The Innovation Patent System: Abolition of Innovation Patents or Groundhog Day?

The Australian Government’s Productivity Commission (“The Commission”) Draft Report has assessed the current second-tier Innovation Patent System (IPS) and recommends its abolition.

Australia has had a second-tier patent system since 1979 when ‘petty patents’ were introduced.  These had a maximum term of six years.  While petty patents were initially subject to local novelty, they had to meet the same inventive threshold as standard patents to be granted.  In 2001, the little used petty patent system was replaced by the IPS with the objective of promoting innovation by Australian small and medium sized enterprises (SMEs).  The IPS was intended to provide ‘fast, limited monopoly protection for lower level or incremental inventions’.  Innovation patents have a lower inventive threshold than standard patents, a maximum term of 8 years, and only 5 claims are allowed in an Innovation Patent.

AGPC Considerations

In assessing the IPS, The Commission’s Draft Report has considered the welfare of the Australian community taking into account the following:

  • the lower threshold of inventiveness of Innovation Patents
  • costs and administrative procedures involved in the IPS
  • the users of the IPS
  • whether the IPS targets inventions of social value
  • whether the IPS targets incremental or additional inventions
  • strategic uses of the IPS
Strategic Uses of Innovation Patents

While the The Commission has found that use of the IPS is low (6,000 active patents in 2014 compared to over 120,000 standard patents), it has somewhat surprisingly concluded that there is a ‘multitude’ of low value innovation patents which create uncertainty, increase noise and promote patent thickets.  The Commission  is also critical of the strategic use of divisional applications for innovation patents out of an earlier standard patent to target alleged infringers.

Possible Reforms if the IPS is retained

The Commission  has concluded that some reforms would be required if the IPS were to be retained.  They considered raising the innovative step to the same level as for standard patents, i.e. an obviousness test rather than just a novel difference which contributes to the working of the invention.  The Commission has also considered reintroducing a mandatory examination process, and limiting the period in which damages could apply until after official publication of the claims that have been allegedly infringed.  Whilst these proposals would limit the strategic uses of the IPS, The Commission  has concluded this would result in innovation patents more closely resembling the former petty patents, which would be tantamount to a ‘Groundhog Day’ policy.

While The Commission’s  report is currently in draft form pending submissions from interested parties by 3 June 2016, the final report is still likely to recommend the abolition of Innovation Patents.  This will mean that after the passage of appropriate legislation, Australia is likely to lose its second-tier patent system which has existed in different forms since 1979.