08 August 2010

New Zealand Allows Patents on "Embedded Software" but Fails to Provide a Definition

Back in April this year, the parilament of New Zealand voted for a major Patents Reform Bill that tightened the standards of patentability of software-implemented inventions, such that they would have been broadly eliminated in New Zealand.

The bill was drafted by the Select Commerce Committee after consulting the country's (open source) software industry, represented by the Computer Society (NZCS) and the Open Source Society, which obviously convinced the lawmakers that patents are detrimental to open source software development. In this regard, the bill summarises that
Protecting software by patenting is inconsistent with the open source model, and its proponents oppose it. [...] They felt that computer software should be excluded from patent protection as software patents can stifle innovation and competition, and can be granted for trivial or existing techniques. In general we accept this position.
Unsurprisingly, there were not only happy faces in New Zealand and some buisiness voices expressed their fear that the decision damages investments in New Zealand's software development industry, among which was the NZICT, which claims to represent "New Zealand's ICT industry" and, as such, also the local subsidiaries of a number of international patent holders (e.g. Microsoft, IBM, HP).

Further, Chris Auld, director of New Zealand software developer Intergen, critisised that the Bill would “suck the lifeblood” out of the New Zealand software development industry and added that the justified criticism agains software patents should better have led to improvments of the quality of search and examination of software-related patent application by the NZ Intellectual Property Office (IPONZ). The Commerce Select Committee was especially critisised for particularly listening to the rather passionate open source lobby.

In the end the bill suggested to explicitly exclude software from patentability: "We recommend amending clause 15 to include computer programs among inventions that may not be patented."

When the Select Commerce Committee issued its report on the Patents Bill in early July 2010, it also mentioned the possibility of an exception for "embedded" software. i.e. software whose only purpose is to control a machine. During its consideration of the Bill, the Committee received submissions that inventions relating to "embedded" software as part of a machine should be able to obtain patent protection. But, since the Commitee found that too difficult to define, such a distinction was not put in the Bill, whereas the Committee added “that our recommendation [...] would be unlikely to prevent the granting of patents for inventions involving embedded software".

Then reports occured that NZ Commerce Minister Simon Power publicly indicated that the government would support the computer program exclusion, but that the Ministry of Economic Development (MED) is backing away from the Commerce Committee’s recommendation and instead plans to redraft the Bill along the lines of the European Patent Convention (see reports here and here), which indeed would have been a step in the right direction.

Even more rumours on a European approach towards software patents were planted by reports on a letter in which a New Zealand patent attorney reports from the NZICT discussing this shift. While the blog post has been deleted soon after publication, some were quick enough to reconstruct it from Google cache and to extract that a government official made the points that the MED "had serious concerns" and "the intent had never been to ban software patents outright". Instead, "the signal that the Government wants to send is to follow European law and practice [according to which] software [...] should have a technical purpose and be an inventive step to be patentable".

Now, after all this back and forth, the MED has decided that it was the real intent of the Committee, all along, to treat machine-controlling software as a special class that may be patentable. Consequently, it was then confirmed by Minister Power on July 15, 2010 that "further amendment to the bill is neither necessary nor desirable" and that he "instructed the IPONZ to develop guidelines to allow inventions that contain embedded software to be patented", since it was accepted by the Committee and the Minister that companies investing in inventions involving "embedded" computer programs should be able to obtain patent protection for these inventions (see also reports here and here).

Apparently, like in other juristictions before, also the legislative of New Zealand has failed to clearly specify the distinction between patentable and unpatentable software in a Bill and now handed the problem down to the executive authority, the IPONZ, to manage this by (presumably more or less vague) guidelines, which will be subject to another round of lobbing (as already announced by the NZCS) and public discussion and then most likely be covered by court proceedings as soon as the first patent application is rejected based on these guidelines.

In the same context, Mark Summerfield of the Patentology blog pointed to the fact that "it is the experience of every government, patent office and court that has ever attempted to draw a 'bright line' between patentable and unpatentable computer-implemented inventions, that this is a futile exercise" and, consequently, it has taken more than two decades of jurisprudence in Europe, the US and Australia to develop their respective present positions on so-called "software patents", while grey areas still remain as to where the respective boundaries lie.

In the light of this history, it appears highly doubtful whether the IPONZ can succeed where the Select Committee found it "too difficult to define such a distinction" and competent legal and technical minds across the world have failed as well. In any case, it will be exciting to follow how New Zealand tries to set up an embedded/non-embeded doctrine competing with the technical-character paradigm of the EPO Appeal Boards (see e.g. here) and the increasingly similar technical-problem paradigm of the German Federal Court of Justice (see e.g. here), on the one hand, and the abstract-idea paradigm of the US Supreme Court (see e.g. here) and the machine-or-transformation paradigm of the US CAFC (see e.g. here), on the other hand.

In the end, maybe after another two decades of intense discussions and lobbying, it will eventually turn out that all theses appraches only represented different "compromises around linguistic traps" (as former CAFC Chief Judge Paul Michel called his Bilski decision) and meanwhile have converged into a common "theory" on software patent eligibility. First tender indications of such conversion migh be the increasing interchange of "indefinite legal concepts" between the various judical approaches, such as the notion of "software as such" as codified in Art. 52 EPC, which has recently been used by the BPAI in ex parte Proudler to reject claims based on the US Supreme Court's abstract idea approach, or the fact that the German Federal Court of Justice recently analysed under which circumstances "embedded software" may represent statutory subject-matter and, by this, convered towards the EPO approach.

From a more political point of view, the IAM blog added that, if the final law and guidelines (and possibly also court proceedings) confirm the non-patentability of computer programs in New Zealand, "anti-software campaigners will have a legislative template and a real live working example of a software patent-free environment on which to base their arguments in future".

(Photo (C) 2007 by Unofficialenglandrugby via Flickr under the terms of a CC license)