Brian Kahin, University of Michigan

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Brian Kahin, University of Michigan

  1. 1. The Great Debates: Software Patents & Patent Reform Brian Kahin Computer & Communications Industry Association Nov. 17, 2006
  2. 2. The President’s Commission on the Patent System “To promote the progress of useful arts in an age of exploding technology” (1966) “ The Commission believes strongly that all inventions should meet the statutory provisions for novelty, utility and unobviousness and that that [data processing programs] cannot readily be examined for adherence to these criteria.” “ Reliable searches not feasible or economic because of the “tremendous volume of prior art being generated.””
  3. 3. Information failure in the ICT sector <ul><li>[T]here are too many patents to be able to even locate which ones are problematic. I used to say only IBM does clearance … but IBM tells me even they don't do clearance searches anymore. </li></ul><ul><li>Robert Barr, Vice President, Worldwide Patent Counsel, Cisco Systems, Inc., FTC Roundtable, October 2002 </li></ul>
  4. 4. TI has something like 8000 patents in the United States that are active patents, and for us to know what's in that portfolio, we think, is just a mind-boggling, budget-busting exercise to try to figure that out with any degree of accuracy at all. Frederick J. Telecky, Jr. , Senior Vice President and General Patent Counsel, Texas Instruments, FTC/DOJ hearings Feb 2002
  5. 5. <ul><li>1966: President’s Commission on the Patent System </li></ul><ul><li>1972: Gottschalk v. Benson </li></ul><ul><li>1981: Diamond v. Diehr </li></ul><ul><li>1994: PTO hearings </li></ul><ul><li>1994: Allapat: “useful, concrete, and tangible result” (Fed Circuit) </li></ul><ul><li>1998: State Street (Fed Circuit) </li></ul><ul><li>2003: FTC report </li></ul><ul><li>2005: inter-industry split over reform </li></ul><ul><li>[2005-06: PTO RFC; Labcorp] </li></ul>
  6. 6. basic science biotech software services social sciences/ liberal professions complex technologies traditional subject matter expansion of subject matter logic, mathematics
  7. 7. <ul><li>one patent covers many possible products </li></ul><ul><li>one product encompasses many possible patents </li></ul><ul><li>patented product </li></ul>
  8. 8. <ul><li>one patent covers many possible products </li></ul><ul><li>- = many possible implementation </li></ul><ul><li>- breadth problem </li></ul><ul><li>- characteristic of “business methods” </li></ul><ul><li>one product encompasses many possible patents </li></ul><ul><li>- = many possible infringements </li></ul><ul><li>- overpatenting problem </li></ul><ul><li>- “complex product” technologies </li></ul>
  9. 9. <ul><li>pure business methods (frequent flyer programs) </li></ul><ul><li>old business methods (reverse auctions) on the Internet </li></ul><ul><li>software-implemented business methods (one-click ordering) </li></ul><ul><li>program features </li></ul><ul><li>internal processes </li></ul><ul><li>code-level algorithms </li></ul>breadth granularity
  10. 10. interdependence in time and space <ul><li>complex products </li></ul><ul><ul><li>component systems >> integrated circuits >> software </li></ul></ul><ul><ul><li>overlapping layers of embedded patentable functions </li></ul></ul><ul><ul><li>amplified by low threshold standard </li></ul></ul><ul><li>cumulative innovation </li></ul><ul><ul><li>speed set by inattention to patents </li></ul></ul><ul><ul><li>free transfer among academic/professional communities </li></ul></ul>
  11. 11. norm of non-exclusivity <ul><li>compulsory licensing (AT&T) </li></ul><ul><li>non-enforcement (Silicon Valley) </li></ul><ul><li>cross-licensing/portfolio licensing </li></ul><ul><li>leading to: </li></ul><ul><ul><li>MAD </li></ul></ul><ul><ul><li>“ open” patent pools </li></ul></ul><ul><ul><li>non-assertion covenants </li></ul></ul><ul><ul><li>nonparticipation </li></ul></ul><ul><ul><li>delayed enforcement/holdup </li></ul></ul>
  12. 12. few producers (millions of individual users but) little practical liability patent = product pharmaceuticals
  13. 13. millions of producers widespread independent invention large downstream value chain massive potential for liability complex products: 1000s of patentable functions software
  14. 14. <ul><li>low cost of “invention” </li></ul><ul><ul><li>relative to complementary value in product: other inventions, design, implementation, testing, debugging, marketing: product complexity </li></ul></ul><ul><ul><ul><li>alternative means of protection: copyright, secrecy, lead time </li></ul></ul></ul><ul><ul><li>relative to information costs and legal costs </li></ul></ul><ul><li>cumulative nature of innovation </li></ul><ul><ul><li>interdependence (complexity) </li></ul></ul><ul><ul><li>product cycles relative to patent cycles </li></ul></ul><ul><li>potential liability </li></ul><ul><ul><li>embeddedness, interdependence, downstream dependence </li></ul></ul>economic context: value and cost of patents
  15. 15. <ul><li>importance of innovation to economic growth </li></ul><ul><li>growing role (scope, scale & strength) of patents </li></ul><ul><li>but diversity in </li></ul><ul><ul><li>subject matter </li></ul></ul><ul><ul><li>process of innovation (e.g., collaborative innovation vs. pipeline model) </li></ul></ul><ul><ul><li>diversity in business context (information revolution, international trade, disaggregation) </li></ul></ul><ul><ul><li>diversity in business strategy and patent practice </li></ul></ul>
  16. 16. expanded arguments for patents <ul><li>financing startups </li></ul><ul><li>promote vertical disaggregation, markets for technology </li></ul><ul><li>encourage R&D investment </li></ul><ul><ul><li>“ net users” pay “innovators” </li></ul></ul><ul><ul><li>protect market position </li></ul></ul>
  17. 17. classical model protection against imitation <ul><li>evolving uses </li></ul><ul><li>licensing income </li></ul><ul><li>cross-licensing </li></ul><ul><li>facilitate outsourcing </li></ul><ul><li>defensive disclosure </li></ul><ul><li>deterrence </li></ul><ul><li>“ value extraction” </li></ul><ul><li>inhibit entry/thicket building </li></ul><ul><li>impose costs on rivals </li></ul><ul><li>hold up complex products </li></ul><ul><li>hold up standards </li></ul><ul><li>exploit imbalance in litigation capacity </li></ul><ul><li>“ weakest first” snowballing </li></ul><ul><li>collusive settlements </li></ul><ul><li>submarine tracking </li></ul><ul><li>picket patenting </li></ul><ul><li>suppress invention (protecting cash cow) </li></ul><ul><li>intimidate small companies </li></ul><ul><li>instill customer uncertainty </li></ul><ul><li>broadcast assertions </li></ul><ul><li>threaten IPOs </li></ul>

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