Major improvements to U.S. Patent Law passed by Congress

After many years of gestation, the U.S. House of Representatives on June 23 passed the America Invents Act. The Senate passed its own version in March 2011. While there is some minor work required to reconcile both versions, what is clear is that U.S. Patent Law is on the verge of the largest substantive changes in 60 years, and that U.S. law will be more harmonised with international norms than ever before.

First to File

The most important change from an Australian perspective is the move to a 'first to file' type system. In the rest of the world, regardless of who invented first, the first inventor to file becomes the legitimate patent owner. This is not currently the case in the U.S. At present, an inventor who files later but invents first can, subject to very stringent evidence requirements, obtain the patent rights. However, this expensive and time consuming procedure - called an interference - creates significant uncertainty for investors and the public at large.

It also creates an anomaly where in some cases one party owns the U.S. patent, after a successful interference, supplanting the owner throughout the rest of the world. Although the example of small inventors was often used to justify the first to invent principle, in fact the overwhelming beneficiaries were U.S. corporates who understood how to play this game.

The U.S. will now abolish this distinction, and operate a first to file system, in common with the rest of the world. This will, for example, make current elaborate laboratory notebook practices involving witnessing of pages unnecessary for patent law purposes.

New Review Processes

Many countries, for example  Japan, Australian and under the European Patent System, have had review procedures available to challenge a decision to grant a patent at the patent office, and benefiting from the technical expertise of the patent office examiners. These are generally known as opposition systems, and provide an alternative to challenge in the court system.  Although a limited form of this existed previously in the U.S., a more extensive version will operate as the new inter-partes review and post grant proceedings. These proceedings will be handled by the Administrative Patent Judges of the current Interference Trial Section of the USPTO. A window will operate after grant for such reviews and again after filing patent infringement litigation.

This will provide an avenue for much lower cost challenges to dubious patents.

Fees and Delays

There has been a major push, supported by business in general, to allow the patent office to keep all the fees it collects, so that the funds can be re-invested in measures to reduce the backlog of patent applications. There are (as at 27 June 2011) 703, 175 pending U.S. patent applications which have not been examined. The USPTO is a major operation, employing almost 10,000 staff and having annual revenue of about 2.1 Billion USD. Historically, this pool has been convenient one to dip into to assist the general budget issues of the U.S. Federal Government. A limited form of this measure was passed by the House, in contrast to the Senate, where the full segregation was allowed. This will have to be settled by negotiation, prior to signature by President Obama.

The process of patent reform in the U.S. has taken many years, and although this Act does not resolve all the issues, it will make a vast improvement, especially from the perspective of non-U.S. users of the U.S. patent system.

by Peter Franke

Adam at the Institute of Food Technology Convention, New Orleans - Part II

Hi again!

Here are my latest thoughts and observations from IFT11.

• A number of big names have opted not to exhibit at IFT11, including Danisco, Kerry Ingredients and FMC.
• Talking to most of the exhibitors, they feel that things are a little quiet in the expo, compared with previous years. Many are saying that they are nevertheless making a useful number of good quality contacts.
• I did discover one Australian company at end expo: Cavitus Pty Ltd., an ultrasonic processing technology development company from Sydney. I spoke to Dr Darren Bates, the CTO of Cavitus, with whom I had drafted a couple of ultrasonic processing patent applications a few years ago. You can check out what he is doing at www.cavitus.com.
• The field of functional ingredients and delivery systems is very big business for the major ingredient suppliers. Particularly so for ingredients that allow an on-pack claim. 
• The same trend is happening in pet foods, with claims for brain health, joint health, renal health, eye health being pursued (to name a few!).

Finally, did you know that McDonalds in the U.S. work with their beef suppliers to ensure they only use Temple Grandin's humane cattle handling systems? (Check out Dr Grandin's site here)

More thoughts soon!

Cheers, 

Adam

Adam at the Institute of Food Technology Convention, New Orleans - Part I

My first couple of days at the Institute of Food Technology convention (IFT11) have been great, if a little overwhelming! Over 9,000 attendees, 900 exhibiting companies - hard to know where to begin.

