Do Patents Really Have Nothing to do With Innovation?

By Peter Kerr 16/02/2012 39

A guest blog – Doug Calhoun’s recent comments, here and here, on the potential fate of NZ IP law encouraged sticK to ask Doug to write more fully

As Stephen Joyce, the new minister both of science and innovation and economic development gets to grips with his new portfolios, he should be addressing the disconnect between the innovation policy and the patent policy of both the current National and the previous Labour led governments.

In mid-November 2011 the Ministry of Science and Innovation released a report entitled “Powering Innovation”. The link is here:

The third recommendation of that report was:

“Individual commercialisation units [of CRIs and Universities] should continue to develop or increase capability both through embedded skills and through networked activity, to deliver high quality screening of IP opportunities and increased good quality commercialisation deal flow nationally.”

The MSI terms of reference identified the “high value manufacturing and services sector” (HVMSS), to which the recommendations apply, as including:

“… biotechnology, processing, electronics and embedded systems, mechatronics and robotics, sensing and scanning devices, medical technologies, advanced materials and manufacturing technologies (including plastics), marine technology, pharmaceuticals, agritechnologies, digital technologies and information and communication technology (ICT)”

The disconnect is most graphically illustrated by clause 15 of the Patents Bill, which proposes to exclude the following technologies from being patented in New Zealand:

• Treatments of second medical indications in humans
• Methods of medical diagnosis practiced on humans, and
• Computer programs.

Medical technologies are becoming more and more focussed on genomics, proteomics and other emerging “omics” evolving from the ability to analyse the components of DNA. Inventions that are being made involve finding new uses for or better administration of known medicines through targeted diagnoses of patients according to genetic traits. And infometrics and diagnostic algorithms involving sophisticated software are indispensable tools integral to such inventions. Most of the other HVMSS technologies also incorporate software to make them work. Yet the Patents Bill would ban patents for many of these technologies.

How did we get to this?

Government policies for promoting innovation and for reforming patent law were developed in separate silos in a fiercely tribal public service culture.

Patent law reform was done in the Ministry of Economic Development (IP policy) silo. MED has been particularly vigilant in protecting its patch from any outside dissenters (for example, me). At the heart of the MED policy is the observation that about 90% of New Zealand patents are granted to foreigners. The benefits of these may flow overseas. Therefore, we should make it as difficult as possible within our international obligations to get a patent in New Zealand.

The main international treaty obligation MED have in mind is the TRIPS treaty. That treaty sets minimum standards of IP protection that member countries must provide. Article 27 of TRIPS requires countries to grant patents in all fields of technology with some exceptions. The medical treatment and diagnosis exceptions in the Patents Bill are permitted under TRIPS.

The exclusion of patents for computer programs came as a result of the proponents of open source software successfully playing a game of last tag. They stayed on the sidelines throughout the consultative process in the eight years before the bill was introduced and then ambushed the select committee with tales of US patent “thickets” and how they would be put out of business if software patents were permitted. (They did not mention that software related inventions had been able to be patented here since the 1990s and that they were still in business.) The select committee introduced the ban, in spite of the earlier MED recommendation and cabinet decision to the contrary. The controversy generated can be distilled from the submissions made on the proposed guidelines for determining what is to be excluded. The link is here:

The MED view of patent economics is a very narrow one focussed on protectionism. Rather than seeing patents as an incentive to invest in innovation involving the commercialising of inventions, MED advised the Commerce Select Committee:

“One consequence of the large number of New Zealand patents granted to overseas owners is that New Zealand may bear the potential costs imposed by these patents, but may not gain any benefit over and above what would have been gained if these patents had not been granted in New Zealand.”

The only evidence on which that analysis was based was the repeated observation that about 90% of New Zealand patents are granted to foreigners. The supposed consequence of that percentage is speculative – note the use of the word “may”.

The MED advice concluded:

“In developing patent legislation for New Zealand, the aim must be to maximise the benefits of the patent system to New Zealand. In light of the preceding discussion, there would seem to be no value to New Zealand in having a patent system that provides wide patent rights. This would probably have little effect on innovation in New Zealand or anywhere else, but would, because of the high proportion of overseas patents, potentially impose significant costs on New Zealand for little compensating benefit.”

“The best policy for New Zealand, given what is known about the workings of the patent system, would be to have the strictest criteria for granting a patent that are consistent with our international obligations, and apply these criteria as rigorously as possible.”

What was the nature or quantum of the ‘significant costs’ was not identified.

The link to the briefing paper is here:

MED did commission a survey of patent users and an analysis of academic papers on the economic effects of patents – after the bill had been drafted and was about to be introduced into parliament. MED released the resulting report (the Uniservices Report) after the select committee had dealt with it. The link to the report is here:

The two main conclusions of the Uniservices Report were:

• while most people surveyed had heard of intellectual property, there was a very low understanding of how it worked or how to manage it, and
• technology transfer has an important role in advancing innovation and patents are the currency of technology transfer.

And the MED response?

‘The views in this report do not represent the views of the Ministry of Economic Development. Should the Ministry decide to act upon any of the recommendations in the report, we will consult with stakeholders.”

The World Intellectual Property Organisation (WIPO) has a team of economists who have recently produced a 186 page analysis of the economic effects of IP (primarily patent) systems. The link is here:

The depth of analysis and large number of papers cited in the report shows that those economic effects are very much more complex than the MED view. There is growing investment in and internationalisation of science and innovation. IP is increasingly being treated as a tradeable end in itself, as well as a means to an end. There are emerging new collaborative mechanisms for trading IP and IP intermediaries for doing it. It echoes and expands upon the Uniservices Report conclusions: tech transfer is important for innovation and patents are its currency.

Among its conclusions are that the objective of any patent policy maker should be to achieve “quality” patents. By quality they mean that a patented invention is both novel and inventive, it is properly described and that the invention claimed is of the same breadth as the description. But the WIPO report also emphasises the importance of “appropriability” in promoting investment in innovation based on inventions.

The primary policy objective of MED in patent law reform has been to make patents as difficult as possible to get in New Zealand. One consequence of that policy is that any patent that is granted under the new law is more likely to be a quality patent. However the Patents Bills goes far beyond that and aims to have a chilling effect on seeking New Zealand patents — going so far as to ban patents for some HVMSS technologies. If the HVMSS technologies cannot be patented they are not going to be appropriable.

The MED policy does not take into account that New Zealand (or foreign) based innovators, seek patents in New Zealand to protect their investment in commercialising their innovations here. And at the same time, MSI is advocating that innovators, led by the CRIs and universities, should be doing exactly that.

Understanding patent law and developing policy is a bit like peeling an onion – there are a lot of layers to it. The respective ministers who have been in charge of patent law reform since 2000 – Laila Harre, Judith Tizard and Simon Power – have recognised this and largely followed the advice of the MED. None had any mandate to look into innovation policies – and science and innovation policy advisors had little incentive to look into patent policy. Any quantum tunnelling between their respective silos has been effectively stamped out.

The silo approach is perpetuated in the post 2011 election briefings to incoming ministers. Responsibility for patent policy rests with Craig Foss, the new minister of commerce. His briefing paper urges him to get on with the Patents Bill. (That bill has been awaiting a second reading since the end of March 2010.) The briefing for Stephen Joyce urges him to be the leader of interdepartmental promotion of innovation — but makes no mention of the role of patents in innovation.

It is time that government recognised that a patents regime has a role to play in innovation. That role is the granting of high quality patents and promoting innovation that embraces IP management as a key component.

And what can Mr Joyce do?

• He can amend the Patents Bill to get rid of the HVMSS technology exclusions
• He can commission a review of the Patents Bill with an aim to amending it to achieve a regime that grants quality patents but does not create chilling red tape in doing so
• He can promote IP policy that supports innovation within New Zealand and the development of excellence in the management of IP.

Good luck minister.

