End of the Line for Australian Innovation Patents

 Australia has phased out its innovation patent system, following legislative changes to the Patents Act 1990 (Cth). 

The final day for filing a new Australian innovation patent is 25 August 2021.

The relevant amending provisions of the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2020 (Cth) commence from 26 August 2021 - 18 months after the Act received royal assent.

What is (or was) an Innovation Patent?

The innovation patent was conceived as a simpler, faster, and more economical, form of protection for inventions compared to a standard patent or provisional patent.

Unlike a standard patent, an innovation patent does not require the applicant to demonstrate an "inventive step". 

However, the prospective patentee must still demonstrate the subject matter has:

• novelty - namely, the absence of public disclosure of the invention before the priority date; and 
• an innovative step - namely, that the invention is different from known prior art, and makes a 'substantial contribution to the working of the invention'.

The duration of an innovation patent (once granted) is up to 8 years after its filing date, subject to payment of annual renewal fees. The specification is limited to 5 patent claims and formal examination of the application is optional.

Once filed, the application may be granted in as little as 1 month, and examination (if requested) can be completed within 6 months.

The overall cost of the application (excluding professional attorney fees) is estimated at approximately A$1,500 - substantially less than the cost of a full standard patent.

The Phase-Out

In 2015, the Australian Productivity Commission was tasked with a review of Australia's intellectual property laws, including to "ensure that the intellectual property system provides appropriate incentives for innovation, investment and the production of creative works while ensuring it does not unreasonably impede further innovation, competition, investment and access to goods and services".

The Productivity Commission's Final Report was released in 2016, and included a recommendation to abolish the innovation patent system.

That recommendation was formally supported by the Australian Government in 2017, stating in its response: "The [Australian] Government considers that more targeted assistance would better achieve this objective [to stimulate innovation in Australian SMEs], while avoiding the broader costs imposed by the innovation patent system."

Legislation was then implemented in two parts:

• The 'Part 1' Act (passed in 2018) included amendments to copyright, designs and trade mark legislation, among other measures; and
• The 'Part 2' Act (passed in 2020) addressed the recommendation to abolish the innovation patent system.

According to IP Australia's official announcement, the phase-out stems from several reasons, which are reflected in the 2016 Productivity Commission Final Report:

1. The innovation patent's low barriers to entry made it easy to file a patent application, but resulted in a clogging of the system. Further, it was argued that strategic filers could exploit the system as a means of stifling competition.
2. The low innovation threshold and lack of compulsory examination created difficulties and uncertainty for other innovators in gaining a clear understanding of freedom to operate.
3. Innovation patents were not recognised internationally. This is said to have jeopardised international expansion prospects and exposed patent holders to potential copycat activity in international markets.

IP Australia's conclusion was that the innovation patent system had failed to achieve to its objectives, whilst imposing an A$11m annual administrative burden on the agency.

Where to from here?

Existing innovation patents filed before 25 August 2021 will continue to remain in force until their expiry, and divisional applications based on an existing innovation patent application will still be permitted provided the effective priority date is on or prior to 25 August 2021.

To support SME innovators, IP Australia has deployed a range of other measures including:

• an online portal;
• a dedicated "SME Fast-Track" patent process to shorten the examination timeframes for SMEs; and 
• piloting access to subject matter experts and case managers targeted at assisting self-filers.

It will remain to be seen what impact the removal of innovation patents has on the broader Australian patent landscape.

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Ben Thorn is an Australian intellectual property lawyer based in Brisbane, Queensland. He is the founder and director of Xuveo Legal, and is the current chair of the Queensland Law Society Technology and Intellectual Property Committee. Ben has been listed as a recommended intellectual property lawyer in Doyle's Guide 2020 and 2021.

Rabbit skin patent refused

An appeals board of the European Patent Office has upheld the refusal of a patent for "rabbit skin comprising biological active substance and its use" on public policy grounds. And, having read the first claim, I heartily approve; more than that, I am appalled not only that the application was ever filed (it was an international application seeking a European patent, by a Chinese pharmaceutical company) but that the invention was even devised. Claim 1 is just ghastly.

