Wednesday, June 03, 2009

About those patents...

I've been following the case of In Re: Bilski since it hit the headlines last October. What came out of that court last year was no less than astounding: business ideas cannot be patented unless they transform an article or are attached to a particular machine. Finally, we see a crack in the wall of entrenched interests against competition. Now that Bilski, et. al., have managed to get a willing ear from the Supreme Court next fall, the legal news and blogosphere is agog with all kinds of predictions.

What Bilski and his friends did was to patent nothing more than an idea. Not really an invention, just an idea about how to hedge risks in commodities trading related to weather. As Bilski describes it, they conceived of a series of mental steps used to mitigate risk in commodities trading in response to and in anticipation of changes in weather patterns. Such a series of steps could be implemented in software as a computer program. When his appeal was denied in the federal circuit court of appeals, patentees all over the country realized that tens of thousands of their patents and patent applications were at risk. This decision is said to threaten not just business method patents, but also software patents. Undeterred, Bilski has been granted certiorari in the US Supreme Court. But even in the Supreme Court, there are some rumblings that Bilski will be even less welcome there.

On the side of the patent holders, we see so much concern for all that investment and how a decision against Bilski could "stifle competition" and destroy the value of existing patent portfolios. But not a single tear is shed for the humble consumer, faced with an ever limited choice of products, manufacturers and vendors to choose from. Add to that the reduction of investment in research and development in the software industry, as found by James Bessen, et. al. Patents are monopoly power and can be used to wipe out any encroaching competition. As we have seen with Amazon's one-click patent, the fighting over intellectual property land grabs is reaching the heights of pettiness. All this for 20 years of royalties.

On the side of the rest of us, people who don't own any patents and have little power to sway the proceedings, other than to voice our concerns, we see people extolling the virtues of a freer market. Try the Free Software Foundation. Or Against Monopoly. To them, a market unconstrained by patent barriers, is a market free to innovate.

The book "Against Intellectual Monopoly", makes some very pointed observations about the relationship of patents to maturing industries. When an industry is young, innovation proceeds at an amazing pace, as innovators rush to get their products out in front as first movers. Young industries are also under the radar when it comes to regulation. Governments tend to move slowly to develop a regulatory regime in response to new technology.

But when an industry matures, the incumbents start to run out of ideas and think that somehow, they need more encouragement. I know, lets dangle patents in front of their noses! That should keep them moving. But the sad reality is that patents only hinder and stifle innovation, protecting the incumbents.

As someone who works with software, I have noticed another trend. You are all aware of the concept of the computer virus, or, in more general terms, "malware." Malware is what you get when you click on links from people you don't know. They could be in email or on a web page, it doesn't matter. It's out there. Subprime mortgages, health insurance, MLM, male enhancement advertisements, and the whimsical, the Nigerian treasure chest from a recently deceased leader. Malware is not just about advertising, it's also about stealing your personal information, taking down websites and storing child porn on your personal computer without your knowledge.

Now look at the malware industry. No court will protect them. They seek no copyright or patent protection. They are quite simply an unfettered market that has adapted to the conditions surrounding it. Since they are not busy applying for patents or copyrights, nor are they suing anyone to grind them into dust for want of a licensing fee or injunction, they are very busy innovating. Please note, I'm not saying they are right in what they are doing, I'm just making an observation.

Now look at the antivirus industry. They are collecting patents by the hundreds if not thousands. They are suing each other. They copyright their works. They seek government protection in what is supposed to be a free market. How are they succeeding? I wonder, if the product they offer is so superior, why would they need patent protection from competition?

Malware is a very profitable industry. Estimates of how many computers are infected, or get infected vary, and no precise number can be found. Reliable estimates hover around 15% of computers worldwide. But it is fair to say that the number is large enough to support an opposing antivirus software industry who's primary purpose is to protect the rest of us for a fee. Many pundits say that we are losing the war against malware. Why? It's hard for me to say without pointing the finger at the lust for monopoly power in patents and copyrights.

While these antivirus companies are "innovating", their lawyers are trying to make sure their products don't infringe on someone else's patent. Or they are trying to make sure their patent claims cover every other product that could compete with theirs. There are so many software and business method patents that we have what is known as a patent thicket. It is now widely acknowledged to be impossible to write software without infringing any patents.

There is also the issue of customer service. A company with a stack of patents doesn't have to worry about competition. They don't have to smile when they meet you. They don't have to be friendly when they greet you on the phone, either. A patent holder could be the sole supplier of the product you seek. Lucky you. Customer service? The estimated wait time for this call is 20 minutes, please hold and listen to some advertising.

Here are some things that have patents. You use them every day. All of them are software patents and all of them use math. You might have heard of the book, "Math You Can't Use." This case is just about that. The patenting of logical expressions.

MP3 music file format
MP4 a video file format
DVD encoding
encryption
one-click for amazon
certain features of the Microsoft Office Open XML file format (OOXML)
The FAT32 file system from Microsoft (using long file names to substitute 8.3 filenames)

This court case, In Re: Bilski, has the potential to clear the field and make way for real innovation. Hopefully, the court will see that the social surplus provided by software and business method patents is completely overwhelmed by the costs of these patents. What costs? Narrowing of and/or lack of consumer choice, reduced R&D investment, vendor arrogance and grandiosity, litigation, litigation contingency planning, trees, trees and more trees.

It is my hope that, over the next few years, the power of business method and software patents will be decimated so that all of us can innovate, copy ideas, improve on them and pass them on to the next generation or even the next person we share it with, without a single encumbrance.
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