The Rise and Rise of Software Patents

James Robertson points to a New York Times op-ed piece by Timothy Lee.

Microsoft has changed their position on software patents since 1991 – what was different then?

In 1991 most personal computer users were still using DOS, not Windows.

Windows was welcome because it provided a standard way for PC applications to take advantage of RAM over 640K. Applications like Lotus and WordPerfect required incompatible and unstable high memory drivers (want to use a different app? Edit AUTOEXEC.BAT and reboot. Repeat). While Mac users were able to use Excel and Word without these limitations, the vast majority of PC users were unaware of the advantages of standardised graphical user interfaces, postscript printing or built-in networking. Apple, however, saw Windows as a threat, and had already been litigating against Microsoft for three years by this time.

When Bill Gates was stating his concerns about patents held by "some large company", he may have talking about Apple. But the lawsuit was related to copyrights, not patents.

Apple had the tables (briefly) turned on them, when Xerox filed suit, also alleging copyright infringement against work they had done on the Star.

So where were the patents?

Some people feel that Apple, Microsoft, and others plagiarized the GUI and other innovations from the Xerox Star, and believe that Xerox didn't properly protect its intellectual property. The truth is a bit more complicated. Many patent disclosures were in fact submitted for the innovations in the Star; however, at the time the 1975 Xerox Consent Decree, an FTC
antitrust action, placed restrictions on what the company was able to patent.^[4] In addition, when the Star disclosures were being prepared, the Xerox patent attorneys were busy with several other new technologies such as laser printing. Finally, patents on software, particularly those relating to user interfaces, were an untested legal area at that time.

The law is clearer now, notwithstanding differences between Europe and the US.

Apple wasn't able to patent these things because they didn't invent them.

Xerox wasn't able to patent them because of an antitrust ruling (and there may be some truth in the fact that the business was oblivious to the incredible work being done at PARC).

While I don't like to play the alternative history game (the real thing is confusing enough, thanks), the rise of Microsoft and Apple might have turned out differently had it not been for this ruling.

Investment banks have an interest in software patents for two reasons. First, they have a responsibility to their clients to invest in companies with legally identifiable market advantages. Patents are a big part of that, especially for technology companies. Right or wrong, if you have a technology company and you want someone to invest in your firm, patents can increase your market value.

Second, financial patents are becoming more widespread, and software is a big part of that. Investment banks are actively encouraging their (very large) development teams to work with their legal departments to protect their inventions. Again, right or wrong, this is partly defensive (e.g. if firms have a portfolio of patents they can enter into cross-licensing agreements with potential competitors, or they can use patents to obtain a monopoly on innovative business ideas), and partly opportunistic. It is possible that even banks might find the revenue streams from IP licensing attractive.

While not everyone is happy about software patents (they increase the cost of doing business, and can act as barriers to new entrants into a market), they can also be useful. They can help to create and sustain advantages for people who are careful and clever enough to spot the opportunities.

Either way, ignoring them is not advisable.

Update: Donald Knuth on Software Patents