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Analysis of software patentability in Europe

Posté le Monday 17 May 2004 by François PELLEGRINI

Legal analysis of software patentability

Why the question of software patents is badly put

The proponents of software patentability justify it by the need to protect the software components which are increasingly present within innovative tangible inventions, and for which, according to them, copyright does not give sufficient protection. An example that is often considered by members of patent offices is the one of a new washing machine that washes the linen more efficiently, and such that the innovating washing sequence is implemented by means of a computer. The software carried out by this computer would be, within this framework, at the origin of the technical contribution brought by this new machine, and should thus be covered by patent claims.

This test case is used as a conceptual basis to postulate the existence of "technical" software, as opposed to software "as such" which would not be patentable because they do not produce any technical contribution.

However, postulating the possible existence of a discrimination between "technical" and "non-technical"software based on the examination of their effects, which we call the "doctrines of software technicality", cannot hold vis-a-vis a rigorous analysis. In the above-mentioned case of the washing machine, the technical effect is the improvement of the washing of linen by the machine. This effect is obtained by application of an innovating washing process, consisting in the dispensation of detergent at such or such moment of the washing cycle, by the realization of better mixing of water and of the linen, etc., all operations carried out by the machine in the material world. The software operating the machine does control this innovating washing process, but is not, in itself, the source of it. It is the process which is innovative and produces the technical effect wished for, not the software.

Any software, carried out by a computer, does nothing but handling symbolic quantities according to a pre-established program, independently of the way in which these symbolic quantities are materialized within the computer which carries out the program (electrons, photons, magnetic moments, quantum states, etc). The computer, in order to interact with the physical world, needs peripherals, which materialize the symbolic systems quantities into physical actions in the outside world: activation of a servo unit, displaying of a particular luminous information on a screen, etc. The software which drives the washing machine can thus be carried out on a simulator, and run exactly as it would do within the washing machine, but without producing the expected technical effect. It is because the technical effect is independant from the considered software, but resides in the effective carrying on of the process.

The legislator had already analyzed this situation to draw the conclusions which it imposes, and to authorize the claiming of industrial processes. The manufacturer of innovative washing machines can thus claim his process of innovative washing as well as the machine which carries it out without needing software patents at all.

Let us notice to conclude this section that a software which would sum the values of two quantities of reagents that are present in the tanks of a chemical reactor could be regarded as "technical" according to the doctrines of software technicality, while it would not if it were used to compute the sum of the balances of two bank accounts, while both software perform exactly the same process.

Similarly, one cannot consider that some software produces a technical effect when it allows to "perform computations more efficiently" or it "improves the efficiency of a computer". Let us remark at first that these doctrines are even more radical than the ones of software technicity, because it would allow one to consider as "technical" any software that provides better processing performance than any existing software, without any reference to any given problem, or rather by considering that any use of a computer constitutes in itself a technical application.

The actual efficiency of a given algorithm being completely dependent on the architecture of the computer onto which it has been implemented and is running, the alledgedly technical features of an algorithm are not linked to it, but rather are based on the adequacy between the subjacent hardwere and implementation considerations that belong to the realm of copyright, since they are specific to each individual implementation of software on a given architecture. The consideration of increased efficiency is therefore not effective to define a stable frontier between alledgedly "technical" and "non-technical" software.

The impossible formalism of software technicity

The conceptual impossibility to discriminate between "technical" and "non-technical" software condemns in advance to failure any attempt to embody this discrimination into legislative texts. An obvious example of this failure is the text proposed by the Irish presidency which, while defending itself from allowing total patentability of software, indeed achieves this result.

Recital 7b, supposed to limit software patentability, is contradicted by Recital 13 and Article 2b which say explicitly that software alone can carry out a "technical contribution", and by Article 5b which allows the patenting of software carrying out such "technical contributions". These articles allow any “inventor” to patent any type of software, because those are always created to solve a given problem. In the same way, Mr. David Sant, official representative of the European Patent Office attached to the European institutions, confirmed in a conference at the European Parliament the official interpretation of the European Patent Office, which considers as a technical contribution any situation within which one can say that one has to consider technical factors before beginning to program, a situation encountered by all computer programmers and which neutralizes Article 4a, allegedly designed so as to limit software patentability only to "technical" software.

