Objectives of public funding
11.6 The Australian Government provides funding for medical and scientific research with the broad aim of promoting the national interest. Within this aim, there are a number of more defined objectives: promoting research; improving healthcare; and stimulating economic growth.
11.7 These benefits flow as a result of the ‘utilisation’ of publicly funded research. Utilisation occurs when results are transferred to end users, through what are sometimes referred to as ‘routes to end use’. These routes include the transfer of research into the public domain where it can be used freely; and transfer to industry for development into marketable healthcare products, such as tests and treatments.
11.8 In 2001, the Australian Government launched Backing Australia’s Ability, a five-year strategy designed to promote research, development and innovation. Three broad themes were identified in the strategy: generating ideas through research; commercialisation of those ideas; and developing and retaining a highly skilled workforce. Intellectual property protection was nominated as one of the strategies for accelerating the commercialisation of ideas.
11.9 This strategy is supported by the Australian Research Council (ARC) and the National Health and Medical Research Council (NHMRC). The NHMRC has identifieda number of reasons why the protection and commercial exploitation of research provides important public benefits:
The rapid development of science and technology, especially the emergence of modern biotechnology, provides Australia with an unprecedented opportunity to use its strong position in health and medical research to build knowledge-based industries that can compete in the global knowledge economy. Commercial exploitation of research findings benefits the economy through employment growth and national wealth generation, as well as being an essential step in the delivery of new drugs or health treatments to the community.
11.10 The Australian Government funds research activities through various agencies, principally the ARC and the NHMRC. In 2001, approximately $300 million was spent on publicly funded research in biotechnology. Such funding enables researchers to purchase equipment and resources and may provide financial support for researchers to devote time to pursuing a particular project.
11.11 Promoting research is also a means of increasing the population of skilled researchers in Australia. This may help create a critical mass of researchers in a particular area, aid Australia in becoming well recognised in a field of research, and consequently attract more overseas researchers.
11.12 Funding research into genetics and biotechnology allows researchers to investigate the causes of disease and promotes the development of new or improved treatments and tests. Such research may improve the options available to the medical profession for identifying and treating disease. Most publicly funded research is upstream research and further development may be needed to turn the outcomes of this research into downstream products. The public benefits from improved healthcare through reduced mortality and illness.
Stimulating economic growth
11.13 Government can foster the development of a strong research base needed in a knowledge-based economy by public investment in research. Developing a research base is crucial for Australia’s continuing economic growth. For example, it has been estimated that encouraging the commercial development of research results has the potential to generate between 10,000 and 15,000 new jobs in Australia over five years.
11.14 It is Australian Government policy to promote the commercialisation of publicly funded research. Encouraging effective commercial development of research stimulates growth by creating products and product ideas. These might be manufactured and sold by Australian companies, creating employment and helping to develop the Australian manufacturing sector. If these products are marketed overseas, this may increase the export of Australian products. Alternatively, research results may be commercially developed to the stage where licensing agreements can be made with overseas companies to develop the product to market-ready stage. This generates income for Australian organisations holding intellectual property in the form of licensing fees and royalties. These financial returns may be put back into research and development to support the Australian biotechnology research sector and industry further.
Public benefit from research funding
11.15 Few would dispute that if public money is used to fund research, the benefits of this research should flow back to the community in some form. A major issue is how best to ensure that the benefits of publicly funded research are realised. It is not always clear whether this is best achieved by freely sharing the results of publicly funded research or by commercialisation of research results, and if commercialisation is preferable, what is the best way to maximise the gains.
11.16 It has been argued that the results of such research should be publicly available because the research has been supported with public funds. Exclusive control of new technology, such as through patent protection, may prevent others from freely using it.
11.17 However, the public benefits of such research may sometimes be realised more effectively by attracting investment for commercial development to take research through to the product stage. In its 2003 report on patenting and licensing by public research organisations, the Organisation for Economic Co-operation and Development (OECD Report) noted that governments are increasingly recognising that ‘placing the outputs of publicly funded research in the public domain is not sufficient to generate social and economic benefits from research’. John Grace, former chief executive of Australian biotechnology company Amrad Corporation Limited, has made a similar point:
If a researcher is doing something really clever that might lead to a new drug, the only way that benefit will get to the community will be through the commercial activities of the company in developing it. And no company in the world will develop a drug without a patent. So … if you are a researcher that really wants to benefit mankind through a discovery, via some treatment, then a patent is not only essential, it is legitimate.
11.18 This thinking was also the basis of shifts in United States policy in the early 1980s to allow organisations receiving public funding for research to patent and commercialise the results of that research. This policy is discussed later in this chapter in the context of ‘march-in’ rights.
Benefit to research organisations
11.19 Research organisations can benefit from holding intellectual property by exploiting it to generate financial returns that can be used for further research and to support the organisation. They are able to do this by:
establishing spin-off companies to develop and market products created from technology patented by the organisation; and
licensing patented technology to industry and other research organisations in return for licence and royalty payments.
11.20 The Garvan Institute of Medical Research (Garvan Institute) is an example of an organisation realising such benefits. The Garvan Institute is an autonomous, not-for-profit medical research institute with strengths in gene-based research. In 2002, the Garvan Institute’s commercial relationships generated $2.5 million, which it used for its operations and growth.
Department of Education Science and Training, Review of Closer Collaboration between Universities and Major Publicly Funded Research Agencies (2004), 29.
Commonwealth of Australia, Backing Australia’s Ability: An Innovation Action Plan for the Future (2001), 18.
Australian Research Council and others, National Principles of Intellectual Property Management for Publicly Funded Research (2001), 2.
National Health and Medical Research Council, Interim Guidelines: Intellectual Property Management for Health and Medical Research (2001), 1. The Interim Guidelines are no longer in effect.
Biotechnology Australia, Freehills and Ernst & Young, Australian Biotechnology Report (2001), 9.
 See, eg, Health and Medical Research Strategic Review Committee, The Virtuous Cycle: Working Together for Health and Medical Research (1998), 125–126; Australian Government, Backing Australia’s Ability: The Australian Government’s Innovation Report 2003–04 (2003), 24.
Australian Research Council, University Research: Technology Transfer and Commercialisation Practices (1999), xvii.
 For example, the objective of the Cooperative Research Centres program is ‘to enhance Australia’s industrial, commercial and economic growth through the development of sustained, user-driven, cooperative public–private research centres that achieve high levels of outcomes in adoption and commercialisation’: Department of Education Science and Training, Cooperative Research Centres Program: 2004 Selection Round Guidelines for Applicants (2004), [1.2.1]. See also Health and Medical Research Strategic Review Committee, The Virtuous Cycle: Working Together for Health and Medical Research (1998); Minister for Education Training and Youth Affairs, Knowledge and Innovation: A Policy Statement on Research and Research Training (1999); Australian Science Capability Review, The Chance to Change (2000); Commonwealth of Australia, Backing Australia’s Ability: An Innovation Action Plan for the Future (2001); Australian Government, Backing Australia‘s Ability: Building Our Future through Science and Innovation (2004).
Organisation for Economic Co-operation and Development, Turning Science into Business: Patenting and Licensing at Public Research Organisations (2003), 9.
B Pheasant, ‘The Value of a Pure Thought’, Financial Review (Sydney), 12–13 August 2000, 26. See also M Stott and J Valentine, ‘Gene Patenting and Medical Research: A View from a Pharmaceutical Company’ (2004) 3 Nature Reviews Drug Discovery 364.
Garvan Institute of Medical Research, Annual Report (2002), 59.