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INTERFACE BETWEEN IP AND COMPETITION LAW



About the Author: Aditya Vikram Singh is a student of 5th year at Institute of Law Nirma University.


It is considered that, IPR and Competition laws works in different realms and sometimes contradicts each other. The IPR law provides monopoly to individual against some innovation. Competition law on the other hand, strives toward curbing the abuse of monopoly. The tension between the two arise because of non-exclusionary nature of the IPR law. Moreover, the recent cases involving the two laws suggests that, the scope of both are converged towards each other.

The aim of the IPR law give exclusive rights to the inventors for some time. So that the inventor can recuperate his research and development investment. Thus, the innovation can be encouraged. While the competition law is the mechanism to control the misuse of monopoly, market from distortion. The aim of the competition law is to promote efficiency and curb anti-competitive practices, to improve economy and consumer welfare.

The idea of IPR law is to give exclusive rights as incentive and thus promote innovation. This will be beneficial for future market by attracting more contributions and competition. It will also improve dynamic efficiency. Further, the competition also promote competition for innovation as the companies tries to gain first mover advantages, learning curve advantages and to gain IPRs. Thus, it is clear that both laws strives toward promoting innovation and consumer welfare.

Since both the laws are in consistence with each other, one of the major issue which arise is that, if any case arise involving both the laws, then which forum will be considered to be the appropriate forum. The Competition regulator will try the case or the IPR regulator. Various jurisdiction have come up with different solutions to the issue.


Trips

There are two preventive measures taken to curb the misuse of IPR

(i) Compulsory licensing- It is a contract enforced by the government even if the patentee is not willing to sell or contract the product with the willing buyer. Avccording to article 31 of TRIPS it is granted in three situations (a) in the interest of public(b) National emergency (c) Anti-Competitive Practices

(ii) Parallel Imports- when patented or copyrighted goods are brought in market of different country without the permission of IPR holder when it was placed in the market of other country. It works on the Doctrine of exhaustion that, once the product is placed in the market then the IPR right on that batch of the product is exhausted.

The authorities dealing with competition policy regulation must look at every IPR case by applying rule of reason approach. Moreover, the laws related to abuse of dominance can also be applied this will lessen high potential cost related to reducing motivations to innovate.

The coexistence of these two laws raise the question of jurisdiction during the overlap of two laws. Whether the IP forum will be appropriate or the dispute will be tried by the Competition Authorities. Since there is overlap between the two laws then, the statutes related to them must be harmoniously constructed to come up to solution. To understand the same the regimes of different jurisdictions must be taken into consideration.


United States

It is the traditional belief that the IPR protection causes monopoly and thus it is against the Antitrust Law. It was later evolution of jurisprudence which suggested that the reward theory in IPR promotes innovation and thus leads to more substitutes which again results in diverse alternatives and which in turn results in increased competition in market. Moreover on the issue of overlap, in the case of Kodak and In re Independent service organization the court reiterated the principle that IPR does not give unrestricted right to violate the Anti-trust laws. By this the court have tried to remove the contrast of overlapping jurisdiction. If Anti-Trust law has been violated by an IPR holder then the jurisdiction would lie with the competition forum till the extent the principle of Anti-Trust is involved. Further, it was held in the case of United States v. Microsoft, all the laws will applied generally to the IPR laws and IPR holder and they are not provided with any immunity from Anti-Trust laws. In the case of FTC v. Actavis the Supreme Court applied the rule of reason. It was found by the court that ―exclusionary potential of the patent could not protect the agreement from antitrust attack.

It is evident from the precedents that US is continuously making a balance between the two areas of laws. The judicial precedents suggests that the IPR protections are subjected to Anti-trust law if any Anti-Competitive practices takes place due to the same.


European Union

Article 81 (presently Article 101) TFEU suggests about the conflict between the Antitrust and IPR laws. Abuse of dominant position by IPR licensing agreement is prohibited by Article 82. ECJ has clearly distinguished between the grant of IPR and the exercise of IPR rights and has held that the IPR owner can be restricted from the use of IPR till the extent it is restricting Treaty prohibition on anti-competitive agreements.

