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Moir Patent and Data Protection Empirical evidence on patents and data protection Response to the Productivity Commission's Issues Paper on Intellectual Property Arrangements. Hazel V J Moir Adjunct Associate Professor Centre for European Studies College of the Arts & Social Sciences The Australian National University Canberra, Australia [email protected] The views presented in this submission are my own and should not be taken to represent the views of any institution with which I am affiliated. 31 January 2016 ii Author information I have an honours degree in economics from Cambridge University (1969) and a PhD from Brown University (USA) where I specialised in demography and development economics (1975). My early working experience included market research, private health insurance and development assistance. During my 19 years’ service in the Australian Public Service, I spent over 5 years in the Bureau of Industry Economics (BIE). I also advised on microeconomic reform of transport and communications in the Prime Minister's department in 1989 and 1990. In 2004 I embarked on a second PhD, in public policy at the ANU. The subject of my dissertation was an economic assessment of the patent system, using data on granted business method patents to assess the height of the inventive step and identify the principal rules which caused such a very low standard for the inventiveness test. Since then I have explored a number of aspects of patent policy, including secondary pharmaceutical patents, patent policy in trade agreements and the norms that would be required to implement Article 7 of TRIPS – the Article which calls for balance in patent policy. In addition to academic papers I have made submissions to s number of government and parliamentary enquiries. I hold the position of Adjunct Associate Professor at the Centre for European Studies, College of the Arts & Social Sciences, Australian National University, where I do research on patents, data protection and geographical indications. iii Contents Author information ............................................................................................................. ii Acronyms .......................................................................................................................... iv Summary ............................................................................................................................ v 1. Introduction: the need for evidence and a welfare perspective .................................... 1 Evidence based policy ........................................................................................................ 1 Previous reviews of the patent system ............................................................................... 2 2. Effectiveness ....................................................................................................................... 4 Time in the market before imitation ................................................................................... 4 Survey data on inducement: the appropriability studies .................................................... 5 Proportion of patents used .................................................................................................. 6 Diffusion ............................................................................................................................ 6 Overall assessment of effectiveness ................................................................................... 7 3. Efficiency ............................................................................................................................ 8 Patents for non-induced inventions .................................................................................... 9 The reverse onus of proof .......................................................................................... 11 The decision-making rule for patentability evidence ................................................. 12 The hypothetical person skilled in the technology ..................................................... 12 Limitations on relevant existing knowledge .............................................................. 13 Narrowness of relevant technology field ................................................................... 14 The High Court's very low inventiveness standard .................................................... 15 Removal of the synergy doctrine ............................................................................... 16 Limit amendments to a single instance ...................................................................... 16 Patent incentives and penalties .................................................................................. 18 Other factors leading to a low inventive step. ............................................................ 22 Patents and spillover benefits ........................................................................................... 23 Subject matter ................................................................................................................... 25 Software and business methods ................................................................................. 26 Methods of medical treatment .................................................................................... 28 Discoveries ................................................................................................................. 29 4. Combining effectiveness and efficiency: the net welfare impact ................................ 31 The objectives of patent policy ........................................................................................ 31 Type I and II errors .......................................................................................................... 33 The cost of low quality patents: evergreening ................................................................. 34 Net welfare impact ........................................................................................................... 35 5. Adaptability ..................................................................................................................... 38 6. Accountability .................................................................................................................. 41 Data deficiencies .............................................................................................................. 41 Institutional issues ............................................................................................................ 43 Making patent policy ........................................................................................................ 45 7. Enforcement ..................................................................................................................... 46 8. Data protection ................................................................................................................ 48 9 Other questions asked by the Commission . .................................................................. 50 Attachment A: Studies funded by the pharmaceutical industry ...................................... 53 Attachment B: Dissenting statement, IPAC Review 1984 .............................................. 54 Attachment C: Evergreening – insights into patent costs ............................................... 56 iv Attachment D: TPPA submission to DFAT .................................................................... 56 Attachment E: ACIP membership, 2009 and 2013 ......................................................... 57 Bibliography ..................................................................................................................... 59 Acronyms ABS Australian Bureau of Statistics ACIP Advisory Council on Intellectual Property API Active Pharmaceutical Ingredient ARV antiretroviral (medicine) AUSFTA Australia United States Free Trade Agreement CAFC Court of Appeals for the Federal Circuit (US) CGK Common General Knowledge EPO European Patent Office EPC European Patent Convention FICIP Australia The Australian Federation of Intellectual Property Attorneys FTC Federal Trade Commission (US) GATT General Agreement on Tariffs and Trade IPAC Industrial Property Advisory Committee IPCRC Intellectual Property and Competition Review Committee IP intellectual property IPR intellectual property right IPRIA Intellectual Property Research Institute of Australia IPTA Institute of Patent and Trade Mark Attorneys of Australia IT information technology PBAC Pharmaceutical Benefits Advisory Committee PBS Pharmaceutical Benefit Scheme PPR Pharmaceutical Patent Review R&D research and development SME small and medium-sized enterprise TRIPS Agreement on Trade Related Intellectual Property Rights PHOSITA Person having Ordinary Skills in the Art (USA) PPR Pharmaceutical Patent Review PSA Person Skilled in the Art (Australia) USPTO US Patent and Trademark Office WTO World Trade Organization v Summary Government intervention in markets is generally undesirable as there are substantial costs to such interference. What then is the rationale for the patent intervention? If R&D costs are high and imitation times are relatively speedy, then an innovating company may not have sufficient exclusive time in the market to recoup R&D costs through higher prices. Where such innovation has substantial positive spillover benefits , society would wish to provide an incentive for this to occur. But patent systems
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