Patentable Subject Matter. Final Report

Transcription

1 Patentable Subject Matter Final Report December 2010

2 The Advisory Council on Intellectual Property (ACIP) is an independent body appointed by the Australian Government to provide advice to the Minister for Innovation, Industry, Science and Research and to IP Australia on matters of intellectual property policy and administration. The Minister has requested ACIP to take a broad, strategic view of the role of intellectual property and its contribution to the development of Australian industry. Members of ACIP are drawn from business and manufacturing sectors, the patent attorney and legal professions, government, the tertiary and research sectors, and technology and commercialisation groups. IP Australia is the federal agency responsible for administering the patent, trade marks, design and plant breeder s rights systems. This paper is also available at Commonwealth of Australia 2010 This work is copyright. You may download, display, print and reproduce this material in unaltered form only (retaining this notice) for your personal, non-commercial use or use within your organisation. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved. Requests and inquiries concerning reproduction and rights should be addressed to Commonwealth Copyright Administration, Attorney General s Department, National Circuit, Barton ACT 2600 or posted at

3 Senator the Hon Kim Carr Minister for Innovation, Industry, Science and Research Parliament House CANBERRA ACT 2600 Dear Minister In 2008 you asked the Advisory Council on Intellectual Property to review patentable subject matter. As Chair of ACIP, I am pleased to present you with the report. In its wide consultations ACIP has listened to the concerns of the business community, interest groups and other stakeholders, and has sought a balanced approach to take account of their diverse views and interests. A key recommendation is to introduce a general patentability exclusion in respect of subject matter the commercial exploitation of which would be wholly offensive. The proposed exclusion would provide a mechanism for dealing with contentious subject matter in extreme cases and remove the current uncertainty in relation to the doctrine of general inconvenience. Another important recommendation is to amend the Patents Act 1990 to introduce a clear and contemporary definition of patentable subject matter, remove overlap and improve clarity. The report also recommends including a statement of objectives in the Patents Act 1990 to outline its purpose and provide general guidance in the application of the legislation. I look forward to the Government s response to the report. Yours sincerely Leon Allen Chair 23 December 2010

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5 Contents Reader s guide... iv Part A Key points... 1 Part B Overview and recommendations... 2 Part C Review of patentable subject matter Introduction and background Objectives of the Australian patent system What does this have to do with patentable subject matter? What should the statement of objectives say? Patentable subject matter The international landscape The Australian legislation Does the test for patentable subject matter allow the patent system to meet its objectives? Can the legislation be improved? How should the legislation be changed? Exclusions from patentability Specific exclusions General exclusion Application of the test Applying the general exclusion Standard of proof for patentability Appendix 1 Extracts of Patents Act Appendix 2 International definitions of patentable subject matter Appendix 3 Previous Australian reviews Appendix 4 List of submissions Appendix 5 Public discussions Abbreviations Notes iii

6 Reader s guide Part A Key Points Part A sets out the key points arising from our review. Part B Overview and Recommendations Part B sets out our views, recommendations and the reasons for our recommendations in summary. Part C Review of patentable subject matter Part C sets out our detailed review of patentable subject matter. This part examines the issues and evidence that we considered during the review. It also considers the benefits and disadvantages of various options and discusses the reasons for our recommendations. Appendices The appendices provide details about submissions to the review and consultation with stakeholders. They summarise the outcomes of previous Australian reviews touching on patentable subject matter, and include extracts of the relevant parts of the Patents Act They also provide general information about how Australia s main trading partners and the major patenting jurisdictions define patentable subject matter. iv

7 Part A Key points Recent debate about the patent system in Australia has centred on the patenting of genetic materials, computer software and business methods. There are concerns that people are being allowed to patent discoveries and abstract ideas rather than inventions, that the threshold of inventiveness in Australia is too low, that the existence of patents hampers innovation in some technological fields, and that undesirable, unethical or offensive inventions can be patented. Our recommendations provide a framework to deal with these contentious issues. Australia s patent legislation, the Patents Act 1990, should contain a statement of objectives outlining its purpose. At present, it does not contain one. Any test for patentable subject matter must support the objectives of the system. Furthermore, anyone wanting to interpret that test should do so in the context of those objectives. The patent system must take account of both economic and ethical matters. The patent system is a social contract between the innovator and the state. It is important that the patent system is able to take account of both economic and ethical matters when regulating what may be patented. Australia s patent legislation has always excluded some subject matter from patenting on ethical grounds. The Australian Government should not provide incentives that are inconsistent with the values of Australian society. The current test for patentable subject matter as applied by the courts in Australia is the best one available to us. It has the flexibility to cope with a variety of concepts and to adapt to new technologies. It has been tested by users and refashioned by Parliament and the courts over a period of time that has seen unprecedented technological change. Nevertheless, there are problems with the current wording of the Patents Act Firstly, the legislative language is obscure: it does not match the principles developed by the courts to determine inherent patentability. Secondly, the manner of manufacture requirement overlaps with other tests for patentability. Thirdly, the wording of the patentability requirements is confusing. Finally, there is uncertainty about the residual exclusions covered by the general inconvenience proviso. We recommend changing the Patents Act 1990 to codify the principles of inherent patentability (as developed by the High Court in the NRDC case and in subsequent Australian court decisions). This change is not intended to change the substance of the test for inherent patentability in Australia. The boundaries around the subject matter that can be patented would be maintained, because the recommendations propose a restatement of the law in the words that are currently applied by the courts. Because the principles of inherent patentability address only the economic goals of the patent system, we also recommend specific and general exclusions to address certain ethical concerns that may arise. The current specific exclusion preventing the patenting of human beings and biological processes for their generation should be retained. Instead of the general inconvenience proviso, a general exclusion would preclude the patenting of inventions the commercial exploitation of which would be wholly offensive to the ordinary reasonable and fully informed member of the Australian public. Finally, we recommend changes to assist the Commissioner of Patents when applying the test for patentability. These changes enable the Commissioner to obtain advice about application of the general ethical exclusion, and require the Commissioner to be satisfied (on the balance of probabilities) that an invention is a patentable invention before granting a patent for it. 1

8 Part B Overview and recommendations 1 INTRODUCTION AND BACKGROUND In 2004 the Australian Law Reform Commission (ALRC) published a report on gene patenting and human health. The ALRC reported that manner of manufacture, the key concept of patentable subject matter in Australia, was ambiguous and obscure. The ALRC also said that it was unclear whether the test, according to the traditional principle that an invention not be generally inconvenient, had the ability to consider ethical issues. It recommended that the appropriateness and adequacy of the manner of manufacture test be reviewed, with a particular focus on the requirement that an invention must not be generally inconvenient. The Minister for Innovation, Industry, Science and Research asked the Advisory Council on Intellectual Property (ACIP) to conduct the review. The inquiry was broadened to encompass patentable subject matter due to the high degree of overlap between manner of manufacture and other criteria for patentability. In conducting the review, ACIP published two consultation papers and held public discussions in a number of capital cities. Recent debate about the patent system in Australia has centred on the patenting of genetic materials, computer software and business methods. There are concerns that people are being allowed to patent discoveries and abstract ideas rather than inventions, that the threshold of inventiveness in Australia is too Our recommendations provide a framework to deal with contentious issues. low, that the existence of patents hampers innovation in some technological fields, and that undesirable, unethical or offensive inventions can be patented. In its recent report Gene Patents, the Senate Community Affairs References Committee (the Senate Committee) considered the impacts of gene patents on healthcare, medical research and the health and well-being of Australians. Our recommendations provide a framework to deal with these contentious issues. 2 OBJECTIVES OF THE AUSTRALIAN PATENT SYSTEM Australia s patent legislation, the Patents Act 1990, should contain a statement of objectives outlining its purpose. At present, it does not contain one. 2.1 What does this have to do with patentable subject matter? The terms of reference for this review ask ACIP to inquire, report and make recommendations to the Australian Government on patentable subject matter. It is not a review of the patent system as a whole. Yet it remains important to consider the objectives of the patent system, and to consider whether those objectives are sufficiently transparent. Tests for patentable subject matter must support the objectives of the system. Interpreting the tests should be done in the context of those objectives. The Acts Interpretation Act 1901 (Cth) requires legislation to be interpreted in a way that promotes the purpose or objective of the Act. This is the case even when that 2

