The Patent System: Focusing on the Fundamentals

The Australian Government’s Productivity Commission (“The Commission”) Draft Report, while welcome as a prudent, periodic position report on Australia’s IP system, recommends some very significant changes to the Australian patent system to address what it sees as an imbalance between its costs and benefits to Australian society as a whole; and a misalignment between Australia’s status as a net IP importer and its patent policy.

This perspective has not gone unchallenged.  For example, the World Trade Organisations’s Chief Economist has questioned whether patent policy should be formulated on the assumption that Australia will always be a net IP importer.

Watermark has considered the key proposed changes, their significance and the likelihood of implementation (in the absence of opposition) as shown in the table below:

Proposed Action Significance Likelihood of Implementation Challenges
Explicitly exclude business methods and software from patent protection. (Draft Recommendation 8.1) High Low 1) Proposed action not Trade-Related Aspects of Intellectual Property/Trans-Pacific Partnership compliant.

2)  No justification for discriminatory treatment of growing important economic sector.

Abolish innovation patent system.

(Draft Recommendation 7.1)

High High Government possibly sympathetic.
Raise overall threshold for inventive step (Draft Recommendation 6.1) Low Low Neutral – no action required in view of recent Raising the Bar changes.
Reform extensions of term for pharmaceutical patents so that they are calculated only on the time taken for regulatory approval by Therapeutic Goods Authority.

(Draft Recommendation 9.1)


High Low Adverse trading partner response.
Extensions of term for pharmaceutical patents should only be granted through a tailored system which explicitly allows for manufacture for export in the extension period.

(Draft Recommendation 9.2)

High Medium Adverse trading partner response.
Improve data collection requirements surrounding extensions of term and consider ongoing costs and benefits of maintaining the extension of term system .

(Draft Recommendation 9.5)

High Low (other than on cost/benefit monitoring) Adverse trading partner response.
Introduce objects clause explaining the purpose of the Patents Act.

(Draft Recommendation 6.1)

Low High Government possibly sympathetic.


Doubtless the Draft Report is set to generate a lot more heat than light as various stakeholders contest the various recommendations.  Doubtless, too, those having a view about The Commission draft recommendations would be well advised to file submissions before the 3 June 2016 deadline.

That said, only three of the draft recommendations have any real prospect of enactment.  Trading partner resistance and Australia’s approach to trade agreements make reform in the pharmaceutical space unwise and highly unlikely. Introduction of an appropriately drafted object clause is also unlikely to cause any harm, provided that it does not influence patent validity.

On the other hand, abolition of the innovation patent system – rather than sensible reform – would deprive Australia of a second tier protection system which has worked well in other jurisdictions such as Germany and Japan.  And this, despite supportive economic evidence supporting the system. Exclusion of business methods and software would distort Australia’s patent system, denying patent protection to an economically important class of inventions.  The Commission has not provided a persuasive case for this move and it is likely to be strenuously resisted given that many believe that even the Australian common law interpretation of invention has become too restrictive so far as this class of invention is concerned.