Indescendibility

'Indescendibility' by David Horton in (2014) 102 California Law Review comments that

 Supposedly, one of the most important sticks in the bundle of property rights is the power to transfer an asset after death. This Article explores objects and entitlements that defy this norm. Indescendibility — property that cannot be passed by will, trust, or intestacy — lurks throughout the legal system, from constitutional provisions barring hereditary privileges, to statutes that prohibit decedents from bequeathing their valuable body parts, to the ancient but misty doctrine that certain claims do not survive the plaintiff, to more prosaic matters such as season tickets, taxi cab medallions, frequent flier miles, and social media accounts. The Article first identifies the common policy underpinnings of these diverse rules. It compares the related issue of market inalienability — property that can be given away but not sold — and concludes that indescendibility often serves unique objectives. In particular, forbidding posthumous transfer can avoid administrative costs. The Article then uses these insights to propose reforms to the descendibility of body parts, causes of action, and items made non-inheritable by contract. ... 

Indescendibility pops up throughout the legal universe. For instance, the U.S. Constitution and several of its state counterparts abolish the British custom of allowing noble titles and governmental positions to be inherited. Likewise, the Uniform Anatomical Gift Act (UAGA) prohibits decedents from transferring their organs and other human tissue: assets which can be worth hundreds of thousands of dollars. Similarly, under the ancient but troublesome doctrine of abatement, an array of legal claims do not survive the plaintiff, including allegations of defamation, personal injury, and constitutional violations under 42 U.S.C. § 1983 and Bivens. Finally, an expanding web of fine print prohibits the posthumous transfer of season tickets, frequent flier miles, and digital assets like email and social media accounts.

This Article explores this neglected room in the cathedral of private ordering. It begins by gathering and then critiquing the leading justifications for why we sometimes deny owners the ability to transfer assets after death. For starters, some courts, lawmakers, and commentators have assumed that indescendibility is simply a posthumous version of market inalienability: property that can be given away but not sold. Conversely, I argue that the policy foundations of market inalienability often do not apply to indescendibility. Consider human tissue, which is both market inalienable and indescendible. Policymakers exempt organs and similar biological resources from bargained-for exchanges to spare low-income individuals from pressure to enter into transactions they may later regret. Yet not only is such paternalism out of place in wills and trusts law—the dead do not experience regret — but the indescendibility of body parts disproportionately impacts poor families. Likewise, non-commodification rhetoric also drives the market inalienability of the human anatomy: perhaps allowing people to treat their bodies like the junk in their attic would coarsen our sense of what it means to be human. But again, this argument is much weaker when applied to the newly deceased, who are on the verge of being buried or cremated. Thus, indescendibility can be more difficult to justify than market inalienability.

Another common rationale for indescendibility is that a decedent cannot transfer certain things because they are “not property.” Again, body parts are the prime example, although the same logic explains why certain legal claims do not survive the plaintiff, and why a growing number of companies inform consumers that everything from points in loyalty programs to personal seat licenses to virtual currency is “not your property.” But because “property” is merely a label for a bundle of rights—including the power to transmit an item after death—the not property rationale is a spectacular circle. To say that something cannot be passed after death because it is not property does not address why the thing should not be descendible; instead, it cycles straight from the fact that the thing “is not property” to the conclusion that “[o]nly property . . . is descendible.”

Indescendibility also stems from the intuition that particular rights are too “personal” to pass to a decedent’s heirs and beneficiaries. For centuries, the abatement doctrine required judges to dismiss tort claims when the plaintiff died. The idea was that lawsuits for physical injuries were intimately tied to the plaintiff and thus should not enrich her loved ones. Today, every state has modified the abatement rule by passing a survival statute. But rather than clarifying matters, these wildly-divergent laws have only codified the confusion that existed at common law. In fact, some survival statutes been struck down for lacking a rational basis under the Equal Protection Clause—a testament to the bankruptcy of the “personal” logic. Indeed, the fixation on the plaintiff’s stake in the lawsuit was never a deliberate policy choice; instead, it reflected seventeenth-century judges’ conflation of tort and criminal proceedings.

After challenging these oft-cited justifications for indescendibility, I offer a qualified defense of the phenomenon. I contend that barring posthumous transfer can prevent what I call “administrability” problems. Allowing certain objects or entitlements to be inherited would create substantial management costs. For instance, because a decedent’s body parts must be harvested mere hours after her death, including them in her estate would require expensive medical procedures followed by a mad scramble to find transplant recipients. Likewise, descendible future causes of action, such as the right to sue for defamation of the dead, would saddle personal representatives with a duty of eternal vigilance: failing to pursue valid claims would expose them to liability for breach of fiduciary obligation, and distributing damage awards would grow harder as time passes and lines of consanguinity splinter. Some of these costs, such as the burden on the legal system of perpetual rights, are garden-variety negative externalities, and tip the scales toward stripping decedents of the power to transfer. At the same time, though, the majority of these expenses, such as organ harvesting and higher fiduciary fees, would be paid out of the estate. Arguably, then, decedents should be free to incur them in return for the benefits of inheritability. But here a unique aspect of wills and trusts law enters the equation. Succession is mandatory: once something is descendible, it must be passed on. Even decedents who would prefer not to transfer a descendible item—for example, people who object to organ harvesting on spiritual grounds, or whose bodies are worth less than the harvesting fees—would not be able to escape inheritance’s gravitational pull. Partial indescendibility can therefore be appropriate for assets that some decedents would strongly object to conveying.

Finally, I bring these insights to bear on three examples of contemporary indescendibility. First, I argue that although body parts should not be indescendible for the same reasons they are market inalienable, administrability costs counsel against making human tissue fully descendible. Thus, I propose that states be allowed to experiment with clear statement regimes that allow decedents to signal their wish to have their organic matter sold for the benefit of their loved ones. Second, I urge lawmakers to abolish the abatement doctrine—a relic that serves no purpose—and deem all existing causes of action to be assets of a decedent’s estate. Third, I explain how defining the contours of “pure” indescendibility can be helpful for the nascent problem of indescendibility by private agreement. Although virtually every issue in this area is unsettled, the unconscionability doctrine and the implied covenant of good faith and fair dealing are likely to emerge as the primary checks on non-inheritability clauses. These black-letter contract principles are heavily influenced by the reasonableness of consumers’ expectations and drafters’ motivations for deleting rights. By exploring these issues in the context of “pure” indescendibility, I hope to begin the conversation about limits on indescendibility by contract.

The Article contains three Parts. Part I introduces the overlooked phenomenon of indescendibility, focusing on constitutional provisions that prohibit hereditary privileges, statutes that bar decedents from conveying their body parts, legal claims that expire when the plaintiff dies, and the emerging area of contractually-mandated non-inheritability. Part II collects and criticizes the justifications that policymakers, courts, and scholars have offered for eliminating a decedent’s power to transmit property. Part III contends that indescendibility can be best understood as an attempt to limit administrability costs. It then uses this analysis to suggest reforms to the inheritability of body parts, causes of action, and rights made indescendible by fine print.

Offgrid Identity and Protests

'Privacy Protests: Surveillance Evasion and Fourth Amendment Suspicion' by Elizabeth E. Joh in (2013) 55(4) Arizona Law Review argues that

The police tend to think that those who evade surveillance are criminals. Yet the evasion may only be a protest against the surveillance itself. Faced with the growing surveillance capacities of the government, some people object. They buy "burners" (prepaid phones) or "freedom phones" from Asia that have had all tracking devices removed, or they hide their smartphones in ad hoc Faraday cages that block their signals. They use to surf the internet. They identify tracking devices with GPS detectors. They avoid credit cards and choose cash, prepaid debit cards, or bitcoins. They burn their garbage. At the extreme end, some "live off the grid" and cut off all contact with the modern world.

These are all examples of what I call privacy protests: actions individuals take to block or to thwart government surveillance for reasons that are unrelated to criminal wrongdoing. Those engaged in privacy protests do so primarily because they object to the presence of perceived or potential government surveillance in their lives. How do we tell the difference between privacy protests and criminal evasions, and why does it matter? Surprisingly scant attention has been given to these questions, in part because Fourth Amendment law makes little distinction between ordinary criminal evasions and privacy protests. This article discusses the importance of these ordinary acts of resistance, their place in constitutional criminal procedure, and their potential social value in the struggle over the meaning of privacy.

Joh comments that -

some steps taken by individuals are so extreme or so expensive that they are unlikely to ever represent only a privacy protest. Just as the possession of burglar’s tools can point to little else but the likelihood of a past or planned crime, some actions have little non-criminal value. Expense is a factor. The fabrication of genetic information is likely prohibitively expensive enough to discourage widespread use by consumers, at least until costs decrease. Changing small details of one’s records on the internet may require modest expense and effort, but the creation of an entire virtual identity, accompanied by a real world creation of an alternate address, bank account, and the deliberate use of a credit card in several locations is likely only to be undertaken by someone who wishes not to be found under any circumstances. Undergoing identity-changing plastic surgery may only be elected by a criminal, but there are matters of degree. Asking a surgeon to graft skin from another part of the body to one’s fingertips is likely the act of a fugitive; applying superglue to one’s fingertips may not be.

