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An experimental use exception for New Zealand's patent legislation. An options paper [2006] NZAHGovDP 1 (1 February 2006)
Last Updated: 12 July 2020
An Experimental Use Exception for New
Zealand’s Patent Legislation
An Options Paper February 2006
ISBN 0-478-28465-9
© Crown Copyright
First Published February 2006 by the Regulatory and Competition Policy Branch
Ministry of Economic Development
P O Box 1473 Wellington New Zealand
http://www.med.govt.nz
Permission to Reproduce: The copyright owner authorises reproduction of
this work, in whole or in part, so long as no charge is made for the supply of
copies,
and the integrity and attribution of the work as a publication of the
Ministry of Economic Development is not interfered with in
any way.
Disclaimer
The opinions contained in this publication are those of
the Ministry of Economic Development and do not reflect official government
policy.
Readers are advised to seek specific legal advice from a qualified professional
before undertaking any action in reliance on the
contents of this publication.
While every effort has been made to ensure that the information set out in this
publication is accurate,
the Crown does not accept any responsibility whether in
contract, tort, equity, or otherwise, for any action taken, or reliance placed
on, any part, or all of the information in this publication or for any error in
or omission from this publication.
Contents
Information for Persons Making Submissions
Submissions in relation to
this options paper are invited from inventors, scientists, patent owners, patent
attorneys, users of patented
inventions and members of the public.
Submissions will be considered in the development of policy recommendations to
the Government on possible legislative reform.
To aid respondents in making submissions, questions for discussion appear at the
end of this options paper.
Submissions should be sent to:
Experimental Use Submissions Attention: Warren Hassett Regulatory and
Competition Branch Ministry of Economic Development PO Box 1473
WELLINGTON
E-mailed submissions are also welcome and should be sent to: patexpuse@med.govt.nz
Further copies of this paper may be downloaded from the Ministry’s
website: http://www.med.govt.nz
Submissions may be subject to disclosure under the Official Information Act
1982. Persons making submissions that include commercially
or otherwise
sensitive material that they wish the Ministry to withhold under that Act should
clearly identify the relevant information
and the applicable grounds under which
the Ministry could withhold the information.
The closing date for submissions is 7 April 2006
1. Introduction
- This
options paper deals with the issue of the use of patented inventions for
research or experimental purposes by parties other than
the patent owner. In
particular, it considers the question of whether or not New Zealand’s
patent legislation should explicitly
state that such use does not infringe a
patent. Several possible options for dealing with this issue are presented for
consideration.
1.1 Why is the issue of experimental use being
considered?
- In
recent years concerns have been expressed in many countries, including New
Zealand, over the granting of patents for genes and
gene sequences
(“genetic material”). Some of these concerns relate to moral or
cultural matters, while others relate
to implications for research and for the
cost and availability of health services. Genes and gene sequences are
patentable in New
Zealand.
- The
breadth of patents granted for genetic material have raised economic concerns.
In particular, concerns have been raised that
patents are being granted for
genetic material even though the patent owner has not identified any specific
use for the material,
or that, having identified just one use, rights will be
granted that cover all uses to which the genetic material might be
put.
- A
consequence of this is that other researchers who wish to use the patented
genetic material in order to identify a use, or further
uses, must then pay a
licence fee to do so. This may discourage such research, which could mean that
potentially valuable clinical
applications of genetic material will not be
developed, or that development of such applications will be delayed until the
patent
expires. There is also concern that patents of such breadth may
unnecessarily raise the cost of health care.
- These
concerns came to prominence in New Zealand in 2003 when an Australian company
Genetic Technologies Ltd (GTG) approached a number
of New Zealand organisations,
including District Health Boards and Crown Research Institutes, seeking to
enforce two patents relating
to the use of so-called non-coding DNA. Non-coding
DNA is used in diagnostic testing for a number of health conditions and is also
used extensively in the life sciences.
- As
a result of the concerns raised by the activities of GTG, the Government asked
officials for further information on the issues
surrounding the granting of
patents on genetic material. The status of the use of patented inventions in
research or experimental
work was one issue that was identified as being of
particular concern. Consequently, the government asked the Ministry of Economic
Development, in consultation with the Ministries of Health and Research, Science
and Technology to consider the possibility of a
research exemption for New
Zealand’s patent legislation.
- Similar
concerns expressed in Australia led to the Australian Government asking the
Australian Law Reform Commission (ALRC) to consider
issues surrounding the
patenting of genetic material. As part of its review, the ALRC considered the
question of whether an experimental
use exception should be incorporated into
Australia’s patent legislation. The Australian Advisory Council on
Intellectual Property
(ACIP) was directed to specifically consider the issue of
an experimental use exception. The ALRC and ACIP reviews are discussed
in
Section 5 of this document.
7.1.1 What is a Patent?
- A
patent is an intellectual property right granted under the Patents Act 1953. The
grant of a patent provides the patent owner with
the exclusive right to make,
use or sell the patented invention for a term of up to 20 years from filing the
patent application.
Patent applications are granted after an examination process
by the Intellectual Property Office of New Zealand by
(IPONZ).
- In
return for the exclusive right provided by the grant of a patent, the patent
applicant must provide a full and complete description
of the invention, which
is made public by IPONZ when a patent application is accepted. Once the patent
has expired, anyone may use
the invention.
- The
exclusive rights provided by the grant of a patent allow patent owners to
prevent others from copying their inventions and “free
riding” on
their investment in research and development. This gives inventors a greater
opportunity to make a return from these
investments, and provides an incentive
to develop inventions that might not otherwise be developed. It is this
incentive for innovation,
and the resultant benefits to society that is the main
justification for the grant of a patent.
10.1.1 Use of Patented Inventions in Research
- Much
innovation is “cumulative”. That is, it builds on the results of
previous innovation. There may be problems, though,
if previous innovations are
the subject of current patent rights.
- For
example, researchers wishing to undertake research involving a patented
invention may need to actually use or produce that invention.
