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Friday, 23 November 1979

Senator JESSOP (South Australia) -As Chairman of the Senate Standing Committee on Science and the Environment I have an interest in this matter. I think that Senator Cavanagh will find that the Bill is a preliminary step to following up matters which the honourable senator discussed in his speech. In the course of the Committee's undertaking this inquiry and examining the whole position of industrial research and development it had quite a bit of evidence from patent attorneys and the Commonwealth Scientific and Industrial Research Organisation on the patent system in Australia. The Patent Cooperation Treaty recognises the universal requirement of patent validity and that this depends on whether the related invention is generally new. The basis on which the invention is judged is essentially the same in every country. Accordingly, when patent protection is sought in several countries, each patent office carries out very similar investigations. This duplication is eliminated through the establishment under the Treaty of a limited number of patent offices which undertake these investigations.

Under the Treaty which we are considering six patent offices are designated as international searching authorities. Following accession to the Treaty the Australian Patent Office is to become both a searching and a preliminary examination authority. This is probably one of the reasons why this piece of legislation is being brought forward. The publication of details of patents granted is one of the principal factors in any patent system because this facilitates the avoidance of patent infringement and provides information to industry permitting exploitation of inventions on the expiry of the patent. There are approximately one million new patent documents generated world wide which cover about 400,000 different inventions. Procedures under the PCT will have to operate cheaply, efficiently and quickly to deal with these 400,000 inventions. If this is achieved the Treaty could provide a useful source of technical knowledge for Australia.

International patent information- INPADOC, I think it is commonly known as- is currently available in Australia, but access to this is very expensive and is not easy, in some instances. The Minister for Productivity (Mr Macphee) has reminded me that the Patent Office has acquired the systems to facilitate access to INPADOC and that in applying those systems under the Treaty, the Patent Office will develop improved access techniques.

Senator Cavanagh - Tell me why you did not support the amendment to the motion for the second reading and endorse the decisions of your Committee?

Senator JESSOP - I do not want to get into a protracted argument. I now want to incorporate in Hansard letters from me, as the Committee Chairman, and replies from the Minister for Productivity on the subject. Perhaps those letters will provide Senator Cavanagh with further information and explain our concern in the matter.

Leave granted.

The letters read as follows-13 September 1979

Telex AA62326

The Hon. Ian Macphee, M.P., Minister for Productivity, Parliament House, Canberra, A.C.T. 2600

Dear Minister,

Patents Amendment ( PCT) Act 1 979

Section S.3 of my Committee's recent report on Industrial Research and Development in Australia discusses patents. From evidence presented to the inquiry, the Committee came to the conclusion that the alleged benefits of Australia's patent system are open to serious question. It went on to say that a strong case can be made as far as international treaties will allow, for an examination of the Australian patent system with a view to its realignment with national interest. There are quite good reasons for believing that accession by Australia to the Patents Co-operation Treaty (PCT) may well be contrary to the national interest.

Australia is a net importer of technology and is likely to continue to be so for many years. Of approximately 1 1,000 patent applications filed in Australia each year, only 1,000 are of Australian origin whilst the remaining 10,000 originate overseas. Each year many thousands of inventions are developed, the owners of which do not consider it worthwhile to seek protection in Australia. These inventions may accordingly be used by Australians without payment of overseas royalty. Through the Australian Patent Information Service (APIS), Australians can obtain information on overseas inventions. In particular, the APIS enables Australians to determine which inventions are not protected by an Australian patent. Please note, however, that my Committee recommended that access to patent information should be improved.

At present the method of obtaining an Australian patent is such that Australians are advantaged compared with overseas applicants. Even so, 90 per cent of Australian patents are granted to foreigners. Australian accession to the PCT will almost certainly reverse this situation with foreign applicants being advantaged vis-a-vis Australians. Therefore the probable result of Australian accession to PCT is a greatly increased number of Australian patents granted to overseas applicants. In consequence fewer inventions will be freely available for use by Australians.

One could argue in favour of the Bill that Australian accession to the PCT will make it easier for Australians to obtain foreign patents. However, out of 1,000 individuals and firms which file Australian patent applications in any year, only about 300 apply for foreign patents. This small number would not appear to outweigh the advantages of free access to overseas patent information.

It is argued that Australian accession to the PCT will assist in the transfer of technology to this country. This is a most dubious proposition. Improved access to overseas patent information is probably of much greater assistance.

