08 August 2018

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

Global NetworkLegal 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.

24 July 2018

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

MaybeMy 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.

17 July 2018

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

Anger and frustrationLast 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 20th 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 22nd, down from 21st), Austria (down from 20th to 21st), and Iceland (crashing down from 13th in 2017 to 23rd in 2018).

Yet, while Australia has risen slightly in the overall rankings, it continues to languish in a pathetic 76th 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 43rd overall in the GII, and a rather poor 75th on innovation inputs, its effectiveness in converting those inputs places it at number 35 in the output ranking.

10 July 2018

A Brief History of the Australian Innovation Patent

History lessonThe 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.

03 July 2018

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

ResearchOn 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.

26 June 2018

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

Clearing the BarLast 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.

19 June 2018

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

Ball Point PenThe 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.

11 June 2018

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

HeaderOn 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.

05 June 2018

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

Intellectual capital light bulbThe 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.’

30 May 2018

Examination Allocations, Delays and Acceptance Rates at the Australian Patent Office, 2014-2017

Examination under the microscopeIt is perfectly reasonable for anybody who has applied for a patent to want to understand how the application process works, how long it is likely to take, and what are their prospects of actually receiving a granted patent in the end.  Unfortunately, it is not easy to find this information, in part because there are many factors that influence the patent examination process.  These factors include the different laws and regulations that apply in each country, variations that depend upon the field of technology of the invention, and the effect of workloads and application backlogs in the relevant patent offices.

In this article, I will review the application process at the Australian Patent Office, and look at some recent data drawn from the latest 2018 release of the Intellectual Property Government Open Data (IPGOD) to illustrate how delays in examination, and prospects of success, can be dependent upon technology and the way in which examination work is allocated within the Patent Office.  I was initially prompted to conduct this analysis by anecdotal accounts of a patent application ‘death squad’ within a particular team of Australian examiners.  However, since the plural of ‘anecdote’ is not ‘data’, I wanted to see whether there is any evidence to support these accounts within the most recent IPGOD data.  I did find the answer, along with a number of other insights.

The first thing to understand about the Australian patent examination system, for those not already familiar, is that it requires each patent applicant to file a request for examination that is generally distinct from other filing formalities.  This is in contrast to the US system, for example, in which examination fees must be paid at filing of a new application, which is then examined in its turn without further action by the applicant.  In Australia, it is possible to request examination (and pay the corresponding fees) at the time of filing, however most applicants elect to defer this step.  After filing, examination may be requested at any time, but a request must be filed within five years of filing, or within two months of the applicant being directed to request examination by the Commissioner of Patents, whichever is earlier.  This is almost invariably the Commissioner’s direction, since directions are typically issued within three-to-four years of the initial filing date, i.e. well within the five year limit.

As we shall see, what happens next depends strongly upon the field of technology of the invention – or, more precisely, upon how the examination task is allocated within the Patent Office, which is, in turn, largely technology-dependent.

21 May 2018

New Data Released by IP Australia Provides Fascinating Insights Into Patent History

Fascinating insights from dataIn the first year of operation of the Australian national patent system – 1904 – just over 1,200 patent applications were filed, more than 85% of which were lodged in the names of individual inventors, rather than companies.  In 2017, by contrast, around 28,600 Australian standard patent applications were filed, of which just 10% named personal applicants – nowadays, 90% of all patent applications are filed by companies and other collective organisations.  This observation naturally prompts the question: when did invention cease to be a predominantly individual activity, and become principally the product of corporate research and development?

With the release by IP Australia last week of the first stage of the 2018 Intellectual Property Government Open Data (IPGOD) it becomes possible to directly answer this question for Australian patent filings.  For the first time, thanks to machine learning technology, every applicant on every application for all four registered IP rights (patents, trade marks, registered designs and plant breeder’s rights) is flagged as either an individual, or a corporate entity.  In past years this information was only consistently available for patent records from around 1980, due to the more limited data that could be extracted from earlier record-keeping systems.  By the 1980’s, over 80% of all patent applications were being filed each year by corporations rather than individuals.

In fact, the transition from consistently 80% or more personal filings to consistently over 80% corporate filings took place over a period of nearly four decades, starting in 1920.  The final year in which more patent applications were filed by individuals than by corporations was 1933, and by the start of the second World War over two-thirds of patent applicants were corporations.

Historical records also clearly show the impact of international conflicts, and global and domestic economic events, on patent filing behaviour.  A comparison using US patent data as a benchmark also shows that filings of Australian patent applications have historically tended towards strong growth, but relatively high volatility.  In the 21st century, however, growth in Australian patent filings has clearly slowed relative to the US benchmark.

12 May 2018

Trials, Tribulations & Settlements – an Analysis of Patent Litigation Data from the Federal Court of Australia

JusticeThis is a guest contribution from Kelvin Tran of Litimetrics.  Further details about the author can be found at the end of the article.

