Software Patents And Your Company

by Niall Douglas

(intended to be published in

Early in 2003, Software Patents are likely to become enforced within the EU, despite that the European Patent Convention explicitly excludes computer software since 1973 and that the 2000 EPC Diplomatic Conference made it clear the EPC Contracting States did not want to change this. Unfortunately, the proposed EU Directive will effectively render this provision null and void which is deeply unfortunate, for three reasons:

  1. Foreign software multinationals hold at least 64% of the software patents already in the EPO (European Patent Office)
    This effectively means the EU IT industry will from now on pay an increasing annual fee to Japan and especially the US among others gaining nothing we do not have already in return. This annual "tax" will amount to tens or even hundreds of million of euro each year, thus placing the EU IT industry at an ever-increasing disadvantage. The overwhelming size of the foreign software industry as compared to our own means we shall never become net benefactors from this system.
  2. Software patents encourage monopolies and discourage innovation
    Every time an EU-based technology start-up begins, it will already be facing a slew of royalty payments to the US, thus making financial viability that much harder. The net result will be only big companies will be able to afford to develop new technology, thus preventing new blood entering the marketplace and increasing the tendency towards monopolism.
  3. Philosophically, theories and algorithms should not be patentable
    Patents are supposed to cover design, not the theory and there are explicit rules against patenting mathematical algorithms. Software patents are the equivalent of patenting the entire concept of a pump - so that anyone manufacturing any pump whatsoever is bound by the patent. This is really not a good idea for the long-term viability of the software industry in any country.

    If one were to make software patentable, it should be the implementation, not the theory i.e.; the program itself, not how to make the program. In fact, software occupies a unique position unlike anything else in philosophical theory (it is somewhat lengthy to explain here, but work by Bertrand Russell and Norbert Wiener explains in detail) and in reality should be treated as something unique and special and requiring its own separate legal framework. To foist existing and indeed very old structures on such a unique thing damages the software industry and inevitably society as a whole. Nevertheless, the current system is much better than the proposed system.

For more information, please consult which contains proofs of almost all the figures, ideas and concepts used in this pamphlet.

What this will mean for your company

Currently, your company writes its software according to available manpower, technical merits and perhaps available off-the-shelf solutions. Should software patents become enforced in the EU, you will strictly speaking now need a lawyer present at every technical meeting to advise on which algorithms cost what royalty fee and your software will now be designed around what costs the lowest fees and little else.

If you're a contractor, you are usually directly liable for patent infringement in any work produced by your private limited company. A single even frivolous law suit would be enough to bankrupt you and permanently put you out of business.

If you decide to ignore legal advice and press on regardless, you may get away with it if your product never performs particularly well. But if you come out with the next big thing and become an object of concern for your competitors, they can slap you with so many software patent infringement law suits you either have to sell up to them or go bust.

Either way, expect to spend a lot of time fighting patent infringement cases with expensive lawyers. Software patents cover the concept and because they are so wide-ranging and vague, it's near impossible to determine which of the already registered 30,000 patents apply to your product. These patents cover some of the most basic algorithms in software today and while you might think they would be invalid because of prior art - well you'd be right, but you'll still need to employ a lawyer and go to court to prove you're right. Add together several frivolous law suits per year, and again you could be looking at bankruptcy.

While this move is disastrous for small companies and one man limited companies (ie; contractors), it's also a grave concern for larger companies with more resources to be awarded in patent litigation. Whatever way you look at it, European industry loses.

It doesn't have to be this way

Despite the claims from pro-software patent organisations such as the BSA (mostly backed by US software multinationals), the EU is under no treaty obligation to enforce software patents. The EU can decide as it has always done either one way or another. Currently with massive financial backing, the lobby to overturn the 1991 ban is likely to win. Only your voice of concern can alert MEP's why they should reject any proposals to enforce software patents.

Software patents are bad for the industry, bad for business and bad for Europe. Act now and maybe we can stop them forever.

An expert view on why software patents are bad for the industry
A list of typical out-of-court settlements resulting from unwitting software patent infringement

What can I do to help?

Note that just because this campaign is being primarily fronted by supporters of Linux and other free software, it has nothing to do with free software specifically. Traditional proprietary software such as your products - your livelihood - are just as equally affected.

Niall Douglas
9th December 2002

More links: