Pat Pilcher: Software patent stoush could have huge impact

Commerce Minister Craig Foss. Will software be patentable under new legislation? Some say yes. Photo / Warren Buckland

A pitched political battle looks set to be fought over legislation that could play a huge role in the future shape of New Zealand's emerging digital economy. For the last hundred or so years, New Zealand's economic fortunes have been closely tied to exporting wool, bits of dead sheep and beef plus logs. Moving towards the future, a growing part of New Zealand's future economy is likely to be closely tied to the tech sector.

For technology to become a fully functioning cog in NZ's economy, the way we treat intellectual property (e.g. the ideas and concepts behind the software, hardware and other innovation that underpins much of the tech sector) is critically important. In a nutshell, we'd better get our patent laws right or we may find local businesses involved in unwinnable patent fights against lawyered-up multinationals when they could be innovating, exporting and otherwise creating wealth for New Zealanders.

To their credit, the government has already begun to review New Zealand's patent laws, with a new patent bill to replace the creakingly ancient Patents Act of 1953 whose laws are barely relevant in the digital age. The overarching aim is for the government to provide a balance between innovation and protecting public interests.

Achieving this is no easy feat, and already the bill is mired in controversy as Commerce Minister Craig Foss changed the wording of a clause within the bill which could have huge ramifications for New Zealand's fledgling software industry.

His amendment has changed some crucial wording in the bill that some say has the government moving away from excluding software from being patented (as per select committee recommendations), to parts of the bill being sufficiently vague that software may indeed become patentable. Clause 10a of the supplementary order paper 120 was amended to read: "..prevents anything from being an invention for the purposes of this Act only to the extent that a patent or an application relates to a computer program as such"

It might only be two words, but from a legal standpoint the addition of "as such" makes all the difference and could see kiwi companies being locked into protracted legal battles against multinationals whose lawyers are likely to emerge as the only real victors, whilst New Zealand could end up on the losing side.

This, says Labour spokesperson for Communications and Information Technology, Clare Curran, could be lethal for New Zealand's small yet critically important software industry: "Those two words are fatal for Kiwi innovation. It's not too late for Mr Foss to change his mind and listen to our Kiwi software innovators. If not then his legacy will be one of massive failure for our local software industry.... What Mr Foss is pushing through is complete madness, is anti-kiwi innovation and shows a lack of digital ambition."

Not so says Foss: "Under our current law, computer programs can be patented in New Zealand. The threshold for an invention to be patentable is too low, and is inconsistent with international standards. The "as such" limitation ensures that computer programs cannot be patented. A computer program itself will not be patentable under this Bill. A device such as a digital camera or washing machine, that makes use of a computer program will be patentable, but the software itself will not be."

The Minister's sentiments however are not echoed by the Kiwi software industry players, many of whom believe this amendment to the bill could prove to be fatal for their industry.

Included amongst those concerned with the bills potential to negatively impact New Zealand's software industry is Greg Dawes, Associate Professor of Philosophy & Religion at the University of Otago who says that "Experience elsewhere has shown that an "as such" clause will effectively undermine the intention of the select committee, a fact that has been pointed out by many IT professionals, including the Institute of Information Technology Professionals, internetNZ, the NZ Open Source Society, and NZRise".

Dawes isn't alone in his views. The wider software industry is so concerned that They've clubbed together to form NZrise and created a petition that has secured approximately 1,200 signatures asking the minister to reconsider his amendment.

According to Don Christie, co-chair of NZrise "The economic case against software patents is compelling, they have stifled innovation and the cost of litigation and licensing is something NZ companies can ill-afford."

Of equal concern, Labour allege that despite repeated commitments of the previous Commerce Minister, Simon Power, that software would be excluded from patentability, pressure has been placed on the government to change their minds around software patentability. "The Craig Foss amendment to the Patent Bill is direct evidence of the sway and influence on our government Ministers by multinationals such as Microsoft, which while they have a presence in New Zealand, and employ people, their profits are largely directed offshore." says Curran.

Of equal concern, changes to the bill could see businesses that had invested in New Zealand pulling out. Geomechanica, a Canadian software company had planned to relocate to NZ because they felt that the original patent ban on software as proposed in the unmodified form of the bill would foster an innovation friendly environment. Sadly tweaks made to the patent bill could render a New Zealand business case untenable for them and others, depriving New Zealand of employment opportunities, potentially setting our digital economy back by decades.

According to AJ Guillon, co-founder of Geomechanica, "We have planned our products and marketing based on a relocation to New Zealand, exporting innovative software without the threat of domestic software patents. If the software patent bill passes with the "as such" wording, we cannot justify a relocation to a country with an ambiguous law on a matter that is so important to us."

So the argument goes that aside from entangling software companies in costly patent wrangles, making software patentable could arguably stifle innovation to the point where it'll be more economically attractive to keep exporting bits of dead animals and logs rather than diversifying into an innovation led, high-tech economy.

Because software is a largely mathematical creation, making it patentable could also theoretically see mathematical concepts being patented.

This could lead to a loophole that'd see larger companies armed with teams of lawyers patenting much of the fundamental building blocks of computer applications (in the US such basic application fundamentals as progress bars, double clicks and even scanning a document and sending it via email have already been patented), making it next to impossible for smaller companies to develop applications without being hauled into court.

Incentives to troll the system are also likely to be high. Many software companies when hit with a lawsuit are likely to settle out of court in order to avoid legal costs and the negative publicity/share price impacts associated with a legal bun-fight. Given the money likely to be involved, it is possible that many arcane yet widely significant aspects of application coding could be patented with a view to making a fast buck.

Once again the long term loser is New Zealand whilst multinationals grow fat at our expense.

We've all seen the insanity that is the US patent system, and how it led to those shameful Apple VS. Samsung courtroom brawls. The big question is how badly do we want something similar for New Zealand?