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Intellectual property, information technology and trade practices

Cartel conduct

In December 2008 the Commonwealth Parliament introduced a bill that proposes to change the law on cartel conduct. Cartel conduct can occur where there are understandings or arrangements between companies to fix prices, share markets, control output or rig bids.

The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 proposes to change the law on cartel conduct by establishing criminal penalties and parallel civil penalties for serious cartel conduct.

An exception to the proposed prohibitions is where the cartel conduct is contained in a contract for the purposes of a joint venture and the joint venture is for the production and/or supply of goods or services.

You will need to review your documents, systems and procedures to ensure compliance with the new cartel conduct laws.

Component pricing

The Trade Practices Amendment (Clarity in Pricing) Bill 2008 has been discussed in previous updates. The Bill became an Act on 25 November 2008 and will come into effect on 25 May 2009.

The Act prohibits component pricing for goods and services unless a single figure price prominently accompanies the component pricing. However the new rules on component pricing will not apply when a corporation is making a representation exclusively to other businesses or governments.

If you have standard consumer contracts which include component pricing, you should revise them to ensure that a single figure price prominently accompanies any component pricing.

Predatory pricing and unconscionable conduct

The Trade Practices Legislation Amendment Act 2008 was passed in November 2008, resulting in a change in the law on predatory pricing and unconscionable conduct. Predatory pricing occurs when a company charges a very low price for goods and services with the intent of forcing a competitor to withdraw from the market or to prevent entry of competitors into the market.

A company will now contravene predatory pricing laws even if it will not be able to recoup the losses incurred by predatory pricing. Laws on predatory pricing now also apply to corporations with a substantial degree of market power as opposed to a substantial market share.

The Act also changes the law on unconscionable conduct. Previously, companies were not allowed to engage in unconscionable conduct in trade or commerce, but only where the supply or acquisition of goods or services was at a price of $10 million or less. The Act removes the $10 million threshold in these cases.

You will need to review your documents, systems and procedures to ensure compliance with the new predatory pricing and unconscionability laws.

Contributory infringement of patents by product suppliers

The High Court has recently considered the meaning of ‘supply’ and ‘staple commercial product’ in relation to contributory infringement of patents.

In October 2008 the High Court handed down judgment in the case of Northern Territory v Collins. Collins had a patent for producing oil from the mixture of bark and wood in cypress trees.

The Northern Territory government grew cypress pine on its Howard Springs Plantation and between 1993 and 2001 it granted licenses to Collins and later to Australian Cypress Oil Company (ACOC) to enter its land and harvest the cypress trees. Collins sued the Northern Territory government for contributory infringement of the patent, because it granted ACOC a license to harvest the cypress trees.

The High Court held that the granting of a license to ACOC constituted ‘supply’ of a product. In coming to this decision the High Court focused on the practical effect of the ACOC license rather than the legal nature of the license.

However, Collins was ultimately unsuccessful because the High Court held that the cypress trees were a staple commercial product. Under section 117(2)(b) of the Patents Act a person will infringe a patent if they supply a product to another person, unless the product is a staple commercial product. The High Court held that cypress trees were a staple commercial product because they are supplied for a variety of commercial uses.

If you supply products that have a variety of legitimate commercial uses you are unlikely to infringe a patent, except if you induce infringement by, for example, advertising the product with infringing instructions on how the product can be used.
Who does this affect?

Companies whose business operations are involved in the energy and resources sector.

What do you need to do?

This publication aims to provide you with an overview of recent legal developments that are relevant to your business. Should you wish to discuss any of the information attached please contact the relevant Partner.

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