Materials on Intellectual Property - Case Study Example

Governed by the judicial mandate to grant patents to “anything under the sun made by man” current US patent law stands as an obstacle to a common international treatment of business method, software [and biotechnological] patents”. 1. INTRODUCTION The question of available protection for new products which are software is a complex issue. Under UK law, the Copyright Design and Patents Act 1988 (“the Act”), software is protected by the law of copyright. Although this is a powerful form of protection against an authorised copying of code, it may not be adequate to protect novel underlying ideas behind the software. For example, although copyright prevents competitors from taking the whole or a substantial part of the software code, it does not prevent a competitor from mimicking the novel concept behind the software system and taking these concepts to develop its own software1. Theoretically patent protection should address the inadequacies of copyright as a means of protecting novelty. The purpose of patent protection is to encourage and fuel innovation and the practical use of inventions. However, the issue of whether software should merit patent protection has remained a contentious issue with inconsistent approaches internationally. Under UK law, the Patents Act 1977 (PA) does not provide patent protection for anything that consists, of a method of doing business or a programme for a computer per se2. The European Patent Office (EPO) on the other hand has adopted a liberal interpretation to patent protection of software by excluding software patent protection unless they have “technical effect”3. US law goes further in favour of a presumption of patent protection by requiring software to have “practical utility”4, however neither the US or EPO position provides guidance on what constitutes technical effect or practical utility for the purpose of patent protection and the liberal approach of the EPO has effectively widened the parameters of patent protection under the guise of the ambiguous “technical effect” concept. Additionally, the US approach to the patenting of business methods has been very liberal, which in turn has de facto widened the parameters of protection available for software patents. However, Fink comments that “such patents are an easy target for criticism and have led many European commentators to conclude that the United States patent law has strayed from “the basic objectives of the patent system”5. The focus of this analysis is to critically evaluate the proposition that the US approach to patentability of business methods “stands as an obstacle to a common international treatment of business method, software [and biotechnological] patents”. In doing, so I shall undertake a contextual approach by evaluating the differing approach of the English courts to the EPO with regard to the patentability of computer programs. Moreover, I shall consider the dichotomy between the European and national approach with a contextual consideration of the international position under US law, which is pertinent to the attempts of current intellectual property law to keep up with the pace of technological advances and move towards a system of international harmonisation of patent law, which is arguably vital in the contemporary digital business model. 2. THE INHERENT PROBLEM OF SOFTWARE PATENTABILITY Despite the EPO and US move towards recognition of software patentability, its application in practice has remained contentious due and inconsistent. Although the UK Patent Office has adopted and amended its guidelines in accordance with the EPO position6, it begs the question as to how useful this is in practice when the EPO has preferred to take an ad hoc approach to patent protection of software instead of providing substantive guidance. Furthermore, notwithstanding the guidelines, the UK courts continue to take a restrictive approach. The problem is compounded by the fact that debate on software patentability has justifiably focused on what constitutes “patentable subject matter” as defined under national laws7. The requirement of function, novelty, inventive step and industrial use is essential to filter claims that fail to qualify for patent protection in order to protect inventions. Indeed, in the case of Astron Clinica Limited v The Comptroller General of Patents, Designs and Trade Marks,8 the High Court referred to the fact that the UK intellectual property office “considers such claims are prohibited by Article 52 of the European Patent Convention”. The European Patent Office considers such claims are allowable if the program has the potential to bring about, when running on a computer, a further technical effect which goes beyond the normal physical interactions between the program and the computer”9. In contrast, the US patent legislation applies a categorical approach to patentable subject matter, according to five categories of subject matter, namely processes, machines, articles of manufacture, and compositions of matter all merit patent protection10. The European Patent Convention (EPC) and the PA’s approach although wider in definition, can have a limiting effect as the requirement of “industrial application” without any guidance or specified non-exhaustive categories creates uncertainty as to what might merit patent protection11. To exacerbate the uncertainty, the European approach expressly excludes computer programs, however only “as such”12. Whilst clearly welcome instead of outright exclusion, it fails to add any light as to when a computer program would be granted software protection. Furthermore, despite the issues of novelty and inventive step which also factor in the debate on software patent protection, the centre of the uncertainty seems to lie in the issue as to whether computer programs, “as a class, should even be susceptible to patent protection in the first instance”13. 