Senate debates

Wednesday, 16 October 2019


Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019; Second Reading

10:53 am

Photo of Louise PrattLouise Pratt (WA, Australian Labor Party, Shadow Assistant Minister for Manufacturing) Share this | | Hansard source

Today, as we discuss the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019, there are a few issues the Labor Party would like to draw to the attention of the Senate. As we know, the bill is a response to the Productivity Commission's inquiry into Australia's intellectual property arrangements—these include patents, trademarks and copyright arrangements—that reported in 2016.

By way of background, back in 2018 the government introduced the Intellectual Property Laws Amendment (Productivity Commission Response Part 1 and Other Measures) Bill to this parliament. The bill at that time contained a number of technical amendments to the trademark and plant breeder's rights regimes and was supported by the Labor Party. Most significantly in this bill, the government has, in schedule 1, sought to abolish the innovation patent scheme as part of a broader suite of innovation system reforms. The innovation patent scheme has been a special eight-year patent designed for small and medium enterprise innovations. Small and medium enterprises will leave the standard 20-year patent as the only form of protection.

The Productivity Commission and Intellectual Property Australia did identify that the scheme is underutilised by small and medium enterprises. The Productivity Commission stated in their report that the lower innovation step contributes to a multitude of low-value innovation patents that create uncertainty for other innovators and financiers. Innovation patents are used strategically as a litigation tool to target alleged infringers of standard patents or to increase uncertainty over the scope of rights for competitors. These are important issues that do indeed need to be addressed.

The report also noted that the inventiveness requirement for a standard patent in Australia is too low. They said:

The low innovative threshold has proven more harmful than helpful, including (perversely) for SMEs. It has encouraged a multitude of low value patents, covering everything from a pet bed to a pizza box that converts to a bib. This, in turn, has reduced the credibility that patents provide for attracting finance for commercialisation, and created uncertainty for other innovators who are unsure whether they are infringing on another party's patent. Patent attorneys openly advertise ways in which users can game the system, including to improve their bargaining position in patent disputes and to frustrate entry by competitors.

So Labor understands that the case has indeed been made and that the innovation patent has not been achieving its goals of facilitating cheap and simple intellectual property protection for small and medium enterprises.

Intellect Property Australia have concurred. They've said the innovation patent fails to encourage research and development that would not have otherwise occurred and it is unlikely to provide net benefits to the community. Furthermore, Intellectual Property Australia has identified the problem of low usage. Australian SMEs typically file around 100 innovation patents a year. Approximately 70 innovation patents are certified to achieve enforceable rights. Australian SMEs file between 1,000 and 1,400 standard patents a year. Between 2011 and 2017 Australian small and medium enterprises received between three and 10 times as many enforceable standard patents a year as they received innovation patents. For the past 18 years, Intellectual Property Australia found only 23 Australian SMEs were moderate users of the innovation patent, meaning they obtained at least five innovation patents and certified at least one.

Abolishing the innovation patent scheme without ensuring a fair and affordable access to patent protection will nonetheless negatively impact on SMEs in Australia that require intellectual property protection. SMEs that need patent protection for their innovations will find it more difficult unless Labor's sensible amendments that we've put forward to this chamber are supported and incorporated into this legislation. Abolishing the innovation patent scheme without any alternative mechanism will simply create a significant and serious gap for small to medium enterprises seeking support to access the patent system and to innovate. We note that evidence provided to the Senate Economics Legislation Committee, in its inquiry into this legislation, suggested that there would be a significant gap for SMEs if the innovation patent was removed without an alternative mechanism being put into place to assist these industries, to assist small to medium enterprises to access the patent system and to protect their innovations. Medicines Australia, in their submission, said:

… Australia's innovation ranking has fallen from 20th in 2018 to 22nd in 2019 on the World Intellectual Property Organization's (WIPO) Global Innovation Index. Consequently, there is clearly a need for Australia to develop and maintain a strong and stable intellectual property environment …

Another submitter to this inquiry, the Institute of Patent and Trade Mark Attorneys of Australia, expressed its concern about the government's failure to propose an alternative system to the innovative patent. It said:

… the Government has not provided innovative Australian businesses with an alternative system to replace the Innovation Patent System when it is phased out.

This is exactly why Labor is proposing amendments to this legislation that will extend the grandfathering period for the innovation patent. Our amendments would ensure that a statutory review is undertaken to assess the impact on Australian small to medium enterprises of abolishing the innovation patent scheme and make recommendations to facilitate access to standard patent protection for small business in Australia. Our amendments to this bill would provide small business with additional time before the innovation patent is removed and would provide the opportunity for small to medium enterprises to make their case about how the innovation patent is being used and what can be done to ensure that a simple, affordable and administratively effective system is put in place. We understand, at this point, that the government is supporting our amendments and we welcome the government's commonsense approach to doing so. We also understand the government intends to raise inventive step requirements for standard patents. But, given the government's somewhat complacent approach to scrapping the innovation patent, we will be watching this move closely because we want to ensure that the interests of small to medium enterprises are considered when any future changes are made to the standard patent settings.

Our current patent system is difficult for these small to medium enterprises to access, and, as a general observation, SMEs aren't using the innovation patent very much at all. Meanwhile, on this government's watch, Australia's innovation ranking has fallen. It's fallen on the World Intellectual Property Organization's Global Innovation Index. IP lawyers and innovation system experts must concede that the status quo for Australia isn't good enough. Some stakeholders have acknowledged this inadequate current state of play in discussions with the opposition in recent weeks. This is why the opposition is urging the government to promptly address the need for greater support for Australian SMEs in protecting their intellectual property through the standard patent. The government's response to the Productivity Commission's inquiry into intellectual property arrangements expressed that the innovation patent failed in its objective to stimulate innovation for Australia's SMEs and that targeted assistance would better achieve that objective. We encourage the government to immediately make public the targeted assistance that will stimulate innovation for Australian small to medium enterprises.

In closing, I want to make clear that Labor believes smaller businesses should be given more time before the innovation patent is removed. They should have greater opportunities to present their case to officials about how the innovation patent is being used in their individual cases and what can be done going forward to ensure a replacement system is put in place in a timely way. There is no doubt that Labor supports the overall intent of the bill, because, as my opening remarks made clear, we can see the flaws in the current system. We do recognise the need for change to the existing patents and innovation system. It isn't delivering for smaller and medium sized businesses. We urge the government to support Labor's amendments and in doing so do the right thing by smaller and medium sized businesses that are especially frustrated by the government's approach to date.

