Intellectual Property Rights (IPRs) and Competition law are perceived as sharing a venerable relationship given their seemingly contrasting intention of the purpose of legislation.[1] However, it can be said providing exclusive rights for a limited period, pushes the competitive market to innovate something new, which also provides the consumer with a variety of choice. In other words, in theory, incentivizing innovation through exclusive rights elevates the level of competition from static to dynamic, which is in contrast adversarial perception of IPRs and competition law.[2]
Practically, it has been observed, even the most stringently regulated right is susceptible to abuse at a determined and motivated right owner to the detriment of healthy competition. This necessitates the existence of a safety valve in the form of competition law.[3]
Therefore, the goal of competition law with respect to IPRs is to ensure that the said exclusive type of rights is exercised within the limits prescribed in a manner which is beneficial to consumers and which promotes competition and overall helps the economy. Therefore, if an IP owner confides with any conflict with competition law only in the case of a transgression in his capacity as an IP owner if such transgression distorts or hinders a good competition.[4]
Both regimes can thus function to promote consumer welfare in the same manner, while showing similarities and differences in their consideration of short and long run effects on consumer welfare.[5] Patent law and the incipiency elements of antitrust law are similar in that they both are ultimately based on inherently uncertain predictions of what is going to happen in the future. The difference is that in the antitrust regime we sometimes are concerned about conduct that in the short-term may be benign or even helpful to consumers, but that may be harmful in the long run, whereas in the patent regime, we are willing to tolerate immediate consumer harm, e.g. monopoly pricing in the expectation that in the long run it will benefit consumers by encouraging innovation.[6]
Section 3 of the Competition Act, expressly bars any enterprise or association of enterprises or person or association of persons from entering 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 adverse effect on the competition in the market and hinders the smooth functioning of a market.[7] There are two exceptions under Section 3, i.e. sub sections 3 and 5(i), which reads as:
“3(3)- Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services.”[8]
“3(5)- (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 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-Conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);”[9]
One interpretation is that the exception stated under Section 3 of the act, with respect to IP rights in Section 3(5)(i)[10] is absolute, and therefore, there will be no application of the Competition Act in the issues regarding that of IP owners, and therefore agreements made to obstruct healthy competition shall not be void if made in the garb of IPR. However, this interpretation may not be correct since a limitation or rather a restriction is provided in the section to limit the use of the exception, as it is stated in the Section that the conditions must “reasonable conditions” imposed in connection with protection of IP rights. Therefore, there must be a real and reasonable nexus between the condition imposed on a third party by an IP owner such as a patentee and the object of preventing infringement of the IP right. Thus, if the condition fail to pass test of “reasonable conditions” of the conditions, with respect to the object of preventing infringement, it would run afoul of the proscription under Section 3, and would therefore fall under the jurisdiction of the Competition Commission and may declare the agreement void. Support for this position may be drawn from the recommendations of the High Level Committee on Competition Policy and Law, also known as “the S.V.S. Raghavan Committee Report”[11] published in the year 2000. Extracted below is the relevant recommendation of the said Committee with respect to application of the Competition law to the conduct of IP owners:
“5.1.8 There is, in some cases, a dichotomy between Intellectual Property Rights and Competition Policy/Law. The former endangers competition while the latter engenders competition. There is a need to appreciate the distinction between the existence of a right and its exercise. During the exercise of a right, if any anti-competitive trade practice or conduct is visible to the detriment of consumer interest or public interest, it ought to be assailed under the Competition Policy”
Evidently, Section 3(5) portrays this recommendation since it tries to maintain a balance between protection of Intellectual Property and prevention of anti-competitive practices undertaken under the garb of IP protection. This position is observed by the erstwhile Planning Commission’s Report Policy published in the year 2007.[12] Stating the following:
“4.1.13 IPR laws in India have provisions to take care of these potential IPR related competition abuses including provision for compulsory licensing. The Competition act of 2002, does have a specific provision to deal with anti-competitive behaviour arising out of unreasonable restraint of intellectual property holder of intellectual property beside being a factor to be considered while determining ‘dominance of an enterprise’ attained under a statute in the relevant market”
[1] Pham, Alice, Competition Law and Intellectual Property Rights: Controlling Abuse or Abusing Control?, Pg-13 (CUTS International,2008).
[2] I.d.
[3] J Sai Deepak, Patents and Competition Law: Identifying Jurisdictional Metes and Bounds in the Indian Context, National Law School of India Review, 2015, Vol. 27, No. 2 (2015), pp. 135-146.
[4] Pham, Alice, Competition Law and Intellectual Property Rights: Controlling Abuse or Abusing Control?, Pg-13 (CUTS International,2008).
[5] I.d.
[6] J Sai Deepak, Patents and Competition Law: Identifying Jurisdictional Metes and Bounds in the Indian Context, National Law School of India Review, 2015, Vol. 27, No. 2 (2015), pp. 135-146.
[7] I.d.
[8] The Competition Act, 2002, § 3, No. 12, Acts of Parliament, 2003 (India).
[9] The Competition Act, 2002, § 3, No. 12, Acts of Parliament, 2003 (India).
[10] The Competition Act, 2002, § 3, No. 12, Acts of Parliament, 2003 (India).
[11] Government of India, Report of the High Level Committee on Competition Policy and Law, 2000 (India).
[12] Planning Commission, Report of the Working group on competition law, 2007(India).
The Column Of Curae 