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Friday, August 30, 2013

NZ Patents Bill heralds international harmony, but limits scope of protection for some computer inventions

By Partner Chris Bird

Five years after its introduction, and after its third reading, the new Patents Bill was passed by the New Zealand Parliament on 27 August 2013.

The story so far

The current New Zealand Patents Act is 60 years old, and was modeled on the now repealed UK Patents Act of 1949. It has a low threshold for patentability compared with most other countries, thus leading to broader patent rights being granted in New Zealand than elsewhere. The new Bill is intended to create a more balanced patent system, in line with other developed countries, and to protect inventions and encourage innovation.

A higher validity threshold

Examination under the new regime will be a lot tougher than under current law. Examiners will now examine for inventive step (non-obviousness). The new prior art base will include matter published or used in New Zealand or anywhere else in the world ie an absolute novelty test.

Several new mechanisms will be introduced to allow third parties to challenge a patent application or a granted patent. These include opposition before grant, re-examination before grant, 'assertions' (ie third party submissions) before acceptance, revocation actions (before the Patent Office or before a court), and re-examination after grant.

Subject matter exclusions

The new law excludes from patentability any invention where commercial exploitation of the invention is contrary to public order or morality. Examples include processes for cloning human beings, modifying the germ line genetic identity of human beings, using human embryos for industrial or commercial purposes, or modifying the genetic identity of animals that is likely to cause them suffering without any substantial medical benefit to human beings or animals.

The Bill further excludes human beings, methods of treatment of human beings, methods of diagnosis by surgery or therapy practiced on human beings, and plant varieties.

A higher hurdle to clear for software inventions

A controversial new clause, clause 15(3A), was added during passage of the Bill in response to submissions received from the open source movement. This clause simply stated that 'a computer program is not a patentable invention', and was criticised by many as creating an unacceptable inconsistency with major trading partners. The exclusion has therefore been the subject of two governmental Supplementary Order Papers (SOPs), which substitute a new clause 10A for clause 15(3A).

Clause 10A provides that the exclusion to computer programs only applies to the extent that a patent claim relates to a computer program 'as such'. Readers will recognise that this echoes European-style 'as such' terminology. However, unlike Europe, New Zealand does not propose to introduce any explicit technical requirement for patentable subject matter, and so we will not know how clause 10(A) will be interpreted until the NZ courts get to grapple with it. Further, the provision makes clear that 'as such' applies only if the actual contribution made by the alleged invention lies solely in it being a computer program, so to ensure that valid patents can still be obtained for embedded software ie ways of operating machines or carrying out processes which are implemented by computer programs. The outcome may be that it becomes difficult to protect pure 'business-method' inventions (for example, programs for performing accounting or management functions, in which general-purpose computers are programmed for newly-devised business processes, but otherwise function precisely in their normal way).

While the amendment aligns the NZ Patents Act more closely with UK and European law, it moves it away from Australian law, which has no such express exclusion. This could create a problem due to the inconsistency with the stated intention by the Australian and New Zealand governments to align their respective IP laws. Having said that, despite the lack of any statutory exclusion, Australian case law is currently moving in a direction which may severely limit the validity of pure 'business-method' patents.

Cultural awareness

The Bill includes provisions recognising the place of Maori as indigenous people, and seeks to protect the interests of Maori in their traditional knowledge.

A Maori Advisory Committee (which also has power with regard to trademark applications which incorporate Maori text or imagery) may advise the Commissioner of Patents on whether an invention claimed in an application is derived from Maori traditional knowledge or from indigenous plants or animals. If so, the Committee will advise whether commercial exploitation of that invention is likely to be contrary to Maori values.

Transitional arrangements

Validity of existing patents and patentability of applications filed before commencement of the new Act will be judged under existing standards. For divisional applications filed out of an 'old Act' patent application, the divisional will still be dealt with under the old Act.

PCT applications entering the New Zealand national phase before commencement of the new Act will enjoy the provisions of the old Act, otherwise the new Act will apply.

Process to commencement

The Patents Bill will receive Royal Assent from New Zealand's Governor-General in due course. This will set a date for commencement of the new Act, providing time for drawing up the necessary regulations.

Impact of the change

First, we would expect to see a rush of applications as the commencement date approaches, with applicants wishing to take advantage of the current more lenient provisions.

Many of the changes in the Patents Bill are long overdue, particularly the introduction of 'absolute novelty' and the inventive step requirement. The myriad of ways to challenge an application or patent will require careful scrutiny by users of the patent system, as there will be various advantages and disadvantages inherent in the different avenues. Raising the patentability standards is likely to require IPONZ to increase the number of patent examiners and their training and resources support, which will mean extra cost. We can therefore expect to see official fees rise.

Overall, the new law is a necessary step for New Zealand, and one to be welcomed. New Zealand patent standards will now be a lot closer to those of its major trading partners, genuine innovations will remain protectable, and the changes should help encourage New Zealand businesses to innovate and to grow.

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