New patent legislation at last for New Zealand

After many years of waiting, a bill which completely overhauls New Zealand’s outdated 1953 patent legislation was introduced into the New Zealand Parliament this year.

As it stands at present, New Zealand’s patent legislation is based on the 1949 United Kingdom patents act which was replaced in the United Kingdom in 1977. New Zealand still has local novelty, and does not examine applications for obviousness, which has had to be raised in opposition or revocation.

The Patents Bill 2008 imposes stricter requirements on the grant of a patent and brings New Zealand legislation into line with that of most other countries.

Major features of the Bill are the introduction of absolute novelty, examination for inventive step and a ‘whole of contents’ approach to dealing with conflicting applications. Other notable features are the establishment of a Maori Advisory Committee to provide advice to the Commissioner of Patents on patent applications for inventions involving indigenous plants and animals, a specific experimental use exception, publication of patent applications 18 months from the earliest priority date, the abolition of pre-grant opposition and the introduction in its place of re-examination, and reform of the patent attorney profession.

Standard of proof
Presently, patent applications are examined on the basis that the ‘benefit of the doubt’ is given to an applicant when deciding if a claimed invention is patentable. Instead, there will be a tougher test of satisfying the Commissioner of Patents that an invention is patentable on the ‘balance of probabilities’.

Criteria for granting a patent
A patentable invention is defined in the Bill as an invention that:
• is a ‘manner of manufacture’; and
• is new; and
• involves an inventive step; and
• is useful.

The term ‘manner of manufacture’ has been retained from the current legislation (and repeats the reference to section 6 of the Statute of Monopolies). This has been interpreted by the Courts to exclude ‘products of nature’, mere discoveries, mathematical algorithms, mere schemes or plans, and methods of medical treatments of humans. The retention of this in the
definition of invention means this case law is likely to continue to apply.

There are statutory exclusions from patentability for medical treatment of humans by surgery or therapy and methods of diagnosis on human beings.

The Bill is silent on Swiss-type claims, although it is likely that the case law established by Pharmaceutical Management Agency Limited v the Commissioner of Patents [2000] 2 NZLR 529 will survive. A further exclusion is plant varieties, which are protectable under the Plant
Varieties Act 1987.

The Bill provides for absolute novelty, meaning that novelty will be destroyed by written or oral description or use of the invention anywhere in the world. There has been some erosion of the current local novelty requirement with the advent of the internet, but the change to absolute novelty is likely to receive widespread approval. Introduction of absolute novelty will assist in reducing the risk that patents are granted in New Zealand for inventions that are otherwise known elsewhere and would not be eligible for patent protection in other countries. There is specific acknowledgement of this in the explanatory note to the Bill which notes:

‘A key objective…is to, as far as possible, reduce the possibility that patents will be granted for things that are not innovations and, where such patents are granted, to make it easier and cheaper for the validity of such patents to be challenged.’

Additionally, the Commissioner will now be able to refuse a patent application on the ground that the claimed invention does not involve an inventive step, so that the patent will be refused if the claimed invention is obvious to a person skilled in the art.

Patent applications will also be examined for usefulness, ie, the invention must have specific,
credible, and substantial utility. This criterion reflects the United States’ ‘utility’ requirement and Europe’s ‘industrial application’ requirement. The main reason appears to be to prevent the grant of overly broad patents for genetic material without the applicant demonstrating a particular use.

Whole contents examination
The whole contents of a New Zealand complete specification with an earlier priority date published after the priority date of the examined application will be considered on examination for novelty.
Under the existing legislation, the patent must be prior claimed in a granted patent, a much narrower criterion, which has long been replaced elsewhere around the world and a source of considerable frustration. Most recently it caused considerable difficulty in the SmithKline Beecham litigation against Synthon involving paroxetine mesylate.

