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VIABILITY OF SOFTWARE PATENT: A GLOBAL OVERVIEW “If people had understood how patents would be granted when most of today's ideas were invented, and had taken out patents, the industry would be at a complete standstill today”-Bill Gates INTRODUCTION Today, human interaction with software has become indispensable. Computer software makes a device functional and life convenient. Indeed, the software industry has mushroomed into a globalized and one of the fastest growing industry. As per NASSCOM1, presently, the Indian software industry exports were valued at $126 billion and domestic at $ 41 billion.2 Undoubtedly, an Industry of such magnitude calls for a stable, protective and progressive Intellectual property (IP) legal framework. However, IP protection of software has always been a topic of debate, both at National as well as International level.3 The said debate enumerates from the vagueness of appropriate choice between software copyright protection and patent protection. The argument in the favour of patent is that copyright protects the expression of the work and not the idea embedded inside the expression. Copyright protects the code of a software, while it does not stop the utilization of the idea behind the software. Contrarily, patent of software protects the key idea and fundamental features of the software. Hence, copyright & patent can be complimentary in few regards. Similarly, trade secrets do not secure against innovations and ideas underlying a software that are effectively ascertainable by people in general through free revelation or figuring out. While, Patent on the other side, shields the “idea” behind the software or the” functionality” of the software. A “software patent” prevents the contenders from delivering the similar product, benefits, or idea irrespective of whether the questioned software has seen the light of the day by way of copying, independent development or reverse-engineering. “Software patent”, as a term, does not have a universally accepted or approved definition, which remains one of the issues with software patenting. However, Lemley and Allison have

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The National Association of Software and Services Companies (NASSCOM) is the trade association of Indian IT Industry. 2 Outlook 2019: IT Swings Between Big Opportunities, Small Challenges, The Economic Times (Jan. 2, 2019), https://economictimes.indiatimes.com/markets/stocks/news/outlook-2019-it-swings-between-big-opportunitiessmall-challenges/articleshow/67346582.cms . 3 Patenting Software, World Intellectual Property Organization, https://www.wipo.int/sme/en/documents/software_patents_fulltext.html.

suggested a definition as “an invention that is completely embodied in software, even if the claims of the patent refer to a system or article of manufacture.”4 However, there are arguments against “software patents” that software is not a subject matter which is patentable. Questions include whether software is a mere algorithm, mathematical formula, or abstract ideas, ineligible to be patented or it has a technical effect, making it entitled to patent protection5; or how can a software fulfil the other requirements necessary so as to be patentable i.e., i) industrial application or usefulness; ii) novel; iii) inventive step; and iv) the disclosure of invention must meet certain substantive standards in the patent application.6 It is also argued that the very nature of the industry, the pace of software industry development, makes it ineligible to the protection.7 One line of arguments also contends that software patent can prove to be a hurdle in the path of innovation.8 While, some jurisdictions take software under the umbrella of patent protection, other do not, primarily developing countries, and, also, no uniformity or consistency can be observed among the countries granting patent protection to software. This paper throws the light on the patent protection of software regime under international framework, Europe, the United States, and India, answering the question whether patent protection is inevitable to growth of the software industry, absence of which would impede the development of this emerging industry. The paper also deliberates upon the judicial development corelated with “software patent”. INTERNATIONAL FRAMEWORK The international framework neither provide for a yardstick on which patentability of a software can be judged upon nor provide a concrete answer to the debate on “software patent”. The “Paris Convention for the Protection of Industrial Property” of 1883, the oldest and still in force convention, does not highlight any requirements that could be considered a qualifying test for a software to be eligible for patent protection and leaves entirely on the laws of the adopting member states to decide the subject matters that could be afforded patent protection.9 Also, the Patent Corporation Treaty, does not an explicit answer whether a software is

