The concept of free market in India has undergone dynamic changes since the advent of liberalisation in 1991. The growth led to the establishment of major multinational companies in India, which in turn required control of monopolistic/anti-competitive approaches of such companies. To prevent the evils of monopoly/anti-competition and its manifestations, various measures have been adopted by the government of India from time-to-time. The enactment of Competition Law(s) is a major step in that direction.
The Competition Law, in terms of the broader meaning of ‘anti-competitive’, crosses paths with another legislation (i.e. intellectual property laws, or ‘IP Laws’ in short), which grants exclusive rights to the owners of intellectual property and may be used in a manner that may be held as anti-competitive. However, there are fine distinctions between the two legislations. Still, the overlap in competition, innovation and intellectual property rights (IPR) remains one of the most controversial and interesting issues of present times.
Competition Law in India
The Competition Law in India is presently governed by the provisions of the Competition Act, 2002 (Act). There are three main elements which are intended to be controlled by implementation of the provisions of the Act – anti-competitive agreements, abuse of dominant position and regulation of combinations which are likely to have an appreciable, adverse effect on competition. In the present discussion, the relevant elements are anti-competitive agreements and the abuse of dominant position.
The term anti-competitive agreement, as such, has not been defined under the Act. However, any agreement with respect to the production, supply, distribution, storage, acquisition or control of goods or provision of services by enterprises which is anti-competitive is prohibited and void. Such agreements must cause or are likely to cause an appreciable, adverse effect on competition in a relevant market in India. The relevant market may be a geographical or a products’ market.
On the other hand, a dominant position is a position of strength enjoyed by an enterprise in the relevant market in India, which enables it to:
• Operate independently of competitive forces; and,
• Impact its competitors, consumers, relevant market in its favour.
The relevant factors for determining dominant position include market share, size and resources of the enterprise/competitors, economic power of enterprise, vertical integration, dependence of consumers etc.
There are primarily three stages in determining whether an enterprise has abused its dominant position. The first stage is defining the relevant market. The second is determining whether the concerned undertaking/enterprise/firm is in a dominant position or has a substantial degree of market power or has monopoly power in that relevant market. The third stage is determining whether the undertaking in a dominant position with substantial market power/monopoly power has engaged in conducts specifically prohibited by the statute or amounting to abuse of dominant position/monopoly, or attempt to monopolise under the applicable law.
In simple words, any action that would come within the purview of anti-competitive agreements and/or abuse of dominant position, as defined under the Act, would be held as a contravention of the provisions of the Act and would be liable for action prescribed there under.
IP Law in India
The most important of the Indian IP Laws are the Patents Act, 1970, the Trade Marks Act, 1999, the Copyright Act, 1957 and the Designs Act, 2001. The above legislations are supported by relevant rules framed there under.
In order to be recognised as an author or inventor of an intellectual property, an application along with associated documents needs to be filed in the prescribed manner with the relevant statutory body. On being satisfied with the authenticity and conformity of the information/associated documents (filed by the author/inventor), the statutory body issues a certificate which is proof of the ownership of author/inventor in the intellectual property. The certificate recognises the exclusive rights of the author/inventor in the intellectual property for a limited time-period; however, such time-period can be further renewed under IP Law. The purpose of seeking registration under IP Laws is to strengthen exclusive rights over intellectual property (which, inter-alia, helps in dealing with cases of infringement), and commercially exploit such intellectual property.
The intent of IP Laws is to encourage new technologies, artistic expressions and inventions while promoting economic growth. The authors/inventors of intellectual property receive direct benefit of IP Laws, as they know that their creative work will be protected and that they can commercially exploit the labour put in for creating or further developing intellectual property.
Are Intellectual Property Rights Anti-Competitive?
The prime objective of the Competition Law is to eliminate anti-competitive practice, encourage free trade and prevent abuse of dominant position by market players; while the objective of IP Laws’ is to acknowledge and safeguard the intellect and hard work put in by creators and inventors of intellectual property by granting a time bound exclusive control to commercially exploit such intellectual property. Such exclusive control over intellectual property may go against the prime objective of the competition law, as the holder of IPR has the liberty to control all commercial and other aspects of intellectual property, i.e. control over price, demand and supply. As such, his actions can be held as anti-competitive.
However, the IPR becomes anti-competitive only when the author/inventor of intellectual property includes restrictive clauses in licensing contracts (vide which they grant license to use intellectual property) such as territorial restraints, exclusive dealing arrangements, tying or grant-back requirements, or abuse of their dominant position in the market, combinations involving IPR issues and denial of market access. All such practices fall within the scope of either anti-competitive agreements or abuse of dominant position, and are liable for action under the Act.
It is important to appreciate the underlying intention of IP Laws which is to serve larger public interests by providing a platform to authors/inventors to come forward and disclose the product of their intellect. Despite this intention, the extent of IPR is often determined by the protection of interests of the owners, rather than benefit extended to the public at large, which does not seem to be correct. It is to be understood that merely grant of an IPR by itself does not create or ensure market power; as the exclusive right over the intellectual property is only a protection granted from the legal point of view.
IP Laws cannot be applied in isolation from other legal disciplines, particularly the Competition Law. While IP Laws grant the exclusivity and monopoly right in the intellectual property to the author/ inventor, it is the Competition Law that keeps a check on the usage and exercise of these rights. Competition Law frowns upon the unreasonable exercise of market power or the abuse of dominant position obtained as a result of the IPR. There is a necessity for law enforcers to delve deeper into the finer differences of IP Laws and Competition Laws and understand their common objectives.
Deepak Dahiya is the managing partner of a Delhi based law firm, Legal Imperials. All views expressed in the article are personal in nature and we advise you to obtain specific legal opinion/ advice on issues relating to subject matter of this article. We would welcome all your views and queries on this article at firstname.lastname@example.org