The implications of the Unitary system on software patenting: a shortcut to harmonization of software ?

Master thesis Law & Technology Tilburg University Name: Dorrit Sliepen Supervisor: P. Vantsiouri Second reader: Dr. M.H.M. Schellekens ANR number: 945332 Date: 14 June 2013

Table of contents

1. Introduction ...... 1 2. The system of software patenting ...... 5 2.1. The history behind legal protection of software ...... 6 2.2. The international framework for patent protection of software ...... 9 2.3. The definition of Software ...... 15 2.4. EPO case law ...... 17 3. The European Patent with Unitary effect...... 23 3.1. The new system ...... 24 3.1. The position of the different EU Member States ...... 26 3.3. Lessons from the Court of Appeal for the Federal Circuit ...... 30 3.3. Comparing the Federal Circuit and the UPC ...... 34 4. Unitary patent system: implications for software patents ...... 36 4.2 The possible scenario’s regarding the scope of the ...... 38 4.3 The implications on software patents regarding the judicial system ...... 42 4.4 The knowledge acquired from the Federal Circuit ...... 43 5. Conclusion ...... 46 Annex I ...... 49 Annex II ...... 50 Bibliography ...... 52

ii

‘If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it.’

- F. Machlup 19581

1 Machlup 1958, p. 80.

iii 1. Introduction

The idea of having a patent that will provide protection in all of the Member States of the European Union (EU) originates from the late 1940s, when Mr. H. Longchambon wrote his report ‘Creation of a European patents office’.2 Eventually the European Patent Office (EPO) was established in 1977, on the basis of the European Patent Convention (EPC).3 There is a history of harmonization between countries in the field of Intellectual in the European Union (EU). Examples are harmonization of the laws of , design, , neighboring rights, database rights and plant variety rights.4 Nevertheless, the harmonization of patent law has fallen behind.5 The EPC has attempted to bring standards into the practice of granting patents, just like other international conventions and treaties. However a patent that provides protection in all of the EU countries6 has been a long debated topic. Recently there has been a break-through in the EU regarding patenting. Specifically, regulation 1257/2012 on ‘implementing enhanced cooperation in the area of the creation of unitary patent protection’ was introduced.7 This regulation will make it possible to apply for a European patent with Unitary effect (Unitary patent). By adopting this regulation, European patent law has been created because a regulation has direct effect in the Member States. Before the Regulation took effect, the EPC only harmonized national patent law between Member States on a limited basis, for individual national law had to be changed in accordance with the EPC. In this thesis ‘European patent law’ will therefore refer to the harmonization because of the EPC. The focus of this thesis will be on a difficult area in European patent law: patenting software. There have been many debates over if and how software should be protected by law in the Member States of the European Union. Protecting software through patents is possible in Europe but it has some restrictions. Similarly, the introduction of the Unitary patent will also have its implications on software patents.

2 Parliamentary Assembly, Creation of a European Patents Office Report, September 6, 1949, doc. 75. 3 European Patent Office, http://www.epo.org/about-us/organisation.html, last visited June 11 2013. 4 Tritton 2008, p. 7. 5 Tritton 2008, p. 7 6 In this thesis ‘EU countries’ will refer to Member States of the European Union 7 Regulation 1257/2012, Official Journal of the European Union L 361/1.

1 This thesis will explain the current protection of software through software patents and the effects of the Unitary patent on software patents. The research question in this thesis will be:

“The implications of the Unitary patent system on software patenting: a shortcut to harmonization of software patents?”

After several years of debates on the harmonization of patenting software at a European level, the European parliament rejected the Council’s proposals on of computer-implemented inventions in 2005.8 On the one hand there has been a group against software patents, consisting mostly of individuals, small and medium-sized enterprises and social movement organizations.9 On the other hand, the group in favor of software patents, consists mostly of multinational software firms.10 Such multinational firms believe in the strong protection of software by patents, because, as large companies they have the resources to file for patents and to defend them in court.11 The other group, that is, the group against software patents, is not only worried that small and medium enterprises (SMEs) are left behind because they do not have as much resources as large companies, but also believe that software patents will have a stifling effect on innovation.12 They fear that as the scope of software patenting broadens, it becomes more difficult to invent, since new inventions will infringe with existing patents.13 The dominant firms in the software market want to protect their strong position and by preventing competitors from using their patented software, competitors cannot offer products that are interoperable on the leading software.14 This creates a barrier for companies wanting to enter the market and a disadvantage for existing competitors in the market. The importance of patents and the enforcement of patents to firms have led to firms creating strategies on how to defend and use their patents in such a way that they can benefit the most. This can even lead to escalated litigation, also called a ‘’.15 For example, patent wars in the smartphone industry often involve a software

8 European Parliament document commissioner’s statement, http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+CRE+20050706+ITEM- 007+DOC+XML+V0//EN&query=INTERV&detail=3-100&language=EN, last visited June 11 2013. 9 Leifeld 2012, p. 382. 10 Leifeld 2012, p. 383. 11 Chabchoub 2005, p. 974. 12 Chabchoub 2005, p. 973. 13 Patel 2013, p. 2. 14 European Committee for Interoperable Systems, ‘Interoperability, competition and open standards: The keys to a software strategy for European citizens and consumers’, p.1. 15 Paik 2013, p. 3.

2 related claim.16 This is also illustrated by the on-going patent war between Apple and Samsung.17

The aforementioned objections and supporting arguments can be brought back to a core question of harmonizing software patenting: can software be patented? As of now, there is no European legislation that defines ‘software’. Instead it is commonly understood that software includes both computer programs and its ancillary materials, which could mean documentation, computer files or data.18 In the literature different terms are used for this definition such as computer programs and computer related inventions. To avoid confusion, software will be used in this thesis to indicate ‘computer programs and its ancillary materials, which could mean documentation, computer files or data’. Article 52 of the EPC, which defines what is patentable, could be interpreted in such a way that an invention must be ‘technical’ for it to be patentable. Importantly, though, software is not considered technical under European patent law.19 Yet the EPO and national patent offices do grant patents on software.20 This only goes to show the importance of interpretation of the EPC in this matter.

With the introduction of the Unitary patent, one can apply for a patent granted by the EPO which has unitary effect in the territory of the 25 participating states.21 This brings many advantages to the patentee such as simplicity, reduction of costs and making the European patent more accessible.22 Accordingly, the EPO will play a bigger role in the granting of patents and in setting the standards of protection. Aside from the introduction of the Unitary patent, there is also an agreement on the Unitary Patent Court (UPC) to rule on cases regarding the Unitary patent.23 To mention a few of the UPC’s intended advantages, the UPC will provide harmonization in case law and abandon the system where patent holders need to litigate in several Member States.24 Opponents of software patenting see the bigger role of the EPO and the limitation of the power of national courts in the new patent system as a threat to software. They fear it could mean that the EPO will expand the scope of patents to cover software more broadly.25

16 Paik 2013, p.11 17 Steve Lohr, Apple-Samsung patent battle shifts to trial, THE NEW YOTK TIMES, July 29, 2012 and Fighters in a patent war, , October 7, 2012. 18 Ballardini 2008, p. 563. 19 Ballardini 2008, p. 564 20 Ballardini 2008, p. 565. 21 European Patent Office, http://www.epo.org/law-practice/unitary/unitary-patent.html, last visited June 11 2013. 22 Patel 2013, p. 11. 23 Agreement on a Unified Patent Court, Council of the EU, doc. 16351/12, January 11, 2013. 24 Agreement on a Unified Patent Court, Council of the EU, doc. 16351/12, January 11, 2013, p. 4. 25 Patel 2013, p. 12.

3 This thesis is based on doctrinal research, including the research of EU regulations, directives and their preambles. Furthermore, the relevant national- and European Court of Justice (ECJ) case law and literature are examined, with attention devoted to the difference between copyright and patent protection for software. The problems regarding harmonization of software patent law are also discussed, with the different opinions and interpretations by different Member States on software patents interspersed where relevant. European and national laws of the EU Member States need to be in accordance with European and international agreements such as the TRIPS- agreement, the EPC and the Community Patent Convention. This is why the interpretation on software patents in these agreements will be discussed. At this point the Unitary patent is not yet available. Therefore it is not possible to be certain of the effects of the Unitary patent, as there are no examples available, and case law has not been produced yet. The possible effects of the Unitary Patent will be looked at by the opinion of the EPO and literature on this subject. A comparison will be made between the UPC and the United States Court of Appeal for the Federal Circuit (Federal Circuit), to see the impact of a single-court regarding patent law cases.

First, it will be discussed how the current European patent system applies to software (Chapter Two). In Chapter Three the advantages and disadvantages of the Unitary patent will be discussed, including the comparison with the Federal Circuit. Chapter Four will be devoted to the influence of the developments in the EU legal framework to software patenting. Chapter Five will conclude that the EPO does regard software as patentable. However the definition on software is not clear enough to make their approach completely transparent. The expectation is that the Unitary Patent will be available for software. It is likely that the EPO will continue their current approach on software patenting. The Unitary patent’s mission is to solve several problems that arise because of different patent system in different Member States. The Unitary patent will be able to create some harmony in the European software patenting practice, but it will also leave some room for market fragmentation. The comparison with the Federal Circuit shows several pitfalls for the UPCs approach to software. In the end it is concluded that the Unitary patent has a big impact on software patents without this being discussed thoroughly up front.

4 2. The system of software patenting

Holding a patent means having the exclusive right to the exploitation of an invention for a period up to twenty years and receiving the associated monopoly profits.26 There have been several justifications in support of the patent system as such. The ‘natural rights theory’ originates from 1971 when the French Constitutional Assembly adopted the principle. The theory is based on the idea that did not differ from material property. Therefore the same exclusive control of intellectual property should be possible as you would have on material things.27 Put succinctly: the inventor has thought of and created the invention, and therefore he should be able to benefit from this invention.28 A theory based more on morality instead of materiality is the ‘reward theory’. This theory espouses that it is not private property which justifies patenting, rather securing the reward for the inventor which does.29 According to the ‘public interest theory’, patenting is justified because of the element of public disclosure of the invention. Believing that this disclosure will benefit society, third parties can use the disclosed information to further develop and benefit society.30 Being able to obtain a patent can provide strong incentives to invent. The invention and disclosure will benefit society and the inventor will benefit from her invention.31 Because the patent holder is the only person that may use the invention without restrictions, a monopoly arises. Some argue that this situation of a monopoly could become undesirable.32 It means that third parties cannot use or evolve the exact same invention to benefit society.33 The question arises, whether the benefits outweigh the costs.34 This question is especially important when discussing the patentability of software because of its special characteristic, its intangibility.35

26 Art. 63 European Patent Convention. 27 Machlup 1950, p. 12. 28 Machlup 1950, p. 14 29 Machlup 1950, p. 17. 30 Bakels 2002, p. 2. 31 Machlup 1950, p. 21. 32 Bakels 2002, p. 2. 33 Machlup 1950, p. 24. 34 Bakels 2002, p. 3. 35 Ballardini 2008, p. 564. This will be further discussed on page 17.

5 2.1. The history behind legal protection of software

When the American company IBM created the first electronic computer in 1953, they did not take any measures to protect their intellectual property. The company even decided on a policy stating that it was impossible to patent computer programs and procedures.36 The approach of IBM not to protect software as property can be explained by the fact that only three percent of the cost of manufacturing a computer was spent on manufacturer- supplied programs.37 At the same time, other players in the software industry were also not using intellectual property rights to protect their software. The software programs that were designed for organizations were tailored to the needs of those organizations and could not be used generally, thus there was no need for protection of software at the time.38 In addition, the early users of computer programs, who were mainly using them for research, were not in need of protecting the intellectual property of the software they were using.39

During the 1950s IBM became a key player in the digital computer market. During that time, IBM and its competitors used the concept of bundling and software sharing.40 Bundling means that the main equipment was sold without charging extra for the software.41 Thus organizations were being created where software could be shared, free of charge.42 However, during the mid-1960s the market changed. The independent software industry took over. Software houses started to develop customized or general purpose software for a fee. Hence the software houses began competing with the main- frame manufacturers. As the software houses charged for the sale of software, it became clear that the software was valuable property.43 As a result, protection of this property became important, especially the protection of both the source code of a program and the protection from unauthorized copying of the software.44

It was clear that protection of software was needed. It was unclear, though, what means would best facilitate this need. In the US three options where put forward: Protection of software under law, copyright law and patent law.45 Pursuant to

36 Campbell-Kelly 2005, p. 210. 37 Campbell-Kelly 2005, p. 210. 38 Campbell-Kelly 2005, p. 211. 39 Nimtz 1979, p. 7. 40 Nimtz 1979, p. 7. 41 Nimtz 1979, p. 7. 42 Nimtz 1979, p. 8. 43 Nimtz 1979, p. 8. 44 Campbell-Kelly 2005, p. 211. 45 Bender 1985, p. 412.

