The Intellectual Property Safe Harbour (1975 – 2019) R.I.P.
The legislation removing the intellectual property safe harbour from the Competition and Consumer Act 2010 was passed by Parliament and received the Royal Assent on 12 March, 2019. This means that there is now a period of 6 months within which businesses are expected to review their existing arrangements and make any refinements required to maintain the legality of those arrangements.
This review will need to be comprehensive because the removal of the safe harbour could render currently lawful arrangements unlawful and, in a worst case scenario, giving effect to them, criminal conduct. Arrangements involving competitors will be the most sensitive. Given that the Act prescribes that each related company of a party to an arrangement is deemed also to be a party and that a “competitor” includes anyone or their related companies who would be a competitor but for an arrangement between them, scenarios where a licensor continues to produce the licensed goods or provide the licensed services either directly or through its related companies, or is capable of doing so but does not, require particular attention.
A typical example would be a franchise operation where the franchisor or its related companies have their own outlets. In such systems, even territorial restrictions are likely to require authorisation from the Australian Competition and Consumer Commission to maintain their legality. This is an unfortunate consequence of the Government introducing legislation covering only half of the recommendation in relation to the safe harbour made by the expert committees on whose recommendations the legislation is based.
Further complicating matters is the fact that any review of existing arrangements will need to ascertain whether the “purpose” of a provision was a prescribed purpose. The courts have held that the purpose in this context is to be determined on a subjective and not an objective basis. This means that the intentions of the people who negotiated the particular arrangement are critical in determining why a particular provision was included in an agreement.
Whilst agreements with competitors and deemed competitors are the most sensitive, any intellectual property licence or assignment agreement will need to be assessed and a determination made as to whether the inclusion of a provision was for the purpose, or had the effect or likely effect, of substantially lessening competition in a relevant market unless the agreement is only between related companies or has been granted authorisation by the ACCC.
If you have entered into any arrangement involving the licensing or assignment of any intellectual property rights (whether or not involving a competitor or deemed competitor), then you will need to review these arrangements to ensure they do not fall foul of the Act after 12 September, 2019. If they do or are likely to, it may be necessary to apply for authorisation from the ACCC. The cost of applying for authorisation from the ACCC in non-merger matters is $7,500.00.
This article was written by Rodney De Boos, who has also previously reported on this matter and can be seen here.
Rodney will be doing a seminar on the removal of the safe harbour, the details of which can be found here.