competition law

This article is written by  Shruti Chincholkar pursuing a Certificate Course in Competition Law and Enforcement.

This article has been published by Sneha Mahawar.

Nature and object of IPR

An “Intellectual Property (IP) refers to the creation of the mind, such as inventions; literary and artistic works; design; and symbols and images used in commerce.” The primary object of IPR is to IP holders with an economic reward for their contribution to the invention or innovation. The particular economic benefit is only given to the IP holder restricting others in the economy. IP Holders are not limited to individuals but also include corporations and artificial legal entities. According to WIPO, “[IPR] is like any other property right. They allow creators, or owners, of patents, trademarks, or copyrighted works to benefit from their own work or investment in a creation. These rights are outlined in Article 27 of [UDHR], which provides for the right from the protection of moral and material interests resulting from authorship of scientific, literary or artistic productions.”

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It has to acknowledge that IP rights are private rights of an individual for his creation, innovation, or invention. Its aim is to provide economic benefits to its holder.  Various companies across the globe rely upon IPR for their revenue and distinguish themselves from their competitors using IP rights. However, it is pertinent to note that IPR also acts as a bait for further innovation However, it is also a means for commercialisation of inventions and innovation, which shall take place in the near future without even the existence of IP rights.

Nature and object of Competition Law

“Competition law provides the framework for competitive activity and the process of competition”. Competition law comprises several rules and regulations for maintaining fair competition and a market. It aims at protecting the competition for the welfare of consumers and the economy as a whole. The Competition law concerns itself with governing the conditions for sustaining competition in the market by prohibiting anticompetitive practices to avert the abuse of dominance. It aims at protecting the market, encouraging different players, and acknowledging their benefits of bringing innovation to the market. The primary objective of antitrust law is the welfare and protection of the end consumer in the economy.

It is to be acknowledged that IPR and Competition law have the common goal of the welfare of the consumers. IPR is also used as a motivator for innovation which further transforms into its commercialisation. On the other side of the spectrum, the antitrust regulation tries to avert anti-competition behaviour and abuse of dominance by protecting the welfare of end consumers and appreciating innovation. The overlap here is that IPRs are private rights and they benefit the holder economically and not the end consumers. However, from the perspective of the long run, IPR brings quality to the products and services purchased by the consumers resulting in their welfare.

Interlink between Competition Law and IPR in the Indian context

Overlap between IP rights and antitrust regime

An antitrust regime is a regulatory framework for overcoming an aspect of market failure which is the creation of a monopoly. On the other end, IPR is private rights given to the IP Holder which accounts for the monopoly in the market through the exclusivity given to the IP holders. Contrary to the popular notion that these two regimes are at the non-convergent ends of each other, they have been founded upon the similar object of protecting the welfare of consumers. 

The most important case where this issue was addressed by the U.S v. Microsoft where the issue in question was whether Microsoft abused its dominant position by tying Internet Explorer with Windows by the misuse of its Ip rights. The Supreme Court of the U.S did not hold Microsoft to the abuse of its dominant position stating that there are two different markets and protecting its IP rights.  However, the case of United  States v. Line Material Co held that  “the possession of a patent/intellectual property right does not exempt an entity from the applicability of antitrust/competition laws”.

There is also a notion that bringing IP rights into the paradigm with the Competition law will distort its whole purpose of exclusivity granted to the IP holders. This notion states that innovation will not expand if there are no IP rights to stimulate it. However, taking away IP rights completely from the scenario of competition law will not benefit consumers in the short-run as well as the long-run in a given economy. Also, innovation will always take place irrespective of the IPR.  Therefore it has to be the interlink of IPR and antitrust law encouraging innovation as well as controlling the monopoly in the market for the protection and welfare of the end consumer.

