09 August 2015

IP Australia Has the Innovation Patent In Its Sights, Again!

CrosshairIP Australia has initiated a consultation on the recommendation of the Advisory Council on Intellectual Property (ACIP), in its one-page statement issued in May 2015, that Australia’s second-tier ‘innovation patent’ system be abolished.  While the terms of the consultation naturally do not say it in so many words, it seems to me that IP Australia is gunning for the innovation patent, and would like to see ACIP’s latest recommendation implemented by the government.  The consultation paper is available from IP Australia’s web site, and submissions are requested by 28 September 2015.

ACIP had previously reported on a three-year review of the innovation patent system back in June 2014.  Its report that was largely inconclusive, and made no recommendation supporting either the retention or abolition of the innovation patent system.  However, as I explained in an earlier article, immediately following publication of an IP Australia report on The Economic Impact of Innovation Patents ACIP (or somebody purporting to speak for ACIP – see later) was miraculously struck by certainty, and issued its short-but-sweet revised recommendation that the Australian government should consider abolishing the innovation patent.

The IP Australia report resulted from analysis of the Intellectual Property Government Open Data (‘IPGOD’) dataset that has been compiled and made available to the public, free of charge.  The IPGOD (which presumably resides in IP Heaven, assuming such a place exists) contains over 100 years of data on IP rights applied for in Australia.  It includes information on all aspects of the application process, augmented by a unique set of identifiers enabling IP rights to be linked to individual firms and firm-level business information.  The analysis was conducted under the auspices of IP Australia’s Office of the Chief Economist, as part of its ongoing studies of the Economics of IP, and the report concludes that ‘the innovation patent is not fulfilling its policy goal of providing an incentive for Australian SMEs to innovate’.

IP Australia vs the Innovation Patent

This is not the first time that IP Australia has moved against the innovation patent.  In the midst of ACIP’s review, it initiated its own consultation on a proposal that the lesser requirement of ‘innovative step’ be abolished, and replaced with the same test of ‘inventive step’ as now applies to standard patents.  While this would not have abolished the innovation patent itself, it would certainly have rendered it essentially obsolete as a second-tier right, and returned us to the bad old days of the petty patent.  The suggestion was not generally well-received by stakeholders, and the feedback received by IP Australia was ultimately absorbed into the ACIP review.

I cannot help wondering – what did the innovation patent ever do to IP Australia to deserve such animosity?  Do our IP czars perhaps find themselves to be the butt of jokes at international gatherings of their peers, over Australia’s rather unique second-tier patent right?  Perhaps the Americans and the British laugh at the whole idea that such a thing would serve any useful purpose in a modern economy, while the Germans, Japanese and Chinese chortle away at distant Australia taking its own path, instead of copying their utility model systems.  Whatever the case may be, I would not want to find myself in the shoes of the innovation patent right now.


ACIP’s sudden, and assured, change of heart itself struck me as odd for a couple of reasons.  Firstly, ACIP spent three years conducting a review of the innovation patent system, and was unable to conclude that it should be abolished.  Yet, within days of the publication of IP Australia’s economic analysis, ACIP was able to give the findings ‘careful consideration’, and conclude that this one report suddenly tipped the scales unequivocally in favour of abolition.  A one page statement – unsigned, unbranded, and without any identification of the Council members involved in its preparation –was, apparently, sufficient to communicate ACIP’s new position based on a couple of choice excerpts from IP Australia’s 100 pages of analysis and appendices.

Secondly, there is absolutely no evidence to suggest that the Australian Government requested that its Advisory Council provide an update on its review of the innovation patent system.  On the contrary, in fact, it simply could not have done so.  As the ‘about’ page on ACIP’s web site currently states:
About ACIP
Update: After publication of this article, the former chair of ACIP, Jim Butler, posted a comment clarifying the process which led to the publication of the Council's one-page statement.  You can read his comment below.

In brief, ACIP was provided with a presentation on the IP Australia report by two of its authors on 3 March 2015.  Following discussion, ‘Council members agreed that, given the new evidence contained in the Report, if the objective of the innovation patent system was to help Australian SMEs then the system should be abolished.’

