IPR Law

Software Patents

Ivan Khosa

Roll no. 7/10

Submitted to:Dr. Jasmeet Gulati

IPR

TABLE OF CONTENTS

AUTHORITIES REFERRED III

CASES III

WEB SOURCES REFERRED III

STATUTES REFERRED IV

ACKNOWLEDGEMENT IV

INTRODUCTION 1

SOFTWARE PATENTS 2

SOFTWARE PATENTS IN US 2SOFTWARE PATENTS IN EUROPE 3SOFTWARE PATENTS IN INDIA 4CRITICISM OF SOFTWARE PATENTING 5

OTHER FORMS OF IP PROTECTION OF SOFTWARE 6

PROTECTION UNDER COPYRIGHT LAW 6PROTECTION UNDER TRADE SECRET LAW 7LIMITATIONS OF THESE OTHER MEANS 8

CONCLUSION 9

ii

IPR

AUTHORITIES REFERRED

CASESDiamond v Diehr, 450 US 1975(1981)..........................................................................2

Funk Bros. Seed Co. v Kalo Inoculant Co., 333 US 127,130 (1948)............................2

Gottschalk v Benson, 409 US 63(1972).........................................................................2

In re Alappat. U.S. Court of Appeals Federal Circuit. July 29, 1994. 33 F.3d 1526.....3

In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385 (Fed. Cir. 2008).................................3

Mackay Radio & Tel. Co v Radio Corp of Am., 306 US 86,94 (1939);.......................2

State Street Bank & Trust Co v Signature Financial Group, 149F.3d 1368 (Fed. Cir.

1998)..........................................................................................................................3

WEB SOURCES REFERRED

1. Ritushka Negi, Business method and software patent trends in India, available

on

http://www.iam-media.com/Magazine/Issue/35/Management-report/Business-

method-and-software-patent-trends-in-India

2. Arya Mathew, Patent Protection For Computer Program - Analysis Of The

Forms Of Ip Protections Available For Computer Programs And Justification

For Patent Protection In The Indian Context, available at

http://www.altacit.com/pdf/Patent%20Protection%20for%20Computer

%20Programme.pdf

3. Aurobinda Panda, Business Method Patent & Computer-Related Inventions

Patents in India (August 24, 2010). Available at SSRN:

http://ssrn.com/abstract=1867023 or http://dx.doi.org/10.2139/ssrn.1867023

4. Software Patents, IPpro Services (India) Pvt. Ltd, available at

http://ipproinc.com/admin/files/upload/48df91ce5af4e4e711c64fc23bcbdaa4.p

df

iii

IPR

STATUTES REFERRED

Indian Patent Act, 1970

European Patent Convention

ACKNOWLEDGEMENT

I would like to thank my IPR professor, Dr. Jasmeet Gulati for providing me insight

and being instrumental in my research. I would also like to thank my family and my

friends for giving me support throughout my research.

iv

Software Patents

INTRODUCTION

India is well known for its software industry, which has growth exponentially in a

short space of time. According to estimates of the National Association of Software

and Services Companies (NASSCOM) – the main trade body and chamber of

commerce of India’s IT and business process outsourcing industries – the domestic

software industry generates annual revenues of around US$60 billion, the bulk of

which is exported. Further, many top multinational companies either do business in

India or have research centers there, thus promoting knowledge exchange and

bringing in valuable foreign know-how.1

The laws which govern the protection of computer software fall under the domain of

intellectual property. Intellectual property protection is generally granted for the

benefit of both creator of the property and public welfare. There is a three step

process linking the public welfare with intellectual property. The first step involves

expanding the scope of legal protection offered to software creator by granting them

enhanced monopoly rights. The second step is this kind of enhanced protection

creates a reward system motivating further creativity. Finally, this expansion of

inventive activity brings about the discovery of more ideas and faster advancement of

technology. The end result of this process is that the public receives different range of

software products.2

The granting of intellectual property protection to computer programmes can be seen

as a form of legal subsidization to a particular industry and technology. The

intellectual property regimes that protect computer software have had a direct impact

on the ownership and user regimes that have been established; the alternatives to

proprietary software, open source and free software have been a philosophical and

1 Ritushka Negi, Business method and software patent trends in India, available on <http://www.iam-media.com/Magazine/Issue/35/Management-report/Business-method-and-software-patent-trends-in-India>2 Arya Mathew, Patent Protection For Computer Program - Analysis Of The Forms Of Ip Protections Available For Computer Programs And Justification For Patent Protection In The Indian Context, available at <http://www.altacit.com/pdf/Patent%20Protection%20for%20Computer%20Programme.pdf>

1

Software Patents

practical response to the existing legal regimes.

