Patent experts rail at IP report

Graeme Philipson

If you wanted to comment on the Productivity Commission’s draft report from its inquiry into Australia’s Intellectual Property arrangements, that opportunity has now passed.

The long-anticipated report was released by Government in shadow of Christmas – in fact, less than a week before Santa arrived – having been commissioned by Joe Hockey (remember him?) in September 2013. Comments closed this week.

These things sure do move slowly. Now the Government will consider its response to the report, which may or may not translate into legislation.

The response will be published some time later this year – perhaps. This Government has developed a habit of sitting on these sorts of things.

The inquiry’s aim was to “examine whether Australia has the right balance between promoting competition and protecting intellectual property, while considering our international trade obligations.”

There were over 600 submissions, four roundtables, and six public hearings. We cannot say the issues have not been widely aired.

All avenues for commenting on the report are now closed. At least all official channels. Interested parties can always go public with their reactions to the report and its recommendations, through the press, for example.

And that is just what has happened. Two of Australia’s leading patent attorneys have spoken with expressing their concern with some of the Productivity Commission’s recommendations. They say that, if enacted, the recommendations will have the perverse effect of making Australian less, rather than more, internationally competitive.

“The report is actually at odds with Australia’s National Innovation and Science Agenda,” says Peter Caporn, a Principal with Wrays, which is Australia’s largest independent IP firm.

“In many respects the report is profoundly anti-IP. Of real concern is the pervasive undermining of the rights of innovators to determine how the fruits of their labour may be used, accessed and treated.

“Shouldn’t the rights holder get to determine how their product is consumed?”

Mr Caporn says that the recommendation that Australia’s innovation patent be abolished is a classic case of ‘throwing out the baby with the bathwater’.

“The innovation patent has long been under the microscope after a series of reviews. The patent’s maximum eight year term is granted without substantive examination, the result of lobbying from inventor groups that didn’t want to jump through too many hoops to obtain a granted patent in Australia, and who felt that the previous Petty Patent regime had failed them.

“Now the Productivity Commisionn wants to reverse that. To be enforceable, the innovation patent needs to satisfy an innovative step test, rather than the previous standard patents inventive step test.

“Some people say this too low a hurdle, and that the remedies for the owner of an innovation patent against an infringer are the same as those available to the owner of a standard patent, despite the much shorter term, relative to a standard patent (eight years versus 20 years).

“But that doesn’t mean the innovation patent should be scrapped. There are a number of other options available that have not been adequately explored by the Productivity Commission. There could be different remedies for infringement.”

Mr Caporn says there is a real risk, that this and other recommendations, if they were implemented, would act as a disincentive to innovation.

“Many of the changes appear to undermine the very basis of IP protection.

“The patent system has provided the grant of a limited monopoly in exchange for the disclosure to the public of the invention, so that others can benefit from that disclosure in the mid to long term.

“But the report recommends that we adopt the most stringent regime presently available in terms of denying patents an ‘inventive step’, despite recent legislative changes that have significantly raised the bar for patentable inventions in Australia.

“The report refers to ‘gaming of the system’ to attract investment. The Productivity Commission seems to have a basic mistrust of professional advisors, entrepreneurs and investors. There is little understanding that it is entrepreneurs and investors that commercialise innovation, not the Government.

“Australia’s National Innovation and Science Agenda states that we ‘need to embrace new ideas in innovation and science, and harness new sources of growth to deliver the next age of economic prosperity in Australia’.

“It will be interesting to see whether the Government’s response to the final report identifies that many of the recommendations are anti-innovation and anti-innovators, seeking to pander to consumers at the expense of innovators.”

Many of his criticisms are shared by Chis Baxter, head of Sydney-based Baxter IP. “The Productivity Commission seems to have a powerful anti-business agenda,” he says.

“The report is full of anti-business rhetoric, and is contains a number of false or unsupported assertions.

“For example, it says ‘Australia grants exclusivity too readily’. Where? Who says this and what are their business credentials in understanding who SMEs innovative?

“It says Australia has a ‘proliferation of low quality patents’. Where? Which ones? Who decides which ones are low quality?

“If this is in fact the case, it is because IP Australia is encouraging Australian innovators to try to write and file patents themselves. Such patents are naturally of a low quality,” Mr Baxter said.

“IP Australia’s so called ‘online assistant’ Alex discourages innovators obtain professional advice for their patent lodgement.”

Mr Baxter says the report does not properly address the very important practical benefit of patents in attracting capital from angel or other equity investors. “Even where a company has patents that stand a slim chance of success, investors will gain confidence in funding such companies because of the efforts they have made to protect their IP. Those companies are more likely to be successful investments.

He also says that the report’s assumptions about software patents are essentially wrong or meaningless:

‘Software development typically occurs rapidly’.

“Wrong. A company I’m involved in just launched a new, relatively simple SAAS company which involved two and a half years of development, innovation and iterations. That is not unusual.

Software builds sequentially on existing ideas.’

“Sure, but all ideas do. This is meaningless.”

‘Software development is getting cheaper.’

“Sure – If you want Australian innovators to offshore their software development.”

Mr Caporn and Mr Baxter are intellectual property lawyers, and we can assume they have an interest in ensuring that the concept of intellectual property, derided by some as an absurdity, continues to play an important part in modern life.

But their criticisms of the Productivity Commission’s report are not trivial. We are a long way from seeing any results from the inquiry or from the Government’s eventual response to it, but given the Attorney-General’s well-demonstrated knowledge of intellectual property issues, and the Treasurer’s deep interest in such matters, you would have to be optimistic to believe that much good is to come from this, especially any time soon.

At least some people seem to understand what is at stake.


Do you know more? Contact James Riley via Email.

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