The New Zealand Patent Office (IPONZ) and the Ministry of Business Innovation and Employment (MBIE) recently completed a round of consultation on proposed changes to section 258 of the New Zealand 2013 Patents Act (“2013 Act”) relating to the filing of divisional applications from a current patent filed under the previous New Zealand 1953 Patents Act (“1953 Act”).
Background to the proposed amendment
The 2013 Act raised the standard of patent applications in New Zealand to bring it into line with standards applied in overseas countries including the requirement for direct examination of inventive step as well as novelty. The previous 1953 Act provided for direct examination of novelty only but required a granted patent to have inventive step to be valid.
Divisional applications can be filed from a parent patent application any time up to acceptance and be given the same original filing date and priority date of the parent provided that the divisional application does not contain new subject matter over that originally disclosed in the parent. The term of a divisional patent is 20 years from the filing date of the parent patent application. Divisional applications are usually filed to divide out subject matter from the parent patent to satisfy a “unity of invention” objection in an examination report (i.e. that the claims disclose more than one invention).
S258 specifies that divisional applications made from a 1953 Act parent patent application is treated as a patent filed under the 1953 Act. This means it is possible to keep an original 1953 Act patent application pending for up to 20 years after the 2013 Act came into force (until 2033).
Interests of third parties
This proposed legislation amendment promotes the interest of third parties such as Fisher & Paykel Healthcare who argue that daisy-chaining of divisional applications creates uncertainty in the market as it is possible for 1953 Act divisional patents to be granted covering obvious (not inventive) variants to a product or process which already exists in the market. This leaves third parties open to being sued for patent infringement where they previously thought they had freedom to operate. The only protection would be opposing the grant or revoking a granted patent (which is expensive), paying for a license or ceasing marketing and/or production of a product/service unnecessarily in order to protect their interests.
One view is that s258 of the 2013 Act is a loophole exploited by many existing 1953 Act patent applicants as a defensive strategy to keep a divisional application pending in case an infringement by a third party is not captured by the claims of the granted parent patent. In this way, it may be possible to make fairly based claim amendments on the divisional application which do capture the infringing product or process and which are granted and subsequently enforceable against the infringing third party.
IPONZ argues that the existing system of daisy chaining 1953 Act divisional applications also imposes high costs on training examiners to examine under both the 2013 and 1953 Acts until at least 2034. This in turn may lead to higher IPONZ patent fees.
In the consultation document, IPONZ proposes three options going forward:
1. No change;
2. A specified cut off date after which 1953 Act divisional applications are not allowed to be filed; and
3. A specified date after which divisional applications filed from a 1953 Act parent patent application would be considered a 2013 Act application (i.e. examined for inventive step).
The Ministry prefers option 3 on the basis that unlike option 1 it would eliminate the uncertainty for third parties and the need for IPONZ (the New Zealand Patent Office) to maintain the capacity to examine 1953 Act applications (likely within 2 years of the specified date). While option 2 would also achieve these advantages it does not meet international obligations in the form of Article 4G of the Paris Convention on the basis that it would restrict the ability of applicants to file divisional applications in response to a unity of invention objection during examination.
Interests of patent applicants
Any proposed change in the legislation must be balanced by the negative impact to patent applicants (see here submissions filed by the Institute of Patent and trade Mark Attorneys (IPTA)), particularly in view of the relative small number of New Zealand patent oppositions (less than 0.5% per patent filings). Retrospectively applying the more stringent requirements of the 2013 Act to patent specifications drafted under the 1953 Act will have a significant impact on patent applicants who in many cases would not have anticipated the law change.
A further argument in favour of patent applicants for retaining the current legislation (MBIE option 1) is that all granted patents from both Acts are subject to the new 2013 Act options for challenging a granted patent such as re-examination and revocation at any time during the term of the patent. While the grounds of challenge for 1953 Act patents are limited to those provided for under the 1953 Act they do include the ground of lack of inventive step (obviousness). In this way, the options to third parties to challenge invalid 1953 Act divisional applications are expanded.
Where to from here?
Further clarification from MBIE is required as to whether a divisional application filed under option 3 would be examined the 2013 Act or be considered a 2013 Act application and therefore be subject to all 2013 Act requirements such as formally requesting examination. The current Patents Regulations 2014 sets a five year limit from the original filing date in which to request examination. In the case of a 1953 Act divisional application this deadline may have already passed.
Whether the daisy chaining situation is a significant issue is unclear from the data presented in the consultation document as there is a significant drop-off in third generation divisional filings (341) over second generation filings (691). This trend is likely to continue with fourth generation filings but as yet there is no data.
The next step is likely to be a Bill put before Parliament. Whichever option MBIE decides upon they will have to be seen to step a fine line between the interests of third parties and those of patent applicants.