THE INTERFACE BETWEEN

COMPETITION LAW &

INTELLECTUAL PROPERTY
RIGHTS

Manpreet Kaur
LLM (Business Laws)
National Law School of India
University,
Bangalore.
 PROJECT OVERVIEW
Intellectual Property Competition Law
Rights

 IPRs are intangible

 Free and fair play of
property rights conferred market forces
for tangible fruits of  Freedom of trade
innovative endeavour,  Foster competition
creative expression and  Consumer welfare
commercial goodwill.  Efficiency
 Reward to creators
 Incentive to invest, invent
and innovate
 Information dissemination
 Efficiency
 AREAS OF CONVERGENCE

Innovation

Competition
Consumer
Efficiency Law &
welfare
IPR

Economics
growth
 AN INEVITABLE CHASM
IPR confers Monopoly while Competition Law curbs
Monopoly
 OBJECTIVES & DELIVERABLES
Objectives:
Interplay between IPR & Competition Law in major
jurisdictions
 USA

 Canada

 European Union

 Japan

 Australia

Deliverables:
 Lessons For India
 FINDINGS - The Position In US

The US constitutional mandate of “promoting the progress of

Science and Useful Arts”, forms the bedrock of copyright
and patent laws.
 S. 1 of the Sherman Act prohibits ‘every contract,
combination…or conspiracy, in restraint of trade or
commerce’

 S. 2 of the same Act prohibits conduct that ‘monopolizes, or

attempts to monopolize any part of trade or commerce’

 The Clayton Act of 1914 declares such acts illegal ‘where the
effect… may be to substantially lessen competition or tend to
create a monopoly in any line of commerce’

 S. 5 of the FTC Act, gives the FTC broad latitude to attack

“unfair methods of competition” and “unfair or deceptive
acts or practices”.
1995 Antitrust Guidelines for the Licensing
and Acquisition of Intellectual Property

 IPR treated like other forms of property

 Existence of IPR does not necessarily confer
market power
 Complementarities between IPR and
competition law
 “Innovation” markets
 Horizontal and vertical relationships
 The rule of reason
 The anti-trust safety zones
 Judicial Precedents

Essential facilities
doctrine

United states v.
Lorain Journal
Terminal rail road Intergraph Case
case
association
Contd.
Verizon v. Law Offices of Curtis V. Trinko, LLP
 anti-trust laws cannot transcend beyond the normal statutory duties to
deal.
 the Sherman Act does not restrict a trader’s right to deal with whomever he
pleases
 Pre-requisites - defendant should possess monopoly power in the relevant
market and willfully acquire or maintain that power in a manner different
from the market development of the monopoly power
Xerox Case
there is no violation of the Section 2 for mere refusal to license unless:
 The patent was obtained through fraud on the Patent and Trademark
Office.
 The refusal was objectively baseless and the intent was to interfere directly
with the business relations of a competitor,
 The refusal was part of an otherwise unlawful tying strategy.

FTC v Dell Computer

 Abuse of standard setting.
 The Position In Canada
At the root of IP law "lies a concern to avoid
overextending monopoly rights on the products
themselves and impeding competition"
An overview of the Competition Act 1986
 Purpose – competition, efficiency & consumer welfare
 Conspiracy
 Refusal to deal
 Price maintenance
 Abuse of dominance
 Remedial measures under S.32

Intellectual Property Enforcement Guidelines 2000

 IPRs are at par with other forms of property
 Conduct –
xiv. involving “mere exercise” of IPR or
xv. “something more than mere exercise” of IPR
 Judicial Precedents

Apotex Inc. v Eli Lilly and Co

 Interrelation between S.45 of Competition Act and S.50
of Patents Act – harmonious construction
Tele-Direct case
 “the selective refusal to license a trademark is not an
anti-competitive act”
Kirkbi AG v. Ritvik Holdings Inc
 The law of intellectual property discourages attempts to
bring the monopoly position back in another guise
 “Competition between the products using the same
technical processes or solutions, once patent rights are
out of the way, is not unfair competition.
 Position in Japan
Law Concerning Prohibition of Private
Monopolization and Maintenance of Fair Trade 1947
 private monopolization
 unreasonable restraint of trade
 unfair trade practices
 S. 21 – exception in favour of IPRs
The 1999 Guidelines
 Interrelation between S.21 and AMA
 list of vertical agreements which are unlawful
 acts of prohibited private monopolization
 Judicial precedents
 Nihon Record – attempt by manufacturers of audio
discs to prevent the shops from renting out these discs to
customers was held by the FTC to be anti-competitive.

 Sony Computer Entertainment – retail price

maintenance
“Section 21 Antimonopoly Act is deemed to have been
enacted for the purpose of confirming that even if acts
are considered to be the ‘exercise of rights’ under the
Copyright Act, if those acts are considered to deviate
from or run counter to the purposes of the IP protection
system considering their effect on orderly competition,
those acts will no longer be regarded as acts considered
the exercise of rights, and the AMA shall apply to them
Contd.

