Software as a service

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Software_as_a_service 

 

Software as a service (SaaS /sæs/) (also known as subscribeware or rentware) is a software licensing and delivery model in which software is licensed on a subscription basis and is centrally hosted. It is sometimes referred to as "on-demand software", and was formerly referred to as "software plus services" by Microsoft.

SaaS applications are also known as Web-based software, on-demand software and hosted software. The term "software as a service" (SaaS) is considered to be part of the nomenclature of cloud computing, along with infrastructure as a service (IaaS), platform as a service (PaaS), desktop as a service (DaaS), managed software as a service (MSaaS), mobile backend as a service (MBaaS), datacenter as a service (DCaaS), and information technology management as a service (ITMaaS).

SaaS apps are typically accessed by users using a thin client, e.g. via a web browser. SaaS has become a common delivery model for many business applications, including office software, messaging software, payroll processing software, DBMS software, management software, CAD software, development software, gamification, virtualization, accounting, collaboration, customer relationship management (CRM), management information systems (MIS), enterprise resource planning (ERP), invoicing, human resource management (HRM), talent acquisition, learning management systems, content management (CM), geographic information systems (GIS), and service desk management. SaaS has been incorporated into the strategy of nearly all leading enterprise software companies.

According to a Gartner estimate, SaaS sales in 2018 were expected to grow 23% to $72 billion.

History

Centralized hosting of business applications dates back to the 1960s. Starting in that decade, IBM and other mainframe providers conducted a service bureau business, often referred to as time-sharing or utility computing. Such services included offering computing power and database storage to banks and other large organizations from their worldwide data centers.

The expansion of the Internet during the 1990s brought about a new class of centralized computing, called application service providers (ASP). ASPs provided businesses with the service of hosting and managing specialized business applications, with the goal of reducing costs through central administration and through the solution provider's specialization in a particular business application. Two of the world's pioneers and largest ASPs were USI, which was headquartered in the Washington, DC area, and Futurelink Corporation, headquartered in Irvine, California.

Software as a Service essentially extends the idea of the ASP model. The term software as a service (SaaS), however, is commonly used in more specific settings:

• While most initial ASP's focused on managing and hosting third-party independent software vendors' software, as of 2012 SaaS vendors typically develop and manage their own software.
• Whereas many initial ASPs offered more traditional client-server applications, which require installation of software on users' personal computers, SaaS solutions of today rely predominantly on the Web and only requires a web browser to use.
• Whereas the software architecture used by most initial ASPs mandated maintaining a separate instance of the application for each business, as of 2012 SaaS solutions normally utilize a multitenant architecture, in which the application serves multiple businesses and users, and partitions its data accordingly.

The acronym first appeared in the goods and services description of a USPTO trademark, filed on September 23, 1985.

DbaaS (database as a service) has emerged as a sub-variety of SaaS, and is a type of cloud database.

Distribution

The cloud (or SaaS) model has no physical need for indirect distribution because it is not distributed physically and is deployed almost instantaneously, thereby negating the need for traditional partners and middlemen. However, as the market has grown, SaaS and managed service players have been forced to try to redefine their role.

Pricing

Unlike traditional software, which is conventionally sold as a perpetual license with an up-front cost (and an optional ongoing support fee), SaaS providers generally price applications using a subscription fee, most commonly a monthly fee or an annual fee. Consequently, the initial setup cost for SaaS is typically lower than the equivalent enterprise software. SaaS vendors typically price their applications based on some usage parameters, such as the number of users using the application. However, because in a SaaS environment customers' data reside with the SaaS vendor, opportunities also exist to charge per transaction, event, or other units of value, such as the number of processors required.

The relatively low cost for user provisioning (i.e., setting up a new customer) in a multitenant environment enables some SaaS vendors to offer applications using the freemium model. In this model, a free service is made available with limited functionality or scope, and fees are charged for enhanced functionality or larger scope. Some other SaaS applications are completely free to users, with revenue being derived from alternative sources such as advertising.

A key driver of SaaS growth is SaaS vendors' ability to provide a price that is competitive with on-premises software. This is consistent with the traditional rationale for outsourcing IT systems, which involves applying economies of scale to application operation, i.e., an outside service provider may be able to offer better, cheaper, more reliable applications.

Architecture

The vast majority of SaaS solutions are based on a multitenant architecture. With this model, a single version of the application, with a single configuration (hardware, network, operating system), is used for all customers ("tenants"). To support scalability, the application can be installed on multiple machines (called horizontal scaling). In some cases, a second version of the application is set up to offer a select group of customers access to pre-release versions of the applications (e.g., a beta version) for testing purposes. This is contrasted with traditional software, where multiple physical copies of the software — each potentially of a different version, with a potentially different configuration, and often customized — are installed across various customer sites. In this traditional model, each version of the application is based on a unique code.

Although an exception rather than the norm, some SaaS solutions do not use multitenancy, or use other mechanisms—such as virtualization—to cost-effectively manage a large number of customers in place of multitenancy. Whether multitenancy is a necessary component for software as a service is a topic of controversy.

There are two main varieties of SaaS:

Vertical SaaS

Software which answers the needs of a specific industry (e.g., software for the healthcare, agriculture, real estate, finance industries).

 

Horizontal SaaS

The products which focus on a software category (marketing, sales, developer tools, HR) but are industry neutral.

