This article reviews events since the failed European draft directive on software patents; discusses the existing UK and European law and offers some thoughts as to how we have reached our present position. I go on to discuss the arguments put forward by both sides and ask ‘where do we go from here?’

 

It is almost a year since the European Parliament threw out the proposed directive on Computer Implemented Inventions (‘the CII draft’) by a massive majority of 648 to 14.  The vote was taken after a period of furious lobbying by all interested parties, from software giants such as Microsoft to proponents of the Open Source movement.  In the aftermath, both sides claimed victory.  They were both wrong – we all lost.

 

Over the last 12 months, matters have got worse.  Decisions from the UK and European Patent Office (EPO) and courts have merely confirmed that this area of law is in utter disarray. The existing rules for patenting software need revision – they are uncertain, complex and lack uniformity throughout the EU.  I am in favour of legislative intervention and see the CII draft Directive as an opportunity lost. However, I acknowledge that, with vocal, powerful and active lobbies on either side of the debate, it was difficult to see how good law could have been born from these two parents.

 

Two recent UK Patent Office decisions: Agilent Technologies Inc[1] and Pablo Cappellini[2] have demonstrated the conservative approach to granting software patent applications.  The UK approach is now easily distinguished from the more liberal EPO practice.  Considering that in the USA they have an entirely distinct approach, patenting everything under the sun, it is a matter of some concern that we are unable to achieve uniformity within the EU.

 

The Current Law

As with all types of patent, applicants must demonstrate that they have a new invention, involving an inventive step which is capable of industrial application (ie it must have a physical effect).  The criteria for novelty is met if the invention does not form part of the state of the art and is not obvious.

 

In the context of software patents, the exclusions from this criteria cause greatest difficulty. In both Patent Offices (UK and EPO), examiners interpret identical exclusions contained in the Patents Act 1977, s 1(2) and Article 52(2) of the European Patent Convention (EPC), which include:

 

‘…a scheme, rule or method for performing a mental act…or doing business, or a program for a computer…

But the foregoing provision shall prevent anything being treated as an invention for the purposes of this Act only to the extent that a patent or application for a patent relates to that thing as such.’

 

Agilent Technologies’ application concerned an apparatus and method for analysing several types of data obtained when monitoring a telephone signalling network.  The Hearing Officer agreed with the Examiner’s view that the invention fell within the exclusions from patentability.  The approach taken by Mr Peter Prescott QC in his judgment in CFPH LLC’s Application[3] was adopted.  The test applied was that ‘one must look at the contribution to the art, and ask whether it falls solely within the “excluded subject matter” areas’.  Arguments based on the necessary technical contribution being contained in the software architecture were also rejected.

 

Mr Cappellini’s application was an algorithm for planning a delivery route for a package, using a network of carriers.  The inventive element was that the algorithm permitted individual carriers in the network to deviate from their normal, predefined route in order to create new meeting places where packages could be exchanged between carriers for onward transmission.  Mr Cappellini argued that the technical contribution came from the fact that the algorithm corresponds to real-world physical entities, and that the system issues instructions to the practical effect of controlling a real transport operation.  This argument did not find favour and the application was rejected on the basis that there was no advance (no new nor non-obvious element) that is an invention in the sense of Article 52.

 

It is my view that both applications had much greater prospects of being granted in the EPO following its decision in the Hitachi case.[4]  In Hitachi the EPO Board further restricted the effect of Article 52(2)(c) exclusion by holding that only claims to ‘purely abstract concepts devoid of any technical implications’ or the like will be refused as being excluded from patent protection. Of course the substantive criteria for patentability must be present also.  Strong arguments that Agilent Technologies and Mr Cappellini’s applications are not purely abstract concepts devoid of any technical implications can be made.

 

How Did We Get Here?

 

The software industry of the early 21st century is unrecognisable compared to that of the 1970s.  Which other industries have experienced such growth[5] and transformation?  There are very few of us whose daily lives are not surrounded by software and machines dependent on software.  The legal protection of this most valuable commodity is of great importance. 

