Abstract
The coalescence nature of Intellectual Property Rights (hereinafter termed as ”IPR”) and Competition Law hereinafter termed as ”CL”) is often perceived as a dichotomy, akin to antithetical nature of Magnets. As IPR bring in monopolies to spur innovation whereas, CL necessitates the idea of free markets and repudiates the monopolies concept. But, a deeper examination reveals that both laws can able to work in tandem to stimulate innovation in technology centric markets. The proviso, Section 3(5)(i) of the Competition Act,2002 demonstrates this balance by exempting certain IPR related agreements from the purview of the above-mentioned Act. The ongoing legal tussle (Ericsson and Monsanto) before the court supports the stance. Despite, the existence of ambiguities in interpreting “reasonable conditions” under Section 3(5), statutory clauses (like Section 60 and Section 62 of the Competition Act,2002) epitomizes the legislative intent to harmonize the objectives of promoting innovation and ensuring fair competition . Ultimately, the idea of achieving balanced approach obliges to form a clear guidelines to navigate the interplay between IPR laws and Competition Laws, ensuring that both can fulfil their roles without being incursive to each other
Keywords: Section 3(5)(i), Competition Law, Intellectual Property Law, Ericsson and Monsanto, TRIPS Agreement
Introduction
The legal conundrum between Competition law and IPR Laws [including Patents Act] are epitomized by a term “Friends in Disagreement”. Despite there exists no direct reference to the term “Competition” in Indian IP statutes but in vice versa the Competition law provides certain exemptions to protect the IPR’s. Precisely, Section 3(5) of Competition Act 2002 as this Section standardizes the effect of Competition law on IPR’s in positivistic sense and adopts a proactive approach signifying that the completion act intervenes only when its application potentially, restricts an individual’s ability to restrain infringement or imposing certain restrictions in order to protect his IPR that may have been conferred upon him under relevant IP statutes mentioned therein. Henceforth, the purposes that are meant to be served by the application of the IPR statutes are given priority and preference over the purposes that are meant to be served by the application of Competition statutes
Research Methodology
This research paper takes shape through descriptive approach towards the subject. Furthermore, this research paper involves the application of primary sources including statutes case laws and treaties and secondary sources obtained from various sources including newspaper, academic journals, websites, commentaries to deeply analyse on need for navigating a balanced approach between the Competition Act and Intellectual property rights.
Review of Literature
Hanns Ullrich, Expansionist Intellectual Property Protection and Reductionist Competition Rules: A Trips Perspective (2004).
This article examines that implications of the TRIPS agreement on global intellectual property protection and Competition policy. The author identifies that this agreement fosters an expansionist approach to IP rights at the expense of competition and innovation particularly in third world countries. Furthermore, he highlights the tension between the necessity of the open markets and the robust IP Protection by suggesting that current IP laws, influenced by TRIPS, possess a probability to hinder economic development and technological progress. The author calls for a more balanced approach that integrates competition principles to promote fair and equitable growth in the global economy
Itumeleng Lesofe, Finding the Right Balance Between the Enforcement of Competition Law and the Protection of Intellectual Property Rights, 11th Competition Law, Economics and Policy Conference, 31 August 2017.
This article highpoints the significant challenges and opportunities in balancing competition law enforcement and protection of intellectual property rights . also this article address forum shopping in IPR disputes underscores concerns over efficiency and fairness. The author emphasises the need for nuanced competition laws to avoid stifing innovation while preventing anti competitive practices. The OECD discussions opens up divergent views but stress the importance of coordination between IP and competition policies
Paramjeet Berwal, Section 3(5)(i) of the Competition Act – An Analysis, 27 NLSIR 201 (2015).
