13 September 2012

NZ Patents Bill Second Reading Debate

NZ Parliament On 12 September 2012, the New Zealand parliament debated the new Patents Bill, in its ‘second reading’ speeches.  For readers unfamiliar with the British-style parliamentary system, a ‘first reading’ is when a bill is introduced into parliament, the ‘second reading’ is generally when it is substantively debated and amendments proposed, and a ‘third reading’ is when it is either passed, or rejected (with or without various amendments).

As we have reported recently, the big issue regarding this legislation – which will replace the horrendously outdated Patents Act 1953 – is whether, and/or to what extent, computer programs will be patentable.  Unsurprisingly, therefore, the heated debate which has surrounded this issue in recent days was reflected in the New Zealand parliament.

New Zealand is a politically interesting country.  It has been quite some time since it has had a true majority government.  The conservative National Party currently governs, but holds only 59 of the 121 seats in the parliament.  The main opposition parties are the Labour Party (which holds 34 seats) and the Green Party (with 14 seats).  The remaining seats are held by five minor parties, three of which are currently supporting the Nationals’ government.  However, none of the minor parties are bound to vote with the government on issues not directly affecting its ability to retain power.

So while the Nationals only need to find two votes in order to push legislation through, there can never be absolute certainty that this will happen.

As we explain in greater detail below, as of this moment it appears likely that the Nationals will succeed with their proposed ‘European-style’ software patent exclusion (see NZ Government Backtracks – to Europe – on Software Patents).  However, the Labour opposition has introduced its own more radical exclusion, which would ban all software patents with the sole caveat that this does not prevent ‘an invention that makes use of an embedded computer program from being patentable’, i.e. the same provision championed by the No Software Patents in NZ lobby group (see ‘My Software, My Choice’).

Additionally, the Green Party has gene patents in its sights, although this does not appear to be the same hot-button issue it has been in Australia (see, most recently, ‘Gene Patents’: Lies, Damn Lies, and Statistics).

THE DEBATE

Political enthusiasts can read the entire debate in the New Zealand Hansard of 13 September 2012.  For those less enthusiastic, here is a summary of what transpired when the Patents Bill received its second reading.

Members of the governing Nationals, the opposition Labour and Greens, and the minority NZ First party all spoke to the Bill, and the three proposed amendments:
  1. Supplementary Order Paper (SOP) 120, which is the Nationals’ proposed amendment including the European-style restriction on software patents;
  2. SOP 123, which is the Labour-backed ‘embedded systems only’ amendment; and
  3. SOP 124, which is an amendment proposed by Greens’ member Steffan Browning seeking to bar patents on ‘life’.
The governing National Party (59/121 members) are, obviously enough, in favour of the Bill as amended by SOP 120, to bar the granting of patents on software to the extent that a claim is directed to a computer program ‘as such’.

The main opposition Labour Party (34/121 members), equally obviously, favour the Bill as amended by Clare Curran’s SOP 123, barring software patents outright, but providing that inventions including embedded software are nonetheless patentable.

The NZ First party (8/121 members) and the Green Party (14/121 members) both also spoke in favour of the Labour proposal SOP 123.

Only the Greens spoke to the ‘gene/life’ patent exclusion proposal, suggesting that there is little interest or appetite for this amendment.  Hopefully, then, this will be last we hear of it – not because it is not an important issue (we have previously shared our views on this in Why IP Professionals Must Take ‘Gene Patent’ Opponents Seriously), but because the specific proposed provision is an appallingly poor and ill-thought-out piece of drafting which requires far greater scrutiny before being allowed anywhere near the statute books.

No members of the Māori Party (3/121 members), Mana (1/121 member), ACT New Zealand (1/121 member) or United Future (1/121 member) spoke either for or against the Bill, or any of the proposed amendments.  Notably, the Nationals have ‘confidence and supply’ agreements with all three of these parties, which means that they have promised not to vote against the government on matters which will prevent it from governing.  However, they are not generally obliged to vote with the Nationals on individual issues.

