18 June 2017

IP Australia’s Chief Economist on the Role of Economic Modelling, the Innovation Patent... and Perpetual Motion!

Benjamin Mitra-Kahn[Note: This is the third, and final, part of the transcript of my conversation last year with IP Australia’s Chef Economist, Benjamin Mitra-Kahn.  The first two parts were A Conversation with IP Australia’s Chief Economist and Talking ‘Data’ with IP Australia’s Chief Economist.]

The Australian innovation patent system has been under a cloud for some time, with first the (now defunct) Advisory Council on Intellectual Property (ACIP), and then the Australian Government’s Productivity Commission, calling for the system to be abolished.  The original source of evidence behind these calls was a report produced by IP Australia’s Office of the Chief Economist entitled The economic impact of innovation patents.  The report used Australian patent filing data, linked to company-level business information, to make the case that the innovation patent is not achieving the objective of stimulating innovation among Australian small and medium enterprises (SMEs).

Many patent professionals have a different perspective on this issue, albeit one that is strongly influenced by the particular cross-section of users of the innovation patent system that they encounter in their daily practice.  I recently read a ‘defence’ of the system by a New Zealand-based practitioner arguing, in essence, that innovation patents had been useful to a number of his clients, and he would be sorry if they were to be abolished.  While I believe that there is an argument to be made, based upon the data, that more weight should be given to attorney-represented SME applicants in assessing the worth of the innovation patent system, the kinds of ‘feelpinions’ expressed in that article do not, in my view, constitute a very useful contribution to the debate.

But if those at the coal face might have difficulty in seeing the forest for the trees (if you will pardon my carbon-based mixed metaphor), might it not also be the case that economists, with their penchant for aggregating and analysing data, could sometimes fail to see the trees for the forest?  Either way, it seems that a clash of cultures has arisen between those who view the individual trees as important and those who believe that the system can only be properly evaluated via an aerial view of the entire forest.  My own inclination, absent evidence to the contrary, is to presume that each of these perspectives lies at the extreme of a continuum, and that they are therefore equally likely to provide an incomplete view.

In any event, this disparity in the perspectives of IP practitioners and economists was a topic I was very keen to discuss with IP Australia’s Chief Economist, Ben Mitra-Kahn, when we spoke last year.  But before we got to that, we first covered the future of IP Government Open Data, a.k.a. the IPGOD, and the fate of patents on perpetual motion under the new ‘utility’ requirements introduced in 2013 by the Raising the Bar patent law reforms.

12 June 2017

Reforms Cut Average Patent Opposition Delays by Two Years, But They Still Take Too Long

Oppositions are downAustralia has a pre-grant patent opposition system, meaning that an opportunity is provided after a patent application has been approved by an examiner, but before a patent is actually granted, for third parties to raise objections.  The usual policy justification for pre-grant oppositions is that they allow grounds of invalidity that may have been unavailable to the examiner to be raised by parties who may have greater familiarity with, and access to, knowledge and prior art information relating to the claimed invention.  Most often, an opponent is a competitor of the patent applicant, and thus has a particularly strong incentive to ensure that an invalid patent that may hinder its own activity is not issued.  Accordingly, the public benefits from this additional level of scrutiny which can reduce the incidence of invalid patents being granted.

The disadvantage of pre-grant opposition proceedings is that they extend the period during which a patent application remains pending – sometimes by many years.  In the event that (as is overwhelmingly the case) a patent is ultimately granted, the patentee may have been deprived of a significant portion of the time during which it might have been able to immediately enforce its rights.  The wider public is also disadvantaged by lengthy delays, during which time the ultimate scope of any patent granted – or, indeed, whether or not a patent will be granted at all – remains uncertain.

Prior to the Raising the Bar (‘RTB’) reforms to the Australian patent laws and regulations, which came into effect on 15 April 2013, the largest contribution to opposition delays was the time taken by opponents and patent applicants to prepare evidence supporting their respective positions.  Although the rules nominally allocated three months to each of the three usual evidentiary periods, applications for extensions of time, and for opportunities to file additional evidence had become, in practice, almost impossible for the Patent Office to refuse.  However, the RTB reforms included significant amendments to the Patents Regulations 1991 that have substantially limited the ability of each party in a patent opposition to obtain an extension of time to prepare evidence.  With four years now having passed since the amendments commenced operation, it is timely to take a closer look at their impact on opposition delays.

Using data available in the 2017 edition of IP Australia’s IP Government Open Data (IPGOD) set, I have analysed 211 patent oppositions that have commenced since 2004, and which proceeded through to a Patent Office hearing and final decision.  Of these, 102 were conduced entirely under the pre-RTB regime, while 57 were conducted wholly according to post-RTB extension-of-time regulations.  The remaining 52 oppositions were ‘transitional’, in the sense that they commenced pre-RTB, but included at least one evidentiary period governed by the post-RTB rules relating to extensions of time.

The main findings from my analysis are that:
  1. the RTB reforms have cut the average total duration of an Australian patent opposition by nearly 50%, from just over four years (1512 days) to just over two years (773 days);
  2. variability in opposition duration has dropped even more dramatically, by more than a factor of three, but the standard deviation remains high at over 200 days;
  3. the average total time required for parties to prepare and file evidence has been slashed from 803 days to just 250 days;
  4. however, the period between finalisation of evidence and a decision following a hearing remains lengthy, averaging 332 days, and also highly variable, with a standard deviation of 130 days;
  5. furthermore, where an application is not refused as a result of opposition (i.e. the overwhelming majority of cases), the period between the decision and grant of the patent is hugely variable, having a standard deviation of 162 days, in relation to an average of just 121 days.
A common contributor to non-evidence-related delays, both before and after a hearing on the substantive merits of an opposition, is the procedure that must be followed if the applicant wishes to amend the application to address grounds of opposition.  Additionally, although appeals of opposition decisions to the Federal Court of Australia are relatively rare, when they do occur they contribute significantly to the average duration and variability of post-decision delays.  Finally, it appears that it is not uncommon for delays to be incurred after finalisation of evidence primarily due to a failure of the Patent Office to progress the opposition expeditiously to a hearing.  These delays may be on the order of many months, as a result of which the average time between completion of evidence and a decision in post-RTB oppositions is now greater than the average time required for preparation and filing of all evidence by both opponent and applicant.

It is therefore clear that while the RTB reforms to the requirements for obtaining an extension of time to prepare evidence have been highly effective, many patent oppositions are still taking months longer to resolve than should be required.  What has changed, however, is that opponents and applicants are no longer the primary source of delays.  The next frontier for further improvement in the speed of resolution of patent oppositions lies within the Patent Office.

04 June 2017

Private R&D Expenditure Positively Impacted by Clustering and Academic Research Spending, New Study Finds

Network effectsThe Australian Government’s Office of the Chief Economist recently published a new research paper entitled The role of spillovers in research and development expenditure in Australian industries (which I will refer to as ‘the Spillover paper’).  The paper describes an econometric model that uses data from Australian companies that conduct research and development (R&D), and looks at how R&D activity of other firms and public institutions affect a firm’s own R&D expenditure, i.e. the effects of ‘spillover’ of R&D being conducted elsewhere.  The paper also examines the impact of geographical proximity and clustering on these R&D spillovers.

