Updated as at 29/10/2001.
1. What is a Patent?
Patents grant monopoly rights for a limited period for novel, useful, inventive and innovative products and processes. Essentially, a patent is a legal monopoly granted by the Commissioner of Patents or by staff of IP Australia acting under delegated authority from the Commissioner (1) that allows the patent owner to prevent others from using, selling, or otherwise exploiting the patented invention or innovation without the permission of the patent owner.
The patent system is based on the policy of encouraging innovation and technological development by granting a legal monopoly to inventors. In return for the monopoly rights, the inventor must disclose his or her invention to the world so that the information may be shared and promote further development such that the public can readily make use of the invention once the monopoly expires.
The inventor can also try to protect his or her invention another way, for example, by keeping it a secret (see Confidential Information fact sheet), and thus try to protect the secret of his or her invention forever. However, relying on trade secret is a more risky way of protecting one’s invention. Most inventors prefer to obtain a patent thus guaranteeing a period of monopoly during which they try to recoup the cost of their investment in the invention.
2. Patentable Inventions
Not all inventions are patentable. Unlike copyright protection, which is automatic, patent protection exists only after an application for patent protection is made and is granted. The application process determines whether or not the invention or innovation meets the legal requirements of a patent.
The Patents Act 1990 (Cth) sets out such requirements. In applying for a standard patent, the patentable invention must be novel, inventive, useful and of a manner of manufacture.(2) If the invention is unable to meet the inventive threshold, an innovation patent can be applied for. In this case, the invention must be new, innovative, useful and of a manner of manufacture.(3) In either case, to meet the requirement of being a manner of manufacture, the invention must relate to the useful arts (in the field of economic endeavour) rather than in the fine arts.(4) This definition has further expanded to include "a mode or manner of achieving an end result...of utility".(5)
Certain subject matters are considered to be inherently non-patentable. For example, in Australia, policy reasons prohibit the patenting of human beings and the processes for their biological regeneration.(6) Other subject matters not patentable include ideas on their own without application, pure mathematical algorithms, scientific principles and laws of nature.
The application documents must set out fully the patent specification and the claims of the invention. The claims define the scope of the monopoly granted to the owner of the patent - the patentee. Whilst applications for standard patents can contain unlimited claims, innovative patent applications can only be comprised of up to five. These documents become available for the public to view.
Once granted, a standard patent may give up to twenty years of protection to the owner from the date of filing (or longer, in the instance of pharmaceutical products). Innovation patents provide protection for only eight years from the date of the patent. Until 23 May 2001, it was also possible to gain protection for petty patents, which (as the name suggests) are for lesser inventions. Petty patents gave the patentee up to six years of protection from the date of filing. However, the petty patent system has now been replaced with the innovation system outlined above. Therefore, only petty patents in force on 23 May 2001 continue to be valid.
3. How to find an Existing Patent
More than thirty million patent documents have been published worldwide, and approximately one million are added each year. 7% of world patenting activity takes place in Australia.
This makes it important for inventors and innovators to search for existing patents. This ensures that they will not infringe someone else’s patent through their own activities, nor waste time and money duplicating work that has been done elsewhere. Even where an existing patent is found, inventors and innovators can then seek a licence from the initial patent holder to use that patent. In any event, searching for existing patents allows inventors and innovators to stay abreast of recent developments and trends in their relevant market.
An inventor or innovator can search the patents databases provided by IP Australia themselves, which provides up-to-date information concerning Australian patents. In order to do so, visit http://www.ipaustralia.gov.au/patents/P_srch.htm. Alternatively, where more technical and complex inventions and innovations are concerned, a patent attorney or other suitably qualified professional specialising in the relevant field can more efficiently and accurately search the relevant databases. For further information, see http://www.ipaustrlaia.gov.au/patents/P_info.htm.
4. How to obtain a Patent
The following is a brief description of the major stages in obtaining a standard patent. The procedure for innovation patents is essentially the same, although having minor differences at certain stages.
