Intellectual Property Policies and Practices in Commonwealth Agencies
The audit examined agency approaches to the management of intellectual property under its control, and identified themes common to the management of all types of intellectual property. The audit objective was to:
(i) form an opinion on whether Commonwealth agencies have systems in place to efficiently, effectively and ethically manage their intellectual property assets; and
(ii) identify areas for better practice in intellectual property management by those agencies.
Intellectual property refers to the rights granted by law in relation to the fruits of human intellectual activity. It includes all copyright, all rights in relation to inventions (including patent rights), plant varieties, registered and unregistered trademarks (including service marks), registered designs, circuit layouts, confidential information and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields. Each intellectual property type is recognised and protected under Australian law. In both the public and private sectors, intellectual property is being recognised as an increasingly important resource, contributing to and enhancing both the operations of an organisation and its value. The Commonwealth government in particular, due to the breadth and diversity of its activities, is a significant generator, acquirer and user of intellectual property.
However, the fact that intellectual property assets are less tangible than physical assets, makes managing and accounting for intellectual property more difficult and complex. Organisations are often unaware of the intellectual property 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, intellectual property can be bought, sold, licensed, lost or stolen. Intellectual property is a valuable, albeit intangible asset. It should, therefore, be managed accordingly in line with accountability requirements for the ‘efficient, effective and ethical' management of resources.
Intellectual property management is the implementation of measures to ensure that an organisation identifies, adequately protects and controls intellectual property assets and, where appropriate, facilitates exploitation of those assets for commercial, operational and public benefit.
The Australian National Audit Office (ANAO) recognises that there is no one-size fits all approach to managing intellectual property. Due to the diverse nature of agency activities, types of intellectual property managed and the extent to which intellectual property is critical to core business, strategies for intellectual property management will differ between agencies and sometimes within an agency.
However, there is a set of common principles that, in the ANAO's view, should underpin the management of intellectual property in any organisation. During the audit, the ANAO developed a framework for intellectual property management, which comprises a number of integrated management activities. Although generally applicable to any organisation, the framework was developed with specific reference to the public sector environment. It consists of a number of management elements that work together to comprise intellectual property management. It is not intended as a solution, or plan, for all types of intellectual property in all circumstances but provides guiding principles for consideration and implementation.
Audit objective and methodology
The audit objective was to:
- form an opinion on whether Commonwealth agencies have systems in place to efficiently, effectively and ethically manage their intellectual property assets; and
- identify areas for better practice in intellectual property management by those agencies.
To achieve the objective, the audit was conducted in two stages. The first involved a survey of 74 Commonwealth agencies to examine the extent to which agencies had structures or systems to support the management of intellectual property. The second phase involved case studies in seven agencies to further examine and showcase selected intellectual property management practices.
The audit examined agency approaches to the management of intellectual property under its control, and identified themes common to the management of all types of intellectual property. The ANAO recognises that, within these general themes, an agency would need to adopt an intellectual property management approach that is consistent with its core functions and objectives, and is appropriate to agency circumstances. The ANAO does not advocate a single solution for all intellectual property types and all agency circumstances, as noted earlier.
The audit did not focus upon the appropriateness of an individual agency's approach to intellectual property management; nor did it conduct a comprehensive assessment of the outcomes of individual agency management of intellectual property. The ANAO notes that these areas could be the subject of future performance audits.
Intellectual property and the Commonwealth
The tools made available by advances in information and communication technology have greatly increased the potential usefulness and value of the extensive information registers and databases created and maintained by the Commonwealth. The Commonwealth Consolidated Financial Statements for 2002–03 report intangible assets across the Commonwealth with a value of $6679 million ($2284 million in 1996–97). Of this amount, computer software comprised $3406 million ($1035 million in 1996–97) with other intangibles amounting to $3273 million ($1249 million in 1996–97).
The treatment of intellectual property assets in an agency's financial statement is complex and uncertain. Commonwealth agencies are required to report the value of agency software as an intangible on the balance sheet. However, the difficulties associated with valuing and identifying intellectual property mean that much of an agency's intellectual property is not recognised within the agency financial statements.
The Commonwealth does not have a whole-of-government policy approach to managing intellectual property. As a result, agencies are responsible for devising their own approaches to the management of the intellectual property they generate and/or acquire. In contrast, all States and Territories, with the exception of one, have either implemented, or are planning to implement, a policy addressing intellectual property management at the whole-of-government level.
Leadership and corporate support
Only 30 per cent of agencies surveyed had a policy addressing the management of intellectual property.
Of these, 90 per cent rated intellectual property as of medium or high importance to their business. Although most agencies are not involved in the generation and commercialisation of intellectual property, management of intellectual property, is nevertheless, an important part of agency operations.
Six of the seven case study agencies had a policy, adapted specifically to the functions and circumstances of the agency. All of the case study agencies had also implemented some form of staff support for intellectual property management, ranging from a centralised intellectual property group to training, guidelines and websites.
