Tuesday, January 31, 2006

Let their screens go black

The news that wireless pager maker RIM faces a shutdown of its network is the best patent news in years.

The US patent system is broken and Congress isn't going to fix it until they realize that it is not the envy of the world and that the costs of a broken system are considerable.

Open source activists have complained about the patent system for years: if all the interesting techniques are locked up by software patents there may be no scope for free software. As a result the debate on the net is generally dominated by a 'free software vs evil corporations' mentality that overlooks the fact that the patent system isn't working for corporations either.

The USPTO points to the fact that more patent applications are filled in the US than anywhere else as a mark of the success of the system.

In reality the number of patent applications is really a result of the broken patent system. It is fairly obvious that weak standards of review and lax criteria for originality encourage more applications. What is less obvious is that this situation forces companies to apply for patents for their own protection even if they have no intention of enforcing them. If you do not apply for the patent someone else will.

Some of the patents issued over the past ten years defy explanation. One patent issued in the mid 90s essentially laid claim to the idea of digital certificates over a decade after the idea had been proposed by Lauren convoluted in his 1979 Msc. thesis. The wording of the invention summary made it obvious that it had been lifted in its entirety from the IETF PEM specification published five years earlier.

Now you might be thinking that such a patent would be pointless, surely anyone threatened with a lawsuit would recognize that it was completely bogus. Not so, the 'inventor' of this particular patent made a nice chunk of change by selling it to an Internet startup just after it announced it was planning an IPO. The message was clear: pay me to keep quiet or go to market with an IPR lawsuit hanging over you.

US law assumes that a patent is valid. This means that a patent troll enters the courtroom with the scales heavily tilted in their favor. Successfully defending a patent infringement lawsuit typically costs in the region of $2 to $5 million.

Defensive patents mitigate the problem in the short term but exacerbate it in the long term. Most of the junk patents being hawked by patent trolls were originally filed as defensive patents. This has not generally proved to be a problem as long as the patent is owned by a company whose principle objective is to build a real business that provides real products. A company that has a real business has to be very sure that a patent is enforceable before going to law.

The problem comes when the original company goes bust and the patent portfolio becomes just another asset. This happened in the case of the notorious OpenMarket 'shopping cart' patents. I was one of may early Web developers deposed in the Sovereign Software lawsuit against Amazon. Open Market never attempted to demand royalties for the patents but after they went bankrupt they were bought by a law firm. Amazon paid $40 million to settle, it is likely that the case would have cost them far more to 'win' at trial.

Despite being vociferously opposed to software patents the free software movement has only been affected indirectly. Patent trolls are only interested in money, few free software projects have enough money to be worth a lawsuit.

This situation is changing, partly because large companies with deep pockets such as IBM and Sun have adopted open source as an integral part of their business strategy but also because of the proliferation of 'defensive patents'. It is like the cold war arms race: neither side really wanted to spend such huge sums building warheads but neither could afford to be the first to stop.

The US patent system is broken. It is not performing its intended function of encouraging innovation. In fact the reverse is true, innovation is actively discouraged. On several occasions I have been asked to remove a particular feature from an Internet standards proposal because it might be the sort of thing someone might decide to patent. The patent system does not work for the free software movement and it does not work for legitimate vendors either. Even companies that have vast patent portfolios are facing larger liabilities from spurious software patents than they are likely to gain.

The US patent system is broken and congress needs to fix it, the RIM shutdown should it occur may be the catalyst for change. I will look at what those changes should be in some of my next posts.

Part 2