2.1
This chapter summarises the 2018 IP Australia consultation on the exposure draft of the bill. It then examines views on the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019 (the bill) made to this inquiry.
2.2
Submissions to the inquiry predominantly addressed the following issues:
phasing out of the innovation patent system (IPS);
Crown use of patents and designs;
use of drawings, graphics and photographs.
IP Australia consultation on exposure draft
2.3
IP Australia consulted on the exposure draft of the bill between 23 July 2018 and 31 August 2018. The following outlines the key issues and views raised during the consultation.
Objects clause
2.4
Many submissions opposed the introduction of an objects clause, raising concerns with the reference to 'technological innovation'; that it would introduce uncertainty and complexity; it is unnecessary; and the reference to 'economic well-being' is unclear.
2.5
Mylan supported the objects clause. However, it questioned the implications drawn from the fact the patents system is primarily economic in nature. In particular, Mylan argued the patent system, although part of the Australian economy, is not separate from the national interest. As such, it is inappropriate to exclude ethical and social considerations from patent considerations. Further, Mylan stated this is inconsistent with the TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement, which states patents may be excluded when it is 'necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment'.
2.6
IP Australia did not find merit in the claims and reiterated the government's intention to introduce an objects clause to provide guidance in the interpretation of the Patents Act 1990 (Patents Act).
2.7
Specifically, IP Australia stated:
using the term 'technological innovation' is consistent with how intellectual property (IP) is discussed internationally and it is unlikely the courts will interpret the term as being intended to narrow or change the subject matter eligibility threshold for a grant of a patent;
the long-term clarification provided by the objects clause will be worth any short-term uncertainty; and
it is clear economic wellbeing is intended to be promoted in Australia.
Abolishing the innovation patent
2.8
Some submissions received during the consultation opposed the abolition of the IPS, others commented on the transitional arrangements. IP Australia stated no significant new evidence on the value of innovation patents was presented in submissions that had not already been considered by the Productivity Commission (PC) and the government. Further, IP Australia is confident the transitional provisions 'strike a good balance between all relevant interests without adversely affecting existing rights'.
Crown use of patents and designs
2.9
Submissions received by IP Australia were mostly supportive of the Crown use provisions. One submission suggested the amendment would provide the government with a broad mandate to interfere with the rights of patent and design owners. IP Australia is of the view the 'primary responsibility' test clarifies circumstances in which Crown use can be invoked. Further, under the legislation, the rights of patent and design owners will be better protected due to increased certainty and the addition of ministerial oversight.
2.10
However, drawing upon evidence provided in some submissions, IP Australia made some minor technical changes to provide greater clarity and certainty of the operation of some provisions.
Compulsory licencing of patents
2.11
The majority of submissions supported the compulsory licencing proposals. Those that objected questioned the need for change, and whether the provisions were consistent with Australia's international obligations, particularly under the Australia United States Free Trade Agreement (AUSFTA). IP Australia reiterated the PC's recommendation that the compulsory licencing of patents provisions should be clarified to provide greater certainty and transparency, and disagreed that the provisions were incompatible with international agreements.
2.12
IP Australia made a number of minor drafting amendments in response to suggestions from stakeholders.
Inventive step
2.13
The exposure draft of the bill contained 'Part 1—Inventive step', intended to strengthen the inventive step requirements for standard patent applications. This was a response to recommendation 7.2 from the 2016 PC inquiry report, and closely related to both recommendations 7.1 and 8.1.
2.14
IP Australia noted the government remains committed to accepting the PC's recommendation and raising the requirements for the inventive step.
2.15
However, submissions to IP Australia's consultation suggested the proposed changes to the legislation and the bill's Explanatory Memorandum (EM) would not achieve the intended outcome of sufficiently raising the threshold for the inventive step. This is because the wording was not sufficiently different to that which exists currently, and the courts may not have sufficient regard to the EM when considering the proposed inventive step changes.
2.16
The government has decided to postpone changes to the inventive step requirements, and associated 'prior art base' provisions to allow for further consultation and reformulation.
Inquiry into the bill
Object of the Act
2.17
Submissions to this inquiry raised three key concerns with the proposed objects clause:
the reference to 'technological innovation' will affect what can be patented;
the clause will introduce uncertainty and complexity; and
economic wellbeing is difficult to define and quantify.
