IPR Protection of Software Workshop, Helsinki, 21-22 September 2006

by James A J Wilson on 2 October 2006 , last updated

Archived This page has been archived. Its content will not be updated. Further details of our archive policy.

Introduction

The Hotel Linna is one of Helsinki’s stranger hotels. Built in 1903 to resemble a medieval castle, it conspicuously fails to blend in with the rest of the terrace. An unconventional venue for people involved with unconventional software? At 1pm on Thursday the 21st of September, 2006, delegates were taking their seats for the IPR Protection of Software workshop.

Issues at stake

The workshop was organised by the Society for Economic Research on Copyright Issues (SERCI) along with various other partners. It was dominated by lawyers, with a sprinkling of economists thrown in to provide a little variety. One of the lawyers was Mark Lange, a senior attorney from Microsoft. Also present was Georg Grave, head of the FSF Europe. They were to be held in their pens until the final panel, presumably a ploy to keep people from wandering off early and missing a potential bust-up. It wasn’t long, however, before the other speakers began to mark out the ring.

This was to be an interesting conference, not least because it provided the opportunity to hear the arguments of many opponents of open source software. Of course, few people would be so impolite to suggest that open source software is in itself a bad thing, it’s just that it can get in the way of other good things, such as investment, innovation, or healthy profit margins. Essentially, the proprietary position was one of ‘not fair! You’re stealing ideas that we spent time and money coming up with, which discourages investment and is bad for society!’, against the open source cry of ‘not fair! your proprietary business models enable you to block meaningful competition and lock in consumers, which is bad for society!’. Most speakers dodged around direct comparisons of the two broad camps and avoided the issue of whether they were mutually exclusive. The tensions between them, however, were never far from the surface.

These tensions derive from the application of Intellectual Property Rights (IPR), in particular software patents and Digital Rights Management (DRM). Good old-fashioned copyright is not generally seen as much of a threat to open source developers. Indeed, the legal foundation of OSS is in copyright law, licences being concerned with the copyrighted code that constitutes the software. Patents, however, are issued to protect the technical ideas beyond the software, rather than the source code. Thus they can be used to proscribe things that look like imitation, not simply overt plagiarism.

Economic perspectives

First up was Professor Richard Watt, speaking on the history of software economics. This was an interesting introduction, although Open Source Software was notable only by its absence. This was something of a problem in most of the economists’ papers, as many of the classic market theories they applied to software IPR would arguably struggle to account for OSS.

Watt began by explaining the essential difference in approach between lawyers and economists: the former look to apply Lockean property rights, the latter to maximise the efficient use of resources. He argued that lawyers had originally treated software as falling under copyright law as source code looked a lot like a literary work.Watt argued that copyright law was unsuitable for software, and that the law on copyright and patent needed to be revised significantly to create a new kind of intellectual property law that could deal with software in exactly the same manner as any other digital resource. Somewhat surprisingly, Watt proposed that the operating system market, unlike other software markets, was a natural monopoly and should therefore be totally protected, but low prices ensured for consumers. He also challenged the anti-IPR contingent to answer the question, ‘how can we even know if a monopoly price is being charged?’.

Professor Stan Liebowitz, issued a confident polemic about ‘What economics can teach us about regulation in software’. Liebowitz characterised software as a non-rivalrous product, usually with significant network effects – i.e. It is of more use the more users are using it. He argued that property rights were required in software as otherwise production will not occur at an efficient level (the same as in any other market). The idea, therefore, is to balance the extra production caused by the property right against the reduced consumption due to higher prices. ‘Lock-in’, he stated, ‘does not imply inefficiency’, which to my untrained mind implied that the risk of being locked in to a dead product was not calculable in terms of efficiency, which seemed odd.

Liebowitz argued that there was an inbuilt tendency within software markets towards high market shares. This is due to network effects, economies of scale in production, and low ramp-up costs. This situation could be characterised as a form of ‘serial monopoly’, in which there are large market shares, but also large market share changes from time to time. This being the case (and the characterisation seemed reasonable), governments should look for competition for the market, rather than competition in the market, and protect competition, rather than protecting competitors. He used the example of the European largesse towards Real (RealPlayer) in its case against Microsoft (Windows Media Player) as an instance of government failing to understand this. Liebowitz backed up his argument with statistical evidence that suggested Microsoft was not foreclosing the music player market to its competitors. He concluded that governments should enforce property rights and refrain from antitrust intervention.

