PDC: Patent policy

This Working Group (WG) was established by the Policy Development Committee (PDC) on 20 February 2013. The working group was tasked with developing policy to formalize existing party views on patent reform. It was chaired by Mark Gibbons and has prepared the following policy text for potential adoption by PPAU.

Platform amendment
Thoughts and ideas cannot be “owned” as natural property. Patent laws do, however, grant a temporary monopoly over an expression of an idea. This trades a reduction in free access for a greater incentive to disclose and develop ideas.

However, as the information age has reshaped society, patents have become increasingly anachronistic and inadequate in fulfilling their intended purpose. The original twenty-year patent duration was codified at a time when ideas and products took years to spread[1]. It is out of step in a world where products can be developed and marketed to millions of people in a space of weeks, and most credible research now favours a significantly shorter term.[2] The disconnect between patent laws and modern life is worsened by rampant abuse of the patent system. Hoarders and patent trolls are using patents to force creators and inventors to pay additional costs or face litigation – a use which undermines the creation process patents were meant to protect.

Modernising the patent system
Monopolies on ideas are not natural – they are created by the state. While interventions in the free market are sometimes necessary, it is important that they serve the public interest, and reflect the best research. A reduction in patent duration is now clearly overdue, and this should be paired up with explicit protection for public research. Since patents were introduced on the basis of enabling products to be developed, we believe that legal defence of any patent should require the litigant to prove they are using it. Patent law should also permit independent development of the same invention.

Taken together, these measures will curb the incentive to register trivial and defensive patents. This should reduce the quantity of patents, and improve the quality.

Software patents
Patents on programs must reflect the uniquely dynamic nature of the software industry, and durations should be shorter than those applying to other patent types. Functional claiming (which patents the end result of software) should be abolished, as it removes the capacity for the free market to create newer and better approaches.[3]  A larger fee should also apply for software patents to fund additional scrutiny and a raising of the threshold for obviousness and prior art.

Genes and organisms
“Products of nature” are explicitly not patentable under first principles of patent law. However, patents on human genes have been granted on the basis that extraction of material from its natural environment is akin to having invented it.[4] This is an absurd legal artifice which, if applied in other fields, would lead to patents on coal, cotton, and wood.

The granting of monopolies over human genes is a particularly destructive form of corporate welfare because it allows private interests to lock away fundamental information about our bodies. Essential research is being hindered by the obligation to negotiate among dozens of gene patent holders, who bear no obligation to contribute to research themselves.[5] Gene patent holders are imposing huge costs on sick and dying patients for simple tests and treatments.[6]  Curbing these practices requires no more than a return of patent law to first principles, which provide no basis for patents on genes and organisms.

Pharmaceutical patents
Pharmaceutical patents fall into two categories: patents on a process for creating a drug, and patents on a drug itself. Process patents may encourage companies to seek alternative and better ways to produce a desired outcome.[7] However, drug patents have the reverse effect, shutting down free market competition which might otherwise drive improved techniques.

Drug patents are typically justified by the assertion that a strong incentive is needed to support the long and complex research and development cycle for drugs. While drug research is important, patents are a flawed method for accomplishing it, for two primary reasons:


 * The price problem: A guarantee of a twenty year monopoly on a drug removes any necessity to compete on quality or price. Very high prices result, and since a large number of drugs qualify for the pharmaceutical benefit scheme (PBS) the government is ultimately forced to fund the monopolies it has created, to the tune of billions of dollars a year (the cost of patented medicines in the F1 category of the PBS rose by more than a third between 2005–06 and 2009–10).[8] The situation is worse in developing nations where high prices demanded by patent holders deny impoverished people access to lifesaving medicine.[9]


 * The incentive problem: A cure for a condition can only be sold once, but a temporary fix can be sold repeatedly. Drug patents thus contain a structural incentive to engage in the wrong kinds of research. Consequently, only around two per cent of new active ingredients and applications devised by drug companies are considered to make real medical progress.[10]  This means that only a small proportion of taxpayer revenue directed to drug companies ultimately funds genuinely useful research. Firms in China and the US also subject Australia to many dubious and harmful patents, imposing additional barriers on potentially useful research.[11]

