Guy Burgess, IT Lawyer. 09 May 2013, 12:48 pm

Following significant concerns being raised by the Institute of IT Professionals and others within the industry, Commerce Minister Craig Foss today announced a significant change to the Patents Bill currently before parliament, replacing the earlier amendment with far clearer law and re-affirming that software really will be unpatentable in New Zealand.

This is great news for New Zealand's most innovative software companies. But what does the new amendment mean and how does it work? IT Lawyer Guy Burgess explains.

[If you haven't been keeping track of this long-running issue, take a look at IITP's Press Release today welcoming the amendment, or check out this NZ Software Patents site for background - Ed]

Compromises can be good or bad. The latest and hopefully final amendment to the Patents Bill is a good compromise - and a major step towards eliminating software patents in New Zealand.

You can download the new proposed amendment here (PDF).

The amendment ensures that the availability of software patents in New Zealand will at least be greatly restricted, although it may take some years to work out just how far it goes and whether it is enough. There are many reasons why most technologists oppose software patents, as outlined in this prior Newsline article from last year.

In any event, it's a big change to the status quo. When the Bill passes it will be the first time that parliament has specifically legislated on the subject of software patents: the current Patents Act is silent on the subject - which is not surprising given it was passed in 1953.

The current regime simply allows patents for anything that meet the relevant criteria, whether or not they are implemented in software. When software-based applications first arose, IPONZ and the courts had no legislative guidance. Early applications were knocked back, but faced with no provision saying that they should not be granted, software patents have been generally available since the mid-1990s although have only really exploded in recent times.

Options for reform

In the past fifteen years, the trickle of software patents worldwide has turned into a flood. When it was decided to haul our patent law into the twenty-first century, it was logical that software patents be on the agenda.

Perhaps inevitably, controversy arose over which direction New Zealand should take, with patent lawyers and (primarily US-based) multinationals lobbying in favour of patentability, while the local IT community was mostly (though not unanimously) opposed.

There were, broadly speaking, four options that New Zealand could choose from:

The first was to allow "patents on anything under the sun", to use a description of the US regime, and allow software patents without any particular restrictions (the status quo). This option was effectively ruled out by the multi-party Commerce Committee review, which accepted that software patents were becoming increasingly problematic. That view has been dramatically borne out in the US in recent years with software patents coming under fierce criticism, even from President Obama, and studies highlighting the economic and innovative harm they are causing.



The second option was to implement a partial or 'weak' exclusion of software patents, as in the European Union. This is unlikely what the EU intended, but is what they ended up with as a result of the now infamous "as such" proviso added to their patent legislation - a term so vague and malleable that it has effectively negated the software patent exclusion in the EU and led to much confusion and criticism.



The third option was to implement a broad, 'strong' exclusion of software patents, as in the UK. As part of the EU, the UK also uses the "as such" language, but the UK judges have taken a rather more robust approach than their continental counterparts and in 2006 developed a legal test specifically for evaluating patents involving software (known as the Aerotel test). The result is that the UK has tougher criteria for software patents than other EU countries, although that might not remain the case forever.



The fourth option was to chart our own course to clearly exclude software patents. This was the preferred option of many software developers, although MED and MFAT officials were concerned that this may give rise to international trade/IP issues (these concerns were unwarranted in my view - but that's another story).

The original wording change, reported back unanimously from the Commerce Committee in 2010 was a clear, simple exclusion that avoided the EU/UK approach (i.e. it implemented option 4). However, concerns were raised about how this may affect embedded software (Fisher & Paykel smart washing machines being the usual example), and whether the new "untested" language may expose New Zealand to international challenges under the TRIPS treaty.

In August 2012, Commerce Minister Craig Foss, in an attempt to apparently assuage those concerns, amended the Bill to include the controversial "as such" language. While the Minister claimed that the purpose was simply to "clarify" the intention to exclude software patents, this amendment proved highly controversial.

