ACIP REVIEW OF INNOVATION PATENT SYSTEM

Referring to our previous blog dated 13 September 2013, ACIP had been undergoing a review of the Innovation patent system.  On 16 June 2014, ACIP issued the final report on its findings for consideration by the government.  The final report can be found here:

http://www.acip.gov.au/pdfs/ACIP_Final_Report_-_Review_of_the_Innovation_Patent_System.pdf

The report makes somewhat infuriating reading.  The report does not commit to whether the innovation patent system should be retained or abolished.  However, if it is retained, the recommendations are that changes are necessary.

The main recommendations for change are:

1. Making substantive examination of innovation patents compulsory;
2. Restricting patentable subject matter for innovation patents by excluding all methods, processes and           systems;
3. Raising the threshold test for innovative step.

It is hard to argue that item 1 is not a sensible recommendation and would certainly give a degree of certainty and credibility to the system.

Item 2 appears to be trying to be a change based upon tailoring the system to accord with utility model systems in other countries, but the suggestion of excluding ‘systems’ may put this a step too far.

Item 3 is where the main debate lies.  The recommendation is to adopt an ‘old’ inventive step test. Something which is of a lower threshold than the current inventive step test (in order to fulfil the third tier role of the innovation patent), but is higher than the current innovative step.  The problem is that the test proposed brings more uncertainties than certainties to the test.  The test proposed will be a question of obviousness, but obvious in light of what?  The concern is the role that prior art will play in the proposed test.  Prior art will only be considered if it is part of the ‘common general knowledge’.  But that means prior art will have to be proved to be part of the ‘common general knowledge’ in order to be considered.  That, as the past has shown, is beyond the job of an examiner.  Furthermore, that has been the basis for the biggest waste of time and expense in past patent litigation.

Bearing in mind that this final report is merely a recommendation for change and that actual change must come from the government, we must wait and see if anything actually happens in respect of change.

Simon Ellis

ATOMO wins best in show at MDEA

Franke Hyland are delighted to congratulate Atomo Diagostics Pty Ltd on being awarded the top honours at the international Medical Design Excellence Awards in New York.

Atomo’s innovative AtomoRapid HIV test device provides excellent usability and accuracy, at a very cost effective price point.  Franke Hyland is honoured to have Atomo as a client, and has assisted for several years with their international IP strategy, encompassing several patent families, trade marks and designs.

http://www.businesswire.com/news/baybio/20140611006631/en

by Peter Franke

End of Financial Year Deadlines for Government Assistance

Various forms of grants are available to assist early stage businesses and beginning exporters.  

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 to http://www.austrade.gov.au/What-Is-EMDG/default.aspx 

It is important to understand that costs must be incurred in this financial year and paid for this year to be claimable, so if there is anything about to be due, you can bring the action (and expense) forward and claim it this year. 

Peter Franke

The Chinese IP System Rolls On

Last week I spent a few days in Beijing meeting with various Chinese IP attorneys.  As always, the topic of the effectiveness of the IP system in China is an important topic of discussion.  The following are the main points that struck me from these discussions:

• The proportion of the Chinese patent attorney’s work coming from Chinese companies continues to grow. The firms I spoke with varied between 20% to 50% of their work with drafting and filing for local clients. This is leading to Chinese firms being increasingly self-reliant AND looking for suitable foreign associates as the amount of work they are sending out to other countries is increasing.
•  The local clients who are drafting and filing Chinese and international patents are mainly located in the south, and many firms are rapidly growing and expanding their operations from Beijing into the Guangzhou region and other southern provinces.
• Litigation is growing, with tens of thousands of IP litigation matters reaching the Chinese IP courts each year. About 90% of these are between two Chinese firms.  The word is that the judges are usually pro-IP rights holders and, where the defendant is a substantial organisation as opposed to an individual, enforcement outcomes are very effective.
• The Chinese government is heavily subsidising the number of patents filed by Chinese companies, including international patents, and this has led to a lot of patents being filed without a great deal of thought by the applicants as to validity or enforceability.  However, this is decreasing and the focus is shifting to quality.