If we set aside these extreme examples, there are numerous steps individuals take though they are engaged in no criminal activity to shield from the police. Although privacy protests should not suggest to the police that these individuals are necessarily behaving in criminally suspicious ways, they likely do in fact convey that meaning, since most of these actions are indistinguishable from steps criminals will take. .... What distinguishes privacy protests from the evasive steps taken by criminals are the intentions behind such protests. In addition, private protests have at least the potential to be socially useful. While a criminal’s motives are generally unsympathetic, a person engaged in a privacy protest may have motives that resonate with those who identify themselves as civil libertarians, critics of “big” government, and even anarchists, although the protester may not formally align herself with any particular group.

The motivations for some of these protests will be difficult to distinguish from one another because the perceived threats are themselves not easily identifiable. Some will evade perceived government surveillance less because they object to a single act of surveillance and more because the hundreds of pieces of data collected about them that provides, when assembled, a “digital dossier” about their lives. Complicating matters further is the fact that the data used by the police may be initially collected by private entities that sell and share information to other parties for a profit. Yet other individuals object to the growing presence of surveillance in their lives no matter what the source. The use of a disposable email address, in this case, might be an objection both to private corporations that track consumers as well as to the government.

Not all privacy protests represent a strike against technology. When a neighbor draws his blinds or unnecessarily burns his garbage, he is resisting surveillance. In some cases, privacy protests originate out of racial or ethnic tensions. Arab-Americans in Detroit or African-Americans in the South Bronx may engage in privacy protests because they feel police have intruded needlessly into the private lives of others in their communities, even if they have not been affected personally.

Yet what isn’t generally recognized is that these protests--whether from the digerati or community activists--are structurally similar. This has two consequences: first, that both types of protests should be treated similarly; and second, that these groups have a common interest that could spur collective action.

She argues that

The mental model that might have the most impact on privacy protests is one that assumes that “innocent people have nothing to hide.” The slogan adopted by the British government to promote its CCTV surveillance camera network expresses the same sentiment: “If you’ve got nothing to hide, you’ve got nothing to fear.” This worldview assumes that all those who evade, block, or protest government surveillance in other ways are hiding evidence of criminal wrongdoing. Consider again the controversial stop and frisk policies of the N.Y.P.D. In 2011, just over half of the stops conducted by these police were justified on the observation of “furtive movement,” (as opposed to, for instance, fitting a known description or carrying a suspicious object). Leaked documents from the National Security Agency in 2013 revealed that the use of encryption tools alone raised red flags warranting heightened government attention. The pervasiveness of this narrative, widely accepted by the general public as well as the police, when compounded by the deference accorded rather vague articulations police are permitted to provide for stops of individuals, means that privacy protests can be easily classified with criminal acts.

Moreover, to the extent that the police may interpret privacy protests as deliberate challenges to police authority, this may further encourage the police to investigate when no criminal wrongdoing is present. Sociologists have repeatedly demonstrated that perceived disrespect for the police is an important--indeed perhaps the primary--factor in determining the degree to which police interfere with an individual’s liberty. In this sense, then, the privacy protestor might present the worse sort of affront to the police: someone who appears to have something to hide and is proud of it.

As with all types of police errors that result in innocent persons being stopped or investigated by the police, there are significant social costs that extend beyond individual embarrassment, discomfort, and wasted time. Large numbers of erroneous and seemingly unjustified police stops and arrests can lead to the reduction of public trust in the police. This effect is hardly symbolic, for an erosion of trust in the police can result in greater noncompliance with the law, as well as refusals to cooperate when the police seek witnesses and volunteered information. .... Privacy protests don’t affect all forms of police investigation. They will not, for instance, greatly affect traditional investigative techniques that target a specific person or group of people based on previously gathered intelligence. When the police are investigating a known suspect regarding a homicide, for example, those who engage in privacy protests are not likely to arouse police suspicion.

Where privacy protests do matter, however, are in cases where police have neither prior intelligence nor a known target. Instead, the police start out with a violation and look for evidence and criminals. The targets are as yet unknown, because the police are “trolling” or “fishing” for suspects. In such instances, the police have an offense or a group of offenses they are interested in investigating, and seek patterns of suspicious activity that might identify potential suspects.

Police efforts to uncover terrorist activity exemplify these open ended investigations. Unlike many other kinds of crimes, terrorism is an offense that places special emphasis on preventive policing. Added to these pressures is the highly secretive nature of terrorist planning. In response, police rely primarily on two options: covert policing, which requires the penetration of closed criminal groups by undercover police, and the identification of patterns of suspicious activity. In this latter approach, the police are looking for behaviors and activities that suggest the planning or execution of terrorism plots, without necessarily having any particular person or activities in mind.

Privacy protests are also relevant as technologies expand surveillance capacities to look for crimes of all kinds. This “bureaucratic surveillance” makes possible the gathering of great quantities of data that can be sifted through multiple times for multiple purposes. The ubiquity of such surveillance changes the very nature of policing, as New York’s Court of Appeals recently observed. Technological innovations--in that case, a GPS unit--permit the “new technological perception of the world” by the police that is equivalent to the addition of “millions of additional police officers” in every city.

Banerji, Twitter and Political Communication

In Banerji v Bowles [2013] FCCA 1052 the Federal Circuit Court of Australia has considered claims of the implied freedom of political communication in relation to tweeting by a Commonwealth employee regarding the policy of her Department.

Neville J indicates that

There are two inter-related issues to be determined in the current proceeding:

(a) Is there an unfettered implied right (or freedom) of political expression/communication, for which the Applicant contends, based on comments by Kirby J in Australian Broadcasting Corporation v Lenah Game Meats?

(b) Should an interlocutory injunction issue to prevent the Applicant’s [apprehended and/or imminent] dismissal by the Respondent?

The answer to both questions is “no.”

The Applicant contends that her right of political expression is a constitutionally protected right which operates, in any event and without restriction, to prevent her dismissal – actual or apprehended - by the Respondent.

For the reasons that follow, and subject to what is said below in relation to undertakings regarding the departmental review process and the implementation of any proposed outcome from it, (a) there is no such constitutional right for which the Applicant contends, and (b) an interlocutory injunction should not issue because the legal base for it has not been made out, and or, in the alternative, in the exercise of the Court’s discretion, it should not, in any event, be granted.

As noted below, the Department gave an undertaking when the matter first came before the Court in Sydney late last year, which has effectively preserved the position of the Applicant within the Department, pending the conclusion of the review process. That undertaking has continued, with slight variation. On the basis of it continuing until (a) the review process is completed, (b) any determination is made (but not yet implemented) by the Department, and (c) a further 14 days after the determination is made but before it is implemented to allow for any further Application, there is neither utility nor need for an interlocutory injunction to issue. ...

There have been multiple iterations of the Application that is currently before the Court, by which the Applicant [originally] sought urgent [interlocutory] injunctive relief against the Respondent.

The Applicant contends that she is at risk of adverse action, namely the imminent termination of her employment. She says that she has been advised of that determination; the Department of Immigration and Citizenship (“the Department”) says that the internal review process continues, that no determination of the Applicant’s employment fate has been made, and that she has been invited to comment on the recommendations of the review. On the information before the Court, it would appear that the Applicant does not distinguish, or has not distinguished, between a recommendation by a reviewer and a decision by her employer, the Department.

Subject to what is said later in these reasons, the Department resists the Application for interlocutory relief. The Department also contended that this Court does not have the jurisdiction to deal with the Application. In part (summarily stated) this was because (a) there was a constitutional matter in relation to which the Court has no relevant jurisdiction, conferred, associated or accrued, and or (b) the Applicant has not specified or sought any final relief.

As already noted, while initially seeking injunctive relief, the Applicant now seeks declaratory orders which are said to relate to, or arise out of, the alleged infringement, by the Respondent, of her ‘implied freedom of political communication’ under the Constitution. The Applicant contends that her implied freedom arises out of, in particular, comments made by Kirby J in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd.

As already indicated, as the following reasons confirm, the Applicant has not established that the declarations sought should be made, or that an injunction should issue. While the Applicant’s fears of dismissal are doubtless real, the internal processes have not yet been concluded. Her immediate ‘fear’, as she has articulated it, does not in all the circumstances, in my view, establish a sufficient basis – in fact or in law – for any legal redress at this time. Moreover, I accept the submission by the Respondent that, in any event, damages will (or will likely) be an appropriate remedy if the Applicant ultimately makes out her case. Similarly, reinstatement may be an appropriate alternative remedy. Accordingly, her interim or interlocutory Application must be dismissed. Given that the Department has not sought an order for costs but simply that the Application be dismissed, in the circumstances, I make no order as to costs.

