JLIS Volume 23 Issue 2

This volume may be cited as (2014/2015) 23(2) JLIS
Published in 2015
ISSN 2200-3517
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ii
Editorial Board
Chairman
The Hon M D Kirby AC CMG
Editor
Dr Brendan Gogarty
Law School, University of Tasmania
Associate Editor
Professor Dianne Nicol
Law School, University of Tasmania
Student Editorial Board 2015
William Bartlett, Caitlin Chivers, Adrian Staples
Members
Professor E Akindemowo, Thomas
Jefferson School of Law
Associate Professor Benjamin Goold,

University of British Columbia
Hon Magistrate Dr Roger Alasdair

Brown, Local Court of NSW
Professor Graham Greenleaf, University

of NSW
Professor Herbert Burkert, University of

St. Gallen
Professor K Bowrey, University of NSW
Professor W van Caenegem, Bond
University
Professor A Christie, University of
Melbourne
Professor Dan Hunter, Queensland

University of Technology
Dr Jane Kaye, University of Oxford
Professor Andew Kenyon, University of
Melbourne
Professor G Laurie, University of
Edinburgh
Associate Professor Yee Fen Lim,
Nanyang Technological University
Professor G Cho, University of Canberra
Professor J Mattick Institute for Molecular

Bioscience University of Queensland
Dr Chris Dent, University of Melbourne.
Professor D Mendelson School of Law

Deakin
Professor E Clark, Griffith Business

School
Associate Professor Melissa DeZwart,
University of Adelaide
Dr James Popple, Australian

Administrative Appeals Tribunal
Professor M Purvis, University of Otago
Professor L Edwards, University of

Sheffield
Dr M Rimmer, Australian National

University
Associate Professor J Forder, Faculty of

Law Bond University
Professor D Vaver, University of Oxford
Board details can be found at http://www.jlisjournal.org/about.html
iii
Inviting Contributors: We welcome scholarly and research articles of any

length (preferably 500010,000 words) on topics related to law, information
and science and papers giving information on major new research projects,
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email: editor@jlisjournal.org.
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Journal Homepage: http://www.jlisjournal.org/
iv
JOURNAL OF LAW, INFORMATION AND

SCIENCE
PUBLISHED BY THE FACULTY OF LAW, UNIVERSITY OF TASMANIA
Contents for Vol 23(2)2014-2015
!
Editorial................................................................................................ vi!
Market Disclosure and Governance Challenges When Floating
University Research on the Stock Market: The Float of
Melbourne IT Limited by the University of Melbourne ..................
John Selby ............................................................................................... 1
Flashpoints in 3D Printing and Trade Mark Law
Amanda Scardamaglia ......................................................................... 30
Patent Law and Community Interest in Public Health: Should
Patent Law be supplemented by a Health Impact Fund?
Jowa Chan............................................................................................. 55
The Limited Impact Of Evergreening Practices In Australia
Stephanie Crosbie ................................................................................. 83
Data Exclusivity and Public Health under the TRIPS Agreement
Olasupo A Owoeye ............................................................................. 106
The ICJ Whaling Case: science, transparency and the rule of law
Brendan Gogarty, Peter Lawrence ..................................................... 134!
Editorial
This general issue spans articles published from late 2014 through to early
2015; reflecting our production of a separate special issue in the latter part of
2014. This issue is also the first to be produced in cooperation with a Student
Editorial Board. We have, unfortunately lost a funding stream that allowed us
to employ a permanent Managing Editor. Bruce Newey, who previously held
this role, has thankfully found equivalent employment with the Tasmanian
Law Reform Institute although he has generously agreed to continue in an
advisory role with the JLIS. Whilst we are very sad to see him go, we know he
will make an equally invaluable contribution to law reform in Tasmania. We
are sincerely grateful for Bruce's hard work and dedication to the JLIS over
many years.
Under the new production arrangements editorial decisions and oversight
will remain the responsibility of the (academic and professional) Editorial
Board. Similarly, all papers will continue to be double-blind peer reviewed by
leading scholars in the field. The Student Editorial Board will manage this
process and assist in copy editing and author communications. Thus far the
authors who have participated in the student managed editorial process have
provided very positive feedback.
We are buoyed by this and the
overwhelming positivity of the student editors themselves. We welcome Will,
Caitlin and Adrian to the JLIS team.
As a general edition, the articles in this issue cover a range of novel and
emergent issues in law, science and technology. In his work Market Disclosure
and Governance Challenges When Floating University Research on the Stock Market
John Selby analyses the very live issue of the commercialisation of university
research and innovation in the context of the float of Melbourne IT Ltd by the
University of Melbourne. The article provides an insightful scrutiny of that
process and sets out lessons for other universities intending to privatise
previously publically funded activities.
Amanda Scardamaglia on the other hand, examines a much more emergent
technology, with no less important legal and commercial implications; 3d
printing. Her work, Flashpoints in 3D Printing and Trade Mark Law, examines
the largely unexplored questions about how the technology will impact on
trade mark law, in light of the projected uses and responses to the new
technology.
Jowa Chan, also discusses the intersection of intellectual property law, science
and technology, in respect of pharmaceutical patents. In her work Patent Law
and Community Interest in Public Health Chan considers whether a one-size-fitsall system to regulate the pharmaceutical industry is justified in light of the
modern research and development environment. She argues that there is a
vi
need for a national Health Impact Fund to complement (rather than compete
with) the existing patent system in light of the recent focus on pharmaceutical
patent reform.
Stephanie Crosbie also discusses the regulation of pharmaceuticals in The
Limited Impact Of Evergreening Practices In Australia. 'Evergreening' refers to
the strategic use of the patent system to extent the time and length that
patents protect high-earning pharmaceuticals. Crosbie concludes that the
concerns about evergreening practices are not as detrimental as some critics
have suggested and may, in fact, be beneficial for follow-on and cumulative
innovation in the field.
Moving from domestic to international intellectual property law, Olasupo
Owoeye discusses Data Exclusivity and Public Health under the TRIPS
Agreement. As he notes, that agreement has created a sui generis regime over
test data submitted to national drug regulatory authorities. He argues that
data exclusivity should not be a barrier to the use of compulsory licenses and
that it may be possible to rely on the grounds for compulsory licensing under
the TRIPS Agreement to satisfy the exceptions to TRIPS data exclusivity
requirements.
Peter Lawrence and I also examine the intersection of science and
international law in The ICJ Whaling Case: science, transparency and the rule of
law. While that decision has undoubtedly moved international law forward in
respect of legal-scientific state obligations we argue that it did not go as far as
some may believe it did. As a side note I thank Professor Dianne Nicol for
overseeing the double-blind peer review of that article to ensure the process
was at arms length given my role on the Editorial Board of the JLIS.
Finally I recognise the exceptionally valuable work of the JLIS Editorial Board
and peer reviewers for this issue. The peer review process is a vital
cornerstone of the academic enterprise, but can be a largely thankless task.
While those who have worked behind the scenes to improve the scholarly
work in this journal cannot be identified, we thank them for their contribution
to the journal, and the field more generally.
Brendan Gogarty, Chief Editor, 2015
vii
Market Disclosure and Governance Challenges When

Floating University Research on the Stock Market:
The Float of Melbourne IT Limited by the University
of Melbourne
JOHN SELBY
1
Introduction
Whilst most Australian universities are very familiar with the heavy burden
of complying with laws relating to the proper management of the public
sector, they have had fewer opportunities to gain experience complying with
laws regulating the proper management of the private sector. The need to
reconcile these two regulatory burdens is particularly challenging when those
universities seek to commercialise their research, especially through floating
subsidiary companies on the Australian Stock Exchange. This article examines
the events which led to the first float of a company by an Australian
university, that of Melbourne IT Pty Ltd (MelbIT) by the University of
Melbourne in 1999. Amongst its other activities, MelbIT held the
commercially valuable right to process applications to register dot-com.au
domain names, a right which aligned with significant investor interest in
Internet-based business models in the 1990s. Using new primary sources, it is
a case study of the challenges that affected the Universitys governance, and
of the importance of making full disclosures to the market during the time
before the initial public offering of their shares to investors (known as the preIPO period).
Australian universities are subject to ongoing financial pressures. This article
seeks to inform stakeholders within Australian universities of some of the
risks and opportunities to make better use of information in their governance
processes relating to research commercialisation so as to capture a greater
proportion of the profits generated by floating research companies on the
Australian Stock Exchange. This article applies agency theory to argue that
several internal incentive structures, information asymmetries, and decisionmaking processes within the governance systems of the University of
Melbourne led to the university receiving a significantly smaller proportion of
the overall profits from the float of MelbIT than it otherwise could have
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Dr John Selby, LLB (First Class Honours, University Medal), PhD (UNSW), BInt
Bus. (Griffith), Grad Dip in Legal Practice (NSW College of Law), Grad Dip in
Arbitration (UQ), Lecturer in the Department of Accounting and Corporate
Governance, Macquarie University.
N.b. Information about volumetric and EAP page numbering is set out on page ii of this issue.
Journal of Law, Information and Science
Vol 23(2) 2014-2015
achieved. It also argues that the failure to disclose adequately to the investing
public the existence of sales contracts signed by MelbIT before the closing
date for subscriptions to the initial public offering of the company may have
amounted to a breach of the Corporations Act 1989 (Cth), which was in force at
the time. It offers valuable insights for senior managers in Australian
universities who may find themselves in similar circumstances in the future.
The first section of this article reviews the existing scholarly analysis of the
MelbIT float. The second section is a case study of the events which led to that
float. The third section analyses the three main issues which arise out of that
case study, namely the decisions made about how MelbIT should be valued,
the method by which it should be floated, and what information should be
disclosed to investors so as to inform their decisions about whether to invest
in the company.
Existing Analyses of the MelbIT Float
Whilst several print and some radio1 and television2 journalists have analysed
the privatisation of MelbIT and its surrounding stakeholder conflicts, analysis
of the subject by academics has been relatively scant. The few scholars who
have examined this float can be divided into two camps: those supportive and
those critical of it. Sharrocks 2001 article, Media Representations of the
MelbourneIT Story,3 was supportive of the management of the University of
Melbourne and the float in general. His perspective can be contrasted with
the lengthy critique of the float within Cain and Hewitts book, Off Course:
From Public Place to Marketplace at Melbourne University.4
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1
See, for example: ABC Radio National, The Effect of Market Forces on Sandstone,
National Interest, 8 February 2004 (John Cain and John Hewitt)
<http://www.abc.net.au/rn/nationalinterest/stories/2004/1040420.htm>
(25
May 2015).
See, for example, the online transcript of the ABC Four Corners story Domain
Games which also contains a chat forum with postings by Robert Elz: ABC
Television, Domain Games, Four Corners, 5 June 2000 (Stephen McDonell)
<http://www.abc.net.au/4corners/stories/s136215.htm> (25 May 2015).
Sharrock was an honorary research fellow at the Universitys Centre for the Study
of Higher Education, and a management consultant to senior university managers.
See: Geoff Sharrock, Media Representations of the MelbourneIT Story (2001) 73(2)
AQ: Journal of Contemporary Analysis 7.
John Cain and John Hewitt, Off Course: From Public Place to Marketplace at Melbourne
University (Scribe Publications, 2004). Cain and Hewitts book has been reviewed
both positively: Paul Kniest, Book Review: University Overboard (2004) 46(2)
Australian Universities Review 40; and negatively: Geoff Sharrock, Book Review: The
Idea of the University (2004) 20(1) Policy 44; Geoff Sharrock, Rethinking the
Australian University: A Critique of Off Course (2004) 26(2) Journal of Higher
Education Policy and Management 265. Another very brief critique of the MelbIT float
can be found in: Di Adams, The Unintended Consequences of Deregulation:
Australian Higher Education in the Market Place in Paul Trowler (ed), Higher
EAP 2
The Float of Melbourne IT Limited by the University of Melbourne
Sharrocks analysis focused upon the rationale behind the float of MelbIT,
how its shares were allocated, and whether it was appropriately valued.
Whilst Sharrock accepted that the Australian education sector (as a whole)
was underfunded, he rejected media claims that Melbourne Universitys
motivation for privatising MelbIT was the need to ensure its own survival.
Instead, he argued that it was sold to generate funds to be re-deployed more
effectively in other research projects being undertaken by the University (e.g.
in the Bio21 project), and that the company was never an essential part of the
University.5 Sharrock next rejected the Auditor-Generals finding6 that the
University of Melbourne should have sought independent advice regarding
the valuation of MelbIT (which would have enabled the University to better
decide which float strategy to pursue), claiming that of the four broker
responses, JB Weres was simply the most remunerative for the University.
Whilst Sharrock posited that the only appropriate methodology for
determining the value of a company to be floated on the stock exchange was
the discounted cash-flow methodology (the methodology used by JB Were in
determining the maximum amount it was willing to underwrite the float) and
that other methodologies were based on irrational exuberance,7 this
appeared to contradict the multiple of forecast revenues valuation
methodology referred to on MelbITs own website shortly after it formally
announced that the company would float on the stock exchange.8 The next
claim by Sharrock (that 10% of MelbITs shares were sold to the general
public) seems slightly disingenuous, given that he appeared to have included
MelbITs Directors and staff as members of that public (which would boost
the 8.4% claimed by the Auditor-General by another 1.3%). Whilst those staff
may be members of the public in a sense, they were insiders, not outsiders,
to the float.
Finally, Sharrock dismissed the National Tertiary Education Unions (NTEU)
claim that the company should have been floated through a non-underwritten
book-build process9 because it would have exposed the University to the risk
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Education Policy and Institutional Change: Intentions and Outcomes in Turbulent
Environments (Open University Press, 2002) 154.
5
Geoff Sharrock, above n 3, 9.
Auditor-General of Victoria, Report on Ministerial Portfolios, tabled in the Victorian

Parliament on 1 June 2000
<http://www.audit.vic.gov.au/publications/2000/20000601-MinisterialPortfolios-June-2000.pdf > (25 May 2015).
Geoff Sharrock, above n 3, 10.
MelbourneIT, Company Announcement: Melbourne IT Float to Net $93.5m

(Media Release, 1999)
<http://corporate.melbourneit.com.au/news/newsstory.php?id=21> (29 January
2010).
A book-build involves the broker soliciting bids from potential investors. Those
bids specify how many shares the investor hopes to acquire and the price per share
that investor is willing to pay. After the deadline for receiving all such bids has
passed, the broker orders the bids on the basis of the investor who was willing to
pay the highest price per share down to the investor willing to pay the lowest price
EAP 3
Vol 23(2) 2014-2015
of a lack of demand for the shares. His position can be contrasted, however,
with the views of a panel of experienced Australian stock brokers and asset
managers, who candidly stated that:
Under the old fixed-price system inevitably the vendor gets a lower
price than he might. Book-builds limit the risk that a sale is mispriced. [Vendors and brokers] dont like mis-pricing, whereas [Asset
Managers and other investors] like mis-pricing [because they are]
after inefficiencies. The Americans run the deepest capital market in the
world and theyve never even heard of fixed price floats.10
As part of a broader study of perceived shortcomings in the grand strategy of
the University,11 Cain and Hewitt were critical of the decisions made when
floating MelbIT. These authors were academics within the Department of
Political Science at the University of Melbourne - Cain having formerly been
the Premier of Victoria. Whilst Cain and Hewitt regarded the value of MelbIT
as being based on excellence in academic research, it should be noted that the
company was always distinctly separate from the Department of Computer
Science at the University of Melbourne and that it did not undertake
academic research.
Sharrock published two reviews of Cain and Hewitts book. In his first
review, Sharrock disputed the validity of the overall concept of the university
expressed by Cain and Hewitt as out-dated, and criticised the book for
containing errors in facts and interpretations. Whilst he argued that the sale of
MelbIT delivered a very substantial financial gain to the University (i.e. $78m
clear profit, or a >20 000% return on investment), this ignored the potential
for an even larger return if the float had been undertaken through a bookbuild process (albeit during a period of relative investor irrationality).12
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
per share. The broker then allocates shares in the volumes requested by the
investors willing to pay the highest price per share downwards until all the shares
on offer have been allocated. Thus different investors may pay different prices for
the shares in the company and a volume-weighted average share price is
determined after the float.
10
See: Malcolm Maiden, Its Sink or Swim Time as More Floats Set Sail, The Age
Newspaper (Melbourne), 8 November 2003 <http://www.theage.com.au
/articles/2003/11/07/1068013396687.html> (25 May 2015).
11
John Cain and John Hewitt, above n 4, 131. They incorrectly asserted that MelbIT
held a monopoly as the only issuer of .au names in Australia, a claim ignorant of
the ability of Australian Internet users to register .net.au, .org.au, etc third-level
domains without dealing with MelbIT (which only had a de facto monopoly on the
processing applications for registrations within the .com.au second-level domain).
Cain and Hewitt criticised the three members of the University Council who did
not declare a conflict of interest when accepting MEILs recommendation to use JB
Were as the primary broker for the float on the basis of being preferred private
clients of that broker. Those three members of Council then were offered and
accepted allocations of shares from JB Were during the initial public offering of
MelbIT whilst most other University staff were under the Vice-Chancellors
prohibition on being issued shares.
12
Geoff Sharrock, Book Review: The Idea of the University, above n 4, 48.
EAP 4
Sharrock was incorrect to argue that MelbITs first cash-flow positive business
activity was the registration of domain names the company was formed to
expand an existing profitable research relationship with Ericsson.13 Finally,
Sharrock argued that, given the opportunity for a $78 million upfront
payment in 1999, it would have been fantasy for the University to have kept
MelbIT for its ongoing cash-flows.14 Although he made this statement back in
2004, the perspective available from hindsight now appears to contradict it:
MelbIT generated $178 million in net profits after tax between 1999 and
2013.15 At an average of $12 million per year in net profits after tax over
fourteen years, the $78 million float proceeds would have had to generate an
annual yield of more than 16% to be equally valuable.
Sharrocks second review of Cain and Hewitts book covered similar territory
to his first, but in greater detail, particularly in relation to the shifting role of
universities from providers of elite education to providers of mass
education.16 He referred to MelbIT as a commercial enterprise that served no
academic purpose, claiming that the University of Melbourne would have
been at least $78m poorer if it had not floated the company, before criticising
Cain and Hewitt as subscrib[ing] to an old-fashioned, monopoly-oriented,
public sector fundamentalism that is inadequate to the tasks and resource
requirements now facing the Australian university sector.17
Floating MelbourneIT
Having criticised the analyses published by other scholars on the float of

MelbIT, this section examines primary source documents and interviews with
key participants to build a richer case study of the events between 1996 and
1999 that led to the float by the University of Melbourne of MelbIT. First, the
earliest commercial activities of MelbourneIT Pty Ltd are examined. Next, the
commercial opportunity (i.e. the processing of applications for com.au
domain names) that led to MelbITs financial growth is briefly explored. The
decision-making processes through which the University of Melbourne
floated MelbIT are explored, and a discussion of how its value was
determined is included. Finally, the case explores how two international sales
contracts signed by MelbIT prior to its float affected its market value.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
13
Interview with Peter Gerrand, former head of CITRI and founding CEO of MelbIT
(Melbourne, 22 January 2010).
14
Geoff Sharrock, Book Review: The Idea of the University, above n 4, 49.
15
See the Financial Reports and Annual Reports issued by MelbIT between 1999 and
2013 <http://www.melbourneit.info/investor-centre/annual-reports>.
16
Geoff Sharrock, Rethinking the Australian University: A Critique of Off Course,

above n 4, 267-8.
17
Ibid.
EAP 5
Vol 23(2) 2014-2015
3.1 MelbourneIT Pty Limited Founded

MelbIT was incorporated at the University of Melbourne on 22 April 1996,18
prior to the University agreeing with RMIT in September 1996 to discontinue
their former joint-venture, the Collaborative Information Technology
Research Institute (CITRI).19
Having started at CITRI in 199420 and established its relationship with the
telecommunications company Ericsson on 1 May 1996, Professor Peter
Gerrand was offered the opportunity to be the founding CEO of MelbIT by
Frank Larkins, Deputy-Vice Chancellor (Research) at the University of
Melbourne.21 The Vice-Chancellor of the University of Melbourne at the time,
Alan Gilbert, advised that MelbITs role was to be long-term and strategic
to demonstrate the Universitys leadership in information technology to
industry and to government.22 MelbIT sat outside the Faculty of Engineering
and the Department of Computer Science at the University so as to focus on
commercialising applied research with, and for, industry partners. MelbIT
started with a 3-member board of directors, and 3 staff and research
development contracts with Ericsson (a commercial relationship which
Gerrand had developed at CITRI).
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
18
MelbourneIT,
Annual
Report
1999
(2000)
Domain
Avenue,
70
<http://www.domainavenue.com/mit_annual_report_1999.pdf>. Unfortunately,
MelbITs own website only listed its annual reports back to the year 2000 and the
1999 report was not available at <http://corporate.melbourneit.com.au/investorrelations/annualreport.php> (25 May 2015).
The internal holding structure of MelbIT within the University of Melbourne
changed over time. In 1996, the company was created as a wholly-owned
subsidiary of Melbourne Research Enterprises Limited, which in turn was a
company limited by guarantee wholly-owned by the University of Melbourne.
See: Auditor-General of Victoria, above n 6, 23-4.
19
(Melbourne, 22 January 2010); RMIT, Report of the Council of the Royal Melbourne
Institute of Technology: Jan 1 to Dec 31 (1996) 9
<http://mams.rmit.edu.au/4eyhwuy09094z.pdf> (25 May 2015); RMIT, Schools
Affiliated Research Sold to US Company (2006)
<https://web.archive.org/web/20080809170502/http://www.rmit.org.au/brows
e;ID=86nrvpoy3t7u> (25 May 2015); Council of the University of Melbourne,
Meeting Minutes (4 March 1996) University of Melbourne
<https://web.archive.org/web/20131003182657/http://www.unimelb.edu.au/C
ouncil/minutes/mar96.html> (25 May 2015).
20
Monash University Electrical Engineering Alumni Society, Newsletter of the

Alumni of the Department of Electrical and Computer Systems Engineering
(MONELEC Alumni News No 2, 1994)
<http://www.ecse.monash.edu.au/alumni/Alumni2.html> (25 May 2015).
21
University of Melbourne, University Leader Frank Larkins Steps Down

<https://web.archive.org/web/20130712184139/http://blogs.unimelb.edu.au/m
usse/?p=422 > (25 May 2015).
22
EAP 6
Despite reports to the contrary, early in its life MelbITs main business was
not focused on domain names.23 It expanded its profitable research
collaboration with Ericsson and developed maxi.com.au, a system to facilitate
the online payment of local council rates, inter alia, with NEC Consulting.24 It
operated on a cash-flow positive basis from the beginning, although it did
receive a support guarantee of up to $350 000 from the University when it was
formed.25
MelbITs role regarding the dot-com.au domain name system arose as a
consequence of it being in the right place at the right time. On 21 June 1996,
Charles Wright published an article on the front page of the Australian
Financial Review, Business Tackles the Net Keeper, in which he identified
Robert Elz as a bearded 42-year old bachelor, a computer scientist at the
University of Melbourne, and criticised the up to 12 week delays in
registering business domain names occurring under Elzs watch. In response
to threats of lawsuits from major corporations, Elz was reported as saying
Ive got no money, and no assets so that doesnt worry me a bit. Ive no
interest in money.26
This newspaper article, with its implied criticism of the University of
Melbourne, caused significant consternation at senior levels of the University.
When the Department of Computer Science, where Robert Elz worked, could
not provide a solution, the head of that Department, Peter Thorne, turned to
Peter Gerrand at MelbIT for assistance in reducing the backlogged queue of
applications for registrations of dot-com.au domains.27 Peter Gerrand sought
from Robert Elz,28 and was granted on 8 October 1996,29 a 2-page contract
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
23
For example, see: Cain and Hewitt, above n 4, 131, which states that MelbourneIT
was established in April 1996 its business was the supply of domain names for
individuals and businesses in Australia and overseas.
24
25
Ibid.
26
Whilst the archives of the Australian Financial Review are not freely available to the
public through www.afr.com, that sites searchable index shows the Wright article
was published on page 1 of the Australian Financial Review on 21 June 1996.
Fortunately, the author of the article, Charles Wright, reproduced the original text
of it on his blog. See: Charles Wright, Business Tackles the Net Keeper? on
Charles
Wright,
Bleeding
Edge
Blog
(September
2007)
<https://web.archive.org/web/20130430231444/http://bleedingedge.com.au/bl
og/archives/2007/09/a_little_history.html> (25 May 2015). Peter Gerrand,
Commercial Internet Domain Name Administration in Australia (1998) 48(3)
Telecommunications Journal of Australia 63, 65 erroneously stated the date of
publication of Wrights article in the Australian Financial Review as 12 July 1996.
27
28
Robert Elz cautioned that he would retain policy control over the second-level
domain and would not be changing its existing policies. He hoped that this change
would increase his ability to process applications for the other second-level
EAP 7
Vol 23(2) 2014-2015
which granted MelbIT a five year non-exclusive licence to process the

applications for the registration of dot-com.au domains.30
As MelbIT developed subsequent generations of its automated domain name
registration application processing platform software, additional functionality
was added.31 To recover the costs of developing its higher-volume/more
rapid dot-com.au registration service, in late 1996 MelbIT proposed to
introduce a time limit for the registration of domain names (two years before
renewal was required) and a registration fee (tiered depending upon the
speed with which the applicant wanted the registration to be processed). As it
did not know the fair market value of its service, Peter Gerrand decided to
charge a fee which undercut by 10% the cost of registering a dot-com domain
through Network Solutions (i.e. $125 for a two-year dot-com.au
registration).32
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
domains he managed, namely .org.au and .oz.au. Elz admitted that economic
issues arent something I claim to know anything at all about, but recognised that
MelbIT would likely charge some annual fee. He (rather optimistically) stated that
I am fairly confident that this is not a profit-seeking exercise from MelbourneIT,
and that the costs will be as low as practical to actually keep the service viable and
operational with suitable response times: Robert Elz, Possible Changes to
COM.AU Administration, Message posted to aus.net.policy newsgroup dated 9
September 1996, <http://groups.google.com> (25 May 2015).
29
Adrian Kloeden, MelbourneIT Concerns with .au (3 August 2001) ICANN

<http://www.iana.org/reports/2001/au-redelegation/kloeden-to-lynn03aug01.html> (25 May 2015); Internet Names Australia, .com.au Doman Name
Allocation Policy
<http://web.archive.org/web/19990508065310/http://www.ina.com.au/register
/names.html> (25 May 2015).
30
Robert Elz reserved the right to appoint other registrars upon giving MelbIT three
months notice. MelbIT could not change the original criteria through which it
assessed applications for registration of .com.au domains without endorsement for
the changes from an appropriate Internet community body. The Victorian
government provided a $100 000 grant to MelbIT in return for it reducing the
backlog of applications from 2 400 businesses. This money was used to build the
first of three generations of IT systems used by MelbIT to accelerate and automate
the process of processing applications for .com.au domains: Internet Names
Australia, above n 29; Interview with Peter Gerrand, former head of CITRI and
founding CEO of MelbIT (Melbourne, 22 January 2010).
31
After establishing a rapport with the Trade Marks Registrar in Canberra (which
was keen to offer online searches of its own register), Peter Gerrands team were
able to incorporate trademarks as a basis for considering applications for the
registration of .com.au domain names. By the third generation of the platform,
sixteen national and state databases were automatically checked when considering
each application for registration, including business names, trademarks, approved
geographic names, the yellow pages, etc. Such a policy had not been possible for
either Warwick Jackson or Robert Elz to implement prior to this time as online
access to the Trade Marks database had not previously been available.
32
(Melbourne, 22 January 2010). See also: Jan Whitaker, Domain Registration Shifts
EAP 8
When interviewed for the Wright article published in the Australian Financial
Review, Robert Elz had mooted the idea of charging registration fees, but on
an exponential scale for each commercial entity (i.e. $20 for their first .com.au
domain, $200 for the second, $2 000 for the third, and so on).33 MelbITs
proposal was for a flat fee for each registration, which would encourage a
higher volume of applications than did Elzs pricing model. MelbIT
announced this proposal through a statement issued on Christmas Eve 1996
(and then shut down its offices for the holidays until 1 January 1997).34
MelbITs proposal caused a swift reaction by Australian Internet users, with a
surge of applications lodged for the still fee-free .net.au 2LD. To cope with the
sudden spike in application volume, the manager of the .net.au 2LD
introduced a registration fee of $150 per .net.au domain, $25 higher than that
charged by MelbIT.35
3.2 Significant Growth in MelbourneITs Revenues and Profits

This section outlines how growth in the domain name application processing
component of its business enabled MelbIT to significantly increase its
revenues (and profits) between 1996 and 1999, leading to its float on the
Australian Stock Exchange. The introduction in 1996 by MelbIT of an
automated online processing system for applications for dot-com.au domains
and a help desk for applicant enquiries significantly increased the efficiency
with which Australian businesses were able to register such domains. Rising
demand and the ability to charge a significant fee for a business with high
start-up costs but relatively low marginal costs delivered economies of scale
that enabled this for-profit subsidiary of the University of Melbourne to
generate significant positive cash-flows.
In the three weeks that followed the launch of MelbITs .com.au registration
application processing software platform, a backlog of more than 2500
applications was processed. To further facilitate increases in the demand for
.com.au domains, MelbourneIT used the process developed by Robert Elz of
gaining endorsement from Australian Internet community bodies for changes
to eligibility requirements within the .com.au application policy. In February
1997, the Internet Industry Association DNS Forum agreed that the Warwick
Jackson-imposed prohibition on the registration of common words would be
narrowed to the rejection of specific classes of words, such as gazetted place
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
to MelbourneIT message posted to LINK Discussion List on 8 October 1996,
available
at
<http://mailman.anu.edu.au/pipermail/link/1996October/025076.html> (25 May 2015).
33
Charles Wright, above n 26.
34
Michael Malone, Re: Renewal Notice for iinet and invoice number iinet-1, message
posted to the DNS Mailing List on 24 December 1996, available at
<http://www.dotau.org/archive/1996-12/0148.html> (25 May 2015).
35
Peter Gerrand, above n 26, 65.
EAP 9
10
Vol 23(2) 2014-2015
names and generic products (goods and services).36 Eleven months later, the
board of the Australian Domain Names Administrator further refined generic
products to be those categories listed in the index to Telstras Yellow Pages
phone directory. In November 1997, at a seminar hosted by the Registrar of
Trade Marks, the members of the Australian Internet community present
voted overwhelmingly to permit registrations on the basis of trade marks.37
These changes, together with increased awareness of the benefit of using the
Internet in Australian society, the perception of a dot-com boom in the
United States and heavy advertising, led to massive growth in the volume of
applications for .com.au domains being received by MelbIT (see Figure 1
below). In mid-1996, applications were arriving at a rate of 1 000 per month.
By the end of that year, applications had grown to 1 500/month. In its first 18months of operations, MelbIT processed 33 000 applications.38
Figure 1: Cumulative .au and .com.au registrations over time39

Whilst MelbIT had always been cash-flow positive since its inception, once
the registration fee of $125 per domain came into effect in late 1997, that cash-
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
36
Internet Names Australia, above n 29. Warwick Jackson was originally granted by
Robert Elz in 1986 the right to manage the .com.au ccTLD. Jackson set policies for
and managed that domain for nearly a decade, but when demand significantly
grew for registrations in 1995, Jackson relinquished his management right back to
Elz.
37
Peter Gerrand, above n 26, 68.
38
Ibid 65-6.
39
Caslon Analytics, auDA and dot-au (December 2008)

<https://web.archive.org/web/20100727161558/http://www.caslon.com.au/aud
aprofile.htm> (25 May 2010).
EAP 10
11
flow soared (despite the significant costs associated with the development of
its three generations of domain registration application processing software,
which led to a temporary cash-flow crisis in March 1999). Its senior managers
approached the University offering a management buyout worth $1.5 million
to $3.5 million, which the Board of MelbIT rejected. The Board was concerned,
however, about senior managers of the company resigning to take up more
lucrative opportunities in other dot-com companies, so they started looking at
options for spinning off the company from the University, with an initial
valuation of $15 million.40
This idea was reinforced within the senior management of the University of
Melbourne by another front-page article published in the Australian Financial
Review on 23 April 1999, entitled MelbourneITs Giant Leap for Domain
Kind.41 That article relayed MelbITs success in being appointed as one of five
companies to be test registrars of the .com global top-level domain. Peter
Gerrand attributed that success to MelbITs technical skills and its carefully
nurtured relationship with Paul Twomey, who by that time was the
Australian Governments representative on the Governmental Advisory
Council of the Internet Corporation for Assigned Names and Numbers
(ICANN),42 which had its first meeting in Singapore in March 1999.43
3.3 The Decision to Float MelbourneIT

The previous section examined the role played by MelbITs domain name
application processing department in significantly increasing the revenues
(and profits) of its business. This led to pressure from some internal
stakeholders who sought to privatise those public profits through various
commercialisation strategies.
Given the range of privatisation strategies promoted by different stakeholders
within MelbIT outlined in the previous section, it was not a foregone
conclusion that the company would be floated on the Australian stock
exchange. The company was a subsidiary of the University of Melbourne and
consequently fell within the ambit of the overall commercialisation strategy of
that university and the decision-making processes which operated therein.
Universities undertake a range of basic- and applied-research projects, some
of which eventually reach the stage of readiness for commercialisation. It is
relatively common for universities to enter into technology licensing
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
40
Interview with Geoff Rees, former Chairman of MelbIT (Telephone, 2 February

2010).
41
John Davidson, Melbourne ITs Giant Leap for Domain Kind Australian Financial
Review (23 April 1999) 1.
42
43
ICANN, Communique of the Governmental Advisory Committee (2 March 1999)

<http://gac.icann.org/system/files/GAC_01_Singapore_Communique.pdf> (25
May 2015).
EAP 11
12
Vol 23(2) 2014-2015
agreements with existing private and public companies wherein the company
pays a proportion of income (or profits) for the right to exploit the research
(e.g. the 1991 royalty agreement reached by the Faculty of Medicine at the
University of Melbourne relating to the Cochlear implant).44 The university
may also enter into an outright sale agreement wherein a company purchases
the patent in its entirety for a fee. Alternatively, the university may offer to
sophisticated investors (and/or internal or external venture capital firms) the
opportunity to invest in a private company to fund further the development
of a product which commercialises the original research. This may involve
successive rounds of funding offers which dilute the universitys holdings
substantially (especially for research involving significant up-front
expenditure). A third method of commercialisation (though less common) is
for the university to float directly a company established to exploit the
research on the Australian Stock Exchange.45 It was this latter method which
was selected by the University of Melbourne as the means of exploiting
opportunities generated by its wholly-owned subsidiary, MelbIT.46 The
typical reasons as to why a for-profit company is floated on the stock
exchange include:
The need to raise additional capital which will be used to fund the
ongoing operations of the company;
To enable early investors to sell-down their holdings and cash-out
some or all of those monies;
To raise the public profile of the business (which is especially relevant
for debt-financiers, suppliers, and customers); and
To establish liquidity in the shares of the company through the
determination of their fair market value on an ongoing basis (which
assists the company to borrow money, to launch takeovers and to
clarify the value of employee share- and option-schemes).47
Given the proven financial success of MelbIT, its public popularity, and the
fact that it was so cash-flow positive that debt financing was not necessary,
the first, third, and fourth reasons listed above were not applicable. However,
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
44

2010).
45
See, for example, the discussion of the research commercialisation strategies of

Australian universities in: Australian Research Council, Research in the National
Interest:
Commercialising
University
Research
in
Australia
(1999)
<http://www.arc.gov.au/pdf/00_03.pdf> (25 May 2015).
46
Council of the University of Melbourne, Minutes of September Meeting, University of

Melbourne
(September
1999)
<https://web.archive.org/web/20080201003341/http://www.unimelb.edu.au/C
ouncil/minutes/sep99.html> (25 May 2015).
47
Steven Goodman, To Float or Not to Float?, Truman Hoyle Lawyers Blog (28
February 2006)
<https://web.archive.org/web/20110217011224/http://www.trumanhoyle.com.a
u/downloads/Tofloat-SG0206.pdf> (25 May 2015).
EAP 12
13
the second of those four reasons does appear to have been the motivation for
the University Council to approve the float of the company.48
3.4 Determining the Value of MelbourneIT

The previous section outlined the decision-making process through which
stakeholders within the University of Melbourne agreed to commercialise
MelbIT through a float on the Australian Stock Exchange. This section
examines how those stakeholders determined the price at which they would
value the company for its float.
Once the decision was made to pursue a public float of MelbIT, one of the
major challenges faced by the board of the parent company, Melbourne
Enterprises International Limited (MEIL) and the Board of MelbIT was to
determine a fair market value for the company. In 1999, listed companies with
Internet-related business models were trading at very high multiples of their
revenues (whether current or forecast) and were experiencing significant
volatility in their market capitalisations (even on a daily and weekly basis).49
In preparing for the float of MelbIT on the Australian Stock Exchange, the
Council of the University of Melbourne was concerned about the volatility of
the market capitalisation of listed technology companies and the impact that
such volatility could have on the market demand for shares in the float. Such
technology companies had been valued by investors in the share market on
the basis of being growth firms (i.e. their share price was a function of the
present value of their current operations and of their future investment
opportunities, not only of their existing cash-flow). This was because of the
potential for some of those firms to dominate their nascent markets and earn
abnormally-large returns in the future (as had been the case with, for
example, Google). Unfortunately, due to information asymmetry and the
impossibility of knowing in advance which markets would prove profitable
(as was the case with, for example, pets.com), it was not possible for investors
to predict which firms would succeed and which would implode as a
consequence of expending too many of their resources on marketing and
research and development without achieving such a dominant market
position. Another reason for the stratospheric price-earnings multiples of
those companies had been the excessive optimism of financial analysts who
made recommendations to clients seeking to invest in the share market.50
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
48
Council of the University of Melbourne, above n 19: The minutes of the September
1999 meeting of the Council of the University of Melbourne contain the relevant
information.
49
For an analysis of this price volatility see, for example: William Schwert, Stock
Volatility in the New Millenium: How Wacky is NASDAQ? (2002) 49(1) Journal of
Monetary Economics 3.
50
Tokic reports that in 1999-2000, the average listed technology firm spent 75% of its
revenues on marketing and R&D. See: Damir Tokic, What Went Wrong with the
Dot-Coms? (2002) 11(2) Journal of Investing 52, 54.
EAP 13
14
Vol 23(2) 2014-2015
One method of valuation which was considered was to determine the

multiple which represented the value of market capitalisation over projected
revenues for similar companies, and then to apply that multiple to MelbITs
forward revenue projections. Unfortunately, the multiple was changing
rapidly and the University was concerned that there was froth in the market
generally at the time. Ultimately, the University of Melbourne hoped to
generate proceeds in excess of $50 million from the sale of MelbIT.51
MelbITs board supported the concept of determining its own value based
upon multiples of market capitalisation over projected revenue through a
press release it issued on 18 November 1999. In that statement, the company
formally announced details of its $110m float, which would raise $93.5m by
selling 85% of the stock onto the market. Revenue growth was forecast at
100% year-on-year. The float would be one of the first domain registration
business floats since Network Solutions in 1997. Network Solutions has a p/e
of 246 (market cap $US5Billion and its shares went from $25 in Nov 98 to $150
in Nov 99). MelbITs projected revenues in 1999 were $A12.34m. JB Were said
interest in the float was high and would be fairly evenly divided between
institutions and private investors.52
In return for agreeing to fully underwrite the float of MelbIT, JB Were
received a fee of $2 898 500 in addition to reimbursement of its out-of-pocket
and legal expenses up to a maximum of $45 000.53 As MEIL was a company
limited by guarantee, it was prohibited from paying a dividend to the
University of Melbourne. Instead, it made a gift to the University of $50
million of the proceeds it received from the float.54
MelbITs shares were sold to its initial investors at $2.20 per share. On its first
day of trading as a listed company, MelbITs shares opened at $8.21, reached
an intra-day high of $9.10, and closed at $7.95. 11.8 million shares were traded
on that first day, delivering a stag profit of around 320-410% for the initial
investors. For the next few months, its share price moved roughly sideways,
oscillating around $8, as seen in Figure 2 below.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
51

2010).
52
MelbourneIT, Melbourne IT Float to Net $93.5m (Media Release, 1999)

<https://web.archive.org/web/20010208131240/http://www.melbourneit.com.a
u/ver2/html/investrelations/company_news/index.htm> (25 May 2015).
53
MEIL paid $2 666 000 and MelbIT paid $232 500. See: MelbourneIT, Annual Report
1999 (2000) 73 <http://www.domainavenue.com/mit_annual_report_1999.pdf>
(last accessed 25 May 2015). Unfortunately, MelbITs own website only listed its
annual reports back to the year 2000 and the 1999 report was not available at
<http://corporate.melbourneit.com.au/investor-relations/annualreport.php> (25
May 2015).
54
Auditor-General of Victoria, above n 6, 29.
EAP 14
15
MelbourneIT+Daily+Closing+Share+Price+($A);
18"
16"
14"
12"
10"
8"
6"
4"
2"
0"
Closing"Price"
Figure 2: MelbourneITs daily closing share price in the three months after it was
floated
55
3.5 Pre-Float (non-)Disclosures of International Sales Contracts

Whilst the previous section examined how stakeholders within the University
of Melbourne determined the price at which they would float MelbIT on the
Australian Stock Exchange, this section examines the impact that two major
customer sales contracts signed by the company before its float had upon
investor perceptions of its fair-market value in the period shortly after that
float. Later sections analyse whether those contracts were accurately
communicated to investors prior to the closing date for subscriptions to the
float.
In the first few months after its float, MelbIT announced to the share market
that before its float it had signed two sales contracts which would be likely to
increase the volume of domain name registrations that it processed, thus
potentially increasing its revenues (though not necessarily profits); one with
Verio and another with Intuit.56 Analysis of price and volume signals
extracted from trading data shortly after those announcements provide
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
55
This historical price and volume data was found at: Yahoo! Finance, MLB Historical
Prices
<http://ichart.finance.yahoo.com/table.csv?s=MLB.AX&d=11&e=8&f=2012&g=d
&a=11&b=13&c=1999&ignore=.csv> (25 May 2015).
56
The public were first notified of these contracts by MelbourneIT Limited on 10

December 1999: MelbourneIt Ltd, Company Background Pre-Listing Announcement
(December
1999),
Australian
Stock
Exchange
u/ver2/html/investrelations/company_news/index.htm> (25 May 2015).
EAP 15
16
Vol 23(2) 2014-2015
evidence of shareholder attitudes towards the valuation of MelbIT (i.e.

whether shareholders were relying primarily on the basis of the discounted
cash-flow method or a multiple of revenues method).57
3.5.1 Verio Contract
In the week prior to its announcement to the public after close of trade on 12
January 2000 that it had signed a contract to provide domain name
registration services to Verio (in return for which Verio took a 4.9%
shareholding in MelbIT), MelbITs share closing price had averaged $7.58
with an average daily volume of 297 000 shares traded. Whilst there was an
initial rise in both share price and volume on the morning of the first day after
the announcement (a 3.4% intra-day rise in the share price on average
volume), share traders sold the stock on the following day, driving the price
down by 8% on volume 40% higher than average. Overall, the news that this
contract had been signed appears to have already been factored into the
publics valuation of the company during the price surge that occurred on its
first trading day, and subsequent disclosure to the public of the identity of the
counterparty to that contract did not have a lasting positive impact on the
companys share price.
3.5.2 Intuit Contract
The outcome of not announcing the Verio contract to the public before the
closing date for subscriptions to the float can be contrasted with the impact on
its share price when MelbIT announced that it had similarly partnered with
Intuit to provide domain name registration services to its QuickBooks
customers (a contract it had signed on 6 December 1999). When that
announcement was made after the close of trade on 9 February 2000, MelbITs
share price rose 70% to $12.95 in just five days on trading volumes 3.75 times
heavier than it had averaged in the week prior to that announcement.58 Over
those five days, the overall share market rose by just 0.76%. Thus, this
announcement of an opportunity for an increase in the volume of domain
names registered clearly altered shareholder perceptions of the value of the
stock as demonstrated in Figure 3 below.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
57
The performance of a stock relative to the overall market is also important in

determining the significance of a companys announcement. For an example of an
academic study of the importance of price and volume signals on boundedly
rational share traders, see: Steven Hubbert, Mark Lang, and Michelle Yetman,
Volume and Price Patterns Around a Stocks 52-Week Highs and Lows: Theory
and Evidence (2009) 55(1) Management Science 16.
58
The announcement on 14 February that Mercury Asset Management had become a

substantial shareholder in MelbIT by acquiring 2.5 million shares or 5.02% of the
company did not contribute directly to this trading volume increase: Mercury had
bought those shares by 21 January 2000 (three weeks prior to the announcement of
the Intuit contract). See: MelbourneIT, Becoming a Substantial Shareholder (14
February 2000), Australian Stock Exchange <http://www.asx.com.au
/asx/statistics/displayAnnouncement.do?display=text&issuerId=4199&announce
mentId=161308> (25 May 2015).
EAP 16
17
2.5"
2"
1.5"
MelbourneIT"
1"
All"Ordinaries"Index"
0.5"
0"
Figure 3: Change in MelbourneITs daily closing share price compared to overall

share market in the months after its float
59
This section has explored the events which led to the float of MelbIT. This
case study has examined in greater detail the decision-making processes prior
to the float and revealed an issue missed by previous scholars concerning the
decisions regarding the University of Melbourne, and MelbITs executives
decision not to disclose to investors prior to the closing date for subscriptions
to the float of the company the significance of two sales contracts which
subsequently had substantial impact on the valuation of the company. The
legal consequences of those decisions are explored in the next section.
Reviewing the Adequacy of the Pre-Float Valuation and

