Experts assess extent of NZ software patent ban

Intellectual property experts and pundits have been poring over a New Zealand law passed this week that largely banned patent protection for software, trying to define how it will work in practice.

On Wednesday NZ time, shortly after the law was passed in a near-unanimous vote in parliament, David Macaskill of intellectual property law firm James & Wells described the new Patents Act as "the biggest shake-up in New Zealand's intellectual property landscape in more than 50 years".

However, the new law will require significant bedding in, he warned.

That will certainly be true of the provisions relating to software and embedded software. Macaskill said the law now "significantly restricts" what computer software is patentable.

"There is still provision for patenting embedded software, which forms an integral part of a component in which it is sold," he said.

Applications for patents involving software will be affected by more than the specific software provisions in the Act, though. The law also includes more general changes to the way all patent applications, embedded software included, will be assessed.

The Intellectual Property Office of New Zealand (IPONZ) will now be able to examine patent applications to determine whether the claims involve an inventive step over existing products and documents, Macaskill said.

"It is less likely that patent applications will be granted for inventions of dubious inventiveness. This change is a benefit to both patentees and businesses."

However, it may take some time to get patent examiners up to speed with this new provision.

"To prepare for this issue, applicants should carefully consider the issue of inventive step when preparing a patent specification and claims. Thorough canvassing of the issue prior to filing a patent application will help to address potential objections prior to examination."

Further, the law lifts the standard required to secure a patent.

"The new standard is 'balance of probabilities', whereas the old Patents Act required that the 'benefit of the doubt' be provided to the patentee," Macaskill explained.

It is a subjective standard, and that could be a problem.

"In combination with the new requirement to examine for inventive step, IPONZ examiners will be given significant powers to determine whether an invention qualifies for the grant of a patent.

"That is a potential point of concern, given that those same examiners have not previously had to consider these issues. As a result, there is likely to be a period of uncertainty and bedding in to this new provision. It is also anticipated that it will be harder to secure grant of a patent in New Zealand."

Even once a patent is granted, it is now open to permanent challenge because the law permits unlimited re-examination of existing patents.

"Third parties will be able to request re-examination of a patent application or granted patent. This is in effect requesting IPONZ to reconsider the patentability of the claimed invention at any time during the life of the patent," Macaskill said.

"The re-examination process will provide a cost-effective way to challenge the claims of an accepted application or granted patent."

As to embedded software, the law delegates responsibility for drafting regulations on their patentability to the IPONZ commissioner.

"This will create some uncertainty for patentees, and it is suggested that those operating in this technology space should pay close attention to the regulations as they are prepared."

Rick Shera of law firm Lowndes Jordan said on Twitter (@lawgeeknz) that embedded software has already been defined by the UK Aerotel case. It appears that the tests outlined in that case will be highly influential in New Zealand, as they featured prominently in draft examination guidelines developed by IPONZ in 2011.

"The draft guidelines propose that New Zealand adopt a marriage of Australian, New Zealand, and UK case law based upon the first three steps of the Aerotel case," wrote Ben Halberg of law firm Baldwins in a 2011 analysis.

A further James & Wells analysis by Jonathan Lucas and Jason Tuck said reports of a complete ban on software patents are "premature".

"Under the proposed wording, an invention where the improvement to existing technology lies solely in the fact that it is a computer program will not be patentable. However, other types of computer-implemented inventions will continue to be patentable," the pair said.

They added that while the passing of the Act has been widely lauded in the media as a victory for the anti-patent lobby, there is more to the issue than that.

"The reality is more nuanced, and there are reasons why software patents cannot be ignored now that the legislation is passed," they said.

In addition to ongoing patentability of some embedded software, existing software patents could continue to be enforceable for up to 20 years.

Pending applications filed before the new provisions come into force in 2014 will also still be examined under the current regime.

"It will continue to be important for software companies to check that they do not infringe any existing rights," they said.

Nevertheless, the pair conceded that the new law will "reduce the extent of what is patentable compared to the current law, which has no statutory exclusion at all".

While media headlines emphasised the software patent changes, James & Wells' Macaskill pointed out that in many respects, the new law brings New Zealand's patent regime into line with those of other countries.

"More closely mirroring the processes overseas will also help New Zealand businesses to secure patent protection," he said.