COMPETITION LAW AND INTELLECTUAL PROPERTY RIGHTS: AN INDIAN

PERSPECTIVE

COMPETITION LAW

Submitted by:
HARSHIT MALVIYA

2016039

SEMESTER IX

Submitted to:
Ms. Varshita M,
Assistant Professor,
DSNLU

DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

Visakhapatnam
1
 ACKNOWLEDGEMENT

I have taken efforts in this project. However it would not have been possible without the kind
support and help of many individuals. I would like to extend my sincere thanks to all of them.
I am highly indebted to Ms. Varshita M. for her guidance and constant supervision as well as
for providing necessary information regarding the project.
I would like to express our special gratitude and thanks to our faculty member for their
patience, time and helping me in developing the project and people who have willingly
helped us out with their abilities.
TABLE OF CONTENTS

1. INTRODUCTION
2. INTERFACE BETWEEN INTELLECTUAL PROPERTY RIGHTS AND
COMPETITION LAW
3. PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
Patents Protection
Trademarks Protection
Design Protection
Copyrights Protection
Consumer Protection
4. INTERNATIONAL OBLIGATIONS
TRIPS Agreement and Flexibilities for Developing Countries.
Court’s Opinion in Different Jurisdiction.
Study of such conflict from India’s Perspective.
5. INDIAN COMPETITION POLICY WITHIN PATENT LAW: EX-ANTE AND
EX-POST
Ex-ante and ex-post competition within patent law- policy thresholds.
Difference in the nature of market intervention between IP and Competition law.
The Competition Act, 2002.
6. CONCLUSION
 ABSTRACT

Property rights are critical in modern free-market capitalist oriented societies. Intellectual
property rights (IP) protection aims to provide an exclusionary right i.e. a right to exclude
others in doing acts that are offered as a bundle of rights over creations of human mind. IP is
fashioned into different forms of protection like patents, copyright, trademark, geographical
indication, plant variety protection, industrial designs protection, layout design protection,
trade secrets etc. These are a category of intangible rights which protect several aspects of
innovation and forms of human creativity. However, there are important distinctions between
treating real property (land and chattels) and IP owing to fundamentally different economic
character of information/knowledge. Hence excluding others has a tremendous economic
consequence which impacts both innovation and access.

At the same time, competition law and policy is an instrument to intervene in markets and
correct market failures. Such laws primarily seek to encourage competitors to compete
against each other and thereby create an economically efficient free market system. Adam
Smith, father of economics once said: “People of the same trade seldom meet together, even
for merriment and diversion, but the conversation ends in a conspiracy against the public, or
in some contrivance to raise prices.” Thus competition benefits consumers since rivals
compete to attract business by lowering prices, improving quality and services and are driven
by consumer needs.

In conclusion, the study argues that the present Indian Competition Act, 2002 is not equipped
to deal with the interplay between competition provisions and the intellectual property
protection. It reflects on the lack of sufficient rules along with the deficit in sufficient case
laws which makes the issue more complex and suggests that CCI should come out with IPR
and competition specific guidelines in order to deal with those cases.
 1. INTRODUCTION

Competition law and intellectual property law has different occupied field and enacted to
cater distinct objectives. There is a dire need to understand the smooth functioning of the both
the laws.1 Competition law regulate those practices which has anti-competitive effect on
market and thus hampering the smooth functioning of the market. On the other hand, IPR
talks about the exclusive monopoly right to the holder. The non-excludable character that has
been created by IPR that causes deadlock2 between the two essentially which creates interface
between two respective laws. Thus, it creates a tussle between the IPR and Competition laws
which needs to be resolved cordially.

IPR is usually used as a tool to create exclusive monopoly rights to the holder and thus
deterring other players from offering the products in the same market which reduces
competitiveness in the market and led to creation of conflict between objectives of both the
law. IPR is based on the concept of reward theory means the reward the inventor 3 who has
disclosed to the society at large which further intensifies the bone of contention. However, by
observing the objectives there is an undisputed opinion that both the laws promote consumer
welfare and innovation.4 Competition law is enacted to avoid the misuse of the monopoly
power granted under the statute which is widely traced in different before enacting such
legislation to control abuse of monopoly power. The Competition Act, 2002 has widely
accepted the intentions of IPR while framing provisions and it does not eliminate the
dominance achieve by an individual due to such Intellectual Property Rights.5 Thus, a
balanced approach is required to harmoniously construct both the statute and to clarify much
upon that different jurisdictional opinion has to be taken into consideration.

