Importance of intellectual property to the Australian Government

Intellectual property as a significant Australian Government resource

Intellectual property (IP) is a form of intangible property that arises from intellectual activity in the industrial, scientific, literary or artistic fields. Intellectual property includes written and online publications, computer software, logos and other trade marks, inventions, designs, sound recordings, films, broadcasts and music. Intellectual property rights refer to the rights granted by law in relation to IP, and in general, they protect the outcomes of economic investment made by an individual or organisation in pursuing such intellectual activity.

The Australian Government, due to the breadth and diversity of its activities, is a significant generator, acquirer and user of IP. The business of government involves the extensive development, collection, storage, analysis, retrieval and publication of information. This involves the creation of documents, drawings, computer programs, spreadsheets, films and recordings in which the Australian Government owns copyright. Also, as a major contributor to research and development in Australia, through the direct engagement in, commissioning, or funding of research in the medical, health and natural sciences, the Australian Government creates, or helps to create, valuable IP.

The IP required by Australian Government agencies for their ordinary activities has increased¹. For example, the value of intangible assets reported in the Commonwealth Consolidated Financial Statements (of which IP comprises part), has steadily increased. In 2005–06, the value of intangible assets was reported at $7.7 billion, comprising computer software assets valued at
$3.8 billion, and other intangibles at $3.9 billion.

The Government has recognised the need to successfully manage, develop and use available IP to meet ongoing demands and capitalise on potential opportunities. Agencies must, therefore, make decisions about how best to acquire and manage their IP requirements.

Why is IP management important?

The value of IP developed by agencies in the course of their routine operations is becoming more apparent. Intellectual property issues are also becoming an increasingly important aspect of contract management as agencies outsource, consult and contract with third parties to provide services and produce IP for government use, as well as for the benefit of the Australian community.

Just as the tangible assets of an agency should be properly identified, protected and maintained, so too should the intangible assets, including IP. However, because IP assets are less tangible than physical assets, managing and accounting for IP can be difficult and complex. Agencies are often unaware of the IP they create and use. They often do not recognise the benefits that can arise from the ownership and use of such assets. However, like other property, IP can be bought, sold, licensed, lost or stolen.

The management of IP involves the implementation of measures to ensure that an agency identifies, adequately protects and controls IP assets and, where appropriate, facilitates exploitation of those assets for operational and public benefit. Effective management of IP can result in improved operational and financial performance, better use of existing resources, and improved accountability for resources. By considering risks and ownership issues in decisions to distribute, acquire and internally manage IP, agencies are better able to fulfil their management and accountability obligations, and ensure that agency resources are put to productive and efficient use. Poor management of IP can result in a failure to identify and protect IP, resulting in loss of control, liability for infringement of third party IP and improper disposal of IP that is necessary for the agency's work.

Managing IP in the public sector presents unique challenges. In addition to the different policy environment compared to that faced by private sector organisations, public sector agencies may see the management of their IP as a means of:

• stimulating economic growth, industry development, improved competitiveness and even increased employment prospects by the transfer of IP to the private sector;
• encouraging the adoption of agency IP by the wider community thereby benefiting the public; and
• generating revenues from agency IP as an additional source of agency operating revenue.

Due to the diverse nature of Australian Government activities, types of IP managed and the extent to which IP is critical to core business, strategies for IP management will differ between agencies and sometimes within an agency. Although there is no one-size-fits-all approach to IP management, there are general principles that should underpin the management of IP in any agency. Successful IP management also requires that agencies be first aware of and understand their IP management needs, and then implement appropriate measures for the management of IP within their agencies.

IP management by Australian Government agencies

Earlier ANAO audit of IP policies and practices

ANAO Audit Report No. 25 of 2003–04, Intellectual Property Policies and Practices in Commonwealth Agencies (‘the earlier audit') was a cross-agency audit that examined the extent to which a selection of agencies had systems in place to manage their IP assets. The earlier audit found that, although 61 per cent of agencies rated IP as of medium or high importance to their operations, only 30 per cent had developed policies or plans addressing the management of IP within the agency.

The earlier audit noted that there was no Australian Government policy approach to the management of Australian Government IP. Leadership, through a clear senior commitment to IP management, was seen as crucial to achieving the culture necessary for appropriate management of IP. The absence of an overarching policy meant that there were few means by which the importance of IP management could be clarified and brought to the attention of agencies. There was also no clear source of support or guidance for agencies on how to develop and implement measures to better manage their IP. Such guidance would support agencies in applying IP management practices according to their individual needs and circumstances.

To improve IP management, the earlier audit recommended that agencies develop IP policies and implement procedures appropriate to the management of IP within their agencies.

To facilitate increased awareness amongst agencies of their individual responsibility for IP management and of the importance for individually tailored approaches to IP management, the earlier audit also recommended that:

In order to ensure that the Commonwealth's interests are protected, the ANAO recommends that the Attorney-General's Department, the Department of Communications, Information Technology and the Arts, and IP Australia (along with other relevant agencies), work together to develop a whole-of-government approach and guidance for the management of the Commonwealth's intellectual property, taking into account the different functions, circumstances and requirements of agencies across the Commonwealth, and the need for agency guidance and advice on intellectual property management.

The Joint Committee of Public Accounts and Audit (JCPAA) supported the findings of the earlier report, agreeing that there is a need for a whole-of-government approach to IP management. Among other things, in its November 2005 report the JCPAA recommended that:

The Attorney-General's Department commence development of a whole-of-government approach and guidance for the management of the Commonwealth's intellectual property, for completion by May 2006. The Attorney-General's Department should consult widely with Commonwealth agencies, particularly those which are major generators of intellectual property.