Even so, it will be appreciated that the Nationals require only two votes from their coalition supporters, of the six available, in order to get their own way.  There will no doubt be intense lobbying over the coming days and weeks, but right now it is more likely than not that the Nationals’ ‘European-style’ computer programs provision will become law.

WHAT THEY SAID

Readers with no real interest in politics can stop now – the summary above tells you all you need to know about the current state of play, as reflected in the parliamentary debate.  However, for those interested in a taste of what took place, without reading the entire transcript, we have excerpted a few passages below, along with a little of our own commentary.

These are organised by party, rather than in the order in which the respective members spoke.  If anyone feels minded to accuse us of being ‘selective’ in our quotations, we plead guilty as charged.  There are thousands of words of transcript, and we are just trying to give a flavour of each speech.  We do not suggest for one moment that the full democratic process is served by anything other than reading the original in full!

National Party

Member – Craig Foss (Minister of Commerce, introducing Bill)
There will no doubt be strident criticism of Mr Foss’ speech by representatives of the anti-software patents lobby.  It is, indeed, a fine example of careful wording.  We know from the European experience that barring patents on ‘computer programs as such’ does not prevent an invention from being patented merely because it is implemented in software.

Much turns here on the meaning of ‘invention’.  If the inventive step lies in coming up with the idea of a solution to a problem, the implementation of that solution happens to be in software, and if no additional inventiveness is required merely to code it up, then the invention may be patentable.  Those opposed to software patents will be the first to tell you that invention never resides in the coding – it is an incremental process that builds on what came before.

This very fine distinction is subtly skirted in the Mr Foss’ speech, excerpts of which are reproduced below.

During its consideration of the bill, the committee heard many submissions from groups opposed to the granting of patents for computer programs. The Patents Act 1953 does not mention computer programs. However, computer programs can be patented under the existing Act of 1953 if they produce a commercially useful effect, following a 1994 ruling of the Commissioner of Patents.
      …
Various submitters considered that the granting of patents for computer software can inhibit innovation and competition. The committee was also made aware that some New Zealand companies have made significant investments in imbedded software. This is the sort of software that is used, for example, to control devices such as home appliances, digital cameras, and mobile phones. The committee accepted that although the patentability of computer programs themselves should be restricted, patent protection should still be available where an invention includes imbedded software. After considering the approaches taken in other jurisdictions, the committee decided and recommended that the bill provide that computer programs should not be a patentable invention.

It is clear in the commentary on the bill that the committee did not intend that an invention should be ineligible for patent protection merely because it makes use of, or is implemented by, a computer program. Rather, the intention was that granting of a patent should be prevented only where the novelty and inventive step lie in a computer program. In order to make the committee’s intention clear, and to avoid any doubt as to what is intended, I propose that the computer program provision be amended so as to provide that only computer programs as such are ineligible for patent protection.
      …
I acknowledge that there has been discussion around the changes that I have introduced through Supplementary Order Paper 120, but I reiterate that there has been no change to the select committee’s intention that computer programs should not be patentable. Let me be clear: a computer program as such is not patentable. Let me be clear: a computer program itself, under the Supplementary Order Paper and this bill, is not patentable.
Member – Jonathan Young
Mr Young did a fine job of supporting the Minister, as these excerpts demonstrate.

The previous Parliament really grappled with this situation. It is one that is very difficult. I do recall the Minister saying a number of times in his speech today that computer software is not a patentable invention. He made that very clear in a number of very strong statements. Obviously through this debate and through the Committee stage, this will be the crux of the issues that we face. Indeed, through that select committee process, which I was a member of, it was the one issue that did concern a tremendous amount of our time to get some progress on.

So in all of this the effective and modern patents system protects that innovation. I understand that there is a balance between encouraging innovation and protecting the bounty or the windfall that comes from that innovation. We will get this right in our country.

