Intellectual Property and Competition Law in India

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Abstract

This Research paper deals with “intellectual property and Competition Law”. It discusses all the circumstances where both Laws meet together and oppose each other. Nowadays the relation of intellectual property and competition law has received great attention to the development and strengthening of IP protection on a global scale. Sometimes IPR provides exclusive rights to holders that are used as a monopoly weapon. It prevents other competitors from providing similar products in the market. it lowers the market competition & results in a contradiction between the goals of both laws. As a result, a conflict arises among the IP laws and competition laws, which can be handled amicably.

This paper initially addresses certain issues related to competition law & technology markets. It’s opposed to the product market. Secondly, consider whether refusing to licence an IPR to a third party constitutes anti-competitive practice or not. Thirdly, it examines the use of compulsory licences to address anti-competitive activities. Fourthly, the Paper discusses the opinions of jurisdictions and validity of “Intellectual property” & “Competition law” in India. 

Introduction

“Intellectual Property” & “Competition Law” covers various areas & were formed to achieve different goals. It is critical to comprehend the proper functions of both laws. Competition law governs market activities that have an anti-competitive impact and so impede smooth operation of the market. While IP law is established to protect intellectual property under the sole control of right holders, IPR refers to the holder’s exclusive monopoly right. It has to do with IP investment and practise. On the other hand, it promotes the market and customer advantages by encouraging competition among a large number of suppliers of goods, services, and innovative technology.

Intellectual property may be found all over the place. Intellectual property refers to the results of invention, new goods, and technology that are protected in order to succeed in the marketplace. Intellectual property not only provides protection, but it may also help small, medium, and large businesses succeed commercially. Intellectual property provides the protection to creators, inventors for their work in the market and sometimes it constitutes monopoly in the market, and that nature of IPR is contrary to the Competition law.

Competition law is designed to encourage and give a fair opportunity for healthy competition among market rivals, as well as to safeguard the interests of consumers. It is a branch of economic law to regulate the conduct of enterprise/market participants and ensure that producers of goods and services compete fairly with each other. Its goal is to create a better market for customers, safeguard against anti-competition impacts, and promote healthy and fair competition.

Historical background of Intellectual Property & Competition law

In India, we had not had a competition law regime until 2002. “The Monopolies and Restrictive Trade Practices Act” (“MRTP”), commenced in 1969, was the previous system. “The Competition Act, enacted in 2002” & modified in “2007”, was intended to replace MRTP. The relationship between IP and competition has been a source of ongoing discussion among specialists since the passage of this Act. The capacity of India’s competition regime to deal with market dominance produced by IP became highly significant in light of global events, particularly the responsibilities under the TRIPS and the resulting modifications to the IP laws in India. More than one provision of the Competition Act deals with the same thing.

The “abuse of dominant position” is addressed in “section 4 of the Competition Act” in India, which is identical in language to “Article 82 of the EC Treaty”. It is apparent that the law prohibits the misuse of a dominant position rather than the presence of one. It defines what it is to abuse a dominating position and the lists of misuse of market power. The fact that no exception has been made for IPRs is important and pertinent to the current topic.

The Competition Commission said, there is a need to make a balance between protecting the intellectual property holders and preventing abuse of market power. It is further stated that this balance can be achieved by distinguishing between the practices & the existence of rights. If an abusive behaviour is seen during the exercise of a right that is harmful to competition, it must be challenged under competition law. As a result, IPRs have been safeguarded under section 3. When a company has a dominating position and is therefore covered in section 4. then IPRs are not protected to the degree that they are reasonable.

Objective of Intellectual Property and Competition Law

The competition act’s goal is to avoid anticompetitive consequences and promote healthy and fair competition in the marketplace. IPRs are not subject to Section 3 of the Competition Act, which prohibits anti-competitive agreements. Ensures that the competition policy does not interfere with the lawful use of IPR by protecting the rights of the IPR holder to prevent infringement and safeguard these rights as long as the obligations set by the agreement are reasonable.

“Competition law is established to protect the interest of the consumers and ensure the freedom of trade in the market in India.” It prevents the misappropriation of monopoly power, restrictions on free trading, and adversely affects the competition. “The Competition Act of 2002” has largely acknowledged the purposes of IPR when crafting regulations, and it does not nullify an individual’s dominance as a result of such Intellectual Property Rights. Its motive is to encourage fair & healthy competition and to prevent anti-competition in the market. It is clear that both laws encourage consumer welfare and innovation.

The study of competition policy, as defined, necessitates taking into account a variety of governmental actions impacting the acquisition & practices of IPRs. Despite the fact that competition law may be a useful tool for limiting the detrimental impacts of IPRs. Because of a lack of law, implementation, or enforcement, most developing countries are unable to use it to address anti-competitive IPR activities.  As a result, a broader approach to competition policy may be especially useful in developing countries to ensure that IPRs are protected, utilized in a pro-competitive manner.

