Competition Law and its conflict with IPR
Author: VS Warrier
In pursuit of globalization, India has responded positively by opening up its economy, removing controls and resorting to liberalization. In quest of increasing the efficiency of the nation’s economy, the Government of India acknowledged the Liberalization Privatization Globalization era. As a result Indian market faces competition from within and outside the country. This lead to the need of a strong legislation to dispense justice in commercial matters and the Competition Act, 2002 was passed.
Healthy and fair competition has proven to be an effective mechanism which enhances economic efficiency. Therefore the purpose of implementing the competition law was to curb monopolies and encourage competition in Indian market. Intellectual property (IP) refers to creations of the mind: inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.
An Intellectual Property Right (IPR) is, an intangible right “protecting commercially valuable products of the human intellect”; it may comprise patents, copyrights, trademarks and other similar rights2. An IPR includes the right to exclude others from exploiting the non-corporeal asset.
IP is divided into two categories: Industrial property, which includes inventions patents, trademarks, industrial designs, and geographic indications of source; and Copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs.
IPRs and competition are normally regarded as areas with conflicting objectives. The reason is that IPRs, by designating boundaries within which competitors may exercise monopolies over their innovation, they appear to be against the principles of static market access and level playing fields sought by competition rules, in particular the restrictions on horizontal and vertical restraints, or on the abuse of dominant positions.
Intellectual Property Rights and Competition Law have been described as an unhappy marriage. The former may be seen to promote monopolies whilst the latter is designed is oppose them. In other words, on one hand, IP laws work towards creating monopolistic rights whereas competition law battles it. In view of this there seems to be a conflict between the objectives of both laws.
Competition laws involves in formulating a set of policies which promote competition in the market. These are aimed at preventing unfair trade practices. It is also framed with the intention of curbing abuse of monopoly in the market by the dominant company. Consumer welfare and a healthy competition in the market are the main objectives of the Competition Law.
On the other side IP Laws are monopolistic in nature. They guarantee an exclusive right to the creators and owners of work which are a result of human intellectual creativity. Also they prevent commercial exploitation of the innovation by others. This legal monopoly may, depending on the unavailability of substitutes in the relevant market, lead to market power and even monopoly as defined under competition law. It is an advantage granted to the owner over the rest of the industry or sector. When this advantage or dominant position is abused it creates a conflict between IPR and competition law.
In order to combat with IPR monopolies anti-competition laws often include two major measures like parallel imports and compulsory licensing. A compulsory license is where an IPR holder is authorized by the state to surrender his exclusive right over the intellectual property, under the provisions6 of TRIPS. On the other hand a parallel import includes goods which are brought into the country without the authorization of the appropriate IP holder and are placed legitimately into a market.
Innovation has always been a cause in a growing economy resulting in more innovation. The advent of fresh innovations gives rise to healthy competition at macro as well as micro economic levels. IP laws help protect these innovations from being exploited unlawfully. In view of this IP and Competition laws have to be applied in tandem to ensure that the rights of all stake holders including the innovator and the consumer or public in general are protected.
The common objective of both policies is to promote innovation which would eventually lead to the economic development of a country however this should not be to the detriment of the common public. For this the competition authorities need to ensure the co-existence of competition policy and IP laws since a balance between both laws would result in an economic as well as consumer welfare.