The German national Parliament has made a recommendation to the German Federal Government to limit patentability of computer programs to only those programs that directly replace mechanical and electro-mechanical components.

The Bundestag recommendations

In June 2013, the German national parliament (Bundestag) made a recommendation to the German Federal Government to limit patenting of computer software, suggesting that this will encourage competition and innovation. This is merely a recommendation. The German government may disagree, since patents are generally recognized as encouraging research, investment and technological innovation.

The Bundestag expressed a view that copyright protection is the best mechanism for protecting and controlling use of software, and that commercial exploitation of most software should not be restricted by patents. The Bundestag suggested that the German Copyright Act (implementing the European Directive 1991/250/EEC) sets the right balance between protection, innovation and competition, whereas recent interpretation of the German Patent Act and European Patent Convention has given a lot of protection to patent-owning companies.

The Bundestag referred to a number of decisions of the German Federal Court of Justice (BGH), which confirmed patentability of software-implemented solutions to technical problems (specifically X ZB 22/07 of 20 January 2009 which related to a method and system for selecting test modalities; X ZR 27/07 of 20 April 2010 relating to Windows file management; and Xa ZB 20/08 of 22 April 2010 relating to dynamic document generation). The Bundestag noted that these BGH decisions were consistent with the recent practice of the Boards of Appeal of the European Patent Office, which grants large numbers of patents for software-implemented solutions to technical problems.

From the perspective of patent owners, this consistency between courts and patent offices, and the consequent predictability of outcomes, are very helpful. However, the Bundestag feels that there is currently too much uncertainty regarding legal outcomes and liabilities for software developers, due to the challenge of interpreting patent claims and the broad scope of protection obtainable by patenting.

Unlike copyright, a patent may cover all possible software implementations of a new solution and so a company that independently creates software may need the consent of a patent owning company (or several) before they can commercially exploit their software. Without the effect of patents, copyright laws would give exploitation rights to each independent software developer. The Bundestag believes there is a conflict between the current European approach to software-related patents and Directive 1991/250/EEC, and believes there is a need to move towards greater reliance on copyright protection for software.

The Bundestag called upon the German Federal government to take the following five actions:

  1. to ensure that the commercial exploitation rights of a software program remains protected under copyright law, and are not rendered ineffective by third-party software patents;
  2. to ensure that software solutions in the area of pure data processing, software-based reproduction of information and computer-aided control functions are protected exclusively by copyright laws and that no patent protection is granted to abstract solutions in this area;
  3. to continue to regulate use and prohibition rights for software-based solutions through copyright law;
  4. to restrict patent protection to software-implemented solutions in which the computer program serves merely as a replaceable equivalent for a mechanical or electro-mechanical component.
  5. to preserve the precedence of copyright law so that software developers can also publish their work under open source licence terms and conditions with legal security.

Alternative views

Of course, many others take a different view. Recommendations 1-3 above assume that copyright will always provide software innovators with adequate protection, which is not the case because it fails to protect ideas - new ideas and functionality can be copied quickly and cheaply in the software industry, and it is not always easy to prove copying. Patents protect inventions without the need to prove copying.

When making recommendation 4, the Bundestag gave the easy example of software-based washing machine controls that replace an electromechanical program control unit, but the Federal Government will be aware that any new legislation will need definitions that strike a balance between software that deserves patent protection and software that does not – i.e. a definition that strikes the right balance for a wide range of technical solutions. Consider the example of highly inventive software that improves the efficiency and reliability of computer systems, but for which there is no cost effective hardware equivalent. Should this remain entitled to patent protection?

The Federal Government can save itself this difficulty, as Europe already has patent statutes and an extensive body of case law determining the threshold for patentability. The Federal Government will be conscious of the need for its national law to reflect the European Patent Convention (of which it is a signatory), which sets out the principles for patentability. The recent consistency between German national courts and the European Patent Office provides good predictability.

A national government could seek to influence the practice of their national patent office (without new legislation), but the German Government will be aware that 9 out of the top 10 filers at the German national patent office are German companies who would be adversely affected if patent office practice is not consistent with court precedent or differs significantly from European Patent Office practice. This may lead them to conclude that any changes should be at the European rather than national level.