Characteristics

Although not all software-as-a-service applications share all traits, the characteristics below are common among many SaaS applications:

Configuration and customization

SaaS applications similarly support what is traditionally known as application configuration. In other words, like traditional enterprise software, a single customer can alter the set of configuration options (a.k.a. parameters) that affect its functionality and look-and-feel. Each customer may have its own settings (or: parameter values) for the configuration options. The application can be customized to the degree it was designed for based on a set of predefined configuration options. 

For example, to support customers' common need to change an application's look-and-feel so that the application appears to be having the customer's brand (or—if so desired—co-branded), many SaaS applications let customers provide (through a self-service interface or by working with application provider staff) a custom logo and sometimes a set of custom colors. The customer cannot, however, change the page layout unless such an option was designed for.

Accelerated feature delivery

SaaS applications are often updated more frequently than traditional software, in many cases on a weekly or monthly basis. This is enabled by several factors:

• The application is hosted centrally, so an update is decided and executed by the provider, not by customers.
• The application only has a single configuration, making development testing faster.
• The application vendor does not have to expend resources updating and maintaining backdated versions of the software, because there is only a single version.
• The application vendor has access to all customer data, expediting design and regression testing.
• The solution provider has access to user behavior within the application (usually via web analytics), making it easier to identify areas worthy of improvement.

Accelerated feature delivery is further enabled by agile software development methodologies. Such methodologies, which have evolved in the mid-1990s, provide a set of software development tools and practices to support frequent software releases.

Open integration protocols

Because SaaS applications cannot access a company's internal systems (databases or internal services), they predominantly offer integration protocols and application programming interfaces (APIs) that operate over a wide area network. Typically, these are protocols based on HTTP, REST, and SOAP. 

The ubiquity of SaaS applications and other Internet services and the standardization of their API technology has spawned the development of mashups, which are lightweight applications that combine data, presentation and functionality from multiple services, creating a compound service. Mashups further differentiate SaaS applications from on-premises software as the latter cannot be easily integrated outside a company's firewall.

Collaborative (and "social") functionality

Inspired by the success of online social networks and other so-called web 2.0 functionality, many SaaS applications offer features that let their users collaborate and share information. 

For example, many project management applications delivered in the SaaS model offer—in addition to traditional project planning functionality—collaboration features letting users comment on tasks and plans and share documents within and outside an organization. Several other SaaS applications let users vote on and offer new feature ideas. 

Although some collaboration-related functionality is also integrated into on-premises software, (implicit or explicit) collaboration between users or different customers is only possible with centrally hosted software.

OpenSaas

OpenSaaS refers to software as a service (SaaS) based on open source code. Similar to SaaS applications, Open SaaS is a web-based application that is hosted, supported and maintained by a service provider. While the roadmap for Open SaaS applications is defined by its community of users, upgrades and product enhancements are managed by a central provider. The term was coined in 2011 by Dries Buytaert, creator of the Drupal content management framework.

Andrew Hoppin, a former Chief Information Officer for the New York State Senate, has been a vocal advocate of OpenSaaS for government, calling it "the future of government innovation." He points to WordPress and Why Unified as a successful example of an OpenSaaS software delivery model that gives customers "the best of both worlds, and more options. The fact that it is open source means that they can start building their websites by self-hosting WordPress and customizing their website to their heart’s content. Concurrently, the fact that WordPress is SaaS means that they don’t have to manage the website at all -- they can simply pay WordPress.com to host it."

Drupal Gardens, a free web hosting platform based on the open source Drupal content management system, offers another example of what Forbes contributor Dan Woods calls a "new open-source model for SaaS". According to Woods, "Open source provides the escape hatch. In Drupal Gardens, users will be able to press a button and get a source code version of the Drupal code that runs their site along with the data from the database. Then, you can take that code, put it up at one of the hosting companies, and you can do anything that you would like to do."

Adoption drivers

Several important changes to the software market and technology landscape have facilitated the acceptance and growth of SaaS solutions:

• The growing use of web-based user interfaces by applications, along with the proliferation of associated practices (e.g., web design), continuously decreased the need for traditional client-server applications. Consequently, traditional software vendor's investment in software based on fat clients has become a disadvantage (mandating ongoing support), opening the door for new software vendors offering a user experience perceived as more "modern".
• The standardization of web page technologies (HTML, JavaScript, CSS), the increasing popularity of web development as a practice, and the introduction and ubiquity of web application frameworks like Ruby on Rails or Laravel (PHP) gradually reduced the cost of developing new SaaS solutions, and enabled new solution providers to come up with competitive solutions, challenging traditional vendors.
• The increasing penetration of broadband Internet access enabled remote centrally hosted applications to offer speed comparable to on-premises software.
• The standardization of the HTTPS protocol as part of the web stack provided universally available lightweight security that is sufficient for most everyday applications.
• The introduction and wide acceptance of lightweight integration protocols such as REST and SOAP enabled affordable integration between SaaS applications (residing in the cloud) with internal applications over wide area networks and with other SaaS applications.
• Implementing a Product Led Growth framework (Product Led Growth is a business development strategy that leverages product usage to drive customer acquisitions, conversions, and market expansion.) helps company lower costs, get to market more quickly, and more effectively produce the Saas Product that customers want.

