Software patents: You’ll know one when you see it

In? Out? Either way, talk of software patents has dominated discussion of the New Zealand Patents Bill for several years, causing unfortunate delay for a much needed update to New Zealand patent law. However, resolution may be on the horizon. Following fierce lobbying by many in the New Zealand IT sector, the Government has announced a new proposed amendment to the Bill, hailed by some as an effective end to software patents in New Zealand. The reality? Unsurprisingly perhaps, much less clear cut.

To recap, New Zealand currently has no specific exclusion for software patents and takes a similar approach to Australia, allowing a great number of software related patents to be granted. In 2010 a Select Committee recommended that a blanket exclusion for software patents be added to the Patents Bill. Leaving aside the issue as to whether this was compatible with New Zealand’s TRIPs obligation not to discriminate against particular fields of technology in the patents area, the exclusion raised a myriad of questions as to when inventions partially constituted by software would be patentable. In September last year the Government proposed a further clarifying amendment to the Bill, limiting the exclusion to software “as such”. In doing so, it adopted the wording of the European Patent Convention, which is generally seen to be relatively friendly to software patents, and thus angered many favouring a clear limitation on software patents.

In the latest development, the Government has proposed a new replacement provision, which keeps a prohibition on patents for computer programs “as such”, but includes two further clarifying principles. Firstly, a claim in a patent (or application) relates to a computer program as such, if the actual contribution made by the alleged invention lies solely in it being a computer program. Secondly, a series of factors are set out, which must be taken into account in identifying the actual contribution made by the alleged invention. Therefore it is the nature of the “actual contribution” which the invention makes to the existing art which will be the touchstone for determining patentability. If such contribution arises solely from a computer program, it will not be patentable. If the contribution is judged to arise from another aspect of the invention, it will be patentable.

As is foreshadowed in the Explanatory Note to the amendment, the Government’s approach seeks to favour English precedent, rather than the European position. Patentability of software has been a source of tension between the English Courts and the European Patent Office (EPO) for some time, the English Courts taking a stricter approach to the patentability of software, exemplified in the Aerotel decision. Certainly the new clause 10A in the Patents Bill appears derived from the Aerotel test, but whether it takes on a uniquely New Zealand flavour in its interpretation in the Courts, remains to be seen.

Regardless, one can certainly not conclude that software patents are dead in the United Kingdom following Aerotel. Only a few days before the new proposed amendment was tabled in New Zealand, the English Court of Appeal considered the issue in HTC Europe Co Ltd v Apple Inc [2013] EWCA Civ 451. The Court overturned the decision of the High Court rejecting a patent relating to the organisation and operation of touch screen devices, finding that it made a technical contribution to the art and was therefore patentable. Perhaps what we can best learn from overseas experience is, in the words of Lord Justice Jacob, that a valid software patent is “like an elephant: you know it when you see it, but you can’t describe it in words”. Not terribly helpful from a certainty point of view, but sometimes a reality if the law is to respond appropriately to complex questions of shades and degrees.

At a commercial level, the decision to take a significantly narrower path in New Zealand than in Australia, may have real implications for New Zealand software developers who find that software which does not infringe any New Zealand patents, may infringe Australian patents when marketed there. We may also find that over time, the much debated question of whether software patents stifle or encourage innovation, is answered by a geographical shift in the Australasian industry, one way or the other.

Whatever the answer to those questions, in the short term there is palpable relief that the deadlock is broken so that the Patents Bill can progress. Assuming that this latest amendment represents a relatively happy compromise between the interests of both sides of the software debate, the Patents Bill is generally expected to pass into law within the next few months. Of course with the pressure on to have the Trans-Pacific Partnership (TPP) negotiations concluded this year, and the possible impacts this could have on New Zealand’s patent law, it would be unwise to assume anything is done and dusted yet.