A report on the Compulsory Licensing provisions of the Australian Patents Act by the Productivity Commission was released on 27 May 2013.   Most countries, including Australia, have provisions under which patent owners can be forced to licence their patents to others in a limited range of circumstances.

Compulsory licensing is becoming a sensitive issue internationally, particularly in relation to affordable healthcare. The present review was endorsed by the Australian government following reviews on gene patents.

Compulsory Licensing provisions rarely used

In over 100 years, there have been only three applications for a compulsory licence in Australia, and none of them were successful. Possible reasons for this are:

  • The process for granting a compulsory licence is very costly and time consuming, and without certainty of success
  • Compulsory licensing is thought to be a safeguard that is only needed in exceptional circumstances
  • Some also regard compulsory licensing provisions as an effective deterrent against refusals to licence on reasonable terms. 

Key finding of the Productivity Commission

  • There are no clear alternatives to the Federal Court for compulsory licence applications that would involve less time and cost without affecting the quality of outcomes and scope for appeals.
  • The criteria for a compulsory licence should be reformed from the current ‘reasonable requirements of the public’ test.
  • ‘Crown Use’ provisions of the Australian Patents Act provide a less costly and time consuming alternative that can be invoked for the services of a government. However, only two cases of Crown use have been contested in the Courts in Australia.
  • The Crown Use provisions should be reformed so that it is clear they can apply to healthcare services.

Key Recommendations of the Commission

  • A public interest test should replace the existing ‘reasonable requirements of the public test’.
  • When a patent is used to engage in unlawful anticompetitive conduct, a compulsory licence should only be available under the Consumer and Competitive Act.
  • The Crown Use provisions should be amended to clarify that Crown Use can be invoked for provision of a service that the Australian, State and/or Territory Governments have primary responsibility for funding.
  • Approval of a government Minister should be required to invoke Crown Use, and subject to the same pricing principles as for compulsory licensing.

Will the proposed changes have much effect?

  • Applications for compulsory licences are still likely to be a rarity in Australia. Most companies will be reluctant to spend the time and considerable cost of an application to the Federal Court with uncertainty on interpretation of the new ‘public interest test’, if their negotiations for a licence under fair and reasonable terms is unsuccessful.
  • There could be an increased utilization of the equally rarely used Crown Use provisions, if the proposed changes are implemented.
  • Federal, State and Territory governments may make more use of the Crown Use provisions, not only in the healthcare sector, but also for patents relating to food security, alternative energy and clean technologies.