Adoption challenges

Some limitations slow down the acceptance of SaaS and prohibit it from being used in some cases:

• Because data is stored on the vendor's servers, data security becomes an issue.
• SaaS applications are hosted in the cloud, far away from the application users. This introduces latency into the environment; for example, the SaaS model is not suitable for applications that demand response times in the milliseconds (OLTP).
• Multi-tenant architectures, which drive cost efficiency for SaaS solution providers, limit customization of applications for large clients, inhibiting such applications from being used in scenarios (applicable mostly to large enterprises) for which such customization is necessary.
• Some business applications require access to or integration with customer's current data. When such data are large in volume or sensitive (e.g. end-users' personal information), integrating them with remotely hosted software can be costly or risky, or can conflict with data governance regulations.
• Constitutional search/seizure warrant laws do not protect all forms of SaaS dynamically stored data. The end result is that a link is added to the chain of security where access to the data, and, by extension, misuse of these data, are limited only by the assumed honesty of third parties or government agencies able to access the data on their own recognizance.
• Switching SaaS vendors may involve the slow and difficult task of transferring very large data files over the Internet.
• Organizations that adopt SaaS may find they are forced into adopting new versions, which might result in unforeseen training costs, an increase in the probability that a user might make an error or instability from bugs in the newer software.
• Should the vendor of the software go out of business or suddenly EOL the software, the user may lose access to their software unexpectedly, which could destabilize their organization's current and future projects, as well as leave the user with older data they can no longer access or modify.
• Relying on an Internet connection means that data is transferred to and from a SaaS firm at Internet speeds, rather than the potentially higher speeds of a firm's internal network.
• Can the SaaS hosting company guarantee the uptime level agreed in the SLA (service level agreement)?

The standard model also has limitations:

• Compatibility with hardware, other software, and operating systems.
• Licensing and compliance problems (unauthorized copies of the software program putting the organization at risk of fines or litigation).
• Maintenance, support, and patch revision processes.

Healthcare applications

According to a survey by HIMSS Analytics, 83% of US IT healthcare organizations are now using cloud services with 9.3% planning to, whereas 67% of IT healthcare organizations are currently running SaaS-based applications.

Data escrow

Software as a service data escrow is the process of keeping a copy of critical software-as-a-service application data with an independent third party. Similar to source code escrow, where critical software source code is stored with an independent third party, SaaS data escrow applies the same logic to the data within a SaaS application. It allows companies to protect and insure all the data that resides within SaaS applications, protecting against data loss.

There are many and varied reasons for considering SaaS data escrow including concerns about vendor bankruptcy, unplanned service outages, and potential data loss or corruption. Many businesses either ensure that they are complying with their data governance standards or try to enhance their reporting and business analytics against their SaaS data. A research conducted by Clearpace Software Ltd. into the growth of SaaS showed that 85 percent of the participants wanted to take a copy of their SaaS data. A third of these participants wanted a copy on a daily basis.

Criticism

One notable criticism of SaaS comes from Richard Stallman of the Free Software Foundation, who refers to it as service as a software substitute (SaaSS). He considers the use of SaaSS to be a violation of the principles of free software. According to Stallman:

With SaaSS, the users do not have even the executable file that does their computing: it is on someone else's server, where the users can't see or touch it. Thus it is impossible for them to ascertain what it really does, and impossible to change it.

Not all SaaS products face this problem. In 2010, Forbes contributor Dan Woods noted that Drupal Gardens, a web hosting platform based on the open source Drupal content management system, is a "new open-source model for SaaS". He added:

Open source provides the escape hatch. In Drupal Gardens, users will be able to press a button and get a source code version of the Drupal code that runs their site along with the data from the database. Then, you can take that code, put it up at one of the hosting companies, and you can do anything that you would like to do.

Similarly, MediaWiki, WordPress and their many extensions are increasingly used for a wide variety of internal applications as well as public web services. Obtaining the code is relatively simple, as it is an integration of existing extensions, plug-ins, templates, etc. Actual customizations are rare, and usually quickly replaced by more standard publicly available extensions. There is additionally no guarantee the software source code obtained through such means accurately reflects the software system it claims to reflect.

Andrew Hoppin, a former Chief Information Officer for the New York State Senate, refers to this combination of SaaS and open source software as OpenSaaS and points to WordPress as another successful example of an OpenSaaS software delivery model that gives customers "the best of both worlds, and more options. The fact that it is open source means that they can start building their websites by self-hosting WordPress and customizing their website to their heart’s content. Concurrently, the fact that WordPress is SaaS means that they don’t have to manage the website at all – they can simply pay WordPress.com to host it."^[48] The cloud (or SaaS) model has no physical need for indirect distribution because it is not distributed physically and is deployed almost instantaneously, thereby negating the need for traditional partners and middlemen.

Integrated library system

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Integrated_library_system

An integrated library system (ILS), also known as a library management system (LMS), is an enterprise resource planning system for a library, used to track items owned, orders made, bills paid, and patrons who have borrowed.

An ILS usually comprises a relational database, software to interact with that database, and two graphical user interfaces (one for patrons, one for staff). Most ILSes separate software functions into discrete programs called modules, each of them integrated with a unified interface. Examples of modules might include:

• acquisitions (ordering, receiving, and invoicing materials)
• cataloging (classifying and indexing materials)
• circulation (lending materials to patrons and receiving them back)
• serials (tracking magazine, journals, and newspaper holdings)
• online public access catalog or OPAC (public user interface)

Each patron and item has a unique ID in the database that allows the ILS to track its activity.