11:05 am

Photo of Slade BrockmanSlade Brockman (WA, Liberal Party) Share this | | Hansard source

I thank Senator Pratt for her contribution. I note that I was Chair of the economics committee that had a look at this particular bill. At first blush I think many of us on that committee heard the phrase 'innovation patent' and thought it was a good piece of marketing. It says something that we all support. However, on close examination, and noting that both a report from IP Australia and a report from the Productivity Commission found this, it actually was failing in doing what exactly its name said it was trying to do—that is, boost innovation in this country. I think, as a parliament—and as a government, obviously—we have to take seriously that recommendation and the fact that the innovation patent system wasn't boosting innovation in our economy. In fact it was failing to do so. In some cases it was actually being used by larger companies as effectively a legal block to innovation from smaller companies. In that light I think this is a very important action taken by this government to maintain Australia's very proud record of being innovative in science and technology particularly, but also in my beloved fields of agriculture and rural and regional innovation. We do need to look at this issue seriously.

One thing that I think is very important to point out—and I think this needs to be more widely canvassed publicly, and I'd certainly encourage IP Australia to communicate this better to the small and medium sized enterprises of Australia—is that there is actually a cheap and effective way of getting patent protection without going through a full patent application, and that is through the provisional patent system. The innovation patents, as I have said, were widely recognised through a number of inquiries as failing in that objective, but there is another option. It is underutilised. I think at least part of the problem there was that there was a lack of awareness amongst the small and medium sized enterprises of Australia.

As Senator Pratt flagged, the opposition are moving some amendments, which I understand we will be supporting, to do with having a review and looking at ways we can encourage a more innovative patent system. I would really encourage small and medium sized enterprises out there to look at the provisional patent system. Just to give you a couple of comparisons, under the current innovation patent system, which is being phased out, the filing and examination fees are around $680, which is not actually that much less than a standard patent application of $860, whereas with a provisional patent filing the initial filing fee is only $110, and that provides up to 12 months in which a small and medium sized enterprise can consider its options and whether it wants to test a market, to take a patent application forward through to full examination and protection.

The provisional patent system—though it is underutilised, in my opinion—is actually utilised by small and medium sized enterprises. Of the provisional patent applications that are filed around 77 per cent are by individuals or SMEs, so there is a system there that business and individuals can take advantage of. It is underutilised, and that is something that I would certainly encourage IP Australia to focus on, making sure that those businesses out there that are innovating in the Australian economy can have knowledge of the provisional patent system and seek to utilise it more often than they do at the moment.

I will briefly run through some of the details of the bill. Both the Productivity Commission and the Advisory Council on Intellectual Property recommended the abolition of the innovation patent system. Both of the inquiries into the innovation patent system found that small and medium sized enterprises gained little benefit from the current system. In fact, the PC found that most SMEs did not obtain any value from the system at all. The Productivity Commission saw that SMEs made little use of the system—74 per cent of small and medium sized businesses and private inventors filing once, but then never again. So, it wasn't creating an ecosystem of innovation where one innovation flowed on to another. Under the system, 83 per cent never received an enforceable right and 78 per cent let their innovation patents expire rather than paying the small cost of renewing. Additionally, innovation patents are relatively costly to third parties and the wider Australian community, with—I think it was the Productivity Commission—finding a net cost of around $11 million per year to all Australian businesses.

So, the innovation patent system hasn't achieved its intended objective of stimulating ambitious and innovative design in Australia. In fact, it has created an environment that fosters a low level of confidence in the ability of SMEs to innovate. Yes, there are always going to be exceptions to the rule. I'm sure Senator Patrick may tell us later about some of the companies in South Australia that have been using the system. But we cannot base our laws on the exception. We must base them on the rule, and the rule, as found by the Productivity Commission and by the other inquiry, is that the innovation patent system was actually reducing the level of innovation. It suffocated freedom to operate business and it restricted the ability of SMEs to remain internationally competitive.

One of the biggest drawbacks of the system was the low innovation threshold required to claim a patent. To be eligible for an innovation patent, the invention must be new and is only required to be 'different from what is known before and the difference makes a substantial contribution to the working of the invention'. So, innovation patents do not require that the invention meets the inventive steps required for standard patents. This created a level of uncertainty around whether and where SMEs have the freedom to operate. One particular submission to the Productivity Commission noted that an innovative software project was cancelled due to concerns of undiscoverable patents. This was never the intention of the innovation patent system. It was there to encourage Australian SMEs to innovate and design new inventions, whereas the system created an environment where SMEs feared they were constantly in danger of infringing. When legal fees for IP solicitors can run to $1,000 an hour, most small to medium sized enterprises, as everyone in this place knows, cannot sustain a fight for very long over a patent or an innovation claim.

The inquiries also found that this low innovation threshold created the problem of patent thickets in the market. This is where a large number of innovation patents, marginally different from one another, were set up around the designs of other companies', often SMEs', products. This suffocated the ability of small to medium sized enterprises to actually build on and develop their own product and grow their own level of innovation. Big businesses file almost four times as many innovation patents as small to medium sized enterprises, with Apple—who I think everyone would acknowledge is a very large enterprise—being the single highest filer of innovation patents in Australia.

There is another problem with innovation patents in that they weren't recognised in the international system. This increased the risk of overseas organisations copying the invention, effectively with no consequences. That therefore jeopardised the success of Australian SMEs.

The nature of the patent system is that details are published and in the public domain one month after filing. This is comparable to 18 months on a standard patent. So you had a situation where there was weak protection, where the system was being used by larger companies to prevent innovation in smaller companies and where two significant reviews of the system found that it was actually to the detriment of Australian innovation. I'll go back to where I started: there are other options there for SMEs through the provisional patent system and now, through the review, the government has agreed that it can look at ways of increasing the level of innovation amongst our very worthy small and medium-sized enterprises.

To go through the current system, the standard patent system is the main mechanism, particularly once the innovation patents are phased out. Standard patents provide greater protection for an invention and also incentivise a higher level of innovation. The government is committed to ensuring that this is a smooth transition process, and support services will be available, particularly to small and medium-sized enterprises. This includes the ability to fast-track requests, which enables applicants to have their applications examined in an expedited fashion at no additional cost. SMEs will receive an examination report within eight weeks—about the same amount of time that an innovation patent takes. SMEs will be further supported through the application process by the availability of dedicated IP Australia case managers. These case managers will be able to support applicants through the process, as well as help with international applications and protections. IP Australia's web presence will be redeveloped to ensure that SMEs have 24/7 access to this advice and support, as well as accessing the intellectual property portfolio management tool.

Finally, the government will ensure that SMEs in regional areas will be supported by providing education services via events and online. Again, this need to deliver a greater level of education to small and medium-sized enterprises, particularly those outside the major population hubs, is very important. People need to know what they have to do. They often need to get support. We've all heard stories of people, particularly in rural and regional Australia, who are inventors but who don't necessarily understand the law, don't necessarily understand how to protect their intellectual property rights. We know how important it is that they do.

