Recent developments regarding software patents under New Zealand’s new Patents Act

In August 2010 and January 2011, Shelston IP reported that the latest iteration of New Zealand’s new Patents Act now sought to exclude computer software from patentability. The proposed exclusion was not only a reversal of New Zealand’s previous position, it was also contrary to the stance taken by her 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. We also noted that the proposed exclusion appeared 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. Moreover, the Government then placed the Intellectual Property Office of New Zealand (IPONZ) in the near-impossible situation of being asked to define the line in the sand between software and embedded software. A draft Examination Guideline adopting the intent of the test set forth in Aerotel Ltd v Telco Holdings Ltd & Ors Rev [2006] EWCA Civ.1371 was published on the website of the Ministry of Economic Development (MED) – and public submissions were invited, the deadline for which expired on 11 March 2011.

Unsurprisingly, many of the submissions received 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.

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 has charged IPONZ with succeeding where other jurisdictions have consistently failed – both at Patent Office and indeed Court levels. Not only that, but they must hope the Guideline stands 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 create their own distinction between what is and is not patentable – and we consider this preferable to the Government’s proposed scenario in which the tail wags the dog.

We fear the New Zealand Government has somewhat rushed 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 more than seven years. 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, presently scheduled for its second Parliamentary Reading is now likely to be delayed even further. When considered against the backdrop of recent and upcoming events in New Zealand (the Christchurch earthquake, the Pike River mine collapse, the Rugby World Cup and the General Election scheduled for 26 November 2011), it is unlikely that the Patents Bill will be progressed much, if indeed at all, before the end of the year.