Dependent patents

27.60 Where a patented invention (‘dependent patent’) cannot be worked without exploiting an earlier patented invention (‘original patent’), the owner of the dependent patent generally must obtain a licence over the original patented invention. If this is not granted, the owner of the dependent patent might seek authorisation through a compulsory licence to use the original patent.

27.61 Under the Patents Act, the owner of a dependent patent who seeks a compulsory licence over the original patent must satisfy the ‘reasonable requirements of the public’ test.^[69] However, the position is different where an applicant requires a compulsory licence over both a dependent patent and its original patent, in order to work the dependent patent. In those circumstances, the applicant must satisfy the reasonable requirements of the public test in relation to the dependent patent only. The court may grant a compulsory licence over that patent, and over the original patent, if the dependent patent involves an important technical advance of considerable economic significance on the original patent.^[70] This provision is consistent with art 31(l) of the TRIPS Agreement.^[71]

27.62 Therefore, an applicant who owns a dependent patent must satisfy the reasonable requirements of the public test in order to obtain a compulsory licence over the original patent. However, where an applicant requires a compulsory licence over both a dependent patent and the original patent, it need only satisfy the reasonable requirements of the public test in relation to the dependent patent. This position has been criticised as illogical.^[72] Nicol and Nielsen have commented that:

Given that circumstances of dependency are likely to arise frequently in the area of biotechnology, there may be justification for amending the existing provisions, making special provision for issuance of compulsory licences to dependent patent holders where the invention covered by the dependent patent ‘involves an important technical advance of considerable economic significance’ over the invention for which the compulsory licence is sought.^[73]

27.63 The United Kingdom’s compulsory licensing provisions deal specifically with dependent patents. Under s 48A of the Patents Act 1977 (UK), a court may grant a compulsory licence where the patent holder has refused to grant a licence on reasonable terms, resulting in the prevention or hindrance of the exploitation in the United Kingdom of any other patented invention that involves an important technical advance of considerable economic significance in relation to the invention for which the patent concerned was granted.

27.64 DP 68 asked whether the Patents Act should be amended to permit the grant of a compulsory licence to a patent holder who cannot work its patent without using another patent for which authorised use cannot be obtained.^[74] For example, DP 68 suggested the Act could be amended to provide that a court could grant a compulsory licence for an original patent where the dependent patent involves an important technical advance of considerable economic significance on the original patent. In these circumstances, the dependent patent holder would not be required to satisfy the ‘reasonable requirements of the public’ test.

27.65 The ALRC received mixed responses to this question. Several submissions expressed support for this approach.^[75] The Centre for Law and Genetics commented that there are differing degrees of follow-on invention and dependency. It suggested that only the patent holders of new and important applications would be likely to fall within the ambit of the suggested test.^[76]

27.66 By contrast, other submissions expressed caution with this approach. Generally, these submissions argued that such a provision would be unnecessary, because dependent patents are already adequately covered by the ‘reasonable requirements of the public’ test;^[77] or that it would be undesirable, because it would undermine the value of the original patent granted, and the patent system.^[78]

27.67 IP Australia suggested that if such a provision were introduced, it should be on the condition that the dependent patent has a clear material advantage over the original patent; and that the reasonable requirements of the public are not being met.^[79] The Queensland Government suggested that ACIP should review this matter.^[80]

ALRC’s views

27.68 The ALRC does not now consider it necessary to recommend any reforms to the compulsory licensing provisions to address circumstances involving dependent patents.

27.69 As noted above, some submissions supported amending the Patents Act to make specific provision for the owner of a dependent patent to obtain a compulsory licence for an original patent—in particular, where the dependent patent is an important technical advance of considerable economic significance on the original patent. However, other submissions argued that this would be both unnecessary and undesirable. In their view, circumstances of dependency are already adequately addressed under the ‘reasonable requirements of the public’ test; and any specific provision for dependency could undermine the value of the original patent and the patent system.

27.70 The ALRC considers it likely that the ‘reasonable requirements of the public’ test would, in most cases, adequately address circumstances of dependency. For example, a dependent patent holder could argue that the demand in Australia for the original patented invention has not been reasonably met because of the original patent holder’s refusal to grant a licence on reasonable terms. While the Patents Act appears to deal with original patents differently according to the context of the application, this does not appear to impact on the practical availability of a compulsory licence. Accordingly, the ALRC considers reform of these provisions unnecessary.

