Ipr Project
Ipr Project
Ipr Project
I. Introduction
During the early days of computer industry, the software came integrated with hardware. The
issue of intellectual property remained confined to hardware only. All this changed during the
sixties when software was unbundled from hardware. This gave rise to independent software
vendors (ISVs) and the production of standard and custom operating systems, as well as
independent applications softwares. Rapid diffusion of low-cost desktop or personnel computer
(PC) in late seventies and eighties opened up huge opportunities for ISVs. The software industry
gradually increased in terms of overall trade, production and consumption. In 1990s, the
widespread diffusion of the Internet created new channels for low-cost distribution and
marketing of packaged software, reducing the barriers to entry into the packaged software
industry. It also expanded the possibilities for rapid penetration of markets by packaged software
products. This rapid increase in consumption of software and easy penetration of market through
Internet resulted in increased software piracy, creating a big market in pirated software.1
According to estimates the global rate of piracy was 59.9% in the year 2010 that means out of
the total software sold worldwide 59.9% was fake.2 Piracy causes huge losses of revenues to
software companies every year.
This has made the issue of intellectual property protection for software all the more important.
The software is a complex product, which has given rise to a totally different kind of industry in
which the input and the output consist of intangibles. The ownership of intellectual property in
software industry influences the returns to investments, and the market structure. How best to
protect and regulate ownership of intellectual property? The issue of software patenting has thus
attracted considerable attention and debate.
The objective of this paper is to highlight issues related to software patenting
and their implications for software industry. In the ongoing debate or controversy to the
patenting of the software. The Indian scenario is briefed upon in the last followed by the
conclusion.
Graham J H Stuart, Mowery David C, Intellectual Property Protection in US Software Industry, Paper presented at
STEP Board Conference on The Operation of the Patent System,
http://www7.nationalacademies.org/step/Mowery_et_al_paper.doc2001.
2
http://www.nationmaster.com/graph/cri_sof_pir_rat-crime-software-piracy-rate
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http://www.aful.org/pipermail/patents/2000-May/000472.html.
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http://docs.google.com/viewer?a=v&q=cache:Vjd_zbKusOgJ:www.worldtradelaw.net/articles/hudecrequiem.pdf
http://swpat.ffii.org/vreji/papri/iic-schiuma00/indexen.htm
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Stanley Lai, The Copyright Protection of Computer Software in the United Kingdom (Hart Publishing, Oxford,
Portland) April 2000, p 1
7
A compiler software automatically transforms an object code into a source code.
8
The Binary form refers to expression of the instructions in hexadecimal numbers.
9
Laddie, Prescott, Vitoria, Speck, Lane,The Modern Law of Copyright and Designs(Butterworths, London) 1995, p
1608
10
Mathias Strasser, A new pardigm in intellectual property law?: The case against open source, Stanford
Technology Law Review, 4, 2001
11
17 U.S.C 101; Halpern Sheldon W,Craig Allen Nard, Port Kenneth L, Fundamentals of United States Intellectual
Property Law: Copyright, Patent and Trademark (Kluwer Law International, The Hague 1999), p 12
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Patents are granted by the United States Patent and Trademark Office (USPTO), and are valid for
20 years after their grant date. A patent application may be rejected or a granted patent may be
revoked if either fails to completely meet patentability criteria that
1. It is useful,
2. No one else invented it earlier,
3. The patent is not trivial and would not be assumed by experts in that field13
In addition, the U.S. Supreme court has ruled in Gottschalk v Benson14 and Diamond v.
Chakrabarty15 that algorithms, laws of nature, physical phenomena and abstract ideas are not
patentable. The most common way that patents are revoked is when someone documents prior
art where someone else created the invention before the original patent applicant.
