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.[1] 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:[2]

• 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.[3] However, what it actually recommends is rather more limited:

4.1: remove the current unlimited term of protection for published works.[4]

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.

The latter two, so far, have elicited the loudest complaints here and here.[13] Meanwhile, the US’ Register of Copyrights is celebrating the first anniversary of her Fair Use Index.

18.1 expand the safe harbours to online service providers.[5]

Patents

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.[6]

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).[7]

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.[8]

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.[9]

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.[10]

The Productivity Commission also recommends exploring raising the renewal fees payable, particularly in later year’s of a patent’s life.

Registered designs

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.”

Trade marks

I’m just going to cut and paste here: the Government should:

  • restore the power for the trade mark registrar to apply mandatory disclaimers to trade mark applications, consistent with the recommendation of the Advisory Council on Intellectual Property in 2004 (the only people that won’t support this are in the place that counts – IP Australia)
  • repeal part 17 of the Trade Marks Act 1995 (Cth) (Trade Marks Act)
  • amend s. 43 of the Trade Marks Act so that the presumption of registrability does not apply to the registration of marks that could be misleading or confusing
  • amend the schedule of fees for trade mark registrations so that higher fees apply for marks that register in multiple classes and/or entire classes of goods and services.
  • require the Trade Marks Office to return to its previous practice of routinely challenging trade mark applications that contain contemporary geographical references (under s. 43 of the Trade Marks Act). Challenges would not extend where endorsements require goods and services to be produced in the area nominated
  • in conjunction with the Australian Securities and Investments Commission, link the Australian Trade Mark On-line Search System database with the business registration portal, including to ensure a warning if a registration may infringe an existing trade mark, and to allow for searches of disclaimers and endorsements.

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.[11]


  1. Not much discussion here whether the best way to get more technological development is through a strong IP regime or to,scrap the IP system and fully commit to free riding.  ?
  2. Despite the tentative nature of this declaration, it is the first “Main key points”.  ?
  3. Draft finding 4.2.  ?
  4. The Government is trying to do this – see schedule 3 of the exposure draft of the Copyright Amendment (Disability Access and Other Measures) Bill (pdf).  ?
  5. See schedule 2 of the Disability Access and Other Measures bill.  ?
  6. You will have to read Appendix D to find out how the Productivity Commission works out which patents are socially valuable and “additional”.  ?
  7. The EPO cases the Productivity Commission referred to are T 149/93 (Retinoids/Kligman) (1995) at 5.2 and T 1877/08 (Refrigerants/EI du Pont) (2010) at 3.8.3.  ?
  8. Here, the Productivity Commission notes that the Full Federal Court rejected reference to the public interest in Grant.  ?
  9. Dr Summerfield tells you why he thinks that’s a bad idea over here and of course, the Europeans (including the UK in that) do not have all sorts of complications carrying out their nice, clean exclusion.  ?
  10. In an interesting departure from its overarching premise that patents do not really contribute much to innovation because there are other protections such as lead time and trade secrets, the Productivity Commission warns that reliance on data secrecy is sub-optimal compared to patent protection.  ?
  11. Bearing in mind they have to submit their Final Report to Government by 18 August 2016.  ?
  12. In between buying your books from Amazon and Bookdepository, some references to the larger economic issues affecting booksellers here.  ?