Software to be excluded from Patentability in New Zealand

Thursday 10th June 2010

Progress towards an updated Patents Act in New Zealand took another step forward late last month with the issuing of the Commerce Select Committee’s report on the draft Patents Bill (reported recently in MIP).  The report signalled a potentially significant change in the patentability of computer-implemented inventions in New Zealand, with the Select Committee making the surprise recommendation that computer programs be excluded from patentability.

Based upon the United Kingdom’s Patents Act 1949, New Zealand’s Patents Act 1953 incorporates a definition of an ‘invention’(i)  derived from the United Kingdom’s Statute of Monopolies 1623, and states that invention means “any manner of new manufacture”.  The interpretation of this definition has been successively broadened in a series of decisions by the Courts and the Commissioner of Patents over the years, culminating in a 1994 decision of the Commissioner(ii)  which resulted in allowance of claims directed towards computer-controlled methods of air traffic control.  Following that decision, computer-implemented inventions have been patentable provided only that the claimed invention produces a commercially useful effect.

As an initial step towards updating New Zealand’s patent laws, first mooted in 1990, a three-stage review of the Act was undertaken by the Ministry of Economic Development.  The third stage of that review considered the Act’s definition of an invention and the issues relating to its application to modern technology.  Particular consideration was also given to the patentability of software.  A few submissions were received arguing for the exclusion of software, but otherwise submissions were generally in favour of the patentability of software in at least some form(iii).  The Associate Minister of Commerce at the time, Judith Tizzard, thus concluded that “There are, then, no strong arguments for specifically excluding business methods and software from patent protection”(iv).

New Draft Patents Bill

A completely new draft Patents Bill to replace the Patents Act 1953 was released for public consultation in late 2004, and was finally introduced to the House of Representatives for its first reading in mid-2008.  The Bill retained the existing definition of an invention but introduced several important changes which were generally well-received.  Among those changes, the Bill introduced a number of new measures expected to minimise the number of patents for inventions of dubious novelty or inventiveness, a criticism commonly levelled at so-called “software patents”.  In particular, the Bill introduced a change from a “local” to an “absolute” novelty requirement, and added obviousness as a ground for objection during examination.
The Patents Bill was subsequently sent to a Commerce Select Committee for review, and public submissions on the issue of software patentability were received from 67 interested parties, with 36 submissions being heard.  Not all of those parties were necessarily well-informed, however, with the non-profit organisation InternetNZ, for example, incorrectly noting in its submission that “it is not currently possible to obtain a patent in New Zealand for software”(v) and unintentionally arguing that since “the review process which led to the current Bill did not include extensive or thorough consideration of the benefits or costs of allowing for the patentability of software… the status quo… should be reinforced in the absence of any apparent reasons to change it.”

Open Source Opposition Gains Ground

Most outspoken among the parties making submissions to the Select Committee were a number of impassioned proponents of the free and open source software models, whose arguments appear to have been given great weight by the Committee to the possible detriment of the developers of novel and inventive software.

The free and open source models of software development and distribution generally include liberal licences allowing users access to source code to modify, copy, and/or redistribute the software as they see fit, without risk of infringing any copyright or patent rights held by contributors to the software provided that the terms of the licence are adhered to.  A significant proportion of free and open source software is developed collaboratively by volunteers contributing their time and skills to a project.  This collaborative development creates many opportunities for contributors to introduce copyright- or patent-infringing source code or functions to a project, making warranties of non-infringement in licenses problematic and/or inappropriate.  The risk of infringing third-party intellectual property rights is therefore seen as a threat to the free and open access upon which these models are based.

While the term “free” in free and open source software refers to the freedom of access and modification rather than the cost of licensing or using such software, it is common for free and open-source software to be provided without cost to the consumer.  As a result, few open source software projects are in a position to determine whether their software is likely to infringe any patents, pay royalties to patentees, and/or seek revocation of invalid patents.

Advocates of free and open source software are generally united in their opposition to software patents.  The most common argument made in support of this position is that software patents represent a barrier to innovation, whereas the justification for the 20-year monopoly granted by a patent is to encourage and reward innovation and the public disclosure of inventions.  It is also often argued that software, being a written expression of an algorithm, is akin to literary or musical works which are not patentable, and that there is no reason why software should be the only field entitled to “dual protection” under copyright and patent laws.  However, such arguments conveniently overlook both the fact that software is functional, and that certain inventions in other fields are often entitled to copyright, registered design, and patent protection.

