This report presents background information for an inquiry on the compulsory licensing provisions of the Patents Act 1990 (Cwlth).

Key points:

Like most countries, Australia has legislated a system of compulsory licensing so that patent owners can be compelled to license their inventions to others in a limited range of circumstances.

• Survey data and participants’ comments confirm that this is a safeguard which only needs to be invoked in exceptional cases. In response to surveys, patent owners indicate that often they would prefer to license more than they do.
• There have been few applications for a compulsory licence in Australia, and none have been successful. While this is consistent with its status as a rarely needed safeguard, another factor may be the costly and time-consuming process involved in obtaining a compulsory licence order from the Federal Court.
• There are no clear alternatives to the Federal Court that would make compulsory licence applications significantly less costly and time consuming, without also raising concerns about the quality of outcomes and scope for appeals.
• There is, however, a clear case to reform the criteria for a compulsory licence.

• There are currently provisions in both the Competition and Consumer Act 2010 (Cwlth) and Patents Act 1990 (Cwlth) to address anticompetitive behaviour. To remove overlap and inconsistency, when a patent is used to engage in unlawful anticompetitive conduct, a compulsory licence should only be available under the Competition and Consumer Act.
• A public interest test should replace existing criteria based on the ‘reasonable requirements of the public’ in the Patents Act. This would provide an access regime when greater use of a patented invention would deliver a substantial net benefit to the community.

• To reduce uncertainty about international treaty obligations on compulsory licensing, the existing general requirement in the Patents Act to satisfy such obligations should be deleted, and the obligations should be incorporated directly into the Patents Act or its subordinate legislation.
• To improve awareness of compulsory licensing, IP Australia and the ACCC should jointly develop a plain English guide and make it available on their websites.
• The Patents Act contains a less costly and time-consuming alternative to compulsory licensing — termed ‘Crown use’ — that can be invoked when an invention is used for the services of a government. Two key reforms are proposed in this regard.
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    • To reduce uncertainty about the scope of Crown use, the Patents Act should be amended to make it clear that Crown use can be invoked for the provision of a service that the Australian, State and/or Territory Governments have primary responsibility for providing or funding.
    • To improve transparency and accountability, governments should be required to first seek a negotiated outcome, and publicly state the reasons for invoking Crown use in advance, except in emergencies. Governments should in all cases be required to obtain Ministerial approval to invoke Crown use, and be subject to the same pricing principles as for compulsory licensing.