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Wednesday, 16 October 2019
Page: 3092

Senator PATRICK (South Australia) (11:20): I thank Senator Brockman for his monotone and unconvincing contribution to the debate.

An honourable senator interjecting

Senator PATRICK: If he wants to listen to what I've got to say, he may well learn a few things—as I have done as I've wandered around the country talking to small businesses. This bill, amongst other things, seeks to end Australia's innovative patent scheme. In committing itself to this course of action, the government drew upon a range of studies which argue that the current IPS does not deliver Australian small to medium enterprises what they need. This is in direct contradiction of the submissions from SMEs and certainly does not reflect the views and experiences of a number of South Australian innovation based companies that spoke to me personally on this issue.

The government is suggesting that the IPS does not deliver on the purpose for which it was established: to incentivise research, development and innovation. Such commentary shows a disturbing lack of understanding about what drives Australian companies to innovate. Companies are motivated to conduct research and development for two predominant reasons: they have an idea that will ultimately make them money and the government offers R&D tax concessions which help alleviate cost and risk associated with research and development.

Senator Brockman suggests otherwise. He suggests that the motivation for doing innovation here in Australia is that you can get a patent at the end. That shows a complete lack of understanding of business. I don't mean to denigrate Senator Brockman. I know he's toeing the party line and probably doesn't really mean what he says. That is not the reason why people innovate in this country—not at all. I know because I ran an R&D cell for about 10 years. I used the patent system. I know its traps; I know its benefits. But at no time did my company ever suggest to me, when I was running an R&D cell, that the reason we were doing it was for anything other than making some money at the other end from a good idea.

There was evidence provided by Mr Gibbs at the committee hearing. He appeared in a personal capacity, but he is an intellectual property lecturer at Monash University and an IP attorney. His evidence was comprehensive and disturbing. He provided evidence showing how patent applications from Asia have risen from obscurity to dominance in the international patent applications system over the last 20 years. He stated:

China is now the biggest player in Asia, although Japan and South Korea are also big players.

Mr Gibbs stated that 'China recognised the importance of controlling intellectual property ownership' and he advised the committee that China has a regime similar to Australia’s IPS—which is called 'utility model applications'. He said:

They are cheap and quick to obtain and they last for a shorter term, whereas standard patents are expensive, take a long time to be granted and last for up to 20 years. By providing both types of patents and encouraging citizens to use them, China has succeeded spectacularly in growing its local ownership of patent rights, and this has translated into extensive ownership of international patent rights.

It's clear from the Chinese experience that there is utility in such a scheme. I don't know whether the government has noticed this but China's economy is booming and ours is sitting relatively flat, somewhat due to the fact that the government has no vision. In the Governor-General's speech—and I'm not critical of the Governor-General, because of course he's just reading the message of the government—is a whole bunch of housekeeping stuff on health, education, mental health and infrastructure. They are important things, but if the Labor opposition had got into government, the same things would have been in the speech. There's nothing in there about vision—nothing.

So it's with this wisdom, and based on a false premise, that the government is now moving ahead and abolishing the scheme. If you think I'm getting angry about it, I am—because I've spoken to South Australian companies who do not want this to go ahead. I'm going to explain exactly why they use the innovation patent scheme and why the Productivity Commission has misconstrued its own statistics. Australia needs to be using every tool at its disposal to facilitate the protection of innovations. Mr Gibbs provided concerning evidence on the patent take-up rates in Australia. He advised the committee that in China each year 21 patent applications are filed for every 10,000 residents. In Germany it drops down to 10 per 10,000, in the US it's nine per 10,000, in the UK it's three and in New Zealand it's two. Does anyone want to guess what it is in Australia? It is 1.4 applications per 10,000 people, compared with 21 per 10,000 people in China. That is a telling statistic. Mr Gibbs said that if innovation patents were abolished, the figure for Australia would drop to 1.02 per 10,000 people. Importantly he went on to say:

In my opinion, the Australian government should be taking steps to improve Australia's future economic position by increasing the ownership of patents by Australians. If you're looking for reasons why Australia's productivity has been stagnating, then the number of Australian owned patents per capita is a key indicator. In my opinion, the abolition of innovation patents would be a step in the wrong direction.