Interlink between IPR and antitrust laws in India

The antitrust regime and IP laws in India have transformed over the course of the years. It is to be acknowledged that IP legislation in India lack in addressing the concern of concern between the two regimes. However, the statute regulating antitrust in India is the “Competition Act, 2000”. address the issue of overlapping IP rights and the antitrust law under Section 3(5) of the Act. CCI, although a nascent body is the regulator of the competition law in India.  Due to the implementation of the antitrust law, companies and individuals cannot monopolise the market and get unfair gains due to the abuse of their dominant position.  

The most significant ambiguity with regards to the Indian context, is the IP legislations don’t have any single provision with the phrase “competition” drafted in them. The issue here is, that an individual can misuse the IP rights and can sue another individual or corporation for the protection of the same. An inference can be drawn that IP rights have an upper priority over Competition law. However, it has to be noted that with the interpretation given to Section 3(5)(i) of the Act, the overlapping will be reconciled and the greater object of the welfare of consumers will be achieved. 

“Section 3(5)” of the Act states that: 

“(5) Nothing contained in this section shall restrict –

(i) the right of any person to restrain any infringement of or reasonable conditions, as may be necessary for protecting any rights which have been or may be conferred upon him under –

  1. the Copyright Act, 1957 (14 of 1957); 
  2. the Patents Act, 1970 (39 of 1970);
  3. the Trade and Merchandise Marks Act, 1958 (43 of 1958) Trade Marks Act, 1999 (47 of 1999);
  4. the Geographical Indications of Goods (Registration Protection) Act, 1999 (48 of 1999);
  5. the Designs Act, 2000 (16 of 2000);
  6. the Semi-conductor Integrated Circuits Layout-Design Act (37 of 2000);” 

The Act doesn’t interfere with the IP regime, however, the CCI profits from the “appreciable adverse effect on competition (AAEC)” due to the misuse of IP rights by its holder. The aforementioned provision is a rule of exception which allows for overriding IPR over the antitrust regime only in the circumstance of its “reasonable use”. The Act does not forbid domination of any company or individual in the market but it is against the abuse of the dominant position resulting in “appreciable adverse effect on the competition(AAEC)”.  The legislation was passed when the paradigm of the economy shifted from a closed market to liberalisation of the market and its subsequent impact on the economy.  Section 4(2) of the Act gives a strict interpretation leaving out the IP right when it comes to the circumstances involving abuse of dominance and imposition of unfair conditions on the other players or intermediaries or the consumers. 

Henceforth, it can be understood that IP rights are duly protected in India unless the Ip holder abuses its dominant position which is detrimental for the welfare of the consumers. The above-stated section draws out the impact of antitrust legislation on the IPR. It takes into account the “right to protect IPR” rather than deciding whether the alleged infringement is under IPR or not, the jurisdiction of CCI is only restricted to dealing with antitrust regulations.

Interpretation by CCI : landmark judgments

“High-Level Committee Report on Competition Policy” recognises the core object of the IP rights which is a right of private nature given to the IP holder to protect his/her “innovation or invention” as a reward.  However, it also recognises the misuse of IPR for engaging into anti-competitive behaviour.  The judicial precedents also given by CCI are very significant to understand the relationship of IPR and antitrust laws in India.

The issue of overlap of the jurisdiction of the Copyright Board and CCI was raised in the case of Amir Khan Production v. The Director-General,  wherein the jurisdiction of CCI was contested by the respondents as they argued that Copyright Board has the competent jurisdiction to decide the matter. However, the High Court’s rejection of the contention clearly stated that CCI has the jurisdiction for handling the matters of IPR as well as antitrust practices as per its own competence. This case has been very important for stating the scope and power of jurisdiction of CCI is matters involving the overlap of IP rights and Competition law. This affirmed the principle stated in the Kingfisher v. Competition Commission of India.

