IP in business transactions: Australia overview

A guide to intellectual property law in Australia. The IP in business transactions Q&A gives an overview of maintaining an IP portfolio, exploiting an IP portfolio through assignment and licensing, taking security over IPRs, IP and M&A transactions, and the impact of IP on key areas such as competition law, employees and tax.

To compare answers across multiple jurisdictions, visit the IP in business transactions: Country Q&A tool.

This Q&A is part of the global guide to IP law. For a full list of jurisdictional Q&As visit www.practicallaw.com/ip-guide.

Contents

Overview of main IPRs

1. What are the main IPRs in your jurisdiction? How are they protected?

Patents

A standard patent needs to be for an invention that is all of the following:

  • Novel.

  • Useful.

  • Involves an inventive step.

  • Has not been previously (secretly) used by the patentee or by those with the patentee's authority (subject to certain exceptions).

An innovation patent can be obtained for inventions that do not satisfy the inventive step requirement. These patents have a lower ''innovative step'' requirement.

Standard patents last for 20 years, with the potential for extension of some pharmaceutical patents for an additional five years. Innovation patents last eight years.

Patent ownership gives the owner the exclusive right to do or authorise the doing of most commercial activities relating to the patented invention. Patents can be registered with IP Australia.

Trade marks

Trade marks are signs that distinguish the goods or services of the owner from those of other traders. Trade marks can be registered with IP Australia. Unregistered trade marks can be used as the foundation for a passing-off action or an allegation of a breach of the Australian Consumer Law.

Copyright

Copyright cannot be registered in Australia. For copyright to subsist in a work, it needs to be original and have an identifiable human author (or authors). Copyright can subsist in literary, musical, dramatic and artistic works, as well as in sound recordings, cinematographic films, broadcasts and published editions.

The authors of works have moral rights which cannot be assigned, but which can be waived. Similar moral rights are held by the director, producer (if a natural person) and screenwriter of a cinematographic film, and are also held by performers in a live or recorded performance.

Design rights

A design is the overall appearance of a product resulting from one or more visual features. These features can be two or three dimensional, for example elements of shape, pattern, line or colour. The features need to be aesthetic, and not purely functional, in nature.

To be registered, a design needs to be new (meaning not identical) and distinctive (meaning not substantially similar in overall impression), when compared to the prior art.

Trade secrets and confidential information

Unlike the other IPRs, confidential information is generally not seen as personal property. However, its use by others can be controlled by contract or by bringing an action for breach of confidence.

Information known to the general public cannot be confidential information. For an action regarding misuse of the confidential information to be available, the information needs to have been given to the recipient in circumstances importing an obligation of confidence, or the recipient needs to have at least been notified of the confidential nature of the information after receiving it.

Other

Other specific intellectual property rights include:

  • Plant breeder's rights.

  • Circuit layouts.

For further information about the main IPRs, see Patents, trade marks, copyright and designs in Australia.

 

Maintaining IPRs

Search and information facilities

2. What facilities are available to conduct IP searches and obtain IP information on registered IP rights?

Applications to register patents, trade marks, designs and plant breeder's rights can be made using the IP Australia eServices website, accessible at https://services.ipaustralia.gov.au/ssoda/UI/Login?realm=/IPA_EXTERNAL&goto=https%3A%2F%2Fservices.ipaustralia.gov.au%3A443%2FICMWebUI%2Fviews%2Fprivate%2Ficm-home.xhtml.

Patents

Patents can be searched for using the AusPat database, freely accessible at http://pericles.ipaustralia.gov.au/ols/auspat/.

Trade marks

Registered trade marks can be searched for using the Atmoss database, freely accessible at

www.pericles.ipaustralia.gov.au/atmoss/falcon.application_start.

Copyright

Copyright cannot be registered in Australia.

There are a number of collecting societies that can assist with finding information about the owners of particular copyright. Information on Australian collecting societies can be obtained from the Arts Law Centre of Australia website, at https://www.artslaw.com.au/info-sheets/info-sheet/copyright-collecting-societies/.

Design rights

Registered designs can be searched for on the IP Australia website, freely accessible at http://pericles.ipaustralia.gov.au/adds2/adds.adds_start.intro.

Trade secrets and confidential information

Confidential information cannot be registered.

Other

Circuit layouts cannot be registered.

Registered plant breeder's rights can be searched on the IP Australia website, freely accessible at http://pericles.ipaustralia.gov.au/pbr_db/.

