lawyers in India

Competition Law and Intellectual Property Laws

Written by: Poorvi & Madhooja of LawQuest
Constitutional Lawyers in India
Legal Service India.com
  • The Government of India in pursuit of increasing the economic efficiency of the country acknowledged the Liberalization Privatization Globalization (LPG) era by liberalizing the economy and reducing governmental control. Currently the flourishing Indian economy is witnessing aggressive competition in every field. Healthy and fair competition has proven to be an effective mechanism which enhances economic efficiency. Therefore the purpose of implementing the competition law was to curb monopolies and encourage competition.

    In contrast to the objective behind formulating the competition law, Intellectual Property (IP) Laws aim at protecting the research and development inventions carried out by inventor firms from being used by companies producing similar products and subsequently making a profit on the same. In other words, on one hand, IP laws work towards creating monopolistic rights whereas competition law battles it. In view of this there seems to be a conflict between the objectives of both laws.

    Primarily, competition laws involve the formulation of a set of policies which promote competition in the local markets and are aimed at preventing anti-competitive business practices and unwonted government interference. Competition laws are also framed with the intention of curbing abuse of market power by a dominant company. Further, competition law aims at eliminating monopolization of the production process thereby encouraging new firms to enter into the market. The maximization of consumer welfare and an increase in production value are some of the main objectives of competition law. On the other hand IP Laws are monopolistic legal rights granted to the creators and owners of work which are a result of human intellectual creativity.

    These can be in varied fields such as industrial, scientific, literary and art. Intellectual Property Rights (IPR) gives the owners the right to exclude others from using their invented subjected-matter for a limited period of time. Further, IPR laws pertaining to copyrights, patents, trademarks, industrial designs and trade secrets prevent commercial exploitation of the innovation by others. IP rights grant the owner an advantage over the rest of the industry or sector. When this advantage or dominant position is abused it creates a conflict between IPR and competition law.

    Recently an issue was raised in the Delhi High Court in the case of Hawkins Cookers Limited v M/s Murugan Enterprises. Hawkins Cookers Limited is the owner of the trademark “Hawkins” and uses it on several products including pressure cooker gaskets. Murugan Enterprises, manufacturers, among other things gaskets for pressure cookers and uses the Hawkins trademark in respect of parts of pressure cookers to establish compatibility. Murugan Enterprises in its arguments before the court opinioned that it had its own well-established trademark “Mayur” with a prominent peacock displayed on its product packaging. The Delhi High Court in this case held that no reasonable person or purchaser could assume a trade connection between the “Mayur” brand of gaskets and the “Hawkins” brand of pressure cookers. Further, the court opined that in this case the Murugan Enterprises neither sought to benefit from Hawkins’ trademark nor did it try to show a connection between the two. Additionally the court opined that the defendants’ use of the “Hawkins” mark was only to show the suitability of the product to be used as an ancillary product in a Hawkins pressure cooker and that such use would evidently fall within the exception carved out under Section 30 of the Trademarks Act, 1999.

    Further, the use of the trademark in relation to the product is reasonably necessary to indicate the fitness of the gaskets for the “Hawkins” brand of pressure cookers. In the Hawkins case, Justice Kaul also pointed out that “The object of filing of the suit thus appears to be to create a monopoly over such (gaskets) ancillary items so that no third party is able to sell the same in the market.” The judge also goes on to point out that the use of the “Hawkins” trademark on the gaskets packaging would have been infringing if it had been used as a trademark. Since Murugan Enterprise’s use of the “Hawkins” mark was only indicative and is not being used as a trademark there would be no question of infringement. The Delhi High Court judgment in the Hawkins case reflects on the fact that dominant firms cannot be encouraged by courts if they are found to abuse their dominance by creating a monopoly in the market thereby affecting the market share of smaller and/or firms who are in direct competition with such dominant firms.

    Additionally under Competition law, the unavailability of substitutes in the market may establish dominance in the market. Likewise a comparison of market shares between dominant firm and their competitors is useful in determining dominance as well as monopoly. Even then, there seems to be a difficulty in determining the minimum percentage of the market share that could establish dominance and/or monopoly of a particular firm in the market. Various judgments vis--vis dominance has also not been able to establish a minimum percentage that indicates dominance of a firm.

    Anti-competition laws in order to combat the IPR monopolies often include two important measures namely compulsory licensing and parallel imports. A compulsory license is where an IPR holder is authorized by the state to surrender his exclusive right over the intellectual property, under article 31 of the Trade-Related aspects of Intellectual Property Rights (TRIP). Compulsory licenses are granted under certain circumstance such as in the interest of public health, national emergencies, nil or inadequate exploitation of a patent in the country, and for an overall national interest. A parallel import on the other hand includes goods which are brought into the country without the authorization of the appropriate IP holder and are placed legitimately into a market.

    In addition, 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. Firstly, patent pooling is a restrictive practice wherein firms of a particular manufacturing industry decide to pool their patents and agree not to grant licenses to third parties, simultaneously fixing quotas and prices. Secondly, a clause that restricts competition with respect to research and development or which prohibits a licensee to use rival technology is considered anti-competitive under the law. Thirdly, a licensor under the law is prohibited from fixing the price at which the licensee should sell his goods. The above mentioned examples are not by any means exhaustive, but are a few illustrations demonstrating anti-competitive provisions applicable to IPR under the Act. Furthermore, under Section 27 of the Act, the Competition Commission of India (the Commission) has the authority to penalize IPR holders who abuse their dominant position. Further, under Section 4 of the Act the Commission is also authorized to penalize the parties to an anti-competitive agreement, which is in contravention of Section 3 of the Act.

    Conclusion
    Innovation has always been a catalyst in a growing economy resulting in more innovation. The advent of fresh innovations gives rise to healthy competition at macro as well as micro economic levels. IP laws help protect these innovations from being exploited unlawfully. In view of this IP and Competition laws have to be applied in tandem to ensure that the rights of all stake holders including the innovator and the consumer or public in general are protected.
    The common objective of both policies is to promote innovation which would eventually lead to the economic development of a country however this should not be to the detriment of the common public. For this the competition authorities need to ensure the co-existence of competition policy and IP laws since a balance between both laws would result in an economic as well as consumer welfare.

    Poorvi Chothani, Esq., the founder of LawQuest, a general practice law firm, is a U.S. qualified attorney in the U.S. and a member of the global Alliance of Business Immigration Lawyers. She is a registered Solicitor in England and Wales and admitted to the Bar Council of Maharashtra and Goa. *Madhooja Mulay, LL.B.(University of Mumbai) is an Associate at LawQuest. She is admitted to the Bar Council of Maharashtra and Goa

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