Understanding the Impact of Patent Pooling on Competition Law Policy

14th September, 2024 - 6:32 am Categories: Competition Law Patent Litigation Patents 0 Comments

Patent pooling is a form of arrangement by which entities can bring in the rights associated with a patented invention to interdependent or complementary economic exploitation. By such an arrangement, different patent holders can unify their rights with the means of production and distribution, that is, licensees, to the market that has the relevant demand. This would also lead to lower production costs, hence more affordability and accessibility of the inventions to the consumers.

The existence of patent pooling is necessary and has also helped the sociological market demand and supply in many ways. For example, the Medicines Patent Pool was set up by the UNITAID that pooled the various patents for the medicines related to HIV/AIDS and made them affordable and accessible in lower income countries. Even in the technology sector, there are many examples of patent pools that helped to streamline most of the technological equipment that we use today, for example, the Bluetooth patent pool helped to make many devices operable with wireless technology.

Patent Pooling, thus brings about standardization of the product reception, as well as removes competition between them. For example, an entity making a particular software will have to have the right to use a patent protected anti-virus program in order to make the software compatible to the technical standards of being able to make and sell the product. The same has been recognized and legally accepted in many cases because standardization meant that the masses can access better technologies (welfare-enhancing). The European Commission allowed the patent pooling of DVD related technologies because it led to standardization and dissemination of content. Thus, the specifics and the intent and objective of a patent pool arrangement is important to understand its impact on competition.

Placing in juxtaposition, patent pooling and competition law can come to be at loggerheads, because such an arrangement or agreement would theoretically fall under S. 3 of the Competition Act, 2002 which has the definition of an anti-competitive agreement having an appreciable adverse effect on the competition in the market. How so? The patent holders when they enter into a pool may not be able to use their patent beyond the pool. So their profit and interest would depend on the working of the pool and the decisions of the party with the better licensing leverage over the patents that are part of the pool.

A patent pool comes into existence when there is a corporate arrangement between entities holding patent rights- when one invention complements another to provide the complete market-demanded product, or when one patent is essentially a market substitute of the other.[1] The intersecting issues arises when the exclusive rights associated with an intellectual property gets streamlined into the pool. This happens when the pool restricts licensing liberty, and when improved research on the particular invention falls back into the pool leading to dominant position of the pool and unfair trade practices.

In her article[2], the author applies the interpretation of Ss. 3 and 4 of the Competition Act, 2002 with respect to patent pool. When ascertaining a prima facie case, it would inevitably lead to every patent pool arrangement coming under the interpretation of an anti-competitive agreement which may or likely cause appreciable adverse effect on competition. Instead, she suggests applying the prima facie case doctrine on patent pool agreements in the light of certain specific parameters such as continuation of patent rights beyond participation in the pool, or impact on entities with substitute patents. Such a yardstick helps to view patent pools in the light of its special circumstances to reasonably ascertain the impact on competition as well as its role in setting market standards by the pooling agreement.

The interface between competition violation and patent pool arrangement can be found in the case of United States v. Glaxo Group Ltd.[3] of the US Supreme Court of the year 1973. Two companies, Glaxo and ICI had the patents for the method of manufacture in micro-size form, and dosage form of a drug called Griseofulvin, respectively. They entered into an agreement to pool their respective patents for bulk manufacture and sale in which they agreed that they or their authorized subsidiaries will not sell the bulk of the drugs manufactured under the agreement to any independent third party without express consent. This was found to be restricting on the sale and resale of the drug leading to an unreasonable restraint on trade. The Supreme Court upheld the view of the District court found that this arrangement resulted in an economic leverage as it imposed bulk-sales restrictions on its licensees, and closed the griseofulvin market to the other wholesalers resulting in an anti-trust violation.

