Software Patents as Stalking Horses for the Patent System

For those of you who like your discussion about the intersection between IP and innovation/ commercialization/ entrepeneurship laden with rhetorical spice, you cannot beat the commentary of Vivek Wadhwa. Just his current set of affiliations is enough to grab your attention (Visiting Scholar at the School of Information at UC-Berkeley; Senior Research Associate at Harvard Law School; and Director of Research at the Center for Entreneurship and Research Commercialization at Duke University). If credentials were a tradable currency, then this set of affiliations would certainly be the gold standard.

A good example of the Wadhwa-way of writing about these issues can be found in his recent post in the August 7 issue of TechCrunch. Entitled "Why We Need to Abolish Software Patents" here, Wadhwa makes an impassioned plea in favour of abolishing that most maligned of IP rights, the software patent. He makes the following main points in support of his position:

1. Software patents "don't foster innovation, they inhibit it. That is because things change rapidly in this industry. Speed and technological obsolescence are the only protections that matter."

2. Left to their own devices, software companies (especially start-ups) would more likely than not eschew software patents. In support of this, he summarizes the findings of a 2009 article by Stuart Graham, Robert Merges, Pamela Samuelson and Ted Sichelman, "High Technology Entrepeneurs and the Patent System: Results of the 2008 Berkeley Patent Survey". The article concluded, inter alia, that only 24% of startups filed for patent protection, compared with 76% in medical devices and 75% in biotech.

3. He recalled his own experience in connection with a startup, where he was involved in four patents. "I didn't really expect them to give me any advantage ... [b]ut I needed to raise financing, and VCs wouldn't give me the time of day unless I could tell a convincing story about how we we, alone, owned the intellectual property for our secret sauce."

4. Further referring to the Berkeley report, he made the following additional points:

a. "Venture-backed companies also file more patents than others that file patents. They file, on average, 5.9 patents as against the all-company average of 1.7."

b. "Software executives consider patents to be the least important factor for competitiveness". More important are first mover advantage, followed by complementary assets, copyright. trademarks, secrecy, and making reverse engineering difficult.

c. Patents are filed to: (i) prevent competitor copying; (ii) improve the chances for funding: (iii) enhance a company's reputation; and (iv) obtain a bargaiing chip with others. Even venture capitalists are skeptical that patents lead to greater innovation.

5. The conclusion: software patents serve mainly "patent lawyers and patent trolls, not entrpeneurs."

I have several thoughts about Wadhwa's observations:

1. It really does not come as any surprise that patents are less important in software than in other fields. After all, patent protection came later, after copyright and trade secrets had been well-established as the primary forms of legal protection, and software patents have always been uneasily viewed. Because of this, there is a bit of straw-man feel to his argument.

2. Wadhwa's real target is the patent system more broadly, with software patents providing a convenient rhetorical platform to promote his position.

3. If, as summarized in the Berkeley study, venture-backed companies file more patents (no matter what the field!), then the more interesting question is why the apparent disconnect between venture capitalists and other types of companies with respect to patents? Wadhwa suggests that they may not be acting in their own best interests with respect to patents.

4. Maybe yes, maybe no. I would give more credit to those who are putting their (or their client's) money on the line. At the least, more analysis is needed to convince me that venture-backed companies are involved in patent activities for mostly the wrong reasons.

5. Innovation is not equivalent to patenting. There can be innovation without patents; patents without innovation; competition with patents; and competition without patents. The creative, inventive world is complicated, and the multi-faceted role of patents merely reflects that complexity. Accordingly, there is nothing inherently repugnant about any of the motivations for patenting described in 4(c) above.

At the end of the day, Wadhwa's observations are like my last visit to a Chinese food restaurant, tasty but unsatisfying.