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Rewarding innovation: How to address natural nutrition's IP dilemma

By Aiden Essery

- Last updated on GMT

© iStock
© iStock
At a time when the Australian natural nutrition industry is worth A$4.2bn (US$1.8bn), companies face stiff competition as they set out to access to bigger overseas markets, helped by our government’s focus on freer international trade.

Canberra’s role in assisting firms to transition to a global marketplace is to lower the burden of compliance and enforce intellectual property, which in turn encourages innovation. Indeed, without a fertile operating environment, Australian firms will not be able to compete on quality alone. 

Aiden Essery
Aiden Essery

Yet protecting innovation has always been a challenge for complementary medicines. Because many natural remedies have been used traditionally over generations, they are often in the public domain, and therefore struggle to satisfy the requirements for novelty and inventiveness, which are needed to achieve standard patents. 

To date, safeguarding trademarks and trade secrets have been the most widely used means to reinforce IP for herbal medicines. Yet limitations to these stem from the conflict that arises between maintaining the confidentiality of product formulas and protecting consumer health. 

Not surprisingly, regulators require natural health products to disclose information, such as active ingredients and the quantity of contents, on their labels.

According to Euromonitor International, consumers are moving towards natural products and away from synthetic cures—and therefore from patented goods, which have the strongest form of IP protection. 

With increased international competition, safeguarding the IP of new products or functional ingredients, and the extent to which protections may be applied, will play a more important role.

The Productivity Commission recently published a number of recommendations as part of a broad revision of Australian IP arrangements. Among them was a suggestion to abolish the “innovation patent​”, a system designed to assist Australian businesses with IP rights for minor improvements or adaptations to existing products.

In tandem with a recommendation to raise the inventive step threshold for standard patents, this approach aims to improve the quality of Australian patents and improve competition. 

Though I accept the evidence that Australia has far too many low-value patents, I believe that one should not throw the baby out with the bath water.

Another recent Australian review, by an expert panel on regulations governing medicines and medical devices, emphasises the importance of transparency by recommending the increased use of clinical trials to substantiate health claims. This research in many cases fits nicely under the innovation patent system. 

Understandably, the level of data protection afforded to natural health products is never going to that enjoyed by the pharmaceutical industry, where new drug developments do tend to achieve standard patent protection. 

Complementary Medicines Australia, our industry’s apex body, believes that a data exclusivity framework can be designed to create a “race to the top​” environment, whereby firms are finally incentivised to seek empirical evidence for their health claims. 

This will provide ancillary benefits to consumers by giving them a better selection of products, while delivering more engagement to Australia’s research sector. On the whole, the industry will gain through greater credibility.   

We may not have used the IP system as well as we could have, but it’s also true that the role of IP rights in encouraging innovation varies by sector and over time. This is why I believe that an incremental and partnered approach is required to address the concerns of the Australian government to encourage innovation. 

A fine balance must be found between an IP regime that encourages risk taking and innovation, and one that simply creates barriers to entry and stifles competition. 

It is for this reason that CMA is seeking out possible amendments to the Patents Act 1990 to create a more centralised patent framework that addresses the needs of the public, consumers and investors. 

Australia would be much better off if industries pooled their innovation patents which were then administered by not-for-profit trade associations. By licensing these rights to their members, a trade association will then be able to grant first-mover advantage to individual innovators, enforce compliance and improve competition.

In a world characterised by increasing uncertainty, it would be foolish to muddle through the implementation of a radically new IP framework. Instead, we can improve on what we already know. 

  • Aiden Essery is the economic policy adviser for Complementary Medicines Australia.

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