Building a wealthier nation through innovation
Microsoft is passionate about the success of New Zealand businesses on the world stage. From Windows, to Xbox, to the cloud, many Kiwi innovators build on Microsoft technology. When these innovators succeed, we succeed. We do our best to help, with inspiration , expertise , offshore scale , and special deals for start-ups .
Innovators also need clear, predictable laws that let them choose for themselves the business model that’s the “best fit”, and prepares them for success on the world stage.
In March 2010, a new provision was inserted in the Patents Bill which will take away choice from the technology sector and diverge from international norms – and the laws of New Zealand's export markets. The scope and effect to the provision, clause 15(3A), is so ambiguous that a seven page explanatory documents published by the Ministry of Economic Development were unable to adequately clarify how the provision will be applied. In fact no one – even those who asked for a restriction – seems to be able to say exactly which (if any) patentable inventions will be excluded if the proposal becomes law.
Many changes in the Patents Bill are constructive and will help to improve patent quality in New Zealand. However, the proposed exclusion in clause 15(3A) is a step in the wrong direction. And, setting aside policy considerations, an exclusion that no one can explain will be bad law.
We think the focus should be on patent quality, not on an arbitrary exclusion. However, if there must be an exclusion, the question must be asked: “How can inventors and investors make decisions about their commercialisation strategy if it is not even clear which inventions are now to be excluded from protection?”
If no patentable inventions are to be excluded from protection, or no one can say with certainty which patentable inventions (if any) it will exclude, clause 15(3A) will just be a troublesome white elephant, leading to years of pointless litigation to figure out something the Government can easily fix now with the stroke of a pen.
Innovators were faced with similar difficulties after the adoption of an exclusion in Europe. After decades of litigation and debate, there is still disagreement about how the exclusion should be interpreted, resulting in unnecessary inefficiencies, cost and uncertainty for innovators. Ultimately, this has been to the benefit of no one. However, rather than leaving the law as it is or ensuring that a known model where case law has resolved the more serious ambiguities will be adopted, the Ministry of Economic Development has, in both versions of its explanatory papers, proposed a novel approach that departs from international norms and ensures that New Zealand will need to start the process of interpreting and applying the provision from scratch.
Our view on patents is simple. Appropriate protection for intellectual property supports innovation and commerce, and all innovators should have the option to patent their inventions.
The current law is clear. It has not caused problems. It is similar to Australia, and that similarity saves inventors and taxpayers money by reducing re-work to satisfy different technicalities and by avoiding unnecessary cost, secrecy and complexity in commercial transactions.
We are joining Kiwi innovators and their representatives in calling for clause 15(3A) to be deleted from the Patents Bill before the Patents Bill becomes law.
We think this is important for New Zealand’s future.
Laws that encourage and reward organic innovative activity are preferable to relying on Government subsidies to prop up research and development – the fruits of which could then not be used to their full potential if patent protection that is available elsewhere in the world is removed.
Those who want to build a high income, export oriented, innovation driven economy for New Zealand should reject clause 15(3A).
We encourage readers to find out more about this issue.
Microsoft New Zealand Limited's submission further expands on our views and offers an interpretation of clause 15(3A) based on legal principles. We have also collated links to some other perspectives below for ease of reference.
UPDATE: Submissions on the draft guidelines have now been published by the Ministry of Economic Development. Detailed summaries are available from AJ Park, Henry Hughes, Dr Mark Summerfield, James & Wells and in Law News - Patents bill proposes no patents for computer programs . There have also been reports in the Dominion Post and Computerworld. The pie chart below gives an overview of the preferences expressed about clause 15(3A) in submissions to the Ministry of Economic Development.
Bill_15sub3A.png)
Recommended Reading:
Submission on Computer Programs Guideline, New Zealand Law Society
“The Society submits that officials should advise the Minister that to leave the Bill as it is, and continue to finalise guidelines (no matter what those guidelines say), would create ongoing uncertainty because Parliament’s intention will not be able to be discerned from the legislation.”
“If Parliament has doubts that the meaning is clear then it should follow the usual procedure and amend the Bill by supplementary order paper.”
Submission on Computer Programs Guideline, James & Wells
“In view of the proposed wording of clause 15(3A), we believe the Guidelines are both ultra vires and do not give an adequate indication of what is likely to be patentable in New Zealand under the Patents Bill. Therefore, the Guidelines are an inappropriate framework for examination of patent applications.”
Submission on Computer Programs Guideline, Bram van Melle (Maclean Law)
“The Select Committee proposed clause 15(3A) on its understanding of the difference between embedded and non-embedded software. ‘Embedded’ is a loose commercial concept not a technical distinction. […] Attempting to chart a course through this distinction will be problematic as technology is changing all the time.”
Submission on Computer Programs Guideline, Technology Interest Group
“Our group has grave reservations about the Guidelines, and the Patents Bill 15(3A) change on which they loosely rely. Both will increase the uncertainty surrounding patent protection for inventions, and thus increase patent application, litigation and business costs.”
Software: to patent or not to patent, Matt Sumpter (Chapman Tripp)
“[I]n this case the addition of clause 15(3A) introduced a new element which hadn’t been hinted at in the Bill before and it wasn’t something which many of these companies directly affected had even considered, let alone submitted on.”
Submission on Computer Programs Guideline, Business NZ
“BusinessNZ is perplexed as to how a process that started and continued through with a high level of consultation and considered views over the last ten years seems to have fallen at a crucial hurdle in a key area many considered would be left unchanged, as indicated during all stages of the consultation process up until the proposed Clause 15(3A) exclusion was introduced in March 2010.”
Opinion: Fog warning on computer-implemented inventions , Matt Adams (AJ Park)
“People who were opposed to ‘software’ patents emphasised that innovation is strong, even ‘rampant’, with the law that’s in place. One said the software industry is ‘highly competitive, innovative and prosperous,’ and another pointed out that New Zealand was appealing ‘due to the healthy and innovative software industry here.’ Statements like these suggest those who were most opposed to ‘software’ patents had not experienced any detrimental effects from our current law.”
Some musings on the Patents Bill , Elena at Elena's Blog
“In this day and age of clear and concise legislation that can be understood by the man (or woman of course) on the street, it is ridiculous that the plain and clear words of an Act – ‘A computer program is not a patentable invention’ – is not intended to mean what it appears to mean.”
“The New Zealand Patents Bill and draft ‘Examination Guideline: Patentability of Inventions involving computer programs’ are not consistent with UK Patent Law or with European practice more generally. UK Law excludes only claims to computer programs ‘as such’ so that in practice many patent applications for computer-implemented inventions are granted. In contrast, the New Zealand Examination Guideline adopts a far broader interpretation that would appear to exclude from patent protection virtually all computer-implemented inventions.”
NZICT calls for caution over abandoning software patents , New Zealand Information and Communication Technologies Group Inc
“NZICT chief executive Brett O’Riley says the country’s software development sector deserves the same protection as other sectors where invention and innovation occurs.”
“Software patents, while acknowledged as a less than perfect solution in some areas, are none-the-less integral to an individual or company’s right for commercial protection and essential for competing globally. We believe that it is very important that companies retain the option to protect their innovations under patent law, if that is their choice.”
Submission to the Commerce Select Committee , Henry Hughes
“We also support the continued patentability of computer software in New Zealand. [...] We consider that concerns about the novelty and obviousness of computer software patents will be mitigated by the more stringent examination criteria under the new Act.”
Submission to the Commerce Select Committee , New Zealand Institute of Patent Attorneys Inc
“We agree with an invention being patentable on the basis that it is a ‘manner of manufacture’, provided that the exclusions of clause 15 are deleted. […] Exclusions to patentability are not needed for the reason that the courts’ interpretation of ‘manner of manufacture’ enables flexibility to deal with changes in technology [...].”
Submission to the Commerce Select Committee , Fisher & Paykel Appliances Limited
“In relation to the subject matter excluded from patentability under clause 15 [Fisher & Paykel Appliances] specifically supports the absence of ‘computer software related inventions’ from the listed exclusions.”
“A significant proportion of FPA inventions are software related inventions. Much of what it once achieved using dedicated hardware circuitry is achieved using software controlled microprocessors. Many FPA product development engineers are software engineers. […] FPA has been seeking such software related patents since 1985.”
The computer programs affair , Chapman Tripp
“Computer programs run cars, telephones, pacemakers, whiteware and all manner of other gadgetry. Why would you exclude an inventive new camera, eftpos terminal or navigation system from patentability just because it is run by a computer program or used with a computer? Well you wouldn’t.”
Comments
Anonymous
April 18, 2011
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April 18, 2011
Joel, thank you for your observations on this important discussion. I will read your analysis with interest. Out of curiosity, which inventions do you consider that clause 15(3A) will exclude? Waldo [MSFT]Anonymous
April 18, 2011
Wrt clause 15(3A) - Based on F&P's lawyers arguments I assume that they have convinced the policy makers that embedded software (i.e anything burned into an IC) will be covered - which IMHO is just as erroneous as any other patent being allowed - The fast and hard of it is, that Patents, as they are used today, having nothing to do with innovation and everything to do with Legal Battles and International Trade Policy. The only reason you file or take out a licence on a Patent is to prevent yourself being sued, or to have a bartering chip when you infringe. Digital artifacts have no hard resource limits on the way they can be manipulated by people, which arguably is why patents in manufacturing sectors are not so economically morbid as those applied to conceptual realms (such as business methods, software and medical diagnosis). You simply can't exist in a world of ideas which are arbitrarily given exclusive punitive rights to those who were first to file. JoelWAnonymous
April 18, 2011
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April 18, 2011
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April 18, 2011
Thanks Dave for your detailed observations. Respectfully, I disagree. It is important that the law is clear. While the principle of the exclusion may be clear to you, it is not apparent from the text of 15(3A). That makes the provision problematic for the innovators who want to use the patent system, because they will need to apply the text to real circumstances. Waldo [MSFT]Anonymous
April 18, 2011
Waldo, it's interesting you've chosen to only include submissions and commentary supporting the minority view posed primarily by a small number of multinationals and their lawyers. I can't say I'm overly surprised that patent lawyers are pleading for more things to patent. You don't see turkeys voting for Christmas either. The piece also ignores the fact that New Zealand innovators, including the two largest software exporters in New Zealand (Orion Health and Jade) together representing around half of all software exported have come out AGAINST software patents, the former having been the target of their innovation-crushing effect in the form of legal maneuvers from both competitors and non-technology law firms previously. You also appear to have missed the fact that the majority of the New Zealand software sector is firmly against software patents. From an association perspective almost all organisations have spoken out against them including NZCS, the Software Association, NZRise, InternetNZ, the Open Source Society and others. This is nothing new - the previous vendor body (ITANZ) also led the charge against them actually instigating legal action to prevent patents such as Amazon's one-click patent gaining traction in New Zealand. As you are aware, a recent poll by NZCS found that 81% of members supported NZCS's view that on balance software shouldn't be patentable in New Zealand. For the other side of the view expressed above, including a link to a letter to the Minister outlining the key reasons software patents are bad for innovation in New Zealand, see http://bit.ly/i19E7o And lastly, I see a submission from someone calling themselves the "technology interest group". Can you confirm whether Microsoft are a founding member or involved with this "group"? I wonder why they're not prepared to put their name to their views, assuming that it is a "they" of course. Thanks, Paul Matthews NZCS Chief ExecutiveAnonymous
April 18, 2011
Hi Paul, thank you for taking the time to express your opinion. If there is to be an exclusion, then surely it is important to get it right. I would be interested to know what you mean by software patents. And, if those are what should be excluded, would clause 15(3A) do that? Which inventions would clause 15(3A) exclude from patentability? Waldo [MSFT]Anonymous
April 18, 2011
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April 18, 2011
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April 18, 2011
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April 18, 2011
Hi Dave, thank you for sharing your thoughts. You do not appear to have clarified what clause 15(3A) will mean for innovators who do wish to use the patent system. You can continue to post additional thoughts as they arise, but I think understanding the practical implications of clause 15(3A) is a point that needs to be addressed regardless of personal views about whether an exclusion is good or bad. Waldo [MSFT]Anonymous
April 18, 2011
[Post removed due to inappropriate language. Please edit and re-post.]Anonymous
April 18, 2011
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April 19, 2011
Dear Mr Matthews, EverEdge IP is part of the technology interest group and filed the submission on behalf of the group. As such I am aware of the membership of the group which is described in the submission. The decision that was taken not to discuss the membership of the group broadly and the reason for this decision are described in the submission. Microsoft is not a member of the group. As mentioned in the submission, all group members are either individuals or New Zealand owned and operated. I can confirm on the group's behalf that we would be pleased to disclose our membership to the Minister should that be requested. Yours faithfullly Paul Adams, CEO, EverEdge IPAnonymous
April 19, 2011
