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Published : November 08, 2011 | Author : sehajsunderlal@legalserviceindia.com
Category : Intellectual Property | Total Views : 12919 | Rating :

Sehaj Sunderlal. am Sehaj Sunderlal, a final year student from the Army Institute of Law, Mohali, and am very keen to publish an Article on your website. I have previously interned at Anand and Anand's Noida office where i was a part of the litigation team and worked under various aspects of the trademark law. I have also interned with Titus and Co. where i conducted researches and drafted various petitions on different points of Company Law. My internships also include Mr. Meet Malhotra, senior counsel of the Supreme Court, where i learnt the basics of legal drafting , and Steel Authority of India ltd. I have also completed the foundation and executive module of the Company Secretary course from ICSI and am pursuing the professional programme presently.

Technology backed enterprises are based on information and knowledge. Starting from Ford Cars to Microsoft Software are the product of knowledge and its organized application. Information and knowledge is protected by law on Intellectual Property Rights (IPRs). IPRs help to generate production and foster commercial activities. Intellectual Property Rights are regarded as intellectual property that protects applications of novel ideas and information which have commercial value in the market place. Inventions through IPR, their application to industry generate market power for the owners. IPR are growing because numerous exploitable ideas are becoming sophisticated and the industrial companies pin their hopes of having a successful economic future on their superior corpus on new knowledge and off course because IPR’s foster immense commercial returns. But intellectual property has to face a number of challenges in the developing countries.

The Government of India in pursuit of increasing the economic efficiency of the country acknowledged the Liberalization Privatization Globalization (LPG) era by liberalizing the economy and reducing governmental control. Currently the flourishing Indian economy is witnessing aggressive competition in every field. 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 contrast to the objective behind formulating the competition law, Intellectual Property (IP) Laws aim at protecting the research and development inventions carried out by inventor firms from being used by companies producing similar products and subsequently making a profit on the same. 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.
There is requirement of maintenance of balance between IPRs and their application to industry for a stable economy without exploitation of the consumers by a handful of producers. IPRs and competition are co-related and their relationship cannot be overlooked. Caution in the interest of the consumers has to be exercised to maintain equilibrium in the economy.

Competition policy and the law:

Competition policy includes steps taken   by the Government affecting the behavioral pattern of enterprises in the market place. Existence of a policy on competition efficiency of producers is witnessed ushering   in maximum welfare to the society keeping  profit at a reasonable level. Competition policy and law have been introduced in all member countries of the World Trade Organization (WTO). India as a member of WTO has also enacted the law on competition, the Competition Act, 2002 which came into effect on and from 19th June,2003.  Competition policy includes two elements, namely the policy itself and the law introduced for the growth of healthy competition considered essential for the market.

(i) Competition Policy: It is the policy adopted by the Government which reflects inter alia its attitude towards Competition, trade policy, foreign direct investment, de-regulation  that encourages orderly competition beneficial for the economy.
(ii) Competition Law: The Competition Act, 2002 amended in 2007 is in force in the country. The law was passed to end anti-competitive practices with least interference from authorities. Market operators are required to abide by the legal stipulations.

 Competition is important to business and IPR is considered the foundation of industry and services lessens competition. Law on competition gives rise to orderly competition. During the exercise of a right by an enterprise, if a trade practice is not permitted which is to the detriment of market or competition or affects consumer interest, it ought to be assailed under competition law. Competition law aims at ending imperfect competition in the market.

The Competition Act 2002
The Competition Act, 2002 endeavors to shift the focus from restricting monopolies to promoting fair competition, so that the Indian market is equipped to compete with market word-wide. The object of Competition Act is to promote fair competition in the market, to protect consumers, firms from each other’s and the interest of the society. The highlights of the Competition Act are as follows:
• The anti-competitive practices such as price-fixing, output restrictions, bid rigging and market restriction are prohibited.
• Regulates the mergers and acquisitions above threshold limits.
• Competition Act emphasizes in competition advocacy.

The overall direction of this Competition Act is to protect the interest of the consumers, freedom of trade and promote healthy competition

Broadly speaking, intellectual property rights lessen competition while competition law endangers competition. A workable solution can be predicated on the distinction between the existence of a right and its exercise. In other words during the exercise of a right , if a prohibited trade practice is visible to the detriment of competition in the market or consumer interest, it ought to be assailed under the competition law.

