New Research Study from IP Australia Confirms IP Rights Ownership as a Signal to Identify Successful SMEs

If you are a policy-maker, prospective business partner or investor, IP Australia wants you to know that a useful way to identify small and medium enterprises (SMEs) with high growth potential is to look at their IP activity.  A new research report from the Office of the Chief Economist, titled Intellectual property rights and enterprise growth: The role of IP rights in the growth of SMEs, describes a study using data on the full population of Australian businesses – around 600,000 SMEs over the period 2002–2017 – to examine correlations between IP activity, employment, and growth of SMEs.  The study finds that, on average, SMEs that own IP rights (IPRs) are 3.5 times larger than SMEs with no IP rights (7 employees compared to 2 for SMEs with no IP rights).  Furthermore, rights-holders pay their employees better, with median annual wages being A$53,755 per employee compared to A$43,304 for SMEs with no IP rights.

My opening sentences above were very carefully chosen.  There is a risk that this study may be understood or reported in some quarters as implying the presence of a causal relationship between ownership of IP rights and business success.  It should go without saying, however, that (in the absence of evidence otherwise) correlation is not causation.  This is expressly acknowledged in the report itself (page 10), but IP Australia is also choosing its words carefully in promoting the report.  In information provided to media, the Director General, Michael Schwager, is quoted as saying:

This research paper presents evidence, for policy makers and business investors, that SMEs who file for IPRs are more likely to experience high growth than those who do not file for any IPRs.

On average, SMEs that own IP rights are around 3.5 times larger, are older and pay a higher median wage. SMEs filing for all the three types of IPRs, namely patents, trade marks, and designs, are the most likely to achieve high growth in terms of both turnover and employment.

To the casual reader, these statements might be taken to imply a causal relationship.  Saying that entities that do X are more likely to achieve Y arguably implies that X might be a good thing to do if your goal is to achieve Y.  But of course that is not true here.  If all anybody needed to do to succeed in business was to file a trade mark application, then I am sure everybody would be doing it!  An economist or statistician reading the above statements would merely find a few interesting facts regarding the observed relationships between IPR ownership, business growth, company size, longevity, and employee remuneration.  They would see nothing regarding any causal relationship among these characteristics.  All they would learn is that entities represented in the study data that have achieved Y are also more likely than average to have done X.

It is also notable that Michael Schwager’s statements specifically address policy makers and investors.  What about business owners?  Surely they would want to know how to maximise their prospects of success?  Well, of course they would.  But this study, by itself, tells them nothing about how to achieve that outcome.  Just because more successful businesses are more likely to own more IPRs does not imply that simply filing more applications for IPRs is the hidden secret to business success!

So, let’s delve a little more deeply into this report and see what else it tells us about IPRs and successful SMEs, and attempt to infer, from its findings, something about what makes an SME successful, and where other SMEs should be looking to find exemplars from which they can learn.

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Tags: Economics, Innovation policy, IP Australia

Patent-Eligibility of Computer-Implemented Inventions – Appeals Court Says an ‘Advance in Computer Technology’ is Required

In a unanimous decision – Commissioner of Patents v Aristocrat Technologies Australia Pty Ltd [2021] FCAFC 202 – a Full Bench of three judges (Middleton, Perram and Nicholas JJ) of the Federal Court of Australia (‘Full Court’) has reversed last year’s ruling by Justice Burley that claims directed to a so-called ‘feature game’ implemented on an electronic gaming machine (EGM) constituted a patent-eligible ‘manner of manufacture’ under Australia law.  (A ‘feature game’ is a secondary, or bonus, game triggered by the occurrence of a defined event in the ‘base’ game of spinning reels.)  As I explained at the time, Justice Burley applied a two step test, asking firstly whether ‘the claimed invention is for a mere scheme or business method of the type that is not the proper subject matter of a grant of letters patent’ and then – if this question is answered in the affirmative – ‘whether the computer-implemented method is one where invention lay in the computerisation of the method’ as opposed to ‘merely plugging an unpatentable scheme into a computer’.  He found the claims to be patentable at the first step, because they were directed to ‘a mechanism of a particular construction’, i.e. a gaming machine.

The Full Court has rejected Justice Burley’s test, with the majority (Middleton and Perram JJ) proposing an alternative two step test (at [26]) which asks firstly whether the claimed invention is ‘a computer-implemented invention’ and then – if so – ‘can the invention claimed broadly be described as an advance in computer technology’.  The majority determined that Aristocrat’s EGM, despite being claimed in terms of a combination of hardware and software components, was in substance a computer-implemented invention, and that the asserted contribution of the claimed invention ‘pertains only to the use of a computer’ and not to ‘the development or advance of computer technology’ (at [63]-[64]).  As such, they concluded that the claims were not directed to patent-eligible subject matter.

The third judge of the Full Court, Nicholas J, arrived at the same ultimate conclusion, by different reasoning.  He agreed with the majority that Justice Burley’s two step test was not the correct approach, because it failed to ‘engage with the Commissioner’s submission that the invention as described and claimed was in substance a mere scheme or set of rules for playing a game implemented using generic computer technology for its well-known and well-understood functions’ (at [135]).  However, rather than embarking upon an inquiry as to whether Aristocrat’s claims were directed to a ‘computer-implemented invention’ he simply observed that ‘the substance of the invention, as described and claimed, resides in the game program code which embodies a computer implemented scheme or set of rules for the playing of a game’ (at [138]).  He further reasoned (at [140]-[142]) that the game code does not solve any ‘technological problem’, nor does it exhibit any ‘unusual technical effect due to the way in which the computer is utilised’, and therefore that there is nothing ‘about the way in which the game code causes the EGM to operate which can be regarded as having transformed what might otherwise be regarded as purely abstract information encoded in memory into something possessing the required artificial effect.’

While the Full Court found the representative claim at issue to be unpatentable, it did not entirely foreclose the possibility that there may be patent-eligible aspects to the inventions disclosed in Aristocrat’s four innovation patents.  The case has been remitted back to Justice Burley to determine any residual issues in light of the Full Court’s judgment.

There are positive and negative aspects to this decision.  On the plus side, the approach taken by the majority brings some clarity to the approach to be taken in construing and assessing claims to computer-implemented inventions, which often comprise a physical apparatus defined in terms of (possibly conventional) hardware, configured via software for particular functionality.  On the down side, however, the majority also relied upon the existence of ‘an advance in computer technology’ to confer patent-eligibility upon a computer-implemented invention, without providing clear guidance on what, exactly, is covered by this terminology.  The decision also perpetuates an uncertainty that exists around the exact role to be played by prior art information in applying the ‘manner of manufacture’ test to assess patent-eligibility.

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Tags: Appeal, Australia, Computer programs, Games, Patentable subject matter

Raising the Bar Has Not Reduced the Patent Acceptance Rate in Australia

Data on patent acceptances into 2021 confirms that the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (‘RtB Act’), which came into effect on 15 April 2013, has had a minimal impact on the rate of patent application acceptance in Australia – and to the extent that an effect is present, it does not run in the direction that might be expected!  Here, I define ‘rate of acceptance’ as the proportion of examined applications that go on to be accepted for grant.  Between 2009 and 2013, the rate at which applications subject to the former (i.e. pre-RtB) provisions were accepted rose from 69% to 72%.  In comparison, the acceptance rate of post-RtB applications has stabilised at around 75% in each year between 2017 and 2021.

Some people may have anticipated that, in raising the standard of inventive step and introducing stricter requirements for enablement and support of claims, the RtB reforms would result in fewer applications being accepted.  I was not one of those people, and I expect that neither were most other patent attorneys.  Those of us who work on behalf of patent applicants are well-aware that, firstly, most of those applicants are seeking patent protection in other jurisdictions that have high standards of patentability, and are not wasting time and money on equivalent Australian applications for inventions that do not meet those standards.  And, secondly, encountering a higher bar to acceptance does not necessarily mean abandoning the application altogether; often it may simply mean settling for a more limited scope of protection.

Perhaps more surprisingly, however, raising standards of patentability has not resulted in applicants making more rounds of amendment to their applications in order to achieve acceptance.  In fact, if anything applications examined under the post-RtB provisions have been, on average, subject to fewer amendments in examination than pre-RtB applications.