I remember looking at some stats on patents last year. There were just over 1,000 NZ patents that looked like computer-implemented inventions. Just over 20% of these are held by New Zealand individuals, New Zealand companies or New Zealand institutions. This is twice the claimed "going rate". MED claims that New Zealanders own only 10% of all patents granted here. These 1,000 patents represent just 3% of all New Zealand patents. IPONZ treats computer-implemented inventions no differently to other inventions. So they are not classified separately. Patent applicants are encouraged on filing to say whether their invention is chemical, mechanical or electrical. Patent applications are assigned international patent classification (IPC) codes which gives some idea of the area of technology. The 1,000 patents we found all had IPC codes assigned that tend to be assigned to computer-implemented inventions. I'm not aware of any patent litigation in New Zealand involving patents for computer-implemented inventions over the last 15 years that they have been available. Matt AdamsAnonymous
April 19, 2011
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April 19, 2011
NZCS does not appear to have made a submission on the Patents Bill before the Parliamentary Commerce Select Committee. InternetNZ submitted that "it is not currently possible to obtain a patent in New Zealand for software", referred to the disallowance of software patents in the European Union, and urged the Committee to pay close attention to the NZ Open Source Society for "detailed and credible arguments" as to why software patenting should be avoided. The NZOSS made 3 written submissions, according to Parliamentary documents. The first submission (21) favoured harmonisation with Europe. The second (21A) tabled an academic paper. The third (21B) was made well after submissions closed. It was sent to only 2 members of the Commerce Select Committee. Ironically, it criticised what it saw as multiple submissions made by others, criticised the practice of addressing issues raised by other submitters, and asked that its third submission be taken into account "in the interests of completeness and fairness". In the first of its 3 submissions the New Zealand Open Source Society endorsed the Committee's decision to follow Europe. Arguing against alignment with Australia, the NZOSS stated that "the selection of AU patent law as an example of divergence is curious considering that Europe has taken the same stance as NZ. Therefore we are in fact implementing a patent approach that is well supported by some of our largest trading partners". The NZOSS urged NZers to "hold to our principles side by side with the European Union". Catalyst IT made three written submissions to the Commerce Select Committee, according to Parliamentary documents. The first and second submissions (36 & 36A) claimed that software patenting would reduce innovation. The two submissions differed in the amendments requested by the company. The third (36B) was made after Catalyst IT made its verbal submission. It was sent as a letter to only Commerce Select Committee Chairperson Lianne Dalziel. The letter requested a meeting between the letter's author and Dalziel. In the first 2 of its 3 written submissions to the Commerce Select Committee, Catalyst IT claimed that software development is held back when other entities "register patents for software processes many years after the original work, simply because no-one else has yet registered that work due to its freely available nature." This submission does not demonstrate an awareness that patents are granted for inventions that are new at the time the patent is filed. If the work is already freely available it is not patentable. If a patent is granted on an invention that is not new then it is not enforceable. Catalyst IT does not address in its written submissions relevant changes effected by the Patents Bill such as the move to absolute novelty, examination for inventive step, examination on the balance of probabilities, prior user rights, and the ability to crowd source prior art searching. All of these measures reduce potential patent scope. In its verbal submission to the Commerce Select Committee, Catalyst IT claimed that software patenting would reduce innovation. The submitters raised patent threats received around election systems and electronic voting as an example. Catalyst IT has been less than forthcoming with support for its position. Subsequent attempts to obtain even the patent number from Catalyst IT have been unsuccessful. Matt AdamsAnonymous
April 19, 2011
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April 19, 2011
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April 19, 2011
Paul Matthews describes the excerpts of submissions on this blog as a “minority view posed primarily by a small number of multinationals and their lawyers”. As a quote from BusinessNZ’s submission was one of the excerpts, Mr Matthews should know that BusinessNZ does not represent “a small number of multinationals”. BusinessNZ submissions are the result of consultation with and on behalf of a wide membership of thousands of New Zealand companies of all sizes. This consultation process resulted in firm recommendations on changing Clause 15(3A) to ensure compatibility with regulations in other jurisdictions. Kathryn Asare, BusinessNZAnonymous
April 19, 2011
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April 20, 2011
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April 20, 2011
I made a comment above that NZCS does not appear to have made a submission on the Patents Bill before the Parliamentary Commerce Select Committee. It appears Mr Matthews wrote to Hon Simon Power on 15 April 2010 on behalf of the NZCS. The letter can be viewed at this link www.nzcs.org.nz/.../20100415SoftwarePatents.pdf In the letter Mr Matthews states that the NZCS "position can be viewed as truly independent and free from influence". This is great to see. He goes on to make some comments on damage to innovation. He states that "[g]iven the nature of computer software, patents have the potential to (and in many cases have) significantly stifle innovation". What does he mean by "stifle innovation"? What instances of stifling innovation was he referring to in his letter to the Minister? Can he provide some examples in New Zealand of stifling innovation? Matt AdamsAnonymous
April 20, 2011
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April 20, 2011
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April 20, 2011
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April 20, 2011
Hi Paul (NZCS) I appreciate your on-going dialogue on this issue.
