October 17, 2007

Economist Critic of Software Patents gets Nobel Prize

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Brussels, 17 October 2007 — The FFII congratulates Eric S. Maskin, an economist who has long criticised the patenting of software, for receiving the 2007 Nobel Prize for Economics. Prof. Maskin and two colleagues receive the Prize for research into the optimal design of economic mechanisms. By applying his theory to the IT sector, Maskin demonstrated “that in such a dynamic industry, patent protection may reduce overall innovation and welfare.”

The FFII has consistently argued that the patent model of broad 20-year monopolies is completely inappropriate for the fast-moving software sector. In its campaigns against software patents, the FFII has emphasised that they are an impediment to innovation. FFII president Pieter Hintjens says, “Software patents freeze innovation in areas where they are heavily used, such as multimedia or GSM. In unpatented fields, such as e-mail, web, messaging or peer to peer, innovation is fast, valuable and promotes competition.” Small-and-medium sized businesses are especially harmed, says Hintjens: “large firms can afford the legal structures, and the heavy cost of patenting and litigating. Small innovative firms cannot and are kept out of the market.”

Recent studies in the USA also showed that less than 20% of software startups take software patents, four years after receiving venture capital investment. FFII founder Hartmut Pilch explains, “software patents are used by giants such as Microsoft and IP trolls such as Acacia. We don’t see them creating any value for society or economy, except for some lawyers.”

The introduction of software patents in the USA provided a rare experimental test for Maskin’s theory: “… when patent protection was extended to software in the 1980s, […] standard arguments would predict that R&D intensity and productivity should have increased among patenting firms. Consistent with our model, however, these increases did not occur.”

The Nobel award highlights the solid scientific and economic basis on which the FFII demands a modern and innovation-friendly patent system. Thanks to people like Prof. Maskin, our understanding of the effects of the patent system has progressed, but the European Commission is still pushing for ever more and cheaper monopolies without any effective limits to either subject matter or inventivity, and the EPO continues to “interpret” the European patent law to grant thousands of legally dubious software patents each year. Both institutions pretend that this is in the interest of innovation and productivity in Europe, while it in fact hurts Europe’s innovators and industry.

The FFII calls on the Commission to finally acknowledge the insights of people like Prof. Maskin and abandon its naive proliferation policies: “How much more proof is it needed? If IT professionals, economists, and entrepreneurs – and now even a Nobel laureate – agree that software patents are bad for business and innovation, the Commission should take the hint and act to abolish software patents.”

Background Information

Together with his colleagues Leonid Hurwicz and Roger Myerson, Eric Maskin has been awarded the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2007”, commonly (and inaccurately) known as “Nobel Prize in Economics”.

In a joint paper with James Bessen, Maskin argues that standard reasoning about patents is not applicable to the software and computer industries. Whenever innovation is “sequential and complementary” (as is the case in the IT sector) “imitation becomes a spur to innovation, whereas strong patents become an impediment.

The European Commission has been openly pushing for the legalisation of software patents with the Software Patent Directive in 2004/05 and by its support for the European Patent Office (EPO)’s proposal for an European Patent Litigation Agreement (EPLA) in 2007. The FFII was among the leaders of successful campaigns against both attempts to open the floodgates to software patents in Europe.



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About FFII

The FFII is a not-for-profit association, dedicated to the development of information goods for the public benefit, based on copyright, free competition, and open standards. More than 1,000 members, 3,500 companies and 100,000 supporters have entrusted the FFII to act as their voice in public policy questions concerning exclusion rights in data processing.