Introduction:-

Intellectual property rights (IPR), very broadly, legal rights granted to creators and owners of works that are results of human intellectual creativity. This can be in the industrial, scientific, literary and artistic domains. They give their owners the right to exclude others from access to or the use of protected subject matter for a limited period of time. This also gives them the subsequent right to license others to exploit the innovation when they themselves are unable to engage in large-scale commercial exploitation or for other reasons.

Competition policy involves putting in place a set of policies that promote competition in local and national markets, as well as competition law, judicial decisions and regulations specifically aimed at preventing anticompetitive business practices and unnecessary government intervention, avoiding concentrations and abuse of market power.

Competition agreement that initial entry barriers and info remove monopolisation of the production process by encouraging entrance into industries by new players. The objective of competition policy includes a maximisation of a consumer and producer welfare, as well as maximising efficiency in production. Well-designed and effective competition promotes the creation of an enabling in business and government, which improves static and dynamic efficiency and leads to efficient resource allocation and in the abuse of market power is prevented mainly through competition[1].

IPR may be viewed as a mean to reduce competition since the IPIR gives the holder of a right, an exclusive monopoly while hindering others from offering the product in the market. Also IPR may used as a weapon touristy competition between licensees of a particular product. Furthermore, it may be citizen competition law and IP law share the same economic objectives. If the two laws can be interpreted in the background of a common objective, forcible conflict between these two laws can be avoided. There is a board agreement that the two system of law are complementary in their effort to promote innovation and consumer welfare[2].

The process of initiative a new competition in India was not have an expert group set up to study trade and competition policy, following the Singapore ministerial declaration of the WTO in 1996. The resultant competition act, 2002, coming into force in mere months before the expiry of TRIPS compliance period of for India can therefore be seen as India’s fulfilment to its TRIPS obligation.[3]

Conflict of IPR and Competition Policy:-

India passed the competition act, 2002 in line with the economic liberalisation of the country that has created an open market policy that was being followed in India since 1991. The act seeks to:-

 

1. 1. Prohibit anti-competitive agreements;

1. 1. Prohibit the abuse of dominant position by enterprises; and

1. 1. Regulate combinations exceeding threshold limits in terms of prescribed turnover assets.

However Section 3(5) defines a very interface between the paradigm of competition and IPR. It state that nothing contained in this section shall restrict:- the right of any person to restrain any infringement of or to impose reasonable conditions, as will be necessary for protecting any of his rights which have been all may be conferred upon him under:-

 

1. 1. the Copyright act, 1957

1. 1. the patents act, 1957

1. 1. the trademarks act, 1957

1. 1. the geographical indication of goods (registration and protection) act, 1999

1. 1. the design act, 2000

1. 1. the semi-conductor integrated circuits layout design act, 2000

India had admitted its patents acts as far back as 1970, at the same has been amended many times, the last being in 2005, so as to fully comply with the commitments made to the WTO in 1995. Section 3 of the competition act, 2002 states that no enterprise Association of enterprise or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provisions of services, which causes or is likely to cause an appreciable adverse effect on competition between India. Section 3(5) of the Indian competition act, 2002 bestowed a exemption on IPR, displaying the country’s strong commitment to protect IPR rights vis-a-vis competition[4].

The provisions of the competition act, 2002 prohibits the exercise of anti-competitive agreements by the IPR holder since they are in conflict with the competition policies. Further, the act authorises competition commission of India to penalise IPR holders who misuses the dominant position. Furthermore, section 45 of the act the commission is also authorised to penalise the parties to an anti-competitive agreement, in which contravention of section 3 of the act[5].

However, this manifestation of section 3(5) is far removed from the original recognition given by the high-level committee to the fact that all forms of IPRs have the potential to raise competition policy problems, in effect to recognise the existence/exercise distinction.[6] that apart, it has no mention of  exhaustion,, parallel importation or compulsory licensing. Owing to the exemption under section 3(5), the square peg of anti-competitive practices tethered to the use of IPRs must now be brought through the round holes of “abuse of dominant position”[7] under section 4.