The Court notes that

Ms Banerji originally contended (and continues to maintain) that the Respondent intends to terminate her employment, among other things, because of her use of social media, and in particular her “Twitter” account. On that account, using the ‘Twitter handle’ of “@LALegale”, Ms Banerji has made, or shared, regular comment (sometimes mocking, sometimes critical) on, for example, (a) the practices and policies of the company that provides security services at Commonwealth immigration detention centres, (b) the immigration policies of the Australian Government, (c) information and comment by the Opposition spokesman on immigration (Mr Morrison), (d) the Minister for Foreign Affairs (Senator Carr), (e) the [then] Prime Minister, (f) the Leader of the Opposition, and (g) employees of the Department.

Ms Banerji appears to have claimed that she has been discriminated against in relation to a “whistle-blower complaint” against a manager who she said has been engaged in “covert surveillance of an employee’s social media account without her knowledge, with intent using monitoring software in prima facie breach of telecommunications legislation...”

She claimed that the Department, in breach of the Public Service Act, failed to protect  her from retaliation by the manager in the form of an allegation that Banerji breached the APS Code of Conduct through  use of Twitter.

In relation to the implied right of expression of political opinion, Banerji contended that "closer scrutiny of the substance of the tweets shows that none are offensive or damaging to individual persons, but instead, they are expressions of political opinion, to which all Australian citizens have a constitutionally implied right". She also contended that termination of her employment would be contrary to [unidentified “discrimination legislation that states that an employee must not be terminated for her political opinion”.

Neville J states that

Ms Banerji maintained (par. 51) that on close scrutiny of the substance of the tweets, “it is evident that they are a simple expression of political opinion, made in her own time away from work”. In such circumstances termination of her employment “would be unconscionable.” To be unemployed would lead, she said, to “convulsive shock.”

In her submissions filed 29th January 2013, the Applicant focussed primarily upon what she described as the contravention by the Department of “a constitutionally guaranteed freedom of political communication”. She said: “... were the Respondent to terminate the Applicant for her use of the social media Application ‘Twitter’ on the grounds that she expressed her political opinions, the Respondent’s actions would be unlawful in that they would purport to limit a constitutional [sic] implied right to political expression”. 

Neville J highlights two submissions, commenting

Ms Banerji said:

The Applicant is proud to be a public servant. She is of the view that in such a small way [sic] she is helping to run our country. She considers herself to be an employee of the people – the government and its executive arm the Respondent, being the representative government of the people. The Applicant does not want to see the Respondent acting unlawfully, in deference to the people of Australia, her employer. The Applicant’s allegiance is to the Australian people, for whom she is a servant – the true meaning of the term ‘public servant’.

Respectfully, whatever her philosophical views about representative government, or her employment, and accepting that the Court does not [yet] have a copy of her contract of employment, the legal reality is that she is an employee of the Department of Immigration and Citizenship (as it then was, and from time to time is – subject to the usual political vagaries regarding departmental name changes). I do not understand this legal status ever to have been disputed.

Secondly, at paragraph 2.18 (p.18) of her January 2013 submissions, which is a reply to paragraph 55 of the Respondent’s January submissions, Ms Banerji stated:

The Applicant replies that, under all of the circumstances, she deserves to remain in employment, that her employment should never have been threatened, that no sanction should have ever been proposed – that no sanction should be imposed, let alone the sanction of termination of employment. The practical result of affirming the breach and imposing the sanction is to contravene the implied freedom of political communication. In the Applicant’s view, this would be unlawful, and the executive power invalid. The Applicant has done nothing wrong. Expressing her political opinion, whether harsh or not, whether critical or not, whether done in her own name or not, whether done as an APS employee or not, whether done as an employee of the Department of Immigration or not, whether she indicates that she will continue or not, is not wrong – it is a right which is constitutionally guaranteed under our country’s laws, and any attempt by the Respondent to act in contravention of that right, is invalid and unlawful.

The Court went on to discuss [at 98-106] the freedom of political communication, commenting that

In essence, the Applicant contends that, whatever her comments on policy or persons, when and however made, including while employed by the Department, and notwithstanding her contract of employment and the APS Code of Conduct, and whatever the Department’s guidelines regarding the use of social media, her remarks constitute political comment. She contends further that her comments are constitutionally protected by the acknowledged “[f]reedom of communication on matters of government and politics [which] is an indispensable incident of that system of representative government which the Constitution creates.”

Ms Banerji maintains that her “right” to make the comments, which she acknowledges she has made, was recognised by Kirby J in ABC v Lenah Game Meats, to which I have earlier referred.

Respectfully, the principle for which the Applicant contends is not supported by relevant authority, including the judgment of Kirby J in Lenah Game Meats.

The unbridled right championed by Ms Banerji, which she says Kirby J articulated, does not exist. His Honour qualified his earlier comments (on which the Applicant relies) and went on the say in Lenah Game Meats, at [198] and [199] (internal citations omitted; emphasis added):

In these circumstances, and in respect of the activities of the appellant in this case, I would be prepared to accept, for the purposes of the present appeal, that broadcasting of ideas about government or politics relevant to the activities of the Federal Parliament or of a State parliament would fall within the principle expressed in Lange.

However, this principle does not uphold an inflexible rule. Australian law does not embrace absolutes in this matter. Many regulatory laws, federal and State, continue to operate in ways that are compatible with the representative democracy established by the Constitution. Restrictions, imposed by law, for limited purposes (even where they may incidentally diminish completely uninhibited discussion of issues of government or politics) may yet be compatible with the Constitution. It is only if the law in question is inconsistent with the intended operation of the system of government created by the Constitution that the implied constitutional prohibition has effect.

Further, the on-going jurisprudence of the High Court in relation to the implied right of political expression has confirmed the limitations to which Kirby J referred, such that, as with ‘rights’ generally, they are not unbridled or unfettered. Indeed, it may be that the Applicant has not, or does not, distinguish between a licence and a right. Further, even if there be a constitutional right of the kind for which the Applicant contends, it does not provide a licence [allegedly] to breach a contract of employment. In any event, among other things, in Attorney-General for South Australia v Corporation of the City of Adelaide, for example, the joint judgment of Crennan and Kiefel JJ confirmed, at [166] (internal citations omitted), that the right asserted here “is not a personal right. It operates as a restriction on legislative power and does so to support the constitutional imperative of the maintenance of representative government.” 

Likewise, in the same case, at [151] and [152], Heydon J confirmed the obvious point that the Australian Constitution does not contain provisions similar to the First and Fourteenth Amendments of the United States’ Constitution, or Article 5 of the German Constitution, both of which provide expressly for a right of freedom of expression.

As already observed, the unfettered right asserted by the Applicant does not exist. In the circumstances outlined in the current matter, and certainly only in the context of an interlocutory Application, I do not see that Ms Banerji’s political comments, ‘tweeted’ while she remains (a) employed by the Department, (b) under a contract of employment, (c) formally constrained by the APS Code of Conduct, and (d) subject to departmental social media guidelines, are constitutionally protected. Further, it makes no difference, and actually strengthens the case against granting the relief she seeks, that her “tweets” occurred (in part or in full) while she was also professionally retained or engaged in employment outside her duties with the Department, and in relation to which she has/had no formal permission from the Department to be so employed.

In any event, the constitutional claim or protection sought by Ms Banerji has not been made out.

By way of observation only, in the event the matter proceeds to a final hearing or some other Application is ultimately filed and constitutional issues remain, subject to submissions from the parties, in my view, such matters should be heard and determined by a superior court, which obviously would be the Federal Court of Australia.

On to the appeal!

NZ Patents

Alongside the ACIP consultation paper regarding Innovation Patents highlighted here it is interesting to see the new New Zealand Patents Bill, passed yesterday and heading towards signature by the NZ Governor-General.

The Bill was noted in 2010. It features provision for the protection of Māori traditional knowledge, along with the protection of indigenous animals animals plants, but does not fully implement recommendations in the Waitangi Tribunal's Ko Aotearoa Tēnei report regarding New Zealand law and policy affecting Māori culture and identity.

The Bill provides for a Māori Advisory Committee to, on request, advise the Commissioner of Patents whether an invention is derived from Māori traditional knowledge, from indigenous plants or from indigenous animals. If so, the committee will advise whether commercial exploitation is likely to be contrary to Māori values, with the Commissioner being able to refuse registration and thus patent protection.

Section 275 provides for Appointment and membership of Māori advisory committee -

(1) The Commissioner must appoint a committee called the Māori advisory committee.

