Management, compliance & auditing

Software Patent Law: EU, New Zealand, and the US compared

1. Introduction

A patent is defined as an exclusive right or rights provided by a government to an inventor for a certain period of time in exchange for the public disclosure of an invention. A software patent is a patent for an invention involving software. The extent to which software patents should be granted varies from country to country.

The present contribution examines the current state of the art of the software patent law in the EU (Section 2), New Zealand (Section 3), and the US (Section 4). The two countries (New Zealand and the US) and one supranational organization (the EU) were chosen because of their different approaches towards software patents. Subsequently, an examination of the advantages and disadvantages of the US and European approaches towards patentability of software is provided (Section 6). These two approaches represent the two major approaches towards patentability of software.

2. Software patent law in the EU

The European Patent Office does not grant patents for computer programs or computer-implemented business methods that make no technical contribution. According to Article 52(2)(c) and (3) of the European Patent Convention (an international treaty establishing the European Patent Organization as well as an autonomous legal system according to which European patents are granted), a program for a computer can be patented only if it has the potential to cause a "further technical effect." The technical effect must go beyond the inherent technical interactions between program (software) and computer (hardware).

The European Patent Office accepted that the ordinary technical effects of all programs could not per se constitute technical effect because it would make all software patentable. According to the European Patent Office, an example of a program having "further technical effect" is a program that meets at least one of the following three conditions: (1) controls a technical process; (2) governs the operation of a technical device; (3) causes the software to solve a technical problem.

3. Software patent law in New Zealand

Pursuant to the Patents Act 1953, computer programs can be patented in New Zealand provided they produce a commercially useful effect. In 2008, a new Patents Bill was introduced in New Zealand's parliament. Initially, the new Patents Bill contained a provision stating that computer software cannot be patented. However, New Zealand's commerce minister Crag Foss amended the Bill so that only software "as such" cannot be patented. Consequently, inventions that include software can be patented. The new Patent Bill will probably become a New Zealand law on 31 December 2013.

The New Zealand Open Source Society (ZOSS) viewed the amendment as a victory for US corporations "who have refined the art of the patent infringement extortion, and have broken the software marketplace overseas, using software patents to set back any would-be competitors."

According to National Business Review (a weekly New Zealand newspaper aimed at the business sector), the amendment has been welcomed by patent lawyers because the complete removal of software patents "robs inventors of the incentive to innovate and create new material if others can simply free-ride on that investment."

4. Software patent law in the United States

The Patent Act of 1952 was enacted on the basis of Article I of the U.S. Constitution. The Patent Act of 1952 has been encoded in Title 35 of the United States Code. Pursuant to § 101 of the Title, an invention is patentable only if it is novel, useful, and fits into one of four categories: (1) processes, (2) machines, (3) manufactures, or (4) compositions of matter.

While software or computer programs are not explicitly mentioned in the United States patent law, the United States Patent and Trademark Office has a long established practice of granting software patents. This practice is supported by many decisions of the US courts. For example, in Diamond v. Diehr 450 U.S. 175 (1981), the United States Supreme Court stated that controlling the execution of a physical process, by running a computer program did not preclude patentability of the invention as a whole. In In re Beauregard 53 F.3d 1583 (1995), the Federal Circuit stated that pure software operating on an ordinary computer is patentable.

5. Advantages and disadvantages of the US and the European approach

The US and the European approaches towards patentability of software have both advantages and disadvantages. The main advantage of the US approach is that it protects software developers against competitors creating equivalent solutions. Such protection can incentivize the software developers to invest in research and development of new software. In a country that prohibits software patents, anyone who slightly modifies the source code of an already existing program can claim the copyright on that program. The reason is that copyright law protects only the form of expressed ideas, but not ideas, concepts, systems, or methods of operation.

At least four disadvantages of software patents can be mentioned. Firstly, patent systems may hinder research and innovation because they allow monopolies and powerful companies to exclude others from industrial science. The reason is that only big corporations can pay the high patent fees. At present, a software patent in the United States costs approximately USD 18,000.00. An average patent litigation may cost around 3,000,000 USD and an extra 2,000,000 USD for an appeal.

Secondly, software patents are usually quite slow. For example, in 2005, the projected average pendency for patent applications in the "Computer Architecture, Software & Information Security" department of the U.S. Patent and Trademark Office was 3 and a half years.

Thirdly, software patents represent a big burden on software developers. Data from the patent firm RPX shows that there are about 250,000 active patents in the United States that may have some relevance to the activities of mobile device manufacturers. This means that a smartphone developer is theoretically burdened by 250,000 restrictions on his or her design.

Fourthly, software patents may cover trivial inventions. Richard Stallman argues that such inventions are regarded as nontrivial by the patent examiners because "any idea can be made look complex when analyzed to death." Another reason for patenting such trivial invention is that they are often described in a complex manner in the patent application.

6. Conclusion

At present, it is easier to obtain a patent in the United States and New Zealand than in the European Union. The reason is that the requirement imposed by the US law and New Zealand law that the invention should be useful is less strict than the corresponding European "technical effect" requirement.

By adopting the new Patents Bill, New Zealand will abandon the US approach and embrace the European approach. The current debates in New Zealand concern mainly the extent to which New Zealand should follow the European approach. By introducing Clause 10A(2) which does not allow patents for "a computer program as such," the government prefers to allow software patents in some cases. However, the New Zealand software industry believes that the words "as such" will lead to European-style problems, namely, increased costs of developing software, furthering monopoly, and hindering innovation. Moreover, the words "as such" may appear to be a legal loophole under which most software will in fact be patentable, even though the objective of government and the industry is exactly the opposite.

References

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