10 December 2017

Pfizer Appeal Success Opens Door for Patent Litigation Over ENBREL Biosimilar

DiscoveryBack in March, I reported on a decision of Justice Stephen Burley denying Pfizer an order for preliminary discovery to confirm its belief that Samsung Bioepis AU (‘SBA’) was infringing a patent covering methods of producing Pfizer’s biological medicine for treatment of autoimmune diseases marketed under the name ENBREL.  At the time, I noted that the decision appeared to create a substantial barrier to enforcing patents relating to methods of producing biologics, since the very characteristics that make biosimilarity difficult to quantify – i.e. that similar physicochemical, biological, immunological, efficacy and safety characteristics may be observed despite variations in the structure of the complex biologic molecules – were what prevented Pfizer from convincing the court that it had a sufficient belief that infringement was occurring.  I therefore indicated that I would not be at all surprised to see the decision appealed.

Pfizer did indeed appeal, and a Full Bench of the Federal Court of Australia has now handed down its decision, with three judges unanimous in overturning Justice Burley’s decision and granting Pfizer preliminary discovery: Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd [2017] FCAFC 193.

The key to Pfizer’s successful appeal lies in the wording of Rule 7.23(1)(a) of the Federal Court Rules, which relates to a precondition for an order for preliminary discovery that ‘the prospective applicant … reasonably believes that the prospective applicant may have the right to obtain relief in the Court from a prospective respondent’ (emphasis added).  The primary judge had determined that evidence provided by an expert witness on behalf of Pfizer did not provide a reasonable basis for its belief that SBA was infringing the Pfizer patents, but rather amounted to ‘mere suspicion’.  On appeal, the Full Court shifted focus away from evaluating the factual correctness, or otherwise, of expert evidence (which was, inevitably, in dispute between the parties), and back to the language of the Rule.

Thus, as Chief Justice Allsop stated (at paragraph [81] of the Full Court decision), ‘[i]t was not a matter of which body of expert evidence to prefer; rather, it was whether Pfizer reasonably believed that it may have a right to relief.’  Or, as Justice Perram observed (at paragraph [134]), ‘[t]he question was not whether [SBA’s expert] Professor Gray was right and Dr Ibarra was wrong. The question was whether the belief held by Mr Silvestri, the Assistant General Counsel and directing mind of Pfizer, was reasonable’.  Both judges also criticised a tendency for applications for preliminary discovery to mutate into ‘mini-trials’, in which a form of fact-finding takes place due to a ‘perceived need to show the reasonableness of a belief that a right to relief exists rather than might exist’ (at [119]).

This decision should provide comfort to patentees of biological processes, and indeed of manufacturing and other ‘hidden’ processes more generally.  It confirms that what a prospective applicant needs to prove in order to be granted preliminary discovery is not a likelihood that infringement is actually occurring, but only that there is some reasonable basis for its subjective belief that infringement may be occurring.  This should not only make preliminary discovery easier to obtain, but also ensure that applications for preliminary discovery do not continue to turn into costly and time-consuming mini-trials.

04 December 2017

New USPTO Data Set Reveals Extent of Patent-Eligibility Confusion and Carnage

Circle of ConfusionA new research dataset released by the US Patent and Trademark Office (USPTO) reveals that since the Supreme Court of the United States (SCOTUS) issued its 2010 ruling in Bilski v Kappos, the rate at which US patent applications are rejected on subject-matter grounds (as compared with other grounds of rejection) has increased from 8% to 13%.  (A hat-tip, by the way, to Dennis Crouch at the Patently-O blog for bringing this new dataset to my attention, and using it to compare rates of anticipation and obviousness rejections over the period covered by the data.)

As interested followers of patent-eligibility (you know who you are) will be aware, during this period the Supreme Court has issued four opinions restricting the scope of patentable subject matter: Bilski v Kappos 130 S.Ct. 3218 (2010), relating to ‘pure’ business methods; Mayo v Prometheus 132 S.Ct. 1289 (2012), relating to diagnostic methods; AMP v Myriad 133 S.Ct. 2107 (2013), relating to isolated genetic materials; and Alice v CLS Bank 134 S.Ct. 2347 (2014), relating to computer-implemented business methods.  Each of these decisions resulted, at least initially, in an increase in subject-matter rejections by the USPTO in the corresponding fields of endeavour.  And while there have been subsequent declines in the rates of Bilski- and Myriad-based rejections, the signs are that rates of rejection based on Mayo and Alice are at least steady, and possibly increasing.

Notably, updates to USPTO examination guidance on subject matter eligibility in July 2015 and May 2016, which were regarded by many as providing much-needed clarification expected to reduce the rates of rejection, do not appear to have had any impact on overall subject-matter rejection rates, or on the rates in the specific fields most affected by Bilski, Alice, Myriad, and Mayo.

Overall, the SCOTUS impact since 2010 appears to have been an increase in the relative number of patent-ineligible inventions for which applications are filed at the USPTO, averaged across all fields of endeavour, of around 60%!  Another, more pragmatic, way of looking at the data is to say that for every 100 applications filed, around five (i.e. one in 20) will now be rejected on subject-matter grounds, that would not have been rejected prior to June 2010.  Of course, the retrospective effect of the Court’s determinations on eligibility means that patents previously granted are not saved by preceding the recent decisions, which is why there has also been carnage in the US Federal Courts.

This all creates additional uncertainty around the availability and value of patents in affected technology areas, to the detriment of investors, innovators, and the patent system itself.

03 December 2017

When Does Importation of Refurbished and Refilled Printer Ink Cartridges Infringe a Patent?

PrinterIf you have purchased a consumer-grade printer at any time during the past decade or so, then you will be well aware that the manufacturers of these products have mostly adopted the so-called ‘razor-and-blades’ business model.  According to this model, an initial item – such as an inkjet printer – is sold at a low price (possibly below cost) in order to increase subsequent sales of consumable supplies – i.e. ink cartridges.  Unsurprisingly, an entire industry has evolved to supply cheaper ‘generic’ versions of these consumables, either by manufacturing copies or, more commonly, by refurbishing and refilling used cartridges.  Printer manufacturers, in their turn, have developed a range of strategies in an effort to thwart generic competition and maintain an effective monopoly on the sale of consumables.

For example, some of the measures employed by original equipment manufacturers (OEMs) are physical, such as forming uniquely-patterned structures (‘interface patterns’) on the exterior of ink cartridges so that they can only be installed into the specific printer models for which they are intended.  Other strategies involve more sophisticated technological measures, such as configuring memory chips installed in the ink cartridges – which perform a legitimate function in monitoring ink usage and level to prevent damage to print heads that results from operating the printer with an empty cartridge – to frustrate efforts to reset the memory contents.  If the memory chips cannot be reset or reproduced by a generic supplier, then even a refilled cartridge will fail to function with a printer that interrogates the memory and finds an indication that it is empty.

Intellectual property rights also play a role in the ongoing struggle between OEMs and generic suppliers.  In some jurisdictions (though not, it must be said, Australia) registered design rights can be used to protect the physical appearance of cartridges – including ostensibly functional interface patterns – and thus prevent the manufacture and sale of copies.  Functional improvements in cartridge technology can also be protected by patents, again enabling the sale of copies to be restrained through infringement actions.

However, refurbishing and refilling of cartridges represents a grey area for IP laws.  The default legal position is that once a product (which the common law would class as a ‘chattel’) has been sold, the purchaser becomes the owner, and is free to deal with it as he or she wishes, including reselling, donating, or disposing of it, whereby any subsequent owner may enjoy the same rights of possession.  This raises the question of whether there can be infringement of an IP right, such as a patent, when instead of making and selling a copycat product, a competitor legally acquires spent ink cartridges and restores them to (roughly) their original condition for resale?  The answer – as I am sure any lawyer will tell you – is ‘it depends’.