The major concerns of competition law in regard to intellectual property rights and other market power that may result from granting such rights, and the detrimental effect caused by the anti-competitive exercise of IP rights. At its simplest, market power can harm consumers by setting price higher than those needs your cost-effective production. Moreover, the harm caused the market power may extend beyond this, when the protection granted forms allow them to slower or distort innovation. Under the circumstances, market power will limit the growth of productivity over time, and reduce the scope for sustainable increasing in living standards. In other words, on one hand, IP laws work towards creating monopolistic rights whereas competition law that is it. In view of this there seems to be a conflict between the objectives of both laws. [8]

In order to combat, IPR monopolies anti-competition laws of point include two major measures like parallel imports and compulsory licensing. Compulsory license is when an idea older is authorised by this date to surrender his exclusive rights over the intellectual property, under the provision of TRIPS. The import includes goods which are brought into the country without the authorisation of the appropriate IP holder and are placed legitimately into a market. Innovations has always been a causing growing economy resulting in more innovations. The advent of breast innovation gives rise to healthy competition at micro as well as microeconomic levels. IP laws help protect this innovations from being exploited unlawfully. In view of this, IP and competition laws have to be applied in tandem to ensure that the rights of all stakeholders including the innovators and the consumer or public in general are protected.[9]

The common objective of both policies to promote innovation which would eventually lead to economic development of a country however they should not be to the detriment of the common public. For this the competition authorities need to ensure the coexistence of competition policy of IP laws since the balance between both laws would result in economic as well as a consumer welfare. It is thus implicitly understood that the real issue that competition law has is not with the existence but with the exercise of IPRs.

TRIPs Agreement and Competition Law:-

Perhaps the most important characteristics of the TRIPS agreement is a room provided for flexibilities, presumably for developing countries. Given the uphill battle faced by developing countries in terms of compliance that TRIPS provisions relating to pharmaceutical products patents, plant varieties and well-known trademarks to name a few, competition law related compliance but an additional download imposed on developing countries. Constantly, the scope for exercising flexibilities exist for developing countries in these area as well[10].

There is specific, if limited mention in the text of TRIPS agreement itself to the role competition policy is expected to form a supplementing the IPR policy under the TRIPS[11].

Thus, the competitive balances sought to be attained by TRIPS are contained in the objectives and principles. First, member may, in formulating or amending their laws, adopt appropriate measures to prevent abuse of IPRs, restraint of trade or international transfer of technology. Second, is an interpretative principle in favour of adopting measures necessary for preventing monopoly abuse by IPR holders and anti-competitive licensing arrangements, which is poured into operation article 40(a lex specialis provision to general provisions in article 8.2), which establishes a regime for controlling such practices[12].

The TRIPS objective and principles is to attain competitive balances are provided in articles 7[13] and 8.2. This article sets the framework for the TRIPS agreement and have been lauded as being consistent with developing country interest.

It is only TRIPS in the WTO package that clearly recognises the adverse effect of the anti-competitive practices on trade, technology transfer and development.

The negotiating history of TRIPS reflects the concern of developing countries regarding the adverse effect of IPR related anti-competitive practice. As a result of mutual concessions, TRIPS does contain article 8.2, 31(k) and 40 provisions akin to competition rules.

The other limb of the TRIPS objectives and principles relevant to competition law is provided by article 8.2[14]. It is significant from a developing country perspective since it afford room for justifying provisions of competition law to deal with areas on which TRIPS is silent, such as an IP are abusing arising out of dominant position.

This article recognises WTO members competence to formulate or amend the domestic legislation and to adopt appropriate measures in order to prevent the interdependent kinds of IPR related practices: (i) abuse of IPRs by right holders; (ii) practice that unreasonably restrain trade; (iii) practice that adversely affect international technology transfer. Such restrictive practice cover both unilateral abuse by companies and contractual restraints on IPR-related trade.

However, due to the scope of TRIPS, article 8.2 does not apply to other potential anti-competitive arrangements with primary object that does not directly relate to IPRs, such as a merger and acquisition.

Article 40, as a lex specialis provision to article 8.2 regarding anti-competitive practices Godrej licenses, provide:

 

1. 1. members agreed that some licensing practice or conditions pertaining to intellectual property rights which restrain competition may have adverse effects on trade and may impede the transfer and dissemination of technology.

1. 1. Nothing in this agreement shall prevent members of verifying in the legislation licensing practices or conditions that in particular cases constitute an absolute of intellectual property rights having an adverse effect on competition in the relevant market. As provided above, a member may adopt, consistently with the other provisions of this agreement, appropriate measures to prevent or control such practices which may include for example exclusive Grandback condition, conditions preventing challenges to buy and coercive package licensing, in the light of the relevant laws and regulations of that member[15].

