From 13 September 2019, commercial arrangements relating to IP rights - including licences, assignments, litigation settlement agreements and other contracts, arrangements or understandings between businesses - will no longer be exempt from the anti-competitive conduct provisions of the Competition and Consumer Act 2010 (Cth) (CCA), following repeal of s 51(3) (the IP Exemption).

Businesses that rely on IP assets - especially in the health, pharmaceuticals and IT industries - are strongly encouraged to review and seek advice on their existing arrangements for compliance with the CCA, particularly where they have relied on the IP Exemption, to ensure they are not prosecuted by the Australian Consumer and Competition (ACCC).

Enforcement

In finalised guidance recently released (ACCC Guidance), the ACCC indicated that provisions prohibiting cartels, anti-competitive arrangements, concerted practices and exclusive dealing that have the purpose or effect of substantially lessening competition in a relevant market, will be actively enforced in relation to:

  • the grant of licences and assignments in relation to patents, trade marks, registered designs, copyright or eligible circuit layout rights;
  • conduct giving effect, on or after 13 September 2019, to conditions or provisions in such licences, assignments or arrangements even where entered into before the Effective Date.

Businesses can apply to the ACCC for immunity from prosecution by way of notification or authorisation of their existing arrangements under Part VII of the CCA. However, this does not cure prohibited conduct in which the business has already engaged.

Penalties for corporations in breach of Part IV of the CCA are the greater of AUD10 million, three times the value of the benefit obtained from the conduct, if this benefit can be determined by the Court, or 10% of the corporation's annual revenue in the preceding 12 months. Individuals can also be fined up to AUD 500,000.

Identifying risk

Moving forward, arrangements that include the following features will be at particular risk of prosecution under Part IV:

  • limitations on the use of intellectual property rights in relation to particular customers or territories;
  • quantity or price restrictions;
  • "patent pool" arrangements i.e. two or more patent owners agreeing to cross-licence patents relating to a particular technology;
  • “pay for delay” arrangements i.e. where a company pays a competitor to delay market entry;
  • restrictive licence conditions in settlement arrangements following a dispute; and
  • "grant-back" obligations i.e. where a licensee must disclose and transfer/license any improvements made to a licensed technology back to the licensor.

For competition advice on IP licensing, assignments or other agreements, please contact Fleur Gibbons, and in relation to:

  • copyright, trade marks and designs - Melinda Upton and Nicholas Boyle;
  • software licences - Tim Lyons and Nicholas Boyle;
  • patents - Robynne Sanders and Nicholas Tyacke.