Software patents: who’s really upset?

The Government’s decision to ban software patents has been harshly criticised as likely to damage investment and “suck the lifeblood” out of the New Zealand software development industry (Computerworld print edition, 12 April 2010). What evidence is there to support these contentions? Certainly none have been put forward. Here are comments from a trio of industry-leading organisations who know a thing or two about the industry:

  • The CEO of the New Zealand Computer Society, Paul Matthews, says “on balance the evidence is clear that software patents are simply too harmful to our sector, and in fact all of New Zealand, to support. We were very happy to see Software Patents removed from the Bill and will be making it very clear to Government that we would be very disappointed to see them make an unwelcome return.”
  • IP lawyer and former president of the New Zealand Software Association, Wayne Hudson, says that most of NZSA’s members can’t afford to “play the patent game”, and most members are “probably apathetic” to the issue.
  • The CEO of Orion Health, New Zealand’s leading software exporter, Ian McCrae, supports the ban on software patents, saying the negatives outweigh the positives (Computerworld print edition, 12 April 2010).

Add to that the New Zealand Open Source Society (which has been the leading voice against software patents), other leading firms such as Catalyst IT, and numerous others, and it is clear that a very large part of the industry is either happy or apathetic about the ban on software patents.

The cross-party Commerce Committee (chaired by former lawyer, and opposition MP, Lianne Dalziel, and deputy-chaired by National MP Peseta Sam Lotu-Iiga, also a lawyer) unanimously recommended the ban, accepting the submissions in favour. The Commerce Minister, Simon Power (another former lawyer) says “the Government believes the committee has dealt with the issue in a sensible manner and has found a reasonable solution”.

So who is actually unhappy about this decision?

  • Microsoft New Zealand, which says it is “concerned”, although it acknowledges it doesn’t actually do software development in this country;
  • Microsoft partner Intergen (a leading NZ firm), which says it damages the industry [see comments section], although it was (by its own account) not interested in putting in a submission to the Select Committee (Computerworld print edition, 12 April 2010), and according to IPONZ does not hold any patents in its name or its parent company’s name.
  • NZICT (whose Tier 1 members include major patent-holders Microsoft, IBM, and HP), though it appears not to have a policy position on this apparently critical issue, did not make a submission to the Select Committee, and did not mention software patents in its 17 November 2009 submission on “New Zealand’s research, science and technology priorities”.
  • Patent attorneys AJ Park and Baldwins, both of which have filed software patents on behalf of international patent holders.

So, in the main, it appears that those unhappy about the decision are limited to the local subsidiaries of major international patent holders, their association (NZICT), and their local business partners. Their opposition is understandable. There are certainly some advantages to software patents to existing holders – but there are more disadvantages and other reasons not to allow them.

Banning software patents will align New Zealand with the European Union and remove a significant threat to the local industry. The general unavailability of software patents in the EU does not seem to have held back the IT sector in that region (or indeed the development of the internet itself). No compelling arguments have been put forward to indicate that New Zealand will somehow have a different experience after the new law takes effect. Instead, as the Select Committee unanimously found and the Government has agreed, the removal of software from patentability is a positive move, and one that has support across New Zealand’s IT industry.

16 thoughts on “Software patents: who’s really upset?

  1. Hello Guy,

    I can’t let the above reference to Intergen go without some points of clarification.

    I was the individual quoted by Computerworld New Zealand.

    My specific criticism is that distinguishing software patents as apart from other patentable inventions damages our industry due to limiting the security available to equity investors. In other words it makes the software business less competitive in the capital markets making capital either more expensive or harder to come by- an unfortunate and unintended consequence, maybe, but a consequence nonetheless.

    You have done a patent search on Intergen and GZ2 Holdings (the parent company of Intergen). I encourage you to also search for NZ Patent # 566291. Held by Aptimize Limited. Aptimize was a company incubated by Intergen and, on the strength of their invention and the intellectual property secured therein, Aptimize raised venture capital early last year. You will note that GZ2 Holdings Limited is a major shareholder in Aptimize.
    I’d like to think that this in some ways proves my point in so far as our access to seed capital for this business was largely helped by the rights that we had secured through the patent process.

    Hope that helps to clarify our position and the motivation behind my comments.

    As to not making a submission to the select committee: I’m afraid I have to plead guilty to simply getting on with growing our business in what were challenging economics times for our entire economy. I speak from a well informed, affected but otherwise somewhat apathetic position on these matters.

    Regards
    Chris Auld
    LLB/BCom. (Information Science) MNZCS
    Executive Director – Intergen

    • Hi Chris

      Thanks for your clarification. I’ve noted it in the blog post.

      As I said, I don’t doubt that software patents can be valuable (extremely valuable, in some cases). But like everything there’s a trade-off – software patents will benefit some, and harm others. The Select Committee has now had a detailed look at the issue and unanimously recommended that on balance software processes should not be patentable. As Ian McCrae said, the negatives (of the system as a whole) outweigh the positives.

