Will Patent Office Practice on Computer-Implemented Inventions Be ‘Rokt’ By Federal Court Ruling?

A judge of the Federal Court of Australia has reversed a Patent Office rejection of a computer-implemented invention – more precisely, a computer-implemented business process relating to the presentation of online advertising.  In Rokt Pte Ltd v Commissioner of Patents [2018] FCA 1988, 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.

The basic idea of the invention, although the details are not important, is to provide a mechanism whereby a user has an opportunity to engage with an offer while accessing a web site before being presented with targeted advertising.  In this way, advertisements are presented only to those users that are most likely to interact with them, and make a purchase.  Since advertisers must often pay for placement of their advertisements within web pages, the invention provides an improvement in that the costs associated with placing advertisements in front of consumers who do not interact with them may be reduced.

A Patent Office Hearing Officer 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.  Rokt appealed to the Federal Court.

In upholding the appeal, the court rejected an approach to identifying ‘the substance of the invention’ based upon comparing discrete claimed elements with the contents of the prior art, and considering only the contribution made by new or unconventional elements, which has increasingly become standard practice at IP Australia in recent times.  On the face of it, then, the Rokt decision should encourage some change in this practice, although the existence of a number of relevant higher court decisions, a pending judgment from an expanded Full Bench of the Federal Court, and a high likelihood that the Commissioner of Patents will appeal the Rokt decision means that any immediate practice change is unlikely.

Perhaps the most interesting – and, in my view, somewhat alarming – aspect of the Rokt case, however, is the extent to which the parties relied upon expert evidence.  Whether or not a claimed invention comprises patentable subject matter, i.e. is the kind of ‘thing’ for which a patent may be granted, is supposed to be a question of law.  Traditionally, therefore, it has not relied upon an extensive factual background, and particularly not upon evidence as to the state of the prior art, which is more properly the province of enquiries into whether an invention is novel and/or involves an inventive step.  However, largely due to the recent evolution of Patent Office practice, and in anticipation of the arguments the Commissioner was likely to run in the appeal, Rokt clearly felt obliged to back up its case with evidence from an expert witness, causing the Commissioner to follow suit.  Rokt’s expert was even cross-examined in court.

This does not seem right.  I therefore think it important to understand how we got here (spoiler alert – in my view it is IP Australia’s fault) and where we might be headed (hopefully back to more sensible ground, but that is in the hands of the Full Court).

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Tags: Australia, Business processes, Computer programs, Patent Office, Patentable subject matter

Proposed Merger of QANTM IP and Xenith IP – Another Symptom of a Great Malaise in the Australian IP Services Market?

On 27 November 2018 QANTM IP Limited (ASX:QIP) and Xenith IP Group Limited (ASX:XIP) announced that they have entered into an agreement to merge through an all-scrip scheme of arrangement.  The merger is subject to approval by a court, and by Xenith shareholders.  If it goes ahead (as seems likely), each Xenith share will be exchanged for 1.22 QANTM shares.  Existing QANTM and Xenith shareholders will end up owning 55% and 45%, respectively, of the merged group, which will comprise five Australian specialist IP firms (Davies Collison Cave, FPA Patent Attorneys, Griffith Hack, Shelston IP and Watermark), along with IP valuation, innovation and advisory service provider Glasshouse Advisory (currently owned by Xenith IP) and Malaysian IP firm Advanz Fidelis (which was acquired by QANTM IP in June 2018). 

Based on the closing share price of QANTM and Xenith on 26 November 2018, the merged group would have a market capitalisation of A$285.2 million, which still places it well behind the original listed Australian IP group, IPH Limited (ASX:IPH), which had a market cap of A$1.11 billion as at close of trading on 30 November 2018.

An additional interesting piece of information to fall out of the QANTM/Xenith announcement is the fact that IPH had itself been courting QANTM with a view to a possible merger or acquisition.  In an ASX announcement on 27 November 2018, in response to ‘media speculation’, IPH confirmed making a number of approaches to QANTM on the basis of non-binding, conditional proposals, culminating on 20 November 2018 with a proposal with an equivalent value of A$1.80 per QANTM share (a notional premium of 37.4% over the A$1.31 at which QANTM shares were trading on that day).  QANTM countered by announcing that its Board did not consider this proposal to be in best interests of its shareholders, due to its ‘highly conditional’ nature and ‘significant execution risk’.

All this would appear to confirm something that I have long suspected – that the Australian market is not big enough to sustain three publicly-listed groups of IP service providers.  IPH obviously saw QANTM as a potential acquisition target, while QANTM clearly did not wish to be acquired on IPH’s terms!  Instead, QANTM and Xenith have decided that they will be stronger together than they are separately.

But why is it such a struggle for these groups to flourish in the Australian market?  One advantage of the public listing of these companies is that, through their annual reports, there is now far greater transparency than ever before in respect of the financial performance of IP services businesses.  In combination with publicly-available data on Australian filings for IP rights, this provides useful insights into where the revenues – and profits – are coming from.  I have looked at these numbers, and I am afraid that my conclusions are not rosy.  The Australian market appears to be stagnant, with firms struggling to enhance profitability.  Growth in the listed groups has come through acquisitions rather than genuine new business, with revenues per professional staff member being pretty consistent across the industry.  Low-value, transactional work, which ought to have the greatest exposure to competition and downward price pressure, continues to be significantly more profitable than high-value, bespoke services.  Yet, despite the obvious challenges and risks that these circumstances present, as far as I can tell firms are continuing to do the same old things that they have done for years, in terms of professional staff management and marketing, with the predictable result that nothing much is changing.

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Tags: Australia, Innovation policy, IPGOD, Patent attorney profession

Drafting a Patent Specification with ‘Reasonable Skill and Knowledge’ is a Collaborative Exercise Between Client and Attorney

A recent appeal decision by a Full Bench of the Federal Court of Australia has clarified what is meant by the requirement for a patent specification to be framed with ‘reasonable skill and knowledge’, finding that this is a collective responsibility that arises among everybody involved, including inventors, patent attorneys, and any other corporate managers or intermediaries.  Under Australian law, this requirement arises in relation to the effect of amendments on the rights of a patentee.  In particular, a patent is only enforceable during the period prior to making an amendment if the specification without the amendment was ‘framed in good faith and with reasonable skill and knowledge’.

This decision should be of interest not only to Australian patent attorneys, but to patent professionals globally who are involved in drafting specifications that may ultimately be filed in Australia, and result in the grant of Australian patents.  It confirms that responsibility for ‘framing’ a specification with ‘reasonable skill and knowledge’ does not lie solely – or even primarily – with the person tasked with actually drafting the specification, but is shared between all those involved in the process.

A competent patent attorney might be expected to have reasonable knowledge of the law and practices relating to the drafting of patent specifications, and to make reasonable efforts to obtain necessary information from a client.  However, the client has a key role to play in ensuring that the patent attorney is properly instructed.  And while the patent attorney is not necessarily expected to share the level of domain-specific technical expertise of an inventor, the specification will nonetheless be assumed to have been drafted with the benefit of the client’s knowledge of the invention, including knowledge that the client reasonably should be taken to have had, in all of the relevant circumstances.  Ensuring that this is the case is at least as much the responsibility of the client as it is of the patent attorney (or other patent professional) tasked with drafting the specification.