A decision issued by Justice Burley in the Federal Court of Australia addresses a particularly interesting variation on this theme.  Seiko Epson Corporation v Calidad Pty Ltd [2017] FCA 1403 concerns the collection, refurbishment, and refilling of ink cartridges for Epson-branded printers outside Australian jurisdiction, and subsequent importation and sale of the refilled cartridges by Calidad.  While the case covers a range of issues, including trade mark infringement, trade practices and contract law, the most substantial aspect of the decision – and the one of greatest interest to this blog, of course – is whether or not importing and selling the refurbished cartridges constitutes infringement of Seiko’s Australian patents covering certain features of its cartridges.

The short answer, according to Burley J, is ‘it depends’!  In particular, it depends upon exactly what is done in the course of refurbishment, and whether this results in the product being ‘materially altered’, insofar as it is ‘an embodiment of the invention as claimed.’  If you want to know what that means, and how his Honour arrived at this unique conclusion, read on.

26 November 2017

Continuing Hostility to Computer Implemented Inventions Lands the Commissioner of Patents in Court. Again. Twice.

NoIf anyone thought that the decisions of the Full Federal Court of Australia in Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 and Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 would clarify the law relating to patent-eligibility of computer-implemented inventions (CIIs), resulting in greater certainty for patent applicants, then the evidence suggests that those people should be sorely disappointed.  On the contrary, 2017 has seen the continuation of a series of Patent Office decisions that show a persistent gap between applicants’ expectations of what is patentable, and what IP Australia is willing to accept.  Two of these decisions, Todd Martin [2017] APO 33 and Rokt Pte Ltd [2017] APO 34 have now resulted in appeals to the Federal Court of Australia: Todd Martin v The Commissioner of Patents, QUD374/2017; and Rokt Pte Ltd v The Commissioner of Patents, NSD1292/2017.

Furthermore, in the most recent twist of fate for bemused patent applicants, the Patent Office appears to have adopted a version of the England and Wales Court of Appeals’ four-step test for patentable subject matter, as set out in Aerotel Ltd v Telco Holdings Ltd; Macrossan’s Application, [2006] EWCA Civ 1371 (Aerotel/Macrossan).  This approach has been applied in four of the decisions published so far this year rejecting CIIs.  Additionally, on 1 August 2017 the Patent Manual of Practice and Procedure (‘Examiners Manual’) was updated to make a variation of the Aerotel/Macrossan test the primary approach to examination practice in relation to patentable subject matter. 

It appears that IP Australia is continuing to ‘develop’ the law in this area, rather than following the ratio decidendi of the courts’ opinions, as it is bound to do.  It should come as no surprise, then, that this strategy has resulted in appeals to the Federal Court, which is the only way to establish whether the direction being taken by the Patent Office is ‘correct’ under the law.  And with 13 decisions – so far, in 2017 – rejecting claims to CIIs, there has been no shortage of opportunities for applicants to appeal!

19 November 2017

Sweet! Patent Office Finds Specification ‘Clear Enough and Complete Enough’ to Support Full Scope of Polypeptide Claims

Completing the puzzleThe Intellectual Property Laws Amendment (Raising the Bar) Act 2012 raised the standard of disclosure in a patent specification, requiring that it be ‘clear enough and complete enough for the invention to be performed by a person skilled in the relevant art’: Patents Act 1990, section 40(2)(a).  This change from the old ‘fair basis’ provision was intended to align Australian patent law with that of the UK and Europe, requiring the disclosure to be commensurate with the scope of the claims, i.e. that the description should be sufficient to enable the skilled person to perform the invention across the full width of the claims.

So far, there has been no judicial consideration of this new enablement requirement, and until recently there was just one Patent Office decision, CSR Building Products Limited v United States Gypsum Company [2015] APO 72, in which the Hearing Officer found that claims directed to light-weight, fire-resistant gypsum panels did not meet the required standard.  In particular, the panels were claimed in terms of their properties – core density, core hardness, Thermal Insulation Index, and fire resistance – however it was found that the specification did not provide a sufficient disclosure of how to achieve those properties, other than by manufacturing and testing samples.  In this particular case, there were a number of process and starting material parameters that could be varied, but no guidance in the specification on how to adjust these parameters to achieve the claimed properties with reasonable certitude.  (For more information on the CSR decision, see Disclosure and Support in Australian Patent Specifications: Raised Bar Trips Applicant in Opposition.)

As of 14 November 2017, however, we now have a second decision from the Patent Office on the ‘clear enough and complete enough’ requirement, this time in favour of the patent applicant: Evolva SA [2017] APO 57.  In this case, the claims relate to ‘methods and materials for enzymatic synthesis of mogroside compounds, and in particular to glycosylating mogrol using Uridine-5’-diphospho dependent glucosyltransferases (UGTs).’  While that might make sense to  biotechnologist, for the rest of us the invention basically covers methods of making compounds similar to those that are naturally-occurring in the fruit of the vine siraitia grosvenorii (luo han guo or monk fruit), which is native to China and Thailand.  The extract of this fruit is 300 times sweeter than sugar, and thus can be used as a low calorie sweetener.

Evolva’s claimed method involves using an enzyme (polypeptide) to catalyse a reaction resulting in the desired mogroside compounds.  Effective polypeptides are defined in the patent specification in terms of five amino acid sequence listings.  However, the claims are not limited to these sequences, but are drafted to encompass polypeptides ‘having at least 90% sequence identity’ to the sequences set out in the listings.  The examiner had objected that the specification did not provide a ‘principle of general application’ which would enable the invention across its full scope, and that the skilled person would therefore need to produce and test every polypeptide having up to a 10% difference from the listed sequences in order to determine which would work, and which would not.  Therefore – the examiner concluded – the claims were not enabled across their full scope, and the ‘clear enough and complete enough’ requirement of section 40(2)(a) was not satisfied.

While this case might seem, at first blush, to be analogous with the CSR decision, the Hearing Officer here reached the opposite conclusion, overruled the examiner’s objections, and directed that the application proceed to acceptance.  The case demonstrates how the question of what constitutes an enabling disclosure is very much specific to the technology at issue, and to the skills and abilities of the person skilled in the art.  It also provides useful further guidance, in the absence of any judicial consideration as yet, on how the Patent Office will approach application of the ‘enablement’ requirement in section 40(2)(a) of the Patents Act 1990.

12 November 2017

Compelling Applicants to Identify ‘Technical Features’ of Inventions Claimed in Australian Patent Applications

Technical featuresAs I have reported previously, a consultation process in currently underway in relation to a number of recommendations accepted by the Australian Government following the Productivity Commission’s Report on its Inquiry into Australia’s Intellectual Property Arrangements (‘PC Report’)IP Australia has issued a number of consultation papers, and written submissions from interested stakeholders are due by this Friday, 17 November 2017.

The primary concern of the economists making up the PC committee that conducted the IP inquiry, with regard to patents in particular, is that rights are granted too readily in Australia, resulting in an excessive number of ‘low-value’ patents being granted.  When the PC economists refer to ‘low-value’, what they mean is that the innovations protected by the patents have low social or additional value.  The Report explains these characteristics in the following terms (see pages 200-1 of the Report):
  1. innovations are of greater social value where they result in new goods, services, or production methods that improve the allocation of society’s limited resources, particularly where those innovations advance human knowledge and create knowledge spillovers into other areas of the economy;
  2. innovations are additional where they would not have been developed or commercialised (or development would have been delayed) absent patent protection – noting that (at least according to some economic theories of the patent system) patents for innovations that are not ‘additional’ impose net costs on the community even if the innovation is socially valuable.
As a result of these concerns, the PC wants Australian patents to be harder to obtain (or, in the case of innovation patents, impossible to obtain).  The primary mechanism proposed by the PC for achieving this objective is to raise the standard of inventive step, possibly by imposing conditions that are unique among the world’s patent systems, such that the requirements in Australia are at least as high as, and preferably higher than, those existing in other jurisdictions.

