Australian Patent Performance is the Victim of a Vortex of Negativity, and Education (Alone) is Not the Solution

In my previous article, I wrote about low patent-filing rates by Australian innovators, and lamented that this is the continuation of the country’s long history of giving intellectual property away for free.  And while occasionally this has been done intentionally, with good (if misguided) intentions, more often it is the result of a failure, through ignorance or inadvertence, to recognise and protect IP where suitable forms of protection are, in fact, available.  I speculated that there may be some fairly persistent cultural biases that keep IP protection generally, and patents in particular, off the radar of many Australian innovators, and I suggested that lifting Australians’ use of the patent system may require little more than some effort at self-education, and a change in mindset.

Thinking about this further, however, I have realised that it is mindset-change that represents the real challenge here.  There already exist many resources to assist Australian innovators in improving their IP awareness and knowledge.  IP Australia provides a range of educational materials, including videos published via its YouTube channel, and (in a very welcome change from its reticence just a few years ago) is active on both Facebook and Twitter.  It also does a lot of outreach and educational work through email lists, seminars/webinars and other events.  Another major source of information is the Australian IP profession – patent attorneys, trade marks attorneys, and IP lawyers.  Most patent attorneys, for example, do not charge for initial consultations, and between phone enquiries and initial meetings often provide over an hour of free education and general advice before a potential client makes a decision on whether to proceed or not.  And for every such enquiry that leads to paid work, there may be half-a-dozen or more that go nowhere.  IP Australia’s recently-developed ‘Engaging an Attorney Toolkit’ is yet another good educational resource, which assists innovators in getting the most out of their initial contact with a patent attorney.

However, there is nothing new about the availability of many of these types of educational materials.  Furthermore, while they have been growing in number and quality over recent years, there has been – as the charts in my previous article show – absolutely no real growth in the numbers of patents being filed by Australians, in Australia and elsewhere, over this period.  Just today, I attended IP Australia’s first ever IP Summit, ‘Launch to Export’, where rooms of interested members of the public heard about various aspects of IP protection, government assistance programs, and the experiences of successful entrepreneurs.  My guess, however, is that this event will also have no impact on patent filings.

What I realised, as I looked around the room, is that all of these educational events, efforts and materials have one thing in common – the people who engage with them have already made the decision that they need to find out more about IP.  The information may now be more readily-available, and of higher quality, than in the past, but what has not changed is that the subset of innovators and entrepreneurs actually motivated to seek IP knowledge has not fundamentally changed.  Unlike the schooling of children, neither the government, nor anybody else, has the power to make IP education compulsory!  Nor is it a question of leading the horse to water in the hope that it may decide to drink – the horse has refused the bridle, cantered across the paddock, jumped the fence, and decided to forego all aqueous opportunities in favour of pursuing its own interests elsewhere!

So the educational content is available, but we need to get Australian innovators and entrepreneurs to want to consume it.  To make that happen, we are going to have to figure out why there is so little interest in IP in general, and patents in particular.  I maintain that this is largely a cultural issue, and I hypothesise here that there is a reinforcing feedback system operating, that I will call the ‘vortex of negativity’!  To drag the mindset of Australians caught in this vortex back into the light, where they can evaluate the potential value of patenting their innovation with clear and unbiased vision (and I am not, of course, suggesting that patents are always the right choice), I suggest that we may need to appeal to their basest economic instincts, by providing clear financial incentives or rewards to businesses that patent their new technology.  And I have a few modest proposals as to how this might be done!

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Tags: Government programs, Innovation, Innovation policy, Tax incentives

Australians Must Step-Up On Patents, Stop Giving Away Free IP!

There is a famous story about how the insect repellent Aerogard^® became a household name in Australia.  It involves a visit to Australia in 1963 by Queen Elizabeth II, in the course of which Her Majesty was sprayed with a formulation developed by CSIRO entomologist Doug Waterhouse, containing the chemical N, N-diethyl-meta-toluamide (DEET), to ward off the country’s numerous and persistent flies.  (Apparently, clouds of the insects had interfered with the famous Royal Wave on a previous visit.)  Within days, the Mortein company requested the formula from Waterhouse, who obligingly handed it over gratis, as was CSIRO policy at the time – three cheers for the great generosity of the Australian taxpayer!  The rest, as they say, is history … including the inevitable 1969 acquisition of the Australian Aerogard product and brand by British company Reckitt & Colman (now the massive multinational conglomerate Reckitt Benckiser).  Other innovations commonly touted as having originated in Australia, but capitalised upon elsewhere, include the black box flight recorder, heart pacemaker, photovoltaic cells, and X-ray crystallography.

