A New Zealand “innovation (or advancement) patent”? Now distinctly possible. Australia’s second-tier innovation patent regime has been all over the news recently – literally overnight, it went from death row to receiving a stay of execution. Although it is not without its faults, has been prone to certain unintended outcomes and has recently gained some high-profile critics, the Australian innovation patents regime has arguably been relatively successful in stimulating R&D activity (innovation) amongst Australian small-to-medium enterprises (SMEs).

On the other hand, New Zealand has never previously had (or indeed needed) any such second-tier patents regime. Under the outgoing Patents Act 1953, inventive step was not examined, which in effect, meant that one could often obtain a New Zealand standard (20 year) patent for the same “low level” invention that if pursued before the Australian Patent Office may only have been worthy of an innovation (8 year) patent. With the advent of the Patents Act 2013, this is no longer true. In fact, the balance has been effectively reversed.

Introduction

New Zealand’s new Patents Act 2013 (the “new Act”) took effect from 13 September 2014. Any complete application filed in the Intellectual Property Office of New Zealand (IPONZ) following commencement of the new legislation is subject to patentability standards substantially aligned with international norms. Such standards include examination for inventive step and represent a perceptible increase with respect to those prescribed under the outgoing Patents Act 1953 (the “old Act”).

In the absence of a second-tier patents regime in New Zealand, many applications that would have met the standards for patent protection under the old Act stand to be denied protection under the new legislation. In this article, we briefly examine the justification for this legislative gap and consider ways in which the present imbalance may be redressed, should the New Zealand Government wish to do so.

Private Member’s Bill in NZ’s Parliament

Call it coincidence or design, but hot on the heels of recent developments in Australia, a Private Member’s Bill was tabled in New Zealand’s Parliament on 5 April 2018. Introduced by National (liberal, opposition) “list” MP, Dr Parmjeet Parmar (National’s science and innovation spokesperson), the Patents (Advancement Patents) Amendment Bill 2018 (the Bill) purports to install NZ’s answer to Australia’s innovation patent – the “advancement patent”. The General Policy Statement recites:

This Bill seeks to enhance New Zealand’s innovative performance by providing intellectual property protection rights to advancements that are novel, useful and non-obvious that may or may not qualify as an invention for the standard patent. This is by introducing a more accessible, quicker, and cost effective second-tier patient system that provides protection to allow management and exploitation of the advancement with reduced risk. The monopoly of use of the advancement through a cost effective and quicker second-tier patent system will not only provide an opportunity for further advancement activity but, like the standard patent system, the ability to commercialise the advancement without the fear of it being copied”.

The parallels between NZ’s advancement patent and Australia’s innovation patent are thereby readily apparent.

An “advancement step”

Clause 6 of the Bill defines what is meant by an “advancement step”.

An advancement, so far as claimed in a claim, involves an advancement step if—

(a) the advancement is distinctly different from what would be known before the advancement by a person who is—

(i) a skilled worker in the field; but

(ii) has only common general knowledge of the art, having regard to any matter which forms part of the prior art base, and of other related technology, and common general knowledge in other jurisdictions generally; and

(b) the advancement makes a useful improvement to the working of the thing referred to in the claim.

Interestingly, rather than borrow from Australia’s “innovative step” definition, the proposed definition is based upon Danish law – which is itself broadly consistent with the recommendations of Australia’s former Advisory Council on Intellectual Property (ACIP), as handed down in its review of the innovation patent system in May 2015.

An “advancement step” = a 10 year monopoly

One interesting difference between the Australian and proposed New Zealand regimes is that whereas Australia offers only an 8 year monopoly in exchange for providing the public with an “innovation”, the Bill proposes a 10 year term in exchange for an “advancement”.

“Certification” is not an option (it’s compulsory)

Another aspect of Australia’s innovation patents regime that attracts criticism is optional examination (“certification”). As readers will know, an Australian innovation patent isn’t enforceable until such time as it is certified – but if enforcement is not intended or envisaged, there is no requirement for certification to ever be requested; the innovation patent can just sit there, unexamined and unenforceable, for the full 8-year term.

Under New Zealand’s Bill certification/examination can be commenced following the applicant’s request, a third party’s request – or of the Commissioner’s volition. In general, we view this as being consistent with the broad policy evoked under the Patents Act 2013, in which the public interest of having the patentee’s rights established relatively quickly and efficiently are paramount. On the other hand, allowing an advancement patent to go unexamined for 10 years (as it could if Australia’s system was borrowed) creates uncertainty for third parties that is generally inconsistent with the “spirit” of the new Act.

Legislative space for the advancement patent

The three main changes that have been effected under the patentability criteria prescribed by the new Act are: a shift from local to absolute novelty; an extension of the examination criteria to include an assessment of inventive step; and the requirement that a patent specification adequately “supports” the invention claimed (as opposed to the lower standard of fair basis required under the old (1953) Act). In real terms, the patentability threshold has been lifted appreciably and the balance of power in the patent bargain shifted perceptibly in favour of the Government (and third parties).

