Wednesday, August 28, 2013

New Zealand Parliament adopts UK approach to software patents, allows broad swaths of them

I just learned on Twitter, from a patent attorney supporting software patents who is very happy about this outcome, that the New Zealand Parliament has adopted a patent reform bill containing a compromise wording on the patent-eligibility of software inventions. Three years ago I commented on the legislative process in New Zealand and cautioned people that abolition wasn't certain because there were clear signs of political support for software patents. For example, the proposal that was on the table at the time said in a footnote that smartphone inventions, almost all of which are software patents, should remain patentable. Based on today's decision I can say with certainty that abolition absolutely positively did NOT happen. (Formally, a third parliamentary reading occurred after that tweet, but it was merely a formality).

While I can see on Twitter that the movement pushing for abolition declares victory, that's not only inaccurate but also an irresponsible thing to do. From the perspective of abolitionists (and I know a thing or two about this because I founded and used to run the European NoSoftwarePatents campaign), the glass in New Zealand is not even half-full. It's still almost entirely empty. I understand that politicians and political movements like to overstate their achievements only to please their supporters/voters, and in this case the spin-doctoring may be driven by a desire to influence political debates in other jurisdictions and the evolution of case law in New Zealand, where there will obviously be some degree of uncertainty now, in some areas, as the courts have to apply the first patent reform bill in decades.

I advocate realism and rationality here because it's the only responsible thing to do. If people are misled to believe that New Zealand has (largely or entirely) abolished software patents, they will make decisions that they will sorely regret when they find out the truth too late. Some innovators will be discouraged from filing applications for software patents, and later they may be sued by those who know that software is still largely patent-eligible in New Zealand and won't have patents of their own to defend themselves with. And some people will believe they are free to infringe -- until they get sued and a court holds them liable. I can't prevent others from engaging in reality distortion, but my conscience doesn't allow me to tell anything other than the truth on this.

I'm now going to explain why the New Zealand outcome is far from large-scale abolition, and why the "compromise" is mostly a victory for those promoting, not those opposing, software patents.

Three years ago, the bill contained a broad statement that "[a] computer program is not a patentable invention" (§ 15-3A). It turned out to be unworkable, and clarifications like smartphones being patentable showed that the intent never really was to do away with all software patents. But a broad statement it was, and the compromise adopted today contains the European "as such" wording. In Europe, hundreds of thousands of software patents have been granted because an exclusion of computer programs "as such" is not an exclusion of patents on software inventions that make a technical contribution. Simply put, "as such" excludes certain aspects of software from patent-eligibility, but not all of them. It largely excludes parts that are protected by copyright law anyway, as opposed to the technical solutions to technical problems that are the province of patent law. The supplementary order adopted in New Zealand says this:

Subsection (1) [which says, like the 2010 bill, that a computer program is not an invention] prevents anything from being an invention or a manner of manufacture for the purposes of this Act only to the extent that a claim in a patent or an application relates to a computer program as such.

[emphasis mine]

Again, "as such" alone doesn't really mean a huge difference between U.S. and European rules on patent-eligibility. The U.S. approach of "everything under the Sun made by Man" being patent-eligible is obviously the most permissive one, but I follow litigation on a cross-jurisdictional basis and in the smartphone patent disputes I watch the vast majority of software patents asserted in the U.S. also exist, or could have been successfully applied for if the patentee had so elected, in Europe.

The New Zealand compromise doesn't stop there, and it then seeks to clarify "as such":

A claim in a patent or an application relates to a computer program as such if the actual contribution made by the alleged invention lies solely in it being a computer program.

[emphasis mine]

The order then goes on to provide examples of what falls within the scope of patent-eligibility in accordance with this sentence. That sentence on it own would not really mean anything. Most of those hundreds of thousands of European software patents also don't cover inventions that lie solely in being a computer program. There's a clear technicity requirement.