Disclosure Decisions
This section first examines two previous investigations into the float of
MelbIT: an internal investigation ordered by the Vice-Chancellor of the
University of Melbourne, and an external investigation undertaken by the
Victorian Auditor-General. It then considers the legal effect of the additional
information presented above which does not appear to have been considered
by those investigations.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
59
This historical price and volume data was found at: Yahoo! Finance, MLB Historical
Prices
<http://ichart.finance.yahoo.com/table.csv?s=MLB.AX&d=11&e=8&f=2012&g=d
&a=11&b=13&c=1999&ignore=.csv>; and Yahoo! Finance, ÂORD Historical Prices
<http://ichart.finance.yahoo.com/table.csv?s=%5EAORD&d=11&e=8&f=2012&g
=d&a=7&b=3&c=1984&ignore=.csv> (25 May 2015). Daily closing price data for
MelbIT and the All Ordinaries Index were divided by their respective values on 14
December 1999 to generate this relative price movement chart.
EAP 17
18
Vol 23(2) 2014-2015
An internal university investigation implemented by the Vice-Chancellor to

determine, amongst other things, whether the share issue was under-priced
reported that a thorough and proper process was undertaken to reach what
was believed to be a true valuation and that the boards of MelbIT and MEIL
were not at fault.60 Cain and Hewitt criticised this committee as consisting of
people who owed their jobs to some of those whose conduct they were
examining, on premises that prevented a wide, full-blooded examination.61
An external review of the float was undertaken by the Victorian AuditorGeneral,62 whose report focused upon three topics: 1) the processes the
University went through to determine whether and how to float MelbIT; 2)
how to value the company; and 3) whether and how to allocate shares to
various University employees. Its overall conclusions were that:
The failure of the University of Melbourne to obtain an independent
authoritative valuation of MelbourneIT Limited was a significant
deficiency in the float process, in that valuation would have provided a
benchmark against which proposals from brokers and underwriters
could have been better considered, [and that the University should
have] considered alternative methods of sale to achieve the best
outcome from the privatisation of public sector companies.63
This report highlighted the conservative risk-minimisation mindset of the
University Council (the University did not wish to expose itself to any risk
associated with the float64) and the Boards of MelbIT and its parent company,
MEIL.65 These stakeholders were focused mainly on preserving the reputation
of the University by ensuring that the float was fully sold, rather than on
maximising the value received from the privatisation of a public asset. The
Auditor-General noted that JB Were used a discounted cash-flow valuation
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
60
Cain and Hewitt, above n 4, 213-4.
61
Ibid 139.
62
Auditor-General of Victoria, above n 6. Whilst the report is informative and

generally accurate, it does contain some errors: the Report conflates Melbourne ITs
international business which registers .com (and other gTLD) domains with the
companys 5-year licence to process applications for .com.au domains granted in
1996 by Robert Elz. The Report erroneously states that Melbourne ITs core
business originated from obtaining a 5-year licence to register domain names in
Australia. This licence was one of only a limited number of licences held
worldwide and had originally been obtained in 1989 by a computer systems
administrator employed by the University. MelbITs business in fact originated
from its research contracts with Ericsson and other multi-national corporations. It
was only later in MelbITs history that it started to process applications to register
.com.au domains and even later again when it received a licence from ICANN to
register .com domains.
63
Ibid 3.
64
Ibid 30.
65
Ibid 27.
EAP 18
19
method to determine the maximum amount to which it was willing to underwrite the float of MelbIT. Such a figure did not amount to a valuation of the
company, instead only reflecting the maximum that JB Were was willing to
pay to the University in the event that the float was a total failure.66 The
Auditor-General recommended in any future floats of public sector
companies, the use of a book-building method in fixing a share price should
be seriously considered, as it may be a better indicator of market demand and
therefore price for the share offer, due to the creation of competition between
institutional investors and retail investors.67
4.1 Decision-making by the University of Melbourne when Floating

MelbourneIT
Whilst there are certainly advantages and disadvantages to the use of a fullyunderwritten float structure and a non-underwritten book-build structure, it
is arguable, given the risk of perverse incentives inherent in underwriting a
float, the relatively miniscule financial contribution that the University had
invested to capitalise the company, the fact that the University had retained
full ownership of the company until the day of its float (a relatively rare
situation for universities when commercialising their research, whose
ownership is often diluted down to a capital holding of <50% by the time of a
float), and the difficulty it was having in determining a fair market value for
the company, that it would have been wiser simply to have let the market
determine the price it was willing to pay for MelbIT. It is arguable that such a
situation would almost certainly have generated a substantial profit for the
University and saved millions of dollars in underwriting fees (even in the
context of the price volatility of the time); only the extent of that profit would
have been unknown in advance.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
66
Ibid 47. Although the boards of MelbIT and MEIL had valuation reports from its
lead advisor, Deloitte Corporate Finance, and its business advisor, LEK
Consultancy, had analysed the value of each component of the business, these
were not independent authoritative valuation reports. LEKs report valued the
company at up to $A190 million (if it were to be listed on the United States-based
NASDAQ stock exchange) and was based upon a comparison of the ratio of
market capitalisation to forecast revenues for other listed internet-based
businesses, such as Network Solutions.
It is interesting to note that whilst the University was willing to accept JB Weres
discounted cash-flow valuation model for the under-written value of the company,
in its announcement which formally announced its intention to float the company
(released in mid-November 1999), MelbIT did not refer to JB Weres valuation
model, instead it highlighted that Network Solutions has a p/e of 246 (market cap
US$5 billion and its shares went from US$25 in Nov 1998 to US$150 [in Nov 1999].
MITs projected revenues in 1999 were A$12.34 million. Thus, whilst internally the
University appeared willing to accept a discounted cash-flow valuation model for
the proceeds it would receive from the float, to the rest of the world (including
institutional investors, preferred clients and the general public), it was hyping the
companys value on the basis of a far more speculative model, i.e. LEK
Consultings model of the multiple of market earnings to forecast revenues:
MelbourneIT, above n 52.
67
EAP 19
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Vol 23(2) 2014-2015
This section examines how the decision-making processes and incentive

structures within the University of Melbourne may have caused it to act in a
manner that was not in the institutions long-term best interests.
As highlighted in the internal and external reviews of the decision by the
Council of the University of Melbourne to commercialise MelbIT by floating it
on the Australian Stock Exchange, internal stakeholder conflicts arose in two
ways. The first related to how the University determined the valuation at
which it should sell MelbIT.
4.1.1 Decision-making on the Value of MelbourneITs Business
Various stakeholders with different incentives held very different
perspectives on the appropriate float value of MelbIT. As he would have an
opportunity to determine where the proceeds would be allocated, the Vice
Chancellor of the University wanted to generate as much money as possible
from the float, whilst the University Council favoured a lower valuation as
they wanted to minimise the reputation-risk to the University that the float
might fail to be fully subscribed. As it regulated the university sector in
Victoria and had granted $100 000 in seed funding to MelbIT to kick-start its
domain name business, the Victorian Government wanted to maximise the
float value so as to ensure the largest possible revenue boost to its most
prestigious university. The underwriters of the float, JB Were, wanted to
minimise the value of the float to the lowest level acceptable to the University
Council for two reasons: first, that would minimise the extent of their liability
as underwriters if the float failed to be fully subscribed; and second, the
opportunity to distribute shares in a hot float with a large first-day increase
in its share price to their preferred clients could be used as a basis to extract
larger commissions for the stock broker from those preferred clients in the
long term than would be earned in underwriting fees from the University of
Melbourne in the short term. The conflict between the goals of these various
principals and agents clearly had the potential to be intense.
The risk minimisation strategy approved by the University Council
contradicted the instruction that the University gave to MEIL to maximise the
value [of the float] to the ultimate shareholders.68 This instruction occurred in
the context of the Vice-Chancellor reminding the University Council that
other possible considerations, such as the potential value of MelbIT as a
research sponsor or [research and development] incubator facility for the
University, should not be pursued at the expense of maximising shareholder
value.69
Whilst the boards of MEIL and MelbIT could only speculate that the 400%+
spike in the share price of the company on its first day of trading was part of
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
68
69
Council of the University of Melbourne, Minutes of Council Meeting No 7 (4 October

1999) <http://www.unimelb.edu.au/Council/minutes/oct99.html>.
EAP 20
21
a sudden increase in interest by investors in Internet stocks,70 the Victorian

Auditor-General attributed this to the secondary market judging the value
of the shares on the basis of additional information which had not been
included in the prospectus for the company.71 That additional information
related to two contracts which the company had signed prior to the initial
allocation of shares with US-based companies for the wholesale processing of
domain name registration applications, one with Intuit and one with Verio.
MelbIT had announced the existence of those agreements and their general
terms (but not the identities of the counterparties) in the period of time after
the closing date for subscriptions and before the first day of trading in the
shares. The effect of those contracts was to raise significantly MelbITs
revenues (though with lower profit margins per registration). This meant that
whilst there would be a significant increase in revenue for the company going
forward, the increase in profits was less determinable.
During its pre-float negotiations, MEIL presented the lead broker, JB Were,
with its analysis of the Intuit and Verio contracts. This led JB Were to increase
MelbITs maximum underwritten value by $20 million (from $90 million to
$110 million) on the basis of the impact of those contracts on its discounted
cash-flow model. However, if retail investors were to apply the alternative
valuation method used by LEK Consulting (which was a multiple of forecast
revenues), those investors would increase their estimate of the worth of the
company by far more than JB Weres $20 million.
Whilst the University of Melbourne could have issued an amended
prospectus which included additional information about those two contracts,
its directors argued that this would have caused the float to be delayed from
December 1999 into early 2000 (thus requiring the preparation of revenue and
income forecasts for the year 2001, which were not required in the 1999
prospectus), and risked the departure of senior staff.72
It is debatable whether the arguments presented by MEIL to justify its failure
to notify formally potential investors (in the initial public offering of MelbIT)
of the Intuit and Verio contracts were sufficient. For example, on 11
November 1999, MEIL issued a supplementary prospectus for MelbIT, which
advised that on 8 November 1999 Robert Elz had transferred to auDA his
authority to set policies for the .com.au second-level domain (whilst retaining
control of his authority over the other .au second-level domains).73 Despite the
statements made by the directors in the supplementary prospectus that the
transition would have no material effect,74 it is arguable that such a
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
70
71
Ibid.
72
Ibid 36.
73
Ibid 43.
74
MelbourneIT, Supplementary Prospectus dated 11 November 1999, 2 (located on page

44 of MelbourneIT, Annual Report 1999 (2000) Domain Avenue
<http://www.domainavenue.com/mit_annual_report_1999.pdf> (25 May 2015)).
EAP 21
22
Vol 23(2) 2014-2015
transition would be expected to affect materially the profitability of MelbITs

.com.au domain name registration application processing business going
forward because auDA was expected to liberalise the existing policies (thus
permitting a higher-rate of registration applications) prior to introducing
competitors to MelbITs de facto monopoly on processing .com.au registration
applications.
Given that the company had signed the first of its two contracts (the one with
Intuit) on 7 November (the day prior to Robert Elzs transfer of his authority
to auDA), it is perplexing that information about the Intuit contract was not
included in the supplementary prospectus issued four days later alongside
the good news regarding the transition in the .com.au policy regulator.75
MelbIT had signed the Intuit contract the day before Robert Elzs transfer, and
regarded both events as being not market sensitive, yet felt it was only able
to notify potential investors of the latter change (which the directors believed
would not have a material effect on MelbourneIT) without causing a delay in
the float.76 MelbIT only notified investors of the existence of the Intuit and
Verio contracts on 10 December 1999 (six days after the closing date for
investors in the initial public offering and four days prior to the first day of
trading), referring to them as not sufficiently material to warrant the issue of
a supplementary prospectus. The Australian Stock Exchange was not notified
that the Intuit contract was market sensitive until 9 February 2000.77 Clearly
investors did regard the Intuit contract as being likely to materially impact
upon the value of the company heavy trading in MelbITs shares saw its
share price rise 58% in the days after that announcement (see Figure 3, above).
At the time of MelbITs float, s 1021 of the Corporations Act 1989 (Cth) set out a
list of information that had to be included in a prospectus whilst s 1022
required issuers to include all reasonable information as investors and their
professional advisers would reasonably require, and reasonably expect to find
in the prospectus.78 s 1024(1)(b)(ii) of that Act permitted the issuance of a
supplemental prospectus in the event there arose a significant new matter
that would have been required to be included in the original prospectus
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
75
Auditor-General of Victoria, above n 6, 34. The Auditor-Generals report did not

consider whether the contract should have been disclosed in the Supplementary
Prospectus MelbIT issued on 11 November 1999.
76
MelbourneIT, above n 74. MelbIT has only made available its annual reports from
2000 onwards on its website. See: <http://www.melbourneit.info/investorcentre/annual-reports>.
77
MelbourneIT, MelbourneIT Signs Exclusive Partnership with Leading E-finance

Provider,
Intuit
u/ver2/html/investrelations/company_news/newsstory.cfm?newsid=46>
(25
May 2015).
78
Corporations Act 1989 (Cth), s 1022(1). Note that the float of MelbIT occurred before
the fundraising reforms of the Corporate Law Economic Reform Program Act 1999
(Cth) came into effect and before the Corporations Act 2001 (Cth), which contains
more detailed provisions regarding the contents of prospecti under ss 710-711.
EAP 22
23
under either ss 1021 or 1022. s 996 of that Act made such it an offence for a
person to authorise or cause such an omission, unless such omission was
inadvertent.
When MelbIT took advantage of the s 1024 process to issue a supplemental
prospectus on 11 November 1999, its failure to include within that document
notification to potential investors of the signing of the Intuit contract may
have amounted to a violation of s 1022 and s 996 of the Corporations Act 1989
(Cth). So the issue is whether the omission was inadvertent and whether it
was reasonable for the directors to delay the announcement of the signing of
the Intuit contract until after the closing date for subscriptions by IPO
investors, and until February for the Verio contract. Given the pre-float
actions of the underwriter JB Were to increase its guaranteed underwriting
amount by $20 million after being presented with evidence of those two
contracts, it would be hard to argue that the board of the company were
unaware of the material and market value of these contracts. They appear to
have simply kept that information from the general public prior to the close of
the subscription date for the IPO, something which could have easily been
done by adding information about the Intuit contract to the supplemental
prospectus of 11 November 1999, or by extending the closing date for investor
subscriptions until beyond the announcement on 10 December 1999 of the
Verio contract.
4.1.2 Decision-making on the Float Method for MelbIT
The consequence for the University of Melbourne of having chosen to use an
underwriter for the float of MelbIT, rather than using a book-build method or
an auction for determining its valuation, was that it was forced to use the
valuation method selected by the underwriter rather than the valuation
method which would have had a greater probability of maximising the value
of the company to the University.79 The University of Melbourne received a
much lower amount of money from the proceeds of the float than otherwise
would have been the case. The vast majority of the profits of the float of
MelbIT went to the preferred clients and institutional clients of the
underwriter and the float manager, rather than to the University of
Melbourne (the stag profits on the sale of the 11.8 million shares traded
during the first day of the float alone were worth between $56.7 million and
$81.5 million in profits over and above the proceeds of the float)! Based
upon just the first day of trading, the use of a book-build method for pricing
the float would have more than doubled the return to the University. As
recognised by the Auditor-General of Victoria, paying closer attention to the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
79
For a study of these options, see: Ann Sherman, Global Trends in IPO Methods:
Book Building Versus Auctions with Endogenous Entry (2005) 78 Journal of
Financial Economics 615. Sherman identified the global IPO trend away from
underwriting and even book building towards public auctions, noting Googles
effective use of that process to more efficiently maximise the revenues it generated
from its float.
EAP 23
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Vol 23(2) 2014-2015
risks generated by agency costs could have delivered a much greater return
for the University of Melbourne.80
The long-term and short-term interests of stakeholders in an institution may
often be in conflict.81 If one stakeholder (the principal) is dependent upon
another stakeholder (the agent) throughout repeated rounds of transactions,
there is a risk that the agent may exploit the information asymmetry and
incomplete information problems which plague their principal so as to
maximise their own interests in the short term.
4.1.3 Stakeholders with Conflicting Incentives
First, it is arguable that Australian universities, including the University of
Melbourne, were beset by a fundamental problem both internally and in their
broader institutional environment, the solution to which was disputed by
Cain and Hewitt, and Sharrock.82 That problem is that whilst the Universities
have many good things into which they could invest resources (time, minds,
money, facilities, etc), those institutions lack the financial resources to
implement all of those good things. Consequently, senior university
administrators are placed in the unenviable position of having to select and
support a subset of alternatives into which they deploy resources, with all of
the zero-sum political game-playing that this involves. In making such
decisions, the (idealised) goal should be to generate a return on some
winners sufficient to cover those selected which do not succeed and to
expand the size of the overall pot of resources for subsequent rounds of the
game.
The second internal factor is that those senior administrators, like vicechancellors, are appointed on relatively short fixed-term contracts with
incentive bonuses for achieving certain key performance indicators. It is
arguable that this combination of factors leads to a strong incentive for vicechancellors to squeeze perceived cash cows for short-medium term gain,
rather than be steward of them in a manner which would maximise long-term
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
80
Ibid. Having identified significant defects in the operations of the University of

Melbourne which arose in the context of an innovative strategy by its management
(the first float of a company attempted by a Victorian University), as predicted by
agency theory, in an attempt to reduce agency costs, the Auditor-Generals
findings focused on increasing the oversight of University management by the
state through: 1) the involvement of the Department of Treasury and Finance in
valuation issues, alongside independent third party private sector valuers; 2) the
need to separate the role of the lead advisor and broker; and 3) the need for
stronger risk management principles within the University.
81
See generally: Claude Menard and Mary Shirley (eds.), Handbook of New
Institutional Economics, (Springer, 2005); Frank den Butter and Sjoerd ten Wolde
The Institutional Economics of Stakeholder Consultation: Reducing
Implementation Costs Through Matching Zones (2011) Tinbergen Institute
Discussion Paper No. 11-162/3, 2.
82
See: above n 4.
EAP 24
25
results (the benefits of which would flow to, and be exploitable for short term
gains by, subsequent teams of senior administrators).83
During the mid-1990s, the senior management of the University of Melbourne
was faced with competing demands for resources in excess of their capacity to
supply such resources. For example, the Vice-Chancellor at the time
supported three expensive strategies: Melbourne University Private; Bio21;
and Universitas 21 Global.84 When faced with the opportunity to generate
significant revenues in the short-term through floating MelbIT, which
revenues could be deployed to finance some of these strategies, it is perhaps
not surprising that a vice-chancellor on a limited contract would be tempted
to adopt that short-term strategy. Whilst leaving MelbIT to continue to
operate as a cash-cow within the University could potentially generate greater
overall benefits in the medium to long term, the likelihood of such a result
would be uncertain. Given the short-term nature of employment contracts for
senior university management, a long-term stewardship strategy for MelbIT
would also have been prone to the whims of future vice-chancellors who
could be tempted to sell off the company during their own tenure so as to
gain the short term benefits of the opportunity to allocate those proceeds to
their own preferred strategies. It is not surprising, then, that the vicechancellor at the time, Alan Gilbert, deployed the largest proportion of the
proceeds generated by the float of MelbIT towards a group he had
championed, the Bio21 Institute, to support their medical, agricultural, and
biotechnology research projects.
Third, a challenge for the university sector which arose out of the structure of
these governance institutions was the impact of these short term pressures on
the long term sustainability of the university system. Whilst Robert Elz was
not responsible for the systems developed within MelbIT to process high
volumes of applications for the registration of .com.au domain names, he did
work for several decades within the Department of Computer Science at that
University. Without the in-kind support Robert Elz received from that
Department to focus on his network research, deployment and management
activities for the .au, .org.au, and .com.au domains (which were generally
outside of the scope of his employment), the Internet in Australia was
unlikely to have developed in the successful manner in which it did. That the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
83
Cain and Hewitt, above n 4, 31 decried this situation and called for an increase in
government funding to solve the issue of scarcity and steward the (few) cash cows
for the long-term. When looking at the broader institutional environment, Sharrock
recognised that successive Australian governments (of both political persuasions)
face a similar problem (at a larger scale) and consequently Australian universities
have been tasked with finding their own solution (through the short-term-focused
market). Whilst Sharrock was correct to argue that in absolute terms, the funding
provided to Australian universities by federal and state governments was at an alltime high, Cain and Hewitt were also correct to point out that in both relative and
real terms, that funding has significantly declined over time. So the debate between
those authors can be distilled down to a conflict over whether universities should
bear responsibility themselves for resolving these financial tensions internally, or
should those tensions be relaxed through an expansion of state funding.
84
Ibid.
EAP 25
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Vol 23(2) 2014-2015
Department of Computer Science received not a single penny of the proceeds

from the sale of MelbIT (at the express order of the Vice-Chancellor85) is a
significant disincentive for that Department, or others like it, to invest their
scarce resources to support long-term basic research, proselytising, and/or
skills development amongst their staff to lay the groundwork for the next
generation of technologies, akin to the Internet, and the next generation of
businesses like MelbIT.
This prohibition on faculties or departments benefiting directly from the
proceeds of the commercialisation of technology developed by their staff was
clearly not the case for all faculties within the University of Melbourne as the
Faculty of Medicine was receiving $750 000 per year in royalties from
Cochlear prior to the float of MelbIT. Perhaps it was a case of the Department
of Computer Science missing an opportunity, or choosing not to exploit its
employees outside work for Departmental gain as a matter of principle? The
consequence, however, was a significant disincentive to champions of longterm success in computer science (or, more accurately, the transfer of that
incentive to the bio-medical researchers in the Bio21 project whose research
and opportunities were turbo-charged by the proceeds of MelbIT).
Fourth, it is arguable that both the broader institutional environment and the
opportunities presented by the high agency costs described above created
incentives for the senior management of the University of Melbourne to
experiment with innovative strategies, such as the first public float of a
company based upon university research in Victoria. The existing constraints
on public sector benefits from options and share allocations had not been
defined by the Victorian government in its code of practice, thus providing
incentive to the management and staff of MEIL to initiate the proposal to float
the company (after their attempt at a management buyout was rejected by the
University).
It is unclear whether the members of the University Council who were listed
on JB Weres preferred private clients list were similarly motivated, but they
do not appear to have taken active steps to disclose the existence of their
conflict of interest to the University Council when it considered the proposal
to float MelbIT through JB Were. The Vice Chancellors desire to stimulate
bio-medical research at the University of Melbourne through a public-private
partnership under the Bio21 initiative was constrained by a lack of funds until
the opportunity to generate a large short-term return through the float MelbIT
presented itself.
The more interesting question is whether these factors also influenced the
choice of the University Council to commercialise MelbIT through a fully
underwritten float as opposed to a book-build. Employing the benefits of
hindsight, it appears that Australian investors are quite willing to invest in
companies floated to commercialise university-based research, even if those
companies are at quite an immature stage in their businesses (or having, for
example, large accumulated losses and negative operating cash-flows).
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
85
EAP 26
27
Subsequent floats of several cash-flow-negative research companies (e.g.

Regenera, Impedimed and QrxPharma) by Australian universities have been
fully subscribed (some have even been over-subscribed).86 Thus, the need for
fully-underwritten floats has not been demonstrated in itself in practice, and
the concern of the University Council that the float of MelbIT may not have
received sufficient demand from investors would appear to have been
unsupported by the evidence (despite the volatility which existed in the share
market at the time). Of course, the University Council would not have known
this ex ante.
The benefit of a fully underwritten fixed price per share float was that it
guaranteed benefits for both the management and staff of MelbIT (financial)
and for the senior management of the University (i.e. a guaranteed level of
funding which could be re-deployed to Bio21, inter alia). Unfortunately, the
opportunity cost of those benefits was the chance for the University to receive
the full value which the Australian public was willing to pay for the company
(whether rationally or otherwise). By selecting a fully-underwritten float as a
strategy, the University was precluded from taking advantage of the
opportunities presented by MelbITs growing its revenues through signing
overseas contracts. Those advantages could have been pressed by notifying
potential investors of the contract MelbIT had signed with Intuit via the
supplementary prospectus for MelbIT which was issued by the University,
and about the Verio contract by extending the closing date for subscriptions.
The increased revenues (though not necessarily increased profits) available to
MelbIT from those contracts would have significantly increased its perceived
capital value amongst those potential Australian investors who valued
technology companies on the basis of a multiple of their projected revenues
(as opposed to a cash-flow or profit basis), and could have increased
consequently the price per share bids which would have been received
through a book-build float.
From an economic perspective, it is arguable that the University of Melbourne
should have floated MelbIT through a book-build rather than a fully underwritten float. However, the confluence of factors arising out of the
Universitys higher-level governance institutions and the agency costs
imposed by inadequate supervision of its senior management by the Victorian
State Government, permitted significant value to be transferred from the
University to institutional investors and the preferred private clients of the
brokers JB Were and Commsec through the initial public offering of the
shares in MelbIT at below the price which would otherwise have been paid by
Australian investors at the time. Much of those stag profits could (and
arguably should) have flowed to the University of Melbourne.
As underwriters and IPO marketing advisors engage in multiple rounds of
business with institutional investors and preferred clients each year, whilst a
university engages so rarely with those investors that each interaction might
almost be considered a separate event, the incentives for the two parties differ
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
86
Investmart, Float Details for Listed Companies <http://www.investmart.com.au> (25

May 2015).
EAP 27
28
Vol 23(2) 2014-2015
significantly, posing substantial risks for a university which fails to

appropriately monitor and constrain its underwriters and IPO marketing
advisors. The underwriters and IPO marketing advisors have an incentive to
under-state the market value of a universitys research so as to deliver
repeatedly stag profits to their institutional investors and preferred clients
who will then continue to use those advisors on an ongoing basis. On the
other hand, a university wants to maximise the price it receives from all
investors for the research it commercialises through an initial public offering.
The book-build method offers a university a means of determining the fair
value of its research without the risk of opportunistic behaviour by its
advisors. Arguably, if the float of a business similar to MelbIT were to occur
in the future (i.e. were a university seeking to commercialise its research with
the goal of cashing out money from an established profitable business), a
book-build method would be a more appropriate method for determining the
value of the business than a fully-underwritten float.
Conclusion
This article has presented a more detailed case study of the foundation, early
operations, and float by the University of Melbourne of MelbIT than has preexisting literature. It has reconciled the competing perspectives of Sharrock,
and Cain and Hewitt over the rationale for the float of the company through
an analysis of the impact of the broader institutional environment on the
senior management of the University of Melbourne, and has examined the
consequences of the agency costs which arose due to inadequate supervision
by the Victorian Government of that senior management.
Deficiencies in the pre-float disclosure of information to investors have been
identified, along with the significant opportunity for financial gains which
were missed by the University of Melbourne as a consequence of those
deficiencies. A greater awareness by university senior management of their
risks of liability for omissions within prospectus documents under s 1022 of
the then Corporations Law (now ss 710-711 of the Corporations Act 2001 (Cth))
may be more likely to encourage more timely disclosure of transactions,
which may have a substantial impact upon the valuation of a company being
floated by a university, especially if the book-build method is used in the
float.
Contrary to Sharrocks position, it is arguable that there is merit in the
conclusion drawn by the Auditor-General of Victoria that when considering
future commercialisations of university research through floating a company
on the stock exchange, those universities should consider using a book-build
or an auction process rather than a fully-underwritten float, especially in
situations where the entity being commercialised has already reached the
stage of being operationally cash-flow-positive. This must be the case, even if
such a process will not necessarily guarantee a successful float or a successful
company the commercialisation of university research is inherently risky,
especially if the company is formed when that research is at too early a stage
in its development.
EAP 28
29
However, such advice is unlikely to receive significant support within the

senior management of Australian universities if they continue to be subjected
to an institutional environment which places upon them extreme pressure to
achieve short-term financial returns which can be re-deployed into other
areas of those universities. The consequence of such a strategy, however, is
the risk of undermining the long-term success of those universities due, as has
been discussed, to the short-term interests of the contracted management of
the universities, and the disincentive this provides to the tenured faculties
and researchers (particularly those outside the bio-medical and
pharmaceutical disciplines) to develop commercially viable research without
sufficient reward.
EAP 29
AMANDA SCARDAMAGLIA*
Abstract
This article considers the previously unexplored trade mark related issues arising
from 3D printing. It draws on the existing futures discourse to forecast the possible
futures for 3D print and trade mark law, with an especial focus on the various
flashpoints at which 3D printing and trade mark law may collide, in light of the
projected and expected incumbent response to this new and emerging technology.
Introduction
You never change things by fighting the existing reality. To change
something, build a new model that makes the existing model obsolete.
Buckminster Fuller (1895 1983, undated).
Much of the extant literature on three dimensional (3D) printing has been
both enthusiastic and unadulterated, generating predictions of A Third
Industrial Revolution.1 While this has sparked several optimistic
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
*"" Senior" Lecturer," Swinburne" Law" School." " The" author" wishes" to" thank" the"
anonymous"referees"for"their"thoughtful"and"considered"feedback."Thanks"to"Dan"
Hunter,"Dean"Lusher"and"Angela"Daly"for"their"comments"on"an"earlier"draft"and"
to"the"participants"at"the"Oxford/UNSW"IP"Roundtable"WIP"event.""This"research"
was" supported" by" a" Swinburne" Centre" for" Transformative" Innovation" Research"
Fellowship."
1
"" The"Economist,"A+Third+Industrial+Revolution"(21"April"2012)"
<http://www.economist.com/node/21552901>"(29"May"2015)."Further"see:"N"
Hopkinson"and"R"J"M"Hague"(eds),"Rapid+Manufacturing:+An+Industrial+Revolution+for+
the+Digital+Age"(John"Wiley"&"Sons,"2005);"New"Scientist,"3D"Printing:"Second"
Industrial"Revolution"is"Under"Way"on"New+Scientist+(Special"Report)"(1"August"
2011)+<http://www.newscientist.com/special/3D^printing>"(29"May"2015);"
Christopher"Barnatt,"3D+Printing:+The+Next+Industrial+Revolution"(7"November"2014)"
ExplainingTheFuture.com"<http://www.explainingthefuture.com/3dp_book.html>"
(29"May"2015)."Another"theme"that"dominates"the"literature"is"that"of"unknown"
potential,"with"several"possible"futures"for"3D"printing"forecast."On"this"see:"
Thomas"Birtchnell"and"John"Urry,"3D,"SF"and"the"Future"(2013)"50"Futures+25,"
31
conversations about the subversion of traditional manufacturing,2 and the

dismantling of the distinction between the amateur and the entrepreneur,3 it
has also sparked some more measured discussions about the legal and
regulatory aspects of 3D printing.
Intellectual property law has been central to this commentary. On this, the
usual intellectual property suspects have featured prominently, with much of
what has been written about the intersection between 3D printing and
intellectual property dominated by patents, copyright law and designs.4 This
however has been at the expense of any detailed consideration of the
application of trade mark laws and laws protecting commercial reputation
more generally, which are just as relevant to the debate.5 This article fills the
existing gap by exploring the legal issues that may arise as a result of 3D
printing, with a specific focus on the application of trade mark law and its
ancillary protection in Australia. In doing so, it draws upon the existing
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
where"the"authors"draw"on"science"fiction"in"visioning"[sic]"the"potential"economic"
and"social"consequences"of"3D"printing."
2
3
4
"" See" for" example:" Tim" Mazzarol," 3D+ Printing:+ The+ Game+ Changer+ for+ Future+
Manufacturing+ (10" July" 2012)" The" Conversation" <http://theconversation.com/3d^
printing^the^game^changer^for^future^manufacturing^8151>"(29"May"2015).""
"" Chris"Anderson,"Makers:+The+New+Industrial+Revolution+(Crown"Business,"2012)"18."
"" As"to"patents"see"for"example:"Daniel"Harris"Brean,"Patents"to"Combat"
Infringement"via"3D"Printing:"Its"No"Use"(2013)"23(3)"Fordham+Intellectual+
Property,+Media+&+Entertainment+Law+Journal"771."As"to"copyright"see"for"example:"B"
Rideout,"Printing"the"Impossible"Triangle:"The"Copyright"Implications"of"Three^
Dimensional"Printing"(2011)"5(1)"The+Journal+of+Business,+Entrepreneurship+&+the+Law"
161;"Michael"Weinberg,"Whats+the+Deal+with+Copyright+and+3D+Printing?"(Public"
Knowledge"Whitepaper,"2013);"Lucas"Osborn,"Of"PHDs,"Pirates,"and"the"Public:"
Three^Dimensional"Printing"Technology"and"the"Arts"(2014)"1"Texas+Arts+and+Media+
Law+Review+811."On"design"law"see:"Tyrone"Berger,"The+3D+Revolution+is+Upon+Us++
And+Designers+Need+Better+Protection"(27"November"2014)"The"Conversation+
<http://theconversation.com/the^3d^revolutionîsûponûsând^designers^need^
better^protection^34051>"(29"May"2015)."For"a"more"general"enquiry"into"the"
intellectual"property"implications"of"3D"printing"see:"Dinusha"Mendis"and"Davide"
Secchi,"A+Legal+and+Empirical+Study+of+3D+Printing+Online+Platforms+and+an+Analysis+of+
User+Behaviour+(UK"Intellectual"Property"Office,"2015)."
"" While" there" are" several" works" considering" the" intellectual" property" implications"
flowing"from"3D"printing"at"large"as"noted"above"n"4,"the"attention"afforded"to"the"
trade"mark"related"aspects"of"the"debate"are"somewhat"fleeting."Moreover,"they"are"
distinctly" American" and" British" in" flavour." See:" Lucas" Osborn," Regulating" Three^
Dimensional" Printing:" The" Converging" Worlds" of" Bits" and" Atoms" (2014)" 51+ San+
Diego+ Law+ Review+ 553;" Simon" Bradshaw," Adrian" Bowyer" and" Patrick" Haufe," The"
Intellectual"Property"Implications"of"Low^Cost"3D"Printing"(2010)"7"SCRIPTed+5."""
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Vol 23(2) 2014-2015
futures discourse6 but from a legal perspective, forecasting the possible

futures for 3D print and trade mark law.
It begins by contextualising the debate with a short history of 3D printing in
order to lead into the central focus of the article that is, the relationship
between 3D printing and trade mark law. Particular attention is then paid to
the various flashpoints at which 3D printing and trade mark law may collide
in light of the projected and expected incumbent response to the trade mark
related issues that 3D printing exposes. The normative legal questions that
will be raised in the process will also be canvassed.
At this point, it must be said that this article does not set out to present an
exhaustive account of all of the trade mark related issues arising from the use
of 3D print technology. Rather, it modestly attempts to draw attention to
some of the most obvious futures for 3D print and trade mark law at a general
level not all of which are new as 3D print technology will likely give rise
to modern manifestations of familiar trade mark controversies.7
With this in mind, ultimately, it is argued that a typically reactive and strictly
legal response is likely to be expensive and ineffective for trade mark owners
in preventing the unauthorised reproduction of their trade marked goods. It
may also simply delay the inevitable. And if 3D printing does become our
reality, a reality where consumers become makers, then trade mark owners
will eventually have little choice but to embrace the new model of doing
things. In the meantime however, we are likely to see incumbents try and use
the intellectual property system, and more particularly for the purposes of
this article, trade mark law, as a control mechanism to guard against the rise
of 3D printing where that may encroach on their ability to control their brand
and their market.
3D Printing Primer
At its most basic level, 3D printing allows users to turn a blueprint into a
physical object.8 Also known as additive manufacturing or rapid
prototyping, 3D printing differs from traditional subtractive manufacturing
processes, which usually requires taking a block of material, say plastic, and
cutting or taking away from that block until a 3D object is formed. Instead, 3D
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
6
7
"" See"especially"Birtchnell"and"Urry"above"n"1.""
"" As" a" consequence," this" article" does" not" engage" in" a" detailed" assessment" of" the"
jurisdictional"issues"that"3D"printing"presents"or"the"issues"around"secondary"trade"
mark"liability.""
"" Michael" Weinberg," It+ Will+ be+ Awesome+ if+ They+ Dont+ Screw+ it+ Up:+ 3D+ Printing,+
Intellectual+ Property,+ and+ the+ Fight+ Over+ the+ Next+ Great+ Disruptive+ Technology" (Public"
Knowledge"Whitepaper,"2012)"2."
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33
printing gradually builds up a 3D object, layer by layer, adding filament

material to do so.
In terms of the 3D printing process, the first step begins with the design of a
blueprint, usually created with a computer aided design (CAD) programme
such as AutoCAD or Google Sketchup. Alternatively, a 3D scanner could be
used to create a CAD file by scanning an existing object. The CAD file is
versatile and can be shared, copied and modified in the same way as other
computer files. Once generated, the file can be used as the platform from
which to direct the 3D printer as to how to create the object that is the subject
of the file, layer by layer using an extruder (fused-filament), chemical agent
(binder) or a laser (sintering/melting).9
While many, especially media commentators, are attracted (or distracted) into
drawing parallels between new and old technologies, when it comes to
printing of 3D objects, the relationship between traditional two dimensional
(2D) printers or photocopies and 3D printers is largely superficial.10 Indeed it
is easier to describe the disanalogies than the analogies. The first and most
obvious point of difference relates to the different printing processes. 2D
printers print in two directions, being left to right, whereas 3D printers also
move up and down so as to stack layer upon layer until a 3D object is formed.
In terms of output, 2D printers use ink while 3D printers are capable of
expelling all manner of materials or filament, including plastic, metal, ceramic
and cement. 3D printers are also capable of extruding what some might
consider exotic materials or at least exotic when compared with traditional or
primary manufacturing processes. For instance, the popular press has become
fixated on the potential to print edible 3D objects especially chocolate,11 while
bio-fabrication and the possibility of using human cells to print living tissues
has also naturally captured the imagination of media outlets worldwide.12
Given this, the range of objects capable of being 3D printed is seemingly
limitless. And this is where the remarkable potential of this technology lies
in the capacity to print both simple and extraordinarily complex objects, some
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
9
"" Birtchnell"and"Urry,"above"n"1,"28."
10
"" Osborn,"Of"PHDs,"Pirates,"and"the"Public,"above"n"4,"813."
11
"" See"for"example:"Oliver"Wainwright,"3D^Print"Your"Face"in"Chocolate"for"that"
Special"Valentines"Day"Gift"The+Guardian+(online),"26"January"2013"
<http://www.theguardian.com/artanddesign/architecture^design^
blog/2013/jan/25/3d^print^chocolate^face^valentines^day>"(29"May"2015);"Pagen"
Kennedy,"Who"Made"that"Hershey"Bar,"The+New+York+Times+Magazine+(online),"11"
January"2013"http://www.nytimes.com/2013/01/13/magazine/who^made^that^
hershey^bar.html?_r=0"(29"May"2015)."
12
" The"Economist,"Biofabrication:+Fit+to+Print+(6"April"2013)"
<http://www.economist.com/news/scienceând^technology/21575745^new^ways^
make^living^tissueârtificially^fit^print>"(29"May"2015)."
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Vol 23(2) 2014-2015
of which traditional manufacturing techniques are not well suited, or even

capable, particularly for bespoke products.
This wide-ranging utility is evident in the recent history of commercial 3D
printing.13 The potential of 3D printing is not limited to its commercial
application though, as demonstrated by the RepRap movement, which at its
core sought to move 3D printing outside the realms of the factory and into the
hands of the individual through the creation of a 3D printer that is selfreplicating and capable of printing all of its own parts.14 The maker
movement has gained significant traction over the last decade,15 with do-ityourself (DIY) printing becoming more commonplace, especially as the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
13
"" To"date,"3D"printing"has"been"used"to"produce"fully"functional"prosthetic"limbs:"
Ashlee"Vance,"3^D"Printing"Spurs"a"Manufacturing"Revolution,"The+New+York+
Times+(online),"13"September"2010"
<http://www.nytimes.com/2010/09/14/technology/14print.html?_r=0>"(29"May"
2015)."It"has"also"been"used"by"those"in"the"fashion"industry:"Rachel"Hennessey,"
3DZPrinting+Hits+the+Fashion+World+(7"August"2013)"Forbes"
<http://www.forbes.com/sites/rachelhennessey/2013/08/07/3^d^printed^clothes^
could^be^the^next^big^thing^to^hit^fashion/>"(29"May"2015);"Whitney"Hipolite,"3D+
Print+Fashion++Russian+Runway+Show+Features+some+of+the+Worlds+Top+3D+Printed+
Fashion"(27"August"2014)"3DPrint.com"<http://3dprint.com/13120/3d^print^fashion^
show/>"(29"May"2015)."Controversially,"the"technology"has"also"been"used"to"make"
3D^printed"guns:"Alexis"Kleinman,"The+First+3DZPrinted+Gun+has+been+Fired"(6"May"
2013)"Huffington"Post"http://www.huffingtonpost.com/2013/05/06/3d^printed^gun^
fired_n_3222669.html>"(29"May"2015);"Powerful"and"Here"to"Stay:"US"Firm"Slams"
First"3D^printed"Metal"Gun,"The+Sydney+Morning+Herald+(online),"9"December"2013"
<http://www.smh.com.au/digital^life/digital^life^news/powerfulând^here^to^stay^
us^firm^claims^first^3dprinted^metal^gun^20131209^2xava.html>"(29"May"2015);"
Andy"Greenberg,"Have+3ZD+Printed+Guns+Evolved+into+Serious+Weapons+in+Just+One+
Year"(15"May"2014)"Wired+"<http://www.wired.com/2014/05/3d^printed^guns/>"(29"
May"2015)."3D"printing"technology"is"also"being"used"to"convert"digital"or"liquid"
data"about"an"individuals"body"into"tangible"3D"forms."On"this"point"see"for"
example:"Deborah"Lupton,+Fabricated"Data"Bodies:"Reflections"on"3D"Printed"
Digital"Body"Objects"in"Medical"and"Health"Domains"(2015)"13"Social+Theory+and+
Health+99."
14
" See" R" Jones" et" al," RepRap" " The" Replicating" Rapid" Prototyper+ (2011)" 29" Robotica"
177."
15
"" For"more"on"the"maker"movement"see"Mark"Hatch,"The+Maker+Movement+Manifesto:+
Rules+ for+ Innovation+ in+ the+ New+ World+ of+ Crafters,+ Hackers,+ and+ Tinkerers+ (McGraw^
Hill,"2013);"Cory"Doctorow,"Makers+(Tom"Doherty"Associates,"2010)."
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equipment becomes more affordable and the print quality increases,

coinciding with the expiry of several early key 3D print patents.16
Clearly however there is still a way to go, as most at home printers are not
overly sophisticated and there are still issues around quality of output. Even
so, it is thought that over time these chinks will be ironed out and the
continued evolution of 3D printing will push us closer towards a world in
which people do not buy consumer goods any more but instead download
them from the web and print them themselves.17 The proliferation of CAD
files on file sharing sites such as Thingiverse make this prospect all the more
real,18 as does the emergence of 3D print shops, which offer 3D printing
services to the everyday person.19
Protecting Trade Marks, Trade Dress and Commercial

