I.

Introduction
With the ongoing acceleration of innovation and competition, the game of free international
trade is being ruled by two rules i.e. Intellectual Property Rights (IPRs) and the Competition
Policy.1 To prosper in the game one has to be the master of these two. Intellectual Property is
a term owning its origin to different international meet like Paris Convention, Berne
Convention and essentially TRIPS agreement. TRIPS agreement was instrumental in shaping
the Intellectual Property Laws as they are now.2 Intellectual Property is a term given to the
innovation which are gifts of intellect and are intangible in nature. It is a common umbrella
covering many other independent areas, each having a particular set of laws primarily
patents, copyrights, trademarks and trade secrets.3 These laws are meant to encourage
innovations and reward the originality by promising to provide exclusive or near exclusive
right on profile, recognition & acknowledgement.4 This ultimately benefits both the
individuals and other consumer & society at large. Just as IP laws encourage innovation,
Competition policies are made with a view to enhance healthy competition in the market.
They are meant to control anticompetitive practice, attempt to monopolies the market and any
other action which is against the competitive spirit. They seek to protect the process of
competition from restraints, particularly to prevent restrictive commercial practices that
impede the efficient production and diffusion of goods and technologies. They mainly
concern them with consumer welfare.
Intellectual Property Laws are made for social welfare i.e. welfare of the consumer as well as
producer. But the Competition policies often give priority to consume over the producers in
the competitive market. This becomes the first point of conflict between them. Secondly, after
an IPR enters the market, this nature associated with a competition advantage would very
1 See e.g. David J. Gerber, Global Technological Integration, Intellectual
Property Rights and Competition Law: Some Introductory Comments, in F.M.
Abbott, David J. Gerber, Public Policy and Global Technological Integration
(Kluwer Law International 1997), pp. 15-22.
2 P. Torremans, Intellectual Property Law (India: Butterworths 2001), p. 4.
3 T. P. Ross, Intellectual Property : Damage and Remedies (Law Journal Press
2005) ,p. 3.
4 Mozer v. Stein [1954] 347 U.S. 201,219.

likely give rise to the proprietors misuse or abuse of his exclusive marketing rights (EMRs)
which, however, is just contrary to the competition policys primary mission towards
combating any prevention, restriction or distortion of competition. To exemplify we can think
of a situation in which a proprietor of a patented technology refuses to grant it to others who
are in need and all prepared to exploit it. By misusing the protective rights given to the
proprietor he not only strengthen his monopoly status but simultaneously eliminates potential
competitors from the market. The remedy to a refusal to license is primarily available within
IPR legislation itself by imposing a so-called compulsory license for non-use or abusive
refusal.5
The conflict between Competition and IPRs is age old. The pendulum keeps on swinging
between the two according to the prevailing social circumstances. Earlier Competition
superseded protection provided to the innovations by IPRs but with changing needs of the
society it was felt that at few instances Intellectual Property should be given priority over
competition policies. The struggle continued. But in the recent past, due to fast paced
globalization, privatization and ever-increasing international trade, the innovation and the
competition have converged to share the same stage. The debate of who wins over whom is
slowly shifting towards who complements whom and how far. Both the areas do conflict in
the short run but in the longer run both of them sought to achieve more or less the same
objectives. They use different vocabularies to somewhere achieve the same end. 6Abuse or
misuse of one often violates the legal principles of the other. They together act as a
mechanism of check and balance for each other. To ensure an appropriate balance between
IPRs and competition policy is very vital to providing dynamic incentives for innovation and
efficiency and proposing optimal solutions for resource allocation in a knowledge-based
market economy.7 IPR, competition and their changing interface have very old political and
historical tradition. Both of them relate strongly to citizens rights, government policies and
consumer protection. Also, in a modern globalized economy, both play significant roles in the
5 See e.g. Paris Convention for Protection of Industrial Property of March 20,
1883, as amended in 1979, (hereinafter Paris Convention) Art.5 (A); See also the
TRIPS Agreement, supra note 3, Art.30. For a full discussion on compulsory
licenses, see further infra text under 5.2.
6 See e.g. Spencer Weber Waller and Noel J. Bryne, Changing View of
Intellectual Property and Competition Law in the EC and the USA, vol. XX:1,
Brooklyn Journal of International Law (1993).

enhancement of competition and competitiveness by encouraging innovations in national and

international market. The understanding of balance of this relationship are of exceptional
importance to developing countries to evolve and develop their legal systems in such a way
that IPR protection remain in perfect harmony with relevant competition issues.8
This work is an attempt to analyse the complementary character of IPRs and competition
policies on the wake of the continued liberalization of international trade. It also explains
IPR-related practices versus competitive requirements as well as the application of
competition policy to the exercise of IPRs. The conclusion of the work suggests how both the
areas can be in balance with each other in a comprehensive manner.

