Hon Christopher Finlayson

Hon CHRISTOPHER FINLAYSON (Attorney-General) on behalf of the Minister of Commerce: I move, That the Patents Bill be now read a first time. At the appropriate time I intend to move that the bill be referred to the Commerce Committee for consideration. I suppose the first issue to be confronted is the pronunciation of the word “patent”. Some people say “pay-tent” while others say “pat-ent”. Indeed, I am reminded of the story of three leading barristers who were called to the inner Bar many years ago. Mr Turner advised the court that he had in his hand letters “pay-tent”; Mr Leicester advised the court that he had letters “pat-ent”, and Mr Leary advised the court that he had in his hand a document essentially similar to the other two! This bill reforms a very important aspect of New Zealand’s intellectual property regime.

The Patents Act 1953 is overdue for reform. It is modelled on the Patents Act 1949 of the United Kingdom, and that legislation had its roots in the Statute of Monopolies 1623, which was enacted following the famous case of monopolies that struck down a royal monopoly on the manufacture of playing cards. As was observed in a 2005 decision of our Court of Appeal called Pfizer Inc v The Commissioner of Patents, the 1953 Act is a curious amalgam arising out of very old and peculiar circumstances, which arose out of the long history of the royal grants of privilege in the United Kingdom. It then evolved through various statutory provisions, and the law has been supplemented over the years by the leading decisions of senior appellate courts, which set out case law landmarks against which the law of patents had to be viewed. I agree with the observation of Justice Hammond at paragraph 110 of that case that given the already intrinsically challenging subject matter of patents, this background has not made the law readily accessible or easy to understand. It was the deplorably obscure state of the law that led Charles Dickens to write A Poor Man’s Tale of a Patent.

What are patents? They are an intellectual property right granted for inventions providing the patent owner with the sole right to capitalise commercially on the invention for the term of the patent. They therefore provide an incentive for innovation. However, patents can also impose costs on society as they are, effectively, a form of monopoly right. This is a particular issue for New Zealand as most patents granted are to foreign applicants.

In New Zealand patents are granted after an examination process by the Intellectual Property Office of New Zealand under the authority of the Commissioner of Patents. The standard of patent examination required by the 1953 Act is less strict than that required for most countries. This means that patent rights granted in New Zealand may be broader in scope than rights granted for the same invention in other countries. Another consequence is that patents may be granted for inventions that already exist or where they are obvious variations on existing technology. This has the potential to disadvantage New Zealand businesses and consumers as technology that is freely available elsewhere could be covered by a patent in New Zealand. Since innovation is often incremental, building on what already exists, local innovators may also be disadvantaged.

To be granted a patent under this bill, an invention must be a manner of manufacture, novel, involve an inventive step, and be useful. These criteria are stricter than those in the current Act, and are more closely aligned to the criteria applied in most other countries. Applying the stricter criteria will substantially reduce the potential disadvantages to local firms and consumers arising from criteria applied under the current Act. Inventive steps and usefulness are not part of the examination process under the Patents Act 1953, although lack of an inventive step or usefulness are grounds upon which third parties can challenge the grant of a patent.

Novelty and an inventive step will be determined on the basis of all information that has been made publicly available anywhere in the world before the filing date of a patent application. Under the current Act, these criteria are determined with respect to what is known or used in New Zealand only. No notice is taken of information published outside New Zealand. The courts have also interpreted the 1953 Act to require the Commissioner of Patents to give applicants the benefit of the doubt when deciding whether to grant a patent. The effect of this is that the commissioner may have to grant patents that a court is likely to find invalid. The bill removes this requirement, requiring that the decision to grant or not to grant a patent be based on a balance of probabilities approach.

The bill excludes some inventions from patent protection, even though they might otherwise meet the requirements for a patent, if there is no benefit to the nation in allowing these inventions to be patented. Methods of treatment of human beings by surgery or therapy, and methods of diagnosis practised on human beings will not be able to be patented under the bill. The courts have decided that such methods are not patentable under the Patents Act 1953, but there is no specific exclusion in the 1953 Act. To remove any doubt as to whether such methods are able to be patented in New Zealand, the bill introduces a specific exclusion. In line with the recommendations of the Royal Commission on Genetic Modification, human beings and biological processes for their generation have been excluded from patent protection. Perhaps an exception could be made for the chief Opposition whip, but it would be defeated, I think, by the usefulness test I referred to earlier. Also excluded are inventions whose commercial exploitation would be contrary to morality or public policy. It is likely that few patent applications would be refused on this ground. This provision is intended to be used only in relation to inventions where commercial exploitation is likely to be offensive to a significant section of the community, including Māori.

No matter how thorough the patent examination process is, some patents may be granted that should have not been granted. Such bad patents have the potential to impose unnecessary costs on the Crown, for example, in the health budget, and also impose costs on consumers and businesses. The bill, therefore, introduces simplified procedures that will reduce the cost and complexity involved in challenging bad patents. The bill also provides for the establishment of a Māori advisory committee to advise the Commissioner of Patents in relation to applications for inventions involving traditional knowledge or indigenous plants and animals. The establishment of a Māori advisory committee was recommended by the Royal Commission on Genetic Modification.

The bill also contains a number of procedural and administrative matters associated with the application for a patent so as to minimise costs and delays. It also updates the regulatory regime for patent attorneys who provide technical and legal advice on intellectual property matters.

The bill is consistent with New Zealand’s international obligations in this area, including the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS agreement). The TRIPS agreement has been amended with regard to the granting of compulsory licences for the production of patented pharmaceuticals for export to countries that require such pharmaceuticals to deal with public health problems, but have insufficient or no capacity to produce them themselves. The Government proposes to accept this amendment to the TRIPS agreement, and appropriate amendments to the bill will be proposed during the select committee consideration. I commend this bill to the House.