Statutory licensing for patents

23.3 As discussed elsewhere in this Report, the way in which a patent holder exploits, or chooses not to exploit, a patented invention could impact adversely on the conduct of research, or on the cost effective provision of healthcare.

23.4 Dr Dianne Nicol and Jane Nielsen have suggested establishing a statutory licensing scheme under the Patents Act to facilitate third party access to certain types of biotechnology patents. They suggested that this could reduce the time and cost involved in patent searches, monitoring and pursuing infringers, and negotiating licences; lessen the risk of anti-competitive conduct; increase certainty of access; and decrease individual licence fees. It would also provide an ongoing income for the patent holder through licence fees. In their view, such a scheme could be appropriate for those patented inventions for which broad access is clearly in the public interest—such as patented research tools and diagnostic tests. In these cases, the scheme would provide a means of balancing access and incentive to innovate.[4]

Possible models

23.5 There are several possible models for facilitating the licensing of patented genetic inventions under the Patents Act. Briefly, these could involve:

  • a statutory framework facilitating the voluntary licensing of patented inventions subject to specified terms and conditions—for example, by enabling patent holders to enter inventions into a public register for licensing;

  • a statutory framework facilitating the compulsory licensing of certain patented inventions, subject to specified terms and conditions; or

  • a sui generis system that permits third party use of genetic inventions in certain circumstances, in return for reasonable remuneration.

Voluntary licensing

23.6 One model for voluntary licensing is the ‘licence of right’ that exists in the United Kingdom. Under s 46 of the Patents Act 1977 (UK), a patent holder may apply to the Comptroller of Patents for an entry into the patent register to the effect that licences under a patent are available ‘as of right’.[5] Once entered, the patented invention is available for licensing to any third party. The parties must agree on the licence terms or, failing agreement, the Comptroller of Patents may set them.[6] Where a patent holder has registered its patent for such licensing, it is entitled to a reduction in the renewal fees for the patent.[7]

23.7 Part VI of the Copyright Act 1968 (Cth)(Copyright Act)also contains a model in relation to copyright works. Under Part VI, a copyright owner (or collecting society) may refer a ‘licence scheme’ to the Copyright Tribunal for approval. The licence scheme outlines the circumstances in which the copyright owner would be willing to grant a licence for its copyright work, and stipulates the fees and conditions for such use. The Copyright Tribunal may make an order confirming or varying the scheme, as it considers reasonable in the circumstances. The Tribunal may determine disputes arising under a licence scheme, including disputes arising from the licensor’s refusal to grant a licence in accordance with the scheme.[8]

23.8 Nicol and Nielsen suggested an alternative form of licensing, based on the educational licensing scheme operating under the Copyright Act. While that scheme is a form of compulsory licensing, Nicol and Nielsen appear to support a system of voluntary participation. In their view, the scheme would involve:

  • patent holders registering patents—putting the onus on them to notify users that they have a patent and will pursue infringers;

  • the payment of standard licence fees;

  • the collection of fees by approved collecting agencies; and

  • the creation of a Patent Tribunal to resolve disputes and determine fee structures.[9]

Compulsory licensing

23.9 The Copyright Act contains several statutory licensing schemes that permit the use of copyright material without the copyright owner’s consent, subject to the payment of equitable remuneration, and compliance with certain statutory conditions.[10] These schemes are generally administered through collecting societies, which collect and distribute fees on behalf of the copyright owners. The Copyright Tribunal has jurisdiction to settle disputes regarding the determination of royalties or equitable remuneration for uses under the statutory licences, and to arbitrate disputes regarding the terms of licences or proposed licensing schemes.[11]

23.10 These schemes could provide a model for a statutory licensing scheme under the Patents Act. For example, the educational licensing scheme operating under Part VB of the Copyright Act provides that educational and other institutions may reproduce and communicate works for the proper purposes of the institution, provided that they do so in accordance with the procedures specified in the Act for recording, noting, giving notice, and limiting access to the work.[12] The institution relying on the scheme must give the collecting society a ‘remuneration notice’, undertaking to pay equitable remuneration for the licensed copies and communications that it makes. Where the licence fees and other conditions cannot be agreed between the institutions and the collecting society, the Copyright Tribunal may determine them.[13]

23.11 In the United States, Assistant Professor Donna Gitter has proposed a form of statutory licensing for patented DNA sequences. Under her proposed scheme, the patent holder would be required to license a patented sequence to any scientist pursuing commercial research in return for a reasonable licence fee. The scientist would be required to give the patent holder written notice before commencing research using the sequence, and the licence fee would be dependent on the commercial value of the end product developed through the research. This would eliminate the need for licence negotiations and up-front payments, while still protecting the patent holder’s right to a reasonable royalty.[14]

A sui generis system

23.12 Luigi Palombi suggested another option under which the person who first discloses a specified genetic sequence, together with a description of its function or utility, would be granted a ‘genetic sequence right’ as an alternative to a patent. The right would subsist for a period of 20 years. The right owner would receive a royalty for any use of the material, and could enforce the right through national courts in a similar manner to that applying to copyright infringement. In his view, this would facilitate the publication of genetic sequence information but remove the right to withhold licences for such technology.[15]

Nature of participation

23.13 Where a patent holder intends to license its patented invention widely, a statutory licensing scheme could provide an effective and efficient mechanism to facilitate such licensing. For example, a patent holder might choose to register a generic research tool in order to notify all other researchers that the product is subject to a patent, and to provide a mechanism for collecting licence fees for use of the tool. This would avoid the time and cost involved in tracking each individual use. It would also reduce the time and cost of searches in relation to biotechnology patents, and increase certainty for those using these inventions.[16]

23.14 However, a voluntary scheme is unlikely to address all of the circumstances in which a researcher or health provider might seek access to a patented invention. For example, where a patented invention has few substitutes, and is therefore a highly valuable commodity, the patent holder may prefer to enter into an exclusive licence, or not to license the invention at all.

