05 Mar 2015

Australia gets compulsory patent licensing laws for pharmaceutical exports to developing countries

by James Neil, Richard Hoad

Australia's compulsory patent licensing laws are being amended to support the export of patented pharmaceuticals to countries in need. Pharmaceutical patent holders need to be aware that, if someone asks for a licence for export to developing countries, refusal could result in an application to the Federal Court for a compulsory licence.

In 2005, an international agreement was reached to empower domestic courts to grant compulsory licences for the manufacture of patented pharmaceuticals for export to developing countries. A decade later, this regime is about to become a reality in Australia.

The TRIPS Protocol

Australia is a signatory to the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement). The TRIPS Agreement sets out the minimum requirements for intellectual property protection for WTO member states.

In 2005, the TRIPS Agreement was amended by way of the "TRIPS Protocol", with the aim of encouraging patent owners to either:

  • provide medicines at affordable prices to least developed and developing countries in need; or
  • issue voluntary licences to generic manufacturers to provide medicines at affordable prices.

If a patent owner is unwilling to do so voluntarily, then the TRIPS Protocol provides a mechanism to force the patent owner to issue a compulsory licence. While a number of countries have amended their patent legislation to incorporate this system, Australia has not done so – until now.

Australia changes its compulsory patent licensing laws

The TRIPS Protocol regime will now be implemented in Australia as a result of the enactment last month of the Intellectual Property Laws Amendment Act 2015 (Cth). Among other things, the Act contains a mechanism by which compulsory licences for patented pharmaceutical inventions may be sought and granted to enable the manufacture of a pharmaceutical product in Australia for export to an eligible importing country. The changes come into effect on 25 August 2015.

In order to obtain such a licence, an applicant must apply to the Federal Court of Australia. The Court may then grant the licence if, among other factors:

  • the application is made in good faith;
  • the pharmaceutical product is to be imported by the eligible importing country or an authorised third party importer;
  • the proposed use of the pharmaceutical product is to address a public health problem in the eligible importing country (eg. a national emergency or other circumstances of extreme urgency); and
  • exploiting the patented pharmaceutical invention is necessary to enable the import and proposed use of the pharmaceutical product as mentioned above.

The patent owner will not be left without compensation for the grant of the compulsory licence: it will be paid an amount agreed between it and the applicant for the compulsory licence or, if no agreement can be reached, the licence fee will be determined by the Court. In the latter case, the amount will be what the Court considers to be adequate remuneration, taking into account the economic value of the licence to the eligible importing country. In the case of national emergency or extreme urgency, the licence may be exploited before an amount of compensation is agreed or determined

Safeguards to protect the patentee's commercial interests

The Act includes a number of provisions which are intended to act as safeguards to protect the legitimate commercial interests of the patent owner, including mechanisms to ensure that the procedure is not exploited by competitors (and others) for commercial gain. For example:

  • the licence will only extend to the manufacture of the quantity of products necessary, and only for the duration necessary, to address the public health need in the eligible importing country; and
  • an application to the Federal Court under these provisions must be accompanied by a statement made by or on behalf of the eligible importing country to the effect that it will take reasonable measures to prevent the goods leaving that country.

What the future holds

The Productivity Commission recently held an inquiry in relation to the compulsory patent licensing regime in Australia. In its final report, the Commission did not address the TRIPS Protocol because it considered those issues to be beyond its terms of reference. However, it did recommended sweeping changes to Australia's compulsory patent licensing laws. Whether the current Government has the appetite to introduce such extensive legislative changes in this area remains to be seen.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.