Since 2010, there have been 472 patent proceedings filed in the Federal Court of Australia.  During the same period, there were over 160,000 standard patents granted, and over 1,400 innovation patents certified.  On those numbers alone, the chance that an applicant or even opponent will be involved in Federal Court litigation is therefore rare.  It’s obvious why - litigation is expensive and lengthy, and litigants, for the most part, are sensible.

Most rights-holders know that litigation only makes sense when the commercial value of the rights to be enforced exceeds the costs of litigation.  But rights-holders often can’t accurately estimate the true costs of litigation.  Litigation therefore also occurs because the parties lack information to make fully informed decisions about whether the value of the rights to be protected outweigh the costs to protect them (i.e. the costs of litigation).  This cuts both ways – those who underestimate the cost and length of litigation might litigate where alternatives make better economic sense, while those who overestimate fail to litigate when it is the optimal strategy.

The source of uncertainty is clear – comprehensive and comprehensible data is not readily available. In this piece, I use data compiled by Litimetrics to look at trends associated with Federal Court patent litigation. I rely on data:
  1. that Litimetrics collects about Federal Court patent litigation from electronic court dockets;
  2. from IP Australia itself (e.g. via IPGOD and AusPat); and
  3. from the published judgments, mined by Litimetrics.
I’ll look at numbers related to the typical duration of proceedings and trials, the various stages that they go through and the proportion of cases that proceed to a final judgment (as opposed to settling). Briefly, the data shows that:
  1. 2013 and 2014 were the busiest recent years for patent litigation in Australia;
  2. the median duration of patent litigation that proceeds to a trial and final judgment is over three years;
  3. cases that settle prior to trial, however, have a median duration of 210 days;
  4. many events punctuate typical patent proceedings – directions hearings alone, for example, average over 16 per proceeding; and
  5. once the trial is over, litigants can expect to wait a number of months for a decision in a patent case.
All of this is useful information for rights-holders who may be considering the commencement of patent proceedings.

08 May 2018

Australian Patent Performance is the Victim of a Vortex of Negativity, and Education (Alone) is Not the Solution

Vortices of negativityIn my previous article, I wrote about low patent-filing rates by Australian innovators, and lamented that this is the continuation of the country’s long history of giving intellectual property away for free.  And while occasionally this has been done intentionally, with good (if misguided) intentions, more often it is the result of a failure, through ignorance or inadvertence, to recognise and protect IP where suitable forms of protection are, in fact, available.  I speculated that there may be some fairly persistent cultural biases that keep IP protection generally, and patents in particular, off the radar of many Australian innovators, and I suggested that lifting Australians’ use of the patent system may require little more than some effort at self-education, and a change in mindset.

Thinking about this further, however, I have realised that it is mindset-change that represents the real challenge here.  There already exist many resources to assist Australian innovators in improving their IP awareness and knowledge.  IP Australia provides a range of educational materials, including videos published via its YouTube channel, and (in a very welcome change from its reticence just a few years ago) is active on both Facebook and Twitter.  It also does a lot of outreach and educational work through email lists, seminars/webinars and other events.  Another major source of information is the Australian IP profession – patent attorneys, trade marks attorneys, and IP lawyers.  Most patent attorneys, for example, do not charge for initial consultations, and between phone enquiries and initial meetings often provide over an hour of free education and general advice before a potential client makes a decision on whether to proceed or not.  And for every such enquiry that leads to paid work, there may be half-a-dozen or more that go nowhere.  IP Australia’s recently-developed ‘Engaging an Attorney Toolkit’ is yet another good educational resource, which assists innovators in getting the most out of their initial contact with a patent attorney.

However, there is nothing new about the availability of many of these types of educational materials.  Furthermore, while they have been growing in number and quality over recent years, there has been – as the charts in my previous article show – absolutely no real growth in the numbers of patents being filed by Australians, in Australia and elsewhere, over this period.  Just today, I attended IP Australia’s first ever IP Summit, ‘Launch to Export’, where rooms of interested members of the public heard about various aspects of IP protection, government assistance programs, and the experiences of successful entrepreneurs.  My guess, however, is that this event will also have no impact on patent filings.

What I realised, as I looked around the room, is that all of these educational events, efforts and materials have one thing in common – the people who engage with them have already made the decision that they need to find out more about IP.  The information may now be more readily-available, and of higher quality, than in the past, but what has not changed is that the subset of innovators and entrepreneurs actually motivated to seek IP knowledge has not fundamentally changed.  Unlike the schooling of children, neither the government, nor anybody else, has the power to make IP education compulsory!  Nor is it a question of leading the horse to water in the hope that it may decide to drink – the horse has refused the bridle, cantered across the paddock, jumped the fence, and decided to forego all aqueous opportunities in favour of pursuing its own interests elsewhere!

