A number of years ago IP Australia made an appointment that flew under the radar at the time, but whose impact is now being felt strongly. Since his appointment, the Chief Economist has undertaken a number of reviews aimed at quantifying the economic impact of aspects of the patent system, including most recently, innovation patents.

The innovation patent is a second-tier patent with a lower inventive threshold, lower cost and shorter term than a standard patent. The innovation patent is used to achieve protection for lesser inventions that do not meet the obviousness test that applies to standard patents, but nevertheless making a substantial contribution to the working of a device or process. The policy objective of the innovation patent is to encourage innovation among Australian small and medium sized enterprises (SMEs) by offering protection for this type of innovation. In practice, the innovation patent is also used as a tool in litigation where rapid protection tailored to capture a potential infringement is desirable.

The Australian Council on Intellectual Property (ACIP) published a review of the innovation patent system in 2014. They made recommendations for changes to the system to address many of its perceived flaws. However they withheld any recommendation on the retention or abolition of the innovation patent system as they were unable to obtain empirical evidence as to whether the system stimulate innovation in Australia, or not. The economic review was undertaken to address this point.

The review concluded that the innovation patent system is failing to incentivise SMEs to innovate and is imposing an overall net cost on SMEs. The economic analysis indicates that the private value of innovation patents flows disproportionately to large firms that already file standard patents, with most Australian SMEs and individuals gaining little benefit from the innovation patent system. Further, the low level of repeat use of innovation patents by SMEs suggests that the innovation patent is not fulfilling its policy goal of providing an incentive for Australian SMEs to innovate.

At this point the story takes a strange turn, as ACIP was abolished in the Abbot Government's efforts to reduce costs and slash red tape. Despite this, ACIP issued a corrigendum to their original report indicating that in light of this economic information the Government should consider abolishing the innovation patent system.

IP Australia has now issued a paper which seeks views on ACIP's recommendation that the Government consider abolishing the innovation patent system, and on any potential alternatives to encouraging innovation amongst SMEs.

IP Australia invites interested parties to make written submissions by 28 September 2015.