Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

Tonight I would like to follow up on my earlier speech on how the government manages intellectual property. Then, I highlighted an Australian National Audit Office report which showed that piracy threatens nearly $4 billion of computer software because of government inertia towards intellectual property management; the fact that the government has broken a 2004 election promise to fix that problem; and a three-year recommendation for a whole-of-government approach to IP management that has still not been implemented.

I am continuing to scrutinise the government’s record on IP management because its current policy is stifling ICT industries’ commercial growth, and it is lagging behind the rest of the world with regards to IP ownership as well as IP management. Combined, this luddite mentality towards IP contributes to Australia’s brain drain and is threatening the viability of indigenous ICT companies.

I would like to talk about other ways the government could manage IP, but first I will recap what constitutes IP. It covers inventions, designs, copyright and circuit layouts. It is this intellectual information that is driving our fledgling but burgeoning ICT industry. Our ICT industry accounts for, surprisingly, 4.6 per cent of Australia’s gross domestic product. It drives 85 per cent of productivity growth in the manufacturing sector.

We know from the ANAO report that the worth of intangible assets such as computer software—which should be protected by IP—has mushroomed in the past decade. In 1996 it amounted to little more than half a billion dollars. By last year, it was worth nearly $8 billion. Many ICT companies, in selling their software to government agencies, want to retain that intellectual property. Understanding this commercial reality, state governments in Victoria and South Australia have complied. They have come to an agreement that IP is better served by being vested in the supplier than in the government. There, it simply accumulates dust and is not used. These governments have struck the right balance between access to and control of IP. It is a win-win, where the state governments have access to the IP necessary for their usage of, for example, a software package, and the ICT company maintains the IP necessary for innovation and to help maintain business.

This is also the preferred option for other countries, such as Canada and Japan. The latter, by the way, has the second largest ICT market in the world, so it is obviously doing something right when it comes to growing this key industry. Not so our current government. It has adopted an attitude which can be paraphrased as, ‘We pay for it; hence, we should own it.’ But, as we have seen, that attitude towards ICT is actually curtailing enterprise and innovation.

Governments pay for an ICT solution, but do not need IP ownership to receive the benefits from that procurement. IP rights are simply those stopping others from doing certain things with the particular product or material. It is not even as if IP itself is a valuable asset for the government. This is the nub of my argument: much of the value of ICT lies in its potential for commercialisation. But most IP relating to ICT has little or no commercial potential. Governments procure the software under a licence to maintain and upgrade the product. As such, the IP of that software is redundant. Its management, however, is critical. We know, from two successive audit reports, that the government has failed in this direction.

Again, to recap: two successive audits in four years found that two-thirds of government agencies had no policy for managing IP. A recommended whole-of-government approach towards such management still has not been achieved. Such an approach was meant to have been completed by May last year, but to this day confusion remains over whether this rests with the Attorney-General or with the Minister for Finance and Administration, Senator Nick Minchin.

It is not as if the government has not recognised the need to address IP management, for it developed a policy statement on IP management in the lead-up to the 2004 election—another broken promise, for that has not been enacted. Yet IP is becoming critical as the government outsources more and more work to third parties. If it manages IP right it will boost competitiveness, increase revenue and stimulate economic growth, but to date it is simply ignoring the problem, hoping it will go away.

The ICT industry is now demanding that the government adopt more flexible procurement policies for software and other intangibles. It wants to be able to retain the IP in ICT solutions created under government contracts. In this way, both government and industry can realise significant benefits in cost savings, innovative solutions, reduced compliance overheads and greater participation in government markets—the latter especially so when it comes to smaller businesses. The government itself acknowledges this:

As a rule of thumb, the party best able to support and enhance the technology and to pursue appropriate markets for the benefit of consumers should exercise ownership rights.

But the government’s record on IP falls far short of this worthwhile, indeed noble, goal.

Let us look at other countries’ policies with respect to intellectual property. Canada, for example, recognises that the best way of achieving good economic outcomes from its ICT industry is by assigning IP ownership to the supplier. Ditto for the government of the United Kingdom. These countries have found that a policy of supplier ownership, coupled with government licensing, helps industry develop products. The same practice has been adopted in widespread markets in the United States. Again, the federal government encourages its states to develop licensing arrangements with a supplier, which retains the intellectual property.

So we see a clear trend emerging—that is, governments of nations and peers of Australia in the ICT area lean towards supplier ownership of intellectual property arising from government ICT contracts. I am stating this simply as an alternative that is at this stage worthy of investigation. I acknowledge up-front that there will be some areas of government where IP is critical and needs to reside within the particular department or agency. IP of Defence contracts, for example, could prove an exception to the general proposition.

I started this speech proposing retention of IP ownership by the supplier. That is one way government can encourage Australian ICT innovation and distribution. But this government, as we have seen, is not even at the starting blocks in this race. Instead, departments continue to haggle over where responsibility for IP management lies. A chain of correspondence on this subject between various departments dates back to 2004. It shows nearly three years of wrangling between the Attorney-General’s Department and Finance. As of last August, both departments were still letter-writing over the minutiae of responsibility for IP management. The latest audit, which I referred to earlier, concludes:

Almost three years after agreement to the earlier audit report recommendations, an over-arching approach and guidance to agencies on IP management has not been achieved.

I hope tonight I have shown how government indifference towards IP is stifling the innovation of indigenous ICT companies. Let this be a warning to the government: abide by your promise to fix the management of IP; otherwise, you will continue to contribute to the brain drain from this country.