Interestingly, in the transition between the two legal regimes, the earliest applications to be examined under the provisions of the RtB Act had acceptance rates in excess of 90%, while acceptance rates of the last applications to be examined under the former provisions fell to below 50%.  These effects are most likely attributable to the respective applicants’ strategies in pursuing early examination of post-RtB applications, and in persisting to the bitter end with some pre-RtB applications.

Another interesting observation is that expedited examination has become increasingly popular in the years since the RtB reforms commenced, rising from just under 6% of all cases in 2014/15 to over 8% in 2020/21.  In particular, expedited examination under the Global Patent Prosecution Highway (GPPH) program rose from just 2.7% of cases in 2013/14 to 5.1% in 2019/20.  In fact, GPPH requests were the majority of all expedited examination requests in every post-RtB year except for the first (2013/14).

Finally, the most recent data confirms (once again) that the duration of patent prosecution (i.e. from examination request through to acceptance, in successful cases) has reduced significantly – from a median of over 600 days, to a little more than 400 days – since commencement of the RtB reforms.  This has been due, in almost exactly equal parts, to the tighter time constraints imposed on applicants, and to reductions in Patent Office delays in commencing examination after a request has been filed.

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Tags: Australia, Examination, Law reform, Patent analytics, Patent law, Raising the Bar

Australia and NZ: ‘Reasonable Efforts’ to Join the Hague Agreement on Industrial Designs Mean Nothing

Recently, both Australia and New Zealand have reached ‘agreement in principle’ on proposed free trade agreements (FTAs) with the UK.  Details of the Australia-UK agreement in principle can be found on the Australian Department of Foreign Affairs and Trade (DFAT) website, while the NZ-UK agreement in principle is available from the NZ Foreign Affairs and Trade website.  Each document states that Australia/NZ will make all reasonable efforts to join the UK as members of the Hague Agreement, which provides an international registration system for industrial designs.  An article which appeared on the Lexology site last month stated that these developments imply that ‘Australia has (finally!) agreed to join the Hague Agreement on Industrial Designs’.

This is not true.  I do not see Australia joining the Hague Agreement in the foreseeable future, Australia-UK FTA notwithstanding.  I am less familiar with the political position in New Zealand, but suspect that the situation is not much different in the Land of the Long White Cloud.

Here is a fun fact…  Article 17.1(5) of the Australia-US Free Trade Agreement (AUSFTA), which entered into force on 1 January 2005, states that:

Each Party shall make its best efforts to comply with the provisions of the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs (1999), and the Patent Law Treaty (2000), subject to the enactment of laws necessary to apply those provisions in its territory.

Yet here we are, nearly 17 years later, and Australia is still not a member of the Hague Agreement.  It would seem that the phrase ‘best efforts’ in a trade agreement basically amounts to nothing more than a promise to think about it over an unspecified – and potentially indefinite – time frame.  I suspect, therefore, that an undertaking to make ‘reasonable efforts’ in an agreement in principle is code for ‘they want us to do it; we have no plans to commit to doing it; but we do not want to hold up negotiations by actually saying no.’

And there are very good reasons – namely three separate processes of review and consultation since 2012 – for believing that Australia has no intention of joining the Hague Agreement any time soon.

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Tags: Australia, Designs, International treaties, New Zealand

Innovation Patent System ‘Ends’ not with a Whimper, but a Bang!

The innovation patent has been Australia’s second tier patent right since 2001, but it is now being phased out.  Just over two months have now passed since the final day on which new, original (i.e. not derived from an existing application) innovation patents could be filed.  As of 26 August 2021, the only way to obtain an innovation patent application is by division or conversion from an application that itself has a filing date on or before 25 August 2021.  Innovation patents have a maximum term of eight years from the initial filing date, and thus after 25 August 2029, at the latest, there will be no more innovation patents.  Predictably, the number of innovation patent applications being filed grew significantly during the weeks and months leading up to the final deadline, driven in large part by applications of dubious merit originating in China and India.

So how did filing numbers end up?  And why has it taken two months for me to get around to this analysis?  Well, to answer the second question first, the huge deluge of applications – nearly 2,800 over 25 days in August, over half of which were filed in the final six days – created a backlog that IP Australia is still clearing.  As at the time of writing, there remain around 300 innovation patent applications that are yet to be processed in any way, meaning that details of who filed them, and who the applicants are (and where they are from) remain unavailable.  At this point, however, a clear picture is emerging.  Furthermore, there is some evidence that IP Australia has been prioritising the order in which the remaining applications are being processed according to the workload involved, such that almost all unprocessed applications were filed by Indian applicants.

In the final days, Australian resident applicants filed innovation patent applications in unprecedented numbers, apparently driven primarily by those who had received advice from patent attorneys about the final deadline and the implications of the phase out of the innovation patent.  Indian and Chinese applicants continued to fleece the system for cheap patent certificates, accounting for over half of the applications filed in August.  Filings originating elsewhere in the world increased only modestly, suggesting that genuine demand for innovation patents by foreign applicants remained relatively low until the end.

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Tags: Australia, Innovation patent, Patent filing

DABUS Again Denied in the US and the UK, Part III – Implications for Australia

In both the US and the UK, patent offices have refused to allow applications filed by Dr Stephen Thaler to proceed, on the basis that the named inventor – an ‘AI’ machine dubbed DABUS – is not a human being.  In the first article in this series I looked at the US approach to the role of the inventor in patent law and practice, and at the recent decision of Judge Leonie M Brinkema in the United States District Court for the Eastern District of Virginia (‘EDVA’) upholding the USPTO’s decision.  In the second, I discussed the split decision of the Court of Appeal of England and Wales, which upheld (by a 2-1 majority) the decisions of the UK Intellectual Property Office (UKIPO) and the High Court.

In Australia, the Patent Office also refused to allow a corresponding application by Dr Thaler to proceed.  In contrast to the US and the UK, however, that decision was overturned by Justice Beach in the Federal Court.  The Commissioner of Patents has now appealed that ruling to a Full Bench of the Court (case no. VID496/2021).  In this article, I will be looking at the potential implications of the recent US and UK decision for the conduct and outcome of the appeal in Australia.

It should be said at the outset that the US law is very different to that of Australia, and it is therefore unlikely that anything in Judge Brinkema’s legal reasoning will be influential upon the Full Court.  It has also become apparent through the UK High Court and Court of Appeal decisions that while the UK law shares some similarities with the corresponding provisions of the Australian Patents Act 1990, there are also some significant differences.  Even so, there are aspects of the reasoning of Lord Justice Arnold in the Court of Appeal that the Australian appeals court may consider persuasive, and that could therefore influence the outcome here.

There are two key questions likely to be addressed in the appeal, both of which also arose in the UK, although only the first received substantive attention in the US.  These are:

1. Can DABUS, as an ‘AI’ machine and not a human being, validly be named as an inventor on a patent application?
2. Can Dr Thaler, not being (at his own insistence) the inventor, establish a proper legal basis for entitlement to the grant of patents on inventions said to be generated by DABUS?

I shall look at each of these questions in turn.

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Tags: Artificial intelligence, Australia, DABUS, Inventorship, Patent law, UK, US

DABUS Again Denied in the US and the UK, Part II – the Split Decision in the UK

In the first article in this series I looked at the US approach to the role of the inventor in patent law and practice, and at the recent decision of Judge Leonie M Brinkema in the United States District Court for the Eastern District of Virginia (‘EDVA’) upholding the USPTO’s decision to refuse two patent applications on the basis that the ‘AI’ machine DABUS is not a human being and therefore cannot be an inventor under US law (Stephen Thaler v Andrew Hirshfeld and the US Patent and Trademark Office, Mem. Op. [PDF 998kB]).  In this article, I shall turn my attention to the split decision of the Court of Appeal of England and Wales in Thaler v Comptroller General of Patents Trade Marks And Designs [2021] EWCA Civ 1374, in which parallel efforts to name DABUS as an inventor have also been rejected, with Thaler’s appeal being dismissed despite a weighty dissent by Lord Justice Birss.

