More on Abolishing Software Patents

The partners of Union Square Ventures (Fred Wilson and Brad Burnham) recently had a “Union Square Session” on “Innovation, Entrepreneurship, and Public Policy.”  In these sessions, they get together some of the smartest people they know around a topic to spend a day talking about a set of issues – in June, one of the subjects of the “Innovation, Entrepreneurship, and Public Policy Session” was patents.  I was on the road and wasn’t able to join them, but I was interested to see what came out of it.

There’s a short summary up on the Union Square Ventures website titled “Do Patents Encourage or Stifle Innovation.”  Fred referenced my post “Abolish Software Patents” and his subsequent post “Patently Absurd” as starting points for the discussion.

While the summary is interesting, the actual transcript of the session is fascinating if you are interested in this issue.  It’s relatively short (16 pages – less than 15 minutes of reading time.)  In it, you see three different perspectives: academic, legal, and entrepreneurial in conflict generally about the patent system, whether or not it is an effective and appropriate mechanism for protecting intellectual property, and how it could be improved.

My original post focused specifically on software patents and my ranting against the patent system continues to be limited to software patents.  While some of my perspective can be generalized, I don’t know enough about the fundamental dynamics of other industries (such as biotech) to either have a strong feeling or any credibility discussing these areas.  However, I believe I do with regard to software (I’ll leave you to be the judge of that.)

After reading the transcript, I came away feeling more strongly than ever that software patents should be abolished.  All the counter arguments – especially about creating a liquid market – sail right past the key point of the difficulty with software patents – a requirement that the patent be non-obviousness or that there be no prior art.  I’ll restate the central point of my original argument – I’ve carefully read hundreds of patents (yes, parts of my life are extremely tedious and boring) and most – if not all – of the software patents that I’ve read fail either the non-obvious or the no prior art requirement. 

However, once a patent is granted, it’s now a property right and the only way to deal with it is to pay for the right to use it or to litigate against its validity.  For a young, cash strapped, entrepreneurial company working on new innovations, paying for the right to use something that you believe shouldn’t have been patented in the first place is effectively the equivalent of a regulatory burden which is well known to stifle innovation.  Your alternative to litigate in advance of creating your innovation is impractical – it’s almost certain that you won’t have the financial resources to do this.  For a large, cash rich company that employs lots of lawyers, creating more property rights (e.g. patents), even if they are bogus, is now part of their business process.

All of the current argument in favor of software patents presume that software patents are legitimate. If 99% of them were, my argument wouldn’t be valid.  However, my guess is that – if subjected to a deep, open, and all inclusive review approach like the one that John Funk recently proposed – less than 1% of software patents would stand.  Even if I’m wrong and it’s 80/20 or even 50/50, I believe my point holds.  If your property is illegally or inappropriately gotten, you should not stand to profit from it.  If you think you should because of “the system” or the lack of expertise / ability / time / whatever of the current patent system, just go read Atlas Shrugged again for a doomsday scenario. 

I think this is a hugely important debate that will have a profound impact on the software industry over the next 20 years.  I know I’m taking an extreme position – that’s deliberate – in an attempt to really generate debate on this.  Interestingly, the reaction from people deeply involved in this issue – including several academics and lawyers – seems to be split 50/50 – half of them tell me how naive I am; the other half nod their heads up and down vigorously.  Whenever there’s such a split in consensus, I think it means I’m on to something.