IPR Law

Software Patents

Ivan Khosa
Roll no. 7/10

Submitted to:
Dr. Jasmeet Gulati

IPR

TABLE OF CONTENTS

AUTHORITIES REFERRED

III

CASES
WEB SOURCES REFERRED
STATUTES REFERRED

III
III
IV

ACKNOWLEDGEMENT

IV

INTRODUCTION

SOFTWARE PATENTS

SOFTWARE PATENTS IN US
SOFTWARE PATENTS IN EUROPE
SOFTWARE PATENTS IN INDIA
CRITICISM OF SOFTWARE PATENTING

2
3
4
5

OTHER FORMS OF IP PROTECTION OF SOFTWARE

PROTECTION UNDER COPYRIGHT LAW

PROTECTION UNDER TRADE SECRET LAW
LIMITATIONS OF THESE OTHER MEANS

6
7
8

CONCLUSION

ii

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AUTHORITIES REFERRED

CASES
Diamond v Diehr, 450 US 1975(1981)..........................................................................2
Funk Bros. Seed Co. v Kalo Inoculant Co., 333 US 127,130 (1948)............................2
Gottschalk v Benson, 409 US 63(1972).........................................................................2
In re Alappat. U.S. Court of Appeals Federal Circuit. July 29, 1994. 33 F.3d 1526......3
In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385 (Fed. Cir. 2008)..................................3
Mackay Radio & Tel. Co v Radio Corp of Am., 306 US 86,94 (1939);........................2
State Street Bank & Trust Co v Signature Financial Group, 149F.3d 1368 (Fed. Cir.
1998)..........................................................................................................................3

WEB SOURCES REFERRED

1. Ritushka Negi, Business method and software patent trends in India, available
on

http://www.iam-media.com/Magazine/Issue/35/Management-

report/Business-method-and-software-patent-trends-in-India
2. Arya Mathew, Patent Protection For Computer Program - Analysis Of The
Forms Of Ip Protections Available For Computer Programs And Justification
For

Patent

Protection

In

The

Indian

Context,

available

at

http://www.altacit.com/pdf/Patent%20Protection%20for%20Computer
%20Programme.pdf
3. Aurobinda Panda, Business Method Patent & Computer-Related Inventions
Patents

in

India

(August

24,

2010).

Available

at

SSRN:

http://ssrn.com/abstract=1867023 or http://dx.doi.org/10.2139/ssrn.1867023
4. Software

Patents,

IPpro

Services

(India)

Pvt.

Ltd,

available

at

http://ipproinc.com/admin/files/upload/48df91ce5af4e4e711c64fc23bcbdaa4.p
df

iii

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STATUTES REFERRED
Indian Patent Act, 1970
European Patent Convention

ACKNOWLEDGEMENT
I would like to thank my IPR professor, Dr. Jasmeet Gulati for providing me insight
and being instrumental in my research. I would also like to thank my family and my
friends for giving me support throughout my research.

iv

Software Patents

INTRODUCTION
India is well known for its software industry, which has growth exponentially in a
short space of time. According to estimates of the National Association of Software
and Services Companies (NASSCOM) the main trade body and chamber of
commerce of Indias IT and business process outsourcing industries the domestic
software industry generates annual revenues of around US$60 billion, the bulk of
which is exported. Further, many top multinational companies either do business in
India or have research centers there, thus promoting knowledge exchange and
bringing in valuable foreign know-how.1
The laws which govern the protection of computer software fall under the domain of
intellectual property. Intellectual property protection is generally granted for the
benefit of both creator of the property and public welfare. There is a three step
process linking the public welfare with intellectual property. The first step involves
expanding the scope of legal protection offered to software creator by granting them
enhanced monopoly rights. The second step is this kind of enhanced protection
creates a reward system motivating further creativity. Finally, this expansion of
inventive activity brings about the discovery of more ideas and faster advancement of
technology. The end result of this process is that the public receives different range of
software products.2
The granting of intellectual property protection to computer programmes can be seen
as a form of legal subsidization to a particular industry and technology. The
intellectual property regimes that protect computer software have had a direct impact
on the ownership and user regimes that have been established; the alternatives to
proprietary software, open source and free software have been a philosophical and
1

Ritushka Negi, Business method and software patent trends in India, available on
<http://www.iam-media.com/Magazine/Issue/35/Management-report/Businessmethod-and-software-patent-trends-in-India>
2
Arya Mathew, Patent Protection For Computer Program - Analysis Of The Forms Of
Ip Protections Available For Computer Programs And Justification For Patent
Protection In The Indian Context, available at
<http://www.altacit.com/pdf/Patent%20Protection%20for%20Computer
%20Programme.pdf>
1

Software Patents
practical response to the existing legal regimes.