The issues in the UK case are somewhat different, and more nuanced, than in the US.  While all three judges on the Court of Appeal agreed that an ‘inventor’ under the UK law must be a human being, the fact that DABUS is a machine was not immediately determinative of the outcome.  An inventor is not required to play any active role in the filing, prosecution, or grant of a patent in the UK, so arguably there remains a question as to whether an application can be permitted to proceed even if a legally valid inventor has not been – or cannot be – named.  In the event, the answer to this question turned on whether or not the applicant (i.e. Dr Thaler) could satisfy statutory requirements to name the inventor, and to indicate how he is entitled to be granted patents on inventions that he did not claim to have devised himself.

Lord Justice Arnold and Lord Justice Birss disagreed on the outcome, with the tie being broken by Lady Justice Elisabeth Laing, agreeing with Arnold LJ that the DABUS applications should be deemed withdrawn. 

Arnold LJ is the preeminent patent law specialist on the Court of Appeal.  He was elevated to the Court of Appeal in 2019, after being appointed to the High Court in 2008, and as Judge in Charge of the Patents Court in April 2013.  In March 2016 he was appointed as an External Member of the Enlarged Board of Appeal of the European Patent Office.  Impressive as this is, however, Birss LJ is no lightweight.  In 2010 he was appointed as a Specialist Circuit Judge sitting in what was then the Patents County Court.  In 2013 he was appointed to the High Court, and in 2019 he filled the place formerly held by Arnold LJ as Judge in Charge of the Patents Court, before being elevated to the Court of Appeal in January 2021.

So this is a case in which the dissenting judgment must be taken seriously, especially with the possibility still open of an appeal to the Supreme Court.  But for now, at least, the balance of the law remains against DABUS in the UK.

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Tags: Artificial intelligence, DABUS, Inventorship, Patent law, UK

DABUS Again Denied in the US and the UK, Part I – the Approach in the US

On 27 August 2021, the Commissioner of Patents lodged an appeal (case no. VID496/2021) against the decision of Justice Beach in the Federal Court of Australia finding that the ‘AI’ machine known as DABUS could be named as sole inventor on an Australian patent application.  Unusually, and presumably in recognition of the media and public interest generated by this case, IP Australia took the step of announcing the filing of the appeal, while emphasising that ‘[t]he appeal is centred on questions of law and the interpretation of the patents legislation as it currently stands’ and that ‘[t]he decision to appeal does not represent a policy position by the Australian Government on whether AI should or could ever be considered an inventor on a patent application.’  The appeal will most likely be heard by a Full Bench of the Federal Court comprising three judges, although in rare cases deemed sufficiently significant a five judge panel may be assigned.  A hearing could take place as early as November this year, but at this stage it seems more likely to be scheduled for early in 2022.

In the meantime, however, parallel test cases initiated by Surrey University Professor Ryan Abbott’s Artificial Inventor Project have been making their way through the US and UK courts.  On 2 September 2021, Judge Leonie M Brinkema in the United States District Court for the Eastern District of Virginia (‘EDVA’) rejected Dr Stephen Thaler’s appeal against the USPTO’s decision to refuse two patent applications on the basis that DABUS is not a human being and therefore cannot be an inventor under US law (Stephen Thaler v Andrew Hirshfeld and the US Patent and Trademark Office, Mem. Op. [PDF 998kB]).  And on 21 September 2021, a majority of the Court of Appeal of England and Wales (Lord Justice Arnold and Lady Justice Elisabeth Laing, Lord Justice Birss dissenting) upheld a decision of the High Court which agreed with the UK Intellectual Property Office (UKIPO) that Thaler’s applications should be deemed withdrawn because of his failure to identify a natural person as inventor (Thaler v Comptroller General of Patents Trade Marks And Designs [2021] EWCA Civ 1374).

These cases are, of course, of interest because they concern the fascinating question of whether non-human machines can be inventors for the purposes of obtaining patent.  But they are also interesting for what they reveal about the differences between the treatment of inventors under US and UK law.  In the US the inventor is central and indispensable – a position that arguably derives ultimately from the Constitutional authority for Congress to make laws ‘promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries’.  In the UK, however – and in the view of Birss LJ in particular – the identity of the inventor is almost irrelevant in the majority of patents applied for, prosecuted and granted.

I will cover these latest developments in the DABUS saga over a series of three articles.  In this first article, I will look at the approach taken to the role of the inventor in the US, how it differs from other jurisdictions, and the recent decision from the EDVA.  The second article will cover the split decision in the UK, and how the differing opinions of eminent patent jurists Arnold LJ and Birss LJ stack up.  Finally, in the third part I will look at where Australia sits, and consider whether either of the US and UK decisions may be of any relevance in the upcoming Full Court appeal.

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Tags: Artificial intelligence, DABUS, Inventorship, Patent law, UK, US

It’s Farewell to Shelston IP, as IPH Executes Another ‘Integration’

The corporate behemoth that is IPH Limited (ASX:IPH) – which at close on 10 September 2021 had a market capitalisation of A$2.00 billion, and was trading at a near-all-time-high of A$9.270 – has, through a series of acquisitions and ‘integrations’, brought about the demise of a number of well-known names in the Australasian IP firmament.  Fisher Adams Kelly, Callinans, Cullens, Watermark and Baldwins are all brands that, until not so long ago, were familiar to anyone with an interest in the IP services market, but which no longer exist.  And on 8 September 2021, IPH announced [PDF, 98kB] that Shelston IP is next in line.  Shelston IP will be integrated with Spruson & Ferguson Australia, with the combined firm operating under the Spruson & Ferguson brand from 1 November 2021, at which time the Shelston IP brand will be retired.  Full systems integration is expected to occur in December 2021.

Ironically, at the time of writing, the ‘About us’ page (Wayback Machine archive, for posterity) on the Shelston IP web site summarises the firm’s history as follows:

Shelston IP has provided excellence in intellectual property for over 160 years. Throughout this time we have developed deep relationships with our clients including with some of the world’s most recognisable companies; relationships that span more than fifty years. Like our clients we never stand still and have innovated, grown and aligned our business for success ensuring we will still be here in another 100 years.

Sadly, this is not to be, and many (me included) will be sad to see the demise of yet another firm with such a long history.  But IPH – unlike Xenith IP Group Limited, the listed entity that Shelston IP itself established and which went on to own Watermark and Griffith Hack before being acquired by IPH – has been uncompromising in its determination to generate greater efficiencies and profitability from its stable of firms.  And while IPH is not without critics, both within and outside the profession, it is no mean feat to build a A$2 billion company.  By my estimation, this now makes IPH large enough for inclusion in the ASX 200 index.  Love it or hate it, according to established financial metrics, IPH is a hugely successful enterprise.

I have taken a look at some of the data on changes in the number of patent attorneys at firms within the IPH group over the past 18 months or so, as well as the group’s patent filing numbers over the past financial year, to try to get a sense of where the IPH businesses may be heading.  I was also fortunate to have the opportunity to speak with IPH CEO, Dr Andrew Blattman, on Friday 10 September 2021.  In what follows, I will present a few of my observations, along with relevant comments from my discussion with Dr Blattman.

Dr Blattman is, of course, the CEO of a listed company, and he has obligations to shareholders and the market that may limit what he can say publicly, and which at the same time constrain him from misleading the market in any way.  Not everyone (including me) will agree with everything he says.  However, I have done my best to accurately report his comments without distorting or misrepresenting his views.  (I have used the blockquote style when reporting Dr Blattman’s comments to clearly differentiate them from my opinions and commentary, although it will be obvious from the context that they are not exact quotes.)  I am not trying to engage in hard-hitting journalism here, just to be a source of information and opinion.  And please keep in mind, if you choose to engage through the comments section at the end, that the High Court has just confirmed that I am legally responsible for any defamatory content you may post!

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Tags: Australia, Patent attorney profession

Did the Pandemic Affect 2020 Australian PCT Filings?

As I reported back in January, there were some indications of weakening patent filings by Australian applicants in 2020.  Domestic applicants filed 10% fewer Australian standard applications than in 2019.  And while provisional filings overall fell by only 2%, those prepared with professional assistance – which involve greater expense, but are also far more likely to provide a sound basis for valuable future patent rights – fell by nearly 5%.  While perhaps not the sole factor, it is logical to assume that the business impact of the COVID-19 pandemic was somewhat influential in this decline.  Of course, Australian application numbers are not the only indicator of filing activity.  Each year, Australian residents file over 1,500 international applications under the Patent Cooperation Treaty (PCT), representing potential future filings not only in Australia, but also in any of the other 152 (as at the time of writing) contracting states.  So it is also interesting to know whether there was a corresponding decline in PCT filings by Australian residents in 2020.

