Software and Business Method Patents

"The patent system added the fuel of interest to the fire of genius." Abraham Lincoln (the only U.S. President to be issued a patent)

Hidden innovation which is eventually lost to society is exactly the situation which patents were intended to correct. In a sense, patents are an indication that society expects us not only to contribute products, but also to disclose our technology, and not just keep it hidden. Certainly, if a business folds completely, we do not want its accumulated expertise to be lost as well.

History of Patents

The modern concept of the patent was established in England where, in 1449, King Henry VI awarded a patent to John of Utynam for stained glass manufacturing. This patent established the notion of a state-granted limited monopoly.

Beginning in 1552, a series of "letters patents" was issued by the Crown. The monarchy began a trend of issuing patents for its own benefit and for the benefit of officers and friends of the Court. Patents were issued on entire industries, not just inventions. For example, the Stationers enjoyed complete control over the publishing industry in England. The balance of power soon shifted towards those whom the monarchy decided to favor. Reform began with reign of Queen Elizabeth I. Francis Bacon commented that the Queen would grant patents for any invention that she deemed useful to the country. In an effort to curb further abuses of power, Parliament, in 1624, passed the English Statute of Monopolies, which outlawed all royally sanctioned monopolies. Realizing the importance of protecting inventors and the economic benefits associated with encouraging innovation, an exception was allowed for patents of "new manufactures." These patents were awarded to the inventor as long as their new devices did not hurt trade or result in price increases. Additionally, a statutory limit of fourteen years was imposed on English patents.

The United States Patent Office represented an early form of U.S. Federal support for science which enabled scientists, inventors, and entrepreneurs to secure property rights for their innovations. While many of the original thirteen American Colonies had some form of patent law, Thomas Jefferson (among others) influenced the development of the first national patent system in 1790.

Article 1, Section 8, Clause 8 (the "Intellectual Property Clause" also called the Patent and/or Copyright Clause) of the United States Constitution states, "Congress shall have the Power... To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

Many of the patents issued during the 18th and 19th centuries were attempts to solve practical problems. In part, the practical nature of most patents was a reflection of ideals that only physical, useful inventions should be granted a patent. It was not until the mid-twentieth century that there was a call to patent "everything made by man under the sun." America saw an increased number of inventors. As a result, more patents were filed. Among these were several landmark patents during the first hundred years following the Patent Act of 1790. Included among these are Eli Whitney's Cotton Gin patent; Samuel Morse's Morse Code patent; Charles Goodyear's Vulcanized Rubber patent; Alexander Graham Bell's Telephone patent etc.

The explosion of patents enabled corporations to essentially create legalized monopolies on their inventions. Many have argued that this has hurt competition, while others show that the rise of the corporation beginning in the late nineteenth century has helped America grow into an economic power.

Patents currently take several years from date of application filing to date of issuance. Many times, a patent is issued long after the technology that was embodied in the patent has become obsolete. Patents are still being granted for obvious, non-useful inventions (this is legally uncalled for including under the Indian Patents Act, 1970). Additionally, there currently exists a flood of patent infringement litigation - American corporations have realized the financial benefit associated with winning a patent infringement suit. Millions of dollars are routinely awarded for damages and patent licensing fees. For some, patents have become nothing more than a mechanism for bargaining in court.

What is a Patent?

A patent is a set of exclusive rights granted by a government to an inventor or applicant for a limited amount of time (normally 20 years from the filing date). The term "patent" originates from the term to patent which means to lay open (to public inspection) and the term letters patent, which originally denoted royal decrees granting exclusive rights to certain individuals or businesses. Per the word's original definition, one theory of patent legislation is to induce the inventor to disclose knowledge for the advancement of society in exchange for a limited period of exclusivity. Therefore a patent is a monopoly right.

According to the Indian Patents Act, 1970 –

Patent is a grant from the Government to the inventor for a limited period of time, the exclusive right to make use, exercise and vend his invention. After the expiry of the duration of patent, anybody can make use of the invention.

What is an invention?

According to the Indian Patents Act, 1970 – Invention means any new and useful a) art, process, method or manner of manufacture, b) machine, apparatus or other article, c) substance produced by manufacture, d) and includes any new and useful improvement of any of them, and alleged invention. An invention is the creation of intellect applied to capital and labour, to produce something new and useful. Such creation becomes the exclusive property of the inventor on grant of patent.

