3.66 In later chapters of this Report, the ALRC examines reforms that are designed to address possible problems with the patenting of genetic materials and technologies. This section explains the overall approach taken by the Inquiry in assessing these problems and in recommending reforms.
Working with the patents system
3.67 The ALRC’s approach is predicated on acceptance of the fundamental objective of the patent system in seeking to encourage innovation by granting limited monopoly rights. In this context, there should be realistic expectations of the patent system and what it can achieve. For example, as discussed in this chapter and in Chapter 7, the patent system may be ill suited to addressing all the social and ethical concerns that are raised by the use or exploitation of patented inventions. Those issues are better addressed by laws and practices that exist outside the patent system. Some of the reforms needed were considered by the ALRC and the Australian Health Ethics Committee in their 2003 report, Essentially Yours: The Protection of Human Genetic Information in Australia, where recommendations were made, for example, to improve the ethical oversight of human genetic research.
3.68 An important feature of the patent system is its long-term perspective of the role of monopoly rights in fostering innovation and delivering public benefit. For example, some people think that exclusive rights to exploit a particular genetic invention are not in the public interest because they prevent open access to a specific medical genetic test for a period of 20 years. Yet this consideration must be weighed against the role of patent rights in promoting the innovation and investment that led to the availability of the test in the first place. Research and development are not only costly, but time-consuming. Many therapeutic benefits are still to be realised from the genetics revolution that began in the 1970s, whose landmarks have been described above.
3.69 In reaching its recommendations, the ALRC has been mindful of the need for reforms that make the existing system work better, rather than conceiving an entirely new system. This approach recalls the much quoted conclusion of Professor Fritz Machlup in his study of the economic benefits of the United States patent system:
If one does not know whether a system ‘as a whole’ (in contrast to certain features of it) is good or bad, the safest ‘policy conclusion’ is to ‘muddle through’—either with it, if one has long lived with it, or without it, if one has lived without it. If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it.
3.70 As Machlup implies, the patent system can be improved if particular features can be identified as good or bad. This Inquiry was directed to that task.
Evidence of the impact of gene patents
3.71 The previous sections have identified some of the concerns that have been raised about the patenting of genetic materials and technologies. One difficulty in assessing these concerns is that there have been very few empirical studies in Australia addressing gene patents and their impact on research, biotechnology or healthcare. Overseas studies are also few, and their conclusions may not be capable of being generalised to Australian conditions. Where studies have been conducted, the conclusions are often equivocal.
3.72 The ALRC received a broad range of comments and opinions about the actual or potential effects of gene patents, including anecdotal accounts about research or healthcare being hindered by gene patents, or by the commercial strategies of patent holders. There are limits to what may be learned from the experience of one patent or set of patents, or the exploitation of patent rights in a specific social and commercial situation. Just as an old common law saying is that ‘hard cases make bad law’, hard cases may also make for poor law reform. Even if firm evidence can be found that the exploitation of a specific gene patent has led to problems for research or healthcare, it does not follow that this justifies a systemic response by which widespread change is sought to the entire patent system.
3.73 The ALRC believes that there is limited evidence to date that gene patents or licensing practices have had any significant adverse impact on the conduct of genetic research or on healthcare provision in Australia. Many of the concerns that have been expressed to the Inquiry relate to possible future problems and are based on assumptions that may or may not be borne out with time—for example, assumptions about the future development of the market in medical genetic testing, or the intentions of patent holders with regard to the exploitation and enforcement of gene patents.
3.74 In view of the equivocal nature of evidence about adverse impacts on research and healthcare, the ALRC considers that it should adopt a cautious approach towards recommending radical changes in patent law and practice. Major changes should be proposed only in response to demonstrated problems. This is particularly so given that such changes have uncertain flow-on effects; for example, on future investment and innovation in genetic technologies, and on the development of the biotechnology industry. On the other hand, caution does not imply inaction, and the patent system must be flexible enough to deal with problems as they emerge.
