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UNFAIR COMPETITION

Sanjeev Kumar Chaswal LL.M. (IPR & ARB) M.S. Cyber Security & Cyber law

A market economy allows and encourages competition between industrial and commercial organisations. As competitors are out to win, they may sometimes be tempted to use malicious means to gain an unfair advantage such as making a direct attack against a competitor or misleading the public to the detriment of a competitor. Self-regulation, via associations of organisations, can play an important role by setting up a code of conduct or controlling practices, however, it often fails to be respected by participants or followed by judicial authorities. In 1900, at the Brussels Diplomatic Conference for the Revision of the Paris Convention, Article 10 bis was added to the Convention to try and prevent unfair competition.

What is Unfair competition


As a general rule, any act or practice carried out in the course of industrial or commercial activities contrary to honest practices constitutes an act of unfair competition; the decisive criterion being contrary to honest practices. In Belgium and Luxembourg honest practices are sometimes referred to as honest trade practices, in Switzerland and Spain as the principle of good faith and in Italy as professional correctness. It is not easy to find a clear-cut and worldwide definition of what constitutes an act contrary to honest practices. Standards of honesty and fairness may differ from country to country to reflect the economic, sociological and moral concepts of a given society

Behaviour classified as unfair competition


To prevent unfair practice certain actions are limited by law. Article 10 bis of the Paris Convention classifies unfair business practices into three broad categories:

Acts causing confusion.


Acts that are misleading. Acts damaging goodwill or reputation.
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Acts causing confusion.


An act or practice, in the course of industrial or commercial activities, that causes, or is likely to cause, confusion with respect to anothers enterprise or its activities, in particular, the products or services offered by such an enterprise constitutes an act of unfair competition. Even the likelihood of confusion having a detrimental effect comparable to actual confusion constitutes an act of unfair competition and this widely enlarges the scope of protection. For instance, a trademark, whether registered or not, or a products appearance may lead to confusion. Appearance of a product includes packaging, shape or other non-functional characteristic features of the products.

Acts that are misleading


A misleading act can create a false impression of a competitors product or services leading to the consumer, acting on false information, suffering financial damage.

Misleading acts can take the form of a statement giving incorrect indications or allegations about an enterprise or its products or services. For example, misleading statements concerning the manufacturing process of a product may relate to a products safety and create a false impression.

Acts damaging goodwill or reputation


Reducing the distinctive character, appearance, value or the reputation attached to a product could damage anothers goodwill or reputation. For instance, any act that dilutes the effect of a trademark is considered unfair as it could destroy the originality and distinctive character of a trademark. Other acts that could be classified as causing unfair competition include discrediting anothers enterprise or its activities, industrial or commercial espionage, and acting unfairly with respect to confidential information such as breach of contract or breach of confidence.

Protection against unfair competition


Protection against unfair competition is an ever-evolving notion that has to adapt to the evolution of trade, and the development of new principles and obligations for participants in the business market. Originally designed to protect the honest businessman, the scope of protection against unfair competition has now been enlarged to include protection of the customer. Nowadays laws against unfair competition aim to ensure fair competition in the interests of all concerned. Under the Paris Convention, Member States are obliged to provide protection against unfair competition. This obligation is reinforced by Article 2 of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) that obliges members of the WTO to comply with the Paris Convention.

What is Unfair Competition Law


Two potential meanings of the term competition law Set of provisions ensuring that competition continues to exist in anti-trust law Rules of fair practice in an existing market - unfair competition law. Both areas are generally distinct. What is acts of competition: The Acts done for the purpose of selling goods or providing services. Unfair competition law addresses traders In proceedings concerning unfair competition the defendant is generally a trader. It may, however, protect consumers. Some legal systems give locus-standi to consumer organisations in unfair competition proceedings. Other legal systems distinguish between unfair competition law and consumer protection law.

What is Unfair Competition Law


Areas of unfair competition law Focus: consumer protection Misleading advertising Aggressive advertising = Undue influence on consumers Cold calling, e-mail spamming, ect. (some jurisdictions only) Focus: protection of trade values Damaging goodwill Exploiting goodwill Interference with contractual relations Misappropriation of trade secrets Product imitation

The international legal framework


Article 10bis Paris Convention: (1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition. (2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition. (3) The following in particular shall be prohibited: 1. all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; 2. false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor; 3. indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.

The international legal framework


Provisions on unfair competition in the TRIPS agreement? No consensus on the question of a general tort of unfair competition. (Art. 22) Protection of geographical indications. (Art. 39) undisclosed information, borderline areas between intellectual property and unfair competition

The international legal framework


Examples of unfair competition according to WIPO Model Provisions: Causing confusion Damaging anothers goodwill or reputation Misleading the public Discrediting anothers business

Disclosing or misappropriating trade secrets

The Unfair competition and IP legal framework


Unfair competition and intellectual property : Theory: Unfair competition law is a specific branch of tort law. It prohibits certain acts without granting rights. Example: Art. 10bis of the Paris Convention aims at the prevention of prevent misleading advertising without protecting a competitors or consumers subjective right. Practice: Some areas of unfair competition law do protect rights. There is no clear dividing line between unfair competition and intellectual property law. Examples: protection of trade secrets, protection of goodwill against acts causing confusion Open (and debated) question: Should unfair competition law be allowed to fill gaps in the intellectual property system.

The Unfair competition and IP legal framework

Geographical indications Trade secret protection

IP

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Unregistered TMs Misappropriation of reputation Product imitation

WIPO Model Provisions on Protection Against Unfair Competition


A wide interpretation can be given to an act or practice contrary to honest practices. For example, an omission to act can also be considered an act of unfair competition. The WIPO Model Provisions on Protection Against Unfair Competition defines the failure to correct or supplement information concerning a product test published in a consumer magazine, thereby giving a wrong impression of the quality of the product offered on the market, or failure to give sufficient information concerning the correct operation of a product or concerning possible side-effects of a product, as an act of unfair competition.

WIPO also states that failure to comply with honest practices should arise in the course of industrial or commercial activities. This can be broadly understood as being activities of organisations providing goods or services particularly the selling or buying of such products or services and activities of professionals such as medical doctors or legal experts.