To this end, the PC has recommended that applicants for patents in Australia should have to identify the technical features of the invention in the patent claims.  It has conceived of this as a new obligation, over and above existing legal requirements for patent claims in Australia, having a goal of improving the information available to examiners for identifying relevant prior art and assessing inventive step.  Furthermore, the PC believes – and IP Australia appears to have accepted – that this is an existing additional requirement under European patent law, and that it will impose a minimal burden upon most applicants.

In my view, however, the PC’s proposal is fundamentally misconceived.  In saying this, I mean no disrespect to the Commissioners.  They were handed an impossible task by the Government – given just 12 months to understand, review, and recommend reforms to Australia’s IP arrangements across the whole gamut of relevant rights, including patents, copyright, trade marks, registered designs, plant breeder’s rights, and circuit layout rights.  Consider, however, that after focussing primarily on patent law and practice continuously for over 15 years of my working life, I still find inventive step to be a difficult and constantly shifting topic.  When looked at from this perspective, the PC did a remarkable job.  But it would be wrong to think that all of its pronouncements are authoritative and beyond reproach.

IP Australia has offered three alternative proposals for implementing the PC’s recommendation, one of which requires change to substantive legal requirements for patent validity, while the other two would primarily involve changes in examination practice.  Unfortunately, because the recommendation itself is flawed, I do not consider any of these proposals to be acceptable.  Legislative change would create uncertainty and have possible unintended consequences, whereas changes in practice without the backing of legislation would be liable to challenge as being inconsistent with existing law.

05 November 2017

New Online Register Exposes IP Australia’s Policy Concerns

Online engagementA few weeks ago, following the release of the Government’s response to the Productivity Commission inquiry into Australia’s intellectual property arrangements, IP Australia published a beta version of its ‘policy issues register’ online.  Publication of the register is an initiative by IP Australia under the Open Government National Action Plan, and is intended to enhance public participation in government decision-making.

While many interested stakeholders in the Australian IP system would be aware of active enquiries, consultations, and legislative reform – such as the ongoing consultations into various matters, including raising the standard of inventive step under the Australian patent law, and on the proposed draft Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill and Regulations 2017 – up until now there has been little insight available into other issues and concerns that may have been occupying the policy wonks at IP Australia.

This is changed by the new online register, which is a list of issues that IP Australia is considering or working on for policy action or legislative amendment.  The issues may relate to any of the IP rights administered by IP Australia, i.e. patents, trade marks, designs and plant breeder’s rights (but, notably, not copyright, which falls within the responsibilities of the Department of Communications and the Arts). 

Issues listed in the register may come to the attention of IP Australia as a result of:
  1. government priorities;
  2. recommendations from IP related reviews;
  3. stakeholder suggestions;
  4. international developments; or
  5. internal proposals.
The current beta release of the online policy issues register will run until 16 March 2018, after which IP Australia plans to conduct a review in response to any input from the public.  In the meantime, it is possible to provide feedback on each individual issue via an accompanying form, to submit new policy issues for consideration, and to submit comments on the beta policy issues register itself.

Below, I highlight just a few of the patent-related areas in which IP Australia’s ongoing policy concerns are revealed by the online register.

29 October 2017

The Impending Extinction of the Australian Innovation Patent

Last ThylacineThe photograph accompanying this article is of ‘Benjamin’, the last known thylacine (commonly known as the Tasmanian tiger), which died in captivity in the Hobart zoo, most likely as a result of neglect, on 7 September 1936.  Benjamin had been captured in 1933, three years after the last thylacine known to have been shot in the wild was killed by a farmer.  Indeed, a major contributor to the thylacine’s extinction was its inconvenience to farmers.  As the largest carnivorous marsupial of modern times, the thylacine was blamed for the slaughter of livestock, and between 1888 and 1909 the Tasmanian government paid £1 per head for dead adult animals and ten shillings for pups – which was a lot of money at the time.

The innovation patent is another unique Australian creature that is about to become extinct at the hand of government policy.  Unfortunately for the innovation patent, it has become a great inconvenience to economists, within IP Australia and at the Productivity Commission, who believe that the system, and in particular the low threshold for the innovative step, contributes to low value patents, which they blame for the imposition of unacceptable costs on the community.  IP Australia has now published draft legislation and rules (the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill and Regulations 2017) including measures to implement aspects of the Government’s response to the Productivity Commission’s inquiry into Australia’s Intellectual Property arrangements.  These measures include the abolition of the innovation patent which will, if the draft legislation becomes law in its current form, go out like the thylacine, not with a bang but a whimper, dwindling slowly away over eight years after the last shot has been fired against it. 

Of course I am aware that the extinction of an entire species is a tragedy of criminal proportions, and that comparison with the mere repeal of a second-tier patent system is hyperbole of the highest order.  But I am using this rhetorical device to highlight the analogous manner in which government policy is driven in each case by a single perspective on the problem at hand.  Both the thylacine bounty and the abolition of the innovation patent are the result of governments acting on input provided by particular interest groups, i.e. farmers and economists respectively.  Just as the 19th century was a different time, when there would have been little public interest in, or opposition to, the culling of a unique native animal to protect farmers’ livelihoods (and the food supply), there is today very little interest from the broader community in challenging economists’ views on what is best for Australia’s innovation and intellectual property systems.

Economic modelling has become one of the primary drivers of so-called evidence-based policy-making, despite the fact that very few people (including most, if not all, politicians) could claim to understand the economists’ models, assumptions, or the statistical methods used to produce their ‘evidence’.  In fact, economic models rarely make reliable predictions, even when they fit past data well.  Just this past week, the deputy governor of the Reserve Bank of Australia has conceded that the Bank can only ever predict even the most basic economic indicators within a wide margin of error and that, ‘not surprisingly, forecast misses are more common than not’.  If the country’s top central bankers cannot predict headline figures like economic output and inflation with any precision, what prospects do economists have of predicting the long-term impact of different options within the Australian patent system on national innovation and productivity?

Sadly, we will never know if there was a solution better than ‘termination with extreme prejudice’ to the problems posed by either the thylacine or the innovation patent.  But, once we accept that the innovation patent must and will die, IP Australia’s current proposal seems like a soft option.  I say that if we are going to abolish the innovation patent, it should be done as swiftly and decisively as possible!

22 October 2017

Patent Applicants Are the Most Prolific Patent Opponents

Arm WrestleA few weeks back I looked at the geographical origins of participants in Australia’s patent opposition system, finding that Australian residents are overwhelmingly the most likely to oppose patents, and proportionately the most likely applicants to be opposed (although, numerically, US-originating applications are opposed slightly more often).  Under the current Australian law, anyone can oppose the grant of a standard patent, or the certification of an innovation patent, for any reason, although it is reasonable to suppose that most oppositions are filed by companies or individuals with concerns about prospective infringement.  It is, of course, perfectly possible to infringe somebody else’s patent without having had any prior involvement with the patent system.  There is certainly no requirement to have any patents or applications of your own in order to be at risk of infringement, or to have reason to wish to oppose a competitor’s application or patent.

Nonetheless, from analysing data available in the 2017 edition of IP Australia’s IP Government Open Data (IPGOD) set, I have found that one thing that the vast majority of patent opponents have in common is that they are also the owners of their own patents and/or applications.  Of 1,234 oppositions to standard patents (under section 59 of the Patents Act 1990) and to innovation patents (under section 101M) between 2004 and 2016, an overwhelming 82% were filed by entities (which I shall call ‘applicant-opponents’) that also filed at least one patent application during this period. 

Furthermore, while applicant-opponents made up only 0.33% of all patent applicants, they were collectively responsible for filing 6.6% of all Australian patent applications between 2004 and 2016.  The top 30 patent filers over this time includes 10 applicant-opponents. 

In one respect, this is not a surprising discovery.  Parties that are engaged with the patent system in one aspect (e.g. as patent applicants) are presumably more likely to be engaged in  range of other aspects, such as searching of patent registers and databases, monitoring their competitors’ patenting activities, identifying and watching applications that may present an infringement concern, and opposing in cases where it is deemed to be worthwhile in order to mitigate risk or curb overly-expansive patent claims.

