New ACIP issue paper on a 'Review of the Innovation Patent System'

In recent years, the Advisory Council on Intellectual Property (ACIP) has been conducting a number of reviews and issued corresponding papers on IP reform in Australia.

On 17 August 2011, ACIP issued a paper calling for submissions on its next review concerning the Innovation Patent system.

The closing date for submissions for review is 14 October 2011.

The Innovation patent system is a unique system in the global IP arena.

At its heart, the innovation patent system offers a second-tier patent enforcement regime to the standard patent system. The innovation patent requires the satisfaction of an 'innovation step' test, which is considered and intended to be a lower threshold than the 'inventive step' test required for a standard patent. The trade-off for this lower threshold test being that the maximum term of an innovation patent is less than that for a standard patent – 8 years as opposed to 20 years. However, there have been criticisms that, while for a shorter term, the innovation patent offers the same level of infringement enforcement as a standard patent, although is much harder to counter due to its lower validity threshold requirements.

The innovation patent has been criticised as being overly generous to patent owners and open to abuse. The innovation patent is much more encompassing in terms of what subject matter it can provide patent protection for when compared with other second-tier patent mechanisms offered in some other countries (notably utility models provided in Germany, China, Japan and Korea).

The innovation patent can also offer a quick enforcement strategy while a parallel standard patent application is pending, due to the quick turnaround times offered for the progress of innovation patents by IP Australia. Such strategic uses may not have been originally intended and foreseen, however the system has been exposed to quite valid strategic uses in this regard.

The review paper is being expansive enough to ask radical questions such as whether a second-tier patent system in Australia is still required and, if so, should a utility model system, as used elsewhere, be adopted. 

Realistically, we are unlikely to see reform of such magnitude occur.

In the current Australian patent climate, the standard patent system is on the verge of significant legislative reform to 'raise the bar'. This would potentially further the validity threshold gap between the innovation patent system and the standard patent system.

The ACIP paper does propose amendments to raise the bar of the innovation patent system to close the perceived gap which will occur following the pending changes to the standard patent system. If anything, this is likely to be where the ACIP paper may be more likely to effect change.

by Simon Ellis

Biofuels - Something Happening Here

I attended the Biofuels Summit in Brisbane on 28-31 August 2011. I have to say it was an eye-opener as to the breadth and depth of both the R&D and commercialisation work that I going on in Australia and the rest of the world in the biofuels area.

The ‘face’ of biofuels over the last few years has been the fermentation of bio-ethanol from cereal (food) sources. However, because of the ‘food vs fuel’ debate on land use, this has moved on to new and interesting technology fields – sometimes called ‘second generation’ biofuels.

While I was struck by the inroads bio-fuels have already made into the automotive fuel chain, it seems that the level of use of biofuels could be a lot higher than it is. There were a number of perceptions that are holding back biofuels at the moment, including apparently limited refuelling facilities, the perceived risk of voided engine warranties, compromised emissions rating, limited fuel tank (range) capacity, need for engine modifications, need for mechanic training. These are some of the perceptual challenges for the biofuel industry.

The solution in Brazil is to make it illegal to sell any car that cannot run on ethanol!

Nevertheless, some transport companies are embracing biofuels. Finemores Transport are using biodiesel from Biodiesel Producers P/L in Wodonga, who use tallow as a feedstock. They have used more than 20 million litres of B20 biodiesel since 2008 without problems.

Boeing are working on sustainable biofuels from non-food sources to replace fossil jet fuels.

The Summit showcased a number of companies that have some interesting technologies in development:

• Lanzatech are a New Zealand based technology company who have developed a technology to convert steel-making waste gas to biofuel. They have a Chinese joint venture planning to make >30 million gallons of ethanol per yr by 2013. Not surprisingly, the see their patent and IP portfolio as a key strength.
• Zeachem is a US based biomass processor using biochemical treatment to produce ethanol, which is based on the digestive organisms of termites.
• Licella is an Australian company using a new technology to produce high energy density bio-crude in one pass. They are working with Norske Skog to build the largest pilot facility in the Southern Hemisphere to process biomass to biofuels.
• Aurora Algae are based in WA and were founded at UC Berkeley. They have a pilot facility near Karratha WA for harvesting biofuels from algae, while simultaneously producing dietary Omega-3 EPA fatty acids. To date, they have filed 39 patents in low cost cultivation/harvesting/extraction/conversion of algae biofuels.
• Microbiogen are using their expertise in yeast to create technology for making sustainable next generation biofuels. They have developed a yeast strain that can metabolize xylose, previously thought to be impossible. Microbiogen argue that even second generation biofuels will still ‘crowd out’ food production. Their technology can allow this to be avoided.