I was at a conference with the head of the Defence Forces, and he was saying that one of the most important things for small and medium-sized enterprises when dealing with military procurement is to make sure they actually have their intellectual property tied down. They need to have themselves fully protected if they expect to do business with the Australian military. That's understandable from Defence's point of view. They need to know that what they're buying is properly owned and properly controlled by the company that's selling it to them, but that is obviously a potential hurdle for the small and medium-sized enterprises who wish to try to achieve something in that space. Through this provision of services to small and medium-sized enterprises, IP Australia can greatly assist in that sphere by making sure SMEs can act quickly on an idea, can get the advice they need to get protection in overseas jurisdictions and can get the dedicated case managers they need to make sure that the proverbial t's are crossed and i's are dotted and to make sure that the intellectual property protection is there so they can do business both in Australia and globally in the most efficient and effective way possible.

Getting rid of the innovation patent system over a period of time will reduce a level of trivial and undeserving innovations being covered by our intellectual property rights system. We want a fairer environment. We want to restore innovation confidence to SMEs. As I've said, the government will support the amendments proposed by Senator Pratt. These amendments require the government to review the accessibility of patents of small and medium sized enterprises in the 15 months after the bill is enacted. The phasing-out of the innovation patent system will start 18 months after the bill is enacted rather than 12 months after enactment. By encouraging SMEs to use the standard patent system and the supports available, we will create a more balanced IP system with the ability to enjoy all the benefits to our economy that science, innovation and new technological developments bring to us all.

11:20 am

Photo of Rex PatrickRex Patrick (SA, Centre Alliance) Share this | | Hansard source

I thank Senator Brockman for his monotone and unconvincing contribution to the debate.

Honourable Senator:

An honourable senator interjecting

Photo of Rex PatrickRex Patrick (SA, Centre Alliance) Share this | | Hansard source

If he wants to listen to what I've got to say, he may well learn a few things—as I have done as I've wandered around the country talking to small businesses. This bill, amongst other things, seeks to end Australia's innovative patent scheme. In committing itself to this course of action, the government drew upon a range of studies which argue that the current IPS does not deliver Australian small to medium enterprises what they need. This is in direct contradiction of the submissions from SMEs and certainly does not reflect the views and experiences of a number of South Australian innovation based companies that spoke to me personally on this issue.

The government is suggesting that the IPS does not deliver on the purpose for which it was established: to incentivise research, development and innovation. Such commentary shows a disturbing lack of understanding about what drives Australian companies to innovate. Companies are motivated to conduct research and development for two predominant reasons: they have an idea that will ultimately make them money and the government offers R&D tax concessions which help alleviate cost and risk associated with research and development.

Senator Brockman suggests otherwise. He suggests that the motivation for doing innovation here in Australia is that you can get a patent at the end. That shows a complete lack of understanding of business. I don't mean to denigrate Senator Brockman. I know he's toeing the party line and probably doesn't really mean what he says. That is not the reason why people innovate in this country—not at all. I know because I ran an R&D cell for about 10 years. I used the patent system. I know its traps; I know its benefits. But at no time did my company ever suggest to me, when I was running an R&D cell, that the reason we were doing it was for anything other than making some money at the other end from a good idea.

There was evidence provided by Mr Gibbs at the committee hearing. He appeared in a personal capacity, but he is an intellectual property lecturer at Monash University and an IP attorney. His evidence was comprehensive and disturbing. He provided evidence showing how patent applications from Asia have risen from obscurity to dominance in the international patent applications system over the last 20 years. He stated:

China is now the biggest player in Asia, although Japan and South Korea are also big players.

Mr Gibbs stated that 'China recognised the importance of controlling intellectual property ownership' and he advised the committee that China has a regime similar to Australia’s IPS—which is called 'utility model applications'. He said:

They are cheap and quick to obtain and they last for a shorter term, whereas standard patents are expensive, take a long time to be granted and last for up to 20 years. By providing both types of patents and encouraging citizens to use them, China has succeeded spectacularly in growing its local ownership of patent rights, and this has translated into extensive ownership of international patent rights.

It's clear from the Chinese experience that there is utility in such a scheme. I don't know whether the government has noticed this but China's economy is booming and ours is sitting relatively flat, somewhat due to the fact that the government has no vision. In the Governor-General's speech—and I'm not critical of the Governor-General, because of course he's just reading the message of the government—is a whole bunch of housekeeping stuff on health, education, mental health and infrastructure. They are important things, but if the Labor opposition had got into government, the same things would have been in the speech. There's nothing in there about vision—nothing.

So it's with this wisdom, and based on a false premise, that the government is now moving ahead and abolishing the scheme. If you think I'm getting angry about it, I am—because I've spoken to South Australian companies who do not want this to go ahead. I'm going to explain exactly why they use the innovation patent scheme and why the Productivity Commission has misconstrued its own statistics. Australia needs to be using every tool at its disposal to facilitate the protection of innovations. Mr Gibbs provided concerning evidence on the patent take-up rates in Australia. He advised the committee that in China each year 21 patent applications are filed for every 10,000 residents. In Germany it drops down to 10 per 10,000, in the US it's nine per 10,000, in the UK it's three and in New Zealand it's two. Does anyone want to guess what it is in Australia? It is 1.4 applications per 10,000 people, compared with 21 per 10,000 people in China. That is a telling statistic. Mr Gibbs said that if innovation patents were abolished, the figure for Australia would drop to 1.02 per 10,000 people. Importantly he went on to say:

In my opinion, the Australian government should be taking steps to improve Australia's future economic position by increasing the ownership of patents by Australians. If you're looking for reasons why Australia's productivity has been stagnating, then the number of Australian owned patents per capita is a key indicator. In my opinion, the abolition of innovation patents would be a step in the wrong direction.

I and many South Australians agree with Mr Gibbs.

Let me now explain why the Productivity Commissioner is wrong. I sat down with a number of companies last week—and I acknowledge that the minister's office and IP Australia attended. We listened to a group of CEOs of South Australian companies talk about the way in which they use innovative payments. Listen carefully, because this is something that the Productivity Commission, for all its wisdom, for all its resources, didn't manage to discover. I talked to one company in South Australia that has 40 or 50 physicists working on innovative ideas—things that they can turn into products that they can then export and are exporting. What happens is that they spend about a year with 40 physicists working on something as a stepping stone to something else.

Just to give a made-up example to help the chamber out, if you are trying to get to a new type of mobile phone, you've got to have a number of steps along the way. Those steps are not necessarily things that you can patent using a standard patent. A standard patent might require, to use another example, 100 points, and all someone has to do to knock out a patent is knock away one point. If you have 99, the patent doesn't stand. With the IPS, you only have to get to 80. So, you can use it to protect a stepping stone while you move to the next stepping stone, which you also protect with an IP, and then the next one. And then finally you get to the point of a standard patent, where you now protect the idea that you want to take to market.

When you look at the statistics, that's the reason these IPs are not renewed. They achieve a purpose and the company moves on and makes an application for another one to protect the next stepping stone and so forth. And that's going to go. That company in South Australia is a great company and it employs a number of South Australians and it generates exports. They are going to be harmed by a Liberal government that says it's interested in exports and in supporting small business.