Who can apply and be granted a patent
Currently, only inventors or their assignees may apply for a patent. Sometimes overseas applicants have difficulty where the rights to an invention are assigned and the assignment has not been completed before the time limit for filing the application in New Zealand has expired. Due to differing requirements in other countries, the New Zealand application is often filed in the name of the assignee who, at the time of filing, may not have the right to apply under New Zealand law. To overcome this problem, the Bill will provide that any person may apply for a patent, but only inventors and their assignees have the right to be granted the patent.
The requirement for New Zealand residents to seek permission from the Commissioner if they wish to file for a patent application overseas and have not already filed in New Zealand has been dropped.

Inventions made by employees
There are no major reforms in relation to the rights of employees to inventions. The New Zealand government has chosen not to introduce the types of provisions in the UK Patents Act or in other countries such as Japan providing for specific benefits for employees.
Instead, the only reform is to transfer the jurisdiction for determining disputes between employers and employees from the High Court to the Employment Relations Authority (which did not exist at the time of the 1953 legislation).
The position on employee inventors therefore remains to be determined by contract and common law. The complexity of this issue was highlighted in the context of commercialisation in universities in the recent decision of French J in nearby Australia in
the record 400-page decision of University of Western Australia v Gray (No 20) (2008) 76 IPR 222. There may be some debate on this issue at the Select Committee.

Maori Advisory Committee
There is a Maori Advisory Committee, whose role is to advise the Commissioner of Patents on whether a claimed invention is derived from Maori traditional knowledge or from indigenous plants or animals, and, if so, whether the commercial exploitation of that invention is likely to be contrary to Maori values.
A similar committee was set up under New Zealand’s recently amended trademarks legislation. It has operated since 2003, with few adverse decisions resulting in refusal of trademarks.
Publication will now be 18 months from the earliest priority date, instead of as acceptance at present. This brings New Zealand into line with overseas countries and with the date of publication of PCT applications.

Examination procedure – time limits
The Commissioner now has the power to set time limits for response to examination reports issued by the Commissioner in addition to the overall time limit for overcoming all objections that currently exist. Failure to meet these time limits will mean the applications will be deemed to be abandoned.

Disclosure of searches
The Bill requires applicants to disclose to the Commissioner any documentary searches carried out by or on behalf of a foreign patent office for the purpose of assessing the patentability of the invention. Failure to disclose the search reports will mean the Commissioner will refuse to amend the complete specification, if the effect of the proposed amendment would be to remove a ground of objection to the specification arising from the existence of some or all of the information disclosed in those search reports.
This requirement was tried in Australia but was recently withdrawn, so it is surprising that it has been retained in the Bill.

Publication
Currently, patent specifications are not published until after the application has been accepted. This is out of line with most overseas countries and international applications filed under the Patent Co-operation Treaty. Under the Bill, the complete specification of New Zealand patent applications will be open to public inspection automatically 18 months
after the earliest priority date.
All documents relating to applications filed in relation to the patent application will be open to public inspection and examination reports will become available once the application has been accepted.

Re-examination and revocation before the Commissioner
One of the most controversial parts of the new Bill is the removal of pre-grant opposition. This will take New Zealand away from the procedures of its Australian neighbour and is likely to be the subject of considerable debate at the select committee hearings on the Bill prior to the enactment of the legislation. It can reasonably be expected that this will be challenged by a number of parties.
The Bill does however provide for third-party involvement prior to grant by way of re-examination on the basis that the invention concerned is not novel or lacks an inventive step. It specifically allows any person to assert to the Commissioner after publication, that an
invention is not novel or does not involve an inventive step after publication.
The present ability to apply to the Commissioner to revoke the patent within a year of grant (known as belated opposition under the current law) has been retained, but the one year-time limit has been dropped. Any person can apply to the Commissioner to revoke the patent on the basis that it is not novel and lacks an inventive step, and the parties may request a hearing before the Commissioner makes his decision.