On the other hand, as I have already noted anybody can become an infringer, whether wittingly or unwittingly.  It is therefore a little disturbing that the opposition data indicates that parties without patents or applications of their own appear to take little interest in the risks potentially presented by their competitors’ patent applications.

15 October 2017

Australian Patent Law Contains, Includes, and Comprises Dangers for Foreign Applicants

Balancing ActIt is the function of a patent claim to define the scope of the invention protected by the patent.  Infringement occurs when an accused system, article, or process is covered by the particular terminology used in a patent claim.  Many inventions are combinations, e.g. a system, article, or process made up of two or more elements, components, or steps that work together to provide some new and useful function or result.  Claims directed to such inventions must therefore recite the relevant combination.

A generic example of a combination claim is: ‘a widget including element A, element B, and element C.’  In this example, the word ‘including’ is a transitional term signifying that what follows is a list of elements, each of which must be present in a widget that falls within the scope of the claimed invention.

The choice of transitional terms in combination claims can be significant.  To illustrate, if I tell you that my breakfast this morning included coffee and toast, you would probably not assume that this was necessarily the entire content of my breakfast.  My statement would be true if I also had cereal and juice.  Similarly, if I were to add that my coffee contained milk, you might suppose that I could also have added sugar.  On the other hand, if I were to say that my breakfast consisted of coffee and toast, you would naturally understand me to be saying that this is all that I had for breakfast today.

But what if I were to tell you that my breakfast comprised coffee and toast?  If you are a patent attorney, and you know that I am also a patent attorney, then in all likelihood you would understand that I am not excluding the possibility that my breakfast included other elements.  If you are not a patent attorney, then you might think it odd that I would choose an uncommon and potentially confusing word like ‘comprised’, when I could just as easily have been clear and said ‘included’ or ‘consisted of’.

The fact is that in a number of major jurisdictions the transitional term ‘comprises’ (and variations, such as ‘comprising’) is essentially regarded as a ‘term of art’ in patent drafting.  The US Patent and Trade Marks Office Manual of Patent Examining Procedure, Section 2111.03, lists a number of rulings of the US Court of Appeals for the Federal Circuit (CAFC) to the effect that the term ‘comprising’ is ‘inclusive or open-ended and does not exclude additional, unrecited elements or method steps.’  In the 1997 case of Genentech, Inc. v Chiron Corp. 112 F.3d 495 the CAFC expressly stated that: ‘”Comprising” is a term of art used in claim language which means that the named elements are essential, but other elements may be added and still form a construct within the scope of the claim.’  Similarly, the European Patent Office Guidelines for Examination, Part F, Chapter 4, Section 4.21, states that: ‘While in everyday language the word “comprise” may have both the meaning “include”, “contain” or “comprehend” and “consist of”, in drafting patent claims legal certainty normally requires it to be interpreted by the broader meaning “include”, “contain” or “comprehend”.’

Internationally, then, the settled expectation of many practitioners drafting patent specifications and claims is that the words ‘comprises’ and ‘comprising’ can safely be used to indicate that the elements or steps recited in a combination are not intended to be exhaustive.  Thus a claim defining ‘a widget comprising element A, element B, and element C’ will be infringed not only by an unauthorised widget consisting only of elements A, B, and C, but by widgets including these elements along with one or more additional elements that are not essential to the functioning of the claimed invention.

Those international practitioners may therefore be surprised to learn that ‘comprises’, and its variants, enjoy no such presumption of non-exhaustiveness in Australia, as a judge of the Federal Court of Australia recently reminded us in Nichia Corporation v Arrow Electronics Australia Pty Ltd (No 4) [2017] FCA 864.

01 October 2017

Users of the Australian Pre-Grant Patent Opposition System

SparringAustralia has a pre-grant patent opposition system, meaning that an opportunity is provided after a standard patent application has been approved by an examiner, but before a patent is actually granted, for third parties to raise objections.  Specifically, once an application has be accepted for grant, the accepted specification is published and there is then a three-month period during which anybody who believes that the granted patent would be invalid (wholly, or in-part) may file a notice of opposition.  The filing of such a notice commences the formal opposition procedures defined in the Australian Patents Act 1990 and Patents Regulations 1991, which are described in greater detail in this earlier article.  It is also possible to oppose an Australian innovation patent, via a similar procedure.  However, since innovation patents are initially granted quickly, without substantive examination, and can only be opposed after examination and certification, the corresponding opposition proceedings are necessarily initiated post-grant.

The World Intellectual Property Origanization (WIPO) web site includes a handy primer on opposition systems, which suggests that pre-grant systems are relatively uncommon in the developed world, with Australia being counted among such IP luminaries as Costa Rica, Honduras, Mongolia, Pakistan, and Zambia in providing for pre-grant opposition proceedings.  Although the completeness of the WIPO summary is questionable – it does not, for example, include New Zealand, which has a pre-grant system similar to Australia’s – it is certainly true that none of the so-called ‘IP5’ offices (i.e. the European Patent Office, Japan Patent Office, Korean Intellectual Property Office, State Intellectual Property Office of the People's Republic of China. and the United States Patent and Trademark Office) has such a system.  Other than Australia and New Zealand, it appears that the most significant countries having pre-grant opposition systems are India, Spain, and Portugal.

So, who uses the Australian pre-grant patent opposition system?  Using data available in the 2017 edition of IP Australia’s IP Government Open Data (IPGOD) set, I have analysed information on oppositions to standard and innovation patents commenced since 2004 (when the IPGOD opposition records commence).  This analysis shows that:
  1. Australians are overwhelmingly the most common participants in opposition proceedings, with Australian-resident companies or individuals having filed 771 oppositions, and Australians being applicant and/or opponent in two-thirds of all oppositions filed;
  2. Australians are almost equally likely to oppose applications by other Australians (261 oppositions filed) and by US residents (262 oppositions filed);
  3. the US is the second most common origin of opponents (258 oppositions filed), and US-resident companies or individuals are involved, as applicant and/or opponent, in around one-third of all oppositions;
  4. in terms of absolute numbers, US-resident applicants are the most common targets of opposition proceedings (453 cases), however this largely reflects the fact that US residents are by far the largest users of the Australian patent system – in relative terms, Australians are the most likely to be opposed, with oppositions being filed against just over 2% of all accepted applications naming Australian applicants;
  5. the Australian opposition system is rarely used by residents of countries other than Australia and the US, with the next most common origins of opponents being New Zealand (45 cases), Germany (34 cases), and the UK and Denmark (tied on 21 cases each);
  6. even accounting for the generally low usage of the Australian opposition system other than by Australians and US residents, Japan is a notable anomaly – while Japanese applicants were the second largest beneficiaries of the Australian patent system between 2004 and 2016, receiving over 17,500 patents, Japanese applications were opposed only 22 times, and Japanese residents were responsible for only nine oppositions during this period; and
  7. other than relatively high usage by Australians and New Zealanders, and the notably low usage by Japanese, residents of other countries tend to use the Australian opposition system in fairly consistent proportion with their use of the Australian patent system.

11 September 2017

Australian Government Commences Consultation on Proposed Patent Law Reforms

OptionsThe Australian Government recently issued its response to the Productivity Commission’s final report on its Inquiry into Australia’s Intellectual Property Arrangements, indicating support for a number of the Commission’s recommendations.  IP Australia has now published a set of consultation papers discussing proposed implementation of the Government’s response to a number of recommendations in the report, as well as a 2013 report by the Commission on Compulsory Licensing of Patents.  Four of the five consultation papers that have been released relate to patents, and address: amending inventive step requirements; introducing an objects clause into the Patents Act 1990; amending the provisions for Crown use of patents (and designs); and amending the provisions for compulsory licensing of patents.  (Additionally, a fifth paper addresses introducing divisional applications for international trade marks.)

Written submissions in response to questions presented in the consultation papers are due by Friday 17 November 2017, and should be sent via email in Word, RTF, or PDF format to consultation@ipaustralia.gov.au.