Technological innovation
2.18
Some submissions argued the term 'technological innovation' could change what is considered patentable in Australia. It could result in certain types of innovations and subject matter being excluded from patent protection.
2.19
Davies Collison Cave suggested the term could exacerbate what they regard as existing restrictive interpretations. For instance, they argue:
Examiners of the Australian Patent Office are currently applying a restrictive interpretation of the Federal Court decision in RPL Central to exclude a range of software inventions on the basis that they are simply not sufficiently technological and relate more to schemes or plans. Given all software executes a series of processing steps; it is too easy to classify any software as a scheme.
2.20
The Australian Chamber of Commerce and Industry (ACCI) similarly stated some items, such as information technology methods for management, may be at risk of becoming excluded from the patent system.
2.21
Knowledge Commercialisation Australasia argued the introduction of 'technological innovation' could result in the eligibility threshold for grant of the patent being used to narrow or change the subject matter.
2.22
Medicines Australia stated Australia's Federal Court has warned against introducing requirements that could restrict the application of the patent system and questioned whether a patentable process must result in the application of science and technology on the basis that what constitutes 'science and technology' changes over time as a consequence of the unpredictability of the advances of human ingenuity.
2.23
IP Australia has previously responded to these claims, stating 'technological innovation' is consistent with the terms in which intellectual property is discussed internationally, including in the wording of Article 7 of the TRIPS agreement.
2.24
Further, IP Australia argues the ordinary meaning of the term 'technological' is 'the application of scientific knowledge for practical purposes' and it is unlikely the courts will depart from this ordinary meaning. As such, it is unlikely simple mechanical inventions of life sciences inventions will not be considered 'technology'.
2.25
IP Australia also disputes that the courts will interpret the term as being intended to narrow or change the subject matter eligibility threshold for a grant of a patent, in the absence of some explicit provision to do so. IP Australia stated:
The test for patentable subject matter in Australia is whether or not the invention is a 'manner of manufacture' under paragraph 18(1)(a) of the Patents Act, and this provision remains unchanged. For example, software patents would continue to be assessed according to this test.
Uncertainty and complexity
2.26
Medicines Australia argued certain phrases in the objects clause—such as 'promotes economic wellbeing' and 'balances over time the interests of producers, owners and users of technology and the public'—are highly subjective.
2.27
The Law Council of Australia (Business Law Section) questioned the need for an objects clause and suggested the proposed clause introduced ambiguity. In particular, the council suggested the phrase 'and the transfer and dissemination of technology' could be used to both support and deny a patent.
2.28
In responding to submissions to its exposure draft process, IP Australia stated the role of the objects clause is to provide guidance in the interpretation of the Patents Act. It is not intended to provide a ground to challenge a patent on the basis of its subject matter, or override existing Australian jurisprudence on patentable subject matter. Rather, the intent is to provide clarity and certainty in the legislation by stating the underlying purpose of the patents system in Australia.
2.29
Dr Hazel Moir agreed, stating:
An objectives clause provides guidance to patent decision makers about how to handle the central paradox of patent policy—the conflict between a monopoly grant to encourage invention and the impact of that monopoly in discouraging invention and imposing unnecessary costs on consumers and taxpayers. This central conflict is magnified by the impact monopolies have on rent-seeking behaviour.
2.30
However, Dr Moir suggested the proposed objects clause does not address the issue of balance in patent policy: 'inventions merit lengthy monopolies only if they are induced by the patent system and offer a net benefit to society [emphasis in original]'. She argued there is no point having an objects clause that provides 'so little useful guidance to patent decision makers' to act in the interests of the public.
Economic wellbeing
2.31
Macquarie University stated the objects clause could potentially require patentees to generate evidence about how their inventions promote economic wellbeing. Similarly, Medicines Australia noted the long-term economic impact and utility of a patent may take years to understand.
2.32
However, the EM makes clear the objects are not new and reflect the existing goals of the patent system. Further, it states the objects clause:
…will not have any effect on the existing requirements for the grant of a patent. The elements to be considered when assessing an application for a patent are clearly set out in the Patents Act and existing case law, and the objects clause is not intended to alter this. For example, patentable subject matter will continue to be assessed in accordance with section 18 of the Patents Act.