Interestingly (ominously) there were a couple of representatives from the Australian Consumer and Competition Commission (ACCC) attending the summit. They told me they always take an interest in emerging markets, and the biofuel industry is certainly emerging!

by Adam Hyland

A reduction in Red Tape - Business Name Registration Changes

Business name registration is a necessary evil if you operate in Australia as a business under anything than a personal or company name. If you trade as a trust, a partnership, or just want to operate under another name, then you must register a business name.

The idea of the system is to ensure that customers, suppliers and the public at large can identify the entities which are trading. It is important to understand that registering a business name does not create any rights in the name registered – for that, you would need to register a trade mark with IP Australia. The process is fairly simple in most cases, and the fees (while never welcome) are not excessive.

The big problem arises when a business wants to operate in several locations within Australia. Each state and territory has a separate system. In most cases, you are also required to have a local business address specified. In the era of internet based sales, it is not always easy to tell if you are trading in a particular state or territory. What is a reasonable system for one state becomes an messy and expensive exercise when you are required to register in six states and two territories.

Another complication is that the system currently operates independently of the Australian Business Number (ABN) system, which is required for tax, GST and related purposes.

Following from a decision at COAG (Council of Australian Governments, including Federal, State and Territories), a bill has been introduced into the Federal Parliament to create a single national business name system. States will refer their powers to the Commonwealth, and ASIC will operate a single, on-line system. Existing names will be grandfathered, with provisions to deal with the co-existence of (e.g.) ‘Beachside Fish & Chips’ in multiple states.

Also, the system will require that an ABN be provided for each registration, so that the business name and ABN systems are aligned.

It will take all the states to pass their corresponding legislation before the new scheme is in operation, so it is likely to be a year or two away. The outcome should be a much more efficient, on-line, one stop national business name system, which will simplify requirements for anyone in or starting a new business.

by Peter Franke

Patent Prosecution Highway pilot program between IP Australia and the USPTO extended and expanded

Since 14 April 2008, IP Australia and the USPTO have been trailing a program called the Patent Prosecution Highway (PPH). The underlying aspect of the program is to allow accelerated or expedited examination of a patent application in either Australia or USA based upon a corresponding application in the other country which has at least one formally allowed claim.

The pilot was initially restricted to only patent applications which were originating in either Australia or the USA. In other words, applications having a priority claim from a country other than Australia or USA were excluded from the program. By practical effect, this tended to exclude the program from non-US and non-Australian applicants.

Since, January 2011, the program was expanded to include applications coming from the PCT system. Again, though, only PCT applications having originated from Australia and USA and having either of these countries as the International Searching/Examination Authority were eligible for the PPH program.

The PPH program has now been extended for another 12 months, which commenced on 15 July 2011. However, the extended program has now been expanded so as to be less restrictive on what constitutes eligible applications. Now the requirement of origin has been removed so that any Australian and US patent application will be eligible regardless of country of priority claim. In effect, this has now opened the door for the program to any applicant having eligible corresponding US and Australian patent applications.




by Simon Ellis

EMDG's - something from the Government that really can help

Export market development grants (EMDG's) are a long running Federal Government program designed to assist new exporters.They provide a grant of up to 50% of expenses incurred in relation to launching and developing export markets, covering expenses such as:

Overseas promotion and travel costs

Trade fairs

 Marketing visits

Promotional literature and advertising

Visits from overseas buyer

Intellectual property registration and insurance costs

The grants are available on the basis of funds being spent and then claimed.There are a set of detailed criteria for eligibility, mainly to prevent any rorting of the system, but any Australian resident IP developer or manufacturer is very likely to be eligible.There are caps on the maximum  and minimum amount that can be claimed, and on the size of business ( turnover under $50  million).

As a bonus, in the first year you can claim expenses back for the last two tax years, which could be a great head start for any emerging exporter.

Intellectual property expenses which are allowed include those which relate to registration of patents, trade marks, designs, plant breeder’s rights, and copyright. It does not cover expenses relating to Australia or New Zealand, but it does cover the costs of  seeking protection in other countries, including your Australian attorney’s fees, official fees and foreign attorney costs.

For more information, contact us or go to http://www.austrade.gov.au/What-Is-EMDG/default.aspx.

One final tip – claims for the 2010/11 year are now open, and if you get in early, your claims will also be paid early.

Peter Franke

AIFST 2011 Blog

I was very pleased to attend the 44^th annual AIFST Convention in Sydney, from the 10^th – 13^th July 2011. Franke Hyland was particularly pleased to sponsor the Executive Lunch on Tuesday 12^th July. Thanks to our guest speaker, Arthur Blewett, CEO of Agrifood Skills Australia (www.agrifoodskills.net.au), who gave an excellent presentation on the work his organization is doing to bridge the skills gap for the agri-food industries.

I was also honoured to be asked to succeed Prof. Ken Buckle as the public officer of the AIFST. Prof. Buckle will be stepping down from the position in the near future and I look forward to being able to contribute to the Institute in some small way.

