Software Protection (Copyright and Patent Law)
1. The need for protection; history
Software is central to the functioning of modern society. Without software, there would be no computers, no telephones, no internet and no control of a great number of technical objects. Whereas the creation of most of the complex computer programs requires substantial investment, because of their digital nature programs are vulnerable to unauthorized copying. Also, computer programs are an important export item of the industrialized knowledge economies, which are often poor in natural resources. Hence, the need for effective exclusive protection of computer programs became apparent both against unauthorized copying, adaptation and imitation by competitors and in order to secure foreign markets in countries which did not have their own software industries, but which had a demand for computer programs nevertheless.
This gave rise to the question which intellectual property right (intellectual property) is best suited to accommodate the protection needs of computer programs in view of their particular characteristics. Likely candidates were patent law, copyright law (copyright) and trade secret protection. Whereas patent law protects inventions that are new, involve an inventive step and are capable of industrial application, the object of protection of copyright is an individual creation, traditionally in the area of literature and the arts. As a matter of principle, patent law is as open to new technologies as is copyright to new intellectual creations. On the one hand, computer programs are of a purely technical and functional character, but they do not as such formulate rules directed at the human mind for making use of forces of nature. On the other hand, computer programs are written in computer language, but this language is not directed at the human reader but rather at the computer. In view of this, neither patent nor copyright appears to be the appropriate protection scheme for computer programs.
Consequently, in 1977, computer programs ‘as such’ were excluded from patent protection both under the European Patent Convention (EPC) and under harmonized national patent laws. Similarly, in the 1970s, in conformity with their general scepticism towards patent monopolies at the time, US courts initially showed great reluctance towards patent protection. However, plans to adopt a special regime for the legal protection of computer programs within the framework of the World Intellectual Property Organization (WIPO) were abandoned in 1985. In the meantime, US software industries had massively lobbied for an inclusion of computer programs in copyright, which in their view had several advantages over any sui generis protection. First and foremost, copyright had already been regulated at the international level. Secondly, protection does not require application and registration and is therefore easy to obtain both at home and abroad. In addition, the exclusive rights against one-to-one copies and adaptations of copyrighted programmes sufficiently protected the computer program industries in those days when the market for mass standard software was about to emerge (the PC was only introduced in 1982). Of course, doubts regarding the appropriateness of copyright protection for computer programs never disappeared completely. In particular, the long period of protection is a problem, which prevents competitors from entering the market for far too long. Moreover, broad adaptation rights could be used by the initial rightholder to block improvements of existing software, thus depriving consumers of obtaining improved software. Since it was not really clear to what extent computer programs, as a late-comer, fell under the existing international copyright conventions, the United States then worked towards the explicit inclusion of computer programs in the catalogue of copyrighted works, first in bilateral trade-agreements coupled with the threat of trade sanctions, and secondly by seeking to have copyright protection of computer programs incorporated in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the WIPO Copyright Treaty (WCT). Consequently, computer programs have since then been protected by copyright ‘as literary works’. With its Dir 91/250 (republished as Dir 2009/24), the EU has followed suit.
In spite of the protection of computer programs by copyright, from the industry point of view the need for additional protection by way of patent law has not ceased to exist. Copyright only protects the form/expression, but not the program idea itself. In addition, software-related inventions in the area of automated control-devices and technologies are in need of protection as inventions. The same is true regarding mere software inventions in the area of the internet. Indeed, it would be strange to withhold patent protection for inventions in one of today’s most innovative areas of technology solely on the basis of the argument that computer programs as such cannot be patented. According to the solution finally adopted in most of the industrialized states, computer programs as such may still be excluded from patent protection, but patent protection is available for software-related inventions, provided the requirements of technical nature and inventive step/non-obviousness are met.
