Making the most of the Patent Prosecution Highway

One of the major challenges facing the international patent system is the growing number of applications in the major patent offices. The largest patent offices are the ‘Big 5’ - the US, Chinese, Korean, Japanese and European patent offices.

As you can see from this graph, the numbers of applications are staggering, and the growth in recent years has been huge. The meteoric rise in filings from China, and to an extent India, reflects their rapid industrialisation, and movement from nations that only absorb technology to those that develop and export their own IP. There are estimated to be 6.7 million patents in force around the world, and around 1.9 million new applications were filed internationally in 2009.

An interesting fact is that  as a consequence of the use of the European patent system, the Australian patent office now handles more new patent applications than France and the UK.

In an increasingly multilateral and interconnected world, patent officials are spending more and more time examining exactly the same patent applications as have been filed in each of the other 4 ‘big 5’ offices. There has been a great deal of work done between the offices to enable greater recognition of work by the other offices, so as to reduce the extent of duplication (quintlication!) and unnecessary re-work. Even modest gains on each case can create significant increases in overall efficiency and reduce the time application have to wait to be examined.

Patent Prosecution Highway

One measure has been the adoption of the Patent Prosecution Highway (PPH) process. This started as a set of bilateral agreements between the USPTO and a few other national patent offices, which has grown to bilateral arrangements between the USPTO and 20 other national offices. The precise nature of the agreements vary, but they are all concerned with allowing improved speed of processing from applicants.

More recently, this had spread to co-operation between other offices. The Japanese and Chinese patent offices have just announced that they have established their own PPH process. This will involve, in addition to examination co-operation, the exchange of English language abstracts of their respective patent collections, to assist them both in better searches and examination.

Advantages for Australian applicants

For Australian applicants, the PPH arrangements provide a real opportunity. Australia has a very liberal process for allowing expedited examination. For a small additional cost, it is possible to have examination occur quickly, generally within two months. Assuming a favourable examination outcome, and prompt action, the application can be accepted within about 4 months from filing. The favourable outcome can then be used to invoke the PPH arrangements with the US. Again, assuming that the examination outcome is generally favourable (for at least some claims) then a US issued patent can be obtained within 6 or 7 months.

In the normal course, this would be closer to 3 years or longer. As is always the case in the US, it is possible to allow some claims to proceed to issue, and file a continuation to pursue broader claims, if appropriate.

Early grant in the US is not always an advantage, but depending upon the business strategy, it can be extremely valuable. For example, transforming a pending Australian application into granted patents in the US and Europe can be very significant for potential investors, as it takes a probability into a reality.

A mechanism for rapid examination in the US for Foreign applicants

Recently, the PPH agreement between the US and Australia has been amended, so as to include any cases examined by the respective offices, including cases that claim priority from another country. This means that applicants from other countries (including the US) can use the Australian expedited examination process, obtain acceptance, and then file in the US and use the PPH process. We offer very cost effective inclusive pricing for expedited examination, please let us know if this is of interest and we will be happy to provide more detail.

We expect to see more and more of such bilateral and multilateral examination agreements , and so we will continue to monitor the development of PPH and similar mechanisms, to identify the advantages and opportunities for our clients in their use.

by Peter Franke

R&D Tax Credit – New & Improved

Many of those who have invested in R&D over the last 20 years will be familiar with the former R&D Tax Concession scheme. It provided a corporate tax rebate based on ‘eligible’ R&D investment at ‘income deduction’ rates varying between 125% and 175% of the investment, depending on the type of activity paid for (and in which years the investment occurred). A key distinction was between what comprised ‘core activities’ and ‘support activities’.

Of course, this did require quite a bit of expert record-keeping to prove to the taxman that the activities were genuine R&D as defined in the Tax Act.

The system was generally thought to provide a good incentive, but was criticised on some fronts and was also seen to be open to some ‘over-claiming’, particularly in the area of what could be classified as ‘support activities’.

The area of software development also proved a difficult one under the old scheme, with many ‘in-house’ software development activities failing to attract the incentive.

From 1 July 2011 the new R&D Tax Credit scheme came into effect. This scheme has a number of significant differences from the old scheme, most aimed at making the system easier to use, and to redress some of those difficulties mentioned above.

Without going into too much detail (as we are, after all, patent attorneys, not tax accountants!) the highlights of the new scheme include:

• the incentive is now available to a wider range of companies, with the rules on Australian ownership of resultant intellectual property (IP) having been relaxed. The criteria is now based around the activity actually occurring in Australia;
• the effective rebate ‘rate’ per R&D dollar has increased for all entities, and more so for smaller entities;
• the Tax Credit is now ‘below the line’ - meaning the rebate is calculated as an after-tax reduction in tax paid;
• for smaller entities (turnover of less than $20M) the Tax Credit can be paid in cash if the company is not in profit and therefore not paying net tax;
• the rules around software development have been relaxed, enabling much more of this key activity to attract the benefit.

However, the rules around the eligibility of ‘supporting activities’ have been tightened, excluding claims for activities that are not solely provided to support the R&D effort, but which also support much of the ‘business as usual’ activity (e.g. roads built to access both R&D and production activity).

If you are interested in finding out more about how to access these benefits, Franke Hyland are happy to recommend some REAL experts in the field to help you!

by Adam Hyland

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