THE INTERFACE BETWEEN IPRs AND COMPETITION:

INDIAN SCENARIO

( : औ )

DISSERTATION

Submitted to

Directorate of Distance Education (DDE), Kurukshetra University, Kurukshetra, Haryana

in partial fulfilment of the requirements for the degree of LL.M. (Master of Laws)
By
PANKAJ KUMAR
Session: 2010-12
DDE Ref. No.: 45420
Registration No.: 10-DE-823
Email id: agarwal.biotech@gmail.com
Contact no. +91 9312322988

Supervised by
Dr. Sushila
Assistant-Professor (Law), National Law University (NLU), New Delhi-110078

Electronic copy available at: http://ssrn.com/abstract=2097477

Electronic copy available at: http://ssrn.com/abstract=2097477
 CERTIFICATE BY THE CANDIDATE

I hereby declare that the work reported in this dissertation entitled “THE INTERFACE
BETWEEN IPRS AND COMPETITION: INDIAN SCENARIO” has been carried out by myself
Mr. Pankaj Kumar for the partial fulfilment of the requirements for the degree of LL.M. (Master
of Laws) from Directorate of Distance Education (DDE), Kurukshetra University, Kurukshetra,
Haryana, India.

I further declare that I have done an independent and original work of required standard under
the supervision of Dr. Sushila, Assistant-Professor (Law), National Law University, New Delhi-
110078 and it has not been submitted elsewhere for award of any other degree.

Date: 31/03/2012
Place: New Delhi PANKAJ KUMAR
Session: 2010-12
DDE Ref. No.: 45420
Registration No.: 10-DE-823
 ACKNOWLEDGEMENTS

I am overwhelmed with pleasure and pride to express my feelings and a sense of

indebtness in gesture of acknowledgement to some people for their valuable
guidance and wise direction during the course of my LL.M.

I express my deep sense of gratitude to my supervisor Dr. Sushila, Assistant-

Professor (Law), National Law University, New Delhi-110014 for her helpful and
inspiring guidance, persistent encouragements and meticulous effort during the
study.

With deep sense of indebtness, I take this opportunity to express my sincere and
heart-full thanks to Dr. K.D. Singh Deputy Director (Law), Competition Commission
of India (CCI), Mr. Anil Bhardwaj, Secretory General, Federation of Indian Micro and
Small & Medium Enterprises (FISME) for their helpful and inspiring guidance,
persistent encouragements and constructive criticism and advise throughout the
study.

I would like to express my sincere thanks to all my colleagues at FISME for the
encouragement and the support during the study.
Last but not the least, I would like to thank my parents, other family members and
friends who helped me in order to finish the study.

Pankaj Kumar
 PREFACE

The relationship between intellectual property rights and competition issues has
attracted growing attention. Though IP law issues intellectual assets to the exclusive
control of right owners, competition law strive to avoid market barriers and benefit
consumers by encouraging competition among suppliers of goods, services and
technologies. Such challenges are particularly complex in developing countries, the
majority of which have little or no tradition in the application of competition law and
policies. In fact, in most of these countries intellectual property rights have been
expanded and strengthened in the absence of an operative body of competition law,
in contrast to developed countries where the introduction of higher levels of IP
protection has taken place in normative contexts that provide strong defences
against anti-competitive practices.

The concept of Intellectual property rights as developed in India cannot be divorced

from the developments in the international arena as well as in the nation-to-nation
relations. The impact of the law relating to unfair and restrictive trade practices as
affecting the regime of IPR on the economic front is emphasized in this study. In
particular, greater attention would be given here to the interface between IPRs and
competition in Indian scenario.

The present study discusses the relation between IPRs, monopoly and competition
and the public interest and the shifting of the balance towards the IP right holders
before examining the conditions and circumstances of exiting scenario. The
arrangement of the study is as, Importance and Relevance of the study are given in
chapter (i). Chapter (ii) discusses objectives of the study. Hypothesis of the study
is given in chapter (iii). Chapter (iv) discusses Research Methodology. Review of
existing statutory Law and Case-Laws are given in chapter (v). Chapter (vi)
discusses conceptual framework covering important terms and their meaning etc.
Analysis and interpretations given in chapter (vii). Chapter (viii) discusses brief
findings and suggestions. List of cases given in chapter (ix). Chapter (x) mentions
Annexures: List of Tables graphs etc. Chapter (xi) mentions Bibliography and
Appendices etc.
 INDEX
P. No.
Letter for the approval of Topic from Course Coordinator
Certificate from the Supervisor
Certificate of declaration by the candidate
Acknowledgement
Preface
Contents -
Chapter (i) Importance and Relevance of the study ……………………………….. 1
Chapter (ii) Objectives of the study ……………………………………………….. 13
Chapter (iii) Hypothesis of the study ……………………………………………… 14
Chapter (iv) Research Methodology ………………………………………………. 16
Chapter (v) Conceptual framework covering important terms and their meaning … 57
Chapter (vi) Review of existing statutory Law and Case-Law ……………………… 40
Chapter (vii) Analysis and interpretations ………………………………………….. 107
Chapter (viii) Findings and suggestions ……………………………………………. 112
Annexures:
Annexure I: Genesis of Competition Policy in India ……………………………….. 116
Annexure II: Illustrative List of Parameters for Undertaking Competition
Assessment …………………………………………………………………………. 122
Annexure III: List of cases ………………………………………………………….. 126
Bibliography and web-links ………………………………………………………… 127
 CHAPTER (I) IMPORTANCE AND RELEVANCE OF THE STUDY

INTRODUCTION
The study explores a number of issues where not much work has yet been done in
developing countries but that could be of relevance in tackling the interface between
IP and competition policies. Notably, the study deals with some competition law
issues specifically relating to IPRs. It thus discusses the extent to which the refusal
to license IPRs such as patent to a third party may be deemed anti-competitive. The
study considers, further, anti-competitive situations arising from the acquisition and
enforcement of IPRs. The use of compulsory licenses to remedy anti-competitive
practices is also examined together with a number of state interventions that
determine key aspects of their competition policies.

“People of the same trade seldom meet together, even for merriment and
diversion, but the conversation ends in conspiracy against the public or in some
contrivance to raise prices”1

When there is perfect competition in the market, the consumer is sovereign, as his
welfare is maximised. However, monopoly is bad for the consumer and the
economy. The monopolist controls the market by various way including increase
prices, reduce volumes etc.

In the present age 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

1 Adam Smith, The Wealth of Nations (1776)

1
encourage competition in Indian market. This study is a review into the advocacy
issues in the field of intellectual property rights and competition law in general and
more particularly, the interface establishing the balance between these two law and
policy

In a market economy, competition is essential to curb market distortions, induce

efficiency in the use of resources, prevent monopoly or oligopoly, maintain prices
at fair levels or as low as possible, prevent excessive or monopoly profits and
promote consumer interests and welfare.

IPR is privilege granted in recognition of the need of the holder to recoup costs
incurred in the research and innovation process, so as to maintain incentives for
further innovation. Thus an IP entails an exclusive right for a limited time, enabling
the holder to charge a higher price than the marginal cost of production. Such
higher price generally reduces access of consumers to the product, and access of
other producers to production inputs and methods.

The monopoly granted by IPRs prevents or deters competition from rivals that can
sell at lower prices. These are costs that are seen to be short-term (since the
exclusive right is of a limited duration), but which are supposed to be outweighed
by the long-term benefits brought about by the innovation which IPRs encourage.2

There is thus a balancing required between the monopoly privilege granted to the
IP holder and the public interest (including consumer welfare, the competition from
other producers, and national development prospects). The appropriate balance
requires the right policies that enable that IP be appropriately given for correct
reasons and to the correct parties, and that they be of an appropriate period, and
that flexibilities and exemptions and exclusions are provided to safeguard vital
public interests.

If the balance is tilted excessively to the IP holder, then one consequence is that
the IP facilitates a stream of monopoly profits beyond what is justified for

2 INTELLECTUAL PROPERTY, COMPETITION AND DEVELOPMENT by Martin Khor, Third World Network

2
recovering the costs of innovation, and society bears the costs unreasonably.
These may include prevention of access to goods and services (including
essentials such as medicines, food and information, and important inputs for
production), curbing of industrial development, an overall reduction in competition
and its benefits for resource allocation, and monopolization in products, sectors or
the economy as a whole.
It is thus important, especially for developing countries, that the standards of IP be
appropriate, that there be adequate exclusions and flexibilities, and that the
framework enables IP to be awarded appropriately for the right inventions and to
the right parties, and that there be sufficient provisions policies and legal provisions
that counter the abuse of IP privileges when they occur.

In economic competition, the winner should be the enterprise providing the most
useful and effective product or service on the most economical and (to the
consumer) satisfying terms. This result can only be achieved, however, if all
participants play according to a certain set of basic rules. Violations of the basic
rules of economic competition can take various forms, ranging from illegal but
harmless acts (which can be committed by the most honest and careful
entrepreneur) to malicious fouls, intended to harm competitors or mislead
consumers. Experience has shown that there is little hope of fairness in
competition being achieved solely by the free play of market forces. In theory,
consumers, in their role as referees of economic play, could deter dishonest
entrepreneurs by disregarding their goods or services and favouring those of
honest competitors. Reality, however, is different.
As an economic situation becomes more complex, consumers become less able to
act as referees. Often they are not even in a position to detect by themselves acts
of unfair competition, let alone react accordingly. Indeed it is the consumer who—
along with the honest competitor—has to be protected against unfair competition.3

In certain jurisdictions, the intellectual property laws, unfair competition laws and
anti- trust (competition) laws have developed in such a way that they complement
to each other with making an appropriate balance. The balance is necessary

3 WIPO Summer School Reading Material

3
because “on the one hand, exclusive rights granted under IP laws by definition
exclude competition in a particular setting and allow excluding third parties from
directly competing with the IP right holder; on the other hand, competition law
seeks to facilitate direct competition and tends to limit the use of exclusive rights.” 4

A number of regulations linked to the acquisition and exercise of intellectual

property rights, such as those dealing with the marketing approval of
pharmaceuticals and agrochemicals directly influence market entry and
contestability. Such regulations integrate what may be called a country’s
“competition policy”. Given the lack of legislation, weak implementation or absence
of policies to deal with the IP-competition relationship in developing countries, a
competition policy approach may be particularly useful to ensure a pro-competitive
exercise of intellectual property rights (IPRs).

Developing countries can follow their own approach to competition law and IPRs
since there are no international rules (with the exception of Article 40 of the
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) that
constrain the capacity of such countries to discipline IP-related anti-competitive
behaviour. In the absence of international rules on the matter, countries may have
different views about what constitutes undesirable anti-competitive effects as a
result of the exclusivity granted under IPRs.

Although competition law has usually dealt with markets for goods, markets for
technologies exist separately from those for products or services and may also be
subject to competition law. Competition law may, in particular, address situations in
which IP is used to charge excessive prices for or prevent access to protected
technologies. Competition provides a strong incentive for developing new
technologies in certain fields. In cases where IPRs are granted, governments can
adopt measures to mitigate the monopolisation of technologies and promote
competition. Thus, although Article 31(b) of the TRIPS Agreement only refers to
the refusal of a voluntary licence as a condition for the granting of a compulsory

4 Teaching of Intellectual Property; Chapter 6 Teaching intellectual property, unfair competition and anti-trust law by Thomas Cottier and Christophe

Germann, Cambridge University Press 2008

4
licence, the unilateral refusal to license a patent (generally known as “refusal to
deal”) can be considered grounds for granting a compulsory licence and has been
contemplated in a number of national patent laws.

