2004-06-17 NL Ministry of Economy continues to misinform the Parliament

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Note: there is now a reply to this letter which notes and debunks most errors and inaccuracies, available at NlGovLttrResp0422En

On 16th June, the responsible State Secretary of the Dutch government sent a letter to the Parliament explaining the Dutch position, as promised in the preceding debate. The original Dutch version can be found here. Below is an English translation of this letter. It will be discussed in the Dutch Parliament on 24th June.

The letter contains a large number of wild assertions, which demonstrate a naive belief in the universal beneficence of the patent system, a complete ignorance of economic research in the field and unwillingness to take the work of the Dutch and European Parliaments into account. Additionally, it contains a lot of factually plain wrong information about the proposal supported by the ministry ("business methods are per definition not technical and thus not patentable according to the Council text", "article 5.2 makes sure that a program outside the context of the patent cannot be claimed", "the inventive step/technical contribution must lie entirely in the technical aspects of the invention", "the solution must be technical") and false statements about legal matters (such as "copyright doesn't protect against rewriting of the same program in another language").

Already in 2001, the "patent experts" of the Ministry of Economics failed to take a vote of the Dutch Parliament (which was backed by the software industry association FENIT as well as the open source association VOSN) into account. Instead, they pursued the European Patent Office's practice of unlimited patentability through the Council, while trying to dissimulate this fact and avoiding to give any reasoning for it.

It should also be noted that the ministerial letter is coming out after the Parliament has strongly scrutinised the ministry's policy and after Reinier Bakels presented a memorandum which lays out the basic misunderstandings of the ministry in way that should be very easy to understand.

It is not quite unusual to see that patent officials in governmental ministries are unwilling and even unable to engage in any other intellectual activity than that of reciting enunciations from patent authorities. What surprises most is that even the Minister of Economics is willing to identify himself with such an open display of irresponsibility and incompetence in matters of economic policy.

Translation work division:

Thanks to everyone that helped!

page 1-3 (till right before point 2)

1. The importance of patents on computer implemented inventions

This cabinet rates the knowledge economy of paramount importance. Industrial property in general, and patents in particular, are instruments for companies to protect their investments in research and development (R&D) and thus enables them to regain the associated costs. Without this protection, companies will invest less in innovation. The starting point here is that technical inventions that are new, creative and applicable in industry, should be protectable by means of patents. In the modern knowledge economy, inventions mostly lie in the field of information technology. This is about software in combination with an application within a device.

For example, when a company makes a technical invention to modify a television signal, with the purpose of enhancing display quality, then that should be patentable. It is possible that, to make this invention work, the software uses algorithms, for instance a square root. A computer program to efficiently calculate a square root, as such, is not patentable. But a new and non-obvious method to modify a television signal to enhance the display quality, in which this square root calculation is applied, is patentable because it is a concrete technical invention. Naturally, the algorithm stays freely available for other applications. It's just disallowed to modify a television signal in a comparable way, with the purpose of enhancing the image quality. In other words, it's prohibited to use the same technical solution for the same technical problem. Such highly technological inventions are protected by the patent right on computer-implemented inventions. It is my opinion that, if we want to advance the knowledge economy in Europe, the protection of such inventions should be taken care of in a good and unambiguous way. The draft directive with the contents on which the Council recently reached a political agreement, in my opinion offers a solid base towards this goal.

Patents on computer implemented inventions are currently awarded based on the European Patent Convention (hereafter: the EPC) and the interpretation that the European Patent Office gives to it. The governing European patent right embraces the idea that software isn't patentable. Software as such is "only" a question of (computer)-language and comparable to, for instance, literature. This is protected by copyright. In the same way that a sentence like "I love you" cannot be patented, software as such cannot be patented. What copyright doesn't protect, however, is the invention that is brought about and effectuated in a device and for which the written software is an essential instrument to its operation. When only the software as such is protected and not the invention that the software is meant for, the situation arises that someone else can evade copyright by formulating the program differently, and subsequently the invention becomes freely usable.

