New Zealand’s Patents Bill has its second parliamentary reading

New Zealand’s Patents Bill 2008 has finally had its second Parliamentary Reading. Ironically, however, it is probably further from being passed into law than it was prior to this second Reading.

On 12 September 2012, more than three years after its first Reading, the Patents Bill 2008 was approved by a clear majority of the House. However, to assume therefore that there was a majority consensus as to the content of the Bill would be incorrect.

As many of our recent articles have suggested, the “major” point of controversy with the Bill in its present form is the so-called “software exclusion”. Without wishing to revisit the chain of events leading to the various proposed forms of the exclusion, the three options presented to the Government recite:

  1. A computer program is not a patentable invention.
  2. A computer program is not an invention for the purposes of this Act [however, this] prevents anything from being an invention for the purposes of this Act only to the extent that a patent or an application relates to a computer program as such.
  3. A computer program is not an invention for the purposes of this Act [however, this] does not prevent an invention that makes use of an embedded computer program from being patentable.

Each of these options has issues:

  • Option 1 appears to fall foul of TRIPs Article 27 – and has been specifically identified by the US Government as being an impediment to the forthcoming NZ-US Free Trade Agreement negotiations.
  • Option 2 serves to (selectively) import nearly four decades of EPO case law as to the parameters of “as such”; such selectivity has been openly criticised by the European Union. Moreover, within days of this proposal being released, more than a thousand New Zealand software developers signed a petition vehemently opposing it.
  • Option 3 requires a line in the sand to be drawn between software and embedded software. Four decades of EPO case law has been unable to achieve this – and so to adopt such a clause is surely akin to opening a can of worms.

In line with New Zealand’s legislative process, the Bill would usually now be passed to a Parliamentary Select Committee for further consideration. However, as reported previously, the Minister responsible for this legislation has indicated that this will not happen:

“I do not see any justification for delaying passage of the Patents Bill further, particularly given the benefits to New Zealand in having modern patent legislation”.

At the time of writing, it is uncertain whether the Bill will now be referred to a Select Committee for further consideration; the Minister’s previous statement hints that it won’t, whereas the controversy surround the software exclusion hints that it may. Watch this space.

Whereas the Government had previously stated that passage of the Patents Bill was a genuine priority, one cannot help but feel that the controversy over the form of the software exclusion will stymie this intention. Not only will a further Select Committee stage take much time and effort, but the major Opposition party (Labour) has now indicated that despite supporting the Bill yesterday in Parliament, they will oppose it in its third Reading so long as the “as such” exclusion remains. Moreover, given the make-up of New Zealand’s Parliament, they believe that they could have the numbers to “shoot down” the Bill if necessary.

Whilst the final form of the software exclusion is anyone’s guess, there are several less controversial (or even non-controversial) provisions that seem certain to be enacted in their present form. As summarised below, the Bill is essentially a hybrid of the current Australian and United Kingdom legislation and is essentially as per its initial exposure draft of December 2004, with the significant addition of a statutory Experimental Use Exception to patent infringement. This had been the subject of a separate government review, but given the interim period, was consumed within the broader reforms.

A brief synopsis of some of the more significant upcoming changes includes:

  1. Replacement of the current local novelty standard with absolute novelty.
  2. Examination will be extended to now include an evaluation of inventive step.
  3. “Whole of contents” objections based unpublished applications having an earlier priority date may be made in respect of both novelty and (unlike Australia) inventive step.
  4. A claimed invention must be a “manner of manufacture”, within the meaning of s.6 of the Statute of Monopolies, and “useful”, insofar as it must have “specific, credible, and substantial utility”.
  5. A patent may be refused if its “commercial exploitation” (possibly narrower than mere “use”) is contrary to public policy or morality.
  6. Inventions derived from Māori traditional knowledge, or whose exploitation would be considered contrary to Māori values are denied protection.
  7. Methods of diagnosis will be statutorily excluded from patentability, irrespective of whether such method is part of a surgical procedure. Other specific exclusions include human beings, biological processes for their generation, therapeutic, surgical and diagnostic methods for their treatment, and plant varieties. No specific exclusion is provided for business methods.
  8. An application will be published 18 months from the priority date and damages are accruable for infringement from this point. Publication of an international PCT application is to be treated as a local publication.
  9. Infringement provisions will be expanded to include contributory infringement.
  10. Between publication and grant, a third party may lodge observations as to novelty and/or inventive step.
  11. The grounds of revocation are broadened due to the expansion of the prior art base, as outlined above. Filing for revocation before the Commissioner may become a cost-effective means for challenging a patent’s validity.
  12. The continuing absence of an extension of patent term for pharmaceuticals (itself, the subject of a separate review), in relation to the proposed retention of “springboarding”, and the launch of the Trans-Tasman Therapeutic Products Agency.
  13. Clarification of the employee/employer relationship and derivation of title.
  14. The continued absence of a statutory basis upon which an employee may seek compensation for a commercially successful invention.
  15. Benefit of the doubt to be replaced by a balance of probabilities approach when deciding whether to grant a patent.
  16. Introduction of an Experimental Use Exception: “It is not an infringement to do an act for experimental purposes relating to the subject matter of an invention (which includes determining how the invention works, its scope, or the validity of the claims, or seeking an improvement of the invention) if that act does not unreasonably conflict with normal exploitation of the invention”.
  17. The disclosure requirements for a micro-organism can be met by depositing a specimen in a recognised depositary.
  18. Examiners’ Reports are placed open for public inspection once an application has been accepted.
  19. Grace period of 12 months where the disclosure was without the Inventor’s consent.
  20. Removing the current requirement for New Zealand Inventors to seek the Commissioner’s permission to file a foreign application if they have not already filed a first/priority application in New Zealand.
  21. The new Act will apply to all applications with a complete specification filing date on or after the date of commencement; the Patents Act 1953 will continue to apply to all applications with a complete specification filing date before the date of commencement.
  22. Patents granted under the Patents Act 1953 are continued under the Bill, with their existing key dates, term, and grounds for revocation. This is necessary because with the stricter criteria for granting a patent, which means that some patents granted under the current Act would be invalid under the new Act.

We now estimate that the Bill, incorporating at most, only relatively minor changes (other than to the software exclusion), will pass into New Zealand law on 31 December 2013. The complementary Patents Regulations should be made available prior to commencement of the new Act; this will allow the Regulations to give effect to the provisions of the new Act.