15 June 2011

Stakeholders Say ‘No’ to NZ Computer Program Exclusion

The New Zealand Ministry of Economic Development (MED) has published submissions received in response to its invitation to comment on the draft guidelines prepared by the Intellectual Property Office of New Zealand (IPONZ) in relation to the proposed exclusion of computer programs from patentability in the Patents Bill currently before the New Zealand parliament.

The draft guidelines were published back in December (see NZ Patent Office Issues Draft Guidelines on Computer-Implemented Inventions), and are intended to give effect to the intention that the exclusion ‘a computer program is not a patentable invention’ in clause 15(3A) of the Bill should nonetheless allow inventions that contain embedded software to be patented.

It is fair to say that the guidelines – and indeed Clause 15(3A) itself – have received very little support in the published submissions.  In fact, out of 36 submissions, we count only two relatively unqualified supporters, and one of those (the submission of Internet New Zealand) consists simply of a concurrence with an earlier submission from the New Zealand Open Source Society (NZOSS) which is not amongst those published by MED.

One thing that is surprising about the submissions is the breadth of interests represented.  No one is surprised when patent attorneys express concerns about constraints on the scope of patentable subject matter, and it is hardly a shock to find Microsoft amongst the contributors.  However, other companies and organisations expressing concerns about the legislation and guidelines comprise a cross section of domestic and foreign private and public entities, including The Director General of Trade for the European Union, Auckland UniServices, the New Zealand Institute of Plant and Food Research, Fisher & Paykel Appliances, the Business Software Alliance, Geological and Nuclear Sciences Limited, Airways New Zealand, Intel, Thermal Chemistry Limited, Qualcomm and Air New Zealand.

Despite these diverse interests, a number of common themes emerge in many of the submissions:
  1. widespread opposition to clause 15(3A) itself ;
  2. the observation that the stated intent of clause 15(3A) is inconsistent with its plain wording;
  3. concerns that the guidelines will have no legal standing, and will therefore do nothing to alleviate uncertainty;
  4. a preference for expressly aligning New Zealand law with that of Australia, the US or Europe; and
  5. objections that the proposed exclusion is inconsistent with New Zealand’s obligations, under the Trade-Related Aspects of Intellectual Property (TRIPS) Agreement, to provide protection for ‘inventions in all fields of technology’.

OPPOSITION TO CLAUSE 15(3A) – A POLITICAL MORASS

MED expressly stated that ‘in releasing the draft guidelines for comment, it is not intended to re-open the debate regarding the patentability of computer programs, or whether an amendment should be made to clause 15(3A).’

Nonetheless, many of the submissions have either expressly, or implicitly, criticised the proposed legislation.

We find this hardly surprising.  Indeed, it is frankly disingenuous of MED to speak of ‘re-opening’ a debate that was never truly open in the first place.  In words taken from the submission of New Zealand patent attorneys Ellis Terry:

A little intellectual honesty is needed to review how the software exclusion arose. Prior to the Select Committee hearing MED reviews of patentable subject matter had indicated that software would be patentable subject matter. A strong lobby at Select Committee hearings persuaded the Select Committee that a software exclusion would be desirable. One industry representative pushed the case for “embedded software” and this became the exclusion to the exclusion.

We knew already that the ‘strong lobby’ was made up of open source software advocates.  By its own admission, in a submission to MED, the ‘one industry representative’ appears to have been Fisher and Paykel Appliances (FPA):

Unfortunately, none of the anti-patent submitters had considered the situation of programs for embedded systems…. This was hardly surprising since none of these submitters were engineers. The Select Committee became aware of the position of embedded systems only after hearing the submission from FPA.

A number of submissions expressed disappointment at this last-minute ‘hijacking’ of what had been, up to this point, an open and consultative process.  The submission of BusinessNZ (which describes itself as ‘New Zealand's largest advocacy group for enterprise’) is representative:

… BusinessNZ is perplexed as to how a process that started and continued through with a high level of consultation and considered views over the last ten years seems to have fallen at a crucial hurdle in a key area many considered would be left unchanged, as indicated during all stages of the consultation process up until the proposed Clause 15(3A) exclusion was introduced in March 2010. This has led to confusion and uncertainty for many in the business community.