 

Never before have we had a commodity of such value that can be ‘stolen’ with such ease.  Through digital copying techniques, perfect copies of software can be made on a limitless scale.  With the apparent inadequacy of anti-copying technological protection the software industry looks to legal protection to safeguard its assets.[6]  As a contrast, the Open Source Movement aspires to the ability to freely share and co-operate in the development of software with few restrictions.

 

Intellectual property law is charged with regulating and protecting the fruits of the information technology industry.  Sixty years ago, no such industry existed it is now one of the most important industry sectors worldwide.  The first widespread appreciation of the role played by the software industry role came about as a result of the ‘Millennium Bug’ hype.  The public at large feared that, if software could not cope with change of year from ‘99’ to ‘00’, our Society could not function[7].   The provision of our heat and light, healthcare, transport, food and water all depended on computer programs functioning as they should.  It is difficult to think of an asset that performs such an integral role in so many aspects of our lives. 

 

So why are we incapable of drafting laws to protect it adequately?

 

The Debate

 

The pro and anti software patent lobbies have too much vested in this issue to concede ground.  It is impossible to place categories of people and organisations into the two lobbies with complete accuracy but generalisations can be made.

 

For example, software giants such as Microsoft, Nokia and SunMicrosystems are typical of the large organisations that you would expect to find in the pro software patent lobby. They have a great deal of investment in research and development and consider software patents to afford the best opportunity to protect that investment.  These companies have the most to make out of being in a position to exploit their IPR in software with the protection of patents and have lobbied hard to promote the expansion of this protection.

 

The other side of the debate are less easily categorised.  They could be seen as the small software developers and civil libertarians who see software patents (and possibly the patent system in general) as state-sanctioned monopolies.  The disparate voices of this lobby are organised under various banners such as FFII[8] or nosoftwarepatents.com. They advocate sharing of knowledge and ideas for all.  

 

Although my position is largely pro-software patents (provided clarity can be achieved), I do acknowledge certain merits of the anti-software patent lobby. The example of BT’s attempt to enforce a patent in hyperlinking technology certainly supports their position.  In 2000, during a review of its 15,000 global patents BT discovered what they considered to be a patent that claimed technology in hyperlinking filed in 1980.  Of course in 1980 few could have contemplated the Internet revolution – this technology related to linked remote terminals on a closed network of Post Offices.  Much to the relief of the US ISP community (the UK patent had expired), BT’s test case was dismissed in August 2002.  The criticism of BT’s position was that the patent claims were written in vague, unspecific terms that were being stretched to cover Internet technology.  Commenting on the case in February 2002 Stephen Probert, deputy director of the Patent Office, said ‘It seems ludicrous that a patent for one technology can cover another but patents are anything but precise and are meant to cover things that aren’t yet invented.’[9]

 

If BT’s claim had been upheld, ISPs based in the US would have had to pay a licence fee to BT for use of this technology which, by 2000, was one of the most commonly used features of the Internet.  Whilst I think it is crucially important that inventors should be afforded appropriate protection to enable them to exploit the fruits of their labour, this claim by BT was a step too far. 

 

The Open Source Movement

 

As the name suggests, the basic idea of the movement[10] is that source code is open to all to copy and develop.  The only restriction is that, where use is made of Open Source code in developing code, the code thus developed must also be made available on an Open Source basis.  What started out as little more than an academic experiment has grown into a powerful movement.  Recently major organisations[11] have woken up to the benefit and credibility of Open Source Software (OSS) and have begun using it in preference to conventional software.

 

One reason for the success of OSS is the perception of it as being the bright new thing.  There is an attraction to OSS based on nothing more than the fact that it isn’t Windows.  It does appear as if Microsoft’s exploitation of their monopoly position is driving users to OSS solutions. 

