Intellectual property and public funding

11.58 As discussed above, most health-related research in Australia is publicly funded. This raises issues about the role of the funding body in decisions about the commercialisation of any resulting research.

11.59 Neither the ARC nor the NHMRC assert rights to the ownership of intellectual property arising out of their funding.^[45] They have stated that they ‘do not wish to hold a stake in direct ownership of IP nor do they intend to benefit directly from commercial outcomes of the research they fund through their financial support’.^[46] However, each body emphasises that organisations should seek to commercialise intellectual property for the public benefit where appropriate and address issues of identification and protection of intellectual property and issues of management.

11.60 The ARC and NHMRC influence the exploitation of intellectual property resulting from research they fund through the National Principles of Intellectual Property Management for Publicly Funded Research (National Principles). These principles were released in 2001 by the then Minister for Education, Training and Youth Affairs and the Minister for Health and Aged Care. The decision to develop the principles came as a result of the Australian Government’s policy to further support research investment and commercialisation.^[47]

11.61 The National Principles state that public funding bodies should have clear policies about whether they will claim ownership or associated rights for intellectual property generated from research supported by their funding. A requirement for compliance with the National Principlesis often included in the ARC funding rules and agreements for particular grant programs.^[48]

11.62 The National Principles require organisations receiving funding to have procedures and policies to:

• support researchers in recognising discoveries that may have commercial value and provide for a review process to identify intellectual property that can be protected and exploited;^[49]
• clarify staff responsibilities in relation to intellectual property, including the prevention of premature public disclosure of research results prior to obtaining intellectual property protection;^[50]
• outline whether they will claim any ownership or associated rights to intellectual property from publicly funded research (including research conducted by postgraduate students);^[51]
• guide researchers in assessing the existing intellectual property that may affect their freedom to operate in their field of research;^[52]
• review intellectual property and associated commercial activities and outcomes;^[53]
• recognise the rights and needs of all stakeholders involved in the research and define the way in which benefits from the development and exploitation of the intellectual property will be allocated;^[54] and
• provide guidance in relation to potential conflicts of interest concerning ownership, management, protection and exploitation of intellectual property.^[55]

11.63 The National Principles state that organisations and, where appropriate, individual researchers^[56] ‘are expected to consider the most appropriate way of exploiting the IP generated from publicly funded research’.^[57] The National Principles indicate that the options range from exclusive and non-exclusive licences, research agreements or contracts, through to joint ventures or the establishment of spin-off companies.

11.64 Research organisations are also required to be in a position to report on their intellectual property management.^[58] However, the ARC does not take action to ensure that the results of ARC funded research are commercialised. It also does not require organisations receiving ARC funding to comply with any national interest policy.^[59] However, it does track the research projects it funds, and conducts surveys with the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and the NHMRC to see how many produce patents and commercial outcomes such as spin-off companies.^[60]

Promoting the public interest

11.65 A range of issues arises from the current allocation of intellectual property rights in publicly funded research. These centre on whether this allocation promotes the major objectives of health and medical research funding, which are to generate healthcare and economic benefits for the Australian population.

11.66 A concern raised by some researchers is that shifting focus towards commercialisation of publicly funded research will direct research efforts away from some less lucrative fields. Some researchers are concerned that they must favour work areas that will yield patentable discoveries that can be commercialised because they are expected to exploit intellectual property to fund further research.^[61]

11.67 There are also concerns that leaving the development and exploitation of research results to research organisations may mean they are not effectively translated into community benefits. This concern results, in part, from the absence of any requirement for organisations receiving public funding to exploit any resulting intellectual property in a way that benefits the public. As discussed above, public funding bodies in Australia generally take a ‘hands-off’ approach to the commercial development of research results and do not direct how results should be exploited.

11.68 Allowing research organisations to hold intellectual property in the results of publicly funded research may limit access by other researchers and developers to these results. Given that these results have been generated using public money, it may be desirable to ensure that benefits flow back to the public.

11.69 There may also be tensions between what might be perceived as organisational benefit, public benefit and national benefit. In deciding how to develop its intellectual property, an organisation may be confronted with a choice between maximising its own financial returns and maximising the benefits that may flow to the Australian community in the form of jobs, wealth and healthcare.