This raises the
question as to whether or not research or experiments involving the patented
invention will infringe the patent.
If research or experiments involving a
patented invention were considered to infringe a patent, significant costs could
be imposed
on researchers. Such costs could act as a disincentive to research in
areas where there was a risk of infringing patents.
- If
the possibility that research or experimental work might infringe patents did
act as a disincentive to research, innovation in
New Zealand could be inhibited.
This would run counter to the goal of the Government’s Growth and
Innovation Framework to develop
a knowledge economy. The question of the status
of research or experimental work involving patented inventions is therefore one
that
could have significant implications for innovation in New
Zealand.
1.2 What are the issues?
- The
question of the status of research or experimental work involving patented
inventions arose from consideration of the implications
of granting patents for
genetic material. This question, though, is relevant to other areas of
technology as well. The discussion
of this question in this document will
therefore not be limited to research involving patented genetic
material.
- There
are three questions that will need to be addressed when considering the issue of
the use of patented inventions in research:
- does
research involving a patented invention constitute patent infringement? and
- if it
does, is this a problem that needs to be addressed? and, if
so,
- how
should this problem be addressed?
- The
purpose of this document is to consider these questions and to seek public input
on whether or not changes to New Zealand’s
patent legislation in this area
might be needed
2. Experimental Use and Patent Infringement
- In
considering the issue of the use of patented inventions in research or
experimentation, the first question that needs to be considered
is whether or
not such use constitutes patent infringement.
2.1 The Law in New Zealand
- The
infringement provisions of the Patents Act 1953 do not specifically mention
experimental use. The most relevant case-law would
appear to be Smith Kline
& French Laboratories Ltd vs Attorney General1. This
case dealt with the question of whether the importation of a patented substance
(in this case a pharmaceutical) for the purposes
of conducting experiments
connected with obtaining marketing approval constituted an infringing
“use” of the invention.
The Court of Appeal held that it
did.
- In
this decision Hardie Boys J stated:
“Doubtless experimentation will usually have an ultimate
commercial objective; where it ends and infringement begins must often
be a
matter of degree. If the person concerned keeps his activities to himself, and
does no more than further his own knowledge or
skill, even though commercial
advantage may be his final goal, he does not infringe. But if he goes beyond
that, and uses the invention
or makes it available to others, in a way that
serves to advance in the actual market place, then he infringes”.
- It
would appear from this decision that it is the ultimate objective of the
research which determines whether or not the use of a
patented invention for
research or experimental purposes infringes a patent.
“Non-commercial” research would not infringe,
while
“commercial” research would. It is not clear though, just where the
boundary between “commercial” and
“non-commercial”
research lies.
- What
does appear to be clear, however, is that the status of the researcher or
research organisation involved is immaterial. In light
of this, the activities
of a non-profit institution such as a university may be just as liable for
patent infringement as those of
a commercial organisation.
2.1.1 The Regulatory Review Exception
- In
December 2002, the Patents Act 1953 was amended to introduce a “regulatory
review exception”. This allowed third parties
to make, use or sell an
invention for purposes reasonably related to the development and submission of
information to a government
agency in order to gain approval to make, use or
sell the invention2. This exception was intended to facilitate the
entry onto the market of generic products, such as generic pharmaceuticals. It
does
not cover research or experimental work done for purposes unconnected with
obtaining regulatory approval.
1 (1991) 4 TCLR 199
2 S68B of the Patents Act 1953.
2.1.2 Review of the Patents Act 1953
- In
August 2000, the government began a review of the Patents Act 1953. This review
has now been completed. A new Patents Bill has
been drafted by the Parliamentary
Counsel Office. An exposure draft of this Bill was released in December
20043. Public submissions on the exposure draft have been analysed,
and further draft of the Bill is being prepared. It is expected that
the Bill
will be ready for introduction to Parliament late in 2006. At this stage it
seems likely that the Patents Bill will be enacted
and brought into force by mid
2008 (after suitable regulations are developed).
- The
issue of the experimental use of patent inventions was not specifically dealt
with in this review, as, at that time, it had not
been identified as a problem.
The infringement provisions of the draft Patents Bill do not contain any
specific provisions regarding
the experimental use of patented inventions that
would alter the existing situation. Subsequent events, both in New Zealand and
overseas
(as described later in this document) have highlighted potential
problems with the law as it stands.
- Compared
with the Patents Act 1953, the draft Patents Bill contains a more comprehensive
definition of the rights associated with
the grant of a patent. In particular,
clause 17(1) of the Bill provides that:
A patent gives the patentee the exclusive rights, during the
term of the patent, to exploit the invention and to authorise another
person to
exploit the invention.”
- Clause
17(2) of the Bill defines “exploit” as including the acts of making,
hiring, selling, using, importing or otherwise
disposing of the invention. This
does not alter the position with respect to the use of patented inventions in
research or experimental
work, compared with the position under the Patents Act
1953. The Bill also retains the regulatory review exception referred to
above.
- If,
after considering public submissions, the government decides to incorporate a
research exemption in New Zealand’s patent
legislation, it is intended
that the exemption be introduced by way of a Supplementary Order Paper to the
draft Patents Bill if it
cannot be incorporated into the Bill prior to its
introduction.
2.2 Status of Experimental Use Under the Patents Act
1953
- It
seems then, that the Patents Act 1953 and associated case-law provide little
guidance for researchers looking to find out whether
research or experimental
work that they wish to carry out would be held to infringe a patent. On the
basis of the case-law, the question
could probably only be determined by a Court
after the work had been carried out, and only then if the patent owner decided
to initiate
an infringement action that eventually went to court. The status of
research or experimental work involving a patented invention
in New Zealand
seems uncertain.
2.3 Is There a Problem?
- Since
the status of research or experimental work involving a patented invention in
New Zealand appears uncertain, it is clear that
there is a possibility that such
work
3 A copy of the draft Patents Bill can be obtained
from http://www.med.govt.nz/buslt/int_prop/patentsreview/draftbill/index.html
could be held to be infringement. This leads to the second question posed in the
introduction: does this cause a problem that needs
to be addressed?
