Exemptions for IP from Prohibitions on Restrictive Trade Practices Repealed
From 19th August 2019 the exemptions from the prohibitions on restrictive trade practices that allowed for certain dealings in intellectual property will be removed when the repeal of subsection 51(3) of the Competition and Consumer Act 2010 takes effect.
Part IV of the Competition and Consumer Act 2010 covers restrictive trade practices and principally involves prohibitions on cartel conduct, arrangements or acquisitions that have the likely effect of substantially lessening competition, certain types of boycotts, misuse of market power, exclusive dealing and resale price maintenance. Cartel conduct concerns arrangements between parties who would otherwise be in competition involving: price-fixing; restricting outputs in the production and supply chain; allocating customers, suppliers or territories; or bid-rigging.
Section 51 provides for exceptions to the prohibitions on restrictive trade practices covered in Part IV. Currently subsection 51(3) concerns exceptions for the conditional licensing or assignment of patents, registered designs, copyright or eligible circuit layout rights, although its exceptions do not extend to the misuse of market power or resale price maintenance.
The repeal of subsection 51(3), which will apply to both existing and future contracts was one of the recommendations of the Productivity Commission’s 2016 Report on Intellectual Property Arrangements, and will make that aspect of Australia’s competition laws consistent with those of major trading partners such as Canada, Europe, and the United States. The repeal will allow IP rights in Australia to be considered as not necessarily mutually exclusive with competition law, but could have compliance issues for parties - particularly for IP intensive industries in the following scenarios:
- clauses or arrangements that place territorial restrictions on licensees;
- clauses or arrangements requiring licensees to vest or licence any improvements they make to the licensor as this can dis-incentivise innovation and strengthen the licensor;
- where there are arrangements involving IP between competitors or otherwise potential competitors that fall within the scope of the above noted attributes of cartel conduct;
- where there are exclusive arrangements involving IP that have the purpose, effect or likely effect of substantially lessening competition in a market;
- the aggregation of patent rights by a particular business having the likely effect of substantially lessening competition in a market;
Where a party’s conduct falls within the prohibitions of restrictive trade practices they may be able to obtain immunity from the Act’s penalties by obtaining an authorisation under section 88. Obtaining such authorisation requires sufficiently establishing that the IP arrangement is unlikely to result in a substantial lessening of competition in a market (unless it also qualifies as cartel conduct, certain types of boycotts or resale price maintenance) or that its public benefits offset any public detriments.