9 objective is not expressly stated in the Act. If there is no statement of objectives within the patents legislation, its purpose must be uncovered through secondary sources such as reports to Government, second reading speeches and explanatory memoranda. A statement of objectives is preferable because it conveys the reasons behind Australia s patent system more transparently. A statement of objectives would clarify the interaction between the patent system and competition policy. Including a statement of objectives in the Australian patents legislation would also bring it into line with the practice in other Australian legislation in which objectives clauses, either for a whole Act or a part of an Act, are used. Objectives clauses are also included in the patents legislation of other nations, including Japan, Korea, China, and in the New Zealand Patents Bill. Recommendation 1 Include a statement of objectives in the Patents Act 1990 (Cth) describing the purposes of the legislation. 2.2 What should the statement of objectives say? The World Trade Organization s Agreement on Trade Related Aspects of Intellectual Property Rights (the TRIPS Agreement) sets out minimum standards of intellectual property (IP) protection that member states must provide. The TRIPS Agreement describes the objectives of the intellectual property system as follows: The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations. The TRIPS Agreement recognises that there are both economic and non-economic aspects to the intellectual property system. It also recognises that there needs to be an appropriate balance between the interests of different stakeholders. The TRIPS Agreement sets a general principle in favour of patentability for inventions with separate provisions for exclusion of certain subject matter on policy grounds. The objectives clauses contained in the intellectual property legislation of other nations reflect these TRIPS Agreement principles. Australia is a signatory to the TRIPS Agreement, which means that current and future Australian patent law must be compliant with it. Any statement of objectives outlined in the Australian legislation should reflect these principles. In Australia, there are two contrasting views about the purpose of the patent system. The first is that the patent system has, or should have, only economic goals, and that patent law is not the appropriate place to deal with other matters. 3

10 The second is that all law has a social context, and patent law is no exception; the primary goal of the patent system should be to benefit society, which means taking into account both economic and non-economic matters. Economic matters include the contribution to economic growth, and the effects on trade, investment, and international competitiveness. A policy generally meets its economic goals if it addresses market failure, and the net economic effect is positive. The patent system addresses economic matters by providing incentives to innovate, encouraging the dissemination of knowledge, and by facilitating technology transfer, commercialisation and diffusion of knowledge. Non-economic matters are not so easy to weigh objectively. In the patent environment, they can arise when technological developments converge with noneconomic matters. For example, where an invention is considered to be abhorrent, an incentive in the form of a patent to commercially exploit that invention should not be provided. Where the commercial exploitation of an invention is against society s interests, we need to ensure that these concerns are addressed. Ethics (also known as moral philosophy) is the branch of philosophy that addresses situations where we need to resolve concerns about how to act. From now on this paper will refer to these non-economic matters as ethical matters. We are not persuaded by submissions that the patent system is or should be immune from ethical considerations. The patent system is a social contract between the innovator and the state. It is important that the patent system is able to take account of both economic and ethical matters when regulating what may be patented. Australia s patent legislation has The patent system must take account of both economic and ethical matters. always excluded some subject matter from patenting on ethical grounds. The Australian Government should not provide incentives that are inconsistent with the values of Australian society. In broad terms, the legislation should provide an environment that promotes Australia s national interest and enhances the well-being of Australians by balancing the competing interests of stakeholders. One set of stakeholders is those who hold patent rights. Having invested in research and the development of new products and services, the innovator is given the exclusive right to commercially exploit the invention for a limited period. This gives the patent owner the opportunity to generate profits, and provides an incentive for investment in research and development. In return for the exclusive right to exploit the invention, the innovator discloses the details of their invention to the public. Those who use this knowledge include competing businesses, researchers and developers, and the general public. Their ability to exploit the information without permission is restricted during the patent term. This can lead to a negative effect on innovation, particularly in technologies that develop through cumulative innovation. 4

11 Australian society is also a stakeholder. They want to have access to the latest technology at a reasonable price. Costs to society include restricted access to and higher prices for the invention during the patent term. These competing interests must be balanced so that the patent system delivers a net gain for Australian society. This can be realised by achieving the desired economic goals while addressing any ethical concerns that may arise. Recommendation 2 The statement of objectives to be included in the Patents Act 1990 (Cth) should describe the purposes of the legislation as being to provide an environment that promotes Australia s national interest and enhances the well-being of Australians by balancing the competing interests of patent rights holders, the users of technological knowledge, and Australian society as a whole. 3 PATENTABLE SUBJECT MATTER In Australia the Patents Act 1990 adopts a technology-neutral approach to the patenting of inventions. The Act sets out the field of patentable subject matter by defining invention, then limits the inventions that can be patented to a defined class of patentable inventions. In addition, the legislation specifically excludes some subject matter from patentability. The legislation thus sets out a number of tests to define patentable subject matter, that are designed to advance the economic goals of the system. The legislation also filters out subject matter where patents may be undesirable, taking ethical concerns into account. 3.1 Does the test for patentable subject matter allow the patent system to meet its objectives? Recent debate about the patent system in Australia has centred on the patenting of human and animal genes, computer software and business methods. This debate leads us to ask whether the test for patentable subject matter allows the patent system to meet its economic objectives, while also addressing ethical concerns Economic objectives The economic objectives of the patent system are to balance the competing interests of stakeholders so that Australia s national interest is promoted and the well-being of Australians is enhanced. The patent system meets its economic objectives when it contributes positively to economic growth, trade, investment and international competitiveness by addressing market failure that would otherwise lead to sub-optimal innovation. Nevertheless, the patent system can also have negative economic consequences. 5

