TRIPS and European software patent legislation

Dr. Karl Friedrich Lenz


Copyright of this article remains with the author. In particular if you want to publish a translation, please contact kf02 at k lenz name.

I. The Question from FFII

The Foundation for a Free Information Infrastructure (FFII from here on) has asked me for an opinion on their set of amendment proposals[1] for the second reading of the software patent Directive in Parliament and their statement of interests regarding this legislation.[2] They wanted to know whether those proposals and the interests and goals behind them are compatible with the Agreement on Trade-Related Aspects of Intellectual Property (abbreviated as “TRIPS”[3] from here on), among other things.

This answer focuses on the interpretation of TRIPS regarding the legislative project.

Of course there is already a rather comprehensive analysis of the TRIPS aspect on the FFII website.[4] However, I would like to try to have a swing at this problem as well.

II. TRIPS and EU legislation

When discussing TRIPS and the European Patent Convention, one difference is clear from the start, whatever your opinion about the interpretation of these treaties might be.

The European Patent Convention is in force in all EU Member States. It is also the only legal basis for all decisions of the European Patent Office. There is no way to doubt the direct effect of this treaty in Europe.

In contrast, the relation between TRIPS and EU legislation is somewhat more difficult.

As the Court of Justice has confirmed in the recent Van Parys case on March 1st, 2005,[5] law of the World Trade Organization (abbreviated as “WTO” from here on) is not self-executing in Europe.

While that particular case was about trade in bananas and not about the TRIPS agreement, its result only confirms what the Court of Justice has said in its 2001 judgment on the biotechnology patent Directive:[6]

“It is common ground that, as a rule, the lawfulness of a Community instrument does not depend on its conformity with an international agreement to which the Community is not a party, such as the EPC. Nor can its lawfulness be assessed in the light of instruments of international law which, like the WTO agreement and the TRIPS and TBT agreements which are part of it, are not in principle, having regard to their nature and structure, among the rules in light of which the Court is to review the lawfulness of measures adopted by the Community institutions (Case C-149/96 Portugal v. Council (1999), ECR I-8395, paragraph 47).”

Therefore, assuming that some amendment Parliament accepts ends up in the final text and that the amendment in question violates TRIPS obligations, what happens next is nothing, for starters.

For example, the most relevant provision of TRIPS here is Article 27 (Patentable Subject Matter). If the final Directive said that patents shall not be available for pharmaceutical and agricultural chemical products (which is rather unlikely to happen), that would be clearly violating Article 27.

However, even in this clear case individuals and individual companies can't rely on TRIPS to challenge the validity of any Community legislation.

The reason for that is that other important WTO member states like America also don't view WTO treaties as self-executing. If the American software industry is not happy with the result of this legislation process, they can lobby their government to start a dispute resolution under WTO rules. They can't rely directly on TRIPS to get applications approved that are excluded by the resulting Directive.

That would mean the American government asking the EU to grant more software patents. While it may be open to doubt if such a request would meet with a warm reception here, the point now is that until such time the EU legislative bodies decide that they want to adopt some change the American government happens to request, TRIPS has no legal effect on an EU Directive.

While this might be a deplorable state of affairs under a concept of rule of law, it is exactly the same the other way round. For example, the recent WTO ruling[7] finding America in violation of WTO obligations in respect of their Internet gambling regulations changes exactly nothing on the validity of those regulations until such time as the great power of Antigua forces the U.S. to comply with that ruling by imposing sanctions (good luck with that project, one might add).

Since Americans are only observing their WTO obligations if they happen to feel like it, they can't really complain if the EU attaches the same amount of direct effect (essentially none) to TRIPS obligations.

The WTO has introduced the possibility of sanctions. If consultations between America and the EU don't resolve the issue, America might request the WTO to authorize sanctions in the amount of the interest America has in liberally granted European software patents. While this might be viewed as progress compared with the GATT era that did not have such sanctions, one might also agree with Ethier[8] that these sanctions actually rather work to constrain potential punishments by giving priority to negotiations, restraining the amount of sanctions to a substantially equivalent withdrawal of concessions and by not providing multilateral sanctions.

Authorizing sanctions would require putting a dollar number on the interest America has in European patent inflation in the software sector (the number of dollars expected to flow to the American companies leading in the worldwide software market by removing existing restrictions). Having that happen would of course make it clear to everyone without any chance of doubt that removing such restrictions is not in the interest of the European software industry paying the resulting royalties, but in that of the American industry that is on the receiving side of the royalty stream.

Having that point cleared up alone would probably be worth any sanctions America might impose.

As a first result we therefore note that whatever interpretation of TRIPS one might adopt, there is no direct effect of the TRIPS treaty on EU legislation. The worst case conceivable would be having America (probably no other WTO Member State would have an economic reason to complain) start a WTO dispute resolution procedure some time in the future.

III. Interpretation of Article 27 TRIPS

This debate is about patentable subject matter. The scope of that is laid down in Article 27 paragraph 1 (abbreviated 27.1 from here on) TRIPS:

“Subject to the provision of paragraphs 2 and 3, 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. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.”

An explanatory note to the first sentence says:

“or the purposes of this Article, the terms “inventive step” and “capable of industrial application” may be deemed by a Member to be synonymous with the terms “non-obvious” and “useful” respectively.”

