The Folly of Legislating Against Software Patents

This article was first published in the December/January 2005 edition of Intellectual Asset Management ( and is published here with permission. The author of this article is Craig Opperman, a South African patent attorney and former employee of Spoor & Fisher. Craig now practices as a patent attorney in the United States, where he is a partner of the firm Morgan, Lewis & Bockius LLP.

Anti-software and business-method patent lobbying efforts in Europe are alarmist rhetoric and more harmful than helpful to the software industry. Despite its media appeal, a prohibition on these patents is doomed to fail, as it is impossible to prohibit something that cannot be defined.

History has shown that astute IP strategists will easily circumvent any prohibition on software and business-method patents in Europe. In doing so, they will create patent portfolios that trap unprepared software companies which have been lulled into a false sense of security by a toothless prohibition and protectionist nonsense about the software industry needing different rules from others. Moreover, as any student of legislation knows, laws based on hype and hysteria or lacking a logical foundation are just plain bad public policy.

So, instead of embarking on futile and potentially competition-inhibiting attempts to legislate against software and business-method patents, it is better for those who care about IP to manage reality. Software and business-method patents, in whatever guise, have been with us for decades and are here to stay. Legislating accordingly will level the playing field and reduce the chance of the uninformed being blindsided. Instead of expending precious resources on muddying the waters with indefinite policies on what subject matter is patentable or not, it is better to encourage and fund the European Patent Office (EPO) to apply strictly the basic novelty and non-obviousness rules of patentability.

Some History to This Tale

This may seem like an obvious approach, but despite its logical appeal, there is some history that should be considered. In many countries, those in Europe for example, patent laws appear to prohibit software and business-method patents. Layered over this are very vocal groups who believe that the software industry is somehow different from any other and should be excluded from the benefits and challenges of patent protection: their argument being that software is an art form and thus subject to copyright, not patent protection. These two facts – apparent prohibition and vitriolic opposition – have misled many in the software industry to believe the myth that, especially in Europe, patents do not cover software or business methods.

But the reality is very different and many innovators, entrepreneurs and businesses – large and small – have been caught totally unprepared by what has happened on the ground. People soon realised that copyright only protects against actual copying of code and not against copying an underlying concept, however innovative and valuable it may be. Copyright is therefore a totally ineffective vehicle for protecting computer-based innovation. The result is that some, not all, in the software industry began filing for patent protection to protect against the underlying functionality of their software innovations being misappropriated. Unsurprisingly, therefore, studies began to reveal a very different reality to that suggested by legislation or the anti-patent lobby and people began to discover that software and business-method patents have existed for decades, even in Europe.

Yet, despite this reality, the debate has reignited with the European Commission’s efforts to regulate software and business-method patents. Having lost in the US, the anti-software and business-method patent block has focused its attention on the Commission’s renewed attempt to define rules for patenting software. Unfortunately, this opposition and the media hype that it has generated is creating significant uncertainty and perpetuates the practice of ignoring European software patents. This inevitably gives certain players a competitive advantage to the detriment of others, often those the opposition block is purporting to help. Thus, the vocal opposition to software and business-method patents is hurting - not helping - the European software industry.

Don’t Try to Legislate That Which Cannot be Defined

The practical reality is that, despite legislation to the contrary, innovators continue to obtain patents covering software and business-method innovations. It may be tempting for legislators to deal with this by strengthening the legislative prohibition against software or business-method patents. This solution has some basic appeal, particularly in light of the current outcry surrounding these patents, but a clinical analysis quickly reveals that it is not a viable solution. It is simply not possible to define what a software/business-method patent is or is not, and any legislative prohibition would be easy to circumvent.

Specifically, a patent’s coverage and thus its characteristic as a software or business-method patent is defined by its claims. Experience has shown that good patent attorneys can craft patent claims that are clearly not software or business-method claims, but which certainly cover software or business methods. Take, for example, the notorious one-click patent. In its current US form it would almost certainly be a prohibited business method patent in Europe, but it would take less than 30 minutes to make a few cosmetic changes to this patent’s first claim and move it from the realm of clearly business method to that of clearly not business method. This is demonstrated in the text below, where the original claim is shown with additions underlined and deletions shown as strikethrough.

