Compelling Applicants to Identify ‘Technical Features’ of Inventions Claimed in Australian Patent Applications

As I have reported previously, a consultation process in currently underway in relation to a number of recommendations accepted by the Australian Government following the Productivity Commission’s Report on its Inquiry into Australia’s Intellectual Property Arrangements (‘PC Report’).  IP Australia has issued a number of consultation papers, and written submissions from interested stakeholders are due by this Friday, 17 November 2017.

The primary concern of the economists making up the PC committee that conducted the IP inquiry, with regard to patents in particular, is that rights are granted too readily in Australia, resulting in an excessive number of ‘low-value’ patents being granted.  When the PC economists refer to ‘low-value’, what they mean is that the innovations protected by the patents have low social or additional value.  The Report explains these characteristics in the following terms (see pages 200-1 of the Report):

1. innovations are of greater social value where they result in new goods, services, or production methods that improve the allocation of society’s limited resources, particularly where those innovations advance human knowledge and create knowledge spillovers into other areas of the economy;
2. innovations are additional where they would not have been developed or commercialised (or development would have been delayed) absent patent protection – noting that (at least according to some economic theories of the patent system) patents for innovations that are not ‘additional’ impose net costs on the community even if the innovation is socially valuable.

As a result of these concerns, the PC wants Australian patents to be harder to obtain (or, in the case of innovation patents, impossible to obtain).  The primary mechanism proposed by the PC for achieving this objective is to raise the standard of inventive step, possibly by imposing conditions that are unique among the world’s patent systems, such that the requirements in Australia are at least as high as, and preferably higher than, those existing in other jurisdictions.

To this end, the PC has recommended that applicants for patents in Australia should have to identify the technical features of the invention in the patent claims.  It has conceived of this as a new obligation, over and above existing legal requirements for patent claims in Australia, having a goal of improving the information available to examiners for identifying relevant prior art and assessing inventive step.  Furthermore, the PC believes – and IP Australia appears to have accepted – that this is an existing additional requirement under European patent law, and that it will impose a minimal burden upon most applicants.

In my view, however, the PC’s proposal is fundamentally misconceived.  In saying this, I mean no disrespect to the Commissioners.  They were handed an impossible task by the Government – given just 12 months to understand, review, and recommend reforms to Australia’s IP arrangements across the whole gamut of relevant rights, including patents, copyright, trade marks, registered designs, plant breeder’s rights, and circuit layout rights.  Consider, however, that after focussing primarily on patent law and practice continuously for over 15 years of my working life, I still find inventive step to be a difficult and constantly shifting topic.  When looked at from this perspective, the PC did a remarkable job.  But it would be wrong to think that all of its pronouncements are authoritative and beyond reproach.

IP Australia has offered three alternative proposals for implementing the PC’s recommendation, one of which requires change to substantive legal requirements for patent validity, while the other two would primarily involve changes in examination practice.  Unfortunately, because the recommendation itself is flawed, I do not consider any of these proposals to be acceptable.  Legislative change would create uncertainty and have possible unintended consequences, whereas changes in practice without the backing of legislation would be liable to challenge as being inconsistent with existing law.

The PC’s Recommendation and European Law

Recommendation 7.3 of the PC Report is that ‘IP Australia should reform its patent filing processes to require applicants to identify the technical features of the invention in the set of claims.’  The PC had apparently formed the impression that this is a requirement imposed by the European Patent Office (EPO) under the European Patent Convention (EPC), asserting (on page 230 of the Report) that:

The EPO, for example, can request applicants to … identify in their set of claims the technical features of the invention. This enables the EPO to more easily ensure that patent protection is only made on the basis of technical features, and allows follow-on innovators to identify the core technical element of the patent claim. The EPO also requires patent applicants to describe their invention in a way that makes clear the technical problem that the invention is intended to solve, and in this context, state any advantages of the invention over the prior art.

It appears that IP Australia has accepted this statement at face value, with the consultation paper affirming that ‘[r[equiring applicants to identify in the set of claims the technical features of the invention … is consistent with EPO practice.’  The difficulty with this, however, is that it reflects a misunderstanding of the profound differences between the respective schemes of the EPC and the Australian Patents Act, and of the nature of the ‘technicality’ requirement under the EPC.

Rule 43(1) EPC requires that ‘claims shall define the matter for which protection is sought in terms of the technical features of the invention…’.  Contrary to the PC’s assertion, however, this is not a mechanism for the EPO to request applicants to explicitly identify technical features.  Rather, it is a rule regarding the required content of a patent claim.  As stated in section F.IV.2.1 of the EPO Guidelines for Examination:

The claims must be drafted in terms of the “technical features of the invention”. This means that claims should not contain any statements relating, for example, to commercial advantages or other non-technical matters, but statements of purpose should be allowed if they assist in defining the invention.

