10 reasons why the Govt should support SOP 123

Here are the top 10 reasons why the Government should support SOP 123 to replace the problematic “as such” proviso in the Patents Bill:

1. The current “as such” wording fails to exclude software patents

The Government claims that the current Patents Bill will exclude software patents. But a top QC has confirmed that it fails to do that – instead computer programs will remain patentable, except in specific circumstances. If the Government does still intend to exclude software patents – as it claims – then the “as such” proviso must go.

Update: intellectual property expert Doug Calhoun has confirmed this: “The effect of the [as such] exclusion is that there is no real change in the law.”

2. It will be hailed by the local IT industry

Well over 1,000 (and counting) software developers and supporters back SOP 123 (which implements the wording requested in the petition), including New Zealand’s two largest software exporters – Jade and Orion Health – and personnel from other leading kiwi firms such as Xero. Supporting SOP 123 to clearly exclude software patents (as the Government says is intended) will be hailed by this valuable – and well connected – community.

3. It is consistent with the Commerce Committee’s unanimous recommendations

The Commerce Committee was unanimous and clear: computer programs should be excluded from patentability. They certainly did not recommend to “effectively allow the patentability of computer programs except where these have no technical effect”, which is what a top QC says will occur under the current Bill. SOP 123, on the other hand, is consistent with the Commerce Committee’s intentions, as it clearly excludes software patents.

4. It is consistent with the Minister’s own words

Commerce Minister Craig Foss said the “as such” change to the Patents Bill was to exclude software patents but ensure that:

“inventions that make use of embedded computer programs will be patentable.”

We now know that “as such” will have a different effect. But SOP 123 will achieve the Minister’s stated intention, and uses words almost identical to the Minister’s own:

Subsection (1) does not prevent an invention that makes use of an embedded computer program from being patentable.

SOP 123 therefore achieves the Minister’s intention, consistent with his own words.

5. It is consistent with the Government’s previous statements

Prior to the introduction of the “as such” proviso, the Government had on many occasions confirmed that the Commerce Committee’s unanimous recommendation had been accepted. But the introduction of the “as such” proviso reverses this position by allowing software patents to continue. SOP 123 brings the Bill back to consistency with the Government’s previous statements, by actually excluding software patents.

6. It is a plain-English improvement to the convoluted and problematic “as such” proviso

The “as such” proviso has proven controversial in Europe, controversial between New Zealand and Australian patent attorneys, and has even been described as having an “ambiguous nature” by the World Intellectual Property Organisation (WIPO) itself. Is that what we want in the Patents Act?

In contrast, SOP 123 is plain-English, based on the Minister’s own clear words,  unambiguous, and widely supported by the IT industry.

7. It raises no issues under TRIPS

MED has confirmed that no software patent exclusion, anywhere in the world and in any form, had ever caused TRIPS problems, despite 64 countries excluding software from patentable subject matter.

8. It costs nothing, only clarifies

Kiwi software developers do not ask for much. They don’t ask for subsidies or tax breaks, or cause political headaches with pollution, etc. The one time the IT industry asks the Government for something, it is to clarify one sentence in a Bill to ensure an outcome the Government says it wants anyway.

This is a very small and reasonable ask, from a very important and valuable industry. Will the Government listen?

9. It will give the Patents Bill broad support in the House

The Patents Bill has mostly enjoyed broad support in the House, and so it should. The controversy over the late “as such” change is simply because it will fail to do what it claims to do. SOP 123 will clarify this and result in a better law. This is all that is required for the Bill to regain broad support for its third reading.

10. There is no “politics” in it

This change is about clear law. It simply seeks to fix one sentence in the Bill that currently fails to achieve what it is supposed to achieve. This should not be controversial. Clear law is not a political issue, and there is no reason for legislators not to support SOP 123 to achieve better law.


If the Government wishes to retain software patents, then it should say so, and keep the “as such” wording. But If the Government remains committed to implementing the Commerce Committee’s recommendation to clearly exclude software patents – as it claims – and in a manner supported by the local IT industry, then it must support SOP 123.

Copyright (Infringing File Sharing) Amendment Bill

Justice Minister Simon Power had a day of two halves yesterday. The good: he announced a crackdown on the legal aid system (the Criminal Bar Association is “appalled” at the changes, so they must be good). The bad: he announces that Parliament was to rush through the Copyright (Infringing File Sharing) Amendment Bill under urgency.

While the Bill is being passed under urgency  – with the reason for the indecent haste unexplained and unjustified – it will have an easy ride through, with 111 of 122 MPs voting for it. Only the Greens, Chris Carter and Hone Harawira opposed passing the Bill under urgency. The move was supported by National, ACT, the Maori Party, United Future, Labour and Progressives.