Committee view
2.33
The committee agrees the objects clause is not new in substance and simply reflects the existing goals of the patent system.
2.34
The committee is of the view the objects clause constitutes current best practice in legislative drafting and will provide a valuable statement of the overarching framework for the patent system to guide decision makers and the community.
Innovation patents
2.35
IP Australia's guide to applying for patents explains there are presently two types of patents in Australia:
a standard patent that gives long-term protection and control over an invention. It lasts for up to 20 years (or up to 25 years for pharmaceutical substances); and
an innovation patent that is a relatively quick and inexpensive way to protect an incremental advance on existing technology rather than a ground-breaking invention. Protection lasts for a maximum of eight years.
2.36
There are, however, three types of applications: provisional applications, complete applications, and international applications. Provisional applications will be discussed further below. Complete applications include applications for a standard patent and an innovation patent. International applications are a way to apply for patents in different jurisdictions simultaneously. They are also known as Patent Co-Operation Treaty applications.
2.37
The committee received several submissions supporting the phasing out of the IPS, though some concerns were expressed over the length of the transition period.
Opposition to phasing out the innovation patent
2.38
Many submissions to the inquiry raised concerns with the phasing out of the IPS. As explained by UNSW Knowledge Exchange, these concerns reflect the nature of research and development processes in small- to medium-sized enterprises (SMEs)—characterised by incremental, small steps that are nevertheless commercially significant for the companies concerned.
The substantial investment which we make into research and development and smart manufacturing in Australia is underpinned by the present patent system. Innovation is not necessarily ground breaking. We develop smart products that are better than our competitors and more user friendly for our customers. This involves incremental steps of inventiveness which, while attracting innovation patent protection, may not qualify for a standard patent.
2.40
Those who support the present system argue the innovation patent allows businesses to proceed with confidence so they can protect their invention and obtain a return on their investment in research and development. This is particularly the case in situations where there is only short-term market value, such as fast-moving consumer goods.
2.41
The innovation patent provides the protection needed to confidently demonstrate products to potential commercial partners, investors, or buyers.
2.42
Patents are also said to level the playing field by affording protection to SMEs in the face of potential competition from large corporations who can out-compete emerging rivals by copying an innovation and using their superior marketing and distribution channels.
2.43
Bend-tech explained:
…our innovations regularly make incremental improvements on OEM [original equipment manufacturer] products. If we are unable to protect these innovations, the OEM will simply incorporate the improvement into their product. In this way we will lose significant business to large international companies.
2.44
The following table provides an explanation of the major differences between a standard patent and an innovation patent.
Table 2.1: Major differences between standard and innovation patents
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Invention must:
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Be new, useful and involve an innovative step
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Be new, useful and involve an inventive step
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The application should include:
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A title, description, up to five claims, drawings (if applicable), an abstract and forms
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A title, description, any number of claims, drawings (if applicable), an abstract and forms
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A patent is granted if:
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The application satisfies formalities requirements (note a 'granted' innovation patent cannot be enforced)
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The application is examined and found to satisfy the requirements of the Patents Act
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Examination:
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Optional: Examination can be requested by the patentee or a competitor to clarify legal rights
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Mandatory: as certain requirements must be met before patent is granted
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Certification:
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Must comply with certain requirements as determined by an examiner. Only after certification can the patent be enforced
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N/A
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Australian Official Journal of Patents
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Publication at grant and again at certification
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Publication 18 months from priority date and again at acceptance
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Protection period:
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Eight years, if annual fees paid
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20 years, if annual fees are paid
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How long does the process take?
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One month for grant; six months if an examination is requested
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Six months to several years depending on circumstances
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How much does it cost?
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Approximately $1,500 including maintenance fees over 8 years (not including advisor fees)
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Approximately $9,000 including maintenance fees over 20 years (not including advisor fees)
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Source: IP Australia
2.45
Submissions highlighted several characteristics of innovation patents that make them of value to SMEs and their research and development model, including:
provide focussed protection;
protect inventions that do not satisfy the inventive step requirements for a standard patent;
allow companies to enforce their intellectual property rights within Australia [providing they have certified the patent]; and
assist companies in applying for the equivalent of innovation patents in other countries via modified examination.
