Protecting IP in a post-patent environment

Guy Burgess looks at the recent Select Committe recommendation on patents

Recently the Government announced its intention to adopt a select committee’s recommendation to “exclude software from patentability” – that is, to ban software patents. Where will the ban — if implemented — leave local software developers’ ability to protect their intellectual property?

How will the removal of software from patentability, if confirmed, affect the ability of local IT firms to protect the intellectual property in their software?

Putting aside the pros and cons of the software patent debate, let’s start with four key facts:

First, relatively few firms pursue software patents in New Zealand, and the majority will therefore not notice any difference (except the welcome removal of a significant source of risk). Likewise, firms that currently own New Zealand software patents will not lose those patents.

Second, New Zealand firms will still be able to apply for software patents in countries that continue to allow them. This is no change from the current law and simply reflects that patents are territorial — a New Zealand patent only provides rights in this country.

Third, excluding software from patentability will in no way leave software “unprotected”. Software currently has the luxury of being one of the few endeavours to receive “double coverage”, from both copyright and patent law. If patentability is indeed removed, software will continue to be protected by copyright (as it is around the world), which has long been regarded as its primary means of protection.

Fourth, many countries, including those in the European Union, similarly do not allow software patents (or business method patents, in some cases) or significantly restrict them, and continue to have thriving IT industries (indeed, New Zealand didn’t grant software patents until 1995).

So the short answer is that the change would have a minimal effect for most developers in this country. Nor would it “tilt the playing field” in either direction in terms of local versus foreign firms – the change applies to both equally. In addition, existing software patent holders can take comfort from the prospect that no new, potentially competing or challenging software patents would be granted in New Zealand.

Future IP

Assuming the proposal is implemented, how can local developers protect new IP in a post-software patent environment?

The answers are a mix of legal and practical considerations.

Orion Health CEO Ian McCrae, who backs the proposal, summed up the practical side well: “Our best protection is to innovate and innovate fast” (Computerworld, 15 April 2010). This reflects the fact that most New Zealand firms either choose not to attempt to patent their software, cannot afford the potentially high cost and uncertain outcome, or recognise it does not meet patent requirements.

For start-ups in particular, the argument can be made in many cases that limited funds are better spent on staff, development and other key requirements, than on a potentially costly, time-consuming and uncertain software patent application (which, in New Zealand, would only grant rights in a small market).

Patents require detailed disclosure of the invention – to obtain a New Zealand patent, the successful applicant discloses the workings of their invention to the world. While a New Zealand software patent could serve as the basis of applications in other countries and provide a priority date, the time, expense and disclosure required may not be conducive to an “innovate fast” strategy for small firms in a rapidly changing environment.

Of course, software patents can remain an important strategy when foreign markets (particularly the US) are targeted for a software product – and in such cases, foreign software patents may still be applied for.

Legal protection

On the legal side, New Zealand developers have two key non-patent methods of protecting the IP in their software: Copyright and contractual protection.

These have been the cornerstones of protecting IP in software since its earliest days. But how do they compare with the rights granted by a software patent?

Copyright

Copyright is the primary manner by which IP in software is protected around the world. Copyright protects original works (including computer programs), but does not protect the “idea” or purpose behind the work. For example, the source and binary code of an original program is protected by copyright, but the purpose or functionality provided by the program is not — someone else is free to write a program that performs a similar function, as long as they do not copy the first program’s code (or another aspect protected by copyright).

This differs considerably from a patent, which (in general terms) grants a monopoly over the underlying invention.

In New Zealand, original computer programs and related works are automatically protected under the Copyright Act 1994 from the moment of creation – there is no need to register copyright or add a copyright notice. And thanks to international treaties, the automatic copyright in a New Zealand work can be recognised and enforced in many countries around the world.

A patent, on the other hand, must be applied for (typically with specialist assistance). If granted, the patent is only effective in New Zealand. Additional patents must be applied for in each country for which patent rights are sought.

Contractual protection

Intellectual property is also commonly protected via contracts. Parties are generally free to negotiate whatever contract terms they want (there are some exceptions), including specific IP restrictions and protections.

Contracts can therefore provide patent-like protection of “ideas” and other commercial interests that may not be capable of protection under copyright. To give a common example, if an entrepreneur wants to disclose an idea (such as an idea for a program or new technique) to a potential investor, but wants to prevent the investor from either making use of the idea for themselves or disclosing it to others, a confidentiality agreement including those terms could be entered into (the law provides additional, non-contractual protection for confidential information). The agreement can also contain an indemnity, providing a direct means of seeking damages and lost profits if the recipient breaches the agreement.

Contracts can also bolster protection of copyright works and are typically essential in protecting trade secrets (which can include software code and processes).

However, unlike a patent, contractual protection only applies to the parties to the contract. A non-party will not be bound to the contract, whereas a patent can provide rights against the public at large (within its territorial scope).

Is the ban a bad thing?

There are certainly two sides to the software patent debate. However, after an eight-year review process (lengthy by any reasonable standard), public consultations, and submissions from all sides of the debate, Parliament’s Commerce Select Committee unanimously recommended they be banned. This has since been endorsed by the Government, and received cross-party support. Perhaps most significantly, it has also received strong support from the local IT community.

My view is that the arguments against software patents outweigh those in favour.

There is no doubt that banning software patents in this country reduces a source of risk for all New Zealand software developers. Everyone from professionals to hobbyists, from major corporations to small businesses, from proprietary to open source developers, benefits from a reduced threat of software patent liability in New Zealand.

Meanwhile, New Zealand developers can continue to seek software patents in countries that allow them. In other words, firms that see software patents as essential to their international strategies or attracting investors will still be able to seek those software patents, where available.

Whether or not a software patent can or will be sought, it is essential for firms to understand the options for protecting valuable IP via robust copyright and contractual measures, supported by appropriate business processes.

This article provides general information and does not constitute advice. Professional advice should be sought on specific matters.

Comments

Anonymous

1

I find the argument that we should utilise the patent systems of other countries, but not provide it ourselves to be weak and intellectually dishonest.

Please provide a single local example, where a software patent has stifled innovation? I don't mean a reference to a vague website, I mean a real homegrown example?

Mark Harris

2

I think it's worth noting that the people who don't think software should be patentable are willing to put their name to their statements, whereas the people who think it should be patentable choose to remain anonymous. This leads one to wonder if the supporters of software patents are really New Zealanders discussing an issue vital to our future, or whether they're employees of multinational corporations who are seeing a crack in the armour of "intellectual property" which must be resisted on principle.

soap byte

3

sounds like a few different views on this - whats the full range of if's and butt's and consequences? Any examples like wiramu's ?

David

4

Whether you agree with it or not, trying to ban software patents will have little effect. When software is embedded in machines, the machine is still patentable as well as what it does. Whether software or an electronic circuit is used to achieve that end is irrelevant and generally requires no inventive effort.

In Europe, software is not patentable in its own right, but it is when embedded in a machine. The same will likely be the case in NZ and rightfully so.

One effect will be to keep the open source community happy, but those who come up with genuine advances in technology and want to reap the benefits of the patent system should still be able to.

Anonymous

5

Seems to be there:
"... a confidentiality agreement including those terms could be entered into (the law provides additional, non-contractual protection for confidential information)."

Anonymous

6

How are small NZ software developers ever going to get ahead if they can't protect their big developments? A big software company will come along and re-do the idea, easily getting around copyright issues. They need to protect themselves - lately there have been numerous cases of small companies asserting rights over large multinationals.

To say you can protect overseas but not here is hypocritical - what if everyone said that? Software should be patentable just like any other technological developments - its not special. The obviousness requirements in the new Patents Act will ensure no absurdly simple software patents get through, not that they are valid under the current law.

Nevyn

7

Great article Guy and I applaud it's tone.

For those still harping on that we need software patents: the article approached it more from the point of view that "it's happening, there is still protection, this is what you need to know about it."

In the meantime, I still struggle with the position that Software Patents are a good thing. The buffering system for almost all the gui's (as well as the mouse) all came from one place - Xerox Parc. Had Xerox patented the system, we'd not have the GUIs we so enjoy today. While Xerox would probably be huge today had they patented this technology, computing would be a much different affair. I'd argue that the Internet wouldn't exist in the same form as it does today. Chances are, we wouldn't be here now arguing the point. Who knows what technology today (one-click checkout?) is going to be the foundation for technology of tomorrow? The stakes are far too high to have a "all mine" approach to it.

Regards,
Nevyn.

Joel Wiramu Pauling

8

The patent system, in software or otherwise, does not produce either an economically or innovation maximizing market.

This has been shown conclusively over and over again. We are beholden to having a patent system because that is how many established industries operate. Making a bold move such as completely removing Patents and introducing some form of marketing rights just doesn't work given the established status quo.

The software industry is has been widely innovative and prosperous, IN SPITE OF, not because of the patent system, and should be held up as an example of just how badly the patent system in general is.

The key industries which benefit from patent regimes are multinationals, who use Patents as a form of strategic market segregation and monopolization strategy.

There are a number of myths around patents, specifically that of the "David and Goliath" of the small inventor/wizard toppling the Goliath in a particular market segment due to the magic of a patent. The reality is that Goliath refrains from crushing David with his own 'magic' in exchange for being allowed to use Davids magic. Feel free to wander around in my fields say the giant, but I won't promise that I won't trample on you.

Feel free to read my thesis for extensive references :

http://researcharchive.vuw.ac.nz/handle/10063/1027

Kind regards

-JoelW

Anonymous

9

You have not mentioned confidentiality - the proper management of confidential information provides one of the most valuable forms of protection but is unfortunately not often well managed.

Anonymous

10

So in summary, Dave Lane the spokesman for the anti-software patent lobby:

1. Is unable to provide a single example of a patent that has stifled innovation in New Zealand

2. Clearly does not understand the situation in Europe, where there _are_ software patents

3. Repeatedly resorts to simple-minded insults.

Is this what convinced the Select Committee?

Mr P Attorney

11

Children! Play nicely! ;)

I have been fascinated by the discussions. Particuarly as a patent attorney who, I emphasise, does not work with software patents at all so it would make no difference to my practice whether the law changes or not.

The debate is a good one and I can see both sides. I think on balance the pro-exclusion arguments are a bit weak and I haven't yet seen anything to convince me as to why the law should change. That is my view.

I believe the software community does need to learn more about patents. Some of the comments I have seen here do show that it is misunderstood and ill-founded arguments are being used to make a potentially far-reaching law change. I would encourage them to go and talk to a patent attorney (but one who knows more about software than I do!). Most will give general advice at no charge and are happy to educate.

Whatever happens this will be a talking point for a while. I just hope whatever decision is made it is based on justifiable evidence for the good of the country. At the moment I am not convinced.

Don Christie

12

We have come across plenty examples where our clients were threatened by patent trolls and yes, this does have an impact on innovation. These cases were presented to the select committee.

Here are two examples... one claim to cover election systems, and a second the sequencing of text messages so that you could tell what order they were sent and received in...yes, a count.

I am a bit surprised that the anon commenters here who on the one hand claim that patents are needed but then on the other try to claim they have no impact. Why have them is they have no impact?

Finally, yet another anon patent lawyer asks why we don't educate ourselves. As someone involved in a 2 year process trying to overturn a software patent I consider myself reasonably versed. That said, I have issued two invitations to AJ Park to talk to the NZOSS about software patents and have been turned down. I one communication it was claimed they had no view on the issue...

Brenda

13

Examples of patents stifling innovation.. you're looking for descriptions of software that doesn't exist due to fear of patents?

A common tactic is to claim someone is infringing your patent, without saying what patent they're are referring to. Microsoft do this from time to time.. claiming linux infringes their patents, but won't tell us which patent. It does stifle innovation. It means New Zealand software companies don't get business contributing to and supporting Linux operating system due to some unspecified patent danger. No, the support work for Microsoft OS doesn't make up for this loss. New Zealand can do better than just basic support on the OS level and the apps on top. We can build the OS itself. We can shape the direction the whole OS goes in.

I can attest, that the potential for something i write to inadvertantly infringe on a patent does stop me writing a lot of code - mostly in the import/import of formats or in making free versions of apps. It's not just the fear I'll infringe a patent, but becuase someone with enough funds for a lawyer thinks i infringed. The fear of a patent lawsuit is stronger than what patents really are.

Patents are used to stop competition. We're not competing with the foreign companies, within NZ, because the larger foreign companies have large patent portfolios. They're used like nuclear weapons, as a deterent against competition. When someone threatens you with a patent lawsuit, you gotta hope you can find a patent in your own arsenal to threaten them back with.

I want them gone. Copyright prevents me copying someone's code without permission. The code is the implementation, and that's the real innovation. Protect that.

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