~ Doug Calhoun
IP Mentor
Serial Stirrer

39 Responses to “Do Patents Really Have Nothing to do With Innovation?”

  • It was a mistake to exclude software programs from patent protection. The open source community advocates were just whining script kiddies. I have pointed this issue out on a debate at Labour’s Red Alert blog in the past with its cheerleader on the exclusion of software program in patent protect, Clare Curan.

    The thing about those idiot lots (open source proponents) is that they have used tools that have been developed by others for free, but unbeknown (to most of them) that those knowledge came from R&Ds, ie, it costs money. Algorithms don’t fall from sky or just being invented in (business as usual) software houses around the county. They came from peer review engineering/math/stats/science journals. If we have to examine our software industries (locally), one would hardly find any new inventions (algorithms). Those that do, tend not to publish their work and also, they apply for patent protection and good on them for doing so, because it cost them money to do the R&D resulting in their invention.

    Don Christie and the the open source local movements don’t read a peer review computing papers (for algorithm developments in their product developments). There is nothing innovating in their software products. What they do is business as usual stuff. No cutting-edge or invention.

    Our IT industry is the most hyped one amongst other sectors. Well done to Sam Morgan, but that kind of software cannot be called innovation. Its been done overseas before he started it locally. It didn’t take him a platoon of PhDs to develop TradeMe exactly as the kind of thing that Microsoft, Google, Oracle, Apple, IBM are doing. No wondered that those R&D based software companies (Microsoft) were against the exclusion of software programs from patent protection.

    That’s understandable because those R&D based companies hire an army of PhDs to do nothing except inventing or figuring out new algorithms. They frequently published their findings in various journals, which developers like me can grab and implement those algorithms for commercial use. I spent zero $ on the invention of those new algorithms except my time i spent in implementing them that cost money. Anyone from around the world can grab those papers and implement the algorithms as well, because they’re publicly available in research journals. Once can just check out the number of research publications that’s pouring out of Microsoft Research on a regular basis. I frequently download papers from Microsoft Research (Asia Division) for algorithms I’m interested to implement. There are tons of regular new publications that are coming out from there. If I get stuck with implementing a particular algorithm, then I make contact with the authors of those papers and ask for clarification or help. Sometimes I sent my codes of their algorithms to them to check for correctness, since one cannot really be sure if his/her understanding of the formula/algorithm derivations in a paper that he/she read is correct. No one can read the minds of the authors by just following their derivation in their papers. Its often necessary to check with the authors of the papers.

    I believe that Peter Griffin who runs Sciblog is a proponent of open source. I’m not against open source, since I use a few of them, but to berate Microsoft and other software companies who want to protect their software invention via patent is simply daft and uninformed.

    I believe that the exclusion of software programs from patent protection will not make R&D-based software companies like MS, IBM, Google even think twice about establishing an R&D center in this country, simply because they can’t afford to protect their inventions here.

  • On another issue, I’m not excusing Microsoft and others for trying to protect their software inventions via patents, because they themselves do engage in patent trolling, which is the real hindrance to innovation. I’m against patent trolling and not software algorithm (or system) invention.

    In fact, what should have been excluded from patent protection is patent trolling but not software algorithm inventions. These 2 are not the same thing. This is what open source proponents fail to understand. They see those 2 as the same thing, which they’re not. I believe that this misunderstanding is based on their lack of understanding of what original invention type of R&D is about, because in their entire career as programming, they have been doing things as business as usual. They’ve never implemented anything based on original research (ie, concepts originated/available from research journals).

  • Patent trolling is just what software patents are GOOD for if they’re to be considered a tradeable commodity and a strategic commodity.

    The real problem here is software patents exist at all.

    It’s a material fact that all levels of software development takes place in a non-patent environment and such an environment does not impede the creation of software for commercial or research purposes.

    We know this true because there was a time frame, before software patents say 1850 to 1990, when the most fundamental basics of computing were invented including Boolean logic, Von Neumann machines, finite state automata, the Turing machine, operating systems, GUIs, database software, spread sheet software, word processing software etc etc etc .

    All this was created with no expectation or incentive of patent protection.

    Today, we have the sorry spectacle of Blackberry being for over half a billion dollars by NTP over a patent that amounts to putting certain information in a database at time 1 and then taking it out at time 2 to use it for some specific purpose. Literally, they’re procedure patents which consist of nothing more than enumerating non-inventive steps in a certain order.

    This is what software patents must be- patents on disembodied processes which exist independently of any particular implementation. So instead of having a patent on a specific light switch, the very concept of a light switch is patented.

    As far as the OP calling programmers who understand how economically destructive (to everyone but lawyers) software patents are “script kiddies” I have to ask , is Donald Knuth aq “script kiddie?”.

    But as long as we’re slinging invective, please step aside and allow me because I can certainly sling it with the best of them.

    The fact is the only people who lobby for software patents are IP attorneys who, like the parasites they are, are seeking to attach themselves as non-value producing entities to an otherwise thriving industry and suck it for everything they can. The only end product of their participation will be a dead stream where once economic activity flowed, filled with the dead, floating carcasses of companies and innovation they’ve poisoned. By the time they’re done the world will be filled NTPs and Intellectual Ventures :

    and real innovation and economic incentives to create will have been driven completely out of the picture.

    And why? So they can sustain the lifestyle they’ve become accustomed to which involves snorting truckloads of coke , popping amphetamines then jetting down down to the Dominican Republic to enlist the services of 10 year old prostitutes. Then there’s the fact that the prostitute-cum-trophy wife they married is going to walk the first day her Niemann Marcus card gets declined.

    THIS, ladies and gentlemen, THIS what our opponents are.

    Are we done with the useless name calling now now? Or should I continue?

  • Scirpt Kiddle

    The East Texas District Court is, in the eyes of US Public Radio, a patent version of the OK Corral. But an evidence based academic study (that was not just seeking a good story) has found that most opinions about patent trolls (good and bad) are just myths. The link to the article is:

    One US industry report suggests that 500,000 new app-related jobs in spite of software patents and patent trolls. That link is:

    As Neil Young would have it, “There’s more to the picture than meets the eye.”

    And as for charactersing patent attorneys as parasites, it is worth remebering the Oscar Wilde quote, “If you can’t answer a man’s argument don’t panic – you can always call him names!”


    Doug Calhoun

  • I’d like to add a link to this research, on the enormous cost of patent trolling in the US (half a trillion dollars since 1990).

    Also, I think many are confused about what the original purpose of patents were – they protected _concrete_, _manufactured_ objects and the discrete parts thereof. It simply doesn’t make sense, in many cases, to patent things like software, for example, since the code is often made up of a mix of code from various other places (or, if it isn’t, it might benefit to do so, particularly in terms of people not needing to reinvent the wheel every time!).

    And I’m not sure why the ‘whining script kiddies’ comment was necessary. If nothing else, it’s hardly true and, Falafulu, if you have an issue with open source, I suggest you immediately stop using, um, services like google, for a starters :)

  • It’s interesting that Doug Calhoun (ex AJ Park) suggest “One consequence of that policy is that any patent that is granted under the new law is more likely to be a quality patent.” In fact, many of NZ’s software patents (Amazon 1-click, anyone?) are often poor. One example, is patent #566291 granted for CSS and JS aggregation techniques for which plenty of prior art existed. The NZ system ignores overseas art (in the age of the global internet!) and is biased with a presumption of validity.

    The late involvement of open source proponents illustrates the very problem with software patents. In the last decade, use and sharing of open source software has soared and this has led to direct clashes with IP systems predicated on scarcity and unable to keep up with the rapid pace of development.

    I won’t bother engaging with Falafulu Fisi but I note that name-calling and denigration seem quite par-for-the-course amongst proponents of big IP.

    IP proponents seem deaf to the fact that it’s not just open source people concerned about software patents. The NZ Computer Society and largest indigenous software companies also recommend against software patents.

