United States: Computer-Implemented Inventions In Europe

The European Commission’s draft directive¹ on patent protection for computer-implemented inventions was intended to clarify the current legal situation in Europe and harmonise the approach taken by the national courts of the European Union’s member states and the Boards of Appeal of the European Patent Office. The Europe-wide consultations that preceded the initial draft also established that many European entities wished to avoid a drift toward the more liberal patenting regime of the United States. The draft directive would also make the European Court of Justice the highest authority.

However, controversy has reigned since September 2003 when, during its first reading of the draft computer-implemented inventions directive, the European Parliament introduced a considerable number of amendments as a response to prolonged and emotional lobbying by various anti-patent groups, including elements of the open source programming community. The result, according to most commentators, was an unworkable text² that threatened to reverse any positive impact the directive would otherwise have had on business interests in the European Union. The law-making process in the EU involves a "co-decision procedure" in which the European Parliament and the Council of Ministers of individual member states must agree on the text of the legislation before it can become law. Predictably, the Council of Ministers subsequently rejected most of the Parliament’s amendments and, in May 2004, published a further version³ of the draft directive representing a political agreement pointing to a common position between ministers of the various states. On March 7, 2005, the Common Position was adopted by the Competitiveness Council, despite requests for more discussions from a minority of dissenting states (including Denmark, Poland and Portugal). The legislation is now expected to proceed to a second reading by the European Parliament.

This review is based on the Competitiveness Council’s text of May 2004, but will also mention some of the key issues of controversy in the Parliament’s text. Much of the controversy has arisen from the fact that the definition of "computer-implemented inventions" in the directive is extremely broad. The result is that much of the draconian legislation in the directive would be felt by industries far beyond the software development and operating systems development spheres. In fact any industry offering a product or service with at least part of its functionality implemented in software would be affected. Therefore, the directive would be felt in industry sectors as diverse as consumer electronics, domestic appliances and life sciences (e.g., medical device makers). There is real concern that Parliament’s controversial amendments would adversely affect technology industries in the European Union. This seems to be the main reason for the vociferous debate that has ensued.

How Does Europe Currently Differ from the United States?

The last decade has seen the United States liberalise its patent granting practice such that inventions which have "a useful, concrete and tangible result" can qualify for protection by patents. While novelty and non-obviousness are required for patentability in the United States, patentability does not require the equivalent to the EU requirement for a "technical contribution" to the field in question. At the European Patent Office (EPO), an invention is considered to have made a technical contribution where it is shown that the invention is capable of bringing about a "technical effect which goes beyond the ‘normal’ physical interactions between the software and the computer on which it is run." Applications have been allowed when the invention is used to control a machine or technical apparatus, as well as when an invention models physical entities or leads to an improvement in performance (or saving of resources) as part of a computer system. These are just examples. If the software has the required technical character, it can be claimed on or off a suitable carrier.

On the other hand, business methods implemented by known technical means are not considered patentable in Europe, since the mere use of a computer or other programmable apparatus does not necessarily confer what is regarded to be "technical character." Furthermore, in Europe the use of algorithms is only patentable where the algorithm is reduced to an application in which it makes a contribution in a technical field, usually by means of some programmable apparatus or technical method. Thus, certain software and business methods that do not meet the EU’s requirement of a "technical contribution," may qualify for protection in the United States, provided there is novelty and inventive step.

In contrast, the practice in Europe has been to require a technical character as a condition to patentability. This difference in approach vis à vis the United States has meant a higher barrier to getting patents granted in Europe, but at the same time it has been widely acknowledged that valuable protection remains available for computer-implemented inventions (CIIs) and software in Europe.

How Would the Directive Limit Patent Protection for Software in Europe?

Regarding substantive principles of patentability, the directive explicitly ties the identification of technical character with the assessment of inventive step. This is because its central proposal (in both the Competitiveness Council and Parliament text) requires that to be patentable, an invention implemented at least in part though the execution of software on a computer or similar programmable apparatus has to make a non-obvious contribution in a technical field. This establishes the bar for patentability at a level similar to that which has been the recent practice at the EPO.

Advice from an experienced EPO practitioner should be sought to clarify the prospects for success in a particular case, but, as a rule, it can be assumed that if the only contribution made by software or a programmed apparatus is nontechnical, such as performing an act electronically which would otherwise have been performed mentally or in the course of doing business, the prospects of achieving a patent grant are low. Just as is the case now, few technically implemented business methods are expected to qualify for patent protection under the Competitiveness Council text. Examples of the few possible exceptions include situations in which the implementation is based on particularly novel data structures or interfaces.

Thus, under the draft legislation (and arguably under recent case law as well) the assessment of "technical contribution" is tied up with the determination of inventive step and is considered less as a preliminary issue before assessment of novelty and inventive step. In practice, many software-implemented inventions would not meet this test because, irrespective of whether or not the claim as a whole is inventive, the contribution to the art (inventive step) may well be rejected as amounting to nothing more than a non-technical step of performing a mental act, a mathematical method, playing a game, a scientific theory or running a program for a computer. When considered in isolation this "non-obvious technical contribution" issue has the potential to reduce the scope of protection for computer implemented inventions in Europe. The Competitiveness Council text, which is based on this definition, should therefore be regarded as representing a more stringent regime than that currently in place. However, when considered alongside the remainder of the proposals in the draft legislation, particularly those in the Parliament’s text, the effect is regarded as drastically limiting what would traditionally have qualified as a patentable computer implemented invention in the European Union. The concern is that without an acceptable level of patent protection, technology companies will in future direct investment away from Europe.

