In this blogpost, Priyanka Kansara, Student, National Law University, Jodhpur explains the inter-relationship between the law related to Intellectual Property Rights and the Competition Law. She talks about the complementary nature of both these laws together with the concept of compulsory licensing.
INTRODUCTION
The relationship between the Laws- are they contradictory or complementary to each other?
Competition Law is aimed to provide an ideal mercantile environment while keeping in view the economic development of the country, promotion and sustenance of the competition in the market and protection of the interests of the consumers in the country. Competition is based on the Intellectual Assets and innovation skills. Intellectual property, like, any other property, is considered as an asset of its owner. Intellectual assets in the globalized economy are the way towards the economic growth and a strengthening factor, which enhance the competition in the market.
While discussing these legal regimes, two important perspectives come into mind; firstly, the impact of IPR in shaping the discipline of the Competition Law, and secondly, the application of competition law on the post grant use of IPRs. Completion and innovation are two parallel situations interlinked with each other, which define Competition Law and IPR Law respectively.
It is true that IPR Law Regime creates a monopoly but Competition Law removes monopoly. Intellectual Property Rights protect and incentivize along with a monopoly right over the invention for a limited period of time. On the other hand, Competition Law protects and prevents unfair competition. Ultimately, Intellectual Property Rights Law reduces competition whereas, the Competition Law creates competition. However, it is a myth that Competition Law and Intellectual Property Law regime are contrary to each other. Instead, they are parallel to each other as Intellectual Property law protects the free riding of creative achievements and incentive to innovation. By preventing free riding, firms are encouraged to produce their own goods, which necessarily, lead to competition. IPRs create an exception to free competition, by granting exclusivity, to promote innovation. Whereas, the Competition Law regulates the property rights including the IPR, and prevents the unfair use of someone’s Intellectual assets.
The Competition Law aims to prevent anti-competitive behaviour to control unlawful exploitation of the position of strength in the market while dealings with third parties and it regulates the property rights; while IPRs are used to leverage and expand market power beyond the essentially granted anti-free-riding function which can be restricted by antitrust law.
Strict Legislative interpretation of the Intellectual Property Law regime confines the possibility of enhancement of Competition Law phenomena and the nucleus of IPRs Law to the legislation only; it confines the Competition Law within a boundary within which the competitors may exercise their exclusive rights to hold the licence and right to innovate with infringing other Intellectual Property Rights. But, it is important to draw a clear demarcation between the extent of Intellectual Property Rights Protection and Competition intervention for innovation in high technological position. Monopolistic rights provided under the Intellectual Property Laws are to be provided for a certain specific time; the reason behind it is that technology and the innovations should change with the passage of time as it is a compulsory requirement for the economic development. Competitive policy in the market requires new trend and ideas; the formulae to Intellectual assets are made open for general public after a specific time so that new innovations could be created by experimentation. So, the meaning is to say that, in reality, Intellectual property Laws are interlinked with Competition Laws for commercial purposes. IP Law regime is not just a monopolistic policy, but it balances the stance of Intellectual assets with the Global Market.
Concept of Compulsory Licensing: An Emerging trend towards Indian Patent Law Regime[1] and Licensing Agreement: Licensing process
Licensing allows the holder or the owner of the Intellectual Assets to have a degree of control over its own creation so that the others cannot take undue advantage of it in the industry. Generally, IPR is considered as General Anti- trust principle. The events of IPRs related anti-competitive practices can be treated as a ground for granting a compulsory licence. Basically, Licence and Licensing Agreements are used to reserve the rights with regard to the licensee and the licensor, and extension of a ‘brand’ and co-marketing strategies. Licensing Agreements, which should fulfil all the conditions needed for a valid agreement, ascertain and expand the rights of the manufacturers, distributors.
Article 31 (b) of the TRIPs Agreement states about the use of the subject matter without the authorization of the right holder, if prior to the use, the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time. This Article of the TRIPs Agreement only refers to a voluntary licence as a condition for the granting of a compulsory licence, the unilateral refusal to licence a patent (generally known as “refusal to deal”) can be considered grounds for granting a compulsory licence and has been contemplated in a number of national patent laws.
