PRODUCTIVITY COMMISSION IP ARRANGEMENTS INQUIRY REPORT - HINTING AT THE FUTURE OF IP LAW IN AUSTRALIA? PRODUCTIVITY COMMISSION INQUIRY REPORT

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1 PRODUCTIVITY COMMISSION IP ARRANGEMENTS INQUIRY REPORT - HINTING AT THE FUTURE OF IP LAW IN AUSTRALIA? PRODUCTIVITY COMMISSION INQUIRY REPORT By Rebecca Sandford, Associate, HWL Ebsworth Lawyers Released on 20 December 2016, the Productivity Commission (Commission) Intellectual Property Arrangements Inquiry Report (Report) 1 represents a comprehensive review of the current registered IP rights regime in Australia. The difference between the Report and other recent IP reviews (of which there have been many) is that other reviews have tended to focus on specific areas of IP law - for example innovation patents, pharmaceutical patents, design protection, or copyright - rather than taking a consistent, holistic and coherent approach across the totality of Australia s IP arrangements, as the Report sought to do. The Report sets out the Commission s recommendations for future changes to ensure that Australia s IP system, as far as possible in the global framework in which it operates, meets key principles of effectiveness, efficiency, adaptability and accountability, and achieves the Commission s stated aim for the IP system (namely that it provides appropriate incentives for innovation, investment and the production of creative works, whilst ensuring it does not unreasonably impede further innovation, competition, investment and access to goods and services). Ambit of the Report 1. The Commission was tasked with the following - admittedly mammoth - undertaking: a. examining the effect of the scope and duration of protection afforded to Australia s IP system on: b. research and innovation, including freedom to build on existing innovation; c. access to and cost of goods and services; and d. competition, trade and investment; 2. recommending changes to the current system that would improve the overall wellbeing of Australian society, which take account of Australia s international trade obligations, including changes that would: a. encourage creativity, investment and new innovation by individuals, businesses and through collaboration, whilst also not unduly restricting access to technologies and creative works; b. allow access to an increased range of quality and value goods and services; c. provide greater certainty to individuals and businesses as to whether they are likely to 1 Productivity Commission 2016, Intellectual Property Arrangements, Inquiry Report No. 78, Canberra. 1

2 infringe the intellectual property rights of others; and d. reduce the compliance and administrative costs associated with intellectual property rules; and 3. in undertaking its inquiry, taking regard of various factors impacting on Australia s IP rights regime, including: a. Australia s international arrangements, including obligations accepted under bilateral, multilateral and regional trade agreements; b. the IP arrangements of Australia s top intellectual property trading partners and the experiences of these and other advanced economies in reforming their IP systems to ensure those systems meet the needs of the modern economy; c. the relative contribution of imported and domestically produced intellectual property to the Australian economy; 2 d. the Government s desire to retain appropriate incentives for innovation and investment; e. the economy-wide and distributional consequences of recommendations on changes to the existing intellectual property system, including on trade and competition; f. ensuring the intellectual property system will be efficient, effective and robust through time, in light of economic and technological changes; g. how proposed changes fit with, or may require changes to, other existing regulation or forms of assistance (such as research subsidies) currently providing incentives for the development of intellectual property; h. the findings and recommendations of the Harper Competition Policy Review; 3 and i. the findings and recommendations of other recent review and inquiries into Australia s IP systems. 4 Key Findings The Commission first identified four guiding principles that it says Australia s IP system should embody - namely that the system should be effective, efficient, adaptable and accountable, with the overarching objective of maximising community wellbeing. 5 The Report then concluded that Australia s IP arrangements fall short of embodying those principles in many ways, and improvement is needed across the spectrum of IP rights. In particular, in the Commission s view: 1. changes to IP arrangements are needed to ensure that creators and inventors are appropriately rewarded for their efforts, whilst still fostering creative endeavour and investment in IP that would not otherwise occur, only providing the incentive needed to induce that additional investment or endeavour, and resisting impeding follow-on innovation, competition and access to goods and services; 2. Australia s patent system grants exclusivity too readily, allowing a proliferation of low-quality patents, frustrating follow on innovators and stymieing competition; 3. copyright is broader in scope and longer in duration than necessary, with a cost borne by innovative firms, universities and schools; 4. timely and cost effective access to copyright content is the best way to reduce infringement; 2 For example, to Australia s terms of trade and other economic impacts of IP protection, including on inward investment. 3 Including recommendations related to parallel import restrictions in the Copyright Act 1968 and the parallel importation defence under the Trade Marks Act In particular, the Advisory Council on Intellectual Property s Review of the Innovation Patent System, the Senate Economics References Committee s inquiry into Australia s innovation system, and the Australian Law Reform Commission s Copyright and the Digital Economy report. 5 Ibid, Overview & Recommendations, page 5. 2