John R. Allison & Mark A Lemley, Who’s Patenting What? An Empirical Exploration of Patent Prosecution, 53 Vanderbilt L. Rev. 2099, 2110 (2000). 5 Legal Dimensions of Cyber space, (S.K. Verma et al. eds., 2nd ed. 2004). 6 id at 3. 7 Gordon Irlam & Ross Williams, Software Patents: An Industry at Risk, https://tech-insider.org/freesoftware/research/acrobat/9401.pdf. 8 Ravindra Chingale & Srikirishna Deva Rao, Software Patent in India: A comparative Judicial and Empirical Overview, 20 J.I.P.R. 210, 212 (2015). 9 The Paris Convention for the Protection of Industrial Property 1883 art. 1. 4

patentable, but it talks about the examination of international application for a computer programme invention by the office in-charge.10 The office in-charge may or may not consider the examination of such application. “The Agreement on Trade-Related Intellectual Property Rights (TRIPS)” tries to swipe away the dirt on the answer regarding the patentability of software. Article 27 of TRIPS comes to the rescue of “software patents” in the international debate on “software patent”. It provides, “patents shall be available for any inventions, whether products or processes, in all fields of technology, provided they are new, involve an inventive step and are capable of industrial application.”11 Hence, the TRIPS agreement extends the protection of patent to all fields of technology, provided they qualify the requirements stated in the article. The TRIPS agreement also provides for the exclusions of patentable subject matter12 and computer software is not one among defined exclusions. Unlike, copyright protection for computer software13, TRIPS agreement does not provide explicit patent protection to software. However, the obligation of contracting member states, as provided under TRIPS agreement, to take all technological inventions, having potential of industrial application, under the garb of patent protection, may challenge steps taken against “software patent”. But the inability of international agreements to provide for an explicit provision for “software patent” makes uniformity in rules apropos of patent protection a hard-pressed task. The TRIPS agreement, through article 27, accords patent protection only to inventions. However, the definition of invention does not find its place in the TRIPS agreement, putting the definition of invention and exclusions concerned under the discretion of member states.14The present status quo allows countries to ascertain the extent of patent protection to be accorded to computer programs.15

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Regulations under the Patent Cooperation Treaty Rule 39.1 & Rule 67.1. Agreement on Trade-Related Aspects of Intellectual Property Rights art. 27.1, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 33 I.L.M. 1197 (1994). 12 Agreement on Trade-Related Aspects of Intellectual Property Rights art. 27.2 & 27.3, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 33 I.L.M. 1197 (1994). 13 Agreement on Trade-Related Aspects of Intellectual Property Rights art. 10.1, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 33 I.L.M. 1197 (1994). 14 U.N.C.T.A.D.-I.C.T.S.D., Resource Book on Trips and Development, 357 (2nd ed., Cambridge University Press 2005). 15 Legal Dimensions of Cyber space, (S.K. Verma et al. eds., 2nd ed. 2004). 11

EUROPEAN FRAMEWORK- EUROPEAN PATENT CONVENTION Around 1960s, Europe began with harmonizing of patent laws, following which “the Patent Cooperation Treaty” was signed. The UK Patent Act of 1949 provided patent protection to software as the definition of invention meant “any manner of new manufacture….”16. Similarly, Germany also had liberal approach towards “software patent.”17 On 5th October 1973, after rounds of negotiations, 16 countries signed “the European Patent Convention (EPC)” which took the force of law in 1977.18Consequently, both, the United Kingdom and Germany changed their law in conformity with the EPC. Article 52 provides patent protection to every invention capable of industrial application.19 However, Article 52(2) also explicitly excludes “programmes for computers”. Although, article 52(2) has to be read with article 52(3), which provides, “Paragraph 2 shall exclude the patentability of the subject-matter or activities referred to therein only to the extent to which a European patent application or European patent relates to such subject-matter or activities as such.” However, EPC does not define invention. The case of VicomSystems’s Application20 was the judicial decision on the issue of patentability of software. Granting patent, the Technical Board of Appeal (TBA) decided that when a technical process is performed through computer programme and a claimed has been made upon the same process and not over the programme, it cannot be denied patent protection because the technical contribution, as defined, is what which concerns the state of art. The similar principle of technical effect of software on the invention became a decisive factor for grant of patent protection to computer programmes.21 Later, in case of IBM- Computer program product22& IBM- Computer Program II,23 it was decided that if a technical effect has been produced by execution of a programme on a computer, then a claim to such computer programme product cannot be denied patent protection. Although, the mentioned technical effect must be in addition than mere interaction between the computer and the programme. Further, it was also decided that a solution to technical problem is enough to provide technical