I will give a bit of a 'grab bag' of impressions and ideas:

• sustainability is a major theme and concern of the food industry. What exactly does it mean? It does seem to be a mix of issues including environmental concerns, public health, employee welfare and charitable works. These things have been part of corporate social responsibility (CSR) for some years. Listening to the likes of McDonald's, Wal-Mart and Coca-Cola the sustainability drive is now about pushing suppliers to adopt their CSR policies.
• A big presence of Chinese chemical and ingredient companies at the expo. While some of their marketing pitches are unsophisticated, their determination and pricing is compelling!
• No identifiable Australian presence at the conference or expo. Apart from a few expats doing great things over here - special thanks to Wayne Howard and the team at BASF for their hospitality!
• Whole grains and their health benefits seem to have a higher recognition here than in Australia. Even corn producers are getting in on the act with ' whole corn' formulation ideas being demonstrated.
• There is a debate raging between corn producers and others about the health benefits of high fructose corn syrup (HFCS), with some products now sporting 'HFCS-free' claims.

More thoughts from New Orleans tomorrow. Follow my tweets on @frankehyland

Adam

Government’s response to ACIP’s ‘Review of Post-Grant Enforcement Strategies’ report

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.

A report issued on 19 February 2010 by ACIP entitled Post-Grant Patent Enforcement Strategies, made a number of quite radical proposals intended to address perceived prohibitive issues of effectiveness and cost faced by SMEs when considering enforcing their granted patent rights.

On 3 June 2011, the Government issued a response to the report’s recommendations. Despite the hype, the Government’s response is quite deflating on the more radical recommendations and only the ‘soft’ recommendations have been accepted.

Of the interesting recommendations was a general push for better access to alternative dispute resolution with a patent focus. Within this framework was a recommendation that IP Australia host an IP dispute resolution centre. The Government, while condoning the use of alternative dispute resolution (ADR) mechanisms, rejected the idea that IP Australia hosts such a centre. Similarly, the proposal of the formation of a specific Patent Tribunal for patent disputes was rejected on the question of value, given that such a tribunal would be inevitably limited to issuing non-legally binding recommendations as opposed to binding decisions.

Another interesting proposal was to empower Australian Customs to seize goods which potentially infringe an Australian patent right. Australian Customs currently have such powers in regards to Australian Trade Mark and Copyright owners. Again, the Government response was to reject this proposal on practicality. The question of patent infringement is not an easy question to determine and hence, should Australian Customs be burdened with a question it is not readily equipped to answer.

While some may see the Government’s response as deflating, the reality is that the Government’s response is quite grounded from a practicality viewpoint. What will be the spin generated by this non-event?

by Simon Ellis

New directions in medical devices create challenges in IP Protection

A major new trend in medical devices was commented on repeatedly at the AusMedTech conference earlier this week. This is a consequence of the convergence, and increasing sophistication, of several key technologies.

In this class of device, a relatively simple sensor is disposed on a patient. This may be implanted or worn, and typically senses a particular parameter. The sensor communicates wirelessly to another device, which then sends the data via the internet to a remote server, or the cloud, for processing. The data is then processed, often in a very sophisticated way, and reports or provides indications to patients and/or their physicians. Device systems addressing conditions as diverse as epilepsy, hypertension, congestive heart failure and incontinence were discussed at the conference.

This is a very powerful new technical methodology, which also creates a new business model. As well as the supply and fitting of the sensor device, an additional source of revenue comes from the on-going processing, reporting and management of the devices and the processing. From the device manufacturer’s perspective, there are risks that, for example, the user or their physician could contract with an alternative provider for the processing and reporting work. There are thus multiple risks to the revenue base of the business – not just supply, fitting and servicing of the device, but also the on-going processing and report service.

In some cases, it may be possible to bundle the on-going services as free, or paid up front, particularly when the life of the product is relatively short. If the device is intended to be worn occasionally, for example in a blood pressure monitoring situation, then the business could proceed mainly as a fee for service operation. However, these options are difficult for an implanted device, or one intended to be operated by an intermediary on multiple patients. To some extent, and in some situations, careful software licensing may be able to reduce the risks.

In terms of patent protection, the challenge is how to control the service aspect. One issue is territory – if the processing is happening in the cloud, then to the extent it is localised in any territory, that may not be a territory where the patent is effective. Generally, where a method is claimed, if key steps are not taken in the jurisdiction, then the patent is not infringed. Even if method steps are spread across multiple jurisdictions where there are patents, because only part of the method is performed in one place, there may be no infringement. For example, the pre-processing of the data may occur on a patient owned device; the data is initially processed in a second country, the report compiled and generated in a third country, and the report sent back to the physician in the first country. Depending upon the system, it may not even be possible with any certainty to define the territory where the steps are undertaken.

