Australian Government Looking Into the ‘Patent Box’

Australia’s assistant treasurer, Arthur Sinodinos, has confirmed that the government will be looking into the possibility of introducing so-called ‘patent box’ tax breaks.

I have written about patent box schemes before (incidentally, the name comes from the box provided on tax forms for companies to claim the benefit).  Such programs, which provide reduced tax rates (typically between 5% and 15%) on income attributable to patented IP, have been introduced in a number of countries, including the UK, the Netherlands, Belgium, France, Ireland, Spain, Luxembourg, Switzerland and China.

In the United States the Manufacturing Innovation in America Act of 2013 (HR 2605), which would provide for a patent box tax reduction, was introduced in the House of Representatives on 28 June 2013, and is currently before a congressional committee.  (I note, however, that GovTrack.us gives the legislation only a 1% chance of getting past committee, and a 0% chance of being enacted!)

Potential patent box rules will be proposed by AusBiotech and the Export Council of Australia, and will considered as part of a planned government review of research and development later this year.

I am pleased to see that a review that includes consideration of a patent box scheme will be going ahead, and I am hopeful that it will report favourably on the proposal.  I am in favour of a patent box tax reduction in Australia for two reasons:

1. I believe that it provides the right incentive for commercial innovation, by rewarding not only investment in R&D (as existing grant and tax relief programs do), but more specifically R&D which results in protectable intellectual property which is then actually protected and successfully commercialised; and
2. with a number of other developed economies providing patent box tax incentives, Australia places itself at a competitive disadvantage as a location for conducting research, development and manufacturing if it does not do likewise.

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

Recording Security Interests in Australian Patents and Other IP

If you own a patent, or some other valuable intellectual asset, you might want to use it as security to obtain a loan, or other financial support, for your business.  Conversely, if you have funds that you are thinking of investing in a business that owns relevant IP, you may wish to secure an interest in the IP so that you can take ownership if the investee defaults on its obligations.

These types of arrangements are perfectly legitimate.  Registered intellectual property rights, such as patents, trade marks and registered designs, are like any other property in that they can be used as collateral, mortgaged, and otherwise dealt with as securities.

It is preferable that any such security interests be officially and publicly recorded.  There are a number of reasons for this.  For one thing, if somebody is considering buying or licensing a patent, they ought to be able to find out whether any third party holds an interest in it (in the same way that, when buying a second had car, you need to find out whether it is still under finance).  Furthermore, when something goes wrong, such as the rights-holder declaring bankruptcy, there should be some simple way for a party with an interest in the assets to establish its priority.  This is particularly important in more complex cases, in which a number of investors and creditors may have competing claims.

But how, and where, should you record any interests in Australian patents or other registered IP rights?

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Tags: Australia, Licensing, Security interests

IP Australia Consults (This Time) On Further IP Law Amendments

[Update: This post was updated on 21 January 2014 in response to a clarification that I received from IP Australia.  The intention of the bill remains that Australia would extend the benefits of the TRIPS compulsory licensing provisions, for manufacture and export of generic pharmaceuticals to least developed countries, beyond the minimum requirements, so as to encompass non-WTO member countries.]

IP Australia has released an ‘exposure draft’ of a proposed Intellectual Property Amendment Bill 2014, and is inviting interested parties to make written submissions on the draft bill and associated draft explanatory memorandum by 7 February 2014.

The draft bill is a revised version of the Intellectual Property Laws Amendment Bill 2013, which narrowly missed out on being passed in the Senate (after having made it through the House of Representatives) when a Federal Election was called on 4 August 2013.  Among other things, the draft bill includes new provisions required for the implementation of a single patent application and examination process for Australia and New Zealand, amendments to enable the implementation of a single regulatory regime for patent and trade marks attorneys in Australia and New Zealand, and some further minor amendments to repeal unnecessary document retention provisions, and correct some oversights in the Intellectual Property Laws Amendment (Raising the Bar) Act 2012.

Unlike the earlier Raising the Bar reforms, which passed through both houses of parliament in 2012 with bipartisan support, the 2013 bill passed only by a narrow majority in the House of Representatives, with the then opposition (now government) conservative Liberal National Party (LNP) coalition voicing strong objections to two aspects of the legislation, namely:

1. amendments to the Crown use provisions of the Act, to implement recommendations made in the Productivity Commission Inquiry Report into Compulsory Licensing of Patents; and
2. introduction of new compulsory licensing provisions, implementing Australia’s obligations under the TRIPS Protocol to enable pharmaceutical manufacturers to apply to the Federal Court for a compulsory licence to manufacture generic versions of patented medicines to export to developing countries, based on draft legislation which was released for consultation in August 2012.

