[Ip-health] Indian IP and Competition

[Judit Rius Sanjuan]

URL: http://www.financialexpress.com/fe_full_story.php?content_id=3D161927

The Financial Express
Edits & Columns
TODAY'S COLUMNIST

Intellectual property and competition
Legal monopolies foster innovation, but could also be unjust in some cases

Vinod Dhall
=97/The writer is acting chairman, Competition Commission of India. Email:
vinoddhall@hotmail.com/

An intellectual property right (IPR) is, according to Black=92s Law
Dictionary, an intangible right =93protecting commercially valuable
products of the human intellect=94; it may comprise patents, copyrights,
trademarks and other similar rights. An IPR includes the right to
exclude others from exploiting the non-corporeal asset.

The main reason why an IPR is granted is to give an incentive for
innovation, research and investment. In the absence of IPR protection,
other firms would be able to take a free ride on the R&D investment made
by the inventor firm. In a sense, IPRs also create competition in
innovation. According to Professor Valentine Korah, in Competition Law
Today (edited by yours truly), competition in the sphere of innovation
is regarded as more important than competition from someone providing
the same product in the same way. Society at large places a premium on
innovation, on which progress in many arenas of human endeavour is
predicated.

However, IPR laws do recognise that such protection cannot be for an
indefinite period, as after some time, the intellectual property should
be available to the wider public and world of enterprise in the general
interest. Even within the IPR period, the intellectual asset may be used
without restriction for certain purposes=97for non-commercial purposes,
that is, such as research and training.

Further, in some laws, provisions exist for =91compulsory licensing=92, by
which the IPR holder is forced to give up exclusive control of the
intellectual asset. Under the Indian Patents Act, for example, a
compulsory license may be sought after three years of the sealing of the
patent on three grounds: non-satisfaction of reasonable requirements of
the public, non-availability of the patented invention at a reasonable
price, or patented invention not being worked upon in India.

Tension can arise between IPRs and competition law because IPRs create
market power, even monopolies, depending upon the extent of availability
of substitute products. IPRs tend to restrict competition, while
competition law engenders it. Hence, competition law frowns upon the
unreasonable exercise of market power or the abuse of dominant position
obtained as a result of the IPR.

Tension can arise between IPRs and competition law because IPRs create
market power, even monopolies, depending upon the extent of availability
of substitute products. IPRs tend to restrict competition, while
competition law engenders it

In the EU, US and in other jurisdictions as well, there are a number of
cases which illustrate the contradictory pulls that draw competition law
and IPRs apart. In both jurisdictions, the courts recognise that firms
that enjoy a dominant position due to the IPR might in exceptional
circumstances have a duty to supply or license the IPR. But according to
Professor Korah, in Europe, the requirements of novelty and inventive
steps are perhaps stricter than in the US.

Let=92s take a glance at some of the more instructive cases of recent
times. In the Commercial Solvents case, a company which had a monopoly
over a raw material was obliged to supply it to Zoja, a competitor. In
the Volvo case, while recognising the company=92s copyright over spare
parts, the court pronounced that in three circumstances, the refusal by
a dominant firm to supply a dealer on fair terms may amount to abuse of
its power: charging unfair prices, refusing to supply spare parts to
dealers to whom it refused a license, and failing to supply spare parts
for old models. In the Magill case, the company wanted to produce for TV
viewers a comprehensive guide to the programmes of three existing TV
stations. However, the TV stations refused to let Magill publish their
programmes, citing copyright infringement. The court held this to be
abuse of dominance arising from the copyright. In the Microsoft case,
the company=92s refusal to give its competitors complete information on
interoperability between their software systems and Microsoft Windows
was held by the European Commission to be a violation of its competition
law. (The case is under appeal).

The Indian Competition Act, 2002, recognises the importance of IPRs such
as patents, copyrights, trademarks, geographical indications, industrial
designs and integrated circuit designs. While Section 3 prohibits
anti-competitive agreements, sub-section (5) thereof says that this
prohibition shall not restrict =93the right of any person to restrain any
infringement of, or to impose reasonable conditions, as may be necessary
for protecting any of his rights=94 enjoyed under the statutes relating to
the abovementioned IPRs. By implication, unreasonable conditions imposed
by an IPR holder while licensing his IPR would be prohibited under the
Competition Act. This provision is not very dissimilar to the laws in
other countries.

In some jurisdictions, restrictions that have been regarded as
unreasonable and anti-competitive include agreements restricting prices
or quantities of goods that may be manufactured, or curbing competition
between the licensee and the licenser, stipulating payment of royalty
after the license period, certain types of exclusivity conditions,
patent pooling, tie-in arrangements, and so on. A long list of such
practices held to be =93unreasonable=94 is available in the Competition
Commission=92s booklet on Intellectual Property Rights under the
Competition Act, 2002.

Thus, in the case of unreasonable restrictive practices by the IPR
holder, relief is available to the affected parties under the
Competition Act. The Commission can pass a variety of orders, including
penalties up to 10% of the turnover, cease and desist orders, direct
modifications of the (license) agreement, and any other orders or
directions that it may deem fit.

--
Judit Rius Sanjuan
Attorney
judit.rius@keionline.org

Knowledge Ecology International (KEI)
www.keionline.org / www.cptech.org
1621 Connecticut Ave, NW, Suite 500 Washington, DC 20009 USA
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