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An International Comparison of Government Funding for R&D and IP Costs

Governments around the world are increasingly encouraging R&D, and particularly innovation, by supporting local companies as well as attracting foreign companies to invest locally in R&D. Equally there is a push for the IP generated from the R&D to be properly legislated for and protected. This article examines and compares ways that governments have been providing encouragement, for example the types and levels of direct support and tax relief offered by a number of key economies.

Direct support

Direct support in the form of grants or subsidies for R&D is very common in the jurisdictions listed. Direct support for resulting IP is less common in Europe and the US but is more widely available in a number of Asia Pacific countries as set out below. 

Direct support for R&D is often in the form of either research funding, (which may be done via collaboration with academia) or project type grants for a specified export product or market strategy. It will often partially cover such things as employing R&D technical staff, prototyping costs, market surveys and sometimes associated professional advice. For example In Singapore the direct funding support has been increased to 90% of IP costs for Covid-19 affected businesses.

As foreshadowed above, direct support for IP filings is less common than the direct support for R&D.  Sometimes funding may be available for capability development e.g. IP strategy work or FTO searching, but not IP filing per se. However, when it is available, it will usually be focused on the initial stage of filing a provisional followed by a PCT application. Usually by the end of the 30 Month PCT deadline, commercial arrangements should be in place and the project should be self-funding. China has long provided a comprehensive central policy for IP filing subsidies, which is then implemented by the provincial governments.

Tax relief

Tax relief is another tool used by governments to incentivise local innovation or investment. This support may be in the form of tax breaks (that may be refunded in cash for R&D or IP spending) or IP box regimes. 

Enhanced tax breaks on R&D and cash pay-outs for tax losses are often of most interest for start-ups who have a high burn rate and need to hoard every dollar they can. Increasingly for multinationals who are forum shopping for the most favourable regime to locate a R&D hub, the tax regime may be a deciding factor.

Tax relief on IP expenses, and more so on IP derived income, is also becoming a tool for encouraging innovation in some economies. 

Patent Boxes or IP Boxes are a developing tool used around the world and essentially prescribe a lower tax rate on income derived from patents (and in some cases from other forms of intellectual property).  The UK has a good example of a patent box, where the tax on patent derived income is prescribed at to 10% but it can go as low as 2.5% such as Cyprus.

Tax is obviously a more complex issue to describe and compare between different jurisdictions. The table below (and accompanying footnotes) is a snapshot of the different types of support available in several patent jurisdictions at the time of writing, but is subject to significant change in the current environment. 

Country IP direct support R&D direct support Tax Break IP box
NZ Yes1 Yes2 Yes3 No
Australia Yes4 Yes5 Yes6 No
Singapore Yes7 Yes8 Yes9 Yes10
China Yes11 Yes12 Yes13 No14
US No15 Yes16 Yes17 No
EU Yes18 Yes19 Yes20 Yes21

Conclusion

A wide range of subsidies and tax relief provisions are currently available, and in the predicted recession, countries are likely to offer even more generous schemes (for those that haven’t already). This is an important factor for corporate counsel or leadership teams considering where to base their R&D efforts. As always, expert advice will be necessary to assess this for individual circumstances.


1 Callaghan Innovation IP development programme up to $22,000 (40% subsidised). Co-investment of up to $900,000 available for international growth. https://www.callaghaninnovation.govt.nz/innovation-skills/innovation-ip and https://www.nzte.govt.nz/our-services/international-growth-fund.

2 Grants of 40% of eligible R&D costs. See https://www.callaghaninnovation.govt.nz/grants.

3 15% R&D tax credit, 28% cash-out of R&D losses. https://www.classic.ird.govt.nz/research-development/rdti/rdti-about/ and https://www.classic.ird.govt.nz/research-development/rdltc/overview/what-is-rdltc/what-is-rdltc.html.

4 15% R&D tax credit, 28% cash-out of R&D losses. https://www.classic.ird.govt.nz/research-development/rdti/rdti-about/ and https://www.classic.ird.govt.nz/research-development/rdltc/overview/what-is-rdltc/what-is-rdltc.html.

5 Up to $100,000 for research costs. https://www.business.gov.au/grants-and-programs/csiro-kickstart and https://www.business.gov.au/grants-and-programs/innovation-connections.

6 Up to 43.5% R&D tax offset. https://www.ato.gov.au/Business/Research-and-development-tax-incentive/.

7 Grant of up to 80% of product development costs. https://www.enterprisesg.gov.sg/financial-assistance/grants/for-local-companies/enterprise-development-grant/innovation-and-productivity/product-development.