Technology markets as opposed to product markets

Technology market refers to new innovations i.e., protected by intellectual property rights whereas product market is limited to commodities. Licensed intellectual property in the technology market is required to exercise market values. Technology is a component that is incorporated into a product or manufacturing process. Input & output both markets are affected in competition through Technological licensing. For example, an agreement between two firms selling rival products and cross-licensing technology related to the manufacture of these goods may limit competition in the product market. There is a distinction between product and technology markets, anti-competitive behavior can occur if either or both IPs are being used to pay high fees or limit access to protected technology.

Technology transfer and dissemination, as well as the promotion of technological inventions. The preservation and enforcement of intellectual property rights must be maintained for the joint benefit of producers and users of technological knowledge, and in a way that is favourable to social and economic wellbeing, as well as a balance of responsibilities and obligations.

Does refusing to licence Intellectual Property lead to monopoly

In the matter of intellectual property, no one can access the data without the license granted. Intellectual property rights create monopoly & anti-competition in the market. The basic question arises in determining the relation of intellectual Property and competition law, that it may give permission or not, to a third party to utilize protected Subject matter without taking licenses from the IP Owner. The answer is that the relation of IP & Competition law encourages innovation and consumer welfare. but the nature of both two laws creates conflicts in each other. because Competition law promotes fair competition in the market and IPRs promotes a monopoly which reduces the competition in the market. In a monopolised market a third party may get access to exploit protected subject matter in order to compete with each other.

Therefore, under some national laws, a unilateral rejection to voluntarily licence a patent (often referred to as “refusal to deal”) might be sufficient grounds for awarding a compulsory licence. 

“The WTO Secretariat has expressly recognised the prospect of defining a (refusal to deal) as grounds for giving such licences, despite the fact that Article 31 (b) of the TRIPS Agreement only cites the rejection of a voluntary licence as a prerequisite for awarding a forced licence.”

Similarly, In SC “Entertainment Network (India) Limited v. Super Cassette Industries Ltd.[1] upheld the problem of contradiction between two laws. Even if the owner of the copyright has a complete monopoly on their work. The court noted that if the monopoly interferes with the smooth operation of the market, it is limited. Then it’s a breach of the law of competition. There is no doubt that the IP Owners are enjoying the fruits of their labour work by receiving royalties from licences issued.

In industrialised nations, it is widely acknowledged that owning IPRs does not inherently give market dominance. The prevailing belief is that IP law & competition law both are complementary to each other, that they seek the promotion of innovation as well as competition. Nonetheless, the IPR protection under competition law.

Do Compulsory licenses address anti-competitive activities?

Under both IPR and competition laws Compulsory licencing may be used to address anti-competitive behaviour. But it cannot, generally Compulsory licensing is one way to increase competition in the market. In some situations, the Intellectual Property laws permit the issuance of a license to use someone else’s patented invention without the patent owner’s consent. After the issuance of a compulsory license, the grantee can produce patented inventions on payment of a reasonable royalty. These licences are issued under Article 31(k) of TRIPS agreement.

TRIPS is a World Trade Organization (WTO)-administered international agreement that establishes baseline criteria for different types of intellectual property that Members must adopt into their national legislation. On the question of competition law, the TRIPS Agreement is more of a convenience than a need. TRIPS can help us achieve the competitive balance needed to foster both innovation and economic growth.

The following are the TRIPS Agreement guiding principles for the interplay between IPR and competition law:

a) Each country’s choice to reserve its own IPR-related competitiveness policy is up to them.

b) There must be coherence between the TRIPS Agreement’s IPR-related competition policy and the principles given out in the TRIPS Agreement.

c) Members’ primary attention should be on identifying and combating activities that obstruct the spread of protected technology.

It should be highlighted that the impact of issuing compulsory licences on competition will be determined by market structure & specific competition. Due to the reputation of the patent owner and strong presence in the market, the market shares compelled licensees receive can be modest & also may be insignificant in some circumstances. Compulsory licences should be supplemented by additional policies that successfully encourage competition. It is critical, in particular, that the obligatory licensee be allowed to export, as stipulated by “Article 31(k) of the TRIPS Agreement – the compulsory licensee be allowed to export in order to achieve economies of scale.”

Legal Precedents

There are several examples of proceedings involving the intersection b/w “IP laws” & “competition law”.

Inthis case “Aamir Khan Productions Pvt. Ltd. v. Union of India[2]facts are that the Multiplex Association filed an application to CCI against the United Producers & Distributor forum (UPDF) alleging that UPDF as per section 3 of the act has made an anti-competitive agreement and abused their dominance position under section 4. The CCI directed the DG to investigate under section 26(1). DG inquired the matter & reported it to be a “cartel” means the anti-competition agreement has happened. After receiving the report of DG’s investigation CCI has issued a show cause notice to UPDF. but UPDF, without giving reason, approached the Bombay high court, contending that the jurisdiction will not come under CCI. Because films come under copyright protection. It’s a matter of Intellectual Property. After listening to all facts and contentions the High court of Bombay said that “CCI has the power to deal with IPR cases and competition law” even CCI determined that intellectual property rights are just statutory rights provided under a statute, rather than a sovereign right.

