The Evolution of Patent Policy : Redefining Inventiveness

Economists assume there is new knowledge or know-how embedded in patented inventions. This new knowledge should result in spillover benefits which can provide dynamic efficiency gains to offset the static efficiency losses of the patent system. Unfortunately this assumption is out-of-date. 'Novelty' and 'inventiveness' are used as a proxies for new knowledge, but over time judges have introduced detailed legal doctrines (policy rules) limiting how these proxies work. These ignore the issue of new knowledge. Most existing knowledge is disallowed in assessing novelty, and the quantum of inventiveness required is, in Australia, a scintilla. This evolution in innovation policy seems never to have been evaluated – case law precedents have generally been simply incorporated into statute law. This paper traces this evolution, following the major legal decisions reducing the quantum of inventiveness required in Australia for grant of a standard patent. It commences with a short comparison of economic and legal approaches to the issue of patentability (section 2). By focusing on the economic rationale for grant of a monopoly for an invention, one can assess whether the legal proxies adopted are likely to sufficiently mirror the underlying rationale to produce positive economic outcomes. This section also provides a short exposition of the legal approach to patent grant, including the key elements in the complex legal approach to 'inventiveness'. The main section of the paper then reviews the key doctrines and the legal decisions underlying them. The final section of the paper discusses the extent to which statute law is (or is not) amended to fix problems created by economically unsound decisions. During 2009 IP Australia undertook what it described as an exercise in improving "the Australian patent system as a vehicle to support innovation" (IP Australia 2009a: 1). Issues addressed included the knowledge used in determining inventiveness and part of the test for inventiveness. These consultations fed into the Intellectual Property Laws Amendment (Raising the Bar) Act 2012. Despite these "raising the bar" consultations and amendments the inventive step requirement for an Australian patent remains virtually non-existent. Replacing the proxy tests of novelty and inventiveness with a more direct test of the contribution to knowledge or know-how is considered