Australia’s second tier patent system, the innovation patent system, was introduced primarily to provide patent protection for incremental and “lower level inventions” that did not meet the necessary requirements for a standard patent and could not be protected as a registered design. To be patentable, an invention for the purposes of an innovation patent need only be novel (i.e. new), involve an innovative step, which has a lower threshold of inventiveness than the inventive step requirement for standard patents, be useful, and not have been secretly used before the priority date.
Unlike standard patents it is not necessary to have an innovation patent substantively examined for patentability before grant (or even at any time after grant). Rather, the Australian Patent Office, IP Australia, merely performs a formality check of an innovation patent application to ensure that the application is in condition for acceptance. Therefore, an innovation patent application is usually granted within a matter of only a few weeks (unlike a standard patent which can take up to four years or more), thereby providing a quickfire and cost-effective solution to securing patent protection for an invention.
By providing IP rights for lower level inventions, it was hoped that the innovation patent system would stimulate innovation in Australian small to medium business enterprises (SMEs) and provide patent owners with an IP right that was quick and cheap to obtain, was relatively simple, and lasted for a period of time that was sufficiently long enough to encourage investment.
Since the launch of the innovation patent system back in 2001, however, a number of concerns have been voiced by various stakeholders questioning the effectiveness of the system. Many of the concerns have arisen following the decisions of a number of high profile Court cases involving innovation patents., 
One of the key concerns raised by stakeholders is that an innovation patent is overly generous given that it has a very low threshold of inventiveness, but that once substantively examined for patentability and subsequently certified, and therefore legally enforceable, the certified innovation patent has the same remedies (i.e. damages, account of profits and injunctive relief) against infringement as a standard patent. It has been suggested that some Applicants are using the innovation patent system as a tactical tool for litigation purposes by obtaining rapid protection for high level patents that would ordinarily be the subject of a standard patent application, and then using this protection to suppress competition, and potentially “evergreen” standard patents.
Another concern for some is that a large number of innovation patents are being granted for obvious or minor improvements which do not deserve patent protection. Indeed, the relative ease by which it is possible to obtain patent protection through the filing of multiple (divisional) innovation patents for minor variants of a successful invention enables Applicants to build a so-called “patent thicket” around a standard patent for that invention. As such, an opponent wishing to oppose the original standard patent would also need to challenge each of the additional innovation patents, thereby incurring additional time and expense. Such a “patent thicket” also makes it difficult for competitors to know whether they are likely to infringe a patent if they decide to enter this particular sector of the market.
A number of these concerns have since been addressed by way of new legislation, the Intellectual Property Laws Amendment (Raising the Bar) Act 2012, which came into effect on 15 April 2013.
For example, an Applicant for a pending standard patent application no longer has the opportunity to file divisional innovation patent applications after three (3) months from the earlier standard patent application being advertised for acceptance. This means that a person accused of infringement of a first patent will no longer find themselves subsequently seeing the proceedings amended to include one or more divisional innovation patents drafted to address the weaknesses of the first patent that were identified in the earlier proceedings.
By the same token, it is also no longer possible for Applicants to target an alleged infringer of a granted standard patent by filing a divisional innovation patent application having the same priority date as the standard patent, but being drafted specifically to capture the alleged infringement. Such a strategy was notably employed by Britax Childcare Pty Ltd in their recent attempt to capture alleged infringing products by Infa-Secure Pty Ltd.
Other notable changes affecting the innovation patent system as a result of the Raising the Bar Act also include:
Review of the Innovation Patent System
In an attempt to address some of the further concerns, the Government looked to two independent IP bodies, the Advisory Council on Intellectual Property (ACIP) and IP Australia, to conduct reviews of the innovation patent system.
In February 2011, the ACIP undertook a review of the innovation patent system to assess its effectiveness in stimulating innovation by SMEs in Australia. Six months later, the ACIP released its findings in its ‘Review of the Innovation Patent System’ (the ACIP Review), which set out a number of perceived problems with the innovation patent system, most notably the inventiveness threshold and the overly generous relief available for infringement of innovation patents. Interested stakeholders were then invited to make comments on the findings of the ACIP review.
