Whither — or Wither — the Innovation Patent?

Last month the Australian Government’s Advisory Council on Intellectual Property (ACIP) released an ‘Options Paper’ in its ongoing review of the innovation patent system.  The options presented in the paper are threefold: do nothing; modify the innovation patent system in some as-yet unspecified way; or abolish the innovation patent system entirely.  I think that pretty much covers the full gamut of possibilities, and ACIP is now going back to the public seeking further input.

I have written about this review before, most recently in relation to IP Australia’s ‘Raising the Step’ proposal, in September 2012, to completely eliminate the distinction in inventive threshold between standard patents and innovation patents, such that an ‘invention’ and an ‘innovation’ would be required to meet exactly the same inventive step threshold.  As I wrote at the time, IP Australia’s publication of its consultation paper – which arrived complete with drafting instructions for the proposed amendments to the Patents Act 1990 – appeared to completely pre-empt ACIP’s review.

Submissions were due by 25 October 2012, in response to IP Australia’s consultation.  I made a submission, although it appears to have gone astray, since my name is not included among the list of submissions on page 46 of the ACIP Options Paper.  While I expected that the submissions would be published, and some further proposals or conclusions put forward by IP Australia, on the contrary the consultation seemed to disappear without trace.  In fact, ACIP’s Options Paper reveals that the submissions to IP Australia were passed on for consideration in the course of its ongoing review.

Strange Things Afoot…

Before saying a little more about the content of the Options Paper, I would like to highlight a concern about the level of transparency – or, rather, the lack thereof – of actions taken in relation to this review under the previous government.  ACIP’s paper reveals rather more than just what became of IP Australia’s consultation process, and a little digging around the website of the Department of Prime Minister and Cabinet turns up an additional hint of what was going on behind the scenes.

The introduction to the Options Paper (page 6) summarises events as follows.

1. In February 2011, the then Minister for Innovation, Industry, Science and Research, Senator the Hon Kim Carr, directed ACIP to review the innovation patent system.  This, at least, we knew.
2. In September 2012, the then Parliamentary Secretary for Industry and Innovation, the Hon Mark Dreyfus QC MP, directed IP Australia to conduct a public consultation on raising the inventiveness threshold for innovation patents to the same as that for a standard patent.  Of course, we know that IP Australia conducted this consultation, but the fact that the direction came from the Parliamentary Secretary is new information – to me, at least.
3. In April 2013, the then Minister for Climate Change, Industry and Innovation, the Hon Greg Combet AM MP, informed ACIP that the Australian Government was open to raising the inventiveness threshold for innovation patents to the same as that for a standard patent. The Minister also asked ACIP to finalise its review of the innovation patent system by late 2013 and provide the Government with a report addressing the whole of the innovation patent system.  This, as far as I am aware, is also new information.

A bit of digging through the Department of Prime Minister and Cabinet website turns up a document identifying legislation proposed for introduction [PDF, 90kB] during the 2013 Winter sittings of the Australian Parliament, which took place between May and July.  (Since this document will probably disappear at some future date, I have archived a copy.)

That document identifies the Intellectual Property Laws Amendment Bill 2013 which, as I reported recently, was indeed introduced during the Winter sittings, but did not quite make it through the full process to become law before this year’s election was announced and Parliament suspended.  According to the Departmental document (which is undated, however the metadata in the PDF file indicates that it was created on 10 May 2013) it was anticipated that the Bill would:

1. implement the TRIPS protocol;
2. implement Trans-Tasman patent application and examination processes and a single patent attorney regime for Australia and New Zealand; and
3. reform the innovation patent system.

As we now know, the Bill as actually introduced (and passed in the lower house) tackled the first two of these objectives, but not the third.

While this is all rather opaque, a couple of observations seem in order.

1. The Labor Government under which all of this funny business occurred was hopelessly divided.  Senator Kim Carr, who initiated the ACIP review, was a supporter of the Government’s first leader, Kevin Rudd, and was relegated to the outer ministry after Rudd was deposed by Julia Gillard and her supporters.  In March this year, Senator Carr quit the Cabinet following the first, abortive, attempt to reinstate Rudd as leader.  In this toxic environment, it is perhaps unsurprising that a subsequent Minister would have no qualms gazumping an ongoing enquiry established by his predecessor.
2. The innovation patent system was itself a product of the previous Howard conservative coalition government, and therefore a natural target for the Labor party while in government, although it remains unclear how and why it became such a significant issue that reform almost became the subject of legislation this year.

The postscript to all of this, of course, is that Rudd’s supporters eventually were able to depose Gillard, and Kim Carr regained his post as Minister for Innovation, Industry, Science and Research, if only briefly, before the Labor Government was voted out at the recent election.

Options

As I noted at the outset, ACIP’s paper outlines three options.

Option A is to do nothing, at least for the present, and wait and see what effect the Raising the Bar patent reforms may have on use of the innovation patent system.  If the innovation patent system were to be changed so soon after the recent law reforms came into effect (on 15 April 2013) it might be impossible to know whether any changes in the behaviour of applicants and patentees are due to reform of the innovation patent system in particular, or due to the more wide-ranging Raising the Bar reforms.

