Patents (Advancement Patents) Amendment Bill

Thank you, Madam Deputy Speaker. It is a pleasure to be talking on this Patents (Advancement Patents) Amendment Bill at its first reading. I’ve got to say that it’s a very good bill, I believe—a very good bill, proposed by a hard-working spokesperson, someone who has thought about this issue deeply. In compiling this bill, I know that she’s carefully looked at international precedence for such a scheme to be introduced. I’m ably informed that there are many such schemes in place around the world. I did understand Mr Iain Lees-Galloway, the previous speaker, and he referred to the issue of why we should be doing this when it looks like Australia’s repealing it. Of course, he gave his speech some time ago. What we now know is that Australia’s doing a U-turn on that. It is doing a U-turn, and they’re going to retain this scheme that the good Dr Parmar has proposed in this bill.

💬 Hon Member: What are you talking about?

Yes, it is. I’m just looking across to my opposition. They need to do a bit more research. They’re dealing with old information. They need to get more current. Of course, what this bill does—she has picked up the best parts of some of the international precedence and brought it forward into this bill. I think that’s a really good thing, because creating a dynamic economy—which New Zealand has to some extent, and it has the potential to be even more so—is a really important facet if we’re going to grow the productivity of New Zealand over time.

For those who have been through the traditional patent system—and I have been involved too to some extent—the time and cost of getting intellectual property properly registered and the process for authenticating the design or the copyright or the intellectual property (IP) is a significant cost. So this results in a very expensive cost and, in many instances, the—Madam Deputy Speaker, I’m just looking at the time.

💬 DEPUTY SPEAKER: It’s all right. I’ve got it here.

Oh, you have? I don’t know how long I’ve spoken for. OK. So the cost of the traditional system is very significant not only in time but actually the financial cost.

Of course, we want New Zealand companies to create IP. We want our universities to be creating IP and be doing this. What this does is create a good second level for the advancement of what can be termed as sort of the next level of IP. It relates only to New Zealand. It means that IP can be captured, can be used by the inventor, and can mean that we can protect that IP in New Zealand. It’s a different case if you want to take it overseas.

I’ve got to say that I think this is an excellent bill. I’ve got to say that I highly recommend it. I believe it is worthy of the support of the Government. I’m looking across to the Minister over there. I hope she’s well informed. I hope she takes the position of supporting this excellent member’s bill.

Can I just acknowledge, first of all, as we do on members’ day, the member for having the bill pulled from the ballot. This is obviously the second of her bills that is on the Order Paper today. Unfortunately, she was unlucky with the result of the first one, and I’m sorry to say she’s going to be unlucky with the result of this one too.

Can I just spend some time giving a little bit of context to this debate in the five minutes allotted to me. The last time the patent legislation was amended in this House was 2013. If my memory serves me correctly, that was when the Opposition was the Government. If they thought it was such a great idea to introduce second-tier patents into the New Zealand realm of intellectual property (IP), then maybe they should’ve done it then. I think there was probably a reason for them not doing it at that stage: because of the fact that, across the Tasman and in other like nations, second-tier patent systems have proved to be completely and utterly ineffective. So while giving the member credit for the ambition of trying to get this to the point of it becoming law, first of all, it won’t, and it won’t probably because of the same reasons that her Government back in 2013 saw fit not to introduce a second-tier patent system.

What we do know about the previous Government in terms of its ambition for innovation was that it was quite happy for the levels of R & D spending here in New Zealand to languish at about 1.3 percent of GDP, while the average for other like nations in the OECD sat at 2.4 percent. But what I can say to that point in terms of what question I would expect to hear from the Opposition—“What are you going to do about it?”—is that I’m very happy to say that my colleague sitting to my left, the Hon Megan Woods, has taken action to increase that amount and saw fit to have this Government introduce $1 billion worth of R & D tax credits to take the level of investment higher than the previous Government, to help grow this economy to ensure that the businesses that we do want to make sure are internationally competitive will get the support to do that. I actually think that’s a concrete measure to make sure that our businesses that want to be innovative and more internationally competitive do get the assistance that they deserve.

