A reply to arguments against software patents presented by Richard Stalmann at University

of Calgary , 2005http://www.youtube.com/watch?

v=1Uw_ENS6rAUhttp://www.youtube.com/watch?v=KmVLNEuQMAk (portuguese)

Antonio Abrantes, 2012

A reply to Richard Stallman about software patents (part I)

ArgumentsCopyright law and patent law have nothing essential in common

A patent can protect a small part of an product – it is unfair

One patent one product – it is myth

Small companies has no benefits with software patents

Copyright & Patents

Patent Law and Copyright Law [..] these two laws have nothing essential in common as far the restrictions they impose on the public [..] the term “intellectual property” tries to generalize all these laws that are all completelly different [...] this is a simplistic over generalization [0:00-02:30]

Copyright & patentsAlthough the term intellectual property

itself was likely in use by the mid-nineteenth century in the first half of the century the term industrial property more often held sway and was only finally superseded in the second half of the twentieth century.

MAY, Christopher; SELL, Susan. Intelectual Property Rights: a critical history, 2006, p.18

Nonrivalrous possessionIf I know a particular piece of information,

and I tell it to you, you have not deprived me of it. Rather we both possess it. MERGES, Robert; MENELL, Peter; LEMLEY, Mark. Intellectual property in the new technological age. Aspen Publishers, 2006. p. 2

Copyright & PatentsIt is well understood that for Locke, labor

plays a crucial role in both justifying and bounding property rights. Again, there are strong parallels to the world of IP rights. […] the addition of individual labor is what transforms public domain starting materials into a unique creative product. MERGES, Robert. Justifying Intellectual Property, Harvard University Press, 2011, p. 579/6102 (kindle version)

Free flow of information ?The problem is that the pace and velocity of

information exchamge is not the only relevant issue in the world of IP. The generation of new information is equally important. IP is about more than how quickly information changes hands. It is about the nature of that information, in particular of new and in some cases unique contributions to the great flow of information coursing thorough the society [p.596]. Information may be easy to share, but novel and useful information is still hard to create. Therefore property still makes sense [p.605] Labor, directed to a useful end, justifies private appropriation. And the scope of appropriation is determined by the extent of labor [p.754] MERGES, Robert. Justifying Intellectual Property, Harvard University Press, 2011

Idea/expression dichotomyCopyright law does sometimes protect the design

elements of utilitarian objects as the sculpture/lamp of Mazer v. Stein. While courts have had difficulty at times separating the artistic from the utilitarian, they have steadastly refused to extend copyright protection to utilitarian aspects os three dimentional objects such as lamps, jewelry and mannequins. Protecting object code and microcode raises many of the same issues. How should courts separate the unprotected utilitarian aspects of a computer program from the protectable expressive aspects ? MERGES, Robert; MENELL, Peter; LEMLEY, Mark. Intellectual property in the new technological age. Aspen Publishers, 2006. p 970

Idea/expression dichotomyCopyright law protects

expression but not ideas. To illustrate, if an author of spy novels copies a portion of Ian Fleming novel about James Bond, he is an infringer. If, inspired by Fleming, he decides to write a novel about a British secret agent who is a bon vivant, he is not an infringer. LANDES, William, POSNER, Richard. The economic structure of intellectual property law, 2003, p.91

Apple’s burden was to prove “virtually identical copying” rather than “substantial similarity” 9th Circuit

Apple v. Microsoft (1988-1994)

Copyright x patentsTo assume that computer programs are just one

more new means of expression, like a film played, may be quiet wrong. The form – the written source code or the menu structure depicted on screen – look hauntingly like familiar stuff of copyright, but the substance probably has more to do with problems presented in patent law . Applying copyright law to computer programs is like assembling a jigsaw puzzle whose pieces do not quite fit...

MERGES, Robert; MENELL, Peter; LEMLEY, Mark. Intellectual property in the new technological age. Aspen Publishers, 2006. p . 998

Machine and its parts

If there are five things that corresponds that is listed in claim number one , that machine [with millions of parts] is prohibited [3:45]

Machine and its partsRobert William Kearns was the inventor of

the intermittent windshield wiper systems used on most automobiles from 1969 to the present. His first patent for the invention was filed on 1964. Kearns won one of the best known patent infringement cases against Ford Motor Company (1978–1990) and a case against Chrysler Corporation (1982–1992). Having invented and patented the intermittent windshield wiper mechanism, which was useful in light rain or mist, he tried to interest the "Big Three" auto makers in licensing the technology. They all rejected his proposal, yet began to install intermittent wipers in their cars, beginning in 1969. http://en.wikipedia.org/wiki/Robert_Kearns

Machine and its parts35 U.S.C. 112 Specification. The specification shall contain a written description

of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention. The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention

http://en.wikipedia.org/wiki/Title_35_of_the_United_States_Code#Section_112

Machine and its partsThe claims of a patent define the invention to which the

patentee is entitled the right to excludeA patent holder can seek to establish patent infringement

in either of two ways: by demonstrating that every element of a claim (1) is literally infringed or (2) is infringed under the doctrine of equivalents.