Overall, the model indicates that there are positive effects on R&D expenditure due to spillovers from peers and clients to companies that are located nearby (within 25 or 50km).  Furthermore, R&D expenditure by academia also has a positive influence on a company’s R&D expenditure within state boundaries.  However, R&D spending by government bodies appears to have the opposite effect, seemingly ‘crowding out’ private R&D spending.

The study has important policy implications, because it suggests that public support for R&D, whether to private firms through grants and/or tax incentives, or through funding of research in universities and other public institutions, results in benefits not only to the organisation receiving the direct support, but also to other firms and institutions more broadly.

Significantly, the modelling provides further evidence that Australia’s reputation for having a woefully low level of industry/research collaboration (which is based on one rather dubious OECD data point) is largely undeserved.  I have previously observed that Australian companies clustered geographically close to major academic institutions tend to file more patent applications, while research by IP Australia has shown a healthy rate of patent applications naming industry and research partners as co-applicants from Australia when compared with other OECD nations.  The Spillover paper supports this by showing a positive correlation between academic and industry R&D spending, particularly for companies and institutions located within the same state (and, in practice, probably more closely than this, although the paper does not break down academic R&D expenditure below state level).

I discuss further details of the model, and the paper’s key findings, later in this article.  If this is all you are interested in, feel free to skip ahead.  But first I would like to take the opportunity to explain the general process of econometric modelling for readers who may be interested in better understanding how economists think about the kinds of questions addressed by this paper, and how to interpret their results.

28 May 2017

Talking ‘Data’ With IP Australia’s Chief Economist

Benjamin Mitra-KahnIt has been an unduly long time – just over a year, in fact – since I published the first part of a conversation I had with IP Australia’s Chief Economist, Benjamin Mitra-Kahn.  But the two of us (mainly me, if I am honest) have finally got our act together to edit most of the transcript into a readable form.  I am therefore very pleased to be able to start publishing the remainder of our discussion.  Despite the passage of time, the content is still highly relevant, indeed in some ways even more so, considering the increasing importance of economic analysis and the role of data science in driving government policy in relation to intellectual property.

Late last year, for example, the Australian Productivity Commission (PC) released its final report on its Inquiry Into Australia’s Intellectual Property Arrangements.  The report reviewed the Australian IP system in its entirety, and made a number of significant recommendations to the Government, which are currently under consideration.  While prior reviews and inquiries into components of the IP system had been conducted by panels that included economists, the PC’s review was the widest, and the first to be conducted entirely by economists.  Naturally, the PC sought to draw conclusions and make recommendations based on evidence, and a key theme of the final report is the need for accountability in the IP system, including by developing and maintaining a sound evidence base to inform policy decisions.

It is in this context that economic research, such as the 2012 study by Boston University academics James Bessen and Michael Meurer which concluded that ‘patent trolls’ cost the US economy $29 billion in 2011, can have a huge impact.  Some people (including me) questioned the reliability of the source data and methods used in that study, but a far larger number – including some widely-read media outlets – simply took the Bessen and Meurer results at face value.

I was therefore very interested to get the views of IP Australia’s Chief Economist on that particular study, and to talk about the work that is being done in Australia to make better-quality data available to researchers, and other interested stakeholders, through the IP Government Open Data (IPGOD) initiative.

21 May 2017

Identifying Patent-Eligible Software Claims... Using Software

MatrixAs I have previously reported, the major and immediate impact of the US Supreme Court’s Alice decision in June 2014 was to reduce the rate of ‘business method’ patents issued by the US Patent and Trademarks Office (USPTO) by three-quarters, while having a negligible effect on ‘technical’ software-implemented inventions.  While the data in my earlier article ended in December 2015, I have now been able to update my results to the end of March 2017, as shown in the chart below.  There has been no change in the overall trend during the intervening 15 months, with ‘business method’ patent grants still running at around 50% of 2007 numbers, while technical software patents, and patents across all areas of technology, are issuing at rates nearly twice those of 2007.
Patent Grants (March 2017)
In a recent post on the Bilski Blog, US patent agent Mark Nowotarski has made similar observations about the impact of Alice on ‘business method’ patent grants, going on to analyse the characteristics of those patent claims are are still being allowed in the USPTO’s business method Art Units.  He has noted that it is commonly by including ‘physical limitations’ (e.g. reciting hardware such as ‘mobile devices/sales kiosks’ or ‘physical sensors’) and/or ‘software limitations’ (e.g. reciting technical functionality such as ‘graphics/ image processing’ or ‘cryptography/security’) that applicants have been able to overcome Alice-based subject-matter rejections.

This got me thinking.  If there are common forms of technical language that arise in patent-eligible claims, then might it be possible to train a machine-learning system to predict whether a particular claim is, or is not, likely to be patentable?

It turns out that this does indeed appear to be possible.  I built a machine-learning model using data published by the USPTO, including the claims of 24,462 recently-abandoned 4967 recently-allowed applications, all examined within ‘software’ and ‘business methods’ Art Units.  In cross-validation tests (i.e. using a portion of the known data for training, and the remainder to test model performance) I was able to achieve around 75% prediction accuracy.  In trials of a hand-picked ‘random’ sample of more recent patents and published applications, not in the training/test set, the model correctly classified all actually allowed claims (of four examples) as patentable.  It also classified the claims of four abandoned applications as unpatentable, and two published-but-rejected-and/or-amended claims as unpatentable.  In only one case did the model classify a claim that had been rejected on subject-matter grounds as likely-patentable.

The model may thus be capable, with a probability of success of over 70%, of determining whether or not a proposed claim to a computer-implemented invention includes sufficient technical content to overcome a subject-matter-based rejection, at least under the Alice test as it is applied by the USPTO.

14 May 2017

How IP Australia Has Been Quietly Curbing Abuse of the Innovation Patent System

Stop guyUpdate, 16 May 2017: The Commissioner of Patents, Fatima Beattie, has responded to this article in the comments.

While working with the new 2017 release of the Intellectual Property Government Open Data (IPGOD) I noticed something unusual – in October 2016, IP Australia refused 101 innovation patent applications.  Adding to the mystery, in 53 of these cases the refusal was retrospective, in the sense that innovation patents had already been granted, in one case as far back as April 2015.  Not only is refusal something that can only happen to a pending application (a granted patent can, however, be revoked), but it is something that generally does not happen to an application for an innovation patent.  As at the time of this writing, there are 23,387 innovation patent records in IP Australia’s AusPat system.  Never before, nor (as yet) since, these 101 cases has an innovation patent application been refused.

The one thing that all 101 of these applications have in common is that they name a Chinese resident company or individual as applicant.  I have written on a number of previous occasions about suspected abuse of the Australian innovation patent system by Chinese applicants (see Junk Patents Dumped on Australia as Chinese Subsidies Rorted, Chinese Junk Patents Revisited: 2013 Filings Update and, most recently, Users and Abusers of the Australian Innovation Patent System).  IP Australia’s Australian Intellectual Property Report 2017 (‘IP Report’) observed that:
Although Australian residents remain the main users of the innovation patent system, for the first time since its inception, non-residents made up the majority of innovation patent applicants with 54 per cent of the total in 2016.
The increase in international applications is attributable almost exclusively to an increase of some 142 per cent in applications from Chinese residents to 871 applications. This accounts for around 93 per cent of the overall increase in non-resident applications, and represents 38 per cent of total filings.

