Innovation patents: Is the system about to be abolished?

Based on that paper, the now disbanded Advisory Council on Intellectual Property (ACIP) recommended abolition of the Innovation Patent System. Yet the Innovation Patent System is overwhelmingly used by Australian applicants, and in particular by Australian SMEs, and anecdotal evidence suggests that those users are largely very happy with the system and obtain an economic benefit from it.

A consultation paper has now issued seeking submissions on the proposed abolition. Users of the system and other interested parties have until 28 September 2015 to make submissions

Is the innovation patent system about to be abolished?

The innovation patent system in Australia has been under review for some time. However it seems that, rather than change the system to address perceived deficiencies in the system and improve its effectiveness, IP Australia are now contemplating abolishing the innovation patent system in its entirety.

Purpose of the innovation patent system

The purpose of the current innovation patent system, which was introduced in 2001, was stated by the Government to be to “stimulate innovation in Australia SMEs”. In particular, the Revised Explanatory Memorandum presented to the Parliament to explain the Bill that introduced the innovation patent system, stated:

“The purpose of the proposed innovation patent system is to stimulate innovation in Australian SMEs. It would do this by providing Australian businesses with industrial property rights for their lower level inventions. Industrial property rights are not available for these inventions at present, which means competitors may be able to copy them. For this reason, a firm making lower level inventions cannot be certain of capturing the benefits that come from their commercial exploitation. This lowers the incentive to innovate.

The existing petty patent system, administered by IP Australia, has an inventive threshold the same as that for standard patents. This means that it does not meet the need Australian businesses have identified for lower level protection and which most overseas governments are already providing for their SMEs.”

The innovation patent system addressed this purpose by replacing the requirement for an “inventive step” for a standard patent (or the previous petty patent), which generally requires an invention to not be obvious, with an “innovative step” test, which generally has a lower required threshold of inventiveness.

Evidence has shown that innovation patents are being used primarily by Australian SMEs for the purpose of protecting lower level innovations, as the system intended. The system also has lower costs for applicants than the alternative standard patent system and is well suited to protecting products that have a relatively short commercial life.

Perceived problems with the system

Whilst there have been a number of concerns raised about the innovation patent system, in particular the granting of unexamined rights and the level of innovation necessary for an innovative step, it seems that the key problem is its alleged failure to achieve its objective and stimulate innovation in Australia.

History of the review

Back in February 2011, the Government asked the Advisory Council on Intellectual Property (ACIP) to investigate the effectiveness of the innovation patent system with a view to suggesting reforms which could improve its operation. ACIP released an Issues Paper in 2011 seeking submissions from stakeholders, and also conducted extensive consultation. ACIP released an options paper in August 2013. ACIP’s final report was released on 16 June 2014. In that report, ACIP did not make any recommendations supporting the retention or abolition of the innovation patent system, as they were unable to obtain adequate empirical evidence as to whether the system does or does not stimulate innovation by Australian SMEs.

ACIP however considered that evidence was available to support changes to the system to improve its effectiveness and, in particular, recommended raising the level of innovation required above the current innovative step level, but below the higher inventive step level that applies to standard patents. Other recommendations were made including making requesting examination compulsory prior to the third anniversary of the filing date.

Subsequent to the publication of the final paper, ACIP was abolished. Although ACIP was effectively disbanded after their last meeting, they were given permission to work on an addendum to their innovation patent report which took account of an economics paper commissioned by IP Australia and written by IP Australia’s in house economics team.

The report led to the short statement published by ACIP recommending abolition of the innovation patent system.

Our comments on the report “The Economic Effect of Innovation Patents”

At FB Rice, we were somewhat surprised to learn that the innovation patent system apparently had no positive economic impact, particularly as our clients seem, on the whole, quite satisfied with the system and appear to obtain an economic benefit from it. Certainly we have not heard from any clients who agree that the system should be abolished.

The report fails to properly consider one of the important functions of the innovation patent system such as providing a necessary litigation tool in a patent system which has a pre-grant opposition and subsequent Federal Court appeal system which can delay the grant of a patent for many years.

FB Rice is also concerned that IP Australia’s report fails to address whether the changes to the system ACIP had proposed to improve its effectiveness would address any of the economic benefit issues, particularly on the downside, such as costs to third parties.

The innovation patent system is overwhelmingly used by Australian applicants, as opposed to the standard patent system, where the vast majority of patents are granted to overseas applicants. Hence we fear that its abolition will overwhelmingly have a negative impact on local Australian applicants rather than on overseas based applicants.

We are concerned that the proposal to abolish the innovation patent system will have a significant detrimental effect on the ability of Australian small to medium enterprises (SMEs) to protect their innovations.

Submissions

The Institute of Patent and Trade Mark Attorneys of Australia (IPTA) will be making submissions supporting the retention of the innovation patent system. Any FB Rice clients who have used the innovation patent system in the past or intend to use it in the future who are concerned about the abolition of the innovation patent system may voice their concerns to their normal FB Rice contact or to Partner and IPTA President, Jeremy Dobbin.

The deadline for making submissions is 28 September 2015.

Submissions detailing your concerns and opposition to IP Australia’s proposals may be made to:

David Simmons
IP Australia
PO Box 200
WODEN ACT 2606
Email: consultation@ipaustralia.gov.au

You may also copy your submissions to the following:

The Hon Karen Andrews MP
Parliamentary Secretary to the Minister for Industry and Innovation
PO Box 6022
House of Representatives
Parliament House, Canberra ACT 2600
Email: karen.andrews.mp@aph.gov.au