History

Pre-computerization

Prior to computerization, library tasks were performed manually and independently from one another. Selectors ordered materials with ordering slips, cataloguers manually catalogued sources and indexed them with the card catalog system (in which all bibliographic data was kept on a single index card), fines were collected by local bailiffs, and users signed books out manually, indicating their name on clue cards which were then kept at the circulation desk. Early mechanization came in 1936, when the University of Texas began using a punch card system to manage library circulation. While the punch card system allowed for more efficient tracking of loans, library services were far from being integrated, and no other library task was affected by this change.

1960s: the influence of computer technologies

The next big innovation came with the advent of MARC standards in the 1960s, which coincided with the growth of computer technologies – library automation was born. From this point onwards, libraries began experimenting with computers, and, starting in the late 1960s and continuing into the 1970s, bibliographic services utilizing new online technology and the shared MARC vocabulary entered the market; these included OCLC (1967), Research Libraries Group (which has since merged with OCLC), and the Washington Library Network (which became Western Library Network and is also now part of OCLC).

1970s–1980s: the early integrated library system

Screenshot of a Dynix menu

The 1970s can be characterized by improvements in computer storage, as well as in telecommunications. As a result of these advances, ‘turnkey systems on microcomputers,’ known more commonly as integrated library management systems (ILS) finally appeared. These systems included necessary hardware and software which allowed the connection of major circulation tasks, including circulation control and overdue notices. As the technology developed, other library tasks could be accomplished through ILS as well, including acquisition, cataloguing, reservation of titles, and monitoring of serials.

1990s–2000s: the growth of the Internet

With the evolution of the Internet throughout the 1990s and into the 2000s, ILSs began allowing users to more actively engage with their libraries through an OPACs and online web-based portals. Users could log into their library accounts to reserve or renew books, as well as authenticate themselves for access to library-subscribed online databases. Inevitably, during this time, the ILS market grew exponentially. By 2002, the ILS industry averaged sales of approximately US$500 million annually, compared to just US$50 million in 1982.

Mid 2000s–present: increasing costs and customer dissatisfaction

By the mid to late 2000s, ILS vendors had increased not only the number of services offered but also their prices, leading to some dissatisfaction among many smaller libraries. At the same time, open source ILS was in its early stages of testing. Some libraries began turning to such open source ILSs as Koha and Evergreen. Common reasons noted were to avoid vendor lock in, avoid license fees, and participate in software development. Freedom from vendors also allowed libraries to prioritize needs according to urgency, as opposed to what their vendor can offer. Libraries which have moved to open source ILS have found that vendors are now more likely to provide quality service in order to continue a partnership since they no longer have the power of owning the ILS software and tying down libraries to strict contracts. This has been the case with the SCLENDS consortium. Following the success of Evergreen for the Georgia PINES library consortium, the South Carolina State Library along with some local public libraries formed the SCLENDS consortium in order to share resources and to take advantage of the open source nature of the Evergreen ILS to meet their specific needs. By October 2011, just 2 years after SCLENDS began operations, 13 public library systems across 15 counties had already joined the consortium, in addition to the South Carolina State Library. Librarytechnology.org does an annual survey of over 2,400 libraries and noted in 2008 2% of those surveyed used open source ILS, in 2009 the number increased to 8%, in 2010 12%, and in 2011 11% of the libraries polled had adopted open source ILSs. The following year's survey (published in April 2013) reported an increase to 14%, stating that "open source ILS products, including Evergreen and Koha, continue to represent a significant portion of industry activity. Of the 794 contracts reported in the public and academic arena, 113, or 14 percent, were for support services for these open source systems."

2010s–present: the rise of cloud based solutions

The use of cloud-based library management systems has increased drastically since the rise of cloud technology started.

Many modern cloud-based solutions allow automated cataloging by scanning a book's ISBN.

Software criteria

Distributed software vs. web service

Library computer systems tend to fall into two categories of software:

• that purchased on a perpetual license
• that purchased as a subscription service (Software as a service).

With distributed software the customer can choose to self-install or to have the system installed by the vendor on their own hardware. The customer can be responsible for the operation and maintenance of the application and the data, or the customer can choose to be supported by the vendor with an annual maintenance contract. Some vendors charge for upgrades to the software. Customers who subscribe to a web (hosted) service upload data to the vendor's remote server through the Internet and may pay a periodic fee to access their data.

Data entry assistance based on ISBN

Many applications can reduce a major portion of manual data entry by populating data fields based upon the entered ISBN using MARC standards technology via the Internet.

Bar code scanning and printing

With most software, users can eliminate some manual entry by using a bar-code scanner. Some software is designed, or can be extended with an additional module, to integrate scanner functionality. Most software vendors provide some type of scanner integration, and some print bar-code labels.

Societal views on patents

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Societal_views_on_patents 

 

Legal scholars, economists, activists, policymakers, industries, and trade organizations have held differing views on patents and engaged in contentious debates on the subject. Critical perspectives emerged in the nineteenth century that were especially based on the principles of free trade. Contemporary criticisms have echoed those arguments, claiming that patents block innovation and waste resources that could otherwise be used productively, and also block access to an increasingly important "commons" of enabling technologies (a phenomenon called the tragedy of the anticommons), apply a "one size fits all" model to industries with differing needs, that is especially unproductive for industries other than chemicals and pharmaceuticals and especially unproductive for the software industry. Enforcement by patent trolls of poor quality patents has led to criticism of the patent office as well as the system itself. Patents on pharmaceuticals have also been a particular focus of criticism, as the high prices they enable puts life-saving drugs out of reach of many people. Alternatives to patents have been proposed, such Joseph Stiglitz's suggestion of providing "prize money" (from a "prize fund" sponsored by the government) as a substitute for the lost profits associated with abstaining from the monopoly given by a patent.

