October 2006

THE INTELLECTUAL PROPERTY AMENDMENT ACT 2006 - OVERVIEW

SYNOPSIS

This newsletter reviews the major changes introduced by the Intellectual Property Amendment Act 2006 ("the Act") relating to Patent and Trade Mark law which received Royal Assent on 27 September 2006.

Changes to Patent Law

Prior Use

The Act sets out to clarify three areas of uncertainty in section 119 of the Patents Act 1990 (Cth). Section 119 currently provides a defence to an action for infringement for third parties who have been making a product or using a process disclosed by a patent prior to the granting of the patent. The reworded section 119 clearly states that:

• the prior use must take place in the patent area, Australia;
• if a prior user exploits, or has taken definite steps to exploit the product, method or process claimed by a patent before the priority date of the patent, they may continue to exploit the product, method or process without infringing the patent;
• the right to rely on this defence can be assigned but not licensed.

Compulsory Licensing

The Act provides an additional ground on which a court may order a patentee to grant a compulsory licence to an applicant. The additional ground is in the form of a competition test where a compulsory licence may be granted if the patentee engages in anti-competitive behaviour in contravention of Part IV of the Trade Practices Act 1974 (Cth).

Springboarding

Companies seeking to place a generic pharmaceutical product on the market may rely on the patentee's data proving safety and efficacy of the product in order to gain regulatory approval. This is called 'springboarding'. Section 78 of the Patents Act 1990 (Cth) has a narrow provision allowing springboarding only in relation to pharmaceutical patents which have been granted an extension of term. The Act widens this provision by allowing springboarding to take place at any time in relation to any pharmaceutical patent, not only those whose term has been extended. This brings Australia into line with competing markets such as the USA, New Zealand and the European Union.

Changes to Trade Mark Law

Registrar of Trade Marks

The Act grants the Registrar of Trade Marks increased powers to revoke accepted trade mark applications or registered trade marks in certain circumstances.

Access to Information

Increased public access to information held by IP Australia relating to trade mark applications/registrations is introduced by the Act. This will aid those who wish to register a trade mark or oppose the registration of a trade mark. The Registrar of Trade Marks will also have the power to require that sensitive information, such as business information, be held in confidence.

DETAILED REPORT

INTRODUCTION

On 27 September 2006, the Intellectual Property Amendment Act 2006 (Cth) ( "the Act") received Royal Assent. The Act contains significant amendments to sections of the Patents Act 1990 (Cth) ( "Patents Act") and the Trade Marks Act 1995 (Cth) ( "Trade Marks Act").

These amendments implement several outstanding recommendations of the Intellectual Property & Competition Review Committee's (IPCRC) report, 'Review of the Intellectual Property Legislation under the Competition Principles Agreement' (known as the "Ergas Report") and the Advisory Council on Intellectual Property (ACIP) report, 'Review of Enforcement of Industrial Property Rights'.

The Intellectual Property Amendment Bill was referred to the Senate Economics Legislation Committee ( "the Committee") for review and the Committee's report, 'Provisions of the Intellectual Property Amendment Bill 2006' was issued in August 2006. The Committee recommended that Parliament pass the Intellectual Property Amendment Bill 2006.

This newsletter reviews that major amendments made by the Act to Intellectual Property Law in Australia.

PATENTS ACT

Prior Use

Section 119 of the Patents Act provides a defence to an infringement action on the grounds of prior use.

Section 119

(1) Where, immediately before the priority date of a claim, a person:

(a) was making a product or using a process claimed in that claim; or

(b) had taken definite steps (whether by way of contract or otherwise) to make that product or use that process; the person may, despite the grant of a patent for the product or process so claimed, make the product, or use the process, (or continue to do so) in the patent area, without infringing the patent.

The IPCRC Ergas Report identified three areas of section 119 of the Patents Act which were unclear as to their scope and effect. The Act repeals section 119 and substitutes it with new provisions that address the concerns, which are set out below [1].