The bill provides two examples, one of an invention meant to be patentable under the compromise bill (a washing machine that does a better job at washing clothes) and one meant to be excluded ("a process for automatically completing the legal documents necessary to register an entity", using standard computer hardware). These examples still don't really provide much clarification because these are two extremes, and for line-drawing you need a narrow corridor, not the broadest one imaginable. If the improved washing machine was excluded from patent-eligible subject matter, the patent system would be confined to little more than molecular pharmaceutics. As for the auto-completion of legal documents, the bill only says that "[t]he hardware used is conventional" and that "[t]he only novel aspect is the computer program", and that "[t]he mere execution of a method within a computer does not allow the method to be patented", but most of the hundreds of thousands of software patents we have in Europe are patented because of a technical contribution that goes beyond what this description says. In fact, the auto-complete example in the New Zealand bill is so vague that, without a greater degree of specificity, it wouldn't even be useful for the purpose of illustrating differences between U.S. and European software patent-eligibility rules.

It would be an understatement to say that there is a broad corridor between the two extreme examples contained in the New Zealand bill. The courts in New Zealand are now left to do all of the line-drawing work because politicians, who ultimately realized that they couldn't deprive domestic inventors of protection and isolate their country on the international scene by violating the TRIPS agreement, didn't really do so. At best, one can read between the lines of that bill that there was some pressure to be restrictive in connection with software patents -- but restriction is a fundamentally different thing than abolition.

The story that is being told by New Zealand politicians and lobbyists/activists is that the New Zealand patent reform bill adopts the UK case law on software patents, which is described as the most restrictive one in Europe. In the smartphone patent cases I watch, challenges to the validity of patents are regularly brought in UK courts, typically in hopes of influencing decisions by German courts, where most European infringement complaints are filed. And the UK is anything but a "no software patents" jurisdiction. Therefore, New Zealand won't be a "no software patents" country either.

The rate of success of defendants in infringement proceedings, or plaintiffs in declaratory judgment complaints seeking the invalidation of patents, is indeed very high in the UK, but that's not because of patent-eligibility rules. There are various reasons for this. One thing I noticed in various smartphone cases is that UK judges tend to frequently find patents obvious over "common general knowledge", while German courts (particularly the German courts hearing infringement cases, in which the validity of a patent is looked at cursorily but not actually adjudicated) want to see evidence in the form of prior art references (documents, products etc.).

For a case study that shows what the UK approach really comes down to (and what future New Zealand patent-eligibility case law may very well look like after today's patent reform vote), I recommended an HTC v. Apple case. The England and Wales High Court threw out four Apple patents, but even though HTC claimed that every one of them was a software patent and therefore covered an ineligible invention, it prevailed only once -- and even that finding of patent-ineligibility was reversed on appeal! As a result, one of the two claims of that patent survived, and the other one was still found invalid, but only on obviousness grounds. The lower court had basically found that the patent in question, EP2098948 on a "touch event model", didn't have a technical effect but merely made life easier for programmers by giving better structure to code. This is very similar to the New Zealand concept of an invention lying solely in it being a computer program: there's something about it that is limited to the intangible realm of code, not the real world of programmed devices. And even that reasoning wasn't affirmed on appeal.

I'm in no position to predict what the New Zealand courts are going to make of this bill, but I can tell you based on my intimate knowledge of the European situation (I'm based in Germany and follow patent disputes in many countries, including several European countries, which obviously include the UK) that the courts and the patent office in New Zealand still have massive wiggle room to allow software patents, so if I were a corporate executive who cared about the New Zealand market, I would definitely continue to file software patent applications, and I wouldn't consider it responsible to assume that I can just go ahead and infringe.

When all of this settles out, some of the people who celebrate today will be very disappointed to find that the New Zealand patent reform bill isn't nearly as restrictive, let alone abolitionist, as they used to think. By the time they find out, many of today's politicians may not be in office anymore.

[Update] I did a follow-up post the next day that explains all of this further. I'd like to stress that the NZ patent reform bill doesn't disallow patents on graphics adapters, so, for one example, it's still possible to patent video compression techniques, which can later be asserted against infringing software. That's an example that also came up in the European software patentability debate about a decade ago, in which I participated rather actively. [/Update]

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