Maintenance of main IPRs

3. What steps must a business take to maintain the registration and legally protectable status of its main IPRs?

Patents

Yearly patent renewal fees need to be paid. These fees first become payable from the fourth anniversary of the filing date for a standard patent and the second anniversary of the filing date of an innovation patent.

The price of renewal increases over time. The fee can still be paid for up to six months after the due date, although a late payment fee applies. If payment is still not made within that six month period, the patent ceases to be in force, although an extension of time to pay the fee can be sought in some limited circumstances.

A compulsory licence for a patent can be sought by another party if they can prove one of the following:

  • The applicant cannot obtain reasonable authorisation to work the invention, the reasonable requirements of the public have not been satisfied, and the patentee has failed to give a satisfactory reason for failing to exploit the patent.

  • The patentee has, in relation to the patent, contravened (or is contravening) Australian anti-competition laws.

It is quite rare for compulsory licences to be sought in this manner. Where such a licence is granted, a revocation action can then be brought on similar grounds.

Trade marks

A trade mark registration needs to be renewed every ten years. The fee can still be paid for up to six months after the due date, although a late payment fee applies. However, if payment is still not made within that six month period, the trade mark is removed from the register.

An action can be brought in certain circumstances to remove a trade mark from the register for non-use. Use by a licensee will only be relevant for these purposes if adequate control is exercised by the trade mark owner.

A trade mark can also be deregistered if it becomes a generic name for the relevant products or services.

Copyright

Copyright cannot be registered.

Design rights

A registered design can be renewed once, five years from filing. Renewal grants another five years of protection.

Although a legislative regime does exist for compulsory licensing of underutilised registered designs, it is not frequently used.

Trade secrets and confidential information

Confidential information cannot be registered. Protection of confidential information is best achieved by making plain its confidential status to any recipients. Where confidential information is disclosed pursuant to a business arrangement, contractual provisions can be used to help ensure it is not improperly disseminated or misused. As confidential information loses its status as such once it becomes common knowledge, it is important to take swift action where widespread disclosure is threatened.

Other

Circuit layouts cannot be registered.

A renewal fee needs to be paid for plant breeder's rights each year on the day the right was granted. If a renewal fee is not paid within 30 days of the due date, the plant breeder's right will be revoked.

Monitoring infringement

4. What steps can a business take to avoid infringing another party's IPRs and to monitor whether another party is infringing its IPRs?

Patents

Avoiding infringement. To check if a proposed activity or product would infringe any Australian patents, a party should undertake a patent search (see Question 2). Lawyers can assist with searches and advise on infringement of patents identified and on the prospects of revoking a problematic patent, or opposing a pending patent application. Otherwise, a licence can be sought from the patent owner.

Monitoring activity. Monitoring whether infringing activity is occurring is best done through review of market activity in the relevant channels. Internet searches will usually be relevant. Purchases of potentially infringing goods can be carried out to establish if infringing activity is occurring. In cases where infringing use may be hidden, court orders may be used to obtain information.

Trade marks

Avoiding infringement. A registered trade mark search can be conducted to see if there are any similar registered trade marks. However, since an action can also be brought on the basis of an unregistered trade mark, searches of business and company names, the internet and relevant directories should also be used. Lawyers can assist with searches and advise as to whether the proposed conduct would be likely to infringe, and possible options for dealing with the issue.

Monitoring activity. Monitoring whether infringing activity is occurring is best done through periodic review of market activity by competitors, through relevant channels and on the internet.

A Notice of Objection can be lodged with the Department of Immigration and Border Protection, specifying particular trade marks. This enables Australian Customs to seize what they consider to be counterfeit goods infringing the specified trade marks or copyright. As a practical matter, it is important to provide Customs with educational materials and tools to assist them to easily identify counterfeit products.

If goods are seized, and their owner does not make an application for their release, they are forfeited to the Commonwealth Government and normally then disposed of. An infringement action can be brought in response to the application for release.

Copyright

Avoiding infringement. Copyright infringement occurs when the prior work is copied. Consequently, the most certain way to avoid a copyright infringement action is to ensure newly produced works are entirely original creations. Even creations that are merely "inspired" by previous ones can lead to credible allegations of infringement. Subconscious copying is still an infringement, so it is best to carry out internet searches to ensure there are no other products that are so clearly similar that a strong allegation of copying may arise.

There is no general fair use defence for copyright but there are a number of specific defences (such as for criticism and review). There are broad defences for three dimensional features of industrial designs.

In some cases a licence to use copyright subject matter (such as music) can be obtained through a copyright collecting society.

