New Zealand: Software patents in NZ: widespread criticism of proposed exclusion and examination guidelines

The future of software patents in New Zealand remains in doubt following an almost unanimous rejection of a proposal to exclude computer-implemented inventions from patentability in a recent public consultation. 

The Ministry of Economic Development (MED) sought public opinion on draft guidelines that are intended to be used to examine patent applications for computer-related inventions in New Zealand. The public has responded with resounding disapproval of both the proposal and draft guidelines. 

The guidelines were published by the MED following a  recommendation from the Commerce Select Committee (CSC) that software should be excluded from patentability by introducing clause 15(3A) into the Patents Bill, which states that "computer software is not a patentable invention". The CSC wanted guidelines to be developed that would, however, permit protection for "embedded" software inventions. The software exclusion was proposed because the CSC is of the opinion that software patents do not encourage innovation and have a negative effect on New Zealand society.

Who made submissions?

James & Wells was one of the first to publish its submissions to the draft guidelines. We question the CSC's justification for clause 15(3A) and recommend that it be removed entirely. But, if it is to be kept, our view is that the guidelines will need a substantial re-write. 

Now, the MED has published all 36 submissions that were made. The submissions come from a variety of sources, which broadly fall into the following groups:

• Innovative New Zealand companies such as Auckland UniServices, Airways New Zealand, Fisher& Paykel Appliances, Thermal Chemistry Limited and Air New Zealand, as well as two Crown Research Institutes.
• New Zealand business groups such as NZICT Group, Business Software Alliance and BusinessNZ. These groups collectively represent a large number of New Zealand businesses across many fields.
• Large international technology companies like Microsoft, Intel and Qualcomm.
• Patent experts in New Zealand and abroad, including the New Zealand Institute of Patent Attorneys (NZIPA), the Institute of Patent and Trade Mark Attorneys of Australia (IPTA) and the International Federation of Intellectual Property Attorneys (FICPI). Along with James & Wells, other New Zealand patent attorney and law firms also made submissions.

Perhaps the most telling submissions are those of the first group in the above list. These are New Zealand companies that are actively innovating using software and benefiting the country's economy as a result. The fact that these companies have criticised the proposed exclusion and the guidelines is significant. Innovators want to be able to protect their software-related advances because they see a benefit in doing so. This is contrary to the CSC's justification for proposing the exclusion. 

Also significant is that many of the companies concerned about the affect of clause 15(3A), such as Auckland UniServices, Air New Zealand and Thermal Chemistry Limited, are not specialist software developers. The proposals affect innovative businesses in many fields, not solely those in the ICT sector.

Some people have questioned the motivation of patent attorneys and law firms in supporting the ability to protect computer-implemented inventions using patents because there is a view that this support is for self gain. However, a law firm's primary allegiance is to its clients and no firm would put forward an opinion that was not shared by the companies it represents.

Overall, a diverse mix of entities, public and private, Kiwi and foreign, made submissions, showing that this is a broad-reaching issue in which many have an interest.

What views were expressed?

The following points came out as representative of the submissions: 

• The majority wanted clause 15(3A) to be deleted entirely, so that software inventions would remain patentable in New Zealand. This is despite the fact the MED tried to discourage comments on clause 15(3A) itself.
• Most expressed their concern at the lack of clarity provided by the combination of clause 15(3A) and the draft guidelines. This lack of clarity stems from inconsistency in the wording of clause 15(3A) compared to its intent, the questionable legal standing of guidelines in the face of apparently clear legislative wording and the absence of case law based on equivalent laws in other jurisdictions.
• Most thought that, if they were to be retained, the guidelines required amendment. Of those who suggested changes, most wanted the guidelines to adopt the European approach for examining such applications. Some wanted closer alignment with Australian procedure. 

Only four of the 36 submissions could be construed as supporting a legislative restriction on software patents in some form, although only one of the submissions found no fault in the draft examination guidelines. Yet again, those favouring the exclusion could not provide any concrete evidence of economic harm to New Zealand if computer-implemented inventions remain patentable. On the contrary, the submissions suggest that the patentability of such inventions economically benefits the country.

Where next for software patents in New Zealand?

The MED has failed to produce examination guidelines that provide a clear position on what is patentable and what is not patentable under the proposed exclusion. But to be fair to the MED, it was given an impossible task by the CSC, which either does not appreciate the hole it is digging for patent reform in New Zealand or chooses to ignore it.

If there is to be no amendment of clause 15(3A), the submissions suggest that the European approach to examining applications will give the clearest position to stakeholders and best meet the intent of the provision.

However, we think that the government should take heed of the submissions made on this issue and re-consider the reform proposed by the CSC. There has been no adequate public survey of whether the Patents Bill should exclude computer-implemented inventions. Given the opposition to clause 15(3A) in these submissions (despite the MED discouraging comments on clause 15(3A) itself), public support of the exclusion is clearly not assured.

The Patents Bill is still awaiting its second reading in parliament and this will provide an opportunity to prevent a flawed law being passed. However, with a general election looming, patent reform is unlikely to be a pressing issue.

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James and Wells is the 2010 New Zealand Law Awards winner of the Intellectual Property Law Award for excellence in client service.