A Harmonious Construction of IP and Competition Laws

Anjuri Saxena
Rajiv Gandhi National University of Law, Patiala

Introduction

stem does not favor patent holders excessively.” It is the onus of the registry to be non-partisan and analyse each case with utmost probity. Fourthly, the blanket protection of twenty years to patents should be discarded. Novel categories should be introduced, like Utility Models which provide more benefits to small organisations like MSMEs or Start-ups and save them from hefty patent fees, and are also granted protection for a shorter duration. Lastly, in cases of copyrights, alternative business models like in the case of Netflix, Amazon Prime, Spotify, etc should be used wherein the customers after paying the mandated fees can enjoy the vast amount of content available on them. All things considered, it is the democratisation of innovation and expansive dissemination of knowledge that can curb future monopolies.A Chinese proverb says, “what is earned with hard labour is eaten with pleasure”, but what is the extent of such pleasure in case of intellectual property rights (IPR) is a dilemma which needs to be resolved. The moral justification of IPRs is attributed to the Lockean Theory of Private Property stating, “The Labour of [Man’s] Body and the Work of his Hands, we may say, are properly his.”  In brief words, IPRs are ownership rights that arise out of the intellectual labour of a person’s mind which range from patents, copyrights, trademarks to designs. The basic tenet of IPRs is that it is a negative right, thus works on the premise of exclusion. Therefore, only the owner or the creator has the legitimate right to use that intellectual property (IP) unless provided otherwise, say by way of licenses. Competition Law on the other hand, tries to curb those practices which are anti-competitive in nature. At the forefront it is understood that these two laws work in antithesis with each other. But when we look at them in the context of their objectives, “both the disciplines promote dynamic efficiency: that is, a system of property rights and market rules that create appropriate incentives for invention, innovation and the risks involved in R&D.”  

Interplay of IP and Competition law

The Indian Competition Act is fairly a new entrant when we compare it with its counterpart in countries like the US and UK. The Competition Act was enacted in 2002 in India to fill up the lacunas create by the MRTP Act. When we talk about the interplay of IPR and Competition law, majorly Section 3(5) of the Competition Act comes into the picture. This section lays down that, “the provisions with respect to anticompetitive agreement (section 3) will not be applicable to agreement entered into by any person for restraining any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his or her rights guaranteed under the IPR statutes in India.” Thus it is only with respect to licensing agreements which promote innovation in the market that the blanket exception applies. Apart from this, another important aspect of the interplay of these two laws lies in the cases of Abuse of Dominance (AoD). Though exception is given under section 3, “section 4 of the act provides with sufficient conditions for interfering in intellectual property matters in cases of abuse of dominant positions.” The supreme agency which enforces the intricacies of Competition Law, the Competition Commission of India (CCI) and its power to deal with IPR cases has been iterated in many cases. The Bombay High Court in the case of Aamir Khan Productions Pvt. Ltd. v. Union of India, held that in cases where there is an intersection of IPR and Competition Law, the CCI has jurisdiction to deal with such matters. The Supreme Court asserted the same in the case of Entertainment Network (India) Limited v. Super Cassette Industries Ltd, wherein the court opined that though Copyright holders enjoy monopoly it should be exercised in such a way that it causes turbulence in the functioning of market and is anti-competitive in nature. Furthermore by way of section 27, the CCI has the power to penalize IPR holders acting in contravention to the Competition Law. 

Apart from AoD cases, IPR protection is at crossroads with competition law in various other cases such as, refusal to license and excessive pricing. Even though the objective of IPRs is to promote innovation and advancement of dynamic competition in the market, it so happens that the refusal to license especially in cases of patents leads to a slump in the entry of new players. In the case of Re Independent Service Organizations, the Ninth Circuit bench of US held that anti-trust laws cannot be violated under the garb of intellectual property rights. Not agreeing to grant a license, “refusal to allow access to production facilities (essential facilities), refusal to cooperate in normal industry practices”, all these construe some form of anti-competitive practices. Conclusively, it comes to the point that there needs to be a balance of competition in the market wherein IPRs are not in contravention with competition law but rather create a leveo playing field. 

Another aspect which needs to be looked at from the perspective of these two laws, is the amendment that has been proposed in the Competition Act. The Draft Competition (Amendment) Bill, 2020 proposes the addition of section 4A which just like section 3(5) extends an exception to IP related matters in the case of AoD. Though a bare reading of the proposed amendment only aims to clarify and strengthen the position of IP holders, in practicality it might create some hiccups. The proposed section 4A would act as a further haven for already dominant firms which would use this section to deny any necessary IP right and create unwarranted conditions for new entrants in the market. Therefore, this provision might topple the balance that the courts have been trying to achieve between both the laws.    