2.46
The Institute of Patent and Trade Mark Attorneys of Australia (IPTA) argued the low innovative step requirements for an innovation patent recognise commercial value can be obtained from comparatively simple inventions. That the purpose of innovation patents is to protect commercial advantage was also suggested by the Australian Automotive Aftermarket Association.
2.47
Redarc, and others, are of the view removing the innovation patent will reduce research and development and the ability to enforce IP rights because the alternative, pursuing a standard patent, is more difficult, uncertain, time-intensive and expensive. Without the ability to protect inventions through an innovation patent, the company is of the view it will be more vulnerable to competition, particularly from overseas.
Support for reforming the innovation patent
2.48
Some submissions acknowledged the shortcomings of the system, but argued it can be improved by:
addressing its underutilisation;
dealing with the existence of uncertified innovation patents that create uncertainty;
raising the innovative step requirements;
limiting innovation patent divisional applications; and
modifying the remedies available for infringement.
2.49
Dr Summerfield and others stated Australian businesses make poor use of the patent system when compared to innovators of Australia's major trading partners. This is of concern at a time when innovation and ownership of intellectual property is increasingly important to Australia's economic success. The streamlined and lower-cost entry point provided by the innovation patent, in combination with other measures such as education and awareness programs, can play a role in improving Australian business commercialisation of valuable innovations.
2.50
Dr Summerfield argued IP Australia could stop calling an uncertified innovation filing a 'patent'; and could require applicants wishing to maintain an innovation patent to request examination within a specified time period. Further, he suggested several ways the innovative step could be raised, short of the inventive step required under a standard patent. Dr Summerfield is of the view the innovation patent can be leveraged to provide greater benefits to Australian SMEs. The Law Council of Australia made similar representations.
2.51
The Law Council of Australia also suggested limiting the circumstances in which divisional innovation patents can be filed, as the current process is potentially open to abuse. Establishing a limit would help address the issue whereby innovation patent owners divide out innovation patents from pending standard patent applications so as to target alleged infringing activities.
2.52
As to remedies for infringement, the Law Council of Australia argued for limiting the availability of damages, or the accounting of profits, to infringements of an innovation patent occurring after the official publication of the claims that have been infringed. This would address the situation where an owner of an innovation patent is able to claim damages for infringement dating back to the effective date of the innovation patent. If the patent results from a divisional application, this potentially takes the date back to the date when the patent was pending and prior to its publication.
2.53
Dr Summerfield cautioned against drawing conclusions about the efficacy of the innovation patent from the fact the majority of innovation patent applications come from overseas, predominantly China. He suggested Chinese companies obtain innovation patents in Australia for the purpose of receiving Chinese government cash incentives. As many Chinese applicants are interested only in obtaining the initial patent certificate, most are never certified because there is no interest in enforcing the patent. Neither do such applicants have interest in expending further funds on maintaining the patent beyond the first 24 months, at which time annual maintenance fees come payable. Dr Summerfield is of the view that because these applications are short-lived and of no economic or commercial significance in Australia, they 'should be disregarded in any serious analysis of the effectiveness, and potential, of the innovation patent system', and in any case, can be readily deterred.
Case for phasing out the innovation patent system
Incentive for research and development and other correlations
2.54
IP Australia, drawing upon a range of studies, argued the IPS does not deliver for Australian SMEs and further, does not deliver the purpose for which it was established—to incentivise research, development and innovation in Australia.
2.55
IP Australia studied innovation patents filed in Australia over a
14-year period and the firms that filed them, and compared these firms to those that did not file innovation patents. Their research found:
…firms that file innovation patents don't have higher incomes than firms that don't, meaning that if you get an innovation patent it doesn't help your revenues. Firms don't do more R&D [research and development], and they don't live longer if they certify their patents. That means that the system isn't providing a monopoly right or an incentive for the companies that are getting them.