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Tags: Amendments, Damages, Patent attorney profession, Patent drafting, Patent specifications

Changes to Australia’s Law on Inventive Step Put On-Hold Following Consultation on Draft Legislation

Back in July, I reported the commencement of a process of consultation on an Exposure Draft of legislation – the proposed Intellectual Property Laws Amendment Bill (Productivity Commission Response Part 2 and Other Measures) Bill 2018 – intended to introduce a number of further reforms to Australia’s intellectual property laws, including abolition of the innovation patent, introducing an ‘objects clause’ into the Patents Act 1990, and (again) raising the standard of inventive step.  The consultation period concluded on 31 August 2018, and IP Australia received 18 non-confidential submissions (including one from me [PDF, 155kB]).  It has now published a response to those submissions [PDF 188kB].  Additionally (assuming that my own experience is representative) individual responses have been prepared and sent to each party that made a submission, which has become a commendable feature of recent consultations by IP Australia.  Full details of the draft legislation, and consultation process, can be found on IP Australia’s web site.

As many readers will be aware, the majority of the provisions in the draft legislation are intended to implement recommendations arising from the Productivity Commission’s (PC) enquiry into Australia’s Intellectual Property Arrangements, that have been accepted by the government. 

Following consultation, IP Australia intends to proceed with the following reforms, substantially as proposed in the draft legislation:

1. abolition of the innovation patent system;
2. introduction of an ‘objects clause’ into the Australian Patents Act (for anyone who does not already know, an objects clause is a provision that outlines the underlying purposes of the legislation, which can be used to resolve uncertainty and ambiguity); and
3. amendments to Crown use and compulsory licensing provisions (subject to a number of technical amendments identified in submissions).

None of this comes as a great surprise.  Given that the government accepted the PC’s recommendations in each of these areas, IP Australia has an obligation to progress the implementing legislation.  Any action to block these reforms must now take place at the parliamentary level.  The changes to Crown use and compulsory licensing in fact received broad support from stakeholders.  On the other hand, many submissions continued to oppose the abolition of the innovation patent system, and the inclusion of an ‘objects clause’, notwithstanding that challenging the decisions already made by the government was beyond the scope of the consultation process.  As would be expected, therefore, such submissions fell on deaf ears.  Indeed, one can almost detect a note of irritation in IP Australia’s reply that it ‘notes that the decision to abolish the innovation patent system was taken by the Government, and that this consultation was directed towards the implementation of that decision.’

In a less predictable twist, however, IP Australia has found a range of concerns expressed in submissions relating to the draft amendments to inventive step provisions to be ‘persuasive’.  In particular, it has been persuaded ‘that the proposed changes to the legislation and the accompanying EM [Explanatory Memorandum] will not achieve the intended outcome of sufficiently raising the threshold for inventive step, as the wording is not sufficiently different and that the courts may not have sufficient regard to the EM when considering the proposed inventive step changes.’

As a result, the inventive step reforms have been placed on-hold pending further consideration:

IP Australia has advised the Government of the outcome of this consultation process. The Government has decided to postpone changes to inventive step to ensure there is sufficient time to formulate and consult further on options to ensure legislative changes have the intended effect.

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Tags: Australia, Law reform, Obviousness, Patent law, Public consultation

Representative Body of Australian Patent Attorneys Seeks to Intervene in Pivotal ‘Software Patent’ Appeal

On 19 October 2018, the Institute of Patent and Trade Mark Attorneys of Australia (IPTA) filed an interlocutory application seeking leave to intervene in the appeal (no. NSD734/2018) by Encompass Corporation Pty Ltd against the decision of a single judge of the Federal Court of Australia in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421.  This appeal is of particular significance because it is to be heard by an expanded panel of five judges of the Federal Court, rather than the usual three judges.  Consequently, the decision could potentially overrule (or reconfirm) prior appeal decisions, and will be binding on all Australian courts and tribunals, other than the High Court.

As I reported last week, the Commissioner of Patents recently joined the proceedings as an ‘interested party’ – a development that I suggested may leave many other stakeholders, including numerous current and future applicants for patents on computer-implemented inventions, unrepresented in a case that could substantially shape the patentability of such subject matter for many years to come.  I therefore floated the idea that this presented an opportunity for an organisation such as IPTA to step and speak on behalf of other users of the Australian patent system.  And while I cannot take any credit – I am certain that IPTA would have already had its application in the works before my article was published – I am, naturally, very pleased to see that this has indeed come to pass.

It does seem, however, that the process of joining the proceedings is considerably more fraught for IPTA than it was for the Commissioner of Patents.  While the Commissioner was apparently able simply to ‘appear’ as an ‘interested person’, IPTA has had to make an application to intervene.  That application can be opposed by the principal parties to the appeal, and may be refused by the court.  In fact, the order issued by the court [PDF, 93kB] in response to IPTA’s application includes the following terms:

The application by the Institute of Patent and Trade Mark Attorneys of Australia (IPTA) to intervene on this appeal, pursuant to rule 9.12 of the Federal Court Rules 2011 (Cth), be stood over to the first day of the appeal.

On or before 5pm on Wednesday 31 October 2018, the IPTA file and serve written submissions of no more than 5 pages in length on the question of manner of manufacture within the meaning of s 18(1)(a) of the Patents Act 1990 (Cth) that it would seek to rely upon if intervention were granted.

On the positive side, this process ensures that IPTA will have the opportunity to file short written submissions, although these may be ignored by the court if it decides not to grant the application to intervene.  On the other hand, IPTA will incur the full cost of preparing and filing its written submissions – in addition to the costs of its application and attending court in order to argue its case for intervention – without knowing whether they will receive any consideration by the court.

I have been informed by the current President of IPTA, Richard Baddeley, that while the appellant (i.e. Encompass) has consented to the intervention, the respondent (i.e. InfoTrack) has indicated its intention to oppose IPTA’s application to intervene.  For this reason, IPTA is proposing to confine its intervention to the five-page written submissions, and will not be requesting to present oral submissions at the appeal hearing.

Considering that IPTA’s submissions are likely to support the interests of patentees and patent applicants – the primary stakeholders whose interests are not already represented in the proceedings – it is not surprising that Encompass (the patent owner in the dispute) would support IPTA’s intervention, and InfoTrack would oppose it.  I would like to think, however, that the court will be mindful of the fact that (barring a High Court appeal) it will be setting down legal principles that could endure for a significant period of time, and would therefore welcome all the input it can get to assist it in this task.

Hopefully, then, IPTA’s application to intervene will be granted, and its submissions will be considered by the court in reaching its decision in the Encompass appeal.  It is also my hope that this may finally result in some much-needed clarity, consistency, and coherency in the Australian law, and examination practice, in relation to patent-eligibility of computer-implemented inventions.

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Tags: Appeal, Australia, Computer programs, IPTA, Patent Office, Patentable subject matter

Australian Commissioner of Patents to Participate in Major Software Patent-Eligibility Appeal

The Commissioner of Patents has been added as an ‘interested person’ to the parties involved in the appeal (no. NSD734/2018) by Encompass Corporation Pty Ltd against the decision of a single judge of the Federal Court of Australia in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421.  As I reported back in June, the case involves a pair of innovation patents owned by Encompass, which survived attacks based on alleged lack of novelty and innovative step, only to be found invalid on the basis that they did not relate to patent-eligible ‘manners of manufacture’.  In reaching this conclusion, the judge appeared to be strongly influenced by the state of the prior art, as represented by the evidence upon which InfoTrack relied for its novelty and innovative step cases.

The Encompass appeal is of particular significance, because an expanded panel of five judges has been assigned.  Usually, only three judges sit on a Full Bench of the Federal Court of Australia to hear appeals against decisions of a single judge.  An expanded panel has the power to overrule prior three-judge decisions (such as those concerning the patent=eligibility of computer-implemented inventions in Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 and Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177), and its decision will be binding on all Australian courts and tribunals (including the Patent Office), other than the High Court.

