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.

Effect of Tightening Acceptance Deadline on Examination Delay

For any readers unfamiliar with the Australian patent examination process, here is a quick primer. (Everyone else can skip this paragraph.)  Examination in Australia does not happen automatically – the applicant must file a separate request for examination, and pay a fee.  Following the request, and after a delay that depends upon the backlog in the Patent Office and/or whether or not the applicant also requests expedited examination, an examiner will examine the application and issue a first action.  This is usually a first examination report, however it is possible that no objections or other barriers to grant of a patent are identified, in which case the application will be accepted for grant immediately.  Following an examination report (if any) the applicant may respond, and further examination is then conducted.  This ‘back-and-forth’ between applicant and examiner can be repeated multiple times, however there is a fixed deadline for acceptance, and if the time runs out then the application lapses. 

Prior to the Raising the Bar reforms, the acceptance deadline was 21 months after the date of the first examination report, although there was an incentive to finalise the application within 12 months, in the form of monthly response fees payable during the final nine months.  For any application in which the examination request has been filed on or after 15 April 2013 the acceptance deadline is reduced to a hard limit of 12 months after the date of the first examination report.

You would probably think that tightening the acceptance deadline in this way would reduce the period for which patent applications are under examination.  And you would, in a typical case, be right.  The chart below summarises statistics on the period between the first report and acceptance of all those applications that have ultimately gone on to be accepted on an annual basis, based upon the year in which the examination request was filed.  The ‘years’ in this chart (and all others below) have been offset to align with commencement of the Raising the Bar reforms, i.e. the year ‘2012’ is the period between 15 April 2012 and 14 April 2013 (i.e. the final 12 months prior to the deadline reduction), while the year ‘2013’ is the period between 15 April 2013 and 14 April 2014, and so forth.  The blue shaded region represents the recent period during which the data is not reliable – by definition, most cases in which examination requests were filed during this period are still under examination, and those that are not are among the most rapidly-accepted such that only the shorter examination periods are contributing to the statistics.

As can be seen, cutting the acceptance deadline resulted in an immediate and sustained fall in the median examination period, with half of all (successful) applications being accepted within around 200 days of initial examination following the change, compared with around 300 days beforehand.  There has been less effect on the most speedily processed applications, with the fastest 20% of applications now being accepted in under 100 days, which was not unprecedented even prior to the reforms (see, e.g., the early period of the above chart). 

At the other end of the spectrum, the slowest applications are now more likely to be accepted close to the time limit, with the 80^th percentile – i.e. the top 20% of applications – being accepted after around 350 days or more, which is getting very close to the final deadline!  (There is an additional factor at play here, as explained further below, but this affects only around one eighth of these slow applications.)  In comparison, under the old 21 month system 80% of successful applications were accepted within about 470 days, which is more than 150 days short of the final deadline for these cases.  To further illustrate the effect on applicant behaviour, the chart below shows the distribution of the acceptance time (for all those applications that have been accepted), as the number of months following the first examination report, before and after the Raising the Bar reforms (i.e. ‘pre-RTB’ and ‘post-RTB’).  As can be seen, applicants are now considerably more likely to leave filing a successful response until almost the last minute!

Overall, then, reducing the acceptance period by nine months has had a much smaller effect – closer to three months – on the time applications spend under examination.

The average period has fallen by less than the median, indicating that a relatively small number of extreme outliers are ‘pulling up’ the mean while having little effect on the median.  This might seem odd, given the hard limit of 12 months on acceptance, but there is a further subtlety in this data that I have yet to explain.

Divisional Applications as ‘Continuations’

If an applicant is unsuccessful in achieving acceptance before the deadline (i.e. 21 months under the former system, or 12 months now) this is not actually fatal to their prospects of obtaining a patent.  Any time up until the very last day, the applicant may file a divisional application, naming the unsuccessful (and about-to-lapse) application as the ‘parent’.  A new examination request is then made (usually fairly soon after filing, upon direction by the Patent Office), and the whole process starts over.

