Nexedi Business Model Nexedi is an innovative software publisher located in Lille, France. Nexedi has developped a complete ERP software - ERP5- based on a novel business model which allows to represent any corporate information with only 5 core concepts. Nexedi has also developped innovative technologies which allow to implement QOS on regional wireless networks: PEWIT. Nexedi business model consists in selling large scale ERP projects based on ERP5 technology. Each project includes a combination of consulting, custom development, and training. More than 30% of Nexedi added value relates to R&D. More than 5 man years have been invested in R&D in ERP5 at this date. Nexedi balance was positive in 2002 and 2003. It is expected to be positive in 2004. Nexedi IP Strategy Nexedi views intellectual property (IP) as a strategical tool for software business. Nexedi IP strategy is based on 4 approaches: - **copyright**: we use copyright to license our software technology. For example, we provide our ERP5 software under GPL license. This license allows to build a community of developers and, at the same time, prevents anyone from stealing our technology. - **trademark**: we use trademarks in both a defensive way and an offensive way. Owning a trademark gives us a kind of defensive protection for our Internet domain names. It prevents another company from claiming our domain names. Offensive use of trademarks include the ability for us to prevent another company from using the ERP5 brand to commercialise a project which is not related to ERP5 or create market confusion. - **secret**: we keep some software code secret. For example, client specific code which allows to compute industrial prices or margins is part of our client trade secret. It is never published. - **patents**: we currently file software patents as a preventive measure. Patents provide us no protection, cost us time and money but will be required if the European Union decides to legalize software patents. Nexedi and Software Patents Nexedi holds a couple of patents on so-called *computer implemented inventions*. One of our patents relates to a technology which allows to use of peer to peer in business. Another patent relates to a system which allows to view all Japanese television channels in France. Another patents relates to the use of an SQL index to query an object database. All our patents describe innovations which are new, inventive and have as much technical effect as any software patent We also tend to file broad patents on innovations which are simple, yet non trivial, rather than narrow patents on complex innovations. Our patents are filed before any line of code is written or published. We use a procedure called *deferred examination* which allows to pay only 35 EUR for getting a patent. We then transform our patents into *utility certificates*, which provide the same level of protection as a patent, but during only 7 years, and do not require any examination. Up to now, all our patent applications have been accepted. Once a patent is filed, we wait for the official approval from the French Patent Office to publish our technology, which usually takes 3 months. We then start writing code and publish it within a few weeks. As a consequence, going through software patents adds a delay of 3 months to the release our technology and costs us about 2 days of engineering resource for writing the patent itself. Nexedi Intentions with Software Patents Nexedi intention with software patents is dual: - **defensive measure**: in the event software patents become enforceable in Europe and a competitor tries to use patents to prevent Nexedi from doing business or to prevent the ERP5 community from developping ERP5, Nexedi will give away its patents to whoever can attack this competitor. - **fiscal optimisation**: our competitors use software patents to increase their profitability. For example, Ireland is used as a hub by US software companies to evade corporate taxes through patent licenses. Some EU companies use software patents to reduce corporate taxes during acquisition / merger operations. Patents are considered as long term asset and benefit from special fiscal Laws. This creates a strong incentive to account software R&D through patents rather than through copyright. Until software R&D fiscal Law gets harmonized and until accountants get used to consider copyright as a valuable asset, Nexedi must follow the same practices as its competitors. Software Patents ROI Nexedi has no intention to use software patents to prevent another company from imitating Nexedi technology. We are perfectly aware that software developments, inluding the most innovative ones, are made up of 99% ideas and technologies imitated from others. Getting a patent for the remaining 1% ideas and technologies which are really innovatives does not give any enforceable protection. Patent disputes between software companies usually end up with cross licensing agreements which mostly benefit to lawyers and patent attorneys rather than to software innovators. As it has been perfectly summarized by Pierre Haren, CEO of Ilog, world leader in optimisation compoenent software: "The general use of software patents has the effect for software publishers to divert their resources from product improvement to juridical intelligence and legal dispute activities" Patents cost time and money to Nexedi, and force us to postpone the public release of our technologies. Patents generate no turn-over. They may eventually provide us some fiscal flexibility whenever Nexedi migrates its HQ to another country in the distant future. This is why we consider at Nexedi that software patents have a negative ROI (return on investment). Conclusion: Nexedi Against Software Patents Nexedi does not want software patents to be legalized in Europe and supports amendments voted by the European Parliament that exclude dataprocessing from subject matter, ensure freedom of publication and interoperability. We believe those amendments set a clear limit to the patent system, protect interoperability in the software industry and make sure software publishers are not threatened by the patent system, yet allow traditional industry keep on patenting their technology.