17 July 2018

Australia Again Fares Woefully in Capitalising on Innovation in WIPO’s Annual Index

Anger and frustrationLast week, the World Intellectual Property Organization (WIPO) published its Global Innovation Index 2018 (GII) report, as it has done every year since 2011.  Jointly authored with Cornell University and the INSEAD Business School in France, the GII is intended to provide ‘a detailed quantitative tool that helps global decision makers better understand how to stimulate the innovative activity that drives economic and human development.’  It ranks 126 economies based on 80 indicators, ranging from intellectual property filing rates to mobile-application creation, education spending, and scientific and technical publications.

In 2018, Australia ranks 20th overall, which is a gain of three places since 2017.  The countries that were ahead of Australia and that have slipped behind in 2018 are New Zealand (now 22nd, down from 21st), Austria (down from 20th to 21st), and Iceland (crashing down from 13th in 2017 to 23rd in 2018).

Yet, while Australia has risen slightly in the overall rankings, it continues to languish in a pathetic 76th place, i.e. in exactly the same position as last year, in a measure that I regard as particularly telling – the ‘innovation efficiency ratio’, which indicates how much innovation ‘output’ the country is getting in return for its innovation ‘inputs’.  Australia’s efficiency ratio is just 58%, which compares to the median of 61%, and is way below the values for those countries that are most effective at converting innovation inputs into outputs, such as Switzerland (96%), Luxembourg (94%), China (92%), the Netherlands (91%), and Ukraine (90%).  Yes, you read that correctly – Ukraine is the fifth highest performing economy on innovation efficiency because, while it ranks just 43rd overall in the GII, and a rather poor 75th on innovation inputs, its effectiveness in converting those inputs places it at number 35 in the output ranking.

10 July 2018

A Brief History of the Australian Innovation Patent

History lessonThe innovation patent is Australia’s second-tier patent right, which has existed since 2001.  It differs from a standard patent in that it has a shorter term (eight years instead of 20), has a lower inventiveness standard (‘innovative step’ rather than ‘inventive step’), has a five-claim limit, can be granted rapidly following only a formalities review, is not subject to any form of pre-grant opposition, and need not be subject to substantive examination (although it must be examined and certified before it can be enforced against any accused infringer).

In recent years, the innovation patent system has been under a cloud, with a number of forces assembling arguments and evidence in support of its abolition.  Legislation was recently drafted and published for public consultation including provisions that would, if enacted, result in a phase-out of the innovation patent.  However, at the last minute these provisions were removed prior to introduction of the legislation to the Australian Parliament.

If, as still seems most likely, the innovation patent is to be abolished in the near future, this seems to be an opportune time to review its short, but eventful, life.

Prehistory – the Rise and Fall of the Petty Patent

Before the innovation patent, Australia had a secondary patent right called the ‘petty patent’.  Petty patents were originally introduced in 1979, and they differed from standard patents in that they had a shorter term (up to six years), could include only three claims, were faster to obtain, and were not subject to a pre-grant opposition process.  However, they required exactly the same level of inventiveness as a standard patent, and could not therefore be used to protect any invention that could not otherwise be protected by a standard patent.  Unsurprisingly, petty patents came to be used primarily as a tool for strategic patent enforcement.

In 1994, the Australian Government decided to review the petty patent system, in response to recommendations made in a report to the Prime Minister's Science and Engineering Council (PMSEC), The Role of Intellectual Property in Innovation.  In July 1994, the Government referred the petty patent system to a relatively new panel, the Advisory Council on Intellectual Property (ACIP).  The resulting review of the petty patent system was (somewhat ironically, as we shall see) ACIP’s first major inquiry.

In August 1995, ACIP published its report on the Review of the Petty Patent System, in which it recommended that the petty patent be abolished and replaced with a new system in order to fill a perceived gap between registered design rights and standard patent protection.  Among a number of other differences from the petty patent system, the ‘innovation patent’ proposed by ACIP would be a true ‘second tier’ right having a lower ‘inventiveness’ requirement, and which would therefore enable innovators to obtain protection for lower-level innovations that might not otherwise qualify for standard patent protection.

