1.1 Do you agree that these are the basic features required of the patent system?
We would agree that these are some of the attributes a patent system should have, but not an exhaustive list. This list fails to consider whether patents are fundamentally necessary to induce innovation in any particular area of art. The list also fails to address the issue of adequate disclosure, i.e., what is considered sufficient information published by the patentee to permit another skilled in the art to reproduce the invention. Finally, the list fails to address that competition is far more important to driving innovation than patents and competition helps assure that the consuming public’s interests are being respected. Consequently, any unified patent system needs to assure that, with respect to any permitted patents on software, that competitors are able to create interoperable products without concern regarding infringement.
1.2 Are there other features that you consider important?
In addition to the points raised above, the adoption of a system must first address what technologies are going to be covered by the system. There has been intense opposition in Europe to permitting the patenting of software. There has also been much frustration that the European Patent Office ignores the dictates of its own charter with respect to software patents. At the same time, there appears to be general consensus that patents covering software that produce an observable effect in hardware should be permitted.
In some areas of commerce, such as pharmaceuticals, the availability of injunctive relief upon a finding of patent infringement is considered critical. In other areas, such as software, injunctive relief is considered highly problematic given the number of patents that may apply to a single software product. Given that some national legal systems within the European Union do not generally recognize the common law concept of injunctive relief, this issue will need to be addressed before establishing a uniform patent system, not after such a system has been established.
Attempting to adopt a uniform system without first addressing what that system is to cover undermines the public interest and is likely to create undesirable consequences in the marketplace. Given the difficulties currently observed in the U.S. in attempting to address deficiencies in the current U.S. patent system, it should be recognized that there will never be a better opportunity to properly configure a uniform system than prior to its commencement.
1.3 How can the Community better take into account the broader public interest in developing its policy on patents?
No patent system exists in a vacuum. Each such system interacts with other areas of the law, most particularly law respecting competition. There are a number of unresolved tensions between patent law, which restricts competition, and the public interest represented in competition law. Much of that tension arises from perceived misuse of patents to restrict competition or imbalance that competition. Because competition law does not provide timely or consistent solutions to resolve instances of patent misuse, such issues should be addressed within the patent law itself.
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?
Red Hat does not oppose the concept of a Community Patent. At the same time, we do not see the compelling need for a Community Patent. We do, however, oppose the common political approach of March 2003 if a Community Patent is to be established. Specifically, we find the following aspects of the common political approach to be unacceptable:
- The extensive translation requirements
- The central role of the European Patent Office in any such scheme. As the EPO operates outside the jurisdiction of the European Union, we believe, as a condition of any Community Patent system the EPO should be subsumed into the governance structure of the European Union.
Apart from these specific objections, Red Hat believes a Community Patent system should have the attributes addressed in Section 1.
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?
Although Red Hat favors the system as it now stands, if a Community Patent system is to be adopted, we believe the only logical approach is to have a single, centralized litigation system for European patents. However, a key aspect of the process of establishing such a centralized litigation system will be determining uniform rules of procedure, patentability, and remedies for infringement. Those aspects must be clearly delineated in order for member states to make a reasoned judgment as to whether such a system will work.
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?
Red Hat believes a multiplicity of litigation systems would lead to forum shopping, inconsistent enforcement, and confusion in the market place. In addition such an approach will place an extreme burden on SMEs.
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 the Member States?
Red Hat believes the existence of business method and software patents are detrimental to both competition and innovation. In particular, the software industry operated successfully and produced dramatic innovation for years relying solely on copyright and trade secret law without software patents. Even after software patents were available, most software companies pursued them solely for defensive purposes. It has only been in recent years that a handful of large software companies have sought to use software patents as a means of sustaining dominant positions in the market, thus reducing competition and, in so doing, innovation. There is inconsistent treatment of software and business method patents among the member states of the European Union and the European Patent Office. Any Community Patent system should be established on the most conservative common denominator of such treatment, permitting patents on software only where such patents produce a tangible effect in hardware outside of general purpose computers.
4.2 To what extent is your business affected by such differences?
Red Hat believes any system that permits widespread issuance of software patents will damage not only our business, but the entire software industry, and will slow the rate of innovation by reducing competition.
4.3 What are your views on the value-added and feasibility of the different options (1)-(3) outlined above?
Harmonization of patent law, without addressing the fundamental issues of its necessity in producing innovation and competition within the software industry, is worse than the present state of the various patent systems in operation in Europe.
4.4 Are there any alternative proposals that the Commission might consider?
The Commission should insist that the European Patent Office address the issues of software and business method patents in a manner consistent with its charter, particularly Article 52 thereof.
5.1 How important is the patent system in Europe compared to other areas of legislation affecting your business?
10 - No single piece of legislation that could be considered by the European Commission could do our business and the software industry more harm. The thicket of software patents (more than 200,000 have been issued in the U.S.) have created a degree of complexity and financial burden that no SME will be able to effectively compete. It would be detrimental to the developing software industry in Europe to have a similar system imposed.
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?
1 - The patent system is entirely unnecessary to the effective operation of the software industry. The commercial software industry as we know it today grew at an impressive rate from the early 1980’s through the mid-1990’s without any impact from patents. Even beyond the mid-1990’s most software companies pursued patents solely for defensive purposes. It has only been in recent years that major software companies have threatened others with the patent portfolios as a means to stifle competition. Unlike the pharmaceutical and other similar industries, there is no empirical evidence that patents are necessary to produce innovation in the software industry. In fact, most software innovation has been a result of healthy competition, and healthy competition is quickly succumbing to the expansion of software patents. One must ask why software is so special that it, unlike any other art, deserves protection under both copyright and patent regimes.
5.3 How important to you is the patent system in Europe compared to the patent system worldwide?
5 - It is of equivalent importance to other major patent systems.
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 the future? What problems have you encountered using the existing patent system?
Red Hat obtains patents only because others choose to threaten us with their patent portfolios, i.e., we obtain patents solely for defensive purposes. We make our patents available to others developing open source software on a royalty-free basis. It is noteworthy that our company has been repeatedly cited for its high level of customer value, and despite the fact that we do not charge license fees for our software, we have been able to produce margins on our services around the software that rival the gross margins of established software companies. Thus, we have found software patents to be nothing but a financial drag on our business and a potential threat to its future.
We would far prefer a system that denied patents to software. We also observe increasing tension between various industry sectors, particularly information technology and pharmaceuticals, over the applicability and enforcement of patents. These issues are rife within the U.S. patent system and are likely to become just as problematic in any European patent system.
5.5 Are there other issues than those in this paper you feel the Commission should address in relation to the patent system?
None other than those raised in prior responses hereto.