India's economic landscape has witnessed a significant transformation in recent decades, characterized by the rapid growth of innovative industries and the increasing importance of intellectual property rights (IPR). Simultaneously, the nation has been vigilant in maintaining a competitive market through its robust competition law framework. This article delves into the complex interplay between competition law and intellectual property rights in India, examining how these two areas of law coexist and sometimes clash.
India has been diligent in promoting innovation and protecting intellectual property rights through various legislative mechanisms. However, it's equally committed to fostering a competitive marketplace. The country's competition law framework and relevant case laws demonstrate a commitment to preventing anti-competitive practices. The relevant sections of the Competition Act, 2002, and key intellectual property laws in India that pertain to the interplay between competition law and intellectual property rights in India are discussed herein below.
The primary objective of the Competition Act of 2002 is to promote fair competition and prevent anti-competitive practices in the Indian market. The law identifies and prohibits practices such as cartels, abuse of dominant positions, and mergers that may substantially lessen competition.
- Section 3 [Anti-Competitive Agreements]: It prohibits agreements (including those related to IP rights) that cause or are likely to cause an appreciable adverse effect on competition in India. Subsection (g) to Section 3(5) was inserted vide Competition (Amendment) Act, 2023, to protect rights of the individuals under any other law for the time being in force relating to the protection of other IPR
- Section 4 [Abuse of Dominant Position]: It includes instances where dominant entities use their IP rights such as rights in patents to engage in anti-competitive practices.
- Section 19(3) [Factors for Determining Abuse]: These factors may include issues related to IP rights.
- Section 20(4) [Regulation of Combinations]: This section deals with combinations (mergers and acquisitions) and their impact on competition. It may be relevant in cases where intellectual property assets are involved in mergers or acquisitions.
IP Rights encompass patents, copyrights, trademarks, and trade secrets. These rights incentivize innovation by providing creators and inventors exclusive rights to their creations for a specific period. In India, these rights are governed by various statutes, including the Patents Act, 1970, the Copyright Act, 1957, and the Trade Marks Act, 1999.
- The Patents Act, 1970: Section 83 & Section 84 [Compulsory Licences] – Compulsory licensing play a significant aspect of balancing IP rights and competition.
- The Copyright Act, 1957: Section 31 [Compulsory License in works withheld from Public] – Covers compulsory licenses for copyright, allowing for fair use and access in specific situations.
- The Trade Marks Act, 1999: Section 29(4) [Infringement of registered trade marks] – Addresses cases of trademark infringement, which may intersect with competition law when it involves unfair competition practices.
- The Designs Act, 2000: Section 22 [Piracy of registered design] – Discusses the registration of designs, which may have implications for competition in industries where product design is a crucial element.
- The Geographical Indications of Goods (Registration and Protection) Act, 1999: Section 11 [Application for Registration] – Pertains to the registration and protection of geographical indications, which can influence competition in markets where these indications are relevant. However, there is no specific provision in the act to safeguard anti-competitive practices.
These sections of the law provide the legal framework for addressing issues at the intersection of competition law and intellectual property rights in India. They offer guidance for competition authorities, courts, and businesses on how to navigate disputes and maintain a balance between protecting intellectual property and ensuring fair competition in the market.
The Intersection of Competition Law and Intellectual Property Rights
The intersection of competition law and IPR in India is where things get intriguing. Interaction between both – competition law and IPR in India is complex due to their inherent tensions. On one hand, IPR protection encourages innovation and rewards the inventors and creators for their efforts. On the other hand, the exclusive rights granted under IPR can lead to monopolistic practices. Balancing these interests is a delicate task. IP rights are designed to incentivize innovation by granting exclusive rights to inventors and creators. However, these exclusive rights can potentially lead to monopolistic behavior that hampers competition. Striking the right balance is challenging.
