Review of Commerce Act IP Exclusions could mean changes for IP Owners and Licensors

Monday 6th May 2019
Article written by: Sean Brogan

As part of a wider review of the Commerce Act 1986 the Ministry of Business, Innovation and Employment (MBIE) has proposed the repeal of sections of the Commerce Act which exclude statutory intellectual property (IP) rights from applying to some of the anti-competitive provisions.

The Commerce Act contains three broad IP-related exceptions to the prohibitions on anti-competitive activity in sections 7, 36(3), 36A(4), and 45. The rationale for inclusion of these protections was based on the view that IP and competition laws are incompatible with each other, with IP rights seen as monopolies which would inevitably and unintentionally lead to abuse of the anti-competitive provisions of competition legislation.

Sections 36(3) and 36A(4) provide that enforcement of an IP right by itself does not constitute an abuse of market power in New Zealand. Section 7 provides that the Act does not affect or limit any other law relating to breaches of confidence, which can involve IP such as trade secrets.

Section 45 sets out that prohibitions on what would otherwise be considered anti-competitive behaviour do not apply where there is an agreement to authorise acts normally restricted by an IP right. This means that if you hold a statutory IP right (patent, design, trade mark, copyright, plant variety, or layout design) and authorise another party to do something with that right, such as licensing the right to copy a work or manufacture an invention, that agreement on its own does not violate competition law.

Under the more modern conception of competition law informing MBIE’s approach, IP rights are no longer considered to be the exclusive monopolies as which they were once viewed. This view recognises that exclusive rights to a single work are not the same as a monopoly over a market, as IP rights do not belong to their own market but are instead part of one or more broader market categories. By way of example, while a granted patent can provide exclusivity over a particular device, it does not prevent the existence of a competitive market of other devices which achieve the same ends by different means, and equivalent competitive markets can and do function in relation to each type of IP right.

With this view in mind and in light of international approaches which either do not involve, have removed, or (in the case of Australia) are in the process of removing such IP-related exclusions to competition law, MBIE considers that removing New Zealand’s exclusions are likely to provide clarity as to the application of the law and avoid edge cases where truly anti-competitive behaviour could be shielded unjustly.

In the event that these recommendations are taken up, it will be important for those engaged in the licensing of IP to review these arrangements to ensure that they do not constitute anti-competitive conduct under the amended Act. The most recent round of submissions on the review have just closed but it is still early days for the process and it is likely to be some time before any actual changes are made.

Written with assistance from Joseph Bracewell

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