SMEs – You and IP Australia Need to Talk!

A contingent of key staff from IP Australia, led by Director General Philip Noonan, is currently engaged in a tour of mainland capital cities, where they have been consulting with members of the IP professions on the draft amendments to the Australian Patents Regulations 1991, which are open for comment until 21 November 2012 (see Draft Regulations Reveal Applicants to be Slugged with Search Fee and Timeframes Slashed in Second Stage of Proposed Regulations).  We were fortunate to have the opportunity to attend the Melbourne discussion on Wednesday, 14 November 2012.

A small but highly-engaged contingent of about 20 patent attorneys, trade marks attorneys and lawyers attended either one, or both, of the two 90 minute sessions.  The format was basically a ‘round table’ discussion (though the actual table was rectangular), which ranged across a number of the issues raised by the draft regulations.  The IP Australia representatives generally seemed receptive to the various views expressed by the participants, and equally willing to explain and defend their position on the proposed regulations.  It is fair to say that there was fairly robust discussion on a small number of the more contentious issues!

The Australian IP law reforms, and the accompanying amendments to the regulatory regimes, encompass trade marks, designs and copyright matters, as well as changes to the regulations governing the patent and trade marks attorney professions.  However our interest, as always, is primarily in relation to the patent reforms.

In this article, we cover a few of the topics discussed.  However, we wish to highlight particularly the potential impact of the proposed search and examination fee regime on Australian small-to-medium enterprises (SMEs).  While there are certainly people within the patent profession who will be advocating a rethink of this regime, on behalf of our local SME clients, it is equally important that SMEs ensure that their own voices are heard directly.  Otherwise, there is a real risk that some Australian SMEs will be effectively priced-out of their own patent system!

SEARCH FEES TO DISPROPORTIONATELY IMPACT AUSTRALIAN SMEs

Probably the most contentious patent-related issue canvassed during the discussions was the ‘preliminary search and opinion’ (PSO) process, and the associated A$2200 fee. We highlighted the proposed search and examination fee regime in our earlier article Draft Regulations Reveal Applicants to be Slugged with Search Fee, however at the time we noted that it was unclear in what circumstances the higher search fees would be levied.

It was therefore useful to hear ‘straight from the horse’s mouth’, as it were, exactly what IP Australia has in mind.  And what we learned is that the search procedures are being proposed with all of the best intentions, though seemingly with insufficient consideration of those applicants likely to be most significantly affected by the system.

As we understand it, the principles that IP Australia is seeking to apply are that:

1. every patent application, wherever it originates, should have a search conducted at the earliest possible opportunity, for the benefit of the applicant and any third parties that may wish to evaluate the prospects of a patent being granted; and
2. the total fees payable on every application should be roughly equivalent, and the proportion of those fees paid to IP Australia should reflect the work involved.

For convenience, we will call these the ‘early search principle’ and the ‘equality of cost principle’ – emphasising that we have made these terms up, and they are not authorised, approved or endorsed by IP Australia!

According to the early search principle, any Australian patent application which is not derived from an international application (on which a search would already have been conducted), or which does not claim priority from an earlier foreign application (which, it might be assumed, would itself be subject to a search) will be required to go through the Australian PSO process.

Furthermore, according to the equality of cost principle, full Australian search fees may be payable in any case where the Australian examiner does not have access to results of a prior (foreign or Australian) patent office search.

The practical effect of the proposed application of these principles is that any applicant for an Australian patent, for which there is no prior international search, or foreign priority application, will pay search and examination fees totalling at least A$2200.

As a practical matter, IP Australia’s current intention is to require payment of the A$2200 fee for a PSO on any new Australian standard patent application which is neither the national phase of an international application, nor a ‘convention application’ (i.e. an Australian application claiming priority from a prior foreign patent application).  For applications filed through eServices (see A Tour of IP Australia’s Latest Online Service Offerings), the online system will automatically levy the PSO fee, i.e. it will not be possible to file the application without paying the fee.  For applications filed by other means, if the fee is not paid at filing then IP Australia will issue an ‘Invitation to Pay’, requiring payment within two months, otherwise the application will lapse.

Almost every patent application filed in Australia by a foreign applicant falls into one, or both, of the above categories.  Thus non-Australian applicants – including large multinational corporations – will not be required to pay the A$2200 PSO fee at filing.  Furthermore, larger Australian companies which typically file applications in multiple countries will commonly use the international application system.  Alternatively, they may employ filing strategies (such as filing initially in the US instead of in Australia) which will allow them to avoid the higher Australian fees, and minimise the overall cost of filing and examination of their portfolios.

It is therefore likely that the only applicants who will be required to pay for a PSO at filing will be smaller Australian companies, and individual inventors, filing standard patent applications directly in Australia, either as in original application, or claiming priority from an earlier Australian provisional application.

In such cases, the total fees payable at filing will be A$2570 (A$370 application fee, plus the A$2200 PSO fee).  The applicant will also subsequently be required to pay the examination fee of A$490.

By way of comparison, a ‘small entity’ (generally, an individual inventor, or a company with up to 500 employees) filing in the US pays US$505 in application and search fees, and a US$125 examination fee.

It is also worth noting that while any convention application will escape the requirement to pay the PSO fee at filing, the vast majority of foreign patent offices do not provide an early search/opinion service.  The European Patent Office does so, as does the UK Intellectual Property Office, but the USPTO does not.  The Chinese State Intellectual Property Office does not.  The Canadian Intellectual Property Office does not.  The Japanese Patent Office does not.  The Korean Intellectual Property Office does not.  The Intellectual Property Office of New Zealand does not.