Firstly, it was unclear whether the existing section 119 of the Patents Act required the prior use of the patented invention be in Australia or if it included use anywhere in the world. In order to protect Australian research and development (R&D) from multinational firms claiming prior use in an overseas jurisdiction, the new section 119 of the Act confirms that to rely on the prior use defence, the prior use must actually occur in Australia.

Secondly, the existing section 119 allowed a person who was making a product or using a process claimed by a patent, before the priority date of that patent, to continue to make the product or use the process without infringing the patent. However, it was uncertain whether this precluded the prior user from exploiting the product or process in any other manner after the patent has been granted, for example selling the product. The effect of the new section 119 of the Act is that a person may, without infringing the patent, do any other act that exploits a product, method or process if immediately before the priority date of the relevant patent the person had been exploiting, or had taken definite steps to exploit, the product, method or process. Section 119(5) of the Act defines 'exploit' to include:

a. in relation to a product:

(i) make, hire, sell or otherwise dispose of a product,

(ii) offer to make, hire, sell or otherwise dispose of the product; and

(iii) use or import the product; and

(iv) keep the product for the purpose of doing an act described in subparagraph (i), (ii) or (iii); and

b. in relation to a method or process:

(i) use the method or process; and

(ii) do an act described in subparagraph (a)(i), (ii), (iii) or (iv) with a product resulting from the use of the method or process.

Thirdly, it was not clear under the existing section 119 of the Patents Act whether the right to rely on the prior use defence was limited to the actual prior user or whether the right could be assigned or licensed. In organisations such as universities, the actual commercial exploitation of an R&D product is usually undertaken by another entity. Therefore, the ability of such organisations to assign or license the right to rely on the defence of prior use is of great value. The Act permits the assignment of the right per se which allows another to further develop and bring the product to the market [2].

The new section 119 of the Act came into effect the day after the Act received Royal Assent and applies in relation to patents granted as a result of applications filed on or after this date.

Compulsory Licensing

The IPCRC Ergas Report stated that section 133(2) of the Patents Act was outdated and recommended that a stringent competition test replace the existing provision. The existing section 132(2) states that a court may order the patentee to grant a compulsory license to an applicant if:

(a) the reasonable requirements of the public with respect to the patented invention have not been satisfied and;

(b) the patentee has not provided a satisfactory explanation for failing to exploit the patent.

The Act repeals section 133(2)(a) and (b) and replaces them with the following paragraphs that allow the court to grant a compulsory license if:

(a) All the following conditions exist:

i. the applicant has tried for a reasonable period, but without success, to obtain from the patentee an authorisation to work the invention on reasonable terms and conditions;

ii. the reasonable requirements of the public with respect to the patented invention have not been satisfied;

iii. the patentee has not provided a satisfactory explanation for failing to exploit the patent; or

(b) The patentee has contravened, or is contravening, Part IV of the Trade Practices Act 1974 (Cth) ( "TPA") or an application law in connection with the patent. [3]

Part IV of the TPA regulates anti-competitive behaviour such as making contracts, arrangements or understandings that restrict dealings or affect competition [4], the misuse of market power to eliminate, damage or prevent a competitor from entering the market [5], exclusive dealings [6] and the practice of resale price maintenance [7].

The amendment seeks to strike a balance between the interests of the patentee and the public interest in promoting a competitive market. By retaining the existing provisions it gives the patentee an opportunity to provide a satisfactory explanation for their failure to exploit an invention. The addition of a competition test in section 133(2)(b) curbs anti-competitive behaviour and ensures that the threat of a compulsory license is strong enough to motivate patentees to work innovations sooner and more widely than they otherwise would have been [8].

The amendments to section 133(2) of the Patents Act commenced the day after the Act received Royal Assent and apply to conduct (including omissions) connected with a patent granted before, on or after this date.

