The Harper Review (IP Update)

We previously reported on the Competition Policy Review Panel’s Draft Report on the effectiveness of Australia’s current competition laws and policy (see our earlier post here). As well as competition issues, the review also examined the impact of the intellectual property regime on innovation, trade and competition policy.

Yesterday, the Panel released its Final Report (which can be accessed here).

The Final Report:

  • retains the emphasis in the Draft Report on the need to address the impact of disruptive technologies (such as 3D printing and the widespread dissemination of material online); and
  • recognises the inherent conflict in IP policy between facilitating the exploitation of new technologies to their full extent (which may enhance productivity), and encouraging ideas and innovation.

The Panel’s final recommendations for IP laws and policy generally mirror the recommendations made in the Draft Report. We have summarised a sample of the submissions and further detail provided in the final recommendations below:

 

Draft recommendations Sample of submissions on the Draft Report Final outcome
An independent body (such as the Productivity Commission) should undertake an overarching review of Australia’s IP regime.  Review should:

  • focus on competition policy issues arising from new developments in technology and markets (including the technology-neutrality of IP arrangements); and
  • assess principles underlying negotiations of IP provisions in international trade agreements.
  • In support -some submissions queried the effectiveness of IP rights in promoting new ideas and creations.
  • Against -some submissions were concerned that a review of IP laws might be premature given the rapid rate of development of the digital marketplace, and that the introduction of a ‘fair use’ copyright exception should not be delayed by further review of the IP system.
Draft recommendation adopted.

  • Inquiry should be 12 months long and commence within 6 months of the Federal Government accepting the recommendation. The Panel noted concerns about the frequency of IP reviews, but countered that recent reviews were only partial examinations.
  • Review should particularly examine the extent and duration of IP protection, whether the IP regime actually incentivises innovation and it should be technology neutral.
  • Separate review should assess processes for establishing negotiating mandates to incorporate IP provisions in international trade agreements. Given Australia is a net importer of IP, Australia’s 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 and that we don’t continue to incur net costs (e.g. such as under the Australia-US Free Trade Agreement which imposed increased royalty payments on Australia).
Repeal IP licensing/assignment exceptions in section 51(3) of the Competition and Consumer Act 2010 (Cth). Section 51(3) exempts conditions of an IP licence or assignment that relate to products created through the application of the IP right (as opposed to the transfer itself).IP licences and assignments should remain exempt from CCA cartel provisions.
  • In support -the ACCC (among others) argued there was no reason why IP licensing and assignments should be exempt.
  • Against -rights owners were (unsurprisingly) against the repeal of the CCA exception. E.g. the Australian Recording Industry Association submitted that the exemption was important as it avoids liability where IP licensing conditions are efficiency enhancing. Others pointed out that one of the rationales of IP law is to give rights holders a monopoly, which they should be able to exploit without being subject to the full extent of competition law. Submissions also expressed concern about business uncertainty and increased compliance costs.
Draft recommendation adopted.

  • The Panel observed that the rationale for the exception is flawed –assumes imposition of conditions cannot extend the scope of the exclusive rights granted to the IP owner and therefore cannot harm competition. However, in certain industries (e.g. pharmaceuticals or communications), cross licensing arrangements can be entered into to resolve disputes that impose anti-competitive restrictions on each licensee, which should be subject to competition law.
  • Did not give much weight to concerns about business uncertainty or compliance costs, as the economic benefits of increased competition “almost always” outweigh compliance costs.
  • IP licensing/assignment arrangements that are risk of breaching the CCA but which are likely to produce offsetting public benefits, could be granted an exemption from the CCA through the notification or authorisation processes.
  • If a block exemption power is introduced (one of the Panel’s competition recommendations) to exempt conduct unlikely to substantially lessen competition or likely to result in a new public benefit from the CCA, it could be used to specify ‘safe harbour’ licensing restrictions for IP owners.
  • Repeal of section 51(3) should not be delayed, despite proposed review of the scope of IP provisions.
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 achieved by restricting competition. Parallel importing refers to the importation of genuine goods by persons other than the licensed distributor or manufacturer. Restrictions on parallel imports are similar to other import restrictions (such as tariffs) in that they benefit local suppliers by shielding them from international competition consumers).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 support -the ACCC submitted that parallel import restrictions effectively provide an import monopoly to the domestic distributor. Similarly, the Australian National Retailers Association argued the restrictions distorted competition, particularly as new technologies worked in favour of retailers with overseas stores or warehouses which could circumvent the restrictions.
  • Against -other submissions (such as from the Australian Screen Association) submitted that parallel import restrictions on copyright material served geographical licensing arrangements that must exist in order to enforce rights holders’ exclusive rights. Some (such as the Australian Copyright Council) submitted that parallel importation laws do not prevent consumers from purchasing goods from other jurisdictions online, and that the restrictions only apply to commercial entities and to commercial quantities.
Draft recommendation adopted.

  • Restrictions on parallel imports should be removed. Specifically, parallel import restrictions on books should be repealed (and should take effect 3 years after the policy change is announced) and parallel import restrictions on second-hand passenger and light commercial vehicles should be progressively relaxed.
  • The Federal Government should also announce an independent review of all remaining provisions of the Copyright Act that restrict parallel imports and of the parallel importation defence under the Trade Marks Act (to commence within 6 months of accepting the recommendation).

Where to next?

The Federal Government has stated that it supports the broad direction of the Final Report. The Minister for Small Business has called for consultation on the Final Report and invites submissions by Tuesday 26 May 2015.

 

About the Author

Daniella Phair
Daniella'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…
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