 

We have yet to see how far this backlash will go, but at present there is a growing disillusionment with the company that will inevitably push some users to alternatives.  Arguments can be made that Microsoft have overplayed their hand, unfairly exploiting their position of strength to the prejudice of those who dared compete with them.

 

The great advantage of having numerous developers, as with OSS, is that more eyes reading the code should detect more errors and more minds are available to come up with bug fixes. A practical drawback to OSS is that proprietary software tends to be more user friendly.  It is generally accepted that a higher level of technical knowledge is a prerequisite to installing and operating OSS.  There appear to be exceptions to this generality in that companies such as Red Hat have OSS offerings such as Red Hat Desktop which are user friendly.  It may be that OSS companies will make up ground in this direction but in the meantime open source code tends to be mainly used by users with developed technology skills in IT support roles, such as operating servers, rather than by the typical software user.

 

It could be argued that through use of less user-friendly software users will be forced to take ownership of the technology which they are using and that this could bring its own benefits.  Greater interaction by users in the development or enhancement of software will increase technology skills throughout the community that can only be a positive development.  Users, and the IT community in general, will benefit in the long run from a steep learning curve from use of OSS.  However to achieve this we must be prepared to pay the additional management and training costs associated with this learning curve.

 

Practical Arguments against Software Patents

 

Persuasive, practical arguments have been articulated by the anti-software patent lobby.  Although they are important considerations I do not think they are insurmountable hurdles to clarifying the law in this area.

 

Training and skills of patent examiners

Of course patent examiners must be accustomed to understanding new technologies, whether they are electronic, mechanical or whatever, however a liberalisation of the restrictions on software patents will inevitably lead to an increase in the number of software patent applications.  Software patent applications require more specialised skills and training than other applications.  Whilst these skills are now required for examination of the software patent applications presently being received, it does appear that new software patent examiners would need to be recruited to manage the increased demand.

 

Examining software patent application

When examining any patent application, the limits of what is being claimed must be clear to the examiner and it is necessary to provide an explanation of the invention with sufficient clarity so that a person skilled in the art may understand how it works.  Typically this is achieved through words and drawings.  Software patent applications present their own challenges – it is difficult for an examiner to be satisfied that what is claimed actually works. 

 

It is impracticable to expect patent offices to have hardware capable of operating every conceivable piece of software which might be presented with an application.  Even if financial and time constraints permitted this, it might still be difficult for examiners to be satisfied that the software was performing with the claimed functionality. 

 

Extent of claims

There is a risk that claims drafted at the high level of the functional specification of a program will lead to unduly wide monopolies being granted.  It would be the responsibility of patent examiners to ensure that they restricted the scope of the granted patent to the unique, creative element in the program rather than the overall function.

 

Prior art search

The Patent Office’s most effective means of narrowing the scope of claims in a patent application is through prior art searches.  I have considerable concern that prior art searches will be of less effect with software patent applications than with other applications.  Prior art searches are rarely absolute but the possibility of their being largely ineffective in searching prior art in software is a risk. 

 

One reason for this is that until recent years alternative means of protection for software have been employed.  I would estimate there are millions of computer programs in existence, leaving aside those patented, the owners of the few of these which are well known will have gone to great lengths to maintain secrecy in them rather than publish their functionality in a form which can be discovered by patent examiners (ie published source code).  Software forming the state of the art may have been protected by copyright or contractual means.  Without such prior art being recorded with patent offices, it is not likely to be discovered in a prior art search.

 

Another difficulty arises from the diverse nature of computer programs compared with other technologies.  An examiner wishing to conduct a prior art search into, say, knitting machine technology would know to begin looking at relevant trade publications.  There may be different branches of the knitting industry but there would be a general body of knowledge the main mass of which would be identifiable.  In contrast, if I take the example of a computer program which provides time management/recording functionality, a prior art search would most likely begin with the software industry but would need to consider all industries (such as legal or accountancy) who would use time management or recording software.  There might be other, less obvious, users of such technology like manufacturing businesses that may have an interest in monitoring employee time on tasks.

