New Zealand: The Patents Act 2013 creates legislative space (as distinct from impetus) for a New Zealand innovation patent

Last Updated: 23 August 2016
Article by Gareth Dixon

A New Zealand "innovation patent"? Unlikely, but watch this space nonetheless. The popularity of Australia's innovation patents regime has been well documented. Although it is not without its faults, has been prone to certain unintended outcomes and has recently gained some high-profile critics, the Australian innovation patents regime has arguably been relatively successful in stimulating R&D activity (innovation) amongst Australian small-to-medium enterprises (SMEs).

On the other hand, New Zealand has never previously had (or indeed needed) any such second-tier patents regime. Under the outgoing Patents Act 1953, inventive step was not examined, which in effect, meant that one could often obtain a New Zealand standard (20 year) patent for the same "low level" invention that if pursued before the Australian Patent Office may only have been worthy of an innovation (8 year) patent. With the advent of the Patents Act 2013, this is no longer true. In fact, the balance has been effectively reversed.

Introduction

New Zealand's new Patents Act 2013 (the "new Act") took effect from 13 September 2014. Any complete application filed in the Intellectual Property Office of New Zealand (IPONZ) following commencement of the new legislation is subject to patentability standards substantially aligned with international norms. Such standards include examination for inventive step and represent a perceptible increase with respect to those prescribed under the outgoing Patents Act 1953 (the "old Act").

In the absence of a second-tier patents regime in New Zealand, many applications that would have met the standards for patent protection under the old Act stand to be denied protection under the new legislation. In this article, we briefly examine the justification for this legislative gap and consider ways in which the present imbalance may be redressed, should the New Zealand Government wish to do so.

The shifting sands of patentability

The three main changes that have been effected under the patentability criteria prescribed by the new Act are: a shift from local to absolute novelty; an extension of the examination criteria to include an assessment of inventive step; and the requirement that a patent specification adequately "supports" the invention claimed (as opposed to the lower standard of fair basis required under the old Act). In real terms, the patentability threshold has been lifted appreciably and the balance of power in the patent bargain shifted perceptibly in favour of the Government (and third parties).

One consequence of increasing the patentability threshold in New Zealand is that many applications that would have met the criteria for patent protection under the old Act are likely to be denied protection under the new Act. This, in turn raises the question as to whether low-level inventions denied the full benefit of Letters Patent are nonetheless worthy of some measure of protection, for instance, by way of a second-tier, or innovation patent regime similar to that of Australia.

Following Australia's lead

The Australian innovation patent system is still in its infancy, but is considered by many (not including ACIP, see below) to have been relatively successful thus far. An "innovative step" requires only that the invention/innovation for which protection is sought differs from the prior art in a way that makes a substantial or real contribution to its working. As such, the test is, at best, a pseudo-novelty assessment and an obvious variation may still satisfy the innovative step criterion. The patent bargain is, however, shifted such that in exchange for offering the public only an innovative step, a patentee is afforded only an 8-year monopoly. On the other hand, the innovation patent is relatively inexpensive, granted fairly quickly and can be somewhat difficult to revoke. There are, of course, other relativities, advantages and disadvantages between the Australian standard and innovation patent systems.

One of the goals of any second-tier patent system is to encourage local SMEs to develop low-level or incremental inventions/innovations and market them locally. In the context of New Zealand, the term "locally" can be extended to include Australia, given proximity, trade relations and ongoing Single Economic Market (SEM) reforms between the two. The majority of Australasian (AU/NZ) locals to whom an innovation patent system may be attractive are SMEs that typically require a relatively quick return on investment (which, in turn means less R&D, less "invention", and thereby less suitability to the standard patent system).

Striking an appropriate balance

The old Act patentability standards enabled many local patentees to get established in the New Zealand market without the threat of direct competition. This facility has been lost under the new Act. On the other hand, the old Act also allowed foreign patentees to do the exact same thing and in so doing, stymied competition and innovation throughout New Zealand. Given that one of the overriding incentives of any patent system is to stimulate economic activity, it may be argued that the new Act should properly contain provisions that protect not only the large corporates by way of standard patents, but also SMEs and the like, through adoption of a New Zealand innovation patent.

Trans-Tasman harmonisation initiatives

The SEM harmonisation initiatives were first signalled by the Australian and New Zealand Governments in 2009. However, such reforms are by no means revolutionary. They merely represent the next phase in the ongoing trans-Tasman harmonisation, something that began, in earnest, in the early 1980s.

The end goal of the SEM reforms, as the name would suggest, is to create unitary market conditions on both sides of the Tasman Sea. Save for the common currency and the obvious differences in respect of scale, the SEM reforms seek to develop the Australia-New Zealand common market along European lines. Under SEM conditions, it would be somewhat incongruous to encourage innovation in Australia by way of the Australian innovation patent, but not in New Zealand. As such, the ongoing SEM initiatives actually serve to create pressure toward a New Zealand innovation patent system.

