Answer to Community Patent Consultation

[This is NLnet's official reaction on the Community Patent Consultation by the EU about software patents]
Stichting NLnet is a Dutch foundation which works on the advancement of internet technology following a strict Open Source philosophy. NLnet spends between 1 and 2 million euro per year on internet technology innovation, and has a vested interest in keeping all results of its projects freely available for anyone to use, read, modify or redistribute.

Section 1 - Basic principles and features of the patent system

1.1 Do you agree that these are the basic features required of the patent system?

The most important feature of the patent system is that it must guarantee continued or increased innovation. We do not want to see its expansion in areas where it is counterproductive. For example we do not want to see an expansion of subject matter without clear evidence that this produces better results. In particular we see only disadvantages in allowing patents on software and software protocols.

1.2 Are there other features that you consider important?

The patent system is only part of the problem. We would like to see an overall innovation strategy, and more assurance that the patent system produces "good" patents, in a way that can be empirically defined.

1.3 How can the Community better take into account the broader public interest?

By separating the legislative, judiciary and executive tasks in the patent system, and by making the patent system accessible to society at large, not just specialists. We want to see more innovation, not simply more patents. Our proven way to boost innovation is by means of open source where it is applicable. Patents are witholding innovation and deployment.

Section 2 - The Community patent as a priority for the EU

2.1 By comparison with the common political approach, are there any alternative or additional features that you believe an effective Community patent system should offer?

The most important point is to separate the executive, legislative and judicial powers which are all currently performed by the EPO to some extent. We really do not want to see the EPO defining community law, bypassing the Commission and Parliament.

Section 3 - The European Patent System and in particular the European Patent Litigation Agreement

3.1 What advantages and disadvantages do you think that pan-European litigation arrangements as set out in the draft EPLA would have for those who use and are affected by patents?

If the EPLA were to enforce the high-quality patents defined by EPC article 52, this could have a positive impact. If the EPLA were to enforce the EPO TBA case law (and thus enforce software and business method patents), the results would be catastrophic in our opinion.

3.2 Given the possible coexistence of three patent systems in Europe (the national, the Community and the European patent), what in your view would be the ideal patent litigation scheme in Europe?

We would want to litigate a Community patent before a Community court, based on Community law made by Community legislators. This court should be independent of any Patent Office.

We would want to litigate national patents in national courts. This is convenient in terms of geography, language, and culture. Given that European Patents are more or less collections of national patents, at least the possibility to go to a national court should be kept.

Above all we must be able to appeal to a court which is not bound by the case law of the executive (the various patent offices), since such judicial independence is a basic requirement of our justice system.

Section 4 - Approximation and mutual recognition of national patents

4.1 What aspects of patent law do you feel give rise to barriers to free movement or distortion of competition because of differences in law or its application in practice between Member States?

Any organisation operating in a country with software patents (like the UK) is at a disadvantage compared to an organisation in a country where these are not allowed (like Poland).

4.2 To what extent is your business affected by such differences?

Our organisation is affected when we are unable to determine accurately whether the software products developed in our projects are "legal" in other member states, so we are exposed to a significant and unmanageable risk when we pursue our main goal: making all our results freely available to use, read, modify and/or redistribute in any country.
Software patents make this risk very high and there is no insurance available for software patent infringement.

4.3 What are your views on the value-added and feasibility of the different options (1) - (3) outlined above?

The "subject matter" criterion is missing from the list in point 1. Subject matter is a critical criterion, since it is on this basis that the EPO has granted tens of thousands of software and business process patents.

4.4 Are there any alternative proposals that the Commission might consider?

All proposals must come back to these basics: does the system guarantee good patents, transparency, and accountability?

Section 5 - General

5.1 How important is the patent system in Europe compared to other areas of legislation affecting your business?

• Without software patents: 2.
• With software and business method patents: 8 (as in, the patent system becomes a serious problem for us).

5.2 Compared to the other areas of intellectual property such as trade marks, designs, plant variety rights, copyright and related rights, how important is the patent system in Europe?

• Answer: 2. Completely irrelevant to our organisation, we explicitly do not want patents on the products and results developed in our projects, since we want them to be as widely and freely available as possible.

