US. As of 2004, approximately 145,000 patents had issued in the 22 classes of patents covering computer implemented inventions. (see table to the right). About 17,000 new patents are issued each year.

A large fraction of these patents are assigned to major companies. Microsoft, for example, had about 5000 patents issued to it as of April 2006. IBM has over 3,000 patents issued to it every year, although a significant fraction of these are unrelated to software.

Many software companies cross license their patents to each other. These agreements allow each party to practice the other party's patented inventions without the threat of being sued for patent infringement. Often, there is no payment of any royalties between the parties. Microsoft, for example, has agreements with IBM, Sun Microsystems, SAP, Hewlett-Packard, Siemens AG, Cisco and recently Autodesk<ref>IDG News Service</ref>. Microsoft cross-licensed its patents with Sun, despite being direct competitors, and with Autodesk even though Autodesk has far fewer patents than Microsoft.

The ability to negotiate cross licensing agreements is a major reason that many software companies, including those providing open source software, file patents. As of June 2006, for example, Red Hat has developed a portfolio of 6 issued US patents, 1 issued European patent, 13 pending US patent applications, and 25 pending international PCT (Patent Cooperation Treaty) patent applications. Red Hat uses this portfolio to cross license with proprietary software companies (e.g. Microsoft, IBM) so that they can preserve their freedom to operate<ref></ref>.

Many software patent holders license their patents in exchange for monetary royalties. Some patent owners, such as IBM, are in the business of selling the products they patent and view licensing as a way to increase the return on their investment in innovation. IBM generates an additional $US 2 billion per year by licensing<ref>Newsweek Article</ref>.

Other patent holders are in the business of inventing new computer implemented inventions and then commercializing the inventions by licensing the patents to other companies that manufacture the inventions. Walker Digital, for example, has generated a large patent portfolio from its research efforts, including the basic patent on the reverse auction technology. US universities also fall into this class of patent owners. They collectively generate about $1.4 billion per year through licensing the inventions they develop to both established and start up companies in all fields of technology, including software<ref></ref>.

Still other patent holders focus on obtaining patents from original inventors and licensing them to companies that have introduced commercial products into the marketplace after the patents were filed. Some of these patent holders, such as Intellectual Ventures, are privately held companies financed by large corporations such as Microsoft, Intel, Google, etc. Others, such as Acacia Technologies, are publicly traded companies with institutional investors being the primary shareholders<ref></ref>.

The practice of acquiring patents and licensing them is controversial in the software industry. Companies that have this business model are pejoratively referred to as patent trolls. It is an integral part of the business model that patent licensing companies sue infringers that do not take a license. Furthermore, they may take advantage of the fact that many companies will pay a modest license fee (e.g.$100,000 to $1,000,000) for rights to a patent of questionable validity, rather than pay the high legal fees ($2,000,000 on up) to demonstrate in court that the patent is invalid.

[edit] Software Patents and Open Source

Several free software / open source initiatives, such as an open source alternative to dolby audio compression, have had to be shut down when the owners of patents covering different aspects of the initiatives demanded license fees. The initiatives did not have the budget to pay the license fees<ref></ref>. This has led to tremendous animosity in the open source community towards patents (see Software patent debate).

Several proprietary software companies, such as IBM, have granted royalty-free licenses to open source initiatives. Novell has gone further by committing to actively use its patent portfolio against companies that bring actions against certain open source products. These actions, however, cover only a small fraction of existing software patents.

[edit] See also

[edit] Notes

<references />

[edit] External links

[edit] Economic studies

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