Option B is to abolish the innovation patent system.  On pages 36-37 of the Options Paper, ACIP lists nine factors in favour of abolition, and six favouring retaining the system.  There is nothing very surprising in these lists: the case against the innovation patent includes under-utilisation, uncertainty, doubts about its effectiveness in fostering innovation, and strategic use by large multinationals (such as Apple); while the case in favour includes the fact that it does appear to provide individual inventors and small-to-medium enterprises (SMEs) with IP protection to which they would not otherwise have access, that abolition would simply recreate the ‘gap’ in available protection that the innovation was created to fill, and that there is no real evidence that innovation patents are causing any great harm or uncertainty in practice.

Option C is to change the innovation patent system, and might equally be labelled ‘everything not covered by Options A and B’.  Included among the reforms proposed for discussion are:

1. raising the level of innovation required for a valid innovation patent (though not necessarily to the ‘inventive step’ standard, as proposed by IP Australia);
2. reducing available remedies, for example by making injunctive relief unavailable to any patent-holder which is not exploiting the invention themself;
3. limiting the scope of the monopoly to a single embodiment as disclosed in the patent specification (I must say that I find this a completely absurd and impractical suggestion);
4. changing processes, e.g. by making examination/certification compulsory;
5. changing the name of the right, so that an unexamined, unenforceable innovation patent right is not called a ‘patent’ (I think this is quite a good idea, if only because it may put a stop to one possible abuse of the Australian patent system by foreign companies);
6. education – this seems to be a compulsory recommendation of any report by an IP advisory panel, which is probably not surprising because IP rights and procedures are complex, and the public will never be as well-informed as they could be;
7. creating further exclusions of the subject matter which can be covered by an innovation patent, e.g. methods and processes, chemical compositions, pharmaceuticals and computer-implemented inventions; and
8. limiting access to the innovation patent system, e.g. to individuals and SMEs.

My Thoughts

My first observation would be that the innovation patent system is quite widely utilised by Australian inventors and SMEs.  The ACIP report includes the following rather misleading chart, which seems to imply that foreign applicants have been gradually taking over the system.



In fact, the number of innovation patent applications filed has doubled over the period shown in this chart, so despite the ‘decline’ in Australian applicants from 85% to 65% of the total, in absolute terms there are one-and-a-half times as many Australian applicants now using the system as compared with ten years ago.

Furthermore, figures also included in the Options Paper show that the proportion of certified innovation patents held by Australian individuals and companies has remained relatively steady over time, which indicates that Australians have been electing to have their patents examined in increasing numbers, while many of the additional patents obtained by foreign companies remain uncertified and unenforceable (which may well reflect the ‘junk patent’ phenomenon).

Overall, the usage of the innovation patent system by Australians, the feedback from a report on the economic value of the innovation patent system [PDF, 751kB] commissioned by ACIP, along with anecdotal evidence and my own experience, strongly suggest that Australian inventors and SMEs do value and utilise the innovation patent system.  I therefore believe it should be retained.

However, the innovation patent as currently implemented undoubtedly has some problems, the most significant of which is that the ‘innovative step’ standard is too low.  I do not think that this would be very difficult to fix.  As I pointed out earlier this year, there have been four different, and increasing, standards of inventive step in effect in Australia over the past 20 years or so.  That means there are three choices available with which the courts are familiar, but which would not involve raising the standard to the current level of inventive step as applied to standard patents.  Personally, I would be inclined to suggest that the original Patents Act 1990 standard be adopted (i.e. inventive step assessed against the common general knowledge in combination no more than one item of prior art information).

I also think there is much to be said for limiting the availability of injunctions to those patent-holders who actually have a corresponding product in the market. The ability to claim damages in the form of a ‘reasonable royalty’ from an infringer which is not a competitor should be sufficient in other cases.

Additionally, limiting access to innovation patents to ‘small entities’ might well be a practical option.  It would require only a definition of ‘small entity’, and a requirement that an applicant declare that it qualifies at the time of filing.  There would be no need for the Patent Office to conduct any checks – a new defence to infringement of an innovation could be created to cover the case in which an applicant made a false declaration of small entity status.

Finally, I would change the name of an uncertified, unenforceable innovation patent to, for example, ‘innovation registration’.

One thing I definitely would not do is to exclude computer-implemented inventions from innovation patent protection.  This, it seems to me, is precisely the wrong option.  On the contrary, an innovation patent already looks a lot more like the reduced term IP right that is presently advocated by the Electronic Frontier Foundation.  With a few judicious reforms, innovation patents could become the preferred means to protect software inventions, for which the 20-year term of a standard patent is often not justified.

Submissions

Submissions in response to ACIP’s Options Paper are due by 4 October 2013, and should be sent to:

Jeff Carl
Secretariat
Advisory Council on Intellectual Property
PO Box 200
WODEN ACT 2606
Email: mail.acip@ipaustralia.gov.au 
Telephone: 02 6283 2543

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Tags: Australia, Innovation patent, Law reform