In July 2018, the intellectual property office of Australia (IP Australia) released an exposure draft for the proposed Intellectual Property Laws Amendment Bill (Productivity Commission Response Part 2 and Other Measures) Bill 2018. The exposure draft proposed several key changes proposed to the Australian patent legislature based on the recommendations set out by the 2013 Productivity Commission Report (Report) and 2016 Report into Australia’s Intellectual Property Arrangements.
The exposure draft, in effect, responds to the assertions made by the Productivity Commission’s Report that the Australian Government take actions to strike a better balance in the current patent system, which is thought to slightly benefit the rights holders against the interests of the broader Australian community.
As such, some of the proposed changes to the patent legislation include:
- abolishing innovation patents;
- introducing an ’objects’ clause for the Patents Act;
- raising the inventive step requirements;
- repealing certain data requirements relating to pharmaceutical patents that have their term extended; and
- amending the compulsory licensing provisions in the Patents Act.
This article briefly explores the Australian Government’s response to the proposed changes and key recommendations to the Report, whilst also discussing the potential implications of these responses.
Abolishing ‘second-tier’ innovation patents.
Innovation patents were originally introduced in 2001, with an intention to boost the innovation in small and medium-sized businesses (SME’s) in Australia, and to provide a faster and more affordable means for SME’s to protect their innovations.
Innovation patents target lower level inventions which involve novelty, an innovative step (a lower threshold than the inventive step of a standard patent), and are aimed at short market life inventions (up to eight years) that might be superseded by newer innovations. However, since their inception less than 5,000 patents were ever awarded this category, resulted in a substantial regulatory burden according to IP Australia.
This system also came under some intense criticism from the productivity commission for granting “too easy” protection for inventions, and resulting in a “proliferation of low-quality patents”, which hinders innovation, stifles competition, and needlessly shifts the burden to consumers of technology. The draft memorandum therefore recommends that the innovation patent system be abolished.
Introducing objects clause to the Patents Act
To provide greater clarity and guidance on the purpose of the provisions in the Patents Act, the exposure draft recommended to the introductione of an ‘objects’ clause to the act, which ensures a continued consistency between policy intent and administrative and judicial interpretation.
The proposed wording of the objects clause in the Patents Act (section 2A) will read as follows:
“The object of this Act is to provide a patent system in Australia that promotes economic wellbeing through technological innovation and the transfer and dissemination of technology. In doing so, the patent system balances over time the interests of producers, owners and users of technology and the public.”
The exposure draft also goes on to provide that “the term ‘technological innovation’ … is not intended to narrow or change the subject matter eligibility threshold for grant of a patent ”and“ is intended to be interpreted broadly to mean the applications of scientific knowledge for practical purposes”.
Amending the definition of inventive step
The Australian Government also supports the recommendation of the draft memorandum to amend the definition of ‘inventive step’, in line with the approach taken by the European Patent Office (EPO). This is because the commission considers the EPO as the benchmark in the patents examination realm due to its effectiveness in ‘filtering’ out’ low-value patents.
The government considers EPO’s efficient filter against low-value patents is the so-called problem-—solution approach. Presented in 1982, it has led to drastic changes to how inventive step is assessed in all instances before the EPO, and was widely perceived as the first systematic approach to inventive step in a patent office worldwide.
Consequently, the commission focusses especially on the aspect of aligning the assessment of inventive step in Australia with the approach taken by the EPO.
However, under the prerequisite that the underlying finding in view of this filter against low-value patents is correct, it is questionable that the alignment of the inventive step approach alone will do the job.
Turning to recent EPO history, we find that the EPO’s ‘Raising the Bar’ initiative of 2010, included three major levelrs to achieve higher patent quality:
(1) clarification of the scope of protection sought prior to search (which measure includes a limitation of the number of independent claims);
(2) mandatory response to the written opinion issued with the search report; and
(3) one opportunity to file voluntary amendments and mandatory provision of the basis for the latter.