Copyright is free, automatic, proportional, and very effective for all domains it covers. Trademarks are useful for certain cases. The patent system has traditionally only been applicable to innovations in fields of applied natural science. Our organisation has no direct experience with patents in this field, so we cannot comment on their effects there. However, when applied to other areas, the patent system creates significant distortions. These distortions are clear from any examination of the litigation that occurs in industries that produce or use software.

The extreme case of software and business process method patents is of most concern. These patents create such distortions that they bring the entire patent system into disrepute. Even US financial analysts are starting to become concerned that the US is actually becoming less competitive by having software patents.

5.3 How important to you is the patent system in Europe compared to the patent system worldwide?

• Answer: 2. We do not seek patents on our software. Copyright and and copyleft are ideal tools for us.

The greatest advantage of the current European patent system, based on EPC law, with respect to (e.g.) the US patent system is that it largely protects innovation from the predation of patent speculators (also called "patent trolls"). This happens through the effect of national courts, which tend to reject software and business method patents, and through language and cost barriers which prevent mass-patenting. Ironically, the higher cost of patents improves the quality of patents, as can be seen from the US, which has very low patent costs, and very low general quality of patent claims.

5.4 If you are responding as an SME, how do you make use of patents now and how do you expect to use them in future? What problems have you encountered using the existing patent system?

• Answer: 1. We do not seek patents on our software. We want our internet technology innovations to be as widely available and usable as possible, and this goal is best served by using well-known Open Source licenses. The extremely fast pace of internet technology development in the past 20 years has only been possible thanks to the free availability of protocol specifications, reference implementations and intensive exchange of ideas through open source software and documentation. Patents are counterproductive in this type of Open Source driven innovations, and are only slowing down true innovations in this area.

5.5 Are there other issues than those in this paper you feel the Commission should address in relation to the patent system?

• Answer: 8. Yes. For us, the key issues are not documented at all.

We would like to restate these key issues:

1. The current lack of and urgent need for separation of powers in the patent system.

2. The current lack of a comprehensive innovation management. The patent system is only one tool available in the legislator's arsenal of innovation policy measures. Far too often, more patents are equated with more innovation. The UK study mentioned in the Commission's impact assessment of the software patents directive (which received replies from 11 UK SMEs) showed that these SMEs in general did not care about patents. The conclusion was not that they did not need patents (this possibility was not even considered), but that they should be better informed about the usefulness of patents.

   A Community Innovation Office, which bases its recommendations on input from businesses, academics and civil society, and which can formulate all-encompassing innovation strategies, would be much more productive and useful than yet another attempt to force the EU into following the EPO's case law. Patents should only be applied if a market is clearly distorted in a way which can be solved by introducing limited time monopolies. They may also prove to be useful in case innovation in a market is stagnant because knowledge is too closely guarded and barely disseminated, thereby hampering follow-up innovation by competitors. But they are not a magical means which one simply can apply to a field in order to make it even more innovative and competitive.

3. A functioning patent system must produce measurably good patents. This essential criteria is not mentioned anywhere. What defines "good"? How is this measured, over time? What rules are in place to protect that definition? How are those rules protected from the eternal hunt by patent specialists who seek to "hack" them into meaning something else? Which courts judge on these rules? How does the patent system adapt to change without becoming hijacked by vested interests? How does the patent system prevent the business of "patent speculation"? These are the questions that we feel are at the heart of the matter, not the superficial issues of patent cost, translation, etc.

Section 6 - Submitter details

• 1a) Are you replying as a citizen/ individual or on behalf of an organisation? Replying on behalf of an organisation
• 1b) The name of your organisation/contact person: Stichting NLnet
• 2a) In which Member State do you reside/ are your activities principally located? The Netherlands.
• 2b) Are you involved in cross-border activity? Yes.
• 2c) If you are a company: how many employees do you have? We have 4 direct employees. Indirectly, through projects we are funding, we are employing approximately 25 persons.
• 2d) What is your area of activity? Development and promotion of innovative internet-related software under Open Source conditions.
• 2e) Do you own any patents? If yes, how many? Are they national/ European patents? We have no patents.
• 2f) Do you license your patents? Not applicable.
• 2g) Are you a patent licensee? No.
• 2h) Have you been involved in a patent dispute? Not yet.
• 2i) Do you have any other experience with the patent system in Europe? No.

Wytze van der Raay,
financial director Stichting NLnet