II. Intellectual Property Rights and Competition Policy

2.1 Intellectual Property and Intellectual Property Rights
Intellectual Properties are those intangible properties that give their owners a legal stake in
the fruit of their creativity & reputation. Broadly speaking, patents over inventions,
copyrights cover expressive works of authorship, trademarks cover words & design that
indicated the source, sponsorship or quality and trade secrete cover confidential business
information.9 As said earlier each of the above mentioned terms represent one unique set of
legal right and none of them overlaps with each other.
These laws are meant to encourage innovations and reward the originality by promising to
provide exclusive or near exclusive right on profile, recognition & acknowledgement. 10 This
ultimately benefits both the individuals and other consumer & society at large.
7 See Robert D. Anderson et Nancy T. Gallini, Executive Summary of Industry
Canadas Research Volume on Competition Policy and Intellectual Property
Rights in the Knowledge-Based Economy (University Calgary Press, 1998).
8 See further e.g. Jayashree Watal, IPRs and Developing Countries in the World
Trade Organization: The Way Forward, (Oxford Uni. Press, 2000).
9 See TRIPS: What are intellectual property rights? at the WTO Website
<http://www.wto.org>.
10 Mozer v. Stein [1954] 347 U.S. 201,219.

Intellectual property is similar to other type of properly in a way that, in both, the owner of
the property has the right of excludability as well as he can lease or sell his property to other
whenever he wants to. If we talk about the differences then the major difference arises in the
number of users that can use the property at a given point of time. In intellectual property,
multiple users, whether ten, a thousand or millions can use a given item of intellectual
property at the same time.11 Free riding is a term given when subsequent user benefits from
the intellectual property without compensating the creator or recognizing his efforts. It is
considered as a hazard to intellectual property because creation of the first product unit is
very expensive and is bore by the innovator but they can be reproduced at essentially zero
cost. The main aim of the Intellectual Property Laws is to protect the innovators from free
riding and to strike a balance between the rights of the innovators and the right of the public
to access such creation for the overall development & welfare of the society at large. Once
the Intellectual Property Rights expire the intellectual property can be used in public domain
without legal barrier & restrictions.
A patent is a government recognized right to an invention or discovery. The patent owner has
the exclusive right to make, use, sell or import (often known as practice of patents)
emboldening the invention.12 Utility patent: plant patents; and design patents relate to any
new useful process, machine etc; discovery or a sexual reproduction of a nero variety of
plant; and new original design for product respectively. The patent consists of a title for the
invention and the background of the invention which distinguishes it from others. The patent
holder has a right to bring an action against one who without permission uses the patent
subject matter often known as patent infringement.13 The thing that should be noted is that
the patents are only effective through the duration of their term.

11 See e.g. US IP Guidelines (1995), supra note 14 , II. General Principles,

Art. 2.0 (a): for the purpose of antitrust analysis, the Agencies regard
intellectual property as being essentially comparable to any other form of
property; see also Laurence R. Hefter and Robert D. Litowitz What is
intellectual property? the US Department of State Publication, available at the
State Website <http://usinfo.state.gov>.
12 P. Torremans, Intellectual Property Law (India :Butterworths, 2001), 52.
13 P. Narayanan, Intellectual Property Law (Lucknow :Eastern Law House,
2001), 15

Copyright is a form of protection for tangible original work of ownership. It includes

mainly literary14, dramatic15, musical16, artistic17 intellectual work whether published or
unpublished. To explain further it is not the idea that copyright protected but the expression
of it like arrangement of words and facts. The two important pre requisites for an item to be
copyright protected are modicum of originality and tangible medium of expression which
is fixed.18 Exclusive rights to reproduce, prepare subsequent derivative work, distribute and in
some cases perform or display its copyright material are granted to copyright owner. If any
other person independently creates a work that is similar to the copyright material, then he
cant be charged of copyright infringement. This is also known as doctrine of independent
creation. 19 Registration of copyright is not important but if copyright owner sues a party for
copyright infringement then he has to get the copyright registered first. Copyright protection
lasts the life of the author (if known) plus an additional 70 years. For the authors anonymous
the terms is 120 years after his creations or 95 years after first publication , whichever comes
first. Copyrights protections is neither applicable to names , title or slogan nor to useful
aspect of graphite or sculpture work . Fair use permits some minimal copying without
owners permission . The merger doctrines also prevents a creators from asserting exclusive
right over the works that express the only method to explain an idea as if permitted would
limit public use & welfare .20
A trademark is an identifier that distinguishes the source sponsorships, or quality of the goods
or services of the one party from those of other. For example any words , phrase or design ,
color , sounds , packaging etc. or practically anything that indicate a specific source or quality
can serve as a trademark. This not only includes trademarks but also trade names, service
14 P. Torremans, Intellectual Property Law (India :Butterworths, 2001), p. 180.
15 Ibid, p.186.
16 Ibid, p.187.
17 Ibid, p. 188.
18 M.A.I. v. Peak Computing [1993] 991 F. 2d 511 19th Cir.
19 Moore v. Kullicke & Soffa Indus [2003] 318 F. 3d 561, 573 (3d Cir.)
20 Aldrick v. Reminglon Rand, Inc. [1942] 52 F. Supp. 732 (N.D. Tex.).

