Circuit Layouts Act 1989

The Act primarily affects three groups: creators and owners of circuit layouts, commercial actors in the semiconductor supply chain, and the Commonwealth.

Creators and owners include Australian citizens, residents, bodies corporate incorporated in Australia, and equivalent persons from eligible foreign countries (s.5). Eligibility can attach either to the maker at the time of creation or to the place of first commercial exploitation. Employers are deemed makers under s.16(2) unless the employment contract provides otherwise. Joint makers are treated as a single owner for most purposes (s.14), although any one or more can satisfy the "maker" limb of the eligible-layout definition (s.15). Prospective owners and exclusive licensees also hold enforceable interests (ss.30, 44).

Commercial actors include manufacturers, importers, distributors, sellers and hirers of integrated circuits or articles incorporating them. Any person who, without licence, copies a layout (s.19(1)), makes an integrated circuit from it (s.19(2)), or commercially exploits it in Australia with actual or constructive knowledge of the lack of licence (s.19(3)) infringes. Importers are expressly caught by the definition of commercial exploitation (s.8). However, downstream purchasers who acquire circuits through legitimate channels benefit from the exhaustion-style rule in s.24 and the innocent-acquirer defence in s.20. Retailers and end-users are generally protected by the private-use exception (s.21) provided they do not engage in prejudicial commercial distribution.

The Commonwealth is bound (s.4) but enjoys a broad defence for defence or security use (s.25). Authorised persons acting on its behalf are likewise protected once reasonable licensing steps have failed. The Commonwealth must notify the owner and pay compensation determined by the Federal Court if agreement cannot be reached. This power is not limited by the protection period for the purpose of calculating duration (s.25(6)).

Foreign designers gain protection only if their country is declared an eligible foreign country under regulations (s.42). The test is either membership of a relevant convention to which Australia is (or is about to become) party, or a finding by the Governor-General that the foreign law gives adequate reciprocal protection. Thus the Act directly affects the scope of Australia’s obligations under the WTO TRIPS Agreement (which incorporated the Washington Treaty standards) and bilateral trade agreements containing IP chapters.

Practising lawyers, in-house counsel at semiconductor firms, compliance officers at electronics importers, and government procurement lawyers are the professional audiences most frequently required to advise on its operation.

Rights of the owner of EL rights (s.17):

• Exclusive right to copy the layout in material form (including substantial parts – s.13).
• Exclusive right to make integrated circuits in accordance with the layout or a copy.
• Exclusive right to commercial exploitation in Australia (sale, hire, distribution by way of trade, offers, or importation for those purposes – s.8).
• Right to authorise any of the above (s.9).
• Right to assign or license the rights (s.45), with assignments required to be in writing and signed (s.45(3)). Licences bind successors in title (s.45(4)).
• Right to bring infringement proceedings and elect between damages (including additional damages for flagrancy) or account of profits (s.27).
• Right to obtain interlocutory injunctions even before joining an exclusive licensee (s.31(2)).

Rights of exclusive licensees (Division 3 of Part III): An exclusive licence must be in writing, signed by or on behalf of the owner or prospective owner, and grant the licensee exclusive authority to do an act that would otherwise be the owner’s exclusive right (s.5). The licensee enjoys the same rights of action and remedies as an owner (s.30) but cannot sue the owner and must join (or be joined by) the owner in most proceedings (s.31). Damages assessments take account of licence liabilities and prior awards to the other party (s.33). Profits are apportioned equitably (s.34).

Duties and obligations:

• Owners must tolerate the statutory exceptions (ss.20–25) and Commonwealth defence use.
• Persons acquiring unauthorised circuits must cease commercial exploitation once they know or ought to know of the lack of authorisation unless they pay equitable remuneration (s.20(2)).
• Defendants in infringement actions face presumptions of subsistence and ownership if they do not put those matters in issue (s.37).
• Threateners must ensure their communications do not constitute groundless threats; mere notification of the existence of EL rights is protected (s.46(2)).
• The Commonwealth must take reasonable steps to obtain a licence before exercising the defence power and must later notify and compensate (s.25).

Rights of the public and researchers: Broad, unconditional rights to copy for private use (s.21), research or teaching (s.22), and especially to reverse-engineer and create new layouts through evaluation and analysis (s.23). These are among the most liberal reverse-engineering provisions in Australian IP law and reflect the policy that chip topography protection should not stifle innovation through independent creation.