The nature of the Commissioner’s interest in the outcome of the Encompass appeal is therefore clear.  The eventual decision may determine whether the current approach of the Patent Office to computer-implemented inventions – which is increasingly reliant upon consideration of the state of the prior art – is legitimate, or whether the Office has in fact been denying patents on the basis of flawed reasoning.  (Not that there is anything – other than filing divisional applications and keeping fingers crossed for a change in law and/or practice – that applicants can do about this.)

Furthermore, the Commissioner is currently involved in three appeals before single judges of the Federal Court which will undoubtedly be impacted by the Encompass decision: Rokt Pte Limited v The Commissioner of Patents, NSD1292/2017; Repipe Pty Ltd v The Commissioner of Patents, WAD323/2018; and Aristocrat Technologies Australia Pty Ltd v The Commissioner of Patents, NSD1343/2018.  Of these, the Rokt case has already been heard and is awaiting judgment, so the potential for an outcome that is inconsistent with whatever the expanded Full Court decides in Encompass will be of concern to all parties involved (including, presumably, the judge).  The Repipe and Aristocrat cases appear unlikely to be heard until well into 2019 (a hearing date is yet to be set for Repipe, while Aristocrat is currently set down for hearing in September 2019), making it likely that a decision will be handed down in Encompass in plenty of time for the parties to consider its effect on their positions – with the possibility of this resulting in settlement prior to trial.

It appears that the Commissioner intends to make substantive submissions, and to be represented at the hearing in the Encompass case.  According to orders issued by the Chief Justice on 2 October 2018 [PDF, 160kB], the Commissioner is to file a summary of submissions of up to 10 pages in length by 4.00pm on 17 October 2018, following which both Encompass and InfoTrack will have a week within which to file and serve any submissions in reply, also of up to 10 pages.  The implication is clearly that one or both of the main parties to the appeal may take issue with what the Commissioner has to say.

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Tags: Appeal, Australia, Computer programs, Patent Office, Patentable subject matter

Will an Expanded Full Bench of the Federal Court Bring Sense to Australian Law on Computer-Implemented Inventions?

The law relating to patent-eligibility of computer-implemented inventions – and its practical application by the Australian Patent Office – is currently a mess.  As I have noted recently, over the past few years disproportionate resources have been devoted by both applicants and the Patent Office to disagreements over whether or not particular inventions are patentable according to the ‘manner of manufacture’ test required by the Australian law.  In just the past three years, there have been over 10 times as many hearings held, and decisions issued (42 in total), in relation to this particular aspect of the law than in the entire first decade following commencement of the current Patents Act 1990. 

Anybody who believes that this is not indicative of a serious problem is fooling themselves.  The Institute of Patent and Trade Mark Attorneys of Australia (IPTA) flagged its frustration with the current situation in a submission [PDF, 123kB] in response to the recent consultation on the exposure draft of the Intellectual Property Laws Amendment Bill (Productivity Commission Response Part 2 and Other Measures) Bill 2018, noting that:

IPTA is particularly concerned by the current approach being adopted by IP Australia, and lower courts, in relation to the assessment of patentability of inventions based on software. Many inventions which satisfy novelty and inventive step requirements are being rejected outright by IP Australia, even when such inventions are considered patentable in Europe. IPTA is so concerned about this current trend within IP Australia that it has recently set up a working group to study this area to see what can be done to head off this disturbing trend.

While this is a valuable initiative, there is a real prospect that the issue will be resolved in the courts over the coming months.  In the past year or so there have been four appeals filed with the Federal Court of Australia against Patent Office decisions refusing applications for computer-implemented inventions: Todd Martin v The Commissioner of Patents, QUD374/2017; Rokt Pte Limited v The Commissioner of Patents, NSD1292/2017; Repipe Pty Ltd v The Commissioner of Patents, WAD323/2018; and Aristocrat Technologies Australia Pty Ltd v The Commissioner of Patents, NSD1343/2018.  Of these, the Todd Martin case was discontinued following an (unsurprisingly) unsuccessful mediation.  The Rokt case was heard on 18-20 July 2018, and is currently awaiting judgment.  The Repipe and Aristocrat cases are currently in preliminary stages, and are yet to be set down for a hearing.

However, the case that will trump them all is one that does not involve the Commissioner of Patents.  Back in June I wrote about the decision of a single judge of the Federal Court of Australia in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421.  In that case, a pair of innovation patents owned by Encompass survived attacks based on alleged lack of novelty and innovative step, only to be found invalid on the basis that they did not relate to patent-eligible ‘manners of manufacture’.  In reaching this conclusion, the judge appeared to be strongly influenced by the state of the prior art, as represented by the evidence upon which InfoTrack relied for its novelty and innovative step cases.

Encompass has appealed that decision (Encompass Corporation Pty Ltd v InfoTrack Pty Ltd, NSD734/2018) to a Full Bench of the Federal Court of Australia.  Notably, the Court has empanelled an expanded bench of five judges – Chief Justice Allsop, and Justices Kenny, Besanko, Nicholas, and Yates.  This is a rare event, that usually only occurs when a case is of particular importance, and/or where there is some prospect that the Court may be called upon to overrule an earlier decision of a three-judge panel.  In this case, however, there is reason to suppose that the prospects of the Full Court overruling either of its two most recent decisions on patent-eligibility of computer-implemented inventions, Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 and Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177, are fairly slim, given that the expanded panel includes two of the three judges – Justices Kenny and Nicholas – responsible for those decisions.  The third judge, Justice Annabelle Bennett (as she then was), retired from the Federal Court in 2016.

The Encompass appeal is scheduled to be heard on 8-9 November 2018, and a decision is therefore likely in the first half of 2019.  A five-judge ruling can override not only all of the ongoing appeals currently before single judges of the court, but also any or all of the existing first instance and Full Court decisions on patent-eligibility of computer-implemented inventions.  In my view, the Patent Office has good reason to be concerned that the Encompass decision, when it comes, will invalidate the approach that it is currently taking to the examination of computer-implemented technologies. 

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Tags: Appeal, Australia, Computer programs, Patent Office, Patentable subject matter

How Can an Innovative National IP Office Balance Its Roles as Technology Examiner and Technology Developer?

IP Australia incorporates the Australian Patent, Trade Marks, Designs, and Plant Breeder’s Rights (PBR) Offices, the core ‘business’ of which is to provide services to their ‘customers’ in respect of the administration and registration of Australian IP rights.  Indeed, IP Australia may be seen as a significant ‘exporter’ of such services considering that, for example, over 90% of applicants for Australian patent rights are foreign residents, as are over 50% of applicants for design registrations and PBRs.  In respect of its core services, IP Australia holds a true monopoly – no other government or private sector service provider can grant, or otherwise administer, enforceable IP rights in Australia.  IP Australia operates these services on a cost-recovery basis, i.e. it aims to fully recover the costs of service-provision through the official fees that it charges to its ‘customers’.

The scare quotes around the business-oriented terminology in the opening paragraph reflect my scepticism of the fashion for modelling government service provision as a form of business enterprise.  I am not alone in this scepticism.  Writing in the Harvard Business Review last year, Canadian business and management expert Henry Mintzberg noted that ‘[r]unning government like a business has been tried again and again, only to fail again and again’.  He also called the portrayal of citizens as customers a ‘misguided, overworked metaphor’, going on to observe:

Business is essential – in its place. So is government, in its place. The place of business is in the competitive marketplace, to supply us with goods and services. The place of government, aside from protecting us from threats, is to help keep that marketplace competitive and responsible.

Consistently with Mintzberg’s view on the appropriate role of government, IP Australia has a single Outcome under the Australian Government’s budget and accountability framework, which is:

Increased innovation, investment and trade in Australia, and by Australians overseas, through the administration of the registrable intellectual property rights system, promoting public awareness and industry engagement, and advising government.

