Change in the air for IP laws in Australia: 5 key takeaways

The Government’s recent response to a major report on IP arrangements suggests Australia’s intellectual property laws are about to change. So, what are the key proposed changes and what impact are they likely to have? We’ve put together an overview, together with five key takeaways for your organisation.

Background

In June this year we examined the Productivity Commission’s report on IP arrangements in Australia. The Government has now released its response to that report. As we anticipated, the Government supports, or supports in principle, many of the Productivity Commission’s recommendations.

A summary of the Government’s position on each recommendation is set out at the end of this article and we examine the impact of the Government’s response to particular recommendations below.

IP Australia is already consulting in relation to a number of the proposed amendments to the Patents Act. Submissions can be made before 17 November 2017. Further consultations in relation to proposed changes to the Copyright Act will take place later this year and in the first half of 2018.

Top 5 takeaway messages

1. Users of the innovation patent system and companies that are considering enforcing patent rights should consider the merit of applying for innovation patents before the system is abolished.

2. Online service providers and rights holders should consider whether the proposed extension of the safe harbour scheme (which provides protection from copyright infringement) will impact on their business models.

3. Brand owners will need to act with greater vigilance to ensure that they are engaging in sufficient use of their registered trade marks so that those registrations are not at risk. The vulnerability of registrations will need to be considered every 3 years from the date the trade mark is filed.

4. Brand owners in the fashion and FMCG space will need to ensure that their distribution agreements clearly define any territorial restrictions and that they are complied with.

5. Pharmaceutical companies will need to ensure that they comply with the proposed new system for monitoring settlement agreements and that those agreements are not objectionable from a competition law perspective.

Changes to the Government’s approach to IP policy

The Government agrees with the Productivity Commission that it should promote a more coherent and integrated approach to IP policy. It states it has already taken steps to do this by:

• establishing a dedicated IP policy unit within the Department of Industry, Innovation and Science; and

• an interdepartmental policy group to support ‘an integrated and coherent approach to developing the Government’s policy agenda for IP issues’.

In our view, having a coherent and integrated approach to IP policy is a welcome step, not only to address the recommendations supported by the Government but also to help raise the profile of intellectual property laws in Australia.

Proposed changes to patent law

The major changes that the Government intends to implement are:

• the introduction of an objects clause to the Patents Act 1990 (Cth) to provide a clear statement of legislative intent to guide the courts in interpreting the Act (the Government will consult further as to the precise wording of the objects clause);

• raising the bar for an inventive step under sections 7(2) and 7(3) of the Act ‘to put beyond doubt that the assessment of inventive step in Australia is consistent with the European Patent Office’;

• the innovation patent system will be brought to end.

The changes to the inventive step test are unlikely to have a significant impact. The Commission’s proposal is intended to clarify that a mere “scintilla” of invention is insufficient to establish an ‘inventive step’. As the Law Council pointed out in its submission to the Commission, this proposal was based on a misunderstanding that Australian courts apply the “scintilla test” rather than the statutory one our courts do apply which asks whether the claimed invention is “obvious”.

The abolition of the innovation patent system is a major reform. Australia has had a second tier patent system for low-level innovations since 1979. Users of the innovation patent system include local IT companies as well as companies in the gaming, transport and energy industries. Innovation patents have been a very powerful tool in litigation as they are granted quickly and are difficult to revoke.

Proposed changes affecting the pharmaceutical industry

A system for monitoring and mandatory reporting of settlement agreements between originator and generic pharmaceutical companies to detect ‘pay for delay’ agreements is supported in principle, with the Government stating that it would ‘improve transparency and would equip the ACCC to detect any anti-competitive behaviour’.

The Government has suggested that a reporting scheme informed by the framework under the Corporations Act 2001 for Australian financial services licensees (AFSL) may be appropriate.

If the AFSL approach is adopted, the reporting scheme may require pharmaceutical companies to implement compliance programs to monitor and report pay for delay settlement agreements affecting Australian consumers, with penalties for a failure to report.

Innovative pharmaceutical and biotech companies will be relieved by the Government’s decision not to implement the Commission’s proposed changes to the extension of term regime for pharmaceutical patents, which would have severely limited the availability and length of extensions of patent term. Nevertheless, the Government hasn’t ruled out other changes ‘to improve the patent extension system’. We may therefore see rights to extension of term being curtailed in some other way.

Proposed changes to trade mark law

With respect to trade mark law, the major changes that the Government intends to implement are:

• reduce the grace period for challenging non-use of a trade mark (from 5 to 3 years) to address the problem of unused trade marks ‘cluttering’ the register;

• ensuring that the parallel import of trade marked goods does not infringe a registered trade mark where the goods have been brought to market elsewhere by the owner or licensee of that trade mark; and

• to require the Trade Marks Office to challenge trade mark applications that contain contemporary geographical references.

In terms of the grace period, brand owners will need to be vigilant in ensuring that they use their marks quickly and across the full scope of the goods or services for which their marks are registered within three years from filing their applications. This change may assist in ensuring that marks which are not being used, do not present an obstacle to subsequent trade mark applications.

The second of these changes will remove any basis for brand owners to challenge the sale of genuine goods manufactured overseas but imported without the local trade mark owner’s approval. The Government will engage in further consultation on exposure draft legislation.

Proposed changes to competition law

As we predicted in June, the Government will finally take steps to repeal section 51(3) of the Competition and Consumer Act 2010 (Cth). Section 51(3) deals with the relationship between intellectual property and competition law.

If passed, a repeal of section 51(3), would bring some much needed clarity to that uneasy relationship, with the Government stating that ‘where there is evidence of anti-competitive conduct associated with IP licensing arrangements, it is important that such conduct is appropriately regulated’. In practice, this would mean that IP transactions would no longer benefit from the limited exemptions under section 51(3) and would be subject to competition law, just like any other transaction.

The Productivity Commission recommended that the ACCC issue guidance on the application of Part IV of the Competition and Consumer Act 2010 (Cth) to intellectual property rights however the Government did not respond to that recommendation. We think that a repeal of section 51(3) will nonetheless give the ACCC sufficient motivation to release such guidance.

The Government also notes that, if anti-competitive conduct relating to intellectual property transactions is nonetheless in the public interest, the established ACCC authorisation process (which allows for arrangements that might otherwise contravene competition law to be authorised) is available under Part VII of the Competition and Consumer Act 2010 (Cth).

Proposed changes to copyright law

The recommendation made by the Productivity Commission, that Australia introduces a fair use exemption in lieu of the current and more restrictive fair dealing exemptions, received a lukewarm response from the Government, with it merely ‘noting’ the recommendation and stating that ‘this is a complex issue and there are different approaches available to address it’.

The Government nonetheless intends to publicly consult on ‘more flexible’ copyright exemptions in early 2018 following the finalisation of other copyright reform priorities.