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

Last 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’.

Raising the Inventive Step (Again)

The Productivity Commission made two recommendations in relation to the inventive step requirements for patents, that were broadly accepted by the Government.  These recommendations were:

1. to further align the inventive step standard for the grant of a patent in Australia with that of the European Patent Office through raising the inventiveness threshold; and
2. to introduce a requirement for applicants ‘to identify the technical features of the invention in the set of claims’.

IP Australia presented a number of options for implementing these recommendations.  Having considered the submissions on this aspect of the consultation (one of which, I should note, was by me), IP Australia’s response proposes to:

1. replace the existing definition of inventive step in the Patents Act with wording based on Article 56 of the European Patent Convention (EPC), along with additional legislative clarification of the ‘prior art base’ for inventive step, and provide additional guidance in the explanatory memorandum (EM) to accompany the legislation; and
2. make no legislative change in relation to ‘technical features’, but provide guidance in the EM and the Patent Manual of Practice and Procedure on how technical features should be considered for the purposes of assessing inventive step under the ‘European approach’, noting that in certain situations there may be a degree of overlap between the assessment of inventive step and the assessment of ‘manner of manufacture’ (i.e. subject-matter eligibility).

The guidance on ‘technical features’ should be interesting!  I have argued on this blog, and in my submission to IP Australia, that there is simply no basis in Australian patent law for focussing on the technical features of a claim, or of the invention that it defines.  The general principles of claim construction are well-established, and include (see, e.g., Pfizer Overseas Pharmaceuticals v Eli Lilly [2005] FCAFC 224):

1. in approaching the task of construction, one must read the specification as a whole;
2. a patent specification should be given a purposive construction rather than a purely literal one;
3. too technical or narrow construction of claims should be avoided.

There is nothing in these principles that authorises privileging ‘technical’ features over ‘non-technical’ features in a claim.  Furthermore, the Full Federal Court, in Grant v Commissioner of Patents [2006] FCAFC 120, has questioned whether it is even possible or appropriate to define patentable subject matter in terms of ‘science and technology’, stating (at [38]):

What is or is not to be described as science or technology may present difficult questions now, let alone in a future which is as excitingly unpredictable now as it was in 1623 or 1959, if not more so. We think that to erect a requirement that an alleged invention be within the area of science and technology would be to risk the very kind of rigidity which the High Court warned against.

In view of this authority, I find it very difficult to see how a ‘technical features’ requirement can be introduced into Australian law without legislative change.  The Productivity Commission – and, it seems, IP Australia – appears to have unusual faith in the power of extrinsic materials, such as explanatory memoranda and Patent Office guidelines, to alter substantive law.

Objects Clause – Another Avenue to Attack ‘Software Patents’?

In light of submissions received (a majority of which, as I noted above, were opposed to the introduction of any object clause), IP Australia is proposing the following text, which is a modified version of both options presented in the consultation paper:

The purpose of this Act is to provide a patent system in Australia that enhances the wellbeing of society by promoting economic wellbeing through technological innovation and the transfer and dissemination of technology. In so doing, the patent system should balance over time the interests of producers, owners, users of technology, and the public.

The underlined phrase above (‘economic wellbeing through…’) replaces both the Productivity Commission’s original proposal (‘wellbeing of Australians by promoting…’), and IP Australia’s alternative option (‘wellbeing of society by promoting…’).  This change was responsive to a number of submissions expressing concerns that use of the term ‘wellbeing of Australians’ could result in preferential treatment of Australians, which would conflict with Australia’s international treaty obligations, while the term ‘wellbeing of society’ would require a value judgement as to the social value of an invention and could create legal and business uncertainty.

A number of submissions also expressed concerns about the term ‘technological innovation’, and particularly that this might change or narrow the subject-matter eligibility threshold – concerns that mirror those of the Full Federal Court in Grant, quoted above.  In response, IP Australia notes that ‘the objects clause is not, in and of itself, intended to provide a grounds for challenging the subject matter of a patent, nor to override existing Australian jurisprudence on patentable subject matter and the manner of manufacture test.‘  However, it goes on to say:

…the [Productivity Commission (PC)] made it clear that the principal purpose of the patent system is to enhance the wellbeing of Australians by promoting technological innovation. The PC considered that the introduction of an objects clause containing this language would address a number of its concerns about the balance of the patent system. In particular, the PC considered that an objects clause would better balance the patent rights of software and business method innovators and users, and help alleviate its concerns regarding the quality of software patents.