2.3.1 Have There Been Infringement Cases Involving NZ
Researchers?
- The
first question that might be asked is whether any New Zealand researchers have
been sued for patent infringement on the basis
of the use of a patented
invention in research or experimental work. In New Zealand, to date, there is
little evidence that researchers
have been sued for patent infringement for
research or experimentation involving a patented invention. Perhaps the most
relevant
case is that involving Genetic Technologies Ltd
(GTG).
- Genetic
Technologies Ltd (GTG) is an Australian company that, in 2003, sought to enforce
two New Zealand patents on non-coding DNA4 analysis and mapping. The
GTG patents claim a “strategy” whereby characteristics of (and
mutations in) the genes can be
predicted by looking at the non-coding part of
the gene in unrelated individuals. GTG approached the health sector and a number
of
life science organisations including the Crown Research Institutes, with the
intention of entering into licensing agreements. It
appeared that almost anyone
undertaking genetic research or testing would be infringing these
patents.
- The
parties concerned formed a consortium to negotiate with GTG. The matter was
subsequently settled out of court after the validity
of the patents was
questioned. It was agreed that no license fee would be payable by consortium
members for use of the methods covered
by the patents. Notwithstanding this, the
consortium members still incurred substantial legal costs.
- Apart
from the GTG case, the Ministry is unaware of any other cases where New Zealand
researchers have faced infringement actions,
or threats of such actions. This
does not, of course, mean that other cases do not exist.
2.3.2 Effect of Possible Liability for Infringement on
Research
- Even
if there have been very few, if any, cases where research or experimental work
involving a patented invention has been the subject
of infringement litigation,
this does not necessarily mean that there is no problem. It is possible that the
potential for being
sued for infringement may make researchers reluctant to
consider research or experimental work in areas that may be the subject of
patent rights.
- If
researchers are sued for patent infringement, they could incur significant
costs. If their work is found to be infringing, they
could be liable for
damages, as well as having to pay an ongoing license fee for future use of the
invention involved. Even if a
court was to find in the researcher’s
favour, there could still be significant costs incurred by the researcher, as an
award
of costs by the courts would be unlikely to cover all of the costs
incurred by the researcher.
- Of
course, researchers could avoid the risk of being sued for infringement by
taking the precaution of obtaining a license. There
are, however, costs involved
in following this course, quite apart from the license fee. The researcher would
have to determine which
4 Non-coding DNA is DNA that does not confer a
specific trait.
patent(s) was involved, and then locate and negotiate with the patent owner.
These “transaction costs”, as well as the
license fee, may be
unaffordable for many researchers or research institutions, particularly if
there were more than one patent and
patent owner involved.
- In
recent years, there has been significant publicity about this issue, both in New
Zealand and overseas. This may have increased
awareness among researchers about
the possibility that their research work could infringe a patent. If researchers
have decided not
to pursue particular areas of research to avoid the risk of
conflict with patent rights, innovation in these areas may be inhibited.
This
may mean that New Zealand misses out on the benefits of such
innovation
2.4 International Experience
2.4.1 Australia
- As
in the New Zealand Patents Act 1953, the infringement provisions of the
Australian Patents Act 1990 do not specifically exempt experimental use from
patent infringement. Such use is not explicitly included either. There appears
to
be no Australian case law dealing with the issue of experimental use. The
most relevant Court decision appears to be a 19th century case,
Frearson v Loe5. In this decision it was held
that:
“Patent rights were never granted to prevent persons of
ingenuity exercising their talents in a fair way. But if there be neither
using
nor vending of the invention for profit, the mere making for the purpose of
experiment, and not for a fraudulent purpose, ought
not to be considered within
the meaning of the prohibition, and if it were, it is certainly not the subject
of an injunction.”
- The
Patents Act 1990 also contains a regulatory review exception (s78). This applies
only to patents extended under s70 of the act, and, as in New Zealand, does not
apply to research or experimental work unconnected with gaining regulatory
approval.
- In
the last few years the Australian Law Reform Commission (ALRC) and the
Australian Advisory Council on Intellectual Property (ACIP)
have considered the
issue of a research exemption for the Patents Act 1990. The work done by the
ALRC and ACIP is considered in section 5 of this document.
2.4.2 The United States
- As
with New Zealand and Australia, there is no explicit research exemption in the
United States Patents Act (Title 35, U.S. Code). Judicial decisions have,
however, established experimental use of a patented invention as a defence to an
allegation of infringement. In Whittemore v Cutter6 Supreme
Court Justice Storey held:
“[I]t could never have been the intention of the
legislature to punish a man who constructed such a machine merely for
philosophical
experiments, or for the purpose of ascertaining the sufficiency of
the machine to produce its described effects.”
5 [1878] UKLawRpCh 49; (1878) 9 ChD. 48
6 29 Fed. Cas. 1120, 1121 (CCD Mass. 1813).
- Later
court decisions have interpreted this experimental use defence very narrowly. In
Roche Products, Inc. v. Bolar Pharmaceuticals Co., Inc7 the
Court of Appeal for the Federal Circuit (CAFC) held that the experimental use
rule could not be construed:
"so broadly as to allow a violation of the patent laws in the
guise of ‘scientific inquiry’, when that inquiry has definite,
cognizable, and not insubstantial commercial purposes. The defense is also
limited to "tests, demonstrations, and experiments" not
"in keeping with the
legitimate business" of the alleged infringer.”
- In
a more recent decision, Madey vs Duke8, the CAFC held
that:
“[R]egardless of whether a particular institution or
entity is engaged in an endeavour for commercial gain, so long as the act
is in
furtherance of the alleged infringer’s legitimate business and is not
solely for amusement, to satisfy idle curiosity,
or for strictly philosophical
inquiry, the act does not qualify for the very narrow and strictly limited
experimental use defense.