The strong opposition to software patents from the free and open source community is a viewpoint not necessarily shared by commercial developers of the more traditional “closed-source” or proprietary software.  Without software patents, developers risk seeing their own inventive products reproduced by other companies and/or open source groups having the resources to create their own implementation of an inventive idea, thereby avoiding infringement of the inadequate protection provided by copyright law.  Such companies are therefore faced with being unable to recoup their development costs in the face of competition from companies with much larger or more effective marketing campaigns, and open source software groups having unlimited programming resources with minimal or non-existent overheads.  Proponents of software patents therefore often argue that patents do encourage innovation and provide an incentive for the significant investment made in the development of new inventions involving software.

The Select Committee issued its report on 30 March 2010, surprising even the opponents of software patents with their recommendation for exclusion.  Even more surprising, however, was the justification provided for this recommendation, with the Committee agreeing with submissions arguing that “‘new’ software invariably builds on existing software”.  The suggestion that software is somehow unique in this regard is staggering, and the Committee members are clearly unfamiliar with Sir Isaac Newton’s famous comment that “If I have seen a little further it is by standing on the shoulders of giants.”  The Committee in its report went on to accept that software patents “can be granted for trivial or existing techniques”; this would seem to demonstrate a clear ignorance or misunderstanding of the basic requirements for patentability (namely novelty and inventive step), or at best a lack of faith in the ability of the Patent Office and Courts to consistently apply those requirements.

The Select Committee did recognise that there are likely to be inventions involving the use of software which might be patentable, in particular referring to “embedded software”, but avoided the difficult task of attempting to precisely define what may and may not be patented.  Instead, the Committee suggested that the Intellectual Property Office of New Zealand be given the unenviable task of developing guidelines on the issue.

Commerce Minister Simon Power has indicated that the Government will back the proposed exclusion of computer programs.  Members of opposition parties have also expressed their support for the Committee’s recommendation.  A press release from the opposition New Zealand Labour party quoted their Commerce spokesperson and Chairman of the Select Committee, Lianne Dalziel, as saying,

“Copyright is the appropriate form of intellectual property protection. We believe that this change to the Bill isn’t a big change from previous law at all. Patents are not used to protect books or music.” 

The Labour party’s Communications and IT spokesperson Clare Curran, also a member of the Select Committee, adopted similar reasoning in her support of the recommendation.  “Imagine if a piece of music was patented and you could therefore not use the notes in that piece of music.”

Passage of the Bill

The Patents Bill will receive a second reading to provide Members of Parliament with the opportunity to debate the principles of the Bill and the changes proposed by the Select Committee.  It is expected that the Patents Bill will pass the second reading rather than being defeated, since it is widely recognised that the Patents Act 1953 is long overdue for an update.  The Bill will then proceed to a Committee of the whole House to allow Members to debate and vote on the Bill clause-by-clause, and then will be given a third and final reading.  Bills at that stage are rarely rejected, and once passed will require only Royal assent from the Governor-General before becoming law.  It is expected that the Patents Bill will come into force as the Patents Act 2008 some time in 2011.

If computer programs are indeed excluded from patentability as recommended by the Select Committee, there is likely to be significant uncertainty regarding the boundaries of patentability for computer-implemented inventions for some time.  In the past, questions of patentability have been raised with the Commissioner and/or Courts relatively infrequently due to the relatively small size of the market in New Zealand.  It could be some time before there is a body of case law to provide guidance on the issue.  Until then, it is the guidelines to be developed by the Intellectual Property Office of New Zealand which will initially determine the boundaries of patentability if the Bill is enacted in its present form.

File Software Patent Applications Now

To avoid the software exclusion, applicants may wish to consider filing patent applications in New Zealand before commencement of the Patents Act 2008.  Transitional provisions in the Patents Bill state that applications made under the Patents Act 1953 “generally continue to be dealt with under that Act”(vi). 

In the case of national phase applications entering New Zealand from a Patent Cooperation Treaty (PCT) application, applications will continue to be dealt with under the present Act if the applicant fulfils their obligations under Article 22(1) or 39(1)(a) of the Patent Cooperation Treaty prior to commencement of the new Act(vii).

Any divisional applications filed from applications made under the Patents Act 1953 will also proceed under that Act(viii)  regardless of when the divisional application is filed, provided only that they are antedated to the filing date of the parent application (i.e. do not add any new subject matter).

This article was published in MIP Week, May 2010.

(i) Patents Act 1953, Section 2 (ii) Hughes Aircraft Co.’s Application, Commissioner’s Decision No P03/1995, Commr Popplewell, 3 May 1995
(iii) Summary of Submissions on Exposure Draft of Patents Bill, Ministry of Economic Development, 2002
(iv) Review of the Patents Act 1953 Stage 3: Part 1, Hon Judith Tizard, 2003
(v) Submission to the Commerce Committee on the Patents Bill (235-1), Internet New Zealand Inc, 2 July 2009
(vi) Patents Bill 2008, Section 299(1)(b)
(vii) Patents Bill 2008, Section 305 (viii) Patents Bill 2008, Section 304

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