  • Script Kiddie said…
    Donald Knuth aq “script kiddie?”

    Irrelevant comparison. Note that Knuth was doing his work on behalf of the largess of the taxpayer. Had he worked on his own and spend his own money on his invention (very impressive) then he would thought twice about his opinion on open source software.

    Well, the right people to ask are the likes of Bill Gates, Page & Brin (Google) as the PageRank algorithm was patented by Stanford, and Google bought it back for a few hundred million dollars. Why on earth Stanford went to great length to patent the PageRank algorithm (including their other R&D work)? Why, why , why? The answer is obvious. Innovation comes from protection of their IPs.

    Now, how about a small island like Samoa, Tonga or Fiji? Do you expect to find something (IT) innovative from those islands? I don’t think so. You may ask why? They have nothing to be protected because they have never had any inventions. Now, how about extending that small island examples to say, countries in north Africa, say Nigeria or Egypt? Well, you could find similar pattern over in those countries? You might think twice about the reason. They have nothing to be protected and why bother to spend money in R&D to invent something new (that’s what innovation is) only to be given away to their competitors at the end because it is not protected? You can pretty work out that countries who don’t protect software inventions don’t innovate. If you disagree with me, then I’m keen to be shown some real innovations from Lybia, Nigeria, Somalia, Yemen, etc,…

    Script Kiddie said…
    So instead of having a patent on a specific light switch, the very concept of a light switch is patented.

    I think that we’re basically agreeing on the some things here but we differ on the generalizing of what should be patented and what not. You can see that I have addressed it above? In saying that, what I criticized here is the exclusion of software invention (as in algorithms) from patent protection, which is miles away from what you said above. They are not the same thing, are they?

    From time to time, I see patents from Microsoft, Google, IBM, Oracle and similar research-based software companies being filed. How do I know? Well, I have communicated with some of the authors of those inventions, because their papers are publicly available (in computing/engineering journals). I have implemented some of those algorithms for commercial use, the only restriction I have was that I can’t make a claim to them. Similar thing as the PageRank algorithm from Google. Everyone is using it (or implemented) , however, just don’t make a claim to it and try to profit from it, because their lawyers are gonna come after you. So, its Ok to use it, but don’t claim it.

  • Aimee said…
    I suggest you immediately stop using, um, services like google

    WHY? IBM, Oracle, Intel, Microsoft use some open sources. Does it mean that I have to stop buying their products/services simply because they use open sources?

    Your comment doesn’t make sense. If you think it does, then I believe that you’re arguing with yourself.

    Look, using open sources by anyone whether it is Google, IBM, Microsoft or individuals as myself (as I’ve clearly stated in my previous post that I do use them in some of my projects) is not the same argument as protecting software inventions via patent? Totally different arguments you’re coming from.

  • Jonathan said…
    patent #566291

    I think that this patent #566291 should have never been granted in the first place. This is not the argument I’m making here. I differentiate invention where 2 (or more people) met up in a pub and discuss some ideas and then try to patent it. It only costs them a few pints of lion red to start with. The pub inventors did not engage in R&D which took them hours (if not months) , let alone spent huge amount of money to come up with their invention.

    Such invention cannot be equated with something like the one being discussed in the paper below (one from Microsoft).

    Ditributed Nonnegative Matrix Factorization for Web-Scale Dyadic Data Analysis on MapReduce

    From the paper, there are 5 doctorate individuals (authors of the paper) who were involved in that research work. My point? What they were researching is something new (the NMF algorithm is a new variant which is distributed that they invented). It took them perhaps weeks or months to come up with the invention. I’m not sure whether the Microsoft team had filed patent on this, but that’s not why I mentioned it here.

    Imagine a NZ software company employing 5 PhD computer science researchers to spend time coming up with just this single paper (in weeks or months) as one invention only before they move on to their next R&D topic? No, NZ software company can survive financially to do this sort of innovative R&D. First, employing PhDs (let alone 5 of them) is not going to be cheap. Second, this kind of invention (unlike its pub counter-part) takes quite sometime before anything fruitful can come out of it. This is what I mean real innovation as opposed to pub invention (which only costs a few pints of beers). I’m for the protection of real invention & innovation (like the example I have cited above) as opposed to pub invention that Jonathan mentioned above, because plenty of prior art existed.

    To summarize my position:

    – Real software invention/innovation as my example above, must be protected via patent.

    – Pub invention/innovation as the example that Jonathan highlighted above in relation to patent #566291 (plenty of prior art existed) MUST NOT be protected at all.

    I hope that I make my position clear here, because the open source movement still can’t differentiate the 2 above as I already mentioned it in my first post on this thread.

    I come to believe that there’s a misunderstanding here.

  • aimee whitcroft

    Thanks for the link to another paper. I guess the results of every academic paper are determined by how the authors frame the question they are looking at.

    Not many patent trolls about in NZ. This is probably because IPONZ grants only around 4,000 to 5,000 patents per year, while the US patent office grants 200,000+.

    You are quite right that the 1623 definition of an invention was “manner of manufacture”. That definition is still in the Patents Bill. However, the courts in the UK and now in NZ have always given a developing interpretation to what it means. Inventions, by their very nature, are unpredictable and it would be endlessly chasing your tail to try to limit the definition to what was innovative at the time the law was passed.

    Isaac Newton, the theory of gravity guy, said that he was able to achieve what he had because he stood on the shoulders of giants. All knowledge is incremental and builds on what went before – there is nothing unique to software building on the ideas of others.

    You might want to consider the Treasury paper on innovation and productivity. The link is:


    Thank you for acknowledging my former firm. I retired (after 32 very enjoyable years with them) six years ago. I guess that puts me into the pro patents tribe.

    Your understanding of the current law is not quite right. If a patent is bad (for prior art or any other reason) then it cannot be enforced. And there is a cottage industry out there finding relevant prior art if IPONZ has not done its job. See:

    You could sign on as a bounty hunter with your knowledge of relevant prior art and turn it into a nice little earner!

    “The NZ system ignores overseas art (in the age of the global internet!)”

    What the law actually says it that prior art is only citable from the date it is available in New Zealand. But the day it is available on the Internet it is available in New Zealand – so the new law won’t make much difference.

    “and is biased with a presumption of validity”

    The concept of presumption of validity is a feature of US patent law, but not New Zealand law. What you probably meant was that when an application is being examined at IPONZ, where it is not clear whether or not an invention is eligible for patent, the applicant is given the benefit of the doubt. However, when the validity of a patent is contested in a court there is no benefit of a doubt and the case is decided on all of the evidence.



  • Congratulations Doug for a very important article. Both your article and the reply contributions show its certainly a complex but very important subject.
    The most powerful and important bottom line conclusion for me is that it is vital that a “whole of government” approach is taken in contrast to what appears to have happened (and unfortunately too often the case). This is a vital issue for innovation to make a strong impact on economic development, and to do so in a way NZ can obtain comparative advantage to other countries. The current NZ Government appears to strongly espouse that principle.
    Hence it is important that strong involvement on this issue occurs between MED and MSI (Ministry of Science & Innovation) and probably even Tradenz, and the Tertiary Education sector experts in this area – as well as of course, the private sector.
    If I understand correctly, we are discussing draft legislation not law as it is still a Bill. If so there is an opportunity for changes to be made as a result of such Government integration. Is that correct?

  • Doug writes, “I guess that puts me into the pro patents tribe.”

    That was already clear from your use of the words “ambush” to describe submissions to the select committee by people you disagree with.

    “If a patent is bad (for prior art or any other reason) then it cannot be enforced.”

    It can be “enforced” because a patent owner can seek licensing and it’s only a firm with deep pockets who can afford the court case to invalidate the patent. That’s one of the broken aspects of the patent system.