Senator Gallacher asked a question in the committee. He asked the government: 'Is there a saving if you get rid of the innovation payments? Do you save money?' IP Australia answered, 'We don't save money.' So you are shutting down a scheme that is useful to Australian companies and it's not going to save you a brass razoo. This is crazy stuff. It makes no sense to shut down the IPS when it is useful and valued by SMEs, especially if retaining the system costs you nothing. There's a certain arrogance in officials and indeed politicians who are telling that to companies and entrepreneurs—particularly when the companies and entrepreneurs don't get a regular pay cheque like the officials do. Everyone in this chamber knows that, at the end of the month or every fortnight, they're going to get a pay cheque. That's not what happens in the corporate world. You have to run a business sensibly. You have to work out ways to make money. We are arrogantly telling these people what they don't need.

Make no mistake: the South Australian companies I talk to want to retain this. By shutting it down, you are hurting Australian businesses. If anyone wants to contact my office, I'm happy to bring you down to South Australia and show you. You can talk to these companies. That's what the Productivity Commission didn't do, that's what IP Australia didn't do and that's what the government didn't do.

When we asked these companies about the consultation, none of them were aware of it. They were too busy making money, creating jobs and exporting materials overseas. They don't have time to watch what the Productivity Commission is doing. They could of course employ someone to keep an eye on the Productivity Commission and keep an eye on the chamber. But these are people who are trying to do business—and you're trying to shut them down, you're trying to hurt them. There is arrogance in officials and politicians doing that.

Labor has proposed some amendments, and Centre Alliance will support them because they're the lesser of two evils. But I ask Labor: have you got this in writing? Have you got this secured? I know what happened when you made a deal on encryption. You made a deal on encryption and let legislation go through, but the government didn't honour that. For some reason you don't remember that. So I hope you have a solid commitment on this. Senator Pratt said she will be watching the government. And I will be watching the opposition to make sure you get what has been committed to you by the Liberal coalition, because if you don't you will have sold out Australian SMEs.

I will be moving an amendment later and I'll be asking for the support of the chamber. I note that Senator Roberts is here. If Senator Roberts wants to come across to my office, I've got submissions from Queensland companies that say they do not want this abolished. The bill does a lot of good things but the schedule that removes the innovative patent scheme is flawed, it's not well thought through. It's been designed by people who are remote from the real business world. I urge people to support my amendment when I move it.

11:34 am

Photo of Paul ScarrPaul Scarr (Queensland, Liberal Party) Share this | | Hansard source

I note the comments that were just made by Senator Rex Patrick. Obviously the good senator is extremely passionate about innovation and the ability of small and medium enterprises both in his home of South Australia and across the country to pursue innovation and unleash that entrepreneurial and innovative spirit, which I believe Australia is still renowned for.

In defence of my colleague Senator Brockman, from Western Australia, I think Senator Brockman is aware of the commercial realities underlying the development of patents and the small and medium sized enterprises who develop ideas and seek to take those ideas, through an intellectual property process, to the market and generate revenues, ultimately producing and deriving profit for the benefit of themselves. From my experience of dealing with innovators in the small and medium sized enterprise sector—and I'll come to that in a moment—there's also that spirit of wanting to pursue an idea and commercialise it so that people both in this country and around the world have the benefit of it. In my experience, it isn't just about money. Money is extraordinarily important to it; the profit is extraordinarily important to forming the basis of a sustainable business, but there is that desire to also commercialise an idea so people across the world can have the benefit of that idea. And I've seen that in the context of the mining industry.

I worked for 12 years in a mid-tier mining company that set up two mines in one of the poorest countries in the world, in Laos—a copper and gold mine, and a gold and silver mine. In that company, we actually used intellectual property that was designed right here in Australia by small and medium sized enterprises. I would always say to people when they talked about mining that mining is not, as it is sometimes characterised by certain stakeholders, simply digging a big hole in the ground and operating that hole like a quarry. I am not intending in any way to cast aspersions upon my friends who run quarries—very important business in this country. But the reality is that mining relies on innovation and technology. And I saw, in my previous life outside of this place, the great work that companies are doing in this country in that space. This includes things like environmental monitoring systems. It includes things like tyre management systems, which mean mining companies can utilise their tyres and maintain them so they get greater use out of those tyres. That's what being a sustainable business is about, and there are a lot of great things which are being done in that space.

In relation to that sector, there are difficulties with the current system. Senator Brockman did a good job, I think, outlining some of those real practical issues for those small and medium sized enterprises, which Senator Patrick is passionate about—and I recognise his passion in standing up and fighting for them. The protection for low-level incremental innovation will no longer be available with the abolition of this category of a provisional patent. That's important because the Productivity Commission actually found that that low threshold allows for a proliferation of low-value patents and what's referred to as patent thickets. What's the result of that? I can tell you what the result of that is. I have an example. It's a quote from a submission from a company in the resources space, an SME who supplies the mining industry—an industry I was involved with and am a passionate supporter of. It's been de-identified for privacy reasons. The SME was disadvantaged by the innovation patent system, disadvantaged by the occurrence of what's referred to as patent thickets—the proliferation of low-value patents. Who uses that flaw in the system? It's the big companies seeking to crush that small and medium sized enterprise entrepreneurial spirit, which Senator Patrick spoke so passionately for.

Here's a direct quote from one of those SMEs: 'We've been recently threatened by a big corporation with a letter of cease and desist for'—a certain product—'which has been widely used in the mining industry for almost 30 years and regarded by some of the leading experts as common knowledge. Fortunately, I've gathered enough evidence and had the money to be ready for a potential court action. However, there are so many other small-business owners who could not afford the $1,000-plus per hour legal fees from a decent IP solicitor, and I think that sort of IP system is the antithesis of fair competition.'

So, whilst I respect Senator Patrick coming into this chamber and defending businesses that form part of his constituency in South Australia, the reality is that there are, equally, small and medium-sized enterprises who are currently being disadvantaged by the system, which this bill is seeking to address. Again, I reiterate: it is the protection of low-level incremental innovation that's causing this issue of low-value patents and patent thickets for small and medium-sized enterprises in the mining sector. And it's not just the mining sector. Many small software firms wrote to the Productivity Commission and the former Advisory Council on Intellectual Property stating, for example, that 'innovation patents make innovation in the software industry much more difficult because of the low threshold and uncertainty about freedom to operate'.

Again, I'm quoting from the actual submissions. There was consultation. If there hadn't been appropriate consultation, I wouldn't be able to stand in this chamber today and quote from them, to be quite frank. Here are some examples of submissions from software firms: 'The innovation patent system provides a high financial legal risk to incidental infringement'; 'protection for fairly unsubstantial ideas'; 'a tool in legalised anti-competitive practices benefitting only market-dominant companies'—I'll repeat that: a tool in legalised anti-competitive practices benefitting only market-dominant companies—'and hence, a detriment to consumers.' Senator Patrick maybe needs to take some care that he is not going to throw out the baby with the proverbial bathwater in this debate, because there are small and medium-sized enterprises in the mining sector, as I've referred to, and in the software space, who will be affected. My home state of Queensland has a great history of software development and IT innovation. There are small software firms who are concerned that the current system provides—and I'll quote again—'a tool in legalised anti-competitive practices benefitting only market-dominant companies'. I personally think that's something this Senate needs to address, and this bill seeks to do exactly that.