Reputation
While traditionally trade marks comprised of distinctive devices or graphical

signs, and later brand names and words,20 in recent times, it is understood
that almost anything at all that is capable of carrying meaning can function
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
16
"" See" for" example" United" States" Patent" No" 4,575,330" (filed" 8" August" 1984);" United"
States" Patent" No" 4,863,538" (filed" 17" October" 1986);" United" States" Patent" No"
5,121,329" (filed" 30" October" 1989)" and" United" States" Patent" No" 5,204,055" (filed" 8"
December"1989).""
17
"" See"Bradshaw,"Bowyer"and"Haufe,"above"n"5,"11."
18
"" Thingiverse"is"an"online"design"file"repository,"which"presents"itself"as"a"
community"for"discovering,"making,"and"sharing"3D"printable"things."See:"
<http://www.thingiverse.com/>"(29"May"2015)."For"more"on"the"history"of"
Thingiverse"see"Jarkko"Moilanen"et"al,"Cultures"of"Sharing"in"3D"Printing:"What"
can"we"Learn"from"the"Licence"Choices"of"Thingiverse"Users"(2015)"6"Journal+of+Peer+
Production"<http://peerproduction.net/issues/issue^6^disruptionând^the^law/peer^
reviewedârticles/culturesôf^sharingîn^thingiverse^what^can^we^learn^from^the^
licence^choicesôf^thingiverseûsers/>"(29"May"2015)."Other"design"file"repositories"
include"Shapeways"<http://www.shapeways.com>"(29"May"2015),"Cuboyo"
<http:www.cuboyo.com>"(29"May"2015),"MyMiniFactory"
http://www.myminifactory.com"(29"May"2015),"Repables"
<htpp:www.repables.com/>"(29"May"2015),"Fabster"<htppwww.fabster.com/>"(29"
May"2015)"and"Yeggi"<http://www.yeggi.com>"(29"May"2015)."
19
"" In"Australia"see:"3D"Print"Express"<http://www.3dpe.com.au/>"(29"May"2015).""
20
"" For"more"on"the"evolution"of"trade"marks"see"Amanda"Scardamaglia,"The"Colonial"
Trade"Mark"Regime:"Opening"Up"the"Australian"Archives"on"Colonial"Trade"Mark"
Registrations"(2013)"23"Australian+Intellectual+Property+Journal+222,"242246."
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Vol 23(2) 2014-2015
as a trade mark.21 As such, the types of signs or subject matter capable of

protection have been broadened over time to include colours, scents, sounds
and even the dcor and environment in which goods and services are sold.22
The definition of a trade mark has also been extended to encompass shapes.
In most jurisdictions, or at least those that are signatories to the Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS),23 shapes are
subject matter capable of registration as a trade mark. This is because TRIPS
sets out a broad definition of what constitutes a trade mark so as to include
any sign capable of distinguishing goods or services.24 So, in addition to all of
the more conventional signs that are used as trade marks such as logos and
brand names, 2D and 3D shapes are also registrable. When this fact is
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
21
"" Qualitex+Co+v+Jacobson+Products+Co,"514"US"159,"162"(1995)."
22""
See"for"example"Fuddrucker^s+Inc+v+Doc^s+B.R.+Others+Inc,"826"F"2d"837"(9th"Cir,"1987)"
where"the"Court"found"that"a"restaurants"dcor,"menu,"layout"and"style"of"service"
were"protectable"trade"dress.""See"also"Two+Pesos+v+Taco+Cabana,"505"US"763"(1992)."
More"recently,"the"Court"of"Justice"of"the"European"Union"(ECJ)"has"confirmed"that"
Apple"Inc"is"able"to"register"the"layout"of"its"store"as"a"trade"mark."See"Apple+Inc+v+
Deutsches+ PatentZ+ und+ Markenamt+ (German+ Patent+ and+ Trade+ Mark+ Office)"(Court" of"
Justice" of" the" European" Union," C^421/13," 10" July" 2014)." The" same" mark" was"
approved" by" the" United" States" Patent" and" Trademark" Office" (USPTO)" on" 22"
January"2013."In"Australia,"an"application"for"the"same"mark"was"lodged"by"Apple"
Inc" but" was" not" registered." See" Australian" Trade" Mark" Application" Number"
1401839"and"1041840."
23
"" The"Agreement+on+TradeZRelated+Aspects+ of+Intellectual+Property+Rights+1994"(TRIPS)"

sets"out"the"minimum"standards"of"protection"required"for"each"of"the"key"areas"of"
intellectual" property" law," and" which" must" be" adhered" to" by" each" Member" State.""
Critically," TRIPS" is" a" minimum" standards" agreement," such" that" Members" are"
permitted" to" provide" more" extensive" intellectual" property" protection," but" face"
potential"sanction"if"they"fall"below"these"threshold"requirements.""With"respect"to"
trade"marks,"the"key"TRIPS"provisions"are"enshrined"in"pt"2."
24
"" Article" 15.1" provides" that" all" signs" that" are" distinctive," visually" perceptible" (or"
capable"of"graphic"presentation)"and"not"inconsistent"with"the"Paris+Convention+for+
the+ Protection+ of+ Industrial+ Property," signed" 20" March" 1883" (entered" into" force" 20"
March"1883)"must"be"eligible"for"registration."Such"signs"include"particular"words"
including"personal"names,"letters,"numerals,"figurative"elements"and"combinations"
of"colours"as"well"as"any"combination"of"such"signs."While"the"nonêxhaustive"list"
of"subject"matter"set"out"in"art"15.1"does"not"explicitly"refer"to"shapes,"shape"marks"
nevertheless"are"accepted"to"fall"within"this"definition."
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considered in the context of 3D printing, it is clear that trade mark law is ripe
for disruption by 3D printing.25 It is also ripe with opportunities.
In Australia, shapes including 3D shapes are registrable pursuant to the
expansive definition of a sign as contained in the prevailing Trade Marks Act
1995 (Cth), which includes any letter, word, name, signature, numeral,
device, brand, heading, label, ticket, aspect of packaging, shape, colour, sound
or scent.26 Thus, as well as making explicit provision for the registration of
colours, sounds and scents for the first time in Australia, the Trade Marks Act
1995 (Cth) which replaced the 1955 Act, also expanded registrable subject
matter to expressly include aspects of packaging and shapes. The only
qualifier for registration is the threshold requirement that the sign must
function as an indicator of source or badge of origin such that it is used to
distinguish one persons goods and services from others.27
There were several motivations for the legislative change in Australia. Of
primary significance was the need to ensure Australian trade mark legislation
was consistent with TRIPS. Lawmakers were also likely driven by the fact that
the absence of any specific statutory protection for 3D marks in the 1955 Act
put Australia at odds with other jurisdictions such as the United States28 but
particularly the United Kingdom, which had acted to enshrine TRIPS into its
trade mark law in 1994.29
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
25
"" Devan"R"Desai"and"Gerard"N"Magliocca,"Patents,"Meet"Napster:"3D"Printing"and"
the"Digitization"of"Things,"(2013)"102"The+Georgetown+Law+Journal+1691,"1709."
26
"" Trade+Marks+Act+1995"(Cth)"s"6."""
27
"" Ibid"s"17."
28
"" In"the"United"States,"the"Lanham+Act"15"USC""1052"(1946)"explicitly"provides"that"a"
sign"shall"not"be"refused"registration"purely"on"account"of"its"nature."Accordingly,"
when" it" comes" to" assessing" the" subject" matter" of" trade" mark" protection" in" the"
United" States," it" is" the" source" distinguishing" ability" of" a" mark," not" its" ontological"
status"that"matters.""
29
"" In" the" United" Kingdom," and" consistent" with" art" 2" of" the" European+ Trade+ Mark+
Directive+ (the" Directive)," a" trade" mark" is" defined" under" s" 1(1)" of" the" Trade+ Marks+
Act+ 1994+ (UK)+ c" 26" as" consisting" of" any" sign" capable" of" being" represented"
graphically" particularly" words," including" personal" names," designs," letters,"
numerals," the" shape" of" goods" or" of" their" packaging," provided" such" signs" are"
capable" of" distinguishing" the" goods" of" one" undertaking" from" those" of" other"
undertakings." Pursuant" to" this" definition" and" the" principles" set" out" in" Koninklijke+
Philips+ Electronics+ NV+ v+ Remington+ Consumer+ Products+ Ltd,+ Case" C^299/99" [2002]" 2"
Common+Market+Law+Reports"52,"a"sign"(including"shapes)"cannot"be"precluded"from"
registration" because" it" is" prima" facie" incapable" of" acting" as" a" badge" of" origin."
Instead,"any"determination"as"to"registration"is"contingent"upon"the"assessment"of"
!
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Vol 23(2) 2014-2015
The expansion of trade mark law in Australia in this regard sparked a flurry
of dialog, centred mostly on the lingering ambiguities surrounding the
registration of shapes as trade marks.30 Central to this dialog is the question of
functionality and the registration of monopolised or functional shapes which
may have anticompetitive effects. Several jurisdictions have addressed this
concern and made provision to specifically exclude from registration what are
deemed to be inappropriate applications.
The European Trade Mark Directive (the Directive), and consequently British
trade mark law for example, imposes registration restrictions for signs
consisting of shapes that result from the nature of the goods themselves, are
necessary to obtain a technical result or give substantial value to the goods.31
This prohibition is justified on the basis of the public interest, in ensuring that
natural, functional or ornamental shapes may be freely used by all.32 There is
an equivalent prohibition under Singaporean trade mark law.33
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
distinctiveness,"whether"that"be"ab"initio"or"through"the"use"which"is"made"of"the"
sign.""
30
"" In" Australia" there" is" a" long" list" of" academic" papers" dissecting" the" registration" of"
shapes"as"trade"marks"in"Australia."See"for"example:"Julia"Baird,"The"Registrability"
of" Functional" Shape" Marks" (2002)" 13" Australian+ Intellectual+ Property+ Journal+ 218;"
Patricia"Loughlan,"The"Concept"of"Sign"in"Australian"Trade"Mark"Law"(2005)"16"
Australian+ Intellectual+ Property+ Journal+95;+ Jani" McCutcheon," Monopolised" Product"
Shapes"and"Factual"Distinctiveness"under"s"41(6)"of"the"Trade+Marks+Act+1995+(Cth)"
(2004)" 15" Australian+ Intellectual+ Property+ Journal+ 18;" Mark" Davison," Shape" Trade"
Marks:" The" Role" and" Relevance" of" Functionality" and" Aesthetics" in" Determining"
their" Registrability" (2004)" 15" Australian+ Intellectual+ Property+ Journal" 106." Also" see"
Megan" Richardson," Australian" Intellectual" Property" Law:" The" Form/Function"
Dilemma""A"Case"Study"at"the"Boundaries"of"Trade"Mark"and"Design"Law"(2000)"
European+ Intellectual+ Property+ Review+ 314;" Amanda" Scardamaglia," Protecting"
Product"Shapes"and"Features:"Beyond"Design"and"Trade"Marks"Australia"(2012)"7"
Journal+of+Intellectual+Property+Law+and+Practice"159.""
31
"" European+ Trade+ Mark+ Directive," arts" 3(1)(e)(i)(iii)." Accordingly," Swiss" chocolate"
giant" Nestl" was" unsuccessful" in" registering" the" 3D" shape" of" its" chocolate" wafer"
product," the" KIT" KAT," because" the" mark" was" found" to" have" consisted" of" a"
functional" shape" (and" was" also" devoid" of" distinctiveness)." See" United" Kingdom"
Trade" Mark" Application" Number" 2552692," as" opposed" by" Cadbury" UK" Ltd" (20"
June"2013)."
32
"" A"Folliard^Mongurial,"Distinctive"Character"Acquired"Through"Use:"The"Law"and"
The" Case" Law" in" J" Phillips" and" I" Simon" (eds)" Trade+ Mark+ Use+ (Oxford" University"
Press,"2005)"[409]."
33
"" Trade+Marks+Act"(Singapore,"cap"332,"2005"rev"ed)"s"7(3)."
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In the United States, the restriction on the registration of 3D shapes is found

in the functionality doctrine, which provides that the shape subject of
protection must not be essential to the use or purpose of the product or
service and not affect the cost or quality of the product or service.34 More
specifically [t]he functionality doctrine prevents trade mark law, which seeks
to promote competition by protecting a firms reputation, from instead
inhibiting legitimate competition by allowing a producer to control a useful
product feature.35 Critically, the functionality doctrine operates to preclude
protection even when the evidence establishes that consumers have come to
associate a functional product feature with a single source.36
The position in Australia by contrast, is far less restrictive. This is due to the
fact there is no functionality doctrine under Australian trade mark law
preventing the registration of functional shapes.37 Nor is there any explicit
legislative provision or ground of refusal relating to functional shape trade
marks, although such a limitation was included in the Trade Marks Act 1994
(Cth), an Act which never came into operation.38 Thus, the registration of
shape marks in Australia is most likely to hinge upon section 41 of the Act
and the marks capacity to distinguish, whether that is inherently or factually
on account of prior or factual use.39
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
34
"" Qualitex+Co+v+Jacobson+Prods+Co,"514"US"159,"163164"(1995)."This"is"confirmed"at""
1202.02(a)"of"the"Trademark+Manual+of+Examining+Procedure"(April"2014"ed)"(TMEP).""
The" statutory" basis" to" restrict" registration" on" the" grounds" of" functionality" can" be"
found"in""2"Lanham+Act"15"USC""1052(e)(5);""2"Lanham+Act"15"USC""1052(f);""23"
Lanham+Act"15"USC""1091(c);""14"Lanham+Act"15"USC""1064(3)"and"33"Lanham+Act"
15"USC.""1115(b)(8)."
35
"" Qualitex+Co+v+Jacobson+Prods+Co,"514"US"159,"164165"(1995)."
36
"" See"TMEP""1202.02(a)(ii)."
37
"" This"may"explain"why"the"3D"shape"for"the"chocolate"wafer"product"the"KIT"KAT"
as" discussed" in" above" n" 31," was" not" registered" in" the" United" Kingdom," but" is" a"
registered" trade" mark" in" Australia." " See" Australian" Trade" Mark" Application"
Number"849093.""
38
"" See" for" example" s" 39" of" the" Trade+ Marks+ Act+ 1994+ (Cth)," now" repealed." The" Trade+
Marks+ Act+ 1994+ (Cth)" was" hastily" enacted" by" Parliament" to" meet" a" deadline"
imposed"pursuant"to"Australias"obligations"under"TRIPS,"but"it"never"commenced"
and"was"eventually"replaced"by"the"Trade+Marks+Act+1995+(Cth)."
39
"" See"for"example:"Chocolaterie+Guylian+N.V.+v+Registrar+of+Trade+Marks"(2009)"180"FCR"
60," where" an" application" for" the" registration" of" a" seahorse" shaped" chocolate" was"
rejected"because"the"shape"was"not"sufficiently"distinctive"to"qualify"for"registration"
under" what" was" then" s" 41(1)" of" the" Act" and" would" not" have" had" the" capacity" to"
distinguish"under"what"was"then"s"41(5)"of"the"Act.""
EAP 10
40
Vol 23(2) 2014-2015
It should be said that the jurisprudence on this point does indicate a

reluctance to permit the registration of shapes in Australia where doing so
would mean that the proprietor of the mark will be in a better position than a
patentee or the proprietor of a registered design, each of whom has a
protection limited to the span of a relatively short time.40 Even so, the judicial
statements made on the issue are purely obiter,41 and as the issue of
functionality is subsumed into discussions of distinctiveness under Australian
trade mark legislation, it is still possible that functional shapes could be
registrable if they come to acquire secondary meaning and in fact become
distinctive of one traders goods.42
If one can overcome these hurdles for protection (however constrained or
otherwise they may be), what does trade mark registration give the registered
owner, be it for traditional signs or shapes? Trade mark registration
essentially entitles the registered owner to the exclusive right to use the mark,
authorise others to use the mark and obtain relief if anybody encroaches on
these rights.43 Critically, the trade mark owner is not granted an unlimited
monopoly to use that mark, or shape as the case may be, to the exclusion of all
others. Instead, they are only granted the right to use that sign as a trade mark
that is in the course of trade as a badge of origin and stop others from doing
the same but only with respect to a sign that is likely to cause confusion.44
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
40
"" Koninklijke+ Philips+ Electronics+ NV+ v+ Remington+ Products+ Australia+ Pty+ Ltd" (2000)" 100"
FCR"90,"93"[1]"(Burchett"J)."
41
"" See" also" obiter" statements" in" Kenman+ Kandy+ Australia+ Pty+ Ltd+ v+ Registrar+ of+ Trade+
Marks" (2002)" 122" FCR" 494" at" [137]" where" Burchett" J" observed" that" [t]he" concerns"
expressed" in" both" Philips+ v+ Remington+ (Aust),+ FC+ and" Philips+ v+ Remington+ (Eng)+
about" the" prospect" of" trade" marks" creating" monopolies" related" only" to" the"
registration" of" trade" marks" that" would" restrict" access" to" functional" features" or"
innovations,"and"for"this"reason"were"well"founded."
42
"" Pursuant" to" s" 41" of" the" Trade+ Marks+ Act+ 1995+ (Cth)." This" is" the" preferred" position"
put" forward" in" Jani" McCutcheon," Monopolised" Product" Shapes" and" Factual"
Distinctiveness"under"s"41(6)"of"the"Trade+Marks+Act+1995+(Cth)"(2004)"15"Australian+
Intellectual+ Property+ Journal+ 18," where" at" 33" the" author" argues" that" it" should" be"
possible"to"register"under"s"41(6)"the"shape"of"a"monopolised"product""provided"
distinctiveness"in"fact"is"established"and"[i]f"Parliament"considers"that,"for"policy"
reasons,"such"signs"should"nevertheless"be"prohibited"from"being"registered,"then"it"
is"submitted"that"this"should"be"made"overt"""
43
"" Trade+Marks+Act+1995"(Cth)"s"20."
44
"" In"Australia"see"Trade+Marks+Act+1995"(Cth)"ss"120(1)(2)."In"Europe"see" First+Council+
Directive+89/104/EEC"of"21"December"1988+to"Approximate+the+Law+of+the+Member+States+Relating+
to+ Trade+ Marks," art" 5," which" has" subsequently" been" replaced" by" a" codified" version"
under"the"European+Parliament+and+Council+Directive"2008/95/EC"of"22"October"2008"
to" Approximate+ the+ Law+ of+ the+ Member+ States+ Relating+ to+ Trade+ Marks." This" has" been"
!
EAP 11
41
Thus, the alleged infringing mark has to be used to speak to consumers as an

indicator of source.45 Consequently, personal, descriptive or aesthetic use of a
shape or the use of a shape for its functional capacity will not ordinarily
constitute infringement nor will the purely descriptive use of a registered
word mark. Use of a sign that is not confusing will also not infringe the rights
of the trade mark owner.46 Confusion might arise because the marks are
substantially identical,47 or because they are deceptively similar in which case
the alleged infringing sign so nearly resembles a registered mark such that it
is likely to deceive or cause confusion.48
In the event that a trade mark owner does seek to exercise their legislative
rights and bring a claim for trade mark infringement, they will not ordinarily
do so in isolation. Rather, claims of trade mark infringement are usually
argued in conjunction with the various other legal actions which supplement
the protection afforded by statutory trade mark regimes, for registered trade
marks but also unregistered trade marks in certain circumstances, including
shapes and trade dress. For example, laws which guard against false and
misleading conduct under the Australian Consumer Law (ACL) are commonly
used by traders to supplement the statutory protection available for
registered trade marks, including traders with unregistered trade marks, such
as product designs.49 Confusing uses of registered and common law marks
may also be captured by the ancillary protection afforded to trade marks and
3D shapes as found in the law of passing off, which has been successfully
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
implemented"by"s"10"of"the"Trade+Marks+Act+1994+(UK)"c"26."In"the"United"States"see"
"32"Lanham+Act"15"USC""1114.""
45
"" At"least"this"is"the"case"in"Australia"subject"to"s"17"of"the"Trade+Marks+Act+1995"(Cth)"
and"the"principles"set"out"in"Shell+Co+(Aust)+Ltd+v+Esso+Standard+Oil+(Aust)+Ltd"(1961)"
109"CLR"407."The"threshold"for"use"in"the"United"Kingdom"is"much"broader"such"
that" any" use," which" takes" unfair" advantage" of," or" is" detrimental" to" the" distinctive"
character" of" the" repute" of" the" trade" mark" will" constitute" use." See" Trade+ Marks+ Act+
1994+ (UK)" c" 26," s" 10." The" threshold" for" use" in" the" United" States" is" somewhat"
narrower"and"more"aligned"to"the"Australian"position.""
46
"" See"CocaZCola+Company+v+PepsiCo+Inc+(No+2)"[2014]"FCA"1287"(3"December"2014).""
47
"" To" determine" whether" trade" marks" are" substantially" identical" involves" a" side" by"
side"comparison,"taking"into"account"the"visual"and"aural"similarities."See"Shell+Co+
(Aust)+Ltd+v+Esso+Standard+Oil+(Aust)+Ltd"(1961)"109"CLR"407,"414415.""
48
"" Trade+Marks+Act+1995+(Cth)"s"10.""""
49
"" See" the" ACL" as" set" out" in" sch" 2" of" the" Competition+ and+ Consumer+ Act" (Cth)" 2010"
(which" has" replaced" the" Trade+ Practices+ Act+ 1974+ (Cth)" and" in" particular" s" 18" (and"
the" related" s" 29)" which" prohibits" misleading" or" deceptive" conduct." For" a" case"
involving"a"product"design"(leather"couch)"see"Parkdale+Custom+Built+Furniture+Pty+
Ltd+v+Puxu+Pty+Ltd+(1982)"149"CLR"191.""
EAP 12
42
Vol 23(2) 2014-2015
used to protect a traders goodwill or reputation which is tied up in the shape

or design of a product, where that indicia has acquired secondary meaning as
being distinctive of that traders goods and services.50
Intersections in 3D Printing and Trade Mark Law
4.1 Exploitation Opportunities and their Doctrinal Consequences

The surge in 3D printing and its take up by businesses around the world
means there is a great deal of scope for the exploitation of 3D shapes pursuant
to the law relating to trade marks as outlined in the preceding section. As a
consequence, there may be a greater uptake in 3D shape trade marks as
companies look to expand their intellectual property portfolios and
monopolise 3D printing technology for their businesses the first of several
potential future flashpoints involving 3D print and trade marks.51 This is
especially so because trade mark protection offers more flexibility than other
intellectual property regimes. So for instance, while design law provides a
limited monopoly period (usually for a maximum 10 years),52 trade mark
registrations can be renewed perpetually so long as the mark is still in use.
Trade mark law may also be an appealing alternative to copyright protection,
as statutory trade mark law gives the owner the certainty of registration,
which copyright cannot afford, at least in those jurisdictions where there is no
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
50
"" For"a"classic"case"of"passing"off"where"a"trader"was"able"to"show"its"product"shape"
(a" plastic" lemon" shaped" container)" had" acquired" secondary" meaning" without"
registration" and" was" successful" in" its" claim" for" passing" off" against" a" competitor"
who" had" adopted" similar" shaped" packaging," see" Reckitt+ &+ Colman+ Products+ Ltd+ v+
Borden+ Inc" [1990]" UKHL" 12" (1" January" 1990)." For" a" more" recent" successful" case"
involving"the"shape"of"a"coffee"plunger"see"Peter+Bodum+A/S+v+DKSH+Australia+Pty+
Ltd"(2011)"92"IPR"222."
51
"" Of"course,"this"exploitation"possibility"has"long"been"available"to"the"manufacturers"
of"3D"objects"utilising"traditional"mass"manufacturing"methods"(at"least"for"as"long"
as" 3D" shapes" have" been" registrable" as" trade" marks" in" Australia)." " The" present"
curiosity" and" thirst" for" 3D" print" technology" may" however" see" a" renewed," albeit"
short^lived"surge"in"3D"shape"mark"applications"as"some"of"the"enthusiastic"early"
users"seek"to"mark"out"their"territory"in"the"3D"print"sphere."""
52
"" In"Australia,"under"s"46"of"the"Designs+Act+2003"(Cth),"the"term"of"protection"is"five"
years" from" the" filing" date" of" the" design" application" in" which" the" design" was" first"
disclosed."If"the"registration"of"the"design"is"renewed"under"s"47,"then"the"term"of"
protection" is" 10" years" from" the" filing" date" of" the" design" application" in" which" the"
design" was" first" disclosed." Compare" this" to" the" position" in" the" United" Kingdom"
pursuant"to"s"8"of"the"Designs+Act+1949"(UK)"c"88"and"in"the"United"States"under"the"
Patents+Act+(Designs)"35"USC""173.""
EAP 13
43
copyright registration system.53 The ability to perpetually renew trade mark

registrations also means that the period of protection may outstrip the
monopoly afforded by copyright, so long as the trade mark is still in use,54
and is still distinctive.55
Of course the opposite may turn out to be true. And instead of seeing a shift
towards shapes and trade dress registration, it may be that 3D printing results
in a shift away from the use of these types of signs. This is based on the
hypothesis that the unauthorised use of shape marks will dramatically
increase as a consequence of 3D printing (a matter that will be discussed later)
such that product configurations, without word marks or corresponding
logos should become less valuable.56
Time will tell whether this reality eventuates. Imagining, at least in the
interim, there is somewhat of a rush in the use and registration of shapes and
trade dress as a reflection of the present interest in 3D print, there are various
ways in which companies might make the most of the trade mark system
when it comes to 3D printing and 3D shapes. The recently announced
collaboration between Hersheys and 3D Systems provides an indication of
how things might play out in practice,57 with this announcement shortly
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
53
"" Pursuant" to" the" Berne+ Convention+ for+ the+ Protection+ of+ Literary+ and+ Artistic+ Works,"
signed" 9" September" 1886," (entered" into" force" 5" December" 1887)" (Berne"
Convention)"copyright"registration"is"unnecessary"as"copyright"arises"as"a"matter"
of" law." Several" Berne" Convention" members" have" established" voluntary" national"
registration" systems" for" copyright" and" sometimes" also" for" related" rights."" In" these"
Member"States,"registration"facilitates"the"exercise"of"copyright"and"related"rights,"
by" providing" owners" with" a" simple" and" effective" means" to" clearly" establish"
authorship" and/or" ownership" of" rights." While" copyright" registration" systems" did"
exist" historically" in" the" Australian" colonies," the" United" Kingdom" and" the" United"
States,"they"are"no"longer"operational,"although"registration"is"still"required"in"the"
United"States"for"the"purposes"of"awarding"statutory"damages."
54
"" See"Trade+Marks+Act+1995+(Cth)"s"92"where"a"trade"mark"can"be"removed"from"the"
register"for"nonûse."
55
"" See"Trade+Marks+Act+1995+(Cth)"s"87"where"a"trade"mark"can"be"removed"from"the"
register"where"the"mark"has"become"generic.""
56
"" Desai"and"Magliocca,"above"n"25,"1710."
57
"" See"Rachel"Park,"Big+Confectioners+want+in+on+3D+Printing+as+3D+Systems+and+Hershey+
Team+Up+(16"January"2014)"3D"Printing"Industry+
<http://3dprintingindustry.com/2014/01/16/big-confectioners-want-3d-printing3d-systems-hershey-team/">(29"May"2015)."
EAP 14
44
Vol 23(2) 2014-2015
following the companys success in registering the shape of its well-known

chocolate bar as a trade mark in the United States.58
Given chocolate and confectionary products are already popular subjects of
shape-based trade mark registrations around the world but especially in
Australia,59 there are some real opportunities for these businesses to capitalise
on their monopolies and carve out an exclusive space in the 3D printing
chocolate market. Of course, these opportunities extend beyond the realms of
the manufacturers of chocolate and confectionary as any company who has
registered a 3D shape as a trade mark would be able to enjoy the benefits of
their monopoly to the exclusion of others.
There are of however consequences that flow from this and if we do indeed
see a growing penchant for shape mark registrations, policy makers and
judges will, sooner or later, have to grapple with some prickly policy
questions. For a start, 3D printing and the registration of 3D shapes may open
up old wounds concerning the function of trade mark law, the rationale for
the registration of shapes and other non-conventional signs as trade marks,
and the expansion of registrable subject matter more generally. It may even
lead to a re-evaluation of the function of the trade mark beyond its economic
function as a badge of origin, which is central to the current rationalisation of
trade mark law.60 A shift to shape trade mark registrations away from other
modes of intellectual property will also undoubtedly place increased
emphasis on the functionality doctrine in the jurisdictions in which it
operates, as a gatekeeper to the sanctity of the trade mark system. In
Australia, it might shine a light on the long over-due need for Parliament to
explicitly exclude the registration of functional shapes, before an
opportunistic party tries to take advantage of that fact that there is no clear
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
58
"" Re+ Hershey+ Chocolate+ and+ Confectionary+ Corporation," Serial" No." 77809223" (June" 28,"
2012)."
59
"" See:"Australian"Trade"Mark"Number"706789"for"the"interlocking"triangles"used"by"
Kraft"Foods"Schweiz"Holding"GmbH"for"TOBLERONE."Also"see"Australian"Trade"
Mark" Number" 706789." Further" see" Trade" Mark" Number" 706623," being" the" shape"
used"by"Cadbury"Enterprises"Pty"Limited"for"its"FREDDO"FROG."Finally,"note"the"
failed"attempt"by"Chocolaterie+Guylian+N.V.+to"register"the"shape"of"a"seahorse"for"its"
chocolate"products,"as"referred"to"above"n"39."
60
"" William" M" Landes" and" Richard" A" Posner," Trademark" Law:" An" Economic"
Perspective" (1987)" 30" Journal+ of+ Law+ and+ Economics" 266;" William" M" Landes" and"
Richard" A" Posner," The+ Economic+ Structure+ of+ Intellectual+ Property" (Harvard"
University"Press,"2003)."
EAP 15
45
judicial or legislative statement on the appropriate test for excluding trade

marks from registration on the grounds of functionality.61
The other pressing concern that may arise from this circumstance relates to
the enforcement of the rights associated with shape marks and trade dress, in
an environment where 3D printing is the norm. This includes the inevitable
conflict that will arise between rights holders and their alleged infringers as
we move towards an economy of things, including shapes, where advances
like 3D printing promise to do for a variety of physical goods what the
Internet has done for information.62
4.2 Trade Mark Piracy

From an enforcement perspective, there are various flashpoints at which 3D
printing and trade mark law may collide if 3D printing causes a piracy
problem for trade marks in the same way the internet has facilitated the
current, apparent, copyright piracy scourge. The first flashpoint involves
reproducing 2D trade marks on 3D printed objects. That is, at the macro level,
trade mark law is implicated in the processes of 3D printing where an object,
which includes a trade mark, is copied using a 3D printer. This would only be
an issue in a commercial context, as trade mark infringement is generally
limited to uses of a trade mark in trade or commerce that are confusing. Thus,
printing a ceramic mug on a 3D printer which includes the Coco-Cola
dynamic ribbon device, which is a registered trade mark, would likely
constitute trade mark infringement, where those mugs were sold
commercially. Ancillary liability under the heads of law discussed in the
previous section would also likely follow, especially if the use of that device
was likely to cause confusion and lead consumers to think that the mug was
an authorised or licensed product of The Coca-Cola Company. The same
however cannot be said if the mug were printed for personal use. This is
because it would almost certainly be a use which is not captured by section
120 of the Trade Marks Act 1995 (Cth). Moreover, there is almost no likelihood
of confusion in this instance since [y]ou know you made the product, so there
is no chance that you are going to be confused about where it came from.63
Claims for infringement might similarly arise with respect to making or
printing 3D versions of 2D marks, akin to that seen in Coca-Cola Co v All-Fect
Distributors Ltd.64 This is especially in relation to the 3D reproduction of 2D
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
61
"" Mark"Davison,"Shape"Trade"Marks:"The"Role"and"Relevance"of"Functionality"and"
Aesthetics" in" Determining" their" Registrability" (2004)" 15" Australian+ Intellectual+
Property+Journal"106,"111.+
62
"" Mark"Lemley,"IP"in"a"World"Without"Scarcity"(2015)"90"New+York+University+Law+
Review+460."
63
"" Weinberg,"It"Will"be"Awesome"if"They"Dont"Screw"it"Up,"above"n"8,"8."
64
"" See"CocaZCola+Co+v+AllZFect+Distributors+Ltd+(1999)"96"FCR"107.""
EAP 16
46
Vol 23(2) 2014-2015
fictional characters, many of which are registered as 2D trade marks or at

least are exclusively associated with particular film and television franchises
and their production companies. They are also popular subjects of 3D printed
fan art. Typically, these grievances have been framed in terms of copyright
infringement, (often necessarily because of the operation of the DMCA)65
but claims for trade mark infringement, passing off and misleading conduct
may also arise into the future as these laws provide another mechanism for
proprietors to censor the unauthorised use of their content. This might be the
case especially in Australia given the absence of any DMCA equivalent.
Another flashpoint arises concerning the person designing 3D print files and
the platform that makes these files available for download, as well as the
commercial entities which seek to take advantage of 3D printing in their own
businesses. Imagine for example somebody designs a hubcap for a Mercedes
Benz car and makes that design file available for download on Thingiverse.
Like the ceramic mug, it may be downloaded by individuals for their own
personal use. It might also be downloaded by motor mechanics or smash
repairs services, looking for cheap, after market spare parts.
Now to be clear, producing and designing a hubcap that is simply compatible
with a Mercedes Benz car is not problematic from a trade mark law
perspective per se. Describing it that way on a digital file repository site like
Thingiverse is also not problematic. That is, unless the designer made false
representations or misleading statements about their affiliation or connection
with Mercedes Benz, in which case the ACL would apply as would the law of
passing off.66 Otherwise, most jurisdictions explicitly make allowance for this
kind of descriptive use where it is necessary to use a trade mark for the
purpose of indicating the intended purpose of a product, in particular as an
accessory or spare part.67 If however, the Mercedes Benz logo is featured on
the hubcap and therefore included in the file, the matter becomes more
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
65
"" See" for" example" the" furore" which" arose" with" respect" to" a" 3D" printed" Iron" Throne"
iPhone" Dock," derived" from" the" cult" television" series" Game" of" Thrones," in" which"
HBO"reportedly"issued"a"take^down"notice:"3deres.org,"3D+Printing+Startup+Received+
Takedown+ Notice+ from+ HBO+ for+ IP+ Infringement" (13" February" 2013)"
<http://www.3ders.org/articles/20130213^new^3d^printing^company^received^
takedown^notice^from^hbo^forîpînfringement.html>"(29"May"2015)."
66
"" The platform hosting the misleading content on the other hand, may escape
liability. See Google+ Inc+ v+ Australian+ Competition+ and+ Consumer+ Commission+ (2013)
249 CLR 435. For a discussion of this case see Amanda Scardamaglia," Misleading"
and" Deceptive" Conduct" in" Australia:" Google+ Inc+ v+ Australian+ Competition+ and+
Consumer+ Commission" [2013]" HCA" 1" (2013)" 35(11)" European+ Intellectual+ Property+
Review"707."
67
"" In"Australia"see:"Trade+Marks+Act+1995+(Cth)"s"122(1)(c)."In"the"United"Kingdom"see"
for"example"Trade+Marks+Act+1994"(UK)"c"26,"s"11(2)(c)."In"the"United"States"see:""33"
Lanham+Act"15"USC""1115(b)(4).""
EAP 17
47
complicated. For the motor mechanic who prints the trade marked hubcap
and sells it to their clients, this will probably amount to trade mark
infringement as there has been use of the mark in commerce. Ancillary
liability may also arise. The platform facilitating this commercial use and the
designer responsible for uploading the file may also be implicated for
enabling this, although one would have to establish use of the mark by the
platform or designer involved.68
The use of registered trade marks in an online environment complicates
matters even further, since use for trade mark infringement must occur in
Australia. On this, Merkel J observed in Ward Group Pty Ltd v Brodie & Stone
plc that: 69
[t]he use of a trade mark on the internet, uploaded on a website
outside of Australia, without more, is not use by a website proprietor
of the mark in each jurisdiction is downloaded. However ... if there is
evidence that the use was specifically intended to be made in, or
directed or targeted at, a particular jurisdiction then there is likely to
be a use in that jurisdiction when the mark is downloaded. Of course,
once the website intends to make and makes a specific use of the
mark in relation to a particular person or persons in a jurisdiction
there will be little difficulty in concluding that the website proprietor
has used the mark in that jurisdiction.
Based on this statement, it is uncertain whether a file sharing site such as
Thingiverse (which is based in the United States) could be said to be using a
trade mark by hosting a design file containing a registered trade mark and
making it available to download, or whether the designer themselves may be
held responsible.70 If there is evidence that Australian consumers have
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
68
"" In" Australia," the" position" of" who" precisely" may" be" liable" for" trade" mark"
infringement" (primary" or" secondary)" is" described" as" murky." See" Robert" Burrell"
and" Michael" Handler," Australian+ Trade+ Mark+ Law+ (Oxford" University" Press," 2010)"
512."As"to"platform"liability,"there"is"no"test"case"in"Australia."Existing"international"
precedent" would" indicate," at" least" in" the" context" of" keyword" advertising," that"
hosting"platforms"are"unlikely"to"be"liable."See:"Google+France+SARL+v+Louis+Vuitton+
Malletier+ SA" (C^236/08)" [2010]" ECR" I^02417." The" designer" of" a" 3D" print" file"
incorporating"a"trade"mark"may"however"be"liable"as"a"primary"infringer"but"also"
further"to"s"147"of"the"Trade+Marks+Act+1995+(Cth)"for"assisting"a"person"in"applying"
a"registered"trade"mark"to"goods"under"s"146."""
69
"" Ward+ Group+ Pty+ Ltd+ v+ Brodie+ &+ Stone+ plc" (2005)" 143" FCR" 479," 49091" [43]" (Ward+
Group)."
70
"" The"terms"of"use"of"many"of"these"file^sharing"sites"may"limit"their"liability"in"this"
respect,"pushing"the"onus"of"responsibility"back"on"the"user."Thingiverse"for"
example"would"be"precluded"from"any"liability"by"virtue"of"s"5"of"their"terms"and"
conditions"which"provide"that"users"agree"to"indemnify"the"company"from"any"
!
EAP 18
48
Vol 23(2) 2014-2015
downloaded the offending file, that may not be enough to satisfy the
requirement that there has been use of a trade mark targeting a market in
another country.71 Thus, pursuant to the Ward Group test, a trade mark owner
in Australia may have no recourse under the Trade Marks Act 1995 (Cth)
against the designer who uploads the file or the file sharing platform. Then
again, a lot of time has passed since the Ward Group case, and if the matter
were brought before a court today, they may adopt an entirely different
approach, one which better reflects the current state of trade and commerce
and does not ignore the universal and seamless character of the internet.72
Given the case law on this aspect of use is scant and further elaboration has
been left wanting, it may only be a matter of time before 3D printing further
exposes the requirement of trade mark use in an online context in Australia.
A third flashpoint arises for the person who prints the trade marked hubcap
at home and fits the item onto their S-Class Mercedes Benz. This is different
from the earlier example involving the ceramic mug bearing the Coca-Cola
trade mark, which if only being used privately, would unlikely result in
confusion. The public use of the hubcap on the S-Class Mercedes Benz is very
different, as there is a risk that the public may believe the hubcap emanated
from the trade mark owner. Even so, it may still not be considered to be use in
commerce, which is an issue which 3D printing may expose to greater
scrutiny. And while the term trade has been afforded a broad interpretation,
it would be a stretch to say this type of use could properly be referred to as in
the course of trade. In any event, this scenario is probably a moot point, in
light of the current state of technology, since it is unlikely that consumers will
have 3D printers sophisticated enough for laser sintering metal, let alone the
technical skills to print spare car parts at home.73
The legal issues presented by this hypothetical are more vexed if we take this
scenario one step further and instead of fitting the 3D printed hubcaps on a
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
claim"or"demand"made"by"a"third"party.""See:"Thingiverse,"Makerbot+Terms+of+Use"
(last"updated"14"February"2014)"
Thingverse.com<https://www.thingiverse.com/legal>"(29"May"2015)."
71
"" This"is"a"test,"which"some"commentators"have"suggested"remains"unclear."See:"Sam"
Ricketson," Trade" Mark" Liability" arising" out" of" Internet" Advertising" (2007)" 12"
Media+ and+ Arts+ Law+ Review+ 1," 25;" Domenic" Carbone," Electronic" Commerce" and"
Protecting" Intellectual" Property" on" the" Internet" (2009)" 37" Australian+ Business+ Law+
Review"239,"248."See"more"generally"Warwick"Rothnie,"A"Bona"Fide"Offering"to"the"
World"at"Large:"(Not)"Using"Signs"on"the"Internet"(2006)"17" Australian+Intellectual+
Property+Journal+45."+
72
"" Ricketson,"above"n"71,"27."
73
"" This" is" especially" since" research" indicates" that" most" consumers" use" 3D" print"
technology" in" pursuit" of" their" personal" hobbies" and" for" pleasure." " See" generally"
Mendis"and"Secchi,"above"n"4."
EAP 19
49
Mercedes Benz vehicle, they are used on a different brand vehicle, such as a
Toyota Corolla. Here, Mercedes Benz as the trade mark owner would not so
much be concerned with consumer confusion, but with the dilution of their
brand and thus may seek redress accordingly, under the doctrine of trade
mark dilution.
In a nutshell, dilution protection seeks to protect the prestige of a trade mark
and guard against someones ability to make a copy and sell it to someone
who knows that the good is a copy, because that copying may reduce the
artificial scarcity of the good and its ability to be a status symbol.74 Thus,
somebody who prints an object on a 3D printer bearing a trade mark, which is
used on a third party product, as imagined in the above example, will
obviously be objectionable from the perspective of the trade mark owner
pursuant to the principles of trade mark dilution.
While trade mark owners in the United Kingdom and United States will have
a cause of action,75 this is probably not the case in Australia. There are
however, conflicting views about whether section 120(3) of the Trade Marks
Act 1995 (Cth) provides some limited form of dilution protection in certain
circumstances for owners of well-known trade marks.76 The fact that nearly
two decades after the inclusion of section 120(3) into Australian trade mark
law there is no definitive ruling which supports that proposition seems to
confirm that trade mark dilution is not a current part of Australian trade mark
law.77 And rightly so, if one accepts that the primary function of the trade
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
74
"" See:"Desai"and"Magliocca,"above"n"25,"1711."
75
"" See"s"10(3)"of"the"Trade+Marks+Act+1994+(UK)"c"26"and"in"the"United"States"see"Federal+
Trademark+ Dilution+ Act+ of+ 1995," Pub" L" 10498," 109" Stat" 985" which" amended" the"
Lanham+Act"15"USS""1051"(1946).""
76
"" See" for" example:" Michael" Handler," Trade" Mark" Dilution" in" Australia?" (2007)" 29"
European+ Intellectual+ Property+ Review" 307" giving" a" narrow" interpretation" of" the"
section."Contra"Maurice"Gonslaves"and"Patrick"Flynn,"Dilution"Down"Under:"The"
Protection"of"Well^Known"Trade"Marks"in"Australia"28"(2006)"European+Intellectual+
Property+Review"171,"who"argue"that"s"120(3)"of"the"Trade+Marks+Act+1995+(Cth)"is"an"
explicit"anti^dilution"provision.""
77""
In"fact"there"have"been"no"successful"cases"decided"under"s"120(3)"in"Australia,"let"
alone"any"judicial"clarification"on"its"precise"scope.""Only"a"handful"of"cases"have"
made" reference" to" the" connection" between" 120(3)" and" dilution," although" this" has"
done" nothing" to" clarify" the" issue." See:" Campomar+ Sociedad+ Limitada+ v+ Nike+
International+Ltd"(2000)"202"CLR"45,"66."Also"see:"CocaZCola+Co+v+AllZFect+Distributors+
Ltd+ (1998)" 43" IPR" 47," 65." The" other" decided" cases" have" all" been" interlocutory"
applications"and"have"mostly"only"shed"light"on"what"it"means"to"be"the"owner"of"a"
well^known"trade"mark."See"for"example:"San+Remo+Macaroni+Company+Pty+Ltd+v+San+
Remo+Gourmet+Coffee+Pty+Ltd+(2000)"50"IPR"321.""
EAP 20
50
Vol 23(2) 2014-2015
mark is an economic function, and that the key harm in which trade mark law
seeks to remedy is consumer confusion. Even so, 3D printing may bring this
issue to the fore and trade mark owners may seek to use section 120(3) to
broaden the ambit of trade mark infringement, particularly since many 3D
print uses of trade marks do not fit squarely within the traditional grounds of
trade mark infringement.78
While the preceding analysis has focused on how 3D printing facilitates the
reproduction of 2D trade marks on 3D objects and ipso facto trade mark
infringement, 3D printing also makes it possible to reproduce 3D trade marks
with ease, and without the permission of the trade mark owner. This is
another important flashpoint at which 3D printing and trade mark law will
collide, raising the same liability issues as the reproduction of 2D trade marks.
And as 3D printing technologies improve and becomes more mainstream at a
commercial and consumer level, the above canvassed scenarios may become
more common place. Indeed, it may become the norm, and in the same way
that modern technology has led to the democratisation of content distribution,
3D prining may very well lead to a democratisation of objects. This might
further result in an increase in counterfeit products, although this is very
much dependant on the improvements in 3D print quality.
At present, for mass produced items, traditional manufacturing processes are
decidedly more efficient than 3D print, but this may change in the future.79 At
a consumer level however, printing personal fashion items and accessories is
already a reality.80 Thus, the ability of consumers to freely download and
print their own knock-off designer sunglasses, handbags, jewellery and even
furniture may spawn a digital music and movie file sharing equivalent for
physical things an equivalent that may threaten to undermine the entire
business model of those particular industries.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
78
"" It"is"worth"observing"that,"in"its"current"form,"s"120(3)"would"not"assist"trade"mark"
owners"in"stopping"the"unauthorised"reproduction"of"their"goods"or"trade"marks,"
as"it"only"applies"to"cases"where"the"defendant"is"using"a"trade"mark"with"respect"
to"goods"and"services"which"are"unrelated"to"the"class"of"goods"or"services"to"which"
the"plaintiffs"trade"mark"is"registered."As"such,"the"use"of"the"Mercedes"Benz"trade"
mark" on" a" Toyota" Corolla" vehicle" would" not" fall" under" s" 120(3)," for" the" same"
reason.""
79
"" This"has"been"acknowledged"in"a"report"into"consumers"and"3D"print"which"found"
that"utaking"into"account"accessibility"to"materials,"sophisticated"printing"machines,"
costs"and"economics"for"the"average"user,"the"impact"of"this"technology"will"not"be"
felt" among" the" general" public" for" a" few" years" to" come.u" See:" Mendis" and" Secchi,"
above"n"4,+45."
80
"" And" indeed" a" preference" for" 3D" print" enthusiasts," with" fashion" and" jewellery"
among" the" most" popular" categories/tags" used" on" 3D" printing" online" sharing"
platforms."See:"Mendis"and"Secchi,"above"n"4,"32."
EAP 21
51
4.3 The Incumbent Response

As the foregoing discussion has highlighted, there are various enforcement
issues trade mark owners must deal with as 3D print technology develops,
and consequently, a number of approaches they might take. Firstly, brand
owners may choose to respond by strictly and heavy-handedly enforcing
their rights (or threatening to do so via cease and desist letters), in order to
extend the reach of their monopolies beyond commercial uses and into the
homes of 3D hobbyists. They may also seek to play down the significance of
the use requirement in order to do so, although past precedent suggests the
courts are unlikely to support such an argument, where use of a trade mark
for embellishment purposes has been looked upon favourably and not
considered to be use as a badge of origin.81
As many trade mark uses associated with 3D printing will not fall within the
scope of sections 120(1)(2) of the Act, trade mark owners may look to
extend their monopoly in other ways. In particular, the owners of well-known
trade marks may embark on a campaign imploring lawmakers for stronger
protection of their brands, in the same way as the copyright content lobby
have implored Parliament for among other things, tougher penalties against
music and movie piracy. With respect to trade marks, the lobbying may
extend to greater protection for the owners of well-known marks, including
dilution protection, and harsher criminal penalties for wilful trade mark
counterfeiting.82
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
81
"" See"Top+Heavy+Pty+Ltd+v+Killin+(1996)"34"IPR"282."On"this"further"see"Adam+Open+AG+
v+ Autec+ AG+ Case" (C^48/05)" [2007]" ECR" I^01017)" which" involved" the" use" of" the"
registered" Adam" Opel" logo" on" the" radiator" grill" of" an" accurately" scaled" replica"
model" of" the" Open" Astra" V8" coupe." " The" ECJ" confirmed" that" there" would" not" be"
infringing"use"if"the"average"consumer"understood"the"use"of"the"mark"to"indicate"
that"this"was"a"model"of"an"Opel"car,"as"the"origin"function"of"the"mark"would"not"
be" affected." When" the" matter" went" back" to" the" referring" court," they" held" that" the"
use"of"the"original"logo"on"the"goods"did"not"fulfil"any"of"the"functions"of"the"trade"
mark"as"the"relevant"consumer"would"merely"regard"the"logo"device"affixed"on"the"
defendantus"model"car"as"an"exact"copy"of"the"mark"that"the"original"car"had"affixed"
in" exactly" the" same" space." Consequently," the" mark" would" only" be" seen" as" a"
reproduction"of"a"detail"of"the"original"car."Relevant"consumers"would"not"regard"it"
as"a"reference"to"the"trade"origin"of"the"toy"car.""
82
"" As"it"stands,"the"criminal"penalties"for"trade"mark"infringement"can"be"found"in"pt"
14"of"the"Trade+Marks+Act+1995+(Cth)"and"includes"offences"of"applying"a"registered"
trade"mark"to"goods"knowing"that"the"mark"was"registered"or"being"reckless"as"to"
whether" the" mark" was" registered" under" s" 146." Penalties" include" fines" and"
imprisonment"for"up"to"five"years.""
EAP 22
52
Vol 23(2) 2014-2015
Another possibility is that the scorn of trade mark owners may shift to the
manufacturers of 3D printers83 and even ISPs in demanding that they block
websites which host allegedly infringing material.84 This would seem
especially probable given that it is highly inefficient for trade mark owners to
pursue individuals for trade mark infringement involving the reproduction of
3D and 2D marks using their 3D printers at home. Doing nothing however is
not an option, as brands try to preserve the distinctiveness of their trade
marks and take control of their intellectual property portfolios.
If past experience and the response of the copyright content industries when
faced with the challenges of Internet piracy is anything to go by, all of the
possibilities canvassed in this section are a very likely reality. And in the same
way that these legacy industries lobbied for greater regulation and an
expansion of their legal rights, brand owners may have a similar reactionary
response, throwing their weight about and embarking on a litigation binge in
the process.85
An alternative and more optimistic reality may be that these brands and trade
mark owners engage with the public, or at least consumers and the DIY 3D
print community by authorising the kinds of activities that would otherwise
be legally actionable. They may even choose to make such designs available
to consumers as a way to capitalise on the public desire for their products,86 or
include consumers in the 3D print process.87 There are other opportunities for
trade mark owners which do not involve the strict enforcement of their legal
rights but may have commercial advantages. In particular, 3D printing offers
brands the opportunity to enhance brand power through safety, quality, and
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
83
"" Arguably" manufacturers" of" 3D" printers" may" be" liable" pursuant" to" the" criminal"
trade"mark"offences"and"in"particular"ss"1467"of"the"Trade+Marks+Act+1995+(Cth).""
84
"" Cartier,+Montblanc+and+Richemont+v+BSkyB,+BT,+TalkTalk,+EE+and+Virgin+(Open+Rights+
Group+ intervening)" [2014]" EWHC" 3354" (Ch)" provides" a" glimpse" into" this" kind" of"
future." Here," the" Cartier" group" was" successful" in" its" application" for" a" blocking"
injunction" against" five" of" the" United" Kingdoms" major" ISPs," requiring" them" to"
block"six"websites"selling"counterfeit"goods.""
85
"" The" response" of" the" content" creators" has" been" simply" summarised" in" this" way" in"
Lemley,"above"n"62,"497^498."
86
"" Desai"and"Magliocca,"above"n"25,"1710"(footnote"99)."
87
"" Drawing"on"a"recent"initiative"involving"Hasbro,"who"appointed"Super"Fans"to"
create"Super"Art"inspired"by"their"iconic"MY"LITTLE"PONY"products."See"The"
Shapeways"Blog"Hasbro"&"Shapeways"Enable"3D"Printing"Fan"Art"with"
SuperFanArt"on"The"Shapeways"Blog"(21"July"2014)"
<http://www.shapeways.com/blog/archives/16759^hasbro^shapewaysênable^3d^
printing^fanârt^with^superfanart.html>"(29"May"2015)."
EAP 23
53
ongoing engagement with the company.88 Brands can do this by offering

authorised 3D print accessory files to respond to those consumers who want a
guarantee as to quality and safety. There are some promising examples
already emerging where trade mark owners are embracing 3D print,89 but it
remains to be seen whether these are one off initiatives or not.
If trade mark owners do not think more pragmatically about these things, and
if 3D printing does evolve to reach even a fraction of its potential, in time,
there is a risk that the likelihood of consumer confusion may be totally
eroded. In fact [t]here will be less, or perhaps no, reason for consumers to
think that any popular trade mark [or trade mark] observed outside of a store
was made by the brand owner.90 Thus, in ten years time or even sooner, an
equally valid conclusion may be that products that look similar are in fact,
homemade,91 obfuscating the risk of confusion and consequently the ability to
make out a case of trade mark infringement, passing off and misleading and
deceptive conduct all of which are predicated on the notion of confusion.
So how should policy makers respond to this crossroads, if at all? It would
seem that calls for wide-sweeping legislative reforms to respond to the
emergence of 3D print technology are premature.92 With respect to trade
marks, legislative reform which would mark a departure from the primary
economic underlying policy that justifies trade mark protection in Australia
would be unwise. In particular, any calls for the introduction of dilution
protection into Australia (or a broad reading of section 120(3)) should be met
with caution for the same reasons. It may however be a good time to reevaluate the role of non-conventional trade marks and the need for a specific
exclusion for functional marks. Further consideration should also be given to
the scope of secondary trade mark liability in Australia, a matter which was
referred to briefly in this article, but which is severely underdeveloped in case
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
88
89
"" See:"3ders.org,"Adidas+pops+up+in+London+with+giant+shoebox+&+3D+printing""(30"January"
2014)"<http://www.3ders.org/articles/20140130âdidas^popsûpîn^london^with^
giant^shoebox^3d^printing.html>"(29"May"2015)."Also"see:"Sandra"Helsel,"Adidas+
Incorporating+3D+Printing+into+Footware+Design"(2"December"2014)"Inside"3D"
Printing+<http://inside3dprinting.com/adidasîncorporating^3d^printingînto^
footware^design>"(29"May"2015)."
90
91
"" Ibid.""
92
"" This" is" consistent" with" the" findings" of" a" review" commissioned" by" the" UK"
Intellectual" Property" Office" which" considered" that" a" premature" call" for" legislative"
and" judicial" action" in" the" realm" of" 3D" printing" could" stifle" creativity" and"
innovation," and" impede" on" the" right" of" manufacturers" and" content" creators" to"
protect"their"livelihoods.""See"Mendis"and"Secchi,"above"n"4,"43."
EAP 24
54
Vol 23(2) 2014-2015
law and in the academic literature. The jurisdictional issues alluded to would
also benefit from further analysis.
Conclusion
While there are some uses to which 3D printers can be put which may
infringe the rights of trade mark owners, this is mostly at the perimeters. So
although some commercial uses may impinge on the rights of trade mark
owners, personal uses are less controversial. That is not to say that such uses
are not objectionable to trade mark owners, who are concerned not just with
consumer confusion but with the dilution of their brand and controlling all
corners of their market. We have seen the rhetoric used by incumbent
companies who see 3D printing not as an opportunity but as a threat. This
rhetoric is often followed by calls for an expansion of intellectual property
laws to further entrench their rights in an attempt to restrict the continued use
of new and emerging technology. When it comes to the intersection of trade
mark law and 3D printing, there is no reason to expect anything different. 3D
printing therefore, is shaping up to be the next battleground for intellectual
property law overreach, with trade mark law set to play a pivotal role.
EAP 25
Patent Law and Community Interest in Public Health:

