28 May 2017

Talking ‘Data’ With IP Australia’s Chief Economist

Benjamin Mitra-KahnIt has been an unduly long time – just over a year, in fact – since I published the first part of a conversation I had with IP Australia’s Chief Economist, Benjamin Mitra-Kahn.  But the two of us (mainly me, if I am honest) have finally got our act together to edit most of the transcript into a readable form.  I am therefore very pleased to be able to start publishing the remainder of our discussion.  Despite the passage of time, the content is still highly relevant, indeed in some ways even more so, considering the increasing importance of economic analysis and the role of data science in driving government policy in relation to intellectual property.

Late last year, for example, the Australian Productivity Commission (PC) released its final report on its Inquiry Into Australia’s Intellectual Property Arrangements.  The report reviewed the Australian IP system in its entirety, and made a number of significant recommendations to the Government, which are currently under consideration.  While prior reviews and inquiries into components of the IP system had been conducted by panels that included economists, the PC’s review was the widest, and the first to be conducted entirely by economists.  Naturally, the PC sought to draw conclusions and make recommendations based on evidence, and a key theme of the final report is the need for accountability in the IP system, including by developing and maintaining a sound evidence base to inform policy decisions.

It is in this context that economic research, such as the 2012 study by Boston University academics James Bessen and Michael Meurer which concluded that ‘patent trolls’ cost the US economy $29 billion in 2011, can have a huge impact.  Some people (including me) questioned the reliability of the source data and methods used in that study, but a far larger number – including some widely-read media outlets – simply took the Bessen and Meurer results at face value.

I was therefore very interested to get the views of IP Australia’s Chief Economist on that particular study, and to talk about the work that is being done in Australia to make better-quality data available to researchers, and other interested stakeholders, through the IP Government Open Data (IPGOD) initiative.

21 May 2017

Identifying Patent-Eligible Software Claims... Using Software

MatrixAs I have previously reported, the major and immediate impact of the US Supreme Court’s Alice decision in June 2014 was to reduce the rate of ‘business method’ patents issued by the US Patent and Trademarks Office (USPTO) by three-quarters, while having a negligible effect on ‘technical’ software-implemented inventions.  While the data in my earlier article ended in December 2015, I have now been able to update my results to the end of March 2017, as shown in the chart below.  There has been no change in the overall trend during the intervening 15 months, with ‘business method’ patent grants still running at around 50% of 2007 numbers, while technical software patents, and patents across all areas of technology, are issuing at rates nearly twice those of 2007.
Patent Grants (March 2017)
In a recent post on the Bilski Blog, US patent agent Mark Nowotarski has made similar observations about the impact of Alice on ‘business method’ patent grants, going on to analyse the characteristics of those patent claims are are still being allowed in the USPTO’s business method Art Units.  He has noted that it is commonly by including ‘physical limitations’ (e.g. reciting hardware such as ‘mobile devices/sales kiosks’ or ‘physical sensors’) and/or ‘software limitations’ (e.g. reciting technical functionality such as ‘graphics/ image processing’ or ‘cryptography/security’) that applicants have been able to overcome Alice-based subject-matter rejections.

This got me thinking.  If there are common forms of technical language that arise in patent-eligible claims, then might it be possible to train a machine-learning system to predict whether a particular claim is, or is not, likely to be patentable?

It turns out that this does indeed appear to be possible.  I built a machine-learning model using data published by the USPTO, including the claims of 24,462 recently-abandoned 4967 recently-allowed applications, all examined within ‘software’ and ‘business methods’ Art Units.  In cross-validation tests (i.e. using a portion of the known data for training, and the remainder to test model performance) I was able to achieve around 75% prediction accuracy.  In trials of a hand-picked ‘random’ sample of more recent patents and published applications, not in the training/test set, the model correctly classified all actually allowed claims (of four examples) as patentable.  It also classified the claims of four abandoned applications as unpatentable, and two published-but-rejected-and/or-amended claims as unpatentable.  In only one case did the model classify a claim that had been rejected on subject-matter grounds as likely-patentable.

The model may thus be capable, with a probability of success of over 70%, of determining whether or not a proposed claim to a computer-implemented invention includes sufficient technical content to overcome a subject-matter-based rejection, at least under the Alice test as it is applied by the USPTO.

14 May 2017

How IP Australia Has Been Quietly Curbing Abuse of the Innovation Patent System

Stop guyUpdate, 16 May 2017: The Commissioner of Patents, Fatima Beattie, has responded to this article in the comments.

While working with the new 2017 release of the Intellectual Property Government Open Data (IPGOD) I noticed something unusual – in October 2016, IP Australia refused 101 innovation patent applications.  Adding to the mystery, in 53 of these cases the refusal was retrospective, in the sense that innovation patents had already been granted, in one case as far back as April 2015.  Not only is refusal something that can only happen to a pending application (a granted patent can, however, be revoked), but it is something that generally does not happen to an application for an innovation patent.  As at the time of this writing, there are 23,387 innovation patent records in IP Australia’s AusPat system.  Never before, nor (as yet) since, these 101 cases has an innovation patent application been refused.

