Published on the 20/09/2019 | Written by Jonathan Cotton

Bill seeks to phase out Australia’s second-tier innovation patent system…

Established in 2001 to encourage SME innovation, Australia’s innovation patent system will soon cease to be, amid concerns that the scheme – which grants eight year patents for incremental iterative advances on existing technology (rather than outright inventions which are subject to 20 years) – is stifling competition.

The scheme offers fast track patent protection’ in months rather than years, and costs less than standard patents at AU$1,500 compared to AU$9,000.

In 2016 the Productivity Commission advised that the system should be abolished, stating that Australia had ‘lost its way’ on IP policy, and criticising the scheme for ‘granting patent exclusivity too readily, allowing for a proliferation of low-quality patents’, and ‘frustrating follow-on innovators and stymieing competition’.

“Economic evidence shows that the innovation patent system fails to incentivise R&D, and allows big business to block SMEs from innovating.”

Now the Australian Senate committee on economics legislation is endorsing a bill that will see the innovation patent scheme terminated.

It makes sense, says IP Australia. It says research shows that the innovation patent system has not achieved its intended objective.

“Economic evidence shows that the innovation patent system has a net cost of AU$11 million per year to all Australian business, fails to incentivise research and development, and allows big business to block small and medium enterprises from innovating.”

Furthermore, low standards for innovation patents may actually be inhibiting genuine innovation and competition, the group says.

“Low thresholds and unexamined innovation patents create uncertainty around where SMEs have freedom to operate. This is eroding confidence and investment in SME innovation.”

The group also argues that reckless innovation patents have the potential to weaken Australian innovators in overseas markets.

“Obtaining protection through an innovation patent can backfire if a business wants to export. Innovation patents are not recognised overseas and can’t be used as a basis for foreign patents. Innovation patents disclose the SMEs’ inventions, exposing them to overseas copycats.

“The Australian Government should abolish the innovation patent system.”

Not everyone is ready to say goodbye to the scheme however, including the Australian small business and family enterprise ombudsman Kate Carnell, who says that abolishing the regime would create a significant barrier for small businesses.

“Although we acknowledge the current system is not perfect, it’s the only viable way for SMEs to access temporary or short-term IP protections, which is essential, particularly when disputes arise,” says Carnell.

“Small businesses face significant hurdles when trying to protect their IP rights. They don’t have in-house lawyers or patent expertise and often experience difficulties in accessing risk capital.”

And many small businesses rely on the innovation patent system to attract funding, says Carnell.

“Investors won’t even look at a company that doesn’t have those protections in place. Standard patents are more expensive and can take over two years to get. It’s just not a viable option for small businesses that want to protect their products.”

But Hudson Gavin Martin senior associate Laura Carter doubts the scrapping of the innovation patent will ultimately affect innovation downunder.

“There are arguments either way, but on the whole I don’t think it provides as much value as it does provide a barrier.”

It’s debatable, argues Carter, that the scheme encourages innovation among SMEs at all.

“Yes, it’s great that they can get some recognition of a contribution to the development of a product that we then all get to use – that is the basis of the IP system in general – but I’m not sure that there is going to be anyone out there who would develop a product thinking ‘Oh, I’ll only do this because I can get some protection for it through the innovation patent’.

“An innovation patent is more like a bonus that comes down the track rather than the aim of any development, so we probably won’t miss out on too much in the way of development if we don’t have it.”

“From the consumer’s point of view we’re probably going to get the product one way or another.”

And for those Aotearoa-based innovators holding out that an innovation patent might be coming our way, the abolition of the system in Australia is likely the final nail in that coffin. A member’s bill was proposed – just as Australia was starting to float the idea of scrapping its one – but that failed at first reading.

“I don’t think New Zealand would go down that path,” says Carter.

“What that means for people developing products in New Zealand is, occasionally they will develop something that’s really great but won’t get them a standard patent. There would be times when yes, it would be nice if there was a lesser standard of protection we could give those people, but we don’t have that. Either it’s inventive and you get a patent or it’s not.”