IP Australia, the department registering and administering patents and other registrable intellectual property rights in Australia, recommend seeking the assistance of a patent attorney when intending to apply for a patent. Statistics show that a high percentage of "do-it-yourself" patent seekers fail because of the lack of knowledge in relation to the law, technology and procedural requirements.(7) For a listing of patent attorneys throughout Australia, see http://www.ipta.com.au/fellows/fellowsindex.html.
(a) Filing an application
To obtain a patent, the first step is to file an application. IP Australia allows potential patentees to apply online for innovation patents.
An application must include:
* a written specification describing the invention and how it works;(8)
* a completed patent request form;(9) and
* the filing fee (payable by credit card if an online application is made).
It is possible to file a provisional specification to obtain as early a priority date as possible. Obtaining the earliest priority date is important because when the application is examined for novelty and inventiveness, any material which is published after the priority date is not taken into account, thus giving more opportunity for the invention to be found to be inventive and novel. However, filing a provisional application on its own does not give patent protection. One must file a complete application (meaning complete specification) within 12 months of filing a provisional application. If the inventor does not file a complete application associated with the provisional application within the 12 months, any priority is lost.
In general, when inventors believe they have an idea for a new product or process that is patentable, the inventor will file a provisional application as soon as possible to obtain the earliest priority date possible and continue to work on the invention to improve it. As long as the final claimed invention is substantially based on the original application, an inventor is still entitled to claim the original priority date. However, they must ensure that a complete specification is filed within 12 months of the original provisional application.
(b) Examination of Application
After an application is filed, it is examined by the Patent Office of IP Australia in Canberra. The type of examination undertaken depends on the type of patent sought.
Examination is not automatic. The inventor must file a request for examination and pay a separate fee for examination. If the request has not been made between one to two years after filing, the Patent Office will direct the inventor to request an examination. Once the direction is made, the inventor has 6 months to make the request. The examination process usually takes about 5 months. After completing the examination, the Patent Office will send either an adverse report (a report giving reasons why the application does not meet the requirements of the Patents Act in its present form) or a notice that the application has been accepted.
If an adverse report is issued, the Patent Office also issues an information sheet that outlines the deficiencies in the application. Deficiencies usually arise because the claims are unclear, too broad or cover something that is already known. It is possible to then amend the application in accordance with the information sheet and submit it for another examination. Once the Patent Office is satisfied that all deficiencies have been corrected, the application will be accepted. Sometimes, however, the deficiencies may be of a nature which cannot be corrected.(10)
The granting of an innovation patent is simpler and can take place within a month. If the complete application passes an initial formalities check (simply that the application is complete and meets requirements), the patent is granted. The innovation patent is valid for eight years, provided that annual maintenance fees are paid. As such, the examination process is not mandatory for innovation patents. Nonetheless, when undertaken, it is virtually the same as for standard patents and will strengthen enforcement of the patentee’s rights.
(c) Publication of Application
In the case of standard patents, publication of the unexamined application occurs about 18 months after the initial application in the Australian Official Journal of Patents regardless of whether or not it is examined. With innovation patents, publication occurs when the patent is granted. Published patent specifications are made available to the public and are sent to certain libraries and overseas patent offices. This means that the contents of patent specification are no longer confidential. If the application for a standard patent is accepted, the acceptance of the patent is published together with the application incorporating any amendments made. In the same way, certification of an innovation patent calls for further publication.
(d) Opposition
After the publication of acceptance of the application for a standard patent, there is a period of three months given for any opposition to be made by anyone to show that the patent would be invalid if granted. This opposition can only occur after certification in the case of innovation patents. According to IP Australia, only a very small percentage of accepted applications are opposed.(11) If the application for a standard patent is not opposed, it is sealed and the patent certificate sent to the applicant at the end of the opposition period. The patent is finally granted. A standard patent is valid for twenty years, counting from the date when the complete application is filed, subject to the payment of annual maintenance fees.
