Technology Patents

October 5th, 2012 at 12:00 pm by David Farrar

Judge Richard Posner has blogged:

I am concerned that both patent and copyright protection, though particularly the former, may be excessive.

To evaluate optimal patent protection for an invention, one has to consider both the cost of inventing and the cost of copying; the higher the ratio of the former to the latter, the greater the optimal patent protection for the inventor. The ratio is very high for pharmaceutical drugs. The cost of inventing a new drug, a cost that includes the extensive testing required for the drug to be approved for sale, is in the hundreds of millions of dollars, yet for most drugs the cost of copying—or producing an identical substitute—is very low. And so the ratio of the first to the second cost is very high, making it hard for the inventor to recover his costs without patent protection (and for the additional reasons that the present value of the revenue from sale of the drug is depressed because of the length of time it takes to get approval, and that the effective patent term is truncated because the patent is granted, and the period patent protection begins to run, when the patent is granted rather than, years later, when the drug can begin to be sold).

Pharmaceutical drugs are the poster child for patent protection. Few other products have the characteristics that make patent protection indispensable to the pharmaceutical industry.

I think Judge Posner articulates well why patents are so necessary in areas such as pharmaceutical. Without them, we would have far fewer drugs and vaccines.

The problem of excessive patent protection is at present best illustrated by the software industry. This is a progressive, dynamic industry rife with invention. But the conditions that make patent protection essential in the pharmaceutical industry are absent. Nowadays most software innovation is incremental, created by teams of software engineers at modest cost, and also ephemeral—most software inventions are quickly superseded. Software innovation tends to be piecemeal—not entire devices, but components, so that a software device (a cellphone, a tablet, a laptop, etc.) may have tens of thousands, even hundreds of thousands, of separate components (bits of software code or bits of hardware), each one arguably patentable. The result is huge patent thickets, creating rich opportunities for trying to hamstring competitors by suing for infringement—and also for infringing, and then challenging the validity of the patent when the patentee sues you. 

Just as patents encourage innovation in the pharmaceutical industry, there is a growing belief they stifle innovation in the software space. Hence why NZ has, in theory, decided not to allow software patents.

The Government has proposed a legislative wording which is effectively:

A computer program is not an invention for the purposes of this Act … to the extent that a patent or an application relates to a computer program as such

Labour MP Clare Curran has proposed an amendment, supported by many NZ technology groups, being:

A computer program is not an invention for the purposes of this Act … ]but] does not prevent an invention that makes use of an embedded computer program from being patentable

Guy Burgess has blogged that an opinion by Andrew Brown QC has stated:

 the Government amendment, now incorporated into the Bill following the second reading, will effectively allow the patentability of computer programs except where these have no technical effect e.g. algorithms, schemes or plans

Andrew Brown is one of the leading intellectual property lawyers in NZ, if not the leading one, so his opinions carry considerable weight. His full analysis is here. It is worth noting that overall, he thinks the “as such provision” presents a workable set of criteria and signposts.

Personally I think the issue is not just a workable definition, but also whether you want software patentable at all. My view is that amendment by Clare Curran is superior as it clearly says software is not patentable, however protects inventions that have software embedded within them.

National no doubt has to vote in line with the Government decision. However United Future, ACT and the Maori Party do not. I hope they take the time to get to grips with this issue – which is an important one for many NZ technology firms, and that they back the Curran amendment. It is, in my opinion, closest to what the Select Committee unanimously recommended.

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