03 July 2018

Australian Government Consultation on Changes to the R&D Tax Incentive Program

ResearchOn 8 May 2018, the Australian Government announced its plans to reform the Research and Development Tax Incentive (R&DTI) program to better target the program and improve its integrity and fiscal affordability in response to the recommendations of the 2016 Review of the R&D Tax Incentive (‘the Review’).  Changes to the program will apply for income years starting on or after 1 July 2018, i.e. the current financial year just beginning.  On 29 June 2018, the government released exposure draft legislation and associated explanatory materials setting out its proposed implementation of the reforms.  It is currently seeking stakeholder feedback on these materials, and has published an accompanying consultation paper outlining areas in which specific feedback on the implementation of the reforms is being requested.

The R&DTI is the Australian Government’s largest, and most costly, innovation incentive program.  In its current form, it provides a tax offset (of 43.5% or 38.5%, depending on annual aggregated turnover) for some of a company's cost of eligible R&D activities.  To be eligible, an applicant must be an incorporated company, and be conducting eligible core R&D activities incurring an expenditure of at least A$20,000.  The legislation defines eligible activities as being experiments that are guided by hypotheses and conducted for the purpose of generating new knowledge.

The Review found that the R&DTI was failing to fully achieve its objectives of generating additional R&D activities and was not well targeted, in the sense that it provides benefits for R&D activities that would have been undertaken anyway.  It also found the cost of the Incentive had exceeded its initial estimates of A$1.8 billion per annum when it was introduced in 2011-12.  In 2016-17, it actually cost around A$3 billion.  The Review made a number of recommendations to improve the integrity and effectiveness of the program and to promote its objectives.  The proposed legislation would implement a number of these recommendations, adopted in the 2018-19 national budget.

If passed, the proposed changes to the R&DTI program will apply a A$4 million cap to the refund available to small companies (although, notably, clinical trials will be exempt from the cap).  They will also reduce the incentive available to large companies, and make the corresponding tax offset dependent upon R&D intensity (i.e. cost of R&D relative to total expenditure).  Additionally, they will close some ‘loopholes’ and make a number of adjustments to the administration of the program, including enhancing transparency by requiring information about companies’ R&D tax claims to be published.

A consultation process in currently underway, with submissions due by 26 July 2018.

26 June 2018

Federal Court Offers Little Insight on How Far the Bar Has Been Raised on the Standard of Disclosure in Patent Specifications

Clearing the BarLast week I wrote about a recent Australian Federal Court decision on patent-eligibility of a computer-implemented invention, Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421.  There is, however, a further aspect to this decision that may turn out to be of greater significance because, in addition to attacking Encompass’ patents on subject matter and novelty grounds, InfoTrack also sought to have the patents invalidated on the basis that the disclosure in the specification was deficient under the requirements of section 40 of the Patents Act 1990.  I believe that this is the first time that the current provisions, since commencement of the Intellectual Property Laws Amendment (Raising the Bar) Act 2012, have received substantive judicial consideration.  Furthermore, given that the decision has been appealed by Encompass (case no. NSD734/2018), and a Notice of Contention filed by InfoTrack, it seems highly likely that the post-Raising the Bar provisions of section 40 will soon be reviewed by a Full Bench of the Federal Court of Australia.  If so, then we may find out just how far the bar has actually been raised on the disclosure requirements.

The former version of section 40 required, among other things, that a patent specification ‘describe the invention fully’, and that the patent claims defining the invention must be ‘fairly based on the matter described in the specification’.  Over time, the courts interpreted these provisions as, in most cases, requiring only that the description should enable a person of ordinary skill in the relevant field to implement something falling within the scope of the claims without further invention, and should provide a ‘real and reasonably clear disclosure’ of the invention that is broadly consistent (or, at least, not inconsistent) with what is claimed.  In practice, this was a pretty low bar that generally allowed applicants to make relatively broad claims despite possibly having disclosed only a single, specific, implementation of an invention.

