Software Industry prepares for key UK patent ruling this Friday

[Jonas Maebe <jonas.maebe@ugent.be>]

PRESS RELEASE -- [ UK Law / Economy / ICT ]

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Software Industry prepares for key UK patent ruling this Friday
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This Friday the UK Court of Appeal is expected to hand down its
judgement in the cases of Macrossan’s Application and Aerotel vs. Telco.
These cases are of vital interest to anyone concerned with the ongoing
debate over the patentability of software and business methods in the UK
and Europe. Both of the cases at issue concern patents in the area of
software and business methods and so the appeal presents a historic
opportunity for the UK courts to reaffirm the clear exclusion of these
areas from the scope of patentability as well as to send an important
signal to legislators and patent officials at the European level.

Rufus Pollock, Director of FFII-UK said,

“We hope that the Court of Appeal will uphold the decisions of the
judges at first-instance who found against the patents in both cases. We
also hope that they will take this opportunity to clearly reaffirm the
exclusions of software and business methods that exist in the European
Patent Convention.

This is particularly important for two reasons. First, innovation in the
software and business sector both in the UK and across the EU must be
protected from the damaging effects that patents would engender if
allowed in these areas. Second, given the degree of controversy
surrounding these matters in recent years it is crucial that Courts make
it clear what the situation is.”

** End of Press Release **

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Contact Information
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Rufus Pollock
Director, FFII-UK
+44 (0)7795 176 976
rufus.pollock@ffii.org.uk

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Notes to editors
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1. Software and Business Method patents in Europe
2. The patents in question
1. Aerotel
2. Macrossan
3. About the Foundation for a Free Information Infrastructure

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1. Software and Business Method patents in Europe
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* Computer programs and "rules, schemes, and methods for doing business"
are specifically excluded from patentability under Article 52 of the
European Patent Convention (1973), "to the extent that [an application]
relates to such subject-matter or activities as such". See
<http://www.european-patent-office.org/legal/epc/e/ar52.html>

* The rule is "fudged" (Sir Robin Jacob, Stephen Stewart Memorial
Lecture, 1996), to allow hardware when programmed to be patentable in
some circumstances - if the application can be shown to represent a
contribution to an area of technology beyond that areas specifically
excluded.

* The United States goes much much further, allowing patentability for
anything which produces a "concrete, useful and tangible result". This
rules in the patenting of new programming techniques, computer
implementations of business methods, and even it seems this week, new
accounting strategies for tax minimisation
(see <http://www.iht.com/articles/2006/10/19/business/norris20.php>)

* The European Patent Office goes a little further than UK courts,
generally allowing patents on new computer methods if there is an
identifiable "technical" improvement. In contrast to the UK, such
improvements need not be related to technological areas beyond those
excluded by Art 52. Thus a general patent application for a faster
method for calculating square-roots (Gale's Application), which was
ruled out in the UK, would probably be allowed by the EPO; whilst a new
way of the highlighting the active player in a football video game,
allowed in a recent EPO decision, would probably not be allowed by the
UK. The UK approach can be seen to give software developers a "safe
harbour" of subject matter, where they can make improvements without
having to worry about possible patent risk.

* In 2002 the European Commission launched a Directive to confirm the
EPO approach across the whole of the EU. The Directive was strongly
supported by many of the world's largest software and industrial
companies, and much of the patent legal establishment. But the Directive
was strongly opposed by a majority of individual developers and smaller
software companies who felt that patents would be a much greater threat
than any benefit, and that large companies would hold all the trumps if
it came to court cases. Some of the campaign and testimony sites from
this time can still be found on the internet, such as:

* <http://www.economic-majority.com/testimony/index.en.php>
*
<http://web.archive.org/web/20050307135156/protectinnovation.ffii.org.uk/read_testimony>
* <http://www.nosoftwarepatents.com/en/m/intro/index.html>

The proposal was ultimately rejected overwhelmingly by the European
Parliament in July 2005 (by 648 votes to 14)

* Following the rejection of the European Directive, there has been a
spate of cases about software and business method patentabilty in the UK
High Court, mostly challenging UK Patent Office decisions to reject
applications. The High Court has consistently confirmed the UK approach,
and upheld the Patent Office in every instance.

* However, **High Court decisions do not establish binding precedents on
other High Court cases while decisions by the Court of Appeal do bind
lower courts**. This week's decisions will be the first time the Court
of Appeal will have ruled on the questions of software and business
method patentability since 1997, and are expected to give a definitive
statement of the UK law in this area - either supporting the run of
existing UK court decisions; or decisively striking out in a new direction.


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2. The patents in question.
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In both cases, the patents in question relate to new software operating
on conventional, known hardware; where the novelty rests entirely in the
business or administrative logic being implemented.

Aerotel's Patent
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* Aerotel's patent is GB 217 1877, based on the state of technology in
January 1985:
<http://v3.espacenet.com/textclam?DB=EPODOC&IDX=GB2171877&F=0&QPN=GB2171877>

It claims the making of telephone calls using prepayments. The essential
idea is to have a telephone exchange which keeps a record of clients'
credit. Clients can then dial into the exchange, and have their calls
completed for as long as they have credit to pay for them.

It is accepted that the method would have been readily implemented using
an electronic control exchange of a kind that had been available in
Britain from the 1970s. Only the novel business logic programmed into
the exchange is new.

* Aerotel has sued Telco for patent infringement. However, in the High
Court, Judge Lewison granted Telco's application for summary dismissal,
and revoked the patent, finding that it did indeed describe no more than
a method of business. ([2006] EWHC 997 (Pat))


Macrossan's Application
=======================

* Macrossan's application is EP1346304 / GB 2388937 / application
GB314464.9:
<http://v3.espacenet.com/textclam?DB=EPODOC&IDX=GB2388937&F=8&QPN=GB2388937>

It has been described by one software contractor as an absolutely
conventional "fill-in-the-blanks website that picks the right docs based
on guided answers, then fills them in appropriately and disgorges them
wherever required". The only new idea was to apply this to the documents
needed to incorporate a company.

* Macrossan's patent application was rejected by the UK Patent Office.
In the High Court, Macrossan appealed against this rejection, but the
appeal was dismissed by Judge Mann, finding that although not
specifically a business method, it was a method of performing a mental
act by a computer. ([2006] EWHC 705 (Ch))

* Macrossan has also applied for a European Patent, which could still be
granted for countries in Europe outside the UK. The European application
has not yet been decided by the EPO.


Summary
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* It seems likely, on current caselaw, that both patents would probably
today be rejected by the EPO as not containing anything novel beyond new
administrative or business logic, with solely administrative and
business consequences. But the approach taken by the Court of Appeal
will be seen as an important commentary on EPO practice, and may
significantly affect future developments.

* At stake is not only what the Court of Appeal decides, but *how* it
decides it. Even if both patents are dismissed, software developers will
be looking particularly closely at whether the Court reaffirms the UK's
traditional more restrictive and more literal reading of Article 52, or
whether its argumentation follows the more permissive reading of the EPO.


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3. About the Foundation for a Free Information Infrastructure
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The Foundation for a Free Information Infrastructure (FFII) is a
not-for-profit association registered in twenty European countries,
dedicated to the development of information goods for the public
benefit, based on copyright, free competition, open standards. More than
850 members, 3,500 companies and 100,000 supporters have entrusted the
FFII to act as their voice in public policy questions concerning
exclusion rights (intellectual property) in data processing.

FFII-UK is the UK branch of the FFII.

* <http://www.ffii.org/>
* <http://www.ffii.org.uk/>