SOFTWARE PATENTS
Patents are exclusive territorial monopoly rights granted to inventors, in exchange for
their disclosure of the invention, for a limited period of time, enabling them to cover
the cost of innovation. All over the world patents are generally granted for tangible
products or processes in all areas of technology that are new and useful with certain
exceptions like, abstract ideas, mathematical algorithms and life forms.3
With the rise of computer related technology and with it the software industry in the
last quarter of the last century it has become necessary to provide suitable intellectual
property protection to this nascent, but increasingly important, area of technology.

Software patents in US
Title 35 U.S.C.101 states that whoever invents or discovers any new and useful
process, machine, manufacture, or composition of matter, or any useful improvement
thereof may obtain a patent. The law does not expressly prohibit any field of
technology from being patentable. Only the courts had excluded laws of nature,
scientific phenomena, and mathematical formulae from patentability.4
Till the 1970s courts treated software-related inventions as unpatentable subject
matter as software was essentially mathematical formulae. 5 However, in Diamond v
Diehr the US Supreme Court decided that patent cannot be denied for an invention for
the only reasons that its claims contained mathematical formulae. 6 But, it was the
landmark decision of the Court of Appeals in the Federal Circuit (CAFC) in the State
Street Bank & Trust case, concerning a US patent claiming a data processing system
for implementing a particular investment structure that combines the advantages of
3

Aurobinda Panda, Business Method Patent & Computer-Related Inventions Patents

in India (August 24, 2010). Available at SSRN: <http://ssrn.com/abstract=1867023 or
http://dx.doi.org/10.2139/ssrn.1867023>
4
Mackay Radio & Tel. Co v Radio Corp of Am., 306 US 86,94 (1939); Funk Bros.
Seed Co. v Kalo Inoculant Co., 333 US 127,130 (1948)
5
Gottschalk v Benson, 409 US 63(1972)
6
Diamond v Diehr, 450 US 1975(1981)
2

Software Patents
economies of scale with the tax benefits of partnership, which held that any computerrelated invention is a patentable under law if it produces a useful, concrete and
tangible result7 that enlarged the scope of patentable subject matter. Then, further in re
Alappat8 the court indicated that even where mathematical concept is embodied in a
specific machine to produce a useful, concrete and tangible result then the
mathematical concept is a subject matter for patent.
Another consequential case with regard to software patents is the re bilski case which
was decided in 2008. In light of the long awaited ruling in re bilski, the useful,
concrete and tangible result test gave way to a new test for patentability. The test has
been referred to as the "machine-or- transformation" test. 9 The machine or
transformation test brings about the question: What does a particular machine
constitute? And if a software program runs on a computer, which is technically a
machine, can it be patented? The USPTOs Board of Patent Appeals and Interferences
(BPAI) has already answered this question: A general purpose computer is not a
particular machine, and thus innovative software processes are unpatentable if they
are tied only to a general purpose computer.10

Software patents in Europe

Art 52(2) of the European Patent Convention (EPC) expressly excludes computer
related program per se and methods of doing business per se from patentable
subject matter, but, only to the extent to which a European patent application or
European patent relates to such subject matter or activities as such.11
Till the late 90s the European patent office guidelines and the Board of Appeal took a
similar and consistent view that, a computer programme claimed by itself or as a
record on a carrier is unpatentable irrespective of its content. 12 In T833/91, the
7

State Street Bank & Trust Co v Signature Financial Group, 149F.3d 1368 (Fed. Cir.
1998)
8
In re Alappat. U.S. Court of Appeals Federal Circuit. July 29, 1994. 33 F.3d 1526
9
In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385 (Fed. Cir. 2008)
10
Software Patents, IPpro Services (India) Pvt. Ltd, available at
<http://ipproinc.com/admin/files/upload/48df91ce5af4e4e711c64fc2
3bcbdaa4.pdf>
11
Art 52(3) European Patent Convention
12
T204/93 OJ
3