The short answer is, possibly, but not as large as the decline in standard application filings.  While it is almost certain that some PCT applications filed in 2020 have yet to be published, and are therefore not visible, the worst-case decline in international filings by Australian residents is around 6%.  However, once all applications are published and available to be counted, there may be closer to 2% fewer PCT applications filed by Australians in 2020 as compared with 2019.  This would be consistent with a similar decline in the previous year, and with the recent trend in provisional filings, which predate the pandemic.

Furthermore, the pattern of PCT filings across 2020 was much the same as in previous years, with no indication of applicant behaviour being influenced by the progress of the pandemic.

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Tags: Australia, Patent analytics, PCT

Chinese, Indian Applicants Go Mad for Innovation Patents as System Gets Set to Close on a (Dubious) High

Over 1,000 Australian innovation patent applications were filed in July – an all-time record, ahead of 768 applications in June and 692 in May.  Between 2010 and early 2020, there were typically between 100 and 200 innovation patent applications filed each month.  But with the system set to close to new applications from 26 August 2021, filings have surged over the past year, with over 600 applications every month since October 2020 (with the exception of February 2021, when ‘only’ 482 applications were filed).  China remains the most prevalent country of origin for these applications, accounting for nearly 45% of new innovation patent filings in July.  However applications received from India have grown significantly since June 2020, with Indian applicants filing a third of applications in July.  Applications by Australian applicants have increased modestly over the past couple of months, rising to 175 in July.  Applicants from other jurisdictions seem (so far) nonplussed by the imminent demise of the innovation patent system, with no apparent recent surge in filing numbers.

It is well-known that the motivation for Chinese applicants seeking Australian innovation patents – which are subject only to a formalities examination before being granted – is to obtain government incentive payments without the delay and expense associated with substantive examination.  While these subsidy schemes are supposed to be coming to an end, clearly there are still sufficient incentives available for Chinese entities to keep filing for as long as it remains possible to do so.  It is less clear why innovation patents have recently become so popular with Indian applicants, however I have noted that many of the applications appear to be filed in the names of academic or research institutes, and/or individuals or teams including people with academic titles.  I therefore suspect that being an inventor or applicant on a granted patent may have benefits for people pursuing academic or research careers in India.

In any event, it is clear that the vast majority of innovation patent applications are currently being filed by non-resident applicants for reasons that have nothing to do with any genuine desire to obtain or commercialise intellectual property rights in Australia, and few are filed by the Australia small and medium enterprises (SMEs) that the system was intended to benefit.  Surging demand for innovation patents in the lead-up to the system being closed to new applications is overwhelmingly being driven by Chinese and Indian applicants, with Australian residents showing relatively little interest in taking advantage of the final opportunity to file new innovation patent applications.

Of course, genuine users of the patent system – including Australian applicants – are continuing to file standard applications and international (PCT) applications, and these may be converted to innovation patents in the future, or form the basis for divisional innovation patent applications, where the filing date is earlier than 26 August 2021.  While these types of applications have been a minority in the past, they will necessarily become the only sources of ‘new’ innovation patents as the system is phased out over the coming eight years.

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Tags: Australia, Innovation patent, Patent filing

In Becoming the First Country to Recognise Non-Human Inventors, is Australia a Hero of Progress, or a Chump?

As I recently (tentatively) predicted, on Friday 30 July 2021 Justice Beach in the Federal Court of Australia handed down a judgment giving Australia the dubious honour of becoming the first country in the world to legally recognise a non-human as a valid inventor on a patent application: Thaler v Commissioner of Patents [2021] FCA 879.  I would suggest that the remarkable speed with which this unnecessarily lengthy (228 paragraphs) decision was rendered, after being heard on 2 July 2021, may reflect the judge’s enthusiasm for issuing such a ground-breaking ruling.  Unfortunately, I do not share that enthusiasm, and I am confident that there are many others who are equally uncomfortable with the outcome.  My hope is that this includes officials within IP Australia and the Department of Industry, Science, Energy and Resources, and that the decision will be duly appealed to a Full Bench of the court.  It is, in my view, deeply regrettable that the Commissioner of Patents did not put on a stronger defence in the first instance because, even though an appeal was probably inevitable either way, the worldwide publicity that this decision is now generating is not necessarily beneficial for Australia.

The judge summarised his reasoning (at [10]) that:

…in my view an artificial intelligence system can be an inventor for the purposes of the Act. First, an inventor is an agent noun; an agent can be a person or thing that invents. Second, so to hold reflects the reality in terms of many otherwise patentable inventions where it cannot sensibly be said that a human is the inventor. Third, nothing in the Act dictates the contrary conclusion.

The patent system faces many challenges, but right now a need to grant more patents in a wider range of circumstances in not one of them.  We are in the grip of a global pandemic, and very serious questions are being asked about whether patents deliver a net benefit to the people of the world by incentivising the development of new vaccines and treatments, or whether they have the detrimental effect of denying affordable access to vital care and protection in poor and developing nations.  While I am firmly in the former camp, it only becomes harder to defend the patent system when opponents see the law expanding access to allow inventions generated by machines – potentially including those owned and controlled by giant corporations.

The standing and reputation of Australia and our patent laws are also at risk.  The country is already the target of criticism – rightly or wrongly – for declining to support calls for a waiver of IP provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS).  The Federal Court’s decision in Thaler is receiving global attention, and not all of it is positive.  One tweet (in Spanish) compares Australia’s patent-friendly approach unfavourably with the infamous incident of an early innovation patent being granted for a ‘circular transportation facilitation device’, a.k.a. the wheel.

Just because patents are (or, at least, can be) good, it does not follow that more patents, generated in more ways, by more entities, must be better.  Australia should not think that we will necessarily come across as a socially and technologically progressive nation by ‘leading the way’ on allowing patents to be granted for inventions generated by non-humans.  On the contrary, we risk being left out on our own and looking like chumps.  The United States will not follow our lead – there are Constitutional, statutory and procedural barriers to permitting US patent applications naming non-human inventors.  The European Patent Office will not follow in the foreseeable future – it has already established its position via an academic study and discussions with member states of the European Patent Convention.  The UK has so far rejected any expansion of inventorship to non-humans.  And, contrary to recent reports (and the claims of the Artificial Inventor Project’s Ryan Abbott), the recent grant of a patent in South Africa naming DABUS as inventor indicates nothing about that country’s law or position on the issue.  As South African patent attorney Pieter Visagie has explained, the application effectively avoided any scrutiny of the legitimacy of the inventor by virtue of being filed via the international (PCT) system.

So what does Australia gain by being the first – and possibly only – country in the world to legally recognise non-human inventors?  Nothing, as far as I can see, other than a whole lot of unneeded publicity and global scrutiny of our patent laws.  If we are lucky, we will not receive many serious patent applications for inventions generated by machine inventors, and little practical harm will be done.  At worst, however, we could become the only country in the world to grant patents on such inventions, mostly filed by foreign applicants, creating exclusive rights that are enforceable only in Australia to the relative detriment of Australian innovators and consumers.

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Tags: Artificial intelligence, Australia, DABUS, Inventorship, Patent law

The Leading Firms for Australian Patent Filings in Financial Year 2021

It is common to summarise patent filing numbers over calendar years – back in January I reported on various filing statistics for 2020, and IP Australia did likewise in April.  For most Australian businesses, however – including patent attorney firms – the more important reporting period is the financial year ending on the 30^th of June.  It is therefore interesting to look at patent filing numbers over the 12 month period commencing at the beginning of July, overall and for individual firms.  In this article I will report on filing performance in the 2021 financial year (‘FY21’), which ran from 1 July 2020 to 30 June 2021, as compared with the previous (and, to some extent, earlier) financial year.

