In 2014, I wrote an article entitled "Innovation patents – useful but unloved by some" in which I discussed the Report published in May 2014 of the review of the innovation patent system carried out by the Advisory Council on Intellectual Property (ACIP).
In the Report, ACIP was unable to make any recommendations as to whether to abolish or retain the system in its current form, but it did make some recommendations as to how the patentability threshold for innovation patents might be raised in order to address concerns about the low threshold currently in place.
The reason why no recommendations were made either for the retention or abolition of the innovation patent system, was that ACIP was unable to derive any empirical evidence to enable an assessment to be made of how effectively the system was meeting one of the original objectives, which was to stimulate innovation, particularly from SMEs, by offering protection for relatively low-level inventions.
Although the Report was a final report, in an unprecedented development, ACIP issued a statement in May 2015, based on analysis of data by IP Australia's Office of the Chief Economist, that the innovation patent system is not achieving the objective of stimulating innovation amongst SMEs and that government should therefore consider abolishing the system.
When writing my original article, I considered that one organisation which appeared to be lacking in affection was IP Australia. The latest statement based on the analysis undertaken by IP Australia would seem to confirm that view.
IP Australia's "Raising the Step" paper on innovation patents
In September 2012, IP Australia under its then Director General, Phillip Noonan, issued a consultation paper "Innovation patents – raising the step". Motivation for that was the low level innovative step threshold for innovation patents. The paper proposed a radical solution by requiring a non-obvious inventive step, essentially the same test as applicable to standard patents. If that proposal had been adopted it would have removed most of the value of innovation patents in protecting low level inventions and would have rendered the system almost worthless. Although from the public perception at least, that consultation paper appeared to have sunk without trace, the attitudes which drove that paper appear now to have resurfaced.
Why were innovation patents introduced? Do they achieve their purpose?
An objective of the innovation patent system, as originally introduced, was to stimulate innovation in Australian SMEs by providing Australian businesses with intellectual property rights for their lower level inventions. Another objective was to provide easier, cheaper and quicker rights.
It seems to the writer incontrovertible that the system in its present form provides very effective protection for lower level inventions. With the current low threshold for innovative step, the innovation patent provides a very strong IP right in the sense that it is much more difficult to invalidate on prior art grounds than is a standard patent, while providing the same relief on infringement as does a standard patent. Unquestionably it also provides easier, cheaper and quicker enforceable rights than does a standard patent. How then does the analysis undertaken by IP Australia's Office of the Chief Economist lead to the recommendation made by ACIP in its recent statement?
The results of the analysis were published in a research paper (IP Australia Economic Research Paper 05). The recent statement by ACIP says the following:
A key finding in this research paper is that Australian SMEs are less likely to use the patent system after filing an innovation patent than a company that has not previously filed an innovation patent. This suggests that innovative activity is not being stimulated among these groups by the innovation patent system.
According to the research paper:
The great majority of Australian SMEs and private inventors appear to gain little benefit from the system … Only 23 SMEs have become moderate users of the innovation patent system … The average SME or private inventor files once and never again (74%), does not receive any enforceable right (83%) and lets their patent expire early because they see its value at less than the $110-$220 cost of renewal (78%). (page 2)
The conclusions drawn can, in polite language, best be described as "extraordinary".
Negative perception of the patent innovation system
Considering first the key finding "that Australian SMEs are less likely to use the patent system after filing an innovation patent than a company that has not previously filed an innovation patent". What is "wrong" with the system that supposedly engenders that attitude?
As noted above, the innovation patent system can provide a very strong protective right that can be granted and certified in a condition for enforcement very quickly, sometimes in just a matter of weeks after filing, and the associated costs are undoubtedly less than those for obtaining a standard patent.
Quite plainly the system fulfils its role in protecting lower level inventions quickly and at less cost than the standard patent system. It seems to the writer that the negativity likely arises from lack of evidence of commercial success for the invention which is the subject of the patent. Another potential negative might be the cost of enforcement. However, both of these factors are issues that affect all patents, not just innovation patents.
The benefits of the innovation patent system for SMEs
I consider now the quoted statement from the research paper that the great majority of SMEs and private inventors appear to gain little benefit from the system. In the writer's experience of working with with SMEs over several decades, many tend to innovate on an irregular basis, as and when the need arises, and innovation patents have been a useful vehicle for them in securing protection.
Indeed many seem to be quite grateful that this type of protection is available to them. Private inventors fall into rather a different category. The first flush of enthusiasm can soon diminish when they face difficulties in commercialising the invention or in obtaining funding for further development and so forth. The fact that many let their patent expire early because they see its value at less than the cost of renewal, says to the writer everything about the invention, the subject of the patent, rather than the ineffectiveness of the innovation patent system.
ACIP’s latest statement
It does seem extraordinary that this statement by ACIP has been released just on the basic of data, economic data at that, primarily from one source. Economic data can be interpreted in a variety of ways, whether to justify or not the building of a road tunnel or rail link according to the desires of the government of the day. Is it too cynical to suggest that the issues here are no different?