This article is written by Surabhi Singh and Richa Goel. This article is further updated by Upasana Sarkar. This article deals with IPR and Competition Law, which provides a detailed understanding of their concept, origin, application, importance, and relationship with one another.

It has been published by Rachit Garg.

Introduction

In recent years, it has been seen that the connection between competition law and Intellectual Property Rights (IPR) is a contemporary issue. Competition law deals with an efficient mechanism to counter anti-competitive agreements, regulate mergers and acquisitions, restrict the use of dominant positions, etc. On the contrary, Intellectual Property Rights try to strike a balance between the rights of the owner and social interests. It helps the owner of the intangible property get exclusive rights and commercial value for his intellectual creation.

It is indicated from the above paragraph that a tassel exists between IPR and competition law. IPR gives exclusive rights and a monopoly, with which competition policy disagrees. On the one hand, it is important to boost the spirits of the inventor, and on the other hand, competitiveness in the market should also be controlled. However, they are also complementary in certain areas. IPR provides a chance for technological innovation, which in turn creates more products and results in the dynamic growth of the product, which is considered one of the aims of the competition policy.

Mainly the market is regulated through different systems or mechanisms, i.e., free market operation and regulated market operation. Let us study this mechanism in detail in the latter part of the article. 

Two mechanisms of market regulation

The economic operation of a country is operated through two mechanisms, i.e., free market and the regulated market. The reason behind adopting the two different mechanisms is for the better working of the country’s market.

Free market system 

In this system, the manufacturer identifies how much product should be produced and what will be the capital invested for invention or innovation. The free market system helps in inventing new products as well as determining their price. The government has no role in it. It rejects the monopolistic behaviour of the producers.

In this, there is a direct relationship between the service provider, producer, or manufacturer and the consumer. Through this system, the manufacturer takes unfair advantage of the consumer easily for profit and the untamed competing interest. This results in an unbalanced country’s economy or market.

Regulated market system

In this system, trade and businesses (buying and selling) are governed through different regulatory bodies, and they are controlled by the state. It is done to prevent unfair trade practices and monopolies. There is a check and balance for monitoring the activities of the suppliers through different legislation. It also compels the manufacturer to produce various products that are essential for the livelihood of the public at large and for improving the economy of the nation. 

Criticism of the regulated market system 

When an excessive restriction is imposed on the economy, it will prejudice the economy as rigid, as there will be no or minimum flexibility in operation. Where there will be less flexibility, there will be less invention or innovation. As a result of this, the consumer is actually failing to get what they want. 

Analysis- It can be said by analysing both mechanisms that the countries require a regulated market as well as a free market, since both of them have their advantages and disadvantages. Furthermore, prices need to be stable in order for the suppliers to meet the demands of the buyers. An open economy with regulatory organisations is preferable to one that is inflexible for both the Competition Law and IP Laws. A market without any regulating bodies will cause an unbalanced situation, and once it goes out of control, it is difficult to restore.

Concept of IPR and Competition Law

The concepts of Intellectual Property Rights (IPR) and competition law were regarded as two separate areas in earlier times. The IPR law acts as a facilitator that is used to strike a balance between the owners’ rights and social interests in the trade and economy of every nation. It protects intangible properties like trademarks, patents, inventions, and creative works from any unauthorised use by any other person without the owner’s permission. The Competition Law deals with the laws and regulations relating to market competition by efficiently countering various anti-competitive agreements, discouraging monopoly, restricting unauthorised trade practices, regulating managers and acquisitions, etc. In recent times, this perspective has changed, and both of them are used to govern the market mechanism by promoting the welfare of consumers and transferring technologies. They play a crucial role in maintaining a dynamic and competitive market. 

Intellectual Property Rights (IPR)

IPR deals with the rights of the owners of various creative inventions. When a person makes an innovation, all the rights regarding that innovation are vested in him. The Intellectual Property (IP) motivates these people to make more innovative creations, differentiates them from the creations of other people, and grants consumers more choices regarding goods and services. 

IPR safeguards the legal rights of these creative owners who create different designs, symbols, images, etc., that are used for commerce and trade purposes. The right to use these creations is conferred upon the sole owners of those creations. 