In consequence of the above I believe that further careful consideration of the whole matter is warranted before the Bill introduced on 28 August becomes law. In your second reading speech you say that "without exception Australian industry has appreciated the benefits to be obtained from participation in the Treaty and expressed unqualified support for Australian accession". I regret that my Committee would find it difficult to agree that this statement truly reflected the considered views of all representatives of industry. May I therefore, with the greatest respect, urge you before proceeding further with this Bill, to consider most carefully section S.3 of my Committee's report on Industrial Research and Development in Australia. In particular, may I again draw your attention to page 139 where we say "Australia's present patent system may well be acting against the country's best interests. Once again absence of any clear policy or plan for national industrial development makes it very difficult to know where our best interests may lie. Even so, a review of our patent system in the light of the situation with respect to IR&D is clearly indicated. The Committee accordingly recommends that the Minister for Productivity undertake an examination of both the national and international relevance of present patent laws and agreements to Australian IR&D and the importation of technology".

Action on this recommendation should be completed and the situation clearly understood before seriously contemplating Australian accession to the PCT.

Yours sincerely,

(D. S. JESSOP) CHAIRMAN

Minister for Productivity Parliament House Canberra, A.C.T.2600 5 October 1979

Senator D.S. Jessop, Chairman,

Australian Senate Standing Committee on Science and the Environment, Parliament House, Canberra, A.C.T.2600

Dear Senator,

Your letter of 13 September 1979, drawing my attention to your Committee's Report on Industrial Research and Development in Australia and requesting deferment of Australian accession to the Patent Cooperation Treaty (PCT) until the completion of the review of the patent system recommended in the Report, raises a number of extremely important issues. In view of the Committee's conclusions on the effects of the patent system, I appreciate your concern with the question of Australian accession to the PCT. I have therefore taken the opportunity to reply to your letter in some detail.

I would point out that I gave careful consideration to the submissions critical of the Australian patent system which were presented to your Committee and the conclusions which it reached in the light of these submissions before introducing the Bill. In my view, although those submissions have a superficial plausibility, they reflect an approach to the patent system which is inherently unsound. For that reason, I made a particular point in my Second Reading Speech of explaining in detail the significance of Australian accession to the PCT in relation to the operation of the patent system and the benefits to Australian industry from participation in the operation of the Treaty. I believe that speech presents a more objective and accurate evaluation of the Australian patent system than that submitted to your Committee and I hope therefore that your Committee will give careful consideration before it adopts a concluded approach to the Bill.

Before discussing the particular issues referred to in your letter, I would express my concern with your remark that your Committee would find it difficult to accept that the statement in my speech that "without exception Australian industry has appreciated the benefits to be obtained from participation in the Treaty and expressed unqualified support for Australian accession" reflected the considered views of all representatives of industry. I trust that remark reflects an unawareness of the investigations conducted prior to the introduction of the Bill rather than a commitment to a preconceived assessment of its impact.

The fact of the matter is that the question of Australian accession to the PCT was widely publicised amongst interested parties and the attitude of industry sought well before accession was authorised by Cabinet. Responses were received from organisations widely representative of various sectors of Australian industry, including the Confederation of Australian Industry, Australian Manufacturers' Patent, Industrial Designs, Copyright and Trade Mark Association, the Agricultural and Veterinary Chemicals Association of Australia and the Australian Industrial Research Group, as well as individual Australian companies, both large and small, including BHP, AWA, APM Ltd, Simpson Pope Ltd and Alcan Australia Ltd. Although some non-industry bodies opposed accession, every response from industry, without exception, expressed unqualified support for early Australian accession. As the essential function of the patent system is to assist Australian industry and as accession to the PCT is intended to improve the operation of that system, I think it is essential that, if your Committee is to form a considered view of the Bill, it should be clearly aware of that response by industry.

As you correctly state in your letter, approximately 90 per cent of the 1 1,000 Australian patents granted annually in Australia, are granted to overseas patentees, notwithstanding that the present diversity of patent laws significantly advantages Australian applicants. Moreover, despite the high proportion of overseas applicants for Australian patents, numerically such applicants constitute only a small proportion of the applicants for patents in other countries. As a result, a large number of inventions, the subject of overseas patents, are freely available to Australian industry though publication of overseas patent documents in Australia.

One objective of the PCT is to rationalise patent application procedures, thereby facilitating foreign participation. Australian accession will therefore assist Australian inventors in obtaining foreign patents and, conversely, correspondingly assist foreign inventors in obtaining Australian patents. You acknowledge in your letter the benefits for the present relatively small number of Australian inventors in obtaining overseas protection but believe that increased foreign participation in the Australian patent system as a result of the PCT will disadvantage Australian industry by reducing the present free access to overseas inventions. It follows from that view that the foreign participation disadvantages Australian industry. I consider such view to be incorrect.

