In recent years, it has become clear that the effect between competition law and intellectual property rights (IPR) is a contentious issue. As competition law deals with an efficient mechanism to counter anti-competitive agreements, regulating mergers and acquisitions, restricting the use of dominant position etc. On the contrary, Intellectual Property Rights seeks to strike a balance between the rights of the owner and the interests of society. It assists the owner of intangible property in obtaining exclusive rights and monetary value for his artistic work. The aforementioned indicates the existence of a tassel between IPR and competition law. Because IPR confer exclusive rights and monopolies with which the competition policy fails to comply. On the one hand, it is critical to boost the inventor's spirits, while on the other hand, market competitiveness must be organised. They are, however, complementary in some ways. IPR allows for technological innovation, which leads to the creation of more products and the dynamic growth of the product, which is one of the goals of competition policy.
It is widely assumed that IPR and competition law have opposing goals. The reason for this is that IPRs, by establishing limits within which competitors may exercise exclusive legal rights (monopolies) over their invention, appear to be in conflict with static market access and level playing fields in competition rules, specifically by restricting horizontal and vertical limits, or on monopoly abuse.
The connotation of word- ‘Competition’ :
In both IPR and competition law, the term "competition" has different connotations. The main goal of granting licences in IPR is to encourage competition among prospective innovators while simultaneously restricting competition in a variety of ways, and after a specified period, the rights pass into the public domain, thereby ending the competition. The primary goal of competition law is to put an end to abusive market practises, to stipulate and encourage market competition, and to ensure that customers get the right product at an affordable price with improved quality.
IPR and Competition Law Comparison:
With the advancement of jurisprudence pertaining to the harmonious construction of both laws, a thorough critical analysis of the issue is required. Every IPR subject matter does not have to be in conflict with competition law. The IPR creates a dominant position, but there is no reason to believe that it leads to abuse of that position. To analyse such a problem, we must first examine the statutory framework and judicial precedents.
The relationship between intellectual property rights and competition law appears to be contradictory, but it is not; rather, it assists the individual in investing in a dynamic competition by restraining the rigid competition. It allows the holder to make exclusive use of his product for a set period of time. During such a time, patent holders have monopoly power and are in a position to dominate. Such dominance will not result in a violation of antitrust law.
As time passes and new cases arise, the supplementary but not contradictory function of both laws emerges. To understand the problem that arises when applying an IPR and competition law, it is necessary to examine Indian competition laws and how they have been structured to eliminate such problems.
IPR and Competition Law in India:
In India, IPR laws such as the Patent Act, Copyright Act, and Trade Marks Act have precedence over the Competition Act in cases involving IPR infringement. If the patent holder's exercise of rights results in anticompetitive behaviour, the Patent Amendment Act (2005) provides for the issuance of licences to stop such anticompetitive activity. The Competition Commission of India's role in this regard is abysmal. Instead, the two Acts can be combined, with tie-in arrangements, prohibiting or revoking licences in the case of infringed competing technology, patent pooling, royalty payment, measures to be taken after the patent has expired, and so on. When it comes to dealing with market abuse, competition law must take precedence over IPR Acts.
As previously stated, the Competition Act exempts mergers and market dominance abuse. Such exceptions should be granted with prudence and not arbitrarily.
Despite the fact that IPR and Competition Law are viewed as overlapping fields of law with competing goals, it is critical that they work together to maintain market balance. IPR, on the 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 imposing the previously mentioned restraint.
Thus, it is possible to argue that IPR holders abuse their position by establishing market dominance. Aside from competing interests, there are other ways in which IPR and Competition Law complement each other. IPR has carved a niche in the market by introducing diverse products and services by creating and protecting a "idea" or "expression," which only increases competition.
This competition would entail developing the best product on the market in terms of innovation, price, and consumer growth, to name a few factors.
IPR and competition law are complementary and thus cannot be considered separately, given that their scope appears to largely overlap and, in some cases, clash. It is thus critical to facilitate a balance between IPR and Competition law in order to achieve the goals of widespread competition and consumer welfare while also protecting innovation by providing inventors with adequate protection to allow them to recover R&D investments. In these cases, the role of competition law is to impose regulation on IPR where IPR holders abuse their dominant positions, exceeding the ‘reasonable use' of their rights under section 3(5) of the Indian Competition Act. In such cases, the CCI should be given adequate powers to deal with IP issues that cause market distortions and be recognised as a court of law. However, competition law should not be overly broad. The threshold for regulation under competition law should not be higher than the cases in which IPR has an appreciable adverse effect on competition.
Conflict between IPR and Competition Law:
Intellectual property refers to the creations of the mind, such as works of literature and art, as well as symbols, names, images, and designs used in commerce. The Intellectual Property Right (IPR) is an inherent right to “protect commercially valuable products of the human intellect,” such as patents, copyrights, trademarks, and related rights. An IPR is required to prevent others from using a non-corporeal commodity. An IPR is required to prevent others from using a non-corporeal commodity.
Intellectual property is divided into two categories: intellectual property, which includes patents for inventions, trademarks, industrial designs, and geographical references, and copyright, which includes literary and creative works such as books, poetry and plays, animations, songs, sketches, paintings, photos, and sculptures, and architectural designs. Copyright interests include those of musicians in their works, phonograph manufacturers in their recordings, and radio and television stations in their programming.
Competition legislation necessitates the creation of a set of laws that promote market competition. These are intended to prevent unfair trade practises. It is frequently framed with the goal of limiting the dominant company's abuse of hegemony in the industry. The Competition Act's primary goals are consumer protection and fair competition in the industry. The terms of the 2002 Protection Act prohibit holders of IPRs from engaging in anti-competitive practises that are incompatible with competition policies. Furthermore, the Act empowers India's Competition Commission to prosecute IPR holders who abuse their dominant position.