    “What the law actually says it that prior art is only citable from the date it is available in New Zealand. But the day it is available on the Internet it is available in New Zealand – so the new law won’t make much difference.”

    In that case the new law remains broken in general, but particularly with respect to software.

    “when an application is being examined at IPONZ, where it is not clear whether or not an invention is eligible for patent the applicant is given the benefit of the doubt. However, when the validity of a patent is contested in a court there is no benefit of a doubt and the case is decided on all of the evidence.”

    That sounds like bias to me. The system is tilted in favour of granting a private benefit over the public domain, and the costs fall to those not seeking private benefit to invalidate the patent.

  • Godfrey Bridger,

    Thank you for your compliment. You got the most important part of the message that I was trying to convey – that the left hand of government does not know what the right hand is doing!

    And I am not alone in suggesting this. You might be interested in the Scott report that was commissioned by Treasury. The link is:

    Among its recommendations were:

    – Public servants need to adjust their role to becoming participants in the public policy community – not the sole sources or ultimate arbiters of policy
    -Consultation with outsiders should be conducted to add real value to policy development
    – Consultation with other agencies should be early enough for constructive change
    – Advice should be based on evidence, analysis, debate and peer review rather than on consensus among officials required to be consulted under the cabinet manual rules
    – Policy advice should be aligned with broad strategic objectives, particularly when the issues need to be addressed by more than one agency.

    As for the fate of the Patents Bill, it is well past the level of draft legislation. It has been reviewed by a select committee that considered public submissions, amended from when it was first introduced into Parliament – and sent back to parliament with the changes. The next stages are for a second reading debate, a committee of the whole house review (when changes can be made), a third reading and then a signing into law by the governor- general. After that, regulations have to be drafted before the law comes into force.

    So yes – there is still an opportunity to change the Patents Bill. If Mr Joyce is listening.


    “In that case the new law remains broken in general, but particularly with respect to software.”

    Patents are an economic tool intended to encourage investment in innovation through commercialisation of inventions. The theoretical basis for this is discussed in a Treasury paper at the link:

    “Another characteristic often attributed to knowledge is non-excludability. Non-excludability means that once a good has been created, it is impossible to prevent other people from gaining access to it (or more realistically, is extremely costly to do so).”

    ~ Page 10

    “If knowledge is not perfectly excludable, others can benefit from the knowledge other than the creator. The knowledge “spills over” to others – a positive externality. This outcome is good from a social point of view, because the benefit to society as a whole outweighs the loss of potential economic rents the creator could have made from keeping the knowledge to herself (because knowledge is non-rival). However, the creator’s ex post inability to capture enough of those rents will diminish the incentive to invest in developing knowledge in the first place.”

    ~ Page 12

    In other words, the purpose of software related patents is to encourage investment in commercialising software related inventions by delaying others’ free access to those inventions until the investor has made a return on the investment. But patents are not a guarantee that the patent will make a good return. Research in Motion suffered a hiccup when it was found to infringe some patents (owned by a patent troll), but its continuing decline in value was not as a result of that lawsuit – it is because Apple® keeps bringing out iPhones® that the market wants more than Blackberries®.

    As I see it, concerns about the patent system are directed to its popularity among US innovators, particularly when inventions are software related. But to me it is managing the many inter-related patents in one technology area rather than the existence of patents that needs to be addressed. One answer is the formation of patent pools, many of which already exist.

    Your distaste for software related patents is not shared by many in the mobile handset technology market. Last year was a boom one for them:

    The trouble with a blanket ban on patents for computer programs is that it could also ban patents for mechanical devices like car brakes, car suspensions, washing machines and medical devices (like baby incubators) that operate in innovative ways because of the software that controls them. The select committee stated that it did not want to prohibit patents for “imbedded software” but then gave IPONZ the hospital pass of trying to draft guidelines that somehow define a clear line between the computer program for Angry Birds, and that for Fisher & Paykel’s Smart Drive® washing machines.

    Open source software has co-existed with patents for as long as it has been around. There was no evidence of any open source provider ever having been threatened, let alone sued for patent infringement in New Zealand under the existing law (which does allow software related inventions to be patented) – so why make the change?



  • Doug, FYI it’s Jonath_a_n

    I agree that the concerns about software patents are largely driven by what is happening in the US. The US seems a particularly litigious place and it seems to have plenty of IP maximalists who are pushing the system to breaking point, and attempting to export their extreme copyright and patent approaches on NZ via TPP.

    Just because a bunch of money is changing hands in the mobile handset space doesn’t impress me. All I see is an arms race with respect to patents; raising costs for incumbent players and raising barriers to entry for startups. What benefit does it have to mobile phone users?

    There are plenty of cases of open source software providers being sued in the US over patents. Just because it may not have happened here yet isn’t reason to retain software patents. Even if the patent is bogus the defense costs would bankrupt most developers; I know I don’t want that over my head every time I push some code.

  • Jonath_a_n,

    I can agree and sympathise with your wish not to get sued.

    But politicians need to take into consideration the broader interests of society when they make rules. And they need to look at the consequences – intended or unintended – of the laws they pass.

    The intention of the ban on software patents is so that open source software developers won’t get sued for patent infringement. One consequence is that the change is not to be retrospective so that any patents in the system can be enforced for up to 20 years after the change comes into effect.

    What the select committee did not really appreciate was that their decision to ban patents for computer programs had the effect of choosing the open source software as a business model and excluding business models based on patents. Submitters as diverse as Air New Zealand, Airways New Zealand, Auckland Uniservices and Fisher & Paykel were not slow to point this out at the first opportunity:

    Given that we have a patent system in New Zealand – and that after the bill now before parliament becomes law, we will still have a patent system – your concerns (and mine) are what can you do to avoid getting sued?

    I have two suggestions, both of which offer business opportunities to software developers:

    – Develop a searching algorithm (with help from experienced patent searchers) to be able to drill into IPONZ’s database and focus on making comparisons between what an innovator is proposing to do and what is claimed in current New Zealand patents. (Developers of language translation software face similar challenges – and get better at translating by comparing texts done by human translators with those done by computer.)

    – Set up an electronic clearing house whereby willing patent owners and those wishing to use others’ patented technologies can do so with a process little more complicated than registering a domain name.

    Over to you.


  • I agree that politicians should take into consideration the broader interests of society when making rules. That’s why evidence that software patents are beneficial would be interesting to see. Research indicates that software patents are not a driver of innovation [1]

    The intention of banning software patents is not to protect open source developers, and it’s a mistake to think that is the crux of this issue. In NZ, 80% of NZCS members opposed software patents as did many of NZ’s largest indigenous software developers[2]. It’s not an issue of open source vs software patents its a question of those who play the game vs those who don’t, and whether society benefits.

    “What the select committee did not really appreciate was that their decision to ban patents for computer programs had the effect of choosing the open source software as a business model and excluding business models based on patents.”

    This is completely wrong. Speed to market and trade secrets are obvious strategies for software vendors in the absence of patent protection. There is nothing about the absence of a patent that requires a company to choose open source as a model.

    I’m not convinced your suggestion of a searching algorithm for patents is a business opportunity. I doubt it’s technically possible in the first place; I would be impressed by a system that could parse claims from patents and come up with semantic matches to “what an innovator is proposing to do”.

    As a business opportunity it relies on software developers wanting to spend money on protecting themselves from the the threat of patent shakedowns when they shouldn’t have to worry about that in the first place (i.e. treating the symptom not the disease) and secondly, as a developer, what should I be checking for: each line of code, each function, each module, each application? It’s akin to an author needing to check for infringement for each sentence, paragraph, chapter or book before they write.

    A clearing house has some merit, especially with respect to copyright. To some extent a national or international register of works would help identify owners of works and help resolve some issues of orphaned works etc. But it would certainly bring problems of its own.


  • Jonath_a_n,

    First of all, this discussion has turned constructive – good on you.