The choice of the legislator thus cannot be a half-measure: either he fully endorses the enablement of a regime of total software patentability, or it entirely rejects it, as does the doctrines worked out by the European Parliament during the vote of the directive in first reading, which rejects claims on software, while still allowing the patenting of material inventions and of industrial processes that make use of software for their control, which was already the case in the past, since it is the very meaning of Article 52.2 of the European Patent Convention.

This binary choice, of considerable economic and strategic consequences, cannot be done lightly, all the more than the extension of patentability would be practically irreversible.

Are software patents legally mandatory?

Some players refer to Article 27 of the TRIPS Treaty, which requires the existence of patents for any field of technology, to justify the legal need for software patents. As underlined by Mr. Paul Hartnack, General Comptroller of the United Kingdom Patent Office, this interpretation is not the only possible one.

One can consider, like the Commission and the Council do in their proposals for a directive, that software is intrinsically technical, and that Article 27 of TRIPS requires to have software patents. One can also consider, like the European Parliament, that software does not reside within a field of technology but with that of intellectual works, and thus beyond the range of Article 27 of TRIPS.

Here again, policy makers are free to decide, because the choice between the two doctrines is still possible.

Software Patents and copyright are exclusive

Until now, the copyright and patent regimes had coexisted without conflict, their purposes being different, since copyright dealt with the protection of individual works of authors, while the purpose of patents was to protect inventors of innovative processes implemented within (non-unique) apparatuses designed to solve a given problem.

The extension of the patent system to software constitutes the first major attack to copyright law, to which the legislator had, after deep thinking, incorporated software. This assimilation was altogether natural because software, just like books, consist in the production of a textual original work (the source code of the program), resulting from the combination of elementary ideas. For an adventure novel, these elementary ideas can be: "love scene on a balcony", "twins being mistaken one for another", etc. For software, it can be: "alphabetical sorting in a list", "displaying a progress bar telling the user to have patience", etc.

Unlike copyright, which protects final works, software patents, which protect against the imitation of features, allows the protection of these elementary ideas, and thus prevent whoever to realize a program implementing a protected idea. This would amount, in the case of books, to be allowed to claim elementary ideas such as the balcony love scene, although the same idea can lead to very different implementations, such as the balcony love scenes of Romeo and Juliet and of Cyrano de Bergerac, which are not plagiarisms one of the other.

Software patents, by allowing their holders to claim elemenary ideas, thus constitutes an extremely powerful monopoly-building tool, because the holder of a single patent can prevent the selling of all software implementing this idea, whatever their application domains can be.

In this extent, software patentability can be regarded as violating the TRIPS and WIPO treaties. Indeed, Article 10 of TRIPS stipulates that software belongs to the realm of copyright, and Article 13 of TRIPS, as Article 10 of WIPO, that one cannot systematically prejudice the legitimate interests of the rightholders. However, considering software patentable indeed prejudices the rightholders, since the author of an original software can be prevented from marketing it for the reason that this software infringes on one or several software patents, irrespective of legitimate exceptions such as harm to public morals. As more and more artistic creations make use of software (such as video games, for instance), the occasions for litigation can only increase, at the detriment of creation in the considered industries.

Although one can argue that these articles in TRIPS do apply only to the exceptions which the legislator could introduce in the copyright regime only, it is clear, considering the spirit of these treaties, that the forging of software patentability, which has no legal necessity, tends to have a destructuring, rather than structuring, effect on existing intellectual property regimes that exist to date, and no one knows what could be the long-term consequences of the extension of the patent regime to fields for which it had indeed not be designed for, neither for which it has economic justification.

The decision to introduce software patents amounts to answering implicitly the question of knowing which system, between the patent or the copyright regimes, must have preeminence, without any possibility of debate nor of being able to check the validity of this approach.

The copyright regime is oriented towards the protection of existing works, already accessible to the public since already created, the existence of the protection making it possible to regulate by subsequent contracts the way the public can access these works.

The software patent regime allows one to claim an idea, irrespective if there exist or not concrete achievements implementing these ideas and being able to benefit to the public.