2. INTERFACE BETWEEN INTELLECTUAL PROPERTY RIGHTS

AND COMPETITION LAW

Ever since the Statues of Monopolies was enacted in England in the year 1624, the tension
between the IP and completion laws have existed because the prohibited monopolies but

1
K.D. Raju, “The Inevitable Connection between Intellectual Property and Competition Laws”, Journal of
Intellectual Property Rights.
2
Ibid.
3
Holyoak & Torreman, Intellectual Property Law, Oxford University Press, 2008.
4
Atari Games Corp v. Nintendo of Am Inc, 897 F.2d 1572, 1576 (Fed Cir 1990).
5
Case No. 04/2015, Best IT World India Private Limited v. M/s Telefonaktiebolaget L M Ericsson (Publ) (CCI).
allowed patent monopolies. Companies are not allowed to maintain a monopoly over the
market however they can monopolise their technologies for any specific period of time. The
Competition Act of India seeks to prohibit anti-competitive agreements, prohibit the abuse of
dominant position by organisations and to regulate mergers. The act prohibits an enterprise to
enter into an agreement in respect of production, supply distribution or control of goods or
provision of services, which is likely to cause an adverse effect on competition within India
but at the same time it bestows a blanket exception on IPR.6 However, section 4 of the act
provides with sufficient conditions for interfering in intellectual property matters in cases of
abuse of dominant positions. The courts have held that CC has the jurisdiction to deal with
competition cases involving IPR. In the case of FICCI Multiplex Association of India v.
United Producers Distribution Forum,7 the question was whether c copyright holder can
enjoy his right when it effects the competition in the market. The court held that the copyright
is a statutory right under the Copyright Act, 1957 and not an absolute right and the IP laws do
not have a total overriding effect on the competition laws. The European Courts of Justice
and US Supreme court have held that the aim of IPR is to ensure innovation in all areas and
furtherance of commercial interest is only secondary. The CCI has the authority to punish
IPR holders who abuse their dominant position under Section 27 of the Competition Act,
2002.

Furthermore, the concept of complementary goals of intellectual property and competition

law system is used to make laws on licensing. In the case of Entertainment Network (India)
Limited
v. Super Cassette Industries Ltd,8 Supreme Court held that the rights of copyright owner to
exercise monopoly or to charge royalty through issue of license is not absolute. Overpricing
of any patented product is not really against the provisions of the competition Act but has
close links to the refusal to license. In the case of Singhania & Partners LLP v. Microsoft
Corporation,9 Indian competition authorities failed to see the abuse of dominant position,
tying agreements and other anti-competitive charges by Microsoft.

Practices in the field of IPRs which do not enjoy exemptions inter alia include the following:

1. Patent Pooling is considered to be restrictive trade practice. The term “pool” has been
used to describe myriad different arrangements in which patent owners in some manner have

6
The competition Act of India, 2002, section 3.
7
FICCI – Multiplex Association of India vs. United Producers/Distributors Forum and Others, [Case No.1/2009
decided on 25.5.2011].
8
Entertainment Network (India) Limited v. Super Cassette Industries Ltd, 2008 (37) PTC 353 (SC).
9
Singhania & Partners LLP v. Microsoft Corporation Pvt Ltd., Case no. 36/2010, decided by the CCI on 22 June
2011.
combined their patents. The term means locking up of all technology in respect of an
intellectual property in a few hands by means of a pooling agreement. The essence of a patent
pool, therefore, is an agreements between patent owners to waive their exclusive patent
rights. Such agreements make it difficult for outsiders to compete with the parties to the
pooling agreement. Therefore, an enterprise manufacturing a particular product and entering
into agreement to pool their patents and entering into an agreement to not to grant licenses to
third parties, fixing quotas and price for the products produced on the basis of patent owned
by operating in the market fall in the category. Pooling effect could keep away new entrants
in the market. Patent Pooling could give advantage of super profits and promote imperfect
competition being against government policy and the Competition Act. Patent pooling is
commonly experienced in the Drug and high technology based industries.10

2. Tie-up arrangement entered amongst few enterprises is another form of restrictive

practice that creates market imbalance and leads to imperfect competition. An instance where
a licensee of a particular product is also required to buy some other material along with the
main product in the nature of a tag on item which forecloses opportunities to other producers
fall in the category. There are many instances of barring licensees from competing or to
handling goods with those of the patentee.11

3. Agreement including a clause requiring for payment of royalty by the licensee even after
the expiry of the patent period or payment for unpatented products along with the patented
know-how fall under restrictive trade practice and the exemption under Section 3(5) does not
hold good.

4. Agreement including a clause restricting competition in Research and Development or

prohibition imposed on a licensee from using rival technology would take away exemption
granted under Section 3(5) of the Act and such agreements would be anti-competitive.

5. Agreement by which a licensee may be subjected to a condition not to challenge the

validity of IPR in question is an anti-competitive agreement and such agreement does not
enjoy immunity granted u/s 3(5).

6. A licensee may be required to grant back to the licensor any know-how or IPR acquired
and not to grant licenses to anyone else. This is likely to augment the market power of the
licensor

10
Resnik DB, ‘A biotechnology patent pool: An idea whose time has come’ (2003).
11
Jefferson Parish Hosp. Dist. No. 2 v. Hyde (1984) 466 US 2.
in an unjustified and anti-competitive manner thus leading to withdrawal of privilege u/ SS 5
of Section 3.

7. An agreement by which the licensor fixes a price of a product at which the licensee should
sell in the market is an anti-competitive agreement and the immunity u/s 3(5) is withdrawn.

8. An agreement by which the licensee may be restricted territorially or according to

categories of customers is anti-competitive and the protection granted u/s 3(5) is lost.12

9. A licensee may be coerced by the licensor to take several licenses in intellectual property
even though all may not be the required by the licensee. The agreement is said to be package
licensing and is regarded anti-competitive and is outside the exemption granted u/s 3(5).