Identifying intellectual property
Approximately half the agencies surveyed reported that they had mechanisms in place for identifying intellectual property. This would suggest that a significant proportion of agencies do not have systems in place in order to know what assets they own, use or control. This has consequences for the effective and efficient management of intellectual property assets by those agencies. Without such information, agencies increase the risk of ‘giving away' valuable intellectual property, paying multiple times for access to the same piece of intellectual property and more broadly ignoring intellectual property assets when making strategic resource and operational decisions.
Just over a third of agencies surveyed reported that they have an intellectual property register. The case study findings suggest that these databases are mostly used as a means to record and manage intellectual property registration and/or licence details, rather than to inform strategic planning and decision-making in the agency.
Fifty-five per cent of the agencies surveyed reported that they had mechanisms in place to decide on the appropriate level of ownership for intellectual property. The survey and case studies demonstrated that the most common approach was through standard contractual agreements, with intellectual property clauses presenting a preferred ownership option. In most cases the agency (Commonwealth) would retain ownership of the intellectual property. However, the audit found that a few agencies adopted more flexible approaches to ownership.
Monitoring and protection
Nineteen per cent of agencies had a system in place for monitoring agency use of its own intellectual property; whereas 50 per cent had a system for monitoring agency use of third party intellectual property.
The most common means of protecting intellectual property identified was the use of contractual clauses (94 per cent of agencies having adopted such a strategy). Restricting access to intellectual property was next (68 per cent), with technological protection measures and the registration of intellectual property less common (39 per cent).
IP transfer and uptake
Only 34 per cent of agencies surveyed indicated that they had systems in place to manage the licensing, transfer, sale or disposal of agency intellectual property. All the case study agencies had systems in place, or under development, for the uptake or transfer of agency intellectual property.
Twenty-six agencies (35 per cent of agencies) indicated that they had commercialised intellectual property in the last two years.
Twenty-six per cent of Financial Management and Accountability Act (FMA Act) agencies, compared with 52 per cent of Commonwealth Authorities and Companies Act (CAC Act) agencies, had commercialised intellectual property in the last two years.
The ANAO also asked agencies that had commercialised intellectual property to estimate the annual revenue received from commercialisation and transfer of agency intellectual property. Of the 13 agencies that provided an estimate, the average annual revenue was $1.7 million. Excluding the Commonwealth Scientific and Industrial Research Organisation (CSIRO) (whose annual revenue from intellectual property was $17.6 million in 2001–02), the average annual revenue over the remaining 12 agencies was $349 000 (ranging from $4000 to $2 million per annum).
Evaluation and reporting
Although most case study agencies reported to senior management on the management of agency intellectual property, there was room for better use of this information to inform agency planning and strategic decision-making, as well as for further reporting on, and evaluation of, the effectiveness of the intellectual property procedures and practices in implementing the agency's intellectual property management policy.
The ANAO found that, overall, only 30 per cent of agencies have developed specific policies or procedures for managing intellectual property. The agencies involved in the case studies had varying systems in place to manage their intellectual property.
The Commonwealth does not have a whole-of-government policy approach to managing intellectual property. As a result, agencies are responsible for devising their own approaches to the management of the intellectual property they generate and/or acquire.
The ANAO notes that, although the Commonwealth IT IP Guidelines provide useful guidance to agencies on the management of IT–IP (including consideration of ownership options for intellectual property managed by an agency), there remains a need for broader guidance and support for agencies on intellectual property management more generally. The upcoming review of the Commonwealth IT IP Guidelines by the Department of Communications, Information Technology and the Arts (DCITA) may provide an opportunity for more detailed assessment of the need for further guidance and support for Commonwealth agencies on the management of intellectual property in general, with input from other interested agencies.
A whole-of-government policy on the management of intellectual property by Commonwealth agencies may be one means by which the importance of, and individual agency responsibility for, the management of intellectual property under their control is clarified and brought to the attention of all agencies. A whole-of-government policy could also nominate an agency, or agencies, responsible for monitoring and reporting on the implementation of the policy and provision of appropriate support to agencies. The ANAO has made one recommendation directed to the Attorney-General's Department (AGD), DCITA and IP Australia and other relevant agencies, aimed at developing a whole-of-government approach to address these areas.
The ANAO has also made a recommendation aimed at improving the efficient, effective and ethical administration of agency intellectual property. We have also identified areas for improvement and better practice in agency management of intellectual property.
The seven agencies involved in the case study, together with AGD, DCITA and IP Australia, were given an opportunity to comment on the proposed report. All agencies responded and the ANAO has taken their comments into consideration in finalising this report.
In general, agencies were in agreement with the audit findings and the two recommendations. All agencies agreed, or agreed in principle, to both recommendations.
Agency comments in response to the recommendations are provided at paragraphs 2.24 and 2.25 of the Report. Agency comments on the proposed report in general are provided in Appendix 4 of the Audit Report.