While CSIRO is no longer in the game of giving away valuable intellectual property for free, sadly it seems the same cannot be said for Australian innovators more generally.  Otherwise, how are we to explain a stagnation in patent filings by Australian residents?  Over eight years, from 2009 to 2016 – the most recent year for which numbers are available at the World Intellectual Property Organization (WIPO) IP Statistics Data Center – the number of Australian patent applications filed by Australians barely varied from around 2500 per year.  Australians actually file more US patent applications than they do Australian applications, however these numbers are also stagnant, fluctuating around 3700 applications over the same eight-year period.  In 2016, the rate of US patent filings by Australian applicants was 152 applications per million population.  In the same year, US applications by US applicants ran at 913 per million population.

Surely the reason for the low filing rates, and lack of growth in filings, cannot be a lack of Australian innovation?  According to the 2017 Global Innovation Index (GII) Report, Australia ranks 23^rd out of 127 countries for innovation performance, which is not great.  Significantly, however, Australia fares much better on ‘input’ metrics than on ‘output’ metrics.  Input metrics capture elements of the national economy that enable innovative activities, and encompass institutions, human capital and research, infrastructure, market sophistication, and business sophistication.  Australia ranks 12^th on the innovation inputs sub-index, and performs particularly well on infrastructure (ranked 7^th), human capital and research (9^th) and market sophistication (9^th). 

But even though Australia is (mostly) well-placed to generate positive innovation outcomes, it has long lacked the ability to follow-through.  On the GII outputs sub-index Australia ranks a lowly 30^th, while on the innovation efficiency ratio (outputs divided by inputs) the country ranks an abysmal 76^th.

Furthermore, on the input side Australian businesses lack sophistication, with the country ranking 27^th on this group of metrics.  Tellingly, the business sophistication group of metrics includes ‘patent families filed in two or more national offices’ (relative to GDP by Purchasing Power Parity), in which Australia performs appallingly, by any standard.  Australia’s score on this metric is just 1.0, which compares to the USA on 5.0, Japan on 15.5, Korea on 16.3, and New Zealand on 4.7.  It is hardly any comfort that the UK (2.5) and Canada (2.9) are not great performers on this metric, either – they are still doing a lot better than Australia.

In my experience, ‘lack of sophistication’ pretty much sums it up when it comes to many Australians’ attitudes towards intellectual property generally, and patents in particular.  Too many Australian innovators and businesses simply do not understand intellectual property.  They ignore it, put it in the ‘too hard’ basket, are ignorant about it, or are sceptical or even actively hostile towards it.  Certainly they do not value it highly, and many are extremely reluctant to spend any money on it.  But in choosing not to protect their intellectual property, these businesses are, in effect, just giving it away for free, as surely as CSIRO once did as a matter of policy.

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Tags: Innovation, Innovation policy, Patent analytics

IP Australia’s 2018 Annual Statistics – a ‘Damning Report Card’ on Australian Patent Filing?

Last week, IP Australia published its Australian Intellectual Property Report 2018 (‘IP Report’).  This annual report is largely a summary of filing numbers and other statistics, along with additional analysis on selected areas in which IP Australia has ongoing research interests.  Last year’s report, for example, looked at Australia’s performance in collaborations between industry and public research institutes based upon the evidence of jointly-filed patent applications.  This theme is continued in the 2018 report, with a chapter reporting on economic analysis indicating that research grants targeting industry/public research collaborations result in better IP outcomes.  Despite this relatively positive news, with its useful insights and analysis, some media outlets have predictably chosen to focus primarily on raw numbers in order to talk down Australia’s efforts.

For example, InnovationAus reporter Stuart Kennedy has called the 2018 IP Report a ‘damning report card on patent filing’ which (Kennedy says) has caused CSIRO chief Larry Marshall to admit that ‘Australia needs to lift its game’.  Kennedy also wrote (somewhat disparagingly, I felt) last week about the fact that Australia’s top patent applicant for 2017 was ‘poker machine king Aristocrat Technologies’, under the headline ‘a shocking punt on patent filings’.

