Legal-economic study: Commission text lacks legal certainty and economic rationale
10 March 2005 -- The paper "Software Patents: a closer look at the European Commission's proposal" by Maria Alessandra Rossi of the Doctoral School of Law and Economics, University of Siena, argues that the Commission's proposal for the software patents directive does not increase legal certainty and that it lacks compelling economic arguments to codify the European Patent Office's practice. Additionally, it notes that the European Parliament's first reading text was a step in the right direction.
About the Commission and EP texts
- The European Parliament reviewed the draft Directive on first reading on 24 September 2003, approving an amended version of the Commission's proposal that undoubtely made some steps in the direction of improving clarity in the definition of patentable subject matter in the field of computer-implemented inventions.
- (about 18 May) The sudden switch in Germany's position was pivotal in allowing the reach of an agreement on a compromise document that rejected crucial amendments that Germany itself had proposed, and in particular a specification of the requirement of technical contribution according to which the use of natural forces to control physical effects beyond the digital representation of information is considered to belong to a field of technology, while the mere processing, handling and representation of information is not.
- The agreement reached at the Council's 18 May meeting almost immediately showed signs of a breakdown.
- (about the Commission proposal) In spite of the above-mentioned advantages, in this section we will argue that the answer to the question whether we should expect increased legal certainty to follow from the Proposal's approach to pursue the harmonization objective along the lines of EPO jurisprudence should be given in the negative.
- (about the Commission proposal) The main problem with the approach taken by the Proposal is that it establishes a set of conditions for patentability whose only meaningful and consistent interpretation coincides with a significant extension of patentability, close to the situation corresponding to a deletion of art.52(2) and (3).
- Alternatively, if the EPC is there to stay in its current form, an attempt to find criteria more stringent than those contained in the Commission's Proposal for a distinction between patentable and unpatentable subject matter should be pursued. This is the approach taken by Parliament in the amendments approved on first reading.
About economic policy
- However, it could be the case that !SMEs' low propensity to patent depends on reasons different from a lack of information, given that it is currently low also in countries where software has long been patentable.
- The only unquestionable conclusion is, perhaps, that there is a need for more economic analysis targeted specifically to the software sector in order to inform policy making.
- Basing the rationale for policy intervention on an assessment of the ensuing benefits and costs to society seems a much more promising avenue to take than relying on inherently uncertain distinctions based on semantics. After all, it should not be forgotten that the primary rationale for the very existence of the patent system is the objective of increasing innovation, so that decisions concerning its modifications should be taken on the basis of an assessment of the measures that would best serve this purpose, rather than by focusing exclusively on the internal consistency of the system as it has historically developed.
- The second assumption is that, in considering changes to the status quo, the burden of proof should be on those proposing the changes. This implies that if, as argued in the previous section, the Proposed Directive is likely to result in a significant extension of patent protection granted to computer programs, we think the Commission should provide a much more compelling economic justification for its Proposal.
- ... only the results of a study conducted by the London Intellectual Property Institute (which is by no means an economic think-tank) on behalf of the Commission are expressly mentioned ...
- All of the empirical studies we are aware of reveal that firms in the software industry, and especially !SMEs, tend to rely predominantly on means other than patents in order to protect their innovations
- It is certainly true that patent holders' initiatives such as patent pools and cross-licensing may reduce the adverse consequences of patent-related transactional difficulties, but the question remains as to whether the overall benefits of software patents outweigh their costs, including the costs of devising these private solutions.
- First, there is the question of the high number of trivial software patents patent offices routinely grant. This does not seem to be only an administrative problem requiring an increase in funding for prior art searches.
- Second, the risk of inadvertent infringement is particularly high in the software field.
- Having said this, it should be noted that it might be particularly difficult to practically implement a high non-obviousness (inventive step) threshold in software, because of the difficulty of defining the very meaning of inventiveness in the software field
- If, on the contrary, the Directive chose to adhere to EPO jurisprudence as a basis for harmonization, as the Proposal submitted by the Commission does, it is doubtful that it would be able to serve well either the purpose of increasing legal certainty or the objective of promoting innovation.
- As for the objective of increasing innovation in the software sector, our negative conclusion on the ability of the Commission's Proposal to achieve it comes from a survey of recent economic literature.
- Indeed, the economic evidence surveyed in this paper suggests that software possesses some peculiar characteristics that deserve special attention in devising patent policy:
- (a) software presents some peculiar obstacles to the consummation of the traditional protection-for-disclosure bargain inherent in the functioning of the patent system ![..]
- (b) the characteristics of innovation in the software industry suggest that an "inventive step" requirement more stringent than in more traditional industrial fields should be applied ![..]
- (c) software-related patents should be narrowly construed
- Unfortunately, the Proposal currently submitted by the Commission does not take the chance of addressing these issues adequately.