United States: Status Update on the European Union Software Patent Directive Activity(1)

Originally published on 5 December, 2001

As of this writing, it is still uncertain when the European Union, DG Internal Market may construct and publish a draft of the planned EU Software Patent Directive, and when such a Directive is likely to be considered by the Commissioners.

On 19 October 2000, the European Commission, DG Internal Market, launched a consultation on the subject, "The Patentability of computer-implemented inventions". The aim of the consultation was to seek the views of interested parties, the public at large and Member States in order to help the European Commission formulate a policy that strikes the right balance between promoting innovation through the possibility of obtaining patents for computer implemented inventions and ensuring adequate competition in the market place. DG Internal Market produced and made available on its web site, the consultation paper that invited comments by 15 December 2000 on the preferred scope and economic impact of harmonisation in the area of computer implemented inventions. The paper contained a number of proposed "Key Elements" for a harmonised approach to the patentability of computer-implemented inventions in the European Community. A total of 1447 responses were received, amounting to around 2500 pages of text. To digest this plethora of responses, DG Internal Market hired an outside consulting firm to review and summarize the contents of the responses. The consultants report is now available on the DG Internal Market web site. This status update presents a few key points from the consultants executive summary of the report. Interested parties are encouraged to read the entire report.

The efforts of the European Union (EU) over the past few years has been to try to deal with the globalization of markets and the rapid advances in technology in the Internet and Computer software related industries.

"With the advent of the Community trademark and design statutes, the absence of a single title under patent law valid for the whole of the European Community is one of the final remaining major challenges for the establishment of a truly single market in the field of intellectual property."

Just as there is a need for uniformity and efficiency in the processing and litigation of a European patent in the various countries of the European Union, there is a similar need for harmonization of patent procedures specifically related to software and "software-implemented inventions." That is, because the European Patent system only provides a system for the examination and grant of patents, but leaves the administration of post-grant proceedings, including proceedings relating to the validity of patents, to the national laws of the contracting states, these software-related patents, once granted, have to be interpreted and defended in the national courts. Consequently, there exists the possibility that differences may arise between European countries as regards the validity of patents granted by the EPO, even to the extent that the same invention may be held to be protectable by a valid patent in some countries and not in others . Another example of the divergences which have arisen in practice concerns the allowable form of claims. Conditions for patentability among the contracting parties of the EPC are therefore effectively not totally uniform.

"All Member States of the European Community being contracting parties to the EPC, this variation in the legal position therefore has direct negative effects on the proper functioning of the internal market of the European Community, which is a classic justification for intervention at the Community level."

The Green Paper on Innovation, adopted by the EC in December 1995 and the Green Paper on Patents adopted by the EC in 1997 indicated a need to clarify the law on software patents in Europe, in order to remove the legal uncertainty on software patents caused by Article 52 (2) and (3) of the European Patent Commission (EPC). Following a consultation centered on the Commission’s 1997 Green Paper on patent matters , the patentability of computer programs was one of the priority issues identified in early 1999 on which the European Commission should rapidly take action . It was envisaged that a Directive harmonising Member States’ law on the issue would remove the ambiguity and lack of legal certainty surrounding the issue. Furthermore, it was suggested that "computer programs" should be deleted from the list of non-patentable items in Article 52 of the European Patent Convention.

During 1999, public debate on the issue intensified. Some sections of European industry repeatedly asked for swift action to remove the current ambiguity and legal uncertainty surrounding the patentability of software-related inventions, while on the other hand, developers and users of open source as well as small and medium-sized enterprises backing the open source community increasingly raised concerns about software patents in general. The entire foundation of the patent system, namely that patents stimulate innovation and are therefore basically good for society, was called into question like never before. As a result, the European Commission instituted an economic study of software patents in the US and in Europe. This study was an attempt to determine whether software patents have led/contributed to the rise in the eCommerce market (with its related growth in the US economy) in the US, and whether the lack of similar less-liberal software patent policies in Europe had contributed to the lagging economy in these areas in Europe. This study was completed in early 2000.

On 19 October, 2000 the European Commission launched consultations (i.e. requests for comments) via the Internet on the patentability of computer-implemented inventions. Comments regarding the Directive were received until December 15, 2000. A total of 1447 responses were received, amounting to around 2500 pages of text. To digest this plethora of responses, DG Internal Market hired an outside consulting firm to review and summarize the contents of the responses. The consultants report is now available on the DG Internal Market web site.

The following is taken from the Summary of the consultants report.

Responses were received from individuals and organizations in all EU and EEA member states apart from Liechtenstein , various CEEC countries, the US, Australia and South Africa.

The consultation paper asked the following questions:

• Should harmonisation take place on the basis of the elements contained in this document? Or:
• Should a more restrictive approach be adopted? Or, conversely:
• Should more liberal conditions coming closer to the practice in the United States of America prevail in the future?

