In a move widely seen as a boost for innovation and competition in the technology sector, New Zealand has passed a law that will prohibit the patenting of computer software.

The reformed Patents Bill, which was first drafted five years ago, passed third reading in the New Zealand Parliament Wednesday. The new law states that "a computer program is not an invention" and hence cannot be protected by a patent.

"This bill marks a significant step towards driving innovation in New Zealand," said Commerce Minister Craig Foss in a press release on his ministry's website. "It replaces 60-year-old legislation and introduces a patent system suited for the 21st century."

IT experts and supporters of open source software have long been lobbying for a patents ban, arguing that the process of developing software necessarily draws on aspects of existing programs and allowing patents on such material greatly restricts the kind of cross-pollination needed to develop new software.

"The patents system doesn't work for software because it is almost impossible for genuine technology companies to create new software without breaching some of the hundreds of thousands of software patents that exist, often for very obvious work," said Paul Matthews, chief executive of the Institute of IT Professionals in New Zealand, one of the groups that had lobbied for patent reform.

In a press release, Matthews praised the passage of the bill and called it a "victory for common sense."

"Today's historic legislation …sends a clear message to the rest of the world that New Zealand won't tolerate the vexatious practice of 'patent trolls'," he said. "That is, when software patents are created with the sole purpose of bringing costly litigation against inventive technology companies."

Intellectual property laws have chilling effect

Groups like IITP and InternetNZ, which advocates for an open internet, had argued that patent laws have a chilling effect on software developers who fear their work will be challenged in the courts.

"Patenting software would not only make the continued development of the internet more difficult; it would reduce innovation and could well stymie interoperability of various software platforms," InternetNZ had said earlier this year when arguing in favour of a patents ban for software.

Countries around the world are struggling to clarify what can and can't be patented in the realm of the internet and computer technology, and tech giants like Apple, Microsoft, Samsung and Amazon are waging multibillion-dollar battles over technology patents in numerous jurisdictions.

In New Zealand, the parliamentary commerce committee examining the proposed patent reform had argued that New Zealand's patent legislation, modelled on the since-repealed United Kingdom Patents Act 1949, had "a low threshold for patentability compared with most other countries."

"This low threshold can lead to broader patent rights being granted in New Zealand than in other countries," the committee wrote in its brief on the issue, "which can disadvantage New Zealand businesses and consumers, as technology that may be freely available in other countries can be covered by patents in New Zealand.

"This can discourage innovation and inhibit growth in productivity and exports."

In Europe, software creators must demonstrate that their program "actually makes a contribution in a technical field" in order to qualify for a patent.

According to the U.K. Intellectual Property Office, "whether a computer-implemented invention is patentable depends on the contribution the invention makes."

"For example, if it provides improved control of a car braking system, it is likely to be patentable, but if it merely provides an improved accounting system, it is probably not patentable," the office says on its website.

No definitive court rulings in Canada

In the U.S. and Canada, the software patent matter has been fought largely on a case-by-case basis in the courts, with no definitive ruling on what makes software patentable.

In a 2010 decision, for example, Canada's Federal Court ruled that Amazon's one-click technology, which allows customers to complete an online purchase with a single click of a mouse, could be patented.

In a more recent decision in the U.S., the Court of Appeals for the Federal Circuit ruled that software patented by the internet retailer Alice.com (which has since gone into receivership) was not patentable, but the judges were split in their decision and critics said the ruling provided little direction for future cases.

"The only thing the judges seem to agree on is that we need more clarity, but they can't even figure out what that looks like," Julie Samuels, an intellectual property lawyer with the Electronic Frontier Foundation, told PCWorld magazine at the time. "No one understands what the hell is or isn't patentable, including the ... Federal Circuit."