Software patentability Legal approaches in eu, UK, us and russia Anna Kravtsova, June 2017

Nature of software programs The term ”software” or ”computer” program is used to describe a sequence of instructions to a computer. Software is not a monolithic work and includes several elements: source code; object code; algorithm. These elements may fall within different categories of intellectual property protection.

Protection of software Software is used increasingly in all fields of technology; R&D cycle to create a new software requires a great amount of investment and needs an adequate protection; Source and object codes are protected by copyright; Ideas and algorithms are core elements for software and might be protected by patents; Software may have completely different source codes but same functionality and produce same results.

Copyright protection This is a redacted presentation Please write to klein@vkupartners for a complete presentation * Berne Convention for the Protection of Literary and Artistic Works (1886) ** Agreement on Trade-Related Aspects of Intellectual Property Rights (1994) *** WIPO Copyright Treaty (1996) ****SAS Institute Inc. v. World Programming Ltd. (C-406/10)

Patent protection A patent is a 20-years right on use of technical invention, on implementation of an idea into practice as a product or a process*. According to Art. 27 of TRIPS Agreement patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. A computer program as such is excluded from patentable subject matter in many countries**, but underlying ideas and algorithms might be considered patentable if presented as a method of technical solution of a certain problem, under certain conditions. *** *International Journal of Law & Information Technology/2006, Volume 14/September/Articles/ Andreas Grosche ”Software Patents -- Boon or Bane for Europe? - Int J Law Info Tech” (2006) 14 (3): 261. ** In UK, EU and Russia computer programs are excluded from patentable subject matter, in US there is no such restriction ***There is a system of international conventions for patents covering mostly all industrialized countries in the world: - The International Convention for the Protection of Industrial Property (”Paris Convention”); - The Patent Co-operation Treaty (»PCT»); - Agreement on Trade-Related Aspects of Intellectual Property Rights (”TRIPS”). The Paris Convention and PCT enable effective worldwide protection to be obtained without excessive costs.

Legal approaches in EU This is a redacted presentation Please write to klein@vkupartners for a complete presentation * UK and most EU countries are signatories; ** According to the Software Directive (EEC 91/250) ideas and principles which underlie any element of a computer program, including those which underlie its interfaces are not protected by copyright (art. 1.2). ***With some exceptions EPO’s approach to Art. 52 (2) and (3) of EPC was not adopted in UK.

Legal approaches in EU – EPO cases EPO interpretation of the EPC term ”invention” provides that controlling or carrying out a technical process is not excluded from the patentability, irrespective of whether it is implemented by hardware or by software. EPO core case law related to software patents: Hitachi/Auction method (T 258/03) – the invention shall involve any hardware and provide a non-obvious solution to a technical problem – this test is followed by EPO in many cases; AMAZON/Gift Order (T1616/08) – a method “for placing a purchase order via a communications network” is an ”invention” within the meaning of Art 52 (1) EPC; DUNS LICENSING ASSOCIATES/Estimating Sales Activity (T 0154/04) – a EU patent might be granted for an automated method of commercial transaction or any other computer- implemented method*. *See also: IBM/Computer Programs (T 0935/97) – understanding of ”invention” shall include practices of other jurisdictions, Two identities/Comvik (T 641/00), Auction method/Hitachi (T 258/03), Circuit simulation I/Infenion Technologies (T 1227/05).

Legal approaches in UK This is a redacted presentation Please write to klein@vkupartners for a complete presentation * The test is followed in Symbian Limited v Comptroller General of Patents [2008] EWCA Civ 1066; **In Aerotel v Telco and Macrossan's Application [2006] EWCA Civ 1371* a 4-step test was introduced for patentability: Properly construe the claim (the statement defining the patent monopoly); Identify the actual contribution; Ask whether the contribution falls solely within excluded subject matter; and Check whether the actual or alleged contribution is actually technical in nature. The test is quite strict so the recommendation is to apply in EPO first and to receive a EU patent with UK designation. Protection of functional elements of the software revised in Navitare Inc v Easyjet Airline Company [2004] EWHC 1725 case: - copyright protection for software is a given; - copyright is not connected with functional effects; - advantage in a bright line rule protecting only the claimant’s embodiment of the function in software and not some superset of that software. ***See Communications Law/2010 - Volume 15/Issue 3, 1 August/Articles/Filing software patents: Can you do it? Why do it? Is it worth it? - (2010) 3 CL, Paul Leaves.

