c

INTER RELATIONSHIP BETWEEN IP LAWS AND

COMPETITION LAWS

Capacity building program by National Innovation

Foundation
Venue : Indian Institute of Management, Ahmedabad
Date: 6th July 2017

R. Muralidharan
Advocate, Patent Agent ,Law Lecturer, Mediator
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 R. Muralidharan
Advocate, Patent Agent
Law Lecturer, Mediator

INTER RELATIONSHIP
Manu Associates,
BETWEEN IP LAWS AND 143/4, 8th Main,14th Cross,
Royal fort Apartments
COMPETITION LAWS Malleswaram.
Bangalore. 560003.
Mobile:-0-94482 47549
mailto:
muralimanu@gmail.com/
2 advrmuralidharan@gmail.com
Murali 01/10/2019
 PRESENTATION SUMMARY
1. Operative definitions of IP Law & Competition Law
2. Do they not aspire to achieve conflicting objectives?
3. In case of a conflict, should specialized remedies under IP Law be
preferred to a general remedy under Competition Law.
4. Case studies.
5. Competition Law Issues relating to Acquisition/Exploitation/Licensing
Issues of IP.

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 Are monopolies inevitable?
• WTO agreements visualize that all Global Trade will have to be
done on the basis of competitive cost advantage on a non-
discriminatory basis.
• It is well known that over a period of time, a dominant actor in
the market will acquire “economies of scale”. This cost
advantage coupled with the dominant market share will
provide the monopoly holder an unjust advantage in the
imperfect and usually unregulated market.

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 Perils of monopoly
• Monopoly position gives the holder a real power over the market.

“Power corrupts and absolute power corrupts absolutely”. Hence

countries around the world have enacted competition laws to ensure

that the consumer interest is best serve by ensuring that there is free

competitions and the customer enjoys unrestricted choice of goods

and services.
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 Indian Position on Monopoly
• In India between 1950-1990, the growth of the Indian industry was
stunted by the notorious License-Quota-Raj which ensured that
nobody except public sector undertakings enjoy market monopoly.
This proved disastrous to the consumers as well as economic health
of India. However, after liberalization and swelling of Indian
Foreign Exchange Reserves, Indian companies are growing in a big
way globally and hence, there is a need to regulate them without
stunting their growth.

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From MRTPC to CCI - Where we go?

• In these circumstances, the regulation of corporate growth by

the Competition Commission of India is a timely one.

• However, economists around the world are debating the

usefulness of competition laws as in several instances,

prevention of monopoly had not been in consumer interest.

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Technology-New means of Production
Market domination through dominant share is old method and

market domination by technological means is the new method.

Acquisition of IPR over technologies that are used in a big way by

the market enables the actor monopoly over technology. Often,

market penetration through technological means is more durable

and effective means of ensuring market domination.

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IPR –an exception to the general rule against
monopoly

• IPRs are usually monopolies granted by states and have civil

and criminal remedies for ensuring their effective enforcement.

Thus, these laws encourages perpetuations of monopolies for

legitimate reasons which apparently are in conflict with the

objective of competition laws

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Conflict resolution between IP & Competition Laws
• There is a school of thought that believes that Competition
Commission should keep its hands off from IP monopoly issues.

• The other school believes that competition law should deal with
every monopoly abuse issue, how so ever acquired.

• Since IP laws are an exception to the general rule against monopoly,

IP Abuses, even if involving Competition Law issues will have to be
dealt with under the various IP Legislations first and if not proved
adequate then under the CCI Act.
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Section 3 of the Competition Act 2002
• This provision prohibits an enterprise or association of enterprises
or person or association of persons from entering into any agreement
in respect of production, supply, distribution, storage, acquisition or
control of goods or provision of services, which causes or is likely to
cause an appreciable adverse effect on competition within India.
• The provision further lists out the kind of provisions in agreements,
which are presumed to have an appreciable adverse effect on
competition.
• Section 4 of the Act enumerates situations in which an abuse of
dominant position is presumed
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Exception in CA for exercise of IP laws
• However Section 3 of the Act makes an exception for the
exercise of rights and agreements under IP laws.
• Sub-section 5 of section 3 reads as follows:
• 3(5) Nothing contained in this section shall restrict— (i) 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 or may be conferred upon him under—
• (a) the Copyright Act, 1957 (14 of 1957); •
• (b) the Patents Act, 1970 (39 of 1970); •
• (c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks
Act, 1999 (47 of 1999); •
• (d) the Geographical Indications of Goods (Registration and Protection) Act, 1999
(48 of 1999); •
• (e) the Designs Act, 2000 (16 of 2000); •
• (f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);

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 Exception…contd.
(ii) the right of any person to export goods from India to the
extent to which the agreement relates exclusively to the
production, supply, distribution or control of goods or
provision of services for such export.
However it is implied that imposition of unreasonable
restrictions in the exercise of IPR would be governed by Section
3 of the Act.