    Secondly, Pamela Samuelson’s guest blog (your first footnote) outlines the debate nicely. Prof Samuelson’s Berkley Survey has been widely discussed among the patent fraternity and mustered in support of both those for and against software patents.

    The survey indicates that patents are not favoured in general by software startups. But Prof Samuelson then asks:

    “If patents provide only weak incentives for investing in innovation among software startups, why are two-thirds of the VX firms and at least one-quarter of the D&B firms seeking patents?”

    The answer, she speculates, lies in the perception that they are seen as important to potential investors.

    So that leaves open the possibility that if there are no software patents, software developers in New Zealand may find it more difficult to raise funding from potential investors – even if the software developers themselves see no value in them. (I think they used to call that cutting off your nose to spite your face.)

    The only instance that I can recall of a software patent troll in New Zealand was about 15 years ago. A young Canadian issued an ill-advised press release about how he was going to enforce his NZ patent against multiple innovators here. He was a troll that the littlest billy goat gruff could have seen off. His “patent” was only an application. He soon disappeared. (It happened before any online news sites so I can’t provide a link.)

    One of the ironies of the current Patents Bill is that it omits the “unjustified threats” section in the 1953 Act. That section gives anyone who is threatened with a patent infringement suit the right to sue the threatener and recover damages caused by that threat. (If a patent owner barks he better be able to bite.) I was a little surprised that those who were so concerned about the threat of patent trolls did not lobby for the retention of the section that was a direct deterrent.

    As for the searching algorithm, what I had in mind was that the searcher would prepare a draft model claim defining what the innovator was proposing to do – and then the algorithm would compare that draft claim with the claims of current patents. The search would only be as good as the draft claim but Google seems to be pretty good at making these things work. Their patent search is better than that of the USPTO.

    And I am in agreement with you about the US copyright position under the leaked TPP papers. Last September a paper I wrote was published in the NZ Intellectual Property Journal suggesting that copyright law ought to be rethought from the perspective of the user, rather than being rejigged to protect existing business models. It is only available to paid subscribers of LexisNexis online, but the citation for the printed version is:

    “What is Happening has Already Happened: Re-examining Copyright from a User Perspective”, NZ Intellectual Property Journal, Vol 6, Part 5, pp. 797 – 802.

    In the paper I floated the idea of a digital copyright clearance facility in New Zealand, picking up from the recommendation in the UK Hargreaves Report – for which there is a link:


  • Wow, I’m surprised it took me so long to find this discussion.

    Doug, we’ve discussed this in other contexts before. I’m part of the so-called “script-kiddie” brigade so thoughtfully defined by Falafulu Fisi (who is, no doubt, an astute and very fine looking man).

    The key things you, as a (retired) legal professional, need to understand are the following:
    1. there will never be a fair software patents regime. The incentives involved ensure that. The only way a patent agency (IPONZ in NZ), could provide a reasonably fair asssessment of software patent applications would be if they were able to draft a nontrivial segment of existing professional software developers into vetting applications for obviousness and prior art. As it is, they don’t even bother, granting any software patent application unless someone specifically challenges it (which, of course, seldom happens, as few people see any point in reading software patent applications for money, much less out of interest) and as a result, the quality of software patents (in NZ and overseas) is abysmal across the board.
    2. the risk to software developers from software patents is NOT, as you seem to suggest, the threat of losing a patent infringement suit and having to pay damages. It’s the fact that the simple act of being accused of infringement is a massive liability. Even if the patent is found to be invalid. In the US, it reportedly costs about $3million to *mount a defense against a patent infringement suit*. 99.99% of NZ companies don’t have that sort of money lying around. The simple *threat* of a patent infringement suit is enough to keep developers out of entire areas of software development. The cost of defending or invalidating a patent is so biased in favour (in terms of the cost and time required) of the aggressor, and would put most software companies out of business. The current patent legislation in NZ effectively provides a loaded gun to any software patent holder. All it takes is for someone to pull the trigger – as has been done many times over in the US. The software developers of NZ are smart enough to proactively disarm the weapon before some idiot gets their hands on it.
    3. software patents do not inspire software developers. If, as you suggest, they are required by venture capitalists, I suggest that, in a country where there are no software patents, VCs will simply have to change their criteria for investment.

    Doug, as I see it, you’re probably good at your job, but let’s not forget that your role, as an IP lawyer, is to protect your client’s interests, and I don’t believe protecting the interests of your client’s industry overall is part of your brief. Your role is to assist your client to navigate the complex territory of IP law, which is a construct of government legislation and legal precedent. Ultimately, if possible, you help your customer “game” the legal system to maximise their benefit (which might well come at the expense of others). The more you can gain for your client, the more you gain personally. It is in your interest to ensure that there are winners and losers.

    We in the software industry, however (be we open source focused or not) would like a level playing field in which one player with dubious software patents cannot run roughshod over entire market segments and create unacceptable liabilities for all who develop software.

    I encourage you to embrace the idea that NZ is leading a global transition away from overbearing “IP”. I encourage you to help your colleagues (I know a couple of them personally) work out how to make money by helping software developers negotiate a patent-free marketplace. Also, I encourage you to prepare for an influx of clever software patent-refugees (and their skills and resources) from other parts of the world who have not yet come to their senses. We’ve already had enquires from abroad (US and Canada) even before the Patents Bill is formally enacted.

  • Another point that occurs to me, having to do with the economics of software development: software development, by and large, is *not* a capital intensive process. The fact that open source software exists (and is thriving in hundreds of thousands of projects, and drives the Internet) should be more than ample evidence of that fact. Software development is governed by the economics of abundance more than those of scarcity, and as such breaks most historical economic models (like those employed by most “traditional” software development firms, e.g. that miniscule set, primarily corporate-based, who try to patent their software, as well as by those who want to invest in software firms).

    The emerging open source development model, which is now pervasive (i.e. the vast majority of software you use on the web is, or is entirely built on/with open source software, e.g. Google, Yahoo!, Facebook, etc.) is completely governed by the economics of abundance. The Internet is, in essence, a global data replication machine.

    Those companies who continue to trade software on the basis of scarcity are approaching the end of their run. Their model succeeded in the window of time where the world was trying to get its collective head around software as a concept, as the Internet was forming. Those adhering to that model have resorted to developing increasingly tenuous (and futile) “technological protection mechanisms” (TPMs) to simulate “scarcity-type behaviour” with inherently (trivially) replicable software. They continue to want to benefit from the economics of scarcity, and they are using their massive residual wealth to influence governments (witness the US’ IP chapter in the TPPA) to support their efforts.

    As anyone in the world can see, the scarcity and abundance tribes are now at war, and – while the Internet exists – a victory of abundance is inevitable. The scarcity camp is becoming increasingly marginalised by the mass of humanity, and as more people become acquainted with the Internet, the tipping point will be reached (if it hasn’t been already) and the history books will marvel at the naivete of the “scarcity mongers”.

    Software patents are a holdover from the scarcity era. Until legislators (and (ex) IP Lawyers) accept that software patents do not do what patents in general were intended to do – encourage innovation for the greater good – then we cannot have a sensible conversation about the brave new world of digital abundance we’ve already entered, like it or not. Some of us, however, are quite comfortable with that new world, and would rather trust in the opportunities that it presents than persist in trying to deny its existence.

  • Dave

    Thank you for joining the debate.

    I know that patent attorneys/lawyers get a bad rap, and the most “egregious” (a favourite expression of American lawyers) cases get the widest press. But it is worth bearing in mind that for every lawyer acting for the windscreen there is another one acting for the bug. I am no longer in the business of acting for either. But I am trying to promote the future prosperity of New Zealand through innovation – for the sake of my future grandchildren as well as my super!

    Just as an evolutionist is never going to displace the mindset of someone who believes in the biblical story of creation – an ex-patent attorney is never going to displace the belief of an open source software developer that patents are a curse. (And for the software development business you may be right – it is your call.) But I hope we can agree to play the ball and not the man.

