Release by IP Australia of draft of legislation for partial implementation of Federal Government's response to Productivity Commission final report

Last month, IPKat had the privilege of publishing an interview with Patricia Kelly, Director General of IP Australia in connection with both the "Intellectual Property Arrangements: Productivity Commission Inquiry Report" and the "Australian Government Response to the Productivity Commission Inquiry into Intellectual Property Arrangements". Kat friends Tim Golder and Lauren John of Allens report on legislative developments in connection with these publications.

IP Australia has released an exposure draft of the legislation that will partially implement the Federal Government's response to the Productivity Commission's (PC) final report on its inquiry into Australia's IP arrangements. We discuss some of the significant amendments to Australia's IP laws which are included in the draft legislation.

The death of the innovation patent is near. Well, sort of…

They were meant to be the cheaper, faster alternative to standard patents, intended to protect lower level or incremental inventions and promote innovation by SMEs. Yet just like the petty patent system which came before it, the innovation patent system is set to be abolished (or rather 'phased out'). An innovation patent provides fast protection and lasts for 8 years from the filing of the application. An innovation patent must meet the same novelty test as a standard patent, but only needs to possess an 'innovative step' (a lower threshold than the 'inventive step' required for a standard patent). The PC recommended that the innovation patent system be abolished because it does not achieve its objectives and protects innovations that are of low social value.

The proposed amendments will take effect 12 months after the amending Act receives Royal Assent – most likely some time in 2019. The proposed amendments mean that IP Australia will no longer be able to (1) grant an innovation patent on an application having an effective filing date on or after the day the amendments take effect or (2) certify a claim of an innovation patent having a priority date on or after that day (an innovation patent must be certified before it can be enforced). The current regime will continue to operate for existing applications. Also, the existing rights to file divisional applications and convert a standard patent to an innovation patent will remain for any patent/application that was filed before the amendments take effect. So fear not, innovation patent enthusiasts – there will still be innovation patents in effect for up to 8 years after the amendments commence.

Taking the grey area out of the grey market?

The PC recommended that the Government amend the Trade Marks Act 1995 (Cth) to ensure that parallel imports of marked goods do not infringe an Australian registered trade mark when the marked good has been brought to market elsewhere by the owner/licensee of the mark. Currently, s123(1) provides that an importer of trade marked goods will not commit an infringing act if the trade mark was applied to the goods 'by, or with the consent of, the registered owner of the trade mark'.

Although cast in quite simple terms, the interpretation and application of s123(1) has proved to be a minefield for importers (and lawyers!). The onus lies on an importer to prove all of the requirements of the defence, which can be difficult as an importer is unlikely to be privy to the commercial arrangements between the Australian registered owner and the party that put the goods on the market. For example, in the Sport Leisure case, a retailer imported goods purchased from an Indian manufacturer who had obtained a licence from the Australian trade mark licensor. The licence terms prohibited the Indian manufacturer from supplying those goods outside of India, and so the manufacture, in the knowledge that the goods would be exported, did not constitute an application of the mark with the consent of the Australian licensor. Thus the importation and sale of those goods in Australia was held to infringe.

The current provision will be replaced by a new, and rather wordy, s122A (shown below), which partially reflects the corresponding provision in the trade marks legislation of our friends across the ditch (s97A, Trade Marks Act 2002 (NZ)). The new provision will apply to any infringement actions brought after the provision commences.

The new provision is intended to reduce the evidentiary burden on the importer (who will only have to establish that it was 'reasonable to assume' the trade mark had been applied with consent). The concept of 'consent' has been extended to include consent subject a condition, to overcome, amongst others, the decision in the Sport Leisure case. The provision also refers to the consent not only of the owner of the mark in Australia, but also to a range of people set out in s122A(1)(c). This is to protect the importer in the situation where the Australian trade mark has been assigned to a related company or distributor in order to circumvent the application of the current s123.

122 A International exhaustion of registered trade mark in relation to goods

             (1)  In spite of section 120, a person who uses a registered trade mark in relation to goods does not infringe the trade mark if:

                     (a)  the goods are:

                              (i)  similar to goods in respect of which the trade mark is registered; or

                             (ii)  closely related to services in respect of which the trade mark is registered; and

                     (b)  the goods have been put on the market in Australia or a foreign country; and

                     (c)  at the time of use, it was reasonable for the person to assume the trade mark had been applied to, or in relation to, the goods by, or with the consent of, a person who was, at the time of the application or consent (as the case may be):

                              (i)  the registered owner of the trade mark; or

                             (ii)  an authorised user of the trade mark; or

                            (iii)  a person authorised to use the trade mark by a person mentioned in subparagraph (i) or (ii), or with significant influence over the use of the trade mark by such a person; or

                            (iv)  an associated entity (within the meaning of the Corporations Act 2001) of a
person mentioned in subparagraph (i), (ii) or (iii).

Note:         For goods that are similar, see subsection 14(1).

             (2)  A reference in paragraph (1)(c) to consent to the application of a trade mark to, or in relation to, goods includes, without limitation, a reference to:

                     (a)  consent subject to a condition (for example, a condition that the goods are to be sold only in a foreign country); and

                     (b)  consent that can be reasonably inferred from the conduct of a person mentioned in subparagraph (1)(c)(i), (ii), (iii) or (iv).

             (3)  In determining whether the first‑mentioned person in subparagraph (1)(c)(iii) was authorised to use the trade mark or had significant influence over its use, disregard how that authority or influence arose, for example:

                     (a)  whether it arose directly or indirectly; or

                     (b)  whether it arose by way of proprietary interest, contract, arrangement, understanding, a combination of those things, or otherwise.

Changing the grace period for challenge non-use of a trade mark

Currently, a ‘grace period’ applies such that a registered trade mark may not be removed for non-use until 5 years have elapsed from the filing date of the application in respect of the registration. To address the PC's concerns that there are many unused trade marks on the register, the amendments will reduce the grace period to 3 years from the date the particulars of the trade mark were entered on the register. Wait… there's more!

If that wasn't enough change for you, don't worry! IP Australia has undertaken separate consultation on proposed reforms to implement other aspects of the Government's response, including amending Australia's inventive step requirements (a contentious proposal given those requirements were amended in 2013 to bring Australia's inventive step laws into line with those in the UK and Europe) and introducing an objects clause into the Patents Act 1990 (Cth).