Defining the public benefit

11.70 A subset of concerns about the public benefit returns from public funded research is whether those benefits should flow to the Australian public in particular, or to the global public generally. This concern may also extend to whether to benefit Australia economically, for example by fostering growth of the biotechnology industry, or to benefit Australians in other ways, such as by providing access to healthcare products. These objectives are not necessarily mutually exclusive. As the NHMRC noted in its submission:

The NHMRC clearly supports the conduct of ethical research that leads to the maximum benefit for Australia. However, the NHMRC acknowledges that this does not necessarily equate to providing Australian companies with an advantage and acknowledges that benefits to Australia may flow through a number of different means.^[62]

11.71 Placing restrictions on the way intellectual property in publicly funded research is exploited is one mechanism for favouring national benefit. DP 68 asked whether the National Principlesshould be expanded to require research organisations to:

• favour Australian industry when commercialising patented inventions created through the use of public funds; or
• include a ‘no Australian disadvantage’ clause in any sale, licence or partnership arrangement involving patented inventions created through the use of public funds.^[63]

11.72 Many submissions expressed strong objections to introducing requirements to favour, or avoid disadvantage to, Australian industry.^[64] These objections included:

• It is unclear what would constitute ‘favouring’, or ‘avoiding disadvantage to’, Australian industry.^[65]
• Requirements of this kind may conflict with Australia’s obligations under various World Trade Organization and bilateral free trade agreements.^[66]
• The Australian biotechnology industry is small and mainly comprised of small-to-medium sized enterprises, which may not possess the resources and expertise to commercialise some technologies well.^[67] To fulfil a requirement to favour Australian industry, holders of intellectual property may have to develop the technology with a less competitive company, which would be counterproductive to effective commercialisation of Australian research.^[68]
• A general requirement to favour, or avoid disadvantaging, Australian industry is inconsistent with the ARC and NHMRC policies that commercialisation of intellectual property in research should be determined on a case-by-case basis.^[69]
• Australian research success rests in part on overseas funding and investment, and collaboration with international research organisations, which might be inhibited by requirements to favour links with Australian companies.^[70]
• Requirements to favour local industry may discourage investment in commercialisation of Australian research, as investors may not wish to be subject to such restrictions on commercial development.^[71] They may also adversely affect the capacity to licence technology if the requirements will also restrict the licensee.^[72]
• Requirements of this kind may be inconsistent with the NHMRC’s opposition to proposals by the United States National Institutes of Health (NIH) to introduce similar measures.^[73]

11.73 However, the idea of promoting support for local industry was not wholly rejected. A few submissions supported requirements to favour, or avoid disadvantage to, Australian industry.^[74] Others submissions suggested a better alternative would be to require Australian industry to be favoured where practicable.^[75] The Western Australian Department of Industry and Resources suggested that a broad, principled approach might also be more practical and effective than a strict requirement to favour local industry.^[76] The Centre for Law and Genetics stated that the preferable approach is to focus on the best means of commercialising the technology and how to achieve the greatest national benefit from it.^[77]

11.74 The ALRC concurs with the objections expressed in submissions and does not consider it desirable to require that local industry is favoured, or not disadvantaged, when commercialising intellectual property in genetic research.

Options for reform

11.75 There are a number of possible mechanisms for promoting the flow of public benefit from publicly funded research. One option is the introduction of broad principles into the National Principlesto ensure that publicly funded research, where commercialised, results in appropriate public benefit. Including directives at this level would require research organisations receiving public funding to incorporate similar principles into their intellectual property policies. This may shape the direction taken by organisations in developing and commercialising research.

11.76 This approach does not preclude commercialisation of research results. Rather, it aims to encourage intellectual property holders to select the most appropriate means of capturing public benefits from research, which may often be through commercialisation. Such an approach is taken in guidelines released by the Rural Industries Research and Development Corporation (RIRDC), which requires the research it funds to be managed ‘in such a way as to maximise the benefit to its stakeholders’.^[78] The RIRDC points out that:

In some cases this will be achieved through commercialisation of research results … Commercialisation will be implemented when it provides a faster, more sustainable or more practical avenue for making new products, processes and services available to the RIRDC’s primary stakeholders.^[79]

