Nidhi Singh. Economics for Competition Law student at King’s College London – Practising Advocate with the Supreme Court of India
Introduction
Competition law and Intellectual Property law may at first appear to have different scope. However, the increasing number of cases involving Competition law and Intellectual Property Rights (IPR) matters proves otherwise. Specifically, the case-law of the Competition Commission of India (CCI) illustrates that the scope of these two disciplines may at times overlap and their aims collide.
In the following lines, I will discuss whether, and to what extent, a conflict may arise between Competition law and IPR. To this aim, I will sketch the Indian Competition law provisions regulating the exercise of IPR. Reference will then be made to Indian case-law regarding the jurisdictional issues arising from the overlap between Competition law and IPR. I will conclude by arguing that Competition law and IPR are not so irreconcilable as it may appear at first, and some balance can – and needs to – be found between these two disciplines.
Competition Law & IPR
According to the United Nations Conference on Trade and Development (UNCTAD) document on ‘Examining the interface between the objectives of competition policy and intellectual property’,[1] the main objective of IPR is to encourage innovation by providing the relevant incentives. This objective is achieved by granting to inventors some exclusive rights on their inventions to allow them to recover research and development investments for a certain period of time.
The objectives of Competition law are instead those of promoting efficiency and enhancing economic growth and consumer welfare. To achieve them, Competition law constrains, to some extent, rights arising out of private property (e.g. by limiting the right to mergers among undertakings) for the benefit of the community. Competition is considered desirable for the economy because it encourages innovation and enhances competitiveness. The approach to limitation of property rights on the grounds of competition issues more usually accepted by regulatory authorities is that of ‘workable competition’. First discussed by J. M. Clark in 1940,[2] workable competition accepts that there are elements of monopoly in virtually all markets and that the role of authorities is that of ensuring that enough competition among undertakings is left to protect consumers from market abuses. Clark emphasises three key features of workable competition: (1) rivalry among sellers, (2) the ‘free option’ of buyers to purchase from alternative vendors, and (3) efforts by sellers to equal or exceed the attractiveness of others’ offerings.[3]
Thus, whilst IPR is about individual rights by offering protection to private rights on inventions, Competition law safeguards the interests of the market and the broader community, by limiting private rights that may harm the community’s overall wellbeing. However, both Competition law and IPR ultimately accept that consumer welfare is achieved by furthering innovation.
Exception to IPR under Section 3(5) of the Indian Competition Act 2002
The Indian Competition Act 2002 is designed not to interfere with IPR. However, if the CCI finds that IPRs create an appreciable adverse effect on competition (AAEC)[4], the Act provides for the possibility to bring action[5].
More specifically, Section 3(5) of the Indian Competition Act 2002[6] contains an exception clause with regard to the use of IPR, which allows for the reasonable use of these exclusive rights over the innovation. ‘Reasonable use’ means that Section 3(5) of the Act only allows IP holders to impose ‘reasonable conditions’ on their licences to secure IP protection, without triggering Competition law issues.
Indeed, India’s Competition law does not prohibit dominance,[7] unlike the erstwhile Monopolies and Restrictive Trade Practices (MRTP) Act of 1969,[8] but rather restricts the abuse of dominance per se. The Indian Competition Act was enacted in view of the economic development of the country post liberalisation and privatisation. The shift has been from ‘command-and-control’ triggered policies to an open market policy, and thus now, ‘monopoly’ itself is not per se bad, though an abuse of this ‘monopoly’ justifiably is.[9]
However, the exception clause of Section 3(5) of the Indian Competition Act 2002[10] finds its limit in section 4(2) of the same Act, which states that there shall be an abuse of dominant position if the enterprise imposes unfair and discriminatory conditions or prices in the purchase and/or sale of goods.[11]
Thus, the rights of IPR-holders find limits to their use to the detriment of consumers. This means that, under Indian Law, IPR-holders cannot place unreasonable restrictions on innovations while licensing the IPR. There is no predetermined list of “unreasonable” restrictions, and most times this evaluation will have to be carried out on a case-by-case basis. For example, Section 83 (f) and (g) of the Patent Act, 1970 provides that the patentee or person deriving title or interest on patent should not resort to practices which “unreasonably” restrain trade or adversely affect international transfer of technology and that the patented invention should be made available at reasonably affordable prices to the public.[12]
Conflict Between IPR & Competition Law
According to the High-Level Committee Report on Competition Policy and Law, ‘all forms of Intellectual Property have the potential to raise Competition Policy/law problems. Intellectual Property provides exhaustive rights to the holders to perform a productive or commercial activity, but this does not include the right to exert restrictive or monopoly power’[13]. Thus, if the report acknowledges the legitimate aim of IPR of preventing others from using one’s invention without the necessary ‘licence’, it nevertheless also recognises the need to curb anti-competitive behaviour that may surface in the exercise of IPR.
