INTERPLAY BETWEEN IPR RIGHTS AND COMPETITION LAW

Bhavna Jain V

Saveetha School of Law, SIMATS

1.  INTRODUCTION

Intellectual property means creation out of a person’s mind, and intellectual property rights denote the rights or the reward given to the creator of this intellectual property for their contribution. The intellectual property rights of the creator include the exclusive right to create, use, and commercially exploit the product subject to public welfare. The creator is granted temporary monopolistic rights over that property. Various types of intellectual property are protected by law through patents, copyrights, trademarks, industrial designs, geographical indications, etc.

Competition laws are the set of laws that are introduced to ensure free and fair competition among the various players in a relevant market and ensure that the consumers are protected and not exploited in the market. The competition law principles do not per se prohibit monopoly in the market. Still, they prohibit and make it unlawful to abuse the monopoly or the dominant position in the market through various anti-competitive practices that are unfair and also cause an Appreciable Adverse Effect on the Competition (AAEC).

While viewing both these laws primarily, their objectives of granting exclusive monopoly to the creator and prohibiting abuse of dominant position and monopoly, respectively, might seem to be in conflict, as the creator of the intellectual property, when granted the monopoly, has the right to exclusively use, produce, and sell the product, which might be unfair and anti-competitive to other players in the market and can also exploit the consumers, which in turn violates the fundamental principles of the competition law. But, when these laws are seen more comprehensively, it can be noted that these areas of law complement each other by offering various advantages, ensuring free and fair competition while granting the creators of IP their exclusive rights through a justified monopoly.

2. PROVISIONS IN IP LAWS TO MAINTAIN COMPETITION

While dealing with the exploitation of IP rights by the creators, there are various ways in which the IP statutes ensure that the IP rights holders do not exploit their reward by affecting the public at large. The various exemptions allowed to the intellectual property rights granted are compulsory licensing, the Bolar exemption, parallel importation, access to benefit sharing, etc.

A patentee has the right to either assign, license or sell the product protected under IPR. If the patentee with his consent licenses a third party to create, use, and sell the product, it amounts to voluntary licensing, but if the patented product meets the various criteria of being unaffordable, inaccessible to the public, and not available in India, then the government, without considering the consent of the patentee, can license the product to a third party after the expiration of three years of granting the patent rights to the patentee. This refers to compulsory licensing. Compulsory licensing is granted to third parties to ensure that the patentee does not exploit the consumers. Therefore, ensuring that the competition law’s objective of protecting consumer and public interest is fulfilled. For instance, in the case of Bayer Corporation v. Union of India, the cancer-healing drug Nexaver was granted compulsory licensing in India as it met the condition under section 84 of the Patents Act, 1970.

The Bolar exemption is a statutory exemption granted to third parties to infringe the patentee’s rights after 17 years of granting a patent (i.e., 3 years before the expiration of the patent) for only research and development processes to create a generic product. However, the third party cannot commercially produce or sell the product; they can only do it after the expiration of the patent rights as observed in the case of Roche Products v. Bolar Pharmaceutical Co., The Bolar exemption ensures that there is a reduction in the time between the expiration of a patent and the introduction of new players in the relevant market for that product, in turn ensuring that there is equal opportunity for new market players and that the consumers are not exploited.

Parallel importation is yet another provision under section 107A(b) based on the principle of exhaustion, which specifies that the IP holder cannot control the actions of the purchaser of the product beyond the sale. This ensures that the patent holder does not control the actions of the purchaser through any anti-competitive practices, which amounts to the abuse of its dominant position in the market.

Further, the IP rights that are granted to the creators, which allow for exclusivity and monopoly, ensure that these rights are only granted for a limited period, for example, 20 years for patents, 10 years for trademarks, etc. This limited period ensures that the monopoly that is created is justified enough to then allow other players in that relevant market after the expiration of the IPR to compete with the patentee in a fair and free competition.

3. PROVISIONS IN COMPETITION LAW THAT ENHANCE IP RIGHTS

The Competition Act, of 2002 deals with various aspects of competition, like anti-competitive agreements, abuse of dominance, and also enforcing and regulating combinations in the market. The act establishes the CCI (Competition Commission of India) as a body to regulate these practices in the market. In the case of Amir Khan Private Limited v. Union of India, it was held that section 3(5) of the Competition Act does not simply remove the jurisdiction of CCI on cases related to IPR.

Section 3 of the act prohibits any type of agreement, action, or practice in the market that causes an appreciable adverse effect on the competition (AAEC) through any type of anti-competitive agreements (vertical agreements and horizontal agreements). Some of the practices that cause AAEC through horizontal agreements include price fixing, limiting production, distribution, and development, allocation of market, and bid rigging. Effects of vertical agreements could include tying agreements, exclusive supply or distribution agreements, refusal to sell, and resale price determination. Section 3(5) of the act exempts rights under various IP laws from the ambit of anti-competitive agreements but only to the extent of protecting their rights as observed in the case of Shri Shamsher Kataria v. Ors., It is ensured that the IP holders enjoy their rights through this exemption, but there is a check with the condition that this exemption is only applicable for them to protect their rights. Therefore, even the IP holders are not allowed to create AAEC through any anti-competitive agreements. Thus, promoting the objectives of both competition law and intellectual property rights law.

