03 November 2012

Is IP Australia Ready to ‘Raise the Bar’?

Raise the BarIP Australia has temporarily suspended its practice of case management of divisional applications, which was introduced in October 2010 (see IP Australia Gets Tougher on Patent Applicants and IP Australia’s ‘Case Management’ of Divisional Applications).

The purpose of this practice has been to limit abuses of the system by expediting examination of divisional applications, and providing only a limited (two month) response period if any objection is raised which is substantially the same as an objection raised in the parent case (or other ancestor).  This prevents applicants from using divisional applications to achieve a form of ‘continued prosecution’, whereby an application is kept pending without making any meaningful progress towards acceptance.

According to a directive published in Section 2.10.11 of the Australian Patent Manual of Practice & Procedure, examiners are now to:
  1. discontinue the practice of reducing the response time frame for divisional applications on which an objection is raised in the first report for the same or substantially the same reason as an objection was raised in the report on the parent or other ancestor, … . Where a first report has already been issued with a reduced response time frame, examination should proceed in accordance with the case management approach and reduced response time frames can continue to be used at further report stage where appropriate; and
  2. discontinue the expediting of divisional applications as a matter of routine and accord them the same priority as other examination work.
We have no official (or unofficial) information regarding the reasons for this abrupt change of practice, however we suspect that it may be due to an actual, or anticipated, rise in the number of examination requests generally being received by the Patent Office.  And the reason the rate of examination requests can be expected to rise – perhaps dramatically – is because any pending application for which a request for examination has not been made by 15 April 2013 will be subject to the more stringent standards of patentability established by the Raising the Bar Act 2012.

We wonder… is IP Australia ready for this?

EXAMINATION REQUESTS WILL BE FILED

The Intellectual Property Amendment (Raising the Bar) Act 2012 unquestionably sets a higher standard for patentability in Australia (see Australia’s ‘Raising the Bar’–What This Means for Patent Applicants).

This means that there are pending applications which may result in valid patents under the current legislation, but which may be invalid under the revised legislation effective after 15 April 2013.

In many cases, these applications would pass examination either way, because examiners will inevitably not have a great depth of understanding of the technology in many cases, and may not identify the most relevant prior art (which is not always to be found in readily searchable sources).  The acid test of strength and validity of a patent is not examination, it is when the claims come under concerted attack by an interested, informed third party – such as a competitor – during a patent opposition, or in litigation.

In this context, for an applicant who has a choice, there is absolutely no benefit in having a patent which is subject to the higher standards.  A patent is not stronger or more valuable because it has survived examination under more stringent standards.  It is stronger and more valuable only to the extent that it is less likely to be found invalid.  And clearly this is the case if the standards which apply are lower, not higher.  In contrast to the US position, there is no presumption of validity for a granted patent in Australia.  ‘Clear and convincing evidence’ is not required to prove a patent invalid.  Any patent may be attacked at any time, and its validity is assessed against the applicable legal requirements on the ‘balance of probabilities’, i.e. whether it is more likely than not that the patent is invalid.

For any application already filed before 15 April 2013 – including all currently pending cases – the existing law will apply to the application, and to any resulting patent, for its entire term, so long as a request for examination is made before 15 April 2013.

Most applicants for patents in Australia are assisted and advised by Australian patent attorneys.  All registered Australian patent attorneys are subject to the Code of Conduct promulgated by the Professional Standards Board, clause 3.2.7 of which states that:

An attorney must at all times act within the law and be subject to that obligation in the best interests of the client.

Furthermore, clause 3.02 of the Code of Ethics of the Institute of Patent and Trade Mark Attorneys of Australia (IPTA) states that:

Members must give priority in their professional conduct to act
(a) within the law
(b) in the best interests of their clients
(c) in the public interest, and
(d) in the interests of the profession as a whole, in that order.

So, any wider public interest, or interest of the profession, is subordinate to clients’ interests.  The only higher priority is not to break the law.