This sounds a lot like a bet each way.  On the one hand, the objects clause will not override the clear statement of a Full Bench of the Federal Court of Australia that a ‘science and technology’ test for subject-matter eligibility is not appropriate, but on the other hand it will (somehow) further restrict the availability of ‘software’ and ‘business method’ patents (themselves terms that are notoriously ill-defined).

Crown Use

As the name suggests, ‘Crown use’ provisions in the Patents Act 1990  (and in the Designs Act 2003) enable the Queen (or, more specifically, Her ministers and their delegates in the Australian Federal, State and Territory governments) to access and use patented technology without prior authorisation of the patentee.  The patent owner must, however, be fairly compensated for such use.  Crown use ensures that the patent system does not prevent or limit governments’ abilities to act in the public interest.

Despite the fact that Crown use provisions have rarely been invoked – or, perhaps, because of it – a number of reviews, including one by the Productivity Commission,  have identified potential problems with the Crown use provisions, and recommended changes.  After considering the submissions received, IP Australia is now proposing that the provisions be amended:

1. to clarify the circumstances in which Crown use provisions can be invoked, being ‘for the provision of a service that the Commonwealth, State or Territory Governments have the primary responsibility for providing or funding’;
2. to provide greater transparency and accountability by requiring the Crown to attempt to negotiate use of an invention before invoking Crown use, to provide the patentee with a ‘statement of reasons’ before commencing use, and to obtain Ministerial approval prior to commencing use; and
3. to refine the standard of remuneration to be paid to the patentee as compensation for the Crown use.

Compulsory Licensing

A compulsory licence is a Court order, that can only be granted in specific circumstances set on in section 133(2) of the Patents Act, requiring a patent-owner to grant a licence to another party, allowing that party non-exclusive rights to exploit the patented invention in exchange for fair compensation.  A compulsory licence has never been granted in Australia, although there have been three cases in which an application was made.

As with Crown use, notwithstanding the relative unimportance of the compulsory licensing provisions, a number of reviews have identified potential problems and proposed reforms.  After considering the submissions received, IP Australia is now proposing:

1. to undertake public education and awareness activities;
2. to amend the law so that a compulsory licence may be granted when it is in the ‘public interest’ to do so (which will replace the existing test which requires that ‘the reasonable requirements of the public with respect to the patented invention have not been satisfied’); and
3. to amend provisions relating to ‘dependent patents’ (i.e. patents on follow-on inventions that can only be worked if the patentee is authorised to exploit an earlier ‘original patent’) so that they apply only to the patentee of the dependent patent, as appears to have been the original policy intent.

Conclusion – Next Steps: Drafting and More Consultation

IP Australia’s intention is now to proceed with the preparation of draft legislation, and proposed explanatory memoranda, implementing its chosen options.  These will then be published for comment.

Potentially, then, there will be a further opportunity for stakeholders to propose changes to the wording of the proposed legislative amendments, and extrinsic guidelines.  In practice, however, I expect that any such changes will be limited to correcting any unintended consequences or other issues in the drafting.

The fact is that the Productivity Commission issued its report and recommendations, and the Government has accepted a number of those recommendations.  There are many people – myself among them – who are concerned that the Productivity Commission did not really have sufficient time to fully comprehend the complexities of the IP system generally, and the patent system in particular, or to understand the potential consequences and implications of its recommendations.  Nonetheless, the Government has made its decision and IP Australia’s job is to support the Government.  As with the abolition of the innovation patent, efforts to alter or reverse any aspect of the decision through the consultation process are bound to fail.

Personally, I think that the attempt to introduce a ‘technology’ requirement into Australian patent law via extrinsic materials (i.e. the Explanatory Memorandum, and Patent Office guidelines) and the wording of the objects clause, is unfortunate.  There is no question that the Productivity Commission’s intention was to ensure that such a requirement exists.  However, given that a Full Bench of the Federal Court of Australia has said otherwise, it seems inevitable that the effectiveness of the implementation will remain unclear for some time, and may require a ruling by the High Court – which cannot occur until a number of years after the changes are introduced.  I cannot see how such an extended period of uncertainty is of benefit to anybody.

However, I am resigned to the fact that this is the way that things are going.  In any event, I look forward to seeing, and commenting on, the draft legislation!

Tags: Australia, Law reform, Public consultation