Software patents and how we fare in Europe and the UK

Ahead of the ScotSoft 2014 event in Edinburgh on Thursday 2nd October, we here at Metis Partners thought it would be fitting to examine some statistics around software patenting trends at home and abroad, and consider what other forms of protection are currently afforded to software-focused innovators and companies.

In the first instance, we decided to undertake our own brief independent research into the software patent landscape in Europe, with a particular focus on our home base, the UK. Our aim was to identify patent applications and granted patents (collectively, IPR filings) filed through the European Patent Office (“EPO”), as well as directly through the UK Intellectual Property Office (“UKIPO”) and the German Patent and Trade Mark Office (“DPMA”), collectively referred to as Europe in this post. As our goal was to obtain a broad understanding of patenting trends around software, we did not restrict ourselves to the most relevant international patent classification (“IPC”) code for software (G06F), but conducted our search using a number of IPC codes which either directly or indirectly related to software based innovation1. For those who are not familiar with the term, IPC is a classification system used globally to classify inventions according to various areas of technology. It is important to note that the IPC system is continually revised in order to ensure that new areas of technology can be more accurately captured.

Over the past 15 years, there has been a notable trend in software patent filings across Europe, with a surge in filings between the early-to-mid 2000s. However, in more recent years, there has been a notable decrease in software-related patenting activities in Europe.graph1We would note that filing figures for 2012 and 2013 may not be accurate given that there may be a delay in the updating of public patent registers as well as in the publication of a given patent application. Nonetheless, it is a puzzling trend given the frequency with which software patents are mentioned both in the news and within the IP industry itself.

The top 15 applicants of software-related patents yielded a list of companies known to most of us, and was unsurprisingly dominated by Microsoft Corporation. Interestingly, however, we noted that there appeared to be a trend in regards to world-leading mobile information technology companies, such as Samsung and Nokia, positioning their patent portfolios to compete with some of the software heavyweights in Europe. This is a strategic move given that the technology lines between traditional computing and mobile computing are increasingly blurring, and companies who traditionally operated in separate sectors could potentially be finding themselves in denser technology landscapes which can either foster collaboration (as was the case between Nokia and Microsoft) or wars.graph2We subsequently took a closer look at the software patent filings to better understand the trend in technology/application area where these patents were being filed. Below is a visual diagram of the top technology/application areas of software-related patents in Europe. For ease of reference, the bigger the circle, the more software-related patents we found pertaining to that technology area.

graph3

 

So how does the UK compare to the rest of Europe? Using the initial set of results of relevant IPR filings, we extracted information on IPR filings where the priority country had been classified as the UK. The priority country is the country in which a patent application is first filed before being extended into other territories. The priority country often serves as a good indicator that the filing’s applicant is of local origin (i.e. a UK based company).

In terms of filings per year, the UK closely followed the trend we observed in Europe, with a peak of software-related patent filings in 2003 followed by a steady decrease in software-related patent filings.

graph4

graph-5Top software-related patent applicants in the UK vary from telecommunication providers to information-technology providers, however with the exception of few, all appear to be part of larger multi-national corporations.

And in which technology/application areas are software-related patents being filed in the UK? Our research shows that our innovators are quite big in bioinformatics, bio-analysis software and management software relating to medicine and healthcare – although, given the med/bio-tech research and development activities which are taking place around Oxford, Cambridge and the rest of the UK, this may not come as a big surprise.

Software patents and alternative means of protection

Although attempts have been made to harmonise patenting laws internationally via, for example, the “TRIPS” agreement of 1994, it effectively only set a minimum standard on IP regulations with individual countries free to provide more extensive standards if they wished, resulting in marked IP regime differences from country to country. And it will come as no surprise that software patenting activities within Europe as a whole are not as substantial as they are in the US. Below, we have outlined the view that European, US and UK patent legislation takes with regards to software:

  • EU and the UK

    Whilst one can apply for a European Patent, there is no unitary “EU Patent” (at least, not yet); rather, the applicant applies to the European Patent Office via a single patent grant procedure, but receives a bundle of national patents from each country in which patent protection has been granted.

    Complicating matters, Article 52 of the European Patent Convention (and the equivalent Section 1 of the Patents Act 1977 in the UK) lists exceptions to what may be considered an invention, one of which is “a program for a computer,” which is further caveated in that the exception only relates to computer programs “as such”. As a result of this exception to the exception, patents for software have been granted in the EU, but interpretation and application at national level remain varied, with a recent example being the German Parliament’s passing of a motion stating computer programs cannot be patented.

  • US

    The position in the US is much more lenient and in general, software is considered a subject matter capable of being patented. Previously, the US Supreme Court declared a software patent would be granted provided it produced a “useful, concrete and tangible result”. This widely drawn test allowed for a huge number of software patents to be granted and, whilst the scope of this has been amended in recent years, the general consensus remain that obtaining a patent for software in the US is a lot easier than in Europe.