Article 65 paragraph 4 (abbreviated 65.4 from here on) is a transitional arrangement:

“To the extent that a developing country Member is obliged by this Agreement to extend product patent protection to areas of technology not so protectable in its territory on the general date of application of this Agreement for that Member, as defined in paragraph 2, it may delay the application of the provisions on product patents of Section 5 of Part II to such areas for an additional period of five years.”

Article 70 paragraph 8 (abbreviated 70.8 from here on) is another transitional rule:

“Where a Member does not make available as of the date of entry into force of the WTO Agreement patent protection for pharmaceutical and agricultural chemical products commensurate with its obligations under Article 27, that Member shall:

(a) notwithstanding the provisions of Part VI, provide as from the date of entry into force of the WTO Agreement a means by which applications for patents for such inventions can be filed;

(b) apply to these applications, as of the date of application of this Agreement, the criteria for patentability as laid down in this Agreement as if those criteria were being applied on the date of the filing in that Member or, where priority is available and claimed, the priority date in the application; and

(c) provide patent protection in accordance with this Agreement as from the grant of the patent and for the remainder of the patent term, counted from the filing date in accordance with Article 33 of this Agreement, for those of these applications that meet the criteria for protection referred to in subparagraph (b).”

Our question here is to what extent this Article 27.1 determines the extent of patent protection for software.

An answer to this question might lead to some restrictions on what amendments Parliament wants to adopt, even though there can be no restrictions on what Parliament can adopt with legal force, the TRIPS Agreement having no direct effect on EU legislation.

The burden of proof lies with anyone who wants to put the freedom of decision of the European legislation into doubt. Any such restriction must find a clear and definite basis in the TRIPS agreement. As long as we can’t find such a clear and definite basis, we assume that the EU legislator is completely free to decide this important issue as our starting point.

The method of interpretation has to follow the general rules in Article 31 to 33 of the Vienna Convention on the Law of Treaties. We will do that first and then look at precedent panel decisions on the TRIPS Agreement for further clarification.

1. Ordinary Meaning

The starting point for the interpretation of Article 27.1 is determining its ordinary meaning.

We note that Article 27.1 has two sentences. Sentence one says that patents shall be available for inventions “in all fields of technology”, while sentence two tells us that discrimination as to the “field of technology” is prohibited.

The question is how far this determines the discussion about what “inventions” “in all fields of technology” means for software.

For example, sometimes the term “software” is used in a broad way that includes a movie on a DVD, as opposed to the DVD-player. Under current European law movies are not patentable subject-matter.[9] Movies are “aesthetic creations” under Article 52 paragraph 2 number 2 EPC. Therefore, while the DVD technology is necessary to display the movie, the movie as such is not subject matter “in a field of technology”.

Therefore we can confirm that there is no clear and definite basis in Article 27.1 TRIPS to force Members to extend patentability to movies.

Another clear exception to patentability in Article 52 paragraph 2 number 3 EPC is that of “schemes, rules or methods of doing business”. Business is not a field of technology. Therefore, there is no clear and definite base in Article 27.1 TRIPS to force any Member to grant business method patents.

In contrast, software in the more narrow sense (excluding music or movies) and restricted to computer programs might be understood as belonging to a “field of technology”.

Right now, we want to find out the “ordinary meaning” of these words. We start by looking at definitions in popular dictionaries.

The Merriam-Webster dictionary[10] returns the following definition for “technology”:

“1 a: the practical application of knowledge especially in a particular area. b: a capability give by the practical application of knowledge (a car’s fuel-saving technology).

2: a manner of accomplishing a task especially using technical processes, methods or knowledge (new technologies for information storage).

3: the specialized aspects of a particular field of endeavor (educational technology).”

The American Heritage Dictionary of the English Language[11] gives us: “a. The application of science, especially to industrial or commercial objectives. b. The scientific method and material used to achieve a commercial or industrial objective.”

The Cambridge Advanced Learner’s Dictionary[12] defines “technology” as “(the study and knowledge of) the practical, especially industrial, use of scientific discoveries.”

And at Wordreference.com we find “the practical application of science to commerce or industry”.

These various attempts at defining the word “technology” are not identical, but show some scope for variation. None of them make any reference to software.

The same is true for the wording of Article 27.1 TRIPS. In contrast to Article 52 EPC, the words “programs for computers” are found nowhere there.

There is also no definition of the term “invention” in Article 27.1 anywhere in TRIPS. This is in contrast to Article 2 paragraph 1 of the Japanese patent law that defines “invention” as the highly advanced creation of technical ideas by which a law of nature is utilized. The EPC also does not give a definition of the term “invention”, leaving that task to the European Patent Office and the courts of Member states.

We conclude from the analysis of the ordinary meaning that software is neither excluded nor included expressly as a “field of technology” and that there is no definition in the TRIPS Agreement for either the term “invention” or the term “field of technology”.

Therefore we find no clear and definite basis for restricting the freedom of the EU legislation to define the meaning of “invention” and “field of technology” in relation to software by looking at the ordinary meaning of these terms.

2. Context

Next we try to find some more clues for our question from the context. The relevant context for the purpose of interpretation is not only the text of the Agreement (including its preamble), but also any agreement relating to TRIPS which was made by all parties in connection with the conclusion of the Agreement and any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty (Article 31 paragraph 2 of the Vienna Convention on the Law of Treaties). Together with the context, under Article 31 paragraph 3 of the Vienna Convention the following shall be taken into account: Any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions, any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation, and any relevant rules of international law applicable in the relations between the parties.