Monitoring activity. Monitoring for copyright infringement can be carried out through periodic review of competitor products, as well as through internet searches. A Notice of Objection lodged with the Department of Immigration and Border Protection can be used to combat importation of counterfeit goods, as discussed above in relation to trade marks.

Design rights

Avoiding infringement. A registered designs search should be conducted. However, the term of a registered design can extend back to a period commencing before it was registered and published, so even applications for designs that are not yet viewable on the Register can form the basis of an infringement action. This means that market check searches need to be performed. Lawyers can assist with searches and advise whether the proposed conduct would be likely to infringe a particular registration.

Monitoring activity. Monitoring whether infringing activity is occurring is best done through periodic review of market activity. Purchases of potentially infringing goods can be carried out to establish infringing activity is occurring, but it is best to organise such a purchase through a law firm.

Trade secrets and confidential information

Avoiding infringement. It is often apparent where an issue of misuse of confidential information may arise, due to the nature of the information and the circumstances in which it was acquired. Particular care needs to be taken with using information provided by new employees who may have acquired the information from their old employer, and any case where information has been received under a confidentiality agreement.

Monitoring activity. It can be difficult to determine that a party is using confidential information obtained from another. Where an ex-employee joins a competitor, attention should be paid to suspicious changes in business practice by the competitor. Issues can also arise where a party is given access to confidential information pursuant to a contract, which subsequently comes to an end. In such circumstances the activity of the other party should be carefully monitored, and preferably it should be confirmed that all documents containing the confidential information held by that party are destroyed.

Court orders may be available to obtain information in cases of suspected infringement.

Other

Before a particular plant variety is commercially propagated in Australia, a search should be conducted to ascertain if there is a relevant plant breeder's right registration.

 

Exploiting IPRs

5. What are the main steps in conducting an IP audit in your jurisdiction to determine the content of an IP portfolio?

Specific steps for particular IP rights are outlined below. In every case, a search of court files is advised to ensure there are no pending proceedings. In every case, document retention should be checked in relation to documents including licences. Authorship and version control records are of importance particularly in relation to copyright.

The employment status of IP contributors should be checked, and where IP is created by contractors the contracts should be reviewed.

Database searches can be used to check the business's filed IPRs.

Patents

A review should be made of research and development work being carried out by the business to determine if there are any new inventions that could be patented. Where the business is a party to a patent licence, checks should be done on any improvements which have been made to the licensed technology, and who owns the related IPRs.

Trade marks

An audit should confirm that registered trade marks are actually being used by the business, or if they are being used by licensees, that sufficient control is being exercised by the licensor. It should be confirmed the trade mark is being used in relation to all of the goods and services to which the registration relates.

The branding being used by the business should be checked to ensure that it matches the trade marks that have been registered. Something that would ordinarily not be distinctive enough for a trade mark registration may become distinctive because of extensive use by the business. An assessment should be made whether there are portions of the branding (for example, particular colours) that are now so well known by consumers, and so associated with the business, that an attempt should be made to register them as a trade mark.

Copyright

An IPR audit should confirm that the copyright in any logos being used by the business is owned by it, and any assignments of such copyright to the business have been done in writing, signed by the assignor. Ownership of specialist software vital to the business should be considered, and if this software is licensed from a third party, checks should be made of what rights the business will have if the licensor becomes insolvent or chooses to terminate the agreement. As noted above, it is of particular importance to ensure that proper version control and authorship records have been maintained.

Design rights

An internal audit should confirm that adequate procedures are in place to ensure designs are registered before corresponding items are advertised for sale.

Trade secrets and confidential information

These should be identified and it should be confirmed adequate controls are in place to protect the business's confidential information. The business should consider whether any confidential information should be the subject of a patent application.

Other

Plant breeder's rights and circuit layouts are not normally relevant to most businesses.

 

Assignment

Scope of assignment

6. On what basis can the main IPRs be assigned?

For most IPRs, where there is more than one owner, assignment of an interest in it will require the consent of all owners.

Patents

A patent can be wholly assigned, or an assignment can relate to a part of the Australian territory.

Trade marks

A registered trade mark can be wholly assigned, or an assignment of a registered trade mark can be partial in relation to the goods or services to which the trade mark relates. However, the assignment cannot be restricted to a particular geographical area.

An assignment of a registered trade mark or an application for registration can be done without the assignment of goodwill.

An unregistered trade mark can only be assigned along with the goodwill of the business.

Copyright

Copyright can be wholly or partially assigned. An assignment of future copyright can be made.