So why would software patenting seen as such a desirable and advantageous step to take by software developers? Patents are generally seen as affording a greater level of legal protection to an innovation as a granted patent can be easily proven. A granted software patent may prevent others from using a certain algorithm without the innovator’s permission, or may prevent others from creating software programs that perform a function in a certain way. This is opposed to copyright protection, which merely prevents the copying of a particular expression of an idea, i.e. the duplication of a software program in its entirety, or the copying of a portion of software code. Furthermore, it can sometimes be difficult to prove copyright infringement, as an innovator must prove ownership of copyright as well as copying by the alleged infringer.

Conversely, however, software patenting is seen as inhibiting innovation, impractical due to the rapidity with which software evolves and infrequently used by software firms themselves. Excepting large software firms, which file copious amounts of software patents and are often in the midst of the software patent debate, smaller software firms and start-ups often depend on being first to market, developing strong “network effects,” selling complementary services or other strategies to benefit from their innovation.

Whilst it not the purpose of this blog to debate the pros and cons between European patent legislation and US patent legislation as it is applied to software, we are interested in exploring alternative means for protecting software, particularly given that so many of our clients have businesses which either focus on software creation or have created valuable software as part of their overall offering.

It is good to remember that a software program itself is considered a “literary work,” and therefore will be protected by the law of copyright automatically and without registration. The limitation to this, however, is that copyright only protects the code itself (i.e. an expression of an idea), and not the invention/idea itself, and therefore does not necessarily prevent others from expressing the same idea differently, i.e. using different code. A good example of this is the myriad of word processing applications which currently exist on the market.

A software patent, by virtue of what a patent is meant to achieve, provides the patent owner with negative rights, i.e. rights to prevent others from using or exploiting the invention claimed in the patent. Given the stricter European regime on patenting software and the sheer costs associated with patenting, which may be difficult for small software start-ups to cough up (particularly given the long uphill battle awaiting those who intend to patent software), businesses which have generated software containing unique algorithms or functionality may want more than just copyright to protect their software innovations.

Though IP management is often synonymous with formal, registrable forms of protection, we often remind our clients that software, bits of code and data can all be protected as trade secrets of the company if they are well-protected from leaking into the public domain and are well-defined in collaboration, joint-ventures and even employment agreements. The downside of treating software as a trade secret, however, is that the software must only be used internally; if software is made accessible to the public at large, this necessarily negates its ability to be considered a trade secret. This approach is therefore best suited for businesses where software has been developed for internal use, and where the software provides the business with a significant competitive advantage over others who are operating in the same field.

In instances where software is created for public distribution and a trade secret approach is no longer ideal, businesses can take steps to deter others from replicating software programs and/or encoded algorithms, or taking proactive steps to prove infringement should they find themselves in that position. Steps can include encryption of underlying software code and/or the insertion of dummy or redundant code in order to provide more weight to a claim of copyright infringement, as well as putting software code into escrow to prove date of creation.

We understand that when seeking to consolidate your position and protect the investment you have made, there is no perfect one-size-fits-all solution due to the inherent intricacies of not only software development, but the software industry as a whole. This is why we often recommend that businesses consider relying on a combination of the protection mechanisms listed above, while simultaneously working to add greater value to their software by building value in collateral IP surrounding their critical software. Building up brand, and engendering customer loyalty, can mitigate against circumstances where software cannot be protected as a trade secret and is capable of reconstruction by skilled software engineers. One need only to think about Microsoft and the bevy of copycat software suites, some of which are even free, to see the value inherent in a well-known brand with significant client loyalty. Metis Partners has worked with a number of software-centric businesses in Europe, the US and South East Asia to help improve IP value through effective protection and exploitation of software-related IP assets and collateral IP.

A final word of caution. We have seen numerous examples where clients have relied on open-source software to generate software which they wished to protect and commercially exploit in the future. Programmer affinity to open source software and code is understandable, given that it is cheap and backstopped by a global team of support volunteers. Do keep in mind, however, that open source software is provided to you under licence, and in some instances that license may prevent you from commercially exploiting your software/code and/or requiring you to license-back any modifications or creations you have achieved through reliance on the open source software/code. If you are creating software which you intend to protect and commercially exploit, do take a quick look at the terms and conditions of the open source licence under which the software/code is being made available to you.

Metis Partners is a specialist IP firm with offices in the UK and US, and has a multidisciplinary team of IP specialists who assist companies with assessing, exploiting and monetising IP assets across various industries, including IT and software. We wish all award nominees at the ScotSoft 2014 awards dinner the best of luck and a lot of fun.

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