July 5, 2005

Changes loom for patent process in US, EU

Author: Tina Gasperson

Experts say the U.S. is far too permissive when granting patented status to technologies that many say are "obvious." Reformers are working to change that through the Patent Act of 2005, introduced in Congress this year. Ironically, in the European Union Parliament, a battle is raging over a directive that pits the European Patent Office and Microsoft, among others, against open source software proponents and small technology houses in Europe. If the software patent measure gains a majority vote tomorrow, the EU patent system will become much more like that of the current United States system.

In a speech before the House of Representatives on June 8th, Congressman Howard Berman said the Patent Act contains a number of provisions designed to "deter abusive practices by unscrupulous patent holders," mostly in the software industry.

Non-obviousness is supposed to be the foundation of the patent system. No invention should be granted a patent if it doesn't contain the "aha" factor - the element of surprise that grabs experts in the technology, causing them to exclaim, "wow! I never thought of that!" Yet, over and over again, the United States Patent and Trademark Office (USPTO) grants patents for algorithms that leave software developers scratching their heads and saying, "that one, we already knew."

According to the book "A Patent System for the 21st Century," the rate of approval by the USPTO for patent applications filed from 1993 to 1998 was between 85 and 97 per cent, because applications originally denied can still have life in continuations. Continuation is the process whereby an original patent application can spawn "children" related to it, that use the same technology, refer to the same prior art, and are given the same date of application. So, if an original application is denied, chances are that persistent continuations will result in the eventual patenting of the technology.

It is now so easy to receive patent approval in the United States, that a new industry has sprung up whereby companies exist solely to manage "patent portfolios." The companies sell licenses to use their patented technologies, and sue entities that infringe on their patents. Patents are bought and sold or given as assets in bankruptcy cases. No longer do inventors hold their own patents exclusively to allow for unhindered creativity for a time. Now it is likely that the "inventor" of the technology is working for one of the patent portfolio mills, spending his days searching for an unpatented algorithm or researching market trends in order to snap up patents on future technology, with no intention of ever actually producing and marketing products that use the technology.

The Computer & Communications Industry Association (CCIA) recently testified before the Subcommittee on Intellectual Property regarding the Patent Reform Act of 2005. According to the report, the CCIA believes the United States' "one size fits all" approach to patents doesn't work because pharmaceutical patents, for example, are so different from software patents. "Pharmaceuticals are important enough and few enough that people read them," the report states, but complex technologies are "especially vulnerable to patent assertions because the whole... product can be held hostage to a patent on one of thousands of underlying functions."

Will Rodger, director of public policy for the CCIA, holds out tentative hope for reform. "I'm sure we will get change. But I'm less certain that what we end up with will be truly substantial. Thus far discussion has focused on measures designed to appeal bad patents after they are issued."

In Europe it is much more difficult to obtain any kind of patent than in the United States. Patents on software are practically unheard of, and the ones that do exist are not legally enforceable.. However, the EU Parliament is to vote today on a new patent directive that would make it easier for companies seeking to obtain legal software patents. On March 7, 2005, the EU Council adopted what it calls a "common position" on software patents, and turned it over to the Parliament for a vote. A common position is a sort of recommendation to the general parliament about a voting issue. Its closest counterpart in the United States would be a bill that must be voted on by legislators before becoming a law. If the current common position on software patents is adopted without any changes, it would become much easier for big companies like Microsoft to obtain and enforce patents against smaller technology companies, in some cases forcing them out of business.

American and European lobbyists from rich companies likely to benefit from the measure are pushing the European Union to change the system and make it more like the one in the States. One U.S. patent expert says the EU Parliament has been fed a "steady diet of disinformation." UK IT lawyer David Harris says the current patent process in Europe is good, if slow, but agrees that "rich American software companies and their European branch offices 'wine and dine' politicians and Eurocrats - they employ knowledgeable and sophisticated lobbying."

Rodger says the measure that Parliament is set to vote on will "pretty much duplicate the bad system we have here." But the CCIA is pushing back. "We're lobbying the issue as hard as we can from the U.S., and Red Hat, Sun, MySQL, and Oracle are working it over there."

"[Parliament] has heard they need easy software patenting so they can 'compete with the United States and Japan.' Who knew that nuisance suits, trolls and submarine patents could be such a boost to the economy?" Rodger says. In a July 1, 2005 letter CCIA members urged the EU Parliament to vote against the common position, calling it a "vote on the future of software, software-enabled knowledge, the service economy, and the very fabric of the information society."

In a July 4, 2005 release, Red Hat Deputy General Counsel Mark Webbink said "Adopting software patents can only benefit established players. If the Common Position is adopted, you can be sure that Europe and its emerging cadre of small and medium sized software developers will be irreparably harmed."

A final vote on the common position, which states that the ability to patent software is a "critical factor" in technological innovation, is expected by the end of the day. If the directive passes unaltered, the CCIA believes the result will be "less competition, higher prices, less innovation, and fewer choices for European customers."

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