Views on the bill
2.1
This chapter summarises the views on the Intellectual Property Laws
Amendment (Productivity Commission Response Part 1 and Other Measures)
Bill 2018 (bill) raised by submitters to the inquiry.
2.2
Comments received on the bill focussed predominantly on the proposed
amendments to the parallel importation of trade marked goods and the Plant
Breeder's Rights Act 1994 (PBR Act). This chapter examines the
evidence received in relation to these measures as well as touching on some of
the general comments made in relation to the language used in the bill.
Parallel importation of trade marked goods
2.3
The submissions received from the Intellectual Property Committee of the
Business Law Section of the Law Council of Australia (IPC),[1] Professor Robert Burrell and Professor Michael Handler (Burrell and Handler)[2] and Dr Ana Penteado,[3] commented on the proposed amendments to the parallel importation of trade marked
goods.
2.4
As discussed in Chapter 1, schedule 1, part 1 of the bill implements the
Productivity Commission's Recommendation 12.1,[4] by amending the Trade Marks Act 1995 (Trade Marks Act) to clarify the
circumstances in which the parallel importation of trade marked goods does not
infringe a registered trade mark.
2.5
IP Australia informed the committee that parallel imports are where
genuine goods that are sold overseas are brought into Australia and on-sold
without the trade mark owner's consent. IP Australia explained that:
Parallel importation of trade-marked goods supports
competition and the Trade Marks Act is intended to permit parallel imports.
However, there is uncertainty around the current provisions, and recent legal
decisions have increased the difficulty of importing legitimate goods into
Australia. Some trade mark owners have employed particular strategies to
prevent parallel importation, contrary to the original policy intent of the
Trade Marks Act.[5]
2.6
As such, the reforms proposed in schedule 1, part 1 of the bill are
intended to ensure that:
...parallel imports of legitimately marked goods are not taken
to infringe an Australian registered trade mark when the goods have first been
brought to market by the registered owner of that mark or another person who
has (or had at the relevant time) some sort of relevant commercial or
contractual relationship with the registered owner.[6]
Reasonable inquiries
2.7
Proposed subsection 122A(1) of the bill sets out the criteria that must
be met in order for a person's activities to be taken as not infringing a trade
mark:
- Paragraph (a) requires that the goods the person has used the
trade mark on are similar to the goods covered by the Australian trade mark
registration.
-
Paragraph (b) requires that the person who would otherwise have
infringed the mark must have made reasonable inquiries in relation to the trade
mark before the time of use.
- Paragraph (c) requires that a reasonable person would have
concluded that the trademark was applied to, or in relation to, the goods by or
with the consent of the registered owner or authorised user of the trade mark,
or a person who has significant influence over how the registered owner or
authorised user uses the mark.[7]
2.8
With respect to paragraph (b) the Explanatory Memorandum (EM) makes
clear that the nature of the inquiry will depend on what the hypothetical
objective reasonable person would do in the circumstances. The EM states:
Requesting and receiving a certificate of authenticity from
the supplier would be sufficient in most circumstances. However, the extent of
the inquiries will be determined by the facts of the situation. For example,
where the supplier is widely known or suspected to supply counterfeit goods or
where the goods are being offered at suspiciously low prices or through dubious
trade channels, more searching inquiries may need to be made, such as
contacting the trade mark owner to confirm consent. Conversely, by way of
example, if the goods are purchased from a retailer widely known to be the
licensed distributor of the trade mark owner at the normal price of genuine goods
in the relevant market, then no further inquiries may be needed.[8]
2.9
With respect to paragraph (c) the EM clarifies that the 'reasonable
person...would have concluded' test is objective, and not intended to involve
determining the subjective knowledge of the actual person. The EM states:
...the question should be: what would a hypothetical reasonable
person in the importer’s situation (with the information obtained from the
reasonable inquiries) conclude?[9]
Stakeholder opinion
2.10
While generally supportive of the proposed amendments to the parallel
importation of trade marked goods, IPC suggested that the present wording in
the bill will allow the importation and sale of counterfeit goods, provided
that the importer made reasonable inquiries and a reasonable person would have
concluded they were genuine. IPC were concerned that:
...the parallel importation provisions of the Bill have adverse
unintended consequences and do not reflect the Government's intention, which
the IPC understands was to implement the recommendations of the Productivity
Commission. As drafted, the provisions will undermine the ability of trade mark
owners to prevent the importation and sale of counterfeit goods in Australia.[10]
