Lipstick on a pig

It’s to the credit of policymakers that they have steadfastly refused to kiss this pig called ‘software patents’, despite it being dressed up in the lipstick of ‘innovation’.

Lipstick on a pig” is a popular Americanism for making superficial or cosmetic changes that disguise the true nature of a product. The pig in question is the regime of software patents being advocated by some multinational corporations (MNCs) and their highly paid lawyers, while the lipstick is the much abused term—“innovation”.

Ever since the Indian Patent Office (IPO) issued the revised Computer Related Inventions Guidelines, a host of MNCs has been busy trying to lobby the Indian government to overturn these guidelines. At stake is India’s future in the digital age.

Patents are a state-granted monopoly on an invention, for a limited period of time. Those who have been granted these monopolies then get the right to prevent others from using the ideas and methods they have patented. Software developers, and researchers who study innovation, contend that the US, which has the most permissive patenting system in the world, made a huge mistake by bringing software under the ambit of patentability.

James Bessen and Michael Meurer, two Boston University professors, found that almost 38% of all patent litigation in the US is around software. In their book,Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk, the authors explain how software falls within the realm of abstract ideas, and that it is impossible to draw boundaries around abstract ideas.

For example, if a property developer is planning to build a skyscraper on a piece of land, he can do a title search and find out the boundaries to the east, west, north and south of that piece of land. A clear title enables the developer to invest money with peace of mind. However, software being an abstract field, even law-abiding software developers cannot do a conclusive patent search in the areas they are working on, which increases the risk of software development in countries that allow software patents.

The US patent system has come to such a pass that even a respected inventor like Andy Grove of Intel was compelled to say, “The patent product brings financial derivatives to mind. Derivatives have a complex relationship with an underlying asset. While there’s nothing wrong with them in principle, their unfettered use has damaged the financial services industry and possibly the entire economy.” This was right after the financial crisis in 2008 that was caused by housing derivatives.

How did the US patent system go so wrong that one of its most venerated inventors became its harshest critics? In their book, Innovation and Its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What to Do About It, two Harvard University professors Adam B. Jaffe and Josh Lerner explain how the 1980s were a time of great concern about US “competitiveness”, as well as a general movement to shrink government and make it more efficient. The government responded to these concerns by making the United States Patent and Trademark Office (USPTO) run more like a business, so that its processes would become easier for inventors. The effect was that patent seekers turned into “clients” and not applicants at USPTO. The authors add that USPTO (much like IPO) has been chronically strained for resources, with patent examiners often having just a dozen hours to assess a patent application.

As a result, the number of patents granted in the US has reached 326,000 in 2015, up from 66,170 in 1980. The flood of poor quality patents in the US has led to a surge in lawsuits, and the rise of patent trolls—organizations that make nothing, and whose sole business is to acquire patents and use them to extract royalty payments from unsuspecting users.

Under the Patent Cooperation Treaty, if India allows software patents, it will have to give priority to the existing patents that have been filed in other countries. Bessen and Meurer estimate that there are around 4,000 patents on e-commerce and around 11,000 patents on online shopping in the US. If these patents are granted in India, MNCs will have the right to exclude Indian companies from using their claimed inventions. This will slow down the pace of innovation, and nip India’s growing software product ecosystem in the bud.

It is to the credit of Indian policymakers that they have steadfastly refused to kiss this pig called “software patents”, despite it being dressed up in the lipstick of “innovation”. This gives Indian software developers the freedom to innovate without worrying about patent lawsuits.

Patent shift: Hope for IT innovation, not litigation

One of the persistent threats to India’s software product ecosystem is from the constant push by MNCs for allowing software patents in India.

India’s nascent software product industry is growing rapidly and is on a trajectory where we can see global brands like Amazon, Google and Facebook emerge in the next 10 years.

One of the persistent threats to India’s software product ecosystem is from the constant push by MNCs for allowing software patents in India.

The MNCs (or more often, their well paid lawyers) cleverly couch this argument by saying that this will promote “innovation” and help the domestic software industry .

To which, we at the Indian Software Product Industry Round Table (iSPIRT), would like to respond by saying, “Thanks for your concern, but let us Indians worry about innovation within our own country”.

Over the last several years, we have seen many attempts by MNCs to (mis)interpret the Indian Patents Act in such a manner that software patents will be allowed in India.

We firmly believe that software patents are a recipe for litigation and not innovation. The history of patent litigation in the US serves as a cautionary tale for India. If you are a software developer in the United States, writing code and innovating is a risky proposition. The moment you are successful, patent trolls land up, claim that you are violating their patents and try to extract royalties from you.

Research conducted by James Bessen and Michael J Meurer, explained in their widely acclaimed book “Patent Failure How Judges, Bureaucrats, and Lawyers Put Innovators at Risk”, has shown that patents in the area of software have high rate of litigation. Due to the nature of software, the boundaries of patents granted in this field are often hazy and this leads to increased litigation.

The authors in a study published in 2012 estimate that direct costs of patent assertions by patent trolls total about $29 billion accrued in 2011. In 2011, a number of mobile app developers, most of them based in the US, got legal notices from a firm called Lodsys.

The notice claimed that in-app purchases used by these apps violated the patent held by the firm and threatened them with legal action if they did not enter into a license agreement with Lodsys.

Thankfully , Indian software developers and startups have not had to encounter such frivolous legal notices until now. Individual developers and star \tups can innovate freely in India, thanks to the foresight of our parliamentarians who exempted computer programmes per se from patentable subject matter. More patents has never meant more innovation.

This is a myth that patent lawyers love spreading, as patent litigation serves to expand their market opportunities.

However, the “Guidelines for Examination of Computer Related Inventions (CRIs)” (2015 guidelines) issued by the Patent Office on August 21, 2015 could have changed the scene in India as it was worded in a manner that permitted patents in the field of software.

Although the guidelines are only meant to ensure a uniform approach by the staff of the Indian Patent Office while examining patent applications and does not constitute rule-making, these would have led to a liberal examination process resulting in grant of more patents in the area of software.

This would have made innovation in the area of software akin to step ping on a mine field. We therefore welcome the order issued by the Controller General of Patents, Designs and Trademarks dated February 19, 2016 finalising the Guidelines for Examination of Computer Related Inventions (CRIs).

It is also important to call out the role of lawyers in this discussion. Warren Buffet, the ace investor, famously said, “Never ask your barber if you need a haircut.” In a similar vein, policy makers must disregard the self-serving clamour call from lawyers for more software patents in India. Most of these lawyers stand to benefit from increased patent filing and increased litigation.

Allowing software patents would have paved the way for digital colonisation of India, since the vast majority of software patents are owned by MNCs.

We therefore applaud the Indian Patent Office for revising the guidelines and promulgating a clear test for issuing patents. We believe that these guidelines are some of the clearest guidelines anywhere in the world and we believe this will help innovation, not litigation.