06 May, 2014

To File or not to File: Grace Periods in Australia

To File or not to File: Grace Periods in Australia

With apologies to Shakespeare, the title is often representative of people, notably SMEs and individual inventors, who are keen to develop and commercialise their intellectual property (IP), but are reluctant to seek protection for their IP, for any of a number of reasons. The concept and implementation of grace periods in Australian IP law may provide some solace.

The above dilemma is particularly the case for those entrepreneurs whose IP right lies in an invention possibly protectable by a patent or an industrial design protectable by a design registration. The legislative requirements for patents and designs stipulate that invention or design be “new” as of the date of filing the initial application. Further the basic rule is that any publication or use of the invention or design before the initial filing can be used to invalidate the subsequent application or registration.

The big problem for SMEs and individuals is that they are often not in a position to commercialise the IP without the industrial, commercial and/or financial assistance of a third party. Further, that assistance is rarely forthcoming without the third party requiring knowledge of the IP. This Catch-22 situation is sometimes addressed by the preparation of a confidentiality or secrecy agreement between the IP owner and the third party whereby some disclosure can be made prior to the filing of any patent or design application. There are two problems with this approach. Firstly, many third parties refuse to sign confidentiality agreements, often for fear of being restrained in respect of their own activities. Secondly, it has never been clear whether the disclosure of the IP to the third party amounts to commercialisation or use of the IP, as the confidential disclosure could be seen as an inducement to invest in the IP.

However, on 1 April 2002, amendments were introduced into the Australian Patents Act 1990 to provide that the disclosure of the invention before the filing of a patent application could not be used to invalidate the patent application or subsequent patent, provided the patent application was filed within 12 months of the first disclosure. This introduced to Australian patent law the concept of a “grace period” in relation to self-disclosure or unauthorised disclosure.

In Australia the term of the grace period is 12 months preceding the filing date, and a patent application must be filed during that period to avoid the disclosure being applicable against the application. Grace periods are also found in the United States, Canada and The Philippines, with 12 month terms, where they also apply to designs. Japan has a grace period with a 6 month term.

Litigation in Australia in respect of the grace period has been limited. This suggests to the author that introduction of the grace period has been non-contentious not withstanding that, again in the author’s experience, the grace period is being relied upon by Australian patent applicants.

In Mack Innovations (Australia) Pty Limited v Rotorco Pty Limited (2010) QSC 138, the court considered the provisions implemented on 1 April 2002, and held that the meaning of “patent application” as it was then stated in the Act, was not limited to the filing of a complete (patent) application, as it was expressly stated in the Regulations. The Regulations were subordinate to the Act. In Mack, the filing of a provisional patent application within 12 months of the first disclosure was held to be sufficient to enliven the grace period provisions. This legislative loophole in Australian patent law has since been remedied by way of the Raising The Bar amendments to the Patents Act 1990, which came into force on 15 April 2013. The Act now clearly states that a complete patent application must be filed within the 12 month period to avail of the grace period.

In Canada, recent litigation has indicated that the grace period can be relied upon, although the circumstances for reliance can vary depending upon the manner in which the invention was disclosed. In Wenzel Downhole Tools v National Oilwell Canada, 2012 FCA 333, equipment was rented encased in boxes to customers. The Court held, not withstanding that the customers had made no use of that equipment nor indeed opened the boxes, there was an opportunity to do so, sufficient to constitute disclosure of the invention, as the invention was in the hands of a customer. The subsequent filing of a patent application, outside of the 12 month grace period, was therefore invalid. In another case, Varco Canada v. Pason Systems, 2013 FC 750, a different result was found where the inventor tested the invention on the oil rig of a third party oil rig and personally performed all test drilling. The Court held that the invention was not placed in the hands of the rig operator. The subsequent filing of a patent application, outside the grace period, was upheld. The provisions for reasonable trial and experiment of an invention before the filing of a patent application were relied upon.

The “grace period” however is not be something IP owners should plan to rely upon as a matter of routine practice – it is a savings provision, intended to allow the proprietor to recover something that would otherwise have been lost. The recovery however is limited to Australia and the other jurisdictions mentioned above. In other significant jurisdictions, Europe and China for example, absolute novelty applies, and disclosure of the invention before the filing of a patent application will generally be sufficient to invalidate the patent application.

The grace period in Australia has been with us now for more than 12 years. Anecdotal evidence suggests that, as a legislative provision, it appears to be working. Nevertheless, the Australian Law Review Commission (ALRC) has been considering the grace period and has made recommendations to Government to assess the efficacy of the grace period laws.

One significant omission of Australian IP law is that a grace period was not included in the Designs Act 2003, even though that legislation was proposed to Parliament within a clear window of opportunity after the introduction of the 2002 amendments to the Patents Act 1990. Clearly, a lost opportunity. Nevertheless, the Advisory Council on Intellectual Property (ACIP) is currently conducting a review of the Australian Design system, and an Issues Paper, published in September 2013, lists the grace period as a matter for consideration. This is good news, as the provision of grace periods for industrial designs internationally is more extensive than that for patents as discussed above.

In summary, the grace period provisions under existing patent legislation should provide potential applicants with some level of comfort, particularly against inadvertent disclosure or use of an invention. However, in order to secure the fullest extent of patent protection, particularly internationally, potential applicants are well advised to prepare and file any patent application before any public disclosure or commercial use of the invention.

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