Australian IP law reforms to become reality

Shelston IP has previously foreshadowed proposed changes to Australia’s various IP regimes intended to strengthen and improve Australia’s IP system. Having passed unamended through the Senate the Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 was passed by the House of Representatives on 20 March 2012. All that remains now is for the Bill to attain Royal Assent. Once this is achieved (usually a formality), most of the changes prescribed in the Bill will come into effect 12 months later.

The Bill comprises six schedules, each of which addresses one key area:

1.   Raising the bar on the quality of granted Australian patents

2.   Providing freedom of access to patented inventions for the purposes of obtaining regulatory approval and conducting research

3.   Reducing the delays often encountered in resolving patent and trade mark oppositions

4.   Assisting the operation of the IP profession

5.   Improving mechanisms for trade mark and copyright enforcement, and

6.   Simplifying the IP system.

In this article, we briefly examine some of the more salient changes from the dual perspectives of both local and foreign applicants.

1.   Raising the bar on the quality of granted Australian patents

It has been argued that the standard of patentability in Australia has not advanced in step with that of our major trading partners. Rightly or wrongly, there has been a perception that Australian patents have been too easy to obtain; a corollary of this is that a number of granted Australian patents may provide protection for inventions that would not meet the threshold for patentability in other jurisdictions. Such patents, of course, have flow-through effects in that they stifle innovation by not satisfying their end of the patent bargain i.e. the provision of full disclosure of the patented invention to the public. A summary of the changes made in an attempt to address these shortcomings follows:

a)   The criteria by which a prior art document is eligible to be considered for the purposes of inventive step are to change. The changes will remove restrictions on the information and background knowledge taken into account when assessing inventive step. Currently, prior art eligible for the purposes of assessing inventive step must be such that it could reasonably be expected to have been ascertained, understood and regarded as relevant by a person skilled in the relevant art. It will now only be necessary that a skilled person would understand the prior art and regard it as relevant. The expectation that a document be ascertained (i.e., located, which could often be argued around in cases where the publication was, for instance, in an obscure or unrelated journal) will be removed, thereby effectively widening the prior art base.

b)   Secondly, the assessment of the common general knowledge of an ordinary skilled worker in the art will no longer be restricted to Australia, but will be assessed against an undefined but apparently more international standard.This change also has flow-through consequences in relation to (a) above. Previously, the geographical restriction imposed constraints in court and opposition proceedings, where the parties often require expert evidence to establish the bounds of the common general knowledge. The geographical restriction often required the selection of Australian-based experts, even when they may not be best placed to provide this evidence insofar as their expertise or experience is concerned. It also compelled the parties to compete over a relatively small pool of local experts. More complete expert evidence should lead to a higher threshold of patentability for applications passing through examination and opposition.

c)   The changes will extend the present requirement that a patent specification adequately explain how the invention works. An Australian patent must be useful. However, the courts have been reluctant to revoke a patent on the grounds that it does not meet this requirement. Under the new legislation, the patent specification will need to disclose a specific, substantial and credible use for the claimed invention.

d)   The bar will be raised in relation to sufficiency requirements. The changes will now require that the specification disclose the invention in a manner which is clear enough and complete enough for the invention to be performed by a person skilled in the relevant art. This change seeks to ensure that a claim is enabled across its full scope, as compared with the present situation where it is merely necessary to enable something within the scope of the claims.

e)   The idiosyncratic Australian requirement that the claims be fairly based on the description will be replaced with a more generic requirement that the claims find support within the specification. In the recent past, the courts have held that the fair basis requirement was met where the claims were consistent with the body of the specification, when read as a whole. The change clearly seeks to prevent claims that are broader than is justified by the extent of the description, drawings and contribution to the art.

f)   The changes also expand the grounds that can be considered during examination to make the grounds more consistent with those available to the courts. For example, during examination, it will become possible to consider prior use of an invention. Further, all examination criteria will be considered under a balance of probabilities test, rather than the applicant being afforded the benefit of the doubt.

g)   A further consequence of the Bill is likely to be that the amendment of a complete specification will be more heavily restricted, such that the amended specification cannot disclose matter that extends beyond that disclosed originally. Exceptions, of course, will remain in the cases of correcting an obvious mistake or a clerical error. This change seeks to avoid a bizarre anomaly under the present legislation in which patent rights may accrue before the applicant has fully described their invention.