Almost all of the responses fell into one of the following two distinct groups:

Members

Students, academics, engineers, start-up companies

Concerns

Threats to the open-source movement and SMEs, lack of patenting resource and expertise, fear of litigation, negative impact on standards for interoperability

Proposals

Severely restrict the patentability of software

Limit infringement liability for "open-source" software

Reject all business method patents

Members

Established industry players, government agencies, lawyers,

Concerns

Protection of development investment, equality with the US, opening up of global markets

Proposals

Harmonize the application of European Patent Office practice

Apply patentability criteria to software that are slightly more liberal than those proposed in the Commission consultation paper

Take extreme care with patenting of business methods

The consultants report points out "that the group opposed to software patents (91%) numerically dominated the response. A large proportion of this group was explicitly from the "Open Source" movement including the Eurolinux "petition". Of responses that were sent directly to the Commission and were not from explicit "Open Source" respondents, 54% supported software related patents."

The consultants conclude however, that "if account is taken of the economic muscle and number of organizations represented by responses from industry and other associations it can be argued that there is an "economic" majority in favor of patents on computer-implemented inventions. On the other hand, those opposed to software patents would claim that due to the size and fragility of their organizations, they require support. They would also claim that it is only the "open-source" movement, e.g. Linux, that can effectively take on the "Micro$oft"s of this world."

The consultants report further indicates that generally the topics raised by those respondents who submitted comments directly to the Commission gives a good summary of the concerns of all groups worried about software patents. These were, in order of frequency of mention:

• Patents Favor Large Organizations
• Patents are anti Open Source
• Philosophical Objections
• Software is Different
• High Risk of inadvertent infringement
• Copyright is adequate protection
• Patents are unnecessary
• Low Quality of Software Patents
• Increased Product Cost
• Abuse of Patents
• Threat to interoperability & standards

The consultants report that within the group that was broadly in favor of patenting computer-implemented inventions there was a degree of consensus on the preferred scope of harmonisation. This position is slightly more liberal than that expressed in the Commission consultation paper. The consensus position is:

• Strong support for the TRIPS agreement on a global scale
• Detail should be handled by jurisprudence rather than direction by, for example, a European Directive.
• Traditional patentability criteria should apply to software in the same way as other technologies. In particular there was a majority view that each of the criteria, in turn, should be tested against the characteristics of the invention as a whole
• The most likely criterion for rejection of a software patent application is lack of "technical effect and/or technical character". Failure of the tests for "industrial applicability" or "non-obviousness" may contribute.
• Practical guidance on software patentability is required including examples of what is, and is not, patentable.
• Copyright and patent protection should be independent forms of protection with the possibility of "double-banking".
• Patentability criteria should be strictly and consistently applied in order to limit the number of successful applications for inventions involving business methods.
• Patents are applicable to any form in which software is sold including downloads and all forms of data carrier.
• No changes in general patent law are required.
• A "one-stop" European patent application is required.
• Remove the "software as such" references in Article 52 of the European Patent Convention.

The consultants reported that there were differences in view as to how urgent it is for the Commission to take action regarding harmonisation. It was agreed that the principal harmonisation requirement is to achieve common criteria for rejection/acceptance of patent applications, particularly those involving business methods. Some believed that a Directive was urgently required, others believed that cooperation between patent offices would achieve the same effect. Some believed that harmonisation was required on a global scale.

Various other proposals were submitted by some respondents including:

• Shortened term for patent protection;
• Use of compulsory licenses;
• Special limits on the liability of distributors of open source software;
• Sui Generis protection for software to replace both copyright and patent protection.

It is highly recommended that those of you who are interested in this on-going debate should read the entire consultants report to get the flavor of the intensity of feelings on both sides of this issue.

As to the process of agreeing on a directive within the Commission, I am told that the process generally works like this. Formally speaking, final decisions on proposals for legislation are made by the Commissioners meeting together in college. In that process the individual Commissioners are advised by the "services" (that is the Directorates-General) with which they are associated.

There appears to be no question that DG Internal Market are the lead service for this and other "domestic" intellectual property legislation, although other DGs (particularly Information Society, Enterprise, Competition and Research) also have a major interest. Unsurprisingly, each will approach the question from the perspective of its own "mission". It is noted that within the European Commission itself there are strong advocates for both sides of the Software Patent debate. For example, on October 1, 2001 on a technology mailing list on the Internet, the personal views of Philippe Aigrain were expressed against a proposed change by the W3C to the royalty-free patent licensing policy. Mr. Aigrain is the Head of Sector "Software Technologies", EU DG INFOS/E2, and he closes his message with the comment that "I would like to stress that the new policy pre-empts [sic] the result of a debate on the scope of patentability which is far from closed, in the US as in Europe." While there are strong feelings within the Directorates General on both sides of the software patent issue, it is to be hoped that if measures can command the agreement of at least a substantial majority, if not a consensus, among all interested services before they go to the Commissioners for decision, the ultimate result will be less contentious than it presently appears to be.

The Commission is believed to be trying to fix its position on the question of harmonizing the software patent rules as soon as possible and is currently considering what next steps to take. Any proposal for a harmonising Directive would need to be adopted by the Council and the European Parliament before being transposed into the laws of the Member States. Depending on the specific measures proposed, the possibility of making corresponding adjustments to the European Patent Convention would also need to be considered.

There is some indication that a draft Directive might be made available for further internal consideration before the end of 2001. However, it appears that it will be many months before such a Directive will affect today’s patent practitioners. In the interim, the present EPO rules are considered workable by most patent practitioners, and the forthcoming revised EPO Examiner Guidelines should clarify some of the software and business method issues.