I don't doubt that in the future, historians will look back on the "dotcom revolution" and wonder how and why so much power was, at such a critical time, vested in people so breathtakingly unsuited to wielding it properly.
Nowhere is this "volatility" and unsuitability more amply demonstrated than in the area of software patents. I don't believe it is an exaggeration to say that software patents represent the single biggest current threat to the ongoing process of growth and innovation in the computer industry as a whole. They are probably the least understood and most potent weapon of large corporate software firms in the modern marketplace.
On the surface, a patent seems like a fair and reasonable thing. Put simply, it is a legally sanctioned licence to maintain a monopoly on a technology you have invented without the threat of competition for a certain period. Under GATT rules, that period is currently 19 years.
For conventional patents, this probably works. There are, however, three significant practical problems with software patents:
Problem 1: The type of patents granted
Every time you double-click in a document, or move a cursor across a screen, you are using a patented idea. It appears to be possible to patent the most absurdly basic or obvious things - for instance, Microsoft has recently purchased a patent that covers sending out bills for multiple creditors through a centralised service. So, if you started acting as a clearing house for bills for a number of organisations, you would be breaching this patent and could be liable to legal action from the owner.
Of course, the decision about what makes an idea innovative or clever is subjective, but the European Patent Office has reportedly granted something like 13,000 software patents in the last two years (which is interesting in itself, since software patents are still theoretically illegal in the EU). I struggle to believe that there could have been 13,000 genuinely significant software innovations worthy of patent protection in that time.
Problem 2: The antiquity and inefficiency of the legal system
Patents are legal devices, and as such, they must be issued under the auspices of a nation's legal system.
Unfortunately, legal systems work in a different space-time continuum from the real world, leading to amazing incidents like the Unisys patent on the Lempel-Ziv compression used in GIF files: this patent took several years to issue, and threw the industry into turmoil when it was finally granted, because nobody had known that the application was in process. This ancillary phenomenon, called "the submarine patent", can result in a developer breaching a patent for a number of years without having any way of determining that he has actually done so, and often finding himself retroactively liable for the breach.
Problem 3: The effect of patents on the standards process
The cornerstone of online commerce is the "secure connection", which is based on a protocol called SSL ("Secure Sockets Layer"). Unfortunately, until very recently SSL involved the use of an encryption technology patented and aggressively exploited by a firm in the US. The effect of this was to place SSL technology outside the reach of any but the largest corporations, yet somehow SSL became a "recognised standard". This must be every venture capitalist's dream come true - the proverbial licence to print money: get a technology over which you have exclusive and unthreatened control accepted as a standard. For the broader community, however, it is usually a disaster.
Patents are an example of a pre-industrial concept that has simply failed to adapt to the demands of the computer age. The idea of a software patent that lasts for 19 years is ridiculous in an industry where a year is an eternity; equally, the fact that a software patent can take years to grant, and can be granted for strange and conspicuously inappropriate ideas, leaves the whole concept of the software patent jarringly out of touch with reality.
Large corporations have realised that they can exploit this dichotomy between law and reality and are now rushing to buy up patents as quickly as possible so they can charge incomprehensible amounts in royalties. Some firms, for example Rambus, appear to exist solely to swallow patents so they can extract money from the broader industry. The overall effect of this in time will be to stifle innovation, since it will become impossible to develop new products without either infringing some obscure patent at some point during the process, or paying gigabucks for the right to use the patented technologies you need.
There is a growing swell of international opinion that the whole idea of software patents has become increasingly derailed, that it is past time to re-evaluate the concept and begin again. Unfortunately, as long as the process is controlled by vested interests such as lawyers and corporates, we appear to be doomed to live in an industry that has no escape from being irredeemably out of control ... er, sorry, I mean "volatile".
Harris is the Dunedin-based developer of internet email package Pegasus Mail. Send email to David Harris.