Computer Law & Security Report Vol. 18 no. 3 2002ISSN 0267 3649/02/$22.00 © 2002 Elsevier Science Ltd. All rights reserved

197

EC Draft Patent Directive

Everyone agrees that computer software should be protected by intellectual property. But there is no consen-sus as to how much protection there should be, and by what means it should be given. Copyright seems to pro-tect too little, patents are thought to protect too much, and we have gone too far along our present path even toconsider any sort of “sui generis” protection, such as was suggested in the early days of the debate. This arti-cle explores the controversies associated with the issue of ‘patents for software’ and the most recent proposalfor a directive coming from the European Commission.

EC DRAFT PATENT DIRECTIVE“I WOULDN’T START FROM HERE IF I WERE YOU” -INTELLECTUAL PROPERTY PROTECTION FORCOMPUTER SOFTWARE IN EUROPE AND THEPROPOSED NEW DIRECTIVE ON COMPUTER-IMPLEMENTED INVENTIONSTrevor Cook - Bird & Bird

1. INTRODUCTIONThe controversy in Europe of the late 1980s, leading up to theCouncil Directive on the Legal Protection of ComputerPrograms1 of 1991, now seems like ancient history.This mea-sure, harmonizing aspects of the copyright protection forcomputer programs to overcome German case law2 that hadheld such works to be insufficiently creative to be so protect-ed, got bogged down with controversies over exceptionsdirected to interoperability and decompilation.Ten years on,the European Commission has waded back into the fray withits Proposal for a Directive on the Patentability ofComputer-implemented Inventions,3 (the Proposal) present-ed on 20 February 2002, in a brave attempt to steer a middlecourse through the maelstrom of software patents in Europe.Before analysing this latest contribution and where we areheading in Europe, it is worth looking at how we got to themess we are now in.This involves a brief review of what hashappened to copyright over the period as a means of protect-ing computer programs,as the pressure for patents reflects, inlarge part, a failure of copyright, rightly so, to resist the pres-sures of certain rights owners in software.

2.WHAT’S WRONG WITH COPYRIGHT?

Protecting computer programs as works of literary copyrighthas been of enormous value in protecting such programsagainst piracy - namely their ‘bit-to-bit’ copying. However,many people who devise new programs want to protectrather more than the precise expression of their program -they want to protect something of its functionality as wellwhich, in practice, means protecting more of the idea,and less of its expression - something more like a patent.

Attempts to do so by stretching copyright beyond the naturallimits of a right developed and refined over hundreds of yearsto protect truly creative works, in order to try to protect suchfunctional works as programs, have produced, as accuratelycharacterized by Greg Aharonian,“30 Years of Bad Logic”, and“a succession of eventually discredited court cases”.4

Intellectual property lawyers of my vintage can rememberlitigating computer games in the 1980s, in which dramaticcopyright in the ‘game plot’ had to be asserted in an attemptto import into UK law the audiovisual copyright of US lawused for cases in which no bit-to-bit copying took place (ifonly because the alleged copy was written for a different con-sole, using a different processor, with different graphics andsound hardware, and which required programming in a dif-ferent computer language).We then avidly followed develop-ments across the Atlantic, in which attempts were made toapply similar principles to computer programs for businessapplications - US cases such as WWhheellaann vv JJaassllooww5 in 1986,withits “structure, sequence and organization” test, and CCoommppuutteerrAAssssoocciiaatteess vv AAllttaaii6 in 1992, with its “abstraction, filtration andcomparison” test, still being applied late into the 1990s;although, since the middle of the decade, decisions in casessuch as AAppppllee vv MMiiccrroossoofftt7 and LLoottuuss vv BBoorrllaanndd8 have resultedin copyright’s star waning.

The problems inherent in such attempts to use copyrightto provide patent-like protection for underlying ideas, with-out the discipline of patentability criteria and patent claims,were well illustrated by English attempts to apply these “prin-ciples” in cases such as JJoohhnn RRiicchhaarrddssoonn vv FFllaannddeerrss,,9 IIbbccooss vvBBaarrccllaayyss10 and CCaannttoorr FFiittzzggeerraalldd vv TTrraaddiittiioonn..11 The difficultyof drawing clear principles from the English cases can be con-trasted with their remarkably similar fact patterns - computer

MayJune1803.qxd 5/3/02 11:24 AM Page 197

198

EC Draft Patent Directive

programmers rewriting an application that they had alreadywritten for another, and taking ‘short cuts’ in so doing - thusthis author’s right, so applied, seemed most readily capable ofbeing used against authors.