(e) Costs
The estimated cost of obtaining an Australian standard patent including attorney fees is between $5000 to $8000. Maintenance fees over a twenty year term would be a further $7000.(12)
In applying for an innovation patent, filing fees are in the order of $500. These do not include examination fees, which amount to a further $300 where the applicant requrests the examination. In addition, the applicant must also consider patent attorney fees, as well as annual renewal fees in the vicinity of $1000 over eight years.
The major component of the fees associated with the application is the attorney fees incurred in preparation of the application. The actual filing and examination fees are under $1500. For further information, see http://www.ipaustralia.gov.au/patents/ P_fees.htm.
5. Patents and the Internet
Patent protection plays an increasingly important role with respect to the internet and internet-related activities in two important areas:
* protection for computer-related technology; and
* protection for business methods.
(a) Patents and Computer Programs
Innovations in computer hardware, to the extent that they met the necessary requirements, were always patentable subject matters as the result of the invention could be clearly seen. However in relation to computer software, matters were not so straightforward. For a long time, computer programs were not held to be patentable subject matter on the basis that they related to certain classes of unpatentable subject matter, such as methods of operating a known machine (the computer), abstract ideas, intellectual processes or mathematical or scientific algorithms. This is explicable to some extent because the early programs related mostly to the execution of complex scientific and mathematical algorithms in academic and government environments with little or no commercial application.
The change of attitude in Australia occurred in the early 1990s in Australia, when the Federal Court of Australia decided in a case regarding a computer program for producing an improved curve image that if the invention produces a commercially useful effect, the invention will be patentable.(13) This was followed by another decision in which the Federal Court again expanded the boundaries by stating that if a claim covered computer processing equipment which created an artificial and useful result in a field of economic endeavour, it would be patentable. As a result of these court decisions, IP Australia adopted a new practice which treated computer programs in the same way as other claims of innovation.(14) The test is now whether or not the claimed invention produces a commercially useful effect. The Patent Office accepts that "any innovative idea which provides a practical solution to a technological problem" may be the subject of a patent. This approach was confirmed and accepted in a number of subsequent decisions. (15)
The computer industry was slow to take up the opportunity to patent software but since the mid-1990s, there has been a substantial increase in the number of applications filed. These may be considered as being directed towards software inventions.
Patent protection is likely to augment copyright protection as a significant method of protection software. An advantage of the patent system is that it gives the owner a complete monopoly, even if another person has created something independently or by reverse engineering for the purposes of interoperability (see Copyright fact sheet). However, the costs associated in going through the patent registration process may mean that the majority of software creators continue to rely on the automatic protection afforded by copyright as their main method of protection. Another factor deterring software developers from seeking patent protection is the publication process referred to above. The subject matter of a patent application is made available to the public and therefore anyone who wishes to misappropriate software the subject of a patent can simply obtain a copy of the patent specification and copy the code. To prevent this, the patentee would have to take patent infringement action, which can be very costly and time consuming.
(b) Patents and Business Methods
Another area of increasing importance to businesses in protecting their intellectual property rights is the patenting of business methods. Business methods belonged to the category of subject matter that was traditionally held not to be patentable. However, as business method innovation became more intertwined with technological innovation, particularly in relation to internet-related commerce, it was recognised that business methods may be patentable in certain circumstances. The development in this area is largely driven by the practices in the USA. There, the registration of business method patents has grown exponentially over the last two years. This is partly due to recent cases in the USA where the courts have found business methods to be patentable. This area in Australia, although new, is developing. The Federal Court recently decided that a patent covering a device or invention AND a business method was patentable (16). This has implications for ways of doing business over the internet in that developers of new business methods should consider seeking patents for their methods or if an existing patent for the business method is found, seeking a licence from the patent holder to use that patent.
