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Patents ‘destroy competition’, lawyer claims

Adam Zuchetti
Adam Zuchetti
20 June 2019 4 minute readShare
IP Australia

A lawyer has hit out at the patents system, suggesting that the concept of intellectual property is “immoral and inefficient” and actually hinders, rather than promotes, economic growth and market competition.

Terry Dwyer, a chartered tax advice lawyer and Harvard PhD recipient, commented on a recent My Business story about a trademark dispute involving White Pages owner Sensis and an SME, suggesting that “most intellectual property rights should not exist”.

“They are unnatural instruments of monopoly, especially patents. They did not exist at common law. Passing off is the only real wrong,” he said.

Asked to expand on his comments and why he believed that to be the case, Dr Dwyer referred My Business to his 2012 submission to the Productivity Inquiry into Compulsory Licensing of Patents.

“Patents are immoral, contrary to the principles of natural liberty, natural law, to the common law and detrimental to the progress, prosperity, safety and health of all peoples,” said in his submission.

“The patent system should be destroyed for same reason that slavery was destroyed — as an offence against natural justice and natural liberty.”

The submission continued by stating that “ideas and knowledge are like the air: they belong to all and to none”.

“Invention cannot found a just claim to property,” Dr Dwyer wrote.

His submission said that under the modern system, “the heirs of Eric the Red or Christopher Columbus would be vying in the Courts for ownership of the North American continent and demanding rent from several hundred million people”, and suggested that there is little difference between patents and slavery.

“Slavery is now widely seen as immoral. But is there such a vast difference between telling a man he does not own himself and must labour for his master, or telling him that he may not work except on condition he pay rent to a monopoly patent holder?”

‘Discouraging competition’

Dr Dwyer also said in his submission that intellectual property laws are restricting market competition.

“It is well known that the patent system is used to discourage competition,” he wrote.

“Who will dare research or explore new ways of manufacturing anything in an area where the road to new products is well sprinkled with upturned nails in the form of patents, actual or pending, waiting to explode his tyres and send his commercial enterprise off the road into financial ruin in the Law Courts?

“Patents suppress innovation; they force the creation of artificial differences and incompatibilities between products so that, instead of getting the efficiencies of common architecture and standards arising by consensus for products, each producer must labour to differentiate his product lest he be sued for patent violation.”

The submission added: “The proper and natural reward for invention is the premium for being the first in the marketplace. Patents reward laziness and tardiness, they discourage emulation and competition.”

As an example, Dr Dwyer said that patents over medical innovations pose a risk to human health, by way of monopolising the production of vital, even life-saving medications and increasing their costs, which then weigh on the public purse, through subsidies under the Pharmaceutical Benefits Scheme (PBS).

“The Productivity Commission should take a principled stand in this matter and declare itself... in favour of the public interest in the freest and most productive use of human talent, unshackled from vexation by those vested interests who, armed by misconceived statutes, claim to stand in the way of the advancement of their fellow men until they pay a toll-charge for the privilege of producing,” the submission concluded.

Indeed, IP Australia’s director general, Patricia Kelly, said last year that innovation patents offered little gain for SMEs and private inventors.

Patents serve foreign organisations, trademarks popular for Australians

The Productivity Commission — charged with investigating the effectiveness of compulsory licensing provisions — released its final report on 28 May 2013, having sent it to then Gillard government two months earlier.

It noted that the vast majority of patents granted within Australia do not actually go to Australian residents.

“Australia is a net importer of technology. Of the 14,557 patents granted in 2010, 1,178 (8 per cent) were granted to Australian residents,” the final report said.

It also noted that compulsory licensing provisions had been rarely sought in Australia, and of those applications that had been sought, “none have been successful”.

More recently, the IP Report 2019 from IP Australia noted that the number of patent applications in Australia has gradually increased between 2009 and 2018 — except for a noticeable dip in 2014 — to reach 29,957.

Of those lodged last year, the vast majority came from the US, with local applications in a distant second — ahead of Japan, Germany and the UK.

Of the almost 30,000 patent applications made in 2018, medical technology accounted for 3,663 applications. Other common industries seeking patents were biotechnology (2,726), pharmaceuticals (2,531), organic fine chemistry (1,884) and civil engineering (1,708).

Similarly, the volume of trademark applications has also grown over the same period, from 56,573 in 2009 to 79,490 in 2018.

However, those sought by local residents peaked in 2015 and has been on a slow but steady decline in the years since. At the same time, the number of trademark applications made by non-residents has jumped sharply since 2016.

Nevertheless, Australians still make up the majority of trademarks sought by country of origin, accounting for 45,891 last year, compared with 33,599 from all other countries combined.

The same report noted that, while trademark cluttering — a register containing many unused or overly broad trademarks that restrict use of the same or similar marks by others — is “challenging”, it suggested that this “is not an immediate concern” in Australia.

What are compulsory licences?

As defined by IP Australia in a 2017 report also on compulsory licences, a compulsory licence under the patent system is “an order for a patentee to grant a licence to another party, allowing that party non-exclusive rights to exploit the patented invention”.

“Compulsory licencing is one of several safeguards in the Patents Act 1990 (Patents Act) that allow a patented invention to be used without the authorisation of its owner,” it said.

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Patents ‘destroy competition’, lawyer claims
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Adam Zuchetti
Adam Zuchetti

Adam Zuchetti is the former editor of MyBusiness and a senior freelance media professional, specialising in the fields of business, personal finance and property. In 2020, he also embarked on his own business journey – inspired in part by the entrepreneurs and founders he had met through his journalistic work – with the launch of customised pet gifting and subscription service Paws N’ All.

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