So the educational content is available, but we need to get Australian innovators and entrepreneurs to want to consume it.  To make that happen, we are going to have to figure out why there is so little interest in IP in general, and patents in particular.  I maintain that this is largely a cultural issue, and I hypothesise here that there is a reinforcing feedback system operating, that I will call the ‘vortex of negativity’!  To drag the mindset of Australians caught in this vortex back into the light, where they can evaluate the potential value of patenting their innovation with clear and unbiased vision (and I am not, of course, suggesting that patents are always the right choice), I suggest that we may need to appeal to their basest economic instincts, by providing clear financial incentives or rewards to businesses that patent their new technology.  And I have a few modest proposals as to how this might be done!

01 May 2018

Australians Must Step-Up On Patents, Stop Giving Away Free IP!

Step UpThere is a famous story about how the insect repellent Aerogard® became a household name in Australia.  It involves a visit to Australia in 1963 by Queen Elizabeth II, in the course of which Her Majesty was sprayed with a formulation developed by CSIRO entomologist Doug Waterhouse, containing the chemical N, N-diethyl-meta-toluamide (DEET), to ward off the country’s numerous and persistent flies.  (Apparently, clouds of the insects had interfered with the famous Royal Wave on a previous visit.)  Within days, the Mortein company requested the formula from Waterhouse, who obligingly handed it over gratis, as was CSIRO policy at the time – three cheers for the great generosity of the Australian taxpayer!  The rest, as they say, is history … including the inevitable 1969 acquisition of the Australian Aerogard product and brand by British company Reckitt & Colman (now the massive multinational conglomerate Reckitt Benckiser).  Other innovations commonly touted as having originated in Australia, but capitalised upon elsewhere, include the black box flight recorder, heart pacemaker, photovoltaic cells, and X-ray crystallography.

While CSIRO is no longer in the game of giving away valuable intellectual property for free, sadly it seems the same cannot be said for Australian innovators more generally.  Otherwise, how are we to explain a stagnation in patent filings by Australian residents?  Over eight years, from 2009 to 2016 – the most recent year for which numbers are available at the World Intellectual Property Organization (WIPO) IP Statistics Data Center – the number of Australian patent applications filed by Australians barely varied from around 2500 per year.  Australians actually file more US patent applications than they do Australian applications, however these numbers are also stagnant, fluctuating around 3700 applications over the same eight-year period.  In 2016, the rate of US patent filings by Australian applicants was 152 applications per million population.  In the same year, US applications by US applicants ran at 913 per million population.

Surely the reason for the low filing rates, and lack of growth in filings, cannot be a lack of Australian innovation?  According to the 2017 Global Innovation Index (GII) Report, Australia ranks 23rd out of 127 countries for innovation performance, which is not great.  Significantly, however, Australia fares much better on ‘input’ metrics than on ‘output’ metrics.  Input metrics capture elements of the national economy that enable innovative activities, and encompass institutions, human capital and research, infrastructure, market sophistication, and business sophistication.  Australia ranks 12th on the innovation inputs sub-index, and performs particularly well on infrastructure (ranked 7th), human capital and research (9th) and market sophistication (9th). 

But even though Australia is (mostly) well-placed to generate positive innovation outcomes, it has long lacked the ability to follow-through.  On the GII outputs sub-index Australia ranks a lowly 30th, while on the innovation efficiency ratio (outputs divided by inputs) the country ranks an abysmal 76th.

Furthermore, on the input side Australian businesses lack sophistication, with the country ranking 27th on this group of metrics.  Tellingly, the business sophistication group of metrics includes ‘patent families filed in two or more national offices’ (relative to GDP by Purchasing Power Parity), in which Australia performs appallingly, by any standard.  Australia’s score on this metric is just 1.0, which compares to the USA on 5.0, Japan on 15.5, Korea on 16.3, and New Zealand on 4.7.  It is hardly any comfort that the UK (2.5) and Canada (2.9) are not great performers on this metric, either – they are still doing a lot better than Australia.

In my experience, ‘lack of sophistication’ pretty much sums it up when it comes to many Australians’ attitudes towards intellectual property generally, and patents in particular.  Too many Australian innovators and businesses simply do not understand intellectual property.  They ignore it, put it in the ‘too hard’ basket, are ignorant about it, or are sceptical or even actively hostile towards it.  Certainly they do not value it highly, and many are extremely reluctant to spend any money on it.  But in choosing not to protect their intellectual property, these businesses are, in effect, just giving it away for free, as surely as CSIRO once did as a matter of policy.

24 April 2018

IP Australia’s 2018 Annual Statistics – a ‘Damning Report Card’ on Australian Patent Filing?

The patient needs more analysisLast week, IP Australia published its Australian Intellectual Property Report 2018 (‘IP Report’).  This annual report is largely a summary of filing numbers and other statistics, along with additional analysis on selected areas in which IP Australia has ongoing research interests.  Last year’s report, for example, looked at Australia’s performance in collaborations between industry and public research institutes based upon the evidence of jointly-filed patent applications.  This theme is continued in the 2018 report, with a chapter reporting on economic analysis indicating that research grants targeting industry/public research collaborations result in better IP outcomes.  Despite this relatively positive news, with its useful insights and analysis, some media outlets have predictably chosen to focus primarily on raw numbers in order to talk down Australia’s efforts.