We start out by looking at the text of TRIPS for relevant context, starting with those Articles expressly cited in Article 27.1 TRIPS.

Article 65.4 TRIPS clearly implies that some developing countries are supposed to extend the scope of their patent laws to “areas of technology” (not “fields” as in Article 27.1) not protectable before. However, it does not give any clue about what areas of technology that might be. More to the point, Article 65.4 TRIPS tells us nothing about whether software should be an “area of technology” under that Article and thus, by extension, under Article 27.1 TRIPS.

In contrast, Article 70.8 TRIPS gives us one example of an area of technology that needs to be patentable subject-matter in all Member states under Article 27.1 TRIPS. Members need to make patent protection available for “pharmaceutical and chemical products”.

The only thing this tells us for our question is that the TRIPS Agreement has exactly one specific and expressly stated “area of technology” for which Article 27.1 TRIPS requires patentability, and that “area of technology” is clearly not software.

Looking next at Article 10 we find that the TRIPS agreement protects computer programs as literary works under the Berne Convention.

There is no equivalent declaration on the patentability of software in Article 27.

Therefore at least there is no definite decision of the TRIPS agreement especially on the issue of software patentability, as can be seen in contrast to the definite decision for copyright protection.

Next we look at context outside the text of the TRIPS agreement. For our case especially the EPC might become relevant as “subsequent practice” (Article 31 paragraph 3 b) Vienna Convention on the Law of Treaties).

The relevant Article 52 EPC has been revised at a Conference of the Contracting States in November 2000. The revised version is expected to enter into force in 2007.

In that revision, the formula of Art. 27.1 TRIPS “in all fields of technology” has been added to the wording of paragraph 1, which will read from 2007 on:

“European patents shall be granted for any inventions, in all fields of technology, provided that they are new, involve an inventive step and are susceptible of industrial application.”

However, the exclusion of “programs for computers” in paragraph 2 c) has not been removed.

If the Article 27.1 TRIPS formula “in all fields of technology” was interpreted to be incompatible with excluding “programs for computers” from patentability, Article 52 EPC would become contradictory in the 2007 version.

This practice of important TRIPS member states in revising Article 52 EPC after the TRIPS agreement would seem to exclude the theory that the simple formula “all fields of technology” decisively limits TRIPS Member States’ ability to decide about the complex issues of finding the right balance for software patents.

Also India’s decision in March 2005[13] not to extend patent protection to software is highly relevant subsequent practice for our question. India had a deadline until 2005 to comply with Article 27.1 TRIPS and has enacted patent reform legislation for that purpose. While doing so, India has decided that Article 27.1 TRIPS does not require extending patentability to software.

We conclude that while there is not one single reason to be found in the context of Article 27.1 TRIPS to assume that software is a “field of technology”, we find multiple reasons to put that assertion into doubt.

3. Object and Purpose of the Treaty

Article 31 of the Vienna Convention on the Law of Treaties also requires to consider the object and purpose of the treaty in question in the interpretation. As pointed out by Shanker,[14] the 2001 Doha declaration expressly confirmed for TRIPS:

Accordingly and in the light of paragraph 4 above, while maintaining our commitments in the TRIPS Agreement, we recognize that these flexibilities include:

a) In applying the customary rules of interpretation of public international law, each provision of the TRIPS Agreement shall be read in the light of the object and purpose of the Agreement as expressed, in particular, in its objectives and principles.”

To do that requires clarifying the purpose of the TRIPS agreement.

One might be tempted to turn to Article 7 TRIPS for that task, since it is titled “Objectives”. However, that Article does not say anything about the purpose of the TRIPS agreement as a whole, but rather gives a general guideline about the purpose of the protection and enforcement of intellectual property rights.

The purpose of the TRIPS agreement as such is described in the Preamble.

There we find, among other statements:

“Recognizing, to this end, the need for new rules and disciplines concerning:

(…) (b) the provision of adequate standards and principles concerning the availability, scope and use of trade-related intellectual property rights;”

We conclude that Article 27.1 TRIPS serves the purpose to provide an “adequate” standard for the scope of “trade-related” patents.

The first purpose does not help in the interpretation of the term “technology”. We are addressing the question if it is adequate to extend patent protection to software. So we already know that our task is finding an “adequate” level of protection and learn nothing new from this part of the Preamble wording.

The second purpose also does not help much. It tells us that the TRIPS agreement is supposed to find an adequate level of patentability for “trade-related” subject matter. However, it would seem to be unpractical to develop one set of patentability rules for patents with no relation whatsoever to international trade and a different one for patents owned for example by American companies. Actually, Article 27.1 TRIPS not only requires extending the scope of patentability in some countries, but it also specifically prohibits any discrimination on the grounds of the place of the invention and of whether the products in question are imported or locally produced. There can be no double standards.

We conclude that we don’t find any new results for our interpretation of the term “all fields of technology” from the purpose of TRIPS.

4. Preparatory Work and Circumstances of Conclusion

Since we can’t find a clear and definite basis for the assertion that Article 27.1 TRIPS requires extending patentability to software by the above means of interpretation, we might be entitled to have recourse to the preparatory work for the TRIPS agreement and the circumstances of its conclusion. Article 32 of the Vienna Convention on the Law of Treaties allows this if the result of using the above methods leaves the meaning ambiguous or obscure or leads to a result which is manifestly absurd or unreasonable.