Software Patents
technical Board of Appeal broadened the scope of patentability, the technical
contribution that allows a subject matter to be patentable might lie in (1) problem
underlying the invention, (2) the means constituting the solution, or (3) the effects
achieved by the solution of the underlying problem.13
And later in three cases, relating to inventions of IBM, the scope of patenting
software related patents in Europe was considerably enlarged. All three relates to
applications for patent by IBM which claimed for computer programmed on a
computer-readable medium.14
European patent Office rejected the applications stating that, since the medium and
the program recorded thereon were not technically related the technical character of
the computer program could not be derived from the physical character of the storage
medium on which it was recorded.15 The Board of Appeal in its conclusion reasoned
that technical effect is achieved by the internal functioning of a computer itself under
the influence of said programme, on the said condition all programmes must be
considered as inventions, also a computer programme on a computer readable
medium has the potential to produce a technical effect and hence not excluded from
patentability. In another case, the Board of Appeal concluded that all programs when
run in a computer are by definition technical. 16 These findings are totally divergent to
the decision in SOHEI, which stated that normal interactions between a program and
a computer could not amount to a technical contribution and it is necessary to show
that a new machine was created.

Software patents in India

Section 3 of the Indian Patent Act, 1970 covers topics that are not patentable. Section
3(k) states as unpatentable a mathematical or business method or computer program
per se or algorithms. The sub-section (k) was added to Section 3 of the Indian Patent
Act, 1970 by the Patents Amendment Act, 2002. This sub-section for the first time in

13
14
15
16

T833/91 OJ
Panda, supra note 3.
T1173/97 OJ
T0931/1995 OJ
4

Software Patents
Indias patent history made patentable at least certain aspects or variations of
computer program related inventions.17
In 2005, the President of India moved an Ordinance to include computer software that
was embedded in hardware like computer, mobile, televisions etc. and having
industrial application under the definition of patentable inventions by amending
Section 3(k) of the Indian Patent Act, 1970. The Ordinance split the Section 3(k) into
two sub-sections (k) and (ka). The excluded subject matters as originally contained in
Section 3(k) were provided in the new sub-section (ka). The sub- section (ka) now
included as topics not patentable a mathematical method or a business method or
algorithms. The amended Section 3(k) read as follows:
a computer program per se other than its technical application to industry or a
combination with hardware.
The points of interest in the above proposed amendment were the addition of the
technical application criteria and combination with hardware. The intention was
to make clear that if an invention directed at computer software had technical
application to industry or coupled to hardware then it was patentable. This seems
analogous to the EPOs further technical contribution criteria.
However, stiff opposition to the above amendments caused the Indian Parliament to
reject the Ordinance and not enact the same. As a result, the law as it stands now has
been reverted to the original position of excluding computer programs per se from
patentability. The per se catch again introduced ambiguity to the law and as a result
a number of applications relating to software inventions are filed in India every year
by not claiming computer programs per se but attaching a hardware component to
meet the statutory requirements.18

Criticism of software patenting

Monopoly: Large corporations have the technical, financial and legal resources to
develop a considerable patent portfolio around emerging technologies. Additionally,
what they dont create they can buy from lesser companies. It could be argued that
17
18

IPpro Services, supra note 10.

Negi, supra note 1.
5

Software Patents
this is the case with any product but the difference is that software is free of real
world constraints and highly sophisticated software products may be created, which
may be dependent on various technologies. If the various dependent technologies are
patented, further innovation in the technology by anyone other than the holder of the
patent may come to a stand-still. This may lead to monopolistic control.
Innovation: As an off shoot of the monopolistic tendencies of large corporations,
small time or start up software companies may be caught in between stifling patents
on fundamental concepts which do not allow for any innovation. In the field of
software, even the smallest company can potentially turn a great idea into a successful
product because the capital requirements are relatively moderate. Software patents
would force small companies to obtain costly patents themselves and thereby
artificially inflate the capital needs of software development.
Impact on the Open Source Community: The increased rate at which certain countries
are granting software patents may indeed sound the death knell for the open source
community. Developers face the risk that original code they have written in good faith
could be deemed to infringe an existing software patent. The presence of an active
open source community has forced large organizations to cut down on prices. Since it
is available free of charge (subject to certain conditions), open-source software is a
fierce competitor to traditional software companies. It takes away market share, and
in doing so brings down the price levels.19

OTHER FORMS OF IP PROTECTION OF SOFTWARE

Protection under Copyright Law
Copyright protection, like patent protection, exist on the theory that the public
benefits from the creative activities of authors, and that the copyright monopoly is a
necessary condition for such creative activities. Copyright protects the expression of
an idea and not the idea itself, provides that the expression constitute the fruits of
intellectual labour, and it should not be copied from else where. Under copyright
laws of different jurisdictions world over, software is considered as a literary work.
19

