Commentary: Inventing A Better Patent Law

Can Europe spur software innovation while safeguarding intellectual property?

Patent law is one of the pillars of capitalism, a way to reward creativity by granting inventors temporary monopolies on their work. The idea worked fine when the inventions in question were physical objects such as Edison's lightbulb or industrial chemicals. But tailoring patent law to the Digital Age has turned out to be fiendishly difficult. And that difficulty has provoked one of the loudest debates on intellectual property Europe has ever seen.

The problem: Until two decades ago, the only way to protect software against trade theft was via copyright. As with a novel or song lyrics, a copyright guards the actual lines of code in a program. But it can't prevent someone from reusing the groundbreaking ideas brought to life through software. That's why U.S. courts gradually widened the law to allow software claims. Trouble is, software is somewhere between technology and art. If patents were allowed on lyrics, for instance, the Beatles might have had a 25-year monopoly on every song written about yellow submarines.

Now a bitter battle is raging in Europe over how much protection to afford software. On one side are Brussels technocrats and tech giants such as Microsoft Corp. (MSFT ) and Nokia Corp. (NOK ), who insist Europe must do more to protect intellectual property or it risks compromising its global competitiveness. "If you want to compete with the U.S. and China, you have to have patents to protect your software," says Jean-Philippe Courtois, the CEO of Microsoft Europe.

The opposing camp is every bit as adamant. An army of economists, left-leaning politicians, and programmers such as Linux creator Linus Torvalds argue that software patents are a creativity-crushing weapon wielded by multinationals to throttle upstarts. They would like to see Europe forswear such patents entirely. Many see the fledgling "open-source" software movement -- which has particularly strong momentum in Europe -- as the Old World's best shot at challenging the dominance of U.S. software giants such as Microsoft. Allowing any sort of software patents, they say, could ruin open source by putting programs behind lock and key.

Ironically, Europe's patent battle is heating up just as Americans are questioning the value of software patents themselves -- and could influence the outcome of the U.S. debate. Tech leaders complain that the U.S. system has run amok. Corporations are locked in an intellectual-property arms race, stockpiling patents and spending millions of dollars every year prosecuting or fending off lawsuits. The result is a legal minefield that makes it nearly impossible to write a program without tripping over somebody else's protected string of code. "We are filing hundreds of patents each year for reasons unrelated to promoting or protecting innovation," said Cisco Systems Inc. (CSCO ) counsel Robert Barr in hearings before the U.S. Federal Trade Commission last year. "The system is in danger of destroying itself."

CAN EUROPE DEVISE a better solution? The whole world is watching. For the past two years, the European Union has been working to tighten its existing patent laws, while harmonizing the overlapping and contradictory provisions in its 15 member states. One goal was to preclude the worst excesses of the U.S. system. But the whole process was upended in late September, when the European Parliament unexpectedly approved a draft law that effectively banned all software patents. Anti-patent advocates were jubilant. "More innovation will come to market if companies don't have to waste so much money on lawyers," says Laura Creighton, co-founder of collaboration software maker AB Strakt, based in Göteberg, Sweden.

Trade groups, however, were apoplectic. The European Information, Communications & Consumer Electronics Technology Industry Assn. labeled the draft law a "disaster" that would "rob innovators" of protection and fair compensation for their work. Luckily for them, the European Council of Ministers has refused to sign off on the legislation, arguing that it is rife with inconsistencies.

The sad fact is that because of such polarization, Europe may be blowing an opportunity to devise a more nuanced approach to protecting intellectual property. Patent opponents are justified in fighting to set the bar for software patents higher than in the U.S., where the process has become a costly free-for-all that works against small innovators. But an outright ban is no solution. Such a move would put Europe at odds with the U.S. and Japan, as well as violating rules set out by the World Trade Organization. It could also invalidate thousands of software patents already issued by the European Patent Office, erasing billions worth of intellectual property and jeopardizing patent licenses negotiated by firms across Europe.

To find a middle ground, both sides must start by turning down the rhetorical volume. Opponents of patents should accept that an across-the-board ban could hobble a host of vital European industries, from automotive to telecom to medical systems, whose products nowadays usually have some software component. Both camps should work to preserve elements of Europe's existing patent laws that help limit some American-style excesses. For instance, the Paris Convention of 1883 requires that for patents to remain exclusive, an invention must be exploited in actual products. That helps prevent companies from hoarding unused software patents, as now happens across the Atlantic.

Lastly, Europeans should work to craft a new patent process that is smart and fast. That would include rapid publication of applications, speedy approvals, and ample opportunity for challenges after the initial grant -- a step now being contemplated in the U.S. as well. By offering protection, not suffocation, Europe could yet offer the best way to foster digital innovation.

By Andy Reinhardt

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