Griffith Hack Clean & Sustainable Technologies

Patent reform: Good or bad for Australia’s clean and sustainable industry? by Justin Blows

The Australian government, through IP Australia, believes that Australian patentability standards are too low, particularly the threshold for inventive step and the level of disclosure required. It argues the case in this recent report. Patents, it is argued, reward invention of sufficient merit by granting a monopoly of limited term in return for a full disclosure of the invention so that others can perform it after the monopoly ceases.

IP Australia believes that now the deal is too favourable for the patentee, especially those of incremental inventions. Consequently, they propose that the inventive step threshold and disclosure requirements be raised.

Will Australian patent reform throw the cleantech baby out with the bathwater?

Will Australian patent reform throw the cleantech baby out with the bathwater?

The wrong patent reform may severely damage both the Australian clean and sustainable technologies industry and the Australian economy. Let’s get this straight: this is a big deal. The biggest economic opportunity for countries like Australia is, in the opinion of economists like Nicolas Stern, a mass exploitation of clean and sustainable technologies. This has the potential to create wealth on the same scale as the introduction of the railways, electricity, cars, and information technology, for example. Some of these technologies are going to be old, like roof insulation and energy efficiency, but others, like solar and green vehicles, will be new technologies. The economic rewards for a vibrant clean and sustainable technologies industry in Australia are potentially very large.

The consultation brings up the contentious topic of patent thickets which are, according to the paper, an overlapping set of patent rights requiring those who wish to commercialise new technology to seek multiple licenses from multiple patentees. The paper notes that patent thickets are most likely to occur in complex technologies. Clean and sustainable technologies – such as the smart grid and solar cells – are complex technologies. Many advances in clean and sustainable technologies are not so much disruptive, as incremental in nature.

Surely, however, that is not to say that the advances do not deserve protection and reward?  The older variants of the technology, for which patent protection has expired, are still available for use, and not locked away. Surely the existence of the older variants ensures that any mark up reflects an increase in efficiency attributable to the patented improvement? Surely this is the right approach, and one that is well argued in the report Are IPR a Barrier to the Transfer of Climate Change Technology. How else would clean and sustainable technology innovation be encouraged? While so called patent thickets are often raised as an issue, in practice these problems are usually solved quite effectively by cross-licensing, creating standard-setting bodies and by developing patent pools where these do not breach competition laws, as is well argued in the report Intellectual property rights: The Catalyst to Deliver Low Carbon Technologies.

The first patent thicket precipitated the Sewing Machine War of the 1850’s. The sewing machine was, in the context of the period a staggering invention, immensely complicated, and of enourmous social and industrial consequence. It mechanized sewing and clothing production, freeing countless seamstresses from appalling working conditions. And, there was a lot of money to be made in the making and selling of sewing machines. This opportunity was not lost on the many inventors that each invented one or more of the approximately ten ‘breakthrough’ elements required to make the machine function.

Would have the sewing machine been invented if each of these inventors had no way of being paid for their individual contribution? As described in this excellent paper by Adam Mossoff, the inventors respective patents allowed them to find their own commercial solution – in this case by pooling their patent together and selling licenses to other manufacturers – which enabled each of the inventors to profit. Could convoluted legislation really find such a creative and satisfactory solution to what is essentially a commercial problem of rewarding inventors or their companies?

Mossoff argues that the current discourse on patent thickets is empirically impoverished and, by implication, disconnected with the commercial realities of getting technology to market. The solution of the Sewing Machine War, for example, reveals the innovative ways in which patent-owners can rescue themselves from commercial gridlock, and in so doing, unleash an explosion in productivity and innovation in a product that was central to the success of the Industrial solution. If legislative change was not needed for the industrial revolution, why is it needed for the clean and sustainable technology revolution?

Indeed, it is often assumed that ‘incremental’ inventions are not as worthy of patent protection, but the story of the Sewing Machine War shows that important innovation happens in a series of seemingly incremental inventions, and that incremental inventions need every bit as much encouragement by the patent system as ‘eureka’ inventions. The powerful personal computers of today are very different from those 25 year ago, but do you remember like I do that the difference from one year to the next was never staggering?  

Raising the bar will make it easier to invalidate a patent but there is no evidence to my knowledge that Australian clean and sustainable technology patents actually suffer from a quality problem. Rather, raising the bar may have the perverse effect of increasing the costs and effort required for obtaining a patent. An attorney may feel obliged to draft a thicker specification containing information that every one knows anyway. The attorney may also need to argue with a patent examiner over legal technicalities that have little connection with the true value of the patent. Raising the bar may also encourage lawyers to ‘have a go’ at a patent on legal technicalities that, again, have little connection with its true value. The reforms may also encourage infringement of patent rights because the infringer will have a greater opportunity to invalidate the patent they infringe. Once it is understood that patent rights have been devalued in Australia, the venture capital essential for the success of many clean and sustainable technology companies will be more difficult to obtain, slowing down the development of the industry.