2.11
In contrast, Burrell and Handler suggested that the 'reasonable
inquiries' elements of proposed subsection 122A(1) overcame the problem that it
may be impossible for a parallel importer to be absolutely certain that the
goods are in fact legitimate. Burrell and Handler observed that:
All that the importer can do is make reasonable inquiries as
to whether the trade mark had been applied by or with the consent of one of the
parties listed in (c), and act on that information in a reasonable manner. As
IP Australia has explained, without such a provision parallel importation would
remain 'unacceptably risky' and the 'supply of parallel imports to the
Australian market' would remain stifled.[11]
2.12
As such, Burrell and Handler were of the view that the approach proposed
in paragraphs 122A(1)(b) and (c) of the bill represented a sensible way
forward, noting that :
- an importer who makes reasonable inquiries and reaches the
reasonable conclusion that the goods are legitimate, but who unwittingly
imports counterfeit goods, will not be liable for damages up to the point in
time it is notified that the goods are counterfeit;
- brand owners can still pursue remedies against the supplier; and[12]
- IP Australia’s response to the [public] consultation was
thoughtful and led to the proposed provision being altered in important
respects.[13]
2.13
Dr Penteado also commented on the proposed 'reasonable inquiries' and 'reasonable
person' tests, and expressed the view that the tests 'are unpredictable, which
is of subjective nature, not objective nature of what is reasonable.'[14] However, as noted above, the EM provides that the reasonable person test 'is
intended to be objective, and is not intended to involve determining the
subjective knowledge of the actual person.'[15]
Use of a 'deceptively similar' mark
2.14
In addition to acknowledging that the bill goes a long way to fixing the
defects in the current law, Burrell and Handler raised a 'relatively minor
issue' about the ability of the new parallel importation of trade marked goods
provisions to protect against the use of 'deceptively similar' trademarks. Burrell
and Handler explained that:
Currently, the s 123 defence [in the Trade Marks Act] applies
only if the defendant uses 'a registered trade mark'. By virtue of s 7(1), this
extends to use by the defendant of a mark that is ‘substantially identical’
with the registered mark. The draft 122A(1) applies in exactly the same way.
However, as soon as the defendant goes beyond this to use a ‘deceptively
similar’ mark, the defence falls away.[16]
2.15
This issue was not raised during the exposure draft consultation[17] and is not listed on IP Australia's public policy register as a policy issue
that is currently being addressed.[18]
Plant Breeder's Rights
2.16
The submissions received from Rijk Zwaan Australia (RZA), the Australian
Seed Foundation (ASF) and CropLife Australia (CropLife) addressed the proposed
amendments to the PBR Act only. Overall, these submitters were supportive of
the bill's proposed reforms to the PBR Act, noting that they:
- clarify the circumstances where an Essentially Derived Variety
(EDV) declaration can be applied for;
-
strengthen the position of the PBR owner/exclusive licensee; and
-
should act as an increased deterrence of potential infringers.[19]
2.17
Notwithstanding this support, these submitters also expressed some
concerns about the drafting of the bill and suggested that the reforms needed
to go further to provide adequate protection for plant breeders, including via
the introduction of a United Kingdom-style Information Notice System (INS).
2.18
The submission received from Dr Penteado also commented on the
amendments related to PBR.[20]
Essentially derived variety
declarations
2.19
The PBR Act extends protection of registered varieties to EDVs. EDVs
share all the essential characteristics of a registered plant variety but are
clearly distinct and qualify for PBR registration in their own right. As
discussed in Chapter 1, schedule 1, part 2 of the bill seeks to amend the PBR
Act to allow an application for an EDV declaration to be made in instances
where the plant variety subject of the EDV application is not a registered PBR
or undergoing application for PBR.[21]
2.20
IP Australia informed the committee that the purpose of this amendment
is:
...to close a loophole that allows breeders of derived
varieties to free-ride on protected plant varieties. The Bill proposes to
expand the circumstances where an EDV declaration can be applied for to ensure
PBR holders are protected, regardless of whether breeders of a derived variety
have applied for PBR or not.[22]
2.21
To give context to the current loophole, IP Australia provided the
committee with the following example:
...where a grower holds a PBR for a certain crop, and a
competitor files for a PBR for a slightly different variety of the same crop,
the competitor can be required to share their royalties with the original
grower. However, if the competitor exploits the current loophole by choosing
not to file for a PBR, they can commercialise their crop and cannot be required
to share their royalties.[23]
2.22
Under the reforms proposed in the bill, the original grower will be able
to share in their competitor's royalties.
