Wellington
A guest blog - Doug Calhoun's recent comments,
As Stephen Joyce, the new minister both of science and innovation and economic development getsto grips with his new portfolios, he should be addressing the disconnect between the innovationpolicy and the patent policy of both the current National and the previous Labour ledgovernments.
In mid-November 2011 the Ministry of Science and Innovation released a report entitled "PoweringInnovation". The link is
The third recommendation of that report was:
"Individual commercialisation units [of CRIs and Universities] should continue to develop orincrease capability both through embedded skills and through networked activity, to deliver highquality screening of IP opportunities and increased good quality commercialisation deal flownationally."
The MSI terms of reference identified the "high value manufacturing and services sector" (HVMSS),to which the recommendations apply, as including:
"... biotechnology, processing, electronics and embedded systems, mechatronics androbotics, sensing and scanning devices, medical technologies, advanced materials and manufacturingtechnologies (including plastics), marine technology, pharmaceuticals, agritechnologies, digitaltechnologies and information and communication technology (ICT)"
The disconnect is most graphically illustrated by clause 15 of the Patents Bill, which proposesto exclude the following technologies from being patented in New Zealand:
•Treatments of second medical indications in humans
•Methods of medical diagnosispracticed on humans, and
•Computer programs.
Medical technologies are becoming more and more focussed on genomics, proteomics and otheremerging "omics" evolving from the ability to analyse the components of DNA. Inventions that arebeing made involve finding new uses for or better administration of known medicines through targeteddiagnoses of patients according to genetic traits. And infometrics and diagnostic algorithmsinvolving sophisticated software are indispensable tools integral to such inventions. Most of theother HVMSS technologies also incorporate software to make them work. Yet the Patents Bill would banpatents for many of these technologies.
How did we get to this?
Government policies for promoting innovation and for reforming patent law were developed inseparate silos in a fiercely tribal public service culture.
Patent law reform was done in the Ministry of Economic Development (IP policy) silo. MED hasbeen particularly vigilant in protecting its patch from any outside dissenters (for example, me). Atthe heart of the MED policy is the observation that about 90% of New Zealand patents are granted toforeigners. The benefits of these may flow overseas. Therefore, we should make it as difficult aspossible within our international obligations to get a patent in New Zealand.
The main international treaty obligation MED have in mind is the TRIPS treaty. That treaty setsminimum standards of IP protection that member countries must provide. Article 27 of TRIPS requirescountries to grant patents in all fields of technology with some exceptions. The medical treatmentand diagnosis exceptions in the Patents Bill are permitted under TRIPS.
The exclusion of patents for computer programs came as a result of the proponents of open sourcesoftware successfully playing a game of last tag. They stayed on the sidelines throughout theconsultative process in the eight years before the bill was introduced and then ambushed the selectcommittee with tales of US patent "thickets" and how they would be put out of business if softwarepatents were permitted. (They did not mention that software related inventions had been able to bepatented here since the 1990s and that they were still in business.) The select committee introducedthe ban, in spite of the earlier MED recommendation and cabinet decision to the contrary. Thecontroversy generated can be distilled from the submissions made on the proposed guidelines fordetermining what is to be excluded. The link is
The MED view of patent economics is a very narrow one focussed on protectionism. Rather thanseeing patents as an incentive to invest in innovation involving the commercialising of inventions,MED advised the Commerce Select Committee:
"One consequence of the large number of New Zealand patents granted to overseas owners is thatNew Zealand may bear the potential costs imposed by these patents, but may not gain any benefit overand above what would have been gained if these patents had not been granted in New Zealand."
The only evidence on which that analysis was based was the repeated observation that about 90% ofNew Zealand patents are granted to foreigners. The supposed consequence of that percentage isspeculative - note the use of the word "may".
The MED advice concluded:
"In developing patent legislation for New Zealand, the aim must be to maximise the benefitsof the patent system to New Zealand. In light of the preceding discussion, there would seem to be novalue to New Zealand in having a patent system that provides wide patent rights. This would probablyhave little effect on innovation in New Zealand or anywhere else, but would, because of the highproportion of overseas patents, potentially impose significant costs on New Zealand for littlecompensating benefit."