marks, collective marks and certification marks. Unlike other intellectual properties,
trademarks also benefits the consumers. It brings benefit to the owner from its business
reputation as well as benefits the consumer by making their search easy and reducing tracing
and searching expenses. Trademarks present the goodwill & the reputation of the owner in
commerce. This creates an obligation for the owner to maintain the standard & quality
otherwise trademarks rights will be lost.21 Trademarks rights are automatically created
whoever a person or business develops goodwill in a mark and uses that marks in business.
Registration only creates presumptions to the validity of the trademark at the time of
litigation. The term of a registered trademark is potentially perpetual and still there is scope
for unlimited renewals. For unregistered marks, right continue indefinitely & unlike
copyright and patents rights, unregistered trademarks rights do not expire after a set term, non
use of the marks for continuous three years and failure to maintain the quality lead to the loss
of trademarks rights.
Trade secret is any information that delivers independent economic value from not being
generally known or readily ascertainable by proper means and is the subject of reasonable
efforts to maintain the secrecy. In order to claim trade secret protection, a business entity is
required to take reasonable steps to prevent its trade secret from being disclosed to the
general public.22 Trade secret is protected indefinitely but once it becomes generally known
or can be discovered easily, it comes out from the preview of protection because it becomes a
part of public domain. Two other important IPRs are geographical indications (a sign used on
goods that have a specific geographical origin and possess qualities or a reputation that are
due to that place of origin)23 and industrial designs (the ornamental or aesthetic aspect of an
article for industrial use).24
The importance and the necessity of the IPRs to promote innovation and in turn the social
development is widely accepted world over. Thus the incentives to create such valuable
21 Kellogg Co. v. Natl Biscuit Co., [1938] 305 U.S. 111,122.
22 Mabrey v. Sandstream, Inc. [2003] 124 S.W. 3d 302,310 (Tex. App.).
23 Geographical indications are protected in accordance with national laws and
under a wide range of concepts, such as laws against unfair competition,
consumer protection laws, laws for the protection of certification marks or
special laws for the protection of geographical indications or appellations of
origin. See idem.

information shall be provided by legal instruments. Intellectual property law is so designed to

grant and protect IPRs while at the same time regulate the exercise of IPRs. These IPRs are
guaranteed mostly by the national legislation but some of them has also been guaranteed by
the international treaties.25 Although there are similarities between national legal
arrangements, some significant divergences in this respect have proven very costing and there
thus have been international efforts towards harmonizing the national laws governing IPRs
worldwide. For instance, the WTO Agreement on Trade-related Aspects of IPRs (TRIPS),
which was concluded in the Uruguay Round of GATT in 1994 and came into effect on 1
January 1995, represents the greatest achievement of the international harmonization of IPR
laws up to date and contains the most extensive legal protection of IPRs by imposing
minimum legislative norms on its member states.26 Other important examples of the
harmonization include: Paris Convention for the Protection of Industrial Property (the Paris
Convention)27, signed in 1883 and amended in 1979; Patent Cooperation Treaty (PCT),
adopted in 1970;28 Madrid Agreement Concerning the International Registration of Marks
(the Madrid Agreement), adopted in 1891;29 the Berne Convention for the Protection of
Literal and Artistic Works (the Berne Convention), created in 1886;30 Hague Agreement
24 The design may consist of three-dimensional features, such as the shape or
surface of an article, or of two-dimensional features, such as patterns, lines or
color. In most countries, an industrial design must be registered in order to be
protected under industrial design law. As a general rule, to be registrable, the
design must be "new" or "original". The term of protection is generally five
years, with the possibility of further periods of renewal up to, in most cases, 15
years.
25
26 See e.g. Weerawit Weeraworawit, Commentaries on the TRIPS Agreement,
supra note 35.
27 See supra note 11, text available at the WIPO Website
<http://www.wipo.org>.
28 See supra note 11, dealing with international patent application and grant,
treaty text available at the WIPO Website <http://www.wipo.org>.
29 Text available at the WIPO Website <http://www.wipo.org>.
30 Text available at the WIPO Website <http://www.wipo.org>.

