Feedback Sought on Proposed R&D Tax Incentive Package
The Ministry of Business, Innovation and Employment has released discussion documents regarding a Research and Development tax incentive package that is intended to take effect in April 2019.
The package seeks to establish a simpler system that is available to a wider range of businesses whilst ensuring that the tax credit is only available for genuine research and development. The package is part of a wider package of support for research, science and innovation, aimed at developing a more diverse, productive and sustainable economy. It also has the goal of increasing the expenditure by businesses on research and development from the current level of 1.3% of GDP to 2% of GDP by 2027. It is proposed that:
- A 12.5% tax credit on eligible expenditure will be available to business doing R&D in New Zealand. The credit will be available for eligible expenditure incurred from 1 April 2019;
- It will be available to all businesses, regardless of legal structure, that are located in and carrying out R&D in New Zealand relating to their business or intended business with the intention of making a profit and who will effectively own the results of the R & D;
- If the R&D activity is sub-contracted, the incentive should go to the business commissioning the R&D and not the business that is getting paid for doing the work;
R&D would be defined as:
(a) Core activities: those conducted using scientific methods that are performed for the purposes of acquiring new knowledge or creating new or improved materials, products, devices, processes, or services; and that are intended to advance science or technology through the resolution of scientific or technological uncertainty, or
(b) Support activities: those that are wholly or mainly for the purpose of, required for, and integral to, the performing of the activities referred to in paragraph (a).
- Subject to a range of excluded activities, the R&D activity would need to address a material problem and anticipate, but not necessarily attain, a material advance in science or technology by applying processes that rely on scientific method;
- A business will need to spend a minimum of $100,000 on eligible expenditure, within one year, to qualify for the tax incentive, unless the R&D activities are outsourced to an Approved Research Provider.
- The maximum tax credit per year will be $15 million dollars, although it is possible that Ministerial discretion could be used to allow greater tax credits.
In addition to the above features, feedback is sought on whether the credit should be limited to labour costs or include other items such as depreciation on tangible property, materials costs and overheads. A range of ineligible expenditure is also given, which includes the costs of acquiring intangible assets. Further information can be found at www.mbie.govt.nz/RDincentive, and feedback should be sent to RDincentive@MBIE.govt.nz by 5pm 1st June 2018.
Partial Priority Held to Also Apply to Determination of the First Application for Priority Purposes
In Johnson & Johnson Consumer Inc v Pfizer Inc the EPO Boards of Appeal held that the concept of partial priority also applies in the context of deciding whether an application from which priority is claimed is the first application for priority purposes.
Johnson & Johnson’s patent has a filing date of 16th February 2005 and claimed priority from a US application filed on 23rd July 2004, which in-turn was a continuation-in-part of a US application filed on 13th January 2004. In line with the disclosure in the priority document the patent claim concerned a dosage form comprised of a compressed core having an elongated shape with gelatinous coatings at each end on top of a sub-coating that covers most of the core. The gap between the two gelatinous coatings ranges from 3% to 33% of the elongated tablet’s length.
Pfizer opposed the patent on the basis of prior use during the priority period while also claiming that the asserted priority document is not the first application for priority purposes. The earlier US application filed on 13th January 2004 differed by disclosing a gelatinous coating gap width ranging from 5% to 33% of the elongated tablet’s length. Johnson & Johnson argued that the earlier application could not be the first application for priority purposes since the later change to a range of 3% to 33% is considered to be added matter, meaning that the two ranges define two different inventions.
The EPO Boards of Appeal noted the relevance of the recent EPO Enlarged Board of Appeal decision G 1/15, which acknowledged the concept of partial priority for claims encompassing alternative subject matter. The EPO Boards of Appeal considered that the rationale underlying the G 1/15 decision also applies where the priority application and an earlier application filed by the same applicant partially relate to the same invention. In such a scenario the priority application would only be the first application in respect of the part of the invention which is not the same as in the earlier application. Applying this to the facts of the case led to the conclusion that the claims to the dosage forms where the gap width is in the range of 5% to 33% do not have a valid priority date.
The EPO Boards of Appeal disagreed with the Opposition Division’s assessment of priority by using the added matter test under Article 123(2). An earlier Enlarged Board of Appeal decision G 1/03 held that the disclosure as the basis for priority must be interpreted in the same way as the basis for amendments – namely, the added matter test under Article 123(2). The EPO Boards of Appeal agreed that the same criteria are to be applied in the two scenarios when deciding what has been disclosed. However, it held that this approach cannot be assumed to apply when evaluating the validity of what has been disclosed. Whereas validity considerations may mean that a priority document only establishes partial priority, there is no equivalent in the form of an amendment that establishes partial validity. Hence, while amending a range of 5% to 33% to a range of 3% to 33% would not be allowed under Article 123(2), a range of 5% to 33% can establish partial priority for a range of 3% to 33%.
UK Ratifies the UPC Agreement
On World IP Day the 26th April 2018 the UK ratified the Unified Patent Court Agreement (UPC Agreement), being the sixteenth state to do so.
Following the UK’s ratification, the only remaining barrier to the UPC Agreement and the Unitary Patent (UP) coming into force is ratification of the UPC Agreement by Germany. However, Germany’s ratification of the UPC Agreement is currently on hold on account of a complaint that has been lodged with Germany’s Constitutional Court, which alleges that ratification of the UPC Agreement by Germany would breach its constitution. The complaint, by a German lawyer, appears to have sufficient basis to be taken seriously since the majority of complaints to Germany’s Constitutional Court are ruled inadmissible. Given that decisions of Germany’s Constitutional Court cannot be appealed, the complaint should be resolved one way or the other before Brexit takes effect in late March 2019. However, it is possible that the Constitutional Court will instead refer the question to the Court of Justice for the European Union.
