Are Software Patents Helping or Killing Innovation?

The big story of the last few days (other than NORAD tracking that mysterious object flying in from the North Pole) was that Microsoft lost its appeal on the patent infringement case to tiny (30 employees) i4i of Toronto, Canada.  The end result is that Microsoft must stop selling Word 2007 with the offending technology (a way of editing XML).

I sympathize with both sides.  Even in a company with the size and market power of Microsoft (perhaps especially in a company with the size and market power of Microsoft), it is difficult to know what it a true innovation on your part, or an approach similar to what someone else had already patented.

On the other hand, I may be one of the few people left standing who remember the Stac Electronics incident of the early 1990s.  Microsoft, in talks to acquire this maker of disk compression technology, had its engineers look at the details of Stac’s approach.  Microsoft then halted acquisition talks and in 1993 came out with its own compression technology with MS-DOS 6.0 that looked suspiciously similar to Stac’s.  It was not Microsoft’s finest moment.

i4i is not a patent troll, but by all accounts a small software company seeking to protect a technology it patented in good faith.  It’s especially difficult for a small company to do so, because of the legal uncertainties and resources required, compared to an adversary with virtually unlimited time and resources.  Most choose to shrug and move on without a fight.

I would like to think that most innovation occurs in a strictly meritocratic way – we take the current state of the art, and improve upon it in imaginative and useful ways.  It looks like it works that way, but there is a lot of ambiguity and occasionally outright theft under the covers.

I think that most people agree that patenting business methods (think Amazon “1-Click” checkout) is a bad idea, and we seem to be moving ever so slowly away from that practice.

But beyond that, technology patents are a mixed blessing.  It used to be that companies interested in legal protection would copyright the code (with some redaction), but that still allowed for copying functionality and even appearance through reverse engineering.  Yet the US patent rules and process are still largely mired in an era where inventions were physical things rather than ideas expressed as software.

Don’t count on that changing anytime soon.  Today, software companies that can afford to do so patent just about everything they can, not to protect their intellectual property, but rather to build a patent portfolio.  That patent portfolio is perhaps the best protection against litigation, as many lawsuits are settled with cross-licensing agreements.  It may not fit our definition of justice, but it seems to be the best way of resolving patent ambiguities today.