Intellectual property rights grant exclusive legal rights to the owners, necessarily restricting access of others to the same, which in turn reduces competition in the market. On the other hand, Competition law/anti-trust law seeks to promote competition and increase access to the market. Thus, we can see that both of these subjects are contrary to each other. But at the same time, there is another opinion that the two realms can, not only co-exist but also complement each other.
Therefore, the purpose of this article is to analyze, how both IPR and Competition law are connected and interdependent. This study concentrates on the fact that; to develop the economic efficiency in the country both IPR and Competition Law must co-exist and this study comes up with the guidelines that will help to improve the efficiency in the Indian system of Competition law and patent offices.
Historically, the laws of Intellectual Property and Competition Law were two separate systems. They are regarded as areas at odds with each other. Competition law deals with an efficient mechanism to counter anti-competitive agreements, regulating managers and acquisitions, restricting the use of dominant position, etc. On the contrary, IPR tries to strike balance between the rights of the owner and social interest. It helps the intangible property owner to get exclusive rights and commercial value for his collection. Hence, here both of them have a tassel between them. IPR gives a monopoly to the owner to which Competition law disagrees.
However, in recent days this approach has been given up as both IPR and Competition law has one like feature i.e. consumer/social welfare and thus, they are complementary to each other. Intellectual property Law grants an exclusive right with the hope to induce people to make technological innovations that are needed in society. Similarly, the Competition law aims to provide the customers, the goods and services of high quality at the lowest possible price. Therefore, we can see that both have adopted different methods to reach the same goal.
Intellectual Property Rights (IPR)
Intellectual Property Rights consists of a bundle of legal rights conferred upon the owner of intangible property to acquire the exclusive legal rights (monopoly) to utilize commercially his intellectual creations. There are two categories in IPR and they are Industrial property and Copyrights. The Industrial property includes patents, trademarks, industrial designs, and geographic indications of source; and Copyright includes literary and artistic works such as novels, poems, and plays, films, musical works, artistic works such as drawings, paintings, photographs, sculptures, and architectural designs.
The Industrial Revolution that happened in the 19th century in Europe gave rise to new inventions. It is known as the era of scientific inventions. It is when; patenting the intangible properties came into being for the protection of the creative ideas from commercial misuses. The term ‘IPR’ began to be used in the 19th century, though it was not until the 20th century that intellectual property became commonplace in the majority of the world’s legal systems.
The first multilateral effort was made through the Paris Convention for Protection of Industrial Property held on 20th March 1883 in Paris. It was followed by the Berne Convention for Protection of Literary and Artist Works in 1886 in Berne, Switzerland. These two initial international efforts can be termed as the Magna Carta of IPRs. Since then the IPR regime has made a long journey and with the establishment of WIPO and TRIPs, the IPR jurisprudence has been firmly established at international as well as at the national level.
The main purpose of intellectual property law is to encourage the creation of a wide variety of intellectual goods. This gives economic incentive for their creation because it allows people to profit from the information and intellectual goods they create.  Intellectual Property Right (IPR) in India was imported from the west. The Indian Trade and Merchandise Marks Act 1884, was the first Indian Law regarding IPR. The first Indian Patent Law was enacted in 1856 followed by a series of Acts being passed. They are the Indian Patents and Designs Act in 1911 and the Indian Copyright Act in 1914. Indian Trade and Merchandise Marks Act and Indian Copyright Act have been replaced by the Trade and Merchandise Marks Act 1958 and Copyright Act 1957 respectively.
Competition law is a law by the legislature that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is known as antitrust law in the US and anti-monopoly law in China. The main purpose of this law is to encourage competition in the market and to provide the customers to have the best products at the lowest possible price by preventing a monopoly in the market. The benefit of having competition in the market are lower prices, better products, wider choice, and greater efficiency than those existing under monopoly.
Competition law is the tool through which the Government controls and regulates the producers/players in the market. So, the competition law relates to a matter of competition and competitiveness so that goods and services are sold at competitive prices and the consumers have a choice as to the products they wish. Besides, competition law prevents artificial entry barriers, facilitates market access, and compliments other competition-promoting activities.
The objectives of IPR and Competition Law
It is observed that IPR and Competition law are contrary to each other. It is because, IPR grants a monopoly to the innovators of the new product, to which others have no access to, or simply it protects those owners from commercial exploitation of their products by granting them exclusive legal rights. Whereas, competition Law is against the static market access and competition rules specifically the abuse of monopoly position. Therefore, it can be noted here that, the word ‘competition’ is used differently by IPR and Competition Law.
