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Wednesday, April 12, 2006

The Brazilian Software Market and Patents
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The Brazilian software industry is fairly small, several speakers at our Digital Americas Summit here in Sao Paulo acknowledged. Imports far outweigh exports, although the Brazilian government is working to encourage the industry and hope to see exports in software rise from (US) $300 million in 2005 to (US) $2 billion in 2007.

There are several government steps proposed to achieve that goal, much of which appear to involve government wealth transfers. Not proposed currently is the idea of patenting software.

A patent attorney over dinner in Sao Paulo told me that like many places, patents aren't generally applied to software there. Instead, copyright law is used. Not surprisingly, about the only domestic software written is for very narrow and customized enterprise projects for which there is really no market for piracy. He said that any consumer software product could be replicated legally under copyright law because precise code can be written around easily. The innovation behind the code has no protection without patents, he said.

At the conference, SOFTEX Vice President Marcio Girao challenged PFF's Tom Lenard on software patents. Tom replied that in the US, many agree that there is room for improvement in the software patent process. He also argued those claims may be overstated, as while lawsuits have increased, they've increased proportionately to the increase in software patents. He said the issue of patent quality and reform needs to be separated from the argument of software patent merits.

Girao responded that while he is happy with existing IP laws in Brazil, if Europe embraces software patents Brazil will be forced to so as not to be left out. As Tom has noted, Brazilian Congressman Julio Semeghini said he will call for a congressional public hearing on the topic. He also defended existing IP law but said that Brazilian software companies still have to deal with patents held by foreign competitors and must pursue patents in other countries, so if Brazil is not to be excluded from the world market, it must confront the patent software issue directly. I look forward to hearing what transpires at that hearing.

On a later panel, Momsen, Leonardos & Cia partner Otto Licks said Brazilians are developing software that is then patented by US companies in the US. "Some people call that a brain drain... we need those bright minds here in Brazil." Also, he said, Brazilian individuals and companies are getting patents in the US. "They should be able to get patents here in Brazil," he argued.

GWU Law Professor John Duffy defended software patents. A good example of a software patent, he said, is Google's first patent. It patents their search approach, which starts with a basic search, then involves a search within the search results based on popularity. That innovation has led the company to a market cap of $123 billion, but couldn't be protected by copyright because the method could be written in a thousand different ways.

He dismissed objections one by one: 1) Some say open source is better, but Duffy said there's no reason we can’t have a future of patented and open source software. 2) Despite the belief that patents benefit large companies, Duffy said small companies can't survive against the large ones without patents. 3) Developing countries aren't hurt by such patents, they're helped, Duffy said, citing Google's move of a research facility to Bangalore, headed by the author of their first patent, Krishna Bharat. 4) Yes, the US produces some bad software patents, but he blamed that on the US PTO taking its time to embrace such patents and developing a research database. He said Brazil need not repeat that mistake.

A Brazilian patent examiner, Antonio Carlos Abrantes, did not encourage those wanting software patents. He said he is happy to give a patent for a device to control a furnace but not a similar device to control a PC, because the latter involves software code and mathematical methods and needs to be covered under copyright under Brazilian law. He did say that copyright is a poor protector of software, and said that is why people turn to patents. That said, he argued "the US issues far too many patents" and showed a long list of software patents he said he never would have issued. But Duffy said many of those examples appeared non-obvious, and added that it is absurd to expect a software engineer to write a patent for software that somehow excludes mathematical methods.

From the audience, Marylin Peixoto da Silva Nogueira, information technology policy undersecretary for the Brazilian Ministry of Science and Technology, said the government is not against patents, they just want to ensure there won’t be a stifling of innovation or an inappropriate appropriation of knowledge. This argument is made often by reluctant government officials (it's common in Europe). It's harder to tackle than the myths Duffy tackled, because "inappropriate appropriation of knowledge" is about as vague as the FCC's "public interest standard." In other words, it means whatever the regulator says it means, and that is not a good basis for public policy.

posted by Patrick Ross @ 11:43 AM | Digital Americas

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