21 June 2020

COVID Update – Likely Hit to Australian and NZ Patent Filings Now Evident

Virus pursuitFor the past two months I have been tracking Australian and New Zealand patent filings to see whether there is evidence of any impact of the COVID-19 pandemic on new applications in either country (see here for my April report, and here for my May report).  Given the relatively short period between lockdown and the end of April, I had been looking at weekly variations, which might give an early indication of any downturn, but at the same time are more susceptible to short-term fluctuations that may obscure an underlying trend.  Now that the economic impact of the pandemic has spanned more than three months, I have switched to looking at monthly filing numbers.  On this time scale, figures for May show clear signs of a decline in patent filings in both Australia and New Zealand, compared to 2019, and it seems possible that there was a COVID-related drop in filings in Australia in April also.

The recent falls in Australian standard patent applications, and New Zealand complete applications – which make up the majority of filings in each country – are substantial.  In Australia, standard patents filings in May were down by over 14%, year on year, while the corresponding drop in New Zealand filings was over 20%.  There was an even larger decline in provisional application filings in New Zealand, at around 43% year on year for May, although the number of provisional filings is so low that this figure is subject to large fluctuations even at the best of times.  (Fun facts: the greatest number of provisional applications filed in New Zealand in a single month over the past 20 years was 141, which occurred in August of 2006; and the last time the number exceeded 100 was in July of 2013.)

Interestingly, filings in Australia of provisional and innovation patent applications show somewhat different behaviour.  As it happens, Australian provisional filings have been below 2019 levels every month, but they have been less below in more recent months than back towards the start of the year.  However, improvements up until April appear to have stalled, and possibly reversed, particularly for new applications filed during May using the services of patent attorneys.

Innovation patent filings have completely bucked the trend.  Every month, the number of innovation patents filed this year has been significantly higher than for the same time in 2019, with total filings year-to-date up by about 50%.  Last month (i.e. May 2020) there were 221 new innovation patent applications filed, which is the tenth highest monthly total since the system commenced in 2001!  (Fun fact: the greatest number of innovation patent applications filed in a single month was 369, in July of 2016.)  However, this innovation patent boom has been driven primarily by Chinese applicants, which may serve to mask any decline in filings by applicants from Australia and other countries.

A decline in filings is obviously not good for patent attorneys, but we should not forget that it is not great for IP Australia, either, which operates on a cost recovery basis such that the overwhelming majority of its operating expenses are covered by the fees paid by users of the patents, trade marks, registered designs, and plant breeder’s rights systems.  Over April and May, I calculate that patent filing fees received by IP Australia were down by nearly A$200,000 on the same period in 2019.  While this is not particularly significant in comparison to its annual budget of just over A$210 million, my guess is that the drop in patent filings is only the tip of the iceberg as IP rights owners make tough cost-cutting decisions.  Furthermore, reduced filings today will have follow-on effects in reduced future revenue from examination, acceptance, and maintenance fees.

14 June 2020

IPH Juggernaut Rolls On in NZ – AJ Park to Acquire Baldwins in NZ$7.9m Deal

Australian Securities Exchange (ASX) listed company IPH Limited (ASX:IPH) has announced that its New Zealand based subsidiary AJ Park has reached an agreement to acquire fellow NZ IP firm Baldwins.  The NZ$7.9 million (A$7.4 million) purchase price includes a deferred consideration of NZ$400,000, with the initial amount paid 65% in cash and 35% in new IPH shares.  The deferred part of the settlement will be paid in cash.  (Read the full ASX announcement here [PDF 247kB].)

The acquisition of Baldwins by AJ Park will see the Baldwins patent attorney practice merged into AJ Park IP, and Baldwins’ legal business into AJ Park’s allied law firm, AJ Park Law.  As a result, the Baldwins brand will become the latest casualty of the transformation that has been ongoing in the Australian and NZ IP profession in recent years.

The official line, as provided in the IPH announcement by AJ Park’s Managing Director, Dr Andrea Dickens, is that:

Baldwins is a highly regarded firm in the New Zealand market and we believe this acquisition will give our merged businesses greater depth and provide our clients with access to a complementary team of experienced IP professionals. We look forward to welcoming the Baldwins partners and staff to AJ Park.