It is presently intended that legislative amendments relating to the issues discussed in the consultation papers be included in a Bill for introduction to Parliament in 2018.  Prior to this, it is expected that there will be further consultation on an Exposure Draft of the proposed amendments.

IP Australia will conduct further consultation on other measures covered by the Government’s response to the Productivity Commission’s report – including  phasing out of the innovation patent system – later in 2017, with a view to introducing corresponding further amendments in a Bill as soon as possible.

04 September 2017

Proposed Code of Conduct for Trans-Tasman Attorneys Risks Unintended Adverse Consequences for Firms and Clients

Red TapeFollowing publication of a consultation paper in April 2017, the Trans-Tasman IP Attorneys Board (TTIPAB) – the regulatory body formerly known as the Professional Standards Board for Patent and Trade Marks Attorneys – has now released a Draft Code of Conduct 2018 (‘draft Code’), Draft Guidelines to the Code of Conduct 2018, and Explanatory Notes for public consultation.  The draft Code and other documents, including the original consultation paper, and non-confidential submission received in response, can be found on the TTIPAB web site.

In many respects, the draft Code is an update and improvement on the existing Code of Conduct for Patent and Trade Marks Attorneys 2013, that codifies what most in the IP professions would regard as good ethical and business practice, and plain ‘common sense’.  For example, the draft Code confirms, in a new section 19(1), that ‘a registered attorney is a fiduciary in respect of the registered attorney’s dealings with a current client, and owes a duty of loyalty to a current client’, which is the basis upon which most attorneys have conventionally operated anyway.  Additionally, it draws on comparable international regulations, and in particular the UK Rules of Conduct for Patent Attorneys, Trade Mark Attorneys and Other Regulated Persons, to ensure that the standards applicable to patent and trade marks attorneys in Australia and New Zealand are on-par with the expectations of corresponding professionals in other jurisdictions.

Unsurprisingly, given recent developments in the Australian profession, the main area in which the draft Code includes provisions that are specific to local circumstances is that of firm ownership.  In particular, the draft Code seeks to specifically regulate the way in which Trans-Tasman (i.e. Australian/NZ) attorneys communicate their legal and ownership structures to clients.  In the specific case that an attorney firm is a member of what the draft Code calls an ‘ownership group’ – i.e. two or more firms, often operating independently at least in relation to the provision of attorney services, and having a common owner – the draft Code proposes further obligations to obtain written consent of clients when separate firms within the group act on opposing sides in certain contentious matter.

While the draft Code represents an improvement upon the current Code in many respects, the provisions relating to business structures and ownership groups are unprecedented, and very much influenced by the recent developments in the IP professions in Australia.  As such, I am concerned that they are unduly prescriptive, and have the potential to create unintended (although certainly not unforeseeable) consequences.  In particular, draft provisions relating to client communications are likely to place unduly onerous obligations not only upon Australian and NZ attorneys, but also upon the foreign attorneys with whom they work, and those attorneys’ clients, around the world. 

Furthermore, draft provisions relating to independence of firms within an ownership group may actually have the unintended effect of encouraging firms to form alternative structures.  This could involve mergers of firms, leading to an actual reduction in competition and choice in the marketplace for IP services, or it could involve the development of new structures that have perhaps yet to be imagined.

It is my opinion that a Code of Conduct for attorneys should focus on the fundamentals.  If appropriate ethical obligations are in place, that apply to individual registered attorneys, attorneys who are partners/directors of firms, and incorporated attorneys, then desirable behaviours can be expected – and undesirable behaviours can be addressed through disciplinary proceedings – regardless of legal and ownership structures.  It is not the role of the Code of Conduct to regulate how attorneys go about the day-to-day operations of their businesses, so long as the interests of clients are adequately protected.

As I will explain in this article, I therefore consider that the draft Code is, in some respects, unduly prescriptive.  I anticipate that firms operating within ownership groups will share this view.  However, even independent attorneys should be concerned that the draft Code, if brought into force, would oblige them to communicate information regarding their legal and ownership structure to all clients – domestic and foreign – for whom they act.

Written submissions in response to the draft Code are due by 28 September 2017, and should be sent via email to MDB-TTIPABCodeofConduct@ipaustralia.gov.au.

28 August 2017

Vale Innovation Patent – Australian Government Responds to Productivity Commission IP Report

Sad sackThe Australian Government has issued its response to the Productivity Commission’s final report on its Inquiry into Australia’s Intellectual Property Arrangements, indicating its support for a number of the Commission’s recommendations.  In the area of patents in particular, the Government intends to implement recommendations to further amend the law in relation to inventive step, introduce an ‘objects clause’ into the Patents Act 1990 and ‘phase out’ (i.e. abolish) Australia’s contentious second-tier right, the innovation patent.  It has also indicated its support for a proposal that ‘IP Australia should reform its patent filing processes to require applicants to identify the technical features of the invention in the set of claims’, although it is unclear at this stage exactly what form the implementation of the recommendation will take.

The Government has largely rejected recommendations of the Productivity Commission to set patent fees to promote broader intellectual property policy objectives (as opposed to the current objective of recovering the costs of running the Patent Office), and to restrict the availability of extensions of term for patents relating to pharmaceutical products.  It has, however, indicated support ‘in principle’ for the introduction of a system for transparent reporting and monitoring of settlements between originator and generic pharmaceutical companies to detect potential ‘pay for delay’ agreements, modelled on the US system.

As I will discuss further in this article, the demise of the innovation patent has been on the cards for some time, and is now all but inevitable.  Adding an objects clause to the Patents Act may be little more than window-dressing.  Much will depend on how it is worded (and the Productivity Commission’s proposal will not be popular), and then how much weight it is given by the courts (which might, I would suggest, be very little).  Further enhancing the inventive step standard, which the Productivity Commission has suggested should be based upon the European model, is not hugely controversial, in my opinion. 

As I shall endeavour to explain, however, if there is to be a fight over any of the proposed reforms it is most likely to be over the requirement to identify ‘technical features’ in patent claims.  In combination with raising the inventive step standard to the highest possible level, I believe that this recommendation reflects the Productivity Commission’s general antipathy to the idea that the patent system provides any net economic benefit to Australia, and its belief that patents should therefore be as difficult to obtain as is practicable.  But the potential consequences of a new, and unique, requirement for Australian patent claims could be far-reaching, and detrimental to Australian innovators.

18 August 2017

Extensions of Term for ‘Swiss-Style’ Claims Involving Recombinant DNA Technology? Federal Court Says ‘No’!

Matterhorn SunsetA Full Bench of three judges of the Federal Court of Australia has overturned an earlier decision of the Administrative Appeals Tribunal, and has ruled that extensions of patent term are not available for second and subsequent medical uses of pharmaceutical substances that are produced by recombinant DNA technology: Commissioner of Patents v AbbVie Biotechnology Ltd [2017] FCAFC 129 (AbbVie).  In particular, the court found that so-called ‘Swiss-style’ claims are not directed to pharmaceutical substances, and therefore cannot be the subject of a term extension, even if they involve the use of pharmaceutical substances that have been ‘produced by a process that involves the use of recombinant DNA technology’ (to use the terminology of section 70(2)(b) of the Patents Act 1990).

In Australia, the normal maximum term of a patent, i.e. 20 years from its original filing date, can be extended by up to five years in the case of certain pharmaceutical products, to compensate for the time that is typically required to complete trials and obtain the regulatory approvals necessary to actually commence marketing of a commercial drug.  Generally, extensions are available only for patents covering the pharmaceutical substances themselves – patents on methods of making or using the substances are not extendible (section 70(2)(a)).  The one exception to this rule relates to the use of recombinant DNA technology in the production of a pharmaceutical substance (section 70(2)(b)).