It follows that many – and perhaps most, if not all – Australian patent attorneys will consider themselves obliged to recommend that clients file applications, and examination requests, prior to 15 April 2013, wherever possible.  To do otherwise is arguably not in the best interests of those clients, and might therefore be a breach of the Code of Conduct (which, as clause 5.1 of the Code makes clear, is grounds for complaint).

There may be some scope for differing views on this issue, but we know for a fact that policy and practice decisions on this exact point are currently being made within firms of patent and trade marks attorneys across the country.

HOW BIG A PROBLEM IS THIS?

A spate of examination requests – and possibly a spike in new filings, with accompanying requests – could be a massive problem for IP Australia.

It is difficult to determine the exact scale, but the prospective numbers are scary!  IP Australia is currently issuing directions to request examination on applications having priority dates in mid-2008.  Right now – with nearly six months still to go before the new provisions take effect – there are over 48,500 standard patent applications with priority dates later than 1 July 2008 which are not yet accepted, i.e. which are  either (mostly) awaiting examination, or (in a few cases) already under examination.

If we assume, just for the sake of obtaining some estimate, that the recent rate of examination requests is approximated by the rate of subsequent acceptances (i.e. that most examined applications are ultimately accepted in some form, and that new directions to request exam are issued as older cases are cleared from the system) the current rate of requests is probably running at around 18,000 per year.  (There were 17,376 acceptances published in the past 12 months.)

Also in the past 12 months, 7,240 standard patent applications were directly filed in Australia, while 19,848 international applications entered the national phase here.  That is over 27,000 new applications in total!  And, as we have already noted, it is quite possible that there will be a spike in applications in the months leading up to 15 April 2013.

Taking all of these figures into account, and the likely advice that will be offered to applicants, it is quite possible that IP Australia will see at least two-to-three years-worth of examination requests filed within the next five-and-a-half months!

If this is even remotely in the right ball-park, it is potentially a huge problem. 

We understand that IP Australia has been recruiting new examiners.  However, new recruits will need to trained before they will be up-to-speed in examining applications without substantial supervision.  At the same time, all examiners will require training in the application of the new laws, standards and practices which will apply under Raising the Bar.  Initially, the number of applications to which these standards will apply will be a mere trickle compared to the flood of applications still subject to the existing law, but examiners will still need to be prepared to handle them.

CONCLUSION

IP Australia created this rod for its own back.  As we reported following the original release of the Exposure Draft of the Raising the Bar Bill (see Patent Reform Exposed Part VIII – Transition), IP Australia always wanted the new provisions 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.
It backed down on an initial proposal to make the amended law retrospectively effective for all pending applications on which an examination report had yet to be issued (see Senate Patent Reform Bill – A Closer Look).  Natural justice requires that applicants who filed in good faith on the basis of the currently-prevailing laws should have the opportunity to have their applications assessed under those laws.  However, it may have been a mistake to create an incentive for all current applicants to request examination en masse in the lead-up to commencement!

A better balance might have been achieved by having the new laws apply only to applications filed after the Royal Assent (15 April 2012), for which a request for examination had not been filed by commencement (15 April 2013). 

Of course, none of this is likely to be news to IP Australia, and it may have plans and processes in place, and the situation in hand.  We certainly hope so, because the alternative is potentially a massive blow-out in the backlog of applications awaiting examination, and the associated delays.

To get back to our opening point, in these circumstances it is hardly surprising that IP Australia would have decided not to make the situation any worse by continuing to deliberately bring forward the examination of divisional applications.

The one ray of light in all this, however, is that the average total elapsed time between filing and grant of a patent may not actually be any longer than is presently the norm.  After all, if it were not for the changes in the law, many of the existing applications would simply have sat in the Office for another one, two or three years, awaiting the issue of a direction to request examination.  They may now spend that time waiting, instead, in the queue for their turn to be examined.

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