6 the example set by US, some EU member nations adopted similar policies, discussed below. Regarding trade secret law: it is a branch of the law of unfair competition.46 Some EU Member States had created protection of trade secrets in their national law in an early stage by themselves, while others did this because of the obligation by the TRIPS Agreement.47 Trade secret law revolves around the principle that the invention must stay secret. Advantages of trade secret law for the inventor are that rules surrounding the applicability of trade secret law are clear, while simultaneously providing a broad scope of protection.48 For example, when the software is developed for sale on a small basis, secrecy can easily be maintained, while contracting and licensing provisions can support the secrecy.49 However, there are also some important disadvantages for society. Because the information about the invention stays secret, this will slow down the progress in the field (follow-on innovation).50 Furthermore there is a loss of protection once the invention becomes publicly known.51 Similarly, keeping the invention a secret becomes more difficult when the software is sold on a larger scale. The protection provided by trade secret law may not be adequate for all software inventions,52 for example when reverse engineering is easily possible. Reverse engineering is defined as ‘real parts are transformed into engineering models and concepts’.53 This means that without infringing trade secret law or copyright law, which will be discussed below, the software can be recreated.

The above arguments make it important to look at the other options of protection. The World Intellectual Property Organization (WIPO) has tried to solve the problem regarding software protection by suggesting a sui-generis system, the ‘WIPO Model Provisions on the Protection of Computer Programs’.54 Creating sui-generis protection means not using the existing intellectual property laws, and instead using a system specially designed for the protection of software. However national legislators did not share the opinion of the WIPO.55 The reason why a sui generis system was not warmly welcomed was because the Berne Convention offered flexible (copyright) protection, therefore this protection was also available for software, although, later on the EU

46 Nimtz 1979, p. 19. 47 Art. 39 TRIPS Agreement. 48 Bender 1985, p. 437 49 Maier 1987, p. 162. 50 Bender 1985, p. 437. 51 Bender 1985, p. 438 52 Maier 1987, p. 162. 53 Varady 1997, p. 255. 54 WIPO Asia Pacific Regional Seminar on IP and Software in the 21st Century, May 29-30 2007, Sri Lanka, document number WIPO/IP/CM/07 Topic 1, p. 1. 55 WIPO Asia Pacific Regional Seminar on IP and Software in the 21st Century, May 29-30 2007, Sri Lanka, document number WIPO/IP/CM/07 Topic 1, p. 1.

7 Directive on the legal protection of computer programs offered tailored protection, almost like a sui generis system.56

Copyright law protects the expression of the author, not the idea behind it. Some argue that protection through copyright does not create a monopoly that could slow down innovation.57 This is mainly because when an invention is protected by copyright, the inventor cannot prevent others from arriving at the same expression on their own via a different route.58 Others believe that both patent and copyright protection provide a monopoly, as they deter infringement with civil and criminal sanctions.59 Some even claim that a monopoly because of copyright is especially present when dealing with software. The term of protection under copyright (seventy years after the death of the author) is very long when it comes to software and hardware, since technological innovation occurs much faster in these areas. Thus such long protection creates inefficiencies and stifles innovation.60 In general it is seen that patents provide stronger protection than software. Patent law protects the underlying idea, not just the expression. The WIPO formulates this as following: ‘it has been said that copyright protects against piracy, while patents protect against copying by competition’.61

To obtain a patent there are criteria that need to be met and an application must be filed at the patent office. This provides good documentation on the invention. Furthermore, under copyright someone can still derive the same innovation from a different route without infringing the copyright. This is not possible when protecting an invention using a patent. In the early 1990s the European Union adopted the Directive on the legal protection of computer programs (henceforth Software Directive).62 In the Software Directive the approach of protecting software through copyright was adopted as the appropriate protection for software.63 Currently the conclusion of the WIPO is that it is a generally excepted principle that ‘computer programs should be protected by copyright, whereas apparatus using computer software or software-related inventions should be protected by patent’.64 This illustrates the third possibility to protect software, namely protection through patent law. The system of patenting software will be examined in detail below.

56 Rowland 2000 , p. 66. 57 Struik 2010, p. 9. 58 Tritton 2008, p. 467. 59 Fellmeth 1998, P. 3. 60 Fellmeth 1998, P.4. 61 WIPO Asia Pacific Regional Seminar on IP and Software in the 21st Century, May 29-30 2007, Sri Lanka, document number WIPO/IP/CM/07 Topic 1, p. 8. 62 Council Directive 91/250/EEC on the legal protection of computer programs, Official Journal L 122, 17/05/1991 P. 0042 – 0046. 63 Struik 2010, p. 9. 64 WIPO, http://www.wipo.int/copyright/en/faq/faqs.htm, last visited at June 11 2013.

8 2.2. The international framework for patent protection of software

Prior to 1980s, most courts in Europe ruled that software was excluded from patentability except the court of the United Kingdom.65 Until today, the countries of the European Union have not been able to agree on a single way to deal with software patenting. To see what kind of protection is offered to software in the European Union it is necessary to look at the different (patent) conventions and treaties that apply, and the attempts that have been undertaken to harmonize the protection of software in the EU. Of importance are the Paris Convention, the TRIPS agreement, the Patent Cooperation Treaty as well as the European Patent Convention.

In 1883 the Paris Convention for the Protection of (Paris Convention) came into force. Up until today, 174 countries are contracting parties to the Paris Convention, including all the countries of the European Union.66 Contracting states are allowed to enter into separate treaties, on the condition that these treaties do not contradict with the Paris Convention. The effect of this provision is that the Paris Convention is still important for treaties and agreements that have been drafted after the Paris Convention. For European countries the Paris Convention harmonized patent law to a considerable degree.67 In the Paris Convention, certain main principles can be found. 68 The principle of national treatment, the right of priority and the provision on compulsory licensing will be discussed. Of importance is the idea that nationals of a contracting party to the Convention will enjoy the same rights provided by the Convention in other countries as the nationals of that contracting country (principle of national treatment).69 This means that the treatment of software patents by a contracting country must be equal for its own nationals and the nationals of other contracting states. However, the national treatment principle does not prevail in a situation where there is a patent granted in another contracting state that would not have qualified for patent recognition if it was applied for in this contracting state.70 This could for example be the case when one contracting state grants patents for business methods and another contracting state does not.71 When an application for a patent has been filed in a contracting country, there will be a right of priority for the purpose of filling an application in the other contracting

65 Sumner 1988, p. 331. 66 Overview contracting parties to the Paris Convention, available at http://www.wipo.int/treaties/en/ShowResults.jsp?lang=en&treaty_id=2, last visited at June 11 2013. 67 Tritton 2008, p. 63. 68 Tritton 2008, p. 62. 69 Paris Convention, art. 2(1). 70 Thomas 2007, p. 21. 71 Thomas 2007, p. 21.

9 countries.72 The right of priority provides the patentee time, to consider if he also wants to apply for a patent in other Member States, without losing the inventive element of the invention. In a fast changing industry such as software it is favorable to have such a period to think over your strategy. To prevent abuse of patents there is a provision on compulsory licensing.73 This provision can balance out the need for protection of software and the need of others to access technology on software for follow-on innovations. All of the above mentioned provisions provided by the Paris Convention do create some harmonization regarding software patents, but only to a very small extent.

The next international development important for patent law is the Trade Related Aspects of Intellectual Property Rights agreement, known as the TRIPS Agreement. The TRIPS Agreement came into effect in 1995. The agreement covers a wide variety of intellectual property rights. All countries who are a member of the WIPO are also a contracting state to the TRIPS Agreement. The four main features of TRIPS are provisions on minimum standards of protection, enforcement, dispute and criminal sanctions.74 Especially interesting for the protection of software is article 27 of the TRIPS Agreement. This article discusses the patentable subject matters. It states that: ‘patents shall be available for any invention, whether product or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application’.75 Importantly, this means that software cannot be excluded from patentability under TRIPS which, ultimately, influenced the EPC’s adoption of the same phraseology, i.e., ‘in all fields of technology,’ making it clear that technical inventions of all kinds can be patented.76 At the ‘Conference of the contracting States to revise the 1973 European Patent Convention’ in 2000, a proposal was made to ban ‘programs for computers’ from the list of inventions which shall not be regarded as patentable by the EPC. This was proposed because several Member States, such as the Netherlands, felt that the text of Article 52(2)(c) was obsolete.77 It was stressed that after the removal, the criteria for patentability should stay the same, it should not lead to business methods being patented.78 However, this proposal was not supported by enough Member States.79 Several Member Sates said that the implication of the proposed changes were not clear, they were afraid that the interpretation of the Article by the court and the legislator would

72 Paris Convention Art. 4. 73 Paris Convention Art. 5. 74 Tritton 2008, p. 52. 75 TRIPS Agreement art. 27. 76 A Guide to the EPC 2000, p. 28. 77 Conference of the contracting states to revise the 1973 European Patent Convention 2000, document number MR/24/00, p. 21. 78 Conference of the contracting states to revise the 1973 European Patent Convention 2000, document number MR/24/00, p. 21. 79 Conference of the contracting states to revise the 1973 European Patent Convention 2000, document number MR/24/00, p. 71.

10 change.80 In its case law, the EPO Technical Board of Appeal has confirmed that the TRIPS Agreement did not have the intention to exclude software from patentability.81 However in the particular case this was inapplicable, since the EPC is not a contracting party to the TRIPS Agreement, therefore when interpreting the EPC the TRIPS Agreement was not of importance.82

In 1978 the Patent Cooperation Treaty (PCT) came into effect. All Member States of the EU have ratified the convention and therefore belong to the International Patent Cooperation Union.83 The national patent office grants the patent. The PCT enables an applicant to file an ‘International Application’ at the national patent office. The International Bureau of the WIPO will designate a patent office as an International Searching Authority, which will make a search of the and state the results in a preliminary report.84 The applicant can file for a patent at the national patent office with priority within 30 months after the international filling.85 The PCT procedure is cost- efficient because there is no need to file an application in each country and while the application is pending it provides time for the applicant to determine the desirability of obtaining patent protection in different countries. The preliminary report can help with this decision.86 Article 17(2)(a) of the PCT states that some subject matters can be excluded from searching.87 These subject matters are explained in detail in the Regulations, rule 39 (vi) mentions that no search is required in the case the subject matter is a ‘computer program to the extent that the International Searching Authority is not equipped to search prior art concerning such programs’.88 Because the offices that are required to do the search do not always have employees specialized enough in software and there are no sufficient databases with documentation on all the existing software, there is a risk that software related inventions are not being searched. Additionally, because of the mentioned problems, when conducting the search, the employee is not able to determine what other corresponding techniques should be searched. Although

80 Conference of the contracting states to revise the 1973 European Patent Convention 2000, document number MR/24/00 , p. 70. 81 Case EPO Technical Board of Appeal 1173/97, paragraph 2.3 (Computer Programs/IBM). In this decision the Board has ruled that there is no justification for applying the TRIPS Agreement to the EPC, because the EPC is not a contracting party to the TRIPS Agreement. However, the Board does think it is appropriate to take TRIPS into consideration when interpreting the EPC, since TRIPS gives a clear indication of current trends (paragraph 2.3). 82 Tritton 2008, p. 116. 83 Tritton 2008, p. 69. 84 Tritton 2008, p. 70. 85 Tritton 2008, p. 70. 86 Trirron 2008, p. 71. 87 PCT Art. 17. 88 Regulations under the PCT, Rule 39, http://www.wipo.int/export/sites/www/pct/en/texts/pdf/pct_regs.pdf, last visited June 11 2013.

