Peter Jackson made New Zealand famous for trolls, but when it comes to “patent trolls” and their potential to stifle innovation, especially in the software sphere, it appears the New Zealand legislature has been less welcoming. This week, a proposed amendment to the Patents Act to exclude computer programs (i.e. software) from patentable subject matter met with almost unanimous approval.

Following a review and extensive consultation with stakeholders in 2000, a new Patents Bill (“the Bill”) was introduced to the NZ Parliament in July 2008. After its First Reading Speech, the Bill was referred to the Commerce Select Committee, which in 2010 controversially proposed an amendment to ban software patents. Controversy between free and open source software advocates and the commercial software and technology industry delayed the passage of the Bill, however a proposed amendment introduced in May was approved last week by a vote of 117 to 4 following its Third Reading Speech in the NZ House of Representatives. The amendment provides:

10A Computer programs

(1) A computer program is not an invention and not a manner of manufacture for the purposes of this Act.

(2) Subsection (1) prevents anything from being an invention or a manner of manufacture for the purposes of this Act only to the extent that a claim in a patent or an application relates to a computer program as such.

(3) A claim in a patent or an application relates to a computer program as such if the actual contribution made by the alleged invention lies solely in it being a computer program.

To clarify this statement of patent eligibility of computer programs, the Bill includes two illustrative examples. Firstly, a computer program which provides a method for improving the performance of a washing machine (for example resulting in cleaner clothes or lower power consumption) is patentable because the contribution of the computer program is the improved way in which the washing machine works – a functional result. On the other hand, a computer program that automatically completes legal documents is not patentable because the method of completing legal documents, which would not otherwise be patentable, is not rendered patentable by virtue of achieving the result via a computer program. In the latter case, the invention lies solely in the computer program.

Following the UK model

The Explanatory Note to the relevant amendment to the Bill suggests that the approach is intended to be consistent with UK precedent. It is worth noting that UK courts have recently found software for designing a drill bit and a system for monitoring electronic communications and alerting users to inappropriate content not to be ‘computer programs “as such”’, and therefore patentable inventions. More recently, in HTC Europe Co Ltd v Apple Inc (2013), the English Court of Appeal also upheld the patentability of an invention relating to the organisation and operation of touch screen devices. The Court found that the invention made a technical contribution to the art because the solution to the problem of how to treat separate simultaneous touches on a touchscreen device, in substance, improved the device. The mere fact that the invention was implemented via software did not negate the fact that the problem and its solution were essentially technical in nature and so not excluded from patentability.

What does the potential change mean for software patents in Australia?

In Australia, following a failed parliamentary petition to remove computer programs from patentable subject matter in 2010, inventions relating to computer programs remain patentable. The leading authority on the point is CCOM v Jiejing (1994) in which it was decided that for a software invention to be patentable, there must be “a mode or manner of achieving an end result which is an artificially created state of affairs of utility in the field of economic endeavour”. In the recent case of Research Affiliates LLC v Commissioner of Patents (2013), a claim to a computer-implemented method of generating a financial index was held not to be patentable because the claimed method could readily have been “carried out manually”, and the claimed method of implementation was merely “the modern equivalent of writing down the index on pieces of paper,” and “no more than the use of a computer for a purpose for which it is suitable” (see our alert here for more on this case).

More recently, Justice Middleton held a computer-implemented method and system for the assessment of the competency or qualifications of individuals with respect to recognised standards to be patentable subject matter in RPL Central v Commissioner of Patents (2013). The main inquiry in this case was whether the claims related to a ‘product’, in the NRDC sense of an artificially created state of affairs, and something in which a new and useful effect can be observed. His Honour found that the computer-effected steps of the invention gave rise to a change in state or information in a part of a machine, therefore producing a physical effect in the sense of a concrete effect, phenomenon, manifestation or transformation. His Honour rejected the Commissioner’s objections on the tangible effect requirement from NRDC (which he framed in the language of a ‘physical’ effect), stating that there was no requirement for a “significant” physical effect “central” to the purpose or operation of a claimed process. In the present case, the computer was found to be a central part of each claim in any case.

Importantly, His Honour then stated that in order to assess whether a claimed invention is patentable subject matter, it is not appropriate to “subtract from the invention any aspect of computer implementation and then determine whether what remains is [patentable]”. In this case, the magnitude of the task performed by the invention and the express terms of the claims themselves informed His Honour’s conclusion that the computer was an essential part of the invention as claimed, as it enabled the method to be performed. The significant information provided in the claims on how the invention was to be implemented by means of a computer program distinguished the case from Research Affiliates (see our more detailed post on RPL Central v Commissioner of Patents here).

Finally, it is worth mentioning the Intellectual Property Laws Amendment Bill 2013, which reached the Senate in late June, but lapsed during the caretaker period – see our post here. The Bill proposes a single economic IP market between Australia and New Zealand. However, the different approach to software patents across the ditch is a reminder that conflicting laws will ultimately limit the extent to which a completely streamlined approach to IP in Australia and New Zealand can be achieved.