Commerce Minister Craig Foss has admitted that his purportedly clear “as such” amendment to the software patent exclusion in the Patents Bill actually isn’t so clear after all. In a letter to me dated 16 October, Minister Foss now admits:

• His “as such” amendment introduces a “grey area” to the software patent exclusion;
• His amendment makes it impossible to achieve a “bright line” exclusion of software patents;
• It is not certain whose jurisprudence our law will follow; and
• The country whose approach we will “likely” follow still allows software patents.

Here are the Minister’s words:

It is clear from decisions of the European Patent Office (EPO) that it is impossible to draw a “bright line” between computer programs “as such” (unpatentable) and other inventions which merely make use of computer programs (potentially patentable). Inevitably there is a “grey” area between the two. This may well result in the grant of patents which some may regard as software patents.

So the Minister is still supporting the “as such” change that he now admits will inevitably create a “grey area” that “may well” result in what are regarded as software patents continuing to be granted in New Zealand. Oh dear #1. The Minister is now simply contradicting his earlier assurances. He is also admitting that the change actually prevents a clear (“bright line”) exclusion of software patents. Why, then, does he continue to support it?

More worryingly, Minister Foss’s letter also states:

There is a significant amount of case law from the United Kingdom courts regarding what is and what is not a computer program “as such”. While the New Zealand courts are not bound by United Kingdom case law, they are likely to look to it for guidance. This provides a degree of assurance about how the “as such” wording is likely to be interpreted.

Oh dear #2. We have the chance to write a Bill that does have a specific and clear effect, but instead the Minister admits that his amendment will only have a “likely” effect, and one that is “likely” to fail to fully exclude all software patents. In other words, it is uncertain: the Minister is admitting he is leaving it to chance. No sensible lawyer drafts contracts to have only a “likely” effect, and no sensible Minister should propose legislation that he admits might turn out differently from what is (supposedly) intended. Minister, you’ve got the chance to expressly state what the law will do – why are you leaving it to chance?

The Minister continues:

It is clear from this case law that most computer programs cannot be patented in the United Kingdom.

Oh dear #3. By acknowledging (perhaps optimistically) that the UK excludes “most” computer programs (though the amount is debatable), he has admitted that the UK still does allow some software patents. If his intention is to exclude all software patents, then why is he still supporting a change that is “likely” (in his view) to fail to achieve that result? And, if the intention is to make all software non-patentable, then why is he concerned about being able to access a “significant amount of case law” about which software is and isn’t patentable?

Another question is why is the Minister sheepishly adopting European language that has proven so problematic, and which even WIPO has said is “ambiguous”? The Minister’s letter holds up TRIPS as the reason for adopting Europe’s problematic “as such” wording:

The “as such” wording is also consistent with the WTO TRIPS Agreement.

But hang on: here’s what the Minister said in another letter of 11 October:

There is also no requirement in the TRIPS Agreement that Members must grant patents over computer programs. Members have the flexibility to decline to grant such patents.

So why then is the Minister holding up TRIPS as an excuse for adopting law that by his own admission fails to exclude all software patents?

There are many unanswered questions. Minister Foss is simply tying himself up in knots trying (but failing) to defend the irrational, unwanted, and unneeded “as such” amendment to the Patents Bill.

Software patents have been all over the news recently both in New Zealand and abroad. Here’s a selection:

The patent, used as a sword

Mr. Phillips and Vlingo are among the thousands of executives and companies caught in a software patent system that federal judges, economists, policy makers and technology executives say is so flawed that it often stymies innovation. Alongside the impressive technological advances of the last two decades, they argue, a pall has descended: the marketplace for new ideas has been corrupted by software patents used as destructive weapons.

Apple trial judge says patent system out of sync

Advances in software and other industries cost much less, he said, and the companies benefit tremendously from being first in the market with gadgets – a benefit they would still get if there were no software patents. “It’s not clear that we really need patents in most industries,” he said. Also, devices like smartphones have thousands of component features, and they all receive legal protection. “You just have this proliferation of patents,” Posner said. “It’s a problem.”