There have been a number of companies who have spoken out, actually, against this bill since it was pulled from the ballot. One I think of most note is one of our rather large exporters, Fisher & Paykel, who said not only should we not do this; if it is introduced, it will make things harder for them as one of our large exporters, make them less competitive, and hand competitive advantage to their overseas-based competitors. So if the Opposition wants to hand an advantage to our overseas-based competitors against one of our largest exporters in New Zealand, Fisher & Paykel, then, by all means, put pieces of legislation like this in the biscuit tin, because it is going to prove that in a very short amount of time since they’ve been removed from office, they’ve become out of touch from the real needs of those companies that want to help grow the economy. And this piece of legislation will not help do that.

So I just want to reiterate the good work that this Government is doing, taking a paltry level of R & D spending from 1.3 percent to closer to the average in the OECD of 2.4 percent. If you look at the figures, I think it was—and I want to get this right, and I’m going to make sure I check my notes. In 2012, New Zealand ranked as the 13th most innovative country in the world. Now, in 2017—based on the 2017 figures—we slipped to 22nd. So the previous Government, who are now the Opposition, really need to start putting their money where their mouth is if they’re going to start introducing pieces of legislation that want to increase the levels of innovation in New Zealand, because their track record and the evidence of their track record and their ranking in the innovation stakes speak to a different story than the one they spouted for nine very long years.

💬 DEPUTY SPEAKER: Just before I call the next speaker, I just will confirm that the times have gone out. However, I have them here—5 minute speech; I’ll give you a bell at one minute.

Oh, thank you so much, Madam Deputy Speaker, for this opportunity to speak on this Patents (Advancement Patents) Amendment Bill. I’d just like to take this first opportunity to congratulate the member Parmjeet Parmar. It’s an unusual circumstance to have two member’s bills under one member’s name being debated on the same evening. So congratulations on that, although if I’d spoken after some of the previous speakers in the last debate, I would not have had anything nice to say about their contributions or the legislation—and that was just the interjections.

On this, unfortunately, Ms Parmar, you have drawn from National’s box of redundant pieces of legislation to take up the House’s time a piece of legislation that is past its use-by date and that, unfortunately, does speak—as previously noted—to an Opposition that is absolutely out of touch. I think the best way to summarise it is to put it in these words: this is an apparent solution looking for a problem.

Now, let me be very clear, and let me use the words of New Zealand business, and let there be no doubt in the House tonight that New Zealand business did not ask for this, and they most certainly do not want this legislation to be passed in the House this evening. I am so glad that we have a Government with a bit of common sense—that might be a nice way to put it.

What we see here is the introduction of a two-tier system. Across the world, we have seen the two-tier system fail almost like a stack of dominoes. Two bigger modern economies come to mind: the Netherlands and—despite the words of Mr Bayly, which don’t make any sense whatsoever—Australia. What we have seen is the introduction of these two-tier systems, and what that has meant—and I’ll quote here—is “The low [innovation] threshold has proven more harmful than helpful, including (perversely) for [small to medium enterprise]. It has encouraged a multitude of low value patents … and created uncertainty for other innovators who are unsure whether they are infringing on another party’s patent.” The issue then is that our small to medium sized enterprises are wondering—and Fisher & Paykel was a great example used by the Minister Kris Faafoi—about their legal position when it comes to innovative development of their businesses.

What we are seeing around the world, and, funnily enough, here in New Zealand, you’ll be surprised to know, and in Australia according to the numbers I’m quoting—in Australia, the predominance of these tier-two patents, funnily enough, belong to large multinational corporates, who are using that low threshold to rig the system, as it were. And what’s the language here? In my words—I can’t quite find a quote—they’re perversely loading the system—

💬 Hon Kris Faafoi: They’re gaming it.

They’re gaming it so that small to medium sized enterprises are unable to innovate—

💬 Dr Parmjeet Parmar: Read my bill.

💬 Hon Kris Faafoi: That’s why we voted against it.

