Patents are only inventive sometimes
According to Dr Hazel Moir from the Research School of Social Sciences at the Australian National University, most of the time innovations covered by patents are not really very inventive at all. In her book Patent Policy and Innovation Dr Moir attacks the patent system. She recommends that policy makers have a look at the quantum of new knowledge that ought to be required to make an invention worthy of protection.
Robyn Williams: Well, in recent times you may have got exercised about patenting gene sequences and got cross that someone seems to want to patent life. But on this program a while back a professor of law at the University of Melbourne pointed out that this may in fact encourage genetic research and provide the means to pay for it. Or patents, the word may make you think instead of idealists like Howard Florey or Tim Berners-Lee, who produced massive innovations: Penicillin for Florey and the World Wide Web for Berners-Lee, and promptly gave them free, gratis, to the world. No patent, just the public good. Of course others promptly moved in to claim what they could, but that’s another story.
So what might you think of patents in this patently avaricious age? Here’s Hazel Moir, who’s an adjunct professor at the Australian National University in Canberra. She’s spent nine years analysing patents and their worth as wealth stimulators and what she’s found is really surprising.
Hazel Moir: When someone tells us they have a patent, an instinctive reaction is to say 'oh, you must be clever'. Patents make us think of things like Velcro, aeroplanes, or useful new drugs like statins. Most of us—to the extent we ever think of the patent system—probably assume that to get a patent you must have made something reasonably inventive. Why else would the government grant you the right to prevent anyone else using that invention even if they had come up with it themselves?
In 2011 parliament was advised that patents are granted in Australia only for things that are a significant advance over what is known. 
If patents are granted only for things that add significantly to knowledge, then society receives the later use of that new knowledge in exchange for the reduced degree of competition. For the essence of patents is that they restrain competition. They allow the patent-holder to prevent anyone else using their own invention if they are closely similar to the patented invention. If patents are granted for things that are only trivial variations to what is known, there is no benefit to society. Indeed society loses as innocent innovative firms can be sued and prevented from using their own technology. Patents do not just stop copying. They stop the use of independently invented technology.
So whether patents are effective and efficient public policy depends critically on 'how inventive' something must be to get a patent.
Unfortunately there are many reports of extraordinarily uninventive patents. A web search for 'trivial patents' unearths some very funny examples. My personal favourites include two patents granted in the USA—one for swinging a swing sideways  and one for queuing for the toilet on an aeroplane. The toilet queuing patent is one of over 75,000 granted to IBM.  A third favourite is Australia's grant of a patent for teaching children about finance by having them work for their pocket money. 
These anecdotes suggest that the actual standard for granting a patent may be very much lower than either a 'significant advance' or 'reasonably inventive'. But while anecdotes can alert us to problems, they are not a proper basis for evidence to answer the question 'just what is the standard for grant of a patent monopoly in Australia?'
To answer this question I took the set of business method applications during the four years 2003 to 2006 and investigated all those that had been accepted in Australia by the middle of 2007. I read these 72 patents and translated the claims for the invention from legalese to English. Shortly I will share with you a short extract from one of the more comprehensible patents so that you can see what is involved.
Reading the patents allowed me to determine the central 'inventiveness' of the application and I then assessed what new knowledge was contributed.
I found two possibly new ideas. Both require only straightforward computer programming to implement, so contribute no new knowledge. Of the remainder, 41 were for simple combinations of known processes. The rest were trivial variations of know processes. In summary I found no new knowledge contributed in any of the 72 patents.
Australia's patent examiners try quite hard to stop the grant of trivial inventions, but their hands are tied by a range of very proscriptive rules developed by the courts to ensure there is never any risk of rejecting an application that might possibly be inventive. The standard of inventiveness used by our courts to determine if a patent should be granted is a 'scintilla'. This minutely small amount is well short of a significant advance in what is known.
To give you a feel for just how trivial these inventions are I will describe to you three granted Australian patents:
· One of our major banks has patented a system which packages two loan accounts and any third product. The two loan accounts have a single credit limit and there are rewards for moving money between them. The examiner rejected the application as being no different from the package already offered by another bank. The applicant argued that there were important differences between the two products. In one linking credit cards is optional but in the other it is compulsory. In one there are benefits when customers move money but in the other there are rewards. These narrow differences in wording rather than technology were accepted as meeting the patent law standard of inventive. A patent was granted.
· Expert systems are marvellous means of saving on scarce resources. They were first commercially introduced in the 1980s so it is surprising to find a patent granted for an expert system invented in July 2002. This software covers transmission of medical data from the home, assessment by an expert and sending an alert if the data are outside the normal range. When the examiner rejected it, the claims were limited to data for peritoneal dialysis. But the examiner rejected it again. The applicant then amended the claims so that once the warning was sent the server went to stand-by mode. This trivial variation ensured that this otherwise uninventive process passed inventiveness standard. It was granted a patent.
· The third example is the simple computerisation of standard processes for valuing a house. I will read you the first two claims:
Claim 1. A method for performing an asset valuation, the method including the steps of:
· posing one or more queries to a valuer which relate to the asset valuation;
· obtaining a response to the queries posed to the valuer; and
· determining, using a computational device, whether an inspection of the asset is required based on the obtained response.
Claim 2. A method as claimed in claim 1, wherein the step of posing involves posing one or more queries relating to the adequacy of information relating to the asset valuation.
And so it goes on.
In response to the examiner's objections that the claimed process was common general knowledge, the applicant's attorney effectively replied 'yes valuers do use computers but they often cut corners and fail to keep records. This invention solves those problems.' The patent was granted.