So the substance of the Bill was uncontroversial for most MPs, despite some semantic gymnastics from Labour MPs attempting to explain why they originally supported it in harsher form than present, then opposed a more reasonable version, and are now supporting it again.

There is no question that the use of urgency for this Bill is an abuse of process. The file sharing reforms have kicked around for several years, since controversy erupted after first being introduced (in more draconian form) by the previous Labour Government. There is no explanation for the sudden need to race it through now.

It is also clear that some MPs still have a poor understanding of the issues. For example, in the House last night National MP Katrina Shanks made bizzare comments suggesting that any file sharing was illegal, and that people who choose to install file-sharing software on their computers must be doing so to infringe copyright. I just so happened to be downloading the latest version of LibreOffice using µTorrent when she said that…

On the substance of the bill, there is no question that it is a substantial improvement over the original proposal. In particular, the original draconian termination provision is now only available to a Court, and only if the judge considers:

“suspension of the account holder’s account is justified and appropriate in the circumstances, given the seriousness of the infringing”

This and other changes mitigate much of the “guilt on accusation” stance of the original Bill (and I do wonder whether many of the Twitterati realise this, given some of the incorrect and alarmist comments flying around), although it remains less than ideal.

Telecom txt spam – RTFC

Stuff reports that Telecom has been accused of “probably” breaching the anti-spam law:

Internal Affairs is looking into whether Telecom may have breached spam laws by sending text messages to customers that did not include instructions on how customers could unsubscribe from receiving such messages… Victoria University law student Hamish McConnochie drew attention to the texts, promoting Telecom’s pre-pay top-ups and roaming services …

Here’s a quick tip: look at Telecom’s Term’s & Conditions (see below).

The anti-spam law (the Unsolicited Electronic Messages Act 2007) requires certain types of commercial electronic messages to offer an unsubscribe facility. This law is “technology neutral” – it applies to all types of electronic messages, including emails, text messages, instant messages, etc. However, the unsubscribe facility is not needed where there is a “contract, arrangement or understanding” between the sender and receiver not to include an unsubscribe. Telcos are well aware of this law and usually take necessary steps to comply. Telecom argues it has such an arrangement as follows:

Telecom sent customers text messages in November telling recipients that unless they objected then, Telecom would deem they had agreed future text messages from the company need no longer include an opt-out message. Spokeswoman Anna Skerten said those messages created such an arrangement.

A “no response means you accept” text cannot create a contract. However, it is arguable that it could create an “arrangement or understanding” – which are clearly intended to mean something less than a contract or other form of express consent.

But what is unusual is that Telecom’s spokeswoman did not simply refer to Telecom’s mobile service terms and conditions (link is for the prepaid version – others exist). Clause 13(3) states:

From time to time we may send you sales and marketing information about Telecom products and services. You can let us know at any time if you do not want to receive sales and marketing information by contacting Telecom Customer Services

There is no need for messy arguments over whether some text sent last year created an “arrangement”, when there is a contract which clearly applies. Together with Telecom’s “opt-out” text, that would probably suffice (there may be a more specific opt-out in some of the other T&C’s but I’m not going to read them all…) Importantly, Telecom’s T&C’s, like most others, also include a “changes” provision allowing Telecom to modify its terms. So if Telecom decides it needs to change or clarify its T&C’s in response to this reportage, it can do so. It should. Vodafone’s T&C’s are much better, as they clearly state:

You agree that we and our Agents may send you marketing messages, electronic or otherwise, about our special offers, products and Services, and those of our selected Agents and third parties which may be of interest to you. You agree too that the electronic marketing message we, our Agents and third parties send need not include an unsubscribe facility.

Internal Affairs could allege that Telecom’s terms (together with the opt-out text) were insufficient and launch a prosecution. I don’t think it would succeed, and it would probably be a waste of taxpayer money:  the worst outcome for Telecom would be a relatively minor fine that would most likely not cover the costs of a defended prosecution. Also it is highly unlikely that any customer will be able to claim compensation (which requires loss to have occurred).

Finally there is room for argument that under clause 11(2)(a), third-party texts would still not be covered by the telco’s terms & conditions, but that is a separate question.

