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The European Unions proposed law on software-related patents will affect any IT company doing business in the EU, according to legal experts. In its current form, the proposed directive on “computer-implemented inventions” could harm open-source developers and smaller software companies because it potentially makes it easier for patent holders to defend software-related patents, attorneys said.
“If adopted, the directive will certainly make it harder for open-source computer programs, since they will not benefit from the [patent] protection and may only suffer from it,” said IP/IT attorney Olivier Hugot, of Paris-based law firm Hugot Avocat.
Following several months of turmoil, the European Commission recently made it clear it intends to push the controversial directive through to the next step in the legislative process, over the objections of the European Parliament. The proposal could be formally adopted by the EU Council as early as Monday, a serious setback for critics, who have been pressuring the Commission to start the process afresh.
The outcome of the current controversy doesnt just affect European companies: Any company doing business in the EU must be aware of the impact of software patents, lawyers say.
For companies involved in developing software, patents mean either the ability to add another layer of legal protection to their inventions, or an added risk that their products will infringe competitors patents. Organizations may also be at risk if they use software that infringes patents, unless they have an indemnity agreement with the software provider.
Vendors and providers in the United States are already getting used to this situation, with a flood of patents on software and business processes issued by the U.S. Patent and Trademark Office since the 1990s. In Europe the situation is different—European law currently makes it impossible to enforce software patents, although the European Patent Office has issued some software-related patents. “There is an extra dimension of risk in the U.S. that we dont have in the EU,” said Martin Hann, an IP partner with London-based law firm Masons.
The proposed patents directive is seeking to address the issue of how companies can use patents to protect inventions that involve software—what are referred to as “computer-implemented inventions” in the directive. For example, U.S. companies with patented technology currently cant always get the same patents from the EPO, or may get the patents but not be able to enforce them because of conflicting policies in the EU member states national patent offices.
“Provided that all the other requirements for patentability are satisfied, why shouldnt software-implemented inventions enjoy the same protection as those implemented in hardware?” said Tom Grek, an IT specialist working with Bristows, a London-based technology law firm. “Companies deserve to have their investment protected.”
European law explicitly prohibits patents on “pure software” but allows software to be patented if it has a “technical effect,” or some impact on the real world. The EPO has taken a relatively liberal interpretation and issued thousands of patents for inventions “embodied in computer programs,” according to Hugot, a practice critics say is effectively the same as issuing software patents. But these are difficult to enforce because of member states opposition, observers say.
The directive is intended to “harmonize” the legal situation across the EPO and member states, giving patent holders more clarity. Critics of the current version of the proposal say it simply institutionalizes the practice of the EPO, effectively allowing software patents. “It appears to lean more toward the case law of the EPO than the case law of some member states,” Hugot said.
He said its difficult to anticipate how the law would be applied by the courts, but it seems to be a step toward additional patent protection, and would be favorable to patent holders over users. “It might make it harder for small and midsized developers because of increasing costs and diminishing freedom with regard to the writing of new software,” Hugot said.
Other legal analysts disagree, seeing the directive as a move toward a stricter interpretation of the law. “This is a retrenching of EU law. It would make it more difficult to get software patents,” said Hann.
Grek agrees. “It seems unlikely that [the directive] will allow software patents in the same manner as the U.S. does,” he said.
For those opposed to the current directive proposal, there is little ambiguity. “At least from a software business perspective, there is no substantial difference between the regime imposed by the European patent establishment and that of the U.S.,” said Hartmut Pilch, president of the Foundation for a Free Information Infrastructure, which has organized a number of demonstrations and petitions against the proposal.
The European Parliament has now been largely brought around to the FFIIs point of view, and in late 2003 made a number of significant changes to the text, most of which were later discarded when the proposal passed to the EU Council.
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SMEs at a Disadvantage
Most industry observers agree that a U.S.-style system of software patents would leave European open-source developers and smaller companies worse off.
Patents give the owner a monopoly on an invention, meaning if someone else independently arrives at a similar solution, they would still infringe the patent. “There is no need for any copying, as there is for there to be copyright infringement,” said Grek. “The risk of open-source, or indeed, even proprietary, software being held to infringe patents is much greater as developers do not need access to the patented software; they merely need to fall within its claims.”
For large companies that can afford to engage in obtaining patents and protecting them in court, software patents are another way to fend off the competition, but for open-source and smaller organizations the picture is different. “The danger is that smaller software companies who cant afford high patenting costs will be swamped by large companies who go around patenting everything in sight,” said Hann.
Big open-source developers such as Red Hat Inc. can afford to play the same game—Red Hat has a policy of obtaining software patents for defensive purposes, pointed out Jonas Maebe, secretary of FFII Belgium. “A small company, or a hobbyist hacker, does not have that money regardless of whether they develop closed or open-source software,” he said.
Smaller companies are also usually unable to afford to provide the indemnity agreements being required by more and more customers, putting them at a further disadvantage, industry observers said. For example, the city of Munich may require such indemnity agreements from its suppliers when it dumps Windows desktops for Linux, but the agreements would cut smaller suppliers out of the competition, said Florian Mueller, head of the NoSoftwarePatents.com campaign.