Revocation in the court
The Bill retains the current law allowing revocation proceedings to be issued in the High Court. The grounds for revocation in the High Court are as follows:
• the invention is not a patentable invention;
• the patentee is not entitled to the grant of the patent;
• the complete specification does not comply with the requirement to describe the invention, method of performance and claims;
• the scope of a claim is not sufficiently included fine or fairly based on the matter disclosed in the complete specifications, other side the patent was obtained by fraud, false suggestion or a misrepresentation;
• the invention was secretly used in New Zealand before the priority date; and
• the patent has been granted contrary to law.

Infringement
The Bill describes the exclusive rights for the patentee to exploit the invention as ‘making, hiring, selling, or otherwise disposing of a patented product, offering to make, hire, sell, or otherwise dispose of, use or import the product, or keep product for performing those acts’. If the invention is a process, exploitation of a product produced by the process in any of these ways will be an infringement, as will the use of the process.
This is a marked improvement on the current legislation which does not define the rights granted to a patentee nor define infringement itself: instead, the exclusive rights to make, use, exercise, and vend the invention are sent out in patent deed and infringement is taken to be anything that falls within the scope of the rights granted to the patentee.
The Bill specifically provides for contributory infringement. There has been some doubt as to
whether this does exist under New Zealand law. The Bill provides that an infringement occurs if a person supplies another person with a means of putting an invention into effect, if doing so would infringe a patent and the person knows or ought reasonably to have known that the supplied means are suitable and intended for that purpose. There is an exception for the supply of staple commercial products.
Where the invention is a process, exploitation of a product produced by the process is presumed to have been obtained by the patent process for obtaining that product. This means that the onus will then reverse to the defendant to establish that it has not been.
The Bill retains the existing provisions in relation to relief for infringement, being the grant of an injunction, and at the election of the plaintiff, damages are on account of profits. This can be refused if the defendant proves that it did not know or ought not reasonably to have known that the patent existed. Labelling the product with the New Zealand patent number will provide notice that the person knew or ought reasonably to have known of the product. There is no provision in the Bill for a remedy for groundless threats of patent infringement. Unless changes are made at the select committee, defendants will need to rely on other remedies particularly of the tortuous variety.
The Bill retains the right to apply for a declaration of non-infringement if the patentee of  exclusive licensee has not provided an acknowledgement to this effect on application from the person applying for it.

Experimental use exception
There is an experimental use exception for acts conducted for experimental purposes relating to the subject matter of an invention if the act does not reasonably conflict with the normal exploitation of the invention. Permitted acts include determining how the invention works, the scope of the invention, the validity of the claims, and seeking an improvement of the invention. The exception is intended to allow further development and improvements in an invention, including new uses of an invention, without fear of an action for infringement, but not to negate unfairly the rights of a patent owner.

Patent Attorney regulation
The Bill sets up a patent attorney standards board comprising the Commissioner, an Assistant Commissioner, at least two persons nominated by the New Zealand Institute of Patent Attorneys, and optionally another person appointed by the Minister. The board’s role includes approving a code of conduct for patent attorneys to be drafted by the Institute of Patent Attorneys, complaints and disciplinary procedures, and determining qualification
requirements. This removes the discipline of patent attorneys from the control of the profession to an independent body. The Bill also allows for the incorporation of patent attorney firms. This will bring patent attorneys into line with recent changes to the legislation governing lawyers in New Zealand. The Lawyers and Conveyancers Act 2006, which came into force on 1 August 2008, now allows for the incorporation of law firms in New Zealand.
The Bill restricts the preparation of specifications or documents relating to an amendment of specification to registered patent attorneys or patent attorney companies.

Conclusion
Although the government of New Zealand changed following the November election, the Bill was reinstated by the new government. It is expected to be considered by a select committee of members of parliament in 2009. Interested parties will be able to make submissions.
Under the New Zealand process, substantial amendments may well be recommended by the select committee prior to the Bill returning to the house to complete the remaining stages, possibly some time before the end of 2009.
This means the earliest the new legislation could be expected to come into effect is during 2010.

This article first appeared in the December 2008 edition of the Asia Pacific Forum News and is reproduced here with kind permission of the International Bar Association, London, UK.