Introductory Info

Date introduced: 25 July 2019
House: Senate
Portfolio: Industry, Innovation and Science
Commencement: Schedule 1, Part 1, and Schedules 2 to 7 will commence the day after Royal Assent. Schedule 1, Part 2 commences 12 months after Royal Assent. Schedule 8 commences six months after Royal Assent. The other Parts of the Bill will commence the day of Royal Assent.

The Bills Digest at a glance

The Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019 (the Bill) contains eight Schedules to amend the Patents Act 1990. It implements the second part of the Government response to the recommendations of the Productivity Commission in 2016 following a broad-ranging review into the intellectual property system, as well as making some further amendments to the Patents Act and the Designs Act 2003.

The Bill also includes a minor technical amendment to the Trade Marks Act 1995.

The substantive reforms are found in Schedules 1 to 4:

• Schedule 1 contains the Government’s responses to the Productivity Commission’s 2016 report regarding the Patents Act. It is in two parts:
  • Part 1 introduces an objects clause for the Act
  • Part 2 phases out the innovation patent system
• Schedules 2, 3 and 4 amend Crown use and compulsory licensing provisions, in response to recommendations in an earlier 2013 Productivity Commission Report:
  • Schedule 2 amends the Crown use provisions in the Patents Act
  • Schedule 3 amends the Crown use provisions in the Designs Act and
  • Schedule 4 amends the compulsory licensing provisions in the Patents Act.

There have been some objections from stakeholders to the above reforms, particularly regarding the phase out of the innovation patent system and the proposed objects clause. However, other stakeholders have expressed support and most submissions could be considered to be representing the particular interests of the stakeholders involved in an area of law that necessarily seeks to balance competing interests. The major reforms were originally proposed following independent reviews and have been subject to lengthy consultations over several years.

Purpose of the Bill

The purpose of the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019 (the Bill) is to amend the Patents Act 1990 to implement the second part of the Government response to recommendations of the Productivity Commission following a broad-ranging review into the intellectual property system, as well as making some further amendments to the Patents Act and the Designs Act 2003.

The Bill also includes a minor technical amendment to the Trade Marks Act 1995.

Structure of the Bill

The Bill contains eight Schedules.

Schedule 1 contains the Government’s responses to the Productivity Commission’s 2016 report recommendations regarding the Patents Act. It is in two parts:

• Part 1 – introduces an objects clause for the Patents Act
• Part 2 – phases out the innovation patent system.

Schedule 2 amends the Crown use provisions in the Patents Act.

Schedule 3 amends the Crown use provisions in the Designs Act.

Schedule 4 amends the compulsory licences provisions in the Patents Act.

Schedule 5 amends the provisions dealing with seals in the Patents Act and Trade Marks Act.

Schedule 6 amends the requirements for patent specifications set out in the Patents Act.

Schedule 7 amends the protection of information provisions under the Patents Act.

Schedule 8 amends the requirements for verified translations of international applications under the Patents Act.

Background

Intellectual Property (IP) rights are a complex legal area and IP protection can take a variety of forms. In general terms, IP protection grants the creators or users of IP (such as inventors, designers, authors, trade mark owners and plant breeders) limited exclusive rights in order to encourage innovation and competition.

Many reforms of various aspects of Australia’s IP system have been proposed or implemented over the course of recent decades, and many of these reforms have been contested, with competing views being expressed by interested stakeholders.[1] As the IP system acts to balance the competing rights and interests of different users and the public, views on the desirability of reforms are often representative of the competing interests of different users of the IP system.

A comprehensive summary of the many reviews, inquiries and consultations that have led to the reforms introduced in this Bill is provided in IP Australia’s submission to the Senate Economics Legislation Committee inquiry into the Bill.[2] IP Australia is the government agency responsible for administering the Acts amended by the Bill. Table 1 provides more information on the IP rights administered by IP Australia and dealt with in the Bill.

Productivity Commission report 2016

On 18 August 2015, the then Treasurer, Joe Hockey, requested that the Productivity Commission undertake a 12 month inquiry into Australia's IP arrangements, including their effect on investment, competition, trade, innovation and consumer welfare. In the terms of reference for the inquiry, he stated:

The Australian Government wishes to ensure that the intellectual property system provides appropriate incentives for innovation, investment and the production of creative works while ensuring it does not unreasonably impede further innovation, competition, investment and access to goods and services.[3]

The Productivity Commission’s final report, titled Intellectual Property Arrangements, (the 2016 PC Report) was handed to the Australian Government on 23 September 2016.[4] The Government’s response to the report’s recommendations was mixed.[5] Some recommendations were supported, some supported in principle and a number of recommendations were not supported. For example, the report’s recommendation that the Government implement a fair use copyright exception in Australia was noted but not supported. Instead the Government indicated it would ‘further consult’.[6]