The possibility of allowing third parties to use IPRs in cases of refusal to deal has
also been considered in some countries under competition law in the context of the
“essential facilities” doctrine. This doctrine applies when one firm, which controls
an essential facility, denies a second firm reasonable access to a product or
service that the second firm must obtain in order to compete with the first.

While some US court decisions have suggested that information may constitute an
essential facility, the extent of application of this doctrine to intellectual property
cases is uncertain. Under European Community law, an “essential facility” may
include an intellectual property right. An IPR holder is not entitled to exclude
competitors from the use of his/her rights when a licence is essential for
competition, such as where the refusal to license prevents the introduction of a
new product or allows the intellectual property holder to monopolise a secondary
market. Developing countries may draw interesting lessons from the application of
the concept of refusal to deal and the essential facilities doctrine in developed
countries. However, there are no rigid models and developing countries can
elaborate their own approaches on the matter in order to respond to their public
interests.

The accumulation of patents in the form of “package patents” may have anti-
competitive effects if used, for instance, to inappropriately extend market power
from legitimate patent claims to illegitimate patents, or to coerce a party into
licensing patents that it might not have otherwise done. “Patent thickets” may also
raise competition law concerns, as co-operation among competitors in different
forms (including cross-licensing) may be necessary to navigate the patent thicket,
ultimately limiting competition.

While much of the literature on IPRs and competition law focuses on patents, anti-
competitive behaviour may be based on or facilitated by other modalities of IPRs.
Thus, copyrights have been involved in important competition law cases. Several

5
studies have shown that copyright creates monopoly power and that the majority of
markets on information goods follow a pathway of progressive concentration at
both the national and international levels. The anti-competitive effects of copyright
protection of software, particularly of interfaces, have been central in several
cases, notably involving the dominant software provider, Microsoft. Competition
law concerns have also frequently arisen in relation to copyright collecting
societies. A fundamental tension between the goals of trademark and competition
laws has also been observed in some cases.

Enforcement measures should allow the protection of the IPR holder’s legitimate
interests, but equally protect against abuses that may unjustifiably distort
competition.

Compulsory licences can be used, both in the context of IPRs and of competition
laws, to remedy anti-competitive practices. Article 31(k) of the TRIPS Agreement,
explicitly provides for the granting of such licences in the case of patents.
Compulsory licences may be used in cases of cross licensing that unduly limit
competition, particularly when they involve substitute technologies, that is,
technologies that actually or potentially compete with each other, independently of
their intrinsic characteristics.

“Patent pools” represent another situation that may be subject to analysis from a
competition policy perspective. Such pools may be used for pro-competitive
purposes. However, they may facilitate tacit collusion in a multiplicity of markets
and allow the pool members to impose abusive terms on non-members wishing to
get access to technologies.

Finally, there are a number of areas in which IPRs play an important role and
where actions taken by governments decisively shape competitive relations. This
is, for instance, the case of regulations determining the requirements for marketing
approval of pharmaceutical and agrochemical products. The sui generis system of
“data exclusivity” applied in some countries – and promoted through free trade
agreements – confers a temporary right to the exclusive use of such data by the
first applicant (generally the company that developed a new product), thereby

6
excluding generic competition during the period of exclusivity. Restrictions to
competition may also arise from the so-called “patent registration linkage” under
which a national health authority cannot approve a medicine, or is obliged to take
other measures, when there are patents relating to the medicine and the applicant
has not obtained the patent owner’s consent.

7
Issues arises from the interface of IPR and competition
There are many issues arises from the interface of Competition & IP laws and some
of them are as follows:
• What extent the court and the competition authority restrict the exercise of
IPRs?
• When is competition law actually applied to IPRs?
• What extent can and should various IPRs Laws be reformed?
• What regulatory relationship needs to be built between CCI and the Patent
Office?
• What conditionality in the licensing agreement needs to be examined and
what could be India’s licensing policies with regard to Intellectual Property?
• What should be CCI’s role when examining grant, if any, of product patents?
• What competition concerns may indicate the probability of imposing
compulsory licensing?
• What regulatory relationship needs to be built between CCI and the Patent
Office?
• What conditionality in the licensing agreement needs to be examined and
what could be India’s licensing policies with regard to Intellectual Property?
• What should be CCI’s role when examining grant, if any, of product patents?
• What competition concerns may indicate the probability of imposing
compulsory licensing?
• What is the relevant market in which the dominance/abuse is alleged?
• Is the enterprise dominant in the relevant market?
• What are the specific indicted practices and do these amount to abuse?
• Exclusionary terms in the licensing of IPRs, specifically the inclusion in
licensing contracts of restrictive clauses such as territorial restraints,
exclusive dealing arrangements, tying or grant-back requirements;
• Use of IPRs to reinforce or extend the abuse of dominant position on the
market, unlawfully;
• IPRs as an element of mergers and cooperative arrangements; and
• Refusal to deal.

8
 BACKGROUND

Interactions between trade and competition could not be more intimate than they
are today, when countries the world over are getting severely affected by the
volatility of trade in primary commodities. The major commodity spike of 2007-08
sent alarm bells ringing when the prices of many primary goods doubled from what
they had been not so long ago. Much of this fluctuation may be explained through
the simple economics of demand and supply, while managing supply side failures
is critical to restore some sense in the market. One such management issue is that
of the inability of trading nations to deal with rampant anticompetitive practices,
especially when the importing countries pay heavily for anticompetitive practices
exempted by exporting countries' competition laws. 5

Technology transfer agreements are necessary to fulfil technological needs that

are impossible to meet with local technical capabilities. Traditional devices of
licence transfer often fall within the purview of antitrust scrutiny and are deemed
anti-competitive practices in general trade, as in the case of territorial restrictions in
licensing. Antitrust laws, although fit to evaluate general trade agreements, often
fail to address intricate problems involving IPR and therefore, lack the tools to
adequately solve them. The blanket protection approach to IP as provided by
Section 3(5) of the Indian Competition Act is equally ineffective due to lack of a
mechanism to deal with IP-related unfair trade practices. The TRIPS under Article
40, permits member states to prevent abuse of IP through anti-trust legislations.
India has permitted cross licensing under its patent laws but has failed to prevent
its anti-competitive fallout in technology licensing.
Therefore, a need for a balance between the two conflicting interests of
competition policy and the protection of technological know-how arises. It further
purports to set forth an adaptation of guidelines for India, keeping in mind the anti-
trust laws of other jurisdictions.6

5 TRADE AND COMPETITION IN THE PRIMARY GOODS SECTOR: "GLOBAL PROBLEMS & SOLUTIONS", AU: Frederic Jenny & Pradeep S Mehta;

The Financial Express, January 13, 2012

6 JOURNAL OF INTELLECTUAL PROPERTY RIGHTS | 16 (3): 258-266 MAY 2011

The Competition-IP Dichotomy: Emerging Challenges in Technology Transfer Licenses; Kutty, AA | Chakravarty, S; Kutty

9
The issues relate to interactions between IPRs and competition law are all the
more important with the coming into force of several provisions of the Competition
Act, 2002. The possibility of tensions between IP and competition law seems to
have been present in the mind of the legislature, when it made some IP-specific
exceptions in Section 3(5) of the Act. Among the important questions which are
likely to arise are (i) the treatment of exclusivity agreements and (ii) the likelihood
of the abuse of intellectual property being categorized as an abuse of dominant
position.

A more general question might arise first – are competition law and intellectual
property rights necessarily at odds with each other?

“… intellectual property rights do not ipso facto confer monopoly power. While they
do permit product differentiation, and sometimes give the owner power over price,
there is a vast difference between an exclusive right and the sort of economic
monopoly that is the concern of anti-trust law…”

Furthermore, the goal of competition law is not to prohibit monopoly. Instead, the
goal is to prohibit anti-competitive conduct – a company that achieves a monopoly
without entering into anti-competitive conduct will not violate the principles of
competition law at all. In sum, the argument is that there is no tension in the goals
being sought by intellectual property rights and competition law (there might
however be some tension in the means through which the goals are sought to be
achieved). The goals in both cases are the same – “wealth maximization”.7

India, embarked on a new trajectory of economic liberalization in 1991, when

a host of controls on trade and industry were removed. The various reforms
initiated recognised the need for removing various fetters on trade and industry
with a view to unleashing the energy and dynamism of competition in the
market. In his Budget Speech, Dr Manmohan Singh, the then Finance Minister

7 Intellectual Property Rights and Competition Law: Friends or Foes?, Mihir Naniwadekar http://spicyipindia.blogspot.in/2009/09/intellectual-property-

rights-and.html

10
underlined, “no power on Earth can stop an idea whose time has come” and that
“It is essential to increase the degree of competition between firms in the
domestic market so that there are adequate incentives for raising productivity,
improving efficiency and reducing costs” Since then, a host of new policy and
regulatory reforms across various sectors have been introduced by the
Government.

After Independence, India pursued a strategy of planned economic

development, with the objective of developing a broad industrial base to achieve
speedy economic self-reliance and promoting social justice. The industrial policy
assigned commanding heights of the economy to the public sector. The State
exercised control over the direction, pattern and quantum of investments through
the Industries (Development & Regulation) Act, 1951 and the Monopolies and
Restrictive Trade Practices Act, 1969 (MRTP Act). A major part of the financial
sector was also kept under Government control while a number of products were
also subjected to price and distribution controls coupled with extensive
reservations and concessions in favour of small-scale industry. The trade policy
too affected competition by providing a high level of protection to domestic
industry. These restrictions, which were in consonance with the National
Strategic Policies at that time and relevant in the context of limited resources and
need of checking monopolies and concentration of economic power, did
nevertheless, impacted competition. However, gradually, and from 1980 onwards,
incremental changes were brought in to usher in greater competition. The
Industrial Policy Statement of 1980 introduced greater competition in the domestic
market, technological up-gradation and modernisation. The major reforms initiated
from 1991 onwards were, however, on a much broader scale, sweep and scope,
and provided a new paradigm shift to economic growth in India, releasing new
entrepreneurial energy and dynamism in the Indian industry, diversification of
domestic production and stimulating exports, adding to the GDP growth.

The last two decades since 1991 have witnessed significant changes in terms of
opening of markets, factor mobility and regulatory environment. The benefits
have been substantial and manifested in various segments of economy, e.g.
telecom, civil aviation, transport, manufacturing, etc. However, the

11
progress has been somewhat uneven, and so also the trickle- down effects on
the common man. Underlying this success is a structural shift in India's growth
trajectory. Further, like many other similar economies under transition, there
have been residual restraints and anti-competitive traits in several areas of
economy. While the process of reforms is a continuing one, the pace and
direction necessitates the introduction of an overarching National Competition
Policy to realize the fuller growth potential of the economy.

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 CHAPTER (II) OBJECTIVES OF THE STUDY

1. Understanding the interface – The interface between IPRs and Competition

is required to understand in Indian scenario
2. Examine market practice – The market practice need to examine regarding
competition and intellectual property
3. Status report - a status report regarding product patent and competition need
to be prepared
4. Policy guideline - a policy guideline for licensing (compulsory licenses) where
it might lead to anti-competitive practices need to be prepared
5. Study the concern laws - competition law concerns stemming from
acquisition of intellectual property need to be studied
6. Merger & Acquisition - issues of acquisition of intellectual property though
merger & acquisition need to be examined
7. Authority restriction - to what extent the court and the competition authority
restrict the exercise of Intellectual Property Rights need to understand
8. Application of Competition Law top IPRs - to what extent the competition law
actually applied to Intellectual Property Right need to understand
9. Laws need to be reformed – to what extent can and should various
Intellectual Property Rights Laws be reformed need to discuss
10. Development of jurisprudence - the development of jurisprudence in India in
the field of protecting of IPRs and competition law need to be observed and
discuss
11. Impact of the Laws - the impact of patent law and competition policy and law
in India need to be observed and discuss
12. Awareness of the law and policy - Generate and increase understanding of
the relationship between intellectual property (IP) and competition law and
policy
13. Prevent abuse - Understanding how to prevent abuse of IP using anti-trust
legislations
14. Highlight the balance - Highlight the need for a balance between the two
conflicting interests of competition policy (IP-related unfair trade practices)
and the protection of technological know-how (Technology transfer)

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 CHAPTER (III) HYPOTHESIS OF THE STUDY

Conflicting objectives
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.