Some made it quite clear that, regardless of MED’s position on the matter, they believe it to be essential that clause 15(3A) be opened up for consultation (e.g. BusinessNZ), and/or that the ultimate responsibility for resolving uncertainty in the scope of the exclusion lies with the parliament (e.g. Ellis Terry, not mincing words: ‘[i]t is bewildering that Parliament acknowledges this uncertainty and abrogates its responsibility to resolve this uncertainty by amendment of the Bill’).

A picture emerges from the submissions of a Committee, and a Government, which – for reasons that are not entirely clear, but seemingly politically-motivated – have become enthralled with a particular lobby group (i.e. the ‘open source movement’), and as a result have jettisoned reasoned policy-making, openness, transparency and a proper public consultation process, in favour of delivering a fait accompli and then expecting IPONZ to clean up their mess.

Yet the submission we find most disturbing is one submitted under the name of the ‘Technology Interest Group’, which describes itself as:

made up of small, medium and large businesses that are New Zealand owned and operated, as well as individual entrepreneurs and commercialisation experts. Most of us use patents, and we all want the choice to use patents. Our group does not include patent attorneys but we have sought expert advice to ensure that our understanding of the issues is sound. Our members wish to be protected from those who have responded with hostility towards different opinions on this topic, so the identity of the members has been withheld.

We can only wonder at what is going on in a supposedly robust modern democracy when legitimate business operators within the community feel the need to make anonymous group submissions in an open public consultation process, for fear of reprisals by (we can only assume) open source software ‘advocates’.  Democratically-elected governments are supposed to restrain this kind of ‘lobbying’, not pander to it!

We will give the final word on this aspect of the submissions to Intel, whose contribution serves as evidence that there is no such thing as a unified ‘open source movement’:

… we do not find any merit in the arguments that … patent protection of computer programs will stifle the development of open source.  The United States has a most active patent litigation bar and probably provides the broadest patent protection for software and yet, open source software thrives in the United States.  The number of actual cases of patents involving the use of open source software is miniscule and Intel supports and uses and distributed open source extensively and is a leader in the open source movement.

STATED INTENT v WORDING OF CLAUSE 15(3A)

A number of submissions make the point that the stated intention of the Commerce Select Committee, that while computer programs in general should not be patentable, inventions involving “embedded” computer programs should continue to be patentable, is inconsistent with the plain wording of clause 15(3A), which makes no distinction between different ‘classes’ of computer program.

The corresponding exclusion in Europe, for example, expressly provides that a claim shall only be unpatentable to the extent that it relates to a computer program ‘as such’.  This proviso has provided the flexibility to allow patents on computer implemented inventions of a suitably ‘technical’ nature (including embedded software systems), while avoiding blanket protection for any and all computer programs.

To the extent that a number of submissions are at all supportive of an exclusion, they express a strong preference that the legislation and the guidelines explicitly adopt a ‘European’ approach, through inclusion of an ‘as such’ proviso.  Patentology first expressed concerns about the absence of such a proviso back in June 2010 (see NZ Committee Recommends Ban on Software Patents).  But, as we reported in July 2010, Commerce Minister Simon Power expressly ruled out any further amendments to the Bill, saying that they would be neither ‘necessary nor desirable’.

Our favourite comment in this issue comes from the submission of EverEdgeIP, expressing some sympathy for the position in which IPONZ has been placed:

Our comments are in no way designed to be critical of the experts who prepared the draft. Their task seems to have been to make Patents Bill 15(3A) mean something different to what it expressly says. Such a brief was bound to fail, and it does.

