Productivity Commission’s Final Report on IP Arrangements: What’s in, what’s out, and what’s next?
In December 2016, the Productivity Commission published its Inquiry Report on Intellectual Property Arrangements, which had been provided to the Australian Government in September. The Inquiry Report came after extensive consultation with various stakeholders including intellectual property professionals, economists and intellectual property owners and users. A summary of the reforms and the PC’s proposed benefits is available here.
The Productivity Commission review, conducted by economists, was the first of its kind, being a holistic review in which the Commission was asked to consider whether current arrangements provide an appropriate balance between access to ideas and products, and encouraging innovation, investment and the production of creative works.
In this post we will give an overview of how the recommendations have evolved since the Draft Report, and what to expect next.
The Productivity Commission’s (PC) inquiry into IP arrangements has been ongoing since the Federal Government’s launch of the inquiry by the then Treasurer, the Honourable Joe Hockey on 18 August 2015, and has inspired over 620 written submissions, 6 public hearings, 2 round tables and countless water-cooler discussions. The subject of much of those debates was the PC’s Draft Report, containing draft recommendations and draft findings on everything from whether Australia should maintain the innovation patent system through to whether the copyright term should be shortened to 15 years. The Australian Government released the PC’s findings for consultation on 20 December 2016, which was open until 14 February 2017. According to the media release, the Government’s response is expected in mid-2017.
The PC has maintained its finding that the term of copyright protection is too long, but has stepped back from suggesting that a term of 15 to 25 years is appropriate, instead stating that a term “considerably less than” life plus 70 years is likely to be optimal.
The recommendation that the Copyright Act 1968 (Cth) (Copyright Act) clearly state that it is not an infringement for consumers to circumvent geoblocking measures remains, as well as the recommendation that the Government repeal parallel import restrictions (PIRs) for books by no later than the end of 2017. The recommendation to remove PIRs was the subject of hundreds of written submissions and was a hot topic at public hearings. At those hearings, the PC promised to review more recent pricing data in order to assess whether the recommendation was warranted. In the Final Report the PC states that ‘new analysis reveals that Australian readers still pay more than those in the UK for a significant share of books’, and has therefore proceeded with the recommendation. The PC has also maintained its recommendation that Australia adopt a fair use defence to copyright infringement, but has reverted back to the wording proposed by the Australian Law Reform Commission’s (ALRC) recommendation rather than persisting with its own proposed wording as set out in Draft Recommendation 5.3. See our post from December 2016 for more detail on what to expect.
The PC also maintained its recommendation to extend safe harbour provisions to cover all providers of online services.
The Final Report has also added some new recommendations flowing from the PC’s requests for information in the Draft Report. Specifically, it recommends that:
- the Copyright Act should be amended to make unenforceable any part of an agreement restricting or preventing use of copyright material that is permitted by a copyright exception, and to allow consumers to circumvent technological prevention measures for legitimate uses of copyright material;
- certain measures should be taken by the Government, including a review by the ACCC, to strengthen the governance and transparency arrangements for collecting societies; and
- the Government should enact the ALRC recommendation to limit liability for the use of orphan works where a user has undertaken a diligent search to locate the relevant rights holder.
Should the Government implement both the recommendation to adopt a fair use exception and the recommendation that an agreement be unenforceable to the extent that it restricts or prevents the use of copyright material that is permitted by a copyright exception, parties will not be able to prevent fair use by agreement. It may be the case, particularly while Australian jurisprudence on what is considered “fair use” develops, that specific terms of agreements restricting use of copyright material may become unenforceable in a way that was unforeseen at the time the agreement was drafted.
Last on copyright: the PC no longer recommends that unpublished works should have the same copyright term as published works.
While the wording of the recommendations concerning patents has changed, the substance of the draft recommendations, in almost all cases, remains the same in the Final Report (you can find our article regarding the draft recommendations here). The recommendations that remain substantially the same are:
- the incorporation of an objects clause in the Patents Act 1990 (Cth) (Patents Act) (albeit in slightly different wording, in particular removing the words “socially valuable”);
- the amendment of the inventive step requirement, including a statement in the Explanatory Memorandum that a ‘scintilla’ of invention, or a scenario where the skilled person would not “directly be led as a matter of course” are insufficient thresholds, and a suggestion that Australia adopt the European “obvious to try” test (see our article regarding the draft recommendations on these points here for further discussion);
- the abolition of the innovation patent system in its entirety;
- the utilisation of patent renewal fees to promote broader policy objectives rather than purely cost recovery, with the specific recommendations that renewal fees should rise each year at an increasing rate, and to increase claim fees for applications with a large number of claims;
- that patent term extensions should only be available for patents covering an active pharmaceutical ingredient (which is already the case under s70 of the Patents Act – see further here) and should be calculated based on the time taken by the TGA for regulatory approval beyond 1 year;
- the introduction of a system for transparent reporting and monitoring of settlements between originator and generic pharmaceutical companies to detect potential pay-for-delay agreements (see the Competition Law section below); and
- the reformation of s76A of the Patents Act regarding data collection.