Moral rights cannot be assigned but can be waived.

Design rights

A registered design can be assigned in whole or in part in relation to territory.

Trade secrets and confidential information

As confidential information is not property, it cannot strictly speaking be assigned. However it can be disclosed to a new party on specified terms.

Other

An assignment of circuit layout rights can be limited in any way. Plant breeder's rights can be wholly assigned.

Formalities for assignment

7. What formalities are required to assign each of the main IPRs?

Patents

Assignments of patents need to be in writing and signed by or on behalf of the assignor and assignee. IP Australia needs to be notified of the assignment and provided with documentary evidence that it has occurred; this can be done using the IP Australia eServices website. The Register of Patents is then updated accordingly.

Trade marks

IP Australia needs to be notified of the assignment; this can done using the IP Australia eServices website. The Register of Trade Marks is then updated accordingly. Generally IP Australia requires that the assignment be evidenced in writing and signed by the assignor, but the assignee is not required to sign.

Copyright

An assignment of copyright needs to be in writing signed by the assignor.

Design rights

An assignment of a design needs to be in writing and must be signed by, or on behalf of, the assignor and the assignee. IP Australia can then be notified so that the Register of Designs is updated.

Trade secrets and confidential information

No specific formalities need to be followed.

Other

Assignments of rights over a protected circuit layout need to be in writing signed by or on behalf of the assignor.

Assignments of plant breeder's rights need to be in writing signed by, or on behalf of, the assignor and assignee. The acquirer needs to notify IP Australia within 30 days of acquiring the rights.

Main terms for assignments

 
8. What main terms should be included in an assignment of IPRs?

The IPRs being assigned should be identified as precisely as possible. Especially where unregistered rights are being assigned, the relevant jurisdictions need to be specified. The parties should be contractually required to co-operate in taking steps necessary for updating the IPR Registers, and for perfecting any assignments of future IPRs. The assignee should also be given the right to bring legal action for events that occurred prior to the assignment. The agreement should include a requirement for the assignor to provide, and permit the use of, any related information or materials required for the enjoyment and use of the IPR.

 

Licensing

Scope of licensing

9. On what basis can the main IPRs be licensed?

Licences of IPRs can be limited. However, particular types of IPR licences can provide additional rights to the licensee.

Patents

An "exclusive licensee" of a patent will have standing to sue for patent infringement. To be an "exclusive licensee", the licensee needs to be granted an exclusive licence to do all of the acts of exploitation of the patent throughout the patent area. For example, the licensor cannot reserve for itself the right to manufacture the patented invention in Australia. Careful contractual drafting may nevertheless be able to impose practical limitations on the rights of such a licensee.

Trade marks

When a licence to use a trade mark is granted, the licensor needs to have the right to exercise control over the use of the trade mark by the licensee.

A business relationship which includes the licensing of a trade mark can frequently create a franchising relationship for the purposes of the Australian Franchising Code of Conduct, which has significant repercussions.

An authorised user of a registered trade mark, being a person who uses the trade mark in relation to goods or services under the control of the owner of the trade mark, has the power to bring infringement proceedings, subject to contrary terms in the licence agreement. If the trade mark owner does not consent to the action, proceedings can only be brought where the owner does not bring an infringement action within two months from the authorised user requesting that they do so.

Copyright

Exclusive licensees have standing to sue for infringement.

Design rights

Exclusive licensees do not have standing to sue for infringement.

Trade secrets and confidential information

A right to use confidential information can be contractually granted.

Other

Exclusive licensees of circuit layouts have standing to sue for infringement.

Exclusive licensees of plant breeder's rights do not have standing to sue for infringement.

Formalities for licensing

10. What are the formalities to license each of the main IPRs?

There is no requirement to register an IPR licence in the relevant Register.

Most IPR licences do not have to be in writing, although it is preferable that they are. For a licence of copyright or of a circuit layout to be an "exclusive licence" (see Question 9), of the sort that can grant the licensee standing to sue for infringement, it must be in writing, signed by or on behalf of the IPR owner.

Main terms for licences

11. What main terms should be included in an IP licence?

Matters that should be dealt with in an IPR licence include the following.

  • Term of the licence.

  • Type of the licence: exclusive or non-exclusive.

  • Right to sub-licence.

  • Confidentiality requirements.

  • Rights of termination.

  • Applicable territory for which the licence applies.

  • Issues concerning payment of royalties, including currency, payment reporting, and method of payment.

  • Responsibility for the payment of any taxes (see Question 24).

  • Ownership of improvements.