Moreover, the profit or non-profit status of the user
is not determinative.”
This decision is widely regarded as narrowing the experimental use exception in
the United States to the point where most organisations
carrying out research or
experimental work involving patented inventions could find themselves liable for
patent infringement.
2.4.3 The United Kingdom
- The
United Kingdom Patents Act 1977 contains a specific “experimental
use” exception. This is based on provisions in the
Community Patent
Convention, (ratified by the United Kingdom and 8 other EU states, but never
brought into force). S60(5) of the
1977 Act states inter
alia:
An act which apart from this subsection, would constitute an
infringement of a patent for an invention shall not do so if –
(a) it is done privately and for purposes which are not
commercial
(b) it is done for experimental purposes relating to the subject matter of
the invention.
- These
exceptions appear to have been interpreted rather narrowly by the courts. In
Smith, Kline & French Laboratories v Evans Medical Ltd9 ,
Aldous J considered that: the word "privately" in s60(5)(a) includes commercial
and non-commercial situations; is not synonymous
with "secret" or
"confidential"; and is used as the opposite of "publicly", denoting an act done
for the person's own use. With regard
to the reference to "purposes which are
not commercial" in s.60(5)(a), the purposes of acts had to be considered. Aldous
J found
there would be infringement if the purposes included any commercial ones
in addition to the non-commercial ones.
- With
regard to s60(5)(b), Aldous J went on to say that:
“if an act is to fall within s60(5)(b) it must be done for
purposes relating to the subject matter of the invention found in
the claims of
the patent alleged to be infringed. The purposes must
7 Roche Prods., Inc. v. Bolar Pharm. Co., Inc., [1984] USCAFED 216; 733
F.2d 858, 863 (Fed. Cir. 1984).
8 Madey v. Duke University, [2002] USCAFED 222; 307 F3d 1351, 1362. (Fed. Cir.
2002)
9 [1989] FSR 513
relate to the claimed subject matter in the sense of having a real and direct
connection with it.”
- In
Monsanto v Stauffer10 Dillon LJ held:
“trials carried out in order to discover something unknown
or to test a hypothesis or even in order to find out whether something
which is
known to work in specific conditions e.g. of soil or weather, will work in
different conditions can fairly, in my judgement,
be regarded as experiments.
But trials carried out in order to demonstrate to a third party that a product
works or, in order to
amass information to satisfy a third party, whether a
customer or a body regulating the safety etc of such products, that the product
works as its maker claims are not, it was held, to be regarded as acts done
‘for experimental purposes’.“
- Michael
Fysh (a Judge in the UK Patents County Court) has suggested that, on this basis,
the experimental use exception has a rather
narrow effect in UK/Irish law. He
said11:
“The qualification may cover such acts as verification of
various kinds (such as seeing whether a compound can be made as proposed
or will
work in a particular climate), assessment of validity, and in-house experiment
for the purposes of improvement and modification
etc. But the exception would in
my view exclude the use of a patented process in experiments specifically to
test some other product
or process with a view to the direct use of the results
thereof for a commercial purpose.”
2.4.4 The EU
- The
patent legislation of a number of EU states (in addition to the UK) also has an
experimental use exception similar to s60(5)(b)
of the UK Patents Act. Much of
the case law dealing with this exception relates to patented pharmaceuticals.
The main area of contention
has been the question of whether or not clinical
trials conducted during the term of a patent constitute
“experiments”.
Such trials will usually be connected with obtaining
of marketing approval for generic pharmaceuticals.
- The
German courts have generally been willing to treat such trials as non-infringing
“experimental use”. In most other
EU countries, including the UK,
such trials are considered to be infringements. In all other technical fields,
the experimental use
exception has not caused any problems in case law. As long
as tests/experiments are directed toward better understanding the content
of a
patent, or toward doing further research with regard to the invention, no
significant problems have ever been observed12.
2.4.5 Japan
- S69(1)
of the Japanese Patents Act states:
10 [1985] RPC 515
11 Fysh, Michael, Legal Issues in Exploiting Drug Patents in
Europe, LES – Italy Conference, December 2002.
12 Goddar, Heinz, The Experimental use Exception -
a European Perspective, CASRIP Symposium Publication Series, No 7 July 2002,
http://www.law.washington.edu/casrip/Symposium/Number7/1-
Goddar.pdf
“The effects of the patent right shall not extend to the working of the
patent right for the purposes of experiment or research.”
The experimental use exception in Japanese Patent Law dates from 1909. At that
time Japan was still a developing country and the
ability to “reverse
engineer” was needed to allow the development of new
technologies13.
- The
Japanese Patents Act does not define “experiment”. The Japanese
courts have held that the testing of generic pharmaceuticals
for the purposes of
obtaining regulatory approval during the term of the patent on the original
pharmaceutical falls within the experimental
use
exception.
13 Kastsuya Tamai, The Experimental Use Exception
– a Japanese Perspective, CASRIP Symposium Publication Series, No 7
July 2002, http://www.law.washington.edu/casrip/Symposium/Number7/1-
Tamai.pdf
3. International Obligations
- New
Zealand is a signatory to a number of international agreements dealing with
aspects of patent protection. These are the Paris
Convention for the Protection
of Industrial Property, the Patent Co-operation Treaty and the WTO Agreement on
Trade Related Aspects
of Intellectual Property Rights (the TRIPS Agreement). Of
these, the most relevant to the issue of a research exemption is the TRIPS
Agreement, in particular Articles 30 and 27.
- Article
30 of the TRIPS Agreement states:
“Members may provide limited exceptions to the exclusive
rights conferred by a patent, provided that such exceptions do not
unreasonably
conflict with a normal exploitation of the patent and do not unreasonably
prejudice the legitimate interests of the
patent owner, taking account of the
legitimate interests of third parties.”
- If
New Zealand were to adopt a research exception, it would have to be consistent
with Article 30. The scope of such an exception
would need to be carefully
considered to ensure that it did not extend beyond the boundaries set by Article
30.