Should Patent Law be supplemented by a Health
Impact Fund?
Jowa Chan *
Abstract
This article explores the lively issue of whether using the patent system as a one-sizefits-all system to regulate the pharmaceutical industry is justified. In assessing the
shortcomings of the patent system, this paper will discuss the problems inherent in
the patent system, which result from its reliance on market forces to generate
royalties to incentivise pharmaceutical research and development. It will be argued
that the system at present does not sufficiently account for public health interests, a
dimension unique to the pharmaceutical research and development industry. By
linking financial returns to market demand for a product at monopolistic prices, an
incentive system rewards the marketing of a product to consumers able to pay for the
product, and not necessarily the health benefits of that product conferred on the
community. Consequently, this article contends that reform is necessary.
The proposal of a Health Impact Fund, as advocated by Professor Thomas Pogge and
Professor Aidan Hollis, will then be evaluated as a national scheme in the context of
Australia's regulatory environment in the latter part of this article. The advantages
of a Health Impact Fund, a prize system using a direct measure of health benefits for
pharmaceutical treatments registered with the fund to determine the size of the
prizes, will be explored and a critique of the adoption of such a system to complement
the Australian patent system will be made. The current practical and legal challenges
faced in implementing such a system will be discussed. Despite the potential obstacles
in implementing a Health Impact Fund on a national scale, this article contends that
having a voluntary scheme to complement the existing patent system is a beneficial
option that is worth considering in light of the recent focus on pharmaceutical patent
reform.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
*
BSc, LLB (Hons) University of New South Wales. Sincere thanks to Dr Catherine
Bond and two anonymous reviewers for feedback during the drafting of this
paper.
56
Vol 23(2) 2014-2015
Introduction
The role of patent law in the field of research and development into
medicines and their methods of use, which for the purposes of this paper will
be referred to as pharmaceutical research and development, has long been a
topic for passionate debate. In Australia, advocates for stronger patent
protection cite the essential incentivising effect that patent law has on
pharmaceutical research and development, and base their arguments on the
need to encourage innovation in the pharmaceutical sector by addressing the
rising costs of research and development. On the contrary, the costs
associated with patent protection are acknowledged to reduce the
accessibility of the benefits of pharmaceutical research and development for
the lower socio-economic sections of the community. At the heart of these
arguments lies the fundamental balance between private and public interests
in Australian patent law.
1
In light of an assessment of the justifications of regulating the pharmaceutical

innovation through patent law, this paper argues that the Australian patent
system alone, in its current form, is not appropriate for managing all
pharmaceutical innovation. Consequently, this paper posits that
consideration should be given to supplementing the current system with a
Health Impact Fund (HIF), a government-run prize system rewarding
particular classes of pharmaceutical innovation suggested by Professors
Aidan Hollis and Thomas Pogge. Despite the HIF being initially proposed as
a global initiative aimed at improving access to medicines to developing
nations, the implementation of a HIF on a national scale offers substantial
benefits for developed nations such as Australia.
4
The first part of this paper, through an assessment of the patent system, will
challenge the notion that patent law has been effective in achieving its policy
objectives. In particular, the effectiveness of patent law in allowing for the
recovery of research and development costs will be questioned. Further, it
will be contended that the balance between public and private interests in the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1
Explanatory Memorandum, Intellectual Property Laws Amendment Bill 1997

(Cth), 3.
Jim OKeefe et al, Unleashing Pharma from the R&D Value Chain (July 2013) AT
Kearney
<http://www.atkearney.com.au/innovation/featured-article//asset_publisher/76R8b2bUBnsg/content/unleashing-pharma-from-the-r-dvalue-chain/10192>.
Tony Harris, Dianne Nicol and Nicholas Gruen, Pharmaceutical Patents Review
Report (Canberra 2013) v.
Thomas Pogge, The Health Impact Fund: Better Pharmaceutical Innovations at

Much Lower Prices in Thomas Pogge, Matt Rimmer and Kim Rubinstein (eds),
Incentives for Global Health: Patent Law and Access to Essential Medicines (Cambridge
University Press, 2010) 178, 196.
EAP 2
Patent Law and Community Interest in Public Health
57
patent system has been skewed excessively towards private interests due to
the reliance on market forces to direct innovation.
The latter part of this paper will explore the advantages of a prize-based
system in the form of a national HIF, put in place to reward pharmaceutical
innovation. It will critique the adoption of such a system to supplement
Australian patent law and evaluate its potential effectiveness in Australia.
This paper concludes that while practical and legal challenges faced in
implementing a HIF do exist, the operation of a HIF is feasible and worth
consideration in future reforms.
Patents and pharmaceutical research and development
Research and development into new medicines and methods of use is a

unique area of innovation when compared to traditional fields of innovation
associated with patents.5 In Australia, two features differentiate this area of
research and development from other forms of technological innovation. The
first is the rigorous regulation of the process of pharmaceutical research and
development, and of the resultant product once its manufacturers wish to sell
it to the public.6 The Commonwealth regulates medicines mainly through the
Therapeutic Goods Act 1989 (Cth) and the Therapeutic Goods Regulations 1990
(Cth).7 To bring a new medicine to market, early research establishing proofof-concept and potential compounds is followed by three phases of strict
clinical trials, with each phase involving progressively more participants.8
The final product is then submitted to the Therapeutic Goods Administration
(TGA) for approval before it can be listed on the Australian Register of
Therapeutic Goods and marketed to the public.9 The TGA requires, on
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
5
According to the Pharmaceutical Patents Review, patents were traditionally

primarily granted for mechanical and industrial processes: Harris, Nicol and
Gruen, above n 3, 40.
There exist other fields of innovation that require standards to be met before the
patented product can be marketed. For example, for genetically-modified
foodstuffs, safety approval from Food Standards Australia New Zealand is
required based on scientific data provided by the company applying for approval,
along with mandatory labelling requirements for products. However, it appears
the pharmaceutical industry is unique in that the regulatory process has affected
the duration of patents in Australia, forming a rationale for the availability of
patent extensions, as discussed later in the article.
Lawbook, The Laws of Australia (at 14 May 2008) 20 Health and Guardianship 20.11
Regulation of Drugs [20.11.260].
Medicines Australia Oncology Industry Taskforce, Access to cancer medicines in

Australia (2013) 37.
Therapeutic Goods Act 1989 (Cth) s 9A.
EAP 3
58
Vol 23(2) 2014-2015
average, two years to consider applications for approvals.10 This stringent

approval process, when compared to traditional patent technologies without
similar regulatory approval requirements, extends the timeframe for the
development of new medicines and methods of treatment.
The second unique aspect of pharmaceutical research and development is the
widely acknowledged high risks of failure of pharmaceutical research
projects,11 which are linked to the research and approval processes and their
associated costs. According to Medicines Australia, an organisation
representing the interests of major pharmaceutical companies operating in
Australia,12 the average cost of developing a new medicine or method of
treatment is approximately $1.5 billion.13 An estimated 50 per cent of capital
investment into pharmaceutical research and development for a product
comprises of opportunity costs of pursuing novel yet unsuccessful
compounds, which initially show potential but are ultimately screened out
during clinical trials.14 These figures are not beyond dispute. In commenting
on pharmaceutical research and development costs estimated by North
American pharmaceutical companies and industry analysts,15 Light and
Warburton have criticised the opaque methodology used in reaching large
cost figures.16 With opaque sampling of chemical compound research costs
and unverifiable corporate data singled out,17 Light and Warburton have
cautioned that the constructed nature of research and development costs
estimates should be recognised and that the methods used to reach the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
10
Medicines Australia, Medicines Australia Factbook 2013 (2013, 3 ed) 55.
11

(Cth), 12.
12
Medicines Australia, About Us (December

<http://medicinesaustralia.com.au/about-us/>.
rd
2009)
Medicines
Australia
13
Medicines Australia, Submission to the Pharmaceutical Patents Review,

Commonwealth of Australia, Review of Pharmaceutical Patents in Australia, 23
January 2013, 1.
14

15
See Joseph DiMasi, Ronald W Hansen and Henry G Grabowski, The price of
innovation: New estimates of drug development costs (2003) 22 Journal of Health
Economics 151. The estimates of the costs required to bring one drug to market in
that study are in the same order of magnitude made by Medicines Australia, with
an estimate of an average of US$1.9 billion for capitalised pre-approval cost per
new treatment brought to market: at 181.
16
Donald W Light and Rebecca Warburton, Demythologizing the high costs of

pharmaceutical research (2011) 6(1) BioSocieties 34, 34.
17
Ibid 38.
EAP 4
59
presented figures should be scrutinised.18 A similar argument may be made

for the figures presented by Medicines Australia. Nevertheless, there is
general recognition in the literature that the costs of bringing a new drug or
method of treatment to the market have risen steadily over the past decade19
with an associated decrease in the success rate of developing new
compounds.20
The already-high risks and costs of research and development into
pharmaceutical innovations are compounded by the direction taken by
research in the pharmaceutical industry, notably the recent emphasis on
biotechnology, as opposed to traditional small molecule chemical
development. The Tufts Centre for the Study of Drug Development, a nonprofit academic research group based in the United States, has observed that
biotechnological drugs are increasingly dominant in the pharmaceutical
industry, with a majority of the top 10 selling treatments in 2012 being based
on biotechnological drugs.21 This shift is relevant to Australia, given
Australias growing prominence in the global biotechnology industry with
ASX-listed biotechnology firms worth over $50 billion.22 Biotechnological
drugs rely on more complex active ingredients than small molecule
chemicals, and require more rigorous pre-clinical trials than small molecule
chemicals.23 DiMasi and Grabowski have observed that biotechnological
treatments in the United States, compared with traditional small molecule
treatments, require extended periods of clinical approval24 and appear to be
significantly more costly to develop than new small molecules.25 The research
direction in the industry therefore appears to support claims of rising costs in
research and development.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
18
Ibid 47.
19
Harris, Nicol and Gruen, above n 3, 37.
20
Ibid 38.
21
Kevin Grogan, Tufts report confirms domination of biotech products,

PharmaTimes
Online
(Online)
14
November
2013,
<http://www.pharmatimes.com/article/13-1114/Tufts_report_confirms_domination_of_biotech_products.aspx>.
22
AusBiotech, About Biotechnology - Industry Overview (3 April 2014) AustBiotech:

Australias
Biotechnology
Organisation
<http://www.ausbiotech.org/content.asp?pageid=25>.
23
Anita M OConnor, Introduction to biotech drugs (2009) 6(1) Regulatory

Rapporteur 4,5.
24
Joseph A DiMasi and Henry G Grabowski, The Cost of Biopharmaceutical R&D:

Is Biotech Different? (2007) 28 Managerial and Decision Economics 469, 473.
25
Ibid 475.
EAP 5
60
Vol 23(2) 2014-2015
The role of patent law as a mechanism for balancing competing public and
private interests in pharmaceutical innovation should be considered with
regard to the industrys unique regulatory environment and costs. In
Australia, the Patents Act 1990 (Cth) (the Act) and its regulations are the
source of the national patent system. A patent is the award of a monopoly to
the patented inventions patent-holder, theorised in most cases to be the
inventor, for a limited period of time, which for a standard patent is twenty
years.26 In return for that monopoly, the patented matters are disclosed to the
public in the form of published specifications.27 For inventors who are also
patent-holders, the system allows them to obtain financial returns for their
invention, and to obtain non-financial benefits by enforcing their proprietary
rights under their patents to prohibit the violation of their statutorilyguaranteed monopoly period by rivals. The public gains access to the details
of the invention on the publication of the patent specifications, and can freely
use the information for follow-on innovation or for exploitation on the
expiration of the patents term.28 The private interest rights conferred onto the
inventor via patents act as incentives for innovation and are balanced against
the public interest in accessibility of the inventions. This balance is further
affected by special regulations concerning pharmaceutical research and
development. Under the Act, pharmaceutical patent terms can be extended
for up to five years beyond the standard patent term of 20 years, entitling the
patent-holder to up to 25 years of protection.29 Pharmaceutical patents are
unique in this respect, with a considerably higher level of protection relative
to other forms of patents. This has been justified primarily by the high costs
associated with developing new pharmaceutical products, the longer time
taken for product development, and the high level of risk associated with
engaging in pharmaceutical research and development.30 The adoption of the
patent system domestically by nations across the world appears to stem from
historical and political factors, rather than a systematic analysis on the
comparative efficiency of patents over alternative methods for incentivising
innovation.31 Despite this, under the current business models adopted by
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
26
Patents Act 1990 (Cth) s 67.
27
Patents Act 1990 (Cth) s 40.
28
Kathy Bowrey, Michael Handler and Dianne Nicol, Australian Intellectual Property
Law (Oxford University Press, 2010) 378.
29
Patents Act 1990 (Cth) ss 70-87.
30

(Cth), 3.
31
Patent legislation was only adopted across Europe after considerable debate,
which saw some nations such as Holland and Switzerland initially move away
from patent legislation, and after historical events weakened opposition to
protectionist policies like the patent system: Steven Shavell and Tanguy van
Ypersele, Rewards versus Intellectual Property Rights (2001) 44 Journal of Law and
Economics 525, 527.
EAP 6
61
pharmaceutical research and development companies,32 commentators have

claimed that patent law plays a pivotal part33 in providing financial incentives
for pharmaceutical innovation.34
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
32
Robert Chalmers, Evergreen or Deciduous? Australian Trends in Relation to

Evergreening of Patents (2006) 30(1) Melbourne University Law Review 29, 59.
33
Harris, Nicol and Gruen, above n 3, 29. See also Andrew F Christie et al, Patents
Associated with High-Cost Drugs in Australia (2013) 8(4) Public Library of Science
ONE 1, 1.
34
It must questioned whether patents are fundamental to providing financial

incentives to encourage innovation because of business strategies based on
exploiting the patent system used by pharmaceutical firms at present, or because
the system itself is inherently necessary to protect and stimulate innovation. The
absence of empirical evidence due to the lack of recent dramatic changes to the
patent system internationally has made it difficult to test whether patents are
fundamental to encouraging innovation, with researchers resorting to analysis of
the patent system in historical eras: Bronwyn H Hall and Dietmar Harhoff, Recent
research on the economics of patents (Working paper no. 17773, 4 Annual Review
of Economics, 2012) 12. See Petra Moser, Innovation without Patents Evidence
from the World Fairs (2012) 55 Journal of Law and Economics 43
<http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=930241>. After presenting
data from British and American World Fairs in the late 19 century and early 20
century, Moser notes that alternate methods to protecting and exploiting
intellectual property, such as secrecy, were considered effective stimulants for
innovation: at 1. She further observes that the majority of inventions presented at
the World Fairs were not patented despite the availability of patent systems in
Britain and the United States: at 29. Moser contends this was partly due to the
difficulty of reverse-engineering some inventions at the time, notably those
involving chemical formulations, allowing secrecy to be used as an effective
method to provide for a monopoly resulting in financial returns: at 22. However,
with the introduction of analytical chemistry, which allowed for chemical
compounds to be reverse-engineered, patent rates for chemical compounds
increased dramatically: at 25. Therefore the importance of patents for protecting
and encouraging investment in innovation arises where the innovation can be
easily reverse-engineered: at 29.
While there is little empirical evidence
supporting the claim that the patent system is fundamental to encouraging
innovation, in light of Mosers observations and given the ease with which rivals
can reverse-engineer a pharmaceutical treatment, it can be said at least that patents
play an important role in protecting pharmaceutical innovation from free-riders:
see Irwin I Park, Extinguishing Exclusive Marketing Rights: Interpreting the
Medical Innovation Prize Fund Act of 2011 (2011-12) DePaul Journal of Art,
Technology & Intellectual Property Law 183, 189. Ultimately, Hall and Harhoff
comment that while patents are not important for innovation incentives in
general, their capacity for generating large financial returns does generate
demand for research: at 35.
th
th
EAP 7
62
Vol 23(2) 2014-2015
Problems with the patents system
2.1 Patents are not the most effective way for cost recovery in
research and development
Increasingly, however, doubts have arisen over the efficiency of patent law as
a mechanism for recovery of costs associated with drug development. While
the patent system overall does encourage expenditure in pharmaceutical
research and development,35 the income generated from the sales of patented
products in the pharmaceuticals industry by far exceeds the expenditure on
recovering research and development. During the period from 2009-2010, of
the total Australian industry turnover of $22 billion, the entire
pharmaceutical industry only utilised around $1.03 billion on research and
development.36 Despite the fact that growth in spending on research and
development within the pharmaceutical industry significantly outstripped
growth in expenditure across all other business sectors,37 the lack of
transparency in the pricing of medicines generates doubt as to whether the
disparity in total revenue and funding applied to research and development
is justified.38 For example, for the drug imatinib, used for treating numerous
cancers such as leukaemia, the price at which it was marketed would have
recouped its development costs within two years of entering the market.39
Part of the disparity is due to inefficiency arising from firms with established
patents deriving income by developing strategies under patent law to
effectively extend the periods of protection received under their patents, or to
discourage the entrance of new participants. Ordinarily, once a patent for an
active pharmaceutical ingredient lapses, the market is open for competition
by generic drug manufacturers, increasing the range of products containing
the ingredient and lowering the prices for equivalent products. For example,
since the lapsing of the patent in 2012 for the compound clopidogrel, the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
35
Intellectual Property Australia Pharmaceutical Patents Review Panel,

Commonwealth of Australia, Pharmaceutical patents review: draft report (April 2013)
6.
36
Department of Industry (Commonwealth), Pharmaceuticals Industry Profile,

Pharmaceuticals
and
Health
Technologies
<http://www.innovation.gov.au/INDUSTRY/PHARMACEUTICALSANDHEAL
THTECHNOLOGIES/PHARMACEUTICALS/Pages/PharmaceuticalsIndustryPr
ofile.aspx>.
37
Intellectual Property Australia Pharmaceutical Patents Review Panel,

Commonwealth of Australia, Pharmaceutical patents review: draft report (April 2013)
65.
38

39
Ibid.
EAP 8
63
active ingredient for the heart-attack prevention drug Plavix,40 more than 70
products containing the same active ingredient have entered the market.41
Further developments in delivery systems and in bio-equivalent compounds
can also be conducted by generic companies once the patent of a medicine
has lapsed.42 However, in a review undertaken by the Pharmaceutical Patents
Review Panel, it was found that firms often manage to register multiple
successive second-generation patents around a single active pharmaceutical
ingredient with negligible novelty, effectively extending or generating a
monopoly over the product by creating a threat of litigation for new market
entrants.43 Generic suppliers are effectively delayed from entering the market
despite the expiration of the original patent.
Arrow Pharmaceuticals Limited v Merck & Co., Inc44 is an example of an attempt
to extend the monopolistic protection around a patented compound. The
respondent, Merck & Co., Inc, had acquired a base patent for alendronic acid
for treating osteoporosis in 1988,45 and subsequently registered seven patents
over the administration of specific doses of alendronic acid and the
composition of tablets and liquid forms of alendronic acid in 2000.46 Gyles J of
the Federal Court of Australia revoked the seven patents on the basis that the
patents over the dosages and compositions were not inventions or methods
of manufacture,47 further commenting that the case involved a clear attempt
to evergreen a patent.48 The problem of granting monopolistic rights for
subject matter that provided negligible intellectual advancement was alluded
to by Gyles J in his observation that:
[t]here is something anomalous about ...a new, stand-alone, patent for
a particular dosage regime for a particular purpose that was
contemplated at the time of the base patent, with no new properties of
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
40
Michael O'Riordan, So Long, Plavix, What a Ride! Clopidogrel Patent Expires (May 17,
2012) Medscape <http://www.medscape.com/viewarticle/764052>.
41
MedIndia, Drug "Clopidogrel" Price list (2013) Generic Drug Database with Price
Details <http://www.medindia.net/drug-price/clopidogrel.htm>.
42
Pharmaceuticals Industry Strategy Group, Commonwealth of Australia, Final

Report (2008) 26.
43
44
Arrow Pharmaceuticals Limited v Merck & Co., Inc. [2004] 213 ALR 182.
45
Ibid 188.
46
Ibid 207.
47
Ibid 211.
48
Ibid 182.
EAP 9
64
Vol 23(2) 2014-2015
the compound having been discovered in an inventive fashion in the

meantime.49
While it may be claimed that there is little empirical evidence on the
frequency and extent of what are termed evergreening practices,50 the above
case shows that attempts to evergreen patents are made. Although the
courts can intervene, the additional costs imposed on the consumers of
intellectual property by the strategies and patents which are not brought to
the attention of the courts represent a considerable inefficiency in the patent
system. Chalmers also observes that reliance on matters brought before IP
Australia for oversight is at times inadequate, due to the disparity between
the resources and expertise available to the pharmaceutical firms, and those
of IP Australia.51 Additionally, the associated costs of litigation around
challenges to questionable second generation patents and to protect valid
patents against competitors must also be accounted for in the industry. Such
inefficiencies in the system are borne by the public. Paying higher prices in
the hope of funds indirectly trickling to research and development projects is
therefore a costly and ineffective method to fund research.52
2.2 Balance of public and private interests skewed to the private

interests of firms
As a result of the monopolies granted to firms conducting research and
development, the patent system also allows pharmaceutical products to be
priced to prohibit access to medicines by those in need of them, arguably
with a complete disregard for public interest health concerns. This is both an
international and national concern.53 In Australia, government subsidies exist
for certain drugs that are assessed as being particularly cost-effective for the
population, listed under the Pharmaceutical Benefits Scheme (PBS). These
subsidies are a recognition that at times the prices of patented drugs are too
high, and that the public interest is served by government intervention.54 For
example, without the PBS subsidy, the drug ranibizumab, used for treating
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
49
Ibid 212.
50
Andrew F Christie et al, Patents Associated with High-Cost Drugs in Australia

(2013) 8(4) Public Library of Science ONE 1, 1.
51
Chalmers, above n 32, 60.
52
Stephen Duckett, Australias Bad Drug Deal (Report No 2013-2, Grattan Institute,
March 2013) 30.
53
Ibid 27.
54
Australian Medical Association, PBS Discussion Paper with AMA Federal Council
Relations
(March
2002)
Australian
Medical
Association
6
<https://ama.com.au/sites/default/files/node/910/PBS%20PaperFinal%20Version.doc>.
EAP 10
65
macular (eye) degeneration, costs $1,830 per dose.55 When prescribed for
patients under the PBS, the maximum amount that can be charged to patients
is $36.10 per dose.56 Another example is the recently-listed drug ipilimumab
(marketed as Yervoy), used for treating advanced malignant melanoma. A
course of four treatments costs approximately $120,000 without PBS
subsidies,57 while under the PBS it is accessible to patients at $36.10 per
treatment.58 Drugs without the benefit of being listed under the PBS are
consequently only available to a small minority who have the capacity to bear
the costs. As such, firms set the prices of their patented drugs to target the
population of price insensitive consumers,59 regardless of the general
demand for the drug.
Moreover, patent law has the effect of stifling real follow-on innovation based
on existing patents. In a situation where patents have been filed around a
particular pharmaceutical product, it becomes increasingly difficult for
competitors or researchers to utilise the patented product in further
innovations without fear of infringing the patent.60 The concern regarding
this deterrence to research and development is illustrated in the recent
reforms made to the Act. The Intellectual Property Laws Amendment (Raising the
Bar) Act 2012 introduced major reforms to more clearly differentiate between
research and commercialisation concerning a patented product.61 In
particular, activities conducted to experimentally improve an invention are
now exempted from infringement.62 Nevertheless, the effects of the new
reforms have yet to be felt, considering that these particular reforms were
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
55
Duckett, above n 52, 23.
56
Department of Health (Commonwealth), Ocular Vascular Disorder Agents,

Pharmaceutical
Benefits
Scheme
<http://www.pbs.gov.au/medicine/item/1382R>.
57
Melanoma Patients Australia, MPA Members celebrate PBS listing of Yervoy (Media
Release, 3 July 2013) 1 <http://www.melanomapatients.org.au/latest-news/mpamembers-celebrate-pbs-listing-of-yervoy-2>.
58
Department of Health (Commonwealth), Chemotherapy Items for Private

Hospital/Private
Clinic
use,
Pharmaceutical
Benefits
Scheme
<http://www.pbs.gov.au/medicine/item/2638W-2641B-2643D-2663E>
59
Paul Grootendorst, Aidan Hollis and Aled Edwards, Patents and Other Incentives
for
Pharmaceutical
Innovation
(29
January
2013)
8
<http://individual.utoronto.ca/grootendorst/pdf/Patents_and_Other_Incentives
_for_Pharmaceutical_Innovation.pdf>.
60
Park, above n 34, 192.
61
Explanatory Memorandum, Intellectual Property Laws Amendment (Raising the

Bar) Bill 2011 (Cth), 9.
62
Patents Act 1990 (Cth) s 119C.
EAP 11
66
Vol 23(2) 2014-2015
only effective from 16 April 2012,63 and the fact that the exemptions only
apply to experimental activities conducted after this date.64
Furthermore, the patents system is a blunt instrument for encouraging
innovation concerning public health as it harnesses market forces to drive
innovation in directions that often have only marginal benefits for public
health. The greatest profits from pharmaceutical products are made by
targeting drugs in demand by patients with the capacity to pay the high
prices under a monopoly.65 The patent system, by relying on the volume of
sales of a product to incentivise pharmaceutical innovation, favours
development of drugs demanded by such patients. The focus is therefore
concentrated on mainly maintenance drugs, medicines that address the
symptoms of diseases without removing the disease itself, as the demand
from patients over the course of the disease would be higher than one-off
preventative or curative drug treatments.66 Medicines that target symptoms
of chronic diseases like heart disease and diabetes would be within this
category.67 Atorvastatin, used for decreasing the amount of cholesterol in the
blood of heart disease patients, and incidentally the most expensive drug for
the government under the PBS,68 is an example. Cardiovascular failure in
patients is at times indicated by elevated levels of cholesterol in the blood, a
symptom of stresses placed on the body.69 Evidence suggests that
cardiovascular failure is primarily caused by a combination of stresses on the
body arising from lifestyle problems that result in inflammation in the
arteries.70 By using atorvastatin to lower cholesterol levels, patients only treat
the symptom of cardiovascular failure. Priorities in research are also skewed
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
63
Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth) s 2.
64
Thomas Faunce, Balancing Public Health, Trade and Intellectual Monopoly

Privileges: Recent Australian IP Legislation and the TPPA (2012) 20 Journal of Law
and Medicine 280, 283.
65
Pogge, above n 4, 184.
66
Ibid 185.
67
Emily Robinson, Health not Wealth as an Incentive for Drug Development: A

Conversation with Thomas Pogge (29 April 2013) Harvard Global Health Institute
<http://globalhealth.harvard.edu/news/health-not-wealth-incentive-drugdevelopment-conversation-thomas-pogge>.
68
Drug Utilisation Sub-Committee, Australian Statistics on Medicines 2010,

Department of Health (Commonwealth) <http://www.pbs.gov.au/statistics/
asm/2010/australian-statistics-on-medicine-2010.pdf>.
69
Peter Dingle, Cholesterol a Symptom, not the Disease (February 2011) Positive Health
Online Issue 179 <http://www.positivehealth.com/article/heart/cholesterol-asymptom-not-the-disease>.
70
Peter Libby, Inflammation and cardiovascular disease mechanisms (2006) 2

American Journal of Clinical Nutrition 456S, 459S.
EAP 12
67
towards making only incremental improvements to existing blockbuster

drugs,71 a phenomenon described by commentators as me-too drugs, which
derive profitability mainly from the marketing power employed by their
developers.72 On the contrary, Medicines Australia claims that me-too drugs
are not necessarily detrimental to the market by offering advances in safety
and efficacy in a particular line of medicines.73 Nevertheless, this argument
ignores the cost of directing efforts away from developing ground-breaking
compounds.
On a broader scale, from both the impacts of patent law on pricing and the
direction in which innovation is driven, traditional patent law focuses on
incentivising pharmaceutical development and pays little regard to the strong
public interest in promoting public health. Pharmaceutical research and
development is distinctive in that the public interest in accessing innovation
in the area directly impacts on the societys fundamental interest in
promoting public health. On the other hand, it may be argued that the patent
system sufficiently caters for public health interests in that a Crown-use
regime exists74 for situations involving national emergencies requiring access
to medicines, a regime that was to be clarified by the now-lapsed Intellectual
Property Amendments Bill 2013.75 However, even if the clarification of the
provisions had been passed, the fact that Crown-use provisions have
historically rarely been used, with a lack of recent case law interpreting the
provisions,76 cannot be ignored. Consumers of drugs during the patent period
have an interest to access pharmaceutical products to promote their health.
The focus of patent law on basing returns solely on the marketing power of
inventors, without regard to wider public health implications on the endusers, is flawed.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
71
Paul Grootendorst et al, New approaches to rewarding pharmaceutical

innovation (2010) Canadian Medical Association Journal 1, 2.
72
Marlynn Wei, Should Prizes Replace Patents? A Critique of the Medical

Innovation Prize Act of 2005 (Working paper, Boston University Journal of Science
and Technology Law, 2007) 3.
73
Medicines Australia, Medicines Australia Factbook 2013, above n 10, 3.
74
Patents Act 1990 (Cth) ss 163-170.
75
Genevieve Butler, Intellectual Property Laws Amendment Bill 2013, Parliament of

Australia, Bills Digest No. 7 of 2013-14, (5 September 2013) 17.
76
Ibid 10.
EAP 13
68
Vol 23(2) 2014-2015
The Health Impact Fund (HIF)
3.1 Background to the HIF

The HIF is an alternative mechanism for stimulating research and
development into pharmaceuticals that has been suggested to overcome the
shortcomings of patent law. The concept of a HIF has its roots in proposals
for a prize system for encouraging research,77 where instead of basing
financial returns for an invention off sales under a limited monopoly, as
under the patents system, financial returns are provided for by an allocation
of an award from a prize fund. The concept of a HIF has been the subject of
academic debate in recent decades, with the concept supported and critiqued
by many over the years, notably by Professor of Law Michael Abramowicz,
Director of Knowledge Ecology International James Love, and Professor of
Bioinformatics Tim Hubbard.78 A variety of proposals have been advocated
for by academics such as Professor of Law and Economics Steven Shavell,
and Professor Tanguy van Ypersele.79 One such version of a HIF was
developed by Thomas Pogge, Professor of Philosophy at Yale University, and
Aidan Hollis, Professor of Economics at the University of Calgary,80 with
some of its features directly resulting from a series of meetings between
academics and industry participants in May 2001, hosted by the World
Business Council for Sustainable Development.81
Presented in separate papers by Pogge and Hollis in 2005,82 Pogge and Hollis
HIF consists of a scalable publicly-funded program83 administering an open
pool of funds provided by the governments of participating nations.
Originally developed as a global initiative involving governments around the
world, this HIF envisages pharmaceutical companies voluntarily registering
their products with the program for a fixed term of 15 years as a result of
patenting their products.84 In return for selling their product at the cost of
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
77
Michael B Abramowicz, Perfecting Patent Prizes (2003) 56 Vanderbilt Law Review

2, 4.
78
James Love and Tim Hubbard, The Big Idea: Prizes to Stimulate R&D for New
Medicines (Paper presented at Ruby Hutchison Memorial Address, Sydney, 14
November 2006) 1519, 1528.
79
Abramowicz, above n 77, 5.
80
Amitava Banerjee et al, The Health Impact Fund: incentives for improving access
to medicines (2010) 375 The Lancet 166, 169.
81
Love and Hubbard, above n 78, 1529.
82
Ibid 1531.
83
84
Ibid 198.
EAP 14
69
manufacture and distribution, the companies are given annual financial

prizes from the HIF for the duration of their registration, with the amounts
received dependent on the assessed extent of health benefits conferred by the
products on consumers.85
In voluntarily registering under Pogges conception of a HIF, pharmaceutical
firms do not relinquish the patents to their registered products under the HIF,
but merely guarantee that they sell their products in accordance to the
conditions imposed by the HIF in return for annual prize amounts86 and
provide free licences of their product after the reward period lapses.87 As
such, the HIF has been described as a contract-based model for stimulating
research and development.88 It links returns derived from a medicine to the
performance of that medicine, rather than to the effectiveness of its
marketing.
Despite being a concept aimed at constructing an international regime,89 and
the fact that no nation has implemented a domestically-functioning HIF, a
HIF as a national scheme is a concept that has gained traction over recent
years. Various forms of HIF have been envisaged, with a framework for a HIF
being suggested to replace the patent system for pharmaceutical innovations
in the United States under a bill presented by Senator Bernard Sanders in
2011 and reintroduced in March 2013, the Medical Innovation Prize Fund Act
S.627, which is currently under consideration.90 Indeed, a scalable HIF has
been proposed for regulating pharmaceutical developments on an individual
state-wide level in the United States.91 A national-scale HIF, as an alternative
incentivising mechanism to patent law operating solely within Australia,
should therefore be considered.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
85
Banerjee et al, above n 80, 166.
86
Matt Peterson, Aidan Hollis and Thomas Pogge, A Critique in Need of Critique
(2010) 3(2) Public Health Ethics 178, 184.
87
88
Mark Nickas, A Patent Prize System to Promote Development of New Antibiotics

and Conservation of Existing Ones (2012) 12(5) Pittsburgh Journal of Technology Law
& Policy 1, 16.
89
90
Congress of the United States of America, S. 627: Medical Innovation Prize Fund Act
113th Congress (2013-2014) (2013) Congress.gov United States Legislative
Information <http://beta.congress.gov/bill/113th/senate-bill/627>.
91
Katherine Jeanne Racz, The Health Impact Fund Proposal: Application in the
United States' Era of Comparative Effectiveness (2011) 19 Journal of Intellectual
Property Law 487, 513.
EAP 15
70
Vol 23(2) 2014-2015
3.2 The voluntary HIF assessed in an Australian context

3.2.1 Advantages of a HIF over the Australian patents system
The primary advantage that a HIF has over patent law is the separation of
cost-recovery for research and development expenditure from the sales of
product on the open market, reducing the reliance on pricing of the end
product to recoup the research and development costs. The return given by a
HIF to innovators of registered products is linked instead to the health
benefits conferred onto population; the greater the assessed health benefits
conferred, the greater the return under a HIF. Pharmaceutical firms are
incentivised to keep their registered product prices to a minimum to ensure
greater accessibility to allow for more widespread health benefits.92
Consequently, a multinational HIF would incentivise firms to develop
products targeting diseases that affect large numbers of people, often in
poverty-stricken nations, regardless of their ability to pay higher medication
prices.
Nevertheless, questions have been raised as to whether a HIF would similarly
affect the accessibility of the products to consumers in developed countries
such as Australia. Specifically, this issue comes to the fore in the context of
the widespread coverage of health insurance in developed nations,93 which in
Australia includes both private and public health insurance, and the existence
of government subsidies in the form of the PBS, which subsidises over 80 per
cent of all prescribed medicines.94 In particular, with a publicly-funded HIF, it
has been claimed that a HIF would merely reallocate the burden of funding
research and development from consumers to taxpayers.95 However, markups for patented products in developed countries often do affect accessibility
when the products reach such a high price that they become excluded from
insurance coverage.96 For example, in Australia, the use of paclitaxel with
carboplatin to treat endometrial cancer is not within the PBS and has resulted
in limited accessibility for patients due to the high prices.97 Additionally, the
flow-on effects of savings from reduced pharmaceutical prices will reduce the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
92
93
Jorn Sonderholm, A Reform Proposal in Need of Reform: A Critique of Thomas

Pogge's Proposal for How to Incentivize Research and Development of Essential
Drugs (2010) 3(2) Public Health Ethics 167, 172.
94

95
Sonderholm, above n 93, 173.
96
Peterson et al, above n 86, 181.
97
Medicines Australia Oncology Industry Taskforce, above n 95, 71.
EAP 16
71
burdens that taxpayers and insurance members will need to bear.98 A

separation of cost-recovery from the profits derived from the sale of a
pharmaceutical product would ultimately lead to lower prices for consumers,
either directly in the purchase of the patented product or indirectly through
the taxes and insurance premiums subsidising the products, and more direct
investment in research and development.
Further, linking a products returns to the health benefits under a HIF also
addresses the problem of misdirection of innovation that patent law
promotes. Pharmaceutical firms registering products with a HIF have no
incentive to register drugs with only marginal health benefits relative to a
first-in-class drug that has been registered under a HIF or existing treatments.
As Love observes, the system would reduce incentives for medically
unimportant products,99 reducing expenditure on innovation that is
ultimately unnecessary for community health. Moreover, competing firms
would be incentivised to enhance the first-in-class drugs registered with a
HIF considerably, rather than to produce imitation drugs. On the contrary,
where a HIF entirely replaces pharmaceutical patents, the lack of
commercialisation options for products under a HIF may have an unintended
side-effect of reducing incentives for the originating firm to improve on the
drug once it has been registered.100 For example, penicillin, as an unpatented
drug, was not subjected to further development until more than a decade
after its introduction.101 While there is a lack of data on this area as a HIF has
not been implemented before,102 such concerns are relevant only to a situation
where a HIF replaces the rights conferred by patents mandatorily. Pogges
conception, on the other hand, is of a HIF supplementing patent law. Firms
can choose to commercialise their product under a HIF or the patent system,
with products of limited medical importance able to be marketed without the
input of a HIF.
Additionally, a HIF has the capacity to be flexible in encouraging real follow
on drug developments in the context of competing firms. Pharmaceutical
firms often have a choice of developing a completely novel line of medicines
with a ground-breaking approach to treating diseases, termed first in class
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
98
Peterson et al, above n 86, 184.
99
James Love, The Medical Innovation Fund Prize - A New Paradigm for Supporting
Sustainable Innovation and Access to New Drugs: De-Linking Markets for Products from
Markets for Innovation (27 May 2011) Knowledge Ecology International 6
<http://keionline.org/sites/default/files/big_prize_fund_overview_26may2011_
letter.pdf>.
100
Wei, above n 72, 17.
101
Ibid.
102
Ibid 9.
EAP 17
72
Vol 23(2) 2014-2015
drugs.103 Other firms opt for follow-on drugs developed on the back of firstin-class drugs, which are often more effective and safer to use.104 Under the
patents system, while the first-in-class developer recovers its research and
development costs, it can use its patent rights to restrict others from
experimentation, demand damages for infringing products, and impose
licensing agreements. A HIF, on the other hand, can be established so that
remuneration can be given for registered first-in-class drugs whose patents
are the basis for development of registered follow on drugs. As returns are
based on usage and health impact, a HIF may assign prizes to those
developing the first-in-class drugs as a drug that did have a major positive
health impact, as part of the assessment system, even where real demand
may be minimal due to the market dominance of more effective follow-on
drugs.105
Moreover, an innovation-incentivising system consisting of a voluntary HIF
supplementing a patents system for pharmaceutical inventions, when
implemented properly, appears to be economically superior to a system that
relies purely on patents. The marketing of goods at monopolistic prices, such
as patented products, generates a deadweight loss to society. Consumers who
derive a value from using the goods which is greater than the production cost
of the product, but who are unable or unwilling to buy the goods at the
monopolistic price set by the patent-holder, will be excluded by the price.106
According to Shavell and van Ypersele, an opt-in rewards system
supplementing a patents system with sufficiently large rewards can avoid
this deadweight loss.107 Potential inventors who would be discouraged from
innovating due to insufficient demand from consumers at the monopoly price
for the invention would take the optional reward. For society to benefit as a
whole, the size of the rewards must be optimal,108 such that the reward is
less than the social surplus generated by the patent.109 Such a result may be
achieved by the government linking the reward size for a invention to the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
103
Informa, First-in-Class Drugs pioneers with great potential! (16 August 2013)
Informa Healthcare
<http://informahealthcare.com/doi/story/10.1517/news.2013.08.16.557>.
104
105
Ibid 1542.
106
Aidan Hollis, The Health Impact Fund: A Useful Supplement to the Patent
System (2008) 1(2) Public Health Ethics 124, 125.
107
Steven Shavell and Tanguy van Ypersele, Rewards versus Intellectual Property
Rights (2001) 44 Journal of Law and Economics 525, 539.
108
Ibid.
109
EAP 18
73
volume of product sales110 or another indicator of the inventions value. An

optional HIF, distributing rewards the size of which are linked directly to the
health benefits conferred by the registered pharmaceutical products, and
requiring registered patent-holders to sell their product at cost and to provide
free licences at the end of the HIF reward term, would be equivalent to an
opt-in rewards system. However, Abramowizc observes that while in theory
an optional reward system is superior to the patent system, the
administrative costs, in terms of the government obtaining information
necessary to set an optimal reward, and the susceptibility of the process to
abuse, may outweigh the benefits of such a system.111 Described as the
Achilles heel of a rewards system,112 this problem is compounded where the
value of follow-on innovations on the patents registered with the reward
system needs to be evaluated as part of the process to determine the value of
the registered patent.113 Nevertheless, in Australia, the ex-ante valuation of
patented pharmaceutical products under the PBS for the subsidies attached to
each treatment shows that administrative costs are not entirely prohibitive for
a centrally-administered system to operate. In any case, Abramowicz
acknowledges that Shavell and van Ypersele have shown that economic
benefits for an opt-in optimal rewards system complementing a patent
system, such as a voluntary HIF, are greater than that generated by a system
based solely on a patent system.114
3.2.2 The legality of a voluntary, national HIF as opposed to a mandatory HIF
scheme
The continuing use of patents alongside a national HIF and the reliance on
the pharmaceutical firms voluntary participation has little risk of
encountering legal obstacles internationally. Specifically, the Agreement on
Trade-related Aspects of Intellectual Property Rights 1994 (TRIPS Agreement)
requires member nations to guarantee the availability of patents with terms
of at least 20 years,115 and only allows for exceptions to the exclusive rights of
a patent, under Article 30, where they:
a) do not unreasonably conflict with the normal exploitation of the
patent;
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
110
Shavell and van Ypersele, above n 107, 541.
111
112
Wei, above n 72, 9.
113
114
Ibid 24.
115
Agreement on Trade-related Aspects of Intellectual Property Rights 1994, signed 15

April 1994, 1869 U.N.T.S. 299 (entered into force 1 January 1995) art 33.
EAP 19
74
Vol 23(2) 2014-2015
b) do not unreasonably prejudice the legitimate interests of the patentholder; and

c) account for the legitimate interests of third parties.116
The TRIPS Agreement has arguably been effective at restricting government
efforts to circumvent patent rights, with a narrow focus on allowing access to
pharmaceutical innovations under the limited frameworks of compulsory
licensing of specific products in times of national emergencies.117 The
flexibility allowed under Article 30 has been criticised as vague,118 although
interpretations of the provisions scope have at times been broad.119 A
voluntary HIF operating together with a patents system, in contrast to a
mandatory system that replaces patents for pharmaceutical products,
preserves patents as required by the TRIPS Agreement and does not engage
Article 30, avoiding the uncertainties in its interpretation.
Nevertheless, in considering the concept of a HIF, calls have been made for
the HIF to be introduced as a mandatory scheme in addition to patent law
regulation. While Pogge advocates for a voluntary scheme,120 critics observe
that such a scheme will allow pharmaceutical firms to continue exploiting
their patents regardless of the social cost and only register products which
they can anticipate the government will be willing to pay too much for,121
introducing further inefficiencies by overcompensation. Such a situation will
not be inevitable, as a HIF would operate to encourage investment in a
treating a disease affecting a poorer section of society, where there has been
underinvestment in the treatment under the patents system due to the
forecasted lack of demand at a high monopoly price. A HIF would make the
treatment commercially viable with a health-benefits rewards system. Yet, a
mandatory scheme avoids the risk of overcompensation problems122 and
minimises the price paid under a HIF to incentivise research in general.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
116
Ibid art 30.
117
Dina Halajia, Inadequacy of TRIPS & the compulsory license: Why broad
compulsory licensing is not a viable solution to the access to medicine problem,
(2012-13) 38 Brooklyn Journal of International Law 1191, 1206.
118
Ibid 1210.
119
Geertrui Van Overwalle, The implementation of the Biotechnology Directive in