The European Patent Office therefore established a practice wherein it awards patents on computer-implemented inventions based on common patent criteria, which are: newness, inventiveness and industrial applicability.

In practice however, the desired possibilities for patenting computer-implemented inventions in Europe, and the possibilities that national patent legislation offer, are still disputed. In juridical practice and jurisprudence of the separate member states, differences exist as well with regard to the protection of computer-implemented inventions.

These differences can cause trade frictions and thus hinder the proper functioning of the internal market. Given the increasing importance in distribution and usage of computer programs in all fields of technology, it is of great importance to create an optimal clarity regarding possibilities of patenting computer-implemented inventions. Therefore, the juridical rules for this must be harmonised, so that the resulting legal certainty and the level of requirements for patentability for such inventions, enable innovating companies to reap optimal benefits from their innovation process and stimulate them to invest in innovation. The legal certainty will be guaranteed because national judges will, when in doubt about the interpretation of the rules regarding the patentability of computer-implemented inventions, be able to request a verdict on it at the Court of Justice.

Page 3-5

2. Contents of the directive, the council text, the amendments of the EP and the position of the cabinet:

The European Commission wants to combine four goals with the directive proposal:

  1. the creation of legal certainty in Europa by means of harmonisation and clear rules;
  2. the preservation of the possibility to patent computer-implemented inventions.
  3. the prevention of trivial patents by requiring inventivity regarding the technical features of the invention;
  4. the preservation of the possibilities for designers to take note of the computer-implemented inventions of patent owners so that via the way of decompilation and interoperability they can design new software products which connect with patented inventions.

These starting-points are shared with the Council. The Cabinet as well has the opinion that it serves innovation. As follows from the approval of the directive by the EP, the EP shares these general starting-points, with the observation of the 64 amendments which the EP added to the directive. Part of the amendments of the EP (about half of them) has been incorporated into the Council text. It appears from the diversity of the amendments from the EP, that inside the EP there is discord as well regarding the desired possibilities for the patenting of computer-implemented inventions. The EP tries to restrict the possibilities of patenting with certain amendments. The council wants this to. But the EP goes a lot further in some of the amendments than the Council considers desirable, and excludes a lot of computer-implemented inventions from patentability (see for this also the discussion of the amendments below).

As such, the Council and the EP disagree on a number of important points regarding the desired possibilities of patenting computer-implemented inventions. Therefore, the Council, with support of the Netherlands, has not adopted part of the amendments from the EP.

Below, I will offer a discussion by article of the directive text on which the Council adopted a political agreement in its first reading, why I think that the directive text implements the four above mentioned points in the best possible way and why the not adopted amendments of the EP implement these starting-points less well. To give a good comparision the original English text will be used.

Council text

EP amendments

Article 1 Scope This Directive lays down rules for the patentability of computer-implemented inventions.

Article 1 Not amended.

| Council text | EP amendments | | Article 2. Definitions. For the purposes of this Directive the following definitions shall apply: | Article 2. Amendment 36, 42, 117. For the purposes of this Directive the following definitions shall apply: | | (a) "computer-implemented invention" means any invention the performance of which involves the use of a computer, computer network or other programmable apparatus, the invention having one or more features which are realised wholly or partly by means of a computer program or computer programs; | (a) "computer-implemented inventions means any invention within the meaning of the European Patent Convention the performance of which involves the use of a computer, computer network or other programmable apparatus and having in its implementation one or more non-technical features which are realised wholly or partly by a computer program, besides the technical features that any invention must contribute. | | (b) "technical contribution" means a contribution to the state of the art in a field of technology which is new and not obvious to a person skilled in the art. The technical contribution shall be assessed by consideration of the difference between the state of the art and the scope of the patent claim considered as a whole, which must comprise technical features, irrespective of whether or not these are accompanied by non-technical features. | (b) (amendment 107, 69) "technical contribution", also called invention, means a contribution to the state of the art in a technical field. The technical character of the contribution is one of the four requirements for patentability. Additionally, to deserve a patent the technical contribution has to be new, non-obvious and susceptible of industrial application. The use of natural forces to control physical effects beyond the digital representation of information belongs to a technical field. The processing, handling and presentation of information do not belong to a technical field, even where technical devices are employed for such purpose. | | | (b)(new)(amendment 55, 97, 108) "technical field", means an industrial domain requiring the use of controllable forces of nature to achieve predictable results. Technical means "belonging to an technical field".| | | (c)(new)(amendment 38, 44, 118) "industry" within the meaning of patent law means the automated production of material goods|

