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Posted on Techdirt - 22 July 2021 @ 01:37pm

COVID-19 Shows What Innovation Looks Like Without Patents (Spoiler: It Works)

This post is one of a series of posts we’re running this week in support of Patent Quality Week, exploring how better patent quality is key to stopping efforts that hinder innovation.

The COVID-19 pandemic has given rise to a fascinating natural experiment: What does innovation look like when patents are largely out of the picture? For Patent Quality Week, I?ll be looking at the development of COVID-19 vaccines and what lessons can be drawn for reforming the patent system.

The development of COVID-19 vaccines has largely progressed without any noticeable effect of patents. None of the vaccine developers have sued competitors for patent infringement, and Moderna has even pledged not to assert patents during the pandemic. To be sure, patents have not been out of the picture entirely: the developers are getting plenty of them, and analysts are predicting the lawsuits to start as early as the first booster shots. But even in this world just partially free of patent threats, a few things are worth noticing.

Start with the sheer number of COVID-19 vaccine products. The two mRNA vaccines from Pfizer/BioNTech and Moderna coexist with each other and vaccines from Johnson & Johnson, AstraZeneca, Novavax, and others. In any other situation, these companies would right now be in massive patent litigation, and many of the firms would likely have dropped their products or not even entered in the first place. Along with non-patent incentives such as government funding and social prestige, the absence of patent assertion has helped open the door to multiple similar vaccines being available on the market.

Similar, but not the same. Moderna?s vaccine can be stored at higher temperatures than Pfizer?s, J&J is a single dose, Novavax is based on more traditional vaccine technology. Each vaccine has distinct characteristics preferable for certain consumers and certain settings.

Multiple suppliers and product differentiation are hallmark features of many competitive markets. It?s simply good business sense for competitors to make slightly different products that serve different consumers, and vaccine manufacturers are no exception. As a result, economists find that ?neck-and-neck? competition spurs innovation when multiple firms each try to outdo the others through incremental improvements and differences.

The presence of multiple, differentiated competitors has been a tremendous boon to the American COVID-19 response. Health care providers can opt for a vaccine technology that best fits their facilities, and some individuals have gotten to choose between mRNA or one-and-done. More importantly, competition means robust supply chains. Contamination of production batches and discoveries of serious side effects didn?t halt the flow of vaccines because other products were in place.

Patents could easily have upended vaccine deployment in the United States by constraining the market to a single supplier. For comparison, during the 2001 terrorist anthrax scare, the only approved drug for anthrax was Bayer?s patented product Cipro. Unlike the COVID-19 vaccine manufacturers, though, Bayer vigorously defended its patents and refused to allow competitors to make Cipro, which led to national panic and tense negotiations until the Bush administration pressured the company into major price and manufacturing concessions.

The word ?monoculture? is sometimes used to describe how dependence on a product or company creates a potentially devastating single point of failure. Originally referring to agricultural wipeouts due to single-crop plantings, the term was popularized by computer security experts who credited a monoculture of Microsoft Windows with the catastrophic spread of computer worms. Others (including myself) have worried about monocultures of cell phone chips, encryption software, and global shipping canals.

The medicine for monocultures is competition to ensure that if one product fails, others will continue to meet the public?s needs. Multiple vaccine options and suppliers are plainly better than panic-buying the last boxes of Cipro on the shelf. Given the potential of patents to create monocultures, how can the patent laws be written to avoid them and foster valuable competition?

There are at least two answers. First, the patent system needs flexibility to deal with unexpected situations such as pandemics and national emergencies. A law called section 1498 already provides this flexibility by allowing the United States to authorize use of any patented technology, with compensation to the patent holder, and Chris Morten and I have argued that the government should be more proactive in asserting this authority. The need for flexibility also explains the importance of the United States? support for international patent waivers. While the COVID-19 vaccine patent truce has resulted in sufficient supply for the United States, worldwide patents have helped to dissuade some foreign drug manufacturers from producing their own. An international waiver that overcomes patent barriers to competition could add more, diverse vaccines to the market. And in view of arguments that vaccine patents are irrelevant in view of manufacturing bottlenecks, it is worth asking whether new international entrants freed from patent restrictions might discover alternative ways of manufacturing vaccines, thereby pushing the bounds of innovation.

More important is to avoid granting patents that enable monocultures in the first place, and that?s where patent quality becomes important. Done right, patents should encourage product differentiation by restricting close copies of a technology while allowing alternate solutions to problems. Monocultures arise from patents on broad swathes of solutions or even on the problem itself?say, patenting the idea of vaccinating against COVID-19 versus a patent on the biochemical structure of a particular vaccine. Especially for computer software, broad problem-covering patents are far too common?patents on scanning to email, accounting for currency exchanges, and one-click online shopping, for example. At best, such patents fall into the hands of trolls who use them to harrass startups and other companies for money. At worst, they become tools that large, dominant firms can use to suppress competitors, setting the public up for the failures that monocultures can cause.