SOFTWARE PATENTSPatents are exclusive territorial monopoly rights granted to inventors, in exchange for

their disclosure of the invention, for a limited period of time, enabling them to cover

the cost of innovation. All over the world patents are generally granted for tangible

products or processes in all areas of technology that are new and useful with certain

exceptions like, abstract ideas, mathematical algorithms and life forms.3

With the rise of computer related technology and with it the software industry in the

last quarter of the last century it has become necessary to provide suitable intellectual

property protection to this nascent, but increasingly important, area of technology.

Software patents in USTitle 35 U.S.C.101 states that „whoever invents or discovers any new and useful

process, machine, manufacture, or composition of matter, or any useful improvement

thereof may obtain a patent‟. The law does not expressly prohibit any field of

technology from being patentable. Only the courts had excluded “laws of nature,

scientific phenomena, and mathematical formulae” from patentability.4

Till the 1970s courts treated software-related inventions as unpatentable subject

matter as “software was essentially mathematical formulae”.5 However, in Diamond v

Diehr the US Supreme Court decided that patent cannot be denied for an invention for

the only reasons that “its claims contained mathematical formulae”.6 But, it was the

landmark decision of the Court of Appeals in the Federal Circuit (CAFC) in the State

Street Bank & Trust case, concerning a US patent claiming a data processing system

for implementing a particular investment structure that combines the advantages of

3 Aurobinda Panda, Business Method Patent & Computer-Related Inventions Patents in India (August 24, 2010). Available at SSRN: <http://ssrn.com/abstract=1867023 or http://dx.doi.org/10.2139/ssrn.1867023>4 Mackay Radio & Tel. Co v Radio Corp of Am., 306 US 86,94 (1939); Funk Bros. Seed Co. v Kalo Inoculant Co., 333 US 127,130 (1948)5 Gottschalk v Benson, 409 US 63(1972)6 Diamond v Diehr, 450 US 1975(1981)

2

Software Patents

economies of scale with the tax benefits of partnership, which held that any

computer- related invention is a patentable under law if it produces a useful, concrete

and tangible result7 that enlarged the scope of patentable subject matter. Then, further

in re Alappat8 the court indicated that even where mathematical concept is embodied

in a specific machine to produce a useful, concrete and tangible result then the

mathematical concept is a subject matter for patent.

Another consequential case with regard to software patents is the re bilski case which

was decided in 2008. In light of the long awaited ruling in re bilski, the “useful,

concrete and tangible result” test gave way to a new test for patentability. The test has

been referred to as the "machine-or- transformation" test.9 The machine or

transformation test brings about the question: What does a ‘particular machine’

constitute? And if a software program runs on a computer, which is technically a

machine, can it be patented? The USPTO’s Board of Patent Appeals and Interferences

(BPAI) has already answered this question: “A general purpose computer is not a

particular machine, and thus innovative software processes are unpatentable if they

are tied only to a general purpose computer.”10

Software patents in EuropeArt 52(2) of the European Patent Convention (EPC) expressly excludes “computer

related program per se” and “methods of doing business per se” from patentable

subject matter, but, “only to the extent to which a European patent application or

European patent relates to such subject matter or activities as such”.11

Till the late 90’s the European patent office guidelines and the Board of Appeal took

a similar and consistent view that, ‟a computer programme claimed by itself or as a

record on a carrier is unpatentable irrespective of its content”.12 In T833/91, the

7 State Street Bank & Trust Co v Signature Financial Group, 149F.3d 1368 (Fed. Cir. 1998)8 In re Alappat. U.S. Court of Appeals Federal Circuit. July 29, 1994. 33 F.3d 15269 In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385 (Fed. Cir. 2008)10 Software Patents, IPpro Services (India) Pvt. Ltd, available at <http://ipproinc.com/admin/files/upload/48df91ce5af4e4e711c64fc23bcbdaa4.pdf>11 Art 52(3) European Patent Convention12 T204/93 OJ