8 Grant of up to 80% of product development costs and 70% of costs up to $100,000 SGD for entering new markets. https://www.enterprisesg.gov.sg/financial-assistance/grants/for-local-companies/enterprise-development-grant/innovation-and-productivity/product-development and https://www.enterprisesg.gov.sg/financial-assistance/grants/for-local-companies/market-readiness-assistance-grant.

9 Grant of up to 80% of product development costs and 70% of costs up to $100,000 SGD for entering new markets. https://www.enterprisesg.gov.sg/financial-assistance/grants/for-local-companies/enterprise-development-grant/innovation-and-productivity/product-development and https://www.enterprisesg.gov.sg/financial-assistance/grants/for-local-companies/market-readiness-assistance-grant.

10 IP income taxed at 5% or 10%. https://www.edb.gov.sg/en/how-we-help/incentives-and-schemes.html.

11 Up to $7100 USD per application. https://www.mondaq.com/china/patent/779124/patent-subsidy-in-china-a-reformation-from-quantity-to-quality.

12 Up to $7100 USD per application. https://www.mondaq.com/china/patent/779124/patent-subsidy-in-china-a-reformation-from-quantity-to-quality.

13 Tax credit up to 75% of R&D costs. Corporate tax rate reduction to 15% under High and New Technology Enterprise (HNTE) programme. https://www.oecd.org/sti/rd-tax-stats-china.pdf and https://www.pwccn.com/en/services/tax/china-rd-incentive-service/high-and-new-technology-enterprise.html.

14 Although see the HNTE programme above..

15 Although companies can benefit from IP developed using federal R&D funding. https://www.innovation.pitt.edu/resources/intellectual-property-overview/federal-funding-and-ip/.

16 Although companies can benefit from IP developed using federal R&D funding. https://www.innovation.pitt.edu/resources/intellectual-property-overview/federal-funding-and-ip/.

17 Tax credit up to 20% of R&D costs. https://squarmilner.com/rd-tax-credit/.

18 Tax credit up to 20% of R&D costs. https://squarmilner.com/rd-tax-credit/.

19 Funding awards of several million Euros at the EU level, grants or awards available in UK, France, Germany and others. https://ec.europa.eu/programmes/horizon2020/en/, https://www.gov.uk/guidance/innovation-apply-for-a-funding-award, https://www.callsforproposals.com/en/french-national-research-agency-anr.html, https://www.research-in-germany.org/en/research-funding/research-funding-system.html.

20 Funding awards of several million Euros at the EU level, grants or awards available in UK, France, Germany and others. https://ec.europa.eu/programmes/horizon2020/en/, https://www.gov.uk/guidance/innovation-apply-for-a-funding-award, https://www.callsforproposals.com/en/french-national-research-agency-anr.html, https://www.research-in-germany.org/en/research-funding/research-funding-system.html.

21 Patent box systems in UK, France, Italy and others. https://taxfoundation.org/patent-box-regimes-europe-2019/.

Strange Bedfellows: Marrying Deep Tech with IP Strategy

In a drama worthy of Shakespeare, players in deep tech, such as artificial intelligence, block chain, big data, robotics, electronics, and photonics, often feel like they are arrayed against an army of foes.

In this series of articles, we will investigate some of the issues encountered by deep tech in trying to integrate IP strategy into their battle plans (or courting strategy as the case may be). In this first issue we will look at the Agile development approach, what challenges this brings, and how an Agile IP strategy can be transformed into a perfect bedfellow.

Agile Development

Agile development is sometimes described as a cult or manifesto for coders. Even though it dates back to 2001, it is still in widespread use today in the deep tech arena, and is gaining more popularity in wider business processes.

It typically relies on short sprints or iterations where everybody in the organisation is focused on implementing a feature or revision within a set timebox. In this mode, it is very hard to find focus or time to spend on IP or other “trivialities”: everybody is focused on the end goal for that iteration.

At the beginning of each sprint there is a goal, but by the very nature of this approach, goalposts shift drastically over the project. This means pinning down what the product will look like at the end is difficult if not impossible. Sprinting is very focused on getting customer feedback at the end of each sprint and feeding that back into the plan for the next sprint.

