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.

How the Proposed Transition Will Work

The proposed transition to a world without innovation patents operates as follows.
  1. The amended legislation will commence one year after it is signed into law by the Australian Governor General.  This will give prospective innovation patent applicants (including those that have filed Australian provisional, or foreign priority, applications) a 12-month window in which they could still file new innovation patent applications.  Any standard patent applications filed during this period may also be used in the future as the basis for a divisional innovation patent filing, and will remain eligible for conversion to an innovation patent.
  2. From the commencement date, it will no longer be possible for an innovation patent to be granted on a newly-filed application.  Technically, it will remain possible to file such an application, however no patent may be validly-granted with an effective filing date on or after commencement.  Divisional innovation patents will continue to be available, as will innovation patents converted from standard patent applications, so long as the effective filing date of the basic application or patent is earlier than the commencement date.
  3. Finally, it will not be possible for any innovation patent claim to be validly-certified if it has a priority date that is on or after the date of commencement.  This provision primarily defends against the possibility of subject matter being added and subsequently claimed in an otherwise valid divisional innovation patent filing.  The inclusion of new subject matter in a Australian divisional patent application is permissible (similar to a US ‘continuation-in-part’ application), with the restriction that at least one claim must be fully supported in the parent application.  However, any claims that rely on the added subject matter are not entitled to a priority date earlier than the filing date of the specification that first included the new matter.

Summary of Published Submissions

Non-confidential submissions relating to the abolition of the innovation patent system were made by Aristocrat Technologies Australia (Aristocrat), the Australian Federation of Intellectual Property Attorneys (FICPI Australia), the Institute of Patent and Trade Marks Attorneys of Australia (IPTA), Mr Kenta Kitamoto, and the Law Institute of Victoria (LIV).  It is not clear whether any confidential submissions were made addressing this aspect of the draft legislation.

Aristocrat devoted three pages to a rehash of arguments against abolishing the innovation patent system, before turning to a discussion of the proposed legislation.  Aristocrat’s position is that commencement of the abolition process (if it must happen) should be delayed until at least three years after the legislation receives Royal Assent, rather than the one year currently proposed, and preferably until ‘an alternative system is developed and implemented to replace the innovation patent system’.  Its argument is that the loss of the innovation patent will reopen the ‘gap’ between registered design protection and standard patent protection that was identified by the Australian Government’s Advisory Council on Intellectual Property (ACIP), and which led to the creation of the innovation patent in the first place.  Sadly for Aristocrat, ACIP’s final act was to recommend abolition of the innovation patent system, and there is no longer any independent body supporting the continuing existence of a second-tier patent right.

FICPI Australia also remains ‘strongly opposed’ to the abolition of the innovation patent system.  In its submission, FICPI Australia did not address the proposed legislation at all, confining itself to reiterating its opposition to abolition.

IPTA also confined its submissions on the innovation patents legislation to reconfirming its belief that ‘the innovation patent system should be retained, albeit in amended form’.  It states that ‘IPTA, together with local users of the innovation patent system, hope to be able to convince the Government (through other means) to reconsider this proposal to repeal the innovation patent system.’  I presume that, by this, they mean such activities as lobbying the members of parliament who will ultimately be called upon to pass the legislation.

Kenta Kitamoto is a patent examiner at the Japanese Patent Office (JPO), and currently a visiting research scholar at Melbourne Law School.  Mr Kitamoto’s submission presented a view not dissimilar to my own, i.e. that allowing ongoing filing of divisional innovation patent applications, and certification of innovation patents after the commencement date, merely prolongs the uncertainty and strategic use of innovation patents that were among the Productivity Commission’s main reasons for recommending their abolition.

The only other submission to expressly mention the provisions relating to abolition of the innovation patent system was from the LIV, which noted that ‘as this has already been agreed to by the Government, the LIV does not propose to make any submissions on the merits of this abolition.’

IP Australia’s Response

Considering that only two submissions were made addressing the merits of the proposed legislation, one (from Aristocrat) favouring an extended transition period, and the other (from Mr Kitamoto) proposing a more strict approach, IP Australia’s response is not particularly surprising:

IP Australia 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. No significant new evidence on the value of the innovation patent system was presented by the submissions that had not already been considered by the Productivity Commission and the Government in reaching that decision.

There was a significant spread of opinion on the transitional arrangements for the phasing out of the innovation patent system, with support for longer and shorter transitional periods. On consideration, IP Australia is confident that the provisions as drafted strike a good balance between all relevant interests without adversely affecting existing rights.

Conclusion – Taking the Fight to Parliament?

While it may appear that Aristocrat, FICPI and IPTA continuing to oppose the abolition of the innovation patent is a case of closing the stable door after the horse has bolted, there may be some method in their madness.  If nothing else, their submissions send the message that substantial opposition to abolition still exists, not only within the IP attorney profession but also in industry.  The battle is not lost until legislation is actually passed, which requires a majority of votes in both the House of Representatives and the Senate.  Currently, the Government has just a one seat majority in the House, and cannot pass legislation without cross-bench support in the Senate.

The process by which decisions are made on recommendations from bodies such as the Productivity Commission is not at all transparent.  The Government’s response, in this case, was issued by the Department of Industry, Innovation and Science, within which IP Australia falls.  It is not clear whether the Commission’s report and recommendations were actually considered in any detail by the Minister, or whether the response is primarily the work of Department bureaucrats.  Certainly, the Department’s fingerprints have been all over moves against the innovation patent system for a number of years: a proposal in 2012 to raise the innovative step standard, without waiting for ACIP to complete its review of the system; IP Australia’s preparation of its report on The Economic Impact of Innovation Patents, and pre-emptive presentation of its results to ACIP, shortly before ACIP’s demise in 2015; commencing its own consultation process, and then passing submissions (which overwhelmingly opposed abolition of the system) on to the Productivity Commission.  This activity has spanned two governments (and four prime ministers) across both sides of politics, and thus appears to be independent of the government of the day.

However, the extent to which abolition of the innovation patent system is actually supported by members of the Government, and by other parties and independent members of both Houses of Parliament, remains unknown.  There is certainly still a case that can be made to individual representatives, regardless of what the complex economic modelling may suggest, that innovation patents are beneficial to, and are supported by, innovative Australian individuals and small to medium enterprises (SMEs).  Certainly, this was the ‘target market’ for the innovation patent, and individuals and SMEs have been the majority users of the system, even if the macroeconomic benefits are questionable.  Very few parliamentarians are going to want to be seen to be supporting legislation that goes against the interests of Australian businesses – if, indeed, the legislation can be cast in that light.

So the fight to save the innovation patent may not quite yet be over.  Although I would say that the lobbyists have an uphill battle ahead of them.


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