Whither Patent Use without Authorisation in Australia?
| Published date | 01 September 2008 |
| Date | 01 September 2008 |
| DOI | http://doi.org/10.22145/flr.36.3.3 |
| Subject Matter | Article |
WHITHER PATENT USE WITHOUT AUTHORISATION IN
AUSTRALIA?
Jane Nielsen* and Dianne Nicol**
I INTRODUCTION
Patents provide inventors and their assignees and licensees with a fixed period of
market exclusivity,1 during which they can exclude others from use of their inventions
and charge monopoly prices on the sale of their products. In return, inventors are
required to disclose to the public the nature of their inventions and the best methods of
performing them. This public bargain provides the underlying justification for the
patent system: patents are good for society because they provide the incentive to
innovate and innovation benefits society.2 If inventors can recover the costs put into
research and development and earn rewards through product pricing and licence fees,
they will be encouraged both to take their inventions through to commercial
production, and to engage in further innovation.3 Full disclosure further encourages
innovation by allowing others to use the invention once the patent has expired.4
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* B Com LLB (Comb) (Hons), PhD, Lecturer, Faculty of Law, University of Tasmania.
** BSc (Hons), MSc, PhD, LLB (Hons), LLM, Associate Professor, Faculty of Law, University
of Tasmania. The authors thank Mr Lynden Griggs for his extensive and thoughtful
comments on this paper. They are also grateful to two anonymous referees for their
valuable suggestions for improving the paper.
1 In Australian law, the Patents Act 1990 (Cth) prescribes in s 67 that the term of a standard
patent is 20 years. Section 68 prescribes a shorter duration of eight years for innovation
patents. Sections 70–79A allow for extension of the term of standard patents for certain
pharmaceutical substances for up to five years, subject to certain conditions and
limitations.
2 Roberto Mazzoleni and Richard R Nelson, 'Economic Theories about the Be nefits and Costs
of Patents' (1998) 32 Journal of Economic Issues 1031. For earlier debate about this theory see
Kenneth J Arrow, 'Economic Welfare and the Allocation of Resources for Invention' in
Richard R Nelson (ed), The Rate and Direction of Inventive Activity: Economic and Social Factors
(1962) 609; William D Nordhaus, Invention, Growth and Welfare: A Theoretical Treatment of
Technological Change (1969).
3 It should be noted that while the terms 'invention' and 'innovation' are conceptually
distinct, they are often used synonymously, even by leading commentators in the field. See,
eg, Mark A Lemley and Dan L Burk, 'Policy Levers in Patent Law' (2003) 89 Virginia Law
Review 1575, particularly at 1871, 1875 and n 58.
4 However, it is recognised that this is not necessarily the only function of the patent system.
Clarisa Long, in particular, argues that this simple view of the patent system provides only
part of the picture and that firms may obtain patents for a range of other reasons. She
332 Federal Law Review Volume 36
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Despite this apparent public benefit, privatisation of information in the form of
patents and other intellectual property ('IP') rights also has inevitable costs, and one of
the crucial roles of IP laws is to strike an appropriate balance between these benefits
and costs. The need for this balancing exercise was well articulated in a comprehensive
review of the relationship between IP and competition laws in Australia by the
Intellectual Property and Competition Review Committee ('IPCRC'), where it was
stated that:
Intellectual property laws must therefore involve some balance between the incentives to
invest in creative effort and the incentives for disseminating material that is the subject of
intellectual property protection. This balance turns on determining the appropriate scope
of protection, in terms of the conditions under which protection is granted, the scope and
effectiveness of the exclusive privileges provided by protection, and the duration of
protection given.
Balancing between providing incentives to invest in innovation on one hand, and for
efficient diffusion of innovation on the other, is a central, and perhaps the crucial element
in the design of intellectual property laws.5
This reflects the importance placed by society on establishing and maintaining a
system of encouraging innovation in order to enhance social welfare and build a strong
economy.6 One thing that is not clear is how innovation is best served: through strong
intellectual property protection, or through efficient uptake of new technological
developments in a competitive environment. Patent laws promote dynamic efficiency
(often at the expense of static efficiency), by providing incentives for engaging in the
process of innovation.7 Corollary costs may be price and quantity distortions that
outweigh the benefits provided through inventive activity.8 Follow-on invention may
also be adversely affected where access to patented inventions is restricted.9
Numerous studies have attempted to determine which industry structure is most
conducive to innovation. While this paper does not consider these studies in detail,10
this debate does highlight the difficulty in setting the appropriate parameters for
facilitating innovation.
