The government’s controversial plan to abolish innovation patents has been approved by Parliament, in a move branded “very disappointing” and “ridiculous” by the nation’s peak IP body. Innovation patents are now officially dead.
The legislation that scrapped the innovation patents system (IPS), which was meant to offer a cheaper and quicker way for SMEs to trademark innovations that may not qualify for a full patent, was passed by the Senate on Wednesday afternoon with bipartisan support.
The Opposition raised concerns with the “significant gap” that would be left after the scheme was abolished, and successfully moved an amendment extending the grandfathering period to 18 months and requiring an inquiry into the current patents scheme.
The Parliamentary debate saw arguments over the effectiveness of the IPS, with the Coalition saying it had been ineffective and actually undermined innovation, rather than supported it.
Cross-bench senators, meanwhile, claimed them as a low-cost way to promote the development of new technologies.
The Coalition introduced legislation to the Lower House scrapping the scheme in July after it had been recommended by the Productivity Commission in late 2016.
The innovation patent scheme, launched in 2001, allowed companies to protect an incremental advance on existing technology, rather than just a new invention. The patents were valid for a maximum of eight years.
There are currently about 6500 active innovation patents, compared to about 130,000 standard patents. The IPS is most popular in civil engineering, furniture and games, information technology methods for management, and electrical engineering.
But the Productivity Commission found the scheme had become “more harmful than helpful to innovative SMEs”, leading to many “low value innovation patents” that had created uncertainty and been used as “strategically as a litigation tool to target alleged infringers of standard patents”.
The Coalition accepted the recommendation and introduced legislation abolishing the IPS in July.
The legislation was given the green light by the Senate economics committee, despite 42 of the 52 submissions to the inquiry arguing against the move.
The legislation was passed in the Senate on Wednesday afternoon with support from the Opposition.
The Coalition, using evidence from the Productivity Commission and IP Australia, argued the IPS has been ineffective and actually stifled innovation through foreign companies claiming trivial patents.
But Institute of Patent and Trade Mark Attorneys of Australia councillor Dr Grant Shoebridge said this is a “terrible misrepresentation” of the IPS.
“It’s very disappointing to see that the politicians in support of the bill seemed to misunderstand how innovation occurs in Australia. I think Australia has made a decision that it doesn’t want to be innovative,” Dr Shoebridge told InnovationAus.com.
“A lot of innovation occurs incrementally and that’s not going to be protected under the standard patent system. If you’re passionate about innovation then this is a bad day.”
Australian companies will now be discouraged from undertaking innovative activities, Dr Shoebridge.
“When I speak to business owners who use IPS, they say that they won’t bother innovating. When you innovate you need to make an investment in it to bring it to market, and if you don’t have a system that is going to provide you with certainty and protection then they won’t innovate,” he said.
Labor did successfully move an amendment that would extend the IPS scheme for a further six months, meaning it won’t be fully scrapped until 18 months after the bill is commenced.
The amendment also requires the government to undertake a review of the accessibility of patents for SMEs within three months of the legislation coming into effect, focusing on the cost of applying for a patent, processing times and awareness of the scheme.
This will give SMEs more time to prepare for the abolition of the scheme and allow them to present a case for alternative arrangements to the government, Labor senator Lousie Pratt said.
But Dr Shoebridge said another review isn’t nearly enough to ensure the patent system becomes better suited to small businesses.
“To support the bill and say let’s have another review is ridiculous. The government is under no obligation to introduce a revised patent system, I just don’t see that happening,” he said.
Liberal Senator Slade Brockman, who chaired the senate committee into the legislation, spoke in favour of the bill in Parliament, arguing the IPS was failing in its core aim to support innovation in Australia, and was instead being used by larger companies “effectively as a legal black to innovation from smaller companies”.
“It has created an environment that fosters a low level of confidence in SMEs’ ability to innovate. We cannot base our laws on the exception, we must base them on the rule, and the rule is that the IPS is actually reducing the level of innovation,” Senator Brockman said.
“Getting rid of the IPS will reduce the level of trivial and undeserving innovations being covered by our IP system. We want a fairer environment, we want to restore innovation confidence to SMEs.”
Senator Brockman’s contribution was labelled as “monotone and unconvincing” by Centre Alliance Senator Rex Patrick, who attempted to move an amendment that would maintain the innovation patent scheme.
This was swiftly voted down, with both the government and Opposition voting against it.
“You are shutting down a scheme that is useful to Australian companies and it’s not going to save you a brass razoo. This is crazy stuff, it makes no sense to shut down the IPS when it is useful and valued by SMEs, and especially if retaining the system costs you nothing,” Senator Patrick said.
“By shutting it down you are hurting Australian businesses. You are trying to shut them down, you are trying to hurt them. Australia needs to be using every tool at its disposal to facilitate the protection of innovations.”