Further, IP Australia has published on its website an article entitleed "Patents for Schemes or Plan". The publication outlines IP Australia's view (which is analogous to that regarding computer codes) that a business method is inherently patentable when it has been implemented in some manner which has some utility in the real world. In other words, the manner of manufacture outlined above has now extended to include modes of achieving end results that create satisfaction where business endeavours are explored.(17) The publication then provides examples of what may be patentable business schemes.
The following are examples of schemes that may be patentable:
* A method of raising funds by seeking sponsors to donate products, and using a random number generator operating in a specified way to conduct a raffle of those products.
* A method of analysing business performance by programming a computer system to compare business performance against a specified set of parameters.
The following are examples of business methods which may not be patentable:
* A method of raising funds by seeking sponsors to donate
* A method analysing the performance of an investment by creating a benchmark, and comparing the investment to the benchmark. As is later stated in the publication, "[i]n the above examples the patentability of the scheme or plan resides in artificially putting the scheme or plan into effect."
These developments are not without criticism and it is acknowledged that major problems may arise. For example, some business method patents are arguably using the disguise of technology to monopolise common processes. Also, there is no comprehensive database of prior art for the patent examiners to compare the claims of the innovators to determine whether or not the claimed invention genuinely meets the requirements of the legislation.
However, despite considerable criticism, this is a practice which is only likely to grow in the future given that countries want to give as much advantage as possible to their nationals and companies in the global competition in innovation and technology. Even the European Union, whose laws expressly exclude computer software technology from patentable subject matter, have started to allow patenting of computer software and business methods in practice. Australia has also been forced to adopt similar practices so that Australian businesses do not suffer disadvantage compared to other international businesses, particularly in relation to companies from USA.
Examples of business methods patents granted in USA include patents for:
* various electronic payment system and methods;(18)
* advertising and marketing on the internet;(19)
* auctions on the internet;(20) and
* accounting and management system.(21)
(c) Problems with Patenting Internet-related Technology
Patent protection is territorial. A patent registered in Australia protects the owner from infringement or breach only in Australia. If an alleged infringement of an innovation protected in Australia occurs outside Australia in a jurisdiction or territory where there is no patent protection for that innovation, there is not much that the owner can do.
Also, the validity of some patents that have been granted for internet-related technology is questionable. However these patents will continue to stand unless a successful revocation proceeding is brought against them. This may arise in situations where the patentee tries to enforce their rights against an infringer. It is open to the alleged infringer to counterclaim that the patent was never valid and therefore should be revoked.
(d) The effect of Innovation Patents
In light of the introduction of the innovation patent system, some of the difficulties outlined above concerning computer programs, business methods and Internet-related technology are alleviated. Since the innovation patent system has a lower threshold of difficulty in meeting the requirements for patenting it encourages patenting by innovators by providing cheaper, simpler and easier alternatives to applying for standard patents (e.g. online applications). Hence, business methods, tools and methodologies, and computer and internet-related innovations, may easily become the subject matter of innovation patents. Further, with the rapid growth of technological industries, efficiency in having an innovation patent granted may be vital to protection and therefore, competitive advantage.
Nonetheless, if the examination process outlined above is bypassed, the innovator may have no legal recourse to assert their rights and maintain such competitive advantage. That is, only once examination is undertaken, and the innovator is granted certification of the innovation patent (i.e. a certificate stating that the patentee has a monopoly over the invention), can the innovator bring an infringement action. Therefore, although not mandatory, it is advisable to seek certification to more thoroughly protect innovations and the competitive advantages they hold.
5. New Developments in Australian Patent System
The Patents Amendments Bill 2001 has recently been introduced into Parliament. The Bill aims to bring Australian patent requirements and procedures in line with international standards.
The Bill primarily amends the requirements for obtaining a standard or innovation patent in terms of novelty, inventive and innovative step. The requirements will no longer be assessed against publicly available information (the prior art base) and common general knowledge in Australia alone. Rather, an invention will be compared against international standards, with such information and persons not only falling within the patent area, but also outside of it.
More generally, the Bill proposes to alter the onus of proof in an examination such that the Patents Office no longer has to find a lawful ground of objection. Instead, they must be satisfied that the invention is novel and inventive or innovative.