Intellectual Property Rights are granted to two different categories, which include industrial properties and copyrights. Industrial properties include patents for industrial designs, service marks, trademarks and others, and copyrights deal with subjects that include artistic and literary works. It lays down provisions for protecting the rights of the owners of novels, poems, musical works, plays, films, and all other works dealing with literature and Artistic works that consist of drawings, paintings, architectural designs, sculptures, photographs, etc. 

Competition Law 

Competition law deals with those laws that are involved in regulating market mechanisms. It promotes competition in the market and prevents unauthorised monopolies. It safeguards trade and business policies by preventing the anti-competitive conduct of various companies. It monitors the policies and regulations of the market system to ensure that no unfair marketing strategy is used and that the producers are in a position to carry out the businesses in a fair way. Consumers are also capable of choosing products and services freely. 

This law prohibits unethical practices by any business group, be it a smaller group or a larger one. Everyone has to follow the provisions of the Competition Law so that nobody faces any difficulty while doing business. There are various anti-competitive practices that are being prohibited by various countries, which include- price fixing, bid rigging, predatory pricing, and dumping.

Origin of IPR and Competition Law 

Intellectual Property Rights (IPR)

In the 19th century, the industrial revolution took place in Europe. It was termed as the era of scientific inventions as it led to many new inventions by the people. When people started making new creative and innovative works, a few other people started copying those works and declaring them as the owners of that particular creation. In this way, it was being misused for some time. To protect the rights of the owners of those creations, the term ‘IPR’ started being used. This took almost a century to become a law in the majority of countries. In the 20th century, these IPR laws were given to the holders of creative works. 

IPR was first used in Paris for protecting industrial property on 20th March 1883, through the Paris Convention that took place in Paris. Again, in 1886, it was used in Berne, Switzerland, when the Berne Convention was held for the Protection of Literary and Artistic Works. These were the first two efforts that gave rise to IPR laws. They were named the ‘Magna Carta of IPRs’. This led to the establishment of Trade Related Aspects of Intellectual Property Rights (TRIPS), which came into effect in 1995, and the World Intellectual Property Organization (WIPO), which was created in 1967, to protect the intellectual property rights of the people. Therefore, the IPR laws are being used at the national as well as international levels. 

Competition Law

The Competition Law came into existence in 1890 when the Sherman Anti-Trust Act, 1890, was enacted in the United States. This Act was enacted to protect the small group against the powers acquired by the large trusts that were formed at the time of the Industrial Revolution. This was done to help the small group use their assets properly by controlling their business in the market with other competitors. It was then considered a key pillar of the market economy. After that, this “Competition Law” was enacted in most of the developed as well as developing countries across the world. 

In India, this Competition Law evolved from Article 38 and Article 39 of the Indian Constitution, 1949, where it is stated that the State has been entrusted with the responsibility of securing and protecting a social order. These Articles lay down the provisions for safeguarding social, political and economic justice and ensuring that the ownership and control of material resources in a community are distributed in such a manner that best serves the common good. It is also the State’s duty to ensure that the market economy does not result in the concentration of wealth. The Competition Act was formulated to equitably distribute wealth among all without an unreasonable monopoly. 

Objectives of IPR and Competition Law

One of the important objectives is to promote competition among prospective innovators by encouraging them to invent new things. It is generally seen that IPR and competition law have conflicting objectives. The reason behind this is to ascertain a certain limit within which competitors can exercise exclusive legal rights (monopolies) over their inventions. This is generally against static market access and competition rules, specifically restricting the horizontal and vertical limits, or the abuse of monopoly position. 

The word  ‘competition’ is used in a different sense by IPR and Competition law.

The connotations of ‘competition’ in both IPR and competition law are different. The main objective of permitting licences in IPR is to encourage competition among prospective innovators and concurrently restrict the competition in several ways. It is given to owners for a specific time period. After that, the rights are not conferred on that individual but go into the public domain, ending the competition. The primary objective of competition law is to stop abusive practices in the market, stipulate and encourage competition in the market, and make sure that customers get a variety of products to choose from at an affordable price with improved quality.

Importance of IPR and Competition Law 

Some of the important purposes served by the IPR are as follows-

• It protects the intellectual creativity of a person by safeguarding the creation of the creator from being infringed by other people. 
• It acts as an incentive to motivate the creators, which in turn promotes invention.
• It gives exclusive rights to the holders of the creations, encouraging them to innovate new things.
• It also encourages competitive intent by securing the investment of the intellectual property holders by enforcing their legal rights.

