Software patents in New Zealand

Patent Bill Draft Consultation Deadline 11 March, discussion at nz-parl, due to common legal heritage FFII UK also might be a good forum to discuss issues.


Current state of New Zealand Law

Intellectual Property legislation is in flux. Judges are having to interpret novel situations in the light of cases from other jurisdictions to an uncomfortable degree.

New Zealand legislators are presently working on draft bills for both patent and copyright law intended to modernise legal rights in media never envisaged back in the 1950s when the last major changes were enacted.

However, none of these changes make any provision whatsoever for the protection of Open Source or Free Software. Some Governments do recognize that the peculiar advantages of such non-proprietary or openly available software for national security and economic development make it vital to give it some protection or standing in law. See for example the bill submitted to the Belgian Senate in 2003, following on from which Belgium established new directives for the use of open standards and OSS by the Belgian government.

The New Zealand Government is not, so far, willing to recognize the implications of the snowballing international adoption of such technology, at least as far as independent researchers have been able to ascertain. In particular, the lack of such recognition in the draft patent bill is likely to hamper New Zealand's economic development and the development of case law by the judiciary, who are reluctant to use mere policy papers to guide the interpretation of the law.

A typical commercial organization keeping track of such developments is Cisco, which maintains a "Government Affairs" page of considerable utility. Cisco is noteworthy not only for its leading position in worldwide networking hardware sales, but also because it runs a tertiary education institution known as the Cisco Academy (which issues such vocational qualifications as CCNA). For obvious reasons it keeps careful track of policy implications.

A typical non-commercial group is "The Centre for Strategic and International Studies", describing itself as "private, nonpartisan, and tax-exempt". It is however headed up by distinguished former members of the US legislature and executive. It periodically updates its International Review of Open Source Policies, the last update being dated December 14th. 2004 at the time of writing. That document is available in PDF format.

Briefly, New Zealand is a member of the WIPO convention. But it is not a signatory to the WIPO copyright treaty, nor the Patent Law Treaty (*PLT*). It is signatory to the Patent Co-operation Treaty (*PCT*, since 1992). This accounts for the vigorous attempts to move New Zealand patent law into line with that of our major trading partners.

Software patents adversely affect programs issued under an open source licence such as the GPL, which is based on copyright. When discussing changes in patent law we should also reflect on applicable copyright and any potential conflicts between the two. In this regard, recall that NZ has never ratified either the WCT or the WPPT by Parliament. The present Copyright law was last amended in 1998 and Patent Law in 1999. Even if the government does ratify the WCT, say, by a quirk of municipal law, no DMCA-like provisions apply until the treaty has been incorporated into a New Zealand statute somehow. That is not going to happen before 2006 at the present rate. So no such statute has been enacted. Thus, Copyright law for example is still governed by the Berne convention.

Discussion documents on the Ministry of Economic Development website - now closed - make it clear that government circles are unhappy with many trends along those lines. Not enough, however, to resist adverse trends in either patent or copyright law should our major trading partners require it. New Zealand lives by its overseas trade: at one point, the country had the highest level of overseas trade per capita in the world.

Proposed revisions of Patent Law

The case of software patents is more complex than copyright, because the New Zealand Patent Office was set up to grant patents where possible. Therefore many patents have been granted which purport to cover, say, a business method or a software algorithm - despite the plain illegality on their face of many of these. Only expensive legal action can strike them down: on the other hand, such patents are widely ignored until someone attempts to enforce them - see the FFII News site for an example. This of course has tended to bring IPONZ into disrepute.

The draft bill tries valiantly to repair this. It instructs the Patent Commissioner to apply a much more stringent criterion for patentability ("Balance of probabilities") than exists at present. But it also introduces for the first time the possibility of software patents, simply by omitting software from the list of items which ARE protected. There is a legal principle to the effect that if a statute lists things which are NOT covered, then everything else IS covered. (The curious may look up its Latin tag, "expressio unius est exclusio alterius".) So when the draft bill specifically lists certain things as unpatentable, if software and business methods are not expressly unpatentable, they must be patentable.