—and develop good business, which is supposedly the claim of the Opposition.

Ha, ha! It is quite distracting.

💬 Dr Parmjeet Parmar: Read my bill.

I have read your bill several times and taken advice on it from New Zealand businesses, who don’t like it.

Actually, it’s probably a good opportunity to end there. I think I heard the bell ring over the furore from the other side. Unfortunately, this is a bill out of time and out of place. New Zealand First absolutely cannot and will not support it, and I thank the Deputy Speaker for the time this evening. Thank you.

Thank you, Madam Deputy Speaker. Well, where to begin after that! Actually, it’s a pleasure to rise in support of my colleague Ms Parmar’s bill. We hear from the Government side—they always think they’ve got the answer. They’ve got a lot of talk, but they don’t often have the actual answer. Every time they think they’re going to do something, it’s the big thing that’s going to change the world. They talk about tax credits—and I’m going to come back to that—as if it’s going to change the world and suddenly make New Zealand the average or above in the OECD.

But, in actual fact, what it takes is what we, when we were in Government, showed over nine years—you make small pragmatic and practical changes that help businesses become more competitive, particularly smaller businesses, which are the predominant businesses in New Zealand. You help them become more competitive, you protect their intellectual property, and you make them more successful, and you make New Zealand more successful. Ms Parmar’s bill does not save the world. It is not intended to do that. It is intended to provide a measure so that the majority of businesses—the small businesses in New Zealand—can invest in their own development and can protect the intellectual property they create. Instead, the members on the Government side start talking about R & D tax credits. I’m mindful of the words that were attributed—perhaps erroneously—to Albert Einstein. He said, or he purportedly said, that “The definition of insanity is doing the same thing over again and expecting a different result”.

Well, the last Labour Government instituted R & D tax credits with such a weak definition of what research and development was that businesses the length and breadth of New Zealand were able to game that system. The Minister there introduced it, and businesses were able to game that system. I know this because I was selling in the IT industry at the time, and my customers told me how they were gaming the system to claim their credits. The Government now reintroduces the same system and tries to tell New Zealand it’s suddenly going to work. Well, that is absolute codswallop. It’s absolute tripe. What we have, instead, is a member of the Opposition introducing a member’s bill that is intended not to save the world in one fell swoop but to provide a pragmatic and practical step that smaller businesses in New Zealand will be in a position where, using a second-tier patent system, they will, one, be able to afford to seek protection of their intellectual property (IP) and, two, they will have the means to do so.

When I was first given the privilege by Simon Bridges, as the new Leader of the Opposition, to have the shadow portfolio of commerce and consumer affairs, the very first people I sought to engage with were intellectual property lawyers, and one of the first firms I met with was the largest genuinely New Zealand - owned and controlled intellectual property law firm in New Zealand, headquartered in Auckland. I met with him. He had much to say about what we had done when we were in Government, and he took the time to educate me on how we could have done more and better. But one point he absolutely made clear: he was aware of Ms Parmar’s bill.

He was aware of the bill going into the ballot, and his comments to me were, “It won’t solve all of our problems, but it is a good step.” One thing he said New Zealand businesses don’t do well is that they do not protect the intellectual property they create. They don’t do it, because, one, it’s enormously expensive to seek international patents under the system as it stands and, two, they’ve just not been used to an environment where that is part of what a business does.

So the case studies he was speaking to me about were things that he had witnessed. He said to me, “Brett, if you go to Fieldays and you see all those people walking around with cameras, they are not tourists looking at your Fieldays in Hamilton and thinking, ‘Isn’t this great?’. They’re agents on behalf of overseas companies taking photographs of the stuff New Zealanders have created, because they’re really certain that those New Zealanders won’t have protected the IP. They can copy it and just get away with it.”

Well, here we go. We’ve got a member with a member’s bill, who’s giving a pragmatic step to get those small Kiwi businesses a chance to protect the stuff they create. They are more likely to use this. Those guys think it’s wrong. Well, 59 countries around the world think it’s right. You might think that 20-odd academics are wrong on the waka-jumping bill. Are you really saying that 59 countries around the world have got this wrong? Maybe you should rethink, Mr Faafoi, and get your hands out of your pockets.

