Fighting SMEs' David and Goliath problem 4 min read
The Federal Government has released the final report on the review of the accessibility of patents for small and medium sized enterprises (SMEs), which follows the phasing-out of the innovation patent system in Australia. The report makes a number of significant recommendations, including on the conduct of patent litigation.
- In light of the phasing out of the innovation patent system, the Government launched a review of the accessibility of patents for SMEs, as we previously reported.
- The final report on the review has now been released. A major theme is the 'fear of litigation' suffered by some SMEs, which has deterred them from using the patent system at all, and seen them instead rely on trade secrecy, and other techniques, to protect their innovations.
- The report makes a number of recommendations aimed at reducing the costs of patent litigation in Australia.
The report identifies that some SMEs have adopted the strategy of avoiding the patent system altogether, due to the perception that they will face a 'David and Goliath' battle should they ever need to enforce a patent – ie a small company feels it cannot win when a large company with seemingly infinite resources infringes a patent. Then again, the report also acknowledges that it is not always possible for SMEs to avoid patent litigation, if they themselves are faced with infringement allegations.
As a result, the report makes a number of recommendations aimed at addressing the 'David and Goliath' issue and encouraging more use of the patent system by SMEs.
A specialist IP court for Australia?
The final report recommends that the intellectual property practice of the Federal Court provide a stream for smaller disputes along the general lines of the UK's Intellectual Property Enterprise Court (the IPEC), in order to give at least one avenue for expedited and inexpensive trial processes (recommendation 9).
Similarly, in 2016 the Productivity Commission recommended that a specialist IP list in the Federal Circuit Court (the FCC) be implemented, which would include an expanded patents jurisdiction for the FCC and incorporate similar features to the IPEC. The FCC currently has jurisdiction to hear and determine certain IP disputes; this does not extend to patents. The final report states that the failure to follow up on the IPEC model was a 'major deficiency' that left Australia's approach to solving disputes within the patent system 'hanging in midair'.
The IPEC was founded in 1990, to provide an accelerated and less costly hearing for IP disputes, and hears all IP cases, including patents. It has a two-track system: one track for small claims; and the 'multi-track', for more complicated matters, such as patent cases. Trials usually last no more than two days, or three days at the most. There is a cap on damages (£500,000) and a cap on the costs that can be awarded against a party (£50,000).
If this recommendation is accepted by the Government, we would expect further consultation on its implementation.
Confining appeals from opposition decisions
Another recommendation in the final report is that legislation be enacted that if a party wishes to appeal a patent opposition, this appeal must be based on the facts and grounds originally available to the Commissioner of Patents, with new grounds being admitted only with the leave of the court (recommendation 10). Although this recommendation is made in the context of a review considering the accessibility of the patent system to SMEs, the recommendation as framed would affect any appeals from a patent opposition decision, whether involving SMEs or not.
Currently, an appeal before the Federal Court from a decision of the Commissioner of Patents in a patent opposition is a de novo hearing of the matter – it is an original proceeding where the court makes a fresh decision, and is not confined to the material and arguments before the Commissioner. This means that the parties can raise, and the court may consider, any ground on which the grant of the patent may be opposed, even if the ground was not raised before the Commissioner.
In some cases, this has meant the number of issues before the court in an appeal, and consequently the duration and cost of the appeal hearing, has ballooned in comparison with the duration and cost of the original hearing before the Patents Office.
It is possible this recommendation will have unintended consequences, in that it could actually increase the cost of opposition proceedings before the Patent Office. If a party is unable to raise new grounds (and new evidence) in an appeal, it will need to evaluate all potential grounds of opposition at the Patent Office stage, and therefore potentially prepare evidence in relation to a greater number of grounds, including preparing such evidence to the standard required for court proceedings (which necessarily increases the cost of preparing the evidence).
The Government is still considering the final report. We will keep you updated on its response to the recommendations.