Overall IP strategy

The overall business goals in deep tech will typically be related to a successful exit or further investment rounds. In such a case, the IP strategy can often be focused on adding value to future investors or other stakeholders. Deep Tech IP is often shrouded in mystery as if there is some secret crystal ball. However, IP strategy is usually very simple:

  • What aspects will add the most value to your revenue projections?
  • Can those aspects be protected (and how)?
  • Who will try to copy it?
  • How will you stop the copiers?
  • Do you need to worry about patent trolls or infringing other patents?

Freedom to Operate

Freedom to operate (FTO) can sometimes be the last thing entrepreneurs want to know about. They are focused on getting their product to market and burn rate. However, stakeholders such as investors, and even government funding can often be tied to this thorny issue.

While stakeholders may insist on getting freedom to operate searching done, depending on the nature of the tech, the markets and even on the investors, it may make sense to delay or rethink what searching is most useful.

Sprints can change the nature of the product drastically, so figuring out what to search is tricky.  Because FTO searching can be expensive, and relies on comparing the launched product with live patents existing at launch, it is often left until late in the process. However, this need not be the approach.

Early on in the project an overall FTO search can be done on the very broad premise. This will draw out any major roadblocks but won’t focus on finer details. This can be used to guide each sprint on general areas or features to avoid.

For each sprint, instead of an FTO search, a short landscape search may be better. This is more targeted at giving an idea of who has patented what in the area of the iteration. This can be used together with a SWOT analysis of your strengths, weakness, opportunities, and threats to help align IP value with the R&D development. At the end of the day, the vast majority of value that successful businesses accrue is intangible (whether measured in the balance sheet or through expert intangible valuations) and this should remind us all of the risks at stake.

Prioritisation

Deciding what to protect, when and how, may cause endless hand wringing. This is particularly acute with an Agile approach since nobody knows what the product will look like at the end of the project. Alternatively, the founders may have heard through contacts that trade secrets are the way to go, or some rumour that software isn’t patentable.

The best approach (as with most things) is to be pragmatic and prioritise with your best guesses. For each sprint, a decision can be made about what might be patented during the sprint and at what stage. This will change according to where that sprint is, in the overall timeline. The organisation can include things to patent in the burn chart/story map but this can be updated as part of the Agile process.

Enforcement

During internal development, before the product has been launched, there is minimal practical risk of patent infringement. However once your product is out in the market, especially in the US, is it common in deep tech to get infringement warnings in the mail. Whether the threat comes from a trading business or a non-practising entity (patent troll), a pre-planned approach to a range of scenarios is a good start.

Often the key is acting quickly and confidently. This may mean calling their bluff straight away (where the patent in question was already known previously to be of dubious validity), not replying, entering a dialogue about collaboration instead, or even entering an early settlement at a much lower royalty rate.

Branding

The brand may be the last thing on engineers’ minds during each sprint, but while customer perception may be the focus of marketing or sales, it should be on the forefront of the whole team.  Sometimes a pseudo internal brand for each sprint can help, which encompasses or represents the personas for the project or sprint. 

At fulfilment or closer to product launch, these internal brands might actually provide some candidates for focus groups. Even at that stage it is important to think through perceptions of different cultures and implications of different languages or pronunciations of major target jurisdictions.

A final word

Buzzwords may be king, but in the end what matters is value. Simplicity is essential in the IP strategy and the simpler and shorter it is the easier it is for all the team to buy into it and integrate it into their tasks. The IP strategy can be a perfect bedfellow of Agile development.

A Final Innovative Step: Australia Plans to Phase Out Innovation Patents (Update)

On 26 February 2020, the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2019 came into force in Australia. This begins the abolition of Australia’s innovation patent system.

Any innovation patent application must be filed before 26 August 2021. From that date, you will only be able to pursue a standard patent in Australia.

This will mark the end of Australia’s second-tier patent. Our earlier post discusses the background to this change.

This change will affect a number of New Zealand and Australian businesses who protect their incremental innovations which do not quite fit in the standard patent system. Get in touch with us to discuss how this change will affect your business.

Fee Changes for NZ Patents and Trade Marks

IPONZ has announced new official fees for patents and trade marks in New Zealand. These will come into force on 13 February 2020.

Trade Marks

For trade marks, many fees are dropping.

The Good News

The fee reduction encourages applicants to use the IPONZ preliminary search and advice option and pre-approved specifications for goods and services.

This encourages small businesses to develop registrable trade marks in conjunction with IPONZ guidance, and there should be fewer applications on the register which are flawed at filing and have little prospect of success. The reduction in IPONZ’s workloads should in turn speed examination, meaning more registrations issue without objections.

The Not so Good News

There is a potential down-side to embracing these services.