  • Who will look after registration/renewal.

  • Restrictions on the use of the licensed IPR.

  • Infringement provisions, including whether the licensee can compel proceedings to be brought by the licensor, and whether there will be an apportionment of the costs and proceeds of litigation.

 

Taking security

12. What are the key issues in taking security over the main IPRs?

Security interests should be registered on the Australian Personal Property Securities Register (PPSR). Registering a security interest on an IPR Register (for example the Register of Patents) does not perfect the security interest and is not a replacement for registering on the PPSR.

Where a security interest is taken specifically over IPRs that can be registered, the description of the IPR in the entry for the security interest in the PPSR needs to refer to one of the serial numbers associated with the registration or application (for example, the patent number). A security interest can be simply registered over all of the assets of a corporation without specifying IPR serial numbers. If this is done a buyer of the IPR will generally take it free of the security interest.

Particular care needs to be taken when granting a security interest over property embodying an IPR or used for the purpose of exercising it, because, where exercise by a secured party of rights in relation to the goods arising under a security agreement necessarily involves an exercise of the IPRs, the security interest may extend over those IPRs as well. How this rule will be applied by Australian courts in practice remains to be seen.

 
13. What are the main security interests taken over IPRs?

General

Perfection of a security interest requires three steps to be fulfilled:

  • Attachment: for a security interest to be enforceable against a grantor, it needs to be attached to the property, which requires that the grantor has good rights in the property, and either the secured party has given value for the interest, or the grantor has acted in a way that creates a security interest.

  • Enforcement: once attachment has occurred, a security interest becomes enforceable against third parties when one of three requirements is satisfied. For IPRs, the relevant requirement is that the agreement is evidenced in writing signed by the grantor (or at the very least which has been adopted or accepted by the grantor by an act or omission that reasonably appears to be done with the intention of adopting or accepting the writing).

  • Perfection: once the above two steps are met, the security interest can be perfected. For IPRs this is done by registering the interest on the PPSR.

Perfection of the security interest is important. For example, a buyer or lessee of personal property, for value, generally takes the personal property free of an unperfected security interest in the property. Perfected security interests generally take priority over unperfected interests.

When an IPR is transferred, security interests over licences for the IPR continue to bind the new owner.

Patents

It is possible to register a security interest on the Patents Register, and this can be a useful way to alert others of the interest.

Trade marks

It is possible to register a security interest on the Trade Marks Register, and if this is done, the security interest holder will receive a notification if an attempt is made to register an assignment of the trade mark.

Copyright

See above, General.

Design rights

See above, General.

Trade secrets and confidential information

Confidential information is generally not treated as property in the strict sense, but there have been suggestions that it can be the subject of a charge.

Other

See above, General.

 

M&A

Due diligence

14. What IPR-related due diligence is commonly carried out in both a share sale or merger and an asset sale?

Share sale or merger

In both a share sale and an asset sale, it is wise for the buyer to carry out a full due diligence enquiry in respect of IPRs. This will generally involve:

  • Identifying IPRs used by the target company, including both registered and unregistered rights.

  • Reviewing any documents relating to the company's IPRs, including licences, assignments, confidentiality undertakings and IP Australia reports regarding registrability of the IPRs.

  • Considering whether there have been any claims for infringement of a third party's IPRs.

It is also necessary to consider whether there are any change-of-control provisions in IPR licences used by the company.

Asset sale

In an asset sale, it is necessary to consider whether any third party consents will be required for assignment of a purchased IPR.

Due diligence similar to that outlined above in relation to a share sale will also need to be conducted. It is common practice to include a schedule to the asset sale agreement that sets out a list of the IPRs included as part of the sale.

The novation of IPR licences will require the consent of the existing parties to the licence.

Warranties/indemnities

15. What IPR-related warranties and/or indemnities are commonly given by the seller to the buyer in both a share sale or merger and an asset sale?

Similar warranties are provided by the seller to the buyer in both a share sale and an asset sale. Typical warranties are listed below.

  • Ownership of IPRs: the seller warrants that it is the legal and beneficial owner of all of the relevant IPRs. A buyer will also usually request that the seller warrants that it has not granted any undisclosed licences to use its IPRs to a third party.

  • Disclosure: the seller warrants that all relevant or material IPRs have been disclosed to the buyer.

  • Infringements: a seller will not usually give an unqualified warranty stating that the conduct of its business does not infringe any IPRs of a third party. However, a seller will generally state that, ''to the best of its knowledge and belief", the conduct of the seller's business does not infringe any third party rights, and that it has not received any notice or threat of any claim alleging its infringement of another's IPRs.