In September 2012, IP Australia conducted a public consultation on raising the inventiveness threshold for innovation patents to the same level as that for a standard patent. IP Australia subsequently released a consultation paper entitled “Innovation Patents – Raising the Step”. This paper reported that a notable increase in the number of filed innovation patent applications occurred as a result of the first Delnorth decision, which ascribed a lower level of patentability for innovation patents than had previously been envisaged by the designers of the innovation patent system. Consequently, IP Australia voiced two concerns, firstly that innovation patents are being granted for enhancements which are obvious, and secondly, that Applicants are using innovation patents to obtain quick protection for high level patents that should be the subject of a standard patent application. To address these concerns, IP Australia proposed that the inventiveness threshold for innovation patents be raised to the same level as that required for standard patents, so as to align the requirements of the Australian innovation patent system with those of other countries operating such a second tier patent system, most notably Germany and Japan. IP Australia then invited submissions from interested stakeholders to assess whether it would be in the public interest to implement such a proposal.
Post Innovation Patent System Review
ACIP’s consideration of stakeholders’ submissions to its review of the innovation patent system was expected to be finalised in late 2013. However, after having reviewed the submissions, the ACIP felt it would be more constructive to release an Options Paper inviting interested stakeholders to make comments on three possible options for addressing the concerns over the innovation patent system as it currently stands.
A synopsis of the three possible options A, B, and C is highlighted below.
Given that the Raising the Bar Act has only just been implemented, it will likely be some time before the effects of these substantial changes to the legislation will be felt, and whether innovation in Australian SMEs will be stimulated as desired. It will also be some time before these legislation changes will be tested by the Courts.
Accordingly, one suggestion put forward by the ACIP is simply to see how these changes to the legislation interact and bed down before making any further changes to the innovation patent system.
Based on the feedback from various stakeholders, the ACIP has identified several issues that would either support or challenge a proposal for abolishing the innovation patent system altogether.
In relation to issues that would support the abolishment of the innovation patent system, the general consensus of stakeholders is that the innovation patent system is under-utilised, it is not achieving its intended goals or policy outcomes, there are no quantifiable benefits flowing to the public, and there is no reliable or quantifiable evidence to corroborate the view that the innovation patent system actually stimulates innovation. There is also concern that the innovation patent system creates uncertainty and increases legal costs due to: the very low inventiveness threshold of innovation patents, the general reluctance of Applicants to obtain certification of a granted innovation patent, the difficulty involved in revoking an innovation patent once certified, and the general perception that many ‘poor’ quality innovation patents are being granted, which could be seen by some as ‘devaluing’ Australia’s patent system. Stakeholders also indicated that the innovation patent system does not encourage Australian innovators to focus on international opportunities, as few of our major trading partners have utility models.
In relation to issues that would challenge the abolishment of the innovation patent system, the general consensus of stakeholders is that if the innovation patent system was abolished, then sole inventors/self-filers and SMEs might be discouraged from entering the standard patent system because the inventiveness threshold for a standard patent is too high and the standard patent system is seen as being too difficult to navigate without expensive professional help. Rather, stakeholders are of the view that innovation patents are a useful asset that can be used to obtain funding. Moreover, even if an application for a standard patent is knocked back for failing to meet the required inventiveness threshold, there is still scope for the standard patent application to be converted to an innovation patent, thereby providing Applicants with IP rights that still might afford some protection/reward for their commercially-valuable innovations.
Rather than abolish the innovation patent system, the ACIP suggested replacing the innovation patent system with an alternative system for protecting low-level inventions. In support, the ACIP points to earlier independent reports produced by the Design Law Review Committee (the Franki Committee) and by Uma Suthersanen, which both suggested that low-level (or ‘subpatentable’) inventions could be protected by fitting such products into other IP categories such as the designs system, or by making appropriate changes to competition law.
Aside from all of the recent changes to the innovation patent system that have already been implemented as a result of the Raising the Bar Act, the ACIP reported in its review that there is still a general agreement that the current level of inventiveness is too low. However, there is no agreement among the stakeholders who responded as to what an appropriate level of inventiveness would be.
