20 February 2019

What Every Patent Practitioner and Applicant Needs to Know About Divisional Applications in Australia

Divisional children Since commencement of the Raising the Bar patent reforms in 2013 there has been a potentially fatal trap in the Australian rules relating to divisional applications.  I have always thought it inevitable that someone would eventually fall into this trap – and practically certain that when it did happen, the applicant would be from the United States.  A recent decision of the Australian Patent Office, in which a US-based applicant has been denied the opportunity to convert an application into a divisional of an earlier filing, in order to avoid having one of its own previous applications cited as invalidating prior art, has confirmed my prediction: Magnum Magnetics Corporation [2019] APO 3.  Of course, this may not be the first time this situation has arisen.  To the best of my knowledge, however, it is the first time it has resulted in an actual Patent Office decision highlighting the issue.

In this recent case, Magnum Magnetics Corporation (‘Magnum’) filed an independent patent application in Australia when (as it subsequently turned out) the application should really have been filed as a divisional of an earlier application.  So far, its efforts to correct this error have been unsuccessful.

As most readers will be aware, a divisional patent application is a type of patent application which is based on a previously filed application, commonly called the ‘parent’ application.  A divisional application inherits the parent’s filing date and, to the extent that it discloses and claims subject matter that was also present in the parent, those claims are entitled to the same priority date.  The primary purpose for which divisional applications were originally created was to enable further inventions that may have been disclosed in an initial application to be protected, since as a general principle a single patent may only claim a single invention.  However, over the years many other practical and strategic uses of divisional applications have been developed.  For example, it is permissible to update or add new subject matter in a divisional application, although any claims based on the added matter will not usually be entitled to the benefit of the parent’s priority date.

Historically, it has been very easy in Australia to convert between ‘regular’ and divisional applications, requiring only a straightforward amendment to the patent request.  Such an amendment could be made at any time during the lifetime of the application/patent.  However, the Raising the Bar reforms changed the rules, adding additional restrictions on when an application may legitimately be converted to a divisional.  These restrictions will rarely be an issue for applicants that are making appropriate and well-informed use of the Australian patent application system.  However, a failure to appreciate the limitations of the Australian system – and, to be honest, this is something I have seen on a number of occasions from US practitioners, since their system is quite different – can get an applicant into trouble.

Unfortunately, this appears to be what happened to Magnum, although I think that there may still be some hope of saving its application.

13 February 2019

Listed IP Group IPH Ltd Acquires Nearly 20% Stake in Competitor Xenith IP Group Ltd

Almighty dollar Today, 13 February 2018, IPH Limited (ASX:IPH) announced [PDF, 156kB] that it has acquired a 19.9% stake in Xenith IP Group Limited (ASX:XIP).  It states that it ‘acquired its interest in Xenith at a price of $1.85 per share from institutional investors at a total cost of approximately $33 million which has been funded from debt facilities’, and that its purpose in doing so is ‘to participate in industry consolidation, consistent with its strategy to pursue acquisitions in the domestic market which are compelling from a strategic and financial sense.’ 

The immediate objective of the transaction, however, appears to be to try to block the proposed acquisition of Xenith by QANTM IP Limited (ASX:QIP), which was announced back in November 2018, and which is currently subject to a review by the Australian Competition and Consumer Commission (ACCC).  At today’s opening price for QANTM of $1.51 per share, the amount paid by IPH for Xenith shares is almost exactly equivalent to the offer on the table under the proposed merger of 1.22 QANTM shares for each Xenith share.  A bird in the hand being worth two in the bush, the ‘institutional investors’ must be delighted with the transaction.  Whether IPH shareholders are as pleased with this imaginative piece of debt financing remains to be seen.

Xenith shares, on the other hand, leapt from a close yesterday (12 February 2018) of $1.40 to open today at $1.75 per share, before closing at $1.69.  This jump followed IPH's notification to the ASX of its off-market purchase prior to the opening of trading, and is most likely a result of retail investors speculating on IPH's willingness to acquire further shares at around $1.85.

ASX:XIP 13 February 2019
In its announcement, IPH explains that:

On the basis of the information released to date, IPH does not support the current Xenith scheme to be acquired by QANTM Intellectual Property Group Limited (“QANTM”) and does not intend to vote in favour of it.

IPH believes an alternative transaction involving a strategic combination of one of these businesses with IPH has the potential to create significant value. IPH intends to seek discussions with Xenith and / or QANTM in relation to an alternative transaction to the current scheme.

06 February 2019

How Australian Patent Attorney Firms Compared on Filings in 2018

2018 Last week, I looked at Australian patent filings in 2018 from the perspective of the patent applicants.  This week, I analyse the data from the perspective of the patent attorney firms and others who actually performed the filing.  The analysis reveals that while the merger of Fisher Adams Kelly Callinans and Cullens into Spruson & Ferguson made that firm the top filer of patent applications across all categories, a number of other firms have distinct ‘strengths’ when it comes to particular types of filings.  For example, smaller and privately-held firms tend to feature more prominently in new provisional application filings (most of which are on behalf of Australian clients), while larger firms and members of the three listed groups dominate in ‘follow-on’ filings derived from earlier priority and international applications (most of which originate overseas).

In a similar vein, while firms within listed groups were responsible for filing 54% of all Australian patent applications during 2018, they filed only 26% of provisional applications, with 39% being filed by individual attorneys and privately-held firms.  ‘Private’ attorneys also filed 27% of all innovation patents, compared with just 16% filed by firms within listed groups.