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The Patents Act 1949, § 101. L. Ford, Alchemy and Patentability: Technology, 'Useful Arts,' and the Chimerical Mind-Machine, 42 Cal. L. Rev. 49, 100 (2005). 18 The History of the E.P.O., European Patent Office, https://www.epo.org/about-us/timeline.htm. 19 European Patent Convention art. 52(1). 20 (1987) O.J.E.P.O. 14. 21 Koch and Sterzel, (1988) O.J.E.P.O. 19 & I.B.M., (1990) E.P.O.R 91. 22 I.B.M.- Computer program product, T 1173/97. 23 I.B.M.- Computer Program II, T 935/97. 17

character to an invention.24 According to case laws, execution or controlling of a technical process does not exclude patent protection, irrespective of its implementation either by software or by hardware. Involvement of a computer programme cannot be a ground to refute patent protection.25 Having a technical character is the key to patent protection. Mere obvious physical effect of carrying on a computer software shall not be considered as a technical character of a programme, an additional effect i.e., working of an electrical filter or a machine including internal functioning26 etc., grants a computer programme with technical character. Conclusively, it can be said that an invention with technical character, whether implemented by computer programme or not, can be provided protection of patent protection under EPC. THE UNITED STATES- AN ACTIVE ROLE BY JUDICIARY There has been always a bright side and a dark side to the patent system. The sides are inseparable, just as the two sides of human personality are inseparable. The legal system of patents has this one simple goal: allow the bright side to shine on innovation, and keep the dark side on check.27 Under the laws of U.S, section 101 of title 35 deals with various aspect of patent law it provides that: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter or any new and useful improvement thereof may obtain a patent therefor, subject to the conditions and requirements of this title.” A bare perusal of Section 101 describes the eligibility criteria for the patentable subject matter. This wider definition has allowed the United States to provide patent in wider areas of technology without any limitation provided the claimed invention must fulfill the criterion of patentability. Judicial interpretation has also shaped the computer software patent law as to what can be considered as patentable subject matter. A fundamental characteristic of the software is different from any other subject matter which earned patent previously. The main difficulty arises from the fact that software is “not a

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I.B.M.-Computer Related Invention, T 115/85. Patents for software? European Law and Pratice, European Patent office, https://www.epo.org/newsissues/issues/software.html. 26 (1990) E.P.O.R. 91. 27 Gregory A. Stobbs, Software Patents (Aspen Publishers, 2007). 25

monolithic work”28

Prior to 1968, court used to adopt narrower view with regard to

patentability of software , In 1968 USPTO adopted new guidelines for examining the criteria of software patent, under these guidelines software, could be considered as a part of a patentable process only if the entire combination produced a physical result. The first software patent was granted by the US on April 23, 1968 on an application filed on April 9, 1965 led to the development of the commercial software industry, U.S. Patent No. 3,380,02929. However, the abovementioned guidelines failed to sustain for a long against the supreme court rulings. The Supreme court first addressed the software patents in 1972, in Gottschalk v. Benson30The court decrying that this is an attempt to a patent on algorithm itself. The court has held that an algorithm is not patentable. A mathematical formula is like a law of nature, the patent law cannot allow anyone to wholly preempt a mathematical or law of nature. In Parker v. flook,31 the U.S. supreme court ruled that the software was similar to mathematics and law of nature both of which are excluded from being patented and, therefore, was per se unpatentable. However, Stigma created by Benson and flook that software may not be patentable, removed in 1981 in the dictum of Diamond v. Diehr32 it clearly opens the doors for software patent by adopting expensive view “anything under the sunthat is made by man or women is a subject matter of patent”.The court held that the computerized process could be patented even if the invention used a mathematical algorithm A new standard of patentability of computer programmes established by Diehr 33case, following this case various tests were evolved by U.S. courts in different cases to check patentability of subject matter to earn a patent. In ReAlappet,34the federal circuit court held that certain type of mathematical subject matter represents nothing more than “abstract ideas” unless it has some “practical application”. the