(2) The Commissioner may, at any time,—

(a) appoint a person to the committee:

(b) remove a member from the committee and, if the Commissioner thinks fit, appoint another member in that member’s place.

(3) A person must not be appointed as a member of the committee unless, in the opinion of the Commissioner, the person is qualified for appointment, having regard to that person’s knowledge of mātauranga Māori (Māori traditional knowledge) and tikanga Māori (Māori protocol and culture).

(4) A member of the committee may resign office by notice in writing to the Commissioner.

Section 276 indicates that

The function of the Māori advisory committee is to advise the Commissioner (on request) on whether—

(a) an invention claimed in a patent application is derived from Māori traditional knowledge or from indigenous plants or animals; and

(b) if so, whether the commercial exploitation of that invention is likely to be contrary to Māori values. 

Importantly, s 277 states that "The Commissioner must consider, but is not bound by, the advice given by the Māori advisory committee".

Finnians Cows

Intellectual property as a matter of modernity and cows? As I began to type this post I received an email announcing that the Republic of Mozambique has deposited its instrument of accession to the Berne Convention, with effect as of 22 November 2013. In his recent lecture at Melbourne University Francis Gurry (WIPO Director General) begins by "recalling briefly the traditional explanations of why we have IP".

There are four main reasons, applicable to varying degrees to all the rights that we characteristically consider to be IP rights.

One set of explanations arises from the non-rivalrous nature of knowledge and information. Knowledge and information are private goods in production. They cost human and financial resources to create. In contrast, they are public goods in consumption. Once available, they may be used by another without lessening their enjoyment by the producer. This characteristic of knowledge was noticed by Columcille in his defence against the charge by Finnian in Ireland in the Sixth Century that he had copied the illuminations of a bible that Finnian had lent to him. When called before King Diarmuid to answer to the charge of theft, Columcille protested that he had not stolen anything, since Finnian still had his drawings and “Finnian’s book was none the worse for his copying from it.” In dismissing the defence, the king ushered copyright into the world by pronouncing “To every cow her calf; and to every book its copy.” 

Gurry goes on to comment that

I believe that there are three questions that are most likely to preoccupy us in the new context of IP. I shall call the first “entitlement”. It relates to the function of IP as a regulator of competitive behaviour that I described above. The second and third questions relate to the function of IP as the keeper of the social and economic equilibrium in respect of the multiplicity of interests surrounding innovation or creation. I shall call them “appropriability” and “access”. Each of these questions deserves a vastly more wide-ranging discussion than I am able to accord them here. I shall limit myself to sketching some highlights to provide an indication of why I believe that they are or will be the dominant questions in the new world of IP.

“Entitlement” is an age-old question. It is the question of the ownership of, or the right of control over, Finnian’s illuminations. It is about who invented or created something first, what are the boundaries between legitimate inspiration from someone else’s literary creation or design, on the one hand, and illicit imitation or slavish copying, on the other hand, and it has always animated the IP world. But it is likely to become even more animated, for three reasons.

The first reason is the enhanced values now involved as a consequence of the rise of the knowledge economy. The second reason is the rise in importance of espionage and the illicit appropriation of trade secrets and confidential information. Technology has enabled espionage on a widespread basis in a way that was not possible previously. This development has coincided with the rise in value of the intangible assets that are the target of the espionage. At the same time, the movement of skilled persons from enterprise-to-enterprise on an international scale is now commonplace. This is not a form of espionage, but it does create a potential vulnerability for the knowledge assets of enterprises.

These developments underline the importance of that branch of IP that is the protection of confidential information or trade secrets. Worldwide it is in a poor condition. There is very little uniformity in approach, with the common law and the civil law traditions viewing the matter juridically in completely different ways. There are few multilateral provisions; those that exist are in the Paris Convention on the Protection of Industrial Property and the TRIPs Agreement. It is an area in great need of attention. But giving it multilateral attention will not be easy. It is a difficult sell to promote secrecy in an age of transparency. Even if this is an  entirely superficial way of looking at the matter, this is the immediate reaction that one may expect and a great deal of care will need to be exercised in laying the basis for an international action.

The third reason for expecting greater animation over the question of entitlement is the silently growing tension between competition and cooperation. I have outlined the reasons why competition is heightening in the area of innovation and IP. At the same time, open innovation has become an increasingly important mode of behaviour in innovation. Open innovation may mean many things, but broadly it describes the tendency a firm to look outside itself to partnerships and collaborations to satisfy its innovation needs, rather than relying on purely inside processes to generate innovation. As has been said, the advantages of cooperation are increasing. This tension between competition and cooperation is going to be a defining issue in the coming decades and IP will be the means of resolving the tension. This is why Samuel Palmisano, the former President and CEO of IBM, has said that “[i]ntellectual property will become one of the key geopolitical issues of the twenty-first century“.

A second cluster of issues and questions will revolve around “appropriability”, which is, of course, not a word. I use it to describe two things– whether  something should be the subject of an IP right and whether something can be the subject of an IP right.

Whether something should be the subject of an IP right raises the question of what may be taken out of circulation and placed in the domain of private property. Theoretically, the position is clear. IP deals only with the new, the original and the distinctive. It only protects what did not previously exist and therefore does not involve any subtraction from the public domain. But in practice, the position is not so clear. The boundary between science and technology, or discovery and invention, is more and more difficult to draw, especially for lawyers, as the recent parliamentary and judicial attention given to gene patenting has shown. The question of what should be appropriated is not confined to scientific advances. It occurs equally with respect to the appropriation of words, signs and symbols through trademark law. Should colours be able to be the exclusive domain of one enterprise, for example?

A major challenge for IP here will be not to lose touch with the general public. As mentioned above, there is an increased social attention and focus on IP for a variety of reasons. If IP, whether through the legislature or the judiciary, takes decisions about appropriability that are not in consonance with the sentiment of the general public, it will lose the social credibility on which all good regulation depends.

Whether something is capable of being appropriated is an entirely different question that arises from the arrival of technologies of perfect and efficient imitation, notably the life sciences and digital technology. The problem that has emerged here is the disjunction between the cost of production, on the one hand, and the cost of reproduction, on the hand. In the case of a new pharmaceutical, the cost of production is estimated by industry to be in the vicinity of a billion dollars and to involve several years of work. Once available and disclosed, however, it can be reproduced by a competent graduate student in three months for a relatively meagre outlay. A new feature film may take two years to produce, involve several hundred persons and cost several hundred million dollars. But, once produced, it can be reproduced with perfect fidelity in a matter of seconds and for near zero cost. These developments are massive challenges for IP and, again, deserve much greater analysis than I am able to give them here.

The third issue that will occupy our attention in the new environment is access. As mentioned above, what IP does is to make access a saleable commodity. While this enables technology markets, it also creates social tension over the price of access and over the lack of access. We have seen this tension played out in relation to access to medicines and biomedical technologies, content on the Internet and climate change technologies, although the last area is more a theoretical debate than a full-scale political engagement that has seized the public’s attention.

It is unlikely that the tension around access will subside. For policy-makers, the challenge will be to try to orchestrate an informed and reasonable public debate. For corporations, the challenge will be to balance being competitive and getting a financial return on investment, on the one hand, with management of a potentially hostile public response, on the other hand. There is a paradox at work here, of course. No one minds, it seems, someone making billions out of new social networking or media technology, but there is widespread social unease at someone making billions out of a new life-saving drug. Which outcome do we want to achieve in the innovation system?

HIPAA in the Sky with Dollars

'The Future of HIPAA in the Cloud' (Seton Hall Public Law Research Paper No. 2298158) by Frank Pasquale and Tara Adams Ragone

examines how cloud computing generates new privacy challenges for both healthcare providers and patients, and how American health privacy laws may be interpreted or amended to address these challenges. Given the current implementation of Meaningful Use rules for health information technology and the Omnibus HIPAA Rule in health care generally, the stage is now set for a distinctive law of “health information” to emerge. HIPAA has come of age of late, with more aggressive enforcement efforts targeting wayward healthcare providers and entities. Nevertheless, more needs to be done to assure that health privacy and all the values it is meant to protect are actually vindicated in an era of ever faster and more pervasive data transfer and analysis. 

After describing how cloud computing is now used in healthcare, this white paper examines nascent and emerging cloud applications. Current regulation addresses many of these scenarios, but also leaves some important decision points ahead. Business associate agreements between cloud service providers and covered entities will need to address new risks. To meaningfully consent to new uses of protected health information, patients will need access to more sophisticated and granular methods of monitoring data collection, analysis, and use. Policymakers should be concerned not only about medical records, but also about medical reputations used to deny opportunities. In order to implement these and other recommendations, more funding for technical assistance for health privacy regulators is essential.

