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The Nexus between IPR And Competition Law

Intellectual property law focuses the creator's interests and attempts to safeguard his rights, whereas competition law emphasises providing consumers with choices through healthy competition among manufacturers and dealers.

While it is critical to have incentives for invention and creativity, which can be ensured by allowing the owner monopolistic rights, it is also critical to stimulate market competition for the benefit of the general public. The concern is not how the laws appear to be at odds in their goals, but rather where the balance should be found. IPR, in its own way, promotes technical innovation. As a result, more products are available on the market, giving customers a larger selection.

While competition law aims to encourage more effective competition, intellectual property law aims to secure a monopoly by safeguarding the owner's exclusive rights at the expense of preventing others from exploiting that particular item. Given the opposing goals of both schools of law, it's easy to see why there's so much disagreement between them. The purpose of this essay is to examine how the two laws' opposing natures can be reconciled.

The common components of both competition law and intellectual property law, as they both relate to the consumer market, are simple to investigate. However, they can also be compared to fire and water, as they are very distinct. Competition law aims to eliminate any actions that stifle commerce and discourage monopoly in general. Intellectual property law, on the other hand, aims to provide a benefit to intellectual property owners by allowing them to freely use their rights while maintaining exclusivity.

Though intellectual property law guarantees lawful owners full rights over their creative assets, competition law aims to prevent market barriers by encouraging competition among various suppliers of goods, services, and technologies to ensure that consumers gain the most.

Conflicts, if any, may arise as a result of such competing and disparate agendas. Another point to consider is that competition law promotes a variety of ideas, such as the importance of free markets and the goal of creating a completely competitive environment that enhances consumer choice. This framework tries to build a system that promotes free trade, consumer rights, and effective resource allocation, among other things. On the other hand, intellectual property establishes a monopoly. There is a discrepancy between the two in this regard.

IPR in Competition Law is addressed under Section 3(5)(i) of the Competition Act of 2002. The section aims to reconcile some of the inconsistencies by excluding IPR from restrictive trade practises. This is because intellectual property protection is vital because it is a necessity for innovation, which is why most laws prioritise IPR protection, especially Competition Law.

There are two mechanisms
A country's economic activity is controlled by two mechanisms: the free market and the regulated market. The adoption of the two separate procedures is intended to improve the functioning of the country market. Manufacturing determines how much goods should be produced and how much money will be invested in creation or innovation in a free market system. Instances of new items, as well as the product's pricing and availability. It has no bearing on the government.

It opposes the manufacturers' monopolistic behaviour. In this case, the service provider, producer, or manufacturer has a direct interaction with the consumer. As a result of this system, the producer may easily take advantage of the customer for profit, and the unrestrained conflicting interests lead to an imbalanced economy or market in the country.

Market System that is Regulated: Business and commerce (buying and selling) are regulated by several regulatory agencies that are overseen by the government. This is done to avoid monopolies and unfair trading practises. Different law provides a check and balance for monitoring the activity of suppliers. It also obligates the manufacturer to develop a variety of items that are necessary for the general welfare of the public and the improvement of the nation's economy.

Criticism:
When an economy is subjected to extreme restrictions, the economy becomes inflexible because there is no or very little flexibility in its operation. As a result of the consumer's need to have exactly what they want, there will be less creativity and innovation when there is less flexibility.

Competition Law

Competition law is a body of law that regulates the market in order to encourage market competition. This is accomplished by monitoring and regulating any anti-competitive behaviour on the part of corporations. The goal of competition legislation is to ensure that consumers have a fair marketplace to choose from and that producers can continue to do business. It aims to ban immoral business activities aimed at getting a bigger market share, which makes it difficult for small and new enterprises to enter the market.

Predatory pricing is one example of anti-competitive behaviour.

Intellectual Property Rights
Intellectual Property (IP) refers to mental creations such as inventions, literary and artistic works, design, and symbols, names, and pictures used in business, according to WIPO. It is the result of the human mind's creative process.[1] It grants the owner the sole right to benefit from their creation for a set length of time, just like any other property right.

Article 27 of the Universal Declaration of Human Rights guarantees the right to moral and material interests protection as a result of authorship of scientific, literary, or artistic works. It supports science, technology, art, and other related fields, and can be linked to a country's growth in those and other fields. As a result, intellectual property must be safeguarded.