Legal approaches in US This is a redacted presentation Please write to klein@vkupartners for a complete presentation *The Code of Laws of the United States of America (U.S.C.)

Legal approaches in US – case law US courts have opened the door to the patentability of software in early 1981 by allowing patents for a software which controlled manufacturing process (Diamond v Diehr case). Subsequent cases have expanded patentability of software in US*. Software patent applications had increased by 16% per year from 1986 to 1997**. Since the late 1990’s subsequent to State Street and AT&T cases***, software has been patentable if it produces ”useful, concrete and tangible result” (See Fugure 1). However in 2014 in Alice Corp v. CLS Bank**** US Supreme Court ruled that mere addition of software code to ordinary aspects of business and technology is not enough for granting a patent, and patents shall not be granted for an abstract idea. Many software patents were invalidated based on Alice case.  * Diamond v Diehr 67 L Ed 2d 155 [1981]; Paine, Webber, Jackson & Curtis Inc v Merril Lynch, Pierce, Fenner Smith Inc, 564 F Supp 1358 [1983]; In re Alappat, 33 F. 3d 1526 [1994]. Subsequent to the Diehr case, a 2-step test for patentability (known as Freeman-Walter-Abele test) was introduced: 1) whether a mathematical algorithm is directly or indirectly recited; 2) whether the algorithm is applied in any manner to physical elements or process steps. **See J Bessen and RM Hunt, An Empirical Look at Software Patents, Research on Innovation Working Paper 03-17/R (2004) http://www. researchoninnovation.org/swpat.pdf. ***State Street, State St. Bank & Trust Co. v. Signature Fin. Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), AT & T Corp. v. Excel Communications, Inc. 172, F.3d 1352 (Fed. Cir. 1999) **** Alice Corp. v. CLS Bank International, 573 U.S., 134 S. Ct. 2347 (2014) Alice held that there is a two-step framework for determining whether claims recite patent-eligible subject matter:  To determine if the patent claim is directed to an abstract idea, Identify (additional) elements showing an inventive concept.

Legal approaches in US - recent developments In 2016 with new cases reaffirmed that software is worthy of patent protection subject to a more strict analysis with application of 2-step Alice test: - Enfish LLC v. Microsoft* confirming patents for a specific non-abstract asserted improvement in computer capabilities; - McRO v. Bandai Namco Games America** protecting software patents for a unique software producing realistic lip synchronization and facial expressions which improved an existing technological process using specific features and techniques; - Amdocs v. Openet telecom *** protecting software of an ”unconventional technological solution to a particular technological problem”. * Enfish, LLC v. Microsoft Corp., No. 15-1244 (Fed. Cir. May 12, 2016) ** McRO, Inc. v. Bandai Namco Games America, Inc., No. 15-1080 (Fed. Cir. Sept. 13, 2016) *** Amdoc (Israel) Ltd. v. Openet Telecom, Inc., No. 15-1180 (Fed. Cir. Nov. 1, 2016)

Legal approaches in Russia – RPO approach This is a redacted presentation Please write to klein@vkupartners for a complete presentation

Conclusion Current worldwide trend – to grant more patents for software, however there is no unified approach to software patentability in the world; Subject matters of such patents are often not a source code and software itself but function which is performed by the software*; A software patent is a vital element for successful development of small innovative businesses; But at the same time might be abused by big corporations to limit and restrict the innovation and further development of software solutions; The debate on software patentability goes on. *Companies like Facebook, Google, Amazon usually obtain patents for each function (script) of their websites;

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