On 25 August 2017, the Government tabled its long-awaited response to the Productivity Commission’s recommendations in relation to Australia’s intellectual property arrangements.
The Government’s response addresses the various recommendations of the Productivity Commission in its consideration of whether Australia’s intellectual property arrangements provide the appropriate balance between access to ideas and products, and encouraging innovation, investment and the production of creative works. The Productivity Commission’s final report was tabled in Parliament in December 2016 and had recommended sweeping legislative reform in the areas of copyright, patent and trade mark law.
The Government’s response supports significant reforms to some aspects of Australian intellectual property, and flags additional rounds of consultation and further uncertainty for others. Below we set out the key responses and our analysis as the Government prepares to commence further consultation.
Of key interest is the Government’s response on the following issues.
- Fair use: the Government has shied away from supporting the recommendation of the Productivity Commission and the ALRC to introduce a broader “fair use” exception into the Copyright Act.
- Geo-blocking: the Government has stopped short of supporting the recommended amendment of the Copyright Act to permit the circumvention of geo-blocking technology, indicating that it would consider the issue further at a later stage.
- Parallel importation of books: the Government supports the repeal of parallel importation restrictions on books.
- Patents Act reform: the Government will amend the “inventive step” test to bring Australia in line with the test for inventiveness applied in Europe, and will consult on the form of a “clear statement of legislative intent” for the Patents Act.
- Innovation patents: the innovation patent system is to be abolished, with existing rights to be preserved.
- Non-use grace periods: the grace period before a trade mark registration can be challenged for non-use is to be reduced from 5 years to 3 years.
- Parallel importation of trade marked goods:changes are proposed to provide clarity on the legality of parallel imports from a trade marks perspective.
- ‘Use’ in trade mark applications: there is in-principle support for the requirement to state whether a mark is in use or intended to be used as at the date of application.
We outline the Government's response in relation to copyright, patent, trade mark and general IP law below.
Despite the Productivity Commission’s recommendations for extensive copyright legislative reform, the Government has stopped short of providing unqualified support for the majority of the Productivity Commission’s recommendations in relation to copyright. Instead, the Government issued a measured response to the recommendations, flagging its intention to undertake yet further review and stakeholder consultation in relation to a number of the key recommendations.
- supports in principle the Productivity Commission’s recommendation that the Copyright Act be amended to prevent “contracting out” of statutory copyright exceptions. However, the Government considers that this issue merits further consideration as part of its review of the Copyright Regulations later this year. Further stakeholder consultation subsequent to that review process has been foreshadowed.
- notes the recommended amendment of the Copyright Act to make clear that it is not an infringement of copyright for consumers to circumvent geo-blocking technology. Again, however, the Government considers that this issue warrants further consideration as part of its review into whether new TPM (technological protection measures) exceptions should be introduced into the Copyright Act.
- supports in principle the Productivity Commission’s recommendation that the parallel importation restrictions for books be repealed, but intends to consult further with the publishing industry on this issue “to develop a reform pathway that is in the public interest”.
- notes the Productivity Commission’s recommendation that the Government implement the ALRC’s recommendation regarding a fair use exception in Australia, but will (again) publicly consult on more flexible copyright exceptions in early 2018.
- supports in principle the recommendation that the safe harbour scheme, currently limited to “carriage service providers” (who are predominantly ISPs), be expanded to cover all providers of online services, but is continuing to undertake stakeholder consultation on the safe harbour scheme before considering whether to introduce these amendments.
- supports the Commission’s recommendation to amend the Copyright Act to limit liability for the use of orphan works, where a user has undertaken a diligent search to locate the relevant rights holder.
In addition, the Bureau of Communications and Arts Research, in consultation with the ACCC, will undertake a review of the effectiveness of the Code of Conduct for Copyright Collecting Societies.
The Government’s response on the copyright recommendations and its desire for yet further review and consultation is surprising and perhaps disappointing given the large number of government inquiries in relation to copyright over the last decade. Several of these inquiries have made recommendations similar to that of the Productivity Commission on issues such as fair use and the contracting out of statutory exceptions. It appears that such copyright reforms remain on the distant horizon, with further uncertainty for the future of copyright law in Australia.
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There are likely to be significant reforms to Australia’s patent system, as the Government has supported a number of the Productivity Commission’s key recommendations in this area.
- supports the recommendation that an objects clause should be included in the Patents Act to provide “a clear statement of legislative intent”. The exact wording of the proposed clause will be the subject of further public consultation.
- supports the recommendation that the innovation patent system should be abolished. The Government takes the view that the original objective of stimulating innovation in Australian SMEs would be better achieved by the provision of targeted assistance. The Patents Act will be amended to abolish the innovation patent system while maintaining existing rights.
- supports changing the test for inventive step as the Productivity Commission recommended, notably indicating this will “put beyond doubt that the assessment of inventive step in Australia is consistent with the European Patent Office”. This signals a radical departure from existing Australian law, which has differed from European law in this area. Again, the precise wording of the proposed amendments are to be the subject of further public consultation.
- supports a recommendation that patent filing processes should require applicants to identify the technical features of the invention in the claims. No detail is provided in relation to what precisely will be required, but this is said to be in line with the recommendation about reforming the inventive step requirements.
- supports in principle the observation, despite a lack of evidence, that pay for delay settlements in pharmaceutical cases have the potential to seriously harm competition and innovation in relation to pharmaceuticals. The Government will consider requiring settlements between pharmaceutical patent owners and generic pharmaceutical manufacturers to be subject to reporting to and monitoring by the ACCC. The Government will consider implementation options, notably including how to reach agreements which are entered into overseas, that could impact Australian markets.
