Competition Law and IPR- Friends or Foes?

An intellectual property right holder is granted legal rights to protect his intellectual property- here is where competition law plays a huge role by ensuring that such power and monopoly is restricted in the market.

Both intellectual property rights and competition law have co-existed separately and peacefully since a number of years. It was later understood that competition law can provide a boost to IPR since the market would be unpredictable, less complacent, more innovative and grow faster due to the impact of competition law. A plethora of cases as held by the ECJ elaborated on the fact that the real concern that competition law has with IPR is not with the existence of IPR but with its exercise.

There are theories that imply usage of competition laws in IPR issues.

(i) Potential abuse of monopoly with respect to pricing, especially in developing countries where effective substitutes to IPR protected products may not be readily available.

(ii) With regard to business strategies and dominant abuse of IPRs, competition law provides a cushion in the form of anti competitive agreements. Section 3 of the Competition Act, 2002 deals with anti competitive agreements like horizontal agreements (agreements to limit production/supply, fix prices, bid rigging, allocate specific markets) vertical agreements (tie-in arrangements, exclusive supply/distribution arrangement, resale price maintenance, refusal to deal).  Cartels are further restricted under the domain of anti competitive agreements. Cartels are agreements between enterprises, persons, a government department and association of persons not to compete on price, product, services or customers.

Further, abuse of dominant position is dealt under Section 4 of the said Act. Such abuse is prominent by predatory pricing, limiting production of the goods, creating barriers to entry of such goods, denying market access, gaining advantage in another market by using dominant position in the present market.

It is pertinent to note that the Competition Act 2002 incorporates a blanket exception for IPRs under Section 3(5) based on the principle that IPRs deserve to be isolated and protected the essential element is innovation. If the Act interferes in technological or artistic or intellectual innovation, the resultant product would not reflect the novelty that it intends to provide. Hence, the Act merely does not permit unreasonable actions or methods from taking place under the pretext of protecting one’s IPR. To conclude, the Competition Act guards those IPR licensing, or other supply/distribution agreements which is governed by or for IPR products or services.

What is appalling is that the Act does not mention exhaustion, compulsory licensing or parallel importation. Also, an IPR holder would definitely resort to a complaint under Section 4 since his rights are curtailed under Section 3. Abuse of dominant position would albeit provide a much narrower scope as compared to proving an anti competitive arrangement, but nevertheless, all IPRs have the potential of raising an issue in competition policy perspective. Hence, this bar in fact, gives more power to the IPR holder and there is no consideration of public interest or licensees or assignees.

In the case of Dr. Vallal Peruman v. Godfrey Phillips (India) Ltd. (MRTP Commission 1994) and Manju Bharadwaj v. Zee Telefilms Ltd.  (MRTP Commission 1996) it was held that the view that unfair trade practices could be triggered by the misuse, manipulation, distortion, contrivance or embellishment of ideas, it would amount to trade mark misuse and the IPR holder would expose himself to an action.

In another interesting case, US v. S C Johnson & Sons (c iv. No. 4089 – 59 fed. reg. 43, 859, 25th August, 1994) Bayer AG was a major global supplier of insecticides except in USA. It developed a new unique and potent active ingredient for insecticides for household use and secured a patent for the technology. It licensed the new technology to S C Johnson & Sons, which was a dominant market leader in pesticides market, the market share being 50-60%. The Antitrust Division of the US challenged in the US Court, this licensing arrangement which reduced incentives of Bayer to compete with Johnson in manufacture and sale of household insecticides and which further helped Johnson to increase its dominance in the US market. The Court decided that Bayer should offer the patented ingredient to other pesticide manufacturers on reasonable terms. Further, Johnson’s competitors were allowed access to active ingredients that Bayer may introduce later. Through this decision, the court sought the maintenance of competitive markets while protecting the IPR.

Balance between Competition Law and IPR in India

In India, the IPR laws like the Patent Act or Copyright Act or Trade Marks Act have over riding powers over the Competition Act in matters related to any abuse of IPR. If an anti-competitive result arises from the exercise of the rights by the patent holder, the Patent Amendment Act (2005) provides for issue of licenses to stop such anticompetitive activity. It is abysmal that the role of Competition Commission of India is nil in this respect. Instead, an amalgamation of the two Acts can be made, where tie-in arrangements, prohibiting or revoking license in case of any infringed competing technology, patent pooling, royalty payment, measures to be taken after the patent has expired, and so on. Competition Law needs to override the IPR Acts when it comes to handling any market abuse of the later.

As mentioned earlier, the Competition Act exempts mergers and dominant abuse in the market. Such exemptions should be made with leniency and not arbitrary.

Despite the fact that IPR and Competition Law are seen as overlapping fields of law with conflicting purposes, it is prominent for them to work in tandem to maintain balance in the market. IPR, on one hand, allows IPR holders to exercise exclusivity over their work, whereas Competition Law on the other hand, restricts any kind of monopoly in the market by holding restrains as earlier mentioned.  Thus, in a way, it can be said IPR holders abuse their position by creating dominance in the market.

Leaving aside conflicting interests, there are other ways where IPR and Competition Law are in sync with each other. By creating and protecting an “idea” or “expression”, IPR has carved a niche in the market by introducing diverse products and services, which only enhances competition. This competition would involve creating the best product in the market in terms of innovation, price, consumer growth, to name a few.

Friends or foes, we cannot say. A dichotomy between IPR and Competition Law cannot be changed, but ensuring their co-existence is the only way forward.

[1] Consten & Grundig v. Commission [1966] CMLR 418 ; Deutsche Grammophon Gesellschaft v. Metro-SBGroβmarkte GmbH [1971] CMLR 631; Keurkoop v. Nancy Kean Gifts [1983] 2 CMLR 47 and RTE & ITP v. Commission [1995] 4 CMLR 718, at para 49.

About the Author: Ms. Madhuri Iyer, Trade Mark Attorney at Khurana & Khurana and can be reached at: Madhuri@khuranaandkhurana.com

Follow us on Twitter: @KnKIPLaw .

Leave a Reply

Archives

  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • September 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010