I am attending the INTA meeting in Hong Kong next and will post my thoughts on that soon.

Adam Hyland

Proposed Intellectual Property Laws Amendment Bill Released

A draft of the Intellectual Property Laws Amendment Bill has been released for public review.  The Bill, when finalised, is expected to be introduced to Parliament in the near future.

While the proposed amendments include some fairly minor matters, the three key issues are measures to:
- implement the Protocol amending the TRIPS agreement, allowing Australian manufacturers to export pharmaceutical products to least developed and developing countries suffering from a health crisis (under a compulsory license from the Federal Court).

• allow for single trans-Tasman patent application (SAP) and examination (SEP) processes and a joint patent attorney regime for Australia and New Zealand. (See our blog dated 16 May 2011 discussing this initiative)
• extend the jurisdiction of the Federal Circuit Court to included Plant Breeder's Rights.

The inevitable hot topic will be the TRIPS issue.  The TRIPS agreement was amended in recognition of the issue of a health crisis occurring in developing countries, whereby much needed medicine or pharmaceuticals are not only required, but at a low cost.  In the case of a patented pharmaceutical, there is the potential for a patentee to stand in the way of the supply of the much needed pharmaceutical if the patentee is unable or unwilling to provide the pharmaceutical at the required low cost.

The proposed remedy is to allow third parties to apply for a compulsory licence to exploit the patent for the sole purpose of making and exporting the patented pharmaceutical to a country suffering from a health crisis.
While compulsory licence provisions exist in Australian patent legislation, they centre on the fact that, despite a demand, the patented invention is not being exploited, or sufficiently exploited, to meet the demand in the patent jurisdiction (i.e. Australia).  The proposed changes look outside of Australia for the source of the need.

The TRIPS provisions will be likely to operate as a measure for coercing pharmaceutical patent owners to provide low cost aid in times of crisis under threat of allowing someone else to do so.

It will be an interesting spectacle seeing if the pharmaceutical lobbyists will have any effect upon the proposed TRIPS changes.

SIMON ELLIS

Lamborghinis in Jakarta

I am told by an Indonesian colleague that Indonesia is now the biggest marketplace for Lamborghinis in the world, as of 2013. More Lamborghinis were sold in Indonesia than in the USA, or Italy, or even China.

It was also instructive to learn that all of the Mercedes-Benz cars for the ASEAN economies are assembled in Indonesia.

We shouldn’t be surprised after all Indonesia is the fourth most populous country in the world. Yet, even for those of us living on Indonesia’s doorstep, the rise of the Indonesian economy seems somewhat unheralded.

So it was an eye-opener for me to make my first visit to Jakarta in November last year. Ten years ago, our Australian clients almost never nominated Indonesia as a destination for patent, trade mark or design filing. Recently, this has picked up for some clients who are seeing Indonesia as an increasingly important market. Accordingly, Franke Hyland thought it was time to strengthen our network in the great nation to our north.

I am certainly pleased that I made the effort to visit Jakarta. As is the case in many similar developing economies, the juxtaposition of great apparent wealth in gated communities with apparent poverty in makeshift housing is unfamiliar to Australians. Even more arresting though is impression of an advancing economy, pursuing technological advancement and building a distinctly Western-style future.

I see a strong future in Indonesian cities for a number of technologies, including communications, food technology and medical devices. These are some of the areas of business that I expect will be pushed forward as the Indonesian economy advances.

Having seen the potential of the Indonesian economy over the next couple of decades, I will certainly be encouraging our clients to consider protecting their IP rights in Indonesia. It is an economy, a market and a nation that we would be foolish to ignore.

Adam Hyland.

I’m a director of a company; I’ve invented something, who owns the patent rights?

This presents a fairly common and important question. The issue of ownership of or entitlement to a patent is a fundamental aspect of patent validity. A patent issued to a patentee who was not entitled to the patent is a ground for invalidity and can result in the revocation of the patent.