Are IPRs Creating Intellectual Monopolies?

It is amply clear that the owner/creator exercises unchartered right over that IP. This leads to the presumption of the existence of a monopoly in the IP market. The possible concoction of IPRs and monopoly practices might baffle one today, but there have been various proponents of it even before. One of them is Adam Smith, who though in a positive connotation, considered patents and copyrights to be monopolies. “Thomas Jefferson was also a proponent of the “monopoly” view.” Even today the debate continues and Professor Lloyd Weinreb of Harvard maintains that “the most that can be said confidently about copyright or patent is that it confers a monopoly” But the opponents vehemently reject this line of thought and assert that to be engaged in any monopolization, there should be a power to influence the price and supply in the market. Thus interplay of IPRs and their monopolization can be in two ways, one in the semantic sense and another in the legal sense.

In practical application when we look at the extent to which IPRs are granted, it becomes blatant that there remain multiple areas that are exposed to monopolization. The most common platform for abuse of dominant position or even monopolization stands to be in the form of patents and copyrights. Copyrights that endow protection to literary and artistic works also include software and computer programmes. The glaring example of monopolization of computer programme is ironically what I am typing this essay on, Microsoft. Looking at monopoly in the semantic i.e. “exclusive ownership through legal privilege, command of supply, or concerted action”, we sense can loosely put Microsoft under this category. For desktops, the Microsoft OS has a share of 77.1% of the global market. With no strong competition from other companies, Microsoft stands to be in a position of price control which it very subtly exerted by way of increasing the price of Windows 10 Home. Thus increased prices and no apt replacement is what probably leads to these programmes being pirated, not that it is a justification of any sorts. In India as well a case was filed by Singhania & Partners LLP, alleging that Microsoft was indulging in anti-competitive behaviour and abusing its dominant position with respect to the sale of Windows and Office 2007. Though such allegations remained unfounded by the CCI and Microsoft was exonerated from any penalty, the CCI failed to investigate deeper into the market conditions which very blatantly showed that Microsoft was the biggest player in market and was in exerting its monopoly under the blanket of IPR protection and licensing policy. The case has now reached the Supreme Court and the decision stands awaited.  

 The next case can be of Google, wherein the EC found them guilty of favouring their own content by way of providing better display/visibility in the search results. Another monopolization of copyrights is textbooks especially college/university books. On top of the already heft college fees, students are made to invest in expensive university course books, which usually have a new edition every year or so, thus inadvertently making defunct the already existing editions.

Moving on, the next blatant platform of monopolization is the patents. “Patent holders are most likely to abuse market power via various practices, such as refusal to license, excessive pricing, unfair or discriminatory licensing, abuse of dominance, and delaying market entry of competitors.” Some global examples include that of Aspen Pharma, which was accused of raising the prices of five cancer drugs. In another case, the AstraZeneca-Losec a pharmaceutical company was found guilty of misleading the patents’ offices and creating unnecessary hurdles in the entry of new entrants, inadvertently creating a monopoly. Proponents of patents emphasise that it is strong protection granted to patents that lead to more innovation. But, “recent studies by Petra Moser and Heidi Williams, among others, find little evidence that patents boost innovation.” Rather such protection acts as a roadblock to further innovation, it hinders sequential innovation and adds up the cost of new technology. Another problem that arises due to patent rights is that it induces rent-seeking. Not only this, but firms also tend to indulge in ‘patent races’, “where too much effort is invested in innovating quickly in order to be the first to get the patent.” Ergo, there lies no doubt that state-sponsored monopolies in the form of patents are open to a plethora of abuses. 

Preventing Monopolies

All of this boils down to the desideratum of a structure that actually solves the dilemma. One has to accept the fact that, the overhauling of the complete system of IPRs would be a huge miscue. There is no doubt that IPRs on their own provide incentive to the creator, if authors are not going to granted rights for their works, novels then they wouldn’t be motivated enough to actually work again. The possible solution for not letting IPRs turn into a monopoly is multi-faceted. Firstly, we need to re-examine our existing laws and remove unnecessary provisions and excessive protection. Not just this, we need to implement those already in place, for instance, every patentee is required “to submit annually, a statement to show the extent to which the patented invention has been commercially worked in India.” If they do not comply with the same, they are prone to compulsory licensing. Secondly, rather than impediments, there should be an environment of positive competition that rolls the dice for innovation and technological diffusion. Furthermore, the government should take up the role of developing R&D through direct funding. Thirdly, it should be ensured that “the litigation sy         

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