01 May 2016

Australian Productivity Commission Releases Draft Report on Intellectual Property Arrangements

PC Draft Report CoverOn 18 August 2015 the Australian Government (through the then-Treasurer Joe Hockey) directed its Productivity Commission (PC) to undertake a 12 month public inquiry into Australia's intellectual property (IP) system.

The PC’s draft report was released on 29 April 2016.  and is open for further submissions and feedback up until Friday, 3 June 2016.  The PC then anticipates holding public hearings during June, most likely in Sydney, Melbourne and Canberra.  The final report to the Government (whomever that may be, given that an election is anticipated in the meantime) is due in August.

It seems safe to say that many of the PC’s draft recommendations will prove controversial.  Of course, being a review of the entire IP system it takes in copyright, trade marks, registered designs, plant breeder’s rights, and various related areas of public policy.  As usual, however, my focus here is to summarise the draft recommendations relating to the patent system in particular.  In future articles I will be discussing some of these proposals in more detail.

‘Patent System Fundamentals’

In the PC’s view, the 2014 Raising the Bar reforms to the standards required in order to obtain a patent in Australia did not go far enough, particularly in relation to the test of inventive step.

Firstly, the PC proposes that the statutory test for inventive step should be simplified and broadened, in line with major foreign jurisdictions:

The Australian Government should amend ss. 7(2) and 7(3) of the Patents Act 1990 (Cth) such that an invention is taken to involve an inventive step if, having regard to the prior art base, it is not obvious to a person skilled in the relevant art.

I can hardly disagree with this proposal, at least.  I have said as much myself (see Can the High Court Fix Australia’s Obviousness Problem?) and the PC has kindly cited that article in its own discussion of the issue.

The PC would also like to see the required level of ‘inventiveness’ over the prior art raised, although it is somewhat vague about how this might be achieved, given that it is a matter that is largely in the hands of the courts, and may also be subject to obligations under international treaties.

The PC also thinks that the Patents Act should include an ‘objects clause’, and that the Patent Office and the courts should be bound to have regard to those objects:

The Australian Government should incorporate an objects clause into the Patents Act 1990 (Cth) (Patents Act). The objects clause should describe the purposes of the legislation as being to enhance the wellbeing of Australians by providing patent protection to socially valuable innovations that would not have otherwise occurred and by promoting the dissemination of technology. In doing so, the patent system should balance the interests of patent applicants and patent owners, the users of technology — including follow–on innovators and researchers — and Australian society as a whole.

The Australian Government should amend the Patents Act such that, when making a decision in relation to a patent application or an existing patent, the Commissioner of Patents and the Courts must have regard to the objects of the Patents Act.

My only comment on this is that it does not seem very workable to me.

The PC would also like to see official fees being employed as a control on the duration and breadth of patent rights:

The Australian Government, with input from IP Australia, should explore the costs and benefits of using higher and more pronounced renewal fees later in the life of a standard patent, and making greater use of claim fees to limit the breadth of patent protection and to reduce strategic use of patents.

I can see that setting higher maintenance fees in the later years of a patent might well be effective in causing patentees to abandon patents that are no longer delivering sufficient commercial value.  However, I am not sure why the PC believes that applying claim fees will have any effect on the breadth or strategic use of patents.

‘Innovation Patents’

The PC’s draft recommendation in relation t the innovation patent system is brief, and entirely predictable:

The Australian Government should abolish the innovation patent system.

I do not agree, although I do think that the innovation patent system should be reformed.

‘Business Methods and Software Patents’

The PC thinks that there is an identifiable category of subject matter, which it calls ‘BM&S’ (i.e. ‘business methods and software’), and that:

The Australian Government should amend s. 18 of the Patents Act 1990 (Cth) to explicitly exclude business methods and software from being patentable subject matter.

This is, in my view, a bad recommendation which is based on a flawed analysis and poor understanding of the role and nature of software in modern innovation.  I will be covering this at length in a separate article.

‘Pharmaceutical patents’

The PC draft report suggests that extensions of patent term for pharmaceutical products should be reined in, and that the activities that competitors may engage in during the extension period should be expanded:

The Australian Government should reform extensions of patent term for pharmaceuticals such that they are calculated based only on the time taken for regulatory approval by the Therapeutic Goods Administration over and above one year.

Regardless of the method of calculating their duration (draft recommendation 9.1), extensions of term in Australia should only be granted through a tailored system which explicitly allows for manufacture for export in the extension period.

Actually, I must say that I am a little surprised that the PC has not proposed more significant restrictions on terms extensions, such as were suggested in the previous government’s Pharmaceutical Patents Review.

The PC also considers that there should be no further extension to the term of protection for data relating to biologics (although I was under the impression that this was already settled, anyway, following the conclusion of the Trans Pacific Partnership Agreement negotiations).

There should be no extension of the period of data protection, including that applicable to biologics.

Further, in the context of international negotiations, the Australian Government should work with other nations towards a system of eventual publication of clinical trial data in exchange for statutory data protection.

So-called ‘pay-for-delay’, or reverse payment arrangements, are also of concern to the PC.  These are forms of patent dispute settlement agreements in which are patent holders pay competitors who have threatened to enter the market and challenge the validity of the patent, in exchange for a delaying in the competitor’s entry to the market.

The Australian Government should introduce a transparent reporting and monitoring system to detect any pay-for-delay settlements between originator and generic pharmaceutical companies. This system should be administered by the Australian Competition and Consumer Commission.

The monitoring should operate for a period of five years. Following this period, the Australian Government should institute a review of the regulation of pay-for-delay agreements (and other potentially anticompetitive arrangements specific to the pharmaceutical sector).

Finally, the PC would like to see existing provisions for pharmaceutical companies to provide information on their Australian R&D activities when requesting extensions of patent term clarified, and enforced more strictly, to enable the real benefits (or otherwise) of the extension or term regime to be evaluated:

The Australian Government should reform s. 76A of the Patents Act 1990 (Cth) to improve data collection requirements. Thereafter, extensions of term should not be granted until data is received in a satisfactory form.

After five years of data has been collected, it should be used as part of a review to consider the ongoing costs and benefits of maintaining the extension of term system.

Information Requests

The PC is also seeking input on a number of specific topics.  I am simply going to reproduce the patent-related requests below.  Readers with particular interest and experience in these areas should refer to the draft report for more details on the PC’s objectives and requirements.

The Commission is seeking further information from participants on the likely costs and benefits from reforming patent filing processes. Would there be any unintended consequences from requiring applicants to construct their claims in the two–part form that applies in Europe or articulating why their invention is non–obvious? Are there better approaches available?

The Commission is seeking information from participants on the costs and benefits of an exemption from infringement for experimental activities that use a patented invention. Are there any examples in Australia where the efforts of researchers have been hindered by the lack of such an exemption?

What approaches or tests could be used to differentiate between inventions where the contribution of embedded software is trivial and inventions where the contribution of embedded software is genuinely deserving of patent protection? Should such tests be implemented in law or patent examination practices?


Obviously, I encourage interested stakeholders to read the draft report, and to consider making submissions on aspects of interest or concern.  I anticipate making submissions in relation to select draft recommendations, and will be writing about these is upcoming articles.  I will welcome any comments and discussion here, or on those future articles, that might inform or clarify my thinking on the relevant issues.


Post a Comment

Copyright © 2014
Creative Commons License
The Patentology Blog by Dr Mark A Summerfield is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Australia License.