Fisher& Paykel Healthcare Limited and the Patents System

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1 2 July 2009 Fisher&Paykel HEALT HCA RE Fisher & Paykel Healthcare Limited 15 Maurice Paykel Place, East Tamaki P O Box , Panmure Auckland, New Zealand Telephone: Facsimile: Website: Clerk of The Committee Commerce Committee Room Bowen House Parliament Building WELLINGTON BY FASTPOST Dear Sir COMMERCE SELECT COMMITTEE PATENTS BILL Submissions by Fisher & Paykel Healthcare Limited This submission is made on behalf of Fisher & Paykel Healthcare Limited (FPH). I am the Intellectual Property Manager of FPH. My contact details are: Jon Harwood IP Manager Fisher & Paykel Healthcare Limited PO Box Panmure Auckland 1741 Tel: FPH would like to appear at the committee hearings. We will be represented by Logan O'Callahan from our Patent Attorneys A J Park. Summary We support the aims of the bill to tighten up the granting of patents in New Zealand. We believe these aims would be further advanced by: Keeping pre grant opposition that is available in the present law; Introducing time limits on filing divisional applications; Limiting the scope for amendments of patent applications, publication. particularly after The background, reasons and specific changes requested are detailed in the rest of the submission. / IP Ltr to Commerce Committee FPH Submissions on Patents Bill

2 Fisher& Paykel Healthcare Limited and the Patents System 1. FPH is a New Zealand headquartered manufacturer of healthcare products, including respiratory humidifiers, breathing circuits and CPAP equipment. FPH has manufacturing plants in New Zealand and Mexico. FPH exports products around the world and export sales dwarf sales in New Zealand. FPH began as a business unit within the Fisher & Paykel group to develop and sell a respiratory humidification invention originally developed by DSIR scientists. FPH is now the leading global supplier of respiratory humidification equipment for hospital care, and also has substantial market share in the global market for pressure support systems for treating sleep apnea. FPH's main competitors are located in the USA, Australia, France and Germany. FPH's competitors include: Respironics, ResMed, Puritan Benett and Devilbiss. FPH's business strategy is to make internationally marketable products in New Zealand using innovative, proprietary technology. FPH competes successfully against equally ambitious foreign rivals by being innovative. It is only through innovation and the allocation of capital and resources to product development and its associated patent portfolio that FPH is able to conduct its business from New Zealand and survive on the international market. FPH strongly supports and is a large user of the international patent system. It relies on the patent system to protect its innovation. FPH primarily needs patents in the jurisdictions of its competitors and in the world's largest markets for healthcare. FPH therefore applies for and obtains patents in many countries other than New Zealand. FPH is not a substantial direct user of the New Zealand patent system. None of its competitors are based here or would make products specifically for this market. However, it has a significant and legitimate interest in New Zealand patents legislation as it is directly affected by the quality of patents granted to its competitors. Background to Comments on Patents Bill The Patents Act 1953 has allowed or had the potential to allow our foreign competitors to obtain patents in New Zealand which they might not be able to obtain in their own or other countries. FPH believes patents have been too easy to obtain in New Zealand and, further, those patents may not be challenged in the way that our own patents in other countries may be challenged. 8. FPH also wishes to see fewer patents granted for trivial inventions. Comments on Patents Bill 9. FPH welcomes and supports the following provisions in the Bill: (a) (b) Clauses 3(a) and (b) as setting the objective of ensuring most granted patents should be valid on an absolute basis; Clause 61(1)(b) (in conjunction with clause 13) requiring examiners to examine for inventive step;