For example, InnovationAus reporter Stuart Kennedy has called the 2018 IP Report a ‘damning report card on patent filing’ which (Kennedy says) has caused CSIRO chief Larry Marshall to admit that ‘Australia needs to lift its game’.  Kennedy also wrote (somewhat disparagingly, I felt) last week about the fact that Australia’s top patent applicant for 2017 was ‘poker machine king Aristocrat Technologies’, under the headline ‘a shocking punt on patent filings’.

The numbers in the IP Report do indeed tell us that the number one Australian-based applicant for Australian standard patents in 2017 was Aristocrat Technologies Australia, with 157 filings, followed by CSIRO (45), the University of Queensland (18), Bluescope Steel (15) and Monash University (also 15).  But so what?  Aristocrat is a commercial operation, with its own business justifications for seeking patent protection for its innovations, which are no doubt driven by the market in which it operates and its ability to secure a competitive advantage from its patents.  In this context, each individual patent filing may represent a relatively minor innovation, in technical terms, while still making a commercially useful contribution to the overall portfolio. 

Research organisations, such as CSIRO and universities, on the other hand, are expected to invest in substantial and longer-term scientific and technological advances, often at a pre-commercial stage of development.  We would hardly praise them for squandering precious funds on hundreds of individually trivial patent applications, merely for the sake of making their filing numbers look better.

It has to be said, however, that IP Australia does not exactly help the situation in the way it has presented some of the numbers.  It would be very easy (though wrong) to take the following messages away from the patents chapter of the 2018 IP Report (these are all direct quotes, and each appears in the first sentence of a paragraph in the report):
  1. ‘While applications grew overall in 2017, applications for standard patents by Australian residents decreased by about five per cent’;
  2. ‘Non-resident filings increased by two per cent in 2017 to 26 403, which was 91 per cent of all filings’;
  3. ‘World patent filings have been growing strongly since 2010, averaging around eight per cent annual growth to 2016, while Australia's growth has averaged about three per cent over the same period’;
  4. ‘Patent grants to Australian residents in 2017 fell by 17 per cent compared to 2016 and now make up just five per cent of the total.’
If this were all there is to the numbers, the description ‘damning report card’ might indeed be apropos.  Fortunately, the situation is not nearly as bad as these figures suggest.

17 April 2018

Australian Appeals Court Upholds Patent ‘Promise Doctrine’, but it’s a Question of What the Inventor ‘Intended to Do’

ESCO locking mechanismThe Australian Patents Act 1990 requires, in section 18(1)(c) and 18(1A)(c), that an invention must be ‘useful’ in order to be patentable.  This is also commonly known as the requirement for ‘utility’.  Failure to meet this requirement, i.e. inutility, is therefore a ground upon which a patent application may be rejected, or a patent revoked.  One of of the ‘rules’ that has been developed by the courts over the years for assessing utility is an obligation upon an applicant or patentee to satisfy any ‘promise’ that might be made for an invention in the patent specification.  This is sometimes known as the ‘promise doctrine’ – e.g. in Canada, where it was abolished last year by the Supreme Court.  I had been hoping that a Full Bench of the Federal Court of Australia might decide to do likewise, given that the opportunity had arisen.  In a recently-issued decision, however, it has unfortunately declined to do so: ESCO Corporation v Ronneby Road Pty Ltd [2018] FCAFC 46.

On the face of it, a requirement that an invention fulfil any stated promises does not seem unreasonable.  If, for example, an applicant falsely asserts that an invention is worthy of a patent, at least in part because it achieves some valuable improvement over its predecessors, and receives a patent on that basis, then the Patent Office has arguably been misled in its decision to grant the patent.  However, I do not see what this has to do with utility.  The Australian Patents Act 1990 provides a perfectly good mechanism for revoking patents that have been obtained by ‘fraud, false suggestion or misrepresentation’ in section 138(3)(d).  But if an invention is, in fact, useful for some purpose, and the patent specification otherwise meets all of the requirements for a valid patent, then it is difficult to see why the applicant’s choice to include – or not – some ‘promise’ in the specification should make any difference.

The position becomes even more fraught when a specification includes more than one promise.  This aspect of the utility requirement has not previously been conclusively addressed by the Australian courts – i.e. if a patent applicant makes multiple promises for an invention, it is necessary that all of those promises be met by the claims, individually and/or collectively?  The Full Court’s decision in ESCO Corporation has, at least, clarified this situation, with the court deciding that a claimed invention must indeed meet whatever promise(s) have been made for it in the specification.

However, this does not mean that resolving the question of utility is simple in any given case.  The court has explained that whether or not a relevant promise has been made and met must be addressed, by determining whether the invention as claimed does what it is intended by the patentee to do.  This necessarily involves an enquiry into the patentee’s intentions, through consideration of the specification as a whole, including the claims.  It is therefore not simply a matter of identifying some explicit, straightforward, statement in the specification that appears to make one or more ‘promises’ – as the court did (wrongly) at first instance in the ESCO case – and asking whether the claimed invention satisfies all of the stated ‘promises’. 