The main objective of permitting license in IPR is to encourage competition among the prospective innovators and concurrently restrict the competition in several ways and after a specified period, the rights go to the public domain ending the competition. The primary objective of competition law is to stop the abusive practices in the market, stimulate and encourage the competition in the market, and to make sure that the customers get good quality goods and services at a reasonable price.
According to the ‘United Nations Conference on Trade and Development’ (UNCTAD) document on ‘examining the interface between the objectives of competition policy and intellectual property,’ the main objective of IPR is to encourage innovation by providing the relevant incentives. This objective is achieved by granting to inventors some exclusive rights on their inventions to allow them to recover research and development investments for a certain period.
The objectives of Competition Law are instead those of promoting efficiency and enhancing economic growth and consumer welfare. To achieve them, Competition law constrains, to some extent, rights arising out of the private property for the benefit of the community. Competition is considered desirable for the economy because it encourages innovation and enhances competitiveness.
Thus, we can say that the IPR is about individual rights which offer monopoly only to the owner of the innovated product, for the protection of his invention from commercial exploitation, whereas Commercial Law safeguards the interests of the market and the broader community, instead of an individual, by limiting the private rights that may harm the community’s wellbeing and thus, encourages competitiveness in the market. Although they are completely in odds with each other, their main objective, in the end, is consumer welfare.
The Nexus between IPR and Competition Law
The application of IPR law to competition issues is regarded as one of the most complicated issues in the field of competition law. Competition law may be applied when particular IPRs have been obtained fraudulently or in an improper manner, for example, when patents have been obtained by deceiving the patent office.
First of all, there are two opposing views on the interface of IP Law and Competition Law. The foremost tension between these two subjects is competition. Competition Law is always regarded as the one, which eliminates monopoly in the market and encourages competition, whereas IPR eliminates the competition by providing rewards to the innovators who invent new products in the market, thus encouraging a system of monopoly. But there is a different opinion by the advocates for this interface theory that the main function of IP law is to properly assign and defend property rights on assets that have economic value. On the other hand, the main goal of competition law should be to minimize the adverse consequences of monopoly power arising from IPRs.
And the second view contends that competition law continues to encourage competition in the field of market and the broader community resulting in numerous innovations leading to economic growth. Similarly, the IP Law also encourages innovations by granting them exclusive rights for protecting their innovations from commercial abuse. Hence, it’s clear that the aims and objectives of IPRs and competition laws are complementary, as both aim to encourage innovation, competition and to enhance consumer welfare. Therefore, it is vitally important to preserve competition in innovation because ultimately competition ensures the best outcome for consumers.
As we have already discussed, the objective of competition law involves two faces firstly consumer welfare, secondly the economic freedom of market players. When a patent holder adopts any kind of anti-competitive practice, the government can adopt measures like the compulsory licensing of such technologies which have been stated in Section 31(b) of WTO Trade-Related Aspects of IPR (TRIPS) Agreement.
The various sections which speak about the inevitable connection between IPR and competition law are:
Section 3(5) of the Indian Competition Act, 2002 which exempts reasonable use of such inventions from the purview of competition law, and thus this section itself suggests that it only protects reasonable conditions imposed by the IPR holder and any unreasonable condition imposed can be dealt under Competition Law.
Section 4 of the Indian Competition Act, 2002 deals with abuse of dominant position and it prohibits its abuse only and not its mere existence. What is to be noted for our current discussion is that no exception has been created for IPRs under this Section, maybe because IPRs may not confer dominant position in the market and even if they do so, this Section does not prohibit the mere existence of dominant position but only its abuse.
Section 4(2) of the Indian Competition Act, 2002 which makes the action by enterprises to be treated as abuse and be equally applicable to IPR holders,
Section (3) of the Indian Competition Act, 2002 prohibits anti-competitive practices, but this prohibition does not restrict “the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights” which have been conferred under IPR laws like Copyright Act, 1956, Patents Act, 1970, the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999), The Designs Act, 2000 and the Semi-Conductor Integrated Circuits Layout-Design Act, 2000.
Although the IPR and Competition Law have adopted different paths to achieve the same aim of consumer and social welfare, their different objectives and methods will always have a conflict with each other. As already discussed above that both IPR and Competition Law can co-exist and are complementary, but this middle path which always leads to conflicts between these two can only be reduced by separating the functioning of the two spheres from each other. Allowing interference into each other’s domains will lead to a conflict, which will necessarily have to be resolved by placing one superior to the other. Such a policy decision can be largely avoided if their operations are kept independent of each other.