Some of the important purposes served by the Competition Law are as follows-

• It encourages anti-competitive policies and prohibits price fixing, bid rigging, predatory pricing, and dumping.
• It encourages competition among innovative producers. 
• It prevents unhealthy competition, abusive market practices, discourages monopoly, etc.
• It promotes economic growth in society and looks after the welfare of consumers.
• It encourages the highest quality of goods and services at the lowest price for consumers.
• It promotes wider choices for consumers as well.

Interface between IPR and Competition Law

In the beginning, while studying IPR and competition law, we will find that their objectives are not similar. They may seem to be irreconcilable and are in conflict with one another. Though their principles may seem to overlap, their ultimate goals remain the same. Their aim is to look into the welfare of consumers by providing them with improved goods and services and encouraging new innovations in the market economy. It gives benefits to the holder of the right to make exclusive use of his product for a particular period. During that time, the patent owners have all the rights to use and monopolise it. Such dominance will not lead to an infringement of antitrust law. To understand the problem arising while applying IPR and competition law, it is necessary to look into the Indian laws to know about competition and how it has been structured to eliminate such problems.

IPR under the Competition Act, 2002

There are some Sections of the Indian Competition Act, 2002, that deal with the relationship between IPR and competition law, which are mentioned below. 

Prohibition of tying agreement

Section 3(4) of the Indian Competition Act, 2002, was included to prohibit tying agreements. Tying agreements are those where a useful or desirable product or service is sold by the seller on the condition that the buyer will also buy another product, which is less desirable, from the seller. This provision was enacted to encourage innovation, which is the main objective of IPR, and also promote competition in the market economy.

Protection of IP right-holder

Section 3(5) was included to protect the rights of an IPR holder. It states that competition law does not affect IPR rights. But if we study Section 3(5) with Section 4, then we find that it also restrains the IP holders from abusing their dominant position, and if they misuse their dominant position, then competition law will come into the picture. From this, we can conclude that they are complementary to each other rather than contradicting each other.

In the case of Valle Peruman and others v. Godfrey Phillips India Limited, (2005), a trademark owner misuses the trademark by manipulating/ distorting it. It will amount to unfair trade practices for trademarks. The Supreme Court, while taking into consideration the competition policy of India, held that “all kinds of intellectual property have the potential to infringe the competition.” The court further observed that a trademark owner has the right to use his trademark reasonably and subject to the conditions imposed at the time of granting a patent.

In the case of Aamir Khan Production Private Limited v. The Director-General (2010), the Bombay High Court stated that the Competition Commission of India has jurisdiction to look into the matter of competition and IPR. This stance of the court has been further carried forward by the Competition Appellate Tribunal in the case of Kingfisher v. Competition Commission of India (2012). In this case, it was held that Section 3(5) does not limit the right of the holder of IP rights to sue for infringement of copyright, trademark, patent, etc. The Competition Commission of India has conferred the power to deal with all the cases that come before the Copyright Board. Thus, competition law does put a bar on the application of other laws.

Prohibiting Abuse of dominant position

Section 4 of the Indian Competition Act, 2002, intends to prohibit abuse of dominant positions. However, it does not mean that the existence of a dominant position is prohibited. It means that an exception has been made for IPRs under this Section. This is due to the following reasons-

• IPRs given to the holder may not always lead to monopolies in the market.
• If the IPRs grant a dominant position, then it also does not mean that they are abusing market power. The abuse of the dominant position needs to be proven.

Sub-section (2) of this Section deals with the way an enterprise should be treated if an action taken by them seems to be abusive. This Section is also applicable equally to IPR holders. Sub-section (3) of this Section is applicable for restraining any infringement of or imposition of conditions so as to safeguard one’s Intellectual Property Rights that are granted by IPR Laws. The IPR Acts that confer such rights are as follows-

• Copyright Act, 1956
• The Designs Act, 2000
• Patents Act, 1970
• Semiconductor Integrated Circuits Layout-Design Act, 2000
• Geographical Indications of Goods (Registration and Protection) Act, 1999

Therefore, it can be said that both IPR and competition law can co-exist with one another. Their goals are complementary and supplementary to each other. Both their functioning and operations are kept independent, without unnecessary interference in each other’s domains.