Let me give you another quote from a submission, another quote from the product of the consultation that occurred in relation to this legislation: 'Patents have damaged innovation in the software industry, and I personally have been involved in an innovative software project that was cancelled due to concerns of undiscoverable patents.' This player in the small and medium-sized software space actually cancelled the project because of concerns about what the current system was producing—cancelled the project. That's crushing innovation. That's actually crushing the innovation which Senator Patrick speaks so passionately about. So I think we need to be careful before coming to hasty judgements with respect to this matter.

I'll go further. Innovative Australian company iSignthis supports the phasing out of the innovation patent system, giving an example of a software innovation from a competitor that was rejected for a patent in the USA due to iSignthis's own pre-existing patent. I mean, any system that produces an outcome like that has to be cast into question. However, the competitor's innovation was able to be protected in Australia as an innovation rather than a standard patent. This curtailed iSignthis's freedom to operate. It substantially increased its costs and impinged upon its freedom to operate—an innovative Australian company, iSignthis.

Lastly, I'll give you another example. Innovative Australian companies ResMed, Cochlear and Mylan all support the phasing-out of the innovation patent for similar reasons. These are great Australian companies. These are wonderful Australian companies that, on the basis of ideas in Australia, innovation in Australia, research and development in Australia, have commercialised their IP, their products, taken them to the market, provided a wonderful service to countless people all over the world and are listed on our Australian Securities Exchange. What did they say? 'Innovation patents can be a disincentive to invest in Australian R&D and expand or maintain manufacturing in Australia.' That's exactly what we want to do. We want to not just maintain manufacturing but expand manufacturing in this country. Why do they say this? Because of the way they can be strategically used by competitors. I must say, when a senator refers to innovations in the People's Republic of China with respect to intellectual property, I think that needs to be taken with a grain of salt. I would be very, very happy to put our patent, innovation and intellectual property protections against some other countries in the world any day.

This is what ResMed, Cochlear and Mylan are saying: 'Innovation patents can be a disincentive to invest in Australian R&D and extend or maintain manufacturing in Australia. The disincentive to invest in Australia and potential enforcement of innovation patents against Australian manufacturers has the ripple effect of reducing Australia's tax base.' Again, that should be something this chamber is fighting against. We should be conducting the research and innovation in this country. We should be conducting the manufacturing and expanding that manufacturing in this country. The creation of that wealth should lead to a higher tax base in this country, which will provide the services that the Australian people have a right to expect when living in this country. There are some material issues with the current patent system. Substantial consultation took place and that consultation did discover those concerns from actual operators—small operators, medium sized enterprises and the larger doyens of the research and enterprise sector in this country, who have provided such an inspiration to all of us.

Can I also say: there are alternatives. The provisional patent system provides one of those alternatives. SMEs will not be disadvantaged, or should not be disadvantaged, by this change. The few who do use innovation patents regularly will receive dedicated support and services from IP Australia to ensure they are not negatively impacted. If they are, we should all come back to this chamber. We should go to our ministers and raise those concerns. That's exactly the reason I put my hand up to serve in this place: to make it easier, not harder, for small and medium sized enterprises to be innovative, engage in that research and establish manufacturing bases in this country. Some of the services that IP Australia will provide include fast-tracking of standard patent applications, access to dedicated IP Australia case managers, a purpose-built platform for small businesses to access tailored products and dedicated outreach programs which will deliver patent education to small businesses in regional areas. Those services are extremely important and need to be provided.

I would like to finish on a positive note. I was delighted last month to attend a STEM camp for grade 11 students in my home state of Queensland, at the Queensland University of Technology—one of our great universities in the state of Queensland. It was an absolutely inspiring day. There were grade 11 students from all parts of Queensland in the camp for the course of a week, working with some of the smartest minds in my home state of Queensland in the STEM field.

The one workshop I attended, which left a longstanding resonance with me, was in relation to industrial design, intellectual property. There were six teams of grade 11 students who were asked to design a stool. I don't know about you, Mr Acting Deputy President Brockman, but I find it easier talking about this workshop than I would have found participating in it, and I said that to the students themselves. These students were asked to design a stool that would carry 75 kilograms of weight, although I must thank one of the students—when I approached his stool, he said, 'It's okay, Senator, it will actually take 200 kilograms.' Maybe it was over-engineered but it was safe and prudent to be so!

I was so impressed by these students' intellect, ingenuity and innovation. They showed me prototypes. One showed me on his laptop how they'd used design features on his computer to design the stool. There were artistic flares and flourishes with the stools. My favourite—the one that would take a 200-kilogram senator—had decidedly art deco flourishes. It was quite an inspiration. I said to those students and I say to this chamber today, I think this country has a fantastic future when we've got such talented students, in all of our home states, who are being supported by educational institutions and those of us seeking to make it easier, not harder, for them to realise all of their opportunity and full potential. Thank you.

11:51 am

Photo of Malcolm RobertsMalcolm Roberts (Queensland, Pauline Hanson's One Nation Party) Share this | | Hansard source

As a servant to the people of Queensland and Australia, in speaking on the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019 I want to speak mostly about the amendments to be proposed by Senator Patrick. I won't be voting on this bill, because our party will not be supporting any critical legislation until the government comes good with supporting dairy farmers with a code of conduct. That is essential. That is a matter of priority. But we also want to protect small business and we need to continue to ensure that small business is given a fair go in our country. Small business is the largest employer in Australia.

Coming back to this legislation, the purposes of the original legislation were to provide protections for the owners and developers of intellectual property in Australia, including providing protections through the innovation patent system. Many small businesses rely on incremental innovation, and this has been protected by using the rapid and low-cost protection provided in the innovation patent system. The bill before the house would phase out this important protection without replacing it with a system offering the same advantages that the innovation patent system provides. What would be left is the standard patent system, which is expensive and slow and provides uncertainty in the level of protection it should create for the business that is developing innovative technology and ideas.

The existing innovation patent process offers rapid and low-cost protection for these small businesses. Without that level of protection offered through the innovation patent system, small businesses, which provide substantial employment and potentially turn over millions of dollars annually, may lose all if an unscrupulous business should steal the technology related to commercially relevant operations before it is fully protected. This government has said that it will stand up and support small businesses—just as it said it will be building dams. Three days ago it said it will be building dams. It turns out it's two dams with incremental improvements to existing dams. That's it—no vision, no forethought, no rescuing of farmers today let alone in the future.

To dump the innovation patent system and erase the advantages of rapid and inexpensive patents is contrary to the interests of Australian small businesses relying on the protection of their innovative technology. In my experience, in my reading of history and technology, innovation comes from the individual. Small businesses rely on the individual and they create the perfect ground for the fertilising and developing of ideas. This is, in a sense, a trade measure that works contrary to Australian interests. That's what the government is proposing. Why would they do so?