The ‘idea/expression dichotomy’ in copyright is notrestricted to computer programs. However, it becomes mostsignificant whenever copyright is used to protect functionalmaterial, as we know only too well in the UK from the headydays of design copyright litigation in the 1980s, whichprompted the observation in the House of Lords in LLBBPPllaassttiiccss vv SSwwiisshh12 that, “it all depends what one means byideas.”Our response in the UK was, by the Copyright Designsand Patents Act 1988, to abolish design copyright and replaceit by a sui generis regime tailored to the protection of func-tional designs.

The issue of protecting the ideas behind a computer pro-gram was addressed only tangentially in the Report from theCommission on the implementation and effects of Directive91/250/EEC,13 in the context of a brief discussion of patentprotection for software-related inventions in which it wasobserved:

One aim of patent protection would be to cover the underly-ing ideas and principles of a computer program, whichaccording to recital 14 of Directive 91/250/EEC can never beprotected by copyright.Such principles are also reflected in the WIPO Copyright

Treaty,Article 2 of which mandates the protection of comput-er programs as literary works,but Article 2 of which provides:

Copyright protection extends to expressions and not toideas, procedures, methods of operation or mathematicalconcepts as such.

This in turn reflects section 102(b) of the US Copyright Actbut, until LLoottuuss vv BBoorrllaanndd, this seems to have been disregard-ed by US Courts.

3. WHAT’S WRONG WITH PATENTS?

In the USA there is no express statutory exclusion of comput-er programs from patentability, but the development of thelaw in this area got off to a bad start with the Supreme Courtdecision in 1972 in GGoottttsscchhaallkk vv BBeennssoonn,14 which many inter-preted as holding computer programs unpatentable.Although a further Supreme Court decision in 1981 inDDiiaammoonndd vv DDiieehhrr15 explained that this was not so, and thatGGoottttsscchhaallkk had concerned claims to a mathematical algo-rithm “as such”, it was not until the 1990s that the scope forusing patents to protect computer programs,and latterly busi-ness methods, became more widely recognized and the lawbecame more permissive of such patenting, with CAFC deci-sions in AArrrrhhyytthhmmiiaa RReesseeaarrcchh TTeecchhnnoollooggyy vv CCoorraazzoonniixx,16 IInnrree AAllaappppaatt,17 AATT&&TT vv EExxcceell18, and finally SSttaattee SSttrreeeett BBaannkk vvSSiiggnnaattuurree FFiinnaanncciiaall GGrroouupp19, culminating in the recognitionthat even mathematical algorithms and business methodscould be patentable subject matter. In the current state of USlaw,to constitute patentable subject matter,an invention needonly fall within the technological arts, and merely using acomputer or software means that an invention will be part ofthe technological arts if it provides “a useful, concrete andtangible result”.

In Europe, computer programs appear at first sight to beexcluded from patentability by the express language of

Article 52(2) of the European Patent Convention of 1973,which not only appears to exclude “programs for comput-ers”, but also, amongst others, “mathematical methods”,“methods for performing mental acts ... or doing business”,or “presentations of information”. However, by Article 52(3),these exceptions only exclude such matters “as such”.Under pressure from applicants, an increasingly narrowinterpretation of the exception by the EPO has resulted in its granting more than 20,000 patents for computer software-based inventions.20 The EPO has achieved this byfocussing on the “technical character” of an invention andinstancing such exceptions “as such” as examples of cases in which there is no technical character. However, the con-cept of “technical character” seems to have become everbroader,and, as recognized by a Technical Board of Appeal of the EPO in T 0931/95,21“it may very well be that .. themeaning of the term “technical” or “technical character” isnot particularly clear”.