Competition and Patent Law

Patent law is an adjunct to competition policy which helps to establish fair market behaviour through preventing the unauthorized making and selling of patented products, which is the main objective of competition policy. Competition concern arises only when the patent owner uses their innovation in a manner that undermines the purposes of the patent rights.

Granting a right to the owner of the patent will not amount to the infringement of antitrust, but abuse of the rights will amount to a violation of antitrust policies. Patent rights are given only for a particular duration of time, i.e. twenty years from the date of filing. If such rights are given for an unlimited period, then it results in misuse of monopoly power, and it will clog the competition by restricting the invention or innovation of products. A competition law comes into the picture when the exclusive rights to exclude others are given to the patent owner from entering into the market. It comes into the picture to thwart disagreeable market conditions.

Penalty provisions  

It is the duty of the Commission (CCI) to see that, while making an IPR agreement, no unreasonable conditions are present in the agreement that is mentioned under Section 3(5) of the Competition Act, 2002. He is empowered to penalise any right holder, business group or enterprise that included such clauses in the agreement. The penalty must not be greater than ten percent of the average turnover for the last three preceding financial years. If an enterprise is a ‘company’, then the directors will be held liable for including such provisions in it. The guilty will be penalised and punished for such acts. The Commission also has permission to use the following powers-

• CCI has the power to direct the parties to an agreement to discontinue the agreement and order them never to re-enter into such agreements.
• It has the power to order the party who included such unreasonable clauses to modify the agreements.
• It has the power to direct the enterprises concerned to follow the orders that are being passed by the Commission. They must act in accordance with the directions, which include payment of costs and others, if any.
• He has the power to pass such orders or give directions as he may think fit.

The Commission also has the power to direct the division of an enterprise if it finds any case of abuse of dominant position by an enterprise under Section 4 of the Indian Competition Act, 2002, as mentioned earlier. In other words, it can be said that IPRs and Competition Law work hand-in-hand. The Competition Laws show that consumers do not face any problems due to the imposition of unreasonable conditions while IP rights are being exercised.

Difference between IPR and Competition Law

Intellectual Property Rights (IPR) and Competition Law are being used to implement new policies in the market economy. But there are a few points of differences that can be seen while implementing anti-competitive practices, which are presented in a tabular form-

SL no.	Basis of difference	Intellectual Property Rights (IPR)	Competition Law
1.	Nature	IPR ensures that the inventors or creators of work get awards for their innovations, which in a way encourages monopolies in the market.	It encourages competition among the people in the market economy, which will in turn result in economic growth for the country.
2.	Scope	It tries to eliminate competition by securing the rights of the IP holders.	Competition law, on the other hand, tries to eliminate the monopoly system in the market by encouraging competition.
3.	Protection/ Restrictions	The IPR laws safeguard the rights of the inventors from competitive exploitation of their products.	Competition Law sees that unreasonable restrictions are not imposed upon market competition.
4.	Application	IPR is concerned with the benefits to consumers. It encourages the innovators to make new and improved goods and services for the consumers.	Competition Law, on the other hand, implements policies for anti-competitiveness, unfair trade practices, fair pricing, prohibits tying agreements, closing market gaps, and many more.
5.	Responsibility	The responsibility of IPR is to grant and look into the functioning of property rights.	The responsibility of Competition Law is to see the manner in which these rights are exercised in the market and their effect.

Licensing of IPR and Competition Law

IPR and competition law promotes inventions by protecting the rights of the owners of intellectual property, which in turn motivates people to make new innovations, leading to a healthy and competitive market. They play an important role in economic activity as well as market competition. With increasing digitalisation and rising intangible assets in the economy, the application of these IPR and competition laws has also increased in day-to-day life. So, for better protection of these intellectual properties, licensing of IPR and competition law has taken place. Licensing helps the IP owners with their innovations, as it acts as an incentive for them to invent new things and invest in new innovations. 

Article 31 of the TRIPS Agreement provides for the grant of compulsory licenses, under the following situations:-

• In the interest of public health
• In case of a national emergency 
• Anti-competitive practices

There are many inferences regarding the inter-link between competition policy and IPR that require it to be taken into account. Authorities regulating competition policy should consider each case relating to IPRs with a reasoned approach. However, abuse of dominance laws could be applied to IPRs and suitable remedies must be granted.

