Slade Brockman (WA, Liberal Party) Share this | Hansard source

I thank Senator Pratt for her contribution. I note that I was Chair of the economics committee that had a look at this particular bill. At first blush I think many of us on that committee heard the phrase 'innovation patent' and thought it was a good piece of marketing. It says something that we all support. However, on close examination, and noting that both a report from IP Australia and a report from the Productivity Commission found this, it actually was failing in doing what exactly its name said it was trying to do—that is, boost innovation in this country. I think, as a parliament—and as a government, obviously—we have to take seriously that recommendation and the fact that the innovation patent system wasn't boosting innovation in our economy. In fact it was failing to do so. In some cases it was actually being used by larger companies as effectively a legal block to innovation from smaller companies. In that light I think this is a very important action taken by this government to maintain Australia's very proud record of being innovative in science and technology particularly, but also in my beloved fields of agriculture and rural and regional innovation. We do need to look at this issue seriously.

One thing that I think is very important to point out—and I think this needs to be more widely canvassed publicly, and I'd certainly encourage IP Australia to communicate this better to the small and medium sized enterprises of Australia—is that there is actually a cheap and effective way of getting patent protection without going through a full patent application, and that is through the provisional patent system. The innovation patents, as I have said, were widely recognised through a number of inquiries as failing in that objective, but there is another option. It is underutilised. I think at least part of the problem there was that there was a lack of awareness amongst the small and medium sized enterprises of Australia.

As Senator Pratt flagged, the opposition are moving some amendments, which I understand we will be supporting, to do with having a review and looking at ways we can encourage a more innovative patent system. I would really encourage small and medium sized enterprises out there to look at the provisional patent system. Just to give you a couple of comparisons, under the current innovation patent system, which is being phased out, the filing and examination fees are around $680, which is not actually that much less than a standard patent application of $860, whereas with a provisional patent filing the initial filing fee is only $110, and that provides up to 12 months in which a small and medium sized enterprise can consider its options and whether it wants to test a market, to take a patent application forward through to full examination and protection.

The provisional patent system—though it is underutilised, in my opinion—is actually utilised by small and medium sized enterprises. Of the provisional patent applications that are filed around 77 per cent are by individuals or SMEs, so there is a system there that business and individuals can take advantage of. It is underutilised, and that is something that I would certainly encourage IP Australia to focus on, making sure that those businesses out there that are innovating in the Australian economy can have knowledge of the provisional patent system and seek to utilise it more often than they do at the moment.

I will briefly run through some of the details of the bill. Both the Productivity Commission and the Advisory Council on Intellectual Property recommended the abolition of the innovation patent system. Both of the inquiries into the innovation patent system found that small and medium sized enterprises gained little benefit from the current system. In fact, the PC found that most SMEs did not obtain any value from the system at all. The Productivity Commission saw that SMEs made little use of the system—74 per cent of small and medium sized businesses and private inventors filing once, but then never again. So, it wasn't creating an ecosystem of innovation where one innovation flowed on to another. Under the system, 83 per cent never received an enforceable right and 78 per cent let their innovation patents expire rather than paying the small cost of renewing. Additionally, innovation patents are relatively costly to third parties and the wider Australian community, with—I think it was the Productivity Commission—finding a net cost of around $11 million per year to all Australian businesses.

So, the innovation patent system hasn't achieved its intended objective of stimulating ambitious and innovative design in Australia. In fact, it has created an environment that fosters a low level of confidence in the ability of SMEs to innovate. Yes, there are always going to be exceptions to the rule. I'm sure Senator Patrick may tell us later about some of the companies in South Australia that have been using the system. But we cannot base our laws on the exception. We must base them on the rule, and the rule, as found by the Productivity Commission and by the other inquiry, is that the innovation patent system was actually reducing the level of innovation. It suffocated freedom to operate business and it restricted the ability of SMEs to remain internationally competitive.

