Federal Government keen to ensure that the Australian public has access to essential technology

24 July 2012

The Productivity Commission is to review patent compulsory licensing powers

The Australian Government has asked the Productivity Commission to conduct an inquiry into the compulsory licensing provisions of the Patents Act 1990 (Cth).

The inquiry was announced by Assistant Treasurer David Bradbury and the Parliamentary Secretary for Industry and Innovation, Mark Dreyfus and will “assess, advise and recommend on the impacts and mechanisms of compulsory licensing invoked by the Patent Act’s public interest and anti-competitive safeguards”.  The Productivity Commission proposes to release an Issues Paper in August 2012 with submissions due by 28 September 2012 and the Final Report to go to Government on 29 March 2013.

The terms of reference for the inquiry require the Commission to:

  • assess whether the current Australian provisions can be invoked efficiently and effectively;
  • recommend any measures to efficiently and effectively exercise these safeguard provisions, in a manner consistent with Australia’s international obligations; and
  • recommend any alternate mechanisms, to ensure that the balance between incentives to innovate and access technology best reflect the objectives of reasonable access to health care solutions, maximising economic growth and growing the Australian manufacturing industry.

The scope of this inquiry will enable review of what is in Australia’s best interest

The inquiry will take into account multiple areas of public interest including access to affordable health care, impact of gene patents, climate change mitigation, food security and alternative energy technologies.  Notably it will also look at compulsory licensing provisions in other jurisdictions and give consideration to how those provisions could enable government authorities (the Crown) to compulsorily acquire patent licenses.  The Commission will also consider how any new provisions will operate within the framework prescribed by the Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth).

The review is in response to previous Senate Committee and Australian Law Reform Commission reports on gene patents which recommended a review of the operation of compulsory licensing provisions.  These reports highlighted that biotech patent holders could potentially deny the Australian community access to diagnostic tools and therapeutic tests.

Given these reports and ongoing commentary on the difficulty in using the existing compulsory licensing provisions in the Patents Act to compel licensing by patent holders, the scope of the inquiry is specifically required to include an assessment of:

“...whether the current Australian compulsory licensing provisions can be invoked efficiently and effectively to deal with circumstances where reasonable requirements of the public are not being met or where the patent holder engages in anti-competitive behaviour.  This includes, but is not limited to, consideration of concerns that gene patents may hinder access to affordable healthcare, including access to medical advice that relies on the identification and use of gene sequences related to human health and disease”.

It is timely to consider the Australian regime in light of recent international developments

Recent focus on compulsory licences has been on India where about a third of all drugs are produced.  In 1972 India abolished patents for pharmaceutical products, excluding processes, to encourage the development of its domestic drug industry.  This resulted in the rise of domestic firms producing much more affordable medicines through alternative processes.  However, since 2005 India has been required to allow patents in all categories, so Indian firms cannot (without a licence) develop generic versions of drugs patented post 2005.

Earlier this year, India granted its first compulsory licence to an Indian generic drug company for the production of Bayer’s patented anti-cancer drug Nexavar.  Bayer’s version of this drug was being offered at a cost of approximately $5,600 per month whereas the generic drug company planned to market the drug at about 3% of that price (approximately $180 per month) while still paying the license fee and making a profit.

The compulsory license was granted by the Indian Controller of Patents, Designs and Trademarks essentially on the grounds that Bayer’s price was exorbitant and rendered the drug unobtainable by most Indian households.  Other factors influencing the granting of the compulsory license included the fact that India imported a very small quantity of the drug allowing only a small number of patients to receive it.

The granting of compulsory licences deals with the contentious issue of attempting to ensure the public has access to affordable medicine while at the same time protecting the companies bringing the medicines to the market.  The decision of the Indian authorities outlined that Bayer were only supplying 2% of the patients requiring the Nexavar drug and charging a price that was excessive thereby not fulfilling the reasonable requirements of the public by making the medicine available to them at a reasonably affordable price.

While the key proponents for review have focused on healthcare, all patented technologies will be impacted by the Commission findings

No doubt patent holders of various forms of technology will be assessing the need to make submissions to the Productivity Commission and reinforcing the desirability of a scheme that does not significantly depart from the established framework.

The Commission will be required to balance any submissions for change to the compulsory licensing scheme with retaining incentives to innovate so as to maximise economic growth and support Australia’s manufacturing industry.

Innovators and consumers alike have a vested interest in ensuring that Australia’s current compulsory licensing provisions operate as a safeguard to ensure reasonable public access and if invoked, operate efficiently and effectively.

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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Eddie Scuderi

Partner. Brisbane
+61 7 3228 9319


Odette Gourley

Partner. Sydney
+61 2 9210 6066


James Cameron

Special Counsel. Brisbane
+61 7 3228 9752