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Extending IPR in software. An Empirical Analysis of the Use and Impacts of of Software Patents

Fraunhofer Institute for Systems and Innovation Research. Extending IPR in software. An Empirical Analysis of the Use and Impacts of of Software Patents. Jakob Edler Fraunhofer Institute for Systems and Innovation Research Karlsruhe, Germany.

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Extending IPR in software. An Empirical Analysis of the Use and Impacts of of Software Patents

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  1. Fraunhofer Institute for Systems and Innovation Research Extending IPR in software. An Empirical Analysis of the Use and Impacts of of Software Patents Jakob EdlerFraunhofer Institute for Systems and Innovation Research Karlsruhe, Germany Presentation at the Trend Chart Policy Benchmarking Workshop ”New Trends in IPR Policy: The challenge of strategic patenting” Luxembourg 3-4 June 2003

  2. Fraunhofer Institute for Systems and Innovation Research Outline • Introduction: Background and objectives of the study • Main empirical results of a survey among German software developers • Policy challenges

  3. Fraunhofer Institute for Systems and Innovation Research Background and Objective of the Study • BMWA - Current discussion on European harmonisation - German contribution • Consortium • Max Planck Institute for Intellectual Property, Competition- and Tax Law, Munich (Prof. Dr. Joseph Straus, Ralph Nack) • FhG-ISI (K. Blind, J. Edler, M. Friedewald) (+ FhG-Patentoffice) • Comparative legal analysis by MPI: EU, Germany, US, Japan • Main Objectives: • Evaluation of the present patent protection status for software innovations • Effects of current and possible future IPR on innovation and growth: is software a special case? • Identification of policy challenges and appropriate forms of IPR in the software area

  4. Fraunhofer Institute for Systems and Innovation Research Basic assumptions about software development • The innovation activities in the software area show special features: interoperability, sequentiality, open source • Software patents might have special - more detrimental (?) - effects in this area . • Methodological/theoretical approach: economic significance of software patents determined by • present behaviour • the development of future innovation activities • the attitudes of the actors about the effect of legal changes.

  5. Fraunhofer Institute for Systems and Innovation Research The Sample of the Survey Two Groups: • Primary sector (answering n =188): • Software-developing enterprises (n =149) • Independent Software Developers (ISD) (n =39) • Secondary sector (n =68) Whole range of software products covered • independent final product, embedded, customised • software alongside hardware production • all kinds of functionality (technical, media, management, systems-related etc.) • individual solutions, small lot, standardized

  6. Fraunhofer Institute for Systems and Innovation Research Main empirical results (1) • Patents play a relatively small role at present in the software sector as protection instrument • Majority of firms of the primary sector and many in the secondary sector are highly ambivalent towards patenting • no active patenting strategies • limited knowledge and awareness • Patent activities correlate with • export intensity, • size and • degree of hardware business • Independent developers • are completely negative in their attitude, • feel that they are already greatly “hampered” and • regard administrative simplifications and adaptations in the existing system as counter productive.

  7. Fraunhofer Institute for Systems and Innovation Research Main empirical results (2) • Importance of peculiarities in software development confirmed • sequentiality • the necessity to ensure interoperability • utilisation and availability of open code (becoming more important across all actor groups!!) • Broad patenting on software related inventions seems to have negative implications for these three core elements of software development, especially as for availability of open source and interoperability.

  8. Fraunhofer Institute for Systems and Innovation Research Main empirical results (3) IPR knowledge low • In both sectors (secondary a bit better) • Firms with better knowledge • hardware producers • young companies • Patent as information source unimportant (esp. primary sector): most important reason: covering against patent law suit (defensive) • Poor IPR organisation • More than 90 % in primary sector and 60% of secondary sector do not have patent unit: not relevant, external consultation, costs • SMEs significantly less well organised and less knowledgeable

  9. Fraunhofer Institute for Systems and Innovation Research Main empirical results (4) • Firms call for a globally uniform, binding and enforceable patent law. • No unambiguous answer to the direction such a harmonisation should take • Slight majority to maintain and broaden status quo (except ISD) • Majority rejects • patents for software-supported business processes • general patenting of „software as such“ • Majority of firms call for stronger administrative support as for patent issues (not ISD)

  10. Fraunhofer Institute for Systems and Innovation Research Main empirical results (5) • Different judgements about effects of a broader patenting. • Independent developers are very negatively minded in all dimensions. • In the short term: firms see a greater scope for action in the firms which increases their competitiveness. • In the long term: danger for innovation dynamics. • No differences between big and small companies • Especially endangered: Open Source as a kind of public good, which promotes innovation dynamics.

  11. Fraunhofer Institute for Systems and Innovation Research Overall conclusions • Negative effects on innovation dynamics and variety of software seems to be greater than the benefits • Long-term costs are expected not only for juridical administration but also from • impeding the further development of Open Source („public good“) • decreasing intensity in competition (number of competitors decreases) • Result: general technical progress/ innovation dynamics potentially hampered (network effects, interactive production etc). • Broader patentability of software seems not desirable: • the lower level of protection is no locational disadvantage • companies oppose US model • international, strategic use of patents obvious, but concentrated on relatively few large companies.

  12. Fraunhofer Institute for Systems and Innovation Research Policy challenges • Companies wish international harmonisation and legal security and clarity of law • Supplementary guidelines towards a clearer and more appropriate demarcation on what is patentable and what is not (example: bio-patents): regularly updated and discussed by international experts • Additional “software” code in patent classification in order to ease search for state of the art and existing patents • Open Source needs some sort of protection from protection • Of practical use would be • administrative simplifications, support (patent information systems, consulting infrastructure etc.) • knowledge building • improve own possibilities for utilisation • deal better with foreign patent systems

  13. Fraunhofer Institute for Systems and Innovation Research Further information: German full text: Blind, K.; Edler, J.; Nack, R., Srauss, J. (2002): Software-Patente. Eine empirische Analyse aus ökonomischer und juristischer Perspektive; Heidelberg: Physica (ISBN 3-7908-1540-3) http://www.sicherheit-im-internet.de/themes/themes.phtml?ttid=2&tdid=1367 English executive summary: http://www.isi.fhg.de/ti/departm.htm

  14. Fraunhofer Institute for Systems and Innovation Research Additional information

  15. Fraunhofer Institute for Systems and Innovation Research Utilisation of various Instruments to protect software- and computer-related Developments

  16. Fraunhofer Institute for Systems and Innovation Research Significance of various Strategies for the Protection of software- and computer-related Developments (1= very small; 5 = very high)

  17. Patents as innovation impediments Fraunhofer Institute for Systems and Innovation Research • Similar patterns in firms of primary and secondary branch : • 20% have been impeded (ISD: over 60%) • 5-10% have cancelled an on-going project (ISD: almost 30) • 10-15% have not stared a project (ISD: 50%) • IPR disputes • 30 % in secondary and 15% in primary branch ever been involved • number of lawsuits correlates with external activities (US!) and size • German enterprises are very seldom the plaintiffs • ISD claim to be impeded very intensively • Co-operation in software development hampered, especially with competitors

  18. Attitudes on the Suitability of different legal and administrative Possibilities for Reform of Patenting of software- and computer-related Inventions: Difference between Share of Enterprises agreeing and disagreeing

  19. Consequences anticipated for own Enterprise as a Result of the Possibility to patent “Software as such” (- 1 = decrease, +1 = increase)

  20. Consequences anticipated for own Branch as a Result of the Possibility to patent “Software as such” (- 1 = decrease, +1 = increase)

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