Rule 43(1) is drafted in the context of Article 52(1) EPC, which provides that ‘European patents shall be granted for any inventions, in all fields of technology, provided that they are new, involve an inventive step and are susceptible of industrial application.’  As noted by the EPO Board of Appeal in T 0154/04 (Estimating sales activity / DUNS LICENSING ASSOCIATES), ‘[h]aving technical character is an implicit requisite of an “invention” within the meaning of Article 52(1) EPC (requirement of “technicality”).’

It’s About Subject Matter, Not Inventive Step

Accordingly, there is no provision of the EPC, or its implementing Rules, authorising the EPO to impose any special or additional obligation upon applicants to identify technical features of an invention, in the claims or otherwise.  Rather, it is simply the case that a claim that does not recite any technical features cannot be an “invention” within the meaning of the EPC.  This is, therefore, a question of subject matter, the role of which is performed by the ‘manner of manufacture’ test in section 18(1)(a) of the Australian Patents Act. 

It is true – and particularly pertinent to cases involving excluded subject matter defined by Article 52(2) EPC – that non-technical features recited in claims are disregarded by the EPO for the purposes of assessing inventive step (see EPO Guidelines Section G.VII.5.4: Claims comprising technical and non‑technical features).  However, under Australian law the assessment of subject-matter eligibility, i.e. ‘manner of manufacture’, is clearly distinct from the assessment of inventive step.

Australian Courts have Rejected a ‘Technology’ Requirement

It should be noted, firstly, that the ‘manner of manufacture’ test, as it has been developed by the courts in Australia, already excludes a range of ‘non-technical’ subject matter, e.g. ‘[b]usiness, commercial and financial schemes as such have never been considered patentable’ (Grant v Commissioner of Patents [2006] FCAFC 120, at [14]).  Accordingly, if it were these types of ‘inventions’ that were of concern to the PC, then no action would be necessary in any event.

However, the Australian courts have also shown a reluctance to fall back on a general ‘technological arts’ test for patent-eligibility.  As the Full Court also noted in Grant (at [38]):

One thing that stands out from NRDC is the emphasis that their Honours put on the unpredictability of the advances of human ingenuity. What is or is not to be described as science or technology may present difficult questions now, let alone in a future which is as excitingly unpredictable now as it was in 1623 or 1959, if not more so. We think that to erect a requirement that an alleged invention be within the area of science and technology would be to risk the very kind of rigidity which the High Court warned against.

This presents two potentially unsurmountable problems for any implementation of the PC’s recommendation.

1. Introducing an obligation that an invention be ‘technical’, whether directly or via the back-door of requiring that it be claimed in technical terms, clearly requires legislative change to the substantive requirements for validity of a patent.  With regard to the as it law currently stands in Australia, the courts have refused to declare that ‘the realm of human endeavour in which patents may be granted can be defined positively as that of science and technology’ (Grant at [35]).  IP Australia has no authority to impose any additional ‘technicality’ obligations on applicants.  Any attempt to do so would ultimately be subject to challenge in the Federal Court, which would almost certainly be successful based upon existing High Court and Full Federal Court authority. 
2. The primary reason for the courts’ reluctance in this regard has been a lack of any workable, future-proof definition of terms such as ‘technology’ and ‘technical’.  This raises the question of whether any legislative implementation should incorporate a definition (thus risking the ‘rigidity’ that concerned the court in Grant), or leave the matter open for judicial development (thus creating additional uncertainty for applicants, patentees, and the public generally).  Neither of these options appears particularly satisfactory.

Further complicating matters, if the PC’s recommendation is viewed in context in the Report, it is apparent that its concerns are not even around the patenting of conventionally ‘non-technical’ subject matter.  In Box 7.1, on page 203 of the Report, the PC lists a number of examples of the types of ‘low-value’ patents that it is trying to target with its recommended package of reforms.  These include:

1. a candle wick formed with a three dimensional pattern (AU2012351979);
2. a pizza box with outer and inner wall panels, with perforated removable portions in the outer wall (AU2008255242);
3. a set of plant pots that lock together (AU2003202654); and
4. a pet toy with an internal skeletal member and sound-emitting squeaker device (AU2010202886).

Notably, none of these patents is directed to subject matter that would be regarded as inherently ‘non-technical’ under the patent law of any major jurisdiction in the world today.  Indeed, the patterned candle wick is patented in the US (patent no. 9,644,172), (among other countries, and currently under examination at the EPO), as is the squeaking pet toy (US patent no. 8,312,844).  The claims in all four cases include numerous technical (e.g. structural and/or functional) features that would plainly satisfy any requirement to identify such features, and which clearly ‘define the matter for which protection is sought in terms of the technical features of the invention’, in the words of Rule 43(1) EPC.

IP Australia’s Options

IP Australia’s consultation paper presents three options for implementation of the PC’s Recommendation 7.3:

1. Option TF-1: assessment by examiner through modified claim requirements
2. Option TF-2: assessment by examiner through inventive step requirements
3. Option TF-3: assessment by examiner through a separate document requirement.

