By Cynthia Cochrane SC and Catherine Bembrick -
Snapshot
- Conditional licensing or assignment of intellectual property (‘IP’) rights is no longer exempt from the prohibitions against cartel conduct and anti-competitive conduct in Part IV of the Competition and Consumer Act 2019.
- Parties engaged in an IP dispute must consider whether any proposed settlement agreement raises issues under Part IV.
- The recent Juno Pharmaceuticals application, now withdrawn, highlights the significant issues that parties face in seeking authorisation from the ACCC.
Since the repeal of s 51(3) of the Competition and Consumer Act 2010 (Cth) (‘CCA’) in September 2019, conduct involving specified intellectual property (‘IP’) rights is no longer exempt from key prohibitions in Part IV of the CCA. In an important development for the pharmaceutical industry, the ACCC was recently asked to authorise the making of a patent settlement and licensing agreement in Juno Pharmaceuticals Pty Ltd & Anor v Celgene Corporation (Federal Court of Australia, VID718/2020). In its draft determination, the ACCC indicated that it would refuse authorisation and, after providing further information to the ACCC, the parties have now withdrawn the application. The Juno authorisation application highlights the significant difficulties that parties now face when seeking to settle disputes involving IP rights.
Repeal of s 51(3) – removal of a broad exemption
The repeal of s 51(3) from the CCA saw the removal of a broad exemption from key civil and criminal prohibitions in the CCA for certain conduct ‘relating to’ IP rights, including cartel conduct. Cartel conduct is prohibited under the CCA regardless of its actual effect on competition. Following the section’s repeal, conduct relating to IP is now treated in the same way as any other conduct for the purposes of Part IV of the CCA. While the scope of the exemption in s 51(3) was unclear (given the limited number of cases or explanatory materials considering it), it was broadly understood by IP practitioners as operating to exempt from Part IV of the CCA a patentee imposing conditions on the granting of a licence or assignment of a patent. Relevantly, it was considered to exempt from Part IV of the CCA settlement agreements entered into by parties to patent litigation (commonly competitors or potential competitors) which contained a conditional licence agreement.
Any agreement between competitors relating to IP rights, including agreements that impede the ability of one party to compete with the other, requires careful scrutiny to overcome any cartel or competition issues under Part IV of the CCA. This is because the court may impose significant sanctions on a party who engages in conduct in contravention of Part IV of the CCA, including criminal and pecuniary penalties. In particular, where an individual is found guilty of engaging in criminal cartel conduct, the court may impose a sentence of up to 10 years’ imprisonment. The ACCC may also seek related orders against individuals, such as orders disqualifying a person from managing a corporation.
