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Australia-China FTA Conference in Shenzhen

28-29 June 2006

Day 1 - Intellectual Property

Intellectual Property and the Free Trade Agreement Process

Dr Ian Heath, Director General, IP Australia

The appropriate protection of intellectual property (IP) rights is integral to the development of innovative cultures and knowledge-based economies.  IP rights create and sustain exclusivity in the marketplace.  They are recognised as crucial commercial assets and play an important role in supporting technological innovation and progress.  They are also a vital instrument in promoting international trade.

Australia has a sophisticated, developed economy that benefits from high quality intellectual property rights.  This is so across all sectors of the economy in both services and goods, including, eg, the mining, electronics, agriculture, education, medical and automotive sectors of Australia's economy. 

Australia's IP regime is comprehensive, balanced and rigorous.  Public education, transparency, cooperation and harmonisation with international standards are important elements of the Australian IP system.

This comprehensive and balanced regime has been developed over a long period.  IP Australia, the Australian Government agency responsible for administering legislation relating to industrial property rights, that is, patents, trade marks, industrial designs and plant breeder's rights has been in existence for over 100 years. Protection for copyright, administered by the Australian Attorney-General's Department, has been available for a similar time period. This is in contrast to the situation in China where, although the concept of IP is also at least 100 years old, a comprehensive legal system pertaining to IP rights is relatively recent, dating back to the 1980s. 

It is important to acknowledge the great strides China has made since then to introduce a modern IP system.  This includes through accession to numerous international IP treaties, its accession to the WTO in 2001 including accession to the Agreement on Trade Related Aspects of Intellectual Property Rights (the TRIPs Agreement) and China's program of continuous implementation and revision of laws concerning IP rights since then.  It is a very challenging task to provide IP law and enforcement tools to international standards in such a short time. Any IP office facing an increase in international patent filings of over 200% since 2000 as China has done, accepting nearly half a million patent applications in 2005, or that receives more than half a million trade mark applications as the China Trademark Office did in 2005, faces extraordinary challenges. 

Despite these achievements, challenges remain for
China.  A recent Australia Industry Group (AIG) member survey indicated that IP is the most important non-tariff trade barrier facing companies involved in the $28 billion trade between China and Australia.  Effective enforcement of IP rights is particularly important to Australian IP owners.  Many industries, including from the automotive, machinery, chemical and electrical parts sectors have expressed concerns about their ability to protect and, particularly, to enforce their IP rights in China.  Concerns about protection and enforcement are also important issues for Australia as a whole.  The value of Australia's IP is estimated to be around $30 billion dollars.  This is more than the additional benefits to the Australian economy expected over ten years with the successful completion of an FTA with China.

The negotiation of a comprehensive free trade agreement between our countries, that includes substantive IP commitments, will give a clear signal that both our countries recognise the importance of IP rights to our respective economies and that both countries are committed to effective IP rights protection.

It is clear that as IP becomes an increasingly important component of trade, it is important that inventors, trade mark owners, plant breeders and designers, whether in a developed or developing country, are able to protect their innovation in all markets where their goods and services are being traded.  Quite often though, the procedures required to protect and enforce IP, not only in the domestic market but overseas, appear to be complex or the protection provided to IP is such that the IP owners defer entering the market until they feel more confident about the protection they are likely to receive.  In negotiating a free trade agreement (FTA), opportunities arise for governments to work together to make the process for seeking, obtaining and maintaining IP rights simpler, more efficient and effective.  Consequently there may be opportunities for a reduction in transaction costs for obtaining and maintaining those IP rights and instilling greater confidence in the IP system of partner countries such that traders will be encouraged to undertake business with FTA partners.

It is costly to gain IP protection.  Small and large businesses in many countries are increasing pressure on their governments to decrease the cost of obtaining and enforcing IP rights.  One way to reduce transaction costs for business is to harmonise IP laws and practices around the world to reduce the number of different administrative requirements applicants face in different countries.  Global protection systems, such as the Patent Cooperation Treaty and the Madrid system for the international registration of marks, assist with streamlining administrative requirements for IP owners trading internationally.  Australia and China are both members of these treaties.  However, where IP owners are not using these systems and are applying for IP protection directly to countries of interest then other treaties, such as the Patent Law Treaty and the Trade Mark Law Treaty and various classification treaties can assist to harmonise national requirements.  Such treaties set basic standards for IP applications, such as time periods for responses to offices, maximum requirements allowable, which ensure more consistency in approach in Member countries where IP protection may be sought.

