The case for patent reform for software is cogently laid out by Timothy Lee in a recent New York Times opinion piece. He shows that Microsoft - currently a leading proponent of software patents, with 6,000 to its name - sang a very different tune in 1991 when it was still an up-and-comer.
In a memo to his senior executives, Bill Gates wrote, "If people had understood how patents would be granted when most of today's ideas were invented, and had taken out patents, the industry would be at a complete standstill today." Mr. Gates worried that "some large company will patent some obvious thing" and use the patent to "take as much of our profits as they want."
Gates understood the risk that the patent system posed to software companies and he began to do something about it: apply for patents. Today, software companies engage in a battle of mutually assured destruction, patenting many "obvious things" as a defensive tactic as much as anything. I won't sue you if you won't sue me, is the tacit agreement among patent-wielding software companies. Lee points out that Vonage didn't play this game and they got burned. When you're threatening the telcos, you should expect to play hardball, and Vonage didn't even show up with a glove much less a crotch protector.
The Gates memo predicted that a large company would "patent some obvious thing," and that's exactly what Verizon has done. Two of its patents cover the concept of translating phone numbers into Internet addresses. It is virtually impossible to create a consumer-friendly Internet telephone product without doing that. So if Verizon prevails on appeal, it will probably be able to drive Vonage out of business. Consumers will suffer from fewer choices and higher prices, and future competitors will be reluctant to enter markets dominated by patents.
Lee argues that software companies don't need patent protection when copyright protection for software also exists. Not only is copyright adequate, it's cheaper, easier and available to everyone. Patents on the other hand require patent attorneys, or at least patent agents. They're arcane, cumbersome, difficult to apply for and expensive to defend against.
Yet, as the Vonage case demonstrates, participating in the patent system is not optional. Independent invention is not a defense to patent infringement, and large software companies now hold so many patents that it is almost impossible to create useful software without infringing some of them. Therefore, the only means of self-defense is the one Mr. Gates identified 16 years ago: stockpile patents to use as bargaining chips in litigation. Vonage didn't do that, and it's now paying a very high price.