10. A condition included in an agreement between a Licensor and Licensee imposing quality
control on the licensed patented product beyond those necessary for guaranteeing the
effectiveness of the licensed patent is anti-competitive practice and no protection u/s 3(5) can
be enjoyed.

11. Any agreement which includes restriction of the right of the licensee to sell the product of
the licensed know-how to persons other than those designated by the licensor may be
violative of competition and is anti-competitive and outside the scope of protection u/s 3(5).

12. Agreement by which there is restriction on the use of a trade mark by the licensee shall be
regarded anti-competition as it restricts competition to select the free use of a trade mark by
the licensee. Such agreement falls under the scope of anti-competitive agreement.13

13. Agreement to grant indemnity to the licensor to meet expenses and the action of
infringement in proceedings is anti-competitive within the meaning of S 3(5).14

14. Undue restriction on licensee’s business shall be considered to be anti-competitive.

Restriction on use of a drug could be a restriction on the licensee if it is stipulated by an
agreement that the medicine should be used for humans and not animals even though it could
be used for both humans and animals. This leads to withdrawal of the exemption granted u/ s
3(5).

12
John Klein, ‘Cross- Licensing and Antitrust Law’, (United States Department of Justice, 2nd May 1997).
13
Govaere, I., The Use and Abuse of Intellectual Property Rights in E.C. Law, (3rd edn, Sweet & Maxwell
London 1999) 5.
14
Kumar Jayant and Abir Roy, Competition Laws in India (1st edn, Eastern Law House 2008), 200.
15. Agreement limiting the maximum use of a patented invention on the licensee may affect
competition and the immunity granted by Section 3(5) stands withdrawn.

16. Any agreement wherein a condition is imposed on the licencee to employ or use staff
designated by the licensor is likely to be regarded as an anti-competitive agreement and is
liable to be outside the purview of S 3(5).

3. PROTECTION OF INTELLECTUAL PROPERTY RIGHTS

Patents Protection

Patents means an official document giving the holder of the patent the sole right to make, use
or sell an invention and preventing others from imitating it. From the manufacturer’s
prospective patents create a market barrier to other competitors and they can also charge
royalties on the license of patents to third parties. Though patents give effective protection to
invented new technology; it is an expense. It allows the owner to commercially exploit the
consumers. The patent system has protected inventors by giving them an opportunity to profit
from their labours, and it has benefited society by systematically recording new inventions
and releasing them to the public after the inventors’ limited rights have expired.15

India made its patent laws compatible with the Trade-Related Aspects of Intellectual Property
Rights (TRIPS) Agreement under WTO by 2005 and has incorporated all changes in the
Patent Act, 1970 through various amendments. These changes caused paradigm shift in the
thinking of the intellectual property managers and inventors.16

Trademarks Protection

Trademark symbolizes the value or goodwill associated with the goods and which can be
assessed by the extent to its perception in the public mind with regards to its quality and
specific source. The goodwill associated with a trademark can be among a company’s
greatest intellectual property assets. Protecting one’s trademarks by using them properly,
promoting them, and monitoring one’s rights by challenging infringers, is essential in
maximizing their value. Trademarks rights are infringed, when one party uses a mark of
another party and that

15
6Govaere, I., The Use and Abuse of Intellectual Property Rights in E.C. Law, (3rd edn, Sweet & Maxwell
London 1999) 5.
16
Keith E. Maskus and Mohammad Lahouel, ‘Competition Policy and Intellectual Property Rights in Developing
Countries: Interests in Unilateral Initiatives and a WTO Agreement’ (1999).
is likely to cause confusion in the minds of consumers as to which party is the source of the
original goods or services, he/she wants to purchase. In determining whether two marks are
“confusingly similar,” courts look at the overall commercial impression made by the two
marks from the standpoint of a reasonable customer. Do they look alike or sound alike?17 Do
different words have a similar or identical meaning?18 Disposing the appeal and remanding
the case to the trial court, Cadilla Healthcare for ‘Falsigo’ v. Cadilla Pharmaceuticals for
‘Falsitab’,19 an anti-malarial drug, the honorable Supreme Court set out the following general
factors for deciding of deceptive similarity in an action for passing off on the basis of
unregistered trademark:

• The nature of the marks-word marks/ label marks/ word and label marks;
• The degree of resemblance between the marks, both phonetically and in ideas;
• The nature of the goods in respect of which they are used as trademarks;
• Similarity in the nature, character and performance of the goods of the rival traders;
• The class of purchasers who are likely to buy the goods bearing the marks, their
education, intelligence and the degree of care they are likely to exercise in purchasing
and/or using the goods;
• The mode of purchasing the goods or placing orders for the goods; and
• Any other extraneous circumstances which may be relevant in the extent of
dissimilarity between the competing marks.

