Two patents taken out recently by Amazon.com on its 1-Click system have caused a considerable stir in the Internet world. Richard Stallman launched a campaign for users to boycott Amazon. Tom O'Reilly, CEO of the publisher O'Reilly Associates, has also entered the fray, publishing an open letter to Amazon. Jeff Bezos, CEO of Amazon.com, responded with a statement on the subject of patents.
One-click, fast and easy patents
What exactly is a patent?
It is a legal title of protection for an invention of a certain quality, which gives the owner of the patent the exclusive right to prevent anyone else from using that invention in commerce for a given period of time.
How do we determine if a patent can be issued?
There are three conditions of patentability. There is the requirement that the invention be novel so nobody else must have invented this same thing. The satisfaction of that condition is determined by a government patent office doing a search of what they call "prior art", that is to say the technological history in a certain area. The second condition is called non-obviousness. That is, the invention must not be an obvious answer to a problem for someone who is skilled in that technological field. So even if an invention is new, it will nevertheless not qualify for patent protection if it is not sufficiently inventive to have been non-obvious to a person who knows that area of technology. Thirdly, there is the utility requirement. The invention must be useful. For example, you cannot get a patent on a pure algorithm or a pure idea that has no practical application. It has to have a use in the world. So a perpetual motion machine would not qualify.
Recently people have begun patenting business processes. This has turned out to be quite a problem.
Let me make comments on a couple of levels. First, on a legal level, traditionally it was thought that patent protection was not available for software, nor was it available for a business method. There are specific exceptions in Europe and the United States. There has, however, been an evolution in thinking in the last couple of years in relation to these two matters. Courts, as well patent offices, have taken the view that if there is an invention which uses software or if you like, software which has a practical application, or a business method which is used in practice as opposed to being a theoretical idea, then it qualifies for patent protection.
There are several difficulties associated with this. First of all, how do you determine if it is new. The problem is that, unlike other fields, there is no comprehensive database of all of the software that has ever been developed in the world. Patent offices are trying to put such a database together, but there is still the problem of deciding if this is really a new way of doing things. As for business methods, they have been used in all markets since markets existed. So again there is a lack of comprehensive, descriptive database of all business methods.
A second problem is that some people feel that a lot of the controversy we see now is a result of a lack of rigor in issuing patents, in particular in applying the non-obvious standard. According to them, if more care had been taken, a number of patents wouldn't have been granted and there wouldn't have been such controversy in the market about people are being excluded from using what in fact are pretty common-place inventions.
The third level of response is that we are living in a time where there are shifts in the notion of scarcity and abundance. New things are scarce that were not scarce previously and some things are abundant that were not so before. Economic values are, in consequence, shifting a lot. Domain names, for example, are a new scarcity because of their uniqueness. The fear on the part of a lot of people is that, just as electronic commerce is getting underway, that patents on business methods are going to create a new scarcity and exclude people from certain methods which are very profitable, to the disadvantage of the development of electronic commerce.
The answer to the question depends on the application of the patentability criteria. On the whole, the patent system has favoured innovation, even though it does so by offering an incentive to investment in innovation by granting exclusive rights which actually reduce the use of a new invention. However, if the patent standards are applied at too low a level -that is to say, something that is fairly obvious to anyone in that particular field - then the exclusions are too extensive in the market and act as barriers rather than incentives.
Can a patent be overthrown?
Yes, it can. Either you can challenge the patent after it has been issued in an administrative procedure at the patent office or you can go to court to get a declaration of invalidity.
How do you see the future of patents in the light of these problems
One of the features of the new economy is that there is immediate interest in these issues on the part of a wide range of participants. In the older economy, the issues of patents does not create such significant and generalised public debate. It wouldn't capture the attention of CEOs of enterprises. In the new economy, quite a lot of people participate in the debate about the patentability of business methods. Jeff Bezos [CEO of Amazon.com], for example, has made a statement on the question of the "on-click" patent and how he views necessary adaptations to the patent system. I don't think you will find many CEOs of the major enterprises in the old economy taking positions on patent protection. For me, that is an indication of the centrality of intellectual property to the new economy. Where intellectual capital is increasingly the source of wealth generation, the control of it is intellectual property.
Is there not also a problem of the duration of a patent? Twenty years is an eternity in the so-called Internet world.
That was a suggestion of Jeff Bezos. He feels that for business method patents the duration should be from three to five years. On the other hand, the technology is moving so rapidly and the business responses to it are also moving so rapidly that the market will create the obsolescence of the invention making it less economically significant. In twenty years time, there will be new methods of doing business. Of course you could use that argument to have patent times reduced.
Let's tie this into the debate in the human genome area. What you find with the human genome is that the pure description of the genome is not patentable. What is patentable is an application of that description. A very short number of years ago, it was thought that there were no practical applications of business methods in this new networked environment or of algorithms. But we have seen that, as a result of the development of the technology, the networked environment and the commercialisation of that environment, that in fact there are applications and that has given rise to the desire of people to have patent protection. It has also give rise to the view that patent protection is available for business methods and software applications because there is an environment to which they can be applied. So with the genome, we will see the patents rolling out because the description of the genome creates the environment for applications to be developed.
What do you see as the way forward?
The concern being expressed about the economic consequences of the issuing of patent on business methods is entirely justified. We want to do everything possible to encourage the development of new applications in the networked environment and electronic commerce in so far as that improves our daily lives. It is an entirely proper question to ask whether issuing patents on new business methods in the networked environment is going to be constructive or destructive. My own personal view is that if the standards are kept to a sufficiently high level, patenting will be a contribution and not a barrier.
Is WIPO the forum for sorting out such issues?
I think this is another example of a practical situation in which we don't really require a legislative solution. It's a question of the adjustment of a system designed for entirely different things (basically mechanical technology) now been applied to an environment which was technologically unimaginable when the patent system was developed. It is that process of adjustment that needs to be worked through. One important task is ensuring that there is a uniform approach internationally, that standards are not applied at one level in one country and a different level in another, creating an uneven playing field for a medium that doesn't know any separation of the playing fields. But that is a question of applying unifromly standards that already exist , rather than creating new standards.
Francis Gurry, Geneva,
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