Rather than aid the clean and sustainable technology industry the reforms have the potential to bog down the industry in patent prosecution and litigation. Perversely, the proposed changes may actually lessen industries’ use of the patent system and decrease the rate of innovation that the patent system seeks to foster, at least for the Clean and sustainable technology industry. This may leave commercially important Australian inventions unprotected. Australian industry is sensitive to patent related costs. Australia may fail to develop its own strong and prosperous clean and sustainable technology industry and the economic benefits and green jobs that it will create. Less patent applications means fewer disclosures of new technologies. Some of these new technologies may instead be kept secret and be forever unavailable to others. This would hinder the diffusion of clean and sustainable technologies during a time when the planet desperately needs them.

One has to wonder whether the backlog of patents waiting to be examined by IP Australia is a major motivation for the proposed changes. Rather than employ enough high quality examiners to enforce the existing patent standards in a timely fashion, is IP Australia being pressured to cut corners and save costs by raising the bar to drive down the number of patent applications filed? That can’t be good for protecting Australia’s clean and sustainable technologies.

How is this for an idea: Why don’t we recognise the very important work IP Australia and its examiners do and give them the support they need for top-notch and timely patent examinations. Australian patent quality may be significantly improved by more rigorous examination against the existing patentability standards, without having to raise the bar.

Finally, for the interested, IP Australia is particularly concerned with the legal concepts of inventive step, full description and fair basis. These can be quite tricky to apply, however all of them are prerequisites for an invention to be patentable. An invention that is not obvious to a Person Skilled in the Art in light of the prior art has an inventive step. The patent specification must describe the invention fully, including the best method known to the applicant of performing the invention. The claims must be fairly based on the matter disclosed in the specification.

Justin Blows


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Patent reforms: an alternative view

The proposed reforms of the Australian government are overdue, and deserve serious consideration by patent users.

It seems an oxymoron that patents both encourage and discourage innovation. Patents encourage innovation by providing a monopoly to reward the efforts of inventors who develop and publish new inventions. Simultaneously patents can discourage innovation by competitors, yet competition is an excellent driver of innovation. Patent law is a balancing act between these two drivers, and the limited terms of patents (a maximum of 20 years) is just one means of seeking a balance.

There are a number of other mechanisms used to achieve the necessary balance. One of these mechanisms is to ensure that the monopoly granted is limited to what has been invented. Currently in Australia an inventor only has to show one example of an type of invention to be able to claim all examples of the type of invention claimed. Under the proposed reforms, protection would be limited to the inventions disclosed in the patent specification, or variations of the claimed invention that do not require ‘undue experimentation’. In simple terms, if you did not think of it, you can’t claim it.

A second important balance is that inventions have to be new and inventive. This immediately raises the question – new and inventive compared to what? Under current Australian patent law a patentable invention has be a) new compared to any earlier patent, public document or commercial usage (publication) anywhere in the world, and b) inventive compared to any prior art publication where a skilled person would have reasonably expected to have ascertained, understood, and regarded as relevant.

This raises the next question – how do you decide what this hypothetical skilled person would have ascertained, understood, and regarded as relevant? How do you see inside this hypothetical person’s mind?

These questions have occupied the minds of many of our best IP lawyers and judges. In 2007 the High Court of Australia ruled that the design of storeroom locks did not count as a prior art publication when considering whether domestic locks were inventive, because it was not proven that the designer of the domestic lock would consider the design of storeroom locks as relevant. While one cannot argue with the way the High Court has applied the law, this outcome can be argued to be absurd – which is a reflection on the underlying law.

In contrast, under the proposed reforms, there would no requirement to prove that a prior art publication was ‘relevant’ for the viewpoint of inventive step. Among other things, this would make an immediate impact on patent examination. Currently, patent examiners are reluctant to raise objections on the grounds of inventive step as it is difficult for them to prove that a prior art publication is relevant. But without this need, we can expect patent examiners to assert that more patents are not inventive during examination.

In practice, the combination of these two reforms (and some other proposed changes) would make patents harder to get and narrower in coverage. My Griffith Hack colleagues are right to suggest that this may increase the burden and likely costs for patent applicants. However most patent applicants are also technology users – and as technology users should benefit from the lower risk of infringing the undeserving patents of others. Genuine innovations, whether in the Cleantech or other areas, are still going to lead to granted patents, and rightly so.

An added benefit of the changes is that they will help to align Australian patent law with patent law in other countries. In the long run there is no inherent reason why patent laws vary around the world, and these variations impose additional costs on inventors and companies who file patents in many countries. Aligning patent laws requires individual countries to give up some of their uniqueness – and Australia’s current patent law in the above areas is unique compared to patent law in major trading partners such as the US, China, UK, Europe and Japan.

There is one further proposed reform worth noting. The Federal Government is also proposing introducing the right to experiment on a patented invention without infringing the patents. In the Cleantech area this might, for example, help a solar cell company develop and test a competitive solar cell in advance of the expiry of a blocking patent. As with the above reforms, this reform will tip the balance towards technology users and away from patent owners. However this particular reform is not necessarily about alignment of Australian patent laws with international norms, as there are few international norms in this area.
Do you think these reforms will affect your business? The first public consultation period for these reforms has just ended, but law reform is a long process. The Federal Government will no doubt welcome your contributions, and Griffith Hack would be pleased to work with you to help to better understand and manage the impacts of any changes once legislated.

Mike Lloyd

Comment by Griffith Hack

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