These debates are part of a larger discourse on intellectual property protection which also reflects differing perspectives on copyright.

History

Criticism of patents reached an early peak in Victorian Britain between 1850 and 1880, in a campaign against patenting that expanded to target copyright too and, in the judgment of historian Adrian Johns, "remains to this day the strongest [campaign] ever undertaken against intellectual property", coming close to abolishing patents. Its most prominent activists - Isambard Kingdom Brunel, William Robert Grove, William Armstrong and Robert A. MacFie - were inventors and entrepreneurs, and it was also supported by radical laissez-faire economists (The Economist published anti-patent views), law scholars, scientists (who were concerned that patents were obstructing research) and manufacturers. Johns summarizes some of their main arguments as follows:

[Patents] projected an artificial idol of the single inventor, radically denigrated the role of the intellectual commons, and blocked a path to this commons for other citizens — citizens who were all, on this account, potential inventors too. [...] Patentees were the equivalent of squatters on public land — or better, of uncouth market traders who planted their barrows in the middle of the highway and barred the way of the people.

Similar debates took place during that time in other European countries such as France, Prussia, Switzerland and the Netherlands (but not in the USA).

Based on the criticism of patents as state-granted monopolies inconsistent with free trade, the Netherlands abolished patents in 1869 (having established them in 1817), and did not reintroduce them until 1912. In Switzerland, criticism of patents delayed the introduction of patent laws until 1907.

Contemporary arguments

Contemporary arguments have focused on ways that patents can slow innovation by: blocking researchers' and companies' access to basic, enabling technology, and particularly following the explosion of patent filings in the 1990s, through the creation of "patent thickets"; wasting productive time and resources fending off enforcement of low-quality patents that should not have existed, particularly by "patent trolls"; and wasting money on patent litigation. Patents on pharmaceuticals have been a particular focus of criticism, as the high prices they enable puts life-saving drugs out of reach of many people.

Blocking innovation

The most general argument against patents is that "intellectual property" in all its forms represents an effort to claim something that should not be owned, and harms society by slowing innovation and wasting resources.

Law professors Michael Heller and Rebecca Sue Eisenberg have described an ongoing tragedy of the anticommons with regard to the proliferation of patents in the field of biotechnology, wherein intellectual property rights have become so fragmented that, effectively, no one can take advantage of them as to do so would require an agreement between the owners of all of the fragments.

Some public campaigns for improving access to medicines and genetically modified food have expressed a concern for "preventing the over-reach" of intellectual property protection including patent protection, and "to retain a public balance in property rights". Some economists and scientists and law professors have raised concerns that patents retard technical progress and innovation. Others claim that patents have had no effect on research, based on surveys of scientists.

Poor patent quality and patent trolls

Patents have also been criticized for being granted on already-known inventions, with some complaining in the United States that the USPTO fails "to do a serious job of examining patents, thus allowing bad patents to slip through the system." On the other hand, some argue that because of low number of patents going into litigation, increasing quality of patents at patent prosecution stage increases overall legal costs associated with patents, and that current USPTO policy is a reasonable compromise between full trial on examination stage on one hand, and pure registration without examination, on the other hand.

Enforcement of patents – especially patents perceived as being overly broad – by patent trolls, has brought criticism of the patent system, though some commentators suggest that patent trolls are not bad for the patent system at all but instead realign market participant incentives, make patents more liquid, and clear the patent market.

Some patents granted in Russia have been denounced as pseudoscientific (for example, health-related patents using lunar phase or religious icons).

Litigation costs

According to James Bessen, the costs of patent litigation exceed their investment value in all industries except chemistry and pharmaceuticals. For example, in the software industry, litigation costs are twice the investment value. Bessen and Meurer also note that software and business model litigation accounts for a disproportionate share (almost 40 percent) of patent litigation cost, and the poor performance of the patent system negatively affects these industries.

Different industries but one law

Richard Posner noted that the most controversial feature of US patent law is that it covers all industries in the same way, but not all industries benefit from the time-limited monopoly a patent provides in order to spur innovation. He said that while the pharmaceutical industry is "poster child" for the need for a twenty-year monopoly, since costs to bring to a market are high, the time of development is often long, and the risks are high, in other industries like software the cost and risk of innovation is much lower and the cycle of innovation is quicker, and obtaining and enforcing patents and defending against patent litigation is generally a waste of resources in those industries.

Pharmaceutical patents

Some have raised ethical objections specifically with respect to pharmaceutical patents and the high prices for medication that they enable their proprietors to charge, which poor people in the developed world, and developing world, cannot afford. Critics also question the rationale that exclusive patent rights and the resulting high prices are required for pharmaceutical companies to recoup the large investments needed for research and development. One study concluded that marketing expenditures for new drugs often doubled the amount that was allocated for research and development.

In 2003, World Trade Organization (WTO) reached an agreement, which provides a developing country with options for obtaining needed medications under compulsory licensing or importation of cheaper versions of the drugs, even before patent expiration.

