Competition law and Intellectual Property rights in Australia: The Harper Review's Final Report recommends further inquiry and changes

31 March 2015

On 31 March 2015, the long awaited Final Report of the Harper Review of Australia's competition laws was released. In addition to a sweeping range of recommendations for reform of competition law and policy (which will be the subject of a separate article), the Report recognises the increasing importance of access to, and the creation of intellectual property (IP) in the digital age and proposes shifting the balance between protecting IP rights and competition policy.  

Why the focus on IP in a review of competition law?

The Review panel has rightly recognised that IP rights have an important role to play in "facilitating (or inhibiting) innovation, competition and trade", stating that "IP rights can help to break down barriers to entry but, when applied inappropriately, can also reduce exposure to competition and erect long-lasting barriers to entry that fail to serve Australia’s interests over the longer term".   It is this recognition of the interplay of IP protection and competition law which has prompted the Review panel to make its recommendations.

What are the recommendations?

The Panel has made two key recommendations concerning IP rights. First, it recommends an overarching review of Australia’s intellectual property regime, and secondly, that the current limited exception from the majority of competition law prohibitions, which exists in the Competition and Consumer Act 2010 (Cth) (CCA), for certain types of transactions involving IP (which does not exist in most comparable countries) be repealed.  The exception currently covers conditions in licences or assignments of IP rights in patents, registered designs, copyright, trademarks and circuit layouts in certain circumstances. It does not extend exempt such conditions from the prohibitions on misuse of market power and resale price maintenance.

The Panel recommends that the Australian Government require the Productivity Commission to undertake a 12 month long inquiry that focuses on competition issues arising from new developments in technology and markets and the principles that are to underpin IP provisions in international trade agreements. This includes a separate independent review of Australia's processes for negotiating trade deals that concern intellectual property.

What are the possible effects if the recommendation for removal of the IP exception is implemented?

The Review panel considers that IP rights should be subject to the CCA in the same manner as other property and rights.  It recommends repealing the current exception relating to conditions in licences or assignments of IP and that this recommendation should not be delayed by a review of the current IP regime. This recommendation, if taken up, will particularly impact those in the pharmaceutical and communications industries. It will mean that the use of cross-licencing arrangements to resolve disputes that contain anticompetitive restrictions on the licensees will now be subject to the CCA. However, the same protections from the absolute prohibition on cartel conduct that currently apply to vertical supply arrangements (as a result of "anti-overlap" provisions in the CCA which permits such conduct to be assessed for its effect on competition) would apply equally to IP licences. 

If the Review panel's recommended introduction of a general block exemption power for the ACCC, in which the ACCC could effectively create 'safe harbours' for certain conduct, is taken up, this could be applied to create safe harbour licencing restrictions that identify when conduct is unlikely to substantially lessen competition. If the conduct falls within the safe harbour, IP owners may be able to avoid the time and resources involved in seeking authorisation or notification for IP licences or assignments that would otherwise be at risk of amounting to an anticompetitive practice. 

All of this is, however, dependent on the Report's recommendations making their way into law. While the Australian Competition and Consumer Commission are supportive of the Report's recommendations regarding IP, the question is whether the Australian Parliament will have the appetite to turn them into law.  

Authors

Kathryn Edghill

Partner
Australia

Call me on: +61 2 9226 9888
Cicely Sylow

Cicely Sylow

Associate
Australia

Call me on: +61 2 9226 9888