A method of requesting an item comprising:

  • under control of a client system,

- displaying information identifying the item; and

- in response to only a single action being performed, sending a request for the item along with an identifier of a requestor of the item to a server system;

  • under control of a single-action requesting component of the server system,

- receiving the request;

- retrieving additional information previously stored for the requestor identified by the identifier in the received request; and

  • generating request for the requested item for the requestor identified by the identifier in the received request using the retrieved additional information; and
  • supplying the item to the requestor

Some may view this as an academic exercise. But it is not. What is important here is that the new claim, which is clearly not a business-method claim (some may argue that it is not even a software patent claim as the only computer elements are hardware), is broader than and envelopes the original patent claim. Thus the new claim covers, amongst other things, a business method without being a business-method patent claim. Most importantly, this new patent claim would be patentable subject matter under European law and, it is submitted, under any enhancements to the patent laws.

Thus, the current legal environment creates an anomaly – the broader patent claim/monopoly is patentable but the narrower, pure business-method claim is not! Alternatively put, if one cannot define a software or business-method patent, how can one prohibit it? This is clearly an undesirable and untenable situation, one that will exist irrespective of the wording of any legislation, as the above example or an equivalent can be repeated. Rather than have additional legislation compound the uncertainty, it is better to clarify matters and recognize legislatively the reality that software and business methods are patentable.

Don’t Try to Legislate Against Something That has Been Around for a Very Long Time

There is an equally compelling reason not to attempt to prohibit business-method and software patents: they have been around for a long time, even in countries where they are supposedly prohibited.

By way of illustration, the US Patent and Trademark Office (USPTO) produced a very interesting study on early business-method patents as defined by them. Its business-method-patent white paper (see reference at the end of the article) cites numerous examples of business-method and software patents, many of which are over a century old, well before the computer age. For example, the study noted: "[T] he first fifty years of the US Patent Office saw the granting of forty-one financial patents in the arts of bank notes, bills of credit, bills of exchange, check blanks; detecting and preventing counterfeiting, coin counting, interest calculation tables, and lotteries." The study goes on to observe: "Contrary to popular view, [automated financial/management business data processing method patents] did not suddenly spring into being in the late 1990s. On January 8, 1889, ... United States patents 395,781; 395,782; and 395,783 were granted to inventor-entrepreneur Herman Hollerith…. Mr Hollerith’s method and apparatus patents automated the tabulating and compiling of statistical information for businesses and enterprises. They were acclaimed nationally and viewed as revolutionizing business data processing. The protection of his patents allowed his fledgling Tabulating Machine Company to succeed and thrive," and in 1924 be renamed IBM.

In Europe, where the rule is that business methods are not patentable per se, the position is similar. An early 2000 study on patenting business methods in Europe by UK solicitors Olswang and Oxford University’s Intellectual Property Research Centre (see references) illustrates what has been known for some time. Despite an apparent prohibition and a strict patent examination system, it is very possible to obtain business-method patents in Europe.

Software and business-method patents are therefore not a new phenomenon and merely tightening the legislative prohibition will not make them go away, even if they could be defined.

Media Hype Does Not Mean That Software and Business-Methods Patents are Bad

Beyond the reality of all the existing software patents (or patents that could be applied to software) is the media hype surrounding the issue. Much of the debate and, indeed, many political agendas, are being driven by this. The popular press, usually wary of reporting on esoteric subjects like patents, has entered the fray with gusto. So too, have a range of pundits, economists, academics, and others, many of whom have never even read a patent claim, are not qualified to speak on the subject or who may have fairly obvious agendas.

The consequence has been a reactionary public response that is, at best, ill-informed and unnecessarily heated. More importantly, most of the attention and pontificating has been based on emotion, not fact, and many of the accusations of overly broad and invalid patents have proved absolutely groundless.

Consider again, the example of’s one-click patent number 5,960,411. When enforced against rival, it was catapulted into something of a poster child for the business-method-patents-are-bad lobby and the popular press, both print and internet, went berserk, decrying the patent from all sides.

One of the best-known critics was Tim O’Reilly, a regular publisher on the internet and often-quoted, vocal critic of business-method patents. In an open letter to Jeff Bezos (see references), CEO of, Mr O’Reilly reflected the media-driven sentiment by scathingly criticizing the patent as failing " to meet even the most rudimentary tests for novelty and non-obviousness to an expert in the field", and alleging "[t]he technique had been deployed on thousands of sites well in advance of your 1997 patent application". O’Reilly even co-founded a much-publicized, but now defunct website,, offering rewards for patent-destroying prior art. Not surprisingly,’s one-click patent was one of the first patents listed. But, despite a five-month bounty-period and a US$ 10,000 reward, no patent-destroying prior art was discovered. This forced O’Reilly himself to admit, in a March 2001 letter posted on his website, " In October 2000, I posted a $10,000 Bounty on the 1-Click patent. The results are now in. The breadth, depth, and quality of the prior art documents that my Bounty turned up does, in fact, indicate that 1-Click shopping on the Web wasn´t nearly as obvious as we all assumed it was. …So I want to offer Jeff something of an apology…." (see references).