As we move through this bill, particularly through the Committee stage, we are going to get to the very nub of some of these issues that members have raised in this House. I believe that we are going to work through and have a system, a regime, that is going to serve the innovators and inventers of our country very well, and we will continue to see and reap the benefits of that great work.
Member – Sam Lotu-Iiga
Mr Lotu-Iiga (a member of Samoan background, in New Zealand’s relatively ethnically-diverse parliament) also supported the party line, going so far as to support the notion of granting protection to nominally ‘incremental’ innovation.  It is not clear that (objections to software patents aside) the new act will actually achieve this – part of its effect will be to significantly expand the available prior art, to a global rather than local basis, and to raise a number of patentability standards.

Here is some of what Mr Lotu-Iiga had to say.

So much of our innovation, as has already been stated—and I see a lot of this in my own electorate of Maungakiekie—is incremental, and it builds on what has gone on before. We certainly grappled with a number of issues around computer software and computer programmes, but on this side of the House we are committed and determined to focus on boosting growth and jobs, so this bill in its entirety is about updating our patent laws and providing incentives for innovation. We have got to balance that out with those who are taking on new inventions and adding to them.
Member – Mark Mitchell
Mr Mitchell appeared to have a better grasp of exactly what the bill does in terms of raising the bar on ‘incremental’ innovation.

One of the changes that I feel is critical is that the bill strengthens the criteria for granting a patent to ensure that patents are granted only for genuine innovations, defined as a manner of manufacture, that are novel, and non-obvious and useful. This change brings us into line with international best-practice. It will simplify the procedures for granting a patent, including removing the current requirement for local applicants to seek permission to file a foreign patent application, if they have not filed an application in New Zealand. It will also streamline the procedures for challenging the granting of a patent. This is a very good bill.
Member – Mike Sabin
We cannot let Mr Sabin’s speech pass without reproducing the entertaining manner in which it began.  Apparently, the Honourable had turned up to parliament resplendent in a tie bearing an image of well-known political pundit, Homer J Simpson:

MIKE SABIN (National—Northland): I will take a short call on this bill, the Patents Bill.
Hon Trevor Mallard: What’s that on his tie?
MIKE SABIN: It is Homer Simpson, Mr Mallard, a very well-known—
Hon Trevor Mallard: The member’s hero.
MIKE SABIN: He is reacting in quite the way I am sure you did on election night.

From this, we assume that the image in question includes the exclamation ‘DOH!’

The rest of the speech lacked anything like the same level of entertainment value – a combination of party line, and conciliation.

The members opposite have alluded to the fact that there was significant political consensus on the bill in its early passage through the select committee and have traversed the concerns they raised with regard to the Supplementary Order Paper from the Hon Craig Foss. I do not intend to cover that any more other than to say that I am sure that, as this matter moves further, through the Committee stage, that members on both sides of the House will work diligently to ensure that the right outcome is achieved in the interests of New Zealand.

Labour

Member – Clare Curran
As the sponsor of SOP 123, it will come as no surprise that Ms Curran spoke at length of its benefits.  Oddly, however, she began with a story which appeared (to us, at least) to be more a demonstration of its futility.

How will banning software patents in New Zealand assist a local industry in which 99% of revenue is from exports, primarily to the US and Europe, where patents for computer-implemented inventions are permitted?  This suggests that there is no good reason for New Zealand not to adopt a standard matching at least one of these major export markets, and since Europe is the more restrictive of the two, that would seem to be the preferred choice.  Which is exactly what SOP 120 seeks to do.

Here is some of what Ms Curran had to say.  (US readers should note that elsewhere in the world ‘tabled’ means ‘introduced into the house’, not ‘scrapped’ as it does in the US Congress.)