23.15 Where a patent holder has a broad patent over an upstream genetic research tool, but refuses to license the tool to other researchers, there may be a public interest in facilitating access on a compulsory basis. However, this would represent a significant exception to the exclusive right of exploitation generally granted by a patent, and may be more appropriately addressed through the Crown use and compulsory licensing provisions of the Patents Act.

TRIPS implications

23.16 Any new statutory licensing scheme should be consistent with Australia’s obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 (TRIPS Agreement).[17] In particular, art 27(1) provides that patent rights generally must be enjoyable without discrimination as to the field of technology. Article 30 deals with exceptions to patent rights, and art 31 deals with other uses without the patent holder’s authorisation.

23.17 Article 30 states that members may provide limited exceptions to the exclusive rights conferred by a patent, provided that these exceptions do not unreasonably conflict with the normal exploitation of the patent, and do not unreasonably prejudice the patent holder’s legitimate interests, taking into account the legitimate interests of third parties.

23.18 Article 31 provides that members may permit the use of a patented invention without the patent holder’s consent, subject to specified conditions. For example, authorisation must be considered on a case-by-case basis, and the applicant must have previously attempted to negotiate a licence from the patent holder (except in circumstances of national emergency, other extreme urgency, or for public non-commercial use).[18]

23.19 It is unlikely that a voluntary statutory licensing scheme would violate Australia’s obligations under the TRIPS Agreement. Such a scheme does not constitute an exception to the rights conferred by a patent, or a use without the right holder’s authorisation. A voluntary licensing scheme that applied only to patented genetic inventions would not adversely affect a patent holder’s enjoyment of its patent rights.

23.20 By contrast, a compulsory statutory licensing scheme for patented inventions could have TRIPS implications. A compulsory scheme that applied only to patented genetic inventions could be inconsistent with art 27(1) if it constitutes ‘discrimination’ by field of technology.[19]

23.21 A compulsory scheme would be unlikely to comply with art 31 if it authorises the use of a patented invention without considering the individual merits of the case and does not require prior negotiation with the patent holder. There may, however, be scope under art 30 for a compulsory scheme, provided that it is a limited exception to the exclusive rights conferred by the patent, which does not unreasonably conflict with the normal exploitation of the patent, and does not unreasonably prejudice the patent holder’s legitimate interests, taking into account the legitimate interests of third parties. The ALRC notes that the TRIPS Agreement contains a similar provision for exceptions to copyright, which provides a basis for compulsory statutory licensing schemes.[20]

[4] D Nicol and J Nielsen, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry (2003) Centre for Law and Genetics Occasional Paper No 6, 240–241.

[5]Patents Act 1977 (UK) s 46(1).

[6] Ibid s 46(3).

[7] Ibid s 46(3)(d).

[8] See Copyright Act 1968 (Cth) Part VI. See also R Reynolds and N Stoianoff, Intellectual Property: Text and Essential Cases (2003), 216.

[9] D Nicol and J Nielsen, Patents and Medical Biotechnology: An Empirical Analysis of Issues Facing the Australian Industry (2003) Centre for Law and Genetics Occasional Paper No 6, 240.

[10] For example, see Copyright Act 1968 (Cth) ss 47, 54–64, 70, 107–109, 183, Pt VA, VB, VC. See also J McKeough, A Stewart and P Griffith, Intellectual Property in Australia (3rd ed, 2004), 206.

[11] J McKeough, A Stewart and P Griffith, Intellectual Property in Australia (3rd ed, 2004), 206.

[12] S Ricketson and C Creswell, The Law of Intellectual Property: Copyright, Designs and Confidential Information: Looseleaf Service (1999), [12.100].

[13] Ibid, [12.130].

[14] D Gitter, ‘International Conflicts over Patenting Human DNA Sequences in the United States and The European Union: An Argument for Compulsory Licensing and a Fair-Use Exemption’ (2001) 76 New York University Law Review 1623, 1679, 1683. See also I Turnbull, Submission P91, 16 April 2004.

[15] L Palombi, Submission P28, 1 October 2003.

[16] D Nicol, ‘Gene Patents: The Ultimate Snatch’ (Paper presented at Hatching, Matching, Snatching and Dispatching, AIHLE 7th Annual Conference, Newcastle, 27–30 June 2002), 13.

[17]Agreement on Trade-Related Aspects of Intellectual Property Rights (Annex 1C of the Marrakesh Agreement Establishing the World Trade Organization), [1995] ATS 8, (entered into force on 1 January 1995).

[18] TRIPS Agreement, art 31(a), (b). See Ch 26, 27 for more detail.

[19] See Ch 4.

[20] TRIPS Agreement, art 13. This article provides that members must confine limitations or exceptions to exclusive rights to certain special cases that do not conflict with a normal exploitation of the work and do not unreasonably prejudice the legitimate interests of the right holder.