While I appreciate Professor Butler's explanation, it seems to me that it only strengthens the case for the present attack on the innovation patent being an IP Australia 'stitch up'.  Months before The Economic Impact of Innovation Patents was released to the public, it had been presented to ACIP by the very people who prepared it, and drew the adverse conclusions that I have previously questioned.

ACIP's statement was prepared and forwarded to the Minister at the end of March, but was not released to the public until after IP Australia published its report nearly two months later.  No other stakeholders had any opportunity to provide further input to ACIP and, now that the Council has been abolished, we never will.
Just to make sure the time-line is perfectly clear:
  1. in April 2015 ACIP was abolished, after more than 20 years of service to a number of successive governments;
  2. on 25 May 2015, IP Australia published its report on the economic impact of innovation patents;
  3. on 28 May 2015, the ACIP web page on the Innovation Patent Review was updated with the one-page statement of its about-face on its earlier conclusions;
  4. on 24 July 2015, the ‘about’ page was updated to state that ‘ACIP was abolished in April 2015’; and
  5. on 5 August 2015, IP Australia issued its public consultation paper on “ACIP’s” revised (and posthumous) recommendation that the government consider abolishing the innovation patent system.
Maybe I am a bit old-fashioned, or perhaps I am just completely misunderstanding this whole ‘democracy’ thing, but to my mind the Australian people are entitled to know who is responsible for the statement attributed to ACIP – given that ACIP did not exist at the time it was released – and why the statement was made.  It frankly beggars belief that the seven members of the former ACIP (health economist Professor Jim Butler, IP academic Professor Mark Davison, IP lawyer and academic Mr Adam Liberman, patent attorney Mr Greg Munt, organic chemist and biotech company founder Dr Tracie Ramsdale, IP legal academic Associate Professor Kimberlee Weatherall, and academic economist Professor Beth Webster) all reviewed the IP Australia report in detail, got together to discuss its implications, agreed on a revised recommendation, and issued a statement after their roles on the Council had been terminated!

Addressing Issues Without Abolition!

There is much that could be done to address concerns about the innovation patent system. 

The test for ‘innovative step’ unquestionably sets the bar too low.  However, this does not inevitably imply that it should be raised all the way to the level of the standard standard patent, or that innovation patents should be abolished altogether. 

Innovation patents have been used in ways for which they were not primarily intended – particularly by large companies – and they are obtained in significant numbers by individuals and small companies that, in all likelihood, have a very limited idea of what they are doing and why, and therefore see no benefits from the system.  But they are also obtained by a notable number of SMEs and individual inventors (1385 applicants in IP Australia’s study) that have clearly seen value in the system, and gone on to file further innovation and/or standard patents. 

This is not a sign of a system that has failed so badly that abolition is obviously the ‘default’ option, and yet that is what IP Australia’s consultation strongly implies.  To be precise, IP Australia is seeking ‘feedback’ on:
  1. the ACIP recommendation that the government should consider abolishing the innovation patent system; and 
  2. any alternative suggestions to encourage innovation amongst SMEs.
Come on, IP Australia!  Why do you hate the innovation patent so?  Neither of these points directly seeks input on possible reforms to the innovation patent system which, in my view, ought to be front-and-centre as a option. 

As for the second point, any patent system – including a second-tier system – cannot, all by itself, ‘encourage innovation’ among SMEs.  It can only be a part of an overall framework for creating an environment in which innovation is encouraged and rewarded.  Merely introducing a new second-tier patent right was never going to lead to a significant increase in innovation activity in Australia.  There are numerous ‘alternative suggestions to encourage innovation amongst SMEs’ that could be submitted, but many of them would have very little to do with the IP rights system administered by IP Australia!

Conclusion – Making Your Views Heard

I shall probably write more on this topic during the consultation period, and I will certainly be making a submission of my own.  I would encourage all interested stakeholders to do likewise, and/or to share your thoughts in the comments below.


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