Since we can neither clearly confirm nor reject the assertion that Article 27.1 TRIPS requires extending patentability to software, we feel entitled to proceed further under the assumption that the meaning is still “ambiguous and obscure” on this question.

a) Preparatory Work

First we look at the preparatory work leading to the TRIPS agreement. Some part of the negotiations seems to remain still “restricted”, but a large package of documents is available at the WTO website.[15] The fact alone that even after 10 years of the TRIPS Agreement has come into force some of the preparatory work remains undisclosed to the public seems to make it difficult to find any clear and definite basis for the assertion that Article 27.1 TRIPS requires software patents, since anything that might be found in the “derestricted” documents may have been invalidated somewhere in the secret undisclosed part of the preparatory work. It is of course also open to doubt from a point of view of open and democratic legislation that the minutes of some preparatory negotiation group twenty years ago should have the force to restrict the freedom of the EU legislator.

Having studied these documents, I have not found many cases where any of the WTO members participating in the negotiations even mentioned software patents, and not one where anybody requested that the TRIPS agreement made their introduction mandatory. It is probably fair to say that the issue of software protection was discussed mainly in the context of copyright (where it was enacted in the final text) and received practically no attention in the context of the negotiation of patent rules.

That includes two pages of discussion on patentable subject matter in the minutes of the meeting of the negotiating group of 12-14 July 1989.[16] No one mentioned software patents in that meeting. Especially India was strongly opposing even extending patentability to drugs. Software patentability was not an issue at all.

In the minutes of the meeting of the negotiating group of 30 October to 2 November 1989[17] we see software patents mentioned in the discussion of a Canadian proposal to exclude software per se from patentability, which was probably modeled after the EPC. This proposal of course has not found the necessary consensus to be adopted in the final version of Article 27.1 TRIPS, and if it had been adopted, it would be far from requiring software patentability.

In contrast, numerous statements are to be found that would put the assertion of Article 27.1 TRIPS requiring software patents further in doubt.

For starters, software clearly is not a physical product. Traditionally, the GATT agreement is only concerned with trade in physical goods. Therefore the mandate of the negotiators in a GATT forum to discuss the intellectual property protection for an aspect of trade in services is very weak. In contrast, drugs (which have been expressly stated to belong to a “field of technology” in Article 70.8 TRIPS) clearly are products. Many statements in the negotiations from the very beginning on insisted on not discussing intellectual property as such, the proper forum for doing so being either the WIPO or the negotiations on the revision of the Paris Convention.[18]

A working document from the Secretariat of August 1987[19] compiles the specific points in relation to exclusion from patentable subject matter like this:

“Some participants have referred in particular to the exclusion in some countries of chemical, pharmaceutical and food products. The protection of manufacture only, where it exists, is not regarded by these participants as an adequate substitute, because of difficulties of enforcement and the scope for inventing around the patent. It has been said that in some countries this is facilitated by requirements to incorporate in the patent claim scientifically unnecessary but legally limiting process parameters. Another view expressed was that protection of chemical and pharmaceutical products could impede technological progress in the invention and development of new ways of producing such products. Reference has also been made to certain countries that allow patents for chemical compositions but not compounds or which do not allow, or in practice to not issue, patents for new uses of known products or compounds. Other exclusions of product areas mentioned as a cause of problems include cosmetics, agricultural machinery, fertilizers, metal alloys, anticontaminant equipment or processes, atomic energy or nuclear-related inventions and methods for the treatment of the human/animal body. An issue raised by some participants is the lack of patent or other protection in many countries for biotechnological inventions. In this connection, reference has been made to the absence of protection for plant breeders’ rights in some countries or differences in the systems of law under which they are protected (specific legislation or patent law).”

There is no mention of software anywhere in this list. Almost all of the “fields of technology” there are about products, only the “methods of treatment” one is concerned with services.

In the draft text produced on the Chairman’s responsibility of 23 July 1990[20] we find as one alternative proposal for the protection of computer programs under copyright:[21]

“In view of the complex legal and technical issues raised by the protection of computer programs, PARTIES undertake to cooperate with each other to identify a suitable method of protection and to evolve international rules governing such protection”.

This would indicate that at least a substantial number of delegations did not feel that the difficult issue of finding adequate protection for computer programs was already settled sufficiently to require copyright protection in a “trade-related” treaty. While this skeptical view has found no expression in the final text, it would seem to be unlikely that the more far-reaching assertion of patent protection for software would be able to reach consensus under these circumstances. This view is confirmed by the minutes of the meeting of the negotiation group of 2, 4, and 5 April, 1990, where the view was expressed that “the protection of software should be left to the national laws of each country.”[22]

The Chairman’s report text draft on patentable subject matter[23] (the later Article 27.1 TRIPS) is much longer and contains several named exceptions from patentability, only part of which are adopted in Article 27 paragraph 3 of the final text. The 1990 draft also excludes “scientific theories, mathematical methods, discoveries and materials or substances already existing in nature.”

