We've heard a lot over the last few years about how the Internet levels the playing field, how it will be the "great equalizer" of economic markets. We're living in the "knowledge economy," we've been told.
The implication: That in the age of the Internet you don't need to be a millionaire tycoon before you start your business. Anyone with enough know-how and elbow grease can set up shop and, potentially, become the next great American success story.
At the 1998 Wall Street Journal Technology Summit, Cisco CEO John Chambers compared the Internet to a "true second Industrial Revolution." When the marketplace is the Internet, he declared, "...the big don't beat the small. The fast beat the slow."
Then again, having piles and piles of money doesn't hurt, either — right, John?
The truth is, in this race the tortoise is all too likely the one that will beat the hare. And it's not because he's "slow and steady," or because the hare falls asleep on the track, either. All the tortoise needs is some deep pockets, and he can tilt the so-called "level playing field" right back in his favor.
More and more, our own government has proven itself willing to hand big corporations like Cisco this kind of financial home court advantage — for a fee. It comes in the form of U.S. Patent Law.
Patent registrations have been recognized as a function of government for about as long as there's been a United States. Their purpose is to encourage invention and innovation by allowing originators of pioneering ideas a kind of "grace period" in which only they can decide where and how the idea is used.
But there are limits. Traditionally, only "unique, specific and non-obvious" ideas may be patented. Isaac Newton, for instance, couldn't have patented his calculus as "a method for studying differentiation and integration in mathematical functions." He'd first have to come up with a specific thing he could do, making use of that idea — like a machine for targeting artillery shells.
Disturbingly, however, an increasing number of patents are being issued that seem to stretch the definition of "unique, specific and non-obvious." Amazon.com, for example, claims through its patents the exclusive right to let customers buy products from its Web site with a single click. Other sites must require two clicks or more.
Yet while Amazon's 1-Click may be the best-known case, there are many other patented software technologies at work on the Web. That the public doesn't recognize their existence only makes their implications more alarming.
For instance, the GIF image format is widely used in Web graphics. It wouldn't be an exaggeration to claim that GIF images are found on almost every page you'll encounter while surfing. And yet GIF relies on a mathematical algorithm called LZW compression, the exclusive patent for which is held by a company called Unisys.
MP3 audio, too, is popularly regarded as a groundbreaking tool for delivering free music over the Internet. Yet beneath the surface, it's not so free. The method for encoding MP3s is patented by Germany's Fraunhofer IIS-A.
What's dubious about such patents is that they don't represent new mechanical apparatus or a means of affecting the physical world — say, making diamonds from coal. They're nothing more than mathematical techniques: perform this series of operations on one set of numbers and you get another set of numbers.
In the past, a computer program that performed a specific series of operations and achieved a certain result could always be copyrighted. That meant no other company could use that code in its software. But you couldn't patent the idea itself; you couldn't prevent someone else from writing an entirely new, entirely different piece of software that had the same result.
Thanks to court decisions beginning in the 1980s, that's changed. You might never have seen LZW compression code written by a Unisys employee in your life; it doesn't matter. You can't legally write your own software for creating GIF images — that is, not without cutting a deal.
For companies that hold these types of patents on software algorithms, the name of the game isn't being the only one on the block to use the technology. Quite the opposite, in fact; the thing to do is to let everyone use it. Just make sure they pay royalties.
Even better: Don't start collecting the royalty fees right away. One of the more insidious tactics in the royalties game is to patent some method or algorithm, perhaps even publish it, and then wait a while. Chances are, sooner or later products will begin to appear that build upon the ideas in the patent.
Often the authors of the new product won't even realize they're infringing on a patent. The patent might be obscure or date back many years. The patent holder waits until the new product gains widespread usage or popularity. Only then, when it's far too late to rethink the design, do they hit the product's authors with a bill.
This was exactly what happened with both MP3 and GIF, and there are surely countless other potential cases lurking in the shadows of the U.S. Patent Office. For one thing, some software patents are so broadly worded as to defy anyone to avoid infringing upon them, like Amazon's 1-Click. Others seem to claim ownership of programming techniques that have been in use for decades.
Just searching the records for prior patents that might conflict with a new product is prohibitively costly. Because of this, anyone developing software might potentially face the unexpected "gotcha!" of a patent infringement case.
The most common "defense" is really little more than a gamble: just wait for someone to file a suit against you. If your lawyers feel they can't prove the patent is invalid, you pay.
And those costs can add up. IBM might stand to make as much as $1.5 billion per year from patent-licensing revenues. It's little wonder, then, why the U.S. Patent and Trademark Office receives some 2,500 patent applications for "business process software" each year. For some companies, patents on software can be a more profitable product than the software itself.
That might work for the big-money players like Microsoft, IBM, Cisco or Amazon. But smaller software companies, Open Source projects and individuals are left out in the cold. These small-time developers lack the funds needed to defend against patent infringement claims — or to file for patents themselves.
Left vulnerable to patent lawsuits from a Microsoft or an IBM, many of these small developers will eventually no longer be able to afford the costs and risks of staying in business. Thus, their products will go unmade or be sold to larger corporations — effectively stifling innovation. Should the current trend continue, expect a chilling effect on the software industry at large.
Fortunately, not all corporations endorse the current trend in the U.S. Bertelsmann, Oracle, Adobe, Borland, Autodesk and others have all spoken out against software patents in the past. And yet all continue to make use of patents. They claim they have to — lest someone else use patent law against them.
Not all governments support the idea, either. The European Union recently voted not to extend patent protection to software. And Taiwan prevented Internet and software companies from going public for many years, citing "over-reliance on patents, rather than factories." In Asia, where Western ideas of intellectual property are untraditional, many analysts remain suspicious of businesses built chiefly around the ownership of ideas.
So why does the U.S. government support these kinds of software patents? Because the patents benefit people and companies — the Microsofts and the IBMs of the world — who have a lot of money. These companies and the lawyers who work for them pack the kind of financial clout it takes to keep laws on the books.
What's needed, then, is more political action from the other side of the fence. The League For Programming Freedom is one grassroots organization dedicated to lobbying for reform of patent laws. Another company, BountyQuest, acts as a sort of clearinghouse for anyone who wants to offer an award for documentation that could invalidate a questionable patent. And on an individual level, one can write Congress to help make them aware of the issue.
Let's get the tilt out of our "level playing field."
