IPR and Competition Law

IPR and Competition law
Rationale behind IPR

• incentive to invent
• To encourage disclosure
• Commercialization of technology
• Increase dynamic efficiency
Rational for competition
• Social welfare
• Maintaining allocative and productive efficiency
IPR and competition law – working in
tandem
• Both aim to produce efficiency in market
• Consumer welfare
• Both are divergent path to same goal
Conflicts
• Abuse of dominant position

• Refusal to License
• Excessive Pricing
• Tying agreements
S 3(5) (i) OF THE COMPETITION ACT
• IPR laws should not be applied in isolation to competition law
• Shamsher Kataria v Honda Siel Cars Ltd (Automobile spare parts
case)
CCI dealt with the IPR exemption under s 3(5)
The CCI identified 2 issues:
a. Whether the right protects any intellectual property?

b. Whether the right has been conferred upon by relevant IPR statutes?
The CCI held that if any exemption is claimed under the section, the pre-
requisite is that the rights in question have to be conferred by the
mentioned IPR statutes. The OEMs had failed to submit relevant documents
to prove that they had IPRs in India conferred by the Acts mentioned in s
3(5) (i) and as a result, the OEMs could not claim protection under the said
section.
Definitions of market
To determine the relevant product market for IPRs, it is necessary to take a look at
the factors mentioned in s 19 (7) of the Act:
a. Physical characteristics or end-use of goods

b. Price of goods or service
c. Consumer preferences;
d. Exclusion of in-house production
e. Existence of specialized producers;
f. Classification of industrial products.
With reference to the Automobile Spare Parts case, the CCI identified 3 separate
relevant markets.
g. Primary market- Manufacture and sale of cars

h. Aftermarkets- sale of spare parts including the tools, technical manuals, etc.
i. After-sale service of repair and maintenance
Scope Of The Section
• most laws are biased towards IPR

• The same can be said for competition law
• IPR laws are given a clear preference and priority over the
objectives sought by competition law.
• CCI has jurisdiction to determine whether the existence of
IPRs has a restrictive or monopolistic power in the market
and prohibits any anti-competitive practices.
• As held in the Automobile Spare parts case, the rights must
be conferred by the acts mentioned in the section and are
therefore limited.
Infringement And Imposing Reasonable
Conditions
• The competition act does not specify what amounts to
infringement,
• For imposing reasonable conditions, the section does not

specify the same. The usage of words like maybe
conferred and imposition of reasonable conditions was
purely intended, and this legislative intent is enough to say
that the Competition act did not want to exclude the
application of IPR statutes
Economic theory of intellectual property and
competition
• Theory of monopolies leading to innovation
• Baxter’s comparability test
• Bowman’s “competitive superiority test”
• Kaplow’s ratio test
The role of the TRIPS agreement in IPR and competition law
• Article 40 of the TRIPS Agreement explains that any licensing

practice or conditions that are related to Intellectual Property
Rights may have a severe impact on trade and it may also act
as a barrier when it comes to the transfer of technology.
• Article 40.2 of the TRIPS Agreement permits its members to
specify any form of abuse of IP rights that may have a
negative impact and to adopt measures to prevent such
adverse effects.
Preventive Measures
Two methods have been used to prevent the abuse in IPRs:-
• Compulsory licensing (a contract which is involuntary between a willing buyer and
an unwilling seller is enforced by the government.)
• Parallel imports (goods brought into another country once they have been placed
in the market elsewhere without the permission of a patent or copyright holder.)
Under Article 31 of the TRIPS Agreement provides for the grant of compulsory
licenses, under the following situation:-
• In the interest of public health
• In case of national emergency
• Anti-competitive practices
Essential Facilities doctrine:
a. united states v Terminal rail roads association
b. Volvo case : case 238/87, volvo,1998 ECR 6211
c. Colgate doctrine: United states v Colgate & co.(1919) 250 US 300
Competition and Patent Law
• Patent law is adjunct with competition policy which

helps to establish a fair market behaviour through
preventing the unauthorized making and selling of
patented products which is the main objective of
competition policy.
• Granting a right to the owner of the patent will not
amount to the infringement of antitrust but abuse of the
rights will amount to a violation of antitrust policies.
Important cases
• Aamir Khan Production Private Limited vs The Director-General
The Bombay High Court states that the Competition Commission of India has
jurisdiction to look into the matter of competition and IPR.
• Valle Peruman and others Versus Godfrey Phillips India Limited
Facts- Trademark owner misuses the trademark by manipulating, distorting. It
will amount to unfair trade practices of trademarks. The court while taking into
consideration the competition policy of India stated that “ all kinds of intellectual
property have the potential to infringe the competition.
The court also further observed that a trademark owner has the right to use his
trademark in a reasonable manner subject to the conditions imposed at the time
of granting a patent.
• Kingfisher vs Competition Commission of India
The court held that Section 3(5) does not limit the right of the holder of IP rights
to sue for infringement of copyright, trademark, patent, etc. Competition
Commission of India has conferred a power to deal with all the cases that come
before the Copyright Board. Thus competition law does put the bar on the
application from other law.
Important cases
• FICCI Multiplex Association of India vs United Producers
Distribution Forum
in this particular case the main question was whether the competition in the
market affects the right of the copyright holder. the court observed in the
above case that the right granted to the copyright holder is not absolute right
but it’s a statutory right under the copyright Act, 1957. The European courts
of justice also held that the objective of IPR is to encourage innovation in all
areas and further provide commercial gain.
• Entertainment Network (India) Limited vs. Super Cassette
Industries Ltd
In this case, the supreme court observed that the charge of royalty through
an issue of license for the copyright owner is not an absolute right. if the
patented product is priced very high then it will directly contradict the
competition law but because of this license would be cancelled.

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IPR and Competition law

Rationale behind IPR

• Abuse of dominant position

a. Whether the right protects any intellectual property?

a. Physical characteristics or end-use of goods

g. Primary market- Manufacture and sale of cars

• most laws are biased towards IPR

• For imposing reasonable conditions, the section does not

• Article 40 of the TRIPS Agreement explains that any licensing

• Patent law is adjunct with competition policy which

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