This article has been written by Ms. Janaki Nair Vineetha, a 5th – year student at Symbiosis Law School, Pune.

INTRODUCTION

What is Competition Law and IPR?

The Competition Act, made into law in the year 2002, can be said to be the most supportive piece of legislation towards the Indian economy in the early 2000s, when the country was going through the outcomes and repercussions of opening its gates to the world in 1991. The main purpose of the Act in question is to make sure that the only kind of competition that exists in the Indian market is one which is legal [and healthy]. It does the afore – mentioned by controlling price fluctuations and prohibiting unfair as well as misuse of trade practices by the dominant industries in the market. An early example to illustrate the Act’s purpose would be the way in which the Roman Empire, around 50 B.C.[1], protected their grain trade – the Empire imposed heavy fines to whichever person directly and deliberately stopped supply ships from reaching the port of Rome. This intentional obstruction of the grain trade directly restricted trade practices in Rome by a huge amount and ensured the concentration of trade power onto the hands of a few traders who did not have to supply the grain by vessels. 

India’s tryst with such economic growth – focused legislation began by the implementation of the Monopolies and Restrictive Trade Practices Act [MRTP] of 1969, which eventually got replaced by the Competition Act of 2002 due to the need for more inclusive regulations of a modern developing economy. The latter is also more defined and clearer with its definitions than the former Act ever was[2]. One of the biggest takeaways of the Competition Act is its inclusivity of Intellectual Property Rights [IPR]. 

IPR, according to the World Trade Organisation, refers to the rights given to people “over the creations of their minds”[3]. The United Nations Conference on Trade and Development [UNCTAD], had stated in one of its discussions on competition law and policy[4] that the primary objective of IPR is to facilitate innovation by providing necessary and relevant incentives. IPR in this manner rewards innovation and creativity by granting the creator an ‘exclusive right’ over the use of the creation for a specified period. In other words, what the creator earns by IPR is authority over the object/creation that they made. Thus, the realm and the surface objective of IPR is the polar – opposite of what competition law stands for – the two are like fire and water.[5] Competition Act prohibits any kind of unfair monopoly over products whereas IPR encourages control over a specific product/creation for a specific time-period.

COMPLICATED INTERPLAY BETWEEN IPR AND COMPETITON LAW

Friends or Opponents?

Now, the question is whether the two legal enactments can ever be two sides of the same coin.

To answer that, the Competition Act 2002 has a particular provision[6] reserved for the usage of the IPR in the market. Section 3 of the Act explains in detail as to the kind of agreements which would be prohibited by law as they adversely affect the competition within Indian markets. Sub-clause 5 of Section 3 however, provides the exception to whatever was talked in Section 3 until then. It states that nothing in the section would restrict the right of an individual to “restrain infringement or impose reasonable restrictions” conferred to them by the IPR Acts (i.e., Copyright Act 1957, Patents Act 1970, Trade Marks Act 1999, etc.) of India.

The main rationale for this support of IPR by Competition law is the similar end point both legislations have. IPR and competition laws are complimentary to each other in the manner that both share a concern to increase economic prowess to the ultimate benefit of the consumers. Enterprises and other entities are more likely to innovate if they feel as if they are somewhat protected against free riders in the industry who may steal the former’s creations for themselves; they are also more likely to want to innovate if there is increased competition in the existing market[7]. Thus, competition policies cannot do away with IPR protection.

At the same time, the Competition Act 2002 ensures that there still exists conflict between the two laws. The Act states that no enterprise shall abuse its dominant position[8] and has laid down several conditions which would amount to be abuse if carried out by the individual or enterprise purchasing/selling goods or services. To illustrate, an IP holder, for example, decides to sell his invention in the public market at Rs.2 per product, when similar goods of other manufacturers are worth at least Rs.5 in the same market. The reason that the former IP holder decided to sell it at Rs.2 was because he knew that the consumers would flock to his product due to its abysmally low price, thus eliminating the products of his competitors. This kind of pricing mechanism done by the IP holder is known as predatory pricing¸ and it is one of the vices that the Competition Act prohibits. As per Section 4, it is also an example of abuse of dominant position, which violates the competition law of the country.