Inter alia the provisions of the Act, S 3 prohibit anti-competitive agreements including agreements entered in relation to IPRs. The preamble to the Act states that the Act has been enacted to establish a Commission to prevent anti-competitive practices, promote and sustain competition, protect the interest of the consumers and encourage free trade in the market. An express provision Section 3(5) is incorporated in the act, that reasonable conditions as may be necessary for protecting IPR’s during their exercise would not constitute anti competitive agreements. In other words, by implication, unreasonable conditions in an IPR agreement that will not fall within the bundle of rights that normally form a part of IPR’s would be covered under section 3 of the act.
Provisions like Section 3 of the new Competition Act, 2002 (the Act) deals with anti- competitive agreements which cannot be used by IPR holders since they are in conflict with the competition policies.

Section 3 of the competition act

Anti-competitive agreements -


No enterprise or association of enterprises or person or association of persons shall enter 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.


Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void.


Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of pe sons, including cartels, engaged in identical or similar trade of goods or provision of services, which



directly or indirectly determines purchase or sale prices;



limits or controls production, supply, markets, technical development, investment or provision of services;



shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way;



directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition:



Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services.



Explanation.-For the purposes of this sub-section, "bid rigging" means any agreement, between enterprises or persons referred to in sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the eff ct of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding.


Any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets, in respect of production, supply, distribution, storage, sale or price of, or trade in goods or provision of services, including-



tie-in arrangement;



exclusive supply agreement;



exclusive distribution agreement;



refusal to deal;



resale price maintenance,



shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.



Explanation.- For the purposes of this sub-section,-




"tie-in arrangement" includes any agreement requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods;




"exclusive supply agreement" includes any agreement restricting in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person;




"exclusive distribution agreement" includes any agreement to limit, restrict or withhold the output or supply of any goods or allocate any area or market for the disposal or sale of the goods;




"refusal to deal" includes any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods are sold or from whom goods are bought;




"resale price maintenance" includes any agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged.


Nothing contained in this section shall 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 or may be conferred upon him under-




the Copyright Act, 1957 (14 of 1957);




the Patents Act, 1970 (39 of 1970);




the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);




the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);




the Designs Act, 2000 (16 of 2000);




the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);



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. Prohibition of abuse of dominant position

Analysis of Section 3 of the Act.
S 3 deals with anti-competitive agreements which affect the market and Ss (5) of S 3 of the Act states the prima facie IPRs are not considered anti-competitive though they have the characteristic of monopoly. Agreement under the Act includes any arrangement, understanding or concerted action entered into between parties. It may not always be in writing between the parties intended to be enforceable in law. Accordingly, the conduct of the parties is important in categorizing arrangements under the Act. 

Each of the aforesaid Acts have been enacted for protection of each of the intellectual properties which are different in nature. Patents deal with inventions, trademarks deal with brands, geographical indications deal with place of origin, designs deal with industrial designs and semi-conductor integrated circuit lay out design deal with electronic products.

Section 3(5) of the act declares that “reasonable restrictions as may be necessary for protecting” any IPR will not attract Section 3. The expression “reasonable conditions” has not been defined or explained in the act. By implication, unreasonable conditions that attach to an IPR will attract section 3.In other words, licensing agreements likely to affect adversely the prices, quantities, quality or varieties of goods and services will fall within the contours of competition law as long as they are not in reasonable juxtaposition with the bundle of rights that go with IPR’s.

For example, a licensing agreement may include restraints that adversely affect competition in goods markets by dividing the markets among firms that would have competed using different technologies. Similarly, an arrangement that effectively merges the research and development activities of two or only a few entities that could plausibly engage in research and development in the relevant field might harm competition for development of new goods and services. Exclusive licensing is another category of possible unreasonable condition. Examples of arrangements involving exclusive licensing that may give rise to anti competition concerns include cross licencing by parties collectively processing market power, grant backs and acquisitions of IPR’s.

