The Exposure Draft of New Zealand's long-awaited Patents Amendment Bill was released on 18 March 2025, with public submissions due by 1 April 2025. First flagged in 2018, and following several years of inactivity, the condensed timeframe for public consultation would indicate that this is now a Government priority.
The Bill seeks to remedy New Zealand's patent "divisional problem". This is explained in detail below, but in a nutshell occurs due to a plurality of essential incompatibilities between divisional practice under the "old" Patents Act 1953 and "new" Patents Act 2013.
The "problem", per se, arises because the Transitional Provisions tied to the new Act mean that a divisional filed from an old Act case is itself an old Act case, despite the associated legislation having ceased more than a decade ago. This creates legislative and procedural challenges for applicants, attorneys and IPONZ, alike – and a "fix" has long been sought.
For reasons explained below, unfortunately the Bill appears to be too little, too late.
The Patents Amendment Bill 2025
The Bill is considered a result of observations regarding the co-existence of the 1953 and 2013 Acts, as well as a 2018 Discussion Paper in which submissions were sought regarding (amongst other things) what was by then known colloquially as the "divisional problem".
The Institute of Patent and Trademark Attorneys of Australia (IPTA) was one of the primary respondents, and I authored a significant portion of its submission. Although more than six years have passed, it seems like only yesterday!
Setting the scene, readers may recall that significant (but non-exhaustive – see below) consequences of a divisional application filed from a 1953 Act case remaining a 1953 Act case are that it:
- Is not examined for inventive step; and
- May be challenged through post-allowance/pre-grant opposition (and the like) – but that the objective standard is the "benefit of the doubt".
In order to remedy these issues, for old Act divisionals filed after a specified date, the Bill proposes to:
- Examine them for inventive step. This purports to "fix" one limb of the "divisional problem" by ensuring that novel-yet-obvious divisional claims are not granted; and
- If an old Act divisional filed after the above specified date is later opposed/re-examined, etc., the lower "balance of probabilities" standard (i.e., that of the 2013 Act) will apply to a prospective challenger.
Immediate thoughts on the Bill
I have no issue with either of the proposed changes, only that they do not go nearly far enough. Indeed, they "fix" what are arguably two of the lesser issues inherent in the "divisional problem" without touching on some of the more significant ones.
Examining future 1953 Act divisionals for inventive step is consistent with the New Zealand Government's overall policy objectives in establishing the new Act, which are as valid today as they were upon release more than a decade ago. The overall desire was to raise the bar with respect to the quality of patents granted in New Zealand. This, in turn, means that local innovators are not encumbered by thickets of arguably invalid yet nonetheless difficult to revoke patents. Patents granted without any examination for inventive step are a good example of what the Government has sought to stop.
The proposed change in objective standard from "benefit of the doubt" to "balance of probabilities" also represents a welcome change, given the above policy objectives. The "benefit of the doubt" standard has largely been interpreted as an opponent/revoker requiring practical certainty to invalidate an erroneously granted patent. This, of course, acts as a deterrent to potential patent opponents and stands to further stifle local innovation.
These two measures are the extent of the proposed changes – the Bill goes no further. I expect both will be uncontroversial – and on the understanding that the Government wishes to pass the Bill by June 2025, there is, on its face, nothing that should prevent this happening.
Public submissions are due by 1 April 2025. However, it is highly unlikely the Government will consider expanding the scope of the Bill, given its desire to push through the legislation (and the fact that the salient arguments for doing so were presented back in 2018). This is why I say "too little".
According to the Bill, the "specified date" will be 3 months following commencement. Given that this is only an Exposure Draft – and that the entire legislative process must now be worked through – even on an accelerated timeframe, it is difficult to envisage the new legislation taking effect before the end of 2025. This is significant, given there are now only around 90 old Act cases still pending (i.e., cases from which old Act divisionals could be filed).
For context, if we go back to 2018 and the previous round of public consultation, there were more than 600 old Act cases still pending at the time. The scope of the equivalent legislation enacted back in 2018 would have had significantly greater reach than it does now. In other words, it's "too late".
While these amendments are welcome, essentially the Bill only "fixes" two of the plethora of issues associated with the "divisional problem" – and it's about 6-8 years late.
The "divisional problem"
In its 2018 submission, IPTA identified five primary issues inherent in the "divisional problem", namely:
- the 5-year bar for requesting examination for new Act cases
- the facility to "daisy chain" old Act divisionals indefinitely
- poisonous priority (whole of contents novelty self-collision between parent/divisional)
- strictness of double patenting, and
- perfection of double patenting at the time of filing a divisional application.