Need for flexibility
3.75 While adverse effects of gene patents may not yet be manifest, the ALRC recognises that this may change in response to shifts in the commercial, scientific, medical and technological environments, or in the interactions among them.
3.76 For example, patent holders may become more active in enforcing certain patent rights, perhaps in response to the success of new business models. New medical, scientific and technological developments in the field of human genetics may provide new opportunities to exploit genetic inventions. Some isolated genetic materials (and related gene patents) may come to have an importance that was unanticipated, while other much-heralded patents may end up as technological backwaters, rather than being at the forefront of developments.
3.77 The nature and extent of the potential problems—and whether existing legal mechanisms provide appropriate and effective remedies—are difficult to assess. The appropriate response to this challenge is to ensure that patent laws and practices are sufficiently flexible and robust to anticipate and respond to future problems. This approach has influenced the recommendations made in this Report, which are more often directed to influencing patent practices than to recommending substantive changes to patent law. The need for flexible regulation has been described by the ALRC elsewhere as one mechanism for ensuring that today’s law reform is relevant to the scientific developments of tomorrow.
Constraints on reform
3.78 There are other factors that constrain the extent to which it would be appropriate for the ALRC to recommend sweeping changes to the patent system. These include: the need to balance the interests of researchers, healthcare providers and consumers, and the biotechnology industry; the desirability of maintaining the technology-neutral nature of the Patents Act; and the international legal framework relating to patents.
Balancing of interests
3.79 The Terms of Reference direct the ALRC to consider the impact of gene patents on: (a) research and its subsequent application and commercialisation; (b) the biotechnology sector; and (c) the cost-effective provision of healthcare. The interests of each of these sectors are different and sometimes conflict—at least on the surface—and must be balanced in recommending reform. For example, when making recommendations directed to promoting access to patented inventions for healthcare purposes, the ALRC has been mindful of the impact of reforms on the biotechnology sector and on the potential for commercialisation of research. Not surprisingly, perhaps, the views expressed in submissions from health departments often differed markedly from those expressed in submissions from departments responsible for industry and innovation.
3.80 While the Inquiry’s Terms of Reference instruct the ALRC to report on the impact of patenting laws and practices related to ‘genes and genetic and related technologies’, in general, the ALRC does not believe that concerns about the patenting of inventions involving genetic materials and technologies should be addressed by provisions in the Patents Act dedicated only to these types of inventions.
3.81 While there is some scope for technology-specific regulation through guidelines issued by the Patent Office (that is, IP Australia) and other relevant institutions, there are cogent reasons for maintaining, so far as possible, the technology-neutral nature of the Patents Act. The introduction of legislative provisions that are specific to inventions involving genetic materials and technologies may suggest that specific provisions should also be implemented for future technologies—an approach that would unnecessarily fragment and complicate Australian patent law in the long term.
3.82 Many reforms considered by the Inquiry do not lend themselves to being formulated in a manner that is specific to genetic materials and technologies. Some recommendations, therefore, have been framed so as to apply to all patented inventions. These include, for example, recommendations made in relation to a new experimental use exemption, Crown use and acquisition, and compulsory licensing. In some cases, the decision to recommend reforms applicable to all patentable inventions was bolstered by submissions that identified similar problems with respect to other patentable subject matter. In other cases, the uncertain implications of reform on other patentable subject matter constituted one reason not to recommend change.
3.83 Legislative reform that is specific to genetic materials and technologies would represent a departure from attempts to harmonise the patent laws of various jurisdictions and lead to divergence between Australian patent law and that in major industrialised countries—with implications for investment in the Australian biotechnology sector. Further, the adoption of specific laws for genetic materials and technologies may have implications for Australia’s international obligations. For example, the Agreement on Trade-Related Aspects of Intellectual Property Rights 1994imposes constraints on the extent to which the national laws of member States may discriminate by ‘field of technology’. This provides an important reason why it is appropriate to make some recommendations applicable to all patentable inventions.