The ‘low-cost’ option of self-filing continues to be a popular – if unwise – choice for many Australian applicants.  Over a quarter of all provisional applications and innovation patents were self-filed in 2018, as were perhaps 10% or more of all standard applications filed by Australian residents.  Assuming that the past remains a good guide, the overwhelming majority of these applications will never deliver any value or result in rights being granted to their owners.

30 January 2019

Top Patent Filers of 2018 – Software, Gaming and FinTech Companies Prominent Despite Questions Over Eligibility

2018 In the 2018 calendar year, the number of standard patent filings in Australia in grew modestly, by 3.6%, to 29,960.  This growth was reflected in both direct national filings, up from 9,007 to 9,046, and National Phase filings under the Patent Cooperation Treaty (PCT), up from 19,898 to 20,914.  Meanwhile, the number of provisional applications filed fell once again, by 5.2% from 5,182 to 4,943.  Applications for the condemned innovation patent, however, increased from 1,816 in 2017 to 2,121 in 2018, although abuse of the system by Chinese applicants seeking government subsidies at home remains rife, probably accounting for nearly a quarter of all innovation patent filings.

Interestingly, despite continuing uncertainty amid rejections by IP Australia of applications directed to so-called computer-implemented business methods, companies with significant interests in software, gaming/gambling, and financial technology (‘fintech’) feature strongly among the top applicants for Australian patents in 2018.  These companies include Qualcomm, Aristocrat Technologies Australia, Apple, LG Electronics, Huawei, Accenture Global Solutions, Samsung, Visa International, Mastercard International, Facebook, and Google.

The fall in provisional filings is disturbing, and continues a trend that has been virtually unbroken since the start of the millennium – in 2000, the number of provisional applications filed hit a peak of 7,434, and has declined almost every year since then.  As far as I can tell, the number of provisional applications filed in Australia has not been below 5,000 since at least as far back as the mid-1980s.  The overwhelming majority of provisional applications are filed by Australian resident companies and individuals, and the number of filings thus reflects a combination of the amount of innovation taking place in the Australian economy, and the level of interest from Australians in protecting their ideas through the patent system.

Sadly, the decline in provisional filings does not surprise me, and is symptomatic of the malaise in the Australian market that I wrote about most recently in relation to the proposed merger of QANTM IP Ltd and Xenith IP Group Ltd.  Before this, I had written about Australians’ lack of business sophistication when it comes to IP, about the poor appreciation in this country of the value of IP and corresponding decline in per capita patent filings, and about the particular failures of small and medium enterprises (SMEs) to identify, manage and protect their IP assets.  The situation is certainly not improving.

The top Australian applicant for standard patents in 2018 was, once again, Aristocrat Technologies, with 252 applications – up from 157 applications in 2017.  No other Australian resident company featured in the top 30 applicants, with the next most prolific Australian filer being CSIRO with 55 applications – encouragingly up from 45 in 2017.

Public research institutions also featured strongly among the top filers of provisional applications, with Monash University (44), the University of NSW (44), The University of Sydney (40), CSIRO (39), the University of Queensland (27), the University of Melbourne (21), the University of Western Australia (17), and the Queensland University of Technology (16) occupying eight of the top 10 spots.

For all the numbers, and further commentary, please read on.

22 January 2019

Commissioner of Patents Files Appeal in Case On Patent-Eligibility of Computer-Implemented Invention

Christmas briefsThere may have been little rest and relaxation over the Christmas and New Year period for lawyers working on behalf of the Australian Patent Office because, as I predicted back in December, on 16 January 2019 the Commissioner of Patents filed an application in the Federal Court of Australia for leave to appeal the decision of a single judge in Rokt Pte Ltd v Commissioner of Patents [2018] FCA 1988.  In that judgment, Justice Alan Robertson found that a claimed method and system for providing ‘a dynamic, context-based advertising system, introducing a distinction between an engagement offer, without a direct advertising benefit, and an advertisement designed to lead directly to the sale of the product’ is patent-eligible subject matter under the Australian ‘manner of manufacture’ test.  In doing so, he reversed the decision of a Patent Office Hearing Officer, who had found that ‘the substance of the invention in this case amounts to business innovation’, which was not patentable, and therefore refused Rokt’s patent application: Rokt Pte Ltd [2017] APO 34.

There is no great surprise in this move by the Commissioner.  As I have previously noted, judgment is pending in the appeal from Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421 – a case that has been heard by an expanded bench of five judges, and which concerns similar issues to those which arose in RoktThe Commissioner of Patents intervened in the Encompass appeal, and the Institute of Patent and Trade Mark Attorneys of Australia (IPTA) also sought to intervene, and filed written submissions.  The outcome in Encompass could well change the understanding of the law relied upon by the judge in Rokt.  The Commissioner will therefore want to ensure that the opportunity to have the facts in Rokt reconsidered under the law to be explained in Encompass is not lost.

The Encompass and Rokt cases are not the only appeals currently before the Federal Court in respect of Patent Office decisions refusing applications for patents on computer-implemented inventions.  The other ongoing cases are:
  1. Aristocrat Technologies Australia Pty Ltd v Commissioner of Patents (NSD1343/2018), which is an appeal from Aristocrat Technologies Australia Pty Limited [2018] APO 45, and is scheduled to be heard on 2-4 September 2019; and
  2. Repipe Pty Ltd v Commissioner of Patents (WAD323/2018), which is an appeal from Repipe Pty Ltd [2018] APO 42, and is scheduled to be heard on 25-27 June 2019.
With the Encompass judgment expected in the first half of the year, and the Rokt, Aristocrat and Repipe appeals likely to be heard subsequently (assuming they are not resolved between the parties in the wake of the Encompass decision), 2019 could be the year – at last – that we get some clarity around what is, and is not, patent-eligible when dealing with computer-implemented inventions.

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