The Innovation Patent is a ‘second tier’ patent established to promote innovation in Australia. It has some similarities to the ‘utility model’ regime widely adopted in various forms elsewhere. IP Australia has released a controversial consultation paper titled “Innovation Patents-Raising the Step” in which it argues that the Patents Act 1990 should be amended to:
Rather than the knee jerk reaction proposed by IP Australia which is to raise the innovation step threshold to the same as that required for inventive step applicable to standard patents, the outcomes of the ongoing Federal Government initiated review of the innovation patent system being conducted by the Advisory Council on Intellectual Property (ACIP) should be awaited. ACIP’s more in-depth analysis can then be carefully considered to ensure any changes made to the innovation patent system address actual deficiencies whilst satisfying the intended purpose of the system; to serve the needs of incremental innovators with commercial products that cannot be otherwise protected.
IP Australia’s attempt to canvas opinion on the innovation patent system appears to attempt to pre-empt the ACIP report that has yet to be finalised and published.
Instead of lifting the innovative threshold, other reforms might be better suited to reducing any actual (rather than perceived) problems in a system intended to support small and medium sized businesses and an innovative, as opposed to ‘inventive’ commercial sector.
The innovation patent system was introduced in 2001 as an improved version of the pre-existing, but poorly utilised, petty patent system. The objective was to encourage small to medium sized innovators to protect incremental improvements in products that would not otherwise meet the threshold for standard patent protection, design protection, and/or which might have a relatively short commercial life span. The 1995 ACIP Review of the Petty patent system(7) reiterated the findings of the 1984 Industrial Property Advisory Committee (IPAC) report ‘Patents, Innovation and Competition in Australia’ that many Australian companies were innovative, but in incremental yet commercially valuable ways, and were not being provided with any protection for their innovations by the prevailing design and patent protection legislation. As a result there was little incentive to commit money to develop and commercialise a product which could be copied with relative impunity.
Innovative step; section 7(4) Patents Act 1990:
‘…..an invention is to be taken to involve an innovative step when compared with the prior art base unless the invention would, to a person skilled in the relevant art, in the light of the common general knowledge as it existed in the patent area before the priority date of the relevant claim, only vary from the kinds of information (in the prior art base) in ways that make no substantial contribution to the working of the invention.’
Essentially the innovation patent system provides:
Users of the Innovation Patent
According to IP Australia, under the petty patent system only about 300 applications were filed each year whereas about 1600 innovation patent applications were filed in 2011. However, the proportion of Australian applicants for innovation patents has dropped from 85% in 2001 to 65% in 2011, ‘with much of the decline since the Delnorth decision’ (see below). However, the total number of innovation patent applications has increased significantly, so more Australians than ever are using the innovation system.
What isn’t provided by IP Australia is a breakdown of from which foreign countries most of the innovation patents are originating, and whether it is from those countries that most standard patent originate. According to a 2005 IPRIA Review(6), between 2001-2003 there was quite a difference. For example, Taiwanese applicants filed less than 1% of the foreign originating standard patent applications but 50% of the foreign originating innovation patent applications, whereas 14% of innovation applications and 46% of standard applications originated from the USA in the same period.
Perceived Problems with the Innovation Patent System
IP Australia is concerned that the threshold for what constitutes an innovative step has been set so low by the courts, for example, in the decision in Delnorth Pty Ltd v Dura-Post (Aust) Pty Ltd [ FCA 1225], that clearly obvious enhancements of previously known products or methods are patentable, thereby leaving the innovation patent system open to abuse.
An aspect of inappropriate use raised by IP Australia is the potential for evergreening: a strategy in which companies may effectively extend the life of their patents or create patent thickets to hinder innovation by rivals.
According to IP Australia ‘such strategic behaviour could potentially bring Australia’s IP system into disrepute both in Australia and overseas, because it would highlight the poor balance between protection and innovative disclosure within Australia’s innovation patent system.’ Moreover, since the Raising the Bar patent reforms intend to raise the threshold of inventive step required for standard patents to align with the laws of major trading partners IP Australia considers that it would be remiss not to also raise the innovative step threshold.
There is also concern that applications are increasingly in highly technical fields contrary to the intention of the government that the system target ‘incremental’ inventions of short commercial life.
If this is a legitimate problem, the legislation could be amended to restrict further the subject matter appropriate for innovation patent protection. See, for example, comments made below regarding Japan’s utility model. Alternatively, if it is found by ACIP that the innovation patent system is being ‘abused’ mostly by large, high tech applicants, rather than by small, local innovators, an option might be to restrict applicants to only those who would qualify as a ‘small entity’ (or something similar) to return exploitation of the system to the intended users.
The 1995 ACIP review of the petty patent system considered that it was important to have a system similar to utility model protection available in other jurisdictions such as Germany and Japan.
According to IP Australia, other developed economies such as those of Germany and Japan apply an inventive step test to their utility model. ‘In Germany’s case the standard is the same as for a Standard Patent whereas in Japan the difference between a utility model and a patent is a matter of degree only….for a (standard) patent the inventive merit of the invention must be of a more valuable quality.’