His words illustrate amply why one should not pay attention to popular media hype about software/business-method patents. Most of the pontificating about invalidity or broad scope is incorrect and not based on scientific analysis. Indeed, as shown above, much media pontification is simply plain wrong and cannot be used as a basis for a legislative agenda. Despite the negative media, many of the most despised software/internet or business-method patents are valuable corporate assets and should be recognised as such.

Prohibiting Software Patents Will Enhance Uncertainty and be Bad for Business

So, software and business-method patents are not new, nor are the issues. Unfortunately, the uncertainty caused by the dichotomy between the legislative prohibition and practical reality is bad for competition because it favours the larger companies. Legislation can change that by removing the current putative prohibition against software and business-method patents. This will clarify the position, level the playing field and, accordingly, boost competition.

The current situation and any added prohibitions on patenting software are bad for the software industry because they create a competitive imbalance in favor of those that pay attention to reality. Effectively, the current situation is uncertain, with the law prohibiting, but reality allowing software and business-method patents. This benefits more aggressive companies at the expense of the weak, a point well illustrated on an international level by the Olswang study.

More alarming, from a European competition point of view, it appears that US companies are taking the most advantage of this reality. This is amply shown in the graphical representation of business-method patent filings from the study (see chart below).

From the chart, it is clear that US companies, which historically have been more aggressive in protecting valuable innovation and less confused about the rules, dominate the business-method patent filings in Europe. They have a 52% share of these filings, compared to an average of less than a 30% share of filings across all technology areas. This means that US companies are in a patent-favorable position in the business-method patent arena versus their European competitors.

In exactly the same way, companies that recognise the reality (and are not deterred by the apparent legal prohibition) will patent their software and business-method innovations, even where there is an apparent prohibition, thereby gaining competitive advantage in the marketplace. These companies, therefore, benefit from the uncertainty created by the current legislative position.

This harmful effect has been recognized by the UK Patent Office’s study on the issue of patenting software and business methods (see references). It found that: "…the current legal position is uncertain, and that this uncertainty is harmful"; and concluded that: "… the Government agrees with those respondents who said that at present the law is not clear enough, and that this is damaging. Clarification is needed…."

It is, therefore, imperative to level the playing field by removing this uncertainty and recognising, legislatively, that software and business methods are, indeed, patentable. This will send a clear message to all and will allow innovative, young companies to stake out protection for their technologies, instead of being hampered by an uncertain legal position.

And no, this will not lead to the situation, proffered by lobby groups, in which software patents threaten innovation and the ability of smaller companies to compete against the bigger players. Exactly the opposite could be true. In the same way that creative companies can out-innovate more staid, bureaucratic large companies, they can gain patent advantages as well. History is replete with such examples of small companies that have built huge values by being smart with the way they strategized and worked with their patent portfolios.

Lambs to the Slaughter

There is probably no better way to end this than to quote Paul Heckel (see references), an early software pioneer and patent holder who had his patents infringed by a much larger company. His 1992 article entitled "Debunking the Software Patent Myths", observes: "[T]he software community will be best served by articles about how to avoid infringement, how to deal with infringement notices, how to find prior art, how to use patents to protect new ideas, how to differentiate products, and how to make the patent system work better for software (based on experience rather than speculation). In brief, we should direct our energies towards making the system work so as to increase innovation and competitiveness, rather than fighting patents."

Paul Heckel’s words of caution are also worth remembering by those who so vociferously oppose software patents: "Microsoft, IBM and others are applying for patents in quantity. Those who don´t understand the situation, are not. Many are happy to have software patents attacked. Why let your competitor in on a good thing? Why pioneer new product ideas when it is less risky to copy competing products and incorporate useful features once market success is proven … from the perspective of large companies, a loud voice, like the [anti software-patent] League, yelling against software patents can be useful, as a meat packer finds a Judas goat useful in leading sheep to slaughter."


USPTO Business Methods White Paper:

Olswang survey:

Tim O’Reilly letter to Jeff Bezos:

O’Reilly apology to Jeff Bezos:

UK Patent Office Business Method Report:

Paul Heckel article:

To obtain more information about the legal position regarding software patents in South Africa, please contact Lance Abramson or Chris de Villiers, two of Spoor & Fisher's software patent specialists.

Date published: 2005/02/01
Author: Spoor & Fisher

Tags: legislation software patents