While the statutory provisions governing patentability arethe same throughout Europe, there are differences in relationto software-related patents between the case law and prac-tice of the Boards of Appeal of the EPO and the patent officesand courts of Member States.This is best instanced by the UK,in which the exception for computer programs is the least ofa potential patentee’s worries, and the courts, on appeal fromthe UK Patent Office, have held patent applications for soft-ware also to fall within other of the excepted grounds. Sounsatisfactory was the position, that the United KingdomPatent Office took the step of publishing a Practice Notice“Claims to Programs for Computers”22 in April 1999,attempting to clarify the position by observing that, in noneof the decided English cases had there been a “substantivetechnical contribution”, and announcing that it would beadapting its practice as to the nature of the claims that itwould grant on such inventions to accord with that of theEPO at the time.The English Courts have not had an opportu-nity to comment on this explanation of their decisions but,in any case, harmony between the UK Patent Office and the EPO proved short-lived, as in HHuuttcchhiinn’’ss AApppplliiccaattiioonn23 theUK Patent Office Hearing Officer declined to follow the reasoning of T 0931/95, criticising it as “exalting style oversubstance.”

In consequence, we have a confused and unsatisfactorysituation in Europe, with many granted software patents(normally in the names of applicants from outside Europe),likely to be enforceable in some courts, but probably not inothers, whilst many Europeans either fail to try to protecttheir own software-related inventions, (either in Europe orin the USA), or remain oblivious to the fact that their activi-ties (either in Europe or in the USA), may fall within thescope of such a granted patent.24 In contrast, one may criti-cise the law as to software patenting in the USA, but at leastone knows what it is.

4. BACKGROUND TO THE PROPOSAL FORA DIRECTIVE ON THE PATENTABILITY OFCOMPUTER-IMPLEMENTED INVENTIONSThe new Proposal is the result of an extensive consultationexercise launched by the European Commission on 19October 2000, based on a consultation paper on the

MayJune1803.qxd 5/3/02 11:24 AM Page 198

199

EC Draft Patent Directive

patentability of computer-implemented inventions.25 Theimmediate result of the launch of this consultation was toscupper a proposal, at a Diplomatic Conference in November2000 to amend the EPC, to drop the relevant Article 52(2)exception.This consultation had, in turn, been prompted byan earlier consultation emerging out of the Commission’s1997 Green Paper on the Community Patent and the PatentSystem in Europe that had identified an urgent need toremove apparent ambiguities and lack of legal certainty aris-ing from the different ways in which Member States wereimplementing laws governing patents for computer software.

The Commission also commissioned a study specifically tolook at the implications for SMEs (small- and medium-sizedenterprises) involved in the development of software, investi-gating how they managed their intellectual property. Thisrevealed that many smaller software and IT companies wereuncomfortable with,or uncertain about, the protection offeredby the patent system. This was not just due to uncertaintiesover infringement and patentability, but also because of thecost and the time taken to secure protection (if granted).

In the UK, the Department of Trade and Industry (DTI)mounted a separate consultation (extending also to businessmethods), the results of which were fed into the Commissionone. Its key conclusions were that there should be no signifi-cant change to the patentability of software; but that the lawwas not clear enough and urgent European action to clarify itwas needed. It also concluded that business methods shouldremain unpatentable.26

5.THE PROPOSAL FOR A DIRECTIVE ONTHE PATENTABILITY OF COMPUTER-IMPLEMENTED INVENTIONSThe outcome of the Commission’s consultations is a Proposalaimed at harmonizing protection for computer-related inven-tions,while avoiding any sudden change in the legal position.The Proposal is a subtly drafted document, which treads apath between extending the scope of patent protection forsoftware, and resists the call to exclude patent protectionentirely. However, it does not fully adopt the current positionof the EPO.

The Proposal preserves the principle established in EPOcase law that a “technical contribution”is an essential require-ment to any patentable invention. However, it defines thisterm as “a contribution to the state-of-the-art in a technicalfield that would not be obvious to a person skilled in the art”,which serves explicitly to bring the issue of inventive stepinto the assessment.The other definition in Article 2 is that ofthose inventions which are the subject of the Proposal:

computer-implemented invention” means any invention theperformance of which involves the use of a computer, com-puter network or other programmable apparatus and havingone or more prima facie novel features which are realisedwholly or partly by means of a computer program or com-puter programs.

As pointed out in the accompanying explanatory memoran-dum, this definition excludes algorithms defined without ref-erence to a physical environment, and it is a consequence ofthis definition that “the novelty” of such invention “does notnecessarily need to reside in a technical feature”.This is con-sistent with the “technical contribution”being assessed under

inventive step. Such inventions are, by Article 3, to be consid-ered “to belong to a field of technology” for which, underTRIPs, patents are to be available for inventions that are new,involve an inventive step, and are susceptible of industrialapplication, as is also declared in Article 4(1).