These comments by IP Australia are somewhat misleading.
The German utility model was introduced to meet a perceived need for a new species of IP which provided a limited form of design protection for simple devices, such as agricultural products and domestic appliances.(1,2)
In relation to inventive step, a German patent requires ‘erfinderische Tatigkeit’, which translates to ‘inventive activity’, whereas a utility model requires only ‘erfinderischer Schritt’, which translates to ‘inventive step’. Under German Law the prior art base relevant to a utility model is different to that for a patent.(3) French and English texts of the European Patent Convention use the words ‘inventive step’ as the equivalent to ‘erfinderische Tatigkeit’ and as a result, a level of confusion is this caused.(1)
While the legislation actually requires different levels of inventiveness as between utility models and standard patents; however recent court decisions have treated the inventive threshold of the utility model as equivalent to that of patents.
In Japan only devices can be protected by a utility model. The statute also differentiates the level of inventiveness required for utility models and patents. Allowing for inaccuracies in translation, the inventive threshold applied for a utility model according to Article 3(2) is whether the device ‘would have been exceedingly easy to create’ based on the prior art, whereas for patents (Article 29(2)) the threshold is whether it ‘would have been easy to make the invention’ based on the prior art.(4)
According to the Japanese Patent Office, ‘although the patent system is designed to protect an invention which involves highly advanced and sophisticated technologies, the utility model system is, on the other hand, designed to protect a device related to the shape or construction of articles or a combination of articles. The words “invention” (i.e., reflecting “high creativity”) and “device” (i.e., reflecting “creativity”) are used for ideas involving different levels of creativity’.(5)
It would appear that the inventive step threshold is lower for utility models in Japan.
Many countries have a second tier utility model in which the inventive threshold is lower than for the standard patent, and it is in these countries where there is the most widespread use of the utility model. For example in China 161,000 utility model applications were filed in 2006 alone; in Germany nearly 20,000 utility model applications were filed, and in Korea 33,000 utility applications were filed.(1) The question is, is high use of a utility model a bad thing?
According to IP Australia, raising the ‘innovation step’ to ‘inventive step’ would ensure that obvious innovations are excluded from the innovation patent system thereby removing the opportunity for strategic use of the system by applicants:
According to IP Australia, innovation patents may inappropriately extend the life of pharmaceutical patents and delay the introduction of less expensive generic medicines, leading to increased cost to consumers and an increase in government expenditure through the Pharmaceutical Benefit Scheme (PBS).
The appropriate term of protection available to an originator company for a pharmaceutical product, and access to generic medicines by the market, are important economic issues.
It is true that the originator pharmaceutical companies use the innovation patent system to position for litigation against generics. But these actions often have as their basis standard patents as well. Changes to the innovation patent system alone will not address the problem IP Australia outlines. Is it a coincidence then that IP Australia has also now announced an enquiry into pharmaceutical extension of term provisions in the Patents Act 1990?
It is perhaps ironic that originator and generic drug manufacturers are often now housed under the same corporate roof and so any changes to the innovation patent system may be a win!
Raising the inventive step threshold for innovation patents will not necessarily reduce or prevent applicants filing innovation patents for tactical purposes. Innovation patents are often based on a standard patent the examined claims of which will later be considered by the Patent Office to meet the inventive step threshold.
Moreover, in the 1995 ACIP review (7) it was concluded that many of the petty patents were filed when an early search and quick grant was required for tactical reasons, i.e. to obtain rapid grant of an enforceable right, which is exactly what IP Australia alleges the innovation patent is being inappropriately used for now.
In Germany it is widely accepted that utility model protection is used as a means of enforcing protection quickly in infringement litigation; particularly important when fast-moving products are copied almost as soon as they appear on the market, long before a patent is granted.(1,2)
It would be interesting to know whether this strategic use of the utility model is considered detrimental to innovation in Germany.
The IP Right
The validity threshold for the petty patent and standard patent was practically the same due to the ease of electronic access to foreign publications. The only advantage to applicants was the speed and relatively low cost to grant and yet the petty patent system was poorly utilised.
ACIP recommended the adoption of a new utility model (innovation patent) to address the gap between design protection and the high threshold for full patent protection for incremental inventions with a relatively short life cycle, whilst retaining a low cost and rapid grant process.
The fact that more international applicants are filing innovation patents could be due to several factors:
The strategic use of innovation patents or any utility model right will not be altered by raising the innovative step to an inventive step.
IP Australia would like feedback on their proposals by the deadline of 25 October 2012. We recommend that users of the innovation patent system provide feedback, particularly if the proposals are considered to pose a threat to their ‘innovative’ business in Australia.
by Dr Bruce Dowsing
(6) Intellectual Property Research Institute of Australia (IPRIA) Report No. 02/04; ‘Australia’s Second-Tier Patent System: A Preliminary Review’, A. Christie and S. Moritz (2005).
(7) Advisory Council on Intellectual Property (ACIP) 1995 Review of the Petty Patent System