Recently, however, we have seen IP Australia extending its services into areas that are, arguably, beyond this core mission, and engaging in activities in which it – again, arguably – positions itself in competition with private enterprise.  Examples include:

1. the TM Headstart service and Trade Mark Assist tool which, despite disclaimers that they are not substitutes for legal advice, compete directly with services provided by trade marks practitioners; and
2. the Patent Analytics Hub, which provides analysis, visualisation and interpretation of patent data, and competes directly with various patent search and analytics service providers, albeit ‘only’ for clients in the government and public research sectors – which actually includes some of the largest potential customers for these services in Australia.

Additionally, as I noted just last week, IP Australia is now engaged in its own internal IT development projects, applying machine learning techniques to patent classification and assessment of trade mark applications.  Its Chief Data Officer was also quoted last week by the online IT news outlet ZDNet, speaking on IP Australia’s efforts in relation to improving its business intelligence and analytics capabilities through internal ‘agile’ software development projects.

Just to be clear, I am not saying that all – or any – of this is necessarily a ‘bad’ thing.  IP Australia may, indeed, be the best-placed agency to be delivering these projects.  And, as I also pointed out in my article last week, it has by any standards – public or private sector – demonstrated over the past few years an impressive capability to deliver IT projects in a timely and cost-effective manner.  Certainly, IP Australia is not the only IP authority in the world to be engaging in such activities, with materials from the World Intellectual Property Organization (WIPO) May 2018 Meeting of Intellectual Property Offices (IPOs) on ICT Strategies and Artificial Intelligence (AI) for IP Administration revealing various projects ongoing at WIPO, the European Patent Office, the Russian Patent Office (Rospatent), the German Patent and Trade Mark Office, and others.

Even so, there is an argument to be made that IP Australia, as the agency responsible for regulation of registered IP practitioners (i.e. Australian patent and trade marks attorneys) is, at the same time, competing with those practitioners, albeit in a very limited capacity.  Furthermore, as the agency responsible for examining and registering (or refusing) IP rights in relation to new inventions – including software-based and machine learning technologies – IP Australia is also now itself engaged in developing such technologies.  This raises the question of whether any conflicts of interest arise as a result?  And, if so, what is the nature of those conflicts, and how should they be managed?

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Tags: Australia, Machine learning, Patent Office, Patentable subject matter, Public policy

Computerised Decision-Making – Coming Soon to an IP Office Near You?

The Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Act 2018 (the ‘PC Part 1 Act’) received Royal Assent, and thus passed into law, on 24 August 2018.  Following an initial consultation, which confirmed (in case any confirmation was required) that the proposal to abolish the innovation patent system remained controversial, it had an easy passage through the two houses of the Australian Parliament after the corresponding provisions were dropped from the Bill at the eleventh hour.  (These same provisions have since been incorporated into the draft of the Intellectual Property Laws Amendment Bill (Productivity Commission Response Part 2 and Other Measures) Bill 2018.) 

The PC Part 1 Act implements a number of less-contentious recommendations made by the Productivity Commission in its 2016 Report into its inquiry into Australia’s intellectual property arrangements, including clarifications on the legality of parallel imports, reducing the initial period before a registered trade mark may be challenged on grounds of ‘non-use’, and reducing reporting obligations relating to pharmaceutical patents with an extended term.  The Act also implements a number of measures that have been on IP Australia’s policy agenda for a while, most of which are intended to streamline and align the administration of the Australian IP system and make ‘technical amendments’ to correct or clarify IP legislation.

Included among the ‘streamlining’ measures are provisions to enable the Commissioner of Patents, and the Registrars of Trade Marks, Designs, and Plant Breeder’s Rights ‘to arrange for a computer program under their control to make decisions, exercise powers, and comply with obligations under the legislation’, i.e. to permit computerised decision-making.  When this idea was originally proposed in a public consultation process conducted in June-July of 2015, it was described as the ‘expanded use of automated systems’, and would have required the Regulations to prescribe specific decisions that may be automated.  The small number (three) of submissions received on this proposal were generally positive, but all noted the important role of the Regulations in controlling, and/or keeping the public informed, of the types of decisions that might be computerised.

However, three years is an eternity when it comes to progress of digital technologies, and with advances in machine learning and other techniques, the range of decisions that might presently, or in the near future, be wholly or partly automated has expanded greatly since the initial consultation in 2015.  The provisions that have actually been enacted (and which came into effect immediately upon receiving Royal Assent, i.e. on 24 August 2018) include no requirement for Regulations to be made permitting the automation of particular decisions.  Going forward, therefore, any decision, or related action, under the Patents, Trade Marks, Designs, or Plant Breeder’s Rights Acts may be automated using a computer program, if/when the relevant Commissioner or Registrar considers it appropriate.  The legislation has been drafted such that this may include both procedural actions (e.g. allowing an extension of time when no objections have been raised) and substantive actions (e.g. preparing an issuing examination reports).

While it might seem unlikely that computers will be examining patent applications any time soon, a submission made by IP Australia to the World Intellectual Property Organization (WIPO) prior to a meeting of international IP Offices held in May 2018 indicates that fully or partially automated trade mark examination – at least at the stage of an initial report – may be much closer to reality.

In any event, the necessary legislative permission is now in-place to enable any part of IP Australia’s decision-making processes to be automated, and an increase in the removal of human beings from the day-to-day execution of routine tasks that perhaps do not require high levels of adaptability and/or creativity is most likely now inevitable.  Fortunately, the legislation includes provisions that will make it easy for a computerised decision to be ‘overruled’ by a human decision-maker.  Furthermore, both computer and human decisions may be appealed to the Administrative Appeals Tribunal.

To find out more about how this will all work – and what IP Australia is up to in automating trade mark examination – please read on.

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Tags: Australia, Examination, Law reform, Machine learning, Patent Office, Trademarks

Data on Patent Office Decisions Highlights Impact of Law Reforms, and Continuing Problems with Law on Patent-Eligibility

Since commencement of the Patents Act 1990 in 1991, up until the end of August 2018, the Australian Patent Office has issued 1,851 published decisions (including, in earlier years, decisions relating to applications filed under the 1952 Act but issued under the transitional provisions of the 1990 Act).  Of these, decisions on substantive oppositions to the grant of standard patents have been by far the most common (666 in total).  Indeed, the vast majority of Patent Office decisions relate in one way or another to opposition proceedings, with the next most-frequent being procedural matters associated with oppositions (including decisions on costs, and final decisions following applicant amendments), and decisions on extensions of time to serve/file evidence.

Analysis of decisions issued by the Patent Office over time also highlights the impact of changes in law and practice, including the effect of amendments to the rules governing the grant of extensions of time in patent oppositions which came into effect with the Raising the Bar reforms in 2013.  The rate at which substantive opposition decisions, and decisions on extensions of time to file evidence, have issued since this time are consistent with other data indicating that the reforms have been effective in improving the efficiency of patent opposition proceedings.

Even more remarkable, however, is what the data reveals about the effect of recent changes in practice and case law relating to patent-eligibility of ‘contentious’ subject matter, and in particular of computer-implemented inventions.  Since 21 July 2010, when the Patent Office issued its decision in Invention Pathways Pty Ltd [2010] APO 10, there has been a total of 53 published decisions relating to examination objections asserting that the claimed inventions were not for patent-eligible subject matter (i.e. a ‘manner of manufacture’ under Australian law).  As I have noted on a number of occasions (most recently in Continuing Hostility to Computer Implemented Inventions Lands the Commissioner of Patents in Court. Again. Twice. and Computer-Implemented Inventions and the ‘Ball Point Pen Principle’ – Why the Australian Law on Patent-Eligibility is a Mess), the vast majority of these decisions have upheld the examiners’ objections, resulting in the applications being refused. 