Google chairman says software patents bad for innovation

“Patent wars are a disaster for all of us. Everyone can find prior art for everything. So the new trick is to get judges to block devices country by country. It’s bad for innovation, it’s bad for choices.”

Top Rackspace lawyer: “We’d love to get rid of software patents”

In addition to facing its own lawsuits, Rackspace is increasingly seeing its clients sued as well. Last month, for example, a patent troll sued the source control company Github. The troll also named Rackspace in its lawsuit, apparently believing that merely hosting Github’s servers is sufficient to make Rackspace liable for Github’s alleged infringement. “No company is safe from patent trolls,” Schoenbaum told us.

Federal Reserve Bank of St Louis: scrap patents

We can see that cost today as tech companies like Google spend billions on “defensive patents,” which are essentially useless other than as a protection against lawsuits. We see it whenever a cool startup firm is forced to license a bogus patent from a litigious troll. And we see it in the untold dollars spent on legal fees and unnecessary patent filings for ludicrously broad or impractical ideas.

Locally, David Farrar (Kiwiblog) has commented on the Patents Bil:

Personally I think the issue is not just a workable definition, but also whether you want software patentable at all. My view is that amendment by Clare Curran is superior as it clearly says software is not patentable, however protects inventions that have software embedded within them.

National no doubt has to vote in line with the Government decision. However United Future, ACT and the Maori Party do not. I hope they take the time to get to grips with this issue – which is an important one for many NZ technology firms, and that they back the Curran amendment. It is, in my opinion, closest to what the Select Committee unanimously recommended.

Paul Matthews of the IITP has written a nice wrap-up of the current situation, including the poll showing 94% of NZ IT professionals against software patents:

Indeed the view of the kiwi ICT community is fairly clear on this one. The latest example is last week’s Institute of IT Professionals poll where a resounding 94 percent of IT Professionals with a view favoured the Institute continuing to oppose software patents. Yes, 94 percent. And not a small poll either – over 1000 of our members responded.

So why do so many oppose software patents? One reason is that the last few years of software-patenting decisions means it’s now simply not possible to write software today without breaching patents. Many believe software patents represent the biggest threat to our profession since Turing kicked things off at Bletchley Park, as do the patent trolls; lawyers who increasingly make a living out of gaining patents on obvious things and suing successful technologists.

Commerce Minister Craig Foss has further highlighted the uncertainty caused by the “as such” amendment to the Patents Bill with these comments in a letter dated 19 September 2012:

The purpose of the ["as such"] change is to clarify that computer programs themselves will not be patentable, while inventions which use a computer program merely as a tool, for example to control a device or process external to the computer, will still be patentable.

This is yet another version of the what the the ambiguous “as such” amendment is supposed to achieve (and one remarkably similar to what Fisher & Paykel Appliances proposed). If the description above is indeed the intention, then why should the Bill not say so in similarly clear words? Why, instead, should the Bill use the vague “as such” phrase, which has been proven to be open to a wide range of conflicting interpretations? The irony is that the Minister’s stated intentions of the proviso are usually clear and understandable – it’s just a pity that he insists upon using completely different words in the Bill!

The Minister continues:

It is also a major change from the current situation under the Patents Act 1953, where most computer programs can be patented.

And that, perhaps, is the most compelling evidence of the problem with “as such”: the Minister describes the Bill as a “major change”, yet leading intellectual property lawyers say that the “as such” change restores the “status quo” and makes “no real change in the law“. You cannot get further apart – and more uncertain – than that.

So it is indeed ironic that the Minister criticises the industry-supported amendment on the grounds that it may lead to uncertainty:

As there is no universally accepted definition of “embedded computer program”, making this distinction would be difficult and is likely to lead to considerable uncertainty.

The Minister’s logic seems to be this: we cannot use “embedded computer program” because there is no universally accepted definition, which may lead to uncertainty. So instead we will use “as such”, which also has no universally accepted definition, has led to major uncertainty overseas, has lead to major uncertainty already about its predicted effect in New Zealand, has been described by WIPO as having an “ambiguous nature”, and has been rejected by the local IT industry.

