Transaction costs are good: software patent debate continues

Don Marti is asking the wrong question when he writes:

The question is where you draw the line of what is or isn’t patent infringement. If Victor invents something, and I describe it in prose, I’m not infringing. If he invents something and I build it as hardware, I am. But if I do something in between between hardware and prose—”software”— where do you draw the line of where he can sue me?

Don keeps mixing in the question of copyright with patent. Copyright protects the expression – and Don cites David Touretzky’s case to show that it is possible to abuse copyright to limit free speech. The case that Touretzky describes is a dispute over the Digital Milenium copyright act and has nothing to do with patents. If you publish code that implements IBM’s circuit patent IBM should not complain – you are merely describing how their invention works, something that patents are supposed to encourage. As far as patents are concerned there is no line to draw unless you want to claim that prose itself can embody invented machinery –

All of the arguments for software patents work just as well for prose patents. Just as a software patent covers the algorithm, not the code, a prose patent could cover the literary device, sequence of topics, or ideas used to produce some effect on the reader.

Nice try, but a metaphor is not an equivalence. Both in theory and practice, circuits and software are fundamentally similar. To explain why software should not be patentable, you need to either argue that circuit methods should not be patentable or show that circuits are distinguishable from software methods in some fundamental way. The IBM patent shows that the inventors of at least one circuit method consider it to be implementable either as a program or some wires. That is, IBM’s lawyers are claiming that a patent on a circuit method implies a patent on software implementations of that method. If software patents imply prose patents, and you object to prose patents, then isn’t it incumbent on you to demand abolition of hardware patents too? That’s the line in question – not a line between prose and code.

I also want to object to Don’s example of himself as a possible infringer. The problem that patents are intended to address is the problem of businesses taking the works of inventors without paying them, not the problem of an individual making a machine in his basement. If Don patents an invention, the patent system is supposed to make sure that IBM cannot make products incorporating that invention without coming to terms with Don. I’m in favor of a “fair use” exemption for patents, so that tinkerers can’t be dragged off to jail and not just for software patents either. In fact, I’m in favor of a number of reforms of the patent system to address the issues raised by some critics of software patents. My objection is to the supposed “solution” of abolishing software patents.

The debate over software patents isn’t just an attempt to set one arbitrary line between the patentable and the unpatentable. It’s about resisting the slide toward higher and higher transaction costs that happens when patents creep into places where they don’t make sense.

I think this is certainly correct in terms of the intentions of most of the people who oppose software patents, but good intentions are not assurances of good results. Patents on business methods seem to me to be absurd. Patents on genetic sequences that have already been invented by evolution are worse. The patent system, in general, is gamed in favor of big companies and is abused by the granting of patents for trivial “inventions”. These are all real problems in need of real solutions. I don’t see how arguing that software is in some undefinable way a technology that is uniquely unsuitable for patenting addresses these problems.

Finally, I’m not at all convinced either that eliminating software patents would “reduce transaction costs” or that reducing transaction costs is always a good thing. Transaction costs for software seem to me to be dominated by lack of interoperability (technical/business problem) and license management (driven by contracts, not patents). There is a very interesting paper by Tim Wu on wireless that discusses the transaction costs imposed the reluctance of carriers to make wireless phones interoperable. That is a much more insightful analysis than “software patents are bad”. And who says it is always good to reduce transaction costs? One could reduce transaction costs on music by deciding that artists don’t need to get paid or reduce transaction costs in the transport of toxic chemicals by eliminating all that onerous paperwork that those terrible governments impose. All those labeling requirements on food ingredients and on the flammability of childrens’ clothing increase transaction costs etc. etc.

There is a common problem in engineering where we become so enamored of a technique that we forget the result we want. To me, the anti-software-patent folks have made that kind of mistake.

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