Hardware clause makes software patenting difficult

Changes in India’s software patent laws are stoking heartburn among companies that are looking to file patents in India, which could impact investment flows into the country.

Companies based in India and elsewhere depend on patents to protect their intellectual property and attract investments to succeed in a competitive marketplace. However, some minor changes to the patent guidelines have caused a major headache.

The issue on hand has to do with the insertion of a clause — specifying that a patent can be granted only when there is a combination of a hardware and software, instead of a software tweak.

The 2016 revised patent examination guidelines for computer-related inventions will effectively deny many software-enabled inventions patent protection in India because they require novel hardware – rather than demonstrating the impact of ‘novel’ hardware.

This has stirred a hornet’s nest in the software fraternity among both the multinational and Indian camps.

“We had filed for a patent that involved an innovative use of an algorithm, which was rejected by the Indian patent office,” said an Indian mid-size software company in the fintech segment.

Likewise, a multinational internet company, with billions of dollars in revenue, filed for a patent for a particular functionality with regard to its Instant Messenger (IM) chat app.

According to the officer’s ruling, the application pertains to a method of scheduling and displaying the online presence status of a user of an instant messaging application. The Controller-General of Patents, Designs & Trademarks office, in his assessment, however, pointed out that the method of setting, determining, displaying are nothing but computer algorithmic steps for giving a solution to the detailed problem.

It concluded by saying that the claims do not constitute a patentable subject matter and purely relate to algorithmic steps, software and presentation of information. The mere presence of hardware does not make the claim eligible for patent, it ruled.

It is this last point that has perturbed many in the industry.

“At a time when software is being used from rockets to refrigerators, it is not feasible to bring in the hardware bit,” says Jared Ragland, BSA Senior Director, Policy.

Some in the industry say this new patent regulation is the result of lobbying by some white-label hardware makers. An email sent to the department went unanswered.

Part of the problem that Ragland points to has to do with change in manufacturing. “Earlier, one could re-engineer a calculator into another similar device, but now software is the differentiator,” he says.

BSA, along with others, had brought this to the government’s attention; but this has gone unheeded.

Ravi Bhola, an attorney at K&S Partner, an IPR firm, says that going forward, as hardware prices get commoditised, there will be less innovation. “Uncertainty is not good,” he adds.

Industry watchers believe this will impact investment inflows.

“Already, at least one company is considering not seeking (patent) protection in India,” says Ragland.

But Venkatesh Hariharan, a member of the thinktank iSPIRT’s expert group on software patents, says that multinationals and Indian companies have divergent interests in this aspect.

iSPIRT, the Software Freedom Law Centre (SFLC) and some start-ups have, however, welcomed the changes in patent guidelines.

It is estimated that the US has around 4,000 patents on e-commerce and around 11,000 patents on online shopping. The number of patent filings is growing in India. In 2015, around 3,415 patents were filed, according to US Patent and Trademark Office.

To be fair, globally there is a debate raging over patents in the fast-evolving world of technology, which can result in multiple litigations and deter innovation if the whole concept is not properly thought through. In 2014, the US Supreme Court ruled against a series of banking patents that did npt cover a concrete software process, but were founded only on an abstract idea.

Similarly, the European Patent Office believes that there is no legal or conclusive definition for a software patent. According to the Foundation for a Free Information Infrastructure, software patents should not exist under European law.