The Patent & Trademark office owns no responsibility with regard to the misuse of
trademarks by unauthorized parties. The owner of a registered mark has to be watchful to
find out infringement, file a suit and enforce its rights. Once the owner determines that
another party is infringing, a simple ‘cease and desist’ letter from the trademark authority is
sufficient to end the infringement. Further the registered user can sue the infringer in Indian
Court, which is potentially a costly proposition.20 The owner needs to access the
commercial value of the mark and the possible economic loss that would result from the
dilution of the mark’s distinctiveness caused by the infringer. It is important to note that an
infringer will be less likely to succeed in infringing an arbitrary or fanciful mark because
of its inherent

17
Cadbury India Limited v. Sm Dyechem Limited, (2000) 1 GLR 680 (Piknik v. Picnic).
18
Play Boy v. Play men; Aqua-care v. Water Care.
19
Cadila Healthcare Ltd v. Cadila Pharmaceuticals Ltd. (Civil Appeal No. 2372 of 2001 decided on March 21,
2001).
20
Magill, IMS Health and Microsoft cases.
 distinctiveness.21 Conversely, descriptive marks are much easier to successfully infringe
because of their inherent weakness in distinguishing the products or services they denote.

Design Protection

As per Design Act 2000,22 design refers to the features of shape, configuration, pattern or
ornamentation, which can be judged by the eye in finished products. Design registration is
used to protect the visual appearance of manufactured products. A registered design gives
you a legally enforceable right to use your product’s design to gain marketing edge. It also
prevents others from using the design without your agreement. The design registration in
India is intended to:

• Protect only for the appearance of the article and not how it works.
• Protect features of shape, configuration, pattern or ornamentation.
• Protect designs, which have an industrial or commercial use.
• Exclude the designs, which are essentially ‘Artistic Works,’ which are covered by
copyright legislation and are not eligible for design registration.
• Protect the features which appeals to and is judged by the eye. The features are
applied by industrial process.

Copyrights Protection

The Copyright Act, 1957 in Section 14, describes copyright as the exclusive right subject to
the provisions of this Act. It authorizes the copyright owner for the reproduction or copying
in respect of a work or any substantial part thereof, namely:23

• Copyright vests in original work involving skill, labour and judgment in respect of
literary (such as books, publication including computer software); dramatic and
musical works, artistic works;
• Engineering drawings;
• Sound recording;
• Musical work;
• Cinematography film, etc.

21
Magill TV Guide/ITP, BBC and RTE, [1989] 4 CMLR 757.
22
Patrick Rey: Presentation at FTC/DOJ Hearing on competition and Intellectual property law and policy in the
knowledge based economy (22nd May 2002) “http://www.ftc.gov/opp/intellect/020522refdoc.pdf’.
23
Debra A. Valentine: Intellectual property and antitrust: divergent paths to the same goal.
Computer programs are entitled to protection under the present laws. Computer software
comprises program manuals, punched cards, magnetic tapes, disks, and papers etc. which are
needed for the operation of computers. Manuals, papers and computer printouts can be
classified as literary but the concept of algorithms, normally used in programming are not
covered under copyright protection. Software containing certain special information in a
particular notation, mainly punched cards is considered as a literary work. The magnetic tapes
and disks, on which electronic impulses are recorded, are considered as literary work.

As per Section 51 of the Copyright in a work shall be deemed to be infringed:

When any person without a license granted by the owner of the copyright of the Registrar of
Copyrights under this act or in contravention of the conditions of a license so granted or of
any condition imposed by a competent authority under this Act-

• does anything, the exclusive right to do which is by this Act conferred upon the
owner of the copyright, or
• permits for profit, any place to be used for the communication of the work to the
public

The Intellectual property is one of the corner stones of modern economic policy at the
national level. It is increasingly becoming an important tool for sustainable development in
the knowledge-based society of this millennium. Therefore, understanding and appreciating
the economic foundations of the IP systems is a prerequisite for comprehending its increasing
importance and role in national strategies for enhancing competitiveness and accelerating
socioeconomic development. As the IPR legislation gives protection to the marketers or
owners of the IPRs, it may lead to the monopolistic situation and exploitation of the
consumers. However, through the enactment of the following laws the consumer’s interest is
protected.

Consumer Protection

The Consumer Protection Act, 1986 is an important social legislation to protect the
consumers from exploitation from the business and trading community with bad intentions. 24
Under this act the government has made provision for the establishment of consumer councils
and other authorities for the settlement of consumers’ disputes and for the matters connected
therewith to secure speedy and in- expensive redressal of their grievances.25 With the
enactment of this
24
Consumer Online Foundation v. Tata Sky Limited & Others, CCI order dated 23 March 2011.
25
Part VII – Regulations & Marketing International Marketing Conference on Marketing & Society, 8-10 April,
2007, IIMK 721.
law, consumers now feel that they are in a position to deal with the business community and
corporations against their exploitation.

The broad salient features of Consumer Protection Act are:

• The Act is exclusively passed for the interest of the consumers

• It seeks to promote the rights of the consumers
• It covers private, public and co-operative sector
• The provisions of Act are compensatory in nature
In short, it protects the consumers from influences of the seller’s (marketer / manufacturer)
coercive power by way of unfair trade practices to restrict competition. The Consumer
Protection Act, 1986 prohibits marketers form adopting the following unfair trade practice26:

• False representation of the quality, composition, style or model of goods and services.
• Falsely alleging affiliation and misleading statements about the usefulness of goods
and services.
• Warranties or guarantees given without adequate tests, or expressed in misleading
terms,
• giving false or misleading facts disparaging the goods, services or trade of others.
• Announcing bargain prices for goods, which are either put on sale or are offered in
quantities
• which are not reasonable with respect to the nature of the trade, offering gifts, prizes
or other items with the intention of not providing them as offered.
• Sale of substandard and hazardous goods under defined conditions.
Restrictive trade practices

Consumer Protection Act defines the following trade practices as restrictive and regulates
conditions regarding any agreement arising between the seller and purchaser in the course of
business.