In the case of software, priviledging the patent regime compared to the copyright regime thus amounts to priviledging the defensive and anti-competitive behaviors which are inherent to the patent system, based on exclusion and rent seeking, as opposed to the active behavior of the creator of original works putting them at the disposition of the public in a context of free competition.

Economic analysis of software patentability

The legal analysis of software patentability presented above made it possible to show that there exists no legal obligation by international treaties, TRIPS for example, to create them. Quite to the contrary even, the existence of software patents creates incoherence and legal insecurity for software rightholders. The decision to have or not software patents within the European Union can thus be freely decided on the basis of economic and strategic criteria only.

Another consequence of this analysis is that, contrary to what the writers of the directive have announced, the conditions for software patentability in Europe will indeed be similar to those into force in the United States, with the result that the current situation of the United States on the matter constitutes the exact reflection of what the situation will be in Europe if the version of the Irish presidency of the directive were accepted.

Let us also notice that, with respect to this analysis the conceptual bases of which are simple and accessible to any person who has some knowledge of the domain, , one can legitimately wonder about the the apparent ingenuity of the writers of the directive who pretend that there exist a discrimination between "technical" and "non-technical" software. If one gives them a minimum of credit, one will arrive at the conclusion that they are fully aware of this impossibility, which leads to wonder about their motivation to legitimate total software patentability even at the price of a distortion of the truth.

If simple ideological motivation cannot be neglected, it is not sufficient to account for all of the observed behaviors. One therefore has to acknowledge the existence of a collusion of economic interests between the leaders of the patent offices, the members of the various commissions of experts involved in the drafting of the directives, and the people in charge of the legal departments of some big companies, with the deliberate purpose of providing these latter the most efficient anti-competitive weapons as possible, considering that the legal services of these companies are the biggest customers of the patent offices, which themselves live on the fees of granted patents, and considering that there exists an important professional porosity between these three communities.

Software claims, interoperability, and monopolies

The analysis of the version of the directive endorsed by the Irish presidency shows that most of this text is designed so as to favor the creation and enforcement of monopolies on whole sectors of the data-processing industry, without any counterpart for the consumer.

Article 5b of this text introduces program claims, which make it possible to sue any software creator, vendor, or user, provided that a patent has been granted on any of the elementary ideas that the software implements. This would allow big companies with large legal departments to scare potential users of competing software, well before inolving courts, thus distorting competition in an insidious way.

This text also rejects any right to interoperability. Article 6 does nothing but maintaining the exceptions of retro-engineering and decompilation allowed by the directive of 1991 regarding the protection of software by cupyright. But whereas these exceptions are sufficient in the context of copyright, they are worthless in the context of patents, since any manufacturer who reimplements, for the sake of interoperability, processing methods for a patented file format, would be infringing of this patent.

The mode of creation of software, based on cumulative innovation, as well as the very short development cycles of this industry, do not allow any longer to account for the existence of a patent system which is expensive, heavy and slow.

Indeed, unlike in the material world, the time necessary for a competitor to imitate some software is hardly any less than time taken by the development of the original software, because the development itself constitutes the most expensive activity in comparison to the simple fact of having the idea of the software, which yields that, in this very reactive market, initial innovators have time to profit from their protucts before any competitor appears.

Moreover, any such competitor can gain market shares only if its product is of better quality, brings additional innovations, or is less expensive than the original product, which can only be, as development costs are almost identical by what precedes, if the market price of the original product were too high. A proof of this is that, on any given market segment, a product of good quality and at a reasonable price has little competitors.

Therefore, without software patents to build monopolies, competition, innovation, and consumers win. These consumers are both private individuals and companies of all sizes and all fields of activity, because the impact of information technologies on productivity affects every sector of the economy.

To conclude, let us note that patents does not bring any information which is not already public, since the features of a software that are protected by some patent naturally appear when using the software, thus allowing any "person skilled in the art" to understand its principles of operation. Let us also remark that the jargon used to write these patents is in general incomprehensible to any computer professional, and of a technical level which is so low that no information is usable in practice, since the goal of the drafting of the patent is to be as generic as possible in order to block as many competitors as possible.