Perhaps the Prime Minister's admission a week ago last Thursday, when he talked about unaccountable, internationalist bureaucrats who dictate the globalist agenda, leads to the answer.

Australia became a signatory to the UN's Lima Declaration in 1975, when Prime Minister Gough Whitlam, the Labor Prime Minister, signed the declaration. It was ratified the following year by Prime Minister Malcolm Fraser, the Liberal Prime Minister. The original signing was at the second general conference of the United Nations Industrial Development Organization, UNIDO, held in Lima, Peru. By the way, major countries around the world did not commit to it but Australia did. We committed to adopting trade measures designed to ensure increased exports from developing countries to developed countries, including Australia, and to stimulate free trade transfer of our processes, our management and our technology to the Third World. Look at what that has done. These measures have been devastating to Australian manufacturing, agriculture and industry generally and to the Australian economy in general. A global approach has not been good for Australian interests, when Australian interests must come first. The government's responsibility is to the people of Australia and to the country of Australia.

In 1994, the Liberal Premier of Western Australia, Richard Court, outlined the way in which our government had been usurped by the United Nations, in particular, and other globalist entities. That was 25 years ago. Two years later, 23 years ago, Pauline Hanson MP, as she was known at the time, also spoke about the erosion of Australian sovereignty and the decimation of Australian industry due to the UN and other globalist entities. Ten years ago, when I learned about it, I started speaking about it. We can assure everyday Australians that we will work relentlessly to restore Australian sovereignty. We are far too closely aligned with the UN, whose interests are not aligned with the interests of Australia. We need to restore governance in Australia that is working for Australia's interests, and we will continue to work to restore governance in Australia that is working for Australia's interests.

We need to protect small business intellectual property. The major parties—Liberal and Labor—have let down the Australian public in many ways. This bill, which neglects small business, is just another example of the sellout of the interests of Australians by the government. So I support the amendments that, as he foreshadowed, Senator Patrick will move, because they will maintain the protections achieved by the current innovation patent system, and we are opposed to the removal of the innovation patent system.

11:57 am

Photo of Perin DaveyPerin Davey (NSW, National Party) Share this | | Hansard source

I rise to speak on the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019. This bill is the second piece of legislation that delivers on the Liberal-National coalition government's commitment to review and reform our intellectual property system. Before I begin my contribution, allow me to address some of the comments that Senator Patrick made earlier. The company to which Senator Patrick referred in his contribution is, as I understand it, an ASX listed company with an annual turnover of $2 billion. This is not a small or family business, which the innovation patent system was designed to support. Indeed, Senator Patrick has highlighted the problem with the broken system: it has been used by large multinational corporations, such as Apple, at the expense of small and family businesses.

Our government makes no apology for standing up for small and family businesses. After all, we are the government for small and medium enterprises and family businesses. These reforms are designed to deliver a system that will work for those businesses. Importantly, the government has undertaken significant consultation with the small business sector, as well as with other industry stakeholders, with respect to our proposed changes. Senator Patrick is way off track when he claims that no consultation has been undertaken. As part of its review into the system, the Productivity Commission held hearings in every capital city in every state, including South Australia, as well as in regional locations. And, in its own review into the innovation patent system, IP Australia undertook consultation as well. This is not rushed reform. That is why it is now the second bill looking to amend our intellectual property laws. This bill is the result of over four years of careful, considered consultation with the industry and with our stakeholders. The intellectual property system is an important element of the economy, because it promotes and incentivises investment in creativity, innovation, research and technology, which is exactly what our government seeks to enable.

In 2015 the Productivity Commission was asked to undertake a review, and that's when the consultation started. The government responded to the Productivity Commission's recommendations in 2017, and we then undertook making the amendments necessary to deliver on our response. The first bill, which was implemented in 2018, was commended on its thorough stakeholder consultation by the Senate and received royal assent on 24 August 2018. This bill builds on the previous bill's stakeholder consultation and addresses the further recommendations by the Productivity Commission to reform the patent system, which is contained in schedule 1 of this bill. The bill also includes amendments in response to a number of other recommendations made in 2013 regarding compulsory licensing of patents. It also makes a number of technical changes to streamline and modernise the administration of Australia's intellectual property systems. As I said before, extensive consultation has been undertaken all the way through, because as a government we want to work with industry, stakeholders and small to medium enterprises to encourage innovation and entrepreneurship.

We have great minds in Australia, including in regional Australia. In fact, the combine harvester was invented in Australia and is now used internationally. That is what our country is capable of and that is what our government wants to support. Many of our best ideas are born from small to medium enterprises and family businesses. But, unfortunately, as found by the Productivity Commission, they are the least likely to benefit from our existing innovation patents system. The cost of the innovation patent system appears to be a barrier for small to medium enterprises, which does exactly the opposite to what the system was designed to do, and that is to encourage innovation. Senator Patrick had a go at my colleague Senator Brockman because he interpreted Senator Brockman's comments that small to medium enterprises would innovate only if there was a patent at the other end. But in saying that, he rightly identified that it's not about the patent for people innovating; it is about making money at the other end. And the best way to enable people to make money from their good ideas is to give them a patent that provides them security without doing so at excessive cost to the industry.

The Productivity Commission found that our current innovation patent system places too much of a cost burden on small to medium enterprises, so as a government we are taking that on board. We have consulted and we are acting. We are not removing people's access to patents. We are streamlining the system so that they have better certainty and better security.

Part 2 of this bill begins the phasing out of the innovation patent system. It is a second-tier patent system that is not working. The government's decision to phase out this system was based on an assessment of its impact on the innovation system and on the economy more broadly.

The government accepts the amendments that are proposed by Senator Pratt. These amendments will require us to review the accessibility of patents with small- to medium-sized enterprises in the 15 months after the bill is enacted, and that is a sensible thing to do, because we are talking about making business for small to medium enterprises easier, better and more efficient, so it is a sensible amendment that we will be supporting.

The phasing out of the innovation patent system will start 18 months after the bill is enacted rather than 12 months after the enactment. They system was originally intended to encourage small to medium enterprises to do more research and development and to protect their smaller inventions. But, as I've said before, the top five applicants over recent years have been Apple and four large Chinese entities. The evidence shows us that our innovation patent system is not doing what it is designed to do. It is not encouraging small to medium enterprises to apply for innovation patents. In fact, the cost burden is actually pushing them out. So, this reform will remove the uncertainty and confusion around granted but unexamined patents in the system. It will prevent firms from using the system as a strategic tool in infringement matters, and it will remove unnecessary costs on third parties and consumers that have been generated by the system.

