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Wednesday, 20 June 2007
Page: 54

Senator MARK BISHOP (12:58 PM) —A few months ago, I spoke about the government’s appalling record at that time on managing intellectual property. I showed how its indifference to fixing the issues associated with the problem was contributing to Australia’s brain drain and threatening the viability of indigenous ICT companies. I pleaded with the government to take heed and address its management of intellectual property as a matter of urgency. As I pointed out in my speeches earlier this year, it had been promising such action for over four years. Finally, just two months after I called for urgent action, it appears the government has listened to some degree. Could it be that this government, noted for its nonchalant attitude towards the Senate, is finally listening? Is it finally acting on a call from Labor, acting on advice from two independent audit reports and acting to fix its four-year record of broken promises?

The government has just announced sweeping changes to the management of intellectual property. At last, the government is relinquishing its default ownership of IP on software purchases. Finally, there is recompense for small Australian owned IT companies who want to sell their software to the government. Hopefully these changes to the government’s management of IP will deliver a more level playing field for those companies. It will help them to commercialise their product for government work.

At long last this government is listening to Labor and helping small businesses achieve their particular business goals, for intellectual property is emerging as this clever country’s latest growth industry. A quick recap: intellectual property covers inventions, design, copyright and circuit layouts. As such, it is a driving force behind our fledgling but burgeoning ICT industry. This is an industry which covers more than 24,000 specialist firms. That is the 13th largest ICT market in the world, and it generates an annual income of nearly $80 billion. As such, our ICT industry accounts for 4.6 per cent of Australia’s GDP. It drives 85 per cent of productivity growth in the manufacturing sector, and it is behind intangible assets such as computer software—which should be protected by intellectual property rights—which have mushroomed in the last decade. In 1996, the value of such intangible assets amounted to little more than half a billion dollars. By last year, they were worth nearly $8 billion alone. Looking at those figures, you begin to understand and realise just how important intellectual property is, for it is that which protects this huge and growing industry.

I acknowledge the government is finally moving on managing its own IP. But, having made that comment, I should enter the caveat that I am appalled that it has taken so long to act. After all, we have had the promise of activity each year for the last four years. The government promised to have in place a whole-of-government approach to IP management by May last year, but it was only last month that the government sprang into action, and that was only after two damning audit reports into its mismanagement of IP and after I raised the issue twice in the Senate.

But the government is adopting a minimally decent attitude towards its IP management responsibility. It released nine IP principles to all government agencies, most of which are couched in floral language. For instance, the first principle calls on government agencies to manage IP in an ‘effective, efficient and ethical’ manner. More motherhood statements follow. The third principle is: ‘Agencies are expected to periodically review their IP management frameworks.’ There is also disturbing elasticity in the time frame given to agencies to implement these principles. They have until July next year, which is seven years behind an original commitment to a whole-of-government approach to IP. But the principle in which we are most interested is No. 7. This states: ‘Agencies should adopt a flexible approach in considering options for the ownership, management and use of IP.’ Agencies are also encouraged to only procure the IP needed for their agency—one small step, albeit delayed, for the government, but a quantum leap for thousands of small businesses. Why? Because they can now sell the software they have developed to other, non-government companies, effectively giving them control over their own invention.

It is a pity that the government could not have acted sooner. After all, they were warned of the problems regarding management of IP back in 2001. Then, the auditors fired the first warning shots of what has become a multibillion-dollar industry. The Auditor’s report showed that piracy threatened nearly $4 billion of computer software because of government inertia towards IP management and that a three-year recommendation for a whole-of-government approach to IP management had not then been implemented. As mentioned, the government had promised to fix the problem just before the 2004 election but never got around to it. That report also warned that government policy was stifling ICT industries’ growth. Meanwhile, industry experts told how Australia was lagging behind the rest of the world with regard to IP ownership as well as IP management. It was this Luddite approach by government that contributed to Australia’s brain drain and, as mentioned, threatened the viability of indigenous ICT companies.

Just to show how important IP is becoming, it is emerging as a growth market for superannuation funds. Earlier this year, a state owned super fund invested $30 million into an international intellectual property fund. Another Melbourne based fund specialising in IP assets reported an investment return of more than 50 per cent, year to date. There is now even an intellectual property index in the United States.

It is critical, then, that the government addresses its management of IP to ensure the success of small businesses in this area—to allow smaller ICT companies, in selling their software to government agencies, to retain the intellectual property. Hopefully, these new IP principles will go part of the way to rectifying that particular anomaly.

It is a pity that the government did not act sooner and take a leaf out of the statute books of Victoria and South Australia. Years ago, they came to an agreement that IP is better served with the supplier than with the government, where it is just not being used. So the Victorian and South Australian governments decided to remedy the situation. They effectively struck a balance between access to and control of intellectual property. In those states, the governments have access to the IP necessary for their usage of, for example, a software package yet the ICT company maintains the IP necessary for innovation and to help maintain its business. And that is the preferred option for other countries, such as Canada and Japan. Governments pay for an ICT solution but do not need IP ownership to receive the benefits from that procurement. IP rights are simply those stopping others from doing certain things, different things or developmental things with that material.

It is not as if the IP is a valuable asset for government, for much of the value of ICT is in its commercialisation. Most IP relating to ICT has little or no commercial potential; it is particularly oriented towards tasks or solutions. Governments procure the software under a licence to maintain and upgrade the product. As such, the IP of that software is redundant. Its management, however, is critical. Hopefully, these new guidelines will offer some way forward, for the anomaly has been a longstanding source of frustration for custom software developers. Hopefully the change in policy will mean that, for the first time, companies can keep ownership of products made for the government and later commercialise them. The guidelines allow government agencies to decide whether they need to retain IP management or relinquish that right. It gives them the power to set up their own IP management framework within a whole-of-government approach. Critically, the final IP guideline states that if commercial activities are not central to the agency’s core business then commercialisation of that IP should ‘remain an ancillary activity’. So if they fail to nominate a position, ownership defaults to the seller. In this way, both government and industry can realise significant benefits in terms of cost savings, innovative solutions, reduced compliance overheads and greater participation in government markets.

Finally, it is useful, I suspect, that the Attorney-General is accepting responsibility for the government’s management of IP. I mention this because ownership of IP was ambiguous when the auditors carried out their latest report into IP management. They noted that the delays in implementing a whole-of-government approach to the issue were caused by the shillyshallying between the office of the Attorney-General, Mr Ruddock, and the office of the Minister for Finance and Administration, Senator Minchin.

It is not as if the government has not recognised a need to address IP management, for it developed a policy statement on IP management in the lead-up to the 2004 election. As mentioned earlier, that election pledge came to nought. If the government manages IP well, it will boost competitiveness, generate revenue and stimulate economic growth. I trust that these new guidelines will go part of the way to solving the issue of IP management. I trust, too, that the government will continue to listen to the Senate and act on its advice, as it has done in this particular matter. The government’s more flexible approach to procurement policies for software and other intangibles is encouraging. I realise that there are some areas of government where IP is critical and properly needs to reside within the department. By way of example, the IP for some Defence contracts would probably fall into this category. I am pleased that the government has finally seen fit to mend a promise which, to date, it has broken. It is finally tightening up the regulations on intellectual property management. Let us hope that that is one of the many steps that are necessary to help stem the brain drain from this country.