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01.25.08

Software Patents Anticompetitive by Nature

Posted in Microsoft, Novell, Patents, Standard at 8:27 pm by Dr. Roy Schestowitz

Ownership of mathematics, protocols

The previous post raised the issue one faces when a competitive entity is allowed to collect royalties from all its rivals. Novell foolishly permits this. There is an inherently anti-competitive issue in patents and this was recently brought up by Richard Stallman. Glyn Moody likens it to a return to the age of guilds.

A couple of news stories remind us of the nature of this problem. The first one we alluded to yesterday, but here is a press release.

Chairman Majoras disagreed with the majority’s determination of liability, stating that “[t]his case departs materially from the prior line [of FTC standard-setting ‘hold-up’ challenges], in that there is no allegation that [the patent holder] engaged in improper or exclusionary conduct to induce IEEE [Institute of Electrical and Electronics Engineers] to specify its NWay technology” into the relevant standard. “The majority has not identified a meaningful limiting principle that indicates when an action – taken in the standard-setting context or otherwise – will be considered an ‘unfair method of competition,’” she said, adding also, “The novel use of our consumer protection authority to protect large corporate members of a standard-setting organization is insupportable.”

Given the questionable integrity of the FTC, it was surprising to see it getting actively involved for a change. The second article weaves this with a story that involves Rambus, which Andy Updegrove has kept track of for at least a year. Here it is.

On Wednesday, the Federal Trade Commission (FTC) announced the most important resolution of a standards-related enforcement action since Rambus, and possibly since its landmark settlement with Dell Computer in 1995. At issue was whether a licensing promise made by a patent-owning participant in a standards development process is binding upon someone that later owns the same patent. In a split 3 – 2 decision, the FTC has ruled that it does, when the later owner exploits the “lock in” of the marketplace by dramatically increasing the cost to license the patent in question.

Discussing this further would probably prove to be a distraction. However, it’s clear that software patents, trolling and intellectual monopolies will become a very important issue on which the success of Free software is hinged. The tying of one’s intellect with fees is somewhat adverse to collaboratory science. Research and developments is a case of building one framework upon another, not necessarily paying for it. When it comes to algorithms, it’s a matter of nature and physics, which are not necessary tangible (and shouldn’t be). Never mix software patent with trademarks and copyright. It’s means of propaganda (through confusion), as some would put it.

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