Identity

'Conferring Dignity: The Metamorphosis of the Legal Homosexual' by Noa Ben-Asher in (2014) 37(2) Harvard Journal of Law and Gender argues

The legal homosexual has undergone a dramatic transformation over the past three decades, culminating in United States v. Windsor (2013), which struck down Article 3 of the Defense of Marriage Act (DOMA). In 1986, the homosexual was a sexual outlaw beyond the protection of the Constitution. By 2013, the homosexual has become part of a married couple that is “deemed by the State worthy of dignity.” This Article tells the story of this metamorphosis in four phases. In the first, “the Homosexual Sodomite Phase,” the Court famously declared in Bowers v. Hardwick (1986) that there is no right to engage in homosexual sodomy. In the second, “the Equal Rights Phase,” the Court in Romer v. Evans (1996) cast the legal homosexual as a member of a “class of citizens” whose exclusion from anti-discrimination protections the Constitution could not tolerate. In the third, “the Liberty Phase,” the Court shifted its focus in Lawrence v. Texas (2003) to an enduring intimate bond involving private sexual acts protected from government intrusion. In the fourth and current phase, the “Equal Dignity Phase,” the Court in United States v. Windsor (2013) validated the decision of several states to “confer [upon homosexuals] a dignity and status of immense import.” ;

The heart of the Article is an analysis of this final phase. Though Windsor is an important civil rights victory, the Court’s opinion ushers in new costs for the legal homosexual. In the process of dignifying the same-sex couple, the Court erases the terms homosexual and lesbian, casts marriage as an elevated moral state, and, most importantly, promotes a concept that the Article calls a weak dignity. Windsor’s dignity is weak in three ways. First, human dignity is not understood by the Court as inherent in all humans. The Court instead assumes that the state confers dignity upon individuals. Second, Windsor explicitly assumes that marriage enhances the moral status and integrity of those who enter it. Third, Windsor adopts a rhetoric of injury and pity that presents all those in same-sex relationships and their children as the wounded and humiliated victims of DOMA. The Article concludes with suggestions on how advocates and courts applying Windsor to the next wave of marriage litigation can employ the concept of equal dignity while moving beyond its weaknesses.

Innovation Patents

The Advisory Council on Intellectual Property (ACIP) has released a 56 page Options Paper [PDF] as part of its consultation regarding innovation patents.

In reporting on initial consultation - alongside the September 2012 IP Australia Innovation Patents – Raising The Step consultation paper - ACIP comments that

Several clear themes have developed from the submissions and roundtables as follows:

• The innovation patent system is widely seen as being useful, but it is hard to quantify if it is actually stimulating innovation by Australian SMEs. 

• The level of innovation is widely seen as too low, though there is no clear indication of how the level can be raised or to what level it should be raised. 

• There are significant concerns regarding the costs for enforcement and the inappropriateness of the remedies give the low level of innovation.

ACIP articulates three options for the innovation patent system

Option A – No change 

The Raising the Bar Act has made substantial changes to the legislation supporting the innovation patent system as outlined briefly in Appendix 7. It is reasonable to see how these changes interact and bed down before making any more changes to the system. If the innovation patent system is changed again in the immediate future, then it will not be easy to predict how these new changes will interact with those in the Raising the Bar Act. Hence, it will be difficult to determine the collective impact that these new changes might have on the system. 

The March 2013 report on The Economic Value of the Australian Innovation Patent by Verve Economics assessed the potential economic aspects of the innovation patent system. Part of this assessment was done via a survey of 3,195 Australian inventors  who had protected their innovations with innovation patents. A total of 517 surveys were returned which is a response rate of about 16.2%. Tellingly, only 10% of the respondents were large firms (firms with 200 plus full-time employees), whilst 45% of the respondents were individuals. The remaining respondents were SMEs broken down into 16% small firms (5-20 full-time employees) and 30% medium firms (21-200 full-time employees).  Also, nearly 37% of the respondents identified themselves as operating in the manufacturing sector. 

While not all of the comments received portrayed the innovation patent positively, the majority of comments portrayed innovation patents in a positive light. The comments also showed that inventors mainly use innovation patents for traditional purposes and the use of innovation patents adds value to their firms. This study also found that the weighted average value placed by inventors on each of their innovation patents was approximately $895,000—a not inconsiderable valuation, though perhaps not a fully credible valuation due to the fact that it was self-assessed. 

As noted in Part 2.3, the objective of the innovation patent system is to stimulate innovation in Australian small and medium enterprises (SMEs). The Verve survey has shown that individuals and SME user-groups appear to be generally satisfied with the innovation patent system—albeit this survey occurring prior to the full impacts of the Raising the Bar Act being felt by users of the system. 

Option Option B – Abolish the innovation patent system 

Issues that support abolition 

There are a number of issues relating to the innovation patent system that support the abolition of the system in Australia. These issues are as follows:

• The system is under-utilised—only about 300 innovation patents are certified each year from about 1,400 innovation patents that are granted—clearly most innovation patentees do not seek certification. Also, there are about 26,000 complete patent applications filed each year in Australia—granted innovation patents represent only about five% of this total. 

• The system is not achieving its intended goals or policy outcomes (e.g. the large portfolios of certified innovation patents held by large companies and the large number of granted divisional innovation patents with standard patent parents). 

• Case law indicates that sophisticated users are strategically using the system with no quantifiable benefits flowing to the public. 

• Interest groups (e.g. innovation patentees, patent attorneys and lawyers) agree that the system stimulates innovation but there is no reliable and quantifiable evidence available to corroborate this view. 

• The system creates uncertainty and increases legal costs because of the very low inventive threshold and the fact that an innovation patent doesn’t need to be certified (and once certified, is very difficult to revoke). 

• There is a perception that a lot of ‘poor’ quality, uncertified innovation patents are being granted and put on the Register of Patents. These granted patents are ‘devaluing’ Australia’s patent system. 

• The United Kingdom has looked into utility models and rejected them due to increased uncertainty and legal costs. 

• There are alternative ways to protect lower level innovations (e.g. designs law or competition law). 

• The innovation patent system is unique to Australia and very few of our major trading partners have utility models. Hence, the innovation patent system does not encourage Australian innovators to focus on international opportunities.

Issues that contradict abolition 

There are also a number of issues that contradict any proposal to abolish the innovation patent system in Australia. These issues are as follows:

• If the system is abolished, sole inventors/self-filers and SMEs might be discouraged from entering the patent system because the inventive threshold for a standard patent is too high and the standard patent system is seen as being too difficult to navigate without expensive professional help. 

• Innovation patents are a form of personal property—they are an asset and can be used to obtain funding. 

• Higher level inventors who fail to satisfy the level of innovation for a standard patent can still get some protection/reward for their commercially-valuable innovations if they convert their standard application to an innovation patent. 

• Even allowing for the Verve report, there is a lack of credible information available on how SMEs are using the system—abolishing the system might remove IP protection that is really useful to SMEs. 

• Abolishing the innovation patent system will re-establish the ‘gap’ between the designs system and the patents system that was first identified by the Franki Committee and endorsed by ACIP in their Review of the Petty Patent System. 

• It is arguable that the public mischief caused by having uncertified innovation patents on the Register of Patents may not be as great as is popularly made out since more than half of all innovation patents cease within three years of their date of filing.

Replace the innovation patent system 

It may be possible to replace the innovation patent system with an alternative system for protecting low-level inventions. Both the Franki Committee and Uma Suthersanen have investigated options for doing this. 

In paragraph 42 of its Report on the Law Relating to Designs – First Term of Reference, the Franki Committee recommended that any new designs legislation should contain the following definition of design: “Design” means features of shape, configuration, pattern or ornament applicable to an article, being features which in the finished article can be judged by the eye of the Court, but does not include a method or principle of construction. At paragraph 45 of this report, the Committee elaborated on this definition in the following terms:

We feel that protection should be available on as broad a basis as practicable and, provided that the ordinary requirements of the community and industry are not unreasonably impeded, we can see no real reason why all features of shape or configuration, whether they serve a purely functional purpose or not, should not come within the definition of design. We do not propose that the function itself should be capable of protection by way of the designs legislation but simply that function should be no bar to the registration of particular features of shape or configuration as a design provided that the design is new or original and otherwise registrable.

The Committee also recommended in paragraph 45 that the legislation should contain the following provision: An application for the registration of a design shall not be refused nor shall a registered design be invalid on the ground that the design consists of or includes features of shape or configuration that serve only a functional purpose. 

The Australian Government did not endorse the Franki Committee’s recommendation in this regard. The designs legislation was not amended to include a functional design, though other recommendations relating to the petty patent system were implemented. Suthersanen suggests that ‘subpatentable’ inventions can be protected by fitting such products into existing IP categories—such as under the designs system.She believes that this can be achieved by changing the designs legislation to allow for the protection of a ‘functional design’ as presently exists in the UK. Under subsection 1C(1) of the current UK Designs Act, a right in a registered design ‘shall not subsist in features of appearance of a product which are solely dictated by the product’s technical function’. This UK definition contrasts with the definition of a design under Australian law wherein a design, ‘in relation to a product, means the overall appearance of the product resulting from one or more visual features of the product’. As can be seen, there is some flexibility for ‘functionality’ under the UK legislation which is absent from the Australian legislation. 

