This article is written by Sanjana Jain, a student of Guru Gobind Singh Indraprastha University, Delhi. This article talks about Intellectual property rights and the conflicts that arise between intellectual property rights and competition law. It also discusses whether the IPR is a competitive property right or a monopoly right.
Table of Contents
Introduction
Nowadays, Intellectual Property Rights (IPRs) have grown up to such a position that they have acquired an extremely important role in a country’s and global economy’s scientific, technological and industrial development. The domain of Intellectual Property (IP) is vast. This is an arena that is constantly evolving, with its new forms emerging now and then. This evolution of IP is primarily stimulated by the emergence of technological and scientific advancements in society.
The prime object of IPR is that ‘the innovators must enjoy the benefits of the hard work done by them and shall always be protected against any infringement or violation of their intellectual property. The labor and effort that is put in by the innovator to achieve the final result is something concerning which he deserves to be protected. However, to reach the goal, the law guarantees the property rights to the innovator for a limited period which allows him to earn profit from the goods which he has innovated. Every creation shall be guarded by strict laws in such a way that such creation does not suffer from the problem of appropriation. There shall be balanced rights such that they encourage the innovation of intellectual goods but not discourage the goods, wide use is the primary focus of modern intellectual property law.
India has to sign the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), for the formation of the World Trade Organization (WTO), at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994 it was negotiated. The main aim of the TRIPS Agreement is to make stronger standards of protection and provide effective enforcement at both national and international levels.
Meaning of property
The Supreme Court of India (SC), in the case of Jilubhai Nanbhai Khachar v. the State of Gujarat, stated that “Property, in lawful terms, means a bunch of rights which are guaranteed and are protected by the law. It also includes other valuable rights and interests, most particularly the right of ownership and exclusive right to a thing, the right to get rid of that thing in every possible legal way, or the right to possess/use it and also the right to exclude others from interfering with it in any way.”
In R.C. Cooper v. Union of India, case the Supreme Court held that property is “the highest right of a man; it includes estates, ownership, interests incorporeal things, and it also includes rights such as TM’s, copyrights, patents, etc. and even the rights in personam, capable of transmitting or transfer, eg. debts; and it signifies a beneficial right to a thing having some monetary value, especially w.r.t. succession or transfer, and their capacity of being injured.”
Listed below are the different types of property:
- Tangible/intangible
- Corporeal/incorporeal
- Moveable/immovable
What are intellectual property rights
A property is an ‘intellectual property’ when it first originated in the mind of the author before it was brought into some material form. It is the protection granted to the creators or innovators for their innovative creations and to protect them against any possible infringement. The IPR is an intangible (invisible) right to protect what is the product of the human mind, such as a new invention. At times, IPRs are referred to as ‘Knowledge Goods’. The acts that deals with the protection of intellectual property are as follows:
- Trade Marks Act, 1999
- The Patents Act, 1970 (as amended in 2005)
- The Copyright Act, 1957
- The Designs Act, 2000
The purpose of granting this protection is to ensure that society is not deprived of such useful innovations merely due to the fears in the minds of such innovators that their interests are not protected. This is how IPR promotes the process of innovation and creativity. Intellectual Property (IP) protection ensures that the creators/innovators enjoy both commercial and moral value for their work. By providing financial incentives to the Innovators, IPR boosts the investment in Research & Development. Most Importantly, the IPR creates incentives and helps in serving the interests of the public by boosting Economic Growth.
To know more about IPR please visit
Analysis of law and economic principles
Intellectual Property Rights are made to protect the innovator’s knowledge from exploitation. The intellectual property rights are the legal mechanism to protect corporate assets from exploitation. The main aim of the IPR is to exclude others from making decisions such as giving for sale, selling, or importing the creation of the creator. It has been an ongoing debate whether the holder of the intellectual property right possesses an economic monopoly or not. However, according to many scholars both the terms are distinct from each other. According to Edmund Kitch from an economic point of view “property” and “monopoly” are not relatable to each other. A seller who owns his goods has property but no monopoly if similar things are sold in the market by many other sellers. But a seller, who controls the price of a good that he sells, has a monopoly because no other seller of that goodwill thinks to compete with him in the market, but not property if the seller of the good does not own the good he sells.” They can distinguish between:
An exclusive right on an innovation associated with the intellectual property rights
If anyone develops an idea that is exactly similar to the idea which was developed earlier by someone else then such an idea will be formally prohibited, and the patent will be granted to its first inventor by excluding others and only allowing him to import, use or sell through a valid contract. It is based on the assumption that it is impossible that two minds can develop the same ideas as the development of an idea depends upon the developer’s personality. But in natural science, it is considered that two minds can create the same ideas as creation is done based on laws of nature rather than based on the personalities of two different people.