My systematic evaluation of the knowledge contributed in patent documents seems relatively unique in evaluating the actual standards in our patent system. My results—that the quantum of inventiveness required for grant of a patent in Australia is negligible—are supported by a reading of the proscriptive rules that patent examiners are required to follow. Patent law asks not 'is it inventive?' but 'is it obvious?' This is like selecting the short-list for a beauty quest by eliminating only those who are ugly. There is a vast population between ugly and beautiful; and a vast number of applications for patents which pass the low patent 'is it obvious' test but fall far short of 'a significant increase over what is known'. Trivial patents are not anecdotes. They are the norm.
But does it matter?
How can such trivial inventions hurt anyone?
Let me draw two examples from Australian court cases.
In 2001 Justice Heerey of the Federal Court determined that a patent using dynamic storage on a consumer loyalty card was valid. During the court hearing both parties agreed that dynamic storage was well-known among IT specialists. Here, however, dynamic storage was being used in a consumer loyalty card—an application for which the technique is very well suited. Indeed the defendant, Catuity, had independently invented an identical technique which it was using on buses in Western Sydney. But the judge considered that it was not obvious for a consumer loyalty expert to use this well-known technique and upheld patent validity. He found Catuity guilty of infringement. In addition to paying legal costs, and damages, Catuity had to go back to the drawing board on its own invention which it was no longer allowed to use. They had to develop other, arguably inferior, solutions. Catuity would not agree that uninventive patents cause no damage.
Similarly Doric—found guilty of infringing a patent for a lock—would not agree. Lockwood's patent overcame a defect in their earlier patented lock that had the effect of locking somebody into their own home. Lockwood's first claim was found to be not new, and therefore invalid, compared to an existing store-room lock. But in claim 13 they specified that their rim-mounted lock had a detent mechanism that moved radially. In the earlier store-room lock the detent mechanism moved axially. The High Court found the knowledge embodied in the earlier store-room lock was inadmissible evidence and held Lockwood's patent to be valid. Doric, of course, was faced with having to make changes to its product, pay damages, and pay costs for a legal dispute that lasted seven years. Doric would hardly agree that trivially different products cause no harm when they are patented.
There is no way of knowing how many other innovative Australian companies suffer harm from patents granted for trivial 'inventions'.
The Australian Patent Office currently grants over 17,000 patents a year but collects no information on how these monopoly privileges are used. 
But it is clear, both from court cases and from my empirical research, that the standard of inventiveness required for grant of a patent in Australia is a scintilla. This falls far short of the 'significant advance' standard advised to parliament in 2011.
Implementing the 'significant advance' standard would eliminate the costs and uncertainty imposed on innovative firms by trivial patents. It would also eliminate a significant amount of rent-seeking behaviour. A higher standard would still provide market exclusivity for genuinely inventive inventions such as break-through drugs. But minor variations on these would be less likely to be granted patents.
It has been suggested that at least 60% of patents granted in the USA are very trivial. It is widely agreed that the inventiveness standard is lower in Australia than in the USA. This suggests that at least 10,000 of the 17,000 patents granted here each year are trivial—they appear to be completely undeserved. They offer no new knowledge so provide no benefit to society. But as the examples of Catuity and Doric show, they create real risks for other innovative businesses.
Robyn Williams: So, what’s it all for? More power for the paper-pushers or real encouragement for the innovators and the market? That was Hazel Moir with some original research done as an adjunct professor at the Australian National University in Canberra.
Next week: Robin Robertson with a short history of the mobile phone.
 Explanatory Memorandum to the Intellectual Property Laws Amendment (Raising the Bar) Bill 2011, p.40. http://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22legislation%2Fems%2Fs837_ems_561ef790-9811-43d0-b14f-04c924723c94%22
 US patent number 6,368,227 filed on 17 November 2000 and granted on 9 April 2002. Following much public laughter – see for example Jeff Hecht, "Boy takes a swing at US patents", New Scientist, 17 April 2002 – the USPTO re-examined and revoked the patent.
 Search for granted patents on USPTO website (http://appft1.uspto.gov/netahtml/PTO/search-bool.html and enter International Business Machines in the assignee name field. On 19 April 2013 this search came up 75,325 granted patents. IBM has a further 50,126 applications that were either never granted or are still waiting examination.
 Australian patent 2003203582, filed 8 April 2003, granted 3 December 2003.
 Australian patent 2005204292, filed 26 August 2005, granted 9 August 2007.
 Australian patent 2003281184; filed 14 July 2003, granted 25 October 2007.
 Australian patent 2005203023; filed 12 July 2005, granted 1 June 2006.
 Welcome Real-Time SA v. Catuity Inc,  FCA 445 (17 May 2001).
 Lockwood v. Doric  HCA 21.
 Table 1, IP Australia, Australian Intellectual Property Report 2013 (http://www.ipaustralia.gov.au/about-us/corporate/reports/?doc=139839&view=Detail).
 Quillen, for example, considers the inventiveness standard in place before the establishment of the Court of Appeals for the Federal Circuit was relatively good. At that time the average proportion of issued patents found invalid by the courts was 65.7% (C.D. Quillen Jr, “Innovation and the U.S. patent system”(2006) 1 Virginia Law and Business Review, p 211).
 IP Australia, Getting the Balance Right: Toward a Stronger and More Efficient IP Rights System, Consultation Paper (2009), pp.9–13.
- Dr Hazel Moir
- Adjunct Associate Professor
Research School of Social Sciences
College of Arts & Social Sciences
The Australian National University
- Patent Policy and Innovation
- Dr Hazel Moir
- Edward Elgar (available as e-book from Google Books)
- Robyn Williams
- Brigitte Seega