Yesterday we heard that Kiwi video games studios in New Zealand released 73 commercial video games in the last year, primarily selling them digitally on iPhones, on websites, and on Android smartphones. And that local industry has nearly doubled in the last 2 years. It employs 380 fulltime-equivalent game developers. It is a high-tech, high-growth industry. The chair of the New Zealand Game Developers Association said: “We’ve learnt how to make money from business models like digital distribution, freemium, virtual goods and crowdfunding. Exporting and acting global from day one have been key to the industry’s growth.” Ninety-seven percent of Kiwi games were digital downloads, with low distribution costs and high margins. Ninety-nine percent of sales revenue came from exports, with the USA and Europe being the largest markets.
      …
Software—for the Minister’s benefit—is lines of code, like music is lines of notes, and books are lines of text. Software is a collection of mathematical algorithms and mathematical equations. In order to create new software you have to build on existing software. It cannot be patented, because that would stop it in its tracks. That is what this bill tries to do, and that is what that amendment that the Minister is putting in front of this House today will stuff up.
      …
The amendment that has been tabled by Labour provides very simply language and a clear definition of what the committee actually intended. The bill actually, as it stands, simply says: “A computer program is not a patentable invention.” That is the intent of the select committee. Our Supplementary Order Paper clarifies that by saying that it does not prevent an invention that makes use of an embedded computer program from being patentable.
Member – Clayton Cosgrove
Mr Cosgrove was another of the opposition members to criticise the Nationals’ eleventh-hour scotching of the Commerce Selec Committee’s computer program exclusion.

This bill, the Patents Bill, was introduced by the previous Labour Government. I was not on the Commerce Committee at that point, but as I understand it the committee exhaustively examined the issues surrounding this legislation. The bill had, in general, widespread and bipartisan support—I think unanimous support; I am looking at the former chair of the Commerce Committee. The committee reported back the legislation with a report that was supported unanimously. I know other colleagues were on that committee. Even, I am advised, the former Minister in charge of this bill, Simon Power, was in agreement with the position of the committee. Then, under the cover of darkness, the new Minister some time later popped out a rather controversial amendment, as articulated by my colleague Clare Curran, that effectively fired a torpedo into the consensus of the committee.
Member – Lianne Dalziel
Ms Dalziel was the chair of the Select Committee which introduced the computer program exclusion to the Patents Bill, which was, at that time, already the result of a decade of consultation and development.  Whatever went on in that Committee (and we accept that many members of the Committee genuinely believe that they worked hard and grappled with difficult issues), it too took many people by surprise when the outcome from that period of consultation was radically altered by a new exclusion from patentability. 

We will not rehash those issues here – they came out during subsequent consultation on proposed examination guidelines, as we reported in Stakeholders Say ‘No’ to NZ Computer Program Exclusion.  But this earlier debate should not be forgotten, in the context of the opposition parties now accusing the Nationals of doing shady last-minute deals behind closed doors.

Here is an excerpt from Ms Dalziel’s speech, in which she spent some time on discussion of a controversial blog post.  Though the post in question was removed, the text has been preserved by the NZ Open Source Society, for those who wish to see what Ms Dalziel is talking about.

We are so close to having, I believe—not unanimity, obviously, with some parties opposing it altogether—an overwhelming majority in this House in support of the bill that it seems crazy that we have ended up in the situation where we are debating over a single clause in what is a substantial rewrite of patents law, which, of course, is well overdue.

I have to say that I had a really good working relationship with the previous Minister on this matter when I was the spokesperson. I consulted with him all the way through the select committee process. Indeed, when we were dealing with this very issue it was the subject of quite a substantial conversation. I think my colleague Clare Curran joined me on that occasion, and we really nutted through the issues. We felt, both of us on this side of the House, that we had been well received and that we had reached a good outcome. Unfortunately, what seems to have happened is that there seemed to have been some discussions behind closed doors that this side of the House has not been privy to but that was the subject of quite a substantial blog.
Member – David Cunliffe
Mr Cunliffe supported the party line also.  Here is a brief excerpt.