International legal framework
3.84 As discussed in Chapter 4, the international legal framework has an important influence on the reform of Australian patent law. In particular, reform may have implications for Australia’s obligations under multilateral agreements dealing with patents and other intellectual property laws, and under bilateral free trade agreements with other states.
3.85 Although it is possible to amend domestic laws so that they are inconsistent with Australia’s international treaty obligations, Australia may be held responsible on the international plane for breaches of such obligations. The ALRC would have needed compelling reasons to recommend any reform of patent law or practice that would raise doubts about Australia’s compliance with its existing international obligations.
Summary of recommendations
3.86 The ALRC has not identified fundamental flaws in patent law or practice as applied to genetic materials and technologies that justify recommending radical change. However, there are means by which patent law and practice should be fine-tuned to address existing problems and provide greater flexibility in addressing future problems as they arise. This Report makes 50 recommendations for reform. These recommendations are directed to:
improving patent law and practice concerning the patenting of genetic materials and technologies, including through amendments to the Patents Act and changes in the practices and procedures of IP Australia, patent examiners and the courts;
improving patent law and practice concerning the exploitation of gene patents, including in relation to new defences to claims of patent infringement, Crown use and the compulsory licensing of gene patents;
ensuring that publicly funded research, where commercialised, results in appropriate public benefit, including through the adoption of appropriate patent practices;
encouraging universities and other publicly funded research organisations to raise the awareness of researchers about patenting issues and the commercialisation of research;
ensuring that Australian research organisations and biotechnology companies are adequately skilled to deal with issues concerning commercialisation and the licensing of patented inventions;
establishing mechanisms for monitoring the implications of gene patents for research and healthcare so that governments have the ability to intervene where gene patents are considered to have an adverse impact, either in specific cases or systemically;
clarifying the application of competition law to the exploitation of intellectual property rights, including patented genetic materials and technologies; and
clarifying the scope and practical application of exceptions to copyright infringement in relation to genetic research.
3.87 The mechanisms for implementing these recommendations vary. A number of recommendations are directed to legislative change, generally involving amendment of the Patents Act. A small number of these recommendations would make substantive changes to patent law; for example, through the enactment of a new requirement that the Patent Office be satisfied during examination that the criterion of ‘usefulness’ is met; a new experimental use exemption; and a new competition-based test as an additional ground for the grant of a compulsory licence. Other recommendations for legislative reform are of a more minor nature, or are directed to clarifying existing law. These include recommendations to elucidate the ambit of the Crown use provisions, and the extent to which the ‘fair dealing’ provisions of the Copyright Act 1968 (Cth) apply to commercial research.
3.88 However, most recommendations do not require legislative change but involve the development of new or revised guidelines, or other action by government and non-government bodies involved with various aspects of the patent system or its impact on research, biotechnology or healthcare. These bodies include: IP Australia; the Australian Competition and Consumer Commission (ACCC); the Australian Research Council (ARC); the NHMRC; Biotechnology Australia; AusBiotech Ltd; and the Australian Health Ministers’ Advisory Council.
3.89 Some of these non-legislative recommendations are intended to improve the operation of the patent system and the practices and procedures of IP Australia, patent examiners and the courts. For example, the ALRC recommends that IP Australia develop examination guidelines to assist patent examiners in applying the ‘usefulness’ requirement of patentability, and to explain how the criteria for patentability apply to inventions involving genetic materials and technologies. The ALRC also recommends that courts should continue to develop procedures to allow judges to benefit from the advice of assessors or scientific advisors in litigation involving gene patents. This is a matter of particular importance to the Federal Court, which hears and determines most patent litigation in Australia.