12 If the threshold for patentability is too low then patent owners are unfairly favoured over other stakeholders. The contribution that they make by publishing details of the innovation does not outweigh the disadvantage to their competitors (who have to wait until the end of the patent term before they can commercially exploit the invention) and to the public (who pay a premium during the life of the patent). Similarly, if the patent term is too long, then patent owners receive benefits in excess of those needed to encourage their innovative behaviour. Other negative consequences of the patent system are the costs involved in avoiding infringing others patent rights, defending against patent lawsuits, and enforcing patent rights. These costs are particularly significant for small to medium-sized business, and can discourage smaller companies from entering the market. ACIP has previously reviewed the enforcement of patent rights. Further discussion of enforcement issues is beyond the terms of reference of this review. The patents legislation attempts to balance these conflicting matters to deliver a net gain to Australian society. It does this by providing a number of checks and balances. A fundamental check is the test for patentable subject matter, which delineates what subject matter may be patentable before other requirements such as newness and usefulness are considered. It is unrealistic to expect each patent application to be tested against the economic objectives of the patent system. Attempting to do this would add to the complexity and cost of the process and be open to subjective argument. As noted by the Intellectual Property and Competition Review Committee (IPCRC) in their final report, the threshold tests are a filter applied as a proxy for the benefits of the claimed invention to society, since it is usually not possible to do a detailed costs benefit analysis for each patent partly because the value of new inventions is generally difficult and expensive to predict. The current test for patentable subject matter has evolved over the years, and is the best way for the patent system to meet its economic objectives. The test has been developed by the courts, and will continue to evolve as they provide guidance through case law. As noted in the recent Senate Committee report Gene Patents, the courts have made it clear that the patenting of mere discoveries, fundamental concepts and principles is precluded. The courts have made it clear that the patenting of mere discoveries, fundamental concepts and principles is precluded. IP Australia, through its reforms to the Patents Act 1990, is currently addressing concerns that the threshold for patentability is too low. It is proposing to change the standard of proof that examiners use in assessing whether or not an invention comprises patentable subject matter - from giving the benefit of the doubt in favour of the applicant, to being satisfied on the balance of probabilities that the invention meets the requirements. We endorse this proposal and include it as one of our recommendations (see Application of the test later in this section). 6

13 3.1.2 Ethical concerns In order to enhance the well-being of Australians, the patent system should not cause or intensify ethical concerns. This means that ethical concerns resulting from the commercial exploitation of a patented invention need to be addressed. Where access to a beneficial technology (for example a diagnostic test, medicine or therapy) is in the public interest, the community does not want the existence of a patent to hamper access to that technology. Similarly, the community does not want medical researchers to be prevented from undertaking research due to the existence of patents. At the same time, the community does not want to discourage innovators from developing these beneficial technologies. Removing an important incentive for innovators (by excluding patents for beneficial technologies) could have undesirable effects on research and innovation. Improving access to beneficial patented technology is better dealt with through mechanisms other than the test for patentable subject matter. These other mechanisms include providing efficient compulsory licensing and crown use provisions, allowing experimental use of patented inventions, non-legislative mechanisms such as patent pools, and other targeted government programs. ACIP has Improving access to beneficial patented technology is better dealt with through mechanisms other than the test for patentable subject matter. previously reviewed experimental use and the Crown use provisions for patents. Further discussion of these mechanisms is beyond the terms of reference of this review. The Australian government has implemented programs to ensure that medical treatment is available to each individual who requires it, irrespective of the individual s financial means. This is the motivation behind the government s subsidisation of the cost of medical treatment, through the Medicare system. It is also the motivation behind the government s subsidisation of the cost of pharmaceuticals, through the Pharmaceutical Benefits Scheme (PBS). Notably, most of the top-selling pharmaceuticals subsidised by the PBS have been patented. Thus, the government has found a mechanism to support wide access to pharmaceuticals, without removing the innovators rights to patent those pharmaceuticals. In the event that it is found that patents on other beneficial technologies (for example patents for genes, genetic materials and related technologies) are unduly restricting patient access to diagnostic tests or other medical treatment, the Australian experience with pharmaceuticals suggests that the remedy to the access problem lies with a pricing mechanism, not with removing patent protection for these inventions. The second ethical concern is that undesirable and offensive inventions can be patented, or that the commercial exploitation of certain patented inventions is undesirable and offensive. A contemporary example is the concern expressed by some groups about the patenting of genes, genetic materials and related technologies. 7