11.77 Similar provisions are also contained in the conditions for grant funding by the Wellcome Trust in the United Kingdom. The provisions state:

Should any Trust-funded IP arise from the Grant, then the Trust requires the Institution to consider whether the protection, management and exploitation of such Trust-funded IP is an appropriate means of achieving the public benefit.^[80]

11.78 A related reform option is to increase the responsibilities placed on research organisations by the National Principles.^[81]This could be done as part of a review of the National Principles. The DEST Report made a number of suggestions for increasing these responsibilities, which included:

• requiring organisations to notify funding bodies of any identified, valuable inventions created using public funds;
• emphasising that the ultimate responsibility for commercialising inventions rests with the organisation by adopting a time limit for applying for a patent;
• requiring organisations to establish an intellectual property management infrastructure, or to allocate a certain proportion of granted funds towards exploitation;
• emphasising the need to ensure employees’ work arrangements and responsibilities do not act as a disincentive to commercialise and to counter any existing disincentives; and
• directing organisations to include knowledge transfer or commercialisation as an express component of their mission statement.^[82]

11.79 The National Principlesare intended to operate as high-level principles rather than to provide detailed guidance on how research should be utilised in particular cases. An additional reform option is to supplement the National Principles with detailed guidelinesthat provide direction on how the public benefit might be promoted. In particular, such guidelines could cover the range of options for effective commercialisation of research results and the way these may be pursued in a manner that promotes the public benefit.

11.80 Another approach would be to require all research results generated with public funding to be placed into the public domain, precluding anyone from claiming intellectual property rights in the results and excluding the ability to patent them. This approach has the advantage of making research results freely available for other researchers to use and build on.^[83]

11.81 The international SNP Consortium (known as the TSC) adopts a variation of this approach. The TSC takes out patents over the single nucleotide polymorphisms (SNP) that the project identifies, but subsequently releases the details of each SNP into the public domain. The TSC does not plan to enforce the patents except to prevent others from patenting the same information.^[84] The TSC’s stated intellectual property objective is to ensure the SNP map it produces is ‘free of third-party encumbrances such that the map can be used by all without financial or other IP obligations’.^[85]

11.82 However, making intellectual property freely available may not always be the most appropriate means of promoting the development of research results into healthcare products and services. Inventions not protected by a patent may not be further developed. Without the incentive of a limited monopoly to allow costs to be recouped, it is unlikely that a biotechnology company will make the significant investment in developing an invention to product stage. Free access may be appropriate for some foundational technology such as genetic sequence information, while patent protection may be necessary for downstream research results to promote investment in commercial development.^[86]

11.83 Alternatively, intellectual property might be made available through wide licensing at a low cost. Officials at the NIH have suggested in draft guidelines on licensing of genomic inventions that, where exclusive licensing is not required to secure sufficient private investment to develop research results, it is best practice to license intellectual property widely to provide non profit researchers and public health authorities with easy access to new research.^[87] Critics argue that these guidelines take too broad an approach, which may prevent the value of some research from being realised if licensing strategies cannot be determined on a case-by-case basis. Concern that researchers will be required to follow the guidelines to receive funding has also been expressed.^[88]

11.84 A final option is to give funding bodies or government some control of research results in the form of ‘march-in’ rights. This option is considered later in this chapter, although the ALRC believes that it is not appropriate in the Australian context.

Submissions and consultations

11.85 Some submissions suggested that realising public benefit from publicly funded genetic research was an important issue in patent law reform.^[89] A number emphasised that commercialisation is often an effective approach to realising public benefit from research.^[90] Many submissions also highlighted the need to balance realising public benefit, creating incentives for innovation and promoting wide dissemination of research results.^[91]

11.86 DP 68 proposed that the ARC and the NHMRC should review their principles and guidelines on intellectual property and research to ensure that publicly funded research, where commercialised, results in appropriate public benefit.^[92] DP 68 also proposed that, as part of this review, the ARC and NHMRC should include guidance on what is meant by ‘public benefit’ in these principles and guidelines.^[93]

