In 1968, the U.S. granted its first software patent to Martin Goetz, co-founder of Applied Data Research (ADR), for the development of a new process for sorting data using magnetic tape. Since then, and the U.S. Patent Office over the years has liberally granted patents for all kinds of things, with IBM leading the way as king of the patent mountain.

Now Europe is battling over the issue of software patent legislation, and the fight is drawing the spotlight to perceived flaws in the U.S.'s own patent laws. The European Council is introducing new software patent legislation to the European Union's Software Patents Directive that would make it easier to secure patents. This effort has been opposed by the European Parliament and by many industry groups, including the open-source community.

Advocates of the new legislation claim that it will create consistency in Europe's patent system. Opponents claim it will stifle new development and innovation and that only big corporations with armies of patent lawyers will benefit. The issue is not in granting patents for discrete inventions, such as software source code, but in patenting software or business processes.

Sageza Group analyst Clay Ryder points out the potential impact. "If my company writes the source code for a compound interest calculation," he asks, "could that be construed as infringing against the patents of a company that documented its invention of compound interest calculation? This could be chilling, in essence forcing anyone who writes software that is commercially deployed to have to do a patent search before using it. Sounds like a field day for lawyers."

In the U.S., which has much broader criteria for proving patentability, some complain that the situation is already out of hand. Out-Law.com has issued a list of the 10 worst patents covering software and business processes, including patents for such widely used technologies as burning music CDs and making phone calls over the Internet.

One IBMer who wishes to remain anonymous — saying "patents are a sensitive enough subject within IBM that I really don't want to be quoted on this one" — says, "My personal opinion is that patents have gone wild, and [the EU initiatives] will only make it worse."

He cites the example of a patent recently issued to IBM that covers software to manage the Caps-Lock key on a PC. "That kind of patent seems to be ridiculous and, if enforced, stifling," he says.

Goetz, recipient of that first software patent and now president of Goetz & Associates, believes that patents should be granted for the invention of software processes, but not for business methods. "To get a patent, you should have to invent something," he says. "A lot of business methods, which Europe was not allowing at all, should not be patentable."

Bo Horne, president of ProHelp Systems, also sees trouble ahead, both in Europe and in the U.S. "The EU proposals will both legitimize and formalize the underlying causes of problems we already face in the U.S.," he says. "Like tax issues, most companies, large and small, will frequently be totally unaware of existing patents. Small companies, once 'caught,' will not be able to defend themselves against aggressive companies. Many small developers will be forced out of business. Today, many people no longer want to become (or remain) doctors because of what managed healthcare has done to that industry. The same will happen to the software industry if the granting of ill-advised software patents becomes widespread."

Such concerns, of course, bring to mind the SCO suit against both vendors and users of Linux, and it is understandable that the group most concerned about establishing solid ground for the granting of patents is the open-source community.

Ryder believes that the effects of the liberal granting of patents both here and in Europe "could jeopardize the free development and distribution of software based upon fear of inadvertent patent infringement. If the enforcement approach was similar to SCO's tactics, not only competitors but anyone who uses offending software would be a target for licensing fees or legal assault."

Imagine, Ryder says, "if an ISV or open-source organization were to distribute software that was ultimately determined to be an infringement. The patent holder could probably force disclosure of the customers who licensed/purchased the software and then go after them with demands for patent licensing fees. 'Say, that's a nice little piece of software you have running in your business. It would be a shame if something were to happen to it. For $500 a year we can protect your interests ...' A protection racket for software?"

"Right now, it appears SCO is losing its battle to extort money from the Linux community," says Horne. "Imagine the chaos, however, if they were making claims of patent infringement. Major companies would be running scared, and SCO would be raking in millions instead of bleeding profusely."

The current practice for granting software patents may encourage companies and individuals who wish to litigate and get rich. But as writer Lawrence Rosen points out in an article on NewsForge, it's a lot easier to get a patent than to prove its validity in court. He recommends, "Don't be too paranoid about the patent problem. It's a real problem, but not a catastrophe. Any patent owner that tries to assert its patents against open-source software has many hurdles to leap before the royalty checks start to arrive."

However, the current patent situation causes a great many companies to patent software for defensive reasons, claims Goetz. "They get a patent for something just in case someone else is doing it or will be," he says. "That way they can't be sued." Such is likely the case in many of the patents granted to IBM, he believes.

Robin Miller, who authored an article on IBM's Caps Lock patent, seems to share this view. "The problem is not IBM," Miller writes. "In a world where everything including "TODO" lists in code can be patented, it's probably better seeing a "Caps Lock notification method" patent in IBM's hands than in others we could think of. The problem is with the U.S. patent system itself. Whether you think the idea of patenting software is good, bad, or indifferent, there is no question that the [U.S. Patent Office] is doing such a terrible job of deciding which software patents to grant that it has become a worldwide laughingstock."