The transitional provisions state that the old, lower patentability standard will be applied to applications where examination has been requested as at the commencement date of the changes (tentatively April 2013), whereas the new, higher standards will be applied to cases for which examination has not yet been requested. Of particular importance is the fact that the category an application falls into at the commencement date will apply to that application throughout its entire lifespan. Not only will cases examined under the old regime have to meet a lower patentability standard, they will be more difficult to invalidate over their lifetime.

We recommend that once the commencement date is known, applicants wishing to enjoy the lower standard of patentability and thus stronger validity over the life of the patent, should consider bringing forward their examination requests. It may even be worthwhile considering bringing forward PCT national phase and Paris Convention filings so that examination can be requested in time.

2.   Providing freedom of access to patented inventions for the purpose of obtaining regulatory approval and conducting research

Patent legislation throughout the world generally provides that one party shall not exploit another’s patented invention. On the other hand, it is widely accepted at common law that experimenting with, or around, such an invention is permissible so long as such experimentation is not commercial in nature. The so-called Experimental Use Exception to patent infringement (EUE) attempts to strike a balance between providing strong and exclusive rights to a patentee (ie, Art.30, TRIPs), while at the same time stimulating innovation, research and development. Naturally, the social, political and economic climate of different countries necessitates a unique line in the sand as to precisely where experimentation ends and exploitation begins.

The Australian Government has been considering enacting a statutory EUE for more than a decade. The Bill provides certainty to researchers and manufacturers and allows them to go about their activities without worrying about the prospect of patent litigation. It also allows R&D funds to be focussed on R&D, rather than patent searches and infringement opinions. Concerns had been raised that the lack of a statutory EUE was hindering Australian research and follow-on innovation. Although it was generally accepted that some form of implicit EUE did exist, this had never been tested in the Australian courts. As a consequence, the existence and scope of any Australian EUE was uncertain – and innovation was arguably suppressed as a consequence.

The Australian EUE will cover work done for experimental purposes relating to the subject matter of the invention. This applies to tests, trials and procedures that a researcher or follow-on innovator undertakes as part of discovering new information or testing a principle or supposition. The exemption covers circumstances where a researcher may be unaware of the existence of the patent, and includes the subject matter of a patent in a larger more complex experiment.

Springboarding has been allowed in Australia for more than a decade in respect of pharmaceutical patents. This allows generic pharmaceutical manufacturers the freedom to apply for regulatory approval of a product without fear of infringing a patent. However, pharmaceuticals are not the only types of patentable product where pre-market regulatory approval is required; agricultural chemicals and certain medical devices also require such approval. The Bill extends springboarding to non-pharmaceutical technologies, removing the present de facto extension of term, ie, the period after patent expiry when competitors wait for regulatory approval and the patentee enjoys an extended monopoly as a result.

EUE and springboarding provisions are distinct from many of the other changes insofar as they will take effect the day after the Bill receives Royal Assent.

3.   Reducing the delays often encountered in resolving patent and trade mark oppositions

The Bill tightens up the procedures for patent and trade mark oppositions and the filing of divisional patent applications. Refining opposition proceedings is considered to better meet their intended purpose as a means for settling disputes relatively quickly and inexpensively. The Bill also restricts the timeframes within which divisional applications can be filed, reducing opportunities for abusive or exploitative use of the system.

a)   PatentsAustralian pre-grant opposition was originally intended to be a relatively quick and inexpensive process that provided a reasonable indication as to what may happen if corresponding proceedings were to be commenced in, for instance, the Federal Court. However, the current system has certain procedural loopholes that sometimes result in oppositions being relatively protracted and expensive. The changes prescribed in the Bill seek to restore that balance and may indeed lead to Australia becoming an even more effective “testing ground” for potential patent litigation overseas.The period within which a divisional application can be made will extend to the end of the time within which a notice of opposition to grant of the parent application can be filed (three months after advertisement of acceptance). This means that an applicant will be unable to file a divisional application once the period for commencing opposition proceedings on the parent application has expired.

b)   Trade MarksThe amendments relating to trade marks are to commence 12 months after Royal Assent is given.The major impact on trade mark practice and procedure concerns changes to the handling of oppositions. These changes will apply to notices of opposition filed on or after the commencement date. Any opposition in progress prior to that date will continue to be handled under the current regime.The objective is to reduce delays in resolution of oppositions so that these types of disputes are settled quickly and inexpensively.As most of the procedural changes are to be made by amendments to the Regulations, we will need to wait until those amendments become available before providing detailed advice.Significantly, an opponent will be required to file a statement of particulars of the grounds to be relied upon in an opposition. This must be filed within one month of filing the opposition. The particulars will need to describe the material facts on which each ground of opposition is based. Failure to file this document will result in dismissal of the opposition. Amendments to a notice of opposition and statement of particulars will also be limited.This means that an opponent will need to use the three-month period after advertisement of an application to research its position, particularly as it appears that grounds for extending the opposition period may also be limited.The other significant change is that the applicant will need to file a notice of intention to defend the opposed application. Failure to do so will result in lapsing of the application. An extension of time will be available to file this notice.It is likely the amendments to the Regulations will also significantly enhance the Registrar’s power to issue directions and control the duration of the evidence phase. Extensions will be tightly controlled and the parties to an opposition will need to act promptly and diligently.

4.   Assisting the operation of the IP profession

The Bill allows Australian patent and trade marks attorneys to incorporate. This gives them greater freedom in their business activities. Presently, there are anomalies between the ways in which patent and trade mark attorneys may conduct their business and the ways in which other professionals can operate – specifically, the legal profession. The Bill allows patent and trade mark attorneys to extend to client-attorney communications the same privilege as presently exists for client-lawyer/solicitor communications.

These changes will come into force 12 months following Royal Assent of the Bill.

5.   Improving mechanisms for trade mark and copyright enforcement

Significant amendments are briefly as follows:

a)    CustomsThe current notice of objection scheme for Customs to seize goods will be amended to close loopholes and make it easier for trade mark owners to obtain information about the exporter and importer. A particularly significant change is that the importer of the seized goods must make a claim for their return, otherwise they will be forfeited to the Commonwealth. This claim must include information which will assist the objector in contacting the importer.

b)   PenaltiesThe penalties for indictable offences are to be raised to be in keeping with similar offences under the Copyright Act.The Court will also be given discretion to award additional damages for flagrant trade mark infringement.

6.   Simplifying the IP system

The Bill does away with many unnecessary procedural hurdles and simplifies the application processes across all forms of registrable IP. These changes are designed to make the Australian IP system easier to use in an increasingly electronic and globalised business environment. In particular:

a)   Presumption of registrability of trade marksThe amendments will make it clear that there is a presumption of registrability when applying all criteria for assessing a trade mark’s capacity to distinguish. The Registrar can raise an objection if satisfied, on the balance of probabilities, that a ground exists for rejecting an application.This is unlikely to materially impact on current practice, but may assist in a borderline case.

b)   Federal Magistrates CourtThe Federal Magistrate’s Court will be given jurisdiction to hear trade mark and design matters.

Concluding Remarks

It could be argued that many of the changes outlined above have been a long time coming. Any changes that remove uncertainty (eg the EUE), promote innovation (eg raising the bar on invalid patents), or streamline cumbersome processes (eg reducing opposition delays) are likely to be welcomed. Of course, it will be more than 12 months before many of the changes take effect – and it will be interesting to observe the effects of these far-reaching changes on our IP landscape over time.