Asia IP

The Draft Report released on September 22, 2014, by the Competition Policy Review, chaired by professor Ian Harper, has highlighted intellectual property rights as ‘important for competition and flow-on inventions’ in Australia.

But according to senior legal consultant Charles Alexander, an IP and privacy specialist at Minter Ellison in Sydney, the report also focuses on a potential negative effect for consumers – that “IPRs can deter competition and limit choice for consumers [and] facilitate monopolistic or anticompetitive behaviour.”

Intellectual properties themselves do not deter competition, limit consumer choice or facilitate monopolistic or anticompetitive behaviour, says Carolyn Oddie, a partner at Allens in Sydney. “Sometimes companies with IPRs may misuse their market power associated with those rights to gain competitive advantage beyond the scope of their rights when settling disputes, but in the main, if the scope of the conduct is limited to the rights granted in the IP, there should not be an issue. In some circumstances where the rights are vital for future development and create a bottleneck, licensing on appropriate terms may be necessary.”

Certain uses of IPRs can deter competition, though. “The report makes it clear that Australia’s competition and IP laws should promote the legitimate and beneficial use of IP, while preventing the use of IP in a manner that harms consumers and markets,” says Damian Slizys, a partner at Freehills Patent Attorneys in Melbourne. “Getting this balance right in a changing technological environment is the focus of the report’s recommendations.”

The Harper Panel recognized the need to balance IP protection to promote innovation, “but Harper was clearly concerned that the present review was insufficient to fully consider all relevant issues,” says Alexander.

The panel did not try to fully consider all issues with IP, but rather identified it as an area that required further consideration, Oddie says. “That is why the panel called for an independent review of the area. It recognized clear tension between IPRs and the need to foster new technologies, but realized a detailed review of the position was beyond the scope of its report.”

Alexander noted Harper’s call for an ‘overarching review of IP’ focusing on issues arising from new developments in technology and markets, but believes that any such review would have to be carefully focused.

Slizys agrees that the scope of such review needs to be carefully framed because the landscape is complicated, as acknowledged in the Harper Review. “Any implication that patent protection might be confined to industries and technologies where the system encourages innovation needs to be considered carefully in an environment where technologies are developing rapidly and in circumstances where an additional level of complexity and uncertainty would be introduced by an attempt to discriminate between technologies. A better approach is for the system itself to recognize and appropriately reward innovation from a technologically neutral position. This, we would submit is the intention behind the patent system.”

There has already been a detailed review of Australia’s Copyright Act, and it would be a pity if another review resulted in consideration again of all the same issues, Alexander says. “However, it would make sense to conduct a limited review and consider the ‘best IP interests’ of Australian consumers, as well as the public interest generally. Harper flagged such a review as including assessment of the principles and processes followed by the Australian government in negotiating IP provisions in international trade arguments.”

While not saying so directly, Alexander noted that the report took an implied critical stance on some of Australia’s international trade agreements – those that provide increased IP protections.

“Harper states that it is important that commitments regarding the extent of IP protection in Australia are based on the best interests of Australians, and those should be established through an independent cost-benefit analysis,” Alexander says. “The panel includes recommendations relating to the review of the processes involved when international trade agreements were negotiated.”

Another key issue considered by the panel is whether Section 51(3) of Australia’s Competition and Consumer Act (CCA) should be repealed. There are at least four reports that have considered Section 51(3) amendable or even repealable, says Daniel Preston, a partner at Herbert Smith Freehills in Melbourne.

Section 51(3) provides a limited exception from many provisions of the CCA for certain IP transactions involving licensing or assignments.

Section 51(3) is outdated and has not been amended for some time. The application of the section has also been unclear and it has rarely been tested, Oddie says. “However, if it is repealed, it is important that appropriate safeguards for IP are built into the Competition and Consumer Act 2010 in some other way. In particular, IP licences should not be subject to the cartel provisions and some block exemption or guidelines should be included to appropriately deal with IP and give some certainty to IP owners.”

The recommendation to repeal Section 51(3) will particularly affect licensors of IP such as patents in inventions and copyright in materials such as films and sound recordings as well as copyright licensing societies, Alexander says. “In practical terms, this would mean that where agreements have the potential to be found to have the purpose or likely effect of substantially lessening competition, licensors would need to consider whether to retain the offending provisions or seek authorisation from the Australian Competition and Consumer Commission.”

Nevertheless, the removal of the exceptions from the Competition and Consumer Act will unlikely result in a substantial erosion of the ability of IPR holders to exploit their rights, says Philip Aitken, a solicitor at Herbert Smith Freehills.