In the Singapore case of Global Yellow Pages[9], the defendant violated the plaintiff’s copyright and counterclaimed in court. The defendant alleged that the subsistence of the IP in the plaintiff’s artistic works, data, etc. are at dispute. However, the court found out that the defendant had abused the dominant position which it benefitted from in the market, and which was as a result restricting free and fair trade of the plaintiff. The court opined that the defendant’s counterclaim does not hold substance in front of the High Court.

The Competition Commission of India [CCI]

The Competition Commission of India [CCI], which is the authority that enforces the 2002 Act across the country, handles all complaints regarding the applicability of competition issues involved in both IPR as well as Competition law. It was established in 2003 but started operating fully in the year 2009. Even though the purpose of IPR, which is preventing the exploitation and free riding of an individual’s creation and hard work, is valid [as could be seen by Section 3(5) of the 2002 Act], the Indian legal system also understands the need to limit the rising of anti-competitive behaviour during such IPR grants. Therefore, the CCI assumes the authority as prescribed above and plays jurisdictional roles in IPR related competition law issues.

In the case of Telefonaktiebolaget LM Ericsson[10] a petition was filed before the Delhi High Court by the plaintiff [Ericsson] regarding patents. Ericsson had challenged the order passed by the CCI by stating that the CCI lacked jurisdiction to commence or pass any order with regards to a patent claim as this IP was covered by a separate legislation known as the Indian Patents Act of 1970. The High Court held that the Patent Act would prevail if there existed irreconcilable differences between the latter and the Competition Act as far as it relates to the topic of anti-abuse of dominant positions. However, no such differences were revealed in the two acts, and the High Court also observed that the remedies under the two are not mutually exclusive. Both laws can exist in harmony with each other, and it is up to the concerned party to approach the relevant authority under the Patent Act for necessity. It would not be inconsistent with the CCI orders under the 2002 Act.

Furthermore, in the case of FICCI – Multiplex Association of India[11], the CCI clearly talks about the state of IPR amid competition law provisions. The CCI states that the non-obstante clause given in Section 3(5) of the 2002 Act exempts the IP holder from competition law violation only when it comes to protection of his/her IP rights from infringement. Moreover, in the case of Super Cassette Industries Ltd.[12], the Supreme Court observed that the copyright holder can enjoy his monopoly only if s/he does not disturb market functioning in having such control. Otherwise, it would be violation of competition law.

CONCLUSION

To conclude, IPR and the Competition Act are very much different sides of the same coin – however, Indian legal and governance system primarily focuses on the boosting of the market economy. Therefore, the exception afforded to IPR in the Competition Act of 2002 is a necessity, but this exception is not absolute. The monopoly and exclusivity granted to IP and IP holders can quickly turn south and promote anti-competitive tendencies in the market economy. Therefore, fetters to decrease such behaviour was needed, and that is the birth of compulsory licensing. It refers to the process in which the Government allows a third party to have rights to the usage of the IP (usually) without the permission of the original inventor/IP holder. This is done so to strike a balance between the monopoly granted for an IPR and abuse of that monopoly/dominant position and anti-competitive behaviour from the product/service seller.

Both the Competition Act as well as Intellectual Property Rights protection are necessary for a booming market economy.

TABLE OF REFERENCES

BOOKS

1. JH SCHOVSBO, INTELLECTUAL PROPERTY RIGHTS IN A FAIR WORLD TRADE SYSTEM: PROPOSALS FOR REFORM OF TRIPS 308 – 358 (Edward Elgar Publishing 2011).

