Productivity Commission calls for stricter criteria for compulsory patent licensing

Changes should be made to the patents system to improve access to technologies while protecting patent holders’ rights, according to the Productivity Commission.


Patenting to technology associated with human genes, climate change mitigation, food security and alternative energy has become increasingly sensitive amid concerns that patents may prevent affordable healthcare, food and energy.


Governments have the ability to impose a compulsory licence, which forces the owners of a patent to license their technology to other companies or individuals who then pay a set fee.


A draft report by the Productivity Commission supports the retention of a system of compulsory licensing so that patent holders can be compelled to license their inventions to others if access is being unduly restricted.


However, the report identifies deficiencies in existing arrangements and proposes a number of reforms, including:

  • Removing overlap and inconsistency so that it is clearer how a compulsory licence would be granted to remedy unlawful anticompetitive conduct.
  • Replacing existing criteria based on the “reasonable requirements of the public” with a “public interest” test that provides an access regime for patented technologies (for cases other than unlawful anticompetitive conduct).
  • Establishing pricing principles for arbitrated outcomes to ensure that patent holders receive a return commensurate with the commercial and regulatory risks they face.

The commission anticipates the compulsory licensing provisions will continue to be used very rarely under its proposed reforms because, rather than typically restricting access to technologies, patent holders often want to license more than they do.


The report also supports retention of Crown use provisions that allow an invention to be used for the services of a government without a patent holder’s consent.


The commission has proposed the provisions be amended so it is clear they can be applied to services that governments have primary responsibility for providing or funding.


Presiding Commissioner Alison McClelland noted “this would reduce uncertainty about the scope of Crown use that applies to areas such as access to healthcare”.


The Commission has also called for improved protection of patentees’ rights under Crown use.


Governments should be required to first seek a negotiated outcome, obtain ministerial approval to invoke Crown use, and publicly state the reasons before such use occurs.


These requirements should be able to be waived in emergencies. In all cases, Crown use should be subject to the same pricing principles as for compulsory licensing.


According to Michael Caine, a partner at Davies Collison Cave, the changes being proposed are “all about pharmaceuticals”, suggesting they won’t affect start-ups.


“What they really want to achieve is they want [an environment] where the genetic testing companies we have here don’t have to worry about being closed from doing particular genetic testing,” Caine says.


“They want free access to be able to use genetic tests someone might spend millions of dollars developing.”


The Commission is seeking feedback on the draft report, including input on a possible licence-of-right mechanism to encourage voluntary licensing of patents.


The report will be finalised in March 2013.


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