Belgium and its after-effects: the introduction of a new research exemption and a
compulsory licence for public health (2006) 37(8) International Review of Intellectual
Property and Competition Law 889, 909.
120
121
122
Nickas, above n 88, 24.
EAP 20
75
Further, in commentary directed towards Senator Bernard Sanders bill

proposing to establish the Medical Innovation Prize Fund in the United
States, which sought to compulsorily limit the exploitation rights of
pharmaceutical firms for their products,123 Love suggests that a mandatory
scheme does not violate the TRIPS Agreement. He asserts that the bill has
been drafted to exploit the inherent flexibilities under the TRIPS Agreement124
especially under Article 30. Love argues that a limited exception may be
made for patents concerning medicines and vaccines which are reasonable in
the context of the legitimate interests of the patent-holders due to the
payments to be made from the mandatory HIF.125 Proponents of the
mandatory scheme therefore suggest that a mandatory HIF is both legally
feasible and necessary to realise the advantages of prize systems over those of
the patent system.
On the other hand, a mandatory HIF scheme is more likely to conflict with
the patent provisions against discrimination in regulating patents from
different fields of technology within the TRIPS Agreement. Article 27.1 of the
TRIPS Agreement prohibits discrimination in patent regulation along the
lines of the field of technology for patent rights.126 While the strict
interpretation of discrimination between patents in different fields of
technology has been rejected by a WTO Panel in favour of an interpretation
allowing differentiated regulation for legitimate reasons,127 a law that
unjustifiably differentiates between patents of specific fields of technology is
likely to be considered discrimination.128 Unjustifiable differentiation is also
not limited to imposing regulation to the detriment of patents within a
particular field of technology, with laws unjustifiably favouring a particular
field of technology being considered as discrimination.129 A mandatory HIF
that replaces patent regulation only for pharmaceutical research would be
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
123
Park, above n 60, 185.
124
James Love, The Medical Innovation Fund Prize - A New Paradigm for Supporting
Sustainable Innovation and Access to New Drugs: De-Linking Markets for Products from
Markets for Innovation, Knowledge Ecology International (27 May 2011) 8 <
http://keionline.org/sites/default/files/big_prize_fund_overview_26may2011_le
tter.pdf>.
125
Ibid 9.
126
Agreement on Trade-related Aspects of Intellectual Property Rights 1994, signed 15

April 1994, 1869 U.N.T.S. 299 (entered into force 1 January 1995) art 27.1.
127
Maria Victoria Stout, Crossing the TRIPS Non-discrimination Line: How CAFTA
Pharmaceutical Patent Provisions Violate TRIPS Article 27.1 (2008) 14 Boston
University Journal of Science and Technology Law 177, 182.
128
Panel Report, CanadaPatent Protection of Pharmaceutical Products, WTO Doc

WT/DS114/R (March 17, 2000) [7.94].
129
Stout, above n 127, 182.
EAP 21
76
Vol 23(2) 2014-2015
likely to be considered as regulatory discrimination against patents

originating in the field of pharmaceutical innovation. While Article 27.1 does
not prevent bona fide differentiated regulatory treatment for patents of
different fields of technology to address problems unique to the specific
fields,130 the scope of bona fide differentiation in regulation to date appears to
be limited. An example of regulation that has withstood a formal legal
challenge regarding discrimination would be amendments to a patent system
allowing for pharmaceutical products to be stockpiled by non-patent-holders
for pursuing regulatory approval for generic production in the last six
months of a patent terms validity.131 Such a measure does not appear
comparable to the radical reform entailed by imposing a mandatory HIF,
including the removal of industry-specific patent rights. In contrast, by
working in conjunction with the patents system, a voluntary scheme does not
require the removal of pharmaceutical patent rights, therefore reducing the
risk of being seen as discriminatory regulation within the general patent
system.
A voluntary scheme also avoids the risks of constitutional challenges in an
Australian context. Under the Australian Constitution, the Federal
Government must justly compensate individuals for any property acquired.132
For schemes mandatorily restricting pharmaceutical patents to confer only
rights compatible with the operation of a HIF, constitutional challenges are
likely to be made on the basis that no just compensation would be provided
to pharmaceutical firms for the limiting of their intellectual property rights by
the government. While it has been recently re-iterated that mere restriction of
intellectual property rights by Federal legislation, without more, does not
engage s 51(xxxi),133 the introduction of a scheme which would not compel
firms to subscribe and restrict their exploitation rights under their patents
would avoid the litigation costs of such challenges.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
130
Panel Report, CanadaPatent Protection of Pharmaceutical Products, WTO Doc

WT/DS114/R (Mar. 17, 2000) [7.94].
131
This was the subject of the most authoritative WTO Panel decision on the
interpretation of Article 27.1 to date, namely the Canada Patent Protection of
Pharmaceutical Products decision of 2000. The facts giving rise to the dispute
centred about Canadas implementation of laws removing liability for patent
infringement in cases where the patented product was used for a purpose
reasonably related to gaining regulatory approval in a period as specified by
regulations. The Canadian government then specified a liability-free period of the
last six months of a patent term for patented medicines in regulations: Panel
Report, CanadaPatent Protection of Pharmaceutical Products, WTO Doc
WT/DS114/R (March 17, 2000) [2.1]-[2.7].
132
Australian Constitution s 51(xxxi).
133
JT International SA v Commonwealth (2012) 86 ALJR 1297, 1311.
EAP 22
77
3.2.3 Policy considerations against a mandatory scheme

While there are merits to a mandatory scheme in reducing the risks of
overcompensation, a mandatory HIF would also not be suitable for
regulating all pharmaceutical products. As Pogge observes, a HIF will not
generate substantial returns for drugs that have limited health benefits, such
as hair-loss treatments.134 A voluntary HIF established with the patents
system will ensure that the patents system will remain open to firms as an
alternate pathway for exploiting their products. Firms wishing to devote
resources into developing drugs that do not have a great enough health
impact for a HIF award may still have a viable mechanism to recoup their
research and development costs under the patent system.135
Furthermore, the introduction of a mandatory HIF would encounter far more
political and industry opposition than a voluntary scheme would encounter
in terms of its implementation, especially in light of recent demonstrated
willingness on behalf of pharmaceutical firms to utilise their patents in
voluntary initiatives. Numerous commentators have noted that the
introduction of a HIF to replace the patent system in financing
pharmaceutical research and development would face considerable
opposition from pharmaceutical firms,136 which would be further exacerbated
by the large public funding requirements for a mandatory HIF.137 On the
other hand, a voluntary HIF depending on industry participation is a more
feasible option, especially due to the opportunities presented to firms to
profit from research efforts directed at maximising HIF rewards. The
willingness of pharmaceutical firms to participate in alternate schemes,
utilising their patent rights in a more socially conscious yet simultaneously
profitable manner, can be discerned in the operation of the voluntary
international Medicines Patent Pool for HIV/AIDS treatments. A voluntary
patent pool consists of a central administrating agency that receives patents
registered to it by a group of patent-holders.138 The patents are then licensed
out to third parties in return for royalties that are distributed to the registered
patent-holders.139 With patent pools recognised as effective mechanisms to
reduce transaction risk and costs in separately obtaining licences for
numerous patents associated with a single product,140 the Medicines Patent
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
134
135
Ibid.
136
137
Nickas, above n 88, 16.
138
Michelle Childs, Towards a Patent Pool for HIV Medicines: The Background
(2010) 4 The Open AIDS Journal 33, 34.
139
Ibid.
140
Ibid 35.
EAP 23
78
Vol 23(2) 2014-2015
Pool was established by UNITAID in 2010 to allow pharmaceutical firms to

register their patents across multiple jurisdictions for antiretroviral drugs.141
There have been positive responses from several large pharmaceutical
firms,142 the most recent of which being an agreement by ViiV Healthcare, a
joint venture between Pfizer, GlaxoSmithKline and Shionogi, to increase
access to its new antiretroviral drug, dolutegravir, through the pool.143 While
the involvement of large pharmaceutical firms in such an initiative does not
directly indicate the level of support that a HIF may receive, it does show that
where returns are reasonable under a voluntary scheme, industry may be
willing to lend its support to the scheme.
3.3 Implementation
3.3.1 A sketch of an Australian HIF
With regard to the existing literature on Hollis and Pogges HIF and the
regulatory landscape for Australian healthcare, an operational national HIF is
likely to be a Federal body administering allocated public funds. Hollis and
Pogge suggest that the body administering the HIF consist of independent
branches to:
a) determine the technical standards of measuring health impacts across
various diseases;
b) conduct forecasts and surveying of health benefits of each registered
treatment to determine the size of the reward available; and
c) audit the process of determining the rewards.144
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
141
Eric Noehrenberg, Implications of Patent Pools on Innovation Regarding

Antiretrovirals (2010) 4 The Open AIDS Journal 67, 69.
142
The Medicines Patent Pool, at the time of writing, has obtained licensing
agreements for eight antiretroviral drugs: See UNITAID, UNITAID Welcomes
ViiV Healthcares Latest Collaboration with the Medicines Patent Pool to Increase
Generics Access for Key New HIV Medicines (Media release, 1 April 2014) <
http://www.unitaid.eu/en/resources/press-centre/statements/1336-unitaidwelcomes-viiv-healthcare-s-latest-collaboration-with-the-medicines-patent-poolto-increase-generics-access-for-key-new-hiv-medicines>.
143
This agreement was announced on 1 April 2014 by the Medicines Patent Pool:
Katherine Moore, Medicines Patent Pool, ViiV Healthcare Sign Licence for the
Most Recent HIV Medicine to Have Received Regulatory Approval (Media
release, 1 April 2014) <http://www.medicinespatentpool.org/medicines-patentpool-viiv-healthcare-sign-licence-for-the-most-recent-hiv-medicine-to-havereceived-regulatory-approval/>.
144
Aidan Hollis and Thomas Pogge, The Health Impact Fund: Making New Medicines
Accessible for All
(Incentives for Global Health, 2008) 39.
EAP 24
79
Broadly, as a national Australian concern, the HIF may be administered by a

Federal body with an annual budget tasked with distributing rewards. On
application by a pharmaceutical patent-holder, the body would determine
whether to register a treatment based on standards of similarity to the
treatments already on the register, and would determine the reward sizes. To
determine the annual rewards for a particular product, pharmaceutical
research and development companies may be required to submit health
impact data to the administrative body on application for registration, in a
similar vein to the submissions made to the Pharmaceutical Benefits
Advisory Committee on application for PBS registration,145 and at the end of
each year of registration for continuous evaluation. As transparency is central
to such a system,146 to allow companies to predict the extent of the rewards
received, determinations should be published by the administering body.
The initial stage of implementing a scheme is likely to require a more limited
scope of coverage for the HIF, to provide a period of time to evaluate the
operation of the HIF and to reduce political opposition to its implementation.
Due to the lack of an operational HIF, many uncertainties remain as to the
potential problems that can arise on implementing the HIF and the extent of
such problems. For example, aside from the need to establish the standards of
patent registration, the potential scale of litigation around the refusal of the
administering body to register treatments too similar to those already on the
register147 and the disputes regarding the sizes of the rewards distributed
remains unknown.148 Wei suggests that the HIF could be initially
implemented as a scheme limited to particular types of treatment, such as
vaccines, or limited by specific diseases.149 Apart from the reduced level of
complexity encountered in decision-making for the body administering the
HIF, due to the smaller number of markets of treatments involved,150
Abramowicz also observes that a HIF limited by treatment type may attract
support from specific interest groups related to the treatment type, allowing
for greater political support for the scheme.151 While there may be concerns
that targeting specific treatment types in the initial stage of the HIF may also
make it susceptible to concentrated interest group lobbying,152 the relative
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
145
Stephen J Duckett, Drug Policy Down Under: Australias Pharmaceutical Benefits

Scheme (2004) 25(3) Health Care Financing Review 55, 59.
146
147
Racz, above n 91, 512.
148
149
Ibid 21.
150
151
Ibid.
152
Ibid 89.
EAP 25
80
Vol 23(2) 2014-2015
simplicity of a limited scheme would be necessary to gauge and respond to

implementation issues.
3.3.2 Funding the HIF
The primary concern raised by critics of implementing a full-scale HIF is the
funding of the prizes awarded to industry. Pogges original idea proposed
seed funding for an international scheme of $6 billion per year, to be
contributed by governments around the world and initially divided among
approximately 20 registered medicines.153 The funding would grow
incrementally over each year, as more high impact medicines are
registered.154 For an Australian HIF, funding that could match the seed
funding of a larger international regime may be found by redirecting some of
the current funding to the PBS. In the financial year ending on 30 June 2012,
approximately $9.19 billion was directed to subsidising prescription
medicines under the scheme.155 The top ten most expensive medicines
subsidised by the government alone cost the scheme over $2.3 billion.156 With
such funding being directed towards medicines priced under patent
monopolies, the removal of monopolistic pricing for products registered
under the HIF would drastically reduce the rationale for having government
subsidies for prescriptions under the PBS. However, an argument may be
made that under a voluntary scheme, pharmaceutical companies will decide
on the path that yields greater returns. As a result, there would be no real
reduction overall to the government, as the drugs that are more profitable
under the PBS will remain monopolistically priced for the government. Those
drugs with more health impacts currently under the PBS and better
remuneration prospects under the HIF will be registered, increasing the
governments total costs. While a scheme requiring all medicines to be
registered under the HIF will overcome such a problem, this solution has its
own obstacles as discussed above in Sections 3.2.2 and 3.2.3. It may be
possible to reduce the profits made by pharmaceutical companies when
registering under the PBS by reallocating a percentage of their returns under
the PBS to subsidise the HIF. Nevertheless, the solution appears to require
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
153
Incentives for Global Health: The Whitney and Betty MacMillan Center at Yale,
Financing the Health Impact Fund (2013) The Health Impact Fund
<http://healthimpactfund.org/financing-the-health-impact-fund/>.
154
Ibid.
155
Department of Health (Commonwealth), Summary of PBS Processing year ending 30

June 2012, PBS Expenditure and Prescriptions: Expenditure and Prescriptions
twelve
months
to
30
June
2012
<http://www.pbs.gov.au/info/statistics/expenditure-and-prescriptions-30-062012#Summary>.
156
Department of Health (Commonwealth), Table 10(a) Highest Government Cost Drug

(incl Drs Bag) by PBS Item, PBS Expenditure and Prescriptions: Expenditure and
Prescriptions
twelve
months
to
30
June
2012
<http://www.pbs.gov.au/statistics/2011-2012-files/table-10a.pdf>.
EAP 26
81
further taxation by the government to cover the costs of a HIF or reform to

the PBS to limit the governments remuneration to firms listing products
under the scheme.
3.3.3 Measuring health impacts
Despite concerns raised by critics regarding the standard of measurement to
assess the health benefits of a given treatment, and the adverse implications
raised by employing health benefits as a standard for remunerating
pharmaceutical innovators, Australia is in a unique position to overcome
these challenges. Pogge has suggested that health benefits can be measured
or estimated according to quality-adjusted-life-years (QALYs), additional
healthy life or years of life impaired by the effects of a medical condition
gained by a patient from using a particular pharmaceutical product.157 Under
his conception of a HIF, remuneration is determined by a fixed monetary
amount per QALY.158 However, Hubbard and Love have criticised this
proposal, claiming that a strictly proportional QALY-dependent payment
under the fund would lack flexibility to address diseases that affect fewer
patients.159 In turn, a system based entirely on QALYs may unfairly
disadvantage patients affected by diseases that are less common in the
community.160 Additionally, assessment regimes would necessarily be
complicated where a patient requires a cocktail of drugs which have been
registered under a HIF, or where a particular pharmaceutical product has
detrimental side-effects.161 While these problems appear to be overly
complex, these have to an extent been addressed in the existing costeffectiveness assessment system in Australias PBS,162 which estimates the
cost-effectiveness of pharmaceuticals to determine the level of
reimbursement. Problems associated with establishing a monitoring system
for the actual health impacts of a particular pharmaceutical innovation, while
a concern where a HIF is implemented in a developing nation,163 are not
issues in a developed nation like Australia, given the extensive recordkeeping infrastructure available. Therefore, Australias existing system of
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
157
William W Fisher and Talha Syed, A prize system as a partial solution to the
health crisis in the developing world in Thomas Pogge, Matt Rimmer and Kim
Rubinstein (eds), Incentives for Global Health: Patent Law and Access to Essential
Medicines (Cambridge University Press, 2010) 181, 198.
158
Ibid 198.
159
160
161
Ibid 12.
162
163
Sonderholm, above n 93, 173.
EAP 27
82
Vol 23(2) 2014-2015
estimation of drug effectiveness may be well-suited to the problem of

assessing remuneration under the HIF.
Conclusion
The debate around the merits of patent law in relation to pharmaceutical
patents and access to pharmaceutical innovations has been one with a long
history. The justifications for patent laws role in regulating pharmaceutical
products are well-known: to ensure the financial viability of innovation in a
field where research and development involve significant investments and
risks; and to provide public access to patented innovations after the
expiration of the patent term. However, Australian patent law has its
shortcomings in regulating pharmaceutical research and development;
patents are an inefficient method for financing pharmaceutical research and
development, and tend to direct investments towards profitable yet
medically unimportant products. As a result, the balance between public and
private interests at the heart of patent law has been skewed excessively away
from public interests due to the unwillingness of patent law to consider the
public interest in enhancing public health inherent in pharmaceutical
innovation. Consequently, the proposal for establishing a HIF, as suggested
by Hollis and Pogge, to supplement patent law in regulating pharmaceutical
innovation should be considered. The establishing of a voluntary HIF
mechanism circumvents potential legal obstacles under the TRIPS Agreement
and the Australian Constitution. The HIF links financial returns to the
performance of the patented innovation, incentivising not only research and
development, but also access to the patented product. Despite the likely
increase to costs borne by the public for the HIF to operate, such a system
would be a more balanced incentives regime, encouraging pharmaceutical
product innovation based to a larger extent on direct health benefits on the
product rather than the marketing power of firms for their products. While
numerous difficulties in implementing a HIF exist, Australia is uniquely
placed to implement a HIF. Australias existing cost-effectiveness mechanism
of the PBS may be transplanted into a HIF health impact assessment regime.
The implementation of a voluntary HIF, either for general application or with
a limited scope targeting specific treatments, alongside patent law regulation
should therefore be seriously considered.
EAP 28
The Limited Impact Of Evergreening Practices In

Australia
STEPHANIE CROSBIE *
Abstract
Concerns are often raised regarding the impact of strategies employed by
originator pharmaceutical companies to expand patent protection with a view to
maximising profits. It has been argued that such practices have a negative
impact on competition and access to affordable pharmaceuticals for the public.
This article focuses on evergreening as one such strategy in an Australian
context and argues that as a matter of practical reality, the impact of
evergreening practices in Australia is not as detrimental as the concerns that
have been raised regarding such strategies suggest. In support of this argument,
this article examines: the ability of Australian patentability requirements to
appropriately regulate the grant of follow-on patents, as demonstrated in cases
of alleged evergreening including Merck & Co Inc v Arrow Pharmaceuticals
Limited, Aktiebolaget Hassle v Alphapharm Pty Ltd and H Lundbeck A/S v
Alphapharm Pty Ltd; the diverse generic and originator ownership of follow-on
patents in Australia; the role of follow-on patent applications as part of
legitimate and predictable business practices; the benefits potentially flowing
from follow-on and cumulative innovation; and the limited scope and thus
limited threat of follow-on patents in comparison to original patents. The
findings of the Report of the 2013 Pharmaceutical Patents Review will also be
considered.
Introduction
Pharmaceutical patents are temporary monopoly rights granted to exclude
others from commercially exploiting an invention for or directly related to a
medicine, including those for active ingredients, new formulations and
methods of use.1 They are granted in return for disclosure, in the patent
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
*
Stephanie Crosbie is a final year Science/Law student from the University of New
South Wales. The author would like to thank Dr Catherine Bond for her helpful
comments on drafts of this article.
!
84
Vol 23(2) 2014-2015
specification, of sufficient information to allow an invention to be performed

using the best method known to the applicant.2 Patents over pharmaceutical
inventions are pervasive in Australia, representing the third largest
technology area for patent applications, with most applications filed by
multi-national pharmaceutical companies.3
Concerns have been raised regarding the strategies utilised by such
pharmaceutical companies to extend their patent monopolies, particularly
surrounding the implications for patent policy, competition and affordable
access to health care in our contemporary society that is highly reliant on
pharmaceuticals.4 Evergreening is one such strategy that has resulted in
criticism of originator pharmaceutical companies both in Australia and
internationally. Evergreening is a colloquial term with no universally
accepted definition. However, it is commonly used to describe the strategic
utilisation of the patent system to extend the breadth and duration of patent
protection for high-earning pharmaceuticals, by obtaining firstly an original
patent for the API (Active Pharmaceutical Ingredient), and then multiple
follow-on patents for different aspects of the same drug.5
Evergreening was discussed in the IP Australias Pharmaceutical Patents
Review (the Pharmaceutical Patents Review).6 The Pharmaceutical Patents
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1
Tony Harris, Dianne Nicol and Nicholas Gruen, Pharmaceutical Patents Review,
Report (2013) 25; Gaurav Dwivedi, Sharanabasava Hallihosur and Latha Rangan,
Evergreening: A Deceptive Device in Patent Rights (2010) 32 Technology in Society
324, 324; Inderjit Singh Bansal, Deeptymaya Sahu, Gautam Bakshi and Sukhjeet
Singh, Evergreening A Controversial Issue in Pharmaceutical Milieu (2009) 14
Journal of Intellectual Property Rights 299, 299.
Patents Act 1990 (Cth) s 40 (Patents Act).
See, eg, Dwivedi, Hallihosur and Rangan, above n 1; Andrew Christie and Sally
Pryor, Evergreen Dilemma: Law Blind to Patents Purpose (2004) On Line Opinion
1; Robert Chalmers, Evergreen or Deciduous? Australian Trends in Relation to the
Evergreening of Patents (2006) 30 Melbourne University Law Review 29.
Rhonda Chesmond, Patent Evergreening in Australia Under the Australia

United States Free Trade Agreement: Floodgates or Fallacy? (2006) 9 Flinders
Journal of Law Reform 51; Harris, Nicol and Gruen, above n 1, 7, 105; Bansal et al,
above n 1, 299.
Harris, Nicol and Gruen, above n 1. The Report was provided to the Government
in May 2013. Initially it appeared that the Report would not be released, based on
the response of Ian Macfarlane, the Minister for Industry, to a question posed by
Western Australian MP Melissa Parke: Commonwealth, Questions in Writing:
Question No 22, House of Representatives, 11 February 2014, 100. It was suggested
that this hesitation was attributable to the recent changes in leadership in
Australia: Mark Summerfield, Pharmaceutical Patents Review Buried by Successive
Governments
(16
February
2014)
Patentology
<http://blog.patentology.com.au/2014/02/pharmaceutical-patents-review-
EAP 2
The Limited Impact of Evergreening Practices in Australia
85
Review endeavoured to evaluate the ability of the Australian patent system

to balance access to competitively-priced pharmaceuticals with encouraging
research and development by providing patent protection as an incentive for
investing in innovation.7 The Pharmaceutical Patents Review concluded that
evergreening can have an unfortunate effect of frustrating competitors
efforts to enter the market and increasing uncertainty for generics and
others seeking to innovate, by facilitating extended protection through
ownership of multiple patents surrounding a single pharmaceutical.8
In this article, I will argue that in reality the impact of evergreening practices
in Australia is not as unfortunate or detrimental as has been claimed. By
way of introduction, in Part 1, I will discuss the pharmaceutical industry and
practices of evergreening. In Part 2, I will set the legal scene for evergreening
in Australia by explaining the way current patentability requirements
appropriately regulate the grant of follow-on patents. The concerns raised by
others regarding evergreening will be outlined in Part 3, which will be
rebutted in Part 4 where I will present four practical realities that suggest that
evergreening is not of significant concern in Australia. In Part 41, I will
discuss an empirical analysis revealing that follow-on pharmaceutical patents
are owned by a variety of companies,9 indicating that evergreening strategies
are not exclusively utilised by allegedly unfair originator companies. In Part
4.2, I will argue that evergreening is generally a predictable and legitimate
business practice that operates within the bounds of Australian patent law.
The potential benefits flowing from the ability to seek follow-on patents and
cumulative innovation will be highlighted in Part 4.3. Finally, in Part 4.4, I
will argue that follow-on patents are necessarily more confined in scope than
the original patent, and thus do not often pose a substantial threat to
competition.
Pharmaceutical Patents And Evergreening In Australia
The pharmaceutical industry, which is comprised of companies that develop

pharmaceuticals for use as medication,10 is one of the most profitable in the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
buried-by.html >. Ultimately, the Report was released to the public in 2014 as a
response to stakeholder interest: IP Australia, Review of Pharmaceutical Patents in
Australia (14 August 2014) <http://www.ipaustralia.gov.au/about-us/iplegislation-changes/review-pharmaceutical-patents/>.
7
Harris, Nicol and Gruen, above n 1, iv.
Ibid 117.
Originator pharmaceutical companies are those who originally invent a

pharmaceutical, and are generally contrasted with generic companies who
develop cheaper alternatives once the original patent has expired: Ibid viii, 121.
10
Kim Sweeny, The Pharmaceutical Industry in Australia (Working Paper No 34,

Centre for Strategic Economic Studies, 2007) 1.
EAP 3
86
Vol 23(2) 2014-2015
world11 and is experiencing growth in Australia.12 The research and

development of pharmaceuticals is challenging, risky and expensive,13
requiring substantial upfront investment.14 These problems are often the
result of high failure rates; extensive delays between initial discovery and
market entry of a drug; and the fact that pharmaceutical products are often
relatively easy to reverse engineer, and are thus susceptible to free riders.15
It has been noted by Medicines Australia that it takes approximately $1.5
billion and 12 to 15 years to bring a new drug to market.16 While the
impartiality of this estimation may be questioned due to the involvement of
Medicines Australia in promoting the interests of originator pharmaceutical
companies, this figure is substantially concordant with other suggestions. For
example, another estimate puts the cost of releasing a new pharmaceutical at
approximately US $800 million.17 Despite the risk and initial outlay, the
rewards are potentially high.18 For example, Pfizers cholesterol lowering
blockbuster atorvastatin, Australias biggest selling medicine, has generated
$120 billion in cumulative global revenue since 2000.19
As a result of the initial risks and expense, pharmaceutical companies rely
heavily on the patent system to enhance profitability through the exclusivity
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
11
Rhonda Chesmond, above n 5, 60.
12
Department of Industry, Innovation, Science, Research and Tertiary Education,

Australian Pharmaceutical Industry Data Card (2011) cited in IP Australia,
Pharmaceutical Patents Review, Background and Suggested Issues Paper (2012).
13
Roger Collier, Drug Patents: The Evergreening Problem (2013) 185 Canadian
Medical Association Journal 385, 386; Kate Gaudry, Evergreening: A Common
Practice to Protect New Drugs (2011) 29 Nature Biotechnology 876, 876; Harris,
Nicol and Gruen, above n 1, 28.
14
Bansal et al, above n 1, 301.
15
Gaudry, above n 13, 876; Harris, Nicol and Gruen, above n 1, 28; Robert Weissman,
The Evergreen Patent System: Pharmaceutical Company Tactics to Extend Patent
Protection (2002) Multinational Monitor 19, 19.
16
Harris, Nicol and Gruen, above n 1, 33 citing the Medicines Australia Submission
to the Pharmaceutical Patents Review, January 2013, 1.
17
Joseph DiMasi, Ronald Hansen and Henry Grabowski, The Price of Innovation:
New Estimates of Drug Development Costs (2003) Journal of Health Economics 22,
151, 166 cited in David Cutler, The Demise of the Blockbuster? (2007) 356 New
England Journal of Medicine 1292, 1292.
18
19
Reuters, Update 2 Pfizer Aims to Keep One-third of Lipitor Pie (30 November
2011); Nature Reviews Drug Discovery (2011) 10 Nature Medicine 889.
EAP 4
87
afforded by intellectual property protection.20 Empirical findings show that

patents play an important role in encouraging pharmaceutical innovation,
which enhances the quality of public health care and advances our scientific
knowledge.21 These factors suggest that patents, by providing an assurance
that there will be a period of market exclusivity in which the originator can
recoup extensive research and development costs, have an important role for
both the community and pharmaceutical companies.22
Further, the rising costs associated with developing pharmaceutical
products,23 the potential for high profitability and the increasing pressure on
companies to increase returns on investments24 have all created an incentive
to stretch the boundaries of the patent system to maximise the scope and
length of patent protection.25 One strategy that has been employed by
pharmaceutical companies in order to expand patent protection is
evergreening. This practice involves seeking multiple follow-on patents for
various features of an API over time in order to maximise patent protection.26
The most common evergreening paradigm involves an originator company
lodging an initial patent claiming the API for a drug. Later, the company
lodges so-called follow-on patents, which are simply new standard or
innovation patents that claim extraneous features of the drug.27 These follow-
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
20
Henry Grabowski, Patents, Innovation and Access to New Pharmaceuticals

(2002) 5 Journal of International Economic Law 849, 8502.
21
Ibid 8503; Edwin Mansfield, Patents and Innovation: An Empirical Study (1986)
32 Management Science 173, 174.
22
23
UK Office of Health Economics, The R&D Cost of a New Medicine (2012) cited in
24
Michael Burdon and Kristie Sloper, The Art of Using Secondary Patents to
Improve Protection (2003) 3 International Journal of Medical Marketing 1, 1;
25
Gaudry, above n 13, 877; Lara Glasgow, Stretching the Limits of Intellectual
Property Rights: Has the Pharmaceutical Industry Gone Too Far? 41 IDEA: The
Intellectual Property Law Review 227, 227; Chalmers, above n 4, 31.
26
Chesmond, above n 5, 51; Harris, Nicol and Gruen, above n 1, 105; Bansal et al,
above n 1, 299.
27
Harris, Nicol and Gruen, above n 1, 105. Other strategies involve marketing
techniques and life-cycle management, where originator pharmaceutical
companies employ strategies to extend their patent monopoly, including
prescription switching from an old pharmaceutical coming to the end of its patent
life to a new variety which does have patent protection: Harris, Nicol and Gruen,
above n 1, 1056. As these are not directly related to the patent system, they will
not be discussed further in this article.
EAP 5
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Vol 23(2) 2014-2015
on patents typically claim new variations, improvements, formulations,

derivatives, packaging, dosing regimes, delivery systems, and new methods
of use, production and manufacture.28 As a result, this practice both broadens
the scope of patent protection for a single drug and extends the length of
protection, as follow-on patents expire later and thus have a greater
monopoly profit potential.29
For example, there are various follow-on patents associated with lamotrigine,
the API originally patented by GlaxoSmithKline in 1980, used to treat central
nervous system disorders, including epilepsy.30 The original drug was an oral
tablet sold under the name Lamictal, and the original patent expired in 2000
in most countries.31 GlaxoSmithKline applied for a follow-on patent in 1992
for a chewable and dispersible tablet formulation, which enhanced patient
compliance and ease of use.32 Prima facie, this could suggest that
GlaxoSmithKline was able to extend their patent monopoly for lamotrigine.
However, in reality, when the original patent for the oral tablet expired,
generic competitors were still able to enter the market and supply consumers
with a generic alternative to Lamictal.33 Importantly, the competitors were
only precluded from manufacturing the new, chewable tablet formulation
that was the subject of the follow-on patent.34 Additionally, generic
competitors were prompted to design around GlaxoSmithKlines follow-on
patent and develop alternative chewable tablet formulations using different
technology that had a similar effect.35 Indeed there are numerous Australian
follow-on patents associated with lamotrigine, claiming alternative tablet
compositions and enhanced formulations, owned by more than ten originator
and generic pharmaceutical companies.36
This initial example suggests that instances of evergreening do not
inevitably violate patent policy nor hinder competition to the extent that has
been claimed. These concerns will be explored further in Part 3, following an
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
28
Harris, Nicol and Gruen, above n 1, 105; IP Australia, above n 12, 25; Bansal et al,
above n 1, 299.
29
Gaudry, above n 13, 877.
30
31
GlaxoSmithKline, Evergreening (2011) Global Public Policy Issues 2.
32
Ibid.
33
Ibid.
34
Ibid.
35
Ibid 23.
36
Based on a search for lamotrigine on the IP Australia AusPat Patent Register on 31

January 2014.
EAP 6
89
analysis in Part 2 of the centrality of patentability requirements in

appropriately regulating evergreening practices.
Patentability Requirements And Their Role In

Appropriately Regulating Evergreening Strategies In
Australia
The Australian patentability requirements play a fundamental role in

ensuring that all patents, including follow-on patents, meet appropriate
standards, as demonstrated through the cases discussed in this section.
2.1 Australian
Strategies
Patentability
Requirements
and
Evergreening
In Australia, the Patents Act 1990 (Cth) (Patents Act) imposes a number of
substantive patentability requirements and disclosure requirements, which
must be met to obtain a standard patent.37 The substantive requirements for
both standard and innovation patents are specified in s 18 of the Patents Act.38
A standard patent can only be granted over an invention that: is a manner of
manufacture; is novel when compared with the prior art base as it existed
before the priority date of the claim; involves an inventive step; is useful; and
has not been secretly used before the priority date.39 Of these requirements,
manner of manufacture, novelty and inventive step are most contentious in
cases of evergreening.
The manner of manufacture requirement refers to a mode of achieving an
end result that is an artificially created state of economic utility.40 The manner
of manufacture requirement should operate to limit inappropriate attempts to
patent products or processes that are not legitimate inventions creating a new
and useful state of affairs, but are instead better characterised as mere
discoveries or scientific theories. This acts as a restraint on the grant of a
follow-on patent in the context of evergreening.41
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
37
Patents Act.
38
A standard patent affords 20 years of protection, while innovation patents expire

after eight years and are subject to a lower threshold of inventiveness, as
innovation patents only require an innovative step as opposed to an inventive
step: Ibid ss 67, 68.
39
Ibid s 18(1).
40
Ibid s 18(1)(a); National Research Development Corporation v Commissioner of Patents

(1959) 102 CLR 252, [25] (Dixon CJ, Kitto and Windeyer JJ); CCOM Pty Ltd v Jiejing
Pty Ltd (1994) 28 IPR 481, 51314 (Spender, Gummow and Heerey JJ).
41
See 2.2.1.
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Vol 23(2) 2014-2015
The novelty of the patent claims is measured against the prior art base, which
includes information publicly disclosed in a document or made available
through doing an act, as understood by a person skilled in the art.42 Hence, it
requires that the invention has not been previously disclosed in such a way
that a skilled addressee would be able to apply and use the invention without
needing to undertake further inventive work.43 In the context of evergreening,
the novelty requirement should operate to ensure that follow-on patents are
not granted for what has already been disclosed, in either a previously filed
patent specification or other publicly available information.44
The inventive step threshold requires that the product or process is an
advance on prior knowledge, which means that follow-on patents must
actually be inventive and non-obvious.45 When compared with the prior art
base, it must not have been an obvious step to a person skilled in the relevant
art in light of the common general knowledge.46 Following amendments to
the Patents Act, contained in the Intellectual Property Laws Amendment (Raising
the Bar) Act 2012 (Cth), the inventive step requirement has been strengthened,
and now more information can be considered in assessing inventiveness.47
The Pharmaceutical Patents Review has stated that these amendments may
make it more difficult to patent trivial advances or obvious variations,
thereby limiting the opportunities for patent portfolio-type evergreening.48
As these amendments only took force in April 2013,49 their impact on
evergreening practices is not yet known.
For pharmaceutical patents, the practical effect of these requirements is that
monopolies cannot be granted for drugs or pharmaceutical processes that
have already been invented, or are obvious given what has previously been
done in the field. This means that to be granted a follow-on patent,
incremental or cumulative improvements must be substantial enough to meet
patentability thresholds. Christie and Pryor have insightfully highlighted that
the patentees motives are irrelevant to patent validity.50 Hence, patent
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
42
Patents Act ss 18(1)(b)(i), 7(1), sch 1 (definition of prior art base).
43
H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70, [174] (Bennett J) citing Hill
v Evans (1862) 1A IPR 1, 6.
44
Patents Act s 7(1), sch 1 (definition of prior art base).
45
Ibid s 18(1)(b)(ii).
46
Ibid s 7(2), sch 1 (definition of prior art base).
47
48
Ibid 119.
49
Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth) s 2.
50
Christie and Pryor, above n 4, 2.
EAP 8
91
applications for follow-on patents cannot be rejected merely on the basis of a

patentees improper motives in attempting to gain an unfair advantage that
could subvert patent policy or hinder competition.51 Instead, recourse must
be made to the patentability criteria to regulate patent quality in Australia.
This makes the patentability requirements crucial in the case of evergreening.
2.2 Australian Cases Applying the Patentability Requirements in

Situations Involving Evergreening
There have been relatively few evergreening cases in Australia.52 The three
cases that will be discussed in this section each demonstrate the adherence of
Australian courts to the patentability requirements in ascertaining the
validity of follow-on patents, and their role in appropriately regulating
evergreening. Merck will be considered first as an example of an unsuccessful
attempt to patent a dosage regime associated with a previously patented API,
followed by Aktiebolaget and Lundbeck as instances where follow-on patents
were found to be valid, having satisfied the patentability requirements.
2.2.1 Merck & Co Inc v Arrow Pharmaceuticals Limited (Merck)53
Merck owned patents claiming alendronate, the API used in osteoporosis
medication to inhibit bone resorption, filed in 1990, and a method for using
alendronate using a one-per-day oral dosage regime.54 A follow-on patent
was claimed for an alternative one-per-week dosage regime, which reduced
gastrointestinal side effects and raised patient compliance.55 The follow-on
patent claiming the weekly dosage regime was challenged in an action for
revocation by a generic manufacturer, Arrow, under s 138 of the Patents Act.56
At first instance, Justice Gyles held that the follow-on patent was invalid for
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
51
Ibid.
52
In contrast, it has been argued that evergreening has become endemic in the
United States and Canada (see, eg, Chesmond, above n 5, 54; Weissman, above n
15; Christie and Pryor, above n 4, 1). There are a greater number of cases
surrounding evergreening in the United Kingdom, which take a similar approach
to courts in Australia in assessing follow-on patents according to the patentability
requirements (see, Burdon and Sloper, above n 24). Evergreening has attracted
extensive criticism from Indian courts (see, eg, Novartis AG v Union of India &
Others (2013) Civil Appeal No 27062716).
53
[2006] FCAFC 91.
54
Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91, [4][5]; Arrow
Pharmaceuticals Ltd v Merck & Co Inc [2004] FCA 1282, [9].
55
Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91, [10], [12].
56
Arrow Pharmaceuticals Ltd v Merck & Co Inc [2004] FCA 1282, [1].
EAP 9
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Vol 23(2) 2014-2015
two main reasons57 and his decision was upheld on appeal to the Full Federal
Court by Heerey, Kiefel and Dowsett JJ.58
First, Gyles J found that the claims failed to satisfy the requirements of a
patentable invention and manner of new manufacture in s 18 of the Patents
Act.59 His Honour emphatically stated that each of the so-called method
claims was one way of utilising alendronate and its known quantities for the
known purpose of preventing or treating osteoporosis by a known method of
oral administration.60 In this way, Gyles J classified the claims of the followon patent as mere directions for use (and not an invention nor a manner of
manufacture) as reduction in side effects produced no new technical effect or
involved no discovery of new physical properties or results in the
compound61 beyond standard mixing and formulation techniques.62 The
decision reinforced the principle that the specification must disclose a new
substance, new characteristic of a known substance, new use or new method
to qualify as a manner of manufacture.63 In this case, the specification did not
disclose a new substance, nor a new property or use of a known substance.
Second, it was held that the subject matter of the follow-on patent lacked
novelty.64 Information surrounding the invention had been previously
published in the Lunar News journal in 1996 and 1997.65 While the
publications were not well known,66 they still formed part of the prior art
base because 18 000 copies were circulated and they were published on the
Lunar Corporation website.67 Consequently, the contents were held to be
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
57
Ibid.
58
Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91, [114].
59
Arrow Pharmaceuticals Ltd v Merck & Co Inc [2004] FCA 1282, [80], [97].
60
Ibid [87].
61
Arrow Pharmaceuticals Ltd v Merck & Co Inc [2004] FCA 1282, [87], [95]; Merck & Co
Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91, [15][16].
62
63
Ibid [83]; National Research Development Corporation v Commissioner of Patents (1959)

102 CLR 252, [7]; Wellcome Foundation Ltd v Commissioner of Patents (1980) 145 CLR
520, [20][21]; Commissioner of Patents v Microcell Ltd (1959) 102 CLR 232, 249
(Dixon, McTiernan, Fullager, Taylor and Windeyer JJ).
64
Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91, [113].
65
Arrow Pharmaceuticals Ltd v Merck & Co Inc [2004] FCA 1282, [37], [41].
66
Ibid [98]; Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91, [80][84],
[89].
67
Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91, [98], [102][103].
EAP 10
93
publicly available for the purpose of novelty.68 The prior publications also
sufficiently disclosed the invention to defeat novelty by anticipating each of
the claims,69 as the articles clearly conveyed the benefits of a weekly dosing
regime and the approximate quantity used.70
This decision emphasises that a follow-on patent claiming a dosage regime
must still satisfy each of the patentability requirements. Justice Gyles stated
that the case involved what would now colloquially be called an attempt to
evergreen a pharmaceutical patent.71 Interestingly, His Honour looked
unfavourably on the fact that Merck attempted to claim a particular dosing
regime for a particular purpose that was contemplated at the time of the base
patent, with no new properties of the compound having been discovered in
an inventive fashion.72 It is this lack of further ingenuity that appears to
make Merck distinguishable from other cases considering follow-on patents
involving previously unknown properties that were not contemplated at the
time of the original invention, as in Aktiebolaget and Lundbeck, discussed
below.
2.2.2 Aktiebolaget Hassle v Alphapharm Pty Ltd (Aktiebolaget)73
In Aktiebolaget, a follow-on patent directed towards a new formulation for
coating omeprazole (sold as Losec), used in the treatment of gastrointestinal
disorders, was challenged in the High Court.74 Aktiebolagets follow-on
patent claimed a method of formulating omeprazole in a way that enabled it
to be delivered to the small intestine without degradation in the stomach by
using a protective coating and with the addition of an alkaline material.75
Omeprazole itself could not be commercially exploited without such a
protective coating.76 The patent for omeprazole, the API, was close to expiry,
and, consequently, Alphapharm sought to import and sell a generic
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
68
Ibid; Arrow Pharmaceuticals Ltd v Merck & Co Inc [2004] FCA 1282, [100][101].
69
Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91, [17], [89]; Arrow
Pharmaceuticals Ltd v Merck & Co Inc [2004] FCA 1282, [98].
70
Merck & Co Inc v Arrow Pharmaceuticals Ltd [2006] FCAFC 91, [79], [112], Arrow
Pharmaceuticals Ltd v Merck & Co Inc [2004] FCA 1282, [30], [109], [116].
71
72
Ibid [88] (emphasis added).
73
(2002) 194 ALR 485.
74
Aktiebolaget Hassle v Alphapharm Pty Ltd (2002) 194 ALR 485, [3][6] (Gleeson CJ,
Gaudron, Gummow and Hayne JJ).
75
Ibid [3] (Gleeson CJ, Gaudron, Gummow and Hayne JJ).
76
Ibid.
EAP 11
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Vol 23(2) 2014-2015
equivalent.77 Aktiebolaget brought infringement proceedings against

Alphapharm, and Alphapharm counterclaimed for revocation of the patent.78
The primary judge in the Federal Court, Lehane J, held that the follow-on
patent was obvious and, on that basis, made an order for revocation.79 On
appeal to the Full Federal Court, Justice Lehanes findings were upheld.80
A 52 majority of the High Court, however, allowed an appeal against this
finding. The majority, comprising of Gleeson CJ, Gaudron, Gummow and
Hayne JJ (in a joint judgment) and Callinan J (in a separate judgment), found
that the combination of elements used in the new tablet formulation and their
interaction was inventive, even if some integers were previously known
while others were new.81
Interestingly, the Pharmaceutical Patents Review described the Aktiebolaget
follow-on patent as an example of the importance of the patent system
extending protection to cumulative research and incremental developments.82
Without the follow-on patent, the API could not be delivered to the correct
site of action to achieve the intended medical effect,83 and the High Courts
decision is consistent with patent policy in rewarding such an important
invention. Here, the High Court is seen to condone evergreening practices
provided follow-on inventions satisfy the patentability requirements.84
In contrast, both McHugh and Kirby JJ dissented, with Kirby J stating that
this Court should avoid creating fail-safe opportunities for unwarranted
extensions of monopoly protection that are not clearly sustained by the law.85
However, despite His Honours concerns, where the patent meets the current
patentability requirements, the grant of monopoly protection will be
sustained by the law.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
77
78
79
Aktiebolaget Hassle v Alphapharm Pty Ltd [1999] FCA 628, [26][121], [234] (Lehane
J).
80
Aktiebolaget Hassle v Alphapharm Pty Ltd [2000] FCA 1303, [156] (Wilcox, Merkel
and Emmett JJ).
81
Aktiebolaget Hassle v Alphapharm Pty Ltd (2002) 194 ALR 485, [65] (Gleeson CJ,
Gaudron, Gummow and Hayne JJ), [194] (Callinan J).
82
83
Harris, Nicol and Gruen, above n 1, 113 quoting the Institute of Patent and Trade
Mark Attorneys of Australia, Submission to the Pharmaceutical Patents Review,
20.
84
Chesmond, above n 5, 61.
85
Aktiebolaget Hassle v Alphapharm Pty Ltd (2002) 194 ALR 485, [101].
EAP 12
95
2.2.3 H Lundbeck A/S v Alphapharm Pty Ltd (Lundbeck)86

This central issue in Lundbeck was whether Lundbecks follow-on patent
claiming escitalopram satisfied the novelty requirement.87 Escitalopram,
which is used to treat depression, is an isolated enantiomer of citalopram,
another antidepressant drug.88 Lundbeck had already filed for a patent for
citalopram in 1977, which was due to expire in 2009, before filing for
escitalopram in 1989.89 Alphapharm, a manufacturer who sought to produce
a generic alternative, sought revocation of the later escitalopram patent.90 On
appeal to the Full Federal Court, Justice Lindgrens findings at first instance91
were upheld by a 21 majority, with Emmett J (in dissent) holding that the
invention lacked novelty.92 The majority of the Full Federal Court (consisting
of Bennett and Middleton JJ) decided that because the initial citalopram
patent specification described the racemate but not the isolated enantiomer,
to the skilled addressee, there was no prior disclosure of the claimed
enantiomer in the original patent nor in any other prior art information.93
Hence, the follow-on patent did not disclose an invention which, if
performed, would infringe the initial patent as prior disclosure did not
contain clear and unmistakable directions to obtain the enantiomers in their
independent form.94 The skilled addressee would not have been able to
identify, separate and analyse the enantiomer from citalopram without
further experimentation.95 As such, the follow-on patent was deemed by the
majority to be novel and thus valid.96
2.2.4 Summary
Each of the above cases demonstrate the willingness of Australian courts to
strictly and appropriately apply the patentability standards to keep
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
86
[2009] FCAFC 70.
87
H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70, [117] (Bennett J);
Alphapharm Pty Ltd v H Lundbeck A/S [2008] FCA 559, [2] (Lindgren J).
88
H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70, [37][38] (Emmett J).
89
Alphapharm Pty Ltd v H Lundbeck A/S [2008] FCA 559, [6][7] (Lindgren J).
90
H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70, [7] (Emmett J).
91
Alphapharm Pty Ltd v H Lundbeck A/S [2008] FCA 559.
92
H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70, [112] (Emmett J).
93
Ibid [193] (Bennett J), [249] (Middleton J).
94
Ibid [194] (Bennett J).
95
96
EAP 13
96
Vol 23(2) 2014-2015
evergreening within its lawful bounds and to uphold the integrity of the
patent system by filtering out invalid follow-on claims. In contrast to
Aktiebolaget and Lundbeck, the follow-on patent in Merck attempted to claim a
dosing regime that was not essential to the commercial exploitation of the
pharmaceutical, involved no scientific ingenuity and was contemplated early
in research and development. Conversely, the follow-on patent in Aktiebolaget
was fundamental to the administration of omeprazole in treatment and
involved an inventive combination of integers to achieve this purpose.
Similarly, the escitalopram patent in Lundbeck involved inventiveness in its
identification and isolation and had not been previously disclosed to the
public.
Addressing
Strategies
The
Concerns
Regarding
Evergreening
Despite the strict adherence of Australian courts to the patentability

requirements demonstrated above, evergreening practices have been
routinely criticised by various commentators for two main reasons. First, it
has been argued that evergreening practices undermine patent policy, and
second, that they reduce competition and consequently limit affordable
access to the pharmaceuticals on which the health of modern society relies.
However, as will be discussed in Part 4, these concerns ignore many of the
practical realities surrounding evergreening, suggesting that these criticisms
are often not warranted in an Australian context.
3.1 Evergreening Strategies Undermine Patent Policy

