A new bill passed on 18 February 2019 amends the Competition and Consumer Act 2010 (Cth) by repealing the historic IP licensing exemption. It also facilitates small businesses pursuing private litigation against anticompetitive conduct under the CCA.
1. A historic IP exemption will soon be removed from the CCA, meaning intellectual property licensing arrangements will soon be treated like any other dealing from a competition law perspective.
2. The repeal applies to conditions in both existing and future contracts, arrangements and understandings, meaning there is no 'grandfathering' of the current exemption. Businesses that license IP should review existing contracts to ensure that any licence conditions will not contravene the anti-competitive conduct prohibitions in the CCA.
3. The same bill enables small business to seek no adverse costs orders to facilitate private litigation against anti-competitive conduct under the CCA.
Removal of IP exemption under CCA
The Treasury Laws Amendment (2018 Measures No. 5) Bill 2018, which passed both houses on 18 February 2019, enacts recommendations from the Harper Report and Productivity Commission IP Arrangements Inquiry Report. It repeals the IP licensing exemption in s 51 (3) of the Competition and Consumer Act 2010 (Cth) (CCA) and equivalent provisions in state legislation.
Businesses should review their IP licensing arrangements to ensure that any restrictions or conditions do not risk contravening the anti-competitive conduct prohibitions in the CCA. While not every licensing restriction will contravene the CCA, the removal of s 51(3) means businesses must now actively consider the competition implications of their IP arrangements. Businesses may seek authorisation by or notification to the ACCC to use licensing arrangements which would otherwise contravene the CCA, if it can be shown that the use of those arrangements will result in a net public benefit.
Facilitating private litigation by small business against anti-competitive conduct
The same Bill also includes amendments to the CCA designed to facilitate claims by small businesses against larger businesses alleging contravention of the anti-competitive conduct prohibitions of the CCA.
The amendments – which take effect from 1 July 2019 – allow small businesses and family enterprises to seek no adverse costs orders, where the imposition of a costs order would otherwise deter the applicant from pursuing a private action for anti-competitive conduct under the CCA.
Factors the court must consider before making a no adverse costs order include the disparity between the financial positions of the applicant and the respondent, and whether the action raises a reasonable issue for trial. These considerations appear to balance the need to facilitate greater access to justice for small businesses against the risk of vexatious litigation. Applicants must also show that their action raises issues which are of significance to other people or groups of people, creating a public interest test which applicants will also need to satisfy before a no adverse costs order is made.
The changes seek to remedy the power or cost imbalance between large and small businesses and encourage small businesses to enforce their rights under the CCA. It is unclear whether these amendments will have their intended effect as applicants will still be liable for their own costs in bringing proceedings.
Finally, the Bill also enacts consequential amendments to the Australian Small Business and Family Enterprise Ombudsman Act 2015 (Cth) to extend the jurisdiction of the Small Business Ombudsman to assisting small businesses in preparing and making submissions for a no adverse costs order under s 82 of the CCA.
The repeal of the IP exemption will affect telecommunications, pharmaceutical, technology and healthcare industries – as well as industries with significant IP licensing arrangements.
The amendments to facilitate private litigation by small business protections have the potential to impact all businesses irrespective of size.