Context/Background

In 2000, the proposal for a Directive of the European Parliament and of the Council on the patentability of computer-implemented inventions (CII) initiated extensive discussions on the desirability to set up a harmonized European system of patentability of computer implemented inventions.

On 7 March, 2005, the European Competitiveness Council adopted a Common Position on the CII (7 March Common Position) . This agreement represents a carefully balanced solution that will preserve incentives for European innovation in digital technologies, while at the same time, ensuring that patentability does not extend into non-technical areas or unduly hinder interoperability.

Benefits to Industry and Consumers of 7 March, CII Adoption

• Intellectual property protection, including patents for computer-implemented inventions are critical to sustaining innovation and growth in the ICT industry.
• The Directive does not constitute a fundamental change for software companies but merely aims at bringing legal certainty in relation to the patentability of computer-implemented inventions.
• If 7 March Common Position is made law, the Directive will provide the legal certainty necessary for all participants in the Information Society -including large and small companies
• Of particular interest to small-to-medium-sized enterprises (SMEs), the Directive will provide:
  • Economic incentives to develop new products, expand operations abroad and compete effectively against established market players
  • A streamlined patent process that will assist SMEs in attracting much needed investment financing
  • Economic certainty of legal ownership of innovations that will encourage additional research & development vital to the SME sector

• CII patents promote innovation.
  Patent offices in both the EU and the U.S. have been granting patents for computer-implemented inventions for decades, with estimates of over 100,000 patents for CII-based innovations having been granted in the U.S., and over 30,000 in Europe. The level of software innovation during this same period has been unprecedented and there is every reason to believe that this exceptional level of innovation occurred because of CII patents. Patent protection justifies investment and provides an important incentive for SMEs to develop and market their goods. It enables SMEs to license innovations without losing the ability to exploit them in the marketplace. In turn, this permits SMEs to effectively compete against established markets players.
• CII patents may promote follow-on innovation and dissemination of technology.
  A pre-requisite for patent protection is the disclosure of a clear description of the technology, providing SMEs with critical technical information. This may encourage further innovations through the development of compatible solutions. Without patent protection, developers may be forced to rely on trade secret protection, which may impede technological dissemination. Reliance exclusively on trade secret protection can also make it more difficult for software developers to contribute valuable technologies to standardisation efforts or collaborate on interoperability. This is of particular importance to the software industry as software is normally supplied in an object code form without access to the working functionality of the software.
• CII patents protect aspects of computer programs that often are ineligible for other forms of IP protection.
  Software includes not only a descriptive element, but also a design element. Copyright protects only the expression of ideas-in the case of software, this generally means the source code. Trade secret laws do not cover the "invention" side of information technology once disclosed. Patent protection covers design and functionality so that a SME software designer might receive no economic benefit from the invention itself if patent protection were unavailable.
• CII patents will reduce confusion surrounding protection of innovations.
  It is likely that SMEs are particularly vulnerable to the differing laws in Europe regarding software inventions. Most SMEs lack necessary specialist legal advice or the funds to obtain it, potentially placing SMEs in a weaker position vis-a-vis larger players. Software patents will provide SMEs with certainty of legal ownership assisting their position in the market.
• CII patents will encourage investment in SMEs.
  Investors are increasingly cautious of funding new and existing companies that fail to adequately protect that investment. Investors regard intellectual property protection as a fundamental consideration. Patent protection helps secure more confident investment and reduces the vulnerability of SMEs from better-resourced competitors.