3

Software Patents

technical Board of Appeal broadened the scope of patentability, “the technical

contribution that allows a subject matter to be patentable might lie in (1) problem

underlying the invention, (2) the means constituting the solution, or (3) the effects

achieved by the solution of the underlying problem”.13

And later in three cases, relating to inventions of IBM, the scope of patenting

software related patents in Europe was considerably enlarged. All three relates to

applications for patent by IBM which claimed for computer programmed on a

computer-readable medium.14

European patent Office rejected the applications stating that, ‟since the medium and

the program recorded thereon were not technically related the technical character of

the computer program could not be derived from the physical character of the storage

medium on which it was recorded”.15 The Board of Appeal in its conclusion reasoned

that “technical effect is achieved by the internal functioning of a computer itself under

the influence of said programme”, “on the said condition all programmes must be

considered as inventions”, also a computer programme on a computer readable

medium has the “potential to produce a technical effect” and hence not excluded from

patentability. In another case, the Board of Appeal concluded that all programs when

run in a computer are by definition technical.16 These findings are totally divergent to

the decision in SOHEI, which stated that normal interactions between a program and

a computer could not amount to a technical contribution and it is necessary to show

that a new machine was created.

Software patents in IndiaSection 3 of the Indian Patent Act, 1970 covers topics that are not patentable. Section

3(k) states as unpatentable “a mathematical or business method or computer program

per se or algorithms.” The sub-section (k) was added to Section 3 of the Indian Patent

Act, 1970 by the Patents Amendment Act, 2002. This sub-section for the first time in

13 T833/91 OJ14 Panda, supra note 3.15 T1173/97 OJ16 T0931/1995 OJ

4

Software Patents

India’s patent history made patentable at least certain aspects or variations of

computer program related inventions.17

In 2005, the President of India moved an Ordinance to include computer software that

was embedded in hardware like computer, mobile, televisions etc. and having

industrial application under the definition of patentable inventions by amending

Section 3(k) of the Indian Patent Act, 1970. The Ordinance split the Section 3(k) into

two sub-sections (k) and (ka). The excluded subject matters as originally contained in

Section 3(k) were provided in the new sub-section (ka). The sub- section (ka) now

included as topics not patentable ‘a mathematical method or a business method or

algorithms’. The amended Section 3(k) read as follows:

“a computer program per se other than its technical application to industry or a

combination with hardware”.

The points of interest in the above proposed amendment were the addition of the

“technical application” criteria and “combination with hardware”. The intention was

to make clear that if an invention directed at computer software had technical

application to industry or coupled to hardware – then it was patentable. This seems

analogous to the EPO’s “further technical contribution” criteria.

However, stiff opposition to the above amendments caused the Indian Parliament to

reject the Ordinance and not enact the same. As a result, the law as it stands now has

been reverted to the original position of excluding computer programs per se from

patentability. The “per se” catch again introduced ambiguity to the law and as a result

a number of applications relating to software inventions are filed in India every year

by not claiming computer programs “per se” but attaching a hardware component to

meet the statutory requirements.18

Criticism of software patenting Monopoly: Large corporations have the technical, financial and legal resources to

develop a considerable patent portfolio around emerging technologies. Additionally,

what they don’t create they can buy from lesser companies. It could be argued that

17 IPpro Services, supra note 10. 18 Negi, supra note 1.

5

Software Patents

this is the case with any product but the difference is that software is free of real

world constraints and highly sophisticated software products may be created, which

may be dependent on various technologies. If the various dependent technologies are

patented, further innovation in the technology by anyone other than the holder of the

patent may come to a stand-still. This may lead to monopolistic control.

Innovation: As an off shoot of the monopolistic tendencies of large corporations,

small time or start up software companies may be caught in between stifling patents

on fundamental concepts which do not allow for any innovation. In the field of

software, even the smallest company can potentially turn a great idea into a successful

product because the capital requirements are relatively moderate. Software patents

would force small companies to obtain costly patents themselves and thereby

artificially inflate the capital needs of software development.

Impact on the Open Source Community: The increased rate at which certain countries

are granting software patents may indeed sound the death knell for the open source

community. Developers face the risk that original code they have written in good

faith could be deemed to infringe an existing software patent. The presence of an

active open source community has forced large organizations to cut down on prices.

Since it is available free of charge (subject to certain conditions), open-source

software is a fierce competitor to traditional software companies. It takes away market

share, and in doing so brings down the price levels.19

OTHER FORMS OF IP PROTECTION OF SOFTWARE

Protection under Copyright Law Copyright protection, like patent protection, exist on the theory that “the public

benefits from the creative activities of authors, and that the copyright monopoly is a

necessary condition for such creative activities”. Copyright protects the expression of

an idea and not the idea itself, provides that the expression constitute „the fruits of

intellectual labour‟, and it should not be copied from else where. Under copyright

laws of different jurisdictions world over, software is considered as a literary work.

