IP Australia released a consultation paper on 25 September 2012 about the Australian Government's proposed reform of Australia's second tier innovation patent system.

The Government's calls for urgent reform appears to have been triggered by the ongoing AustralianApple v Samsunglitigation.  Apple's strategy of filing innovation patent applications (many of which are related to corresponding standard patent applications) over the last three to four years has been an integral part of Apple's preparation for the current litigation with Samsung.  Apple has filed over 100 innovation patent applications, over 70 of which are certified and in-force.  In view of the low 'innovative step' requirement for innovation patents, Apple's growing arsenal of certified Australian innovation patents will be particularly problematic for Samsung and other companies who are active in the Australian smartphone and tablet market.

The Government proposes to raise the inventiveness threshold for innovation patents to be the same as standard patents.  The change seeks to address the Government's concerns that the innovation patent system is being used to obtain patent rights for obvious inventions or 'enhancements'.

IP Australia has invited interested parties to make submissions on the consultation paper, but you will need to be quick.  The closing date for submissions is 25 October 2012.

The innovation patent system

The innovation patent system replaced Australia's much maligned petty patent system in 2001 with the aim of better stimulating innovation in Australia's small-medium enterprises (SMEs).

Innovation patents are granted for inventions that involvean innovative step.  An invention is taken to involve an innovative step unless the invention differs from the prior art only 'in ways that make no substantial contribution to the working of the invention'.  The innovative step threshold can be contrasted with the higher obviousness-based threshold ofan inventive stepfor a standard patent.

Some of the other differences between innovation and standard patents include:

  • innovation patents have a maximum term of eight years (maximum term of a standard patent is generally 20 years)
  • innovation patents are limited to five claims
  • innovation patents cannot be for plants and animals, and the biological processes for the generation of plants and animals.

Innovation patents are normally granted within a few weeks of being filed following a basic formalities check.  Unlike a standard patent, an innovation patent is not subject to pre-grant examination or advertisement for opposition purposes.

Before an innovation patent can be enforced, however, it needs to be substantively examined and certified.  The patentee or anyone else can request examination at any time.  Once certified, an innovation patent gives the patentee the same exclusive rights as a standard patent.

The innovation patent system therefore enables innovators to obtain patent rights for inventions that would not reach the inventive step threshold of a standard patent and a design registration (that protects the appearance of a product) would be inadequate, and that are less susceptible to a validity attack.  The system is also cheaper and quicker for patentees, who are typically able to obtain and assert patent rights sooner.

Why the change?

The Government is concerned about the flow-on effects of granting patent rights for obvious enhancements.

The Australian Courts have held that an invention has an innovative step when the differences from the prior art are essentially 'real' or 'of substance'.  So a sort of expanded novelty test.  It is irrelevant whether the differences are obvious.

The Government argues by allowing obvious enhancements to be patented, the innovation patent system has failed to stimulate innovation.  Inappropriate use of the system has instead stifled innovation. The Government identifies two problems in particular.  The first is the potential for evergreening where patentees can extend the life of their patents by validly patenting obvious enhancements to the original invention.  The second is the potential for patent thicketing where patentees create walls of patents that stop others entering, competing and innovating in the market.

Sounds petty...

IP Australia's proposed reforms will essentially take Australia back to the previous second tier, petty patent system that the innovation patent system replaced.

The petty patent was rarely used because of the widely held industry belief that applications for petty patents, as they were then being examined by IP Australia, were required to have essentially the same level of inventive step as standard patents.  In consequence, the petty patent system failed to achieve its goal of incentivising innovation by providing a way for Australia SMEs to commercially exploit lower level inventions.

By now raising the inventive threshold of innovation patents to be the same as standard, an innovation patent will be substantially the same as a standard patent, albeit with a reduced number of claims (5), reduced term (8 years) and reduced subject matter.  The only material advantages over a standard patent will be the potentially quicker grant and ability to enforce rights, and the modest savings on official fees.

ACIP review

Interestingly, IP Australia's review has pre-empted the Advisory Council of Intellectual Property's (ACIP's) review of the innovation patent system that commenced in 2011.  ACIP is currently considering submissions and proposes to release an interim report for further comment in late 2012 and a final report in mid-2013.

Although the Government recognises ACIP's review 'will provide valuable insights and recommendations for improvements', the Government says the need for policy reform is urgent.

The Government's position is consistent with the recently enacted Intellectual Property Laws Amendment (Raising the Bar) Act 2012.  The Act makes many significant changes to Australia's intellectual property laws that come into force on 15 April 2012, including raising the inventive step test for standard patents.  The Government is raising the inventive step test in response to concerns Australian patents are being granted with claims broader than are allowable under the laws of Australia's major trading partners, particularly the US and Europe. 

During public consultation on the changes and passage of the Act, the Australian innovation patent system has been the elephant in the room.

Time for a reformation

It is clear that the innovation patent system needs to be reformed.  Although the current system has many benefits for SMEs (cheaper, quicker, ability to protect lower level inventions), it is open to abuse (evergreening, creation of patent thickets).  What is not so clear is whether the Government has properly considered alternative reforms that could address the existing problems but still meet the objectives of a second tier patent system.

Several alternative reforms to the innovation patent system have been canvassed by the patent attorney profession.  Alternatives include using the existing inventive step test for a standard patent that will be raised (for standard patents) in early 2012, using the same inventive step test as for a standard patent but restricting the prior art base, or limiting available remedies for infringement (for example, place a cap on available damages and/or bar injunctive relief).

ACIP is considering the merits of these and other alternatives.  By not waiting for ACIP to complete its review that has been going on for over a year, however, the Government will effectively kill off Australia's second tier patent system without first considering ACIP's 'valuable insights and recommendations for improvements'.  The review may turn out to be redundant.