A small boost for NZ privacy – cloud questions remain

The recently-enacted Privacy (Cross-border Information) Amendment Act 2010 improves New Zealand’s privacy framework, but also highlights the challenges to privacy caused by the internet. The new law amends the Privacy Act 1993 in 2 main ways:

  • It strengthens cross-border privacy co-operation by providing for the referral (by the Privacy Commissioner) of complaints to overseas authorities; and
  • It establishes a “mechanism for controlling the transfer of information outside New Zealand where the information has been routed through New Zealand to circumvent the privacy laws of the country from where the information originated” – so, an anti-circumvention measure.

The cross-border co-operation provision is a small but good step. There are ongoing international privacy initiatives, such as the recent APEC Cross-border Privacy Enforcement Arrangement, and an essential aspect of any international arrangements is the ability for local authorities to interact with their foreign counterparts.

The anti-circumvention measure also assists in this regard, to prevent New Zealand being seen as a “privacy haven” – one that permits “data laundering” if you will . As the Privacy Commissioner Marie Shroff says:

Ensuring that European business and regulators see New Zealand as a safe place for information processing is important for New Zealand’s reputation.

The anti-circumvention measure was added as Part 11A of the Privacy Act 1993. Section 114B(1) states:

The Commissioner may prohibit a transfer of personal information from New Zealand to another State if the Commissioner is satisfied, on reasonable grounds, that:

(a) the information has been, or will be, received in New Zealand from another State and is likely to be transferred to a third State where it will not be subject to a law providing comparable safeguards to this Act; and

(b) the transfer would be likely to lead to a contravention of the basic principles of national application set out in Part Two of the OECD Guidelines and set out in Schedule 5A.

This provision will be useful, for example, to help promote New Zealand data centres hosting data for overseas clients. New Zealand firms who do host or receive data from overseas (it does not apply to New Zealand-sourced data) should have processes in place for ensuring that the “transfer” of data out of New Zealand can be halted if required by the Privacy Commissioner issuing a transfer prohibition notice.

But in the age of cloud computing, are things that clear-cut? Often, the cloud (or the internet in general) makes it hard to know just where data is located. A New Zealand firm may receive data from overseas, and “host” that data in its facilities, but if the New Zealand provider itself uses cloud-based storage, what appears to be data being hosted in New Zealand may in fact be hosted overseas again. A key benefit of cloud computing is that providers can (in theory) transfer data anywhere in the cloud seamlessly. Data can be divided to multiple places at once, and be transferred without notice at about the speed of light. In these situations, who on earth will know what information is where? All of which makes the language of section 114B(1) – “if information has been, or will be, received in New Zealand from another State” – sound rather quaint, as if they are dealing with courier packages.

The challenges of privacy controls in the cloud-era are well known. Just how much regulation is ultimately attempted, necessary or desirable remains to be seen, bearing in mind that most users are willing to trade privacy for functionality.

Tech law update 30 July 2010

Consumer guarantees & online auctions

The Government is now accepting submissions on its reform of the Consumer Guarantees Act, which will extend standard consumer protections to online auction sites such as TradeMe. The proposed text is as follows:

Supply by auction or competitive tender under subsection (3) does not include supply of goods and services by a supplier through a competitive bidding process using an online trading facility.

This will be a welcome change for consumers, and one I expect will be supported by many retailers.

Jailbreaking iPhones deemed legal

The US Copyright Office has ruled that jailbreaking (or unlocking) iPhones or other devices does not infringe copyright law. This clears the way (for now at least) for consumers in the US to legally use third-party tools to install  “unsanctioned” apps on their devices. To date, Apple has kept a very tight grip on which apps can – and cannot – be installed on iPhones (all via its official AppStore). Jailbreaking involves removing or bypassing Apple’s built-in restrictions that prevent unauthorised apps from being installed. Apple (and others) have argued that this breaches copyright law, by bypassing DRM restrictions and unlawfully modifying their code (similar in some ways to the “technological protection measure” provisions in New Zealand’s Copyright Act 1994). Proponents claim that jailbreaking is fair use.

The matter will not end here. Given the revenue involved it is likely to be a contentious issue for years to come. The US Copyright Office is not a Court, so its ruling is susceptible to legal challenge. Also, jailbreaking is still a breach of the iPhone’s EULA:

“You may not and you agree not to, or to enable others to, … modify … the iPhone Software or any services provided by the iPhone Software …”

However the enforceability of such a provision is greatly limited, and in practice largely useless if jailbreaking software and service providers become mainstream.

s92A rolls on

IT lawyer Rick Shera blogs on the New Zealand Law Society’s submission on s92A of the Copyright (Infringing File Sharing) Amendment Bill. He notes the Society’s recommendation that the Bill “should be amended to provide the Court with the power to order that the account holder may not open an account with another ISP during the period of any suspension”. That the existing Bill does allow someone to simply get another account could be seen as a loophole – but part of the reason why I have always thought disconnection was a red herring. In any case, the Law Society’s proposed change is simply draconian.