The foundation of the patent system is the grant of a temporary monopoly to
exploit an invention in exchange for disclosure of the technical details of the
invention to the public, which optimises public benefit by fostering the
dissemination of information and incentivising investment in innovation.97
Opponents of evergreening practices argue that by extending the patentprotected effective market life of a pharmaceutical, evergreening undermines
this rationale and the patent bargain between patentees and the public.98
Dwivedi et al have stated that evergreening practices are deceptive and
undermine the spirit and intended purpose of patent laws and, further, that
they are utilised in the quest of sustained profits and market exclusivity.99
Similarly, Collier has expressed concerns about evergreening practices that
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
97
Peter Drahos, Six Minutes to Midnight: Can Intellectual Property Save the
World? in Kathy Bowrey, Michael Handler and Dianne Nicol (eds), Emerging
Challenges in Intellectual Property (Oxford University Press, 2011) 38.
98
See, eg, EPO Economic and Scientific Advisory Board, Workshop on Patent Thickets
(2013) 5 cited in Harris, Nicol and Gruen, above n 1, 115.
99
Dwivedi, Hallihosur and Rangan, above n 1, 325, 329.
EAP 14
97
involve [t]weaking something old and calling it new by slightly modifying

aspects of existing drugs to obtain further patent protection,100 which results
in economic advantage for originator pharmaceutical companies without
significant therapeutic advantage for consumers.101 Many of these concerns
appear to stem from a belief that follow-on patents are not original or true
inventions or that they are attempts to bypass patent laws.102
The patentability requirements operate to uphold patent policy, by regulating
the quality of patents granted in Australia. Follow-on patents are subject to
the same patentability and disclosure requirements as original patents and
are equally exposed to the challenges of meeting these requirements. Hence,
if the requirements specified in the Patents Act are applied correctly, the grant
of follow-on patents should not undermine patent policy nor bypass patent
laws. A patentee must disclose an actual invention meeting the patentability
requirements to be granted an additional patent and, hence, be required to
release further innovative information in exchange for the grant of the followon patent. This suggests that, in reality, evergreening practices are not
deceptive strategies that undermine patent laws and that a company cannot
simply obtain a follow-on patent by tweaking something old.
As such, the Pharmaceutical Patents Review, together with other
commentators,103 have correctly identified the patentability requirements, and
not originator pharmaceutical companies, as the gatekeepers of acceptable
patenting behaviour in Australia.104 Provided the patentability requirements
are applied appropriately in examination by the Patent Office and enforced
appropriately in court proceedings, it is difficult to sustain arguments that
follow-on patents are not true inventions which deserve protection.105 In this
way, evergreening practices utilising follow-on patents do not undermine the
fundamental policy rationale that monopolies should be granted for
inventions in return for the exchange of information.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
100
Collier, above n 13, 385.
101
Ibid.
102
See, eg, Dwivedi, Hallihosur and Rangan, above n 1, 326.
103
See, eg, Scott Parker and Kevin Mooney, Is Evergreening a Cause for Concern?
A Legal Perspective (2007) 13 Journal of Commercial Biotechnology 235, 241.
104
Harris, Nicol and Gruen, above n 1, 119, 121.
105
Dwivedi, Hallihosur and Rangan, above n 1, 324.
EAP 15
98
Vol 23(2) 2014-2015
3.2 Evergreening Strategies Reduce Competition and Access to

Health Care
When an originator company develops a patent portfolio or patent
thicket106 containing numerous follow-on patents surrounding a single
pharmaceutical, this can create a barrier for generic producers and
competitors.107 Generic pharmaceuticals are drugs that are equivalent to a
brand name drug, and are capable of being supplied after the patent for the
brand name drug has expired.108 They play an important role in assisting to
secure affordable access to pharmaceuticals because they are less expensive
than branded drugs given that the pharmaceutical has already been
developed, tested and approved.109 Consequently, evergreening has attracted
criticism for allegedly undermining the patent system for the purpose of
unfairly blocking competitors.110 Bansal et al have stated that evergreening
promotes development of unfair means of competition and related abuse by
creating a roadblock for generic companies that are trying hard to provide
safe and efficacious medicines to the masses at cost effective prices.111
Similarly, Glasgow has argued that layering patents to ensure blockbuster
drugs remain under patent protection beyond a single patent term has
undesirable costs for generic manufacturers and consumers.112
Even when a generic manufacturer could technically manufacture an API
without infringing a follow-on patent, the need to navigate through a maze
of patents113 and the resulting potential for litigation can act as a deterrent to
enter the market.114 It has been argued that the resulting lack of competition
harms consumers115 by reducing access to affordable pharmaceuticals.
However, this assertion is not entirely accurate in Australia, due to the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
106
IP Australia, above n 12, 26.
107
Harris, Nicol and Gruen, above n 1, 105, 117.
108
World Health Organization, Generic Drugs

<http://www.who.int/trade/glossary/story034/en/> (1 November 2014).
109
110
See, eg, Collier, above n 13, 385.
111
112
Glasgow, above n 25, 228, 249.
113
Mike Hutchins, Extending the Monopoly How Secondary Patents can be used
to Delay or Prevent Generic Competition upon Expiry of the Basic Product Patent
(2003) 1 Journal of Generic Medicines 57, 57.
114
Gaudry, above n 13, 878; Burdon and Sloper, above n 24, 16.
115
Dwivedi, Hallihosur and Rangan, above n 1, 329.
EAP 16
99
existence of the Pharmaceutical Benefits Scheme (PBS). The PBS is designed

to provide equal access to affordable pharmaceuticals for all Australians
through the provision of government subsidies on most pharmaceuticals.116
As such, pharmaceutical prices for consumers are not as much of a concern in
Australia, as they are in countries without such a system, even though the
market entry of a generic version of a drug can produce a cost saving to the
PBS117 of over 25 per cent.118 Indeed, the Generic Medicines Industry
Association notes that generic medicines saved the PBS an estimated $1.4
billion from 20052009.119 However, the existence of the PBS means that in
Australia, evergreening practices would not impact on the publics access to
competitively priced pharmaceuticals.
Practical Realities Surrounding Evergreening In Australia
Prima facie, evergreening practices can run contrary to the central tenets of
the patent system.120 However, the reality in Australia is that concerns
regarding abuse by originator pharmaceutical companies discussed above
are often overstated and ignore the positive aspects of follow-on innovation.
These factors mitigating the negativity surrounding evergreening in Australia
will be discussed in this Part.
4.1 Diverse Ownership of Follow-on Patents in Australia

There is a general presumption that evergreening is undertaken by originator
companies who seek to create a patent thicket to maintain their market
dominance.121 In support of this belief, Gaudry has found that evergreening
strategies are common in the US, with the existence of numerous patents per
pharmaceutical.122 A recent Australian empirical analysis undertaken by
Christie et al found similar results, including the presence of multiple patents
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
116
Peter Drahos, Buddhima Lokuge, Tom Faunce, Martyn Goddard,

Pharmaceuticals, Intellectual property and Free Trade: The Case of the USAustralia Free Trade Agreement (2004) 22 Prometheus 243, 244.
117
118
Department of Health and Aging, Price Reductions for Second Main Cycle (2013),
cited in Harris, Nicol and Gruen, above n 1, 37.
119
120
121
See, eg, Bansal et al, above n 1, 299, 306; Dwivedi, Hallihosur and Rangan, above n
1, 324, 329; Collier, above n 13, 385; Glasgow, above n 25.
122
Gaudry, above n 13, 876.
EAP 17
100
Vol 23(2) 2014-2015
per drug.123 However, the study went further and examined the ownership of
these patents with surprising results. This suggested that the general
presumption that evergreening is undertaken by originator companies is not
the reality.124
In their study, Christie et al analysed the patents associated with 15 of the
most expensive drugs in Australia.125 The results showed that drug costs are
concentrated around a small number of pharmaceuticals that represent
approximately one third of total drug expenditures in the PBS.126
Additionally, they found a mean of 49 patents associated with each drug.127
For example, 22 patents were associated with ipratropium (a drug used for
the treatment of pulmonary diseases including asthma) and 121 were
associated with omeprazole.128 Prima facie, these results may support the
employment of extensive evergreening practices by originators in Australia
to expand patent protection. However, examination of ownership of these
patents revealed that three quarters of the patents were owned by companies
other than the drugs originator, with half of these patentees being nonoriginator companies.129 Hence, the majority of the numerous patents
associated with highly profitable blockbuster drugs in Australia were owned
by non-originator companies.
These valuable empirical results suggest that the common perception of
unscrupulous originator pharmaceutical companies manipulating the patent
system through evergreening to gain an unfair advantage is misguided and
too simplistic.130 In reality, many companies seek to obtain monopolies over
innovations surrounding blockbuster drugs by claiming follow-on
inventions.131 This suggests that non-originator companies are also investing
in follow-on innovation related to highly profitable blockbuster drugs.132
Additionally, many companies are seeking to hold part of the monopoly
control of a blockbuster drug to produce pharmaceuticals on expiration of the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
123
Andrew Christie, Chris Dent, Peter McIntyre, Lacklan Wilson and Davis Studdert,
Patents Associated with High-Cost Drugs in Australia (2013) 8 PLoS ONE 1.
124
Ibid 1.
125
Ibid.
126
Ibid.
127
Ibid 3.
128
Ibid.
129
Ibid.
130
Ibid 6.
131
Ibid 1.
132
Ibid 4.
EAP 18
101
original patent for an API.133 The presence of dispersed ownership of followon patents also supports a conclusion that evergreening is not inhibiting
competition on expiry of the original patent, as many companies are
exploiting and seeking protection for their cumulative inventions in relation
to the original API.
Similarly, Parker and Mooney note that evergreening practices are open to
competitors, and that the phenomenon is not only limited to original
companies claiming follow-on inventions.134 Generic and competitor
ownership of follow-on patents is also evidenced in the lamotrigine example
discussed in Part 1. Additionally, IP Australia has found that later patent
filings for pharmaceuticals are dominated by third parties with earlier patents
mostly owned by originators.135
The study conducted by Christie et al demonstrates that the dichotomy
between originator pharmaceutical companies who supposedly exploit the
system and generics who seek to provide affordable access to
pharmaceuticals is not as sharply delineated as is commonly perceived. All
types of pharmaceutical companies utilise the patent system for business
objectives in pursuit of the profits associated with a patent monopoly. Even
where follow-on patents are sought by originator pharmaceutical companies,
this is often a legitimate and predictable commercial strategy.
4.2 Commercial Strategies and Responsibilities

As noted in Part 3, there is a tendency to criticise originator pharmaceutical
companies for trying to manipulate and circumvent the patent system in
order to gain an unfair advantage.136 However, where there is scope in the
law to gain a commercial advantage, and a strong incentive to do so, it is to
be expected that pharmaceutical companies will take every opportunity to
extend their monopoly protection.137 Indeed the Pharmaceutical Patents
Review notes that high levels of profitability and risk for pharmaceutical
companies will inevitably encourage business strategies to maximise
exclusivity and protection through the patent system and its complexities.138
Utilising the patent system as a business tool,139 within the bounds of the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
133
Ibid 6.
134
Parker and Mooney, above n 103, 239.
135
IP Australia, Pharmaceutical Patents Review, Draft Report (2013) 137.
136
See, eg, Bansal et al, above n 1; Collier, above n 13; Glasgow, above n 25.
137
138
Ibid 33, 39.
139
EAP 19
102
Vol 23(2) 2014-2015
law, constitutes a legitimate business practice140 and pharmaceutical

companies should not be expected to observe some higher standard of
patentability than in other industries.141 Rather, failure to use the boundaries
of the patent system would constitute a failure to act in the best interests of
the company, particularly given the risk and expenses associated with
developing new pharmaceuticals.142
It is acknowledged that these legitimate business objectives of pharmaceutical
companies may not always be congruent with the social and medical needs
of the public.143 However, it is the responsibility of Parliament and the
Government to find the optimal balance between providing incentives for
future inventions of new drugs and ensuring affordable access to existing
drugs.144 If evergreening is perceived to run contrary to patent policy,
Parliament must enact clear laws to regulate such conduct, and, in the
meantime, pharmaceutical companies should not be condemned for
behaviour that is lawful.
4.3 The Benefits of Follow-on Patents

Investment in research and development by originator pharmaceutical
companies makes a substantial contribution to health and welfare.
Additionally, pharmaceutical innovation is often incremental and
cumulative.145 As such, Chesmond notes that it is both common and
appropriate for companies to develop improved formulations or new uses or
methods of manufacture for their previously patented products and apply for
new patents over those products.146 In addition to the important medical
advancements often resulting from development of APIs, follow-on patents
can also offer substantial improvements in existing knowledge and health
care. For example, the improved lamotrigine tablet formulation (that was the
subject matter of the follow-on patent discussed in Part 1) offered significant
practical benefits including enhanced patient compliance and the
encouragement of further innovation by competitors.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
140
141
142
Ibid.
143
IP Australia, above n 12, 48.
144
Ibid.
145
146
Chesmond, above n 5, 53.
EAP 20
103
It is consistent with patent policy to reward cumulative inventiveness and

legitimate follow-on research and development with patent protection.147 The
ability to claim follow-on inventions enhances the incentive to continually
improve existing pharmaceuticals148 and this should be a goal of the patent
system.149 While this can occasionally inhibit generic competition, reduced
competition is an acceptable consequence of the compromise between
incentivising innovation and increasing access to cheaper pharmaceuticals.150
4.4 The Confined Scope of Follow-on Patents

Chalmers has described evergreening as a tool for the extension of monopoly
exclusivity over a particular pharmaceutical which operates to reset the
clock on patent protection.151 Similarly, Hemphill and Sampat have
suggested that evergreening can extend the effective market life of a
pharmaceutical beyond the standard 20-year term,152 in addition to the
potential for a five year maximum extension for patents relating to
pharmaceutical substances.153 However, these arguments seem to ignore the
reality that it is only the subject matter of the follow-on patent that receives
further protection, not the API. Indeed, Parker and Mooney insightfully note
that the patent system is inherently adapted to reflect how much innovation
in fact takes place and to prevent evergreening, meaning that patenting
minor variations results in the grant of a narrow monopoly which will not
significantly limit market competition.154
A follow-on patent cannot cover the same inventive material as the original
patent because it would not satisfy the patentability requirements.155 Followon patents are often more narrow, which limits the scope of the monopoly
and leaves open the opportunity for competitors to design around the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
147
148
149
Frederic Scherer, The Link Between Gross Profitability and Pharmaceutical R&D
Spending (2001) 20 Health Affairs 216 cited in Gaudry, above n 13, 878.
150
Thomas Faunce and Joel Lexchin, Linkage Pharmaceutical Evergreening in

Canada and Australia (2007) 4 Australia and New Zealand Health Policy 1, 1.
151
Robert Chalmers, above n 4, 31.
152
Scott Hemphill and Bhaven Sampat, Evergreening, Patent Challenges, and

Effective Market Life in Pharmaceuticals (2012) 31 Journal of Health Economics 327,
3278.
153
Patents Act ss 67, 7079A.
154
155
Ibid 238.
EAP 21
104
Vol 23(2) 2014-2015
original patent without infringement.156 Consequently, in most cases, the

presence of follow-on patents will not inhibit generic producers from
exploiting the subject matter of the original patent on expiry without liability
for infringement.157
The confined scope of follow-on patents (compared to the original API)
means that they pose less of a threat to competition than has been claimed.
This is demonstrated in the grant of follow-on patents for venlafaxine related
medicines. In its submission to the Pharmaceutical Patents Review,
Alphapharm proposed that venlafaxine related medicines have undue
market exclusivity of over 39 years.158 Venlafaxine is the API in the
antidepressant Efexor.159 The original patent was granted in 1988 and expired
in 2008.160 Two follow-on patents were granted, claiming an extended release
formulation and an active metabolite, granted in 2001 and 2008
respectively.161 While the presence of two additional follow-on patents could
be perceived as inappropriate evergreening, the Pharmaceutical Patents
Review noted that there is no evidence that the two follow-on patents have
prevented competitors from entering the market once the original Efexor
patent expired.162 Rather, on expiry of the original patent generic,
manufacturers have been able to use alternative release formulations and
produce a competitor extended release venlafaxine.163 Indeed there are
numerous Australian venlafaxine related patents owned by a diverse range of
companies, despite the fact that the follow-on patents will expire in 2017 and
2023 respectively.164
Conclusion
This article has illustrated that while the practice of evergreening is pervasive
in Australia, its impact is less concerning and controversial than generally
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
156
Ibid 239.
157
Ibid 235.
158
Harris, Nicol and Gruen, above n 1, 110 citing the Alphapharm, Submission to the
Pharmaceutical Patents Review, 14.
159
160
Ibid.
161
Ibid 110.
162
Ibid 111.
163
Ibid.
164
Based on a search for venlafaxine on the IP Australia AusPat Patent Register on 31

January 2014.
EAP 22
105
perceived. Evergreening through the grant of follow-on patents is permissible

under Australian patent law (provided patent requirements are satisfied).
Accordingly, evergreening is appropriately regulated by the patentability
requirements, which distinguish legitimate inventions from frivolous
attempts to undermine the system. To expect pharmaceutical companies to
do more than the law requires by the adoption of patenting practices that
promote the public interest while sacrificing their commercial interests is
unrealistic.
EAP 23
Data Exclusivity and Public Health under the TRIPS

Agreement
Olasupo A Owoeye *
Abstract
The Agreement on Trade Related Aspects of Intellectual Property Rights (the TRIPS
Agreement) is the first international agreement to set certain minimum standards
for the protection of test data submitted to national drug regulatory authorities in
order to obtain marketing approval for pharmaceuticals. This protection has created a
sui generis proprietary right in undisclosed information, akin to a patent right. The
TRIPS regime for test data protection is also popularly known as data exclusivity,
although there is some controversy as to whether the TRIPS data protection
provisions actually establish a data exclusivity regime or not. There has been much
concern as to the effect that the TRIPS framework for test data protection may have
on access to medicines, even though this issue has not yet attracted the same level of
academic commentary or analysis in comparison to the impact of the TRIPS patents
regime. The standard of test data protection required by the TRIPS Agreement and
the implications for access to medicines in developing countries are issues that are yet
to be fully examined and understood.
1
This article examines the legal framework for test data protection under the TRIPS
Agreement and the obligations it creates for Member States in relation to data
exclusivity. It investigates the extent to which the TRIPS test data protection
requirements impose fetters on compulsory licensing and the question of whether the
right to keep undisclosed information confidential can be dispensed with through the
compulsory licensing mechanism. The article considers the connection between test
data protection and the need to safeguard public health, with particular focus on the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
*
Olasupo A Owoeye LL.B (Ibadan), GradCertRes, PhD (Tasmania), Lecturer in

Law, RMIT University, Vietnam. The author acknowledges with thanks the
research grants from the University of Tasmania Law School and the Institute for
the Study of Social Change, University of Tasmania. Special thanks also to my
PhD supervisors, Prof Dianne Nicol and Dr Jane Nielsen as well as the
anonymous peer reviewers for their comments on the manuscript of the article.
Marrakesh Agreement Establishing the World Trade Organization, opened for

signature 15 April 1994, 1867 UNTS 3 (entered into force 1 January 1995) annex
1C,The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS
Agreement).
107
implications for access to medicines in developing countries. It is posited that

developing countries are not likely to derive any real benefit from data exclusivity,
other than as a possible boost to investment in the local pharmaceutical industry.
However, developing countries are still obliged to comply with their obligations
under the TRIPS Agreement, including introducing data protection legislation,
which could delay the availability of generic medicines. The article argues that data
exclusivity should not be a barrier to the use of compulsory licences and that it may
be possible to rely on the grounds for compulsory licensing under the TRIPS
Agreement to satisfy the exceptions to TRIPS data exclusivity requirements. It takes
the view that the promotion of free trade and development of pharmaceutical
manufacturing capacity will go a long way in alleviating some of the challenges
relating to access to medicines that may be caused by data exclusivity and intellectual
property (IP) protection.
Introduction
The Agreement on Trade Related Aspects of Intellectual Property Rights (the
TRIPS Agreement) is the first international agreement to set certain minimum
standards for the protection of test data submitted to national drug
regulatory authorities in order to obtain marketing approval for
pharmaceuticals.2 This protection has created a sui generis proprietary right
in undisclosed information, akin to a patent right. The TRIPS regime for test
data protection is also popularly known as data exclusivity, although there is
some controversy as to whether the TRIPS data protection provisions actually
establish a data exclusivity regime or not. There has been much concern as to
the effect that the TRIPS framework for test data protection may have on
access to medicines, even though this issue has not yet attracted the same
level of academic commentary or analysis in comparison to the impact of the
TRIPS patents regime. The standard of test data protection required by the
TRIPS Agreement and the implications for access to medicines in developing
countries are issues that are yet to be fully examined and understood.
This article examines the legal framework for test data protection under the
TRIPS Agreement and the obligations it creates for Member States in relation
to data exclusivity. It investigates the extent to which the TRIPS test data
protection requirements impose fetters on compulsory licensing and the
question of whether the right to keep undisclosed information confidential
can be dispensed with through the compulsory licensing mechanism. The
article considers the connection between test data protection and the need to
safeguard public health, with particular focus on the implications for access
to medicines in developing countries. It is posited that developing countries
are not likely to derive any real benefit from data exclusivity, other than as a
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
2
Marrakesh Agreement Establishing the World Trade Organization, opened for signature
15 April 1994, 1867 UNTS 3 (entered into force 1 January 1995) annex 1C, The
Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS
Agreement).
EAP 2
108
Vol 23(2) 2014-2015
possible boost to investment in the local pharmaceutical industry. However,

developing countries are still obliged to comply with their obligations under
the TRIPS Agreement, including introducing data protection legislation, which
could delay the availability of generic medicines. The article argues that data
exclusivity should not be a barrier to the use of compulsory licences and that
it may be possible to rely on the grounds for compulsory licensing under the
TRIPS Agreement to satisfy the exceptions to TRIPS data exclusivity
requirements. It takes the view that the promotion of free trade and
development of pharmaceutical manufacturing capacity will go a long way in
alleviating some of the challenges relating to access to medicines that may be
caused by data exclusivity and intellectual property (IP) protection.
The Nature of Data Exclusivity
Data exclusivity has been defined as the protection of clinical test data
required to be submitted to a regulatory agency to prove safety and efficacy
of a new drug, and prevention of generic drug manufacturers from relying on
this data in their own applications.3
Data exclusivity has also been described as:
a time-bound form of intellectual property protection that seeks to
allow companies to recoup the cost of investment in producing data
required by the regulatory authority. The effect of data exclusivity is
to prevent the entry of generic competitors, independent of the patent
status of the product in question.4
A data exclusivity regime is therefore concerned with the extent to which a
national drug regulatory body may be prohibited from relying on the
originators data in approving the products of prospective generic
competitors. Test data normally contains information that enables the
government to assess the risks and efficacy of a drug before granting it
market authorization.5 Such information may include drug composition,
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
3
G E Evans, Strategic Patent Licensing for Public Research Organizations:

Deploying Restriction and Reservation Clauses to Promote Medical R&D in
Developing Countries (2008) 34 American Journal of Law and Medicine 175, 184.
C Clift, Data Protection and Data Exclusivity in Pharmaceuticals and

Agrochemicals, in A Krattiger, R T Mahoney, L Nelsen, et al. (eds) Intellectual
Property Management in Health and Agricultural Innovation: A Handbook of Best
Practices
(MIHR
and
PIPRA,
2007)
435
<http://www.iphandbook.org/handbook/chPDFs/ch04/ipHandbookCh%2004%2009%20Clift%20Data%20Protection%20and%20Exclusivity.pdf>.
L Dwyer, Patent Protection and Access to Medicine: The Colombia and Peruvian
Trade Promotion Agreements (2007) 13 Law & Business Review of the Americas 825,
840.
EAP 3
109
factoring method and potential health risks to people, which makes the data
of significant commercial value.6
Generally, before marketing approval is granted for pharmaceuticals in any
country, the relevant national drug regulatory authority must have been
satisfied as to the safety, efficacy and quality of the drug. This is normally
satisfied through reliance on the information that can be gleaned from the test
data submitted by the manufacturing company, which would, amongst other
things, include the chemical composition of the drugs and pre-clinical and
clinical drug trials, as well as tests conducted in the manufacturing process.
Such test data may subsequently be relied on to register generic substitutes
on the ground of bioequivalence. The implication of this is that generic
manufacturers are able to rely on proprietary information generated at
considerable cost by the originator once the period of protection provided by
the data exclusivity regime has expired. This allows generic manufacturers to
enter the market without the financial burden of generating their own test
data. There are also ethical issues involved in allowing generic manufacturers
to rely on the originators test data. Clinical trials generally involve the use of
both human and animal research subjects7 and requiring generic
manufacturers to duplicate clinical results will entail onerous consequences
for the research subjects. Paragraph 12 of the World Medical Associations
Declaration of Helsinki is particularly instructive in relation to the ethical issues
involved in clinical trials. It provides:
Medical research involving human subjects must conform to generally
accepted scientific principles, be based on a thorough knowledge of the
scientific literature, other relevant sources of information, and adequate
laboratory and, as appropriate, animal experimentation. The welfare of
animals used for research must be respected.8
Paragraph 18 of the Helsinki Declaration further provides that any medical
research involving the use of human subjects must be preceded by a careful
assessment of the foreseeable risks and burdens to human subjects and
communities affected by the investigation. The implication of these
provisions is that where there is already sufficient knowledge in the field
from previous clinical trials, there can hardly be a justified basis for repeating
the same process.
Precluding generic manufacturers from using previously submitted test data
in order to gain access to a given market can pose a real barrier to access to
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
6
Ibid.
PhRMA, Clinical Trials: The Phases of Drug Testing and Approval (2006)
<http://www.phrma.org/innovation/clinical-trials>.
World Medical Association, Declaration of Helsinki, adopted by the 18th WMA

General Assembly, Helsinki, Finland, June 1964.
EAP 4
110
Vol 23(2) 2014-2015
medicines in developing countries.9 It has thus been argued that the

regulatory miasma occasioned by the data exclusivity regime is a significant
part of the global system that embargoes access to medicines in developing
countries.10 The reason the data exclusivity regime is problematic in terms of
access to medicines is that, where test data is protected, generic
manufacturers will not be able to rely on it for the purpose of seeking
marketing approval until the expiration of the protection offered. The
implication is therefore that the rigorous, time consuming and expensive
process of generating test data will serve as a substantial disincentive to
market entry by the generic industry and, as a consequence, access to cheaper
medicines will be delayed.
Where a product is under patent, data exclusivity is unlikely to be of material
effect as the patent has the same effect in preventing entry onto the market of
generic versions of the product. However, where the product is not
patentable or off patent, data exclusivity can act independently to prevent
any generic companies wishing to enter the market from doing so until the
data exclusivity regime ends.11 Data exclusivity may confer a stronger right
than a patent as governments have a limited ability to interfere with it. A
government may interfere with the exclusive rights of a patent holder
through compulsory licensing but a data exclusivity regime cannot be so
easily truncated.12
Trade secrets have been recognised and protected under common law rules
and unfair competition legislation in a number of countries for many years,
long before the advent of TRIPS.13 The TRIPS Agreement is, however, the first
international convention to introduce an international regime for test data
protection and this is generally considered one of its most significant
features.14 Prior to TRIPS, Article 10bis of the Paris Convention for the Protection
of Industrial Property provided for protection against unfair competition.15 A
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
9
M R Morgan, Medicines for the Developing World: Promoting Access and

Innovation in the Post TRIPS Environment (2006) 64 University of Toronto Faculty
of Law Review 45, 68.
10
B K Baker, Ending Drug Registration Apartheid: Taming Data Exclusivity and

Patent/Registration Linkage (2008) 34 American Journal of Law and Medicine 303,
344.
11
Clift, above n 3, 433.
12
Ibid.
13
UNCTAD-ICTSD, Resource Book on TRIPS and Development (Cambridge University

Press, 2005) 522.
14
C M Correa, Trade Related Aspects of Intellectual Property Rights: A Commentary on the

TRIPS Agreement (Oxford University Press, 2007) 367.
15
Paris Convention for the Protection of Industrial Property. adopted 20 March 1883,!828
UNTS 305 (entered into force 7 July 1884).
EAP 5
111
broad interpretation of Article 10bis of the Paris Convention may have the
effect of protecting test data against unfair competition but does not offer
anything akin to data exclusivity. However, as will be seen below, the TRIPS
test data protection framework transcends the requirement of protecting
products against unfair competition by establishing a data exclusivity
framework that accords the status of an independent proprietary right on the
party entitled to such protection.
1.1 Test Data Protection Under TRIPS

The TRIPS Agreement imposes an obligation on all Member States to offer
adequate protection for confidential information submitted as a prerequisite
for gaining market approval for a new drug. Article 39 of the TRIPS
Agreement addresses this issue in the following terms:
1.
In the course of ensuring effective protection against unfair

competition as provided in Article 10bis of the Paris Convention
(1967), Members shall protect undisclosed information in accordance
with paragraph 2 and data submitted to governments or
governmental agencies in accordance with paragraph 3.
2.
Natural and legal persons shall have the possibility of preventing

information lawfully within their control from being disclosed to,
acquired by, or used by others without their consent in a manner
contrary to honest commercial practices so long as such information:
3.
a.
is secret in the sense that it is not, as a body or in the precise

configuration and assembly of its components, generally
known among or readily accessible to persons within the
circles that normally deal with the kind of information in
question;
b.
has commercial value because it is secret; and
c.
has been subject to reasonable steps under the circumstances,

by the person lawfully in control of the information, to keep
it secret.
Members, when requiring, as a condition of approving the marketing

of pharmaceutical or of agricultural chemical products which utilize
new chemical entities, the submission of undisclosed test or other
data, the origination of which involves a considerable effort, shall
protect such data against unfair commercial use. In addition,
Members shall protect such data against disclosure, except where
necessary to protect the public, or unless steps are taken to ensure
that the data are protected.
An argument has been made that the initial wording of Article 39(1),
ensuring effective protection against unfair competition, suggests that the
protection afforded under Article 39 is founded on the rules relating to unfair
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competition as outlined in Article 10bis of the Paris Convention.16 Such

protection would therefore offer a safeguard against unfair commercial
practices without giving rise to exclusive rights.17 On this basis, Article 39
does not create proprietary rights but only gives de facto control to the owner
of the undisclosed information.18 Daniel Gervais has taken the view that the
protection against unfair commercial use is enough to satisfy the protection
against non-disclosure.19 Carlos Correa also maintains the position that the
text of Article 39 is unusually clear in showing that the obligation under the
provision does not go beyond the requirement of protection against unfair
commercial practice recognised in the Paris Convention.20 He further argues
that not only does the language of Article 39 fall short of what could be
recognised as data exclusivity or the creation of an independent proprietary
right, but also that any interpretation requiring the establishment of exclusive
rights,as constantly stated by the United States (US) and the pharmaceutical
industry, is fundamentally at variance with the language of TRIPS.21
While the argument that Article 39 does not go beyond the requirement to
protect against unfair commercial use (as provided for in the Paris
Convention) does sound attractive, it is not necessarily convincing. It is
important to note that obligations under the Paris Convention are already
incorporated in the TRIPS Agreement by virtue of Article 2, which provides:
1.
In respect of Parts II, III and IV of this Agreement, Members shall

comply with Articles 1 through 12, and Article 19, of the Paris
Convention (1967).
2.
Nothing in Parts I to IV of this Agreement shall derogate from

existing obligations that Members may have to each other under the
Paris Convention, the Berne Convention, the Rome Convention and
the Treaty on Intellectual Property in Respect of Integrated Circuits.
Given the fact that obligations under the Paris Convention are already binding
on parties, it would be superfluous to reproduce Article 10bis of the Paris
Convention in the text of the TRIPS Agreement. In addition, it is clear that
Article 39 of TRIPS contains specific provisions that substantially differ from
Article 10bis. Indeed, the opening wording of Article 39 says that Members,
in the course of ensuring adequate protection against unfair competition,
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
16
UNCTAD-ICTSD, above n 12, 527.
17
Ibid.
18
Ibid.
19
D Gervais, The TRIPS Agreement: Drafting History and Analysis (Sweet & Maxwell,
Thomson Reuters, 4 ed, 2012) 545.
th
20
Correa, above n 13, 367.
21
Ibid.
EAP 7
113
must protect undisclosed information in line with the further standards

imposed by the provision. It is therefore submitted that the protection
required under Article 39 is not just confined to the protection against unfair
commercial use, as a number of eminent scholars in the field have argued,
but also requires standards significantly higher than those available under
the Paris Convention. Writing in a similar vein, Nuno Pires de Carvalho
argues:
the purpose of Article 39 is not to oblige WTO Members to provide
for effective protection against unfair competition, but rather to
clarify two issues relating to the protection of trade secrets that the
legislation of many countries had failed to address appropriately22
Is Article 39 About Data Exclusivity?
The drafting history of TRIPS shows that the US attempt to introduce a tenyear data exclusivity standard was wholly rejected by the negotiators.23
Correa has particularly argued that the language of TRIPS does not suggest
that the mandated test data protection should be accorded through the grant
of exclusive rights.24 A literal interpretation of TRIPS Article 39 does not
explicitly disclose a data exclusivity regime.25 However, when interpreted
against the backdrop of the fact that Article 39(3) is meant to restrain
countries from acting in a way inconsistent with the trade secret status of test
data, it would seem that the reasonable inference to be drawn is that Article
39(3) is meant to operate as a data exclusivity standard.26 Indeed, Lorna
Dwyer has expressed the view that test data is fast becoming a new IP right:
It shifted from a mere trade secret to a separate right akin to a patent
with a minimum protection of five years. It also shifted from a
protection of undisclosed test information to a protection for even
publicly available information. The impact has been to prevent
generic pharmaceutical manufacturers from entering the market, thus
preventing people in developing countries from receiving lifesaving
medicines. No credible justification for such protection has been
offered. The research and development costs have already been
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
22
N Pires de Carvalho, The TRIPS Regime of Patent Rights (Kluwer Law International,
2 ed, 2004) 388.
nd
23
Gervais, above n 18.
24
Correa, above n 13.
25
A X Fellmeth, Secrecy, Monopoly, and Access to Pharmaceuticals in International

Trade Law: Protection of Marketing Approval Data under the TRIPS Agreement
(2004) 45 Harvard International Law Journal 443, 459.
26
Ibid 463.
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Vol 23(2) 2014-2015
recovered by the patent holders, having been included in the price of

the medications for over twenty years.27
Aaron Fellmeth has argued that the public protection exception in Article
39(3) can only be justified in cases of real public emergency and that allowing
a competitor to use the test data can hardly be justifiable even in an
emergency except when it can be proven that the competitor had the only
available facilities for testing the drug.28 On the other hand, in dubiis
benigniora praeferenda sunt is a principle of statutory interpretation that says
the imposition of onerous obligations should be discouraged where the
language of a treaty is capable of different interpretations or contains certain
ambiguities.29 Having regard to the fact that Article 39 allows the use of test
data where such use is necessary to protect the public, a literal interpretation
of Article 39(3) does not support the view that such use can only be available
where there is an emergency. It is submitted that all that is required to use
test data under Article 39 is evidence that this use is clearly in the public
interest and not for commercial considerations. Requiring a public health
emergency before allowing the use of test data would unnecessarily fetter the
flexibility of the TRIPS Agreement.
Data exclusivity has been the subject of much criticism for a number of
reasons. It is viewed as conferring patent-like protection on test data through
the creation of financial disincentives against generic manufacturers who
may want to enter the market by requiring them either to wait for the data
exclusivity to expire or to invest significantly in the production of a new set
of test data. It also extends patent protection which, it is believed, would have
provided adequate compensation for the originator brand company.30 Data
exclusivity is therefore another factor that may have very serious implications
for health care systems and access to affordable medicines in developing
countries.
Whilst data protection limits the ability of countries to derogate from the
exclusive rights of originators by enhancing generic production,
pharmaceutical companies continue to pursue greater protection for patents
and test data and the reduction of price controls.31 In the words of Fellmeth:
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
27
L Dwyer, Patent Protection and Access to Medicine: The Colombia and Peruvian
Trade Promotion Agreements (2007) 13 Law & Business Review of the Americas 825.
28
Fellmeth, above n 24, 464.
29
B A Garner (ed), Blacks Law Dictionary (Thomson Reuters, 9 ed, 2009) 1836.
30
T Lemmens and C Telfer, Access to Information and the Right to Health: The
Human Rights Case for Clinical Trials Transparency (2012) 38 American Journal of
Law & Medicine 63, 85.
31
F M Abbott, The WTO Medicines Decision: World Pharmaceutical Trade and the
Protection of Public Health (2005) 99 American Journal of International Law 317, 357.
th
EAP 9
115
economically developed countries have consistently pushed for an

interpretation of the TRIPS Agreement that would confer on large
pharmaceutical companies price-inflating monopolies over drugs that
are neither patented nor patentable, through guarantees of exclusive
rights to clinical testing data necessary to obtain marketing
approval.32
Another significant consideration here is the effect of test data protection on
patented products that are compulsorily licensed. Given that the data
exclusivity regime confers a right independent of the patent, the grant of a
compulsory licence in relation to a pharmaceutical product is arguably
without prejudice to the test data protection. Therefore, the ability of the
compulsory licensee to rely on the originators clinical trial results for gaining
marketing approval on the basis of the compulsory licence alone may be
debatable. This point is examined further below.
2.1 Elements of Test Data Protection Under the TRIPS Agreement

As already noted above, Article 39(3) provides for test data protection and
encapsulates the TRIPS test data protection regime. This regime can be
broken down into the following elements:
a.
the product must utilize new chemical entities (newness

requirement);
b.
the origination of the undisclosed test data must involve

considerable effort (origination requirement)
c.
the test data must be protected against unfair commercial use

(protection against unfair competition requirement); and
d. the test data must be undisclosed except where necessary to

protect the public or where steps are taken against unfair
commercial use (non-disclosure obligation and the exceptions).
2.1.1 Newness Requirement
Article 39(3) provides that the pharmaceutical or agricultural chemical
product for which protection is sought must utilise new chemical entities. It
could be argued that the requirement that the chemical entity is new is akin
to the requirement for novelty in patent law. If this is the case, then the next
question is what is the standard required to satisfy this newness
requirement? Since this term is not defined by the TRIPS Agreement, it is
submitted that countries are at liberty to decide the standard of newness for
test data protection that suits their local circumstances. This position is fully
in consonance with Article 1(1) of the TRIPS Agreement which provides that
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
32
Fellmeth, above n 24, 445
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Vol 23(2) 2014-2015
Members are under no obligation to provide more extensive protection than

that required under the Agreement and that they shall be free to determine
the suitable method of enforcing the provisions of the Agreement within their
legal system and practice.
In the alternative, it has been argued that the concept of newness in respect
of chemical entities does not relate to the novelty or undisclosed nature of the
data but the administrative act of registration.33 In other words, the concept of
new under Article 39(3) has nothing to do with the patent standard of
novelty but registration and the effects of registration of a chemical entity for
purposes of its novelty are basically territorial.34 Gervais has described this as
the practical approach to defining new under Article 39(3).35 He opines that
provided that a chemical entity has not been previously submitted for
regulatory approval in a given country, it should be considered new and the
data generated from it should be eligible for protection.36 To date, there has
been no official guidance as to which of these differing views should be
adopted by Members as fulfilling the newness requirement in Article 39(3).
Section 201 of the US Food Drugs and Cosmetic Act, for instance, defines a new
drug as:
Any drug (except a new animal drug or an animal feed bearing or containing
a new animal drug) the composition of which is such that such drug, as a
result of investigations to determine its safety and effectiveness for use under
such conditions, has become so recognized, but which has not, otherwise
than in such investigations, been used to a material extent or for a material
time under such conditions.
Although using the act of registration as a benchmark for newness is
defensible under Article 39, it is nonetheless submitted that the newness
requirement in Article 39 should not be based on the act of registration.
Chemical entities should only be considered new where the chemical
composition has not been formerly recognised by people, qualified by
scientific training and experience, as safe and effective for the treatment it has
been found to offer. There is also support for the view that Article 39(3) will
not cover cases where approval is required for new dosage forms,
combinations, new forms of administration, crystalline forms, isomers, etc of
existing product,37 as they would not fall within the definition of a new
chemical entity. In summary, it is submitted that since TRIPS does not
provide a clear definition of the newness requirement, Members may rely on
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
33
Pires de Carvalho, above n 21, 397.
34
Ibid 397-8.
35
Gervais, above n 18, 544-5.
36
Ibid.
37
EAP 11
117
Article 1(1) of the TRIPS Agreement to interpret this requirement in a way

conducive to their socio-economic welfare.
2.1.2 Origination Requirement
Article 39(3) provides that the origination of test data to be protected must
involve considerable efforts. It is generally assumed that for pharmaceuticals,
the generation of test data in most cases involves considerable effort
especially in conducting clinical trials.38 It would appear that a reasonable
inference to draw from this provision is that the effort involved should not
only be substantial economically but also in technical and scientific terms.39
On the other hand, this part of the test data protection regime has been
criticised as extending IP beyond its boundaries of rewarding the creators of
original ideas and new inventions to the protection of investment and not
intellectual contribution.40 The protection of investment, according to Correa,
should be within the purview of competition law and not IP.41 It is, however,
doubtful if it can be rightly argued that the development of a new invention
can be fully separated from the investment that inevitably goes with it. There
is also no gainsaying the fact that test data generation involves substantial
economic resources and scientific knowledge. It is thus submitted that the
considerable effort requirement will be easily met in virtually all cases of
pharmaceutical test data generation.
2.1.3 Protection Against Unfair Competition Requirement
Article 39(3) requires national drug regulatory authorities to protect
information submitted to them against unfair commercial use to the extent
that such information remains undisclosed. It should be noted that the test
data regime under Article 39(3) is essentially for regulatory approval for
marketing pharmaceutical or agricultural products. It does not entail selling
or offering data for sale.42 To that extent, the point has been made that
commercial use can only mean granting marketing approval to competing
goods without the consent of the first registrant.43 As Pires de Carvalho
argues:
The whole idea of Article 39.3 is to prohibit parasitic behaviour or
free riding. Any measures, such as relying on bioequivalence tests or
other abridged procedures that alleviate the second registrant from
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
38
Gervais, above n 18, 545.
39
40
41
Ibid.
42
TRIPS Agreement art 39.
43
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Vol 23(2) 2014-2015
obligations that have been imposed to the first registrant should be

deemed as such.
On the other hand, Correa has argued that the concept of unfair is relative to
the values of a particular community and varies among Members.44 He posits
that even though the use by government may have commercial implications,
it still does not amount to a commercial activity but a defensible State
practice.45 He thus highlights the following as actions a country may
undertake without violating Article 39(3):
a.
Require the second-entrant to produce its own testing data or to

obtain an authorization of use from the originator of the data;
b.
Allow the second-entrant to rely on the originators data against

payment of compensation;
c.
Use the originators data in order to technically examine

second-entry applications. In this case, the authority directly
relies on the originators data;
d. Require the second-entrant to prove that his product is similar to

an already registered product, without having to examine and
rely upon the originators data.46
Hiroko Yamane also takes a similar view, positing that Article 39(3) only
requires Members to prevent the disclosure of data submitted to regulatory
bodies to competitors and does not entail more than the protection against
unfair commercial use by competitors.47 In Ruckelshaus v Mosanto,48 it was
argued before the US Supreme Court that the use by a subsequent applicant
of Mosantos protected agrochemical product data was unconstitutional, even
though Mosanto was entitled to compensation for the use. The US Supreme
Court rejected Mosantos complaint and noted the common practice of
relying on originators data in the US. This case was decided a decade before
the entry into force of the TRIPS Agreement. The Court in the Mosantos case
did not recognise the originators right to exclusive use but there was an
obligation to compensate the original owner of the data. The Canadian
Federal Court of Appeals decision in Bayer Inc. v Canada (Attorney General) is
also very instructive. The decision was based on North American Free Trade
49
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
44
Correa, above n13, 381.
45
Ibid 383.
46
Ibid 384.
47
H Yamane, Interpreting TRIPS (Hart Publishing, 2011) 470-1.
48
Ruckelshaus v Mosanto, 467 US 986 (1984).
49
Bayer Inc. v Canada (A-G) [1999] 3 F.C. D-25.
EAP 13
119
Agreement (NAFTA)50 provisions concerning test data protection that are

similar to the provisions of TRIPS Article 39. The Court held in Bayer Inc. v
Canada (Attorney General) that if the generic manufacturer exercises the option
of having the Minister examine the confidential information filed by the
innovator, it will be relying on the test data. The Court however noted that
this would not be the case if the generic manufacturer is able to establish the
safety and effectiveness of its product on the basis of bioequivalence or
bioavailability studies without the Minister having to rely on the innovators
data.
Although the Canadian courts have recognised use on the basis of
bioequivalence as not amounting to unfair commercial use, it is wrong to
contend that there is a general consensus on this point. Daniel Gervais noted
that such use could come under scrutiny and that the interpretation of the
Canadian Court is at odds with the view supported by a number of WTO
Members including the European Union and the United States.51 In a similar
vein, Nuno Pires de Carvalho describes any reliance by government on the
innovators data as an unauthorised free riding that should be
discouraged.52 Jerome Reichman on the other hand contends that Article 39 of
TRIPS does not prohibit governments from relying on innovators data on the
basis of bioequivalence.53
Whilst the Canadian courts and some experts seem to favour the view that
use on the basis of bioequivalence does not amount to an unfair commercial
practice, it is still doubtful if this view can be seen as fully consistent with
obligations under the TRIPS Agreement. A literal interpretation of Article 39, it
is submitted, clearly suggests that any use of protected test data without the
owners consent will be inconsistent with the TRIPS Agreement except where
it is used to protect public health or if it does not amount to unfair
commercial use. The use of such data for the purposes of ascertaining the
safety and efficacy of drugs will not be unfair commercial use.54
As mentioned earlier, one unsavoury effect of restraining drug regulatory
authorities from granting marketing approval on the basis of bioequivalence
is the problem of having to substantially repeat toxicological and clinical
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
50
North American Free Trade Agreement, signed 17 December 1992, [1994] CTS 2
(entered into force 1 January 1994) (NAFTA).
51
Gervais, above n 18, 545-6.
52
53
J H Reichman, Rethinking the Role of Clinical Trial Data in International