Many countries and jurisdictions have a general unfair competition law which is based on fault or wrongdoing. As an alternative to protection under designs legislation, Suthersanen also suggests changes to competition law to protect ‘subpatentable’ inventions. This suggestion is based on the creation of an anti-copying right or a misappropriation tort. 

However, such an approach has been rejected by the Australian courts. In Moorgate Tobacco, Deane J. of the High Court of Australia said: 

The rejection of a general action for “unfair competition” involves no more than a recognition of the fact that the existence of such an action is inconsistent with the established limits of the traditional and statutory causes of action which are available to a trader in respect of damage caused or threatened by a competitor. Those limits, which define the boundary between the area of legal or equitable restraint and protection and the area of untrammelled competition, increasingly reflect what the responsible Parliament or Parliaments have determined to be the appropriate balance between competing claims and policies. 

Gibbs C.J., Mason, Wilson and Dawson JJ agreed with these conclusions. 

Option C – Change the innovation patent system 

Recent changes 

There have recently been significant changes to the innovation patent system due to the final implementation of the Raising the Bar Act on 15 April 2013. An overview of these changes can be found in Appendix 7. In summary, these changes can be collated into four broad subject areas as follows:

• Changes to divisional application - Section 79C has been amended so that the deadline for filing a divisional innovation patent is three months after advertisement of acceptance of the earlier application (where the earlier patent is a standard patent) or no later than one month after the advertisement of certification of the parent patent (where the earlier patent is an innovation patent). This amendment will prevent applicants strategically filing divisional innovation patents during court or opposition proceedings, as happened, for example, in the Delnorth case. 

• Sufficiency - There have been various amendments made that have tightened up on the disclosure requirements for an innovation patent specification—especially those relating to subsections 40(2) and 40(3). Whilst these amendments have no bearing on whether an innovation patent is granted, they have made it more difficult for an innovation patent to get certified—especially for self-filing and self-prosecuting applicants who often file specifications with a minimal disclosure of their innovation.  

• Inventiveness threshold (usefulness, common general knowledge, public information) - There has been an increase in the inventiveness level applicable to innovation patents due to the removal of the geographical restriction on common general knowledge used for assessing whether a difference over the prior art involves no substantial contribution to the working of the invention. However, it may take another 24-36 months for these amendments to ‘bed down’ and enable an estimation of the quantum of the increase. 

• ‘Balance of probabilities’ test - The ‘balance of probabilities’ test only applies to questions of fact and is most relevant for determining questions of novelty or innovative step. It requires examiners of patents to weigh up all of the material before them and decide, on balance, whether an objection is more likely than not to be applicable. Another way of viewing the balance of probabilities is to ask whether the objection is highly plausible, more probable than not, or prima facie reasonable in the context of the material being considered. Questions of law are not subject to assessment by the balance of probabilities test.

Raise the level of innovation 

As stated earlier in this Paper, ACIP has found general agreement that the current level of innovation is too low. ACIP is not surprised by this finding since the innovation patent system provides protection for very small differences that would not, of their own accord, sustain an inventive step. However, there is no agreement within the stakeholder group as to what is an appropriate level of innovation. 

Stakeholder suggestions include having a test of ‘not clearly obvious’ although it is difficult to see how a Federal Court judge would be able to distinguish between what is obvious but not clearly obvious. The LCA, FICPI and IPTA suggest a test of assessing the substantial contribution in question against the relevant prior art so that the substantial contribution would have to make a substantial contribution to the working of the prior art. It is not entirely clear how this would differ in practice from the existing test. 

Regarding the LCA submission, they are suggesting that a test be developed that addresses the perceived issues arising out of the Delnorth decision but which remains less onerous that the inventive step requirement. They believe that this could be achieved by amending subsection 7(4) of the Patents Act to permit direct reference to the common general knowledge alone or in combination with any one of the kinds of information set out in subsection 7(5). 

Another alternative test suggested by IPTA is to apply the test of inventiveness applicable under the Patents Act 1952 so that the level of innovation would be by reference to what would be obvious having regard to common general knowledge in Australia. This test may have an advantage since it has been the subject of previous case law and there may be some certainty associated with it. On the other hand, current practices relating to the quick retrieval and use of digital information may generate difficulties in distinguishing between what is generally known and what information can be very readily converted into what is known. 

A proposal to raise the level of innovation to the inventive step level has been thoroughly consulted on by IP Australia with its Raising The Step proposal. A majority of the submissions to this proposal did not endorse the change. The general consensus of respondents to either the ACIP Issues Paper or the Raising The Step paper is that raising the level of innovation to inventive step level will act as a disincentive for innovation and R&D. A common thought was that such a change will effectively render the system entirely impotent. 

ACIP has spent considerable time wrestling with this issue. If the level of innovation is raised to the ‘inventive step’ level, then the innovation patent system is rendered ineffective and it might as well be abolished. If the level of innovation is raised to an intermediate level, then it is difficult to conceive of a suitable test that will be easily understood by users, IP professionals, patent examiners and the courts. In any event, history has shown that it may take a decade or more for the legislative provisions defining the new level of innovation to be tested in the courts. In the interim there will be some uncertainty as to required level of innovation. With these options in mind, ACIP invites further stakeholder comment on their preferred option for the level of innovation and how this option will make the innovation patent system more robust. 

Reduce remedies 

It is widely accepted that IP enforcement costs are high. As noted in Part 4.4, nearly half of all comments and submissions made to ACIP were related to relief from infringement. There was widespread agreement in these comments/submissions that the remedies available to an innovation patentee are not appropriate given the low level of innovation required to pass the innovative step threshold. However, a number of stakeholders had opposing views. Whilst they agree that enforcement costs are high, they also believe that reducing the remedies (e.g. by removing injunctive relief—the most common form of remedy sought) would reduce the attractiveness of innovation patent system. It might also drive undesirable behaviours. 

A possible solution to this conundrum could be to remove the possibility of seeking injunctive relief from those innovation patents that are not being commercially exploited. Alternatively, the term of injunctive relief could be reduced by an amount equal to the delay in seeking certification. Both options give encouragement to innovation patentees to use their patents and undesirable behaviours—such as delaying infringement actions for as long as possible to maximise the value of any possible compensation—are discouraged. 

Limit the monopoly 

An alternative to raising the level of innovation might be to limit or restrict the monopoly of an innovation patent to a single embodiment. This single embodiment would only be protected to the extent that it was actually disclosed or illustrated in the innovation patent specification as originally filed. No alternative constructions, mechanical equivalents, or other variations would be protected. If such a proposal is implemented, it will have a beneficial impact on reducing the uncertainty inherent to the innovation patent system. The major issue identified by some stakeholders underlying these concerns about uncertainty is that the vast majority of innovation patents are never examined. Hence, the exact extent of the monopoly that may potentially be protected by these innovation patents is uncertain. If the monopoly is restricted to a single embodiment fully disclosed in the specification, then an interested party can better predict the extent of the potential monopoly and make a more informed commercial decision based on this prediction. 

Change processes – formalities check, compulsory certification 

ACIP has considered changing the processes for granting an innovation patent— specifically, ensuring that each innovation patent application has at least one claim prior to it proceeding to grant. Also considered was a proposal for compulsory examination, either before grant, or within three years of the date of grant. These proposals were both mentioned earlier in Part 4.3. 

ACIP, however, has some concerns with the compulsory examination proposal since it will substantially increase the costs of obtaining an innovation patent. Such a move could be seen as directly hindering or restricting access to the system by individuals and SMEs. 

Change the name of the right 

ACIP received a number of comments from stakeholders attending the roundtables that the name ‘innovation patent’ is confusing. There is a general perception within the broader community that a ‘patent’ has some form of legally-enforceable right. Unfortunately for innovation patents, this perception is incorrect since an innovation patent has no enforceable rights until after it has been examined and certified. As indicated in Part 3.1.1, nearly five out of every six innovation patents do not gain enforceable rights. Hence, the stakeholders believe that the term ‘patent’ should not be applied to these applications as it is inconsistent with public perceptions. These stakeholders suggest using a different name for the IP right or swapping the terms so that an innovation patent does not take up the name ‘patent’ until after it is certified. 

Education 

There is no doubt that there are some very sophisticated users of the system (e.g. the patentees that have portfolios of five or more certified innovation patents that were discussed in Part 3.1.4). However, it is clear from the written submissions and roundtable discussions that a significant number of individuals and SMEs are generally ill-informed of the advantages and disadvantages of using the innovation patent system. 