Mikko Mustonen’s talk on Open Source and Efficiency was not easy to follow as a non-economist, but his view tended to be negative. Asking the provocative question, ‘can anyone here think of a single functionality that OSS has brought to users’, nobody put their hands up in the allotted four seconds, proving that OSS was essentially ‘piracy’. It was ‘piracy’ because OSS developers were effectively freeloading on earlier ideas and developments, avoiding the fixed costs of software development.

The European Patent Office (EPO) sent a number of delegates to the workshop. Christoph Laub and Falk Giesma described the process by which the EPO considered software patents, even though, officially, they don’t. The EPO awards patents for technological innovations, not for software. However, software may involve technical innovations, so, in effect, it can be patented, albeit indirectly. A further imponderable is that ‘no definition of the word “technical” is contained in the European Patent Convention’. Don’t you love lawyers? In practice, they use “technical” to indicate things that process physical data or ‘processing which affects the way a computer operates’(!), and add that the technical character may be ‘implied by the physical features of an entity’. In practice, the case studies that the EPO presented suggested that it wasn’t quite as easy to get ‘technical’ innovations passed as this makes it sound, but nevertheless suggested that there are a lot of patents out there waiting to be won by those willing to spend the money.

Laub and Giesma then contrasted the European method with the American. They characterised the difference as ‘technical’ against ‘useful’. The Americans evaluate patent claims in terms of the usefulness of the innovation, and so can more easily include business and organisational methods, making the US system broader than the European. This technical vs. useful distinction applies to prior art challenges to patents too. To fight an American patent, one needs to prove functional similarity; to fight a European patent, one needs to establish a similar prior technical contribution.

Professor François Lévêque, speaking on open source software, copyright, and patents, started by pointing out that OSS relies on copyright law. He then argued that ‘copyleft’ licences (which require anyone adapting and re-distributing the software to apply the same licence) may reduce innovation, as software using such licences could not be used by those unhappy with non-monetary rewards. Academic licences, on the other hand (including BSD and Apache), would not restrict innovation in this way.

Lévêque thought that small OSS companies were probably not as careful to check for patent infringements in their code as larger companies, but also less likely to be sued as they have less money to surrender. His advice for OSS companies was to keep thorough track of prior art, and use a licence with patent clauses, such as the forthcoming GPL v3.

Empirical studies

Heli Koski of the Helsinki School of Economics had conducted a wide-ranging survey of software companies in Europe with interests in OSS, gathering an impressive 900 or so responses. The survey looked at motivation and licence choice. When firms were asked about what they thought of patents, the most common responses were that they were costly, and necessitated legal procedures which were time-consuming and delayed their time-to-market. Other complaints were that they hampered innovation, and that they constrained versioning. Whilst a wide range of OSS licences were used by respondents, the most popular was the GPL, with over 50% of the market.

Meanwhile, Professor Knut Blind of the Technical University of Berlin had also been doing some surveying, looking at software patents and the European software industry. He observed a growing use of software patents. Other software-protection strategies perceived to be increasing in importance between 2000 and 2004 included lead-time advantages and secrecy pledges. Prosecution of copyrights remained fairly constant with about 56% of software developers regarding it as of high or very high relevance for protecting software and computer-related developments. The proportion regarding patents as high or very high priority over the same period rose from 35% to 68%.

Other findings from Blind’s research were that:

  • Manufacturing companies producing software for their own uses are key driving forces of software patents
  • Only large companies use strategic patents
  • However, patents can be an effective instruments for start-ups looking to establish a foothold in the software industry
  • The costs of patenting are an obstacle
  • Patents are not used as information sources
  • OSS developers are afraid of the negative consequences of patents

Addressing this last point, Blind was not entirely negative about the future for OSS, saying that open source models and patenting were not complements, but substitutes.

Finale: the policy panel

And so, at last, to the policy panel. This consisted of Dietmar Tallroth (Nokia Director), Mark Lange (Microsoft Attorney), Georg Grave (Chairman of the Free Software Foundation Europe), and Benjamin Henrion (Foundation for a Free Information Infrastructure (FFII) Brussels).

Lange was, to nobody’s amazement, in favour of software patents. He argued that patents provide an incentive to innovate from return on investment. Lots of investment has gone into Office 2007, their large and costly user preference studies for instance. As an example of the outcomes of this, Lange demonstrated a new, graphical style-selector interface, which was quite neat but hardly revolutionary. This was patented in development to ensure return on investment. In truth, it is unlikely to blow OpenOffice out of the water, but clearly the new emphasis on getting patents for new features is in response to such perceived new threats.