Following are my (semi-random) compilation of information thoughts provoked by the sessions I attended at the convention:

•  In the next 40 years we will consume as much food as we have in the last 500 years. The challenge for the food industry and for food technologists is to determine how we will make up the likely gap between food demand and food production safely/reliably/cost effectively/nutritionally?
•  In 1942 50% of all food borne illness was caused by raw milk. Yet ‘raw milk’ seems to be making a comeback for what seem to be uncertain nutritional reasons.
• Technology transfer is one of the key priority areas for Australia's national food plan.
• The JR Vickery Address was delivered by Ian Chubb, Chief Scientist of Australia. He thinks food scientists need to do a better job at telling stories that bring home the benefits of new food technologies. He also thinks that technology transfer is one of Australia's main contributions to global food security, and that climate change is a major risk to Australia's food security and industry. His message is that the status quo will not get us through: innovation in the food industry is crucial to Australia's future.
• We have heard a lot about peak oil. However, peak phosphorous will be reached some time this century. No phosphorous = no food.
• Woolworths have seen a great increase in consumer demand for instant reaction to food trends, and for information on food products.
• Woolworths say consumers want manufacturers and retailers to make healthy food choices easier.
• Birch & Waite say austerity is currently a strong household trend, along with a new focus on quality and a developing affinity for home brands. They also see gourmet inspiration from TV shows such as Masterchef and ‘star’ chefs driving consumer behaviour.
• Businesses need an innovation process, not just a development process. Birch & Waite recommend a value stream study to underpin the innovation process.
• Kim Leighton from the Australian Food and Grocery Council AFGC says food companies cannot afford to ignore social media.
• Watch for the AFGC's upcoming smartphone app 'GS1' - will allow in-store product information delivery via direct scanning.
• An MRI scan on a potato? Yes - to find the perfect way to make crispy roast potatoes. A food technology gem I learned today at the AIFST conference!
•  Planet Ark says that carbon output labelling on food products helps consumers take personal responsibility for their carbon emissions. Carbon footprint is not an inherent property of a food product. It changes as different decisions are made along the supply chain. The issue of environmental labelling of foods is evolving - for now the focus is on carbon footprint as a proxy for overall impact. Aldi is the first company in Australia to sign up to the Planet Ark carbon production label program.
• Visy says 84% of consumers say they are concerned about the environmental impact of packaging, but only 13% actually buy environmentally sustainable packs. Nevertheless, Visy is investing AUD 500M in sustainable packaging technologies.
• The biggest challenge in recycling packaging is getting the consumer to deal appropriately with the used packaging at the start.

If you would like any more information on any of the topics mentioned above, please contact me here via mail@frankehyland.com.au.

by Adam Hyland

Adam at the IPBC 2011 in San Francisco

Having enjoyed my time in New Orleans, I spent a couple of days in Florida catching up with a number of US patent attorney colleagues. A consistent theme in my discussions with them was the pervasive view that the US economy is in a very poor state and belts that tightened during the GFC are remaining so.

A consequence of this is that US companies who previously would have included Australia in their global patent strategy are often declining to do so. While this isn’t good news for Australian patent attorneys who rely heavily on this work coming into Australia, it does make me wonder whether there are some golden opportunities out there for Australian companies to exploit US technology that is not being actively protected here? It is worth spending some time and effort to investigate this if there are US technology leaders in your area of business.

Following this I attended the Intellectual Property Business Congress (IPBC) in San Francisco. This was a relatively small event (500 delegates) but there were some real thought leaders in the area of commercial use of IP in attendance, which made for some very engaging sessions.

Out of these, I made the following observations (across a number of topic areas):

• Between now and 2015, the USPTO and the EPO expect to greatly increase ‘shared workload’ co-operation in the areas of searching and examination of patent applications.

• Currently, about 90% of USPTO trade mark examiners work exclusively from home. While more difficult to implement due to the nature of the work, they would like eventually to have the same proportion of patent examiners working from home.

