Terry Cutler chaired a panel that released the report on September 9. It contains 72 recommendations designed to encourage and develop innovation in Australia.

Chapter seven of the report deals with IP and criticises judges who, in ruling that software and business methods could be patented "overturned important 'gatekeeping' principles of the patent system that existed until the early 1980s". It quotes a section of Patent Failure, a recent book by James Besson and Michael Meurer, which states that software, business method and finance patents are far more likely to be litigated than other patents.

This is irrelevant, according to Robert Cooper, partner of Mallesons Stephen Jaques in Melbourne: "That scenario doesn't occur in Australia. To rely on it seems misconceived," he told Managing IP . Cooper said that in fact, there has been very little litigation in Australia based on software, business method or finance patents.

But there is general agreement that some reform of Australia's law governing inventive step may be needed. In the case of Lockwood v Doric the Australian High Court stated that "a scintilla of invention" is all that is needed to support a patent in Australia. IP Australia, in its submission, stated: "The Australian High Court has recognized that the level of invention required to obtain a patent in Australia is lower than elsewhere."

The report also tries to deal with the problem of the high cost of patent litigation deterring smaller companies from litigation. It states that a review by the Attorney-General to streamline civil procedure may not do enough and that "more radical experiments might be tried".

Recommendation 7.4 states that firms involved in IP litigation should have the right to opt out of "appellate double jeopardy". This means that a firm could choose at first instance not to appeal the decision unless it funds the costs of both parties during that appeal. If any party chooses to take this option, both sides would be bound by it.

But this proposal could have the opposite effect to that intended, according to Cooper, because the richer companies involved in litigation would be able to use this rule to their advantage: a big company could opt to use this system and if it loses at first instance it has the resources to fund both sides of an appeal, but a small company faced with the same legal bill might be unable to meet the costs.

Senator Kim Carr, Minister for Innovation, Industry, Science and Research, described the review as "a vital first step in harnessing the potential of innovation and putting it to work for the benefit of all Australians".

Comments on the innovation review can be made using an online form until September 30. The report will be followed by a white paper that is due in December this year.