This piece has been authored by Siddharth Addy, LLM Student at IIT Kharagpur
- Introduction
The concept of algorithms is not defined per se in any legal statutory text, though in an attempt to explain the same we refer to the definition, adopted by the Hon’ble Supreme Court of the United States of America which states that, “An Algorithm is an unambiguous, ordered sequence of steps that leads to the solution of a given problem.”[1] Coming to the Indian market we note that India has the second largest ecosystem of Software as Service (“SaaS”) companies generating revenue of USD 12 – USD 13 billion in the financial year of 2022 and an inflow of Foreign Direct Investment (“FDI”) into the economy of USD 5 Billion over the last five financial year.[2] In the presence of such a multi-billion dollar industry and expanding technological advancement in the ecosystem, all the companies be they startups, big techs, MSMEs, or small-scale businesses are in the race to protect their products and process Vide Intellectual Property Law (“IPR”) but sadly India lacks any proper legislation or provision on patenting algorithms. Majorly all SaaS companies develop products based on algorithms that resolve unique issues, a classic example could be, the Luhn algorithm[3], also known as the modulus ten (‘10’) or mod ten (‘10’) algorithm, which is a simple checksum formula used to validate a variety of identification numbers, such as credit card numbers, IMEI numbers, Social Insurance Numbers.
In the Indian market ecosystem, the government is taking measures and creating policies to enhance the inflow of FDI in the country and taking a leap to make India a global hub for technology-driven startups. However, a great hindrance to the due process is the express bar of Section 3(k) of the Patent Act, 1970 which expressly bars patenting of algorithms, to draw a nexus we also refer to the guidelines for examination of the computer-related invention which “specifies that algorithms in all forms including but not limited to, a set of rules or procedures or any sequence of steps or any method expressed by way of a finite list of defined instructions, whether for solving a problem or otherwise, and whether employing a logical, arithmetical or computational method, recursive or otherwise, are excluded from patentability.”[4]
Deciphering the above statement, it prima facie indicates the presence of a trade barrier for entry of technology-driven companies who have incentivized their business model based on algorithms (assuming the company has entered into the market with a profit motive), drawing a tangent. Whether the same result in Appreciable Adverse Effect (“AAE”) in the market remains unanswered. However, In the absence of patent protection, it is amply clear that the inventors would not be able to effectively monetize their invention thereby either they would exit the market or not enter the market at all creating a quagmire effect in nexus with the present policies aimed towards making India a global business hub.
To draw a nexus further, we refer to the judgment pronounced by the Hon’ble Delhi High Court whereby the Hon’ble Judge Justice Prathiba M. Singh, J stated that “Many inventions in emerging technologies including by SMEs, start-ups and educational institutions can be in the field of business methods or application of computing and digital technologies, therefore, there is a need to reconsider the exclusions in Section 3(k) of the Patents Act, 1970, in view of the growing innovations.” [5]
Over the next part of this article, we will draw a comparative analysis of the scope of protection which extends to algorithms and the need for the insertion of algorithms under the purview of the Patent Act, of 1970 further we will analyze the present challenges, draw a nexus from the 161st parliament committee report and formulate potential recommendations which may be adopted to overcome the issue at hand.
- Patenting Algorithms > Other IPR protection
The present legislative scheme states that algorithms cannot be patented[6], thereby lawyers and strategists tend to strategize their IP vertices based on the business goal of the organization, the most common and first line of defence is copyrighting the algorithm[7], but there are various barriers to the same, which I intend to decipher in this article firstly, the scope of copyright work is limited to the expression of an idea and not the idea itself, this means that unless the algorithm is expressed in a computer programming language vide an interface the same is not copyrightable as the scope of copyright does not include ideas, methods, process, system, concept, principle, and discovery; secondly, only the natural person’s expression of an idea can be copyrighted but not the invention of generative AI thereby further narrowing down the scope of copyrighting algorithms, finally, The inventors are not inclined generally to copyright their invention as they do not want to publish the algorithm and just want the functionality of algorithm widely available in the market.