What is even more remarkable about this, however, is that the number of such decisions over just the past eight years is more than double the grand total of just 21 decisions issued over the entirety of the preceding 19 years in relation to all available grounds of examination objection.  Furthermore, 38 of those 53 decisions have been handed down just within the past three calendar years.

As I have said before (e.g. in …Why the Australian Law on Patent-Eligibility is a Mess, linked above), this recent high incidence of applicants taking examination objections to hearings is a bad sign for the state of Australian patent law in relation to subject-matter eligibility.  The large number of decisions is bringing less, rather than more, clarity to the law, reflecting a high level of uncertainty, and a widespread lack of agreement among patent applicants, attorneys, examiners, hearing officers, and judges as to exactly what the law is – or should be – in this area.  And this uncertainty is not good for innovation and investment in digital technologies, because where there is uncertainty around the availability of IP protection, investors can have no confidence in either the ability to defend their own IP position, or of having freedom-to-operate in the relevant technical space.  Uncertainty thus discourages investment, and in this sense works directly against the incentive that the patent system is intended to provide.

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Tags: Australia, Examination, Opposition, Patent analytics, Patent Office, Patentable subject matter, Raising the Bar

‘Innovation’ Drops From the Agenda as Yet Another Sitting Australian Prime Minister Given the Boot

Last week, Australia got a new Prime Minister, with former Treasurer Scott Morrison replacing former lawyer, investment banker, tech investor, and republican Malcolm Turnbull.  However, lest any foreigners, hermits, or future historians who have perhaps stumbled upon this article in the National Library’s Pandora Archive, assume that this is a sign of a robust democracy recognising the will of the people, I should point out that it was not as a result of a general election, but of internal sniping and fighting within a governing party.  As many readers will be aware, this is now ‘normal’ in Australia – the last elected Prime Minister to actually lead their party to a subsequent election was John Howard in 2007.  Since then, we have had just three further elections, but five changes of Prime Minister.

In September 2015, when Turnbull deposed Tony Abbott as Prime Minister of Australia, a wave of positive sentiment swept through Australia’s innovation community – among which I count the many entrepreneurs, scientists, researchers, technologists, investors, and associated professional services providers (including patent attorneys) whom I encountered at various meetings, events, and seminars during those heady early days of the Turnbull Government.  The reason for this was partly because many of those people viewed Malcolm Turnbull as a kindred spirit, with personal, hands-on experience as an investor in technology businesses, and a generally progressive and positive attitude towards science, technology, and innovation.  Additionally, Turnbull’s first major policy announcement was of an investment of A$1.1 billion over four years in a ‘national innovation and science agenda’, in which he called for an ‘ideas boom’ to replace the ‘mining boom’ (and, more generally, Australia’s reliance on primary industry for exports), and declared his desire to see a cultural shift to embrace risk-taking, and destigmatise failure.

Ah… halcyon days!

Over less than three years, however, most of that initial positive energy has dissipated, to be replaced with disillusionment and disappointment, as talk of innovation at the top levels of government petered out to little more than a whisper.  And now, with the change in ‘leadership’ (I use the word advisedly), it seems that ‘innovation’ is completely off the agenda.  In particular, in announcing his new Cabinet, Prime Minister Scott Morrison has ditched the word entirely, with Karen Andrews being appointed Minister for Industry, Science and Technology (which presumably means that the Department formerly known as Industry, Innovation and Science is to be similarly renamed), and former Minister for Jobs and Innovation, Michaelia Cash, now appointed as Minister for Small and Family Business, Skills and Vocational Education.

So how did this happen?  How did ‘innovation’ go from a A$1.1 billion policy imperative to being a dirty word in government in under three years?

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Tags: Australia, Innovation, Innovation policy, Politics

Changes at IP Australia, as DG Patricia Kelly Retires From an Illustrious Career in Service of Science, Technology and Innovation

As recently announced by IP Australia, on 10 August 2018 its (now former) Director General, Patricia Kelly, retired from the Australian Public Service after a career spanning 38 years.  She will be replaced by Michael Schwager, another career public servant with a long association with Australian industry, innovation, and science portfolios, and whose current role is as acting Chief Operating Officer at the Commonwealth Scientific and Industrial Research Organisation (CSIRO) – which, as it happens, was Australia’s leading filer of new provisional patent applications in 2017.  He is expected to commence in the role next month.

An article on the public sector news and commentary site The Mandarin is effusive in its praise of Patricia’s achievements over the past five years at IP Australia.  And while I have no doubt that she would be among the first to disclaim complete responsibility for the authority’s recent IT successes (the eServices online portal was, for example, originally launched in April 2012, prior to her commencement), the fact is that she has overseen the bulk of what is almost certainly the most successful digital transformation program in Australian government history.  In the context of an embarrassing litany of failures by other official bodies, IP Australia recently received a global award – shared with high-profile private enterprises PayPal, Foxtel and Vodaphone UK, against over 1000 other entrants – for its efforts to become the country’s first fully-digital government agency.  Considering that less than five years ago the vast majority of Australian patent applications were still filed on paper (or, in a pinch, via facsimile), this is an astonishing achievement.

From my perspective, I would particularly commend Patricia on her fearless commitment to openness and engagement with the wider community.  Whereas, for example, the previous leadership appeared to prefer ‘preaching to the choir’, and was overtly antipathetic towards engaging via social media, IP Australia under Patricia Kelly has embraced social media and – based on my own experience – welcomed critical opinions with, if anything, greater enthusiasm than assenting ones.  Patricia and I have certainly not always seen eye-to-eye, but what we have in common is a desire for the Australian IP system, and the benefits that it provides to Australia, to be the best they can possibly be.  In working towards this goal, her administration has actively sought input from a diverse range of interested and informed stakeholders across the political, social, and commercial spectrum.  I hope that this aspect of Patricia’s legacy will be sustained under the new leadership.

Patricia Kelly came to IP Australia with impeccable credentials in science, research, innovation and industry.  From 2004 to 2013 she had served on the Committee for the Governments Co-operative Research Centres (CRC) program.  From 2006 to 2013 she chaired the Audit Committee of the department known variously through this period as the Department of Industry, Tourism and Resources, the Department of Innovation, Industry, Science and Research, and the Department of Industry, Innovation, Science, Research and Tertiary Education (and now just the Department of Industry, Innovation and Science, within which IP Australia is itself situated).  Additionally, from 2006 to 2008 Patricia was a member of the Council of the University of Technology Sydney (UTS), and in 2008 she was a member of the Review Panel of the National Innovation System.  She also led Australia's bid to host the Square Kilometre Array (SKA) radiotelescope and was a founding member of the Board of the International SKA Organisation.

In appointing Michael Schwager as Patricia’s replacement, the Government appears to have recognised the clear benefits of having the role occupied by someone with a background in industry, science, and innovation, and who has every reason to embrace continuing progress at IP Australia.  According to his LinkedIn profile, Michael has a long history with the Department of Industry, in its various incarnations, dating back to at least the mid-1990s.  From 2000-2005 he was General Manager, Technology, Manufacturing and Service Industries at Invest Australia – at the time, the Government’s inward investment agency.  He has since held various positions at the Department of Industry, Innovation and Science, where his responsibilities have included engagement with the pharmaceutical and biotechnology industries, the small business sector, the US and Canadian education, science, research and innovation systems, and heading up Innovation Programmes at AusIndustry.  Prior to his current acting position at CSIRO, Michael was most recently the Department’s Chief Operating Officer.

I therefore think that there is every reason to expect a smooth transition at IP Australia, and a continuation of Patricia’s positive achievements. 

On a personal note, Patricia has been a regular reader and supporter of this blog, as well as an occasional commenter, throughout her time as Director General, for which I am grateful.  I wish her a long and fulfilling retirement.

