By Penny Farbey, Senior Associate
The Productivity Commission has released its draft report into Intellectual Property Arrangements. Several recommendations in the report could, if accepted and implemented, have a profound impact on the pharmaceutical industry.
The recommendations could cause:
- The inventive step bar to the grant of patents to be raised further.
- Uncertainty as to the patentability of certain inventions.
- Reductions in the ability to gain patent term extensions and, potentially, in the length of the data exclusivity periods.
- Increased costs associated with maintaining patent portfolios.
- The establishment of a transparent reporting and monitoring system to detect ‘payfor- delay’ settlements”, similar to those operating in the US and EU.
The Commission has made it clear in the draft report that it considers the patent system to be more advantageous to the rights of the patent holder and to have too low a threshold for inventiveness. To address this, the draft report provides a number of recommendations.
Inventive step
The Commission has recommended that the Patents Act be amended so that an intention is taken to involve an inventive step if, having regard to the prior art base, it is not obvious to a person skilled in the relevant art. Currently the test is whether an invention would have been obvious to a person skilled in the relevant art in the light of the common general knowledge (CGK) as it existed before the priority date of the relevant claim, either alone or combined with prior art documents.
There are apparently three aims to this recommendation: (i) to raise the level of inventiveness required to obtain a patent; (ii) to shift of the onus of proof onto applicants; and (iii) to simplify the test for inventiveness by removing the distinction between prior art and common general knowledge.
The Commission’s recommendations are driven by their desire to ensure that patents are only granted to products with a genuine therapeutic advantage. Although the draft report discusses that there currently need only be a “scintilla of invention” for there to be an inventive step and seeks to increase the degree of inventiveness required, this test is derived from the courts, not the language of the Act. Furthermore, given that the Patent Act was only amended in 2013, this recommendation may be premature until the effect of previous reforms has been fully realised.
Objects clause
One of the recommendations of the draft report provides for the introduction of a broad objects clause into the Patents Act. The clause would establish the purpose of the Act as being to “enhance the wellbeing of Australians by providing patent protection to socially valuable innovations that would not have otherwise occurred” and “should balance the interests of patent applicants and patent owners, the users of technology… and Australian society as a whole”.
It is unclear what this objects clause would add to the existing patentability. It may introduce a subjective assessment of “social value” into the examination of patents requirements. Furthermore, it may exclude certain inventions from patentability if they were subjectively deemed to not be “socially valuable” or against the interests of society.
Extension of term (EOT)
The Commission was highly critical of the EOT regime. To reform the EOT system, the draft report recommended that the EOT period be calculated solely on time taken for regulatory approval by the Therapeutic Goods Administration in excess of one year. This recommendation was provided in order to ensure that EOTs were not granted in relation to a sponsor’s own delay. The Commission also recommended that, regardless of how EOTs are calculated, manufacturing of product for export should be permitted during the EOT period.
The Commission considered that any benefit Australia received from EOTs was vastly outweighed by the cost of EOTs to the Australian Government. The Commission further noted that EOT policies appear to have been inadequate in attracting R&D to Australia. However, the Commission conceded that Australia’s international legal obligations dictated policy flexibility in relation to EOTs.
The Commission also conceded that allowing manufacture for export could conflict with Australia’s international legal obligations, such as the TRIPS requirements. However, the draft report included remarks indicating that granting EOTs to pharmaceutical patents only may already breach the technological neutrality requirements of TRIPS. The Commission proposes that, given the potential conflict between the requirements in TRIPS and the positive requirements to grant EOTs in other international agreements such as the TPP and AUSFTA, Australia should settle any uncertainty by allowing manufacture for export during the term of any EOT.
Data exclusivity
Concerns were raised in the draft report regarding the strategic use of data protection to artificially extend patent protection. The Commission recommended at minimum keeping the current five years (including for biologics), and preferably exploring ways to reduce the exclusivity period.
They suggested pursuing the earliest possible publication of data, particularly for biologics. The implications of this recommendation may be serious. The Australian Government has recently stated that Australia will not be extending the data exclusivity for biologics from five years to eight years (although it is expected that the US will keenly push for increased protection). Furthermore, where the draft report recommends that Australia should reduce the exclusivity period, this would be inconsistent with Australia’s obligations under the TPP and AUSFTA.
Costs
The Commission has recommended restructuring patent fees by steeply escalating fees towards the end of a patent term and imposing higher filing fees to discourage holders from maintaining patents for their full term and to reduce speculative or strategic claims. This has the potential to disproportionately affect smaller businesses, as administrative fees are less likely to deter larger corporates from establishing and maintaining their IP rights.
We will keep you informed of developments in regard to the Productivity Commission’s Draft Report on Intellectual Property, which is expected to be finalised in August 2016 after a review of submissions from interested parties.
Read more from other Wrays thought leaders in our launch edition of The Gatherer.
