Australia: New Zealand proposed second-tier advancement patent yet to advance

As seasoned patent scribes, who have between us covered almost everything of significance coming out of New Zealand over the past 15 years, the manner in which a recent article resonated was somewhat unexpected. The article didn't cover the new Patents Act 2013, poisonous divisionals, the TPP, or even Eminem supposedly suing the NZ Government for copyright infringement – rather, it related to the proposed "Advancement" patent. On reflection, recent goings-on in Australia regarding the will they/won't they nature of the "Innovation" patent cull probably served to bring the notion of Australasian second-tier patents more into the global IP focus than it might otherwise be. Nonetheless, given that we've fielded a few recent questions of the "what's happening?" variety, this seems like an opportune time for a quick update.

Update – Has the Advancement patents legislation advanced at all?

The short answer is "yes, but not much". As readers may recall, the Private Member's Bill ( Patents (Advancement Patents) Amendment Bill 2018) was tabled in New Zealand's Parliament on 5 April 2018. A stroke of good fortune saw it drawn from a ballot system (applicable to Members' Bills – those not introduced by sitting Ministers) and its first reading commenced on 16 May 2018. However, in the time available, only two of the eleven scheduled speeches were completed – and the first reading was "interrupted", where it has remained for the past two months.

When will the first reading continue?

The very nature of the Bill means that it is uncertain when the first reading will continue. Firstly, Parliament only considers Members' Bills once a fortnight – and even then, only for a short allotment of the session. Secondly, the Parliamentary Order Paper is re-drawn prior to every session – and so last on the previous session certainly doesn't mean first off the next (we saw this numerous times during consideration of the Patents Act 2013, which spent nearly five years yo-yo-ing up and down the queue).

At present, the Bill has slipped a little way down the agenda. This may reflect one of two things: Firstly, Parliament's changing/adapting priorities; and secondly, the fact that the Bill is sponsored by a member of the Opposition. In these respects, it is uncertain when the first reading will resume.

Any clues so far as to how it's been received?

Somewhat surprisingly, after just two speeches, some of the political landscape confronting the Bill has begun to reveal itself. Dr Parmjeet Parmar (the sponsor) provided the first speech. Predictably, Dr Parmar spoke of all the "pros" for adopting a second-tier patent system. Indeed, in respect of recent efforts to save Australia's Innovation patent, many of these economic and social arguments have had a good amount of air-time lately. The political arguments, on the other hand, haven't been as prevalent in Australia's Innovation patent debate.

The second (reply) speech was given by a Government Minister, Iain Lees-Galloway, and hints at some of the obstacles Dr Parmar may face in ultimately having the Bill passed. The Minister raised the Australian example. Paraphrased, if second-tier patents are so great, why is Australia on the brink of abolishing theirs? Further, where is the evidence that NZ SMEs are crying out for a second-tier patent? Finally, the Minister suggested that the (governing coalition majority) Labour party would not support the Bill, which on a purely numerical basis, means that the legislation's only chance of survival is for the (governing coalition minority) New Zealand First party to cross the floor.

On this basis, the odds don't look great. And that's just to ensure passage to the next stage of the legislative process – the Select Committee phase.

A political football?

Should a second-tier patents regime have been included in the Patents Act 2013? We'd actually canvassed that notion previously, and concluded, all things considered, that it was probably a case of "too much too soon". In this respect, it took more than a decade to modernise a single patents regime that had its origins in World War II and included such antiquated concepts as local novelty – two regimes were probably never on the cards.

However, Minister Lees-Galloway's short speech did allude to the possibility of the Advancement patent becoming something of a "political football". Were the Government and Opposition to effectively blame each other for not including both regimes in the Patents Act 2013, they would be conveniently forgetting something we've mentioned above: the 2013 Act took more than a decade to come into effect – both main parties formed Government during that period and both had equal opportunity to include it. To this end, we'd hope that the legislation stands or falls on its merits – not on the back of a political blame-game.

Pre-history of the Advancement Patents Bill

New Zealand's new Patents Act 2013 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, under which a second-tier patents regime was never needed.

Why the impression that New Zealand never "needed" a 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 was no longer true. Indeed, the balance had been effectively reversed.

Private Member's Bill in New Zealand's Parliament

Call it coincidence or design, but hot on the heels of recent developments in Australia, a Private Member's Bill was tabled in New Zealand's Parliament on 5 April 2018. The Bill purports to install NZ's answer to Australia's Innovation patent – the "Advancement" patent. The General Policy Statement recites:

"This Bill seeks to enhance New Zealand's innovative performance by providing intellectual property protection rights to advancements that are novel, useful and non-obvious that may or may not qualify as an invention for the standard patent. This is by introducing a more accessible, quicker, and cost effective second-tier patient system that provides protection to allow management and exploitation of the advancement with reduced risk. The monopoly of use of the advancement through a cost effective and quicker second-tier patent system will not only provide an opportunity for further advancement activity but, like the standard patent system, the ability to commercialise the advancement without the fear of it being copied".