Changing relation of IPR Law and Competition Law in India

In earlier times, it was seen that IPR law and competition law were contradictory. However, due to new developments in recent times, a change in the relationship between the IPR and competition law is evident. While IPR aims at safeguarding the rights of the creators, the Competition Law aims at maintaining efficiency in market competition by preventing any misuse of dominant positions, unfair trade practices, and anti-competitiveness acts. The legislature, while making the IPR laws, made an effort to protect the inventors’ rights and compensate the innovators in case of infringement of their rights. The provisions of the Competition law are made in such a way that they offer better market access to society. With the changing laws and recent judicial pronouncements, these two laws are being harmonised. The objective of IPR changed from preserving the rights of innovators to promoting new thoughts and ideas. Thus, IPR now acts as an element of Competition law policy. 

The Competition (Amendment) Bill, 2020

In this new Amendment Bill, the following two major changes were made-

• The application and ambit of Section 3(4) were expanded, and
• It includes instances where there were dominant positions in the IPR Safe Harbour.

This Bill aimed to expand the scope of anti-competitive agreements by incorporating the term ‘any other agreement’. This clause was set forth in Section 3(4) of the Competition Act, 2002 and its ambit was expanded by amending Section 3(4), where it was decided to incorporate the term ‘any other agreement’. It was introduced to broaden the application of anti-competitive practice in various situations. 

The IPR safe harbour provision that was included under this new Amendment Act was applicable only in India, where these anti-competitive activities are involved. The safe harbour provision helps safeguard the inherent security granted to intermediaries against the imposition of any kind of liability for the activities done by third parties. To further expand the ambit of this IPR Safe Harbour provision, Section 4A was added to the Competition Act, 2002. This Section was included to grant better protection to the IPR holders and strengthen their rights.

Interlink between IPR and Competition Law

To ensure competitiveness in commercial markets

With new developments and changes in the commercial environment, an interlink is created between intellectual property rights and competition law. IPR ensures that owners of the intangible assets are given exclusive rights over their innovations regarding trade secrets, trademarks, patents, creative business works, etc. The Competition Law that protects commercial markets from anti-competitiveness ensures that consumers are able to make a conscious choice while consuming goods or availing services from any brands present in the market. Distinctiveness in the trademarks and designs of the products helps the consumers differentiate one product from the other. This uniqueness is guaranteed by the Intellectual Property Rights Laws. It prevents other individuals from copying the trademark of a particular brand as all the exclusive rights are given to the trademark holder. Therefore, both IPR and competition law work together to ensure fair competition without any unhealthy practices by any individual or business group.

Issues faced by IPR and Competition Law

IPR and competition law also face some difficulties and issues. When the laws of intellectual property are implemented on brands’ non-differentiating features like business or trade secrets or any other aspects of a business that add to the uniqueness or distinctiveness of a particular business, IP laws cannot safeguard rights in that situation. If it is permitted, then it would mean granting a monopoly over them. However, the rules of the Competition Law oppose the Intellectual Property Laws’ unduly extension and imposition on the facets of a business. Therefore, the situation becomes a little bit complicated, as not enforcing IP laws will create a lot of problems in commercial environments. It may lead to non-competitiveness among the members of the business groups. Under those circumstances, the IP laws would be unable to protect the distinctiveness of a business, which would eventually lead to imitation and duplicating of that business’s products by other businesses. If this happens, then the competition among the businesses will eventually decrease, leading to an imbalance between IP and Competition Law. So the enforcement of IP Laws is very necessary for balancing the interests of producers and creating new things that facilitate adequate competition in commercial environments. 

Ways to resolve conflicts between IPR and Competition Law

Intellectual property pights and competition law must work in balance with one another. To do that, certain conditions must be followed to resolve the issue. The following steps can help in harmonising both the laws-

• The authorities of intellectual property rights and competition laws must work in coordination with each other to maintain a balance in the market economy. IPRs and competition law must work in a way so as to safeguard the rights of the IP holders, support them in making new innovations, and increase the competitive spirit.
• Different programmes must be organised by the members, developing and explaining the connection between IP and competition law and their policies.
• A review should be done regularly to prevent unfair competition.
• In any case of refusal to deal, there must be a policy of granting compulsory licenses.
• The inventors and creators of the products must be given enough protection as well as benefits for their research and development purposes. 
• Some reasonable conditions must be imposed on them, but that should not be beyond a certain point, which will cause an adverse effect on the exercise of the IPRs creating problems in the proper implementation of Competition Law.