There are two opposing views on the interface between a competition law and IPR
(Intellectual Property Rights) laws. The first contents that there is a tension between
competition and intellectual property, arguing that competition law seeks to
eliminate monopolies and encourage competition, while IPR laws reward creators
and inventors with a limited monopoly. According to the proponents of this view, the
main function of IPR laws is to properly assign and defend property rights on assets
that have economic value. On the other hand, the main goal of competition law
should be to minimise the adverse consequences of monopoly power arising from
IPRs.

The second view contends that competition law continues to be a vital means of
ensuring continued innovation and economic growth. The aims and objectives of
IPRs and competition laws are complementary, as both aims to encourage
innovation, competition and enhance consumer welfare. It is vitally important to
preserve competition in innovation because competition ensures the best outcome
for consumers.
14
Competition authorities are normally concerned with anti-competitive practices such
as abuse of dominant position whatever be the source of such practices, rather than
with the abuse of IPRs. The Competition Act 2002 specifically refers to IPR laws.
Section 3(5) of the Act states that agreements entered into for imposing reasonable
conditions or restraining infringements of IPRs conferred under respective IPRs
laws would not be actionable under the Competition Act 2002. The Competition Act
2002 applies to IPRs in relation to abuse of dominant position and combinations.
Therefore, abuse of dominance due to an IPR is liable for action under the Indian
Competition Act just as IPR-related dealings in combinations leading to an anti-
competitive effect.

Thus, the issues involved are technical and multifarious and need to be dealt with in
diverse ways.

As there are opposing views on the interface between a competition law and IP laws
and it has argued that competition laws encourage competition and prohibit
monopolies while IP laws reward innovators with a limited monopoly.

Observation
It has been observed that –
• Marketing and distribution related business alliances with others
• Use of multiple channels for marketing, though considerably through open market
• No competition from imports for majority
• Sourcing IP through in-house R&D by many
• R&D suffers from low success rate and long gestation lag
• Increasing technology acquisition/licensing
• Majority of the IPs are product related

15
 CHAPTER (IV) RESEARCH METHODOLOGY

The main significance and objective behind the IP laws is defend ones IPRs by
issuing some limited monopoly rights for a limited terms in order to promote the
further investment in research & development. On the other hand, the main
objective of competition law is to minimize the adverse consequences of monopoly
power including one arising from IPRs. To address various said issues concerning
the subject, various online documents other than few books need to be referred.

The situation of developing countries and the development context

The models and practices that serve as the basis for harmonization are generally
tilted in favour of IP holders, with serious implications also for competition. When
they are transferred to developing countries, so too are the imbalances. However,
the effects on developing countries are even more serious, as there are systemic
reasons why upward harmonization towards developed countries’ IP standards is
inappropriate and damaging for most developing countries.

The overwhelming share of patents in developing countries is held by foreigners,

and thus most of the commercial benefits of IP accrue to these foreign institutions.
There are large and growing patent rents transferred from developing to developed
countries. Since the patents are owned by foreigners, local researchers and
enterprises are blocked or restricted in their use of the patented materials. Local
industries will also find it difficult or impossible to produce similar products as those
patented.

In terms of effect on competition, the situation confers monopoly rights on

foreigners, and local enterprises are placed in a situation in which they face high or
even insurmountable obstacles to compete. The kind of reverse engineering
undertaken by today’s now-developed countries during their development phase,
or by industrially successful developing countries such as South Korea, when they
did not have to adhere to the TRIPS Agreement’s high IP standards, will be
extremely difficult or impossible to undertake today.

16
Recent studies show the high extent of costs incurred by developing countries. The
former chief of trade policy research8 estimates that the obligations on developing
countries to implement TRIPS will result in increased payments by them of US$60
billion a year. It has estimated that the net annual increase in patent rents resulting
from TRIPS for the top six developed countries in this field will be US$41 billion
(with the top beneficiaries being the US with $19 billion, Germany $6.8 billion,
Japan $5.7 billion, France $3.3 billion, UK $3 billion and Switzerland $2 billion).
Developing countries that will incur major annual net losses include South Korea
($15.3 billion), China ($5.1 billion), Mexico ($2.6 billion), India ($903 million) and
Brazil ($530 million).9

It has argued that the World Bank’s patent rents estimates, already high enough,
significantly understate the actual costs to developing countries, as these only
measure the direct outflow of patent rents from these countries. In addition there
are economic distortions as the IP protection causes goods to sell at prices far
above their marginal costs, thus giving rise to “deadweight costs”. Citing other
studies, they estimate the deadweight costs to be twice the size of the estimated
patent rents.10

In addition, there are costs for administering and enforcing IP laws and policies,
requiring law reform, enforcement agencies and legal expertise. World Bank
project experience indicates that it will cost a developing country $150 million to get
up to speed on three new WTO areas (IPRs, SPS and customs valuation). He
notes that this amount is more than a full year’s development budget in many
LDCs.11

Many analysts believe that the developing countries received a bad deal in
accepting TRIPS in the Uruguay Round. “Through TRIPS developing countries
took on as legal obligation a cost of $60 billion per year, but there is no legal
obligation in the agreement on any Member to provide anything in exchange”.

8
the World Bank, Michael Finger (2002)
9
A report by the World Bank (2002)
10
Weisbrot and Baker (2002)
11
Finger (2002)
17
Finger adds that the Uruguay Round “grand bargain” was that developing countries
would take on obligations in the new areas and in exchange developed countries
would provide better access to their markets, particularly on agricultural products
and on textiles and clothing.12

It has concludes that compared with the outcome of the market access
negotiations, the TRIPS amounts (i.e. net rents) are big money. The US obtained
13 times more benefit from annual patent rents arising from TRIPS than from
liberalization of industrial tariffs with Germany, France and UK gaining 3.6 times
more. Conversely, the loss from TRIPS obligation is 18 times greater for Korea
than gains from Uruguay Round tariff liberalization, and the costs outweigh benefits
7 times for Mexico and 4.7 times for China.

Well known trade economists who advocate free trade have also written harshly on
the imbalances of TRIPS and the adverse effects on competition caused by the
upward harmonization of IP standards induced by TRIPS. The economics
professor at Columbia University, in a letter to Financial Times argued that the
WTO must be about mutual gains in trade whereas IP protection is a tax on poor
countries’ use of knowledge, constituting a wealth transfer to the rich countries.
“We were turning the WTO, thanks to powerful lobbies, into a royalty-collecting
agency by pretending, through continuous propaganda that our media bought into,
that somehow the question was ‘trade related’.” He advocated that the TRIPS
Agreement be removed from the WTO.13

The economics professor at Yale University also advocates taking TRIPS out of
WTO altogether or at least renegotiating some of its provisions. The arguments put
forward as benefits to developing countries of high IP standards are that this would
encourage local innovation, and foreign enterprises would be more willing to
transfer technology and to invest.14

“These a priori arguments are based on the premises that first IPR protection of the

12
Finger 2002: p.11
13
Jagdish Bhagwati (2001)
14
T.N. Srinivasan (2000)
18
type imposed by TRIPS is needed to encourage innovation and second that foreign
enterprises place a significant weight on the strength of IPR protection regime. The
theoretical justification for and even more importantly the empirical evidence in
support of both these premises is not at all strong….It would appear that patent
protection as a spur to innovation does not appear to be powerful in the real world.
And the cost to the general public of restricting access to new technology through
patenting may be high.”15

In relation to balance of gains and losses and to the effect on competition, it can be
stated, “Most of the gainers from TRIPS are in rich developed countries and only a
few, if any, in poor countries. This being the case, even if gains outweigh losses,
international transfers would be needed to compensate losers. No such transfers
from gainers to losers are envisaged as part of TRIPS. Besides, TRIPS, unlike
tariff reductions, involves the creation or strengthening of the monopoly position of
developed country producers in the markets of poor countries. Thus, TRIPS
creates a distortion of monopoly in developing countries, the rents from which
accrue to the rich. Besides, any acceleration of innovative activity, which is the only
rationale for granting monopoly rights, if it comes about at all, will take place mostly
in rich countries. Whether some of the benefits from any acceleration of innovation
in the rest of the world will accrue to poor countries is arguable. In any case the
benefits, if any, are uncertain and in the future, but the costs to developing
countries are concrete and at the present.”16

Competition and Patents -

There is a close link between patent rights and competition, which, in simple terms,
can be characterized by two factors: on the one hand, patent laws aim to prevent
the copying or imitation of patented goods, and thus complement competition
policies in that they contribute to fair market behaviour. On the other hand,
competition laws may limit patent rights in that patent holders may be barred from
abusing their rights by applying monopolistic practices. In sum, experience shows
that too high or too low protection of both patents and competition may lead to

15
T.N. Srinivasan (2000)
16
T.N. Srinivasan (2000)
19
trade distortions. A balance has thus to be found between competition policy and
patent rights, and this balance must achieve the goal of preventing abuses of
patent rights, without annulling the reward provided for by the patent system when
appropriately used.

The search for this balance between patents and competition policy objectives is
reflected both within the patent system as well as in respect of its relationship with
competition law.

Within the patent system, the core principles of the system have been framed
precisely with a view to ensure that the system simultaneously fosters innovation
and remains consistent with fair market rules. Therefore, safeguards and
boundaries have been built into the patent system, among which are the fact that
most patent systems protect only inventions, not discoveries, the limitation of
patent rights as to their contents and their duration, and the conditions of
patentability that have been framed precisely in a way that should allow the system
to generate patents only for those inventions which are most likely to serve the
public interest, but should prevent patents for those inventions that would appear
not to benefit society.

On the other hand, competition law has as its objective to prevent undesired
market behaviour and, in particular, abuses of a market position. In relation to
patent rights, such behaviour would cover activities going beyond the objectives
and boundaries set by the patent system. Such situations may occur, for example,
where an exclusive license totally excludes other competitors from market entry,
through restrictive selling practices or where patent rights are used to create
horizontal agreements for fixing price levels. Against this backdrop, competition
policies and laws can be an important instrument to regulate potential abuses of
patent rights and to complement patent inherent boundaries.17

Competition issues and MSMEs -

Competition Policy relates to introduction and fostering of competition principles in
executive policies of government on one hand, and to provide legal recourse

17 WIPO web resources on competition and patents http://www.wipo.int/patent-law/en/developments/competition.html

20
against public or private behaviour, that results into stifling of competition in an
economy, on the other. The phenomenon of Competition Policy is new one in India.
While a not-so effective mechanism of MRTP did exist for curbing monopolies in
private markets, there is no precedence of institutional mechanism for restraining
executive policies against anti-competitive behaviour.
A functional and effective Competition Commission mechanism is needed urgently
by MSMEs to ensure that they are not victimized by Monopolies and Cartels and are
not thrown out from public procurement through ‘crowding out’ and pooling.

MSMEs are already suffering from the instances of monopolies, cartels and abuse
of dominance in Iron and Steel, Copper, Aluminium and plastic raw material in India.

