The Patents Bill will provide a much needed update to New Zealand's outdated patent laws but contains some controversy in a proposed exclusion to patentability for inventions involving computer programs.

Second reading gains widespread parliamentary support

On 12 September 2012, the New Zealand Patents Bill had its second reading in Parliament, over three years after its first reading and over four years after it was first introduced as a Bill.

In the parliamentary debate that followed there was unanimous support for the Patents Bill in general, with all parties acknowledging the need to update New Zealand's outdated patent1 laws. A modernisation of the 60-year old Patents Act was seen by most as essential for promoting economic growth in New Zealand by incentivising innovation. Many of the proposed changes to the patent legislation will also bring New Zealand into line with equivalent laws in other countries.

Debate over software clause

Almost all of the parliamentary debate centred on recently introduced changes to a proposed clause to exclude computer programs from patentability2.

Prior to the second reading, the Government released Supplementary Order Paper No 120 . That paper proposed to amend the exclusion to software patents to exclude only inventions that "relate to a computer program as such". The two words "as such" were added to the existing form of the exclusion, a small but arguably important change to clarify the extent of the exclusion by mirroring the wording of legislation in the UK and Europe.

While the National Government defended the recently proposed amendment, MPs from Labour, the Green Party and NZ First opposed the change. Labour MP Claire Curran tabled Supplementary Order Paper No 123, which proposes to amend the wording of the exclusion to state that it does not extend to any inventions that "make use of an embedded computer program".

Introduction of an exclusion

A first point of note is that the inclusion of any exclusion at all is a victory for the anti-software patent lobbyists. In both the current law and the first draft of the Patents Bill there was no software exclusion of any kind and nor were submissions on an exclusion sought by the Select Committee which heard public submissions on the Bill after its first reading.

Some of the MPs opposing the Government's preferred "as such" wording complained that Craig Foss, the Minister of Commerce, introduced the recent amendment to the exclusion without due consultation.

However, this objection could be viewed as hypocrisy from the anti-software patent contingent since the exclusion itself was surprisingly introduced to the Bill prior to its second reading on the recommendation of the Commerce Select Committee (CSC). That recommendation resulted from lobbying from a number of small Kiwi software developers and was not subsequently opened to a democratic submission process.

Options for the software exclusion

The crux of the debate pivots on the choice of wording for the clause that will exclude some software inventions from patentability.

It is fair to say that everyone recognises the importance of clear wording. If innovators have a clear understanding of what is and is not patentable under the legislation, they can make an informed decision about whether to apply for patent protection and litigation costs (generally seen as only benefitting the legal sector) can be minimised.

It is also fair to say that advocates of both alternatives believe their preferred wording provides the most clarity. But who is right? And does it matter?

It could certainly be argued that the aim of all parties, in terms of legislating on what inventions should be patentable and what should not, is the same and that, ultimately, both options will be interpreted in a similar way. But even if that is the case, there is obviously a preference for the clearest and most robust wording.

The benefits of "as such"

In our view, while not ideal, the "as such" version is the better option.

On the face of it there would seem little difference between excluding "computer programs" and "computer programs as such" from patentability. But the words "as such" are essential to clarify that, while the particular software steps chosen to implement a computer program should not be patentable, the fundamental effect of the computer program itself may be, provided of course that it is novel3 and sufficiently inventive (the same criteria applied to any patentable invention4). This follows the intentions of the CSC who introduced the exclusion.

Another benefit of "as such" is that it mirrors the equivalent legislation in the UK and Europe. Those patent regimes have used this wording for some time now, meaning NZ software developers and decision makers have access to a wealth of case law to clarify any uncertainty in its meaning.

In the Parliament debate, Claire Curran and others argued against the "as such" wording by noting some criticism of the UK and European legislation. It is certainly true that there have been some contentious cases in these jurisdictions but the more cases that are decided, the greater the clarity that follows, and at least our decision makers can hit the ground running.

The problems with "embedded"

Compare that with defining the exclusion of software inventions except "embedded computer programs". The term "embedded" is not defined and has not been considered by any patent office or court anywhere in the world.

Ms Curran herself states that "the boundaries of embedded software [will] be determined by the Government on a case-by-case basis as appropriate". In other words, to reach the clear position everyone wants, cases will need to be litigated. Ironically, this is the very situation Ms Curran seeks to avoid. Given the few New Zealand patent cases that go to a patent office hearing, and the fewer still that reach the courts, it could be a long time until the much-needed clarity is found, and that clarity will come at a significant cost to those unlucky litigants required to blaze the trail.

