In July, we reported that the Australian Competition and Consumer Commission (ACCC) had released draft guidelines in relation to the application of competition law to IP licensing, following the repeal of section 51(3) of the Competition and Consumer Act (CCA).
The ACCC has now published its guidelines in final form. Although broadly similar to the previous draft, there are some notable changes in the final version:
- The ACCC now explains its approach to assessing the effect or likely effect of particular conduct on competition as involving a “with or without test”, which compares the likely state of competition “with” the relevant conduct to the likely state of competition “without” the relevant conduct. Significantly, the test involves assessing the “without” scenario as there being no IP licence at all (not a licence without the possibly anti-competitive condition). Applying this test, IP licences will rarely involve a “substantial lessening of competition”, because even a licence with restrictive conditions will typically allow greater exploitation of the relevant IP than no licence at all.
- On the other hand, where a licence condition does not relate to the licensed IP, it is less likely that the appropriate “without” scenario would involve assessing competition without the licence. If the condition is aimed at securing some “collateral advantage” for the licensor, it may be appropriate to consider the state of competition “with” the licence but “without” the relevant condition.
- The draft guidelines stated that IP licences between competitors which contained territorial restraints, price restrictions or output restrictions are likely to amount to prohibited cartel conduct. The final guidelines give greater emphasis to the “purpose” and “purpose/effect” conditions under the CCA in assessing whether such restrictions will be unlawful.
- As if to illustrate the complexities of this area of law, in several of the example scenarios given in the guidelines, the ACCC has changed its position in relation to whether conduct in question would be unlawful. For example, one hypothetical scenario involves a patent licence between steel manufacturers, which restricts the amount of licensed steel that the licensee may produce. The draft guidelines stated that this would be likely to contravene the cartel provisions of the CCA (as an output restriction). However, the final version takes a different view on the basis that the licensee would be able to supply more steel (including the licensed steel) than it could have done without the licence, and so the ACCC concludes that the “purpose” condition is not satisfied.
It will ultimately be a matter for the Courts to determine how the CCA will be interpreted in the context of IP licences, following the repeal of section 51(3). However, the ACCC’s guidelines will be required reading for anyone involved in IP licensing in Australia.