Rethinking intellectual property

The responsibility of software companies towards society has not been high on the agenda the corporate social responsibility community in recent years, perhaps because the environmental and social impacts of production appear to be very low, while the value added to society appears pretty high. When such companies as Microsoft appear in the corporate responsibility press it is often about traditional corporate philanthropy, involving their donation of products or services to specific educational projects.

However, IT companies sit at the nexus of two of the most important changes to capitalism today which should make them a key focus for future work on corporate responsibility issues. On one side is a key technological development in recent capitalism, cheap information technology (IT), while on the other side is the international protection of intellectual property, which is probably the most important regulatory development in capitalism of our time, as it extends private property rights into new areas. The allocation of private property rights as opposed to collective use rights, and the responsibilities and obligations of those people or organisations which enjoy such property rights is a key political question at the heart of capitalism. When the nature and allocation of private property rights are being negotiated, as is the situation with intellectual property today, it reveals to us the way 'property' is an inherently political concept concerning a balancing of private and collective interests. As this balancing of the private and collective interest is a key theme in most corporate social responsibility and citizenship debate, we might reasonably expect developments in the nature and allocation of property to appear.

The responsibility of pharmaceutical corporations who hold patents to crucial drugs for diseases like AIDS has been the focus of some attention over the last few years. Most corporate responses have been in the form of cutting prices and in some instances relaxing their patents, to improve access to medicines in the global South. However, the key issue of what constitutes the responsible use of corporate power in shaping the regulatory regime on intellectual property remains relatively un-debated and unresolved. Recent events in the IT sector make this question even more urgent to explore, and bring IT companies more firmly into the corporate responsibility spotlight.

A significant development came in February, when the European Parliament rejected unanimously a draft Directive to introduce patenting for software.17 The issue had been in play since moves in 97/98 by the European Patent Office to institutionalise patents for software design, and on the negotiating table since a draft Directive was proposed in 2002.18 The issue of patenting of software is just one of the intellectual property (IP) issues facing the information and communications technology (ICT) sector that have implications for public benefit, and thus can be considered in the context of corporate responsibility.

IP is legally defined under three headings: copyright, patents, trademarks. Patent coverage is generally more restrictive than copyright because, while copyright restricts re-use of a particular piece of creativity, a patent, in IP terms, is the equivalent of protecting a whole style of creativity. So, taking language as a hypothetical example, copyright covers a particular text; but patenting would cover a whole style of formatting, or genre of writing, or a certain use of grammar or punctuation. And thus, applied to software, patents could close down a wide range of potential creativity, bringing all sorts of software developments within the scope of concepts of 'similarity' in both 'operation' and 'effect', and thus under the control of patent holders.

What is at stake here in practical terms? A huge amount for both business and society. Arriving on the software scene has been open-source software, with Linux, the desktop/server operating system, at the head of the charge. But the terrain in which these newcomers are emerging is not smooth, and is getting worse: the open-source movement is in serious danger of being tripped up not so much by the question of quality or compatibility (issues with open-source software that are now being overcome, partly through backing by computing giants like Sun and IBM) but by questions over IP. If software patents are set up in Europe, the open-source movement might have its scope for software development badly curtailed; and Linux users are already being sued for illegally using, within the Linux software code, supposedly copyrighted proprietary code.

In 2004 Microsoft was bidding to install their software on the 14,000 desktops of the Munich municipal government. After offering, eventually, a 35% discount on the original $40M US bill, and sending their senior management to meet the Mayor, the Munich government chose Linux, the freely-available, no-licence-required open-source operating system for its desktop machines. Why was this important enough for Microsoft to offer such reductions? By going with Linux, the Munich contract was a watershed in the transition to the desktop machine of Linux, out from its ghetto in back-office servers, where Microsoft's dominance has been hitherto unassailable.19

Nevertheless, the switch to Linux was nearly scuppered by the threat of messy IT patent lawsuits. Munich put its transfer to Linux on hold while they waited for a clarificatory ruling from the EU Commission over whether their shift to open-source would put them in regulatory difficulties should the then-current draft Directive on software patents have come into force; and leave them moreover with software to which updates would only be patchy and infrequent (since those updates would themselves be subject to patent disputes). In the end, they proceeded before receiving guidance - and Munich Mayor Christian Ude told the Commission that it should scrap the software patents law in any case.20