Practices  in the field of IPRs which do not enjoy exemptions inter alia include the following: 
 1.   Patent Pooling is considered to be restrictive trade practice. The term “pool” has been used to describe myriad different arrangements in which patent owners in some manner have combined their patents. The term means locking up of all technology in respect of an intellectual property in a few hands by means of a pooling agreement. The essence of a patent pool , therefore , is an agreements between patent owners to waive their exclusive patent rights.  Such agreements make it difficult for outsiders to compete with the parties to the pooling agreement. Therefore, an enterprise manufacturing a particular product and  entering  into agreement to pool their patents and entering  into an agreement to not to grant licenses to third parties, fixing quotas and price for the products produced on the basis of  patent owned  by  operating in the market fall in the category. Pooling effect could keep away new entrants in the market. Patent Pooling  could give advantage of super profits and promote imperfect competition being against government policy and the Competition Act. Patent pooling is commonly experienced in the Drug and high technology based industries.

2.  Tie-up arrangement entered amongst few enterprises is another form of restrictive practice that creates market imbalance and leads to imperfect competition. An instance where a licensee of a particular product is also required to buy some other material along with the main product in the nature of a tag on item which forecloses opportunities to other producers fall in the category. There are many instances of barring licensees from competing or to handling goods with those of the patentee.

3.   Agreement including a clause requiring for payment of royalty by the licensee even after the expiry of the patent period or payment for unpatented products along with the patented know-how  fall under restrictive trade practice and the exemption under S 3(5) does not hold good.

4.  Agreement including a clause restricting competition in Research and Development or prohibition imposed on a licensee from using rival technology would take away exemption granted under S 3(5) of the Act and such  agreements would be  anti-competitive.

5. Agreement by which a  licensee may be subjected to a condition not to challenge the validity of IPR in question is an anti-competitive agreement and such agreement does not enjoy immunity granted u/s 3(5).

6. A licensee may be required to grant back to the licensor any know-how or IPR acquired and not to grant licenses to anyone else. This is likely to augment the market power of the licensor in an unjustified and anti-competitive manner thus leading to withdrawal of privilege u/ Ss 5 of S 3.

7. An agreement by which the  licensor  fixes a price of a product at which the licensee should sell in the market is an anti-competitive agreement and the immunity u/s 3(5) is withdrawn.

8. An agreement by which the licensee may be restricted territorially or according to categories of customers is anti-competitive and the protection granted u/s 3(5) is lost.

9.  A licensee may be coerced by the licensor to take several licenses in intellectual property even though all may not be the required by the licensee. The agreement is said to be package licensing and is regarded anti-competitive and is outside the exemption granted u/s 3(5).

10. A condition included in an agreement between a Licensor and Licensee imposing quality control on the licensed patented product beyond those necessary for guaranteeing the effectiveness of the licensed patent is anti-competitive practice and no protection u/s 3(5) can be enjoyed.

11. Any agreement which includes restriction of  the right of the licensee to sell the product of the licensed know-how to persons other than those designated by the licensor may be violative of competition and is anti-competitive and outside the scope of protection u/s 3(5).

12. Agreement by which there is restriction on the use of a  trade mark by the  licensee shall be regarded anti-competition as it restricts competition to select the free use of a trade mark by the licensee. Such agreement falls under the scope of anti-competitive agreement.

13. Agreement to grant indemnity to the licensor to meet expenses and the action of infringement in proceedings is anti-competitive within the meaning of S 3(5).

14. Undue restriction on licensee’s business shall be considered to be anti-competitive. Restriction on use of a drug could be a restriction on the licensee if it is stipulated  by  an agreement that the medicine should be used  for humans and not animals even though it could be used for both humans and animals. This leads to withdrawal of the exemption granted u/ s 3(5).

15. Agreement limiting the maximum use of a patented invention on the licensee may affect competition and the immunity granted by  S 3(5) stands withdrawn.

16. Any agreement wherein a condition is  imposed on the licencee to employ or use staff designated by the licensor is likely to be regarded as an anti-competitive agreement and is liable to be outside the purview of S 3(5).
Protection of IPR’s
1.    Patents Protection
Patents means an official document giving the holder of the patent the sole right to make, use or sell an invention and preventing others from imitating it. From the manufacturer’s prospective patents create a market barrier to other competitors and they can also charge royalties on the license of patents to third parties. Though patents give effective protection to invented new technology; it is an expense. It allows the owner to commercially exploit the consumers. The patent system has protected inventors by giving them an opportunity to profit from their labours, and it has benefited society by systematically recording new inventions and releasing them to the public after the inventors’ limited rights have expired.