The numbers in the IP Report do indeed tell us that the number one Australian-based applicant for Australian standard patents in 2017 was Aristocrat Technologies Australia, with 157 filings, followed by CSIRO (45), the University of Queensland (18), Bluescope Steel (15) and Monash University (also 15).  But so what?  Aristocrat is a commercial operation, with its own business justifications for seeking patent protection for its innovations, which are no doubt driven by the market in which it operates and its ability to secure a competitive advantage from its patents.  In this context, each individual patent filing may represent a relatively minor innovation, in technical terms, while still making a commercially useful contribution to the overall portfolio. 

Research organisations, such as CSIRO and universities, on the other hand, are expected to invest in substantial and longer-term scientific and technological advances, often at a pre-commercial stage of development.  We would hardly praise them for squandering precious funds on hundreds of individually trivial patent applications, merely for the sake of making their filing numbers look better.

It has to be said, however, that IP Australia does not exactly help the situation in the way it has presented some of the numbers.  It would be very easy (though wrong) to take the following messages away from the patents chapter of the 2018 IP Report (these are all direct quotes, and each appears in the first sentence of a paragraph in the report):

1. ‘While applications grew overall in 2017, applications for standard patents by Australian residents decreased by about five per cent’;
2. ‘Non-resident filings increased by two per cent in 2017 to 26 403, which was 91 per cent of all filings’;
3. ‘World patent filings have been growing strongly since 2010, averaging around eight per cent annual growth to 2016, while Australia's growth has averaged about three per cent over the same period’;
4. ‘Patent grants to Australian residents in 2017 fell by 17 per cent compared to 2016 and now make up just five per cent of the total.’

If this were all there is to the numbers, the description ‘damning report card’ might indeed be apropos.  Fortunately, the situation is not nearly as bad as these figures suggest.

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Tags: Australia, Innovation policy, Patent analytics

Australian Appeals Court Upholds Patent ‘Promise Doctrine’, but it’s a Question of What the Inventor ‘Intended to Do’

The Australian Patents Act 1990 requires, in section 18(1)(c) and 18(1A)(c), that an invention must be ‘useful’ in order to be patentable.  This is also commonly known as the requirement for ‘utility’.  Failure to meet this requirement, i.e. inutility, is therefore a ground upon which a patent application may be rejected, or a patent revoked.  One of of the ‘rules’ that has been developed by the courts over the years for assessing utility is an obligation upon an applicant or patentee to satisfy any ‘promise’ that might be made for an invention in the patent specification.  This is sometimes known as the ‘promise doctrine’ – e.g. in Canada, where it was abolished last year by the Supreme Court.  I had been hoping that a Full Bench of the Federal Court of Australia might decide to do likewise, given that the opportunity had arisen.  In a recently-issued decision, however, it has unfortunately declined to do so: ESCO Corporation v Ronneby Road Pty Ltd [2018] FCAFC 46.

On the face of it, a requirement that an invention fulfil any stated promises does not seem unreasonable.  If, for example, an applicant falsely asserts that an invention is worthy of a patent, at least in part because it achieves some valuable improvement over its predecessors, and receives a patent on that basis, then the Patent Office has arguably been misled in its decision to grant the patent.  However, I do not see what this has to do with utility.  The Australian Patents Act 1990 provides a perfectly good mechanism for revoking patents that have been obtained by ‘fraud, false suggestion or misrepresentation’ in section 138(3)(d).  But if an invention is, in fact, useful for some purpose, and the patent specification otherwise meets all of the requirements for a valid patent, then it is difficult to see why the applicant’s choice to include – or not – some ‘promise’ in the specification should make any difference.

The position becomes even more fraught when a specification includes more than one promise.  This aspect of the utility requirement has not previously been conclusively addressed by the Australian courts – i.e. if a patent applicant makes multiple promises for an invention, it is necessary that all of those promises be met by the claims, individually and/or collectively?  The Full Court’s decision in ESCO Corporation has, at least, clarified this situation, with the court deciding that a claimed invention must indeed meet whatever promise(s) have been made for it in the specification.

However, this does not mean that resolving the question of utility is simple in any given case.  The court has explained that whether or not a relevant promise has been made and met must be addressed, by determining whether the invention as claimed does what it is intended by the patentee to do.  This necessarily involves an enquiry into the patentee’s intentions, through consideration of the specification as a whole, including the claims.  It is therefore not simply a matter of identifying some explicit, straightforward, statement in the specification that appears to make one or more ‘promises’ – as the court did (wrongly) at first instance in the ESCO case – and asking whether the claimed invention satisfies all of the stated ‘promises’. 