Court gave a new test to determine the

patentability on the basis of practical application, any software would be considered eligible if

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Andre's Guadamuz Gonzalez, The software patent debate, 1 JOURNAL OF INTELLECTUAL PROPERTY LAW & PRACTICE 196, (2006). 29 Gene Quinn, The History of Software Patents in the United States, I.P. Watchdog (Nov. 30, 2014), https://www.ipwatchdog.com/2014/11/30/the-history-of-software-patents-in-the-united-states/id=52256/. 30 409 U.S. 63 (1972). 31 Parker v. flook, 437 U.S. 584 (1978). 32 450 U.S. 175 (1981). 33 id. 34 33 F.3d 1526 (Fed. Cir. 1994).

it is producing “useful, concrete and tangible result”. Finally, in State Street Bank & Trust v. Signature Financial Group Inc35 business method also become a subject matter of the patent. A drastic change came in 2008, in Re Bilski36 circuit court while rejecting all tests developed by previous decisions held that the decisive criterion of patentability was to be found in the classic “machine-transformation test”. The supreme court while affirming Bilski v Kappos37 held that the machine-or-transformation test is a very convenient way to determine patentability, but not an exclusive or exhaustive test, all software need not meet the “machineor-transformation test” to be a patentable subject matter38 but left upon lower court’s discretion39. The court suggested an additional way to test eligibility if the claimed software participated in “basic computer operation of a computer”. the test applied affirmatively in Alice Corp. Pty. Ltd. v. CLS Bank International40, for the “patentability of an abstract idea there must be an additional inventive concept having additional features beyond the concept”41. However, after the Bilski decision eligible patent subject became a pure matter of litigation due to a broad interpretation of section 101. INDIAN SCENARIO The software industry in India is one of the fastest growing sectors with an average growth of 50% in the last decade. India is one of the leading sourcing destinations across the world, “accounting for approximately 55 percent market share of the US$ 185-190 billion global services sourcing business in 2017-18”42. The Indian patents act 1970, governs all aspects of patent law. In India, the software will not be considered patentable if it does not have any technical application. Section 3(k) of the Act,

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149 F.3d 1968 (Fed. Cir. 1998). 545 F.3d 943, 88 U.S.P.Q.2d 1385. 37 130 S. Ct. 3218 (U.S. 2010). 38 The Supreme Court stated, “It may not make sense to require courts to conine themselves to asking the questions posed by the machine-or-transformation test. Section 101’s terms suggest that new technologies may call for new inquiries.” id. at 606. 39 The Supreme Court directed to the Federal Circuit for the expressly determining patent eligibility in that case— and for the implied purpose of providing flexible rules for providing guidance to the public, but the Court did not “take a position on where that balance ought to be struck.” 40 573 U.S. 208, 134 S. Ct. 2347 (2014). 41 Joseph S. III Bird, A Virtual Analog Rule for Software Patent Eligibility, 8 Landslide 47, (2015), https://www.uspto.gov/sites/default/files/documents/2015ig_f_bird_9nov2015.pdf. 42 IT & ITeS Industry in India, India Brand Equity Foundation (Dec., 2018), https://www.ibef.org/industry/information-technology-india.aspx. 36

