...

First ranked source given a weighting of 3, second ranked source a weighting of 2, third ranked source a weighting of 1.

Main Reasons for Companies Consulting Patent Information

52%	Check on potential patent infringements
25%	Consider new products or processes which could be manufactured or used with or without a licensing agreement
10%	Assess the state of the art before embarking on a R&D project
7%	Assess the novelty of an invention with a view to patenting
5%	Check on what competitors are doing
1%	Solve technical problems

In England by the late 16th century, patents had regularly been granted by the Crown for the encouragement of invention and innovation. But Royal prerogative in this as in other matters soon degenerated to near total misuse with patent monopolies being granted to reward favourites and to help consolidate the power of the Crown. As restrictive patent monopolies began to cover such daily necessities as salt, oils, vinegar, starch and saltpeter, public outcry became great. Eventually pressures exerted via the House of Commons and the Courts led to the next major development in the world history of the patent system: the English Statute of Monopolies of 1623. This Statute which declared monopolies to be void under common law, made an exception for invention patents. Patent law was thus contradictory from the beginning.

By the end of the 18th century, the U.S. and France had established patent law based on the English Statute of Monopolies. In the early decades of the 19th century many European countries adopted formal patent laws. However, controversy and debate on the patent system heightened as the 19th century progressed. Indeed for a few years it appeared as if the patent abolitionist movement, which was linked to the free trade movement would prevail.

Parliamentary committees and royal commissions investigated the operation of the British patent system in 1851-52, in 1862-65, and again in 1869-72. The findings of these reviews lent considerable weight to the arguments of the patent abolitionists: "Some of the testimony before these commissions was so damaging to the repute of the patent system that leading statesmen in the two Houses of Parliament proposed the complete abolition of patent protection." However, compromise prevailed and the eventual Patent Reform Bill that arose out of the 1872 Commission's Report advocated changes to patent law that would significantly weaken the harmful effects of patent monopolies: "... a reduction of patent protection [from fourteen years] to seven years, strictest examination of patent applications, forfeit of patents not worked after two years, and compulsory licensing of all patents." This Bill was passed by the House of Lords.

While ultimately a matter of judgement, this study leaves little room for doubt that the benefit/cost ratio of the patent system in Australia is negative, or at the very best, in balance. However, this conclusion does not necessarily imply an economic justification for abolishing the patent system. The costs and benefits of an institution need to be distinguished from the costs and benefits of abolishing that institution. In the perspective of the national economy, the economic effects - both costs and benefits - of the patent system in Australia are quite modest. However, the costs of the unilateral abolition of the patent system to Australia's international commercial relations could possibly be much larger; the Swiss experience outlined in the historical section of Chapter 2 is pertinent.

Since the benefits of the patent system are so tenuous and subtle and the overall benefit/cost ratio is considered to be negative, there is no economic justification for extending patent monopolies by lengthening the term, or by widening the grounds for either infringement, or patentability (for example, Plant VAriety Rights or computer programs). However, in the light of our findings, there is considerable economic justification for policy action to reduce the negative effects of the patent system by stricter examination, by reducing the length of term and the scope of patent monopolies, and by action to deal with undesirable restrictive practices in patent licensing.

An historical awareness of the political economy of patent reform suggests that this task is not easy at the domestic policy level. This is basically because those who perceive they would lose by such reform are concentrated, powerful and active defenders of their interests. In contrast, those who would gain by patent reform are diffuse and hardly aware of their interest in the matter. Again a pertinent parallel could be drawn with the tariff issue. Furthermore, since the patent system's costs and benefits cannot be measured precisely, "the optimum limits of the patent system, whether with respect to time, space, patentability or restrictions on the use of the grant must always remain a subject of controversy. There is no doubt, however, that the costs have been underestimated". For these reasons, as well as the patent system's intrinsic international nature, patent reform is best pursued in international forums - such as the conferences for the revision of the Paris Convention. This need not preclude unilateral action by Australia whenever such action is deemed practically appropriate or feasible. There is now ample economic justification for measures which might be taken to reduce the costs of the patent system in Australia.

This report does not live up to its claim to have adopted economic perspectives and to have applied economic criteria. It has not consistently applied economic criteria; it has not made use of the available empirical evidence; and the concept of social cost, so frequently mentioned, has never really been fully grasped.

...

The sensible objective is rightly declared to be "to modify the Australian patent laws, adjusting the length, strength and breath of patent rights" to maximize the net benefit. It is unfortunate that the Report soon strays from this path.

No amount of talk about individual patent successes nor about a future in which the Australian economy has magically become progressive, innovation-oriented, and competitive on the world scene, can hide the fact that Australia exports little in the way of manufactured goods and has few innovations for sale. Most patents are granted to overseas firms. To make the most of this situation, Australia needs to reduce the social costs to the extent possible without inhibiting innovation and without provoking international retaliation. As a small nation, there is scope for such action. The constraints of the [Paris] Convention are largely a myth.

...

To acknowledge the circumstances of the Australian economy and to seek such a balancing of social costs and dynamic benefits is to reject much of this Report. In particular, it points to:

1. reduction of standard patent term [from 16] to 10 years;
2. some freeing of import competition from the restrictions patents permit ...
3. ...
4. making sure that provisions such as compulsory licensing and re-examination can function effectively;
5. ...
6. avoiding the restrictive consequences and additional social costs that can arise if the scope of the patent system is extended unnecessarily in the development of the information economy;^[1]
7. weakening the professional patent attorney monopoly of costly advice;
8. significantly improving the educational requirements for those working within the patent system; and
9. clarifying the extent to which Patent Office operations are to be subsidized.

...

This report is not an imaginative one. It is constrained by the very "haze of assumptions about rights and rewards for inventors, special pleading by those directly involved, and a plethora of legal procedures and criteria in the Patents act" that it deplores. Many of its recommendations are for no change; and when change is implemented it is all too often merely procedural or has little prospect of being effective. A good opportunity to adjust an ancient institution to the current needs of the Australian economy has been missed.