Australia: Federal Government responds to Productivity Commission Inquiry into Intellectual Property Arrangements

While broadly supportive, the Australian Government has indicated that it will proceed cautiously with the implementation of the Commission's recommendations.

The Australian Government has responded to the recommendations of the Productivity Commission Inquiry into Intellectual Property Arrangements. That report courted considerable controversy having recommended a series of foundational changes to Australia's intellectual property laws. Overall, the Government's response can be characterised as restrained but broadly supportive. We outline below the recommendations and responses that are most relevant to industry participants.

Copyright

Fair use

The Productivity Commission recommended that Australia adopt a fair use exception to copyright infringement (instead of the current fair dealing regime), echoing that earlier recommendation of the Australian Law Reform Commission.

The Government notes this recommendation. Observing that "this is a complex issue and there are different approaches available to address it", the Government will publicly consult on more flexible copyright exceptions. This consultation is slated to occur in early 2018 following the finalisation of other copyright reform priorities.

Technology Protection Measures (TPMs) and agreements to restrict the use of copyright material

The Productivity Commission recommended that agreements to restrict the use of copyright material that is otherwise permitted by a copyright exception should be unenforceable. Consumers should also be permitted to circumvent TPMs for legitimate uses of copyright material.

The Government supports in principle this recommendation. However, the Government has indicated that there will not be any action until the review of the Copyright Regulations 1969 has been completed. That review will examine the need for new TPM exceptions to facilitate the legitimate use of copyright material which will inform any reforms. The Government has also signalled an intention to implement a streamlined process for future TPM exception reviews.

The Government will consult on how best to approach the issue arising from agreements to restrict the use of copyright material that aligns with any reforms to the copyright exceptions.

Geoblocking

The Productivity Commission recommended that the Copyright Act 1968 (Cth) be amended to make clear that it is not infringement for consumers to circumvent geoblocking technology. Further, it recommended the Government refrain from entering into international agreements that would prevent or ban this circumvention.

The Government notes this recommendation and will consider the issue as part of its review of the Copyright Regulations 1969.

Parallel importation of books

The Productivity Commission recommended that the Government proceed to repeal parallel import restrictions for books to take effect no later than the end of 2017.

The Government supports in principle this recommendation. The Government has indicated that any reforms will be developed in consultation with the book industry to develop a reform pathway that is in the public interest.

Orphan works: The Productivity Commission recommended that liability for the use of orphan works be limited where a user has undertaken a diligent search to locate the relevant rights holder.

The Government supports this recommendation and will consult on the most appropriate way to limit liability.

Safe harbour

The Productivity Commission recommended that the safe harbour scheme be expanded to cover all providers of online services.

The Government supports in principle this recommendation. Currently, the safe harbour provisions only cover "carriage service providers" such as internet service providers. There is a concern that this is ill-suited to a dynamic, digital economy. The Government will undertake further consultation on the safe harbour provisions prior to the introduction of any amendments.

Patents

Objects clause

The Productivity Commission recommended that an objects clause be inserted into the Patents Act 1990 that indicates a purpose of enhancing the wellbeing of Australians by promoting technological innovation and the transfer and dissemination of technology.

The Government supports this recommendation and will amend the Act such that it expresses the legislative intention. However, the Government states that it will give further consideration to the exact wording of the objects clause. This is a major change.

Further, the Government references prior recommendations of the Commission in 2013 favouring an objects clause when it was asked to review the compulsory licensing provisions for patents. Those recommendations were similarly directed at ensuring that there was a balance between the interests of producers, owners and users of technology.The government will consult further on the 2013 recommendations in the implementation of its current response.

Inventive step

In Australia, an invention is taken to involve an inventive step when compared with the prior art base unless it would have been obvious to a person skilled in the relevant art. Under the current approach, an invention is not obvious unless the skilled person would be "directly led as a matter of course" (the modified Kripps test). Alternatively, it has been stated that a "scintilla of invention" is all that is required. The Productivity Commission is of the view that such an approach establishes insufficient thresholds and has noted that the European test "obvious to try" may be a suitable test.

The Government supports this recommendation stating that it intends to make amendments that will "put beyond doubt that the assessment of inventive step in Australia is consistent with the European Patent Office". However, any legislative change and relevant explanatory memoranda will be exposed to public consultation.

Innovation patents

The Productivity Commission recommended that the innovation patent system be abolished.

The Government supports this recommendation. The Government notes that the innovation patent system was established to foster innovation for small and medium sized enterprises (SMEs) but that these objectives are not being met. The Government has formed the view that these enterprises would benefit from more targeted assistance and that the costs to third parties and the broader community favour the abolition of innovation patents.

The Government will introduce amendments to abolish the innovation patent system while preserving existing rights.

Patent filing

The Productivity Commission recommended that the patent filing process be reformed to require applicants to identify the technical features of the invention in the set of claims.

The Government supports this recommendation and intends to implement it together with the reforms to inventive step.

