05 November 2021

Australia and NZ: ‘Reasonable Efforts’ to Join the Hague Agreement on Industrial Designs Mean Nothing

Sign hereRecently, both Australia and New Zealand have reached ‘agreement in principle’ on proposed free trade agreements (FTAs) with the UK.  Details of the Australia-UK agreement in principle can be found on the Australian Department of Foreign Affairs and Trade (DFAT) website, while the NZ-UK agreement in principle is available from the NZ Foreign Affairs and Trade website.  Each document states that Australia/NZ will make all reasonable efforts to join the UK as members of the Hague Agreement, which provides an international registration system for industrial designs.  An article which appeared on the Lexology site last month stated that these developments imply that ‘Australia has (finally!) agreed to join the Hague Agreement on Industrial Designs’.

This is not true.  I do not see Australia joining the Hague Agreement in the foreseeable future, Australia-UK FTA notwithstanding.  I am less familiar with the political position in New Zealand, but suspect that the situation is not much different in the Land of the Long White Cloud.

Here is a fun fact…  Article 17.1(5) of the Australia-US Free Trade Agreement (AUSFTA), which entered into force on 1 January 2005, states that:

Each Party shall make its best efforts to comply with the provisions of the Geneva Act of the Hague Agreement Concerning the International Registration of Industrial Designs (1999), and the Patent Law Treaty (2000), subject to the enactment of laws necessary to apply those provisions in its territory.

Yet here we are, nearly 17 years later, and Australia is still not a member of the Hague Agreement.  It would seem that the phrase ‘best efforts’ in a trade agreement basically amounts to nothing more than a promise to think about it over an unspecified – and potentially indefinite – time frame.  I suspect, therefore, that an undertaking to make ‘reasonable efforts’ in an agreement in principle is code for ‘they want us to do it; we have no plans to commit to doing it; but we do not want to hold up negotiations by actually saying no.’

And there are very good reasons – namely three separate processes of review and consultation since 2012 – for believing that Australia has no intention of joining the Hague Agreement any time soon.

How Does the Hague Agreement Work?

The Hague Agreement Concerning the International Registration of Industrial Designs allows applicants to register an industrial design by filing a single application with the International Bureau of the World Intellectual Property Organization (WIPO).  An international design application may include up to 100 designs, provided they all belong to the same class of the International Classification for Industrial Designs (Locarno Classification).  Applications may be filed in English, French or Spanish, must contain reproductions of the industrial design(s), and must designate at least one Contracting Party.

There are currently 75 Contracting Parties, including the USA, the UK, the European Union, Canada, Japan, and South Korea.

While the Hague system streamlines filing, and may simplify registration of designs in member countries, it does not bypass national examination processes.  A designated Contracting Party may refuse protection within a period of up to 12 months from the date of publication of the international registration, based upon a failure of the application to satisfy national requirements for registration.  Generally, such a refusal is equivalent to an initial examination report, to which the applicant may respond in an effort to overcome whatever objections have been raised.

If Australia were to join the Hague Agreement, this streamlined international registration system would become available to Australian applicants.  However, it would also require Australia to amend its design registration laws to be compatible with requirements of the 1999 Geneva Act of the Agreement, and to accept applications from applicants in other member countries via the Hague system.

Why Has Australia So Far Resisted Joining the Hague Agreement?

While membership of the Hague Agreement would provide benefits to Australians seeking foreign design rights – including (potentially) simplified procedures and reduced costs – it is not clear that these benefits would outweigh a number of perceived disadvantages to Australia in joining the Hague system.

Between 2012 and 2015, the Australian government’s Advisory Council on Intellectual Property (ACIP) conducted a review of the designs system.  In its final report, ACIP noted a number of disadvantages to Australia in joining the Hague Agreement.  Principal among these was the requirement to extend the maximum term of protection of registered designs in Australia from 10 to 15 years.  While ACIP received a number of submissions supporting a longer term, regardless of whether or not Australia became a Hague member, its report stated that ‘ACIP is hesitant to recommend an extension of exclusive rights in the absence of any economic or empirical evidence suggesting that such an extension is necessary.’  It observed that extended periods of exclusive rights impose costs on consumers and competing businesses, and that there was no evidence available of any countervailing benefit such as incentivising new designs, or supporting the success of design-intensive Australian businesses.