Our Ministry of Economic Development's Patent Law review committee is clearly aware of the arguments on both sides, since it has opened a consultative process which ends on March 11th. 2005, and a corresponding website with a wealth of views. A small number of submissions are in place arguing the view shared by FFII that such a step will harm trade and innovation more than it will improve it. We need more. Please note however that submissions are not intended to contradict public policy, which according to the website has already been decided. Rather, the M.E.D. is on the lookout for unintended consequences. We need to convince their political masters that the 'unintended consequences' will be severe.

Public Policy

Perils from the proposed policies can take at least two forms. Software patents are in the opinion of this writer an unacceptable violation of the rights of the individual and in addition, will have a grievous economic impact on this country's most promising new industries. The committee might well discard such a submission, but a warning note must be sounded.

One way to illustrate this is to examine the impact on small New Zealand businesses. I have been in communication with engineers at small high-tech New Zealand outfits, which are likely to lose far more than they will gain by such a change in what is patentable.

It is well known for example that the Fraunhofer Institute patents on mp3 encoders (and decoders) impose an extra cost on the myriad of small electronics businesses worldwide which make consumer goods such as MP3 flash memory players. Firms such as Tait Electronics or Scott Technology will be in an analogous position. If they have to look over their shoulders every time they implement some mathematical function in electronics for a given purpose, the pace of innovation will slow to a crawl.

Only large firms with patent portfolios of their own will be able to join the forthcoming cartel – and a cartel it is, given the public statements of HP, Microsoft, IBM, and Apple on the vital necessity of accumulating a pool of patents with which to cement mutual relations and beat off newcomers.

Small businesses worldwide are the engines of job creation and prosperity. In a world trade arena where large firms in large countries can apply what amounts to a tax on innovation, small business in small nations will be comparatively much harder hit. The New Zealand government in particular have a constituency originating in small business and union affairs. It implements such changes at peril of the electorate's displeasure.

Let's put a desirable public policy to one side and address unexpected legal consequences of software or method patents. In a simple submission, I would choose to highlight two consequences for the legal system.

The first is that henceforth there would be a conflict between patent law and copyright law, which I have dealt with above in some detail, but let us perform a gedanken experiment.

If most of the interesting development work is done by a vast army of open source programmers, what happens when a patent prevents them from 'exploiting' their code? (The proposed draft makes it clear that 'exploit' includes non-commercial, non-profit activity). Are such developers going to permit the use of their code by the patent holder? Not likely. Many of them are, like Richard Stallman, sufficiently bloody-minded to sue. Others have vested the EFF with the copyright, and the EFF, too, will sue if sufficiently provoked. Even more work for outfits like Apple, IBM, and HP: they, too, will sue.

The second has to do with the declaration by the Associate Minister of Commerce that nothing in the draft bill conflicts with the New Zealand Bill of Rights Act 1990, nor the Human Rights Act 1993. Such a statement must be included in any Bill presented by the Attorney General to Parliament, according to section 7 of the Bill of Rights Act for example.

One might be forgiven for thinking that the Attorney General had not properly put her mind to the issues involved. After all, Section 14 of the Bill of Rights Act provides, in uncompromising terms, that "Everyone has the right to freedom of expression, including the freedom to seek, receive, and impart information and opinions of any kind in any form." On the face of it it is difficult to see how any monopoly on ideas (patents) or expression (copyright) could survive such a Bill. The answer comes in two parts, legislative and case law. The Bill of Rights Act contains with it the seeds of its own destruction, such as the provision that nothing in the Bill of Rights Act will override any statute! The other is that Patents are an ancient concept in English law, going back to the Statute of Monopolies of 1623, and the courts do not lightly overturn such policies. Even copyright goes back to the reign of Queen Anne.