    I agree that software patenting has gotten out of hand in the US. But that is just a microcosm of how the capitalist system has evolved in the US. (The Tea party movement is another.) And with the Darwinian nature of the US economy, the entities that adapt survive – those that don’t adapt file for bankruptcy and come back to fight another day. The adaptations (I have mentioned in an earlier comment) to patent thickets include the Article One bounty hunters and patent pools.

    The New Zealand Patent Office issues 4,000 to 5,000 patents per year. The US office issues about the same number every Tuesday. So the potential threat of a patent troll in New Zealand is much more limited based on those numbers alone. I have trouble believing there is much potential for maintaining a viable patent trolling business model in New Zealand. Patent trolls have to pay their bills too.

    (I reckon Wellington based software developers ought to be a lot more concerned about the earthquake resistance of their premises – Canterbury ones already are.)

    The debate isn’t just about software developers. And the availability of software patents does not mean that they are compulsory. If anyone makes a judgement not to use patents because they do not see any value in them they are not obliged to.

    I have two concerns about the consequences of a ban on patents for computer software:

    – That it will mean that inventions for software driven technologies (e.g. just about everything to do with the operation of a car these days) will either be harder or not possible to patent, and

    – That the select committee had not the slightest idea of how you distinguish between software per se and a software implemented invention.

    I deliberately used the word “ambush” in my post because the select committee seemed to focus on what was in their face during the hearings – the power relationship between patent trolls and open source software developers – and either were not aware of or ignored the power relationship between innovators with software related patents and their infringers – and the need to weigh up the two power relationships. Suppose the committee had been told that the ban could mean that a Chinese manufacturer could produce and sell into New Zealand a Smart Drive power unit copied from Fisher & Paykel in competition with the original?

    And in my submission to MED on the software ban examination guidelines (the link is above) I have reviewed how the European Patent Office and the UK office have given significantly different interpretations to the meaning of the ban on “computer programs per se” even though they are applying exactly the same 1977 law. The English appeal courts have attempted to reconcile those views – and each time the UKIPO have had to revise their guidelines. The select committee has, by its action, invited patent attorneys and IPONZ examiners to define the boundary. Patent attorneys will do their best for their clients. Examiners will struggle with very uncertain guidelines. And sometime, after years of uncertainty, the courts will try to draw a line. Uncertainty is of no assistance whatsoever to innovation – but that is the legacy of the ban.

    AND NOW FOR SOMETHING COMPLETELY DIFFERENT. (With acknowledgement to Monty Python.)

    Where we can agree, I think, is that copyright law should be subject to a reality check – and that check should be focused on the expectations of the users. About 20 years ago I gave a blue skies talk to librarians about the absurdity of having a photocopier in a library, which – duh – was full of books – and then asking the user to consider the section of the Copyright Act that spells out how a judge determines how much free copying is allowed. I pointed out that all the books in the Wellington City library were bar coded. Why not install a reader on the photocopier and program the computer to credit a percentage of the fee that the user paid to the account of a copyright collection agency for distribution to the author. My local supermarket uses bar coding in much the same way to make sure there is another box of Weetbix waiting for me next time I am shopping.

    Applying the same approach to the Skynet law in New Zealand, if the rights holder has enough information about who is illegally file sharing so that the ISP can give three notices to the file sharer, why not just send the ISP a bill for a reasonable copying charge – probably a few cents. If teenage daughter has been sharing $150 worth of Justin Beiber tracks in a month, dad or mum would be liable and teenage daughter could be grounded from the Internet until she had paid it back. Where regulation would come in would be in the level of charge – just like phone charges are regulated.

    While there are a few anarchists out there who will go to any length to avoid paying anything for downloading content, most users are just looking for the best deal that they see as fair. One of the ironies of the Megaupload business model is that file sharers were paying a subscription fee to be able to illegally (?) download. The extravagance of Kim Dotcom’s lifestyle is testimony to the conclusion that his subscribers found his deals to work for them.

    And don’t get me started on TPMs!

    The something completely different ideas are developed in my essay in the NZ Intellectual Property Journal in September 2011, also mentioned above.


  • Dave Lane said…
    Google, Yahoo!, Facebook

    Google (and Yahoo) do original R&D and they do (most of the time) publish their findings in various journals. Facebook doesn’t do R&D at all nor publish anything. What they build is business as usual as I have mentioned in my previous posts. There is no innovation at all in what Facebook is doing. It doesn’t mean that Google & Yahoo (including other R&D based software companies) use some open source projects then the value of their (original) R&D is worthless not protecting via patent. Your argument is very weak here.

    Can you tell me, what software innovation Facebook has done? I’ll also ask you to tell me a software company in NZ that innovates? Name one? If you find one, then describe their so called innovation? Stop misusing the word innovation for something that is not really not innovation.

    PS : I know a few local software companies that have funded researchers at University to do original R&D on their behalf. Funny enough, those companies have co-patented the technology with Uni-services (commercial arm of University of Auckland). These are the type of knowledge that you don’t find in any open source projects out there, otherwise, those local companies won’t fund University researchers to do R&D on their behalf.

  • I’m can’t remember of where exactly I read it (perhaps it was on Labour’s RedAlert blog), but I think it was Don Christie’s company Catalyst IT that was threatened by the patent holder of an electronic voting machine (or software), because his company was going to (or already) develop(ed) a system of the same nature to be initially used in our local election (and then perhaps sell them overseas at a later stage) . They moaned about this in our news-media (and also to misguided politicians who think that software shouldn’t be patent), because they said, it stifled innovation.

    I completely agreed with Don then (and his opensource movement on that), but for different reasons.

    First, there was no invention in something like a electronic/software voting system. The idea falls in the category of pub invention, which is really not invention at all and it should not have been protected via patent in the first place.

    Second, the idea that innovation is stifled because Don and his company couldn’t developed a system based on a similar idea (which is already protected by patent) is absurd. Can anyone tell me here if developing an electronic/software system for election can be regarded as innovation? Even if Don’s company was granted permission by the patent holder (perhaps via licensing agreement) to develop such a system, the final product is not in anyway be called innovation at all. This is the type of software that the open source movement thinks that it is real innovation. This is somehow equivalent to real innovation by companies who funded University researchers to do R&D on their behalf which may lead to inventions that can be patented.

  • Falafulu,

    I’m no expert on Facebook and their innovation, but I happen to know they’ve given quite a few “innovations” back to the open source community. One of the more widely known ones is HipHop, their just-in-time compiler for the open source PHP language and script interpreter, which turns it into high performance C++ code. The performance gains are substantial… I can’t say if that’s innovative or not, don’t know enough about it, but it’s certainly useful. And I’ve no doubt whatsoever that the USPTO would happily grant Facebook a patent if they stumped up with the application fee.

    I’m not sure why you seem so prickly about the word “innovation” – there is no real metric for innovation in software, and certainly none is used by IPONZ (nor with the USPTO) to establish the inventiveness of any software patents filed. Patents are granted for software by default – they are only ever scrutinised if someone explicitly contest them (which costs money and a LOT of time, neither of which most software developers can spare).

    As you say, most software that is patented is not actually worthy of a patent… there are *rare* case where I believe software is truly inventive, but sadly, telling the difference is WAAAY beyond what IPONZ (or any other patent assessor) will ever be able to do with any reliability. Ultimately, regardless of the legitimacy of any given software patent, every software patent granted is a liability for all software developers whose software could at some future time be deemed, by the patent holder, as worthy of suing for infringement. Regardless of who wins the case (if it ever goes to trial – it seldom does in the US, because the deck is so stacked against the accused – they normally just pay up the extortion money, or fold up.), it’s an impediment to progress because even defending against a spurious, baseless patent infringement lawsuit takes time and money, and, as I said before, few software developers can spare either/both.