The treatment of an old Act divisional (as addressed by the Bill) was identified in IPTA's submission, but was ascribed secondary importance. The five issues listed above were considered paramount.
Over the interim, the two double patenting issues have largely resolved through changes to (or clarification of) IPONZ practice, and a couple of useful Hearings decisions. The poisonous priority issue is confined to somewhat rare circumstances with the Government arguably justified in prioritising other low hanging fruit. However, arguably the two biggest issues inherent in the "divisional problem" – namely the 5-year bar on requesting examination of new Act cases and the facility to "daisy chain" old Act divisionals indefinitely remain unaddressed by the Bill.
The old Act, the new Act and "daisy chaining"
New Zealand patent applications are binary.
Applications termed an old Act case are those for which a complete specification was filed with IPONZ prior to 13 September 2014, and are subject to the Patents Act 1953 throughout its lifecycle. An application filed on or after this date is a "new Act case" and is subject to the Patents Act 2013.
The one exception to this rule arises with respect to divisional applications. A divisional filed from an old Act case is itself to proceed as an old Act case, irrespective of whether it was filed before, on, or after the date of commencement. Availing of this facility is advantageous in two main respects: a) the patentability criteria prescribed under the old Act are perceptibly softer; and b) the "daisy-chaining" of old Act divisionals is not restricted, meaning that in theory, one can keep the subject matter of a patent application pending throughout its 20-year lifecycle.
Unsurprisingly, a divisional filed from a new Act case will itself proceed as a new Act case. The new Act prescribes not only higher patentability standards, but also limits the period that examination can be requested on a new Act divisional to five years from the filing date of the original "parent" application (you can still daisy-chain new Act divisionals beyond 5 years, you just can't request their examination – cue the term "zombie divisional").
Initial Government review – completed October 2016
New Zealand's Ministry of Business, Innovation and Employment (MBIE) had published a paper entitled "Divisional patent applications: Possible changes to the transitional provisions in section 258 of the Patents Act 2013". Public submissions from interested stakeholders closed 14 October 2016.
As stated in the paper, the purpose of the review was to:
..seek feedback on whether or not the transitional provisions in section 258 of the Patents Act 2013 ("the 2013 Act") relating to divisional patent applications should be amended to limit when divisional applications can be filed or examined under the Patents Act 1953 ("the 1953 Act"), and if so, what those amendments should be.
In other words, there was a recognition on the Government's part that the transitional provisions, as they stand, could give rise to certain unintended consequences. Specifically, it is plausible that we could have the last of the old Act divisionals still pending in the year 2033! The question, therefore, was whether the transitional provisions attached to the Patents Act 2013 were consistent with the policy intent underpinning such legislation.
Policy intent of the Patents Act 2013
Paraphrased heavily, the policy intent of the Patents Act 2013 could be summarised as, on the one hand, a recognition that the primary users (patentees) of the New Zealand patent system are foreigners – and on the other hand, that those principally encumbered by thickets of broad patents (as were achievable under the old Act) are locals (third parties). The new Act thereby sought to redress any imbalance – be it real or perceived – in favour of third parties.
Hand-in-hand with this broad policy objective came the realisation that the facility to daisy chain old Act divisionals indefinitely within the 20-year patent term, created an undue burden on third parties. Whether a patent applicant intent on maintaining pendency, and thereby uncertainty on the part of competitors looking to enter the market, for a period of two decades was abusing, or merely making use of the system is immaterial. The point is, that with this possibility came a perception on the part of the New Zealand Government that third parties were being commercially "paralysed" in the interim. In general, locals could not afford to do battle with foreign corporations during opposition or revocation proceedings – and the facility to daisy chain divisionals indefinitely meant that even if they could (and assuming that they won), the next generation divisional/s may effectively block them for the entire 20-year patent term.
While the above may be an extreme/unlikely scenario, it nonetheless exists as defining the practical limits to which the present transitional provisions could be worked in favour of the patentee. This was identified as potentially contrary to the spirit of the new legislation.
Proposals under the review
The review put forward three main proposals:
- Do nothing/maintain the status quo. This option would likely prevail in the event that public submissions failed to identify indefinite daisy chaining as being an issue.
- Establish a final date by which no further old Act divisionals may be filed. This option arguably went too far in respect of removing certainty for patentees (taking away their right to file a divisional) and may have been inconsistent with New Zealand's international obligations (Paris Convention, Articles 4G(1) and 4G(2)).
