The Productivity Commission has recently released a draft report recommending software and business methods be specifically excluded from being patented. Spruson & Ferguson believes that such action would be harmful to Australia’s technology start-up sector, in particular to SMEs whose competitive advantage resides in innovative software interfaces and processes.
Most heavily affected are businesses whose innovative technology is public-facing, and hence unable to be hidden in code. Examples include user interface technologies, eCommerce platforms, mobile apps, and innovative website technologies. Furthermore, often where the crux of a software invention is at the concept level (and not reliant on unique coding approaches), businesses with those forms of software (e.g. in fields such as data security, search engines, and data management/processing) face difficulties in advertising their product offerings without enabling competitors to develop imitations.
Without an ability to secure patent protection, there is nothing to prevent a business’ innovative software technologies from being copied, at the concept level, by competitors. This is a greater problem for smaller enterprises, whose ability to operate commercially in a successful manner would be obliterated in the event that competitors were to copy and replicate significant technology that distinguishes them in the market place.
Without software patent protection, technology companies face at least the following difficulties:
- Raising capital. Investors want to know that a business can protect its core value-add software technologies from being replicated by competitors. Inability to secure protection will inhibit the flow of capital to new and growing software businesses.
- Remaining innovative. Where innovation can be copied freely at a functional level, focus turns to being a “copy economy” rather than an innovative market. Indeed, in such a copy economy, innovation carries with it a risk of providing competitors with advantages (given that software innovative functionalities are able to be freely copied).
- Implementing exit strategies. Without patent protection, there is limited incentive for acquisitions. A potential acquirer has an option to simply engage their own programmers to replicate innovative software functionalities developed by what would formerly have been acquisition targets.
- We encourage all parties with an interest in software patents to make submissions in response to the Productivity Commission report by Friday 3 June 2016 at www.pc.gov.au/inquiries/current/intellectual-property/make-submission#lodge
The full Report is available here, and the relevant discussion is provided at section 8, commencing on page 233.