LACK OF LEGAL STANDING

Almost all of the submissions from lawyers and patent attorneys – and a few others besides – make the point that any guidelines issued by IPONZ will be of dubious value in determining the interpretation of clause 15(3A).  The submission by patent attorney firm Baldwins is typical:

… in the recent decision of the High Court in Bomac Research Limited v Merial Limited (14 April 2010, Miller J, High Court Wellington: CIV 2009-485-2141), the court found that IPONZ guidelines cannot be used to modify legislative provisions.  Therefore, in our submission, a judge is very likely to ignore IPONZ guidelines in connection with the exclusion, and look at the wording of the Act, for which the exclusion is quite specific ….

MERITS OF ALIGNMENT WITH A MAJOR TRADING PARTNER

Another recurring theme is the ‘uniqueness’ of the proposed exclusion.  There is no other jurisdiction in the world with an exclusion for computer programs expressed in like terms, an certainly no other that assesses patentability in the manner suggested by the draft guidelines.

Many businesses that generate IP, and operate internationally, expressed a desire that the New Zealand law should be aligned with at least one of the country’s major trading partners.  Air New Zealand’s submission was perhaps the most direct in terms of its preferences:

We would prefer that the legislation and guideline [be] closer aligned with (in decreasing order of preference) Australia, the United States or Europe.

INCOMPATIBILITY WITH TRIPS AGREEMENT

One of the more rarefied objections to clause 15(3A) – at least in a climate of some scepticism about the benefits of globalisation, and concerns about the influence of more powerful nations in international negotiations – is that it may be in violation of New Zealand’s international treaty obligations.

For example, in the submission of patent attorney firm Henry Hughes, ‘such a blanket exclusion would be likely to be contrary to New Zealand’s obligation under [Article 27(1) of] the TRIPS Agreement to make patents available “for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.

While the prospect that proposed legislation may violate one or other obligation under some international agreement is a sledgehammer often wielded by opponents within the legal professions, governments (whom we suspect tend to deal with such matters via diplomatic channels) are generally unswayed by such threats when the alternative is a potential loss of popularity within the electorate. 

The submission, in this case, is probably valid.  But arguments based upon domestic issues and the national interest are likely to be more effective.  We are therefore not surprised that a number of submissions which might have been expected to raise the TRIPS issue did not do so.

CONCLUSION

In the absence of any earlier consultation, it is hardly surprising that many submissions are vehemently opposed to clause 15(3A), and to the draft guidelines.

It is not clear whether the Commerce Select Committee, or the Commerce Minister, really understood the can of worms they were opening with the 11th-hour introduction of such a significant amendment to the Patents Bill, or that they had been effectively hoodwinked by a vocal, but economically insignificant, special interest group.

Let us be clear, however – open source software is not, in itself, without economic significance.  It is deployed successfully in many commercial environments, and contributes significantly to innovation in a variety of industries.

But that is not what this debate is about.  There is absolutely no reason (as Intel points out) that open source innovation cannot coexist with strong IP protections, such as patents.  Some forms of progress are better pursued through open innovation models, while others (typically those that require significant long-term investments) are only viable with the support of effective IP rights.

We conclude with another passage from the submission of EverEdgeIP, because we could not have said it better ourselves:

To understand the best outcome on a fundamental intellectual property policy, it is necessary to understand how the tools provided by intellectual property fit into business strategies. Our experience is that intellectual property strategy should flow from the business case, not the other way around.

It is fair to say that often patent protection is not well suited to the business strategy. For example, some clients are better served by secrecy, or by defensive publication. At other times, patent protection is absolutely essential to the business strategy. There is no question that patents, including New Zealand patents, are a useful and indeed essential tool in the right circumstances.

We mention this because the question should not be “who wants to use patents, and who doesn’t want to use patents”. That will not provide an answer to what the best overall outcome is for New Zealand. The question should be, “is the choice to use patents useful to some inventors to implement their business strategy, and does providing the choice in reality cause a greater detriment to those who don’t want to use patents”.

Hear, hear!  We just hope that the New Zealand government is now listening.

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