Is Inventive Step In New Zealand “Udderly” Ridiculous?...And Will It Improve Under The New Legislation?

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Under the present regime in New Zealand, the objection that a patent application lacks an inventive step is not available during prosecution and the burden of proof required to show a lack of inventive step in an opposition proceeding is significantly higher than that required to invalidate a patent post-grant.

The recent opposition decision of Merial Ltd v Zoetis LLC [2013] NZIPOPAT 21 demonstrates the difficulties associated with establishing a lack of inventive step in relation to a patent application directed to a significant area of commercial interest – the treatment of mastitis in dairy cattle.

The New Zealand Patents Act 2013 (‘the new Act’) comes into effect in September 2014 (see our previous article: Introducing…New Zealand’s Patents Act 2013). The new Act will introduce significant changes to the application of the ground of inventive step and it is expected this will result in more certainty around the validity of granted patents on the register.

The burden of proof in opposition decisions

Section 21(1)(e) of the New Zealand Patents Act 1953 provides that a patent application may be opposed on the ground that the invention so far as claimed in any claim of the complete specification, is obvious and clearly does not involve any inventive step having regard to matter published or what was used in New Zealand before the priority date. Section 41(1)(f) provides that a patent may be revoked by a Court if the invention is obvious and does not involve an inventive step in light of what was known or used in New Zealand at the priority date.

The use of the word “clearly” has been read to mean that the burden of proof is substantially higher in order to establish a lack of inventive step in an opposition than for a revocation before a Court.

The opposition decision

The opposed application, NZ 541269, relates to the combination of an antibacterial formulation (in a vegetable oil formulation) with a gel-based teat sealant. Teat sealants are used in cows to help reduce mastitis resulting from bacterial infections during the dry period and prior to calving.  It is estimated that the mastitis costs the New Zealand dairy industry $280 million every year in lost production.1  The potential market for effective treatments is therefore large and the field of teat sealants has become a hotly contested area.  Merial Ltd and Zoetis LLC are just two of the many significant players in this space and it is anticipated that there will be many contested patent proceedings in relation to this field in the future.

Merial Ltd’s argument that the claims lacked an inventive step relied on the assertion that it was obvious at the priority date to combine an antibiotic in a vegetable oil formulation with a teat sealant.  The hearing officer found that this assertion was not made out and favoured the applicant’s view that antibiotics in an aqueous formulation would be preferred.  Interestingly, the hearing officer indicated that the assertion may have been made out if the opponent had provided experimental evidence that compared aqueous and oil-based formulations – it is not clear whether that evidence should have been part of the prior art or whether the opponent should have conducted the experiments themselves.  If the former, than surely novelty would have been a more appropriate ground, if the latter, than it seems unduly burdensome for the opponent to show that the claimed formulations are better than an alternative when the applicant itself prima facie holds that position.

In any case the decision clearly demonstrates the difficulties associated with proving a lack of inventive step at the opposition level in New Zealand.

Inventive Step under the New Zealand Patents Act 2013

Under the new Act, inventive step will now be considered during examination. Currently, obviousness is only considered during revocation or post-acceptance opposition proceedings. As a consequence, it could be argued that the standard of applications proceeding to grant in New Zealand is lower than in other jurisdictions and there is undue burden on third parties to seek invalidation of these lower quality patents in order to establish a freedom-to-operate position.

As discussed above, the burden of proof under the current provisions require the opponent to demonstrate that alleged invention  “clearly does not involve an inventive step” having regard to the prior art base. The requirement to “clearly” demonstrate obviousness coupled with the narrow prior art base against which obviousness is assessed, means that the number of successful oppositions before the New Zealand Patent Office is low, as demonstrated in the above-discussed opposition by Merial Ltd to Zoetis LLC’s’ application.

Under the new Act, not only will examiners consider inventive step but the prior art base has also been expanded. Accordingly, examiners will be required to determine whether a claim is obvious in light of “all matter (whether a product, a process, information about a product or process or anything else) that has at any time before the priority date of that claim been made available to the public (whether in New Zealand or elsewhere) by written or oral description or use, or any other way”.

The wording of the relevant sections of the new Act have been derived from the Patents Act 1977 (UK). Accordingly, it is likely that examiner’s will refer to UK case law in support of any inventive step objections raised during prosecution of applications or in assessing inventive step during opposition proceedings.

There are also changes to the burden of proof required to invalidate a patent during post-acceptance opposition proceedings. The opponent need now only satisfy the Commissioner that a claim lacks an inventive step on the balance of probabilities. Furthermore, while the burden of proof will be lowered at the opposition stage, it will be increased at examination (from “benefit of the doubt” to “balance of probabilities.”). With fewer “bad” patent applications being accepted and a greater number of successful oppositions, the changes to New Zealand’s patent law should see an overall increase in the standard of granted patents.

The new Act will apply to applications filed after 13 September 2014 (with the exception of divisional applications which are back-dated to before this date).

Going forward

The outcome of the Merial and Zoetis case is interesting for a number of reasons. Firstly, there are a number of players in the area of veterinary compositions for prevention of mastitis and many of these are attempting to get patent protection for their inventions. It is likely that we will start to see more patent cases in this area in both New Zealand and Australia. Secondly, the case highlights the current difficulties faced by potential opponents wishing to prevent grant of patents in New Zealand. It is likely that with the changes to New Zealand’s patent law, coming into force in September 2014, that fewer “bad” patent applications will proceed to grant and third parties will have a greater chance of success in opposing the grant of patents.

1. Ben Chapman-Smith (20 June 2012) Dairy industry ups the war against mastitis, The New Zealand Herald.
2. New Zealand Patents Act 2013, sub-section 8(1)