It is my belief that the primary motivation for Chinese applicants to obtain Australian innovation patents is to secure government subsidies that are paid upon the grant of foreign patent rights.  An innovation patent is granted following a check only of certain formalities, and without substantive examination as to novelty and inventive step (or, rather, the lower standard of innovative step).  Although the resulting patent must pass examination and be certified before it can be enforced, the applicant nonetheless receives a certificate that conveys (at least to anybody who is insufficiently familiar with the workings of the Australian innovation patent system) the impression of a full patent grant .

It is clearly undesirable, to say the least, for the Australian Register of Patents to be cluttered with dubious registrations, and for these Chinese ‘junk’ patents to cloud our ability to assess how effectively the innovation patent system is serving the small-to-medium Australian enterprises for which it was primarily designed.  I therefore welcome any legitimate steps that may be taken to curb this activity.  However, the statutory basis for these ‘refusals’ is not clear to me.  It may be that the Commissioner of Patents is stepping outside the bounds of the Patents Act 1990.  If so, then it would not be the first time!

08 May 2017

Beaton Survey Reveals Listed Australian IP Firms’ Epic Failure to Communicate

FailIn a new report, specialist professional services consulting house Beaton Research + Consulting reveals the results of a survey investigating how users of IP services view public ownership of IP firms, and their perceptions of its effect on service, quality, value, and price.  The report is likely to make uncomfortable reading for executives and practitioners at Australia’s three listed holding companies, IPH Limited (ASX:IPH), Xenith IP Group Limited (ASX:XIP) and QANTM IP Limited (ASX:QIP), and the nine specialist IP firms that they now own.  Conversely, it will bring some comfort to partners and practitioners at privately-held firms, many of whom believe that their independence presents an opportunity to differentiate their services in the Australian market.

While the methodology of the Beaton survey is far from rigorous, and the report states that its findings should be regarded as ‘indicative’ rather than necessarily ‘representative’, the headline results are nonetheless an indictment of listed firms’ efforts to communicate the nature and implications of their changes in ownership and corporate structure.  I have been saying for some time – not only on this blog, but privately to anyone who will listen – that perceptions are important, irrespective of the commercial reality, and that firms within the listed groups have not done enough to address concerns not only of the market, but of their professional employees who are understandably uncertain of what the changes mean for their future career paths.  Yet even I was surprised by the extremity of some of the findings of the Beaton report.

For example, fewer than half of respondents who have used the services of Australia’s longest-standing listed firm, Spruson & Ferguson (owned by IPH Ltd), during the previous 12 months were able to correctly identify their service provider as being a member of a listed group, while nearly a fifth wrongly believed the firm to be privately-owned.  The overwhelming majority of clients of Shelston IP (owned by Xenith IP Group Ltd) did not know whether the firm was publicly or privately owned.

The news is even worse for listed firms when it comes to client perceptions of the service impacts of public ownership.  Nearly 80% of respondents either agreed or strongly agreed that a reduction in the number of privately owned firms is against clients’ interests, while only 2% disagreed or strongly disagreed.  Two thirds believe (i.e. either agreed or strongly agreed) that firms owned by ASX-listed companies must put the interests of shareholders above the interests of clients.  Only 5% perceive that there is a benefit to public ownership in making an IP firm stronger.

It is important to appreciate that the survey findings reflect client perceptions, which may be different from reality – although it is worth recalling the words of Republican strategist and adviser to Ronald Reagan and George Bush Snr, Lee Atwater, who famously said in the 1980s (long before we had ‘fake news’ and ‘alternative facts’) that ‘perception is reality’.  As I recently reported, the Trans-Tasman IP Attorneys Board (TTIPAB) – the regulatory body formerly known as the Professional Standards Board for Patent and Trade Marks Attorneys – has not identified any actual issues of conflict of interest or service standards in the current arrangements implemented by listed groups of IP firms.  However, the TTIPAB did express concern that ‘the degree of awareness and understanding of the listed group scenario among some clients, and the stake-holding public more generally, is limited’.  The Beaton survey unquestionably bears this out. Indeed, ‘limited’ might be regarded as an understatement in light of some of the survey results.

30 April 2017

IP Australia Research Challenges Claims of Country’s Poor Industry-Research Collaboration Record

Chart setupOn 26 April 2017, IP Australia celebrated Alien Day World Intellectual Property Day with the launch of the Australian Intellectual Property Report 2017 (‘IP Report’) and the release of the Intellectual Property Government Open Data (IPGOD) 2017.  The Report includes a summary of latest IP trends and statistics across all IP rights administered by IP Australia (patents, trade marks, registered designs and plant breeder’s rights).  As in previous years, it also presents results from specific research projects undertaken within the Office of the Chief Economist.  This year, IP Australia’s researchers have taken on an often-cited (see, for example, this article from The Australian or this one from InnovationAus.com) statistic that placed Australia last (33rd out of 33 rated countries) in the OECD for collaboration on innovation between industry and higher education or public research institutions over the 2008-10 period.

The OECD assessment featured in its 2015 Science, Technology and Industry Scoreboard, and was based on data provided by the Australian Bureau of Statistics (ABS) survey.  That data, in turn, was based upon a survey of Australian businesses conducted in relation to activities in the 2010/11 financial year (the most recent ABS data on ‘Innovation in Australian Business’ is available from its website).  This measure has been criticised as failing to account for the particular nature of the Australian market – having a small number of large universities and research organisations, and a large number of small firms – and of failing to compare apples with apples, given that most of the other OECD nations used measures  based on a European survey not implemented in Australia.

IP Australia’s research takes up that criticism, noting that ‘asking those firms how often they collaborated with a university is likely to under-estimate the totals’.  Instead, it seeks to use an objective, data-driven, measure of collaboration – namely, the incidence of universities co-filing applications for a patents or other IP rights with industry-based partners.  On this measure, Australia ranks 13th of  35 countries, above average and ahead of many countries that rated very highly in the OECD rankings, such as Finland (first on OECD data), Slovenia (2), Austria (3), Hungary (4), Sweden (5), Germany (7), Norway (8), Denmark (9) and Japan (12).

Personally, I do not believe either set of data.  But at least we now have two different perspectives on measuring collaboration which may encourage policy-makers to view the OECD rankings with the scepticism they deserve!

21 April 2017

Regulatory Board Recognises Validity of Publicly-Listed Patent Attorney Structures

TickThe Trans-Tasman IP Attorneys Board (TTIPAB) – the regulatory body formerly known as the Professional Standards Board for Patent and Trade Marks Attorneys – has released a consultation paper as part of its review of the Code of Conduct for Patent and Trade Marks Attorneys 2013 (‘Code’).  This review was mandated under the arrangement between the Australian and New Zealand governments to merge the registration and disciplinary regimes for attorneys in the two countries, which came into effect on 24 February 2017.  Any amendments to the Code that may be necessary or appropriate in response to the creation of the Trans-Tasman attorney regime must be made within 12 months of its commencement, i.e. by 23 February 2018.

In addition, as I mentioned in an earlier article regarding the consolidation of a number of Australian IP attorney and legal firms into publicly-listed groups, the TTIPAB commissioned Professor Andrew Christie of the University of Melbourne to examine these structural changes in the profession and advise on whether any further regulatory amendments are required in light of these developments.  Professor Christie has delivered his report, and the TTIPAB has consolidated his findings, and its corresponding proposed revisions to the Code, into the present consultation paper.