Adhering to treaties that simplify IP administration for rights holders and IP offices reduces transaction costs and provides greater certainty to applicants pursuing IP rights, as well as sending a clear message to traders and rights holders that a country is committed to best practice in this field.  Bilateral relationships, including through the FTA process, can be a useful mechanism to demonstrate a commitment to improving IP systems for the benefit of traders and the public alike.  There are many IP issues being discussed in international fora.   Some of these issues impact on the ability of the IP rights holder to adequately protect their IP.  Some issues address the balance between the rights of the public and those of IP owners.  In view of the time lag in reaching international consensus on some of these issues, bilateral relationships provide an ideal opportunity to further explore these issues. 

It is hoped that through an FTA consensus may be reached between Australia and China on areas of best practice for the mutual benefit of users of the IP system, potential traders and society in general.  This extends not just to a commitment to various treaties or administrative practices but a commitment to best practice through ensuring processes are in place for a transparent customer-focussed IP system which encourages IP users to seek appropriate protection for all facets of their IP.

Increasingly Australia and China see the value of making their IP systems more accessible.  IP Australia, for instance, has for the past ten years been strongly focussed on providing information on its website to assist those applying for IP rights to better understand IP and the requirements for applying for protection and maintaining their rights.  The information includes legislation, forms, examination guidelines, official notices, hearings information and our search databases.  We run seminars, training sessions and provide an assistance line for customers as well as a trade marks assisted filing service.  We are pleased China is similarly engaged in making its IP system more accessible with similar features on its websites, most notably the recently released trade marks database.  Again the FTA provides an ideal opportunity for officials to focus on how to make the IP system more accessible and transparent, to increase the likelihood of applicants achieving a positive outcome for their applications and in being able to use appropriately the available enforcement mechanisms.

As mentioned previously there are continuing concerns about the ability of Australian traders to adequately protect IP in China.  There is a lack of confidence in their ability to successfully gain protection for, and enforce, IP rights in China.  Australian industry wants to be able to operate with confidence in China. While it is accepted that significant steps have been taken to create a modern IP system and that the Chinese Government is trying to address enforcement issues there remains a level of frustration with the system. This is being brought to the Australian Government's attention strongly through the FTA process.  Submissions to the Australian Government reveal many Australian companies are reluctant to engage fully with China because of concerns about the security and protection of their IP.  These reluctant companies represent foregone investment that should contribute to the bilateral trade relationship and include a number of companies involved in fields of cutting edge high technology.  Their concerns are inhibiting technology transfer.  Inclusion of substantive commitments in a comprehensive IP chapter can help China's ongoing modernisation of its IP regime to attract this investment. 

This is, of course, not a one way street.  The Australian Government is committed to increasing the knowledge of the Chinese IP system in the Australian business community.   The government has provided IP Australia with resources to undertake an advocacy program to try to address this issue.  We have undertaken market research to gauge Australian industry and the Australian IP profession's perceptions and experiences in protecting IP in China, as well as trying to find out how we can assist IP owners to access the IP system in China more confidently, including accessing its enforcement regime. 

The market research did identify a widespread need for more information about protecting IP in China, preferably through a website.  To address this issue, IP Australia is creating a website to include information on the IP system in China.  This will include a series of fact sheets which will also be disseminated at seminars we are holding around Australia.  We are working with government and non-government officials in China, Australian IP professionals and industry groups, such as the Australia Industry Group, as well as Austrade to better understand the Chinese IP system and to identify how we can best address concerns raised in the submissions and the market research.

It should be noted that the market research did indicate strong optimism about the future of the IP system in China.  This said, the FTA process provides an important mechanism to support the current cooperative efforts between IP agencies to better understand each other's IP system and the issues each grapples with to improve its effectiveness.  As well, the FTA process enables officials to continue to focus on improving transparency and accessibility of the IP system and to work together to streamline and harmonise processes, where appropriate, to make a more effective and efficient IP system.  This in turn has the potential to facilitate further trade between the two countries by increasing the confidence of traders in utilising the IP system in each country which should also promote foreign investment and technology transfer. Each government is thus well placed to send a clear message to business about its commitment to supporting a modern IP system.  High quality IP provisions in the FTA will: