Productivity Commission weighs in on Software Patents

The Productivity Commission publicly released their Inquiry Report on Intellectual Property Arrangements on 20 December 2016. The Report examines Australia’s Intellectual Property (IP) system in detail, and makes recommendations to improve its operation. The full Inquiry Report can be found here.


There is no doubt that computer technology has increasingly become important in day-to-day activities of individuals as well as businesses over the years. In light of the growing importance of such technology, and recent legal decisions, the Report, in Chapter 9, looks at the patentability of business methods and software.

Thankfully for many of our start up and established information technology clients, there are no plans or suggestions to take any substantive action to legislate against software patents.  This is contrary to some of the fears held at earlier stages in the review process, and it is likely that submissions made to the draft Report have been somewhat persuasive.

However, one key point raised in the Report is that future grants of software patents should be monitored by IP Australia, with the data collected used to assess whether further software patent reform is needed. The Report indicates that early evidence suggests that the more recent approach taken by IP Australia to assess patentability of computer implemented inventions in light of the decisions made in RPL Central and Research Affiliates is narrowing the scope of patent protection.  It is surprising that IP Australia would be tasked with such monitoring, as one might suggest that they are not directly involved at the “business end” of intellectual property strategy matters.

The recommendations and findings of the Productivity Commission in relation to business method patents and software patents is that raising the inventive step, requiring technical features in patent claims, and the inclusion of an objects clause would better balance the patent rights of software innovators and users.  This perhaps misses the point of the patent system as a business tool for assisting in commercialisation of technology, instead favouring a commercially ignorant view of patents as being rewards for scientific excellence.

While the Productivity Commission acknowledges that there are a number of instances where software clearly warrants patent protection, the Commission considers several factors in relation to the effectiveness and efficiency of software patents. In particular, the Report considers whether software patents are actually needed to encourage additional innovation. In this regard, the Productivity Commission is of the view that patent protection, in general, is not critical for encouraging software innovation as the life span of software products is relatively short. Only lip service is given to the crucial point that patents are often necessary from a commercial standpoint in the context of seeking capital investment; the Commission essentially avoids that point by commenting that a better quality patent system may serve to provide a better indication to potential inventors as opposed to a weak patent which could be a less effective indication.

As mentioned above, the Productivity Commission has not suggested any substantive changes to the current position in Australia in relation to computer implemented inventions, suggesting that they are generally happy with the current state of play (although one might suggest that their apparent understanding of the status quo might be misguided, given the extent to which attorneys, examiners and applicants are struggling to understand the actual bounds of patentable subject matter).  Accordingly, at this stage, we do not foresee any major changes in relation to the Patent Office practice in handling business method patents and software patents as a result of the Report; such changes are however inevitable due to other driving factors.

Shelston IP will continue to keep at the forefront of patentable subject matter debates, and keep clients well-advised as to strategies best suited to establishing commercially sensible protection over their technologies.