Concerning the Deposit of Industrial Designs (the Hague Agreement), concluded in 1925; the
Treaty on Intellectual Property in Respect of Integrated Circuits (the IPIC Treaty), 1989; and
the World Intellectual Property Organization (WIPO),31etc..
2.2 Competition and Competition Policy
Competition is basically an economic concept which can be defined as Open market rivalry
in which every seller tries to get what other sellers are seeking at the same time-sales, profit
and market share by offering the best practicable combination of price, quality, and service.
Where

the market information

flows freely,

competition plays regulatory function in

balancing demand and supply. It means a peaceful existence within the market of a sufficient
number of buyers and sellers such that no single market participant has enough influence to
determine the price. It is also defined as a situation which is opposite to monopoly. Any
barrier to entry, abuse of market power, and unfair practices aimed at unlawful commercial
benefits would as a result impede competition. In a word, competition can be perceived as a
fair, orderly and efficient market mechanism.
Competition policy, namely, is the legislative as well as administrative measures taken by a
state to enforce this mechanism, intending to establish and regulate a healthy market in which
a reasonable and efficient competitive environment can be maintained to bring about
economic prosperity.32 . Competition policy is a broader term, covering all aspects of
government actions that affect the conditions under which firms compete in a particular
market whereas the term competition law or antitrust law is a narrow one usually referring to
legislation, judicial decisions, and regulations specifically aimed at avoiding the
concentration and abuse of market power on the part of private firms which could use that
power to eliminate potential competitors. 33 Competition policy is mainly a set of restrictive
rules as regards some particular market practices, which are deemed harmful to competition.
31 Established on the basis of the Treaty Establishing the WIPO in 1967, which
became a specialized agency of the United Nations (UN) in 1974, mainly
operating three kinds of activities: registration, the promotion of
intergovernmental cooperation in the administration of intellectual property and
specialized programs. Full information is available at the WIPO Website
<http://www.wipo.org>.
32 See further e.g. Edward M. Graham and J. David Richardson, Competition
Policy for the Global Economy. Institute for International Economics
(Washington D.C. 1997).

There are mainly three kinds of such practices which are subject to its scrutiny. Concerted
action is the first of them. Every contract, combination in the form of trust or otherwise, or
conspiracy, in restraint of trade34 provided that the restraint is unreasonable 35 is declared to be
illegal. Unreason ability of restraint is basic to prove such a contract illegal. There are two
tests that can be used to check unreasonability. First is per se test in which there is a
presumption as to the illegality of the contract in certain cases and the burden of proof is on
the shoulders of the defendant. Second test is rule of reason, in this test court takes into
account the effect of such contract and if it is found to be affecting competition adversely, the
contract is declared to be illegal. Competition Policy takes into account only horizontal
restraints.36 Horizontal restraints directly affect the competitors whereas the vertical restraint
established by the decision made between the brands.37
Unilateral Action is another kind of action prohibited by Antitrust Policy. Monopolization,
attempt to monopolize & conspiracy to monopolize are held be violative of Competition
Policies. Monopolization includes i) the possession of monopoly power in the market and ii)
the willful acquisition or maintenance of that power. It requires that the acquisition of the
monopoly power is not at all the result of superior product, business acumen or historical
accident38 but the power has been acquired due to some anticompetitive conduct. Here the
anticompetitive conduct is better defined as an exclusionary conduct which is other than
competition on the merits or restraints reasonably necessary to competition on merits, that
reasonably appears capable of the making a significant contribution to creating or
maintaining power.39 Attempted monopolization requires i) engaging in anticompetitive
33 See Jerry F. Xia, Intellectual Property Rights and Competititon Policy:
Double-edged sword, Eramanus University (Rotterdam 2001).
34 Sherman Act, Sec. 1.
35 Standard Oil Corporation v. U.S. [1911] 221 U.S. 1, 58.
36 White Motors v. U.S. [1963] 372 U.S. 253, 263.
37 Bus. Elecs. Corp. v. Sharp Elecs. Corp. [1988] 485 U.S. 717, 735-36.
38 Am. Tobbacco v. U.S. [1946] 328 U.S. 781, 786-87.
39 Barry Wright Corp. v. ITT Grinnell Corp., [1983] 724 F. 2d 227, 230 (1st Cir.).