  • Doug,

    “The debate isn’t just about software developers. And the availability of software patents does not mean that they are compulsory. If anyone makes a judgement not to use patents because they do not see any value in them they are not obliged to.”

    I’m afraid that’s a ridiculous statement. I cannot believe that you and other IP lawyers (like your former colleague Matt Adams and even the delightful Mr Waldo Kupiers of the Microsoft Corporation, I believe) would ever say something like that seriously. You imply that the software of patent holders somehow occupies a different dimenision than software of non-patent holders, and yet, in the US, non patent holders (those who have “opted out” of the patent system) are being sued into submission or oblivion in the US right now. In NZ, there may well be existing cases we’ll never know about because they settled quietly. If I’m not mistaken, an NDA forcing the accused to keep mum regarding the terms of settlement (and even the fact that there *was* a settlement) is the norm, not the exception.

    Software patents are not a choice for those being accused of software patent infringement. They can be accused despite opting out of the system all together, simply by developing and marketing software. To suggest that there’s an “opt out” option for software developers is simply disingenuous and, frankly, insulting.

  • Doug,

    You also talk about the ambiguity surrounding the definition of software (actually “computer program” strictly speaking) creating an unacceptable ambiguity for IPONZ… as if their job didn’t have any ambiguities already. Surely, with a concentration of resources, and review by a board of practicing, credible software developers, I would’ve hoped they could cobble together a pretty serviceable definition.

    I note that this would not be the first ambiguity to rear its ugly head in law… consider heady concepts like “obviousness”, “innovative step”, and “prior art” with which applicants, their lawyers, and assessors already have to grapple… surely those will have to be made far less ambiguous before they can be included in patent legislation, no? Come on, what a ridiculous argument.

    Doug, what I’d love to know is this: given the sparseness of software patents in NZ (with the vast majority being granted to overseas own multinationals – 90% perhaps?) what harm will it do NZ to exlude software? Who knows. What good could it do? Time will tell. To my mind, it’s a worthwhile experiment, because we know it’s royally screwed up America’s software industry, to the point where US companies are looking to up stakes and move to other countries, like NZ, who still have a hope of avoiding the trainwreck that is US Intellectual Monopoly law and practice.

  • Don,

    By seeking to discredit my views by lumping me in with Matt and Waldo you have crossed the line between playing the man and playing the ball – something I said I hoped we could agree not to do.

    I conceded I was not going to change your mind – maybe you might now concede that you are not going to change mine.

    For both of these reasons I think we should agree that correspondence on this matter is now closed.



  • I assume you meant Dave not Don, Doug.

    Apologies for drawing unflattering parallels – it wasn’t my intention for that to be an insult, merely an illustration of a common gambit among those addressing this issue from an IP lawyer perspective. I’d still be quite grateful for an explanation from your perspective of how “opt in” and “opt out” works with software patents within a given legal jurisdiction (e.g. NZ or the EU or the US).


  • Dave,

    Apology accepted.

    The debate on the merits was getting repetitive, but I shall try to address your question about “opting in” and “opting out”. I use the expression “address” because I don’t think anyone can really answer it.

    I have not considered the issue as an opt in – opt out one before. I hope I understand where you are coming from. What I interpret the question to be is how do you distinguish between a computer program in isolation – and a software implemented invention?

    The starting point is that what constitutes patent eligible subject matter is defined in abstract terms – and to complicate matters further, the routes taken by the courts in each country or (in the case of the EU) bundle of countries to apply the abstract definition to a particular patent application is different. That may help explain why in New Zealand the Amazon 1-click invention was found to be patent eligible on the first go:

    while the Canadian application for the same invention was twice rejected by the Canadian IP Office and twice the federal court ordered the office to have another look. After the second time the Canadian office did allow the application to advance to patent:

    So you can see why patent attorneys risk trying the patience of their clients by prefacing their advice with the two most dreaded words in their vocabulary – “It depends”!

    The abstract definition in New Zealand is “manner of new manufacture”. And the volume of cases attempting to apply that definition to particular inventions is large – and, much like quotations from the bible, one can usually be found in support of or against the eligibility of any given invention. There are not many court cases in New Zealand on the issue so we tend to look to pre 1977 English cases (1977 was when the UK law was changed to conform to European law) and more recently Australian cases – both based on the manner of manufacture definition.

    A good summary of the latest Australian decisions is found in Patentology:

    Mark Summerfield has identified the question, which I think your “opt in – opt out” framework is to asking:

    “If a patent application discloses a method or process which, in itself, falls outside the scope of patent-eligible subject matter, can it be rendered patentable by virtue of machine-implementation, i.e. in the form of a programmed computer?”

    And his conclusion – that the question itself is problematic – illustrates why I said I could only address your question – not answer it.

    I can’t add much to what Mark has said about the US and Australian positions.

    The position in Europe is a bit different, but the uncertain outcomes very similar. Under the governing law “invention” is not defined. Instead the law starts with the principle that inventions in all fields of technology are patentable – with a list of exceptions. One of those is a computer program per se. The dividing line (defined in the European patent office) between what is excluded and what is not is determined by whether or not the software makes a “technical contribution”. (That makes some sense – software that does not make a technical contribution is not within a “field of technology”.)

    The UKIPO has taken a more restrictive view of how the European law ought to be interpreted. It has revised its practice notices on three occasions after English court decisions have overturned refusals by the office:

    So I am afraid that the candid answer to the opt in – opt out question is – it depends.

    And if you think that this situation needs a reality check, you are not alone. At a recent conference Randal Rader, the chief judge of the US federal court that decides all patent case appeals, had a moan about the outcome of some US Supreme Court decisions:

    “Rader expressed his frustration with the fact that there are no bright line rules, which make it impossible for counsel to advise clients, such as a CEO who needs to make a decision tomorrow. Rader, acting as if he were the lawyer giving the advice, said: “I can get you an answer in about 5 years,” referring to the lengthy process of litigating and obtaining an answer to a fresh legal question. Rader, switching to CEO role, said: “well, I have to make a decision tomorrow.” Rader explained that this is the world he lives in, the obvious implication being that the Supreme Court does not live in or understand the real world as it pertains to the business of innovation and the monetization of intellectual property.”

    (A “bright line rule” is something like a law that defines specific blood alcohol limits – as opposed to a law that says it is an offence to be drunk in control of a vehicle.)

    The link to the judge’s out of school remarks is



  • Hmm – thanks very much for your comprehensive response, Doug. Sadly I do think we’re experiencing a bit of a misunderstanding there… My “opt-in/out” point is related to my post above where I quoted this statement in one of your previous posts:

    “If anyone makes a judgement not to use patents because they do not see any value in them they are not obliged to.”

    What I was incredulous about is that “opting out” of “using patents” is anything other than a head in the sand defense. What I’m saying there is that, should I choose to “opt out” of patenting my clever software creation because I see no point in doing so, in the NZ system, I am still vulnerable to patent infringement lawsuits. I cannot really opt out – I can only choose not to initiate the patent game, but I can nonetheless be victimised by someone else deeming my software to be infringing on their patents.

    They might receive a patent for an innovation which is preceded by my innovation, or other independent prior art… or their patent might be granted for something which is considered a trivial or obvious “innovation” to a skilled software developer. Even so, the onus is on me to prove in a court of law, with all of the expense and lost time that entails, that I have not infringed on that patent, or that that patent should not ever have been granted in the first place.

    In the meantime, through no fault of my own, my business fails and/or I run out of money. It is due to exactly this sort of trail of events that most (99%) of US-based software patent lawsuits are settled out of court, with the accused paying the accusor an undisclosed sum, with that secrecy almost always protected by an NDA (presumably agreed to by the accused in return for a generous reduction in the extortion). This scenario plays out regularly – *even though most of the software patents would be found invalid in a court of law*. The onus on the accused is *so* onerous, and the risk of losing (due to, for example, the dubious judgement of an illiterate jury in East Texas) so costly, that most companies either fold immediately and pay the accusor, or they fold because they can’t afford to pay.

