Storytelling In The News: #79

The story of copyrights and patents of business processes

March 5, 2004

The story of patents and copyrights is supposed to be that they serve the public interest and encourage innovation. Innovation is essential to economic success, so it is only right that strong protection for intellectual property has a central role in the modern economy. But if protection of intellectual property is too broad, the story can have a less-than-happy ending: patents can prevent innovations being used as widely as they should be and discourage follow-on innovations. Several current examples give pause for thought as to whether the supposed protection of intellectual property is really in the public interest at all..

The story of Linux: SCO's story vs IBM's story

One chapter in the intellectual property epic concerns Linux, the widely used Linux operating system. that has been developed by thousands of programmers around the world on a collaborative basis in what is known as "open source" methodology. The story which these developers share - and users count on - is that the Linux software is open to all. It is software developed by the people, for the people.

Enter SCO a few months ago, a tiny company in financial difficulty, with its story that it owns the copyright to certain portsion of the Linux code. SCO has launched an aggressive lawsuit against IBM claiming substantial damages.

IBM's story is the opposite. It claims that the software is in the public domain and that IBM, along with all the other Linux users are entitled to use it without paying huge fees to SCO. The lawsuit is now wending its tortuous way through the courts.

SCO's story - if it were to prevail in the law courts - would put in jeopardy large sections of the software industry, and threaten the future of the whole open source movement. While SCO has expanded its legal fight by focusing on name-brand companies, its moves are alienating it from an industry that has ardent fans of the free operating system. "It's either a bold bet-the-company move [to add lawsuits] or a suicide gambit," Yankee Group analyst Laura DiDio told The Salt Lake Tribune. "Right now, the majority of the industry views it as the latter."

Thus the story in the industry is that SCO is an upstart and a public nuisance - a company telling stories without substance in order to make money. Undeterred by its unpopularity, SCO is pressing forward with its aggressive claims, under the guidance of some high-priced lawyers who now also have a large financial stake in winning the case.

A judge has ordered SCO to pony up more information on its code in its fight against IBM. "In a ruling filed in the U.S. District Court in Utah, Magistrate Judge Brooke Wells said SCO hasn't yet provided enough information about its charges that IBM moved proprietary Unix software to Linux. In consequence, she ordered the company to 'provide and identify all specific lines of code that IBM is alleged to have contributed to Linux from either AIX or Dynix,' IBM's two versions of Unix," CNET's News.com has reported. "The judge also directed SCO to 'identify with specificity all lines of code in Linux that it claims rights to,' repeating an order she issued in December."

SCO's story now impacts cars and drivers:

On March 3, SCO made good on its threat to intensify its battle with the corporate world over the Linux operating system. The Utah-based Unix software developer yesterday sued AutoZone Inc. and DaimlerChrysler Corp. in a move that takes the contentious debate over the nature of "open-source" computer code to a new level of belligerence.

Now SCO is threatening other companies with the aim of extracting user fees. SCO alleges that DaimlerChrysler violated its Unix software agreement with SCO. In its lawsuit against auto-parts retailer AutoZone, SCO claims the company violated SCO's Unix copyrights.

The cases represent a major escalation in SCO's efforts to protect its Unix business from what SCO perceives as unfair competition from Linux," The Boston Globe reported. The Wall Street Journal said the move broadens "its legal attack on Linux to users of the popular operating system."

Can SCO prevail? So far, the story in the industry is that the odds don't look good. "I don't know of any case in which an end user of mass-distributed software has been sued simply for obtaining or possessing it," Jonathan Zittrain, an assistant professor at Harvard Law School, told the Deseret News.

Whose story will prevail? SCO's story that it owns the copyright to a portion of the code? Or IBM's story that the code is public property? The courts in due course will decide, but in the meantime, SCO is trying to intimidate Linux users with its story: if it wins its court case, it will be enriched by many millions of dollars. Even the risk that it might win may be enough to win it significant revenues from companies that would prefer to settle, rather than have a patent suit on their hands.

IBM patents an auction process

In the SCO case, IBM is the defendant and the alleged victim of an intellectual property system run wild. But in other areas, IBM is also the aggressive patenter of intellectual processes.

This week, the Financial Times points to to a US patent granted recently to IBM for a "smooth-finish" auction, an auction that is programmed to end at a random time. Perhaps this sounds like just the kind of original idea that patents were designed to protect.

But the Financial Times points out that the patent examiners appear not to have read Samuel Pepys, the 17th-century British diarist, who describes the Admiralty's auction of two ships by a "candle" auction. Candle auctions end when a candle goes out, or when a pin pushed into the candle falls out because enough wax has melted. They have been used for centuries and while, as Pepys noted, some candles expire at fairly predictable times, it requires neither much imagination to consider making an auction's ending time less predictable, nor much computing skill to programme this randomness.

Even if the IBM patent is a mistake, the problem is not easily rectified. Someone could challenge its validity. But why should they bother? The beneficiaries of a successful lawsuit would be all those who might wish to run auctions competing with IBM, and all those who would benefit from auctions being run at competitive prices; but the plaintiff would bear the costs of the suit. Moreover the plaintiff could probably not contest the patent unless it entered the market at high investment cost. Even if the plaintff ultimately prevailed, it might be badly damaged if IBM could obtain a preliminary injunction. Rather than betting my business before the judge, the company might agree to pay licence fees to IBM.

* This is what happened when Barnes & Noble reached a settlement with Amazon when Amazon claimed proprietary rights in "one-click shopping".

* Similarly, several companies have agreed to pay royalties to Priceline for its price-matching system, also arguably only a slight variation on centuries-old sales mechanisms.

Why should anyone risk paying millions of dollars and risk the entire company to fight IBM's patent?

The story of public policy and intellectual property

According to the Financial Times, US intellectual property law has essentially run amok. The US patent law now appears to permit the patenting of business methods and software that are not particularly new or innovative, with the result that innovations are being stifled not encouraged. The Financial Times points that such process "innovations" that would generally not be patentable in Europe. If the patent system goes too far, the whole economy suffers, yet individual companies may not wish to risk challenging it.

Lawrence Lessig in his book The Future of Ideas (2001) agrees. He suggests that the law should be changed and that there should be a moratorium on the patenting of business processes should be suspended, pending a study of the public interest in allowing such patents. The examples of patents in the fields of auctions and storytelling reflect the merits of his argument.

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