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The Treasury Laws Amendment (2018 Measures No. 5) Bill 2018 which received royal assent on 12 March 2019 repeals section 51(3) of the Competition and Consumer Act 2010 (Cth) (CCA).  This section previously provided Intellectual Property owners with protection against prosecution for IP licence conditions which would otherwise breach Part IV the CCA.

Intellectual Property (IP) owners are ordinarily allowed to licence their IP on the terms they consider appropriate. The repeal of section 51(3) of the CCA means that those owners must now ensure that the terms of those licences do not infringe the other provisions of Part IV of the CCA.

Previous State of the Law

Prior to this change, section 51(3) of the CCA provided that the conditional assignment or licensing of IP rights was exempt from contraventions of Part IV of the CCA if the assignment or licence related to IP rights which were the subject of a patent, registered design, copyright, or “EL rights” (as defined in the Circuit Layouts Act 1989).

This protection did not extend to where the contravention related to misuse of market power or resale price maintenance offences.

The rationale for this approach was that without some protection being afforded to innovators (including the ability to control the price of those rights), then innovators may no longer feel incentivised to create new products for the public benefit.

The Change in Law

Schedule 4 of the Treasury Laws Amendment (2018 Measures No. 5) Bill 2018 (Amending Bill) repeals section 51(3) and inserts a new section 186 of the CCA. In essence, section 186 of the CCA ensures that even if an agreement in relation to IP rights was formerly protected by section 51(3), it will no longer be protected. 

This change became effective from 12 September 2019.

Impact of the Change

Businesses which licence IP rights (whether registered or not) should review their agreements in light of the provisions of Part IV of the CCA, such as by:

  1. fixing, controlling or maintaining the price of the IP;
  2. limiting or allocating the use of the IP to certain customers or within certain areas; or
  3. preventing, limiting or restricting the supply, production, acquisition or capacity of the IP.

This will be even more important if any of the licensees are competitors of the business.

Consequences of a Breach

The possible penalties for a breach of most of the provisions of Part IV of the CCA for companies include, but should not exceed, the greatest of either (i) $10 Million, (ii) 3 times the benefit gained (if this can be assessed) or (iii) 10% of the annual turnover in the previous 12 months.

Individuals may also be prosecuted for a maximum penalty of $500,000.00. Directors of companies should also review their insurance arrangements as policies may specifically exclude coverage if these offences are confirmed.

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