In drafting this reform, we did take our time—but we took our time to make sure we got it right. A number of possible reforms were considered as an alternative to the complete abolition, but these improvements would have substantially limited the advantages of the system itself. Through our consultation we have identified that just correcting the current flaws of the innovation patent system would have resulted in the reintroduction of a system similar to the petty patent system, which was previously abolished. So this legislation is designed to implement reform that ensures that existing rights are maintained and protected and that there will be no impact on innovation patents filed before the legislation commences.

SMEs will not be disadvantaged by this change, and those few that do use the innovation patent system regularly will receive dedicated support and services from IP Australia to ensure that they are not negatively impacted. Senator Patrick has questioned why the government are doing this if, as per advice he has received, there is no government cost saving from IP Australia in doing so. But for this government it is not about reducing costs; it is about saving businesses money and making it easier for businesses to do business. It is about supporting small to medium enterprises, and it is about making the system better so that those who have good ideas can get the patent protections they need without excessive costs to themselves or third parties. To do so, IP Australia are going to provide services to small to medium enterprises that include the fast-tracking of standard patent applications so that small to medium enterprises that want a fast patent can get their application examined as quickly as possible—as quickly as they could have for an innovation patent, and at no additional cost.

They will also provide access to dedicated IP Australia case managers, which will include support for small businesses to seek fast protection in Australia and in overseas markets. They will provide a purpose-built platform for small businesses to access tailored products and services, including 24/7 assistance, industry advice and intellectual property portfolio management tools. They're also developing dedicated outreach programs to deliver patent education to small businesses in regional areas to support the diversified intellectual property strategies required throughout the business cycle.

The Department of Industry, Innovation and Science has conducted extensive stakeholder consultation to better understand the needs of small to medium enterprises in relation to commercialising their ideas, and all these support networks are designed to realise that. The department of industry and IP Australia are working closely together to explore and develop further opportunities to support small to medium enterprises in doing this. The government does not accept the amendments to the bill that are proposed by Senator Patrick and Centre Alliance to remove the amendments commencing the abolition of this innovation patent system.

I will also briefly address some of the other aspects of the bill. Part I of the bill introduces an objects clause to the Patents Act. A number of inquiries, including that of the Productivity Commission, found that the patent system lacked a clear objective or overarching framework to guide decision-makers and the community and therefore recommended the introduction of an objects clause into the Patents Act—and this certainly is not an unusual clause for a piece of legislation. The objects clause will provide an overall statement of general principle about the purpose of the Patents Act and will provide assistance to the courts to interpret the legislation and to resolve uncertainty and ambiguity. It will ensure the patent system remains adaptable and fit for purpose as new technologies and innovations are developed in the future.

Schedule 2 will improve the transparency and accountability for Crown use of patented technology, while protecting the rights of the patentee. Crown use is a rarely used safeguard in the Patents Act that allows the government to access and use patented technology without authorisation from the patentee. The changes we are proposing today will clarify the circumstances in which Crown use can be invoked. It introduces a level of ministerial oversight and provides a clearly defined standard for the remuneration paid to the patentee—that is, we are going to respect the innovator and the patent holder.

Schedule 4 requires the courts to consider whether it is in the public interest to grant a compulsory licence. Compulsory licensing provides a mechanism to prevent the patentee from restricting others from exploiting the invention in the local market, where the patentee has failed to do so itself. These provisions are rarely used. The changes will amend the compulsory licensing provision to replace the reasonable requirements of the public interest test with a new public interest test, the focus of which will be whether demand for a product or service is being met on reasonable terms and whether access to the patented invention is essential for meeting that demand. The amendments will improve the clarity and certainty of the legislation and strengthen the rights of patentees by allowing access to the patent only when it is in the public interest to do so.

The remaining schedules to the bill make minor technical amendments that will streamline procedures and improve the efficiency of the IP system. They make minor changes to the Patents Act and Trade Marks Act to correct errors, to streamline procedures and, importantly, to reduce red tape when applying for IP rights and applications.

This bill builds on the government's extensive consultation with the sector and with stakeholders and it enhances Australia's IP system. It supports innovation, creativity, businesses and growth. It supports and encourages innovation while making it easier for small-to-medium enterprises to get a standard patent and to have their innovation rewarded without excessive burdens. I commend the bill to the chamber.

12:13 pm

Photo of Matt O'SullivanMatt O'Sullivan (WA, Liberal Party) Share this | | Hansard source

I rise to speak on the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019. As part of our government's plan to grow our economy and create 1.25 million more jobs, we have a longstanding commitment to innovation and technology. This commitment has seen the economy create over 1.3 million jobs since we were elected. That's why Australia's economy is growing at 2.3 per cent—a stronger rate than the OECD average and all other G7 economies, except for the United States. We recognise that innovation is the catalyst for creating business and job opportunities in the future. As a government, we've demonstrated our commitment time and again to developing considered policies that get the right settings, and to providing unprecedented funding, informed by expert advice. We on this side of the chamber are making sure innovation includes all Australians. It's about bringing along traditional industries while we're also developing new technologies, industries and firms. And it's about making sure that this system remains accessible to all. Australia's intellectual property system makes an important contribution to the economy, because it promotes and incentivises investment in creativity, innovation, research and development.

This bill has been brought before the Senate by the government as a responsible and measured response to a Productivity Commission report which recommended a range of improvements to our IP arrangements. The commission completed its public inquiry into Australia's IP arrangements and published its first inquiry report on 18 August 2016. They were asked to consider whether current IP arrangements provide an appropriate balance between access to ideas and products and encouraging innovation investment and the production of creative works. It's critical that this system not only keeps pace with expectations in the 21st century but remains accessible to all individuals and organisations seeking to have their good ideas protected, giving them the confidence they need to create and grow new businesses.

This bill represents the second set of legislative measures in response to their first report and proposes a number of technical fixes to the system. The singular focus and objective of Australia's intellectual property system is to support innovation and investment in the Australian economy, ensuring businesses have the confidence to grow, to employ more Australians and to keep our nation at the global forefront of developing new technologies, ensuring Australia's IP arrangements keep pace with advances in technology and new ways of doing business in an increasingly globalised world. This innovation and research plays a significant part and is critically important to ensuring our industries and universities remain on the cutting edge.

Nowhere is this more important and prevalent than in my home state of Western Australia. Acting Deputy President Brockman, you certainly know how important this is. Since the iron ore industry was opened up by Menzies and the Court government in the 1960s, our resources sector has been on a consistent and rapid trajectory of growth, enabled by significant advances in the homegrown development of technology which has increased production, productivity, efficiency and, very importantly, safety. We all know that this comes at significant cost. Over decades, we've seen billions and billions of dollars spent by industry, businesses large and small—in partnership with government—and research institutions on research and development activities.

Australia's strong intellectual property arrangements have played a critical role in providing the necessary confidence in protections to enable this development. Australia, and Western Australia in particular, would be a very different place if the system were not as robust as it is. Government and industry from around the globe are now looking to my home state of Western Australia to provide solutions and technology for their own industries. We see this in the resources sector, the agricultural sector and remote operations like the subsea and space sectors, just to name a few. As a direct result of research and development over the last few decades, we have now seen significant new opportunities from across a range of new and adjacent industrial sectors—which, on the face of it, seem to bear no relationship to each other—coming together to solve quite significant problems. Just look at our oil and gas industries and the mining sectors and see how they're contributing to the space industry. Just look at the space industry and how that stands to contribute to agriculture.