Public procurement and Government buying also suffer from ad-hoc policies which
aim to crowd out MSMEs. A recent decision of the Government not to buy
medicines from companies having a turn-over less than Rs. 30 crore is a case in
point. Such instances are increasingly coming to light in power sector also in both
the centre and the states.

Indications on the ground show that developing countries are more prone to cartels,
because they often lack effective competition regimes.

In India, cartels have been alleged in various sectors viz. cement, steel, tyres,
transport (trucking), rubber, power cables etc. and also a number of overseas cartel
i.e. soda ash, bulk vitamins, petrol etc. Very recently the real estate developers
body National Real Estate Development Council has approached the Competition
Commission of India (CCI) seeking intervention against alleged cement cartelisation
hitting real estate developers. One has to wait and watch how the same is handled
by CCI.

Shifting of balance of IP, Monopoly and competition-

There are benefits to be derived from an appropriately designed and implemented
IP policy geared to the public interest and to development needs, that takes
account of the factors requiring balancing, and that attains the right balance.
However, when the policy is inappropriately designed, or when the proper balance
is not struck, there can be adverse effects of IP on competition, the public welfare
21
and development requirements.

Due to the TRIPS Agreement, several flexibilities that countries had in their IP
policies have been narrowed. For example, TRIPS mandates that national
treatment be provided for patent applications; patents have to be given for both
products and processes, and there cannot be different treatment on a sectoral
basis. This has affected many developing countries that had previously excluded
from patentability certain sectors (such as medicines, food and chemicals) or
certain categories (especially product patents in medicines).

TRIPS set minimum standards for a wide range of IP that are mandatory to
implement. Many analysts have concluded that TRIPS has very significantly tilted
the balance in favour of IPR holders, most of who are in developed countries, vis-
à-vis consumers and local producers in developing countries and vis-à-vis
development interests.

The results are that:

(i) The new orientation of the patent office combined with the court’s legal
interpretations make it much easier to get patents. Patents on inventions that are
trivially obvious, such as the process of making a particular type of sandwich, or a
method for swinging on a swing, are being given.
(ii) Patents have become weapons for firms to harass its competitors.
(iii) Patents have enabled companies to win huge damages awards and put rivals
out of business.
(iv) Patent approvals are extended to new areas including purported discoveries
that are actually familiar, such as patents on previously well-known option pricing
formulas.18 While some innovators who obtain the patents are rewarded, the
activities of many others who are competitors are inhibited or even stopped,
including their potential innovation activities.

IP policy and practice in developed countries have been exported to the rest of the
world through international harmonization programmes and treaties. The TRIPS is

18
Jaffe and Lerner 2004: pp.2-3
22
the best example of these. The agreement was mainly prompted by and even
designed by representatives of certain industries in developed countries, which
succeeded in getting their governments to successfully advocate their cause in the
Uruguay Round, overcoming the initial strong resistance of many developing
countries.19

WIPO has also been an active forum for IP harmonization, for example through its
1996 Copyright Treaty. The present negotiations for possible new treaties relating
to patents and to broadcasting are other examples. In fact, WIPO has become a
more active forum for negotiations for new treaties aimed at harmonization of IP
systems and rules than the WTO.

If current patent harmonization negotiations proceed along the lines advocated by

the developed countries in the substantive patent law treaty process, there is a
strong possibility that the results of recent developments in the major countries
(such as the relaxing of criteria of patentability and the much easier granting of
patents) will be disseminated to the rest of the world. There is thus a danger that
what many analysts consider a dysfunctional system will be disseminated to
developing countries.

Bilateral and regional agreements that involve developed countries with developing
countries are other channels through which new aspects of IP are being
transferred to developing countries. Many of these arrangements have TRIPS-plus
provisions, requiring the parties to undertake obligations that narrow their policy
space to choose between options. For example, they may contain conditions for
compulsory licensing that are more restrictive than permitted under TRIPS, or that
require parties to commit to a provision on data exclusivity preventing the use of
test data in the drug approval process relating to generic drugs that is not required
by TRIPS.

19
Raghavan 1990, Drahos 2003 and Sell 2003
23
 STUDY ON HOW PATENTS RIGHTS ARE ABUSED AND THEIR IMPACT ON
SME’S & OTHER DEVELOPING COUNTRIES

Patents are privileges granted by the governments to the applicant (innovator) in

hope on promoting innovation and creation of new technologies. Though, today
companies are taking advantage of their monopolistic rights after acquiring patents.
More & more organisations are plugging into strategic patenting of inventions which
can be harmful to the society and public in large both consumers and the MSMEs.
Further, this has been a growing concern on the increasing costs of patented
medicines, food & other basic goods.

This study does not criticize IPRs or patents but gives an insight on the ways in
which patent rights are abused. Further this study reveals the impacts, due to such
abuse of patents rights, on the SMEs & the developing countries.

EXAMPLES OF EFFECTS OF IPRs ON COMPETITION AND WELFARE

The upward harmonization of IP standards has shifted the balance adversely for
the public interest and for development needs in developing countries. Recent
developments in developed countries have also tilted the balance much more
towards the IP holders. There have been adverse effects on competition as well as
consumer access. Below are examples.
(a) Effects on competition and market structure -
The monopoly provided by patents enables the patent holder to block or otherwise
discourage rival firms entering the market, or even in some cases to undertake
research and innovation. This may be justified if the patents are given correctly,
and for the right duration, and moreover if the IP holder does not abuse his right.

The trend in some developed countries in relaxing the criteria, standards or

practice of granting patents, and the practice of some companies owning patents in
harassing rivals is increasing the anti-competitive effects of IP. The number of
patents tripled from 1983 to 2002 (from 62,000 to 177,000), accompanied by a
proliferation of patent awards of dubious merit, for example “inventions” that are
not new or are trivially obvious.20

20
Jaffe and Lerner (2004)
24
There has also been a corresponding explosion in patent lawsuits. One recent
trend is that an established firm with many patents demands rivals to take out
licences to its patents and many of the rivals choose to settle rather than fight
(even if they do not believe they infringe) as they do not have the means to fight
expensive cases. Many large companies engage in this patent enforcement
activities as a line of business; for example, Texas Instruments is netting almost $1
billion annually from patent licences and court settlements due to an aggressive
enforcement policy, and in some years this source of revenue has exceeded net
income from product sales. Besides paying royalties, the small firms may reduce
their R and D investment, shying away from innovations in areas where big firms
have patents. Thus, the effect is the suppression of innovation by younger and
smaller firms, and the reduction of competition in the market.

A second trend is the emergence of individual inventor who holds up established

firms. The individuals have been granted patents of dubious validity, with overly
broad claims. The established firms often choose to settle rather than face the
uncertainty of a court case.

(b) Effects on competition, prices and access to essential goods

The monopoly rights granted to patent holders enables them to restrict competition
and charge monopoly prices. Proponents of IP point to the need for innovators to
recoup the cost of research, and thus a mark-up on normal profits is needed.
However, critics claim that in some cases the balance is tilted in favour of the
patent holders, who make excessive or even exorbitant profits by over-charging
consumers excessively high prices, even after taking account of the need to
recoup research costs. In order for policy makers to be able to judge whether the
balance is struck, or how far it has been missed, it is important to be able to obtain
data on costs and prices from the companies that hold the patents.

In medicines, the effect of patent monopolies on prices is demonstrated by data

that compare prices of patented/branded and generic products; the prices of the
same product sold in different countries; and the prices of raw materials used in

25
producing medicines in the open competitive market and in transfer-pricing
practices of TNCs. The following are some conclusions.

(i) Prices of branded or patented products are often far higher than prices of
generics. A comparison of HIV/AIDS medicines in 2001 show that the US price of
3TC (lamivudine) by Glaxo was US$3,271 per patient per year while the Indian
generic producer Cipla’s price was $190. For viramune (nevirapine), the branded
product was sold in the US for $3,508 while the Cipla generic price was $340.21

(ii) When generic competition is introduced, prices of the patented product will fall.
For example, the drug simvastatine was sold in branded version in Malaysia
(where there was no generic competitor) for $1050 per 100 units; in India the same
brand was sold for $18 as there was a generic competitor which was sold for $11.22
In Brazil, when the government started producing generic versions of AIDS drugs,
the prices of equivalent branded products dropped by 79%.23

(iii) When a drug company sells the same product in different countries, it
differentiates the prices according to “what the market can bear”. Where alternative
or generic medicines are available, a branded product is usually priced lower; the
same brand will sell at higher price levels in countries where there is no
competition. The same brand zantac was sold cheaply in India ($2 for 100 tablets)
because it faced generics competition. It was sold at $3 in Nepal, $9 in
Bangladesh, $30 in Vietnam, $37 in Thailand, $55 in Malaysia, $61 in Sri Lanka,
$63 in Philippines and $183 in Mongolia. It was also sold at $23 in Australia, $77
in Canada, $196 in Chile, $132 in El Salvador, $150 in South Africa and $97 in
Tanzania.24

(iv) TNCs practice transfer pricing in the trade of raw materials used in the drugs,
raising the cost of medicines in developing countries. A study in Pakistan found
that TNCs exported raw materials to their subsidiaries in Pakistan at much higher

21
Kavaljit 2001
22
K. Balasubramaniam 2002
23
Medicins sans Frontieres 2001
24
Health Action International 1998
26
prices than the prices of the same raw materials if purchased from the open
international market at competitive rates. In the case of a drug produced by a
German company, the price for raw materials charged to the company’s subsidiary
in Pakistan was $11,092 per kg whereas the competitive international price was
$320, a price difference of 3,360%. An Italian company charged its Pakistan
subsidiary for raw materials at a price 7,044% more than the international market
price.25

(v) Some surveys show that drug companies can charge more in developing
countries than in developed countries for the same branded products. For
example, in 1998, retail prices of 10 out of 13 commonly used drugs were higher in
Tanzania than in Canada; the average retail prices of 20 commonly used drugs in
10 countries of Central and South America were all higher than the average retail
prices of the same drugs in 12 OCED countries.26

(c) Patenting of life forms -

An example of abuse of the patent system is in the patenting of biological
resources and the misappropriation of these resources and associated traditional
knowledge. The patenting of these resources can lead to monopolization of these
resources by corporations mainly of developed countries, thereby affecting the
competitiveness of developing countries.

TRIPS thus oblige WTO members to grant patents for micro-organisms and non-
biological and micro-biological processes for the production of plants and animals.
There is no reason why these have been singled out for patentability, whereas
members are given the discretion to prohibit patents on plants and animals, and on
biological processes.

(d) Agriculture, biological resources and traditional knowledge

Before TRIPS, developing countries were able to deal with agriculture, food and
genetic resources in their own way. Several countries excluded agriculture and

25
Health Action International 1994
26
Health Action International 1998
27
food from IP protection. However, TRIPS Article 27.3(b) provides for protection of
plant varieties by a patent, a sui generis system or a combination of both.

In some of those countries where there are patents on plant varieties, farmers are
being prosecuted for alleged violation of IPRs. These developments could be
reproduced in developing countries in the future.

A report27 how American farmers have been impacted by litigation arising from the
use of patented genetically engineered crops produced by Monsanto. The report
notes that, to date, Monsanto has filed lawsuits against 147 American farmers and
the company has a staff of 75 devoted solely to investigating and prosecuting
farmers. The report expresses concern that in its quest to be the source for staple
crop seeds in the US and around the world, the company will overturn centuries-
old farming practices through lawsuits. The largest recorded judgment that was
found thus far in favour of Monsanto as a result of a farmer lawsuit is
US$3,052,800. Farmers have paid an average of US$412,259 for cases with
recorded judgments. Many farmers have to pay additional court and attorney fees
as well as costs of the company.