3 3 (c) (d) The adoption of a "balance of probabilities" test in assessing patentability criteria in place of giving applicants the benefit of the doubt; The adoption through clauses 6 and 8 of an absolute novelty standard in place of the long outdated requirement of local novelty. Pre Grant Opposition 10. FPH believes that the stated purposes of the Bill to provide "procedures that allow the validity of a patent to be tested" (clause 3(a)(ii)) and "provide greater certainty for patent owners and the users of patented inventions that patents will be valid after they have been granted" cannot be met so long as there is no provision for full pre grant opposition proceedings. 11. While fewer patents of dubious validity hopefully are now likely to survive examination some will emerge which are not patentable inventions (clause 13) or which have complete specifications which do not meet all the requirements (clause 37). 12. FPH believes that pre grant opposition proceedings should be retained. It would prefer never to have to incur the expense and employee time in such proceedings. However, it believes third parties with valid concerns should have the right to be heard before IPONZ grants patents. 13. FPH has not launched any oppositions at IPONZ. This partly reflects the level of patent filing in New Zealand by its competitors to date. However, at least one competitor is now filing in large volumes in New Zealand. The New Zealand sales market is not significant, so the purpose of these filings is to cover FPH's base of manufacture. FPH would like to retain this valuable right to oppose grant to reduce the chance that its manufacturing for global export is not disrupted by assertion of dubious patents. 14. All grounds for post grant revocation (clause 106) should be available for third party involvement pre grant. It is better that patent applications can be challenged before a patent is granted rather than merely provide an opportunity for revocations after grant. This is even more the case now that there will be some presumption of validity in respect of granted patents. 15. FPH is aware that some countries no longer offer pre grant opposition proceedings although, however Australia still has pre grant opposition. FPH urges that such proceedings be retained in New Zealand. FPH has experience with post grant opposition procedure in other countries and is not convinced that post grant opponents' arguments receive equal weight to those of patentees by a patent office which has already decided an invention is patentable and seen fit to grant a patent. 16. Under the Bill post grant revocation proceedings are available in either the Court or before the Commissioner. The latter avenue is not available under the 1953 Act. Furthermore because infringement proceedings may have been commenced the only forum for challenging a dubious patent will be the Court. There is therefore a cost advantage in allowing pre grant opposition. 17. FPH notes the provisions for third party assertions and the procedure for requesting re examination available to third parties. These do not fill the gap created by the Bill's removal of the currently available pre grant opposition. The grounds for re

4 4 examination are limited to novelty and inventive step and a prior art base which is limited to prior publications. Striking a Balance between Fair Coverage for the Patent Owner and Certainty for the Public 18. Many of the products in the industries in which FPH competes have rapid uptake. Effective competition in these industries requires rapid response to changes in consumer demand. 19. FPH believes the patent system should act as an encouragement to innovation without becoming a drag on competition and efficient business operation. FPH is particularly concerned with practices which draw out uncertainty around the scope of a patent or potential patent. These will be somewhat reduced by early publication at 18 months after priority. However, the benefit of the early publication is undermined if the applicant can subsequently claim material that was not clearly indicated as the invention they are patenting in the published application. This is further undermined if the practice of divisional applications continues to allow indefinite delays for creating new claims. 20. As an illustration of the present environment, a divisional application must be filed before acceptance of the parent application, but there is no limit on nesting divisional applications. So a subsequent, grandchild, divisional application can be filed, and, in turn, a subsequent great grandchild divisional application, and so on. By this process, pending patent applications can be maintained right through the life of the patent family from the filing date to the date of expiry. 21. While a pending patent application persists, there is no prohibition on amendment to expand the scope of claims, and only vague limits on the claims that can be drawn from the patent application and therefore no effective notice to the public. The only controlling influence on the claims that could be obtained is a requirement that the claims be fairly based on the disclosure, and be novel and inventive. In a highly competitive industry, a competitor who is aware of the patent has only two options: (a) Proceed on the basis that the present claims fairly represent what the patent owner will try to protect. In this case, if the applicant draws up new claims that target your product, you may be forced to withdraw your product and lose your invested capital and time. At best you may be put to substantial additional expense challenging validity of the patent application or patent. (b) Assess all possible claims that the applicant could draft, whether indicated as being the protected invention or not. This involves a meticulous search and analysis of the prior art and detailed analysis of the entire disclosure of the patent. This is typically more expensive than preparing and filing a patent application. Following this review, the only safe course is to avoid all possible claims that could be drawn from the patent application, even though in practice, none of those hypothetical claims may ever be filed. 22. This unfairly transfers the cost burden, uncertainty and the business risk to the public. Yet it is the applicant that benefits directly from the ability to patent their invention and the applicant that is in the best position to understand their invention and fairly draw the scope of their patent application from the beginning.

