My attempt to summarise Parma Session 1 ‘Sufficiently plausible’ has been posted on IPKat here.
Clare Cunliffe’s report on the session about IP and competition is here.
The European Commission has fined Google EUR2.43 billion (approx. AU$3.6 billion) for misusing its market power over internet searches.
According to the Commission, Google has over 90% market share for internet searches in the EU.
The Commission found that Google had abused this dominant position in internet searching by promoting results for its own Google comparison shopping service over results for competing comparison shopping services.
While this is no doubt the start of a long legal process, Ben Thompson at Stratechery has an interesting, succinct analysis of the application of competition rules to Internet players here which is well worth reading.
Updated to fix some broken links
The Productivity Commissions’s final report into “Intellectual Property Arrangements” has been published.
An overview and recommendations is here.
The full report is here.
The key points sign off with a stirring call to action – or harbinger of what’s to come:
Steely resolve will be needed to pursue better balanced IP arrangements.
The Government has announced it is undertaking further consultations with us about the Commission’s recommendations and wants to hear your views by 14 February 2017. I wonder how many bunches of roses they will receive?
If you need authority for the proposition that registering a trade mark, or enforcing the rights under the registration, does not necessarily mean you are carrying on business in Australia, Besanko J may help you out.
The ACCC sued Nexans SA and others alleging they were engaged in price fixing cartel.
Nexans SA is the global parent of the Nexans group. It had registered NEXANS in Australia as a trade mark. It had also licensed the trade mark to Nexans Australia, which was a member of the group, but not a direct subsidiary.
Besanko J rather sensibly stated at :
…. I do not think the fact that the ultimate holding company of a large worldwide Group, insures all of the directors and officers of the companies comprising the Group means that the ultimate holding company is carrying on business within all the jurisdictions where companies in the Group are operating or is even a reasonably strong indication of that fact. The registration of trade marks in Australia by an overseas company could be an indication that the company is carrying on business in Australia, but, of course, it is only the beginning of the inquiry. The fact is that here there is a licence to Nexans Australia which (depending on the precise circumstances) may be considered to be an authorised user of the registered trade marks under s 8 of the Trade Marks Act. Nor do I think the fact that Nexans SA took action in this Court to protect its rights as owner of the registered trade marks indicates that it was carrying on business within Australia.
His Honour then explored other factors which in the end did lead to Nexans SA being held to carry on business in Australia. Ultimately, however, Besanko J did not consider it had engaged in the cartel behaviour, but another company, Prysmian, had.
Here is a selection of links to IP-related matters I found interesting this week:
I hope you find some interesting. If you did or have a question, leave a comment or send me an email
Here is a selection of links to IP-related matters I found interesting this past week (or two):
I hope you find some interesting. If you did or have a question, leave a comment or send me an email
The Productivity Commission has released its draft report into Intellectual Property Arrangements.
You will be startled to learn that the Productivity Commission has discovered Australia is a net importer of intellectual property. We buy more IP from the rest of the world than we sell to it. Fig. 2 in the Report indicates Australian IP earned AUD1 villion from overseas, but we paid out about AUS4.5 billion for the use of their IP. The Productivity Commission then notes that we provide surprisingly strong IP protection for a country in our position. This finding guides the Productivity Commission’s recommendations which might broadly be characterised as: take the least restrictive option in terms of IP protection (where our international obligations permit).
The Productivity Commission explained its position this way:
Intellectual property (IP) arrangements need to balance the interests of rights holders with users. IP arrangements should:
• encourage investment in IP that would not otherwise occur;
• provide the minimum incentives necessary to encourage that investment;
• resist impeding follow-on innovation, competition and access to goods and services. (emphasis supplied)
So, for example, after much gnashing of economists’ teeth about the (let’s face it, indefensible) term of copyright protection, the Productivity Commission considers that the appropriate term of protection is somewhere between 15 and 25 years. However, what it actually recommends is rather more limited:
4.1: remove the current unlimited term of protection for published works.
5.1: implement Parliament’s At What Cost? IT pricing and the Australia Tax recommendation to make it clear that it is not an infringement of copyright to circumvent geoblocking.
5.2 repeal the remaining parallel import restrictions for books.
5.3 amend the Copyright Act 1968 to replace the current fair dealing exceptions with a broad exception for fair use.
18.1 expand the safe harbours to online service providers.
The Productivity Commission reports that there are 120,000 active patents registered in Australia. 93% of these have been granted to non-residents. There are also 25,000 – 30,000 applications each year; of which about 60% ultimately proceed to grant.
According to the Productivity Commission, however, there are too many granted patents which do not contribute social value and are not “additional” – in the sense that they would not have been made if there was no patent protection.