So what earthly use is such a Bill of Rights? Well, it has two important provisions. One is that although it can't overturn a statute, a judge is obliged to interpret any statute in the light most favourable to a defendant. The second is that although normally used by citizens against arbitrary acts by civil servants, there is one section which applies to us. That is subsection 3(b), which allows it to apply to actions "By any person or body in the performance of any public function, power, or duty conferred or imposed on that person or body by or pursuant to law." The Commissioner of Patents, of course, is such a civil servant. There is absolutely nothing to prevent an action against the Commissioner for issue of a patent which contravenes the Bill of Rights, section 14.

Here is where case law comes in. Up till the draft bill, the question of what was NOT patentable was left to interpretation of the ancient Statute of Monopolies.

As you know, once upon a time mathematical ideas were considered not inventions but discoveries. This made them unpatentable according to law. Software algorithms were (thanks to Church and Turing) known to be completely equivalent to a mathematical system, a thing even lawyers and judges could discern. As a result it was universally agreed that the expression of the idea (program) could be copyrighted, but the mathematical idea itself could not, since a discovery of a new use for an old idea cannot be 'invented'.

Time went on; legal opinion changed. Usually the discovery in question was medical/agricultural in nature, but if one discovery can be patented, they all can. For New Zealand the rot first set in with the "Wellcome Foundation v. Patents Commissioner" case, followed in 2000 by that of the "Pharmaceutical Mngt Agency v. Patents Commissioner". As Justice Cooke put it, "...contrary to our own decision in Beecham... that a discovery of a new use for a known product cannot provide a basis for a grant must, in its bald form, be rejected as outmoded". And, presumably, a new use for an old algorithm will be treated similarly.

The major tussle in case law is to what extent the Statute of Monopolies is still good law. In cases from Wellcome to Pfizer, the state buying organization (Pharmac) has been at odds with IPONZ and the patentholders. Medical treatments benefit from two attributes which software does not possess: patenting medical treatments is immoral, and there is explicit provision in the TRIPS accord for signatories to exclude them. We can probably argue convincingly that certain patents will be immoral in the same way cornering the market in breathable air would be. But there is no way we can argue the presence of a TRIPS provision. So we are left with persuading the courts that software patents are "generallie inconvenient", hurt trade, etc. This will be hard, and even if we succeed, we still have to show how the TRIPS accord can be circumvented.

In the submission process, some of our lobby group were able to emphasize that they were asking to have mathematical algorithms excluded.

This is a much easier sell than asking to have software excluded, since our political and judicial elite may look and sound learned, but from a technical point of view they're often as ignorant as swans (to borrow a phrase from Kenneth Clark) and are unlikely to have ever heard of the Church-Turing equivalence (that every effective mathematical computation can be carried out by a Turing machine, ie. a computer). They can, however, just about grab the idea that a mathematical algorithm is a pure idea which in a sense has always existed so must be a discovery.


Even in the present state of open source activity, court action is not unprecedented. There are other developments on the horizon. On the proprietary side, the OASIS group is putting together their vision of a software patent nirvana, one in which proprietary developers issue each other licences on RAND (“Reasonable And Non-discriminatory”) terms.

This will tend to exclude the open-source developers which are now responsible for by far the largest installed base of websites (Apache, for example) and servers (Linux), worldwide.

One can only speculate what kind of retaliatory weapon will be made available to Open Source developers. To my mind, "going nuclear" would involve a special patent licence. Representatives are putting together a new version of the GNU Public Licence among others, one which takes into account the opportunities provided by software patent law.

Many will be aware of Bruce Perens' newish Open Source Patent indemnification project (Open Source Risk Management LLC). While an interesting idea, it is passive. An active defence along the same lines would include patents usable on decidedly discriminatory and unreasonable terms, along the lines of lex talionis.

For any ordinary bloke - any inoffensive legal person - a licence to use the patent would be granted. For certain others, and I think we can all identify who, it would not - except on the basis of reciprocal agreement. Commercial firms come to such agreements all the time. Why shouldn't the open source community have its own patent portfolio?

No-one can be sure how such a face-off will end. The upshot, as best I can predict, will be a deadly legal embrace which poisons industrial advancement. If the legislators really want to run such a risk, someone needs to warn them that small nations have no niche in such an industrial ecosystem.

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