2.23
Noting that 'it is likely that the EDV is very similar to the earlier
variety and in most cases protection is not filed for', the ASF agreed with IP
Australia that the proposed reforms would close a loophole that exists where an
EDV cannot be declared if no PBR application has been made for the later variety.[24]
2.24
In offering their support for this proposal, ASF noted that the changes
proposed in the bill in relation to EDVs will simply bring Australia's PBR law
more in line with the International Convention for the Protection of New
Varieties of Plants (1991) (UPOV).
Assessment
2.25
As a result of the proposed reforms, the assessment of a second variety
as registrable for EDV declarations for non-PBR protected second varieties is
required, as the second variety will not have already been assessed as per the
ordinary registration requirements for PBR.[25]
2.26
RZA did not consider it appropriate to require the second variety to
meet all the ordinary criteria for registration, including the criterion that
the variety has not been exploited or has been only recently exploited. RZA argued
that:
According to UPOV, the second variety only needs to qualify
as a variety. To qualify as a variety, it is not relevant whether a plant
grouping has already been exploited or not. Further, we consider it impossible
to determine when a third party has exploited another variety for the first
time.[26]
2.27
However, the EM to the bill clarifies that:
Given that a successful EDV declaration will mean that the
applicant for a declaration’s PBR will extend to the second variety, fulfilment
of the ordinary registration criteria for PBR is required.[27]
Test growing
2.28
Under the proposed reforms, the Registrar of PBR (Registrar) may order a
'test growing' if it would assist them in making a decision regarding the
application for an EDV declaration. In such circumstances, the bill provides
that the applicant for an EDV declaration is required to pay all costs
associated with the test growing.[28]
2.29
RZA argued that the applicant for the declaration should only pay the
cost of the test growing in case the second variety is assessed not to be an
EDV:
In case the second variety is assessed to be an EDV, the
breeder of the second variety should bear the cost. It is important to note
that the breeder of the second variety not only has been infringing a PBR by
selling the EDV without permission, but could have avoided the cost by asking
permission from the applicant to commercialize the second variety as soon as he
intended to sell the EDV.[29]
2.30
However, the EM to the bill justifies the requirement that the applicant
for a declaration pay all costs associated with the test growing as follows:
As the applicant would benefit if the variety is declared an
EDV, it is reasonable for them to bear the costs of test growing. If the EDV
application is successful the applicant could be expected to recover any cost
as part of a licence negotiation with the second breeder.[30]
2.31
In addition, IP Australia's response to the public consultation on the
exposure draft of the bill directly addressed this issue and indicated that, on
balance, it is appropriate that the applicant for an EDV declaration must pay
all costs associated with the test growing. IP Australia stated:
No clear case was made for why the second breeder should pay,
as the second breeder gains no benefit and it raises the potential of vexatious
applications and unfairness to the second breeder if the second variety is
found not to be essentially derived. On the other hand, a successful EDV
applicant will gain PBR protection from the test growing, and could recover any
costs as part of a licence negotiation with the second breeder.[31]
2.32
RZA also raised with the committee the possibility of the breeder of the
second variety supplying different material for testing, and suggested that in
order to avoid fraud an independent expert be appointed by the Registrar who
collects material of the second variety. RZA argued that:
...the breeder of the initial variety should be allowed to
provide material of the second variety to be included in the test growing. In
case the material supplied by the breeder of the second variety appears to be
different from the material of the second variety supplied by the breeder of
the initial variety, further investigation is necessary.[32]
2.33
However, the EM to the bill makes clear that:
If the applicant for a declaration fails to comply the
Registrar must refuse the application for a declaration.