3 5. commercial transactions involving IP rights should be subject to competition law, with the current exemption under the Competition and Consumer Act being based on outdated views; 6. while Australia s enforcement system works relatively well, reform is needed to improve access, especially for small and medium sized enterprises; 7. the absence of an overarching objective, policy framework and reform champion has contributed to Australia losing its way on IP policy; 8. international commitments substantially constrain Australia s IP policy flexibility; and 9. previous reform efforts have more often than not succumbed to misinformation and scare campaigns, and steely resolve will be needed to pursue better balanced IP arrangements in Australia. Recommendations The Report then proceeds to make a range of recommendations arising from the above conclusions, including: 1. Raising patent quality by increasing the degree of invention required to receive a patent, abolishing the failed innovation patent, reconfiguring costly extensions of term for pharmaceutical patents, and better structuring patent fees; 2. Introducing a system of copyright user rights, including the (well-established) principles-based fair use exception; 3. Making it easier for users to access legitimate content by: a. clarifying the law on geo-blocking; and b. repealing parallel import restrictions on books (having regard to new analysis which demonstrates that Australian readers still pay more than those in the UK for a significant share of books); 4. Repealing the current exemption under the Competition and Consumer Act 2010 for commercial transactions involving IP rights; 5. Introducing and resourcing a specialist IP list within the Federal Circuit Court to provide a timely and low cost option for resolving IP disputes; 6. Introducing better governance arrangements for a more coherent and balanced approach to IP policy development and implementation; and 7. Focussing international IP engagement on reducing transaction costs for parties using IP rights in multiple jurisdictions, and encouraging more balanced policy arrangements for patents and copyright. In making the above recommendations, the Commission took care to acknowledge that Australia s IP arrangements are not a blank slate, with many aspects of the system having come about, or been strengthened, by way of commitments in international agreements. Those agreements often contain prescriptive obligations relating to key policy levers such as the duration and scope of protection. Australia s capacity to change domestic policy arrangements in any significant way can, therefore, be limited. In addition, the Commission noted the practical constraints to independent IP policymaking, given that IP is a globally tradeable asset and Australia is a relatively small market, and significantly departing from international IP arrangements could frustrate Australia s access to overseas innovations. 3

