| Publication Date | Version | August 18, 2023 | 1.0 |
| Keywords | Intellectual Property Rights, Competition Law, Anti-Competitive, Abuse of Dominance |
| Legislation(s) |
|
| Jurisdiction | India |
Introduction
Intellectual Property Rights (‘IPRs’) are rights in relation to ‘intellectual property’, whether contractual or under the statute.
Intellectual property (‘IP’) refers to creations of the mind, such as inventions; literary and artistic works; designs; symbols, names and images used in commerce.
[1]
The right to enjoy the fruits of one’s intellectual property is not in debate and is recognized under various statutes.
The question is the boundary within which such a right may be exercised.
There is a thin line between using IPR for one’s benefit and abusing it to curtail ‘free and fair competition’ in the market.
While ‘anti-competitive’ agreements are not permitted under the Competition Act, the said Act protects the right of a person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his intellectual property rights conferred under specified legislations.
‘Abuse of dominance’ by a dominant enterprise or a group in relation to a relevant geographical market or a relevant product market is also not permitted under the Competition Act.
However, similar protection, as available in the case of ‘anti-competitive’ agreements, is not available in the case of ‘abuse of dominance’ — the issue is analyzed in this article.
Recognition of IPRs in India
IPRs are recognized under the legal regime in India, broadly under the following heads:
Copyright means the exclusive right to do or authorize certain acts in relation to work such as literary, dramatic or musical work, computer programs, cinematograph films, or sound recordings.
[Section 14 of the Copyright Act]
Patent means a patent for any invention granted under the Patent Act 1970.
The true and first inventor of the invention can claim it.
[Section 6 of the Patent Act]
Geographical indication, in relation to goods, means an indication that identifies such goods as agricultural goods, natural goods, or manufactured goods as originating or manufactured in the territory of a country or a region or locality in that territory.
[Section 2(e) of the Geographical Indications of Goods (Registration and Protection) Act]
Trademark means a mark capable of being represented graphically and which is capable of distinguishing the goods or services of one person from those of others.
[Section 2(zb) of Trademark Act]
Semi-conductor integrated circuit means a product having transistors and other circuitry elements which are inseparably formed on a semiconductor material.
[Section 2(r) of Semi-conductor Integrated Circuits Layout Design Act]
Design means only the features of shape, configuration, pattern, ornament or composition of lines or colours applied to any article.
[Section 2(d) of The Designs Act, 2000]
Scope of IPR Protection with Respect to Anti-Competitive Agreements
Section 3 of the Competition Act lists out agreements that are deemed to be ‘anti-competitive’ agreements under the Competition Act.
Any agreement that causes or may cause an ‘appreciable adverse effect on competition’ is considered anti-competitive.
The factors taken into consideration by the Competition Commission of India (‘CCI’) are:
- Creation of barriers to new entrants in the market.
- Driving existing competitors out of the market.
- Foreclosure of competition by hindering entry into the market.
- Accrual of benefits to consumers.
- Improvements in the production or distribution of goods or provision of services.
- Promotion of technical, scientific and economic development.
However, rights exercised for the protection of IPR are protected under Section 3(5) of the Competition Act.
The CCI discussed the scope of this exception in several cases.
Shri Shamsher Kataria v. Ors
In this case, a complaint was filed against Honda, Volkswagen, and Fiat for entering into anti-competitive agreements.
[2]
These car manufacturers entered into exclusive supply agreements with original equipment manufacturers citing reasons such as ensuring quality control and protection of brand goodwill.
The CCI laid down a twofold test:
A) Whether the right put forward is correctly characterized as protecting intellectual property.
B) Whether the requirements of the law granting the IPRs are being satisfied.
The keyword is ‘necessary’, meaning the IPR holder can protect his right but only up to a specific limit.
FICCI Multiplex Association of India v. United Producers Distribution Forum
In this case, the informant alleged anti-competitive agreements by multiplexes.
[3]
CCI held that the protection under Section 3(5) is not absolute.
Competition law provisions will apply, and the IPR holder only has the right to protect his work from infringement.
The intent is to harmonize the legitimate interests of an IPR holder with the larger goal of encouraging competition.