The definition of computer-implemented inventions is given in article 2a. The EP adds in the amendments 36, 42 and 117 that such an invention is an invention as meant by the EPC. Of course this is true in essence, but the goal of the directive is to actually remove the uncertainties in the convention regarding computer-implemented inventions. As explained earlier, the possibilities that the EPC gives regarding the patenting of computer-implemented inventions lead in practice to discussion and legal uncertainty. In the Council's vision, a reference to the convention doesn't help to solve that problem.

page 6-7

Article 2b is about what kinds of inventions can be considered to be patentable. With regard to this, the Council chooses the approach that each invention that is new, inventive and applicable, can be considered for patenting. The Council however adds an important condition. The inventiveness of the invention must lie in the technical aspects of the invention. The technical solution of the problem must therefore be inventive. As a consequence, business methods, that are non-technical in nature and are just implemented using a computer, are not patentable. This way, the draft directive as desired by the Cabinet and the Council is to a great extent different from the American practice, in which almost any invention is in principle patentable.

With amendments 107 and 69, the EP adds some elements. Firstly the EP mentions the technical character of the invention as a fourth patenting criterium. Patent law that is generally in force however, considers three requirements for patentability. The addition of a fourth criterium leads to confusion and is contrary to international patent treaties. In substance however, the opinion of the Council does not deviate from the wish of the EP, the inventiveness of the invention must lie in the technical aspects. In the explanation of article 4 below this will be discussed in more detail.

More far-reaching is the stipulation that "The processing, handling and presentation of information, even where technical devices are employed for such purpose" do not belong to technology and are, in consequence, not patentable. Such a stipulation excludes many, if not all, computer implemented inventions from patentability. After all, it is inherent in computer implemented inventions that they contain elements of data processing. An invention, as earlier described, for the improvement of the image quality of a television set will probably be covered by this. The Council regards exclusion of patentability of such inventions as bad for the climate of innovation in Europe and contrary to international patent law treaties and for these reasons undesirable.

Besides this, the EP proposes two new sub-articles. Firstly a new article 2b (amendments 55, 97 and 108). This article gives a definition of the concept "field of technology". The aim of this is to be able to diverge from the TRIP's treaty (the treaty linked to the WTO with regard to intellectual property). Within this treaty it applies that patent law should be open to all fields of technology. Exclusion of computer implemented inventions is not possible based on this. By, however, stipulating that it cannot be regarded as a field of technology, exclusion would be possible. The EP wants to limit the patent law to inventions that use the forces of nature. This is however a vague concept. All processes take place by forces of nature. Introducing such kind of additions rather leads to legal insecurity and must therefore be rejected.

Finally the EP proposes, with regard to article 2, via the amendments 38, 44 and 118, to reserve patent rights to branches of industry that produce material goods. It is unclear what is intended by this. Possibly the EP wants to exclude software manufacturers by this. Based on international patent treaties this is not possible. It also remains the question whether this is desirable and also practicable. For instance, Microsoft recently received a U.S. patent on an improvement of the mouse (see also the explanation on article 4 below). Does this amendment mean that Microsoft can only get a patent on this invention if the company itself is going to produce the mouse, implementing the invention in it? The Council does not regard this as a desirable situation and therefore did not adopt this amendment.