Furthermore, Section 45 of the Act empowers the Commission to penalise a party's anti-competitive arrangement, which is in violation of Section 3 of the Act. The core considerations of competition law regarding intellectual property rights are the market influence that could result from the award of such rights and the negative consequences induced by the anticompetitive exercise of IP rights. Market control, at its most basic, harms customers by setting prices higher than those required to secure cost-effective supply.
Furthermore, the harm caused by market dominance can go beyond that, if the security afforded to businesses allows them to delay or distort innovation. Under these conditions, market power would limit long-term economic growth and reduce the potential for sustained improvements in living standards.
According to the High-Level Committee Study on Competition Policy and Law, all aspects of intellectual property have the potential to improve competition policy/law issues. Intellectual property gives holders complete freedom to engage in a profitable or economic activity, but it does not give them the right to exercise restrictive or exclusive power. As a result, if the study recognises the IPR's valid purpose of prohibiting anyone from exploiting one's innovation without the necessary "licence," it also recognises the need to limit anti-competitive behaviour that may occur during the IPR exercise. For this reason, in many cases where a dispute between IPR and competition law arose before national courts, the CCI, which frequently plays jurisdictional roles in relation to competition issues, immediately advocated authority for itself. National courts also generally granted it some authority. In Aamir Khan Productions Pvt Ltd v Union of India, the Bombay High Court ruled that the CCI has the necessary authority to deal with competition law and IPR cases.
Similarly, in Kingfisher v CCI, the Bombay High Court ruled that the CCI is qualified to deal with all issues before the Copyright Board of India. This was also the outcome of the FICCI Multiplex Association of India v United Producers/Distributors Forum case, which confirmed the CCI's jurisdiction once more. Finally, in Ericsson v CCI, the Delhi High Court ruled that nothing in the Indian Patents Act 1970 could specifically or indirectly remove the CCI's authority.
The Exemption of IPR under section 3(5) of the Competition Act 2002:
The Indian Competition Act of 2002 is intended to prevent IPR infringement. However, if the CCI believes that IPRs are causing an Appreciable Adverse Effect on Competition (AAEC), the Act allows for the possibility of legal action. More importantly, Section 3(5) of the Indian Competition Act of 2002 contains an exemption provision relating to the use of IPRs, which allows for the fair use of these exclusive invention rights. “Fair use” means that Section 3(5) of the Act only requires IP holders to impose “reasonable terms” on their IP security licences without interfering with competition law.
Indeed, unlike the former Monopolies and Restrictive Trade Practices (MRTP) Act of 1969, India's Competition Act prohibits the exploitation of dominance rather than supremacy. The Indian Competition Act was enacted in response to the country's economic growth following liberalisation and privatisation. The shift has been from “command-and-control” triggered policies to a free-market approach, so “monopoly” is no longer a bad thing in and of itself, but it is justifiably exploitation of this “monopoly.”
However, the exemption provision of Section 3(5) of the Indian Competition Act 2002 is limited by Section 4(2) of the Indian Competition Act, which states that a misuse of a dominant position occurs when an undertaking imposes unjust and discriminatory requirements or rates on the purchase and/or sale of products.
As a result, to the detriment of customers, the interests of IPR holders impose limitations on their use. This means that, under Indian law, IPR holders will not impose arbitrary limitations on inventions when licencing the IPR. There is no set list of “unreasonable” limitations, so this decision would have to be made on a case-by-case basis the majority of the time. Sections 83(f) and (g) of the Patent Act of 1970, for example, state that a patent proprietor or an individual acquiring title or interest in a patent shall not engage in activities that ‘unreasonably' limit trade or negatively impact the international transfer of inventions, and that the patented invention shall be made available to the public at fairly fair rates.
Following analysis, it is possible to conclude that IPR is a right, whereas Competition law is a regulating body that makes regulations regarding the production, supply, distribution, and storage of goods, among other things, to be performed by the enterprise while operating the market. IPR is defined as a benefit granted to the creator of a product or the author of a script to allow them to use it exclusively for a set period of time. We can back this up with labour theory, which states that a person is entitled to the benefits of all hard and labour work.
It appears that these two laws are contradictory in nature, but they are not, as we can see from the preceding study. Both laws are supplementary to each other, and one enters the picture when the other is misused. Competition law strives to provide customers with a wide range of options, and it strikes a balance between the rights of the manufacturer and the rights of the customers by maximising profit with a high-quality product in an affordable price. IPR also allows the manufacturer to be compensated for the sole creation of the product, which benefits the general public. The monopoly position provided by the IPR does not appear to violate competition policies, but misuse of the position may.
Report of High-Level Committee on Competition Policy and Law, S. V. S. Raghavan Committee, Para. 5.1.7
Aamir Khan Productions Pvt Ltd v Union of India, 2010, 112 Bom LR 3778
Kingfisher v CCI, Writ Petition No. 1785 of 2009, Bombay High Court
FICCI Multiplex Association of India v United Producers/Distributors Forum, Case No. 1 of 2009, CCI Order Dated 25 May 2011
Ericsson v CCI, W. O. (C) 464/2014 & CM No. 911/2014 & 915/2014
Section 3(5), Indian Competition Act 2002
Section 4(2), Indian Competition Act 2002
3rd Year, B.A LL.B (Hons.)
C.M.P. Degree College, Faculty of Law.
University of Allahabad.