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Software patents putting International Financial Report Standards (IFRS) in danger - 5 April 2005
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<h1>Software Patents in Europe</h1>
[ <a href="/activities/swpat/swpat.html">Introduction</a>
| <a href="/activities/swpat/background.html">Background</a>
| <a href="/activities/swpat/status.html">Status</a>
| <a href="/activities/swpat/documents.html">Further Reading</a> ]
</center>
<br />
<center>
Open Letter
[<a href="/activities/swpat/letter-20040510.html">2004-05-10</a>]
[<a href="/activities/swpat/letter-20040531.html">2004-05-31</a>]
[<a href="/activities/swpat/letter-20040706.html">2004-07-06</a>]
[<a href="/activities/swpat/letter-20040802.html">2004-08-02</a>]
[<a href="/activities/swpat/letter-20040906.html">2004-09-06</a>]
[<a href="/activities/swpat/letter-20041004.html">2004-10-04</a>]
[<a href="/activities/swpat/letter-20041101.html">2004-11-01</a>]
[<a href="/activities/swpat/letter-20041206.html">2004-12-06</a>]
[<a href="/activities/swpat/letter-20050103.html">2005-01-03</a>]
[<a href="/activities/swpat/letter-20050207.html">2005-02-07</a>]
[<a href="/activities/swpat/letter-20050307.html">2005-03-07</a>]
[2005-04-05]
[<a href="/activities/swpat/letter-20050502.html">2005-05-02</a>]
[<a href="/activities/swpat/letter-20050606.html">2005-06-06</a>]
</center>
<h2>
Software patents putting International Financial Report Standards (IFRS) in danger
</h2>
<h3>5 April 2005</h3>
<p>
The European Information &amp; Communications Technology Industry
Association (EICTA) combines 32 national ICT/CE associations
from 24 European countries with 48 direct company
members. EICTA altogether represents more than 10.000
enterprises in Europe with more than 2 million employees and
revenues of over 200 billion. The Association heavily supports the
monopolisation of software ideas. Mr Provoost is
president of EICTA and represents Philips Consumer Electronics
as Senior Vice President and Chief Executive Officer.
</p>
<p>Dear Mr. Provoost,</p>
<p>
The European Council and European Commission are pushing for the
introduction of software patents in Europe to such an extent and in such
ways that they raise justified doubts in the democratic roots of Europe.
</p>
<p>
Your association, the European Information &amp; Communications Technology
Industry Association (EICTA) has strongly supported this agenda in the
past. In the discussion, you raised the argument that "We must be
allowed to protect out innovations."
</p>
<p>
This statement we fully agree with. However, if you believe that
software patents help protect innovation, it seems you were being
misinformed, as the role of software patents is not to protect, but to
prevent innovation. Bill Gates pointed this out in an internal Microsoft
memo in 1991:
</p>
<p class="quote">
"If people had understood how patents would be granted when most of
today's ideas were invented and had taken out patents, the industry
would be at a complete stand-still today."</p>
<p>
He said this because he understood that patents on software inevitably
are monopolies on abstract logic and ideas.
</p>
<p>
If Pythagoras was to come up with his theorem today, in a software
patent regime he would clearly be entitled to get a monopoly on
it. Pythagoras could then arbitrarily select the conditions under
which others could make use of or build upon his idea.
</p>
<p>
Software usually embodies literally thousands of abstract ideas. Under
a software patent regime, each of these could be turned into a
monopoly and would constitute a no-go zone for competitors. That is why
Bill Gates also said:
</p>
<p class="quote">
"A future start-up with no patents of its own will be forced to pay
whatever price the giants choose to impose. That price might be
high: Established companies have an interest in excluding future
competitors."
</p>
<p>
In other words: software patents are an anti-competitive tool that
serves to raise the burden on innovation. The height of that barrier
is flexible and can easily be raised to trip established companies,
such as Philips, and innovative newcomers alike.
</p>
<p>
In previous letters we have explained how software patents cost jobs
and economic power in Europe. Today we would like to inform you how
they pose a threat to the International Financial Reporting Standards
(IFRS) [1] as all the ideas used in these standards will be implemented
in software and would therefore be patentable. This will affect all
European companies as the IFRS rules have been mandatory to all listed
companies in the European Union since 2002.
</p>
<p>
If you check the US Patent and Trademark Office (USPTO) database, you
will find that there are already hundreds of patents on software ideas
concerning expressions like "account" or "financial report". One of
them protects a system "for financial planning and advice" [2]. That
particular patent is held by American Express Financial Corporation
(Amex) - a company which we know better for its credit cards than its
innovative software.
</p>
<p>
After establishing a legal basis for software patents in Europe, Amex
might arbitrarily choose to determine which software company is
allowed to implement the IFRS or similar standards.
</p>
<p>
This of course assumes that none of Amex' competitors has an interest
in blocking such development and uses their patent on another
necessary idea to stop the development. But even if no one does: As all
systems have many components in common and the number of methods to
make computer systems secure is limited, any such software would
always be less secure in a software patent regime.
</p>
<p>
People in Europe often seem to look to the United States for economic
advice. This time, the CEO of Computer Associates, John Swainson, has
made the message remarkably clear: Europe should not introduce
software patents. [3]
</p>
<p>
Copyright provides a very efficient protection for computer software,
but in order for Copyright to protect your innovation, you first need
to have an innovation. That is why we hope EICTA will stand up and
oppose software patents because: "We must be allowed to innovate."
</p>
<p>With kind regards,</p>
<p>
<a href="/about/people/greve/">Georg Greve</a><br />
President<br />
Free Software Foundation Europe (FSFE)<br />
<a href="/">fsfe.org</a>
</p>
<p class="footnote">[1] <code class="footnote">
<a href="http://en.wikipedia.org/wiki/Ifrs">http://en.wikipedia.org/wiki/Ifrs</a>
</code></p>
<p class="footnote">[2] <code class="footnote">
<A HREF="http://patft.uspto.gov/netacgi/nph-Parser?Sect1=PTO2&amp;Sect2=HITOFF&amp;p=1&amp;u=/netahtml/search-bool.html&amp;r=7&amp;f=G&amp;l=50&amp;co1=AND&amp;d=ptxt&amp;s1='accounting+standards'&amp;OS=%22accounting+standards%22&amp;RS=%22accounting+standards%22">US Patent 6,430,542: Computer-implemented program for financial planning and advice system</A>
</code></p>
<p class="footnote">[3] <code class="footnote">
<a href="http://www.ftd.de/tm/it/1110009214683.html?nv&#61;sl">http://www.ftd.de/tm/it/1110009214683.html?nv&#61;sl</a>
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