The economic threat of the software patents for the European data-processing industry

According to a report by the French Commissariat au Plan issued in 2002, the French software sector is essentially made of small structures. Indeed, 58 % of the 28,500 companies of the sector have at most two employees. These figures are almost equivalent in Germany and in the other countries of the Union. Small and medium-sized enterprises of the software sector represent more than 70 % of jobs and wealth produced by this sector in Europe, not counsidering the software departments of large industrial and service companies (such as banks, insurance companies, etc) which contribute to a great extent to the development of "in house" software which will never be marketed but could nevertheless be subject to software patent infringement lawsuits.

Small companies are on average more innovative, more reactive, and more inclined to base their development on the creation of new products than on an established system of monopolistic revenues. In fact, since SMEs of the software sector represent its economic majority, as well as a pool of creativity that is necessary to the development of new technologies, all new regulations should be developed for their benefit.

Regarding the introduction of software patentability in Europe, this same report of the Commissariat Général au Plan sees in the "abrupt decision to extend patentability to software[...] real dangers for the European industry, because of the considerable unbalance between the United States and Europe on the matter", and insists that "Only the armed peace prevailing to date, because of the legal uncertainty that remains around the notion of software patent, indeed explains that existing patents [the about 30,000 doubtful software patents already granted by the EPO] are not used more often.".

A system of incentives for innovation cannot be effective unless it encourages the production of final goods that benefit to citizens and thus to the society at large. On the opposite, the monopolization of upstream concepts disadvantages the production of such goods, because it is then more profitable for an economic actor which has patented a concept to seek rents from the entities taking the commercial risk to carry out the final products, rather than to make such products by itself and be under the risk of patent infringement lawsuits from its likes. Consequently, the more the extent of the patent is broad and lasting, the more behaviors of predation and risk avoidance are favored, to the detriment of innovation. In the case of software, the minimum duration of 20 years, which would be imposed by TRIPS if one would consider software as patentable, represents more that 10 times the average duration of the commercial life of any software, which is an economic nonsense, as this blocks further developments by other innovators who must, in order to enter the market, pay fees for basic ideas the development cost of which, if any, has been paid back many times already.

At best do large players agree on patent portfolio exchanges, which allows them to pretend they live in a patentless world, but this has several perverse effects. First, what economic interest is there for these companies, and therefore for their customers and by extension for the society at large, to finance the filing of patent being used to counter the existence of other patents, whereas the absence of patents would amount to exactly the same? Then, after such exchanges, the only entities having to support the cost of the licenses are the innovative small and medium-sized enterprises, which cannot enter the markets which would reimburse their investments. The system thus functions exactly the opposite as it should, wrongly penalizing the SMEs.

Software patents are moreover a danger for investors. Without patents, any investor is certain to be able to market the software he financed, and thus to have a return on investment if these products fulfill a need. With software patents, any economically worthwile software may be attacked, and the return on investment is more dubious. The very recent exhaustive study carried out in the United States on more than 130.000 software patents and 1600 Usonian companies between 1976 and to date showed that the expenditure in software patents replaced more than 10 % of the expenditure of R&D of the companies, at the national level. During Federal Trade Commission hearings on the subject, some company CEOs reported that they were going to devote up to 35 % of their Research & Development expenditure to the building of software patent portfolios, in order to try to protect themselves from infringement lawsuits, although these costly portfolios could not be of any help to protect them from the very high legal expenses that a competitor would like them to spend, at the detriment of their middle and long-term competitiveness.

In this context, it is legitimate to think that, because the market allowing the best return on investment will be a Europe without software patents, the companies that will succeed better will be European companies, that will be more close to their customers, and more able to provide the necessary R&D effort. Any company basing its software development in the United States can be subject to infringement lawsuits on the basis of US software patents, since software developers may implement, knowingky or not, algorithms that are patented in the United States. On the opposite, European developers would be free to develop their software without constraints. Thus, an Europe without software patents is likely to succeed in attracting Usonian companies willing to secure their developments, reversing the direction of the flow of emigration of computer professionals.

Let us notice by the way that nothing prevents a European company from filing patents in the United States to try to improve its chances to penetrate this market. This investment is small in comparison of the one to obtain European patents, and without common measure with the tribute which European SMEs should pay to large US companies if software patents were legalized in Europe.

Last update : 16 May 2004
Author : François PELLEGRINI

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