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Tags: Australia, Michael Schwager, News, Patent Office, Patricia Kelly

Australian Federal Court Upholds Privilege in Communications Involving Patentee’s Foreign Patent Attorneys

Legal professional privilege (also called ‘client legal privilege’ in Australia, to reflect the fact that the privilege is actually held by the client) is a rule of law which protects communications between legal professionals and their clients, along with related records and documents, from compulsory disclosure by order of a court, or under a provision of statutory law.  The rationale for protecting such communications has been explained in various ways, including to encourage full disclosure of information by a client to a lawyer, and to enable the lawyer to give full and considered advice without fear of subsequent adverse consequences to the client.  The privilege that exists between a client and a lawyer is established under the common law, by the Commonwealth Evidence Act 1995, and by similar provisions of state legislation in some states.

In Australia, patent attorneys are generally not also lawyers, however section 200 of the Patents Act 1990 provides that communications, records or documents made for the dominant purpose of a registered patent attorney providing intellectual property advice enjoys the same privilege as if it were made by a legal practitioner providing legal advice. These provisions were strengthened as of 15 April 2013, on commencement of the Intellectual Property Laws Amendment (Raising the Bar) Act 2012, which also extended the privilege to individuals authorised to do patents work under the laws of other countries or regions, i.e. to foreign patent attorneys and patent agents.  Prior to this change, advice provided by foreign practitioners was not protected by patent attorney privilege (Eli Lilly & Company v Pfizer Ireland Pharmaceuticals (No 2) [2004] FCA 850: ‘The language of s 200(2) is clear. The privilege is confined to communications with patent attorneys registered as such in Australia.’)

In a recent decision, a judge of the Federal Court of Australia has upheld the claims of a patentee, Neurim Pharmaceuticals (1991) Ltd, for legal professional privilege and patent attorney privilege in relation to documents prepared by Israeli, US, and UK/European patent attorneys in respect of US and European patent applications corresponding to an Australian patent that is now the subject of litigation: Neurim Pharmaceuticals (1991) Ltd v Generic Partners Pty Ltd [2018] FCA 1082.

Interestingly, a number of the documents were originally produced and communicated in 2008 and 2011, i.e. prior to the commencement of the Raising the Bar reforms that extended privilege to the work of foreign practitioners.  It seems that it was common ground between the parties that the amendments to section 200 have retrospective effect, in the sense that they apply to communications, records, and documents made prior to their commencement.  A similar concession was made in a earlier case relating to privilege in communications that took place in 2004, but were assumed to be subject to the post-Raising the Bar provisions, although in that case it was less clear that the changes in the law would have materially altered the outcome.

Accordingly, the court was not asked to consider whether patent attorney privilege actually applied to the foreign-practitioner documents.  Rather, the dispute between the parties was as to whether the privilege had been waived by the patentee as result of its decision to make amendments to its Australian patent, upon commencing litigation in 2017, that were similar to earlier amendments made to its corresponding US and European patent applications.  The court found that, in the circumstances, privilege was not waived, and Neurim was therefore not required to produce the documents.

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Tags: Amendments, Australia, Patent attorney profession, Privileged communications

Reprieve for the Innovation Patent Short-Lived, as New IP Laws Amendment Bill Exposed for Comment

My speculation that the last-minute removal from the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill 2018 of provisions to phase out the innovation patent system had more to do with political expediency than any change-of-heart over abolishing the system appears to have been well-founded.  Despite an announcement at the time that ‘the Government has decided to undertake further industry consultation targeted at better understanding the needs of innovative SMEs before the phase out of the innovation patent occurs’, and the fact that a consultation to learn more about the needs of innovative SMEs remains open until 3 August 2018, amendments to substantially prevent the grant of new innovation patents have re-emerged in an exposure draft of the Intellectual Property Laws Amendment Bill (Productivity Commission Response Part 2 and Other Measures) Bill 2018.  The provisions are unchanged from the earlier draft, and would simply ensure that no innovation patent application having an effective filing date on or after commencement could pass the formalities examination and be validly granted, and that no innovation patent claim having a priority date on or after the date of commencement could be validly certified.

The new draft legislation, published on IP Australia’s web site on 23 July 2018, also includes provisions intended to:

1. amend the inventive step requirements for Australian patents;
2. introduce an objects clause into the Patents Act 1990;
3. amend Crown use provisions of the patents and designs legislation;
4. amend compulsory licensing provisions in the Patents Act; and
5. implement measures to streamline processes within the Patents and Trade Marks Acts and make technical improvements to the legislation.

Further details of the main patent-related provisions are discussed below.

In addition to the earlier consultation on the provisions for phasing out the innovation patent, IP Australia has also previously consulted on options for implementation of the inventive step changes, objects clause, Crown use and compulsory licensing provisions. However, this draft legislation is the first time that specific legislative provisions have been published for comment.

The exposure draft is open for public comment until 31 August 2018.  Instructions for making submissions can be found on the consultation web page.

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Tags: Australia, Law reform, Patent law, Public consultation

Australia Again Fares Woefully in Capitalising on Innovation in WIPO’s Annual Index

Last week, the World Intellectual Property Organization (WIPO) published its Global Innovation Index 2018 (GII) report, as it has done every year since 2011.  Jointly authored with Cornell University and the INSEAD Business School in France, the GII is intended to provide ‘a detailed quantitative tool that helps global decision makers better understand how to stimulate the innovative activity that drives economic and human development.’  It ranks 126 economies based on 80 indicators, ranging from intellectual property filing rates to mobile-application creation, education spending, and scientific and technical publications.

In 2018, Australia ranks 20^th overall, which is a gain of three places since 2017.  The countries that were ahead of Australia and that have slipped behind in 2018 are New Zealand (now 22^nd, down from 21^st), Austria (down from 20^th to 21^st), and Iceland (crashing down from 13^th in 2017 to 23^rd in 2018).

Yet, while Australia has risen slightly in the overall rankings, it continues to languish in a pathetic 76^th place, i.e. in exactly the same position as last year, in a measure that I regard as particularly telling – the ‘innovation efficiency ratio’, which indicates how much innovation ‘output’ the country is getting in return for its innovation ‘inputs’.  Australia’s efficiency ratio is just 58%, which compares to the median of 61%, and is way below the values for those countries that are most effective at converting innovation inputs into outputs, such as Switzerland (96%), Luxembourg (94%), China (92%), the Netherlands (91%), and Ukraine (90%).  Yes, you read that correctly – Ukraine is the fifth highest performing economy on innovation efficiency because, while it ranks just 43^rd overall in the GII, and a rather poor 75^th on innovation inputs, its effectiveness in converting those inputs places it at number 35 in the output ranking.

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Tags: Innovation, Innovation policy, Politics

A Brief History of the Australian Innovation Patent

The innovation patent is Australia’s second-tier patent right, which has existed since 2001.  It differs from a standard patent in that it has a shorter term (eight years instead of 20), has a lower inventiveness standard (‘innovative step’ rather than ‘inventive step’), has a five-claim limit, can be granted rapidly following only a formalities review, is not subject to any form of pre-grant opposition, and need not be subject to substantive examination (although it must be examined and certified before it can be enforced against any accused infringer).

In recent years, the innovation patent system has been under a cloud, with a number of forces assembling arguments and evidence in support of its abolition.  Legislation was recently drafted and published for public consultation including provisions that would, if enacted, result in a phase-out of the innovation patent.  However, at the last minute these provisions were removed prior to introduction of the legislation to the Australian Parliament.

If, as still seems most likely, the innovation patent is to be abolished in the near future, this seems to be an opportune time to review its short, but eventful, life.

