A panel of top academics and attorneys debated the merits of computer software patents at a conference March 19 at University of Colorado Law School. All agreed that the current patent system needs improvement, but few went so far as to advocate the abolishment of software patents altogether.
by Eric Schmidt
A panel of top academics and attorneys debated the merits of computer software patents at a conference March 19 at University of Colorado Law School. All agreed that the current patent system needs improvement, but few went so far as to advocate the abolishment of software patents altogether.
The conference, titled “Evaluating Software Patents” was sponsored by the Silicon Flatirons Center at CU Boulder and the Intellectual Property Section of the Colorado Bar Association. The event sought to examine possibilities for software patent reform in the wake of recent court decisions such as In re Bilski and eBay v. MercExchange, which signaled fundamental changes in the scope of patent protection and the availability of injunctions as remedies for infringement.
An opening panel on the proper scope of patents aimed to answer the question of what makes software patents different – and more controversial – than traditional patents for hardware and other inventions. Panelists included John Duffy, professor of law at George Washington University; Damien Geradin, professor of competition law and economics at Tilburg University in the Netherlands; Kevin Luo, associate general counsel for Microsoft; Michael Meurer, professor of law at Boston University; Tim Scull, a partner at Merchant & Gould; and moderator Harry Surden, associate professor of law at CU-Boulder.
The group noted that software is newer and more abstract than other machines and technologies patented in the past, but found it difficult to differentiate protection of computer code from patents granted to other inventions. Luo observed that numerous consumer technologies – from mobile phones and remote controls to cars and washing machines – all require some form of “software” to operate.
“Software is everywhere in our lives, so if you look at these examples, you wonder whether it makes sense to have a distinction between hardware and software patents,” he said. “Sure, there are some abstract ideas, but most of the software we’re seeing today is very practical.”
Meurer noted that software patents now account for a quarter of all patents issued, making it more important than ever to ensure that when patents are granted, they are clear and unambiguous enough to protect the inventor’s rights while minimizing inadvertent infringement by others independently developing similar technologies. He said that vague patents pose an obstacle to innovation because software developers face the risk of being sued for inadvertently infringing overbroad patents that can be interpreted as having many meanings.
“Patents are supposed to be a property right, but the system isn’t good at behaving that way,” he said. “They don’t deliver the kind of rewards to innovators that they should.”
Phil Weiser, professor of law at CU-Boulder, moderated a second panel on the realities of patent litigation. The group included Natalie Hanlon-Leh, a partner at Faegre & Benson; Mark Lemley, William H. Neukom Professor of Law at Stanford University; Sean Murphy, vice president of government affairs for Qualcomm; and John Posthumus, a partner at Greenberg Traurig.
The panel discussed the effects of a presumption of validity in patent litigation and the phenomenon of “forum shopping,” which has led to a concentration of patent suits in what are perceived as favorable jurisdictions such as Delaware and the Eastern District of Texas.
Speakers also addressed the rising cost of patent litigation, with Leh noting that companies can expect to spend at least $1 million – and often many times more – on each case. Cost presents a practical bar to startup companies patenting their ideas, and to defending themselves against infringement alleged by larger competitors, panelists said.
“If you don’t have revenues of $50 million and cash reserves, you shouldn’t be in patent litigation, because ultimately it’s going to drain you,” Posthumus said. “It really is a drag on generating revenue and paying attention to running your business.”
Another panel discussing the role of software patents in startup companies and financing decisions was moderated by Brad Bernthal, associate clinical professor of law at CU-Boulder. Panelists included Michael Crawford, a partner at Q Advisors; Jason Haislmaier, a partner at Holme, Roberts & Owen; Jason Mendelson, managing director at the Foundry Group; Sean O’Connor, associate professor of law at the University of Washington; and Bill Vobach, a partner at Townsend and Townsend and Crew.
The panel’s discussion of whether software patents provide incentives for entrepreneurs to innovate led to some of the conference’s most spirited debate. Mendelson, a Boulder-based venture capitalist, said his decision whether to invest in a company depends far more on its business model and management team than its patent portfolio – or lack of one.
“I think (patents) are worthless to incentivize an entrepreneur,” he said. “Entrepreneurs are innovators because they like to innovate, not because of some government incentive.”
O’Connor countered that an intellectual-property regime including software patents facilitates the transfer and commercialization of innovation. He said patents allow inventors to convey their discoveries to a buyer, or shield themselves from personal liability by forming their own business entity.
“Some way of conveying the innovation into the LLC is incredibly helpful,” he said.
The conference concluded with a roundtable discussion between professors Duffy, Lemley and Meurer moderated by Weiser. The group adopted a military analogy to describe a software patent system that has become increasingly defensive, where companies feel obliged to patent anything they develop to protect themselves against the possibility of being sued by competitors for future infringement.
“It’s a nuclear weapon,” Lemley said. “They don’t want to use it; it’s a deterrent.”
Weiser asked whether this kind of “arms race” results in an inherently inefficient system, but Duffy suggested that it might actually have the positive effect of encouraging more research and development. In any case, the group agreed that the rush to patent any new discovery has swamped the U.S. Patent and Trademark Office with a backlog of more than 1 million unexamined patent applications and contributed to the issuance of “bad patents” that don’t serve their intended purposes.
Duffy proposed an end to what he called the PTO’s monopoly on patent processing by allowing other countries – and even private firms – to offer alternative patent examinations that could be better and faster than the U.S. government’s. He said that any industry-specific patent reforms passed by Congress aren’t likely to clear the backlog of patent applications or result in a more efficient system.
“In an area of law like patent law, which is always designed to be operating on the forefront of human knowledge, the idea that we can be fast enough in the legislative process to get things right, I think, is fantasy,” Duffy said.