Federal Government repeal of the IP exemption for restrictive trade practice


Businesses now have less than six months to review their IP arrangements to ensure those arrangements comply with Australia’s competition laws, after the Federal Government repealed section 51(3) of the Australian Competition and Consumer Act, in March this year. Section 51(3) had provided businesses with an exemption for certain types of anti-competitive conduct relating to IP licences, assignments and similar arrangements.

One of the purposes or effects of intellectual property rights is to reduce competition by preventing another person from using your IP. The repeal of the section 51(3) exemption creates commercial uncertainty for many AusBiotech members who rely on licensing and exploitation of their IP rights to facilitate and support their businesses.

As it is not clear at present what arrangements might now fall foul of Australia’s competition laws, AusBiotech is seeking ways to actively engage with the Australian Competition and Consumer Commission (ACCC). In particular, AusBiotech understands the ACCC is developing guidelines to assist businesses to navigate the challenges posed by the repeal of the section 51(3) exemption. The ACCC has advised that draft guidelines will be released for public comment in mid-2019. AusBiotech will provide further communications with its members regarding the draft guidelines in due course.

About the change

Australia’s competition laws prohibit businesses from engaging in certain types of anti-competitive conduct. Examples include:

  • cartel conduct, such as price-fixing, bid-rigging or controlling the output or limiting the amount of goods and services available to customers;
  • exclusive dealing conduct that substantially lessens competition; and,
  • arrangements that have the purpose, or have or are likely to have the effect, of substantially lessening competition.

Prior to its repeal, the section 51(3) exemption permitted some (but not all) types of anti-competitive conduct in relation to IP rights holders who engaged in conditional licensing or assignment of IP rights (including patents), thereby allowing IP rights holders to direct how those rights could be commercialised.

The repeal of the exemption now means that arrangements concerning IP rights – including those entered into prior to the repeal of the exemption – will be subject to the same anti-competitive conduct prohibitions in Australia’s competition laws as other commercial arrangements.

What you need to do

Businesses have until 12 September 2019 to review their existing IP and licensing arrangements to ensure those arrangements will comply with Australia’s competition laws.

The following types of arrangements might be at particular risk of infringing Australia’s competition laws:

  • licenses that include quantity and/or price restrictions;
  • conditions that limit the use of IP rights with respect to certain customers;
  • conditions that limit the use of IP rights with respect to certain territories;
  • patent pooling arrangements;
  • some forms of settlement and licensing arrangements that might be perceived as “pay for delay” type arrangements;
  • restrictive cross-licences entered into by parties following the resolution of a dispute; and,
  • licenses that include “grant-back” obligations (whereby licensees must license back any improvements arising from the licensed technology to the licensor).

The penalties for breaching Australia’s competition laws are serious and businesses who have entered into arrangements such as those listed above should review those arrangements and seek professional advice where required.

In some cases, businesses may be able to apply to Australia’s competition regulator, the Australian Competition and Consumer Commission, for authorisation of their existing arrangements.