Posts Tagged ‘Software Patents’

HR 5418 – U.S. District Court Patent Pilot Program

Thursday, January 22nd, 2009

Tech Environmental Impact Statement

HR 5418 – U.S. District Court Patent Pilot Program

Rep. Darrell Issa
Introduced, January 4, 2007

Legislative Background

Representative Darrell Issa’s legislation aims to increase judicial expertise on patent cases. Most federal judges hear a wide variety of cases and therefore lack the proficiency to handle increasingly technical patent claims. This bill would improve judicial expertise with patents, by creating a pilot program to educate participating judges on patent law and the technical matters underlying patent claims. The Director of the Administration Office of the U.S. Courts would be required to designate at least five district courts from at least three different judicial circuits for this program. Judges would designate themselves to be included among a pool of possible judges to hear patent cases. The program would last ten years. This legislation helps address patent quality at the district court level. Congress similarly targeted patent quality in the judiciary when in 1982 it created a central appellate court for patent cases, the U.S. Court of Appeals for the Federal Circuit (CAFC).

Tech Environmental Effects

This bill would benefit the tech environment in several ways: • District courts that handle the largest numbers of patent cases would be targeted for this pilot program • Participating judges would more frequently preside over patent cases and therefore enhance their expertise in this area • Greater resources will be available for the educational and professional development of judges and to compensate skilled law clerks with expertise in engineering and hard sciences.

   Tech Environmental Impact Studies

Assessing legislative, regulatory, and judicial activity to determine positive or negative effect on the Tech Environment.

The Tech Environment

The system of legislative, regulatory, and judicial conditions under which technology companies operate, innovate, and compete.

About ACT

The Association for Competitive Technology (ACT) is an international education and advocacy group for the technology industry. Focusing on the interests of small and mid-size entrepreneurial technology companies, ACT advocates for a “Healthy Tech Environment” that promotes innovation, competition and investment.

TEQI Scoring

The table below applies the TEQI scoring matrix to this legislation. In each of 10 TEQI categories, the bill is analyzed for potential positive or negative effect on the Tech Environment.

TEQI Category Score  Analysis 
Reduces cost of doing business +1.0   Litigation costs often represent a significant burden on business, especially for smaller firms. Judges with patent expertise would run their courts more efficiently and productively, keeping lawyers in line and reducing legal fees. 
Expands Market Opportunities    
Particularly favorable to small tech firms +1.0   Patents help protect the intellectual assets of all innovative firms, but patent litigation is cost that is a greater relative burden on the bottom-line of smaller firms. Better judicial enforcement of patent protections help small firms reap the benefits of their work.  
Takes government out of a market/process    
Enables firms to participate in regulatory process    
Reduces uncertainty/encourages investment
(VC, Wall St)		    
Stimulates Innovation    
Encourages consumers to spend    
Allows for ROI – encourages business spending +1   Encourages business spending and allows for increased returns on investment. Patents provide incentives for new inventions and help inventors earn a return on their work. Judicial expertise in patent law will improve the value of a patent through rigorous enforcement in infringement actions and proper disposition of bad patents. Increased judicial certainty allows innovators to keep on innovating.  
Workforce growth/stimulates employment    

Total

 

+3.0

 

  

Conclusion

HR 5418 is a targeted pilot program that improves the patent litigation process at the district court level. Its aim is simple – increase the expertise of judges hearing patent cases. Its effect could be substantial, if not immediate. Better informed judges can weed out frivolous claims more quickly while focusing on cases with legitimate claims. As a result, anticipated and actual costs of enforcing and defending lawsuits decrease, reducing the burden on all parties but particularly the budgets of small firms. Less money for lawyers means more money for innovating, so firms can increase their research budgets and returns on investment.

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French DADVSI Copyright Law

Tuesday, April 8th, 2008

Tech Environmental Impact Statement


French DADVSI Copyright Law

French Minister of Culture Renaud Donnedieu de Vabres
Signed into law by French President Jacques Chirac on August 3, 2006








Legislative Background


France recently passed legislation similar to the U.S. Digital Millennium Copyright Act (DMCA).  The Loi relative au droit d’auteur et aux droits voisins dans la société de l’information (Law on Authors’ Rights and Related Rights in the Information Society), commonly referred to as the DADVSI, was supposed to be France’s implementation of the WTO’s TRIPS agreement on intellectual property. However, due to the numerous amendments added to the bill during the legislative process, the DADVSI has become in-part an anti-copyright law whose provisions go far beyond anything mandated by the TRIPS agreement. 


Article 14 of the DADVSI, which is also often called the iPod law, is its most controversial provision.  It mandates interoperability of digital rights management (DRM) systems, requiring sellers of online digital content and manufacturers of digital entertainment devices to provide information about proprietary DRM technologies to competitors if this information is needed to guarantee interoperability.  


Article 14 does have a “safe harbor.” It allows companies to deny access to this information to others if the use of DRM technology has been explicitly agreed to by the copyright holder.  This means that companies wishing to protect their intellectual property can use DRM technology, but only by engaging in time-consuming, cost-intensive, and not necessarily successful negotiations with artists and record labels.       


The law creates a new administrative agency called the DRM Regulation Authority. It has the power to demand proprietary software information from companies. Companies forced to disclose information about proprietary DRM technologies to competitors will receive financial compensation.  However, the scope of compensation will depend on a political body and will not be the result of private negotiations between companies.  


Tech Environmental Effects


Positive Tech Environmental Effects of Article 14:



  • The law opens up opportunities for those companies that base  their business models on connecting to the software of competitors.