Rights granted and rights not granted

A modern patent provides the right to exclude others from making, using, selling, offering for sale, or importing the patented invention. Generally, patents are enforced only through private actions; namely, through civil lawsuits or licensing agreements. Governments typically reserve the right to suspend or cancel a patent at will.

An application for a patent (other than a design patent) must explain how to practice (i.e., make and/or use) the invention(s) and must also include "claims" that particularly point out the invention(s) and will define the protection conferred to the owner of the patent, once granted. Generally, the exclusive rights are limited to the invention(s) defined by the patent's claims. Patent claims are typically of the form of a long sentence, e.g., "An apparatus for catching mice comprising, a base member for placement on a flat surface, a spring member...", "A chemical for cleaning windows comprised of 10-15% ammonia, ...", "A method for computing future life expectancies, the method comprising gathering personal data including X,Y, Z, ...", etc.

Claim language formats and practices vary widely between different countries. Each word of a claim is considered an "element" of the claim. In order to exclude someone from using your invention in a court you will have to demonstrate to the court that what the other person is using is identical to the claimed invention.

International Governing laws

At this time, there are a number of significant international treaties governing patent law. The most universal of these is the WTO TRIPs Agreement, to which almost all countries are a party. The United States, European Union, India and Japan, are parties to all of the significant treaties. This has led to significant harmonization of patent law worldwide, particularly in the last decade of the 20th century and continuing into the 21st.

Patent grants are territorial in nature. Thus, patent protection in multiple countries require separate filings of patent applications in each country, or region, where protection is sought. Within Europe, a single patent application procedure is available through the European Patent Office, but successful applications result in multiple patents (up to 28) rather than a single European-wide patent. Such a European-wide unitary patent, or "community patent", has been the subject of discussion at the EU level since the 1970s, with no result so far.

Many of the international treaties are designed to afford some recognition of filing dates to patent applications filed in one country. In this respect, the most important treaty is the Paris Convention. Typically, inventors are allowed one year from the date of their filing in their home country to file the application abroad, frequently called national stage filing. Systems such as the Patent Cooperation Treaty (or PCT) allow inventors a cost effective way to further delay national stage filings.

Patents in India

Patents in India are regulated by the Patents Act, 1970. This act has been in the center of controversy for quite some time now both in the media as well as in Parliament. This is because the Patent Act, as it stands now does not allow the grant of product patents in the area of certain sectors such as pharmaceuticals. It only allows grant of process patents in these sectors. Under the GATT agreement, India had committed to bring about product patent law in India. A draft Patent Law has been framed and is being discussed.

Patents Act, 1970

Rights of a Patentee

The owner of the "Patent", i.e. patentee is entitled to deal with such property in the same manner as owner of any other moveable property.

The patentee can sell the whole or part of this property (Patent).
He can also grant license to other(s) to use the patented property.
He can also assign such property to any other(s).
Such sale, license or assignment of such patented property naturally has to be for valuable consideration, acceptable mutually.

Period of Patent

In respect of process patents relating to drugs and food, the term is five years from the date of sealing the patents or seven years from the date of the patent whichever is shorter.
In respect of all other patents the term is fourteen years from the date of the patent. A patent is kept alive only by paying the renewal fee from time to time.

Use of Patented Invention by the Central Government

The grant of patent confers the exclusive right of use on the patentee for commercial gain but the Act recognizes that the Central Government may use any invention even without the payment of royalty to the inventor.

The idea is that the invention can be put to use for general public benefit by the government in certain circumstances when the patentee would have to forego his commercial gain in the general public interest.

Some Restricted Use of Patented Invention Permissible Under the Law

The essence of a patent is conferring of the exclusive right on the patentee. Yet some restricted use of a patented invention by a person other than the patentee is permissible under the law. For such instance, use of a patented invention is permissible for research or experimental purposes or for imparting knowledge or instructions to pupils.

What categories does the 1970 Patents Act exclude?

The 1970 Patents Act defines what are not inventions. The following are not inventions within the meaning of this Act:-

an invention which is frivolous or which claims anything obvious contrary to well established natural laws;
an invention the primary or intended use of which would be contrary to law or morality or injurious to public health;
the mere discovery of a scientific principle or the formulation of an abstract theory;
the mere discovery of any new property of new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant;
a substance obtained by a mere admixture resulting only in the aggregation of the properties of the components thereof or a process for producing such substance;
the mere arrangement or re-arrangement or duplication of known devices each functioning independently of one another in a known way;
a method or process of testing applicable during the process of manufacture for rendering the machine, apparatus or other equipment more efficient or for the improvement or restoration of the existing machine, apparatus or other equipment or for the improvement or control of manufacture;
a method of agriculture or horticulture;
any process for the medicinal, surgical, curative, prophylactic or other treatment of human beings or any process for a similar treatment of animals or plants to render them free of disease or to increase their economic value or that of their products.