Patent Law and Antitrust Regulations – A key aspect of patent law and antitrust law is the unilateral right of the patent holder and antitrust protections. Patents grant their holders the exclusive right to make, use, and sell their inventions for a certain period, typically 20 years from the date of filing of patent application. This exclusive right is the core part of the patent grant and allows the patent holder to exclude others from using their patented technology without permission. However, antitrust laws are in place to prevent anti-competitive behavior and promote fair competition. In the context of patents, unconditional, unilateral refusals to license (meaning the patent holder refuses to license their technology to anyone) are generally considered within the patent holder's rights. This is because patents are essentially a government-granted monopoly for a limited time, and patent holders are not obligated to license their technology to others. Conditional refusals to license that cause competitive harm, on the other hand, may be subject to antitrust liability. For example, if a patent holder has a dominant position in a particular market and refuses to license their technology to competitors in a way that harms competition and consumers, antitrust authorities may intervene.
Copyright Law and Antitrust Regulations: Copyright law grants creators exclusive rights to their original works for a limited period. This exclusive right, while protecting creators' interests, can also lead to a monopoly on certain content. When copyright holders abuse this monopoly power to stifle competition, it can raise antitrust concerns1. Similarly, doctrine of 'fair use' under copyright law allows limited use of copyrighted material without permission for purposes such as criticism, commentary, and news reporting. Competition law may come into play when copyright holders misuse copyright claims to suppress fair use or hinder competition, especially in cases involving transformative use of copyrighted works2. Copyright holders often enter into licensing agreements to grant others the right to use their copyrighted material. These agreements can have competitive implications, especially when they involve exclusive licenses that may restrict competition or reduce consumer choice. In such cases, Antitrust authorities may scrutinize such agreements for anti-competitive behavior. Copyright holders should not engage in anti-competitive practices such as price-fixing, market allocation, or exclusionary conduct that harms competition and leads to abuse of dominant position. This may trigger antitrust investigations and enforcement actions3.
Trademark Law and Antitrust Regulations: Similarly, Trademark law grants the holder exclusive rights to use a particular trademark in connection with specific goods or services. While these exclusive rights are crucial for brand protection, they may raise competition concerns when used to create an unjustified monopoly in the market. In Bayer AG v. United Drug Co. Ltd. (UK)4, the court considered the potential anti-competitive impact of granting injunction over the mark 'aspirin', as it could maintain a monopoly in the market. The court observed that, if the plaintiff (trademark holder) is allowed a monopoly of the word as against consumers, it will deprive the trade in general.
Some of the instances of intersection between competition law and IPR in India are as below:
- Abuse of Dominant Position: Companies with substantial IP portfolios, especially in sectors like pharmaceuticals and technology, may misuse their dominant positions to thwart competition. Indian competition authorities have been active in investigating such cases and imposing penalties when necessary. In Novartis Case5, the Supreme Court of India in order to promote healthy competition in the pharmaceutical market, denied Novartis patent for cancer drugs and paved the way for generic companies to make cheap copies of cancer medicine in the developing world. The Supreme Court in its judgement made clear that India is a developing country and the availability of medicines at a cheaper rate is necessary for the lives of 1 billion people.
- Standard Essential Patents (SEPs)6: The use of SEPs, which are critical for implementing industry standards (e.g., 5G technology), can raise issues of anti-competitive behavior when patent holders refuse to license them on fair, reasonable, and non-discriminatory (FRAND) terms. Ericsson v. CCI Cases (2013 – 2016): Micromax7 and Intex8 filed complaints with the Competition Commission of India (CCI) against Ericsson, which has a large portfolio of Standard Essential Patents (SEPs) in respect of technologies that are used in mobile handsets, alleging that Ericsson was refusing to license its SEPs on FRAND terms. The CCI found Ericsson had not adhered to FRAND terms and directed , emphasizing the importance of fair licensing practices for SEPs. These instances highlighted the CCI's commitment to scrutinizing potential anti-competitive behaviour by dominant players in the technology sector. Jurisdiction of CCI in passing such orders was challenged by Ericsson before Hon'ble Delhi High Court. However, the Delhi High Court affirmed the jurisdiction of CCI in patent cases9. The Hon'ble Delhi HC had observed that there exists no "irreconcilable conflict" between the Competition Act and the Patents Act, and that the Competition Act is not to the exclusion of the Patents Act, and vice versa.