Broadly speaking, and consistently with my expectations, no actual issues have been identified with the current ‘listed group scenario’ (as the consultation paper calls it).  While these types of arrangements have the potential create conflict-of-interest situations that cannot arise with traditional independent firm structures, the existing listed holding companies, IPH Limited (ASX:IPH), Xenith IP Group Limited (ASX:XIP) and QANTM IP Limited (ASX:QIP), have all recognised the issues, obtained relevant legal advice, and have implemented a range of measures to manage the associated risks.  The TTIPAB appears generally satisfied with these measures.  The consultation paper states, in particular, that:

The Board recognises that the listed group scenario is a valid legal structure when considered from the perspective of corporations law. The Board also recognises that an equivalent scenario in which the holding company is a private company would also be a valid legal structure. The Board is of the view that attorneys should be free to adopt whatever valid legal structure best suits their commercial interests. Accordingly, the Board does not propose to prohibit or restrict the ability of attorneys to deliver their services through the operation of groups of incorporated attorney firms owned by a holding company, whether that holding company be a publicly listed company or a private company.

17 April 2017

University of California Unsurprisingly Appeals Decision to Terminate CRISPR Patent Interference

Gavel FigureIn February, I reported the decision of the US Patent and Trademarks Office (USPTO) Patent Trial and Appeal Board (PTAB) in the patent interference proceedings initiated by the University of California (‘UC’) against the Broad Institute of MIT and Harvard (‘Broad’) in relation to CRISPR/Cas9 gene editing technology.  That decision was that there is ‘no interference in fact’, meaning that Broad’s development of the CRISPR/Cas9 system for use in eukaryotic cells (i.e. complex cells with, among other characteristics, distinct nuclei) was a non-obvious advance over UC’s development of the system for use in simpler prokaryotic cells (specifically, bacteria), and that there is thus scope for both parties to hold distinct patents.  At the time, I noted that the PTAB decision was subject to a possible appeal to a US Federal Court – most likely the specialised Court of Appeals for the Federal Circuit (CAFC) – and predicted that UC would file an appeal, in view of the substantial commercial interests at stake.

I am therefore not at all surprised to now be reporting that UC has indeed appealed to the CAFC.  In a press release announcing the appeal, UC has confirmed that it ‘seeks to have the PTAB reinstate the interference’, and quotes Edward Penhoet, a ‘special adviser on CRISPR to the UC president and UC Berkeley chancellor’ as saying that:

Ultimately, we expect to establish definitively that the team led by Jennifer Doudna and Emmanuelle Charpentier was the first to engineer CRISPR-Cas9 for use in all types of environments, including in non-cellular settings and within plant, animal and even human cells

Broad has responded with its own media statement saying, in relation to the appeal, that:

Given that the facts have not changed, we expect the outcome will once again be the same.
We are confident the Federal Circuit will affirm the PTAB decision and recognize the contribution of the Broad, MIT and Harvard in developing this transformative technology.

New USPTO Data Set Reveals Recent Trends in Software and Business Method Patent Grants and Filings

New DataThe US Patent and Trademarks Office (USPTO) has released a new public patent data service, which it calls the Patent Examination Data System (PEDS).  PEDS is intended to replace the PAIR Bulk Data (PBD) service, and has a very similar interface for filtering, viewing and downloading bulk US patent data, as well as an application programming interface (API) for live access.  Although PEDS is still under development, is missing some data fields that are present in PBD, and currently provides fewer filtering options than PBD, it is already ahead in a number of important respects. 

Firstly, where I have previously noted that the PBD set was incomplete in relation to patents granted in 2016, this problem seems to have been resolved in PEDS.  Secondly, PEDS includes the ‘transaction history’ for each application in the data set.  Readers familiar with the USPTO’s Patent Application Information Retrieval (PAIR) online system will be aware that the PAIR interface includes a ‘Transaction History’ tab that displays a list of all actions and events that have taken place on the file, along with their corresponding dates.  This information is now included in PEDS.  The USPTO has indicated that, in future, PEDS may include enhancements to search additional fields, additional data from tabs in Public PAIR, and the Image File Wrapper (IFW).

The availability of this new, and more complete, data set has enabled me to revisit the analysis of software and business method patents that I reported back in January, with the benefit of more than a year of additional data.  As a result, I have been able to observe how the trends in patent grants have progressed since the end of 2015.  In short, there has been no further change.  The rate of grant of patents assigned to software Art Units within the USPTO continues to track – and even slightly exceed – the overall rate of grants across all technologies, while business method patent grants remain in the doldrums, flat-lining at the rate to which they fell shortly after the US Supreme Court’s Alice decision in June 2014.

The additional data has also enabled me to look at trends in filing behaviour, which may be indicative of how applicants have responded to Alice and the USPTO’s subsequent changes in examination practice and guidance as applied to software and business method patent applications.  Interestingly, this data indicates that the rate of applicants filing for patents in relation to ‘business method’ inventions has been in steady decline since June 2014, but that there has been an equally steady increase in the rate of filing of applications for software inventions.

16 April 2017

IP Australia Updates Website with Better Advice for Patent Applicants

Browsing with tabletBack in February, I presented an analysis of Australian patent application data showing that self-represented applicants tend to achieve extremely poor outcomes relative to those who seek professional advice and assistance.  In doing so, I pointed out that IP Australia’s web site provided only the most minimal encouragement for prospective applicants to engage a patent attorney before proceeding.  As I reported further in March, this did not pass unnoticed at IP Australia, which was quick to point out that they have a downloadable PDF document (A guide to applying for your patent, 3.89MB) which includes a number of stronger statements about the benefits of obtaining professional assistance.  However, this document was not easy to find, since it was not linked from any of the primary informational/educational content on the site.

Via a tweet at the time, IP Australia promised that they would look into the issue, and see where it might be possible to make improvements.

I am really pleased to report that IP Australia have been true to their word, and the following pages on their web site now include recommendations for prospective applicants to seek professional assistance and/or links to the downloadable patent application guide:
  1. Patent basics
  2. Types of patents
  3. What can be patented
  4. Decide if you have a standard patent
  5. Apply for a standard patent
  6. What to include in your application
  7. Decide if you have an innovation patent

Professional Advice is More Than Application Assistance

If you are an innovator, the benefits of speaking with a professional adviser, such as a patent attorney, before charging straight for the patent office go far beyond just making sure that you have invented something patentable, and that you file a quality application with good prospects of protecting the invention, although it is these aspects which which IP Australia is naturally most concerned.  A patent attorney should also be informed of your specific commercial objectives and can advise on the most suitable overall filing strategy.

10 April 2017

‘Clustering’ Australia’s Patent Applicants

Clusters - BrisbaneI recently generated an interactive map of Australia’s most innovative postcodes, using recent Australian patent application and maintenance data.  While it is, of course, interesting to know whether one lives or works in a particularly innovative part of the country, the exercise of classifying activity by postcode is inherently artificial, in that it presupposes there is something ‘meaningful’ about the region covered by each particular postcode.  There is, however, no reason to suppose that this is the case.  There is nothing about the boundaries between adjacent postcodes, which are set by postal authorities for their own administrative purposes, that would necessarily lead to them being well-suited to the task of locating innovative activity.