11 software is not excluded from patentability under the PCT, the protection of software under the PCT is not clear.89

In Europe, countries felt the need to harmonize patent law to a larger extent than the international treaties that had been designed up till that point. In 1977 the EPC entered into force.90 All members of the European Union are a contracting state to the EPC and also several countries, which are not a member of the European Union.91 Applicants can file for a patent at the European Patent Office (EPO), to obtain several national patents in designated states. The EPO functions as an examination authority.92 Member States should make sure their national patent law is in compliance with the EPC.93 The validity of a European Patent in a certain member state can only be judged by the national court, however the views of the EPO expressed in their case law, are of importance for the national judge.94 When the EPO produces case law on the decision of patentability of an application, this is open for appeal at the EPO.95 The EPC has three requirements that should be met to test if an invention is patentable, which are mentioned in article 52. An invention must be new, involve an inventive step and be susceptible of industrial application.96 Article 52(2) mentions several subject matters, which should not be regarded as an invention. Under (c) ‘programs for computers’ are mentioned.97 But paragraph 3 says: ‘Paragraph 2 shall exclude the patentability of the subject-matter or activities referred to therein only to the extent to which a European or European patent relates to such subject-matter or activities as such’.98 According to the EPC, then, software ‘as such’ should not be patented. The criteria of software ‘as such’ reveals the difficulty of qualifying software.99

In 2002 there was a proposal of the European Parliament and the Council for a Directive on the patentability of computer-implemented invention.100 The proposed Directive mentions the exclusion of patenting computer programs ‘as such’ by Member States’ national patent laws and the EPC. In the meanwhile the EPO had granted more

89 Struik 2010, p. 424. 90 Tritton 2008, p. 84. 91 Overview Member States EPC, available at http://www.epo.org/law-practice/legal- texts/html/guidelines/e/foreword_6.htm, last visited at June 11 2013. 92 Tritton 2008, p.84 93 Tritton 2008, p. 87. 94 Struik 2010. p. 364. 95 Tritton 2008, p. 84. 96 EPC Art. 52. 97 EPC Art. 52(2)(c). 98 EPC Art. 52(3), Curving done by author. 99 For the meaning of ‘as such’ see page 7. 100 EU Proposal Directive 2002 on the patentability of computer-implemented inventions, COM(2002) 92 final, 2002/0047(COD).

12 than 20.000 patents in the area of computer-implemented inventions by 2002.101 Non- transparent patent law could lead to distortion of the internal market, if a computer- implemented protection is protected in one Member State but not in another.102 If inventions or methods are patented which should not be protected by patents, these patents could deter entry or induce exit of firms that are competing with the patent holder.103 This is because the patent holder can threaten her competitors with infringement suits. Some even state that the fear of litigation causes SME’s not to enter areas where other firms hold many patents.104 To protect the internal market, transparent patent law is necessary. The idea behind the proposed Directive was to refrain from extending the patent protection for computer-implemented inventions.105 Therefore the Commission argued that the technical requirement should be codified, so that business methods are excluded from patentability.106 There is a concern that business methods can be patented, if they are described as a software patent. Most of the time business methods involve a computer program.107 In Europe it is believed that patenting business methods would make the scope of patent law too broad. In Europe, it is believed that business method patents lack novelty and/or non-obviousness that is required to obtain a patent.108 However the difference between a business method and software is becoming less clear. Software can be used to implement a business method.109 In both the United States and Europe there is no legal definition on business methods.110 By giving the business method a technical effect it can be patented in Europe, this can be done by using a computer- implemented invention.111

In 2005 the European Parliament has voted against the proposed Directive.112 This was mainly because of the big opposition to the proposal, consisting of movements, companies and national parliaments.113 In 2000, the European Commission launched an online consultation on the patentability of computer-implemented

101 EU Proposal Directive 2002, p. 2. 102 EU Proposal Directive 2002, p. 2. 103 Wagner 2008, p. 176. 104 Wagner 2008, p. 176. 105 EU Proposal Directive 2002, p. 11. 106 EU Proposal Directive 2002, p. 11. 107 Bakels 2002, p. 3. 108 Wagner 2008, p. 176. 109 England and Wales High Court, [2005] EWHC 1589 (Pat), Paragraph 42. 110 Wagner 2008, p. 177. 111 Wagner 2008, p. 177. 112 European Parliament Commissioners statement, available at http://www.europarl.europa.eu/sides/getDoc.do;jsessionid=466FB3D721E65B66E5AC7E447821E195.nod e1?pubRef=-//EP//TEXT+CRE+20050706+ITEM-007+DOC+XML+V0//EN&query=INTERV&detail=3- 100&language=EN, last visited at June 11 2013. 113 Struik 2010, p. 325.

13 inventions.114 From the conclusion of this consultation it seems that the responses can be divided into two categories. First is the group that is opposed to most software patents, categorized as the ‘restrictive approach’. Members are students, academics, engineers and start-up companies. The concerns of this group are the threats to the open-source movement and SME’s, the lack of patenting resources and expertise, the fear of litigation and the negative impact on standards for interoperability.115 The members of the second category are lawyers, established industry players and governmental agencies. This group, which has a ‘liberal approach’, would like to apply traditional patentability criteria to computer-implemented inventions. Its main concerns are to be able to open up to global markets, to protect development investment and equality with the US. The responses were dominated by the group opposed to software patents. This was mainly because a lot of responses came from Eurolinux, an open-source movement.116

By looking at the international framework, it can be concluded that several steps have been taken to harmonize the approach on software patenting in the European Union. The EPC regulates that software ‘as such’ should not be patented. Harmonizing the practice of patenting software in the European Union to a further extent has not yet been possible because of the different interests of different groups, whose opinions were brought forward in an online consultation by the European Commission. When looking at the different arguments in favor and against software patenting that are mentioned in the online consultation, it can be stated that it will be very difficult to meet in the middle. In order to create the same opportunities for SME’s and multinationals, while also maintaining and protecting an open environment to innovate, it would be best not to patent software. However, both SME’s and multinationals need to work with a system where the research and development department is overall profitable. A patent system can provide this. Abolishment of software patents in the EU could mean that the EU becomes less attractive as compared to other entities, such as the United States for example. From a company’s perspective it would mean that the profits would go down and competitors could use their software without investing in the research and development. SME’s could enter the market more easily by copying existing software meaning that they will not have the costs of development, but research and development will become more difficult since they might not have the financial reserves that multinationals have.

114 Website European Commission, Patentability of computer-implemented inventions, available at http://ec.europa.eu/internal_market/indprop/comp/analyses_en.htm, last visited at June 11 2013. 115 Final report, The results of the European Commission consultation exercise on the patentability of computer implemented inventions, p. 3. 116 PbT Consultants, Final report, The results of the European Commission consultation exercise on the patentability of computer implemented inventions, 2000, p. 4.

14 As patents can help firms to protect their valuable intellectual property, patent management and patent strategies become more and more important. Grandstrand has made an overview of six important patent strategies, which can be found in Annex I.117 These strategies show that patents are not only used to protect intellectual property but also to thwart the competition. An even more alarming use of patents is the litigation by non-practicing entities (NPE’s). These NPE’s are also called ‘patent trolls’ and can be defined as ‘a person or entity who acquires ownership of a patent without the intention of actually using it to produce a product and in many cases did not actually engage in developing the technology’.118 The aggressive approach of patent trolls can be a threat to the development of technology of software.

This thesis started with a quote by Machlup, saying that it is not desirable to introduce a patent system if we had to design it again nor to abolish it now that we have it.119 When looking at the problems of software patenting Machlup’s statement is very relevant. But, now that we do have created the opportunity to patent software this system should be designed to make it work optimally.

2.3. The definition of Software

In the aforementioned treaties, conventions, agreements and the proposal Directive different terms are used to indicate ‘software’. Some examples are computer programs, computer implemented inventions and software ‘as such’. These aforementioned terms are often used interchangeably in the literature.120 The reason that there is no definition of software in any of the conventions, treaties or even in the Proposal for a Directive, is the concern that because of the fast technical developments a definition may become quickly outdated.121 In order to determine whether inventions in these fields should be protected through patent law, a closer look at what is being pointed out by these terms is necessary. When talking about copyright protection for software two elements of software are distinguished: the source code and the object code. The source code is ‘the original code of the computer program written in a program language which can be read and understood by human beings’.122 The object code is a code in binary form that is understood by a computer, for humans to understand it needs to be decompiled into a

117 See page 49. 118 Pohlmann 2011, p. 1. 119 Machlup 1958, p. 80. 120 Ballardini 2008, p. 563. 121 Struik 2010, p. 36. 122 WIPO Asia Pacific Regional Seminar on IP and Software in the 21st Century, May 29-30 2007, Sri Lanka, document number WIPO/IP/CM/07 Topic 1, p. 1.

15 source code.123 Thus in accordance with WIPO, when talking about patent protection of software in this thesis, it refers to the protection of the underlying functionality of the program, not only how it is written.124

The WIPO uses a broad definition of software: ‘a set of instructions, which controls the operations of a computer in order to enable it to perform a specific task, such as the storage and retrieval of information’.125 Struik argues that this is an acceptable definition for software to use in patent law. Still, he narrows it down a bit more by stating that software is about an ‘electronical or optical series of zero’s and one’s (executable code) that is capable of controlling the machine and making it able to operate’.126 The software will be installed onto the machine either by downloading it or by using an external carrier.127 Furthermore, the president of the EPO Technical Board of Appeal has noted that: ‘A computer is understood to include not only devices which are generally thought of as such, for example desktop PC’s, but any programmable apparatus (such as a mobile phone or an embedded processor)’.128 This last definition shows that the definition of software is sometimes adjusted to innovation, such as the invention of software for mobile phones. Having a clear definition of software is important to determine what can be patented. This is important for the ability to foresee the principle of legal certainty and harmonization. If different EU Member States use different definitions of software, the scope of the software patents might differ between those countries. Another reason why the definition of software is important, is the development of technology. The definition of software should be clear enough, in order to tell if a new invention may be categorized as a software patent. As technology develops at a fast pace, to create legal certainty, the definition of software should be clear enough to be able to determine whether a new invention is patentable of not. The question whether an invention is patentable or not can have a big influence on the development of the market, especially inventions that are changing the landscape of a specific area. Finally, because of innovation that we are now not yet aware of, the definition of software could be subject to changes in the future.

Several decisions of the EPO Technical Board of Appeal show that an invention should have a ‘technical character’ for it to be patentable.129 Software ‘as such’ is

123 WIPO Asia Pacific Regional Seminar on IP and Software in the 21st Century, May 29-30 2007, Sri Lanka, document number WIPO/IP/CM/07 Topic 1, p. 1. 124 WIPO Asia Pacific Regional Seminar on IP and Software in the 21st Century, May 29-30 2007, Sri Lanka, document number WIPO/IP/CM/07 Topic 1, p. 8. 125 WIPO Asia Pacific Regional Seminar on IP and Software in the 21st Century, May 29-30 2007, Sri Lanka, document number WIPO/IP/CM/07 Topic 1, p. 1. 126 Struik 2010, p. 357. 127 Struik 2010, p. 357. 128 EPO Opinion of the Enlarged Board of Appeal on Referral G3/08, Definitions. 129 Struik 2010, p. 356.

16 excluded because it is considered to be ‘non-technical’.130 In practice it will be difficult to determine whether software can be considered technical. This has to do with software having no physical embodiment, therefore rendering its nature intangible.131 Patent law has been designed for traditional inventions that have physical implementations and tangible components.132 Already in 1987 Brooks identified four elements of software explaining why software differs from traditional inventions. These elements are complexity, conformity, changeability and invisibility. Software is more complex because no two parts are alike, whereas with tangible goods elements repeat. The conformation to other interfaces brings much complexity. When tangible goods are changed they are replaced by new items. Software, too, is often subject to changes. Modifications can be made and software is adjusted to new machineries. Furthermore, software is invisible. This makes the description of software less obvious according to Brooks.133

2.4. EPO case law

Next, the EPO Technical Board of Appeal has issued important decisions regarding discuss the situation regarding the ‘technical requirement’. The analysis of case law shows three different approaches used by the EPO Technical Board of Appeal: the technical contribution approach, the technical effect approach and the any hardware approach.134 In 1986 the EPO Technical Board of Appeal delivered an important decision on software ‘as such’ in the case of Vicom (1986).135 A mathematical algorithm ‘as such’ is excluded from patentability.136 The Board has stated that when a mathematical algorithm is being used in a technical process the end result cannot be seen as a mathematical process ‘as such’ and therefore it is not excluded from patentability.137 The same can be said about software, when software is used on a computer to control the technical process this cannot be seen as software ‘as such’.138 Even if the result is made of non-patentable elements, as long as there is a ‘technical contribution’ made to the known arts, this can be seen as an invention and be patentable.139 The protection of

130 Ballardini 2008, p. 564. 131 Ballardini 2008, p. 565. 132 Ballardini 2008, p. 565. 133 Brooks 1987, p. 11. 134 Ballardini 2008, p. 565. 135 EPO Technical Board of Appeal, 208/84 (1986). 136 EPC Art. 52(2)(a). 137 Struik 2010, p. 366. 138 Struik 2010, p. 367. 139 Ballardini 2008, p. 565.