 Pachinko Machine Manufacturers case – patent

pooling

 Microsoft case - bundling Word and Outlook with

Excel

 Asahi Electrics – unreasonable licensing

conditions; an attempt to divide markets.
 Hokkaido Shimbun - IPR as a tool to snub the entry
of new competitors; flooding of trademark applications
 Position in Australia – The Law
 Section 45 of the Act prohibits anti-competitive
agreements - price fixing among competitors
(S. 45 A) or collective boycott and collective
licensing etc., which are per se illegal and are
deemed to lessen competition substantially.

 Section 46(1) prohibits a firm with substantial

market power from taking advantage of that market
power for the purpose of -
 damaging one of its competitors;
 preventing a person from entering a market; or
 deterring someone from engaging in competitive
conduct in a market.
 Cont.

 Section 47 strikes at anti-competitive vertical conduct

while Section 48 deals with resale price maintenance
which is also per se illegal.
 Sections 88 and 90 of TPA provide for administrative
exemption of conduct, that although may lessen
competition, would be likely to result in a net public
benefit.
 S. 51(3) - exempts certain conduct (imposing of an IP
licensing condition) from the application of several
key prohibitions under Part IV of the TPA – S.45, 47,
50. But this exemption does not apply to S.46 & 48
 Transfield v. Arlo – Scope of S.51(3)
 Intellectual Property and Competition Review
Committee
 Interface between IPR and Competition law
 Recommendations –
4. Compulsory Licensing – “competition test” to
replace “public interest” test
5. Section 51(3) – “substantial lessening of competition
test”;
6. Guidelines on enforcement
 Govt. Response –
8. “competition test” to complement “public interest”
test
9. “substantial lessening of competition” to apply to
per se prohibitions under TPA
 Judicial precedents

Queensland Wire Industries v. Broken Hill Pty Co Ltd

Application of S.46 to refusal to deal & fixing high prices
– “unilateral refusal to deal can be ‘taking advantage’
of market power”.

Universal Music Australia Pty Ltd v. ACCC

“if u want any CDs from me, you must not get any that I can
supply; from anyone else”…
Held - Tying and substantial lessening of competition
 Position in EU – policy imperatives and
the law
 Policy objective – market integration and competition
 Law –

Article 81 – regulates joint conduct

Article 82 – regulates unilateral conduct of large firms
with substantial market share
 Fixing of purchase and selling price

 Limiting production, markets, technical development

 Market sharing

 Supplementary obligations

 Dissimilar conditions to equivalent transactions

Article 81(3) – innocuous agreements preclude 81(1)

 The Block Exemptions
 The R&D block exemption –
acknowledges that research and development
agreements do not generally give rise to competition
concerns because such cooperation often gives rise to
new, technologically superior products thereby
enhancing technical progress and overall consumer
welfare
 IPR licensing block exemption –

‘Technology Transfer Block Exemption Regulation’

(TTBER). It portends that Art.81 (1) shall not apply to
certain types of licensing arrangements, which are
entered into by parties with smaller market shares.
 Judicial precedents
Cases related to “Compulsory Licensing”
 A B Volvo v. Eric Veng

 Magill case

 IMS health v. NDC health

5. The undertaking which requested the license must

intend to offer new products or services not offered
by the owner of copyright and for which there is a
potential consumer demand.
6. The refusal cannot be objectively justified
7. The refusal must be such as to exclude competition
on a secondary market.
 Microsoft case – “abuse of dominance”
 Conclusion – LESSONS FOR INDIA
 Taking rescourse to flexibilities in TRIPS
Article 8(1)(2) - to protect public health and
nutrition, and to promote the public interest in
sectors of vital importance…to prevent the
abuse of IPRs by right holders or the resort to
practices which unreasonably restrain trade or
adversely affect the international transfer of
technology.
 Article 30 – compulsory licensing
 Article 40 - specifying in their legislation
licensing practices or conditions that may in
particular cases constitute an abuse of
intellectual property rights having an adverse
effect on competition in the relevant market.
 2. The tool of “compulsory licensing” –

 Refusal to enter into a voluntary licensing agreement on

reasonable commercial terms (e.g. in the German and
Chinese patent laws);
 Public interest (e.g. in the Swedish law);
 Public health and nutrition (e.g. provisions in the French
law )
 National emergency or situation of extreme urgency;
 Anti-competitive practices on the part of patent holders
 Dependent patents;
 No or insufficient working of the invention in the
national territory
3. The “essential facilities” doctrine –
US and EU judicial precedents;
Retaining the flexibility of developing own model

4. Policy approach towards granting patents –

strict implementation of patentability criteria

5. Guidelines for the application of competition law to cases

involving IPRs
 treating IPRs at par with other property rights
 IPR does not necessarily confer market power
 “competition on merits” and complementarities between IP
law and competition law
 “Per se” category – anti-competitive conduct (IPR)
 Exemptions – R&D, pro-competitive effects
 Static efficiency or Dynamic efficiency?
Thank You