The Debate Between IPR and Competition Law Explained

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There are various market processes or structures that govern market scenario. For simplicity, this paper focuses on two mechanisms: free-market operation and regulated market operation. In a country with a free-market operation, products’ prices are set freely by consensus between buyers and sellers. They are free from any interference from the government or any other regulatory mechanisms. In a regulated market economy, as it can be deduced from the name itself, that various regulatory authorities govern it. The legislation is one of the main components of the regulatory framework, which, in its areas concerned, seeks to balance the free play of monopoly rights and the interests of society.

What exactly is the conflict about?

The relationship between competition law and intellectual property rights (IPR) has been one of the most debated issues in recent years. Competition law has been seen as the most effective mechanism for countering anti-competitive agreements, prohibiting abuse of dominant position, regulating mergers and combinations, and providing an efficient allocation of resources for the benefit of consumers at the end of the day, providing them with wider choices, better quality products at a reasonable price.

Intellectual Property Rights are the vouchers for finding a balance between the owner’s proprietary rights and the common interest. It ensures that the intangible property owner has an exclusive right to gain monopoly rights to exploit his intellectual creation commercially. IPR consists of a bundle of rights that gives the owner the right to exclude others from accessing the product, subject to a limited period.

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IPR is typically used as a tool to establish exclusive monopoly rights to the holder and deter other players from offering the products in the same market, which reduces competition in the market and led to the development of disputes between objectives of both the law. IPR is based on the principle of incentive theory, i.e. the incentive that the inventor has revealed to society at large, which further strengthens the bone of contention. However, by observing the objectives, there is an undisputed view that each legislation promotes consumer welfare and innovation. Competition law shall be enforced to prevent the misuse of the monopoly power given under a statute that is widely distinguished before such legislation is enacted to regulate monopoly power exploitation.

How does India deal with this conflict?

The Competition Act, 2002, has recognized the intentions of the IPR when framing provisions and does not abolish the market power gained by an individual as a result of such intellectual property rights. The 2002 Competition Act 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 MRTP Act’s dispute with the inclusion of vigorous Provisions and in compliance with TRIPS. Section 3 talks about anti-competitive agreements but section 3(5) talks about the interface between the laws which provides a blanket exception to IPR related licensing agreement to encourage innovation in the market. It also regulates the practices which cause an impact on the market by abusing such dominant position under Section 4.

Relevant Case Laws 

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In Entertainment Network (India) Limited v. Super Cassette Industries Ltd, the Supreme Court reiterated the discrepancy between the two rules. The Court observes that even if the copyright holder has a full monopoly, but if the same is limited and causes monopoly and disturbance in the smooth functioning of the market, it would be in violation of competition law.

Undoubtedly, IPR owners will enjoy their labour’s fruits by granting royalties, but the same is not absolute. In Union of India v. Cyanamide India Limited & Another, the Court held that charging high prices for life-saving drugs falls within the limits of price regulation and that CCI has jurisdiction over such matters. In the event of a shortage of substitutes, there is always a risk of monopolies, which disrupts the economic efficiency of the market. Also, the same principle was reiterated in various jurisdictions.

Conclusion

The theory of Intellectual Property Law and Competition Law is based on the fact that IPR is a right. Simultaneously, competition law is a regulation that serves as an artificial handover of business operations. IPR is something that the State grants to the inventor, or it is a reward that the State grants to the maker of every product to exploit its production for a limited period economically.

It seems like these two rules are contradictory, but they are not, as we can see from the above analysis, complementary to each other by backing up when one is violated. There should be no question that there is no inconsistency between the aims of both the legislation. All legislations encourage creativity and consumer welfare. The realms of the two laws were built in a harmonious way to accomplish the middle course. A thorough debate leads to a dispute between the two laws that cannot be resolved in isolation.

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Although they are parallel to each other, their priorities align with each other. Despite such a contentious issue, they have reconciled themselves so that both laws will prevail, which, in turn, promotes innovation and consumer welfare. IPR also aims to reward the producer as the product’s sole maker, which could also favor the public. The dominant position offered by IPR is in itself not a breach of competition laws, but a misuse of that position is. In short, it can be inferred that all of these rules have a similar purpose, but there are different ways of achieving them.


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