Government response

On 21 November 2017, IP Australia announced its intention to implement the supported recommendations in a staged manner through two separate pieces of proposed legislation.[7] The first part, the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Act 2018 (the Part 1 Act) was introduced and passed in 2018. The Part 1 Act contained the initial stage of the Government’s response to the 2016 PC Report, as well as other measures to reform intellectual property laws. It introduced amendments to the Copyright Act 1968, Designs Act, Olympic Insignia Protection Act 1987, Patents Act, Plant Breeder’s Rights Act 1994 and Trade Marks Act.[8]

The second part of the Government’s response is contained in Schedule 1 of the Bill. The outstanding recommendations from the 2016 PC Report that are addressed in the present Bill are:

• the inclusion of an objects clause in the Patents Act[9] and
• the abolition of the innovation patents system.[10]

As part of the Government’s response to the 2016 PC Report, the Government noted that it would consult further on the recommendation relating to the objects clause.[11] The proposed amendments to the innovation patent system were not included in the Part 1 Act. The Explanatory Memorandum states that the provisions of Schedule 1 of the Bill—which deal with both these recommendations—have now been drafted in light of public consultation conducted by IP Australia between 2017 and 2018.[12]

Productivity Commission report 2013

The Productivity Commission also produced an earlier report into aspects of the patent system following an inquiry in 2013, Compulsory Licensing of Patents (the 2013 PC Report),[13] which contained recommendations relating to the compulsory licensing and crown use provisions of the Patents Act.

The relevant recommendations from the 2013 PC Report are:

• Recommendation 6.2: Amend the compulsory licensing provisions of the Patents Act to replace the ‘reasonable requirements of the public’ test with a new public interest test
• Recommendation 7.1: Amend the Crown use provisions of the Patents Act to clearly include use for provision of a service that the Commonwealth, a state or territory has primary responsibility for providing or funding and
• Recommendation 7.2: Amend the Crown use provisions of the Patents Act to require the Crown to better recognise the rights of the patentee, in particular to attempt to negotiate use, to provide a statement of reasons, the use to be approved by a Minister and for remuneration to be determined on the same basis as that for a compulsory licence.[14]

Government response

The Government’s response to the 2016 PC Report stated that the Government would consult further on those recommendations from the 2013 PC Report during the implementation of the response to the 2016 PC Report, as the earlier recommendations were directed to the same aim of ‘ensuring that there is an appropriate balance in the patents system’.[15] The response to the earlier recommendations has resulted in the amendments in Schedules 2 to 4 of the Bill.

Innovation Patents

The innovation patent was introduced in 2001 to provide a lower cost, lower inventive threshold, shorter term patent to encourage incremental innovation and to be more accessible to small and medium businesses and private inventors.[16] The innovation patent system was developed to replace an earlier shorter term patent system, the petty patent system, in response to recommendations of the 1995 Advisory Council on Industrial Property (ACIP) report on the Review of the Petty Patent System.[17]

As noted above, the 2016 PC Report considered the innovation patent system at some length, including its overall impact on the economy and innovation in Australia. Although the 2016 PC Report recommended that the system be abolished,[18] submissions to the Exposure Draft of the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill 2017, which included measures to bring this about,[19] indicated that some stakeholders opposed this,[20] and the measures were not included in the 2018 Bill as introduced.[21] Further consultation was undertaken through the exposure draft of the current Bill.[22]

Innovation patents can have a term of up to eight years as opposed to 20 years for a standard patent (or up to 25 years for a pharmaceutical patent), only require an ‘innovative step’ which is a lower threshold than the ‘inventive step’ which a standard patent requires, and are limited to five claims.[23] Perhaps most importantly, they can be granted following a formalities check with no examination necessary. This means that no assessment of the validity of the subject matter has been undertaken. However, to be used in an enforcement action an innovation patent must first be examined and ‘certified’. This step incurs additional cost and the risk that the patent will be found not to be valid and be revoked. Importantly, prior to certification the innovation patent, while still technically a granted patent, does not possess the legal force of a standard patent.[24]

Certain aspects of the system, such as granting without examination and the lower ‘innovative’ threshold, were contentious when the system was introduced in 2001 and led to criticism from various commentators as well as members of the patent attorney profession. Criticisms included suggestions that an innovation patent would be worthless, particularly compared to a standard patent or to the petty patent system which it replaced.[25] The responses to the system included, for example, a patent attorney applying for an innovation patent for a ‘circular transportation facilitation device’, in other words a wheel, apparently to highlight the potential for the system to be no more than a ‘rubber stamp’.[26]