Patent fees

The Productivity Commission recommended that patent fees be set to promote broader intellectual property policy objectives rather than to primarily recover costs. This recommendation contemplates:

  • an exponential increase in patent renewal fees per year;
  • lower threshold for claim fees; and
  • increased claim fees for applications with a large number of claims.

The Government notes this recommendation. The Government records that the fees are already directed at a balance between innovation and cost recovery objectives and is not persuaded of a need to move away from this framework. The Government has indicated that IP Australia will have regard to this recommendation in any patent fee review to take place in the future.

Patent term extensions

The Productivity Commission recommended that patent term extensions for pharmaceuticals be reformed such that they are only:

  • available for patents covering an active pharmaceutical ingredient; and
  • calculated based on the time taken for regulatory approval that exceeds one year

The Government notes this recommendation but stated that there were no plans to proceed with the recommendation in this form. Any reforms to the patent term extension system will be discussed with the pharmaceutical sector. The Government acknowledged the Commission's findings that these extensions prolong exclusivity and impose significant costs on stakeholders. However, it is apparent that the Government was of the view that the approach of the Commission did not strike an appropriate balance between the development of new, safe and effect pharmaceutical products and their accessibility and affordability.

Pay for delay agreements

The Productivity Commission recommended the introduction of a monitoring and reporting system of settlements between originator and generic pharmaceutical companies to detect "pay for delay" arrangements.

The Government supports in principle this recommendation while (oddly) recognising that there is no evidence of any such activity in Australia. The Government has stated that the lack of evidence does not mean that such activities have not occurred and may simply reflect the difficulty of detecting such arrangements.

The Government appears to strongly favour the introduction of a reporting regime and has identified the reporting regime in the Corporations Act 2001 for Australian financial services licensees as a possible framework.

Trade marks

Grace period

The Government supports a reduction in the grace period from 5 years to 3 years before new registrations can be challenged for non-use. The Government will conduct further public consultation on an exposure draft of proposed legislation to give effect to these changes.

Presumption of registrability

The Government does not support the recommendation to remove the presumption of registrability in assessing whether a trade mark could be misleading or confusing at application. The Government considers that the presumption "sets the level of certainty required at an appropriate level".

Parallel importation

The Productivity Commission recommended that the Government ensure that the parallel importation of marked goods do not infringe in circumstances where the goods have been brought to market abroad by the owner or its licensee. The Commission identified the New Zealand approach as a model clause.

The Government supports this recommendation, recognising that the current exception for parallel imports is not achieving its policy intent and has generated confusion and uncertainty. The Government proposes to release an exposure draft for public comment prior to enacting amendments to give effect to this recommendation.

General practice

The Productivity Commission also made a variety of recommendations relating to practice and procedure, including:

  • requiring trade mark applicants to state whether they are "using" or "intending to use" the mark at application, registration and renewal, and recording this on the Register;
  • requiring the Trade Marks Office to return to its previous practice of routinely challenging trade mark applications containing contemporary geographic references; and
  • in conjunction with ASIC, linking the Australian trade mark search database with the business registration portal, including to ensure a warning if a business registration may infringe an existing trade mark.

All these recommendations found support or support in principle from the Government.

Plant breeder's rights

Essentially derived varieties

The Government supports the recommendation to amend the Plant Breeder's Rights Act 1994 (Cth) to enable essentially derived variety declarations to be made in respect of any variety. The Government will undertake public consultation before giving effect to this recommendation.

The Australian Government response suggests a cautious and consultative implementation of the Commission's recommendations that were supported or supported in principle. The Government appears particularly concerned about the form that any reforms may take and has proposed extensive public engagement.

Public consultation by IP Australia

IP Australia has acted quickly following the Government's response to the Productivity Commission report - it has now commenced public consultation on five IP policy matters, four of which form part of the proposed implementation of that response, and one of which relates to a trade marks issue:

  • Amending inventive step requirements for Australian patents - this paper puts forward options for changes to the Patents Act 1990, and the guidance that would be included in the explanatory materials accompanying the changes;
  • Introduce an objects clause into the Patents Act 1990 - this paper discusses options for the precise wording of an objects clause to set out the purpose of the patents legislation;
  • Amending the provisions for Crown use of patents and designs - this paper discusses options for reform of Crown use provisions for patents and designs;
  • Amending the provisions for compulsory licensing of patents - this paper discusses options for the reform of compulsory licensing provisions for patents;
  • Introducing divisional applications for international trade marks - this paper discusses the introduction of divisional trade mark applications for international registrations designating Australia filed under the Madrid Protocol, plus consequential proposals to harmonise and amend the existing practice in Australia for dividing domestic trade mark applications to align with the new IRDA divisional procedures.

IP Australia invites interested parties to make written submissions by Friday 17 November 2017.

IP Australia will then consider the submissions, and undertake further consultation on an Exposure Draft of the legislation. The legislative amendments relating to these issues are proposed for inclusion in a Bill intended for introduction to Parliament in 2018.

IP Australia's implementation of other measures covered by the Government's response to the Productivity Commission report will be consulted on later in 2017, with a view to introducing this set of amendments in a Bill as soon as possible.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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