• There was a lot of discussion about the difficulties associated with properly valuing a patent or patent portfolio. Judge Randall Rader, Chief Judge of the Court of Appeals for the 9th Circuit, challenged the IP community to achieve the type of valuation certainty apparent in the real estate market. This comment was not met with universal acclaim, mainly due to the far more limited number of IP transactions, and the limited number of ‘buyers’ likely for any given IP transaction.
• Microsoft says that the driver of value of patents in their organisation is litigation value, especially where the paten tis nearing the end of its life. If not litigation value – the IP will be divested.
• For the ‘non-practicing entity’ – they say that a patent that has no commercialisation within five years, the return on investment starts to look ‘ugly’, and divestment of the IP will ensue.
• Microsoft and Alibaba Group (one of China's leading IP owners www.alibaba.com) agree that they will NEVER settle 'unmeritorious' IP infringement lawsuits brought against them by trolls or competitors.
• This year, the China Technology Exchange (CTEX) conducted the first patent auction in China. Twenty-eight Chinese patents were sold for about USD 450,000. A second patent auction, focussed on wireless communication and cloud computing will be held in Beijing in the northern autumn this year.
• Chinese companies filed 13,000 PCT patent applications in 2010. This puts China a long, long way ahead of Australia, for example, as an international filer of patents. There may be a Chinese company’s patent in your future …
• Chinese utility models comprise about 35% of the patent applications filed in China.
• 48,000 patent lawsuits were concluded in China in 2010. The vast majority of these were disputes between Chinese companies on each side. The patent litigation landscape in China is overwhelmingly about Chinese competitors, not about the Chinese vs Foreigner case we are more likely to hear about.
• Also in contrast to popular belief, foreign entities suing Chinese entities over patent rights in China have a 98% win rate in court. Chinese patent courts are reportedly very good for simple and quick patent litigation, less so for more complex matters. Anecdotally, the results of enforcement of Chinese court orders are better in the industrialised north-east, than in the less developed west of the country.
• Chinese electronics and communications company Huawei Technologies has 20 R&D centres across the globe, and have over 20,000 granted patents throughout the world, including over 500 granted US patents, and over 2000 granted European national patents.
• Most Chinese regional governments subsidise patent applications by locals, often to the extent of covering all of the costs incurred. This accords with my view that the Chinese are on a path to become net IP exporters, much the same path taken by Japan after WWII, and faster than Japan.

“The Great Patent Debate” at IPBC pitted Prof. Michael Meurer from Boston University and Prof. Peter Menell from the Berkeley Centre for Law & Technology versus Mark Blaxill and Ralph Eckardt from 3LP Advisors as the 'anti' and 'pro' sides.

The ‘anti’ patent argument was based on the idea that for most industries, the proliferation of patents presently hinders innovation. Among other things, they argued:

• that the patent system works well for the chemical/industries, but it is an economic drag on other industries
• poor examination means there are too many weak patents: not used against actual copyists, but against other innovators
• Microsoft did an enormous amount of innovation in its early years – but developed no patents

The ‘pro’ patent side countered that:

• companies and regions heavily involved in electronics and other manufacturing industries cite economic benefits from patenting
• the rate of patenting in the US against GDP is flat, and lower than it was in 1979, refuting the idea that companies are increasingly stuck in an IP quagmire;
• Patent litigation is ultimately a failure of negotiation. Stronger patent rights will equate to greater certainty of outcome, which would lead to less litigation.

Ultimately, neither side of the debate argue that the patent system should be dismantled, but perhaps there is room to consider moving away from the ‘one size fits all’ system of incentives that the present patent system represents. Both sides agreed the patent system would work better if there was a better market for negotiating the value of patent rights.

The session on ‘open innovation’ explored the following points:

• Collaborative IP sharing can drive better outcomes for the participating businesses.
• Patent pools have the advantage of mitigating group risk.
• Whole new businesses can be built from the shared IP of two or more companies who are willing to share IP.
• However, some organizations have difficulty sharing their "crown jewel" IP by participating in patent pools, collaboration etc.
• For open source collaboration to work, EVERYONE has to play ball - any hold-outs are likely to cause the collaboration to fail
• The attitude that "We have no patents, we open-source everything" equals a non-fundable company, according to Erin-Michael Gill of MDB Capital. However, he says that if you focus on great proprietary positions - there will be real returns. He also says that open source licensing agreements are confusing, which creates uncertainty for investors.
• Skype is a great example of reaping the benefits of keeping key IP assets close to the chest.

Finally:

• As the number of IP trade transaction increase, proper management of ‘chain-of-title’ assumes crucial importance, because the IP value can be lost completely if this area is neglected.
• Successful companies not only understand their own IP, but also their competitors’ and their CUSTOMERS’ IP.
• Companies who tend to defend a lot of litigation see the value and benefit in paying for external IP.
• As SME’s tend to get smaller, IP in some form is becoming their main asset and output. Technical IP often dominates intangible asset value early, but this leaches into brand value over time, as the brands support the IP.
• American Express sees a future role and business opportunity as an IP market place facilitator. They see the hurdles to a functional IP marketplace presently as a lack of uniformity in patent claim interpretation and a lack of transparency around IP transactions (in contrast with the publicly available record of real property transactions). One of the issues I see with this also is that the value of IP is not necessarily intrinsic - it will vary with the situation of the purchaser/licensee.

That concludes my ramblings from IFT11 and IPBC 2011. Next year these two conferences clash with one another on the same weekend in Las Vegas and Lisbon, Portugal respectively so I won’t be able to cover both. Happy to take suggestions on which one I should cover!

by Adam Hyland