Despite this initial resistance, the innovation patent system has attracted applicants looking to protect lower level innovations[27] and has been defended by the patent attorney profession and some small to medium sized enterprises (SMEs) over the course of several subsequent inquiries, although many larger companies remained opposed to it.[28] These inquiries, leading up to the 2016 PC Report, have found, however, that on balance the system is of little economic benefit to industry or the Australian economy and should be abolished.[29] Further, the 2016 PC Report pointed out the following specific problems with innovation patents, highlighting in particular the ways in which they may cause problems for other innovators and for competition in general:

• The innovative step is lower than the threshold for standard patents, which itself is too low. This contributes to a multitude of low value innovation patents, creating uncertainty for other innovators and financiers, and increasing the likelihood that patent thickets will develop.
• Innovation patents are used strategically, either to target alleged infringers of standard patents or to increase uncertainty over the scope of rights for competitors.[30]

Crown Use and Compulsory Licensing

Crown use provisions in the Patents Act and Designs Act allow Australian governments (or another party authorised by them) to use patented technology and registered designs for the purposes of government or a government agency, without the authorisation of the patentee or registered owner. It is a seldom used mechanism.[31]

In general, use is considered to be Crown use or ‘use for the services of the Commonwealth or a State’ where the use of the patent or design is necessary for the proper provision of those services within Australia.[32] The terms of use and remuneration or compensation of the owner are to be agreed between the Crown and owner or may be determined by a court if no agreement is reached.[33]

Compulsory licensing provisions in the Patents Act provide another mechanism that permits a patented invention to be used without the authorisation of the patentee. Under compulsory licensing the owners of a patent may be compelled to allow others to use their patented invention under a licence in certain circumstances such as where a patent that could benefit the community is being underutilised.[34] The current compulsory licence provisions in the Patents Act allow the Federal Court to ‘order a compulsory licence to be granted if the reasonable requirements of the public are not being met with respect to a patented invention’, or ‘if the patentee has engaged in restrictive trade practices in connection with the patent under the Competition and Consumer Act 2010’ and, as it is a licence, ‘the patentee must be paid an agreed amount of remuneration, or an amount of remuneration determined by the court’.[35]

The provisions in the Patents Act relating to Crown use and compulsory licensing have been the subject of commentary, consultation and recommendations in various reports over many years including an Australian Law Reform Commission (ALRC) report in 2004 and ACIP reviews in 2005 and 2010, as well as the 2013 PC Report.[36] These reports have highlighted shortcomings in both mechanisms. The Crown use provisions have been found to lack certainty as to their scope and which government agencies may be able to utilise them, as well as needing better protections for the patentee or owner.[37] The compulsory licensing provisions were considered to be less efficient or effective than they could be, particularly the ‘reasonable requirements of the public’ test which was not consistent with comparable provisions in other laws and which conflates the reasonable requirements of the public with the interests of Australian industry.[38]

As discussed above, the 2013 PC Report made specific recommendations for the reform of the Crown use provisions (Recommendations 7.1 and 7.2) and the compulsory licensing provisions (Recommendation 6.2) in the Patents Act. The amendments in the present Bill implement these recommendations.

Committee consideration

Economics Legislation Committee

The Bill was referred to the Economics Legislation Committee for inquiry and report on 1 August 2019. The report was released on 4 September 2019.[39] Details of the inquiry are at the inquiry homepage.

The Committee recommended that the Bill be passed.[40] Additional comments from Australian Labor Party (Labor) and Centre Alliance Senators are discussed below.

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills made no comment on the Bill.[41]

Policy position of non-government parties/independents

In additional comments to the Report of the Economics Legislation Committee, Labor Senators noted their concerns, based on a number of submissions, that the abolition of the innovation patent system without any alternative system being introduced could create a situation where SMEs lacked the assistance necessary to access the patent system.[42]

The Labor Senators called on the Government to:

... immediately address the need for greater support for Australian SMEs in protecting their intellectual property through the standard patent when the innovation patent is abolished...[and] immediately make public the 'targeted assistance' that will stimulate innovation for Australian SMEs.[43]

Senator Patrick of Centre Alliance also provided additional comments in the Committee Report, noting the concerns of SMEs regarding the value of innovation patents to them, and recommending that the provisions repealing the innovation patent system be removed from the Bill.[44] Senator Patrick has circulated amendments to achieve this and to remove the proposed objects provision.[45]

Position of major interest groups

IP Australia conducted a public consultation on an Exposure Draft of the Bill and associated Regulations during 2018. [46] The bulk of submissions to this consultation that have been published by IP Australia were concerned with the objects clause and the proposed abolition of the innovation patent system.[47]

Further submissions were received in response to the Economics Legislation Committee inquiry into the Bill. These submissions also raised concerns with the objects clause, the abolition of the innovation patent system, and the crown use and compulsory licensing amendments, and are discussed below in the appropriate areas of the ‘Key issues and provisions’ section of the digest.[48]

Financial implications

The Government stated in the Explanatory Memorandum that it expected the Bill to have no financial implications for the Commonwealth.[49]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[50]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no concerns with the Bill.[51]

Key issues and provisions

Objects clause

Part 1 of Schedule 1 introduces an objects clause into the Patents Act.

