Australia Country Report

In 2004, the Australia Law Reform Commission (“ALRC”) published a report, titled Genes and Ingenuity: Gene Patenting and Human Health (the “ALRC Report”), on the impact of Australian patenting laws and practices on research and commercialization of genetic testing and cost-effective access to the Australian health care system. The ALRC Report was the result of an extensive investigation involving community consultation conducted over an eighteen month period. In additional to presenting the ALRC’s findings, the ALRC Report also offers recommendations based on their findings

Guide to Australian Report

Report Title	Abbreviation	Date of Publication	Subject Matter Covered	External Link to Report
Genes and Ingenuity: Gene Patenting and Human Health	ALRC Report	2004	Covers the impact of Australia patenting laws and practices on research and commercialization of genetic testing and cost-effective access to the Australian health care system.	Available Here

Patent Rights and Genetic Patents in Australia

The Australian legal system grants two types of patents for inventions: “standard patents” and “innovation patents.” Standard patents are granted for term periods of 20 years and are considered “the basic form of patent protection for inventions” in Australia. On the other hand, innovation patents are “intended to provide protection for ‘lower-level’ inventions for which standard patent protection is not available” and are granted for term periods of 8 years. Similar to the U.S. patent law system, Australian patent holders are granted the exclusive rights to “make, hire, sell . . . offer to make, sell, hire, or otherwise dispose of [the invention], use, import, or keep it for the purpose of doing any of these things.” Upon grant of a patent, Australian holders have no obligation to use their exclusive rights, or license there invention to others for use. Notably, there is no current provision in Australian patent law for compulsory licensing, however, the ALRC notes in the Report that a compulsory licensing scheme could be created that models the country’s copyright compulsory licensing provisions.

The ALRC Report indicated that patents tend to be granted for: “isolated genetic material that has been separated from the human body or manufactured synthetically,” “methods or products used in testing for mutations in a gene or genetic sequence,” and “general methods for identifying genetic sequences, mutations, or deletions in an individual’s genetic sequence.” Importantly, the claims associated with isolated genetic material or diagnostic methods “may cover all uses of that material” and “often include diagnostic or predictive testing for genetic conditions.”

According to a genetics society , which maintains a register of genetic tests that the ALRC Report relies on, there are approximately 220 genetic tests available in Australia. These tests are conducted by 44 laboratories across the country. Of those 220, approximately thirty percent, or 60 of 220, were identified to be associated with patent rights.

ALRC Report Summary

Scope of Report

The ALRC Report focuses separately on two areas, the impact of patents and related practices on the Australian biotechnology industry, including innovation and development of new technologies, and the impact on patient health, cost, and access. In terms of the biotechnology industry and innovation, the ALRC Report identifies similar issues as the U.S. SACGHS – patent thickets, royalty stacking, and broad patent claims.

For the purpose of identifying issues in innovation, the Report describes the process of researching, developing, and bringing a genetic test product to market into two distinct phases, “upstream” and “downstream.” The upstream phase describes “basic research [that] may involve the identification of gene sequences associated with particular biochemical functions.” In contrast, the downstream phase “may focus on the eventual use of these genetic sequences in the diagnosis of disease or in novel therapies, such as gene therapy or the production of therapeutic proteins.”

Affect of Patents on Future Research and Development

The ALRC defined “broad patent claims” as “patent that grant broad rights to the patent holder and may be seen as covering applications later invented by someone else.” When these broad patents are not licensed, they “can discourage research and innovation either because researchers will be concerned about breaching existing patents, or because downstream inventors will have to pay license fees to those whose patents were granted first.” The Report notes that narrowly defined claims of invention may “encourage others to ‘work around’ the patent, thereby having less impact on related research.” Broad patents may hinder the usage of research tools, especially those that “are of such importance that all or much that follows in the relevant field flows from them.” Thus, if a holder of a broad patent in this area holds out her rights against researchers, there is potential for the patent to preempt large areas of medical research and become a barrier in the development of a broad category of products. Additionally, “[r]esearchers face transaction costs in negotiating the licenses,” and potentially prohibitive licensing fees to obtain rights to use a patent.”

However, despite these concerns, the ALRC concluded that “there is little evidence to suggest that gene patents have any significant adverse effect to date on the conduct of genetic research in Australia.” This conclusion is premised on the fact that many patent holders are not “active in enforcing patent rights.” On this point, the ALRC Report notes that the situation may change, and that there may be the potential for future problems for researchers, and this potential “justifies ongoing monitoring of the problem.”