Since these specific exclusions did not reach consensus, one might conclude that the negotiations on the TRIPS Agreement failed to reach any consensus on the subject-matter excluded from patentability and therefore had no choice but to leave that decision to the legislation of individual Member states. This would make sense, since the exact limits of patentability are a complicated matter not easily resolved by unanimous consensus in passing while talking about trade.

Anyway, as far as I was able to review the preparatory work, I was not able to find a clear and definite basis for the assertion that software was supposed to be included in Article 27.1 as a “field of technology”.

b) Circumstances of Conclusion

The TRIPS agreement is described in a recent book by Pat Choate as a deal between America and developing nations where America put one million American jobs in the textile sector on the negotiating table to receive worldwide intellectual property protection in return.[24] Helfer also explains that “proponents defend TRIPs as part of a WTO package deal in which developing country governments received freer access to the markets of industrialized nations in exchange for their agreement to protect the intellectual property rights of foreign nations.”[25] Abbott confirms[26] that „it is generally accepted that the developing and least developed countries were placed under great political and economic pressure to accept terms that did not adequately take into account their specific interests.“

If this is a fair account of the circumstances of the conclusion of the TRIPS Agreement, (and I think it is), both sides would need to know exactly what they have given up at the time the deal was closed. If developing countries like India agreed to extend the range of patentable subject matter against their own interests so as to finally break the protectionist quota regulations in textile trade, the nature of this deal would seem to make it incompatible with an interpretation in “good faith” (Article 31 of the Vienna Convention on the Law of Treaties) to give the American side the chance to improve their gain in the deal by including areas that were not discussed at the time by extending the territory covered in Article 27.1 TRIPS later on.

We have already seen that the participants in the negotiations leading to the TRIPS Agreement did not discuss software patents. That is only natural if software patents did not evolve as an important question until after the TRIPS Agreement negotiations were finished. While we don’t have the time for discussing the history of the software patent debate in detail here, it seems to be clear from the relevant Wikipedia page[27] that even in America software patents did not take off in a major way before 1995.

If so, the negotiations for the TRIPS treaty had no need to address the issue since it did not have much of an economic impact at the time.

Therefore, while we already know from the analysis of the preparatory work that there is no clear and definite basis for the assertion that TRIPS intended to say anything about software patents, looking at the circumstances of conclusion confirms our result.

c) Result of the Interpretation of Article 27.1 TRIPS

There is no clear and definite basis for the assertion that Article 27.1 TRIPS limits the liberty of national legislation to find the adequate level of protection in relation of software patents.

Therefore, this legislation is not bound in any way by TRIPS considerations.

IV. Discussion of TRIPS Case Law

Next we look at the way TRIPS has been working in international disputes in the first ten years of the WTO.

Under Article 64 TRIPS, disputes under the Agreement are to be settled under the rules of the Dispute Settlement Understanding (DSU from here on) with the exception of some transitory rules. The DSU is a procedural frame for negotiations. We have already seen above that any panel or appellate body decision against the EU would not have any direct effect on a Directive violating TRIPS, just as it has no direct effect on American law.

There have been quite a number of such disputes based on the DSU. The relevant search on the WTO website[28] returns many documents, none of which however concern directly a dispute over software patents.

The closest panel report seems to be the case brought by the EU against Canada complaining about lack of patent protection for pharmaceutical products decided in March 2000.[29] As frequent with WTO panel reports, the document is more than 200 pages long. However, the part of the panel report dealing with Art. 27.1 TRIPS[30] is limited to only a few observations.

The first one is that the prohibition against discrimination based on a “field of technology” in Article 27.1 second sentence TRIPS also applies to exceptions under Article 30 TRIPS. That means that TRIPS members may provide exceptions to the exclusive rights conferred by a patent only as far as those exceptions limit patents in all fields of technology.

The panel then discusses if the provisions of Canadian patent law in question are discriminating, but can find no evidence for such discrimination.

The exceptions in question were related to drug patents. A patent holder can not use the patent to stop a manufacturer of generic drugs to produce them for the purpose of obtaining the necessary permission to sell the generic drug after the patent expires, nor can he stop production of a stockpile that is intended for sale after the date of patent term expiration.

We understand that this case is not about what is patentable subject-matter in the first place, but about exceptions to the rights conferred by a patent. It is therefore not very relevant to our question (interpretation of Article 27.1 TRIPS in relation to software). All we understand from the case is that if any “field of technology” (for example drugs) is protected against discrimination under Article 27.1 TRIPS, that protection extends also to possible exceptions. This might however have some implications when discussing the interoperability exception.

While we are discussing the prohibition of discrimination in Article 27.1 TRIPS we note also that American patent law, which has had a strong influence on the TRIPS negotiations, seems to have developed into a technology-specific way lately,[31] which would seem to be incompatible with Article 27.1 second sentence TRIPS. That however does not stop Burk and Lemley to call for patent regulation specifically tailored to different industries, especially regarding software patents.[32]

V. Discussion of the FFII Position in Relation to TRIPS

We can confirm as a result of our interpretation of TRIPS that there is no clear and definite basis for the assertion that Article 27.1 TRIPS limits the freedom of the EU legislator to find an adequate solution to the software patent problem. We now turn to discuss the FFII position. However, before doing so, we also take a short look at how the current Council common position deals with the TRIPS Agreement.

