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Accordingly, the IPO has revised its guidelines on patent claims involving computer programs.

Nonetheless, the door apparently remains closed on pure software patents, where there is no “technical effect” outside of the software. In a judgement dated 6 February 2008, the High Court upheld the IPO’s rejection of a patent application by tech company Autonomy for a system for searching for files on a computer.

FFII President Pieter Hintjens, who launched the EUPACO forum, explains: “everyone agrees that patents can have a big economic impact. Everyone agrees that getting the patent system ‘right’ is essential to Europe’s growth and prosperity. So we’re very happy to see so many important experts in the patent system stepping forwards to take part in this forum.”

Journalists, and staff of the European institutions, are invited to attend the conference for free.

Joff Wild, editor of IAM Magazine, usually a critic of the FFII’s policies, sums up his view of the EUPACO-2 event:

“When you are face-to-face and talking it is much harder to maintain entrenched positions and to ignore what other people are saying. It is hugely encouraging to see that representatives from industry, the FFII, the EPO and national patent offices, and the Commission will be sharing platforms at this event. The FFII deserves to be congratulated for this initiative which, hopefully, will get the support it deserves.”

The conference will take place on 15 and 16 May 2007, at the Metropole Hotel in Brussels. An online registration form and more information can be found at http://www.eupaco.org/

“In November last year, appeal court judges ruled that this was both a business method and a computer program and was therefore excluded from patentability under Article 52 of the European Patent Convention. His patent application had originally been rejected by the patent office, a decision he had challenged. Macrossan’s invention is an automated system that compiles the necessary documents for incorporating a company in the UK.

In rejecting the case the Lords said it “does not raise an arguable point of law of general public importance”. Macrossan had hoped the Lords would hear his appeal, as the highest court is not bound by any precedents.”

Further information and comment available here at The Register and at Ipkat.

1) The Court made a point of stating that patent granting authorities should not be bowing down to pressure from patent applicants to extend the boundaries of what should and should not be patentable:

“19. it by no means follows that because of pressure from applicants, the grant of patents for excluded categories should be allowed or that the excluded categories (particularly business methods and computer programs) should be construed narrowly. Just as with arms, merely because people want them is not sufficient reason for giving them.”

2) The Court noted the problems of the liberal patent policy in the USA, recognising in paragraph 20 of the judgement that:

(i) ‘despite the fact that [patents for excluded subject matter] have been granted for some time in the US, it is far from certain that they have been what Sellars and Yeatman would have called a “Good Thing.”‘;

(ii) having a patent system does have ‘a price’ and therefore it does not always follow that more intellectual property rights is necessarily beneficial;

(iii) “there is, so far as [the court is aware], no really hard empirical data showing that the liberalisation of what is patentable in the USA has resulted in a greater rate of innovation or investment in the excluded categories”;

(iv) as Peter Prescott QC did in 2005 in the CFPH High Court decision[^1], that ‘[i]nnovation in computer programs … proceeded at an immense speed for years before anyone thought of granting patents for them as such’;

(v) that the extension of patentability in the USA has led to ‘a mass of litigation’ that has created ‘uncertainty’; and

(vi) with a slight sense of English sarcasm, that this might be acceptable if the purpose of the patent system was the ‘encouragement of patents and patent litigation as industries in themselves’ — when we all know that this not meant to be the purpose of the patent system.

3) The Court confirmed that there is a ‘positive intention and policy’[^2] to exclude the items listed in Article 52(2) of the EPC.

4) The Court commented that ‘decisions of the EPO Boards of Appeal are mutually contradictory‘[^3] (emphasis added). It is very rare for an English court to be as open as the Court of Appeal has been in highlighting the need for the EPO to consider clarifying its position by encouraging an internal referral to what is known as the ‘Enlarged Board of Appeal’. The Court also notes how the EPO’s internal examination guidelines have changed over time on the patentability of computer programs and how the current guidelines are inconsistent[^4]. It is worth noting that the wording of the EPC has not changed yet the interpretation of the EPO has over time. The FFII believes that the shifting sands of the internal examination guidelines, as highlighted by the Court, is a natural outcome of having bodies such as the EPO and its own Boards of Appeal making decisions which are not divorced from the administration of the granting of patents; objectivity becomes blurred and it is all too easy for ‘customers’ interests’ to take priority over the interests of European citizens.

5) The Court, discussing the EPO Boards of Appeal approach to construing the computer program exclusion in Article 52(2) as narrow as possible and in a way which divorced the set of programming instructions from the reality that a computer program, to function, must be on some form of media and/or executed on a computer, concluded that such approach was the ‘wrong’ approach because it effectively defeated the purpose behind the exclusion:.

The FFII believes that this reasoning is consistent with the need to ensure that an international convention is interpreted to give effect to its purpose. The framers clearly intended to include computer programs in a set of non-patentable subject matter. The Court of Appeal has sent out a clear message that the word game played by the EPO and the Boards of Appeal is an attempt to defeat such purpose.

6) The Court, to aid consistent decision making and, as a re-statement of existing English law, stated that there should be a 4 stage test:

“(1) properly construe the claim

(2) identify the actual contribution;

(3) ask whether it falls solely within the excluded subject matter;

(4) check whether the actual or alleged contribution is actually technical in nature”[^6].

However, the Court stressed that, “[t]he fourth step — check whether the contribution is “technical” — may not be necessary because the third step should have covered that.”[^7]. This statement is very important because it clearly implies that the Court believes that, if something is solely within excluded subject matter (e.g. a computer program, including standard apparatus used to make the computer program function — as earlier said by the Court), it should not pass the third test, and therefore, there is no need to consider the fourth test. This is important because it is effectively saying that excluded subject matter ‘as such’ does not have a ‘technical’ effect for the purposes of patent law. This statement sends out a clear message against the EPO’s very broad brush approach of classing just about anything as having a ‘technical effect’ which then, using its logic, makes the subject matter patentable rather than excluded. This is restated in paragraph 47 of the judgement when the Court comments:

“a contribution which consists solely of excluded matter will not count as a technical contribution.” (emphasis added)

However, we do feel the Court’s judgement would have been better if:

1) It had focussed more clearly on the uncertainty surrounding hybrid inventions involving patentable subject matter and excluded subject matter under Article 52(2); and

2) It had considered the CFPH statements regarding the supremacy of the English Courts in respect of the interpretation of the EPC and acknowledged the constitutional issues with the judicial function of the EPO and the EPO Boards of Appeal (including the Enlarged Board of Appeal[^8].

[^1]: IN THE MATTER OF Patent Applications GB 0226884.3 and 0419317.3 by CFPH L.L.C. [2005] EWHC 1589 (Pat)

[^2]: Per Paragraph 21

[^3]: Per Parargaph 25

[^4]: Per Paragraph 115

[^5]: Per paragraph 31, emphasis added. See also the comments at paragraph 113.

[^6]: Per paragraph 40

[^7]: Per paragraph 46, emphasis added

[^8]: See paragraph 56 of the CFPH judgement.

In a statement Hintjens said “the patent system, both globally, and in Europe, is under serious stress. The unrestricted expansion of patentability into non-traditional areas together with the rising flood of poorly granted ’soft’ patents in biotech, pharma, and software have throttled innovation. In Europe the European Patent Office earns over Euro 1bn a year but still cannot conduct proper examinations. All solutions seem to be promoting worse patents, and worse patent practice. Something must change.”

“The EPO and Commission have spent much of 2006 building up a campaign to promote a new non-EU patent court, under the so-called EPLA plan. This is being sold as an ‘interim’ solution on the way to a real community patent, but the Commission has failed to provide a roadmap for such an evolution, and the FFII believes EPLA would be a long-term consolidation of today’s broken system.” “With so much power concentrated in one place, and without proper democratic oversight, patent practice will get much worse,” explains Hintjens. “There are important and urgent fixes to be made in the patent system, but the Commission and EPO are blithely ignoring these issues. So, we have launched the European Patent Conference, a gathering of the wisest economists, lawyers, and industry experts. We will look at the patent system, we will build proposals for change, and we will work to get those changes implemented.”

The first EUPACO event will be held in Munich on November 25th, 2006. The second event will be in Brussels on January 24th, 2007. Both events are free to all. A larger, international event is planned for May 2007.

The FFII is calling for speakers and participants from all sectors and disciplines. Hintjens points out that “problems in the patent system affect all industries and all consumers. The European Patent Conference is the ideal opportunity for those who want to fix these problems.” For more information, see http://www.eupaco.org.

http://www.bailii.org/ew/cases/EWCA/Civ/2006/1371.html

The Court of Appeal upheld the rejection of Macrossan but overturned the rejection of Aerotel in the High Court.

Rufus Pollock of FFII-UK said: “We’re obviously delighted that the Court of Appeal upheld the rejection of Macrossan. To have failed to do so would have opened the floodgates for the patenting of business methods as well as overturning much of the recent case-law in the area. The implications of the Aerotel decision are less clear and we are still evaluating the Court’s reasoning. It is certainly a great pity that Aerotel settled with Telco before the hearing so nobody from Telco challenged this representation in court with the result that it was left to the Patent Office to discuss the patent.

One noteworthy aspect of the judgement is the lengthy ‘appendix’ to the decision in which the Court discusses recent EPO jurisprudence. The conclusion to be drawn from the summary is stark: current EPO practice is utterly confused and some recent decisions have reduced the Article 52 exclusion of software programs from patentability to such airy thinness as to render it utterly ineffective.”

For background information see our previous press release:

http://www.ffii.org.uk/archives/32

Rufus Pollock, Director of FFII-UK said, “We hope that the Court of Appeal will uphold the decisions of the judges at first-instance who found against the patents in both cases. We also hope that they will take this opportunity to clearly reaffirm the exclusions of software and business methods that exist in the European Patent Convention. This is particularly important for two reasons. First, innovation in the software and business sector both here and across the EU must be protected from the damaging effects that patents would engender if allowed in these areas. Second, given the degree of controversy surrounding these matters in recent years it is crucial that Courts make it clear what the situation is.”

** End of Press Release **

Contact Information

Rufus Pollock
Director, FFII-UK
+44 (0)7795 176 976
rufus.pollock@ffii.org.uk

Notes for Editors

1. Software and Business Method patents in Europe
2. The patents in question
   1. Aerotel
   2. Macrossan
3. About the Foundation for a Free Information Infrastructure

1. Software and Business Method patents in Europe

• Computer programs and “rules, schemes, and methods for doing business” are specifically excluded from patentability under Article 52 of the European Patent Convention (1973), “to the extent that [an application] relates to such subject-matter or activities as such”. See http://www.european-patent-office.org/legal/epc/e/ar52.html

• The rule is “fudged” (Sir Robin Jacob, Stephen Stewart Memorial Lecture, 1996), to allow hardware when programmed to be patentable in some circumstances - if the application can be shown to represent a contribution to an area of technology beyond that areas specifically excluded.

• The United States goes much much further, allowing patentability for anything which produces a “concrete, useful and tangible result”. This rules in the patenting of new programming techniques, computer implementations of business methods, and even it seems this week, new accounting strategies for tax minimisation (see http://www.iht.com/articles/2006/10/19/business/norris20.php)

• The European Patent Office goes a little further than UK courts, generally allowing patents on new computer methods if there is an identifiable “technical” improvement. In contrast to the UK, such improvements need not be related to technological areas beyond those excluded by Art 52. Thus a general patent application for a faster method for calculating square-roots (Gale’s Application), which was ruled out in the UK, would probably be allowed by the EPO; whilst a new way of the highlighting the active player in a football video game, allowed in a recent EPO decision, would probably not be allowed by the UK. The UK approach can be seen to give software developers a “safe harbour” of subject matter, where they can make improvements without having to worry about possible patent risk.

• In 2002 the European Commission launched a Directive to confirm the EPO approach across the whole of the EU. The Directive was strongly supported by many of the world’s largest software and industrial companies, and much of the patent legal establishment. But the Directive was strongly opposed by a majority of individual developers and smaller software companies who felt that patents would be a much greater threat than any benefit, and that large companies would hold all the trumps if it came to court cases. Some of the campaign and testimony sites from this time can still be found on the internet, such as:

  • http://www.economic-majority.com/testimony/index.en.php
  • http://web.archive.org/web/20050307135156/protectinnovation.ffii.org.uk/read_testimony
  • http://www.nosoftwarepatents.com/en/m/intro/index.html

  The proposal was ultimately rejected overwhelmingly by the European Parliament in July 2005 (by 648 votes to 14)

• Following the rejection of the European Directive, there has been a spate of cases about software and business method patentabilty in the UK High Court, mostly challenging UK Patent Office decisions to reject applications. The High Court has consistently confirmed the UK approach, and upheld the Patent Office in every instance.

• However, High Court decisions do not establish binding precedents on other High Court cases while decisions by the Court of Appeal do bind lower courts. This week’s decision will be the first time the Court of Appeal will have ruled on the questions of software and business method patentability since 1997, and are expected to give a definitive statement of the UK law in this area - either supporting the run of existing UK court decisions; or decisively striking out in a new direction.

2. The patents in question.

In both cases, the patents in question relate to new software operating on conventional, known hardware; where the novelty rests entirely in the business or administrative logic being implemented.

Aerotel’s Patent

• Aerotel’s patent is GB 217 1877, based on the state of technology in January 1985: http://v3.espacenet.com/textclam?DB=EPODOC&IDX=GB2171877&F=0&QPN=GB2171877

  It claims the making of telephone calls using prepayments. The essential idea is to have a telephone exchange which keeps a record of clients’ credit. Clients can then dial into the exchange, and have their calls completed for as long as they have credit to pay for them.

  It is accepted that the method would have been readily implemented using an electronic control exchange of a kind that had been available in Britain from the 1970s. Only the novel business logic programmed into the exchange is new.

• Aerotel has sued Telco for patent infringement. However, in the High Court, Judge Lewison granted Telco’s application for summary dismissal, and revoked the patent, finding that it did indeed describe no more than a method of business. ([2006] EWHC 997 (Pat))

Macrossan’s Application

• Macrossan’s application is EP1346304 / GB 2388937 / application GB314464.9: http://v3.espacenet.com/textclam?DB=EPODOC&IDX=GB2388937&F=8&QPN=GB2388937

  It has been described by one software contractor as an absolutely conventional “fill-in-the-blanks website that picks the right docs based on guided answers, then fills them in appropriately and disgorges them wherever required”. The only new idea was to apply this to the documents needed to incorporate a company.

• Macrossan’s patent application was rejected by the UK Patent Office. In the High Court, Macrossan appealed against this rejection, but the appeal was dismissed by Judge Mann, finding that although not specifically a business method, it was a method of performing a mental act by a computer. ([2006] EWHC 705 (Ch))

• Macrossan has also applied for a European Patent, which could still be granted for countries in Europe outside the UK. The European application has not yet been decided by the EPO.

Summary

• It seems likely, on current caselaw, that both patents would probably today be rejected by the EPO as not containing anything novel beyond new administrative or business logic, with solely administrative and business consequences. But the approach taken by the Court of Appeal will be seen as an important commentary on EPO practice, and may significantly affect future developments.

• At stake is not only what the Court of Appeal decides, but how it decides it. Even if both patents are dismissed, software developers will be looking particularly closely at whether the Court reaffirms the UK’s traditional more restrictive and more literal reading of Article 52, or whether its argumentation follows the more permissive reading of the EPO.

About the Foundation for a Free Information Infrastructure

The Foundation for a Free Information Infrastructure (FFII) is a not-for-profit association registered in twenty European countries, dedicated to the development of information goods for the public benefit, based on copyright, free competition, open standards. More than 850 members, 3,500 companies and 100,000 supporters have entrusted the FFII to act as their voice in public policy questions concerning exclusion rights (intellectual property) in data processing. FFII-UK is the UK branch of the FFII.

• http://www.ffii.org/
• http://www.ffii.org.uk/

Background

The draft European Patent Litigation agreement of 2004 has accumulated strong momentum thanks to support from the European Patent Office (EPO), the patent departments of large companies (= “industry”), the patent officials of the national ministries (= “the member states”) and by the European Commission’s Directorate General of the Internal Market under Commissioner Charlie McCreevy. EPO president Alain Pompidou says the text of the agreement is ready for rubberstamping by the national parliaments. Some national parliaments, such as Germany’s lower chamber (Bundesrat), have already done so. Input from the European Parliament is required only to a very limited extent.

Yet the spearheads of the patent establishment in the European Parliament, MEP Klaus-Heiner Lehne (EPP, DE) and Sharon Bowles of (ALDE, UK), both legal professionals involved in the patent litigation business, have tried hard to push their groups, which together form a majority, into supporting a motion which gives uncritical backing to the EPLA and to the plans of Commissioner Charlie McCreevy.

The socialist, green, left and and eurosceptic parties have filed motions which strongly criticise the EPLA, thereby triggering nervous reactions from Lehne, including a press release in which he calls his adversaries “diehard anti-innovation MEPs”. During the Strasburg session week of late September, the Lehne-Bowles proposal was cut down from 17 to 3 articles which again came under pressure from within their group. Helpful amendment proposals received support among many MEPs in these groups.

Immediate Situation

However, an unexpected turn came on the 3rd of October, when the socialist group, in view of the possibility that Lehne might still achieve a majority for a bad resolution, gave up its strong position and entered a compromise that prevents the worst. According to this compromise resolution, the parliament basically supports the EPLA and asks for the EU to “join the EPC”, but calls for “significant improvements” to the current EPLA text. Meanwhile, efforts are going on to improve this position by tabling amendments, which would turn the current weak green light into a weak red light.

As things stand now, on thursday, October 12, the European Parliament will vote on three different proposals for a resolution on this subject (at a mini-plenary in Brussels), of which the EPP-ALDE-PSE proposal is set to win with a high margin. The deadline for filing new motions is over. However, amendments to existing motions can be filed until Monday, October 9 (the week of the vote) by either party groups or trans-partisan groups of at least 37 MEPs, and some very helpful amendments indeed have chances of being filed next monday and of receiving majority support next thursday.

What you can do

For the last few weeks, the FFII has maintained a continuous relatively strong presence in the European Parliament. There were always at least 2, sometimes more, activists working in the Parliament to support EPLA-critical efforts. You can contact the team by writing to europarl-help [at] ffii [dot] org.

If you can afford to spend a few hours of your time, please find out at http://www.europarl.europa.eu who your MEP is and send her a polite and concise mail where you inquire about the current situation and ask whether she would be willing to meet you or someone from the FFII team to explore the possibility of supporting the current trans-partisan amendment effort. There is a sample fax about the EPLA motion which you can use if you wish.

If you’re from the UK and are going to contact (have contacted) your MEP please notify uk-help mailing list so that we make sure we don’t badger the same overworked MEP twice.

Main Talking Points

1. The EPLA would raise the costs of most patent lawsuits over the status quo, which disadvantages SMEs. For a small to medium-scale litigation, the overall costs will amount to EUR 97,000 to EUR 415,000 according to EPO estimates (and the EPO is pro-EPLA, so the actual numbers may well be much higher). Some SMEs who hold patents would not be able to afford to enforce them, and SMEs who are threatened with patent litigation wouldn’t be able to defend themselves. The current system of country-by-country litigation may not seem perfect, but it’s much more affordable to SMEs than the present proposal for the EPLA.

1a. The EPLA makes patent lawsuits prohibitively expensive for those who publish software on the internet. An Irish programmer could be sued in Cyprus, because the alleged infringement takes place everywhere where the Internet is, including Cyprus, and EPLA says that the lawsuit can be brought to a court at the location of infringment.

1. It’s a question of judicial independence: Lehne-Bowles propose to create a new court system that would be under the control of the same people who also govern the European Patent Office (ministry officials in charge of patent policy), while the alternative motion emphasizes the need to put the EPO under independent judicial control.

2. If judicial independence is compromised as proposed, software patents will become legally enforceable in Europe on a large scale. The way the EPO decides is known because of the EPO’s Boards of Appeals’ decisions; if you take more or less the same material and a very similar construction plan and build a machine, what comes out at the bottom of the machine is more or less the same. And the way the ministry officials in charge of the EPO (who would also be in charge of the EPLA court) like to define patent policy is known because they worked out the EU Council’s proposed software patent directive, which the EP then rejected. The EPLA is all about replicating the EPO structures.

3. The EPLA would strengthen the EPO system at the expense of the EU. The EU would probably become involved in some fashion, but it would be better for the EU to wait until the time is ripe for a true Community patent.

4. It’s about democracy itself. The EPO system is undemocratic and operates without parliamentary control. That’s why it should not be strengthened (or replicated) in its present form. Also, the draft EPLA would give ministry officials legislative authority on the rules of procedure, but in every country in the civilized world, the procedural code for the courts is defined by lawmakers (i.e., parliaments).

5. By supporting the Lehne-Bowles motion, the EP would support commissioner McCreevy’s new patent initiative almost unconditionally (and undeliberately), while the alternative motion voices constructive criticism and positions the Parliament for future debates on the right course of action.

6. Some major companies have even expressed various reservations concerning the proposed EPLA. Nokia, which holds more than 10,000 patents of its own, has said that the EPLA is too much in favor of certain patent holders and jeopardizes innovation.

The proposed task force mainly consists of large IT firms, such as IBM, Cisco, and Intel, and the undersigning associations accuse the Commission of ignoring the fact that 80 percent of the European IT sector, by value, consists of small and medium-sized firms, who are unrepresented in this task force but must bear the brunt of the policies defined by the EU Commission.

Pieter Hintjens, President of FFII, an association which represents 3500 European IT companies, states: “The idea that we can create EU-wide policy and legislation without input from a broad base has been discredited. The EU must become more inclusive and less elitist if it is to survive the challenges of public opinion in the decades ahead. We are giving the Commission the opportunity to work with the majority now, rather than face mass opposition later when it presents yet one more set of special-interest proposals that damage the market.”

David Ramsden, Chairman of the Professional Contractors Group PCG, a cross-sector representative body that represents the interests of 12000 freelancers in the UK points out: “Many of the EU’s most businesses in the ICT sector are also the smallest. The companies represented by PCG exemplify the significance of small firms to this area of the economy. It is vital that they are fully represented on any Task Force or other body relating to the sector.”

Other groups expressing their concern included the 600 German companies of PatentFrei.de representing 600 German companies, the Polish Software Market Association CEA-PME, an umbrella assocation of SMEs in Brussels; the Slovene Software Developers Assocation KODA.

Full press release and more details available here.