The onus is on the applicant for a declaration to establish
all relevant matters and so it is reasonable to expect them to provide the
material necessary to conduct a test growing if the Registrar deems this to be
necessary.
If an interested person fails to provide the material, the
Registrar may draw an unfavourable inference from their failure to do so. The
Registrar has the discretion whether to draw an inference, as, for example, an
interested person could have an interest in the second variety without having
any propagating material (e.g. they wish to commercialise it, but have not yet
done so and have no plants in their possession).[33]
2.34
In addition, all final decisions relating to the application for a
declaration are subject to merits review by the Administrative Appeals Tribunal
(AAT),[34] ensuring 'all parties have an appropriate opportunity to challenge a relevant
decision that affects their interests'.[35]
Protections against infringement
2.35
As discussed in Chapter 1, schedule 2, part 8 of the bill improves
protections against unjustified threats of infringement proceedings in the PBR
legislation;[36] and part 11 gives further power to the Federal Court and the Federal Circuit
Court to award additional damages under the PBR Act when a PBR in a plant
variety is infringed.
2.36
Stakeholders agreed that the current PBR legislation does not provide
adequate protections,[37] 'leaving farmers and other small businesses in that sector more vulnerable to
unjustified threats of infringement proceedings'.[38] The current statutory power to award damages only permits a court to award
damages to compensate the grantee for the actual loss suffered, which 'limits
the flexibility of the court to deter particularly wilful or blatant
infringements'.[39]
2.37
In order to address this problem the bill seeks to introduce provisions
to allow a threatened person to apply to a court for:
- a declaration that the threats are unjustifiable;
- an injunction against continuance of the threats; and
-
the recovery of any damages sustained as a result of the threats
of infringement proceedings.[40]
2.38
In addition, the bill proposes that where damages are awarded in the
first instance, the court will have the power to award additional damages.
2.39
The EM states:
It is intended that these provisions will operate in the same
way as the equivalent provisions for the award of additional damages for trade
mark and patent infringement. Noting that it can be difficult to calculate
compensatory damages, courts have in the past awarded a nominal amount in
compensatory damages, which then enlivens the power to award substantial
additional damages.[41]
2.40
In this context, the EM highlights that under the current law the level
of damages provided in the first instance may be insufficient to deter some
unjustified threats of infringement proceedings:
For example, for a well-resourced business the benefit gained
from hindering a competitor by making unjustified threats of infringement
proceedings may outweigh the cost of ordinary compensatory damages for making
such threats. Similarly, threatened persons may be discouraged from taking
action that could benefit the public generally because obtaining only ordinary
compensatory damages provides insufficient incentive (e.g. if the threatened
persons are individual customers).[42]
2.41
The bill aims to address these problems and the proposed reforms respond
directly to the recommendation in the Advisory Council on Intellectual Property
(ACIP) report to introduce exemplary damages in situations of flagrant or
wilful infringement, based on similar arrangements that exist under the Patents
Act 1990 (Patents Act).[43]
Stakeholder opinion
2.42
CropLife supported the amendments to introduce:
-
protections against unjustified threats of infringement
proceedings in the PBR legislation; and
- additional damages for unjustified threats of infringement
proceedings in the Patents, Trade Marks, Designs and PBR legislation.[44]
2.43
The ASF also offered its in principle support for the amendments, but raised
concerns 'about how a threat can be determined to be unjustified, bad or
flagrant and what criteria are used to prove this'.[45]
2.44
IP Australia's response to the public consultation on the exposure draft
of the bill directly addressed concerns raised regarding what constitutes a
'blatant or flagrant' unjustified threat warranting an award of additional
damages. IP Australia explained:
We consider that further defining a flagrant unjustified
threat in the legislation would limit the court’s flexibility to tailor the
remedy to the circumstances of the case. The intention is that a court will
have considerable discretion, although IP Australia notes that additional
damages for blatant or flagrant infringement have been part of patents, trade
marks and designs legislation for a number of years, and the courts have
developed a number of principles for assessing this. We would expect that the
courts will use similar principles for assessing blatant or flagrant
unjustified threats.[46]
2.45
The EM to the bill also notes that the introduction of additional or
exemplary damages in situations of flagrant or wilful infringement reflect
similar arrangements in the Patents Act, to bring PBR into alignment with other
IP rights.[47]
Exclusive licensees
2.46
As discussed in Chapter 1, schedule 2, part 12 of the bill amends the PBR
Act to allow an exclusive licensee of a PBR to bring proceedings for
infringement for the right they license.