IPONZ’s preliminary search and advice is not a comprehensive search. It does not guarantee that an approved application will not conflict with third party rights.

IPONZ does not consider rights in trade marks outside their limited search or any unregistered trade mark common law rights. This may give small businesses a false sense of security that trade marks are free to use without proper considering all potential risk areas.

The pre-approved list may also not provide protection necessary for a strong trade mark right or may result in applicants simply selecting all goods in a class without tailoring an application to fit their business plans.

The Potentially Bad News

We anticipate that the relatively cheap application process will result in an influx of applications that overclaim the area of interest or are simply speculative filings. Applicants will lodge to reserve a position on the register with no true interest in use.

Trade mark registers internationally are already seeing a dramatic increase in applications from fast-growing economies like China, and this is likely to increase even further when filing is cheap and easily done.

As the register becomes cluttered, trade mark owners will have to negotiate a larger number of trade marks when developing new brands. This can mean an increase in branding costs as oppositions, non-use and invalidity actions may be needed to clear the register of trade marks that aren’t used or that are filed without proper consideration of common law rights and existing reputations.

Overseas brand owners should also be wary of an influx of opportunistic applications endeavouring to trade off overseas reputation and take advantage of a cheap and easy filing process.

What Should You Do Now?

Filing now may save you costs in the long run.

For overseas companies, assess if New Zealand is a potential future market. Are you in Australia already and thinking about neighbouring markets?

If you are expanding or re-branding your business, think about whether you should file for your new trade mark now while others hold off waiting for cheap fees to come into effect. You may well avoid increased risk of citations by getting in early.

As always, the first step in deciding what do to is taking advice from the right person. Talk to our trade marks team today.

Patents

For patents, many fees are increasing.

2013 Act cases

Any application filed after 13 September 2014 is made under the 2013 Act. Almost all pending applications are 2013 Act cases.

For 2013 Act cases, there are two key changes.

The request for examination fee increases from $500 to $750. To avoid this increase, applicants should request examination before 13 February 2020.

IPONZ is also introducing an excess claims fee. This applies to each 5th claim from claim 30 onwards. It is due after acceptance, but is calculated based on the maximum number of claims at any point between requesting examination and acceptance. The excess claim fee can be avoided by having 29 or fewer claims during examination. Since other countries already charge excess claim fees (notably Australia and the United States), most applicants shouldn’t have too much difficulty avoiding this fee.

1953 Act cases

Divisionals of applications filed before 13 September 2014 are made under the 1953 Act.

The key change for 1953 Act cases is the doubling the filing fee to $500. IPONZ hopes this will dissuade further divisional from being filed.

Patent renewals

Patent renewal fees are increasing hugely. All the fees are at least doubled, and the 15th to 19th year fee is almost tripling to $1000 per year.

Unfortunately, there is no way to avoid this increase: renewal fees cannot be paid more than six months in advance.

The Effect

On their face, these fee changes do not seem good for New Zealand businesses. Who wants to pay more?

But, there may be a silver lining to this. Foreign competitors may avoid filing in New Zealand or may allow their patents to lapse earlier to avoid the increased costs. This is particularly likely with foreign entities who apply for patents in New Zealand purely to disrupt New Zealand-based competitors.

The fee changes could therefore actually benefit businesses in New Zealand in the long run.

What Should You Do Now?

Requesting examination now will help to minimise costs.

But the decision on when to request examination goes beyond simply saving a few dollars now. Talk to our patents team to decide how to best manage your patent portfolio.

A Final Innovative Step: Australia Plans to Phase Out Innovation Patents

On 25 July 2019, the Australian Government introduced a bill to make a number of changes to the patents system. The changes to Crown use of patents and designs and to compulsory licences will be of interest to some. But the biggest change is phasing out innovation patents, Australia’s equivalent to a second-tier patent or utility model.

Innovation patents have a lower requirement for inventiveness than standard patents, are granted without substantive examination, and have an 8-year term. This is ideal for incremental improvements which may not justify the expense of a standard patent, but still benefit from a level of protection.

This will align Australia with jurisdictions like the United States and New Zealand which do not have a second-tier patent.

The proposed law will prevent new innovation patent applications being filed. It will not affect existing innovation patents.

This follows the Australian Productivity Commission’s report in 2016 that recommended abolishing innovation patents. Their reasoning is that the innovation patent system probably does not benefit Australian SMEs.

