ACIP Reports on ‘Patentable Subject Matter’

The Australian Government’s Advisory Council on Intellectual Property (ACIP) has released the Report of its review of ‘patentable subject matter’.


The background to the review is set out on ACIP’s web site, of which the following is an excerpt:

In recent years a variety of concerns have been raised about the sorts of things that can be patented. In Australia the main legal test of whether an invention is patentable subject matter is whether it is a 'manner of manufacture'.  In its broad ranging 2004 review of gene patenting and human health Report … the Australian Law Reform Commission (ALRC) recognised the value of a flexible test for patentable subject matter, but found that the manner of manufacture test was ambiguous and obscure. … The ALRC recommended that the manner of manufacture test be reviewed.

… Consequently, the Minister for Innovation, Industry, Science and Research has requested that the Advisory Council on Intellectual Property (ACIP) conduct a review of patentable subject matter, including the appropriateness and adequacy of the 'manner of manufacture' test as the threshold requirement for patentable subject matter under Australian law, and the historical requirement that an invention must not be 'generally inconvenient'.

In the course of the review, ACIP received a number of submissions from stakeholders and consulted with them at public discussions in most major capital cities.

The Report makes eleven recommendations, however these can be grouped into five sets of related recommendations.  ACIP’s media release identifies the three key groups of recommendations as:

1. codifying the established principles of patentability – so that an invention must be an artificially created state of affairs in the field of economic endeavour;
2. maintaining the current exclusion from patentability of human beings and biological processes for their generation – but not introducing any further specific exclusions; and
3. introducing a general exclusion from patentability of inventions whose commercial exploitation would be wholly offensive to the Australian public.

Our own summary of – and shamelessly partisan comments on – all five groups of recommendations are set out below.

Recommendations 1 & 2 – statement of objectives

That (1) a statement of objectives should be included in the Patents Act 1990, which (2) should describe the purposes of the legislation as being: ‘to provide an environment that promotes Australia’s national interest and enhances the well-being of Australians by balancing the competing interests of patent rights holders, the users of technological knowledge, and Australian society as a whole.’

The recommendation that a statement of objectives be added to the Act is sufficiently outside the terms of reference of the review that ACIP felt the need to justify making it:

The terms of reference for this review ask ACIP to inquire, report and make recommendations to the Australian Government on patentable subject matter. It is not a review of the patent system as a whole. Yet it remains important to consider the objectives of the patent system, and to consider whether those objectives are sufficiently transparent.

Tests for patentable subject matter must support the objectives of the system. Interpreting the tests should be done in the context of those objectives.

This is well and good if ACIP’s proposed statement of objectives actually reflects the policy behind the Act, which is, after all, a matter for the parliament.

We are not sure that the proposed statement is at all accurate or meaningful.  We are not sure what it means to ‘provide an environment’, or whether the interests of ‘patent rights holders’, ‘users of technical knowledge’ and ‘society as a whole’ are necessarily competing.  Do users of technical knowledge not also hold patent rights, or belong to society as a whole?

Who decides what is ‘Australia’s national interest’?  Many users of the Australian patent system are foreign.  As we reported just last week, only one of the top ten recipients of Australian patents in 2010 was Australian, and it only just snuck in at number ten.  In this context, the service to the ‘national interest’ lies in the reciprocal rights available to Australian applicants in other countries, but this is reflected more in the relevant treaties to which Australia is a signatory than it is in the Patents Act itself.

We note also that the proposed statement does not contain the word ‘innovation’.  We hear a great deal about ‘innovation policy’, and we have been led to believe that strong IP rights promote innovation, and that innovation is a Good Thing for all of society, so where are the ‘competing interests’? 

We could go on – at length – but we will not.  In our view, this proposal is tantamount to suggesting that the Act should include the worst kind of corporate mission statement.  We hope the government rejects these recommendations.

