BREAKING NEWS – Are Software Patents in New Zealand a Thing of the Past?

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New Zealand’s Minister of Commerce yesterday confirmed that computer programs will be excluded from patentability in the new Patents Act, but inventions for embedded software will be allowed.

This announcement comes after considerable public debate in light of the Commerce Select Committee’s (CSC) recommendation that software should be excluded from patentability. Software industry groups were concerned about the impact the blanket exclusion might have on the ability to protect innovation in New Zealand. Simon Power, the Minister of Commerce, has now decided that the Patents Act will exclude all software from patent protection, but Intellectual Property Office of New Zealand (IPONZ) guidelines will allow inventions for “embedded” software.

This decision is highly questionable and leaves software developers seeking patent protection in New Zealand with little clarity.

Background to the decision

Under the current New Zealand Patents Act, inventions for computer software are patentable provided they meet the usual requirements for patentability, namely that they are novel, inventive and have a commercially useful effect.

A review of the existing Patents Act in the early 2000s led to a Patents Bill being drafted in late 2004. The Patents Bill was finally introduced into Parliament in 2008. At that stage, it did not include any exclusion of software patents.

After its first reading in Parliament in May 2009, the Bill was referred to the CSC who called for submissions. The Ministry of Economic Development (MED) released a statement that a decision had been made not to exclude software from patentability. In response, a number of businesses in favour of excluding software from patentable protection made submissions to that effect. There were fewer submissions in support, but this is hardly surprising because, following the MED’s statement, it was believed that the issue was not under consideration.

The CSC (based, presumably, on submissions made to it by those against software patents) performed a complete turnaround in policy, recommending in March 2010 that the Bill should specify that a computer program is not a patentable invention. However, they did indicate that this would be unlikely to prevent the granting of patents for inventions involving embedded software.

Following this, some members of the New Zealand software community, including Microsoft and the New Zealand Information and Communication Technologies (NZICT) Group, spoke out against the CSC’s recommendations.

The Minister of Commerce’s announcement

Simon Power’s announcement indicated that “a further amendment to the Bill is neither necessary nor desirable”, citing the submissions received from the anti-software patent community in support. The Patents Act will therefore exclude computer programs from patentable protection.

At the same time, Simon Power has instructed IPONZ to develop guidelines that allow inventions that contain embedded software to be patented.

What is “embedded’ software?

Embedded software is software that is run on a special-purpose device (i.e. not a computer) and enables the device to perform a particular function. For example, embedded software typically runs on mobile phones, home appliances, aircraft and much more besides. It is distinct from more general software, which typically runs on an all-purpose computer, like a PC or laptop. Although the distinction between embedded software and other forms of software is often hazy, it is an important difference to define when it comes to rewarding innovation through patent protection.

Often, the fundamental idea of a device performing a particular function can be put into practice in a number of ways. An electronic engineer might develop an electronic circuit to enable the device to perform the function. A software developer might develop code for a computer chip to enable the device to perform the function. Isambard Kingdom Brunel might have developed a complex system of cogs and pistons to perform the function. The inventive concept behind the idea should be able to be protected by a patent, regardless of the manner in which it is carried out. This is why the patentability of embedded software is important.

Comment

The issue of whether software should be patentable in New Zealand is complex. In this article, we do not comment on whether it should be or not, but we will discuss the announcement of the Minister of Commerce and the process in arriving at it.

The decision arrived at by Simon Power has come after a seemingly flawed process. For a long time, there was no suggestion that the issue of software patentability was even in question. So it is not surprising that the CSC received few submissions in support. Instead, an important policy decision seems to have been made based on the submissions against software patentability without giving further time to consider submissions in favour once it was established the issue was under scrutiny. If this is the case, there could be wider ramifications for parliamentary policy-making in general.

The announcement leaves the New Zealand software industry in a very unsatisfactory position. On the one hand, the legislation will impose a blanket exclusion on software patentability. On the other hand, IPONZ has been asked to draw up guidelines on allowing inventions that contain embedded software. This is unsatisfactory for two reasons:

1. IPONZ is faced with the virtually impossible task of drawing up guidelines on an issue that remains unclear in many countries despite many years of case law attempting to settle the issue. How IPONZ defines what is and what is not allowed will be interesting and subject to much criticism.
2. No matter what guidelines IPONZ comes up with, they may have little authority before the courts. A recent decision has suggested that the provisions of the Act and Regulations will always take primacy over IPONZ guidelines, particularly when those guidelines have no official status, are often at odds with the legislation and/or seek to introduce distinctions which are not present in the legislation itself. It will be left to the courts to decide where the boundary of patentability lies and they are bound only by the wording of the legislation, which presently states “a computer program is not a patentable invention”. It is all too easy to envisage the courts interpreting this as a blanket ban on software patents, despite the intentions of the policy makers.

It is difficult to understand why the MED has not followed the example of the European Patent Convention, which has an exclusion to patentability of “programs for computers” qualified by the wording “as such”. The language “as such” may seem insignificant but it provides a legislative basis for courts to allow patents for embedded software inventions but exclude more general software. It would be a simple matter for New Zealand legislation to be worded identically, which would mitigate the risk of the courts applying the exclusion literally, thus making things clearer for all concerned (because European case law could be considered to help understand what kind of inventions are patentable and what are not).

Where to from here?

The Patents Bill is due for its second reading in Parliament. It is currently some way down the agenda but should be dealt with in the coming months. It will be interesting to see if further changes are considered on the controversial issue of the patentability of software inventions. In the light of continued lobbying from the software community, this debate is unlikely to have been put to rest yet.

By Jonathan Lucas, Associate 

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