India: Conflict Between Intellectual Property Law And Competition Law: Critical And Comparative Analysis

Last Updated: 21 May 2019
Article by Naman Maheshwari

Competition law and intellectual property law has different occupied field and enacted to cater distinct objectives. There is a dire need to understand the smooth functioning of the both the laws.1 Competition law regulate those practices which has anti-competitive effect on market and thus hampering the smooth functioning of the market. On the other hand, IPR talks about the exclusive monopoly right to the holder. The non-excludable character that has been created by IPR that causes deadlock2 between the two essentially which creates interface between two respective laws. Thus, it creates a tussle between the IPR and Competition laws which needs to be resolved cordially.

IPR is usually used as a tool to create exclusive monopoly rights to the holder and thus deterring other players from offering the products in the same market which reduces competitiveness in the market and led to creation of conflict between objectives of both the law. IPR is based on the concept of reward theory means the reward the inventor3 who has disclosed to the society at large which further intensifies the bone of contention. However, by observing the objectives there is an undisputed opinion that both the laws promote consumer welfare and innovation.4 Competition law is enacted to avoid the misuse of the monopoly power granted under the statute which is widely traced in different before enacting such legislation to control abuse of monopoly power. The Competition Act, 2002 has widely accepted the intentions of IPR while framing provisions and it does not eliminate the dominance achieve by an individual due to such Intellectual Property Rights.5 Thus, a balanced approach is required to harmoniously construct both the statute and to clarify much upon that different jurisdictional opinion has to be taken into consideration.

II. COURT'S OPINION IN DIFFERENT JURISDICTION

UNITED STATES

The traditional notions relating to IPR laws is that they create exclusive monopolies in the market and thus antithetical to antitrust practices.6 But, with the advancement of jurisprudence on Intellectual Property Laws it was inferred that such reward theory provides substitute products and technologies to the people and increase the variety of options to the consumers and reduce the anti-competitive practices in the market.7 The Department of Justice has created "SAFETY ZONE"8 which provides no imposition of any restriction on the IP Licensing agreement unless and until it creates any appreciable adverse in the market by way of patent pooling which results into coordinating prices or refusal of license which results into competitive harm.

EUROPE

The conflict between both the laws was explicitly mentioned under Article 81 of EC Treaty.9 There is shift from liberal approach to the intervening approach in the IPR related licensing agreement in European Courts.10 Article 82 deters abuse of dominant position created through IPR licensing agreement.11 Two block exemptions were provided in regards to IPR licensing agreement concerning anti-competitive activities. 1st Block exemption was in relation to "specialized agreement" that discourses on the IPR dispensed in year 2000.12 Such specialization agreement was exempted with certain compliances i.e. both the parties do not have more than 20% share and such agreement does not related fixing of prices or output or territorial jurisdiction of Retailers.

2nd Block of exemptions relates to "Technology Transfer" which was dispensed in the year 2004.13 It regulates matter related to patent, know-how, copyright concerning with rule of anti-competitiveness with certain compliances i.e. combined share of all parties should not be more than 20% in relevant market and individual share does not exceed 30% and such licensing agreement is free from severe anti-competitive restraint.

III. STUDY OF SUCH CONFLICT FROM INDIA'S PERSPECTIVE

With the advancement of jurisprudence pertaining to harmoniously construct both the laws it is necessary to critically analyses the issue in great detail. Every subject matter of IPR need not be in derogation with competition law. the IPR creates dominant but there is no reasonable inference that it leads to abuse of dominant position. to analyze such issue, we have to go in depth to the statutory framework and judicial precedents.

