Experimenters breathe a sigh of relief | FB Rice

The Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 proposes a major reform of the Patents Act 1990. One of the interesting areas of reform is the introduction of infringement exemptions for experimental purposes and for the regulatory approval of non-pharmaceutical products.

Proposed Changes To Australian Patent Infringement Exemptions For Experimental Use And Regulatory Approval

The Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 proposes a major reform of the Patents Act 1990. One of the interesting areas of reform is the introduction of infringement exemptions for experimental purposes and for the regulatory approval of non-pharmaceutical products. The aim of these infringement exemptions is to encourage follow-on innovation and they are expected to come into effect later this year or early next year, once the Bill has received Royal assent.

Acts for obtaining regulatory approval (non-pharmaceuticals)

There are existing infringement exemptions in place for the acts involved in obtaining regulatory approval of pharmaceuticals. The amendments in the “Raising the Bar” Bill 2011 propose to introduce a similar exemption from infringement for non-pharmaceutical products that are legally required to undergo regulatory approval in Australia or other countries.

Other products that are required to undergo regulatory approval before they can be marketed in Australia include medical devices through the Therapeutic Goods Administration (TGA), agricultural and veterinary chemical products through the Australian Pesticides and Veterinary Medicines Authority (APVMA) and industrial chemicals through the National Industrial Chemicals Notification and Assessment Scheme (NICNAS). A regulatory approval process can not currently be undertaken in Australia for generic products of these types until the innovator patent has expired. As a consequence entry of competitor products onto the market is postponed and this can effectively provide patent holders with an extension of their patent term, which can range from weeks to years.

The extension of the infringement exemption from pharmaceutical products to non-pharmaceuticals is in line with provisions in place in New Zealand, Israel and Canada. It is in contrast with the corresponding provisions in Europe and the US which currently only have exemptions for regulatory approval of medicines for human and veterinary use.

The infringement exemption will allow companies to perform research and development within Australia which is needed to obtain regulatory approval both within Australia and overseas. This is expected to reduce the need to conduct research and development overseas. The Australian Government proposes that this will allow Australian companies to compete with overseas competitors, which tend to enter foreign markets more quickly after the expiration of a patent than Australian companies.

It is worth noting that these exemptions are intended solely for the processes of obtaining regulatory approval and are not for other purposes. For example, they are not intended to allow, in the process of seeking regulatory approval, stockpiling of a patented product for sale upon expiry of the patent, or manufacture of the product for export to another country.

Acts for experimental purposes

Currently there are no statutory provisions clarifying the extent to which researchers can conduct experiments without infringing a patent. It is widely assumed that a common law experimental use exemption exists within the patent system but there is uncertainty as to the scope of these exemptions. This uncertainty has a knock-on effect on the efficiency of research and may discourage innovation due to the time, energy and cost involved in assessing freedom to operate before commencing research.

The proposed exemptions in the Raising the Bar Bill 2011 attempt to balance the commercial interests of applicants and the freedom of researchers to conduct experiments without being subject to patent infringement proceedings.

The proposed amendments to the Patents Act introduce an exemption from infringement for the use of the patented invention for experimental purposes. The amendment states that:

“A person may, without infringing a patent for an invention, do an act that would infringe the patent apart from this subsection, if the act is done for experimental purposes relating to the subject matter of the invention.”

The amendment includes the following list of experimental purposes which would be exempt from infringement:

determining the properties of the invention;
determining the scope of a claim relating to the invention;
improving or modifying the invention;
determining the validity of the patent or of a claim relating to the invention;
determining whether the patent for the invention would be, or has been, infringed by the doing of an act.

However, this list is not intended to be limiting and it is open for a court to find that other activities fall within the meaning of “experimental”.

This approach is consistent with the system currently in place in Europe. It also aligns Australia with the UK, New Zealand, Japan, Germany, Switzerland and Belgium which either currently have research exemptions or are in the process of implementing similar provisions. The exemption is broader than the common law exemption that currently exists in the US.

It is worth highlighting that these infringement exemptions can also apply in a commercial setting. For example, infringement exemption would also apply to the following situations where:

a researcher may be contracted and paid to undertake experiments;
research may be conducted with a view to ultimately commercialising the end products of the experimentation; and
research may be undertaken with, and partially funded by, a commercial partner.

The acts are exempt from infringement if they are predominantly undertaken for the purpose of gaining new knowledge or testing a principle or hypothesis about the invention. Hence, if the research is conducted solely to improve a patented invention the activity would still be exempt, even if it was intended to commercialise the improvement.

However, it is not intended that these provisions will exempt the use of “research tools” from infringement. For example, the use of a patented assay to facilitate the discovery of active compounds will still be an infringement, as the assay is being used as a tool and the experiments do not relate to the assay itself.

The general consensus is that these research exemptions will be a welcome clarification to the research community on their freedom to operate and also to patent holders as to the circumstances in which they can enforce their patent rights. The Australian Government expects that these exemptions will encourage follow-on innovation and increase the access to new technologies.

For further information on this topic please contact FB Rice.