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Remedies under Patent Law to prevent Patent Abuse
• 1) Compulsory License (section 84) when the reasonable local
demand of the patented invention is not met at reasonable cost or
when the patented invention is not worked within the territory of
India.
• 2) Relatively, this provision had not so far been used widely in the
industry. With the on set of product patent regime, compulsory
licensing procedure before the Controller will be more frequent.
• 3)The Patent Act provides that while determining loyalties payable
for a compulsory license, the Controller will take into consideration
the nature of the invention, the expenses involved in developing a
new concept to a vendible product, profit margin rate in the
industry, costs of regulatory approval, productive life cycle of the
technology, the cost of acquisition of IPR and maintenance etc.
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 Indian Patent Decisions
• Patented product do not control under Drug Price Control Regime.
Usually, product patent holders have traditionally enjoy 60-85%
profit margin. The recent dispute between Roche & Cipla regarding
the product patent for erlotnib (generic name) tarceva (trademark of
Roche), where the Delhi High Court refused to injunction possibly to
encourage healthy competition and facilitate consumers getting the
product at reasonable price. Bombay High Court in Novartis case
refused injunction on similar facts even when the EMR was
subsisting. But Madras High Court in both in Novartis and Adayar
Ananda Bhavan case felt that if there is a granted patent, interim
injunction will more or less be automatic notwithstanding
competition issues.

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Remedies under Patent Law…contd.
Revocation of Patent for non working (section 85).
Powers under this provision had never been exercised in the
history of Indian Patent Regime. Revocation is granted only
when even compulsory licensing provisions will not be
sufficient to prevent patent abuse. But, remember if the patentee
is guilty of inequitable conduct, (which may include an anti
competitive practice) the entire patent becomes unenforceable
by judicial decision which in effect is a patent revocation.

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Discriminatory or Excessive Price
• A dispute arose on the pricing of Monsanto’s Bt gene technology where
Government of Andhra Pradesh asked Central Government to invoke its
powers under Section 92 of the Patents Act to issue compulsory licenses
for Monsanto’s patent on the grounds that “Monsanto is having a
monopoly and through one-sided sub-licence agreements is completely
controlling all the cotton seed firms and, thereby, collecting excessive
royalties”.
• Mosanta had licensed the rights of patent to its joint-venture in India
called the Mahyco Monsanto Biotech (India) Ltd (MMBL). MMBL further
sub-licensed the technology to various Indian seed companies which
eventually developed seed varieties by using the licensed Bt Technology
and supplied the genetically modified cotton seed to farmers.

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Mahyco Monsanto Biotech case
• Upon complaints filed by farmers and State governments, Indian seed
companies refused to pay outstanding royalties to MMBL. MMBL ended
the licensed agreement with the seed companies and commenced
arbitration proceedings before the Bombay High Court and
infringement proceedings before the Delhi High Court..
• An order controlling royalty fee in licensing arrangements and private
agreements was passed by Ministry of Agriculture where royalty fees
was decided to be reduced by 70 percent on cotton seeds and has also
put a cap on seed prices across all states.
• Mosanto filed suit before ‘the’ Delhi High Court to quash provisions
pertaining to the price control order and authorization to determine
royalty fees.
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Remedies under Patent Act
Licensing of related patents under section 91 of the Patent Act.

• Though the amended Patents Act, had repealed the concept of

“licenses of right” , section 92 of the Patent Act provides for powers

to Central Govt. to notify in the official gazette, which would in

effect permit public non-commercial use of the patented invention.

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 Remedies under Patent Act
• Section 92 (a) provides for compulsory licensing of Pharma Patent to
facilitate export to countries that do not have sufficient pharma
manufacturing capabilities.

• For all these reasons, for the purposes of preventing a patent

monopoly abuse, resorting to competition commission laws to
prevent a patent abuse may not be a worthy attempt. Patent law has
sufficient mechanism to prevent abuse of patents.

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Section 140 of The Patents Act, 1970
Avoidance of certain restrictive conditions
• (1) It shall not be lawful to insert in any contract for or in
relation to
• the sale or lease of a patented article or an article made by a
patented process; or
• in licence to manufacture or use a patented article; or
• in a license to work any process protected by a patent, a
condition the effect of which may be—

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Section 140 of The Patents Act, 1970
• a) to require the purchaser, lessee, or licensee to acquire from the
vendor, lessor, or licensor or his nominees, or to prohibit from
acquiring or to restrict in any manner or to any extent his right to
acquire from any person or to prohibit him from acquiring except
from the vendor, lessor, or licensor or his nominees any article other
than the patented article or an article other than that made by the patented
process; or
Explanation: Under this clause, vendor, lessor, or licensor or his
nominees if prohibits or restrict the purchaser, lessee, or licensee to
extent their rights to acquire from any person or to prohibit him
from acquiring except from the vendor, lessor, or licensor or his
nominees any article other than the patented article or an article
other than that made by the patented process, in such cases the
license agreement shall be void or null.