IP Australia’s website has a lot of information about filing for the appropriate IP right. This information outlines some of the benefits and limitations of the innovation patent system.  It is arguable whether this information is being accessed/understood by Australian individuals/SMEs. Perhaps other communication channels may be needed to get the information disseminated to this audience or use group.  Recommendation 7 from ACIP’s Review of the Petty Patent System included a sub-recommendation that ‘Examination may be requested at any time, but not later than 3 years after the application was filed.’ The Government did not accept that insisting on substantive examination would be appropriate since it would add significantly to the ultimate cost for applicants who may be willing or unable to bear this cost, given the low probability of them being involved in litigation. 

Exclusions 

At the present time, the sole exclusions are plants and animals, and the biological processes for the generation of plants and animals, except if the invention is a microbiological process or a product of such a process.ACIP has considered broadening this list of exclusions from the innovation patent system. Appendix 3 provides a list of the exclusions from the utility model systems of a number of Australia’s important trading partners. 

A number of these utility model systems exclude methods and/or process (e.g. China, Japan, the Republic of Korea, Germany, Indonesia and Italy). ACIP considers that methods and processes could be excluded from the innovation patent system because the very nature of the innovation means that these sorts of subject matters are very difficult to reverse engineer—unlike, for example, the situation for devices and mechanical hardware. As such, there is an inherent protection available for innovators who develop new methods and processes. Furthermore, given the low level of innovation required to get an innovation patent certified, there appears to be little benefit to the broader society in granting innovation patents for these subject matters. 

ACIP also considers that chemical compositions and pharmaceuticals could be excluded from the innovation patent system. This would align the innovation patent system with the utility model systems of Japan, the Republic of Korea and Italy. Appendix 4 shows that there have been comparatively few innovation patents granted for pharmaceuticals and cosmetics since the system began in 2001 (less than 1.5% of the total grants). This point was made by Medicines Australia in their submission to the Raising The Step proposal. They also commented that the medicines industry relies primarily on standard patents to protect patentable inventions. If all of the categories including chemical compositions are considered, then the innovation patent grants in these categories only cover 3.25% of the total grants.In any event, ACIP also considers that these sorts of innovations are more appropriately protected under the standard patent system. Such an exclusion would also remove any possibility that the innovation patent system could be used for ‘evergreening’ purposes—this was one of Alphapharm’s concerns raised in their submission to the Raising The Step proposal. 

Lastly, ACIP considers that the innovation patent system could exclude software (i.e. computer-implemented inventions) from the list of patentable subject matters. ACIP notes that Japan and the Republic of Korea already exclude computer software from their utility model systems. ACIP believes that software patents require a comparatively low level of financial contribution by an innovator. Also, it is difficult to conduct a proper evaluation of the prior art base since a significant portion of the software is commercially developed for a client on a bespoke and confidential basis. As such, it is never ‘published’ and hence is not formally part of the prior art base. 

Limit access to the innovation patent system 

ACIP has considered whether measures should be taken to limit access to the innovation patent system. The provisions of the Paris Convention for the Protection of Intellectual Property (Paris Convention) obligate Australia, as a signatory to the Convention, to provide no less favourable treatment to foreign applicants than it provides to Australian  applicants. On this basis, it would arguably be inconsistent with the Paris Convention provisions if access to the innovation patents system was restricted solely to Australian applicants and to applicants resident in Australia. Alternatively, ACIP has considered whether the innovation patent system could be restructured so as to exclude applications from all but individual applicants and SMEs. Such a restriction would be consistent with the objective of the innovation patent system to stimulate innovation in Australian SMEs.  The difficulty with this approach would be how to perform the ‘exclusion’ without creating undue bureaucracy. ACIP notes that the recent changes to the R&D Tax Incentive Program could provide a suitable model.  Under this program, R&D tax incentives are available to entities with an aggregated assessable income of less than $20 million in an income year. An entity’s assessable income is aggregated with the income of its affiliates, entities that it is affiliated with and entities connected with it so that the rules cannot be easily circumvented by diverting income to an associated entity.

Service

In Electrolux Home Products Pty Ltd v Delap Impex Ltd [2013] FCA 600 the Federal Court of Australia has allowed Electrolux Home Products Pty Ltd to serve documents out of Australia's jurisdiction after satisfactorily building a prima facie case against a Hungary-based company for selling Electrolux's appliances without authority and in contravention of Australian trade marks laws. The Court also allowed a substituted service of documents via email to one of the parties whose unwillingness to provide address made personal service impracticable.

Unenforced Warrants and Privacy

The Victorian Ombudsman's Office report on its Own motion investigation into unenforced warrants [PDF] finds that many of the state's offenders "are not being held accountable for their fines, there is little deterrent for failing to pay fines, and road safety is being compromised". The report features concerns regarding privacy.

The Ombudsman comments that in 2011-12 some 4.8 million infringement notices and 1.5 million warrants were issued in relation to offences committed in the state of Victoria relating to road safety and traffic, public order, industry regulation and environment protection. Road safety offences, such as speeding, drink driving and traffic light offences, were the highest category of offences.

The Infringement Management and Enforcement Services (IMES) - which includes the Sheriff's Office -  is responsible for enforcement of unpaid infringement notices and warrants but "is not keeping up with the number of warrants issued each year". As a result  "a large percentage of warrants are not enforced and expire without payment".

Since 2005, approximately two million warrants worth $886 million have been 'written-off' as a result of the Sheriff's Office being unable to effectively enforce the number of warrants issued. During the same period IMES has only cleared $185 million cash for warrants which includes cash collected by Sheriff's Officers. For each warrant finalised by the Sheriff's Office five more are issued. This has resulted in a pool of 3.5 million warrants, valued at more than $1.2 billion currently unexecuted and in a large percentage of cases, will not be executed before they expire after five years.

The report notes that IMES incapacity to respond to the large numbers of warrants is not a new issue, eg highlighted in reports in 1996, 1997, 1998, 2003-04, 2005, 2006 and 2007.

In 2006 the Victorian Government introduced the Infringements Act 2006 providing new sanctions for the Sheriff to deal with those who fail to pay fines or comply with court orders. A 2007 review of IMES Debt Management by PricewaterhouseCoopers noted that in 2000 IMES' gross debt was $280 million and by 2007 had increased to $640 million. Despite these reports and recommendations, the number of unenforced warrants and debt to the state 'written-off' continues to rise.

Factors contributing to the inability of the Sheriff's Office to enforce warrants include -

Limited resources - 172 Sheriff's Officers to enforce warrants. (If the number of unenforced warrants to be executed were shared equally amongst the Sheriff's Officers then this would average 20,400 each, an impossible task).

Out-dated Information Technology - the Sheriff's Office's IT system is 15 years old, has a deficiencies and is not compatible with a range of enforcement activities available to the Sheriff.

Unutilised Powers - Since 2006 the Sheriff's Office has had enforcement powers that it has not utilised, eg the garnisheeing of wages and charging and selling of land and assets. Despite having the power to make company directors liable for debts incurred by their companies since 2006, the Sheriff's Office has not used the power to any significant extent.

Problems with data sharing and reliability - the Sheriff's Office has relied heavily on address data held by VicRoads. "It was not able to record alternative address data it obtained for offenders in its own database nor would VicRoads, until my investigation, update its database based on information received from the Sheriff. There have been some issues with agencies, including VicRoads and the Victorian Electoral Commission, about sharing address details with the Sheriff. In response to my investigation both VicRoads and the Victorian Electoral Commission have said they are prepared to assist the Sheriff's Office with address data within the constraints of their legislation."

Poor enforcement strategies - IMES has no documented and systematic methodology for targeting, selecting and enforcing infringement warrants. Sheriff's Officers are driven by location and convenience rather than prioritising warrants. "There is neither guidance from supervisors nor any IMES policy."

In response the Ombudsman recommends that -

• the Government consider implementing the Fines Reform program as a priority. 
• the Department of Justice provide more detailed annual reporting regarding warrants that are outstanding, issued, finalised, cleared and expired. 
• IMES seek funding for additional Sheriff's Officers.
• IMES introduce a comprehensive operating methodology for actioning warrants across all regions.
• IMES utilise all legislative sanctions available to it in appropriate cases.
• IMES revisit and extend its data matching activities.

The discussion of data sharing is of particular interest to privacy scholars and practitioners. The report states that -

Most warrants relate to traffic infringements. The addresses on these warrants are taken from VicRoads’ database at the time of the infringement.

Sheriff’s Officers do not routinely check warrant addresses with VicRoads before attending an address. VicRoads also charges IMES a fee of 16 cents for each address check it conducts. IMES stated that whether Sheriff’s Officers conduct the checks depends on operational requirements in each region and that some officers perform the checks as a matter of course.

