 "Intellectual property and competition law: Two sides of the same coin")
Intellectual property rights (IPR) and competition laws have been in tussle, albeit coexisted as two sides of the same coin. IPRs are a set of statutory rights protected under the Indian Copyrights Act, Patents Act, and Trademarks Act, provided to the inventor or creator to protect their work and exclusivity and enjoy a carve out under Competition Law. PR allows creators, or owners, of patents, trademarks or copyrighted works to benefit from their own work. These rights are outlined in Article 27 of the Universal Declaration of Human Rights, providing the right to benefit from the protection of moral and material interests resulting from authorship of scientific, literary or artistic productions. IPRs grant monopoly rights to the IPR holders. India has ratified the TRIPS Agreement, which is a minimum standards agreement, allowing Members to provide more extensive protection of intellectual property if they so wish. This has resulted in the modern day IPR legislation in the country.
Competition law (CL) is a set of regulations and statutes designed to promote fair competition, prevent anti-competitive practices, and safeguard consumer interests within the Indian market. The law aims to prevent activities such as monopolistic practices, cartelisation, abuse of dominant market position and anti-competitive agreements. It also seeks to encourage market efficiency, innovation, and consumer choice by ensuring a level playing field for businesses operating in India.
The tussle
The tussle between IPR & CL stems because the former encourages monopoly, and the latter restricts. The TRIPS agreement foresees and acknowledges this friction. Article 40 of the TRIPS says: “Members agree that some licensing practices or conditions pertaining to intellectual property rights which restrain competition may have adverse effects on trade and may impede the transfer and dissemination of technology.”
One example is that a patent gives the holder exclusive rights over the patented product, but CL ensures that such a monopoly is not in the detriment of the market and consumer welfare. IPR laws are thus subject to CL, but not absolutely. Competition Act, in Section 3(5), provides that all reasonable conditions imposed by IP holders in exercise of their IP rights would not be subject to the Competition Act.
In United States vs Microsoft it was held that “copyright does not give its holder immunity from laws of general applicability, including the antitrust laws”.
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In the case of Shamsher Kataria vs Honda Siel Cars it was held that mandating sourcing only from Original Equipment Manufacturers or approved vendors, who were marking up the prices by as much as 5000 per cent was abusive. The defendants tried justifying their conduct by taking defence under Section 3(5) but failed.
In Otter tail Power Co v. the United States, the US Supreme Court ruled that a dominant firm that controls an infrastructure or an asset that other companies need to make use of in order to compete has the obligation to make the facility available on non-discriminatory terms.
Where to settle disputes
Now, since IPR & CL are always in tussle, the next question arises that in case of a dispute between the two, where should the disputes be settled? A recent Delhi High Court judgment in the case of Telefonaktiebolaget LM Ericsson v. CCI stipulates that since (a) Patent Law is a special law when put against CL (b) Patents Act is a subsequent legislation as compared to the Competition Act & (c) Patent Act is a complete code in itself and is capable of dealing with licence violations, violations under the Patent Act would be dealt with by the Patent Controller.
So, does that answer the question? No, because the judgment fails to answer fundamental questions: (a) Patent controller has no jurisdiction over markets in general. Patent Act is indeed a special legislation, when compared with the Competition Act, but the judgment fails to acknowledge that the CCI is the exclusive market regulator of the country. So, when an issue concerns the market in general, no one other than the CCI has jurisdiction. This has been put beautifully by the CCI in the case of In re: Madhya Pradesh Chemists, Case 64 of 2014 –“….what the Commission, as a Competition Regulator, is concerned about is not an independent decision of pharmaceutical company in refusing to supply to a stockist, but the fact that when such decisions flow from the diktat of an association, they take a competition angle. In such a case it is the duty of the Commission to make the markets work in a fair, competitive and unfettered manner and any conduct that comes in the way of such fair and efficient functioning, is amenable to the jurisdiction of the Commission……. Further, Competition law is a special law with a mandate overarching across all sectors (which may also be governed by their respective sectoral regulators). While the sectoral regulators define ex-ante rules to regulate the day to day functioning of the market participants in their respective sectors, the Commission acts more as an ex-post regulator which only intervenes when such players disturb the fair functioning of the markets”. (b) Provisions of the Act have an Overriding effect - Section 60 of the Competition Act is a non-obstante clause giving an overriding effect to the provisions of the Act, Section 62 states that the provisions of the Act are not in derogation of any law but in addition to the provisions of any other law, for the time being in force. Further Section 61 specifically ousts the jurisdiction of the Civil courts on matters pertaining to the Act. These section when read with Section 3(5) are indicative of the legislative intent of the framers, i.e., to give exclusive jurisdiction to the Commission on matters relating to the market (c) Patent Controller cannot decide Competition matters such as abuse of dominance, he can only refer to CCI under Section 21A of the Act.
Way forward
Both IPR and CL play crucial roles in safeguarding public interest and fostering economic growth with innovation. Rather than conflict, there should be their harmonious integration. It's important to recognize that the CCI serves as the primary market regulator. The CCI is adept at ensuring fair competition and growth in open markets. However, when it comes to personal, contractual, or licensing disputes, sectoral regulators should take precedence as they are better equipped to handle such matters.
The writer was the first chairman of the Competition Commission of India. He was executive director at the World Bank for India, Sri Lanka, Bangladesh and Bhutan. He is currently Chairman of Competition Advisory Services LLP. (With inputs from Varun Singh)
These are the personal opinions of the writer. They do not necessarily reflect the views of www.business-standard.com or the 'Business Standard' newspaper