It is, however, creating a lot of uncertainty for other companies, because you have all these uncertain rights sitting around that may or may not be enforceable because people choose not to certify their patents. On top of that has come a strategy where you use innovation patents as a way of suing companies; often they'll be bigger players suing smaller players. That was never the intention of the system, but it's become part of the service offering of the system.
2.56
IP Australia also showed that while firms in the manufacturing sector that file innovation patents invest more in research and development than other manufacturing firms, the same holds for standard patent applications. But in terms of standard patents, this relationship holds true across a broader set of industries. According to IP Australia, the innovation patent by itself has no correlation with firms' sales growth and no impact on market entry rates across industries.
Low usage
2.57
Further, IP Australia identified low usage of the innovation patent. Australian SMEs typically file around 400 innovation patents per year, with approximately 70 [17.5 per cent] certified to achieve enforceable rights. In comparison, Australian SMEs file between 1,000 and 1,400 standard patents each year. Between 2011 and 2017, Australian SMEs received between three and ten times as many enforceable standard patents in a given year in comparison to innovation patents.
2.58
Over the past 18 years, IP Australia found only 23 Australian SMEs were 'moderate' users of the innovation patent, meaning they obtained at least five innovation patents and certified at least one.
Standard for inventiveness
2.59
With regard to the lower standard for inventiveness cited by submitters as the key point of value for innovation patents, the PC found:
The low innovative threshold has proven more harmful than helpful, including (perversely) for SMEs. It has encouraged a multitude of low value patents, covering everything from a pet bed to a pizza box that converts to a bib. This, in turn, has reduced the credibility that patents provide for attracting finance for commercialisation, and created uncertainty for other innovators who are unsure whether they are infringing on another party’s patent. Patent attorneys openly advertise ways in which users can game the system, including to improve their bargaining position in patent disputes and to frustrate entry by competitors.
Alternatives
Mixed IP strategy
2.60
Rather than relying on the innovation patent to protect innovation, IP Australia emphasises the utility of a mixed IP strategy. IP Australia pointed out trademarks, rather than patents, are the main area of intellectual property protection for SMEs. IP Australia research has indicated trademarks, in combination with secrecy and speed to market are more valuable to SMEs than the patent system or the IPS.
2.61
The PC has also encouraged businesses to consider a broader intellectual property strategy and identified a number of ways innovators can protect their intellectual property, including through patents, copyright, trademarks, and registered designs that protect the appearance of a product, including its shape, configuration, pattern and ornamentation.
2.62
The PC examined international studies that showed, except in a few industries (such as pharmaceuticals, specialised machinery and instruments, and chemicals), patents are seldom the most important way for innovators to obtain a return on their investment. Lead-time and superior sales and service are identified as the most important mechanisms through which innovators obtain a return on their investment.
Provisional applications and standard patents
2.63
For SMEs who wish to pursue patents, IP Australia suggests companies consider making greater use of provisional applications for a standard patent. A provisional application, which applicants can currently lodge for innovation and standard patents, establishes a priority date. Whilst it does not provide patent protection, a provisional application is useful in highly competitive industries with constant innovations.
2.64
Applicants have twelve months from the priority date to file a complete application. The cost of a provisional application is $110 (in comparison with $180 for filing an innovation patent application). If the company decides to pursue the application to a standard patent application, a further $370 is payable.
2.65
IP Australia highlighted a number of benefits SMEs could gain from filing a provisional application for a standard patent:
…it allows for a cheaper way for a business to secure a priority claim for their innovation, and a 12 month period to test the market, undertake further research, secure investment, and determine if they wish to pursue a standard patent.
2.66
Although innovation patents are typically granted within a month, to obtain an enforceable right, they must be certified. This process takes approximately two months once a request is received, and costs $500. In comparison, the examination fee for a standard patent is $490. Examination of a standard patent takes on average 12 months.
2.67
However, companies can obtain a free expedited examination of a standard patent which takes eight weeks—meaning a standard patent can be obtained in a similar timeframe to an innovation patent.
2.68
Evidence to the inquiry suggested companies currently pursuing innovation patents would not find securing a standard patent significantly more difficult on account of the low inventive step requirements of the standard patent, meaning most applications that qualify for an innovation patent will also likely qualify for a standard patent.
