European Union: The Murky Waters Of Software Patents

Software patents have been the subject of much debate – not only in the US, but also in Europe. This has been a thorny issue for many years and the future of software patents still remains unknown. At the outset, a breakdown of the differences between patents and copyrights will highlight why the patent is the form of intellectual property which is proving to be the most problematic with regards to software.

Patents v. Copyright

Copyright protects the expression of an idea, such as a literary work. Patent protects the invention and therefore the idea itself.  Copyright can prevent the total duplication of a software program, but it will not prevent the formation of a program that utilizes the same concepts as an existing program. This is where most issues arise.  In order for an invention to be eligible for a patent, certain essential requisites must be satisfied. There must be an "inventive step" and the invention must be novel. It must also be industrially applicable; hence there must be a business scope to it.

In the US, software patents have been in existence since the early 1970s, but courts have recently started to reject software patents. The courts have ruled that simply "doing something on a computer" does not enable one to obtain a software patent on the matter. After hundreds of thousands of patents being issued, it became clear that there needed to be more restriction and the courts have recently been invalidating patents that were already granted.  In 2014, in the landmark Alice Corp judgment, the courts stated "the mere recitation of a generic computer cannot transform a patent ineligible abstract idea into a patent eligible invention." Thus the US is now retreating from its original position of granting software patents somewhat liberally.

Can software be patented in the EU?

The 1978 guidelines published by the EPO made it crystal clear that software is not patentable. However, this line was blurred in 1985, wherein the EPO stated that it was not important whether the invention is produced on a computer for such invention to be considered patentable, but focused instead on the effect it produced. The European Patent Office decided that the term "software" is too ambiguous and thus introduced the concept of a "computer implemented invention". In the 1998 IBM case, the EPO's Technical Board of Appeal stated:

 "A computer program product is not excluded from patentability under Article 52(2) and (3) if, when it is run on a computer, it produces a further technical effect which goes beyond the "normal" physical interactions between program (software) and computer (hardware)".

Therefore, there needed to be a physical object which would benefit from this "technical effect".  

In 2003, the EU proposal for a directive on the patentability of software patents intended to harmonize national legislation and practices with regards to the granting of software patents. However, it was rejected in 2005 by an astounding 648 votes with only 14 votes in favour during its second reading in Parliament. 

Article 52 of the European Patent Convention enlists programs for computers as one of the exclusions from patentability. However, the following paragraph states that such exclusion is "only to the extent to which a European patent application or European patent relates to such subject-matter or activities as such". This convoluted proviso has understandably confused many lawyers and jurists due to the addition of the words "as such". This cast a lot of doubt as to whether software is actually patentable or not. However, the EPO has been known to grant software patents, provided that there is the "technical effect" laid down in the IBM case. In reality, the EPO has granted tens of thousands of software patents, even though this goes directly against what the drafters of the Convention had in mind.

Does this mean that such patents are not legally valid? It could be said that the EU will be following in the footsteps of the US – that is, invalidating patents that have been granted already, which effectively means that there has been a colossal waste of energy and resources. This is unfair on applicants and is not analogous to the idea of software patents to begin with – a patent implies ownership, which should not be capable of being bestowed and then swiftly taken away. The EPO has since felt a need to come up with a more efficient service where a patent will have a universal effect throughout the EU.

The Unitary Patent

The Unitary Patent is a very recent brainchild of the European Patent Office. Through one single request, one will be able to obtain patent protection in 25 member states (Spain, Italy and Croatia are not currently participating). This patent will be subject to the exclusive jurisdiction of the Unitary Patent Court, which will comprise of a court of first instance, a court of appeal and a registry.

