The final report of the ACIP (Australian government Advisory Panel on Intellectual Property) review of the Innovation Patent System came out today.

http://www.acip.gov.au/reviews/all-reviews/review-innovation-patent-system/

The good news is that ACIP have recommended that "no method, process or system shall be patentable".

THIS MEANS NO SOFTWARE PATENTS

Selections from the Report follow. I note that they referred to several of the examples were included in the LUV submission.

I would like to thank Les Kitchen, Rodney Brown, and Daniel Jitnah, who assisted me in writing the LUV submission and Ben Sturmfels for his assistance and contributions on the day of the discussion.

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[The recommendation]

2.5 Recommendation 5:
Amend subsections 18(3) and 18(4) of the Patents Act 1990 (Cth) to provide that, for the purposes of innovation patents, no method, process or system shall be patentable.

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Finally, submissions received by ACIP have argued and provided cogent evidence that in one important business sector—namely the computer software industry—the effect of patenting methods, processes and systems at the innovation patent level is to significantly undermine innovation in that sector, particularly innovation by SMEs.

The patents of concern to some members of the software industry are not for any specific computer program per se or the expression of the program in formal programming language. Rather, they describe some method or algorithm of information processing utilising a computer. The term commonly suggested for this subject matter was ‘computational idea patents’. Examples of such patents include methods to store video files using less disc space or methods to calculate the romantic compatibility
of two people based on survey questions.

From the submissions received it appears that SME sectors of the software industry operate in a different fashion to more traditional industries. Some of these SMEs gain enormous benefits from mixing and matching ideas from many different software projects and recombining them into something new. The potentially vast number of innovation business method patents makes it nearly impossible for developers to properly search this area for every implemented idea that could possibly be infringed when writing new code. Also, the economics of the software industry is unlike most other industries as the internet allows for effectively zero-cost distribution of

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software. Consequently, a very large benefit may be conferred on the patent holder by an innovation patent in return for very little benefit to society at large and a considerable cost in terms of lost innovation and competition.

The major investment in such computer programs is in the detail of writing the relevant computer program that implements the algorithm or method in question. This investment is protected by copyright which prevents the reproduction of a substantial part of the particular computer program in question. In contrast, the algorithm or method in question can be and often is created with minimal investment of either time or capital. Hence, the investment of the first person in the field is adequately protected
while permitting the very competition that is the focus of discussion in the submissions by the computer software people. Some submissions of the software industry argue that exclusivity of innovation patent protection combined with its lower level of innovative step confers an unnecessary and excessive level of protection that stifles rather than encourages innovation in this industry, especially innovation by SMEs.

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[On the background to the paper]

Thirty-four submissions were received by ACIP from individuals and organisations responding to matters raised in the Issues Paper and/or addressing other matters of interest. ACIP was requested to treat two of these submissions as confidential.

Appendix 3.2 provides a list of the individuals or organisations that made a non-confidential submission in response to ACIP’s Issues Paper. Half of the submissions (17) were received from workers in the software industry supporting an abolition of computer-related patents—these submissions are mostly silent on other issues.

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• A significant number of participants in the software industry would like to see software patents excluded from patentable subject matter.

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[Option C - change the innovation system under exclusions]

Lastly, ACIP considers that the innovation patent system could exclude software (i.e. computer-implemented inventions) from the list of patentable subject matters. ACIP notes that Japan and the Republic of Korea already exclude computer software from

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their utility model systems. ACIP believes that software patents require a comparatively low level of financial contribution by an innovator. Also, it is difficult to conduct a proper evaluation of the prior art base since a significant portion of the software is commercially developed for a client on a bespoke and confidential basis.

As such, it is never ‘published’ and hence is not formally part of the prior art base.

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[Appendix 1]

1.2 Abolish the innovation patent system
There was also very limited support for this option of abolishing the innovation patent system, with a substantial proportion of the proponents coming from the software industry sector. Only seven submissions and four attendees at the roundtables supported this option. One submission strongly supported abolishing the system because they thought that innovation patents were very pro-patentee and distorted the Australian market in key industry areas. It was their view that the intentions of the
innovation patent system could be accomplished through the standard patent system.

Another submission supported abolition since the statistics referred to in the Options Paper and the Verve Economics report infer that the system is not achieving its main purpose of stimulating innovation in Australian SMEs.

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1.3 Change the innovation patent system

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A vast majority of the submissions from the software industry supported any mechanism that would limit damages for infringement of computational idea patents, but only if this genre of patents could not be excluded from being suitable subject matter. ‘Computational idea patents’ describe some method or algorithm of computation or information processing.

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Exclusions

ACIP received a considerable number of submissions and comments from individuals, businesses and business associations who work within the software industry over the

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course of this review. An overwhelming number of the comments and submissions advocated for some changes to the treatment of ‘software patents’.

A common theme of 33 of the 34 submissions on this option made to the Options Paper was that the term ‘software patents’ is misleading. Such patents are not about any specific computer program or the expression of the program in formal programming language. Rather, they describe some method or algorithm of computation or information processing.

It was argued that the software industry operates in a different fashion to most traditional industries. It gains enormous benefits from mixing and matching ideas from many different software projects and recombining them into something new. The vast number of existing software patents and business method patents makes it near impossible for developers to properly search this area for every implemented idea that could possibly be infringed when writing new code. Also, the economics of the software
industry is utterly unlike most other industries as the internet allows for effectively zero-cost distribution of software. Therefore, they proposed that software patents should be excluded from the innovation patent system.

One submission commented on their belief that patents in the software industry no longer serve their original purpose of protecting inventors. They have been co-opted by international and large corporates to restrict innovation from happening outside of their businesses. These owners simply reference their ‘war chest’ and patent portfolio and threaten SMEs
innovating in their patent area knowing that the SMEs cannot afford to defend their inventions.

However, one submission from a software industry association strongly objected to any moves that would exclude software patents for the innovation patent system. They believe that an exclusion would restrict innovation and increase its costs. They also believe that such a proposal would be unworkable due to the increasing use of software in products that were not earlier associated with computers.