IP Licences / arrangements may soon breach Australian Competition Law

August 2019

CATHERINE CHANT | Special Counsel HUON SHIELDS | Associate



As a result of the imminent repeal of section 51(3) of the Competition and Consumer Act 2010 (Cth) (CCA), which provides for intellectual property (IP) exemptions from some restrictive trade practices contraventions, new obligations will apply in respect of the licence agreements and other arrangements in respect of IP rights.


Businesses may soon be exposed to substantial penalties if their current licence agreements or other IP arrangements are in breach of the amended law.



Summary

  • Section 51(3) of the CCA currently contains exemptions in relation to conduct relating to IP from some of the restrictive trade practices provisions in Part IV of the CCA (RTP Provisions).

  • The section will be repealed on 13 September 2019.

  • Conduct relating to IP rights will no longer be exempt from the RTP Provisions.

  • It is important that the IP licence agreements and other arrangements relating to IP rights of businesses be reviewed to avoid contravention of the RTP Provisions.


RTP Provisions

Part IV of the CCA contains the RTP Provisions of Australia’s competition law. It prohibits, among other things:

  • Cartel conduct, such as, price fixing and market sharing;

  • The making of a contract or arrangement, or arriving at an understanding, if a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition;

  • Misuse of market power;[1]

  • Resale price maintenance; and

  • Exclusive dealing.


Examples of IP related conduct which may breach some of these provisions following the repeal of s51(3) are:

  • A manufacturer and owner of a patent for a method of manufacture of a product (A) licenses the method to a competitor manufacturer (B) on the condition that B only produces a specified maximum amount of product, over the term of the licence;

  • An Australian film distributor (A) takes a licence to an Australian film from the copyright owner (B), subject to a licence condition that B will not licence the film to other Australian distributors;

  • The practice of patent pools, involving the aggregation of standard essential patents under one licence.


However, businesses can seek authorisations from the Australian Competition & Consumer Commission (ACCC) regarding conduct they are concerned may breach the RTP Provisions. The effect of an authorisation, if given, is the conferral of statutory protection for the conduct in question.



Sanctions

A range of sanctions for RTP breaches are available under the CC Act. For example, a corporation that breaches the RTP Provisions may face a penalty, per offence, up to the greater of;

  • $10 million;

  • three times the value of the benefit obtained as a direct or indirect result of the contravention; or

  • 10 per cent of the annual turnover of the corporation during the 12-month period following the contravention.


Penalties also apply to individuals of up to $500,000 per offence.

Businesses should review their IP arrangements to ensure compliance with part IV of the CCA, bearing in mind that the some of the RTP Provisions will apply to licences granted, assignments made, or contracts, arrangements or concerted practice entered into before, on or after 13 September 2019.



The ACCC has released draft guidelines on the repeal of s51(3) of the CC Act available at https://consultation.accc.gov.au/compliance-enforcement/s51-3-repealguidelines/

Final guidelines are expected to issue in August 2019.


[1] Neither this conduct nor resale price maintenance was exempt under s51(3)

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