Software patents, economic evidence and competition

Transcription

1 Software patents, economic evidence and competition Open Forum on the Substantive Patent Law Treaty World Intellectual Property Organisation Geneva, March 3, 2006 Rishab Aiyer Ghosh - rishab@dxm.org United Nations University / MERIT Maastricht Disclaimer: this presentation represents the author's personal views

2 Overview Software patents: definitions and evidence What are software patents Who owns them Why do firms patent software Software, networks and competition Economic effects of patents on competition Economic effects of types of standards

3 What are software patents? Computer Implemented Inventions = inventions whose implementation involves the use of a computer, computer network or other programmable apparatus, the invention having one or more features which are realized wholly or partly by means of a computer program If realized wholly, then =software Such definitions cannot be used for largescale empirical analysis

4 What are software patents? Large scale searches possible using: Specific patent classes ( IPC method ) Keywords ( Bessen & Hunt method ) All classes for largest software firms ( Hall & MacGarvie method

5 Who holds software patents? Industry Bessen- Hunt Graham- Mowe ry Hall- MacGarvi e All definitions combined T elecommunications Elect rical machinery T ransportat ion equipment Machinery & engines Autos Oil Auto part s Chemicals Print ing Wholesale trade Fabricated metals Misc Computing equipment Paper Furnit ure Pharmaceut icals Food & tobacco Primary metals Business services NEC Inst ruments & Comm. eq Medical instruments Computing systems & soft ware T ext iles & apparel Rubber & plastics Stone, clay, & glass Lumber & wood Soap Total Source: Torrisi & Thoma, 2006 CESPRI

6 Evolution of software patents Country of assignee for EPO software patents DE FR G B IT US JP o the r s Source: Torrisi & Thoma, 2006 CESPRI

7 Evolution of software patents Software patents as a share of all patents, US vs EPO % of all patents 16% 14% 12% 10% 8% 6% 4% 2% 0% Year EPO - keyword method EPO - IPC method USPTO keyword method USPTO - IPC method USPTO - HM method Source: Torrisi & Thoma, 2006 CESPRI

8 Evolution of software patents Concentration of EPO software patents by assignee sector 1 0 0% c umulative pe rce nta ge of pa te nts 9 0% 8 0% 7 0% 6 0% 5 0% 4 0% 3 0% s ic36 Electrical,electronic and telecom m. equip s ic3 5 C o m p ute r e q uip. a n d ind u strial m a chin ery an d eq uip. s ic38 Instrum ents and relate d products The top 10 assignees account for between 57 and 78 per cent of EPO software patents 2 0% 1 0% 0% 1 % 5% 9 % 1 3% 17% 2 1% 2 5% 2 9% 3 3% 37% Source: Torrisi & Thoma, 2006 CESPRI s ic7 3 S o ftw are an d o the r bu s in e ss se rvice s s ic4 8 Te le com m u nica tio n s e rvices 4 1% 45% 4 9% 53% 5 7% 6 1% cumulative percentage of assignee s 65% 6 9% 73% 7 7% 81% 8 5% 8 9% 93% 9 7%

9 Evolution of software patents EPO software patents by publication year and size* of assignee s of t w are p a te n ts pu b licatio n y e ar s Micro S mall Medium L arg e Source: Torrisi & Thoma, 2006 CESPRI *Size is EU definition. Large >250; Medium >50, Small >10 employees

10 Quality indicators Technical quality can only be measured by inspection of patents themselves; citations etc are possible proxies 2.50 index numbers (base=1991) publication ye ar IPCs codes claims f amily backw ard citations f orw ard citations w ithin 5 years Source: Torrisi & Thoma, 2006 CESPRI

11 Software patents and R&D EPO software patent stocks per million euros of R&D stocks US software firms p a t e n t s / in t a n g i b l e s y e a r Source: Torrisi & Thoma, 2006 CESPRI

12 Software patents and jobs Employment average growth rate for European SSPs, holders vs non-holders of software patents Sector Software patenting (base ) (base ) (base ) IT services no 81.89% 88.37% 27.96% IT services yes 61.47% 59.42% -6.84% Pre-packaged software no 61.66% 66.13% 30.47% Pre-packaged software yes % % % Source: Torrisi & Thoma, 2006 CESPRI

13 Why firms patents software Reasons for filing for a software / CII patent Prevent competitors from copying your ideas 49 Defend your firm against infringement suits 43 Block competitors from entering your market 23 Earn licensing revenue 15 Use for cross-licensing or patent exchanges 11 Generate publicity or attract venture capital Source: Ghosh, Glott et al, 2006 MERIT % respondents "very important" or "moderately important"

14 Software patents: inhibition In the last three years, has concern that your software might infringe a patent led your firm to: Change or abandon a software development project to avoid infringement Avoid markets where your software might infringe patents Obtain a patent license in order to develop or use software Percentage (n = 498) multiple response Source: Ghosh, Glott et al, 2006 MERIT

15 Software patents: disclosure In the last 3 years, were any of the following important sources of ideas for your firm's new or improved software? Products on the market 42.8 Internet forums or other informal exchanges 29.9 Scientific publications or trade journals 21.9 Free / Open Source software source code in other products 17.1 Proprietary software source code in other products 12.4 multiple response Patent databases (published patents) 5.2 n = 498 Source: Ghosh, Glott et al, 2006 MERIT

16 Software patents: importance Which of the following are important methods for helping your firm to profit from its new or improved software? first to market 30.3 trademarks / marketing 23.9 technical protection measures 21.5 trade secrecy 17.5 copyright 14.5 multiple response first to publish 11.2 patenting the software 10.0 patenting the hardware linked to the software 8.6 n = 498 Source: Ghosh, Glott et al, 2006 MERIT

17 Patents and competition Patents do not only protect ideas from theft or imitation - they also prevent independent creation of ideas Patents amount to temporary monopolies on useful new inventions (Economist) These monopolies are justified on the basis of increasing knowledge sharing through disclosure, thus increasing innovation Needs to be demonstrated through evidence

18 Patents and competition Software has three unusual properties Mainly incremental innovation Several problems have only one solution Network effects are very strong

19 Patents and competition Network effects can form entry barriers for new technologies Path dependence, QWERTY... Natural monopolies to maximise welfare from network effects Monopolies can lead to rent-seeking and capture of network externalities

20 Economics of standards Alternative approach: separate technology from producer Truly open standards allow natural monopolies of technologies (standards) while providing for full competition among vendors

21 Types of standards Proprietary ( standard?) technologies Natural monopoly in technology leads to natural monopoly in market for products and services based on that technology Results when access to the technology is available only to the rights holders

22 Types of standards ( Semi-open?) Standard technologies Natural monopoly in technology arises (de facto) or is defined (de jure) but some competition provided for in market for products and services Results when access to the technology is available to players other than the rights holders, perhaps retaining advantages for the rights holders

23 Types of standards Open standard technologies Natural monopoly in technology arises (de facto) or is defined (de jure) but full competition provided for in market for products and services Results when access to the technology is available to all (potential) players on equal terms providing no a priori advantages based on ownership of rights

24 Open source software Provides main competing product in: Web servers (#1 in market share) Server operating systems (#2) Network file systems (#2) Office productivity software (#2) Web browsers (#2) Assumes authors have full rights to created software compatible with copyright (independent creation), not with patents