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Section 140 (1)of The Patents Act, 1970
• b) to prohibit the purchaser, lessee or licensee from using or to
restrict in any manner or to any extent the right of the
purchaser, lessee or licensee, to use an article other than the
patented article or an article other than that made by the
patented process, which is not supplied by the vendor, lessor or
licensor or his nominee; or
• Explanation: Under this clause, vendor, lessor, or licensor or his
nominees if prohibits or restrict the purchaser, lessee, or
licensee to use an article other than the patented article or an
article other than that made by the patented process, which is not
supplied by the vendor, lessor or licensor or his nominee, in such
cases the licensee agreement terms to be void.

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Section 140 (1)of The Patents Act, 1970
• c) to prohibit the purchaser, lessee or licensee from using or to
restrict in any manner or to any extent the right of the
purchaser, lessee or licensee to use any process other than the
patented process,
• Explanation: Under this clause, vendor, lessor, or licensor or his
nominees if prohibits or restrict in any manner to use any
process other than the patented process, then such contract or
licensee is void.
• d) to provide exclusive Grant back, prevention to challenges to
validity of Patent & Coercive package licensing, and any such
condition shall be void.
•

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Section 140 of The Patents Act, 1970
• (2) A condition of the nature referred to in clause (a) or clause (b) or
clause (c) of sub-section (1) shall not cease to be a condition falling
within that sub-section merely by reason of the fact that the
agreement containing it has been entered into separately, whether
before or after the contract relating to the sale, lease or licence of the
patented article or process.
• (3) In proceedings against any person for the infringement of a
patent, it shall be a defence to prove that at the time of the
infringement there was in force a contract relating to the patent and
containing a condition declared unlawful by this section
• Explanation: According to this it will be defence against the
infringement to p r o v e that at that time of infringement there was
in force a contract containing a restrictive condition which is
declared void under section 140 of the Patent Act, 1970.

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Section 140 of The Patents Act, 1970
• Provided that this sub-section shall not apply if the plaintiff is not a
party to the contract and proves to the satisfaction of the court that
the restrictive condition was inserted in the contract without his
knowledge and consent, express or implied.
• (4) Nothing in this section shall—
• a) affect a condition in a contract by which a person is prohibited
from selling goods other than those of a particular person;
• b) validate a contract which, but for this section, would be invalid,
• c) affect a condition in a contract for the lease of, or licence to use a
patented article, by which the lessor or licensor reserves to himself or
his nominee the right to supply such new parts of the patented
article as may be required or to put or keep it in repair
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 Trademark laws
• No country in the world provides for compulsory licensing of

trademarks. However, sometimes due to indiscriminate use , marks

which have originally been protected trade names have been

enlarged into public domain, often to the dismay of the trademark

owners
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 Copyright laws
• Section 31 & 31 (a) of the Copyright Act provide for compulsory
licensing for the works withheld from public and section 31 (a)
provides for compulsory license even in unpublished Indian works.
Section 32 speaks about license to produce and publish translation
and 32 (a) provide for publication of works for certain purposes. In
addition, the definition of fair use under section 52 is sufficiently
wide to prevent monopoly abuses. In fact, the copyright is
considered as the most imperfect monopolistic rights.

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Magill Case (European Court of Justice)
• In the above case, the TV broadcasters claimed copyright over the
list of programs to be telecasted and insisted that the programs list
can only be published on daily basis for which they gave royalty free
License. This compelled the consumers to procure the list of
programs well in advance from each of the Broadcasters. A publisher
wanted to publish well in advance a compilation of list of programs
of the week of all the broadcasters.

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 Magill Case (contd)
• The broadcasters refused permission as they had an official
weekly Program list. They even obtained court injunction
against copyright infringement. The compiler went to European
Commission alleging violation of right to compete. European
Court upheld the decision of the Commission that the consumer
interest over rides the concerns of IPR protection.

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Position under new generation IPR

• The Designs Act 2000 contains no provision for compulsory

licensing but prohibits employment of RBPs..

• The new legislations on protection of plant varieties and semi

conductor chips and topography of integrated circuits also
provide for sufficient provisions for compulsory licensing.

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 This presentation is primary meant for
instructional use. Not for Publication. The
ownership of the TM & copyrighted material
(especially cartoons) appearing in the
presentation is acknowledged. Thanks to the
Cartoonists/Photographers, a dull
presentation receives an interesting touch.

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Thank you.

Murali

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