India made its patent laws compatible with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement under WTO by 2005 and has incorporated all changes in the Patent Act, 1970 through various amendments. These changes caused paradigm shift in the thinking of the intellectual property managers and inventors.

2.    Trademarks Protection
Trademark symbolizes the value or goodwill associated with the goods and which can be assessed by the extent to its perception in the public mind with regards to its quality and specific source. The goodwill associated with a trademark can be among a company’s greatest intellectual property assets. Protecting one’s trademarks by using them properly, promoting them, and monitoring one’s rights by challenging infringers, is essential in maximizing their value. Trademarks rights are infringed, when one party uses a mark of another party and that is likely to cause confusion in the minds of consumers as to which party is the source of the original goods or services, he/she wants to purchase. In determining whether two marks are “confusingly similar,” courts look at the overall commercial impression made by the two marks from the standpoint of a reasonable customer. Do they look alike or sound alike? (Piknik v. Picnic) Do different words have a similar or identical meaning? (play boy v. play men; Aqua-care v. Water Care)? Disposing the appeal and remanding the case to the trial court, Cadilla Healthcare for ‘Falsigo’ v. Cadilla Pharmaceuticals for ‘Falsitab’, an anti-malarial drug, the honorable Supreme Court set out the following general factors for deciding of deceptive similarity in an action for passing off on the basis of unregistered trademark:
• The nature of the marks –word marks/ label marks/ word and label marks;
• The degree of resemblance between the marks, both phonetically and in ideas;
• The nature of the goods in respect of which they are used as trademarks;
• Similarity in the nature, character and performance of the goods of the rival traders;
• The class of purchasers who are likely to buy the goods bearing the marks, their education, intelligence and the degree of care they are likely to exercise in purchasing and/or using the goods;
• The mode of purchasing the goods or placing orders for the goods; and
• Any other extraneous circumstances which may be relevant in the extent of dissimilarity between the competing marks.

The Patent & Trademark office owns no responsibility with regard to the misuse of trademarks by unauthorized parties. The owner of a registered mark has to be watchful to find out infringement, file a suit and enforce its rights. Once the owner determines that another party is infringing, a simple ‘cease and desist' letter from the trademark authority is sufficient to end the infringement. Further the registered user can sue the infringer in Indian Court, which is potentially a costly proposition. The owner needs to access the commercial value of the mark and the possible economic loss that would result from the dilution of the mark’s distinctiveness caused by the infringer. It is important to note that an infringer will be less likely to succeed in infringing an arbitrary or fanciful mark because of its inherent distinctiveness. Conversely, descriptive marks are much easier to successfully infringe because of their inherent weakness in distinguishing the products or services they denote.

3.    Design Protection
As per Design Act 2000, design refers to the features of shape, configuration, pattern or ornamentation, which can be judged by the eye in finished products. Design registration is used to protect the visual appearance of manufactured products. A registered design gives you a legally enforceable right to use your product’s design to gain marketing edge. It also prevents others from using the design without your agreement. The design registration in India is intended to:
• Protect only for the appearance of the article and not how it works.
• Protect features of shape, configuration, pattern or ornamentation.
• Protect designs, which have an industrial or commercial use.
• Exclude the designs, which are essentially ‘Artistic Works,’ which are covered by copyright legislation and are not eligible for design registration.
• Protect the features which appeals to and is judged by the eye. The features are applied by industrial process.

4.    Copyrights Protection
The Copyright Act, 1957 in section 14, describes copyright as the exclusive right subject to the provisions of this Act. It authorizes the copyright owner for the reproduction or copying in respect of a work or any substantial part thereof, namely:
Copyright vests in original work involving skill, labour and judgment in respect of literary (such as books, publication including computer software); dramatic and musical works, artistic works;
• Engineering drawings;
• Sound recording;
• Musical work;
• Cinematography film, etc.