The next line of defence for algorithms is Trade secrets, this is one of the most used modes of protection after copyright because, there are no complex requirements i.e., specifications, etc., unlike copyrights, however, the problem with trade secrets is that the profit derives from secrecy, the difficulty with the same is that small startups/MSMEs have to incur a large amount of financial obligation[8] to maintain the secrecy, which is not possible generally for small startups at pre-seed stage.
The above two mechanisms have not proved to be effective so far in protecting the algorithm, this in turn is creating a myriad of dissatisfaction for the inventors who are unable to incentivize their invention effectively, this would create a negative effect in the mind of the inventors thereby discouraging them to enter the Indian market, this would, in turn, create a lower inflow of FDI in the Indian economy.
On the other hand patent protection (otherwise barred) could be a far better means of protection compared to copyrights and trade secrets this is because the inventors would be able to monopolise their rights over their invention and maintain exclusivity and at the same time derive profit out of it thereby based on the above observations it is safe to conclude that the patent protection proposed is more suitable than copyright protection and trade secrets especially when dealing with complex AI and algorithms. The inherent technical characteristics of artificial intelligence (AI) and algorithms may not be fully compatible with the principles of copyright protection or safeguarding trade secrets. According to experts, patent protection is considered the most efficacious measure for safeguarding algorithms. In order to accomplish this objective, it is imperative to broaden the scope of patent protection to encompass algorithms, algorithmic models, and their distinctive datasets. This methodology would bolster the protection of algorithms while concurrently fostering transparency and accountability in their application[1] .
- Challenges in Patenting Algorithms
Over this part of the article, we will dwell upon various challenges that one will face in patenting algorithms in India.
3.1 Express Bar for Patenting Algorithms: –
Under section 3(k) of the Patent Act, 1970 there is an express bar to patent algorithms, read with the examination manual for computer-related invention (“CRI”) it is amply clear that there is little to no protection under the patent law to protect algorithms. [9]
3.2 Conundrum of “Per Se”: –
Application of Per Se under section 3(k) of the Patent Act, 1970 creates a conundrum effect in the minds of the inventors as we know that we shall give effect to every part of the legislation, however, there is a catena of cases where the Hon’ble judges have stated that the word per se does not mean to reject the claim of the invention all together rather, it states that a computer program vide algorithm may be patentable if it has a component of technical effect to it, but yet the scope of technical effect has not been formally documented by the legislation. [10]
3.3 Abstract and Broad Nature of Algorithms: –
Another major issue in patenting algorithms is their abstract nature, which makes them unpredictable even after having all the enablement qualities in it. Further, presently the patent law suffers a lacuna as the law is not clear in interpreting the scope of the algorithm and making it more specific, to extend the part of it that could be patentable.
3.4 Rigidity: –
The Patent Act, of 1970 is an objective-based act and clearly demarcates the exclusion of algorithms under Section 3(k) of the Patent Act, of 1970 leaving little to no room for interpreting the law.
Conclusion & Suggestions
The judicial landscape of India is expanding, it is recognizing the rights of the inventors and is actively advocating the inclusion of patent protection in algorithms, which promises technical advancement and reduces the categorical quagmire that is persisting currently in the Indian market ecosystem. We refer to the matter of Ericsson vs. Intex[11]whereby the court held that the bar of Section 3(k) of the Patent Act, 1970 does not apply to the algorithm when the same is attached to a hardware component, element, etc. The court further elaborates in the landmark matter of FeridAllani[12] statingthat in the modern-day digital world, most of the inventions are based on computer programs, it would make no sense to state that such inventions are not patentable, the Hon’ble Court held that the computer programs/algorithms worthy of technical effect shall be patentable in nature. Similarly in the matter of open TVC[13] Inc, the court gave an obiter that there needs to be a revisitation to the old patent legislation as the current legislation poses difficulty for MSMEs, startups, etc, Inter Alia, we note that an invention having algorithms/computer program per se, does not make the claim fall under the bracket of Section 3(k) of the Patent Act, rather the main operation on which a patent examination shall be done is whether the said invention is creating a technical advancement. We should treat algorithms as any other patentable invention and not treat them differently.