If I was to give one example of this type of collaboration being enabled in WA, it would be the partnership between Woodside Energy and NASA. If you go to the Woodside building in Perth, you'll find what they call a robonaut—a next-generation robot powered by artificial intelligence and technology, developed by our resources sector through decades of investment, trial and error and breakthrough after breakthrough in remote operations. And there are others. Rio Tinto and Fortescue Metals have remote operations controlled from systems operating out of Perth. It's fascinating to see this. But, with Woodside, it's intended that these robonauts will be deployed on the next space station. It's an exciting project which demonstrates what can be achieved when Australian industry has the confidence and environment to be creative, innovate and invest significantly in R&D. It's just one example of what we're doing as a state in this space.

The government's commitment to ensuring our IP arrangements remain strong is ongoing and unwavering. In 2015, the Productivity Commission was asked to undertake a comprehensive review of Australia's IP system. We wanted to ensure that it didn't just keep pace with community expectations and new ways we're doing business; we also wanted to look seriously at how accessible it is to innovators looking to protect their work in terms of the cost and process.

The government responded to the Productivity Commission's recommendations in August of 2017. The first bill, which implemented the government's response to the trade mark and plant breeders' rights system, passed through both houses of parliament in 2018. It was commended on its thorough stakeholder consultation by the Senate committee and received royal assent on 24 August 2018. This bill builds upon that. It's the next necessary step. This bill takes into account the extensive stakeholder consultation and addresses the recommendations made by the Productivity Commission to reform the patent system in schedule 1. It also includes amendments in response to a number of Productivity Commission recommendations made in its 2013 report into the compulsory licensing of patents in schedules 2 to 4.

Extensive consultation has been undertaken for this bill so that it provides stakeholders with several opportunities to provide feedback on the proposals. There's widespread agreement that the innovation patent—a second-tier patent system—is not working. The government's decision to phase out the innovation patent was based on an assessment of its impact on the innovation system and on the economy more broadly. We accept the amendments to this bill proposed by those opposite. These will require the government to review the accessibility of patents for small and medium sized enterprises in the 15 months after the bill is enacted. The phasing out of this innovation patents system will start 18 months after the bill is enacted, rather than 12 months after the enactment, so these are fine.

The system was intended to encourage SMEs to do more R&D, to protect their smaller inventions, but the top five applicants over recent years have been Apple and four large Chinese entities. This reform will remove the uncertainty and confusion around granted but unexamined patents in the system. It will prevent firms from using the system as a strategic tool in infringement matters and remove unnecessary costs on third parties and consumers generated by the system. We do not accept the amendments proposed by Senator Patrick to remove the amendments commencing the abolishment of the innovation patents system.

With regard to crown use, we recognise that this is a rarely used safeguard in the Patents Act 1990 that allows the government to access and use patented technology without authorisation from the patentee. These changes would clarify the circumstances in which crown use can be invoked, introduce a process of ministerial oversight and provide a clearly defined standard for the remuneration to be paid to the patentee. These amendments would increase the certainty and transparency of these provisions whilst protecting the rights of the patentee.

The changes made in this bill will amend the compulsory licensing provisions to replace the reasonable requirements of the public test with a new public interest test. The focus on the new public interest test will be whether demand for a product or service is being met on reasonable terms and whether access to a patented invention is essential for meeting that demand. These amendments will also improve the clarity and certainty of the legislation and strengthen the rights of the patentee, while allowing access to the patent only when it's in the public interest to do so. This bill will also make minor changes to the patents and trademarks acts to correct errors, streamline procedures and reduce red tape in applying for IP rights applications.

In conclusion, the benefits of these amendments are clear. There is a record number of Australian businesses undertaking innovation—innovation which is supported by this government. The Productivity Commission review was particularly important, with data demonstrating small businesses are leading the way, with over 60 per cent of all small firms classified as innovation-active. That's something that we can be very proud of in this country. We are leading the way. Technology and innovation can help businesses improve the way they're working and solve everyday problems. Ultimately, they're the key drivers of long-term job creation, which is, of course, something that we all need to be committed to. These activities are also growing our economy, creating jobs and providing more opportunities for all Australians. I commend this bill to the chamber.

12:26 pm

Photo of Matthew CanavanMatthew Canavan (Queensland, Liberal National Party, Minister for Resources and Northern Australia) Share this | | Hansard source

I thank my fellow senators for their contributions to this debate. I'd also like to thank all the stakeholders who contributed to the consultation we engaged in for the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019. We value the important contributions made by the industry, the research sector, and intellectual property legal practitioners.

The intellectual property system is an important part of the economy, because it encourages the development of new technologies, products and markets. It helps to drive the innovation research that leads to improvements in the technology, jobs and growth that benefit all of us in Australia. In 2015 the government asked the Productivity Commission to undertake a comprehensive review of Australia's IP system. This included copyright, trademarks, patents, designs and plant breeders' rights. The government responded in August 2017 and decided to address the recommendations relating to registered rights through two packages of legislative reform. The legislation implementing part 1 of the government's response to the Productivity Commission inquiry concerning trademarks and plant breeders' rights received royal assent on 24 August 2018.

This bill contains the second suite of changes to address recommendations regarding the patent system. These changes will ensure that our patent system provides an appropriate balance between the rights of patent owners and the interests of the general public. The proposed legislation will ensure that the patents system remains adaptable and fit for purpose as new technologies and innovations are developed in the future. It'll improve the transparency and accountability of the Crown use of patent technology and designs and provide greater clarity and certainty for applicants and patent owners in compulsory licensing matters, ensuring that the interests of the patent owner and the public are considered. The proposed legislation will also streamline and modernise aspects of the intellectual property system, improving efficiency and reducing regulatory costs for Australian business.

This bill was reviewed by the Senate Economics Legislation Committee, which, on 4 September, tabled its report recommending that the bill be passed. The government thanks the committee for its report. We also note that as part of this review Senator Patrick, from the Centre Alliance party, recommended that the provisions repealing the innovation patent be removed from the bill. The government notes this recommendation but does not agree with it. Evidence available to the government indicates that the innovation patent system is harming innovative businesses and failing to meet its objectives to incentivise innovation amongst small and medium enterprises. Our goal is to support Australia's small businesses to make the most of their innovative efforts and help address the complexity and expense the IP system can present to those businesses.

In conclusion, the intellectual property system plays an important role in our economy. It assists Australian businesses to commercialise their ideas and compete effectively in the global marketplace. This bill will help ensure that Australia's intellectual property system remains fit for purpose into the future and balances the needs of innovators and users of technologies with those of the general public too.

Question agreed to.

Bill read a second time.