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Why will small companies benefit more from patents on software than large corporations?

Yes to Patents on Software
Why will small companies benefit more from patents on software than large corporations? Patent databases are history books describing the advance of technology. Anyone who dismisses granting of patent for software is in fact dismissing the whole idea of patents. 
Opinion by Reuven Berman
This article was first published on Yediot Aharonot’s Ynet website.
Recently we have witnessed the fierce battle in the European Community, between those in favor of granting patent for software and those opposing that move. The 648 members of the European Parliament rejected the proposed bill to permit registration of patent on software components in inventions functioning through computer programs. 
That vote means that European Law will remain unchanged. It will not be possible to register a patent for an invention in the field of software. The members of the European Parliament opposed this bill because they deemed it detrimental to the developers’ work freedom and to innovation. In contrast, USA and UK legislators have recognized patent on software explicitly. 
Exactly What is the Argument About? 
The traditional way to protect software is through copyright and commercial secret legislation. Copyright protects against illegal copying of the software and commercial secret laws prevent the disclosure of the logic behind the software. However, in comparison with the protective power of patent, both are weak defenses. Whereas commercial secret laws do not prevent a third party reaching and using the same solution independently; patent laws prevent that third party from making use of the invention, even if it was reached independently. 
Anyone seeking to protect software through patent was soon at wits end because in the past, most patent authorities around the world refused to grant patent on software. Along with the massive growth in the field of software over recent years, there have been developments in the protection of intellectual copyright for inventions in this field. Cracks have appeared in the worldwide consensus against patents for software, to the extent that over the past few years we have seen a reversal in attitudes. 
Patents for Software and the Underlying Logic in Patent Law
The literature provides us with several definitions for patents on software. For instance: Foldoc, the free, online, computing dictionary, defines patent on software as patent designed to prevent others from using programming techniques. To be brief, a patent on software is a patent granted for an invention in which the principal innovation is implemented through a computer program. 
Why is granting patent for software so problematic? It is commonly thought that a process expressed solely through software is similar to a formula used in mathematics or physical laws and in just the same way that no patent is granted for scientific discoveries based on natural phenomena, there is no reason to grant patent for software. 
The example often given by supporters of this approach is the fact that Albert Einstein could not receive patent on the formula E=mc2, because it expresses a natural phenomena. That is true, but for some unknown reason it is not customary to state in the same breath that it would definitely have been possible to receive patent for an atomic bomb, notwithstanding the fact that the atomic bomb is a system that makes use of that formula. 
Another approach opines that in the same way that patent is not granted for a cognitive process, no patent should be granted for software, which is a cognitive process. The determination if the software is a pure cognitive process is based on the final result. In other words – If the software does not have any tangible effect on the world outside the computer, it is a pure cognitive process and therefore, it does not merit patent protection. This approach has been adopted in Europe and it has been termed the “technical effect” approach. 
Oracle is an Unbeliever
One of the foremost opponents to granting patent in the field of software is the software mega-company Oracle, which believes that protecting software using the traditional means of intellectual copyright and commercial secrecy definitely suffice. Oracle’s reasoning: In view of the rapid nature of software development and the relatively low level of resources required to achieve that development, innovations in the field of software are born at meteoric speed. Given that patent examination is a slow process, software developers are left with constant uncertainty regarding questions of innovation at the most critical time. 
Moreover, given that relatively low levels of resources are required for the development of software, many software innovations result from the efforts made particularly by small companies. If small companies have to channel some of their limited resources into investment in patents, there will be a deleterious effect on development and in the final accounting, the public will lose out. 
IBM and Microsoft are Believers
In contrast, IBM and Microsoft hold the opposite opinion. At a hearing held in San Jose, California in 1994, William Neukom, representing Microsoft, said that the Company does not believe that because an invention is implemented only through software there is any justification for negating the inventors’ rights to receive patent on their inventions. 
During that same hearing, Victor Siber, representing IBM, said that the objective for research and development in every technological field is to achieve advantage over competitors. However, if the Law grants a competitor the right to copy the fruit of the developer’s labors, even while the developer is still trying to find the markets for that product, the developer loses. 
According to Siber, biotechnology is a good example of what happens when government tries to limit intellectual copyright in a specific technological field – Leading companies in the field of biotechnology transferred their activities from Europe to the USA, only because Europe did not allow them reasonable protection for the fruits of their research and development. 
Attitudes towards Patents on Software at Important Patent Offices