There are many options for enhancing patent quality and avoiding the dangers of monoculture: rigorously applying law that prohibits patents on computer algorithms and laws of nature, giving patent examiners sufficient time to review patent applications, and enhancing lower-cost ways for competitors to challenge patents issued wrongly. Many lawmakers have been receptive to these ideas, with the White House?s recent executive order and hearings in Congress both looking into how to keep patents from deterring competition. But some have pushed in the opposite direction of more patents regardless of quality. There have been recent efforts to change the law to allow for more patents on software and natural discoveries, patent examiners are overworked, and the Patent Office has made it increasingly hard to challenge questionable patents.

These seemingly backward steps are taken out of fear, a hypothetical worry pushed by patent-holding industries that a more rigorous patent system will destroy incentives to innovate. Perhaps the most important story to be learned from the COVID-19 vaccines is that this worry is unfounded. Multiple competing innovators not bogged down with patent lawsuits can function better, innovate more, and robustly serve public needs better than an industry of patent-backed monocultures. Bold steps toward patent quality should be cause for celebration, with an eye toward a competitive technological future.

Posted on Techdirt - 1 October 2020 @ 10:51am

Oracle Is Wrong About Having Permission To Reimplement Amazon's API. But They Shouldn't Need It.

Readers of this site no doubt know that Oracle’s arguments in its lawsuit against Google, set to be argued in the Supreme Court on Wednesday, could spell disaster for the computer industry, by turning the act of reimplementing an API into copyright infringement. Back in January, I revealed in an Ars Technica piece that it could even spell disaster for Oracle itself, because Oracle’s cloud storage service reimplements Amazon’s S3 API. Oracle did not dispute my findings but shrugged them off, claiming Amazon had granted permission. I was skeptical, but at the time did not have hard evidence to prove a negative that Oracle had no license.

I’ve now found the evidence for why Oracle should be worried. And more importantly, it shows why every tech company and startup should be worried about the Google v. Oracle case.

What Oracle pointed me to in January was an open source Apache license for Amazon’s Java SDK software. This was curious at the time because the SDK doesn’t implement S3 or any other cloud service; it uses the API by calling a handful of its functions. Code that calls an API is distinct from the API itself, so permission to copy API-calling code is not permission to implement an API (assuming, as Oracle does, that you need permission to implement an API). To repurpose a favorite analogy of Oracle’s lawyers, buying the rights to an authorized Harry Potter fanfic does not give one permission to reproduce Chamber of Secrets. Nevertheless, the idea that the SDK license gave Oracle the right to reimplement Amazon’s API continues to circulate among Oracle’s supporters.

The problem is, Amazon itself doesn’t believe it has licensed its cloud API. In 2012, a company called Eucalyptus Systems announced that it had negotiated a license with Amazon to reimplement APIs including S3. Reports of the deal suggest that Amazon was not handing out licenses to just anyone: “Amazon chose to partner with Eucalyptus,” said a representative for the latter company.

The Apache license for the Java SDK has been in place since at least 2010—two years before the Eucalyptus deal. If, as Oracle claims, everyone already had an Apache license to reimplement the S3 API, then there was no reason for Amazon to negotiate out an individual license with Eucalyptus, and there was no reason for Eucalyptus to promote its success in obtaining that license.

In 2014, Eucalyptus was acquired by HP, which raised the question of whether the acquired firm’s API license would transfer. In reporting on the acquisition, one journalist (who apparently now works for Oracle) quoted an anonymous cloud service vendor who described Amazon as “anything but generous on API licensing.” Again, that would make no sense if Amazon had Apache-licensed reimplementation of its APIs in 2010.

Notably, Amazon’s licensing behavior doesn’t say much about whether Amazon actually agrees that API reimplementation is copyright infringement. Numerous people have noted that Amazon never has and probably never will bring a copyright case in court. But risk-averse businesses will want certainty—even the CEO of Eucalyptus did not believe that APIs were copyrightable, but still got a license as “belts and suspenders.” And many major cloud service vendors have not reimplemented Amazon’s APIs despite the obvious benefits of doing so. As one cloud service executive put it in 2014, the Oracle v. Google litigation has made it “more dangerous to use someone’s API design without consulting them first.”

Besides poking a massive hole in Oracle’s Apache-license theory, this “consult first” mentality shows how troublesome Oracle’s copyright theory is. Eucalyptus is not a traditional cloud service provider competing head-to-head with Amazon, but rather software for on-premises servers, allowing companies essentially to run a cloud computing system like AWS on their own computers. Amazon is not in the business of deploying on-site enterprise servers, so Eucalyptus would not have undercut Amazon’s profits—in fact, it probably would have increased Amazon’s profits by locking companies into Amazon’s API even before they switch from on-site servers to the cloud.

The permission culture mentality, applied to the computer industry, could end up only locking in consumers, boosting big firms, and shutting out disruptive startups from competing in the market. In evaluating Oracle’s theory of API copyright, the Supreme Court could either reject it and open the door to robust competition in the technology space, or approve copyright in APIs and entrench dominant services for years to come.

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