Subject Matter Excluded from Patent Protection

The Competitiveness Council draft seeks to maintain the status quo in relation to exclusions, but also clarifies what the exclusions mean. This approach appears to carefully reflect the results of earlier consultations and takes the same general approach as the European Patent Convention; namely, it explicitly excludes computer programs (as such), mathematical methods and business methods. The intention is to prevent such categories from being monopolised in their nontechnical forms and to maintain Europe on a course away from the more liberal U.S. regime. As is currently the case, there remains the potential under the Competitiveness Council text for patentability of programs and algorithms only when they are reduced to an application in which the required technical contribution is evident. The Competitiveness Council text therefore is regarded by many to strike a reasonable balance between protecting investment in product development and leaving the public free to employ corresponding algorithms in other applications.

On the other hand, and very controversially, the Parliament’s text explicitly excludes any invention to do with "the processing, handling, presentation of information," "data processing" and even inventions acknowledged to "improve efficiency/use of resources in a data processing system." These classes of invention have for many years been well within the realms of subject matter that might qualify for patent protection. The Parliament text goes even further in that it also undermines many already granted patents by reciting permitted acts including that it is not an infringement to use a patented technique for "conversion of conventions used … to allow communication and exchange of data…." A combination of the sweeping exclusions and broad permitted acts would remove many classically protected fields from qualification and render very many granted patents unenforceable, including patents outside the sphere of pure software but which fall into the broad definition of computer-implemented inventions.

In summary, the Parliament text would represent a fairly radical departure from the current legal position. Not surprisingly, mainstream technology companies remain extremely concerned. It is difficult to see a driving force for such changes, but if they were intended to support open source development, the potential for damage to other sectors of the software and technology industries appears to have been hugely underestimated. Again, concerns go to the questions of whether or not products will in the future benefit from the traditional levels of protection that justified investment in the development of the technology in the first place. This sort of question has immediate ramifications for the choice of exploitation model, for product quality and for

longer term product support, as well as raising questions as to whether future product development initiatives are commercially feasible at all in Europe. While it is clear open source is thriving under the current legal regime, it is not so clear that wider technology industries, which tend to lean on different business models, would thrive under Parliament’s proposed regime.

Would the Proposed Directive Restrict Interoperability?

The Software Copyright Directive (already in force as 91/250/EEC) provides that copying and the reproduction or translation of code for the purposes of studying the underlying principles of operation of a program is not an act of infringement. European patent protection is not intended to interfere with these interoperability provisions, either now or under the proposed patent directive. As a result, the proposed patent directive includes a clause that explicitly refers to interoperability provisions under the copyright directive with a statement that nothing in it shall affect or limit these rights. Notwithstanding this safety net provided by the combination of the "permitted acts" under patent law and the above interoperability provisions in the draft directive, there remains a minority view that the proposed patent directive might somehow harm or limit interoperability provisions.

Will Claims to Software on a Carrier Be Permitted?

Despite concerns that limiting the claim format available to CIIs would be contrary to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), both the Competitiveness Council and Parliament versions of the draft currently seek to do this. Under the Competitiveness Council text, a claim to a program on its own (or on a carrier) would only be allowable in an application that also includes claims to a programmed apparatus or to a corresponding technical process.

Based on the Parliament text, such claims would not be available in any circumstances. This would appear have implications in some cross-border infringement scenarios in which the lack of availability of such claim formats would lead to no jurisdiction and/or no cause of action for primary infringement.

Where Does This Leave Business Methods?

Pure business methods have never been patentable in Europe. No part of the proposed directive deals directly with business methods and therefore nothing to do with the directive would change this position. There remains a general satisfaction in Europe with the position that pure business methods are not entitled to protection under patent law.

Where Do We Go from Here?

Under usual procedure the Competitiveness Council’s text should now be presented to the European Parliament for a second reading in mid-to-late 2005. There remains significant anti-patent lobbying and a relatively limited understanding of the difference between a U.S.style position and the regime proposed in the draft directive. A second reading by the European Parliament may bring to light further surprises, particularly given that European elections have installed a new Parliament since the first reading. Likewise there are new representatives from new member states following the recent enlargement of the European Union. These new members bring their own views to the Parliament. Poland in particular has publicly backed a shift away from the current Competitiveness Council text and toward the controversial Parliament text.

Among the general public, there seems to be a lack of understanding or refusal to recognise that the position under the Competitiveness Council’s version of the proposed directive represents a move away from the current position in Europe in the opposite direction to the United States. In other words, people fear a more liberal regime (U.S.style), when in fact all drafts currently on the table represent a more stringent regime (i.e., lower-level protection for CIIs and software than is currently available).

The largest obstacle remains reaching an agreement between the Parliament and the Competitiveness Council on these controversial provisions. This will be difficult to overcome. Without an agreement, the directive will not become law. There is therefore a chance that the legislation will enter a conciliation procedure in an attempt to reach some workable agreement, fail or be withdrawn and thus never enter force. One possible alternative would be an amendment to the European Patent Convention, which would be made on agreement of the member states of the European Patent Organization, as distinct from the European Union. Another alternative is to leave the matter to case law to provide the guidance currently lacking in Europe. I am neither for nor against the directive, but do not think the technology industry is benefiting from this extended period of uncertainty.

Justin Hill, Ph.D. is Director of IP Prosecution in the Firm’s London office. He specializes in IP concerning the electronics, computing and software arts. He is a Fellow of the Chartered Institute of Patent Attorneys, where he sits on the Computer Technology Committee.

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