There are many experts who argue that Indian SMEs would be more innovative, if Utility patents are awarded in India. As per news reports the draft under consideration advocates Utility patents saying that “This will help identify the actual, potential and untapped areas of creativity and innovation and facilitate preparation of focused strategy to channelize efforts and financial resources where they are needed,” “Utility patents or protection of grassroots innovation have been an established system in many other countries, including developed economies as they form a key part of the scientific and economic development.”
In this background reasons for Australia abolishing Utility Patents called `Innovation Patent' need to be examined in depth. When introducing utility patents/ petty patents in Australia, similar assumptions were made.
1.4 Objectives of the innovation patent system The need for a utility model to promote, protect and disclose lower level inventions in Australia has been extensively investigated several times over the last 40 years. In the early 1970s, the Designs Law Review Committee (the Franki Committee) found that there was a ‘gap’ for functional inventions that were not sufficiently inventive to gain patent protection and were not protectable under the designs system.33 Their recommended solution to this ‘gap’ was the establishment of a ‘petty patent’ system and an amendment to the designs system to allow for the protection of ‘functional designs’. Subsequently, the Government amended the Patents Act 1990 (Patents Act) in 2000 to establish the innovation patent system. Subsection 7(4) of the amended Patents Act defined an ‘innovative step’ as follows: For the purposes of this Act, an invention is to be taken to involve an innovative step when compared with the prior art base unless the invention would, to a person skilled in the relevant art, in the light of the common general knowledge as it existed in the patent area before the priority date of the relevant claim, only vary from the kinds of information set out in subsection (5) in ways that make no substantial contribution to the working of the invention.
A key finding in this research paper is that Australian SMEs are less likely to use the patent system after filing an innovation patent than a company that has not previously filed an innovation patent. This suggests that innovative activity is not being stimulated among these groups by the innovation patent system.
According to the research paper:
The great majority of Australian SMEs and private inventors appear to gain little benefit from the system… Only 23 SMEs have become moderate users of the innovation patent system … The average SME or private inventor files once and never again (74%), does not receive any enforceable right (83%) and lets their patent expire early because they see its value at less than the $110-$220 cost of renewal (78%). (page 2)
Other evidence in the research paper indicates that the costs and benefits of the innovation patent system do not accrue evenly across the users of the system. While 94% of innovation patent applications are made by private inventors or SMEs and they incur 95% of the regulatory costs of the system, larger firms who are already well served by the standard patent system tend to reap a disproportionate share of the benefits.
The report estimates that the private value of innovation patents is of a similar magnitude to the regulatory costs incurred (in the low tens of millions of dollars per annum). ACIP agrees with the finding in the report that the private gains from innovation patents are likely to be offset by the uncertainty costs to consumers and producers. In view of the newly available evidence, ACIP considers that, taking into account the overall costs and benefits of the system, it is likely to result in a net cost to society.