 

The weakness of prior art searches may have wide ranging implications by weakening the whole system of patent protection.  I understand that when the US Patent Office began granting pure software patents some were granted for software, as forming part of the state of the art, which was very well known throughout the industry.  We all appreciate that a patent application’s survival of a prior art search is no guarantee that it is novel however it is more than a mere paper exercise. 

 

To have credibility the patent offices must appear to understand the relevant prior art and not grant patents that are obviously invalid.  From the UK perspective there is an advantage in the US having gone through that process.  Firstly, we could learn from it in our approach to software prior art searches.  Secondly, there is now a body of US software patents against which prior art searches can be conducted.  The longer the delay in relaxing the rules on software patents goes on, the greater will be the worldwide body of software patents for use in prior art searches.

 

These practical arguments against broadening the availability of patent protection for software are mostly temporary problems that can largely be overcome by committing sufficient resources to tackle them.  Practical difficulties should take second place to the policy that is considered to be the best solution determined to promote national and EU interests.

 

Software developer’s perspective

There is no risk that a computer program developed independently and with the author’s own effort will infringe the copyright in another work.  The same cannot be said of the risk of patent infringement.  In that example the innocence and independent effort (if applied after the patent’s priority date[12]) of the author will be no defence to an action for patent infringement.  To manage this risk the prudent course would be to conduct a prior art search before development work has begun.  I have commented above on the difficulties this would present to trained patent examiners – so the expense of such an exercise before anything had even been developed must be prohibitive for all but the largest software houses.  Smaller technology companies may have little alternative but to risk the waste of their research and development resources and exposure to infringement proceedings[13] by saving the expense of prior art searches pre-development.

 

The Pro-software Patent Lobby

 

I have referred above to the large technology companies who seek to have their software protected by patents.  These companies play vitally important roles in the economies with which they are involved and governments are slow to act against their interests.  The proposed CII Directive was an attempt by the European Commission  to support the interests of the pro-software lobby. 

 

In 2000 John Mogg, Director General (DGXV) spoke in support of enhancing software patent protection.  He listed the importance of protecting industrial intellectual property for the following reasons:

 

–            to promote innovation within the EU which is necessary for the success of any modern economy

–            intellectual property provides a basis from which new products and services are developed

–            competitiveness and employment – as the EU labour market cannot compete on price, it must be able to compete on quality, especially innovation of new products.

 

Two key objectives when addressing the protection of intellectual property are to ensure internal transparency of law within the EU and to create and maintain a level playing field to enhance competition.  These two objectives could easily apply to most areas of law.  However the drivers for protecting industrial intellectual property are most applicable when considering the protection of software in the modern EU economy.  Unfortunately it does appear that the EU will remain a weak challenger to the strength of the US and Asian economies in the technology sector. 

 

Historically the states making up the EU have led the world in new technology and intellectual advancement but that is no longer the case.  There is a good argument for providing more incentives for investment in research and development.  Perhaps the most important incentive is the assurance that the output from research and development will be protected.

 

A persuasive argument for the extension of patents to all software is ‘why not?’.  What reason do we have for excluding this all-important commodity from the protection afforded to almost every other kind of invention in the industrialised world?  I am increasingly of the view that the reason our exclusions and limitations remain is through a lack of political will to change the status quo.  I suggest we look at the issue from a different perspective.  If patent law were a new concept being drafted by legislators for 21^st-century inventions, would we exclude pure software from its protection?  The exclusions were written for a mid-1970s industry and society, which, from a technological viewpoint, bear little or no resemblance to the industry and society of 2006.  The EPC, on which the 1977 Act is based, is over 30 years old.  It would be presumptuous indeed to think our legislators could even contemplate drafting laws to govern IPR in 2040.