Abuse of Dominance Under Section 4 of the Competition Act
No enterprise or group can abuse its dominant position under Section 4(1) of the Competition Act.
It shall constitute an abuse of dominant position if any enterprise or group:
- Imposes unfair or discriminatory conditions or prices.
- Limits or restricts production or development.
- Engages in activities leading to denial of market access.
- Misuses its dominant position to enter another relevant market.
Being dominant itself is not prohibited, but abusing that dominance is prohibited.
Abuse of Dominance and Protection of IPR
The Competition Law Review Committee in its report dated July 2019 observed that a monopoly or economic exclusivity is created by IPRs by their very nature.
The Committee recommended that in cases of abuse of dominance, a defence allowing reasonable conditions and restrictions for protecting IPR may be provided.
[4]
Section 4A was proposed in the draft amendment Competition Bill 2020.
However, the recommendation regarding Section 4A was not incorporated in the Competition Amendment Bill 2023.
International Position
IMS Health GmbH v NDC Health GmbH
IMS provided pharmaceutical sales data in Germany through a protected brick structure.
[5]
The refusal to license would amount to abuse of dominance when:
- The undertaking requesting the licence intends to offer new products or services.
- There was no justification for refusal.
- The conduct excluded all competition in the market.
[6]
RTE and ITP v Commission of the European Communities
Magill TV Guide Ltd was prevented from publishing a comprehensive weekly television guide.
[7]
The Court held that refusal to grant licenses in certain circumstances could amount to abuse of dominant position.
Abuse of Dominance and Patents: The Indian Conundrum
Telefonaktiebolaget LM Ericsson filed writ petitions against the CCI and others.
[8]
The issue involved abuse of dominance relating to Standard Essential Patents (SEP).
The Delhi High Court held that there was no irreconcilable conflict between the Competition Act and the Patents Act.
Monsanto Holdings Pvt. Ltd. v. Competition Commission of India
Monsanto was accused of abusing its dominant position in the Bt. Cotton Seeds marketplace.
[9]
The Court observed that the Competition Act operates in addition to other statutes.
In later proceedings, the Court also held that the Patents Act is the special statute and shall prevail in matters involving exercise of patent rights.
[10]
Viewpoint
By Section 3(5) of the Competition Act, an agreement would not be considered as anti-competitive if such agreement restrains infringement of intellectual property rights.
The conditions imposed should be ‘reasonable’ and ‘necessary’.
The question remains whether similar allowance should be provided in cases involving abuse of dominance.
Section 83 of the Patent Act, 1970 specifically provides that patent rights should not be abused by the patentee.
The social welfare fabric of India’s economy may not yet be ready for unrestricted market forces.
However, there is growing momentum towards balancing social welfare and market dynamics for a more equitable economic future.
Sources
[1]
World Intellectual Property Organization:
https://www.wipo.int/about-ip/en/
[2]
Shamsher Kataria vs. Honda Siel Cars India Ltd., MANU/CO/0066/2014
[3]
FICCI Multiplex Association of India vs. United Producers Distribution Forum, MANU/CO/0018/2011
[4]
Competition Law Review Committee 2019:
https://www.ies.gov.in/pdfs/Report-Competition-CLRC.pdf
[5]
IMS Health GmbH vs NDC Health GmbH:
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62001CJ0418
[6]
IMS Health GmbH v NDC Health GmbH:
https://unctad.org/ippcaselaw/sites/default/files/ippcaselaw/2020-12/IMS%20Health%20v%20NDC%20CJEU%202004.pdf
[7]
Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v. Commission of the European Communities:
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61991CJ0241
[8]
Telefonaktiebolaget LM Ericsson (PUBL) vs. Competition Commission of India and Ors., MANU/DE/0762/2016
[9]
Monsanto Holdings Pvt. Ltd. and Ors. vs. Competition Commission of India and Ors., MANU/DE/1078/2020
[10]
Telefonaktiebolaget LM Ericsson (PUBL) and Ors. vs. Competition Commission of India and Ors, MANU/DE/4435/2023
Radhika Goyal (Ms) and Ashwini Panwar (Mr)
Associate at Alaya Legal