Brexit will have little effect on the UK’s membership of the UPC Agreement since the UK will still be a member of the EPC, which is an international convention rather than a European convention. However, it will require the UK to recognise the authority of the European Court of Justice, at least for patent matters, since that will be the ultimate appellate Court for the Unified Patent Court.
However, given that the Unitary Patent is a European regulation, the UK would have to sign a new agreement with the European Union in order for it to participate in the Unitary Patent system. Although, not being able to participate in the Unitary Patent while being a member of the EPC and the UPC would in practice just mean that separate renewal fees will continue to be required for the UK.
Introduction of Second Tier Patents Possible for New Zealand
On 5th April 2018 the Member’s Bill Patents (Advancement Patents) Amendment Bill was drawn on its first ballot. It appears to have only been deposited in the ballot after confirmation that the Australian Government is undertaking further consultation before deciding whether or not to implement the Productivity Commission’s recommendation to abolish their innovation patent system.
If enacted the Bill would allow for advancement patents, which will be easier, cheaper and quicker to obtain than standard patents, although having a shorter duration.
Instead of requiring an inventive step an advancement patent requires an advancement step such that the advancement is distinctly different from what is known by a skilled worker and that is a useful improvement to the working of the claimed subject matter. As with standard patents, advancement patents have to satisfy manner of manufacture and novelty requirements, not be in respect of excluded subject matter and its use must not be contrary to law. In what appears to be an unintentional drafting error it is stated that advancement patents need to involve less advancement than is required for an inventive step. This is at odds with a later provision in the Bill which allows advancement patent applications to be transformed into standard patents (and vice versa). It would also deprive inventions that contain an inventive step from benefiting from the features of the advancement patent system, which benefits would be particularly useful in fields where technology changes quickly.
As with standard patents applicants will be able to either file a provisional specification followed by a complete specification within 12-months or file a complete specification either as a convention application or in the first instance. However, the complete specification can only contain a maximum of 5 claims. Applications accompanied by a complete specification will, after formalities checks, be granted a provisional advancement patent, which will also then be open to public inspection.
If within 3-years of the complete specification filing date the patentee or a third party does not request examination or the Commissioner has not exercised their discretion to initiate examination, then the provisional advancement patent will lapse. In contrast to the standard patent system whereby the Commissioner has the discretion to direct the applicant to request examination, with the advancement system the Commissioner will instead have the discretion to directly examine the patent, in which case the patentee does not pay a requesting examination fee.
In addition to the above noted requirements, advancement patents will also be examined for clarity, sufficiency, unity, the absence of double-patenting and subject matter exclusions for substances capable of being used as food or medicine that are a mere mixture of known ingredients or processes for producing such a substance by mere admixture. If the examination criteria are satisfied, then the patentee will be issued with a certificate of examination which, once registered, represents a deemed grant of the advancement patent. If the examination criteria are not satisfied, then the patentee is given a reasonable opportunity to amend the specification, failing which the provisional advancement patent will be revoked unless the patentee has requested a hearing.
Granted advancement patents can be either opposed or subject to re-examination. In what appears to be another unintentional drafting error, granted advancement patents can be opposed under either section 93A or section 100F, with the former being superfluous as the latter contains its provisions as well as further grounds and associated provisions. The same grounds are available to third-parties for both oppositions and requests for re-examination, although third-parties take no further part in re-examination proceedings. Unlike for oppositions, requests for re-examination can also be initiated by either the patentee or the Commissioner.
Infringements can occur both in respect of advancement patents and provisional advancement patents as there is no requirement for a provisional advancement patent to be substantively examined before it can be enforced. However, the alleged infringer will have the option of requesting examination of the provisional advancement patent or otherwise contesting its validity in Court proceedings.
Annual renewal fees become due from the second anniversary of the complete specification filing date, which if paid allow for a maximum term of 10-years from the complete specification filing date.
Australia Considers Pro's and Con's of Hague Agreement
IP Australia is seeking input on an economic analysis regarding the economic costs and benefits to Australia of joining the Hague Agreement for designs. The economic analysis is intended to form part of the evidence base on whether Australia should join the Hague Agreement.
The Hague Agreement allows designers to file into 68 territories through a single application. The economic analysis contained in the report concluded that the costs outweighed the benefits. The primary factor influencing the report’s conclusion is that currently about three-quarters of Australian designs belong to foreign applicants, creating a net cost on Australian consumers. It was considered that joining the Hague Agreement would likely further increase that percentage and that the costs would further be exacerbated by the maximum term of Australian designs needing to change from 10-years to 15-years from the filing date in order to be compliant with the Agreement. It was also noted that some Australian designers could utilize the Agreement without Australia being a member if they have residence or a business establishment in a member country. It was, however, considered that an economic analysis would favour joining the Hague Agreement when there has been an uplift in member countries, particularly if that includes accessions by China, Canada and Thailand.
Submissions on the economic analysis are required by 31st May 2018. Feedback is particularly sought on the methodology and assumptions of the economic analysis. Feedback is also sought on any unquantified impacts and case studies and any experience users of the Hague system, or applicants for design overseas have had.