- Article
27 of TRIPS states, in part, :
“...patent rights shall be available and patent rights
enjoyable without discrimination as to the place of invention, the field
of
technology...”
The effect of this is that any research exemption proposed for New
Zealand’s patent legislation must apply to all technologies,
and to all
patents regardless of the country of origin of the invention. This is because
such an exemption is an exception to patent
rights. Applying it to some
technologies but not others would result those technologies enjoying lesser
patent rights than those
technologies not covered by the exemption.
- To
date there appears to have been no WTO Dispute Panel rulings on whether or not a
research or experimental use exception would fall
within the scope of Article
30. The only ruling that may be relevant concerned a dispute between Canada and
the EU. This dispute
related to the adoption by Canada of a “regulatory
review exception” in its patents legislation. This provision is
essentially
the same as the similar exception
adopted by New Zealand (s68B of the Patents Act 1953) subsequent to the
resolution of this dispute.
- In
the WTO Panel Report relating to this dispute, it was accepted that Article 30
should be read in conjunction with other Articles
in the TRIPS Agreement, in
particular Article 7, which states:
“The protection and enforcement of intellectual property
rights should contribute to the promotion of technological innovation
and to the
transfer and dissemination of technology, to the mutual advantage of producers
and users of technological knowledge and
in a manner conducive to social and
economic welfare, and to a balance of rights and obligations.”
The WTO Panel considered that the “regulatory review exception” was
not inconsistent with Article 3014.
- The
existence of explicit experimental use exceptions in the patent legislation in a
number of countries suggests that the principle
of such an exception is not
inconsistent with Article 30. It can be noted that in an early draft of Article
30, “acts done
for experimental purposes” were explicitly listed as
an exception to patent rights15.
14 World Trade Organisation Panel Report Canada
– Patent Protection of Pharmaceutical Products, http://www.wto.org/english/tratop_e/dispu_e/7428d.pdf
15 Gervais, Daniel, The TRIPS Agreement, Drafting
History and Analysis, 2d Edition, Sweet & Maxwell 2003, para 2.292.
4. Exceptions to Other Intellectual Property Rights
- In
considering the question of a research exemption for New Zealand’s patent
legislation it may be useful to look at how similar
issues are dealt with in
other areas of intellectual property. Some other intellectual property statutes
provide exceptions to rights
granted that could be considered as forms of
“research exemptions”. These include plant variety rights and
copyright.
4.1 Plant Variety Rights
- The
grant of plant variety rights provides plant breeders with exclusive rights over
the exploitation of their new varieties. The
justification behind the grant of
these rights is to provide an incentive for breeders to invest in the
development of new varieties.
The grant of plant variety rights in New Zealand,
is governed by the Plant Variety Rights Act 1987 and the UPOV16
Convention. A variety that is protected by a plant variety right is known
as a “protected variety”.
4.1.1 The Plant Variety Rights Act 1987
- The
Plant Variety Rights Act 1987 provides for exceptions to the rights that plant
breeders have over their protected varieties. S18 states that any person
may:
“(a) Propagate, grow, or use a protected variety, for
non-commercial purposes; or
(b) If the production of the hybrid or new variety concerned
does not require repeated use of that variety, -
(i) Hybridise, or produce a new variety from, a protected
variety; or
(ii) Sell and hybrid of, or new variety produced from, a
protected variety.
4.1.2 The UPOV Convention
- S18(b)
of the Plant Variety Rights Act 1987 implements the so-called
“breeders’ exemption”. This originates from Article 5(3) of
the 1978 Revision of the UPOV
Convention (UPOV 78), of which New Zealand is
member. The Plant Variety Rights Act 1987 is based on UPOV
78.
- The
UPOV Convention was revised in 1991. New Zealand has not acceded to this
revision, known as UPOV 91. Compared with UPOV 78, UPOV
91 provides plant
variety rights owners with stronger exclusive rights over their protected
varieties. UPOV 91 retains the breeders’
exemption, although modified to
take account of the stronger rights.
- The
breeders’ exemption is contained in Article15(iii) of UPOV 91. The
relevant part of Article 15(iii) reads:
“[the breeder’s right shall not apply to] acts done
for the purposes of breeding other varieties.”
16 UPOV is the French Abbreviation for the
International Union for the Protection of New Varieties of Plants.
Article 15(iii) also allows the “other varieties” to be freely
exploited if certain conditions are met.
- UPOV
91 also contains an “experimental use” exception. Article 15(ii)
reads:
“[the breeder’s right shall not extend to] acts done
for experimental purposes.”
4.1.3 The Purpose of the Breeders’
Exemption
- The
breeders’ exemption is provided for in the UPOV Conventions to ensure that
plant breeders have access to the propagating
material of protected varieties
for the purposes of developing new varieties. This is in recognition of the fact
that most new varieties
are developed from existing protected varieties. If the
use of protected varieties for the purposes of developing new varieties was
an
infringement of a plant variety right, the ability of plant breeders to develop
new varieties would be restricted. This would
run counter to the object of
granting plant variety rights, that is, to encourage the development of new
varieties.
4.1.4 Review of the Plant Variety Rights Act
1987
- Certain
aspects of the Act have recently been reviewed, and a draft Bill to amend the
Plant Variety Rights Act 1987 has been drafted. An exposure draft of this Bill
was released in August 200517. The Bill provides for the same
stronger rights for plant variety rights owners as provided for in UPOV 91. The
breeder’s exemption
is to be retained, suitably modified, and
reads:
“A grantee’s rights under this Act are not infringed
by acts done in relation to a protected variety or essentially derived
variety
for the purposes of breeding a new variety.”
The “experimental use” exception contained in UPOV 91 is not, at
this stage, being incorporated into the Bill. This exception
would be adopted in
the Plant Variety Rights Act if New Zealand were to ratify UPOV 91.