| Council text | EP amendements | | Article 3. Computer-implemented inventions as field of technology. - deleted - | Article 3A (new) Amendment 45. Member states shall ensure that data processing is not considered to be a field of technology within the meaning of patent law, and that innovations in the field of data processing are not considered to be inventions within the meaning of patent law. |

The amendment of the EP states that data processing does not belong to technology and excludes inventions that use data processing from patentability. However, almost all inventions in television sets, telephones and such, have to do with the processing of flows of information. The Council already found this so obvious that it even deleted an earlier affirmation of it (article 3 as proposed by the Commission). Adopting the EP amendment was, therefore, undesired.

page 8-9 (plus start of last table on page 7)

|Council Text |EP amendements| | Article 4. Conditions for patentability: In order to be patentable, a computer-implemented invention must be susceptible of industrial application and new and involve an inventive step. In order to involve an inventive step, a computer-implemented invention must make a technical contribution. | Article 4. Amendment 70: In determining whether a given computer implemented invention makes a technical contribution, the following test shall be used; whether it constitutes a new teaching on cause-effect relations in the use of controllable forces of nature and has an industrial application in the strict sense of the expression, in terms of both method and result. | || Article 4b. Amendment 60: Member states shall ensure that computer implemented solutions to technical problems are not considered to be patentable inventions merely because they improve efficiency in the use of resources within data processing systems. | | Article 4a. Exclusions from patentability 1.(new) A computer program as such cannot constitute a patentable invention. | | | Article 4a. Exclusions from patentability 2. A computer-implemented invention shall not be regarded as making a technical contribution merely because it involves the use of a computer, network or other programmable apparatus. Accordingly, inventions involving computer programs, whether expressed as source code, as object code or in any other form, which implement business, mathematical or other methods and do not produce any technical effects beyond the normal physical interactions between a program and the computer, network or other programmable apparatus in which it is run shall not be patentable.| |

Article 4 is an important article. It describes the criteria for patentability. The Council adds here in addition to the usual requirements, also the requirement of technical contribution, as defined in article 2. This requirement of technical contribution is however not an extra patentability requirement as proposed by the EP in the previously mentioned amendments 69 and 107, but a more specific definition of the inventive step requirement. To be inventive the invention must make a technical contribution to the solving of the problem for which the invention is intended.

In article 4A, the Council adds important boundaries to the patentability of computer-implemented inventions. It states that merely the use of a computer on its own is not a reason to grant a patent.

Additionally, it is again confirmed that software on its own, separate from an application in a specific device, is not patentable.

The condition of a technical contribution specified in this article also has to stop so-called trivial patents. Trivial patents are patents which are not inventive. Such patents should in either case not be granted, but in practice there is a lot of discussion about whether the standard regarding the inventive step requirement lies high enough among patent examinators. Article 4 states once again very clearly that a computer-implemented invention must make a technical contribution in order to contain an inventive step.

According to current patent law, only inventions which are considere to be novel in a field of technology by an "average" person skilled in the art may be patentable. The Cabinet thinks this is an important addition which should be able to address many of the EP's objections.

To illustrate this more clearly, I'd like to give an example: the recently (April 2004) granted patent to Microsoft on the improvement to a (computer) mouse. In our "General Deliberation" (Dutch: Algemeen Overleg), the Parliament referred to this patent. This concerns a patent on an improvement to a mouse. The invention concerns the following: by pressing the mouse buttons for different intervals, different applications can be launched. This is about an invention in a device (the mouse) which is activated using software. This could be a patentable invention, if it fulfills the applicable patentability requirements: novelty, (technical) inventive step and applicability. In this specific case, one could wonder about the technical inventive step of the invention. Is this invention according to a person skilled in the art technically inventive in such a way that a patent is justifiable? If that is not the case, then this patent should not be granted in Europe based on the absence of an adequate technical inventive step.