- What actual problem with the current law needs clause 15(3A) to solve it? You mention that you believe “the balance between the good and bad elements of software patents falls very clearly on the side of ‘bad’ for New Zealand”. If it is as clear as you suggest, there must be abundant evidence of harm. However commentators here and elsewhere have pointed out that there seems to be no firm evidence of any “bad” effect of patents for NZ computer-implemented inventions. There appear to be a number of examples of the “good”, which you appear to acknowledge, yet there are apparently no tangible examples of “bad” whatsoever. If you do have any examples of the “bad”, it must then also be considered whether these issues can be remedied by the patent quality improvements in the Patents Bill, rather than by a discriminatory exclusion. I may be useful if you can provide examples of harm that NZ patents for computer implemented inventions have caused to those who object to them, and also provide your views of whether the patent quality improvements in the Patents Bill would help to remedy those examples (if any). It's not even clear if the example you have now mentioned relates to NZ patent. Overall it seems to me there is strong evidence that there has been no harm from NZ patents for computer implemented inventions: Many of the people who asked for a restriction were clearly not aware that patents for computer implemented inventions are already law. How could they not have noticed, if those patents are as harmful as they claim?
- Is clause 15(3A) clear? You have put forward one possible interpretation of clause 15(3A) and the draft Guidelines, but I think it is fair to say both are ambiguous – and there is absolutely no need for them to be ambiguous. Based on your analysis, clause 15(3A) and the draft Guidelines do not implement the statements of the Minister or the Commerce Select Committee, irrespective of how one might wish to define ‘embedded software’: “[C]ompanies investing in inventions involving ‘embedded’ computer programs should be able to obtain patent protection for these inventions. The committee and the Minister accept this position.” For context, to ensure there is no confusion about what this means, the Commerce Select Committee’s report in the Patents Bill said: “we are aware of New Zealand companies who have invested in a significant number of software-related inventions, involving embedded software. […] We received advice that our recommendation to include computer programs among the inventions that may not be patented would be unlikely to prevent the granting of patents for inventions involving embedded software.” If your interpretation of clause 15(3A) is correct, then it would seem the advice the Commerce Select Committee relied on when inserting the provision is wrong, the Minister’s statement has not been honoured, and clause 15(3A) does not achieve its intended purpose. Only one thing seems to be clear in all this – that clause 15(3A) is unclear. Unclear law is bad law. Waldo [MSFT]
Anonymous
April 21, 2011
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April 21, 2011
Hi Dave, thank you for your comments. Your argument seems to rest on an assumption that a patent is a market “monopoly”. It would be wrong to assume that a patent is (or even leads to) a market “monopoly”. Clear thinking is needed here. Like many words in the English language, the word “monopoly” has different meanings depending on the context in which it is used. It is true that patents are a legal “monopoly” (that is, an exclusive right like other property rights). However that is an entirely different concept from a market “monopoly” and therefore does imply the economic consequences you mention. No matter how many lawyers (or anti-patent lobbyists) describe patents as a "monopoly", the simple fact is that the vast majority of patents provide no market power whatsoever. The Governments of Australia and New Zealand recently recognised as much, saying as recently as February this year that, “[New Zealand and Australia] recognise that a patent does not necessarily confer market power.”(Reference: New Zealand-Australia Closer Economic Relations Investment Protocol) Even if you were correct, your analysis still does not answer the fundamental questions of exactly what inventions (if any) clause 15(3A) would exclude, and what actual harm (if any) the last 15 years of NZ patents for computer implemented inventions have actually caused to anyone. If any actual harm can be proven, the circumstances would still then need to be examined to determine whether quality improvements in the Patents Bill would help to prevent that harm, and any residual harm would need to be weighed against the benefits. Replacing a law that works with an unworkable law cannot be justified by unsupportable assumptions about market effects. Waldo [MSFT]Anonymous
April 21, 2011
If ambiguity in legislation was grounds for denying it all together, then I suggest that we would have precious few laws at all. Why not specify that what constitutes "software" is determined on a case by case basis by a jury of professional software developers drawn at random from those identifying as such in the electoral rolls. Given that there are, on average, fewer than 80 software patents granted in NZ per year, that shouldn't be too onerous, should it? By the way, how does IPONZ work out all the other many many exclusions to patents? Surely there are some prickly edge cases among that vast swath of creativity that is only eligible for copyright within the current patent regime, no? I guess we have to trust the intelligence and judgement of IPONZ assessors. Yes, that makes me nervous too. Dave LaneAnonymous
April 21, 2011
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April 21, 2011
Hi Dave Yes, I do think citizens are entitled to clear laws, especially when it’s easy to achieve that. A vague fear about what might occur in the future if we keep the law as it is doesn’t seem to be a compelling reason to deliberately pass an unclear law that on one interpretation changes nothing (except make things less certain). Waldo [MSFT]Anonymous
April 21, 2011
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