conduct ii) specific intention to monopolize and iii) a dangerous probability of achieving
monopoly power.40 Conspiracy to monopolize is also prohibited. 41 The third kind is mergers.
Mergers can increase as well as decrease the competition. A merger enhances competition by
enhancing efficiency and helps to enter new market. On the other hand it can be
anticompetitive if it increases the entitys power to raise price or restrain output for a
significant period of terms. The anticompetitive mergers are mainly based on the concept of
market power. Merger based on the concept of market power. Mergers increase the
concentration in the market. This merger can also lead to setting up of super competitive
prices by the entity or the entity controlling the actions & prices of remaining forms. Antitrust
Laws concern themselves more with horizontal at mergers and also with vertical to some
extent.42
It should also be borne in mind that competition policy is primarily a national concept as
well. It is always made and enforced on a national basis. Thus it also varies in its legislative
form and scope from country to country in terms of different legal traditions and state
interests. The most common of them are Antitrust Laws and Unfair Competition Laws.
Further, we will analyze that how competition policy may affect incentives to create new
intangible assets within the meaning of IPRs.43 The first point is that competition policy in
most countries guards against the creation of excessive concentration and market power
through merger control.44 This is perceived significant on the belief that incentives to
innovate are assumed to be greater when an industry is not monopolized. Secondly,
40 Time-Picayune Publg v. U.S. [1953] 345 U.S. 594, 626.
41 Paladin Assocs. v. Mont. Power [2003] 328 F. 3d 1145, 1158 (9th Cir.).
42 Michael L. Weiner, Explaining New Theories of Unilateral Effects, (Spring,
1997).
43 See e.g. Shanker A. Singham: SYMPOSIUM: THIRD ANNUAL LATIN
AMERICAN COMPETITION AND TRADE ROUND TABLE: Competition Policy
and the Stimulation of Innovation: TRIPS and the Interface Between
Competition and Patent Protection in the Pharmaceutical Industry, 26
Brooklyn J. Int'l L. 363 Brooklyn Journal of International Law (2000); see also
OECD Report(1989) at p.6.
44 See Jerry F. Xia, Intellectual Property Rights and Competititon Policy:
Double-edged sword, Eramanus University (Rotterdam 2001).

competition policy may interact with innovation in respect of the application of competition
rules to research and development (R&D) joint ventures, i.e., R&D joint ventures, apart from
certain special circumstances, generally do not raise competitive concerns.45
III. Intellectual Property Rights and Competition: In balance
Though IPRs and Competition Policies share complexities and remained in contradiction
with each other since their start but however, it is now usually being accepted that the two
regimes are not so much at loggerheads as they pursue the goals of consumer welfare and
encouraging innovation46 through different means. Competition is not affected by the
existence of IPRs but by the exercise of these rights47 beyond a reasonable and proper scope.48
The line after which IPRs start hampering the competitive spirit in the market is thin but
appreciable. Hereinafter one after the another we will try to analyze different points where
they are in perfect balance, or, in fact, complementary.
3.1 Existence of Rights v. their exercise
Whenever two different legislations are formulated which in effect give two different kind of
rights, it is first made sure that they should be in compliance with each other and should not
intersect when implement because in such a case purposes for which both rights are created
fail. As far as IPR is concerned, it guarantees two kinds of rights, first is property right and
the second one is personal right. Property right is basically the right of excluding others from
45 See OECD Report: Competition Policy and Joint Ventures, paras. 58, 317,
OECD (1986).
46 According to the United States Federal Trade Commission, competition law protects
free competition inthe marketplace, while IPRs protect innovators ability to earn a
return on the investments necessary to
innovate and both spur competition among competitors to be the first to enter the
marketplace.

47 . This distinction was first introduced in Consten & Grundig v. Commission [1966]
CMLR 418 and was further elaborated in Deutsche Grammophon Gesellschaft v. MetroSBGromrkte GmbH [1971] CMLR 631.

48 C. Gastle, M. Martyn, Trips, doha and the role of competition law in compulsory
licensing, http://www.dtn.go.th/vtl_upload_file//1256803453890/Lecture%20VII,
%20%20TRIPS,%20Doha,%20Com
pulsory%20Licensing,%2009-10-19.ppt (March 7, 2010).