In 2007 the government of Brazil declared Merck's efavirenz anti-retroviral drug a "public interest" medicine, and challenged Merck to negotiate lower prices with the government or have Brazil strip the patent by issuing a compulsory license.

It is reported that Ghana, Tanzania, the Democratic Republic of Congo and Ethiopia have similar plans to produce generic antiviral drugs. Western pharmaceutical companies initially responded with legal challenges, but some have now promised to introduce alternative pricing structures for developing countries and NGOs.

In July 2008 Nobel Prize-winning scientist Sir John Sulston called for an international biomedical treaty to clear up issues over patents.

In response to these criticisms, one review concluded that less than 5 percent of medicines on the World Health Organization's list of essential drugs are under patent. Also, the pharmaceutical industry has contributed US$2 billion for healthcare in developing countries, providing HIV/AIDS drugs at lower cost or even free of charge in certain countries, and has used differential pricing and parallel imports to provide medication to the poor. Other groups are investigating how social inclusion and equitable distribution of research and development findings can be obtained within the existing intellectual property framework, although these efforts have received less exposure.

Quoting a World Health Organization report, Trevor Jones (director of research and development at the Wellcome Foundation, as of 2006) argued in 2006 that patent monopolies do not create monopoly pricing. He argued that the companies given monopolies "set prices largely on the willingness/ability to pay, also taking into account the country, disease and regulation" instead of receiving competition from legalized generics.

Proposed alternatives to the patent system

Alternatives have been discussed to address the issue of financial incentivization to replace patents. Mostly, they are related to some form of direct or indirect government funding. One example is Joseph Stiglitz's idea of providing "prize money" (from a "prize fund" sponsored by the government) as a substitute for the lost profits associated with abstaining from the monopoly given by a patent. Another approach is to remove the issue of financing development from the private sphere altogether, and to cover the costs with direct government funding.

Software patent debate

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Software_patent_debate

The software patent debate is the argument about the extent to which, as a matter of public policy, it should be possible to patent software and computer-implemented inventions. Policy debate on software patents has been active for years. The opponents to software patents have gained more visibility with fewer resources through the years than their pro-patent opponents. Arguments and critiques have been focused mostly on the economic consequences of software patents.

One aspect of the debate has focused on the proposed European Union directive on the patentability of computer-implemented inventions, also known as the "CII Directive" or the "Software Patent Directive," which was ultimately rejected by the EU Parliament in July 2005.

Arguments for patentability

There are several arguments commonly given in defense of software patents or defense of the patentability of computer-implemented inventions.

Public disclosure

• Through public disclosure, patents encourage the open sharing of information and additional transparency about legal exposure.
• Through public disclosure, patents encourage the transfer of mechanical technology, which may apply more broadly.

Economic benefit

• Software patents resulting from the production of patentable ideas can increase the valuation of small companies.
• Software patents increase the return on investment made, which includes government funded research.

Encouragement of innovation

• The ability to patent new software developed as a result of research encourages investment in software-related research by increasing the potential return of investment of said research.

Copyright limitations

Patents protect functionality. Copyright on the other hand only protects expression. Substantial modification to an original work, even if it performs the same function, would not be prevented by copyright. To prove copyright infringement also requires the additional hurdle of proving copying, which is not necessary for patent infringement.

Copyright law protects unique expressions, while patent law protects inventions, which in the case of software, are algorithms; copyright cannot protect a novel means of accomplishing a function, merely the syntax of one such means.

This means that patents incentivize projects that are unique and innovative in functionality rather than simply form. Copyrights, in turn, only incentivize uniqueness in form.

Protection for small companies

Software patents can afford smaller companies market protection by preventing larger companies from stealing work done by a smaller organization, leveraging their greater resources to go to market before the smaller company can.

Hardware patents analogy

Hardware and software are sometimes interchangeable. If people can patent hardware, then ideas describing software implemented by that hardware should also be patentable.

Arguments against patentability

Opponents of software patents argue that:

Software is math

A program is the transcription of an algorithm in a programming language. Since every (Turing-complete) programming language implements Church's lambda calculus by virtue of the Church-Turing thesis, a program is thus the transcription of a mathematical function. Math is not patentable. Therefore, neither is software.

Software encourages patent thickets

A patent thicket is a dense web of patents that companies must decipher to develop new technology. There are various types of patent thickets such as when a single innovation is protected by multiple patent holders or when a product is covered by numerous patents. The consequences of patent thickets are increased difficulty of innovation, complex cross-licensing relations between companies, and discouragement of newcomers from entering the software industry.

Hinders research and development

• Some scientific studies and expert reviews have concluded that patent systems paradoxically hinder technological progress and allows monopolies and powerful companies to exclude others from industrial science in a manner that is irreconcilable with anti-trust laws.
• Gary Becker, Nobel Prize–winning economist, argues, "Their exclusion from the patent system would discourage some software innovations, but the saving from litigation costs over disputed patent rights would more than compensate the economy for that cost."

Hinders innovation

• The Electronic Frontier Foundation published the Defend Innovation whitepaper after doing two and a half years of research on software patents. They concluded that many overbroad software patents are being awarded, which is actually stifling innovation.
• Interoperability is thought to promote innovation, and patent systems have the potential to block the development of such technologies.
• There has been a lack of empirical evidence to suggest that patents have any positive effect on innovation, and furthermore, the system primarily “encourage[s] failing monopolists to inhibit competition by blocking innovation.”