IPpro Services, supra note 10

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Software Patents
Copyright subsist in original works that are capable of being reproduced from a fixed
medium. Movies, musical compositions, painting and other creative expressions are
protected by copyright. The copyright regime is oriented towards the protection of
existing works, already accessible to the public, the existence of the protection
making it possible to regulate by subsequent contracts the way the public can access
these works.
It is a well established principle that computer programs are copyrightable subject
matter, just like any other literary work. Both the TRIPS Agreement, 1995 and WIPO
Copyright Treaty (WCT), 1996 state that computer programs, both in source and
object code must be protected by copyright. Copyright protection applied to software,
would protect only the intellectual property embodied in the software as a mode of
expression. Copyright is a bundle of rights, which entitle the owner to prevent
copying of the protected work, to prevent the distribution of copies and to prevent
preparation of derivative works.20
Computer program mean a set of instruction expressed in words, codes, schemes or
any other form, including a machine readable medium capable of causing a computer
to perform a particular task or achieve a particular result. The words schemes or in
any other form would seem to indicate that the source code and object code of
computer program are entitled to copyright protection.

Protection under Trade Secret Law

The origin of the trade secret law is from the common law concept of tort liability and
confidentiality in employment relationships. It is a saying that a secret known by
more than one person is no longer a "secret", and a trade secret that cannot be sold or
otherwise exploited is useless. The owner of a trade secret can exploit his trade secret
through confidentiality agreements, both with his employees and with his customers
in order to protect the confidentiality of the trade secret. It is not necessary that the
owner of the trade secret take steps to maintain absolute secrecy. But he should take
reasonable steps to maintain secrecy, which will depend upon the circumstances. As a
general proposition, the owner of the trade secret should limit access to the trade
secret to those who have a need to know the secret in order to perform their duties and
20

Mathew, supra note 2.

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Software Patents
the persons those who have sign a confidentiality agreement where they agree that
they will not disclose the secret to anyone and that they will also take steps to
maintain secrecy of the trade secret. Trade secret protection is an important means of
protecting computer software. Coupled with copyright protection, this is the most
effective way to protect computer software. Some times trade secret protects the
functional aspects of software. The main goal of trade secret law is the maintenance
of standards of commercial ethics.21
Generally, trade secret law protects ideas, facts, and know-how, whether in tangible
form or not. A trade secret can be defined as any formula, pattern, device, machine,
process, technique, compilation of information, or program. Hidden aspects of web
sites and software can certainly be protected by trade secret law.
Trade Secret law has also been relied upon to partially fill the void left when software
was denied patent protection by the courts. Patent protection may coexist with trade
secret protection. Trade secret protection will be important during the pendency of a
patent application, and may even protect undisclosed details of an invention during
the term of, or after the expiration of, the patent. Trade secret law protects
confidential business information against unauthorized use or disclosure and is based
on statutory and common law and contractual provisions.

Limitations of these other means

Comparing to the protection given under patent law, the protection given by copyright
and trade secrets has limited scope. The owner of the copyright over an item of
software has the right to prevent any other person from copying the code as it is
written but does not have the right to prevent the utilization of idea behind the code,
providing that the person utilizing the idea must use in a manner that different from
the arrangement of the code. The copyright law is also limited to prohibit
unauthorized copying of the protected work but it does not prohibit all forms of
copying. The expression of a method of operation and principles of a computer
program cannot be protected by copyright. Functional aspects of a computer program
are excluded from copying. A patent provides more secure protection than the
copyright and the trade secret. It protects the idea or functionality of the software.
21

Mathew, supra note 2.

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Software Patents
Copying of an idea is very easy to do and anybody can describe it simply, that is
might a patent is restricting from doing.22

CONCLUSION
It is undeniable that there are several opponents to allowing software patents. But, on
the other hand, it is also true that there are several corporations keen to protect their
interests through patents. The intentions of big corporations acquiring large software
patent portfolios may also be debatable.
On the one hand, patents on software give recognition to software developers and also
serve as return on investment put into developing the software. It may also provide an
incentive for propagating generation of ideas which may be beneficial to society.
On the other hand, software patents may give control of the entire industry to a few
key players and lead to a monopolistic environment where any form of competition or
threat by small or medium sized organizations would be smothered unabashedly. The
part played by the open source community in keeping prices of software applications
in check may also be affected. The biggest threat would be to innovation. Patents are
awarded to promote innovation; however, apparently software patents do not seem to
work that way.

22

Mathew, supra note 2.

9