Innovation patent system to be abolished: results of the Productivity Commission inquiry

The Australian Government recently released its response to the Productivity Commission’s (PC) inquiry into Australia’s intellectual property (IP) system. These recommendations include the significant change of abolishing Australia’s innovation patent system, further raising of the bar on the inventive step threshold for patents, and the replacement of existing exceptions to copyright infringement.

Abolishment of the innovation patent system
Innovation patents require a lower level of innovation compared to a standard patent, provide an eight year monopoly rather than 20 years, and give equal remedies to a standard patent. The lower requirement for validity makes innovation patents difficult to invalidate, and as a result they are a powerful tool for patent owners. Despite this, the PC took the view that the innovation patent system produced low value patents that reduced the credibility of the broader patent system, creating uncertainty for innovators in relation to infringement of other party’s patents. While the profession preferred that the system be reformed rather than abolished, the Government accepted the PC’s recommendation.

The Government will now pursue amendments to the Patents Act 1990 to abolish the innovation patent system, with appropriate arrangements being made to maintain existing rights. The Government indicates that it intends to explore mechanisms to assist SMEs to understand and leverage their IP, secure and utilise IP rights and access affordable enforcement. What form these mechanisms will take is uncertain.

Patent term extension provisions remain unchanged
There will be no significant changes to the patent term extension system for the foreseeable future. The PC recommended rather drastic changes to the patent term extension provisions, including that extensions should only be available for patents covering an active pharmaceutical ingredient and that extensions should be calculated so that they only compensate the time taken by the Therapeutic Goods Administration for regulatory approval over and above one year. The Government noted these recommendations but has elected not to proceed with them. Recognising the importance of patent protection to the pharmaceutical industry, the Government will instead work with the sector and discuss ways to improve the patent term extension system.

Replacement of existing exceptions to copyright infringement
The most important change to copyright law the PC has proposed is to replace a number of existing exceptions to copyright infringement with an open-ended fair use defence, such as exists in the United States. Currently the Australian Copyright Act contains many specific exceptions to copyright infringement including ‘fair dealing’ defences. For a ‘fair dealing’ defence to apply, the copyright use must be for one of a number of specified purposes, (e.g. ‘research or study’ or ‘reporting the news’). In addition, the ‘dealing’ must be fair. In contrast, a fair use defence would be more flexible because it would not be confined to the specific purposes, and Courts could develop the law to meet new circumstances.

The Government has not yet decided to adopt this recommendation but will consult further in early 2018 in relation to more flexible copyright exceptions.

In order to strengthen the existing protections against infringement in the Copyright Act, the PC made another recommendation that:

  • parties would not be able to ‘contract out’ of the exceptions – i.e. include provisions in agreements that override copyright defences
  • consumers be allowed to circumvent technical protections in electronic copyright material for legitimate uses.

The Government has supported both of these recommendations in principle.

Assessment of inventive step to align with the European Patent Office
The PC has recommended that the assessment of inventive step in Australia be fully aligned with the standard of the European Patent Office. The PC also recommended the introduction of a requirement for applicants to disclose the technical feature of their invention in the claims.

The Government has agreed with both of these recommendations, recognising the PC’s findings that while the inventive step threshold in Australia and Europe is similar most of the time, there are still some differences. At present, the legislative amendments relating to these issues are intended to be included in a Bill for introduction to Parliament in 2018. The wording of the legislative change and explanatory memorandum will be the subject of further public consultation.


Andrew is the current Board Chair and a member of the Engineering Team of Phillips Ormonde Fitzpatrick.