- The repeal of section 51(3) of the Competition and Consumer Act 2010 (Cth) (CCA), known as the ‘IP Exemption’, comes into effect on 13 September 2019.
- As a result, many common terms relating to IP rights may be anti-competitive and prohibited by the CCA.
- Businesses should review their IP “arrangements” to ensure compliance with competition laws now that the IP Exemption no longer applies.
The effect of the repeal
Section 51(3) of the CCA exempted conditional licensing or assignment of IP rights from most of the prohibitions on anti-competitive conduct in Part IV of the CCA. This provision applied to conditions of licences and assignments insofar as they ‘related to’ IP rights.
The repeal of the IP Exemption means that conditions of licences, assignments, contracts, arrangements or understandings that relate to IP rights will be subject to the same prohibitions as all other commercial arrangements, including the prohibitions in the CCA against:
- cartel conduct;
- making or giving effect to a contract, arrangement or understanding, or engaging in a concerted practice, for the purpose, or with the effect or likely effect, of substantially lessening competition; and
- engaging in exclusive dealing for the purpose, or with the effect or likely effect, of substantially lessening competition.
IP assignments or licensing arrangements between two or more businesses that are competitors or potential competitors are at most risk.
It is important to be aware that the repeal applies to conduct occurring before, on and after commencement of the repeal. In other words, it applies to all IP arrangements going forward.
Review your IP arrangements now
The ACCC has released Guidelines which outline its approach to enforcing the CCA following the repeal (see https://www.accc.gov.au/publications/guidelines-on-the-repeal-of-subsection-513-of-the-competition-and-consumer-act-2010-cth).
The Guidelines indicate that IP arrangements which include product quality or price restrictions, output restrictions (product supply), territorial restrictions (market allocation), time restrictions, grant-back provisions, no challenge provisions or are exclusive licenses may now fall foul of anti-competition laws.
Many of these types of terms are quite common in IP licenses and assignments. Accordingly, there is a risk that many terms which have rarely been considered anti-competitive to date, may now be viewed as anti-competitive. This is particularly concerning given that both individuals and corporations face very large fines and even criminal penalties if found guilty of this conduct.
In the circumstances, we recommend that all businesses review their IP arrangements to ensure that they comply with competition laws as they now stand. It may also be necessary to change the approach you take to licensing and assignment of your IP going forward.
By Claire Ramsay and Paul Mallon