• Restrictions on the sale of goods to certain person or class of persons.

• Restrictions on purchase of goods on the conditions of purchase on other type of
goods.
• Restricting the purchase of goods on the conditions such as not to deal with goods
other than those of seller.

26
Section 36A and Section 2(1)mn of the Consumer Protection Act.
 • Restricting purchasing and selling of goods only at prices stipulated therein.
• Allowing the concession of benefits by way of discounts, rebate, allowances, and
credit terms in connection with dealing.
• Restrictions on resale prices (lower than stipulated) of the goods or otherwise
stated.
• Restrictions on the quantity, output and the area of disposal of goods.
• Restrictions on employment in manufacture of goods.
• Restriction on resale prices with a result of elimination of competition.

With a complaint from the aggrieved party (individual or firm) or on its own, regarding the
unfair or restrictive trade practices, the regulators are empowered to initiate enquiry and
impose the penalty or issue ‘cease-and desist’ order.

4. INTERNATIONAL OBLIGATIONS: A COMPARATIVE STUDY

TRIPS Agreement and Flexibilities for Developing Countries

Article 8:2 of the TRIPS Agreement states:

“Appropriate measures, provided that they are consistent with the provisions of this
Agreement, may be needed to prevent the abuse of intellectual property rights by right
holders or the resort to practices which unreasonably restrain trade or adversely affect the
international transfer of technology.”

However, this provision has not been interpreted by any panel of the WTO dispute
settlement. While certain conditions like what amounts to “appropriate” are flexible, such
measures taken must be “consistent with the provisions” of the TRIPS Agreement. This
provision primarily allows non-violation and measures that may be taken under Article 40
with reference to practices that IP right holders resort to in imposing “unreasonably restrain
trade or adversely affect the international transfer of technology.” The concept of “abuse of
intellectual property rights by right holders” is particularly not clear. Some have questioned
the concept of abuse underlying IP in the sense that if IP do not provide a positive right to
exclude but only a negative right, how it would have the capability of causing abuse?27 It is
important to note that such a
27
Nuno Pires De Carvalho, The TRIPS Regime of Patent Rights, Kluwer International, 2010.
view is quite narrow looking to the possibility of IP holder choosing to harm competition by
exercising his rights in several different ways.28

In the context of Principles laid down in Article 8, a WTO panel has come to a conclusion that

“These principles reflect the fact that the TRIPS Agreement does not generally provide for
the grant of positive rights to exploit or use certain subject matter, but rather provides for the
grant of negative rights to prevent certain acts. This fundamental feature of intellectual
property protection inherently grants Members freedom to pursue legitimate public policy
objectives since many measures to attain those public policy objectives lie outside the scope
of intellectual property rights and do not require an exception under the TRIPS Agreement.”29

Article 40 is largely based on comity, where a member whose feels that an IP holder that is
national or domiciliary of another member is suspected of having violated competition law.
However, nothing more than a consultation is required by the provisions of this section. In
most cases, members are free to adopt measures consistent with TRIPS to remedy the abuses
of IP. However, it is interesting to note that whether TRIPS allows members to have a
structural presumption (per se rule) in cases of violation of competition law and policy is
debtable in the light of article which states that “Nothing in this Agreement shall prevent
Members from specifying in their legislation licensing practices or conditions that may in
particular cases constitute an abuse of intellectual property rights having an adverse effect on
competition in the relevant market.”30

The concept of “licensing practices or conditions that may in particular cases” is more likely
to be interpreted as a rule of reason requiring competition authorities to assess pro-
competitive benefits versus anticompetitive ones, rather than a structural presumption for or
against all practices. TRIPS does not provide an exhaustive list of practices, however, it is
important to note that grantback conditions, conditions preventing challenges to validity and
coercive package licensing are identified as the type of practices that may be abusive. In this
context it is important to note that Article 40 gives a wide latitude to members to introduce
take any measure consistent with TRIPS. Since there is a moratorium on non-violation
complaints,31

28
Lemley, Mark A., A New Balance between IP and Antitrust (April 1, 2007). South-western Journal of Law
and Trade in the Americas, Vol. 13, p. 237, 2007; Stanford Law and Economics Olin Working Paper No. 340.
Available at SSRN: http://ssrn.com/abstract=980045
29
In EC — Trademarks and Geographical Indications in explaining Article 8:1.
30
Article 40:2.
31
Article 64:2.
many practices may form part of the standard antitrust analysis as applied to IP. Moreover,
Article 31 allows compulsory licence as a remedy for violations of IP.

