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.

Objects Clause

The proposed wording of an objects clause for the Patents Act – which would become section 2A of the Act – is as follows:

The object of this Act is to provide a patent system in Australia that promotes economic wellbeing through technological innovation and the transfer and dissemination of technology. In doing so, the patent system balances over time the interests of producers, owners and users of technology and the public.

This is, I note, a substantially watered-down version of the wording originally favoured by the Productivity Commission (PC), and of wording previously proposed in IP Australia’s options paper.  Those earlier versions stated that the object of the legislation is to provide a patent system that enhances the wellbeing of either Australians specifically (as the PC proposed), or of society in general (IP Australia’s earlier option), ‘by promoting technological innovation and the transfer and dissemination of technology’, and that the system ‘should balance over time the interests’ of various stakeholders.

In the version now being proposed , it seems to be sufficient that the system ‘promotes economic wellbeing’ – of whom, exactly, is no longer specified – ‘through technological innovation and the transfer and dissemination of technology.’  The draft Explanatory Memorandum notes that ‘[t]he term “economic wellbeing” is intended to indicate that the benefits of the patents system are primarily economic in nature’ and that ‘[t]his limits the application of the objects clause to only economic factors and excludes ethical and social considerations’.  There is, in addition, an interesting shift in voice in the second sentence of the clause, from the ambiguous auxiliary verb ‘should’ (does this indicate an obligation, an aspiration, or merely an opinion?) to a simple, seemingly objective, statement of function.

Probably the main remaining issue in the proposed clause is one that has been raised a number of times during past consultations – what impact might the references to ‘technology’ have of the scope of subject-matter that can be protected by an Australian patent?  The draft Explanatory Memorandum states that ‘[t]he term “technological innovation” … is not intended to narrow or change the subject matter eligibility threshold for grant of a patent’ and ‘is intended to be interpreted broadly to mean the applications of scientific knowledge for practical purposes’. Nonetheless, in an accompanying list of specific consultation questions, IP Australia is seeking further feedback on this point:

…does the term ‘technological innovation’ restrict or narrow the concept of ‘innovation’ to suit certain industries only? Which industries? What subject matter that is currently patentable would not be considered ‘technological’?

Inventive Step

Proposed amendments to the definition of ‘inventive step’ in the Patents Act are intended to further lift the standard, above what was already achieved from 15 April 2013 under the Intellectual Property Laws Amendment (Raising the Bar) Act 2012.  In particular, in its 2016 report on Australia’s Intellectual Property Arrangements, the PC recommended that Australia raise its inventive step threshold by adopting the approach used by the European Patent Office (EPO).

The draft legislation would replace the existing subsections 7(2) and 7(3) of the Patents Act.  These provisions together define a ‘multi-step’ process for identifying and combining relevant prior art information, along with common general knowledge in the field of the invention, before applying this information and knowledge in the assessment of obviousness of a claimed invention.  The draft proposes a new subsection 7(2), in the following terms:

For the purposes of this Act, an invention is taken to involve an inventive step when compared with the prior art base if the invention is not obvious to a person skilled in the relevant art.

At the same time, the definition of ‘prior art base’ would be removed from Schedule 1 of the Act, and inserted into a new section 7B.  In particular, proposed subsection 7B(2) would define the prior art base for the purposes of assessing inventive step as follows:

In relation to deciding whether an invention does or does not involve an inventive step, prior art base means:
        (a) information in a document that is publicly available, whether in or out of the patent area; and
        (b) information made publicly available through doing an act, whether in or out of the patent area; and
        (c) a combination of any 2 or more pieces of information mentioned in paragraph (a) or (b) that a person skilled in the relevant art could, before the priority date of the relevant claim, be reasonably expected to have combined; and
        (d) information that is common general knowledge (whether in or out of the patent area), whether that information is considered separately or together with the information mentioned in paragraph (a), (b) or (c).