In short, the only applicants who will be affected – and disadvantaged – by the proposed PSO practice and associated fees will be Australian inventors and SMEs.  And it does not appear likely that either the early search principle or the equality of cost principle will be satisfied, in the majority of cases, by the practice.

We would encourage any individual inventors, small business operators and representative organisations who are concerned about this proposal to make a submission to IP Australia, in accordance with the instructions set out on the consultation web page, prior to the deadline of 5pm on Wednesday, 21 November 2012.

SHORTENED TIME PERIODS

We note that, although the changes to the Patents Regulations will make life somewhat more difficult for patent attorneys in a number of respects – particularly with regard to the shortening of some allowed time periods, and strengthening of IP Australia’s power to refuse extensions of time – these reforms drew very little criticism from the participants in the discussion with IP Australia. 

It must be said that most of the attendees represented a younger generation of attorneys, with around 10-20 years’ experience in the profession, as opposed to the current ‘old guard’ of senior practitioners.  As a group, we are perhaps more inclined to accept the necessity of change, to improve the speed and efficiency of proceedings before the Patent Office, even though the changes in practice and procedure will not come without some pain!

Nonetheless, there is scope for some tweaking to a few of the proposed time periods.  For example, a number of attendees expressed concern about the reduction, from six months to only two, of the period within which an applicant must request examination after the Patent Office issues a direction to do so.  For smaller practices, which do not have resources dedicated to the task of handling examination directions – and which can be significantly impacted by staff illness, vacation time, and other distractions – two months may be a challenging time-frame within which to obtain suitable instructions from overseas clients.  (It is important to realise that examination directions arrive without warning, and in this sense cannot be ‘planned for’ in advance.)  Even so, there did not appear to be anyone present who felt that anything more than three months should be necessary.

ESTABLISHMENT OF ENTITLEMENT

The other specifically patent-related issue that drew some discussion was the practice around establishing entitlement of an applicant to be granted a patent.

It is a requirement under section 15 of the Patents Act 1990 that a patent may only be granted to the inventor(s), or another person (or company) suitably entitled to ownership of the patent by some legitimate chain of title from the inventor.  Typically, inventions come to be owned by the ultimate patent-holder by the terms of an employment contract, or by an express assignment of rights from the inventor.

The scheme of the Australian Patents Act is that anybody may apply for a patent, but only an entitled person (including a corporation) may be granted a patent.  It is therefore a requirement that a Notice of Entitlement (traditionally a form of signed declaration stating the basis for entitlement) be filed before a patent can be accepted for grant.  The Australian patent attorney profession has generally supported this practice, because it provides a legal basis for us to require our clients – particularly the foreign law firms representing overseas applicants – to provide us with entitlement details.  It is quite surprising how frequently problems with the chain of title are uncovered once someone is compelled actually to check their records more closely!

An issue that has now arisen is that the new eServices filing platform – which will soon be the only ‘approved means’ for filing of new applications without paying higher fees – requires that entitlement details be provided at filing.  However, it is not uncommon that clients – and particularly foreign law firms – do not provide details of the chain of title when they instruct an Australian attorney to file a new application.  Even with local or direct clients there can be complications, such as uncertainty about the roles played by different named inventors, which can create uncertainty about the basis for entitlement at the time of filing.

Currently, if the basis for entitlement is unknown or uncertain, it is not possible for an attorney/agent to file an application via eServices, and we would like to see this issue addressed.

There was something of a divide between the patent attorneys in the discussion – who see a statement of entitlement as a substantive matter which can only be addressed when the attorney has a good-faith belief in the basis for entitlement – and the IP Australia representative – who see this as primarily an administrative matter which can, in any event, be corrected at a later stage if necessary.

In any event, it seems that the may be a solution in the works that would be acceptable to both sides, in the form of an additional option within the eServices filing workflow which would be appropriate for cases in which entitlement is unknown or uncertain.

Watch this space!

CHANGES OF NAME

We also took the opportunity to raise the issue of IP Australia’s current view that a change of name of a patentee is an amendment that ‘materially alters the meaning or scope of an entry in the Register’, and therefore must be advertised to provide an opportunity for third-party opposition/objection (see IP Australia Changes Tack on Changing Names).

It turns out that IP Australia is concerned about the possibility that some changes of company name, for example, may be made for nefarious purposes, such as where disputes arise between company directors.

We accept that these kinds of things do happen from time-to-time, but we nonetheless observed that if a company name has been legally changed, and the change recorded by the corporate regulator, then the reality is that there has been no material change in ownership of any patents, but the Register of Patents now contains obsolete information.  Any dispute between company directors is a matter for them, and possibly for the courts and/or the regulator.  But the same corporate entity continues to hold the patent rights, even while ownership and/or control of that entity may be disputed.

And, of course, the vast majority of name changes are made for entirely legitimate reasons, and yet the current practice clearly contributes delay and inefficiency to the process.

We suggested that the amended regulations might expressly deem a change of name to be an amendment that does not materially alter the meaning and scope of a Register entry.  Our views and suggestions were certainly heard, but it remains to be seen whether this will result in any change after further consideration by IP Australia.

CONCLUSION

It was good to have the opportunity to meet with the IP Australia representatives, and to discuss a range of issues relating to the reform process and the draft regulations.  We are grateful to Philip Noonan and his team for making the trip to Melbourne, and taking the time to consult with interested stakeholders, and hope that equally stimulating discussions are taking place in the other mainland capital cities.

Mr Noonan indicated that IP Australia hopes to have a response to the input received from all sources prior to Christmas, although it is not anticipated that a further draft of the Amendment Regulations will be available until early in the new year.

If you want your own views to be considered in that process, do not forget that deadline for submissions – 5.00pm on Wednesday, 21 November 2012.

Tags: Australia, Law reform, Patent Office, Raising the Bar, Regulations