As a result of conducting the required enquiry, it can become apparent that the invention, as defined in a specific claim, or group of claims, was not intended to satisfy all of the ‘promises’ made in the specification.  In ESCO’s case this was necessarily so, because its application included two groups of claims defining different aspects of the invention (a component, and an assembly including the component, respectively) that might encompass different subsets of the advantages asserted for the invention as a whole.

So while I would have liked to see Australia follow Canada in cutting ties with old UK law and abandoning the ‘promise doctrine’, the Full Court in ESCO Corporation has at least brought some much-needed sense to the Australian law.  Determining whether or not an invention is ‘useful’ is not some formulaic exercise involving the mere comparison of statements in the specification with the subject matter of the claims.  Rather, it is a matter of substance, whereby the intentions of the applicant or patentee are to be determined, at least insofar as they are expressed in the specification as a whole, in relation to each claim, or group of claims.  On the other hand, the decision may not go far enough, in that it is not clear that it necessarily applies to cases in which there are not two or more distinct groups of claims relating to different aspects of an invention.

10 April 2018

With Second-Tier Patent Rights in Retreat in Australia, Are They Making an ‘Advancement’ in New Zealand?

Dr Parmjeet ParmarWhile the second-tier innovation patent may be out-of-favour with the Australian government (a late stay of execution notwithstanding), there is at least one New Zealand parliamentarian who is bold enough to stand up for the rights of incremental innovators.  Dr Parmjeet Parmar is a list member for the opposition National Party in New Zealand, who has drafted and submitted a private member’s bill titled the Patents (Advancement Patents) Amendment Bill.  The bill proposes the introduction of a new second-tier patent right which has many similarities with – and a few differences from – the Australian innovation patent, and Dr Parmar suggests that it would fill a gap in the availability of intellectual property rights in New Zealand that was widened by the enactment of the Patents Act 2013.

Generally speaking, the proposed ‘advancement patent’ would – like the innovation patent – provide for a shorter-term patent right, permit fewer claims, and feature a bifurcated system of registration and optional examination and enforceability.  Some of the major differences from the innovation patent would be:
  1. terminology, i.e. ‘advancement’ rather than ‘innovation’, and ‘advancement step’ rather than ‘innovative step’;
  2. maximum term, i.e. up to ten years, rather than eight years; and
  3. lifecycle, i.e. an ‘advancement patent’ would be considered ‘provisional’ initially, and only have the status of ‘granted’ following examination/certification.
Reading Dr Parmar’s maiden speech in the New Zealand parliament, it is not hard to see where she finds her enthusiasm for innovators and innovation.  Born, raised and originally educated in India, she moved to be with her husband in New Zealand where she completed a PhD in biological sciences at the University of Auckland.  She subsequently worked in both academic and commercial science and research, before establishing a business manufacturing natural health products.  Clearly this is a level of hands-on experience with research, innovation, business and entrepreneurialism to which few – if any – of the politicians, bureaucrats and economists currently gunning for the Australian innovation patent can lay claim.

Many people will be surprised to see this new bill introduced in New Zealand at the same time that Australia is looking to abolish the innovation patent.  A common theme in the long gestation of the New Zealand Patents Act 2013 and the recent review of Australia’s IP arrangements by the Productivity Commission was the view, held particularly by certain economists, that for net importers of intellectual property and technology, such as Australia and New Zealand, intellectual property rights tend to be owned predominantly by foreign entities, and that it is therefore not in our interests to grant such rights improvidently, or too easily.

My own analysis of innovation patent data over a nine-year period showed that while the target community of Australian small and medium enterprises (SMEs) were indeed, by filing numbers alone, the dominant users of the system, too many of these were ‘self-filers’, who generally gain no value from their patents, while many of the largest individual users of the system are foreign entities that filed innovation patents for strategic reasons (e.g. Apple, Inc), or merely to take advantage of economic incentives in their own home countries (e.g. many Chinese companies).  While probably not enough to justify abolition – rather than improvement – of the innovation patent, this is not a great look, and is hardly a glowing endorsement of the domestic benefits of a second-tier patent system.

Considering these current concerns with the innovation patent, I decided to take the opportunity to reach out to Dr Parmar and ask her about her motivations for drafting her bill, and why she believes that a New Zealand ‘advancement patent’ would fare better than the Australian innovation patent.  She was kind enough to take the time out of her busy schedule to answer my emailed questions, and I am pleased to be able to present her views in her own words.

