Remember when Apple and Microsoft (along with some other companies) bought Nortel’s patent portfolio? Now they’ve formed a new company that’s in the business of extorting license fees from companies infringing on the patents that they now own. Who’s infringing? Everyone, according to the CEO of the new company formed to turn the patents into cash:

Pretty much anybody out there is infringing. It would be hard for me to envision that there are high-tech companies out there that don’t use some of the patents in our portfolio.

It’s an election year, this is a huge problem that exists entirely within legal realm, and yet there is no coalition working effectively to create change in this system. In the meantime, people are unwittingly working to destroy the technology industry entirely through litigation. In the meantime, nearly all developers go about building things as if patents don’t exist at all.

He lists a lot of good reasons to be against software patents, but here’s his favorite:

I am against software patents because it is not reasonable to expect that the current patent system, nor even one designed to improve or replace it, will ever be able to accurately determine what might be considered legitimately patentable from the overwhelming volume of innovations in software. Even the most trivial of software applications involves hundreds, potentially thousands of design decisions which might be considered by those aggressively seeking patents as potentially protectable inventions. If even the most basic elements of these are patentable, as they are currently, the patent system will be fundamentally unable to scale to meet that demand. As it is today.

The argument that designing a functional patent system for software is infeasible is interesting and correct.

Here’s another reason he doesn’t list that I think should give patent advocates pause. If you look at all of the software being written, is there any evidence that companies and projects that apply for patents are creating any more value than the companies and projects that aren’t? And if they are not, what is the point of the patent system?

Other than a few sleazy actors like Intellectual Ventures there’s an understanding in the innovative side of the tech business that you don’t file aggressive patent lawsuits. You write a lot of patents, you file defensive lawsuits and countersuits, but in general you don’t use your patent portfolio as a big club to try to destroy competitors. Apple’s taking a big crap on that detente.

Nelson Minar on Apple’s patent lawsuit against Android handset maker HTC.

Update: ArsTechnica lists the patents in the suit. They’re all software patents. You disappoint me, Apple.

I’m not a legal expert, so I’m mainly just gathering information, but it sure looks to me like the patent regime as it relates to software is in for fundamental change thanks to a ruling in the U.S. Court of Appeals for the Federal Circuit on Thursday. Links:

• Inside Counsel has a story on the case, in re Bilski, from last year.
• The Wall Street Journal’s story on the ruling.
• The Chicago Law School Faculty Blog has an outstanding post, explaining the 1998 State Street Bank ruling that led to this case, the background of this case, and the three dissents in the 9-3 ruling. The title says it all: In re Bilski: The Fed Circuit Tells Inventors to Stuff It.
• Gene Quinn (a patent attorney who favors the existing patent regime) reports on the ruling and reflects on the implications.
• IP reporter Joe Mullin rounds up reactions. He argues that the decision is not as monumental as others seem to think.

For what it’s worth, I don’t think that the patent regime as it exists today provides an incentive for individual inventors to create inventions. Most of the patent activity, especially in the world of software patents, is sponsored by large organizations who have the infrastructure and budget to try to patent everything they can. I’ve worked at a number of small companies and we’ve never been able to patent much of anything. We’re too busy coding. On the other hand, my friends at large companies are constantly being encouraged to file patents on everything they work on.

The original idea behind patents is that they’d protect the little guy from having his ideas copied by a company with deeper pockets, but I don’t think it’s worked out that way.

The patent system is complicated, and complicated systems favor people with the resources to game the system. It’s why rich people get more tax breaks than the rest of us — they have more to lose and can spend more to exploit loopholes in the tax system. It’s why people in World of Warcraft who can play 12 hours a day do better those that can play 1 hour a day. They have the resources (time) to invest in exploiting every inefficiency they can find. And it’s why companies like IBM, Microsoft, and Apple are always accumulating boatloads of patents.

If this ruling is as broad as some are arguing, it clears the field for startups who want to go out and build a product without the fear that they’ve stepped on one of the thousands of nebulous patents that have already been filed. And that’s to say nothing about the advantages for open source software, where the types of patents that seem to have been eliminated by this ruling have been an actual barrier to adoption.