The parallels between NZ's Advancement patent and Australia's Innovation patent are thereby readily apparent.

First impressions – Did Australia somehow patent the Innovation patent?

First impressions upon reading the Bill was that it was very similar, but certainly not identical to Australia's (currently) death-row "Innovation" patent. In fact, it gave the impression of being a "workaround" – almost as though the Australian Government had somehow patented the Innovation patent, and the New Zealand Government was trying to get as close to it as possible without actually infringing.

Of course, as Dr Parmar explained in her speech, the differences aren't just in relation to Australia – indeed, 58 other countries have second-tier patents regimes and the differences purportedly reflect New Zealand's uniqueness. Objectively though, they do seem slightly arbitrary, for instance, the criteria for an "advancement step" and how/why this should be different to Australia's "innovative step".

An "advancement step"

Clause 6 of the Bill defines what is meant by an "advancement step".

An advancement, so far as claimed in a claim, involves an advancement step if—
  1. the advancement is distinctly different from what would be known before the advancement by a person who is—
    1. a skilled worker in the field; but
    2. has only common general knowledge of the art, having regard to any matter which forms part of the prior art base, and of other related technology, and common general knowledge in other jurisdictions generally; and
  1. the advancement makes a useful improvement to the working of the thing referred to in the claim.

Interestingly, rather than borrow from Australia's "innovative step" definition, the proposed definition is based upon Danish law – which is itself broadly consistent with the recommendations of Australia's former Advisory Council on Intellectual Property (ACIP), as handed down in its review of the Innovation patent system in May 2015.

An "advancement step" = a 10 year monopoly

One interesting difference between the Australian and proposed New Zealand regimes is that whereas Australia offers only an 8 year monopoly in exchange for providing the public with an "innovation", the Bill proposes a 10 year term in exchange for an "advancement".

"Certification" is not an option (it's compulsory)

Another aspect of Australia's Innovation patents regime that attracts criticism is optional examination ("certification"). As readers will know, an Australian Innovation patent isn't enforceable until such time as it is certified – but if enforcement is not intended or envisaged, there is no requirement for certification to ever be requested; the Innovation patent can just sit there, unexamined and unenforceable, for the full 8-year term.

Under Dr Parmar's draft legislation, certification/examination can be commenced following the applicant's request, a third party's request – or of the Commissioner's volition. In general, we view this as being consistent with the broad policy evoked under the Patents Act 2013, in which the public interest of having the patentee's rights established relatively quickly and efficiently are paramount. On the other hand, allowing an Advancement patent to go unexamined for 10 years (as it could if Australia's system were borrowed) creates uncertainty for third parties that is generally inconsistent with the "spirit" of the 2013 legislation.

Legislative space for the Advancement patent

The three main changes that have been effected under the patentability criteria prescribed by the Patents Act 2013 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 1953 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 regime similar to that of Australia. This, of course, is where the proposed Advancement patent fits in.

Following Australia's lead

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 Advancement 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 1953 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 2013 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; the adoption of a New Zealand Advancement patent appears a reasonable means to this end.

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 Advancement 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 past article, some of the specific patent-related SEM initiatives (SAP/SEP, for instance) are unlikely to eventuate.

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

As readers will know, the future of Australia's Innovation patents regime is presently uncertain. As noted by my colleague in his recent article, there is at least now a chance that it will be retained – albeit most likely in an amended form.

Whether Australia abolishes its Innovation patent system, or whether New Zealand establishes an Advancement patent system is neither here nor there 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 New Zealand's 1953 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 Patents Act 2013. 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 patent system.

Whereas the legislative space for a New Zealand second-tier patent system and the economic drivers for its adoption have been well known and publicised, Dr Parmar now provides a political impetus that had previously been lacking.

Next steps

Notwithstanding the many and varied pitfalls noted above, there remains a great deal of water to flow under the legislative bridge before any "real" progress is achieved. Doubtless, NZ parliamentarians will be keeping a close eye on developments across the Tasman in respect of the Innovation patent.

Finally, given some of the economic market reasoning alluded to above, our feeling is that once the dust has settled, Australia and New Zealand will end up with largely similar patents regimes. Whether this includes or excludes a second-tier Innovation/Advancement patent remains to be seen. Watch this space. There has been an unusual level of interest in this topic – and we'll keep readers duly informed.

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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