Prehistory – the Rise and Fall of the Petty Patent

Before the innovation patent, Australia had a secondary patent right called the ‘petty patent’.  Petty patents were originally introduced in 1979, and they differed from standard patents in that they had a shorter term (up to six years), could include only three claims, were faster to obtain, and were not subject to a pre-grant opposition process.  However, they required exactly the same level of inventiveness as a standard patent, and could not therefore be used to protect any invention that could not otherwise be protected by a standard patent.  Unsurprisingly, petty patents came to be used primarily as a tool for strategic patent enforcement.

In 1994, the Australian Government decided to review the petty patent system, in response to recommendations made in a report to the Prime Minister's Science and Engineering Council (PMSEC), The Role of Intellectual Property in Innovation.  In July 1994, the Government referred the petty patent system to a relatively new panel, the Advisory Council on Intellectual Property (ACIP).  The resulting review of the petty patent system was (somewhat ironically, as we shall see) ACIP’s first major inquiry.

In August 1995, ACIP published its report on the Review of the Petty Patent System, in which it recommended that the petty patent be abolished and replaced with a new system in order to fill a perceived gap between registered design rights and standard patent protection.  Among a number of other differences from the petty patent system, the ‘innovation patent’ proposed by ACIP would be a true ‘second tier’ right having a lower ‘inventiveness’ requirement, and which would therefore enable innovators to obtain protection for lower-level innovations that might not otherwise qualify for standard patent protection.

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Tags: Australia, History, Innovation patent

Australian Government Consultation on Changes to the R&D Tax Incentive Program

On 8 May 2018, the Australian Government announced its plans to reform the Research and Development Tax Incentive (R&DTI) program to better target the program and improve its integrity and fiscal affordability in response to the recommendations of the 2016 Review of the R&D Tax Incentive (‘the Review’).  Changes to the program will apply for income years starting on or after 1 July 2018, i.e. the current financial year just beginning.  On 29 June 2018, the government released exposure draft legislation and associated explanatory materials setting out its proposed implementation of the reforms.  It is currently seeking stakeholder feedback on these materials, and has published an accompanying consultation paper outlining areas in which specific feedback on the implementation of the reforms is being requested.

The R&DTI is the Australian Government’s largest, and most costly, innovation incentive program.  In its current form, it provides a tax offset (of 43.5% or 38.5%, depending on annual aggregated turnover) for some of a company's cost of eligible R&D activities.  To be eligible, an applicant must be an incorporated company, and be conducting eligible core R&D activities incurring an expenditure of at least A$20,000.  The legislation defines eligible activities as being experiments that are guided by hypotheses and conducted for the purpose of generating new knowledge.

The Review found that the R&DTI was failing to fully achieve its objectives of generating additional R&D activities and was not well targeted, in the sense that it provides benefits for R&D activities that would have been undertaken anyway.  It also found the cost of the Incentive had exceeded its initial estimates of A$1.8 billion per annum when it was introduced in 2011-12.  In 2016-17, it actually cost around A$3 billion.  The Review made a number of recommendations to improve the integrity and effectiveness of the program and to promote its objectives.  The proposed legislation would implement a number of these recommendations, adopted in the 2018-19 national budget.

If passed, the proposed changes to the R&DTI program will apply a A$4 million cap to the refund available to small companies (although, notably, clinical trials will be exempt from the cap).  They will also reduce the incentive available to large companies, and make the corresponding tax offset dependent upon R&D intensity (i.e. cost of R&D relative to total expenditure).  Additionally, they will close some ‘loopholes’ and make a number of adjustments to the administration of the program, including enhancing transparency by requiring information about companies’ R&D tax claims to be published.

A consultation process in currently underway, with submissions due by 26 July 2018.

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Tags: Legislation, Public consultation, Tax incentives

Federal Court Offers Little Insight on How Far the Bar Has Been Raised on the Standard of Disclosure in Patent Specifications

Last week I wrote about a recent Australian Federal Court decision on patent-eligibility of a computer-implemented invention, Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421.  There is, however, a further aspect to this decision that may turn out to be of greater significance because, in addition to attacking Encompass’ patents on subject matter and novelty grounds, InfoTrack also sought to have the patents invalidated on the basis that the disclosure in the specification was deficient under the requirements of section 40 of the Patents Act 1990.  I believe that this is the first time that the current provisions, since commencement of the Intellectual Property Laws Amendment (Raising the Bar) Act 2012, have received substantive judicial consideration.  Furthermore, given that the decision has been appealed by Encompass (case no. NSD734/2018), and a Notice of Contention filed by InfoTrack, it seems highly likely that the post-Raising the Bar provisions of section 40 will soon be reviewed by a Full Bench of the Federal Court of Australia.  If so, then we may find out just how far the bar has actually been raised on the disclosure requirements.

The former version of section 40 required, among other things, that a patent specification ‘describe the invention fully’, and that the patent claims defining the invention must be ‘fairly based on the matter described in the specification’.  Over time, the courts interpreted these provisions as, in most cases, requiring only that the description should enable a person of ordinary skill in the relevant field to implement something falling within the scope of the claims without further invention, and should provide a ‘real and reasonably clear disclosure’ of the invention that is broadly consistent (or, at least, not inconsistent) with what is claimed.  In practice, this was a pretty low bar that generally allowed applicants to make relatively broad claims despite possibly having disclosed only a single, specific, implementation of an invention.

By comparison, the current version of section 40 requires that a patent specification ‘disclose the invention in a manner which is clear enough and complete enough for the invention to be performed by a person skilled in the relevant art’, and that the claims must be ‘supported by matter disclosed in the specification’.  The intended effect of these changes is, firstly, to require that the description provide sufficient information to enable the skilled person to perform the invention across the full scope of the claims and, secondly, that the scope of the claims should not be broader than is justified by the extent of the disclosure and the contribution made by the invention.  While these intentions are not necessarily apparent from the wording of the provisions, the idea is that they are implied through the use of similar terminology to that used in other jurisdictions (particularly Europe and the UK), as indicated in the Explanatory Memorandum that accompanied the Raising the Bar legislation.

If the changes to the law achieve their intended effects, then the standard of disclosure required, and the concurrence of the relationship between the description and claims, should be substantially enhanced.  I would have to say, however, that there is little in the first instance decision in Encompass v InfoTrack to indicate just how far the bar has been raised.  This appears, at least in part, to be a result of the way the case was argued, which led the court to give greater attention to what the new provisions are not, rather than to what they are.  In any event, it is to be hoped that consideration by the Full Court will be more enlightening.

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Tags: Australia, Enablement, Law reform, Raising the Bar, Support

Computer-Implemented Inventions and the ‘Ball Point Pen Principle’ – Why the Australian Law on Patent-Eligibility is a Mess

The law – and Patent Office practice – relating to the assessment and examination of patents and applications for computer-implemented inventions in Australia is currently a complete mess.  I challenge anyone – whether an inventor, applicant, patent attorney, patent examiner, Patent Office hearing officer, IP lawyer, barrister or judge – to provide a coherent explanation of how to go about deciding whether an invention involving the use of a computer is eligible for patent protection.  I myself cannot do it, so I would genuinely love to have someone explain it to me.

In this article, I will show you where a unanimous Full Court panel of three judges of the Federal Court of Australia – the highest legal authority to have considered patent-eligibility of computer-implemented inventions in this country – clearly stated that it is impermissible to consider the state of the prior art in assessing whether or not the subject matter of an invention is patent-eligible, i.e. a ‘manner of manufacture’ in the terminology used in the Australian law.  Notably, subsequent Full Court panels have thrice accepted the correctness of this decision without criticism.  Then I will show you where a single judge of the Federal Court recently found an invention to comprise ineligible subject matter on the basis that various components of the claims are known from the prior art. 