EP amendment 70 states that an invention must make use of natural forces in the strict sense to be potentially patentable. As previously mentioned, this term must be rejected because all processes run using natural forces and usage of this term leads to confusion and large legal uncertainty.

Amendment 60 states that no patent must be possible for inventions which mean an improvement in the field of data processing. As mentioned earlier, many computer-implemented inventions (in televisions, dvd-players, telephones etc.) contain in one way or another elements of improvements in the field of data processing. Excluding these inventions from patentability is therefore not desirable according to the Cabinet and the Council.

page 10-11

|Council text | Important EP Amendments| |Article 5. Form of claims. 1. Member States shall ensure that a computer-implemented invention may be claimed as a product, that is as a programmed computer, a programmed computer network or other programmed apparatus, or as a process carried out by such a computer, computer network or apparatus through the execution of software. | Article 5 Amendment 104, 120 Member states shall ensure that the use of a computer program for the purposes that do not belong to the scope of the patent cannot constitute a direct or indirect patent infringement. Member states shall ensure that whenever a patent claim names features that imply the use of a computer program a well functioning and well documented reference implementation of such a program shall be published as a part of description without any restricting licensing terms. | | Article 5. Form of claims 2. A claim to a computer program, either on its own or on a carrier, shall not be allowed unless that program would, when loaded and executed in a computer, programmed computer network or other programmable apparatus, put into force a product or process claimed in the same patent application in accordance with paragraph 1.| Amendment 102, 111: Member states shall ensure that a computer implemented invention may be claimed only as a product, that is as programmed device, or as a technical production process. |

Artikel 5.1 doesn't say more than what is usual in patent law; computer-implementeed inventions can be claimed as a product or as a proces. Article 5.2 stresses again that a computer program as such cannot be patented.

In se, the first part of amendment 104/120 does not constitute a big problem for the Council. Unlike the EP however, it is the Council's opinion that what is stated here is so obvious (something that is being used outside the reach of the claims does not constitute a patent violation) that it hasn't been kept.

The second part of the amendment leads to more objections in the Council. It asks for a finished computer program as a part of the patent application. However, in patent applications it is not required for the invention to have been built already and to submit it as a prototype to the patent examintor. However, the amendment asks for this to make the second part of the amendment possible: the free use of that computer program without limitations.

This last thing is not possible, even when only considering copyright. Computer programs are protected by copyright. By saying that the copyright protection of a software program must be given up to be able to get patent protection, this amendment asks for giving up one intellectual property (copyright) to receive another (patent protection). For this reason, the cabinet agrees with the Council that this is not a wanted evolution. In particular because, as previously said, both serve a different purpose.

Amendments 102 and 111 react to the fact that the proposed directive also allows the computer program that belongs with the invention to be present on a carrier outside the invention. However, the Council text says that that program on that medium is only part of the patented matter, if it is intended to be loaded into the invention and exercise its function in there. The program in a different context is not part of the patent. It is the Council's opinion that amendment 102/111 doesn't take into account the practice where sometimes the software is not always a fixed part of the apparatus in which the invention is being implemented, but still needs to be loaded into it.

|Council text | Important EP Amendments| | Article 6. Relationship with Directive 91/250 EC. The rights conferred by patents granted for inventions within the scope of this Directive shall not affect acts permitted under Articles 5 and 6 of Directive 91/250/EEC on the legal protection of computer programs by copyright, in particular under the provisions thereof in respect of decompilation and interoperability. | Article 6. Amendment 76. Member states shall ensure that whenever the use of a patent technique is needed for a significant purpose such as ensuring conversion of the conventions used in two different computer systems or networks so as to allow communication and exchange of data content between them, such use is not considered to be a patent infringement. |

The Cabinet, just like the Council, is well aware of the specificity of patents in relation to software processes. In order not to hinder innovation, it is necessary that inventors and designers can check how the patented invention operates to subsequently think of new products starting from this. Decompilation and interoperability are key concepts in this area. EC directive 91/250 on copyright protection of computer programs sets suitable rules on this in articles 5 and 6.

page 12

These articles are entirely respected in the draft directive regarding the patentability of computer-implemented inventions. The Cabinet is convinced that article 6 finds the right balance between the interests of the software designers and the interests of the patent owners. However, other members states are still not convinced about this. In further legislative procedures we will have to determine whether the statements in this article are adequate for software developers, without giving too much rights to the patent owners. The Council and the Cabinet are convinced that the evaluation articles 7 and 8 of this directive are important instruments to signal potential problems early and to react to them.

