Patent Reform Exposed Part VIII – Transition

In this series of articles on IP Australia’s proposed reforms to the patent system, although we have expressed various concerns in relation to the implementation of some of the changes, we are strongly supportive of the intent of the reforms.  It is imperative that Australia’s patent laws be brought up to international standards, most pressingly in relation to the assessment of inventive step, but notably also in relation to the standard of disclosure required in the patent specification.

However, one aspect of the Draft Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 that we are wholly unable to support is the proposal for transition to the higher standards of patentability.  In particular, the draft transitional provisions (in Item 39 of Schedule 1 to the draft Bill) would have the higher standards apply not only to applications filed after commencement of the amendments, but also to applications already filed, but on which a first examination report has yet to be issued.

With all due respect to those responsible at IP Australia, this can only be interpreted as a stunning failure to appreciate the basis upon which users of the patent system make business decisions relating to the protection of their IP, and upon which their advisors (e.g. patent attorneys) provide input to those decisions.

IP AUSTRALIA’S RATIONALE

The rationale behind the proposed transitional provisions is to move to the higher standards of patentability at the very earliest opportunity.  This is understandable – there are patent applications being filed now that will be subject to the existing standards for the entirety of their potential lifespan (i.e. up to 20 years).  Taking into account possible extensions of term of pharmaceutical patents, even if the new provisions commenced today there might still be patents in-force that are subject to a lower standard of validity as far into the future as 2036!

As stated in the Draft Explanatory Memorandum, IP Australia wants the changes to:

1. take effect as soon as possible, to quickly bring about a better balance and operation to the intellectual property system; and
2. not unduly prejudice users of the system, particularly with respect to not affecting rights granted prior to implementation of the changes, or making incorrect a decision of the Commissioner made prior to the changes.

WHY IP AUSTRALIA IS WRONG

It seems that IP Australia’s idea of matters that may ‘unduly prejudice users of the system’ is limited to its own narrow perspective on the operation of the system.  According to this thinking, the substantive grounds of validity are not applied until an application is examined, and so undue prejudice can only arise if the transition to the new standards were to cause a change in a decision  of the Commissioner already made prior to the commencement.

However, as anyone who actually uses (as opposed to administers) the system will be aware, this thinking is hopelessly flawed.  The Commissioner, and her delegates, are not the only people who make decisions.  Indeed, the impact of decisions made by the Commissioner may be relatively minor in the big scheme of things.  The decisions that really matter are the ones that most often precede the filing of a patent application. 

For example, the fate of an entire R&D program to develop a new product or service may depend upon the likelihood of patent rights being available to protect that investment.  The ability of a university, or other research institute, to transfer technology to the private sector by way of licencing or sale of IP may depend upon the prospects of that IP having formal protection though a patent.

In some industries – such as pharmaceuticals – these decisions may be worth tens, or even hundreds, of millions of dollars.

And how are these decisions made?  At least in part, they are made on the basis of information and professional advice regarding prospective patentability that is necessarily based upon the law as it stands at the time.

Contrary to IP Australia’s views on the matter, an applicant who has already made a decision to file a patent application will be prejudiced by a sudden change in the law, whether or not the application has yet been examined.

While many (indeed, probably most) applications that have already been filed will meet the higher standards that are being proposed, it is – almost by definition – at the borderline of patentability that professional advice is most valuable, and decisions are most fraught.  If just one user of the system is harmed by a change in the law (and there will surely be more than one), then that is one too many.

It is no answer to say that users of the system are being provided with ample warning of the coming changes.  It is unacceptable that the validity of a patent application may depend upon the timing of an event – the commencement of examination – over which the applicant has only limited control.  Does IP Australia really want to receive a flood of requests for expedited examination of pending applications prior to commencement of the amendments?  And what does the Commissioner think will be the consequences when some of those requests are satisfied prior to commencement, while others are perhaps delayed until afterwards?

THE VERDICT

The proposed transitional provisions are absolutely unreasonable and grossly unfair to applicants and their advisers.  If the determination of which laws will apply to an application (and subsequent patent) depends upon an event that is not wholly within the control of the applicant, then there can be no reasonable degree of certainty to form a basis for the making of sound business decisions.

As a patent attorney, it will be impossible to provide useful advice under the proposed transitional regime.  We will need to prepare advice on two scenarios, depending upon the timing of examination, along with a strategy for increasing the probability of obtaining an examination report prior to commencement of the amendments.  The client will then have to grapple with this added dimension of uncertainty in their decision-making.

There is only one fair, reasonable, viable and non-prejudicial manner in which the amendments can apply.  The substantive amendments to patentability standards must apply only to those applications and patents filed on or after the date of commencement of the amendments.

IP Australia’s proposed approach might, at a stretch, bring back that 2036 horizon for expiry of patents subject to the current standards to around 2031.  This is not a sufficient benefit to justify the significant disadvantages of the draft transitional provisions.

Tags: Australia, Law reform, Patent law, Raising the Bar