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CS5038: The Electronic SocietyIntellectual Property: Patents, Software Patents/Copyright

and Open Source

Outline Patents

What are they, Advantages, Criticisms Software patents

Uses, Effects, Problems, Solutions Open source software

Copyleft and GPL Enforcing GPL Open source difficulties

• DMCA, money, image

Note: Much of this lecture’s material was written by Georgios Kritikos and Chris Walker, and later modified by others.

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What is a Patent?

• Exclusive rights granted for a • Fixed period of time (4-20yrs)

for a:

device, method, process or substance (known as an invention)

which is: • new, • inventive, and • useful or industrially applicable.

as could be seen by any person `skilled in the art’ …

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Advantages of PatentsDisclosure

Encourage disclosure into the public domain Otherwise keep inventions secret

InnovationResearch and development costly

Production investmentCommercialisation cost high

(testing, developing market and manufacturing process)

Designing around Incentive for companies to develop workarounds Improved or alternative technologies

Inventor need not manufacture, but can concentrate on innovation.

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Criticisms of PatentsConfers a "negative right" upon owner

Legally exclude competitors from using invention Even if competitor independently develops same invention

Monopolies create inefficiency, stifle competition Higher prices, lower quality, and shortages.

Tragedy of the anti-commons Intellectual property rights may become fragmented No one can use them Examples:

DVD player 12 devices patented by different companiesMicrochip can contain over 5,000 different patentsSoftware could be a big problemAll patent holders must agree to license

Copyright example: WKRP in Cincinnati, extremely popular sitcom unlikely to make DVD release because of music

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Stifling Development? From: Boldrin & Levine: Against Intellectual Monopoly, Chapter 1

In 1769 James Watt got a patent for an improved steam engine.

He went into business with Matthew Boulton (one of the great industrialists of the age – mass maufacturing - very powerful) and got the patent extended to 1800.

Watt then spent his time fending off rival inventors, rather than innovating: 1790s -> superior and independently designed Hornblower engine (?) Boulton and Watt took legal action against Hornblower Jonathan Hornblower found himself ruined and in jail Fear: many other improvements were kept idle until the Boulton and

Watt patent expired. [I’d suggest that this may be slightly unfair - there were a lot of mechanical

problems that Watt had to fight with (and Boulton financed) to make reliable engines, and this took years.]

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Stifling Development? Before 1800:

Not many of Watt’s engines in use Watt’s activity mainly extracting royalties. (?)

After patent expiry: Watt heavily involved in manufacture Steam becomes driving force of industrial revolution.

Fuel efficiency: Not thought to have changed at all during Watt’s patent Between 1810 and 1835 increased by a factor of five.

Irony for Watt: Needed to convert linear movement into steady rotary motion: The “crank and a flywheel” patented in 1780 by Pickard Watt had to use a less efficient mechanism until Pickard’s patent expired

in 1794.

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Stifling Development? Some possible conclusions

Watt possibly set back the industrial revolution by a decade

or two by delaying the mass adoption of the steam engine

Innovation was stifled until his patents expired

Competitors waited until expiration before releasing

innovations

Few steam engines built during Watt’s monopoly

Watt’s skills wasted

Patent too long – estimated break even by 1783

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Trolls and Wars• Patent wars between large technology companies:

• You show me your stack of IP violations

• I show you mine

• We usually cut a deal out of court

• But not always.

• Companies have to accumulate patents just to defend

themselves against others.

• Patent trolls buy patents from inventors. Hold them and look

for opportunities to make money by claiming infringement.

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Exclusions• Patentability exclusions

Business methods are explicitly excluded

Cannot patent a mathematical formula, or a rule,

Can’t usually patent pure programs/software either Usually have to copyright or keep secret.

But can (UK) if part of a wider system with significant `technical effect’.

Substantial variation between systems for granting patents in US and Europe. US often more liberal in what is patentable.

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Ambiguities

• The law in this area appears far from settled.

•Even where principles are supposed to be clear, interpretations in particular cases is confusing.

• Apparently confusing and contradictory judgements.

• Successful appeals.