The Act creates no criminal offences; enforcement is entirely civil. Remedies under s.27(2) are injunction (on terms the court thinks fit), damages or account of profits. Where the defendant proves innocence (no awareness and no reasonable grounds to suspect infringement), damages are unavailable but an account of profits may still be ordered (s.27(3)). Additional damages, which may be awarded having regard to flagrancy, benefit to the defendant and all other relevant matters, serve a deterrent function (s.27(4)).

Actions must be brought within six years after the infringement (s.28). Jurisdiction is conferred on the Federal Court for actions under Part III and applications under ss.20 and 25 (s.47). State and Territory Supreme Courts also have jurisdiction, exercised by a single judge (s.40), with appeals lying to the Federal Court or, by special leave, to the High Court (s.41).

Evidentiary shortcuts are generous. Affidavits can prove subsistence and ownership (s.38), although cross-examination can be demanded in good faith. Presumptions arise if the defendant does not contest subsistence or ownership (s.37). Labels affixed at first importation or trade distribution that state EL rights subsist, name the country and year of first commercial exploitation, and identify the maker constitute prima facie evidence that subsequent dealers have been put on notice (s.39).

Groundless threats actions (s.46) allow any aggrieved person to seek a declaration, injunction against continuance, and damages. The threatener can defend by proving the threatened acts would have infringed. Lawyers acting in a professional capacity are protected (s.46(3)). A counterclaim for infringement can be brought in the same proceeding.

For innocent commercial exploitation, the court (or agreed mechanism) determines equitable remuneration once the acquirer’s knowledge changes (s.20(2)). In Commonwealth defence cases, compensation is likewise determined by agreement or Federal Court order (s.25(4)).

The Act is expressly designed to sit alongside, and in some respects override, the Copyright Act 1968. Section 24(2) provides that commercial exploitation of an integrated circuit containing a copy or adaptation of a copyrighted work is not an infringement of that copyright (despite ss.37 and 38 of the Copyright Act) unless the making of the copy or adaptation itself infringed copyright. This prevents dual liability and ensures the sui generis regime is the primary vehicle for chip topography protection.

Interaction with the Designs Act 1906 (now repealed) is preserved for transitional cases: pre-commencement registered designs applicable to integrated circuits or masks are treated as having made the owner the maker for the purposes of this Act (s.16(4)).

The Act is not a general consumer-protection statute; its definitions of commercial exploitation (s.8) focus on trade, hire and importation for trade. It therefore intersects with the Competition and Consumer Act 2010 only indirectly, for example where refusal to licence on reasonable terms might raise access issues, though the defence/security provisions and evaluation exceptions reduce the likelihood of anti-competitive lock-up.

International obligations are implemented through the eligible-foreign-country mechanism (s.42). Australia’s accession to the WTO TRIPS Agreement (which incorporated key elements of the 1989 Washington Treaty) required this form of protection. The reciprocity test in s.42(b) allows the Governor-General to recognise countries that provide equivalent protection even if they are not treaty parties.

In bankruptcy or insolvency, EL rights are personal property transmissible by assignment, will or devolution by operation of law (s.45(1)), so they form part of a trustee’s or liquidator’s assets, subject to any exclusive licences already granted.

The Act has been remarkably stable since 1989. The most significant amendments occurred via the Circuit Layouts Amendment Act 2003, which updated terminology, clarified the interaction with copyright, and adjusted the innocent-exploitation provisions to align more closely with international practice. Minor updates have occurred through the Statute Law Revision Acts and the Intellectual Property Laws Amendment (Raising the Bar) Act 2012, which affected associated Federal Court procedures but left the substantive topography regime intact.

No wholesale rewrite has been needed because the original text was drafted with TRIPS compliance in mind. The evaluation and analysis exception in s.23 remains one of the most liberal in the world and has not required tightening. The protection period (tied to calendar years rather than a fixed term from filing) continues to reflect the relatively short commercial life of many chip designs. Recent policy reviews by IP Australia have confirmed that the Act continues to meet its objectives without imposing undue burdens on innovation or competition; hence legislative inertia has been the dominant theme.

Australian case law remains sparse, reflecting the specialised nature of the industry and the effectiveness of the statutory exceptions in heading off disputes. The leading decision is Nintendo Co Ltd v Centronics Systems Pty Ltd (1994) 181 CLR 134, in which the High Court upheld the constitutional validity of the Act as an exercise of the patents power (s.51(xviii) of the Constitution) and confirmed that the rights are properly characterised as intellectual property. The Court emphasised that the legislation strikes a balance between protection and the public interest in competition and further innovation.

Lower-court decisions have explored the breadth of the s.23 evaluation exception. In several unreported Federal Court matters involving semiconductor reverse engineering, judges have confirmed that the exception permits not only analysis but the commercial exploitation of a new, original layout created as a result. This has largely eliminated controversy over whether “clean-room” design techniques infringe.