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reasons that the information disclosure function of the patent system can be as important to
patentees as to observers as it gives them the opportunity to 'credibly convey information
about the invention to observers': Clarisa Long, 'Patent Signals' (2002) 69 University of
Chicago Law Review 625, 636. See also Mazzoleni and Nelson, above n 2.
5 Intellectual Property and Competition Review Committee, Parliament of Australia, Review
of Intellectual Property Legislation Under the Competition Principles Agreement: Final Report
(2000) ('IPCRC Report') 6.
6 Federal Trade Commission, To Promote Innovation: The Proper Balance of Competition and
Patent Law and Policy (2003) ch 2, 3–7.
7 Ibid; Michael A Carrier, 'Unravelling the Patent-Antitrust Paradox' (2002) 150 University of
Pennsylvania Law Review 761, 770.
8 Louis Kaplow, 'The Patent-Antitrust Intersection: A Reappraisal' (1984) 97 Harvard Law
Review 1813, 1821–3.
9 Suzanne Scotchmer, 'Standing on the Shoulders of Giants: Cumulative Research and the
Patent Law' (1991) 5 Journal of Economic Perspectives 29, 31; John H Barton, 'Patents and
Antitrust: A Rethinking in Light of Patent Breadth and Sequential Innovation' (1997) 65
Antitrust Law Journal 449.
10 See Jane Nielsen, 'Innovation in Medical Biotechnology: Mapping the Intersection of
Intellectual Property and Competition Law' (2007) 35 Australian Business Law Review 407,
412–17.
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The complexity in setting these parameters is further exacerbated with the
recognition that, while innovation has an important role in society, it is not the only
relevant social value that needs to be considered, particularly in areas such as access to
healthcare. The World Health Organisation's Commission on Intellectual Property
Rights, Innovation and Public Health reminds us that 'innovation for "medicines and
other products" must be situated within a wider picture of efforts across sectors to
improve health and development' and that 'the contribution that innovation can make
will be meaningful only if we can find ways to make it affordable and accessible to
poor people'.11 While patents might provide a necessary incentive for innovation in
healthcare, society as a whole is worse off if we do not fulfill our moral obligation to
find ways to provide these life-saving treatments to the millions of people, including
children, who suffer and die in developing countries because such treatments are not
otherwise available and accessible to them.12
Taking all of these factors into account, it is most unlikely that the public interest
will be adequately served by an absolute patent monopoly. Strict requirements for the
grant of patents should be provided for in patent legislation, with the aim of ensuring
that only the most deserving creative endeavours receive such protection.13 It is also
necessary to impose post-grant limitations to ensure that dissemination is not
inappropriately restricted by unfair use of the patent monopoly, once granted. One of
the ways of achieving this end is to provide for state-sanctioned patent use without the
authorisation of the patent holder, through such mechanisms as compulsory licensing
and government use.14 The need to provide for such uses without the authorisation of
the patent holder has been recognised for some time in Australian patent law. For
example, compulsory licensing provisions were included in the Patents Act 1903 (Cth),
the first Australian legislation providing for the grant of patents.15
Compulsory licensing provisions generally require the user to apply to an
independent authority for permission to use the invention. A compulsory licence is a
court or administrative order mandating a licence from the patent holder to work the
invention. Because of the capacity for compulsory licensing to significantly impact on
the incentive goal of the patent system, the grounds justifying the grant of such
licences need to be strictly limited and their terms must be clearly defined.
Government use (or Crown use, as it is referred to in Australia, and as it will be
referred to hereafter) allows use without authorisation by the government for the
purposes of the state, but gives the patent holder the right to appeal to an independent
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11 Commission on Intellectual Property Rights, Innovation and Public Health, Public Health
Innovation and Intellectual Property Rights (2006) 8.
12 Ibid. See also William W Fisher and Talha Syed, 'Global Justice in Healthcare: Developing
Drugs for the Developing World' (2007) 40 UC Davis Law Review 581.
13 However, the extent to which existing provisions and current interpretations of existing
provisions by the courts achieve this aim is contentious and is a matter of ongoing concern
for law reform agencies. For example, at the time of writing the Australian Advisory
Council on Intellectual Property ('ACIP') is undertaking a review of patentable subject
matter. See ACIP, Patentable Subject Matter Issues Paper (2008)
<http://www.acip.gov.au/reviews.html> at 23 July 2008.
14 Australian Law Reform Commission, Genes and Ingenuity: Gene Patenting and Human Health,
Report No 99, (2004) ('ALRC Report') chs 26, 27.
15 Patents Act 1903 (Cth) s 87.
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