Australia: Government Takes First Steps To Implement Productivity Commission Recommendations

Last Updated: 2 May 2018
Article by Michael Caine

1. The Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other measures) Bill 2018

This Bill was introduced into Parliament on 28 March 2018. Since the Bill does not contain any controversial provisions we expect that it will be passed and will come into effect before the end of the year.

The main highlight of this Bill is that it includes a provision to remove Section 76A from the Patents Act 1990. This is an ambiguously worded provision that requires patentees to lodge R&D expenditure returns with the Department of Health after a patent term extension is obtained. Another highlight of the Bill is that it does not include provisions which were in an earlier exposure draft that were designed to phase out the innovation patent system. Instead, the Government has indicated that it will "undertake further consultation targeted at better understanding the needs of innovative SMEs before the phase out of the innovation patent occurs".

2. Proposed Intellectual Property Laws Amendment (Productivity Commission response Part 2 and other measures) Bill

The following legislative changes are expected to appear in an exposure draft of a Bill to be released in the southern hemisphere winter. These changes were the subject of consultation/options papers published in August 2017.

Inventive step

Following consultation in relation to a number options for implementing the Productivity Commission (PC)'s recommendation to, yet again, amend Australia's inventive step test, IP Australia has indicated that they propose to move ahead with option IS-2, that is to implement the PC's recommendation verbatim with clarification of the prior art base and interpretation. Under this option Section 7(2) of Patents Act would be amended based on Art 56 of the EPC to state: An invention is considered as involving an inventive step if, having regard to the prior art base, it is not obvious to a person skilled in the relevant art.

The definition of 'prior art information' for the purposes of subsection 7(3) in Schedule 1 would be repealed, and the definition of prior art base would be amended such that the prior art base for inventive step includes:

  • any single piece of information; or
  • a combination of any two or more pieces of information that the skilled person mentioned in subsection (2) could, before the priority date of the relevant claim, be reasonably expected to have combined; and
  • common general knowledge as it existed (whether in or out of the patent area) before the priority date of the relevant claim, whether that knowledge is considered separately or together with the information mentioned above.

Some additional clarification will be provided in the Explanatory Memorandum (EM) and Patent Manual of Practice and Procedure (PMPP).

Technical Features

The PC recommended requiring applicants to specifically identify technical features of their inventions. Pleasingly IP Australia has indicated that they propose to adopt option TF-2, that is to require Examiners to assess technical features through the inventive step requirements. No legislation changes are required to implement this option and guidance will be provided in the EM and PMPP.

Transitional Arrangements

IP Australia has indicated that the new inventive step/technical feature requirements will apply to all applications for which an examination request has not been filed by the commencement date. This was option TA-2.

Introducing an objects clause into the Patents Act 1990

Following consultation IP Australia has indicated that they propose to adopt the following objects clause:

'The purpose of this Act is to provide a patent system in Australia that enhances the wellbeing of society by promoting economic wellbeing through technological innovation and the transfer and dissemination of technology. In so doing, the patent system should balance over time the interests of producers, owners, users of technology, and the public.'

This is a modified version of Option B, with the change underlined. It is unfortunate that they have not removed reference to "technological innovation" from the clause, as this expression is likely to result in the objects clause being used as a basis for refusing or revoking patents, especially in the ICT and business method areas. It has also been suggested by some that limiting inventions to those which are technological could "clarify" that certain inventions relating to methods of treatment or diagnosis, or to isolated biological materials, are not patentable. We obviously disagree with this view. We are still hopeful that we can convince IP Australia and the Government that if they must introduce an objects clause it should not refer to "technological" innovation.

Crown Use

IP Australia has indicated that the Government has decided to proceed with option 2(c). This was an option that introduced the PC recommendations, but refined the recommended remuneration standard. The changes that would be required are:

  • Amending s.163 of the Patents Act to clarify that Crown use can be invoked for the provision of a service that the Commonwealth, State or Territory Governments have the primary responsibility for providing or funding.
  • Amending s.164 of the Patents Act to introduce a process of ministerial oversight. This would require:

    • the Crown to attempt to negotiate use of the patented invention prior to invoking Crown use;
    • the Crown to provide the patentee with a statement of reasons no less than 14 days before such use occurs; and
    • Crown use to be approved by a Minister (the Federal Minister with responsibility of the Patents Act or State Attorneys-General).

The PC also proposed that the first two requirements would be able to be waived in the case of an emergency. However, the PC recommended that in all cases patentees should be provided with immediate notice that their patents have been used, and a statement of reasons as soon as practical thereafter. Guidance on what constitutes "immediate notice" and "as soon as practical thereafter" is to be provided in an Explanatory Memorandum. The Minister would also be empowered to make multiple authorisations in the one instrument.

This option would have the effect that the infringement defence provided by s.163 would only apply where Ministerial approval had been obtained in advance of the exploitation.

  • Amending s.165 of the Patents Act to state that remuneration to be paid to the patentee will be "just and reasonable taking into consideration the circumstances of the case".

Compulsory Licensing of patents

IP Australia has indicated that they propose to pursue a combination of options 1 and 3. This involves implementing one of the PC's three main recommendations as well as conducting a public education and awareness campaign. This combined proposal was summarised as follows in the consultation paper:

  • Ensure that s.133 of the Patents Act (which provides for compulsory licences) continues to provide a clear and transparent statement that a compulsory licence is available as a remedy for anti-competitive conduct;
  • Increase certainty and clarity in s.133(2) and s.135 of the Patents Act by removing the reasonable requirements of the public test and replacing it with a public interest test;
  • Balance the right of the patentee to obtain an appropriate economic return on their investment, and the rights of the public to the invention being exploited efficiently;
  • Retain s.136 of the Patents Act (requiring any compulsory licence to be consistent with international obligations), to maintain certainty that the grant of a compulsory licence will not be inconsistent with Australia's international legal obligations; and
  • Communicate the legislative changes to the public, and clarify the intent and purpose of the provisions to patent owners and prospective licensees.

Unfortunately IP Australia was not receptive to arguments that the "reasonable requirements of the public" test resulted in a fairer balance than a general public interest test.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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