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And yes, companies do make money licensing software patents, so there is an incentive to create
new algorithms and processes. However, this innovation incentive is strongly offset by the
actions of companies known as a patent trolls. Reminiscent of the childrens stories where
trolls who camp under bridges and waylay passengers for a toll to cross, their sole business plan
is to obtain broad-ranging patents (often for technology they have not invented) and then sue
large technology companies with deep pockets for patent infringement. The most public instance
of this was when the patent holding company NTP, Inc. sued the makers of RIM, the makers of
the Blackberry Pda phones. NTP had several patents on wireless email. Even though NTP was
able to demonstrate prior art with System for Automated Messages (SAM), RIM was forced to
pay NTP $650 million to avoid a court ordering all Blackberry services shut down. Shortly after
the settlement, NTPs patents were invalidated.16
Although critics of software/Internet/business method patent patents contend such patents allow
large companies to drive small competitors out of the market, in practice, the effect is the
opposite: strong patent protection allows small organizations to compete with the largest
businesses. Unauthorized infringing use of a patented invention can drive the inventor out of the
market; often, small entities can compete with the vastly greater marketing and financial muscle
of large corporations only by having exclusive rights in their developments, a fact that is
recognized by the investment community. Historically, the software and e-commerce industries
have failed to recognize the benefits of broadly enforced patent rights.
Acceptance of business method patents evolved slowly from a recognition by the courts that such
patents were never really prohibited, and that the 1952 Patent Act cannot reasonably be
construed to exclude business methods from patentable subject matter.
The opportunities for unfettered business method patents ballooned with the decision by Court of
Appeals for the Federal Circuit in State Street Bank & Trust Co. v. Signature Financial Group,
Inc.,17 in which the Federal Circuit adopted the view that "business methods" were not statutorily
excluded from patentable subject matter. The genesis of the prohibition on business method
16
17
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18
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The issues involved in conferring patent rights to software are, however, a lot more complex than
taking out copyrights on them. Specifically, there are two challenges that one encounters when
dealing with software patents. The first is about the instrument of patent itself and whether the
manner of protection it confers is suited to the software industry. The second is the nature of
software, and whether it should be subject to patenting.21
Copyright protection extends to all original literary works (among them, computer programs),
dramatic, musical and artistic works, including films. Under copyright, protection is given only
to the particular expression of an idea that was adopted and not the idea itself. (For instance, a
program to add numbers written in two different computer languages would count as two
different expressions of one idea) Effectively, independent rendering of a copyrighted work by a
third party would not infringe the copyright.22
Generally patents are conferred on any new and useful art, process, method or manner of
manufacture, machines, appliances or other articles or substances produced by manufacture.
Worldwide, the attitude towards patentability of software has been skeptical. The Indian Patent
Act, as modified in 2002 had made non-patentable the following:
a mathematical method or a business method or a computer programme per se
or algorithms.
http://www.sarai.net/research/knowledge-culture/critical-public-legalresource.pdf
http://www.legalserviceindia.com/article/l140-Software-Patenting.html
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Many of the world's richest people owe their wealth to copyright law. Some examples are:
Bill Gates; Paul Allen and Steve Ballmer (Microsoft); Larry Ellison (Oracle); Hasso Plattner and
the other founders of SAP; Paul McCartney (Beatles); JK Rowling (Harry Potter).
The patent, on the other hand is granted to the first to apply for it, regardless of who the first to
invent it was. Patents cost a lot of money. They cost even more paying the lawyers to write the
application than they cost to actually apply. It takes typically some years for the application to
get considered, even though patent offices do an extremely sloppy job of considering.
c) Rights conferred
Copyright law gives the owner the exclusive right to reproduce the material, issue copies,
perform, adapt and translate the work. However, these rights are tempered by the rights of fair
use which are available to the public. Under fair use, certain uses of copyright material would
not be infringing, such as use for academic purposes, news reporting etc. Further, independent
recreation of a copyrighted work would not constitute infringement. Thus if the same piece of
code were independently developed by two different companies, neither would have a claim
against the other.
23
Gopakumar K M, The scope of reverse engineering of computer software under the copyright (Amendment) Act,
1999: A critque, Journal of Intellectual Property Rights, 6 (2), 94-108.
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Many patent applications cover very small and specific algorithms or techniques that are used in
a wide variety of programs. Frequently the "inventions" mentioned in a patent application have
been independently formulated and are already in use by other programmers when the
application is filed.
d) Duration of protectionThe TRIPS agreement mandates a period of at least 20 years for a product patent and 15 years in
the case of a process patent.