The term ‘recombinant DNA’ (rDNA) refers to a process of bringing together genetic material from multiple sources to create gene sequences that are not present in nature.  One well-established medical application of rDNA technology is the production of human insulin for the treatment of diabetes.  By inserting the human insulin gene into a bacterium (such as E. coli) or yeast, the resulting organism becomes a biological insulin factory.  Insulin produced in this way has almost completely replaced the use of insulin from animal sources, such as pigs and cattle. 

The Australian extension of term provisions implement a policy under which even though a pharmaceutical substance (such as insulin) may already be known, a patent directed to the (known) substance when made by a new process involving the use of rDNA technology can nonetheless be awarded an extension of term.  This provides an additional patent incentive for companies to invest in research and development of recombinant techniques for production of medications.

AbbVie Biotechnology Ltd (‘AbbVie’) owns a number of Australian patents relating to a pharmaceutical substance known as adalimumab, marketed under the name HUMIRA, which is produced by a process of rDNA technology.  The drug was originally approved in Australia in 2003, for treatment of rheumatoid arthritis.  It was subsequently demonstrated to be effective for the treatment of rheumatoid spondylitis, Crohn’s disease and ulcerative colitis, and was approved for use in treating these further conditions in 2006, 2007 and 2013, respectively.  AbbVie has patents covering these further medical uses of HUMIRA, each of which includes ‘Swiss-style’ claims.

AbbVie applied to the Australian Patent Office to extend the terms of its three further medical use patents, however a Deputy Commissioner of Patents determined that they were not eligible for extensions of term under section 70(2)(b).  AbbVie appealed to the Administrative Appeals Tribunal of Australia (‘Tribunal’), which reversed this aspect of the Deputy Commissioner’s findings, deciding that Swiss-style claims can form the basis for an extension of patent term.  Nonetheless, AbbVie’s applications for extension of term were still rejected, because the Tribunal agreed with the Deputy Commissioner that they had not been filed within the applicable time limits.

The Commissioner of Patents appealed the Tribunal’s findings in relation to the eligibility of Swiss-style claims to the Federal Court, which has allowed the appeal, and affirmed the Deputy Commissioner’s original decision.  This does not surprise me greatly – when I wrote about the Tribunal’s decision last year, I said that I believed it to be wrong, and that I thought it quite likely that the Commissioner would appeal.

13 August 2017

Principles of Patent-Eligibility Continue to Trouble Applicants and Examiners in Australia

BorderlineThe law in Australia regarding patent-eligibility of computer-implemented inventions was supposedly ‘settled’ in May 2016, when the High Court rejected an application for special leave to appeal against a decision of the Full Bench of the Federal Court of Australia, thus leaving Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 and Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 as – for the moment, at least – the last word on the subject.  Yet, clearly, patent applicants and the Australian Patent Office continue to disagree on what, exactly, these decisions mean in particular cases.  In July 2017 alone, there were four decisions issued by the Patent Office resulting from hearings relating to objections against alleged computer-implemented inventions on grounds that each was not for a ‘manner of manufacture’, i.e. patent-eligible subject-matter under Australian law.

In Todd Martin [2017] APO 33, claims directed to a system and method for tracking usage of athletic equipment of an athlete using a GPS-enabled device and a computer server were refused.  In Rokt Pte Ltd [2017] APO 34 claims directed to a computer implemented method for linking a computer user to an advertising message by way of an intermediate engagement offer were refused, following the applicant’s efforts to amend in view of an earlier decision in Rokt Pte Ltd [2016] APO 66.  The claims at issue, and which were also refused, in Discovery Life Limited [2017] APO 36 were directed to a computer implemented method for of managing a life insurance policy with a related medical scheme.  Finally, in Bio-Rad Laboratories, Inc. [2017] APO 38, an examiner’s objections against claims directed to a method of establishing a statistically valid assay mean and assay range for a particular lot of a quality control material were upheld by the Hearing Officer, although Bio-Rad has been provided with an opportunity to amend its application to try to overcome the objections.

I am not particularly surprised by the outcomes in Todd Martin, Rokt, or Discovery Life.  This is not to say that they are necessarily correct – I have not spent the time to review the patent specifications in the detail that would be necessary to form a considered view on the matter.  However, on its face each of the three decisions is consistent with the principles set out in Research Affiliates and RPL Central, i.e. the claims appear to recite the use of generic computer technology as a practical implementation tool, and if this generic technology is disregarded, what is left is a scheme, abstract idea, or business process of the kind that has not generally been regarded as patent-eligible.  The Full Court in RPL Central was very clear about the treatment of such cases: ‘Where the claimed invention is to a computerised business method, the invention must lie in that computerisation. It is not a patentable invention simply to “put” a business method “into” a computer to implement the business method using the computer for its well- known and understood functions’ (at [96]).

Bio-Rad, however, is a different matter.  While the invention in this case involves the development and use of a new statistical analysis procedure, which is conveniently implemented by using a computer for its well-known and understood ability to store information, and to perform computations more rapidly and accurately than a human calculator, it is not apparent that disregarding the computer-implementation leaves only patent-ineligible subject matter.  On the contrary, regardless of how the invention is implemented – and even if it were carried out by a person using a pen and paper for calculation – it would still provide significant economic and technical advantages in terms of reduced cost and resource consumption/wastage in the production of quality control material for use in medical testing.

This is not to say that there are no issues with Bio-Rad’s claims – it is certainly arguable that they are overly broad, and encompass subject matter that does not provide the stated advantages of the invention.  However, these are not conventionally eligibility issues, and it is therefore not clear how or why patent-eligibility came to be the central question in the Bio-Rad case.  This suggests to me that the Patent Office is continuing to grapple with the principles of patent-eligibility set out in Research Affiliates, RPL Central, and D’Arcy v Myriad Genetics Inc [2015] HCA 35, and that applicants therefore still cannot expect predictable or consistent outcomes as examiners endeavour to apply these principles on a case-by-case basis.

06 August 2017

The Meteoric Rise and Spectacular Fall of Damages for Unjustified Threats of Patent Infringement

Unjustified Violent ThreatOn 19 August 2016, a single judge of the Federal Court of Australia issued a ruling awarding damages of A$1,506,859 against the Australian Mud Company Pty Ltd for making unjustified threats of patent infringement proceedings against Coretell Pty Ltd: Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 7) [2016] FCA 991.  Less than a year later, however, a different judge has ‘reluctantly’ dismissed a claim for damages allegedly arising from threats of infringement proceedings made to the public at large via a trade publication: Mizzi Family Holdings Pty Ltd v Morellini (No 3) [2017] FCA 870.  This follows a decision in March of this year, by a Full Bench of the Federal Court on appeal, overturning the Australian Mud damages award.

I first wrote about the Mizzi Family Holdings litigation back in January 2014, following the initial findings in December 2013 of a single judge of the Federal Court that the respondent, Daryl Morellini, had not infringed an innovation patent for a ‘cane billet planter’ owned by Mizzi, and that all prior threats of infringement proceedings were therefore unjustified.

The first relevant threat in the Mizzi case had not been made directly to Morellini, but rather had been directed to the cane growing industry more generally through the combination of an advertisement and an article that appeared in the Canegrowers Magazine of 5 April 2010.  The advertisement had been placed by Mizzi, and included a notice of its patent application.  The article was authored by one Mr Terry Hurlock of Invention Pathways Pty Ltd, who had worked in conjunction with Mizzi’s patent attorneys, and was entitled ‘Infringement Danger’.  This juxtaposition of the advertisement identifying the patent application with the article warning about the potential consequences of infringement was found by the court to constitute ‘unjustifiable threats’, in the circumstance that the patent was not actually infringed.  A second threat was said to have been made in June 2011, after another cane grower, one Mr Girgenti, used Morellini’s planter, and Mizzi made a verbal allegation of infringement and demanded the payment of a royalty.

The initial decision in the Mizzi case was followed by a second judgment of the primary judge, on questions of costs and declaratory relief in relation to the unjustified threats (Mizzi Family Holdings Pty Ltd v Morellini (No 2) [2014] FCA 807), an appeal to a Full Bench of the Federal Court, decided in February 2016 (Morellini v Mizzi Family Holdings Pty Ltd [2016] FCAFC 13), and now the most recent decision on damages related to the threats.  Through all of this, the fundamental original finding of the primary judge – that the patent was not infringed – has remained undisturbed.

