Australia: Promoting an innovation economy – Implications of the government response to the Productivity Commission report into IP arrangements

Last Updated: 18 September 2017
Article by Georgina Hey and Isobel Taylor

We recently published an article on the potential impact on the Productivity Commission's Inquiry Report on Intellectual Property Arrangements (Report) on Australia's innovation economy. In this article, we highlighted how some of the Commission's recommendations, if implemented, could undermine the strong, robust IP protection that is necessary to incentivise investment in research and development, and new-to-market innovation.

In late August, the Australian Government published its long-awaited response to the Report. The Government broadly supports many of the Commission's recommendations, particularly to reform the patent system, but has stopped short of supporting the extensive copyright overhaul recommended in the Report, considering that this requires further research and consultation. In this article, we consider the Government's responses to some of the Report's key recommendations, and the potential implications of these responses.

Responses to the recommended amendments to Australia's patent regime

  • The Government supports raising the inventiveness threshold for the grant of patents. The Government will seek amendments to the Patents Act 1990 (Cth) to align with the more stringent 'obvious to try' test applied by the European Patent Office. This will mean the current 'scintilla of invention' test will be insufficient to meet the inventiveness threshold. The Government will simultaneously introduce an amendment requiring patent applicants to identify the technical features of their invention in the claims. The specific wording of the amendments will be subject to further public consultation, but is likely to mirror the equivalent provisions of the European Patent Convention.
  • As noted in our earlier article, the requirements for patentability were recently substantially increased to align closely with international standards by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth). This change came into force in April 2014, but has only been considered a handful of times by IP Australia and is yet to be tested by the Court. Therefore, any additional legislative change at this stage is arguably premature and possibly unnecessary, as it has the potential to discourage innovators from investing in research and development, and seeking patent protection, in Australia.

  • The Government supports abolishing the innovation patent system, and will seek legislative amendments to implement this recommendation while maintaining existing rights. The Government argues that more targeted assistance would better achieve the original intentions behind the introduction of the two-tier system, which was to stimulate innovation by Australian SMEs. New measures include the IP Toolkit for Collaboration, Source IP, the Patent Analytics Hub and the Entrepreneur's Programme.
  • While providing valuable information to assist SMEs in leveraging and protecting their IP generally, unlike a (potentially reformed) innovation patent system, these measures do not provide the ability to obtain an enforceable right quickly. This is vital, given the potential for delays as a result of the standard patent system's pre-grant opposition process, especially in fast-paced industries such as the tech industry, whose products are characterised by rapid innovation and short shelf-lives.

  • The Government notes the Commission's recommendation to restructure patent renewal fees to rise each year at an increasing rate such that fees later in the life of a patent would well exceed current levels, with the intention of promoting broader IP policy objectives rather than cost recovery. However, the Government considers the current fee structure adequately balances innovation with cost recovery policy objectives. This will be welcome by patent holders because any fee increase could have been seen as a simple fee grab.
  • The Government supports in principle introducing a system for self-reporting and monitoring settlements between originator and generic pharmaceutical companies to detect potential pay for delay agreements, despite a lack of evidence that this is an issue in Australia. The reporting system would be based on the model used in the United States and administered by the Australian Competition and Consumer Commission (ACCC). The Government considers that such a regime would improve transparency and assist the ACCC in identifying anti-competitive behaviour. The Government will further consider the options for implementing this recommendation, with compliance mechanisms for failure to lodge agreements with the ACCC, potentially along the lines of the breach reporting framework applying to financial services licensees. What this may mean for any confidential or without prejudice agreements and discussions is not clear.