Notwithstanding the fact that in the USA, there is no legal barrier to the granting of patent on software, in the past, the US Patent Office has abstained from granting such patents. As time has passed, patent examination has relaxed and patents have been granted for software, on condition that it had links to a technical effect, such as for example, the control of machinery. Since 1995, American patent examination has ignored the question of whether the invention contains a mathematical algorithm. Beginning in 1998, American examinations have been even more flexible in light of the decision handed down by the Federal Court. 
Europe Demurred
In 2000, the EPO (European Patent Organization) was about to lead a real revolution in this field according to a formula presented at a conference held in November of that year. At that conference, the EPO discussed the proposal to define a patentable invention as an invention in any technological field containing innovative advance expressed in industrial applications. Details of the fields in which inventions could not receive patent were deliberately omitted. They included scientific discoveries, mathematical formulae, cognitive processes, game methods, trading methods and more… If the new formulation would have been accepted, Europe would have become a Garden of Eden for inventors, including inventors in the field of software. At the end of the process, the EPO could not find the courage to take such a revolutionary step and the decisions made at the conference were more or less the same as the TRIPS Treaty. For example: Chapter 52, paragraph 2 in the European Treaty determines explicitly that computer software cannot be considered a patentable invention. 
Patents on Software Granted in Israel
Israeli legal authorities have also had to deal with the problems of patenting software. One of the milestones in terms of software inventions, was the decision handed down by the District Court (Judge Brenner), referring to Request for Patent Number 68409, submitted by the United Technologies Company. 
The Court’s decision overturned the Registrar of Patents’ decision to reject the request for patent on a helicopter control system, which used computer software to reduce fuel consumption in varying flying conditions. However, Judge Brenner also reaffirmed that cognitive processes, which includes computer software are not worthy of patent protection. 
In reference to this matter, it is important to mention that Israeli Patent 134525 entitled: “Method for the Execution of Secure Transactions with a Credit Card and the Electronic Verification of Signatures over the Internet” was granted in 2003. The invention to which this patent refers falls within the range of definitions mentioned above in reference to patents on software and therefore it is likely that it constitutes a milestone in the Registrar of Patents’ view of the matter. 
The Single Click Patent

One of the most controversial patents in this field is American Patent Number 5,960,411, which belongs to Amazon.com”. It is known as the “single click patent”. The innovation in the invention is that it saves the user the need to type in the buyer’s details as was customary up to that time. Instead, following the final click, the surfer’s computer sends just the customer’s identification number to the virtual store and appropriately, the store retrieves the user’s address, credit card details, etc. from a database. 
Many eyebrows were raised when Amazon was granted patent for this invention and it is difficult to assume that an “average professional” could not have reached this solution in 1997, when the request for patent was submitted. However, the American Patent Office thought otherwise. 
Those opposing granting of patent on software often mention this example to illustrate the potential absurdities in patenting software, but this is an example that does not represent the mainstream. 
Patents in the Commercial Battlefield
It costs some $10,000 to take out a patent in the USA. Therefore, in the USA small companies such as startups can retain the exclusivity of their technological achievements at a ridiculously low price. They can then use that exclusivity to prevent software giants from making use of their inventions, which will open the way forward for small companies.
On the other hand, large companies have no interest in making claims of breach of patent against small companies, which do not constitute commercial threats or nuisances. The problems will arise when a small company grows to the size that will constitute a threat, which will be expressed as claims of breach of patent and/or demands for royalties, but as a larger company, it will certainly have the resources and will be able to pay that expense. 
Moreover, if a small company invests wisely in intellectual copyright and accumulates the appropriate stock of patents; it will be able to create a strategic balance with the large companies. That balance will make it not worthwhile to try and sue the company for breach. Therefore, in contrast with the commonly held opinion, this writer believes that patents on software inventions benefit small companies no less than large companies.  
The motivation to take out patent on software is the same motivation for patenting in any other technological field. Therefore, those who reject granting patent for software are in fact rejecting the entire concept of patent. Furthermore, in view of the special nature of software, patent law for software must be adapted to suit the unique nature of the field. Thus, one good idea would to reduce the patent period for software to perhaps, seven years from the date on which the patent was granted. 
The software industry is immense and it is worth billions. The industry cannot accept the situation in which an invention, reached by investing resources and talent cannot be patent protected solely because it is software. 
Reuben Berman is a patent lawyer: This article must not be considered legal advice. 
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