Software patents to remain excluded

The Government has cleared up the recent uncertainty about software patent reform by confirming that the proposed exclusion of software patents will proceed. A press release from Commerce Minister Simon Power said:

“My decision follows a meeting with the chair of the Commerce Committee where it was agreed that a further amendment to the bill is neither necessary nor desirable.”

During its consideration of the bill, the committee received many submissions opposing the granting of patents for computer programs on the grounds it would stifle innovation and restrict competition… The committee and the Minister accept this position.

Barring any last-minute flip-flop – which is most unlikely given the Minister’s unequivocal statement – s15 of the new Patents Act, once passed, will read:

15(3A) A computer program is not a patentable invention.


It is clear that the lobbying by pro-software patent industry group NZICT was unsuccessful, although Computerworld reports that its CEO apparently still holds out hope that “[IPONZ] will clarify the situation and bring this country’s law into line with the position in Europe and the UK, where software patents have been granted”. Hope does indeed spring eternal: the exclusion is clear and leaves no room for IPONZ to “clarify” it to permit software patents (embedded software is quite different- see below).

As I wrote earlier, it remains a mystery as to why NZICT, a professional and funded body, failed to make a single submission on the Patents Act reform process – they only had 8 years to do so – but instead engaged in private lobbying after the unanimous Select Committee decision had been made. It also did not (and still does not) have a policy paper on the subject, nor did it mention software patents once in its 17 November 2009 submission on “New Zealand’s research, science and technology priorities”. It is not as though the software patent issue had not been signalled – it was raised in the very first document in 2002. Despite this silence, it claims that software patents are actually critical to the IT industry it says it represents.

The New Zealand Computer Society, on the other hand, did put in a submission and has articulated a clear and balanced view representing the broader ICT community. It said today that “we believe this is great news for software innovation in New Zealand”.

Left vs right?

Is there a political angle to this? While some debate has presumed an open-vs-proprietary angle (a false premise) some I have chatted with have seen it as a left-vs-right issue, something Stephen Bell also alluded to (in a different context) in this interesting article.

Thankfully, it appears not. The revised Patents Bill was unanimously supported by the Commerce Committee, comprising members National, Labour, Act, the Greens, and Maori parties. It reported to Commerce Minister Simon Power (National) and Associate Minister Rodney Hide (Act). Unlike the previous Government’s Copyright Act reform, post-committee industry lobbying has not turned the Government.

What about business? NZICT apart, the exclusion of software patents has received the wide support of the New Zealand ICT industry, including (publicly) leading software exporters Orion Health and Jade, which as Paul Matthews notes represent around 50% of New Zealand’s software exports. The overwhelming majority of NZCS members support the change. Internationally, many venture capitalists and other non-bleeding-heart-liberal types have spoken out against software patents, on business grounds.

Some pro-software patent business owners might be miffed at a perceived lack of support from National or Act, perhaps assuming that software patents are a “right” and are valuable for their businesses. The reality is that only a handful of New Zealand companies have New Zealand software patents (I did see a figure quoted somewhere – will try to find it). Yes, they can be valuable if you have them but that is a separate issue (and remember, under the new Act no one loses existing patents). A capitalist, free market economy (and the less restrictive the better) abhors monopolies, and this decision benefits the majority of businesses in New Zealand. Strong IP protection is essential in modern society – including patents – (see my article “Protecting IP in a post-software patent environment“) but the extent of statutory protection when being reviewed will always come down to a perceived balance, not just for the minority holders of a patent (a private monopoly) but for the much larger majority artificially prevented from competing and innovating by that monopoly.

I have always taken pains to note, like NZCS, that there are pros and cons to software patents. And I am a fan of patents generally. Patents are good! But for software patents, the cons outweigh the pros. There are sound business reasons to exclude them. This specific part of the reform targets one specific area, has unanimous political party support (how rare is that?), and wide local business support. The last thing it can be seen as is an anti-business, left-wing policy (if it was, I’d have to oppose it!)

Embedded software

Inventions containing embedded software will remain, rightly, not excluded under the Patents Bill. Minister Power confirmed that IPONZ will develop guidelines for embedded software, which hopefully will set some clear parameters for applicants.

Software is essential to many inventions, and while that software itself will not be patentable, the invention it is a component of still may be. Some difficult conceptual issues can arise, but in most cases I don’t expect difficulties would arise. This “exception” (if it can be described as such) will not undermine the general exclusion for software patents.