Shamsher Kataria v. Honda Siel Cars Ltd. (2011)

Facts of the case

In the case of Shamsher Kataria v. Honda Siel Cars Ltd. (2011), the petitioner filed a suit in the Competition Commission of India (CCI) against the defendant, stating that Honda, Volkswagen, and Fiat are misusing their dominant position in the market economy by entering into a contract that violates Section 3(5) of the Indian Competition Act, 2002, which states that the only reasonable conditions imposed by the IPR holder will be safeguarded by this Section and in case of imposition of any unreasonable conditions by them, they will be dealt with by Competition law. They were practising anti-competitiveness by controlling the operations of their services and workshops that were selling spare parts for automobiles. They were trying to monopolise the market by not supplying the spare parts of the Original Equipment Manufacturers (OEMs) in the open market. They were charging a higher price from the consumers for those parts and for maintenance services. The respondent argued that their agreements are within the ambit of Section 3(5). 

Issue of the case

Whether the defendants are abusing their dominant position?

Judgement of the case

The Delhi High Court stated that the defendant failed to prove the statements that they made regarding Section 3(5). Therefore, they are liable to face the penalty for violating Sections 3(4) (b), 3(4) (c), 3(4) (d), 4(2) (a) (i), 4(2) (c) and 4(2) (e) of the Competition Act. He was punished by imposing a penalty of 2% of the total turnover on the OEMs and cannot claim protection under the said Section.  It was held that they could not claim protection as they violated Section 4(2)(c) of the Competition Act, 2002, by indulging automobile repairers in market access. 

HT Media Ltd v. Super Cassettes Industries Ltd. (2011)

Facts of the case

In the case of HT Media Ltd v. Super Cassettes Industries Ltd. (2011), the petitioner filed the suit against the defendant, accusing him of not following the provisions of Section 3 and Section 4 of the Indian Competition Act, 2002. According to the petitioner, the defendant was engaged in manufacturing, producing and publication of music and videos in India. They were granted ‘sale of rights of Bollywood music to private FM radio in the territories of India where Bollywood music is prevalent’. It gives its collection of music to radio stations, television stations, and mobile companies not only in India but also in other countries. It was contended that the defendant was abusing his dominant position by controlling more than seventy percent of the recent Bollywood music, which is not in accordance with Section 4 provisions. It was proved by showing that they were charging a huge amount while granting the rights for the broadcast of music from the opposite party; they paid minimum commitment charges (‘MCC’) to the opposite party and made them accept the license fees and MCC.

Issue of the case

Whether the defendant is abusing his dominant position by controlling more than seventy percent of the recent Bollywood music.

Judgement of the case

The Competition Commission of India (CCI) imposed a penalty of Rs. 2.83 crore on the defendant for misusing the dominant position. The defendant was charged under Section 4(2)(a)(i) by the CCI. It was held that the holder’s right to perform and communicate with the public, or to make adaptations, may be considered as different markets individually.

FICCI Multiplex Association of India v. United Producers Distribution Forum, 2011

Facts of the case

In this particular case, the petitioner filed a suit against the respondent, stating that a group of members of the United Producers/Distributors Forum are trying to monopolise the market by prohibiting competition. They produce and distribute almost all Hindi films. They are trying to take control of the Indian film industry. Furthermore, they also instructed their producers not to release those films for exhibition purposes in the multiplexes, which led to a conflict between the petitioner and respondent. The revenue-sharing ratio was also a reason that caused problems between them. 

Issue of the case

Whether the competition in the market affect the rights of the copyright holder?

Judgement of the case

The CCI stated that the IP laws do not have any absolute overriding effect on Competition law. The court observed in the above case that the right granted to the copyright holder is not an absolute right, but it’s a statutory right under the Copyright Act, 1957. The wording used in Section 3(5) of the Act proves the above statement true. From this, it is evident that the scope of this Section is not absolute. It only shields the holder of rights from infringement by exempting him from the restrictive conditions of the Competition Law. The European Courts of Justice also held that the objective of IPR is to encourage innovation in all areas and further provide commercial gain.

