Ipr and competition laws

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THE RELATIONSHIP BETWEEN COMPETITION LAWS AND

INTELLECTUAL PROPERTY RIGHTS .

BY ABISHEK RAMAN



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

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Objectives of competition laws

• I. To check anti-competitive practices• II. To prohibit abuse of dominant position• III. Regulation of combinations.• IV. To provide for the establishment of CCI, a quasi-

judicial body to perform below mentioned duties: 1) Prevent practices having adverse impact on competition 2) Promote and sustain competition in the market 3) Protect consumer interests at large 4) Ensure freedom of trade carried on by other participants in the market and look into matters connected therewith or incidental thereto.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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Nature and intent of intellectual property rights

• Intellectual Property Rights provide exclusive rights to the holders to perform a productive or commercial activity. But this does not automatically include the right to exert restrictive or monopoly power in a market.

• Intellectual property right is an exception to the general rule promoting free competition. The protection is not meant to continue even after the objectives of Intellectual property right have been achieved.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

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• In cases where Intellectual property right is unable to prevent the extension of such power beyond the realm of the intended protection, competition laws are capable of playing this limiting role.

• Hence the attitude of competition law to Intellectual property right is not hostile. It acts in a complementary manner to ensure that the inherent purpose of the rights is not defeated.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

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Application of competition laws to IPR

• When the Intellectual property right owner exceeds the essential function for which the right is granted like the protection of innovators’ achievements against free-riders and protection of the firm’s reputation and identity, competition laws may curtail such abuse and restrict the owner from such exercise of his rights.

• Therefore competition laws maybe applied in the following areas with respect to IPR’s namely:

1) Extent of derived market power 2) Abuse of such market power 3) In Licensing agreements entered by the owners



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

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• Section 3(1) of the competition act refers to Anti-competitive agreements, according to this act :

No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. Any agreement entered into in contravention of the provisions contained above shall be deemed to be void.

case law : kingfisher airlines vs. The competition commission of India



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

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Any agreement entered into between enterprises or associations of

enterprises or persons or associations of persons or between any person

and enterprise or practice carried on, or decision taken by, any association

of enterprises or association of persons, including cartels, engaged in

identical or similar trade of goods or provision of services, which:

(a) directly or indirectly determines purchase or sale prices;

case law: Singhania & partners vs. Microsoft corp. pvt. ltd

(b) limits or controls production, supply, markets, technical

development, investment or provision of services;



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



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(c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

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• the Competition Act, 2002 deals with the applicability of such prohibition relating to anti-competitive agreements to IPRs through section 3(5), an express provision to the section which provides that nothing contained in this section shall restrict-

• (i)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 or may be conferred upon him under-

(a) The Copyright Act, 1957; (b) The Patents Act, 1970;



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



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(c) The Trade and Merchandise Marks Act, 1958 or the Trade Marks Act, 1999; (d) The Geographical Indications of Goods (Registration and Protection) Act, 1999; (e) The Designs Act, 2000; (f ) The Semi- conductor Integrated Circuits Layout- Design Act, 2000;

• (ii) The right of any person to export goods from India to the extent to which the agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for such export.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

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• Section 3(5) of the Act declares that “reasonable conditions as may be necessary for protecting” any intellectual property right will not attract the implications of section 3 of the competition act, 2002.

• The expression “reasonable conditions” has not been defined or explained in the competition act. By implication, unreasonable conditions that attach to an intellectual property right will attract the implications under section 3 of the act.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

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WEBSITE

www.altacit.com

The following are certain types of conditions or arrangements involved in the arena of intellectual property rights that are considered as unreasonable or beyond the scope of the bundle of rights that maybe derived from such intellectual property rights:

1) Tie-in arrangements Tie-in arrangement is a type of such restrictive practice wherein a licensee may be required to acquire particular goods (unpatented materials e.g. raw materials) solely from the patentee, thus foreclosing the opportunities of other producers. There could be an arrangement forbidding a licensee to compete, or to handle goods which compete with the licensor’s interest. Such arrangements are usually considered to hinder the spirit of completion and hence not allowed by the competition act.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

2) Grant back provisions A provision in the intellectual property licensing

agreement requiring the licensee to assign any improvements or modifications made by it, back to the licensor is referred to as a grant back provisions. These provisions are not unlawful per se, however such provisions attract complications when the rights required to be granted back are far broader than the rights originally licensed or when such practices are generally against the norms of the industry in question. Such a grant back provision may hinder the incentives of licensee to innovate due to structure of such a provision, and hence it would amount to violation of competition laws.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

3) Patent pooling This happens when the firms in a manufacturing

industry decide to pool their patents and agree not to grant licenses to third parties, at the same time fixing quotas and prices. They may earn extraordinary profits and keep new entrants out of the market. In particular, if all the technology is locked in a few hands by a pooling agreement, it will be difficult for outsiders to compete. Patent pooling is a restrictive practice, which will not constitute being a part of the bundle of rights forming part of an intellectual property right.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

4) Package licensing A licensee may be coerced by the licensor to take

several licenses in intellectual property even though the former may not need all of them. This sort of practices are resorted by licensors to ensure that even their lesser valued or in certain cases valueless, intellectual properties derive monetary benefits. Section 84 (7) of the Indian patents act, 1970, mentions that such type of coercive package licensing is to be considered as an anti-competitive practice.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

5) Unreasonable regulations or conditions. a) A condition imposing quality control on the licensed patented product beyond those necessary for guaranteeing the effectiveness of the licensed patent may be an anti- competitive practice. b) Restricting the right of the licensee to sell the product of the licensed intellectual property to persons other than those designated by the licensor may be in violation of competition laws. c) A condition imposed on the licensee to employ or use staff designated by the licensor is likely to be regarded as anticompetitive.



Chennai - 600 004.Tel: +91 - 44 - 2498 4821



Bangalore - 560 001.Tel: +91 - 80 - 6546 2400



Tel: +91 - 422 – 6552921

EMAIL

[email protected]

WEBSITE

www.altacit.com

Conclusion

Thus it can be observed that the relation between competition laws and intellectual property rights with its intricacies and ironies is here to stay. It’s amply clear that these two streams of law are bound to converge and cannot be expected stay as mutually exclusive subjects.

With the dramatic increase in trade and stronger economic ties between nations, it is absolutely necessary for countries to strengthen their legislative systems to ensure that they are prepared to handle any impending crisis that may require them to clearly distinguish the two streams of law without compromising on any individual’s rights or public welfare as the case may be.

Documents

Ipr and competition laws