This article examines the complex and multifaceted relationship between IPR and competition law through adhering to due consideration of Legal, economic and social dimensions and seeks to balance these interest by providing exemptions for the reasonable use of IPR’s while preventing the possibility of the potential abuse. Further the author justifies the stance in light of Shamser Kataria Judgement, as the stakeholder must critically evaluate the impact of this section. By doing so, there is high chance to create nuanced understanding these statutes and fostering a more robust and dynamic economic environment
Legal Juxtaposition of Intellectual Property laws and Competition Laws
The position of jurisprudence on the substantive issues between IPR and Competition law is relatively unexplored page of an interesting book. The only legal interface which connects the abovementioned laws is set out under Section 3(5) Of Competition Act,2002 which inscribes that the competition arrangement in India provides by ensuring that the act does not aim to interfere with systematic exercise of the rights conferred and protected under IPR statutes. This present position tend to differ from the previous regime which governed under Monopolistic and Restrictive Trade practices Act,1969.Furthermore, it is an established predicament of law that the abovementioned section does not merely remove the CCI Jurisdiction over IPR related cases but also have an over-riding effect over the other legislations for the time being in force. This nascent stage of these laws has been started to grow in earlier 2010’s as the flourishing existance of developmental rulings of CCI which detailly unveils the intricate relationship between IPR laws and Competition laws
Background
It is irony to note that there is absolutely no reference to term “Competition” in the India IP statutes, but the idea to protect the IPR’s by providing certain exemptions is prominent under Section 3(5)I of the competition Act,2002. As this proviso regulates the effect of CL on IPRs as this section come to play only if the intended objective of this Competition Act impinges the right of the person to restrain infringement and to impose condition for protecting his rights that has conferred on the individual under IP statutes . In layman words, It is not the IPR which are protected by the virtue of the above mentioned proviso rather it is right to protect the IPR that is protected. This research article arises upon the recent case (Ericcson and Mossanto ) sought to protect the IPR’s by following due-diligence of objectives that are sought to be served by the application of the Competition Law
An Examination of the Ericsson and Monsanto Cases
Ericsson the telecommunication giant entangled themselves in a legal tussle with Indian mobile handset manufacturers over its standard Essential Patents related to telecom technologies such as 2G, 3G, etc. the giant, maintaining a significant portfolio of SEP’s sought FRAND (Fair, Reasonable and Non- discriminatory) licensing from these manufacturers as per the standards set by the standard setting organizations (SSOs) like ETSI, 3GPP. When negotiations with companies like Intex, Micromax and Iball are at cross-roads, Ericsson turned to Delhi High Court for enforcement. It did reached a favourable outcome but whereas the above mentioned companies challenged Ericsson’s actions, contending abuse of dominant position and unfair royalty rates. Despite Ericsson’s Argument that Patents Act governed such matters exclusively, the court held that the Competition act could co-exist, allowing CCI to investigate. Ericsson appealed this decision.
On the other hand, Monsanto (now Bayer Crop Science Limited) faced legal tussles in relation to patent licensing practices. Seed companies (informants) whose patent licenses had been terminated, complained to the CCI about excessive royalties and unfair access to patents. Despite Monsanto’s contention, the Delhi High Court ruled that the CCI had the authority to investigate under the Competition Act. Monsanto had challenged this decision setup up stage for further legal scrutiny.
Moot decision of the Delhi High Court
The Delhi High Court’s Judgement shed light on this issue by expounding that the Competition commission of India (CCI) isn’t solely responsible in determining whether patent license affects Competition or not. Furthermore, CCI can examine only matters relating to anti- competitive Agreements and abuse of dominant position whereas the patents act governs exclusively matters relating to licensing conditions .The Patents Act, being exhaustive in nature, prevails over the concerning patent rights. Therefore, all CCI proceedings against Ericcson and Monsanto were duly quashed as the disputes were related to patent rights, not solely abuse of dominance
Other Landmark Judgments
The parties to the Shamsher Kataria judgement claimed IPR exemptions, arguing that due to section 3(5)I of the Act, the limitations placed on Original Equipment Suppliers (OES) to prevent their proprietary parties from engaging in sales without first obtaining consent would be considered reasonable measures to prevent IPR infringements. It is decided that original equipment manufacturers might contractually defend their intellectual property rights against original equipment suppliers and that these OES could only sell completed goods on the open market under certain, non-restrictive conditions.