'Springboarding'

In Australia, all pharmaceutical products require marketing approval and registration by the Therapeutic Goods Administration ( "TGA") under the Therapeutic Goods Act 1998 (Cth). In the case of generic versions of existing registered drugs, the generic manufacturer needs to demonstrate bioequivalence to the existing registered product to gain marketing approval. Bioequivalence means that the generic medicine and the originator product demonstrate essentially the same biological activity of the active pharmaceutical substance in the body when administered in the same dose. Although manufacturers of generic pharmaceuticals may be able to rely on data and information relating to the original registered drug to establish safety or efficacy of the generic drug, the generic drug cannot be registered until the exclusivity period for the originator's data has expired. Further, if there is an existing valid patent in relation to the original drug, the generic manufacturer cannot seek marketing approval, without possibly infringing the patent, until the patent has expired or the patent has been granted an extension of term because it is a pharmaceutical substance per se. Once the generic drug receives TGA marketing approval and is registered, the generic manufacturer may not be able to manufacture, market or sell the generic drug in Australia if there is an existing valid patent relating to the original drug. The use of originator's data to establish the safety and efficacy of a generic drug to obtain TGA marketing approval is called 'springboarding'.

Springboarding reduces the cost of the development of the generic product and the time needed to gain marketing approval as the generic manufacturer does not have to perform the same level of clinical testing and trials as the originator of the drug.

Section 78 of the existing Patents Act allows springboarding only in relation to pharmaceutical patents that have been granted an extension of term [9]. The Minister for Industry, Tourism & Resources set up an Interdepartmental Committee in 2002 to examine the impact of patent extensions and springboarding provisions on generic manufacturers. It found that due to the differences between Australia's pharmaceuticals regulatory approval process and those in other countries, approximately 66% of pharmaceutical patents expire later in Australia than overseas.

The lead time for R&D and regulatory approval to bring generic products to the market is between two to six years. Therefore, it takes a much longer time to bring the product to market if the development work is done in Australia. This discourages generic manufacturers from undertaking their R&D in Australia, thus depriving Australia of investment in other innovative R&D and prevents domestic companies from competing in the lucrative export market on equal terms [10].

The Act [11] brings Australia's springboarding provision into line with competing markets, such as the USA, Canada, New Zealand, Singapore and the European Union by allowing springboarding at any time in relation to any patent, not only on those patents whose term has been extended. The amendments repeal section 78(2) of the Patents Act, regarding the limited exclusive rights of the patentee once a patent extension is granted, and inserts a new section 119A into the exemptions to patent infringement.

Section 119A:

(1) The rights of a patentee of a pharmaceutical patent are not infringed by a person exploiting an invention claimed in the patent if the exploitation is solely for:

(a) purposes connected with obtaining the inclusion in the Australian Register of Therapeutic Goods of goods that:(i) are intended for therapeutic use; and(ii) are not medical devices, or therapeutic devices, as defined in the Therapeutic Goods Act 1989; or

(b) purposes connected with obtaining similar regulatory approval under a law of a foreign country or of a part of a foreign country. [12]

Generic products can only be exported for the purpose of Section 119A(b) where the term of the original pharmaceutical patent has been extended and the generic product to be exported is a pharmaceutical substance per se.

The manufacturing or stockpiling generic products for later sale while the patent is in force are still infringing acts. If this was permitted, Australia would be in breach of its international obligations under the World Trade Organisation Agreement on Trade Related Aspects of Intellectual Property (TRIPS).

These amendments commence 28 days after the date of Royal Assent and apply in relation to the exploitation, at or after commencement of the amended provisions, of all patents in force after that time.

Exemplary Damages

In addition to the remedies, account of profits and ordinary compensatory damages available in section 122 of the Patents Act, the Act amends section 122 to specifically allow the court to award exemplary damages. The court may award exemplary damages if it considers it appropriate to do so having regard to:

(a) the flagrancy of the infringement;

(b) the need to deter similar infringements;

(c) the conduct of the party after the infringing act or after the party was informed that it had allegedly infringed the patent;

(d) any benefit shown to have accrued to that party because of that infringement; and

(e) all other relevant matters.

This brings the remedies available to patent holders for infringement into line with those available under the Copyright Act 1968 (Cth) [13] and the Designs Act 2003 (Cth) ( "Designs Act") [14].

