A recipe for patent reform: Australian Government releases its response to Productivity Commission’s Final Report on IP Arrangements in Australia


Late last week, the Australian Government published its much-anticipated response to the Productivity Commission’s Inquiry into IP Arrangements in Australia. The response follows the Commission’s Final Report, which was delivered in December 2016.

In its response the Government has supported a number of reforms to the current IP system which it says will improve Australia’s intellectual property arrangements by “ensuring they provide the flexibility needed for our 21st century economy.”

In this article we outline the Government’s response to the Productivity Commission’s recommendations regarding Patents made in the Final Report:

Introduction of an Objects Clause

The Commission recommended that an objects clause be incorporated into the Patents Act 1990 (Cth).  The intent of the objects clause is to balance the interests of producers, owners and users of technology over time.

The Government supports this recommendation and will seek amendments to the Patents Act upon further public consultation.

Raising the Inventive Step

The current test for inventive step under ss. 7(2) and 7(3) of the Patents Act 1990 (Cth) is that an invention will lack an inventive step when compared with the prior art base if it would have been obvious to a person skilled in the relevant art in light of the common general knowledge at the relevant priority date, considered either alone or together with additional prior art information that was publicly available at that priority date.  The additional prior art information may be a single documentary or public use disclosure, or a combination of disclosures that the skilled person could have been reasonably expected to have combined.  The test for establishing if the invention is obvious is whether the skilled person would ‘directly be led as a matter of course’ to try the invention in the expectation that it might well produce a useful alternative or result.  It is well accepted that a ‘scintilla’ of invention is a sufficient threshold for satisfying the above obviousness test.

In its Final Report, the Commission recommended that the current test for inventive step under ss. 7(2) and 7(3) of the Patents Act 1990 (Cth) be amended such that an invention is taken to involve an inventive step if, having regard to the prior art base, it is not obvious to a person skilled in the relevant art.  The Commission also suggested that the Explanatory Memorandum should state that the current thresholds for meeting the inventive step are insufficient.  Instead, the ‘obvious to try’ test applied in Europe was put forward as a more appropriate test.

The Government supports this recommendation to raise the inventive step threshold to be more consistent with European Patent Office practice.  The Government will seek amendments to the Patents Act upon further public consultation.  We anticipate that the new provisions will be aligned with the equivalent provisions of the European Patent Convention, with Explanatory Memorandum seeking to guide the Courts to interpret the provisions in a similar manner to that of European Patent Office practice.

Applicants must identify the technical features of their invention

The Commission recommended that patent applicants identify why their invention is non-obvious by clearly identifying the technical features of the invention in the set of claims of a patent application so as to minimise burden.  The technical features could be identified by either disclosing the relevant prior art in the patent specification and/or by drafting the claims in two-part form as per European practice.  This would be consistent with recommendation 7.2 of aligning the inventive step threshold to be more consistent with European Patent Office practice.

The Government supports this recommendation and will seek to implement both recommendations 7.2 and 7.3 at the same time.

Renewal fees

The Commission recommended that the structure of patent renewal fees be reformed such that the renewal fees rise each year at an increasing rate, whilst fees later in the life of a patent would be significantly more than current levels.  The Commission also recommended that the initial threshold for excess claim fees be reduced from the current threshold of 20 claims and introducing a higher excess claim fees for applications with a large number of claims (e.g. in excess of 50).

The Government notes that IP Australia’s fees are already set to balance both innovation and cost recovery policy objectives.  The Government is therefore not persuaded that the restructuring of renewal fees and claim fees is necessary at this time.

Abolishing the innovation patent

Australia currently offers a two-tier patent system including a standard patent system and an innovation patent system.  A standard patent requires that the invention is novel and involves an inventive step, whilst an innovation patent requires that the invention is novel and involves an innovative step.  The threshold for innovative step is generally lower than the inventive step threshold.

The Commission recommended that the innovation patent system be abolished to simplify the overall patent system.

The Government supports this recommendation.  The Government acknowledged that whilst the innovation patent system was established with the objective of stimulating innovation in Australian SMEs, more targeted and cost-effective assistance would better achieve this objective.  The Government will seek amendments to the Patents Act to abolish the innovation patent system, whilst maintaining existing innovation patent rights.


The Productivity Commission’s final report on Intellectual Property (IP) arrangements included a chapter dedicated to pharmaceutical patent reform. The Government has responded to the recommendations in the Final Report in regard to Pharmaceutical Patents:

Patent Term Extension

The Productivity Commission recommended that patent term extensions (PTE) should only be allowed where the actions of the regulator result in an unreasonable delay of greater than 1 year.  Fortunately, the Government recognises the importance of patent protection to the pharmaceutical industry and the substantial development lead-times and costs involved, and that a balance must be struck between encouraging pharmaceutical product development and ensuring affordable access to medicines.

Whilst noting the concerns of the Productivity Commission regarding exclusive market access and the associated extra costs involved to Government, consumers and taxpayers, there are no plans to proceed with this recommendation in the form proposed by the Productivity Commission.

Accordingly, we expect that the current PTE scheme will stay in place at this time.

Data Collection Requirements – PTE

Recommendation 10.1 of the Final Report also proposed that patentees who have obtained a PTE should be required to conform to a more rigorous data collection scheme, such as that currently applied in Canada. The current provisions[1] have been described as ‘flawed, cumbersome and ineffective’.[2]

The Government considers that the Productivity Commission has not provided a convincing rationale for imposing this regulatory burden, and will consider repealing these provisions.

Pay-for-Delay Monitoring

A current concern in other jurisdictions, although there is no evidence that they occur in Australia, is so-called ‘Pay-for-delay’ clauses in settlements, whereby a generic manufacturer is paid by a patentee to delay their entry into the market following the expiry of a patent. Such an agreement is already illegal in Australia under the Competition and Consumer Act 2010.

The Government has supported in principle Recommendation 10.2 to introduce a system for transparent reporting and monitoring of settlements between originator and generic pharmaceutical companies to detect potential pay for delay agreements. The Government will further consider the options for implementing this recommendation.

Please contact us if you would like clarification or further information on any of these points.

[1] Patents Act 1990 (Cth), s 76A.

[2] Spirit Pharmaceuticals Pty Ltd v Mundipharma Pty Ltd [2013] FCA 658, 289, 291.

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