    Example: Microsoft currently makes many times more revenue from Android phone sales (in which Microsoft has had absolutely no part whatsoever – the Android system was built by a company now owned by Google, and is buit on open source Linux) than it does with its own flagship Windows Phone 7 mobile operating system, which has otherwise failed in the marketplace. They have sued the handset makers for dubious patents (which are almost certainly invalid due to prior art or obviousness), having cleverly found the “sweet spot” for “licensing payments” which compell the Android phone handset manufacturers to pay the royalty “tax” than risk the cost and time required to fight the accusation in court.

    This approach has been adopted by industry heavyweights like Oracle, Apple and Microsoft to hobble competition and has led to a software patents arms race in the US, EU and elsewhere. Similarly, non-practicing entities (NPEs) like Intellectual Ventures and Lodsys use their purchased patent portfolios to extort money from innovative software firms as their sole source of revenue.

    The emerging realisation of NZ-based software developers (by no means limited to open source developers) that we had a similarly massive liability here in NZ to what was happening at that time (and continues to happen) in the US, with a real threat from demonstrable aggressors like Microsoft, who have applied for very broad, low quality software patents in the NZ jurisdiction (which were rejected in other jurisdictions), is what caused us to take up the cause to remove that threat with the Select Committee. The only way to mitigate the real risks inherent in software patents in the NZ jurisdiction is to… stop them from being granted to anyone.

    For anyone who’s managed to get this far reading this, well done. For your trouble, if you’d like to learn more about the despicable behaviour of NPEs and corporations like Microsoft and Apple among others, have a listen to this excellent podcast about “patent trolls”:



    P.S. I should mention that I was honoured, never offended, to be mistaken for Don (Christie) :)

  • Dave,

    Oooh – so that’s what you meant.

    You are quite right that you cannot opt out of being sued – just like you cannot opt out of being bullied by the school yard bully. Because the excesses you describe (particularly of Patent Trolls) amount to bullying.

    But just as having a big brother on the other side of the school yard to call over when a bully threatens, or going to your teacher or principle for help, there are ways to respond to a patent bully. One of them is to do a deal with Apple. You give them the rights to your app, which they put in their apps store – and they act as the biggest billy goat gruff and drive the trolls away.

    If you enter the American market patent trolls are a part of the jungle. And it may be that settling a bullying claim is the most cost effective way of dealing with it. But it seems to me that in the cooperative culture of the open source “community” it would make business sense to start a common patent defence pool of funds and resources. And by banding together there is a pretty good chance the community could crowd source relevant prior art to invalidate many patents that are being asserted. Once there is community recognition that individuals are being systematically bullied and the community decides to do something about it – there are lots of strategies available.

    The alter ego to intellectual property law is competition law. And someone who tries to extract royalties for an invalid patent or one that is not infringed can be in breach of competition law rules and liable both for civil damages and criminal penalties. And if it thinks the breach is sufficiently serious, the Commerce Commission can take a prosecution – sort of like the principal stepping in when a bully goes over the line.

    One curious thing about the Patents Bill is that it does not continue with the section that creates the civil offence of making an unjustified threat. Section 74 of the 1953 Act is a “bright line” test that said anyone who threatens a patent suit when they do not have the patent right to do so could be liable for damages caused to the threatened person. If a patent troll did try to extract royalties in New Zealand a “threats” action would be the first response – and the government is intending to take it away.

    The best way to opt out of being sued is to make sure that any new product or program you launch does not infringe any current patents. Although you probably have an aversion to doing so, patent attorneys are best equipped to advise on whether what you propose is or is not an infringement, and patent attorneys have a lot of practice at doing searches. But the skill sets of software developers should assist in them in becoming competent online searchers. One practical thing to do is keep a record of when you first released each new program – because any patent lodged after that date covering it would be invalid.

    (I should protect my backside at this point and say that nothing I say here is to be taken as legal advice and is intended only as general information.)

    I listened to the radio program a few months ago. It was a good story – but it lacked balance. It needed a neutral patent attorney to explain a few things:

    – American lawyers often act on a contingency fee – if they win they get paid a big slice of damages – if they lose they get nothing and are out of pocket for their expenses. So they do everything they can to win. And one strategy is to “forum shop”. Courts in some districts in some states produce more decisions in favour of patent owners. The east district of Texas is one of those. In order to be able to file the case in that court you need to have an address in the district, hence the floor of empty offices.
    – The “expert” they found with a search program that supposedly identified 5,000+ patents for the same product did not have a filter on it that allowed it to distinguish between the claims of each of those patents. The US Patent Office occasionally gets it wrong and issues 2 patents whose claims overlap. But they don’t get it wrong 5,000 times over.
    – And the district where i4i successfully sued Microsoft for patent infringement and was awarded $290 million was the east district of Texas:

    To get back to your question I expect you don’t really want to know how to opt in – but if you did, I suggest you contact a practicing patent attorney.



  • Thanks, Doug, I think we’re on the same track now. Regarding an Open Source patent pool to provide a collective defense, it already exists.
    I just happen to think it’s a shame that we need to expend resources on this…

    Regarding engaging an IP Lawyer to vet our code for patent infringement: given that a reasonably sophisticated software application might incorporate tens of thousands of concepts, any one of which might’ve been granted a (or two) ill-advised patent(s) by IPONZ or USPTO or whoever, means that we’d have to spend more time vetting software for patent infringement than… writing it. Or we’d have to spend more on IP lawyers than we do on developers. Either way, it’s a stupid waste (forgive me if that sounds harsh on IP lawyers – I’m trying to make their job easier :)) and, particularly given the miniscule capital involved in most software companies (never mind the open source developers still at polytech or varsity or still in high school), it’s unrealistic.

    Ultimately, I know (as both a sometimes author and a graduate mechanical engineer) that writing software is more akin writing a book than it is to inventing a new physical device. And we can’t patent plot lines or metaphors or other software analogues if they appear in a book… As it is, we already have Copyright in any case.

    I think we’ve hashed this out now, and I feel we’ve reached some reasonable conclusions. Where we differ, I think, is what amounts to a “reasonable” burden of vigilance and/or cost to impose on software developers to mitigate their risk. I think the threshold should be much much lower, it would appear, than you do. I also have far less faith than you do, I believe, that IPONZ (or any other patent assessing entity) can ever do anything other than award plenty of daft software patents.

  • Interestingly, these popped up this morning:

    From the latter article:
    ‘”Microsoft’s goal is to raise the total cost of ownership of competitive products by forcing companies into signing Microsoft patent cross-licenses so their competitor products are uneconomic compared to Microsoft’s products.” Indeed you can argue that Microsoft may be the world’s most profitable Android company thanks to its patents agreements.

    The problem has been that “few, if any companies, actually looked at the patents that Microsoft has asserted against them.” For example, in the Motorola case, “Microsoft’s patents have been found wanting.”

    Bergelt noted though that the real issue isn’t about quality of patents; it’s that Microsoft has “perverted the patent system.” Large companies like Microsoft wield patents to stifle competition. The OIN is designed to encourage co-operation, fair competition, and defend companies willing to stand up to Microsoft and other patent bullies, like Apple, in today’s non-stop patent wars.’

  • Dave,

    A good place to adjourn the debate.

    But would like to add that I share your view that patent offices do have a capacity to issue daft patents:

    That patent for a stick (nothing to do with the blog of the same name) was recalled and revoked after it came to light. I think that those who favour patents should be just as diligent as those who don’t in criticising junk patents.



  • In France and Europe the general public are protesting against ACTA and its secret negotiations and reduction of civil liberties . In New Zealand the general public doesn’t know, the media is owned out of touch.

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