2. Main features of software protection
Under Art 9(1) TRIPS, which is binding for all WTO Member States, the legal protection of computer programs by way of copyright has been harmonized to a considerable extent. Initial difficulties of characterizing computer programs as copyrighted works within the traditional meaning of artistic works and the notion of originality in the sense of the author’s own personal creation have long since been overcome (France, eg, substituted the classical criterion of the ‘personal imprint’ which has to be visible in the work in question by the criterion of ‘personal contribution’ for computer programs). In particular, the notion of ‘originality’ as the condition for protection was harmonized by Dir 91/250 (Dir 2009/24) by the criterion of ‘the author’s own intellectual creation’. This was intended to overcome existing differences between, on the one hand, the high German threshold according to which the know-how of the average programmer and the mere craftsmanship, ie the mechanical/technical linking and assembly of the material, did not fall within the subject matter of copyright and, on the other hand, the British standard under which everything neither copied nor banal may be copyrighted. Moreover, in view of the increasing complexity of computer programs, continuing differences with regard to the application of the harmonized originality criterion ceased to have an effect already some time ago. In practice, copyright protection against outright copies of copyrighted computer programs no longer is an issue (in addition, trade mark law provides efficient protection in this regard). As regards unauthorized adaptations, copyright protection was never of the importance which was initially intended (or feared, depending on the point of view). The reason may be that the possibilities for independently developing computer programs without adapting already existing software have greatly increased due to automated design tools. Also, the increasing number of available open source programs may have reduced the need of resorting to adaption of copyrighted programs. Computer programs were the first objects of a digital nature which had been embraced by copyright law. Some of the copyright rules which were initially developed for and specially tailored to computer programs were later on applied to all categories of digital works. This ‘paradigm shift’ has been sometimes regretted in traditional copyright literature.
The history of patenting software-related inventions has followed an even more meandering path. Initially, the three patent offices in the United States, Japan and Europe had aimed at formulating harmonized guidelines for the granting of software-related inventions. However, with the State Street Bank decision of the Court of Appeals for the Federal Circuit (CAFC) the United States adopted, in 1998, a much more lenient view towards patenting software-related inventions (149 F.3d 1368). Referring to Art 27 TRIPS, according to which patents shall be available for any inventions ‘in all fields of technology’, no object of inventive activity was regarded as per se excluded from patentability (‘anything under the sun’ was patentable). As a result, and contrary to European practice, the software implementation of already known business methods was considered patentable. In particular, British Telecom’s ‘Hyperlink’ patent and the ‘one-click-through’ patent of Amazon founder Jeff Bezos received considerable media attention. If the first patent had not been invalidated and the second were enforced, virtually all business over the internet would have had to pay royalties for a relatively trivial patent. With its decision In re Bilski, however, the CAFC seems to have again adopted a more restrictive attitude (F.3d 943 (2008)); see, however, the modifications made by the US Supreme Court in Bilski v Kappos, 130 S. Ct. 3218 (2010).
On the one hand, patent protection cannot be withheld altogether in the highly inventive area of digital and networked information technology. On the other hand, since information technology is invariably software-driven, there is a danger that by allowing patenting all too easily, innovation might be blocked in this highly dynamic area of inventive technology. The main focus is on defining appropriately what constitutes a ‘technical’ invention in the area of software-related inventions and how much of an inventive step has to be demonstrated by the inventor in order to merit patent protection. After some initial hesitation, patent offices have by now more or less opened up the patent system to software-related inventions. It should be noted that the European patent will not bring major changes to the existing legislation since, as presently proposed, it is crafted upon the substantive standards of patentability as defined in the EPC.
However, strong criticism regarding the current practice, if not the very notion of patenting software-related inventions has been voiced by the open source community. According to these critics, the incentive effect of patent protection available in the area of software-related inventions remains doubtful at best. Rather, it is claimed that in practice patents are mainly used to secure existing inventions against innovations by competitors (strategic patenting) or collected in order to build up a strong negotiating position in standard setting organizations or vis-à-vis future joint venture partners (accumulation of patent pools). Moreover, the exclusive effect of patent protection is seen as contrary to the network idea of cooperation and sharing. In addition, it is feared that patentability will hinder interoperability, block the adoption of open standards and that it could serve as a tool to fight open source. In addition, the growing thicket of software patents increases the danger of unintended infringement. In particular, small and medium enterprises (SMEs) lack the resource to properly search existing patents and to develop their own patent strategy. Although it has been pointed out that, in many cases, patent protection is the only means of defending smaller software companies from being taken over at low cost by bigger firms, no agreement could be reached as how to best serve the interests of SMEs. In the end, the fundamental criticism has led to the rejection of plans both to revise the EPC (in 2000) and to harmonize the criteria for patenting software-related inventions within the EU (as proposed by the Commission in 2005).