Court’s Opinion in Different Jurisdiction

UNITED STATES

The traditional notions relating to IPR laws is that they create exclusive monopolies in the
market and thus antithetical to antitrust practices.32 But, with the advancement of
jurisprudence on Intellectual Property Laws it was inferred that such reward theory provides
substitute products and technologies to the people and increase the variety of options to the
consumers and reduce the anti-competitive practices in the market.33 The Department of
Justice has created “SAFETY ZONE”34 which provides no imposition of any restriction on
the IP Licensing agreement unless and until it creates any appreciable adverse in the market
by way of patent pooling which results into coordinating prices or refusal of license which
results into competitive harm.

EUROPE

The conflict between both the laws was explicitly mentioned under Article 81 of EC Treaty. 35
There is shift from liberal approach to the intervening approach in the IPR related licensing
agreement in European Courts.36 Article 82 deters abuse of dominant position created through
IPR licensing agreement.37 Two block exemptions were provided in regards to IPR licensing
agreement concerning anti-competitive activities. First block exemption was in relation to
“specialized agreement” that discourses on the IPR dispensed in year 2000.38 Such
specialization agreement was exempted with certain compliances i.e. both the parties do not
have more than 20% share and such agreement does not related fixing of prices or output or
territorial jurisdiction of Retailers.

32
US Department of Justice and the Federal Trade Commission, 'Antitrust Enforcement and Intellectual
Property Rights: Promoting Innovation and Competition' (2007).
33
Illinois Tool Works Inc. v. Independent Ink, Inc., 547 U.S. 28 (2006).
34
US Department of Justice and the Federal Trade Commission, “Antitrust Guidelines for the Licensing of
Intellectual Property”, April 1995.
35
Article 81, European Union, Treaty Establishing The European Community, Available at:
http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12002 E081: EN:HTML (Last accessed 14
October 2019).
36
A. Jones & B. Suffrin, EC Competition Law: Text, Cases and Materials, 2008, p. 777.
37
Ibid.
38
Article 1(2), Commission Regulation (EC) No 2658/2000 of 29 November 2000.
Second Block of exemptions relates to “Technology Transfer” which was dispensed in the
year 2004.39 It regulates matter related to patent, know-how, copyright concerning with rule
of anti- competitiveness with certain compliances i.e. combined share of all parties should not
be more than 20% in relevant market and individual share does not exceed 30% and such
licensing agreement is free from severe anti-competitive restraint.

Study of such conflict from India’s Perspective

With the advancement of jurisprudence pertaining to harmoniously construct both the laws it
is necessary to critically analyses the issue in great detail. Every subject matter of IPR need
not be in derogation with competition law. The IPR creates dominant but there is no
reasonable inference that it leads to abuse of dominant position to analyze such issue, we
have to go in depth to the statutory framework and judicial precedents.

Statutory Framework

The Competition Act 2002 was enacted on the pedestal of economic efficiency and
liberalization. It promotes social, economic and political justice for the people. Competition
law was enacted to fulfil the mischief created by MRTP Act with inclusion of vigorous
Provisions and in compliance with TRIPS.40 Section 3 talks about anti-competitive
agreements but section 3(5)41 talks about the interface between the laws which provides
blanket exception to IPR related licensing agreement to promote innovation in the market but
it also regulates the practices which causes Appreciable Effect on Market by abusing such
dominant position under Section 4.42

There are plethora of cases observing the interface between IPR and Competition laws. In the
Aamir Khan Productions Pvt. Ltd. v. Union of India,43 the Bombay HC held that CCI has
jurisdiction to hear all the matters vis-à-vis competition law and IPR. CCI also held that IPR
related right is not sovereign in nature but merely a statutory right granted under a law.44

39
Commission Regulation (EC) No 772/2004 of 27 April 2004.
40
The Institute of Chartered Accountants of India, “Competition Laws and Policies” (2004), p. 129.
41
R. Dutta, “Critical Analysis: Reflection of IP in Competition Law of India”, at:
http://www.indlawnews.com/display.aspx?4674 (Last accessed 14 October, 2019), p.133.
42
T Ramappa, Competition Law in India: Policy, Issues and Developments, The University Press, New Delhi,
2011, p.24.
43
Aamir Khan Productions Pvt. Ltd. v. Union of India, (2010) 112 Bom L R 3778.
44
Kingfisher v. Competition Commission of India, Writ petitions no. 1785 of 2009.
In Entertainment Network (India) Limited v. Super Cassette Industries Ltd,45 the Supreme
Court reiterated on the issue related to conflict between two laws. The court observes that
even though the copyright holder has full monopoly but the same is limited in the sense that if
such monopoly creates disturbance in smooth functioning of the market will be in violation of
competition law and same was in relation to refusal of license. Undoubtedly, IPR owners can
enjoy the fruits of their labour via royalty by issuing licenses but the same is not absolute.

In Union of India v. Cyanamide India Limited &Another,46 it was held by the court that
charging excessive prices on life saving drugs is within the ambit of price control and CCI
has jurisdiction over such matter. In case of scarcity of substitutes there is always a peril of
creation of monopolies which disturbs the economic efficiency in the market. Further, in
different jurisdiction same principle was reiterated.47

5. INDIAN COMPETITION POLICY WITHIN PATENT LAW: EX-ANTE AND

EX- POST

While competition law is designed to intervene ex-post i.e. after the abuse has occurred, IP
laws are designed to promulgate competition ex-ante. This may surprise many that since the
main objective of any IP is to convey limited monopoly through a right to exclude, how it is
reasonably possible to create competition within the IP based framework. Taking example of
patent law, we can see the certain provisions in patent law in India do create a kind of
dynamic efficiency that balances competition.

