Publications
European IP Bulletin, Issue 36, November 2006 - Hot Topics
1. English Court of Appeal Clarifies Position in Respect of Computer Programs and Business Methods
Dr Justin Hill is Head of IP Prosecution in the London office of McDermott Will & Emery and would be pleased to receive questions by email (juhill@europe.mwe.com)
On 27 October 2006, the English Court of Appeal handed down an important and timely decision clarifying its position as to the patentability of computer programs and business methods. In fact, this judgment consolidated issues arising in two first instance decisions: (i) Aerotel Ltd. v Telco Holdings (and two others); (ii) and Macrossan’s Application, Case Nos. A3/2006/1007 and A3/2006/1067, respectively (heard on 3 and 4th August 2006 by Lord Justice Chadwick, Lord Justice Jacob and Lord Justice Neuberger).
Both decisions appealed concerned the validity of claims directed to so called excluded matter, which includes, among other things, computer programs, methods of doing business and methods of performing mental acts. The Aerotel appeal arose from a patent action in which Aerotel sued Telco for infringement of its patent. Telco counterclaimed for revocation of the patent, alleging the claim related to excluded types of subject matter and was therefore invalid and unenforceable. The patent related to a method and apparatus for providing telecoms services via a special exchange which holds credits for individual customers and only connects calls where a code input by a caller is checked to indicate there is sufficient credit to make the call.
On the other hand, the Macrossan application under appeal related to a patent application rejected by the comptroller, and subsequently also rejected on first appeal to the High Court. The patent application related to an interactive (internet-based) computer system capable of generating the documents required to incorporate a business.
The Court of Appeal set out a four step test which it said clarified similar approaches from the same Court in a earlier decisions. The test is to: (i) properly construe the claim; (ii) identify what the contribution of the invention is; (ii) ask whether it falls solely within one of the types of excluded matter; and (iv) check the contribution is technical in nature.
In applying the test it concluded both Aerotel’s apparatus and method claims to the telephone call system were something more than a business method, as such, and were therefore allowable. Hence, the appeal was allowed. In applying the test to Macrossan’s computerised document generation, the Court found that the method claims were flawed on two counts; they were to an excluded business method and also to an excluded computer program as such.
This case has to some extent clarified the position in the UK. In particular, it has established that the English Court of Appeal continues to recognise a valuable level of protection for computer implemented inventions in which significant function is implemented in software; although, from this decision, we can see that the English Courts apply a slightly different test from that used by the European Patent Office (EPO) Boards of Appeals when making similar assessments. At the same time, and in the interests of longer term harmonisation, the Court of Appeal formulated certain questions which might be put to the EPO’s Enlarged Board of Appeal on how to deal with such matters. Interestingly, the German BGH Court, in Jesco Schwarzer, 28 Sept 2004, Case No. 17W Pat 31/03, has also recently declined to follow aspects of the most recent EPO case law in this field.
2. YouTube Dare to Share
YouTube, founded in February, 2005, as a venture capital firm, calls itself a consumer media company allowing users “to watch and share original videos worldwide” and “to broadcast their videos publicly or share them privately with friends and family upon upload”. YouTube describes itself as ‘building a community that is highly motivated to watch and share videos’. The company is primarily based on the advertisement revenue business model.
The site is neither technically nor conceptually unique, as it is based on Web 2.0 (user generated content) and similar ideas have been previously tried by GoogleVideo, Yahoo, MySpace, MSN video and other such sites. However, YouTube reportedly has up to 72 million hits a month, with 100 million videos watched and 65,000 videos being uploaded daily, overtaking other web networking sites like, MySpace, in terms of the online video market in the US.
Apart from sharing home made videos, the site was also being used for the sharing of copyrighted materials which prompted speculation that the site would be sued out of business by large entertainment houses whose materials were being shared in line with previous cases like Napster and Grokster, particularly after the acquisition of YouTube by Google in October 2006.
Potential arguments in favour of YouTube are that it is within the “safe harbour” provisions of section 512(c) of the US Digital Millennium Copyright Act 1998. Essentially these provisions offer protection to online service providers from infringement liability resulting from copyright materials transmitted or posted by users, provided that the provider reacts promptly to notices of infringement and removes or prevents access to the relevant copyright materials and also fulfils certain conditions. To qualify for safe harbour protection the provider: (i) must not have actual knowledge that the material is infringing, must not be aware of facts or circumstances from which infringing activity is apparent, or upon gaining such knowledge or awareness, respond expeditiously to take the material down or block access to it; (ii) must be unaware of the facts or circumstances from which infringing activity is apparent; (iii) must expeditiously remove or block access to the infringing material upon being notified of the infringing material; (iv) if the provider has the right and ability to control the infringing activity, must not receive any financial benefit directly attributable to the infringing activity; and (v) must designate an agent to deal with infringement notices by filing an appropriate notice with the US Copyright Office and publicly display the information sent to the US Copyright Office on a website.
Unlike in the Grokster case last year (MGM v Grokster), in which the US Supreme court held that Grokster promoted the infringing use of copyrighted materials, YouTube provides guidelines to its users which discourages uploading of copyright infringing materials. Moreover, unlike the Napster case (A&M Records v Napster), where the 9th Circuit Court of Appeals held that Napster did nothing to prevent the use of infringing materials, YouTube will remove infringing, copyrighted materials upon being notified of the same. Further, technologically, YouTube allows only streaming of videos and not downloads and is thus different from the peer to peer file sharing technologies.
YouTube has made significant commercial gain through the advertisements on the site, which may prejudice YouTube’s claim to be merely an online service provider that falls within the safe harbour provisions. This may also depend on whether the users abide by the notice posted on the site, and refrain from infringing copyright materials of third parties. The onus of policing would fall on the copyright owners who might find this task of notifying YouTube every time a infringing material is uploaded, a burden on their resources. Therefore, there could be an argument for suggesting, as in Grokster where the safe harbour defence was set aside, that YouTube could be held to be liable for contributory infringement by inducing infringement.
A significant move has been the deal struck between certain of the large entertainment houses such as the Universal Music Group, Sony BMG, Warner Music, NBC and CBS Corp. with YouTube, which allows it to distribute approved copyrighted material in exchange for a share in revenue. This is indicative of the changing business strategies by content owners in their distribution and promotion patterns which may see them increasingly working with the changing technologies rather than in opposition.
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