Intellectual Property Law: The Case for a Public Goods Approach (2009) 13
Marquette Intellectual Property Law Review 1, 22.
54
This point is examined further in 4.2 below.
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Vol 23(2) 2014-2015
trials, which will not only be profligate but also ethically problematic.55
Nonetheless, it would appear that reliance on the originators test data for the
purposes of granting marketing approval to a generic company, whether
state owned or not, would run afoul of the tenor of the provision except
where there are public health considerations.
2.1.4 Non-Disclosure Obligation and the Public Protection Exception
Where generic companies rely on data that is publicly available, Article 39
will not apply, as the information must be undisclosed to qualify for
protection. This provision is, however, subject to the public protection
exception in Article 39(3).56 The implication of this exception is that Members
may disclose such information where necessary to protect public health or
interest or where certain steps have been taken to adequately protect the
disclosed data against unfair commercial use or competition. The TRIPS
Agreement does not provide guidance on when it will be necessary to protect
the public. Correa has opined that this provision is subject to a necessity
test.57 Deference may be given to Members in determining when such
necessity arises but a Member invoking the provision may have to bear a
very onerous burden of proof, should the measure taken be challenged.58
There is some support for the view that disclosure may be allowed to enable
a compulsory licensee to acquire marketing approval, especially where the
licence is issued to correct anti-competitive practices or to meet the demands
of public health.59 This is examined further below in the section on data
exclusivity and compulsory licensing.60 It is important to note that Article 39
does not provide for a set duration of test data protection and it would seem
that such protection may continue indefinitely until the data can no longer be
considered undisclosed. The generally accepted term of protection, from the
current practice amongst Members, is five to ten years.61 It has been
suggested that terms of protection should be decided on a case-by-case basis,
taking into account the resources committed to the generation of the test data
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
55
56
TRIPS Agreement, art 39(3).
57
58
Ibid.
59
UNCTAD-ICSTD, above n 12, 532.
60
See section 3 below.
61
IFPMA, A Review of Existing Data Exclusivity Legislation in Selected Countries

(International Association of Pharmaceutical Manufacturers Association, 2002).
EAP 15
121
and its novelty, but subject to a maximum protection period to avoid

abuses.62
Data Exclusivity and Compulsory Licensing
A pertinent point to consider here is the likely implication of test data

protection on the use of compulsory licensing. Article 31 of the TRIPS
Agreement, which deals with use without authorisation, provides for
compulsory licensing of patented products. In 2001, the WTO Ministers
adopted the Doha Declaration on the TRIPS Agreement and Public Health (Doha
Declaration). Paragraph 4 of the Doha Declaration provides thus:
We agree that the TRIPS Agreement does not and should not prevent
members from taking measures to protect public health. Accordingly,
while reiterating our commitment to the TRIPS Agreement, we affirm
that the Agreement can and should be interpreted and implemented
in a manner supportive of WTO members' right to protect public
health and, in particular, to promote access to medicines for all.63
The problem was that under Article 31(f) of TRIPS, goods made pursuant to a
compulsory licence in any given country should be predominantly for the
supply of the domestic market. Paragraph 6 of the Doha Declaration mandates
the Council for TRIPS to find a solution to the problems that countries
without a manufacturing capacity in the pharmaceutical sector may
encounter in using the compulsory licensing system. The solution came in the
form of the Doha Paragraph-6 Implementation Decision64 which has now become
TRIPS Article 31bis through the Protocol Amending the TRIPS Agreement of 6
December 2005. The amendment is to take effect upon acceptance by two
thirds of Member States but the number of acceptances that have so far been
recorded is still below this requirement. WTO Members presently have until
December 2015 to accept the amendment.65 The Doha Paragraph-6
Implementation Decision is, however, in force in the meantime.66
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
62
63
Doha Ministerial Declaration on the TRIPS Agreement and Public Health, WTO Doc
WT/MIN(01)/Dec/2 (20 November 2001, adopted 14 November 2001) para 4.
64
Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and

Public Health, WTO Doc WT/L/540 (2 September 2003) (Decision of 30 August
2003).
65
Amendment of the TRIPS Agreement fourth extension of the period for the acceptance by
Members of the Protocol Amending the TRIPS Agreement, WTO Doc WT/L/899, (27
November 2013) (Decision of 26 November 2013).
66
References to compulsory licensing or art 31 of TRIPS in this article should be

understood in the context of the provisions of 31 and 31bis (Doha Paragraph-6
EAP 16
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A potential problem that may arise is that even where a compulsory licence is
issued, the generic manufacturer may still have to seek the approval of the
patent holder to make use of the test data to obtain marketing approval.67 It
has been argued that where a compulsory licence is issued in respect of a
drug, data exclusivity may still present a significant hurdle by making
marketing authorisation for the drug more difficult.68 This is because Article
39(3) establishes a quasi-proprietary, quasi-patent system that confers rights
that are separate and distinct from a patent right.69 In the words of Nuno
Pires de Carvalho:
Test data, actually may support marketing approval of patented
products, but they are invariably developed after the invention is
submitted to the patent office. For these reasons, the terms of
protection of test data have no connection with patents.
It therefore follows that the grant of a compulsory licence to produce generics
does not, generally, affect the protection available under Article 39(3).
The question that follows from this is whether a compulsory licensee may
avoid gaining the data owners authorisation for marketing approval. A case
could be made for arguing that use by government, pursuant to the grant of a
compulsory licence, is not unfair and should not be treated as such. This is
because the compulsory licensing regime under Article 31 of the TRIPS
Agreement requires the payment of adequate remuneration where a
compulsory licence is to be issued. It is therefore presumed that the
compensation paid to a patent holder for the compulsory licence would have
taken the data exclusivity right into account and such use of the information
should, therefore, no longer be considered unfair. Besides, such use can also
conveniently fall under the public health exception available under Article
39(3).
In a similar vein, use by a third party pursuant to a compulsory licence
granted for public health reasons will not, it is submitted, be inconsistent
with Article 39(3) provided that the third party is required to pay adequate
compensation to the patent holder who will also be the owner of the test data.
Article 31(h) of the TRIPS Agreement provides that the right holder shall be
paid adequate compensation in the circumstances of each case, taking into
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Implementation Decision) of the TRIPS Agreement.! For more discussion on
compulsory licensing, see D Nicol and O Owoeye, Using TRIPS Flexibilities to
Facilitate Access to Medicines (2013) 91(7) Bulletin of the World Health Organisation
533-539; O A Owoeye, Compulsory Patent Licensing and Local Pharmaceutical
Manufacturing Capacity in Africa (2014) 92(3) Bulletin of the World Health
Organisation 214 219.
67
Dwyer, above n 26, 843.
68
Clift, above n 3, 433.
69
EAP 17
123
account the economic value of the authorization. It is thus submitted that it

will be an onerous burden indeed to expect a compulsory licensee to pay a
separate remuneration for the patent right and another for data exclusivity.
Since Article 31(h) already requires the compensation paid to the right holder
to take cognisance of the economic value of the authorisation, this will be
enough to compensate for the use of test data as well. In the light of the
foregoing arguments and the provisions of the Doha Declaration, it is
submitted that once a compulsory licence is issued under Article 31 of TRIPS
the data exclusivity regime should pose no further barrier to the use of the
compulsorily licensed product.
3.1 Can Test Data be Compulsorily Licensed?

Another issue that is necessary to consider is whether the government can
grant a compulsory licence in relation to a test data right, especially in cases
where there is no need to get a compulsory patent licence. A brief
examination of the negotiation history of the TRIPS Agreement may be
pertinent here. The Anell draft (Chairmans draft) of 23 July 1990 provided as
follows on this point:
2A(a). Parties shall not discourage or impede voluntary licensing of
undisclosed information by imposing excessive or discriminatory
conditions on such licences or conditions which dilute the value of
such information.
2A(b). There shall be no compulsory licensing of proprietary
information.70
The Brussels Draft of December 1990 did not have the equivalent of Article
2A(b) in the Anell draft but nonetheless provided thus:
3A. Parties shall not discourage or impede voluntary licensing of
undisclosed information by imposing excessive or discriminatory
conditions on such licences or conditions which dilute the value of
such information.71
These provisions prohibiting or discouraging the compulsory licensing of
proprietary information were not included in the final text of the TRIPS
Agreement. Does this mean the TRIPS Agreement can now be interpreted as
allowing the compulsory licensing of proprietary information? Pires de
Carvalho argues that the fact that Article 39(3) does not mention compulsory
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
70
Chairmans Report to the GNG, Status of Work in the Negotiating Group, Negotiating
Group on Trade-Related Aspects of Intellectual Property Rights, including Trade in
Counterfeit Goods, WTO Doc MTN.GNG/NG11/W/76, (23 July 1990).
71
Draft Final Act Embodying the Results of the Uruguay Round of Multilateral Trade
Negotiations Revision, GATT Doc MTN.TNC/W/35/Rev.1 (3 December 1990).
EAP 18
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Vol 23(2) 2014-2015
licensing does not support the inference that it forbids it, as the Agreement
does explicitly forbid compulsory licensing where such is deemed necessary.
This is the case in respect of trademarks under Article 23, which provides
thus:
Parties may determine conditions on the licensing and assignment of
trademarks, it being understood that the compulsory licensing of
trademarks shall not be permitted and that the owner of a registered
trademark shall have the right to assign his trademark with or
without the transfer of the business to which the trademark belongs.
The argument, therefore, is that TRIPS has clearly and unequivocally made it
known where compulsory licensing is not available, as in the case for
trademarks, and in the absence of such express prohibition, it should be
presumed that compulsory licensing will be available. While this argument is
very compelling in principle, it is unlikely that compulsory licensing can be
effectively pursued in practice under the provisions of Article 39(3) except
where the grounds for the compulsory licence fall within the exceptions
recognised under Article 39(3). Thus, no compulsory licence can be granted
under Article 39(3) save to the extent necessary to protect the public interest
or unless adequate steps are taken to prevent unfair competition. It would
therefore appear that compulsory licensing may be available under Article
39(3) where it is used as a measure for taking advantage of the exceptions
recognised under that provision. Any steps taken in excess of the exceptions
will be afoul of the TRIPS Agreement.
The Global Move Towards a Universal Standard for Data

Exclusivity
Many countries have already legislated to provide for data exclusivity

protection. In the US, the Food and Drug Administration (the national drug
regulatory authority) is forbidden from accepting an application for
marketing approval from a competitor for the first five years of registration
without the consent of the initial registrant.72 The same practice has been
adopted by Health Canada.73 In the European Community (EC), Members
are now required to grant six to ten years of data exclusivity to drugs that
have been given marketing approval.74 The EC has taken the position that the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
72
Food, Drugs and Cosmetic Act, 21 USC 355(c)(3)(E)(ii) (2001).
73
Food & Drugs Act, CRC. c. 870 (1985), amended by C.08.004.1, 129 C. Gaz. 2494
(1995) (Can.).
74
Council Directive 2001/83 [2001] OJ L 311/75, art. 10;

Protection and Abridged Applications for Marketing
Pharmaceutical Industry in Richard Goldberg and
Pharmaceutical Medicine, Biotechnology and European Law
Press, 2001) 93, 113.
EAP 19
I Dodds-Smith, Data
Authorisations in the
Julian Lonbay (eds),
(Cambridge University
125
best way to protect test data against unfair commercial use is data exclusivity
irrespective of whether the product is patented or not.75 In Australia, test data
registration is performed by the Therapeutic Goods Administration and
protection is available for a period of five years from the date of registration.76
The justification for limiting the extent of the data exclusivity period, as
already noted, is to avoid a situation where every generic manufacturer will
have to undertake their own clinical trials, which will not only entail a
significant waste of resources as well as ethical issues, but also make it
substantially difficult for people in developing countries to gain access to
much needed drugs at affordable prices. The contrary argument, put forward
by the IP exporting countries, is that there will be little incentive to market
drugs in developing countries without a robust data exclusivity regime.77 Test
data protection offers another layer of protection to products that are not
patented or where the patent term has expired or is close to expiration at the
time of registration.
Since the emergence of the TRIPS Agreement, the US has developed the
practice of including a five year data exclusivity regime in its bilateral trade
agreements.78 The US has also been using more coercive measures under its
301 Watch List to enforce this interpretation of the TRIPS obligations. For
instance, in 1996 a special 301 procedure was launched against Australia for
failing to provide adequate protection to test data submitted for marketing
approval.79 This probably influenced Australias adoption of its own five-year
data exclusivity regime in 1998.80 Other countries that have come under US
trade sanctions or pressure for non-compliance with data exclusivity
requirements include Argentina, Taiwan and Thailand.81
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
75
Communication from the European Communities and Their Member States to the Council
on Trade-Related Aspects of Intellectual Property Rights, WTO Doc 15 IP/C/W/280
(June 12, 2001) 6.
76
See Section 25A(2)(e) Therapeutic Goods Act 1989 (Cth).
77
See C M Correa, Protection Of Data Submitted For The Registration Of Pharmaceuticals:

Implementing The Standards Of The TRIPS Agreement (South Centre, 2002) 6-7.
78
See, eg, Pharmaceutical Patent Issues: Interpreting GATT: Hearings before the Senate
Comm. on the Judiciary, 104th Cong. 35 (1997).
79
United States Trade Representative, Fact Sheet: "Special 301" On Intellectual Property
Rights (1996) <http://www.cptech.org/ip/health/ustr/301-96.htm>.
80
Therapeutic Goods Legislation Amendment Act (No 34) 1998 (Cth).
81
United States Trade Representative, above n 78. In 2012, countries on the US 301
Priority watch list for non-compliance with test data obligations included: Algeria,
Argentina, Chile, China, India, Indonesia, Israel, Pakistan, Thailand and
Venezuela. Others on the watch list for inadequate test data protection were:
EAP 20
126
Vol 23(2) 2014-2015
4.1 Free Trade Agreements and Data Protection

The various free trade agreements and bilateral trade agreements negotiated
by the US contain provisions that impose a level of test data protection that
goes beyond the requirements contained in TRIPS. For instance, the Peruvian
Trade Promotion Agreement and the Colombia Trade Promotion Agreement both
include provisions that prohibit the use of test data on safety and drug
efficacy to obtain governmental approval of generic drugs.
In a similar vein, the Dominican Republic-Central American Free Trade
Agreement (CAFTA) requires signatories to provide test data protection for
five years from the moment the product is granted market approval in their
country.82 This has been described as an effective five-year bar on
compulsory licensing from the time of marketing approval.83 NAFTA also
provides for test data protection for a minimum of five years from the date on
which market approval is granted.84 It is arguable that the standard of
protection required by TRIPS is that the test data must not be used for an
unfair commercial purpose, and must not unduly restrict generic
manufacturers seeking to use it for marketing approval. Data protection
under TRIPS is only applicable to data relating to new chemical entities.
However, under CAFTA, it applies to new products with a chemical entity
not formerly approved in the country irrespective of whether the chemical
entity is new or not.85
4.2 Data Exclusivity and the Right to Health

There is an emerging discourse on the need to recognise access to information
from clinical trials as a basic component of the right to health.86 It is important
to note that the expiration of data exclusivity does not make the test data
available to the public, as such information still remains confidential even
after the period of data exclusivity has expired. However, arguably there is
considerable public interest in making clinical trial results available to the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Brazil, Dominican Republic, Ecuador, Egypt, Lebanon, Mexico, Philippines,
Tajikistan, Turkey and Vietnam.
82
Dominican Republic-Central American Free Trade Agreement, signed 5 August 2004

(entered into force 1 March 2006) art 15.10.1(b) (Dominican Republic-Central
American Free Trade Agreement).
83
E Cowley, The Right to Health: Guatemalas Conflicting Obligations under the

Central American Free Trade Agreement and the International Covenant on
Economic, Social and Cultural Rights (2007) 11 Michigan State University Journal of
Medicine & Law 227, 242.
84
NAFTA art.1711 (6).
85
Dominican Republic-Central American Free Trade Agreement art 15.10.1(c).
86
See generally Lemmens and Telfer, above n 29, 65.
EAP 21
127
public to safeguard public health. Access to early clinical trials, including

phase 1 exploratory trials, could provide helpful information about the health
and safety issues that may attend the marketing of pharmaceutical products.87
It is arguable, therefore, that there exists the need to develop appropriate
knowledge systems and reliable regulatory structure around medical
knowledge.88 Hence, it is submitted that following the expiration of the data
exclusivity period, such information should be readily available, at least for
the purposes of medical research and the advancement of knowledge.
The controversy regarding research reporting and marketing practices of
GlaxoSmithKline and the use of its drug Praxil for the treatment of
depression in children illustrates the point that access to clinical trial
information is in the public interest.89 The company was prosecuted by the
Attorney General of New York for failing to disclose negative data and
lopsided publications to promote off-label prescriptions.90 Another example is
the controversy surrounding Merck and its pain relief medication Vioxx,
which is estimated to have caused hundreds of thousands of severe
myocardial infarctions and cardiac deaths.91 These incidents provide a sound
basis for the proposition that clinical trial data should be accessible where
necessary to ascertain the safety and efficacy of pharmaceuticals.
The argument that access to test data is a fundamental part of the right to
health is founded on the premise that test data is a public good92 and the
ability to access test data information is seen as a major element of the right to
the highest attainable standard of health.93 As noted earlier, the TRIPS
Agreement does recognise the public interest in test data and thus provides an
exception to the rule against disclosure where it is necessary to protect the
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
87
Ibid.
88
Ibid.
89
D Rennie, Trial Registration. A Great Idea Switches from Ignored to Irresistible

(2004) 292(11) Journal of the American Medical Association 1359, 1359; J N Jureidini, L
B McHenry and P R Mansfield, Clinical Trials and Drug Promotion: Selective
Reporting of Study 329 (2008) 20 International Journal of Risk and Safety in Medicine
73.
90
See New York v GlaxoSmithKline, No. 04-CV-5304 MGC (S.D.N.Y. 26 August 2004).
91
R Horton, Vioxx, the Implosion of Merck and Aftershocks at the FDA (2004) 364
The Lancet 1595; E J Topol, Failing the Public Health -- Rofecoxib, Merck, and the
FDA (2004) 351 New England Journal of Medicine 1707.
92
J H Reichman, Rethinking the Role of Clinical Trial Data in International

Intellectual Property Law: The Case for a Public Goods Approach (2009) 13
Marquette Intellectual Property Law Review 1.
93
Lemmens and Telfer above n 29, 99.
EAP 22
128
Vol 23(2) 2014-2015
public.94 The right to health entails the actualisation of public goals such as
availability, accessibility and quality,95 particularly in the field of
pharmaceuticals. Such goals can hardly be realised without fair access to
medical care that is substantially shown to be scientifically dependable and
publicly accepted as effective. The European Court of Human Rights
(ECtHR) decision in Sunday Times v United Kingdom is somewhat pertinent
to the topic.96 An article in The Sunday Times, examining the history of the
manufacturing and regulatory approval of thalidomide, had been banned by
an injunction because its publication would amount to contempt of court. The
ECtHR found that the injunction would amount to an unjustifiable
infringement of Article 10 of the European Convention on Human Rights, which
guarantees the freedom of expression. The ECtHR particularly noted that in
issues pertaining to public health, the public has a right to be properly
informed.97
The human rights dimension to the data protection provision of the TRIPS
Agreement may therefore be a powerful weapon in addressing the public
health implications of the TRIPS data protection regime. There is definitely
the possibility of public health issues arising from data protection and this is
equally recognised in Article 39(3) of the TRIPS Agreement. Member States,
therefore, reserve the right to use such information or allow an independent
third party to use it where necessary to protect public health to the extent that
the protection against unfair commercial use is not compromised. States, in
either using or allowing the use of such information, can justify the use by
relying on the right to health.
The originator test data can be used for granting marketing approval to
generic manufacturers, either pursuant to a compulsory licence or following
the expiration of the data exclusivity period. Use or disclosure of such
information can also be justified both under TRIPS and international human
rights law for the purposes of ascertaining the efficacy or safety of the
product, provided adequate steps are taken to ensure the disclosure does not
result in unfair commercial use of the data.
4.3 Test Data and Clinical Trial Reporting

In 2004, the Global Forum and Ministerial Summit on Health Research issued
the Statement on Health Research which emphasised the need to promote
access to reliable and up-to-date evidence on the effects of interventions and
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
94
TRIPS Agreement art 39(3); See also 3.1. above.
95
Paul Hunt, Special Rapporteur on the Right to Health, The Right of Everyone to the
Enjoyment of the Highest Attainable Standard of Physical and Mental Health, UN Doc.
E/CN.4/2004/49/Add.l (1 March 2004) 33-38.
96
The Sunday Times v The United Kingdom (1979) 30 Eur Court HR (ser A) 245.
97
Ibid 66.
EAP 23
129
called on the WHO to create a platform connecting a network of

international clinical trials registers to ensure a single point of access and the
unambiguous identification of trials. This was further reinforced by the fiftyeighth World Health Assembly in Resolution WHA58.34. As a result, the
International Clinical Trial Registry Platform (ICTRP) was established by the
WHO in 2005, with the aim of enhancing the WHO Trial Registration Data
Set on all clinical trials and promoting public access to the information.98 The
ICTRP search portal provides a one-stop point of access on information
relating to current or completed clinical trials by using records submitted by
data providers all over the world. The ICTRP is largely dependent on both
national and regional regimes for implementation and enforcement.99 Whilst
the creation of the ICTRP is undoubtedly a significant step towards ensuring
the accessibility of clinical trial data, a number of experts have taken the view
that the ICTRP minimal data set is somewhat inadequate and more
information would be required for any meaningful analysis of clinical trials
to be possible.100
One major concern of the pharmaceutical industry is that clinical trial
registration may offer competitors access to information that is substantially
proprietary. Representatives of the industry have particularly expressed the
objections of its members to the disclosure of five data items in the ICTRP
system for being commercially sensitive, these being: official scientific title;
intervention name; target sample size; primary outcome; and key secondary
outcomes. The industry has argued that the disclosure of such information
would deprive the originator company of the benefits of being the first to
enter the market with a novel product.101 It is, however, pertinent to note as
stated earlier, that the obligation to protect test data under TRIPS is not
unqualified. Disclosure is allowed where necessitated by overriding public
interest and the implementation of registration and results reporting systems
fall within this exception.102
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
98
WHO, International Clinical Trials Registry: About the WHO ICTRP (2013)
<http://www.who.int/ictrp/about/en/>.
99
Lemmens and Telfer, above n 29, 72.
100
C Haug, P Gatzsche and T Schoeder, Registries and Registration of Clinical Trials

(2005) 353 New England Journal of Medicine 2811, 2812.
101
Letter from Alan Goldhammer, Associate Vice President United States Regulatory
Affairs, to ICTRP, RE: PhRMA's Second Round Comments on International Clinical
Trials Registry Platform (ICTRP): Disclosure Timing (World Health Organisation,
2006) <http://www.who.int/ictrp/002-PhRMA_29March06.pdf)>.
102
Lemmens and Telfer, above n 29, 82.
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Vol 23(2) 2014-2015
Data Exclusivity and Access to Medicines
In general, the TRIPS Agreement seems to have imposed uniform standards

that are likely to benefit major IP holders, largely resident in developed
countries, at the expense of emerging and least developed economies, which
will have to pay heavier rents for the use of modern technology. This is also
the case with regard to the specific provisions relating to data exclusivity.
Indeed, for the vast majority of African countries and other developing
countries without any significant manufacturing capacity in the
pharmaceutical industry, data exclusivity offers no real benefits. Its
contribution to boosting the investment climate in such countries is at best
equivocal, given the fact that political stability, social security and economic
viability are also important factors that inform investment decisions.
Nonetheless, as succinctly noted by Michael Morgan, the TRIPS Agreement
has become a reality that must be taken into account in any strategy to
remedy the gaps in access and innovation in developing world
pharmaceutical markets.103
The extent to which the TRIPS data protection requirements can be said to
preclude the grant of marketing approval on the basis of bioequivalence may
continue to elicit significant commentaries. It is nonetheless clear that the
TRIPS negotiators directly rejected proposals to include provisions that might
absolutely prohibit the use of originator test data in granting marketing
approval to generic manufacturers.104 However, as the preceding section
demonstrates, the flexibilities allowed under TRIPS are further circumscribed
by the TRIPS-plus obligations contained in many free trade agreements
pursued by the US and the European Union. This point was noted by the
African Union in the 2005 Cairo Declaration where the Ministers posited as
follows:
We note that the African Group initiated the discussion on the
clarification of flexibilities in TRIPS, particularly in relation to patents
and public health as well as biodiversity. We call on African countries
to take appropriate measures at the national level to make full use of
these flexibilities in line with the outcome of the AU Commission
Workshop held in March 2005 in Addis Ababa. We call on the EU not
to introduce in the EPA [Economic Partnership Agreement]
negotiations any TRIPS plus proposals (which go beyond existing
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
103
104
M R Morgan, Medicines for the Developing World: Promoting Access and

Innovation in the Post TRIPS Environment (2006) 64 University of Toronto Faculty
of Law Review 45, 59.
See 3.1.
EAP 25
131
TRIPS obligations) which would compromise these flexibilities. If

such proposals are advanced, they should be rejected.105
For Africa, it seems the need to build innovative capacity is not in any way
enhanced by a data exclusivity regime, but the TRIPS Agreement contains
certain safeguards to ensure IP protection does not become an impediment to
free trade and development. It is unlikely that Africa and most developing
countries stand to benefit significantly from the global move towards a
universal standard for data exclusivity and IP protection.
It is contended that it is critical for developing countries to form a common
front in resisting bilateral or free trade agreements that take away or
circumscribe the flexibilities allowed in TRIPS. The TRIPS standard for data
protection is that it must be protected against unfair commercial use.
However, the obligation against disclosure does not preclude countries from
acting in the national interest in the event of a public health emergency. It is
submitted that developing countries need to ensure that these distinctions are
captured in their national frameworks for data protection.
5.1 The TRIPS Flexibilities

The TRIPS Agreement has a number of provisions to protect public interest
and the interest of developing countries. These provisions are collectively
known as the TRIPS flexibilities. Articles 7 and 8 of the TRIPS Agreement
provides that the Agreement should be implemented in a way conducive to
the socio-economic interests of parties and that Members are allowed to take
measures to protect public health and interest.106 Compulsory licensing is
another major flexibility that may be used to whittle down any barrier that
may be constituted by the TRIPS data exclusivity regime, especially where
such licences are issued to protect public health. This position is further
reinforced by the fact that Article 39(3) of the TRIPS Agreement explicitly
allows a public interest exception where public health is involved. In
addition, the least developed countries are given until 1 July 2021 to comply
with the standards imposed by the TRIPS Agreement.107 WTO Members may
therefore rely on the available TRIPS flexibilities to address any significant
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
105
African Union Conference Of Ministers Of Trade, AU's Ministerial Declaration on

EPA Negotiations, 3rd Ordinary Sess, AU/TI/MIN/DECL. (III) (09 June 2005)
<http://www.issafrica.org/uploads/EPADECLJUN05.PDF>.
106
TRIPS Agreement, arts 8 and 7. See also O Owoeye, Patents and the Obligation to
Protect Health: Examining the Significance of Human Rights Considerations in the
Protection of Pharmaceutical Patents (2014) 21 Journal of Law and Medicine 900,
915-6.
107
See Extension of the Transition Period under Article 66(1) for Least Developed Country
Members,
WTO
Doc
IP/C/64
(Decision
of
11
June
2013)
<http://www.wto.org/english/news_e/news13_e/trip_11jun13_e.htm#decision.
>.
EAP 26
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Vol 23(2) 2014-2015
public health problem affecting them and this will not run afoul of their
obligations under WTO law. It is, however, important to note that developing
countries can deprive their populations of these flexibilities if they do not put
a guard against inordinately high standards or TRIPS-plus provisions that
may be imposed by bilateral or plurilateral trade agreements.
Conclusion
The impact of the TRIPS data exclusivity requirements on access to medicines

is not without its controversies. It is incontrovertible that patents, and
obligations arising from their protection, are not the only reason for the
problems associated with access to medicines. A myriad of socio-economic
factors are responsible for the access to medicines conundrum. That is why
trade rules and IP protection should not be fashioned in a way that will
exacerbate the problem.
It is beyond doubt that the regulatory purpose for drug marketing approval
is more connected with efficacy and safety of drugs than lowering their
prices. Data exclusivity also offers another layer of protection to patent
holders in the pharmaceutical industry and that protection is not dependent
on the patent term. It therefore appears that data exclusivity will only be of
real benefit to developing countries that have some substantial
pharmaceutical manufacturing capacity.
Article 39 of TRIPS should, however, not be construed as making the use of
compulsory patent licensing more onerous as the valid issuance of a
compulsory licence under the TRIPS regime should adequately satisfy the
requirements of Article 39(3). Developing countries are bound by their
international obligations in relation to the protection of IP rights.
Nonetheless, the operation of the TRIPS Agreement is likely to make access to
goods significantly difficult in regions that are yet to fully embrace the global
move towards the promotion of free trade. The TRIPS Agreement was
introduced to ensure that the free flow of goods and services in international
trade does not infringe on IP rights. Having a strong international IP
framework without a corresponding removal of barriers to market entry is
likely to make access to goods more difficult and expensive. An important
way of addressing the access to medicines problem in developing countries is
through the stratagem of free trade. The removal of barriers to trans-border
movement of goods will further facilitate access to cheaper goods and even
encourage manufacturers to invest more in the regions that are likely to be
more commercially viable due to the absence of market barriers.
It is submitted that access to test data for the purposes of ensuring drug
safety and efficacy is an integral part of the right to health and relevant to
consumers welfare and protection. The same argument applies to access to
such products by market competitors especially where necessary to address a
public health situation, even if it is not a real and immediate emergency. Data
exclusivity, it is submitted, should not be a barrier to the use of compulsory
licences under TRIPS, but neither data exclusivity nor compulsory licensing is
EAP 27
133
of real significance where there is a minimal pharmaceutical manufacturing

capacity. It is thus further submitted that there is a need for developing
countries to use the stratagem of economic collaboration and regional market
integration to develop strong local manufacturing capacity in the
pharmaceutical sector and promote the free movement of goods within
regional markets.
EAP 28
The ICJ Whaling Case: science, transparency and the

rule of law
*
BRENDAN GOGARTY AND PETER LAWRENCE#!

Abstract
The International Court of Justice (ICJ) Whaling Case (Australia v. Japan, New
Zealand intervening) was greeted by the popular press, particularly in Australia and
New Zealand, as a win for good science as opposed to bogus science. However,
in this article we argue that a closer analysis of the decision reveals that the ICJ - by
sidestepping the crucial issue of how to define scientific research under the
Whaling Convention - missed an opportunity to further the rule of law in
international law, particularly as it applies to commons areas that require scientific
cooperation and obligations.
Introduction
In this article we analyse the International Court of Justices decision in the

Whaling Case (Australia v. Japan, New Zealand intervening). In particular we
examine the ICJs approach to or perhaps, more appropriately avoidance
of defining scientific research for the purposes of the International
Convention for the Regulation of Whaling (ICRW), or international law more
generally. More than that, it is an exploration of the interface between science
and international law.
The Whaling Case centered upon the legal question of whether Japans lethal
harvesting of whales was, for the purposes of scientific research under the
provisions of the ICRW. As will be discussed, that legal question was
predicated on a contest about scientific veracity, or, more appropriately
scientific demarcation that is, where the boundary line between legitimate
science and other endeavours lies. That is a complex question that has not
been resolved within science itself, let alone philosophy more generally.1
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
*
This article is based on a presentation by the Authors to the 7th Polar Law
Symposium, Institute for Marine and Antarctic Studies (IMAS), Hobart, Tasmania
28 to 31 October 2014. The article is a product of a project entitled Resolving
Scientific Disputes in the Global Commons supported by the Australian
Governance and Implementation Research Group (GIRG). As one or more authors
were members of the JLIS Editorial Board, double-blind peer review of this article
135
However, we argue that, once placed into a legal framework, such questions
require resolution to ensure the rule of law is maintained, if not by the parties
to that framework, then by any adjudicative body charged with interpreting
it.
As will be discussed, scientific definition and demarcation are more than
philosophical questions, they have profound practical and legal implications
within global governance. In this paper we refer collectively to legal rules
allowing or permitting states to undertake scientific endeavours in pursuance
of treaty terms as legal-scientific obligations. Despite the widespread use
and importance of such legal-scientific obligations within global commons
treaties, they have, to date, received little judicial consideration by
international courts and tribunals. The Whaling Case was, therefore an
important milestone in this regard.
This paper will analyse the Whaling Case against the larger backdrop of public
international law, especially as it relates to commons areas and resources. It
will adopt the following framework for that analysis:
Firstly, it will examine the context of the dispute, to establish that the
dispute was at its heart, one about scientific definition and
demarcation;
Secondly, it will discuss why the questions of definition and

demarcation are questions of significant legal importance to
international law over the commons; and
The third and final part of this paper will consider whether the
reasoning of the ICJ in the Whaling Case addresses the underlying
problem of scientific demarcation in a manner, which advances
public international law.
It will ultimately be argued that, while the ICJ did, in fact, adopt an approach
which requires greater rigor and rationality in the application of legalscientific obligations, it did not go as far as might have been hoped. That is, in
very large part, because the ICJ avoided defining science, while implicitly
evaluating Japans claims against largely unexplained scientific criteria. That
is, it made a decision that was somewhat lacking in jurisprudential
transparency. By that we mean it involves unstated or unjustified (either in a
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
was managed by an independent group of editors, overseen by the Associate
Editor, Professor Dianne Nicol, in line with JLIS peer review policies.
PhD, LLB, GDLP, LLP, Faculty of Law, University of Tasmania
PhD, LLM, LLB, BA(Hons), Faculty of Law, University of Tasmania.
Karl Popper described the problem of demarcation as one of the most

fundamental problems in the philosophy of science. See: Karl Popper, Conjectures
and Refutations: The Growth of Scientific Knowledge (Routledge, 1962/ 2014) 55.
EAP 2
136
Vol 23(2) 2014-2015
legal or scientific sense) logical conclusions in its process of reasoning. Insofar

as that is the case, the ICJ appears to have limited the general applicability of
its decision outside the particular factual matrix of the dispute. In that
respect, the Whaling Case can be seen as somewhat of a missed opportunity to
advance the rule of law in relation to international legal-scientific obligations.
Background to the Dispute
The Whaling Case essentially arose from competing interpretations of the

meaning, scope and application of science under the ICRW. The root of the
dispute lies in the 1982 decision of the parties to the ICRW to establish a
general moratorium on commercial whaling subsequent to Article V of the
treaty.2 That Article permits the International Whaling Commission (IWC), as
the governing body of the ICRW, to adopt regulations with respect to the
conservation and utilization of whale resources based, inter alia, on scientific
findings [emphasis added]. At the 1982 meeting of the IWC, Article V was
invoked to amend the Schedule to the ICRW and the catch limits for all
whales to zero, effectively prohibiting commercial whaling within the
regime.3
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
2
Whaling in the Antarctic (Australia v. Japan: New Zealand Intervening) (judgment) (31
March 2014), [herein judgment, and either merits for primary judgment, or by
dissenting or separate judge if name of judge included] <http://www.icjcij.org/docket/index.php?p1=3&p2=1&case=148&code=aj&p3=4> (1 March 2015),
35. See: International Convention for the Regulation of Whaling, signed 2nd December
1946, 2124 UNTS 1 (entered into force 10 November 1948). Article V states 1. The
Commission may amend from time to time the provisions of the Schedule by
adopting regulations with respect to the conservation and utilization of whale
resources, fixing (a) protected and unprotected species; (b) open and closed
seasons; (c) open and closed waters, including the designation of sanctuary areas;
(d) size limits for each species; (e) time, methods, and intensity of whaling
(including the maximum catch of whales to be taken in any one season); (f) types
and specifications of gear and apparatus and appliances which may be used; (g)
methods of measurement; and (h) catch returns and other statistical and biological
records.
2. These amendments of the Schedule (a) shall be such as are necessary to carry out
the objectives and purposes of this Convention and to provide for the
conservation, development, and optimum utilization of the whale resources; (b)
shall be based on scientific findings; (c) shall not involve restrictions on the
number or nationality of factory ships or land stations, nor allocate specific quotas
to any factory ship or land station or to any group of factory ships or land stations;
and (d) shall take into consideration the interests of the consumers of whale
products and the whaling industry.
This was achieved by inserting Paragraph 10(e) of the Schedule to the ICRW; see
International Whaling Commission Report, IWC 34 Annual Meeting, 19-24 July
1982, 72-86
th
EAP 3
137
Japan initially protested against the 1982 commercial whaling moratorium,

arguing that it was driven by social concerns and had no basis in science.4
However, it eventually withdrew its objection and instead indicated that it
would undertake a scientific whaling program, involving lethal sampling of
whales, to prove the moratorium was not based on sound science.5 This
program was ostensibly undertaken in pursuance of Article VIII of the
Convention, which states:
1. Notwithstanding anything contained in this Convention any Contracting
Government may grant to any of its nationals a special permit
authorizing that national to kill, take and treat whales for purposes of
scientific research subject to such restrictions as to number and subject to
such other conditions as the Contracting Government thinks fit, and the
killing, taking, and treating of whales in accordance with the provisions of this
Article shall be exempt from the operation of this Convention. [emphasis
added]
2. Any whales taken under these special permits shall so far as
practicable be processed and the proceeds shall be dealt with in
accordance with directions issued by the Government by which the
permit was granted.
3. Each Contracting Government shall transmit to such a body as may
be designated by the Commission, in so far as practicable, and at
intervals of not more than one year, scientific information available to
that Government with respect to whales and whaling.
Japan ran two back-to-back programs pursuant to Article VIII: the Japanese
Whale Research Programme under Special Permit in the Antarctic (JARPA)
from 1987 to 2005; and subsequently (and immediately following JARPA)
JARPA II from 2006 to 2014.6 These programs had had functionally similar
objectives but varied in their lethal take of different whale species. In both
programs, whale carcasses were sold for consumption as is permitted by
Article VIII.
Despite Japans recourse to Article VIII and its claim to be harvesting whales
to better inform the commercial moratorium, the majority of states in the IWC
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
4
Government of Japan, National Diet Debates, House of Representatives Agriculture, Forestry and Fisheries Committee - No. 2, 11 October 1983 [excerpt],
cited in Memorial of Australia, Whaling in the Antarctic (Australia v. Japan: New
Zealand Intervening) [2014], ICJ Pleadings <http://www.icjcij.org/docket/index.php?p1=3&p2=1&case=148&code=aj&p3=1> (1 March 2015)
[herein Australian Memorial or pleading party and pleading type if other
pleadings], Annex 9, 77.
Merits, above n 2, 36; Counter-Memorial of Japan, above n 4, 13.
Merits, above n 2, 36.
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Vol 23(2) 2014-2015
criticised the use of lethal sampling pursuant to JARPA/JARPA II.7 Some

states, notably Australia and New Zealand, went further than this, arguing
that the actual purposes of the program were commercial and that so called
scientific whaling is contrary to [Japans] international obligations and
should stop;8 a claim that they would eventually take to the ICJ in 2010.
2.1 Arguments of the parties

The arguments made in the ICJ largely reflected the disagreement as to the
meaning and scope of scientific research. Hence, in its Memorial to the ICJ,
Australia reiterated its previous diplomatic position and arguments, that, as a
matter of law, Japan had an:9
[O]bligation not to kill whales for commercial purposes and [an]
obligation not to conduct commercial whaling [because] the true
purpose of JARPA II is continued whaling pure and simplethe issue
of special permits by Japan allegedly under Article VIIIpurportedly
authorising whaling for purposes of scientific research is not
consistent with the Convention.
Japan, in its Counter-Memorial, argued that JAPRA II was:10
[A] legitimate scientific programme, permitted under Article VIII of the
ICRW. JARPA IIs objectives and methods, together with its valuable
scientific outputs are fully consistent with the text as well as with
the object and purpose of the ICRW
It is obvious that Australia is opposed to any form of whaling
regardless of science or law
Japan [has] the earnest hope [for] rational discussion, putting an
end to the unreasonable rows and restoring whale conservation and
management based on science.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
7
Reuben Ackerman, Japanese Whaling in the Pacific Ocean: Defiance of

International Whaling Norms in the Name of Scientific Research, Culture and
Tradition (2002) 25 Boston College International & Comparative Law Review 323, 325326. In the IWC, see: IWC Resolutions 2003-3 and 2005-1, 2005-1, 2007-1; Annual
Reports of the IWC, (2009) 26-28; (2010) p 23; (2012) pp 41-43. IWC Resolutions and
reports are available at <https://iwc.int/home> (1 March 2015).
Press statement by the (then) Australian Federal Environment Minister, Hon Tony
Burke, cited in: Minister for Australian Antarctic Division, Australia continues
push for reform at International Whaling Commission, Press Release, 2nd July 2012
<http://www.antarctica.gov.au/news/2012/iwc-minister> (1 March 2015).
Australian Memorial, above n 4, 3.
10
Counter-Memorial of Japan, above n 4, 4.
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139
Thus, each party claimed that the other party was misappropriating an
agreed treaty term scientific research to mask activities that were not
permitted by the treaty. The conflict over the meaning of scientific research
was highlighted by the intervention of New Zealand, which, in its
observations argued that:11
Article VIII permits the killing of whales only if an objective
assessment demonstrates that the killing is only for purposes of
scientific research and the killing is necessary and the
Contracting Government has discharged its duty of meaningful
cooperation.
Bar the term for the purposes of scientific research, the criteria posited by
New Zealand were not to be found in Article VIII of the ICRW. Japan
subsequently complained:12
New Zealand has a different conception of what counts as "scientific
research Japan has, accordingly, to address two different cases
against it, emanating from two States that have stated openly that they
are acting in a common cause.
While this is not strictly true - New Zealand had not provided an alternative
definition of scientific research per se - Japans observation highlighted an
underlying problem in the ICRW treaty and regime. Specifically there has
historically been a lack of objective certainty amongst the parties, even those
acting in common cause, about what constituted scientific research pursuant
to Article VIII. That is, in part, because the ICRW does not provide a
definition of the term. Nor does it establish any demarcation criteria by which
to distinguish permissible scientific research from the regulated activities of
commercial exploitation and subsistence whaling. As will be discussed in the
next section, that is a problematic oversight, but one common to treaties
relating to commons areas and resources.
The Importance of Scientific Definition and Demarcation to

Commons Treaty Governance
As discussed above, the fact that the whaling dispute could arise in the first
place is largely the product of the ICRWs lack of definitional specificity
about its legal-scientific obligations. That is a common feature of multilateral
treaties over commons resources or spaces.13
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
11
Observations of New Zealand, above n 4, 2.
12
Observations of Japan, above n 4.
13
See i.e. Protocol on Environmental Protection to the Antarctic Treaty (The Madrid
Protocol), opened for signature 4 October 1991, 30 ILM 1455 (entered into force on
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Clearly any law must have limits, and any exception to a law must similarly
have boundary lines; otherwise it constitutes an absolute exception to any
obligation in the treaty. It is therefore appropriate to view the common lack of
definition of scientific terms in multilateral treaties as reflecting an implicit
assumption that such terms have a plain, ordinary meaning outside the
technical-legal confines of any specific treaty.14 Yet the reality is that, despite
the apparent assumption of scientific normativity, definitions of science are
either contested or lack the form of specificity that would allow legal
demarcation between scientific and non-scientific activities.15 This
compounds uncertainties about the scope and content of legal-scientific
obligations.
As a caveat to the following discussion we note the substantive body of
relevant literature especially within the social sciences about scientific
demarcation.16 The problem of summarizing differing schools of thought in a
contested space is, of course, that the summary itself can be interpreted as
value laden and preferential.17 It is not our intention to weigh in on the sociophilosophical debate about scientific demarcation, contribute our own, or to
select a preferred school from within it. Rather, our intention is to highlight
the problems that the very debate has created for legal-scientific obligations
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
14 January 1998) Art 7; United Nations Convention on the Law of the Sea, opened for
signature 10 December 1982, 21 ILM 1261 (entered into force 16 November 1994)
Arts 119(1), 143(3), 238; United Nations Framework Convention on Climate Change,
opened for signature 4 June 1992, 31 ILM 849 (entered into force 21 March 1994) Arts 3,
4(2)(c); Treaty on Principles Governing the Activities of States in the Exploration and Use
of Outer Space, including the Moon and Other Celestial Bodies, opened for signature 27
January 1967 6 ILM 386 (entered into force 10 October 1967) Arts 1, 4; Biodiversity
Convention, opened for signature 5 June 1992, 31 ILM 818 (entered into force 29
December 1993) Arts 7(a), 8; UNESCO Universal Declaration on the Human Genome
and Human Rights (1997), UN GA Res AIRES/53/152, 9 Dec. 1998, Art 18.
14
Vienna Convention on the Law of Treaties, opened for signature 23 May 1969, 8 ILM
679 (entry into force 27 January 1980), (herein VCLT) Art 31.
15
The Oxford English Dictionary, for instance, defines it variously and broadly in
relation to its root science, which is in turn defined as knowledge acquired by
study; acquaintance with or mastery of any branch of learning. The broadness of
the definition provides little to demarcate science from other activities, such as
theology or mysticism, which are generally regarded as antithetical to scientific
research, but which purport to develop knowledge through study. Similarly,
other dictionary definitions do not provide structural criteria by which to
demarcate science from non-scientific research or study. Oxford English Dictionary
(Online Resource) <http://www.oed.com/> (1 March 2015).
16
A helpful treatise on the longstanding contest over scientific definition and

demarcation is set out in: Charles Alan Taylor, Defining Science: A Rhetoric of
Demarcation (University of Wisconsin Press, 1996).
17
Indeed, even stating that it is contested might be interpreted as a preferential value

judgment by those who consider the matter settled.
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141
because of the uncertainty it imports into their terms. We also highlight that
competing demarcation theories exist which are less prone to definitional
uncertainty and therefore provide a possible avenue to a legal definition of
science.
There have been a range of attempts to define science by scientists and
sociologists both pre and post enlightenment; most have been contested or
limited by subsequent advances in scientific knowledge and method.18 As
Taylor notes, the intellectual horizon is littered with attempts to come to
grips with the constitutive character of science.19 By the twentieth century a
general consensus had developed that the only stable feature of science was
that no part of the enterprise was fixed or certain.20 Scientific philosophy
subsequently turned away from settling upon a strict or universal definition,
but instead sought to find a way of effectively demarcating science from nonscience (for instance pseudoscience or policy).21
For much of the twentieth century the dominant approach to scientific
demarcation was that of critical rationalism. Critical rationalism considers
science to be distinct from other disciplines because of its acceptance of its
own fallibility.22 This can be distinguished, for example, from faith-based
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
18
Hoyningen-Huene describes four phases of scientific ontology, each ascribing

differing characteristics to science, each without a single consistent feature. Even
scientific method, which was important in respect of the second and third phase
(from the 17 Century to the 19 Century - mid 20 Century), was discounted in the
fourth and present phase. See: Paul Hoyningen-Huene, Systematicity: The Nature of
Science (Oxford University Press, 2013), 3-6. For an earlier discussion of the
various attempts to describe science and the resultant problems and refutations
see: Lakatos and A. Musgrave (eds), Criticism and the Growth of Knowledge
(Cambridge University Press, 1970) 11; Thomas Nickles The Problem of
Demarcation in Massimo Pigilucci, Maarten Loudry (eds) Philosophy of
Pseudoscience: Reconsidering the Demarcation Problem (University of Chicago Press,
2013) 101-118. For a broader overview of the history of science, including attempts
to describe the enterprise see the seminal work of J.D Beral, Science in History:
Volume 1: The Emergence of Science (The MIT Press, 1971).
th
th
th
19
Taylor, above n 18, 4.
20
Lakatos and A. Musgrave, above n 18, 11.
21
Thomas Nickles summarises the demarcation problem as dealing with a range of

interrelated questions, including what science is: science constitutes empirical
method and knowledge merits the greatest authority is most valuable in
solving the problems we face. See: Thomas Nickles The Problem of Demarcation
in Massimo Pigilucci, Maarten Loudry (eds) Philosophy of Pseudoscience:
Reconsidering the Demarcation Problem (University of Chicago Press, 2013), 102.
22
Critical rationalism was propounded by Karl Popper in a series of works starting

in the 1930s (see: Karl Popper Die beiden Grundprobleme der Erkenntnistheorie
(Tbingen, 1933); Karl Popper, Logik der Forschung (Verlag von Julius Springer,
1935). It was an attack on positivistic interpretations of science. By the time the
ICRW was negotiated, and when Article VII of the ICRW was agreed to, critical
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Vol 23(2) 2014-2015
belief structures which insist upon adherence to basic cantons or

unquestionable tenants. Hence, what demarcates science from non-science is
that all of its parts its aims, methods, theories and so on are open to
falsification and review and, in fact, any proposition in science is
accompanied by a test to prove whether or not it is incorrect.
More recently, a pragmatic socio-historical23 description of science has gained
ascendency, which, while not discounting the falsification theorem, tends to
view it as aspirational rather than reflective of the conduct of normal
science.24 This school recognises the historically paradigmatic nature of
scientific research, 25 the tendency of scientific communities to work towards
stability, consensus, and disciplinary authority, and the influence of sociopolitical factors on the direction and nature of intellectual inquiry.26 Yet, even
within this school, the conduct of science is neither stable nor certain.
Paradigms shift, so that what is the dominant scientific program in any one
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
rationalism was the dominant description of science, particularly due to the
widespread acceptance of the position following the publication of Karl Popper,
The Open Society and Its Enemies (Routeldge, 1945).
23
This school was led by Thomas Kuhn, who criticised falsification as an absolute
description of the conduct, boundaries, and limits of science because it described
the entire scientific discipline only by reference to its revolutionary parts, the
reality being that scientific revolutions are rare and are in fact much slower to gain
traction than political revolutions. See: Thomas Kuhn, Logic of Discovery or
Psychology of Research? in Imre Lakatos and Alan Musgrave (eds) Criticism and
the Growth of Knowledge (Cambridge University Press, 1970) 1-10.
Later dialogue about demarcation has tended to build upon Kuhns paradigm. For
instance, the strong programme of scientific knowledge is premised upon the
allegiance to a shared paradigm as a pre-requisite of scientific validity, but
recognises the sociological and socio-political influences on any community of
knowledge. See: Ideals and monisms: recent criticisms of the Strong Programme
in the sociology of knowledge (2007) Studies in History and Philosophy of Science
Part A 38(1) 210 doi: 10.1016/j.shpsa.2006.12.003
24
For a summary of the socio-historical view of normal science, see Nickles, above
n 21, 109.
25
Each program is constituted of a succession of related but slightly different

theories, methods, approaches, and techniques developed over time, which share a
common core. Scientists working in each program adhere to its core and attempt
to construct their approach and understanding around it. They shield their core
from falsification though protective auxiliary hypotheses to explain anomalies or
unpredicted outcomes. See: Thomas Kuhn, The Structure of Scientific Revolutions
(The University of Chicago Press, first published 1962, 2012 ed).
26
In respect to the sociological nature of scientific paradigms, see variously: Paul