17 embedded software was established.140 After the Vicom (1986) case, the EPO Technical Board of Appeal delivered five decisions stating that text processing programs are not patentable.141 The Board of Appeal confirmed that a computer implementation is not an invention if the contribution is solely based on a computer program.142 In the Sohei (1994)143 decision it was held that to meet the ‘technical contribution’ requirement, the problem does not need to be of a technical nature, as long as the solution has a technical nature.144 The meaning of the ‘technical’ requirement was extended in this decision.145 It was unclear what was considered as a sufficient ‘technical contribution’ to make an invention patentable. This has led to another interpretative line, the ‘technical effect’.146

The IBM I and II (1999)147 decisions where later labeled as the ‘technical effect’ approach.148 Computer programs, even on an external carrier were considered to be technical.149 Such a program should cause a ‘further technical effect’ when carried out on a computer.150 Having a technical character means that’s it is not software ‘as such’ and therefore not excluded from patentability.151 The exception of article 52 paragraph 2 and 3 of the EPC only applies in the case of simple programs that cause no technical effect further than the normal physical interaction between software and equipment.152 But the view of the EPO Board of Appeal has shifted again as shown in case law.153 Similarly, the Pension Benefits System (2000)154 is a case about the patenting of a method to manage a pension payment system. The technical character was not very strong, the invention was more a management method. The EPO Board of Appeal was asked to decide whether an invention needs to have a technical character according to the EPC.155 The Board ruled that the method that was being used did not have a technical character and was just a business method ‘as such’. The product, however, did have a technical character since a computer was used with software for special use, just like in the Vicom (1986) and Sohei (1995) case.156 In the end the product was ruled not to be patentable

140 Struik 2010, p. 368. 141 Struik 2010, p. 368. 142 Ballardini 2008, p. 565. 143 EPO Technical Board of Appeal, 769/92 (1994). 144 Struik 2010, p. 370. 145 Struik 2010, p. 371. 146 Ballardini 2008, p. 565. 147 EPO Technical Board of Appeal, 1173/97 (1999), EPO Technical Board of Appeal, 0935/97 (1999). 148 Ballardini 2008, p. 566. 149 Struik 2010, p. 371 150 Ballardini 2008, p. 566. 151 Struik 2010, p. 373. 152 Struik 2010, p. 374. 153 Ballardini 2008, p. 566. 154 EPO Technical Board of Appeal, 931/95 (2000). 155 Struik 2010, p. 375. 156 Struik 2010, p. 377.

18 because of the lack of inventiveness.157 The approach used in Pension Benefits, whether ‘the claim involves the use of or is to a piece of physical hardware’ is categorized as the any hardware approach.158

In 2010 the Enlarged Board of Appeal has provided some guidance regarding questions asked by Alison Brimelow, president of the EPO.159 She had asked the Board four questions about the interpretation of Article 52 EPC. In her opinion the Boards’ case law was not consistent.160 Not all of the questions were answered because some were considered inadmissible. The Enlarged Board did answer some of the questions and based on these answers a conclusion can be drawn.161 To be patentable, software inventions must have a technical character. This criterion can be met by naming technical equipment in the patent claim (such as ‘computer’), even if no ‘further technical effect’ is being caused. The ‘contribution approach’ is not of importance when determining the technical character of an invention. Software itself, without the help of an external carrier or other equipment can be patented if it causes a ‘further technical effect’. When writing this kind of software the ‘further technical effect’ can be found in the ‘further technical consideration’.162

A schematic summery of the most important EPO rulings regarding software can be found below.

Key element Case Comments by the Board

Technical feature EPO T 208/84 The EPC requires that the claims shall be drafted "in terms (1986) of the technical features of the invention". This condition is Vicom met if the features mentioned in the claims are understood by those skilled in the art as referring to the technical means for carrying out the functions specified by such features. The use of mathematical expressions is admissible, the overriding requirements always being that the claim be clear and concise and that the person skilled in the art can understand what technical means are necessary from the description and/or his general knowledge of the field concerned.163

Technical effect EPO T 1173/97 These cases were labeled as the ‘technical effect’ approach (1999) Computer of the EPO. For computer programs to be patentable, a

157 Struik 2010, p. 377. 158 UK [2006] EWCA Civ 1371, paragraph 26. 159 EPO Opinion of the Enlarged Board of Appeal on Referral G 3/08 reasons 10 till 13.5.1. 160 EPO Opinion of the Enlarged Board of Appeal on Referral G 3/08. 161 Struik 2010, p. 393. 162 Struik 2010, p. 393. 163 EPO Technical Board of Appeal, 208/84 (1986), Reasons for decision 8.

19 Programs ‘further technical effect’ is necessary when the program is Product/IBM (IBM carried out on a computer.164 I) EPO T 0935/97 (1999) Computer Programs Product/IBM (IBM II)

Solution has a EPO T 769/92 An invention comprising functional features implemented technical nature (1994) by software (computer programs) is not excluded from Sohei patentability, if technical considerations concerning particulars of the solution of the problem the invention solves are required in order to carry out that same invention. Such technical considerations lend a technical nature to the invention in that they imply a technical problem to be solved by (implicit) technical features. 165

Business method EPO T 931/95 A feature of a method which concerns the use of technical with technical (2000) means for a purely nontechnical purpose and/or for means does not Pension Benefit processing purely non-technical information does not mean technical Systems necessarily confer a technical character to such a method.166 character

Technical part of EPO T 0641/00 It follows that the Board, although allowing a mix of invention is basis (2002) technical and non-technical features to be claimed, Two considered the technical part of the invention as the basis for identities/COMVIK assessing inventive step.167

Business method EPO T 0258/03 A method involving technical means is an invention within with technical (2004) the meaning of Article 52(1) EPC. Method steps consisting means is inventive Auction of modifications to a business scheme and aimed at Method/Hitachi circumventing a technical problem rather than solving it by technical means cannot contribute to the technical character of the subject-matter claimed.168

Imply use of EPO T 388/04 This board takes the view that subject-matter or activities unspecified (2006) that are excluded from patentability under Article 52(2) and technical means Undeliverable mail (3) EPC remain so even where they imply the possibility of making use of unspecified technical means.169

Technical EPO T 0154/04 The "technical effect approach (with the rider)" applied in

164 Ballardini 2008, p. 566. 165 EPO Technical Board of Appeal, 769/92 (1994, Headnote 1. 166 EPO Technical Board of Appeal, 931/95 (2000), Reasons for decision 3. 167 EPO Technical Board of Appeal, 0641/00 (2002), Consideration 4. 168 EPO Technical Board of Appeal, 0258/03 (2004), Headnote I en II. 169 EPO Technical Board of Appeal, 388/04 (2006), Reasons for the decision 3.

20 contribution (2006) the Aerotel/Macrossan judgment is irreconcilable with the approach Duns Licensing European Patent Convention also for the further reason that Associates it presupposes that "novel and inventive purely excluded matter does not count as a 'technical contribution'.170

Further technical G 3/08 To be patentable, software inventions must have a technical effect Opinion of the character. This criterion can be met by naming technical Enlarged Board of equipment in the patent claim (such as ‘computer’), even if Appeal regarding no ‘further technical effect’ is being caused. The the questions of ‘contribution approach’ is not of importance when Alison Brimelow determining the technical character of an invention. Software itself, without the help of an external carrier or other equipment can be patented if it causes a ‘further technical effect’. When writing this kind of software the ‘further technical effect’ can be found in the ‘further technical consideration’.171

The listed case law from the EPO shows that the approach for patenting software differs over time. In the Aerotel (2006) case, by a UK court, Lord Justice Jacob argues that there are too many approaches.172 These different approaches make it difficult for the national court to rule in accordance with the EPO case law. Jacob LJ states that the British court does not need to follow the EPO case law, since the German Supreme Court, the Bundesgerichtshof (BGH), has already declined to follow the reasoning of EPO case law, this will not lead to European consistency.173

‘In computer program product/IBM, the EPO had decided that “a computer program claimed by itself is not excluded from patentability (by the EPC) if the program, when running on a computer or loaded into a computer, brings about, or is capable of bringing about, a technical effect which goes beyond the ‘normal‘ physical interactions between the program (software) and the computer (hardware) on which it is run.“ In Sprachanlyseeinrichtung, the BGH did not adopt this implied restriction.’174

In the Sprachanalyseeinrichtung (2000)175 case, the BGH focused on the technical nature of the hardware and ruled that there are no restrictions on combining

170 EPO Technical Board of Appeal, 0154/04 (2006), Reasons for the decision 13. 171 EPO Opinion of the Enlarged Board of Appeal on Referral G 3/08 reasons 10 till 13.5.1 172 UK [2006] EWCA Civ 1371, consideration 25. 173 UK [2006] EWCA Civ 1371, consideration 29. Members of the EPC need to take into consideration each other’s case law and the case law of the EPO, but are not bound to do this. It is important that there is consistency in the interpretation of the EPC. 174 Bechtold 2000, p. 5. 175 Bundesgerichtshof, CR 2000-05-11.

21 computer hardware and software for patentability in any way.176 This decision contributed to the widening of the scope of software patenting in Germany.177 When national courts do not follow the EPO case law, this could lead to a situation where the scope of a patent in Germany can be wider than in another Member State. This kind of market fragmentation leads to unfair competition. If a certain software patent is better protected in one Member State, competitors will not be able to use this patent. If the scope of the patent is less broadly protected in another Member State, competitors may use certain elements of the innovation that are not protected by the patent in that Member State, for their own purposes. On a European level this means that competitors are competing under unequal terms.

It can be concluded that although copyright law can protect software to a certain extent, patent law can offer protection not only in a different way but also in a stronger way. Patents protect the idea of an innovation, not just the expression. The EPC states that software ‘as such’ is not patentable. However the EPO does grant software patents. Case law of the EPO shows that the approach on patenting software is often subject to change. The EPC provides guidelines, but the national courts can still give their own twist to the interpretation of the EPC. In 2005 it became clear that it was not possible to harmonize patent law protecting for software on the level of the European Union, because of the opinions and interests of different groups that were too divergent. But the fact that many interests play a part is a sign that it is not possible to leave the situation on how to patent software unequal between Member States.

176 Bechtold 2000, p. 6. 177 Bechtold 2000, p. 6.

22 3. The European Patent with Unitary effect

From the 1960s attempts have been made to harmonize patent law in the European Union. The Community Patent Convention (CPC) of 1975 is an example. In 1985 an agreement was reached on the establishment of the Community Patent Appeal Court. In 1989 it was determined that the CPC would only enter into force when the 12 signatory states had ratified the convention. By 1991 the convention did not enter into force because not all states had ratified the CPC. There were states such as Denmark, Ireland and Spain who encountered constitutional problems when attempting to ratify the CPC. In 1992 states tried to unanimously amend the number of states which had to ratify the CPC in order for the Convention to enter into force, however such an agreement was not reached.178 As the establishment on a community patent was complicated, efforts were undertaken by the EPO to create a ‘European Patent Litigation Agreement’ (EPLA) alongside the EPC.179 The intention was to reduce the costs of litigation by making it no longer necessary to start an infringement procedure in every Member State. The language regime was a stumbling block to some countries as well as the concerns of SME’s that the procedure would become too costly for them as litigation under EPLA would only be less expensive if litigation was necessary in at least three countries.180 In 2003 a declaration was adopted by the Working Party on Litigation that acknowledged that

‘the establishment of a litigation system for European patens has to be paused, in view of the work being done by the European Union to introduce a Community patent with a judicial system of its own’.181

In 2007 an Interim Legal Opinion from the European Parliament was released which is not to be found on the website of the EPO and it is unclear what the status of the document is.182 The document concludes that the Member States are not entitled on their

178 Tritton 2008, p. 194. 179 Ullrich 2012, p. 18. 180 Tritton 2008, p. 189. 181 European Patent Litigation Agreement, website of the EPO, http://collections- r.europarchive.org/dnb/20070703083323/epo.org/patents/law/legislative-initiatives/epla.html, last visited June 11 2013. 182 European Parliament, Interim Legal Opinion, 2007, http://www.ipeg.com/_UPLOAD%20BLOG/Interim%20Legal%20Opinions%20Legal%20Service%20EP%20F eb%201%202007.pdf, last visited June 11 2013.