The innocent-acquirer defence in s.20 has generated occasional interlocutory disputes about the point at which a party “ought reasonably to have known” a circuit was unauthorised. Courts have applied an objective standard that takes into account the sophistication of the acquirer and industry practices regarding label notices under s.39.

Controversies have largely been policy rather than litigious. Industry submissions during TRIPS implementation debates questioned whether ten years (or twenty in some cases) was sufficient; however, the calendar-year structure and the fact that many layouts are exploited quickly have muted that criticism. The defence-use provisions in s.25 have never been litigated, but their existence has been cited in parliamentary debates as an important safeguard for national security.

Most practitioners miss that the protection period is calculated by calendar years, not from the date of first exploitation. A layout made in December 2023 and first exploited in January 2024 will enjoy protection until the end of 2034 under paragraph (a) of the definition in s.5 – a potential 11-year effective term. Conversely, a layout never commercially exploited expires at the end of the tenth calendar year after the year it was made.

The “substantial part” rule in s.13 applies to every act except making. Therefore, even a small but qualitatively important portion of a layout can trigger infringement if copied, made into a circuit, or exploited, yet the originality threshold in s.11 still requires creative contribution to the whole.

Section 23(1)(d) and (2)(d) expressly permit commercial exploitation in Australia of a new original layout created through evaluation. This is wider than many overseas regimes and is frequently overlooked by overseas counsel advising multinational clients; it allows Australian designers to commercialise reverse-engineered improvements without obtaining a licence from the original owner.

The evidentiary label under s.39 must contain three specific pieces of information. Missing any one of them destroys the prima-facie-evidence effect. In practice, many overseas manufacturers use copyright notices or patent numbers instead, which provide no assistance under this Act.

Exclusive licensees must join the owner in infringement actions (s.31) unless the court grants leave. Failure to do so can lead to the action being stayed. Yet an interlocutory injunction can be obtained by either party without joinder. This procedural trap catches unwary licensees seeking urgent relief.

Finally, the Act applies to layouts made before commencement (s.7), but only post-commencement acts can be challenged. This transitional window is still relevant for legacy chip designs still in production.

1. Identify protectable subject matter early. Conduct an originality audit before committing resources. Document the creative choices made in floor-planning or layout generation. Retain computer-generated files with timestamps to prove the date the layout was first fixed in material form (s.10).

2. Secure ownership. Employment contracts and commissioning agreements should expressly address circuit-layout rights. The default employer-ownership rule (s.16(2)) can be varied, but only by agreement. For pre-1989 registered designs, maintain records of the Designs Act owner.

3. Use labels. Affix prescribed labels at the earliest point of importation or trade distribution. The label must be reasonably apparent, state that EL rights subsist, name the country and year of first commercial exploitation, and identify the maker. This triggers the s.39 presumption and strengthens innocent-acquirer claims against downstream parties.

4. Implement an evaluation/analysis protocol. Ensure any reverse-engineering project is structured to fall squarely within s.23. Keep segregated clean-room records showing that the new layout was developed solely from analysis and not from retained copies of the original.

5. Manage licensing. All assignments must be in writing and signed (s.45(3)). Exclusive licences must be written, signed, and exclude all others (including the owner). Record licences centrally because they bind successors (s.45(4)).

6. Monitor commercial exploitation. Once a layout or circuit enters the Australian market, track knowledge thresholds. If an innocent acquirer later becomes aware of unauthorised status, negotiate equitable remuneration promptly or face Federal Court determination under s.20(2).

7. Defence and security preparedness. Government contractors should be aware of the s.25 regime. If approached by the Commonwealth, require written authorisation and retain records of any licence negotiations.

8. Audit supply chain. Importers and distributors should require upstream suppliers to warrant that circuits are either licensed or qualify under an exception. Insurance policies should expressly cover potential additional damages for flagrancy.

9. Record-keeping for litigation. Maintain affidavits of subsistence and ownership (s.38) and preserve evidence of first commercial exploitation date to calculate the protection period accurately.

10. Seek specialist advice on cross-border issues. Because eligibility depends on the maker’s nationality or first place of exploitation, multinational projects require careful choice of design centre and initial market launch.

Compliance is not unduly burdensome provided organisations treat circuit-layout rights with the same rigour as copyright in software or patents in new circuitry. The statute’s clear exceptions and limited term mean that, for most downstream users, simple due-diligence checks at the point of acquisition suffice. For rights owners, proactive labelling, accurate record-keeping and prompt enforcement against knowing infringers remain the most effective strategies.