In their draft report released this week, the Competition Policy Review panel identified the important role that intellectual property (IP) rights play in'competition and flow-on inventions'.

Importantly, the Panel recognised the need to balance IP protection to promote innovation and efficiency with anti-competitive elements, saying 'IP rights can deter competition and limit choice for consumers [and]...facilitate monopolistic or anti-competitive behaviour'.

The panel was clearly concerned that the present review was insufficient to fully consider all the relevant issues.

Intellectual Property Review

The Panel recommended that an independent body, such as the Productivity Commission conduct an 'overarching review of intellectual property' focusing on intellectual property issues arising from new developments in technology and markets.

It also recommended that the review extend to assessing the principles and processes followed by the Australian Government in negotiating IP provisions in international trade arguments.

This recommendation, if accepted, would result in an inquiry from a competition perspective of many of the issues considered by the Australian Law Reform Commission in its inquiry into 'Copyright and the Digital Economy'. One of the terms of reference of that inquiry was for the ALRC to have regard to:

'the importance of the digital economy and the opportunities for innovation leading to the national economic and cultural developments created by the emergence of new digital technologies.'

Any inquiry would also need to cover patents and trade mark rights, so could be expected to take some time. This may also have the effect of stalling action on the recommendations contained in the report of the ALRC.

We would be interested to hear your reactions to this recommendation.

Highlights from the report

Nevertheless, the panel discussed several significant recommendations for IP.

Section 51(3)

One of the main topics considered was whether section 51(3) of the Competition and Consumer Act (CCA) should be repealed. This section provides a limited exception from many provisions of the CCA for certain IP transactions involving licensing or assignments.

The Report noted that a number of previous reports had recommended the deletion of this exception, but that such recommendations had not been followed.

It recommended that commercial transactions including IP rights should be'subject to the CCA, in the same manner as transactions involving other property and assets'. The Report, while recommending the repeal of section 51(3), stated that it considered that IP licences should be exempt from the cartel provisions of the CCA.

This recommendation will particularly affect licensors of intellectual property such as owners of patents in inventions and copyright in materials such as films and sound recordings and may also effect the operations of copyright collecting societies.

IP and International Trade Agreements

While not expressly saying so, the Report was impliedly critical of some of Australia's international trade agreements which provided increased IP protections. It stated that 'it is also important that commitments regarding the extent of IP protection in Australia are based on the best interests of Australians and those should be established through an independent cost-benefit analysis'.

This clearly resulted in the Panel's recommendations to review the processes when international trade agreements were negotiated.

Parallel Imports

The Report noted that many parallel import restrictions had been removed over the last 10 years, but that a limited number remained. It also noted that in some areas, technological developments had allowed such restrictions to be easily circumvented, prejudicing local retailers.

The Panel said that the removal of parallel import restrictions 'would promote competition and potentially lower the prices of many consumer goods'. While recognising certain protections that current parallel import provisions provide, (such as promoting health and safety,) the Panel felt that these issues could be addressed in other ways.

What Next?

The Panel has called for submissions by 17 November 2014.