INSIGHT

Repeal of IP exemption from competition laws to take effect soon

By Lauren John
Competition law Intellectual Property Patents & Trade Marks

In brief 3 min read

Section 51(3) of the Competition and Consumer Act 2010 (Cth) (the CCA), which currently exempts conditional licensing or assignment of IP rights from most of the prohibitions on anti-competitive conduct in the CCA, will be repealed with effect from 13 September 2019. The repeal means that commercial transactions involving IP rights will be subject to the CCA in the same manner as transactions involving other property and assets.

Background

Currently, s51(3) of the CCA exempts conditional licensing or assignment of IP rights such as patents, registered trade marks, registered designs or copyright from most of the prohibitions on anti-competitive conduct in the CCA, other than the prohibitions on misuse of market power and resale price maintenance. The exemption applies to conditions of licences and assignments insofar as they 'relate to' IP rights.

Earlier this year, the Federal Government repealed s51(3) of the CCA. The implementation of the repeal was delayed by six months, to give businesses time to review their IP arrangements to ensure they comply with the CCA, but that grace period will end on 12 September 2019.

The effect of the repeal

The repeal of s51(3) will mean that conditions of licences, assignments, contracts, arrangements or understandings that relate to IP rights will also be subject to the prohibitions in the CCA against:

  • cartel conduct;
  • making or giving effect to a contract, arrangement or understanding that includes a provision with the purpose, effect, or likely effect, of substantially lessening competition; and
  • exclusive dealing arrangements that have the purpose, effect, or likely effect, of substantially lessening competition.

From 13 September 2019, the ACCC will enforce these provisions regarding:

  • the granting of licences, the making of assignments or the entering into of contracts, arrangements, understandings or concerted practices on or after 13 September 2019; or
  • giving effect, on or after 13 September 2019, to conditions in licences, assignments, contracts, arrangements, understandings or concerted practices, even where entered into before 13 September 2019.

The ACCC has released draft guidelines, which outline its approach to enforcing the CCA following the repeal. Final guidelines are expected to be published before the repeal comes into effect.

Final chance to review your IP arrangements

The ACCC's draft guidelines state that the licensing or assignment of IP rights is usually helpful to the competitive process, but they also emphasise the limited and imprecise scope of s51(3). It is important businesses take this final opportunity to review closely any arrangements that will continue beyond 12 September 2019.

The following types of conditions and obligations should be reviewed:

  • restrictions in relation to: output/quantity; price; sale of competing products; specific customers or territories; field of use; quality control; and time;
  • exclusivity arrangements, including sole licences and agreements to buy products exclusively from an IP rights holder or an authorised supplier;
  • patent pooling arrangements;
  • cross-licences;
  • 'grant-back' provisions requiring the licence or assignment back to the licensor of any improvements made by the licensee;
  • no-challenge clauses preventing the licensee from challenging the validity of the licensor's IP rights; and
  • scope of patent clauses specifying that particular products are within the scope of a patent.

You can read more about the repeal of s51(3) in our Review your IP arrangements: IP exemption from competition laws soon to be repealed.