- Patent Holdup and Holdouts: Patent holdups occur when a patent holder demands higher royalties or imposes unfair licensing terms. In such scenarios, the CCI may investigate the issue and impose penalties. Further, settlements in patent infringement disputes often involve complex agreements between originators and generic pharmaceutical companies. The CCI has scrutinized these settlements to ensure they do not unduly delay market entry of generic medicines.10
- Compulsory Licensing: Indian law allows for compulsory licensing of patents under certain conditions, such as when a patented invention is not being adequately exploited. This promotes access to essential medicines and technologies while limiting patent holders' monopolistic power. While it promotes competition, it also raises concerns about the potential devaluation of intellectual property rights. In Bayer Corporation Vs. Union of India and Others (India's first compulsory licensing case), Natco Pharma Limited, filed a request for compulsory license against Bayer's patent before the Controller of Patents and requested the compulsory license based on Section 84 (1) of the Indian Patent Act of 1970, as amended in 2005. The Controller allowed Natco's request and IPAB upheld the decision of the Controller of Patents to grant India's first compulsory license and elaborated the grounds and conditions for compulsory licenses11.
- Application of Law: In a crucial ruling, a division bench of Delhi High Court quashed antitrust proceedings initiated by CCI against Monsanto and Ericsson and held that the Patents Act is a special law, and any issue related to a patentee's exercise of its patent rights should be addressed exclusively under the patent law rather than the Competition Act of 200212.
The above referred case laws demonstrate the evolving jurisprudence in India, reflecting the delicate balance between protecting IP rights and ensuring fair competition. They serve as pivotal examples of how competition authorities and courts navigate the complex relationship between these two areas of law in India's legal landscape.
Notable cases like Ericsson v. CCI and Novartis Case illustrate the real-world challenges. They underscore the importance of fair licensing practices for SEPs and the need to safeguard access to essential medicines while addressing anti-competitive behavior.
Similarly, Standard Essential Patents (SEPs), especially in the technology sector, are crucial for the development of new products and services. Balancing the protection of SEPs with ensuring fair and non-discriminatory licensing terms is vital to prevent anti-competitive practices. Indian competition authorities have shown a willingness to scrutinize SEP-related disputes.
As India continues to evolve economically and technologically, the interplay between competition law and IP rights will remain a dynamic field. Emerging technologies like AI, biotechnology, and digital platforms will present new challenges and opportunities, demanding constant adaptation of legal frameworks.
Balancing competition law and IP rights is essential for fostering innovation, economic growth, and consumer welfare in India. The nation's legislative framework, along with a proactive competition authority, has made significant strides in addressing these challenges. However, ongoing vigilance, adaptation, and nuanced decision-making will be crucial to navigating this intricate intersection effectively. Finding the equilibrium between protecting intellectual property and ensuring a competitive market will remain a central challenge in the years to come.
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1. U.S. V. Microsoft (https://www.justice.gov/atr/us-v-microsoft-courts-findings-fact)
2. Google LLC V. Oracle America, Inc. (https://www.supremecourt.gov/opinions/20pdf/18-956_d18f.pdf)
3. IMS Health GmbH v NDC Health GmbH (https://unctad.org/ippcaselaw/sites/default/files/ippcaselaw/2020-12/IMS%20Health%20v%20NDC%20CJEU%202004.pdf)
5. Novartis AG v. Union of India, (2013) 6 SCC 1
6. Standard Essential Patent is a patent which must be used to comply with a technical standard. There is no alternative to such patents in order to achieve specific technical standard.
7.  CCI 77
8.  CCI 10
9. 2016 SCC OnLine Del 1951 and 2020 SCC OnLine Del 598
11. 2013 SCC OnLine IPAB 25
12. Monsanto Holdings Private Limited & Ors Vs. Competition Commission Of India & Ors., (NEUTRAL CNO.:2023:DHC:4783-DB CASE NO.:LPA 247/2016 JUD. DATE:13-07-2023)
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