Cost and loss of R&D funds

• Should a software developer hire a patent attorney to perform a clearance search and provide a clearance opinion, there is no guarantee that the search could be complete. Different patents and published patent applications may use different words to describe the same concepts and thus patents that cover different aspects of the invention may not show up in a search. The cost of a clearance search may not prove cost effective to businesses with smaller budgets or individual inventors.
• For the U.S. the economic benefit is dubious. A study in 2008 found that American public companies’ total profits from patents (excluding pharmaceuticals) in 1999 were about $4 billion, but that the associated litigation costs were $14 billion.
• Software developers and hardware manufacturers may be forced to pay license fees for standards that are covered by patents (the so-called essential patents). Some examples are H.264, MP3 and GIF (that uses the patented LZW compression algorithm) and JPEG for graphics.

Copyright

• It is argued that traditional copyright has provided sufficient protection to facilitate massive investment in software development.
• Copyright is the right of an author(s) to prevent others from copying their creative work without a license. Thus the author of a particular piece of software can sue someone that copies that software without a license. Copyright protection is given automatically and immediately without the need to register the copyright with a government, although registration does strengthen protection. Copyrighted material can also be kept secret.

Software is different

• Software programs are different from other electromechanical devices because they are designed solely in terms of their function. The inventor of a typical electromechanical device must design new physical features to qualify for a patent. On the other hand, a software developer need only design new functions to create a working embodiment of the program.
• Software is a component of a machine. The computer’s hardware is generic; it performs functions that are common to all of the software that is capable of being executed on the computer. Each software program that is capable of executing on the computer is a component of the computer.
• Computers "design" and build the structure of executable software. Thus, software developers do not design the executable software's physical structure because they merely provide the functional terms.

Trivial patents

• Anecdotal evidence suggests that some software patents cover either trivial inventions or inventions that would have been obvious to persons of ordinary skill in the art at the time the invention was made.
• Patent examiners rarely have a comprehensive knowledge of the specific technologies disclosed in the patent applications they examine. This is in large part due to the enormous number of micro-niches in the software field and the relatively limited number of examiners. So, patents are sometimes allowed on inventions that appear to be trivial extensions of existing technologies.

Open source disadvantage

• The free and open source software community, and many companies that use and contribute to open source oppose software patents because they can impede or prohibit the distribution of free software. They contend that patents threaten to undermine FLOSS, regardless of innovations produced by FLOSS collaborations.

Software patents' usefulness as an information source is limited

• Some patent disclosures in the software field are not readable to some programmers; as a result, patents are rarely used as a source of technical information by software developers.^[25]

Long patent pendencies

• In the software industry, product lifecycles churn rapidly; a product can run through its entire lifecycle and become outdated during the time it takes a patent filed on the invention underlying it to issue.
• According to the United States Patent and Trademark Office’s official statistics for 2015, the average pendency for patent applications categorized under “Computer Architecture, Software, and Information Security” was approximately two and a half years, exceeding the pendencies of all other patent categories.
• The average total pendency of European technology patents in 2015 was approximately two and a half years. Technology patents in China, Korea, Japan, and Europe had first action pendencies of approximately one year compared to those in the United States, with first action pendencies of under two years. Europe and the United States have the longest total pendencies of around 26 months, while China, Korea, and Japan have shorter total pendencies from 15 to 21 months.

Patent trolls

• Software companies are becoming patent hoarders, spending billions of dollars on accumulating patents and even more on litigations and settlements – resources could be better put to use in creating new and innovative software advances. Too many patents are given out, making it difficult for developers to create new software due to possibility of accidental infringement. Engineers say it impedes their creativity.
• In 2016 IBM earned 8,088 U.S. patents; thus earning the most grants from the U.S. Patent Office for the 24th year in a row. They bested their closest tech rival by more than 2,500 patents. Behemoths like IBM, Google, and Oracle gather as many patents in the fields considered 'hot' such as Artificial Intelligence to limit the innovation potential of smaller firms. Patent claims were part of the Oracle America, Inc. v. Google, Inc. case, where Oracle claimed that Google's implementation of Java within Android violated Oracle's copyright and patents. Duke Computer Science Professor Owen Astrachan was involved in the case.
• Not only large companies are patent hoarders. NPEs (Non-Practising Entities) are businesses that assert patents through litigation to achieve revenues from alleged infringers without practising or commercialising the technology covered by the patents they hold. NPEs are very effective in their litigations. Damages awards for NPEs almost are 3 times greater than practicing entities over the last 5 years.

Disproportionately harms startups

• Patent assertion entities (patent trolls) disproportionately affect startups, which are important for job creation and innovation. Companies with less than $100M annual revenue represent two-thirds of unique defendants in troll suits. A large percentage of startups reported that being sued by trolls resulted in significant operational impact.

U.S. Supreme Court decisions

Several Supreme Court decisions since 2000, as well as the Federal Circuit and district court decisions interpreting and implementing them, have dramatically impacted the status of software patents in the United States. They have particularly affected many thousands of business-method patents that issued as a result of Federal Circuit decisions in the 1990s. The two principal Supreme Court decisions were Bilski v. Kappos and Alice v. CLS Bank, the latter of which confirmed the applicability of the earlier decision Mayo v. Prometheus to computer-related inventions in which a computer was used to implement an abstract principle or preexisting business practice. (These cases are the subject of separate Wikipedia articles, which discuss the background and rulings in these cases in more detail, and supply authorities supporting the generalizations about those cases that follow. Additional detail is found in the Wikipedia article Software patents under United States patent law, along with supporting citations not repeated in this summary of those articles.)