14 The Patents Act 1990 currently precludes the patenting of human beings and biological processes for their generation. However, it is possible that new technologies will arise that are considered by Australian society to be inappropriate subject matter for a patent. We want to ensure that the patent legislation is able to address these circumstances as they occur. Inventions of this nature can be dealt with by excluding them from the patent system, as specifically provided for within the TRIPS Agreement. We recommend a framework that can be used by the Patent Office and by the courts, when ethical concerns need to be addressed. This framework is discussed later in this section (see Exclusions from patentability ). 3.2 Can the legislation be improved? The definition of invention in Australia is complex and relies largely on the common law. It incorporates aspects of newness, utility and public policy. Invention is defined as a manner of manufacture, which relies on a definition from the English Statute of Monopolies The Statute of Monopolies 1623 provides that patents are only available for manners of new manufacture that are not contrary to law nor mischievous to the state by raising prices of commodities at home or hurt of trade or generally inconvenient. This results in a definition of invention that goes beyond technological development and includes both economic and ethical matters. The current test for patentable subject matter as applied by the courts in Australia is the best one available to us. It has the flexibility to cope with a variety of concepts and to adapt to new technologies. It has been tested by users and refashioned by Parliament and the courts over a period of time that has seen unprecedented technological change. The current test for patentable subject matter, as applied by Australian courts, is the best one available to us. The wording of the Patents Act 1990 is obscure, contains overlap, is confusing and causes uncertainty. Nevertheless, there are problems with the current wording of the legislation. Firstly, the legislative language is obscure. It does not match the principles developed by the courts to determine inherent patentability. Secondly, the manner of manufacture requirement overlaps with other tests for patentability. Thirdly, the wording of the Patents Act 1990 is confusing. Finally, there is uncertainty about the residual exclusions covered by the general inconvenience proviso The words don t reflect the practice The manner of manufacture test is based on section 6 of the Statute of Monopolies This legislation is nearly 400 years old and has since been repealed in its country of origin. Australia is one of very few countries that still refer to the Statute of Monopolies 1623 in patent legislation to define what is meant by patentable subject matter. The manner of manufacture test can only be understood by reference to a substantial body of subsequent case law. 8

15 This leads to a mismatch between the words of the legislation and the principles developed by the courts. For a person reading the legislation, there is no transparency or guidance about the nature of the test. While the legislation tends to lead the reader to the literal words of section 6 of the Statute of Monopolies 1623, the courts have indicated that this is the wrong approach. The courts have repeatedly acknowledged that an invention does not have to be either a manufacture or a manner of manufacture to be patentable. The principles of inherent patentability used by the High Court in the National Research Development Corporation v Commissioner of Patents (NRDC) decision of 1959, and subsequently followed, are that an invention should be an artificially created state of affairs in the field of economic endeavour. These principles have been consistently applied ever since, and there is now a large body of Australian case law illustrating their operation. The wording of the Patents Act 1990 makes no reference to this well-established interpretation of the manner of manufacture test. As a result, the non-expert is unable to understand one of the key tests for patentability. These views correspond with those of the ALRC. The ALRC acknowledged that while the threshold test of patentable subject matter should be flexible and capable of adapting to developments in technology as they arise, the terms of section 6 of the Statute of Monopolies 1623 are ambiguous and obscure The test overlaps with other tests Overlap with tests for novelty and inventive step The Patents Act 1990 should clearly codify the established principles of inherent patentability that an invention should be an artificially created state of affairs in the field of economic endeavour. The Patents Act 1990 deals with inventiveness in two places: through the definition of invention ( a manner of new manufacture ), and in section 18(1)(b) (which requires a patentable invention to be novel and to involve an inventive step). This has led to an interpretation by the courts that a threshold requirement of inventiveness must be satisfied before reaching the stage where the specific tests for novelty and inventive step are applied. There has been criticism of this aspect of the law in Australia. It makes more sense for questions of newness to be dealt with under the specific provisions for novelty and inventive step, rather than under the general umbrella of manner of new manufacture. However, if the standards of novelty and inventive step in Australia are too low, then the threshold test for inventiveness serves a purpose because it ensures that only patents which provide a real improvement over the prior art are entitled to patent protection. If there are deficiencies in the standards of novelty and inventive step, they should be addressed directly. Indeed, IP Australia is currently proposing reforms to raise the bar for inventive step. It would be clearer to remove the duplication and have the question of inventiveness considered once, when the tests for novelty and inventive step are 9