A somewhat less arbitrary regional structure (from a socio-economic perspective) is defined by the Australian Bureau of Statistics (ABS), in the form of a hierarchy of ‘statistical areas’ (SAs).  In conjunction with its Australian Geography of Innovative Entrepreneurship (2015) research paper, the Department of Industry, Innovation and Science produced its own interactive Innovation Map using the ABS SA3 definitions as the basic regional unit.  Generally speaking, SA3s are regions with populations between 30,000 and 130,000 persons and reflecting regional identity in terms of geographic and socio-economic characteristics.  This results in aggregation of data over wider areas than individual postcodes.  In Sydney, for example, it results in the greatest number of patent filings being attributed to the Sydney Inner City SA3 region.  It is not possible, at this level, to observe the particular concentration of activity occurring around Macquarie University in the North of Sydney noted in my postcode-based analysis, since this is ‘diluted’ by lower activity in other parts of the encompassing Ryde-Hunters Hill SA3 region.
National Innovation Map 2015 - Sydney
The answer you receive thus depends upon the question you ask, e.g. how many patent applicants are located within a particular postcode, or within a particular SA3 region?  In both of these cases, a set of geographic areas is imposed before even commencing the analysis, and the results are constrained by this choice.  In the real world, however, innovation does not begin or end at some artificial boundary set by a postal officer or statistician.  So how can we analyse the distribution of patent applicants objectively and without applying predetermined geographic constraints?

One approach to this problem is a technique known as cluster analysis, or clustering.  The idea behind clustering is to apply an algorithm to automatically group elements in a data set according to a measure of similarity, such as geographic proximity.  It can be regarded as a form of machine learning in which the algorithm is designed to ‘discover’ patterns in the data without explicit direction from a human operator. 

In this article, I present some results of applying one of the most commonly-used clustering algorithms, k-means, to an Australian patent application data set to analyse national and local distributions of patent applicants.  This kind of analysis could be used, for example, to identify regions in which it could be most productive to invest in support for innovative industries, or to set up a business providing services to innovative companies, such as R&D tax advice or IP services.

04 April 2017

Justice Stephen Burley Pulls Excess Teeth from Australia’s Innovation Patent

ToothThe innovation patent is Australia’s ‘second tier’ patent right.  It is granted without substantive examination (but must be examined and certified before it can be enforced), has a maximum term of only eight years, and requires a lower level of inventiveness than a standard patent in order to be valid.  Despite this, however, a certified innovation patent gives its owner all of the same rights and remedies against infringers – including injunctions and financial compensation – as a standard patent.  And in one respect innovation patents have appeared, since September 2011, to offer a distinct advantage over standard patents in that damages have been held to accrue not just back to the date of certification, or the date of grant, but all the way back to the original effective filing date.  In the case of divisional applications, this could be many years before the actual filing and grant dates of the innovation patent.  (For more information, see Britax Childcare Pty Ltd v Infa-Secure Pty Ltd [No 3] [2012] FCA 1019, and my earlier article Innovation Patents Reach Back in Time for Infringement.)

Innovation patents are currently under attack from a number of quarters, and it is no secret that a number of authorities would like to see the system abolished altogether.  I have repeatedly argued, however, that the main criticisms of the system could be dealt with through some judicious modifications to strike a better balance between reduced patentability standards, patent term, rights of patentees, and rights of competitors and the wider public.  (See, for example, IP Australia Has the Innovation Patent In Its Sights, Again!, Five Easy Ways to Fix the Innovation Patent System, The Productivity Commission on Patents – It’s All About ‘Value’ and ‘Quality’, and Users and Abusers of the Australian Innovation Patent System.)

The strategic use of divisional innovation patents to ‘tailor’ claims targeting a competitor’s activity, and then claim compensation back to the original filing date of the parent application, was highlighted by the Australian Government’s Productivity Commission in its final report on its Inquiry into Australia’s Intellectual Property Arrangements.  In a chapter concluding with a recommendation that the innovation patent system be abolished, it presented the following diagram illustrating the discrepancy between the period during which divisional innovation patent claims are public (i.e. when infringers may be on-notice of liability) and the period over which compensation can be claimed (Figure 8.4, p 255).
PC IP Arrangements Report Figure 8.4
However, in a decision issued on 3 April 2017 and authored by Justice Stephen Burley (with whom Justices Nicholas and Jagot expressly concurred, rather than simply issuing a joint judgment), a Full Bench of the Federal Court of Australia has overruled Britax: Coretell Pty Ltd v Australian Mud Company Pty Ltd [2017] FCAFC 54. 

Accordingly, as the law now stands compensation for infringement of a divisional innovation patent cannot be claimed back to the original date of the parent application.  The correct position, according to the Full Court, is that compensation for infringement of an innovation patent (divisional or otherwise) is available only from the date of grant – which is also the date of publication – of the innovation patent.

02 April 2017

Where Are Australia’s Most Innovative Postcodes?

Macquarie University AreaAccording to IP Australia data covering live patents and applications, and recently-filed provisional applications, as at the end of 2015, the most innovative postcodes in Australia, across all fields of technology, are those taking in Macquarie University and surrounds in the North of Sydney.  Postcodes 1710 (Epping, NSW) and 2612 (represented by the nearby Blenheim Road post office) collectively accounted for nearly 1200 patents and pending applications, and 200 provisional applications filed by Australian applicants within the preceding three years.  This represents around 17% and 5%, respectively, of all such patents and applications owned by Australian applicants at that time.

Other hotspots are the regions around the CBDs of the New South Wales, Queensland and Victorian state capitals Sydney, Brisbane and Melbourne.  Also featuring strongly in the top 50 postcodes for patent filing are major university precincts in and around the University of Sydney, Monash University and the University of Melbourne.

In addition to the major cities, where it is unsurprising to find significant concentrations of innovative activities and industries, there are also a number of notable regional centres of innovation.  These include the NSW Central Coast, north of Sydney, particularly around Somersby (postcode 2250), west of Sydney around Long Point (postcode 2867), and Aitkenvale in the suburbs of Townsville in North Queensland (postcode 4814).

More generally, a map of Australian patent filing and ownership by postcode leads to a similar conclusion to the one I reached in my recent analysis of the origins of biotechnology patent applications – innovation is a collective activity that tends to occur in geographic clusters.  By exploring the interactive map below, you will be able to identify the various localities on national, state, regional, urban and suburban scale within which much of Australia’s innovative activity takes place.

26 March 2017

Enforcing Patents on Processes for Producing Biologics – Easier Said Than Done?

Seeking answersA biological medicine, or biologic, is a medicine that contains one or more active substances made by a biological process or derived from a biological source.  Compared to conventional pharmaceuticals, which are made by chemical synthesis using different organic and/or inorganic compounds, biologics are generally much larger molecules that are derived from the living cells of micro-organisms or animals by utilizing the metabolic processes of the organisms themselves.  In many cases, cells are genetically engineered, using recombinant DNA technology, to co-opt their expression capabilities and turn them into tiny ‘factories’ for producing the desired biologic molecules.  The first such substance to be approved for therapeutic use was synthetic ‘human’ insulin, developed by Genentech and first marketed by Ely Lilly in 1982.  Since then, biologics have become increasingly important, and hundreds of biologic medicines are now in use, including therapeutic proteins, DNA vaccines, monoclonal antibodies, and fusion proteins.