Responses to the recommended amendments to Australia's trade mark regime

  • The Government supports reducing the grace period for challenging non-use of trade marks from 5 to 3 years to manage decluttering of the Trade Marks Register, and will consult further on proposed amendments to the Trade Marks Act 1995 (Cth) to implement this recommendation. This will likely lead to an increase in non-use applications which may help brand owners remove unused marks. However, as noted in our earlier article, any amendment should also include an exception where trade mark owners can demonstrate legitimate business reasons for their lack of use.
  • The Government supports in principle introducing a requirement of a statement of 'use' or 'intention to use' a mark at application, registration and renewal. IP Australia will undertake further research to determine the extent of clutter on the Trade Marks Register which will inform the development of reforms, potentially including the introduction of such a requirement. Perhaps this will ensure trade mark specifications are more carefully crafted, but care would need to be taken in making any changes to ensure we do not fall foul of our global obligations by adding this further requirement at these 3 stages in the trade mark lifecycle.
  • The Government does not support removing the presumption of registrability, which requires an examiner to be satisfied to a certain level that a mark is not registrable, in determining whether a mark could be misleading or confusing. The Government does not agree with the Commission's suggestion that it is unreasonably difficult to reject a mark on these grounds, and correctly notes that the current presumption sets the level of certainty required at an appropriate level.
  • The Government supports the recommendation to routinely challenge applications containing contemporary geographical references, but notes that further work is needed to determine the scope of the practice change in the Trade Marks Office. As noted in our earlier article, this issue should properly be considered in the context of the wider assessment of the application's ability to function as a trade mark.
  • The Government supports in principle linking the Australian Trade Mark Search database (previously ATMOSS) with the business registration portal, noting that potential linkages are currently being explored. However, the Government notes that the effectiveness of automatic warnings is reliant on the sophistication of available technologies, and there is a risk that such warnings may not bring all relevant marks to the business name applicant's attention. While the new-look Australian Trade Mark Search website has greater capabilities, it does not appear that it is yet sophisticated enough to ensure all necessary marks (and no unnecessary marks) would be highlighted by a linked search.

Responses to the recommended amendments to Australia's copyright regime

  • The Government notes the recommendation to introduce a fair use exception to copyright infringement, and will further consider this recommendation in the context of wider copyright reform. The Government will publicly consult on potential copyright reforms in early 2018, allowing time to properly consider the complexities of possible amendments and gather information on the regulatory impact of any changes. During this period of consultation, it will be important to ensure that under any proposed amendments, rights holders' interests are adequately protected such that 'fair use' does not effectively amount to 'free use' and it becomes impossible to defeat the defence in practice, which appears to be the main concern of copyright holders.
  • The government supports in principle repealing parallel import restrictions for books, and will consult with the book industry to develop a reform pathway that is in the public interest, to ensure regulatory frameworks and government policies do not unnecessarily restrict competition. This is a sensible reaction to the realities of the global online marketplace, which will ultimately benefit the Australian booksellers marketplace by reducing the price Australian booksellers have to pay for their books.
  • The Government supports in principle the amending the Copyright Act 1968 (Cth) to permit consumers to circumvent technological protection measures (TPMs) for legitimate uses of copyright material. The Government will carry out a review of the Copyright Regulations 1969 (Cth) during the second half of 2017, including considering whether new exceptions should be created to prescribe particular legitimate uses of copyright material, and implementing a simplified process for future TPM exception reviews. The Government is also open to considering whether new TPM exceptions could be created to prescribe particular uses of copyright material prevented by geo-blocking technology.

Next steps

IP Australia has now opened public consultation on five IP policy matters, four of which reflect the proposed implementation of some aspects of the Government's response to the Report. The papers discuss the proposed implementation of the following amendments:

  1. Amending the inventive step requirements for Australian patents;
  2. Introducing an objects clause into the Patents Act;
  3. Amending the provisions for Crown use of patents and designs;
  4. Amending the provisions for compulsory licensing of patents; and
  5. Introducing divisional applications for international trade marks.

IP Australia invites interested parties to make written submissions in response to the questions posed in these five papers by 17 November 2017, with the amendments proposed for inclusion in a Bill slated for introduction to Parliament in 2018, following drafting and further public consultation. IP Australia will further consult on the other measures in the Government's response to the Report later this year.

Before any final changes are made, we hope that they are considered within the context of the Government's stated aim of creating a strong, IP-rich economy, and that decisions are not made to restrict IP holders rights in the mistaken belief that we are a country of net IP users, not generators.

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