the exploitation and use of the property produced from the intellect of the proprietor whereas
personal right means that the creator or creators of an IPR can have the exclusive and infinite
right to entitle his / her or their name(s) to the IPR concerned. Property right expires after a
certain period fixed by the statute but the personal right given is perpetual in nature. For
instance, a copyright would expire 50 years after the death of the author, and the public can
use this copyrighted work totally for free. 49 But his title to the work can never be challenged
nor can he be derecognized for the work he did.
The legal monopoly given to the proprietor to compensate for the investment incurred by him
in form of property rights does not necessarily means that he will enjoy a dominant position
in the market or market power. Here we need to understand what exactly the market power
means. Market power is the power to force a purchase to do something that he would not do
in a competitive market.50 To explain further it can be said to be the ability to raise prices
beyond the level one would expect in a competitive market. A firm with comparatively higher
market power sets a price higher than others. Market power arising from superior products,
business acumen or historical accident is not volatile of Antitrust Laws as they only prohibit
anticompetitive conduct or agreement.51 Often this market power becomes a pre condition for
anticompetitive conducts and practices. In IPRs it seldom happens that some path-breaking
and brand new technology in all of a sudden invented (like Xerox Machine) so as to give a
dominant position to the owner so that he can drive out his competitors from the market.
What usually happens is the new invention is only a slight step ahead in the already existing
technology.52 In such situation the protection provided by IPRs hardly results in sufficient
market power to generate significant monopoly behaviour. Most of the times due to heavy
availability of substitutes in the market and cut-throat competition almost in no time
substitute technology is developed which results into competing trademark. The subtle point
49 The original creators of works protected by copyright, and their heirs, have
certain basic rights. They hold the exclusive right to use or authorize others to
use the work on agreed terms. This exclusive right has a time limit, according to
the relevant WIPO treaties, of 50 years after the creator's death.
50 Eastman Kodak Co. v. Image Technical Servs. [1992] 504 U.S. 451,464.
51 Spectrum Sports v. McQuillan [1993] 506 U.S. 447,458.
52 See further e.g. Dam, The Economic Underpinning of Patent Law, vol. 23,
Journal of Law and Economics (1994), at p. 247.

here is the development of substitute technology and existence of competing trademarks

results into further competition among them to take the lead in the market. Furthermore,
exclusivity alone does not ensure market power but acquiring of dominant position in the
market actually depends on the demand of the intellectual property created. 53 To some extent,
such a legal monopoly is also a rational one in view of the strict requirements for granting an
IPR and the limited term of protection period under law. As already highlighted in the
Introduction, if the IPR exploitation exceeds the boundaries set forth by IP law, then it would
probably lead to the violation of both IP law and competition policy, even though for the
former it may be just of general principles.
3.2 Innovation encourages Competition
Competition Policies involves in formulating a set of rules and regualtions which promote
competition in the market. These are aimed at preventing unfair trade practices with the
intention of curbing abuse of monopoly in the market by the dominant company. On the other
side monopolistic IP Laws guarantee an exclusive right to the creators and owners of work
which are a result of human intellectual creativity so as to prevent commercial exploitation of
the innovation by others.

54

Still they do share some common objectives of encouraging

innovation, promoting competition and eventually improving economic development.55

IPRs give incentive to all those who innovate and by exclusive rights to use also provides a
reward of temporary dominance and lead in the market. Such exclusivity thus encourages
innovation and hence lead to a more competitive environment. IPRs sometimes become very
essential to protect the competitive spirit. Most of the innovation can easily be copied or
imitated if they enter the market without protection. In such a situation the creator would not
be able to earn as much as he invested in innovating. 56 This will discourage him from future
innovation and at macroscopic level the market will become stagnant with very few
innovations coming up once in a blue moon. This situation can dangerously affect the
competition. As without the will to innovate there cannot be any challenge of competing. The
53 See OECD Report (1989), p. 15.
54 See e.g. US IP Guidelines, (1995), chapter1.
55 Ibid.
56 See e.g. Valentine Korah (1997), chapter 8-9.

example of it could be artistic works. Without copyright authors and artists might hardly
make a living, let alone the inspiration to create new works. Simultaneously, competition
policy may also be invoked to protect the same incentives from anti-competitive conduct that
creates, enhances or maintains market power or otherwise harms vigorous inter-firm rivalry.57
Whenever a party in the market will get property rights he will no only get incentives in the
return but the exclusive rights given will act as barrier for the others to compete with them.
The only option that will be left with them would be to increase their innovation skills and
come out with a new technique or product which will ensure that they remain in the
competition. In the course of competing for possible monopolistic rewards of IPRs, firms
technological level and competitive ability would be enhanced by continuously investing on
research and development (R&D). In this sense, the exclusive rights granted by IP laws
would instead have a pro-competitive effect on the market development and resource
allocation. In the longer run, such protection will not only increase operating efficiency and
but will also make the economy more competitive.58
Licensing agreements plays a very important role in encouraging competition in the market.
These licensing agreement acts as the tool to ensure the reward to the innovator as well as
diffuse innovation.59 The terms of licensing agreements may operate in pro-competitive way
such as to permit the licensor to increase the sales of his innovation, to permit him more
easily to come to terms with licensees or to increase product quality or a licensees productive
efficiency. By permitting the licensee to exploit the innovation, scope of further development
and advancement in the innovation is made open.60
3.3 Consumer Welfare & Consumer Protection
Both the IPRs and the Competition Policies, working in different spheres, aim at consumer
welfare and consumer protection. In IPRs all the innovations ultimately converge to
consumer welfare. Such useful innovations can be used by the public either through the
57 See Canada IP Guidelines (2000), Art. 3.
58 See also Valentine Korah.
59 See OECD Report (1989), foreword.
60 Idem. at p.17.