ACIP also found that joining the Hague Agreement would require the development of new systems and impose additional administrative costs on IP Australia.  Furthermore, it considered that the benefits of the Hague system were not clear, due to the relatively low usage of the system at the time, and the fact that a lack of harmonisation of laws and procedures among member countries meant that the international application process was not, in practice, as uniform, streamlined, and low-cost as might be hoped.  At that stage, however, the US and Japan had only recently joined the system, while Canada and the UK were yet to join.  ACIP therefore recommended that Australia continue to monitor the operation of the Hague system, and undertake a detailed investigation into the requirements for membership.  The government accepted this recommendation, and assigned the task to IP Australia.

Then, in 2016, the Productivity Commission (PC) completed its inquiry into Australia’s IP arrangements.  In its final report, the PC was not in favour of extending the maximum duration of registered design rights from 10 to 15 years, citing a recurring theme of its inquiry that ‘the aim is to provide only as much protection as is needed to encourage additional innovation’, and concurring with ACIP that there was no evidence that extending the term of protection would increase design innovation.  The PC also supported the ongoing investigation commenced by IP Australia, and advocated for a ‘wait and be convinced approach to joining the Hague Agreement’.

In 2018, IP Australia completed its economic analysis of the costs and benefits to Australia of joining the Hague Agreement.  In its report, published for consultation in March 2018, IP Australia concluded that ‘it appears that the economic costs to Australia of joining the Hague Agreement outweigh the benefits’.  Reasons for this included:

  1. non-residents filed almost three times more designs into Australia than resident Australians filed abroad, non-residents maintain these registrations longer on average, and joining the Hague Agreement could increase the disparity; and
  2. the Hague system remained underutilised – despite the recent accession of the USA, Japan, and South Korea, less than 10 per cent of global non-resident design applications were filed through the Hague Agreement in 2016.

In an effort to forecast the impact that joining the Hague Agreement may have, IP Australia used the most positive and negative experiences of other accession countries as upper and lower bounds. 

Following revisions to its economic analysis based on feedback received during consultation on the report, IP Australia found that the ‘net present cost to Australia of the quantified impacts is estimated to be between $17.9 million and $87.3 million over ten years, with $43.1 million being the best estimate.’

Conclusion – Still No Reason to Join

As far as I am aware, nothing has changed in the last three years that would substantively alter IP Australia’s conclusion that, from an economic perspective, joining the Hague Agreement would impose a net cost on Australia.

Nonetheless, IP Australia has made the point that its ‘economic analysis is only one piece of evidence and does not preclude a decision to join the Hague Agreement based on other policy considerations’.  Perhaps inking a new free trade agreement with the UK may constitute such a consideration?

Maybe, but it is worth keeping in mind that the PC was quite critical of the approach taken by the Australian government in negotiating IP provisions in trade agreements.  In fact, it recommended the adoption of a number of guiding principles, including ‘avoiding the inclusion of IP provisions in bilateral and regional trade agreements and leaving negotiations on IP standards to multilateral fora’ and ‘explicitly considering the long-term consequences for the public interest and the domestic IP system in cases where IP demands of other countries are accepted in exchange for obtaining other benefits’.

In this context, an undertaking to make ‘reasonable efforts’ in a mere agreement in principle seems highly unlikely to evolve into a firm commitment in a final Australia-UK FTA, particularly considering that a corresponding provision in the AUSFTA has failed over 17 years to result in Australia joining the Hague Agreement.

In short, Australia signing up to the Hague Agreement?  Not gonna happen.  And, for very similar reasons, my guess is that the same can be said for New Zealand.


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