Ex-ante and ex-post competition within patent law- policy thresholds

Ex-ante competition in the patent law context is created by virtue of identifying the level of
non-obviousness that enable the patent office to assess the qualitative features of an
invention. Thus a screening for inventive step leads to efficiencies since a higher level of
inventive step can leave certain aspects of the invention in public domain for lack of
compliance with such a qualifying threshold. This is called the patentability criterion.
Similarly, Section 3(d) of the Patents Act, 1970 also creates a higher threshold for secondary
patents in the area of chemicals by requiring an enhanced efficacy criterion for qualifying as
subject-matter than can be

45
Entertainment Network (India) Limited v. Super Cassette Industries Ltd 2008(5) OK 719.
46
Union of India v. Cyanamide India Limited & Another, AIR 1987 SC 1802.
47
United States v. Microsoft, 38 1998 WL 614485 (DDC, 14 September 1998).
patented. In this case, the Supreme Court’s decision in Novartis v. Union of India48 offers
useful guidance since efficacy has been interpreted as therapeutic, thereby leaving a large
chunk of non-therapeutic inventions although otherwise patentable outside the pale of patent
law.

Post the grant of patents, there are provision that allow use without authorization of the right
holder. Section 47 refers to limited exceptions to the grant of patent rights by creating a
robust research exemption for experimental use and other kind of acts that involve minor
diminution or rights of the patent holder that may not usually conflict with the normal
exploitation of patent rights.

Ex-post provisions like compulsory licence may also create price based competition. Section
84 allows compulsory licences to be granted if the reasonable requirements of the public with
respect to the patented invention are not met or that the patented product is not available at
affordable prices or that the patented invention is not locally worked. A compulsory licence
may be sought after the expiry of three years of grant. There are several important conditions
attached to the grant of a compulsory licence. It is important to note that such a forced
contract, although curtails the patent holders monopoly power, are considered as obligations
on the part of the patentee. This is confirmed by a decision of the High Court in Bayer
Corporation v. Union of India,49 which repatriated the conclusions of the IPAB that since
compulsory licences are grounds for imposing using without authorization (but with
compensation), these are more like obligations on patent holders.

Compulsory licence under section 84 can be granted on the ground that “if, by reason of
conditions imposed by the patentee upon the grant of licences under the patent or upon the
purchase, hire or use of the patented article or process, the manufacture, use or sale of
materials not protected by the patent, or the establishment or development of any trade or
industry in India, is prejudiced; or if the patentee imposes a condition upon the grant of
licences under the patent to provide exclusive grant back, prevention to challenges to the
validity of patent or coercive package licensing”. Similarly section 91 allows grant of
compulsory licences on relate patents which have a possibility of having blocking effects.

Similarly, section 140 of the Patents Act list out several conditions on licensing that are
declared as void. The licences involve typing, bundling, coercive package licensing,
exclusive grant back and licensing condition that impose a bar on challenge to validity of
patents.
48
Novartis v. Union of India, (2007) 4 MLJ 1153.
49
Bayer Corporation v. Union of India, 2013 Indlaw IP AB 20.
 Difference in the nature of market intervention between IP and Competition law

Competition law intervenes at several levels in IP protected markets for remedying

anticompetitive agreements, abuse of dominance and for regulating combinations. However,
the nature of intervention is significantly different. The provisions in patent law are more
aligned with public internet, which are based on structural conditions. The pro-competitive
effects are not in question in an analysis under patent law. The controller is only required to
comply with formal conditions and not to assess issues involving lawful exercise of market
power. Hence provisions in patent law are more in public interest.

However, any assessment under competition law would require evaluation of relevant
markets and an assessment of the degree of market power held by the IP holder. Here the pro-
competitive benefits of certain conditions on licences may be held as valid. It will be
interesting to see how this interface develops in India owing to elaborate provisions in the
patents Act that deal with situations of abuse that may also fall fowl of competition law.

In HT Media v. Super Cassattes India Ltd50, the High Court of Delhi has held that the CCI
can look into violations of section 4 for abuse of dominance. However, once the CCI came to
any finding which is adverse to T-Series, the CCI shall give a week’s time for T-Series to
approach the appropriate forum under the copyright Act for grant of a relief. In this case, the
CCI51 has come to finding that opposite party is in contravention of the provisions of section
4(2)(a)(i) of the Act by imposing unfair condition of MCC on private FM radio stations.
There was also a cease and desist order issued in favor of the complainant. The Commission
further directed to suitably modify the unfair condition of MCC imposed on private FM
stations in India in its existing agreements within 3 months of the date of receipt of this order.
Penalties were also imposed.

It may be interesting to note that since the time duration for applying for a compulsory
licence under the patent law is three years, could the CCI intervene to prevent any immediate
abuse on the part of the patent holder? This is not very clear from any current practice in the
Indian jurisdiction.