Amendment 76 of the EP tries to obtain a similar regulation. However, the EP states that such an action can never constitute a patent infringement. The Council thinks this is too broad a formulation, which also runs counter to article 30 of the TRIPs treaty, which states that the rights of a patent owner must not be limited in an unreasonable way. Substantially, the Council and the EP are however close to an agreement on this point and it is expected that a compromise on this point is attainable.

(after this some things about article 7-11 follow, which are not interesting since uncontroversial)

page 15-17 (from point 4 till right before point 6)

3. The decision making process in Brussels.

I would like to explain this proces here. It concerns in casu a so-called co-decision procedure. The Council and the EP are in that decision procedure co-legislators. Without agreement between the Council and the EP the final EU-directive will not materialise. This is an important decision making principle which I value very much. I think that an EU-directive becomes better if both bodies, each with an own responsibility, come to a joint conclusion.

It is usual in a co-decision procedure that the EP and the Council both formulate an own vision in first reading in relation to the proposal of the Commission. That has happened here as well. In September 2003, the EP accepted 64 amendments to the Commission proposal. Recently, in May, the Council has reached a political agreement in first reading regarding the draf directive text. Of course, the EP opinion was taken into account.

However, it is not required that in this stage, the Council and the EP already have to be in complete agreement. The draft directive now goes to the EP for a second reading. During the coming fall, the EP will look at it in its renewed composition. At that moment it will be clear to what extent the EP insists on the amendments which the Council did not agree to. The opinion of the EP is then again offered to the Council.

If the Council then agrees to all amendments from the Parliament, the EU-directive is definitive. If the Council does not agree to the EP-amendments, a so-called conciliation procedure follows. The Council and the EP will then both have to give in to a certain extent if a directive is to be instated.

4. The vote in the Council

In the "General Deliberation" (Dutch: Algemeen Overleg) you asked about the vote in the Council when it came to establishing a political agreement. Spain was the only member state to vote against the proposed directive. Spain wanted more guarantees concerning the protection of smaller software designers. Three countries have abstained from voting, namely Belgium, Italy and Austria. Belgium has explained that it abstained because it is not yet convinced about the possibilities for interoperability that are offered by the directive. It is know that in Italy there is an ongoing internal discussion about the expected consequences of the directive for the smaller software designers ; that's probably why Italy has abstained. The motivation of Austria is not known. France has made voting declaration in the Council notes. The country states that is supports the proposed directive, but that it will monitor the balance between the interests of all parties involved in future related procedures.

5. In summary

In summary I think that the proposed directive, upon which the Council has agreed, constitutes a balanced realisation of the goals that the Commission wants to achieve, which are shared by the Council and the Cabinet. They are :

  1. creating legal certainty by harmonised and clear rules
  2. the continuation of the possibility to patent computer-implementeed inventions
  3. the exclusion of trivial patents by requiring ingenuity when it comes to the technical aspects of the invention
  4. the continuation of the possibility for designers to learn about patented computer-implemented inventions, so that they can design new products that interface to the patented inventions by decompilation and interoperability.

It is the Cabinet's opinion that this benefits the innovation in the economical area involved. Apart from that, I think that the interests of all entrepreneurs involved must be respected in a balaced fashion.

If in the future procedures we would see that this is not the case, than I will seriously consider modification proposals to rectify the situation. Especially the position of companies in the SME sector will get extra attention in that matter.

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