The Patents Bill And Software: Should We Care?

There is much excitement within the legal and software developer communities about the Patents Bill and the computer software exclusion that is or isn't, depending on whose opinion you choose to agree with.

The Patents Bill goes a long way towards modernising our patent system, but the only thing people are talking about is the software patentability issue.

The battle is being mostly fought between those who file and prosecute patent applications for their clients for a living and who would like to continue to file patent applications for software, and those in the software developer community who worry about the threat to innovation and their freedom to develop if the bill is adopted into law without an exclusion for software.


The parties are now arguing over the merits of the proposed wording of the bill, which was belatedly amended by SOP with the intention of ensuring that embedded software would be patentable. The patent attorneys argued for and have now got in the draft bill wording that reflects European patent practice. The developer community appears split between those who want to see in the bill a specific reference to embedded software, and those who consider the patentability of any sort of software (embedded or otherwise) to be a monstrous evil. It should also be noted that a number of New Zealand technology companies have argued in favour of retaining the ability to patent software.

I have no particular opinion on who is right, and which wording ought to be adopted in the bill, provided that embedded software remains patentable. I'm not a huge fan of software patents generally*, but embedded software patents help technology companies like F&P to remain competitive by ensuring other appliance companies cannot simply copy their components.

So I wonder if some of the excitement over this issue is unwarranted. I'm a commercial/IP lawyer and the IP lawyer part of me gets irritated that many (more than a few, though not all) opponents of software patents don't actually understand what they are fighting against. How can a person oppose software patents when they don't even understand the basic differences between patent and copyright laws?

But the commercial lawyer part of me struggles to see the commercial benefit to the average innovator of a software patent portfolio. For a few companies, such as F&P, protecting embedded software is critical, but your average software company is probably not going to achieve much by spending thousands of dollars on a software patent portfolio, other than a negative cashflow position. Most companies would be better off investing that sort of money in sales and marketing. The cost of enforcing a patent against a potential infringer is also potentially prohibitive.

For most companies the only real benefit to having a portfolio of software patents is that it often impresses investors. In my experience investors (even many savvy and successful ones) are often put at ease when they see a list of patents owned by a potential target, even if many of the patents are worthless or hopelessly invalid. Most investors just won't spend the money to do a proper IP due diligence.

To my knowledge there are no studies in New Zealand demonstrating that software patents stifle innovation. Many people in the tech community worry about the threat of patent trolls using bully-boy tactics to extort payments from developers, but we have not seen much troll activity in New Zealand, and we have had software patents for a number of years. The reality is that anyone in New Zealand who is developing software for export offshore will still have to contend with software patent issues, because in a number of countries (such as the US) software patent laws are more inventor-friendly than our own.

It is all too easy to see what is happening in the US, with companies like Apple and Samsung suing each other and seeking huge damage awards, and to conclude that we have the same problems with our patent system. But the US patent system seems almost custom-designed to push parties into litigation, with its triple-damages regime, forum shopping and fast-track "rocket-docket" rules in some states, jury trials, and contingency fees. In New Zealand anyone seeking to enforce a patent had better be patient and have a decent sum of cash behind them.

In summary, software patents are not the answer for most companies, but nor do they spell the demise of the software industry in this country. And it's unlikely that anyone has been "rescued" by the amended Patents Bill wording, despite what an article from this otherwise reputable law firm might suggest.

* Long-time readers of my blog may recall my previous attempts to defend software patents, but I have moved somewhat in my thinking over the last year or so. That's code for "I changed my mind."