To be honest – and the various justifications and guides for interpretation set out in the draft Explanatory Memorandum notwithstanding – I cannot see how this is going to create any substantial change.  Every single step and hurdle of the current provisions is still present in this proposal.  While subsection 7(2) is simplified, and 7(3) removed, the proposed subsection 7B(2) still requires consideration of whether the skilled person ‘could  … be reasonably expected to have combined’ multiple items of prior art information (as a precondition for, and in addition to, assessing whether this then renders a claimed invention obvious), and it still requires specific identification, and special treatment, of ‘common general knowledge’.  Essentially, every significant word that has caused problems in the existing legislation is still present, but in a different order.  The phrase ‘rearranging the deck chairs’ comes to mind!  One might almost think that the purpose of the proposed legislation is to give the appearance of change, without actually changing anything very much.

It remains a mystery to me why we cannot have a simple, flexible, definition of inventive step (or, conversely, obviousness) like… oh… I don’t know… just about every other comparable jurisdiction on the planet!

Crown Use and Compulsory Licensing

Crown use and compulsory licensing provisions both address circumstances in which a patent owner can be compelled to permit another party to use a patented invention, in exchange for a licence fee.  ‘Crown use’ refers to use by, or on behalf of, government, while ‘compulsory licensing’ refers to use by other entities.  These provisions are rarely invoked, and even more rarely enforced, and have therefore historically been of little practical consequence in the bigger scheme of things.  Nonetheless (and keeping in mind that a lack of use could be a consequence of the provisions not being fit-for-purpose) they have been the subject of a number of reviews over time, including by the Productivity Commission.  As a result, there are various outstanding proposed reforms that are covered by the draft legislation.

With regard to Crown use, the major changes being proposed are:
  1. to clarify that Crown use can be invoked for the provision of a service that any Commonwealth, State or Territory Government has the primary responsibility for providing or funding;
  2. to require that governments give prior notice to a patentee, and first seek a negotiated arrangement, before invoking Crown use (except in an emergency situation); and
  3. to require Ministerial authorisation for invoking Crown use, and for the patent owner to be notified of the reasons for the Minister’s decision.
The main proposed changes in relation to compulsory licensing are:
  1. to replace the test under which a compulsory licence may be granted from meeting ‘the reasonable requirements of the public’ (which the PC found had been conflated with the interests of Australian industry) with a ‘public interest’ test;
  2. to require a court, when granting a compulsory licence, to consider the public interest when specifying the terms of the licence, including remuneration; and
  3. to address problems with existing provisions relating to compulsory licensing of ‘dependent patents’, i.e. those for which access to an earlier ‘original patent’ is also required, particularly where the owners of the original and dependent patents may be different.

Conclusion – Time Is of the Essence

As I noted at the outset, a relatively short period has been provided – until 31 August 2018 – for submissions on the draft legislation.  IP Australia has also stated that ‘due to time constraints’ late submissions will not be accepted.

It is not difficult to infer what these ‘time constraints’ would be.  A federal election (well, at least a half-Senate election, which generally means that the House of Representatives would go to the polls at the same time) must be held in Australia sometime between 4 August 2018 and 18 May 2019.  While Prime Minister Malcolm Turnbull has previously ‘promised’ that an election will not be held until 2019, that thinking could change if the government has a good showing at a number of by-elections that are being held this coming weekend – or, indeed, for any other reason at all over the following weeks and months.  And once an election has been called, the government goes into ‘caretaker mode’, under which it is conventional that no new legislation is passed pending the formation of a new government.

Time is therefore of the essence for the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2018.  Within whatever time remains until an election is called, IP Australia must consider submissions and make any further amendments required to the legislation.  The legislation must then pass through both Houses of Parliament – including the currently-unpredictable Senate, in which the Government does not have a majority.  This process could take a number of months. 

There is, accordingly, a very real risk of time running out during the term of the current Parliament.  And, if that happens, the innovation patent will have received yet another reprieve, along with the possibility of a change of government to a party that might be thought less likely to be in the thrall of the economists at the Productivity Commission.


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