Intellectual Property And Competition Law: Understanding The Juncture
Competition law and intellectual property laws (IP laws) appear to be two quite distinct topics. However, it appears that the two’s interactions occasionally overlap and clash. IP laws grant exclusivity and monopolistic rights in order to preserve the free and open nature of the market, but competition law places restrictions on exclusivity and is categorically opposed to monopolies.
Shared interest in consumer welfare and innovation
Everyone seeks approval or validation to keep doing a certain activity, according to Herzberg’s theory of motivation-hygiene. Similar is the main objective of intellectual property, which is founded on incentive theory. The purpose of intellectual property rights, according to the United Nations Conference on Trade and Development (UNCTAD), is to incentivize innovation. Individuals are given exclusive rights to their works in order to achieve this and profit from their originality, creativity, research, and investments.
[Image Sources : Shutterstock]
The purpose of competition law is to preserve the health and efficiency of the market economy while simultaneously promoting consumer welfare. The exclusive rights obtained from every private property are somewhat restrained for this purpose by competition law. Market participants see competition favourably because it spurs manufacturers to develop new items and improve those already on the market. To promote a climate of functional competition that fosters innovation while diminishing anti-competitive market practises, competition legislation specifically uses this tactic of limiting exclusive autonomy.
As per American economist J.M. Clark, “Monopoly cannot be avoided by the market. Every market has monopolistic aspects, and it is the responsibility of the regulatory authorities to ensure that the monopolizer does not abuse its power and that there is a sense of real competition among suppliers and manufacturers.”
Thus, whereas competition regulation protects such monopolistic rights to promote economic competition and avoid market abuse, intellectual property law grants exclusive protections on privately owned property to promote innovations. The ultimate goal of both businesses is to promote progress and customer welfare.
Precedents and statutes
The 2002 Competition Act is constructed in a way that avoids interfering with the use of intellectual property. However, the Competition Commission of India (CCI) is empowered to take action if it finds that intellectual property rights are significantly harming competition. The Bombay High Court found that the CCI had jurisdiction over both competition law and intellectual property rights in the matter of Aamir Khan Productions Pvt. Ltd. v. Union of India. It was also asserted that rather than being sovereign, intellectual property rights are statutory.
Surprisingly, the act’s Section 3(5) makes it clear that IP owners may only “reasonably use” their exclusive rights. The Act permits CCI to impose “reasonable limits” on IP holders if a departure from this predetermined “fair use” causes problems under competition law. In the case of Entertainment Network (India) Limited v. Super Cassette Industries Ltd., the Supreme Court stated, “a copyright holder’s monopoly is not absolute and that if it interferes with the functioning of the market economy, it will be held accountable for breaking the law on competition and have its licence revoked.”
The competition legislation does not outright prohibit dominance, but rather controls it. Section 4(2) of Competition Act limits the exception to reasonable usage by stating that “there shall become an abusing of dominant position when such company sets discriminatory and unfair terms or prices in the procurement and/or sale of goods.” As a result, intellectual property owners in India cannot impose excessive limits on their inventions under the guise of exercising their exclusive rights. However, there is no list of what is and isn’t reasonable. Depending on the situation, this is generally determined by the jurisdiction. Section 83 of the Patent Act of 1970, for example, states that “the patentee should not engage in methods that “unreasonably” limit commerce or negatively impact the global transfer of technology, and the patent application must be made available to the public at reasonable costs.”
According to the report of the High-Level Committee on Competitive Policy and Law, “every intellectual property right has the potential to raise competition law concerns. Authors have unfettered rights under intellectual property to participate in creative or commercial activities, but not in the exercise of monopolistic or restricting authority.” As a result, although the findings support the idea that intellectual property laws are instruments for avoiding the exploitation of one’s invention, they also assert the necessity of limiting the anti-competitive behaviour that arises from these expansive rights.
In general, parallel imports—items brought into a country without the permission of the owners of the patent, trademark, or copyright—and compulsory licences—an involuntary contract imposed and enforced by the state between a willing buyer and an unwilling seller—have been used as methods to prevent IPR infringement.
Competition law and intellectual property rights are complimentary rather than antagonistic. There may be considerable disagreement over how these laws accomplish their goals. But in the end, both of these systems aim to increase innovation and the efficiency of the market system in terms of customer welfare. It is important to take into account a number of conclusions about the interaction between competitive policies and IPR. To any case involving IPRs, competition policy authorities should adopt a logical strategy. However, the high potential cost of decreasing development incentives may be reduced if abuse of dominance regulations were extended to IPRs and suitable remedies were enacted.
Author : Kaustubh Kumar, A Student at student at the National University of Study and Research in Law, Ranchi, in case of any query, contact us at Global Patent Filing or write back us via email at email@example.com.
J M Clark, ‘Toward a Concept of Workable Competition’, THE AMERICAN ECONOMIC REVIEW (1940) 30(2) 241–56
Report of High-Level Committee on Competition Policy and Law, S. V. S. Raghavan Committee, Para. 5.1