A controversial recommendation relating to reforming pharmaceutical patent term extension provisions did not find favour and was simply noted by the Government. The response notes that the additional cost to the pharmaceutical benefits scheme of providing extensions of patent term is approximately $260 million per annum and that effective patent life in Australia is around 18 months longer than in the United States. However, the Government has no plans to implement the Productivity Commission’s proposal at this time, noting that patents provide a limited period of exclusivity. Ensuring patent owners can generate a reasonable return on their investment ensures continuing innovation and that new and more effective drugs are brought to market in Australia.
The Government also indicated it has no plans to review the basis on which patent fees are set, noting the Productivity Commission’s recommendation, which included suggestions that patent renewal fees should be restructured and claim fees should be increased for applications with a large number of claims. The Government was not persuaded that IP Australia should depart from current Government policy of “user pays” in respect of a particular government activity wherever possible.
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The changes supported by the Government are likely to substantially impact on trade mark practice in Australia.
- supports the recommendation to reduce the grace period from 5 years to 3 years before new registrations can be challenged for non-use.
- does not support the recommendation to remove the presumption of registrability in assessing whether a mark could be misleading or confusing at application.
- supports the recommendation to ensure that parallel imports of marked goods do not infringe an Australian registered trade mark when the good has been brought to market elsewhere by the owner or licensee.
- supports in principle the recommendation to require a statement of “using” or “intending to use” a mark at application, registration and renewal.
- supports the recommendation to routinely challenge trade mark applications that contain contemporary geographical references, but further work is needed to determine the scope of the practical change.
- supports in principle the recommendation to link ATMOSS (the online trade mark database) with the business registration portal.
- supports the recommendation that amendments should be made to the application process to omit Australian Geographical Indications (GI).
- does not support the recommendation that amendments should be made to the process to amend Australian GIs.
The recommendation to reduce the grace period to take non-use actions from 5 years to 3 years is aimed at de-cluttering the Australian register of trade marks. This is a significant change, and will likely mean an increase not only in non-use applications but also in strategic re-filings (the latter may simply contribute further to cluttering). Coupled with changes requiring statements around use and intended use, this should lead to more attention being paid to the drafting of trade mark specifications and may assist in providing greater certainty in the trade mark clearance process. However, the real impact of statements of use (or intended use) will depend on the detail, and is subject to further research and analysis.
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General IP law
The Productivity Commission’s report had made a number of overarching recommendations concerning the governance of Australia’s IP arrangements, which the Government supports.
In particular, the Government:
- supports the formulation of intellectual property policy informed by a robust evidence base and guided by principles of effectiveness, efficiency, adaptability and accountability, which is ironic given the acceptance of certain Productivity Commission recommendations despite vocal observations by industry experts that the Productivity Commission’s report lacked evidence (such as in relation to need to further increase the inventive step standard for patents).
- supports the repeal of section 51(3) of the Competition and Consumer Act which provides limited exemptions from the operation of certain competition law prohibitions against restrictive trade practices – the Government has accepted that IP licensing arrangements should not be exempt from prohibitions against anti-competitive conduct.
- supports the establishment of a standing interdepartmental IP policy group to ensure an integrated and coherent approach to developing the Government’s policy agenda for IP issues and, indeed, has already established the so-called IP Policy Group comprising senior officials from nine departments and agencies.
On enforcement issues, the Government has noted the recommendation to introduce a specialist IP list in the Federal Circuit Court similar to the UK’s IP Enterprise Court. However, the Government observes that the Federal Circuit Court has recently commenced a trial to streamline management of IP matters which should address the Productivity Commission’s concerns. In respect of patent matters, the Government at this stage prefers to leave jurisdiction for these matters with the Federal Court of Australia, which already has judges with the requisite expertise for these complex matters and has also been adopting case management initiatives designed to streamline the process and reduce costs.
In relation to Australia’s part in international IP arrangements, the Government:
- notes but has declined to adopt the Productivity Commission’s suggestions for tasking the IP Policy Group and DFAT with developing guidance for IP provisions in international treaties and expressly rejects the Productivity Commission’s recommendation not to include IP provisions in bilateral and regional trade agreements – the Government rightly points out that such a course would preclude Australia’s participation in the development of important regional trade arrangements.
- notes the recommendation to play a more active role in international fora on IP policy but, rightly, rejects the recommendation as taking insufficient account of the Government’s already considerable efforts and leadership positions in relevant international fora, most notably WIPO and IP-related meetings at the WTO.
The Government has also indicated its support for:
- a loophole in the Plant Breeder’s Rights Act to be closed which allows follow-on breeders to make only very minor changes to protected plant varieties before proceeding to freely market resulting seeds or plants.
- an open access policy providing free and open access arrangements for all publications funded by government, within 12 months of publication.
The Government’s response to the Productivity Commission presents a bold agenda for reform of intellectual property law in Australia. However, further consultation on key reforms will extend the uncertainty for some industries, particularly in relation to the more contentious proposals.
IP Australia will be consulting on changes to the patents, trade marks, and plant breeder's right systems, while the Department of Communications and the Arts will be consulting on changes to the copyright system. The Government anticipates these further rounds of consultation to extend throughout 2017 and the first half of 2018.
Given Australia’s current political climate, whether the parliamentary appetite exists for reform, and what legislative form such reforms might take, remains to be seen. While many stakeholders are likely to welcome the Government’s support for some changes, others will remain troubled by the scope of reform – and some may find the continuing uncertainty about the Government’s intentions for Australia’s intellectual property arrangements increases business risk. Critically, there is still an opportunity to influence the implementation of many of the Government’s more controversial reforms.