This article was prepared by Chloe Walker and Luke Hawthorne
On 23 July 2018, IP Australia released an exposure draft for the proposed Intellectual Property Laws Amendment Bill (Productivity Commission Response Part 2 and Other Measures) Bill 2018, which is open for public comment until 31 August 2018.
The exposure draft proposes several key changes to Australia’s patent laws, borne out of recommendations made by the Productivity Commission (Commission) in its 2013 Report into the compulsory licensing of patents and 2016 Report into Australia’s Intellectual Property Arrangements.
The draft legislation includes provisions that would:
- prevent the grant of new innovation patents; 
- introduce an “objects” clause for the Patents Act; 
- amend the inventive step requirements for Australian patents; 
- amend Crown use provisions of the patents and design legislation;  and
- amend compulsory licensing provisions in the Patents Act. 
While these substantive changes have previously been addressed in less formal terms, this is the first time specific legislative provisions addressing such changes have been published for comment. They follow on from a number of earlier consultations by IP Australia, which addressed in more general terms the phasing out of innovation patents  and, later, the options for implementation of the inventive step changes, object clause, Crown use and compulsory licensing provisions.
Overall, the draft legislation actions the Productivity Commission’s assertion that action needs to be taken to strike a better balance in Australia’s patent system, which currently tips too far in favour of rights holders and against the interests of the broader Australian community. Whether that goal has been achieved and whether the proposed changes will be supported by the intellectual property community remains to be evaluated.
Phasing out innovation patents after commencement.
No further innovation patents will pass a formalities check after the date the proposed legislation receives Royal Assent, and therefore the system will be phased out.
The innovation patent system was originally introduced to provide Australian SMEs with a faster and more affordable way to protect their innovations. However, the system came under fire from the Commission for granting protection too easily, resulting in a “proliferation of low-quality patents” which impedes innovation, stymies competition and unnecessarily shifts the burden to consumers of technology. The Commission therefore recommended that the innovation patent system be abolished.
Item 11 of the exposure draft inserts an additional requirement into the “formalities check” carried out by the Commissioner when considering an innovation patent application. Under the new requirement – which would become sub-section 52(3) of the Patents Act – the date of the patent must be a date before the commencement of this amending legislation. This effectively ensures that no innovation patent application with an effective filing date on or after the commencement of this amending legislation could pass the formalities examination and be validly granted.
Similarly, any innovation patent claim having a priority date on or after the commencement of this amending legislation could not be granted. In this way, the draft legislation initiates the abolition of the innovation patent system, subject to some minor loopholes. An example of such a loophole is where a divisional application is filed to convert a standard patent application to an innovation patent application, where the patent or application was filed prior to the commencement date of these amendments. 
Addition of an objects clause to the Patents Act
The Patents Act does not currently have an objects clause. However, the Commission recommended the introduction of such a clause to provide greater clarity and guidance on the purpose of the provisions in the Patents Act and ensure continued consistency between policy intent and administrative and judicial interpretation over time.
The exposure draft’s proposed wording for an objects clause in the Patents Act – which would become section 2A – reads as follows:
“The object of this Act is to provide a patent system in Australia that promotes economic wellbeing through technological innovation and the transfer and dissemination of technology. In doing so, the patent system balances over time the interests of producers, owners and users of technology and the public.”
The wording is likely to generate strong responses from stakeholders, and perhaps controversy.
This wording deviates from the phrasing originally favoured by the Commission, and from the wording previously put forward by IP Australia in an earlier options paper. Those earlier versions articulated the underlying purpose of Patents Act as being to provide a patent system that enhances the wellbeing, overall, of either Australians specifically (as the Commission proposed), or of society in general (IP Australia’s option), ‘by promoting technological innovation and… the transfer and dissemination of technology’, and that the system ‘should balance over time the interests’ of various stakeholders.
There are key differences in the phrasing used in the exposure draft to take note of.
- Perhaps least significantly, it seems to be sufficient that the patent system ‘promotes’, as opposed to enhances, wellbeing ‘through technological innovation’. Interestingly, the exposure draft wording does not specify whose wellbeing is to be the subject of consideration when deciphering the purpose of the Patents Act.
- Perhaps most significantly, the economic value of patented technology is the focus of the proposed objects clause. The draft Explanatory Memorandum notes that ‘[t]he term “economic wellbeing” is intended to indicate that the benefits of the patents system are primarily economic in nature’ and that ‘[t]his limits the application of the objects clause to only economic factors and excludes ethical and social considerations’. This is to be compared to the Commission’s strong emphasis on the social value of patented innovations throughout its recommendations. The draft Explanatory Memorandum suggests that social, moral or ethical considerations are better addressed in certain safeguard provisions (such as Crown use and acquisition), case law and specific Acts as opposed to in the objects clause.
- Finally, there is somewhat of a clarifying shift in voice in the second sentence of the proposed clause. The ambiguous auxiliary verb ‘should’ of the Commission version is replaced by a simple statement or assertion of purpose.
A final issue concerning the objects clause concerns the impact that references to ‘technology’ might have on the scope of subject-matter that can be protected by an Australian patent. The draft Explanatory Memorandum provides that ‘[t]he term “technological innovation” … is not intended to narrow or change the subject matter eligibility threshold for grant of a patent’ and ‘is intended to be interpreted broadly to mean the applications of scientific knowledge for practical purposes’.