Article 53 (a) EPC tells us that European patents will not be granted in respect of (the draftsman must have been paid by the word, otherwise why not just "for"?) inventions the exploitation of which would be contrary to ordre publique or morality. (Note that it's the exploitation of the invention that has to be considered, not the invention itself, or the rights and wrongs of giving it patent protection) The applicant argued that in Decision T19/90, which I would have recognised more easily had the Board referred to it as Onco-Mouse, the suffering of the unfortunate animal had to be weighed against usefulness to mankind, a point reinforced by the EPO's examination guidelines (GII- 4.1) .

Unfortunately the Guidelines and the Board's decision fall into saying "ordre publique and morality", which is probably acceptable of the word "and" is construed disjunctively - but why on earth depart from the clear wording of the Convention? It is plain that the two concepts are independent, and the fact that the guidelines mention anti-personnel mines as an example seems to me to reinforce the distinction. Anyway, it appears clear enough that the Article does not intend that ordre publique and morality be cumulative requirements. But which was engaged in the present case? That isn't clear. The Board, and the Onco-Mouse board before it, seem to have treated ordre publique and morality as synonymous, which I don't think can be correct. Both decisions go on to balance the suffering of animals against the invention's usefulness to mankind - which is appropriate if ordre publique is being considered, because there are competing public policy goals involved, but surely not if you are considering morality, which has to be absolute.

In the end the Board came to what I think (as if anyone cares what I think) is the right decision, albeit perhaps not for the right reason. Its view was that the invention lacked the degree of usefulness needed to outweigh the suffering its exploitation would cause, because while it was the only way to produce the product, there were other products that do the same job. But I do wish it could have got there more directly.

 

Crown use as a solution to drug costs

There's nothing new about controversy over the cost to the NHS of patented pharmaceuticals. It's inherent in the patent system that patentees who invest possibly eye-watering amounts of money in devising inventions will want to use their monopoly rights to recover that investment and gain a return on it.

Today The Observer reports on a novel solution to the sometimes terrible problems that can arise when drugs are available to treat life-threatening conditions but the price is out of reach. Mechanisms are in place to try to ensure that the NHS is not charged excessively for new drugs, but they have failed to close the gap between what the NHS can afford and what the patentee wants (£105,000 per patient) in this case. The mooted solution is to use the Crown use provisions of the Patents Act 1977, under which the patentee will receive a modest royalty. Section 55 actually uses the expression "for services of the Crown", but section 56(2) specifically includes "the production or supply of specified drugs and medicines" within "the services of the Crown", making it a surprisingly wide concept.

I don't recall section 55 being invoked very often, and while the facts as narrated by The Observer are rather thin - it concentrates on the undoubted human interest aspects - this certainly looks like an interesting departure in patent law. I hope above all else that a solution can be reached that delivers what the unfortunate patients need.

Shanks v Unilever (from Weekly Law Reports)

Here  is the ICLR's report of this important (because one of very few) case on employee inventions, and here is a short summary culled from the report which I believe falls within the permitted act of fair dealing for reporting current events:

‘The time value of money received by an employer following the
vesting of an invention by an employee was not a benefit derived by the
employer for the purposes of section 41(1) of the Patents Act 1977.’

WLR Daily, 23rd May 2014

Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46 (3 July 2013)

Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46 (3 July 2013) was the Supreme Court's (Lord Neuberger (President), Lady Hale, Lord Clarke, Lord Sumption, Lord Reed, Lord Carnwath's) opportunity to rule that the proprietor of a patent which is declared invalid cannot hang on to damages recovered for an infringement of it. Or, to put it another way, a defendant can rely on the subsequent amendment of patent claims to relieve them from liability for damages, which certainly sounds right. A bit of a bifuracation problem - the patent was held valid in the English courts but invalidated by the Technical Board of Appeal in the EPO. For speed, here is the Supreme Court press release:

BACKGROUND TO THE APPEAL

Virgin obtained judgment from the English Court of Appeal (“the CA”) against Zodiac for damages to be assessed for the infringement of certain claims (“the relevant claims”) in a European Patent. The CA found their patent to have been valid and infringed by Zodiac. Subsequently, the Technical Board of Appeal (“the TBA”) of the European Patent Office (“the EPO”) ruled that that the relevant claims were invalid because they had been anticipated in prior art, and retrospectively amended the patent so as to remove, with effect from the date of grant, all the relevant claims.   