In the Telefonaktiebolaget Lm Ericsson (PUBL) vs. CCI case, the Delhi High Court ruled that although the two enactments’ main points may seem to be inherently at odds, the likelihood of an irreconcilable conflict appears to decrease significantly when one considers that antitrust laws serve primarily to prevent the abuse of rights and that patent laws define the boundaries of specific rights. The Competition Act and the Patents Act do not contradict each other in an unresolvable way. It is also impossible to remove the CCI’s authority to hear complaints about abuse of dominance with regard to patent rights if there isn’t an unresolvable conflict between the two laws.
In the case of Financial Software and Systems Pvt Ltd, it was submitted that the defendants was not preventing any third party (other than the Informant) from providing customisation services. Further, the requirement of prior consent of the Opposite Parties for third party customisation was a reasonable restraint under Section 3(5)(i) of the Competition Act, 2002 and the same was de facto applied by other switch software suppliers in India
The Delhi High Court ruled in the Microfibres Inc. v. Girdhar & Co case that the legislative intent was to provide less protection to design activities that are commercial in nature and more protection to pure original artistic works, such as paintings, sculptures, and the like. It is evident from this ruling that the protection afforded to a work that is commercial in nature is not equal to, nor greater than, the protection accorded to a work of pure article.
The district court determined in the case of United States v. Microsoft that “copyright does no give its holder immunity from laws of general applicability, including the antitrust laws”
TRIPS Framework : Safeguarding against Anticompetitive Practices
The primary international agreement that establishes guidelines for identifying information rights is the Agreement on Trade-Related Aspects of Intellectual Property Rights, or TRIPS Agreement. First to establish minimum, legally-enforceable criteria for intellectual property rights (IPRs), the TRIPS Agreement was negotiated during the Uruguay Round, which also gave rise to the World Trade Organisation (WTO). This marks a crucial step towards harmonizing national IP systems. The Agreement aims to balance the protection and enforcement of IPRs with obligations, benefiting both producers and users of technological knowledge. It acknowledges the importance of competition law and its practices, ensuring that the protection of IPRs does not hinder market competition and innovation. By setting these standards, the TRIPS Agreement seeks to foster an environment where technological advancements can be shared equitably, promoting overall economic growth and development.
It is to be noted that there are three guiding sutras surfaces from the competition that are set out in TRIPS Agreement
Firstly, the reservation of IPR related competition policy to sovereign national determination which directly arises from the very wording of the Article 8.2 and 40.2 of the Agreement Article 8.2 states of the TRIPS Agreement states that;
“Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology”
Anti-competitive licencing activities or requirements are covered under Article 40. It expressly grants the member states the latitude to designate abusive intellectual property activities in their state legislatures. The text says :
“(1) Members agree that some licensing practices or conditions pertaining to intellectual property rights which restrain competition may have adverseeffects on trade and may impede the transfer and dissemination of technology.
(2) Nothing in this Agreement shall prevent Members from specifying in their legislation licensing practices or conditions that may in particular cases constitute an abuse of intellectual property rights having an adverse effect on competition in the relevant market. As provided above, a Member may adopt, consistently with the other provisions of this Agreement, appropriate measures to prevent or control such practices, which may include for example exclusive grant back conditions, conditions preventing challenges to validity and coercive package licensing, in the light of the relevant laws and regulations of that Member”
The aforementioned provision appears to have a broad application to trade restrictions related to all types of intellectual property rights covered by the TRIPS Agreement. However, the legislative background and the examples provided in an idea presented under Article 40.2 primarily concentrate on the licencing and trading of technology, rather than trade mark symbols or copyright licencing.
Secondly, a need for conformity between national competition policies pertaining to intellectual property rights and the IP protection principles of the TRIPS agreement. Given that TRIPS consistency involves more than only corrective action, which is always governed by the principle of proportionality. The necessity of consistency pertains to the substantive range of competition laws relating to intellectual property rights.
Thirdly, it is concerning to focus on policies that limit the use of technology that are protected. Since it enables members to establish a narrow range of exceptions to copy right protection and patents in their municipal laws, it does, to some extent, cause rifts with the laws of the municipalities.