The study found that farmers even have been sued after their fields were
contaminated by pollen or seed from someone else's genetically engineered crop;
when seed from a previous year's crop has sprouted, or "volunteered," in fields
planted with non-genetically engineered varieties the following year; and when they
never signed Monsanto's Technology Agreement but still planted the patented crop
seed. In all of these cases, because of the way patent law has been applied,
farmers are technically liable. It does not appear to matter if the use was unwitting
or if a contract was never signed.

According to a press report28 Tennessee farmer named Kem Ralph spent four
years in jail for saving and replanting Monsanto's Roundup Ready soy seed in
1998 and he also had to pay the company 1.8 million dollars in penalties. The

27
Center of Food Safety (2005), USA
28
Inter Press Service 14 January 2004)
28
report says that even if a farmer decides to stop using Monsanto seeds, the GE
plants self-seed and some will spring up of their own accord the following year.
These unwanted "volunteers" can keep popping up for five or more years after a
farmer stops using the patented seeds. Under U.S. patent law, a farmer commits
an offense even if they unknowingly plant Monsanto's seeds without purchasing
them from the company. Other countries have similar laws.

The reports above show a trend in developed countries that may be replicated in
other countries, including the developing countries, should these countries also
adopt particular systems of plant varieties protection.

Developing countries that do not want to allow patents for plant varieties may wish
to introduce their own version of sui generis protection, which provides for the
rights of farmers. However, there may be pressures placed on them to accept a
certain definition and model of a “sui generis system” for plant varieties protection.
These pressures may be partly caused by the lack of clarification as to the
flexibility that Members, especially developing country Members, may have in
instituting their own sui generic system of protection.

(e) Patents and the transfer and use of technology -

It has been argued that higher standards of IP can lead to transfer of technology as
foreign firms would be encouraged to invest in developing countries and make use
of their technologies. However, there is also a counter-argument that foreign firms
that have obtained patents in developing countries are able to make inroads and
profits in these countries without having to produce the patented products there, as
they can import the products and sell them at monopoly prices.

On the other hand, there are several ways in which a strong IPR regime can hinder
access of developing countries to technology.29 Obstacles to technology transfer
make it difficult for developing countries and their firms to upgrade productivity
which is necessary for them to compete successfully. They thus impede
competition.

29
Khor 2002: pp.87-101
29
Firstly, a strict IPR regime can discourage research and innovation by locals in a
developing country. Where most patents in the country are held by foreign
inventors or corporations, local R&D can be stifled since the monopoly rights
conferred by patents could restrict the research by local researchers. Strict IPR
protection, by its apparent bias, may actually slow the pace of innovation in
developing countries, and increase the knowledge gap between industrial and
developing countries. In such situations, the IPR system favours those who are
producers of proprietary knowledge, vesting them with greater bargaining powers
over the users.30 The report31 also provides analysis and examples of how the
patent system might inhibit research and innovation.

"The proposed changes to the IPR policies of developing countries have raised a
number of important issues. One of the most important of these is the likely impact
of these changes on a developing country's ability to undertake research and
development in agriculture. We are particularly concerned about the impact of a
strong IPR system on research aimed at the development of new plant varieties
and genetically engineered plants."32

The research in this area is dominated by firms in developed countries, while public
sector research institutions (both international and national) are very weak. The
adoption of an IPR system which includes patents for biotechnology based
techniques and products will be extremely detrimental to local research.

As study of cotton and rice research in India has shown, most of the important
techniques and genes used in the development of genetically engineered plants
are already owned by firms in developed countries. As these patent rights are not
applicable in developing countries, local researchers are able to undertake
research on local problems. However, once these rights become applicable in
developing countries, research and its commercialisation will face serious problems.

30
Oh 2000
31
CIPR report (2002: pp.126-130)
32
Dr Gahuur Alam (1999)
30
Secondly, a strict IPR regime makes it difficult for local firms or individual
researchers from developing or making use of patented technology.

Thirdly, should a local firm wish to "legally" make use of patented technology; it
would usually have to pay significant amounts in royalty or licence fees. As pointed
out earlier, TRIPS increases the leverage of technology-suppliers to charge a
higher price for their technology. Many firms in developing countries may not
afford the cost. Even if they could, the additional high cost could make their
products unviable. Moreover, there could be a large drain on a developing
country's foreign exchange from having to pay foreign IPR holders for the use of
their technology. Many developing countries with serious debt problems will be
unable to afford to pay the cost of using the technologies.

Fourthly, even if a local firm is willing to pay the commercial rate for the use of
patented technology, the patent holder can withhold permission to the firm, or
impose onerous conditions, thus making it impossible or extremely difficult for the
technology to be used by the firm. Patent holders can refuse to grant permission to
companies in the South to use the technologies, even if they are willing to pay
market prices; or else the technologies may be made available at high prices (due
to the monopoly enjoyed by the patent holders). Companies in the South may not
afford to pay at such prices, and if they do their competitiveness could be affected.

POLICIES AND METHODS TO PRIORITISE COMPETITION PRINCIPLES IN

RELATION TO IP

There are several measures that countries can take to give higher priority to
competition principles in relation to intellectual property. Below is a discussion on
some of them.

(a) Limit the granting of IP according to correct criteria

The wrong granting of IP extends monopoly rights needlessly or to the wrong
parties, and thus widens the extent of anti-competitive behaviour and market
distortions. Perhaps the most important measure to promote competition principles
vis-à-vis IP is that governments institute policies that enable or ensure the
31
appropriate granting of IPRs and that the proper conditions are set (for example
with regard to duration of patent, copyright, etc). The nature of appropriateness of
the grant should be in accordance with the need to attain the right balance
between the need for incentives for the right holder, and society’s need for access
and use of the inventions.

A useful set of guidelines is provided in report33 which states that the underlying
principle in developing country legislation should be to aim for strict standards of
patentability and narrow scope of allowed claims, with the objective of:
 limiting the scope of subject matter than can be patented;
 applying standards such that only patents which meet the requirements for
patentability are granted and that the breadth of each patent is
commensurate with the inventive contribution and the disclosure made;
 facilitating competition by restricting the ability of the patentees to prohibit
others from building on or designing around patented inventions;
 providing extensive safeguards to ensure that patent rights are not exploited
inappropriately; and
 Considering the suitability of other forms of protection to encourage local
innovation.

The report also provides details on the implementation of each of the objectives.

The duration to be given to patents, copyright and other IP should be appropriate in

that it be sufficient to enable the innovator to recover the costs of research and
innovation but not so much as to enable excessive profits. Prices can be regulated
to ensure that the right of consumers to access to essential goods and services is
respected.

(b) Providing for and making use of exceptions, exemptions and limitations -
There should be policy space, especially for developing countries to have adequate
provisions for exceptions, exemptions and limitations to IP in accordance with
development needs and requirements, and the rights to access of essential goods and
services.

33
CIPR (2002: p.49, p.114)
32
Where such exceptions and limitations exist or are allowed in international laws
such as TRIPS, developing countries should make use of them. This would reduce
the extent of monopoly and increase the extent and scope of competition in the
economy, as well as catering to the fulfilment of rights and access to essential
goods and services.

Organisations like WTO, WIPO and other UN agencies should provide technical
assistance to developing countries on how to make use of the exceptions,
exceptions and limitations allowed by international laws, by incorporating them in
domestic law and thereafter in practice.

Existing international laws should be examined for whether the exceptions,

exemptions and limitations are adequate in providing the necessary balance, and
to allow the fulfilment of rights and access to essential goods and services. The
review should then result in the appropriate clarifications and amendments.
Negotiations for new IP-related treaties or new provisions or amendments to
existing treaties should fully take these factors into account. Bilateral and regional
trade/economic arrangements should not have TRIPS-plus provisions.

(c) The proper design and implementation of flexibilities -

Besides exceptions, international frameworks should also contain adequate
flexibilities especially for (but not limited to) developing countries to enable or even
encourage them to take measures that may be required to offset IPRs that are
granted. Such measures are meant to uphold the principles of competition and
meeting the need of access to essential goods and services.

Among these safeguard measures are compulsory licensing, parallel importation

and government and non-commercial use. Technical assistance should be
provided in (i) raising the knowledge of developing countries and their institutions
about their existence, rationale and use, (ii) instituting them in national law and (iii)
implementing these measures.

The existing international treaties should also be examined for their adequacy in

33
providing for these safeguard measures, and clarifications or amendments made to
strengthen these where needed. Negotiations for new treaties should fully take into
account the need for adequate safeguards. Bilateral and regional trade and
economic arrangements should not contain provisions that restrict the flexibilities
that are allowed by international treaties such as TRIPS.

At the national level, governments should review existing legislation to fully

incorporate the flexibilities that are allowed, and then institute policies and
mechanisms to implement them.

(d) Competition principles and legal provisions in laws relating to IP and beyond

Pro-competition principles and measures that exist in IP-related international

treaties should be fully recognized and appreciated and technical assistance
should be provided to developing countries to enable them to be aware of these
and to incorporate them where possible in national legislation, policy and practice.

For example, Article 8.2 of TRIPS under general principles states that appropriate
measures (consistent with the agreement’s provisions) may be needed to prevent
abuse of IPRs by right holders or the resort to practices which unreasonably
restrain trade or adversely affect technology transfer. While licensing is a legitimate
activity of IPR holders and in most cases can be seen as pro-competitive in
legitimizing access to technology to third parties, these activities may also be “anti-
competitive where they are a mere sham for a cartel arrangement, where they
restrict competition between technologies that are economic substitutes for one
another or where they exclude new technologies from the market.”34

Section 8 of TRIPS on “Control of anti-competitive practices in contractual

licenses” has an Article 40 that recognizes that some licensing practices or
conditions pertaining to IPRs which restrain competition may have adverse effects
on trade and impede technology transfer and dissemination. Article 40.2 says that
nothing in the agreement shall prevent members from specifying in their legislation

34
Roffe (1998)
34
licensing practices or conditions that abuse IPRs, having adverse effect on
competition, and a member may adopt appropriate measures to prevent or control
such practices, including exclusive grant-back conditions, conditions preventing
challenges to validity and coercive package licensing, in light of relevant laws and
regulations of that member. Article 40.3 also provides for consultations and
cooperation among members (including through supply of non-confidential
information) to deal with IPR owners that are undertaking anti-competitive practices
in violation of a requesting member’s laws.

Several developed countries have laws or regulations that hold certain anti-
competitive practices as per se unlawful.35 The US Antitrust Guidelines for the
Licensing and Acquisition of IPRs 1995 states that among the restraints that have
been held per se unlawful (by courts in the past) are bare price-fixing, output
restraints and market division among horizontal competitors, as well as certain
group boycotts and resale price maintenance. To determine whether a particular
restraint in a licensing arrangement is given per se or rule of reason treatment, the
agencies will assess whether the restraint will contribute to an efficiency-enhancing
integration of economic activity.

The EC in its Technology Transfer Block Exemption Regulation in general has 8

categories on its blacklist including restrictions relating to price or output,
competing markets, exports to territories within the common market, customer
allocations, R&D activities or full grant-backs of licence improvements.36

Some Commonwealth countries, following the UK, have a provision in their patent
laws that certain anti-competitive practices in patent licences are automatically
deemed to be null and void. For example, Australia’s Patents Act 1990 hold invalid
any conditions that restrict the licensee from purchasing or using a product or
process supplied by the licensor’s competitors or that requires the licensee to
acquire a product not protected by the patent from the licensor; in addition the
Australian Trade Practices Act 1974 specifically prohibits 5 activities: anti-

35
Watal 2001: pp.304-309
36
EC, Technology Transfer Block Exemption Regulation, 240/96, (effective 1996)
35
competitive agreements (including price fixing and exclusionary provision), misuse
of market power, exclusive dealing, resale price maintenance, mergers and
acquisitions with a substantial lessening of competition.

