Intellectual property (IP) is a term referring to a number creations of the mind for which property rights are recognized in the corresponding fields of law. Under intellectual property law, owners are granted certain exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works; discoveries and inventions; and words, phrases, symbols, and designs. Common types of intellectual property include copyrights, trademarks, patents, industrial design rights and trade secrets in some jurisdictions.
Now, the question of contention is that, how far we can say that these rights are exclusive in nature and how often they are termed as monopolistic rights? The Intellectual property rights such as Patents, Trademarks, and Copyrights etc. are given to an owner of the rights for a particular period of time in some cases and in some cases perpetually. More often than not they will turn into monopolistic rights. But as far as India is concerned, monopoly is restricted and any attempt to create a monopolistic business is against the law under Competition Act, 2002. This situation leads to a problem of balance between the IP rights and creation of monopoly. This particular problem is addressed in the newly constituted Competition Act, 2002 which has replaced Monopoly and Restrictive Trade Policies Act, 1969.
Section 3 (5) of the Act is reproduced below:
Nothing contained in this section shall restrict—
(i) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under—
(a) the Copyright Act, 1957 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);
The Indian Competition Act, 2002 recognizes the importance of IPRs such as patents, copyrights, trademarks, geographical indications, industrial designs and integrated circuit designs. While Section-3 prohibits anti-competitive agreements, sub-section (5) thereof says that this prohibition shall not restrict “the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights” enjoyed under the statutes relating to the above mentioned IPRs.
By implication, unreasonable conditions imposed by an IPR holder while licensing his IPR would be prohibited under the Competition Act. This provision is not very dissimilar to the laws in other countries. In some jurisdictions, restrictions that have been regarded as unreasonable, and anticompetitive, include: agreements restricting prices or quantities of goods that may be manufactured, or curbing competition between the licensee and the licenser, stipulating payment of royalty after the license period, certain types of exclusivity conditions, patent pooling, tie-in arrangement, and so.
Importance of protection
The main reason why an IPR is granted is to give an incentive for innovation, research and investment. In a sense, IPRs also create competition in innovation. Competition in innovation will provide improved product with less price. For the benefit of the society the protecting the intellect of a person will be most important ingredient. Protection provided, will help a creator in attaining benefits from labour put in by him and moreover, it will drive him further to attain better ways to achieve the desired results. Absent the IPR protection, other firms would be able to take a free ride on the R & D investment made by the inventor.
Conflict between IPR’s and Competition law
The conflict arises between IPR and competition law because Intellectual Property Rights creates market power, even a monopoly, depending upon the extent of availability of substitute products. Intellectual Property Rights restricts competition, while competition law provokes it. Hence, competition law is against the use of unreasonable exercise of market power or the abuse of dominant position obtained as a result of the Intellectual Property Rights. In the EU, the US, and in other jurisdictions as well, there are a number of cases which bring out the contradictory pulls emanating from competition law and IPRs. In both jurisdictions, the courts recognize that firms that enjoy a dominant position due to the IPR might in exceptional circumstances have a duty to supply or license the IPR.
In the Volvo case1, while recognizing the company’s copyright in spare parts, the court pronounced that in three circumstances refusal by a dominant firm to supply a dealer on fair terms may amount to abuse of the power: charging unfair prices, refusing to supply spare parts to dealers to whom it refused a license, and failing to supply spare parts for old models.
In the Magill case2, the company wanted to produce for TV viewers a comprehensive guide to the programs of the existing three TV stations. However, the TV stations refused to allow Magill to publish their programs citing copyright infringement. The court held this to be abuse of dominance arising from the copyright.
In the Microsoft case, the company’s refusal to give to its competitor’s complete information for interoperability between their software and Microsoft Windows was held by the European Commission to be a violation of its competition law. (The case is under appeal).
Competition law recognizes the IP Rights but they tend to curb the practice of anti-competitive practices adopted by the IP rights holders. A holder of the IP rights can take any step for stopping infringements of his rights moreover he can put reasonable restriction upon the licensee to safeguard his rights under the various IP laws. But if the restriction imposed crosses the line of reasonable restriction then they will come under the purview of anti-competitive activities.