This is not the primary raison d’être for divisional applications.  They were originally devised to enable applicants to pursue claims of different scope – such as to additional inventions – from those in the original application, since there is a general rule of ‘one patent, one invention’.  Even so, using divisional applications to continue examination beyond the acceptance deadline is perfectly legitimate.  I think that it is fair to say, however, that IP Australia is not greatly enamoured of the practice, given that it can significantly extend the period during which one or more applications can remain pending, contributing to the ‘uncertainty’ that I mentioned in the very first paragraph of this article.

To include the effect of this practice in my analysis I identify a ‘continuation divisional’ – i.e. a divisional application that appears to have been filed primarily to continue examination of a thus-far unsuccessful application – as one for which the immediate parent application is never accepted.  This can – and sometimes does – run back through a chain of multiple divisional applications.  In these cases, I have taken the date of the first examination report to be that of the first report issued in the chain, with the date of acceptance being the date on which the final application in the chain is finally accepted.  As a result, there is a small number of these ‘continued’ applications in my dataset for which the delay between the first examination report and acceptance can be much longer than the nominal acceptance deadline period of either 21 months (pre-reform) or 12 months (post-reform).

In fact, I shall show that the reforms have had a noticeable – and presumably unintended – effect on applicants’ use of these continuation divisionals.

Pendency of the Most ‘Stubborn’ Applications

The following chart shows the 98^th percentile of the examination period, again as a function of the year in which an initial examination request was filed.  In the mid-2000s, prior to the Raising the Bar reforms, the most stubborn 2% of cases (representing around 300-500 acceptances each year) remained pending for 1000 days or more between the date on which an initial examination report was issued, and the date on which claims were finally approved.  In the years following the reforms, this statistic has hardly changed.  That is to say, once continuation divisionals are taken into account, there has been no significant change in the proportion of cases that hang around for the better part of three years, or longer.  (Once again, the blue shaded region marks the period in which the data is too recent to be reliable.)

The other notable feature of this chart is the dip in the 98^th percentile of delay for cases in which an examination request was filed between 2010 and 2012, i.e. in the lead-up to commencement of the Raising the Bar reforms.  There are two factors that may have contributed to this dip.  Firstly, between October 2010 and the end of 2012, IP Australia adopted a ‘case management’ approach to continuation divisionals that could significantly foreshorten examination.  However, I would expect this practice to be reflected mostly in cases having an initial (i.e. in the original application) examination request date prior to this period, and it is therefore more likely to have contributed to the significant reduction in delays observed in chains of applications in which examination was first requested between 2004 and 2007.  It is also important to keep in mind that many ‘case-managed’ divisionals never resulted in accepted claims, and are thus not reflected in this data.

The more significant factor between 2010 and 2012 is likely to be the strong disincentive in these cases for applicants to file continuation divisionals, because any new application filed on or after 15 April 2013 would be subject to higher standards of patentability that might limit the scope of claims available.  Most applicants in this period would therefore have sought to achieve acceptance of their existing applications, within the 640 days or so of the 21-month period allowed under the old rules, which is exactly what we see in the 98^th percentile.

Have Reforms Increased Use of Continuation Divisionals?

The chart below shows the proportion of all accepted applications that are continuation divisionals (i.e. not the first/only application in a chain) as a function of the year in which an initial examination request was filed.  Since commencement of the Raising the Bar reforms, the prevalence of such cases has roughly doubled, from around 2% to around 4% of all acceptances.  It therefore appears as though the reforms have resulted in an increased usage of divisional continuations by applicants.  (And, again, the recent data in the blue shaded region is currently incomplete and thus unreliable.)

Given that one of the objectives of the reforms was to reduce uncertainty, in part by limiting the use of divisional applications, this would seem to be a perverse outcome.  There are a number of reasons why it may have happened.  Firstly, it could be the case that a 12 month acceptance deadline is too short for some applicants, who simply run out of time.  A year seems more than adequate, of course, but any patent attorney will tell you that obtaining timely instructions from clients – particularly those located overseas – can be a frustrating exercise!  Another possibility is that the higher standards introduced by the Raising the Bar reforms, particularly in relation to inventive step, may have resulted in more examination objections, that have been more difficult to overcome, than under the former provisions.  Or there could be another reason entirely – one that springs (speculatively) to mind is that the increasing occurrence of subject matter eligibility (i.e. ‘manner of manufacture’) objections over the last decade could be a factor.  Quite likely it is a combination of all these things.

