Australia: The proposed long, slow death of innovation patents in Australia

Last Updated: 2 April 2018
Article by Gareth Dixon

Attempts to kill off Australia's second-tier "innovation patent" system have been ongoing for a number of years. In the most recent challenge, the Productivity Commission has been the lead prosecutor and professional bodies such as IPTA (the Institute of Patent and Trade Mark Attorneys of Australia) have acted for the defence. The Australian Government is, of course, judge, jury and (most likely) executioner. In this article, we briefly cover the proposed arrangements, introduced into Parliament on 28 March 2018, for abolishing the innovation patent system. If implemented, it is likely to be a long, slow process which offers potential benefits to patentees aware of the opportunities and restrictions at each juncture.

Introduction

The relevant legislation covering the phasing out of the innovation patent system is contained within the exposure draft of the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill 2017 ("the legislation"). The proposal, in effect, is for a long, slow death as opposed to simply "ripping off the sticking plaster". To this end, it has been noted that this apparent "compromise" approach may be at odds with the Productivity Commission's strong-arm stance in relation to the strategic use of divisional innovation patents and the uncertainty caused by uncertified (strictly unenforceable but nonetheless "beacon") claims – but that's a debate for another day.

Innovation patents 101

From its introduction in 2001, the "innovation patent" has been held up as a symbol of the Australian Government's commitment to encouraging small to medium enterprises (SMEs). In this regard, Australian SMEs have been the predominant users of the innovation patent system.

The innovation patent is Australia's second-tier patent system. Novelty, written description and industrial applicability criteria are the same as for the first-tier "standard" patent system. Innovation patents, however, have a requirement for an innovative step, which is a lower threshold than that of an inventive step that applies to standard patents. Also, the patentee is afforded only an 8-year term as opposed to the standard 20 years.

Innovation patents are "granted" upon filing (a potential problem in itself, as we will see below), but are not enforceable at law until such time as they have been "certified" (i.e., examined). However, once certified, the enforcement remedies available to a patentee are the same as those for a standard patent. Thus, innovation patents – particularly innovation patents divided out from standard patent "parents", can be effective "litigation weapons" because the low innovative step threshold makes them difficult to revoke in a counter-claim for invalidity (and suing against a divisional innovation patent may not expose the parent patent to a revocation suit). Thus, innovation patents provide a legitimate strategic tool for those looking to enforce their Australian patents.

So, what's the problem?

The perceived "problem" with the innovation patent was three-fold. Firstly, there was a perception that local SMEs were not making adequate use of the innovation patent system (and even if they were, they were not deriving tangible benefits from it). Secondly, that the "granted upon filing" status rendered the system susceptible to abuses such as foreign applicants potentially being able to claim Government subsidies in their country of origin for obtaining a "granted" patent. Thirdly, it was considered that the threshold test for innovative step was too low and that this, in turn, may give rise to a proliferation of difficult-to-revoke certified innovation patents that were enforceable at law.

So, what's the "fix"?

Many commentators as well as IPTA believe that the issues identified with the innovation patent system can be addressed through straightforward revision of the relevant legislation, along the lines of:

  1. raising the level of innovative step to a level above the current innovative step level, but below the inventive step level that applies to standard patents;
  2. making examination mandatory so that a request for examination must be made within three years of the filing of the innovation patent application; and
  3. ensuring that the term 'patent' is only used for innovation patents that have been examined and certified.

However, for reasons that are not entirely clear, the Government appears to have opted to abolish the innovation patent system.

Likely transition arrangements for abolishing the innovation patent system

Assuming the legislation is passed in its current (draft) form this is how the transition from an innovation patent system to no innovation patent system will work:

  1. The legislation is passed into law on "date-X"; it takes effect from "date-Y", which is 12 months from date-X.
  2. At any time prior to date-Y, new innovation patent applications can be filed. In other words, nothing changes until the legislation takes effect on date-Y.
  3. As of date-Y, no new innovation patent applications can be validly granted (see, Point 4, below regarding the potential "zombie" innovation patent). However, an existing standard patent application (e., having a filing date prior to date-Y) can still be converted into an innovation patent, or can have a divisional innovation patent filed from it. With innovation patents having an 8-year term, it will be appreciated that under the proposed system, all innovation patents will have expired by "date-Z" (effectively, date-Y+8).

The proposed transitional arrangements also give rise to a couple of interesting consequences:

  1. The "zombie innovation patent". Curiously, there appears nothing in the draft legislation to prevent the filing of a new innovation patent following date-Y. The restriction appears to be in respect of validly granting an innovation patent having a filing date later than date-Y; this doesn't seem ideal and surely lessons can be learnt from recent developments in respect of New Zealand divisional practice.
  2. Added matter restrictions. An innovation patent claim having a priority date on or after date-Y cannot be validly certified. This guards against effective US C-I-P practice such that a claim reliant on added subject matter may not be entitled to its original priority date; if its revised priority date falls after date-Y, the claim cannot be certified following examination and is thereby not enforceable at law.

Is this all fait accompli?

IPTA continues to actively lobby to retain the innovation patent system. This lobbying includes letters from many concerned Australian SMEs being sent to the relevant Government Ministers, the Opposition Shadow Minister and Cross-bench Senators.

Given that the relevant Bill has just been introduced into Parliament, Shelston IP will continue to monitor the situation and keep readers promptly informed as to progress. In the meantime, patent Applicants may wish to give advance consideration to availing of the Australian innovation patent system during this current period of uncertainty.

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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