30 March 2018

A ‘Death Row Reprieve’ for Innovation Patents as IP Laws Amendment Legislation Reaches Parliament

5 minutes to midnightOn 28 March 2018, the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill 2018 was introduced to the Australian House of Representatives.  Schedule 1 of the Bill, along with associated regulations, will implement various recommendations arising from the Productivity Commission’s inquiry into Australia’s intellectual property arrangements, namely: clarifying the circumstances in which the parallel importation of trade marked goods does not infringe a registered trade mark; expanding the scope of ‘essentially derived variety’ declarations in the Plant Breeder’s Rights Act; reducing the grace period for filing non-use applications under the Trade Marks Act; and eliminating requirements for patentees to provide certain data relating to pharmaceutical patents with an extended term.

Notably absent from the bill as introduced to parliament, however, are provisions for phasing out Australia’s second tier patent system, the innovation patent.  As recently as early March, IP Australia published its response to submissions on the proposed phase-out, rejecting continuing calls for the innovation patent system to be retained in some form, and indicating its intention to proceed with the transition process set out in the exposure draft of the legislation.  But if a week is a long time in politics, three weeks is a veritable eternity, and IP Australia has now announced 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.’

19 March 2018

Is Australia Headed for a ‘Technology’ Test for Patent-Eligibility?

Which wayLast week I reported on IP Australia’s response to submissions made in its consultation on the Exposure Draft Intellectual Property Laws Amendment Bill 2017 and Regulations.  Now, hot on the heels of that development, IP Australia has also published the submissions it received in its other ongoing consultation process, commenced in September 2017, along with its corresponding further response.  This consultation also relates largely to implementing recommendations made by the Productivity Commission, and accepted by the Australian Government, including: amending inventive step requirements; introducing an objects clause into the Patents Act 1990; amending the provisions for Crown use of patents (and designs); and amending the provisions for compulsory licensing of patents.  In this case, however, proposed legislation has yet to be drafted, and the initial consultation has been directed to obtaining feedback from stakeholders on a number of potential implementation options for each recommendation.

A total of 18 non-confidential submissions were received in response to IP Australia’s consultation papers.  Once again, a number of these submissions argued against changes in the law, notwithstanding that the Government has already decided to implement the various Productivity Commission recommendations, and doing nothing is therefore not an option that is open to IP Australia.  Fifteen non-confidential submissions provided comments on the options for amending the inventive step requirements, of which 14 did not support making any changes.  Fourteen non-confidential submissions were received in relation to introducing an objects clause, of which just six submissions were in favour, and eight did not support the change.

There was less stakeholder interest in Crown use and compulsory licensing, however among those that did make submissions on these issues there was somewhat greater support for change.  Of seven non-confidential submissions relating to Crown use, five supported amending the law.  In relation to compulsory licensing provisions, three out of eight non-confidential submissions supported change.

Crown use and compulsory licensing provisions have rarely been invoked in Australia (and no compulsory licence has ever been granted).  Furthermore, the proposed amendments are unlikely to result in any increase in the use of these provisions.  The relative lack of interest in these areas is therefore not very surprising.

However, the proposed changes to the inventive step requirements, and the preferred wording of the objects clause, could have the more profound effect of introducing a ‘technology’ requirement into Australian patent law, creating tension with previous statements of the Full Bench of the Federal Court of Australia rejecting the proposition that patentable inventions be required to fall within an ‘area of science and technology’.

12 March 2018

Continuing Opposition to Abolition of the Innovation Patent Falls On Deaf Ears at IP Australia

Hard of hearingIP Australia has published its response to submissions made in its consultation on the Exposure Draft Intellectual Property Laws Amendment Bill 2017 and Regulations.  The period for comment on the proposed legislation closed on 4 December 2017.  The draft legislation contains measures to implement aspects of the Government’s response to the Productivity Commission’s inquiry into Australia’s intellectual property arrangements, along with amendments to strengthen plant breeder’s rights (PBR) enforcement, streamline official processes, and make technical improvements to the legislation.

While the majority of Productivity Commission recommendations addressed by the draft legislation relate to PBRs and trade marks, the most significant patent-related provisions are those implementing the abolition of the innovation patent system.  The proposed approach would see a fairly gentle transition, with applicants given a year’s notice within which innovation patents would still be granted under the current system, followed by eight years during which all existing innovation patents would gradually cease or expire, and restrictions would be imposed on new applications and the certification of innovation patent claims.

When the draft legislation was published, I argued that the proposed transition could be viewed as too gentle, considering the Productivity Commission’s relatively strong objections to the strategic use of divisional innovation patents, and the uncertainty caused by uncertified claims.  This was, however, very much a contingent view – i.e. given that the innovation patent system is to be abolished based upon the Productivity Commission’s recommendation, the abolition should be implemented in a way that most-effectively addresses the Commission’s reasons for making that recommendation. 

In fact, I would prefer to see the innovation patent system given a second chance, in an improved form.  However, since the Government has accepted the Productivity Commission’s recommendation, and the consultation was directed to its implementation, rather than being a further opportunity to canvas objections to this decision, I did not make a submission.  This did not, however, prevent a number of others from taking the opportunity to once again express their opposition to abolishing the innovation patent system.