Another issue with the term "embedded" is that the field of computer technology is advancing so quickly that its relevance may change in a short space of time. Devices running embedded software today may be run by non-embedded software in the future. For example, the line between mobile devices (that are generally considered to run embedded software) and general-purpose computers (that do not) is quickly fading. The Patents Bill needs to be future-proof to remain relevant and avoid the need to re-legislate in a few years' time.

Making the patent system work for Kiwis

It is mostly small Kiwi software developers that support the broadest exclusion possible. Some anti-software patent proponents have argued that only multinationals are in favour of the narrower exclusion but submissions in response to draft guidelines on how patent applications involving computer programs might be examined released by the Ministry of Economic Development show that many large New Zealand companies also take this view.

The smaller developers seem to see patents as tools that will be used against them. And it is true that the vast majority of NZ patents are filed by overseas companies. But perhaps small Kiwi innovators are not seeing how the patent system could work to their advantage?

Imagine you are a small Kiwi software company that develops a genuinely innovative product. For that product to stand a chance of success when faced with international companies who have the resources to quickly copy it, patents provide the best way to protect the intellectual property5 in the product and then to commercialise it, for example through licensing.

By using patents to their advantage, New Zealand software developers can take their innovations to places that would not be possible if the option to protect did not exist.

Where to from here?

Craig Foss has indicated that the Bill will not be referred again to the CSC so it will now be prepared for a third reading. It remains to be seen whether the Government will stand its ground or amend the controversial software clause in the face of the opposition6 it faces, if only to advance the much-needed reforms of New Zealand's patent laws.

Whatever happens, you can read about it here in subsequent updates. In the meantime, let us know what you think. Is the "as such" exclusion good or bad, and why do so many Kiwi software developers seem to struggle with the concept of patent protection being a shield not a sword?


1 A proprietary right in an invention which provides the owner with an exclusive right for up to 20 years to make, sell, use or import the invention. In exchange for this monopoly the patent is published so that others can see how the invention works and build on that knowledge. The patented invention may also be used by the public once the patent lapses.

2 A proprietary right in an invention which provides the owner with an exclusive right for up to 20 years to make, sell, use or import the invention. In exchange for this monopoly the patent is published so that others can see how the invention works and build on that knowledge. The patented invention may also be used by the public once the patent lapses.

3 One of the requirements for patentability and the first part of the test for inventive step. In patent law "novel" simply means new or not previously known. New Zealand currently has a "local novelty" requirement for patentability. This means that the subject invention will not be novel (and therefore will not be patentable) if it was known or used in New Zealand before the date on which the application for a patent was filed. There is a proposal to amend our legislation in late 2010 to move to an "absolute novelty" standard. This means that the subject matter must not be known or used anywhere in the world before the date of application in New Zealand. If the subject matter is known or used before the date of application, this is known as "anticipation".

4 The product of the creative process of inventing. In intellectual property law "invention" is a legal term usually describing patentable subject matter. Under current New Zealand legislation that subject matter includes any manner of manufacture which is new and involves an inventive step. However, certain types of invention are excluded from patentability. They include inventions which are contrary to morality (for example weapons of mass destruction) and methods of medical treatment (on public policy grounds that such methods should be available for health practitioners to use to the benefit of all society).

5 Refers to the ownership of an intangible thing - the innovative idea behind a new technology, product, process, design or plant variety, and other intangibles such as trade secrets, goodwill and reputation, and trade marks. Although intangible, the law recognises intellectual property as a form of property which can be sold, licensed, damaged or trespassed upon. Intellectual property encompasses patents, designs, trade marks and copyright.

6 In New Zealand, once a patent application has been accepted, it will be published in the Intellectual Property Office Journal. There is then a three month period where the application may be objected to (or opposed), by a third party. If no opposition is made the patent application will proceed to grant.

Any party that has an interest in the subject matter of the patent can oppose acceptance. The grounds that can be used to oppose a patent application include lack of novelty, lack of inventive step and insufficient disclosure of the invention. Not all countries have an opposition period on patent applications. For country specific information, contact your IP advisor.

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.

James & Wells Intellectual Property, three time winner of the New Zealand Intellectual Property Laws Award and first IP firm in the world to achieve CEMARS® certification.