Article 4(2) of the Proposal makes it “a condition ofinvolving an inventive step that a computer-implementedinvention must make a technical contribution” which, byArticle 4(3),“shall be assessed by consideration of the differ-ence between the scope of the patent claim considered as awhole, elements of which may comprise both technical andnon-technical features, and the state of the art.”Thus, as theexplanatory memorandum states, an invention, aspects ofwhich are within the Article 52(2) EPC exceptions, such as amethod of doing business, may still be patentable if a non-obvious technical contribution is present.However, if there isno technical contribution, in that the contribution to the stateof the art lies wholly in non-technical aspects, such as theexcepted matters, there is no patentable subject matter.Although the explanatory memorandum does not say this,expressly integrating the assessment of exceptions into thatof inventive step might herald, in the longer term, a signifi-cant difference in approach to software patents, both bypatent offices and those opposed to software patents, in thatmost real objections to software and business method patentslie in the belief that they are granted for contributions thatare obvious, an issue that has been overshadowed inEuropean patent law and practice by the sterile focus onexceptions.

The clearest difference from current EPO practiceemerges in Article 5, which sets out how claims are to be formulated:

Member States shall ensure that a computer-implementedinvention may be claimed as a product, that is a programmedcomputer, a programmed computer network, or other pro-grammed apparatus, or as a process carried out by such acomputer, computer network or apparatus through the exe-cution of software.

The Commission accepts that the Proposal would not pro-vide for patents to be granted for computer programs in iso-lation from a machine on which they may be run, andacknowledges that this does not accord with the approachadopted by the EPO Technical Boards of Appeal27 in holdingthat if a computer program either by itself or on a carrier,such as a computer disk, has the potential to produce a tech-nical effect when loaded and run on a computer, such a pro-gram claimed by itself should not be excluded frompatentability.Article 5 will therefore exclude claims allowableunder current EPO practice. This will also affect nationalpatent offices, such as that in the UK, whose April 1999Practice Notice adopted the position taken by the EPO.

The present Proposal gives no guidance on how practi-tioners should draft claims from now on, and particularly ifthey anticipate that a current or proposed patent applicationwould be granted after the Proposal becomes a Directive.Such a Directive would have no mandatory legal effect on theEPO, but only on those of its Member States within theEuropean Community.However,as long as such Directive wasseen to be consistent with the EPC, the EPO could, if it chose,and as was done with the Directive on the Patenting ofBiotechnological Inventions,28 modify its practices to accord

MayJune1803.qxd 5/3/02 11:24 AM Page 199

200

EC Draft Patent Directive

with it. If the present EPO practice of allowing “carrier” and“non-carrier” claims were to continue, it is difficult to seehow such claims would be maintained in the future in theabsence of any proposed transitional provisions. Patentsgranted after such Directive came into effect would benational patents and subject to national laws, so any claiminconsistent with the Directive’s provisions would either berevocable under national law, or require amendment.Thus, ifArticle 5 stays, transitional provisions should be considered.

The balance struck by the present regime for copyrightprotection for computer software is expressly preserved byArticle 6, by which “Acts permitted under Directive 91/250EC on the legal protection of computer programs by copy-right, in particular provisions thereof relating to decompila-tion and interoperability ... shall not be affected through theprotection granted by patents for inventions within the scopeof this Directive.”

Articles 7 and 8 of the Proposal provide for monitoringthe impact of computer-implemented inventions on innova-tion and competition,both within Europe and internationally,and on European business including e-commerce with a viewto producing a report on whether or not the rules governingpatentability are adequate.

6. CONCLUSION

Our situation in Europe in protecting the ideas and principlesunderlying computer software is best described by the well-known riposte, when asked for directions somewhere, “Iwouldn’t start from here if I were you”. However, having

decided that it must act, the European Commission has noalternative but to start from here,or a little way back along thepath. As it stands, its proposal would seem to be almost theminimum that it could do to try to get a grip of the issue,with-out running into irreconcilable conflict with established prac-tice of the EPO. But by subtly changing the nature of theinvestigation in prosecution from the sterile one of exceptionsinto one of inventive step, may constitute a greater contribu-tion to getting out of the present mess than many realize.