Article 40.3 and 40.4 contains procedural rules concerning consultation and cooperation between WTO member and forcing its measure regarding licensing-related competition control and other members whose national or domiciliary is alleged, under the former competition law, to engage in licensing related anti-competitive practice.

Article 40.1 acknowledges that some licensing practices or conditions are anti-competitive. Article 40.2 list exclusive grand backs, no challenge provision and coercive package licensing and anti-competitive practice in contractual licensing. The list is not exhaustive an article 40.2 states that these practices are only examples.

Article 40, by defining, also brings within its ambit activities of transactional enterprises in issuing IPR licenses and is therefore far more pathbreaking than any such prior efforts. This positive has to be said against the fact that, in essence, article 40 is morally permissive and contains no substantive indicators of conditions that is deemed to be per se anti-competitive. Under status quo, there is marked this agreement on what licensing conditions are considered per se illegal and what standards are used to decide whether a condition is in permissible or not.[16]

In an enabling sense, though, article 40 gives members the leeway to adopt “appropriate measures” to control anti-competitive practices in addition to a provision for consultation and request-based cooperation to deal with violation of competition laws. It is also evident from a plain reading of article 14 IPL on competition law are weaved in pari materiae and that competition law is seen as a second layer and which has been establishing a balance of pride and obligation relating to IPRs[17]. Further, article 40.1 is tied to these practices and conditions not only “restraining competition” but also having “adverse effect on trade and transfer and dissemination of technology”. This prompts the conclusion that, unlike the original proposal of developing countries, the restraint of competition is nonnegotiable requirement under article 40.1[18].

Under article 6, TRIPS deals with the issue of exhaustion of rights of IPR holders. It is seen as necessary in ingredient in balancing the right of IPR holder and the need of the market[19].

Situations under the TRIPS deems the issuing of compulsory licensing to be valid exercise of members power are listed in article 31 and stands as a powerful counterbalance to the potential adverse effect of strong IPR protection.[20]

Article 31 of TRIPS provide for a grant of compulsory licenses, under a variety of situations, such as:

 

• • the interest of public health;

• • national emergencies;

• • need or inadequate exploitation of the patent in the country;

• • anti-competitive practices by the patentee or they’re assigning;

• • overall national interest.

TRIPS provides ground for compulsory licensing as a remedy correcting anti-competitive practice in general IP are related anti-competitive practice in particular. Nothing in this agreement prevent W members from enacting their own laws allowing the grant of compulsory licensing together with injunction, damages, fines, etc provided the due process is respected.

Case Study:- Microsoft Case

Microsoft’s practice of tying and refusing to license its inter-operability information has been the subject of extensive legal scrutiny. The super dominant company invoked its IPRs to justify its conduct. Although US and EU competition authorities agree that both competition law and intellectual property law share the common purpose of promoting innovation and competition and enhancing consumer welfare, they conquer the principle that neither prevails over the other, and that intellectual property law does not confer an unfettered privilege toilette competition law. If a rider of dominant position in the market, the exercise of IPRs accompanied by exceptional circumstances may violate either US or EU competition law. Generally, such conduct will be scrutinised under the rule, with a focus on the possibility of a limiting competition not only the relevant market but also in the secondary market.

In Microsoft v Commission in the EU is, the first judgement by WTO member where a court invoked TRIPS competition flexibilities to justify the enforcement of domestic competition law. Although the CFI in this case did not accept the direct effect of the TRIPS agreement, the court recognises the right of WTO member to make their own interpretation by stating that:

            In any event, there is nothing in the provisions of TRIPS agreement to prevent the competition authorities of the member WTO from imposing remedies which limit or regulate the exploitation of intellectual property rights held by an undertaking in a dominant position where that undertaking exercise those rights in and anti-competitive manner. Thus ,as the commission correctly observes, it follows expressly from article 40(2) of TRIPS agreement that the members of the WTO are entitled regulate the abusive use of such rights in order to avoid effects which harm competition[21].

Conclusion:-

The incentive theory for the protection of IPR rewards the inventor by giving him a monopoly right for a limited period of time. Competition on the other hand acts against monopoly rights which are abusive in nature. Competition 6 to enhance the market conditions are more toys and competition in the market. An intellectual property right appears to against this principal leading to possible conflict between these two areas of law. Competition can play up proactive role in arresting the abuse of monopoly rights granted by IPR/at the same time IP monopolies are meant to facilitate further innovation and thereby boost further competition in the market. A dominant position in the market per se is not prohibited, but its abuse goes against competition provision.