Additionally the only part of the Compulsory licensing rules of TRIPs is Article 31(k), which does incorporates a waiver condition that compulsory licenses must be issued “predominantly” for the supply in the domestic market. Howsoever, this is not the only remedy available for anticompetitive abuse of IPR’s but also includes injunctions and fines on anticompetitive practices to the arrangements and conducts in the Field of IPRs.
These articles of the Agreement, which include both unilateral and bilateral anti-competitive IPR-related acts, basically deal with the abusive use of intellectual property rights together with specific licencing procedures and circumstances. A peculiar distinction is made on the basis of restrictive practices that impact licensing in general and specifically bearing on those affecting technological transfers. This has the disadvantage that it leaves other potentially anti-competitive agreements, such as mergers and acquisitions, beyond the purview of the TRIPs Agreement. Howsoever, This approach of differentiation ensures that the protection of IPR’s with the need to prevent practices that could stifle innovation and mitigates anti competitive behaviours
Piloting the Legal Synergy between Competition Law and Intellectual Property laws
From the Shamsher kataria to Monsanto ,There has been a persistent legal tussle between CCI and Patentees pertaining to the manner of exercising their right. Still, the conflict remains unresolved.
Traversing Ambiguities and probable Co-existence of Competition law
As outlined Earlier in this context, Section 3(5) of Competition Act 2002 excludes its applicability in agreements aimed at restricting infringement of patent rights. However, this exemption is not absolute in nature as it only applies to agreements necessary for protecting the patentee’s rights under specified statutes by mandating the obligation of reasonable conditions by the patentees. Yet, there do exist ambiguities pertaining to what constitutes reasonable or unreasonable conditions, resulting in broad application by Indian courts without clear guidelines.
Further to this, Section 60 of the Competition Act 2002 establishes its overriding effect over the other laws empowering the jurisdiction of the Competition commission in tandem with accrediting Act’s primacy in the case of conflict to promote economic development. Afterthought, Section 62 of the Competition Act, 2002 clarifies that it acts as add-ons to existing laws rather than striking down on them. These provisions in tandem highpoints the need of legislative intent of the Act to co-exist harmoniously with other legal framework [including Patents Act] emphasising the Rule of Harmonious Construction to be applied.
Recognizing the disparity for sustenance of laws
The junctures of the Intellectual Property Laws and Competition Laws would be a erroneous comprehension if the attribution of directive objective of enhancing innovation to latter or association of enhancing Competition as directive objective to the former. It has to be noted that though two laws aims to achieve different objectives, but they are synergies in nature; each will serve potentially the other by achieving its function. The primary obstacle at hand is in promoting a consonance between the duo-laws and regulation of fair market is to formulate and implement laws within the purview of Intellectual property laws as well as outside Intellectual property laws. As previously mentioned, adoption of Pro-active approach of IPR law promotes Competition.
Furthermore, endorsing a pro-competitive interpretation of IPR law, rather than the questioning the integrity of these rights is desirable as interpretation doesn’t serve as a means to expand IPR’s beyond the intent of legislature. As such IP laws governs the issuance and operation of exclusive rights whereas, Competition law concern itself with how these rights are to be exercised. This differentiation is very vital in fulfilling the objectives of respective laws emphasising that the Competition law should concentrate solely on the impact such exclusive rights on a relevant markets. In short, while coordinating the synergy between both the laws, it is crucial to uphold the differentiation between legal and economic monopolies as former falls in the ambit of IPR related law regime and the latter falls under the dominion of Competition law
Conclusion.
To sum up, there is no discordant conflict between the Competition Act vis-à-vis Patent Act rather they serve complementary purposes, aiming to cultivate innovation and ensure equitable Competition. However the issue of disharmonious jurisdiction between these acts has been contentious which persist even today. Since it has well identified law that the patent rights and Competition policies complement each other, it becomes imperative to establish specific guidelines to navigate the balance between the Patents law and Competition law including SEP’s, jurisdictional matters . As this balance would thwart the exploitation of rights of an person while safeguarding the rights provided under these statutes
Mahesh D
Tamil Nadu National Law University