It is clear from the ACIP review however, that the majority of stakeholders are against increasing the inventiveness threshold of innovation patents to the same level as that for standard patents, as proposed by IP Australia, as doing so would act as a disincentive for innovation and R&D.
The ACIP has thus considered whether there is a possibility to increase the level of inventiveness to an intermediate level. However, in doing so, the ACIP considers that it would be difficult to conceive a suitable test for determining an intermediate level of inventiveness that would be easily understood by users, IP professionals, patent examiners and the courts.
The question of identifying a suitable level of inventiveness has thus been presented to interested stakeholders for comment.
On the issue of relief from infringement, the ACIP have proposed either removing the possibility of seeking injunctive relief from those innovation patents that are not being commercially exploited, or alternatively, reducing the term of injunctive relief by an amount equal to the delay in seeking certification. The ACIP report that both options would encourage patentees to exploit their patents while discouraging undesirable strategic tactics such as delaying infringement actions to maximise the value of any possible compensation.
On the issue of the grant process, the ACIP considered whether compulsory substantive examination of innovation patents, either before grant or within three years of the date of grant, would be a viable option to remove any uncertainty regarding the scope of protection of the innovation patent and thus prevent sub-standard patents being placed on the Patents Register. However, the ACIP is mindful that such a proposal could be seen as directly hindering or restricting access to the system by individuals and SMEs.
On the issue of exclusions from patentability for the purposes of an innovation patent, the ACIP has considered broadening the current list of exclusions to include methods and/or processes, chemical compositions and pharmaceuticals, and computer software, so as to fall in line with the utility model systems of a number of our overseas trading partners.
Until such time as the ACIP has considered all comments submitted by interested stakeholders in response to its Options Paper, and provided its Final Report to the Government, the innovation patent system will continue to remain a useful and powerful tool for protecting incremental advances on a core technology that may not be sufficiently inventive to satisfy the more stringent requirements of the standard patent system. This remains true even post implementation of the reforms of the Raising the Bar Act.
It is unlikely that any substantial changes or indeed abolishment of the innovation patent system will occur any time soon. However, in the event that amendments to the innovation patent system are agreed for reform, such as raising of the inventiveness threshold, then it would clearly be in an Applicant’s interest to file an innovation patent application for their invention prior to such reforms taking effect so as to reap the benefits of the lower patentability requirements of the innovation patent system as they currently stand.
 See section 18(1A) of the Patents Act 1990.
 A brief overview of some of these cases is provided in our recent submission to Managing Intellectual Property (June 2013, vol. 230, pp. 52 – 55).
 See Delnorth Pty Ltd v Dura-Post (Aust) Pty Ltd  FCA 1225; Dura-Post (Aust) Pty Ltd v Delnorth Pty Ltd  FCAFC 81; Seafood Innovations Pty Ltd v Richard Bass Pty Ltd  FCAFC 83; Dynamite Games Pty Limited v Aruze Gaming Australia Pty Limited  FAC 163.
 Evergreening is a term given to the strategy whereby Applicants file an innovation patent application when the term of a standard patent is about to expire. The invention covered by the innovation patent application differs from the standard patent by only an innovative step, yet obtains an additional eight year term.
 See Britax Childcare Pty Ltd v Infa-Secure Pty Ltd.  FCA 467.
 See Delnorth Pty Ltd v Dura-Post (Aust) Pty Ltd  FCA 1225.
 Report on the Law Relating to Designs – First Term of Reference, 1973 – Parliamentary Paper No. 1, Canberra; Report Relating to Utility Models (Second Term of Reference), 1973 – Parliamentary Report Paper No. 121, Canberra.
 Suthersanen U., Utility Models and Innovation in Developing Countries, UNCTAD-ICTSD Project on IPRs and Sustainable Development, February 2006, (available from: http://unctad.org/en/docs/iteipc20066_en.pdf).
 Human beings, and the biological processes for their generation, and plants and animals, and the biological processes for the generation of plants and animals [See subsections 18(2) and 18(3) of the Patents Act 1990].