I and many South Australians agree with Mr Gibbs.

Let me now explain why the Productivity Commissioner is wrong. I sat down with a number of companies last week—and I acknowledge that the minister's office and IP Australia attended. We listened to a group of CEOs of South Australian companies talk about the way in which they use innovative payments. Listen carefully, because this is something that the Productivity Commission, for all its wisdom, for all its resources, didn't manage to discover. I talked to one company in South Australia that has 40 or 50 physicists working on innovative ideas—things that they can turn into products that they can then export and are exporting. What happens is that they spend about a year with 40 physicists working on something as a stepping stone to something else.

Just to give a made-up example to help the chamber out, if you are trying to get to a new type of mobile phone, you've got to have a number of steps along the way. Those steps are not necessarily things that you can patent using a standard patent. A standard patent might require, to use another example, 100 points, and all someone has to do to knock out a patent is knock away one point. If you have 99, the patent doesn't stand. With the IPS, you only have to get to 80. So, you can use it to protect a stepping stone while you move to the next stepping stone, which you also protect with an IP, and then the next one. And then finally you get to the point of a standard patent, where you now protect the idea that you want to take to market.

When you look at the statistics, that's the reason these IPs are not renewed. They achieve a purpose and the company moves on and makes an application for another one to protect the next stepping stone and so forth. And that's going to go. That company in South Australia is a great company and it employs a number of South Australians and it generates exports. They are going to be harmed by a Liberal government that says it's interested in exports and in supporting small business.

Senator Gallacher asked a question in the committee. He asked the government: 'Is there a saving if you get rid of the innovation payments? Do you save money?' IP Australia answered, 'We don't save money.' So you are shutting down a scheme that is useful to Australian companies and it's not going to save you a brass razoo. This is crazy stuff. It makes no sense to shut down the IPS when it is useful and valued by SMEs, especially if retaining the system costs you nothing. There's a certain arrogance in officials and indeed politicians who are telling that to companies and entrepreneurs—particularly when the companies and entrepreneurs don't get a regular pay cheque like the officials do. Everyone in this chamber knows that, at the end of the month or every fortnight, they're going to get a pay cheque. That's not what happens in the corporate world. You have to run a business sensibly. You have to work out ways to make money. We are arrogantly telling these people what they don't need.

Make no mistake: the South Australian companies I talk to want to retain this. By shutting it down, you are hurting Australian businesses. If anyone wants to contact my office, I'm happy to bring you down to South Australia and show you. You can talk to these companies. That's what the Productivity Commission didn't do, that's what IP Australia didn't do and that's what the government didn't do.

When we asked these companies about the consultation, none of them were aware of it. They were too busy making money, creating jobs and exporting materials overseas. They don't have time to watch what the Productivity Commission is doing. They could of course employ someone to keep an eye on the Productivity Commission and keep an eye on the chamber. But these are people who are trying to do business—and you're trying to shut them down, you're trying to hurt them. There is arrogance in officials and politicians doing that.

Labor has proposed some amendments, and Centre Alliance will support them because they're the lesser of two evils. But I ask Labor: have you got this in writing? Have you got this secured? I know what happened when you made a deal on encryption. You made a deal on encryption and let legislation go through, but the government didn't honour that. For some reason you don't remember that. So I hope you have a solid commitment on this. Senator Pratt said she will be watching the government. And I will be watching the opposition to make sure you get what has been committed to you by the Liberal coalition, because if you don't you will have sold out Australian SMEs.

I will be moving an amendment later and I'll be asking for the support of the chamber. I note that Senator Roberts is here. If Senator Roberts wants to come across to my office, I've got submissions from Queensland companies that say they do not want this abolished. The bill does a lot of good things but the schedule that removes the innovative patent scheme is flawed, it's not well thought through. It's been designed by people who are remote from the real business world. I urge people to support my amendment when I move it.