Recommendations 3, 4 & 5 – addressing ‘economic matters’

That (3) patentable subject matter should be defined ‘using clear and contemporary language that embodies the principles of inherent patentability as developed by the High Court in the NRDC case and in subsequent Australian court decisions’; that (4) the Act should be amended ‘to enhance the clarity of the patentability requirements, and to remove overlap of the patentable subject matter provision with the provisions on novelty, inventive step and usefulness’; and that (5) the Act should be amended so that ‘the requirement of “usefulness” encompasses the requirement for utility that is currently an aspect of the manner of manufacture requirement.’

Where to begin?!

These recommendations are deceptively sensible-looking.  After all, who could object to the use of ‘clear and contemporary language’ as opposed to an archaic expression such as ‘manner of manufacture’?

Before you answer, consider this: the Patents Act, like much legislation, is full of terminology that has a particular meaning in its context, informed by numerous occasions of judicial consideration.  In our opinion, the most deceptive terms are those that people might be inclined to believe they understand – terms such as ‘novel’, ‘inventive’, ‘fairly based’, and so forth.

At least a term like ‘manner of manufacture’ flags itself as something that might have a very particular legal interpretation.

ACIP is recommending, among other amendments, that we do away with ‘manner of manufacture’ as the test of patentable subject matter generally, and replace it with ‘an artificially created state of affairs in the field of economic endeavour’.  ACIP claims that this is clearer, and more contemporary, and that it merely codifies the existing test and ‘is not intended to change the substance of the test for inherent patentability in Australia.’

Let us just list the first few problems with this that come to mind.

1. Codifying the current state of the law, however flexible it may appear, nonetheless freezes it in time.  Who knows – in fifty years’ time the terminology ‘artificially created state of affairs in the field of economic endeavour’ may appear as archaic and inapplicable to the technologies of the day as ‘vendible product’ would seem to us today.
2. Even according to the High Court in NRDC, the proposed test is not the law, it is merely one approach to identifying patentable subject matter.  The law, as stated in NRDC requires asking the question: ‘Is this a proper subject of letters patent according to the principles which have been developed for the application of s. 6 of the Statute of Monopolies?’  This is a significantly more adaptable test than ACIP is proposing.
3. Indeed, whatever ACIP may think, the proposed test has arguably changed since the NRDC case was decided.  ACIP’s proposed wording is derived from more recent cases involving computer software.  Ruling in 1959 – long before computer software had any economic significance – the NRDC High Court applied a two-prong test of ‘economic significance’ and a result that is ‘an artificially created state of affairs’.  It is not at all clear that ‘being in the field of economic endeavour’ is the same thing as being of ‘economic significance’.  Whether or not this is so, ‘freezing’ the wording in its current form can only hinder the future flexibility of the test.
4. If the current ‘principles’ are so ‘clear’, why did it take decisions at three different levels (a Patent Office Hearing, appeal to the Federal Court, and further appeal to the Full Federal Court) to establish once-and-for-all that the claims in the Grant case were not patentable?  In all three forums the same conclusion was reached, but for three different reasons!  Changing the wording in the Act begs the question, and will not actually improve clarity.

With regard to the other objectives of these recommendations, we are not sure that issues of alleged ‘overlap’ and ‘utility’ are much more than academic curiosities that only occasionally arise in the decided cases, but we are certainly not opposed to the elimination of potential sources of duplication and ambiguity.

Whatever else the government may take out of these recommendations, we hope it will leave ‘manner of manufacture’ intact as the basic test of inherent patentability.

Recommendations 6 & 7 – existing specific exclusions from patentability

That (6) the existing exclusions of human beings and the biological processes for their generation (standard and innovation patents) and plants and animals, and the biological processes for the generation of plants and animals (innovation patents only) be retained; and that (7) existing specific grounds for refusal of standard patent applications in section 50, and for revocation of innovation patents in section 101B, be repealed.

Just to show that we are not simply nay-sayers, we are very pleased to state that we agree completely with these recommendations.  ACIP is essentially proposing to leave intact the exclusions based on express policy decisions, and to eliminate some increasingly archaic and rarely-invoked exclusions.  As ACIP points out, at least one of the existing exclusions (for inventions ‘the use of which would be contrary to law’) is arguably in conflict with Australia’s obligations under the TRIPS Agreement.

