IP Australia is proposing to terminate the innovation patent system, with an 8 year phase out.

The innovation patent system introduced to Australia by the Government in 2001, was intended to primarily benefit small and medium enterprises (SMEs) by providing patent protection for incremental/iterative innovations. This second tier ‘utility type’ patent is distinct from standard patents used to protect inventions.

In recent years the Australian government (through IP Australia), proposed terminating the innovation patent system based on recommendations made by the (now defunct) Advisory Council for IP (ACIP) and the Productivity Commission. In 2018 IP Australia released an Intellectual Property Laws Amendment Bill (Part 2) (Bill) which it intends to submit to Parliament sometime this year. This Bill proposes a phase out of the innovation patent system. Once the Bill is introduced, opposing the abolishment of the innovation patent system will need to take place within Parliament.

Although the proposed phase-out is gradual - so as not to affect existing patent rights holders, it does propose a date of commencement after which no innovation patents (with a priority date post this commencement) would be enforceable after certification. Despite being unenforceable, innovation patents could continue to be filed and granted.

A final phase-out date of 8 years from the date of commencement would allow all innovation patents filed before the date of commencement to be valid and fully enforceable after certification for their entire duration of 8 years. The bill will also allow innovation patents that have been converted from standard patent applications (filed pre-commencement date) and divisional innovation patents which have been filed from a parent standard or innovation patent application (filed pre-commencement date) to be valid and enforceable after certification.

Innovation patents can provide a quicker, more accessible and cost-effective process compared with the standard patent system. Innovation patents are automatically granted (pending a formalities review) with an optional examination and a short 3 to 6-month timeframe from filing to certification. Innovation patents also have a lower-tier innovative step requirement rather than inventive step (standard patent), an 8-year term (as opposed to 20), and no pre-grant opposition. However, innovation patents only allow for 5 claims at certification; significantly less than the 20 claims allowable on a standard patent. Once an innovation is examined and certified the same infringement remedies apply as those of a standard patent, which can make innovation patents legally strong.

Practical considerations

Depending on your perspective, the characteristics of an innovation patent can be viewed as either advantageous or disadvantageous. For example, according to the Productivity Commission review report, the automatic grant has been used by some applicants to obtain a ‘granted patent’ to support grant applications with no intention of requesting examination.

Litigants (such as Apple Inc) use innovation patents as part of a commercial strategy based on obtaining a certified innovation patent within as little as 3 months from filing. This strategy involves identifying pending Australian standard patent applications within Apple’s portfolio which are less than 8 years old that disclose features found in the litigation targets product. Narrow claims can then be tailored based on the disclosure in the standard patent specification that capture the infringer’s product and at least one divisional innovation patent filed with these narrow claims before the existing standard ‘parent’ patent application gets granted.

These narrow claims are more likely certified and enforceable and are less likely to be revoked in counter-claims for invalidity as the common ground of lack of inventive step used for standard patent invalidity claims cannot be used.

Alternatively, it is possible to run standard and innovation patents in parallel (for the same technology) providing the claim scope is different and that it provides an enforceable patent right while the standard patent is in the application process.

A further strategy relies on the ability to convert standard patents to an innovation patent without fees which can have useful commercial implications. For example, converting a standard patent to an innovation patent after receiving an examination report which has adverse objections on lack of inventive step.

When the Bill’s proposed phase-out is passed into law (the likeliest outcome) and a commencement date is set, we are likely to see a significant spike in innovation patent filings before the final deadline. This echoes what occurred in New Zealand, with the 1953-Act standard patent phase-out before the final deadline (13 September 2014) as patentees availed themselves of the innovation patent facility while it still existed.