Option TF-1 would involve a legislative change to the actual requirements for a valid patent and is thus, for the reasons discussed above, the only one of the three that would be enforceable against applicants and patentees.  IP Australia’s proposal is that section 40 of the Patents Act would be amended to include an additional requirement, phrased similarly to Rule 43(1) EPC, that a claim must identify the technical features of the claimed invention.  The Act would also require amendment such that failure to do so would be grounds for objection/rejection in examination and re-examination, a ground of opposition to the grant of a patent, and a ground for revocation of a patent by a court.

As I have noted, however, such amendments to the Act effectively introduce a ‘technology’ requirement via the back-door, notwithstanding the courts’ repeated refusal to find such a requirement in the place that it rightly belongs – the ‘manner of manufacture’ test for eligible subject-matter.  The reason for the courts’ reluctance is sound – it requires agreement on a clear and robust definition of ‘technology’ (or, equivalently, ‘technical’) which we do not have.  Parliament has repeatedly and consistently left the development of this aspect of the law up to the courts, to ensure the necessary flexibility in the face of human progress.  It therefore seems unlikely that parliament would now intentionally restrict this flexibility via a provision relating to claim language.

Option TF-2 would involve a change in Patent Office practice whereby examiners would raise an objection in the course of the inventive step assessment if they were unable to discern the technical features from the existing specification.  There are two responses to this proposal.  First, there is no requirement in the Australian law as it stands that inventive step be assessed only with regard to ‘technical features’ of the invention.  There is therefore no legal basis for the suggested change in practice, which would ultimately be subject to review via an appeal to the Federal Court.  This could, however, take some time to occur – particularly in view of the costs involved – and, in the meantime, the validity of the practice would be a matter of considerable uncertainty.  Furthermore, a failure by an examiner to raise an objection would not be subject to third-party challenge, e.g. lack of ‘technical features’ would not be a ground of opposition, or of revocation of a patent.

Secondly, the proper approach to an objection of this type under Australian law is not via inventive step, but rather via the ‘manner of manufacture’ test for subject-matter – an option that is already open to examiners in appropriate cases.  It will often be the case that a claim lacking in ‘technical features’ falls outside the existing concept of manner of manufacture, as it has been developed by the courts.  Indeed, even a claim that, on its face, includes technical features may, as a matter of substance rather than mere form, be unpatentable (see, e.g., Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177 at [107], ‘Simply putting a business method or scheme into a computer is not patentable unless there is an invention in the way in which the computer carries out the scheme or method’; D’Arcy v Myriad Genetics [2015] HCA 35 at [94], ‘Although it may be said in a formal sense that the invention as claimed, referring to isolated nucleic acids, embodies a product created by human action, that is not sufficient to support its characterisation as a manner of manufacture’).  Therefore, conducting an equivalent enquiry in assessing inventive step impermissibly conflates two distinct grounds of validity.

Option TF-3 would see applicants obliged to provide an additional document, separate from the patent specification, identifying the technical features of the invention.  IP Australia’s consultation paper indicates that this would involve amendment of the Act and/or Regulations to make submission of the document compulsory, and to require examiners to assess whether or not the document complies with the applicant’s obligations.  As the consultation paper itself acknowledges, this would be a consideration only during examination, and would not be a ground for re-examination, opposition, or revocation of a patent.  This option thus suffers from all of the same problems as option TF-2, with the additional disadvantage of imposing a substantial additional regulatory burden on applicants and examiners – as well as imposing an obligation that would be unique among all of the world’s patent systems.

Conclusion – Can We Just Admit the PC Got This One Wrong?

The Australian government has accepted the PC’s recommendation that ‘IP Australia should reform its patent filing processes to require applicants to identify the technical features of the invention in the set of claims.’  Unfortunately, I suspect that this means that something will have to be done by way of implementation.

Personally, I think this is a very bad thing.  It is pretty clear from where I am sitting that the PC simply did not fully comprehend the potential consequences of its recommendation.  The effect of implementation will not be limited to regulating the information provided by applicants to examiners, but will impact upon issues of substantive law, including the fundamental question of the scope of patent-eligible subject matter which has, until now, been intentionally entrusted to the courts by Australian parliaments for over 100 years.

The best outcome would be for the government to accept that the PC got this one wrong, and walk-back its acceptance of this particular recommendation, however I am not sure that this is a viable option.  Failing that, IP Australia could note that it already has considerable flexibility to consider the technical merit of an invention when assessing eligibility of subject matter under the ‘manner of manufacture’ test, in accordance with High Court and Full Federal Court authority.  Addressing this recommendation via enhanced practice in relation to patentable subject matter, rather than inventive step, seems to me to be more consistent with the existing scheme of the Australian (as opposed to European) patent law.

Tags: Australia, Innovation policy, Law reform, Obviousness, Patent law, Patentable subject matter, Public consultation, Public policy