Is Australia’s ‘fragmented’ approach to intellectual property about to end?

Late last year the Productivity Commission delivered its findings on intellectual property arrangements in Australia. It didn’t pull any punches.

In its 750-page report, it stated: “Australia’s intellectual property arrangements fall short in many ways and improvement is needed across the spectrum of IP rights”. 

With the government’s response due soon, will the Commission’s recommendations be adopted?

The report, published last December, examines the full spectrum of intellectual property rights in Australia.

The Commission's view is that Australia’s approach to intellectual property policy has been ‘fragmented’ and that improvement is needed to rebalance intellectual property laws. It makes a wide range of recommendations, including that government develops an overarching framework for intellectual property policy to ensure that a balance is maintained into the future, particularly when negotiating international trade agreements.

The track record of past intellectual property reviews in this country actually leading to changes in the law isn’t good. However, this report is different in a number of ways.

First, it is a report by the Productivity Commission. Its role is to take a more holistic view of the issues affecting our economy and Australian society. And its track record is good. More of its recommendations tend to be accepted than rejected and its recommendations are often used to formulate government policy.

Second, the government directed the Commission to investigate Australia’s intellectual property arrangements and produce its report following a strong recommendation to do so by the Harper Review.[1]

Third, the current political, economic and social environment (and the headwinds of technological disruption) gives both sides of government sufficient motivation to adopt measures that the Commission claims will encourage innovation and improve the welfare of Australians.

The prospect of certain recommendations made in the report being implemented is good. These are the recommendations that we think are more likely to be adopted by the government in some shape or form:

• An IP policy framework will be developed. The Commission found that the lack of an overarching objective and policy framework for Australia’s IP system has contributed to a lack of balance in current intellectual property arrangements. If such a policy framework is developed, the question will be which Department or Minister is responsible for developing and maintaining the policy, or whether a standing interdepartmental policy group is established. The Commission found that responsibility for IP policy and administration in government is fragmented and has, in some cases, not been afforded sufficient priority.

• An objects clause will be introduced to the Patents Act 1990. This will be done to provide policy guidance to the courts as to when a claimed invention is patentable and, possibly, to embody the need to balance the competing interests of patent applicants and owners with the uses of technology.

• Section 51(3) of the Competition and Consumer Act 2010 will be repealed. Section 51(3) contains intellectual property exemptions that apply in relation to the restrictive trade practice provisions of the Competition and Consumer Act 2010. Both the Harper Review, and now the Productivity Commission, have recommended the repeal of this subsection.

• The ACCC will develop guidance on the interaction between intellectual property and competition laws. With the repeal of section 51 and the complexities associated with understanding how intellectual property laws interact with competition laws, it is likely that the ACCC will develop guidance for patent owners and licensees with respect to the interaction between intellectual property and competition laws.

• The ‘bar’ for patentability may be raised further. The 'Raising the Bar' reforms to the Patents Act 1990 (Cth) were praised by the Commission. However, it recommended that it be raised further, to place the bar for patentability under Australian law at a level commensurate with comparable jurisdictions, such as the United Kingdom. The Raising the Bar reforms were significant, so any adjustments to the threshold for patentability might not be something that the government progresses on an urgent basis.

• The ACCC will commence monitoring ‘pay-for-delay’ settlement agreements. These settlement agreements (for example, where a pharmaceutical patent holder pays a generic drug manufacturer to keep its generic product off the market as part of a settlement agreement to resolve court action) have potentially serious competition impacts. The Commission noted that there is no monitoring system in place to detect such settlement agreements and has recommended that the Australian Competition and Consumer Commission be charged with the task of doing so.

• Extension of term arrangements for pharmaceutical patents may be reduced. The term of a pharmaceutical patent can be extended for up to five years depending on how long it takes between filing the patent and it receiving marketing approval from the Therapeutic Goods Administration (TGA). The Commission argues that this period allows patent applicants to determine extension of time periods (by deciding when an application for marketing approval is made to the TGA) rather than the period being based solely on delays caused by the TGA.

• Copyright fair dealing exceptions will give way to fair use. The Commission argued strongly for replacing Australia’s fair dealing exceptions to copyright infringement with a fair use regime based on “fairness factors”, modelled closely on the fair use exemption that applies in the USA. Given the range of copyright changes that Australia agreed to under the Australia United States Fair Trade Agreement, there is some logic to adopting a more open and flexible fair use exception, particularly in the age of the digital economy where copyright laws are constantly being tested by new innovations.

• Parallel import restrictions on copyright in books will end. Prohibiting parallel imports on books enables IP rights holders to engage in geographic price discrimination which results in Australians paying higher prices for books, the Commission argues. Numerous reviews over the last 20 years have called for the repeal of parallel imports and the recommendation to do so by the Commission might be the final impetus needed to repeal these laws.

• Parallel import restrictions on trademarked goods will be clarified. The Commission noted the uncertainty created by parallel import restrictions under Australia’s trade mark laws. If the recommendations of the Commission are adopted, we may see the government adopt a simpler test similar to the one used in New Zealand, which permits genuine goods to be imported whether or not they have been ‘authorised’ by the local trade mark owner or licensee.

• Specialist IP list in the Federal Circuit Court. The Commission had good things to say about the success of the United Kingdom Intellectual Property Enterprise Court. Steps have already been taken towards establishing dedicated IP procedures in the Federal Court. These reforms are likely to continue and we may also see the introduction of a small claims procedure with limits on trial duration and caps on costs and damages for small claims.

The government has advised that it intends to respond to the final report of the Productivity Commission by “mid-2017”. In the absence of that date being revised, its response shouldn’t be far away.

While not everyone may agree with the recommendations made in the report, there is a real opportunity for the government to respond by approaching IP policy in a more cohesive, proactive and holistic manner.