In the previous times, EC was having very restricted say in the matters of IP having antitrust issues. Article 101(1) and 102 were not comprising IPR issues until some IPR was in question due to specific Anti-trust restriction. In the very first case of Parke, Davis and Co v Probel the ECJ held that the commission have jurisdiction to take cognizance of the cases when the patent protection is being abused to destruct market conditions. Further in the case of Microsoft v. commission the court has held that the dominant entity have “a special responsibility, irrespective of the causes of that position, not to allow its conduct to impair genuine undistorted competition on the common market”. Therefore if the IPR given would be abused then EC jurisdiction will be attracted.


India

The interface between the two regimes can be seen by giving a glance to both the laws. When the Patents Act and the Competition act are taken together then it can be seen that the even when both are separate, they seek the same objectives such as consumer welfare, promote and protect innovation and prevent market from distortive forces. The competition law restrict the market players from entering into anti -competitive practices. The patent Act also aims to restrict the IP owner from doing anti-competitive practices as it provides for Compulsory Licensing so that the IPR holder cannot misuse the Rights.

Agreement with restrictive conditions are made void by the virtue of section 140 of the patents act. According to the section 18 of the Competition ACT, CCI has the duty to eliminate practices, which cause AAEC in the market, encourage and endure competition, protect the interests of consumers and ensure freedom of trade carried on by other participants in market. Section 60 and 62 respectively provides for the overriding effect and harmonious construction of the Competition Act. Thus anything which is specifically mentioned in the Competition Act then it will have an overriding effect on any other enactments at the time being.

Thus, both the acts shows some level of inconsistency with each other and thus there will be overlap in the jurisdiction of the two acts because objective of the two acts are same. None of the two provides for any forum in which the overlapped disputes can be taken.

There is lack of jurisprudence on the matter of overlap between IPR and Competition laws which can be seen by analyzing the related cases.

In the case of Aamir Khan Production v Union of India which is considered as the first case with interface of IP and Competition law, the High Court of Bombay has held that, CCI will have the jurisdiction in the cases concerning with copyright having some direct violation of Competition Act. The court said that, “every tribunal has the jurisdiction to determine the existence or otherwise of the jurisdictional fact, unless the statue establishing the tribunal provides otherwise. On a bare reading of the provisions of the competition act it is clear that CCI has the jurisdiction to determine whether the preliminary state of facts exists”.

In FICCI Multiplex Association of India the court, by the virtue of section 3(5) made it very clear that the Competition Act does not prevent any entity from taking the matter of anticompetitive practices by any IP Right holder to the Competition Commission. The non-obstante clause of section 3(5) will not be applicable if the party id engaged in any restricted trade practice hampering consumer welfare or the market, while using his IP Right. The CCI observed, “Intellectual property laws do not have any absolute overriding effect on the competition law. The extent of the non obstante clause in section 3(5) of the act is not absolute”. It was also held that the section 14 of the Copyright Act does not permit the IP holders to do such acts which are in violation of the Competition Act.

In the case of Ericsson v. Competition Commission of India. Ericson was engaged in unfair and discriminatory pricing for its standard essential patents and argued that, there are enough remedies in Patent Act and thus CCI has no jurisdiction to try the case.

Delhi High Court held that, the remedies available under section 27 of the competition Act and section 84 of the patent act, are not mutually exclusive. Thus, it cannot be said that CCI do not have jurisdiction in the matter. Moreover the Civil Court or the Controller of Patents do not have jurisdiction to try a competition matter. The jurisdiction of CCI will be limited to the issue of abuse of dominance by Ericson.

Thus the judgement have maintained a balance between the jurisdiction of the two statutes while dealing with the issues containing overlap of IPR and Competition Law.


Conclusion

The IPR and the competition laws cannot be seen in isolation as they are complementary to each other both the law aims toward consumer welfare and promotion of innovation. A balanced approach is required while deciding the issues of overlap of IPR and Competition Law. The courts in US and EU have formulated a balanced approach. There is a long way to reach that approach in India as the courts have not taken the task to clear the muddle on the issue of overlap. It was expected from the Ericson judgement but it did not emphasized on the whole act. Rather only section 24 and 87 of the two acts were considered. Some pointed guidelines must be there on the jurisdiction of CCI. Which IP cases can be considered by it and which cannot, shall be made clear. The overlap in the statutes and the jurisdictions must not hinder justice.

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