      Aptimize sounds like a great, innovative firm – all power to them. If the New Zealand patent helped them to get across the line, that’s great. The reforms won’t invalidate their existing patent (at least I think that’s the intention), and they will get the benefit that another person can’t come along and try to gazump them (in New Zealand) – so they win both ways 🙂

      Regarding new startups, the EU seems to get by without (in most cases) software patents. Are we so different? And of course virtually the entire internet got built without software patents. There’s a good post here by a US patent attorney, saying “stop wasting money on patents… In most cases, filing a patent application is a waste of time and energy. Especially for startups”. And that’s in the US – I’d add that in most cases a New Zealand patent will not be of much value. It’s also worth noting that the future of software patents in the US is somewhat up in the air with “Bilski” decision due any day now, and also Barack Obama promising an overhaul of the system.

      Regarding lack of time for making submissions, believe me I sympathise! But I would have thought that if software patents were so vital (in particular to big firms with significant resources), and with the review specifically considering whether or not to retain them, there would have been many more submissions by financially interested people. The industry comments above carry some weight in that regard – at best, most aren’t that fussed. However there were some strong submissions in favour of software patents, so all sides of the debate were heard (despite some bizzare comments that the committee was somehow “hijacked” by the open source movement).

      Cheers
      Guy

  2. Great summary, Guy – very useful having all of the pro-sw-patent players in one place. It is interesting to see how such a tiny percentage of the IT market could now (after the process is completed, and they’ve failed to make a submission through normal channels) be up in arms to reverse the recommendation. Perhaps they thought no one else would get off their bums to make a submission, either. Having taken part in the submission process, I thought it was remarkably well done and even handed – I was impressed with the level of understanding displayed by the committee members in attendance, particularly Lianne Dalziel. Our submission, for the record, is here: http://egressive.com/article/egressive-submission-on-the-nz-patents-bill

    Dave

  3. Guy – you’ve nailed it here. The arguments against software patents easily overwhelm the arguments in their favour. If those who claim they stand to gain through patents thought they had a case they would have presented it to the Select Committee.

    Colin

  4. Films and books are covered by copyright. They are not inventions. If I invent a method of turning iron into gold using software then I should be able to patent my invention or I will never make any money from it, in fact other companies will flood the market with cheap gold and destroy the global economy. (If you don’t like my example, then you have no imagination). Of course I should not be allowed to patent the iron, its a readily available commodity. And of course I should not be allowed to patent my software program, its also a readily available resource. The whole point is that I should be allowed to patent my METHOD.
    Now
    It is LUDICROIUS to use software for all sorts of purposes in the modern age. It might be very well impractical or downright foolish NOT to use software in my invention. Particularly when the PURPOSE of my software component is to AUTOMATE MY INVENTION. The problem is that not enough attention has been paid to the USE of software in an invention, and as a result many stupid and potentially damaging patents have been granted to the FACT of software to execute a method. In other words patents have been granted for automation for its own sake, (for example automating an accounting system).
    Making accounting faster or distributing access to many users or using a database to centralise an accounting system should NOT be patented, but inventing a new method of accounting, and then automating that and achieving techniques that use the new accounting principles, that would be impractical without a computer, SHOULD most definitely be patentable.
    A blanket ban on the computer COMPONENT of invention would be assinine in the extreme and remove all incentive to create an innovative software industry.

  5. Sorry, my bad – please read that as it is ludicrous NOT to use software for all sorts of purposes.

    • Hi kaonyx. Good comment. My quick thoughts in reply:

      If I invent a method of turning iron into gold using software then I should be able to patent my invention or I will never make any money from it, in fact other companies will flood the market with cheap gold and destroy the global economy.

      Only if you disclose your method. The Coca Cola recipe isn’t patented, but is a very highly protected trade secret. In fact if Coke had been patented back in the day, it would be public information and today, when the patent would long be expired, anyone in the world could use the recipe.

      The whole point is that I should be allowed to patent my METHOD.

      Absolutely. If you invent a method of manufacturing iron into gold (that utilised software in some part of it), it would definitely be patentable. It wouldn’t be unpatentable because it uses some software. The law change does not alter this part of the patent system.

      … but inventing a new method of accounting, and then automating that and achieving techniques that use the new accounting principles, that would be impractical without a computer, SHOULD most definitely be patentable.

      You are talking now about a business method patent. The law change does not affect these at all. The current law is that they are not excluded, and you can get a patent for a BMP if it meets the relevant criteria (i.e. it is a “method of manufacture” etc). But remember that BMP’s are only a very recent thing. In most countries they are quite restricted, or not available at all (e.g. the European Union).

      It’s really only the US that allows BMP in a liberal way, but that is currently up in the air. There is a Supreme Court decision due out any day that could spell the end of BMP’s in the US: see Bilski. And in any case, Barack Obama has pledged to overhaul the US system (which is widely recognised as broken).

  6. What if your method is predominantly software based? An invention must be reduced to practice, and that is EXACTLY what software allows.

    • Any patent application has to meet all the usual requirements. For an application to patent software or code itself, the up-coming ban would prevent a patent being granted. The new Act will say: “A computer program is not a patentable invention.”

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  9. Hi Guy

    I hadn’t seen this blog post yours until today, and it seems I’ve missed a bit of discussion. Apologies for the late addition.

    In terms of a complete review of the situation, you might also be interested to have a look at a blog post I wrote some time ago which sums up Microsoft’s position, and also provides a number of other resources on this topic.

    http://blogs.msdn.com/b/nzgovtech/archive/2011/04/18/building-a-wealthier-nation-through-innovation.aspx

    Kind regards
    Waldo

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