Unsurprisingly, these repeated objections fell on deaf ears, with IP Australia focussing in its response on the few submissions that actually addressed the merits of the proposed legislation.  On this basis, it appears at this stage that – absent a last-minute reprieve at the parliamentary level – the process of abolishing the innovation patent system is likely to proceed in substantially the manner set out in the draft legislation.

04 March 2018

The Need to Perform ‘Complex, Time-Consuming and Expensive’ Clinical Trials Does Not Make a Patent Invalid

ChemistryPatents play an important role in the development of new pharmaceutical compounds, and therapies based upon the use of such compounds.  The primary global model for drug development is based upon private enterprise and competition.  Within this model, the carrot of a potential patent ‘monopoly’ provides an incentive for companies to deploy the considerable resources – with costs commonly estimated in the billions of dollars – necessary to discover, research, trial, and market new drugs and therapies.  Although not everyone agrees that this is the best approach, it is difficult to dispute that it has, nonetheless, contributed to the delivery of great benefits to humanity over the past century or so.

Within the realm of conventional ‘small molecule’ drugs (i.e. setting aside, for present purposes, recent developments in biotechnology and biologics) four broad categories of patent protection can be identified.
  1. New compounds.  When an innovator discovers or synthesises a compound that was not previously known to exist and/or to have any useful therapeutic effect, a patent may be obtained for the compound itself.
  2. Formulations.  While it is one thing to identify a biologically-active compound, it is often another altogether to find a safe and effective way of delivering it to a patient.  When an innovator develops a new and/or more effective formulation (e.g. a particular tablet or other oral dosage form), a patent may be obtained for that formulation, even if the active ingredient is well-known and no longer patentable.
  3. New therapeutic effects.  When an innovator discovers that a compound already known to have one or more therapeutic effects has a further, and unforeseen, therapeutic use (e.g. in the treatment of a different disease or condition), a patent may be obtained for a method of using or making the compound specifically for the new therapeutic purpose.
  4. Improved methods of treatment.  When an innovator discovers that a known compound with a known therapeutic use can be made even more effective, e.g. by combining it with other compounds or therapies, or using a different dosing regime, a patent may be obtained for the new method of treatment.
Of course, a patent will only be validly granted in any of these cases if all of the legal requirements for patentability – novelty, inventive step, sufficiency of description, and so forth – are all satisfied.  These requirements are intended to balance the rewards available to innovators against the rights of the broader community to access knowledge and to engage in free competition.

From a policy perspective, getting the balance right is particularly important in the case of pharmaceutical products.  If it is too difficult to obtain a valid patent, there may be insufficient incentive for companies to invest billions of dollars in new drug development.  On the other hand, it is important to keep in mind that, one way or another, it is the wider community – either individually, or through taxes in countries where healthcare is substantially subsidised by government – that ultimately pays for that development, through the higher prices charged for patented drugs.  Allowing patents to be granted too easily therefore may therefore represent a significant social cost.

A major component of the cost of bringing a drug to market is the need to conduct extensive clinical trials in order to prove the effectiveness and safety of the drug, and thus to obtain regulatory and marketing approval.  Such trials typically take years to complete, following the initial discovery of a new compound, or of a new use for an existing compound.  However, a patent application must be filed as early as possible to ensure that any available protection is secured in the event that the trials are successful.

A recent appeal decision of a Full Bench of the Federal Court of Australia sheds light on how the balance between an innovator’s need to file early, and the community’s right to receive a full disclosure of the invention, is struck in the case of a patent for a new therapeutic use of a known compound: Warner-Lambert Company LLC v Apotex Pty Limited (No 2) [2018] FCAFC 26.  The court has confirmed that the fact that the clinical trials required to establish an effective and safe dosage of a drug for a new therapeutic use may be ‘complex, time-consuming and expensive’ will not render invalid a patent that was filed prior to conducting this essential research.

25 February 2018

Venerable Brands Snuffed Out as IPH Group Merges Firms Into Flagship Spruson & Ferguson

Merger AheadOn 6 February 2018, Australian Securities Exchange (ASX) listed company IPH Limited (ASX:IPH) announced [PDF, 156kB] that two of its smaller group businesses – Fisher Adams Kelly Callinans (FAKC) and Cullens – are to be merged into its original and largest firm, Spruson & Ferguson (S&F).  Operation under the single S&F brand is expected to commence in April 2018, with full integration to be completed by July 2018.  The merger announcement comes on the heels of IPH’s settlement of its acquisition of New Zealand IP firm AJ Park on 31 October 2017 [PDF, 189kB].

The merger will erase two of Australia’s oldest IP brands – Callinans and Cullens – from the marketplace, once and for all.  Notwithstanding the preservation of its name within FAKC, however, the Melbourne firm of Callinans – which had over 100 years of history at the time of its merger with Fisher Adams Kelly in 2015 – is already effectively defunct given that, to my knowledge, not one of the firm’s attorneys at the time of that merger remains with FAKC.  For its part, Cullens was the first patent firm in Brisbane, having been founded by George Cullen in 1936.

