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EU rapped over software plan

A proposed law due before the European Parliament next week would derail Europe's software industry while allowing big corporations to take over, European economists warn.

A group of economists from around Europe has issued a scathing critique of the European Parliament's proposed law on software patents, arguing it would damage Europe's software industry while benefiting almost no one except patent lawyers.

In an open letter to the European Parliament issued on Monday, 12 economists from institutions including the University of London, the Oxford Internet Institute and the University of Sussex urged that the proposed Directive on the Patentability of Computer-Implemented Inventions be rejected in its current form when it comes for a vote on Sept. 1. The term "computer-implemented inventions" includes, but is not limited to, software.

While praising the European Commission's goal of creating a more consistent patent framework for Europe, the economists said a better investigation must be made into the potential economic impact of making it easier to patent software innovations.

The current draft legislation would be a recipe for disaster, they said, and would encourage large companies to build up an arsenal of patents they could use to fend off competition from smaller companies. This technique is common in the United States, where the patenting process was liberalized several years ago.

"While clothed as an administrative clarification, the proposed directive will provide opportunities and incentives for the construction of extensive portfolios of software patents," the economists wrote. "The exploitation of these portfolios will have serious detrimental effects on European innovation, growth and competitiveness."

Their assessment is in line with that of many software developers and Europe-based information technology businesses. Opponents of the proposed directive--some of whom are generally in favor of software patents--have compiled a petition of more than 150,000 names and planned a demonstration in front of the European Parliament building in Brussels for Wednesday afternoon.

The patents initiative, which has been shepherded through the European Parliament by the Committee on Legal Affairs and the Internal Market (JURI), aims to harmonize the patent systems across the European Union, making it easier to obtain computer-related patents that will be valid across Europe. Under the current system, many patents approved by the European Patent Office are invalidated by the patent regimes of individual countries.

Arlene McCarthy, JURI's "rapporteur," or the European Parliament member responsible for the draft legislation, said in a June analysis of the proposed directive that there were links between the patentability of computer-related inventions and the growth of IT industries in the United States. Such patents aided "in particular the growth of small and medium enterprises and independent software developers," she wrote, citing a study on the issue carried out for the European Parliament by London's Intellectual Property Institute.

But the economists writing to the European Parliament poured scorn on any notion that software patents and business growth are connected, saying most economic research does not support this claim.

"What is known via academic research is that although a firm's R&D spending is clearly related to its productivity, profitability or market value, there is little evidence that patents contribute separately to performance, that is, above and beyond R&D spending," the economists wrote in an analysis also issued on Wednesday. One study has shown that as software patenting rates have risen, R&D investment in IT sectors has declined, the economists said.

More generally, they criticized the process that has led to the formulation of the draft legislation, saying there has been little balanced background analysis provided to the Parliament. They said McCarthy's own analysis, which will introduce the directive to most members of the European Parliament, omitted reference to economists' concern over the impact of software patents.

"Members of the European Parliament should insist on being informed by independent, critical assessment of the available evidence... before committing the region's economies to an institutional change that will prove very difficult to reverse," the economists wrote.

Those signing the letter included Paul A. David of the Oxford Internet Institute and Stanford University; Bronwyn H. Hall of the University of California, Berkeley, and Scuola Sant'anna Superiore; and W. Edward Steinmueller of the University of Sussex. David, Hall, Steinmueller and Brian Kahin of the University of Michigan wrote the accompanying analysis.

Matthew Broersma of ZDNet UK reported from London.