Item 1 inserts proposed section 2A which provides that the object of the Act ‘is to provide a patent system that promotes economic wellbeing through technological innovation and the transfer and dissemination of technology’.

The object clause goes on to note that ‘the patent system balances over time the interests of producers, owners and users of technology and the public’.

This object clause is very similar to that called for in Recommendation 7.1 of the 2016 PC Report,[52] with the addition only of the term ‘economic’ to qualify ‘wellbeing’, and ‘the public’ being added to the list of interested parties.

The issue of an objects clause has however been contested for several years, with some commentators claiming that it is necessary to legislatively clarify the objects of the system in order to better guide judicial decisions on patentable subject matter, while others believe that it could unduly restrict the scope of what would be considered to be patentable subject matter. IP Australia stated that the objects clause:

... will clarify the underlying purpose of the Patents Act and reduce uncertainty about the operation of the patent system. Courts will also be able to rely on the objects clause to assist in the interpretation of the provisions of the Patents Act, where the meaning of a provision is unclear.[53]

In a submission to the Committee, the Intellectual Property Committee of the Business Law Section of the Law Council of Australia (Law Council) expressed the view that the Act should be drafted clearly enough that an objects clause is not necessary and considered that an objects clause may cause uncertainty. The Law Council submitted that if the objects clause proposed by the Bill was to be inserted in the Act, ‘(t)he words “and the transfer and dissemination of technology” should be deleted’ and that the ‘clause should include a reference to a purpose of the Act being to comply with Australia’s international obligations’.[54]

The Institute of Patent and Trade Mark Attorneys of Australia (IPTA) also oppose the introduction of an objects clause, claiming:

... despite comments suggesting the contrary in the Explanatory Memorandum, it is clearly intended to significantly change the manner in which judicial patent decisions are made in relation to many aspects of patent validity, including the assessment of patent eligible subject matter and inventive step. In particular, the introduction of the word ‘technological’ to qualify the term "innovation" has the potential to cause significant misunderstandings and significant harm.[55]

The Australian Chamber of Commerce and Industry also submitted that Schedule 1 should not proceed and that ‘the term ‘technological innovation’ in the object clause should be abandoned as it will add confusion, costs and may act to exclude certain types of inventions’.[56]

As set out above, Senator Patrick of Centre Alliance has circulated amendments that would remove the proposed objects provision.^[57]

Innovation Patents

Part 2 of Schedule 1 introduces amendments to the Patents Act that will abolish the innovation patent system by setting a cut-off date beyond which no new innovation patents will be accepted.

Innovation patents with a priority date before the amendments come into force (12 months from Royal Assent) will still be accepted and can be examined and/or maintained for their full term as at present, but no further innovation patents will be able to be lodged or granted after that date.[58]

Standard patents will be unaffected, and these amendments do not introduce any alternative form of lower-tier patent system.

These amendments implement Recommendation 8.1 of the 2016 PC Report, discussed above.

Section 52 of the Patents Act provides that a formalities check must be undertaken for applications for innovation patents, and states that if the application passes the formalities check it must be accepted by the Commissioner. Item 4 inserts proposed subsection 52(3) which provides that the formalities check for an innovation patent will only be complied with if the date of the patent (if granted) would be before the commencement date of the proposed subsection. This date will be 12 months from the day of Royal Assent. The impact of this amendment is to allow innovation patents to continue to be lodged for 12 months from the day of Assent.

Section 101B of the Patents Act prescribes the matters which must be considered during an examination of an innovation patent. Item 5 of Schedule 1 inserts proposed paragraph 101B(2)(ha) which provides that one of the matters which must be examined is whether each claim in the specification of the patent has a priority date before the date of commencement of the subsection. That date will be 12 months after Royal Assent.

Section 101E sets out the requirements and procedure for issuing a certificate of examination for an innovation patent. Item 7 inserts proposed subparagraph 101E(1)(a)(viiia) which adds the requirement that an innovation patent may only be issued a certificate of examination if ‘each claim in the complete specification has a priority date that is before the day paragraph 101B(2)(ha) commences’.

Together these amendments mean that examination will consider if innovation patents have been filed within 12 months of the date of assent or earlier and will only allow innovation patents to be certified if that is the case.

