By Minnu Bridgit Sebastian
The relationship between competition law and intellectual property rights is not merely close, but a very intricate one. While on one hand Intellectual Property laws work towards creating monopolistic rights, competition law battles with it. Competition law seeks to eliminate monopoly or abuse of dominance in the market so that new firms can enter the market. The maximization of consumer welfare and increased production value are a few primary objectives of competition law. On the other hand, IP Laws are often considered monopolistic legal rights granted to owners for their intellectual creativity. Intellectual Property Rights (IPR) and Competition Law, are laws bound together by the economics of innovation and market found on a common principle, which also highlights the need for a balance between protecting and fostering innovation and preventing distortions in the market structure.
Article 40 of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) provides that “Members agree that some licensing practices 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”. Similarly, the Raghavan Committee Report on Competition Law, which preceded the enactment of the Competition Act in India, observed in paragraph 5.1.7 that: “All forms of intellectual property have the potential to raise competition policy/law problems. Intellectual property provides exclusive rights to the holder to perform a productive or commercial activity, but this does not include the right to exert restrictive or monopoly power in a market or society. It is desirable that in the interest of human creativity, which needs to be encouraged and rewarded, intellectual property rights need to be provided. This right enables the holder (creator) to prevent others from using his/her inventions, designs or other creations. But at the same time, there is need to curb and prevent anti-competition behaviour that may surface in the exercise of the intellectual property.” Thus, the potential conflict of these laws were anticipated by the law and policy makers even in its primary years due to the very nature of these laws.
In India, the domain of competition is regulated by the Competition Act, 2002, which primarily focuses on the regulation of the market in three areas viz, Anti-competitive agreements, Abuse of dominant position and combinations. Section 3 (5) of the Competition Act states that the provisions of the Act shall 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 or may be conferred upon him under the Intellectual property laws India including the Copyright Act, 1957, the Patents Act, 1970, the Trade Marks Act, 1999, the Geographical Indications of Goods (Registration and Protection) Act, 1999, the Designs Act, 2000 (16 of 2000), or the Semi-conductor Integrated Circuits Layout-Design Act, 2000. However, even with the existence of such a provision, there are several instances where the laws are often at conflict.
When there is such an intricate level of interplay between the laws, the question which naturally arises is whether the Intellectual property laws are actually subject to the Competition law or vice versa? The provisions of the Act as well as the jurisprudence of the Indian Courts suggests that there is no blanket exemption provided to IPRs when it comes to the jurisdiction of the CCI. In the case of Telefonaktiebolaget LM Ericsson vs. Competition Commission of India[1], wherein a petition was filed by Ericsson challenging the jurisdiction of the CCI to pass orders in cases involving patents, in particular, Standard Essential Patents (SEPs) and the jurisdiction of the CCI to commence any proceeding in relation to a claim of royalty by a proprietor of a patent, which is covered by the Indian Patents Act, 1970. Delhi High Court observed that “if there are irreconcilable differences between the Patents Act and the Competition Act in so far as anti-abuse provisions are concerned, the Patents Act being a special Act shall prevail”. It was also observed however that it was apparent that the remedies under the two enactments were not mutually exclusive; in other words, that the grant of one was not destructive of the other. Further, in the case of FICCI – Multiplex Association of India vs. United Producers/Distributors Forum (UPDF) [2], the FICCI alleged that the respondent UPDF had issued a notice instructing all its members not to release any films to the members of FICCI. The members of UPDF contended that a feature film is the subject matter of copyright under the Copyright Act, 1957 which permits the owner of copyright to exploit such copyright in a manner as they deem fit. Notice was also brought by the members of the UPDF to provisions contained in Section 3(5) of the Act to claim that the use of non-obstante clause excluded such rights from the purview of the Act and accordingly, it was asserted that the UPDF members were within their rights to impose reasonable conditions. The CCI in this case dismissed the arguments and stated that: “It may be mentioned that the intellectual property laws do not have any absolute overriding effect on the competition law. The extent of non-obstante clause in section 3(5) of the Act is not absolute as is clear from the language used therein and it exempts the right holder from the rigours of competition law only to protect his rights from infringement. It further enables the right holder to impose reasonable conditions, as may be necessary for protecting such rights.”
Thus, the CCI has adopted a largely balanced and progressive approach in ensuring that the enforcement of competition law is not at odds with the preservation of IP. In this process, it has drawn on judicial practices from other jurisdictions while also developing its own, though somewhat limited, case laws concerning antitrust matters related to intellectual property rights. This includes issues such as fraudulent litigation or restrictions on licensing. What needs to be recognized in this regard is that the CCI is a prime regulator of the market and while much of the CCI’s existing jurisprudence has been developed based on its preliminary orders, a more determinative approach will be determined. As with many other issues, the enforcement of antitrust law on questions involving IP is constantly evolving, with the regulatory authorities aiming to develop a more balanced approach to ensure that the ultimate goals of competition law and intellectual property rights are attained efficiently in a harmonious manner.
[1] Telefonaktiebolaget LM Ericsson vs. Competition Commission of India LPA 246/2016
[2] FICCI – Multiplex Association of India vs. United Producers/Distributors Forum (UPDF) CASE NO. 01 OF 2009
