Response to Software Exception in Patent Bill

Law firms that supported continued software patents have published critiques of the arguments put forward by those who opposed software patents and asked for an exclusion to be added to the Patent Bill. In this article Peter Harrison, vice President of the NZOSS responds.

First I would like to thank the Commerce Committee for the carefully consideration of the issues around software patents and applaud their decision to introduce an exclusion for software from patents. In all honesty it was very unexpected that we would be able to change the direction of this legislation. That we have put forward a argument that was sufficiently compelling means our hard work over the last several years has indeed born fruit.

Of course we are not naive. This is certainly not the end of the line; the Government must adopt the report of the Commerce Committee and pass the legislation. We sincerely hope that the Government will adopt the careful deliberations of the Commerce Committee and carry forward the legislation as proposed by the Commerce Committee. There are many powerful interests who will be very upset by this decision, and no doubt they will bring every influence they have to bear on changing this decision.

Two law firms with an interest in patent law have already weighed in, and so I have taken the time to reply to their comments.

They believe that software patents are inconsistent with the open source model. However, this is only relevant if the model is proven to be best and that all software developers should use it. There is no such evidence. Developers who use the proprietary model should be free to do so unless there is proven economic harm.
- AJ Park

In our submission we did not make the argument that the effect on open source software specifically was reason enough to disallow software patents.

We believe that software patents will damage the interests of our members and of the larger New Zealand Information Technology sector.
- NZOSS Patent Bill Submission

The fact is that many of our members are professional software developers. A significant number of these members develop closed source products. In fact a large number of software developers who are not members also support our position on patents regardless of the business model they use. Our argument is that software patents are harmful to all New Zealand software development houses.

The committee noted that software patents can stifle innovation and competition, although why only software patents have this effect is not explained in the report.
- AJ Park

The ways in which software patents can stifle innovation was given specific treatment in our submission. Our first example was a comparison to books which are no doubt can be creative and innovative, but are not covered in patent law. Software is a form of creative expression in almost every way analogous to writing a book. Our second example was a description of how patents have been used to reinforce monopolies and protect the revenue streams of large multinationals, but have failed to provide revenue to New Zealand software companies.

Finally, we note that the committee’s amendment will mean a divergence from the patent law of our neighbour, Australia, despite a treaty for the harmonisation of business law between our two countries.
- AJ Park

The selection of Australian patent law as an example of divergence is curious considering that Europe has taken the same stance as New Zealand. Therefore we are in fact implementing a patent approach that is well supported by some of our largest trading partners. It is indeed unfortunate that Australia implemented changes to it's patent law as a consequence of the US Free Trade Agreement, as it has seen no benefit from that agreement. It would tend to indicate that changing our patent law to benefit US multinationals should at least wait until we have a solid Free Trade Agreement with the US Administration that delivers something of real benefit to us, such as to cut subsidies to it's dairy farmers and allow us to compete on a equal basis. There is little benefit to sacrificing any meager leverage we may have simply to get to the negotiation table.

It is not clear why the Committee gave the open source Community submissions such weight. To argue that software is unpatentable because it builds on existing software seems unusual given nearly every invention builds on what others did before. As many innovators realise, one object of the patent system is to promote publishing of inventions. Then others have the opportunity to learn and develop from those inventions and improve our standard of living.
- Baldwins

The open source ethic is by no means new. It is the basis of the scientific process in which new discoveries are published for others to build on. We can only suggest that the reason the Committee gave the multiple submissions supporting the exclusion of software such weight was the compelling argument and sincere belief that the interests of all New Zealand should come before that of large multinational corporations.

In the short-term the Government may see this exclusion as helpful to our economy. However, New Zealand is a net importer of technology. Therefore we should not ignore the impact of this exclusion on trade negotiations and wider relations with our major trading partners, such as USA, Europe, Japan and Australia.
- Baldwins

We agree wholeheartedly with the sentiments expressed. We should certainly not ignore the impact of this exclusion on trade negotiations. Australia signed a Free Trade Agreement which resulted in changes to Australian patent law. What did they get for their trouble?

Five years on, it is clear the free trade agreement between Australia and the United States was a dud. Despite the fanfare with which the Howard government introduced it, no tangible benefits have resulted for Australia. Australia's exports to the US in the five years to last year grew by only 2.5 per cent, compared with double­ digit growth for exports to all the major Asian trading partners. Since the signing, America has slipped from third to fifth among Australian export destinations, overtaken by Korea and most recently India. The value of Australian exports to the US is now only about a quarter of those to the two leading customers, China and Japan. The four Asian countries together take more than 10 times the value of exports to the US.
Moreover, between 2004 and 2009, the bilateral trade gap in America's favour grew even larger. Australia's imports from America have grown much more quickly than it's exports to America. According to US data, the gap in America's favour grew from $US6.4 billion ($A7.1 billion) to $US11.6 billion. In 2004 Australian exports to America were worth about 54 per cent of the value of imports from that country. By last year the figure was down to 41 per cent.
- Sydney Morning Herald, March 3, 2010.

We know from the Australian FTA that the single most important concession the US would like to see is for New Zealand to adopt US style intellectual property laws. This is probably our only leverage.

We therefore have a choice. We can either give the US everything they want before we even sit down at the table, or we can hold off and ensure that at the very least we get something out of a FTA; something like the immediate suspension of dairy subsidies in the US. That might actually be in New Zealand's interest. What isn't in our interests is to give up all our leverage before sitting down at the table.

I would prefer that our legislation not be negotiated at all of course, and that we hold to our principles side by side with the European Union.