Discuss about the Analysis of Innovation Patents.
Intellectual Property, or IP, refers to the intangible properties which are created by the use of creativity and intellect of a being. The owner of such property has the monopoly over the intellectual property. IPRs, or Intellectual Property Rights, are the protections which are granted to the owners/creators of the IP. These protections are provided in the form of copyrights, trademarks, patents, trade secrets, and industrial design rights. In the following parts, a discussion has been made on the rationale for providing the protection to the innovation patents in Australia. Further, an understanding has also been attained over the productivity commission recommendation, regarding the abolition of innovation patents.
A patent in Australia provides a legal right, to prohibit or stop any third party from using, manufacturing or selling an invention in the country. Also, such patent can be provided as a license to someone else, to produce the invention on the predefined terms. The patents in Australia are administered by the Patent Office of IP Australia[1].
Two types of patents are granted in Australia, the standard patent and the innovation patent[2]. A standard patent provides the control and long-term protection over the invention. From the date of filing the application for a standard patent, it lasts for tenure of 20 years and in the case of pharmaceutical substances, this tenure is for 25 years[3].
To attain a standard patent, the invention has to be new, it must involve an inventive step, and lastly, it should have the ability to be used or made in an industry. An obvious thing, which can be done by anyone with experience or knowledge of the relevant field of invention, cannot be termed as an inventive step. The invention has to be dissimilar in some form, from the existing technology. And such dissimilarity has to be something other than a mere application of the available information. Before granting a standard patent, the application is thoroughly examined to ensure that the legislative requirements are met with. Such examination can take anywhere between six months to a number of years, depending upon the kind of protection and the relevant circumstances[4].
An invention, which requires protection, but has a shorter market life and which can be superseded by newer inventions, is granted the innovation patent. Such patents last for a period of 8 years[5] and are provided to such inventions, which do not meet the inventive threshold that are required for the standard patents.
Innovative patents are comparatively inexpensive and a quicker medium to attain a protection for the new process, method, substance or device. Such patents require innovative steps instead of the inventive steps. Such an innovative step is taken, when the said invention is dissimilar from the previous known inventions, and this dissimilarity makes a considerable difference to the working of this invention. These innovation patents shield the incremental progression on the existing technology, instead of providing a revolutionary invention. Such patents are generally granted within the month of filing of the application. The reason behind the quickness is that these patents do not require an examination before being granted.
Only after the examination and certification of innovative patents, on the basis of requirements stated in the Patents Act 1990, by the Patent Office of IP Australia[6], the patent is legally enforceable. Such examinations take place only when it is requested by a third party or the patentee or if the Commissioner of Patents decides to carry out the examination of the patent. Further, until a patentee is required to pay for the examination, he is not required to contribute in this matter[7]. A crucial advantage that the innovation patent has over the standard patent is that the former one is easier to defend, especially in such cases where the prospective innovation shows an obvious improvement over the existing technologies.
An Australian Patent only provides protection to the patent in the country. To obtain protection in other countries, the innovator has to file a separate patent application for each of the countries where the protection is sought. Other than that an innovator can file a single application as per the Patent Cooperation Treaty (PCT), which is managed by the World Intellectual Property Organization (WIPO)[8]. By applying for a patent as per the PCT, an application is automatically made in 148 countries, which includes Australia and such PCT application than takes form of a standard patent. In each of the methods, a separate patent application is filed in the applied country(s). By using the PCT application, a convenience is gained by filing patents in numerous countries through a single application. Such application undergoes the examination process, as stated in the standards which are accepted by the 148 countries, and who are the signatories to the PCT. A priority document can be attained for a PCT application through an Australian provisional application, if the PCT application is submitted within 12 months of the submission of such provisional application[9].
Patents are considered to be a very expensive mean to safeguard an invention but it is necessary nonetheless. Patents act as a significant asset for the companies and to safeguard this asset, in the growing competitive world, filing a patent is necessary. In 1997, IBM received 1800 (approx.) patents[10]. In 1998, this number increased to 2700[11]. This increase clearly establishes that IBM understood the importance of protecting the innovative ideas and the best method to do this, in a cost effective way, is a patent. To put it in other words, if a patent owner wants to reap benefits of the innovation, the owner would like to have exclusive rights over such innovation, so that others are unable to replicate it. Further, if a small inventor wants to sell the innovation to larger companies, the innovation has to be protected. Without a patent on such innovation, no company would buy the innovation from such an inventor.
An innovation patent provides an exclusive right to the owner to use and exploit the innovation for a period of 8 years from the date of filing. By gaining the exclusive rights, the innovator is in a position to prevent others from using the innovation commercially, which helps in reducing the competition, as well as, in establishing himself in the market as an eminent player[12]. Further, these exclusive rights help in commercializing the innovation and earning high returns on the investments, which were made to develop the innovative product. The other option available with an investor is a license. By licensing or even selling the innovation, a source of income can be guaranteed.