appropriate payment of royalty or even, just for free after the IPR on it expires or otherwise
on some special conditions.61 The product for sometime though remain in private hands but
after the expiry of certain time it becomes readily available for public good. Without IPR
system, rapid imitation of the innovation would erode the innovations commercial value as
well as the innovator or investors incentives to innovate further, and eventually diminish
consumer welfare. Secondly, the areas of intellectual property that are most relevant for
consumer protection and welfare are Trade Marks, Geographical Indications and Protection
against unfair competition. A trade mark is a sign which is used in the course of trade and
distinguishes goods or services of one enterprise from those of other enterprises. While, a
geographical indication is an indication used to identify goods having special characteristics
originating from a definite geographical territory. These IP rights help the consumers in
buying quality products and protect them from use of substandard products which may cause
health and safety hazards. This way IPRs protect the consumers mental or financial loss or
even their personal or property safety.62
Competition Policies by discouraging unfair competition actually focuses on to protect the
rights of the consumer. The relationship between competition policy and consumer welfare is
said to be governed by three fundamental principles. 63 Firstly, Competition policy exists
within the realms of consumer welfare and not the other way around. Secondly, they
encourages only conduct which promotes consumer welfare. Consumer protection provisions
directly promotes consumer welfare by prohibiting merchants from engaging in deceptive
practices such as misleading representation, double-ticketing and bait-and-switch.64 And
lastly, they impose an obligation of active participation on consumers. This is accomplished
by preventing cartels aimed at price fixing, limiting output or otherwise restricting
61 For example, for the use of individual, or academic research, school
teaching, etc. See further e.g. W. Cornish.
62 See IPR and Consumer Protection,
http://business.gov.in/consumer_rights/ipr_consumerpro.php (Mar 7, 2010).
63 Kevin Hariott, Consumer Welfare within Competition Policy, Jamaica Fair
Trading Competition (Mar 2010).
Web:http://www.jftc.com/Libraries/Speeches_and_Presentations/Competition_We
lfare_Within_Competition_Policy_-_Dr_Kevin_Harriott.sflb.ashx
64 Ibid.

competition, by preventing firms from gaining market power in unjustified ways, e.g.,
through anti-competitive mergers with competitors, by raising the barriers to entry facing
new firms, and by preventing firms with market power from abusing their dominant
positions.65 IPRs and the Competition Policies work as private law and public law
respectively but even following different regulatory mechanism but to achieve the same goal.

3.4 Unfair Competition

Unfair competition is a term applied to all dishonest or fraudulent rivalry in trade and
commerce. Acts of unfair competition are generally characterized by deception, bad faith,
fraud or oppression, or as against public policy because of their tendency to unduly hinder
competition. Trademark Infringement, false advertising, unauthorized substitution of one
brand of good with another, misappropriation of trade secret, false representation of goods
and services are few important unfair competitive practices. IPRs and competition policy can
enjoy a perfect harmony under the law of unfair competition 66 which is one of the three major
components of broad competition policy. IPRs and competition policies overlap each other as
far as curbing the unfair competition is concerned.
The grant of trademark and its registration has been made very rigorous under the IPRs so as
to combat the problem of infringement of trademark. Another important intangible asset is
trade secret (know-how) or undisclosed information, which, however, is outside the scope of
patent law. This approach has been customarily carried out under the framework of unfair
competition law throughout the world.67 If one copies the title of anothers book and this
other book is more widely sold. this infringement obviously cannot be sued under copyright
law but instead possibly under unfair competition law if provided so. In practice it is possible
65 See OECD Report (1989), chapter 2.
66 In this context, unfair competition does not refer to the economic harms
involving monopolies and antitrust legislation.
67 For instance, Articles 16 and 17 of German Anti-unfair Competition Law,
Article 1 of Japanese Law of Unfair Competition Prevention Law, Articles 19 and
20 of Taiwan Fair Trade Law and Article 5 of Law of Peoples. Republic of China
Against Unfair Competition Law, etc. Section 17 of the WIPO Act Against Unfair
Competition and Section 7 of the TRIPS Agreement, on the other hand,
represent some multilateral efforts in this regard.

