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JULY 13, 2005
By Andy Reinhardt Europe's Patent on Failure EU legislators' inability to find common ground on protecting software innovation will do serious harm to the Continent's tech sector A proposed law to create Europewide rules for patenting software was soundly defeated July 6 in Strasbourg, France, after five long years of wrangling among the European Commission, the European Parliament, and aggressive lobbyists. In the wake of "no" votes in France and the Netherlands on the proposed European Constitution, and a bitter rift over the European Union budget in Brussels, the patent fiasco fuels a deepening sense of crisis in Europe. In the end, nearly everyone voted against it (648-14) -- even the proposal's original backers, because no fewer than 170 amendments had so confused matters that initial supporters preferred no law to a bad law. Industry groups that had pushed for uniform software patents in Europe, such as the Microsoft-backed Computing Technology Industry Assn., the Business Software Alliance, and the European Information & Communication Technology Assn., put on a brave face, noting that the defeat prevented "harmful amendments" from being enacted. SPECIAL INTERESTS' SABOTAGE. The sad truth is that everybody lost. Europe still has no clear solution to handling one of the most strategic and vexing issues of the Information Age: In what circumstances and on what terms should software innovations be patentable? Many Europeans had hoped legislators would find an approach that avoided the worst excess of the U.S. system while affording appropriate protection to European innovators. Instead, the process was hijacked by interest groups whose intransigence and ideology scuppered intelligent compromise. The biggest hypocrisy is that everyone claimed to be acting in the interest of innovation and small businesses. Now, with no new rules to go by, businesses large and small don't know what will happen to software patents they've already been granted by national authorities or the European Patent Office -- and which, in some cases, they have already used as the basis for global cross-license deals. GOOD INTENTIONS. Moreover, they're unsure whether future Europe-based R&D will be subject to appropriation by other companies in the region. And especially for resource-strapped small companies that want to protect inventions, obtaining patents in Europe and elsewhere will be as difficult and expensive as ever. This is no way to encourage innovation. The effort to craft an alternative in Europe started out well. From the beginning, most parties agreed that it should be possible to patent an invention -- a new antilock-braking system, say, or a blast-furnace control module -- that contained embedded software. But consensus broke down when people started discussing whether a piece of software that runs on a PC, or even an algorithm by itself, could be granted patent protection. In one camp were patent attorneys, some policymakers, and large multinationals such as Microsoft (MSFT ), SAP (SAP ), and Nokia (NOK ). They generally support software patents as a means to protect innovation by letting companies reap rewards from their R&D investments. PHILOSOPHICAL OBJECTIONS. Of course, many large companies have already obtained hundreds or thousands of patents in the U.S., Asia, or individual European countries. They also have the financial means to defend their patents -- and use them to keep competition at bay. On the other side were many smaller outfits struggling to innovate without running afoul of patents. These were joined by some economists who question the value of patents in spurring innovation. A 2004 study by Boston University visiting professor James Bessen and Robert M. Hunt of the Federal Reserve Bank, for instance, found that the existence of software patents can actually reduce R&D intensity. But the most vociferous opponents were backers of open-source software, for whom patents are anathema to their philosophy and business model. They issued fiery manifestos proclaiming software patents "a danger to democracy" and a threat to Europe's position as a hotbed of open-source software development.
BW MALL
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