3.90 Other non-legislative recommendations are directed to the relationship between the patent system and the three sectors to which the ALRC is required to have regard—namely, research, biotechnology and healthcare. For example, the ALRC recommends that the ARC and the NHMRC review their principles and guidelines to ensure that publicly funded research, where commercialised, results in appropriate public benefit, and that universities continue to take steps to raise the awareness of researchers about intellectual property issues and the commercialisation of research. It also recommends that Biotechnology Australia take steps to assist universities and biotechnology companies in commercialising inventions involving genetic materials and technologies. Commonwealth, state and territory health departments are encouraged to consider actively whether to intervene in patent proceedings where particular gene patents are thought to have an adverse impact on healthcare provision or medical research.
3.91 Another category of recommendations comprises those directed to monitoring the ongoing impact of gene patents. These reforms are intended to ensure that problems are identified at an early stage; for example, through monitoring of anti-competitive conduct by the ACCC. The ALRC also recommends processes for examining the economic and financial impact of gene patents on healthcare services and the monitoring of gene patents by the proposed Human Genetics Commission of Australia.
3.92 The ALRC has sought to adopt a nuanced approach to reform, which seeks to recognise both the generality and longevity of the patents system, on the one hand, and the new challenges generated by human genetic science and technology, on the other. There are many different points at which the patent system may be reformed to address the actual and anticipated problems posed by the patenting of genetic materials and technologies. This does not mean that reform should be sought at every point, but rather that intervention—where needed—should be directed to those places where it will be most effective. This Report seeks to describe the complexities of the Australian patent system and to explain the ALRC’s views about the desirability of reform in dealing with the problems generated by the ‘new genetics’.
 Australian Law Reform Commission and Australian Health Ethics Committee, Essentially Yours: The Protection of Human Genetic Information in Australia, ALRC 96 (2003).
 F Machlup, An Economic Review of the Patent System (1958), 80.
 See 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; M Howlett and A Christie, An Analysis of the Approaches of the Trilateral and Australian Patent Offices to Patenting Partial DNA Sequences (ESTs) (2003).
 See J Walsh, A Arora and W Cohen, ‘Effects of Research Tool Patenting and Licensing on Biomedical Innovation’ in W Cohen and S Merrill (eds), Patents in the Knowledge-Based Economy (2003), 285; Organisation for Economic Co-operation and Development, Genetic Inventions, Intellectual Property Rights and Licensing Practices: Evidence and Policies (2002); M Cho and others, ‘Effects of Patents and Licenses on the Provision of Clinical Genetic Testing Services’ (2003) 5 Journal of Molecular Diagnostics 3.
 Australian Law Reform Commission and Australian Health Ethics Committee, Essentially Yours: The Protection of Human Genetic Information in Australia, ALRC 96 (2003), [4.18], [4.35]–[4.49].
 See Ch 6 in relation to patentability requirements.
 See Ch 13.
 See Ch 26.
 See Ch 27.
 See, eg, Ch 13 in relation to a new experimental use exemption.
 See, eg, Ch 21 in relation to medical treatment defences.
Agreement on Trade-Related Aspects of Intellectual Property Rights (Annex 1C of the Marrakesh Agreement Establishing the World Trade Organization),  ATS 8, (entered into force on 1 January 1995).
 Ibid, art 27.1.
 Under the Australia-United States Free Trade Agreement, the parties agree to reduce differences between their patent systems and to participate in international patent harmonisation: Australia and United States, Australia–United States Free Trade Agreement, 18 May 2004, art 17.9.14.
 The ALRC, in performing its functions, ‘must have regard to all of Australia’s international obligations that are relevant to the matter’: Australian Law Reform Commission Act 1996 (Cth) s 24(2).
 See Ch 6.
 See Ch 13.
 See Ch 27.
 See Ch 26.
 See Ch 28.
 See Ch 6.
 See Ch 8.
 See Ch 10.
 See Ch 11.
 See Ch 14.
 See Ch 17, 18, 22.
 See Ch 19.
 See Ch 24.
 See Ch 19.