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Monday, September 21, 2015

We've created a monster! Government looks to do away with innovation patents

By Emily Cravigan, Associate

Although under scrutiny for some years, things really started to get dicey for the innovation patent system in May of this year, when the Advisory Council on Intellectual Property (ACIP) recommended that the government consider abolishing it altogether. IP Australia is now seeking public submissions on the recommendation by 28 September 2015.

A long review process

Readers of this blog will be familiar with innovation patents – they are the faster, cheaper and more accessible alternative to the standard patent, introduced to encourage innovation amongst small to medium enterprises (SMEs) by providing protection for innovations that may not meet the higher inventive step threshold requirement for standard patents.

The innovation patent has been poked, prodded and probed for some time now. Back in 2011, the Department for Innovation, Industry, Science and Research, concerned about potential misuse, asked ACIP to investigate whether the innovation patent system was meeting its intended objective of stimulating innovation amongst small Australian players. Although ACIP spent three years conducting its review (including by commissioning its own research), its final report was inconclusive - ACIP was unable to recommend whether the system should be kept or done away with.

A year later, IP Australia's Office of the Chief Economist published its report on the subject, The Economic Impact of Innovation Patents, analysing recently released Intellectual Property Government Open Data (IPGOD). Innovation patents, the report said, are not stimulating innovation amongst Australian SMEs - what's more, they are actually imposing an overall net cost on SMEs.

ACIP found this new analysis so compelling that it published a statement as a corrigendum to its report that ACIP considers it likely that the innovation patent system is not achieving its objective and the Government should therefore consider abolishing the system.

Is ACIP's recommendation a little rash?

In the IP Australia report, the low level of repeated use of innovation patents by SMEs has been interpreted that the innovation patent is failing to encourage SMEs to innovate. The report also warns that it is large companies (for example, repeat users like Apple) which are the winners in the system, with smaller players gaining little benefit but copping unreasonable regulatory costs.

A number of commentators have questioned IP Australia's methodology and the report does raise additional questions. For example, although the report concludes that the system is of little value to small players given that the average Australian SME or private inventor files once and never again (74 per cent), does not receive any enforceable right (83 per cent) and lets their patent expire early (78 per cent), the report does not address how these figures compare to the statistics for standard patents, and whether any variance might be entirely natural. It seems odd to create an IP protection system with a lower bar to entry to encourage small players to participate, and then abolish that system because the patents filed by the participants (confirmed to be mainly smaller, Australian players) do not as often result in enforceable rights. Perhaps the statistics cited are unsurprising given that innovation patents are granted without examination and optional certification for enforcement requires additional costs. Smaller players are less likely to commit resources to certify their innovation patents where enforcement is not required and are more likely to apply for only one or two lower-quality patents for inventions that may be at an earlier stage of development. This of itself does not mean that the system does not benefit smaller players – particularly for those that hold the 19 per cent of all filed innovation patents that are certified and enforceable (as noted in ACIP's original report).

ACIP's seemingly quick acceptance of IP Australia's analysis is another complicating factor. After spending three years looking for the answers (and unable to reach a conclusion), ACIP provided very little explanation as to how or why it was able to agree so wholeheartedly with the findings of the IP Australia report.

In light of all this, ACIP's recommendation that the government consider abolishing the innovation patent system seems a little rash. Perhaps the more sensible recommendation would have been to consider amending the system to ensure it meets its policy objectives and benefits the Australian economy as a whole. Plenty of ideas about how to improve the system have been proposed (even ACIP's original report contains a number of recommendations).

Submissions due 28 September 2015

Organisations that rely on innovation patents, or are affected by the innovation patent system, should consider making a submission to IP Australia. Please get in touch with us if you would like our help in this regard.  

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