Importantly, within the context of this article, we have used the term "SEM" holistically, to refer to the SEM reforms over all areas of government. Perhaps somewhat ironically, as can be gleaned from our recent article, some of the specific patent-related SEM initiatives (SAP/SEP, for instance) are unlikely to eventuate.

Too much too soon?

The new legislation undoubtedly creates scope for the adoption of an innovation patent system in New Zealand. Moreover, the ongoing SEM reforms create impetus for this to occur. However, it is worth noting that a second-tier system of patent protection was actually considered (perhaps all too briefly) during the initial consultation and drafting of New Zealand's new Act – although it never appeared in any draft legislation. On the other hand, perhaps this is really just a case of "too much too soon". It is generally accepted that adopting one new patent system will be challenging enough given the virtual revolution that has been required at the IPONZ level; taking on two new systems at once was possibly never an option. Given that the Australian and New Zealand economies are becoming increasingly intertwined, the best local SMEs can probably hope for is a separate Government review sometime in the not too distant future.

Government review of the Patents Act 2013

As it happens, New Zealand's next urgent legislative reforms may very possibly be patent-related. It is commonplace for the New Zealand Government to conduct a review of any new legislation, perhaps a year or two following commencement. This is in order to correct any drafting errors (for example, section 43, relating to the applicability of biological deposits made under the Budapest Treaty; and the fact that unity of invention appears as a ground of opposition) and to ensure that it is meeting its stated aims (the ongoing facility to file multiple successive old Act divisionals may warrant further consideration). Such a review could, in theory, provide a vehicle for the wider reforms that would be necessary in order to install an innovation patents regime in New Zealand.

However, such a review may be some time away. As it happens, the most obvious drafting error on the Patents Act 2013 (unity of invention as a ground of opposition) stands to be corrected in the Patents (Trans-Tasman Patent Attorneys and Other Matters) Amendment Bill 2016, which was otherwise the vehicle to reintroduce the SEM measures that were originally carved-out of the new Act at the Select Committee stage. As such, there appears no real urgency with which the Government should, or may wish to review the remainder of the new Act.

A further window – ratification of the TPP

As readers will know, the Trans-Pacific Partnership (TPP) Free Trade Agreement was recently signed, with New Zealand as a signatory. Ratification of the TPP will require the New Zealand Government to make certain amendments to its various intellectual property regimes, which, in turn, provides another opportunity to install an innovation patents regime, should one be desired. It should be noted that a second-tier patents regime is neither a requirement of, nor precluded by the TPP.

Of course, having a window of opportunity – be it by way of dedicated Government review or TPP ratification, is very distinct from any guarantee that an innovation patents regime will be discussed during such time.

Australia's lead does not necessarily take us toward a NZ innovation patent

As readers may know, Australia's Advisory Council on Intellectual Property (ACIP) has recently completed its Review of the Innovation Patent System. In May 2015, ACIP released a corrigendum stating it now "considers it likely that the innovation patent is not achieving [its objectives, i.e., incentivising SMEs to make use of the patent system] and the Government should therefore consider abolishing the system". It will be interesting to note how much credence this opinion is given at the government level.

Indeed, we have previously written an article on the recent formal recommendations to abolish Australia's innovation patents system. One thing that is clear from these recent proposals is that whereas ACIP was previously the chief proponent of the innovation patent system, its position has now effectively reversed.

Whether Australia abolishes its innovation patent system, or whether New Zealand establishes one is largely immaterial when considered against the economic imperative that for a common market to truly exist, unitary market conditions are required on both sides of the Tasman. Whether New Zealand follows Australia, or vice versa, remains to be seen.

Summary

Under the old Act, one could essentially take an invention/innovation worthy only of an Australian innovation patent (8 year term) and use it to obtain a New Zealand standard patent (20 year term); this facility has been removed with the advent of the new Act. However, in so doing, a New Zealand patent applicant having only a low-level invention is left with no fallback position, for there is currently no second-tier/innovation patent system.

In this article, we have identified the legislative space for such a system, the economic drivers for its adoption and the harmonisation measures that suggest that such a regime would be a matter of evolution rather than revolution.

To a degree, this article is necessarily speculative; the New Zealand Government has given us nothing to suggest that an innovation patents regime is even on their radar. As such, all we have done is to survey the landscape and identify where a change/improvement could be made. That said, we suspect that it is very low on the agenda – assuming, of course, that it is on the agenda at all.

Shelston IP's New Zealand practice

All of Shelston IP's Australian-registered patent attorneys are also dual-registered to practise in New Zealand. Our New Zealand patent practice thereby leverages significantly from our Australian operation and our closeness in respect of law, economics, culture and physical distance means that there are compelling drivers for clients to avail of Shelston IP for their Australasian IP matters.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Shelston IP ranked one of Australia's leading Intellectual Property firms in 2015.

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