The chemical structures of traditional ‘small molecule’ pharmaceuticals are usually well-defined.  Biologics, on the other hand, are often difficult, and sometimes impossible, to characterise structurally due to their size and complexity.  In many cases, some components of a finished biologic may be unknown.  Protecting biologics with patents can therefore be challenging, given the potential difficulty in claiming the active biologic molecule in terms that are sufficiently precise to meet legal requirements for the invention to be clearly defined, while also being broad enough to encompass variations that may have the same therapeutic properties, and satisfying the tests for novelty, inventive step and subject-matter eligibility.

The complexity of biologics also means that they are more difficult to produce than small molecule pharmaceuticals.  Minor differences in the production process, raw materials, temperature, pH, or cell line can result in a significant alteration in a medicine’s quality, efficacy, or safety.  While this creates challenges in manufacturing and quality control, it also creates opportunities for the protection of intellectual property, by securing patents on methods of producing biologic medicines either in place of, or in addition to, trying to claim the active molecules themselves in some form.

Process claims are all very well if the patentee can established that a suspected infringer is using the patented method of production.  But what happens when the suspect company keeps its manufacturing processes secret, as indeed is most commonly the case?  Well, then the patentee may need to convince a judge to issue an order for preliminary discovery, compelling the accused infringer to disclose relevant information about its processes.

This is exactly what Pfizer recently sought to do in preparation for possible patent litigation against Samsung Bioepis AU (‘SBA’) in relation to Pfizer’s product ENBREL (active ingredient etanercept), which is a biological medicine used in the treatment of autoimmune diseases such as rheumatoid arthritis, juvenile rheumatoid arthritis and psoriatic arthritis.  Unfortunately for Pfizer, Justice Stephen Burley has denied its application for discovery, ruling its evidence insufficient to establish a ‘reasonable belief’, as opposed to a ‘mere suspicion’, that SBA is infringing its patents relating to a process for producing etanercept: Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd [2017] FCA 285.

19 March 2017

Revisiting Official ‘Advice’ on Engaging Patent Attorneys

FeedbackLast month I presented an analysis of the fate of Australian patent applications filed by self-represented applicants.  It was not pretty.  I found that for Australian patent applications made by small self-filers, at least 90% of all provisional applications, 77% of all standard patent applications and 95% of all innovation patent applications ultimately result in absolutely no enforceable rights whatsoever. 

I laid some of the blame for this squarely at the feet of IP Australia which, despite its vision of having ‘a world leading IP system that builds prosperity for Australia’, appears to make only the most cursory effort on its web site to encourage prospective applicants to seek advice from a patent attorney.  I also presented examples of corresponding content from the web sites of the US Patent and Trademarks Office, the UK Intellectual Property Office, the European Patent Office and the Canadian Intellectual Property Office, all of which highlight the risks of failing to obtain professional assistance, and encourage applicants to engage a patent attorney.

This elicited some responses from IP Australia via Twitter.  The Chief Economist, Ben Mitra-Kahn, speculated that the fate of self-filed applications might not be a significant issue, on the assumption that the the relative number of self-filers is small.

Sadly, this is not the case.  Based on the Intellectual Property Government Open Data (IPGOD) 2016 data set, in calendar-year 2014, for example, the total number of standard patent applications filed naming one or more Australian resident private or small-business applicants was 1499, of which 220 (14.7%) were self-filed.  Clearly this is not so far short of the 20% of resident self-filers in the UK.  And if history is anything to go by, fewer than 50 of those 220 self-filed applications will ultimately result in granted claims.

IP Australia also pointed out to me that there is a downloadable PDF document, A guide to applying for your patent, that contains stronger suggestions regarding the benefits of professional advice.

Appeals Court Annuls $1.5 Million ‘Unjustified Threats’ Damages Award

Unjustified ThreatUnder section 128 of the Australian Patents Act 1990, a person or company that has been unjustifiably threatened with patent infringement proceedings may seek an injunction to prevent the threats from continuing, and the recovery of any damages sustained as a result of the threats.  These provisions may be invoked pre-emptively by an accused infringer, for example against a patent holder that may be trying to inhibit competition by making vague or dubious claims.  However, they may also be invoked defensively, in response to the actual commencement of infringement proceedings by a patent holder that has initially made threats by way of a cease-and-desist letter.  As the law has developed in Australia, an application for relief from unjustified threats will be successful in any case in which it ultimately turns out that a patent is invalid or not infringed, regardless of how objectively reasonable the patentee’s original belief may have been.

I have written on a number of previous occasions of my concerns about the operation of the unjustified threats provisions in the Patents Act.  Most recently, in August 2016, I discussed the difficulties faced by a patentee in raising and seeking to resolve a dispute prior to commencing proceedings – as required under the Civil Dispute Resolution Act 2011without incidentally opening itself up to a subsequent unjustified threats claim.  At around the same time, a single judge of the Federal Court of Australia (Barker J) issued an 870 paragraph judgment (Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 7) [2016] FCA 991) awarding damages of A$1,506,859 against the Australian Mud Company Pty Ltd (‘AMC’) for making unjustified threats against Coretell Pty Ltd, following a number of years of patent infringement proceedings in which AMC was ultimately unsuccessful.  (For earlier articles on this dispute see Innovation Patent Claims Once Again Construed Narrowly, Australian Appeals Court Further Clarifies ‘Purposive Construction’ and Australian Federal Court Considers Patent Attorney Privilege.)

If you think (as I do) that $1.5 million seems like an excessive amount of damage to have resulted from the sending of a fairly typical letter of demand, then I am pleased to report that you would be correct.  A Full Bench of the Federal Court of Australia has now wholly overturned the ruling of the original judge and ordered that, instead, Coretell’s claim for damages should be dismissed with costs: Australian Mud Company Pty Ltd v Coretell Pty Ltd [2017] FCAFC 44.  In doing so, the Full Court has highlighted the importance of establishing causation, i.e. that damage is sustained as a result of the threats.  In particular, the judgment cautions against failing to distinguish properly between damage sustained as a result of the threat of infringement proceedings and damage sustained as a result of infringement proceedings themselves.

This is, to my mind at least, a welcome development in the law.  While it does nothing to prevent the unjustified threats provisions being invoked by an accused infringer in response to proceedings commenced on the basis of a reasonably-held belief that a patent is being infringed, it significantly limits the practical impact of the provisions in such circumstances.  I imagine that it would be rare for substantial damage to be sustained merely as a result of an initial threat of proceedings in any case where infringement proceedings are actually commenced within a reasonable period of time, allowing for some efforts to resolve the dispute prior to litigation.

12 March 2017

Australia’s Biotechnology ‘Hotspots’ – An Interactive Map

Heatmap-thumbAccording to IP Australia data covering patent applications filed during a 16-year period commencing on 1 January 2000, Melbourne is the biotechnology capital of Australia.  Sydney comes in second, followed by Brisbane.  There is significant biotechnology activity in Adelaide and, to a lesser extent, Perth.  Canberra looks to be an active area, but is something of a special case.  There is, however, very little activity in this sector in Australian regional areas. 

A ‘heat map’ highlighting the locations of organisations filing Australian patent applications relating to developments in biotechnology shows how innovation in the biological sciences thrives principally where there is an ecosystem of academic, medical and corporate organisations located in close proximity.  Melbourne’s leading position is driven primarily by the critical mass of public and private medical and bioscientific research institutes located in the ‘Parkville precinct’ and its immediate surrounds.  Similarly, the primary origins of patent applications relating to biotechnology in the other capital cities coincide with the locations of major research universities, hospitals and associated companies and institutes.

