We asked the German Bundesamt für Statistik (Federal Department of Statistics) for a current VAT breakdown for the following branches of the economy: 72.2 (software houses), 72.3 (data processing services), 72.4 (databases) and 72.6 (other data-processing related occupations).

The result: 69% (about 25,000,000,000 Euro) of 2001's VAT revenue^[1] are raised by SMEs (not more than 50 mio Euro turnover per year). The extent to which these smaller organizations dominate the IT sector can also be seen in the fact that even today 47% (about 17,000,000,000 Euro) come from companies with less than 10 mio Euro turnover per year.

We also asked the Federal Employment Office for statistics about employment in the aforementioned branches (72.2, .3, .4, and .6).

The result: On June 30th, 2003, 80.9% of all people employed in the data processing sector worked in an SME as defined above.^[2]

According to a rule of thumb often cited in the patent world^[3], every company should use about 10% of its year's profit to pay for patent registrations. Small and medium-sized businesses, however, can hardly build more than a partial defense shield this way. If, on the other hand, such a company decides to save this money and focus entirely on R&D and marketing, as many companies do, it still has to divert considerable amounts of its income for patent searches, litigation risks, license negotiations and competitive disadvantages.

As patent lawsuits are not covered by insurance, risks must be absorbed by companies on their own. SME projects in the IT sector are almost always below 100,000 Euro; costs of potential patent lawsuits easily go into the millions. Software patents are therefore much more of a threat than a gamble for the great majority of German IT businesses.

In the software market, innovation is driven by the ability to quickly react to customer needs and expand market share. The head start that an innovative company enjoys is normally protected by copyright, know-how, and the inherent complexity of developed systems. Even large companies like Cisco and Airbus assert that their innovation is driven by these influences moreso than by their approximately 1,000 annual patent applications.

A survey by the University of Sussex in 2001 that was ordered by the European Commission demonstrated that SMEs are not interested in formal protection schemes. The same result can be found in a Fraunhofer Institute survey from 2001, commissioned by the German government, which shows very little enthusiasm for patents among the surveyed companies. Three pan-European organizations for medium-sized businesses (CEA-PME, ESBA, and CEDI) have founded the European mid-sized business alliance to stand against software patents. The Association of German Chambers of Industry and Commerce (DIHK), the Austrian business chamber and many software companies and business associations have expressed similar positions.