23 own to conclude the EPLA agreement, the Community’s competence is exclusive for the matters governed by EPLA.183 In the end the EPLA disappeared to the background. 184

In the end, the EPLA was not successful. Over time the European Union did realize that a Community Patent Court (CPC) is essential for an ‘Enhanced patent system in Europe’.185 Creating this enhanced patent system has been a struggle especially compared to cooperation in other intellectual property fields, such as design and , which have already been harmonized to a certain extent at a European level. But recently the European Union seems to have found some agreement on how to harmonize patent law at a European level. First, on December 17 2012, the European Council approved the EU Unitary Patent Package by adopting Regulation 1257/2012 ‘implementing enhanced cooperation in the area of the creation of unitary patent protection’.186 The second one is Regulation 1260/2012 ‘implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements’. Followed by the agreement on a Unified Patent Court (UPC) on January 11, 2013.187 The UPC will have a Court of First Instance, a Court of Appeal and a Registry. The UPC will enter into force after 13 contracting Member States have ratified the Regulation, the expectation is that the Agreement will enter into force on January 1, 2014.188

3.1. The new system

Reaching an agreement on how to design a European Patent System did not go without a fight. This can be explained by the strong pro and contra arguments. One of the main reasons to harmonize patent law in the European Union is to overcome the differences in legislation between the different Member States. Different protection in different Member States can lead to a distortion of the free movement of goods.189 If a party wants a bundle of national patents revoked or if she wants to enforce the existing bundle patents, litigation in the different Member States is necessary. 190 Especially for SME’s it is

183 European Parliament, Interim Legal Opinion, 2007, p. 9. http://www.ipeg.com/_UPLOAD%20BLOG/Interim%20Legal%20Opinions%20Legal%20Service%20EP%20F eb%201%202007.pdf, last visited June 11 2013. 184 Struik 2010, p. 324. 185 Struik 2010, p. 324. 186 Regulation 1257/2012, Official Journal of the European union, L 361/1. 187 Agreement on a Unified Patent Court, Council of the EU, Doc. 16351/12, January 11, 2013. 188 Agreement on a Unified Patent Court, Council of the EU, Doc. 16351/12, January 11, 2013, p. 6. 189 Smits 2012, p. 5. 190 Smits 2012, p. 6.

24 difficult to litigate in patent procedures.191 This has to do with the high costs for SME’s.192 Another downside of litigating on the same patent in different countries is the chance of getting a different outcome in each Member State. An example where two courts of different Member States provided a different outcome regarding an infringement case is the ‘Epilady’/’Lady Remington’ case. Parties litigated in the UK and in Germany. The Court of Appeal in London dismissed the application for an interlocutory injunction. The German Appeal court did grant preliminary protection. When both courts were confronted with the different outcomes, they both followed the first instance judgment that was delivered by the foreign court.193 Different rulings by different Member States can lead to legal uncertainty and .

Even though the lack of harmonization in the EU causes obstacles, Smits rightly states that it is important to question whether harmonization would overcome these problems or whether it would only create new ones.194 The changes that will occur because of the two new regulations and the UPC agreement are discussed below.

Regulation 1257/2012 makes it possible to apply for a Unitary patent. As the regulation states the ‘Unitary patent protection will foster scientific and technological advances and the functioning of the internal market by making access to the patent system easier, less costly and legally secure’.195 There will be a uniform patent protection in all 25 participating EU Member States. The EPO, grants European patents and the EPO will also grant the Unitary patent in the future. In order to do this some administrative tasks from the Member States should be given to the EPO, these include the registration of the unitary effect and the collection and distribution of renewal fees.196 Regulation 1260/2012 states that the idea behind the translation arrangements for the Unitary patent is that they are simple and cost-effective.197 The specification of Unitary patent will be published in one of the official EPO languages, the claims will be published in all three official EPO languages. Whenever a dispute arises the patent must be translated into the official language of the Member State where the infringement took place or the Member State where the alleged infringer is domiciled.198 In order to improve the infringement procedure, the UPC is specialized in patent litigation and will have exclusive jurisdiction on litigation relating to European patent and also European patents with Unitary effect.199 The fact that there is now one court where you can litigate

191 Agreement on a Unified Patent Court, Council of the EU, Doc. 16351/12, January 11, 2013, p. 3. 192 Harhoff 2009, p. 10. 193 Bornkamm 2004, P. 421. 194 Smits 2012 p. 7. 195 Regulation 1257/2012, Official Journal of the European union, L 361/1, p. 1. 196 Regulation 1257/2012, Official Journal of the European union, L 361/1, p. 3. 197 Regulation 1260/2012, Official Journal of the European Union, L 361/89, p. 1. 198 Regulation 1260/2012, Official Journal of the European Union, L 361/89, p. 3. 199 Agreement on a Unified Patent Court, Council of the EU, Doc. 16351/12, January 11, 2013, art. 1.

25 about unfounded claims, revocation, infringement and validity of patents is designed to reduce the costs of litigation. Having one court will also provide legal certainty.

3.1. The position of the different EU Member States

However, not everyone was as optimistic in 2010 when the idea of the Unitary patent and the UPC arose. Spain and Italy, for example, are not in favor of establishing a harmonized patent system, and while Poland does not have a problem with the enhanced cooperation in the Unitary patent, it nevertheless opposes with the UPC Agreement. Specifically, Poland does not agree with the language regime of the court procedures and the fact that litigation will sometimes take place outside of Poland.200 This said, all EU Member States have voted in favor of establishing a harmonized patent system except for Italy and Spain. The main difficulty that Spain and Italy have with the enhanced cooperation is the language regime for the Unitary patent system, which will be based on the language regime of the EPO.201 The question was whether the specifications of the patent should be translated into all official languages of EU Member States or only into the official languages of the EPO. On the one hand, the patent specification must meet the information function of the patent system, and the specification must be clear because third parties are not allowed to use the invention as claimed. On the other hand, translation requirements can increase the costs of the patent significantly.202 Both Spain and Italy did not agree with these developments of the European patent system. In 2011 they both started a procedure against the Council of the European Union, seeking for an action for annulment of Council Decision 2011/167/EU of 10 March 2011. This decision authorized enhanced cooperation in the area of the creation of unitary patent protection, with only the countries who were in favor participating. This made it possible to continue the enhanced cooperation without Spain and Italy participating.203 In the procedures started by Spain and Italy the main arguments were that the Council was not permitted to authorize the enhanced cooperation procedure according to EU law. They claimed that this decision did not fall within the framework of the European Union’s non-exclusive competence. Secondly, they claimed that the authorization itself was contrary to EU

200 Jacek Ciesnowski, Poland takes wait-and-see approach on unitary patent, WARSAW BUSINESS JOURNAL, February 4, 2013. 201 Council of the European Union, Council authorizes enhances cooperation on creation of unitary patent protection, Press release 7506/11. 202 Ullrich 2012a, p. 10. 203 Council Decision 2011/167/EU, Official Journal of the European Union L 76/55.

26 law.204 The outcome of the case is highly important for the future of the European patent with Unitary effect (Unitary patent), making this case politically sensitive, i.e., important to the future of the Unitary patent in Europe.205 On April 16, 2013, the court rejected the claims of Spain and Italy, making enhanced cooperation possible without the participation of Italy and Spain.206 That said, Italy eventually signed the UPC agreement. With the claims of Italy and Spain rejected, the importance of the argument that the legal basis of the Unitary patent is unsound was reduced.

However, one should keep in mind that even though the outcome of the procedure was in favor of the Unitary patent, it nonetheless resulted in a disruption of the unity of the patent system, as discussed below in this chapter. To get an overview of which Member States will participate in which measure, there is a schematic summary in Annex II.207 This overview shows that Spain will neither participate in the enhanced cooperation, nor sign the UPC Agreement; Italy will not participate in enhanced cooperation, but did sign the UPC Agreement; Poland will participate in enhanced cooperation, but did not sign the UPC Agreement. It is therefore argued that in this situation where Spain will not participate in the new system at all, and Poland and Italy will participate in only half, a fragmentation of markets and unfair competition between participating and non- participating Member States will develop.208 Hence the advantages of the Unitary patent will not be available in the non-participating countries, while the propensity to innovate might be greater in countries that do offer Unitary patent protection. Furthermore, since the far-reaching protection is not available in the non-participating Member States, they could be blocked from parallel imports. This could eventually lead to a situation where their markets become isolated and can even lead to distorted competition.209 In light of the above, it is important to note that while the decision of the ECJ was important for the future of the Unitary patent, it does not have a special impact on software patenting.

What is important for software, is that the new patent system, consisting of the Unitary patent and the UPC can create harmonization in the European Union when it comes to patent law. It lowers the cost of patenting and the need to litigate in several Member States regarding the same patent. The UPC can provide a uniform interpretation on software, which is necessary for legal certainty. Furthermore, in order to function properly the UPC should be able to meet certain criteria. In Smits’ view, these criteria include being able to deal with highly complex cases, as well as being able to deliver

204 ECJ, action brought on: Italy v. Council case C-295/11 and Spain v. Council case C-274/11, (2011). 205 Wadlow 2013, p. 212. 206 ECJ, Judgment of the Court in joined cases C-274/11 and C-295/11, (2013). 207 Page 50. 208 Ullrich 2013, p. 5. 209 Ullrich 2013, p. 6.

27 speedy decisions at a low costs.210 Time will tell whether the UPC will function correctly. Finally, for the Unitary patent to be successful, it is important that applicants choose the Unitary patent over national patents and the European patent, as both of them without unitary effect will still be available.211

After the Agreement enters into force, there will be four possible ways to obtain a patent available to patent seekers in the Member State of the European Union.212 They are:

1. National patents granted by National Patent Office (NPC)

2. European patent (Bundle of national patents granted by the EPO) subject to the UPC Agreement

3. European patent (Bundle of national patents granted by the EPO) not subject to the UPC Agreement

4. European patent with Unitary effect213 (Unitary patent)

The national patent is granted by the NPC of the Member State. When an issue of infringement arises, the national court is competent to rule on the matter. The European patent will be granted by the EPO. When the European patent is subject to the UPC Agreement, the UPC is entitled to judge on infringement matters. There is also the possibility that the European patent is not subject to the UPC Agreement. This can be because the Member State has opted-out on the agreement, the Member State has not ratified the agreement, the European patent does not have a Unitary effect, or the country is a non-EU state. An example of a country that is not an EU state is Switzerland. Swiss nationals are able to use the UPC for their European or Unitary patent in the geographical area of the UPC Agreement.214 The Unitary patent will be granted by the EPO. It will provide protection in EU Member States that are participating in enhanced cooperation and have ratified the UPC Agreement.215 Since Italy and Spain have decided not to participate in the Unitary patent, the Unitary patent will not offer protection in these two countries.

Having several structures to obtain patent protection could lead to market fragmentation. Hilty distinguishes three kinds of market fragmentations. The

210 Smits 2012, p. 12. 211 Smits 2012, p. 14. 212 Note, that not all options will be available in each Member State. This depends on whether the Member State participates in enhanced cooperation and has signed the UPC Agreement. 213 Hilty 2012, p. 1. 214 Tilmann 2012, p. 91. 215 Hilty 2012, p. 1.

28 fragmentation of the patent protection in the EU, the fragmentation in the rules applicable to the Unitary patent, and the fragmentation of jurisprudence.216 All three are discussed below:

Fragmentation of patent protection: Within the fragmentation of the patent protection, Hilty subdivides the territorial fragmentation and the substantive fragmentation. The territorial fragmentation refers to the fact that not all EU Member States will participate in the Unitary patent. Therefore, to protect your invention in all EU countries it will be necessary in some countries to obtain a national patent.217 The substantive fragmentation refers to the fact that four overlapping ways are created to obtain patent protection.218

Fragmentation of the rules applicable to the Unitary patent: This concern, which is popular amongst many other authors as well, regards the discussion about which national law is applicable in case of infringement.219 As Tilmann succinctly writes:

‘regarding the claim for an injunction and the limitations thereon, there is an autonomous European Union law rule for the Union Patent in the Regulation and a harmonized rule for the classical European Patent in the Agreement. For all other sanctions the Court, under the Unified Patent Court Agreement, will have to apply national law implementing the Enforcement Directive, in this respect not going beyond Art. 64 of the European Patent Convention.’220

If the court has to apply not yet harmonized national law, this could eventually lead to unequal protection between Member States.221

The fragmentation of jurisprudence: This may arise because of the many different courts that are competent to interpret and apply European and national patent law.222 The different courts and their exact competence will be discussed in the next chapter. The next chapter will also discuss the influence of the patent system on software patenting.

216 Hilty 2012, p. 1. 217 Hilty 2012, p. 1. 218 Hilty 2012, p. 1. 219 Hilty 2012, p. 2. 220 Tilmann 2012, p. 95. 221 Wadlow 2013, p. 211. 222 Hilty 2012, p. 2.

29 3.3. Lessons from the United States Court of Appeal for the Federal Circuit

The introduction of the UPC can be compared to the reforms in patent litigation in the United States. In 1982, the Court of Appeals for the Federal Circuit (Federal Circuit) was created. This court has exclusive jurisdiction when it comes to patent appeals.223 The main reason for creating a single-court of appeals was to stabilize patent law, as patent law was interpreted differently by the 12 Circuit Court of Appeals.224 Creating a court that would provide stable and clear interpretations of the Patent Act would also prevent forum shopping.225 Furthermore, specialization could lead to more expertise, which stimulates accurate and efficient decision-making.226 It is important to mention that a lot of studies omit that the Federal Circuit is not a ‘specialized court’ when it comes to patent law, since it also has jurisdiction over a variety of other matters, about 60% of its cases.227

To be able to make a comparison between the UPC and the Federal Circuit, an overview of the research on the Federal Circuit is first needed. There have been several studies that examine the implication of adjudicating all of the patent appeal litigation to one court. It should be kept in mind that most of these studies do not look specifically at software patent, however, the findings are still relevant for software patents. Highlighted below are only findings that are relevant for the UPC. This will be done chronologically to show how the court has been criticized differently as time elapsed after the introduction of the Federal Circuit.

