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

I. INTRODUCTION

Competition law and intellectual property law has different occupied field and enacted to cater to distinct objectives. There is a dire need to understand the smooth functioning of both laws.1 Competition law regulates those practices which have an anti-competitive effect on the 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 causes deadlock2 between the two essentially which creates an interface between two respective laws. Thus, it creates a tussle between the IPR and Competition laws that need 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 the 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 achieved 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 increases the variety of options to the consumers, and reduces 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 in coordinating prices or refusal of the license which results into competitive harm.

EUROPE

The conflict between both the laws was explicitly mentioned under Article 81 of the EC Treaty.9 There is a shift from the 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 the 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 relate 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. the combined share of all parties should not be more than 20% in the 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 analyze the issue in great detail. Every subject matter of IPR needs not to be in derogation with competition law. the IPR creates dominance but there is no reasonable inference that it leads to abuse of dominant position. to analyze such an 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 the MRTP Act with the 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 a blanket exception to IPR related licensing agreement to promote innovation in the market but it also regulates the practices which cause Appreciable Effect on Market by abusing such dominant position under Section 4.16

JUDICIAL PRECEDENTS

There are a 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 the conflict between two laws. The court observes that even though the copyright holder has a full monopoly but the same is limited in the sense that if such monopoly creates a disturbance in the smooth functioning of the market will be in violation of competition law and the same was in relation to the refusal of license. Undoubtedly, IPR owners can enjoy the fruits of their labor 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 the creation of monopolies which disturbs the economic efficiency in the market. Further, in a different jurisdiction, the same principle was reiterated.21

IV. CONCLUSION

It can indubitably be deduced that there is no conflict between the aims and objectives of both laws. both laws are promoting innovation and consumer welfare. domains of two laws have been harmoniously constructing to accomplish the middle path. a detailed discussion leads to the 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 such debatable issues, they reconciled in such a way that both laws will prevail which in results promotes innovation and consumer welfare.

Author: Naman Maheshwari, Legal Intern at IP and Legal Filings, and can be reached at support@ipandlegalfilings.com.

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