The Inquiry Report into Intellectual Property Arrangements recently published by the Productivity Commission (Report) argues that Australia’s IP system is weighted too heavily in favour of rights holders and against the interests of the broader community. It has made various recommendations to correct this perceived imbalance. This article considers some of the recommended changes which, if implemented, could also have the consequence of limiting IP protection in Australia, with a flow-on effect on the economic incentive to invest in innovation.

Recommended changes to the patent system include:

  • Raising the inventiveness threshold for the grant of patents, which the Report argues will stem the current proliferation of low-quality, low-value patents. However, this fails to recognise that since the introduction of the changes under the IP Laws Amendment (Raising the Bar) Act 2012 (Cth) in April 2014, the requirements for patentability were substantially increased to align closely with international standards. The new position has only been considered a handful of times by IP Australia and is yet to be tested in Court, so any further amendments are at best premature and at worst unnecessary.
  • Abolishing the ‘failed’ innovation patent system. This ignores the many successful two-tier patent systems in other developed countries, and the importance of the ability to obtain an enforceable right quickly (given the potential for delays as a result of the standard patent system’s pre-grant opposition process). It also ignores the potential for reform, rather than rejection, of the innovation patent system to help it better achieve its other objectives which are, admittedly, currently not being met.
  • Restructuring renewal fees to rise each year at an increasing rate such that fees later in the life of a patent would well exceed current levels. However, the current system is already organised to provide significant economic hurdles for the later years of a patent’s life, such that most patents expire around the eleventh year as it is. In any case patent fees are generally inelastic, that is, demand is minimally responsive to price. Any price increases would disproportionately affect SMEs and individuals, which appears to be at odds with other aims of the patent regime to encourage innovation by such groups.

Recommended amendments to the trade mark regime include:

  • Reducing the initial period available to a new trade mark applicants to use their mark from five to three years, before it becomes vulnerable to removal for non-use. While this may sometimes help brand owners remove unused trademarks, if implemented, it may also require the introduction of an exception for applicants who can demonstrate clear business reasons for their lack of use.
  • Removing the current presumption of registrability, which requires an examiner to be satisfied to a certain level that a mark is NOT registrable, before rejecting it. It could be argued that as a matter of practicality this should be a requirement in any event, and so the arguments for removing the presumption are counter-intuitive.
  • Linking the trademarks and ASIC databases to provide a warning if a business or company name registration may infringe a registered trade mark. This is a good idea in principle, but as all trade mark owners know, their rights in their registered mark only extend to the goods and services covered by their registration (or similar goods and services), and so this could simply function as an unnecessary deterrent to new business entrants.

Recommended amendments to the copyright regime include:

  • Replacing the fair dealing exceptions to copyright infringement with a broader and open-ended fair use exception. If implemented in a principled way, this would reduce the opportunities for businesses and consumers currently lost as a result of the current narrowly drafted and highly prescriptive exceptions, and would better accommodate new legitimate uses of content that are being made as a result of changing technology. However, if implemented, it would be important that ‘fair use’ does not effectively amount to ‘free use’ because it becomes impossible to defeat the defence in practice.

The above recommendations suggest that the Productivity Commission has, in focusing on the “interests of the broader community”, in some cases arguably failed to consider the importance of providing economic incentives to innovate, which requires a robust and effective IP system.

Instead of focusing on how Australia might encourage local innovation and IP production, implementing these recommendations could sadly have the opposite effect of deterring investment in innovation, which would be a step backwards in Australia’s push towards a strong innovation-based economy.

*The author wishes to thank graduate Isobel Taylor for her invaluable work in preparing this post.