In 1987, Adelman has written a report on the Federal Circuit. He argues that the creation of the Federal Circuit ‘has essentially removed the Supreme Court from playing any substantial role in the administration of the patent system’.228 This unique position of the Federal Circuit has a downside, since there is no structural counterbalance of appellate criticism.229 Adelman argues that the Federal Circuit has slowly made it more difficult to invalidate a patent by setting higher standards.230 Overall, Adelman is positive

223 Merz 1994, p. 579 224 Merz 1994, p. 579 225 Gugliuzza 2012, p. 1448. 226 Dreyfuss 2004, p. 770. 227 Gugliuzza 2012, p. 1458, 1439. 228 Adelman 1987, p. 987. 229 Adelman 1987, p. 987. 230 Adelman 1987, p. 989.

30 about the Federal Circuit, as, according to him, the court stresses the importance of the patent system, however, there is still room for improvement.231

In 1989, Dreyfuss researched two topics. The first one was whether expertise and monopolization benefit the evolution of the law.232 Secondly, she looked at the administrative aspects of specialization.233 Dreyfuss concluded that the Federal Circuit changed the concept of validity of patents, and that the court judges harsher when there is the appearance of misconduct before the Patent and Trade Office (PTO). She concludes that the court has begun to ‘make patent law more accurate, precise and coherent’.234 She was not able to interpret the statistics on the efficiency of the court as they were not of good quality.235 She stressed that the court has also taken some measures which favor technology users such as restrictive interpretation of the doctrine of equivalent and a more restrained attitude towards findings of infringement, casting more inventions into the .236 She concluded that the Federal Circuit has worked well for patent law but that the predicted efficiency caused by the specialization has not been proven yet.237

In 1993, Desmond stressed that the Federal Circuit has single-handedly changed the standard of patentability, while when creating the Federal Circuit there was no intention of creating a court with the power to overrule the Supreme Court when it comes to patent law.238 He concluded that especially when it comes to interpreting the obviousness requirement there are some problems. For example, the Federal Circuit creates laws that are in contradiction with Supreme Court decisions. This is problematic since the district courts are following the Federal Circuit’s decisions. Desmond pleads for a more active role of the Supreme Court to have a solid foundation for patent law.239

In 2003, Dreyfuss did another study to see how the Federal Circuit was functioning since her last study. She stated that practitioners think that the centralization of patent appeals in a single court is an improvement.240 Dreyfuss argued that the court has focused on key patent law issues, like standards of obviousness and claim interpretation.241 However, the court has failed to agree on core policy.242 It has become

231 Adelman 1987, p. 1007. 232 Dreyfuss 1989, p. 5. 233 Dreyfuss 1989, p. 5. 234 Dreyfuss 1989, p. 24. 235 Dreyfuss 1989, p. 24. 236 Dreyfuss 1989, p. 28. 237 Dreyfuss 1989, p. 75. 238 Desmond 1993, p. 455. 239 Desmond 1993, p. 489. 240 Dreyfuss 2004, p. 770. 241 Dreyfuss 2004, p. 771. 242 Dreyfuss 2004, p. 776.

31 more difficult to predict which inventions will be seen as patentable or how a claim will be interpreted.243 Other concerns about the court are that the court has been slow to look at the ramifications of its decisions on the PTO, the lower courts, and the consumers of its law.244 Another flaw is that the court does not look at academic literature or lessons of social science research. The court is not able to articulate the law in such a way that it is detailed enough to use for those who rely on it.245

In 2004, Wagner published the result of his analysis on the court’s methodological approach to claim construction. In short, the court uses two methodological approaches, each of which leads to distinct results.246 The methodological approach used, varies from judge to judge.247 He concluded that the Federal Circuit is a court in the midst of broad transition, especially when it comes to personnel.248 In 2005, Moore also criticizing the lack of predictability in claim construction cases, stating that the Federal Circuit is not providing sufficient guidance.249 The effect of this resulted in a high reversal rate.250

In 2003, Lunney called the changes in the patent system a quiet revolution and he researched the economic impact of the changes.251 Lumney concluded that before the creation of the Federal Circuit, ‘patents were rarely valid, but if valid, broadly enforced’.252 After the creation of the Federal Circuit, the court has rewritten the nonobviousness requirement and the doctrine of equivalents, so that now ‘patents are routinely valid, but narrowly enforced’.253 He argued that the disadvantages of this are that the courts can no longer tailor the protection to each individual innovation.254 In the research of Jaffe, he provided statistics on the reversal rate of patent litigation, prior to 1980, when a patent was found to be valid and infringed this was upheld on appeal 62% of the time. Between 1982 and 1990 this was 90%. Regarding patent invalidity or non- infringement, prior to 1980 appeal courts overturned 12%, between 1982 and 1990 this was 18%.

In 2006, Henry’s research emphasized Lunney’s findings that patents are often considered to be valid.255 Infringement procedures became more important.256 Henry

243 Dreyfuss 2004, p. 785. 244 Dreyfuss 2004, p. 772. 245 Dreyfuss 2004, p. 773. 246 Wagner 2004, p. 1111. 247 Wagner 2004, p. 1112. 248 Wagner 2004, p. 1112. 249 Moore 2005, p. 247. 250 Moore 2005, p. 247. 251 Lunney 2003, p. 1. 252 Lunney 2003, p. 2. 253 Lunney 2003, p. 2. 254 Lunney 2003, p. 79. 255 Henry 2006, p. 114.

32 argued that the Federal Circuit’s ‘innovations to patent law have affected patent scope’.257 He refered to the practice where the court rules that there has been no infringement upon a patent, in these cases the scope of the patent might have been narrowed down to being worthless to an inventor.258

In 2007, Petherbridge researched the doctrine of obviousness concluding that ‘the jurisprudence of obviousness, as developed by the Federal Circuit, appears relatively stable and increasingly flexible’.259

In 2012, Gugliuzza has researched the effect on the Federal Circuit of dealing with both patent and non-patent cases.260 He pointed out that one of the problems is that the Federal Circuit prefers bright-line rules over policy-oriented standards.261 Because, ‘this rule-driven approach is troubling, for the key provisions of the Patent Act are relatively sparse and suitable for an instrumentalist interpretation’.262 He stresses that the Supreme Court did not pay much attention to the Federal Circuit the first twenty years of its existence, the last decade the Supreme Court has rebuked the Federal Circuit several times on patent law issues.263 Gugliuzza proposes to replace the current non- patent cases of the Federal Circuit with commercial cases, such as antitrust cases as this helps the court to better understand the economics of innovation.264 The Federal Circuit should focus on the fundamental purpose of patent law, that is, promoting innovation.265 Quillen has written a response essay on Gugliuzza’s research that mentions an interesting aspect. Quillen argues that Gugliuzza does not address the following aspect: ‘the Federal Circuit has a virtual monopoly on all patent appeals, and when it makes a mistake, the U.S. Patent & Trademakt Office, the district courts, and the International Trade Commission are locked in by stare decisions and have no choice but to follow the mistaken policy’.266

256 Henry 2006, p. 114. 257 Henry 2006, p. 114. 258 Henry 2006, p. 92. 259 Petherbridge 2007, p. 4. 260 Gugliuzza 2012, p. 1439. 261 Gugliuzza 2012, p. 1440. 262 Gugliuzza 2012, p. 1440. 263 Gugliuzza 2012, p. 1441. 264 Gugliuzza 2012, p. 1465. 265 Gugliuzza 2012, p. 1466. 266 Quillen 2012, p. 26.

33 3.3. Comparing the Federal Circuit and the UPC

How can the findings on the Federal Circuit be compared to the system of the UPC? First, it must be acknowledged that there are big differences between the American judicial patent system and the system of the UPC. In the American system patent law cases are only centralized when it concerns appeals that are linked to patent law. In the system of the UPC there will be a Court of First Instance and a Court of Appeal. Already on First Instance there will be a specialized patent court and this decision can be checked in appeal. Dreyfuss stresses that most observers agree that the patent law system has been improved because of the Federal Circuit.267 However, criticism is also expressed. First, there are the small changes that the Federal Circuit makes to patent law by interpreting the Patent Act in a new way. For example, the earlier mentioned practice of keeping more patents valid and finding less infringement.268 This could also be a pitfall for the UPC. However, it is presumable that the U.S. Patent Act provides more options to be interpreted freely. The UPC will be bound by the EPC and the EPC is very reticent when it comes to patenting (this can be seen at the ‘as such’ clauses). Thomas states that Europe and Japan have created a policy-based approach when it comes to business method and software patent law.269 While American patent law is ‘governed by the judicial mandate to grant patents to anything under the sun made by man,’ the UPC might be more careful with expanding the possibilities to broadening or widening the scope of patents..270 Nevertheless, we can learn from the Federal Circuit that small changes can have substantial influence.

Second, a recurring critique is the power of the Federal Circuit. Scholars claim that there is limited power of oversight from the Supreme Court. That said, Gugliuzza argues that for the last decade the Supreme Court has intervened in patent law cases several times.271 Certainly, the lack of supervision from the Supreme Court together with the single-court system gives the Federal Circuit a lot of power. Quillen explains that in a self-correcting structure with a court of appeal for each region, when one court makes a mistake, another court can reconsider the issue on its merits and is not obliged to follow the first court’s decision.272 In the current system, the U.S. Patent & Trademark Office, the district courts, and the International Trade commission all have to follow the decision

267 Dreyfuss 2004, p. 800. 268 Lunney 2003, p. 2. 269 Thomas 2007, p. 5. 270 Thomas 2007, p. 5 and Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980). 271 Gugliuzza 2012, p. 1441. 272 Quillen 2012, p. 24.

34 of the Federal Circuit – even if they are incorrect.273 In the system of the UPC, the Court of First Instance will be seated in Paris, London, and Munich, and might also have branches in the different EU Member States. However, there will only be one Court of Appeal in Luxembourg.274 The difference is that in the system of the UPC, the Court of First Instance is already is specialized patent court, it is presumable that fewer ‘wrong’ decisions will go to the Court of Appeal. But if the UPC Court of Appeal makes mistakes, such mistakes will need to be followed by the institutions who are relying on the decision, i.e., the Court of First Instance and the EPO. This is why it is interesting to keep up with all the developments on whether the ECJ will have jurisdiction and a controlling function. It is also interesting to mention that if there would be a Court of Appeals in all the participating countries, this situation would be comparable to the American situation before the creation of the Federal Circuit. We can learn from the American situation that this could lead to contradicting judgments (with the exception that the European Court of Appeals which would be specialized in patent law) and forum shopping. Thus it can be concluded that to create harmonization in the judgments, a single-court of appeals will be helpful. Especially at the onset, oversight from such a body will be pivotal, as to make sure the UPC does not arrogate too much power unto itself. Because the UPC is designed to work as a cohesive system it is possible that the courts will be very aware of the impact of their decision on the judicial system.

The above mentioned ‘lessons’ need to be kept in mind when looking at the implications of the Unitary patent and the UPC on software patenting in the next chapter.

273 Quillen 2012, p. 24. 274 EPO website, http://www.epo.org/law-practice/unitary/patent-court.html, last visited at June 11 2013.

35 4. Unitary patent system: implications for software patents

As the introduction of the Unitary patent will impose changes upon the European patent system, the Unitary patent will also have an influence on software patents. The effect on software patents can be divided into two categories. First, there is the application and granting of the Unitary patent which can influence the scope of the patent. This is why EPO case law is important before the granting of the patents. Secondly, there is the Unified Patent Court (UPC) that will determine the infringement procedure on software patents. The UPC is important for upholding the validity and protecting against infringement of the patent after the granting of the patent. Below, several general implications will be discussed. Second, the impact of the EPO on software patents will discussed. Third, the influence of the UPC on software patents will be discussed on the basis of a comparison with the single-court patent system of the Federal Circuit.