Whatever one thinks about the balance at present struckby the proposal, (which has apparently already been criti-cized by the French Government for going too far towardsprotecting software and business methods by patents), itdoes at least offer the merit of providing a mechanism forironing out national divergences, both in its express lan-guage, and in the competence that it confers on theEuropean Court of Justice (ECJ) to take references fromnational Courts on points of its interpretation. The role ofthe ECJ may also prove welcome in taking account of publicpolicy considerations and providing some legal rigor tocounteract the occasional overexuberance of the TechnicalBoards of Appeal of the EPO in a field which has never hadthe benefit of consideration by the Enlarged Board of Appealof the EPO, but has, as yet, never faced direct challenge inopposition proceedings based on public policy grounds thatone has had in biotechnology.

TTrreevvoorr CCooookk, Partner, Bird & BirdTel: +44 (0)20 7415 6000Email: trevor.cook@twobirds.com

FOOTNOTES1 Directive 91/250/EEC.2 IInnkkaassssoo-pprrooggrraammmm, BGH GRUR 1991, 449, 452.3 COM (2002) 92 final, <http://www.europa.eu.int/comm/internal_market/en/indprop/com02-92en.pdf>.4 Aharonian, G - “30 years of Bad Logic - Deconstructing CopyrightSoftware” - Copyright World -December 2001 - January 2002 p 13-17.5 797 F. 2d 1222.6 982 F. 2d 693.7 35 F. 3d 1435.8 49 F. 3d 807.9 [1993] FSR 497.10 [1994] FSR 275.11 [2000] RPC 95.12 [1979] FSR 145 [1979] RPC 551.13 COM(2000) 199 final - 10.04.2000.14 409 US 63.15 450 US 175; 101 S. Ct 1048; 209 USPQ 1 (1981).16 958 F. 2d 1053; 22 USPQ 2D 1033 (1992).17 33 F. 3d 1526; 31 USPQ 2D 1545 (1994).18 172 F. 3d 1352; 50 USPQ 2D 1447.19 149 F 3d 1368; 47 USPQ 2D 1596 (1998); certiorari denied 119 S.Ct 851 (1998).20 For a fuller review of EPO practice in this area, and the sort ofpatents in it being granted, see “European patents for software, E-commerce and business model inventions” Keith Beresford - WorldPatent Information 23 (2001) 252-263.21 Controlling pension benefits system/PBS PARTNERSHIP - 8December 2000 - in which the Board found a computerized pension

benefits system (i.e.a business method) not excluded from patentabilityunder Article 52(1) EPC,observing that “a computer system suitably pro-grammed for use in a particular field,even if that is the field of businessand economy,has the character of a concrete apparatus in the sense ofphysical entity, man-made for a utilitarian purpose and is thus an inven-tion within the meaning of Article 52(1) EPC.” However, it went on toreject the application under Article 56 EPC as lacking inventive step.22 [1999] RPC 563; <http://www.patent.gov.uk/patent/notices/practice/computer.htm>.23 [2002] RPC p 264.24 For a fuller discussion of the adverse consequences for Europeaninterests of the current situation, and of the considerations thatought instead to be uppermost when examining the patentability ofsoftware patents, see “Patents for Business Methods and ComputerProgram Related Inventions”Trevor Cook - [2000] CTLR 123.25The consultation paper is at: <http://europa.eu.int/comm/interal_market/en/indprop/softpaten.htm> and the analysis of the responses isat: <http://europa.eu.int/comm/internal_market/en/indprop/softpat-analyse.htm>.26 The consultation paper ‘Should patents be Granted for ComputerSoftware or Ways of Doing Business’ is at:<http:// www.patent.gov.uk/about/ippd/consultation/closed/index.htm> and the Gov-ernments conclusions are at: <http:// www.patent.gov.uk/about/conclusions.htm>.27 T 1173/97 and T O935/97 - CCoommppuutteerr PPrrooggrraamm PPrroodduucctt // IIBBMM IIaanndd IIII, [1999] OJEPO 609; [2000] EPOR 219 and [1999] EPOR 301;[1999] RPC 861.28 Directive 98/44/EC.

MayJune1803.qxd 5/3/02 11:24 AM Page 200