Government has responded to the recommendations covering pharmaceutical patent term extensions, innovation patents, trade agreements, pay for delay, fees, the inventive step, competition law, open access and policy.
Key sections of government's response to the Productivity Commission's review of intellectual property arrangements.
Recommendations 7.2 and 7.3 - inventive step
Government accepted the recommendation to further amend sections 7(2) and 7(3) of the Patents Act 1990 covering what constitutes an 'inventive step'.
"Whilst the assessment of inventive step in the European Patent Office and in Australia is similar in most cases, the Productivity Commission considers that some differences still remain," said government in its response. "The Government therefore supports the recommendation to put beyond doubt that the assessment of inventive step in Australia is consistent with the European Patent Office."
It also accepted the recommendation for reform of the patent filing process to require applicants to identify the technical features of the invention in the set of claims.
Recommendation 7.4 - fees
The Productivity Commission recommended reform of patent fees to "promote broader intellectual property policy objectives, rather than the current primary objective of achieving cost recovery."
It recommended fees should rise each year at an increasing rate, including during the patent-term extension perions, saying "fees later in the life of a patent would well exceed current levels."
Government noted but essentially rejected the recommendations, saying it was not convinced of the need to move away from a cost recovery framework.
Recommendation 8.1 - innovation patent system
Government accepted the recommendation to abolish the innovation patent system.
"The Commission found that the majority of SMEs who use the innovation patent system do not obtain value from it, and that the system imposes significant costs on third parties and the broader Australian community," it said. "The Government notes that the innovation patent system was established with the objective of stimulating innovation in Australian SMEs. The Government considers that more targeted assistance would better achieve this objective, while avoiding the broader costs imposed by the innovation patent system."
Recommendation 10.1 - patent term extension
The Productivity Commission recommended the effective abolition of the current five-year patent term extension. It said it should only be available for patents covering an active pharmaceutical ingredient and only be based on the time taken to achieve regulatory approval above the current statutory 255 working day period.
Government noted but effectively rejected the recommendation.
"The Government will discuss ways to improve the patent term extension system with the sector," it said.
"The Government acknowledges that for many pharmaceutical products, the effective patent life – the period between marketing approval and patent expiry – is reduced by the time taken for companies to obtain evidence to support applications under the subsequent regulatory review process.
"In common with other countries, this can affect incentives to discover and develop new pharmaceutical products. The Commission questions whether providing a 15 year effective patent life is necessary to achieve a reasonable return on investment for bringing new pharmaceutical products to the Australian market, and whether the EOT provisions have had a positive impact on attracting additional R&D investment."
It continued, "The Government notes the Commission’s finding that extensions of patent term prolong market exclusivity and impose significant costs on consumers, Government and taxpayers. The Commission estimated that the cost to the Government (through additional costs to the Pharmaceutical Benefits Scheme) of providing extensions of patent term to pharmaceuticals is approximately $260 million per annum.
"The Government notes that the effective patent life of extended Australian patents is 12 months longer at the median than those in the United States and the average expiry date of extended Australian patents is 18 months later than those in the United States.
"The Government recognises the recent Strategic Agreement with Medicines Australia will deliver savings of $1.8 billion over five years to the Pharmaceutical Benefits Scheme.
"Any consideration of changes to the extensions of term regime must strike a balance between ensuring that new pharmaceutical products are developed and that they are safe and effective, but also ensuring that they are accessible and affordable."
Recommendation 10.2 - pay for delay
Government accepted the recommendation to require reporting and monitoring of settlements between originator and generic pharmaceutical companies to detect potential so-called pay for delay agreements.
"The Government notes the concerns raised by some stakeholders that there is presently no evidence that pay for delay activity is occurring in Australia.
"However, it does not follow that such activity has not occurred or that incentives to engage in such conduct do not exist. Rather, it may only confirm the difficulty of detecting such agreements, particularly where an agreement that affects the price or availability of pharmaceuticals in Australia is made overseas.
"In this regard, the Government is aware that pay for delay agreements reached overseas between foreign companies have the very real potential to impact markets in Australia.
"The Government considers that introducing a reporting and monitoring regime for potentially anticompetitive conduct between pharmaceutical patent owners and generic pharmaceutical manufacturers would improve transparency and would better equip the ACCC to detect any anticompetitive behaviour."
It added, "The Government will further consider the options for implementing this recommendation, including suitable compliance mechanisms where there is a failure by a party, or parties, to lodge relevant agreements with the ACCC."
Recommendation 15.1 - competition law
Government will reform competition law to remove the current exemption covering intellectual property licensing arrangements.
"The immediate costs and benefits of removing the exemption under section 51(3) are finely balanced. However, looking ahead, increased cross-licensing may occur in growth industries such as pharmaceuticals and communications, which would considerably increase the benefits associated with removing the exemption."
Recommendation 16.1 - open access
Government will ensure policy promotes "open access to science and research publications and collaborative use of research outputs by researchers and industry is an important element of the Government’s National Innovation and Science Agenda (NISA)."
Recommendation 17.1 - IP policy unit
Government has already established a dedicated policy unit focussed on intellectual property in the Department of Industry, Innovation and Science.
"This unit works closely with IP Australia and the Communications and the Arts portfolio in developing policy and providing advice to the government. The unit is also strengthening relationships with other relevant portfolios including the Treasury."
Recommendation 17.2 - Trade
Government rejected the recommendation to avoid the inclusion of provisions covering intellectual property in bilateral and regional trade agreements, leaving negotiations on related standards to multilateral fora.
"While a number of the Commission’s proposed principles already inform Government arrangements, the Government firmly rejects the proposed principle that IP provisions be excluded from Free Trade Agreements (FTAs).
"Decisions about whether it is in Australia’s best interest to pursue IP provisions within an international negotiation are made on a case-by-case basis. Preventing Australia from negotiating IP provisions in FTAs would impede efforts to advance the interests of Australian exporters in balanced and effective IP protection in overseas markets.
"It would also preclude Australia from participating in important FTA negotiations such as the Trans-Pacific Partnership and Regional Comprehensive Economic Partnership. With this in mind, the Commission’s proposal would prevent Australia from accessing significant economic and welfare benefits of new trade liberalisation occurring through FTAs."