Productivity Commission advocates change to compulsory licensing of patents

Last year, the Australian Government asked the Productivity Commission to review the operation of the compulsory licensing provisions of the Patents Act.  In particular, it asked the Commission to:

  1. assess whether the current compulsory licensing provisions (in Chapter 6 of the Patents Act) can be invoked efficiently and effectively;
  2. recommend any measures to efficiently and effectively exercise the compulsory licensing provisions; and
  3. recommend any alternative mechanisms, to ensure that the balance between incentives to innovate and access to technology best reflects the objectives of reasonable access to health care solutions, maximising economic growth and growing the Australian manufacturing industry.

Following a public hearing in February and the receipt of over 50 written submissions, the Commission released its Report last week (27 May 2013).

The Commission recommended that particular aspects of the compulsory licensing provisions be amended to clarify their operation, to strengthen the criteria for granting compulsory licences and to remove overlap and potential inconsistency with other laws.  Some of the specific recommendations of the Commission include:

  1. Replacing the current “reasonable requirements of the public” test with a new public interest test.  The Commission reports that the new test should specify that a compulsory licence to exploit the patented invention would be available if:
    • Australian demand for a product or service is not being met on reasonable terms, and access to the patented invention is essential for meeting this demand;
    • the applicant has tried for a reasonable period, but without success, to obtain access from the patent owner on reasonable terms and conditions; and
    • there is a substantial public interest in providing access to the applicant, (having regard to different factors such as the benefits to the community from meeting the relevant unmet demand and the commercial costs and benefits to the patent holder and licensee from granting access to the patented invention).
  2. Removing the ground that a compulsory licence may be granted on the basis that a patent has been used to engage in unlawful anti-competitive behaviour.  This recommendation is intended to remove overlap and inconsistency with the Competition and Consumer Act 2010, which currently provides remedies for relief from anti-competitive conduct.  The Report also recommends that the Competition and Consumer Act be amended to explicitly recognise compulsory licence orders to exploit a patented invention as a remedy under that Act.
  3. Clarifying the interaction of the compulsory licensing provisions with international treaty obligations by repealing section 136 of the Patents Act (a general provision requiring that a compulsory licensing order be consistent with international treaties) and instead directly incorporating any treaty obligations into the Act.

Notably, while one of the motivations of the review was to assess whether the compulsory licensing provisions can be invoked efficiently and effectively, the Commission found that that although the substantial costs and length of time associated with obtaining a compulsory licence order is significant barrier to the use of the provisions – given that an application has to be made to the Federal Court – the Commission thought there were no other viable alternatives.  In particular, it stated that moving responsibility to the Patents Office had limitations.

The Commission also proposed a range of recommendations in relation to the Crown use of patents – stay tuned for our summary of these recommendations.