Intellectual Property Rights And Competition Laws : A Study Of Interface
Introduction
The globalization has changed the world economy more drastically than any other thing. Markets all around the world has been specially targeted the most under the globalization. Thus, brought many effects on all the markets globally; some have been reengineered, some have been revamped and the rest have been in a state of flux. One of the major observations which have been accorded during this is that the unregulated markets have been the tendency to assume monopolistic or more monopolistic character and therefore affecting the consumer welfare.
So far, for a market to be welfare for the consumer it is very important that there should always remain a tendency of competitiveness between all the players in the market. During the passage of time, the Competition Laws and Intellectual Property Rights (IPRs) developed and brought many magnificent changes for the efficient competitiveness in the market.
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Competition Law and IPRs are bound together by the economies of progression and brain boggling matrixes of legal rules that attempt to change the adjustment and effect of each methodology. IPR protection is strategy which intended to encourage the innovations, resulting in the benefits of the consumers through the advancement of economic growth. Competition Law on the other hand, has always regarded by market distortion, disciplining anti – competitive practices, preventing monopoly and abuse of monopoly, including optimum allocation of resources and benefiting consumer with fair prices, wider choices and better quantities.
Intellectual Property Rights And Competition Law: Is There Any Tussle Between The Two?
“It is a longstanding topic of debate in economic and legal circles: Hot to marry the innovative bride and the competition groom?”[i]
Due to the wide reach and multiple features, the argument over the interconnection between competition law and IPR policy has always been intriguing. IPRs, in general, define the boundaries within which rivals may exercise legal exclusivity over their innovations, so creating market power[ii] by constraining static competitiveness and encouraging investment in dynamic competition. The protection of those standards and procedures that enable the efficient functioning of markets is the hallmark of competition law.
The non-rivalries and non-excluded aspect of IP, which produces the problem of appropriability[iii], lies at the root of the connection between IPRs and competition law. The origin of this evident inherent problem[iv] is due to the allocation of statutory rights to IPR holders to primarily control access to the IP and to alter monopoly rents for the exclusive use of IPRs. This endeavor to limit market dominance[v] is often ostensibly in violation of competition law.
The IPR and competition law relationship is dominated by two primary issues. To begin with, there is the potential for monopolistic pricing abuse, particularly in developing nations where adequate alternatives for IPR-protected products may be scarce[vi]. Second, competition law aims to make a connection between acceptable business strategies and IPR abuse — a distinction that is frequently muddled by horizontal agreements, exclusionary licencing limitations, tie-in agreements, excessive IPR abuse, and other marketing activities[vii].
There is an intrinsic conflict between competition laws and intellectual property rights, especially when competition law promotes static market across while IPRs emphasizes incentives for increasing competition. In Xerox case[viii], the court stated that,
“The conflict between the antitrust[ix] and IPR laws arises in the methods the embrace that was designed to achieve reciprocal goals. While the antitrust laws prescribe unreasonably restraints of competition, the IPR laws reward the inventor with a temporary monopoly that insulates him from competitive exploitation of his protected art”.
And in the case of Atare[x], the court stated that,
“The intellectual property laws and the antitrust laws share the common purpose of promoting innovation and enhancing consumer welfare. The intellectual property laws provide incentives for innovation and its dissemination enforceable property rights for the creators of new and useful products, more efficient processes and original works of expression. The consumer welfare by providing certain actions that may harm competition with respect to either existing ways or new ways of serving consumers”.
However, the monopoly rights conferred by IPR are not anti-competitive when acted outside their scope and jurisdiction.
In the Microsoft Case[xi], a landmark judgment was given by the European Union Court in 2007[xii] on the interaction between intellectual properties and competition law during the (Agreement on Trade Related Aspects of Intellectual Property Rights) TRIPs regime[xiii]. European Union invoked competition rules for consumer welfare against absolute IPR[xiv].
The allegation, against Microsoft was that they were refusing to license its software to Sun Microsystems while at the same time licensing to Sun’s competitors.
European Commission further held that[xv] (1) Microsoft interoperability information was indispensable for non – Microsoft work server operating systems to be capable of interoperating with Windows domain architecture; (2) the refusal to license entailed the risk of the elimination of all competition in the server operating system market; (3) the refusal prevented other firms to come up with new products in the markets in accordance with customer demand, thus Microsoft’s refusal to license was violation of European Commission competition law[xvi].