Mahyco Monsanto Biotech (India) v. Competition Commission Of India (2018)

Facts of the case

In the case of Mahyco Monsanto Biotech (India) v. Competition Commission Of India (2018), it was stated that the petitioner was abusing its dominant position by charging unreasonably high trait fees for Bt. Cotton Seeds in the Market. MMBI has been producing Bt. Cotton Seeds for a long time and got Intellectual Property Rights for Bt. Cotton Seeds. It involved growing and commercialising these deeds by genetically modifying them. The Competition Commission of India (CCI) investigated the office bearers of Monsanto, the officials of the regulator and the directors of Mahyco Monsanto Biotech to find out whether they are misusing the company’s dominant position in India in Bt. cotton business or not. 

Issue of the case 

Whether the appellant is misusing dominant position by charging unreasonably high trait fees for Bt. Cotton Seeds in the Market.

Judgement of the case 

An appeal was filed stating that CCI has no jurisdiction to investigate the case and pass an order regarding the exercise of rights that have been given by the Patents Act, 1970, as the Patent Controller has the necessary jurisdiction. 

So a complaint was submitted to the Delhi High Court, where the plea was dismissed. After the investigation, it was proven that the dominant position was misused by the appellant. The appellant has imposed unfair and discriminatory conditions in the sub-licensing agreements for the manufacturing of Bt. Cotton Seeds in India. Not only that, they also made exclusive supply agreements and refused to make any deal with the seed manufacturers of India. They retained the right to fix the price of seeds in specific situations, eventually limiting any technological or scientific development in regard to the Bt. cotton technology and Bt. cotton seeds. Hence, the appellant has violated Section 3 and Section 4 of the Indian Competition Act, 2002, by participating in anti-competitiveness and abusing its dominant position in the market economy. 

Conclusion

From the above information, it can be concluded that IPR provides for a right, whereas competition law provides a regulating body that makes the regulations regarding the production, supply, distribution, and storage of goods, and states the rules required to be performed by the enterprise while operating the market. IPR grants benefits to the creator of an innovative product or author of any script to make exclusive use of it for a specified period. 

It appears that both laws are contradictory in nature, but they are not, as we find from the above study that both laws are supplementary to each other and one comes into the picture when one is misused. Competition law tries to offer wide varieties to the customer, and it brings the balance between the rights of the manufacturer and the customers by maximising profit with a quality product at affordable prices. IPR also allows the manufacturer to get the reward for the sole creation of the product, which in turn will help the public at large. The monopoly position offered by the IPR is prima facie not violating the competition policies, but misuse of the position can be violating the policies. 

Frequently Asked Questions (FAQs) 

What does Competition Policy deal with?

Competition Policy deals with the set of policies that encourages competition in the local as well as national markets. This eventually helps in liberalising trade policy, deregulation in the economy, and allowing foreign investments.

What does Section 4A of the Competition (Amendment) Bill, 2020 deal with?

Section 4A of the Competition (Amendment) Bill, 2020, protects the IPR holders by the provision of IPR Safe Harbour when a dominant position is misused.

What was the observation of the Raghavan Committee?

The Raghavan Committee observed that the innovations made by the people always help in developing the economic conditions. With more innovative creations, there is a rapid rise in competition at micro and macroeconomic levels. So the Intellectual Property Law has played an important role in safeguarding inventions from any exploitation. Therefore, it was concluded that innovation, as well as competition, are essential tools for the development of the market economy and the improvement of goods and services for the welfare of the consumers.

What do you mean by refusal to license?

Refusal to license means that the Intellectual Property holders of the exclusive rights may prohibit others from abusing or exploiting their legally granted limited period rights, but they are not permitted to prevent its development. The IP holders cannot impose unreasonable conditions for licensing as it would amount to a refusal to license. This refusal to license is considered as anti-competitiveness.

References

• https://www.oecd.org/daf/competition/licensing-of-ip-rights-and-competition-law.htm 
• https://www.wipo.int/competition-policy/en/index.html
• https://www.thehindubusinessline.com/info-tech/setback-for-big-tech-centre-refuses-inclusion-of-ipr-defence-in-competition-law/article66473868.ece
• http://ijlljs.in/interface-between-intellectual-property-rights-and-competition-law-indian-jurisprudence/
• https://academic.oup.com/antitrust/article/11/Supplement_1/i37/6713582