At the time I wrote (quite rightly, as it turns out):

Once the election is over, and a government has been formed, I would expect to see at least some of the provisions of the Intellectual Property Laws Amendment Bill reintroduced to parliament.

Now that the Raising the Bar reforms are all in operation, correcting the known issues and oversights in that earlier legislation should be a reasonably high priority.  And unless the next government wants to abandon the Trans-Tasman Single Economic Market program, it seems likely that the single filing and examination process and the single regulatory regime reforms will be reintroduced sooner rather than later.

It may, however, be back to the drawing board for the Crown use and TRIPS compulsory licensing provisions.

The new 2014 exposure draft retains all of the Raising the Bar corrections and Single Economic Market (SEM) reforms with only minor amendments, deletes the Crown Use amendments, and makes some substantive changes to the TRIPS provisions.  I have prepared a marked-up copy showing the differences between the 2013 Bill which passed in the House of Representatives, and the current exposure draft.

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Tags: Australia, Compulsory license, Crown use, Law reform, Legislation, New Zealand, Patent attorney profession, Politics

Fighting Unjustified Threats of Infringement Proceedings

N & E Bowder Pty Ltd v Australian Keg Company Pty Ltd [2013] FCA 1436 (24 December 2013)
Mizzi Family Holdings Pty Ltd v Morellini [2013] FCA 1435 (24 December 2013)

Under Australian law, a person or company which feels they have been unjustifiably threatened with patent infringement proceedings can take legal action seeking an injunction to prevent the threats from continuing, and the recovery of any damages sustained as a result of the threats. 

The relevant provision is section 128 of the Patents Act 1990.  It particularly contemplates circumstances in which a patent holder seeks to inhibit competition by making vague or dubious claims (take note, prospective Australian patent trolls), such as ‘by means of circulars, advertisements or otherwise’ as well as by more conventional means, such as cease-and-desist letters. 

Section 128 enables a party which feels threatened to take pre-emptive action against a patent owner, although it has also been used as a counter-claim in response to the commencement of court proceedings for patent infringement. 

In my opinion, the primary purpose of s 128 is to provide a mechanism for accused infringers to address manifestly baseless allegations of patent infringement, thereby restricting the incentive for patent holders to make speculative or anticompetitive threats.  In practice, the Australian Federal Court has interpreted the provision broadly, treating any allegation of infringement which ultimately fails as constituting an unjustifiable threat.

It is therefore interesting that two recent decisions of the Federal Court – both issued on 24 December 2013 – have addressed the issue of unjustified threats.  In one case, the accused party initiated proceedings via the ‘unjustified threats’ provisions, and lost (i.e. the patent owner was able to prove infringement).  In the other case, the patent holder initiated infringement proceedings and, having been unsuccessful in establishing infringement, was found to have made unjustified threats.  Interestingly, the threats in this case were ‘generic’ in nature, having been made through the juxtaposition of an advertisement and an article in a trade publication.

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Tags: Australia, Infringement, Unjustified threats

Chinese Junk Patents Revisited: 2013 Filings Update

Companies in China are continuing to apply for Australian innovation patents – which are not subject to substantive examination before being granted – in order to take advantage of generous subsidies offered by the Chinese government to small and medium sized enterprises (SMEs) for obtaining foreign patents. 

I previously wrote about this phenomenon last February, after it came to my attention that an unusually large number of innovation patent applications had been filed by Chinese companies in 2012, via a number of agents who appeared to conduct no other Australian patent filing or prosecution work.  I far as I have been able to ascertain, none of these agents employ (or are) registered Australian patent attorneys.  It is unclear whether they have other relevant legal qualifications which would enable them to provide patent filing or acquisition services under the Australian law.

I thought it would be worthwhile to investigate innovation patent filings by Chinese companies in 2013, to see whether the practice was continuing.  I have found that it is, although at a reduced level of activity.  I have identified 110 innovation patent applications filed on behalf of Chinese companies during 2013 which appear most likely to have been obtained primarily in order to receive the government payment, rather than because of any genuine interest in obtain valid, enforceable Australian patent rights.

Some of the agents responsible for ‘Chinese junk patent’ filings in 2012 and earlier are continuing to do so, while others appear to have ceased (or, possibly, may be continuing to operate under other names).

Additionally, I have recently received reports confirming my belief that the purpose of Chinese companies in obtaining innovation patents is to claim financial benefits from the government, and not because of any genuine business interests in Australia.

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Tags: China, Innovation patent, Innovation policy, Patent attorney profession, Patent filing, Patents and society, Public policy