The effects of these measures could be defined as to:
- put the examiner in the position to perform a comprehensive search (measure (1)), which is paramount for patent quality;,
- encourage the applicant to reflect on their prosecution strategy as early as possible (measure (2));, and
- reduce the applicant’s options to introduce subject -matter at a later stage that has most likely not been searched (measure (3)).
Next to loss of legal certainty for competitors who need to know that the scope of the granted patent does not deviate significantly from the published application, introduction of non-searched subject -matter in a patent dramatically decreases examination efficiency (if the examiner performs an additional search at examination stage) and/or leads to poor patent quality. The latter is the case if the examiner neglects the additional search and, to a greater or lesser extent, simply sends the application to grant, following the principle “if it’s new, let it through” – thereby short-circuiting the inventive step assessment and opening the door to low value patents.
It appears that the above measures, in combination with a rather restrictive approach regarding allowability of claim amendments, which could be considered a brand label of the EPO as well, would offer some potential to create what the Ccommission might have in mind when it talks about an “‘improv[ed] […] overall environment for innovation”’.
Repeal of data requirements
The current law requires that that the patent holders provide the Department of Health with specified information about the costs of research and development, including any commonwealth funding, for any patent that receives an extension of term. The reason behind this is to assist the Government in determining whether extensions of term for pharmaceutical patents serve in incentivising R&D in Australia.
However, the process has always been considered to be ‘inconsistent’, as the Patents Act does not provide clear guidance in this regard, and no penalties have been imposed on the patent holders for failing to do so. Consequently, the Australian Government has decided that these provisions are no longer required.
Compulsory Licensing and ‘Crown use’
The commission observed that the provisions of Crown use and compulsory licenses were very rarely invoked, and recommended that the legislation be amended as follows:.
‘Crown use’ refers to use by, or on behalf of, the Australian Government.
In relation to Crown use, the draft memorandum proposes to:
- invoke the provision of Crown use towards a service that any Commonwealth, State or Territory Government has the primary responsibility for providing or funding; and
- provide notice to a patentee, and seek a negotiated arrangement, before invoking the Crown use provisions.
‘Compulsory licensing’ refers to use by other entities
In relation to compulsory licenses, the draft memorandum proposes to:
- establish a ‘public interest’ test to determine whether a compulsory license may be granted;
- consider the public interest when specifying the terms of the license, including remuneration; and
- revise the current regulations of compulsory licensing in relation to the ‘dependent patents’.’
Government response in relation to recommended amendments to designs regime
The Australian Government also accepted the recommendation of the former Advisory Council on Intellectual Property (ACIP) to:
- introduce a grace period of six months before the filing date, together with a prior user defence; and
- consider the implications of Australia joining the Hague Agreement Concerning the International Registration of Industrial Designs.
Note the proposed six month grace period is out of step with the US, Japan, and the European Community Designs system.
Government response in relation to recommended amendments to copyright regime
The Australian Government also noted the commission’s recommendation in the context of wider copyright reform and to introduce a ‘fair use exception’ (similar to that of the United States) to copyright infringement.
Government response in relation to recommended amendments to trade mark regime
The government also seeks to reform the Trademarks Act based on the commission’s recommendations, which includes:
- reduction in the period from five to three years, before which new registrations can be challenged on the grounds of non-use;
- clarification of the rules regarding parallel importing of goods into Australia; and
- returning to IP Australia’s former practice of challenging trade mark applications that contain contemporary geographical references.
Therefore, it appears that the Australian Government, based on the recommendations of the Committee, has taken a first step in reforming the law to encourage investments in research and technology, and to help Australian businesses benefit from their good ideas .
Another development in the world of trademarks in Australia refers to the application of discretion by the Federal Court in the non-use provisions.
Trident Seafoods Corporation v Trident Foods Pty Limited (2018)
In 2016 the Full Federal Court of Australia delivered the decision of Lodestar Anstalt v Campari America LLC  FCAFC 92. Lodestar changed the pervading view on licensing arrangements in Australia by stating that the control mechanisms contained within a licensing agreement will be insufficient alone to establish use of the trade mark by the registered owner, and that evidence of the control mechanisms being exercised is required.