4.2 Copyright
- Copyright
deals with the rights of authors and other creators over their original
literary, dramatic and artistic creations. The prime
purpose of copyright is to
benefit society by encouraging the creation of such works, while also
encouraging their dissemination.
Copyright in New Zealand is governed by the
Copyright Act 1994, the terms of the TRIPS Agreement and the Berne
Covention18.
4.2.1 The Copyright Act 1994
- The
Copyright Act 1994 gives copyright owners certain exclusive rights in their
works. The Act provides for some exceptions to these
rights. The most relevant
of these for the purposes of this discussion is s43, Research or Private Study.
S43(1) states:
17 http://www.med.govt.nz/buslt/int_prop/plantvarietyreview/draftbill/index.html
18 Berne Convention for the Protection of Literary
and Artistic Works
“Fair dealing with a work for the purposes of research or private study
does not infringe copyright in the work.”
- There
is no definition of “research” or “private study” in the
Act. In the Newsmonitor case19, Blanchard J defined
“research” as “the searching into a matter or subject or the
investigation or close study
of it”. Blanchard J also
observed:
“...research is... ...something of which a business
organisation is capable. The word is commonly used in business, as in the
phrase
‘research and development’. It is ultimately intended to enable
commercial exploitation or is, perhaps, defensive
in character – too
improve a product, for example, thus avoid the loss of sales or even product
liability litigation. Ulitmately,
the product of the research is likely in some
form to be made public. So I conclude that fair dealing for purpose ... can be
something
done with a commercial end in view.”
- The
Act does not explicitly define “fair dealing”. It does, however,
provide guidelines that are to be used by a court
in determining whether a
particular act constitutes “fair dealing”. S43(3)
states:
“In determining, for the purposes of subsection (1) of
this section, whether copying, by means of a reprographic process or
by any
other means, constitutes fair dealing for the purposes of research or private
study, a court shall have regard to –
(a) The purpose of the copying; and
(b) The nature of the work copied;
(c) Whether the work could have been obtained within a
reasonable time at an ordinary commercial price; and
(d) The effect of the copying on the potential commercial market
for, or the value of, the work; and
(e) Where part of a work is copied, the amount and
substantiality of the part copied taken in relation to the whole
work.”
4.2.2 The TRIPS Agreement
- Article
13 of the TRIPS Agreement allows exceptions to the exclusive rights conferred by
copyright. It states:
“Members shall confine limitations or exceptions to
exclusive rights to certain special cases which do not conflict with a normal
exploitation of the work and do not unreasonably prejudice the legitimate
interests of the right holder.”
4.2.3 The Purpose of Copyright Exceptions
- If
society is to benefit from the existence of copyright, an appropriate balance
must be struck between the interests of creators
of copyright works, and users
of these works. The exceptions provided in copyright law are intended to strike
this balance, with
a view to maximising public benefit from
copyright.
19TVNZ Ltd v Newsmonitor Services Ltd [1993] NZHC 2004; [1994] 2
NZLR 91, 105.
4.3 Summary
- The
examples of plant variety rights and copyright show that providing for
exceptions to intellectual property rights in relation
to “research”
or “experimental” work is an accepted principle. In both cases, the
aim is to ensure that innovation
or creation is not inhibited by ensuring that
innovators or creators are able to build on the results of previous innovation
or creation.
- The
breeders’ exemption incorporated into the plant variety rights system is
perhaps the most relevant to a discussion on the
question of a research
exemption from patent infringement. The copyright example is perhaps less
relevant, given the differences
between a patentable invention and a copyright
work. Nevertheless, the concept of “fair dealing” contained in the
Copyright
Act 1994 (and also in the copyright legislation of many other
countries), could be helpful in defining the scope of a research exemption
for
New Zealand’s patent legislation, if such an exemption is considered
desirable. The interpretation of the term “research”
in s43 of the
Copyright Act 1994 by the New Zealand Courts might also be helpful.
5. The ALRC and ACIP Studies
- As
mentioned in paragraph 40 both the ALRC and ACIP have considered the question of
an experimental use exception for the Australian
Patents Act 1990. The
Australian Government may, after considering the ALRC and ACIP reviews, decide
to incorporate a research or experimental use
exception into the Patents Act
1990. If this happens, this raises the question: would New Zealand be
disadvantaged if New Zealand’s patent legislation did not
contain a
similar exemption?
- If
Australia was to incorporate an explicit research or experimental use exception
into its patent legislation, and New Zealand did
not follow suit, New Zealand
researchers could be placed at a disadvantage compared with their Australian
counterparts. Australian
researchers may have greater freedom to carry out
research involving patented inventions. This could result in Australia being a
more attractive place to carry out research than New
Zealand.
- In
light of this, it would be useful to draw upon the work done by the ALRC and the
ACIP, when looking at the question of a research
or experimental use exception
for New Zealand’s patent legislation. This will be of particular relevance
to New Zealand given
that the infringement provisions of New Zealand’s
patent legislation will, after passage of the draft Patents Bill, be very
similar to those of the Australian Patents Act 1990.
- It
is therefore not intended to repeat, in this document, the analysis carried out
by the ALRC and ACIP. This document should be seen
as complementary to the ALRC
and ACIP reviews. Readers of this document are encouraged to read the documents
produced by the ALRC
and ACIP in conjunction with this one, in considering any
submissions they may make.
5.1 The ALRC Report
- In
December 2002, the Australian Federal Attorney General asked the ALRC to examine
the laws and practices governing the grant of
intellectual property rights over
genetic materials and related technologies, with a particular focus on human
health issues. The
ALRC released an Issues Paper “Gene Patenting and Human
Health” in July 200320, which defined the scope of the inquiry
and outlined questions for discussion.
