The Interface between Intellectual Property Rights and Competition Law

The paradigm of interface between the Intellectual Property Rights (IPRs) and Competition law is that the two legal regimes are interconnected by the economics of fostering innovation and a convoluted web of legal policies that seek to stabilize the scope and effect of each policy. There exists a common area wherein Competition policy and Intellectual Property Law aim at nurturing innovation, effectiveness, consumer welfare and economic growth.

The interface between the two, Competition policy and Intellectual Property Law has been examined from two main aspects: (i) the effect that the Intellectual Property Rights have in shaping the disciplines of competition law; and (ii) the application of competition law on the post-grant use of IPRs

Intellectual Property Rights act as an institutional regulatory framework restricting, usually as an exemption, pure exclusion of restraints by competition law. The Competition Act, 2002 (India) under section 3- outlines that its provisions will not 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 various IPR statutes. Nonetheless, the Competition Act does draw the line insofar as it does not permit unreasonable conditions to be passed off under the guise of protecting IPRs. Thus, in principle, IPR licensing arrangements which interfere with the Competition law policies such as competitive pricing, quantities, qualities of products or abuse of the dominant position whatever be the source of such practices would fall foul of latter in India. For instance, the field-of- use limitation on the Licencee, if it is stipulated that it should be used as medicine only for humans and not animals, even though it could be used for both. Likewise, the Monopolies and Restrictive Trade Practices (MRTP) Commission in - Vallal Peruman and Another v. Godfrey Phillips (India) Limited (MRTP Commission, 1994) and Manju Bhardwaj v. Zee Telefilms Ltd (MRTP Commission, 1996) observed that where a trademark is misused by manipulation, distortion, contrivances and embellishments so as to mislead/confuse the consumers, he would be exposing himself to an action of indulging in unfair trade practices. In other words, this implies that the Competition Act prohibits trade practices visible to the detriment of public interest and also restricts the unreasonable conditions imposed by a right holder during the exercise of a right.

The reconciliation of IPRs and competition policy entails the necessity to identify IP laws as a form of competitive policy, resulting in a bal­ance between individual interests of the right-holders and the interest of the society at large, and encouraging further innovation. Competition law and IPR become less divergent given the fact that fundamental aim of innovation/ inventions is more competition. The construction of interaction between competition law and intellectual property rights is driven by a number of competing considerations apart from the IPRs and competition principles. The challenge for the state is to devise rules both within the ambit of IP law as well as outside it, i.e. statutory IP laws as well as substantive competition law in a manner that promotes dynamic competitive markets The middle path can be achieved only by reconciling the immediate goals of the two systems only with reference to their effect on the market i.e. IP law must deal with the grant and functioning of property rights, while competition law would need to deal with the manner of exercise of these rights.

Disclaimer: The sole purpose of this article is for information only; and not to be construed for any legal advice. The article was drafted, based on the information considered upto 2nd November, 2012.