The single largest filer of patent applications over the period analysed is – as in many other fields of technology – the Commonwealth Scientific & Industrial Research Organisation (CSIRO).  In fact, CSIRO is almost single-handedly responsible for putting Canberra on the map in biotech, as a result of the fact that it uses its national capital address on all patent applications.  However, much of the actual research covered by those applications is conducted at CSIRO’s many other sites around Australia, including locations in and around Melbourne in Parkville, Clayton, Werribee and Geelong.  In all likelihood, therefore, Melbourne’s leading position in Australian biotechnology research and development is even more pronounced than the map suggests.

The top Australian patent attorney firm handling all of these applications is Davies Collison Cave – and it is so by a considerable margin.  Second-placed FB Rice has been responsible for filing only about half as many applications relating to biotechnology over the same period.

05 March 2017

Users and Abusers of the Australian Innovation Patent System

Up and Down In an eight year period – one full innovation patent lifecycle – between 2007 and 2015, Australian residents were overwhelmingly the biggest users of the second-tier innovation patent system, filing over 10,000 innovation patent applications.  The next most frequent filers were the Chinese, with just 1500 applications, followed by US applicants with less than 1000.  Over 90% of the Australian applicants were individuals or small-to-medium enterprises (SMEs – businesses with fewer than 200 employees), i.e. the exact people the innovation patent system was intended to benefit when it was established by the Howard Government in 2001.  Over the same period, Australian residents filed just over 23,000 standard patent applications, a very distant second to US residents who were responsible for 115,000 applications.

Yet despite the system’s success by these measures, it is an open secret that IP Australia would like to see the end of the innovation patent, and has been diligently working behind-the-scenes for some years to achieve this objective.  After first proposing – and failing to win substantive support for – raising the ‘innovative step’ threshold to the same level of inventiveness required for standard patents, IP Australia economists undertook a study of the ‘economic impact’ of the innovation patent system which was used – prior to any publication or consultation on the methodology or results – to convince the now-defunct Advisory Council on Intellectual Property (ACIP) to issue, as its final act, a recommendation that the Government consider abolishing the system.  A belated consultation on this recommendation elicited submissions from a range of stakeholders who once again overwhelmingly supported retaining the innovation patent as a second-tier right in Australia, although many favoured modifying the system to address problems that had become apparent since its introduction in 2001.  IP Australia passed the submissions received in response to its consultation paper on to the Productivity Commission, which was by then in the midst of a 12-month review of Australia’s entire IP system.  To nobody’s great surprise, the Commission recommended abolition of the innovation patent system, in both its draft report and, despite further submissions from stakeholders, in its final report

More recently, Innovation and Science Australia released its Performance Review of the Australian Innovation, Science and Research System, in which it followed the Productivity Commission in declaring that Australia grants patent protection too easily and this has allowed a proliferation of low-quality patents, and innovation patents in particular.  IP Australia was quick to highlight this particular ‘weakness’ of the IP system in a post on its blog.

Now, I do not doubt that IP Australia would dispute that it is gunning for the innovation patent.  Rather, I am sure that its position is that it is seeking to provide evidence-based input to government to enable it to make informed decisions in meeting legitimate policy objectives.  The difficulty I have with this is that, despite a veritable cacophony of dissenting views from stakeholders, with proposals to improve rather than abolish the innovation patent system, it seems that the current position of IP Australia, the Productivity Commission, and Innovation and Science Australia – all of which have the Government’s ear – is informed almost entirely by the IP Australia Economic Impact study.  It is perhaps worth noting that this study cannot be independently replicated, verified and/or its assumptions tested, because key data on which it is based – Australian Tax Office records of R&D tax concession claims by businesses, industry sector information, and business/tax registration records – are not publicly available.

There is, however, much in the Economic Impacts study itself, and in the publicly-available IPGOD data set, supporting a view that the innovation patent system has not failed so badly as to justify its abolition.  Although its fate may already be sealed, given the forces rallying against it, it is worth taking a fresh look at who is using the innovation patent system and, equally importantly, who is abusing it.

27 February 2017

On Using Patent Claims to Predict the Prospects of Success in Examination

Nearest NeighboursIn a recent article, I presented an analysis of US Patent and Trademark Office (USPTO) data demonstrating that success rate for so-called ‘business method’ patent applications has fallen dramatically since the US Supreme Court issued its Alice decision in June 2014.  While the difference between ‘business methods’ and other more ‘traditional’ fields of technology is particularly stark, it is more generally the case that average allowance rates at the USPTO vary considerably across the various examination Art Units (i.e. the groupings of examiners assigned to specific technical subject matters).  For example, an article published by IP Watchdog in 2015, Austin Underhill of Juristat demonstrated that allowance rates across all Art Units range from less than 10% in some of the ‘business method’ units to nearly 100% in Art Unit 3659 (which covers aspects of material and article handling).

It follows that if it were possible to predict, in advance of filing, to which Art Unit a US patent application would likely be assigned, this could go some way towards predicting the prospects of success in examination.

As also mentioned in my earlier article, the USPTO Office of the Chief Economist has published the Patent Claims Research Dataset, comprising six data files containing individually-parsed claims, claim-level statistics, and document-level statistics for all US patents granted between 1976 and 2014 and US patent applications published between 2001 and 2014.

Having this large data set available caused me to wonder: are patent claims a good predictor of the Art Unit to which an application may be assigned?  On the one hand, it seems logical that might be the case.  After all, Art Unit assignments are based on technology, and it is generally necessary to refer to technical features of the invention in the patent claims.  On the other hand, claim language is often broader and more abstract that the specific field of technology to which the claimed invention may be directed, and the allocation to an Art Unit is, in practice, based upon an initial review of the patent specification as a whole, and not just the claims.

There is, however, only one way to find out whether there is a sufficiently strong correlation between claim language and Art Unit to enable prediction, and that is to conduct some experiments using the available data.

My initial results are promising.  By employing some relatively straightforward text processing techniques, I have successfully predicted the Technology Centre to which an application is assigned in just over 70% of cases, the correct group of 10 Art Units in over 40% of cases, and the individual Art Unit in around 24% of cases.  This is certainly sufficient to encourage me to persevere with some more sophisticated techniques, to see if it is possible to make further improvements.

19 February 2017

What IP Australia Does Not Tell You: If You Want a Patent, You Should Hire a Patent Attorney!

Seated ProfessionalThe next time anybody asks me what they need to do to obtain a patent for something they have invented, I shall tell them just one thing: first, find yourself a patent attorney.  Not me, obviously, since I am not currently providing patent attorney services to inventors... but a patent attorney nonetheless.  If they query the cost, I shall simply say that if they cannot afford a patent attorney, then maybe they should forget about patenting their invention.  If they object that there must surely be something they can do without the assistance of a patent attorney, I will reiterate that they need to engage a patent attorney, and that is the one and only piece of advice I have for them.

This is not the advice I have always given in the past.  When working as a patent attorney in private practice myself I would sometimes encounter people who were clearly unwilling or unable to pay for an attorney.  Taking the view that self-help is better than no help at all, I might have directed them to IP Australia’s web site and other resources designed to help them to get started by themselves.