1. Relation of the Council Common Position to TRIPS

The Common Position of the Council[33] mentions the TRIPS Agreement in recital 6:

“The Community and its Member States are bound by the Agreement on trade-related aspects of intellectual property rights (TRIPS), approved by Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994). Article 27(1) of TRIPS provides that 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. Moreover, according to TRIPS, patent rights should be available and patent rights enjoyable without discrimination as to the field of technology. These principles should accordingly apply to computer-implemented inventions.”

Only the last sentence in this recital says anything new. Of course there is a TRIPS Agreement and the EU is a Member of that Agreement. And Article 27.1 TRIPS indeed says “patents for all fields of technology” and “no discrimination”.

However, does the Council want to imply here that there is a field of technology called “computer-implemented inventions” and that Article 27.1 TRIPS is to be interpreted as saying anything about it? If so, that would be clearly in contradiction to our results above.

This particular recital was already included in the original 2002 Commission proposal.[34] There the Commission says[35] in its “Explanatory Memorandum” that the current legal situation under Article 52 EPC does not exclude patentability of programs for computers if they have a technical character and that this is “similar” to Article 27.1 TRIPS. We have discussed the interpretation of Article 52 EPC elsewhere[36] and are not convinced that programs can be divided in two subsets “as such” and “with technical character”. However, we note that the Commission proposal and the Council Common Position seem to assume that Article 27.1 TRIPS requires this kind of thinking.

We have, however, concluded that there is no such requirement contained in TRIPS. We might add that while it might be conceivable to see “software” as a “field of technology”, the term “computer-implemented invention” that is only necessary as a smokescreen to ignore the clear prohibition against software patents in Article 52 EPC is neither known to the general public nor can be reasonably understood to designate a clearly distinguishable “field of technology”.

Actually one of the very problems with the patentability of software in the first place is that software is used in all fields of society (take for example the fields of learning, investment or even law). All of these are clearly not “fields of technology”, but risk becoming fair game for the patent system over the universal bridge of “computer-implemented inventions”, damaging the legitimacy of the patent system as such in the process.

The next reference to the TRIPS Agreement might be seen in Article 8 (b) of the Council Common Position, even if the TRIPS Agreement is not quoted as such:

“The Commission shall report to the European Parliament and the Council by (three years from the date specified in Article 9 (1)) at the latest on

(…)

(b) whether the rules governing the term of the patent and the determination of the patentability requirements and more specifically novelty, inventive step and the proper scope of claims, are adequate, and whether it would be desirable and legally possible having regard to the Community’s international obligations to make modifications to such rules;”

It might have been a good idea to report about the scope of freedom for the EU legislator regarding this question before proposing this legislation, as opposed to three years after implementation of the Directive.

It might also be noted that the present legislation effort might be quoted as later practice when interpreting Article 27.1 TRIPS in the report required from the Commission under Article 8 (b) of the Council Common Position. Just as the fact that India just has rejected the idea of being required to extend patentability to software is subsequent practice on Article 27.1 TRIPS, having the EU legislator implying some kind of limitation on the freedom to legislate this question (even if that implication is extremely vague) might be used ten years later as a reason to deny the EU legislator the freedom to correct the most catastrophic consequences of this legislation.

Therefore, recital 6 should be deleted completely. It doesn’t say much of anything to begin with and is dangerous for the freedom of the EU legislator in later stages at best.

This is all the more urgent because all constraints on EU legislation by the TRIPS agreement are working only in one direction, that of protection patent inflation. Any victory those fighting for a balanced intellectual property regime (like the FFII) happen to secure at the EU or national level can always be challenged at the TRIPS level, but there is no way to request a TRIPS dispute resolution as a second chance to fight against a victory of the other side, as is explained in detail in this article by Dinwoodie and Dreyfuss.[37]

2. FFII Interests

The FFII position is described in a paper on the FFII interests and another one asking for individual amendments to the Council Common Position.

Since individual amendment proposals are based on the interests, we will look at them first.

The position paper on FFII interest mentions Article 27.1 TRIPS when it calls for the legislation to clarify the terms of “invention”, “field of technology”, and “industrial”.

That implies that these terms are not already clearly defined in relation to software at the TRIPS level. As we have seen above, that implication is correct. Legislation in TRIPS member states is free to find an adequate level of protection. For Europe, there is no such legislation for the last 30 years (of course, the EPC clearly prohibits software patents, but it predates the TRIPS agreement and therefore is not contributing much to the task of clarifying the Article 27.1 TRIPS language in relation to software).

There is another mention of TRIPS at the end of the position paper, where it says that Article 30 TRIPS requires clarification of interoperability exceptions at the legislative level.

Article 30 TRIPS gives members the right to grant limited exceptions to the rights conferred on a patent holder. There are some conditions for that (for example that the exception in question is not conflicting with the normal exploitation of the patent) required in Article 30 TRIPS, and under the interpretation of the panel report in the Canada-Pharmaceuticals case mentioned above the prohibition of discrimination by field of technology in Article 27.1 TRIPS applies. There is however nothing in the wording of Article 30 to suggest that the exception needs to be granted by legislation, as opposed to case law or administrative rule.

If one accepts the panel report’s theory, any interoperability exception would need to be formulated in a way not restricted to software or risk being struck down in a later TRIPS dispute settlement procedure. That would be especially problematic if the interoperability exception was a decisive reason to gain the necessary political support to secure a majority from Members of Parliament opposed to excessive patent inflation.