In particular, we are happy to report that ACIP does not support any new technology-based exclusions, and specifically considers that there is no case for excluding so-called ‘gene patents’:

The Senate Committee [Inquiry into Gene Patents – see previous report here] stated that an express exclusion should be introduced only if there is a very clear case, and significant social and political consensus, on the need for such a change. The Senate Committee found that there was neither the clear case nor the consensus justifying change at this time.

The Senate Committee’s view coincides with our view on the matter. We have found that no persuasive case has been made to introduce a specific exclusion to prevent the patenting of human genes and genetic products. Accordingly, we do not recommend the introduction of such a specific exclusion.

It would be comparatively easy for the government to accept and implement these recommendations, and we hope it does so.

Recommendations 8, 9 & 10 – new exclusion on ‘ethical grounds’

That (8) a patentability exclusion should be provided, as permitted by the TRIPS Agreement, to protect ‘ordre public or morality’; that (9) this should ‘exclude from patentability an invention the commercial exploitation of which would be wholly offensive to the ordinary reasonable and fully informed member of the Australian public’; and that (10) the Commissioner of Patents should be provided with ‘an explicit power to seek advice, from any person the Commissioner considers appropriate, to assist the Commissioner in applying this exclusion.’

In our estimation, these recommendations are unnecessary, wasteful and impractical.

As far as we are aware, attempts to patent inventions that might be considered ‘wholly offensive’ are rare.  We are not even sure that we can think of an example that would not be unpatentable on other grounds.  In any event, we do not consider that IP Australia is well-placed to police such things.

The ACIP Report repeatedly states a belief that ‘the patent system must take account of both economic and ethical matters.’  In an ideal world we might agree.  But in the real world accounting for ethical matters incurs a cost, and involves a duplication of effort.  A morally repugnant invention remains so whether or not it is patented.  Denying a patent does not avoid the need to police its use through other legal and social mechanisms.  It can still be used.  Arguably, a patent at least limits who can use it!

We do not accept ACIP’s contention (on page 28 of the Report) that an ‘ethical exclusion’ is required because patenting ‘condones the invention’ or may ‘bring the patent system into disrepute.’  Many inoffensive, yet economically worthless or just plain silly, inventions are patented every year.  More disrepute has been heaped upon the US patent system due to the grant of ‘stupid’ patents (such as Patent No. 5,443,036 for Method of Exercising a Cat) than as a result of morally questionable patents.  The suggestion that Patent Office (or judicial) resources should be expended on assessing the ‘offensiveness’ of inventions is absurd.  If we are trying to keep up appearances, why stop with offensiveness?  Why not also police stupidity, or economic value?

Furthermore, ACIP has recognised the difficulties faced by IP Australia in policing offensiveness, and is therefore proposing that the Commissioner be empowered to consult any appropriate persons on the application of the exclusion.  In other words, let us expend even more national resources on assessing the small minority of potentially offensive patents!

Overall, the cost of rejecting an application to patent an ‘offensive’ invention under the proposed regime will most likely be greater than the cost of accepting it, and letting some other part of the system police its use.  This will be so even if such decisions are not appealed, to consume further resources elsewhere.  But these are just the kind of decisions that do get appealed, and even ACIP acknowledges that ‘the courts are the final authority on whether the commercial exploitation of an invention is wholly offensive to the ordinary reasonable and fully informed member of the Australian public.’  Yes, but is that really what we want them spending their time doing?

In our view, the government should reject these recommendations.

Recommendation 11 – ‘balance of probabilities’

That (11) the Act be amended ‘to require the Commissioner of Patents to be satisfied that an invention is a patentable invention before accepting an application for a standard patent or certifying an innovation patent.’

Currently, an applicant has the benefit of any doubt in relation to whether or not a claimed invention comprises patentable subject matter.  An application must be accepted unless it is practically certain that it does not qualify.  This is in contrast to the other substantive requirements of novelty and inventive step, where a ‘balance of probabilities’ standard applies.

We agree with ACIP that a common standard should be applied across all of the requirements assessed by the Patent Office, and that this standard should be the balance of probabilities. 

We consider that this recommendation should be accepted.

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