With reference to recommendation 5, open source software is often very attractive - it can significantly reduce software development cost and time, and therefore lower consumer prices. Open source has delivered some great successes, such as the Linux operating system. However, software developers who choose to use other people’s open source code need to carefully check the relevant license terms, and need to recognize that open source licensors do not have the right to grant licenses to other people’s intellectual property. Customers (including government departments) need to consider whether open source code offers the right balance between price and quality, and what support will be available if something goes wrong - especially if the software is to be used in critical systems. For example, the Free Software Foundation’s GNU General Public License obliges users to make their source code available for others to reuse and modify, but it contains no warranty and only a disclaimer of liability. The GPL’s requirement for modifications to be marked so that problem code is not attributed to the wrong author will be less comforting to many software buyers than a warranty and an acceptance of responsibility to fix problems.

Legislators must also consider whether an open source community can be relied upon to deliver long-term investment in research and innovation for all types of software that is needed by industry. They must seriously question the Bundestag’s apparent view that a decision by groups of software developer to make their source code available for reuse should give them a right to disregard other people’s intellectual property rights.

An agenda for reform

The German Bundestag also called upon the German government to push for reform of copyright or patent law at European level:

  1. to seek the most concrete definition possible of the technical contribution and the inclusion of a definition of the term “technology”. The definition must ensure that computer programs as such, business methods and algorithms cannot be patented; this should restrict patent law protection to software-supportable teachings in which the computer program serves merely as a substitutable equivalent for a mechanical or electro-mechanical component;
  2. to seek standardisation in all of Europe of a patent law interoperability privilege of the broadest possible scope;
  3. to advocate the position that alternative development concepts, in particular open source projects, should be hindered as little as possible by patent law provisions;
  4. to seek actively at the European level an independent, scientific evaluation of the practice of the patent offices, especially of the EPO, in making decisions to grant patents;
  5. to seek the elimination of deviations in the granting of patents as practised by the EPO and the national patent offices and the prevention of grants of patents on software-supportable teachings.

Are these recommended European-wide reforms desirable?

There will not be universal agreement with these recommendations. Many will agree with reform recommendation 2 and take the view that open standards for interoperability are highly desirable. Such standards should encourage competition by giving customers increased flexibility to choose products from different vendors. Referring to reform recommendations 4 and 5, on-going evaluation is usually helpful and harmonization is certainly highly desirable; but recent decisions of the German courts and the European Patent Office are already very well harmonized (as noted above and apparently recognized by the Bundestag) and it is not at all clear why a new and inventive solution to a technical problem should cease to be patentable as a consequence of it being implementable in computer program code.

The restriction set out at the end of reform recommendation 1 would involve a major change from the current law, and would present practical challenges. Current German case law and patent office practice already limits patentability so that program code that merely implements a new business method or a new abstract algorithm cannot be patented, but a wider range of technical solutions can be patented than “mere substitutes”. The practical point is that legislators and leading judges have recognized for many years that precise definitions of technology quickly become outdated – any definition will need to encompass current inventions but must also have sufficient flexibility to achieve the right outcome for solutions and technologies that have not yet been invented.

Reform recommendation 3 is vague. As mentioned above, open source is often attractive but may not always provide the best solution – either in terms of guaranteeing long term investment in research and technical innovation, or in terms of meeting current commercial needs. The patent system provides important incentives for research and investment, and great care is needed before creating exceptions that will bypass long-established and effective laws and change the commercial landscape.

Taking a Broader View
As well as the above comments on the Bundestag’s specific recommendations, please refer to the A.A. Thornton & Co. website at www.aathornton.com/pages/legal/legal-updates.asp for a Q&A discussion of some more general questions in our July 2013 document entitled “German proposal to limit software patenting”. This includes answers to the following:

  • The Bundestag clearly believes there are real problems – are these concerns valid?
  • What about Bundestag’s concerns about legal uncertainty and unpredictable liability?
  • How well is the patent system working?
  • Is any change required?
  • Should filing strategies change in view of the German Bundestag’s recommendation?
  • Should patent drafting practice change in view of the German Bundestag’s recommendations?