The Minister’s apparent insistence on a “universally accepted definition” is further faulty logic. If that were the criteria, then the following terms currently in the Patents Bill (and also lacking a “universally accepted definition”) would also need to be removed:

• “Commercial exploitation” – clause 14
• “Morality” – clause 14(1)(b)
• “Germ line genetic identity” – clause 14(1)
• “Biological processes” – clause 15(1)
• “Therapy” – clause 15(2)
• “Diagnosis” – clause 15(3)
• And many more…

But there is no call to remove these terms from the Bill. And likewise there is no credible reason against using the commonplace, IT industry-supported term “embedded computer program” – a term which has already been widely used in patents themselves.

All of this could be cleared up by the adoption of the industry-supported amendment, SOP 123. There is simply no good reason not to.

Two more intellectual property experts have said that the addition of the “as such” proviso to the Patents Bill reverses the exclusion of software patents that the Government claims the Bill achieves.

Writing in LawTalk, under the heading “Software patents back again”, barrister Clive Elliot says:

In short, the proposed exclusion of computer programs from the definition of invention has been scrapped.

… Essentially, the [addition of "as such"] restores the status quo as it existed before the last round of select committee hearings on the bill.

That final sentence is particularly telling: the addition of the “as such” proviso has completely overruled the Commerce Committee’s  recommendation, so much so that the 2009 hearings may as well have not been held!

Another IP expert, patent attorney Doug Calhoun, writes:

The effect of the ["as such"] exclusion is that there is no real change in the law.

No real change? The status quo? That is certainly not what the Commerce Committee unanimously recommended.

But according to these experts, the “as such” amendment will result in “no real change” and “the status quo”, by allowing software patents to continue. In contrast, the Government claims that it is changing the law to exclude software patents.

Who is right?

There is now no doubt that the problematic “as such” proviso must be removed from the Patents Bill if the Government wants to exclude software patents as claimed. This follows the advice of leading Queens Counsel Andrew Brown that the “as such” proviso would still allow the granting of software patents except in specific circumstances.

The IT industry (including NZ’s largest software exporters) knows this, and has swung in behind the petition calling to replace the “as such” proviso with a clear exclusion of software patents. The industry-supported amendment has now been officially adopted as SOP 123.

Some patent lawyers are fighting this change, although the reasons they have put forward so far have been faulty. However, patent lawyer Matt Adams has raised a new and (to my knowledge) unique objection. He claims that SOP 123 will:

… embalm the term “embedded” in legislation.

Embalm? That is a rather surreal, perhaps slightly morbid, way to explain the normal legislative process of putting words into legislation.

Once again, this appears to be the undue singling out of one proposed word in the entire Bill. If Matt thinks “embedded” will be ‘embalmed’, does he think that every other word in the Bill will also be ‘embalmed’? If not, then perhaps he could explain why the word “embedded” would be any more or less ‘embalmed’ than any other word in the Bill, or in any other Act. And if the word “embedded” does become ‘embalmed’ in the Act (the correct term is “enacted”), does Matt think it would somehow be harder to amend in future than any other word in the Act?

I do hope there is some explanation, because it is a very unusual claim to make. While some laws do stick around for a long time – and the current Patents Act 1953 is an example – they can still be changed at any time. In fact the 1953 Act has been amended many times, as with most Acts – it certainly hasn’t been ‘embalmed’. That’s how Parliament works – it changes laws (hopefully, usually for the better!).

It is also important to remember the basic principles of statutory interpretation. In New Zealand, the law is taken to be “always speaking”. This is enshrined in s 6 of the Interpretation Act 1999: “An enactment applies to circumstances as they arise.” This is why, for example, the Courts are able to apply pre-internet laws to the the internet, in appropriate circumstances.

Being technology neutral is good, but there is little chance of a plain-English word “embedded” – a term with common industry usage – becoming obsolete, any more than other terms such as “online” or “computer system”. And if a word needs changing, it can be changed. Embalmed? Hardly.

If the Patents Bill is to exclude software patents, the real question is: what wording will achieve that. We know that “as such” won’t. But the industry-supported SOP 123 will – and with no risk of ‘embalming’!