Experts and pundits had differing views as to whether it signalled a change back to the status quo (option 1), or to the EU approach (option 2), the UK approach (option 3), or something else altogether (option 4). Pro-patent lobby groups, lawyers, and in March this year the US Government, claimed that the change meant software patents had been restored under the Bill. Meanwhile, the Minister claimed that the intention remained to exclude software patents.

The local IT community mounted a concerted pushback on the unclear "as such" amendment. An industry petition (backed by key groups IITP, InternetNZ, NZRise and NZOSS) was set up and gained wide support. The petition called on the Government to remove the ambiguous "as such" language, and replace it with a simpler clause that clarified the underlying intention. Labour's Clare Curran adopted the petition's proposed alternative clause as an official proposed amendment to the Patents Bill, and other MPs and parties, including United Future MP Peter Dunne, also raised concerns about the lack of clarity in the Bill.

To its credit, and thanks to the concentrated efforts of many people and not inconsiderable political pressure, the Government decided to take another look at the Bill and has now put forward a new amendment.

The new amendment

The new amendment clears up most if not all of the concerns following the first "as such" amendment. With the new amendment, New Zealand has unequivocally chosen the third path - a broad exclusion similar to the UK, but with some key improvements to ensure that the exclusion is not watered down as it has been in the EU.

Key features are:

The new amendment is a compromise: it retains the controversial "as such" language, but - crucially - it now clarifies what that term means and the intentions behind it. While I would still prefer not to have "as such" in the Bill, the new amendment adds sufficient meaning to make it acceptable.



It ensures that we will not go down the EU path, by effectively "hard coding" parts of the UK Aerotel test (with changes) into the legislation. This means that even if the UK does drift towards a more liberal regime for software patents, New Zealand will not (unless the Patents Act is changed again). This also ensures that IPONZ will be able to implement robust guidelines for examining patents involving software.



Helpfully, it adds two examples into the Bill - one for a software patent application which may be granted, and one which should be declined. Examples in legislation are a good way to demonstrate how a section is intended to be interpreted. The "valid" example is of a washing machine that uses embedded software - so this truly could be called the Fisher & Paykel amendment! The "invalid" example is of a software process for automating company incorporation. It includes the key comment: "The mere execution of a method within a computer does not allow the method to be patented."



Importantly, the explanatory note has been enhanced to make the intention of the Bill very clear, including the following comments: "... where the actual contribution of an invention lies solely in it being a computer program, it is ineligible for patent protection... it will not be possible to obtain a patent for an invention that involves or makes use of the computer program if the sole inventive feature is that it is a computer program".

Why not just remove "As such"?



That's a good question, and certainly many people thought they should do just that.

It appears that the concern was whether doing so would open New Zealand up for a legal challenge for allegedly not meeting its TRIPS treaty obligations. By aligning the law with wording from another jurisdiction that hasn't been challenged, it provided some comfort that New Zealand would be safe.

Whether or not this would have happened is moot now - it was a significant enough concern to the powers that be for the above approach to be adopted.

Vigilance is required

Will the new law prove a sufficient exclusion of software-based patents? Only time will tell. Software patents are notoriously complex, controversial, and (at least in the US) much litigated. There is not even agreement on what exactly constitutes a "software patent". Many can be dressed up as business method patents, which are not directly addressed in the new amendment (that's an issue for another day).

So the boundaries of the exclusion will be tested in due course. Those of us opposed to the patenting of software should be vigilant to watch that IPONZ, and eventually the Courts, enforce the new law robustly. In time it may be necessary to mount a challenge to ensure the intention of the new law is upheld.

But patent applicants are on notice: the local IT community will not tolerate patents that threaten software innovation. If an inappropriate patent is sought and granted, there will be a push for further reform.

Guy Burgess is an IT Lawyer and Associate at Clendons. You can contact him at [email protected] or on Twitter: @guy_burgess