The Patents Act 2013: A triumph for negativism

Doug Calhoun 101X177                 The Patents Act 2013 was thirty years in gestation before its final reading in August. Debates on the Patents Bill were dominated by the controversy over software patents – which overshadowed broader public policy issues considered in this article.

Background

The Industrial Property Advisory Committee, chaired by T.M. Gault QC (as he then was), was appointed in 1983 to review our industrial property laws (the term “intellectual property” did not come into fashion until the 1990s). The Law Commission briefly picked up the baton in 1990. The Ministry of Commerce conducted its own review and published its “Proposed Recommendations” two years later.

The Patents Act 1953 was amended in 1992 to allow New Zealand to join the Patent Cooperation Treaty and again in 1994 to conform to the TRIPS Agreement (Trade Related Aspects of Intellectual Property, one of a suite of agreements that established the World Trade Organisation).

But a planned implementation of the comprehensive 1992 proposals was parked while the Wai 262 claim was being heard.

The process was restarted in 2000, generating several discussion papers and the publication of a draft bill in 2005. The Patents Bill 2008 took another five years.

Policy Issues

The broader public policy issues are:

  • the more rigorous examination of patent applications;
  • the role of patents in innovation; and
  • the continuing divergence between Australia and New Zealand of substantive patent laws.

Rigorous Patent Examination

Under the Patents Act 1953 a patent application is examined to ensure that:

  • it is novel over what has been published in 

New Zealand;

  • what is claimed is fairly based on what is described; and
  • the invention is sufficiently described to enable it to be practised.

These criteria remain under the new Act but, in addition, patent applications will be examined for inventiveness and usefulness – and the prior art base against which novelty and inventiveness are to be judged is anything published or used anywhere in the world.

In 1953, local novelty was significant – it took many months for printed copies of US and UK patent specifications to be available here. But now, with the Internet, publications become available as soon as they are uploaded, so the change to absolute novelty should have little practical effect.

Under the 1953 Act there are three filters to ensure that a patent is valid before it can be enforced against an infringer: the examination filter, the opposition filter, and the post-grant revocation filter.

Each filter has a progressively finer mesh. The examination filter, as noted above, is limited to three grounds and based on prior art located in an examiner’s search. (If the patent application has had an international stage under Patent Co-operation Treaty procedures there will be an international search report and often an examination report to assist.)

The opposition filter allows competitors to object to the granting of a patent on additional grounds. The pleadings can be supported by evidence. The revocation filter allows third parties to seek revocation on the broadest spectrum of grounds with oral evidence and cross-examination before the High Court.

At the examination stage in marginal cases the applicant is given the benefit of any doubt. At the opposition stage the threshold is slightly lower. At the revocation stage the threshold is the balance of probabilities.

Under the 2013 Act the aim is to filter patent applications with the finest mesh at the examination stage. Examiners will examine applications under all the grounds available for revocation.

Decisions are to be made on the balance of probabilities. New procedures will allow third parties to object during the examination stage, to seek re-examination of both accepted applications and granted patents and to seek revocation before the Commissioner of Patents throughout the life of the patent. 

There was an observation in the policy papers that 90% of New Zealand patents are owned by foreigners (followed by the supposed corollary that the benefits of foreign owned patents would flow overseas) – but there was no reference to any studies of the quality of granted patents.

It was apparently assumed that (what amounted to) self-regulation at the examination stage had led to low quality patents. This assumption ignores the checks and balances of the 1953 Act: an invalid patent cannot be enforced. Examination was assumed to be a better check than the threat of unenforceability.

Patents and Innovation

The main purpose of a patent system is to promote investment in innovation. Patents slow down the diffusion of innovation until the original investor has recovered a profit adequate to induce the original investment. By slowing down the diffusion of technical progress there will be more progress to diffuse. Because patents are rooted in that contradiction, there can be no ideally beneficial patent system.

The balance shift made in the 2013 Act is to limit the types of inventions that can be protected by patents (see the exclusions in clauses 10A, 14 and 15 of the Bill) to make it more difficult to obtain patents and easier to challenge them.

Successive governments have struggled to turn Kiwi ingenuity into improved productivity through innovation. The efforts of the current government are found in its Business Growth Agenda (Building Innovation, NZ Government, August 2012).

In none of the studies or policy papers leading up to the Building Innovation report was it ever suggested that too many or low quality patents were a barrier to innovation in New Zealand. And yet the shift in the patent system balance in the 2013 Act is to limit the breadth of patent coverage and to examine them more rigorously.

What is lacking in making a link between innovation and patents is a wider understanding of what patents are and how they may be used in the creation and transfer of technology.

Uniservices concluded as much in a 2010 report, also concluding from a literature review that “the role of patents in facilitating partnerships and exchange between inventors and developers or other financial backers is an area of increasing interest to academics and policy makers alike”.

Patents are the currency of technology transfer. They play an important role in “foreign technology adoption through licensing and royalties, trade and foreign direct investment”.

Technology transfer is a two-way street and patent ownership figures suggest 90% of New Zealand traffic is flowing inwardly – but patent policy sets out to reduce that inward flow. The government response has been to disown the conclusions reached in a report they commissioned. So much for evidence-based whole-of-government policy.

Single trans-Tasman Economic Market

2013 marks the thirtieth anniversary of the CER free trade agreement between Australia and New Zealand. In 2009 the two prime ministers agreed to establish a single economic market (SEM). The label was more ambitious than the content.

Among its goals was the establishment of a joint regulatory regime for patent attorneys, a joint patent filing facility and joint examination of patent applications in both countries for the same invention.

The case for joint regulation of patent attorneys is based largely on administrative convenience dressed up as enhanced competition.

The education and regulation of Australasian patent attorneys will be handled by IP Australia with token input from New Zealand. The main beneficiary will be the Intellectual Property Office of New Zealand (IPONZ).

IPONZ have rid themselves of the task of establishing and running a new regulatory regime for New Zealand attorneys.

Patent attorneys in both countries have competed vigorously with each other since trans-Tasman mutual recognition began in 1998. This will not change.

The single patent filing facility and examination proposal is thinly disguised smoke and mirrors. There will still be two separate offices processing two separate patent applications resulting in two separate national patents.

Those patents will have to be renewed separately in each office and enforced separately in each country. And each will protect the same invention.

Since 1983 Australia and New Zealand have continued to amend their patent laws with little regard for what was being done in the other country. With the 2013 Act some types of inventions that can be patented in Australia, cannot be in New Zealand – an invitation to free ride in New Zealand on inventions patented in Australia. That is hardly a single market.

If one were implementing a true single economic market, one would at least consider whether it would be practical to have a common patent law enforceable in a common court. But instead the SEM mandate was to build limited commonality around two different patent laws.

Conclusions

  • Twenty-five years to get a bill into the house, five more to get it through – inaction by successive governments illustrates the political priority of patent law.
  • In their initial briefing to the Commerce Committee on the Patents Bill, the Ministry of Economic Development recommended:

“The best policy for New Zealand, given what is known about the workings of the patent system, would be to have the strictest criteria for granting a patent that are consistent with our international obligations, and apply these criteria as rigorously as possible.”

It is apparent from the resulting law that this was done.

  • Patent drafters and advisors will have a bonanza of billable hours working out what it all means. Pity about the clients footing their bills.

Doug Calhoun is a retired patent attorney and lawyer. He is on the editorial board of the Intellectual Property Journal of New Zealand, the editor of the newsletter of the New Zealand Institute of Patent Attorneys and a member of the IP Law Reform Committee of the New Zealand Law Society. 

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