Exceptions for enforcement of statutory intellectual property rights can no longer be relied upon by businesses that are subject to the New Zealand Commerce Act 1986 (‘Commerce Act’).

On 5 April 2023, the remaining provisions of the Commerce Amendment Act 2022 (‘Commerce Amendment Act’) came into effect and brought with them a major overhaul of New Zealand’s statutory competition laws. Key changes include:

• Amending the test for determining whether a business has taken advantage of market power (section 36) to an ‘effects’ based test in line with Australia.
• Removing exceptions that shield certain conduct relating to intellectual property from the prohibition of restrictive trade practices (i.e. anticompetitive behaviour).

This update focuses on the IP implications of the changes to the Commerce Act. If you are interested in our thoughts on the changes to section 36, see our previous articles on tougher anti-competition rules and changes to the Commerce Act coming or get in touch with one of our experts. 

What was the old position?

Prior to 5 April 2023, the ‘restrictive trade practices’ provisions in Part 2 of the Commerce Act did not apply to certain forms of IP-related conduct, namely conduct that sought to “enforce a statutory intellectual property right”.

These exceptions were commonly relied upon in the context of IP licence agreements or settlement/co-existence agreements relating to IP disputes.

What has changed?

All IP-related exceptions have been removed from the Commerce Act. This means that any commercial agreement or course of action that enforces, relies upon or gives effect to a party’s statutory IP rights may breach the Commerce Act if it:

• is a contract, arrangement, understanding or covenant that has the purpose, or has or is likely to have the effect, of substantially lessening competition in a market;
• contains a ‘cartel provision’, i.e. a term of an agreement that has the purpose, effect or likely effect of price fixing, restricting output or market allocating;
• gives effect to any of the above; or
• is a misuse of market power (under the new section 36).

The Commerce Commission has published guidance on the types of IP-related conduct that are at risk of being deemed anti-competitive under the Commerce Act. Broadly, this includes:

• refusals to licence IP;
• restrictive licensing of IP (including exclusive licensing and territorial or field-of-use restraints);
• IP licences containing ‘no challenge’ and ‘grant back’ provisions; and
• certain IP settlement agreements.

What do I need to know?

At this stage, the expanded rules are untested and it is unclear whether and how the Commerce Commission will enforce them. It is important to note that the examples provided in the published guidance are neither definitive nor exhaustive, and the application of the Commerce Act will need to be considered on a case-by-case basis. Equally, the Commerce Commission’s appetite for enforcement will depend on the circumstances of each case and, likely, the relative harm to the public of non-enforcement (or, the degree of public interest in enforcement).

For now, businesses should take note that:

• Commercial arrangements entered into pre-5 April are vulnerable to the new rules. Any conduct that ‘gives effect to’ a prohibited contract, arrangement, understanding or covenant may breach the amended Commerce Act, regardless of whether the underlying arrangement was entered into before or after the new rules came into force.
• Certain approaches to commercialising and enforcing IP may have previously been deemed low or no risk (or not been subjected to any risk assessment at all) from a Commerce Act perspective in reliance on the now-removed IP protections. Such approaches may now pose a greater risk under the Commerce Act.

Depending on the business you are engaged in, and the market(s) you are operating in, it may be wise to review any licensing, settlement or other commercial agreements (such as distribution agreements) you have in place, where such agreements rely upon and/or enforce your rights in respect of patents, copyright, trade marks, designs or plant variety rights.

Ask the experts

Unsure about how these changes to the Commerce Act will affect you and your business? Our technology and IP specialists Hayley Miller, Jenni Rutter and Campbell Featherstone have expertise in the sale, acquisition and licensing of IP and settlement of IP disputes. For advice on the changes to section 36, and general advice on the Commerce Act, our competition law expert David Campbell is on hand to answer your questions.