Staff Writer

PERTH, Australia – IP Australia released its final recommendations on five separate intellectual property policy amendments that were put forward by the Productivity Commission that are expected to make their way through Parliament in 2018.

The Productivity Commission's recommendations to update Australia's IP system would be disastrous to the biopharma industry and would put a stranglehold on innovation and investment, industry stakeholders warned.

The government had asked the Productivity Commission to conduct a 12-month review of Australia's IP system, and the commission released its final recommendations in January. The government released its response in August to that report, and IP Australia released its final report, which will form the basis for introducing legislation in Parliament

The original report made a number of "anti-innovation recommendations," including abolishing the second-tier innovation patent system, introducing an objects clause into the Patents Act, removing patent term extensions for pharmaceutical patents, and raising the threshold for the inventive step.

"The recommendations made by the commission, if implemented, would arguably weaken the patent system by taking away rights from innovators," said Grant Shoebridge, principal with Sydney-based Shelston IP Pty Ltd. As such, the recommendations seemingly conflict with the prime minister's National Innovation and Science Agenda, which was designed to boost innovation and investment in Australia "because they would most likely introduce uncertainty into the Australian patent system." (See BioWorld Today, Jan. 23, 2017.)

AusBiotech said the commission's findings were also at odds with the recent commitment to the $20 billion Medical Research Future Fund and the recognition of medical technologies and biopharmaceuticals as one of Australia's areas of strengths to help the country transition as the mining boom fades.

In its comments, Amgen urged the government to reject all the recommendations relating to pharmaceuticals.

Medicines Australia said that the proposed recommendations would hurt local R&D and "send a signal internationally that there is limited incentive to invest in innovative pharmaceuticals in Australia. If a country reduces its IP provisions, it reduces its chance to compete for global investment in R&D and slows down patient access to innovative medicines."

One bright spot

The Australian government offered one bright spot in its comments to the Productivity Commission's recommendations in that it said it had no intention of shortening patent extensions for pharmaceuticals. It pointed to an agreement it reached with Medicines Australia that will deliver savings of $1.8 billion over five years to the Pharmaceutical Benefits Scheme.

The earlier report argued that patent-term extensions were intended to attract pharmaceutical research and development investment to Australia and to improve incentives for innovation. However, it said that the patent-term extension for pharmaceuticals has had little effect on investment and innovation. It notes that Australia only represents "a meager 0.3 percent of global spending on pharmaceutical research and development," and concludes that consumers and governments pay higher prices for medicines because of patent-term extensions.

The commission said that by abolishing the patent-term extension, it would save the Pharmaceutical Benefits Scheme (PBS) roughly $250 million per year. However, that amount is only about 3 percent of the total expenditure, Shoebridge said, which seems to be a "fairly insignificant savings."

The Productivity Commission stressed that Australia's patent system grants exclusivity too readily, "allowing a proliferation of low quality patents, frustrating follow-on innovators and stymieing competition."

Industry opposes objects clause

The Productivity Commission recommended that the Australian government incorporate an objects clause into the Patents Act. It said the objects cause "should describe the purpose of the legislation as enhancing wellbeing of Australians by promoting technological innovation and the transfer and dissemination of technology. In so doing, the patent system should balance over time the interests of producers, owners and users of technology."

The government said it supported the objects clause recommendation, and it said it had accepted a similar recommendation in 2010 that would give guidance to the courts in interpreting the Patents Act. The government said it would consult with industry further on this matter.

IP Australia put forth two possible options for the wording of the objects clause. Option A proposes: "The purpose of the legislation is to enhance the wellbeing of Australians by promoting technological innovation and the transfer and dissemination of technology. In so doing, the patent system should balance over time the interests of producers, owners and users of technology."

Option B proposes: "The purpose of this Act is to provide a patent system in Australia that enhances the wellbeing of society by promoting technological innovation and the transfer and dissemination of technology. In so doing, the patent system should balance over time the interests of producers, owners, users of technology, and the public."

AusBiotech said that the industry is not keen on either option and would prefer to see no objects clause.

"The material difference is the well-being of 'Australians' (Option A) versus the well-being of 'society' (Option B). Both inclusions appear to divert attention from the object, which is to promote and protect investment in innovation," the association said.

The purpose of a Patents Act "is not to benefit society in some nebulous fashion," AusBiotech stressed. Rather, it is to benefit society by "helping innovators, and people who invest in innovation, to be motivated to do so – and by that mechanism, to bring new products and services to the market that will benefit society."

AusBiotech said that the wording should remain consistent with the Trade Related Aspects of Intellectual Property Rights Agreement (TRIPS).

"It's important to recognize that the Australian patent system protects the interests of innovators whether they are based in Australia, or overseas," AusBiotech said in its submission. "Further, our patent system exists under multilateral treaty obligations that are designed to reduce the tendency for individual countries to simply favor their own interest in designing their patent systems.

The association said the proposal has the potential to "create substantial uncertainty and greater burden for patent examiners, who may be tasked with making decisions about a patent's public interest, and applicants, who may be in the position of having to divulge commercially sensitive information to the Patent Office."

Raising the inventive step

The government also supported the Productivity recommendation to raise the inventiveness threshold and introduce a requirement for applicants to disclose the technical feature of their inventions. IP Australia said this would bring Australia's patent standards to be consistent with international best practices and to be parallel with the European Patent Office.

Australia has a second-tier innovation patent system that is intended to promote innovation by small- and medium-sized enterprises (SMEs) that invest in incremental innovations. The Productivity Commission stressed that the "innovative step" required to receive an innovation patent is lower than the inventive step for standard patents, and the "low innovative threshold has proven more harmful than helpful" for SMEs and has "encouraged a multitude of low-value patents."

Shoebridge, however, said it was premature to raise the inventive step threshold since new legislation dealing with the inventive step threshold was introduced in 2013 called "Raising the Bar" Act. AusBiotech agreed in its submission that many of the issues had already been raised in the period leading up to the implementation of the "Raising the Bar" Act.

"The act raised the quality of granted patents to more closely align Australian patentability standards with international standards," the association said, noting that it is unclear why the new provisions have not been given time to settle and their impact assessed before further changes are considered.

The government said in its response that although the "Raising the Bar" reforms "made considerable improvements to the assessment of the inventive step in Australia, they did not change the fundamental nature of the inventive step test in subsection 7(2) of the Patents Act 1990, or the interpretation of that test developed by the courts."

"Along with initiatives to support SMEs introduced through the National Innovation and Science Agenda (NISA) and existing programs such as the R&D Tax Incentive, the government has already implemented a number of measures to support SMEs to better understand, secure and utilize their IP," the government concluded in its report.

It also said that it supports "in principle" the recommendation to introduce a system for transparent reporting and monitoring of settlements between originator companies and generics companies to detect potential pay-for-delay agreements.

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