Thursday, April 06, 2006

Rabbits and Foxes

A couple of weeks ago, at a very large event in Brussels, I sat and watched several government officials, from the US and EU, debate innovation policy. This sounds very grand, but what they actually said, to paraphrase, was "we want to stimulate innovation by spending money and protecting intellectual property".

At an FFII meeting last week, I realised what governments have been thinking. Patents = innovation. This seems obvous but it took me a while to grasp. Governments actually believe that more patents means more innovation. The number of patents has grown tremendously over the last decades. The amount of innovation also appears to have grown tremendously over the last decades. But, I wondered, what is the cause, what is the effect, and what is our perception of the two? Let me tell you what I think.

First, I think innovation has nothing at all to do with how much money is spent or how well IP is protected. Most innovation comes from the simple economic principle of specialisation. That is, as Adam Smith pointed out a long time ago, the basis of all wealth. We specialise, we compete, and we trade. And we innovate in order to do these better.

How can you pay people to specialise, compete, or trade? The concept is ridiculous, and indeed, in my twenty-five years of writing software for money, I've not once seen research grants actually prodding people to do anything except get better at asking for research grants. There is competition for grants, remember.

Paying grants and subsidies for research is like feeding animals. Yes, you can raise a huge herd of tame sheep like that, but the real action happens in the wild, and you cannot feed wild animals without turning them stupid, fat, and lazy.

I'm not suggesting that our (cough cough) government-funded researchers are stupid, fat, or lazy, but... well... it's all relative.

What government can do to promote innovation is to lower the cost of communications, to increase the size of the market, lower taxes, and remove barriers to competition. Then, I believe, you actually have to tie people down and hack their arms off if you want to prevent innovation. And no, I'm definitely not promoting arm-hacking. It is a figure of speech.

So, if patents (software patents in specific but all patents in general) do not promote innovation, what do they do?

As far as I can see, the relationship between innovation and patents would apply to all industries, but software is special for a couple of Very Big Reasons. First the rate of innovation in software is several orders of magnitude greater than in any other industry, because it is a self-hosting technology. Improvements in normal industrial products do not automatically improve the processes that produced them. But if I build a faster compiler, this lets me compile my compiler faster. Secondly. software is the basis for our entire modern service economy. We are all software users and the rate at which we depend on a flourishing and open software industry is increasing all the time.

Any slowdown in the rate of software innovation is a serious threat to our modern economy. So, when I hear, for instance, a large software firm admit that software patents make it impossible to produce new standards today, this does two things. One, it scares me. Two, it tells me that software patents are having a real effect on innovation.

I'll sketch what I believe are the eight stages of the software innovation and patent boom and bust cycle.
  • First stage: software comes into its own as a domain of technology. Up to about 1980, software was still seen as a branch of mathematics. By 1985 this was no longer the case.

  • Second stage: large software manufacturers convince the patent offices to change the definition of "subject matter" so that software becomes patentable. In the USA this happened in the early 1990's. In the EU this happened informally, through half-licit legal interpretation.

  • Third stage: large patent holders push for software patents to be granted more easily, and patent offices start to grant patents on non-software methods, mainly business methods. In the USA this happened from 1999 onwards, and in the EU more or less in parallel with software patents. Governments, seeing the boom in patents, rub their hands with glee, thinking this is the precursor to a new golden age.

  • Fourth stage: specialist patent firms understand that soft patents (software and method patents) are an excellent opportunity, and start to invest massively in these patents. This happened in the USA and EU more or less at the same time, from 2000 onwards. Again, the growth in patents impresses everyone except the engineers and specialists who are actually involved in innovation, who start to get very concerned.

  • Fifth stage: patent holders, who represent a new and wealthy propertied class, lobby for better enforcement of their patents, no matter how trivial or obvious, once granted by the patent offices. The enforcement happens through the courts. In the EU, patent owners lobby for EU-wide standards on enforcement. In the USA, national enforcement was never an issue. In the EU it is the burning issue today.

  • Sixth stage: software patents start to attack the process of innovation and people panic. Discussion starts about whether this was all such a good idea, and how to raise the quality of software patents. The USA has started to enter this debate, and the EU has been wallowing in it, largely thanks to the FFII, for years.

  • Seventh stage: legislators understand, too late, that there is no way to separate the bad software patents from the good. Any filter or gate or barrier that lets through good software patents (if such animals exist), also lets through an infinite horde of bad ones. Industry starts to clamour for a general ban on software patents. In the USA and EU, we are several years away from this.

  • Eighth stage: legislators are faced with the task of undoing everything that has happened since stage two. I don't want to speculate on how this can even be done. Can software patents, once granted, be revoked without creating incredible outcry?

In the meantime, we have a period of at least ten years in which innovation in the software world is effectively dead. Programmers will, of course, continue to program. But the open market will die. Small numbers of monopolies will replace the current software industry. Open source may well get patent exemption, but this would be as good as a declaration of war on small commercial software firms.

Overall, it is a tragic and bleak picture of the future.

I will now try to give you an analogy for this scenario. In the 1980's, scientists studying the population curves of snowshoe rabbits and foxes (ok, it was lynxes but no-one except Canadians and Scots knows what lynxes are) in the Canadian north, found the populations went up and down in cycles. Basically, rabbits breed faster than foxes, so a rabbit population can grow in one season much faster than the fox population, stopping only when they reach the limit their grassy ecosystem can support. The rabbits have a great first couple of years, but then the fox population catches up, and suddenly there are too many predators for the rabbits. The rabbit population crashes, and a little later, so do the foxes.

What I'm saying is that innovation is rabbits, and soft patents is foxes. Software patents eat innovations. They hunt them down, jump on them, bite through their necks, rip their bodies to shreds, and feed them to their young. It's really like that, but with more violence.

Now, the government official responsible for Rabbit Production, who comes for a couple of months to monitor the rabbit population, sees that the rabbits are breeding wonderfully (he's obviously not an Australian), and the foxes too. He sees that the more foxes, the more rabbits! It's amazing! He goes off and starts a fox farm, releasing even more foxes into the wild, because he's jumped to the conclusion that rabbits generate spontaneously from foxes. Correlation and causation are two entirely different things, but the rabbit man does not understand this.

And our large software firms, who are buying patents as fast as they can. What are they? Well, imagine very large, very juicy, and very, very stupid rabbits, who have found nothing better to do than help the government official breed foxes...

You can hardly be angry with Big Software. The bigger they come, the harder they fall.

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