One consequence of increasing the patentability threshold in New Zealand is that many applications that would have met the criteria for patent protection under the old Act are likely to be denied protection under the new Act. This, in turn raises the question as to whether low-level inventions denied the full benefit of Letters Patent are nonetheless worthy of some measure of protection, for instance, by way of a second-tier regime similar to that of Australia. This, of course, is where the proposed advancement patent fits in.

Following Australia’s lead

One of the goals of any second-tier patent system is to encourage local SMEs to develop low-level or incremental inventions/innovations and market them locally. In the context of New Zealand, the term “locally” can be extended to include Australia, given proximity, trade relations and ongoing Single Economic Market (SEM) reforms between the two. The majority of Australasian (AU/NZ) locals to whom an advancement patent system may be attractive are SMEs that typically require a relatively quick return on investment (which, in turn means less R&D, less “invention”, and thereby less suitability to the standard patent system).

Striking an appropriate balance

The old Act patentability standards enabled many local patentees to get established in the New Zealand market without the threat of direct competition. This facility has been lost under the new Act. On the other hand, the old Act also allowed foreign patentees to do the exact same thing and in so doing, stymied competition and innovation throughout New Zealand. Given that one of the overriding incentives of any patent system is to stimulate economic activity, it may be argued that the new Act should properly contain provisions that protect not only the large corporates by way of standard patents, but also SMEs and the like; the adoption of a New Zealand advancement patent appears a reasonable means to this end.

Trans-Tasman harmonisation initiatives

The SEM harmonisation initiatives were first signalled by the Australian and New Zealand Governments in 2009. However, such reforms are by no means revolutionary. They merely represent the next phase in the ongoing trans-Tasman harmonisation, something that began, in earnest, in the early 1980s.

The end goal of the SEM reforms, as the name would suggest, is to create unitary market conditions on both sides of the Tasman Sea. Save for the common currency and the obvious differences in respect of scale, the SEM reforms seek to develop the Australia-New Zealand common market along European lines. Under SEM conditions, it would be somewhat incongruous to encourage innovation in Australia by way of the Australian innovation patent, but not in New Zealand. As such, the ongoing SEM initiatives actually serve to create pressure toward a New Zealand advancement patent system.

Importantly, within the context of this article, we have used the term “SEM” holistically, to refer to the SEM reforms over all areas of government. Perhaps somewhat ironically, as can be gleaned from our past article, some of the specific patent-related SEM initiatives (SAP/SEP, for instance) are unlikely to eventuate.

Too much too soon?

The new legislation undoubtedly creates scope for the adoption of an advancement patent system in New Zealand. Moreover, the ongoing SEM reforms create impetus for this to occur. However, it is worth noting that a second-tier system of patent protection was actually considered (perhaps all too briefly) during the initial consultation and drafting of New Zealand’s new Act – although it never appeared in any draft legislation. On the other hand, perhaps this is really just a case of “too much too soon”. It is generally accepted that adopting one new patent system will be challenging enough given the virtual revolution that has been required at the IPONZ level; taking on two new systems at once was possibly never an option. On the other hand, given that the Australian and New Zealand economies are becoming increasingly intertwined, there does appear to be some initial impetus in support of the advancement patent.

Australia’s lead does not necessarily take us towards a NZ advancement patent

As readers will know, the future of Australia’s innovation patents regime is presently uncertain. As noted by my colleague in his recent article, there is at least now a chance that it will be retained – albeit most likely in an amended form.

Whether Australia abolishes its innovation patent system, or whether New Zealand establishes an advancement patent system is neither here nor there when considered against the economic imperative that for a common market to truly exist, unitary market conditions are required on both sides of the Tasman. Whether New Zealand follows Australia, or vice versa, remains to be seen.

Summary

Under the old Act, one could essentially take an invention/innovation worthy only of an Australian innovation patent (8 year term) and use it to obtain a New Zealand standard patent (20 year term); this facility has been removed with the advent of the new Act. However, in so doing, a New Zealand patent applicant having only a low-level invention is left with no fallback position, for there is currently no second-tier/innovation patent system.

In this article, we have identified the legislative space for such a system, the economic drivers for its adoption and the harmonisation measures that suggest that such a regime would be a matter of evolution rather than revolution.

Next steps

As noted, the Bill was aired in Parliament for the first time on 5 April 2018. As such, there is a great deal of water to flow under the legislative bridge before any “real” progress is known. Doubtless, NZ parliamentarians will be keeping a close eye on developments across the Tasman in respect of the innovation patent.

Finally, given some of the economic market reasoning alluded to above, my personal feeling is that once the dust has settled, Australia and New Zealand will end up with largely similar patents regimes. Whether this includes or excludes a second-tier innovation/advancement patent remains to be seen. Watch this space.