Surprisingly, despite the global pandemic, and a decline in filings over the 2020 calendar year, the number of Australian standard patent applications filed in FY21 grew by 3.6% over FY20, largely due to a very strong first six months of 2021.  Innovation patent applications surged ridiculously, to more than three times their numbers in FY20, for reasons that have nothing to do with either the pandemic, or a genuine interest by most applicants in obtaining enforceable rights.  Unfortunately for the health of the Australian innovation ecosystem (and the patent attorneys that support it), filings of new provisional applications declined by nearly 5% in FY21.

The leading firms for patent filings in FY21 were mostly the well-known names you would expect to see, although a couple of smaller firms have slipped into the top 20 on the strength of large numbers of innovation patent filings, primarily made on behalf of Chinese applicants.  The benefit of the growth in standard applications has not been shared equally, with a couple of big name firms experiencing a decline in new filings, while others did much better than the overall 3.6% growth rate.

I have also looked at the numbers of some key prosecution events – namely new examination requests, responses to examination reports, and acceptances – over the past few financial years.  These indicate that the overall prosecution workload increased slightly in FY21, ensuring that patent attorneys (and examiners) were kept busy with the examination of earlier-filed applications, despite the ongoing pandemic.  Strong numbers of examination requests filed in FY21 suggest that this work will continue to flow into, and beyond, the current financial year.

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Tags: Australia, Patent analytics, Patent attorney profession

Could Australia Become the First Country to Recognise Non-Human Inventors?

On 2 July 2021, a hearing took place at the Federal Court of Australia in Melbourne, before Justice Jonathan Beach, in the matter of Stephen Thaler v Commissioner of Patents.  This case concerns the question of whether a patent may be granted for an invention that was devised by a machine, rather than by a human inventor.  Back in February, I reported on the refusal by the Australian Patent Office to accept as valid an Australian patent application naming an ‘artificial intelligence’ going by the name DABUS (‘Device for the Autonomous Bootstrapping of Unified Sentience’) as inventor.  And in March I reported that an application had been filed in the Federal Court for review of the Patent Office decision.

Regular readers will know my position on this issue – I do not consider it appropriate at this time (or, potentially, ever) to grant patents for inventions devised entirely by automated means, such that there is no human inventor.  I have written an article targeted to a more general audience, which has been published by InnovationAus, providing an overview of the Australian case, and broadly discussing my concerns.  Here I will be going into more detail of the arguments presented at the recent hearing, and why I think it would be very unfortunate if Justice Beach were to decide that this is a suitable case for judicial development of the law to embrace machine inventors, as he is being encouraged to do by Thaler.

I was able to attend the hearing virtually, since it was being held via web conference.  Thaler’s team, led by experienced and highly-regarded barrister David Shavin QC, appeared in person in the Melbourne courtroom with Justice Beach, while the Commissioner of Patents was represented by Hamish Bevan, appearing via video from Sydney (subject to restrictions, due to an ongoing COVID outbreak).  Although I disagree with the proposition, I thought that Mr Shavin presented a persuasive argument that the relevant provisions of the Australian Patents Act 1990 can, and should, be interpreted to encompass non-human inventors, and that Mr Bevan perhaps did not do enough to counter this argument.  I formed the impression that Justice Beach just might be minded to ‘develop’ the Australian law to permit patent applications having no human inventor, in part because he was not presented with any particularly good reasons not to do so.

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Tags: Artificial intelligence, Australia, DABUS, Inventorship, Patent law

Who Are Australia’s Leading Global Patent Applicants?

This is a guest contribution from Mike Lloyd of Patent-Insights.  Mike has previously contributed articles on the impact, from an Australian perspective, of COVID-19 on international patent, trade mark, and registered designs filings, and on what patent data can tell us about the Australian government’s plan for local manufacturing?  Further details about the author can be found at the end of the article.

There is an increasing realisation that a successful economy is also a smart economy, and a smart economy is strengthened by having companies and organisations innovating and commercialising their inventions.

Luckily Australia is full of companies and organisations doing exactly this.  But who are these companies, and in what areas are they innovating in?

To answer this question with the most recent yet reliable data, I have looked at patent global publication data for Australian companies filed in the 12 months prior to 31 March 2021.  I have chosen this period as it is the latest quarter for which reliable data is available. By coincidence this is also the 12 month period after COVID-19 made its impact known, but maybe it is too soon to fully understand the effect of COVID in this area.

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How Effective is Australia’s 12 Month Acceptance Deadline in Limiting Examination Delays?

One of the objectives of the Raising the Bar IP law reforms – most of which commenced on 15 April 2013 – was to reduce delays in the resolution of patent (and trade mark) applications.  The perceived problem with such delays was not that applicants were unhappy with the speed of processing of their applications (in fact, most choose to defer examination and acceptance of their patent applications), but rather that delays create uncertainty about whether a patent will be granted, and what scope the granted claims might have.  As noted in the Explanatory Memorandum to the Raising the Bar Bill, ‘[d]elay may suit the party, but it is not in the interests of the public, or the party’s competitors.’

There were four main features of the reforms that were expected to reduce delays and uncertainty:

1. reduction, from six months to two months, of the period within which an applicant is required to request examination, once directed to do so by the patent office;
2. reduction of the maximum period available for an applicant to obtain acceptance of a patent application, following issue of an initial examination report, from 21 months down to 12 months;
3. ‘tightening’ of the rules around when divisional applications can be validly filed, to reduce opportunities for what the Explanatory Memorandum describes as ‘abusive uses’; and
4. refinement of opposition proceedings, mostly in the form of more stringent criteria for obtaining extensions of time.

The reforms to opposition proceedings had an almost immediate impact, since they applied to all new oppositions filed on or after 15 April 2013, as well as (to a more limited degree) oppositions that were already in progress.  However, since over 99.5% of all accepted applications are not opposed, the reduction in opposition duration is irrelevant to the overwhelming majority of cases. 

It has taken longer to reach the point at which there is sufficient data to evaluate the effect of the change to the examination period, since this only applied to applications for which a request for examination was filed on or after 15 April 2013.  Many of these applications remained in the system for years.  Indeed, the last patent to be granted under the pre-Raising the Bar regime – without being additionally delayed by opposition proceedings – was no. 2010311063, which was derived from a PCT application that entered the national phase in Australia on 17 May 2012.  Examination was requested on 9 April 2013, and a first report issued on 7 August 2018 (after the application inadvertently lapsed and was restored).  The application was eventually accepted on 17 February 2020, and the patent granted on 18 June 2020.

I have now analysed nearly two decades worth of Australian patent examination data, spanning the period before and after commencement of the Raising the Bar reforms.  Further details and charts are below, but in summary I have found that:

1. reduction of the maximum examination period by nine months (from 21 to 12 months) has resulted in a drop of only a little over three months in the median period between initial examination and acceptance of successful applications;
2. the reforms have not, however, resulted in any lasting improvement in the pendency of the most ‘stubborn’ applications, which are only accepted following one or more divisional applications being filed for the purposes of continuing examination (for want of any better term, I call these ‘continuation divisionals’);
3. as a result, the ‘top’ 2% of cases are still pending for 900 days or more between an initial examination report being issued and an application finally being accepted;
4. perversely, following an initial temporary drop in the number of continuation divisionals, the reforms actually seem to have resulted in an increase in the proportion of divisional applications that are filed for the primary purpose of continuing examination;
5. on the other hand, however, the major use (i.e. over 60%) of divisional applications remains their primary purpose of pursuing alternative claims following acceptance of claims in a parent application.

Overall, reducing the examination period has had a relatively minimal effect on total pendency of patent applications – a reduction in the time prior to examination, i.e. between filing and a first examination report being issued, has been much more significant.  However, it appears to have had the unintended consequence of increasing the use of divisional applications to continue examination.

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Tags: Australia, Examination, Statistics

Sequenom Down-Under – Appeals Court Finds Non-Invasive Foetal DNA Test Patent-Eligible in Australia

In 18 June 2021, a Full bench of the Federal Court of Australia (Middleton, Nicholas, and Burley JJ) unanimously upheld a decision of a single judge of the court (Beach J), finding that a method of detecting cell-free foetal DNA (cffDNA) in maternal blood serum comprises patent-eligible subject matter (i.e. a ‘manner of manufacture’) under Australian law: Ariosa Diagnostics, Inc v Sequenom, Inc [2021] FCAFC 101.  The patent at issue is Australian patent no. 727,919, covering an invention originally developed by Oxford University researchers, and subsequently transferred to Sequenom Inc.  The patent expired in March 2018, however a live dispute remains because Ariosa Diagnostics licensed its ‘Harmony Test’ – which Sequenom says (and the Full Court has agreed) infringes the patent – for use in Australia since at least September 2015.