Although this issue has been raised several times in previous consultations, IP Australia is again seeking feedback on this final point. The exposure draft’s accompanying list of consultation questions asks:
“… does the term ‘technological innovation’ restrict or narrow the concept of ‘innovation’ to suit certain industries only? Which industries? What subject matter that is currently patentable would not be considered ‘technological’?”
Amendments to inventive step and prior art
The exposure draft also proposes to increase the standard for patents by amending the definition of ‘inventive step’ in the Patents Act, in line with the Commission’s recommendation that Australia adopt the approach taken by the European Patent Office (EPO). These amendments are intended to go beyond what was already achieved in April 2013 under the Intellectual Property Laws Amendment (Raising the Bar) Act 2012.
The exposure draft seeks to replace a multi-step process for identifying relevant prior art information and common general knowledge, and the combining of that information for use in assessing the obviousness of a claimed invention. This will be replaced by a new subsection 7(2), which reads:
“For the purposes of this Act, an invention is taken to involve an inventive step when compared with the prior art base if the invention is not obvious to a person skilled in the relevant art.”
The definition of ‘prior art base’ is then moved from Schedule 1 of the Patents Act
to a new section 7B, where it is defined separately for each situation in which it may apply throughout the Patents Act
. When assessing inventive step, the new subsection 7B(2) defines ‘prior art base’ as follows:
"In relation to deciding whether an invention does or does not involve an inventive step, prior art base means:
(a) information in a document that is publicly available, whether in or out of the patent area; and
(b) information made publicly available through doing an act, whether in or out of the patent area; and
(c) a combination of any 2 or more pieces of information mentioned in paragraph (a) or (b) that a person skilled in the relevant art could, before the priority date of the relevant claim, be reasonably expected to have combined; and
(d) information that is common general knowledge (whether in or out of the patent area), whether that information is considered separately or together with the information mentioned in paragraph (a), (b) or (c)."
The draft Explanatory Memorandum states that the rewording and compression of these provisions is ‘intended to allow the assessment of inventive step to be unconstrained by rigid verbal formulations’.
While the decluttering of section 7 is a commendable and much anticipated change, there is some doubt that it is going to have any substantial effect in practice. Looking closely, the new provisions have merely reshuffled all the words which have caused problems in the existing legislation. Section 7B(2) still requires consideration of whether the skilled person ‘‘could … be reasonably expected to have combined’ multiple items of prior art information and still requires specific identification of ‘common general knowledge’.
Once again, striking a balance between a high inventive step, which would only permit significant improvements on existing inventions achieve patent protection, and a low inventive step, which would give the same protection to all incremental advances, proves a difficult task.
Crown Use and Compulsory Licensing
Although addressed separately in the legislation, Crown use and compulsory licensing provisions both concern broadly similar circumstances in which a patent owner can be compelled to permit another party to use their patented invention, in exchange for a licence fee. ‘Crown use’ refers to use by, or on behalf of, the Australian government, while ‘compulsory licensing’ refers to use by other entities. The Commission found that these provisions are rarely invoked, and recommended that the legislation should be amended.
With regards to Crown Use, the exposure draft proposes to:
- clarify that Crown use can be invoked for the provision of a service that any Commonwealth, State or Territory Government has the primary responsibility for providing or funding;
- require that governments give notice to a patentee, and first seek a negotiated arrangement, before invoking the Crown use provisions (except in an emergency situation); and
- require Ministerial authorisation for invoking Crown use, and for the patent owner to be notified of the reasons for the Minister’s decision.
The proposed provisions concerning compulsory licensing are intended to:
- introduce a ‘public interest’ test for determining whether a compulsory licence may be granted, replacing the ‘reasonable requirements of the public’ test which is currently in place and which the Commission found had been conflated with interests of Australian industry;
- require a court, when granting a compulsory licence, to consider the public interest when specifying the terms of the licence, including remuneration; and
- address problems with existing provisions relating to compulsory licensing of ‘dependant patents’ i.e. those for which access to an earlier ‘original patent’ is also required, particularly where the owners of the original and dependent patents may be different.
Next steps for the proposed amendments
All interested parties have been invited to make written submissions by 31 August 2018. Given the form in which IP Australia proposes to adopt the Commission’s recommendations, the proposals are likely to generate a broad spectrum of responses – and likely some controversy.
Following receipt of submissions, the final form of any legislative proposal remains to be seen – and indeed, whether there is any appetite in Australia’s political climate for the proposed legislation to be passed also remains unknown.
 Exposure Draft, Schedule 1, Part 3. See 2016 PC Report Recommendation 8.1.
 Exposure Draft, Schedule 1, Part 2. See 2016 PC Report Recommendation 7.1.
 Exposure Draft, Schedule 1, Part 1. See 2016 PC Report Recommendation 7.2.
 Exposure Draft, Schedule 2 and 3. See 2013 PC Report Recommendation 7.1 and 7.2.
 Exposure Draft, Schedule 4. See 2013 PC Report Recommendation 6.2.
 See also https://www.ipaustralia.gov.au/about-us/public-consultations/draft-legislation-intellectual-property-laws-amendment-productivity
 See Draft Explanatory Memorandum, p. 18.