Patenting of the algorithm will be a boon for the Indian market ecosystem, this would encourage inventors to come up with unique inventions that would positively impact our Indian economy i.e., better infrastructure, enhanced employment opportunities, and enhanced financial stability in the Indian economy. However, we note that the present landscape for patent legislation in India is rigid when it comes to patenting algorithms thus, I intend to suggest certain solutions which may be adopted to overcome the crises at hand.
4.1 Revisit the Patent Legislation & Exclude Algorithms from Section 3(k) of the Patent Act, 1970
We refer to the observations of the 161st Joint Committee report “Review of Intellectual Rights regime in India” coupled with observations made in this article, it is noted that the exclusion of patenting of algorithms and further exclusion of creation of algorithms by generative AI is creating a negative effect in the modern-day digital economy, thus the legislature needs to revisit the Patent Act, 1970 to exclude algorithms and add it under the patentable subject matter.
4.2 Adopt set cases to compete in Global Market
Mathematical methods linked with algorithms that involve the use of technical means or a computer interface which creates technical advancement make it a process that is protected as a patent in developed countries like the EU and USA.
4.3. Convert algorithms to a process that would contribute to technical advancement making it easier to protect as a patent[2] .
The algorithms per se cannot be patented however converting it into software output having technical effects could easily be patented.
4.4 Inclusion of AI-generated algorithms under the Patent Act, 1970[3] [4] .
AI-generated Algorithms lacking technological application or industrial utility are not deemed eligible for patent protection. Nevertheless, in the event that an artificial intelligence algorithm or software exhibits notable progress in terms of technical capabilities and practical utility within industries, it may meet the criteria for patent eligibility. It thus should be included within the Patent Act, of 1970.
4.5. Add “Technical effect” as a separate enablement requirement for Algorithms and Computer Related Inventions (CRI) The concept of technical effect shall be properly laid down in the legislation. Currently, there are many definitions given by various judicial pronouncements but the most relevant one is mentioned in the Computer Related Invention Guidelines of 2013 which defines technical effect as “Make things faster: quicker hard-disk access, smarter memory use, better database searches, efficient data compression, user-friendly interface, precise robotic arm control, enhanced radio signal transmission.”
[1]Diamond v. Diehr, 450 U.S. 175, 186 n.9, 101 S. Ct. 1048, 1056 n.9, 209 U.S.P.Q. 1,8 n.9 (1981).
[2]India becomes the second-largest SaaS ecosystem globally, Business Today, https://www.businesstoday.in/technology/story/india-becomes-the-second-largest-saas-ecosystem-globally–whats-driving-this-growth-367551-2023-01-25, (8th August,2023).
[3]Luhn Algorithms, https://www.geeksforgeeks.org/luhn-algorithm/ (8th August, 2023).
[4] Clause 4.5.3, Revised guideline for Computer Related Invention, IPR India (8th August, 2023), IPR India.
[5]OpenTV Inc v. The Controller of Patents and Designs, 2023 SCC OnLine Del 2771
[6] Section 3(k) of the Indian Patent Act, 1970.
[7]Algorithms And Intellectual Property— The Complexity In Protection, Khurana & Khurana, Mondaq,(9th August,2023), https://www.mondaq.com/india/trade-secrets/1162614/algorithms-and-intellectual-property-the-complexity-in-protection#:~:text=Patents%3A%20A%20Patent%20protects%20a,do%20qualify%20for%20the%20same..
[8] Protection of trade secrate and capital structure decisions, Sandy Klasa a, Hernán Ortiz-Molina b, Matthew Serfling c, Shweta Srinivasan d, Elsevier (9th August,2023), https://www.sciencedirect.com/science/article/abs/pii/S0304405X18300473.
[9]IbId, see note 7.
[10] India looking beyond CRI per Se, Mondaq,(12th Aug,2023), https://www.mondaq.com/india/patent/1108186/looking-beyond-computer-program-per-se–elements-in-computer-programs-which-are-not-excluded-under-section-3k.
[11]2023 SCC OnLine Del 1845 : (2023) 299 DLT 737 (DB).
[12]2019 SCC OnLine Del 11867.
[13]2023 SCC OnLine Del 2771.