Section 3(5) of the Act declares that “reasonable conditions as may be necessary for protecting” any IPR will not attract section 3. The expression “reasonable conditions” has not been defined or explained in the Act. By implication, unreasonable conditions that attach to an IPR will attract section 3. In other words, licensing arrangements likely to affect adversely the prices, quantities, quality or varieties of goods and services will fall within the contours of competition law as long as they are not in reasonable juxtaposition with the bundle of rights that go with IPRs. For example, a licensing arrangement may include restraints that adversely affect competition in goods markets by dividing the markets among firms that would have competed using different technologies. Similarly, an arrangement that effectively merges the Research and Development activities of two or only a few entities that could plausibly engage in Research and Development in the relevant field might harm competition for development of new goods and services. Exclusive licensing is another category of possible unreasonable condition. Examples of arrangements involving exclusive licensing that may give rise to anti-competition concerns include cross licensing by parties collectively possessing market power, grant backs and acquisitions of IPRs.
Reasonable condition can also be dependent on fact and circumstance of particular case. What might be reasonable in one case might not be reasonable in another case.
Restriction on anti-competitive activities under various IPR laws in India
The anti-competitive activities are also recognized under various IPR laws.
Under Indian Trade Marks Act, 1999, section 29(8) (a) says that:
A registered trade mark is infringed by any advertising of the trade mark if such advertising---
(a) takes unfair advantage of and is contrary to honest practices in industrial or commercial matters.
Again in section 30 (1) it is provided that:
(1) Nothing in section 29 shall be construed as preventing the use of a registered trade mark by any person for the purpose of identifying goods or services as those of the proprietor provided the use—
(a) is in accordance with honest practices in industrial or commercial matters, and
(b) is not such as to take unfair advantage of or be detrimental to the distinctive character or repute of the trade mark.
Under Indian Patents Act, 1970 section 84(1) there is a provision of compulsory licenses wherein it is said:
At any time after the expiration of three years from the date of grant of a patent, any person interested may make an application to the controller for grant of compulsory license on patent on any of the following grounds, namely:-
(a) that the reasonable requirement of the public with respect to the patented invention have not been satisfied; or
(b) that the patented invention is not available to the public at a reasonable affordable price, or
(c) that the patented invention is not worked in the territory of India.
The compulsory licensing is also recognized under Indian Copyright Act, 1957 under section 31 wherein it is said that;
(1) If at any time during the term of copyright in any Indian work which has been published or performed in public, a complaint is made to the Copyright Board that the owner of copyright in the work-
(a) has refused to republish or allow the republication of the work or has refused to allow the performance in public of the work, and by reason of such refusal the work is withheld from the public; or
(b) has refused to allow communication to the public by 76[broadcast], of such work or in the case of sound recording the work recorded in such [sound recording], on terms which the complainant considers reasonable;
Keeping an eye on the abovementioned provisions of various IPR laws in India, it can be easily deduced that not only Competition law but IP laws are also keeping a check on anti-competitive activities. Proper checks and balance are put in place in order to make sure that no one takes the advantage of the protection provided to him under IPR laws and general public will not be at the receiving end due to the protection to an IPR. The basic aim of any government is to be a welfare government. The rights of country’s citizens should be properly looked after. To do that, it is necessary to have provision of various laws of a country synchronized. This will provide a proper balance between rights of Intellectual property right holder and general public.
The competition among the industry or business is healthy for the customers to get commodities at reasonable price and of best quality. Without competition in the market there will be monopoly and in a monopolistic market consumer welfare is last thing in a producer or manufacturer mind. The ultimate aim for him will be maximization of profit. The MRTP Act, 1969 was enacted to curb the practice of monopolistic business but the aim for which the MRTP Act was enacted were not achieved so there was a need for complete overhauling of the Act. The Competition Act, 2002 came in to force in order to keep a check on the anti-competitive practices which were not kept under old Act. Intellectual property rights, which are monopolistic in nature, tend to create right for the creator and can only be use by him and none else. The rights given to an IP right holder is also acknowledged under Competition Act, 2002 but it also tends to create conflicts as the IP rights are monopolistic in nature whereas Competition Act curbs anti-competitive activities. Under Competition Act, 2002 intellectual property rights holder can restrain any person from infringing his rights and he can also impose any reasonable conditions in order to safeguard any of his rights provided to him under various Intellectual Properties law. Under various IPR laws, the anticompetitive activities are kept in check so that the monopolistic rights should not be detrimental to the welfare of general public.