When determining entitlement the starting point is always the inventor(s). An inventor can decide to assign their rights to another party, whereby that other party can claim to be properly entitled to the patent rights due to the assignment. However, there are situations in which the nature of an inventor’s relationship with another party can be sufficient for the other party to be properly entitled to claim ownership of patent rights from the inventor without any need for an assignment.

The most common relationship that establishes entitlement from an inventor is the employee/employer relationship. When an employee devises an invention in the course of their employment duties and either the duties were such that it would be reasonable to expect the invention to be devised or the employee had a special obligation to the employer (such as a valid clause in an employment contract), the employer is entitled to the patent rights for the invention. There are pragmatic exceptions to the rule. For example, the employer of a telecommunications engineer that invented a new skateboard in their spare time should not be eligible to claim patent rights in the invention as the nature of the invention has no realistic correlation with the employee’s duties. Similarly, the employer of a person employed as a cook in a car manufacturing plant cannot reasonably expect that the person would invent something car-related as part of their employment duties and should not be eligible to claim patent rights if it happened that such an invention was devised.

When an inventor is a director of a company the director may not technically be an employee of the company. As a consequence, the employee/employer relationship rules may not necessarily apply when considering entitlement to patent rights in an invention invented by a director. Nevertheless, in the role of director to a company, a director does hold obligations to the company by way of fiduciary duties. The nature of these fiduciary duties and how they impact upon ownership of a patent invented by a director was recently considered in the equity Division of the Supreme Court of New South Wales in Breakout Barrier Release Systems Pty Ltd v Breakout Barrier Release Systems Australasia Pty Ltd [2013] NSWSC 1815.

In the case, Mr Watmough was a director of both the plaintiff and defendant companies. The business interests of both companies was in locks. Relevant to the present discussion, Mr Watmough had invented and applied for a patent in his own name in relation to a lock invention which was intended to be commercialised by the defendant company. Mr Watmough had not revealed the existence of the patent application nor the potential commercialisation of the corresponding lock product to the plaintiff company. In respect of the decision, the exact nature of the new invention was irrelevant. What was more important was the fact that it was of potential commercial interest to the business of the plaintiff company.

What comes from the case is that a director of a company that devises an invention of realistic interest to the company’s business is obliged, according to their fiduciary duties, to offer the right to exploitation of the patent rights to the company. While this does not imply an automatic transfer of ownership of patent rights between the director and the company, it does imply that the director’s ownership of the patent is more akin to a holding of the patent rights on trust for the company. Furthermore, the fiduciary duties allows the company to veto whether the patent rights can be exploited by the director or another party even if the company decides to waive its right to exploit the patent rights.

Ultimately, a patent right is a right to exploit the patented invention. If, in the case of a director invented invention of potential commercial interest to the company, the company waives the right to exploit the invention and vetos the right for the invention to be exploited by anyone else, the patent becomes effectively redundant.

In the case, Mr Watmough was found to have breached his fiduciary duties by not revealing the existence of the patent application or the potential commercialisation of the corresponding lock product to the plaintiff company. As a consequence, and in the interests of equity, Mr Watmough was ordered to assign his patent rights to the plaintiff.

In the decision, it was highlighted that if the invention had no realistic relationship with the company’s business interest, then a director could invent, own and exploit any patent rights without recourse to or any breach of fiduciary duties to the company.

So, a director invents something, who owns the patent?

According to patent legislation, in the absence of assignment or employee/employer relationship, the director does. However, fiduciary duties may mean that the equitable owner of the patent rights is the director’s company unless the company waives these equitable rights and provides fully informed consent to exploit the patent rights to the director.

While it is commonly the case that patent rights in an invention made by a director are intended to be owned by the director’s company, this transfer of rights between the director and the company is not necessarily established by the director/company relationship nor the fiduciary duties owed by the director to the company. Consequently, as a practical matter, the safest approach is to have an executed assignment in place between the director and the company to confirm patent rights ownership to the company.

by Simon Ellis