By comparison, the current version of section 40 requires that a patent specification ‘disclose the invention in a manner which is clear enough and complete enough for the invention to be performed by a person skilled in the relevant art’, and that the claims must be ‘supported by matter disclosed in the specification’.  The intended effect of these changes is, firstly, to require that the description provide sufficient information to enable the skilled person to perform the invention across the full scope of the claims and, secondly, that the scope of the claims should not be broader than is justified by the extent of the disclosure and the contribution made by the invention.  While these intentions are not necessarily apparent from the wording of the provisions, the idea is that they are implied through the use of similar terminology to that used in other jurisdictions (particularly Europe and the UK), as indicated in the Explanatory Memorandum that accompanied the Raising the Bar legislation.

If the changes to the law achieve their intended effects, then the standard of disclosure required, and the concurrence of the relationship between the description and claims, should be substantially enhanced.  I would have to say, however, that there is little in the first instance decision in Encompass v InfoTrack to indicate just how far the bar has been raised.  This appears, at least in part, to be a result of the way the case was argued, which led the court to give greater attention to what the new provisions are not, rather than to what they are.  In any event, it is to be hoped that consideration by the Full Court will be more enlightening.

19 June 2018

Computer-Implemented Inventions and the ‘Ball Point Pen Principle’ – Why the Australian Law on Patent-Eligibility is a Mess

Ball Point PenThe law – and Patent Office practice – relating to the assessment and examination of patents and applications for computer-implemented inventions in Australia is currently a complete mess.  I challenge anyone – whether an inventor, applicant, patent attorney, patent examiner, Patent Office hearing officer, IP lawyer, barrister or judge – to provide a coherent explanation of how to go about deciding whether an invention involving the use of a computer is eligible for patent protection.  I myself cannot do it, so I would genuinely love to have someone explain it to me.

In this article, I will show you where a unanimous Full Court panel of three judges of the Federal Court of Australia – the highest legal authority to have considered patent-eligibility of computer-implemented inventions in this country – clearly stated that it is impermissible to consider the state of the prior art in assessing whether or not the subject matter of an invention is patent-eligible, i.e. a ‘manner of manufacture’ in the terminology used in the Australian law.  Notably, subsequent Full Court panels have thrice accepted the correctness of this decision without criticism.  Then I will show you where a single judge of the Federal Court recently found an invention to comprise ineligible subject matter on the basis that various components of the claims are known from the prior art. 

I will also show you where a Patent Office hearing officer, in upholding the rejection of a patent application by an examiner, expressly stated that it is legitimate to consider the prior art when assessing patent-eligibility of computer-related subject matter.  I will point you to a recent opposition decision in which the hearing officer found that the claimed invention was not patent-eligible, despite an examiner having accepted the application, and the applicant being successful in establishing that the claims involved an inventive step over prior art raised by the opponent.  And I will identify a further four Patent Office decisions – in addition to 13 published since the beginning of 2017 that I listed last November – in which applications for computer-implemented inventions have been refused, including one relating to an application by Google which cites the aforementioned decision to justify considering prior art when deciding subject-matter eligibility.  In these decisions, the Patent Office is continuing to apply its adaptation 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), despite a lack of any clear authority for this approach in Australia.

Meanwhile, one of two Federal Court appeals of Patent Office decisions has been terminated following unsuccessful mediation, while the other has been delayed after the parties decided that expert evidence is required.  Yes – expert evidence to address whether or not an invention is a ‘manner of manufacture’, which is supposed to be a question of law, on which technical experts have no authority.

This is all, frankly, terrible for the state of patent law, and for high-tech innovation, in Australia.  Literally nobody really knows what the law is.  It is not just that patent applicants, and their attorneys, do not agree with the Patent Office about what is, and is not, patentable.  The Patent Office does not agree with itself!  Inventions that are receiving approval in examination are being rejected in opposition.  Attorneys, examiners, hearing officers and judges are finding it all but impossible to extract coherent principles from the relevant Full Court decisions, without exposing inconsistencies in those decisions.  In Federal Court, technical experts are being called in to shed light on something that is supposed to be a legal issue.  As I recently reported, the examination section that deals with inventions related to computing has the lowest acceptance rates in the Australian Patent Office.  All of this speaks to the uncertainty that currently surrounds what is, and is not, patentable when it comes to computer-implemented invention.

Copyright © 2014
Creative Commons License
The Patentology Blog by Dr Mark A Summerfield is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Australia License.