New Zealand: The computer programs affair

The Government has tied itself in knots trying to ban computer programs from the patent regime.  It has now sought help from the Intellectual Property Office – but they are struggling to untangle the mess.  We think it is time to cut the line and start again. 

This Brief Counsel explains how the problem arose and reviews the remedial efforts to date.  We propose our own solution. 

Computer programs and patent reform: unlikely opponents?

The Patents Act 1953 is way out of date.  The Ministry of Economic Development (MED) and the intellectual property (IP) community started talking about reform options in the 1980s.  That discussion culminated in the Patents Bill 2008, drafted to refresh New Zealand patent law and to bring it into line with our key trading partners. 

The Bill was mainstream in international terms until the Commerce Select Committee (the Committee) inserted clause 15(3A), which says that "a computer program is not a patentable invention".  The exclusion was the product of intense and successful lobbying by members of the "free and open source" software movement.  Free software proponents reckon that software should be free and, as a result, they generally oppose intellectual property rights.1   They say that IP rights lock away creativity and technology behind pay-walls which smother innovation.

Most authors, inventors and entrepreneurs take the opposite view.  They observe that IP rights like patents incentivise individuals and firms to invest in research and development (R&D) in the hope that the gamble bears fruit down the track.  Patents – which protect inventions and new ideas – have been front and centre in this incentive scheme since the 17th century.  Patents have driven the type of dynamic innovation which, for the last 400 years, has progressively made life easier, longer and more fun. 

The Commerce Select Committee tries a third way...

In its April 2010 report to Parliament on the Patents Bill, the Commerce Select Committee acknowledged that the free software movement had convinced it that computer programs should be excluded from patentability.2  The Committee said that "software patents can stifle innovation and competition, and can be granted for trivial or existing techniques".  The Committee provided no analysis or data to support that proposition.

The Committee did, however, get the wobbles when faced with the reality that computer programs play an integral role in an exponentially massive number of inventions.  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.  And even the Commerce Select Committee recognised that.  To meet the difficulty, the Committee asked the Intellectual Property Office (IPONZ) to draft "guidelines" to ensure that inventions containing "embedded software" continue to be patentable, subject of course to meeting general criteria for patentability.

That was a devilishly hard mandate.  For a start: 

  • IPONZ guidelines have no legal standing
  • there is no such thing as "embedded software" in patent law, and 
  • this is completely uncharted territory – no jurisdiction in the world has an outright ban on patenting computer programs like the one in clause 15(3A). 

How then do you take an apparently outright ban like the one proposed in clause 15(3A) of the Patents Bill and turn it into something which is not an outright ban?  It's tricky.  IPONZ's draft guidelines on the patentability of computer-implemented inventions reflect the difficulty of the job.  IPONZ is currently taking soundings on its draft document which reads like a discussion paper on some of the issues rather than a practice note injecting clarity and certainty into a thorny area of law.  

Ending the affair

We need to end the computer programs affair. 

If New Zealand enacted an outright ban on computer – implemented inventions we would be breaking international law.  Let us explain.  In 1994 New Zealand signed the Agreement on Trade Related Aspects of Intellectual Property (TRIPs).  TRIPs was a foundation agreement for the Uruguay Round which established the World Trade Organisation (WTO).  New Zealand has secured deep and enduring trade benefits from its WTO membership. 

TRIPs establishes mandatory minimum obligations of international IP protection.  Article 27(1) of TRIPs says that WTO members must make patents available for inventions "without discrimination as to... the field of technology...".  The proposed computer programs exclusion discriminates against computer technology and would therefore expose our country to litigation before a WTO Panel, which can authorise complaining countries to suspend WTO concessions or other obligations to New Zealand (such as favourable tariffs on our exports). 

The Commerce Select Committee's proposed expulsion of computer programs from the New Zealand patent system is a dilemma for inventors and a difficulty for the country.  There are only two ways to fix the problem: 

  • remove clause 15(3A) from the Patents Bill and keep the law as it is in keeping with the position in Australia and the United States, or
  • ensure that the Patents Bill and any IPONZ guidelines on the patentability of computer programs confirm that New Zealand law on the topic is intended to match and will follow the tolerably clear European position.  That position sets certain restrictions on the patentability of software as such, as opposed to banning the technical contributions which software can make to computers and computer output.3  

We see no workable "third way". 

Patents and productivity:  a New Zealand story

By way of conclusion, it is worth recording how and where IP fits into New Zealand's overall well-being.  In recent years our country has suffered a sustained and alarming decline in Multi-Factor Productivity (MFP).  MFP measures the contribution to economic growth made by factors like technology and organisational innovation. 

The WTO believes New Zealand's fall in MFP is, in part, a function of low levels of R&D.4   

While patent law is not a panacea for productivity decline, dynamic intellectual property law discourages free-riding off inventiveness and encourages investment in R&D and discovery.  Over time, we can expect well written patent law to lift productivity and enhance New Zealand's prosperity and competitive advantage as a trading nation.  As Nobel Prize winner, Paul Krugman, put it: "productivity isn't everything, but in the long run it is almost everything".

For further information, please contact the lawyers featured.


1. See, for example,

2. Patents Bill 2008 235-2 (select committee report) at 5.

3. The European position is set out in Symbian v Comptroller General of Patents [2009] RPC 1 (UKCA) and decision G3/08 of the Enlarged Board of Appeal of the European Patent Office.  The position is amplified in a recent line of British High Court authority running through Autonomy Corporation Ltd's Patent Application [2008] RPC 16, AT&T Knowledge Ventures [2009] FSR 19, Cranway v Playtech [2010] FSR 3 and Gemstar TV v Virgin Media [2010] RPC 10.  Strangely, none of these cases are discussed or cited in the draft IPONZ Guidelines.

4. World Trade Organization Secretariat, Trade Policy Review: New Zealand, WT/TPR216, 6 May 2009.  See too, OECD, Compendium of Productivity Indicators 2008, OECD, Paris, 2008 at p 11.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

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