Patent application changes could force companies to rethink strategy

Small and medium-sized enterprises (SMEs) in new technology fields, as well as academic and publicly funded research institutions, commonly incorporate a number of different inventions in a priority conferring patent application in order to cover all potential bases and future patenting options. Similarly, such applicants may choose to have numerous independent claim draft variants directed to different aspects of a common inventive concept. This strategy allows the applicant to minimise capital expenditure at a time in the invention’s lifecycle where its development into a marketable product, let alone its commercial viability, is at a very early stage. From the perspective of the applicant this is desirable, since scarce financial resources are more profitably spent on research and development with the goal of increasing speed to market of a viable product or completing proof of concept so as to secure higher licensing fees and, thereby, adequate return on investment.

Australian patent legislation gives applicants options to manage and adapt their patenting strategy to specific needs and circumstances (eg, cash-flow projections, technical implementation/development of the invention and commercialisation time lines). One of these is the option to file one or more divisional applications (for inventions falling outside the scope of the parent patent) up to three months after the parent application is accepted. Another is the availability of so-called ‘cascading’ divisional patent applications. For example, three inventions excluded from the original parent patent application prior to its grant could be contained in a first divisional (child) patent application. Subsequently, two inventions could be divided into a grandchild patent application prior to grant of a patent on the first divisional, and so on.

Consultations are underway between the Australian patent office, IP Australia (IPAU), and interested parties on a number of proposals by IPAU that would drastically curtail the divisional application regime, which is viewed by IPAU as being “too generous” and prone to “misuse”.

The proposed restrictive divisional regime would result in the abolition of grandchild divisionals and/or divisionals being allowable only in response to an adverse examination report indicating the presence of multiple, non-unitary inventions in the claim. Another option mooted is the abolition of divisionals that are directed to inventions described but otherwise not claimed in a parent application. A further proposal is to restrict the total number of divisionals to a certain number, and/or restrict the time limit for the filing of a divisional application to a specified (shorter) period based either from the timing of an examination report or prior to the acceptance of the parent application.

Clearly, if one or more of these measures is legislated, applicants stand to lose a considerable number of options from their patenting strategy arsenal, with potentially serious consequences. Several of these consequences are considered below:

• Patent applications with multiple inventions will still be allowed at filing. However, if divisional cascading is abolished, the applicant would need to decide earlier whether to pursue all or only some of the inventions removed from the parent case by way of single divisional applications for each identified invention. Typically, this would occur within three to four years of filing of the parent application, assuming IPAU does not expedite current examination rates. A consequence would be that cost implications would follow at an earlier stage in the portfolio management process. Third parties would likely benefit as the submarine period of non-disclosure of a potential monopoly right would be reduced.
• In the absence of an adverse examination report, applicants may be precluded from filing a divisional application directed to an invention described but not claimed in the original application. This would have negative consequences for a divisional application with claims specifically drafted to address a perceived infringer or specific licensing opportunities that might present themselves to an applicant during pendency of an application.
• In some instances, where the number of claims was limited to a core minimum at filing in order to expedite consideration of core invention claims during examination, it would no longer be possible to file one or more divisional applications with claims directed to preferred embodiments of the core claims. This would have the potential to curtail severely the patentee’s means of tackling infringement of such preferred embodiments.
• If a maximum number of divisional applications were prescribed in the legislation, applicants might be forced to file more patent applications ab initio, with detrimental effects on business cash flow at an early stage of product development. Such a measure could also have the likely unforeseen or unwanted consequence of patent filing numbers increasing, thereby clogging up the system with additional applications requiring examination and patents for which a sound commercial reason for existence has yet to be established.
• Having regard to the applicable pre-grant opposition system in Australia and the procedural tools available to opponents to delay substantially grant of a patent by way of opposition proceedings, restriction on the availability and timing of filing divisional applications, including for an innovation patent, could encourage rogue behaviour by unscrupulous marketplace participants and prevent innovators from obtaining rapid relief for patent infringement of potentially very valuable innovations. 

Admittedly, the current divisional regime allows applicants to keep third parties in limbo for considerable periods of time with regard to patent rights - potentially 20 years - as it is possible to describe and claim an invention in a first patent application and, through a series of successive divisional applications for the same invention, avoid final determination of the patent application. There are good public policy reasons why this practice should be curtailed. However, there are also many valid reasons for maintaining a generous divisional regime.

Several of the proposed restrictions appear to mirror closely the rules that have been established by the US Patent and Trademark Office regarding continuation applications (which are similar to Australian divisionals). A continuation may be filed at any time during the pendency of an application (ie, before it is abandoned or issues as a patent), but under the 2007 rules (which came into effect on November 1 2007 but have now been stayed in their execution by the US court system), only two continuations may be filed in a given family of application. It is suggested that IPAU’s activities on this front have been in part influenced by the actions of its government colleagues in the United States.

It remains to be seen to what extent IPAU will listen to its constituency before implementing any changes. Past practice, however, suggests that policy decisions are often taken without real appreciation of the consequences they may have and the negative impact on patenting strategies of, in particular, Australian SMEs and research institutions. Large transnational applicants will likely simply adapt patenting budgets to the changed patent prosecution timing of individual inventions, whereas smaller entities may find the financial implications of such changes difficult to circumvent.