Drug patents are ultimately far too indirect and unreliable to work as a platform for something as vital as medical research. An alternative approach is needed. We propose the abolition of drug patents: this will allow the PBS to make use of generic drugs, freeing up significant funds which can be redirected towards publicly funded medical research. This research can target critical areas and ensure the development of meaningful cures. Drugs developed with public funds will enter the public domain where generic manufacturers compete on price and quality in a free market. The resulting drugs can be provided at low cost to consumers, and exported as aid to impoverished countries unable to afford monopoly drugs.

Funding will also be directed towards a trial ‘bounty’ system in which rewards are offered for the creation of drugs which serve an identified public good. Private research in this model will target areas not covered by public research, adding breadth to the system and reducing pressure on public research infrastructure. We will also seek to negotiate a new biomedical treaty, which would include a global bounty system to replace drug patents worldwide.[12] Taken together, these measures will grant a far greater role for the free market than exists in the current monopoly system. They will provide a broader research platform and cheaper drugs built in accord with the right incentives.

Policy text
Reduce patent duration to 10 years.
 * The length of "innovation patents" (which have a lower threshold of inventiveness) will be reduced to 5 years.

Prevent misuse of patents.
 * Patent holders will be required to demonstrate active use of a patent as a pre-condition for suing for infringement.
 * Legal protection will no longer apply to patents used as a speculation commodity.
 * Legal protection will apply to non-commercial use of patented material.
 * In the event that non-commercially developed products are subsequently used commercially, liability will apply to commercial users.
 * Legal protection will apply in the event that a party accused of copying can present reasonable proof that the infringing item was developed independently and without knowledge of the patent in question.
 * Explicit protection will apply for open source projects which would be rendered ineffective by extended legal battles.

Reform software patents.
 * Software patents will incur a higher patent continuity fee.
 * Fees will fund impartial, professional reviewers and consultants (experienced in the relevant areas) to review software patents, with the goal of blocking patents that are obvious to someone experienced in area, not novel or having prior-art.
 * The length of patents for inventions primarily embodied in software will be 5 years.
 * Functional claiming will be disallowed.
 * Applicants will not be able to claim patent rights on the outcome of the software, just on the specific implementation.
 * Software patents must contain sufficient information for someone experienced in software development to be able to implement the invention.

Abolish patents on genes and living organisms.
 * Patents on inventions based on a gene (which neither require nor confer rights to the gene itself) will be retained.

Abolish patents on pharmaceutical drugs.
 * Techniques for creating pharmaceutical drugs will remain patentable.
 * All patents on chemicals will be placed in the public domain, and manufacturers will be encouraged to produce generics.
 * Savings made through the substitution of brand name drugs with generics on the Pharmaceutical Benefits Scheme (PBS) will be used to fund medical research:
 * Funding will be allocated to the CSIRO and tertiary institutions to sponsor research in areas considered as priorities for the public good.
 * Publicly funded drugs will be placed in the public domain, and may be exported through aid programs to developing nations affected by drug shortages.
 * Funding will be allocated to trial a "bounty system" to reward firms who create drugs which serve an identified public benefit.
 * The bounty will be determined in advance will be paid annually, over a ten-year period of time.
 * Incentives will be offered to both first- and second-movers: where a new invention is based upon an earlier invention, rewards would be split even if the initial drug is superseded.
 * The amount of the reward for a particular drug would be determined by an expert panel and based on public health outcomes such as number of beneficiaries, level of therapeutic benefit, and capacity to address priority healthcare needs.
 * A ten-year distribution monopoly (subject to price controls) may be granted for drugs which are tested and marketable.
 * Negotiations will begin on a global medical R&D treaty which may be signed by any nation willing to commit appropriate funds to support R&D.
 * Funding will support a global reward system following the principles of the domestic trial.
 * Rewards will be linked to metrics determined by signatory nations.
 * Drugs subject to a bounty will be placed in the public domain, to keep prices down.