Key Points:

The Productivity Commission will examine whether Australia has the right balance between promoting competition and protecting intellectual property.

The Harper Review into Australia's competition laws made a number of sweeping recommendations. Most of these recommendations are still being considered by the Government, but one aspect of the recommendations has now been accepted, with the Government announcing that the Productivity Commission will conduct a broad-ranging review into Australia's intellectual property laws.

The Harper Review recommendations

The Harper Review Final Report included some substantive recommendations impacting on intellectual property, one of which was to recommend the repeal of the intellectual property exemption in section 51(3) of the Competition and Consumer Act. However, it also briefly addressed some concerns regarding the scope of the protection afforded to intellectual property under Australian law. Rather than making any specific recommendations for reform, the Harper Review proposed that the Productivity Commission undertake "an overarching review of intellectual property".

This recommendation was accepted on 18 August 2015, with the Government announcing a 12 month review by the Productivity Commission to "examine whether Australia has the right balance between promoting competition and protecting intellectual property".

The Productivity Commission's Terms of Reference

The Productivity Commission's Terms of Reference explicitly recognise that there is a balance to be struck between providing appropriate incentives for innovation (a rationale underlying patent, copyright and design laws, for example), while at the same time not unreasonably impeding competition. This balancing exercise was the subject of a detailed report in 2000 following an inquiry chaired by economist Henry Ergas. It can be expected that the Productivity Commission will revisit the final report handed down by the Ergas Committee as a part of its inquiry.

The Terms of Reference also recognise that Australia is a signatory to numerous international agreements, such as the Agreement on Trade-Related Aspects of Intellectual Property Rights (or TRIPS Agreement), which provide some limitations as to the scope of the changes that can be made to Australia's intellectual property laws.

What is clear is that the Productivity Commission review will be broad-ranging. Among the issues that the review can be expected to address are:

  • the extent to which Australia should agree to extend the scope and duration of intellectual property protection through future bilateral, multilateral or regional agreements;
  • Australia's laws regarding "parallel imports" (ie. the importation into Australia of goods made overseas with the consent of the owner or licensee in the country of origin, but without the consent of the Australian IP owner/licensee);
  • the related issue of differential pricing between jurisdictions (an issue which has attracted much attention, including in the Commonwealth Parliament, in recent times, particularly in the context of products such as software, music, books and electronic devices);
  • the second tier patent protection regime for "innovation patents";
  • the continuing impact of the "digital economy" and whether Australia's intellectual property laws are keeping pace with these rapid changes ‒ particularly in the area of copyright law;
  • the possible wholesale rewriting of the Copyright Act. While the Patents Act, Trade Marks Act and Designs Act have all been substantially rewritten since 1990, the Copyright Act is now almost 50 years old ‒ despite the fact that copyright law has been subject to the greatest impact from technological change over the past 25 years; and
  • subsidies for R&D activities in Australia.

As Australia continues its development from a resources-based economy into a knowledge economy, the laws governing intellectual property ‒ and the rewards for innovative activity generally ‒ will become increasingly important. Every business operating in Australia should therefore pay close attention to this Productivity Commission inquiry.

What happens next

Other than the final report being due in August 2016, the timeline for the inquiry is yet to be established. However, the first step in the inquiry will likely be for the Productivity Commission to release an issues paper and call for interested parties to make submissions.