25 Oct 2012

Patent reform: Time for a step change?

by Richard Hoad, Kezia Adams

IP Australia's proposed changes would in effect return us to the old petty patent system.

So far this year, we have seen some significant changes to patent law introduced by the Raising the Bar reforms and an inquiry by the Productivity Commission into the system for the compulsory licensing of patents in Australia.

Now, IP Australia has proposed major changes to the innovation patent system, and the Federal Government has announced a review of the current extension of term arrangements for pharmaceutical patents.

What’s an innovation patent?

Innovation patents provide a speedy mechanism to obtain patent protection for lower level inventions. The innovation patent system was introduced in 2001 “to protect incremental inventions that may not be inventive enough to warrant standard patent protection and are not covered by design legislation” and was expected to stimulate innovation by small to medium businesses by providing a faster and easier way to obtain patent protection.

Innovation patents are granted after the Patents Office has conducted a simple “formalities check” and without the need for the Patents Office to assess whether the technology claimed in the patent is actually patentable. This means that innovation patents can be obtained relatively quickly. The patentability of an innovation patent is only assessed after it has been granted and when examination is requested by the applicant, a third party or the Commissioner of Patents. Importantly, innovation patents have a lower requirement for inventiveness than applies to standard patents: a patentable invention must involve an “innovative step”, which is a lower standard than the “inventive step” required for standard patents. The trade-off for the lower inventiveness threshold is that innovation patents only provide an eight year term of protection (whereas the duration of a standard patent is 20 years).

Innovation patents replaced the “petty patent” system which operated in Australia between 1979 and 2001. While the petty patent system provided for expedited examination procedures, it had the same validity requirements as the standard patent system and was not well utilised, with an average of only 300 petty patent applications filed each year. The innovation patent system has been much more widely used and, in that sense, has been a great success.

What reforms are proposed to the innovation patent system?

IP Australia has released a consultation paper, Innovation Patents – Raising the Step, calling for submissions on its proposal to raise the threshold for validity for innovation patents to the same level as standard patents (ie. “inventive step”).

If introduced, IP Australia’s proposed changes would significantly increase the requirement for inventiveness for innovation patents. Although the application process for innovation patents would remain significantly faster than for standard patents, innovation patents would have to meet the same inventiveness threshold as standard patents and yet would have a reduced term of protection and be severely limited in the number of “claims” which may be included (innovation patents may only contain a maximum of five claims, whereas the number of claims in a standard patent is unlimited).

This would effectively return us to the petty patent system. It can be expected that the use of the innovation patent system would quickly decline and that innovation patents would soon achieve the same level of irrelevance as petty patents when that system was repealed.

IP Australia’s timing is highly unusual given that there is already a pending inquiry into the innovation patent system being undertaken by the Advisory Council on Intellectual Property, which is due to next year. There may be a case for reform of the innovation patent system. In particular, the way in which the “innovative step” requirement has been interpreted by the courts could be said to set the bar too low. However, any move towards a wholesale reform of the innovation patent system before that report is released would seem to be an unnecessarily hasty move.

IP Australia cites two reasons for the need for urgent reform:

  • the potential for “evergreening” (ie. use of an innovation patent to effectively increase the duration of protection of an invention claimed in an earlier patent); and 
  • the disparity between the standard of inventiveness required for standard patents and innovation patents following the Raising the Bar reforms.

Submissions to IP Australia are due on 25 October 2012.

What’s the law relating to extensions of term for pharmaceutical patents?

As noted above, the duration of a standard patent is 20 years. However, the Patents Act provides for an extension of term of up to five years for certain pharmaceutical patents.

Patentees can seek an extension for a pharmaceutical patent where the specification discloses:

  • a pharmaceutical substance per se; or 
  • a pharmaceutical substance that is produced by the use of recombinant DNA technology.

In those circumstances, the patentee may seek an extension of term for a period based on the time taken to obtain regulatory approvals for the patented product (but not for a period greater than five years). The extension regime is designed to recognise that, compared with other types of patents, pharmaceutical patents have a shorter effective life, because the extensive testing and regulatory approval processes mean that new pharmaceutical products often enter the market many years after a patent is granted.

What is the scope of the review into the pharmaceutical extension of term laws?

The Government has announced that it has commissioned an expert panel to review the appropriateness of the extension for pharmaceutical patents.

The review will “evaluate whether the system for pharmaceutical patents is effectively balancing the objectives of securing timely access to competitively priced pharmaceuticals, fostering innovation and supporting employment in research and industry.”

As part of the process, the panel will have regard to the following:

  • The availability of competitively priced pharmaceuticals in the Australian market;
  • The role of Australia's patent system in fostering innovation and hence to bringing new pharmaceuticals and medical technologies to the market;
  • The role of the patent system in providing employment and investment in research and industry;
  • The range of international approaches to extensions of term and arrangements for pharmaceutical inventions;
  • Australia's obligations under international agreements (including free trade agreements and the World Trade Organisation agreements);
  • Australia's position as a net importer of patents and medicines.

The review will include a public consultation process, with the final report to be provided to the Government in April 2013.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.