Software patent ban could damage investment

Intergen says venture capital could be discouraged

Any exclusion of software from the New Zealand patents regime will “suck the lifeblood” out of the New Zealand software development industry, says Chris Auld, director of strategy and innovation at Microsoft-specialist developer Intergen.

One major effect, he says, would be to discourage venture capitalists from investing in the industry. Investors would be less willing to sink money into a project whose result will not have adequate protection against imitation.

“This will make it hard for ICT to remain competitive for venture capital alongside other industries that can still get patents for the products,” he says.

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Loss of patent rights, as flagged as favoured by Parliament’s Commerce Select Committee last month, will also discourage people with keen minds from entering software development, Auld predicts. Instead they will apply their idea-generating capability to other fields, such as biotechnology or agricultural technology, worsening ICT’s already serious staff shortage.

“Maybe that [diversion of bright minds into other fields] is government’s intention,” he says; “I don’t know, I find this move hard to understand.

However, Open Source Society president Don Christie says Auld’s is a “very tired old argument that has been discredited”.

“It was, of course, made to the select committee who were obviously unconvinced,” he says.

“All I need to do is point to the explosive growth of the internet, which was based on the idea of openness and uncapturability. In other words, no patents. Indeed, the heydays of the computer software industry have all occurred during periods where patents were not available to software developers.”

Christie says many New Zealand companies now have to sign contracts with huge liability indemnity clauses. These generally indemnify the client against IP infringements and have changed the risk profile for small ICT businesses.

“Essentially they are taking on risks that are ruinous and they have very little real hope of being able to cover those liabilities, even when they increase insurance premiums up the wazoo,” Christie says.

A former lawyer, Auld is not arguing that patents are perfect. The area has been bedevilled with cases of patents granted on reasonably obvious developments, obstructing further innovation.

But that doesn’t reflect a weakness in patent law, he says; rather an under-resourcing of this country’s Intellectual Property Office, charged with examining patent applications.

This is partly a consequence of the software industry’s “meteoric growth”, he says.

“We need better prior-art searches,” Auld says, meaning searches for previous applications of an idea claimed as novel; existence of demonstrable prior art means a patent will not be granted. This would minimise the problem of trivial and obstructive patents.

Alternative ways of protecting software, such as copyright and licensing, don’t offer as much protection as a patent, Auld says. Copyright only protects the particular expression of the idea – the program code and documentation – not the idea itself.

The Commerce Select Committee seems to have listened particularly to the open source lobby, he says, resulting in a biased view of the question. He did not, however, make a submission to the committee himself. “I and people like me are not impassioned, like the open source people. They treat it like a religion and they seem to be able to afford the time to front up and speak at Parliament. I’m just concerned to roll my sleeves up and get on with producing software.

“I don’t know what our [supporters of software patents’] next move should be,” he says.

— Additional reporting by Rob O'Neill