On 29 April 2016, the Productivity Commission released its draft report on its inquiry into Australia’s intellectual property arrangements. The closing date for submissions on the draft report is 3 June 2016.

Summary

The Productivity Commission has made a number of recommendations for extensive reforms to Australia’s intellectual property laws. The Commission found that Australia’s intellectual property system has swung too far in favour of rights holders and therefore stated that action must be taken to rebalance Australia’s intellectual property arrangements. The Commission’s key recommendations include:

  • the introduction of a “fair use” exception to copyright infringement;
  • the protection of consumer rights to circumvent geoblocks;
  • the abolition of Australia’s second-tier innovation patent system;
  • expressly excluding business method and software patents from being patentable subject matter;
  • raising the threshold test for “inventive step” for patentability;
  • reforming the extension of term regime for pharmaceutical patents;
  • the repeal of section 51(3) of the Competition and Consumer Act 2010 (Cth) (CCA), which exempts licensing of intellectual property from certain competition law prohibitions;
  • abolishing defensive trade marks;
  • imposing higher fees for trade mark applications that seek overly broad trade mark rights; and
  • changes to the Federal Circuit Court to improve dispute resolution processes for low-value intellectual property disputes.

The 600 page Draft Report is available on the Commission website, together with a Key Points and Recommendations summary and fact sheets on individual areas of reform. The Draft Report contains 23 draft recommendations to change Australia’s intellectual property laws and has issued 17 further information requests. The recommendations include changes to copyright, patents and trade marks law, each of which is addressed in turn below.

The Commission recommendations, if adopted, would have a significant impact upon Australia’s intellectual property laws. Clients who may be affected by these proposals should consider making a submission to the Commission. The closing date for submissions is Friday 3 June 2016. The Commission is expected to hand its final report to the Australian Government in August 2016.

Copyright

The major copyright recommendation in the Commission’s draft report is the introduction of a US-style “fair use” exception to copyright infringement. This exception is intended to “permit all uses of copyright material that do not materially reduce the incentives to create and disseminate copyright works”. The Commission found that Australia’s current fair dealing exceptions were weighted too much in favour of rights holders and were too narrow and prescriptive. The Commission stated that the Australian Law Reform Commission’s 2014 “fair use” recommendation was too restrictive, and said that for example, a fair use exception should go further to permit the use of orphan works.

Other key copyright aspects of the Commission’s draft report include:

  • a recommendation that consumer rights to circumvent geoblocks should be enshrined in the Copyright Act 1968 (Cth);
  • a recommendation that the safe harbour protection should be expanded from carriage service providers to cover a broader set of online service providers;
  • a recommendation for the repeal of the remaining parallel import restrictions on copyright-protected works;
  • a recommendation that the term of copyright protection should apply to unpublished works;
  • a request for further information on the extent to which licence conditions are being used to contract out of exceptions in the Copyright Act 1968 (Cth);
  • a finding that that the term of protection for copyright works is excessive and that a more reasonable term would be 15 to 25 years after creation. However, recognising limitations of international agreements, the Commission noted that scope exists to collaborate with other countries to seek mutual amendment of these agreements; and
  • a finding that timely and cost-effective access to copyright-protected works is the most efficient and effective way to reduce online copyright infringement.

Patents

The Commission stated that the quality of patents in Australia should be raised. The Commission found that Australia’s patent system granted protection too easily, resulting in a “proliferation of low-quality patents” which impede innovation and stymie competition. The key recommendations to raise the quality of patents in Australia include:

  • increase the threshold for patentability. The Commission recommended raising the “inventive step” threshold by amending section 7(2) and 7(3) of the Patents Act 1990 (Cth) such that an invention is taken to involve an inventive step if, having regard to the prior art base, it is not obvious to a person skilled in the art. The Commission considered that this would also address the issue of “evergreening”, where patent holders seek multiple patents that cover different aspects of the same product;
  • the abolition of the innovation patent system. The Commission found that the innovation patent system may be making it harder for small and medium sized enterprises to innovate and that mere reform of the innovation patent system would be insufficient;
  • the exclusion of business methods and software from being patentable subject matter. The Commission found that the protection afforded to business method and software patents has been “excessive, ineffective and not in the interests of the community”;
  • the introduction of an “objects” clause into the Patents Act 1990 (Cth) to provide an overarching or objective framework to guide the interpretation of the law by the Courts and the Commissioner of Patents;
  • increasing the cost of patent renewal fees later in the life of a standard patent and making greater use of per-claim fees to limit the breadth of patent protection;
  • reforming the patent application process to elicit better information from applicants, such as by requiring applicants to set out how their invention improves on the current state of technology, or requiring patent applicants to explain why their invention is not obvious. The Commission has sought further information as to the costs and benefits of reforming the patent filing process; and
  • seeking further information on whether there should be a broader exception from patent infringement for experimental activities;

Pharmaceutical Patents

Specifically for pharmaceutical patents, the Commission recommended:

  • reforming the extension of term regime for pharmaceutical patents. In particular, the Commission recommended that extensions of term should only occur where there have been unreasonable delays caused by the Therapeutic Goods Administration (TGA). The extensions of term should be calculated based on the time taken for regulatory approval by the TGA over and above one year. The Commission also recommended that manufacture for export should be permitted during the extension period;
  • that there should be no extension of the period of data protection for data submitted in support of regulatory approval processes. The Commission also found that there was a case for making the data more widely available, and suggested that the Australian Government should work with other nations for a system of publication of trial data in exchange for statutory data protection; and
  • a reporting and monitoring system for “pay-for-delay” settlements to be administered by the ACCC. The Commission was concerned with such settlements, where patent holders pay generics to keep their products off the market for longer, occurring within the US and EU.

Trade Marks

The Commission found that legislative change to the trade mark system has resulted in an imbalance, with trade marks of lower quality being registered.

The Commission recommended:

  • abolishing defensive trade marks by repealing Part 17 of the Trade Marks Act 1995 (Cth);
  • amending section 43 of the Trade Marks Act 1995 (Cth) so that the presumption of registrability does not apply to the registration of marks that could be misleading or confusing;
  • restoring the power of the Trade Marks Office to apply mandatory disclaimers to trade marks;
  • imposing higher fees for trade mark applications that seek overly broad trade mark rights (multiple classes of goods and/or entire classes of goods and services);
  • requiring the Trade Marks Office to challenge trade mark applications that contain geographical references (except where endorsements require goods and services to be produced in the nominated area). A more vigorous assessment of geographical references is intended to counter consumer confusion in relation to geographic terms;
  • linking business registration systems operated by ASIC with IP Australia’s trade mark database to ensure a warning arises if a business registration may infringe a trade mark, in order to reduce the risk of unintentional infringement of trade marks by small businesses; and
  • amending section 123 of the Trade Marks Act 1995 (Cth) to explicitly allow for parallel importation of goods where the marked good was brought to market elsewhere by the owner of the mark or its licensee.

The Commission has also asked for further information in relation to the use of trade marked metadata and wine and spirit geographical indications.

Other key aspects of the draft report

Other key aspects of the draft report include:

  • A recommendation to repeal of section 51(3) of the CCA, which provides an exception to some of the restrictive trade practices provisions of the CCA for certain forms of intellectual property licensing and assignment. The Commission also recommended that distinctive treatment of IP rights under the CCA could be achieved through regulatory guidance by the ACCC on the application of competition law. The repeal of section 51(3) was also recommended by the Competition Policy Review led by Professor Ian Harper (see our previous alert here).
  • A recommendation that the Australian, State and Territory Governments implement an open access policy for publicly funded research;
  • A request for further input on proposed reforms to the Federal Circuit Court to improve access to dispute resolution options for low-value disputes involving small to medium enterprises. The Commission did not see a strong case to establish a dedicated IP court along the lines of the UK’s Enterprise Court; and
  • A recommendation that Australia should not yet join the Hague Convention concerning the international registration of designs until a cost-benefit analysis is conducted.