The Australian Chamber of Commerce and Industry (ACCI) submitted that Schedule 1 should not proceed and that the Government should ‘maintain and amend the innovation patent through the addition of mandatory examination and increasing the inventive step threshold, but to a lower level than the current inventive step threshold of the standard patent system’, and called on the Government to ‘consider implementing concurrent measures to pursue the primary objectives of the innovation patent system, in particular the objective aimed to encourage and support SMEs to innovate and commercialise novel ideas’. [59] The submission explained the ACCI’s concerns as follows:

Without a second-tier system, applicants will need to exhaust significantly more resources in applying for, maintaining and defending their intellectual property rights... Over 50 countries possess a second-tier patent system and Australia has had such a system since the late 1970s. While there have been obvious issues with the Innovation Patent system, it has not been given a chance to succeed as there have not been any constructive changes since its introduction in 2001. Recommendations made by IPTA and the Productivity Commission to include mandatory examination and the inventive step may address this issue.[60]

Bodies such as IPTA and the Law Council also opposed the abolition of the innovation patent system in submissions to the Senate Inquiry. The Law Council did however acknowledge some failings with the system, but felt they could be dealt with through reform, rather than abolition.[61]

While many other SMEs also provided submissions opposing the abolition of the innovation patent system,[62] larger enterprises Cochlear and ResMed expressed support for the abolition, but considered that the Bill should be amended to more quickly end any patents relying on the innovation patent system, such as by prohibiting filing and examination of innovation patents immediately upon commencement of the Act.[63]

As set out above, Senator Patrick of Centre Alliance has circulated amendments that would remove Part 2 of Schedule 1 from the Bill.^[64]

Crown Use

Schedule 2 contains amendments to the Crown use provisions of the Patents Act.

These amendments implement Recommendations 7.1 and 7.2 of the 2013 PC Report.[65] As discussed above, those recommendations called for amendments ‘to make it clear that Crown use can be invoked for the provision of a service that the Australian, State and/or Territory Governments have the primary responsibility for providing or funding’;[66] and to require:

• the Crown to attempt to negotiate use of the patented invention prior to invoking Crown use
• the Crown to provide the patentee with a statement of reasons no less than 14 days before such use occurs
• Crown use to be approved by a Minister (the relevant Federal Minister or State Attorneys-General)
• that in instances of Crown use, the patentee is entitled to remuneration determined on the same basis as that for a compulsory licence.

The first two requirements should be able to be waived in emergencies. However, in all cases patentees should be provided with immediate notice that their patents have been used, and a statement of reasons as soon as practical thereafter.[67]

Item 5 of Schedule 2 to the Bill inserts proposed section 160A into the Patents Act to provide a definition of when an invention is exploited for Crown purposes. A definition is currently found in subsection 163(3) which provides that ‘an invention is taken for the purposes of this Part to be exploited for services of the Commonwealth or of a State if the exploitation of the invention is necessary for the proper provision of those services within Australia’. Proposed subsection 160A(1) provides that an invention is exploited for Crown purposes where it is exploited for the services of a relevant authority, by the authority or a person authorised by the authority. Proposed subsection 160A(3) substantially maintains the existing definition of exploitation, but defines exploitation for the services of ‘a relevant authority’ rather than of ‘the Commonwealth or of a State’. Item 25 of Schedule 2 repeals and replaces the definition of ‘relevant authority’ in the Dictionary at Schedule 1 to the Patents Act, to provide that in relation to the exploitation of an invention by or for the Commonwealth, a state or a territory (or an authority of the Commonwealth a state or territory), the relevant authority is the Commonwealth, the state or the territory, as the case may be. Currently, ‘State’ is defined (for the purposes of Chapter 17 of the Patents Act) to include the Australian Capital Territory, the Northern Territory and Norfolk Island. That definition will be repealed by item 27 of Schedule 2 to the Bill, with territories instead being covered in the definition of relevant authority.   

Proposed subsection 160A(4) then further expands on the meaning of services of a relevant authority, defining them, as recommended by the PC, as services that are primarily provided or funded by the Commonwealth, a state or territory, or services that are primarily provided or funded by two or more of the Commonwealth, states or territories.

Proposed subsection 160A(1) establishes that an invention is exploited for Crown purposes if it is exploited for the services of a relevant authority and the exploitation is either by the authority or a person authorised in writing by the authority. Proposed subsection 160A(2) provides that such a person may be so authorised before or after the grant of the patent, and even if they are authorised by the patentee or nominated person to exploit the invention. This replaces existing subsection 163(2) which includes the additional ability for a person to be authorised before or after the exploitation of the invention.

Item 7 will repeal and substitute section 163. The provisions of section 163 are then effectively replaced by those of both proposed sections 160A and 163. Subsections 163(2) and (3) are replaced by provisions of proposed section 160A as discussed above.

The existing subsection 163(1) provides that the exploitation of an invention (either a patent or a pending application) is not an infringement of the patent or nominated person’s rights if the exploitation is for the services of the Commonwealth or a State, and the exploitation is by the Commonwealth or a State or a person authorised by them in writing. Proposed subsection 160A(1), discussed above, will now provide the ability for the exploitation to be by the relevant authority or a person authorised by them in writing.