4 Response Some of the Commission s proposed reforms were always going to be considered controversial and divisive, especially where they involve significant changes to longestablished historical practices, or run the risk of creating additional uncertainty (even if that s just in the short term). The Report itself anticipates a level of push-back against the reforms, noting the need for steely resolve and dedicated commitment to overcome anticipated misinformation and scare campaigns about the proposed changes. Commentators have thus far had mixed reactions to the Report. Some are saying that there is a significant risk that the proposed reforms, in their current form, would largely have the opposite effect to that desired; and that the Report, whilst well-intentioned, goes too far on the basis of a shallow analysis, and relies on information which does not present the entire picture. For example, questions have been raised about the reasonableness of the Commission s finding that the duration of copyright is too long, which is reliant on an assumption that the only reason for copyright protection is to incentivise the creator to create items that have public value, and that the length of protection should reflect the likely life cycle of that value. This approach may overlook one of the key underlying premises for copyright protection, namely that it is not about preventing people from enjoying works it is about designating who should pay, and who should be paid, when a work is enjoyed. 6 Copyright lawyers have similarly argued that the current system already reflects a compromise by permitting specific activities that would otherwise constitute infringement - noting that property rights usually do not have carve-outs for even the worthiest of causes trespass is trespass, even if you want to host a charity for sick puppies in a stranger s private living room 7 - and that the proposed introduction of fair use exceptions will, notwithstanding the previous use of fair use defences in the United States, likely cause confusion and ambiguity in the Australian system, the effect of which will be to stifle innovation, repel investors and cause new products to be tied up in lengthy litigation (all of which is clearly contrary to the desired outcomes of growth, ease of access, reduced cost and increased innovation). However, other interested parties have applauded what have been described as salient and sensible recommendations, 8 in particular with respect to proposed changes to the Copyright Act. It has also been noted that the recommended reduction in international IP transaction costs would be pertinent to trade discussions with India and Indonesia in What s next? The Government has just completed further stakeholder consultation, and has not at this stage indicated whether, or the extent to which, it intends to implement the recommended reforms, with a formal response anticipated in mid It also remains to be seen at this stage whether the release of the Report will affect legislative changes currently slated for introduction in 2017, 10 which are aimed at aligning and streamlining the processes for obtaining, maintaining and challenging IP rights in Australia. Those changes are presently in draft form, and are the subject of consultation led by IP Australia which commenced in It is not currently known when the proposed legislative changes might be put before Parliament, or what impact the Report might have on any submissions in relation to that legislation - but this is certainly a space to watch. 6 Fisher, Eli, Law reform should protect, not harm creators Gazette of Law and Journalism (25 January 2017). 7 Ibid. 9 See 9 See 10 The Intellectual Property Laws Amendment Bill 2017 and Intellectual Property Laws Amendment Regulation

Intellectual property rights regimes have always involved an attempt to encourage innovation by striking a balance between providing commercial protection for the physical expression of ideas, whilst

It appears that in Australia - from a policy perspective at least - the pendulum has started to swing towards a more collaborative, less protectionist approach.

5 Intellectual property rights regimes have always involved an attempt to encourage innovation by striking a balance between providing commercial protection for the physical expression of ideas, whilst still ensuring reasonable limits on that protection to enable other ideas to flourish. It appears that in Australia - from a policy perspective at least - the pendulum has started to swing towards a more collaborative, less protectionist approach. It remains to be seen whether the reforms recently proposed in the Report will be implemented, but if they are, only time will tell whether they will have the intended effect; or whether the suggested reduction in protection incentives will actually stymie, rather than generate, the desired outcomes of innovation and creativity. CONTACT US We welcome you to contact any one of our team with your questions or for further information: PETER CAMPBELL PARTNER, ADELAIDE P M E pcampbell@hwle.com.au REBECCA SANDFORD ASSOCIATE, ADELAIDE P E rasandford@hwle.com.au ABOUT HWL EBSWORTH LAWYERS HWL Ebsworth is a full service commercial law firm providing expert legal services at competitive rates, focusing on client outcomes. Through our combination of legal specialists and industry experience, HWL Ebsworth has established a reputation as a legal service provider of choice for organisations across Australia and internationally. HWL Ebsworth is currently ranked as the largest legal partnership in Australia according to the most recent partnership surveys published by The Australian and the Australian Financial Review and comprises 1,049 staff across offices in Adelaide, Alice Springs, Brisbane, Canberra, Darwin, Hobart, Melbourne, Norwest (North West Sydney), Perth and Sydney. 5

Submission to the Productivity Commission inquiry into Intellectual Property Arrangements

Submission to the Productivity Commission inquiry into Intellectual Property Arrangements DECEMBER 2015 Business Council of Australia December 2015 1 Contents About this submission 2 Key recommendations