STATUTORY FRAMEWORK

The Competition Act 2002 was enacted on the pedestal of economic efficiency and liberalization. it promotes social, economic and political justice for the people. Competition law was enacted to fulfill the mischief created by MRTP Act with inclusion of vigorous Provisions and in compliance with TRIPS.14 Section 3 talks about anti-competitive agreements but section 3(5)15 talks about the interface between the laws which provides blanket exception to IPR related licensing agreement to promote innovation in the market but it also regulates the practices which causes Appreciable Effect on Market by abusing such dominant position under Section 4.16

JUDICIAL PRECEDENTS

There are plethora of cases observing the interface between IPR and Competition laws. In the Aamir Khan Productions Pvt. Ltd. v. Union of India,17 the Bombay HC held that CCI has jurisdiction to hear all the matters vis-à-vis competition law and IPR. CCI also held that IPR related right is not sovereign in nature but merely a statutory right granted under a law.18

In Entertainment Network (India) Limited v. Super Cassette Industries Ltd,19 the Supreme Court reiterated on the issue related to conflict between two laws. The court observes that even though the copyright holder has full monopoly but the same is limited in the sense that if such monopoly creates disturbance in smooth functioning of the market will be in violation of competition law and same was in relation to refusal of license. Undoubtedly, IPR owners can enjoy the fruits of their labour via royalty by issuing licenses but the same is not absolute.

In Union of India v. Cyanamide India Limited &Another,20 it was held by the court that charging excessive prices on life saving drugs is within the ambit of price control and CCI has jurisdiction over such matter. In case of scarcity of substitutes there is always a peril of creation of monopolies which disturbs the economic efficiency in the market. Further, in different jurisdiction same principle was reiterated.21

IV. CONCLUSION

It can be indubitably be deduce that there is no conflict between the aims and objectives both the laws. both the laws are promoting innovation and consumer welfare. domains of two laws have been harmoniously construct to accomplish middle path. a detail discussion leads to a conclusion that the conflict between two laws can't be accomplished in isolation. even though they are parallel to each other but their objectives are converging with each other. Despite of such debatable issue they reconciled in such a way that both laws will prevail which in results promotes innovation and consumer welfare.

Footnotes

[1] K.D. Raju, "The Inevitable Connection between Intellectual Property and Competition Laws", Journal of Intellectual Property Rights

[2] Id at 10

[3] Holyoak & Torreman, Intellectual Property Law, Oxford University Press, 2008.

[4] Atari Games Corp v. Nintendo of Am Inc, 897 F.2d 1572, 1576 (Fed Cir 1990).

[5] Case No. 04/2015, Best IT World India Private Limited v. M/s Telefonaktiebolaget L M Ericsson (Publ) (CCI).

[6] US Department of Justice and the Federal Trade Commission, 'Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition' (2007)

[7 ] Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28 (2006).

[8] US Department of Justice and the Federal Trade Commission, "Antitrust Guidelines for the Licensing of Intellectual Property", April 1995.

[9] Article 81, European Union, Treaty Establishing The European Community, Available at: http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12002 E081: EN:HTML (Last accessed 14 April 2019)

[10] A. Jones & B. Suffrin, EC Competition Law: Text, Cases and Materials, 2008, p. 777.

[11] Id. at p. 773.

[12] Article 1(2), Commission Regulation (EC) No 2658/2000 of 29 November 2000.

[13] Commission Regulation (EC) No 772/2004 of 27 April 2004.

[14] The Institute of Chartered Accountants of India, "Competition Laws and Policies" (2004), p. 129.

[15] R. Dutta, "Critical Analysis: Reflection of IP in Competition Law of India", at: http://www.indlawnews.com/display.aspx?4674 (Last accessed 14 April, 2019), p.133.

[16] T Ramappa, Competition Law in India: Policy, Issues and Developments, The University Press, New Delhi, 2011, p.24.

[17] (2010) 112 Bom L R 3778.

[18] Kingfisher v. Competition Commission of India, Writ petitions no. 1785 of 2009.

[19] 2008(5) OK 719.

[20] AIR 1987 SC 1802.

[21] United States v. Microsoft, 38 1998 WL 614485 (DDC, 14 September 1998).

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