The Majority of Divisionals are Not Continuations

It is not surprising that continuation divisionals remain a feature of Australian patent prosecution.  The reforms did nothing to prevent the filing of such divisional applications (they only affect an applicant’s ability to file divisional applications after being opposed, or to belatedly convert parallel applications into divisional applications).  However, I would not want to leave anyone with the impression that the primary use of divisional applications is to extend the examination of existing cases.

The chart below shows the proportion of divisional applications filed each year (still offset to the 15^th of April, to align with the 2013 reforms) that were not continuations, i.e. where the parent application was actually accepted.  Since there is a prohibition on ‘double patenting’ under Australian law, there is no point in filing a divisional application from an accepted case unless it has claims of different scope, e.g. directed to a distinct invention.  This is, of course, the original purpose for which divisional applications are provided.  (I would also note that member countries of the Paris Convention for the Protection of Industrial Property – including Australia – are obliged, under Article 4.G, to implement a divisional application system.)  It should be noted that this data – unlike the previous charts – includes all divisional applications, regardless of the final outcome, and not only those which are ultimately accepted.

The data shows that prior to the Raising the Bar reforms, around 70% of divisional applications were not continuations.  This rose around the time of the reforms, for the reasons discussed above (i.e. because of the incentive to achieve acceptance of a pre-reform application, rather than filing a continuation divisional).  The proportion of continuation divisionals increased in the years following the reforms, although it appears that over the past year divisional filing behaviour returned to pre-reform levels.

Any attempt to restrict the practice of filing continuation divisionals through timing constraints – such as was attempted, and subsequently reversed (because it was such a disaster), by the European Patent Office (EPO) some years ago – would therefore be harmful to the majority of applicants that use divisional applications for their primary purpose.

Conclusion – Should Something be Done About Outliers?

The Australian system of setting an acceptance deadline, fixed by the date of the first examination report, is not unique.  But nor is it common among major patent offices globally.  In the US, the EPO, China, and Japan – among others – applicants are provided a limited response period, of typically three to six months (usually including a paid ‘extension’ period) within which to respond to each individual examination report, with the patent office being able to force a conclusion to examination once the applicant has had sufficient opportunity (usually at least two attempts) to overcome any objections.  Under the current US system, in particular, applicants are able to continue examination beyond this point simply by filing a Request for Continued Examination (RCE), and paying a further fee.  In all jurisdictions, divisional and/or continuation applications are also available.

The evidence indicates that reducing the acceptance period by nine months (i.e. from 21 months down to 12) reduced the median examination period by only a little over three months.  A major factor here appears to have been the monthly response fees payable after 12 months under the old system, which were effective in discouraging applicants from delaying efforts to overcome examination objections until the last minute.  By contrast, under the current system over a fifth of all successful applicants finally achieve acceptance only within the last month prior to the 12 month deadline.  Quite aside from anything else, this prevalence of ‘late’ responses must place patent examiners under some time pressure, which is not good for them, or for the quality of examination.

On the other hand, the majority of successful applications are accepted within eight months of an initial examination report being issued, which is faster than most – perhaps all – of the jurisdictions that employ per-report time limits.  In typical cases, then, the Australian practice serves us well.

However, the change in acceptance period has had no significant impact on the small proportion of applicants that – for whatever reasons – want to keep their claims pending for an extended period.  There remain hundreds of applications accepted each year that, through the use of continuation divisionals, have been in the system for 1000 days or more since an examination report was first issued.  The proportion of such applications is substantially unchanged from before the acceptance period was reduced.

The evidence of the past in Australia, and from other jurisdictions, is that if you really want to influence applicant behaviour, the best way to do it is through the hip pocket!  And this can be done without affecting applicants that operate well within the normal processes and time limits.  For example, the USPTO charges a higher fee for second and subsequent RCEs than for the first request.  The EPO charges escalating additional filing fees up to the fifth generation of divisional applications.  Both charge applicants fees for being ‘slow’ to respond to individual examination reports (the USPTO after three months, and the EPO after four).

For the outlying cases, if there is any desire to further reduce delays in the examination process, along with the associated uncertainty, there is more that could be done to influence applicant behaviour through changes in processes and fee structures.

Tags: Australia, Examination, Statistics