Conflict of Intellectual Property Rights in Competition Law

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[mks_dropcap style=”letter” size=”52″ bg_color=”#ffffff” txt_color=”#ba5101″]I[/mks_dropcap]PRs are essential for the innovation, creativity and diffusion of technology where as competition law is essential to prevent the anti-competitive practices. However many of the IP licensing practices like tying, grant backs and pooling are not intrinsically restrictive in nature. The restrictive practices in this particular area have been given way for the “rule of reason” approach. On other hand Competition forms the basis for the companies for earning profits. Every country’s economic structure differs from another according to the laws and regulations and the economic structure of the country. India follows a mixed economy due to which all the market structures are applicable to the country varying from one sector to another sector. Competition law is a newly emerged legislation and has been adopted by the emerging developing and developed nations to suit their market structures. All in all every country’s competition law focus on controlling the anti-competitive practices such as dumping, price fixing etc, mergers and acquisitions which are likely to have an adverse effect on the market sector and restricting those practices which are likely to restrict the free trade and economy. Innovation forms the basis for the development.

Competition Law and IPR: Historical Perspective

The competition law of India was enacted after repelling the Monopolistic and Restrictive Policy Act of 1969 by the Raghavan Committee which has been reflected in Section 66 of the Competition law of India. The three main provisions of the said Act has been reflected in the Section 3 , Section 4 and Section 5 and 6 of the act stating “Prohibition of Anti-Competitive agreement” , “ Abuses of Dominant position”  and “ Combinations” respectively. The distinguishing feature of this particular law is that abusive use of the IPRs is given no room for abusing the competition level in the market. Intellectual property protection per se is not abusive but ironically, if it dominates over the market it is only doing a legitimate job of its purpose, namely to create to incentive for further innovation. However, when companies refrain from licensing their intellectual property to competitors, they undermine the basic tenets of competition law as well as the spirit of intellectual property protection.

Nexus between IPR and Competition Law

The objective of the competition law involves two faces firstly protect consumer welfare secondly the economic freedom of market players. When a patent holder adopts any kind of anti-competitive practices, governments can adopt measures like the compulsory licensing of such technologies which has been stated in the 31(b) of the WTO Trade Related Aspects of Intellectual Property Law (TRIPs) Agreement. The various sections which speaks about forming a nexus with two laws are:

Section 3(5) of the Indian Competition Act which exempts reasonable use of such inventions from the purview of competition law,

Section 4(2) of the Indian Competition Act which makes the action by enterprises to be treated as abuse be equally applicable to IPR holders,

Section 3 of the Indian Competition Act prohibits anticompetitive practices, but this prohibition does not restrict “the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights” which have been conferred under IPR laws like Copyright Act, 1957, Patents Act, 1970, the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999), The Designs Act, 2000 and the Semi-conductor Integrated Circuits Layout-Design Act, 2000

Role of Judiciary in protecting Intellectual Property Rights

The conflict between Competition law and IPRs came before Monopolistic and Restrictive Trade Practices Commission (MRTP Commission, predecessor to the Competition Commission) in the case of Vallal Peruman and Others versus Godfrey Phillips India Limited the case stated that trademarks owner has the right to use the mark in a reasonable manner i.e. this right is subject to terms and conditions imposed at the time of grant of trademark. But it does not allow using the mark in any unreasonable way. In case, trademark owner abuses the trademark by manipulation, distortion, contrivances etc., it will attract the action of unfair trade practices of trademark. Competition policy of India, court states that “all forms of intellectual property have the potential to violate the competition”.

Intellectual property is not differentiated from other tangible properties for the purpose of competition law. So CCI can adjudicate matters relating to IPRs. The competition commission can decide constitutional, legal and jurisdictional issues except the validity of statute under which tribunal is established. In the case of Amir Khan Productions Private Limited v. Union of India, the court ruled that competition commission has the power to deal with intellectual property cases. The court laid down, “competition commission has the power to deal with intellectual property cases. What can be contested before copyright board can also be contested before Competition Commission Competition Act, 2002 has overriding effect over other legislations for the time being in force.”

In the same case, FICCI filed information against United Producers/Distributors Forum (UPDF) and others for market cartel in films against the Multiplexes. In order to raise their revenue, UPDF had refused to deal with multiplex owners. The fact that multiplex business is 100 percent dependent upon films hence, making this deal to come into the category of  refusal to deal and anti-competitive. The UPDF and others hold almost 100 percent share in Bollywood film industry. UPDF had been indulged in limiting and controlling supply of films in the market by refusal to deal with Multiplexes which is the violation of Section 3(3) of Competition Act 2002. CCI prima facie found there is anticompetitive agreement and there is abuse of dominant position also.  So CCI directed Director General (DG) to inquire into the matter. DG inquired into the matter and reported it to be cartel. CCI issued a show cause notice. UPDF instead of answering to show-cause notice, the complainant approached the Bombay High Court. UPDF contended that films are subject to copyright protection. Therefore Copyright board has the jurisdiction to deal with matter. Furthermore, contended that for exclusive license, only remedy is compulsory license available under Copyright Act. So petitioner challenges the action taken by the CCI on the ground of lack of jurisdiction. Though, the issue was discussed earlier in Kingfisher v. Competition Commission of India. Considering the importance of the matter, Bombay High Court discussed the matter in great detail. The court ruled Section 3(5) does not restrict the right of any person to sue for infringement of patent, copyright, trademark etc. All the defences which can be raised before copyright board can also be raised before CCI. Hence the competition law does not bar application of other laws.

Conclusion

Thus the TRIPs Agreement provides a basic framework of intellectual property protection as well as enforcement of anti-competitive licensing practices in intellectual property. The IPRs and competition law objectives are consistent and compatible where the competition law intervention is required only when there is an abuse of monopoly rights. It is important to notice that more than 100 countries have enacted competition laws and at the time more than 159 countries have IP laws, and both enforcing authorities must have a role in IP and competition law policy making, especially in developing countries. Moreover the conflict and the struggle over these two issues have created a hazardous situation in the pharmaceutical industry. Thus, there is a great need for guidance in the legislative framework to suit the nature of developing nations particularly for India.

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