Can The U.S. Follow New Zealand and Ban Software Patents?


New Zealand has taken a great step forward in the fight to give “businesses more flexibility to adapt and improve existing inventions, while continuing to protect genuine innovations,” explained Commerce Minister Craig Foss.

In banning software patents, New Zealand has done the equivalent of amending section 101 of the Patent Act that helps define what is, and is not, patentable. As a refresher, this oft-cited section is intended to preclude patent protection for laws of nature, natural phenomena, and abstract ideas.

Historically, courts rules that the algorithms used in software were too abstract, under section 101, to qualify for a patent. Then, in 1998, one Federal Circuit Ruling changed all that. In State Street Bank v. Signature Financial Group, the courts made it easier to get patents on software and “business methods”, previously seen as too abstract.

What this meant in reality, was an explosion in the number of software patents in the system, with inventors arming themselves for business advantage, and in defense. It was this transformational change in Court opinion that has led to patent battles between titans (Apple v. Samsung), and other, more economically dangerous, David and Goliath battles between small startups and bad actors that have become known as “patent trolls”.

In Scaling the Patent System -- a report by Tim B. Lee and Christina Mulligan -- the authors explain that the sheer volume of vague and overbroad software patents makes the the patent system unworkable for software; it is impossible for entrepreneurs to search through granted patents in order to determine whether or not they are infringing -- even if there were enough lawyers, and hours in the day, the discovery costs would be prohibitively high.

So, can we redefine section 101 and solve the scalability problem for software patents? The answer, most likely, is no. While the patent system no longer works optimally for software, it does work for other industries. The pharmaceutical industry, for example, is well served with chemical patents that are indexed, and therefore searchable, by formula. But the fact that the patent system works in some industries is actually both a blessing and a curse: individuals trying to establish new software patents may try to find a new area under which to file. It will be interesting to see if this workaround becomes apparent in New Zealand.

Since there is little political appetite for messing around with Section 101, we’re left with a myriad of other solutions to the problem of software patents and the bad actors that come along with them -- causality that is validated by a recent GAO study. One worth particular mention in this context is the move to expand the business methods review process [link] built into the America Invents Act. At least then, the patent office might be able to weed out the worst (read: most vague and/or obvious) software patents in circulation.

Also of note is the renewed willingness of the Supreme Court to re-enter the debate with their ruling on human genes. In short, they ruled a patent for human DNA invalid because it look laws and nature and included “well-understood, routine, conventional activity previously engaged in by researchers in [the] field.” What makes this ruling especially interesting is the fact that the opinion extended to cover all categories of unpatentable material under Section 101 -- hinting that the Supreme Court might think equally poorly of software patents.

What can we take from New Zealand’s historic law? We can certainly take hope from the fact that other nations have experienced the same problems with software patents (despite differing patent systems), and have found ways to nullify the issue. While the U.S. will likely forge a new path, at least New Zealand’s Institute of IT Professionals (IITP) chief executive, Paul Matthews, added a new word to our patent troll vocabulary when he stated that no longer would New Zealand “tolerate the vexatious (emphasis added) practice of ‘patent trolls’”.

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