Labour supports this bill but, importantly, at this stage only pending clarification of the Government’s willingness to accept our own Supplementary Order Paper in Clare Curran’s name, which, of course, is backed by the vast majority of New Zealand’s innovators. It stipulates that a computer programme “does not prevent an invention that makes use of an embedded computer programme from being patentable.” It leaves the boundaries of embedded software to be determined by the Government on a case by case basis as is appropriate. It would be a nonsense, frankly, to make any computer programme patentable because subprograms could be used to block the development of innovation.

Trevor Mallard
Knowing very little about the details of New Zealand politics, I cannot say what sort of character Mr Mallard actually is, but in his speech he gave the impression of being the Labour Party’s chief head-kicker.  Certainly he was less restrained than other speakers, and perfectly willing to make a few oblique allegations (all under the protection of parliamentary privilege, of course).

What has become clear over the last few days is that this Government has been captured. This Minister has been captured by offshore people who are involved in the software industry. It is vitally important to thousands of jobs in smaller businesses around New Zealand that we have a clear policy in this area, one that is easily understood on the face of the legislation and not one that has to be sorted out time and time and time again in the courts.

What we have now is a group of overseas-owned companies that had an agent who was working for them, who is alleged—I do not know this for a fact, but I will rely on the comments made by my colleague the Hon Lianne Dalziel. The person who was the agent for these multinational software companies working against the interests of New Zealand software companies is now the person who is drafting the rules for the Minister of Commerce . If that is the case, it is an absolute disgrace—an absolute disgrace—if that person is employed by the Ministry of Business, Innovation and Employment.

NZ First

Member – Denis O’Rourke
Mr O’Rourke’s speech revealed that the NZ First party looks likely to support Labour in pressing for adoption of SOP 123.

…coming to the reservations that we have, we also believe, as the Labour representatives have stated, that new clause 10A(1) and (2) are problematic, as recommended by the Minister’s amendment, which, frankly, seems to me to be complete gobbledegook. I believe that Supplementary Order Paper 123 provides for a much better alternative, in that it states: “Subsection (1) does not prevent an invention that makes use of an embedded computer program from being patentable.” When you compare that with the amendment recommended in Supplementary Order Paper 120—which says: “Subsection (1) prevents anything from being an invention for the purposes of this Act only to the extent that a patent or an application relates to a computer program as such.”—to me that is very problematical, in that it is capable of a number of different interpretations. I think I know what it means, but I am sure that there would be others who would have totally different interpretations.

Green Party

Member – Steffan Browning
Mr Browning is the sponsor of SOP 124, and expressed the Green Party’s concerns about patents being granted on ‘life’, as exemplified by the following passage.

We cannot afford, intentionally or not, to allow for the patenting of life forms. It would encourage biopiracy of indigenous resources. It would turn life forms into commodities to be used for profit. It would put up barriers to the free flow of scientific research. Patents were designed to ensure that inventors could gain financial returns for their hard work and ingenuity, and that makes sense in terms of things—in terms of chemistry and physics—but not life. Living organisms were originally excluded from the patent system. They were a product of nature—that is what they were seen as, a product of nature—not a human invention. But this changed in 1980 when courts elsewhere found that they could be a human invention. What made this possible was genetic engineering.
Member – Gareth Hughes
It was Mr Hughes’ speech that revealed the Greens’ position on the software patent issue.

I rise to speak on the Patents Bill and its ugly cousin, the Minister’s amendments. I am pleased to be saying the Green Party will be voting against this bill on its second reading. I mean, talk about messing it up. I mean, it is high time we updated our antiquated 1950s patent law. I know it is laughed at around the world. It is laughed at by patent lawyers. It is good we are modernising it, but talk about messing it up. Where we have messed it up, where the Minister has dropped the ball, is around software patents. The Minister has irresponsibly tabled the significant amendment, which has muddied this crystal clear, unambiguous consensus that came out of the select committee that software should not be patented. Software should not be patented, because what we are talking about is code. It is like we are talking about maths. Copyright is fine.

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