Progress en route to New Zealand’s new Patents Act

The exposure draft of the Patents Bill was released in 2004; we are now well into 2012 – and New Zealand still doesn’t have its new Patents Act. The term “progress” is thereby somewhat subjective. In this article, we briefly explain some of the reasons why, despite much promise, nothing has yet transpired.

The Patents Bill 2008 had its first parliamentary reading in May 2009. It was then passed to the Commerce Select Committee who proposed certain amendments – primarily relating to computer software (discussed below). The next step in the process was a second parliamentary reading. Despite peaking at #20 on the parliamentary agenda, the Patents Bill then fell as low as #56 due to emergency legislation in response to the Christchurch earthquakes, the Pike River mine collapse and the Rugby World Cup. There was also a general election in late 2011 in which the previous government was re-elected on the back of trumpeting policies relating to innovation, science and technology. However, when the new parliamentary schedule was released, the Patents Bill slotted back in at #47 in the queue; it just doesn’t seem to be a priority.

Despite the impediments listed above, one gets the impression that if passage of the Bill was likely to be straightforward it would have been enacted long before now. It follows that passage of the Bill will likely be anything but straightforward; several contentious issues remain: methods of medical treatment, pharmaceutical extension of term – and the issue of where the recently proposed trans-Tasman enhanced cooperation scheme fits within the Bill. However, the most contentious of all is likely to be computer software – or the lack thereof.

The latest iteration of the Bill,  seeks to exclude computer software from patentability.

In order to set the scene for the Government’s present dilemma, it is worthwhile briefly revisiting some of the recent history surrounding the issue of software patents in New Zealand:

  • Software patents are presently “in” under the Patents Act 1953, which is “soon” to be replaced.
  • The exposure draft of the Patents Bill – and indeed the original Bill itself proposed to retain software patents.
  • The Patents Bill passed, relatively easily, through its first parliamentary reading and was then passed onto a Commerce Select Committee, who invited public submissions on any aspect of the draft legislation.
  • A seemingly well-organised lobby of anti-software submissions then persuaded the Government to exclude software patents.
  • The amended Bill has been awaiting its second Parliamentary Reading for more than eighteen months.
  • In the interim, the Government charged the Intellectual Property Office of New Zealand (IPONZ) with the task of developing examination guidelines for applications relating to computer software. These guidelines were published and public submissions again invited.
  • Perhaps unsurprisingly, a well-organised lobby of pro-software submissions were then received and were subsequently published.
  • Quite where the Government goes from here remains to be seen. One consequence of the General Election was that the Minister who had championed the anti-software stance retired from office.

The currently-proposed exclusion of computer software is not only a reversal of New Zealand’s previous position, it is also contrary to the stance taken by its major trading partners – especially Australia and the United States, who generally allow software patents subject to the invention satisfying what approximates to a mild technical effect criterion. Admittedly, in Australia there have been recent practice changes by IP Australia that are more onerous than before, but those changes are subject to appeals to the Federal Court of Australia. We also note that the proposed exclusion appears to contravene New Zealand’s obligations under Article 27 of the TRIPs Agreement, which requires that signatories make patents available “in all fields of technology”.

The “waters were muddied” even further by the Government’s concurrent proposal to allow patents for “embedded software”. In charging them with producing examination guidelines, the Government placed IPONZ in a near-impossible situation in being asked to define precisely where the “line in the sand” between “software” and “embedded software” lies. The draft examination guidelines, adopting the “intent” of the test set forth in Aerotel Ltd v Telco Holdings Ltd & Ors Rev [2006] EWCA Civ.1371, were published – and as mentioned in the above summary, public submissions were invited.

Of the thirty-six submissions received and published, very few offered any support for the Government’s current position. Unsurprisingly, many of the submissions identified the apparent inconsistency between the proposed exclusion, the intent of the Select Committee proposing the exclusion and the guideline itself. Despite the fact that the Government had emphasised that the submission process was not an invitation to revisit the policy decision behind the exclusion, many nonetheless urged an about-face for the sake of consistency with New Zealand’s major trading partners.

A submission was received from no less than the European Union; the New Zealand Government should be at once flattered and embarrassed. The Directorate General of Trade identified and questioned the apparently selective use of UK patent law in the guidelines. The crux of the EU’s submission is a cautionary note that UK law is based on and includes the EPO’s abundant case law – as well as the EPC itself. It has evolved to where it is now as a consequence of this bigger picture, rather than through convenient selection of legal principles.

It will be interesting to see how the Government now reacts to such feedback. Arguably, the “issue” is not so much the guideline itself as it is the policy behind it. As noted previously, the Government somehow expects IPONZ to succeed where other jurisdictions have consistently failed – both at Patent Office and Court levels. Not only that, but they must hope the guidelines stand up in Court, which will likely place greater emphasis on legislative intent and persuasive decisions from other jurisdictions than they would a Patent Office guideline.

A better approach to the “no-win” situation in which the Government appears to have placed IPONZ may be to simply adopt the wording of the European Patent Convention which excludes computer software “as such”. This qualifier has been interpreted to mean that an invention which makes a non-obvious technical contribution or solves a technical problem in a non-obvious way is patentable even where that technical problem is solved by running a computer program. Such wording is significant in that it would give the Courts legislative basis through which to balance, over time, both sides of the argument as to what software is and is not patentable – and one may consider this infinitely preferable to the Government’s proposed scenario of attempting to have any distinction codified in advance in the practice guidelines.

The New Zealand Government appears to have rushed somewhat into this important policy decision without giving due consideration to both sides of the software patenting debate. In part, this may be due to a desire to “quickly” pass the new legislation given that it has now been gestating for the better part of a decade. On the other hand, the issue of software patents has only recently come under consideration and further debate certainly seems justified in this instance. Notwithstanding, this latest public consultation has likely flow-through consequences in that the Patents Bill might simply remain in the Government’s too hard basket – in which case, we should not expect it to be passed any time soon.