Keen to make comforting sounds, Lange explained that Microsoft were only applying for patents on narrow innovations. Also, Microsoft do not wish to keep their patents for themselves, but would be happy to (and already do) trade them with other companies, and, let’s face it, patents are better than trade secrets, as at least patents are open. He said that he recognized and appreciated most of the arguments against software patents, but said this should be fixed by reforming the patent system not ignoring it. He thought in particular that the system needed to: reduce costs (introducing differential prices if needs be); reduce legal uncertainty (i.e. improved clarity); and reduce the number of trivial patent applications. As for OSS, Lange spoke of the ‘reality of mixed environments’ and the number of different licences in RedHat (1,122 apparently), without saying anything particularly significant. After some heavy and occasionally aggressive questioning from the floor, Lange agreed that Microsoft should stop abusing its dominant position if it did abuse it, but it doesn’t. He also denied that the company were acting to hinder interoperability.

Benjamin Henrion admitted he was ‘terrified’ by software patents. In contrast to the current system, he advocated patents that were very clearly defined to avoid infringements and drew a distinction between inventions and innovations.

Dietmar Tallroth of Nokia explained some of the controversial bits of the new GPL v3, and reflected on whether its ‘broad and perpetual covenant not to assert patents when distributing free software’ did not actually increase fear, uncertainty and doubt amongst potential users. Nokia broadly support OSS and the new GPL, but were concerned that this clause might restrict the pool of patents open to OSS developers.

Last up, Georg Grave launched a spirited defence of the four freedoms of the FSF, came up with a 1991 quotation from Bill Gates decrying software patents, and spoke with a lot of sense about lock-in. Responding to Liebowitz’s point about ‘serial monopolies’, Grave argued that it was the proprietary software model itself that led to monopolies, adding that ‘if you destroy Microsoft, some other company would take its place’. He advocated OSS on political grounds, saying that it is beneficial to local businesses, and takes away the power of a proprietary vendor. He stated that ‘governments should not act as agents of monopolization’ by using proprietary software. All of which seemed to be pretty sane.

The question and answer session that followed the presentations included some fairly pointed questions, aimed mostly at those supporting software patents, but the candidates generally restricted themselves to reiterating their key points. The session was enlivened by the spectacle of Lange and Grave being strangely chummy. Watching them pleasantly laughing and ribbing each other, one couldn’t help but wonder whether their mutual admiration really was that strong or whether the next slap on the back might trigger a little retaliatory ultra-violence

Conclusions

What was perhaps disappointing about the conference was the fact that most of the lawyers in attendance were more interested in the law than in OSS. The economists who presented may well have not been entirely representative, but this seemed less likely with regard to the lawyers. One company lawyer I spoke to had recently discovered that their software developers were using OSS, and was very concerned about the effect this might have on the software they were producing, particularly whether open source licences might infect their proprietary products. It was not his job to be enthusiastic or otherwise about open source; his job was to ensure that the proprietary product his company created had as much legal protection as possible; which was a different priority to that of his company’s ‘hippy’ developers.

Many people have an interest in retaining, developing, or promoting software patents, regardless of the consequences for OSS. Some in private business see OSS as a threat, as a form of piracy, potentially imitating their own proprietary software and undercutting it on price. Open source business models may provide new opportunities to entrepreneurs prepared to take the risk, but they also threaten to shrink the software market, which is, understandably, not good news if you’re already in it and wedded to proprietary models.

The increasing emphasis that companies are placing on securing software patents may indeed pose a threat to some OSS development, but it is highly unlikely to stop it in its tracks. The software market is too mature and awash with prior art to make many broad patents enforcible. The large ‘friends’ of OSS, such as Sun and IBM, have acquired patents themselves that they promise not to enforce. The new GPL v3 license looks as though it will contain a clause to prevent redistributors of GPL-licensed software from applying patents. It should also be remembered that software patents, whilst a hot topic, are still something of an unknown quantity in the courts. Few cases have made it that far and been successful. Open source developers should be aware of the issues surrounding software patents, and take steps to ensure they are not infringing existing patents, but should not be panicking just yet.

Further reading

Links:

Related information from OSS Watch: