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Innovation 'crushed' by change to Patents Bill

Tuesday 04 Sep 2012 5:10a.m.

Patents Bill change will 'crush' innovation

By Dan Satherley

'As' and 'such' – two little words that mean little on their own, but together have enraged many in the New Zealand tech industry.

Changes made to the Government's long-gestating Patents Bill would allow inventions that included computer programs to be patented.

On Tuesday last week, a new clause was inserted into a supplementary order paper concerning the bill, which had its first reading in 2009. The original text specifically excluded computer programs from being patentable, while the amendment says that while computer programs themselves are not inventions, the bill only "prevents anything from being an invention for the purposes of this Act only to the extent that a patent or an application relates to a computer program as such".

And it's the inclusion of the phrase "as such" that has many in the tech industry worried.

Paul Brislen, chief executive of the Telecommunications Users' Association says the introduction of these "two magic words" goes against almost every public submission made on the bill.

Mr Brislen says on the surface, software patents look like a good idea, but in practise they lead to "stupid" patents like Amazon's "1-Click" technology, which means companies like Apple have to pay Amazon to have an online store where purchases can be made with a single click.

"Which is quite frankly, rubbish," says Mr Brislen. "It's clicking on a button."

LAWYERS SET TO PROFIT FROM AMENDMENT

The fear many in the tech sector have is that by opening up software to patents, New Zealand companies will be at the mercy of large multinational corporations like Microsoft, Google and Apple.

Strategy and relations manager at Catalyst IT, Jason Ryan, says the bill won't give Kiwi tech companies any more protection than they already have.

"It's going to make a lot of money for software patent lawyers, who argue these things, and it will be an incredibly expensive process for New Zealand companies to patent their software," says Mr Ryan.

He says having to register and defend patents will be beyond the financial ability of most New Zealand-based tech firms.

"How would a New Zealand company defend itself against Apple, with the largest market cap in the world?" he asks. "It's not addressing the issue – you want to foster innovation, not set up a regime in which innovation is crushed by the size of your legal department."

KIWI TECH FIRMS REVOLT

The amendment to the bill, backed by Commerce Minister Craig Foss, has been backed by legal firms like Chapman Tripp and AJ Park, as well as industry group New Zealand Information and Communications Technologies Group (NZICT).

NZICT represents many local tech companies, but not all of them are happy. SMX, a cloud-based email security provider, cancelled its membership of NZICT in protest.

"NZICT really doesn't seem to be reflecting New Zealand software developers at all," co-founder Thom Hooker tells 3 News.

"If you look at the number of patents that are held in New Zealand, the vast majority are actually held by overseas companies setting up a patent in New Zealand so they can establish their presence here and protect their own IP."

Mr Hooker says most of NZICT's funding comes from large off-shore companies or their local partners, so it's not surprising they backed the bill.

"If you look at the people who are defending it, it is the large companies," says Mr Hooker.

The recent court case between Apple and Korean tech giant Samsung has illustrated the technology patents battle on a scale previously unseen. After several months of to-and-fro, a US jury eventually ruled that Samsung had infringed on Apple's patents, and had had to pay them over US$1 billion.

Mr Hooker says if a Apple targeted a Kiwi company, they wouldn't stand a chance.

"If someone like Apple owns these patents, and someone like Samsung can't fight them, then what chance does a little New Zealand software company have?"

BILL EMULATES 'MESSY' EUROPEAN MODEL

The Government, and supporters of the change, say it will not only protect New Zealand firms' intellectual property, it will align our patent laws with our trading partners.

"The bill will continue to protect genuine innovations and encourage Kiwi businesses to export and grow," Mr Foss said on Tuesday evening.

"The minor amendment will enhance our patent legislation and bring it into line with overseas jurisdictions."

But what he calls a "minor amendment" has caused major problems in Europe, says Green Party IT spokesperson Gareth Hughes.

"We're moving away from the critical clarity which was the bill that came out of select committee, which was that software couldn't be patentable," Mr Hughes tells 3 News.

"This makes sense, it was the clear message from our growing IT sector… the European model which frankly is a bit of a mess, and we're going to see probably lawyers deciding what it actually means for New Zealand."

He agrees that the Government has succumbed to lobbying from large multinationals.

"Craig Foss should either withdraw the amendment, or actually put it to a new select committee investigation, because we should hear from the experts exactly what this change will mean, because it is significant."

Labour's IT spokesperson Clare Curran called the amendment a "cruel blow".

"The Patents Bill proposed to exclude computer software from being patentable, because like books, movies or music, it can be protected under copyright law," says Ms Curran.

"The minister has caved in to pressure from big corporations which fear competition from smaller players. That’s a slap in the face to the local industry, and many innovative Kiwi software firms will now face real challenges to develop new software."

She says former Commerce Minister Simon Power got it right when he adopted the select committee's view that software shouldn't be patentable.

WHY SOFTWARE IS DIFFERENT

The problem with software patents, its critics argue, is that software is merely code – and identical outcomes can be achieved in a number of unique ways.

"In the real world if you had, for example, two mousetraps, and I came up with a mousetrap that used one idea, and you came up with another mousetrap that used another idea to work, they might both work and they might both have patentable ideas, and that's fine," says Mr Hooker.

"But if we were talking about a software mousetrap, I might come up with one way of creating that mousetrap in one language and one set of code, and you might come up with a different way of coming up with that virtual mousetrap in a different set of code.

"The end result though is the same, and the only way that we can examine that software mousetrap is to look at the end result, not at the source code.

"In that scenario we'd have a conflict, and it would have to go down to the court level to decide who actually wins that battle. In New Zealand there are a lot of small companies – they can't usually afford to have a legal battle to decide these sorts of issues, so invariably the company with the most legal clout gets their way," says Mr Hooker.

"Imagine if someone had patented fire or the wheel – we'd have to pay a dollar every time we wanted to light a fire."

BILL'S BACKERS KEEP QUIET

3 News asked NZICT why they were backing the amendment despite concern from the industry but they declined to comment, instead referring us to some of their members they said supported the bill – whom apart from Microsoft NZ, also declined to comment.

All Microsoft NZ would say is that it "welcomes the Government’s decision to clarify the language of the Patents Bill", but declined an interview.

NZICT might back the amendment, but a rival tech industry lobby group, NZRise, said it was "appalled".

"We utterly reject the proposed changes and insist that the Government maintains the position it and the select committee have had from the outset," says co-chair Paul Ramsay.

"We believe the changes will discourage invention and constrain innovation in New Zealand. I would seriously question what has been the catalyst for the minister’s change in position."

Mr Ramsay suggests the ongoing Trans-Pacific Partnership discussions could be to blame for the delay in passing the Patents Bill, a view backed up by Mr Hughes.

"This has been speculated by numerous commentators as the reason why the patents law hasn't been progressed in Parliament, because the Government wants to see how the Trans-Pacific Partnership negotiations go," says Mr Hughes.

"America is the only intellectual property net exporter in the world – everybody else in the world is a net consumer – and it's important that the laws globally aren't being written to benefit the US, and I think that's the fear of many TPP countries, and possibly what we're seeing with this patent law debate."

Mr Hooker agrees that only multinational companies stand to gain anything from the Government's U-turn, calling it "indefensible".

"I think it's hard for people to justify this position because it really isn't in New Zealanders' interests, it really is in offshore companies' interests," says Mr Hooker.

"It is an indefensible position, and I'm not surprised you're struggling to find anyone who can debate that side of the equation."

No date has yet been set for the bill's second reading.

3 News

 
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