The major difficulty for Morellini in demonstrating damage was the requirement, emphasised by the Full Court in Australian Mud, to establish causation between the threats themselves and the damages claimed.  The court found (at [20]) that:

There is no direct evidence that anybody declined to deal with Mr Morellini as a result of the threats. It seems that even before the newspaper article on 5 April 2010, there was a degree of reluctance concerning any such dealings. That reluctance cannot have been attributable to the threats. Mr Morellini has not demonstrated that any adverse effect resulted from either of the threats. The newspaper article may well have been widely read within the sugar industry, but there is no reason to believe that the incident involving Mr Girgenti was a matter of common knowledge. Some people in the industry may have heard of it. In either case such knowledge may have reinforced previous perceptions, but that is largely speculative.

As we shall see, unjustified threats provisions were originally enacted to curb anticompetitive, abusive, coercive, or extortionate use of the patent system.  Yet here in Australia we have two recent cases of patentees acting apparently from a good-faith belief that their patents were valid and infringed, and with an arguable case to this effect at first instance and on appeal before a Full Court, in which the prosecution of unjustified threats claims clearly resulted in proceedings becoming significantly more protracted, complex, and costly, than they might otherwise have been.  For a brief period, we hit a high water mark for unjustified threats with a judge awarding over one and a half million dollars in damages, before this was sensibly and firmly reversed on appeal.  Ultimately, neither accused infringer received any award of damages.

How and why did this happen?  What is wrong with the Australian law in relation to unjustified threats that a Federal Court judge could make an astronomical seven-figure award of damages, when the correct sum was zero?  Or that the parties in long-running infringement proceedings would devote such resources to an argument that ultimately brought no benefit to any of them, under provisions that were not originally intended to apply in such circumstances?  And what can be done to fix this situation?

30 July 2017

Technology Specialisations of Australia’s Patent Prosecution ‘Powerhouse’ Firms

Power StationIn 2016, 24,331 patent applications were accepted for grant by IP Australia.  Based on the examination sections to which these applications were allocated, the top technology areas were mechanical engineering (11%), process engineering (10.6%), and construction and mining (9.8%).  And 80% of all these patent applications were handled by just ten firms.  The top three firms – Spruson & Ferguson, Davies Collison Cave, and Griffith Hack – account for over a third of all applications accepted in Australia.

The process of guiding an application through the examination process is commonly known as prosecution.  While local clients generally require a wider range of value-added services, such as advice on patentability and drafting of patent specification, over 90% of all Australian patent applications originate with overseas applicants that primarily require prosecution services.  And since Chapter 20 of the Australian Patents Act 1990 effectively gives registered patent attorneys an exclusive role in providing paid services to complete key tasks required for successful prosecution of a patent application, these services are the ‘bread and butter’ of many of the larger patent attorney firms in Australia.

In this article I will look at the ten firms that power four fifths of all Australian patent prosecution, and the areas of technology in which they operate.  It is important to appreciate, however, that this is not intended as a recommendation of the services these firms provide in relation to any particular technology.  Each firm in the top ten is large enough to employ attorneys with a range of technical backgrounds, and handles applications across all of the technology areas examined by IP Australia.  Self-evidently, far greater specialisation is found in smaller firms, which have fewer attorneys.  Small firms also tend to provide a greater proportion of their services to local Australian clients, and to engage in less of the high-volume incoming prosecution work on behalf of foreign applicants.  A number of smaller firms therefore appeared in my earlier analysis using filing data broken down to distinguish Australian small and large business applicants.  A firm’s experience, and success, in patent prosecution is therefore just one consideration among many in the selection of an Australian IP service provider.

23 July 2017

The USPTO Art Groups That Are Patent Application Purgatory

Reaching HandsA very common question asked by patent applicants is ‘how long will it be until I receive a patent?’  The usual legalese answer to this is, of course, ‘it depends’.  But upon what does it depend?  Some of the factors are within an applicant’s control, such as whether they request examination at the earliest opportunity (in jurisdictions where a separate examination request is required), whether they request expedited/accelerated examination (where it is possible to do so), and how quickly they respond to office actions, pay required fees, and so forth.  But after taking all of this into account, there is still a great deal that is beyond the control of the applicant.

Additional factors that can delay grant of a patent include the backlog of applications in the relevant patent office, the nature of any objections raised by the examiner, and the difficulty of overcoming the objections – either due to their inherent merit, or to the determination of the examiner to maintain the objections in the face of the applicant’s best efforts to present amendments and persuasive arguments.  After all this, however, if the applicant perseveres and is looked upon kindly by the fates, a patent will eventually issue.  But how long after filing will that happen?

The US Patent and Trademark Office (USPTO) has a goal of reducing the average value of what it calls ‘Traditional Total Pendency’ (TTP) to 20 months by 2019.  The TTP is defined as the time between the patent application filing date (which is the date of national phase entry in the case of an international application under the Patent Cooperation Treaty) and ‘final disposition’, i.e. issued as a patent or abandoned.  According to data that can be viewed via the USPTO’s Data Visualisation Center Patents Dashboard, the TTP as of June 2017 is 24.7 months.  However, this number really does not tell the whole story for many applicants.

For one thing, this TTP metric does not take into account applications in which a Request for Continued Examination (RCE) has been filed.  An RCE is typically necessary where an applicant has not managed to secure allowance of an application following a second round of examination, but is not ready to give up and abandon the application.  In many technical fields, the filing of at least one RCE in the course of examination is extremely common.  When RCEs are taken into account, the TTP sits at around 32 months.

Furthermore, ‘average pendency’ characterises the complex process of examination, which occurs across applications in all fields of technology, using just a single statistic, which can be very misleading.  As I will show in this article, average pendency (inclusive of RCEs) varies from 22 months in the fastest examination group to more than 57 months in the slowest (and that is assuming that a patent ever issues at all).  Additionally, the distribution of application pendency varies enormously between different technology groups.  In the slowest group, over an eighth of all applications that ultimately issue as patents take more than eight years to do so.  If your application ends up in that particular cohort, it is of little comfort to know that the average pendency in the group is less than five years!

For rapid processing of your US patent applications, the best fields to be in include semiconductor device fabrication, vehicular technology, telecommunications, and pharmaceuticals.  The worst (perhaps unsurprisingly) include fintech and e-commerce, genetic technologies, and surgical methods and devices.

16 July 2017

IP Firm Patent Filing Data Reveals a Tough and Competitive Market for Australian Attorneys

Professional CompetitionIn its Australian Intellectual Property Report 2017, IP Australia revealed that it received one percent fewer standard patent applications in 2016 than in the previous year. While this is first and foremost a bad sign for innovators, who are clearly finding it harder to justify spending on new products and services, and/or on patenting their developments, it is also not great news for Australian patent attorneys, who are operating in a very challenging business environment.  The silver lining, according to the IP Australia report, was that Australian resident applicants filed 15% more standard applications in 2016 compared with 2015.  You might expect that this would be good for the local patent profession.

However, my own analysis of data released by IP Australia in the Intellectual Property Government Open Data (IPGOD) 2017 reveals a less rosy picture.  Once innovation patents (down by over 4%) and provisional applications (up by just 0.2%, and twice as numerous as standard application filings) are taken into account, the growth in total Australian filings by Australian applicants is only 4%.  Furthermore, all of this is derived from the increase in standard applications, which generally represent the same work, and the same value (to both the applicant and the attorney) as a standard filing by a foreign-resident applicant.  For the most part, provisional applications – which represent the beginning of the patenting process in a majority of cases – are a more telling indicator of current and future innovative activities by clients, and thus of revenues for their attorneys.  Yet provisional filings by Australian entities last peaked in 2012, before declining by nearly 10% in 2013, and have yet to recover to their former high.

