• Chetan Chadha

Role of the Judiciary in Reconciling Competition Laws and Intellectual Property Laws in India


Introduction:

Competition law and Intellectual Property law both have clearly different sets of objectives to cater to, however, there arises a scuffle between both set of laws which needs to be analysed so that the issues arising are resolved intently. Since, Intellectual Property laws create a temporary right in favour of the property holder to exclude others from using the same, Intellectual Property Rights substantially grants a monopoly right to the holder of such rights for a limited period of time. On the other hand, Competition law which is concerned with preventing anti-competitive conduct is enacted to avoid the misuse of the monopoly power granted under the statute. Therefore, it becomes necessary to ensure that not only are the Intellectual Property laws not subject to abuse in the form of excessive pricing, anti-competitive tying, refusal to license, etc. but also to make sure that the antitrust regime is not overbearing and the incentives for prospective inventors to innovate and create intellectual property is retained. The Competition Act, 2002 has widely accepted the intentions of Intellectual Property laws while framing provisions and it does not eliminate the dominance achieve by an individual due to such rights. Thus, a balanced approach is required to harmoniously construct both the statutes.

The Point of Contention in the Indian Context: whether Intellectual Property Laws are subject to Competition Law:

Once an Intellectual Property Right has been granted, the holder of such a right has the absolute choice to decide the most effective way to exploit it. Therefore, the major question that arises here is that should the Intellectual Property holder directly exploit these rights or would it be more beneficial to the Right holder to promulgate the Intellectual Property Right and make it widely available by licensing it to others? The decision of the Intellectual Property holder is a commercial decision and would be dependent upon whether the property holder receives a net surplus through licensing vis-à-vis the alternative of exploiting the Intellectual Property Right itself. Therefore, keeping in mind the above-mentioned dilemma and in order to better understand the harmonious construction between both the Competition laws and the Intellectual Property Laws it is necessary to analyse the statutory framework and judicial precedents in detail.

Legal Framework:

The Competition Act 2002 seeks to prevent monopolies and to prevent unnecessary intervention by the government. Section 3[1] of the Competition Act, 2002 talks about anti-competitive agreements whereas section 3(5) of the Act talks about the interface between the laws. Section 3(5) of the Act further not only provides blanket exception to Intellectual Property related licensing agreements to promote innovation in the market but it also regulates the practices which causes effects in the market by abusing such dominant position under Section 4 of the Act.[2] It is here that the role of tribunals and courts of law comes into play in balancing the conflict between the Competition law and the Intellectual Property laws.

Role of the Judiciary:

The major question that arises here is whether Intellectual Property Rights are subject to Competition law or not. The provisions of the Act as well as the jurisprudence of the Indian Courts suggests that there is no blanket exemption provided to Intellectual Property Rights when it comes to the jurisdiction of the Competition Commission of India.

In the case of Telefonaktiebolaget LM Ericsson vs. Competition Commission of India[3], a petition was filed by Ericsson challenging the jurisdiction of the Competition Commission of India to pass orders in cases involving patents, in particular, Standard Essential Patents (SEPs). The assertion made by Ericsson before the Delhi High Court was that the orders passed by the Competition Commission of India were without jurisdiction as it lacked jurisdiction to commence any proceeding in relation to a claim of royalty by a proprietor of a patent, which is covered by the Indian Patents Act, 1970. After a long-ranging discussion on the nature of remedies that are provided for in the Indian Patents Act, 1970 and the Competition Act, 2002, the Delhi High Court observed that “if there are irreconcilable differences between the Patents Act and the Competition Act in so far as anti-abuse provisions are concerned, the Patents Act being a special Act shall prevail”.[4] However, no irreconcilable differences between the two statutes were found by the Delhi High Court since the remedies provided under the Act (i.e. Competition Act, 2002) for abuse of dominant position were materially different from the remedy as available under the Indian Patents Act, 1970. The Delhi High Court also observed that it was apparent that the remedies under the two enactments were not mutually exclusive; in other words, the grant of one was not destructive of the other. Thus, it was open for a prospective licensee to approach the Controller of Patents (under the Patents Act, 1970) for grant of compulsory license in certain cases. The same would not be inconsistent with the Competition Commission of India passing an appropriate order under the Act.

Therefore, the application of the Act to the cases involving Intellectual Property Rights are not barred at all. Section 3(5) of the Competition Act will not affect the right of any person to “impose reasonable conditions, as may be necessary for protecting any of his rights”. Therefore, an Intellectual Property holder cannot impose any condition as he deems fit. Indeed, the power to do so is circumscribed by Section 3(5) of the Act which provides for general exceptions in case of imposition of reasonable restrictions for protecting intellectual property rights conferred under various statutes. Thus, if the licensor, by way of an agreement, has imposed a reasonable restriction for protecting any of the rights recognised under any of the statutes of IPR recognised under Section 3(5) of the Act, the provisions under Sec 3(1) to 3(4) of the Act will not be applicable.

The Competition Commission of India further addressed this issue in the case of FICCI - Multiplex Association of India vs. United Producers/Distributors Forum (UPDF)[5]. In this case, the Competition Commission of India observed as follows: “It may be mentioned that the intellectual property laws do not have any absolute overriding effect on the competition law. The extent of non-obstante clause in section 3(5) of the Act is not absolute as is clear from the language used therein and it exempts the right holder from the rigours of competition law only to protect his rights from infringement. It further enables the right holder to impose reasonable conditions, as may be necessary for protecting such rights.”

Further, in the case of Aamir Khan Productions Pvt. Ltd. v. Union of India,[6] the Bombay High Court held that Competition Commission of India has jurisdiction to hear all the matters vis-à-vis competition law and Intellectual Property Laws. Competition Commission of India also held that Intellectual Property related rights are not sovereign in nature but merely a statutory right granted under a law.[7]

In the case of Entertainment Network (India) Limited v. Super Cassette Industries Ltd,[8] the Supreme Court reiterated on the issue related to conflict between two laws. The court observes that even though the copyright holder has full monopoly but the same is limited in the sense that if such monopoly creates disturbance in smooth functioning of the market will be in violation of competition law and same was in relation to refusal of license. Undoubtedly, Intellectual Property owners can enjoy the fruits of their labour via royalty by issuing licenses but the same is not absolute.

Conclusion:

In conclusion, it can be deduced that there is no conflict between the aims and objectives of both the laws since both the laws are promoting innovation and consumer welfare. Further, it can be said that the domains of two laws have been harmoniously constructed to accomplish middle path. Since even though they are parallel to each other, their objectives are still converging with each other for ultimate consumer’s welfare. As seen above in the landmark judgments that the judiciary has a major role to play in bringing about harmony between the competition laws and the Intellectual Property laws in India.

[1] Section 3 of the Competition Act, 2002.

[2] Section 4 of the Competition Act, 2002.

[3] W.P.(C) 464/2014 & CM Nos.911/2014 & 915/2014.

[4] Ibid at paragraph 151.

[5] Case No. 1 of 2009. Available at https://www.cci.gov.in/sites/default/files/ FICCIOrder260511_0.pdf

[6] (2010) 112 Bom L R 3778.

[7] Kingfisher v. Competition Commission of India, Writ petitions no. 1785 of 2009.

[8] 2008(5) OK 719.

The article was originally published on www.lexology.com on March 24, 2020 and can be accessed here.


Featured Posts
Recent Posts
Archive
Search By Tags
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square

Subscribe for Updates