To my mind, the result in this case is neither particularly surprising nor contentious.  The patent claims are directed to a method of detecting cffDNA.  While the method is underpinned by the naturally occurring fact – not known until its discovery by the inventors prior to March 1997 – that cffDNA is present in maternal blood serum, a useful method of detecting a previously unknown natural phenomenon, having a practical application, has long been considered patentable.  Ariosa’s arguments that Sequenom’s claims were in substance directed to the ‘mere’ discovery itself, resulted only in the production of ‘information’, and therefore unpatentable, were unsuccessful.  And while the broad scope of the main claim in this case might raise other issues, such as obviousness or sufficiency of description, these matters have also been addressed at first instance and/or on appeal, and are separate from the question of subject matter eligibility. 

Nonetheless, this case will generate some interest, if only because the result in Australia is opposed to the outcome of equivalent litigation between Sequenom and Ariosa involving a corresponding patent in the United States.  In that case, a narrower claim than in Australia was found to be directed to an unpatentable natural phenomenon.  The result was controversial, not least because a number of judges on the US Court of Appeals for the Federal Circuit (CAFC) – including Judge Linn on the original panel (Ariosa Diagnostics, Inc.v. Sequenom, Inc. (Fed. Cir. 2015)) and Judges Lourie and Dyk in a decision refusing en banc rehearing – indicated that they felt bound by the Supreme Court precedents, but did not agree with the outcome.  There was therefore great disappointment when the US Supreme Court declined to hear an appeal.

The outcome of the Australian appeal is not all bad news for Ariosa, however, with the finding of the primary judge on infringement being partially reversed.  In particular, there were periods during which the Harmony Test was not carried out in Australia, but instead samples were sent to the US for testing by Ariosa, which the primary judge found also to be infringing actions.  The Full Court has disagreed, finding that ‘importing’ the information resulting from the tests into Australia did not comprise a relevant ‘exploitation’ of the claimed method, as it might have done were the product of the method a physical article.

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Tags: Australia, Biotechnology, Diagnostic methods, Patentable subject matter

Is Corporatision Creating a ‘Brain Drain’ in the Australasian Patent Attorney Profession, or is it Just Slick Marketing?

An article appeared on the Lexology legal news service in the past week that riled me a little – not least because it mentions my name and (in my view) misrepresents something that I wrote a few months ago.  For those who may be unfamiliar with Lexology, it is a service that aggregates content from legal and attorney firms, and other service providers, creating a searchable archive and delivering tailored email bulletins to subscribers.  It is free to subscribe and read, but the firms that provide all the content pay handsomely for the privilege of being aggregated and distributed.  In other words, it is not so much a ‘news’ service for readers as it is a marketing service for the contributing firms.  Most of the content is originally published on the firms’ web sites, from which it is automatically picked up (‘ingested’) by Lexology. 

While many of the articles appearing on the Lexology site are useful and informative – e.g. reports of the latest legal developments in various jurisdictions served by the contributing firms – some are pure marketing.  The piece that has so irked me falls, in my opinion, into the latter category.

The article in question is entitled ‘The brain drain: why are senior patent attorneys leaving?’  Authorship is attributed to James & Wells partners Ceri Wells and Adam Luxton.  Wells is one of the firm’s founders, while Luxton recently joined the firm having previously worked for Spruson & Ferguson – a firm owned by listed holding company IPH Limited (ASX:IPH).  Lexology picked the article up from James & Wells’ website, although that was not its first outing – it was originally published as a sponsored article in Australasian Lawyer [PDF 1.04MB]. 

Never let it be said, then, that James & Wells has not extracted maximum value from the piece, which bears all the hallmarks of having been written not by Wells and Luxton themselves, but rather by a marketing professional.  It takes the classic public relations form of ostensibly objective reporting, interspersed with quoted and paraphrased comments from Wells and Luxton in support of the article’s main theses, which are that:

1. there has been an ‘exodus of senior patent attorneys from formerly private firms’ because of ‘corporatisation’, and the acquisition and merger strategies of the listed holding companies IPH Limited and QANTM IP Limited (ASX:QIP);
2. as a result, those firms are losing the benefit of these senior practitioners’ experience, and they are ‘being replaced by younger people with a lot less experience’ who are ‘missing out on the mentorship they need at that point in their career’;
3. this may lead to junior attorneys feeling ‘overworked and stressed’;
4. practitioners in ‘corporatised’ firms may lack the autonomy and discretion to keep clients ‘at the forefront’ and to build strong relationships ‘based on trust and respect’; and
5. established firms now owned within corporate groups are no longer able to guarantee clients that ‘whoever you engaged in that organisation would be able to deliver’.

Overall, the tenor of the article is simply that ‘corporatised firms = bad’ whereas ‘traditional privately held, partnership type models (like James & Wells) = good’.  Perhaps it feels plausible that this might be so, and doubtless there are people around who will attest, anecdotally, to some experience that supports the argument.

I am just not persuaded that it is true, or that having firms going around claiming that it is are doing the Australasian profession any favours.

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Tags: Australia, New Zealand, Patent attorney profession

‘Patent Box’ Update – the Devil is in the Details When it Comes to Dates

I previously reported on the Australian government’s budget announcement that it will be introducing a so-called ‘patent box’ tax incentive for medical and biotech (and, possibly, clean energy) innovations.  Implementation details of the scheme are yet to be worked out, and the government is promising to consult closely with industry on the design of the patent box.  However, while the final form of the scheme – which will not come into effect until 1 July 2022 – may not be known for many months, there is already at least one critical issue that prospective users of the system may need to consider.

The government’s fact sheet on ‘tax incentives to support the recovery’ states that ‘…granted patents, which were applied for after the Budget announcement, will be eligible’.  There is, as yet, no clear indication of what the government means by ‘applied for’, however in its ‘What’s New’ email (to which you can subscribe here), sent on 14 May 2021, IP Australia states that ‘[t]o be eligible, the patent must have a priority date after 11 May 2021…’.  Being unable to find this detail in the budget papers, I sent out a tweet asking whether anybody else had seen it, and tagging @IPAustralia, which responded:

Hi Mark, thanks for your comment. This is our understanding of the announcement. Further details on the patent box will be released in the coming weeks by Treasury as part of the public consultation.

— IP Australia (@IPAustralia) May 14, 2021

There is a big difference between ‘priority date’ and ‘filing date’, which hopefully will be open for discussion during the public consultation.  If the critical date is the priority date, then this means that Australian medical and biotech innovators who have already filed a priority application (e.g. a provisional application) prior to the budget announcement would not be eligible for the patent box tax incentive if they subsequently file a complete application claiming the benefit of the provisional filing date.  On the other hand, if they were now to file the same complete application in Australia without a priority claim, then they would be eligible for the scheme upon grant of any resulting patent.

The risk of dropping a valid claim to priority, of course, is there there may be intervening prior art that could invalidate or limit the scope of the claims, which has been made public after the priority date, but before the subsequent complete filing date.  To minimise this risk, the complete application should be filed as soon as possible. 

Fortunately, the Australian grace period protects an applicant against their own disclosures during the 12 months prior to the complete filing date.  Furthermore, the discovery of intervening prior art would not be fatal, at least up until grant of the patent (see regulation 10.2B(7) of the Patents Regulations 1991), since the patent request could be amended to include the priority claim, with the consequence that the patent box incentive would then be unavailable.

The choice to file in Australia without claiming priority would not affect the applicant’s right to claim priority in other jurisdiction, either through direct applications or via the Patent Cooperation Treaty (PCT).

But, frankly, this seems perverse.  To my mind, the logical choice for the critical date is the filing date of the complete patent application, which commences the patent term of up to 20 years during which the patent box tax incentive could be claimed.  Basing eligibility on the priority date will simply encourage strategies, such as I have outlined above, to engineer eligibility.  This does not serve anybody’s interests.  The government will not make significant savings on the operation of the patent box scheme, while applicants will feel compelled to adapt their patent filing strategies simply to comply with an arbitrary choice of eligibility criteria.