19 IPpro Services, supra note 10

6

Software Patents

Copyright subsist in original works that are capable of being reproduced from a fixed

medium. Movies, musical compositions, painting and other creative expressions are

protected by copyright. The copyright regime is oriented towards the protection of

existing works, already accessible to the public, the existence of the protection

making it possible to regulate by subsequent contracts the way the public can access

these works.

It is a well established principle that computer programs are copyrightable subject

matter, just like any other literary work. Both the TRIPS Agreement, 1995 and WIPO

Copyright Treaty (WCT), 1996 state that computer programs, both in source and

object code must be protected by copyright. Copyright protection applied to software,

would protect only the intellectual property embodied in the software as a mode of

expression. Copyright is a bundle of rights, which entitle the owner to prevent

copying of the protected work, to prevent the distribution of copies and to prevent

preparation of derivative works.20

Computer program mean a set of instruction expressed in words, codes, schemes or

any other form, including a machine readable medium capable of causing a computer

to perform a particular task or achieve a particular result. The words „schemes or in

any other form‟ would seem to indicate that the source code and object code of

computer program are entitled to copyright protection.

Protection under Trade Secret LawThe origin of the trade secret law is from the common law concept of tort liability and

confidentiality in employment relationships. It is a saying that a secret known by

more than one person is no longer a "secret", and a trade secret that cannot be sold or

otherwise exploited is useless. The owner of a trade secret can exploit his trade secret

through confidentiality agreements, both with his employees and with his customers

in order to protect the confidentiality of the trade secret. It is not necessary that the

owner of the trade secret take steps to maintain absolute secrecy. But he should take

reasonable steps to maintain secrecy, which will depend upon the circumstances. As a

general proposition, the owner of the trade secret should limit access to the trade

secret to those who have a need to know the secret in order to perform their duties and 20 Mathew, supra note 2.

7

Software Patents

the persons those who have sign a confidentiality agreement where they agree that

they will not disclose the secret to anyone and that they will also take steps to

maintain secrecy of the trade secret. Trade secret protection is an important means of

protecting computer software. Coupled with copyright protection, this is the most

effective way to protect computer software. Some times trade secret protects the

functional aspects of software. The main goal of trade secret law is the maintenance

of standards of commercial ethics.21

Generally, trade secret law protects ideas, facts, and know-how, whether in tangible

form or not. A trade secret can be defined as any formula, pattern, device, machine,

process, technique, compilation of information, or program. Hidden aspects of web

sites and software can certainly be protected by trade secret law.

Trade Secret law has also been relied upon to partially fill the void left when software

was denied patent protection by the courts. Patent protection may coexist with trade

secret protection. Trade secret protection will be important during the pendency of a

patent application, and may even protect undisclosed details of an invention during

the term of, or after the expiration of, the patent. Trade secret law protects

confidential business information against unauthorized use or disclosure and is based

on statutory and common law and contractual provisions.

Limitations of these other meansComparing to the protection given under patent law, the protection given by copyright

and trade secrets has limited scope. The owner of the copyright over an item of

software has the right to prevent any other person from copying the code as it is

written but does not have the right to prevent the utilization of idea behind the code,

providing that the person utilizing the idea must use in a manner that different from

the arrangement of the code. The copyright law is also limited to prohibit

unauthorized copying of the protected work but it does not prohibit all forms of

copying. The expression of a method of operation and principles of a computer

program cannot be protected by copyright. Functional aspects of a computer program

are excluded from copying. A patent provides more secure protection than the

copyright and the trade secret. It protects the idea or functionality of the software.

21 Mathew, supra note 2.

8

Software Patents

Copying of an idea is very easy to do and anybody can describe it simply, that is

might a patent is restricting from doing.22

CONCLUSIONIt is undeniable that there are several opponents to allowing software patents. But, on

the other hand, it is also true that there are several corporations keen to protect their

interests through patents. The intentions of big corporations acquiring large software

patent portfolios may also be debatable.

On the one hand, patents on software give recognition to software developers and also

serve as return on investment put into developing the software. It may also provide an

incentive for propagating generation of ideas which may be beneficial to society.

On the other hand, software patents may give control of the entire industry to a few

key players and lead to a monopolistic environment where any form of competition or

threat by small or medium sized organizations would be smothered unabashedly. The

part played by the open source community in keeping prices of software applications

in check may also be affected. The biggest threat would be to innovation. Patents are

awarded to promote innovation; however, apparently software patents do not seem to

work that way.

22 Mathew, supra note 2.

9