Negative Tech Environmental Effects of Article 14:


Forced interoperability is detrimental to the tech environment in several ways:



  • By undermining free market mechanisms and diminishing incentives for innovation, the law creates inefficiencies and harms the economy 
  • Rather than rewarding innovators, the law punishes them for their creativity by forcing them to disclose trade secrets and other proprietary information to competitors
  • Article 14 gives excessive power to the new Regulation Authority to be founded under the DADVSI, leaving it to the bureaucrats rather than to private negotiations between private companies to determine the price at which information about proprietary DRM technologies is made available to competitors
  • Mandated interoperability destroys the ability of firms to engage in creative pricing strategies and differentiation, thereby diminishing the incentives for content creation and distribution
  • Entrusting the management of the compulsory licensing process to a government agency means that transactions between private firms become susceptible to political pressure

  

Tech Environmental Impact Studies


Assessing legislative, regulatory, and judicial activity to determine positive or negative effect on the Tech Environment.


The Tech Environment


The system of legislative, regulatory, and judicial conditions under which technology companies operate, innovate, and compete.


About ACT


The Association for Competitive Technology (ACT) is an international education and advocacy group for the technology industry. Focusing on the interests of small and mid-size entrepreneurial technology companies, ACT advocates for a “Healthy Tech Environment” that promotes innovation, competition and investment.


TEQI Scoring


The table below applies the TEQI scoring matrix to this legislation. In each of 10 TEQI categories, the bill is analyzed for potential positive or negative effect on the Tech Environment.



















































TEQI Category Score  Analysis 
Reduces cost of doing business EVEN   Article 14 reduces the cost of doing business for follow-on companies trying to connect to the software of established competitors. On the negative side, it increases the cost of doing business for companies who must negotiate new licenses with every artist featured in their online store.  
Expands Market Opportunities EVEN  Article 14 expands market opportunities for imitative companies. However, compulsory interoperability decreases market opportunities for tech firms who use DRM to differentiate their products. 
Particularly favorable to small tech firms EVEN   Small tech firms that want to use DRM technologies in their products will be at a competitive disadvantage if innovations can be capitalized on by competitors. Article 14 may, on the other hand, be beneficial for those small firms wanting to connect to DRM systems so that they can capitalize off of other companies’ innovations.  
Takes government out of a market/process -1.0   The law establishes a new government agency where none previously existed. This Regulatory Authority has the power both to demand interoperability information from companies and determine the price at which it is sold to competitors. As a result, innovators will not only lose the right to refuse to license proprietary technology, they will also lose the right to negotiate the terms under which they do so.  
Enables firms to participate in regulatory process -1.0   The law does not envision the automatic participation of an industry council in the Regulatory Authority’s decision-making process. The lack of a fixed consultation procedure between the tech industry and the Regulatory Authority is especially disadvantageous for small firms, who tend to be unaware of informal opportunities for participation and less well-equipped than their larger competitors.  
Reduces uncertainty/encourages investment
(VC, Wall St)		 -1.0   Mandated interoperability takes control away from the innovator and therefore adds more uncertainty to a firm’s ability to earn a positive return on investment. Investors will be wary to provide funding for products when competitors can force interoperability and thereby reduce potential profits.  
Stimulates Innovation -1.0   Article 14 rewards imitators rather than innovators. It makes it easier for companies to capitalize on the innovations of others, thereby diminishing incentives for investing substantial amounts of time and money into the creation of innovative products. The law is more likely, therefore, to stymie innovation in the digital content market than to stimulate it.  
Encourages consumers to spend +1.0   The interoperability requirement may lead to the proliferation of new online digital content stores and new digital entertainment devices. More choice and lower prices may increase consumer spending.  
Allows for ROI – encourages business spending +1.0   Business spending and R&D efforts are expected to provide positive returns on investment. Article 14 diminishes such returns and thus takes away the incentives for spending. Forced interoperability reduces opportunities for product differentiation and creative ways to recapture R&D costs  
Workforce growth/stimulates employment +1.0   The law opens up business opportunities for firms trying to connect to the software of established competitors, so it might lead to workforce growth and stimulate employment in the short run. However, if established companies decide to leave the French market because they feel that their business models are being undermined by the forced disclosure of proprietary information, then the loss of jobs associated with their withdrawal could offset any gains stemming from the creation of new firms.  

Total

 

-1.0

 		  

Conclusion


Article 14 will have an overall negative effect on the Tech Environment.  By inserting a government agency into market processes, it threatens the ability of the market to rapidly innovate  Given the fast pace at which the tech industry moves, governmental regulations simply cannot be crafted and amended quickly enough to keep up with developments in the industry.  Moreover, the French are targeting what is but a niche market of a much larger market, with online music sales accounting for a mere 6% of music sales overall in 2005.  


Furthermore, entrusting the pricing of compulsory DRM licenses to a government agency carries with it the danger of the agency’s being hijacked by political interests.  Given that companies can challenge decisions of the Regulatory Authority in the Paris Appeals Court, the future might see the propagation of law suits rather than the proliferation of innovative products.


Originally, the DADVSI served a sensible purpose– to update French intellectual property law to provide better legal protection for DRM technologies.  However, DADVSI’s Article 14 makes it harder for companies to protect their intellectual property and deploy DRM-based business models that allow for creative pricing strategies and differentiation. 


Overall, the forced interoperability provision is a solution in search of a problem and is likely to have greater negative effects than it will have benefits for the tech environment.

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