5 5 23. In specific terms, FPH requests a limit on the time for filing divisional applications and a stricter rule for establishing a priority date and assessing allowability of an amendment. 24. FPH suggests that the balance struck in the European patent system (EPC) is fairer than the balance achieved in New Zealand under the Patents Act 1953 or under the Patents Bill A divisional application can only be filed under the EPC for "subject matter which does not extend beyond the content of the earlier application as filed (Article 76(1)). Under this test, the claimed combination must be unambiguously derivable from the original disclosure. In practice, a divisional application will only have priority where the claim is directly matched by a corresponding collection of integers in the text of the prior document. The prior document must have recognized that same collection of integers as being an invention. The absence of an integer, or the inclusion of an integer that was not disclosed in the particular combination, is regarded as added subject matter. 26. The "no added matter" rule outlined above applies equally to all amendments (Article 123(2)). Amendment is now allowed that would add subject matter. This limits the ability to broaden claims of a pending patent application or claim material that is not unambiguously set out as being an invention. 27. As a patent applicant, FPH has frequently encountered and had to deal with the consequences of these rules. At times, this results in obtaining protection that is less than we would desire. However, we recognize that it makes us consider the nature and scope of the invention more clearly at the outset of the patenting process. We also export product to Europe and we recognize the benefit of these limitations when assessing our freedom to operate in that market. 28. Europe has recently signalled that they intend to clamp down on use of divisional applications in the ways discussed above. So far, they have introduced more stringent limitation on the timing of filing divisional applications (amended rule 36 EPC). Up until now, the European system has allowed for divisional applications to be filed, chaining one from the other. In future divisional applications must all be filed within two years of the first examination report on the ultimate parent application. The United Kingdom has a different rule with similar effect divisional applications must be in order for grant 4 years and 6 months after the earliest filing date. 29. In contrast, the system in USA is more flexible for the patent applicant but imposes a much greater burden and uncertainty on the competitors. In practice, the US system allows a chain or cascade of divisional applications, or continuation applications. Presently, there is no limitation on the number of applications in the cascade and consequently pending applications can be maintained through the life of the patent family. 30. In USA, the limitation on subject matter is essentially governed by their written description requirement (35 USC 112). In practice, a patent applicant can draw a claim to any novel and non obvious combination of features. These features can be collectively disclosed in their patent application, even if the combination was not foreshadowed or recognized as an invention. 31. This leads to exactly the behaviour described above (paragraphs 11 and 12), where applicants modify the breadth of their protection according to developments in the market after they have filed their application. They eventually pursue claims that

6 6 barely resemble the inventions identified in their original patent application. It has been said in USA that the inventors should not be deprived of their entitlement (patents are part of their constitution) simply because they did not understand the scope of what they had invented. However, it seems ludicrous to suggest that other people in the market should have to assess the inventor's contribution and to guess what path the inventor might take, when this burden could be so much more easily discharged by the inventor, who will also be the party receiving the benefit of the patent FPH is a user of the US patent system and uses these opportunities in situations where they can be usefully applied. On the other hand, it is also faced with the additional burdens of assessing these opportunities, and dealing with the aftermath, when it is assessing its freedom to operate in that market. Having been involved extensively with the systems both in Europe and USA, FPH has a firm belief that the European system, even without the new limitations on divisionals struck a better balance between the right of the patentee to adequately protect their invention and the right of competitors to get on with business with an appropriate level of certainty. FPH sees the general global trend in this area as being to narrow the opportunity for gaming the system, with Europe and USA both proposing substantial limitations on divisional and continuation filing. FPH would like New Zealand to adopt a forward thinking position when substantially revising our patents legislation. Experience suggests that otherwise we are unlikely to take the necessary steps for decades to come. Suggested Amendments 35. Amend title of Subpart 8 to "Amendment of Specifications". 36. Amend Section 79 "General rules concerning amendments of specifications after acceptance" by changing references to "acceptance" to "open for public inspection": In title of 79 at ine 2, change "after acceptance" to "of applications open to public inspection". In 79(1) at ine 1, replace "the acceptance of a complete specification, an amendment to that specification" with "After an application is open to public inspection, amendment of the complete specification". In 79(2) delete "the date of the publication of the accepted complete specification". This passage is of no consequence. In 80 replace "the accepted' with "an accepted' this will limit publication of amendments to cases that have been accepted. 37. Include new Section 78A include the limitation of Article 123(2) of EPC: "78A General rule concerning amendments of specifications. A patent application or patent may not be amended in such a way that it contains subject matter which extends beyond the content of the application as filed."

7 7 38. Amend Clause 33(1): Insert at line 3 between "and" and "in": "within 3 years at 6 months of the filing date of the application". Note: The filing date of a divisional application is the filing date of the parent, so this will limit divisional applications to the filing date of the ultimate parent. Insert at last line after "original application": "only in respect of subject matter which does not extend beyond the content of the earlier filed application as filed" Yours sincerely Jon Harwood Intellectual Property Manager Fisher & Paykel Healthcare Limited