INTERNET ARTICLES

1. Howard Ullman, Ancient Rome had Competition Law, MY DISTRIBUTION LAW (Dec 13, 2022, 05:11 PM), http://www.mydistributionlaw.com/2012/03/ancient-rome-had-competition-law/ .
2. Utsav Sharma, Journey from MRTP to Competition Act, LINKEDIN (June 9, 2020), https://www.linkedin.com/pulse/journey-from-mrtp-competition-act-utsav-sharma .
3. Competition Policy and Intellectual Property Rights – Policy Roundtables, ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT [OECD], https://www.oecd.org/daf/competition/1920398.pdf (last visited Dec 14, 2022).
4. Ruchika Ghosh, Compulsory licensing of patents and its effect on competition, JOURNAL OF MEDICAL SOCIETY (Dec 13, 2022, 06:06 PM), https://www.jmedsoc.org/article.asp?issn=0972-4958;year=2020;volume=34;issue=2;spage=55;epage=60;aulast=Ghosh;type=0 .
5. WORLD TRADE ORGANIZATION, https://www.wto.org/english/tratop_e/trips_e/intel1_e.htm (last visited Dec. 13, 2022).
6. Examining the interface between the objectives of competition policy and intellectual property, UNCTAD, https://unctad.org/system/files/official-document/ciclpd36_en.pdf (last visited Dec 14, 2022).

LEGAL PROVISIONS

1. S.3 (5), The Competition Act, 2002.
2. S.4, The Competition Act, 2002.

CASE LAWS

1. Global Yellow Pages Ltd. V. Promedia Directories Pte Ltd., (2010) SGHC 97.
2. Telefonaktiebolaget LM Ericsson vs. Competition Commission of India, (W.P.(C) 464/2014 & CM Nos.911/2014 & 915/2014).
3. FICCI – Multiplex Association of India v. United Producers/Distributors Forum (UPDF), 2011 CompLR 0079 (CCI).
4. Entertainment Network (India) Limited v. Super Cassette Industries Ltd. & Ors., (2008) 13 SCC 30.

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[1] Howard Ullman, Ancient Rome had Competition Law, MY DISTRIBUTION LAW (Dec 13, 2022, 05:11 PM), http://www.mydistributionlaw.com/2012/03/ancient-rome-had-competition-law/ .

[2]Utsav Sharma, Journey from MRTP to Competition Act, LINKEDIN (June 9, 2020), https://www.linkedin.com/pulse/journey-from-mrtp-competition-act-utsav-sharma .

[3] WORLD TRADE ORGANIZATION, https://www.wto.org/english/tratop_e/trips_e/intel1_e.htm (last visited Dec. 13, 2022).

[4] Examining the interface between the objectives of competition policy and intellectual property, UNCTAD, https://unctad.org/system/files/official-document/ciclpd36_en.pdf (last visited Dec 14, 2022).

[5] JH SCHOVSBO, INTELLECTUAL PROPERTY RIGHTS IN A FAIR WORLD TRADE SYSTEM: PROPOSALS FOR REFORM OF TRIPS 308 – 358 (Edward Elgar Publishing 2011).

[6] S.3 (5), The Competition Act, 2002.

[7] Competition Policy and Intellectual Property Rights – Policy Roundtables, ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT [OECD], https://www.oecd.org/daf/competition/1920398.pdf (last visited Dec 14, 2022).

[8] S.4, The Competition Act, 2002.

[9] Global Yellow Pages Ltd. V. Promedia Directories Pte Ltd., (2010) SGHC 97.

[10] Telefonaktiebolaget LM Ericsson vs. Competition Commission of India, (W.P.(C) 464/2014 & CM Nos.911/2014 & 915/2014).

[11] FICCI – Multiplex Association of India v. United Producers/Distributors Forum (UPDF), 2011 CompLR 0079 (CCI).

[12] Entertainment Network (India) Limited v. Super Cassette Industries Ltd. & Ors., (2008) 13 SCC 30.

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