3. EXISTING LAW The current EPO position acknowledges in principle the concept of software being a patentable subject. Nevertheless, there are no clear, objective definitions of the conditions for such protection and there is no consistent approach to discerning whether any particular claim for patent protection will be successful. If we consider the cost of patent applications, this leaves innovators in a situation where only those with the funds and backing of established companies would be able to test out a patent application, which contradicts the purpose of patent law as a means to encourage innovation. Patent applications are expensive in any event however the lack of any meaningful guidance at the outset proves a deterrent, leaving software developers reliant on the inadequate protection and exposure of copyright protection. The EPO position distinguishes between patentable and non-patentable subject matter in relation to software on whether or not the software has “technical effect”14. The Court of Appeals for the Federal Circuit in the US has in interpretation discarded the categorical approach of the US legislation and introduced a “practical utility” requirement15, which requires the software to achieve a “useful, concrete, and tangible result16” in order to qualify for patent protection. This in itself highlights the poor drafting of both US and EPO measures. Although both the “technical effect” and “practical utility” measures are in line with the concept of inventive step and industrial use requisites for patentability and exclude by their very nature abstract ideas and laws of nature17, in leaving it open for judicial bodies to interpret the grey area leads to ad hoc decisions on a case by case basis, perpetuating the uncertainty. There is still no answer to the obvious question of what actually constitutes “technical effect” and “practical utility”. Herein lies the inherent difficulty of legislating for software within the ambit of patent law. Every computer program in use on a computer arguably produces a “technical effect” in a sense. For example, the program causes the computer to store, modify and transmit signals. However, if the sole fact of transmitting electric signals internally in the computer by execution of the program was in itself sufficient to constitute technical effect, this would lead to the undesirable result of every computer program being granted a patent. However, this has perpetuated uncertainty in European Patent law and indeed any meaningful attempt towards harmonisation, which creates difficulties at national level due to parallel systems of community wide patents and UK patents. This is further compounded by the subjective determinations of what constitutes technical effect. For example, the Vicom decision18was the first significant decision given by the EPO with regard to the grant of software patents. The application related to a mathematical process, which was processed by a computer to enhance digital images on screen. The EPO made a distinction between a process having a purely abstract and mathematical effect and a technical effect, which should be patentable. Moreover, the EPO acknowledged that the technical effect test could render something patentable notwithstanding the fact that the constituent elements were not. Furthermore, the EPO asserted that “generally speaking, an invention which would be patentable in accordance with conventional patentability criteria should not be excluded from protection by the mere fact that for its implementation modern technical means in the form of a computer program are used. Decisive is what technical contribution the invention as defined in the claim when considered as a whole makes to the known art”19. However, in the Astron case, the High Court in referring to the EPO rationale in Vicom commented that “none of these decisions dealt expressly with the allowability of claims directed to computer programs themselves.20” One method of alleviating the problem of floodgate applications would be to follow the approach in Koch & Sterzel/X-ray Apparatus21 by requiring “technical effect” beyond the internal manipulation of electrical signals that is inherent to the execution of any computer program. However, this approach was again specific to the facts of the case and the problem in this approach could result in the pendulum swinging to far against patent protection for software. Accordingly, it would appear that either suggested application of the technical effect standard fails to adequately provide a clear and meaningful approach to the patentability of software. The US approach of “practical utility” also suffers from weaknesses. Firstly, the problem of what constitutes “practical”. If this definition equals “physical” then it is argued that “all software executing on a computer has “practical” utility in the send that all software creates physical effects within the computer in……..electrical signal manipulation”. This would lead to the absurd result of digital downloaded music files being patentable. The Court of Appeals for the Federal Circuit (CAFC) considered this issue and indicated that the approach should involve a consideration beyond physicality. In the case of State