Tuesday, June 10, 2014

Welcome to Software Patents - 1

Pieter Hintjens

If you know me, you know that I take my work seriously [..] So imagine my shock [..] when I discovered first-hand that my lifelong profession -- building software products and convincing people to give me money in exchange -- was potentially illegal. Simply sitting down, taking a clear problem, and solving it step-by-step using my talent and experience could land me in court [..].

[I]n 2003 my firm received a polite letter from a patent lawyer representing a firm called AllisBlue, claiming that we were infringing on the "invention" of storing an email address and mobile phone number together in a database. We'd spent several years building a product, something like Twitter, that let people send and receive text messages in interesting ways. The economy was deep in crisis. We'd put most of our capital, maybe a quarter of a million Euro, into this product. The lawyer told us, "stop selling your product, and license our invention". They didn't sell software. Just the rights to use that trivial patent.

I called the European Patent Office (EPO) [..] and asked them, "how can someone patent software?" They answered, "that's not possible in Europe, it's forbidden by law". What? "Yes, the patent law specifically excludes data processing." [..]

I contacted the other Belgian wireless application firms, and over the next months we organized a forum to discuss the issue. Most of them had also been in touch with AllisBlue. One had already been in court. It turned out that AllisBlue consisted of, literally, one pending patent and a million Euro in cash. The money was just there to litigate [..]

It was scary to see how afraid [a lot of other] firms were of going to court. AllisBlue had an easy strategy. Rather than attack firms directly, it attacked their clients. It sued a newspaper for using an text message service. The newspaper canceled its service immediately. The firm providing the service turned around and licensed AllisBlue's patents. It never went to a real judge. The simple threat of going to court was more than enough to force these businessmen into unethical deals. They did the math, and it was cheaper to pay off the blackmailer than to stand up to him. AllisBlue didn't make software, so was immune to any counter-attack [..].

Patent law has several filters [supposedly a good thing] for "low-quality patents". (Oh, don't imagine for a second this is for your benefit as citizen. Patent law is written by the patent industry for the patent industry. These filters are just meant to stop general inflation of patents.) A patent must be new, it must be non-trivial, and it must not be for software [..] So one firm tried to oppose the AllisBlue patent by finding examples of existing software that did the same thing, years before. They failed because the EPO didn't accept that evidence. . Ah, you see, "prior art" is only valid if it's documented in a database the patent office will search. Which means certain academic journals, and previous patents. Since no-one had patented the AllisBlue "invention" before, it was, in the eyes of the EPO, "innovative".

Perhaps you're start to see how the patent system creatively redefines words like "invention" and "innovation", but I'm getting ahead of myself. Back to the story.

Our own product was barely making money. The mobile operators charged huge fees just to let us connect to their networks. I figured, if we pay one patent troll, what stops us being blackmailed by a second, and a third? I canceled the product, fired the team, wrote off the investment, and cursed the system [..]

[Then] I spent two years [..] focusing all my time and remaining money to slow down the patent system's expansion in Europe. It was an education: today I know more about patent and copyright law than even most specialized lawyers [..]

Let's explore some figures. I'm writing this in late 2011. In March, Microsoft paid Nokia about $1 billion for a deal that gave Microsoft access to Nokia's patents. A little later, HTC bought S3 for $300 million, to get access to S3's patents, mainly because Microsoft and Apple were attacking it. Then in July, a group of firms (Apple, Microsoft, Oracle, RIM, Sony, EMC, Ericsson) paid $4.5 billion for a set of patents from Nortel. Google bid somewhat less, and lost the auction. In October, Sony paid $1.45 billion for Ericsson's patent portfolio. Then in November, Google got Motorola Mobility, and its patents, for $12.5 billion.

What's staggering here is that in 2011, firms paid about $20 billion for patent rights. In 2010, Apple spent $1.8 billion in R&D. Google spent about $4 billion. The total for the whole software industry can't be much more than that $20 billion.

Yet those patents are just for mobile phones, essentially yesterday's technology. My guesstimate of $20 billion for R&D is mostly for cloud computing, social networks, and the rest of tomorrow's infrastructure. The patent wars for one segment of technology are costing as much as R&D into the future of all software technology combined.

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