The recent Federal Court decision of Trident Seafoods Corporation v Trident Foods Pty Limited  FCA 1490 confirms the Lodestar position and clarifies that even if the parties to the license agreement are in a commercial relationship, with shared directors, if the registered owner does not exercise any control mechanisms, there is no use of the trade mark.
While Trident does not depart from the findings in Lodestar, the trademarks were allowed to remain on the Register through exercise of the discretion afforded by s 101(3) of the Act.
Trident Seafoods is a large vertically integrated seafood distributor from North America, and uses the following trade mark:
(“Trident Seafoods Logo”)
Since 2007, Trident Seafoods has sold seafood products in the Australian market under the trade mark “BOUNTIFUL”, claiming that it has been forced to do so because of the Trident Foods brand.
Trident Foods is an Australian company and subsidiary of Manassen Foods Australia Pty Ltd (“Manassen”). When Manassen acquired Trident Foods, it took over the sales of “TRIDENT” branded products. Trident Foods claimed that it had licensed Manassen to use the “TRIDENT” trademarks in relation to a range of food products., however, during the non-use period this did not include fish products.
In 2013, Trident Seafoods filed a trade mark application for the Trident Seafoods Logo in Class 29 but was blocked by prior Trident Foods prior registrations, and Trident Seafoods filed applications to remove the registrations for non-use.
The Registrar found that while Trident Foods could not show use, it was appropriate to exercise discretion under s 101(3) and maintained the trademarks on the Register.
Federal Court Aappeal
Was Manassen’s use “under the control of” Trident Foods?
Trident Foods argued that an unwritten license agreement contained control mechanisms and provided a subsequent recitation of the terms of the license. Justice Gleeson disagreed that this showed “actual use” of the trademarks during the non-use period, because the terms of the agreement were at odds with the actual practice of Trident Foods.
The fact that Trident Foods and Manassen were in a corporate relationship with a commonality of directors was also found to be insufficient. After consideration of the arguments, Justice Gleeson could not be satisfied that Manassen’s use was “under the control of” Trident Foods, concluding that there was no use in terms of s 8.
Discretion under Section 101(3)
Despite finding no use, Justice Gleeson exercised the discretion afforded by s 101(3) of the Act to maintain the trademarks on the Register, stating that the following circumstances justified such a finding:.
Following the non-use period, Trident Foods began to sell tinned tuna products in the Australian market. Despite Trident Foods’ admission that the sales were motivated by the non-use application, the fact that the sales were not unprofitable, or sold on an uncommercial basis was found to be enough to avoid a finding of “bad faith” use. Justice Gleeson stated that Trident Foods constantly changed its use of the trademarks to respond to circumstances in the marketplace, and that Trident Foods had also developed an intention to use the mark on tinned mackerel products.
Even though the recitation of the unwritten licensce agreement was insufficient to show control for the purposes of s 8, Justice Gleeson was satisfied that the formalisation of the agreement was done with a view to ensuring that “actual control” is established. The longstanding use of the “TRIDENT” brand by Manassen with the knowledge and acquiescence of Trident Foods, and on a wide-ranging portfolio of foods was also considered reason for maintaining the marks on the Register.
 Australian Government Response to the Productivity Commission Inquiry into Intellectual Property Arrangements, August 2017, p9.
 Productivity Commission Report 2016, Intellectual Property Arrangements, Inquiry Report No. 78, Canberra.
 Decision T 24/81 of the EPO’s Boards of Appeal.
 Productivity Commission Report 2016, Intellectual Property Arrangements, Inquiry Report No. 78, Canberra, Recommendation 7.2.
 Exposure Draft of the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2018: Draft Explanatory Memorandum, July 2018, p6.
 Patents Act 1990 (Cth) s76(A).
 Patents for which access to an earlier ‘original patent’ is also required, particularly where the owners of the original and dependent patents may be different.