As I explained more fully in my Second Reading Speech, the essential basis of a patent system is to assist indigenous industrial development by enabling local industry to exploit new technological developments, initially, by the provision of an economic environment within which to create a commercial market by excluding competition through the grant of a patent and, subsequently, by the disclosure of the necessary information enabling industry generally to fully utilise those developments on the expiry of the patent.

When that basic fact is appreciated, it is clear that the nationality of a patentee is totally irrelevant to the operation of a patent system. Moreover, the increased utilisation of the patent system through the inclusion of overseas inventions contributes significantly to the effectiveness of the system. It is of course true that inadequate exploitation of patented technology can inhibit technological development. Such failure, however, is an abuse of a patent monopoly for which the Patents Act provides remedies by the grant of compulsory licences to interested parties or, in appropriate circumstances, by the revocation of the patent.

It is extremely difficult to quantify the precise extent to which a patent system contributes to innovation or to identify the specific casual relationships between patents and national development. The fact is, however, that those countries with the most extensively utilised patent systems have the greatest degree of industrial development and in all such countries an increasing utilisation of their patent system has accompanied their increasing level of development. Almost without exception, in every one of those countries, foreign participation constitutes a major source of the patents granted each year.

Overseas inventions constitute the major source of new technology and I believe that the increased utilisation of the Australian patent system by the inclusion of those inventions will significantly facilitate the transfer of overseas developed technology to this country. As I stated, I believe the provision of that assistance is a major function of the patent system and the failure to exploit it seriously diminishes the effectiveness of the patent system.

Your Committee's conclusion that Australia's present patent system may well be acting against the country's best interests, raises a broader issue than the effects of foreign participation since it implies that the grant of patents generally may inhibit industrial development. So far as I am aware, there is no evidence to support that contention and the parallel development of patent activity and industrialisation strongly suggests otherwise. Your Committee may be interested to know that following a recent Court decision, patent protection in Italy will be extended to pharmaceuticals. In a paper in this subject, the Director of the Italian Patent Office noted that the absence of patent protection had condemned the Italian pharmaceutical industry to trail along behind foreign firms by simply copying their products without making any serious research effort. According to the Director, the most qualified Italian firms have been asking for many years for the patent system to be extended to pharmaceutical products and that the provision of such protection will stimulate research.

Although I cannot agree with your Committee's conclusions on the questionable value of the Australian patent system and the desirability of deferring accession to the PCT, its recommendation for a review of the Australian patent sysetm is well taken. Overseas patent systems, as evidenced by the European Patent Convention and the Community Patent Convention, have been undergoing major development. Moreover, developing countries have developed an intense interest in exploiting patents as a means of accelerating technology transfer to those countries, as evidenced by their initiative in revising the major international industrial property agreement ( the Paris Convention ). I believe those developments indicate that the Australian patent system contains considerable potential for improvement as a mechanism for increasing industrial development and encouraging industrial research and development by Australian companies.

In the circumstances, I consider that there are no valid grounds for deferring Australian accession to the PCT and considerable benefits to be gained by early accession.

Although your letter indicates that your Committee presently holds an opposite view on that question, I trust that the explanation provided in this somewhat lengthy reply and in my Second Reading Speech will convince both you and the members of your Committee of the correctness of my point of view.

Notwithstanding any divergence of views, I believe your Committee's concern with the patent system to be wholly beneficial in as much as the significance of the patent system in fostering technological development in Australia has been widely unappreciated and its role largely ignored.

Yours sincerely,

Ian Macphee 18 October 1979

Telex AA62326

The Hon. Ian Macphee, M.P., Minister for Productivity, Parliament House, Canberra, ACT 2600

Dear Minister,

Patents Amendment (PCT) Act 1979

Thank you for your letter of 5 October 1979 concerning the Patents Amendment (PCT) Act 1979. Your letter was considered at a meeting of my Committee members on 17 October 1979 at which appreciation was expressed for the detailed care you have given to responding to their apprehension that accession to the Patent Co-operation Treaty (PCT) may not be in the best national interest.

I must say at once that the Committee has at no time arrived at, nor expressed, a settled opinion for or against the Act, rather it has heard arguments of sufficient weight to give pause for further examination and reflection before making a firm commitment. Your letter has in large measure allayed the doubts felt by the committee members. They feel that if their comments in the report on 'Industrial Research and Development in Australia' and my letter of 13 September 1979 have assisted in stimulating a review of the patents system, then one of their major objectives has been attained.