IP Law must deal with the grant and functioning of property rights, while competition law would need to deal with the manner of exercise of these rights, only concerning their effect on the market. The difference between policy decisions and individual case decisions needs to be maintained. Such separation is essential for both areas to be able to efficiently fulfill their goals and in the long term complement and supplement each other.
In recent years EU and U.S are receiving many cases that involve the IPR and Competition law disputes. But in India, the cases involving IPR and Competition Law disputes are very less in number; in fact, it is still in the infant stage. But in a case, Aamir Khan Productions vs. the Director-General the court dealt with the matter related to the competition law and IP law for the first time.
The conflict between the IPRs usually came before the Monopolistic and Restrictive Trade Practices Commission (MRTP Commission) which is the predecessor of the Competition Commission. But now the cases related to applicability of competition issues to both IPR and Competition Law are dealt with by the Competition Commission of India (CCI) which enforces The Competition Act, 2002 throughout India. This Commission was established on 14th October 2003 and became fully functional in May 2009. The CCI comprises a Chairperson and 6 members.
In India, there are only a few cases which have dealt with the conflict between IPR and Competition Law. Some of the cases which have observed the interface between these two fields are discussed below:
1. Aamir Khan Productions Pvt. Ltd. vs. the Director-General, in this case, Bombay HC held that the Competition Commission of India (CCI) has jurisdiction to hear all the matters related to IPR and Competition Law.
2. In Kingfisher’s case, the Competition Commission of India (CCI) also held that Intellectual Property related right is not a sovereign but statutory right granted under law.
3. Entertainment Network (India) Pvt. Ltd. vs. Super Cassette Industries Ltd. In this case, the Supreme Court reiterated on the issue of conflict between IPR and Competition law. The Court observed that even though the copyright holder has a full monopoly, such a monopoly is also limited if it creates a disturbance in the smooth functioning of the market, which will violate Competition Law and the same was with the refusal of license. Undoubtedly, Intellectual Property owners can enjoy the fruits of their innovations through royalty by issuing licenses but the same is not absolute.
Although IPR and Competition Law traditionally conflicted with each other, they never aim to replace each other, instead, they are complementary. Both of these aim at promoting competition in innovation. That is because innovation in the market will result in the invention of new products for the welfare of the consumers, which eventually results in the economic growth of the country. Both of these adopt different paths to achieve the same goal i.e. consumer welfare leading to the economic welfare of the country. And thus, IPR and Competition Law cannot be considered in isolation, given that their scope seems to largely overlap and, also sometimes clash. It is hence, appropriate to strike a balance between both of these fields by separating their functions and making their operations independent to fulfill the ultimate aim of both IPR and Competition Law i.e. consumer welfare.
- What are the main conflicts between Intellectual Property Law and Competition Law?
- How are IP Law and Competition Law different from each other in adopting methods?
- Explain the objectives of both IP Law and Competition Law?
- How both IPR and Competition Law are connected, beyond their conflicts?
- Mention the cases decided in the Indian Courts that speak about the interface between IPR and Competition Law.
- Conflict of Intellectual Property Rights in Competition Law from https://libertatem.in/articles/conflict-of-intellectual-property-rights-in-competition-law/
- Intellectual property rights and Competition law: divergence, convergence and independence http://docs.manupatra.in?newsline/articles/Upload/502431F8-79FB-483F-BAED-OFEBDF56339.pdf
- Competition Law & Intellectual Property Rights Interface – KSLR at https://blogs.kcl.ac.uk/kslrcommerciallawblog/2018/07/09/competition-law-intellectual-property-rights-ipr-interface/
- The interface between IPR and Competition Law: Indian Jurisprudence at http://ijlljs.in/interface-between-intellectual-property-rights-and-competition-law-indian-jurisprudence/
- The conflict between IPR and Competition Law: a critical and comparative analysis: https://www.mondaq.com/india/cartels-monopolies/807504/conflict-between-intellectual-propert-law-and-competition-law-critical-and-comparative-analysis
 Mark A. Lemley, Property, Intellectual Property, and Freeriding, Texas Law Review.
 Interface between IPR and Competition Law: Indian Jurisprudence at http://ijlljs.in/interface-between-intellectual-property-rights-and-competition-law-indian-jurisprudence/
 Intellectual property rights and Competition law: divergence, convergence and independence http://docs.manupatra.in?newsline/articles/Upload/502431F8-79FB-483F-BAED-OFEBDF56339.pdf
 Forrester Ian S. Competition Law and IPR: Ten years on the debate still flourishes, http://www.eui.eu/RSCAS/Research/Competition/2005/2005 pdf.
 2010 (112) Bom L R 3778.
 Kingfisher vs. CCI, writ petition no. 1785 of 2009.
 2008(5)OK 719