IT professionals and legal experts Thursday welcomed the passing of legislation in New Zealand that bans the patenting of software, saying it would discourage foreign monopolies over basic lines of computer code.

The Parliament passed the Patents Act late Wednesday, and it will replace the previous 60-year-old patent law when it takes effect in 12 months.

Commerce Minister Craig Foss said the Act marked a significant step toward driving innovation in New Zealand with a patent system suited for the 21st Century.

"By clarifying the definition of what can be patented, we are giving New Zealand businesses more flexibility to adapt and improve existing inventions, while continuing to protect genuine innovations," Foss said in a statement.

The Ministry for Business, Innovation and Employment said the new law was aligned with that of New Zealand's trading partners and international practice, making it easier for New Zealand businesses to export and grow.

Institute of IT Professionals chief executive Paul Matthews said the legislation sent a clear message to the rest of the world that New Zealand would not tolerate "the vexatious practice of patent trolls," who patented software with the sole purpose of bringing costly litigation against inventive technology companies.

The law had taken five years to form, but became controversial in August last year with the introduction of a motion to remove software from the exemptions to patents.

"The patents system doesn't work for software because it is almost impossible for genuine technology companies to create new software without breaching some of the hundreds of thousands of software patents that exist, often for very obvious work," Matthews said in a statement.

Communications and IT spokesperson for the main opposition Labor Party, Clare Curran, said she had been contacted by several overseas IT companies which wanted to transfer their business to New Zealand because of the more favorable environment for software development.

"Patenting software would have stifled the local industry and favored largely foreign companies by allowing them to use monopoly rights over inventions inside New Zealand to discourage competition and innovation," Curran said in a statement.