New World Order: Changes In Technology Patent Trends

The debate about patentability of business methods and gene technology and the desirability of such patents has been enlivened by DET and GT.

INTRODUCTION

Major patent litigation in New Zealand has, in the past, predominantly concerned the pharmaceutical and chemical industries. To some extent this has occurred because major international companies involved in those areas have seen New Zealand as a country with a well established court structure, having well-defined, if old, patent laws, (based on the United Kingdom Patents Act 1949); and Courts which are favourably disposed towards intellectual property owners. However, there is a recent trend for New Zealand patentees in various new technologies to aggressively enforce their patent rights and this is having an impact on the relevant industries in New Zealand. Industry perceptions of patent rights and what can be patented are also being challenged.

The biotech industry is one example of this, where the Australian company Genetic Technologies (GT) has approached numerous New Zealand district health boards, government research organisations and private companies regarding its New Zealand patents covering test procedures utilising “non-coding” or “junk” DNA. GT is named as patentee in two New Zealand patents entitled respectively, “Intron Sequence Analysis Method For Detection of Adjacent And Remote Locus Alleles As Haplotypes” and “Genomic Mapping Method By Direct Halotyping Using Intron Sequence Analysis Variations”. The patents both have equivalent patents outside New Zealand, including in the United States, Canada, Europe and Japan. Interestingly, the inventor named in the patents is a New Zealander, Dr Malcolm Simons, a co-founder of GT.

The New Zealand media has reported GT requesting, in one instance, for a signing on fee and a waiver of past patent infringements, NZ$10 million (US$6 million approximately), and an ongoing annuity of NZ$2 million.

Inevitably there has been a strong reaction from New Zealand companies and organisations involved in this industry in respect of these demands and the desirability of patents being granted in this area of technology.

DET PATENT

Another industry is the information and communication technologies (ICT) industry which has recently been alarmed by allegations of patent infringement by DE Technologies Incorporated (DET), a small Canadian company.

The DET patent is entitled “Universal Shopping Centre For International Operation”. The subject matter generally relates to an international transaction system for operation over the internet or an intranet for the sale and purchase of goods. DET has written to approximately fifteen New Zealand etailers, alleging patent infringement. The letters also invite the recipient to negotiate a license with DET. The up-front license fee is a considerable sum for those in the New Zealand e-commerce sector, who are relatively small enterprises.

The patent was granted in New Zealand more than one year ago, meaning that alleged infringers can now only contest the validity of the patent before the Courts, rather than before the New Zealand Intellectual Property Office. Since proceedings before the Courts are usually significantly more expensive, this is placing greater pressure on the recipients of DET’s threats to take licences from DET.

This has caused significant controversy in the ICT industry since many industry players perceive the ordering system at the heart of the DET patent to be well known, or at least obvious, at the priority date. However, another primary concern of many of those in the industry is that the media have mistakenly referred to the DET patent as protecting fundamental aspects of e-commerce which any international etailer will need to use. These reports have also caused widespread concern in Australia.

The main claim of the DET patent requires the following functional steps:

  1. Determination of a language.
  2. Determination of a currency.
  3. Product selection.
  4. Database access to obtain at least one of: price; product code, or; shipping information;
  5. Provision of shipping destination;
  6. Shipping costs calculation;
  7. Confirmation of funds availability;
  8. Generation of an “electronic title”.

The patent also includes a broad claim to a “signal stream” generated by a system according to the invention.

ISSUES RAISED BY DET PATENT CLAIMS

The claims raise a number of interesting issues.

Firstly, the features to be performed by the invention as claimed appear to be more limited than the media are speculating, and there certainly appears to be scope for alleged infringers to avoid using features of the claims and thus avoid infringement. However, it is very likely that there are a number of etailers who infringe, so validity of the DET patent may be contested. This will provide an interesting situation because as yet New Zealand has not seen any litigation of a “business method” type patent.

Also, being largely based on the United Kingdom Patents Act 1949, the definition of invention in New Zealand is still taken directly from the Statute of Monopolies in relation to which there is a body of case law which excludes “mere schemes or plans” from being patentable.

Therefore, one argument for invalidity is that the invention claimed is no more than a mere scheme of doing business. In other words, simply implementing a business scheme in a computer or communications environment without adding any additional invention should not be patentable.

Another interesting aspect of the validity or invalidity of the DET patent is whether the underlying business method, i.e. the underlying transaction process, is nothing more than process that has been performed manually already. For example, if transactions were previously conducted by letter or email in accordance with the functionality claimed by the DET patent, is there any invention in simply translating this method into a computerised environment?

Novelty is another aspect which may be of considerable interest to practitioners should litigation ensue. The first matter of interest is the priority date. DET obtained a corresponding US patent (US6,460,020) based upon a provisional application filed in 1996. A complete application was filed in 1997, and it is from this complete application that priority was claimed in New Zealand. Therefore, there are questions about the validity of the priority date that has been claimed, in view of the existence of an application made more than 12 months previously.

Quite apart from the priority date issue is the fact that New Zealand still has only a local novelty requirement. Accordingly, the prior art available to contest validity of the DET patent could be quite narrow. DET has a corresponding US patent that has somewhat narrower claims than the New Zealand patent. This is thought to be because New Zealand’s local novelty requirement has precluded some relevant prior art.

INTERNET PUBLICATION

However, the recent defamation case in Australia, Dow Jones and Co. Inc. v. Gutnick [2002] HCA 56, opens up some interesting possibilities for argument about publication via the internet. The decision held that the place of publication of material on the internet was the place the material is viewed, rather than the location of the server on which the material is stored. Under New Zealand’s local novelty provisions novelty arguments usually rely on the existence of a physical product or document that was clearly publicly available in New Zealand. There may now be an argument that publications available to New Zealanders via the internet are publicly available in New Zealand.

DET has claimed some success in licensing rights to the invention in the USA. DET also has a granted patent in Singapore. Of concern to the ecommerce industry in New Zealand is whether DET will have sufficient success to the extent that its transaction method becomes a de facto standard for ecommerce international transactions. But it is difficult to find any real evidence of success that DET may have had with licensing their patent rights. So there is a strong suspicion that DET is attempting to enforce its rights in New Zealand to gain leverage elsewhere.

WHY CHOOSE NEW ZEALAND?

There are a number of reasons, additional to those mentioned in the opening paragraph, for choosing New Zealand as the jurisdiction to enforce patent rights in the ecommerce area.

Firstly, there may be a relatively weak prior art base for infringers to contest the validity of the patent rights.

Also, although there is no authority that business method patents are valid in New Zealand, the Intellectual Property Office appears to accept that patents should be obtainable for business methods.

In the gene technology area an additional reason may be the New Zealand requirement to satisfy only local novelty may enable patents to be granted here which may not be granted, or may have a much wider scope than, in other countries.

There is also the advantage for litigating patents in all areas that legal costs in New Zealand are significantly lower than in other jurisdictions while having a relatively efficient legal system.

So New Zealand provides an attractive forum for asserting the patent rights and litigating to enforce those rights if necessary. Therefore there is significant opportunity for New Zealand patentees to persuade others in foreign markets to accept that their patents may have validity and that a licence should be obtained.

Whatever the outcome, the allegations made by DET and GT have created considerable increased awareness in New Zealand of patent rights and have considerably enlivened the debate about the patentability of business methods and gene technology and the desirability of such patents.

This article was previously published in Patent World, October 2003