Computer programs are entitled to protection under the present laws. Computer software
comprises program manuals, punched cards, magnetic tapes, disks, and papers etc. which are needed for the operation of computers. Manuals, papers and computer printouts can be classified as literary but the concept of algorithms, normally used in programming are not covered under copyright protection. Software containing certain special information in a particular notation, mainly punched cards is considered as a literary work. The magnetic tapes and disks, on which electronic impulses are recorded, are considered as literary work.
As per Section 51 of the Copyright in a work shall be deemed to be infringed:

When any person without a license granted by the owner of the copyright of the Registrar of Copyrights under this act or in contravention of the conditions of a license so granted or of any condition imposed by a competent authority under this Act-
• does anything, the exclusive right to do which is by this Act conferred upon the owner of the copyright, or
• permits for profit, any place to be used for the communication of the work to the public

The Intellectual property is one of the corner stones of modern economic policy at the national level. It is increasingly becoming an important tool for sustainable development in the knowledge-based society of this millennium. Therefore, understanding and appreciating the economic foundations of the IP systems is a prerequisite for comprehending its increasing importance and role in national strategies for enhancing competitiveness and accelerating socioeconomic development. As the IPR legislation gives protection to the marketers or owners of the IPRs, it may lead to the monopolistic situation and exploitation of the consumers. However, through the enactment of the following laws the consumer’s interest is protected.
5.    Consumer Protection
The Consumer Protection Act, 1986 is an important social legislation to protect the consumers from exploitation from the business and trading community with bad intentions. Under this act the government has made provision for the establishment of consumer councils and other authorities for the settlement of consumers’ disputes and for the matters connected therewith to secure speedy and in- expensive redressal of their grievances. With the enactment of this law, consumers now feel that they are in a position to deal with the business community and corporations against their exploitation.
The broad salient features of Consumer Protection Act are:
• The Act is exclusively passed for the interest of the consumers
• It seeks to promote the rights of the consumers
• It covers private, public and co-operative sector
• The provisions of Act are compensatory in nature
In short, it protects the consumers from influences of the seller’s (marketer / manufacturer) coercive power by way of unfair trade practices to restrict competition.
The Consumer Protection Act, 1986 prohibits marketers form adopting the following unfair trade practice {Section 36A and Section 2(1)mn}:
• False representation of the quality, composition, style or model of goods and services.
• Falsely alleging affiliation and misleading statements about the usefulness of goods and
• Warranties or guarantees given without adequate tests, or expressed in misleading terms,
giving false or misleading facts disparaging the goods, services or trade of others.
• Announcing bargain prices for goods, which are either put on sale or are offered in quantities
which are not reasonable with respect to the nature of the trade, offering gifts, prizes or other items with the intention of not providing them as offered.
• Sale of substandard and hazardous goods under defined conditions.
Restrictive trade practices
Consumer Protection Act defines the following trade practices as restrictive and regulates
conditions regarding any agreement arising between the seller and purchaser in the course of business.
• Restrictions on the sale of goods to certain person or class of persons.
• Restrictions on purchase of goods on the conditions of purchase on other type of goods.
• Restricting the purchase of goods on the conditions such as not to deal with goods other than those of seller.
• Restricting purchasing and selling of goods only at prices stipulated therein.
• Allowing the concession of benefits by way of discounts, rebate, allowances, and credit terms in connection with dealing.
• Restrictions on resale prices (lower than stipulated) of the goods or otherwise stated.
• Restrictions on the quantity, output and the area of disposal of goods.
• Restrictions on employment in manufacture of goods.
• Restriction on resale prices with a result of elimination of competition.
With a complaint from the aggrieved party (individual or firm) or on its own, regarding the unfair or restrictive trade practices, the regulators are empowered to initiate enquiry and impose the penalty or issue ‘cease-and desist’ order.

IPR vs. Regulations
IPR ensures protection by prohibiting unauthorized use and thus reward original effort owner. Regulatory aspects are legal regulations associated with manufacturing (particularly in pharma sector) to ensure the safety and quality of products, which are meant for human consumption. Unlike IPR that are voluntary in nature, regulatory aspects are laws, which are to be obeyed and complied with. They remain in force as long as a product is being manufactured and primarily aimed at public health by ensuring safety and quality of the products being manufactured and marketed. The regulatory procedures ensure that safety, quality control and testing parameters are not compromised by the manufacturers or marketers for the profit motives. Thus the focus of IPR and Regulatory Aspects is entirely different i.e. while IPRs focus at encouraging innovations and new developments, regulatory aspects deal primarily with ensuring consumers interest by way of ensuring safety in manufacturing, usage, consumption, fairness in distribution for product availability and truthfulness in communication to the consumers. On the marketing side, the regulatory aspects ensure availability of quality product at reasonable prices looking into the interest of the masses and create deterrents for unscrupulous marketers. Thus the regulations empower the consumers to exercise his various rights such as fundamental rights, constitutional rights, investors’ rights, medical rights and legal rights.

