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.