The reality, based on my analysis, appears to be somewhat less rosy.  Both AJ Park and Baldwins have experienced reductions in professional staff numbers and patent filings in recent years, and in these respects the acquisition of Baldwins will do little more than put AJ Park back in substantially the position it was in about a decade ago.  Baldwins, for its part, appears to have been sold to AJ Park on a valuation that looks relatively low compared to past acquisitions in the profession – and particularly so alongside the recent acquisition of Sydney firm Cotters by QANTM IP Limited – suggesting that the firm may not hold a particularly optimistic view of its own future as an independent entity.

09 June 2020

Federal Court Finds Computer-Implemented Gaming Machine Patent-Eligible in Australia

Gaming MachinesOn appeal from a decision of a delegate of the Commissioner of Patents, a single judge (Justice Burley) of the Federal Court of Australia has found that the claims of a number of innovation patents owned by Aristocrat Technologies Australia Pty Ltd, directed to electronic gaming machines (EGMs), are directed to patent-eligible subject matter: Aristocrat Technologies Australia Pty Limited v Commissioner of Patents [2020] FCA 778.  As the judge put it in the first paragraph of the judgment, the central question in the case was ‘whether a claim to an [EGM], which includes a combination of physical parts and computer software to produce a particular outcome in the form of gameplay, is a manner of manufacture’ (referring to the test for patentable subject matter under the Australian Patents Act 1990).

In a series of five decisions relating to computer-implemented inventions issued by Full Benches of the court since 2014 – including one from an expanded bench of five judges – a ‘two step’ approach to assessing patent-eligibility of such inventions has emerged.  The first step is to construe the patent specification, from the perspective of the person skilled in the relevant art, to identify the claimed invention.  This is to be determined as a matter of substance, and not merely based on the particular form of the claims.  If the invention, in substance, comprises patent-ineligible subject matter, such as a mere scheme, idea, or business method, then the second step involves an enquiry into whether the claimed computerisation involves some further contribution sufficient to render the invention patent-eligible.  It is not enough, as the Full Court has made clear, simply to ‘put’ an otherwise unpatentable scheme, idea, or business method ‘into’ a computer.

In the present case, however, the judge effectively short-circuited this enquiry, finding at the first step that Aristocrat’s claims were, in substance, for ‘a machine of a particular construction which implements a gaming function’.  As a result, the question of patent-eligibility was resolved immediately – an EGM is not a mere scheme or a business method, and is thus a ‘manner of manufacture’.  There was, the judge concluded, no need to proceed with step two.

This finding seems straightforward enough, and accords with common sense.  As the judge also observed, there is no dispute that an old-style mechanical gaming machine would be patent-eligible, so why should the outcome be any different if the same functionality is implemented using modern technology?  On the other hand, however, the form of the claims in the present case is not necessarily so different from those in a number of the earlier decisions where the inventions were found not to be patent-eligible.  I therefore suspect that this decision may not yet be the last word on the patentability of EGMs under the ‘manner of manufacture’ test.

06 June 2020

Ten Years of Patentology

TenOn 6 June 2010, I clicked ‘publish’ on the very first article here at the Patentology blog.  Back then I did not even have my own domain name.  The URL was patentology.blogspot.com (which still works, incidentally).  As with any new web site, and particularly a new blog in a world with millions of blogs competing for attention, I do not imagine anyone much noticed the new kid on the block.  And, frankly, that is probably just as well.  That first post was a fairly esoteric piece about how the Venetians in 1474 managed to pack all of the core features of modern patent law into a single paragraph, whereas the Australian Patents Act and Regulations (in 2010) occupied a total of 376 pages (not including the nearly 300 pages of Schedules to the Regulations).

While I do not know how many times that first article was viewed (I did not get started with website analytics until a few months later), I do know that the most popular post I ever wrote is Can I – and Should I – Patent My Smartphone App?  This article was published on 4 October 2012, and has since received nearly 65,000 unique pageviews.  It still features regularly in search performance reports from Google, and typically sees a few tens of visits each month.  It was most popular in 2014-2015, when it was viewed over 1,000 times every month.