"The best policy for New Zealand, given what is known about the workings of the patent system,would be to have the strictest criteria for granting a patent that are consistent with ourinternational obligations, and apply these criteria as rigorously as possible."
What was the nature or quantum of the “significant costs” was not identified.
The link to the briefing paper is
MED did commission a survey of patent users and an analysis of academic papers on the economiceffects of patents - after the bill had been drafted and was about to be introduced into parliament.MED released the resulting report (the Uniservices Report) after the select committee had dealt withit. The link to the report is
The two main conclusions of the Uniservices Report were:
•while most people surveyed had heard of intellectual property, there was a very lowunderstanding of how it worked or how to manage it, and
•technology transfer has animportant role in advancing innovation and patents are the currency of technology transfer.
And the MED response?
“The views in this report do not represent the views of the Ministry of EconomicDevelopment. Should the Ministry decide to act upon any of the recommendations in the report, wewill consult with stakeholders."
The World Intellectual Property Organisation (WIPO) has a team of economists who have recentlyproduced a 186 page analysis of the economic effects of IP (primarily patent) systems. The link is here :
The depth of analysis and large number of papers cited in the report shows that those economiceffects are very much more complex than the MED view. There is growing investment in andinternationalisation of science and innovation. IP is increasingly being treated as a tradeable endin itself, as well as a means to an end. There are emerging new collaborative mechanisms fortrading IP and IP intermediaries for doing it. It echoes and expands upon the Uniservices Reportconclusions: tech transfer is important for innovation and patents are its currency.
Among its conclusions are that the objective of any patent policy maker should be to achieve"quality" patents. By quality they mean that a patented invention is both novel and inventive, it isproperly described and that the invention claimed is of the same breadth as the description. But theWIPO report also emphasises the importance of "appropriability" in promoting investment ininnovation based on inventions.
The primary policy objective of MED in patent law reform has been to make patents as difficult aspossible to get in New Zealand. One consequence of that policy is that any patent that is grantedunder the new law is more likely to be a quality patent. However the Patents Bills goes far beyondthat and aims to have a chilling effect on seeking New Zealand patents – going so far as to banpatents for some HVMSS technologies. If the HVMSS technologies cannot be patented they are not goingto be appropriable.
The MED policy does not take into account that New Zealand (or foreign) based innovators, seekpatents in New Zealand to protect their investment in commercialising their innovations here. And atthe same time, MSI is advocating that innovators, led by the CRIs and universities, should be doingexactly that.
Understanding patent law and developing policy is a bit like peeling an onion - there are a lotof layers to it. The respective ministers who have been in charge of patent law reform since 2000 -Laila Harre, Judith Tizard and Simon Power - have recognised this and largely followed the advice ofthe MED. None had any mandate to look into innovation policies - and science and innovation policyadvisors had little incentive to look into patent policy. Any quantum tunnelling between theirrespective silos has been effectively stamped out.
The silo approach is perpetuated in the post 2011 election briefings to incoming ministers. Responsibility for patent policy rests with Craig Foss, the new minister of commerce. His briefingpaper urges him to get on with the Patents Bill. (That bill has been awaiting a second readingsince the end of March 2010.) The briefing for Stephen Joyce urges him to be the leader ofinterdepartmental promotion of innovation – but makes no mention of the role of patents ininnovation.
It is time that government recognised that a patents regime has a role to play in innovation. That role is the granting of high quality patents and promoting innovation that embraces IPmanagement as a key component.
And what can Mr Joyce do?
•He can amend the Patents Bill to get rid of the HVMSS technology exclusions
•He cancommission a review of the Patents Bill with an aim to amending it to achieve a regime that grantsquality patents but does not create chilling red tape in doing so
•He can promote IP policythat supports innovation within New Zealand and the development of excellence in the management ofIP.
Good luck minister.
~ Doug Calhoun
IP Mentor
Serial Stirrer