50
HT Media v. Super Cassattes India Ltd, Case No. 40 of 2011.
51
http://www.cci.gov.in/May2011/OrderOfCommission/27/C-2011-40.pdf.
 The Competition Act, 2002

The Competition Act, 2002 endeavours to shift the focus from restricting monopolies to
promoting fair competition, so that the Indian market is equipped to compete with market
word- wide. The object of Competition Act is to promote fair competition in the market, to
protect consumers, firms from each other’s and the interest of the society.52 The highlights of
the Competition Act are as follows:

• The anti-competitive practices such as price-fixing, output restrictions, bid rigging

and market restriction are prohibited.
• Regulates the mergers and acquisitions above threshold limits.
• Competition Act emphasizes in competition advocacy.
The overall direction of this Competition Act is to protect the interest of the consumers,
freedom of trade and promote healthy competition.

Broadly speaking, intellectual property rights lessen competition while competition law
endangers competition. A workable solution can be predicated on the distinction between the
existence of a right and its exercise. In other words during the exercise of a right, if a
prohibited trade practice is visible to the detriment of competition in the market or consumer
interest, it ought to be assailed under the competition law.53

Inter alia the provisions of the Act, Section 3 prohibit anti-competitive agreements including
agreements entered in relation to IPRs. The preamble to the Act states that the Act has been
enacted to establish a Commission to prevent anti-competitive practices, promote and sustain
competition, protect the interest of the consumers and encourage free trade in the market. An
express provision section 3(5) is incorporated in the act that reasonable conditions as may be
necessary for protecting IPR’s during their exercise would not constitute anti-competitive
agreements. In other words, by implication, unreasonable conditions in an IPR agreement that
will not fall within the bundle of rights that normally form a part of IPR’s would be covered
under section 3 of the act.

Provisions like Section 3 of the new Competition Act, 2002 (the Act) deals with anti-
competitive agreements which cannot be used by IPR holders since they are in conflict with
the competition policies.

52
The Competition Act, 2002, amended in 2007 came into force on 31st March, 2003.
53
Kumar Jayant and Abir Roy, Competition Laws in India (1st edn, Eastern Law House 2008), 200.
In Multiplex Association of India v. United Producers,54 the CCI came to a conclusion that
copyright is a statutory right and not absolute. It is restricted to the term granted under the
statute. The extent of 3(5) which is in the nature of a non-obstante clause was held as clearly
providing guidance. Hence collective bargaining agreement entered into by trade associations
is anticompetitive in nature. Hence a violation of Section 3(3)(a) and (b) was made out and
the defence under 3(5) was not upheld.

Under Section 4, refusal to licence IP can also amount to abuse of dominance. Section 4(2)
(b) and (c) considers the question of abuse of dominance which involves limiting production
of goods or provisions of services or market or restriction the technical or scientific
development relating to goods or services to the prejudice of consumers or denial of market
access. However, there are no cases of grant of compulsory licences in India. But a remedy in
the form of a compulsory licence is definitely possible for violation of competition law. The
HT media case discussed above will be the first one if the CCI determines that compulsory
licence is an appropriate remedy.

In another case, Bull Machines Pvt. Ltd. v. JCB India Ltd.,55 the Hon’ble high court came to a
conclusion that once a interlocutory relief was granted by any court, CCI could not have
jurisdiction, although the high court has allowed CCI to conduct the investigations.

The Competition Act, 2002 is not primarily intended to interfere in IP protection unduly,
however, if the CCI finds AAEC in India, there is definitely an action possible under the Act.
Section 3(5) when read with Section 60 and 62 of the Competition Act gives and impression
that resolution of the IP Competition interface is fraught with difficulties. Section 60 states
that the provisions of the Act shall have effect notwithstanding anything contained in other
law (non-obstante clause). Section 62 at the same time states that the provisions of the Act
shall be in addition to and not in derogation of any provision in any other law. This creates
problems in assessing the real nature of the interventions that are possible under the
Competition Act. For example: Under section 3(5) allows IP holders to impose “reasonable
conditions” on their licences to secure IP protection. However, the test for reasonableness
cannot completely undermine the rights of the IP holder. Similarly, would it be unreasonable
to conclude that Section 3(5) can be invoked where conditions declared as unreasonable
under Section 140 or

54
Multiplex Association of India v. United Producers, Case No 1 of 2009, CCI order dated 25 May 2011.
55
Bull Machines Pvt. Ltd. v. JCB India Ltd, Case No 105 of 2013.
84 or 91 of the Patents Act, are to be prima-facie considered also unreasonable under the
competition Act.

6. CONCLUSION

Competition law acts against the abusive monopoly rights whereas IPR rewards the inventor
by providing him with a monopoly right for a limited period of time. IPR goes against the
principle of competition law to enhance market conditions by more choices. However,
Competition laws can play an active role in checking the abuse of rights granted by IPR.
These two laws are neither conflicting nor competing in nature but they are complementary to
each other. Therefore, CCI should adopt specific guidelines to deal with cases that involves
both the provisions of IPR and competition laws. To avoid of concentration of undertakings
in IPR rich companies, merger guidelines should be strictly implemented. Furthermore, using
of license to eliminate competition for improper benefits must be brought under the horizon
of abuse of IPRs.