Is Australian law on patents and experimental use about to be clarified?

By Nicholas Tyacke.

Key Points:
Without changes to the Patents Act, the precise boundaries between permissible and impermissible use of a third party's patented invention for experimental purposes in Australia will remain unclear.

In the last issue of Life Sciences Insights, we discussed recent US developments in the law concerning the experimental use of patented inventions. This article provides an update on Australian law on this issue, in light of a recent report recommending changes to Australian law.

In the life sciences field more than any other, it is essential that the boundary separating permissible (non-infringing) and impermissible (infringing) use of a third party's patented invention for experimental purposes be clearly drawn at the location that optimises the balance between primary and secondary innovation.

As discussed below, unlike the US and Europe,under current Australian law, it is unclearwhere, if at all,such a boundary is drawn with respect to experimental use in general, whilequestionsare being asked as to whether the boundary drawn by the exception for experiments undertaken to obtain regulatory approval of pharmaceutical products ("the springboarding exception") strikes the optimal balance.

Following a two year review into whether Australian researchers and business would benefit from the introduction of an explicit experimental use exception into Australian patent law, the Advisory Council on Intellectual Property ("ACIP")[1] has released its report recommending such an exception.

As stated in the media release:

"The report recommends that patent law be changed to make it clear that research done for experimental purposes does not infringe patents, as long as it does not unreasonably conflict with the normal exploitation of a patent. ACIP believes this will allow researchers to continue experimenting in patented fields, but if anyone wants to use a patented invention in the normal way then a license must be obtained from the owner."

ACIP's recommendations

The ACIP Report contains five recommendations to the Commonwealth Government. The first and main recommendation states:

"The Patents Act be amended to establish the following provision:

The rights of a patentee are not infringed by acts done for experimental purposes relating to the subject matter of the invention that do not unreasonably conflict with the normal exploitation of a patent[2].

Acts done for experimental purposes relating to the subject matter of the invention include:

- determining how the invention works;

- determining the scope of the invention;

- determining the validity of the claims;

- seeking an improvement to the invention."

Although the ACIP review was concerned with the need for a general experimental use exception rather than a springboarding exception, ACIP nevertheless received a number of submissions on this issue. As a result, the ACIP Report includes as Recommendation 5 that:

"The Government ... consider reviewing the impact on Australian industry of the absence of an exception from infringement for activities undertaken prior to the end of the initial patent term relating to obtaining regulatory approval."

Australian law on experimental use today

As the ACIP Report acknowledges, current Australian law is unclear as to whether experimental use of patented inventions constitutes patent infringement.

There is currently no provision in the Patents Act 1990 on whether experimental use constitutes infringement. Under that Act, a patentee is given the exclusive right to "exploit" the patented invention. Although "exploit" is defined in the dictionary of Schedule 1, that definition does not clearly include or exclude experimental use. Nor does the Act explicitly set forth a general exception for experimental use of patented inventions. This has led to a debate as to whether this means that no such general exception exists, or whether the failure to explicitly exclude an experimental use exception from Australian patent law, as well as the whole basis of the patent system, implicitly support the existence of such an exception. This issue remains unresolved by case law.

Though lacking an explicit general exception for experimental use, the Patents Act does include a specific limited experimental use exception in relation to pharmaceuticals. Where the owner of a pharmaceutical patent has applied for and been granted an extension of the term of that patent, the Act exempts from infringement of that patent the use of a pharmaceutical substance claimed by that patent for experimentation solely for purposes in connection with gaining regulatory approval, either in Australia or overseas, of goods intended for therapeutic use. Thus, this narrow exception applies only in very limited circumstances, among other things only being available with respect to patents that have had their term extended.[3]

Experimental use internationally

In conducting its review, ACIP considered whether it could adopt world's best practice, or at least most common practice, in formulating an experimental use exception. However, its review revealed that the law on experimental use of patented inventions differs markedly around the world.

For example:

• US courts have allowed an increasingly narrow exemption for experimentation that is not in furtherance of the alleged infringer's legitimate business, but is solely for amusement, to satisfy idle curiosity or for strictly philosophical inquiry.

The narrowing of the scope of this exception to its present form was partially responsible for amendments to US patent legislation explicitly providing a springboarding exception. As a counterpart to the creation of this exception, US patent legislation was amended to provide for an extension of the term of pharmaceutical patents to compensate for the time involved in seeking regulatory approval to market the patented product. Though enacted as counterpart amendments, the experimental use exception is available with respect to pharmaceutical patents that would otherwise be infringed, irrespective of whether an extension of the term of such patents has been sought, let alone actually granted, unlike under current Australian law.

• In Europe, most countries have a statutory experimental use exception worded similarly to the following:

"The rights conferred by a patent shall not extend to acts done for experimental purposes relating to the subject matter of the invention."

However, this language has been interpreted differently by different European countries, particularly with respect to whether it includes clinical trials.

ACIP rejected both the US and European approaches.

The ALRC's recommendation

In undertaking its review into genes and patenting, the Australian Law Reform Commission (ALRC) specifically considered the issue of experimental use and, in its final report Genes and Ingenuity released in August 2004, recommended the following exception:

"The Commonwealth should amend the Patents Act 1990 (Cth) (Patents Act) to establish an exemption from patent infringement for acts done to study or experiment on the subject matter of a patented invention; for example, to investigate its properties or improve upon it. The amendment should also make it clear that:

(a) the exemption is available only if study or experimentation is the sole or dominant purpose of the act;

(b) the existence of a commercial purpose or objective does not preclude the application of the exemption; and

(c) the exemption does not derogate from any study or experimentation that may otherwise be permitted under the Patents Act."

The ALRC has thus recommended an exception for "experimenting on" the subject matter of an invention whereas ACIP has recommended an exception for experiments "relating to" that subject matter. It is unclear whether there is any real difference between the two in practice, although the latter appears to be broader.

The Government's response to the ALRC's recommendation has been deferred and will be provided in conjunction with its response to the ACIP Report.

Conclusion

Unlike the laws of many of Australia's trading partners, Australian patent law is currently unclear as to whether it includes a general exception for experimental use of a third party's patented invention. Although an explicit limited springboarding exception currently exists, questions are being asked as to whether this exception strikes the right balance. Both ACIP and the ALRC have now recommended that the uncertainty as to the existence of a general experimental use exception be remedied by the introduction of a specific exception for experimental use. ACIP has also recommended that the Government review the current springboarding exception.

Unless and until the Government acts on these recommendations (and perhaps beyond), the precise boundaries between permissible (non-infringing) and impermissible (infringing) use of a third party's patented invention for experimental purposes in Australia will remain unclear. As a result, experiments undertaken using a third party's patented invention without a licence should not be undertaken without legal advice.

For further information, please contact John Collins.