The second most viewed article is The Story Behind CSIRO’s Wi-Fi Patent ‘Windfall’, published on 5 April 2012, with just over 13,000 unique pageviews.  This article gained popularity as a result of contentious claims that CSIRO was a ‘patent troll’, principally as a result of a hatchet-job published by technology news site Ars Technica (How the Aussie government “invented WiFi” and sued its way to $430 million).  I debunked the Ars Technica piece in a post entitled Five Reasons Why Ars Technica’s Savaging of CSIRO is Appalling, which itself received over 2,000 unique pageviews in under 48 hours after a link was tweeted by celebrity science presenter Dr Karl Kruszelnicki, and gave a boost to views of the ‘windfall’ article itself.  (I recently updated the ‘windfall’ article – which I consider a valuable summary of the history of CSIRO’s Wi-Fi commercialisation efforts, and which still receives a few visitors each month – to repair all of the broken links with references to archived copies of all the now-defunct pages and documents.)

01 June 2020

Case Transfers Show No Preference for Privately Held vs Publicly Listed Firms

File arrowPatent attorney clients are notoriously ‘sticky’ – it is well-known that they rarely change service providers.  Indeed, out of a sample of 279,035 live applications and patents managed by Australian and New Zealand patent attorneys as of early 2019, only 3,854 (1.4%) were transferred away from those attorneys over the past 16 months or so.  Of these. the overwhelming majority (3,813) were transferred to a different attorney/firm, with responsibility for the remainder (230) being taken over by non-attorneys – mostly the owners of the patents/applications.  (In the remainder of this article I am going to use the term ‘cases’ to refer collectively to both pending applications and granted patents.)

Within my sample of active cases, 62% are handled by firms in listed groups, 34% by privately-held practices, and 4% by non-attorneys.  Taking into account the fact that listed group firms have nearly twice as many cases to ‘lose’, I found no evidence that clients are any more likely to transfer work from firms in listed groups to privately-held firms than they are to transfer in the other direction.  The flow in both directions was approximately 0.6% of the size of the respective available pools of cases.  Looking at domestic (i.e. Australian and New Zealand owned) cases in isolation, there was a net flow from listed group firms to privately held firms.  At the same time, however, clients of listed group firms were less likely to transfer their cases away than clients of privately held firms.

Overall, privately-held firms appear to be the most likely to lose clients, collectively seeing around one in 50 cases transferred away during the period that I have analysed.  In comparison, publicly-listed firms saw just under one in 100 cases transferred away over the same time.  However, the largest source of ‘churn’ was transfers between firms within the privately-held sector, with 1,344 cases in this category.  This resulted in privately-held firms also being the most likely to win clients away from their competitors, collectively acquiring nearly one in 40 active cases from other firms.  Publicly-listed firms acquired just one in every 140 of the active cases in their care from competitors over the period analysed.

Patent attorneys generally seem to have a fractious relationship with the kinds of applicants that are inclined to ‘go it alone’.  This is perhaps not surprising, given that a major reason for applicants to choose self-representation is to save on costs, and that fees are a leading cause of disputes between patent attorneys and clients.  Frankly, most of these clients are best avoided, since they are often more trouble than they are worth (the clients might well say the same of the patent attorneys to whose fees they object).  Privately-held firms (which include all the smaller practices) are the most likely to acquire cases from self-represented applicants (220 over the period analysed), and they are also the most likely to part ways with clients in favour of self-representation (185 cases).  Listed-group firms (which include many of the largest practices) appear to have far less contact with these types of clients, collectively gaining and losing just 67 and 45 cases, respectively, over the same period.

Looking at individual firms, big ‘winners’ from transfers of cases include RnB IP, Wrays, and FPA Patent Attorneys, while the greatest net losses were experienced by firms including Cotters Patent & Trade Mark Attorneys, Pizzeys, FB Rice, Griffith Hack.  For the major firms, however, gains and losses due to transfers of existing cases represent a very small proportion of overall business.

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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.