Section 4 of the act prohibits any type of abuse of a dominant position in the market. A dominant position refers to a superior position in the market where the enterprise can act independently from its competitive factors and can manipulate the market and competitors in its favour. Therefore, if any person or enterprise abuses or is likely to abuse this dominant position, then it is prohibited. This section does not exempt the IP holders, and therefore it is ensured that even the IP holders do not abuse their dominant position in the market.

Any combination as per the definition under section 5 of the act is required to get prior approval of the CCI, and the CCI also has the power to investigate any combination and decide accordingly where it believes that there would be AAEC due to that combination. Therefore, it is ensured that there is fair competition maintained in the market.

In conclusion, intellectual property laws do not have any absolute overriding effect on competition law. It was held in the case of Multiplex Association of India v United Producers Distributors Forum and others, that the Competition Act exempts the provision with respect to anti-competitive agreement in only limited circumstances i.e. to protect the rights conferred by the relevant IPR statutes.

4. ADVANTAGES OF THE INTERRELATION

Intellectual property laws and competition laws separately complement each other by ensuring the protection of the rights of IP holders while making sure that there is free and fair competition in the market. The interrelation of IPR and competition law also serves various advantages, like ensuring fair competition, providing levelled and equal opportunities to the market players, promoting innovation, promoting consumer welfare, and promoting the country’s economic growth.

The competition law provisions, where a few exempt the IP holders and others bind them, ensure that fair competition in the market is ensured, and with its combination of the various exceptions of compulsory licensing, the Bolar exemption, and parallel importation in the IP laws, ensure that no enterprise in the market is obstructed by the dominant player nor anyone is restricted entry to the market, thus promoting a fair and free market that provides equal and levelled opportunities to all players.

When the entries to the market are not restricted, there becomes a larger chance for more enhanced research and development in that relevant market leading to innovations and development. By having many enterprises in the market engaged in fair and healthy competition, it can be made sure that the consumers are not exploited through the practices of price cutting, price determination, predatory pricing, or even by restricting choices to them through the competition law provisions and the exceptions in the IP laws. Therefore, consumer protection is also enhanced. Therefore, when all these advantages are achieved, there is intimate economic growth in the country due to the advanced technological development and free and fair economy.

5. CONCLUSION

India's economy is impacted by the intertwining of its competition law and intellectual property rights (IPR). These laws are governed by the Patents Act of 1970, the Copyright Act of 1957, and the Competition Act of 2002. IPR encourages innovation by awarding short-term monopolies, but competition law makes sure that these monopolies don't negatively impact consumer welfare or market competition. India's strategy, which is motivated by public interest and socioeconomic factors, strikes a balance between innovation and market justice, especially in industries like technology and pharmaceuticals.

Even with these developments, problems still exist. Concerns about anti-competitive behaviour and the belief that IPR automatically confers monopolies are still common. Nonetheless, this problem is lessened by the temporary nature of IP rights and the protective function of competition law. When IPR and competition legislation work together, they provide level playing fields for market participants while advancing consumer welfare, which unquestionably promotes economic growth and innovation.

However, there is still room for improvement, particularly in high-impact sectors like digital markets and pharmaceuticals, where there is a need for more precise guidance on how IPR and competition law cross. It is advised that India improve its regulatory structure to guarantee a more uniform and transparent application of IPR-related competition rules to overcome these difficulties. More focused rules would be helpful for the Competition Commission of India (CCI) when dealing with complex licensing agreements, particularly when it comes to Standard Essential Patents (SEPs) and FRAND (Fair, Reasonable, and Non-Discriminatory) terms. More knowledge and instruction about the subtleties of this confluence for businesses and legal experts can also assist in preventing disputes and promoting a more creative, competitive, and resilient market. India can continue to promote innovation, economic growth, and consumer welfare while reducing the risks of monopolistic activities by strengthening cooperation between IPR and competition law agencies.

REFERENCES 

1. What are IPRs, TRIPS, and WTO? https://www.wto.org/english/tratop_e/trips_e/intel1_e.htm.

2. Bayer Corporation vs. Union of India Through the Secretary on 15 July, 2014.

3. Roche Products v. Bolar Pharmaceutical Co., 733 F.2d 858 (Fed. Cir. 1984)

4. Amir Khan Private Limited v. Union of India, 2010(112) Bom LR3778.

5.  Shri Shamsher Kataria v. Ors., Case No. 03/2011, 25 August 2014 (Automobiles Decision).

6.  Multiplex Association of India v United Producers Distributors Forum and others, Case No. 1 of 2009 decided on 25.05.2011.

7. Indian Patent Act, 1970.

8. Competition Act, 2002.

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