IP Amendments Bill 2013: #1 Crown Use, Pandemics and the Zombie Apocalypse?

On 30 May 2013, the Australian Parliament was presented a Bill for an Act to amend legislation relating to intellectual property, called the Intellectual Property Laws Amendment Bill 2013 (report here).  The first schedule of the bill proposes amendments which address Crown use provisions based on recommendations contained in the Productivity Commission’s 2013 Report on “Compulsory Licensing of Patents”.  In this, the first of 6 posts relating to the proposed changes, we take a closer look at the proposed changes to “Crown use”.

The Australian patent system is designed to balance the interests of a number of stakeholders.  To ensure that the interests of the community as a whole are not adversely impacted by the existence of a patent, the Patents Act 1990 (the Act) contains three safeguards that allow for a patented invention to be exploited (usually the sole right of the patentee) by someone else and without the authorisation of the patentee.  These are:

• Compulsory licensing provisions (sections 133-140 of the Act);
• Research and regulatory approval exemptions (sections 119B and 119C of the Act); and
• Crown use provisions (sections 163-170 of the Act).

The Intellectual Property Laws Amendment Bill 2013 seeks to amend the Act in relation to Crown use and compulsory licensing.  In this post, we take a look at the proposed changes to Crown use.

What’s wrong with the current Crown use provisions?

The Act sets out that where an invention “… is exploited by the Commonwealth or a State (or by a person authorised in writing by the Commonwealth or a State) for the services of the Commonwealth or the State, the exploitation is not an infringement”.

The first problem is a lack of clarity as to the scope of Crown use in light of the phrase “for the services of the Commonwealth or the State”. The question posed is: how far and to whom do the services of the Commonwealth or State extend?   Take the following scenario:

The State of Victoria invokes Crown use for a gene patent for medical testing.  Does Crown use apply if samples collected in Victoria and sent for analysis to NSW where Crown use has not been invoked?  There is the additional question of what entities can qualify as “the Crown”. Does it extend to employees, commissions, statutory authorities, statutory corporations, government business entities, government owned corporations and private corporations under contract to the government?

The second problem which the amendments in the Intellectual Property Laws Amendment Bill 2013 seek to address is a lack of transparency and accountability relating to Crown use.  In light of the ambiguity regarding who Crown use may apply to and how it is exercised (there are only two prior cases in Australia on this point), there is the potential for the provisions to be wittingly or unwittingly misused. For example, organisations not qualifying as the Crown for the purposes of the provision may believe they have immunity from patent infringement actions, when in fact they do not.  Additionally, the threat of Crown use by an organisation could be used as a negotiating tactic to reduce licence fees.

The Bill seeks to address these issues with the following changes:

Proposed Changes to the Act

1. Clarification that Crown use can be invoked for the provision of a service that the “relevant Authority” ( more clearly defined as Australian, State and/or Territory Governments) has the primary responsibility for providing or funding (s160A);
2. Requirement that the Crown attempt to negotiate use of the patented invention prior to invoking Crown use (s163(2)(a));
3. Requirement that the Crown to provide the patentee with a statement of reasons no less than 14 days before such use occurs (s163(2)(c));
4. Requirement that Crown use to be approved by a Minister (the relevant Federal Minister or State Attorneys General) (s163(2)(b));
5. Requirement that in instances of Crown use, the patentee is entitled to remuneration determined on the same basis as that for a compulsory licence (s165(2)).

In Case of Emergency…

Under proposed s163A, in emergencies the Crown is not obliged to attempt to negotiate or issue a statement of reasons prior to intended use. Therefore, in the advent of a pandemic, or zombie apocalypse access to patented medicines or death rays would not be inappropriately delayed.  The Crown would however be required to provide patentees with immediate notice that their patents have been used, and a statement of reasons as soon as practical thereafter.

The Productivity Commission report (upon which the proposed amendments in the Bill are based) considered that Crown use would be a more efficient and cost effective way for governments to make use of patented inventions than compulsory licensing.  If the intended clarification of Crown use provisions is effected, then perhaps we may start to see increased reliance on Crown use.  However, with appropriate checks and balances also provided for, patentees may also avoid being kicked in the crown jewels.