The rulings of this court will affect the Member States who have ratified the agreement. The EPO hopes that the establishment of the court will add to more predictability in proceedings and avoid parallel litigation. Since all unitary patents will thus have their own court, there is also an expectation of faster and more efficient procedures than if these were to be held in the relevant Member States. So far, seven Member States have ratified the agreement – and Malta was among the first to do so. It will come into force once it has been ratified by thirteen states, which is expected to be around 2016. Nevertheless, the position of software patents under this new patent system will remain to be seen. When it comes into force, it will lay the cornerstone for more debate on the subject – as being able to achieve a unitary software patent will mean that it will automatically be recognized in all the Member States.

The Unitary Patent might be able to open the floodgates for software patents in Europe, since if it allows for software patents, they will become immediately applicable in all the EU Member States. The same might be said for the contrary – however, the fact that the EPO allows for a Unitary Patent court of appeal means that this discussion might go on for years to come.

The Key Players

The main players in this debate are the big patent owning companies, patent trolls, SMEs and Open Source Software (OSS) supporters. Big Patent Owning companies (BPOs) such as Apple and Samsung tend to obtain as many patents as possible so as to defend their market position. Patent cases can be very expensive; however, BPOs can afford to defend their patents against anyone who encroaches upon them. Patent cases cost between $1.9 million and 16.7 million each in the US alone.

On the other side of the coin, there are the so called "patent trolls". These acquire patents from bankrupt companies or "sleeping patents" and subsequently start lawsuits against any and all who infringe upon these patents, even though these patents are not actually being used. Patent trolls generally attack BPOs, and cost the US around $30 billion annually. Statistics show that the majority of patent law suits are launched by patent trolls.

SMEs are usually caught in between these two players. It is difficult for SMEs to be able to afford their own patents and defend them in court. SMEs must also tread lightly as they are in constant danger of infringing on the patents of a BPO. A lawsuit of that magnitude would mean certain economic failure for an SME. They can, however, liaise with the BPOs and obtain cross-licencing agreements. However, in this respect, SMEs would not be in a very favourable position as they have no bargaining power when compared to the BPOs. Patent trolls, and patent holding companies, have been known to lend a helping hand to SMEs and defend them in court, as patent trolls can meet the legal expenses. This would be done in exchange for a big percentage of any damages awarded. Open Source Software is in a similar precarious position.

Open Source for Open Minds

Open Source Software (OSS) has been in existence for a long time. Software has a "source code" which is its most important component – through the source code one can make changes to the program, add features and fix bugs. The distinctive feature of OSS is that its source code can be modified or enhanced by anyone. This has led to the birth of operating systems such as Linux and server applications like Apache Web. Needless to say, OSS relies on the idea that all software should be free and its use uninhibited. Proponents of OSS campaign heavily against software patents. The Open Source Software movement has produced some of the most important software in the world, and software patents would seriously impair this movement and inhibit innovation in this area.

The EPO has recently focused more on the criteria of the "inventive step" for patents, which might possibly mean it has begun to clamp down on frivolous patents. It is clear that at this stage the only ones in favour of software patents are big patent owning companies and patent trolls, as they are the ones that stand to gain most from such a situation, with SMEs and Open Source Software proponents being caught in between.

Software patents are not the solution

In 1993, a researcher at the University of California, Michael Doyle, filed a lawsuit because he singlehandedly held the rights to the most integral part of the internet – webpage interactivity. He proceeded to win the lawsuit and received the hefty sum of $521 million as compensation.

This goes to show that what might have been considered "inventive" and avant garde thirty years ago, has become part of our everyday activity and is now taken for granted. Unfortunately, these situations are close to impossible to foresee. Patents are not well suited for the protection of software – copyright is the only other option. Another possibility is the creation of a new intellectual property right that is tailor made for software, as opposed to attempting to fit a square peg into a round hole.

Patents are clearly not the answer - had Michael Doyle enforced his patent rights as soon as they were infringed upon, innovation in this sector would have been stifled from the start. Instead, the World Wide Web had the chance to flourish and thrive before Michael Doyle stepped in to claim his winnings. The internet has been so successful because it is a collaborative and concerted effort between persons who are able to contribute.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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