The debate about whether companies and individuals should be able to patent software has received particular prominence in recent years due to the EU's proposals for a directive on the patentability of "computer implemented inventions".
However, what is less well known is the extent to which software can be and is already being patented within Europe.
Although it is generally understood that patents for software can be obtained in the US, European companies frequently do not appreciate that such patents are being obtained in Europe through the European Patent Office and some national patent offices. Indeed, the applicants for these patents tend to come from outside the EU - in particular US and Japanese companies.
They are pressing ahead with software patenting strategies regardless of the ongoing European debate on what should be patentable, and are leaving many of their European competitors behind.
So what approach to patenting should companies adopt, and what can be patented?
What is most important is that companies consciously take some basic measures to protect what their employees invent. Ideally, these should ensure that inventive ideas are collected, evaluated and converted to patent applications where appropriate.
However, alternative steps might include ensuring clear records of inventions are kept (even where these are not to be patented or exploited), and then deciding whether to keep these confidential or to publish sufficient details of them so as to prevent competitors obtaining patents (a potentially risky strategy).
In this context, it is important to realise that owning patents can act as a deterrent to being sued, as well as providing a means of inhibiting your competitors and creating revenue streams. Many patents are now obtained as much for their defensive value to the applicant (for example, to use against an aggressor who is trying to assert its own patents), as for offensive reasons.
The European Patent Convention governs the position at European level and provides that certain things are not to be considered "inventions" for the purposes of patentability.
These include computer programs and methods of doing business but these exclusions from patentability only apply where the invention relates to that thing "as such".
The two words "as such" have caused considerable difficulty. Similar provisions are contained in the national laws of the UK and other EPC member states.
However, the current situation is confused - not only have national courts come to inconsistent decisions on what can be patented, but the decisions of the European Patent Office (EPO) on this issue are themselves contradictory.
The EPO's current approach is broadly to allow patent claims incorporating software as long as the claim involves the use of hardware or other apparatus, however mundane. This is subject to the other basic criteria for patentability being met: ie, that the relevant invention is both novel and inventive (or non-obvious) when compared against what is known in the relevant field at the time.
However, this approach has evolved relatively recently and differs from the approach previously followed by the EPO, when it used to ask instead whether the invention made a so-called "technical contribution" to what was known at the time. If not, then the invention was not patentable and, for these purposes, a computer program in itself did not count as a "technical contribution".
The difference in effect between the EPO's old and current approach is fairly significant, with the current approach setting a much lower bar for patentability than used to be the case and thus making software patents easier to obtain.
In October 2006, the English Court of Appeal gave a judgment which laid down the criteria to be used by the English courts and UK Patent Office in deciding whether a computer program (or business method) could be patented. Although influential, this decision is not binding on other national courts in Europe or on the EPO which may take different views on this issue.
However, the judgment emphasised the need for European patent judges to be consistent with one another and called for clarification in this area at a European level. According to Lord Justice Jacob, this was an area in which the approach taken mattered, as "billions (euros, pounds and dollars) turn on it".
The English judgment concerned two cases: one relating to a patent application for an electronic document assembly system (for which the inventor had already secured patents in Australia, New Zealand, Singapore and South Africa) the second relating to a patent for a system for managing pre-payment for telephone calls.
The court decided that, as it was bound by previous English Court of Appeal decisions on patentability, it was required to follow the "old" EPO approach rather than the current one. (The court was also rather critical of the current EPO approach.) This "old" and narrower approach is thus what will be applied by the UK Patent Office and English Courts for the moment.
However, in an attempt to clarify this approach, the court also laid down a four step test to be applied in practice.
The Court of Appeal decision does not radically change the position in the UK. However, by laying down a "four step" test, the judgment gives clearer instructions about how to approach the software exclusions on patentability.
This may make it easier for the UK Patent Office and Courts to apply them and may therefore lead to less disputed decisions and so more certainty for UK business.
Nevertheless, one might say that the decision still does not fully address the underlying problem: what exactly should and should not be patentable in the context of software?
The question of whether in any particular case there can be said to be a "technical contribution" is still likely to lead to uncertainties in interpreting the position.
However the request for clarification at European level may be the beginning of the road to more clarity - and consistency - in this area of law.
In the meantime, the fact remains that patents are available and obtainable for novel and inventive computer programs. While these may be easier to obtain in the EPO than the UK Patent Office and may still be subject to attack in the English courts, the approach taken by US companies and the likelihood of further changes in the law mean it would be short-sighted for UK companies to ignore the area completely.
Mark Taylor is a senior associate at law firm Lovells
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This was first published in March 2007