posted by Christian Schaller on Tue 19th Apr 2005 18:26 UTC

"Patents, Page 2/3"
And of course the companies not yet in the antitrust spotlight can freely use their software patent arsenal to bring their competitors down. For many smaller companies the legal cost of fighting software patent claims, no matter how strong evidence they feel they can bring forth that the patent is invalid, can be enough to kill them off. This report accuratly points out that with the number of patents out there the cost of getting the patents invalidated one by one is way out of range for most companies or private persons needing to do so.

And even if you believe you have a valid case and the money for getting a patent found invalid you still need to have faith that the legal system is able reach the correct solution. Jonathan Schwartz, COO of Sun Microsystems, quite clearly stated in his blog that one of the reasons they settled was because they doubted they would be able to get a fair trial against Kodak in front of a Rochester jury, being the hometurf of Kodak.

Using patents to form cartels

Many of the major players also abuse the software patent system in another way to keep their smaller competitors down. When all the major players in a market joins together in an agreement that limits competition or fixes prices its commonly called a cartel. Patent law is being used today by many of the leading companies in the tech industry to form cartels in the form of patent pools. A good example here is how the major companies behind the DVD standard have set up a patent licensing system which ensures that no matter who produces DVD players they will be able to earn money on it, forcing their competitors to subsidize them. There are some efforts to fight this and return competition to the marketplace and one can only hope that the Chinese DVD makers who are suing the DVD patent pool are successful with their effort. But unrelated to whether that specific case is successful or not the patent cartels are another example of how software patents are being utilized to harm competition and limit the free market, and in turn harm both the economy itself and employment rate.

What is the goal of the market economy

The goal of a functioning market economy is to generate as much wealth as possible for as many people as possible. Critics of the free market might claim otherwise, but I think its rather indisputable that the combination of democracy and market economy have created more wealth for a higher percentage of the population in the countries where it have been applied than any other known system used through history. Not to say its perfect, like any other system its in constant need of adjustments and refining, but no plausible better solution has yet to be presented.

The most important aspect of the free market compared to some of the other systems tried through history have been, you guessed it, a free market. A free market is one where there is actual competition and everyone is able to set up shop and win in the market if they are better at doing what they do than their competitors are. Sadly enough it seems that the people who traditionally advocated the free market have to some degree lost their way and moved from being pro-market to being pro-business, in the sense that instead of believing in the ability of the market to generate wealth they believe in the ability of big mega-corporations to generate wealth. This is sadly enough a return to the old medieval system where guilds and similar had almost market monopolies in their own segments, which I think we can safely conclude when looking back did not generate more wealth for society as a whole than the later system of a free market. Sure the big mega-corporations, like the guilds before them, do generate wealth, but much less wealth than a free market would.

The switch from being pro-market to being pro-business have the unfortunate side effect that the policy makers, instead of listening to those who advocate systems that generate more competition in the marketplace, tend to instead listen to those who have power in the market today and want to hold on to it. Which means that where the pro-market people attack the software patent system for generating monopolies the pro-business people defend it as its enables them to eliminate competition. And to some degree they have an easier job of arguing for their position as it is easier to come up with number of employees who might loose their job at a big company if they loose business than it is to come up with number of jobs generated by small and midsize companies if they are allowed to compete. That said most economists agree that protectionism is never a good thing for economic development and software patents is just the latest fad among a long string of protectionist efforts which needs to be defeated. We can only hope that people at the WTO wake up to the true nature of software patents soon and joins us fighting for this latest of trade barriers to be dissolved.

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  1. "Patents, Page 1/3"
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  3. "Patents, Page 3/3"
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