The Intent behind the two laws

The term 'competition' has different meanings in the paradigm of the two different fields of law. IPR encourages potential innovators and creators to compete, which leads to increased innovation and creation. This limits the competition by providing an exclusive right for a specific period of time. However, at the end of that time period, that product or service eventually enters the public domain. Competition Law intends to prevent unfair trade practices, and instead, encourage competition in marks.

Competition law prevents a company or business using their dominant position in the market as an unfair advantage over all businesses. A business may earn a dominating position, for e.g. Android has a fairly large share of the smart-phone market. That is not a problem but the problem is if Android uses this dominant position in any unlawful manner to have a negative impact on the competing companies.

Paris Convention defines unfair competition under Article 10(b)(2) as "any act of competition that is opposed to honest practises in industrial and competition affairs."

Patent laws are drafted in such a way that bootlegging can be avoided Patent law and competition law, in a sense, are both attempting to promote fair market behaviour, which is the primary goal of competition law. The concern in competition law arises only in a situation where the patent owner may use the patent in such a way that exceeds the objective of his rights and abuses it to cause a violation of anti-trust policies.

TRIPS

The World Trade Organization (WTO) formed an international agreement known as the Trade Related Aspects of Intellectual Property Rights (TRIPS) to standardize the regulations for different aspects of Intellectual property Law. The members of WTO signed up for this, including India. One of the primary concerns raised during the policy-making of TRIPS was the unjust competition created by granting the IP Rights holder a monopoly on their product.

Article 40 of the TRIPS agreement says that licensing practices regarding IPR can have a detrimental effect on trade and may hinder the transfer of technology. Article 40(2) allows members to shortlist any IP Rights violations and develop mechanisms to counter those violations. However, this list is not exhaustive. The provisions with regard to the anti-competitive measures are suggestive and permissible instead of mandatory and binding.[2]

Compulsory Licensing

Compulsory licensing is a statutory mechanism adopted to prevent IPR Rights from getting concentrated in the hand of the right holder. This helps the government to ensure the non-voluntary transfer of copyright from the owner to an individual who may apply for permission to republish that work to the public, in exchange for paying a royalty to the owner. Article 31 of the TRIPS agreement provides an exemption from compulsory licensing in times of national emergency or any urgent situation.[3][2]

The Conflict in the Indian Context

Given the progress of the jurisprudential school of thought that encourages harmonious construction of two seemingly opposing laws, for an overarching objective, we must apply that ideological lens to understand the link between IPR and Competition Law. Every aspect of IPR is not necessarily in conflict with competition law.

Although intellectual property rights provide a monopoly to the owner or creator, it is always accompanied by reasonable restrictions and regulations, to avoid any exploitation of that monopolistic power. To understand this in greater detail, one has to analyse the legislative framework in India.

The Competition Act 2002 was drafted on the notion of economic competence and liberal policies. The Act aimed for social economic and political justice and progress for the common man. Competition Law was drafted in a way to cover the loopholes found in the Monopolies and Restrictive Trade Practices Act. The Competition Act did so by accommodating certain provisions and adhering with the TRIPS agreement.

Indian Competition Act in relation to Intellectual Property Rights

As per Section 3 of the Indian Competition Act, 2002:
'No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India'

An exception is provided through Section 3(5) of the Act for intellectual property rights, which conveys that competition law usually does not intervene in matters of IPR law. However, the abuse of dominant position which may meddle with policies for IPR is covered under Section 4 of the Act. Section 4 helps us see how the link between Competition Law and IPR can be complementary in nature.

As Section 3 referred to anti-competitive agreements, section 3(5) is in reference to the interaction between the laws which culminates into an exception to IPR related licensing agreement, in order to strike a balance between encouraging innovation in the market while enforcing regulations that lead to the Appreciable Effect on Market by the exploitation of the monopolistic power as per Section 4.

In our country, both the law of IPR and the law of competition are still developing. In the case of Aamir Khan Productions v. The Director General[4], Bombay High Court held that the Competition Commission of India has the jurisdiction and authority necessary to manage the matters concerned with Intellectual Property rights.

The court also stated that rights associated with intellectual property are simply a statutory provision and not sovereign in nature Similarly, in the matter of Kingfisher v. Competition Commission of India[5], the court held that CCI has the authority to deal with matters that come before the Copyright Board. However, one must keep in mind that India is still at a nascent stage.