Bilski case

The Bilski case involved a patent application on methods for hedging against commodity price fluctuations, which the PTO had rejected. The Federal Circuit, in In re Bilski, upheld the PTO's rejection on the grounds that the claims failed the machine-or-transformation test, which the court held should be used as the sole test of patent eligibility. The court did not hold that all business methods are patent ineligible, though a minority of the judges would have ruled that business methods are not properly the subject of patents. 

The Supreme Court affirmed the judgment of ineligibility, in Bilski v. Kappos, but on more general, and less articulated in detail, grounds of undue abstractness. It rejected the Federal Circuit's elevation of the machine-or-transformation test as the sole test of patent eligibility, saying that rather it was simply a "useful clue." The 5-4 majority refused to hold that all business methods were incapable of being patented, but four justices would have established such a rule. A concurring opinion pointed out that the Court was unanimous, however, as to many issues in the Bilski case, including a rejection of the Federal Circuit's late 1990s State Street Bank decision, which allowed patents on any advance, technical or nontechnical (and in that case a numerical financial calculation of stock price changes) that produces a "useful, concrete and tangible result."

The Supreme Court's Bilski decision was criticized because of its lack of detailed guidance on how to determine whether a claim was directed to an abstract idea. Nonetheless, it provided some clarification and affirmed the Federal Circuit's taking a new direction in its software-related patent cases.

Mayo case

In Mayo v. Prometheus, the Supreme Court invalidated a patent on a diagnostic method, because it non-inventively implemented a natural principle; the Court drew on cases involving computer software and other abstract ideas. In this case, the Court was much more detailed in describing how to recognize a patent-ineligible claim to an abstract idea. The Mayo methodology has come to dominate patent-eligibility law. It revived the approach of the Flook and Neilson cases, which is to treat the underlying principle, idea, or algorithm on which the claimed patent is based as if it were part of the prior art and to make patent eligibility turn on whether the implementation of it is inventive. This led to the "two-step" Alice test described next.

Alice case

At the time the Mayo case was decided, there was some uncertainty over whether it applied only to natural principles (laws of nature) or more generally to patent eligibility of all abstract ideas and general principles, including those involved in software patents. The Alice decision confirmed that the test was general. The Alice case involved patents on electronic methods and computer programs for financial-trading systems on which trades between two parties who are to exchange payment are settled by a third party in ways that reduce the risk that one party performs while the other does not. The patents cover what amounts to a computerized escrow arrangement. 

The Court held that Mayo explained how to address the problem of determining whether a patent claimed an unpatentable abstract idea or instead a potentially patentable practical implementation of an idea. This requires using a "two-step" analysis.

In the first step, the court must determine whether the patent claim under examination contains an abstract idea, such as an algorithm, method of computation, or other general principle. If not, the claim is potentially patentable, subject to the other requirements of the patent code. If the answer is affirmative, the court must proceed to the next step.

In the second step of the analysis, the court must determine whether the patent adds to the idea "something extra" that embodies an "inventive concept." If there is no addition of an inventive element to the underlying abstract idea, the court finds the patent invalid under section 101. This means that the implementation of the idea must not be conventional or obvious to qualify for a patent. Ordinary and customary use of a general-purpose digital computer is insufficient; the Court said—"merely requiring generic computer implementation fails to transform [an] abstract idea into a patent-eligible invention."

The ruling continued with these points:

• A mere instruction to implement an abstract idea on a computer "cannot impart patent eligibility."
• "[T]he mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention."
• "Stating an abstract idea 'while adding the words "apply it"' is not enough for patent eligibility."
• "Nor is limiting the use of an abstract idea to a particular technological environment."

The Alice decision met a mixed reception, but profoundly affected U.S. patent law. In its wake, as explained in the Wikipedia article on the case, courts invalidated vast numbers of so-called software and business-method patents (the overwhelming majority of those the United States Court of Appeals for the Federal Circuit considered) and the number of such patents issued has drastically fallen. The Alice decision has been widely criticized for its failure to specify in detail the boundaries of patent eligibility, but it has also been defended because its unanimity tends to stabilize decisional law in the field.

Subsequent developments

After Alice, the Federal Circuit and district courts invalidated large numbers of business-method and software patents based on those courts' interpretations of Alice. Federal Circuit Judge William Bryson summed this up in these terms:

In short, such patents, although frequently dressed up in the argot of invention, simply describe a problem, announce purely functional steps that purport to solve the problem, and recite standard computer operations to perform some of those steps. The principal flaw in these patents is that they do not contain an “inventive concept” that solves practical problems and ensures that the patent is directed to something “significantly more than” the ineligible abstract idea itself. [Citing Alice and Mayo.] As such, they represent little more than functional descriptions of objectives, rather than inventive solutions. In addition, because they describe the claimed methods in functional terms, they preempt any subsequent specific solutions to the problem at issue. [Citing Alice and Mayo.] It is for those reasons that the Supreme Court has characterized such patents as claiming “abstract ideas” and has held that they are not directed to patentable subject matter.