Kia ora, Madam Deputy Speaker. Ngā mihi nui ki a koutou. Kia ora. Look, if you needed a reason to vote against the legislation using simple common sense and logic, you would just simply listen to that member—

💬 DEPUTY SPEAKER: Actually, I wouldn’t do that. Don’t bring me into the debate.

—to the member Brett Hudson—because he raised this conspiracy theory that people are going around Fieldays taking photographs. It absolutely undermines his argument, because the whole point of this legislation is doing something which, back in the 1970s, used to be called petty patents. It’s the idea of a lower-level patent to make it easier.

Essentially, what this member’s bill does is reduce it from the current “inventive” level down to the “advancement” level. So those people supposedly out there taking photographs, trying to steal people’s intellectual property—it’s exponentially easier to steal that intellectual property under this member’s bill, because, previously, there used to be an “inventive” step; now there’s simply an “advancement” step. All you have to do is take a photograph, copy it, and do a little tiny change to it, so it fundamentally erodes their argument.

I heard the previous National speaker, Andrew Bayly, say the problem with patents is the cost and the problem with patents is the time it takes. That is the whole point of patents. You’ve got to do something novel. You’ve got to do something inventive. And you’ve got to be able to put your money where your mouth is to protect it. What that party wants to do is weaken it so far that you’d make an absolute mockery of the patent system, because the Opposition—I keep saying “the Government”; the Opposition—say they want to support small business, but, in fact, this legislation is bad for New Zealand business, because what we know, and what we’ve heard from New Zealand businesses, is that this is simply going to encourage patent trolls. It’s simply going to encourage people going to court instead of going to the lab and inventing new products.

We’ve heard from New Zealand businesses that the biggest problem they face is from patent trolls, and this proposal opens up the door to patent trolls to come and mess around with our intellectual property regime in New Zealand. Their arguments are further eroded by the simple fact that they had the chance to fundamentally review our 1950s patent legislation and they didn’t do it. It was amended only five years ago, and they didn’t do it.

So, look, I’d like to acknowledge the member Parmjeet Parmar. I believe her intentions are good. I think everyone in this House wants to see New Zealand become a more innovative economy. It’s been called the “New Zealand Paradox” in the economic literature: why, ostensibly, despite our economic settings, we’ve got such low productivity and earnings. And the problem, of course, is that we’re in the bottom half of the developed world for our spending as a percentage of GDP on R & D. We patent four times less than equivalent overseas countries.

And, I guess, the last reason that I want to say is that the Opposition’s arguments are the reasons why we’re voting against it. They said, “Oh, there’s dozens of countries voting for this.” They didn’t name them, though, did they? The countries doing it are all mostly developing economies, in a fundamentally different innovation and intellectual property regime from us. The US doesn’t do it. The UK doesn’t do it. The European Union doesn’t do it. I mean, Belgium and the Netherlands are moving away from it. Australia is moving away from it. I mean, if I can quote the Australian Productivity Commission, they said categorically that the second-tier patent experiment has failed. The low innovative threshold has proven more harmful than helpful, including, perversely, for small and medium enterprises. It’s encouraged a multitude of low-value patents and has created uncertainty for other innovators, who, I’m sure, would be infringing for another party’s patent.

So what we’ve heard is that it didn’t work, it was a failure, it was bad for businesses, and it provided uncertainty. Those aren’t the things we’re going to do to provide a more innovative, smarter New Zealand. So, look, I’m proud to be opposing this legislation. [Interruption] I support having a review—

💬 DEPUTY SPEAKER: Order! Come on, guys.

—of our intellectual property regime. Look, the Government’s got a fundamental review of our copyright legislation. This is how we can really promote those creative industries going forward. I know the member’s got the right intentions with this legislation. I think we should review the 2013 patent review to make sure it is working, but, look, let’s not do, as one commentator said, “an absolutely horror show of legislation.” That’s why we’re voting against it tonight.