In a similar fashion to TRIPS, India may adopt programs like Compulsory Licensing in situations where the price of products is exorbitant. The Competition Commission of India should come up with stricter regulations. The courts now prioritize the interest and rights of the consumer and believe that they should be guarded even at the cost of the right holder or owner. One way for India to develop these laws and policies further is by drawing parallels to American and European cases.

Judicial Precedents
There is a multitude of cases that can be analysed to understand the interaction between Competition law and IPR. In the case of Entertainment Network (India) Limited v. Super Cassette Industries[6], the Supreme Court reflected on the clash between IPR and Competition law.

It was held that even though the copyright holder has a designated and complete monopoly, it is essential that the monopoly is not used to exploit the functioning of the market. The abuse of that power will be seen as a violation of competition law and will lead to a refusal of granting a license. Although the IPR owners can derive royalty by issuing licenses, it is not an absolute right.

In the case of Union of India v. Cyanamide India Limited[7], the court stated that the issue of selling life-saving drugs for exorbitant prices is under the ambit of price control. The CCI has jurisdiction on matters of price control. In a situation where customers have the choice to select amongst limited options, there is always the concern of a particular product gaining hegemony, which interrupts the economic competency of the market. This principle was also reflected in the case of United States v. Microsoft.[8]

The landmark American Case:
"It is a longstanding topic of debate in economic and legal circles how to marry the innovation bride and the competition groom"

The case of United States v. Microsoft Corporation was a milestone judgment in this regard. This case started in 1998 when allegations arose against Microsoft for exploiting their dominant position by linking their operating system with their web browser for purchase. This limited the market for all other web-browsers. Those who used the Windows operating systems anyway had a copy of the Internet Explorer.

It was contended that the Internet Explorer was a unique and distinct set-up altogether since there is a different version found in the other Operating Systems. The judgment held that Microsoft has abused its monopolistic power and intended to disadvantage other operating systems through an unfair practice. It was considered a violation as per Section 1 and 2 of the Sherman Anti-Trust Act.

Microsoft challenged this verdict. However, the final decision said that Microsoft has to be categorized into two different components. One would be the browser, and the second one would be the operating system.

Conclusion
The goal of intellectual property rights is to establish a balance between the creator's exclusive rights and the general good. Competition law, on the other hand, focuses on limiting monopolies and unfair advantages so that customers have a wider range of options and higher-quality items at more affordable costs.

To understand the relationship between Intellectual property Right and Competition Law one must understand that IPR provides rights while Competition Law is a set of regulations. IPR aims to protect the rights of the owner and creator while Competition Law functions like a hand controlling the market. The government grants the innovator exclusive rights as an award and incentive.

The innovator is free to commercially capitalize on his product for a specific time duration. On prima facie level it may seem that IPR and Competition laws oppose each other but through the analysis provided above, one can see that they have an overarching goal and they complement each other to reach that objective.

Competition Law strives to provide a multitude of choices to the customers and balance it against the rights of the manufacturers and sellers. It is essential for the public good that consumers have access to quality products at affordable prices and a variety of options to select from. IPR intends to grant the manufacturer his due for being an innovator.

The hegemonic position granted by IPR is not necessarily in derogation with Competition law but the exploitation of that position would be. Both laws are interested in encouraging innovation and public good simultaneously. The objective of both laws can be understood through a harmonious construction to define the balance between the two. Both these laws cannot achieve their objective separately but need to be understood through the lens of similarity, for them to accomplish what they intended.

End-Notes:
  1. VK Ahuja, Law relating to Intellectual Property Rights (2nd edn, Lexis Nexis 2013) 3
  2. Parveen G, 'The Interplay Between Competition Law And IPR
  3. Licensing Of IP Rights and Competition Law (Organisation for Economic Co-operation and Development 2019)
  4. Aamir Khan Production v. The Director-General, 2010 (112) Bom L R 3778
  5. Kingfisher v. Competition Commission of India, Writ petition no 1785 of 2009
  6. Entertainment Network (India) Limited v. Super Cassette Industries MANU/SC/2179/2008
  7. Union of India v. Cyanamide India Limited, (AIR 1987 SC 1802)
  8. United States v. Microsoft, 38 1998 WL 614485 (DDC, 14 September 1998.

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