This needs to be remedied. However, the Productivity Commission acknowledges that international agreements put constraints on our freedom of action. There are 10 recommendations for patents.
The key recommendation for standard patents is yet another go at raising the threshold of inventive step.
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 relevant art.
This looks very similar to what we already have. As the Productivity Commission envisages matters, however, there are important differences. First, it reverses the onus currently expressed in s 7(2). According to the Productivity Commission, the current position is the opposite of where the onus lies in the USA, Japan, the EU and the UK (amongst others). Rather than a challenger having to prove the invention is obvious, therefore, the patentee will have to prove it is not.
Secondly, the Productivity Commission sees the current requirement that there be only a scintilla of invention being raised. The Productivity Commission sees this low threshold being reflected in the limitation on “obvious to try” being something which the skilled addressee would be directly led as a matter of course. Instead, the Productivity Commission considers that the test should be at least:
whether a course of action required to arrive at the invention or solution to the problem would have been obvious for a person skilled in the art to try with a reasonable expectation of success (as applied by the Boards of Appeal of the EPO).
This change would be buttressed with appropriate comments in the Explanatory Memorandum and, additionally, the insertion of an objects clause into the Act. The latter would be intended to ensure that the Courts focused on the social objectives of the Patents Act including, in particular, the public interest.
On the more colourful fronts, the Productivity Commission also recommended repeal of the
abomination innovation patent and amendment of s 18 explicitly to exclude from patentable subject matter business methods and software.
Pointing to analysis which estimates the net present value to R & D of the extension of term for a pharmaceutical patentat at year 10 at $370 million – of which only $7.5 million would accrue to Australia because our industry is so small – while the cost to the Australian government and consumers of the same extension of term is estimated at $1.4 billion, the Productivity Commission also wants a significant tightening up of the regime for extending the term of pharmaceutical patents. The Productivity Commission also opposes any extension of the period of data protection for therapeutic goods, including biologics.
The Productivity Commission also recommends exploring raising the renewal fees payable, particularly in later year’s of a patent’s life.
The Productivity Commission considers the registered design system deficient but, as we have committed to it internationally and there is no better alternative, we are stuck with it.
However, continuing the net importer theme, Australia should not go into the Hague system “until an evidence-based case is made, informed by a cost–benefit analysis.”
I’m just going to cut and paste here: the Government should:
Also, s 123 should be fixed up so that parallel importing does not infringe.
Like the rest of us, the Productivity Commission is bemused by the Circuits Layout Act and recommends implementing “without delay” ACIP’s 2010 recommendation to enable “essentially derived variety declarations to be made in respect of any [plant] variety.”
On competition policy, s 51(3) should be repealed and the ACCC should develop guidelines on the application of our antitrust rules to IP.
Innovatively, the Productivity Commission also recommends free access to all publications funded directly by Government (Commonwealth, State or Terriroty) or through university funding.
There are also at least 17 requests for further information.
If you are inspired to make a further submission, you should get it in before 3 June 2016.
The Canadian Competition Bureau has published updated guidelines relating to the enforcement of intellectual property rights and the antitrust (competition) rules.
The Bureau does not presume that the exercise of IP rights violates competition rules but, in assessing whether there are competition law ramifications, it distinguishes between two types of conduct: conduct “involving something more than the mere exercise of the IP right, and those involving the mere exercise of the IP right and nothing else.” Special rules, which may be applied in “very rare circumstances” apply to the latter. While the general competition rules apply to the former.
Why should someone in Australia care?
For one thing (bearing in mind the ACCC’s challenge to Pfizer’s practices when its Lipitor patent was expiring – judgment is reserved in the appeal), the US Supreme Court is expected to hand down a decision this year on how US antitrust laws apply to reverse payment settlements.
For another thing, following the Competition Review here in Australia:
Lid dip: Peter Willis
The Treasurer and the Minister for Small Business have now announced that review.
According to the Harper Review:
an appropriate balance must be struck between encouraging widespread adoption of new productivity-enhancing techniques, processes and systems on the one hand, and fostering ideas and innovation on the other. Excessive IP protection can not only discourage adoption of new technologies but also stifle innovation.
Given the influence of Australia’s IP rights on facilitating (or inhibiting) innovation, competition and trade, the Panel believes the IP system should be designed to operate in the best interests of Australians.
The Panel therefore considers that Australia’s IP rights regime is a priority area for review. (emphasis supplied)
In reaching that view, the Harper Review flagged concern about entering into new treaties with extended IP protections.
The terms of reference state:
In undertaking the inquiry the Commission should:
- examine the effect of the scope and duration of protection afforded by Australia’s intellectual property system on:
a. research and innovation, including freedom to build on existing innovation;
b. access to and cost of goods and services; and competition, trade and investment.