In old days, intellectual property and competition law were often considered like poles of a magnet that repel each other. As a result of this apparent antagonism between the two , intellectual property regime was considered to be creating monopolies to spur innovation, while the purpose of the competition law is to eliminate monopolies 

It has been realised that both works in tandem and have complementary roles in driving innovation in today’s technologically dynamic markets. Intellectual property represents a particular form of ownership and a property right in an intangible abstract idea expressed in tangible form. For example , copyright is granted when the idea is executed in some tangible  form and similar is the case with designs , patent and other intellectual property rights.. The essential attribute of ythe grant of intellectual property rights is the “right of exclusion” , which means that the intellectual property rights owners can exercise his rights to the exclusion of the whole universe. On the other hand competition law aims at attaining maximum possible production of resources and best possible allocation of the same. This can be one way of looking at the aims of both the laws. However, competition and intellectual property law are the two different bodies of law having their independent and two different areas of operation.
Intellectual property and Competition law: working in tandem-
A proper discourse of basic nature of intellectual property rights and competition law reveals that both aims at producing efficiency in the market. In the long run , both aim at consumer welfare and they complement each other. In the case of intellectual property goods , the marginal cost of production is very less. The cost incurred is cost of research and development and the cost of inventing new technologies along with ancillary expenditure incurred in bringing up that product in the market. Absence of any monopoly right will disallow the inventor to recover the cost of research and development.This might  result in discouraging investors to invest in bringing up newer technologies, which create dynamic efficiency in the market. At the same time the disclosure requirements of intellectual property provides a pathway for further innovations. Thus intellectual property regime is definitely dynamically pro competitive even if it is statistically non-co operative. In the long run, technological progress contributes far more to consumers welfare than does the elimination of static deficiencies caused by non competitive pricing. From an economist perspective, intellectual property law is primarily concerned with the provision of appropriate ex-ante incentives( and increasing competition in innovation markets), while competition law is primarily concerned with ex poste incentives( and increasing competition in product markets). But as Valentine described, both are divergent paths to the same goal.

Functional aspect of intellectual property law:
Going much deeper into the operation of both legal regimes, one can notice that intellectual property rights are complementary to each other. It should also be appreciated that the operational area of both is also different, as intellectual property rights deals with the grant of rights by the state whereas competition law deals with the use of those rights. At the same time the rationale behind both meets at the same point.

Provisions to deal with Intellectual Property Right (IPR) abuses…weak:
The Act recognises that the bundle of rights that are subsumed in intellectual property rights (IPR) should not be disturbed in the interests of creativity and intellectual/innovative power of the human mind. It accordingly, exempts reasonable conditions forming a part of protection or exploitation of intellectual property rights. However, “what is reasonable?” is not explicitly mentioned in the Act. Secondly, the Act is silent about the remedies, ifunreasonable conditions accompany IPR licences and limit competition. Compulsory licensing and parallel importing are two key remedies of great importance and a competition law cannot remain silent in this regard. However, in India, the IPR laws such as the Patent Act or Copyright Act or Trade Marks Registration Act have over riding powers over the Competition Act in matters related to IPR abuses. For instance, in cases where an anti-competitive outcome arises from the exercise of the rights by the patent holder, the Patent Amendment Act (2005) provides for issue of licenses to stop such anticompetitive activity. However, the role of CCI to examine such matters does not find any mention. Competition law is a useful tool to discipline licensing agreements that restrain marketing and product development, and consequently have an anti-competitive effect. Accordingly, competition law in several countries cover abuse of IPRs. Competition law is best suited to decide whether there is an adverse effect on competition from the use of IPRs.  The Act should explicitly mention what constitutes ‘unreasonable’ conditions. An indicative list of unreasonable conditions should be given, such as, patent pooling; tie-in arrangements; prohibiting licensee to use competing technology; an agreement to continue paying royalty even after the patent has expired, fixing the prices at which licensee should sell, etc. The Act should specify the remedies that are available, in case of abuse of IPRs. In this context, competition law should override IPR laws.