Because every element of a claim is essential and material to that claim, a patent owner must, to meet the burden of establishing infringement, show the presence of every element or its substantial equivalent in the accused device. If even one element of a patent’s claim is missing from the accused product then there can be no infringement as a mater of law

MERGES, Robert; MENELL, Peter; LEMLEY, Mark. Intellectual property in the new technological age. Aspen Publishers, 2006. p . 259

One patent one product

The myth that people have is the idea that a patent is a entire product [4:28] That was not always a myth, in early 1800s it was worked that way [58:17]

One patent one productEdison, Ford and countless innovators are

recognized as sole inventors for concenience. The histories we know depart from the trtuh for the simple reason that ir makes them easier to remember. [...] I you look under the cover of any innovation, the magic of self-containment fades. There are subinventions, subproducts, minor-breakthroughs, and parts ans components, each with a story of their own. Every wondrous thing is comprised of many other wondrous things

BERKUN, Scott, The Myths of Innovation

One patent one productData that have been collected indicate that most

innovation is not a radical process. The majority of changes which occur in our society result in an evolutionary stream of rather small, mostly, unnoticed, modifications […] most of the developments in general purpose digital computers resulted from small, undetectable improvements, but when they were combined they produced the fantastic advances that occurred since 1940

A Descriptive Model of the Intra-Firm Innovation Process, Kenneth E. Knight, The Journal of Business ,Vol. 40, No. 4 (Oct., 1967), pp. 478-496 http://folk.uio.no/ivai/ESST/Outline%20V05/Intra-fifm%20innovative%20process.pdf

One patent one productThe evidence from the petroleum refining industry

indicates that improving a process contributes even more to technological progress than does its initial development [... ] Most significant for our present purposes is his finding that cumulative effect of minor technical changes on cost reduction was actually greater than effect of major technical changes

ENOS, John A measure of the rate of technological progress in the petroleum refining industry, Journal of Industrial Economics, june 1958, p.180 cf. ROSENBERG, Nathan. Inside the Black Box: technology and economics, p.68

One patent one productThis chapter documents instances from past centuries

where inventors freely shared knowledge of their innovations with other inventors. It is widely believed that such knowledge sharing is a recent development, as in Open Source Software. Our survey shows, instead, that innovators have long practiced “collective invention” at times, including inventions in such key technologies as steam engines, iron, steel, and textiles. Generally, innovator behavior was substantially richer than the heroic portrayal often found in textbooks and museums. Knowledge sharing promoted innovation, sometimes coexisting with patents, at other times, not, suggesting that policy should foster both knowledge sharing and invention incentives […] the collaboration was not necessarily opposed to economic incentives

Knowledge Sharing Among Inventors: Some Historical Perspectives, James E. Bessen, Alessandro Nuvolari http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1944201

Patents for Small inventors ?

[the lobbies] appeal to the myth that software patents “protect” the “small inventors” [6:04]

Patent for small inventors ?More generally, a property rights system favors new

entrants because large firms can use other tools related to their market power to continue to grow (e.g., leveraging products against other products, leveraging services against products, marketing advantages). Small firms have nowhere to turn except property rights. It is easier for a small startup to pursue an idea to the point of having a solid patent or set of patents sufficient to protect the idea from competitors than to develop the kind of brand identification and market power that would allow it to compete against large incumbents

MANN, Ronald. The Commercialization of Open Source Software: Do Property Rights Still Matter?, September 2006, Harvard Journal of Law & Technology, Volume 20, No.1, Fall 2006 University of Texas School of Law, Law & Economics Research Paper No. 058 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=802805

Patent for small inventorsThe first funding for Google as a company was secured on August 1998 in

the form of a $100,000USD contribution from Andy Bechtolsheim, co-founder of Sun Microsystems, given to a corporation which did not yet exist. On June 7, 1999, a round of equity funding totaling $25 million was announced; the major investors being rival venture capital firms Kleiner Perkins Caufield & Byers and Sequoia Capital http://en.wikipedia.org/wiki/History_of_Google

PageRank process has been patented (U.S. Patent 6,285,999). However, the patent is assigned to Stanford University and not to Google. Google has exclusive license rights on the patent from Stanford University. The university received 1.8 million shares of Google in exchange for use of the patent; the shares were sold in 2005 for $336 million. http://en.wikipedia.org/wiki/PageRank

Patent for small inventors Similarly, a few firms have obtained venture financing after

their open source product was distributed, modified, and already a market success. When developers at the University of Cambridge developed Xen (software that lets hardware run multiple operating systems) and distributed it openly through two versions, they were then able to form a firm, XenSource, with $6 million of venture backing. That financing was used, in turn, to support work on a third version of the product, the distribution of professional releases tailored for different environments, and product support. The notable point is that the innovative activity preceded the financing. This contrasts starkly with the financing model for firms pursuing proprietary software strategies, where little or no development or deployment is likely to occur before first financing

MANN, Ronald. The Commercialization of Open Source Software

Patent for small inventors ?Just as the banking system created a market for capital

and the insurance industry created a market for risk, the growth of the patent system may be creating a market for innovation. This provides a sort of “liquidity” to knowledge that did not previously exist, argue Ashish Arora, Andrea Fosfuri and Alfonso Gambardella in their 2001 book, “Markets for Technology, the Economics of Innovation and Corporate Strategy”. Seen that way, the evolution of the patent system in IT and telecoms is simply part of a broader movement to create an institutional mechanism for the transfer of ideas to fuel economic progress.

