ALRC’s views

13.77 The ALRC believes it is desirable to remove uncertainty about the existence and scope of an experimental use exemption in Australian law. This approach received broad support in submissions. The existing uncertainty is unhelpful to the research community and commercial organisations. It has the potential to result in under-investment in basic research; and to hinder innovation if researchers become concerned that their activities may lead to legal action by patent holders.

13.78 It is implicit in the ‘basic underlying deal’ embodied in the grant of a patent by the state that experimental use of an invention does not infringe the patent holder’s rights.[136] The patent holder is given the exclusive right to exploit the invention for the term of the patent but in return agrees to disclose the invention at an early stage. This avoids duplication of research investment, and makes the invention available as the basis for further research. In a sense, an experimental use defence may be seen as a corollary to the disclosure requirement because, without it, researchers would be allowed only to read the description of the patented invention, without being able to experiment with the invention to see if and how it works.[137]

Framing the defence

13.79 The ALRC’s view is that the Patents Act should be amended to incorporate an express experimental use provision that: (a) is framed as an exemption; (b) applies to all patented inventions; and (c) does not derogate from any experimental or research use that may otherwise be permitted under the Patents Act.

13.80 The provision should be framed as an exemption so that experimental use is considered a non-infringing act. This is consistent with the ALRC’s view that experimental use is not part of the exclusive rights granted to a patent holder. Existing defences to claims of patent infringement in the Patents Act, other than those based on the validity of a patent, are generally characterised as ‘exemptions’.[138]

13.81 The experimental use exemption should apply to all patented inventions, not just those concerning genetic materials and technologies. Submissions and consultations emphasised that the problems encountered in relation to the experimental use of patented genetic technologies are similar to those applicable to other subject matter, such as business methods and pharmaceuticals.[139] In addition, the TRIPS Agreement imposes constraints on the extent to which the national laws of signatory countries may discriminate by ‘field of technology’.[140] This provides another important reason why it is appropriate to extend this reform beyond gene patents to all patented inventions.

13.82 The legislation should make it clear that the exemption is not intended to derogate from any experimental or research use that may otherwise be permitted under the Patents Act, for example, based on the meaning of the word ‘exploit’ as used in s 13 of the Act. The ALRC’s recommendation also leaves open the possibility that the pending ACIP review of patents and experimental use may recommend a broader provision protecting a wider class of research use of patented inventions.

13.83 The full benefit of reform will not be achieved unless the scope of any new experimental use exemption is carefully defined. In those jurisdictions in which common law defences are more firmly established than in Australia, significant doubts exist about their ambit. Doubts may persist even where statutory exemptions exist, as in the United Kingdom and other member States of the European Union, unless the scope of the exemption is articulated carefully.

Relationship with the patented invention

13.84 There are several possible criteria that might be used to delineate the boundary between permissible and impermissible experimentation or research involving a patented invention. For example, distinctions might be drawn between:

  • experimentation on a patented invention and research involving the use of a patented invention;
  • the purpose or intention of experimentation or research, in terms of its technical, scientific or commercial motivations;
  • the technical, scientific or commercial outcomes of experimentation or research; or
  • the nature of the organisation conducting the experimentation or research, for example whether the organisation is a commercial or not-for-profit entity.

13.85 The ALRC’s view is that the key element should be the first listed criterion—that is, the relationship between the experimentation or research and the patented invention. At a minimum, experimentation that seeks further knowledge about the patented invention and its uses should be covered. The exemption should also extend to experimentation or research on the patented invention aimed at improving the invention.[141]

13.86 It is not a simple matter to describe what kinds of experimental uses of genetic materials or technologies should be regarded as involving experimentation on a patented invention, and therefore protected by an experimental use exemption. However, a good starting point is that study or experimentation on patented genetic materials or technologies for the purpose of improving, further developing, or testing them should be covered.

13.87 For example, the ALRC suggests that experimentation on patented genetic materials aimed at discovering another function of a genetic sequence or its interrelation with another genetic sequence should generally be covered by the exemption. On the other hand, the use of some genetic materials, such as gene promoters and repressors,[142] should not be covered because the material is not itself being investigated, but is being used as a research tool to investigate a gene and its expression.

13.88 In some cases, study or experimentation will not be the only purpose for which a patented invention is being used. For example, research may be intended to learn more about the function of a genetic sequence, but also to learn how to develop a commercialisable genetic testing kit. For the exemption to apply, study or experimentation should be the ‘sole or dominant purpose’.[143] The exemption should not apply where the use of the invention is directed to other purposes—such as to enable processes for the manufacture of an invention to be developed or improved.

Commercial objectives

13.89 In the ALRC’s view, it would be unrealistic to insist that study or experimentation on a patented invention have no, or minimal, commercial objectives. An important purpose of the patent system is to promote experimentation as a stepping stone to the development and commercialisation of new or improved inventions. Whether experimentation is conducted by a non-profit or commercial entity, or with altruistic or commercial motivations, does not seem important to this purpose.

13.90 This position is reflected by comments expressed by Newman J, in her dissenting judgment in Integra Life Sciences v Merck KgaA,[144] in the United States Court of Appeals for the Federal Circuit. Newman J stated, in response to arguments that commercial motivations should disqualify researchers from relying on the United States common law defence, that:

an ultimate goal or hope of profit from successful research should not eliminate the exemption. The better rule is to recognize the exemption for research conducted in order to understand or improve upon or modify the patented subject matter, whatever the ultimate goal. That is how the patent system has always worked: the patent is infringed by and bars activity associated with development and commercialization of infringing subject matter, but the research itself is not prohibited, nor is comparison of the patented subject matter with improved technology or with designs whose purpose is to avoid the patent.[145]

13.91 Provided that experimentation is on the subject matter of the patented invention, the existence of a commercial objective should not preclude the application of the exemption because the patent system is intended to facilitate research and promote innovation and commercialisation. The patent system ‘both contemplates and facilitates research into patented subject matter, whether the purpose is scientific understanding or evaluation or comparison or improvement’.[146] It may be that some commercially-orientated research falls outside the scope of the exemption. If so, this will not be because the research has a commercial objective but because it is not ‘study or experimentation on the subject matter of the patented invention’. This may be the case, for example, where trials are conducted not to find out more about the subject matter of a patented invention but simply to prove known characteristics of the invention to the satisfaction of a regulator.