3. Individual Amendment Proposals

a) Definition of “field of technology

The FFII proposes a definition of the term “field of technology” as an amendment to Article 2. One of the reasons given is that Article 27.1 TRIPS does not give a definition for this term, leaving this as a task for national legislation.

As we have seen above, that assessment of Article 27.1 TRIPS is correct.

b) Ensuring TRIPS compliance?

Another proposal mentioning the TRIPS Agreement is that of an Article 4 a), where data processing is declared as to be not a field of technology. The justification for this amendment proposal says that this is ensuring TRIPS compliance.

We have seen that there is no clear and definite basis for asserting that Article 27.1 TRIPS reduces the national legislator’s freedom to extend or not extend patentability to software.

Therefore, there is no special need to “ensure TRIPS compliance”. The EU is free to decide the question either way.

However, if this amendment is adopted, it will count as “subsequent practice” regarding Article 27.1 TRIPS. Just as the decision of India not to introduce software patents is one more reason to assume that national legislators have the right to decide about the question, this clear EU decision would count as well.

On the other hand, since TRIPS only works in one direction (patent inflation), other TRIPS members as America would still be free to decide that software belongs to a field of technology. All the above amendment does is to declare that any assertions of Art. 27.1 TRIPS requiring software patents will be vigorously ignored.

c) Recital 6

We have already discussed recital 6 in the Council Common Position and decided that it should be deleted above.

The FFII amendment proposals agree that this recital should be deleted completely (as Parliament has done in first reading), but also propose a text that would be acceptable instead. That text is:

“The Community and its Member States are bound by the Agreement on trade-related aspects of intellectual property rights (TRIPS), approved by Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) 1. Article 27(1) of TRIPS provides that 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. Moreover, according to that Article, patent rights should be available and patent rights enjoyable without discrimination as to the field of technology. This means that patentability must be effectively limited in terms of general concepts such as "invention", "technology" and "industry", so as to avoid both unsystematic exceptions and uncontrollable extensions, both of which would act as barriers to free trade. Thus inventions in all fields of applied natural science are patentable, whereas innovations in fields such as mathematics, data processing and organisational logic, are not patentable, regardless of whether a computer is used for their implementation or not.

The justification for this proposal is:

“It must be made clear that there are limits as to what can be subsumed under "fields of technology" according to Art 27 TRIPS and that this article is not designed to mandate unlimited patentability but rather to avoid frictions in free trade, which can be caused by undue exceptions as well as by undue extensions to patentability. This interpretation of TRIPS is indirectly confirmed by lobbying of the US government last year against Art 27 TRIPS, on the account that it excludes business method patents, which the US government wants to mandate by the new Substantive Patent Law Treaty draft.

In its first reading, Parliament deleted this recital, and therefore the amendment that proposed the above change was not voted upon. Deletion is better than keeping the original, but clarification regarding the applicability and interpretation of the TRIPs agreement is even better.”

This interpretation of the TRIPS agreement is different from our result above. It wants to find the correct level of “adequate” protection from the purpose of TRIPS Agreement of avoiding frictions in free trade.

We think this is impossible.

The only “relation” between the fields which a WTO country legislation admits as patentable subject matter and trade lies in the fact that the U.S. and other developed countries promised to phase out the textile sector quota system in return for more patent protection worldwide. They might as well have asked for some other policy change unrelated to trade, for example stronger human rights protection standards (the U.S. was likely to ask for such a policy at the time of the Uruguay Round) and called the resulting treaty “Trade Related Aspects of Human Rights” (TRAHS) Agreement.

Even if one concedes that there might be some kind of relation between patent protection levels and trade somewhere, there is no way to decide the complex issue of software patents by a simple deduction from that relation.

Therefore, we think that it is both too optimistic and too ambitious to try doing exactly that. We stand by our result that Article 27.1 TRIPS says nothing about the question and recommend again to just delete recital 6.


[1] FFII, The European Parliament’s Work on Software Patents in 2005, wiki.ffii.org/Plen05En.

[2] FFII, FFII interests and the EU Software Patent Directive, swpat.ffii.org/analysis/needs.

[3] Some people abbreviate this as “TRIPs”. The correct abbreviation would be “TRAIPR”, or if one insists on arbitrarily dropping words “TRAPs” would be possible as well, dropping “intellectual” rather than “aspects”. My reason to use “TRIPS” is that the WTO also uses this spelling, and while “TRAIPR” would be more consistent, that would come at the cost of having no one know that particular abbreviation.

[4] FFII, The TRIPs Treaty and Software Patents, swpat.ffii.org/trips/index.en.html.

[5] Judgement of the Court (Grand Chamber), 1 March 2005, in Case C-377/02, Leon Van Parys NV v. Belgisch Interventie- en Restitutiebureau (BIRB), www.snipurl.com/el3p.

[6] Judgment of the Court, 9 October 2001, Kingdom of the Netherlands v. European Parliament and Council, in Case C-377/98, snipurl.com/el42.

[7] Report of the Appellate Body, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, WT/DS285/AB/R, 7 April 2005, snipurl.com/dz1i.

[8] Ethier, Wilfried J., Intellectual Property Rights and Dispute Settlement in the World Trade Organization, 2003, snipurl.com/ela3, pages 2 to 4.