It is not clear when (or if) the bill will be enacted. However, there is no indication that this will be a contentious bill, and it may well pass through both houses relatively quickly.

Once the law comes into force, there will be an 18-month transition period in which new innovation patents can be filed. After that, no new applications will be allowed. With the 8-year term of innovation patents, this means that the final innovation patent, and so the innovation patent system as a whole, will likely reach the end of its life in 2028.

Reducing Reuse: Australia’s Full Court Develops the Law on Refurbishing Patented Products

The Full Court has confirmed that refurbishing patented products in Australia may result in patent infringement.

The Cast

Seiko is a Japanese company which is a large player in the printer market. Seiko sold ink cartridges in Australia under the Epson brand which were covered by the claims of an Australian patent.

Ninestar is a Malaysian company who would acquire used Epson cartridges. These would be refilled with ink and have their memory updated or replaced to allow the cartridge to be reused in Epson printers.

Calidad is an Australian group of companies, which imported the refurnished cartridges from Ninestar and sold them in Australia.

The Background

Seiko asserted that Calidad’s actions in Australia infringed its Australian patents.

In 2017, the Federal Court of Australia found partly in favour of Seiko. Burley J ruled that cartridges which had the memory replaced were infringing, but those that were merely refilled were not infringing. Both parties appealed to the Full Court of the Federal Court of Australia.

The Law

The Full Court’s judgment in Calidad Pty Ltd v Seiko Epson Corporation [2019] FCAFC 115, issued on 5 July 2019, found entirely in favour of Seiko. All of Calidad’s cartridges were found to be infringing.

The Full Court confirmed that the sale of a patented product gives a third party user an implied licence to have “all the normal rights of an owner”, which includes using or selling. However, the third party user cannot rely on this implied licence to make an infringing product.

Jagot J’s position (supported by Greenwood J) was that, because Seiko sold a single-use cartridge, the implied licence could not cover multiple uses. Ninestar’s actions made the cartridge act beyond how Seiko intended, and therefore was not covered by the implied licence:

The product which Seiko sold, in the form in which it was sold, was capable of use until the memory chip showed that the ink in the container was exhausted. By re-programming the memory chip, Ninestar enabled an embodiment of the invention, which could no longer be used, to be used. It was not repairing the cartridge. The cartridge was not damaged or worn in any way. It had simply reached the end of its intended life as a printer cartridge. Ninestar, by re-programming the memory, putting a new hole in the cartridge to enable it to be re-filled with ink, re-filling the cartridge with ink, and sealing the new and the existing hole created by the original use, manufactured a new embodiment of the invention, an act which could never have been authorised by the implied licence and could never be the subject of an exhaustion of patent rights by reason of sale. Calidad, in importing those cartridges, necessarily exploited the invention and thus infringed the patents.

[177] per Jagot J.

Yates J had a slightly different reasoning. The modifications were such that Ninestar’s refurbished products could not be said to be of Seiko’s making:

The correct approach was to ask whether, in each particular category, the modifications which Ninestar made to the original Epson cartridges altered them in such a way that they were, in substance, different articles to those which Seiko had put into the market and thus into the hands of the original owners. If so, they were not the articles in respect of which Seiko, as patentee, had given the implied licence and Calidad could not rely on that licence in respect of what were, in substance, different articles.

[293] per Yates J.

Under either reasoning, Ninestar’s action went beyond the implied licence that comes attached to the sale of patented products. Calidad’s importation of these refurbished products therefore was an infringement of Seiko’s patents.

This is a more restricted implied licence than that of the primary judge’s approach. The primary judge looked at whether Ninestar’s modifications amount of material changes to the features that embodied the claimed invention, and found that merely refilling the ink and updating the existing memory was not a material change.

The Future

Any modification of a patented product which does not strictly replace damaged parts or which was not envisioned by the original seller may be an infringement of an Australian patent.

This could have a significant effect on third party repairers or modifiers, who will now need to consider whether their actions could be patent infringement.

Calidad may try to appeal this to the High Court, which would be free to depart from the earlier decisions (including the 1911 Menck decision) which the Federal Court and Full Court felt bound by. If the High Court decides to hear the appeal, the doctrine of implied licence in Australia may yet be refurnished.

New Zealand’s New Grace Period

On 30 December 2018, New Zealand will implement a grace period for disclosures by an inventor or applicant made in the year before a patent application is filed.

This follows from New Zealand ratifying the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 25 October 2018, and the CPTPP being scheduled to enter into force on the same day.

This article discusses how the new New Zealand grace period will work.