Precis
The growing importance of innovation is indisputable. The goals of IP promote innovation, creativity and diffusion of technology. The basic role and function of completion law is to prevent anticompetitive practices that harm economic efficiency and increase transaction cost. Dynamic efficiency, economic efficiency and welfare of consumers should be the prime importance in both cases. Competition in the market has to consider the IPR rights of innovators which always boost the market. After analyzing the legislations and cases reveals that competition law is not sufficiently equipped with the analytical tools necessary to find out the IPR protection implications, both the set of laws (Competition and IPR protection) share the same basic objectives, promotion of innovations and welfare of society. Long term efficiency should be promoted rather justified from a short-term point of view. The IP and competition law objectives are consistent and compatible. The competition law intervention is required only when there is an abuse of monopoly rights. The “rule of reason” approach has replaced the rigid methods of the “Nine No Nos” era. The new patent enforcement tactics are based on the need for new economics. India is still in the developing stage, and competition law has to improve its strategy for dealing with IP infringement. Protection of intellectual property rights is effectively counterbalanced by competition policy.
If a dominating position is identified under Section 27(g), the Competition Commission of India can conduct an investigation and issue relevant orders. However, under the 2007 amendment to the Act, licensing and other IP concerns have yet to be brought before the CCI and the Appellate Tribunal specially Constituted for Competition Cases.
When it comes to the conflict between competition and intellectual property, the competition Act has not yet reached the level of establishing law on the matter. The Commission has yet to meet difficulties in putting the measures into effect. India should likewise adopt such standards in order to properly govern the world’s largest market economy. The pharmaceutical industry’s continued concentration on IP protection has ramifications for developing countries like India and other least developed countries in the battle against diseases like HIV/AIDS. The cost of transactions would rise, and societal welfare will be harmed, if IP rights are aggressively enforced and countered with competition law. It is crucial to note that more than 100 nations have implemented competition laws, while more than 159 countries have enacted IP laws, and both enforcement authorities, particularly in developing countries, must contribute in Intellectual Property and competition law policymaking. More legislative supervision is needed in light of available law in the US and the EU, which can aid in the creation of IP and competition policies in nations like India.
Author: Siddharth Singh Chauhan, A Student of Dharmashastra National Law University, Jabalpur, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing.
REFERENCES
[i] Mario Monti, European Commissioner for Competition Policy (January 2004).
[ii] Market power is hereby termed as the ability profitably to maintain prices above, or output below, competitive levels for a significant period of time.
[iii] OECD, Competition Policy and IPRs (1989) 2. In the survey conducted by the OECD, Licensors reported that they face alternate supplies only in 27 per cent of the cases. In 34 per cent, the number of alternate supplies is low, ranging from 2 to 5. In around 30 per cent of the cases more than 10 alternate supplies are available.
[iv] Supra Note 3 at 10.
[v] A. Ng., D. Liang and P. Waters, Interest between Intellectual Property Law and Competition Law.
[vi] L Peerperkorn, „Intellectual Property Licenses and Competition‟ (2003) 26 LER 4; Supra Note 3 at 14-15.
[vii] Supra Note 1 at 15.
[viii] SCM Corp. v. Xerox Corp. 645 F. 2d1159.1203 (2dCir1981).
[ix] Competition Law is known as antitrust law in the USA and is laws that promote or maintain market competition by regulating anti – competitive conduct. See Martyn D. Taylor, „International Competition Law: A new dimension for the WTO? ‟(Cambridge University Press 2006).
[x] Atare Games Corp v. Nintendo of America, 897 F. 2d 1572, 1576 (Fed Cir. 1990).
[xi] CFI Case T – 201/04, Microsoft v. Commission.
[xii] This was against two competition cases decision of European Commission in European Commission Decision of March 24, 2004 relating to proceeding under Article 32 of the European Commission Treaty; COMP/C-3/37.792 Microsoft) OJ 2007 L32/33.
[xiii] Hans Henrik Lidgard and Tu T. Nguyen, „The CFI Microsoft Judgment and TRIPS Competition Flexibility‟.
[xiv]Tsenchiv G, „Latest Development in the Microsoft Case in the European Union: Microsoft Officially Allows Browser Choice to Customers‟ (2010) 16CJEL 85-88.
[xv] Raju K D, „Interface between Competition Law and Intellectual Property Rights: A Comparative study of the United States, European Union and India‟ (2014)2 Intel. Prop Rights115.
[xvi] Id.