When a large number of patents are pooled, it results in limitations on the capacity of an individual patent holder to diversify their use of the patents in the industry. This limits the scope of use. It deters bargaining between the parties in the pool with respect to commercialization of the patent as may be possible without the existence of a pool.[4] Such a situation is described as a patent thicket, where diverse uses of a patent are lost in a thicket, leading to gatekeeping of market-relevant products or technology. Here, there is an adverse and unfair impact on the competition on a potential market of the particular use to the patent.

Compulsory licensing under the Indian Patent intends and tries to bring those inventions in active demand to supply. It comes into the picture when the patent is subject to unreasonable gatekeeping, when the patent is not working, or its economic exclusivity is not optimized. Patent pooling brings together multiple right of monopolies under one arrangement making it more susceptible to the applicability of competition policies. Thus, negotiating patent licenses and creating an arrangement must take into consideration its potential adverse impact on the competition in its market so that no entity capable of participating in the particular market is restricted by an unfair trade arrangement.

Patent pooling is relevant in times like public emergencies where inventions have to be exploited. The provisions relating to compulsory licensing in S. 83 of the Patents Act, 1970 indicate the practicality of such an intention. Arrangements like the Medicine Patent Pool were entered into by entities that assessed their ultimate impact on the market and the returns on such a use of their patents. They can be described as successful because entities entered and participated voluntarily. The ultimate perspective of the patent holder to exploit their economic exclusivity which is why a provision for compulsory licensing where the state involves itself in public interest exists- to balance competition as well as allow flow of innovation and its relevance in continuing improvements.

Competition policy in India aims to check the impact of a particular market event on the sustainability of the market as well as the market entities, with the ultimate aim being optimizing market options for the consumers. This is why relevant market is defined both with respect to the particular product as well as the geographical bounds of the market. By geographical bounds, it means the demand and sociological need in a particular territory, and the capacity of market players to adhere and exist in such a space.

Monopolistic characteristics of patent and the policies that foster competition in the market are intended to encourage innovation and inventions in all aspects. Patent pools when assessed by competition rules raise multiple questions on the balance between the rights and the policies for individual property rights and public or social interest.

Author: R Dharini, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

References

1. S & A Law Offices, ‘Patent Pools in India’ (com, 18 December 2023) (https://www.lexology.com/library/detail.aspx?g=6a730147-4bb0-4d8e-b579-90c294a39d15 accessed 3 September 2024).
2. Medicines Patent Pool, ‘Agreements with Innovators’ (MPP Home- The Medicines Patent) (https://medicinespatentpool.org/progress-achievements/licences accessed 3 September 2024).
3. Secretariat WIPO, ‘Patent Pools and Antitrust- A Comparative Analysis’, 2014 https://www.wipo.int/export/sites/www/competition-policy/en/docs/patent_pools_report.pdf (accessed 3 September 2024).
4. Shama Mahajan, ‘Patent Pooling and Anti-Competitive Agreements: A Nascent Dichotomy of IPR and Competition Regime’ [2020] 6(2) NLUJ LR 35-70.
5. Raawiah Mansoor, ‘Anti-Competitive Tendencies of Patent Pools: Challenges and the Road Ahead’, [2023] 3(4) JCLJ 392-400.
6. Anjana Girish, ‘Scope of Intellectual Property Rights in Times of Covid: Indian Scenario’, [2020] 5 UPES LR 87.
7. Bhagirath Ashiya, ‘Patent Thickets: The Quagmire of Intellectual Property Rights’, [2016] 1 JIPL 38.

[1] Secretariat WIPO, ‘Patent Pools and Antitrust- A Comparative Analysis’, 2014 https://www.wipo.int/export/sites/www/competition-policy/en/docs/patent_pools_report.pdf (accessed 3 September 2024), p. 5.

[2] Shama Mahajan, ‘Patent Pooling and Anti-Competitive Agreements: A Nascent Dichotomy of IPR and Competition Regime’ [2020] 6(2) NLUJ LR 35-70, 67.

[3] 1973 SCC Online US SC 26.

[4] Bhagirath Ashiya, ‘Patent Thickets: The Quagmire of Intellectual Property Rights’, [2016] 1 JIPL 38, 42.