Proposed subsections 163(1), (2) and (3) will replace the provisions of subsection 163(1) with an expanded set of requirements that must be satisfied for the exploitation of a patent or application for Crown purposes to not be an infringement. Proposed subsection 163(1) adds the requirement that the exploitation must be in the following circumstances mentioned in proposed subsection 163(3):

1. the relevant Minister considers that the relevant authority has tried for a reasonable period, but without success, to obtain from the applicant and the nominated person, or the patentee, an authorisation to exploit the invention on reasonable terms;
2. the relevant Minister approves, in writing, the exploitation;
3. the invention is exploited for Crown purposes;
4. if the exploitation is by a person authorised by a relevant authority for the purposes of subparagraph 160A(1)(b)(ii)—the person is authorised by the relevant authority before the exploitation starts;
5. at least 14 days before the exploitation starts, the relevant authority gives the applicant and the nominated person, or the patentee:   
   1. a copy of the approval referred to in paragraph (b); and
   2. a written statement of reasons for approving the exploitation.

Proposed subsection 163(2) adds the requirement that if terms relating to the exploitation have been agreed or determined under section 165, then they must be complied with or the exploitation will be an infringement.

Proposed subsection 163(5) provides that relevant minister means the Commonwealth Minister who has responsibility for the Patents Act, or a state or territory Attorney-General, depending upon which government the exploitation is by or for.

Proposed section 163A deals with Crown exploitation in emergencies. Proposed subsection 163A(3) provides that the circumstances that are required to be met for an emergency exploitation to not be an infringement are:

• the relevant Minister considers that the exploitation is required because of an emergency,
• the invention is exploited for Crown purposes, and
• approval is given in writing before the exploitation begins, as is any authorisation if needed.

Proposed subsection 163(4) provides that the exploitation of an invention in circumstances of an emergency requires the relevant Minister to provide the patentee (or applicant and nominated person) with a copy of the approval and written reasons as soon as practicable after the approval. This is in contrast to the requirement in proposed subsection 163(3) for written notice in other, non-emergency situations, to be provided at least 14 days prior to the exploitation.

Item 11 repeals and substitutes subsection 165(2), which deals with remuneration and terms for crown exploitation. Currently subsection 165(2) provides that the terms for the exploitation of an invention, including remuneration, are as are agreed, or determined by a method agreed, between the relevant authority and the nominated person or the patentee or, in the absence of agreement as are determined by a prescribed court on the application of either party. Proposed subsection 165(1) provides similarly for the terms, including remuneration, to be as agreed or determined between the relevant authority and the nominated person or the patentee, or as determined by a court. Proposed subsection 165(2) elaborates that the court must determine an amount that is just and reasonable, having regard to the economic value of the exploitation and any other matters the court considers relevant.

Item 19 repeals and replaces section 166 which provides that agreements or licences fixing terms on which a person other than the Commonwealth or a State may exploit an invention are inoperative unless approved by the Commonwealth Minister or relevant State Attorney-General. Proposed section 166 provides that such agreements or licences are inoperative with respect to the exploitation of the invention in the circumstances mentioned in subsection 163(3) or 163A(3) unless approved by the relevant Minister.

The Law Council noted its support for the amendments in Schedule 2, with the reservations that ‘in some circumstances it may not be apparent what (if any) patent rights may potentially apply to a proposed exploitation of an invention by a relevant authority, and consequently which party is to be approached for authorisation’ and that in relation to the provisions dealing with remuneration for exploitation, ‘the term “reasonable” may be inconsistent with [the] requirement under section 51(xxxi) of the Commonwealth Constitution that any acquisition of property by the Commonwealth should be on “just terms” alone’.[68]

Dr Dimitrios Eliades, a barrister with a longstanding interest in the Crown use provisions,[69] submitted that he considered the requirement for the court to determine remuneration that is just and reasonable to be an improvement, but suggested other additions to the amendments including a note to make clear that certain matters are relevant, and for additional damages against the Crown to be available in the case of infringement or unsuccessful challenge to the validity of the patent.[70]

Schedule 3 contains amendments to the Crown use provisions of the Designs Act which are analogous to the Schedule 2 amendments to the Crown use provisions of the Patents Act, discussed above.

Compulsory Licences

Schedule 4 contains amendments to the compulsory licensing provisions of the Patents Act.