A monopoly on an innovation that is associated with protection from competition
The protection from competition monopoly is dependent on demand and supply. This is connected with continuous profits for the monopolist and a net welfare loss for the society. Barriers are raised by the monopolists to prevent the competition from remaining in the market for a longer time and if nobody notices it, then the society bears heavy social costs.
After examining the principles of patent it is clear that the patent does not possess any economic monopoly. However, it is hard to imagine practically. Two conditions have been pointed out by law and economics that are necessary for showing that IPR is a monopoly in the product markets:
- Characteristics of the product depend only on the patent holder’s blueprint which means that there shall be a one-to-one mapping between the product characteristics and the patent or blueprint.
- However, if there is a case like the one mentioned above, there will be no reason to limit or to control the market unless and until the product faces a monopoly in the market.
The monopolistic producer will not be thrown out of the business if the creator who has the license of knowledge increases the cost of the good which does not have any competition in the monopolistic market and has a downward slope on the demand curve. Moreover, the cost of consumer prices can be increased by the choice of the producer. This gives freedom to the license holders to control the cost of both the final product and the patent license. This shifts the monopoly profits from the producer of the good to the patent holders. If the producer is not happy with the licensing price, then his profit can be adjusted by substituting his factor input.
However, because of the problem of embeddedness, it is not that easy to follow; to avoid squeezing off the profit instead of changing technology, the producer will shift much of the licensing costs on to the consumer prices. The economics literature and mainstream law mainly focus on the exclusive private right, whereas evolutionary economists mainly focus on the evolution of productive knowledge. The monopoly conditions are imposed when the ‘embeddedness’ of a patented blueprint is applied in the product and the production processes.
Intellectual property law v. competition law
Competition law controls those practices which have anticompetitive effects on the market and thus obstructing the smooth functioning of the market. On the other side, IPR deals with the exclusive monopoly right of the holder. The conflict between the two laws has been raised because of the non-excludable character of IPR which creates a struggle between the IPR and the competition laws. IPR by creating an exclusive monopoly right of the innovator reduces the competition which lifts a conflict between the objectives of both the laws. The concept of reward theory is encouraged by the IPR which means reward the creator and hence it can be said that consumer welfare and innovation are favored by both the laws.
In Best IT World India Private Limited v. M/s Telefonaktiebolaget L M Ericsson case, it was stated by the court that “The Competition Act, 2002 has widely obtained the intentions of IPR while framing provisions of the act and it does not abolish the dominance achieved by an innovator due to such Intellectual Property Rights.” We must first carefully understand the statutory framework and judicial precedents thoroughly, to examine the matter of IPR leading to abuse of dominant position. The Competition Act, 2002 was passed based on economic efficiency and liberalization and it also promotes social, political, and economic justice. The competition law was passed in compliance with the TRIPS because of the inclusion of provisions of the Monopolistic and Restrictive Trade Practice Act.
In Aamir Khan Productions Pvt. Ltd. v. Union of India, the court held that “ The Competition Commission of India (CCI) has not the only jurisdiction to hear all the matters of competition law, but also has jurisdiction to hear all the matters of IPR”. The court also stated that the rights related to IPR are statutory rights granted under the law and are not sovereign. In M/S Entertainment Network Limited v. M/S Super Cassette Industries Ltd, the Supreme Court held that if a holder of copyright has a full monopoly and that monopoly creates obstruction in the normal functioning of the market then it will be considered in violation of competition law. It was also held by the court that the license issued will not be absolute.
In competition law, the abuse of monopoly rights of the innovator granted by IPR is considered as a violation of the Competition Act and on the other side, these monopoly rights are granted by IPR to encourage the creation and competitions in the market. In India, the acquisition of IPR to protect the monopoly power in the market shall be regulated by the technology transfer guidelines.
Conclusion
Understanding whether IPRs confer monopolies or merely competitive properties are challenging work, especially when there is a want to include the realistic assumptions of the governance of IPRs at the corporate and sectoral levels. This includes considering:
- Variety of structures of ownership.
- Rights portfolio in innovation systems.
- Licensing possibilities.
- Modes of interaction.
Thus, the question of whether IPR is a competitive property right or monopoly privilege should not only be addressed on the grounds of whether the patent system’s presence is beneficial or creates social costs. We need to have more understanding regarding the most appropriate design.
References
- https://www.mondaq.com/india/cartels-monopolies/807504/conflict-between-intellectual-property-law-and-competition-law-critical-and-comparative-analysis
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