IP & Competition Law…a match made in reform heaven?

Yesterday, the Competition Policy Review Panel released its Draft Report on the effectiveness of Australia’s current competition policy and laws, and its recommendations for the promotion of competition across the economy.

Our colleagues over at In Competition published this brief post here and a more detailed alert here, focusing on the broader aspects of competition policy reform canvassed in the report.

The draft report reminds us that our friends at In Competition really should be our best friends, given the impact of the intellectual property regime on innovation, trade and competition policy. IP and competition law are complementary, both being directed towards improving economic welfare.

However, there is a fine line in IP policy between allowing authors and inventors to exploit and obtain a financial reward for their creativity and inventions (providing an incentive to innovate), and allowing information to be freely disseminated (which the draft report observes is more efficient).

In this context, the Panel has made recommendations in three key areas in respect of IP. We have set out a brief overview of the recommendations (and the Panel’s underlying rationale) below:

 

Recommendation Overview of the Panel’s rationale
  • Undertake an overarching review of the IP regime. Review should be undertaken by an independent body such as the Productivity Commission.
  • This review should focus on competition policy issues arising from new developments in technology and markets (including the technology-neutrality of IP arrangements), and should also assess principles underlying negotiations of IP provisions in international trade agreements.
  • Australia is a net importer of IP (and likely to remain so), so our ability to access IP protected by rights granted in other countries will be important to ensure that Australia can reap the benefits of the digital economy.
  • If applied inappropriately, IP rights can reduce exposure to competition and erect long-lasting barriers to entry that fail to serve Australia’s interests over the longer term. This risk is especially prevalent in commitments entered into as part of international trade agreements. There is currently no IP framework or objectives guiding Australia’s approach to IP rights the context of these agreements.
  • Repeal the IP licensing exceptions in section 51(3) of the Competition and Consumer Act 2010 (Cth). This section currently provides a limited exception from most of the competition law prohibitions for certain types of transactions involving IP.
  • Commercial transactions involving IP rights, including the transfer and licensing of such rights, should be subject to the CCA, in the same manner as transactions involving other property and assets. IP licences and assignments should contravene competition law if they have the purpose, or would have or be likely to have, the effect of substantially lessening competition.
  • However, IP licences should remain exempt from the cartel provisions of the CCA (as with other vertical supply arrangements).
While in the majority of cases, the granting of an IP rights is unlikely to raise significant competition concerns, the use of IP rights (like any other property right) can harm competition (for example, if IP owners extract excessive royalties from licences).
  • Remove any remaining restrictions on parallel imports, unless it can be shown they are in the public interest and the objectives of the restrictions can only be achieving by restricting competition.
  • Parallel importing refers to the importation into Australia of genuine goods by someone other than the licensed or authorised distributor or manufacturer in Australia. Parallel import restrictions are similar to other import restrictions (such as tariffs) in that they benefit local producers from shielding them from international competition.
  • The removal of parallel importation restrictions would promote competition and potentially lower prices of many consumer goods, while concerns raised about parallel imports (such as consumer safety, counterfeit products and inadequate enforcement) could be addressed directly through regulatory and compliance frameworks and consumer education campaigns.

 

In assessing whether our current competition policies, laws and institutions remain fit for purpose, the Panel had regard to three major forces affecting the Australian economy –

  • the rise of Asia,
  • our ageing population, and
  • how new technologies are disrupting the way many markets operate, the way business is done and the way consumers engage with markets.

The Panel also noted the challenge for policy-makers in capturing the benefits of this “digital disruption” while preserving traditional safeguards for consumers. The Panel’s recommendation of a framework-style review of the interaction between IP and competition laws should be considered in this context.

If you’re interested in some light bed-time reading (or is that just us?), the 307-page draft report can be accessed here.

Submissions on the Draft Report (in particular, on Part 2 – Draft Recommendations) are invited and due on Monday 17 November 2014.

About the Author

Daniella PhairDaniella's heart belongs to anything IP related. From cloud computing to fashion trade marks to online advertising, Daniella’s IP interests are broad and varied. Whether her IP Whiteboard posts involve trawling Perez Hilton’s gossip websites or reading an ALRC report, Daniella is up for a challenge. She most enjoys the fact that her interests in IP are becoming increasingly intertwined with her entrenched addiction to all things social media and loves being able to legitimately spend 6 hours on Facebook a day at work…View all posts by Daniella Phair