Beehive Shows Confidence in Kiwi Innovation

The Patents Act 2013 was voted into law by Parliament in Wellington today.

Commerce Minister Craig Foss has created new law that raises the bar for New Zealand patents. It means Kiwi innovators can patent their world leading inventions, without discrimination, in all fields of technology.

“Kiwi thinking leads the world in many areas, but all too often we miss the opportunity to earn what we deserve for our inventions,” says Paul Adams, Founder & CEO of innovation specialists EverEdge IP. “We need to get smarter about using the tools at our disposal. Patents can be used to protect novel research and development from would?be imitators.”

Patents have a unique function in turning innovation into commercial success. He advises, “Each idea has its own potential for success. I’d be the first to say many clients don’t need them, but in the right circumstances patents can be critical. They’re the only way to directly protect genuine inventions. That’s so whether those inventions involve materials, gears, circuits, or software.”

Many New Zealand innovators make good use of patents. “Patents reduce the need for secrecy,” explains Chris Auld, Chief Technology Officer at Intergen and Director of GZ2 holdings, an investor in several successful tech start-ups. “Sometimes secrecy is enough, but often patents are the practical way to protect an invention. I’ve seen for myself how patents play an important role in raising capital for high tech Kiwi businesses.”

A decade ago, the Government started the process of modernising New Zealand’s patent legislation.

“People welcomed nearly all the reforms,” says Matt Adams, who has studied computer science and is a Partner at AJ Park. “No one objects to all the work that has been done to improve the quality of New Zealand patents, and almost everyone wants New Zealand to be more in line with the international patent system.”

However, he mentions there was a fly in the ointment. “Patent law reforms ground to a halt in 2010 when a proposal to ban patents for computer programs was inserted in a draft version of the legislation,” explains Matt. “People who opposed patents for computer programs said a ban was necessary so that software innovation would not be ‘stopped in its tracks’ in New Zealand. They worried that litigation over frivolous patents would tie inventors up in court cases.”

The New Zealand Technology Industry Association represents the technology industry, and CEO Candace Kinser has been following the debate from the beginning. “Opponents of the Minister’s legislations raised concerns that we need to be thoughtful about,” says Candace, “but fortunately there’s no evidence to substantiate their fears. There were widely differing opinions in the industry about whether there was actually a problem in New Zealand.”

“Everyone seems to agree that New Zealand software innovation is rampant”, she says. “Last year, a Government study found that Kiwi software innovation is strong. It is important that the Government supports this sector.”

In the three years since a ban on patents for computer programs was proposed, the Government has stepped back, consulted widely, and reviewed the evidence.

“Patents for computer implemented inventions are already available under law that has been in place since 1953,” explains Matt Adams. “Our research found that hundreds of Kiwi owned companies have made use of the option to patent computer implemented inventions. All indications are that the spectacular growth of New Zealand software innovation has been supported by patents.”

We sometimes hear about patent disputes in the US, rumbling through the news like distant thunder. It’s true that some Kiwi companies exporting there have also faced US patent claims. But our law can’t change that, and he says there is no reason to fear frivolous patent claims in New Zealand. “There are aspects of the US patent system that we would not want here, but software patents are not the issue.” Matt Adams explains that the US has jury trials for patent disputes, triple damages for wilful infringement, and “overly strong protections for dodgy patents” once they are granted.

“Those factors make it all too easy for frivolous patents in any field of technology to win astonishing sums of money in the US courts. Fortunately decades of experience in New Zealand make it clear that we simply don’t have those problems,” he says.

A review of Court records reveals that since the previous legislation was passed in 1953, there has not been a single court case to enforce a New Zealand computer implemented invention. “The Patents Bill will make litigation even less likely,” says Matt Adams.

He also believes that the new legislation means fewer worries about low quality patents being granted in the first place. “The new Patents Act sets a higher bar,” he says. “Applications will need to meet strict new statutory requirements, and if they don’t the appeals process will make them easier to challenge. I think we’ll look back in a few years and see that other countries envy the quality of New Zealand patents.”

The change the Commerce Minister introduced with Supplementary Order Paper 237 brings New Zealand law for computer implemented inventions into line with the United Kingdom, and more broadly, Europe. Those looking for a restriction will be pleased that it’s more restrictive than the US and the previous law in New Zealand. European law was one of the options that was recommended by Government policy officials, and many submissions to the Government broadly supported the European position.

“UK law restricts patents for computer programs as such, while allowing patents for genuine computer implemented inventions that meet the statutory requirements,” says Matt Sumpter, an intellectual property expert and Partner at Chapman Tripp.

“Examples in the new Patents Act illustrate that an invention which improves the operation of a general purpose machine could be patentable regardless of whether software is involved. On the other hand, if it’s just a common business process that is implemented in software then it won’t be patentable just because the software is new.”

Matt Sumpter says the international context is important for patents. “New Zealand is part of the TRIPs treaty on international cooperation. The 1994 agreement says that patents should be available for any inventions, in all fields of technology,” he explains.

“We’re a trading nation, and our exporters routinely work with patents overseas,” he says. “Consistency with Europe and the TRIPs agreement means that Kiwi innovators will have a sound and predictable framework to protect their software ingenuity for years to come. The new Patents Act expressly recognises the importance of international consistency, in section 3.”

“It would have made absolutely no sense to have an outright ban of patents for true inventions just because there’s a computer involved,” explains Chris Auld. “Some people might not want to get patents for themselves. I think everyone respects that. But patents for software inventions have raised very significant funds for smaller New Zealand businesses. An outright ban would have taken away the patent option from us, even for the most remarkable discoveries. It would have placed our sector at a significant disadvantage as against other high tech industries in New Zealand.”

“Microsoft believes in the importance of research and development, so we’ve supported patent laws that will allow innovators to patent genuine inventions on a technology-neutral basis,” says Waldo Kuipers, Corporate Affairs Manager at Microsoft New Zealand Ltd. “Many of the Kiwi software entrepreneurs we partner with are doing very impressive work, and we’ve had a lot of encouragement from them on our stance.”

It’s not just the IT industry that makes innovative software. Organisations as diverse as Fisher & Paykel Appliances, Air New Zealand, Auckland Uniservices, Intel, Aptimize, and GNS Science came forward to push for legislation that does not discriminate against patents for computer implemented inventions. EverEdge IP filed a submission in favour of patent choice alongside a consortium of small, medium and large businesses that are New Zealand owned and operated, as well as individual entrepreneurs and commercialisation experts.

“At the New Zealand Technology Industry Association we have had numerous emails, phone calls, and conversations from our ‘home grown’ software development company members and a number of new members over our position on the issue,” says Candace Kinser. “It is clear that the companies who are innovating, exporting, and growing our nation’s economic position on the world stage are supportive and encouraging of giving all inventors the choice to use patents in the right circumstances.”

The industry group encouraged the Government to ensure that innovators would be free to choose how they commercialise their work. Candace says, “The New Zealand Technology Industry Association believes that innovators should continue to have the choice to patent their inventions. The freedom to choose a sensible commercialisation strategy should not be taken away from someone just because they’re working with computer programs.”

“I have been impressed that Commerce Minister Craig Foss has unwaveringly navigated strong opinions on both sides of the debate. It seems that after giving fair consideration to every point of view, he has decided on a balanced policy.”

The Patents Act is expected to come into full effect a year from now.