May I suggest however, that review of the significance and application of the patent system in Australian technological development should, like development itself, be an ongoing process. It forms an important element in the formulation of national policies for science and technology.

In this connection I feel that much more yet needs to be done to ensure that Australians are provided with quick, easy and cheap access to information on overseas patents. May I therefore redraw your attention to recommendation 41 of the report on 'Industrial Research and Development in Australia'. This proposes that you 'examine the situation with respect to searches of overseas patents with a view of establishing a system to improve access to INPADOC information'.

If access to overseas patent information could be made really easy for Australians, then any remaining unease about the PCT would be almost completely dispelled. I think the benefits improved access could bring to Australian industry are well and widely appreciated.

Yours sincerely,

D.   S. JESSOP Chairman

Minister for Productivity Parliament House Canberra, ACT 2600 31 October 1979

Senator D.S. Jessop

Chairman Australian Senate Standing Committee on Science and the Environment Parliament House Canberra, ACT 2600

Dear Senator Jessop

Your letter of 1 8 October indicating your Committee 's response to my previous reply concerning the Patents Amendment (PCT) Bill is greatly appreciated. As I explained in that reply, I believe that, in enabling early Australian participation in the PCT, the Bill significantly increases the potential of the Australian patent system for assisting technological development in Australia.

As you know, the Bill is one of a number of recent changes in the patents legislation introducing major developments in the Australian patent system. It is therefore appropriate that a review of the patents system be initiated in order to evaluate the collective impact of the various individual changes. The recommendation of your Committee that a comprehensive review of the patent system be undertaken is therefore particularly timely.

I would point out that the review I have proposed will be the first involving an evaluation of the Australian patent system as a mechanism for technological development. As such, it will involve extended consideration of the practical effects of the system on Australian industry. Approximately $7m is invested annually in official fees in obtaining and maintaining patent protection. The patent system is therefore clearly one of the major elements of a national policy for technology, notwithstanding that its significance in this respect is not yet widely appreciated.

A review of the kind I envisage will inevitably disclose specific areas requiring investigation and thus act as a catalyst in generating further inquiry. Accordingly, I see the review as essentially an ongoing process as you suggest.

Finally, in re-directing my attention to recommendation 41 in your Committee's report on Industrial Research and Development in Australia you note the need for much more to be done to ensure that Australians are provided with quick, easy and cheap access to information on overseas patents. It is apparently not fully appreciated that the provision of efficient access in Australia to foreign patent documents was one of the considerations for Australian accession to the PCT. In negotiating early Australian participation in the Treaty, the Australian Patent Office obtained authorisation to act as an International Searching Authority and International Preliminary Examining Authority under the Treaty. As a Searching Authority, the Patent Office is required to provide for Australian applicants technical information derived from the patent documents of all major countries as well as certain technical periodical literature. To fulfil that commitment, the Patent Office has acquired a number of INPADOC systems providing access to international patent documentation and in using those systems under the PCT the Office will be continually developing improved access techniques. Suitable techniques are currently under development. The expertise acquired from operating as a Searching Authority and the techniques developed will be available for exploitation by other Australian users.

The sheer volume of current documentation makes the problem of providing effective access extremely complex. The value of the rationalisation obtained through international co-operation, as is provided by the PCT, may be better appreciated when it is realised that the current difficulties in obtaining access to foreign patent documents originally arose from the failure of patent offices to accept a collectively uniform system in classifying patent documents and opt instead for individually different national systems. The futility of that approach becomes even more obvious when it is realised that each patent office was classifying patent documents for the same purpose.

Information retrieval from international patent documents is an essential element of the PCT and for that purpose a single classification has been adopted for PCT applications. The use of a single access system will therefore significantly improve access to foreign patent documents. The Treaty makes a further important contribution in simplifying access by reducing the present duplication of documents where protection is sought in several countries. It is also specifically designed to increase the use of English in foreign patent documents. Increased utilisation of the PCT will therefore materially assist in simplifying access to information in foreign patent documents in Australia.

I trust the above comments will confirm that your Committee 's recommendation in respect of providing improved access to foreign patent documents has not been disregarded. I also believe that the present Bill is not irrelevant to that recommendation and that accession to the PCT will itself contribute to the provision of improved access systems available for general utilisation in Australia.

Yours sincerely

IAN MACPHEE

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