Never again will I encourage potential self-filers in this way.  It is a great disservice to them, and runs directly contrary to their interests.  As a rational person, I have allowed my views to be changed by actual evidence!  Specifically, I have crunched the numbers to assess how self-represented applicants actually fare at the Australian Patent Office, and the statistics are not merely bad, they are appalling.  In a nutshell:
  1. self-represented ‘small entity’ applicants file about half as many provisional applications in Australia as do applicants with external or in-house attorneys, but less than 7.5% the number of standard patent applications claiming priority from those provisional applications;
  2. the same category of self-represented applicants file 15% more innovation patent applications than applicants with attorneys, but seek certification of those patents in only around 17% of cases, of which over 60% are rejected and cease as a result;
  3. innovation patent applicants with attorneys request certification at double the rate of self-represented applicants, and successfully achieve certification in 83% of those cases; and
  4. when self-represented applicants file standard patent applications, these result in accepted claims just under 23% of the time, compared with a little over 53% of applications filed by applicants with attorneys.
Overall, when I look at Australian patent applications filed by small, self-represented, applicants, I see at least 90% of all provisional applications, 77% of all standard patent applications and 95% of all innovation patent applications ultimately resulting in absolutely no enforceable rights whatsoever.  And this does not account for the fact that even where enforceable rights are ultimately obtained, they may be of minimal commercial or legal value, considering that the applicant may have had only a limited comprehension of what they were doing in the course of examination.

All of this is not only wasteful and harmful to the individual applicants involved, it is associated with a social cost representing a negative contribution to the Australian innovation system.  I therefore cannot understand why IP Australia, which states that its vision is ‘to have a world leading IP system that builds prosperity for Australia’, provides only the most minimal suggestion that applicants might benefit from engaging professional assistance.  It is clear that Australia’s patent-issuing authority should take a leaf from the playbooks of its peers in (at least) the USPTO, European Patent Office, UK Intellectual Property Office, and Canadian Intellectual Property Office, and clearly inform prospective applicants that hiring a patent attorney is practically essential, or at least highly recommended, in order to obtain a commercially worthwhile outcome.

16 February 2017

USPTO Board Terminates CRISPR Patent Interference

TerminatedOn Wednesday 15 February 2017, the US Patent and Trademarks Office (USPTO) Patent Trial and Appeal Board (PTAB) handed down its much-anticipated decision in the patent interference proceedings initiated by the University of California (‘UC’) against the Broad Institute of MIT and Harvard (‘Broad’) in relation to CRISPR/Cas9 gene editing technology.  That decision, in short, is that there is ‘no interference in fact’.  That is to say, the three judges making up the PTAB panel have determined that Broad’s development of the CRISPR/Cas9 system for use in eukaryotic cells (i.e. complex cells with, among other characteristics, distinct nuclei) was a non-obvious advance over UC’s development of the system for use in simpler prokaryotic cells (specifically, bacteria), and that there is thus scope for both parties to hold distinct patents.

In its full decision [PDF, 412kB], the PTAB summarises its findings as follows:

Broad has persuaded us that the parties claim patentably distinct subject matter, rebutting the presumption created by declaration of this interference. Broad provided sufficient evidence to show that its claims, which are all limited to CRISPR-Cas9 systems in a eukaryotic environment, are not drawn to the same invention as UC’s claims, which are all directed to CRISPR-Cas9 systems not restricted to any environment. Specifically, the evidence shows that the invention of such systems in eukaryotic cells would not have been obvious over the invention of CRISPR-Cas9 systems in any environment, including in prokaryotic cells or in vitro, because one of ordinary skill in the art would not have reasonably expected a CRISPR-Cas9 system to be successful in a eukaryotic environment. This evidence shows that the parties’ claims do not interfere. Accordingly, we terminate the interference.

This is a considerable win for Broad which, subject to a potential appeal, has for now delivered a fatal blow to UC’s hopes of invalidating a number of Broad’s CRISPR-related patents and applications.  Unsurprisingly, Broad has reacted to the decision by declaring its full agreement with the PTAB, while UC maintains its belief that the evidence is on its side.  The stock market also reacted quickly to the news, adding US$200 million to the value of the Broad-connected biotech company Editas Medicine Inc.

11 February 2017

Is This The Exact Day That IP Australia Turned on ‘Business Method’ Patents?

CalendarOn 30 October 2008, the US Court of Appeals for the Federal Circuit (CAFC) handed down its en banc decision in In re Bilski, affirming the rejection of patent claims directed to a method of hedging risks in commodities trading.  I have analysed IP Australia patent examination data, which provides reason to believe that this specific event triggered an unacknowledged change in examination practice within the Australian Patent Office.  This change subsequently resulted in a number of published decisions in which claims to computer-implemented ‘business methods’ were found to be unpatentable, and two appeals that went as far as a Full Bench of the Federal Court of Australia.  It is also reasonable to suppose that numerous further applications simply lapsed without fanfare following objections raised by patent examiners.

Most readers would be aware that the Bilski case went on further appeal to the US Supreme Court, which again confirmed the rejection in an opinion issued on 28 June 2010.  The Supreme Court decision was almost immediately cited by an Australian Patent Hearing Officer, who found that a claimed method for commercialising inventions does not constitute patentable subject matter under the Australian ‘manner of manufacture’ test: Invention Pathways Pty Ltd [2010] APO 10.

The Invention Pathways decision resulted in an official change to Australian Patent Office practice whereby a claimed invention, to be patent-eligible, would not only need to involve a ‘concrete effect or phenomenon or manifestation or transformation’ (as per Grant v Commissioner of Patents [2006] FCAFC 120), but one that is ‘significant both in that it is concrete but also that it is central to the purpose or operation of the claimed process or otherwise arises from the combination of steps of the method in a substantial way’.

Invention Pathways was the first of a series of Patent Office decisions refusing or revoking patents for so-called computer-implemented ‘business methods’ based on this logic, including Iowa Lottery [2010] APO 25, Research Affiliates, LLC [2010] APO 31 and [2011] APO 101, Myall Australia Pty Ltd v RPL Central Pty Ltd [2011] APO 48, Discovery Holdings Limited [2011] APO 56, Network Solutions, LLC [2011] APO 65, Jumbo Interactive Ltd & New South Wales Lotteries Corp v Elot, Inc. [2011] APO 82, Sheng-Ping Fang [2011] APO 102, and Celgene Corporation [2013] APO 14.  The Research Affiliates and RPL Central matters both ultimately ended up on appeal before a Full Bench of the Federal Court of Australia, which confirmed that the claims in each case were not patent-eligible, albeit for reasons somewhat different from the Patent Office’s ‘centrality of purpose’ test.

While published reasons are the most visible and detailed outcomes of Patent Office decision-making, they typically have their genesis some months – or even years – earlier, with one or more reports issued by examiners.  The original Research Affiliates application, for example, was first rejected by a patent examiner on 28 October 2009, eight months prior to the Invention Pathways decision.  It is also notable that this type of ex parte hearing, i.e. involving only the patent applicant ‘appealing’ an examiner’s decision, has historically been relatively rare.  Prior to Invention Pathways, I count a total of just 11 published decisions of this type under the Patents Act 1990 (which commenced on 1 April 1991).  This number roughly doubled in the three years following Invention Pathways, driven by rejections of ‘business method’ applications.  It is therefore difficult to avoid inferring that something changed in the prior period that led to this unusual spike in hearings.

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