· Criteria for defining ‘Exemptions’…subjective The Act provides for exemptions to mergers and abuse of dominance on certain grounds, such as ‘Economic Development’ and ‘Public Interest’. However, there is no definition of these terms. In the absence of clear definition/criteria, relevant provisions will be open to varying interpretations, based on the subjective interpretation of ‘economic development’ and ‘public interest’. The Act should lay down the criteria under which such exemptions will be granted  Such exemptions must be publicly notified.

Balance competition and Intellectual Property Rights (IPRs)
The bundle of rights that are subsumed in intellectual property rights (IPR) need to be preserved in the interests of creativity and intellectual/innovative power of the human mind. However, the existence and the exercise of intellectual property rights may generate anticompetitive effects through the monopoly power granted to the holders of the rights. What is called for is a balance between unjustified monopolies and protection of the property right holders’ investment. In view of this, the Competition Act does not permit any unreasonable condition to form a part of protection of intellectual property rights. In several countries, IPR per se is not considered violative of the competition law, but its abuse is certainly covered. The WTO Agreement TRIPS also requires Governments to enact suitable legislation to cover the abuse of IPRs. However, in India, the Patent Act has over-riding powers over the Competition Act, in matters relating to abuse of IPRs. The Patent (Amendment) Act 2005 provides for granting of license to remedy an anti-competitive practice emanating from the exercise of its right by a patent holder. The role of the Competition Commission to examine such matters does not find any mention. Compulsory licensing and parallel importing are two key remedies of great importance and a competition authority cannot be kept out in this regard. Unfortunately, in India this is precisely the case!

Are IPRs and Competition policy objectives conflicting?
IPRs and competition are normally regarded as areas with conflicting objectives. The reason is that IP€Rs, by designating boundaries within which competitors may exercise legal exlusivity (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. This legal monopoly may, depending on theunavailability of substitutes in the relevant market, lead to market power and even monopoly as defined under competition law. However, ensuring the exclusion of rival firms from the exploitation of protected technologies and derived products and processes, do not necessarily bestow their holders with market power given that it is not dominance per se that is prohibited in terms of competition laws, but the abuse of such dominance. There are rare cases where the protected technology can be totally divorced from the process that has been in existence, such that there often exist other technologies, which can be considered potential substitutes to confer effective constraints to the potential monopoly-type conduct of IPR holders. Rather than conflicting, there are areas where IPRs and competition complement each other. By creating and protecting the right of innovators to exclude others from using their ideas or forms of expression, IPRs provide economic agents with the incentives for tech$nological innovation and/or new forms of artistic expression. This will create more inputs for competition on the future market, as well as promote dynamic efficiency, which is characterised by increasing quality and diversity of goods, which is also the objective of competition policy. Moreover, IPRs may create a race for innovation, as firms compete to exploit first-mover advantages so as to gain IPR protection. Therefore, both IPRs and competition policy are necessary to promote innovation and ensure a competitive exploitation thereof. It is necessary therefore to ensure their co-existence.

Case study:
(Union of India and anr v/s cynamide India Ltd and Anr.)
In the Supreme Court of India.
1.      This was a case where a public spirited litigant had complained about the unscrupulous exploitation of the Indian Drug and Pharmaceutical Market by multinational Corporations by putting in circulation low-quality and even deleterious drugs. In this group of cases we are faced with a different problem of alleged exploitation by big manufacturers of bulk drugs. The problem is that of high prices, bearing, it is said, little relation to the cost of production to the manufacturers. By way of illustration, we may straightaway mention a glaring instance of such high-pricing which was brought to our notice at the very commencement of the hearing. 'Barlagan Ketone', a bulk drug, was not treated as an essential bulk drug under the Drugs (Prices Control) Order, 1970 and was not included in the schedule to that order. A manufacturer was, under the provisions of that Order, free to continue to sell the drug at the price reported by him to the Central Government at the time of the commencement of the order, but was under an obligation not to increase the price without the prior approval of the Central Government. The price which the manufacturer of Barlagan Kotone, reported to the Central Government in 1971 was Rs. 24,735.68 per Kg. After the 1979 Drugs (Prices Control) Order came into force, the distinction between essential and non-essential bulk drugs was abolished and a maximum price had to be fixed for Barlagan Ketone also like other bulk drugs. The manufacturer applied for fixation of price at Rs. 8,500 per Kg. The Government, however, fixed the price at Rs. 1,810 per Kg.
Patent rights provide the inducement to originators, allowing them exclusivity to produce the patented drug for a limited period. Competition Law acts as a balancing check, preventing originators from abusing their exclusivity and protecting the entry of generics into the market at the expiry of patents. Unlike the decision of the Hon'ble Supreme Court of India (SC) in Union of India v. Cynamide India Ltd. and Anr. which favoured the interests of manufacturers and discouraged price controls; the Hon'ble SC in its Order dated, 10th March, 2003 in K.S. Gopinath directed the government to ensure that "... essential and life-saving drugs do not fall out of price control". "Pricing of patented and branded generics outside the scope of price control is a major concern. Price negotiations on patented drugs may not ensure affordability and could undermine other best available alternative public health safeguards". Price control of patented drugs is therefore the need of the hour especially in the Indian context where affordability of patented drugs is expected to be less than common.

