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| Small & Medium-Sized EnterprisesSmall and medium-sized enterprises would suffer most from the legalization of software patents. They would bear the brunt of all the negative aspects without having a fair chance to derive significant benefits.Europe's software industry is primarily characterized by small and medium-sized enterprises (SMEs). However, the patent system in general has a reputation for increasingly putting SMEs at a disadvantage, in all areas. The problems are even worse in the field of software. Europe therefore shoots itself in its own foot if it weakens SMEs and strengthens software giants from outside the EU. Some large corporations want to be able to limit, or even crush, smaller competitors at their choosing. In the field of software, even the smallest company can potentially turn a great idea into a successful product because the capital requirements are relatively moderate. Software patents would force small companies to obtain costly patents themselves and thereby artifically inflate the capital needs of software development. The biggest problem is that small companies can't effectively use patents against large corporations but always have to fear that a much larger competitor will cause serious harm to them with the help of the patent system.
"SMEs are crucial providers of pathbreaking innovations, but would
be most adversely affected by patentability. The majority of them is
deterred by the costs of patenting themselves, but would have to
navigate around software patent portfolios of large corporations."
SMEs don't have access to cross-licensing deals.
Only large
corporations with thousands or tens of thousands of patents are in the position
to enter into cross-licensing agreements with their counterparts. The big risk
is that the largest segments of the software market would ultimately
be owned by a small cartel of patent superpowers. It is the desire of some large corporations to make
the ownership of a huge patent arsenal a requirement for being able to
safely compete in the marketplace. SMEs have no chance of ever acquiring
patent portfolios of that size. The "critical mass" of a patent portfolio is
in the thousands. You need to have so many that no one even wants to
even look at them anymore.
SMEs lose a lot of shareholder value to the "patent mafia". Even large corporations have their own problems with productless patent profiteers but they can typically settle any such issues by making a lump-sum payment. SMEs are very often forced into revenue-sharing deals under which they have to give a certain percentage of their sales and/or profits to a patent profiteer. If a company with a 20% pre-tax margin on sales has to give 2% of its sales to an extortioner, then it cedes one tenth of its profits!
"Reback often tells the story of how a team of IBM patent
lawyers went to Sun Microsystems Inc. in the 1980s and claimed that the
then start-up was infringing on seven of its patents. After Sun engineers
explained why they were not infringing,
the IBM lawyers responded that with 10,000 patents,
they would be sure to find some infringement somewhere."
A new trend is that large corporations such as IBM and Microsoft
impose "patent taxes" on SMEs.
IBM prides itself in deriving a
billion-dollar amount every year from "outbound licensing" of its patent
portfolio. The way those deals work is this: IBM now owns around 40,000
patents worldwide. No one, and particularly no SME, ever has the chance
to look at all of those and ensure that there is no conflict between
one's products and any of IBM's patents. So IBM approaches companies and
offers them a costly license agreement to the entire patent portfolio.
Through those deals, IBM not only squeezes money out of the smaller
company but also gets access to sensitive information on the business
of the other company. In the spring of 2004, the press started
reporting that Microsoft is now doing the same. They have already
approached around 100 companies, some of which are European,
and they said that open-source companies would also be targeted.
Click here to read how software patents are used for a legal form of extortion | ||||||||||||||||||||||||||||||||||||||||||
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