  • Validity of IPRs: it is not uncommon for the seller to warrant that the relevant IPRs are valid and enforceable.

Transfer of IPRs

16. How are the main IPRs transferred in both a share sale or merger and an asset sale?

Share sale or merger

In a share sale, the shares in the relevant company are acquired by the purchaser, and as such, there is generally no need to formally transfer IPRs. However, if there are any important IPRs used by the acquired company that are licensed to it by another party, there may be issues with change-of-control provisions. If this is the case, these provisions will need to be dealt with by signed consents or through an assignment deed.

The purchaser may also wish to use this time to tidy up the ownership of any important IPRs, for example, IPRs that are registered in the name of an individual employee of the company acquired, instead of in the company name.

Asset sale

In an asset sale, IPRs are transferred by a sale agreement and a formal assignment of the IPRs, subject to warranties (see above, Share sale or merger).

 

Joint ventures

17. Is it common for companies to set up joint ventures in your jurisdiction to develop projects that heavily involve IPRs?

Joint ventures are common in Australia, including in circumstances where two or more companies agree to develop IPRs jointly.

The joint venture agreement should deal with the following.

  • The ownership of existing and any newly created IPRs.

  • Which party is responsible for any registration (and maintenance) of the IPRs created under the agreement.

  • Which party will be responsible for the enforcement of the jointly-owned IPRs, and the costs and proceeds of litigation will be shared.

  • How existing IPRs will be licensed between participants, what restrictions will apply to these licensed IPRs, and whether any rights to these IPRs will survive the end of the joint venture.

Co-owners of copyright do not have the right to make use of it without the consent of the other owners. If developed copyright is to be jointly owned, the parties should agree in advance what each party will be allowed to do with it.

 

Competition law

Main provisions and common issues

18. What are the main provisions of your national competition law that can affect the exploitation of the main IPRs?

Competition law in Australia is administered by the Australian Competition and Consumer Commission (ACCC). The main competition related prohibitions are:

  • Misuse of market power: a business with substantial market power cannot use it for certain anti-competitive purposes, for example substantially damaging a competitor, or deterring or preventing a person from engaging in competitive conduct.

  • Anti-competitive agreements: contracts, arrangements or understandings that have the purpose of, or are likely to, substantially lessen competition in a market are prohibited.

  • Cartels: companies are prohibited from entering into a contract, arrangement or understanding with competitors which includes a cartel provision, or giving effect to such a provision.

  • Boycotts: competitors are prohibited from agreeing to boycott another company. Collective bargaining agreements are also generally prohibited.

  • Exclusive dealing: companies are not allowed to prohibit (or create price disincentives for) acquirers of their goods or services acquiring other goods or services from a third party, or prohibit their suppliers supplying other parties, where there is a purpose or likely effect of substantially lessening competition. There is also a prohibition on requiring (or creating price incentives for) an acquirer of goods or services to acquire other goods or services from an unrelated third party, regardless of anti-competitive purpose or effect.

  • Resale price maintenance: a supplier is prohibited from imposing a minimum price on retailers of its goods.

The Commonwealth Government has proposed broadening the prohibition on misuse of market power, so that a business with substantial market power will be prohibited from engaging in conduct (regardless of whether use is made of the substantial market power) that has the purpose, effect or likely effect of substantially lessening competition in that or any other market.

 
19. What are the most common national competition law issues that arise in the exploitation of the main IPRs?

Owners of IPRs need to be particularly conscious of the prohibition on misuse of market power, especially if seeking to leverage an advantageous position created by IPRs in one market to attempt to establish dominance in another. The focus in such a business strategy should always be on growing and consolidating sales, and not on undermining competitors.

IPR licences cannot provide a minimum price at which goods can be sold by the licensee. Instead, a general audit procedure can be included to ensure the licensee is selling goods on arms-length terms.

No-challenge clauses should always be subject to legal review by competition law experts before inclusion in an agreement.

Certain ''exclusive dealing'' type provisions in patent licences or assignments are deemed void and should be avoided (section 144, Patents Act 1990 (Cth)).

Exclusions/exemptions

20. What exclusions or exemptions are available for national competition law issues involving the exploitation of the main IPRs?

Exemptions are available for conditions relating to the licensing or assignment of patents, registered designs, copyright, or protected circuit layouts, to the extent the conditions relate to the items/methods protected by the IPR in question. Exemptions are also available for provisions in agreements, between owners of a registered trade mark and authorised users of it, relating to the kinds, qualities or standards of goods bearing the mark that may be produced or supplied. Because of peculiarities in the drafting of the exemption for trade marks, its legal effect is uncertain.

