Patent Impending

Proposed EU legislation could force small software businesses to pay exorbitant licence fees

Richard Stallman, the well-known Free Software guru, once compared developing software to writing a symphony -- with the difference that if there were a musical patent office, Beethoven would have found himself out of work. The example may sound extreme, but it is an indication of what many critics fear will come to pass if proposed European Union legislation on software patents -- coming up for a vote before the European Parliament in next week -- becomes law in its current form.

Under the scenario put forward by those against the proposed directive on the patentability of computer-implemented inventions, small and medium-sized software businesses will find themselves slapped with exorbitant licensing fees, which they must pay in order to continue distributing products. On the other hand, the directive could lead to a more consistent framework for patents across the EU, which would make it easier for companies to legitimately profit from computer-related inventions, according to Labour MEP Arlene McCarthy, responsible for shepherding the directive through the parliamentary process.

The current situation in the US is adding some urgency to the debate -- across the Atlantic, huge patent-related financial penalties are becoming a familiar part of the landscape. In a recent example, a judge told Microsoft to pay $521m (£324m) to Eolas Technologies, a University of California spinoff with one employee, no products, a handful of patents and 100 investors, after Eolas prevailed in its lawsuit over a browser-related patent. If the decision is upheld on appeal, any organisation in the business of making browser software, including open-source projects which give away their products, are likely to have to pay Eolas for a licence.

Another thorny issue is that of business methods, widely patented in the US but barred from patenting in Europe. Since US courts ruled that business methods could be patented in 1998, patent registration -- and subsequent lawsuits -- have mushroomed, with e-commerce giants such as Amazon.com, Priceline.com, Barnes&Noble.com and Expedia having all been hauled into court. Most of the lawsuits ended in settlements. Amazon.com was much criticised for chief executive Jeff Bezos' decision to patent the company's "one click" method for speeding up an online purchase.

The proposed software-patenting legislation is the result of a European Commission effort to clarify patenting rules as they apply to "computer-implemented inventions", a term that includes software. The patent offices of different EU member states currently have different criteria for accepting the validity of software-related patents, a situation that the Commission's proposal aims to remedy.

Since February, the proposed directive of the European Parliament and of the European Council on the patentability of computer-implemented inventions has been considered by three European parliamentary committees, with a final vote by the Committee on Legal Affairs and the Internal Market (Juri) on 17 June. The Juri vote approved the proposal 19-9 with some modifications, and the resulting draft legislative resolution was to go before the European Parliament on 1 September of this year.

Shortly after the vote, the draft resolution was put on a fast-track process that moved the parliamentary vote up to 30 June. This vote would have effectively finalised the resolution as a Directive, which would take effect across the EU and ultimately be promulgated as local legislation by member states. As a measure of how controversial the draft is, however, MEPs successfully cancelled the 30 June vote in order to give them more time to consider all the angles. Critics note that the delay is not as substantial as it seems, since MEPs will be on holiday for most of the period between 30 June and 1 September.

Confusingly, parties on both sides agree that moving towards the US model is a bad idea, and both insist that their proposals will keep the European patent system on a healthier footing than across the pond. For example, Arlene McCarthy, one of the directive's more vocal proponents, has said the draft is designed to stop the European "drift towards a US model". The draft will not allow the patenting of business methods or algorithms, according to McCarthy, as this would amount to giving parties a monopoly on abstract mathematics, and would surely hinder the development of new technology. Patents are restricted to a "computer-implemented invention" that "makes a technical contribution in its inventive step", according to the directive.

Unfortunately, the draft is a bit vague on exactly what constitutes a computer-implemented invention and a technical contribution, according to those who wish to alter the draft, with the result that companies are likely to patent anything they can and defend their patents in court -- a bit like what US companies do now. Companies such as IBM, used to building up large patent portfolios of their own with which to defend themselves against patent lawsuits, will be able to use the law to keep smaller competitors at bay, while patent lawyers will be able to afford larger, flasher automobiles.

In this climate, those rallying against the legislation are mainly scientists, developers and small software companies, with some large businesses such as Bull thrown into the mix, although McCarthy has said many smaller businesses have also come out on her side. Open-source developers fear that software patents could effectively derail their movement, since the development model depends on the software remaining free of intellectual property restrictions.

Many of the documents relating to the directive can be found on the European Commission Web site, here.