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Australia’s approach to intellectual property is undermining innovation policy

Innovation takes place in a global ecosystem. EPA/Adrian Bradshaw

Innovation is not a topic that attracts much serious political debate in Australia. It improves living standards and the economy, but we’re missing out because of the government’s short-sighted approach to intellectual property.

Greater participation by Australians in the international intellectual property system is a key missing ingredient in the country’s innovation policy.

In January 2008 the Commonwealth Government commissioned the Cutler Committee to review the National Innovation System. That review resulted in the Venturous Australia Report. It correctly identified that “within a globalised economy, a national innovation system … needs to be positioned within a global innovation ‘ecosystem’”.

It was an important call for Australia to be internationally focussed.

The report said the way of achieving that internationalisation was through “talent and mobility: attracting talent to Australia and encouraging a culture of internationally connected researchers and entrepreneurs.”

And it wasn’t only the type of people businesses hired that had to change. The advice to companies and public institutions was to share knowledge, expertise and supply chains with their global partners.

But nowhere in the report or its recommendations was there any mention that in order to better position Australia in the “international innovation system”, we all should be encouraged to participate more significantly in the international intellectual property system.

Protection of knowledge in all products should be considered. Otherwise the competitive advantage will be lost, as will the investment in creating that knowledge.

Australia’s poor participation in one part of the intellectual property system, patents, can be shown by looking at some stark figures.

They are sourced from the World Intellectual Property Organisation, the 2010 World Intellectual Property Indicators Report and the Australian Innovation System Report 2010.

• In 2008, Australians held 0.46% of the approximately 6.7 million patents in force throughout the world. China had 2% with a steep upward trajectory.

• In 2008, Australians published 3.18% of the world’s research publications.

• In 2008, there were 3.7 patent applications by Australian residents per $billion GDP; China had 26.8 applications per $billion GDP.

• In 2007, there were 0.2 patent applications by Australian residents per $million Research and Development expenditure. China had 2.

• In 2008, only 9.14% of patents in force in Australia were held by Australians.

So we can conclude that Australians hold an insignificant portion of patents in force worldwide, despite being a significant contributor to the global research landscape.

Although not all of knowledge in the 3.18% of research publications which are originated here would be patentable, or eligible for patenting, there is clearly the potential to increase the portion of patents in force.

In short Australians are punching below their weight in the world patent landscape, in terms of the size of the country’s economy, the spend on research and development, and compared to our economic competitors.

A greater number of patents in Australia are held by non-residents. That means the wealth generated by them is going to be lost to the country.

Internationally, Australia will suffer because of the paucity of its patent holdings. This does and will continue to impose a cost.

The potential to recoup money spent on research and development in Australia and create additional value, will be impeded. We will lose out as parties outside the country will hold rights that prevent or hamper the unfettered use, including commercialisation, of Australian created innovations.

Other developed and developing countries, including China, outstrip Australia’s use of the patent system. They have undertaken a paradigm shift in the way they work to take advantage of the international intellectual property system. But here, Australia’s use continues to be incremental.

Given Australia’s position, it is interesting to compare the attitude to intellectual property and its role in innovation of its leading trading partner. China set out its stall in its 2008 National Intellectual Property Strategy:

“In the world today, with the development of the knowledge based economy and economic globalization, intellectual property is becoming increasingly a strategic resource in national development and a core element in international competitiveness, an important supporting force in building an innovative country…” (emphasis added)

That strategy has in recent times resulted in Chinese residents having a significantly increasing proportion of patents and trade marks applied for and granted, both in China and overseas.

Unfortunately, neither the present nor past Australian governments have understood the link between innovation and intellectual property.

That link does not require that all innovation needs intellectual property protection. Rather, there are categories of innovation which can maximise their chances of success in the ‘international innovation system’, if they are supported by the appropriate intellectual property strategy and protection.

Thus, even if all the elements of internationalisation referred to in the Venturous Australia Report are achieved, and even if Australia continues to invest significant money in funding research, that will not provide the benefits sought by Australia in the “international innovation system”. For that to happen those activities must be properly supported by a much higher level of participation by Australians in the international intellectual property system.

Urgent policy action is essential. As a minimum:

• Australia should have a national intellectual property strategy to support its innovation policy.

• Australia’s national intellectual property strategy should at the very least focus on increasing Australians’ share of patents in force worldwide. That increase should at least aim for a 2% share of patents in force held worldwide, by say 2020. Whilst this policy objective focuses on quantity, quality should also not be forgotten, and is in fact sought to be addressed by the Intellectual Property Laws Amendment (Raising the Bar) Bill 2011, to be considered in the near future by the Australian Parliament.

• Increasing Australians’ share of patents on the Australian patent register. That increase should at least aim for citizens to hold 20% of patents on the Australian patent register over the same period.

• Ensuring that tertiary students are taught about intellectual property as it is relevant to their area of study. This way knowledge about intellectual property becomes part of the natural fabric of an important segment of potential innovators. This would be an improvement on the situation as appears to be the case in many instances now - a forgotten ingredient or an annoying after thought.

The ‘international innovation system’ has intellectual property as a crucial component. To date Australian governments have not fully understood the importance of that component to Australians achieving success in the international market place.

Whilst Australia likes to think of itself as a “knowledge based economy”, it is clearly the case that the country as a whole has not taken advantage of all the tools that are available to it to maximise the value of that knowledge.

Intellectual property, its protection and strategic use is a crucial part of the tool box.

Australia has extensive physical resources and is earning significant returns in the international market place from their extraction and sale. But they are, by their very nature, susceptible to being exhausted.

Those resources are also, by and large, well managed so as to maximise benefits to shareholders and the broader Australian community.

But Australia also has the creative resources of its people.

Those resources are less susceptible to being exhausted and can be better managed so as to maximise benefits to shareholders and the broader Australian community.

In order to achieve that better management and maximisation of benefits, Australian innovation policy must be changed to ensure greater participation by its people in the international intellectual property system.

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