Further, the PC has stated outright that there are no grounds to extend the period of data protection for any pharmaceutical products, including biologics. Extension of the data protection period is something that the United States has consistently pushed for in past trade deal negotiations, so this is a strong statement to the Australian Government that Australia should not entertain such requests.
Despite submissions from the profession that the change to inventive step was premature (for example by the Law Council and IPTA), the PC has maintained its recommendation that the threshold be lifted, stating that although the Raising the Bar initiative had moved the inventive step and other elements of patent law in the right direction, there is a “strong case … for further raising the threshold”. Given that the data on which this recommendation was based largely involved an analysis of pre-Raising the Bar patents, it is difficult to see how the PC reached this view.
In a major departure from the Draft Report, the PC has stepped away from recommending a blanket exclusion of software and business methods from patentable subject matter, and now finds that the combined recommendations of the inclusion of an objects clause, raising the inventive step requirement, and requiring the identification of technical features to be present in the claims, will better balance the patent rights of software innovators and users.
The new recommendation that applicants should be required to identify the technical features of the invention in the claims was something of a surprise to many in the profession. In Australia, under s40 of the Patents Act, the claims must already:
- define the invention;
- be clear and succinct and supported by matter disclosed in the specification;
- not rely on references to descriptions or drawings unless absolutely necessary to define the invention; and
- relate to one invention only.
In the light of the current requirements, the PC’s recommendation appears superfluous.
The PC has not shifted from its previous recommendations regarding competition law, instead the Final Report adds detail regarding implementation of its draft recommendation to monitor settlement agreements to detect potential ‘pay-for-delay’ arrangements. The PC maintains that s 51(3) of the Competition and Consumer Act 2010 (Cth) ought to be repealed, and suggests that this should occur at the same time as giving effect to the other Harper Review recommendations. Read more about the Government’s proposed changes to competition law resulting from the Harper Review here. The Government’s Exposure Draft and Explanatory Material, and submissions regarding the consultation process, are available here. The consultation period on the Exposure Draft closed in October 2016. If this recommendation is to be swept up into the Government’s proposed changes to competition law, because consultation on its repeal has already occurred through this process, the change could happen quite swiftly.
Designs, Plant Breeder’s Rights, Circuit Layouts
Shortly after the PC released the Draft Report last year, the Australian Government responded to the now defunct Advisory Council on Intellectual Property’s (ACIP) report ‘Review of the Designs System’. In light of this, the PC has endorsed that response in the Final Report, which it says will “help address participant concerns of Australia’s designs system” and “lack of understanding of design law”. The PC also states that recommendation 19.2 regarding the creation of a specialist IP list in the Federal Circuit Court will provide for a low-cost avenue for IP enforcement. Given that the Government’s response to the ACIP report acknowledged that there was some overlap between its response and the PC inquiry, now that the PC Inquiry Report is released with this endorsement of the Government‘s response, it is possible that the changes will be implemented in the not too distant future.
The PC has maintained an uncontroversial recommendation regarding amendment to plant breeder’s rights legislation to enable essentially derived variety declarations to be made in respect of any variety.
As for circuit layouts, the PC simply acknowledged that Australia has an international commitment to protect them and, despite imperfections in the system, the best option is to maintain the status quo.
The trade marks recommendations focus on three things: clearing the register of unused marks; linking the trade marks register with the ASIC business name database and providing a warning if a business registration may infringe a registered trade mark; and ensuring that parallel imports of goods do not infringe Australian marks when the marked goods were brought to market elsewhere by the trade mark owner.
As for clearing the trade marks register of unused marks, the PC proposes to achieve this through three mechanisms:
- reducing the grace period from 5 years to 3 years before new registrations can be challenged for non-use;
- removing the presumption of registrability in assessing whether a mark could be misleading or confusing at application; and
- requiring applicants to state whether they are using the mark or “intending to use” the mark at application, registration and renewal, and disclosing this information on the Australian Trade Marks Search (formerly “ATMOSS”).
The PC no longer recommends the repeal of Part 17 of the Trade Marks Act 1995 (Cth) (regarding defensive marks), the restoration of the Commissioner’s ability to apply mandatory disclaimers to trade mark applications, nor an amendment to the schedule of fees such that higher fees are applicable to trade mark registrations made in multiple classes and/or entire classes of goods and services.
IP Governance and Enforcement
The PC has proposed that the Federal Circuit Court establish a specialist IP list to provide a timely and low cost option for resolving disputes across all areas of IP. Costs and quantum of damages recoverable in proceedings before this Court would be capped, with strict case management to minimise court events and hearings limited to a maximum hearing time (for example 2 days as is the case in the UK Enterprise Court).
The PC has also recommended a number of measures with respect to IP governance and policy-making at the domestic and international level to ensure that decisions are made in a balanced and well-informed manner.
The focus of these recommendations appears to be streamlining of processes within Australia and considering Australia’s best interests when negotiating international treaties.