[9] Engström, Christian, Why Can’t I Patent My Movie?, A comment on software patents, actually, January 2004, snipurl.com/el45.

[10] Merriam-Webster Online, www.m-w.com.

[11] The American Heritage Dictionary of the English Language, www.bartleby.com/61.

[12] Cambridge Advanced Learner’s Dictionary, dictionary.cambridge.org.

[13] Buchanan, Matthew, Promote the Progress Blog, “India” Archives, promotetheprogress.com/archives/India/index.html; Free Software Foundation India Press Release, permanent link at Clement, Bruce, Software Patents Blog, snipurl.com/ekl0.

[14] Shanker, Daya, Access to Medicines, Article 30 of TRIPS in the Doha Declaration and an Anthropological Critique of International Treaty Negotiation, 2003, page 2, snipurl.com/el8q.

[15] WTO, History: derestricted Uruguay Round negotiating documents on TRIPS, snipurl.com/eklf.

[16] Secretariat, Meeting of Negotiating Group of 12-14 July 1989, MTN.GNG/NG11/14, 12 September 1989, pages 21 to 22, paragraph 59 (1).

[17] Secretariat, Meeting of Negotiating Group of 30 October – 2 November 1989, MTN.GNG/NG11/16, 4. December 1989, page 9-10.

[18] See Meeting of Negotiating Group of 17-21 October 1988, page 2, paragraph 4: “Some participants said that the text of the Group’s Negotiating Objective had been carefully drafted to steer clear of a discussion of substantive standards. Statements made by some delegates after the Punta del Este Declaration had recognized that the protection of intellectual property rights per se was not within the jurisdiction of GATT. They stressed the importance of the third paragraph of the Group’s Negotiating Objective in circumscribing the role of the Group. It was said that this constituted a recognition that the Uruguay Round must not interfere, or intrude upon, the work of WIPO and all other relevant organizations on all aspects of intellectual property rights. The proposals tabled in the Group were already having a prejudicial effect on initiatives elsewhere, as was seen in the fact that the negotiations on the revision of the Paris Convention were stalled.” And from paragraph 8, on page 3: “His delegation was also not ready to look into the property rights protection in relation to services, as had been proposed.”

[19] Secretariat, Compilation of Written Submissions and Oral Statements, MTN.GNG/NG11/W/12, 11 August 1987, page 11, paragraph 37. The same wording is found unchanged in Secretariat, Compilation of Written Submissions and Oral Statements, Revision, MTN.GNG/NG11/W/Rev.1, 5 February 1988, page 12, paragraph 41.

[20] Status of Work in the Negotiating Group, Chairman’s Report to the GNG, MTN.GNG/NG/W76, 23 July 1990.

[21] See page 8 of the Chairman’s Report.

[22] Secretariat, Meeting of Negotiating Group of 2, 4 and 5 April 1990, MTN.GNG/NG11/20, 24 April 1990, page 9.

[23] See page 19 of the Chairman’s Report.

[24] Choate, Pat, Hot Property, The Stealing of Ideas in an Age of Globalization, New York 2005, Chapter 8 “A Global Solution”; see also Ethier, Wilfried J., Intellectual Property Rights and Dispute Settlement in the World Trade Organization, 2003, snipurl.com/ela3, page 5.

[25] Helfer, Lawrence R., Regime Shifting: The TRIPs Agreement and New Dynamics of International Intellectual Property Lawmaking, 2003, snipurl.com/el88.

[26] Abbott, Frederick M., The TRIPS Agreement, Access to Medicines and the WTO Doha Ministerial Conference, 2001, snipurl.com/el9t, page 4.

[27] Wikipedia, Software patents under U.S. patent law, en.wikipedia.org/wiki/Software patents under U.S. patent law; see also Burk, Dan L. and Lemley, Mark A., Designing Optimal Software Patents, 2005, snipurl.com/el7w, page 82: “Finally, with the late-1990s decisions in State Street Bank and AT&T v. Excel the court unreservedly admitted software to the canon of patentable subject matter.

[28] WTO, Disputes concerning the TRIPS Agreement, snipurl.com/el5u.

[29] Report of the Panel, Canada – Patent Protection of Pharmaceutical Products, WT/DS114/R, 17 March 2000.

[30] Paragraphs 7.85 to 7.105.

[31] Burk, Dan L. and Lemley, Mark A., Is Patent Law Technology-Specific?, 2002, snipurl.com/el7r.

[32] Burk, Dan L. and Lemley, Mark A., Designing Optimal Software Patents, 2005, snipurl.com/el7w.

[33] Proposal for a Directive of the European Parliament and of the Council on the patentability of computer-implemented inventions – Political agreement on the Council’s common position, Interinstitutional File 2002/0047(COD), Snipurl.com/3l66.

[34] Proposal for a Directive of the European Parliament and of the Council on the patentability of computer-implemented inventions, Brussels 20.02.2002, COM(2002) 92 final, snipurl.com/el6c.

[35] Commission proposal, page 6 to 7.

[36] Lenz, Karl-Friedrich, Interpretation of Art. 52 of the European Patent Convention regarding the question to what extent software is patentable, swpat.ffii.org/analysis/epc52/exeg/index.en.html.

[37] Dinwoodie, Graeme B. and Dreyfuss, Rochelle C., TRIPs and the Dynamics of Intellectual Property Lawmaking, 2004, snipurl.com/el9f.