As a result of conducting the required enquiry, it can become apparent that the invention, as defined in a specific claim, or group of claims, was not intended to satisfy all of the ‘promises’ made in the specification.  In ESCO’s case this was necessarily so, because its application included two groups of claims defining different aspects of the invention (a component, and an assembly including the component, respectively) that might encompass different subsets of the advantages asserted for the invention as a whole.

So while I would have liked to see Australia follow Canada in cutting ties with old UK law and abandoning the ‘promise doctrine’, the Full Court in ESCO Corporation has at least brought some much-needed sense to the Australian law.  Determining whether or not an invention is ‘useful’ is not some formulaic exercise involving the mere comparison of statements in the specification with the subject matter of the claims.  Rather, it is a matter of substance, whereby the intentions of the applicant or patentee are to be determined, at least insofar as they are expressed in the specification as a whole, in relation to each claim, or group of claims.  On the other hand, the decision may not go far enough, in that it is not clear that it necessarily applies to cases in which there are not two or more distinct groups of claims relating to different aspects of an invention.

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Tags: Appeal, Australia, Patent specifications, Utility/usefulness

With Second-Tier Patent Rights in Retreat in Australia, Are They Making an ‘Advancement’ in New Zealand?

While the second-tier innovation patent may be out-of-favour with the Australian government (a late stay of execution notwithstanding), there is at least one New Zealand parliamentarian who is bold enough to stand up for the rights of incremental innovators.  Dr Parmjeet Parmar is a list member for the opposition National Party in New Zealand, who has drafted and submitted a private member’s bill titled the Patents (Advancement Patents) Amendment Bill.  The bill proposes the introduction of a new second-tier patent right which has many similarities with – and a few differences from – the Australian innovation patent, and Dr Parmar suggests that it would fill a gap in the availability of intellectual property rights in New Zealand that was widened by the enactment of the Patents Act 2013.

Generally speaking, the proposed ‘advancement patent’ would – like the innovation patent – provide for a shorter-term patent right, permit fewer claims, and feature a bifurcated system of registration and optional examination and enforceability.  Some of the major differences from the innovation patent would be:

1. terminology, i.e. ‘advancement’ rather than ‘innovation’, and ‘advancement step’ rather than ‘innovative step’;
2. maximum term, i.e. up to ten years, rather than eight years; and
3. lifecycle, i.e. an ‘advancement patent’ would be considered ‘provisional’ initially, and only have the status of ‘granted’ following examination/certification.

Reading Dr Parmar’s maiden speech in the New Zealand parliament, it is not hard to see where she finds her enthusiasm for innovators and innovation.  Born, raised and originally educated in India, she moved to be with her husband in New Zealand where she completed a PhD in biological sciences at the University of Auckland.  She subsequently worked in both academic and commercial science and research, before establishing a business manufacturing natural health products.  Clearly this is a level of hands-on experience with research, innovation, business and entrepreneurialism to which few – if any – of the politicians, bureaucrats and economists currently gunning for the Australian innovation patent can lay claim.

Many people will be surprised to see this new bill introduced in New Zealand at the same time that Australia is looking to abolish the innovation patent.  A common theme in the long gestation of the New Zealand Patents Act 2013 and the recent review of Australia’s IP arrangements by the Productivity Commission was the view, held particularly by certain economists, that for net importers of intellectual property and technology, such as Australia and New Zealand, intellectual property rights tend to be owned predominantly by foreign entities, and that it is therefore not in our interests to grant such rights improvidently, or too easily.

My own analysis of innovation patent data over a nine-year period showed that while the target community of Australian small and medium enterprises (SMEs) were indeed, by filing numbers alone, the dominant users of the system, too many of these were ‘self-filers’, who generally gain no value from their patents, while many of the largest individual users of the system are foreign entities that filed innovation patents for strategic reasons (e.g. Apple, Inc), or merely to take advantage of economic incentives in their own home countries (e.g. many Chinese companies).  While probably not enough to justify abolition – rather than improvement – of the innovation patent, this is not a great look, and is hardly a glowing endorsement of the domestic benefits of a second-tier patent system.

Considering these current concerns with the innovation patent, I decided to take the opportunity to reach out to Dr Parmar and ask her about her motivations for drafting her bill, and why she believes that a New Zealand ‘advancement patent’ would fare better than the Australian innovation patent.  She was kind enough to take the time out of her busy schedule to answer my emailed questions, and I am pleased to be able to present her views in her own words.

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Tags: Innovation patent, Innovation policy, Law reform, New Zealand, Public policy