31 October 2018

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

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

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

Following consultation, IP Australia intends to proceed with the following reforms, substantially as proposed in the draft legislation:
  1. abolition of the innovation patent system;
  2. introduction of an ‘objects clause’ into the Australian Patents Act (for anyone who does not already know, an objects clause is a provision that outlines the underlying purposes of the legislation, which can be used to resolve uncertainty and ambiguity); and
  3. amendments to Crown use and compulsory licensing provisions (subject to a number of technical amendments identified in submissions).
None of this comes as a great surprise.  Given that the government accepted the PC’s recommendations in each of these areas, IP Australia has an obligation to progress the implementing legislation.  Any action to block these reforms must now take place at the parliamentary level.  The changes to Crown use and compulsory licensing in fact received broad support from stakeholders.  On the other hand, many submissions continued to oppose the abolition of the innovation patent system, and the inclusion of an ‘objects clause’, notwithstanding that challenging the decisions already made by the government was beyond the scope of the consultation process.  As would be expected, therefore, such submissions fell on deaf ears.  Indeed, one can almost detect a note of irritation in IP Australia’s reply that it ‘notes that the decision to abolish the innovation patent system was taken by the Government, and that this consultation was directed towards the implementation of that decision.’

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

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

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

Why Change the Inventive Step Standard… Again?

Until relatively recently, Australian patents (depending on their age) were subject to one of four distinct legal tests for inventive step.  Each successive change in the law was intended to raise the standard of inventiveness required to obtain a valid patent, principally by expanding the scope of prior art that could be considered in assessing obviousness.  The oldest of these four laws, which applied under the Patents Act 1952, in no longer relevant, since all patents granted under that Act (including pharmaceutical patents having a term extended to 25 years) have now expired.

The most recent update to the law on inventive step was introduced by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012, which came into effect on 15 April 2013.  These amendments have yet to receive judicial consideration, and their effectiveness in raising the standard of inventiveness thus remains largely untested.  Even so, the PC deemed it necessary that Australia raise the bar once again, essentially by adopting the approach used by the European Patent Office (EPO).

A majority of submissions to the consultation (again) opposed changes to inventive step, contrary to the government’s acceptance of the PC’s recommendation.  Reasons included that insufficient time has elapsed since the Raising the Bar legislation was introduced for further changes to be made to inventive step, and that there have been too many recent changes to inventive step which places an undue burden on applicants/patentees.  I think that these are actually pretty sound points, although I have long been in favour (even before the PC inquiry) of abolishing Australia’s unique, ugly, and unwieldy inventive step laws and replacing them with provisions along the lines of one of our major trading partners, such as the US, Europe, or New Zealand.

What Is Wrong with the Proposed Changes?

Broadly speaking, the problem with what IP Australia proposed in the draft legislation is that it will not work, i.e. achieve the desired effect of sufficiently raising the threshold for inventive step.  As I, and others, noted, the proposed legislation appears largely to rearrange the text of the existing provisions without substantially changing the wording that has proven to be problematic.  Furthermore, the PC and IP Australia appear to have placed significant reliance upon the Explanatory Memorandum accompanying the legislation to guide interpretation of the amended provisions.  However, there are good reasons to be sceptical of the power of such ‘extrinsic materials’ to sway the courts, particularly when they require an interpretation that deviates from the plain and established meaning of terminology in the legislation.

As I have already noted above, IP Australia found these submissions persuasive, and the government has therefore decided to place further inventive step reforms on-hold pending development and consultation on alternative options.

IP Australia does not, however, appear at all inclined to pursue a more radical approach of adopting a simpler and less prescriptive form of inventive step legislation.  The existing Australian provisions uniquely set out a specific approach for identifying and employing prior art information, which has, over the years, proven itself only to be a formula for establishing additional barriers to finding an invention obvious.  No other country in the world, to my knowledge – and certainly none among Australia’s major trading partners – has seen fit to enact remotely similar legislation.

Yet indications are that IP Australia is likely to favour yet more prescriptive provisions.  In its published response to submissions, it sates that it ‘will develop further options for amending the inventive step requirement, including ways to incorporate the European test for inventive step into the wording of the legislation’.  In its individual response to my submissions, IP Australia notes that it is ‘concerned that a direct copy of the EPC text could be read narrowly by Australian courts to exclude combinations of prior art documents’.  In my view, this is not a legitimate concern.  At some point, if Australia is to cast off the unwieldy shackles of its recent legislative history, and cease to be an outlier in its implementation of inventive step, someone will need to bite the bullet and make the changes that are needed, and trust that the courts will not ignore the entire context of the reforms – including the progressive nature of prior amendments, the specific recommendations of the PC, and any Explanatory Memorandum accompanying the legislation.  It is difficult to imagine circumstances in which the legislative intent could be any more clear or unambiguous!

There Is No One ‘European Test for Inventive Step’!

So IP Australia plainly does not want to do what I believe ought to be done, in order to give effect to the PC’s recommendation – i.e. to jettison the existing inventive step provisions, with all their historical baggage, and adopt language that more closely follows that of the EPC, and/or the national legislation of its member states such as the UK.  Stakeholders, on the other hand (me included), are broadly opposed to the introduction of further prescriptive verbiage in a dubious effort to ‘incorporate the European test for inventive step into the wording of the legislation’.

I believe that this latter objective is, frankly, unachievable.  For one thing, there is no single ‘European test for inventive step’.  The EPO employs a ‘problem-solution’ approach that is not expressly legislated, but has been developed through the case law of the Boards of Appeal and codified in the Guidelines for Examination, and which cannot readily be distilled into a few lines of unambiguous legislation.  Meanwhile, the courts in individual member states of the EPC have adopted their own approach to implementing the equivalent harmonised national laws, such as the Windsurfing/Pozzoli approach in the UK (so named after the cases in which it was developed: Windsurfing International Inc. v Tabur Marine (Great Britain) Ltd [1985] RPC 59 and Pozzoli SPA v BDMO SA [2007] EWCA Civ 588).

Furthermore, if the history of inventive step in Australia since the government’s efforts (with the 1990 Act) to overrule the High Court’s egregious decision in Minnesota Mining & Manufacturing Co v Beiersdorf (Australia) Ltd [1980] HCA 9 (a.k.a. 3M) teaches us anything at all, it is this: more words is not necessarily better.  Indeed, the more prescriptive text provided to the courts – and to the undeniably clever barristers whose aim is to lead judges to interpret each of those words in ways favourable to their clients – the more problems seem to multiply.  How else to explain the fact that we are now debating the fourth significant amendment to the Australian legislation on inventive step in less than 20 years?

Conclusion – ‘No Changers’ May Yet Win the Day

It is true that the present government accepted the PC’s recommendation to raise the inventive step standard once again.  However, it is also true that in light of the latest developments, and with a general election due by May 2019, there are very good prospects that this government will no longer be in power by the time any new proposals are remotely ready for introduction to parliament.  If I were a betting person, my money would be on this process going around one more time, again with negative stakeholder feedback, and then ending up in the ‘too-hard’ basket under a new government with no political investment in persisting with implementation of recommendations accepted by its predecessor.

If I am right about this then, ironically, it will be the advocates for ‘no change’ – at least until we have had an opportunity to assess the full effect of the Raising the Bar reforms – who will end up getting exactly what they want, in no small part thanks to those of us who were more supportive of change, but directed our efforts to highlighting the potential flaws of the proposed approach.  IP Australia should probably keep this in mind when developing its next round of proposals.


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