that certain violations of IPRs which cannot be repaired by the IPRs itself, in such a case its
most of the time the unfair competition laws come to rescue. The small areas which could not
be protected by IPRs are often taken care by the unfair competition policies.
On the other hand, the first level where the acts prohibited by unfair competition is put a
check on is from the stage of IPRs. IPRs guarantees exclusive rights but at the same time it
also determines the period till which rights will be valid. Thus it maintains a fair balance
between private rights and public rights. Secondly, IP laws very strictly prohibit the
acquisition of IPRs is through unfair competitive means. For example, the trademark law in
most countries would commonly inhibit or provide as grounds for cancellation such unfair
and unlawful acts in the acquisition of a trademark as frauds, fabricating truth, forging related
documents, counterfeiting or translating famous trademarks, etc..68 Thirdly, for some of the
unfair competitive acts, which are not prohibited under unfair competition laws, we can look
for their remedies in IPRs. For example, in the cases of counterfeiting or imitating of
unregistered trademarks, packages or decorations of non-famous trademarks and
advertisements, unfair competition law would probably not be applicable since these
intangible assets do not meet the requirement of famous or well-known, i.e., they have
little commercial reputation to cause serious confusion. Instead, they might be subject to the
prohibitions of copyright law provided that these marks, packages, decorations or advertising
words or pictures can constitute a work under the copyright law. Unfair competitive
practice in IPR licensing agreement like vertical and horizontal agreements, territorial and
non-territorial restraint, no-challenge clauses, exclusive grant-backs, tie-in-arrangement, noncompetition clauses, exclusive pricing & dealing, output restraints etc. are often hit by unfair
competition law in practice if they cross their legal boundaries.
These two not only complements each other if we talk about unfair competition but also
overlap at few points. For example the decoration and packaging of a well-known product
qualifies for protection both in unfair competition laws as well as a copyright. Here, the
proprietor has to choose under which law he wants to protect his intangible asset.

68 See e.g. Article 25 of the Implementing Regulations for the Trademark Law
of the Peoples Republic of China (First Revision Approved by the State Council
of the People's Republic of China on January 3, 1988, Second Revision Approved
by the State Council of the People's Republic of China on July 15, 1993); English
text available at <http://www.chinlaw.com>.

V. Conclusion
The interrelationship and tension between Competition and Intellectual Property Rights has a
very long history. The prime point of difference between them is the goal which they sought
to achieve in short run, though it is now being accepted that the spirit behind both of them
could be the same in the longer run. When Competition Policies seek to encourage
competition by discouraging exclusionary practises, at the same time Intellectual Property
Laws provides some degree of exclusion to innovations to encourage further research and
development. Though in shorter run they seem to be conflicting with each other but
ultimately Intellectual Property Laws complements Competition policies as betterment in the
innovations leads to finer & healthier competition in the market.
The two systems which are said to be in unhappy marriage, however, share very common
purposes. Just as stated in the ruling of Atari Games Corp. v. Nintendo of America, Inc.: The
aims and objectives of patent and antitrust laws may seem, at first glance, wholly at odds.
However, the two bodies of law are actually complementary, as both are aimed at
encouraging innovation, industry and competition."69 As dicussed earlier, temporary legal
monopoly is not enough to create market power but it is somewhere enough to trigger a
competition for innovation in the market. The information about an intellectual property
without protection can be exploited by the people at zero cost and that too without exhausting
the information itself. Thus, the right to exclude allows positive prices to be charged for use
69 US Case, 897 F.2d 1572, 1576 (Fed. Cir. 1990).

of the information and tends to restrict output (or more accurately dissemination of the
information). Both of them aim at consumer protection and consumer welfare. Moreover, we
have seen in practice that IPR licenses are generally pro-competitive than being
anticompetitive. Generally, the application of competition policy affects the use of intellectual
property rights in two main ways. First, and most importantly, competition policy applies to
the clauses used in agreements to license inventions. Second, competition policy may impose
certain remedies for abuses, compulsory licensing in particular, which affects the innovator
immediately and can alter future behavior as well..
The relationship between these two sets of law has changed over time. Like any other
property right, intellectual property being a true property right should have clear boundaries.
This clarity is essential to promote progress because it enables efficient investment in
innovation. Profit is the reward that encourages firms to invest, innovate and compete with
each other through the mechanism of dynamic efficiency.70 In the words of American jurist
Learned Hand, The successful competitor, having been urged to compete, must not be turned
down upon when he wins. If a successful firms rivals believe that a different product would
create more consumer welfare, antitrust policy should encourage them to create that product.
If the Competition overly restrict Intellectual Property Rights, the restriction create strong
incentives for companies to limit the diffusion of both intellectual property and the products
and services reliant on that intellectual property thus limiting international trade.
Consequently the international antitrust treatment of intellectual property assets bears heavily
on the extent of the development of international trade and, ultimately, the rate of progress
towards the creation of a single global economy. After all, innovation is for competition.

70 United States v. Aluminium Co. of Am [1945] 148 F. 2d 416, 430 (2d Cir.).