The new merger is significant in terms of its impact on clients’ choice of patent attorneys in Queensland.  According to the Register maintained by the Trans-Tasman IP Attorneys Board (TTIPAB), FAKC and Cullens collectively employ 26 patent attorneys (and one trade marks attorney) registered at Queensland addresses, out of a total of 93 patent attorneys registered in Queensland.  Following the merger, the largest patent attorney practice in Queensland will be Davies Collison Cave (five attorneys registered in the state), followed by Eagar & Martin, IP Gateway and Pizzeys (all with four Queensland patent attorneys, although Pizzeys also has six patent attorneys based in Canberra).  Of these, Pizzeys is itself a member of the IPH group (though not – yet – merging with S&F) while Davies Collison Cave is Australia’s largest IP firm and a member of the QANTM IP Limited (ASX:QIP) group.  Thus any client in Queensland wanting to work with a mid-tier patent attorney firm will most likely need to look interstate.

I predict that this will not be the last merger of firms within the three publicly-listed ownership groups (the third being Xenith IP Group Limited, ASX:XIP).  While it is commonly believed that the scope for mergers may be limited by the need to avoid conflicts of interest between the clients of the separate firms, my own conversations with people within the groups suggest that this is not necessarily viewed as a major obstacle. 

Furthermore, the updated Code of Conduct for Trans-Tasman Patent and Trade Marks Attorneys 2018, which came into effect on Friday 23 February 2018, creates a presumption of non-independence of firms within an ownership group.  The Code also imposes new obligations on the firms within a group to inform clients of the arrangements, and to obtain informed consent, in writing, from clients on both sides of any contentious matter (e.g. a patent opposition) represented by different firms within the same group.  It is my view that, in some cases at least, these more-onerous obligations may tip the balance in favour of merging firms, rather than maintaining separate operations.

The real question, then, is not if there will be further mergers, but who will be next?

How Much Should a Patent Application Cost?

Juggling DollarsI recently wrote about IP Australia’s new Engaging an Attorney Toolkit, which is an online ‘guide on how, why, what and when to engage your patent attorney’ that is intended primarily to assist people and businesses with minimal knowledge and experience of the patent system in preparing to engage with an attorney.  The toolkit includes a section entitled ‘6 Myths about getting a patent’, the first of which is that ‘a patent will cost me hundreds of thousands of dollars’.  The myth-busting reality, according to the toolkit, is that ‘prices vary, but the cost of drafting and filing an initial patent application (known as a provisional application) for your invention typically costs somewhere between $3000 and $6000.’

Is this information correct?  Or – as one commenter suggested – is a price range of $3000-$6000 liable to create unrealistic expectations, particularly for those prospective clients looking to engage with a major attorney firm?

The toolkit’s estimate is not, in fact, unreasonable, in the sense that the median cost to have a patent specification drafted by an Australian patent attorney is almost certainly somewhere in the range given.  But it is also true that costs for a substantial proportion of all specifications drafted in Australia would fall outside this range.  There are individual attorneys and small firms that might be willing to draft a patent specification for a technically simple invention for as little as $2000.  At the other extreme, an experienced attorney at a top-tier firm might end up charging $12,000 or more for a specification for a complex invention in a sophisticated and challenging field of technology.  Since many attorneys charge by time, and hourly rates vary significantly with experience and across different firms, there are no hard-and-fast rules about what a patent application may cost.

There are, however, hard-and-fast rules about what a patent attorney must tell a client up-front about who they are, how they work, and how much they will charge.  It is timely to mention this, because the new Code of Conduct for Trans-Tasman Patent and Trade Marks Attorneys 2018 just came into effect, on Friday 23 February 2018.  All registered patent attorneys in Australia and New Zealand are subject to the Code, which requires (among other things) that they inform each new client, in writing:
  1. that they are, in fact, registered as a patent attorney, and are bound by the Code;
  2. that they have appropriate competency to perform the work required by the client, including suitable expertise in the technology of the invention;
  3. whether the attorney works for an incorporated firm and, if so, whether it is privately or publicly owned;
  4. whether the firm for which the attorney works is part of a group of commonly-owned firms and, if so, the identity of the other members of the group; and
  5. the procedures, timing and estimated cost of doing the work required by the client.
(With regard to registration, prospective clients should also be aware that Australian law effectively prohibits anybody who is not a registered patent attorney from drafting patent specifications on behalf of others.  In particular, under subsection 201(1) of the Australian Patents Act 1990 only a registered patent attorney or legal practitioner may act as a patent attorney in Australia, and section 202 further provides that, other than in very specific circumstances, ‘a legal practitioner must not prepare a specification, or a document relating to an amendment of a specification’.)

So any prospective client can be assured of being made aware of anticipated costs before any work commences, and can, if they wish, shop around for the best deal.  But how is a newcomer to the patent system to determine what is reasonable, given the very wide range of cost estimates that may be provided?

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The Patentology Blog by Dr Mark A Summerfield is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Australia License.