11.87 The proposed review of the National Principlesreceived strong support in submissions.^[94] Submissions also supported guidance on the definition of ‘public benefit’.^[95] Both the ARC and NHMRC welcomed the prospect of a review, noting that it would be an opportunity to identify areas where researchers and research organisations want greater guidance on commercialisation and patenting of publicly funded research. The NHMRC also noted that the current National Principles may not provide sufficiently detailed information for researchers and research organisations about intellectual property and that it is timely to review them.^[96]

11.88 However, while supporting the need for public benefit to flow from publicly funded research, the Department of Industry, Tourism and Resources (DITR) stated that the National Principlesare not the appropriate instrument for this purpose.^[97]

11.89 DITR commented that the proposal seemed to suggest that commercialisation does not promote public benefit. It noted that commercialisation is one of the most effective means of accruing public benefit from publicly funded research due to the cost of developing technology into marketable products.^[98] Another suggested the proposal is at odds with government policies to promote the commercialisation of research.^[99]

11.90 DP 68 also proposed that the principles and guidelines developed in the proposed review of the National Principles should enable conditions to be attached to the grant of funding for genetic research, to limit the commercialisation of publicly funded research in appropriate circumstances. Such conditions might include a requirement that research results be placed in the public domain, or that a patented invention be widely licensed.^[100]

11.91 This proposal met a mixed reception in submissions. The NHMRC and ARC themselves welcomed the proposal.^[101] The NHMRC acknowledged that:

there may be circumstances in which the NHMRC may wish to fund research, where it would be beneficial for the results of the research to be in the public domain or available for use by others. For example, there may be circumstances under which the NHMRC wishes to fund the development of stem cells lines that are widely available to all researchers.^[102]

11.92 The NHMRC indicated that this could be done by calling for tenders for projects, on which it would have the capacity to impose relevant conditions.^[103] A number of submissions agreed that there might be circumstances in which the public benefit would be served by promoting broad access to genetic technologies.^[104]

11.93 Some submissions agreed with attaching conditions to research funding to ensure wide access to research.^[105] The Centre for Law and Genetics submitted:

We do not see that the implementation of this Proposal would in any way impinge on commercialisation in the normal course of events for ‘commercialisable’ research. We see that the circumstances in which the NHMRC or ARC would impose such conditions as being strictly limited foundational research discoveries of the nature of the human genome project, the SNP project and the HapMap project. In our view, these projects should be freed from the fetters of commercialisation.^[106]

11.94 The Centre also supported imposing conditions because this would justify researchers and organisations in decisions not to commercialise where it would be inappropriate to do so.^[107]

11.95 However, a number of submissions noted that the proposed conditions would be difficult to oversee or enforce.^[108] The Queensland Government commented that due to the difficulty of policing the conditions, the NHMRC and ARC would need to rely on the goodwill and honesty of the funding recipients.^[109] The Centre for Law and Genetics submitted that conditions might be difficult to enforce if a patent is assigned.^[110]

11.96 DITR stated that restricting commercialisation would be unlikely to address any perceived weaknesses with the current system. It pointed out that commercialisation promotes dissemination of research through patent specifications and allows for financial returns from research.^[111] The Western Australian Department of Industry and Resources commented that commercialisation is ‘often essential for the outcome of the research to be developed and made available or accessed’.^[112]

11.97 DITR argued further that there is little evidence that research organisations are granting too many exclusive licences, noting that exclusive licensing is often necessary to ensure successful commercialisation.^[113] However, as the Centre for Law and Genetics pointed out:

some of the most widely licensed patents have been the most lucrative (the Cohen Boyer patent being the most obvious). Hence, wide licensing does not necessarily equate with non-commercialisation (although it does provide public benefit if licence fees are low and other licence obligations are minimal).^[114]

11.98 Some submissions also objected to imposing conditions on funding as they may lead to the protection of research results through secrecy;^[115] unreasonably restrict or complicate commercial opportunities, including the capacity to attract investment, for developing technology;^[116] or result in overseas companies appropriating technology, thereby denying financial returns to Australian research organisations and industry.^[117]

11.99 The Walter and Eliza Hall Institute of Medical Research commented that the proposal to impose conditions ‘ignores the observation that many discoveries and subsequent inventions arise from serendipity. Invention and innovation is not a planned process.’^[118]

11.100 The Western Australian Department of Industry and Resources suggested that an alternative could be to require funding recipients to seek approval from the funder for a proposed commercialisation strategy.^[119] In consultations, the Garvan Institute pointed out that conditions on funding might cause difficulties where research is jointly funded by public and private funds.^[120]

ALRC’s views

11.101 The ALRC considers that intellectual property rights in publicly funded research should vest in the individual or organisation that will best exploit them to promote public interest, including the provision of healthcare in Australia and overseas.