 

In his concluding remarks Director General John Mogg said:

 

‘Improving the patent system will not, in itself, resolve the problem of competitiveness of European industry, but it is clear that the system of protection should not be an obstacle in the protection of results of research and development.  Ultimately, the systems to protect intellectual and industrial property should serve industry and the economy and society at large.  The goals of simplification, legal certainty and proper enforcement mechanisms are concepts which lead our action in this area.’

 

I find this to be an effective high-level summary of what the proposed CII Directive was to achieve.  It could be said that Mogg’s comments are at such a high level they would be unobjectionable to both sides of the debate.  All must accept that intellectual property should serve industry and the economy at large.  Other than at the extreme fringes, the anti-software patent lobby accepts the need to protect the results of research and development – the difference being that they consider copyright provides that protection.

 

I cannot accept that copyright provides adequate protection for software. I see this as being the single biggest flaw in the anti-software patent argument.  Copyright protection will prevent little more than simple copying of the program itself.  There have been attempts to extend it to the ‘look and feel’ of programs that have experienced fairly limited and inconsistent success.[14]  Often what is more valuable is the idea behind the program – which is exactly the property that would be protected by patenting.  If the functionality of a program is not protected then prevention of copying the code itself is of little value. 

 

It is worth mentioning that, irrespective of the rules in place, to have effect they must be enforced.  Copyright provides an adequate mechanism by which the owner of the IPR in the software can prevent simple copying; nevertheless it is estimated[15] that reducing software piracy by 10% would generate US$67 billion for the global economy. So it can be said that the software industry would be better served by enforcement of the protective rules they do have before seeking more but it is not a true comparison.  The infringement of IPR through software theft is endemic and the level at which it is being carried out makes it extremely difficult to prevent.  The type of protection which technology companies seek from patents is intended to enable them fairly to exploit the product of their research and development investment in the market and avoid their competitors gaining an unfair advantage through adoption of their ideas and innovation.

 

It has been argued that the existing system of patent protection is adequate (ie if the software is made available as part of hardware, such as an electronic device, then patent protection should be available for it).  However this does create a two-tier system.  The existing rules of patent protection offer very little for software sold online or on a computer disk without being an inherent part of hardware.

 

Where Do We Go Next?

We do not yet know the full consequences of the failure of the European Parliament to pass the Directive on Computer Implemented Inventions.  Certainly an opportunity to clarify and harmonise the law in the EU on the patentability of software has been lost.  It is difficult to predict the ramifications this will have on the software industry and, in turn, on society at large.  But it is my view that both sides lost out.  The pro-software patent lobby lost out as the law remains in a state of uncertainty and inconsistency throughout the EU.  The anti-software patent lobby lost as software patents are still being granted and, despite the UK Patent Office’s best efforts, in ever increasing numbers – the incremental encroachment onto the scope of the exclusions from patentability is a reality that they cannot ignore.

 

I am in favour of software patents.  I consider the failure to review the express prohibition of them in the EPC and 1977 Act to be greatly disappointing.  These prohibitions have long become outdated.  I have already commented on the value of software products and the importance of affording adequate protection for them.  It is difficult for most of us to comprehend how much Microsoft has made from sale of the Windows operating platform. 

 

I can understand the objections to providing tools to enable the Microsofts of this world from strengthening their grip on the software industry.  There is no doubt that extending the scope for software patents would have this effect but clarity of the law should also enable smaller software developers to protect novel and inventive software.

 

It is regrettable that such uncertain rules pertain for such an important and valuable commodity. The recent decision of the Court of Appeal in Aerotel v Telco; Re Macrossan [2005] EWCA Civ 1371 included a series of suggested questions for decision by the Enlarged Board of Appeal – clear answers would certainly clarify the position.

 

I am far from convinced that the EPO would not have rubber stamped Mr Macrossan’s application on the basis that, through operation of the invention, physical documents were generated. Perhaps the proposed pan-European patent litigation agreement may be a step towards European harmonisation on this difficult issue.

 

 

Colin Hulme is an IP litigator with Burness LLP.