Patent filings are often cited as an indicator of innovative activity. In the recent past there are many good examples where growth in patent filings has mirrored the emergence of new technologies or technology growth in a particular location. Notable examples are the growth in patent filings out of California’s Silicon Valley in the 1990s and early 2000s (from less than 5% of total US patent filings in 1990 to more than 12% in 2006), and the fivefold increase in computer software and business method-related patent applications filed between 1997 and 2003 (based on Patent Cooperation Treaty (PCT) filings in selected International Patent Classification (IPC) classes).

Fast-forward to 2013 and London is being touted as a hub for technological innovation, particularly the area around Old Street on the east side of the city – the so-called “Silicon Roundabout”. In December 2012 UK Prime Minister David Cameron announced £50 million of government investment to regenerate the area with a civic space dedicated to start-ups and entrepreneurs. Google, Microsoft, IBM and others have all made commitments to the area. So what has happened to patent filings of the past few years since "Tech" City's inception?

The chart below was generated from information provided by the World Intellectual Property Organisation in respect of published international (PCT) patent applications from applicants with a London postcode in the area around Silicon Roundabout (E1, EC2A, EC2M, EC1Y, EC1V, E2, N1P, N1C OR E8), where the technology relates to telecommunications or software (IPC Classes H04 or G06).

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The numbers make interesting reading. First, the total number of PCT patent applications out of Tech City is very low (nine applications in 2012, versus more than 1,000 for UK PCT applicants as a whole). The decline in published PCT patent applications from its peak of 24 in 2008 to nine in 2012 is also clearly evident. According to the UK press, the area is awash with tech start-ups and entrepreneurs, all queuing up to be the next Google or Mark Zuckerberg, and all innovating like crazy. Based on evidence from the dot-com boom and Silicon Valley, there should be an increase in patent filing activity. So what could be the reason for this apparent inconsistency?

Perhaps it is the nature of the innovation touted for Tech City that provides a clue as to why patent filing activity out of the area is so low. The press talks about app developers and social media entrepreneurs, but is this really technical innovation as patent offices would see it? 

The requirements for patentability in the computer software and business method fields are complex, and a conventional view has been that obtaining patent protection in these fields is difficult and expensive. The open culture of software development as advocated by the open-source movement has emboldened a whole generation of software developers to steer clear of patents altogether, and many of the young software developers who are drawn to Tech City are of this mindset.

The European Patent Convention (EPC) explicitly states that computer programs and business methods are not inventions for the purpose of obtaining patent protection (Article 52(2) of the EPC), although the EPC qualifies this by excluding these activities only to the extent to which the patent relates to this subject matter as such (Article 52(3) of the EPC). As a result, the wording of the statute has been open to interpretation by the European Patent Office (EPO) and various courts during its 35-year existence, and the EPO now routinely grants patents for computer software provided that certain conditions are fulfilled.  

In 2012 the UK High Court revoked some of Apple’s UK patents during its attempts to enforce them against Korean mobile phone company HTC, including one patent relating to the well-known "slide-to-unlock" feature (for further details please see "HTC prevails against Apple in the UK Patents Court"). In fact, the specific reasons for the revocation of this particular patent concerned anticipation by an earlier publication, rather than any specific objections concerning computer software. However, the prevailing view among many in the software community is that patents for software are difficult and costly to obtain and enforce.

For start-ups and entrepreneurs there is therefore a lot of uncertainty about patents in this field. This could well be one reason why patenting activity for early stage innovators in Tech City is so low. The likes of Google and Facebook only really developed their patent portfolios in a significant way once they had grown into the global corporations that they are today. Perhaps if a Google or Facebook emanates from Tech City, only then will there start to be a substantial increase in patent filing activity. In the meantime, for many Tech City start-ups, applying for patent protection is essential if they wish to gain investment and grow in this fast-changing and competitive sector.

As far as Europe is concerned, the EPO has been reasonably consistent over the past five years in its approach to software and business method-related patent applications. Refusal should be expected for patent applications which relate to pure business methods or computer programs which involve only conventional computer program steps. However, if a genuine technical problem is being solved in a non-obvious way with computer software, it should be possible to obtain a granted patent for the software or device on which the software is run.

This article first appeared in IAM magazine. For further information please visit www.iam-magazine.com.