Historically, licences in relation to intellectual property rights in Australia were shielded from the full force of competition law due to a limited exemption contained in section 51(3) of the Competition and Consumer Act 2010 (Cth).
Repeal of this section came into effect on 13 September 2019, with the result that from that date, competition law applies to intellectual property rights (and licences) in the same way that it applies to other conduct. To date, there have been very few examples where the ACCC has been asked to provide an authorisation of an IP licence.
Recently, the ACCC released a draft determination in respect of an application for authorisation of an intellectual property settlement and licence agreement lodged by Juno Pharmaceuticals Pty Ltd (Juno) and Natco Pharma Ltd (Natco), on one hand, and Celgene Corporation and Celgene Pty Ltd (Celgene) on the other.
The application for authorisation arose from the proposed settlement of patent litigation between the parties in relation to a number of patents owned by Celgene that cover Revlimid® (lenalidomide) and Pomalyst® (pomalidomide). On 9 November 2020, Juno/Natco commenced proceedings against Celgene seeking revocation of the relevant patents. The parties proposed a settlement of the proceedings, which included entering into a licence agreement under which Celgene would grant licences to Juno/Natco to supply generic versions of the patented pharmaceuticals from a specified launch date that obviously predated expiry of the patents. In turn, Juno/Natco agreed not to contest the validity of the patents or launch their generic products before that agreed date.
Historically, licence terms for intellectual property have contained clauses of this type and the parties in this case may have expected the ACCC to approve their request. This would likely have been on the basis that because a patent rights holder has power to stop all competitors from entering the market prior to expiry of the patent, any licence allowing exploitation of the patent before expiry could be seen as increasing competition.
In applying the authorisation test, the ACCC compares the likely future both with and without the proposed conduct that is the subject of the authorisation.
In the present case, the parties submitted that the licence provided clear and substantial benefits, in that without the licence, entry of generic versions of lenalidomide and pomalidomide by Juno/Natco would be delayed. Unfortunately, whilst this may have been true, the ACCC placed weight on the effect of the licence on the potential activities of other competitors. In particular, the ACCC appeared to give great weight to the impact of the licence giving Juno/Natco “first mover” advantage, which was seen as a potential deterrent to other companies seeking to launch a generic version of the drugs. Thus, the licence was seen as replacing competitive tension among current or future generic manufacturers who may be looking to enter the market.
As a result of their analysis, the ACCC intends to deny authorisation to the proposed settlement and licence agreement. This represents a clear sign on the part of the ACCC of their willingness to impose competition law onto IP licences and in light of this development, it is therefore recommended that parties obtain advice prior to entering into any licence agreement.