2.69
For instance, Dr Moir stated there is an 'absence of any genuine inventiveness requirement in the standard patent system … the quantum of inventiveness required for grant of a standard patent in Australia is close to zero'.
2.70
That the inventiveness requirement for a standard patent in Australia is low was a key aspect of the PC's 2016 inquiry report. The PC stated:
…the required minimum advance over the prior art in Australia is a mere ‘scintilla of invention’, which is highlighted by some patent attorneys and referenced in IP Australia’s Patent Examiners Manual.
2.71
As noted above, however, the government remains committed to raising inventive step requirements for standard patents on the grounds the current standard is too low.
2.72
Nevertheless, Dr Moir also argued:
If a firm has a genuine invention (i.e. something that an expert would recognise in the real world as an invention, not something that meets the very low official nonobviousness standard), then a patent might be useful—and will certainly be granted.
2.73
IP Australia stated a further advantage of a standard patent is it gives a company an enforceable right it can use to apply for patents in other jurisdictions [internationally]. This is not possible with an innovation patent, which can only be enforced in Australia, and only once it has been certified.
Assistance for SMEs
2.74
As to arrangements to assist SMEs in the absence of an IPS, both the ACCI and the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) called for measures to assist SMEs enforce and defend their intellectual property rights. In particular, the ASBFEO called for a dedicated small business support service to provide education and training, improved navigability, reduced fees, a truncated patent assessment process, and access to simplified dispute mechanisms.
Committee view
2.75
The committee acknowledges a small number of Australian SMEs use the IPS to protect their intellectual property rights in Australia.
2.76
The committee is of the view Australian SMEs protecting their intellectual property benefit from taking a strategic and diversified approach.
2.77
The committee notes in responding to the PC inquiry report recommendations, the government agreed more targeted assistance to SMEs would better achieve the objective of stimulating innovation.
2.78
The committee acknowledges IP Australia's current outreach work with start-up companies, universities, and small business organisations. The committee encourages IP Australia to consider the suggestions made by ACCI and ASBFEO to develop a targeted program to educate and assist SMEs in adopting diversified approaches to protecting their intellectual property.
Crown use of patents and designs
2.79
Two issues were raised with regard to Crown use of patents and designs:
potential expansion of Crown use; and
Expansion of Crown use
2.80
Medicines Australia raised concerns the bill, by expanding the definition to services that governments have 'primary responsibility' for providing or funding, will potentially broaden Crown use beyond limited and exceptional circumstances. In so doing, it could erode the rights of patent holders and discourage investment in research and development. It recommended the bill be amended to make clear the provisions only apply in cases where Crown use is consistent with international treaties, including TRIPS.
2.81
IP Australia has previously responded to this concern, stating the amendments will not provide the government with a broad mandate to interfere with the rights of patent and design owners. It is of the view the 'primary responsibility' test clarifies the circumstances in which Crown use can be invoked, and in so doing, better protects the rights of patent and design owners, in particular by adding ministerial oversight.
Remuneration
2.82
Dr Dimitrios Eliades recommended, with regard to remuneration for Crown use, that it be made clear (at the end of section 165(2)) if a patentee is exploiting an invention or taking steps towards the imminent exploitation of the invention at the time the Crown proposes exploitation, the court must consider this when determining the economic value of the exploitation of the invention. This will mean the patentee is entitled to lost profits, rather than only royalties.
2.83
Dr Eliades also raised a concern with regard to levelling the playing field between government and patentee in cases of remuneration for Crown use. He noted the current bill does not obligate the Crown to follow the general rule in subsection 163(3) of the Patents Act (and equivalent in the Designs Act 2003), which establishes that the exploitation of an invention is not an infringement of a patent if certain activities are completed. The only penalty is the Crown will lose the protection afforded by Crown use provisions and be open to an infringement action—which is itself an expensive and time consuming process for the patentee and may leave the patentee open to a cross-claim for revocation of the patent. In such cases, any determination of terms and remuneration would have to wait for the conclusion of the infringement or revocation proceedings.
2.84
Dr Eliades recommended that to improve the negotiating imbalance between patentee and government, there should be a greater penalty against the Crown for non-compliance and being found to infringe a patent. Further, with regard to issues that should be considered by a court in determining relief for infringement of a patent (section 122 of the Patents Act), Dr Eliades proposed including any unsuccessful application by the Crown to revoke the grant of a patent or remove the design registration.