However, this has not had much impact on the practice of granting patents. The number of software-related patents applied for is steadily rising. To give just some figures: in 2004, the US Patent and Trademark Office (USPTO) has issued an estimated 30,000, in 2005 an estimated 29,000 and in 2006 an estimated 41,000 software-related patents. At the European Patent Office (EPO) the current existing number of computer-related inventions is internally estimated to be some 30,000. Several more tens of thousands of applications are said to have already been filed mainly by big corporate applicants. The exact numbers are difficult to ascertain since the EPO does not list software-related patents in a category of their own. Patenting software has already become a reality both in the United States and in Europe.
In spite of the fact that both international and European law prescribe the protection of computer programs by copyright ‘as literary works’, Dir 91/250 (Dir 2009/24) contains a number of special provisions to be applied only to computer programs and not to other copyrighted works. For example, it is explicitly made clear that the program protected by copyright includes its preparatory design material. The program handbook, however, enjoys a legal life of its own. Also, the ECJ held that a graphic user interface is not a form of expression of a computer program (Case C-393/09 – Bezpečnostní softwarová asociace; for additional issues see pending Case C-406/10 – SAS Institute). Moreover, it follows from the Database Directive 96/9 (database protection) that computer programs used in the making or operation of databases accessible by electronic means are likewise independent objects of protection and do not form part of the database. Moreover, computer programs are protected by copyright irrespective of their implementation in either software or hardware and irrespective of the medium on which they are stored.
Where a computer program is created by an employee in the execution of his duties or following the instructions given by his employer, the employer shall be entitled exclusively to exercise all economic rights in the program so created, unless otherwise provided by contract. In some Member States, this also is a deviation from general copyright law principles. Additional special rules exist with regard to limitations and exceptions to the exclusive rights vested in copyrighted computer programs. In particular, the making of private copies of copyrighted computer programs is limited, in order to protect the legitimate interests rightholders have with regard to controlling the circulation of their programs. Reproductions may only be made to the extent they are necessary for the use of the computer program and only by the lawful acquirer in accordance with its intended purpose, including error correction. Moreover, back-up copies may only be made by a person having a right to use the computer program in so far as it is necessary for that use, ie only if the rightholder himself does not offer a replacement copy. In this respect, the German Federal Supreme Court has asked the ECJ for a preliminary ruling concerning the issue of the exhaustion of the distribution right regarding the sale of ‘used’ licences (pending case C-128/11 – UsedSoft). Other exceptions to the exclusive right shall ensure that program users may have access to the program’s underlying unprotected ideas and principles.
Although it is a generally recognized principle of copyright law that mere ideas and principles are not objects of copyright protection, these special exceptions are necessary because the underlying ideas and principles can only be ascertained on the basis of the source code which in most cases requires an act of decompilation, ie an act of reproduction and/or adaptation which as such is reserved by law to the rightholder of the program in question. However, from the rightholder’s perspective decompilation bears the risk that users might be tempted to copy the whole program which they are not entitled to do. As a compromise, both the decompilation of someone else’s copyrighted program and the use of the information obtained in the course of or after decompilation are subject to a number of restrictions (interoperability as sole purpose; limitation of legal decompilation to program interfaces; use of the information only in a program which has been independently created). Although the exact contours of this exception to the exclusive rights were the most controversial issue during the legislative process, it never has gained much practical importance. One reason for this might be that infringements in this respect are difficult to prove. Another reason might be that the process of program development has made the problem of decompilation less acute due to the network effects at work in the internet economy which pressure rightholders to open up many of their programs to other program components.
