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<title>Daniel Ravicher's FFII panel presentation
- GNU Project - Free Software Foundation</title>
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<h2>New Developments in Patent Practice: Assessing the Risks and Cost
of Portfolio Licensing and Hold-ups</h2>

<address class="byline">by Daniel B. Ravicher</address>

<div class="infobox">
<p>This is a transcript of a panel presentation given by Daniel B.
Ravicher as the executive director of the Public Patent Foundation on
Wednesday, November 10, 2004, at a conference organized by the
Foundation for a Free Information Infrastructure (FFII) in Brussels,
Belgium. The transcription was done by Aendrew Rininsland.</p>

<p>The GNU Project agrees with the premise that <a
href="/philosophy/limit-patent-effect.html">patents on computational 
ideas are bad</a>, but it disagrees with the assumption that nonfree 
programs are morally legitimate competitors.</p>
</div>
<hr class="thin" />

<p>Thanks. I think, for me, the whole two days of conferences boils to
really one question, and the whole debate boils down to one question:
&ldquo;How do we want success in the software industry to be
determined?&rdquo;
</p>

<p>
Or, another way, who do we want to determine those who succeed and
those who fail in the software industry? Because there are various
people who can make this decision. We can have bureaucrats make the
decision about who wins and who fails, or we can let consumers make
the decision about who wins and who fails. If we want software to
succeed because we want it to succeed on its merits and be the best
software that the public can have, it's more likely we want a system
that lets consumers and end-users make the decision about which
software is selected&mdash;not bureaucrats.
</p>

<p> Now, what does that have to do with patents? The larger you make a
patent system, the more you allow the patent system to impact
software, and the more you're allowing success in the software
industry to be determined by patent-based bureaucrats, those who can
take advantage of the bureaucracy which grants and resolves disputes
regarding patent rights. It's a bureaucratic competition, not one
based on the decision of consumers. That means it's less likely for
the merits to be determinative of what software succeeds.
</p>

<p>
We have to recognize that even without software patents, large
developers have intrinsic advantages over small developers. Large
developers have the resources, large developers have the
relationships, large developers have the distribution channels, large
developers have the brand. So even without software patents, large
developers are still at an advantage&mdash;they start out at an
advantage. Well, then, the next question to me is, &ldquo;If we have
software patents, does that increase the advantage of large developers
or decrease it?&rdquo; because the patent system could benefit small
developers and therefore that could erode some of the naturally
existing benefits that large corporations have.
</p>

<p>
I think that point's been belaboured already. We know that small
developers are not benefited by a patent system, in fact, they are
prejudiced by a patent system. So, enlarging a patent system to apply
to software development only enlarges the disadvantage small
developers have in competition. Again, it comes back: Who do we want
to make the decision about which software developers succeed, do we
want consumers, based on merits and functionality and price, or
bureaucrats, based on whom patents are granted to and who wins patent
infringement cases?
</p>

<p>
The other thing we need to recognize is whether or not the patent
system has a preference for users of certain types of software. A
patent system as we have in the United States benefits those under a
software distribution scheme which allows them to charge
royalties. This is because all software has to deal with the risk of
infringing on patents. Patents don't discriminate between open-source
or freely licensed software and proprietary software: a patent covers
certain technology, it doesn't matter how the software's distributed.
But proprietary software is licensed with a fee so the cost of that
risk can be passed on to the consumer without them recognizing
it. They don't see it, it's baked into the price of the software
they're buying and if you were to ask a consumer if they've bought
insurance against being sued for patent infringement, they would say
they don't believe that have. 
<span class="gnun-split"></span>But in fact they had, because if someone
sues a user of Microsoft software, Microsoft has built in the cost of
stepping in to defend them from that into the cost of the license
fee. On the other side, if you have royalty-free distributed software
such as open-source or free software, you can't bake in the cost of
that risk so it becomes more transparent. And this makes consumers or
users think that open-source is in a worse position than proprietary
software when it's actually not. It's just because the open-source
distribution scheme does not allow someone to sneak in the cost of
that risk to make it opaque instead of transparent. So the patent
system not only prefers large developers over small developers, it
also prefers users of proprietary software over open-source software.
</p>

<p>
If we come back to the initial question, which I think this is all
about, how do we want success in the software market to be determined?
Do we want it to be determined by these types of factors, or do we
want it to be determined by who can get the best software at the best
price?
</p>

<p>
Now, I think it's important to concede the point that people on the
other side will make, which is, will a less-onerous patent system, or
they would call it a &ldquo;less-beneficial&rdquo; patent system, I
call it less-onerous, will harm their business, because people could
copy them. Well, large businesses aren't worried about being
copied. They really aren't. At least not by other large businesses,
this is why they enter into cross-licenses all the time. 
<span class="gnun-split"></span>If a large
company really didn't want its software to be copied, why is it
licensing its patent portfolio to every other big company in the
world? Because it can't stop them from copying it once they enter into
that agreement, so this argument that, &ldquo;Well, we're worried
about people copying our software,&rdquo; the most likely people to
copy your software are other large businesses because they have the
resources and the ability and the distribution channels and the brand
and the relationships. Why are you letting them copy it? You must not
be that worried about it.
</p>

<p>
And so the question is, then, does a patent system have a
net-beneficial effect or a net-detrimental effect on software
development? I think we've seen already it only decreases the ability
for open-source or royalty-free license software to compete with
proprietary software. In the end you have to ask, is less competition
beneficial for the software industry? I don't know what Europeans
think about that, I think Europeans are very pro-competition and I
know us on the other side of the Atlantic are very pro-competition as
well, and so the answer is never less competition is better for
consumers. And so I think as we bring the point home, if we had two
seconds in an elevator to pitch this idea to someone, software patents
have a net-negative effect on competition in the software
industry. 
<span class="gnun-split"></span>True, they may increase competition in some ways, but the
net-effect is anti-competitive. And that's what putting the ability to
decide success in the software industry in the hands of the patent
office or in hands of the courts does. If you need examples, if people
think that's just rhetoric or your opinion, just point to the United
States. Microsoft is a very successful software company, I don't think
anyone would debate that. They've never had to sue anyone for patent
infringement. So they claim they need patents, but yet they've never
had to use them. They cross-license them and that's where we wonder,
&ldquo;If you're worried about people copying, then why are you
cross-licensing them to people?&rdquo;
</p>

<p>
You know, the last point is, who else does a patent system benefit? If
it benefits large developers over small developers, is there anyone
else? A patent system benefits non-developers. Do we really want a
bureaucratic system that helps people who aren't adding anything to
society? What I mean by non-developers are trolls&mdash;which
everyone here is familiar with&mdash;people who get a patent either
by applying for it or acquiring it in some asset purchase and then use
it to tax other developers, other distributors of a product.
</p>

<p>
Do we really want a system which encourages people to not add products
or services to the market place but only detracts from the profits and
capabilities of those that do?
</p>
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<p>Copyright &copy; 2006 Daniel B. Ravicher</p>

<p>Verbatim copying and distribution of this entire article is
permitted in any medium, provided this notice is preserved.</p>

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<p class="unprintable">Updated:
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$Date: 2022/05/31 08:46:03 $
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</p>
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