2.47
The ASF endorsed this proposal; however, it expressed the view that 'this
should not be a right but a negotiated opportunity developed by the PBR owner
and the licensee in the license agreement' and suggested that this was not
clear in the bill.[48]
2.48
CropLife also conditionally supported the amendment because it 'is
consistent with the rights available to exclusive licensees in respect of other
IP rights'.[49] However, it recommended that instead of the inclusion of an 'automatic' right,
the right should be made conditional upon prior written consent by the PBR
owner. CropLife suggested that:
Such an approach facilitates the opportunity for both parties
(the grantee and exclusive licensee) to negotiate on the right to sue
infringers. Through a negotiation process, the PBR owner and the licensee can
further refine the modalities of the right to sue and management of actual
infringement cases in the license agreement. This will provide an appropriate
balance between the rights of the PBR grantee and the licensee to sue
infringers.[50]
2.49
IP Australia's response to the public consultation on the exposure draft
of the bill directly considered these issues and expressed the view that:
Broadening the reach of the licensee’s rights to bring
infringement proceedings for partial rights would take PBR legislation beyond
the scope of the patents legislation on which it is based. This requires
further policy analysis and is beyond the scope of the current proposal.[51]
2.50
Noting that the scope of exclusive licensees for patents is an issue
that has previously been raised by stakeholders for policy consideration, IP
Australia indicated that they 'will add the issue of the scope of PBR exclusive
licensees to this issue, and consider both of them together as part of future
policy work'.[52]
Information Notice System
2.51
In addition to the reforms proposed in the bill, ASF and CropLife suggested
that the recommendation in the ACIP's report to introduce a United
Kingdom-style INS in Australia be implemented.[53]
2.52
CropLife argued that the recommendation to introduce an INS was one of
the most significant in the ACIP's report as it would enable PBR owners to
obtain information from alleged infringers on the source of plant material.
CropLife explained that:
The introduction of a UK-style Information Notice System
would mean PBR owners may be able to require a notice from growers suspected of
infringing PBR, which states the source of specific plant material and
products. A failure to comply within a set time could be counted against the
grower in any subsequent court action.[54]
2.53
The ASF also informed the committee that in the government response to
the ACIP's report it accepted the recommendation to introduce an INS, pending a
feasibility study, and in this context, ASF requested that IP Australia
prioritise its introduction.[55]
2.54
In their submission to the inquiry, IP Australia acknowledged these suggestions
and explained that:
This bill prioritises the implementation of the Government’s
response to the PC’s recommendations. Implementing an INS is not one of the
PC’s recommendations, and the resources to progress further work on an INS are
not presently available. IP Australia intends to progress policy work on the
INS in consultation with the PBRCG [PBR Consultation Group] in the future.
Subject to other Government priorities and resource constraints, IP Australia
expects this will be progressed in 2019 at the earliest.[56]
Public Access to Plant Varieties
2.55
CropLife's submission to the inquiry also raised issues concerning
public access to plant varieties covered by the PBR.[57]
2.56
IP Australia's website explains that it is a PBR requirement that the
grantee ensures reasonable public access to their plant variety within two
years of grant.[58] As observed by CropLife,[59] the only exemption to this requirement is provided for in subsection 19(11)
of the PBR Act, which states:
This section does not apply in relation to a plant variety in
respect of which the Secretary certifies, in writing, at the time of the grant
of PBR, that he or she is satisfied that plants of that variety have no direct
use as a consumer product.