This kind of issue is inherent in cloud computing. Very careful attention to matching the scope and framing of the patent, in a full understanding of the business model and risks in that model, is critical to obtaining effective protection. It is critical for such businesses to undertake a careful analysis of their patent portfolio with a view to minimising the opportunities for opportunistic infringement.

by Peter Franke

Who owns Intellectual Property? Don't follow the money!

“I paid them to do the work, so I own the intellectual property. Don’t I?”

Well, um, probably not.

The fundamental that must be remembered with intellectual property of any kind – ownership naturally rests with the creator, whether that is the designer, author, inventor etc. Paying someone to do a job, where doing that job results in the creation of intellectual property, does not in itself transfer ownership of the intellectual property.

Intellectual property ownership can only be transferred by an explicit contract – one that identifies the IP and to whom it is to be assigned. We suspect that there is a wealth of valuable IP whose ownership still actually rests in the hands of contracted researchers, designers, authors and the like because their contract did not make any clear arrangement for the transfer of IP created in the course of their work to the contracting organisation.

The only ‘exception’ to this rule (or so it is often said) has been the case of the employee inventor/designer/author. However, it would be a mistake to assume that ANY intellectual property produced by ANY employee is actually owned by the employer.

The line of decisions by Australian courts seems to be steadily narrowing the circumstances in which an employer will automatically own the IP output of an employee’s work.

As ever, the answer to the question of IP ownership depends on the unique circumstances of each situation, but to illustrate some general principles, here is a list of circumstances that are likely to mean the employee actually owns the IP in the output of their work:

• If the employee is not expected to create IP as part of their regular role, e.g. if they are part of the sales team, even though they may work with R&D personnel, or even if they are a researcher at a university;
• If the employee creates something new at work, that they were not ‘directed’ to create, even though they are in a role that usually involves the creation such new things;
• If the employee operates as a highly skilled specialist in their role, such that they do not operate under close supervision.

So, in what circumstances will an employer own the IP? Something like this:

• Where the employee is employed to create IP, such as a member of an R&D team, design team or software development team, but where the employee has a more functionary role – not acting as an independent specialist without technical supervision – and is working on a project that forms a part of the employer’s development plan, and is not a ‘skunk work’ with a business application.

Failing that, an employer, or user of contract IP generators, who does not institute a program of obtaining IP assignments is letting ‘its’ business IP walk out the door.


by Adam Hyland

Integrated Patent Examination of Australian and New Zealand Patents

The Prime Ministers of both Australia and New Zealand announced the creation of an initiative to integrate examination of Australian and New Zealand patent applications within a three year period. The initiative is part of a larger framework of bi-lateral measures to simplify or harmonise trade relations between the two countries.

The integrated patent examination initiative announced is still at a high level and details of exactly how the initiative will be brought into practice is something the respective patent offices (IP Australia and IPONZ) will be focusing upon over the immediate future.

The initiative is directed to the scenario where patent applications for the same invention are filed in both Australia and New Zealand. The current practice is that the Australian application is examined by IP Australia and the New Zealand application is quite separately examined by IPONZ. The initiative is designed to replace the separate examination of the applications with an integrated approach so that both applications will be examined by a single examiner at either IP Australia or IPONZ.

It must be stressed that the initiative is not aimed at a harmonisation of patent law between the two countries. There are a number of issues which distinguish the Australian and New Zealand patent legislations. In fact, more distinctions may come when the proposed draft New Zealand patent legislation comes into effect.

Consequently, the integrated examination will inevitably result in the applications being examined separately under their own separate laws, albeit by the same person. The practical hurdle that needs to be addressed in order to implement the initiative will be to train the Australian and New Zealand patent examiners to confidently and competently be able to apply the laws of another country.

To the extent that there are certain overlaps in the patent legislation of Australia and New Zealand, given examination will be conducted by a single examiner, the initiative may well reduce duplication of work and provide a consistent expression of opinion. However, will these perceived benefits be negated or outweighed by the practical difficulties of the examiner applying the non-overlapping or distinguishing aspects of the two patent laws?

by Simon Ellis