- A
further consultation paper, “Gene Patenting and Human Health”, was
released in March 200421. The final report, Genes and Ingenuity: Gene
Patenting and Human Health” was tabled in the Federal Parliament on 31
August
200422. One of the issues that the ALRC looked at was the
issue of research or experimental use exemption. In its final report the ALRC
recommended (Recommendation 13 – 1):
20 http://www.austlii.edu.au/au/other/alrc/publications/issues/27/
21 http://www.austlii.edu.au/au/other/alrc/publications/dp/68/
22 http://www.austlii.edu.au/au/other/alrc/publications/reports/99
“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 considered that the experimental use exemption should apply to all patented
inventions, not just those concerning genetic
materials and technologies.
Submissions to the ALRC emphasised that the problems encountered in relation to
the experimental use
of patented genetic technologies are similar to those
applicable to other subject matter, such as business methods and
pharmaceuticals.
The Australian Government has yet to respond to the
recommendations made by the ALRC.
5.2 The ACIP Review
- This
review was initiated in response to concerns that had been expressed that the
grant of patents, particularly in the biotechnology
field, may be inhibiting
research and development. There was also concern that Australia was earning
insufficient return on its investment
in research and development. It was
considered that inadequate use of the patent system may contribute to this lack
of return.
- In
asking the ACIP to consider the issues, the Australian Government gave the ACIP
the following brief:
“to examine whether some types of patents are inhibiting
research and development in Australia and determine whether both Australian
researchers and business would benefit from introducing an experimental use
exception provision (or some other provision) into the
Australian patent
legislation. In examining this question, ACIP should consider whether an
experimental use exemption would help
researchers more effectively use the
patent system to commercialise their research and development.”
- The
ACIP released an issues paper in February 200423 inviting written
submissions. The public submissions can be found at http://www.acip.gov.au/expusesubs.htm.
Most submissions considered that there was a case for some sort of experimental
use exception for the Patents Act 1990.
- After
analysing the public submissions, the ACIP released an options paper24
in December 2004. The paper presented 5 basic options (labelled A –
E) for implementing
23 Patents and Experimental Use, Issues Paper,
Advisory Council on Intellectual Property, February 2004, p2, http://www.acip.gov.au/library/patentsexpuse.PDF
24 Patents and Experimental Use, Options
Paper, http://www.acip.gov.au/library/Experimental%20Use%20Options%20Paper%20A.pdf
an experimental use exception. Some of these basic options were split into sub-
options. Four options were preferred by the ACIP.
These preferred options
are:
i.
|
No change (option B);
|
ii.
|
|
|
experimental use, without further defining the term “experimental
use” (option
|
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C1);
|
iii.
|
Exemption from infringement for fair experimentation with inclusive
permitted
|
|
uses (option C7); and
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iv.
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Exemption from infringement for experimenting on the subject matter of
the
|
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invention, with inclusive permitted uses (option C8).
|
- These
options are summarised below. More detail on these options can be found on pages
7 – 16 of the ACIP report.
- Most
of the submissions25 received by the ACIP on the options paper
supported the concept of a research exemption for the Patents Act 1990. That is,
ACIP Option B received little support, as did Option C1. Support appeared to be
strongest for ACIP options C7 and C8.
- In
November 2005, the ACIP’s final report26 on Patents and
Experimental use was published by the Australian government. The ACIP has
proposed an experimental use exception which
it believes would optimise levels
of innovation in Australia while meeting Australia’s international
obligations. This proposal
is also discussed below.
5.2.1 The ACIP Preferred Options
Option B – No Change
- Option
B proposes no change to the Australian Patents Act 1990. The current situation
where there may be some uses of a patented invention which do not constitute
infringement would be maintained,
although it is uncertain whether experimental
use is included in this. The courts could be left to decide on these
points.
- The
ACIP options paper acknowledged that this option retains the disadvantages of
the status quo, in particular the uncertainty over
the status of experimental
use of a patented invention. It was considered, however, that given the lack of
evidence that this uncertainty
is actually causing a problem, the potential
disadvantages of making significant changes to the law might be greater than the
costs
of leaving things as they are.
25 The submissions can be found at: http://www.acip.gov.au/expuseoptsubs.htm
26 http://www.acip.gov.au/reviews.htm#expuse
Comment
- The
“current situation” referred to in this option is similar to the
current situation in New Zealand. The “pros”
and “cons”
of this option set out in the ACIP Options Paper are therefore also relevant to
New Zealand.
Option C1: Definition of Exploitation Does not Include
Experimental Use
- Under
this option the Australian Patents Act 1990 definition of exploitation of a
patented invention would be amended to not include experimental use, such as
through adding the phrase
“other than experimental uses”. No
definition of “experimental use” or any other guide to
interpretation
of the term would be provided, the interpretation of this term
being left to the courts.
Comment
- The
Patents Act 1953 does not define the rights attached to a patent in terms of
“exploitation”. The draft Patents Bill,
proposes (in cl 17) a
definition of the rights attached to a patent that is identical to that in the
Australian Patents Act 1990. This option could, therefore, be implemented as
part of the Patents Bill.
- This
would be the simplest way of implementing a research exemption. Although simple,
this approach has disadvantages. As the ACIP
options paper acknowledges, the
lack of a definition of “experimental use” would still leave
considerable uncertainty
as to what constitutes “experimental use”.
Another disadvantage (not mentioned by the ACIP) would be the risk that the
courts could adopt a definition of “experimental use” that was so
narrow that most research or experimental work would
fall outside it –
this is essentially what has happened in the United
States.27
Option C7: Exemption for Fair Experimentation, with Inclusive
Permitted Uses
- This
would involve amending the Australian Patents Act 1990 to create an exemption
from infringement for acts that constitute “fair experimentation” on
an invention. To guide the
Courts in determining what constitutes “fair
experimentation”, the following would be considered:
- The purpose and
character of the act;
- The subject
matter of the invention;
- The availability
of the invention in the market place; and
- The commercial
effect of the act upon the patent holder.
- In
addition, “fair experimentation” would be defined as including (but
not limited to) the following “permitted
uses”:
- Determining how
an invention works;
- Determining the
scope of the claims;
27 See Madey v Duke, supra
- Determining the
validity of the claims; or
- Developing an
improvement to the invention.