- Establish a date after which any divisional filed from an old Act case will proceed under the new Act. This was MBIE's preferred option having regard to the competing factors identified above.
Is indefinite daisy chaining actually an issue?
The review identified that as of mid-July 2016, there were still 3054 pending applications made under the old Act. Of these, more than half (1693) were divisionals. Further, 661 of the 1693 divisionals were "first generation" divisionals (divided from applications that are not themselves divisional applications); 691 of the 1693 were "second generation" divisionals (divided from applications that are first generation divisionals) and 341 were "third generation" divisionals, divided out of second generation divisionals.
While the practice of daisy chaining was indeed being followed, the data shows a drop-off from second to third generation (and likely beyond). This is unsurprising – and suggests that in the extreme situation whereby old Act divisionals could conceivably still be pending in 2033, it is highly unlikely that there would be more than a handful of such applications. This, itself, is somewhat self-evident even in the absence of any data. However, the issue at hand for MBIE in conducting this review was whether the mere facility to have old Act divisionals still pending in 2033 was contrary to the policy underpinning the new Act.
To this end, there were also significant implications for IPONZ:
The effect of this is that the Intellectual Property Office of New Zealand ("IPONZ") must maintain the capacity to examine 1953 Act divisional applications potentially for up to twenty years after entry into force of the 2013 Act. This requirement would mean examiners would need to be trained to examine applications under both Acts until at least the early 2030s. This imposes additional costs and complexity for IPONZ which may mean that IPONZ fees may be higher than might otherwise be the case.
One may suspect, on the basis of the data presented, the longer-term implications for IPONZ and the over-arching policy incentive to promote the interests of third parties, that a significant "issue" was raised via the public submission process (submissions have not been made public).
In such circumstances, the status quo is unlikely to prevail and options 2 and 3 (of which the latter is the only reasonable option for the reasons provided above) may come to be considered in greater depth at Government level. That is, after a certain to-be-determined date, a divisional filed from an old Act case will proceed as a new Act case, subject to (amongst other restrictions) the 5-year limit on daisy chaining identified above.
The Bill is essentially "Option 3 Lite"
Option 3 (i.e., a new divisional filed from an old Act case will proceed under the new Act) carries with it (amongst other things) the 5-year bar on requesting examination. Allowing for some minor legislative tweaks to allow the first generation of any such divisionals to be examined "late", Option 3 effectively solves the "divisional problem" in that the indefinite daisy chaining is curbed.
The Bill provides a somewhat dilute version of Option 3. Rather than proceeding as a new Act case (with all the bells and whistles, including the 5-year bar), the only new Act features applying to old Act divisionals filed after commencement will be examination for inventive step and the lower standard of proof in contentious matters before IPONZ.
As above, daisy chaining was identified by both the Government and IPONZ as "an issue". So how did we end up with a "fix" that fails to address it? Given that the Government has signalled its desire to enact this legislation quickly, perhaps the full Option 3 scenario was "too much, too soon"?
All hope is not lost
Fixes to the "divisional problem" were originally supposed to come within an IP Omnibus Bill – itself originally slated for release back in 2018. The Omnibus Bill was mooted to fix, in one hit, some residual IP issues relating to not only the "divisional problem", but also other proposed amendments to the new Act and Regulations, New Zealand's participation (from an IP perspective) in the CPTPP, trade mark issues, designs issues and so forth.
Coordinating each of these timelines so that all matters can be addressed within the single document is no doubt challenging – although the Government has maintained that it remains a priority for "later this year".
As such, what didn't make the cut in respect of the Patents Amendment Bill 2025 may still be included within the IP Omnibus Bill. However, what it doesn't address – and what the Government has yet to shed light on – is the political motivation for carving "Option 3 Lite" out of the IP Omnibus Bill and progressing that immediately. As above, timing is hardly critical given that we're already 6-8 years "late".
Conclusion
We are now more than a decade into life under the new Act. The "divisional problem" was identified before the new Act even took effect – and when the number of pending old Act cases suggested a "quick fix" may have been desirable.
Fast forward to 2025 and as noted above, we now have only 90-odd pending old Act cases from which further divisional may be filed. The horse has bolted and the purported "fix" is somewhat of a damp squib.
Too little, too late. Better than nothing, although the political impetus for carving "Option 3 Lite" out of the upcoming IP Omnibus Bill seems a little curious.
Watch this space...
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