The Novartis dispute is a landmark Judgment highlighting the fact that the IPR regime must safeguard the economic interests of the country and accordingly dismissed the application seeking patent on Gleevak, under the amended Patents Act. Novartis claimed that India's Patents Act did not meet the rules set down by the WTO and was in violation of the Constitution. The main issue for consideration was whether the Indian Patent Law complies with TRIPS provisions. The Chennai High Court was of the opinion that Section 3(d) of the Indian Patent Act should be construed as a refinement to the enhanced patentability criteria wherein only new forms that demonstrate substantially different utility than what existed before are patentable and held that Section 3(d) of the Patent Act was in compliance with TRIPS provisions. Novartis has submitted Special Leave Petition before the Supreme Court of India and the final verdict is awaited though the patent has already been granted.


Indian regulators and law enforcers would have to find a way to reconcile the major conflicting point in both the fields is created as IPR restricts competition, while competition law engenders it. Hence, although competition law frowns upon the unreasonable exercise of market power or the abuse of dominant position obtained as a result of the IPR but unreasonable restrictive practices are resorted to by the right holder, relief would be available to the affected parties under the Competition Act.

The Act does not permit the creators/holders of several innovations to be secured and exploit their rights granted under the various IPR legislations like Patents Act, the Trade marks Act, the Copyrights Act, the Designs Act or the Geographical Indication of Goods Act. "It does not permit the companies or the innovators to abuse their power while exercising their rights as it could have possible implications on their pricing strategy and affect the consumers." The purpose of the Act is to allow creator/holders to impose only "reasonable" conditions, while exploiting their rights or stopping others from infringing on the owner's rights solely in the interest of the consumers to tackle monopolistic and restrictive practices. Monopoly rights granted to the innovators cannot be misused to escape provisions of the Competition Law by imposing unreasonable conditions.

Innovations and R&D always give rise to healthy competition in the market and are essential for the progressive development of the Indian economy but not at the cost of public interest and consumer welfare. IPRs help in protecting these innovations from being exploited. As a result both the fields are complementary, ensuring that the rights of all parties including the innovator and the consumer are protected. The "just right" balance or a harmonious construction between competition policy and IP preserves private incentives to invest and create, provided undue barriers are not created to future competition and innovation, ultimately upholding the legislative intent of both laws to preserve economic and social welfare in line with the country's ideology highlighted in the preamble to the constitution itself.
Innovation has always been a catalyst 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.
 # { The Competition Act, 2002, amended in 2007 came into force on 31st March,2003 .}
  # David A. Balto: Intellectual property and Antitrust: general principles, 867 PLI/Pat 9, 64.
  # Part VII – Regulations & Marketing International Marketing Conference on Marketing & Society, 8-10 April, 2007, IIMK 721
  # See Patrick Rey: Presentation at FTC/DOJ Hearing on competition and Intellectual property law and policy in the knowledge based economy  (22nd May 2002) “http://www.ftc.gov/opp/intellect/020522refdoc.pdf’
  # See Debra A. Valentine: Intellectual property and antitrust: divergent paths to the same goal.
  # Civil Appeal No. 1603 of 1985 etc.
 # Decided On: 10.04.1987

 # O. Chinnappa Reddy, J.
  # 2006(32)PTC473(Mad)

Authors contact info - articles The  author can be reached at: sehajsunderlal@legalserviceindia.com

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