In terms of affects on the downstream phase of development and commercialization, the ALRC Report discusses potential problems with patent thickets, royalty stacking, and broad patent as potential barriers for market entrants and came to similar conclusions as contemplated for upstream phases of development. The community consultants to the ALRC Report raised concerns over production costs and extraordinarily high license royalty fees caused by overlapping patent rights owned by multiple patent holders. Just as the U.S. SACGHS report found, the ALRC Report notes that patent thickets and royalty stacking problems may be solved through patent pools. However, the ALRC Report concludes that “the most aggressively enforced research tool patents do not exist in Australia, or if they did exist, they do not appear to be enforced.”

The ALRC found that broad patent claims have the potential to effect to “decrease returns on products developed using a patented technology,” in turn, to offset any high license fees to use a product, a company might raise the price of the test to the consumer. In particular, this has the potential to increase “the cost of healthcare products,” decrease the amount of products available “if the development of some products is abandoned,” and cause “inefficient use of resources due to” high license fees or causing companies to “invent around [a patented invention] unnecessarily.” To combat the problem presented by broad patent claims, the ALRC Report recommends that a “usefulness” requirement be included in the patent examination process and that patent application examiners “be satisfied on the balance of probabilities when assessing all the requirements for patentability that are relevant at the stage of examination.”

Blocking Patents and Refusals to License

The ALRC addressed several additional points of inquiry on the impact of genetic patent claims and downstream research, including blocking patents and refusals to license. The Report defines a blocking patent situation as one “where one patent holder has broad patent over an invention (a dominant patent), and another patent holder has a narrower patent over an improvement to that invention or a new invention that relies on access to the original invention (a dependent invention).” In these scenarios, a “holder of a dependent patent will be precluded from practising the improved invention unless it can obtain a license of the dominant patent.” However, the Report concludes on the basis of public inquires that “successfully negotiating a license could solve issues created by potentially blocking patents” and according to at least one respondent, “research is blocked only in exceptional cases.” The Report also notes that another legal mechanism for dealing with blocking patents is through a new compulsory licensing provision in Australia’s patent laws.

On the other hand, the Report did note that refusals to license patented inventions may “be a barrier to commercialisation if licenses are not widely available.” According to one of the studies the ALRC Report relies on, “20% percent of firms surveyed reported abandoning a project because of an inability to obtain a license.” However, in another study of 49 firms, only 6 responded that they had been refused licenses. This led the ALRC Report to conclude that “the perception that refusals to license are not a pervasive problem.” Similar to how blocking patents issues might be solved, the ALRC Report points out that refusals to license may be solved under a compulsory licensing provision.

Impact on Access to Healthcare

Beyond the impact on research, innovation, and commercialization of genetic resting, the ALRC Report also discusses the impact of gene patents and practices on Australia’s health care system in terms of cost and funding. In Australia, most medical genetic tests are generally ordered by medical practitioners, in some cases this involves referring the patient to a clinical geneticist or a genetic counselor. Direct consumer access to genetic testing laboratories is generally not possible. Nonetheless, this limitation does not appear to cause any current problems with respect for access or cost to genetic testing. Commentary received by the ALRC in the course of investigating the Report raised concerns over “the potential impact of patents over isolated genetic materials on public sector laboratories.” The Report found the concerns to be somewhat unfounded in their investigation and stated, “Australian public sector laboratories currently do not pay license fees for the use of isolated genetic materials in medical genetic testing, and generally have not been approached by patent holders seeking to enforce their rights over such materials.” Overall, in contrast to U.S. licensing practices, the ALRC found that there was “little indication that holders of patents related to disease genes were actively enforcing their patents against Australian genetic test laboratories.” Studies conducted in relation to these concerns confirmed that “most laboratories are public hospitals and many do not charge for their services, further suggesting that there may be little financial incentive for [patent holders to] target them.”

The overarching conclusion reached in the report is that “there is little evidence to date that gene patents and licensing practices with respect to genetic testing have had any significant impact on the cost of healthcare provision in Australia.” Overall, the ALRC concludes “there are existing mechanism through which problems might be addressed should they emerge” such as rights of the Crown or a compulsory licensing provision under the patent law.

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