The one thing that all 101 of these applications have in common is that they name a Chinese resident company or individual as applicant.  I have written on a number of previous occasions about suspected abuse of the Australian innovation patent system by Chinese applicants (see Junk Patents Dumped on Australia as Chinese Subsidies Rorted, Chinese Junk Patents Revisited: 2013 Filings Update and, most recently, Users and Abusers of the Australian Innovation Patent System).  IP Australia’s Australian Intellectual Property Report 2017 (‘IP Report’) observed that:
Although Australian residents remain the main users of the innovation patent system, for the first time since its inception, non-residents made up the majority of innovation patent applicants with 54 per cent of the total in 2016.
The increase in international applications is attributable almost exclusively to an increase of some 142 per cent in applications from Chinese residents to 871 applications. This accounts for around 93 per cent of the overall increase in non-resident applications, and represents 38 per cent of total filings.

It is my belief that the primary motivation for Chinese applicants to obtain Australian innovation patents is to secure government subsidies that are paid upon the grant of foreign patent rights.  An innovation patent is granted following a check only of certain formalities, and without substantive examination as to novelty and inventive step (or, rather, the lower standard of innovative step).  Although the resulting patent must pass examination and be certified before it can be enforced, the applicant nonetheless receives a certificate that conveys (at least to anybody who is insufficiently familiar with the workings of the Australian innovation patent system) the impression of a full patent grant .

It is clearly undesirable, to say the least, for the Australian Register of Patents to be cluttered with dubious registrations, and for these Chinese ‘junk’ patents to cloud our ability to assess how effectively the innovation patent system is serving the small-to-medium Australian enterprises for which it was primarily designed.  I therefore welcome any legitimate steps that may be taken to curb this activity.  However, the statutory basis for these ‘refusals’ is not clear to me.  It may be that the Commissioner of Patents is stepping outside the bounds of the Patents Act 1990.  If so, then it would not be the first time!

08 May 2017

Beaton Survey Reveals Listed Australian IP Firms’ Epic Failure to Communicate

FailIn a new report, specialist professional services consulting house Beaton Research + Consulting reveals the results of a survey investigating how users of IP services view public ownership of IP firms, and their perceptions of its effect on service, quality, value, and price.  The report is likely to make uncomfortable reading for executives and practitioners at Australia’s three listed holding companies, IPH Limited (ASX:IPH), Xenith IP Group Limited (ASX:XIP) and QANTM IP Limited (ASX:QIP), and the nine specialist IP firms that they now own.  Conversely, it will bring some comfort to partners and practitioners at privately-held firms, many of whom believe that their independence presents an opportunity to differentiate their services in the Australian market.

While the methodology of the Beaton survey is far from rigorous, and the report states that its findings should be regarded as ‘indicative’ rather than necessarily ‘representative’, the headline results are nonetheless an indictment of listed firms’ efforts to communicate the nature and implications of their changes in ownership and corporate structure.  I have been saying for some time – not only on this blog, but privately to anyone who will listen – that perceptions are important, irrespective of the commercial reality, and that firms within the listed groups have not done enough to address concerns not only of the market, but of their professional employees who are understandably uncertain of what the changes mean for their future career paths.  Yet even I was surprised by the extremity of some of the findings of the Beaton report.

For example, fewer than half of respondents who have used the services of Australia’s longest-standing listed firm, Spruson & Ferguson (owned by IPH Ltd), during the previous 12 months were able to correctly identify their service provider as being a member of a listed group, while nearly a fifth wrongly believed the firm to be privately-owned.  The overwhelming majority of clients of Shelston IP (owned by Xenith IP Group Ltd) did not know whether the firm was publicly or privately owned.

The news is even worse for listed firms when it comes to client perceptions of the service impacts of public ownership.  Nearly 80% of respondents either agreed or strongly agreed that a reduction in the number of privately owned firms is against clients’ interests, while only 2% disagreed or strongly disagreed.  Two thirds believe (i.e. either agreed or strongly agreed) that firms owned by ASX-listed companies must put the interests of shareholders above the interests of clients.  Only 5% perceive that there is a benefit to public ownership in making an IP firm stronger.

It is important to appreciate that the survey findings reflect client perceptions, which may be different from reality – although it is worth recalling the words of Republican strategist and adviser to Ronald Reagan and George Bush Snr, Lee Atwater, who famously said in the 1980s (long before we had ‘fake news’ and ‘alternative facts’) that ‘perception is reality’.  As I recently reported, the Trans-Tasman IP Attorneys Board (TTIPAB) – the regulatory body formerly known as the Professional Standards Board for Patent and Trade Marks Attorneys – has not identified any actual issues of conflict of interest or service standards in the current arrangements implemented by listed groups of IP firms.  However, the TTIPAB did express concern that ‘the degree of awareness and understanding of the listed group scenario among some clients, and the stake-holding public more generally, is limited’.  The Beaton survey unquestionably bears this out. Indeed, ‘limited’ might be regarded as an understatement in light of some of the survey results.

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