Racketeering

There are three distinct groups that want to squeeze money out of the software industry: the patent system itself; companies whose business model is to produce lawsuits, not products; and some large corporations.

There are companies who want to earn money with software patents in a way that is amazingly similar to real-world racketeering. If a criminal gang wants to squeeze money out of a restaurant owner, they send someone who explains to him the "need" for being protected. If that message isn't understood, they send some other criminals that demolish the restaurant to demonstrate the need for accepting their offer. There is nothing wrong with selling security services, but the disgusting thing is if someone creates the problem only to sell the "solution".

Some patent lawyers say that companies should simply allocate a certain level of resources, such as 10% of their profits, for patent protection. What they don't say is that the better alternative would be to eliminate the need for those costs altogether. The patent system may be acceptable in a very few cases but there is no point in extending it to software, which is already protected very well by copyright. And the world surely doesn't need all of the millions of patents that are in force today. Less would be more.

At the expense of the rest of the economy, some companies have made the enforcement of patents their primary or exclusive business focus. In other words: They produce patent lawsuits instead of actual products. Eolas made headline news with an initial ruling that awarded the one-person company approximately 500 million Euros of indemnification from Microsoft. There is another form of patent profiteers: companies that have some patents left over from a more glorious past. A famous example is Unisys, which used to be a very major IT company but lost relevance. Its legal department, which was sitting on patents related to the popular GIF graphics file format, outperformed the salesforce in terms of generating new business.

It gives cause for serious concern that there is a noticeable trend toward the industrialization of patent profiteering. With Acacia and Forgent, the world now has two publicly traded companies, each of them with tens of millions of Euros in the bank, that generate the bulk of their revenues by enforcing patents. Acacia does nothing other than acquiring and commercializing patents. Forgent actually has a small software publishing business, but 90% of its revenues come from patent enforcement. Forgent's primary patent relates to a technique that is used in connection with the JPG graphics file format.

Such companies don't only leverage those patents against software publishers but also against software users. For an example, Acacia launched an initiative and demanded that each U.S. college pay 5,000 US dollars if it offers distance learning by way of Internet videostreaming.

There would be nothing wrong with that concept if the respective companies were major innovators and saved others the effort of reinventing the wheel. Unfortunately, that's not the case. The reason why companies may be forced to pay money to those profiteers and racketeers is only because they were first to register an idea. The value of a patent is highest to those profiteers and racketeers if it is very broad. However, if it is very broad, then it shouldn't ever receive patent protection. So the way the game is played is that patent attorneys write lengthy descriptions of simple ideas so that broad and trivial things look impressive to the patent examiner. Some patents consist of a dozen or more pages but can be "violated" by a single line of program code.

Click here to read why software patents pose substantial risks to, and thereby discourage, investments