New Zealand’s second-tier patent system fails to advance

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As the title suggests, the prospect of a second-tier patent system in New Zealand failed to advance past first base, with the New Zealand Government halting the progress of the “Advancement Patent” following its first reading. While the prospect of New Zealand having a second-tier patent system appears all but dead and buried for now, the debate both for and against its introduction raises a valid question: Did New Zealand need a second-tier patent system?

Background

We previously reported on the possibility that a second-tier patent system was on the horizon in New Zealand, where a Private Member’s Bill entitled the Patents (Advancement Patents) Amendment Bill 2018 (the Bill) was introduced on 5 April 2018. Labelled the “Advancement Patent”, the Bill aimed to provide New Zealand innovators access to a second-tier patent system, affording them the opportunity of patent protection for inventions that may not qualify for a standard patent.

In a rather quick turnaround, the Bill was subsequently drawn from a ballot and its first reading commenced in New Zealand’s Parliament on 16 May 2018. Since then, the Bill endured three days of parliamentary debate, eventually concluding on the 8 August 2018, where it failed to advance to the next ‘Select Committee’ stage.

The “Aye’s”

There were 57 votes in favour of the Bill. The Bill’s sponsor, Dr Pamjeet Parmar, outlined that the introduction of a second-tier system could allow small-to-medium enterprises (SMEs) to enjoy an innovation monopoly for advancements that may or may not qualify for a standard patent under the Patents Act 2013. Dr Parmar focussed most of her debate on the advantages her Advancement patent had over Australia’s innovation patent system. For example, unlike the innovation patent, examination and certification would be compulsory for an Advancement patent leading to increased certainty for the New Zealand public.

The “Nay’s”

There were predictably 63 votes against the Bill. The Government’s position can readily be summed up by Minister Fletcher Tabuteau’s comments that the Advancement patent “is an apparent solution looking for a problem”. Such a phrase would not look out of place in a patent opposition. A common theme in submissions against the Bill was that if a second-tier patent system was in such high demand, then why wasn’t it included in the Patents Act 2013, and why would New Zealand introduce a second-tier system when Australia is in the process of abolishing theirs?

How would the Advancement Patent affect New Zealand businesses?

Depends on who you ask. In support of the Bill, National’s Brett Hudson posited that New Zealand SME’s do not protect the intellectual property they create as it is very expensive to obtain a patent under the Patents Act 2013, and having an a second-tier patent system would likely encourage SME’s to protect their ideas, which too often are “stolen” by competitors.

To support his argument, Mr Hudson referred to Fieldays, New Zealand’s flagship agribusiness expo, and painted the picture that attendees were not tourists or your everyday famers, but actually overseas competitors there to take photos and steal New Zealand innovator’s ideas. He stated that having a second-tier patent system would be readily used by New Zealand SME’s to protect the ideas they create, so that competitors could not launch a copied product in New Zealand.

In contrast, Minister Gareth Hughes argued that lowering the level of inventiveness required for a patent to an “advancement step” would result in increased overseas competition in New Zealand for SME’s. He argued that under the proposed Bill, the very same people taking photos at Fieldays and stealing ideas could then make a minor change and get their own monopoly granted in New Zealand.

Minister Paul Eagle echoed similar concerns, highlighting that overseas competitors could easily attain a second-tier patent and then apply for an injunction to prevent an SME from making products in New Zealand and selling those products, leading to increased legal action for SME’s to defend New Zealand-based manufacturing operations. In particular, the Minister highlighted that many New Zealand businesses are being forced to take legal action against competitors’ patents filed under the Patents Act 1953 which did not examine for inventive step, and that the Bill here would result in similar lower threshold patents effectively stymieing New Zealand SME manufacturing.

Overall, it was the Government’s view was that the current level of inventiveness required for a standard patent created an excellent balance between a relatively significant inventiveness threshold and a good reward for those that cross it, and lowering it would essentially increase competition between New Zealand SME’s and overseas corporations. As such, in their eyes, the Advancement patent was not needed.

The Patents Act 2013

The same political party looking to introduce a second-tier patent system also introduced the “New” Patents Act 2013 in 13 September 2014 which provided a major update and modernisation of the previous “Old” Patents Act 1953 and significantly raised the threshold for patentability. This included examination of inventive step which was not examined for applications filed under the Old 1953 Act (however inventive step was, and still is, a ground of opposition for patents examined and granted under the Old 1953 Act).

As such, under the Old 1953 Act, there was no real need for a second-tier patent system in New Zealand as applicants could obtain a granted patent for low-level inventions lacking an “inventive step”. Such inventions would arguably now only be considered as having an “advancement step” under the Bill, and certainly no longer eligible for the grant of a standard patent under the Patents Act 2013. Essentially, by increasing the patentability threshold in New Zealand, the legislation has arguably created the need for a second-tier patent system for those low-level inventions that were previously eligible for protection under the Old 1953 Act.

Then why wasn’t a second-tier patent system included in the Patents Act 2013? For the time being, the New Zealand Patent Office (IPONZ) currently has to administer both the Old 1953 Act and New 2013 Act during examination, opposition and revocation, and perhaps taking on an entirely new second-tier patent system would have been too burdensome.

Final comments

Is this a missed opportunity for New Zealand, or just a result of caution in view of the current scrutiny of Australia’s similar innovation patent system?

With Australia’s innovation patent system future now looking bleak, the failure of the Advancement patent to advance could result in both Australia and New Zealand excluding access to a second-tier patent system for low-level inventions.