I will also show you where a Patent Office hearing officer, in upholding the rejection of a patent application by an examiner, expressly stated that it is legitimate to consider the prior art when assessing patent-eligibility of computer-related subject matter.  I will point you to a recent opposition decision in which the hearing officer found that the claimed invention was not patent-eligible, despite an examiner having accepted the application, and the applicant being successful in establishing that the claims involved an inventive step over prior art raised by the opponent.  And I will identify a further four Patent Office decisions – in addition to 13 published since the beginning of 2017 that I listed last November – in which applications for computer-implemented inventions have been refused, including one relating to an application by Google which cites the aforementioned decision to justify considering prior art when deciding subject-matter eligibility.  In these decisions, the Patent Office is continuing to apply its adaptation of the England and Wales Court of Appeals’ four-step test for patentable subject matter, as set out in Aerotel Ltd v Telco Holdings Ltd; Macrossan’s Application, [2006] EWCA Civ 1371 (Aerotel/Macrossan), despite a lack of any clear authority for this approach in Australia.

Meanwhile, one of two Federal Court appeals of Patent Office decisions has been terminated following unsuccessful mediation, while the other has been delayed after the parties decided that expert evidence is required.  Yes – expert evidence to address whether or not an invention is a ‘manner of manufacture’, which is supposed to be a question of law, on which technical experts have no authority.

This is all, frankly, terrible for the state of patent law, and for high-tech innovation, in Australia.  Literally nobody really knows what the law is.  It is not just that patent applicants, and their attorneys, do not agree with the Patent Office about what is, and is not, patentable.  The Patent Office does not agree with itself!  Inventions that are receiving approval in examination are being rejected in opposition.  Attorneys, examiners, hearing officers and judges are finding it all but impossible to extract coherent principles from the relevant Full Court decisions, without exposing inconsistencies in those decisions.  In Federal Court, technical experts are being called in to shed light on something that is supposed to be a legal issue.  As I recently reported, the examination section that deals with inventions related to computing has the lowest acceptance rates in the Australian Patent Office.  All of this speaks to the uncertainty that currently surrounds what is, and is not, patentable when it comes to computer-implemented invention.

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Tags: Australia, Business processes, Computer programs, Innovation policy, Patent Office, Patentable subject matter

Evidence Shows that 2013 Australian Patent Law Reforms Have Had No Long-Term Effect on Application Acceptance Rates

On 15 April 2013, the majority of provisions in the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 came into effect.  Among other things, these reforms were designed to lift the inventive step standard, and to impose more-stringent requirements on the disclosure in a patent specification.  As a consequence of this, you would think that some inventions that would have been patentable prior to commencement of the reforms would be unpatentable under the new standard, and that some patent specifications that would have passed muster previously could fail to meet the higher standards for disclosure.  And, if so, then it might logically follow that the proportion of applications that successfully pass examination (i.e. are accepted for grant) would be lower under the new law than under the old.

Yet, as logical as that reasoning may seem, just recently I published an analysis indicating that acceptance rates across almost all examination technology sections at the Australian Patent Office were, in fact, consistently increasing on an annual basis between 2014 and 2016.  That result is surely worthy of a closer look!

A more-detailed analysis of Australian patent examination data covering a period of over three years either side of the Raising the Bar reforms, from 2010 up until the end of 2017, indeed confirms that a naïve assumption that lifting standards should reduce acceptance rates is incorrect.  In fact, acceptance rates had been rising for a number of years prior to commencement of the reforms, and initially this trend continued under the supposedly higher standards.  And although there was subsequently a brief decline in acceptance rates, this has been followed by a period during which acceptances have once again been on the rise.  Indeed, right now it appears as though the proportion of applications that are accepted for grant following examination is around 80%, which is almost exactly where it stood immediately prior to commencement of Raising the Bar.

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Tags: Australia, Examination, IPGOD, Law reform, Patent analytics, Patent law

The Australian Government is Asking SMEs How They Manage and Exploit Their Intellectual Capital (Mostly, They Don’t)

The Australian Government’s Department of Industry, Innovation and Science (DIIS) has launched a consultation ‘to better understand the needs of innovative Small and Medium Enterprises (SMEs) in managing and exploiting their intellectual capital’.  If my experience is anything to go by, the first challenge will be finding Australian SMEs with an understanding of what intellectual capital is, let alone how to manage and exploit it in any systematic way.  Fortunately, DIIS has provided its own definition of the term: ‘by intellectual capital we mean things like ideas, know-how, branding, data, trade secrets and copyright and also registered intellectual property (IP) rights such as patents, trade marks, designs and plant breeder’s rights.’

While potentially patentable inventions may form only a small part of a company’s intellectual capital – and there are, of course, many businesses that are not at all involved in the generation of new technology – patent filings are nonetheless widely seen as one indication of innovative activity within the national economy.  Additionally, applying for IP protection is a clear signal that a business has some awareness of its intellectual capital, even if only informally.  In the case of a patent filing, someone has at least identified the existence of an invention, and made a conscious decision that it is of sufficient value to warrant protection.  I recently wrote about Australia’s poor performance in patent filings, which I attribute to a generally negative mind-set, arising from a combination of ignorance, aversion, and lack of appreciation of the value of patents (and other forms of IP).  Relatively low rates of patent filing might therefore be a reflection of an absence of awareness, processes, and strategies for actively managing and exploiting intellectual capital within the vast majority of Australian businesses.

According to a 2016 report published by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), there were over 2.1 million businesses operating in Australia in 2015.  Just 0.2% of these (around 3,700) were classified as large businesses, employing over 200 people.  A further 2.4% (just under 51,000) were medium-sized enterprises, employing between 20 and 199 people.  The majority of businesses smaller than this – 60.6%, or just over two million – are non-employing sole traders (like me).  As I demonstrate in this article, however, even on the most generous interpretation of the available data, less than 0.3% of SMEs and sole traders filed any kind of Australian patent application in 2015.  On average, SMEs filed around 1.5 applications each (if they filed at all), while the typical individual applicant filed only a single application.  By comparison, just over 5% of large firms filed patent applications in Australia, and on average these firms filed over five applications each.

I fear, therefore, that DIIS will not receive too many responses to its consultation, and those businesses that do respond are unlikely to represent a broad cross-section of Australian SMEs.  Businesses for which intellectual capital is barely on the radar are unlikely to become aware of the consultation, or take the time to respond to questions set out in the Submission Guide, such as: ‘What does “intellectual capital” mean to you?’; ‘What role does it play in your business strategy?’; ‘How does your business exploit its intellectual capital?’; ‘Can you tell us about any successes or failures?’; ‘Do you seek advice on how to manage and exploit your intellectual capital?’; and ‘If not, why not?’.

For those SMEs, and other stakeholders, with an interest in the fate of Australia’s innovation patent system, this consultation provides a further opportunity to make their views known.  When provisions to abolish the innovation patent were recently dropped from legislation introduced to Parliament, IP Australia announced that the Government had ‘decided to undertake further industry consultation targeted at better understanding the needs of innovative SMEs before the phase out of the innovation patent occurs’.  The Submission Guide does not expressly mention the innovation patent, however the consultation is explicitly linked to the Productivity Commission’s inquiry into Australia’s IP arrangements, noting that the Government is ‘committed to continue to further explore the overall needs of Australian SMEs in relation to exploiting their intellectual capital, and securing, utilising and enforcing their IP rights.’  Filing numbers presented in this article show that, for whatever reasons, SMEs have made increasing use of the innovation patent system over time.

While the consultation is primarily directed to SMEs, the Submission Guide also appears to envisage that submissions may be received from ‘professional organisations providing service or advice to SMEs.’

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Tags: Australia, Intellectual capital, IPGOD, Public consultation