Although the patent issue is at bay, at least in Europe, Linux is having a rougher ride in terms of copyright. Much of the crisis with Linux over copyright has arisen due to the company SCO, which claims that Linux uses some of its code (code for the parent system of Linux which SCO owns) illegally. And therefore it is suing the biggest corporate users and vendors of Linux for colossal sums, firms such as IBM, DaimlerChrysler and computer companies like Novell and Red Hat. The first sign of strength of SCO's case, however, was revealed in 2004 when a judge dismissed most of their case against Daimler Chrysler before a trial even commenced.21 IBM, the biggest mainstream convert to Linux having invested hundreds of millions of dollars in developing it for their machines and clients, has attempted to obtain a similar dismissal in its own case against SCO.22 What may be working against SCO's claim that Linux has pirated code that they own is their unwillingness to say which bits of code these actually are.

SCO's legal campaign poses difficult questions for Microsoft. This is because allegations from open source advocate Eric Raymond, who analysed a leaked SCO email, that "at least a third of SCO's entire market capitalization" comes from Microsoft.23 24 Despite various denials and clarifications a significant commercial link exists. 25 The question this raises is whether or not Microsoft's seeming association with SCO is a legitimate way to interact with its competitors. It also raises the issue of what is a responsible use of corporate power on issues as fundamental as determining the scope and nature of private property rights?

The probability of legal action, and its success, is not the same as potential for legal action and it is the latter that concerns large corporations making long-term software decisions. Microsoft's Steve Ballmer, speaking late 2004 in India26, focused on the likelihood of continuing IP difficulties as the main risk posed for those in Asia deciding to adopt Linux. That copyright concerns are threatening the access of the global South to the software they need for their development is a concern, and the role of corporations in this situation should be a focus of corporate responsibility, especially given the increasing attention to corporate contributions to economic development in the South.

The main theoretical argument for protection of software IP goes that properly protected IP is an incentive to perform ever better in a competitive environment: if you won't get any more from making even better products, because you can't protect the return on that investment, why make the products better? The fact that Linux is so successful without anyone having being paid to write its code suggests that this issue is open to debate. In addition, without serious competitors, protected IP becomes a licence to print money. The ethics of arguing about the need to 'protect return on investment from the competitive environment' - when there is no competitive environment - are problematic. In the absence of competition, the inevitable state of affairs is profits are vastly in excess of investment - as they are in the case of Microsoft's products, running up to 400% profit in some cases27 - and prices that are high with no incentive to come down. Poorer regions of the world should not be denied the opportunity to participate in development based on office and home computing - but at current prices, they are.

Growing pressure from open-source technology and piracy led to Microsoft offering in February to sell its XP operating system at half-price across China, for a short period.28 Microsoft has also responded to the 'digital divide' by rolling out a range of educational projects. Also in February, Microsoft senior vice president and chief executive officer of Europe, Middle East and Africa (EMEA) Jean-Philippe Courtois officially opened the Regional School Technology Innovation Center in Jordan, and announced Microsoft's collaboration with United Nations Development Fund Women's e-Village Initiative, to bring IT to educational centres across the country. "Microsoft's alliance with the Jordanian Government is an extension of our broader commitment to help individuals, communities and nations in the Middle East region gain access to the technology, tools, skills and innovation they need to realize their full potential," said Mark East, Microsoft EMEA Senior Director of Education.29

The benefits of helping women to learn IT skills and have access to IT resources could be significant. However, is the best way of developing a sustainable IT sector in countries like Jordan to set people on a path of using proprietary software, rather than the free alternatives? One often heard criticism of voluntary corporate responsibility initiatives is that they are part of a ploy to distract attention from systemic challenges by diffusing conflict. The business model of proprietary software companies appears inherently problematic for sustainable development, and so a true embracing of responsibility would be to look at how to change that business model.

Although Microsoft is a special case, other companies whose core business is based on digital IP protection could do well to engage in dialogue about the future of intellectual property. Security is so readily bypassed by the armies of crackers in the programming community, and files are so readily transferred online - often by 'centreless' peer-to-peer networks which cannot just be shut down - that some other solution than conventional IP enforcement may become commercially necessary, in addition to more socially beneficial.

contents © Greenleaf Publishing, apart from the Introduction © jem bendell, 2006. site by waywardmedia.com