IP no longer spared from competition law: Is your business at risk?

The laws that regulate the conduct of Australian business reflect a community expectation of fair play. Indeed, the Competition and Consumer Act 2010 (Cth) (CCA) seeks to prohibit conduct which lessens competition in the relevant market. Such prohibited conduct might include price fixing, bid rigging or restrictions on outputs, but also extends to practices where competing businesses agree—expressly or implicitly—to act in a way that can be seen as ‘anti-competitive’.

However, until now, there has been an exemption for certain dealings relating to intellectual property (IP). Section 51(3) of the CCA previously granted immunity to certain assignments or licences of IP rights that would otherwise constitute anti-competitive behaviour.

Having reviewed IP and competition policy, the Australian Parliament has now abolished the exception. Businesses were given six months to bring their agreements into line. That grace period has now ended, and the exemption was officially removed from the statute books as of 13 September 2019.

Scope of the changes

The exemption initially provided protection for conditional licences or assignments of certain IP rights, including patents, trade marks, copyright, registered designs or eligible circuit layouts. Eligible provisions or dealings would be spared from prohibitions on cartel conduct, exclusive dealing and other concerted practices, although not from laws forbidding resale price maintenance or misuse of market power.

With these protections now gone, all new and pre-existing licences, assignments, contracts, arrangements or understandings must be made compliant with the CCA by businesses.

Risks, impact and moving forward

Because the scope of the exemption was itself narrow, its removal is not expected to cause any great disruption. All businesses that licence or assign their IP may be affected by the changes, although technology-based industries will be more exposed.

The consequences of non-compliance include penalties as great as $10 million (or greater, in some circumstances).[1]  The Australian Competition and Consumer Commission (ACCC) is an active regulator and there is a very real risk that it will pursue significant instances of breach.

Common IP arrangements that will often carry a risk of breach include:

  • Conditional licences that restrict the use of IP to certain geographical areas, uses, customers or market sectors;
  • Obligations requiring a licensee to transfer or licence any changes or improvements to the subject of the IP back to the initial licensor;
  • Paying a competitor to delay their entry into the market; or
  • Restrictions or requirements regarding output quantity, quality or price.

Businesses may avoid liability by applying to the ACCC for authorisation where it can show that proposed arrangements will result in a public benefit that outweighs any likely public detriment.

The Business Team at BAL Lawyers have extensive experience in regularly preparing and reviewing IP assignment and licensing agreements, as well as providing advice on the application of competition law. Please get in touch with us if you are concerned about whether you might be affected by these changes or if you are interested in knowing more.

Written by Lauren Babic with the assistance of Bryce Robinson.

[1] Competition and Consumer Act 2010 (Cth), Part IV, Subdivision B.