One of the biggest drawbacks of the system was the low innovation threshold required to claim a patent. To be eligible for an innovation patent, the invention must be new and is only required to be 'different from what is known before and the difference makes a substantial contribution to the working of the invention'. So, innovation patents do not require that the invention meets the inventive steps required for standard patents. This created a level of uncertainty around whether and where SMEs have the freedom to operate. One particular submission to the Productivity Commission noted that an innovative software project was cancelled due to concerns of undiscoverable patents. This was never the intention of the innovation patent system. It was there to encourage Australian SMEs to innovate and design new inventions, whereas the system created an environment where SMEs feared they were constantly in danger of infringing. When legal fees for IP solicitors can run to $1,000 an hour, most small to medium sized enterprises, as everyone in this place knows, cannot sustain a fight for very long over a patent or an innovation claim.

The inquiries also found that this low innovation threshold created the problem of patent thickets in the market. This is where a large number of innovation patents, marginally different from one another, were set up around the designs of other companies', often SMEs', products. This suffocated the ability of small to medium sized enterprises to actually build on and develop their own product and grow their own level of innovation. Big businesses file almost four times as many innovation patents as small to medium sized enterprises, with Apple—who I think everyone would acknowledge is a very large enterprise—being the single highest filer of innovation patents in Australia.

There is another problem with innovation patents in that they weren't recognised in the international system. This increased the risk of overseas organisations copying the invention, effectively with no consequences. That therefore jeopardised the success of Australian SMEs.

The nature of the patent system is that details are published and in the public domain one month after filing. This is comparable to 18 months on a standard patent. So you had a situation where there was weak protection, where the system was being used by larger companies to prevent innovation in smaller companies and where two significant reviews of the system found that it was actually to the detriment of Australian innovation. I'll go back to where I started: there are other options there for SMEs through the provisional patent system and now, through the review, the government has agreed that it can look at ways of increasing the level of innovation amongst our very worthy small and medium-sized enterprises.

To go through the current system, the standard patent system is the main mechanism, particularly once the innovation patents are phased out. Standard patents provide greater protection for an invention and also incentivise a higher level of innovation. The government is committed to ensuring that this is a smooth transition process, and support services will be available, particularly to small and medium-sized enterprises. This includes the ability to fast-track requests, which enables applicants to have their applications examined in an expedited fashion at no additional cost. SMEs will receive an examination report within eight weeks—about the same amount of time that an innovation patent takes. SMEs will be further supported through the application process by the availability of dedicated IP Australia case managers. These case managers will be able to support applicants through the process, as well as help with international applications and protections. IP Australia's web presence will be redeveloped to ensure that SMEs have 24/7 access to this advice and support, as well as accessing the intellectual property portfolio management tool.

Finally, the government will ensure that SMEs in regional areas will be supported by providing education services via events and online. Again, this need to deliver a greater level of education to small and medium-sized enterprises, particularly those outside the major population hubs, is very important. People need to know what they have to do. They often need to get support. We've all heard stories of people, particularly in rural and regional Australia, who are inventors but who don't necessarily understand the law, don't necessarily understand how to protect their intellectual property rights. We know how important it is that they do.

I was at a conference with the head of the Defence Forces, and he was saying that one of the most important things for small and medium-sized enterprises when dealing with military procurement is to make sure they actually have their intellectual property tied down. They need to have themselves fully protected if they expect to do business with the Australian military. That's understandable from Defence's point of view. They need to know that what they're buying is properly owned and properly controlled by the company that's selling it to them, but that is obviously a potential hurdle for the small and medium-sized enterprises who wish to try to achieve something in that space. Through this provision of services to small and medium-sized enterprises, IP Australia can greatly assist in that sphere by making sure SMEs can act quickly on an idea, can get the advice they need to get protection in overseas jurisdictions and can get the dedicated case managers they need to make sure that the proverbial t's are crossed and i's are dotted and to make sure that the intellectual property protection is there so they can do business both in Australia and globally in the most efficient and effective way possible.

Getting rid of the innovation patent system over a period of time will reduce a level of trivial and undeserving innovations being covered by our intellectual property rights system. We want a fairer environment. We want to restore innovation confidence to SMEs. As I've said, the government will support the amendments proposed by Senator Pratt. These amendments require the government to review the accessibility of patents of small and medium sized enterprises in the 15 months after the bill is enacted. The phasing-out of the innovation patent system will start 18 months after the bill is enacted rather than 12 months after enactment. By encouraging SMEs to use the standard patent system and the supports available, we will create a more balanced IP system with the ability to enjoy all the benefits to our economy that science, innovation and new technological developments bring to us all.