Street Bank & Trust Co. v Signature Financial Group Incorporated22, the CAFC asserted the following: “the transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes practical application of a mathematical algorithm, formula, or calculate, because it produces “a useful, concrete and tangible result……. Renders it statutory subject matter, even if the useful result is expressed in numbers, such as price, profit, percentage, cost or loss”23. The approach is useful in its lateral approach beyond mere physicality of the financial software as it considers the actual utility and result of the software. From a UK and European perspective, we can draw an analogy with the requirement of inventive step and non-obviousness. The problem with this approach is whether a “useful, concrete and tangible result” is a subjective or objective test and some critics have argued that this passage eliminates the business method exception24. As a wider issue, despite the merits of CAFC reasoning in the above passage, inconsistency prevailed with its decision in AT&T Corporation v. Excel Communications Inc25, where the CAFC discarded the physicality requirement on the basis of precedent and the fundamental purpose of patent protection in useful/industrial arts. Accordingly, this leaves the US position back to square one with the potential for abstract ideas being protected without consistency in US courts application of Statute. As such, Weingartner and Conrad comment that the AT&T decision highlights the fact that the US Courts have maintained its recent, cautious approach to the patent monopoly. In the past two terms, the Court has made it easier to find a patent invalid, increased the ability of licences to challenge the validity of a licensor’s patents and made it more difficult to obtain an injunction against patent infringers”.26 Moreover, in this decision, the US court appears to have recognised its own inability to resolve all software related questions in one case…. Content to address only the precise question before it, however, the remaining four members of the majority left open whether other software incarnations would meet the statute’s definition of “component”27. Additionally, the Courts focused on the jurisdiction issue and highlighted that US patents do not apply extraterritorially, which further impedes attempts towards harmonisation of international patent law and raises the issue of insufficient protection for US patents from infringement outside its borders. This position in the US is further compounded by the issue of “utility”. Indeed, Weingarter and Conrad highlight the point that the proliferation of technological developments in the digital era has “outstripped existing law. Software does not fit naturally within a framework designed to counteract piecemeal sales of hardware…. The filed of biotechnology contains numerous technologies with software like qualities, and as the field of nanotechnology grows, courts and lawmakers will be faced with difficult choices about self-replicating devices. Burgeoning technologies and increased global interaction will continue to test the limits.28” However, the US courts have continued to adopt an inconsistent approach. For example, in the case of State Street Bank29, the CAFC held that “the transformation of data….. by a machine through a series of mathematical calculations into a final share price30” qualified for protection because of the physical utility in producing a “concrete and tangible result” despite the transformed data not representing any physical objects. This suggests that software may have “practical utility” if software results in the machine performing a physical transformation if the result is concrete and useful. Conversely, in re Walter31, the Court of Claims and Patent Appeals (CCPA) distinguished between inventions where the end result was a mere number and when the end result was produced a “physical thing32”. In these cases the logical or application utility of the software has not been a primary consideration. However, some cases have considered logical utility. For example in the AT&T33 case, the CAFC focused on the manner in which the software processed the data. In the case of IBM/Document Abstracting and Retrieving34, the EPO Board of Appeal rejected the claim by evaluating it on the basis of logical utility. Nevertheless, both IBM cases, it was highlighted that computer programs were not excluded from patentability per se and that the program had to be capable of brining about a technical effect which goes beyond the normal physical effects which result from the running of any program35. For example, in the Microsoft/Data transfer case36 the application related to a method of facilitating data exchange across different formats and it included method claims and a claim to a program on a computer readable medium. The Board determined that the method was implemented in a computer and this amounted to technical means sufficient to escape the prohibition in Article 52 Additionally, some cases have focused on the application utility principle or the “real-world” utility of the software, independently of whether the software creates physical transformations or performs information processing steps as we saw for example in the discussion of the State Street 37case above. Although the above cases have considered physical, logical and application utility, they have not been expressly recognised as an authoritative approach as such and there has been an inconsistent approach, with judicial bodies both in the US and Europe preferring to address each scenario