as amended in 2002, explicitly excludes computer programmes from patentability as “a mathematical or business method or a computer per se or algorithm are non-patentable”. The amendment of 2002 in the Indian Patents Act 1970, through section 3(k), made software patents per se a subject matter of non-patentability but not in totality. Use of the word “per se” implies the legislative intent was to allow patent to those inventions which are more than a software. However, the Patents (Amendment) Ordinance 2004 brought a glimmer of hope by expending the ambit section 3(k)43 for patentability, which allowed the patentability of software which was either in combination with hardware or had technical application. However, due to rejection by the Parliament of this amendment in 2005, the change was short lived and the industry could not substantially make use of this opportunity to their benefit. The rejection by the Parliament pulled back the status quo of software patents to its earlier pedestal. In 2005, Indian patent office issued the Draft manual of patent for practice and procedure, providing guidelines for granting of patent to computer programme related inventions. The guideline states that, “methods implemented by software that lack technical effect and methods with a technical effect but lacking hardware support in the specification are not patentable. The method claim should clearly define the steps involved in carrying out the invention. It should have a technical effect.”44 The conviction of the guidelines was to allow patent only to such inventions which had technical effect and hardware limitation. Tragically, these guidelines failed to be implemented uniformly among various patent offices across India because of the non-binding character of guidelines. Again an attempt made by the government in 2008, draft manual containing guidelines issued which were more elaborated on points but were similar in content. It also failed to remove ambiguities. Until 2015, due to the absence of any directions, there was inconsistency among the four patent offices (Delhi, Kolkata, Mumbai, Chennai) across India, in granting of patents to software. In order to wipe out such inconsistency, guidelines were issued by controller of patents in 2015, known as Computer-Related Invention Guidelines (CRI Guidelines). Under 2015 guidelines, a patent could be issued to software if it fulfils certain conditions. However, guidelines of 2015 were recalled because they proved to be violative of section 3(k)45. Finally, in 2016, new CRI 43

The amended Section 3 (k) read as "Section 3 (k): a computer programme per se other than its technical application to industry or a combination with hardware". 44 Ritushka Negi, Business Method and Software Patent Trends in India, https://www.remfry.com/wpcontent/uploads/2017/12/2009-Business-Method-and-Software-Patents.pdf. 45 Yahoo v. Controller and Rediff, OA/22/2010/PT/CH, 8 Dec.2011.

guidelines were issued, altering the prior position on granting of a software patent, a new criterion called ‘novel hardware requirement’was introduced. Under 2016 guidelines, the inventor must show that “invention included a computer program in conjunction with a novel hardware”. The 2016 CRI guidelines cleared the air of legal ambiguities in relation to software patenting in India. Subsequently, in 2017, the Controller General of Patents, Designs & Trade Marks issued revised guidelines which focus on substance over form instead of “novel hardware requirement”. The 2017 guidelines negated the need of “novel hardware requirement”introducing the ease in granting of patent protection to computer software. CONCLUSION Today economies are developing at a very fast pace and so does their respective software industry. New inventions or developments, playing a crucial role, are remodelling the software industry every day. Also, with the active participation of various stakeholders in matters of intellectual properties i.e., courts, governments, society etc. the value and scope of patent protection is swelling and likely to be changed over time. A lot of ink & judicial efforts have already been in put in while defining the scope of patent protection in matters apropos of computer software. A bird-eye view of global patent policies and legal framework weighs the balance towards a stronger patent regime. The TRIPS agreement may act as a shield against any blanket ban on software patent advocating for software patents.46 The EPC does not shut the doors on software for patent protection. Similarly, the United States also has a much clear stance on “software patent” and the CLS Bank International v Alice Corp. Pty. Ltd47 is a widely celebrated judgement among the advocates of “software patents” globally. However, there are concerns around the world against software patents including software being an algorithm which should be given copyright protection; patent protection is not a fit with rapidity of developments in the industry and many more. However, the need of the hour calls for reform in area of “software patent”, failure to do so might impede the pace of evolution of software industry. Patent regulators play a vital role in stronger software patent regime and India’s Controller General of Patents, Designs & Trade Marks needs to have a more active role when compared with its counterparts i.e. the United States’ USPTO and European EPO. Further, there is a need to clear the thin, line when an 46 47

id. 768 F. Supp. 2d. 221 (D.D.C. 2011).

invention surpasses per se stage and turns into a full-fledged patent invention. Although, the debate regarding patentability of software has been turning in favour of the advocates of software patent, the huge chunk of this development of favour of software patent is owed to the active and progressive role played by the judiciary around the world, still the jurisprudence of software patent needs more clarity and there is need for stronger and dynamic role of executive, legislature and judiciary for spreading the horizons of software patent.

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