Can I just say to the member who has been interjecting quite often: she does get the last say of this debate.

💬 Hon Kris Faafoi: No, we do!

Thank you. That’s not particularly helpful.

Thank you, Madam Deputy Speaker. It’s always a pleasure to present my views, particularly on this member’s bill. Labour is opposing the bill because we believe the current patent law is adequate and already offers simple and accessible protection for intellectual property. And I wonder if this is really a priority for National. I’m unsure why they didn’t include the two-tier system when they introduced the Patents Act 2013. Perhaps it’s because a system like the one that was proposed was contrary to the advice of the officials from the Ministry of Business, Innovation and Employment at the time: that such a system would “potentially impose significant costs on New Zealand for little compensating benefit.” So it appears that the current law is working well, and, on that basis, we’re reluctant to make changes when the demand for the two-tier system seems to be non-existent.

We believe that the patent law must continue to promote innovation and economic growth while providing an appropriate balance between the interests of inventors and patent owners, and the interests of society as a whole. We also don’t believe that the bill achieves that, and in fact, it is likely to do the exact opposite. So I applaud the sentiment, but the mechanism is not well considered and actually has a range of unintended consequences which, therefore, make it fundamentally flawed.

It’s not hard to agree with making protection of intellectual property more accessible, quicker, and more cost-effective, but it’s even harder to ignore the disaster of the Australian model, which, I believe, the member’s bill is based on. Funnily enough, the Australians are now in the process of abolishing their version, because it appears to have had no benefit, particularly for the intended target group, and that was small to medium sized enterprises (SMEs) and entrepreneurs. Instead, it’s not only added costs but created confusion.

So the member’s promotion of her bill is, I’m sure, sincere and well meaning, but I’m persuaded, really, by the Australian Productivity Commission inquiry that found that the second-tier system experiment has failed. It found that the easier-to-get second-tier patent system was more harmful than helpful, including, perversely, for SMEs. In fact, in Australia the system has encouraged a multitude of low-value patents, causing uncertainty for other innovators, who are unsure whether they are infringing on another party’s patent. That’s hardly an endorsement.

I’m also nervous that if the proposed advancement patent were to come into effect, overseas competitors of New Zealand - based manufacturers could easily attain these low-threshold patents and then apply for an injunction to prevent New Zealand - based manufacture for all markets. An example is that a multinational company could use an advancement patent in New Zealand, which it could not obtain in the US or Europe, to prevent a New Zealand manufacturer from making products in New Zealand and selling those products anywhere in the world. I think this is a real threat to New Zealand - based manufacturers that are selling their products on the world stage. And I thought, really, that the Opposition cared for New Zealand - based manufacturers. I thought there was a real, authentic, and genuine care for those last remaining manufacturers, who do a great job on the world market, but it’s not so.

If you took an icon company like Fisher & Paykel Healthcare Ltd, that company is currently being forced to take legal action against a competitor’s patent filed under the old New Zealand patent system, which had, like this member’s bill, a lower threshold. That’s really the guts of it. It’s a time-consuming and expensive and unnecessary process they have been through to defend their New Zealand - based manufacturing operations. We oppose this bill. Thank you.

Thank you, Madam Deputy Speaker, for the opportunity to speak in support of the Patents (Advancement Patents) Amendment Bill. Ironically, we see that the purpose of the bill is for providing intellectual property protection rights to advancements that are “novel, useful, and non-obvious”, and I thought that might be an interesting way to analyse some of the arguments against. Some of them have been novel, others not so, and certainly not useful. But, indeed, non-obvious is, perhaps, a kind interpretation of some of the objections we’ve heard so far.

In my remaining time, it seems, really, a very beneficial aim of this bill to enhance New Zealand’s innovative performance. Indeed, it’s not only the individual person seeking this step on to the ladder of intellectual property but, indeed, the whole of our country, our economy, and our society that will benefit thus.

Debate interrupted.

The House adjourned at 10 p.m.