11.102 In the ALRC’s view, research organisations are well placed to utilise intellectual property resulting from research and the ALRC has no evidence of any need to alter the current framework for ownership of publicly funded research. Although the capacity of some research organisations to commercialise technology may be limited by a lack of commercial expertise or funding to develop products, it is unlikely that government funding agencies or researchers themselves are better able to take on this task. In the ALRC’s view, commercialisation problems are better addressed through providing appropriate support to research organisations in the form of funding and advisory services. The options for providing support of this kind are discussed in Chapters 14, 17 and 22.

11.103 There may be differing conceptions of the public benefit and in some instances there may be a variety of benefits that could be generated through exploiting patented research results in different ways. It is clear from submissions that there is a need for greater clarity on what is meant by public benefit. The ALRC considers that in many circumstances commercialisation of genetic inventions will be the best way to maximise public benefit. However, research organisations would benefit from having greater direction in this area.

11.104 In the ALRC’s view, there may be merit in the ARC and the NHRMC implementing the DEST Report’s ‘expanded National Principles approach’ to enlarge the content of responsibilities currently applied to research organisations.^[121]Although the ALRC has not made a specific recommendation on this issue, it does consider that there would be merit in drawing on the reform suggestions made in the DEST Report in any future review of the National Principles.^[122]

11.105 The ALRC also considers there is no single model for achieving public benefit from genetic research. In some instances greater public benefit may result from making patented genetic materials or technologies freely accessible or widely licensed; in others, by allowing a patent to be exploited by a single company. The most appropriate approach to exploiting or using the results of genetic research can only be considered on a case-by-case basis.

11.106 However, the ALRC is of the view that there is a need to ensure publicly funded genetic research, when commercialised, optimises the public benefit. The ALRC regards the National Principlesas the most appropriate location in which to emphasise this need, and recommends that the ARC and NHMRC should review the National Principlesto provide guidance on what is meant by public benefit. In doing so, the ARC and NHMRC could draw on the approaches taken by the RIRDC and the Wellcome Trust.

11.107 In addition, as the National Principles are necessarily broad, the ARC and NHMRC should implement guidelines to assist organisations receiving public funding for research in complying with them. These guidelines should:

• give direction on what is meant by public benefit;
• assist organisations in determining whether it is appropriate for particular research results to be commercialised; and
• identify a range of approaches to the exploitation of intellectual property and the circumstances in which they might be used.

11.108 In developing these guidelines, the ARC and NHMRC should also take account of the Australian Vice-Chancellors’ Committee’s Ownership of Intellectual Property in Universities: Policy and Good Practice Guide.^[123]

11.109 As part of this review, the ARC and NHMRC should ensure the revised National Principles and related guidelines are widely disseminated to research organisations and other relevant stakeholders.^[124]

11.110 The ALRC also considers that in exceptional circumstances the ARC and NHMRC should be prepared to place conditions on grant funding to direct how any resulting technologies are exploited where it is considered that greater public benefit would result from the resulting research being placed in the public domain either with no patent being sought or, where a patent is sought, from being widely licensed. Provision for such conditions to be placed on the grant of public research funding should be incorporated into the National Principles.

11.111 The ALRC acknowledges that many submissions expressed concern about the potentially restrictive impact of such conditions on research commercialisation. However, the ALRC emphasises that conditions of this kind should be imposed only in exceptional circumstances, particularly where the research is foundational and the output of research is a tool that may be widely used by other researchers. The ALRC notes that in many cases, wide licensing of research results can be the most effective commercial strategy.^[125]

11.112 Research organisations should also ensure they have clear policies and effective practices in this area, although the ALRC does not seek to be prescriptive about the content of these policies or practices. To avoid problems with determining ownership and rights to intellectual property in genetic research conducted jointly, either between research organisations or collaboratively with industry, organisations should ensure their intellectual property policies include clear guidance on ownership of results of joint research.