In May 2006, the Attorney-General communicated to the JCPAA his Department's in-principle acceptance of this recommendation and outlined the actions being taken in response to the recommendation.

Re-examining IP policies and practices in the Australian Government

Audit rationale and objective

This audit reports on the progress of the responsible agencies in developing the overarching approach and guidance on IP management, given the earlier audit found that some agencies were waiting for finalisation of this approach before developing their own tailored approaches to IP management.

The audit objective was to examine progress in the development of an overarching approach and guidance for the management of the Commonwealth's intellectual property (Recommendation No. 2 of Audit Report No. 25 of 2003–04).

The audit involved the four agencies (the Attorney-General's Department (AGD), the Department of Communications, Information Technology and the Arts (DCITA), the Department of Finance and Administration (Finance), and IP Australia) that have been working towards developing an overarching approach to IP management.

Overall audit conclusion

The earlier audit found that few agencies had developed policies or plans addressing the management of IP within the organisation. The development of an overarching approach and guidance on IP management was recommended as a way of improving awareness of IP and facilitating improved management of IP by agencies. The JCPAA agreed and further recommended that the approach and guidance be completed by May 2006.

By December 2006, the overarching approach and guidance on IP management was not finalised. Although there has been progress in developing both a Statement of IP Principles (the IP Principles) and a manual of better practice guidance on IP management (the IP Manual), it is still not clear when either the IP Principles or the IP Manual can be expected to be finalised or released.

As a result, there continues to be little profile given to the importance of IP management. Nor is there a clear source of support or guidance for agencies on how to develop and implement measures to better manage their IP, according to their individual needs and circumstances.

The ANAO has recommended that the overarching approach to IP management be finalised as soon as is practicable. The approach will assist in raising awareness amongst agencies of their individual responsibility for IP management. Appropriately communicated, the overarching approach could give the necessary profile to the importance of IP management. The approach could clearly define the Government's expectation that all agencies manage IP within their control according to their individual needs and circumstances. Because of the complexities of IP, improving its management will be an incremental process and the approach should take account of this position.

In order to be effective in raising awareness, ANAO considers the overarching approach should include:

• what is expected to be achieved;
• what is expected of agencies to which the approach applies; and
• who is responsible for ensuring that the approach is achieving what was intended and how will this be evaluated.

In considering implementation of the approach, particular attention will need to be paid to the question of which agency will be responsible for providing advice to agencies on the approach and assistance with its implementation.

Key findings

AGD, DCITA, Finance, and IP Australia have been working towards developing an overarching approach to IP management. Although there has been some progress, Recommendation No. 2 of the earlier audit has not yet been implemented. The target date (May 2006) nominated by the JCPAA in its subsequent recommendation (and agreed to by AGD) for completion of the approach has also passed.

Several factors have contributed to delays in the development of the approach. The ANAO was advised that some delays resulted from:

• increased workload associated with the development and implementation of the Australia
• United States Free Trade Agreement; and
• changes in administrative responsibility for IP following the 2004 federal election.

The ANAO also identified a number of other factors associated with the development of the approach that further delayed progress. These included:

• the failure of the agencies involved to resolve key questions that would lead to a shared understanding of the approach, including:
  • the underlying purpose of the approach; 
  • whether the approach is supported by existing policy;
  • whether it is intended that the approach create rules binding on agencies; 
  • which agencies are subject to the approach; and 
  • how the approach will be communicated;
• a lack of clarity of purpose and inconsistencies within the documents comprising the approach;
• insufficient attention having been paid to questions of implementation of the approach; and
• inadequate structures for dealing with disputes and for recording decisions of the agencies involved in developing the approach.

The often complex nature of whole-of-government challenges means that early attention to establishing structures and processes to identify, discuss and resolve different views in reaching a shared understanding and formal agreement amongst the various agencies is necessary.

Earlier attention to questions of implementation may have enabled more timely identification (and resolution) of some of the issues that eventually arose and that have delayed development of the overarching approach.

It is also important to note that each agency involved in developing the approach is responsible for working together in a way that facilitates timely responses to the whole-of-government challenge of IP management.

Agency responses

The following written summaries of comments on the proposed audit report were received from agencies. Additional agency comments on the proposed report are contained at paragraphs 4.34 and 4.35 of the report.

Attorney-General's Department

The Attorney-General's Department supports both the recommendations contained in the report.

Department of Communications, Information Technology and the Arts

DCITA suggests that where an ANAO report recommends that a whole-of-government approach be undertaken on a particular issue there should be specific recognition of the need for the approach to be lead by an agency with whole-of-government responsibilities.

Department of Finance and Administration

Finance supports both recommendations. Finance will continue to work with relevant agencies, including the Attorney-General's Department, and others including those represented on the interdepartmental committee.

IP Australia

IP Australia has fully and openly participated in the IDC process for the current project. This participation included IP Australia providing comments to Attorney-General's Department (AGD) on the draft Statement of IP Principles in September and November 2006. IP Australia also provided comments in July and September 2006 to AGD on the draft chapters of the IP Manual for input to the next revision of the manual.

IP Australia's main concern is that the final manual is useful and accurate and meets the purpose it was designed for.
IP Australia confirmed its agreement with the draft Statement of IP Principles at a meeting of the IDC held on 13 November 2006. IP Australia also fully endorses the timelines developed by AGD and presented at the November IDC meeting for progressing the IP management process.

Although IP Australia was fully aware of the role it played as an adviser and contributor to the IDC and felt that the group worked well together, we do support the adoption of a more formalised approach, appropriate for this particular issue, to assist in progressing the outcome more effectively.

Footnotes

1 In this report, the term agency is used broadly and is intended to include government bodies subject to the Financial Management and Accountability Act 1997 or the Commonwealth Authorities and Companies Act 1997 (but not including government business enterprises).