This amendment commenced the day after the Act received Royal Assent and applies to infringements of patents occurring on or after this date.

TRADE MARKS ACT 1995 (Cth)

The following amendments to the Trade Marks Act will commence on Proclamation, or at least six months from the date the Act received Royal Assent.

Registrar of Trade Marks - Revocation Powers

The Registrar of Trade Marks will have increased powers to revoke accepted trade mark applications and registered trade marks in certain circumstances.

The existing section 38(1) of the Trade Marks Act allows the Registrar, before registration of a trade mark, to revoke the acceptance of an application to register a trade mark where there has been an error or omission or other special circumstance. This section is repealed and replaced by the new provision that allows the Registrar before registration of a trade mark to revoke the acceptance of a trade mark application if satisfied that:

(a) the application should not have been accepted, taking account of all the circumstances that existed when the application was accepted (whether or not the Registrar knew of their existence); and

(b) it is reasonable to revoke the acceptance, taking account all the circumstances.

The amendment to section 38(1) of the Trade Marks Act will apply to trade mark applications made before and after the commencement of the provision.

Section 84(1) of the existing Trade Marks Act only allows the Registrar to cancel the registration of a trade mark if the owner asks the Registrar to do so. The Act inserts a new section 84A, into the Trade Marks Act which expands the grounds under which the Registrar may revoke the registration of a trade mark. The Registrar may revoke the registration if satisfied that:

(a) the trade mark should not have been registered, taking into account all of the circumstances that existed when the mark was registered (whether or not the Registrar knew then of their existence); and

(b) it is reasonable to revoke registration, taking into account all the circumstances.

The circumstances to be taken into account by the Registrar include:

(a) errors or omissions leading to registration;

(b) Australia's obligations under international agreements;

(c) special circumstances;

(d) use of the trade mark;

(e) legal proceedings relating to the trade mark; and

(f) other action taken in relation to the trade mark.

The Registrar power to revoke the registration of the trade mark is limited in time. The Registrar may revoke the registration only if the Registrar gives notice to registered owner and any party recorded as claiming a right or interest in, the trade mark, within 12 months of registering the trade mark. The Registrar cannot revoke the registration without giving the said parties an opportunity to be heard.

This added power of the Registrar to revoke the registration of trade marks provides a quicker and simpler method for administrative errors to be corrected and reduces the burden and expense of having to make an application to the Federal Court [15]. The Act includes a right of appeal to the Federal Court from a decision of the Registrar to revoke the registration of a trade mark. [16] However concerns have been expressed that the amendments could be used as a quasi opposition process, thus extending the period for opposing a trade mark registration.

Access to Information

The Trade Marks Act does not allow public access to information relating to trade mark prosecution of applications/registrations held by IP Australia. Unlike the Patents Act [17] and the Designs Act, [18] access to such information may only be obtained through applications made under the Freedom of Information Act 1982 (Cth).

Access to documents from IP Australia is usually requested to assess possible opposition to the registration of the trade mark or to determine the grounds of past acceptance or rejection of other trade marks in aid of registering another trade mark.

The Act amends the Trade Marks Act [19] by allowing public access to documents held by IP Australia relating to trade mark applications/registrations after a certain date. Documents of a sensitive and confidential nature, for example business information, are not subject to the public access amendments to the Act. The Act confers statutory power [20] on the Registrar to require that certain information be held in confidence [21].

Stephens Lawyers & Consultants' intellectual property lawyers represent leading pharmaceutical and biotechnology companies in both litigious and commercial matters.

For further information contact:

Stephens Lawyers & Consultants

Level 3, 530 Lonsdale Street

Melbourne VIC 3000

Phone: (03) 8636 9100

Fax: (03) 8636 9199

Email: stephens@stephens.com.au

Website: www.stephens.com.au

All Correspondence to:

PO Box 13286

Melbourne Law Courts

Melbourne VIC 3000

** Written by Shalini Jayaweera (edited by Katarina Klaric)

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Disclaimer : This newsletter is not intended to be a substitute for obtaining legal advice.

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