Emergency and public non-commercial use

27.71 The Patents Act provides that an applicant for a compulsory licence generally must first try for a reasonable period to obtain a licence from the patent holder on reasonable terms and conditions.^[81] The requirement of prior negotiation reflects the nature of a patent right, which is an exclusive right to exploit a new invention for a specified period. However, it necessarily delays the process of obtaining a compulsory licence while an individual or organisation seeking a licence attempts to negotiate with the patent holder.

27.72 DP 68 suggested that there may be circumstances where such a delay might not be in the public interest. For example, Australia could face a public health crisis or bio-terror attack that would require a rapid and efficient response. The ALRC suggested that, in most cases, the Australian Government, or a state or territory government or health department would take the initiative in responding to these situations by invoking the Crown use provisions of the Patents Act.

27.73 However, the ALRC stated that there might be circumstances where the Crown, for whatever reason, does not act. DP 68 asked whether, given the Crown use provisions, the Patents Act should also provide for the grant of a compulsory licence over a patented invention in circumstances of ‘a national emergency or other circumstances of extreme urgency, or in cases of public non-commercial use’.^[82] For example, the Act could provide that the requirement of prior negotiation may be waived in the case of a national emergency or other circumstances of extreme emergency, or in cases of public non-commercial use. This would be consistent with art 31(b) of the TRIPS Agreement.

27.74 Several submissions supported this approach.^[83] A few submissions also supported extending the compulsory licensing provisions to enable the supply of drugs manufactured under a compulsory licence to countries that lack manufacturing capabilities.^[84] The Centre for Law and Genetics suggested that this would fully reflect the provisions of the Doha Declaration on the TRIPS Agreement and Public Health, and would reflect well on Australia’s role as a good international citizen.^[85]

27.75 However, most submissions argued that the Crown use provisions would be a more appropriate mechanism for addressing a national emergency or similar circumstances of extreme urgency, or cases of public non-commercial use.^[86] The Department of Industry, Tourism and Resources considered that removing the requirement of prior negotiation in these circumstances would be ‘draconian, especially in view of the lack of empirical data to support the existence of a significant problem’.^[87]

27.76 IP Australia noted that that compulsory licences are an exception to the exclusive rights granted to a patent holder, and the circumstances of their use should be limited and carefully considered. Any changes to the provisions need to be balanced against the potential to devalue patent rights, and considered in the light of other provisions already available, especially Crown use. It also noted that any changes would need to be carefully considered in the light of Australia’s international obligations—particularly under the TRIPS Agreement and the AUSFTA.^[88] The Queensland Government suggested that the matter could be referred to ACIP for review.^[89]

ALRC’s views

27.77 The ALRC does not consider it necessary to recommend any reforms to the compulsory licensing provisions to address circumstances of emergency, or public non-commercial use of patented inventions. Most submissions did not consider it necessary to make specific provision for the grant of a compulsory licence, without prior negotiation, in these circumstances. In their view, the Crown use provisions are a more appropriate mechanism.

27.78 The ALRC considers that, while theoretically, an Australian government could choose not to exercise the Crown use provisions in an emergency,^[90] such circumstances are likely to be rare, particularly as the Crown use provisions allow for the Crown to authorise others to work the patent on its behalf. In any case, these circumstances may be accommodated under the existing provisions. For example, while the Patents Act requires that an applicant must have tried for a reasonable period to obtain a licence from the patent holder before a compulsory licence may be granted, it is likely that the courts would determine the reasonableness of the period in the context of the exigent circumstances.

27.79 Under the existing provisions, an application for a compulsory licence cannot be made within the first three years after the patent was granted. In these cases, the ALRC considers it most likely that an Australian government would invoke Crown use to address any circumstances of serious emergency, rather than face the disapprobation of the Australian community.

27.80 Finally, several submissions suggested that the existing compulsory licensing provisions should be amended to enable the supply of drugs manufactured under a compulsory licence to countries that lack manufacturing capabilities. The ALRC considers that, although such an amendment may have merit, it falls outside the Inquiry’s Terms of Reference.