Competition Law – IPR Interface: Impact on Innovation

Author: Vishvendra Tomar ((Law Student, Amity Law School-I, Noida)).

Competition Law and IPR Interface debate is a longstanding one. While they share common goals of promoting efficiency there are sometimes issues in the ways of achieving it. The growing tension between this interface has impacted innovation, as its evident from some recent compulsory licensing cases, which triggered an all-round debate whether the competition agencies should intervene in matters of intellectual property, and if yes, on what “theory of harm”? This article would deal with some of such debates and cases.

Interface between Competition Law & Intellectual Property Rights – The Impact on Innovation

The objectives of intellectual property laws and competition law are common in so far as both the sets of laws are meant to promote innovation, creativity and a better market for consumers. However, on a closer analysis, there appears to be a growing tension between the institutional principles of these laws. The conflict seems to arise from the fact that intellectual property laws focus on individual interest while competition law focuses on promoting collective interest through increasing competition.

Notwithstanding the conflict, there has been a recent shift towards viewing intellectual property rights and competition law as complimentary to each other. The Fair Trade commission in its report noted that patents do no easily confer monopoly power on their holders, and additionally that, even where a patent confers a monopoly power that alone does not create a competition law violation.

The European Courts have taken this apparent conflict into account and various methods of harmonization have been attempted. The European Court of Justice developed the doctrine of ‘Exhaustion of Rights’. Also, the adoption of the ‘Community Trade Mark Regulation’ is a step towards this harmonization process so as to reduce this conflict.

The tussle between the two fields of law is on several fronts. FRAND rules, length of licensing agreement, reverse licensing, patent pooling are some of the issues on which the two laws seem to be pitted against each other. The question is where to draw the line between intellectual right and market fairness. A patent holder is free to license out its patent to a person of its choice, but is that freedom absolute? Can we neglect the antitrust applications of such license? And if we can’t, then to what extent can we examine such exercise of intellectual right? Moreover, there is the perplexing question of duration of a license.

In Hartford-Empire Co. v. United States, ((65 U.S.P.Q. 1 (1945).))the Supreme Court of United States accepted that a patent owner is not obligated to ensure accessibility of the patent to general public but it ought to grant it on ‘uniform reasonable royalties’. The suppression of technology plainly has been a target of the antitrust laws in a variety of contexts and, in certain circumstances, those laws have been used to suggest significant limits on the right of an intellectual property owner unilaterally to refuse to license or to sell to a competitor ((Image Technical Services., Inc. v. Eastman Kodak Co., 125 F.3d 1195 (9th Cir.1997).)). The ECJ ruled that the freedom to refuse to license an Intellectual Property right was the exclusive right of the patent holder and refusal to license, in itself, is not abusive. However, the ECJ further clarified that such refusal has to pass the test of its effect on the competition. Similarly, several other judgements of first instance courts may be found on refusal to license vis-à-vis intellectual property ((Bellsouth Advertising v. Donnelley, 719 F. Supp. 1551 (S.D. Fla. 1988); See also Intergraph Corporation v. Intel, 195 F.3d 1346 (Fed. Cir. 1999).)).

In the Maize Seed Case, ((Nungesser v. Commissioner, [1983] 1 CMLR 278.))the Court of Justice differentiated between an open exclusive license and an exclusive license. The Court opined that such open exclusive judgements did not necessarily infringe Article 101(1) of the TFEU. Again, in Coditel v. Cine Vig Films, ((Coditel v. Cine Vog Films, [1983] 1 CMLR 49.))the Court opined in the same year that in cases of copyright, a licensee may require absolute territorial protection and it will not amount to a violation of copyright laws. Similarly, the Courts all around the world are divided on the opinion of handling FRAND patents ((Huawei Technologies Co Ltd v ZTE Corp., Case C- 170/13.)). All around the world, the question of grant of license has perplexed the competition authorities. The meaning of word ‘essential’ remained a puzzle. Does ‘essential’ mean technically irreplaceable or merely unaffordable; and if the latter, what, if anything, should turn on whether the denied party is a large or small player, or what its chances might be out of surviving in the market even with a license ((IAN EAGLES & LOUISE LONGDIN, REFUSALS TO LICENSE INTELLECTUAL PROPERTY – TESTING OF THE LIMITS OF LAW AND ECONOMICS 105 (2011).))?

Indian competition Law, like other jurisdictions, has provided an exception to agreement pursuant to an intellectual property. Though competition watchdogs across the world have normally refused to entangle with intellectual rights, they have been scrutinising possible anti-competitive behaviour relating to access to technology, which has received little attention until recently and is of crucial importance for developing countries.

So far, the Indian Competition Authorities has not faced significant litigation in the puzzling area. Earlier the courts had set the position that Competition Commission of India has no jurisdiction over Intellectual Property Cases. However, limited jurisdiction was granted pursuant to possible antitrust violations ((Amir Khan Productions Private Limited v. Union of India, W/P(C) no. 358 OF 2010; See also Kingfisher v. Competition Commission of India, W/P(C) no. 1785 of 2009.)), but confusion persisted on the ground as to where to draw the line between Intellectual Property Rights and Antitrust Violation. The case of grant of SEP’s by Ericson ((M/s Best IT World (India) Private Limited (iBall) v. M/s Telefonaktiebolaget L M Ericsson (Publ), Case No. 04 of 2015.)), is a case in point. India is yet to witness a major battle between Intellectual Property Rights and Competition Laws, though Indian position has invited much discussion and debate in developed jurisdictions on enforcement and protection of IP rights in India, including criticism for its policy regarding intellectual property rights, its decisions in the matters of compulsory licensing, ever-greening, and its approach towards saving the interests of patent holder’s vis-à-vis the competition law enforcement. Any step taken by the competition watchdog may be perceived to further dilute the rights of an intellectual property holder, and invite criticism. Thus, we must identify the possibility of carving a middle ground between the two laws which look conflicting but can be complimentary.