on a case by case basis. From the EPO’s perspective, this has led to an effective presumption of technical effect, which arguably goes too far in undermining the purpose of patent protection. For example, in the Sohei patent application case38 the application related to the invention which was to provide a computer system for various types of management. The aim was for plurality of function and the interlinking of various management types. In accepting the application, the EPO provided its rationale thus “an invention comprising functional features implemented by software is not excluded from patentability under Article 52(2) (c) if the technical considerations lend a technical nature to the invention in that they imply a problem to be solved by technical features”. The EPO went even further in the Hitachi Auction Method Patent Application.39 In this application, the computer related invention was a controlled program which undertook online auctions. The technical effect element included resolution of delays and freezing bids when bids were placed. In accepting the application the EPO asserted that any method involving technical means constitutes a patentable invention under Article 52(1) and that the relevant test for contribution to the art was whether the invention had technical character. As such, the EPO decision effectively creates a presumption of technical effect and patentability, with inherently flawed arguments regarding novelty and inventive step. This is in market contrast to the UK position, which is highlighted in section below. EUROPEAN DIRECTIVE It was hoped that the position regarding patentability of software would have been clarified (from the European perspective at least) through the implementation of the European Union (EU) Directive on the Patentability of Computer Implemented Inventions40. The objective of the draft directive was to harmonise the approach of various EU national courts. The Directive provided that for software to be protected by patents, the software had to make a technical contribution, which was further defined as contribution to the state of art in a technical field which is not obvious to a persons guild in the art. The Directive utilised a combination of the utility approaches discussed above and aimed to harmonise national member state patent law with regard to software. The Directive’s approach was to favour patentability of software subject to the requirement of inventive step and industrial application. The Directive went further and suggested that if a computer program on its own or on a carrier could potentially produce a technical effect when loaded on a computer then it should be loaded and patentable. Accordingly, the approach was that the software can only be patentable when used as part of process as part of a system. Although welcome in an attempt to harmonise laws throughout EU member states, the Directive still failed to address the issue of what factors would constitute inventive step for the purpose of patent protection and there was still uncertainty as to the industrial application principle. In any event, the European Parliament rejected the Directive, with the current future of the Directive or similar provisions unclear. 4. LATEST DEVELOPMENTS With the future of the Directive in tatters, the English Court of Appeal’s (COA) judgment in the recent case of Aerotel Ltd v. Telco Holdings41 and others is considered to be the current UK authority on software patentability and is not in line with the recent decisions from the EPO. The case involved a patent for a telephone system whereby a caller had a prepaid account with a telephone company, which was rejected as a business method and the second patent involved a patent application for an automated method of acquiring documents necessary for incorporating a limited company, worked by asking the user a series of questions with the answers being routed to a database of previous answers to match documents. This application had been rejected as a method of performing a mental act and for being a computer program. On appeal, Mr Justice Mann sitting in the Patents Court restored the application. The COA chose to interpret the EPC in order to produce a judgment that would go towards achieving a clear position on the issue of patentable subject matter in Europe. Section 1(2) of the PA has created problems due to its interpretation in light of Articles 52 and 53 of the EPC. However, the COA asserted that as the PA was intended to implement the EPC, there should be no disparity and in applying the EPC, the risk of incorrect construction from applying section 1(2) would be avoided. The COA undertook a detailed review of European law, national law and even US law and summarised the various approaches that have been taken to software patentability as follows: 1) The contribution approach. The COA held that when using this approach, it was necessary to consider whether inventive step resided only in the list of excluded matters. If this was the case, then Article 52(2) was applicable and the invention was not patentable. (2) The technical effect approach Under this approach, the COA held that the relevant question was whether the invention as defined in the claim made a technical contribution to the known art. (3) The “any hardware” approach. The question here was whether the claim involved the use of or to a piece of physical hardware, however mundane. If yes, then the invention was not patentable. The “any hardware” approach involved three variants: (i) If the claim was a method which consisted of an excluded category, it was excluded by Article 52(2), even if hardware was used to carry out the method. (ii) A claim to hardware was not necessarily excluded, but would likely be excluded as being obvious. (iii) If there was a claim to something concrete like “apparatus”, then Article 52(2) did not apply and the invention would be patentable. The Court of Appeal thankfully rejected the “any hardware approach” as the three variants could lead to contradictory results in practice. The Court of Appeal also rejected the contribution approach. The COA felt bound by precedent to accept the “technical effect” approach, however asserted that “technical contribution” could not reside in novel or inventive purely excluded matter. In following precedent, the COA followed its decision in Merril Lynch42 where it held that the patent application had to demonstrate a new technical result. However, the COA in Merril Lynch 43had applied this test and found that the technical result was merely a method of doing business and was therefore excluded. The COA acknowledged that their decision may clash with the EPO stance and encouraged a discussion at EPO level of what subject matter can be patentable. The decision also highlights that from the UK perspective patent applications are now required to ensure contribution to the art and set out clearly in the patent claims why the contribution is “technical”. The stricter approach of the COA is clearly welcome as an attempt to introduce some clarity and certainty particularly in light of the Hitachi Auction Method decision, but the hint at the need for EPO discussion again highlights the current uncertainty of patent protection in the context of software. 5. CONCLUSION The above analysis highlights the discrepancy between the UK and EPO approach to patent protection for computer related inventions. Whereas both approach the issue with reference to a requirement of demonstrating “technical effect” the EPO approach has effectively created a presumption of technical effect. This significantly widens the possibility of patent protection, however arguably undermines the overriding purpose of patent protection and creates legal uncertainty. Conversely, the UK adopts a narrow approach, with no clear guidelines on what will constitute technical effect, which is further compounded by the wide US approach “granting anything under the sun”, which not only is difficult to apply under both the UK and EPO approach, it further creates the bizarre legal position of immunity from infringement outside the US due to the US legal approach to the extraterritoriality of US patents. As such, Fink highlights how the “in the present state, the law regarding the patentability of business methods under the EPC leaves much to be desired44”. It is submitted that the inherent difficulty lies in the complexities of software and technology whereas the legislative measures and discussion to date has focused on the pressure from businesses to gain greater legal protection of software. This has led to jurisdictions trying to extend and interpret existing requirements for patentability without a meaningful debate on the complexities of software and technological advances. It is essential to research and consider the variants of what could constitute technical effect or practical utility from the outset. Only then can we consider drafting proposals for a satisfactory method of addressing patentability of software within a credible legislative framework that works towards a meaningful international harmonisation of patent law. BIBLIOGRAPHY Bainbridge (2008) Intellectual Property. 7th Edition Pearson Longman. Lionel Bently & Brad Sherman (2008). Intellectual Property Law. 4th Edition Oxford University Press. James Boyle (2003) The Enclosure Movement and the Construction of Public Domain 66 Law & Contemporary Problems (2003) at 13. Christie & Gare (2008) Blackstone’s Statutes on Intellectual Property Law. 9th Edition Oxford University Press. Cornish (2006). Cases and Materials on Intellectual Property. 5th Edition Sweet & Maxwell. Cornish and Llewellyn (2007). Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights 6th edition Oxford University Press. Jennifer Davis (2007). Intellectual Property Law. 3rd Edition 2007 Oxford University Press M E Fink (2004). Patenting Business Methods in Europe: What Lies Ahead. 79 Indiana Law Journal 299. Hollyoak and Torremans (2005). Intellectual Property Law. 4th Edition Oxford University Press. H Macqueen, C Waelde, & G Laurie (2007). Contemporary Intellectual Property. Oxford University Press. Merges, Menell & Lemley (2003). Intellectual Property in the New Technological Age. Aspen Press. Ian Muir, Matthias Brandi- Dohrn and Stephan Gruber, (2006) “European Patent Law: Law and Procedure under the EPC and PCT” Oxford University Press Robert Plotkin, “Software Patentability and Practical Utility: What’s the Use?” (2004) Graham Smith., (2007) Internet Law and Regulation. Sweet & Maxwell. Gregory A. Stobbs, “Software Patents” 1-46 (Second Edition 2000) Vaver & Bentley (2004). Intellectual Property in the New Millennium. Cambridge University Press. ST Weingarter & AM Conrad (2008). Software exportation dodges bullet: US Supreme Court reins in Extraterritorial Effect of Patents in Microsoft v AT&T (2008) 30 EIPR 477 at 482. All UK case law reports available at www.lexisnexis.com ALL European law reports available at www.precedents.lawtel.com All UK legislation at www.opsigov.uk and ww.statutelaw.gov.uk All European Legislation available at www.europa.eu Websites www.patent.gov.uk www.epo.org Read More