The more demanding requirements that would be imposed by these requirements may well hinder patenting of inventions and innovations, including business methods and computer and Internet-related technologies. The cost and time factors involved in patent registration which were reduced with the innovation patent system may be reborn in the form of greater searching and more stringent procedures. Indeed, the lower threshold provided for innovation patents may be too high for some Australian inventors at an international level.
On the other hand, the standard will help avoid Australian patents being granted that do not meet novelty and inventive or innovative step thresholds elsewhere in the world. As such, the Bill brings Australian inventions and innovations to the fore of international standards. It may encourage further research and development in Australia thereby giving Australian inventors and innovators the ability to lead the world in traditional areas of patentable subject matter, as well as technological advancements in business methods and computer and internet-related technology.
Other relevant Fact Sheets:
Sources of Law
Patents Act 1990 (Cth)
Patents Amendment (Innovation Patents) Act 2000
Patents Amendment Bill 2001 and Explanatory Memorandum
National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252
International Business Machines Coproration v Commissioner of Patents (1991) 22 IPR 417
CCOM Pty Ltd v Jiejing Pty Ltd (1994) 27 IPR 481
Welcome Real-Time SA v Catuity Inc [2001] FCA 445 (17 May 2001)
Welcome Real-Time SA v Catuity Inc (No 2) [2001] FCA 785 (24 July 2001)
End Notes
1. Patents Act 1990 (Cth), sections 61, 62 and 209.
2. Patents Act 1990 (Cth), section 18(1)
3. Patents Act 1990 (Cth), section 18(1A).
4. See National Research Development Corporation v Commissioner of Patents (1959) 102 CLR 252
5. See Knight, P., "Patenting business processes" in Technology and Intellectual Property Issues (Sydney: Clayton Utz, 2001).
6. See section 18(2), Patents Act 1990 (Cth)
7. See generally http://www.ipaustralia.gov.au/patents.
8. The description must be sufficiently full and comprehensive so that someone with knowledge of the technology could reproduce the invention described from the information given in the specification. It does not have to detail the exact dimensions in the nature of a manufacturing specification, as long as those dimensions are not critical to the working of the invention: see http://www.ipaustralia.gov.au/patents/P_file.htm.
9. This can be obtained at IP Australia website at http://www.ipaustralia.gov.au/patents or by contacting IP Australia office
10. See http://www.ipaustralia.gov.au/patents/P_examin.htm.
11. Only approximately 2% of all applications are opposed. See http://www.ipaustralia.gov.au/patents/P_examin.htm.
12. See http://www.ipaustralia.gov.au/patents/P_fees.htm
13. See International Business Machines Coproration v Commissioner of Patents (1991) 22 IPR 417.
14. See IP Australia Patent Office information sheet "Patents for Computer Related Inventions" available at http://www.ipaustralia/patents/.
15. See, for example, CCOM Pty Ltd v Jiejing Pty Ltd (1994) 27 IPR 481.
16. See Welcome Real-Time SA v Catuity Inc [2001] FCA 445 (17 May 2001) and Welcome Real-Time SA v Catuity Inc (No 2) [2001] FCA 785 (24 July 2001).
17. See Knight, P., "Patenting business processes" in Technology and Intellectual Property Issues (Sydney: Clayton Utz, 2001).
18. For example, Mastercard International holds a patent (No. 5,699,528) for the system and method for the bill delivery and payment over a communications network; V-One Corp holds a patent for electronic payment system and method (no. 5,590,197); and a patent (no. 5,727,163) for a secure method for communicating credit card data when placing an order on a non-secure network held by Amazon.com, Inc.
19. Open Market holds a patent (no. 5,724,424) for digital active advertising.
20. The reverse auction patent (no. 5,794,201) held by Priceline.com, Inc.
21. Patent (no. 5,706,442) on system for online financial services using distributed objects held by Block Financial Corp.