However, decompilation still remains an issue in situations where the rightholder abuses his dominant market position, such as was asserted the case of Sun against Microsoft. Here, competition law rather than the copyright exceptions on decompilation provides the solution (CFI Case T-201/04 – Microsoft  ECR II-3601; competition (internal market)). Since the law of copyright contracts and licensing has not been harmonized within the EC, considerable differences continue to exist with regard to the effects of a licence and the scope of national exhaustion of the distribution right (intellectual property (exhaustion of rights)) with regard to business models of distributing software. In practice, a number of contracts have developed with regard to special forms of computer program distribution and use (eg application service providing (ASP) and outsourcing contracts; grid computing), which are all tailored to conform to the respective national legislation of the Member State in which they are used. Finally, although open source aims at non-proprietary marketing models of computer programs, it should not be overlooked that it likewise makes use of copyright law in order to keep open source software free of rights (the ‘trick’ is to grant users of open source programs a non-exclusive licence which automatically terminates if the user does not adhere to the rules of the open source licence).
In patent law, the decisive question is how to define the technical character of a computer-related invention. Although it is relatively easy to describe what is ‘technical’ in general terms, the task becomes rather difficult to decide whether a computer-implemented invention is technical if it combines—as is the rule—both technical and non-technical elements. Without going into too much detail and somewhat simplified, it can be said that at least the EPO has reduced the requirements to be fulfilled in order to find the technical character of a programme-related invention. In other words, a technical character is found as long as the task to be solved is as such of a technical nature. However, the criterion of an inventive step serves as the limiting criterion (in examining inventions which contain both technical and non-technical elements and which, taken as a whole, are of a technical nature, only technical elements are considered, but not those elements which do not make a technical contribution; for remaining issues and past case law of the EPO with regard to the patenting of software-related inventions see the referral G 3/08 under Art 112(1)b) EPC by the President of the EPO, which, however, was declared inadmissible by the EPO’s Enlarged Board of Appeal because it considered differences amongst the various decisions of the Technical Boards of Appeal to be the result of a natural development of case law). In contrast, the German courts began to decide the cases on the basis of the more restrictive ‘core theory’ (according to which an invention which contains both technical and non-technical elements is reduced to its ‘core’, so that no patent protection was available if this ‘core’ was a mere computer program). Subsequently, however, the German courts have been more generous in also taking into consideration non-technical elements although it seems that the German courts have again adopted a somewhat stricter approach towards the patenting of computer-related inventions.
It can be concluded that the development of the legal protection of software by both copyright and patent law has by and large been consolidated at the present point in time. However, it should be noted that the practice of granting software patents has developed into a rather complex area of law. Therefore, both the granting offices and the courts still struggle in drawing an exact and predictable line between what is and what is not patentable in the area of software. Moreover, the details of the actual state of the law as applied by both the granting offices and the courts are only known to the small group of patent attorneys practising in this area. Also, in view of the complexity of the subject matter, it is difficult to formulate general statements without going into the details of each individual case. All these factors make it rather difficult for the legislature to intervene, and legislative action is therefore not to be expected in the near future.
Bridget Czarnota and Robert Hart, Legal Protection of Computer Programs in Europe—A Guide to the EC Directive (1991); Thomas Dreier, ‘The international Development of Copyright Protection for Computer Programs’ in Michael Lehmann and Colin Tapper (eds), A Handbook of European Software Law (1993) 261; Christophe Geiger and Reto M Hilty, ‘Patenting Software? A Judicial and Socio-Economic Analysis‘ IIC 2005, 615; Lionel Bently, ‘Computer Programs Directive’ in Thomas Dreier and P Bernt Hugenholtz (eds), Concise European Copyright Law (2006) 211; Hanns Ullrich and Mathias Lejeune (eds), Der internationale Softwarevertrag (2nd edn, 2006); Yinliang Liu, ‘Patenting Business Methods in the United States and Beyond—Globalization of Intellectual Property Protection is Not Always an Easy Game to Play’ IIC 2011, 395.