Furthermore, CCI clearly held that pricing the drugs exorbitantly high leading to the formation of a monopoly, subsequently resulting in abuse of its dominant position despite being protected by IPR shall render the jurisdiction of CCI.  In the case of Super Cassette, the apex court held that “the owners of the IPR can enjoy the fruits of their labor by issuing licenses and charging royalty, but the same can be restricted and is not absolute in nature.” It is therefore inferred that forming a monopoly is not against the antitrust law however misuse of IP rights for the formation of it and abusing it shall give rise to the antitrust concerns which will be dealt by the CCI.

However, the courts have also acknowledged the significance of IP rights. In the case of FICCI Multiplex Association of India v. United Producers Distribution Forum where the issue that arose was whether the IP holder shall waive his Copyright because it leads to the detrimental impact of the competition in the particular market. It was held that the Copyright of the holder is not absolute and can be waived off over the antitrust law. 

In the matter of Telefonaktiebolaget Lm Ericsson v. CCI, it was held that there are no provisions in the Patent Act, 1970 which bars the jurisdiction of CCI in the cases where there is the overlap of the two, therefore the jurisdiction of CCI cannot be questioned in such a case.

In the case of Department of Agriculture v Mahyco Monsanto and Nuziveedu Seeds v Monsanto, the CCI outrightly gave an order for an investigation into the matter where the complainant alleged the abuse of dominance by the respondents by the misuse of the patent granted to them. Also in the case of Phase Power Technologies Private Limited v ABB India Ltd  it was the jurisdiction of CCI cannot be incompetent on the mere ground that there is a suit on patent infringement that is pending in the civil court.

Therefore, through the judicial its can be inferred that CCI recognises the “existence of IP rights” but in a ‘reasonable use’ if the use of IP rights is beyond the limit of reasonable then if the campy or individual indulges into any anti-competitive practice then CCI shall have authority over it.

Conclusion 

The above critical analysis and discussion through the several judgments, principles and interpretations to various provisions of the Competition Act, 2002  highlight the complementary nature of these two regimes. There is an inference drawn that IPR and Antitrust cannot be enforced in ignorance of each other. Both are entangled with each other, although the premise for both IPR and Competition law is quite different but their ultimate object remains the same. On one side of the coin, IP rights giving protection to the IP holder permit the formation of monopolies and on the other side the Competition law protects consumers as well as the business environment from the anti-competitive behaviours and agreements by the businesses. However, the common goal of serving the welfare of the consumers binds both of them together and which is the very reason that they do not overlap each other rather they co-exist. 

The very question of overlapping comes through the repercussion of misuse of the IP Rights granted to corporations and the individuals. The Competition Act, 2002 duly admits the existence of IP rights but in a ‘reasonable use’ beyond which such agreements or behaviour shall be rendered as anti-competitive. It is pertinent to note that CCI as well as the apex court in the series of precedents observed that misuse of IP rights is not the justification for the contravention of the Competition law. The CCI as the regulator and protector of competition in the economy has duly discharged its stance on the issue of overlap of the two law regimes. Therefore, it can be concluded that the two law regimes are not overlapping each other, rather the only concern which has been solved and interpreted is that the circumstance of unreasonable usage of IPR impacts the competition in the market detrimentally. 

Recommendations

However, there are some recommendations that can be taken into account for better redressal of issues involving IPR and Competition law in context to India which are as follows:

  1. There are no explicit regulations or guidelines which address the issue of overlap between Competition law and IPR. The relevant public authority should take into account the complexity faced by different stakeholders including CCI, consumers and businesses and formulate detailed guidelines on the issue by inferring the guidelines given by the US and EU.
  2. There is no statute of IPR in India that deals with the concern of misuse of IP rights to hamper the competition in the market. There is a need on the part of lawmakers to amend the legislation and address the concern of misuse of IPR and its impact on competition law.
  3. The CCI has been instrumental in understanding the overlap of both the law regimes, but several aspects of the issues especially Section 3(5) of the Act have not been given an interpretation in-depth for understating the reconciliation of conflicts between IP rights and Antitrust law regime.

References

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