• Different results in different jurisdictions.

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The importance of E-Commerce• Software Patents: NOTE: stronger than copyright;

patents the idea independent of a particular implementation

• E-Commerce patents:Patents a way of selling onlineE.g. shopping cart, or financial transaction system

• The driving force of E-Commerce patentsProliferation of WWW $1.4 – $3.8 billion e-commerce annual global

revenue (2003) Intellectual property most valuable assetTechnologies becoming more complex and costly to

develop -> need to patent• E-Commerce patents estimates

~450 annually granted in the US since 2001

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The Beginning

E-Commerce patents “The beginning”US patent caseState Street Bank v. Signature Financial Group(1998)Signature won

System produces 'a useful, concrete and tangible result'Computer implemented process is patentablePatent applications rocketed (not all granted though)[This type of patent now seems to have been rejected by US Supreme Court (since 2008/2009).

Useful, concrete, tangible test not enough Does not pass the machine-or-transformation test. "unclear whether tying a process to a general purpose

computer is sufficient to pass the machine-or-transformation test”

Very confusing situation. ]

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The BeginningControversial E-Commerce patent claims

Stylesheets (Microsoft)

1-Click, Cookies, Consumer reviews (Amazon)

Database operations (Allan Conrad)

WAP (GeoWorks)

Name your price auction (Priceline.com)

Shopping Cart (OpenMarket->divine->bust)

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Current Software Patent Usage• How should e-commerce patents be used?

To protect IPR (main reason)To recognise the inventor’s creativityTo reward the inventor

• How are e-commerce patents used?Market exclusionProduct promotion (exclusive product)LicensingExtortion – typically SMEs (Prodigy, Structured

Document Browser – frame based browsing)Protection of company’s own techniques against

extortion (Novell paid $15.5M for patents)Slow down competitors (Amazon 1-Click:

Barnes&Noble had to remove “express lane” system)Help start-up companies enter market

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The Effects

Who is primarily affectedCompanies (get sued / or afraid to use ideas)Users/Customers (have to pay more)WWWOpen Source Community

Why are they affected?Popular web features are unused Pay higher prices for productsEvolution/R&D is slowed down if not stopped

altogether

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The EffectsTargets

Large companies Allan Conrad sued General Motors, Boeing, Ford,

DaimlerChrysler Soverain vs. Amazon (shopping cart – Amazon

paid $40M) Juliette Harrington vs. Yahoo (single universal

shopping cart for many shops)SME’S

PanIP filed 50 claims for financial transaction system

divine – basic shopping cart system – 150 companies paid licensing fee

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Problems and Criticisms

E-Commerce patents problemsPatent granting process

Too easily grantedPatentability criteria not clearly definedBusiness methods

E-Commerce patents criticismsOverly broad claims (Cybergold, Amazon)Novelty and obviousness (Priceline.com)Selective enforcement of patents – go after soft

targets

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Patent Problems for Open Source Software

Reduced ability for OSS to offer alternatives to proprietary software.

Programmers rarely search patent databases. Lack of funds available to apply for patents,

defend patents, or to fight competitors’ patentsPatent pooling a solution?(cross licensing)

Problems not unique to OSS?

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Protection

How can someone be protectedBuy patentsCross-licensing – sign agreement with

another company on no lawsuitsPatent first

Costs of defendingSettle with $30000 - $40000Or go to court and spend 10-fold

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Solutions and the FutureSolutions and suggestions

Stricter LawsPatent office standards + database of prior artRedefine what an e-commerce patent isChange the duration of the validity

From 17-20 to 3-5Boycott businesses

Future of E-Commerce patentsVenture Capitalists refuse to back companies without

patents IPR companies

- Intellectual Ventures – buy and lease patents- Trolls – buy patents just to sue other companies

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Open Source Software and Intellectual Property Issues

Open source philosophyFree to modify program in any wayFree to feed back changes into community

Business modelsSoftware for free, but charge for supportCharge for different versions/warranties

What legal problems might OSS face?Relatively untested in court?Compatibility with copyright law?Threat from software patentsRisk of violating DMCA (US) / EUCD (EU)?