Competition law needs to be extremely careful about how to exercise discretion under article 31 inducting compulsory licensing since the potential negative effects on R&D and new innovations are immense. Following due administrative/judicial process is an absolute must, as provided by article 31 procedure. The need of harmonising the current act with the standard for branding compulsory licenses in article 31 in the apparent, since the due regard to technical advantage the user stronghold created on the abuse of dominant position section 4. To specify concrete circumstances in the compulsory licenses should be granted or, at very least, which of the conditions in article 31 of the TRIPS are supported by competition law.

The CCI should come up with specific guidelines in dealing with cases involving both competition and intellectual property. The interaction between intellectual property and competition policy is neither conflicting Nordic it is aimed at replacing each other. The conflict arising between IPRs and competition law as stated in the above discussion arises due to monopolistic effect of the IPRs. It can be concluded that both IPRs and competition law goes hand-in-hand. As certain privileges are been given under the IPRs it is restricted by the enforcement of competition laws.

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[1]   http://www.competitionlawindia.com/scope-of-competition-law/ (Visited on 22/09/2013)

[2]   http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v1/11v1_ch11.pdf (Visited on 22/09/2013)

[3]  R. Dutta, Critical Analysis: Reflection Of IP In Competition Law Of India,

http://www.indlawnews.com/display.aspx?4674 (Visited on 22/09/2013)

[4]   Adv. Vishnu S, Conflict Between Competition Law And Intellectual Property Rights 

     http://www.articlesbase.com/intellectual-property-articles/conflict-between-competition-law-and-intellectual-   

    property-rights-3106578.html #ixzz0yxtT0wdR   (Visited on 22/09/2013)

[5]   http://www.circ.in/pdf/Backgrounder-Public_Lecture_By_Allan_Asher_29May2009.pdf  (Visited on 22/09/2013)

[6]  S.M. Dugar, Commentary on the MRTP LAW, Competition Law & Consumer Protection Law- Law,    

   Practices and Procedures: Volume 1 (2006), at 757.

[7]   M. Kochiapalli, Competition Bill in India: The Nexus with IP  

     http://spicyipindia.blogspot.com/search/label/competion%20law (Visited on 22/09/2013)

[8]  Sachin Kumar Bhimrajka, Study on relationship of competition policy and law and Intellectual property   

    rights,http://www.cci.gov.in/images/media/ResearchReports/sachin_report_20080730103728.pdf (Visited on 22/09/2013)

[9]   Paul Edward Galler , International Intellectual Property Conflicts Of Law And Internet Remedies

     http://nopr.niscair.res.in/bitstream/123456789/3620/1/JIPR%2010%282%29%20133-140.pdf  (Visited on 22/09/2013)

[10]   M. Stillwell and E. Tuerk, Towards A Full Review of The WTO’s Trips Agreement Under Article 71.1 ,   

     http://www.ciel.org/Publications/Assessment_Trips_article711.pdf (Visited on 22/09/2013)

[11]   Unctad-Ictsd, Resource Book On Trips And Development (2005), at 543-546.

[12] T.T. Nguyen, and H.H. Lidgard, TRIPS COMPETITION FLEXIBILITIES,

    http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=1528251&fileOId=1528252  (Visited on 22/09/2013)

[13]   Article 7 reads: “The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.”

[14]   Article 8.2 states: “Appropriate measures, provided they are consistent with the provisions of the Agreement,  may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.”

[15]   Articles 40.1 and 40.2 of TRIPS Agreement (emphasis added).

[16]  J. Watal, Intellectual Property Rights In The WTO And Developing Countries (2001), at 305.

[17]   C.M. Correa, Review Of The Trips Agreement: Fostering The Transfer Of Technology To Developing  Countries, http://www.twnside.org.sg/title/foster.htm   (Visited on 22/09/2013)

[18]  C.M. Correa, Trade Related Aspects Of Intellectual Property Rights: A Commentary On The Trips Agreement (2007), at 399

[19]   A.K. Koul, The General Agreement On Tariffs And Trade (Gatt)/World Trade Organization (WTO): Law, Economics And Politics (2005), at 460

[20]   J. Watal, Intellectual Property Rights In The WTO And Developing Countries (2001), at 380-381

[21]   Microsoft v. Commission, [2007] ECR II-3601