Existing intellectual property (IP) arrangements may no longer be safe as Federal Parliament steers away from protection previously afforded to IP holders through safe harbour in the Competition and Consumer Act 2010 (the Act).

Following on from our recent hot topic, the Treasury Laws Amendment (2018 Measures No. 5) Bill 2018 (the Bill) was passed on 18 February 2019. The Bill repeals subsection 51(3) of the Act which provides protection to IP owners who license or assign their IP rights such as trade marks, patents, registered designs, copyright and eligible circuit layout rights. Under subsection 51(3) of the Act these IP arrangements are exempt from certain provisions in Part IV of the Act which prohibit anti-competitive conduct.

The consequence of the enactment of this Bill is that contracts and arrangements concerning IP rights will be subject to the same competition laws that apply to all other commercial transactions.

What IP arrangements will be affected?

The repeal will apply to all IP arrangements entered into both before and after the commencement of the Bill and all IP arrangements that will continue to be in effect after the Bill’s commencement.

When does the Bill come into effect?

The Bill will come into effect once it receives Royal Assent from the Governor General, with the repeal of subsection 51(3) commencing about six months later.

What should businesses and individuals do?

Businesses and individuals should review all of their existing IP licences and assignments to comply with the competition provisions in Part IV of the Act and ensure all future IP arrangements comply with the new regime.

IP arrangements which may amount to cartel conduct, exclusive dealing, anti-competition arrangements, cross-licensing arrangements, resale price maintenance, restrictive license conditions and patent pooling arrangements should be a key focus of any review, as they could amount to a breach of the Act.

Can the ACCC grant authorisation?

The Act provides the ACCC with the ability to grant authorisation of certain conduct in certain circumstances and the authorisation test varies depending on the type of conduct being engaged in.

For example, where the conduct involves a potential or actual breach of the Act, such as cartel conduct, the ACCC may grant authorisation only if it is satisfied that the likely public benefit from the conduct outweighs the likely public detriment.

For other conduct, the ACCC may grant authorisation if either of the following is satisfied:

  1. the proposed conduct would not be likely to substantially lessen competition; or
  2. the likely public benefit from the conduct outweighs the likely public detriment.

Can the ACCC grant a class exemption?

The ACCC is also able to make class exemptions for specific types of business conduct. A class exemption removes the need for a business to lodge individual applications for authorisation in order to engage in specific conduct.

It is unclear at this stage whether the ACCC will be granting a class exemption in relation to certain conduct concerning IP arrangements.

What are the consequences of breaching the Act?

The penalties for breaching the anti-competitive practices provisions in the Act are quite significant. For an individual the maximum penalty is $500,000. For a corporation, the maximum penalty is the greater of the following:

  • $10,000,000;
  • If the Court can determine the “reasonably attributable” benefit obtained from the conduct, three times that amount;
  • If the Court is unable to determine the size of the benefit, 10% of the annual turnover in the previous 12 months.