As if British Telecom didn't make enough money from British citizens, it’s now chasing the US dollar, too. The company has brought a case in the US courts against Prodigy Communications, claiming every time a user in States links from one web page to the next, the host owes BT money.

BT contends its Hidden Page patent, filed in the US in 1976 and granted in 1989, gives the company the intellectual property rights to the hyperlink technology.

If it wins its case, BT stands to make millions — and potentially make the internet much harder to navigate.

The same situation could cover the use of text and graphics on a website or even just the use of a website to conduct business. Patents for both acts have been awarded by the US Patent and Trademark Office to Pan IP, which has already filed lawsuits against 11 small companies, presumably testing the water before going after bigger prey.

Europe is watching this sort of development nervously as it struggles to set rules on its own patent laws and decide what is and is not patentable.

At present, European companies can apply for patents via their own national patent office or through EPO (the European Patents Office). The EPO can grant pan-European patents according to the rules laid down in 1973's European Patents Convention but each European patent is in fact still a bundle of national patents — negotiated, agreed and packaged as one.

Rules about what is and isn't patentable are now being reviewed. Europe's grants patents on fewer items than in the US; even so, current rules are unclear.

Article 52(2) of the European Patents Convention says software programs are not patentable but Article 52(3) qualifies this, stating items in Article 52(2) are banned only if the patent relates to that item — in this case, the software — "as such." Those last two words are responsible for a great deal of debate.

European patent authorities have tended to interpret Article 52(3) as meaning that, while computer programs can't be patented, that rule can be waived if the development includes a technological innovation or "technical effect." Rather than patenting the program "as such," the owner is seen to be patenting the innovation or effect.

There has been variation in what each country will allow and the EPO has been relaxing its rules over time, according to a UK Patent Office spokesman. "We need clarification on this," he said. There are also differences between what individual countries will allow and the UKPO spokesman called for clarification of "what the rule means."

The UKPO doesn't mind whether the EPO or by the European Union clarifies software patent regulations. "It would be ideal to have [the clarification made] by the EU because it's preferable to have a democratically elected body make these decisions, but we just want it done as quickly as possible," he said.

An EU proposal, issued in February and suggesting the law should remain broadly as it is, with computer programs considered outside the scope of patents unless they make a technical contribution" to the field is currently being considered by the EU's Council of Ministers and the European Parliament. Programs "as such" and business methods using technology would not be patentable and would be covered by copyright.

The biggest proposed change from the current situation is that "isolated" programs such as those stored on CD-ROM rather than on computers, would not be patentable. These patents have been allowed by the EPO and some EU member states.

The EPO is not subject to European Community law and bases its decisions on the EPC. However, if the directive is implemented, the EPO will have to follow suit as each European patent it grants is subject to the national laws of each country, which would be covered by the directive.

Dai Rees, a director of the EPO, foresees no problems with the proposed amendments. "It would involve slight changes but it's not that significant," adding that clarification of how the laws should be interpreted would be welcome.

The EPO will continue to follow the rules of the EPC, said Rees. "The directive doesn't directly apply to us," but in time the EPO's administrative council would no doubt adapt the EPC to bring it into line, he added.

However, some groups are suspicious of the EU and the UKPO’s aims. The Eurolinux Alliance, a group of companies and individuals committed to open-source software development, is keen to make patenting software either difficult or impossible. When the EU published a consultation document in October 2000 asking for comments, 90 percent came from Eurolinux members through an open forum set up by the group.

On its website the Alliance claims the EU and the UKPO are dissembling. The EU and the EPO may say they want to clarify the law and have restricted patentability, but in fact they are moving towards unlimited patentability, it said.

Spokesman Hartmut Pilch says the EU knows "what to say to be popular," but that it is heading toward the American model. "Don't read their press releases; read the directive itself. Once people read the directive they see how things really are."

The proposed directive is available online here.

"The EU doesn't actively want business model patents," Pilch said, but "that's the inevitable result of the way they're doing things. To understand it you have to think like a patents lawyer — this is not about boosting the economy or about fostering competition, but simply about making sure the patents business has a future."

All that the Eurolinux alliance and companion organisation FFII (Foundation for a Free Information Infrastructure) can do is keep pushing their point, Pilch said. "Our hopes are very good. The French and Dutch governments have stated clear positions against the directive and Germany is unclear, but once they start thinking about it people see our point," he said.

The UKPO spokesman is dismissive of suggestions that there is a hidden agenda in Europe and insists that the UKPO only wants a clarification of the status quo. Europe's legislation as it stands works well, he said. It just needs to be tightened and clarified to make sure the rules are adhered to.

The situation in the US is not one that Europe wants to recreate, he said. "Some of the patents allowed in the US limit creativity, because people get too scared of infringing them. Patents are being granted on the simplest, most basic things, like automatically comparing a price with a competitor's website and taking 10 percent off. Even the large players don't want to see it happen here because it's becoming a burden in the US. They have to grab as many patents as they can, as bargaining chips, so that they can deal with other companies who have a patent on a technology."

A decision on the proposed directive is due later this year but, if that "stagnates," the UKPO will start to push the EPO to alter the EPC, the spokesman said. "Our overarching concern is to get it clarified as soon as possible."