Proposed changes to the patent enforcement regime

The effective enforcement of patents in Australia has been a point of debate for some time, particularly for small and medium-sized enterprises (SMEs). In response to concerns, in 2006 the minister for industry, tourism and resources asked the Advisory Council on Intellectual Property (ACIP) to conduct a review of the issues relating to post-grant patent enforcement strategies.

The ACIP has now considered responses to the resulting issues paper (November 2006) and has used them to prepare an interim report. Following further consultation, the ACIP expects to submit its recommendations in a final report to the government.

Interim report proposals
To date, the ACIP has put forward the following key proposals:

• IP Australia will establish an IP dispute resolution centre, incorporating a validity and infringement opinion service; 
• A register of experts will be established to provide non-binding expert assessment and mediation capability; 
• A patent tribunal will be established within the IP dispute resolution centre, with members drawn from the register of experts; 
• IP Australia will provide an information resource regarding patent enforcement; 
• The Federal Magistrates Court will be expressly given jurisdiction over patent matters; and 
• Australian customs officials will be given powers to seize infringing goods.

Issues for patentees
The ACIP and its predecessor, the Industrial Property Advisory Committee, have previously submitted numerous reports to the government raising patent enforcement issues. Recurring issues include:

• the cost and complexity of and delays in litigation; and
• the lack of knowledge among many patentees as to the enforcement mechanisms available.

When a patent owner is confronted with an apparent infringement, the first step in asserting its patent rights is generally to send a letter of demand to the alleged infringer. There is some empirical evidence that this can be an effective strategy in stopping the infringing conduct or in initiating negotiations leading towards a licence agreement. However, should the letter of demand be ignored or a counterassertion of non-infringement or invalidity be made, the only way to progress the matter under the present regime may be to initiate infringement proceedings before the courts. This inevitably results in a cross-claim for revocation of the patent for invalidity; as a result, some patentees are reluctant to sue for infringement.

The average time for patent cases to reach judgment in Australia was recently estimated at 2.7 years from filing to the first instance decision. This high average is partly due to delaying tactics by the parties to the litigation. Consideration of validity issues may also be a major contributor to the extended timeframe, particularly when one considers the labyrinthine inventive step provisions in the Patents Act 1990 and the resultant need to adduce extensive expert evidence. When the technical subject matter of the invention is particularly complex, this too can add considerably to the length of the litigation. The greater the time taken to resolve the litigation, the greater the expense to both parties.

ACIP proposals
The establishment of a centralised IP dispute resolution centre by IP Australia would provide a single point of initial contact for patentees with little idea of the options available to them, and the cost and timing of those options.

The ACIP argues that a validity and infringement opinion service, similar to that adopted by the UK Patent Office, could provide a quick and relatively cheap administrative procedure for resolving a patent dispute without the need for court proceedings. Some of the submissions to the issues paper expressed reservations about the capacity of IP Australia to provide the necessary expertise, and of the utility of such a service given that the correction of errors would need to be achieved by appeal or administrative review, adding complexity, delay and expense to the process.

The interim report strongly supports the facilitation by IP Australia of access to mediation services, and to expert assessment services, as means of narrowing and clarifying the issues under dispute. While not suitable in all circumstances, such alternative dispute resolution (ADR) mechanisms could be quite beneficial.

A further option proposed by the interim report is the establishment of a patent tribunal as a non-binding determinative ADR process. However, several submissions to the issues paper expressed doubts that the addition of this further layer of procedural complexity would have any benefit over modifications to the existing court system.

The benefits to patentees of allowing customs officials to seize shipments of infringing products are clear. However, it is doubtful that such a scheme would be workable unless it were based on notification to Customs by the patentee, as is presently effective for trademarks and copyright owners.

Any major changes to the court system or additions to the services presently provided by IP Australia, such as a validity and infringement opinion service or a patent tribunal, are likely to be problematic due to the significant resources that would need to be brought to bear and could because delays could be compounded if an appeal process were invoked.

The author believes that the needs of SMEs could be addressed, at least partially, with minimal disruption to existing arrangements. For example, a centralised IP dispute resolution centre could be of great benefit to SMEs, but the role played by such a centre should remain restricted to education as to the options available and the cost and availability of external services such as mediation and expert assessment.

Any patent system is incomplete in the absence of cost and time-effective enforcement mechanisms. While the current Australian court system is relatively easily accessed by large, multinational patentees, if Australians are to derive value from homegrown innovation the enforcement system must adapt to reflect the fact that most Australian innovators are SMEs which need to be able to ensure that their investment in IP rights does not go to waste for want of appropriate dispute resolution forums.