Hopefully, through the consultation process, common sense will prevail.  In the meantime, however, medical and biotech innovators with pending priority applications should probably seek advice from their patent attorneys.

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Tags: Australia, Innovation policy, Public policy, Tax incentives

IP Australia Rises to the Challenge of Surging Demand for Innovation Patents

Last month, IP Australia issued a notification informing applicants that, due to a high volume of new filings, they may experience delays in having innovation patents granted.  Innovation patents are issued following a formalities examination only – substantive examination for novelty, innovative step, and other requirements, occurs after grant, and only upon request.  As a result the delay between filing and grant is typically relatively short, and has historically been less than four weeks.  However, with a phasing-out of the innovation patent system now looming, and Chinese applicants in particular using the system to claim government subsidies on foreign granted patents, innovation patent applications are currently being filed at over four times their ‘normal’ historical rates.  This obviously means a lot of extra work for IP Australia to process all of these additional applications.

The good news is that after letting things get a little out-of-hand over summer (when, presumably, many staff were on annual leave), IP Australia now appears to be bringing the situation back under control.  Average pendency (i.e. the delay between filing and grant) peaked at 68 days for innovation patents granted in March, before falling to 52 days in April.  In both March and April, the number of patents granted exceeded the number of new applications filed, and the number of pending applications fell from a peak of 1229 in February to 879 at the end of April.  While this is still much higher than historical levels of about 100-150 innovation patent applications pending at any given time, it is clear that IP Australia has allocated additional resources, and has ramped-up handling of new innovation patent applications to the point where it is now once again processing them faster than they are being filed. 

Up until March, it looked as though delays could continue to grow.  It now seems likely that average pendency will be back below a month by July.  This is, of course, barring any further surge in demand that outstrips processing capacity – which could certainly happen, given that the final date for filing new innovation patent applications before the phase-out begins is 25 August 2021, and a last-minute rush might be expected.  But, for now at least, it looks like IP Australia has the situation in hand.

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Tags: Australia, Innovation patent, Patent analytics, Patent Office

Australian Government Announces a (Sort of) ‘Patent Box’ Tax Incentive

This week, the Australian government handed down its annual budget.  At the risk of sounding overly cynical, I am always sceptical about how many of the policy measures announced in the budget will actually come to fruition, given that their funding is often dependent on hazy forecasts of future economic performance, and their implementation may span many years during which future budgets – and potentially new governments – may come and go, bringing their own priorities and revised forecasts.  But even I cannot help sitting up and taking notice when patents get a mention, with all of the ensuing media coverage that brings during the budget frenzy!

So the ‘big news’ is that the government is going to introduce a ‘patent box’ tax incentive scheme in Australia… sort of.  If you are not already familiar with the concept, a ‘patent box’ – the name refers either to an actual box on a form, or to a notional box into which a company allocates a proportion of its income – is a tax incentive scheme under which income that can be directly attributed to the commercialisation of patented technology (as distinct from other attributes, such as branding, know-how, or manufacturing capability) is taxed at a reduced rate.  Other income continues to be taxed at the standard corporate rate.

The Australian patent box scheme is actually going to be somewhat limited, initially applying only to medical and biotech patents, with the possibility that it might also be made available to the clean energy sector.  The incentive will only be available on income generated from patents applied for after the budget announcement (i.e. pre-existing patents and application will not be eligible).  And it will not come into effect until 1 July 2022.  The tax rate on eligible income will be 17%, compared with the normal corporate tax rate of 30% for large companies, or 25% for small and medium enterprises (SMEs).  This discounted rate is higher than other countries that operate a patent box system, e.g. France 15%, Spain 12%, UK 10%, Belgium 6.8%, Luxembourg 5.84%, and Netherlands 5%.  Even taking into account that a number of these countries have a lower corporate tax rate than Australia, equal or larger discounts are also available elsewhere, e.g., in France (where the corporate tax rate is 32.02%), Spain (25%), Belgium (25%), and Luxembourg (24.94%).

So – true to form – the Australian patent box will be a very ‘middle-of-the-road’ affair, with limited eligibility, and relatively modest tax discounts, especially for SMEs that are already subject to a lower tax rate than larger corporates.  As it so often does, the government has decided to limit its exposure by picking winners – this time, medical and biotechnology industries – leaving other sectors (such as IT, where Australian companies such as Atlassian, Canva, Afterpay, Judo Bank, Zip Co, and AirWallex have been punching well above their weight) to fend for themselves.  Or, more likely, to move their R&D activities overseas, into more favourable jurisdictions.

On the other hand, the announcement is something of a turnaround for this government, considering that criticism among G20 finance ministers in 2014, and a 2015 review commissioned by the Office of the Chief Economist in the Department of Industry delivered negative conclusions that seemed to have killed off any prospect a patent box scheme being introduced in Australia.

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Tags: Australia, Innovation policy, Public policy, Tax incentives

March Madness? A Patent Filing Boom Month Defies Recent Trend

I had just finished writing, yesterday, about the latest annual Australian IP Report, and the continuing decline in patent filings in Australia, when I decided to take a look at the numbers for March 2021.  To my immense surprise, March was a boom month for Australian patent applications!  The total number of filings, across all application types (provisional, standard, and innovation patent applications) for the month was 3,906.  To find a month in which more applications were filed in Australia it is necessary to go back eight years, to April 2013, when 7,062 applications were filed.  And that only happened because of the large number of applicants bringing filings forward by up to 18 months in anticipation of the Raising the Bar law reforms, which raised the threshold for the grant of a valid patent and commenced on 15 April 2014.  The only other month that comes close is September 2015, when 3,827 applications were filed.

Of course, part of the reason for the high filing numbers in March is the current surge in innovation patent filings, which are presently running at about four times their ‘natural’ level (based on historical behaviour).  In large part, this is driven by Chinese applicants collecting granted patents in order to claim government subsidies, but also by other users in anticipation of the impending phase-out of the innovation patent system from 26 August 2021.

But innovation patents are not the whole story.  As data presented below demonstrates, there were more standard applications filed in March 2021 than in any month since September 2015.  Even in 2018 – which was a peak year for standard applications – there was no individual month in which more applications were filed.

Nor can the boom month be attributed to Chinese applicants – or any other particular country of origin.  Applicants from seven out of the top 10 countries of origin filed more applications in March 2021 than during the same period last year.

So what is going on here?  I have no idea!  This could be a one-off.  It could be some sort of ‘bounce-back’ from the COVID-19 pandemic (which is, let us not forget, far from over globally).  Or maybe there is something else going on here.  Time – and perhaps a more detailed analysis – will hopefully tell.

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Tags: Australia, COVID-19, Patent analytics

In 2021 Annual Report, IP Australia Makes the Best of Declining Patent Filings

Today (29 April 2021) IP Australia released the Australian Intellectual Property Report 2021 (‘IP Report’), its annual round-up of filing statistics and other facts and figures from the previous year.  As always, my interest is primarily in the Patents chapter of the IP Report and, this year, much of the data presented in that chapter will not be news to readers of this blog.  Notwithstanding small variations – due to the volatile nature of ‘live’ patent records – the IP Report substantially confirms the figures that I published back in January.  The total number of standard patent applications filed in Australia fell by 2%, mostly due to an 8% decline in ‘direct’ filings, while the number of applications filed via the PCT (Patent Cooperation Treaty, a.k.a. international application) route rose by 1%.  Innovation patent applications increased massively – by a factor of around two and a half – driven largely by Chinese demand for granted patent certificates.  Unfortunately for the state of Australian innovation, provisional application numbers continued on a downward trend, with the IP Report noting that they have fallen by an average of 1% per annum over the last 10 years.

The leading Australian resident applicants for standard patents in 2020 were casino gaming machine developer Aristocrat Technologies, national research institute Commonwealth Scientific and Industrial Research Organisation (CSIRO), innovative electrical appliance maker Breville, the University of Sydney, and Monash University.  The top foreign applicant, for the second year running, was Chinese telecommunications device manufacturer OPPO, followed by LG Electronics, Huawei, Apple, and Qualcomm.  The IP Report also confirms that the top countries of origin for Australian standard patent applications were the US, Australia, China, Japan, Germany, and the UK, and that Chinese applicants came within a few dozen applications of knocking Australian residents off second position on the ladder.