Many IP services firms are no different from other businesses, in that they want to generate growth in profits, and deliver value to shareholders – whether these be traditional partners/owners of the firm, a corporate holding company, or investors in a public share market.  With the Australian market for patent filing and prosecution services stagnating, growth must come through developing new service offerings, winning new clients away from competitors, and/or change and innovation within the firm to generate efficiencies, reduce costs, and grow the bottom line.  All of these strategies require investment, whether it be in internal development, marketing, or technology innovation.  It is hardly surprising, then, that some firms are pursuing innovative business avenues, such as public listings and acquisitions, to raise capital and build critical mass to make such investments.

A more complete analysis of Australian patent filing activity over 2015 and 2016 further reveals that:
  1. the top 10 Australian firms accounted for 65% of all patent filings in Australian in 2016
  2. members of publicly-listed groups dominate the top 10 overall, which includes only two independent firms;
  3. however, a more diverse picture emerges when looking specifically at filings by Australian applicants, who are significantly more likely to use the services of an independent firm, particularly if they are an individual rather than a corporate entity; and
  4. while there are many individual gains and losses in market share over the two years analysed, there is no sign (as yet, at least) of any general net tendency for clients to move in either direction between listed and independent firms.
Overall, the figures presented below reflect a dynamic and highly-competitive market for patent filing and prosecution services in Australia.  Fears that public ownership of some firms, and a degree of consolidation in the market, may adversely impact competition appear, for the present at least, to be unfounded.

09 July 2017

Canada Rightly Ditches the ‘Promise Doctrine’ for Utility, Australia Should Follow Suit

CanadaCanada is not a republic.  It is, like Australia, a card-carrying, fully paid-up, current member of the British Commonwealth.  Canada’s Head of State is the same nonagenarian resident of ‘Buck House’ who reigns over us here in Australia.  And while Australia and Canada thus have much in common historically, like most siblings we are growing apart as we grow older.  One further step in that direction was taken by the Canadian Supreme Court on 30 June 2017, when it banished the so-called ‘Promise Doctrine’ of inutility from Canadian patent law: AstraZeneca Canada Inc v Apotex Inc 2017 SCC 36.  In my opinion, Australia should do likewise, either via a similar pronouncement from the High Court or, failing that, through legislation.

The Australian Patents Act 1990 requires, in section 18(1)(c) and 18(1A)(c), that an invention must be ‘useful’ in order to be patentable.  This is also commonly known as the requirement for ‘utility’.  Failure to meet this requirement, i.e. inutility, is therefore a ground upon which a patent application may be rejected, or a patent revoked.  There was originally nothing in the Patents Act to explain exactly what is meant by ‘useful’, although since commencement of the Raising the Bar reforms on 15 April 2013 section 7A has specified that, aside from anything else it may mean, ‘an invention is taken not to be useful unless a specific, substantial and credible use for the invention (so far as claimed) is disclosed in the complete specification’.

Left to their own devices for an extended period of time, the English courts – and subsequently those of countries, such as Australian and Canada, that inherited their legacy – determined that one of the requirements for an invention to be useful is that it should fulfil any promise that may be made for it based upon a reading of the patent specification as a whole.  Furthermore, although there is arguably some inconsistency in the authorities on this point, if the specification makes multiple promises of utility then a claim will generally be invalid if the invention that it defines does not fulfil all of those promises.  In Australia, this principle was most recently demonstrated in Ronneby Road Pty Ltd v ESCO Corporation [2016] FCA 588, where Justice Jessup found all claims of an opposed patent application to be invalid for lack of utility because none would deliver each and every one of six advantages listed in the specification, notwithstanding that a number of the claims would deliver one or more of those stated advantages (see Utility Futility? Usefulness of Inventions and ‘Fatal’ Promises Made in Patent Specifications).

This version of the utility requirement is, in my view, self-evidently absurd.  For one thing, it means that a patent having a specification which makes no explicit statement of the advantages said to be provided by invention is less likely to be invalid for lack of utility than one which includes one or more express ‘promises’.  Additionally, where multiple uses are disclosed in a specification, there is absolutely no sound basis – and certainly no basis in the words of the Patents Act itself – for finding an otherwise valid claim to be invalid simply because, although it is useful, it is not useful for all of the purposes that the inventor has chosen to disclose.

Or, as the Canadian Supreme Court has now wisely stated:

The Promise Doctrine risks, as was the case here, for an otherwise useful invention to be deprived of patent protection because not every promised use was sufficiently demonstrated or soundly predicted by the filing date. Such a consequence is antagonistic to the bargain on which patent law is based wherein we ask inventors to give fulsome disclosure in exchange for a limited monopoly.

Now that our Canadian friends have demonstrated the ease with which this particular tie with the Mother Country can be cut, I can think of no good reason why Australia should not do likewise. 

02 July 2017

How ‘Rational’ Are Australian Patent Applicants?

SharkLast Tuesday night, I watched episode 2 of season 3 of the Australian version of the reality TV program for entrepreneurs seeking investors, Shark Tank.  The episode featured a husband and wife team, Margaret and Peter Powell, who were after funding for their ‘Catch’n’Release’ anchor retrieval system.  Their ingenious mechanism – that immediately impressed all of the ‘sharks’, along with many viewers including me – enables an anchor that has become caught under coral to be dislodged and retrieved without damaging the reef.  Everything was going along swimmingly, until the question of patent protection was raised, and the Powells revealed that a patent application was filed in 1999, and now has less than three years to run.  Four of the five ‘sharks’ very quickly declared themselves ‘out’.

This got me thinking about what motivates Australian innovators to file patent applications.  Obviously Peter Powell never intended that it would take him so long to develop and prototype his invention, or that it would be over 17 years and require the mentorship of a celebrity entrepreneur before he could finally secure a manufacturing deal and bring a product to market.  With the benefit of 20/20 hindsight, it is clear that the Powells would have been better served by waiting to apply for their patent until they were further along the development path.  No doubt, however, they would have had the usual concerns that the invention might be intentionally or inadvertently publicised, appropriated by someone, or independently developed elsewhere, if they did not move to secure their rights at the earliest opportunity.  In other words, they might have been motivated more by fear, uncertainty, and doubt, than by a rational business strategy.

When economists refer to ‘rational choice’, or ‘rational actors’, they are talking about a theoretical construct that is assumed to take account of available information, such as probabilities of events, and potential costs and benefits in determining preferences, and to act consistently in arriving at a self-determined best choice of action.  This is not, of course, how real people generally behave.  Real people often fail to obtain and take into account all of the available information, make little or no effort to determine probabilities, costs, and benefits, and allow their decisions to be swayed by emotional considerations.  Often, the more important the decision, the less likely it is that an individual will make a rational choice (in the economic sense). 

Large corporations, on the other hand, tend to perform somewhat better in the ‘rational choice’ stakes.  For example, a wealthy multinational corporation such as Google, IBM, Microsoft, or Apple, has little to fear over a decision about whether or not to file a patent application for a particular invention – the fate of its entire business hardly depends upon a single patent.  A corporation is better-served by developing a strategy or formula for determining when it will, or will not, file for patent protection, based upon extensive information, experience, and sophisticated advice to which it has ready access.

It therefore seems to me that if we want to know what ‘rational’ behaviour looks like when it comes to Australian patent filing, we should look at how foreign applicants (which accounted for 91% of all standard patent application filings in Australia in 2016, according to IP Australia’s Australian Intellectual Property Report 2017) act.  By comparing the behaviour of Australian applicants against this standard, we might be able to get a sense of just how rational, or otherwise, is their decision-making.

When I did this, I found that the behaviour of large Australian firms (defined as those having 200+ employees) very closely follows that of foreign applicants.  Small-to-medium enterprises (SMEs) appear to be slightly less rational, while private individual applicants (the category into which the Powells fall) exhibit significantly different, and clearly sub-optimal, behaviour.

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The Patentology Blog by Dr Mark A Summerfield is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Australia License.