IPR and Competition Law

The relationship between Competition Law and Intellectual Property Rights (IPR) is one of the most discussed topics in recent years. Competition Law has been regarded as the most efficient mechanism in countering anti-competitive agreements, prohibiting abuse of dominant position, regulating mergers and combinations and provoking efficient allocation of resources to ultimately benefit the consumers, providing them with wider choices, better quality products at a reasonable price. Intellectual Property Rights vouches for striking a balance between the exclusive right of the owner and the social interest. It ensures that the owner of the intangible property gets an exclusive right, so as to exploit commercially his intellectual creation, gaining the monopoly rights thereof. IPR consists of bundle of rights which gives the owner right to exclude others from accessing the product, subject to a limited period of time.
It can be inferred from above that a scrimmage is bound to arise between IPR and Competition Law. IPR seeks to grant monopoly power to which Competition policy dissents to provide, on one hand it is necessary to encourage innovation and on the other proper competitiveness in market should also be observed. Therefore it is not a conflict which exists between the two laws but they are also complementary in nature in certain areas. IPR provides incentives to economic agents for technological innovation, which will create more products and result in dynamic growth of the product, which is one of the objectives of the competition policy.

How Anti-competition laws combat the IPR monopolies

Anti-competition laws in order to combat the IPR monopolies often include two important measures namely compulsory licensing and parallel imports. A compulsory license is where an IPR holder is authorized by the state to surrender his exclusive right over the intellectual property, under article 31 of the Trade-Related aspects of Intellectual Property Rights (TRIP). Compulsory licenses are granted under certain circumstance such as in the interest of public health, national emergencies, nil or inadequate exploitation of a patent in the country, and for an overall national interest. A parallel import on the other hand includes goods which are brought into the country without the authorization of the appropriate IP holder and are placed legitimately into a market.

In addition, provisions like Section 3 of the new Competition Act, 2002 (the Act) deals with anti- competitive agreements which cannot be used by IPR holders since they are in conflict with the competition policies. Firstly, patent pooling is a restrictive practice wherein firms of a particular manufacturing industry decide to pool their patents and agree not to grant licenses to third parties, simultaneously fixing quotas and prices. Secondly, a clause that restricts competition with respect to research and development or which prohibits a licensee to use rival technology is considered anti-competitive under the law. Thirdly, a licensor under the law is prohibited from fixing the price at which the licensee should sell his goods. The above mentioned examples are not by any means exhaustive, but are a few illustrations demonstrating anti-competitive provisions applicable to IPR under the Act. Furthermore, under Section 27 of the Act, the Competition Commission of India (the Commission) has the authority to penalize IPR holders who abuse their dominant position. Further, under Section 4 of the Act the Commission is also authorized to penalize the parties to an anti-competitive agreement, which is in contravention of Section 3 of the Act.

Innovation has always been a catalyst in a growing economy resulting in more innovation. The advent of fresh innovations gives rise to healthy competition at macro as well as microeconomic levels. IP laws help protect these innovations from being exploited unlawfully. In view of this IP and Competition laws have to be applied in tandem to ensure that the rights of all stake holders including the innovator and the consumer or public in general are protected.
The common objective of both policies is to promote innovation which would eventually lead to the economic development of a country however this should not be to the detriment of the common public. For this the competition authorities need to ensure the co-existence of competition policy and IP laws since a balance between both laws would result in an economic as well as consumer welfare.

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