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Tuesday, 25 November 1941

Dr EVATT (Barton) (AttorneyGeneral) . - by leave - On the 6th November the honorable member for Reid (Mr. Morgan) asked a question concerning the practices being indulged in in connexion with claims for royalties. I then informed him -that this matter was giving me some concern, and that I would have an investigation made and inform the House of the result. The investigation is by no moans complete, but I think it is necessary to make an . interim statement. With the object of co-ordinating, to some degree, these activities, the Solicitor-General, in May last,. forwarded a memorandum to all government departments in connexion with payments for the Commonwealth use of patent rights.. ,He drew attention to the necessity for seeking legal advice before final arrangements were made for the acquisition or use of patent rights. Later, the Solicitor-General forwarded another memorandum to government departments in which the nature and extent of patent rights and the incidence thereof on our war activities were explained. Notwithstanding these memoranda, I am not satisfied -.that an adequate appreciation of the position has percolated to those who,. in the first instance, deal with war contracts.

In war-time the danger of extravagant payments is so great that the operation of our patent system should be watched carefully with a view to guarding against the payment by a heavily-taxed nation of unjustifiable royalty claims. This problem' has* received considerable attention in other countries, and the Assistant Attorney-General in the United States of America, in dealing with this subject, has seen fit to condemn the " shrewdly legalistic methods" which have been adopted by some patent-holding organizations. it is desirable that it should be known to all concerned that no person has any exclusive right to make or use any invention in the Commonwealth unless he is the owner of valid letters patent in force in the Commonwealth, or holds a licence from the patentee so to do. J have ascertained that in some cases which have come under notice letters patent granted in England are represented to have the full force of the law in the Commonwealth. Such representations are not true and not justified.

Letters patent do not necessarily remain in force for the full term of sixteen years, because the non-payment of the statutory renewal fees results in the termination of the monopoly. Cases have occurred where claims to royalty have been made against the Commonwealth in respect of Commonwealth letters patent, and it has been found on investigation that such letters patent have long since terminated.

If, for any reason whatever, a patent ceases to exist in the Commonwealth in respect of any particular invention, that invention becomes, in law, the property of the whole community, and no person can thereafter obtain, any exclusive right therein. Therefore, it is of the utmost importance that before any arrangement is made for the payment of royalties in respect of any alleged invention in the Commonwealth, either by government departments or their contractors, the first and foremost inquiry should be directed to the question: Is that patent in force in the Commonwealth? From a perusal of some of the files which have been brought to my notice it appears that some government departments have not realized the necessity for obtaining this vital' information at the outset from the persons claiming th, payment of patent royalties.

I now refer to an associated matter which also requires a most critical approach by officers concerned in negotiating war contracts. It' is obvious that patentees, both here and abroad, may be able to render some technical assistance in the initial stages of the production of their inventions in the Commonwealth. This technical service which such patentees are capable of rendering may take the form of working drawings, information concerned in the technique necessary in the practising of the inventions, and even the assistance of skilled operatives. This technical assistance or service cannot, however, be placed in the same category as patent rights. There appears to be a common misapprehension that it may properly be treated as an associated factor in determining the moneys payable by the Commonwealth in respect of actual or alleged patent rights.

The subject of inventions, designs, drawings or processes which are not patented was elaborately dealt with by the Royal Commission on Awards to Inventors, appointed under Royal Warrant, after the 1914-18 war. That commission, in its first report, made it clear that any remuneration paid for this class of assistance was not based on any statutory right. Cases, however, have recently been brought to my notice where attempts have been made to associate such services with the monopoly rights forming the basis of negotiations. As .a result, the patent royalty claims which are made seem to lx? most unjustifiably inflated.

I now refer to several cases which my inquiries have disclosed. In one ease claims were made against the Commonwealth for royalty payments in relation to machine-gun carriers being manufactured in the Commonwealth. The matter finally reached my department, as a result of which the claimant corporation was called upon to furnish the numbers of the letters patent in the Commonwealth upon which its claim had been based. It was not until negotiations had extended for nearly eighteen months that the corporation had to admit that it possessed no relevant patents in force in the Commonwealth. As a result, the department concerned was saved from having to incur expenditure without legal obligation.

In another case involving munitions equipment, it was found on investigation that certain payments had been made to the British patentees in respect of arrangements for obtaining what was euphimistically called a "manufacturing licence ", before any investigation had been conducted as to the nature and extent of any patent monopoly in force in the Commonwealth.

In another case an overseas patentee had made a claim on a contractor who had indemnified the Commonwealth against any claim for patent, royalties. Although the responsibility for the payment in the first instance devolved upon the contractor, the department concerned instituted precautionary inquiries from my department. It was ascertained that a substantial claim had been made by an American' corporation for a royalty payment, but the Commissioner of Patents advised that the patent had long since ceased to exist in the Commonwealth, and was the free property of the community. The claim was defeated at the last moment, and on the advice of the Attorney-General's Department the cheque was stopped.

Even though a patent for an invention may be in force in the Commonwealth, it is 'essential that the scope and meaning of the monopoly shall be most carefully considered whenever it is claimed to relate to any equipment or goods manufactured by or supplied to Government departments.'' In a recent case a claim for £4,500 was made in respect of a device supplied by a contractor to one department. It was found on investigation that the device supplied to the department did not encroach upon the- patentee's monopoly.

Honorable members will naturally be anxious to learn of the steps which are now being taken in connexion with this matter to remedy any shortcomings. In the early stages of the present war regulation 57a of the National Security (General) Regulations was promulgated. This followed closely on the lines of permanent British legislation for controlling the use by Government departments of patented inventions. Under regulation 57a Commonwealth Government departments and their contractors are entitled to use any invention, despite the fact that it is patented in the Commonwealth. This is a complete departure from the normal position in time of peace, and there is no reason whatever why any Government department, should hold up supplies for war purposes because of the existence of any' patent monopoly. Under the law the Commonwealth may go straight ahead and use the invention, and the terms for such use may be subsequently settled by agreement or by the Attorney-General. From my inquiries it appears to me that this regulation has to a very considerable extent been disregarded.

The investigation which I have caused to be up to the present is of a preliminary nature, and I am giving close consideration ro the present legal and administrative position in order to prevent tlie Commonwealth from being burdened with expenditure in relation to real or alleged monopoly right?, and, what is equally important, extravagant legal claims which are often put forward in connexion therewith for so-called " manufacturing rights" and " proprietary processes " or the like. These phrases are frequently employed to cloud the fact that, patent royalties are not payable at all.

I am invoking the valuable assistance of the Auditor-General and his officers to assist me in seeing -

(1)   that no payments for royalties or rights akin thereto are made by the Commonwealth unlaws they are fully justified by the law and the facts; and

(2)   that so far as possible payments which have been made without sound legal foundation are disgorged.

After I have had an opportunity of making a more complete investigation of this matter, I shallbe in a position to throw further light thereon for the information of the House.

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