2.57
Currently, the only recognised situation where a plant variety may have
no direct use as a consumer product is in cases where a parent variety is
required for the continuing reproduction of a hybrid variety.[60]
2.58
In their submission, CropLife recommends that:
IP Australia starts working on a template for applicants to
complete, invoking this exception. Once this procedure has been made easier,
seed companies can feel more confident filing for parent lines in Australia.[61]
2.59
However, in April 2017 IP Australia published an 'Application for
Exemption from Reasonable Public Access' form on their website.[62]
Drafting
2.60
Dr Penteado's submission to the inquiry made a number of suggestions to
improve the amendments proposed by the bill, including in relation to the language
and expressions used. One example was the use of the expression 'on or after'.[63]
2.61
The bill is a government bill and therefore was drafted by the Office
Parliamentary Council (OPC)[64] in accordance with drafting directions issued by the First Parliamentary
Counsel.[65] The OPC states that it:
...actively encourages the use of plain language in legislation
and is a leader in developing and using plain language techniques...[and is]
committed to reducing unnecessary complexity in legislation.[66]
Committee view
2.62
The committee notes that key parts of the bill originate from recommendations
made by independent reviews, and that the provisions of the bill have been
subject to extensive consultation. In particular, the committee commends IP
Australia for its thoughtful response to the public consultation on the
exposure draft of the bill which ultimately led to provisions of the bill being
altered in important aspects.
Parallel importation of trade
marked goods
2.63
The committee acknowledges the current uncertainty around the parallel
importation of trade marked goods and concerns raised about the importation and
sale of counterfeit goods. However, the committee is of the view that the
proposed 'reasonable inquiries' and 'reasonable person...would have concluded'
tests represent a sensible way forward, in that they overcome the problem that
it may be impossible for a parallel importer to be absolutely certain that
goods are in fact legitimate.
2.64
The committee notes the issue raised by Burrell and Handler regarding
the ability of the new parallel importation of trade marked goods provisions to
protect against the use of 'deceptively similar' trademarks. The committee
considers that as this issue already exists with respect to current section 123
of the Trade Practices Act and it was not raised as part of the extensive
consultation process undertaken in respect of this bill, it would be more
appropriately addressed separately with IP Australia.
Plant Breeder's Rights
2.65
The committee agrees with stakeholders that the reforms proposed in the
bill will clarify the circumstances where an EDV declaration can be applied
for, strengthen the position of the PBR owner/exclusive licensee and act as an
increased deterrence of potential infringers.
2.66
The committee considers that the reforms proposed in the bill will close
a current loophole that exists where an EDV cannot be declared if no PBR
application has been made for the later variety. In this context, the committee
notes the concerns raised about the criteria for registration required for the
second variety. However, as a successful EDV declaration will mean that the
applicant for a declaration's PBR will extend to the second variety, the
committee supports the approach taken in the bill, such that fulfilment of the
ordinary registration criteria for PBR is required.
2.67
With regard to the requirement in the bill that the applicant for a
declaration pay all costs associated with test growing, the committee is of the
opinion that as the applicant would benefit if the variety is declared an EDV,
it is reasonable for them to bear the costs. The committee also understands the
concerns raised about fraudulent behaviour in the supply of material for
testing by the breeder of the second variety. However, the committee observes
that where material is not provided the Registrar of PBR may draw an
unfavourable inference, and that all final decisions relating to an application
for a declaration are subject to merits review by the AAT.
2.68
It is apparent to the committee that the current PBR legislation does
not provide adequate protections to farmers and other small businesses that are
vulnerable to unjustified threats of infringement proceedings. The committee is
encouraged by the support shown for the proposed amendments to introduce
protection against unjustified threats of infringement and additional or
exemplary damages in situations of flagrant or wilful infringement. In this
context, the committee notes that these amendments bring PBR into alignment
with other IP rights.
2.69
The committee is aware of the issues raised by stakeholders regarding
the scope of licensee's rights to bring infringement proceedings for patents,
and welcomes IP Australia's advice that this issue will be considered as part
of future policy work. Likewise the committee notes that IP Australia intends
to progress policy work on the Information Notice System, and that it has
published an 'Application for Exemption from Reasonable Public Access' form on
their website.
Drafting
2.70
The committee notes the concerns raised by Dr Penteado in relation to
the language and expressions used in the bill. However, the committee observes
that the bill was drafted by OPC in accordance with drafting directions issued
by the First Parliamentary Counsel.
Recommendation 1
2.71
The committee recommends that the bill be passed.
Senator Jane Hume
Chair
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