These amendments implement Recommendation 6.2 of the 2013 PC Report.[71] As discussed above, that recommendation called for the amendment of the compulsory licensing provisions of the Patents Act to replace the ‘reasonable requirements of the public’ test with a new public interest test. Recommendation 6.2 specifically called for a compulsory licence to be available where:

• Australian demand for a product or service is not being met on reasonable terms, and access to the patented invention is essential for meeting this demand.
• The applicant has tried for a reasonable period, but without success, to obtain access from the patentee on reasonable terms and conditions.
• There is a substantial public interest in providing access to the applicant, having regard to:
  • benefits to the community from meeting the relevant unmet demand
  • commercial costs and benefits to the patent holder and licensee from granting access to the patented invention
  • other impacts on community wellbeing, including those resulting from greater competition and from the overall effect on innovation.[72]

Recommendation 6.2 also called for the Federal Court to set the terms of the licence, including, where the parties could not reach agreement, ‘any remuneration, consistent with the public interest, having regard to the rights of:

• the patentee to obtain a return on investment commensurate with the regulatory and commercial risks involved
• the public to the efficient exploitation of the invention’.[73]

Item 2 of Schedule 4 omits the section of text in section 132B, the simplified outline of the Part, dealing with court orders based on the reasonable requirements of the public, and replaces it with text reflecting the new conditions in accordance with proposed amendments to section 133.

Section 133 provides the general requirements for applying to the Federal Court for an order requiring the grant of a licence to work a patented invention. It contains the conditions that the court must be satisfied of before making an order, and certain conditions that an order may impose on the patentee and licensee.

Item 5 amends subsection 133(1) to insert “(the original invention)” after the existing reference to the “patented invention”. This additional term is to clarify which invention is being referred to later in proposed paragraph 133(3)(f) which deals with interactions with another patented invention (therein referred to as the dependent invention) if that requires exploitation of the original invention in order for the dependent invention to be exploited.

Item 6 repeals subsections 133(2), (3) and (3B) and replaces them with proposed subsections 133(2), (3), (3A), (3B) and (3C). Subsections 133(2), (3) and (3B) respectively deal with:

• the conditions that the court must be satisfied of before making an order
• the directions that the order must give to the licensee and
• the details required in the order if the working of the patented invention requires the infringing of another patent.

Proposed subsections 133(2) and (3) together replace the conditions found in existing subsection 133(2) with an expanded set of conditions based on those in Recommendation 6.2 of the 2013 PC Report. Specifically, proposed subsection 133(3) lists the following conditions that a court must be satisfied of before making a compulsory licence order:

1. demand in Australia for the original invention is not being met on reasonable terms; and
2. authorisation to exploit the original invention is essential to meet that demand; and
3. the applicant has tried for a reasonable period, but without success, to obtain authority from the patentee to exploit the original invention on reasonable terms and conditions; and
4. the patentee has given no satisfactory reason for failing to exploit the patent to the extent necessary to meet the demand for the original invention in Australia; and
5. it is in the public interest to provide the applicant with authorisation to exploit the original invention, having regard to the following:
   1. the benefits to the public from meeting the demand for the original invention;
   2. the commercial costs and benefits to the patentee and the applicant from providing authorisation to exploit the original invention;
   3. any other matters the court considers relevant, including matters relating to greater competition and any impact on innovation; and
6. if the applicant is the patentee of another invention (the dependent invention) and is seeking the authorisation for the purposes of exploiting the dependent invention:
   1. the dependent invention cannot be exploited by the applicant without exploiting the original invention; and
   2. the dependent invention involves an important technical advance of considerable economic significance on the original invention.[74]

Proposed paragraphs (a) to (e) substantially mirror the conditions proposed by Recommendation 6.2, with the notable difference in paragraph (e) that the authorisation to exploit the invention need only be ‘in the public interest’, rather than the requirement for ‘a substantial public interest’ as recommended by the PC.

Proposed paragraph 133(3)(f) and proposed subsection 133(3A), which deal with licensing an original invention where necessary to work a dependent invention, replace existing subsection 133(3B) using revised language to clarify the intent.

Item 7 repeals and substitutes paragraph 133(5)(b), dealing with the determination of remuneration in respect of a licence by the Federal Court, where the parties cannot agree on an amount. Proposed subsection 133(5)(b) provides that the amount to be determined by the Court is to be ‘just and reasonable’, having regard to:

1. the economic value of the licence; and
2. if the order is made because the court is satisfied that the patentee has contravened, or is contravening, Part IV of the Competition and Consumer Act 2010 or an application law (as defined in section 150A of that Act) in connection with the patent—the desirability of discouraging contraventions of that Part or an application law; and
3. the right of the patentee to obtain a return on investment commensurate with the regulatory and commercial risks involved in developing the invention; and
4. the public interest in ensuring that demand in Australia for the original invention is met on reasonable terms.

Proposed subparagraphs 133(5)(b)(iii) and (iv), although couched in slightly altered language, appear to address the last two points of Recommendation 6.2 from the 2013 PC Report.[75]

Items 11 and 12 of Schedule 4 to the Bill make consequential amendments to section 134 of the Patents Act which deals with the revocation of patents subject to a compulsory licence order after the end of the period prescribed. The amendments would bring the matters to be considered at revocation into line with the matters to be considered when making an order, as introduced by item 6 of Schedule 4.