16 applied. This could be done by changing the definition of invention and the test for a patentable invention, so that neither refers to a manner of new manufacture. Resulting impact on the test for utility The requirement of utility is found in a number of parts of section 18(1). Utility is included in the requirement that an invention be a manner of manufacture (paragraph 18(1)(a)). This has occurred by means of a substantial body of case law. It is a ground by which patent examiners can reject a patent application. In addition, paragraph 18(1)(c) of the Patents Act 1990 expressly states that a patentable invention must be useful. Patent examiners cannot currently reject a patent application on this ground. The ALRC recognised that reform is needed to the way in which the utility of an invention is addressed in the requirements for patentability. It noted that there is considerable confusion about the application of the utility requirements, and that these misunderstandings relate to the extent to which an invention claimed in a patent application must be useful, how such a requirement is imposed, the standard for satisfying this requirement, and the extent to which utility can or should limit the scope of patent claims. The ALRC and the Senate Committee both recommended that Australian patent examiners should examine, and report on, the usefulness of an invention disclosed in a patent application as a separate requirement, and not merely as one of a number of considerations in determining whether an invention satisfies the manner of manufacture and disclosure requirements in sections 18 and 40 of the Patents Act The ALRC also recommended that the legislation should be amended to provide that an invention will satisfy the requirement of usefulness only if the patent application discloses a specific, substantial and credible use. IP Australia has recently proposed similar reforms. If the definition of invention and the test for a patentable invention no longer referred to a manner of manufacture, it would remove the ground of utility from the patent examiners toolbox. We recommend that the requirement of usefulness in paragraphs 18(1)(c) and 18(1A)(c) be reformed, so that it encompasses the requirement for utility that is currently an aspect of the manner of manufacture requirement. We also recommend that the requirement of usefulness be a ground of examination for a standard patent and an innovation patent The drafting of the Act lacks clarity The definitions of the terms invention and patentable invention, and the test for a patentable invention in Section 18, are unclear. Schedule 1 defines an invention as any manner of new manufacture the subject of letters patent and grant of privilege within section 6 of the Statute of Monopolies 1623, and includes an alleged invention. A patentable invention is defined as an invention of the kind mentioned in section

17 This drafting approach results in a lack of clarity. If the definitions of the terms invention and patentable invention are inserted into subsection 18(1) where those terms appear, the subsection effectively reads: Subject to subsection (2), any manner of new manufacture the subject of letters patent and grant of privilege within section 6 of the Statute of Monopolies is an invention of the kind mentioned in section 18 for the purposes of a standard patent if the manner of new manufacture the subject of letters patent and grant of privilege within section 6 of the Statute of Monopolies, so far as claimed in any claim: (a) is a manner of manufacture within the meaning of section 6 of the Statute of Monopolies; and... We believe it is both desirable and possible to make this important part of the legislation clearer in its meaning and effect There is uncertainty about residual exclusions covered by the general inconvenience proviso Section 6 of the Statute of Monopolies 1623 specifies that patents are available to any manner of new manufacture provided that it is neither contrary to the law nor mischievous to the state by raising prices of commodities at home or hurt of trade or generally inconvenient. In the 1963 decision Rolls-Royce Ltd s Application, the Appeal Tribunal upheld the United Kingdom Patent Office s refusal of patent protection for a method of operating an aircraft. One ground for the decision was that the grant of a patent in this case would be generally inconvenient, because the responsibility of a pilot of an aircraft in flight carrying scores of passengers is already sufficiently onerous without adding to his burden the task of avoiding infringement of a statutory monopoly in the operation of his standard engine controls. In this case, the difficulty being addressed was one of access to a beneficial technology, rather than not wanting to provide an incentive to innovate in this area of technology. As discussed earlier, the community does not want to discourage innovators from developing such beneficial technologies. Removing an important incentive for innovators (by excluding patents for beneficial technologies) could have undesirable effects on research and innovation. Improving access to beneficial patented technology is better dealt with through mechanisms other than the test for patentable subject matter. Over time, the focus of the generally inconvenient proviso has changed. The courts have imbued it with different functions sometimes ethical, sometimes economic. The Australian High Court has referred to general inconvenience a number of times as a possible ground of invalidity, but has neither applied that proviso to revoke a patent nor extinguished the concept. In its report, the ALRC said that it was unclear whether the proviso had the ability to consider ethical issues. Due to the overlap with other tests for patentability, it remains unclear as to what, exactly, is excluded by the general inconvenience proviso. For these reasons, we support the removal of the general inconvenience proviso. Later in this report we suggest a better mechanism to address ethical concerns, using modern language. 11

