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From next month, businesses that assign or license intellectual
property (IP) rights must comply with further
competition laws under the Competition and Consumer Act
2010 (Act).
Previously, sub-section 51(3) of the Act exempted commercial
transactions involving certain IP rights from particular
restrictive trade practices provisions, including exclusive dealing
and cartel conduct. From 13 September 2019 these exemptions will no
longer apply.
Businesses must ensure that all pre-existing and new IP
arrangements, understandings, licences, and contracts satisfy Part
IV of the Act. The changes will particularly affect businesses that
rely on IP rights like those in media, entertainment,
telecommunications, medical technology, information technology and
fintech industries.
To assist parties to such agreements, the ACCC has released
draft guidelines to clarify the new law.
Red flags
Companies should consider whether their IP arrangements involve
any
red flags.
The ACCC draft guidelines provide several examples of conduct
that should raise the alarm, including conduct that is currently
problematic in any event. For instance, the ACCC points out that
some arrangements seeking to gain advantages related to IP rights
under section 51(3) of the Act were never exempt due to
over-reach.
One example relevant to the IT industry is where a chip research
and development corporation (R&D Corporation)
licensed a particular circuit layout to a major chip manufacturer
in Australia (Manufacturer) for use in the
manufacture of semiconductor chips for on-sale to other businesses.
The Manufacturer agreed to meet certain expensive quality
requirements during its 15 year licence, which commenced in
2010.
As circuit layout rights are only protected for 10 years from
commercial exploitation, the R&D Corporation's rights over
the licensed circuit layout only last until 2020. The R&D
Corporation has imposed a condition unrelated to the IP rights at
issue - it restricted the Manufacturer until 2025. Accordingly, the
ACCC considers that the conduct after 2020 may breach the Act, and,
in any event, that last five years of conduct was never exempt.
In most cases, including the example above, it will be necessary
to show the conduct has the purpose, effect, or likely effect of
substantially lessening competition in the relevant market. In
determining whether there is a substantial lessening of
competition, the ACCC may compare the likely state of competition
with the relevant conduct to the likely state of competition
without the conduct.
Remedies
Where anti-competitive conduct provisions of the Act are
breached, courts may exercise broad powers. For instance, courts
can order payment of penalties (against corporations or
individuals), damages, refunds, community service, or
restraints.
The pecuniary penalties can be severe. Each contravention can
cost a corporation the greater of:
$10 million
three times the value of the benefit obtained as a (direct or
indirect) result of the contravention; or
10 per cent of its annual turnover for the 12 month period that
follows the contravention.
Next steps
The draft guidelines indicate that the ACCC will prioritise
enforcement of matters that have the potential to harm the
competitive process or cause widespread consumer detriment.
In any event, if businesses are concerned about their IP
arrangements, they should consider the following options:
to avoid breaching the Act, businesses should review their IP
arrangements now, and, if possible, amend agreements to comply with
the Act
where proposed conduct could contravene the new law, businesses
can apply to the ACCC for an Authorisation. Authorisation may be
granted where the likely public benefit resulting from the conduct
outweighs the likely public detriment
as an alternative to Authorisation, businesses proposing to
engage in small business collective bargaining, exclusive dealing
or resale price maintenance can provide a Notification to the ACCC.
Unless the ACCC objects, notified conduct will be protected once
certain timeframes are met
under its power to make class exemptions, the ACCC could grant
certain IP exemptions in future. Businesses may consider suggesting
exemptions to the ACCC for its consideration.
This publication does not deal with every important topic or
change in law and is not intended to be relied upon as a substitute
for legal or other advice that may be relevant to the reader's
specific circumstances. If you have found this publication of
interest and would like to know more or wish to obtain legal advice
relevant to your circumstances please contact one of the named
individuals listed.
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