Software Patents – Incentive or Stumbling Block for Innovation?

Nikolaus Forgó
Nikolaus Forgó

Mr. Forgó, why is the EU patent convention of 1973 no longer adequate to protect software-supported inventions?

Forgó: Actually, it should be enough. But because the suggested guidelines failed, we still have to deal with the PC and the national regulations that implement it. Classification is the problem. When is something simply software, and when is a program used only as a utility for something else? Consider the following example. An automatic braking system (ABS) in an automobile is, of course, an invention that can be given a patent. But should the computer program that makes the ABS run also receive a patent? And what about applications in which the computer program operates even further in the foreground like a diving computer or customer relationship software? Just where are the borders? Patent practice at the European and German levels in the past few years has increasingly started to declare “pure IT solutions,” in which technical contributions are far in the background, as patentable. This development leads to a loss of factual meaning for the corresponding section of the PC and to uncertainly about just what can and what cannot be given a patent.

But there’s also an additional problem. Throughout the world, some legal systems, such as the United States, issue patents for phenomena that Europeans would never see as patentable – such as a patent for the possibility of ordering with one click.

The industry lobby claims that thousands of jobs will be lost without patent protection. The lobby of small and midsize software shops claims the opposite: license fees and the threat of lawsuits endanger their existence, and they face the threat of a monopoly. Which development would be worse?

Forgó: I’m a layman when it comes to economics, but it would seem that a more generous approach to issuing patents, according to the example of the United Sates, would make it more difficult for small and midsize companies to enter the market. Small companies do not typically have the resources and specialized knowledge needed to perform the required patent research ahead of time and to be able to register for a patent afterward. Now, the European economy is characterized by midsize companies much more so than the American economy. That’s why a more generous practice with patents in Europe might lead to multinational groups crowding out midsize companies. As part of increased competition among legal systems in a global economy, you have to ask yourself if you can still afford to create a zone of protection for midsize companies with the different European practice for granting patents.

How can the law encourage and secure the ability of software to support innovation?

Forgó: Patent law is by far not the only protective instrument that the legal system makes available to support the creativity and manufacture of software. Since the 1990s in Europe, it has been typical – if not always self-evident – to copyright software. Of course, you have to remember that copyright law goes back to the late 18th and early 19th centuries. At that time, the paradigm was of a lonely and creative artist working under significant personal deprivation and with considerable financial and personal risk to create a work of art. This image still dominates copyright law but has only very limited application to the profoundly divided labor and organizational process like software development. So it’s thoroughly appropriate to ask if copyright law is really the means of choice and if we should think about an independent protective instrument for software – something like what we already have for databases. A third option would be protection with a utility model – an exclusionary protection similar to a patent.

Before the summer of 2005, the European Parliament regarded the guidelines rather positively. What’s behind the guidelines and why did the majority of representatives suddenly turn around to oppose the guidelines?

Forgó: I believe that two causes were decisive. First, a European-wide and very professionally organized lobby was able to create the public attention and sensitivity to the topic that it deserves. Hardly anyone has more than a vague idea of how elementary and important patent law is for industries with global power in the market like the pharmaceutical industry. Thanks to the lobby, the public has been sensitized to how important it is to think over whom we want to pay for an intellectual service and which financial investments we want to endow with specific exclusionary law at a cost to others. That’s all that patent law is: an exclusionary law to benefit an inventor as a consideration for the payment of a patent fee and the publication of the discovery.

The second reason for the failure involved European power politics. The members of the European Parliament may well have been angry that the European Commission and the Council of Europe simply overrode objections raised during the first reading and just want to push the guidelines through despite significant public opposition. Happily, the European Parliament showed its independence and persistence here.

How can you clearly draw a line between pure software and software-supported invention in future regulations?

Forgó: You can’t, and it’s not necessary. It would be much more important to make the process of issuing patents more transparent and to reform it. In particular, we must make sure that the instances that make the decision truly act independently and allow the legally relevant interests of those involved to be expressed properly during the procedure.

With the Patent Act of 2005, the United States is now trying to limit the flood of patents. So-called patent sharks purchase fuzzy patents from their creators so that they can later claim license fees from the manufacturers of similar products. Can international standards help avoid this situation?

Forgó: It will be very difficult to achieve international unity in patent law. The effort to do so always runs a risk because of its complexity and because the high costs involved in participating in such efforts are paid by the social groups with poor or no organization: small companies and consumers.

Let’s assume that the EU passes a new regulation on the patentability of software. How could that stop patent sharks?

Forgó: I don’t think that we can really expect such a regulation. But if it does appear, you can avoid misuse only with a bundle of measures, including true and organizational independence of claimant instances and the transparency of the procedures. In addition, you would also have to ensure a means to represent the interests of poorly organized groups, perhaps by creating a patent ombudsman or setting up something like citizen or data protection officers. Finally, the procedure should be accompanied by a public that is informed with the facts. But wanting all this is about as realistic as wanting evil to disappear from the world.