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Copyleft - prehistory

• 1975: Bill and Paul get Altair 8800, get BASIC implemented with help.

• Hobbyists `rip-off’ the Micro-Soft owned BASIC. • Jan 31, 1976, Bill gets tetchy

:http://en.wikipedia.org/wiki/File:Bill_Gates_Letter_to_Hobbyists.jpg

• Others implemented own versions of BASIC.• Some wanted their versions to remain free, for example:

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Copyleft – More HistoryOrigin:

Early ‘80s Richard Stallman worked on a Lisp interpreterSymbolics wanted it,

Stallman gave a public domain version Symbolics extended and improved itStallman wanted access to improvements Symbolics refused

Public domain problem:Software in an unprotected stateDevelopers can take public domain originals, modify them,

and sell without providing the source code.

Free Software, Free Society: Selected Essays of R.M. Stallman

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Copyleft

Uses copyright law to remove restrictions

Free distribution of copies and modified versions

Same freedoms must be preserved in modified versions.

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Copyleft - GNU General Public Licence

• GPL uses ‘copyleft ’ ideology : the right to run the program,

for any desired purpose. the right to study how the program works,

and modify it source code access is a precondition

the right to redistribute copies. the right to improve the program,

and release the improvements to the public source code access is a precondition

All derivative works must use GPL Enforced by copyright law

• Can be seen as viral• Restrictive: software often distributed under multiple licenses

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Is the GPL enforceable?

Preliminary hearing, MySQL AB vs Progress NuSphere, 27/02/2002.

NuSphere violated copyright by linking code for the Gemini table type into the MySQL server.

Ended in settlement – no precedent set

Judge Patti Saris "saw no reason" that the GPL would not be enforceable.

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Is the GPL enforceable?

Netfilter/iptables Project vs Sitecom Germany

Sitecom distributed Netfilter’s GPL’d software in violation of terms of GPL.

April 2004 − Netfilter granted preliminary injuction against Sitecom.

July 2004 − Munich District Court confirmed this injunction as a final ruling.

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Actions against GPL

Price-fixing Allegations

Daniel Wallace sues the Free Software Foundation (FSF).

Alleged that the GPL is tantamount to price-fixing(at $0).

The case was dismissed, with Wallace to pay costs.

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Difficulty with New Copyright Laws• How to make a legal DVD player under Linux?

• PyMusique was a program used to interface with Apple’s iTunes Music Store. Downloaded songs are unencrypted AAC files (.m4a). Apple officially provides encrypted AAC (.m4p). Interesting: PyMusique did not remove encryption, it merely failed to

add it

• iTunes Music Store Terms of Service: “You will not access the Service by any means other than through the

software that is provided by Apple for accessing this Service.” Use of PyMusique is in breach of ToS. But is ToS legally binding? This particular clause is ‘below the fold’...

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Difficulty With New Copyright Laws

Ironically...

The 2005 Sony BMG CD copy protection scandal was a public scandal dealing with Sony BMG Music Entertainment's surreptitious distribution of software on audio compact discs.

Sony’s XCP rootkit software was designed to protect copyright of artists...

But it was illegally copied from sections of the LAME MP3 library and the program VLC written by Jon Lech Johansen and Sam Hocevar

not adhering to the terms of the GPL

would require the release of the complete source code for XCP.

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Open Source Difficulty: Money

The Law and Money

Money required for patent application.

Money required for patent defence.

Money required for patent enforcement.

Money required for DVD licensing.

Money required for DRM licensing.

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Open Source Problem : Image

• Open source movement not sympathetic to copyright holders- no open source copyright system developed yet- future development unlikely- no DRM-enabled software – less support from copyright holders

• Companies stay from away Linux for fear of using GPL codeApple requires you to use an official client, but no official iTunes client provided for Linux

Richard Stallman

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Summary Patents

What are they, Advantages, Criticisms Software patents

Uses, Effects, Problems, Solutions Open source software

Copyleft and GPL Enforcing GPL Open source difficulties

• DMCA, money, image