Inventions relating to atomic energy not patentable

No patent shall be granted in respect of an invention relating to atomic energy falling within sub-section (1) of Section 20 of the Atomic Energy Act, 1962.

Process Patents

Inventions where only methods or processes of manufacture patentable

In the case of inventions:-

claiming substances intended for use, or capable of being used, as food or as medicine or drug, or
relating to substances prepared or produced by chemical processes (including alloys, optical glass, semi-conductors and inter-metallic compounds),
no patent shall be granted in respect of claims for the substances themselves, but claims for the methods or processes of manufacture shall be patentable.
A claim for patent of an invention for a substance itself intended for use, or capable of being used, as medicine or drug, (except as defined under point 5 of the definition of medicine or drug), may be made and shall be dealt, without prejudice to the other provisions of this Act, in the manner provided in the Chapter pertaining to exclusive marketing rights.

Background and History of TRIPs

TRIPs was added to the General Agreement on Tariffs and Trade (GATT) at the end of the Uruguay Round of trade negotiations in 1994. Its inclusion was the culmination of a program of intense lobbying by the United States, supported by the EU, Japan and other first world states. Also influential were campaigns of unilateral economic encouragement (under the Generalized System of Preferences) and coercion (under Section 301 of the Trade Act)

After the Uruguay round, the GATT became the basis of the World Trade Organization (WTO). Since ratification of TRIPs is a compulsory requirement of WTO membership, any country wishing to obtain easy access to the numerous international markets opened by the WTO must enact the very strict intellectual property laws mandated by TRIPs.

Furthermore, unlike other international agreements on intellectual property, TRIPs has a powerful enforcement mechanism. States which do not adopt TRIPs-compliant intellectual property systems can be disciplined through the WTO's dispute settlement mechanism, which is capable of authorising trade sanctions against dissident states.

The Requirements of TRIPs

TRIPs requires member states to provide strong intellectual property rights in many of these areas. For example, under TRIPs:

Copyright terms must extend to 50 years after the death of the author (although films and photographs are only required to have fixed 50 and 25 year terms, respectively).
Copyright must be granted automatically, and not based upon any "formality", such as registrations or systems of renewal.
Computer programs must be regarded as "literary works" under copyright law and receive the same terms of protection.
National exceptions to copyright (such as "fair use" in the United States) must be tightly constrained.
Patents must be granted in all "fields of technology" (regardless of whether it is in the public interest to do so). (Note - Legalistic deduction perspective: TRIPS 27 provides that all fields of technology must be patentable. When it was signed software was not regarded as a 'field of technology'. It is an open discussion whether software could be regarded as part of technology. Often colloquial understanding is mixed up with legal language.)
Exceptions to patent law must be limited almost as strictly as those to copyright law.
In each state, intellectual property laws may not offer any benefits to local citizens which are not availble to citizens of other TRIPs signatories (this is called "national treatment"). TRIPs also has a most favoured nation clause.

Software and Business Method Patents

Another recent controversy has been over the relationship between the requirements in TRIPs Article 27 for patentability in all "fields of technology", and the necessity of granting software and business method patents (see EU Directive on the Patentability of Computer-Implemented Inventions). In this situation, highly esoteric legal questions, with socially and rhetorically constructed answers, have become the medium through which political contests are fought.

Only method or process of manufacture patents are allowed for such substances under the 1970 Act.2 India's laws thus do not fulfill the obligations set out in Article 27 of TRIPS,3 but as a developing country it can avail itself of the alternate paths laid out in Articles 70.8 and 70.9.

Although computer programs per se are not patentable and this situation is not normally changed when a program is loaded into a known computer. But if the program when running on a computer or loaded into a computer, brings about or is capable of bringing about a technical effect which goes beyond the normal interactions between the program (software) and the computer (hardware on which it is run), then it is patentable.

However the Board of Appeal has held that there is a distinction between a mathematical method or algorithm as such, and it's use in a technical process. Even if the idea underlying an invention may be considered to reside in a mathematical method, a claim directed to a technical process in which that method is used is not an attempt to obtain protection for the mathematical method as such.