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