8. Stringency Test for Patentability
Introduction
247. The New Zealand Patents Act 1953 is very similar to the United Kingdom Patents Act 1949 and the Australian Patents Act 1952. The United Kingdom Courts have ruled62 that the role of the Patent Office in administering the Patents Act 1949 is not to finally decide whether an invention is patentable, but only to refuse to allow an application to proceed which on no reasonable view could be said to be eligible for a patent. It was ruled that it was up to the High Court to determine actual patentability.
248. The High Court of Australia held that, under the Patents Act 1952, the grant of a patent should only be refused if it was practically certain that if a patent was granted it would be held to be invalid.63 If there is any dispute, the applicant must be given the benefit of the doubt. The justification for this policy is that the Patent Office would not, at the examination stage, have the benefit of the arguments of counsel and oral evidence.
249. The New Zealand courts have followed these United Kingdom and Australian decisions. As a consequence, IPONZ has also followed these rulings, and is required to give the applicant the benefit of the doubt when deciding whether or not to grant a patent.
Why Is This an Issue?
250. If IPONZ can only refuse to grant a patent when it is "practically certain" that any patent granted would be held by a Court to be invalid, it is possible that patents which might be likely (but not almost certain) to be held invalid will be granted.
251. Invalid patents cannot be enforced: that is, they would held to be invalid in infringement or revocation proceedings. However, the outcome of litigation, particularly patent litigation that can involve complex technical matters, is always uncertain. Any party challenging the validity of a patent would have to meet the ongoing costs of litigation, and if the challenge were unsuccessful the challenger might have to meet the patent owner's costs as well. If an unsuccessful challenger was also found to be infringing the patent, the challenger might be liable for damages. Under these circumstances, many patents that are likely to be held to be invalid might never be challenged.
252. The grant of a patent provides the patent owner with an exclusive right to exploit the patented invention. That is, the patent owner has a form of monopoly until the patent expires. If a patent is granted that the courts would find to be invalid, the monopoly rights enjoyed by the patent owner are greater than the owner is entitled to. These greater rights have the potential to restrict competition and raise prices to consumers, and may restrict the activities of local businesses who lack the resources to challenge the validity of the patent. The fact that most New Zealand patents are granted to foreign owners means that most of the financial benefits of these patents will flow out of New Zealand. The persistence of these invalid patents might impose a significant economic cost on New Zealand.
Situation in Other Countries
253. The Australian courts have continued to apply the precedents discussed earlier under Australian Patents Act 1990. Consequently, IPAustralia is required to give applicants the benefit of the doubt when deciding whether or not to grant a patent.
254. In a recent review of the Australian Patents Act 1990, the Australian Intellectual Property and Competition Review Committee (IPCR)64 recommended changing the Patents Act 1990 to require a "balance of probabilities" approach to be used during examination, rather than conferring the "benefit of the doubt" to the applicant as at present. This recommendation has been adopted by the Australian Government, and a bill to appropriately amend the Patents Act 1990 was introduced to the Federal Parliament.65 This bill was subsequently passed on 27 September 2001 as the Patents Amendment Act 2001.
255. This is essentially the same approach now used in the United Kingdom under the Patents Act 1977. Under this Act, the onus is upon applicants to show that their applications meet the legislative requirements when faced with a reasonable challenge. Effectively, objections are made or maintained according to whether, on the balance of probabilities, they are appropriate.66
Should the Stringency Tests for Granting a New Zealand Patent Be Changed?
256. While the recommendation to change the stringency test in Australia was made in the light of what was considered to be an overly liberal application of the "benefit of the doubt" criterion by IPAustralia, it may be worth considering this change in New Zealand. This would increase the likelihood that granted patents are valid, and would harmonise New Zealand law with that of Australia. This would also bring New Zealand practice into line with practice in other countries.
257. The review of the Australian Act, referred to above commented:
While there may be some increase in costs due to more protracted arguments between applicants and examiners, these are likely to be small and to be reduced as each side becomes more familiar with the new stringency of testing. The benefits in terms of improved certainty and validity are likely to be considerable.
258. Should consideration be given to changing the stringency test for deciding whether or not to grant a patent from the present "benefit of the doubt" to a "balance of probabilities" test? If such a test were to be adopted, then there would be increased certainty for both patent owners and third parties, as there would be a greater certainty that granted patents would be held to be valid by the Courts. Given that such a test is being adopted in Australia, it may be desirable to adopt it in New Zealand, so as to provide greater certainty for businesses operating in both countries.
Questions
- Is the stringency test for granting a patent in New Zealand too liberal? If so, why? If not, why not?
- If the test is too liberal, what test should be adopted?
- If a more restrictive test were to be adopted, would there be any advantages or disadvantages other than those identified above?
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