As I have pointed out on numerous occasions, the trends in Australian patent filings have not been good for some time.  Not only are Australian residents making less use of the patent system – standard patent filings by domestic applicants in 2020 were down by 10% on 2019 numbers – but Australia is apparently becoming a less-favoured filing destination for many foreign applicants.  The IP Report tries valiantly to be upbeat, noting that standard patent applications have shown an overall upward trend over the past decade, with 2020 filings 15% higher than in 2011, and that despite the decline (for the second year running) in 2020, application numbers remained ‘higher than the 10-year annual average’.

It is important, however, to view that 15% growth figure in context.  Over the decade from 2010 to 2019 (the most recent year for which data is available from the WIPO Statistics Data Center) filings in the US grew by 27%, in South Korea by 29%, at the European Patent Office by 20%, and in China by an unprecedented 260%.  Of the major patent offices, only Japan experienced a decline in filings – and this is hardly a standard against which Australia should be measuring itself.  It is an easy observation that much of the recent growth in filings has been driven out of China, and that this may not be sustainable, however that is hardly positive news for Australia.  Without significant growth in filings from China, standard patent applications in Australia would have fallen by over 3% in 2020.

The next few years are unlikely to bring a turnaround.  As the IP Report points out, a relatively small decline in filings in 2020 ‘occurred despite the considerable economic impact of the COVID-19 pandemic’ but, because patent filings tend to be a lagging indicator, ‘the effects of the economic crisis in 2020 may not be fully observed until beyond 2021’.

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Tags: Australia, Patent analytics, Patent Office

RePipe Appeals, Following Failed Attempts to Amend

Some time ago – indeed, BC (i.e. before COVID) – I reported on a decision of Justice McKerracher in the case of Repipe Pty Ltd v Commissioner of Patents [2019] FCA 1956 (RePipe No 1).  RePipe is a plumbing business based in Western Australia that has developed a risk management software system called rerisk^®, which is available as a service to other businesses that want to improve their workplace health and safety (WHS) processes.  The system comprises a server-based backend, and an app that can be installed on portable devices (i.e. smartphones or tablets) carried by workers on site.  In use, information and documentation pertinent to WHS compliance processes for particular jobs carried out by workers at specific locations are downloaded to the portable devices. The system provides prompts and checklists to ensure that workers comply with relevant procedures, generates alerts when problems or risks are identified, and enables information provided by the workers to be uploaded back to the server and/or communicated to other workers on site.

RePipe has filed patent applications in a number of jurisdictions.  In Australia, two innovation patents covering the rerisk^® system were examined and found liable to be revoked by the Patent Office, on the basis that their claims were not directed to patent-eligible subject matter, i.e. a ‘manner of manufacture’ under the Australian law.  RePipe appealed to the Federal Court, which upheld the Patent Office decisions in RePipe No 1, issued on 22 November 2019.  The court found that the claimed inventions were, in substance, merely unpatentable business methods.  The claims were not saved by the fact that the inventions were necessarily implemented in software.  As Justice McKerracher explained (RePipe No 1 at [93]-[94]):

No specific application software has been claimed or even identified in any claim of the Patents. No computing programming logic or code is disclosed anywhere in the Patents. The substance of both inventions is a mere scheme that can be implemented using some unidentified software application to cause a server computer and smartphone to perform the steps identified in the claim. To implement the scheme, a reader must use his/her own skill and knowledge to write an appropriate software application. No such application is disclosed in the Patents.

…The language used by patent attorneys when drafting and amending claims cannot convert what is, in substance, an unpatentable business method or scheme into a patentable invention by merely asserting that the invention is in the field of computer technology or by using words in the claim or specification that refer to computer technology …. As a matter of substance, there is no meaningful technical content in the description in the body of the claims or specification.

This was not, however, the end of the story.  Following some further ado (discussed below), RePipe has filed an application for leave to appeal to a Full Bench of the Federal Court of Australia, on 2 March 2021.

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Tags: Amendments, Appeal, Australia, Computer programs, Patent Office, Patentable subject matter

‘AI Inventor’ Update – DABUS Decision Goes to Federal Court

In a fairly predictable development, Stephen Thaler has asked the Federal Court of Australia to review the Patent Office’s finding in February that a patent application cannot be validly filed in this country naming a machine as inventor.  The ‘Application for Judicial Review’ was filed on 9 March 2021 in the Victorian Division of the court, and has been assigned number VID108/2021.  Having been represented by Davies Collison Cave (DCC) in the patent application filed at the Patent Office, Thaler is represented in the Federal Court proceeding by Allens.  The reasons for this change are unclear – DCC incorporates a legal practice as well as its patent and trade marks attorney practice, and could presumably have handled the Federal Court application.  However, it is not unusual for applicants to switch representatives when moving from the Patent Office to the courts, either from necessity, or due to a perception that different firms have particular strengths in different areas of practice.

While the case may be casually characterised as an ‘appeal’ against the Patent Office decision, it is not technically an appeal under the Patents Act 1990.  The Act, and the Patents Regulations 1991, expressly set out the various decisions that are appealable to the Federal Court, and the lapsing of an application for failing to identify a valid inventor is not such a decision.  Instead, the application for review is made under the Administrative Decisions (Judicial Review) Act 1977 (ADJR Act), which provides more generally for review of administrative decisions by the Federal Court.

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Tags: Artificial intelligence, Australia, DABUS, Inventorship, Patent law

Free, Streamlined Extensions of Time to End at IP Australia, but COVID Impact Can Still be Considered Under ‘Normal’ Procedures

Since April last year, IP Australia has provided a streamlined process under which most deadlines associated with Australian patent, trade marks, and design rights – including evidence deadlines in opposition matters – could be extended by up to three months, at no charge, if the extension is required ‘due to the disruptive effects of the COVID-19 pandemic’.  That program ends on 31 March 2021.  From 1 April 2021, extensions of time will still be available for those impacted by the COVID-19 outbreak, but will be considered on a case-by-case basis.

Under the streamlined program, a party seeking an extension of time has been required only to tick a box in order to make a declaration that the impacts of COVID-19 had prevented a relevant act from being carried out within time.  This is much simpler (and cheaper) than the usual process, under which detailed evidence is required – typically in the form of a formal declaration or affidavit, along with any relevant accompanying exhibits – demonstrating exactly how events and/or circumstances have prevented the deadline from being met.  Additionally, official fees have been waived under the streamlined program.  These are typically based on the number of months of additional time requested, and can be quite substantial, e.g. up to A$1500 for a three-month extension of time to file evidence in a patent opposition.

While a blanket waiver of fees is unusual, it is clearly within the power of IP Australia to choose not to levy a fee for any service that it provides.  However, it is not within the agency’s power to waive the requirements of the Patents Act 1990 or the Patents Regulations 1991 (or corresponding legislation and regulations relating to other IP rights) with regard to the grounds upon which extensions of time may be legitimately granted.  In principle, therefore, streamlined extensions have generally been considered under existing provisions allowing for deadlines to be extended where ‘circumstances beyond the control’ of the responsible person(s) have prevented an action from being taken within the required time.  Ticking of the ‘COVID-19 box’ has thus been treated as prima facie evidence that the pandemic was, indeed, the cause of a failure to meet a deadline, with IP Australia warning that a false declaration could put the validity of the applicant’s IP rights at risk.

The initiative to make obtaining COVID-19 extensions simpler and cheaper was further complicated by the fact that in proceedings involving other parties, IP Australia is usually obliged to give those other parties an opportunity to comment on, and/or object to, the grant of an extension of time.  This obligation could not be suspended, and there were at least two patent matters in which objections were lodged.

With practices and procedures for requesting extensions of time returning to normal (or, at least, ‘COVID-normal’), it is to be expected that any party requiring an extension as a result of the impact of COVID-19 will bear a greater onus to demonstrate exactly why an extension is justified.

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Tags: Australia, COVID-19, Extensions of time, Patent Office