Comment
- Option
C7 appears to be an attempt to achieve clarity and certainty as to what acts
constitute “experimental use”, and
are hence exempt from
infringement, while retaining a degree of flexibility. It is not entirely clear
from the ACIP paper whether
the “permitted acts” are subject to the
considerations for determining whether an act is “fair
experimentation”,
or whether those considerations only apply to acts not
falling within the “permitted uses”. The way Option C7 is presented
appears to suggest the latter is intended.
Option C8: Exemption for Experimenting “on the Subject
Matter of the Invention”, with Inclusive Permitted Uses
- This
option would involve amending the Australian Patents Act to provide that acts of
experimenting “on” the subject matter of an invention would not
constitute infringement. The
exemption would only be available if
experimentation was the “sole or dominant” purpose of the
act.
- There
would be some “permitted acts” that would be considered to fall
within the exemption. They include (but are not
limited
to):
- Determining how
an invention works;
- Determining the
scope of the claims;
- Determining the
validity of the claims; or
- Developing an
improvement to the invention.
Comment
- Like
option C7, this option appears to be an attempt to construct an exemption that
provides clarity and certainty to researchers,
while leaving some flexibility.
It would be left to the Courts to interpret terms such as
“experimentation”, or “dominant
purpose” or “on
the subject matter of the invention”. This latter term may cause problems,
though, as it may be
difficult to distinguish between experimentation
“on” and experimentation “with” a patented
invention.
5.2.2 The ACIP Final Proposal
- After
considering public submissions on its preferred options, the ACIP proposed, in
its final report, a single preferred option for
an experimental use exemption as
follows:
“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 the patent.
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.”
- The
ACIP report emphasises that the list of examples is not intended to be treated
as a list of “permitted acts”. Any
activity falling within the scope
of the acts listed must still satisfy the test of not unreasonably conflicting
with the normal
exploitation of the patent if it is to qualify for the
exemption. The proposed exemption is also not intended to derogate from any
other exemption from infringement that exists under the Patents Act
1990.
Comment
- The
proposal for an experimental use exception adopted by the ACIP uses the European
wording “acts relating to the subject matter
of an invention”. The
ACIP felt that this is more likely to be considered to be in accord with the
TRIPS Agreement than other
forms of exemption. The words “do not
unreasonably conflict with the normal exploitation of a patent” are taken
from
Article 30 of the TRIPS Agreement.
6. Conclusion
- Paragraph
14 posed three questions that would need to be answered when considering the
issue of the use of patented inventions in
research:
- could
research involving a patented invention constitute patent
infringement;
- If it
does, is this a problem that needs to be addressed; and, if
so,
- how
should this problem be addressed?
- The
answer to the first question would appear to be yes – the limited case law
in this field suggests that research involving
a patented invention could be
held to infringe a patent, although not all such research would. It is
uncertain, though, just what
research activities would be found to be
infringing, and what would not be.
- This
leads to the next question: is this a problem that needs to be addressed? There
appear to have been few (if any) instances of
New Zealand researchers being held
liable for patent infringement over their research activities. Submissions to
the ACIP review
suggest that this is also true in
Australia.
- The
possibility that research involving a patented invention could lead to
researchers being held liable for patent infringement could,
however, be a
problem. If uncertainties over the status of research involving a patented
invention do influence decisions regarding
research activities, research and
innovation could be inhibited.
- Researchers
may prefer to steer clear of research in fields covered by patents rather than
run the risk of being sued for patent infringement,
or incur the cost of
negotiating licenses. Submissions to the ACIP review suggest that this may be a
problem in Australia. It does
seem then, that the answer to question (ii) above,
is there may well be a problem. One of the purposes of this document is to seek
submissions from interested parties to determine whether there is, in fact, a
problem.
- If
there is in fact a problem, how might this problem be addressed? It is likely
some sort of amendment to New Zealand’s patent
legislation, such as a
“research” or “experimental use” exemption to clarify
the status of research work
involving patented inventions would be required. But
how might such an exemption be worded so as to give clarity and certainty for
all concerned? Another purpose of this document is to seek input from
interested parties on the wording of an exemption if it is
determined that one
is desirable.
- In
order to assist the Ministry in formulation its recommendations to the
government on this issue, submitters are invited to consider
the questions set
out in Section 7.
7. Questions for Consideration
The Situation in New Zealand
- Under
New Zealand law as it currently stands, it appears uncertain as to whether or
not research or experimental work involving a
patented invention would
constitute patent infringement. Please indicate whether or not you agree with
this statement, together with
reasons for your choice.
- Are
you aware of any instances where researchers in New Zealand have been faced with
an infringement action over their use of a patented
invention in their research
or experimental work? If so, please provide details.
- Are
you aware of any instances where New Zealand researchers’ decisions
regarding their research activities have been influenced
by uncertainty about
whether those activities might infringe patents? If so please provide
details.
- Is
there a justification for incorporating an explicit research or experimental use
exemption into New Zealand’s patent legislation?
Please give
reasons.
- If
your answer to question 4 is “yes”, how might “experimental
use” or “research use” be defined?
- If
a research or experimental use exception were to be incorporated into New
Zealand’s patent legislation, should certain activities
be specifically
defined as falling within any research or experimental use exception, or should
any activity be specifically excluded?
- If
Australia were to adopt a research or experimental use exception, would New
Zealand be disadvantaged compared to Australia if New
Zealand did not adopt such
an exception? Please give reasons. If so, should New Zealand adopt the same
exception as Australia?
The ALRC and ACIP Reviews
- The
ALRC recommended that an experimental use exception be incorporated into the
Patents Act 1990, and set out three criteria that such an exception should meet.
What are your views on the ALRC’s recommendation?
- The
ACIP Options paper presented four preferred options. The ACIP final report
proposed a further preferred option. Do you have a
preference for one of these
options? If so why?
- Do
you have a preference for any of the other options presented in the ACIP Options
Paper (apart from the preferred options)? If so,
why?
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