Motor vehicle licence holders are required by legislation to update their details with VicRoads within 14 days of a change of address. VicRoads will only change its address data when information is provided by a licence holder. VicRoads assumes addresses are correct where correspondence it sends out is not returned. At times, a Sheriff’s Officer may become aware of a current address for an offender, which is different to that held by VicRoads. However, VicRoads will not update its database with information provided by Sheriff’s Officers because it is concerned that to do so would place the ‘deemed service’ of VicRoads’ notices at risk. VicRoads told my officers that in such situations, it is concerned about the prospect of court action by licence holders.

The Department of Justice said: Any updates made to the VicRoads database by VicRoads, does not impact on the Deemed service provisions under the Infringements Act 2006.

VicRoads also does not take action against licence holders who fail to update address records because this could lead to ‘unintended consequences’. For instance, action against a person who has simply forgotten. 

VicRoads said that as the Sheriff is able to direct VicRoads to suspend or cancel a licence when an offender fails to pay warrants, VicRoads prefers this method of targeting individual offenders rather than targeting the entire driving population.

In response to my draft report, Mr Facey said: IMES acknowledges that there are some issues surrounding addresses sourced from VicRoads, as the offender in question has failed to update their address with VicRoads despite the requirement to do so within 14 days of moving. Sheriff’s Officers will often conduct their own checks prior to visiting an address, to ascertain if the address in VIMS is current. In addition, the new IME system will allow multiple addresses to be recorded for the first time, ensuring that Sheriff’s Officers will have the greatest chance of locating offenders with outstanding warrants.

In response to my draft report, VicRoads:

• said it should take all reasonable steps to make its address records as accurate as possible 

• agreed that the Sheriff’s Office may become aware of information not provided to VicRoads and there is merit in VicRoads confirming updated address information from agencies such as the Sheriff’s Office 

• said in the future VicRoads will write to clients at both the address on record and the address advised to it by the Sheriff’s Office requesting that the client confirm the correct address 

• noted that where clients fail to comply under the Road Safety (Drivers) Regulations VicRoads may require the client to provide evidence of their address and where appropriate will suspend the client’s licence or permit said in relation to vehicles, VicRoads may require evidence of changes to the residential address of the vehicle’s registered operator and any other addresses for the service of notices and will suspend the registration of a vehicle where this information is not provided 

• said it will maintain contact with the Sheriff’s Office to assess the impact of this process change.

In commenting on "Lack of cooperation between agencies on information sharing" the report states - 

 The 2007 PriceWaterhouseCooper’s review said IMES needed access to other information sources to confirm offenders’ details and suggested access to the Victorian Electoral Roll, Housing Commission and Retail Tenancy data. The review suggested that IMES liaise with the government to resolve any barriers of privacy or cost.

IMES said that these and other agencies refused to provide address data on the basis of privacy concerns.

However, there appears to be no legal basis for such refusals. The Information Privacy Act 2000 (the Privacy Act) protects ‘personal information’ including addresses. However, the right to privacy under the Privacy Act is not absolute and will give way to countervailing public interests including proper administration and the enforcement of laws.

This means that under the Privacy Act an agency may disclose an address if it reasonably believes that the use or disclosure is necessary for the purposes of a law enforcement agency to detect, investigate, prosecute or punish criminal offences or breaches of law imposing penalties or sanctions. IMES is one such law enforcement agency.

IMES also has express power to require the production of information under warrants authorised by courts. The Infringements Act 2006 provides the Sheriff with the power to request information to assist in warrant enforcement and the Sheriff’s Act gives Sheriff’s Officers the power to require certain information. Agencies are generally only exempt from providing information to the Sheriff’s Office relating to a warrant where exceptional circumstances apply.

In response to my draft report, Mr Warwick Gately AM, the Victorian Electoral Commissioner said:

… in 2009, IMES worked with the VEC in relation to providing IMES with access to the personal details of people enrolled on the register of electors. Further, that an initial protocol was proposed by IMES with respect to elector data, which ultimately was not agreed to by the VEC. I confirm that the VEC informed IMES of its decision that the information would not be disclosed under the proposed protocol and that the preferred method for the VEC was for the provision of information to be assessed on a case-by-case basis. … I am very open to further reviewing and developing the protocol with IMES whereby the register of electors is accessed initially by VEC officers on a case by case basis to confirm or update address details against particular individuals as opposed to the continuous provision of the State electoral roll to an agency over which I cannot exercise control.

In response to my draft report, Mr Facey said:

IMES has made a number of attempts to work with other agencies to have access to current address information. For a number of reasons, these efforts have largely been unsuccessful. … IMES is continuing to look at ways to obtain the best address information, such as entering into arrangements with telecommunication companies.

Five finger discounts

'Cleaning House: The Impact of Information Technology Monitoring on Employee Theft and Productivity' [PDF] by Lamar Pierce, Daniel Snow and Andrew McAfee examines how US "firm investments in technology-based employee monitoring impact both misconduct and productivity".

We use unique and detailed theft and sales data from 392 restaurant locations from five different firms that adopt a theft monitoring information technology (IT) product. Since the specific timing of individual locations’ technology adoption is plausibly exogenous, we can use difference-in-differences models to estimate the treatment effect of IT monitoring on theft and productivity within each location for all employees. We find significant treatment effects in reduced theft and improved productivity that appear to be driven by changing the behavior of individual workers rather than selection effects. Although workers with past patterns of theft appear more likely to leave treated locations than others, individual behavioral changes by existing workers drive restaurant-level improvements. These findings suggest multi-tasking by employees under a pay-for-performance system, as they increase effort toward sales following monitoring implementation in order to compensate for lost theft income. This suggests that employee misconduct is primarily a result of managerial policies rather than individual differences in ethics or morality.

The authors conclude -

In this paper, we show evidence that the adoption of information technology can substantially impact both the productive and corrupt behaviors of employees. Our results suggest that when management implements increased monitoring under a pay for performance scheme, employees will redirect effort toward productivity because their incentives have been realigned. Furthermore, our results suggest that the majority of improvement in organizational performance and productivity stems from the improved behavior of existing employees, not from the firing of those engaged in theft. The treatment of individual workers, not worker selection, appears to drive most productivity improvements and theft reductions. This does not mean that worker selection is unimportant in our story. In fact, those workers who stole under the weaker monitoring regime appear to self-select out of the more highly-monitored restaurants, perhaps to other more easily pilfered establishments.

Each of these results is highly consistent with a multi-tasking story where workers (agents) seek to trade off costly effort for income from either productivity under a pay-for-performance scheme or theft. Increased monitoring by management (principal) reduced the net gains from theft, necessarily increasing the equilibrium effort allocation toward productive behavior. In such a model, where workers are free to select out of the firm, increased monitoring also makes outside options more attractive, thereby increasing the likelihood of attrition for all workers who previously derived any income from theft. We note, however, that other cost-based worker activities remain unobservable in our data. We cannot, for example, observe whether reducing one type of theft (stealing revenue) through monitoring increases other forms of theft or misconduct such as inventory shrinkage. Given Olken’s (2007) results on substitution across types of corruption, such costs may very well exist and thereby reduce the profit gains from monitoring.

Another possible explanation for our results is that Restaurant Guard, by reducing the effort or attention required of managers toward theft monitoring, frees them to focus on managing service and food quality. Such a reallocation of managerial effort across dimensions could also result in the productivity and service quality improvements observed in our data. Although we are unable to separate these two mechanisms, both are based in the fundament multitasking tradeoff between misconduct and productivity. A technology tool that improves monitoring of employee misconduct has the potential to improve productivity both by providing financial incentives for employees to redirect effort and through freeing managerial attention toward improving production efficiency.

The results in this paper are important for at least three reasons. First, they represent the measurement of an important economic activity, employee theft, that has largely been observed only indirectly or anecdotally in firms. Although there is a considerable literature on corruption (e.g. Olken and Barron 2009), direct evidence on illegal behavior by firm employees is rare in the economics literature. Nagin et al. (2002) is an exception, demonstrating employee reductions in fraud following audit increases. We are able to show not only the direct effect of monitoring on theft, as they do, but also the secondary employee adjustments to other productive tasks to account for lost income. Second, our results illustrate the value of information technology when it complements human resource practices that motivate productive effort. Similar to arguments made by Bloom and colleagues (2012), the pay for performance system in American restaurants is likely important in how the IT monitoring system in our setting redirects effort from theft toward productivity. Finally, our results suggest a counterintuitive and hopeful pattern in human behavior: employee theft is a remediable problem at the individual employee level. While individual differences in moral preferences may indeed exist, realigning incentives through organizational design can have a powerful effect in reducing corrupt behaviors. This runs counter to the common view in the human resource management literature that productivity and integrity is largely about selection rather than managerial practice or technology (e.g. Ones et al. 1993). We show that firms can use information about employee theft not simply to fire the culprits, but rather to alter their behavior in ways that improve productivity.