29 June 2014

ACIP’s Unworkable Innovation Patent Recommendations

ACIP Review of the Innovation Patent SystemOn 16 June 2014, the Australian Government’s Advisory Council on Intellectual Property (ACIP) released its final report following a review of Australia’s Innovation Patent System.  For any readers who do not know, the innovation patent provides a second tier protection for inventions, having a lower threshold for validity (a test of ‘innovative step’ rather than ‘inventive step’) and a shorter maximum term of protection (eight years rather than 20 years).

The report makes six recommendations, of which only three would have any substantive effect on the actual operation of the innovation patent system.  In my opinion, all three of these are unworkable, and would actually make the system worse, rather than better.  They are:
  1. to replace the current test of innovative step with a ‘higher’ standard based on the High Court’s decision in the ‘3M case’ (Minnesota Mining & Manufacturing Co v Beiersdorf (Australia) Ltd [1980] HCA 9;
  2. to require that innovation patent owners request examination/certification before the third anniversary of lodgement of their innovation patent; and
  3. to exclude from protection by an innovation patent all ‘methods’, ‘processes’ and ‘systems’.
The three non-substantive recommendations are:
  1. the non-recommendation of whether to abolish or retain the innovation patent system in its current form, due to a lack of adequate empirical evidence;
  2. that a term other than ‘patent’ should be used to denote an uncertified (and thus unexamined and unenforceable) innovation… umm… thingy (ACIP suggests ‘application’, but this would leave us with no name for the period between filing and registration); and
  3. that, subject to implementing the other recommendations, there be no change to the remedies available to a innovation patent owner in the event of infringement.
It perhaps matters little what the report says, or what recommendations it makes.  The present Australian government is wholly consumed by its conservative economic and social reform agenda, and most likely has no appetite for patent reform.  It has already attempted to bury one patents review commissioned by the previous government, and is therefore unlikely to take up the issues raised by ACIP’s report.

General Comments

This lengthy review commenced on 1 February 2011, and was supplemented by a proposal and call for comments issued by IP Australia in September 2012.  ACIP also commissioned a report by Verve Economics on the ‘Economic Value of the Innovation Patent’ (a copy of which can be downloaded from the review web page).  Being over three years in the making, and having the benefit of multiple sources of input, one might have expected some firm conclusions and confident recommendations.

Unfortunately, what we have instead is an inconclusive report, with tentative and largely unworkable recommendations.  While this is obviously a criticism of the outcome of the review, it should not be misconstrued as a disparagement of the members of ACIP who no doubt worked long and diligently on the consultation and report.  Opinions on the innovation patent system are easy to come by – everything from the view that it is an abomination that should be repealed, to strong support from those who feel it has provided a much-needed form of protection for commercially-valuable innovations of individual inventors and small businesses.  Hard facts on the actual impact of the innovation patent system, on the other hand, are about as easy to come by as hen’s teeth.

In short, the conclusions you are likely to draw on the merits, or otherwise, of the innovation patent system depend upon who you ask.  And since ACIP asked everyone, it is hardly surprising that the review panel was unable to reach any coherent conclusion.

In what follows, I am going to focus only on the three substantive recommendations of the review, in order to explain briefly why I see them as being unworkable.

I. Raising the Innovative Step

Just to be clear, I believe that raising the innovative step standard is a good idea.  I made a submission in response to the IP Australia proposal pointing out that earlier Australian patent law provides a number of potential options for doing so.  (I note, however, that this submission is not listed in Appendix 3 of the ACIP report, and thus appears to have gone missing.)

However, I consider ACIP’s recommendation to adopt a slightly modified form of the inventive step test which applied under the Patents Act 1952 to be unworkable in practice.  That test, as set out in the 3M case, requires that an invention be non-obvious in view of the common general knowledge possessed by an uninventive skilled worker in the relevant field.  The modification is that, while the 1952 Act test considered only the knowledge of the skilled worker in Australia, the recommended test would take global knowledge into account .

I once called the 3M case the second worst patents decision ever made by the Australian High Court (after Philips v Mirabella [1995] HCA 15).  My view has not changed.  It set the bar for inventive step so low as to be almost laughable.  The problem with the 3M test is that it excludes any and all prior art disclosures (i.e. publications or public use) unless they are proven not merely to be known, but to be part of the common general knowledge possessed by all workers in the field.  As the court put it:

The notion of common general knowledge itself involves the use of that which is known or used by those in the relevant trade. It forms the background knowledge and experience which is available to all in the trade in considering the making of new products, or the making of improvements in old, and it must be treated as being used by an individual as a general body of knowledge.

If a party wanted to rely on a prior publication to establish a lack of inventive step, therefore, it was not sufficient simply to produce the document.  Additionally, it would have to establish, via the production of persuasive expert evidence, that the contents of the document had actually passed into the ‘common general knowledge’ of workers in the relevant field.

There are at least three problems with applying such a test in the modern context.
  1. It is impossible for IP Australia to examine patent claims under this standard.  Examiners can search for prior art, but they are generally not in a position to determine the content of the common general knowledge.  This can only be established by obtaining evidence from people actually working in the relevant field.  This did not matter under the 1952 Act, which did not allow for examination of inventive step (this was left for oppositions and court proceedings, where relevant evidence would be available).  However, the questionable validity of innovation patents that cannot be properly examined for innovative step would create greater uncertainty than exists under the existing system!
  2. The cost of attempting to invalidate an innovation patent for lack of innovative step would significantly increase.  Despite its many flaws, the one virtue of the current test of innovative step is that it is not highly dependent upon expert evidence, and is therefore relatively inexpensive to run as a ground in opposition or court proceedings.  The 3M test is the most evidence-intensive imaginable.  It is not possible even to cite a document without accompanying evidence of the widespread knowledge of its contents!
  3. The 3M test is completely at odds with modern reality.  In a world where almost all information is but a Google search away, it has never been easier for workers in any field of endeavour to find relevant information without special skills or effort.  It is worth noting here that the High Court in 3M expressly rejected a ‘diligent searcher’ test for assessing inventive step.  The fact that something is easily found does not make it part of the common general knowledge.
In the worst case, it is very easy to imagine a scenario in which a claim that would fail the current innovative step test would pass under the 3M test.  For example, a claimed invention might differ from the disclosure in a prior art document in ways that make ‘no substantial contribution to the working of the invention’, as required under the current test.  However, if the document in question cannot be proven, by evidence, to form part of the common general knowledge in the field, then the same claim would pass the 3M test!