The Law Council stated that it ‘does not support replacing the “reasonable requirements of the public” test for the grant of a compulsory licence with a “public interest” test’, and that the proposed grounds for making a compulsory licence order may extend beyond those permitted by Article 17.9.7 of the Australia-United States Free Trade Agreement (AUSFTA).[76] The Law Council also expressed concerns over the difficulties that the proposed amendments could present to a court in balancing interests when considering whether or not to make an order, as well as when setting remuneration.[77] On the subject of the public interest test, the Law Council remarked:

... there will be significant uncertainty for parties as to how the competing interests will be balanced in a particular case. This highlights the difficulties of a “public interest” test: even leaving to one side the rights of the patentee, there is a distinction between the interests of the public in the short term (which might include a desire for immediate and widespread access to patented technology at a low price) and the interests of the public in the long run (which would take into account the public interest in encouraging innovation by appropriately rewarding innovative activity). This potential for uncertainty is a further reason why the Committee considers that the inclusion of “substantial” as a qualifier to “public interest” is important.[78]

Other provisions

Schedules 5—8 contain further minor amendments to the Patents Act and the Trade Marks Act.

Schedule 5

Schedule 5 amends both the Patents Act and the Trade Marks Act to permit the respective official seals used under those acts to be kept and used in electronic form. Items 1 and 2 insert the ability to use the seal in electronic form into the Patents Act, while items 3 and 4 do the same for the Trade Marks Act.

Schedule 6

Schedule 6 amends the Patents Act to expand the requirements for patent specifications that are able to be taken into consideration when a patent is undergoing several stages of assessment.

The Explanatory Memorandum states that this is due to a drafting oversight in the Intellectual Property Laws Amendment (Raising the Bar) Act 2012.[79] That Act amended the Patents Act by, among other things, amending section 40 of the Patents Act which deals with the requirements for patent specifications. That amending act introduced a new requirement at examination by inserting a new subsection 40(3A):

(3A) The claim or claims must not rely on references to descriptions or drawings unless absolutely necessary to define the invention.[80]

Subsection 40(3A) has since been amended, and now refers to ‘references to descriptions, drawings, graphics or photographs’.[81]

However, while the provision in the Act dealing with examination of a patent (section 45) requires a determination of whether the ‘the specification complies with subsections 40(2) to (4)’, thus including the newer subsection (3A), other provisions currently refer to ‘subsection 40(2) or (3)’, thus inadvertently omitting the newer requirement. The provisions of the Patents Act to be amended to include a reference to subsection 40(3A) by items 1 to 6 are:

• paragraph 59(c) dealing with the opposition to standard patents
• paragraph 98(a) dealing with the re-examination of patents
• paragraph 101G(3)(a) dealing with the re-examination of innovation patents
• paragraph 101M(b) dealing with the opposition to innovation patents
• paragraph 102(2)(b) dealing with the amendment of patent specifications
• paragraph 138(3)(f) dealing with the revocation of patents.

Item 7 of Schedule 6 ensures that the amendments will only apply to patents that had to satisfy the requirement of subsection 40(3A) when they were originally examined.

Schedule 7

Schedule 7 of the Bill introduces amendments to sections 55 and 56 of the Patents Act to permit the Commissioner to redact certain information from patent related documents that would otherwise be published. Section 55 provides that patent related documents are to be published on the acceptance or grant of the patent, and section 56 provides that such documents must not be published except as provided for by the Act.

Proposed subsection 56(3) will permit the Commissioner to redact certain information from a copy of a document to be published ‘(i)f the Commissioner reasonably believes that information contained in a document of a kind mentioned in section 55 should not be published or be open to public inspection’.

The Explanatory Memorandum explains that this is due to the fact that while there is a public benefit from access to the information on the patented invention, some patent documents also contain sensitive information of a commercial or personal nature, not related to the invention. The Explanatory Memorandum also notes that the Commissioner currently protects such information from publication by using a broad power under the Regulations, but that this applies to ‘documents’ rather than ‘information’, so at the moment there is no clear power to redact parts of a document rather than whole documents.[82]

Schedule 8

Schedule 8 of the Bill contains a minor amendment to the Patents Act to align better with the modern situation regarding translations of foreign language specifications. Subsection 10(2) currently requires international applications that were filed in a receiving office in a language other than English to also file a verified English translation, if an international filing date needs to be given to them by Australia.

Item 1 of Schedule 8 repeals and replaces subsection 10(2). Proposed subsection 10(2) amends this requirement to be a requirement for a translation into English and, if required by the Regulations, a certificate of verification of the translation. This will enable the Regulations to be amended so that the requirement for a certificate of verification can be waived where appropriate.

Concluding comments

While some of the reforms to the IP system that this Bill implements are not supported by all stakeholders, they were proposed by independent reviews and have been subject to lengthy consultations.