2.85
The Law Council of Australia raised an issue with proposed subsection 165(2) that the court must determine an amount of remuneration that is 'just and reasonable'. The council questioned whether in cases of Commonwealth ministers and authorities, the addition of the term 'reasonable' is inconsistent with the requirement under section 51 of the Constitution that any acquisition of property by the Commonwealth should be on 'just terms' alone. The council noted this limitation does not apply at the state or territory level.
Compulsory licences
2.86
Submissions identified two key issues with regard to compulsory licences: the public interest test, and remuneration.
Public interest test
2.87
Some submissions raised concerns with the 'public interest' test (which replaces the reasonable requirements of the public test in the current legislation), and its open-ended nature.
2.88
The US Chamber of Commerce questioned whether the proposed subsection permitting the court to take into account 'any other matters the court considers relevant' would undermine the stated objective of limiting uncertainty.
2.89
Pharmaceutical Research and Manufacturers of America (PhRMA) agreed, stating there is no definition of what constitutes 'in the public interest' and this may potentially broaden the circumstances under which the courts might grant compulsory licences beyond 'exceptional circumstances'. PhRMA and the Law Council of Australia questioned whether the bill contravenes the AUSFTA.
2.90
The Law Council of Australia suggested there is no need to introduce a public interest test because the patent system is, in effect, a system designed to promote long-term public benefits (increased innovation and sharing of knowledge), in exchange for short-term costs to the public (exclusive rights for a patentee). It further suggested there are differences between short-term and long-term public interests, creating further complexity.
2.91
Nevertheless, the Law Council suggested paragraph 133(3)(e) be amended to specify 'substantial' public interest. The Law Council is of the view this will help the courts to balance the competing interests.
Remuneration
2.92
AusBiotech raised concerns about perceived ambiguity around the factors to which the Federal Court must have regard when determining the amount of remuneration to be paid to the patentee.
2.93
The Law Council of Australia suggested a provision be inserted in paragraph 133(5)(b) to provide a general time frame of 60 days (or such other period as may be specified by the Federal Court) from the date of the order to grant a compulsory licence, for the parties to reach agreement on remuneration prior to the court being able to make a determination on remuneration.
IP Australia response
2.94
The concerns with regard to compulsory licencing were raised during consultation on the exposure draft and IP Australia responded at the time:
the amendments will clarify the operation of the legislation and provide greater certainty and transparency that compulsory licences can only be granted when it is in the public interest to do so [see paragraph 133(3)(e)]; and
the provisions are consistent with Australia's international obligations.
2.95
In its submission to the inquiry, IP Australia further stated the new test would focus on whether Australian demand for a product or service is not being met on reasonable terms, and whether access to the patented invention is essential for meeting the demand. The court will also have to consider whether it is in the broader public interest to grant access to the patent.
2.96
IP Australia did make several amendments to the legislation following the consultation, including with regard to remuneration and public interest in cases of compulsory licencing. During its consultation, IP Australia did not identify the remuneration concerns raised in this inquiry as of concern.
Committee view
2.97
The committee agrees the amendments introducing a public interest test will improve certainty and transparency for patent holders.
Use of drawings, graphics and photographs
2.98
Macquarie University, Medicines Australia and IPTA raised concerns with amendments in schedule 6 that would extend the existing requirement for standard and innovation patent applications to comply with subsection 40(3A) of the Patents Act, to applications for re-examination, opposition or revocation proceedings, or when amendments are proposed to the specification.
2.99
Subsection 40(3A) states claims must not rely on references to descriptions, drawings, graphics or photographs unless absolutely necessary to define the invention.
2.100
The organisations argued that in some cases graphics were required to assist in the representation of an innovation and this proposed amendment reduces certainty for patent applicants by potentially expanding the ground upon which existing patents can be challenged and revoked.
2.101
However, the EM makes clear the amendment addresses an oversight in the drafting of the Raising the Bar Act 2012 and is aligning all stages of the patent life-cycle to be consistent, as was originally intended in that Act.
2.102
The committee recommends that the bill be passed.
Chair