For Copyright, the agreement prescribes a minimum period of the lifetime of the author plus
seventy years.
24
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the
ever
increasing
volume
of
non-patent
prior
art,
the
average
software/Internet/business method patent is citing only 1 to 2 non-patent prior art items, which is
far too few. Worse yet, the vast majority of software patents (about 60%) still cite no non-patent
prior art. Thus, to strengthen your software/Internet/business method patent it is strongly
advisable to find at least 10 pertinent non-patent prior art reference to cite in your patent case and
design around in the specification.
Some software patents are particularly subject to invalidity findings based on lack of enablement
and/or utility. The first paragraph of26 requires an applicant to describe the claimed invention
sufficiently to enable one skilled in the art to make and use the invention27 requires that the
invention have a useful purpose, or Utility. Problems can arise when one or both of these
requirements are not met. In one situation, an applicant fails to disclose a credible utility in the
25
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After the patents (second amendment) in 2002, the scope of non patentable subject matter in the
Act was amended to include the following: a mathematical method or a business method or a
computer programme per se or algorithms.
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The important phrase that was added was per se, and with the amendment we effectively
included Software patents into Indian Law. The latest amendment seeks to expand the scope of
software patents, and states a computer programme per se other than its technical application to
industry or a combination with hardware; a mathematical method or a business method or
algorithms.
This briefing note will addresses the larger question of why we should be concerned about
software patents, and the impact that it will have on the software industry in India.
28
http://www.people.hbs.edu/gllanes/exsoft.html
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The objective of granting patent rights should be to foster the growth and evolution of the
industry. Granting a patent at this stage would be akin to unreasonably prolonging the life of a
product.
It is generally found that those who are investing time creating and lodging patents
are vastly outpacing those who are investing effort bringing such ideas to market. By the time an
immature technology develops to the point where it can be incorporated into products, it has a
dozen or more patents on it that render it commercially intractable.
Software doesn't wear out: In other industries, research continues up to a point where further
research costs too much to be feasible. At this stage, the industry's output merely consists of
replacing parts that have worn out.
However, in the software sector, a computer program that is fully debugged will
perform its function forever without requiring maintenance or modification. What this means is
that unlike socks that wear out, and breakfast cereal that is eaten, a particular software product
29
Gordan T T and Cookfair A S, Patent Fundaments for Scientist and Engineers (Lewis Publications, NY) 2nd edn, 2000.
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Software has different economics: Most other major industries have medium to high research
and development costs and very high production costs. Most often, the production costs dwarf
the other two areas (because of the physicality that they involve) so that these costs can be added
on to the cost of the final product without any relatively major difference in the price.30
Software is unique in this aspect because
-The research costs very little because ideas are as abundant as air
-The development of an idea into a marketable product costs far more than the research.
-The production costs are minimal, often just a little more than the price of the medium,
which is typically a floppy or a CDROM.31
Patents affect the development stage of the process of manufacture of software. Thus the
threat exists that the price of software could be singularly determined by the number of patented
innovations that it incorporates.
30
31
32
www.sarai.net/research/legal/whysoftwarepatentsareharmful.pdf
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Future Impacts
Software patents are a clear and present danger to the viability of software companies and online
businesses. The prevalence of patently self-evident patents and the preponderance of patent trolls
imperil the profit prospective of programmers. When think of the computer programs I require
daily to get my own work done, I cannot help but realize that none of them would exist today if
software patents had been prevalent in the 1960s and 1970s.... If present trends continue, the only
recourse available to the majority of America's brilliant software developers will be to give up
software or to emigrate. The U.S.A. will soon lose its dominant position33 20 years is an eternity
in the technology sector. The increase in patent numbers and patented domains will only serve to
increase the legal and financial burden on U.S. corporations.
Conclusion
Useful software is expensive to create, inexpensive to reverse engineer and has negligible costs
for duplication. In other words, it is cheaper to copy software than to create it. Without sufficient
legal intellectual property protections, commercial software would not be a viable business
model, as few would voluntarily pay for software they could legally get for free.
Software copyrights should be preserved as they protect finished works of software from
unauthorized copying, while software patents should be repealed since they grant monopolies for
33
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