II. Three-Year Exam Request Deadline

The purpose of setting a deadline for requesting examination of an innovation patent would be to reduce uncertainty by ensuring that innovation patents cannot sit on the Register for extended periods without being examined.

The problem with this proposal is that uncertified innovation patents are not the greatest source of uncertainty in the current system.  The greatest source of uncertainty right now is the large number of pending standard patent applications, any of which might be converted to an innovation patent, or form the basis for one or more divisional innovation patents, either for ‘legitimate’ reasons (i.e. unable to pass the inventive step threshold), or for ‘strategic’ reasons (e.g. to target specific infringing activities).

Currently, there is generally no requirement for an applicant for a standard patent to request examination until around four-to-five years from filing. And even then, it is likely that the application will remain pending for up to two further years.  That amounts to around six-to-seven years of uncertainty, per application, as to the existence and scope of any innovation patent rights!

By placing a deadline on requesting examination of innovation patents, strategic applicants will be encouraged to file standard applications in the first instance, to maximise their future options.  The only applicants who may be disadvantaged are the ‘genuine’ users of the innovation patent system who may not be willing or able to spend additional money on pursuing more complex strategies at an earlier stage.

To make matters worse, ACIP has recognised the potential additional cost to IP Australia if this results in additional examination workload, and suggested that a search fee could be charged to assist in cost-recovery.  If the current standard search fee of $2200 were to be applied for this purpose, it could actually be more cost-effective, as well as strategically advantageous, to pursue innovation patent rights only via initial standard patent applications!

III. Restrictions on Claim Categories

ACIP recommends ‘amend[ing] subsections 18(3) and 18(4) of the Patents Act 1990 (Cth) to provide that, for the purposes of innovation patents, no method, process or system shall be patentable.’

As ACIP has rightly pointed out, excluding ‘method’ or ‘process’ claims is consistent with restrictions on second-tier invention rights (e.g. utility models) in other jurisdictions.  However, ACIP is concerned that allowing ‘system’ claims permits de facto protection of methods and processes in the form of systems used to implement those methods.

It appears that ACIP naïvely believes that limiting the words that can be used in the preamble to a patent claim will somehow restrict the subject matter of innovation patents to specific tangible articles and products.  Speaking as a patent attorney with some experience in claim drafting, I can categorically assure ACIP that this is not the case!

For one thing, there is nothing very special about the word ‘system’.  An ‘apparatus’ may have multiple components, while a ‘system’ might well be embodied within a single article.  I would invite the members of the ACIP panel, by way of example, to look up the term ‘system on chip’.

Secondly, even if an invention is genuinely a ‘system’ comprising multiple components, it is generally possible to claim a single component in terms of its own elements, and the way in which they interact with other components of the system.  Indeed, this is often desirable in any event, especially if different parts of the system may be operated by different parties – it is always preferable to have claims that are likely to have a single, clearly-defined, direct infringer.

Finally, by way of example, I was once under the misapprehension that utility model systems which exclude methods and processes cannot generally be used to protect software inventions.  But then I found out that Apple was asserting a ‘slide-to-unlock’ utility model against Samsung in Germany.  Of course, what Apple had done in that case was to obtain protection for a specific product, i.e. a mobile device comprising the ‘slide-to-unlock’ functionality.

I suspect that ACIP may have misunderstood the reasoning behind the ‘process’ exclusions in other jurisdictions.  A method claim (e.g. covering an industrial process) can be very broad, in that it need not be limited to any specific physical implementation.  Thus, for example, an invention supported by a description of a laboratory procedure for performing a process can be claimed in such a way that the patent will also protect a massively scaled-up industrial version, which might be performed using quite different equipment.

Of course the process can be claimed by way of a system, but since a system claim must be supported by the description, it is quite likely that the scope of the resulting patent would not encompass the industrial process if only the small-scale laboratory process is disclosed.  Thus allowing ‘system’ claims, while excluding ‘process’ claims, does place a meaningful limitation on the scope of a second-tier patent right.


I do not make the above criticisms merely by way of a theoretical exercise.  If ACIP’s recommendations were to be implemented, the advice that I – and presumably many other patent attorneys – would offer to clients would be based upon these observations.

I would, for example, advise clients about the possibility of filing statutory declarations regarding the scope of common general knowledge in order to rebut Patent Office rejections.  I would recommend that clients who do not intend to request examination immediately, file standard patent applications rather than innovation patent applications, to avoid the prospect of being forced to request examination within three years.  And I would be advising clients on how to obtain innovation patents on inventions falling within the supposedly ‘excluded’ claim categories.

All of these strategies would be perfectly legal, and the advice would be provided in accordance with my obligation to advise and act firstly within the law, and secondly in the best interests of my clients.

Personally, I do not think that this would be a good outcome for the innovation patent system.  I therefore sincerely hope that the government does not act on these well-meaning, but impractical, recommendations.

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