When looking at the implications of the changes in the patent system on software patenting, a number of things stand out. At this moment, the approach of the EPO on what kind of software is and is not patentable is not clear. First of all, there is no clear definition on software that everybody agrees on.275 It is not clear enough how technical an invention must be to be patentable. The opinion of Member States differ on this subject. By having four different kinds of patents that are granted and adjudicated in different ways, the situation regarding patenting software will become even more complex.276

One of the main reasons why, in 2005, the European parliament could not come to an agreement about a harmonized approach on software was intensive lobbying, both from parties opposed to as well as in favor of software patents.277 With the advent of the Unitary patent, no discussion about software patenting has been held. And since the EPO did not get a mandate to approach software in a different way than it has been doing up until now, it can therefore be presumed that the EPO will handle software in the same way as it has been doing in the past. However, the decisions on one single application for a Unitary patent by the EPO will now have effect in the whole territory of the Enhanced Cooperation. And, in case of litigation, the court will consist out of judges from different Member States, not only national judges. Member States will necessary have to

275 See supra section 2.3. 276 Hilty 2012, p. 2. 277 Meijboom 2003, p. 1.

36 relinquish some power as the new system will have judges from other Member States instead of only national judges, as discussed in further detail at a later point in this chapter. That said, the European patent will only offer protection in the designated states. The Unitary patent will provide protection in all Member States (except Spain and Italy). On the other hand the Unitary patent must not be over-estimated. One of the critiques was that before the Unitary patent would have this far-reaching effect, enough countries needed to ratify the UPC. This objection seems to have been resolved, though, as enough countries have signed the UPC Agreement for the Agreement to enter into force (only Poland and Spain have not signed the Agreement). Another critique is that the success of the Unitary patent will depend on whether firms apply for a Unitary patent, as they can still apply for a national patent or a European patent without unitary effect. Existing European patents will become Unitary patent. However European patent holders can opt- out for several years, which means their European patents will not fall under the UPC jurisdiction. Thus it is the attitude of patent holders and patent seekers that will ultimately determine the outcome of the Unitary patent.

An example of an EU country where the changes in the patent system will be especially noticeable to software patenting is the United Kingdom. The United Kingdom, like the EPO, does use the requirement of the ‘technical contribution’ for software to be patentable. However it is interpreted in a different way than by the EPO. 278 In the case of Aerotel v. Telco and Macrossan’s Applications the British court had decided that the ‘technical contribution’ could be decided by a structured test. Step one is to test if there is a claim construed. Step two calls for an assessment of the inventor’s contribution.279 Step three asks: is the contribution solely of excluded matter?280 And step four deals with the question whether the contribution is technical.281 The British court held that the EPO had a narrow view since it only considered wholly abstract and intangible computer programs as excludable. While, according to the British court, the EPC meant to ‘exclude real computer programs, not just an abstract series of instructions’.282 In the Duns Licensing Associates decision by the EPO’s Technical Board of Appeal (TBA), the TBA decided that the structured test was ‘irreconcilable with the European Patent Convention’.283 The United Kingdom does not represent the view that all computer programs are excludable under the EPC but it does continue to use the structured test.284 With the introduction of the Unitary patent the EPO will grant the patent, thus making the approach of the EPO

278 Patel 2013, p. 6. 279 Aerotel v. Telco & Macrossan’s Applications, [2006] EWCA (Civ) 1371 [63]. 280 Aerotel v. Telco & Macrossan’s Applications, [2006] EWCA (Civ) 1371 [64]. 281 Aerotel v. Telco & Macrossan’s Applications, [2006] EWCA (Civ) 1371 [65]. 282 Aerotel v. Telco & Macrossan’s Applications, [2006] EWCA (Civ) 1371 [31]. 283 EPO Technical Board of Appeal 0154/04, Duns Licensing Assoc., 2008/02 Official Journal of the EPO 46, 71 (Nov. 15, 2006). 284 Patel 2013, p.7.

37 decisive. That said, before the introduction of the Unitary patent, the EPO already did grant European patents, and in the case of software patents, it followed the aforementioned argumentation. Similarly, even though the United Kingdom was not able to influence the view of the EPO on patenting software when granting the patent, it still had its own system. Under the Unitary Patent, then, the difference is that the national court will not be competent to judge in infringement and validity cases when it comes to the Unitary patent and the European patent subject to the UPC Agreement. Therefore an aberrant view such as the United Kingdom held will not be possible to maintain in the case of the Unitary patent and the European patent subject to the UPC Agreement. If it involves a European Patent which is not subject to the UPC Agreement, the national court of the Member State will still be competent to judge. In that situation the national court would still have some influence on how to interpret the EPC and the European patent not subject to the UPC Agreement.

4.2 The possible scenario’s regarding the scope of the software patent

With the new patent system, several scenarios are possible when it comes to software patenting. The Unitary patent is governed by a combination of international rules of the EPC and UPC Agreement, EU law and national law.285 However, as we have seen in the previous chapters, the interpretation of the EPC regarding software patenting, is subject to change. These changes occur because of the interpretation of the EPC in new situations by the EPO Technical Board of Appeal. Innovation also has an influence on the EPO, as new developments in the field might create the need for an adjustment in the view of the EPO to be able to grant patents to these inventions. If the EPO adjusts its view on how to interpret patent software, this could have big consequences for the scope of software patenting. Three possible scenarios will be discussed in detail. There is the scenario that the EPO will widen the possibilities on patenting software. The second scenario is that the EPO will narrow the possibilities of software patenting. And the third scenario is that the EPO will patent software the same way they are doing now. The approach of the EPO will be important for the validity of the patent before the grant.

First, there is the possibility that the EPO will widen the scope of software patenting. This is a scenario that is feared by software patent critics. is a software patent critic who is a founder of the Foundation (FSF). His biggest objection on software patenting is that the source code is being patented. When

285 Ullrich 2013, p. 19.

38 developing new software, many patents can be infringed because of the use of necessary, patented source codes.286 Stallman is worried that the Unitary patent could mean unlimited software patents.287 His first concern is the power of the EPO regarding the granting of software patents. Appeals against the EPO’s decisions would be based on the EPO’s own rules. Stallman concludes that the EPO could ‘tie European business and computer users in knots to its heart’s content’.288 Before, the national courts of the Member States were able to rule on the validity of the patent. Yet, in the new system, Stallman is concerned that the EPO has unchecked power to decide on software patents.289 Stallman recognizes that the ECJ might be able to fulfill this task, but nevertheless says that it is not yet clear how the EPC relates to the ECJ.290 However, Stallman does not mention the influence of the UPC. Even though the national court is not entitled to rule in these cases, the UPC can still look critically at the patents granted by the EPO, the UPC can still test the scope of a patent according to the limitations mentioned in article 27 and 32 of the UPC Agreement.291 That said, at the writing of this, it is not yet clear if the ECJ will function as a higher court, after the UPC. This will become clear once case law on this matter becomes available. The jurisdiction of the ECJ might have a different influence on patent cases. And while the UPC will consist of specialized patent judges, when the ECJ convenes there will not necessarily be patent judges present. Thus the ECJ might take the internal market into consideration, as this has always been an important topic for the ECJ. Furthermore, the ECJ might look at the cases with a whole different view than the EPO and the UPC, creating an extra dimension in the field of patent litigation.

An organization that has a whole different view on software patents as opposed to the FSF is the Software Alliance (BSA). This organization tries to promote innovation by lobbying for strong software protection, as well as fight piracy by creating awareness.292 Providing strong protection for software is in their eyes necessary to stimulate innovation

286 Richard Stallman, Patent Absurdity, THE GUARDIAN, June 20, 2005. 287 Richard Stallman, Beware: Europe’s ‘Unitary Patent’ Could Mean Unlimited Software Patents, THE GUARDIAN, Aug. 22, 2011. 288 Richard Stallman, Beware: Europe’s ‘Unitary Patent’ Could Mean Unlimited Software Patents, THE GUARDIAN, Aug. 22, 2011. 289 Richard Stallman, Beware: Europe’s ‘Unitary Patent’ Could Mean Unlimited Software Patents, THE GUARDIAN, Aug. 22, 2011. 290 Richard Stallman, Beware: Europe’s ‘Unitary Patent’ Could Mean Unlimited Software Patents, THE GUARDIAN, Aug. 22, 2011. 291 Council of the EU, Agreement on a Unified Patent Court, Doc. 16351/12, January 11, 2013, Art. 27 and 32. 292 BSA The Software Alliance website, http://ww2.bsa.org/country/BSA%20and%20Members.aspx, last visited at June 11 2013.

39 and benefit the economy. The BSA argues that the patent system should continuously be improved to prevent abuse.293

The above arguments notwithstanding, a firm’s patent strategy has tremendous influence on the software industry. For example, patent wars and escalated litigation shape the global competitive landscape.294 The earlier mentioned patent trolls can block innovation, as these strategies are undesirable insofar as their goal is not to protect intellectual property, but rather to block the competition as much as possible. In the Unitary patent system, these strategies can be applied on a larger scale and the consequences will accordingly be much bigger. This is significant because competition and innovation cannot be blocked on such a large scale as previous to the Unitary patent.

An important counter-movement against software patenting is ‘open source’ software. Open source software provides the source code to the public. It is not about the software being free, but software where users have freedom to use/change/redistribute the software as they wish.295 Pro open source minded individuals and firms see software patents as a big threat to individual open source developers and small organizations. The fear is that such firms will not be able to afford patent litigation and therefore cannot object to others patenting their inventions.296 They are also worried that software patents will be used to obstruct competitors.297 Such advocates of open source believe that open source software will create faster innovation since everybody can make improvements to available software.298 A difficulty in publishing the source code is the fear that others might have a patent that will apply to the published source code and thus the patent holder will start an infringement procedure.299 Therefore if the scope of software patents becomes wider, this kind of infringement would happen faster and more often, making it more difficult to publish the source code and produce open source software.

In the end, software patenting requires due considerations. Patenting software can block the development of open source software. However this is one of the characteristics of patenting, it creates a monopoly. Patenting software automatically means that others are limited in their possibilities to use that software, this is also the case when developing open source software.

293 Adobe and BSA urge Congress to support software innovation by improving patent quality and curbing opportunistic litigation, March 14, 2013, available at http://www.adobe.com/aboutadobe/pressroom/pressreleases/201303/031413AdobeBSACongressionalT estimony.html, last visited at June 11 2013. 294 Paik 2013, p. 3. 295 Working group on libre software, p. 7. 296 Working group on libre software, p. 21. 297 Working group on libre software, p. 21. 298 Working group on libre software, p. 21. 299 Valgaeren 2004, p.3.

40 There is also the scenario that the EPO will limit the scope of software patenting. The EPO could limit or even exclude the possibility to patent software. Stallman states that it would be good if the system would reject software patents.300 Even if the EPO agreed with Stallman, there would still be the national patent available for software.

Thus limiting or excluding software from the Unitary patent will not solve anything, as there are still other types of patents which can be used to patent software. Furthermore, do so could lead to increased market fragmentation. And, importantly, abolishing software patents could affect our EU economy on a worldwide level compared to the United States and Japan that will continue to grant patents. As we have seen the EPO is currently granting software patents. Therefore it is not likely that the EPO will stop patenting software. If they would do so, this would lead to the strange situation were existing patent on software would still be valid and could even get unitary effect because of the transition period, whereas new applications for Unitary patents on software would be denied. This would make the patent system very unequal.

The last scenario is that the EPO will retain its current position on the patentability of software. Meaning that they will grant the Unitary patent in the same way they have been granting the European patent when it comes to software. With the introduction of the Unitary patent no new discussion on software patents has been started. The Regulation on the Unitary patent and the UPC Agreement do not mention any specific provisions regarding software patenting. The EPO has not been given a mandate or an assignment to treat application for software patents differently than they have been doing up until now. However, as we have seen in Chapter Two, small changes in the approach of the EPO are possible. Having one small change at the time, after a while all these small changes together can lead to a significant change in the approach of the EPO. Especially the EPO Technical Board of Appeal is capable of determining the approach on software patenting when delivering decision.

It is therefore likely that the EPO will use their current approach for application for the Unitary patent. However, as we have seen in Chapter Two, over the years the EPO did change their approach on how to patent software. An approach that is often subject to changes is not a solid basis for the Unitary patent. Also it must be mentioned that technology, and therefore the field of software, is a field that is changing rapidly. One can wonder whether the definition on software in the future will be subject to constant changes which will make it difficult for the EPO to keep their approach up to date and transparent.

300 Richard Stallman, Beware: Europe’s ‘Unitary Patent’ Could Mean Unlimited Software Patents, THE GUARDIAN, Aug. 22, 2011.

41 To conclude, when granting the Unitary patent the EPO has an influence on the scope of the patent and several scenarios are possible. If the scope of software patents is limited or broadened, there will be an immense influence on the software industry. Currently there is no indication that the EPO would change its current approach on software. A transparent approach is important for the legal certainty of the patent system. It is likely that the approach of the EPO will stay the same. However, the current approach of the EPO is already a compromise between the EPC stating that software ‘as such’ is not patentable and the need of software protection by the industry. The attempt in 2005 to create proper legislation on software patenting did not end in new legislation; instead it only showed the difference between the groups in favor and against strong protection of software. With the introduction of the Unitary patent, there has thus far been no discussion on how to treat software. The current ‘compromised’ approach will be applied when granting a Unitary patent, therefore there will be a harmonized approach when it comes to patenting software using a Unitary patent.