According to the above regulations, the mentioned features in contractual IP

licences are anti-competitive per se and thus deemed unlawful in general; thus it
would not require a case-by-case examination to determine whether the mentioned
activities are anti-competitive.

Following the example of developed countries, developing countries should specify

anti-competitive conditions in IPR licences to be per se null and void. As seen
from the above examples, there is leeway for countries to determine what licensing
conditions can be considered to have anti-competitive effects per se and this
flexibility should be retained. However, as pointed out37 in many cases it is not the
restrictive nature of IPR licences that are a cause of concern but the outright
refusal to transfer technology without other cross licensing arrangements, to which
developing country enterprises may have no access. Also, the question as to
whether refusal to deal or license a patent by the right holder can be considered a
patent misuse, has to be clarified. It has provides a useful account of the evolution
of international negotiations in and outside the TRIPS Agreement, on restrictive
practices, and their implications for interpreting and implementing TRIPS.38

There are other provisions in TRIPS that deal with competition issues. For
example, Article 31 on the use of patents without authorization of the right holder,
has a sub-paragraph (k) relating to anti-competitive practices. If a compulsory
licence is granted to remedy a practice determined after judicial or administrative to
be anti-competitive, the obligations in subpara (b) (that before a compulsory
licence can be given, efforts have to be made to obtain a voluntary licence) and in
subpara (f) (that a compulsory licence has to predominantly for the supply of the
domestic market) are waived. Moreover “the need to correct anti-competitive
practices may be taken into account in determining the amount of remuneration in

37
Watal (2002: p307)
38
Roffe (1998)
36
such cases” and authorities can refuse termination of authorization if and when
conditions which led to such authorization are likely to recur. Developing countries
should include this pro-competitive safeguard provision and measure in their
national legislation and policy.

Generally, it would be important for developing countries to incorporate the pro-

competition principles and elements in their national laws and regulations relating
to IP. Moreover, they should establish provisions within national competition law
and regulations that prohibit anti-competitive practices in IP-related licences, as
referred to above.

The process of economic reform in India started in earnest in 1991, when the
regime of license and control began to be dismantled. Sometime after this process
began, but rather lately, the Government turned its attention to having a genuine
competition law. In a free economy, there could be market failures, and enterprises
could form cartels or abuse their dominance. Adam Smith (to quote his words)
wrote of the ‘wretched spirit of monopoly’ in which ‘the oppression of the poor must
establish the monopoly of the rich’.

Thus liberalization is incomplete unless it is complemented by a competition watch

dog that can discipline players that seek to undermine the market for individual
advantage. This wisdom has in fact compelled almost 100 countries to rewrite or
freshly enact a competition law, and set up a modern competition authority.

The Indian Government set up of a high level committee to study the matter; after
considering its report and the suggestions from trade, industry and others, a new
Competition Act was enacted in January, 2003. This Act is a modern piece of
competition legislation moulded on the pattern of similar laws in the world. It covers
the usual three fields:
1. anti-competitive agreements,
2. abuse of dominance, and
3. regulation of mergers and acquisitions.
In addition, it mandates undertaking competition advocacy.

37
The Competition Act marks a conscious departure from the previous Monopolies
and Restrictive Trade Practices Act (MRTP Act). The MRTP Commission
represented the regime of license and control, and it became an anachronism in
the new economic order. According to the Preamble, the Competition Act is for
establishing a Commission which is to prevent anti-competitive practices, promote
competition, protect the interests of consumers and ensure freedom of trade; the
Act specifically makes these the duties of the Commission. This is very different
from the purpose of the MRTP Act which was to control monopolies, defined in
terms of size; the Competition Act punishes behaviour, not mere size. There are
other critical differences between the new Act and the MRTP Act; for example the
Competition Act clearly defines and penalizes cartels, regarded as the most
pernicious form of competition violation; the Commission can impose heavy
penalties; it has extra-territorial jurisdiction and can additionally enter into
arrangements with overseas competition authorities; it incorporates a leniency
programme, and so on. Overall, the two bodies and the two laws are poles apart in
their philosophy, tenor and thrust.

India is the only major economy in the world without a fully functional competition
authority, which is an unfortunate fact. Meanwhile, the Indian economy and its
consumers are losing out, and the gainers are those who may be happily profiting
at public and national expense. It must be the common hope of all who are
concerned about the health of the Indian economy that this exercise will end the
legal uncertainty and will enable the Competition Commission to start its regulatory
and adjudicatory work in full measure, sooner rather than later.39

The creation of “packages” of patents by a company around a given technology or

product has become increasingly common. In the pharmaceutical field, for
instance, ten or more patents are often acquired around the same active
ingredient, even after it has already fallen into the public domain. The accumulation
of patents may be the result of different patent strategies. As examined40, package
patents may be used:

39 Speech of Mr Vinod Dhall, Member, Competition Commission of India, CUTS International

Conference on “Moving the Competition Policy Agenda in India”, 31 January-1 February, 2005
40 Rubinfeld and Maness (2005),
38
- to inappropriately extend market power from legitimate patents claims to
illegitimate patents;
- to coerce a party into licensing patents that it might have chosen to avoid or
design around (especially when the licence fee is not dependent on the number of
patents);
- to reduce a competitor’s incentive to challenge individual patents since as “the
cost of challenging patents increases with the number of patents included in the
bundle, a firm may have an incentive to include weak patents in the package”;
- to misuse patents if the bundle is used “to extend a firm’s monopoly power from
the “space” covered by a strong patent to the space encompassed by strong and
weak patents together”

Compulsory Licences to Remedy Anti-Competitive Practices –

Compulsory licences can be used, both in the context of IPRs and of competition
laws, to remedy anti-competitive practices. Article 31(k) of the TRIPS Agreement,
explicitly provides for the granting of such licences. Unlike other compulsory
licences allowable under the Agreement and following the previous US practice, in
the case of anti-competitive practices:
(a) there is no need to previously negotiate a voluntary licence with the patent
owner;
(b) the need to correct anti-competitive practices may be taken into account in
determining the amount of remuneration;
(c) the compulsory licensee is not subject to the limitation imposed by Article 31;
(d) the licence shall be predominantly for the supply of the domestic market of the
member granting it.

39
Chapter (V) Conceptual framework covering important terms and
their meaning etc

The concept of unfair competition is very wide since any conduct objectively
contrary to good faith is deemed to be unfair. The law includes amongst such forms
of conduct Laws of confusion and deception, gifts which lock consumers into
contractual obligations or which create confusion as to price, and Laws of
denigration, comparison, imitation, exploitation of another’s reputation, breaches of
confidentiality, incitement to breach of contract, infringement of laws on
discrimination and dumping.

Competition laws all over the world are primarily concerned with the acquisition
and/or exercise of market power and its abuse. The term “market power” is
variously known as “dominant position”, “monopoly power” and / or “substantial
market power”.

The term “Competition” refers to a situation in a market place in which firms/

entities or sellers independently strive for the patronage of buyers in order to
achieve a particular business objective, such as profits, sales, market share etc.
By responding to demand for goods and services with lower prices and higher
quality, competing businesses are pressured to reduce costs, innovate in
processes and products, invest in technology and better managerial practices and
increase productivity. This process leads to achievement of static, dynamic as
also resource/allocative efficiencies, sustainable economic growth, development,
and poverty alleviation.

Competition is not an end unto itself, rather a means to achieve economic

efficiency and welfare objectives. Importantly, competition is not automatic, and
requires be promoting, protecting and nurturing through appropriate regulatory
frameworks, by minimising market restrictions and distortions, and provision of
related productive inputs such as infrastructure services, finance, human capital
etc. However, a Competition Policy has to be evolved to imbibe the principles of
competition in various endeavours of the Government, of course in
40
 alignment with the national strategic objectives, alongwith social,
environmental, public safety, and other considerations.

The expression “Competition Policy” means government measures, policies,

statutes, and regulations including a competition law, aimed at promoting
competitive market structure and behaviour of entities in an economy41.

Competition Law is but a sub-set of the Competition Policy. The Raghavan

Committee had observed that “Competition law must emerge out of a national
competition Policy, which must be evolved to serve the basic goals of
economic reforms by building a competitive market economy.”

The World Trade Organisation (WTO) defines competition policy as: “the full
range of measures that may be used to promote competitive market structures
and behaviour, including but not limited to a comprehensive competition law
dealing with anti-competitive practices of enterprises”. World Bank also provides a
definition of competition policy as: “government measures that directly affect the
behaviour of enterprises and the structure of industry. An appropriate competition
policy includes both: (a) policies that enhance competition in local and national
markets, and (b) competition law, also referred to as antitrust or antimonopoly law.”

Competition Policy is a broader term which includes all government policies and
laws whereas competition law is specific statute with a pre- defined mandate to
adjudicate on violation(s) of the law. In the case of India, the Competition Act,
2002 deals with anti-competitive agreements such as price fixing, bid rigging,
joint boycotts, etc; abusive practices undertaken by dominant entities such as
predatory pricing, abusive conditions of supply, etc, and regulation of
combinations. It would be seen that a competition law is a regulatory instrument
to check the prevalence of anti-competitive practices whereas a competition policy
is a proactive and positive effort to build a competition culture in an economy.

41 Several agencies such as the World Trade Organisation (WTO), the World Bank, UNCTAD etc have attempted to define the terms competition policy.

WTO (1999), “The Fundamental Principles of Competition Policy: Background Note by the Secretariat” Working Group on the Interaction between Trade

and Competition Policy WT/WGTCP/W/127

41
The Act defines the expression “dominant position (dominance)” in terms of a
position of strength enjoyed by an enterprise, in the relevant market in India, which
enables it to:
 operate independently of the competitive forces prevailing in the relevant
market ; or
 affect its competitors or consumers or the relevant market in its favour.

It is the ability of the enterprise to behave/act independently of the market forces

that determines its dominant position. In a perfectly competitive market no
enterprise has control over the market, especially in the determination of price of the
product. However, perfect market conditions are more of an economic “ideal” than
reality. Keeping this in view, the Act specifies a number of factors that should be
taken into account while determining whether an enterprise is dominant or not.

Dominance has been traditionally defined in terms of market share of the enterprise
or group of enterprises concerned. However, a number of other factors play a role in
determining the influence of an enterprise or a group of enterprises in the market.

Factors to determine dominant position:

 market share,
 the size and resources of the enterprise;
 size and importance of competitors;
 economic power of the enterprise;
 vertical integration;
 dependence of consumers on the enterprise;
 extent of entry and exit barriers in the market;
 countervailing buying power;
 market structure and size of the market;
 source of dominant position viz. whether obtained due to statute etc.;
 social costs and obligations and contribution of enterprise enjoying dominant
position to economic development.

The Commission is also authorized to take into account any other factor which it
may consider relevant for the determination of dominance.
42
ABUSE OF DOMINANCE
Dominance is not considered bad per se but its abuse is. Abuse is stated to occur
when an enterprise or a group of enterprises uses its dominant position in the
relevant market in an exclusionary or/and an exploitative manner.

The Act gives an exhaustive list of practices that shall constitute abuse of dominant
position and, therefore, are prohibited. Such practices shall constitute abuse only
when adopted by an enterprise enjoying dominant position in the relevant market in
India.

Abuse of dominance is judged in terms of the specified types of acts committed by a

dominant enterprise alone or in concert. Such acts are prohibited under the law. Any
abuse of the type specified in the Act by a dominant firm shall stand prohibited.