18 3.3 How should the legislation be changed? An appropriate test is one that takes into account the desired economic outcomes and can be applied objectively, while addressing ethical concerns. The principles of inherent patentability (as developed by the High Court in the NRDC case and in subsequent Australian court decisions) require that the subject matter of a patent be an artificially created state of affairs in the field of economic endeavour. It cannot be just a discovery, fundamental concept or principle there must be some useful product, physical phenomenon or effect resulting from the working of a method. In addition, the subject matter must relate to the useful, rather than the fine, arts. We recommend changing the provisions of the Patents Act 1990 so as to codify these principles of inherent patentability. This change would address the current problems with the wording of the legislation. It would help people to understand and correctly apply one of the key tests for patentability. The features of an invention would be set out clearly in the legislation, using the language that has evolved from court decisions. Uncertainty would be reduced because the overlap with other tests for patentability such as novelty, inventive step and utility would be removed. The usefulness test would be dealt with separately, and explicitly considered during the examination of a patent application. Overlap and uncertainty around the general inconvenience proviso would also be eliminated. Fair basis, sufficiency and usefulness issues would continue to be addressed by their own specific provisions within the legislation. We have considered, but have rejected, inserting into the legislation a specific exclusion for mere discoveries. The principles of inherent patentability, as outlined above, provide the appropriate test. Including specific reference to particular elements, examples or subsets of these principles is undesirable because it could lead to unintended consequences. Since these principles of inherent patentability address only the economic goals of the patent system, we also The principles of inherent patentability recommend specific and address only the economic goals of the patent general exclusions to address system. We also recommend specific and ethical concerns that may arise. general exclusions to address ethical These exclusions are discussed concerns that may arise. later in this section under Exclusions from patentability. This change is not intended to change the substance of the test for inherent patentability in Australia. The boundaries around the subject matter that can be patented would be maintained, because the recommendations propose a restatement of the law in the words that are currently applied by the courts. This change is not intended to change the substance of the test for inherent patentability in Australia. 12

19 Recommendations 3, 4 and 5 provide a definition of patentable subject matter addressing economic matters. Separate recommendations deal with the ethical matters by means of both general and specific exclusions. Recommendation 3 Define patentable subject matter in the Patents Act 1990 (Cth), for the purposes of both a standard patent and an innovation patent, using clear and contemporary language that embodies the principles of inherent patentability as developed by the High Court in the NRDC case and in subsequent Australian court decisions. Recommendation 4 Amend the Patents Act 1990 (Cth) to enhance the clarity of the patentability requirements, and to remove overlap of the patentable subject matter provision with the provisions on novelty, inventive step and usefulness. These reforms envisage amending the legislation by: replacing the words is a patentable invention in subsections 18(1) and 18(1A) with the words is patentable ; replacing the words if the invention, so far as claimed in any claim in subsections 18(1) and 18(1A) with the words if it ; replacing the current words of paragraphs 18(1)(a) and 18(1A)(a) with the words an artificially created state of affairs in the field of economic endeavour ; changing the definition of invention in Schedule 1 to be the subject matter of any claim ; and deleting the definition of patentable invention in Schedule 1. Recommendation 5 Amend the Patents Act 1990 (Cth) so that the requirement of usefulness in paragraphs 18(1)(c) and 18(1A)(c) encompasses the requirement for utility that is currently an aspect of the manner of manufacture requirement, and is a ground for examination of a standard patent and an innovation patent. 4 EXCLUSIONS FROM PATENTABILITY The patent legislation should contain a mechanism to filter out subject matter that is undesirable for ethical reasons. Our options paper set out alternative mechanisms that could be used: providing specific exclusions (effectively, a list of things that are not 13

