The Australian Government Seeks to Phase Out Innovation Patents (Utility Models)

Last month the Australian Government announced that it was seeking to phase out the Australian innovation patent.  The grounds for this decision were that the innovation patent had failed to achieve its intended purpose.

 

Utility Models as an Intellectual Property Right

The Australian innovation patent is a form of intellectual property (IP) right, often referred to in other jurisdictions as a utility model.

Utility models are similar to standard patents in that they provide for the owner an exclusive right to stop others from using an invention.  However, they have a lower threshold for patentability and offer a corresponding lesser level of protection.

Typically, a utility model will differ from a patent in the following ways:

  1. Patentability: whilst novelty of the invention is still required, inventive step / non-obviousness typically has a lower threshold or is not required at all
  2. Term of Protection: shorter than a patent, usually 7 to 10 years, depending on the jurisdiction
  3. Registration: often simpler & faster, because many patent offices do not perform substantive examination prior to registration
  4. Costs: utility models are cheaper to both obtain and maintain than patents
  5. Subject Matter Qualification: in certain jurisdictions, utility models can only be obtained for certain technologies, and for products but not for processes.

Being easier, quicker and cheaper to obtain, utility models are often sought to protect incremental innovations.  They are well suited for small and medium sized enterprises (SMEs) that make minor improvements or adaptations to existing products.

 

The Australian Experience

The Australian innovation patent has been available since 2001.  It was introduced to replace the previous “petty patent” system.  While having some similarities with a utility model, the “petty patent” required the same level of inventive step as a standard patent.

The introduction of the innovation patent introduced an IP right with a lower requirement for inventiveness, thereby offering protection for innovations that would not otherwise qualify for full patent protection.

Recent studies have shown, however, that the innovation patent has not had the desired effect, especially with respect to SMEs and individual inventors.  These players have not fully embraced the system, often being one-time users, and not maintaining these rights for their full life.  The intended incentivisation of research and development within these groups was not observed either.

Rather, the system had provided a mechanism that enabled big business to stifle the innovation of the smaller players.  The costs of the system were disproportionally borne by the smaller entities, to a net cost to Australian businesses of AUD 11m annually, whilst the larger entities realised the benefits.

 

Wider Criticism and Global Experiences

Criticisms of the innovation patent have been raised over the years, and are often reflected in experiences of utility models within other jurisdictions.  Whereas the intention behind the utility model as an IP right is well founded, it is not often utilised as intended.  For example:

The threshold for what qualifies as an improvement to a technology can be too low.  The lower standards for obtaining IP right protection can actually inhibit innovation and competition.

Substantive examination is often optional.  This can create uncertainty for third parties within the patent landscape, as to the validity of the claims and in determining whether there is freedom-to-operate.  On the flip side, this provides a strategic advantage to the owner of the utility model, as their competitors may have to invest significant analytical resource to answering these questions themselves.

The overall strategic use of utility models is a further criticism of the system, in particular by those organisations with the resources to target the competition with the intention of stifling the competitors’ activities.  The larger player can file “patent thickets”, a dense set of utility models with claims that are difficult to invalidate, that surround a competitor’s own product.  The intention is to inhibit the competitor’s further development of their product and their overall freedom-to-operate.  This can be particularly effective against small competitors or those who otherwise lack the resources to defend a case.

Such tactics make it increasingly difficult for smaller players to compete effectively with the larger players, with the knock-on effect of eroding confidence and investment in SME innovation, stifling the business activities of the very entities these types of IP right are intended to support.

 

Trends in Aotearoa and Our Other Trading Partners

Last year (5th April 2018) New Zealand began formally exploring the introduction of a similar type of intellectual property right, referred to as an advancement patent.  The bill was negative (failed / withdrawn) at its first reading on 8th August, and is currently not being pursued.

It is interesting to note recent developments in China over the past two years, with respect to updates to their utility model system.  In particular there has been an increase in the level of evaluation of novelty, enablement, support, and subject matter qualification during formal examination.

Utility models are a useful and important part of the suite of IP rights.  However, experience shows that they are not often used as intended.  In a number of jurisdictions, they are currently being explored, tested and revised.

Alistair Curson

 

References

Dixon, G. (2018, April 6). Private Member’s Bill proposes second-tier New Zealand “advancement patent”. Retrieved October 01, 2019, from https://www.shelstonip.com/news/private-members-bill-proposes-second-tier-new-zealand-advancement-patent/

Gajewski D. (2019, July 28). “Utility Model Examination in China is Quietly Changing”. Retrieved October 03, 2019, from: https://www.ipwatchdog.com/2019/07/28/utility-model-examination-china-quietly-changing/id=111451/

Gray, E., Watts, R., Scott, R. (2018, April 26). An advancement in name alone? Retrieved October 01, 2019, from https://www.simpsongrierson.com/articles/2018/an-advancement-in-name-alone

IP Australia. (2016, May 30). Types of patents. Retrieved October 01, 2019, from https://www.ipaustralia.gov.au/patents/understanding-patents/types-patents

IP Australia. (2019). “Innovation patents harm small business innovation”. Retrieved October 01, 2019, from: https://www.ipaustralia.gov.au/sites/default/files/innovation_patent_fact_sheet_2019.pdf

IP Australia. “Innovation patents harm small business innovation”. Retrieved October 01, 2019, from: https://www.ipaustralia.gov.au/about-us/news-and-community/news/innovation-patents-harm-small-business-innovation

Lucas, J. Rothwell, C. (2018, April 11). Second-tier patent system proposed for New Zealand. Retrieved October 01, 2019, from http://www.jaws.co.nz/about-us/media/article/second-tier-patent-system-proposed-for-new-zealand

Nash, S. (2018, August 10). New strategic direction for small business. Retrieved October 01, 2019, from https://www.beehive.govt.nz/release/new-strategic-direction-small-business

Parmar, P. (2018, April 5). Patents (Advancement Patents) Amendment Bill. Retrieved October 01, 2019, from https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_77945/patents-advancement-patents-amendment-bill

Parmar, P. (2018, April 6). Bill to introduce second-tier patent system drawn. Retrieved October 01, 2019, from https://www.national.org.nz/bill_to_introduce_second_tier_patent_system_drawn

Summerfield, M. (2018, April 10). With Second-Tier Patent Rights in Retreat in Australia, Are They Making an ‘Advancement’ in New Zealand? Retrieved October 01, 2019, from https://blog.patentology.com.au/2018/04/with-second-tier-patent-rights-in.html

Summerfield, M. (2018, July 10). A Brief History of the Australian Innovation Patent. Retrieved October 01, 2019, from https://blog.patentology.com.au/2018/07/a-brief-history-of-australian.html

Weickmann & Weickmann. “Patents and Utility Models”. Retrieved October 07, 2019, from: https://www.weickmann.de/en/activity-areas/patents-and-utility-models/

World Intellectual Property Organisation. Protecting Innovations by Utility Models. Retrieved October 01, 2019, from http://www.wipo.int/sme/en/ip_business/utility_models/utility_models.htm

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