The innovation patents not only provide a cost-effective and faster way to protect the innovation but also help in reduction of the commercial and financial risks involved in the process of research and development of such innovation. Further, an innovation patent allows the innovator to protect each and every stage of the development of the said invention. Such patents have a broad coverage, as an innovation patent can be taken on any subject matter, as long as it does not involve animals and plants[13]. Innovative patents, even though are for a shorter duration and do not require an examination until necessary, do provide a powerful protection against any infringement, as are available for an infringement of standard patents, in the form of damages and injunctions.
The innovative patent is granted[14] under the section 62 of the Patents Act, 1990 (Act). The exclusive rights[15] relating to the hire, sell, make or disposing off the product are given in the Section 13 of the Act. Section 122 of this Act provides the relief[16] in case of an infringement of a patent in form of accounts of profits, injunctions and damages. The requirements of innovation or novelty[17] are stated in the Sections 1A and 18(1) of this Act. Also, the requirement for an innovation patent is for an innovative step, instead of an inventive step[18]. Innovative patents are published within a matter of weeks[19]. Further, it is optional to get the examination done as per the Act and the right is actionable only after getting the patent certified, after due examination[20]. The Act allows only 5 claims in order to attain an innovative patent[21].
The key to obtaining an innovation patent is the standard of the innovative step or the inventiveness of the patent applied for. The first test for establishing the innovative step was given in the case of Griffins v Isaacs[22] where the judges held that an invention has to involve an innovative step and where the invention differs on a single act or reference, it would not make a considerable contribution to the working of the invention. And so, in this case, the patent was quashed for the lack of innovation, in spite of the differentiation from the earlier act, as the differentiation did not make a considerable contribution to the functioning of the object.
The initial decision regarding what is to be considered as an innovative step was given in the case of Delnorth v Dura-post[23]. This case provided the steps to determine if an innovative step was involved in a case, or not. These included that a comparison should be drawn between each of the claim and the differences should be determined. These differences should than be seen through the eyes of a skilled person, who has the relevant knowledge of the field, in the light of general common knowledge, as was present in the country before the claim was made. Lastly, establish whether the invention that has been claimed differs from the previous art in a way which makes a considerable contribution to the functioning of the object, or not. The court relied on the provisions of the Patents Act, 1990, stated under the sub-sections 7(4) & 7(5) to provide the stated steps in this case.
The decision of this case, along with the ensuing decisions of cases like Mizzi Family Holdings v Morellini[24], Seafood Innovations v Richard Bass[25], SNF v Ciba[26] made the matter of challenging the validity of an innovation, a difficult subject, especially when the innovation can be established. In the case of Dynamite Games Pty Limited v Aruze Gaming Australia Pty Limited[27], all the claims (a total of 5 claims were made in this case) were invalidated for the lack of an innovative step.
In 2001, the innovation patent system was formulated to encourage innovation amongst the small to medium business enterprises (SMEs) in Australia[28]. As stated above, such patents provide protection to the lower level inventions which do not fulfill the inventive criteria laid down for a standard patent and are also not covered by the design legislation. In February of 2011, the Advisory Council on Intellectual Property, or as known as the ACIP, was requested to examine the effectiveness of the innovation patent system in stimulation of the innovations to the SMEs in Australia. On this request, ACIP carried out thorough consultations from the public, including the release of an Options Paper as well as an Issues Paper which placed a variety of probable options available, in order to reform the Innovation Patent System. On June 16, 2014[29], the final report of the ACIP was released. Though, due to the lack of any empirical evidence during this examination, ACIP restrained itself from making any recommendations to support the abolition or retention of this system. Even though ACIP had issued a final report, in an expected development, in May 2015, the ACIP issued a statement based on the analysis of data provided by the Chief Economist of the IP Australia’s Office, stating that the innovation patent system was not accomplishing its purpose of inspiring innovation within the SMEs and hence, the government should move forward with the abolition of this system[30].
The Productivity Commission also conducted an inquiry relating to the intellectual property arrangements in Australia. As per the commission, the grant of protection to an invention, in a properly functioning patent system, should only be given if the inventions are socially valuable and are an addition to the inventions and not merely a change, as is done in the case of innovation patents. Further, the commission holds that the present patent system in Australia is not only poorly targeted, but is also failing publically, by allowing the patents to be granted to low-value patents. The Commission is of the view that such innovation patents inhibit the innovation, rather than assisting them for the SMEs.
The Productivity Commission has also issued a draft report which contains certain recommendations to revolutionize the patent system, as well as, the copyrights, trademarks and other intellectual property rights in Australia[31]. These recommendations include the call for abolition of the second-tier innovation patent system in Australia, i.e., the innovation patents; the exclusion of business methods and the software from being the subject matter of a patent; raising the heights for inventiveness of a patent; change in the time regime of extension of a pharmaceutical patent; and an alteration in the structure of the patent fees. Further, the Commission considers that the whole system of innovation patents is flawed as it has been seen in some cases, that such patents have been used strategically, so as to increase the uncertainty regarding the scope of the rights of competitors, or to target the alleged infringers of the standard patents, without promoting any innovation in true sense[32]. And this uncertainty is one of the reasons why the SMEs in Australia, find it difficult to innovate.
