26.51 Patent law seeks to achieve a balance between encouraging the provision of new and useful goods by rewarding inventiveness, and discouraging ongoing monopolies for critical processes or products. In some circumstances, the exercise of patent rights may have adverse implications for governmental or public interests. Where this is the case, the Crown use provisions ensure that governments can step in to exploit a patent or authorise others to do so. These provisions may be seen as a ‘safety valve’ in particular cases, preventing the public interest from being subverted by the patent system.
26.52 Where important public interests are involved, the Australian Government could potentially legislate to permit the use or acquisition of property, including patents, so as to address the particular problem at hand. However, the Crown use provisions may offer a more expeditious and efficient mechanism, and one that is also available to state and territory governments and their health authorities. In practice, as is the case with the compulsory licensing provisions, the Crown use provisions are not often used. However, they may be important in encouraging patent holders to negotiate on reasonable terms with prospective licensees, including government authorities.
26.53 The ALRC recommends a pattern of laws and practices that is flexible enough to anticipate and respond to any future problems for research or healthcare delivery attributable to gene patents. The Crown use provisions add desirable flexibility to the patent system.
26.54 The ALRC’s recommendations anticipate that Commonwealth, state and territory governments may, in future, consider exercising the Crown use and acquisition provisions more actively, and that there may be circumstances in which it is appropriate to do so. Notably, in Chapter 19, the ALRC recommends a more active role for health departments, in liaison with AHMAC, in considering whether to exploit or acquire a patent under the Crown use or acquisition provisions.
26.55 The ALRC recommends that AHMAC should develop policies regarding the circumstances in which is it is appropriate for the Commonwealth or a State to exploit a patented invention under these provisions for the purpose of promoting human health (Recommendation 26–1). A prime example of such circumstances is where a patent holder or an exclusive licensee exercises monopoly control over a particular genetic test and this has the potential to affect substantially the price, quality or access to the genetic test, with adverse effects for healthcare. While the patent holder would still be entitled to remuneration, the Crown use provisions are an important mechanism through which governments can ensure that key genetic tests continue to be available through public clinical genetics services.
26.56 The ALRC has concluded that it is desirable to clarify that the Crown use provisions are able to be used, where appropriate, in healthcare delivery. While the case law suggests that this interpretation is open on the current wording, the position is not beyond doubt. It is noted that it was found desirable in the United Kingdom to expressly define ‘services of the Crown’ as including the production or supply of specified drugs and medicines.
26.57 The ALRC recommends that the Patents Act be amended to clarify that, for the purposes of the Crown use provisions, an invention is exploited ‘for the services of the Commonwealth or of a State’ if the exploitation of the invention by a Commonwealth or State authority (or by an authorised person) is for the provision of healthcare services or products to members of the public (Recommendation 26–2). The ALRC recognises the broad scope of the term ‘healthcare services or products’. However, this recommendation seeks only to clarify what is included within the ambit of an even broader term that is currently used in the Patents Act, namely, the ‘services’ of the Commonwealth or of a State.
26.58 As discussed above, questions have been raised about whether the Crown use provisions are too broad in their potential application. For example, the ACIP Discussion Paper highlights the broad ambit of the Crown use provisions and asks, among other things, whether the availability of the provisions should be limited or denied to certain entities and whether it would be advantageous to restrict the circumstances in which government can invoke them; for example, only with Ministerial approval or in public health or other emergencies.
26.59 The central focus of the ALRC’s inquiry has been on the desirability of reforms to address the possible adverse impact of gene patents on research and healthcare. Questions about whether the Crown use provisions should be wound back have not been a focus of consultation. However, it should be noted that any proposal to restrict the circumstances in which Crown use may be invoked has the potential to conflict with the policy underlying recommendations made in this Report. For example, restricting Crown use to circumstances of emergency would reduce the nature of the protection provided for the public interest in healthcare provision. On the other hand, placing an obligation on government authorities to obtain Ministerial approval before invoking Crown use would not necessarily be inconsistent with the ALRC’s recommendations. Such an obligation could be implemented, with respect to Commonwealth, state and territory health authorities, through development of the policy recommended in Recommendation 26–1.
26.60 Finally, the ALRC recommends that the Patents Act be amended to provide that, when a patent is exploited or acquired under the Crown use or Crown acquisition provisions, the remuneration or compensation that is to be paid by the relevant authority must be paid promptly and must be just and reasonable (Recommendation 26–3).
26.61 While it may be desirable to provide additional guidance on what constitutes just and reasonable remuneration or compensation, ultimately this is a difficult factual question that can be answered only by reference to the circumstances of each case. As the Patents Act currently provides, the primary obligation should be on the parties to determine remuneration or compensation by agreement, and where they cannot agree it is appropriate for the matter to be resolved by a court. While uncertainty about remuneration or compensation may leave patent holders in a difficult position, the same uncertainty may operate to discourage Crown use, which involves an unquantified financial commitment. Alternative mechanisms for determining remuneration for Crown use are being reviewed as part of ACIP’s review of the Crown use provisions in patents and designs legislation.
Recommendation 26–1 The Australian Health Ministers’ Advisory Council should develop a policy regarding the circumstances in which it may be appropriate for the Commonwealth or a State to exploit a patented invention under the Crown use provisions of the Patents Act 1990 (Cth) (Patents Act) for the purposes of promoting human health. Similarly, the Department of Health and Ageing should develop a policy regarding the circumstances in which it may be appropriate for the Commonwealth to acquire a patent for the purposes of promoting human health. Decisions about Crown use in specific cases must be made on their individual merits.
Recommendation 26–2 The Commonwealth should amend the Patents Act to clarify that, for the purposes of the Crown use provisions, an invention is exploited ‘for the services of the Commonwealth or of a State’ if the exploitation of the invention by a Commonwealth or State authority (or by an authorised person) is for the provision of healthcare services or products to members of the public.
Recommendation 26–3 The Commonwealth should amend the Patents Act to provide that, when a patent is exploited under the Crown use provisions, the remuneration that is to be paid by the relevant authority must be paid promptly and must be just and reasonable having regard to the economic value of the use. Similarly, the Act should be amended to provide that, when a patent is acquired under the Crown acquisition provisions, compensation must be paid promptly and must be just and reasonable having regard to the economic value of the patent.
 See Advisory Council on Intellectual Property, Review of Crown Use Provisions in Patents and Designs Legislation (2003), 11–12.
 As discussed in Ch 20, it has been suggested that monopoly control of medical genetic testing may have an adverse impact on, among other things, the quality of testing and the development of new or improved testing techniques.
 There appears to be no similar need for an amendment directed at research use by the Crown of patented genetic materials or technologies: see Australian Law Reform Commission, Gene Patenting and Human Health, DP 68 (2004), [26.68].
Patents Act 1977 (UK) s 56(2).
 The Health Insurance Act 1973 (Cth) uses the term ‘health service’ to mean, in part, ‘medical, surgical, obstetric, dental or optometrical treatment’ and ‘service’ to include the supply of goods: s 3C(8).
 See Advisory Council on Intellectual Property, Review of Crown Use Provisions in Patents and Designs Legislation (2003), 6–9.
 The ALRC has not found it necessary to reach conclusions about a range of other matters under active consideration by the ACIP review, including whether patent holders have sufficient bargaining power to negotiate with the Crown, and alternative mechanisms for determining remuneration for Crown use.
 The ALRC expresses no view on whether such an obligation is necessary or desirable.