Patents are territorial. The Internet is not. Can a patent for an Internet-related technology protect its owner when the Internet is not confined to a territory?

Intellectual Property protection is often confined to a particular country. To infringe a right in New Zealand, the conduct complained of generally needs to be occurring in New Zealand. However the Internet obeys no such boundaries and respects no such borders. What then of the situation where aspects of a technology accessed in New Zealand over the Internet are located overseas – can someone escape infringement by simply locating a server that's part of a patented system in another country?

No, is the simple answer from a recent UK court decision. In the Menashe v William Hill case the High Court found that the famous British bookmaker had infringed the plaintiff's patented Internet betting system when they provided a similar system to the British public from a server located overseas.

The plaintiffs, Menashe, owned a patent for a betting system that consisted of a host computer (server), terminal computers, and a computer program to allow the terminal to operate the system. William Hill offered a betting system that supplied a program to its UK customers that turned their computers into terminals, and allowed them to link over the Internet to the server, which they had located in Curacao.

Menashe argued that William Hill infringed their UK patent by supplying UK customers with the means to put the system into effect in the UK.

Although accepting that its supply of software was in the UK and that this was an essential part of the invention, William Hill argued that the patent was for the parts of the system, and as one essential part of the system was not located in the UK, there could be no infringement.

The judge held that the patent related to the whole system, being the combination of all the parts. Simply locating one part of the system abroad couldn’t prevent infringement when the result was still to provide UK punters with the benefit of the system. The Court took a broad view in this regard - looking to the spirit and purpose of the protection, not simply the strict linguistic construction, stating that "any other result would be monstrous – allowing a defendant to use supposed cross-border problems to avoid infringement."

This interpretation of infringement of patents for technology provided over the Internet aligns with similar recent UK and US decisions in the areas of domain names and trade mark protection, where the Courts have taken a broad real world approach rather than a technical and purely legalistic approach. The decision closes a possible loophole that would otherwise have allowed those providing services over the Internet to circumvent effective patent protection.

From the perspective of the businesses which face the costs and complexity of obtaining a valid patent, it is essential that having gone through that process, the patent will in fact prevent the exact conduct the patent was designed to cover. The Court's pragmatic approach has ensured that in that case at least, infringement cannot be avoided through technical jurisdictional arguments.

It appears that, just as the Internet is broadening our view of the world, so too the Courts are doing their best to ensure that they similarly broaden their own view of how intellectual property rights can be applied under traditional laws in light of challenges posed by new technologies.

This is a general summary only and should not be taken as a substitute for specific advice.

Alan Potter is an intellectual property partner and patent attorney in the Commercial Department of Simpson Grierson.

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