These exemptions do not apply to the prohibitions on misuse of market power or resale price maintenance.

 

Advertising

21. To what extent do advertising laws impact on the use of third party trade marks?

Use of a registered trade mark for comparative advertising is not a trade mark infringement. However, the Australian Consumer Law includes a broad prohibition on misleading or deceptive conduct carried out in trade or commerce. Where comparative advertising is carried out, it is important to have a sound basis for any claims that are made.

 

Employees and consultants

22. Who owns each of the main IPRs created by an employee in the course of his employment? Must compensation be paid to the employee? What main steps can an employer take to ensure it owns each of the main IPRs?

Ownership

An employer will ordinarily own the IPRs created by its employees in the course of their employment. Moral rights are not automatically waived.

Compensation

There is no separate requirement for compensation to be paid.

Main steps

All employment agreements should expressly state that moral rights in IPRs are waived. The employment agreement should make clear what the duties of the employee are and reiterate that IPRs created during the course of the employment are owned by the employer. For example, an employment agreement with a scientist should make plain that the carrying out of experiments is part of their role and any inventions made during the course of their employment belong to the employer.

 
23. Who owns each of the main IPRs created by an external consultant? What main steps can a business take to ensure it owns each of the main IPRs?

Ownership

IPRs produced by consultants or contractors are ordinarily owned by the creators, although if a design is made by a designer pursuant to a contract with another party, that other party is the owner of the design.

Main steps

Contracts with consultants and contractors need to state that IPRs created pursuant to the agreement are (or will be) assigned and, require the parties to take any steps necessary to perfect the assignment. The agreement should be in writing and signed by both parties. After an IPR is created, an assignment deed should be entered into by the parties to make certain that the assignment can be clearly evidenced.

 

Tax

24. What are the main taxes payable by a licensor on the licensing of the main IPRs?

The terms of a licence agreement will need to be carefully analysed from an Australian tax perspective to determine the tax characterisation of each of the payments to be made by the licensee to the licensor.

Income tax

In general, amounts received by a licensor under a licence agreement for the right to use the IPR are likely to be characterised as royalty income, which the licensor will be required to include in its assessable income on which income tax may be payable.

In cross-border licensing arrangements, licensors should be aware that licensees may be required to withhold amounts on account of royalty withholding tax from the royalty payments. In this regard, licensors should consider negotiating for the inclusion of a "gross-up" clause in the licence agreement.

Licensors should also consider whether they would be entitled to claim a foreign income tax offset in their Australian income tax return for the amount of any withholding tax withheld by the licensee. If the licence agreement involves the actual (or in substance) disposition of the IPR to the licensee, see Question 25.

Goods and Services Tax (GST)

This may be payable by the licensor if the relevant supply is connected with Australia and the licensor is registered (or required to be registered) for GST in Australia. Stamp duty is imposed by Australian states and territories. In some cases, the licensee, not the licensor, may be liable to pay stamp duty in respect of a transaction which includes licensing IPRs.

 
25. What are the main taxes payable by a seller on the sale of the main IPRs?

The tax consequences for the seller on the sale of an IPR will depend on what the IPR being sold is and how it is characterised for tax purposes. Very generally, the disposal of an IPR may result in:

  • A balancing adjustment event (which may require the seller to include an amount in its assessable income or entitle it to claim a deduction in its income tax return).

  • A capital gains tax event (which may result in either a capital gain or capital loss for the seller).

  • The proceeds of the sale needing to be included as ordinary income in the seller's income tax return.

Depending on the nature of the seller, the type of IPR and the structure of the sale process itself, other tax outcomes could also apply. Stamp duty or GST may apply, depending on the structure of the sale (see Question 24).

 

Cross-border issues

26. What major international IP treaties is your jurisdiction party to?

IP treaties that Australia is a party to include the:

  • Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks.

  • World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights.

  • International Convention for the Protection of New Varieties of Plants.

  • Patent Co-operation Treaty.

  • Berne Convention for the Protection of Literary and Artistic Works.

  • Paris Convention for the Protection of Industrial Property.

  • Free Trade Agreement between Australia and the US (see Chapter 17).

A detailed list of treaties can be found at www.wipo.int/wipolex/en/profile.jsp?code= .

 
27. Are foreign IPRs recognised in your jurisdiction?

Patents, trade marks, designs and plant breeder's rights need to be registered in Australia, as foreign registrations do not provide protection within Australia.