Article 40 of the Agreement specifically provides for the possibility of regulating restrictive practices in licensing agreements. This is crucial to ensure the right balance between competition and protection of Intellectual Protection Rights. Cl. (1) talks about the agreement with regard to some licensing practices or conditions pertaining to intellectual property rights, which restraint Competitions, which may have an adverse impact on the trade and may impede the transfer and dissemination of technology.
Position in India
The provision of Compulsory Licensing may be used in the cases of cross-licensing that unduly limit competition policy perspective. Such pools can be used for pro-competitive purposes. Under Indian Patent Act, 1970, the provision with regard to compulsory licensing is specifically given under Chapter XVI of the Act. In March 2012, India’s Controller of Patents granted the first Compulsory Licence in the case of Natco Pharma Ltd. v. Bayer Corporation[2]. Section 84 (1) (a) of the Indian Patent Act, 1970 requires that the reasonable requirements of the public with respect to the patented invention, must not have been satisfied, in order for a compulsory license to be granted; whereas Section 84 (1) (b) of the Act provides that in order for a compulsory licence to be granted, the patented invention must not have been made available to the public at a reasonably affordable price. Further, Section 84 (1) (c) allows for a Compulsory Licence if the patented invention is not worked in the territory of India. The Bayer’s decision sets the precedent for making expensive patented drugs available for Compulsory Licensing under the Patent Act, but it might have an adverse impact on the Foreign Pharmaceutical Industries.
IPR and abuse of dominant position
To prevent and restrict the misuse of monopoly over a subject-matter is a major issue today in the corporate arena. For example, in several cases; it is found that Microsoft has abused its monopoly. Microsoft has abused its dominance to gain competitive advantages in other markets, blocking innovations, and exploiting customers. In India, Microsoft India was held liable for abusing its dominant position as a market leader in the sale of software licences. The Supreme Court held that “by merely changing the label of the licences, though the end use of the licences is the same, the respondents (Microsoft) cannot create two different tie-up arrangements and charge substantially different prices for the licences in question.”
Similarly, the case against DTH operators in India, from the point of view of Competition Law as well as IPR Law can be considered to reduce the Competition as it gives inclusive rights to the holders and exclusive monopoly while hindering others from offering the products in the market.
Specific Overview
An IPR holder is not entitled to exclude competitors from the use of his/her rights when a licence is essential for competition, such as where the refusal to license prevents the introduction of a new product or allows the intellectual property holder to monopolise a secondary market. Developing countries may draw interesting lessons from the application of the concept of refusal to deal and the essential facilities doctrine in developed countries.
The area of IPR under competition law is premised on the assumption that the intellectual property is properly obtained. Competition law may be applied when particular intellectual property rights have not been obtained in the proper manner or are not deserved, for instance when patents have been obtained illegally or by deceiving the patent office. Acquiring patent rights for frivolous developments or with a overbroad claim can provide grounds for anti-competitive intervention even in jurisdictions where IP is essentially seen as compatible with Competition Law.
The anti-competitive effects of copyright protection of software, particularly of interfaces, have been central in several cases, notably involving the dominant software provider, for instance, Microsoft. Competition law concerns have also frequently arisen in relation to copyright collecting societies. A fundamental tension between the goals of trademark and competition laws has also been observed in some cases.
A balanced approach towards the regulative mechanism for the rights between Competition and IPRs can be achieved through diversity of policies and regimes. The legitimate goal of Anti-trust Law is the promotion of efficiency through the protection of the competitive process itself rather than any particular competitive strategy; thus anti –trust law seeks to protect competition, not competitors.
[1] India: Compulsory Licensing: An Emerging Trend Towards Indian-Patent Regime, 25th February, 2014, Mondaq:Connecting knowledge and People, http://www.mondaq.com/india/x/295286/Patent/Compulsory+Licensing+An+Emerging+Trend+Towards+IndianPatent+Regime (accessed on 07-12-2015).
[2] Order No. 45/2013 (Intellectual Property Appellate Board, Chennai).