As per the commission, the patents are granted very easily in Australia, and so a variety of low-quality patents being granted which negates the innovation. A major recommendation is to amend the section 7(2) as well as section 7(3) of the Act, so as to raise the inventive step threshold. There is also a recommendation to include an object clause in the Act. This object clause should, as per the recommendation, describe the purpose of this Act. And the purpose, as given in the draft, is to enhance the welfare of the Australians by providing protection to such patents which are socially valuable innovations, which would have not taken place otherwise, and also by the promotion of the distribution of technology. The view behind these recommendations is that, the patent system should enable a balance of interests between the applicant, the owners, the user of such technology as well as the fellow researchers and innovators, along with the Australian society, as a whole.
The reason behind the commission’s recommendation for abolition of the innovation patent system is that as per the commission, this system creates hardships over the SMEs regarding innovation and a simple reform of this system would prove insignificant. The Draft Recommendation 7.1 contained that the Government of Australian should abolish the innovation patent system[33]. This recommendation of the Commission was influenced by the final report of the review of the innovation patent system by the Advisory Council on Intellectual Property (ACIP) where a similar consideration was held.
However, the recommendation regarding the abolition of the innovative patent system has not been accepted by everyone. The Australian Chamber of Commerce and Industry is one of such bodies, who have opposed this recommendation. In a draft report submitted in this regard, the Chamber has shown its concern over this recommendation. The Chamber noted through its initial submission that even though this system may not be working well for the SMEs in Australia, but it should still be retained till time an alternative mechanism can be identified, so as to allow the SMEs to access the patent system. The Chamber has welcomed such reforms which would be necessary to retain the innovative patents. The Chamber has also welcomed the reforms relating to the increase in the threshold limit, for meeting the requirements of innovative step, as well as, reducing the incentives, to make a strategic use of this system[34].
On the basis of above analysis, it can be concluded that the innovation patents are a crucial part of the patent world, in Australia. Even though they create difficulties for the SMEs to innovate, but they do provide a quicker and cost-effective way to safeguard an innovation. And hence, the recommendation of abolition of such patent by the Commission is not favorable.
Cases
Dura-Post (Australia) Pty Ltd v Delnorth Pty Ltd [2009] FCAFC 81 (30 June 2009)
Dynamite Games Pty Limited v Aruze Gaming Australia Pty Limited [2013] FCAFC 96
Griffin v Isaacs (1938) 1B IPR 6194
Mizzi Family Holdings v Morellini [2013] FCA 1435
Seafood Innovations v Richard Bass [2011] FCAFC 83
SNF v Ciba [2012] FCAFC 95
Legislation
Patents Act, 1990
Other
Australian Trade and Investment Commission, Australian Government, Australian Intellectual Property laws, 2016 < https://www.austrade.gov.au/International/Invest/Guide-to-investing/Running-a-business/Understanding-Australian-business-regulation/Australian-Intellectual-Property-laws>
National Inventor Fraud Center, Patent Protection, 2016 <https://www.inventorfraud.com/PatentProtection.aspx>
World Intellectual Property Organization, Reasons for Patenting Your Inventions, 2016 <https://www.wipo.int/sme/en/ip_business/importance/reasons.htm>
IP Australia, Australian Government, Review of the Innovation Patent System, 21 April 2016 < https://www.ipaustralia.gov.au/about-us/public-consultations/archive-of-ip-reviews/ip-reviews/Review-of-the-Innovation-Patent-System>
Brendan Nugent, Australia’s Productivity Commission recommends sweeping changes to systems for protection of intellectual property, 06 May 2016 < https://www.ajpark.com/ip-central/news-articles/2016/05/australias-productivity-commission-recommends-sweeping-changes-to-systems-for-protection-of-intellectual-property/>
Michelle Lee, Gideon Van Rensburg and Edward Genocchio, Australia Update: Productivity Commission Report – Draft Recommendations Relating To Patents, 17 May, 2016 < https://www.spruson.com/australia-update-productivity-commission-report-draft-recommendations-relating-to-patents/>
Australian Chamber of Commerce and Industry, Productivity Commission Inquiry into Intellectual Property Arrangements, 17 June 2016 < https://www.acci.asn.au/sites/default/files/uploaded-content/field_f_content_file/pc_inquiry_into_ip_draft_report_submission_june_2016.pdf>
Ray Hind, Innovation Patents – Sticking The Boot In, 18 June, 2015 < https://www.davies.com.au/ip-news/innovation-patents-sticking-the-boot-in>
Edith Hamilton and Mark Roberts, Have Your Say By 3 June 2016 On Australia’s Patent System, 13 May, 2016 < https://www.davies.com.au/ip-news/have-your-say-by-3-june-2016-on-the-productivity-commissions-draft-report-o>
IP Australia, Australian Government, Types of patents, 30 May, 2016 <https://www.ipaustralia.gov.au/patents/understanding-patents/types-patents>
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