It is for this reason that the CCI – which also exercises jurisdictional functions in relation to competition issues – promptly advocated for itself jurisdiction in various cases where a conflict arose between IPR and Competition law before national courts. Such jurisdiction was also normally granted to it by national courts. In Aamir Khan Productions Pvt Ltd v Union of India,[14] the Bombay High Court held that the CCI has the necessary jurisdiction to deal with cases pertaining to Competition law and IPR. Similarly, in Kingfisher v CCI,[15] the Bombay High Court held that the CCI is competent to deal with all the issues coming before the Copyright Board of India. Such was also the result in FICCI Multiplex Association of India v United Producers/Distributors Forum,[16] where the jurisdiction of the CCI was once again upheld. Finally, in Ericsson v CCI,[17] the Delhi High Court held that there was nothing in the Indian Patents Act 1970[18] which could either expressly or impliedly oust the jurisdiction of the CCI.
Conclusion
In summary, IPR and Competition law are complementary to each other and thus cannot be considered in isolation, given that their scope seems to largely overlap and, in some cases, clash. It is thus important to facilitate a balance between IPR and Competition law to fulfill the goals of widespread competition and consumers’ welfare, while at the same time protecting innovation by granting inventors sufficient protection to allow them to recover research and development investments.
The role of Competition law in these instances is to impose regulation on IPR where IPR-holders abuse their dominant positions, overstepping the ‘reasonable use’ of their rights under section 3(5) of the Indian Competition Act. In those cases, the CCI should be provided with adequate powers to deal with IP issues that cause market distortions and be recognized jurisdiction.
However, Competition law should not go too far. The threshold of its regulation from a Competition law standpoint should not exceed the cases in which IPR causes appreciable adverse effect on competition.
[1]United Nations Conference on Trade and Development, ‘Examining the interface between the objectives competition policy and intellectual property’, Intergovernmental Group of Experts on Competition Law and Policy, 15th Session, October 2016, available at < http://unctad.org/meetings/en/SessionalDocuments/ciclpd36_en.pdf>, accessed on 22 June 2018
[2]J M Clark, ‘Toward a Concept of Workable Competition’, The American Economic Review (1940) 30(2) 241-56
[3]Ibid
[4]Section 19(3), Indian Competition Act 2002
[5]Competition Law and Intellectual Property Rights, MHRD Project, Government of India, available at <https://epgp.inflibnet.ac.in/epgpdata/uploads/epgp_content/law/05._competition_law/06._competition_law_and_intellectual_property_rights/et/5212_et_06et.pdf>, accessed on 1 July 2018
[6]Section 3 of the Indian Competition Act 2002 provides for anti-competitive agreements, available at <https://www.cci.gov.in/sites/default/files/cci_pdf/competitionact2012.pdf>, accessed on 1 July 2018
[7]Explanation of Section 4 of the Competition Act 2002 defines the expression ‘dominant position’ as a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to- (i) operate independently of competitive forces prevailing in the relevant market, or (ii) affect its competitors or consumers or the relevant market in its favor. Available at <https://www.cci.gov.in/sites/default/files/cci_pdf/competitionact2012.pdf>, accessed on 1 July 2018
[8]Section 10(b), 12A, 12B of the Monopolies and Restrictive Trade Practices Act (MRTP) 1969. The MRTP Act provided for control of monopolies and prohibited ‘Monopolistic Trade Practices’. The origin of this could be traced to the Indian Constitutional Directive wherein the prevention of concentration of economic power is provided for.
[9]V K Singh, ‘Competition Law Dominant Position and its Abuse: Meaning of Dominant Position’, Module written for e-Pathshala, MHRD Project NME-ICT of Government of India, available at <http://epgp.inflibnet.ac.in/view_search.php?&category=5656&ft=et>, accessed on 1 July 2018
[10]Section 3 of the Competition Act 2002 provides for anti-competitive agreements, available at <https://www.cci.gov.in/sites/default/files/cci_pdf/competitionact2012.pdf>, accessed on 1 July 2018
[11]Section 4(2), Competition Act 2002, available at <https://www.cci.gov.in/sites/default/files/cci_pdf/competitionact2012.pdf>, accessed on 1 July 2018
[12]Sections 83 (f) and (g) of the Indian Patents Act 1970, available at <http://www.ipindia.nic.in/writereaddata/Portal/IPOAct/1_31_1_patent-act-1970-11march2015.pdf>, accessed on 6 July 2018
[13]Report of High Level Committee on Competition Policy and Law, S. V. S. Raghavan Committee, Para. 5.1.7
[14] 2010, 112 Bom LR 3778
[15] Writ Petition No. 1785 of 2009, Bombay High Court
[16] Case No. 1 of 2009, CCI Order Dated 25 May 2011
[17]The High Court of Delhi, W. O. (C) 464/2014 & CM No. 911/2014 & 915/2014 available at <http://lobis.nic.in/ddir/dhc/VIB/judgement/30-03-2016/VIB30032016CW4642014.pdf>, accessed on 25 June 2018
[18]See generally, Sections 89, 90, 91and 92 of the Indian Patents Act 1970, available at <http://www.ipindia.nic.in/writereaddata/Portal/IPOAct/1_31_1_patent-act-1970-11march2015.pdf>, accessed on 1 July 2018