Patenting Software and Services. -stakeholder view-
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1 Patenting Software and Services -stakeholder view- Dr. Harald Hagedorn SAP AG OECD Conference IPR, innovation and economic performance August 23 Patent system Principles of the Patent System - provide protection to technical principles -stimulate and support technical innovation - create competition Win in product, win in patent - create economic growth What is the problem with software? Patenting Software and Services, Harald Hagedorn / 2 Software economy Revenue with Software Products by region BILL $ Source: IDC YEAR ROW Asia/Pacific W. Europe N. America Patenting Software and Services, Harald Hagedorn / 3 1
2 Europe: Software Economy 1996 Revenue: 37 bill. Tax revenue: 15 bill. Jobs: Revenue: 6. bill. Tax revenue: 22 bill. Jobs: 43. (Source: PWC 5/1996, The Contribution of the Packed Software Industryto the European Economy) Patenting Software and Services, Harald Hagedorn / 4 Views on software Technical view PAST : mainframe computing, minicomputers TODAY : personal computing pervasive computing embedded computing PROBLEM TODAY : software is expensive to develop, but easy to copy Legal view PAST : TODAY: Copyright protection only Copyright protection, patent protection QUESTION TODAY : What is the best way to protect software in a competitive market? Patenting Software and Services, Harald Hagedorn / 5 Copyright vs. Patent I / legal FACTS Utility patent Copyright OWNER PROTECTION BEGINS DURATION OF PROTECTION SUBJECT MATTER STANDARDS FOR INFRINGEMENT STANDARDS FOR VALIDITY Patenting Software and Services, Harald Hagedorn / 6 Applicant filing request before Patent Office Granted after examination by Patent Office Protection for max. 2 years Protects technical ideas, concepts, principles Scope of protection defined by scope of patent claims Originality, novelty, nonbviousness Author creating &, fixating original expression upon creation, fixation of original expression Protection for 5 to 12 years Literary, dramatic,musical, scientific work Protects Computer Code (Source code, Object code) Copying and improper appropriation Originality & fixation in a tangible medium of expression 2
3 Legal Background Patents: - National Patent Laws - European Patent Convention - Patent Cooperation Treaty (PCT) -- Directive on the patentability of computer-implemented inventions Copyright: - National Copyright Acts - European Union Directive 91/25/EC on the legal protection of computer programs - Berne Union for the Protection of Literary and Artistic Property Patenting Software and Services, Harald Hagedorn / 7 Limitations with software patents Traditionally disallowed n some statute laws exclude programs for computers as such; Art 52(2,3) influence on patent filing strategy Prior art poorly codified lack of long-term patent data base Patent system moves more slowly than the software industry n issue of software patent might take more than 3 years i.e. longer than normal software innovation cycle Patenting Software and Services, Harald Hagedorn / 8 Advantages of Patent Protection Scope If claimed properly broader scope than copyright Independent Creation Protection against independent creation - computer program developed first subject to patent protection Monopoly Patent protection allows to exclude others from making, using, selling, importing no proof of copying by infringer threat of future infringement prevents from emulating technology Patenting Software and Services, Harald Hagedorn / 9 3
4 Advantages of Copyright Protection Lower standard lower threshold compared to required inventive step Less expensive average costs : software patents copyright registration: < 1. Shorter time to effect protection patent issued 2 3 years after filing Patenting Software and Services, Harald Hagedorn / 1 Patent OR Copyright Business view - What are the grounds for competition? u market share, speed, quality, support u price u software innovation Legal view - predictability to get software patents granted - predictability to the resolution of software patent and copyright litigation cases Technological view - What kind of innovation is important to your software development? Incremental or fundamental changes hardware innovation - What is the product life cycle of your software? compared to term of right Patenting Software and Services, Harald Hagedorn / 11 PTO software patent applications Patents / IPC Class G6F Year Total Patenting Software and Services, Harald Hagedorn / 12 4
5 EPO Software patent applications,, EP, EPA, IPC G6F Year 5 Total Granted Software Patents: ca. 2 + Patenting Software and Services, Harald Hagedorn / 13 Software patents issued in 2 Who owns Software patents? Patents issued in year 2 patents 2% EPO patents 7% 8% 18% 59% 34% Patenting Software and Services, Harald Hagedorn / 14 software related inventions to protect by patent What kinds of things can IP protect in software? software you can think of... Interfaces (User and other) Language & extensions Data structures Tools Business methods Features/Functionality Integration E-commerce solutions Internet solutions Debugger Operating systems File systems Graphics & windowing systems Compilers & simulators Cryptography & data compression Data storage and retrieval Patenting Software and Services, Harald Hagedorn / 15 5
6 Why do companies apply for software patents? Provide competitive advantage Protect your investment Control market growth Revenue generation Product exploitation Licensing programs Help form strategic alliances with partners Access to underlying technology in exchange for state of the art Legitimization Market Investors Cross-license Avoid blocking patents Avert litigation Counter claim is best defense in patent litigation Patenting Software and Services, Harald Hagedorn / 16 current issues with software patents in Europe Objectives to be adressed by EU directive on CII n Harmonization among EU member states u What makes a computer implemented invention technical? n Legal certainty, transparency, clarity of law n Enforceability of granted software patents n Rise awareness for software patents n How to deal with business method patents Patenting Software and Services, Harald Hagedorn / 17 Business method patents Methods for doing business n Teaching n Selling, Trading n Valuation of assets e.g. risk evaluation n Insurance n Financial n Services Patenting Software and Services, Harald Hagedorn / 18 6
7 Business method patents 18 SW BM Patents -EU Number Business method patents Software patents Europe Software patents Year Patenting Software and Services, Harald Hagedorn / 19 Conclusion - patentability of software is a challenge to the patent system - software patents are reality - software companies can t ignore them - open questions exist on n quality standard in granting software patents n cross boarder enforcement of software patents One hundred years ago, companies made products. Manufacturing drove the economy. Now it s all about ideas. Knowledge is the foundation of today s economy. In fact, up to 85% of the market capitalization of today s Fortune 5 now lies in intellectual assets, rather than traditional tangible assets. (Source: The Gartner Group, October 21) Patenting Software and Services, Harald Hagedorn / 2 7
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