Virgin submitted that it was nevertheless entitled to recover damages for infringement because the CA’s conclusions - that the patent (including the relevant claims) was valid and that the relevant claims were infringed by Zodiac - were res judicata as between it and Zodiac on the subsequent assessment of damages, and that it was not open to Zodiac to reply on the TBA’s amendment to the patent, as this would be inconsistent with the orders made by the CA. That argument had succeeded before the CA in similar circumstances in previous cases, and the CA had followed those decisions in the present case. Zodiac’s case is that the unamended patent has been retrospectively amended, and that the relevant claims therefore no longer exist, and are deemed never to have existed. It submits that no issue of res judicata arises because that was not the situation considered by the CA.

JUDGMENT

The Supreme Court unanimously allows the appeal and declares that Zodiac are entitled to rely on the amendment of patent in answer to Virgin’s claim for damages on the enquiry. Lord Sumption gives the lead judgment, Lord Neuberger gives a concurring judgment, and the other members of the Court agree with both judgments. 

REASONS FOR THE JUDGMENT

After a review of the law of res judicata [17-26], the Court gives two related reasons why Zodiac cannot be precluded from relying on the decision of the TBA on the enquiry as to damages. One is that it is relying on the more limited terms of a different patent which, by virtue of the TBA’s decision, must at the time of the enquiry be treated as the one that existed at the relevant time, whereas the unamended patent, relied on by Virgin, must be treated as if it had never existed. The second reason is that Zodiac is not seeking to reopen the validity of the relevant claims, which was one of the questions determined by the CA. The invalidity of those claims may be the reason the TBA amended the patent, but Zodiac is relying on the mere fact of amendment, not the reasons why it happened [27, 53, 54].

The CA reached a different conclusion because it followed a line of cases holding that a patentee, whose patent (in proceedings against a particular defendant) is found to be valid and infringed, is entitled to claim damages from the defendant for the infringement without regard to a subsequent revocation of the patent, even though as a matter of English law the revocation of  a patent for invalidity relates back to the date of grant [28, 48]. 

The Court holds that this line of cases was wrongly decided. Their major fallacy is the assumption that cause of action estoppel was absolute generally rather than absolute only as regards points actually determined by the earlier decision. Accordingly, the decisions in those cases had no regard to the fact that the consequences of the patent’s subsequent revocation had not been, and could not have been, determined, or even taken into account, in the earlier decision, because it had not happened by the time of that decision. They were also wrong to suppose that, by taking into account the subsequent revocation, a court would be rehearing the question of validity decided by the judgment on liability.

The revocation was a decision in rem determining the status of the patent as against the world [32, 48]. It had been revoked by the authority which had granted it and it must be treated as never having existed. The issue raised on the enquiry was not invalidity but revocation [32].  

Accordingly, where judgment is given in an English court that a patent (whether English or European) is valid and infringed, and that patent is subsequently revoked or amended (whether  n England or at the EPO), the defendant is entitled to rely on the revocation or amendment on  he enquiry as to damages [35].

The Supreme Court also proposed that the current procedural guidelines laid down by the CA,  which propose that the English court should normally refuse to stay its own proceedings if it  would be likely to resolve the question of validity significantly earlier than the EPO, should be re-examined [38, 69]. 

“Making” and repairing

Last week, we bought an intermediate bulk carrier, or IBC as they are affectionately known. It comprises a plastic container, suitable for holding fluids, within a metal cage which makes it a good deal more rigid and durable than would otherwise be the case. You can stack them on top of one another - though we won't be doing that, as it is only needed to hold water for the horses.