Thagard, Why Astrology is a Pseudo-Science? PSA: Proceedings of the Biennial
Meeting of the Philosophy of Science Association 227-228; David Bloor, Knowledge
and Social Imagery (University of Chicago Press, 1991) Ch.1; and Robert K. Merton
and Piotr Sztompka, On Social Structure and Science (University of Chicago Press,
1996) 205-241.
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143
space and the contents of that program may not be the same at any one time
in history.27
Arguably, both views continue to hold traction in contemporary scientific
philosophy28 and governance;29 one reflecting a view of the ontological status
of science, the other the descriptive epistemology of its everyday practice. 30
Hence, the same scientific experts who argue that all science can say is what it
does not know (critical rationalism), decry approaches to problem solving
which do not meet with contemporary (paradigmatic) consensus as being
unscientific or pseudo-scientific.31 The inherent tensions created by this
apparently contradictory logic, combined with the constantly evolving and
reflexive nature of scientific knowledge and process makes defining science a
fraught task. Arguably that means that where it can be avoided it will be.
The ubiquitous, integrated nature of science within modern society32 permits
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
27
Imre Lakatos, The Methodology of Scientific Research Programmes (Cambridge

University Press, 1978) 34.
28
Gunnar Andersson, Kuhn's, Lakatos's and Feyerabend's Criticisms of Critical

Rationalism (E.J. Brill, 1994).
29
Paul Thagard, Why Astrology is a Pseudo-Science? in D Klemke, Robert

Hollinger, A. David Kline (eds) Introductory Readings in The Philosophy of Science
(Prometheus Books, 3 ed, 1998) 66.
rd
30
Ontology deals with the metaphysical identification of a thing i.e. science as a

discrete enterprise (this is contested by some). Epistemology deals with the study
of the nature of the thing what is valid science: S H Mellone, Psychology,
Epistemology, Ontology, Compared and Distinguished (1894) Mind 3(12) 474.
Although the distinction has metaphysical relevance, it is largely beyond the scope
of this paper, insofar as it relates to the question of scientific demarcation and from
hereon in we will refer only to the espistemic questions.
31
For a discussion in relation to climate change see Anthony Giddens, The politics of
climate change: National responses to the challenge of global warming (2008) Policy
Network Paper <http://www.policynetwork.net/uploadedFiles/Publications/Publications/The_politics_of_climate_c
hange_Anthony_Giddens.pdf>, 6-7 (1 March 2015)
32
Science is accepted as a predominant driver of modernisation and the dominance

of human beings over the natural order. Conversely science is also viewed as
informing our understanding of the risks created by the natural world, but also the
risks from the very modernisation that science itself is responsible for. That is,
science expands our understanding of the natural and human-made world, but
also the nature of risks in it, and the risks posed by the very technologies and
social changes it creates. This constant reflexive modernisation has, since the
industrial revolution (and arguably before), served to integrate science into the
very fabric of global civilisation. See: Ulrich Beck, Anthony Giddens, Scott Lash
(eds), Reflexive Modernization: Politics, Tradition and Aesthetics in the Modern Social
Order (Polity Press, 2004). Beck summarises reflexive modernisation as follows
The more society modernizes, the more knowledge it generates concerning its
foundations, structures, dynamics and conflicts. The more knowledge about itself
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Vol 23(2) 2014-2015
such an aversion as does the tendency by governing elites to treat semantic,

and epistemic questions about science as being of metaphysical, rather than
practical importance.
The problem is that contests over the meaning and scope of science are more
than metaphysical; they in fact permeate global disputes with far ranging
geo-political consequences.33 Those entrusted with determining what is
accepted or legitimate scientific knowledge influence the global
understanding of the natural and man-made world, and, as a consequence,
how the international community should react and restructure itself in
response. 34 That is particularly so when states commit to legal-scientific
obligations relating to shared global spaces and resources. 35
Science is as the foundational Editor of this journal rightly stated one of
the main guidelines for the development of societies, and therefore for the
development of the law.36 What is true at the domestic level is also true at
the international level. As a result of a global society, science has become
increasingly integrated and ubiquitous within the international legal
system.37
That is, in very large part, because of the assumption that it
proceeds upon a path of critical rationalism.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
it possesses and the more it applies it, the more expressly is tradition-guided
action replaced by a knowledge-dependent, scientifically mediated global
reconstruction of social structures and institutions. Knowledge compels decisions
and creates new contexts of action. Individuals are liberated from structures and
they must redefine their situation of action under conditions of manufactured
insecurity in forms and strategies of reflected modernization. Ulrich Beck, World
at Risk (Polity Press, 2009) 119, 120.
33
Science plays a dominant, central role in contemporary international affairs or to

co-opt from Beck, Giddens and others, the global risk society. Society tends to
view science as both the source of risks and the most appropriate mechanism to
identify, understand and attenuate risks. Those who are entrusted with identifying
what is legitimate science and what is not control the basic engine for social
change and management. Beck et al, above n 32.
34
Sheila S. Jasanoff Contested Boundaries in Policy-Relevant Science Social Studies

of Science May 17(2), 224 doi: 10.1177/030631287017002001.
35
In a semantic sense, this means that science can be both the object of the law (i.e.
the law regulates/controls science) and, conversely the laws subject (i.e. science
informs the law/legal decision making). In a wider setting it means that, like
contemporary society more generally, science is interwoven into the fabric of the
wider legal system, both domestically, but also in international law.
36
Rodger Brown Random access memories: Reflections on a Journal (2011) Journal

of Law, Information and Science 21(1), 6.
37
Reflexive modernization operates on all parts of society, including the law. Indeed
much of the development of the modern legal system can be tied into the
advancement of science and technology, see: Ilona Kickbusch 'Health Governance:
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Because critical rationalism denies that any individual or entity possesses

absolute authority to declare scientific truth, science tends to be viewed as the
most rational and apolitical basis for common governance. As Peel notes, the
inclusion of scientific obligations within treaties over such areas imbues them
with a legitimising force and signals a unified commitment to good
governance. 38 Hence, she argues that government delegates in a global
context adhere to the fiction of objective science in order to establish a
common set of ground rules.39
Yet, for ground rules to be law, they must do more than articulate a legal
fiction, they must denote meaningful obligations that are capable of objective,
prospective and consistent ascertainment and application by the states that
are bound by them.40 Where that is not the case such rules begin to lose their
normative status as laws, and, as a consequence, the adherence and fidelity to
them by states.41
As was noted at the outset of this part, minimal definitional guidance is
found within commons treaties that invoke legal-scientific obligations.42
Hence, if states are to be taken at their word that is their commitment to
legal rules is to be accepted prima facie then the lack of internal definitions
within such treaties must be taken to imply that an objective, prospective and
consistent definition is ascertainable from an external source. To date, none
exist within general treaties or international agreements. Nor, perhaps
surprisingly, has there been much judicial attention given to the general
definition of science or scientific research for the purposes of international
law. The Whaling Case promised to bridge that lacuna.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
The Health Society' in Kickbusch, McQueen et al. (eds), Health and Modernity:
Theoretical Foundations of Health Promotion (Springer, 2007) 148.
38
Peel posits that in this context, science has a strong legitimating force that helps
to ensure its continued importance. See: Jacqueline Peel, The Precautionary Principle
in Practice (Federation Press, 2006) 109.
39
Ibid.
40
The United Nations General Assembly has consistently declared fair, stable and
predictable legal frameworks, See: Resolution adopted by the General Assembly
Declaration of the High-level Meeting of the General Assembly on the Rule of Law at the
National and International Levels, UNGA Res A/Res/67/1, I(8) (30 November 2012).
41
Jutta Brunne, Stephen J Toope, Legitimacy and Legality in International Law: An

Interactional Account (Cambridge University Press, 2011) 20-31.
42
Above n 13. As far as we are aware, none of those multilateral treaties seek to
define science or scientific research per se; although some do place caveats on the
exercise of science (the ICRW does not do this). In many respects this may be put
down to both the tendency to treat science as normative, but also the more general
aversion to engaging with semantic or epistemic questions amongst scientific and
governance elites. These factors arguably influence the drafting process, as well as
the governance process within treaty systems.
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Vol 23(2) 2014-2015
Given the non-precedential basis for international law it is, of course,

important not to overstate the relevance of individual judgments even by
the ICJ43 to general international law. Nevertheless, decisions of general
legal principle by the ICJ are highly influential across the international legal
domain44 and will generally be followed both by international courts, and
other domestic and state legal authorities,45 not least because of their
collective commitment to legal certainty and predictability under the mantle
of the rule of law.46 What made the Whaling Case particularly promising in
this respect is the relatively bare-bones reference to scientific research in
Article VIII of the ICRW. That is, there is nothing within the text of the treaty
that might be seen as qualifying the type, quality or nature of scientific
research therein. 47 That meant any subsequent decision about the meaning of
that term should have been generalizable to any treaty regime incorporating
legal-scientific obligations. We say should because the ultimate decision
may not in fact be as generalizable as might have been hoped for.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
43
Statute of the International Court of Justice art 59. (herein ICJ Statute).
44
Factory at Chorzw (Germany v Poland)(Merits) [1928] PCIJ (Ser A) No 17, 76.
45
Pursuant to Article 38(1)(d) of the ICJ Statute, the ICJ does, as a matter of general
principle follow its own settled jurisprudence unless there is cause not to follow
the reasoning and conclusions of earlier cases see: Consular Staff in Tehran Case
(United States of America v Iran) (Judgment) [1980] [33]; and Land and Maritime
Boundary between Cameroon and Nigeria Case (Cameroon v Nigeria) (Preliminary
Objections) (Judgment) [1998], [28]
46
As Acquaviva and Pocar note In addition to the values of certainty and

predictability that stare decisis emphasizes, this doctrine will also continue to thrive
in international adjudication for a different reason: the authority it grants judges to
adapt the law to specific situations by elaborating precise rules in all those areas
not precisely disciplined by treaty or customary law. in Guido Acquaviva, Fausto
Pocar (ed) Stare Decisis Max Planck Encyclopedia of Public International Law (online)
< http://opil.ouplaw.com/view/10.1093/law:epil/9780199231690/law9780199231690-e1683> (1 March 2015).
47
This may be contrasted with World Trade Organisation dispute resolution regime
as it relates to contests over risk assessments between states. For instance, article 5
of the SPS requires states assessing risks to human, animal or plant[s] use the
techniques developed by relevant international organisations (5.1) and if a state is
undertaking measures not based on relevant international standards, guidelines
or recommendations it must provide an explanation why this is the case. While
this may be attributable to the development of treaty law and scientific governance
since the negotiation of the two regimes, it is worth noting that commons treaties
concluded after the establishment of the WTO regime provide scientific research
exceptions in nearly identical terms to Article VIII (for instance in the Madrid
Protocol, see: above n 13). Perhaps it is more correct to view the WTO regime as
one designed to resolve conflicts about contested science whereas commons
regimes are designed around cooperative scientific governance for mutual benefit.
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The Decision of the ICJ
In March 2014, the ICJ determined in favour of Australia and New Zealand,
finding that Japans JARPA II was not a program for the purposes of scientific
research, and could not, therefore, be said to be permitted by Article VIII of
the ICRW.48 The result was immediately lauded in the western popular press
as a win for good science against bogus science.49 The Australian Minister
responsible for bringing the action described the result as ensuring that the
charade of scientific whaling [will] cease once and for all.50 Yet, the reality
was that the courts judgment was much more measured and restricted than
was generally reported.
In fact, while the ICJ found JARPA II to be in contravention of the ICRW, it
did not, as was claimed, vindicate, or even address the argument that Japan
had misinterpreted or misappropriated the description of scientific research
to mask its commercial activities. In fact, the Court found that JARPA II could
broadly be characterised as scientific research51 (quite the opposite of what
was reported in the popular press). Moreover the ICJ denied that its role was
to resolve matters of scientific or whaling policy52 nor pass judgment on the
scientific merit or importance of [Japans] program [nor] decide whether
the design and implementation of a programme are the best possible means
of achieving its stated objectives.53 Instead the Court stated that the
determination of whether scientific activities under Article VIII would be
evaluated under a two-arm test as follows:
[F]irst [the court will ask], whether the programme under which these
activities occur involves scientific research.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
48
Merits, see: above n 2, 71
49
Andrew Darby International Court of Justice upholds Australia's bid to ban

Japanese whaling in Antarctica Sydney Morning Herald (online), 31 March 2014
<http://www.smh.com.au/federal-politics/political-news/international-court-ofjustice-upholds-australias-bid-to-ban-japanese-whaling-in-antarctica-2014033135ude.html> (2 March 2015); Martin Murphy Japan: Let Them Eat Whale, The
Diplomat (online), September 25, 2014 < http://thediplomat.com/2014/09/japanlet-them-eat-whale/> (2 March 2015)
50
Editorial, Australia wins whaling case against Japan in The Hague Associated
Press (online), April 1 2014 <http://www.news.com.au/national/australia-winswhaling-case-against-japan-in-the-hague/story-fncynjr2-1226870210553> (1 March
2015)
51
52
53
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Secondly, [the court will ask] [if the actions pursuant to that
programme] is for purposes of scientific research by examining
whether
the programmes design and implementation are
reasonable in relation to achieving its stated objectives.
This standard of review is an objective one.54
This test will be referred to hereinafter as the Standard of Review test. Bar
the reference to for the purposes of in Article VIII of the Convention, the
court did not extrapolate on the jurisprudential source or justification for its
Standard of Review Test.55
It is important to note from the outset that the test seems to require the
identification of scientific research for the purposes of the first arm of the test,
so as to establish that a program involves scientific research and is for the
purposes of scientific research. However, the judgment provided no
indicia, elements or sub-tests to establish when an activity constitutes
scientific research, and when it does not. Instead the Court undertook a
lengthy discussion about the contested meaning of scientific research
without settling on any particular one itself. Indeed, it concludes by
rejecting Australias argument that scientific research needs to meet four
basic criteria (defined and achievable objectives; appropriate methods;
peer review; and the avoidance of adverse effects) to be described as
scientific. 56
As formulated by Australia, these criteria appear largely to reflect what
one of the experts that it called regards as well-conceived scientific
research, rather than serving as an interpretation of the term as used in
the Convention. Nor does the Court consider it necessary to devise
alternative criteria or to offer a general definition of scientific research
[emphasis added].
The Court then moved on to determining whether JARPA II was for the
purposes of scientific research under the second arm of its test. In other
words it began a line of reasoning without reaching at an articulated
conclusion that provided a general or treaty-specific definition of
scientific research. That was notwithstanding its own recognition of the
contest over the term. 57 Indeed, during the proceedings the Court only
heard very limited evidence on what constituted scientific research from
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
54
55
As will be discussed below, the test appears to be co-opted albeit without

justification from the World Trade Organisation dispute regime. See below 74.
56
Merits, above n 2, 32-33.
57
Caroline Foster New Clothes for the Emperor? Consultation of Experts by the
International Court of Justice (2014) Journal of International Dispute Settlement, 5 (1),
139. 10.1093/jnlids/idt015.
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149
experts nominated by the parties to the dispute; the court refrained from
calling on independent specialist experts in spite of it being empowered to do
so under Article 50 of its statute.
4.1 Why was JARPA II Scientific Research?

As noted above, the Court ultimately concluded JARPA II to be a program
that could be described as scientific research, albeit without propounding a
definition of what scientific research was. The basis for its positive answer to
this essential element of both arms of the test is not found within its lengthy
discourse about the contest over the meaning of scientific research. Rather it
is evident in later conclusions made significantly further in its judgment.
Some 50 paragraphs after it determined not to devise criteria or to offer a
general definition of scientific research, the Court observed:
the JARPA II Research Plan describes areas of inquiry that correspond
to four research objectives and presents a programme of activities that
involves the systematic collection and analysis of data by scientific
personnel. The research objectives come within the research categories
identified by the Scientific Committee in Annexes Y and P. Based on
the information before it, the Court thus finds that the JARPA II
activities involving the lethal sampling of whales can broadly be characterized
as scientific research.58 [emphasis added]
From an international legal perspective this conclusion is somewhat
perplexing. It is not preceded by any legal test or reasoning. Yet the Court
implicitly relied upon indicia or criteria of scientific validity to arrive at its
answer. Specifically, the Court concluded that JARPA II research program (as
opposed to the actual conduct subsequent to that program) could be
categorised as scientific research because it:
1.
Has stated research objectives;
2.
Those objectives align with the research categories in ancillary,

procedural, annexes;
3.
Sets out to systematically collect data;
4.
Sets out to analyse collected data; and
5.
Is conducted by scientific personnel.
The Court did not list such criteria as relevant to treaty interpretation, or
scientific demarcation, earlier in its judgment. Nor did it indicate why other
equally relevant scientific criteria, such as peer review, novelty, rigor,
accepted methodology, and so on, were not equally relevant. Many of these
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
58
Merits, above n 2, 41
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latter criteria are actually included in Annex P (previously Annex Y), which
the Court referred to consistently, yet they seem to have been overlooked by
the Court.59 The Court provided no explanation why the remainder (and
majority) of the criteria set out in that Annex are not also relevant to its
determination. Nor did it explain how it, as a non-scientific, judicial body
determined JARPA II to come within the research categories set out within
that Annex.
In part, the Court was precluded from citing the Scientific Committees
approval of the JARPA II Research Plan under the Annex, because that is
not the role of the Annex or the Committee. Under the ICRW, the Scientific
Committee was, upon the receipt of Japans proposed program, only
empowered to note that it provides the information under paragraph 30 of
the Schedule.60
The review process set out by Annex P is informative not determinative. It is
designed to inform comment, collaboration and information sharing amongst
the parties, not provide a mechanism to approve or reject special permits.
That is done by the state under the provisions of Article VIII.61 As noted
above, the Scientific Committee does not have the capacity to comment upon
the information provided; such a review process is not mentioned in Article
VIII, nor do the words of that Article mandate that feedback by other parties
or bodies must be taken into account. At most, the Annexes form part of the
context of Article VIII.62 Their essentially procedural nature means that they
cannot be considered determinative of the legal scope and content of Article
VIII. Furthermore, procedural review pursuant to those articles could not be
said to form a subsequent agreement between the parties regarding the
interpretation of the treaty or the application of its provisions according to
the 1974 Vienna Convention on the Law of Treaties (VCLT), Article 31.3. Nor are
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
59
This includes a requirement that a state provide, in advance, information

about the objectives (of which the research categories are a subset),
methods, impact assessment, modelling and collaboration/information
sharing arrangements. Annex P Process for the Review of Special Permit
Proposals and Research Results from Existing and Completed Permits <
https://iwc.int/private/downloads/u25vr6ymdaso0o8w404oc4go/Annex%20P%
20updated.pdf> (4 March 2015)
60
Dissenting Opinion of Judge Yusuf, above n 2, 11.
61
Specifically it states; notwithstanding anything contained in this Convention any

Contracting Government may grant a special [lethal] permit subject to such
restrictions as to number and subject to such other conditions as the Contracting
Government thinks fit [which] shall be exempt from the operation of this
Convention [emphasis added].
62
The Vienna Convention on the Law of Treaties (VCLT), provides that treaties are to be
interpreted in their context (article 31.1) and that the annexes to a treaty comprise
part of that context (article 31.2).
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those Annexes designed to establish a process of judicial review vis a vis the
legal validity of Article VIII.
Hence in reaching its conclusion the Court was doing what the Scientific
Committee cannot do under the provisions of the treaty based on the
annexes; determining the veracity of Japans claim that its Research Program
met some of the criteria in Annex P. Insofar as that was the case it appears to
have applied the Annex in a way not envisioned by the Convention parties.
In fact the Courts selectivity of some of the criteria from the annex and not
others indicates that it was undertaking an evaluative process, albeit one that
is not scientifically explained or justified by the accepted rules of treaty
interpretation. In sum, the Courts conclusions seem to lack jurisprudential
transparency.
The same is true of the other criteria the Court relied upon. For instance, the
Court did not indicate why the programme of activities pursuant to JARPA II
were actually systematic, or actually involved scientific analysis of data. It
did not indicate the type of training or qualifications scientific personnel must
have or even that they were to be selected from the relevant field (or how the
relevant field should be determined). Yet all of these criteria require some
form of value judgment that should be made transparent. This would
include the assessment of whether JARPA II does, as a matter of scientific or
legal fact, fall within the categories listed in Annex P. Certainly Japan asserted
that was the case, but Australia had consistently contested the veracity of
such claims. In fact, the core of Australias argument from the outset is that
JARPA IIs objectives were a ruse designed to obscure its actual objectives,
namely to enable the continuation of [commercial] whaling.63
At the general level of principle, where a treaty contains a term that is vague
or contested, then the term can be further clarified by agreement between
parties to the particular treaty, e.g. in relation to the IWRC through a decision
of the International Whaling Commission (IWC). Where there is
disagreement between the parties, which precludes such agreement, which is
clearly the case in relation to the issues in dispute in the Whaling Case, judicial
proceedings offer a further possibility for an authoritative determination of
the issue.64 Where the Court lacks the technical competence to do this itself it
may, pursuant to Article 50 of its Statute, entrust an independent panel of
experts with such an advisory power. For instance it may have empowered a
scientific body, independent from the conflict within the ICRW to advise it as
to whether as a matter of contemporary scientific practice and principle, the
JAPRA II Research Plan actually involved scientific research.65 Regardless of
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
63
Memorial of Australia, above n 4, 2.
64
Bearing in mind the essentially consensual basis of ICJ jurisdiction.
65
This is important because, given the parties have required recourse to an external
legal arbiter to resolve the legal aspect of their disputes it is unlikely a body within
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the approach adopted, it is clear that a state cannot be considered free to

determine the scope of its legal obligations, or contrive an outcome by
constructing a definition of scientific research, which suits its aims.66 Any
subsequent interpretation by the ICJ or other judicial body, should as a
matter of international legal principle, therefore conform to that requirement.
While it is accepted that arriving at a definition of scientific research
grounded in international law is challenging, it would have been preferable
for the Court to at least engage with the underlying problem and reach a
conclusion based on application of the international law rules on treaty
interpretation. Such an approach would have increased the reach and
importance of this decision to general international law, but especially
commons treaties. By avoiding such a definition, yet simultaneously making
a determination as to whether JARPA II was scientific research the Court
appears to have made a scientific/technical evaluation indirectly, without
transparently explaining how or why it has done this. The arbitrary choice of
criteria and unqualified scientific, and technical conclusions made, provide
little legal basis upon which to inform either the relevance of, or content of,
the Standard of Review test outside of the facts of this one case.
4.2 The second, reasonableness arm of the Standard of Review

Test
As noted above, the second arm of the ICJs Standard of Review test requires
that, for a state to establish its research program is for the purposes of
scientific research, it must show that programs design and implementation
are reasonable in relation to achieving its stated objectives.67
The second arm of the test is given considerable attention elsewhere,68 and
will not be analysed in any great detail in this paper. Our position is that both
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
the regime is able to provide scientific advice that is, or would be seen by the
parties to be independent and impartial.
66
The UN Secretary General has summarised the shared common understanding of

the rule of law by the international community as including, at least:
a principle of governance in which all entities including the State itself, are
accountable to laws that are publicly promulgated, equally enforced and
independently adjudicated adherence to the principles of supremacy of law, equality
before the law, accountability to the law, fairness in the application of the law legal
certainty, avoidance of arbitrariness and procedural and legal transparency. Report of
the UN Secretary-General on the Rule of Law and Transitional Justice in Conflict
and Post-Conflict Societies, UN Doc S/2004/616, 23 August 2004,
<
http://www.unrol.org/doc.aspx?n=2004%20report.pdf > (1 March 2015);
67
Above n 19.
68
See Caroline Foster New Clothes for the Emperor? Consultation of Experts by the
International Court of Justice (2014) Journal of International Dispute Settlement, 5 (1),
139. 10.1093/jnlids/idt015
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153
arms of the test rely on a workable definition of scientific research, or, more
appropriately, an objective demarcation test to determine what is scientific
and what is not for the purposes of treaty law. That said, a range of
observations may be made about the lack of legal justification for, or
explanation about, the selection and use of criteria relevant to this arm of the
test. As with the first arm, the lack of jurisprudential transparency
undermines the general applicability of the test outside of the specific facts of
the Whaling Case, let alone the ICRW as a specific regime.
Our primary observation is that at no point did the Court explain from where
it derived the sub-element of objective reasonableness in the second arm of
its test. This is somewhat confusing given those words are not used in the
ICRW in Article VIII or elsewhere. Nor does the Court cite any relevant
jurisprudence relating to the ICRW nor indeed to any treaty within the
larger corpus of international law from which that term might have been
extracted. Beyond that, we also observe that, like with the first arm of the test,
the ICJ did not set out any criteria in advance of its reasoning. Instead such
criteria can only be extracted from the conclusion it reaches by a process of
inverse reasoning.
The most appropriate place to look for the Courts application of the second
arm of its Standard of Review test is in the last two paragraphs of its
reasoning-proper, in which it concludes that:69
[The] broad objectives of JARPA and JARPA II overlap considerably
[without justifying] the considerable increase in the scale of lethal
sampling in the JARPA II Research Plan sample sizes for fin and
humpback whales are too small to provide the information that is
necessary to pursue the JARPAII research objectives based on Japans
own calculations, and the programmes design appears to prevent
random sampling the process used to determine the sample size for
minke whales lacks transparency, as the experts called by each of the
Parties agreed some evidence suggests that the programme could
have been adjusted to achieve a far smaller sample size, and Japan does
not explain why this was not done little attention was given to the
possibility of using non-lethal research methods funding
considerations, played a role in the programmes design no
humpback whales have been taken the take of fin whales is only a
small fraction the actual take of minke whales has also been far
lower than the annual target Neither JARPA IIs objectives nor its
methods have been revised or adapted to take account of the actual
number of whales taken its open-ended time frame, its limited
scientific output to date, and the absence of significant co-operation
between JARPA II and other related research projects Taken as a
whole, the Court considers that JARPA II involves activities that can
broadly be characterized as scientific research (see paragraph 127
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
69
Merits, [225] [227], pp 64-65.
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above), but that the evidence does not establish that the programmes
design and implementation are reasonable in relation to achieving its
stated objectives.
The following criteria might be extracted from those conclusions:
The methodology must be applied consistently (between programs
with similar objectives).
The methodology must be capable of achieving its aims.
The justification for the adopted methodology must be transparent in
relation to its objectives.
The methodology must be reflexive and responsive to the objectives,
including any express or inherent limitation in the objectives and not
be affected by considerations outside of the objectives.
Other factors which indicate the method is not connected to the
objects (lack of deliverables, dates, cooperation).
On the one hand, the use of such criteria may be seen to balance the Courts
lack of engagement with the definition of scientific research by saying that
unjustified aims are identified by inappropriate methods. On the other, the
question remains as to where the criteria were selected from or how they are
justified as a matter of science or international law. They seem to have been
plucked from the ether in what Judge Bennouna describes as an
impressionistic selection of queries, doubts and suspicions, based on a
selection of indicators from among the mass of reports and scientific
studies. 70
As with the first arm of its Standard of Review test, the ICJ does not
obtain evidence from disciplinary experts nor refer to paradigmatic
sources. As Judge Owada points out this results in the Court largely
stepping into the shoes of peer reviewers and undertaking a scientific
assessment of JARPA II in relation to JARPA, straying into an area which
lies beyond its delimited function despite consistently asserting it would not
do this.71
What is also problematic is that many of the criteria the court did select as
relevant to the assessment of the second arm of its test were comparative
in nature. That is, they required comparing the justification, numerical
takes, and consistency between JARPA and JAPRPA II. Furthermore,
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
70
Dissenting Opinion of Judge Bennouna, above n 2, 1.
71
Dissenting Opinion of Judge Owada, above n 2, 12.
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many involved concessions on behalf of Japan, rather than actual scrutiny

by the Court. Both these factors appear to further limit the judgment to
its facts and provide little indication as to how an objective assessment of
the second arm can be made in the absence of two substantial and long
running programs to compare or voluntary concessions by one of the
parties. While the judgment does indicate that there must be procedural
connectivity between the methods adopted and objectives stated,
questions remain. Would ticking off the procedural aspects of the
methodology actually render research valid scientifically? If the scientific
community does not support the research objectives, does it matter if the
methods applied in respect of them are open, transparent, consistent or
reflexive? These questions are not addressed by the decision.
A Misappropriated Test?
The Standard of Review test adopted by the ICJ in the Whaling Case is
strikingly similar to that used by the Appellate Body of the World Trade
Organisation (WTO).72 In fact it seems to be directly co-opted from WTO
jurisprudence. But the WTO is a comprehensive regime with a great deal of
specificity about scientific and technical processes. Moreover, objective
reasonableness in that regime is used to evaluate two competing conclusions
from a risk assessment process accepted to be valid by the Appellate Body.
The Standard of Review test applied by the WTO Appellate Body is derived
from the text of the 1988 WTO Agreement on the Application of Sanitary and
Phytosanitary Measures (SPS). SPS is a significantly different regime to the
ICRW, or indeed the majority of multilateral commons treaties. Unlike those
treaties, the SPS Agreement is largely prescriptive about the types of
programs and procedures that states may use in pursuance of scientific
obligations (or exceptions). Indeed it primarily requires that such programs
be developed not by the state, but by relevant international organisations.73
In other words the veracity of the scientific programs objectives, aims or
design are generally not in dispute in the WTO regime, at least not where the
Standard of Review test is applied. 74 Rather, that test is a judicial tool
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
72
United States Continued Suspension of Obligations in the EC-Hormones Dispute

case (EC-Hormones) WT/DS320/AB/R, WT/DS320/AB/R 16 October 2008, 246
247.
73
SPS, Article 5.1: Members shall ensure that their sanitary or phytosanitary
measures are based on an assessment, as appropriate to the circumstances, of the
risks to human, animal or plant life or health, taking into account risk assessment
techniques developed by the relevant international organizations
74
It is the WTO Member's task to perform the risk assessment. The panel's task is to
review that risk assessment. Where a panel goes beyond this limited mandate and
acts as a risk assessor, it would be substituting its own scientific judgement for that
of the risk assessor and making a de novo review and, consequently, would exceed
its functions, the review power of a panel is not to determine whether the risk
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employed to assist the WTO Appellate Body to determine the international

legal question of which of two competing (otherwise legitimate) programs is
more justifiable to the subject matter, in the circumstances of the case. That is
a very different question to asking whether a single research program is valid
at all.
That is not to say the test should not have been adopted. And it is not to say
that we should not welcome the decision or its potential to advance
international law. There is some apparent merit to the Standard of Review
test adopted by the ICJ, inasmuch as it requires a greater degree of scientific
rigour in state obligations. It also produces an outcome most states of the
IWC hoped for, while ostensibly avoiding making value judgments about the
rightness or wrongness of either Japans or Australias domestic policies on
whaling. However, the wider reaching implications of the decision need to
be carefully considered. We certainly should not refrain from asking
questions about the jurisprudential justification of a decision simply because
we agree (or disagree) with the outcome in that specific case. Certainly there
are some questions the case has left open, possibly unnecessarily.
Most obviously it might be asked why the Standard of Review approach was
adopted and whether it can be justified against the larger corpus of
international law, especially the rules of treaty interpretation set out in the
VCLT. One would have expected that approach to have been the basis for
defining what science means in international treaty obligations. But that did
not happen. Instead the ICJ adopted a test without explanation or
justification. It addressed its core element (whether JARPA II was for the
purposes of scientific research) in the positive without clear legal
explanation or scientific justification. It then used that core element as the
basis to evaluate whether the second arm of its test was made out, based on
unexplained criteria. Judge Bennouna summarized the sidestepping logic as
follows:
The position adopted by the majority is thus a surprising one, since it
amounts to devoting the essence of the reasoning to showing that
JARPA II is not a programme for purposes of scientific research, while
ultimately avoiding the issue of what the true aim of such a
programme is.75
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
assessment undertaken by a WTO Member is correct, but rather to determine
whether that risk assessment is supported by coherent reasoning and respectable
scientific evidence and is, in this sense, objectively justifiable. EC Hormones, above
n 72, 246. See also: Appellate Body Report, Measures Affecting the Importation of
Apples from New Zealand, WT/DS367/AB/R (December 17 2010).
75
Dissenting Opinion of Judge Bennouna, above n 2, 3. See also: Caroline E Foster,

Motivations and Methodologies: Was Japans Whaling Programme for Purposes
of Scientific Research? (Paper presented at the Whaling in the Antarctic: The ICJ
Judgment and its Implications Symposium, Kobe University, 31 May 1 June
EAP 23
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It is important to remember that the ICJ is part of the international legal order
and has a duty to advance the rule of law in international law.76 The rule of
law, at the very least, requires that terms agreed to are capable of being
interpreted by those that are bound by them with certainty, objectively and
prospectively.77 However, the adoption and use of the Standard of Review
test by the Court appears to involve the arbitrary selection of criterion,
retrospective comparison between programs and unexplained reasoning.
Ultimately it means that Japan has been breaching the law for at least a
decade - if not double that time - before it became evident that was
happening. An effective test, framed within the rule of law, should allow a
country to determine, in advance, whether a Special Permit application is
consistent with its international legal obligations. It should not take many
years of activity especially where that activity involves the lethal harvesting
of wild animals to retrospectively make such a determination.78
5.1 Avoiding the real dispute

Given the lack of justification for the Standard of Review test, and the
questions about its wider applicability, even within the ICRW regime, there is
cause to question why this approach was adopted. That is especially the case
as the VCLT and Statute of the ICJ arguably provide a clearer set of
interpretative guidelines for the Court to follow.
As discussed above, much of the dispute and its resolution by the ICJ seem to
have been premised upon a desire to avoid adjudicating on the underlying
motives and purposes behind JARPA II.79 While neither Australia nor New
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
2014) <http://www.edu.kobe-u.ac.jp/ilaw/en/whaling_docs/paper_Foster.pdf>
(2 April 2015).
76
See Resolutions adopted by the General Assembly on The rule of law at the
national and international levels: 64/116 (2010); 66/102 (2012); A/RES/67/1
(2012).
77
Above n 40. There is a well recognised implementation gap between commitment

to the rule of law and its realisation across both domestic and international law.
Nevertheless, these commitments and declarations represent a common
understanding of the function of law, and subsequently what states mean, or
promise to do when they enter into treaty relations.
78
This may require the acceptance that the ICJ is to not just resolve the particular
dispute between the parties, but also to further clarify international treaty
obligations in a manner consistent with the objectives of the particular regime. For
an insightful discussion of these alternate approaches to judicial resolution of
disputes, and their theoretical underpinnings, see Timothy Stephens, International
Courts and Environmental Protection (Cambridge University Press, 2009) 91ff.
79
That is, Australias primary argument was that Japan had not just misinterpreted
the law, but had used its terms as a ruse to cover its actual intentions, contrary
had intentionally done so to undermine the objects and purpose of the treaty. In
other words, Australia was apparently encouraging the Court to examine not only
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Zealand used the term bad faith,80 Japan insisted that both their memorials
amounted to such an allegation.81 The strategic basis for framing the
opposing parties arguments in such a way was apparently two-fold. Firstly,
it would serve to place the onus on the claimant party to prove bad faith, to a
(hitherto unmet) very high threshold. 82 Secondly, it would engage the Court
in adjudicating in a diplomatically sensitive area, which it has historically
avoided doing.83
Consequently, while the dissenting judges in the Whaling Case agreed that the
Court was being asked to make a finding of bad faith,84 the Majority was
notably silent on the matter. Rather the decision is ostensibly concerned with
the implementation JARPA II rather than its aims or purposes. This path was
chosen, apparently, to avoid allegations the Court might be questioning
Japans motives or good faith. 85 As the discussion above has set out, that
articulated process of reasoning is not particularly satisfactory, not least
because of the artificiality in focusing on the implementation of a scientific
program without considering the aims those implementation measures are
directed to. Judge Yusuf therefore argued that:86
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
the methods of JAPRA II, but also the legitimacy of its scientific approach and
aims more generally. See; above n 65.
80
The Vienna Convention on the Law of Treaties requires that all treaties be interpreted
and adhered to in good faith. See Articles 26, 31, 46(2) 69(2)(b). See also the
Declaration on Principles of International Law Concerning Friendly Relations and
Cooperation Among States in Accordance with the Charter of the United Nations, which
commits states to the duty to fulfil in good faith [their] obligations under
international agreements valid under the generally recognized principles and rules
of international law(24 October 1980, UNGA Res 2625(XXXV), UN Doc A/8018 at
124.
81
Australia it said, sought to assert that stated purpose is not its true purpose . It is
an assertion that Japan is acting in bad faith. Similarly, it argued that New
Zealands argument in effect creates a presumption that a State granting a special
permit is acting in bad faith. See Counter-Memorial of Japan, above n 4, 414;
Observations of Japan, above n 4, 24.
82
Lake Lanoux Arbitration (France v. Spain) (Arbitral Award) (1957) ILR 24, 126; Dispute
regarding Navigational and Related Rights (CostaRica v. Nicaragua), (Judgment) [2009]
ICJ Rep 267.
83
Hugh Thirlway, The Law and Procedure of the ICJ 1960-1989: Part Three (1991)
British Yearbook of International Law 62 (1), 15-21, doi: 10.1093/bybil/62.1.1.
84
And that the high threshold of proof had not been made out and/or such a finding
was beyond the competence of the Court, Dissenting Opinions, above n 2 Judge
Yusuf, 15, Judge Owada, 7; Judge Xue, 9.
85
Above n 53. (check this refers to an above n of merits)
86
Dissenting Opinion of Judge Yusuf, above n 2, 15
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159
[B]oth the review and the conclusions of the Judgment [appear to]
entail a finding of bad faith which is not explicitly expressed, since
JARPA II is considered to be in violation of the commercial whaling
provisions of the ICRW.
Yet, there is cause to question whether that is actually the case and, as a
consequence, whether the Court needed to avoid defining scientific research
pursuant to the ordinary rules of treaty interpretation and opt for an arguably
misappropriated test instead.
As discussed above, much of the whaling dispute can be reduced to
definitional and epistemic uncertainty about what constitutes science and
what demarcates it from other enterprises. Choosing one interpretation,
which suits a states interest when there is a multitude available, may involve
self-interested opportunism realistically that is what states do all the time
but it is not bad faith per se. Moreover tacit allegations of bad faith against
other parties (in the case of Australia at least), or express allegations that
other parties are making such claims (as was the case with Japan), should not
serve to characterize the nature of the dispute or direct the courts line of
reasoning in relation to it. The identification of the real dispute underlying
the conflict is part of the ICJs jurisdiction, not the parties.87 Here the real
dispute arose from a fundamental disagreement about what is scientific and
what is not; that is a question of scientific demarcation and a problem with
much wider ranging consequences than simply the ICRW regime. It is that
question to which the ICJ should have turned its attention.
Conclusion
While the ICJ ultimately found in favour of Australia in the Whaling Case, it
did so in a relatively cautious way, largely avoiding some of the more
fundamental questions underlying the dispute. In particular the Court
sidestepped defining scientific research or science for the purposes of treaty
law while implicitly applying selective scientific criteria to determine legal
legitimacy. Hence, while the decision marks a move towards more rigour
and rationality in the application of legal-scientific obligations, there is some
cause to question just how broadly it has advanced international treaty law in
this area.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
87
As the ICJ noted in the Fisheries Jurisdiction case The Court will itself determine
the real dispute that has been submitted to it It will base itself not only on the
Application and final submissions, but on diplomatic exchanges, public statements
and other pertinent evidence which may, in fact indicate the dispute is the result
a question of law to be resolved in the light of the relevant facts within the
jurisdiction of the Court. Fisheries Jurisdiction (Spain v. Canada), Jurisdiction of the
Court, (Judgment) ICJ Rep [1998], 449-451.
EAP 26
160
Vol 23(2) 2014-2015
We acknowledge that we ourselves have not provided our own definition of

scientific research or science in this paper. That was not the point. We
consider that to be the role of the Court, as part of its overarching mandate to
strengthen the rule of law in international law. While defining science is
inherently challenging, we argue that the court should have interpreted
scientific research in Article VIII of the Whaling Convention by application
of international law rules relating to the interpretation of treaties.
While early forms of critical rationalism may have fostered a form of rule
fatalism, contemporary theories of scientific demarcation are much more
descriptive and pragmatic. Insofar as that is the case such theories yield a
range of criteria, or indicia, which the Court might have selected from to
provide a workable legal test for identifying whether a proposed activity is in
accordance with a legal-scientific obligation.88 Those criteria could have
taken into account the paradigmatic nature of science, and the
importance of disciplinary authority within it. In doing so the Court
could have engaged scientific experts pursuant to its statute, both to
identify the criteria relevant to the identification of relevant paradigmatic
authority and its content. Importantly any generalisable test or criteria
would have provided much needed clarification within international
governance about both how to interpret legal-scientific obligations and
who to consult in that interpretation.
The Court, by delivering a decision so closely limited to the facts,
arguably missed the opportunity. Indeed, to the extent a general test
might be extracted from the decision, that test appears to require largely
retrospective evaluations made against uncertain criteria. This risks
permitting states a wider range of definitional discretion about the scope
of their duties than might be appropriate. That is arguably to the
detriment of a range of commons treaties that mandate state legalscientific obligations for the benefit of all humankind.
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
88
Certainly this is an approach taken by domestic courts, who have needed to deal
with such questions for considerably longer and in much greater detail. i.e.
Daubert v. Merrell Dow Pharmaceuticals, 509 US 579 (1993); R. v. Mohan [1994] 2
S.C.R. 9.
EAP 27

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JOURNAL OF LAW, INFORMATION AND

Market Disclosure and Governance Challenges When

Journal of Law, Information and Science

Vol 23(2) 2014-2015

Existing Analyses of the MelbIT Float

The Float of Melbourne IT Limited by the University of Melbourne

Geoff Sharrock, above n 3, 9.

Auditor-General of Victoria, Report on Ministerial Portfolios, tabled in the Victorian

Geoff Sharrock, above n 3, 10.

MelbourneIT, Company Announcement: Melbourne IT Float to Net $93.5m

Journal of Law, Information and Science

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The Float of Melbourne IT Limited by the University of Melbourne

Having criticised the analyses published by other scholars on the float of

Geoff Sharrock, Rethinking the Australian University: A Critique of Off Course,

Journal of Law, Information and Science

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3.1 MelbourneIT Pty Limited Founded

Monash University Electrical Engineering Alumni Society, Newsletter of the

University of Melbourne, University Leader Frank Larkins Steps Down

The Float of Melbourne IT Limited by the University of Melbourne

Journal of Law, Information and Science

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which granted MelbIT a five year non-exclusive licence to process the

Adrian Kloeden, MelbourneIT Concerns with .au (3 August 2001) ICANN

The Float of Melbourne IT Limited by the University of Melbourne

3.2 Significant Growth in MelbourneITs Revenues and Profits

Charles Wright, above n 26.

Peter Gerrand, above n 26, 65.

Journal of Law, Information and Science

Vol 23(2) 2014-2015

Figure 1: Cumulative .au and .com.au registrations over time39

Peter Gerrand, above n 26, 68.

Caslon Analytics, auDA and dot-au (December 2008)

The Float of Melbourne IT Limited by the University of Melbourne

3.3 The Decision to Float MelbourneIT

Interview with Geoff Rees, former Chairman of MelbIT (Telephone, 2 February

ICANN, Communique of the Governmental Advisory Committee (2 March 1999)

Journal of Law, Information and Science

Vol 23(2) 2014-2015

Interview with Geoff Rees, former Chairman of MelbIT (Telephone, 2 February