A Members Bill to amend the New Zealand Patents Act 2013 was introduced by Dr Parmjeet Parmar on 5 April 2018.  If enacted, the proposed law will come into force on 1 October 2019.

The Bill, introduced by a member of the opposition government, is a bolt out of the blue, with no mention of this proposed law change being made during the 2017 election.

Purpose of the Bill

The Patents (Advancement Patents) Amendment Bill 2018 proposes to amend the New Zealand Patents Act 2013 to introduce a ‘second tier’ patent called the Advancement Patent, to sit alongside and be available as an alternative to the existing ‘standard’ patent.

The Bill states its purpose is to encourage technological development and advancement by providing for the grant of advancement patents and provisional advancement patents that –

are easier and less costly to obtain than other patents (i.e. standard patents),
require a lesser degree of advancement than the inventive step requirement for other types of patents, and
provide a lesser term of protection than other patents.

Patentability threshold

Under the present Patents Act, for an invention to be patentable it must be novel and have an inventive step.  For an advancement patent to be granted, an invention must be novel and have an advancement step.  An advancement step involves a lesser advancement than an inventive step, meaning an advancement patent will be easier to obtain than a standard patent.  An advancement step is an advancement that is distinctly different from existing technology and which makes a useful improvement.

The proposed definition for advancement step is based on the requirements for a utility model under Danish law. A utility model is much like a patent in terms of application procedure and enforcement and is sometimes referred to as a ‘small patent’, having a lower standard for patentability than a standard patent.  To be registered as a utility model, a creation must be new and differ distinctly from what was already known.  Thus, Danish law relating to utility models may be useful for understanding the patentability threshold to be applied to the proposed advancement patent, although there is no Danish Supreme Court decision that defines what ‘differs distinctly’ really means.

One possible issue with having more than one standard for ‘inventiveness’ is that it indicates a spectrum of inventiveness.  One may argue that there is no spectrum; a new thing is either inventive or it is not, rather than being more inventive than something else.  An advancement step must fall somewhere between being obvious (not inventive) and being inventive.  This may be difficult to define without presenting a very low threshold for ‘distinctly different’, i.e. something that is novel and useful may be close to the patentability standard to be applied to advancement patents.  An alternative may be to have a different prior art base against which advancement patents and standard patents are examined.  Presently we do not know what ‘distinctly different’ really means.

Application process

An application for a provisional advancement patent will only undergo a formalities check upon filing and will be granted without examination for novelty and advancement step.  The patentee or any other person can file a request to have a granted provisional advancement patent examined for novelty and advancement step.  If the examination requirements are satisfied, a certificate of examination is issued and the provisional granted advancement patent becomes an advancement patent.

A provisional advancement patent (e.g. an unexamined advancement patent) has a maximum term of 3-years from the filing date of the provisional advancement patent, and an advancement patent has a maximum term of 10 years from the filing date of the provisional advancement patent.

Enforceability

Interestingly, a granted provisional advancement patent is enforceable.  This means an owner of a provisional advancement patent will be able to take action against a third party based on patent claims that have not been examined.  From a practical point of view, a patent owner would be ill-advised to take action against another party on the basis of unexamined claims.  However, this provision of the proposed second-tier patent system does allow a patent owner to send an infringer of unexamined patent claims threats of legal action.  An individual or SME without a budget to deal with such threats may decide to comply with a patent owner’s demands, even though the patent claims are without merit.  Such a provision therefore risks stifling innovation, not promoting it.

It is worth noting that utility models in other countries such as in Denmark and Germany are enforceable once registered following a formalities check and without substantive examination.  However, what we have seen in these countries is that utility models are not only filed by small enterprises, but are often filed by large enterprises together with standard patent applications as a precautionary measure should an invention fall below the inventive step threshold, or to obtain granted claims targeted at a competitor’s product.

Other countries allow for a strategic use of utility models together with patents since their laws allow claims of a utility model to also be pursued in a patent application.  The proposed advancement patent system will not allow for this kind of double protection since the provisions of the Bill prevent claims in a standard patent being the same as claims in an advancement patent.

Regardless, a provision allowing for the enforcement of unexamined patent claims is more likely to favour large enterprises, rather than individuals or SMEs, which defeats the low-cost purpose of a second-tier patent system.

The Australian Innovation patent system

The Australian innovation patent system is also a second-tier patent system, with an innovation patent requiring a lower standard innovative step compared to an inventive step requirement for a standard patent.  The objective of the innovation patent system is to encourage innovation by Australian inventors and small-to-medium enterprises by providing a quick and affordable way to protect innovations.   An innovation patent has a maximum term of 8 years.  Additional information regarding the Australian Innovation patent system can be found here. 

The Australian innovation patent system has been in place since 2001.  However, the Australian Productivity Commission recently proposed that the innovation patent system be abandoned. That proposal had seemly been accepted by the Australian government and details on how to phase out the innovation patent system had been put forward, but in a last-minute re-think, the Australian government removed the proposal from a Bill introduced to parliament on 28 March 2018, announcing that further industry consultation is required.

The innovation patent system has been criticised for a number of reasons, including:

providing an improvement threshold that is too low, resulting in marginal inventions being protected;
optional examination, causing uncertainty created by granted innovation patents having uncertified/unexamined claims;
abuse of the innovation patent system, predominantly by large companies, to target competitors with innovation patents that are difficult to invalidate; and
other misuse of the system, for example, patents filed by Chinese nationals seemly to obtain government subsidies for gaining granted patents.

A number of commentators and organisation, such as the Australian Federation of Intellectual Property Attorneys (FICPI Australia) and the Institute of Patent and Trade Marks Attorneys of Australia (IPTA) are in favour of keeping the innovation patent system, but in a revised form.  Proposed revisions include:

• a higher standard of inventiveness;
• force substantive examination of granted innovation patents so that unexamined granted innovation patents that do not meet the required patentability threshold are removed,
• limit damages to after publication of the invention;
• reduce the term from 8 years to 6 years; and
• eliminate the ability of the patentee to obtain an injunction against a competitor.

From the above list of possible revisions to the Australian innovation patent system, the proposed New Zealand advancement patent implements number 2, and perhaps number 1 depending on how the advancement step threshold is to be interpreted.  Additionally, a granted but unexamined innovation patent is not enforceable, whereas a granted unexamined advancement patent would be.  This is likely to present even more uncertainty than the present Australian innovation patent system to individuals and small-to-medium enterprises.

It is commendable that Dr Parmar wants to incentivise innovation for individuals and small-to-medium enterprises in New Zealand, and realises the importance of the patent system in achieving this.  However, if New Zealand is to implement a second-tier patent system, it should learn the lessons from the 17-year old Australian innovation patent system, rather than replicating them.