Section 4 (2) of the Act specifies the following practices by a dominant enterprises
or group of enterprises as abuses:
(i) directly or indirectly imposing unfair or discriminatory condition in purchase or
sale of goods or service;
(ii) directly or indirectly imposing unfair or discriminatory price in purchase or sale
(including predatory price) of goods or service;
(iii) limiting or restricting production of goods or provision of services or market;
(iv) limiting or restricting technical or scientific development relating to goods or
services to the prejudice of consumers;
(v) denying market access in any manner;
(vi) making conclusion of contracts subject to acceptance by other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts;
(vii) using its dominant position in one relevant market to enter into, or protect, other
relevant market.

43
Exploitative and exclusionary behaviour -
Abuses as specified in the Act fall into two broad categories:
 exploitative (excessive or discriminatory pricing, including predatory pricing)
and
 exclusionary (for example, denial of market access).

Predatory Pricing -
The “predatory price” under the Act means “the sale of goods or provision of
services, at a price which is below the cost, as may be determined by regulations, of
production of goods or provision of services, with a view to reduce competition or
eliminate the competitors” [Explanation (b) of Section 4]

Predation is exploitative behaviour and can be indulged in only by enterprises(s)

having dominant position in the concerned relevant market. The major elements
involved in the determination of predatory behaviour are:
 Establishment of dominant position of the enterprise in the relevant market
 Pricing below cost for the relevant product in the relevant market by the
dominant enterprise ['Cost', for this purpose, has been defined in the
Competition Commission of India (Determination of Cost of Production)
Regulations, 2009 as notified by the Commission.]
 Intention to reduce competition or eliminate competitors.

IPRs and abuse of dominance –

While reasonable use of IPRs stand exempted from the rigours of Section 3 related
to anti-competitive agreements, no such derogation is available in case of abuse of
Intellectual Property Rights by right holders, in respect of specified abusive acts.

IPRs involve grant of exclusive rights to the right holders to exploit the results of
their innovation so as to provide incentive to innovate. Competition Act, 2002
exempts the reasonable use of such rights by right holders from the provisions of
Sec. 3 related to agreements. However, the actions by enterprises that shall be
treated as abuse (specified under Section 4 (2)) shall stand applicable equally to

44
IPR holders provided such rights are considered by the Commission to render the
holder a dominant player in the relevant market.

Unfair competition -
The idea of unfair competition has been around for some time and was mentioned
as one of the ways of protecting intellectual property as early as 1900 in the
Brussels revision of the Paris Convention. It can best be seen as practices that
distort the free operation of intellectual property and the reward system that it
provides.

An act of unfair competition is any act of competition contrary to honest practices in

industrial or commercial matters. For example, the following in particular shall be
prohibited:
- all acts of such a nature as to create confusion, by any means, with the
establishment, the goods, or the industrial or commercial activities, of a competitor;
- false allegations in the course of trade of such a nature as to discredit the
establishment, the goods, or the industrial or commercial activities, of a competitor;
- indications or allegations the use of which in the course of trade is liable to mislead
the public as to the nature, the manufacturing process, the characteristics, the
suitability for their purpose, or the quantity, of the goods."

There are many different types of acts of unfair competition including:

- Causing confusion
- Misleading
- Discrediting Competitors
- Violation of trade secrets
- Taking advantage of another's achievements (free riding)
- Comparative advertising

Definition of Unfair Competition under the Paris Convention –

Article 10bis (2) of the Paris Convention defines an act of unfair competition as "any
act of competition contrary to honest practices in industrial or commercial matters".

45
Article 10bis (3) continues specifying which acts, in particular, shall be prohibited:
"all acts of such a nature as to create confusion, by any means, with the
establishment, the goods, or the industrial or commercial activities, of a competitor;
false allegations in the course of trade of such a nature as to discredit the
establishment, the goods, or the industrial or commercial activities, of a competitor;
indications or allegations the use of which in the course of trade is liable to mislead
the public as to the nature, the manufacturing process, the characteristics, the
suitability for their purpose, or the quantity, of the goods."

The need for protection -

Experience has shown that there is little hope of fairness in competition being
achieved solely by the free play of market forces. In theory, consumers, in their role
as referees of economic play, could deter dishonest entrepreneurs by disregarding
their goods or services and favouring those of honest competitors. Reality, however,
is different. As an economic situation becomes more complex, consumers become
less able to act as referees. Often they are not even in a position to detect by
themselves acts of unfair competition, let alone react accordingly. Indeed it is the
consumer who-along with the honest competitor-has to be protected against unfair
competition.

Fair play in the marketplace cannot be ensured only by the protection of industrial
property rights. A wide range of unfair acts, such as misleading advertising and the
violation of trade secrets are usually not dealt with by the specific laws on industrial
property. Unfair competition law is therefore necessary either to supplement the
laws on industrial property or to grant a type of protection that no such law can
provide.

Combat the abuse of a dominant market position -

The rules on the prevention of unfair competition and those on the prevention of
restrictive business practices (anti-trust law) are interrelated: both aims at ensuring
the efficient operation of a market economy. They do so, however, in different ways.
Anti-trust law is concerned with the preservation of the freedom of competition by
combating restraints on trade and abuses of economic power. Unfair competition
law, on the other hand, is concerned with ensuring fairness in competition by forcing

46
all participants to play according to the same rules. Yet both laws are equally
important, although in different respects, and supplement each other.

It is true that describing unfair competition as acts contrary to "honest trade

practices," "good faith" and so on does not make for clear-cut, universally accepted
standards of behaviour, since the meaning of the terms used is rather fluid. The
standard of "fairness" or "honesty" in competition is no more than a reflection of the
sociological, economic, moral and ethical concepts of a society, and may therefore
differ from country to country (and sometimes even within a country). That standard
is also liable to change with time. Furthermore, there are always new acts of unfair
competition, since there is ostensibly no limit to inventiveness in the field of
competition. Any attempt to encompass all existing and future acts of competition in
one sweeping definition-which at the same time defines all prohibited behaviour and
is flexible enough to adapt to new market practices-has so far failed.

This does not mean, however, that acts of unfair competition cannot be
encompassed by any general definition. The most notable of these acts are the
causing of confusion, discrediting and the use of misleading indications. The
common aspect of these most important, but by no means exhaustive, examples of
unfair market behaviour is the attempt (by an entrepreneur) to succeed in
competition without relying on his own achievements in terms of quality and price of
his products and services, but rather by taking undue advantage of the work of
another or by influencing consumer demand with false or misleading statements.
Practices that involve such methods are therefore doubtful at the outset as to their
fairness in competition.

The most important factor for determining "unfairness" in the marketplace, however,
is derived from the purpose of unfair competition law. In this respect, unfair
competition law was initially designed to protect the honest businessman. In the
meantime, consumer protection has been recognized as equally important.
Moreover, some countries put special emphasis on the protection of the public at
large, and especially its interest in the freedom of competition. Modern unfair
competition law therefore serves a threefold purpose, namely: the protection of

47
competitors, the protection of consumers and the safeguarding of competition in the
interest of the public at large.

On the other hand, there is broad agreement that at least some acts and practices
are always irreconcilable with the notion of fairness in competition. These are
discussed in detail below.

Categories of Acts of Unfair Competition -

The following are amongst the most common generally recognized acts of unfair
competition:
- Causing confusion
- Misleading
- Discrediting Competitors
- Disclosure of secret information
- Taking advantage of another's achievements (free riding)
- Comparative advertising

Let's look at each of these in turn.

CAUSING CONFUSION
The Paris Convention (Art. 10bis (3)) obliges member States to prohibit all acts that
are "of such a nature as to create confusion by any means whatever with the
establishment, the goods or the industrial or commercial activities of a competitor".
The scope of this article is very broad, as it covers any act in the course of trade
involving a mark, sign, label, slogan, packaging, shape or color of goods, or any
other distinctive indication used by a businessman. Thus not only indications used
to distinguish goods, services or businesses but also the appearance of goods and
the presentation of services are considered relevant for the prohibition of confusion.
However there are two main areas in which confusion frequently occurs.

These are indications of commercial origin on the one hand, and the appearance of
goods on the other. However, this does not preclude or limit the protection of other
attributes or achievements against confusion.

48
MISLEADING-
Misleading can roughly be defined as creating a false impression of a competitor's
own products or services. It may well be the single most prevalent form of unfair
competition, and it is by no means harmless. On the contrary, misleading can have
quite serious consequences: the consumer, relying on incorrect information, may
suffer financial (or more harmful) prejudice. The honest competitor loses clients.
The transparency of the market diminishes, with adverse consequences for the
economy as a whole and economic welfare.

There is a consensus according to which the concept of misleading is restricted

neither to inherently false statements nor to statements that have actually led to a
false impression on the part of the consumer. Instead it is considered sufficient that
the indications in question are likely to have a misleading effect. Even statements
that are literally correct can be deceptive.

If, for example, chemical ingredients are generally forbidden in bread, the courts of
most countries would consider an advertising claim that a certain bread "was
without chemical ingredients" to be deceptive, because, though literally true, it gives
the misleading impression that the advertised fact is something out of the ordinary.
It is likewise not necessary for the product in question to be inferior, in an objective
sense, so long as the indication or allegation has some enticing effect on the
consumer. For example, if the public prefers domestic goods to foreign goods, a
false declaration to the effect that imported goods are domestic is misleading even if
the imported goods are of superior quality.

Does the concept of misleading vary from country to country?

Generally the concept of misleading does vary from country to country and this can
best be seen in the various national treatments of exaggerations. Although in all
countries obvious exaggerations (even if literally inaccurate) are not considered
deceptive because they can easily be recognized as "sales talk," the question of
what is mere "hot air" or "puffing" and what is to be taken seriously is answered
differently in different countries. In some countries (such as Germany), it is assumed
that the public basically believes all advertising statements, and especially those
that claim uniqueness ("the best, the first," etc.); consequently an especially strict

49
standard is applied. Other countries (such as Italy and the United States of America)
take the exact opposite position and tolerate generally formulated indications, in
particular those in the form of claims of uniqueness. Thus in the United States of
America the courts have generally only intervened if the product advertised as the
best is in reality inferior.

Discrediting Competitors-
Discrediting (or disparagement) is usually defined as any false allegation concerning
a competitor that is likely to harm his commercial goodwill. Like misleading,
discrediting tries to entice customers with incorrect information. Unlike misleading,
however, this is not done by false or deceptive statements about one's own product,
but rather by casting untruthful aspersions on a competitor, his products or his
services. Discrediting, therefore, always involves a direct attack on a particular
businessman or a particular category of businessmen, but its consequences go
beyond that aim: since the information on the competitor or his products is incorrect,
the consumer is liable to suffer also.

Is the concept of discrediting different in different countries?

In some countries a literally truthful remark about a competitor may be considered
unfair competition if the "attack" is blown up out of proportion, or if the words used
are needlessly injurious. On the other hand, some countries expressly restrict the
notion of discrediting to inaccurate or at least misleading statements.

An explanation of this difference in attitudes can be found in the diverging

assessment of "commercial honour." Where unfair competition law has its roots in
the protection of the commercial reputation of the individual businessman-as it does
in the continental European countries-a "special tort of business disparagement"
has emerged, to which, in principle, much stricter rules apply than to defamatory
statements outside the bounds of competition, where constitutional considerations
such as freedom of speech have to be taken into account. In other countries,
especially those that have not developed a comprehensive system of protection
against unfair competition, the attitude is exactly the opposite: it is assumed that, in
the interest of competition, attacks on individual competitors are unavoidable, that
they must be widely tolerated and that a line should only be drawn where the attack

50
is based on false facts. In those countries, the plaintiff usually also bears the burden
of proof as to the falseness of the statement-which can sometimes make an action
impossible.