Current situation

Currently, any public disclosure of an invention could prevent an applicant obtaining a New Zealand patent for that invention. There are only very limited situations in which disclosure can be disregarded (such as being in breach of confidence). This change will align New Zealand with countries like Australia, the United States, and Japan.

Many jurisdictions (notably Europe and China) still have limited, or no, grace periods for disclosures. A disclosure before filing a patent application can therefore still be damaging, and should be avoided if possible.

The new law

From 30 December 2018, the Patents Act 2016 will have a new grace period provision in section 9(1)(f). This will provide:

(1) For the purposes of section 8, the disclosure of matter constituting an invention must be disregarded if 1 or more of the following applies:

(f) that disclosure occurred during the 1-year period immediately preceding the patent date and the disclosure was made by any of the following persons:
(i) the patentee or nominated person:
(ii) any person from whom the patentee or nominated person derives title:
(iii) any person with the consent of the patentee or nominated person:
(iv) any person with the consent of any person from whom the patentee or nominated person derives title.

Which patent applications can use the grace period?

A patent application must have a patent date within 1 year of the disclosure. The disclosure must have occurred on or after 30 December 2018 (future Schedule 1AA(4) of the Patents Act 2016).

The patent date is the date a complete specification was filed (s 103(1)(a)) or that the PCT application was filed (s 46). The filing date of a provisional specification, or any other priority date, is not the patent date.

The provision is not retrospective. Any disclosures that occur before 30 December 2018 are not covered by the grace period.

If you wish to take advantage of the grace period, a complete specification must therefore be filed within one year of the disclosure. It may be worth filing a PCT application in the first instance to use the grace period in multiple countries at once.

Who can disclose?

The new provision expressly covers disclosures made by the patentee (or nominated person who will receive the granted patent, if different) (s 9(1)(f)(i)), the inventors (or anyone else the patentee derives title from) (s 9(1)(f)(ii)), and anyone else with consent of these parties (s 9(1)(f)(iii)–(iv)). This seemingly covers anyone directly involved in a patent application.

This complements the existing provisions which provide a 1-year grace period for disclosures made unlawfully or in breach of confidence (s 9(1)(a)–(b)).

What about third parties?

If a third party receives the inventor’s public disclosure, then on-discloses the information they received, would this third party on-disclosure be covered by the grace period?

Maybe not. A strict reading of the provision would suggest third party on-disclosures are only covered if the third party has the consent of the patentee or inventor. How this works in practice is unclear. Can an unknown party in unknown circumstances receive consent? Does the act of making the information available to the public give implied consent to the public generally for on-disclosure? Would a copyright notice that the information is not to be copied be equivalent to an express lack of consent?

For example, a common scenario would be when an inventor discloses their invention publicly at a conference, and a third party (unknown to the inventor) then publishes a summary of the invention. It is unclear if the third party summary is covered by the grace period or whether it would be prior art.

This exposes a potential hole. Some disclosures may not have consent (and therefore cannot use the new s 9(1)(f) grace period) but are not in confidence or obtained unlawfully (and therefore cannot use the existing s 9(1)(a)–(b) grace period). These disclosures will therefore still be prior art.

Whether third party on-disclosures are covered by the grace period may need to be settled by the courts. Interestingly, the underlying text of the treaty contains no reference to consent being required for the grace period to apply. Instead, the treaty requires that disclosures by “a person who obtained the information directly or indirectly from the patent applicant” must be disregarded (Trans-Pacific Partnership Agreement art 18.38). Depending on the interpretation by the courts, it may therefore be that New Zealand law is not fully in compliance with this part of the treaty.

In the meantime, to mitigate the potential risk of third party on-disclosure, patent applications should be filed as soon as possible after a public disclosure.

How does this compare with Australia?

Australia has had a 1-year grace period since 2002.

The Australian grace period provision is worded differently. The Australian grace period covers information made publicly available by or with the consent of an inventor or applicant (Patents Act 1990 (AU) s 24(1)(b)). The Australian provision therefore focuses on the information disclosed, rather than who made the disclosure. This side-steps the issue of whether a third party needs consent for the grace period to apply to on-disclosure, as long as the initial disclosure was made with consent.

It appears the New Zealand provision was based on the Australian provision. But the change in wording to focus on the person disclosing rather than the information disclosed may be meaningful. It may suggest an intention from Parliament that unconsented third party on-disclosures are not covered by the grace period, and therefore should still be usable as prior art. It remains to be seen how this is applied by the courts in practice.