Antoinette M. Tease Montana Patent
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The Uncertain Fate of Software and Business Method Patents in Europe

Many in the U.S. have criticized the liberalness with which, in their view, the U.S. Patent Office grants software and business method patents. Yet our patent office continues unabashedly to apply the same standard for patentability—namely, utility, novelty and nonobviousness—to software and business method inventions as to other types of inventions. The end result is that the United States leads the world in the number of software and business method patents granted.

In Europe, software and business method patents must clear another hurdle: they must provide a “technical contribution” to the state of the art in order to be patentable. Although no European body has provided a clear definition of this term, the phrase “technical contribution” is generally understood to mean that the software or the business method results in something technical, as in the solution to a technical problem, or that technical features are required to carry out the claimed invention. As is apparent from the circularity of that definition, it provides very little clarity and hardly any predictability.

The requirements for patentability in Europe are set forth in Article 52(1) of the European Patent Convention (EPC). That article states that “European patents will be granted for inventions which are susceptible of industrial application, which are new and which involve an inventive step.” This three-part test roughly corresponds to the utility-novelty-nonobviousness test for patentability in the U.S. Article 52(2) of the EPC also attempts to define what is not patentable. Specifically, it states that the following are not patentable: “schemes, rules and methods for performing mental acts, playing games or doing business and programs for computers.” This language clearly exempts both software and business method-type inventions from patentability. As the law has developed in Europe, however, a computer program that provides a “technical contribution” falls outside the scope of Article 52(2) and is, at least in theory, patentable.

In February of 2002, in response to public debate over whether computer programs should be excluded from the definition of patentable

inventions in Article 52(2) of the EPC, the European Commission (EC) produced a draft Directive on the Patentability of Computer-Implemented Inventions. The full draft can be found at http://www.europa.eu.int/comm/
internal_market/en/indprop/com02-92en.pdf. The goal of the Directive is to harmonize the laws of the EU member states and to “mak[e] the conditions of patentability [for computer-implemented inventions] more transparent.” In the Directive, the EC defines a “technical contribution” as “a contribution to the state of the art in a technical field which is not obvious to a person skilled in the art”—thus leaving the question of what constitutes a “technical contribution” as murky as it was before. The report emphasizes the need for maintaining the “technical contribution” requirement, however, because elimination of that requirement would lead to the patentability of computer-implemented business methods, as in the U.S. According to the EC, the patentability of business methods is a relatively new phenomenon in the U.S., and the Commission feels it is prudent to wait and see whether and how this phenomenon impacts the U.S. economy, and more particularly e-commerce, before Europe follows a similar course.

Interestingly, the drafters of the Directive stated that patent law has played a less significant role in fostering the growth of the computer industry in Europe than it has in the United States. According to the Directive, copyright law (and licensing) has played a greater role in allowing the European software industry to grow than has patent law. The report goes on to criticize the U.S. for issuing clearly invalid patents, particularly involving e-commerce. The drafters of the Directive also note that the cost of incremental innovation, which is typical of the software industry, increases when patent rights must be ascertained and license rights negotiated before development can occur.

The fate of the EU Directive on the Patentability of Computer-Implemented Inventions is currently uncertain. The Legal Affairs Committee of the European Parliament has sent the draft back to the EC, which must decide whether to withdraw the current draft altogether, amend it, or send it back to Parliament in its current form. In the interim, no doubt the European community will continue to watch and evaluate the U.S. experience insofar as software and business method patents are concerned.

Patent Law for the New West
The information in this newsletter is provided for informational purposes only and should not be considered legal advice. Please consult a qualified attorney for advice on a specific legal matter.

2005 Antoinette M. Tease, P.L.L.C. All Rights Reserved.

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