The very next day, the Supreme Court gave judgment in Schütz (UK) Ltd v Werit (UK) Ltd (Rev 1) [2013] UKSC 16 (13 March 2013). The case arose from the activities of a company which replaced the plastic bottles (if "bottle" is an apt word for something that contains 1,000 litres) when they reached the end of their useful lives. Did this amount to "making" IBCs, which would infringe the patent, or was it permitted as repairing?

The Supremes decided that replacing the plastic container does not amount to infringement of the patent for the whole article, reversing the Court of Appeal (a late Jacob judgment, if I remember correctly).

Although the court was careful not to get too deeply into the distinction, observing that there might be an overlap between making and repairing, it nevertheless gives us useful guidance on the difference between making and repair, which has not occupied judicial minds much since United Wire Ltd v Screen Repair Services (Scotland) Ltd, [2000] 4 All ER 353, [2001] RPC 24 (was that really so long ago?) and before that the Solar Thompson case: was the bottle a subsidiary part of the IBC, such that its replacement did not involve making a new article?

Obiter, the Supreme Court also talked about the interpretation of section 68 on the effect on infringement actions of non-registration of transactions with a patent which section 33 says must be recorded.

Cable slips his tag again?*

Cable announces step change to turn ideas into growth, says a Patent Office press release of a speech by the Business Secretary on 17 December. It says that he "launched a range of measures that will improve services to business, strengthen enforcement, and help consumers get the most out of creative products and services". At least the writer of the release can execute a parallel construction.
It goes on to say that "[t]he plans, which will involve a step change in the way the Intellectual Property Office (IPO) delivers services, include:

• launching a superfast patent processing service to deliver patents in just 90 days and a faster trade marks examination service which will deliver a full examination report in five days, instead of 10;
• a campaign to educate smaller businesses about getting the best value from their creativity and innovation;
• action to help consumers and young people understand the importance of respect for IP and the harm counterfeiting or illegal downloading can do; and
• working with key partners, such as the City of London Police, to tackle IP crime such as counterfeiting and online piracy."

Oh, please. What on earth is a "step change"? Is it what a body of marching troops do when they switch feet? Is there a risk that the UK will end up out-of-step with everyone else if we do that? And why are we concerned about the Intellectual Property Office (the Patent Office's "trendy but pointless 'operating name'" per Jacob LJ in EI du Pont de Nemours & Co v United Kingdom Intellectual Property Office [2009] EWCA Civ 966) delivering services? I still feel uncomfortable with it doing more than handling grants of patents and registering designs and trade marks and the associated activities like oppositions. Policy work should surely be for the department itself, and promotion and advice is rightly the province of the legal profession (in the widest sense, including patent and trade mark agents). But it will:

... also expand the way it operates, moving beyond just granting rights and do more to support businesses in understanding the opportunities available to them at home and abroad. This will include piloting an IP advisory service for small and medium businesses with high-growth potential. The IPO will work more closely with organisations where businesses already go for advice such as trade associations, UKTI, chambers of commerce, banks and accountants.

The proposal that has attracted most attention is the one to allow super-fast patents (and, to a lesser extent, trade marks), at a price. The IPO apparently argues that patent applicants often need to secure their rights more quickly than the present system permits, and are willing and (in some cases, but probably not SMEs) able to pay for the privilege. Funny - I thought that rights were secured from the filing date ... And is it really right that we should be introducing a premium patent service when the problem of the cost of litigation is so great, and exacerbated by the unitary court proposals?
Moreover (I have started too many sentences with "and"), what is the point of making a UK national patent quick to get when so many patentees want Europeans? Not a rhetorical question - if anyone has an answer please post a comment.
* If you missed the reference, it's explained here. Nice one, Minister.

The patent system almost nobody wants comes a step nearer

The three instruments which together make up the scheme for a unified patent for the European Union are slowly making their way through the legislative process, which seems to get more convoluted as time goes by, and today the Council looks set to take another step towards putting in place what many regard as little more than a further burden on small and medium-sized businesses (see for example this paper by Dr Jochen Pagenberg, probably the most vociferous critic of the scheme).