- recommend changes to the current system that would improve the overall wellbeing of Australian society, which take account of Australia’s international trade obligations, including changes that would:
a. encourage creativity, investment and new innovation by individuals, businesses and through collaboration while not unduly restricting access to technologies and creative works;
b. allow access to an increased range of quality and value goods and services;
c. provide greater certainty to individuals and businesses as to whether they are likely to infringe the intellectual property rights of others; and
d. reduce the compliance and administrative costs associated with intellectual property rules.
Then follows a catalogue of 9 matters for the Commission to have regard to. These include the Government’s desire to retain appropriate incentives for innovation, the economy-wide and distributional consequences of recommendation and the Harper Review’s recommendations in relation to parallel imports.
The Commission must report within 12 months.
Flick J has ruled that Pfizer did not breach antitrust rules by trying to maintain sales of Lipitor after it came off patent.
Pfizer’s patent on atorvastatin (Lipitor) was due to expire on 18 May 2012. Its analysis showed it was facing a revenue cliff: from $771 million a year in 2011 to $70 million a years by 2015. Pfizer came up with a 3-part plan:
The ACCC brought action alleging by implementing this plan, Pfizer had contravened:
Flick J has dismissed the ACCC’s action.
His Honour found that the relevant market was the market for the supply to community pharmacies in Australia of atorvastatin as the ACCC contended. Pfizer argued the market was the market for the wholesale supply of pharmaceutical products and over the counter products to community pharmacies.
His Honour also found that Pfizer had a substantial degree of power in that market until late 2011 and had taken advantage of that power by implementing its scheme. Pfizer did not have a substantial degree of power in the market from January 2012 on wards.
Before January 2012, Pfizer was the only supplier of atorvastatin and the constraints on the price it could charge imposed by the PBS was “not sufficient to render its market power anything other than “substantial”.” Flick J recognised that there was no precise date which could be identified as the point where Pfizer’s market power ceased to be substantial. By late 2011, however, that power was no longer “enduring” as the expiry date of the patent loomed closer. By February 2012, Ranbaxy was able to enter the market offering its generic atorvastatin for sale and the other intending generic suppliers had registered their products on the Therapeutic Goods Register and were starting sales discussions with potential customers.
Flick J found Pfizer took advantage of its power to impose the direct sales to pharmacies model because the pharmacies were opposed to it, but Pfizer was able to impose it on them as the only possible source of atorvastatin. Similarly, the rebate scheme took advantage of that power because it created an expection of payments in the future on terms that were unclear and yet to be decided. Flick J found that the amount of money accumulated within the rebate scheme by the time the patent expired was very substantial – $35 million – a powerful incentive to buy product from Pfizer. One might wonder, however, why the position would have been any different if the terms on which the rebate could be claimed had been clear.
Even in the period before January 2012 when it had a substantial degree of power in the market, however, there was no contravention of 2 46 because it did not take advantage of its market power for a proscribed anti-competitive purpose.
Pfizer also did not contravene s 47 because in implementing the scheme it did not have the purpose of substantially lessening competition.
Rather than having a purpose of deterring competition by the generics, Flick J accepted that Pfizer was motivated by rationale business objectives. For example, selling directly to pharmacies rather than through wholesalers:
But my question, Mr Latham, was directed to Lipitor and generic atorvastatin, not some dream of establishing a generics business? — But once again you’re asking me to make a decision on – on one product, when I have seven products, over $1 billion, coming off patent. And it’s not just Pfizer Australia. It’s around the world. And to try to get the best business organisation that’s going to deliver continuing operations through those generic products, plus, they have these additional benefits of being closer to pharmacy. Going through the licensee doesn’t tick that important box.
The requirement to take 75% of the pharmacies needs to qualify for the “rebate” also did not have an anti-competitive purpose. Rather, Flick J found that the requirement had been reduced from 100% to 75% – sacrificing $30 million in potential revenue – to enable the pharmacy to establish a second source of supply.
Section 51(3) exempts from s 47 conditions in, amongst other things, licences of patent to the extent they relate to the invention to which the patent relates or articles made according to the invention.
Although its operation did not fall to be determined because there was no contravention of s 47, Flick J would have found it did not apply in this case. His Honour considered that the sale of atorvastatin to the pharmacies would not involve any licence. More importantly, his Honour would have held that the condition was collateral to the patent and so outside the scope of the exemption.
In the event, Pfizer went from selling 100% of the prescribed atorvastatin (as Lipitor) in March 2012, to 32% of prescription in April and settling around 22 – 23% by June 2012. While Pfizer antiticpated marketing advantages in being the only supplier likely to supply generic atorvastatin in pills the same shape, size and colour as Lipitor, the evidence showed it held 100% of the generic market until September 2012, after which its share fell away to 16 – 17% by March/April 2013.