13.92 Whatever its exact formulation, the statutory exemption should more closely resemble the law of the United Kingdom and other member States of the European Union (which permit experimentation to have commercial objectives) than the more restrictive position reflected in United States case law. Member States of the European Union have included experimental use exemptions in their national legislation without any apparent negative effects. Moreover, basing a new provision on the European Union model would promote harmonisation of Australian patent law with the law of a major trading bloc, and would give Australian courts the benefit of considering European case law in applying the new provisions.

13.93 As noted above, the CPC and the Patents Act 1977 (UK) incorporate a private and non-commercial use exemption. While there may be some advantage in also incorporating this exemption into the Patents Act in terms of promoting the harmonisation of Australian patent law with European laws, the ALRC does not find the arguments in favour of it compelling. Such an exemption would have little practical application to the use of genetic materials and technologies, and it did not receive any significant support in submissions to the Inquiry.[147]

13.94 The ALRC’s recommendation provides additional legal protection and certainty to researchers using patented inventions, when compared with the current law. Moreover, the recommendation does not derogate from any research activities involving patented inventions that may otherwise be permitted under the Patents Act. Nevertheless, concerns have been expressed that introducing a new statutory exemption, applying only to experimentation on a patented invention, may encourage more extensive enforcement of patent rights against researchers. The concern is that, by drawing attention to the limited ambit of exempt experimental use, reform may encourage new interest in enforcement by patent holders. However, as discussed above, there are many reasons why patents are not enforced against non-commercial researchers—many of them relating to commercial considerations. The ALRC does not anticipate that there will be any significant change in patterns of enforcement as a result of implementing its recommendation, particularly since any existing experimental use defences are expressly preserved.

Recommendation 13–1 The Commonwealth should amend the Patents Act 1990 (Cth) (Patents Act) to establish an exemption from patent infringement for acts done to study or experiment on the subject matter of a patented invention; for example, to investigate its properties or improve upon it. The amendment should also make it clear that:

  1. the exemption is available only if study or experimentation is the sole or dominant purpose of the act;
  2. the existence of a commercial purpose or objective does not preclude the application of the exemption; and
  3. the exemption does not derogate from any study or experimentation that may otherwise be permitted under the Patents Act.

[136]Canada: Patent Protection of Pharmaceutical Products: Complaint by the European Communities and their Member States, 17 March 2000, WT/DS114/R, 55.

[137] Ibid, 56. See also T Sampson, ‘Madey, Integra and the Wealth of Nations’ (2004) 26 European Intellectual Property Review 1. Other arguments may be used to justify the existence of an experimental use exemption. For example, it has been suggested that because, in principle, the rights of a patent holder should extend no further than the scope of the substantial utility disclosed in the specification, experimental uses of a product are outside the appropriate scope of a patent owner’s rights. Further, the use of a product as an object of scientific inquiry should not qualify as a substantial utility for the purposes of patent law because the benefit of such use is not in ‘currently available form’: Intellectual Property Research Institute of Australia, Submission P88, 16 April 2004 referring to Brenner v Manson 383 US 519 (1966), 535.

[138] See, eg, Patents Act 1990 (Cth) ss 118–119. United Kingdom patents legislation provides that an act done for experimental purposes does not constitute an infringement of a patent—a provision that may be characterised as an exemption: Patents Act 1977 (UK) s 60(5).

[139] Department of Industry Tourism and Resources, Submission P36, 13 October 2003; Davies Collison Cave, Submission P48, 24 October 2003; South Australian Government, Submission P51, 30 October 2003; Institute of Patent and Trade Mark Attorneys of Australia, Consultation, Melbourne, 5 September 2003; AusBiotech Ltd, Submission P58, 7 November 2003.

[140] TRIPS Agreement, art 27(1).

[141] However, the right to exploit any improvement may be subject to earlier patent rights. Depending on the scope of the original patent claims, the improvement, if patented, may be a ‘dependent patent’ that cannot be worked without exploiting the original patent. Where the original patent holder wants to exploit the improvement, cross-licensing may be required.

[142] For example, a CMV (cytomegalovirus) promoter: US Patent No 5,168,062 and 5,385,839.

[143] The terms ‘sole or dominant purpose’ and ‘dominant purpose’ are well understood in Australian law. The terms are used in many contexts in Commonwealth statutes: see, eg, Trade Practices Act 1974 (Cth) s 45DD (situations in which boycotts may be permitted); Income Tax Assessment Act 1936 (Cth) s 82KUB (deductions for car expenses); Social Security Act 1991 (Cth) s 1207P (designated private trusts).

[144]Integra Life Sciences v Merck KgaA 307 F 3d 1351 (2002). The case was heard at the same time as Madey v Duke University 307 F 3d 1351 (Fed Cir, 2002).

[145]Integra Life Sciences v Merck KgaA 307 F 3d 1351 (2002).

[146] Ibid.

[147] ACIPA supported the introduction of such a defence: Australian Centre for Intellectual Property in Agriculture, Submission P81, 16 April 2004.