20 patentable); providing a general exclusion that prevents the patenting of inventions where certain criteria are met; or a combination of specific and general exclusions. Specific exclusions provide transparency and certainty, because inventions that are not patentable are set out in the legislation rather than in common law. Nevertheless, we are not convinced that specific exclusions on their own are appropriate. This mechanism lacks flexibility, because changes to technology or to Australian society s values would require that the list of specific exclusions be updated. In any case, unless changes to the legislation were retrospective in operation, some undesirable patents would be granted before the list could be revised. This mechanism could also work against the objectives of the patent system, because wholly pre-empting an area of technology from being patented would remove an incentive for any future innovation in that area, whether or not it is undesirable. A general exclusion is desirable because it is able to address ethical concerns as soon as they arise. It is not clear that the current legislation contains such a mechanism. This means that there may be nothing to prevent the patenting of inventions that are considered to be immoral, repugnant or against society s interests. Although the general inconvenience proviso may operate as a safety net to address ethical concerns, it is not certain that it does so. If the reference to section 6 of the Statute of Monopolies 1623 is removed from the definition of invention (as recommended above), the general inconvenience proviso will disappear. This will remove any possibility of addressing ethical concerns unless compensating changes are made to the Act. The legislation should address ethical concerns with clear provisions. These provisions should be in the form of both specific exclusions and a general exclusion. Ethical concerns should be addressed by specific exclusions and a general exclusion. 4.1 Specific exclusions The Patents Act 1990 currently contains a specific exclusion to address ethical concerns. This exclusion prevents the patenting of human beings and biological processes for their generation (subsection 18(2)). No case has been made for the abolition of the current specific exclusion preventing the patenting of human beings and biological processes for their generation. It should be retained. Our review has considered whether it is appropriate and desirable to introduce additional specific exclusions to address ethical concerns. We have concluded that no persuasive case has been made to introduce a specific exclusion to prevent the patenting of human genes and genetic products. In its review of Gene Patents, the Senate Committee stated that an express exclusion should be introduced only if there is a very clear case, and significant social and political consensus, on the need for such a change. We endorse this approach. Like us, the Senate Committee found that there was neither the clear case nor the consensus justifying change at this time. 14

21 Accordingly, we do not recommend the introduction of a specific exclusion to prevent the patenting of human genes and genetic products. Other specific exclusions exist (in subsection 18(3) and section 50 of the Act). The exclusion in sub-section 18(3) precludes overlap between the innovation patent and plant breeder s Human beings and biological processes for their generation will remain unpatentable. rights systems, and should be retained in order to maintain access to plant material for Australian plant breeders. It also precludes the patenting of animals for the purposes of the innovation patent. This provision was inserted by Parliament, and no persuasive case has been made to remove it. The exclusions in section 50 of the Act do not relate to ethical matters. They should be removed because they overlap with other patentability tests, they may not be compliant with the TRIPS Agreement, or they do not address the objectives of the patent system. Recommendation 6 Retain the specific exclusions set out in sub-sections 18(2) and 18(3) of the Patents Act 1990 (Cth). As a result of this recommendation, the following subject matter will remain unpatentable: human beings, and the biological processes for their generation; and plants and animals, and the biological processes for the generation of plants and animals (for the purposes of the innovation patent only). Recommendation 7 Repeal section 50 of the Patents Act 1990 (Cth), and the corresponding grounds for revocation of an innovation patent contained in section 101B of the Patents Act 1990 (Cth). As a result of this recommendation, the instances specified in section 50 would be judged on their merits against the principles of inherent patentability. We considered distinguishing between a standard patent and an innovation patent on this issue, but found no reason to do so. 4.2 General exclusion Article 27(2) of the TRIPS Agreement allows countries to exclude inventions for ethical reasons in the following terms: Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to 15

22 the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law. As a signatory to the TRIPS Agreement, Australia may not introduce an exclusion that is broader than that outlined by the TRIPS Agreement. There should be a general exclusion on ethical grounds, so as to address the patenting of any inappropriate subject matter that may emerge in the future. It should be limited in its scope so that the benefits of the patent system are not impeded. It should produce the desired outcomes and be capable of being applied objectively. And, it should be compliant with the TRIPS Agreement. The general exclusion does not need to be the same as those used in other countries. It does need to reflect Australia s national values, and over time the Australian courts will clarify and expand on its interpretation. There should be a general exclusion on ethical grounds. Recommendation 8 Include in the Patents Act 1990 (Cth) a patentability exclusion as permitted by Article 27(2) of the TRIPS Agreement How should the exemption be worded? We are not in favour of adopting the wording from the TRIPS Agreement in the general patentability exclusion, and so we have sought an alternative to the phrase inventions... the commercial exploitation of which is necessary to protect ordre public or morality. In our view, it is generally desirable to use contemporary Australian language, rather than terminology that is not in common use in this country. Indeed, the United Kingdom adopted the phrase public policy or morality as an alternative to the phrase ordre public or morality. In any case, the wording in the TRIPS Agreement does not provide sufficient guidance about how to perform the assessment. In Australia, the preferred method of giving effect to treaties is to translate the relevant provisions of the treaty into the language of domestic law. Our aim has been to find an objective concept that can be used to determine ethical questions, and is of a standard that allows the law to behave in a uniform, foreseeable and neutral manner. The reasonable person test is an objective concept that is commonly used in law. This person is an ideal: the embodiment of all those qualities that we demand of the good citizen. They are fair minded and of average intelligence. They represent an objective standard against which any individual s conduct can be measured. Indeed, patent law uses a similar objective concept when considering inventiveness by considering the views of the hypothetical person skilled in the art. 16