Similarly, in “Union of India v. Cyanamide India Limited & Another[3] The court ruled that charging exorbitant rates on life-saving medications is within the purview of price regulation, and that the CCI had jurisdiction over the matter. When alternatives are few, there is always the risk of monopoly formation, which disrupts market economic efficiency. Furthermore, the same concept applies in other jurisdictions[4].

In “Express Industry Council of India v. Jet Airways[5]”, informant (a non-profit company) has filed information under section 19(1) (a) to CCI against, argued that three Domestic Airlines in India are contravening under section 3, by introducing “fuel surcharge” i.e., FSC by cartelization. There is no legal provision for levying such “Fuel Surcharge”. It also contended that FSC has been further increased by all the airlines at the same rate & from the same date indicates “Concerted Action”. Then CCI gives the order DG to investigate the matter. DG said in his report, there is no violation of Section 3. After collecting and observing the evidence from DG, CCI said that no real efforts were made by the DG, holding that there is a contravention of section 3(1) & section 3(3) by the Opponents (domestic airlines).

Conclusion

In today’s economy, intellectual property and competition play complementary roles in achieving the ultimate aim of consumer welfare protection. IP encourages inventions, which in turn encourages market competitiveness. There is no doubt that the aims and intentions of both acts of law are compatible. Both policies are beneficial to consumers and promote innovation. However, It does not mean that IPRs have dominance in the market. These two laws aim to promote innovation & healthy competition. After a comprehensive investigation it is clear that-

1. Technology market does not oppose the product market. Hence, it helps to preserve benefits of both the user of technology and producer of products.

2. Refusing to licence intellectual property does not lead to monopoly. however, it encourages the technologies.

3. Compulsory licences does not address the anti-competition agreement in the sense of restricting the competition. However, it can be one way to increase competition in the market.

References

  1. Rahul Dutta, “Critical Analysis: Reflection of IP in Competition Law of India”, available at http://www.indlaw.com/display.aspx?4674, (Last visited on July 14, 2021).
  2. Gitanjali Shankar and Nitika Gupta “INTELLECTUAL PROPERTY AND COMPETITION LAW: DIVERGENCE, CONVERGENCE, AND INDEPENDENCE” 4 NUJS L. Rev. 113 (2011).
  3. Carlos M. Correa, University of Buenos Aires, Argentina “Intellectual Property and Competition Law” 21 (International Centre for Trade and Sustainable Development (ICTSD), International Environment House 2, 2007)
  4. Advocacy Booklet on Intellectual Property Rights under the Competition Act, 2002, Competition Commission of India, available at http://www.cci.gov.in/images/media/ Advocacy/Awareness/IPR.pdf, (Last visited on July 16, 2021). See also, Advocacy Booklet on Abuse of Dominance, Competition Commission of India available at http://www. competition-commission india.nic.in/advocacy/Booklet_AbuseOfDominance11032008.pdf (Last visited on July 16, 2021).
  5. Mihir Naniwadekar, “Intellectual Property Rights and Competition Law: Friends or Foes?”, September 1, 2009, available at http://spicyipindia.blogspot.com/2009/09/intellectual-prop­erty-rights-and.html (Last visited on July 16, 2021).
  6. See Statement of Objects and Reasons, Competition Act, 2002.
  7. Article 31(k): “Members are not obliged to apply the conditions set forth in subparagraphs (b) and (f) where such use is permitted to remedy a practice determined after judicial or administrative process to be anti-competitive. The need to correct anti-competitive practices may be taken into account in determining the amount of remuneration in such cases. Competent authorities shall have the authority to refuse termination of authorization if and when the conditions which led to such authorization are likely to recur.”
  8. “Competition policy refers here to the full set of policies and institutions that affect a country’s competitive environment. This concept has been used with a different meaning, encompassing competition laws in addition to other measures aimed at promoting competition in the national economy, such as sectoral regulations and privatisation policies. Also, supervision over the government policies through competition advocacy” (SICE Dictionary of Trade Terms, http:// www.sice.oas.org/dictionary/CP_e.asp).
  9. Abuse of dominant position refers to Anticompetitive business practices in which a dominant firm may engage in order to maintain or increase its position in the market. These business practices by the firm, not without controversy, may be considered as “abusive or improper exploitation” of monopolistic control of a market aimed at restricting competition.” (SICE Dictionary of Trade Terms, http:// www.sice.oas.org/dictionary/CP_e.asp).
  10. Anticompetitive practices refers to A wide range of business practices in which a firm or group of firms may engage in order to restrict inter-firm competition to maintain or increase their relative market position and profits without necessarily providing goods and services at a lower cost or of higher quality” (SICE Dictionary of Trade Terms, http:// www.sice.oas.org/dictionary/CP_e.asp).

[1] 2008(5) OK 719.

[2] “(2010) 112 Bom L R 3778”

[3] “AIR 1987 SC 1802”

[4] “United States v. Microsoft, 38 1998 WL 614485 (DDC, 14 September 1998).”

[5]  “Express Industry Council of India v. Jet Airways (India) Ltd., CCI  2018”

Author: Pooja Pal, RGSOIPL, IIT Kharagpur, West Bengal

Editor: Kanishka VaishSenior Editor, LexLife India.

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