The Economist, 2005 http://www.economist.com/node/5014990

Patent for small inventors ?The most famous successful uses of software patents

are plainly not use by giants to stamp out incipient competition. On the contrary, the most famous incidents are successful attempts by small firms (Stac in the mid-1990’s and Eolas in 2003) to force alterations in Microsoft products that arguably infringed patents held by relatively tiny firms, and a similar attempt by InterTrust to assert rights to digital rights management technology important to a variety of Microsoft products.203 The general point is consistent with recent empirical work suggesting that patents held by small firms are more likely to be litigated than patents held by large firms

MANN, Ronald. The Myth of the Software Patent Thicket: An Empirical Investigation of the Relationship Between Intellectual Property and Innovation in Software Firms, Texas: Texas University, 2004. http://law.bepress.com/cgi/viewcontent.cgi?article=1058&context=alea

Patents for small inventors

PricewaterhouseCoopers http://www.pwc.com/us/en/forensic-services/publications/2012-patent-litigation-study.jhtml

Patents for small inventorsOver a decade ago, radiologist Dr. Bruce

Saffran invented a drug-eluting porous sheet, and was granted 5,653,760. Boston Scientific liked the idea which have earned more than $20 billion as a result of his invention. Imitation resulted in flattery costing $431.9 million, an 8% royalty on U.S. sales, and 6% on foreign sales, from 2004 through last September. The award was reputedly the sixth largest in history. Boston Scientific and a Cordis, a unit of Johnson & Johnson, dominate the market for stents, coated with drugs which release to accelerate healing and prevent post-surgical scar tissue from creating new coronary blockages.

Fonar v. General ElectricFonar was a dispute between medical device

manufacturer Fonar Corporation and General Electric over Fonar's patent on MRI technology. Fonar's founder, Raymond Damadian, was issued U.S. Patent 3,789,832 for an "apparatus and method for detecting cancer in tissue" using the magnetic resonance of atoms. Damadian's patent was the first patent on an MRI machine issued in the United States. Also at issue was a later patent, U.S. Patent 4,871,966 issued in 1989, covering a method for obtaining MRI images of multiple planes at different orientations in a single scan . GE ultimately paid Fonar over $120 million in damages plus interest.http://en.wikipedia.org/wiki/Fonar_v._General_Electric

Stac Electronics v. MicrosoftIn 1993, Microsoft released MS-DOS 6.0, which

included a disk compression program called DoubleSpace. Microsoft had previously been in discussions with Stac to license its compression technology, and had discussions with Stac engineers and examined Stac's code as part of the due diligence process. Stac sued Microsoft for infringement of two of its data compression patents, and won; in 1994, a California jury ruled the infringement by Microsoft was not willful, but awarded Stac $120 million in compensatory damages

http://en.wikipedia.org/wiki/Stac_Electronics

Apple & FingerworksFingerWorks was a gesture recognition company based in

the United States, known mainly for its TouchStream multi-touch keyboard. they had designed and patented the multi-touch technology that Apple would later use in the iPhone, iPad, and Macbook trackpads. Founded by John Elias and Wayne Westerman of the University of Delaware in 1998, it produced a line of multi-touch products including the iGesture Pad and the TouchStream keyboard, which were particularly helpful for people suffering from RSI and other medical conditions. The keyboards were immediately discontinued when the company's assets were acquired by Apple Inc. in early 2005.

http://en.wikipedia.org/wiki/FingerWorks

http://appleinsider.com/articles/10/01/23/inside_the_multitouch_fingerworks_tech_in_apples_tablet.html/page/2

Patent for small inventors

JERUSS, Sara, The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation, october, 2012 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2158455

Patent for small inventors

Patent for small inventors ?100 random cases/year during 5 years. Total 500

cases.Specifically, lawsuits filed by monetizers increased

from 22% of the cases filed five years ago to almost 40% of the cases filed in the most recent year. In addition, monetizers were also heavily represented in the list of those who filed the greatest number of lawsuits. Of the 5 parties in the sample who filed the greatest number of lawsuits during the period studied, 4 were monetizers. Only one was an operating company. Patent monetization entities play a role in a substantial portion of the lawsuits filed today.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2158455

Top Lawsuit Filers

Patent holder success rate

Patent for small inventors That important finding, taken with the fact that the

principal targets of those patents are much larger firms, suggests patents are more beneficial to small firms than to large firms. […] it is clear that the key to a desirable investment opportunity is in the expectation of market power, and all other attributes of the company are indirect predictors of that ultimate goal […] The patent system grants the small firm an automatic stay of competitive activity that remains in force long enough for the firm to attempt to develop its technology.

Ronald J. Mann, Do Patents Facilitate Financing in the Software Industry? http://papers.ssrn.com/sol3/papers.cfm?abstract_id=510103

Thank you !