Patents

An Australian patent application can have the priority date of a corresponding international (Patent Cooperation Treaty) filing, or a corresponding application made in another country that is a party to the Paris Convention for the Protection of Industrial Property (Paris Convention), if filed within 12 months of it.

Trade marks

Australia is a party to the Madrid Protocol (see Question 26), which creates a unified process for seeking trade mark registration in states which are a party to it.

An Australian trade mark application can have the priority date of a corresponding application made in another country that is a party to the Paris Convention, if filed within six months of it.

Copyright

Australia recognises copyright created by citizens, nationals or residents of most countries in the world.

Design rights

An Australian design application can have the priority date of a corresponding application made in another country that is a party to the Paris Convention, if filed within six months of it.

Australia is not a party to the Hague Agreement Concerning the International Registration of Industrial Designs.

Trade secrets and confidential information

Confidential information would need to meet the requirements of Australian law for protection to be available, but there is no territorial limitation regarding where the confidential information first arose.

Other

Australia recognises circuit layouts created by citizens, nationals or residents of a member of the World Trade Organization, or which were first commercially used in one of these countries.

An Australian plant breeder's rights application can have the earlier priority date of a corresponding application made in a party to the International Convention for the Protection of New Varieties of Plants, if made within 12 months of the first such application made in a party to that treaty.

 

Reform

28. Are there any proposals for reform?

The Australian Productivity Commission released a draft report on Intellectual Property Arrangements in 2016. The final report, and the Commonwealth Government's official views on the recommendations made, have not yet been publically released. Some of the particularly noteworthy recommendations made in the draft report are:

  • Repeal of the limited competition law exemption for IPRs (see Question 20).

  • Repeal of the current prohibition on parallel importation of books.

  • Making it legal for consumers to circumvent geoblocking technology.

  • Introduction of a broad "fair dealing" defence to copyright infringement.

  • Strengthening of the "inventive step" requirement for patents.

  • Abolishing the innovation patent system.

  • Express exclusion of business methods and software from being patentable subject matter.

  • Abolition of defensive trade marks.

Amendments to copyright law have been proposed by the Commonwealth Government in an exposure draft of a bill, released for public comment in December 2015. These changes would simplify the statutory licence regime available for Australian institutions, help ensure people with disabilities have access to copyrighted materials suitable for them, and allow libraries to make copies of rare works for the purpose of preserving them. The proposed amendments would also limit the duration of copyright in unpublished works, as the current rules mean that copyright in unpublished dramatic, musical and literary works (other than computer programs) can subsist indefinitely.

 

Online resources

Federal Register of Legislation

W www.legislation.gov.au

Description. Up to date and official copies of federal legislation can be located here. Legislation of each the states and territories is available online via separate websites.

IP Australia

W www.ipaustralia.gov.au

Description. IP Australia administers those IPRs that can be registered. The website provides practical guidance on IPR registration, renewal, and enforcement. The IPR Registers can be accessed through this site.

Australian Competition and Consumer Commission

W www.accc.gov.au

Description. The ACCC administers Australia's competition and consumer laws. Its website provides practical guidance, and access to public registers of prior actions taken by the ACCC.

Australian Taxation Office Legal Database

W http://law.ato.gov.au

Description. This database provides access to a variety of legislative and guiding materials regarding Australian tax law.

Personal Property Securities Register

W www.ppsr.gov.au

Description. This website can be used to search the PPSR and to register security interests.


Assignment of copyright: formalities

Jurisdiction

What are the formalities to assign copyright (for example, in writing, signed by the assignor and assignee)?

Can copyright be registered? If yes, does an assignment of copyright have to be registered or recorded (to be effective against a third party)?

Australia

Assignment of copyright needs to be in writing signed by the assignor.

Copyright cannot be registered.

 

Contributor profiles

Richard Hamer, Partner

Allens

T +61 3 9614 1011
F +61 3 9614 4661
E Richard.Hamer@allens.com.au
W www.allens.com.au

Professional qualifications. Admitted in Victoria (1983), now Australia; BSc Monash University (chemistry/genetics), LLB Melbourne University.

Areas of practice. Intellectual property (particularly patent litigation and licensing in the pharmaceutical and chemical fields) and regulatory work.

Professional associations/memberships. AIPPI, Intellectual Property Society of Australia & New Zealand, AIPLA, LES (President LES Australia & New Zealand 1998-99, Law Council of Australia (Chair IP committee 2013-15).


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