4.3 The implications on software patents regarding the judicial system

As discussed before, several patents will be available for patent seekers. That said, in cases of infringement disputes regarding the validity and infringement of the aforementioned four types of patents, jurisdiction belongs to different courts. The different courts that will be competent to rule on the validity and infringement of patents in Europe are the following:

1. The UPC in respect of infringement and validity of European and Unitary patents for those Member States which have ratified the UPC Agreement.

2. The ECJ in respect of preliminary references from the UPC regarding infringements of Unitary patents.301

3. National courts of EU Member States not ratifying the UPC Agreement or not participating in enhances cooperation and those of all non-EU EPO contracting States regarding infringements and validity of national and European patents.

4. The EPO’s Boards of Appeal in administrative appeals for European patents.

5. National courts or administrative bodies in proceedings regarding nationally granted patents.302

301 As mentioned in §4.2, it is still unclear whether the ECJ will have jurisdiction over the UPC.

42 To summarize, national patents will be adjudicated by the national court of the relevant Member State. This is also the case for European patent not subject to unitary effect. Unitary patents will be adjudicated by the UPC if the relevant Member State has ratified the UPC Agreement. The ECJ might also have jurisdiction regarding the Unitary patent. Because there are different courts ruling over the different patents, it is not unlikely that these courts will produces conflicting verdicts regarding software patents.

As we have seen in this chapter, it is likely that the EPO, when the Unitary patent becomes available, will continue to treat software patenting in the same way they have been doing. This means that the Unitary patent will be available for software. When looking at the goals of the Unitary patent: ‘Unitary patent protection will foster scientific and technological advances and the functioning of the internal market by making access to the patent system easier, less costly and legally secure’.303 One can wonder if these goals are reached when it comes to software patenting. It can be concluded that the application for a Unitary patent on software will be less costly and easier than applying for many national patents. Only one application is needed and the language regime is less demanding. Because of the centralized granting of the patent, it will be easier to have an up-to-date database on software patents. The UPC will provide clear case law. However, because of the unclear definition on software and the availability of other patents which are litigated in different courts, the Unitary patent might not bring the harmonized and legally secure approach for software that the Unitary patent was looking for. In order to get a harmonized approach on software it would be helpful to create a directive on software patenting. Even though in the past this has not been an option because of the different opinions, just continuing patenting software in an obscure way when the Unitary patent will take effect will not improve the situation. The only way the situation on software patenting will improve greatly is when patent seekers, in great numbers, will decide to use the Unitary patent and let go of the other options to patent.

4.4 The knowledge acquired from the Federal Circuit

The experiences of the impact of the Federal Circuit as a single-court system for patent cases is useful to predict the implications of the UPC on software patenting. First, it is important to mention that no research on the Federal Circuit was found that was linked to software patents. Therefore the comparison is not a perfect analogue. That said, it is still a valid tool for comparison from which to proceed. Starting with the impact of

302 Hilty 2012, p. 2. 303 Regulation 1257/2012, Official Journal of the European union, L 361/1, p. 1.

43 the Federal Circuit on the scope of patents: in the literature on the Federal Circuit it becomes clear that patents are more often valid but less often infringed.304 If the UPC would follow this example such developments would greatly impact the scope of software patenting. Thus if software patents were held valid more often, the scope of the patents would naturally broaden. However, when this patent would not lead to infringement, the scope of the patent is narrowed. If software patents are upheld to be valid, this could have an effect on the software industry. If a company or even a has software patents, and competitors know that they will be upheld in court, they might adjust the strategic decision of their business.305 For example, a business could shift its business to a weak IP market to avoid the cost and uncertainty that are part of patent wars.306 This would remain so even if the business were not directly involved in any patent litigation.307 Furthermore, the Federal Circuit is criticized for not taking the economic impact into account since the court does not have many cases in the field of antitrust and .308 This could be a pitfall for the UPC since it only takes on Patent law cases, which could have an impact on software patents since: ‘If the court fails to appreciate competition law as a tool for encouraging invention, there is a danger that it will act as though the nation’s commitment to technological progress requires greater emphasis on patents, leading it more often to hold patents valid and infringed. Furthermore, antitrust cases have historically proven to be an important avenue for the introduction of economics into decisionmaking’.309 This could be a pitfall for the UPC since this court will only take on patent law cases, making them focus on strong patent protection without focusing on the economic impact on innovation.

However, the changes regarding the scope of patents created by the Federal Circuit do not necessarily occur in the same way as the UPC. What we can see is that the Federal Circuit did change the interpretation on patents, and this could also happen because of the interpretations of the UPC. The reason why the interpretation by the Federal Circuit is important is because of the power it has arrogated, mainly because of the lack of supervision from the Supreme Court.310 Note that the last decade this slowly has been changing.311 The ‘wrong’ decision from the Federal Circuit need to be followed.312 If the UPC Court of Appeal is not supervised by the ECJ, erroneous decisions on the interpretation of software need to be followed by the UPC Court of First

304 Lunney 2003, p. 2 and Henry 2006, p. 114. 305 Paik 2013, p. 7 and Jaffe 2000, p. 549. 306 Paik 2013, p. 7. 307 Paik 2013, p. 3. 308 Gugliuzza 2012, p. 1465. 309 Dreyfuss 2004, p. 788. 310 Adelman 1987, p. 987. 311 Gugliuzza 2012, p. 1441. 312 Quillen 2012, p. 26.

44 Instance and the EPO. Because the EU has not been able to agree on the interpretation of the EPC on software patents (there is no regulation/directive on how to patent software), it is not implausible that the UPC Court of Appeal produces a ‘wrong’ decision. In the end this is something that is plausible while having one court of Appeal, the Federal Circuit did show that it did bring harmonization into patent law.

In the end the UPC can bring harmonization into the practice of patenting software. The power of the UPC should be watched closely in terms of making big changes into the practice of software patenting that will be binding for the UPC Court of First Instance and the EPO. Time will tell if the system is designed better to avoid the mentioned pitfalls.

45 5. Conclusion

The goal of this thesis was to research the implications of the introduction of the Regulation on implementing enhanced cooperation in the area of the creation of Unitary patent protection, as well as the effect of the Unified Patent Court Agreement on software patenting. By researching the different treaties, conventions and literature, the following question was sought to be answered: “The implications of the Unitary Patent system on software patenting: a shortcut to harmonization of software patents?”. Researching the international framework for patenting software showed that in the past there have been attempts to harmonize the patenting of software in the Member States of the European Union. The difficulties that have prevented the European legislator from creating this kind of software patent law were the disagreement on the definition of software, the discussion on whether software should be patented at all, and, finally, the strong lobby from parties both for and against software patents. The introduction of the Unitary patent, a patent that is valid in all EU Member States that are part of the enhanced cooperation, has changed the situation on patent law, and will harmonize patenting software to a great extent.

The new patent system can be divided into two parts. First, there is the introduction of the Unitary patent. This is implemented with a regulation and has therefore direct effect in the participating EU Member States. Note that Spain will not be part of the enhanced cooperation. The second part is the introduction of the UPC Agreement. The new patent system does not mention anything specifically related to software patenting. What the implications for software will be, will depend on the approach of the EPO when granting the Unitary patent. The EPO is granting the European patents in accordance with the EPC, which stated that patenting software ‘as such’ is not possible. For software to be patentable, the current approach of the EPO is that is must have a ‘further technical effect’. The approach of the EPO on how to patent software has been subject to change, because of case law of the EPO Technical Board of Appeal and new developments in technology.

When granting the Unitary patent, the EPO could decide to limit, broaden or maintain the current scope of software patents. These three options will each have a different effect on software patents. However, a special approach for software patents is not mentioned in the regulation on the Unitary patent. Also, the European Parliament did not decide to change the approach on software patents. Therefore it is very likely that the approach by the EPO will remain the same when granting the Unitary patent. This does not change the fact that small adjustments in the approach by the EPO are possible and

46 might even be necessary after rulings of the UPC. These adjustments might also be necessary to respond to new developments in the field of software. The fact that the approach on software of the EPO has changed frequently and might still change in the future, will likely have an adverse effect on the legal certainty of software patents. When firms have invented software they might not know what the scope of protection by patens is. Or when the scope of protection is too broad, firms can block follow-on innovation while they have no right to do so. Patent strategies that only have the goal to obstruct the competition or patent trolls are more effective in the Unitary patent system as these strategies will have effect on a large scale. The Unitary patent is therefore sensitive to abuse.

The introduction of the UPC has several positive points for software. Patent litigation will be less costly and the UPC will provide clear case law. This will benefit software patents in general, as contradicting case law will be reduced. Also, forum shopping will be prevented. However, there is still the national court that decides on the national patent and the European patent not subject to the UPC Agreement. If it turns out that the UPC, for example, judges in a stricter way and this is not what the patent holder is looking for, patent holders might not want to apply for a Unitary patent, since the European patent without unitary effect and the national patent will exist alongside. The fact that the Unitary patent will not be the only patent in some ways undermines the new system. Firms can explore which patent provides the strongest protection (a national or a Unitary patent) for their software and which court, that is linked to the patent, is most likely to uphold this protection.

This thesis has also researched the implications of the U.S. Court of Appeals for the Federal Circuit and how these findings could relate to the UPCs implications on software patents. This showed that the Federal Circuit has made significant changes to the scope of patents. These changes are important for the strategies of companies and thus shape the market. The nature of the changes is not directly comparable with the UPC since the American Patent Act and the EPC show significant diversions when it comes to the idea of what should be patentable. However, we can conclude that if the UPC changes the approach on software patents, it could spell huge ramifications on the software patent industry. The big influence of the Federal Circuit occurs from the power it has arrogated because of the lack of supervision from the Supreme Court. This creates a situation wherein decisions of the Federal Circuit have to be followed by lower courts and PTO among others. Hence even erroneous decisions must be followed in this system. If the UPC will be able to arrogate the same kind of power, this could determine the approach on software patent. Since the European Parliament was never able to agree on a harmonized approach on software and the approach has been often subject to change, erroneous decisions from the UPC Board of Appeal are plausible need to be followed by

47 the UPC Court of First Instance and the EPO. This is one of the reasons why it will be interesting to see whether the ECJ will have jurisdiction of the cases from the UPC.

Another critique on Federal Circuit that is important for software, is that the Federal Circuit has no cases on completion law and antitrust law. This effect is that the court focuses too much on the importance of patents, leaving out the importance of competition and economics for innovation. Since the UPC only takes on patent law cases, the court should be careful not to focus too much on strong patent protection but also the economic impact on innovation.

Since the Unitary patent is not yet being granted, there are many possible areas for future research. For example the jurisdiction of the ECJ regarding the Unitary patent and the popularity of the Unitary patent with firms versus other patents. It would also be very interesting to make a more profound analyses on the agreements and differences between the UPC and the Federal Circuit.

To conclude, the Unitary patent system can provide a harmonized approach on software patenting. However, the current approach on software patents, that is likely to be used when granting the Unitary patent, is not a solid approach that provides legal certainty. This approach is not thoroughly discussed up front. So, to answer the research question: the introduction of the Unitary patent is a shortcut to harmonizing software patents without dealing with the difficult discussion on if software should be patented and to what extent.

48 Annex I

Various patent strategies in technology space313:

313 Grandstrand 1999, p. 220.

49 Annex II

Unitary ratification process.314

Member State Participation in the Signature of the Ratification of the enhanced cooperation on the Agreement on a Unified Agreement on a Unified unitary patent protection Patent Court Patent Court

Austria 19.02.2013

Belgium 19.02.2013

Bulgaria 05.03.2013

Czech Republic 19.02.2013

Cyprus 19.02.2013

Germany 19.02.2013

Denmark 19.02.2013

Estonia 19.02.2013

Greece 19.02.2013

Finland 19.02.2013

France 19.02.2013

Hungary 19.02.2013

Ireland 19.02.2013

Italy 19.02.2013

Latvia 19.02.2013

Lithuania 19.02.2013

Luxembourg 19.02.2013

Malta 19.02.2013

The Netherlands 19.02.2013

Poland

Portugal 19.02.2013

Romania 19.02.2013

314 European Commission, Unitary patent – Ratification process, June 5 2013, available at http://ec.europa.eu/internal_market/indprop/patent/ratification/, last visited at June 11 2013.

50 Slovakia 19.02.2013

Slovenia 19.02.2013

Spain

Sweden 19.02.2013

United Kingdom 19.02.2013

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