My own opinion, for what little it is worth, is that the unified patent idea, which looks good on paper, stinks. It is good for Big IP and its lawyers, bad for everyone else, which is a theme you can see running through most developments in the IP worlds at this stage of their development. I recall back in the mid-1980s, when my job at the CBI had the grand title "Head of Commercial Law", no-one really seemed to want the Community Patent Convention: the EPC delivered all the benefits they could ask for, even the big multinationals, but the project clearly has momentum that, eventually, is irresistible.

But I will leave the criticism, for now, to Dr Pagenberg, and make this posting factual. Mostly, anyway. On 19 November COREPER agreed a package, comprising a draft regulation creating the unitary patent which is proceeding on the basis of Enhanced Co-operation a (Euro speak for co-operation between not all the Member States, in this case 25 because Italy and Spain are not taking part), the language regulation, and a 26 member international agreement which will set up a single specialised patent jurisdiction.

The main regulation will create a one stop shop at the European Patent Office in Munich, which will grant patents effective in the 25 member states which are taking part. After a twelve-year transition period, the sort of thing that only the European Union could dream up, there will be a 23 language regime both before and after the patent is granted. Applications may then be filed in any language but processed in English, French or German, and after grant the claims will be translated into 23 languages. Contrary to first appearances, this, it is claimed, will cut translation costs by 80 per cent.

As for the unitary patent court, all the governments at the November council meeting agreed that the seat should be Paris, with satellite courts in London and Munich. The London Court will deal with chemical and pharmaceutical patents and the Munich court with mechanical engineering. That much appears to be fairly non-contentious, the product of a typical Euro horse-trading exercise, but there is a great deal of excitement over changes made to the text in July 2012 on the initiative of the United Kingdom. Articles 6, 7 and 8 of the proposed agreement were deleted, and equivalent provisions added to the parallel international agreement (articles 14 septies to 14 nonies: I think you know you are in trouble when an instrument's numbering gets to bis, let alone septies and nonies, rather like the Z sections in some UK legislation like the Registered Designs Act). Article 6 dealt with the right to prevent third parties from making direct use of an invention, Article 7 with knowingly supplying means relating to an essential element of the invention, and Article 8 to limits on the effect of the single patent. In other words, these three articles described the effect of the granted patent, and deleting them removes from the regulation the essence of what patents are all about. Removing them meant that the Court of Justice could not review infringement matters. The powers of the Court of Justice have been removed and then given to the EU Patent Court, whose authority is therefore boosted. A new article 5bis will throw the matter back to national authorities.

Members of the European Parliament were dismayed at these deletions, saying that it went against the previous agreement that had been reached between the Council and the Parliament and moreover were illegal. Bernard Rapkay MEP, German Social and Democrat member, and the rapporteur for the Legal Affairs Committee (which inevitably in this age of text-speak seems to have become known as JURI), says the removal of these provisions has gutted the enforcement provisions of the regulation and left nothing for the Court of Justice to do (which presumably was exactly what the UK government wanted to achieve). And Mr Rapkay says that the November text appears compatible with EU law and respects the Court of Justice's power to ensure consistent application of the legislation. It also upholds the parliament's right to be involved if the patent rules change. He described the compromise as "sub-optimal", but thought that the Legal Affairs Committee would be able to accept it (see the EP press release here). Nevertheless, the compromise has been criticised by the Greens and European Free Alliance for its lack of legal certainty, with Eva Lichtenberg  MEP (Austria) saying that it ''poses a risk of endless legal proceedings. It is not what we need."

Council is now expected to accept a compromise on the 10th December and Parliament may go on to vote on it in the same week. Then the regulations could be adopted on 21 December and the international agreement signed on 18th February, with the whole package becoming effective when the international agreement is ratified.

While the compromise seeks to deal with the Article 6 to 8 problem, some doubt its effectiveness. The removal of those provisions clearly did not comply with Article 118 TFEU because the deleted articles defined the very substance of the rights conferred by the EU patent. The proposal therefore did not conform to the legal basis set out in the Treaty. The EP declared the removal of those provisions unacceptable and postponed a plenary vote: but placing the same provisions in the international agreement will not work either, according to some critics including the Max Planck Institute. The method of the compromise has also come in for a good deal of criticism. But the bandwagon seems to roll on.