Disclosure of secret information-

A considerable amount of commercial competitiveness of an enterprise can be due
to information developed and accumulated by that enterprise or individuals in it. For
example, the customer and potential customer lists could give that company an
edge over its' competitors who do not have such good quality lists. Another example
could be that an enterprise has developed a secret industrial process, which
enables it to sell a better quality or cheaper product. I hope you agree with me that if
either of these pieces of information were given to a competitor without the
permission of the owner of the information this would result in unfair competition.
Indeed, the disclosure of secret information is defined as unfair competition by the
TRIPS Agreement of 1994, which obliges World Trade Organization members to
provide protection for "undisclosed information".

The TRIPS Agreement specifically describes the protection of undisclosed

information as necessary to protect against unfair competition (Article 39(2)).

Taking undue advantage of another's achievements-

The notion of "free riding" has a number of common features with the notions of
causing confusion and misleading. It could be defined as the broadest form of
competition by imitation. Under the principles of a free market, however, the
exploitation or "appropriation" of another person's achievements is unfair only under
specific circumstances. On the other hand, acts that cause confusion or mislead
normally imply free riding on another person's achievements, but are generally
recognized as forms of free riding that are always unfair.

There are various types of free riding including the dilution of the distinctive value
and quality of a competitor's mark. This could happen if a similar mark is used for
dissimilar goods or services.

51
Comparative advertising-
Comparative advertising may take two forms: a positive reference to another's
product (claiming that one's own product is as good as the other) or a negative
reference (claiming that one's own product is better than the other). In the first
instance, where the competitor's product is usually well known, the crucial question
relates to the possibility of misappropriation of another's goodwill. In the second
case, where the competitor's product is criticized, it is the question of
disparagement that arises. However, both forms of comparison involve an
(unauthorized) reference to a competitor, who is either mentioned by name or
implicitly identifiable as such by the public.

It must be remembered, however, that there are differences in the evaluation of the
notion of "misleading" and especially in that of "discrediting." As mentioned above,
some countries consider statements claiming superiority or uniqueness (like "the
best," etc.) misleading unless they can be proved correct, while others consider
them harmless exaggerations. Different assessments of the notions of "discrediting"
and "misappropriation" are of even greater importance. In countries with a rather
permissive attitude towards true but nevertheless disparaging statements,
comparative advertising is generally tolerated. As long as what is said is true, the
courts will not interfere, even if the reference to the competitor or his product is
clearly disparaging or exploits his goodwill. In countries that traditionally put special
emphasis on the protection of the "honest" businessman and his reputation,
comparative advertising is either forbidden or at least severely restricted.
Sometimes the mere fact that a competitor is named against his will is considered
discrediting and therefore unfair competition. According to the rule that "the honest
businessman has a right not to be spoken of, even if the truth is spoken," the
legislation of some countries has even expressly forbidden all comparisons that
needlessly identify a competitor. The same argument has led the courts of other
countries to find comparative advertising more or less automatically against honest
trade practice (and therefore against the general provision on unfair competition
law).

Although many countries take a strict view that comparative advertising is an unfair
practice, there has been a trend in recent years in which this negative attitude

52
towards comparative advertising has changed. It has been increasingly recognized
that true comparisons of relevant facts can not only reduce the consumer's
information search costs, but also have positive effects on the economy by
improving market transparency. The courts of those countries that traditionally view
comparative advertising as disparaging have gradually relaxed the strict prohibition
on all statements identifying a competitor. For example, price comparisons, if based
on true, relevant and ample material, may be allowed. On the whole, there seems to
be a clear trend towards the admission of truthful comparative advertising.

Other acts of unfair competition-

The field of unfair competition is large and the treatment by different countries quite
varied. So, in order to complete the list of unfair acts as much as possible, it is
worthwhile giving a few more examples, briefly. These are:
- Nuisance advertising. For example advertising which unduly exploits fear to make
a sale.
- The use of sales promotion techniques such as, lotteries, gifts and bonuses.
These are usually regulated to avoid undue inducement to buy.
- Impeding of market activities, such as, the destruction of a competitor's returnable
soft drink bottles.

The main forms of unfair competition in relation to trademarks are unlawful Laws of
imitation that take unfair advantage of a third party’s reputation or efforts.

Indeed, whereas IP rights cover the granting, substance, validity and infringement of
private rights, the concept of unfair competition deals with conduct and actions
which violate general rules and customary practices of honesty, which may harm
the economy and market as a whole (not necessarily an individual or legal entity
trading in the market).

The term "unfair competition" does not therefore relate specifically to competition or
antitrust law but is generally understood to be a liability mechanism not necessarily
related to the breach of IP rights but covers also advertisement, misuse of
confidential information, misappropriation of goodwill, amongst other ways of
misleading customers.

53
Nonetheless, a misconception has existed amongst legal commentators for some
time, according to which parties violating private IP rights should be sanctioned
under the provisions regulating unfair competition.

Intellectual Property v Intellectual Property Rights

Intellectual property (IP) –

• refers to creations of the mind: inventions, literary and artistic works, and
symbols, names, images, and designs used in commerce
• a broad concept that includes productions and matter forming part of
creations of the mind, including inventions, industrial designs, literary and
artistic works, symbols, and names and images
• results from intellectual activity in the industrial, scientific, literary or artistic
fields;

Intellectual Property Right (IPR)-

• an intangible right “protecting commercially valuable products of the human
intellect”; it may comprise patents, copyrights, trademarks and other similar
rights. An IPR includes the right to exclude others from exploiting the non-
corporeal asset
• legal rights, which may or may not be based on a registration, that aim to
protect creations and inventions resulting from intellectual activity in the
industrial, scientific, literary or artistic fields. The scope of the protection
obtained through IPR varies according to the type of instrument employed.

Categories of IP
IP is divided into two categories:
1. Industrial property – it includes inventions such as patents and utility models,
trademarks, industrial designs, and geographic indications of source
2. Copyright – it 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

Such rights-holder includes those of performing artists in their performances,

producers of phonograms in their recordings, and those of broadcasters in their
radio and television programs.
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IP and Unfair Competition-

IP rights often interfere with many public policy areas. Public policies facilitating
free and fair competition sometimes have a potential conflict with IP rights. The
relations between IP rights and competition or anti-trust laws have been much
studied in connection with the potential abuse of IP rights to monopolize the market.
IP rights and the market monopoly are not inherently linked. The majority of
licensing agreements today involve IP rights and most of them contribute to fair
competition in the market in pursuit of greater and enhanced level of innovation in
the economy.

IP system and competition policies are not regarded as an inherent trade-off and
dichotomy. The relationships between them are considered as supplementary and
mutually supportive. Patent and anti-trust law are actually complementary, as both
are aimed at encouraging innovation, industry, and competition.”42

The protection of trademarks and industrial design also promote fair competition
through branding and consumer protection, since they function to clearly identify the
origin of products and services. To provide safeguards and checking mechanisms
against the abuse of IP rights, however, makes it necessary to manage the interface
between competition policies and IP system and policies. In some countries, for
example, guidelines regulating misappropriation of IP rights in licensing have been
actively debated and reviewed. In many countries, the abuse of market-related IP
rights is checked by unfair competition laws or anti-trust laws.

Some common objectives behind the legislation in the subject matter of IPRs
and Competition -
• need to protect the IP by respective IPRs
• Defensive
• Protect creative assets
• Counterattack
• Reduce risk of innovation

42
US Fair Trade Commission Report on ‘Competition and Intellectual Property Law and Policy in the
Knowledge-Based Economy’ (2003).
55
• Offensive
• Exclude others
• Generate income
• Product and service distinctions
• Strategic funds, partners, customers, employees
• Increase valuation

56
CHAPTER (VI) REVIEW OF EXISTING STATUTORY IP LAW AND CASE-LAW

IP Laws are monopolistic legal rights granted to the creators and owners of work
which are a result of human intellectual creativity. These can be in varied fields such
as industrial, scientific, literary and art. Intellectual Property Rights (IPR) gives the
owners the right to exclude others from using their invented subjected-matter for a
limited period of time. Further, IPR laws pertaining to copyrights, patents,
trademarks, industrial designs and trade secrets prevent commercial exploitation of
the innovation by others. IP rights grant the owner an advantage 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.

Protection from Unfair Competition -

IP rights are granted on application by IP Offices and confer exclusive rights with
respect to the subject matter concerned. On the other hand, protection against
unfair competition is based not on such grants of rights but on the consideration—
either stated in legislative provisions or recognized as a general principle of law—
that acts contrary to honest business practice are to be prohibited.

Nevertheless, the link between the two kinds of protection is clear when certain
cases of unfair competition are considered. For example, in many countries
unauthorized use of a trademark that has not been registered is considered illegal
on the basis of general principles that belong to the field of protection against unfair
competition (in a number of countries such unauthorized use is called “passing-off”).

Protection against unfair competition has been recognized as forming part of IP

protection for almost a century. It was in 1900, at the Brussels Diplomatic
Conference for the Revision of the Paris Convention that this recognition was first
manifested by the insertion of Article 10bis in the Convention. As a result of the
subsequent revision conferences, the Article now reads as follows (in the Stockholm
Act (1967) of the Paris Convention):
“(1) The countries of the Union are bound to assure to nationals of such countries
effective protection against unfair competition.

57
Any act of competition contrary to honest practices in industrial or commercial
matters constitutes an act of unfair competition.

The following in particular shall be prohibited:

- all acts of such a nature as to create confusion by any means whatever with the
establishment, the goods, or the industrial or commercial activities, of a competitor;
- false allegations in the course of trade of such a nature as to discredit the
establishment, the goods, or the industrial or commercial activities, of a competitor;
- indications or allegations the use of which in the course of trade is liable to mislead
the public as to the nature, the manufacturing process, the characteristics, the
suitability for their purpose, or the quantity, of the goods.”

Article 1(2) of the Paris Convention mentions the repression of unfair competition
along with patents, utility models, industrial designs, trademarks, trade names,
indications of source and appellations of origin among the objects of industrial
property protection, and Article 10bis contains an express provision on the
repression of unfair competition. In the more than one hundred and fifty States
party to the Paris Convention, the legal basis for the protection against unfair
competition may thus be found not only in national legislation but also at the
international level.

Under Article 10bis(1) of the Paris Convention, the countries of the Paris Union are
bound to ensure effective protection against unfair competition. Article 10ter(1) of
the Convention further provides for the obligation to ensure “appropriate legal
remedies.” In particular, measures must be taken to permit federations and
associations representing interested industrialists, producers or merchants to take
action, provided that this is not contrary to the laws of the country concerned and
does not exceed the rights normally granted to national associations.

Article 10bis(2) of the Paris Convention defines unfair competition as any act of
competition contrary to honest practices in industrial or commercial matters. This
definition leaves the determination of the notion of “commercial honesty” to the
national courts and administrative authorities. Member States of the Paris Union are

58
also free to grant protection against certain acts even if the parties involved are not
competing against each other.

Article 10bis(3) of the Paris Convention gives three examples of cases that “in
particular” have to be prohibited. These examples must not be seen as exhaustive,
but rather as the minimum protection that has to be granted by all member States.
The first two—creating confusion and discrediting—can be regarded as belonging to
the “traditional” field of competition law, namely that of competitor protection. The
third one—misleading—was added by the 1958 Revision Conference in Lisbon, and
takes into account the interests of both competitors and consumers.

Apart from Articles 10bis and 10ter, the Paris Convention contains several
provisions relevant to protection against acts of unfair competition in a broader
sense, especially those concerning trademarks and trade names.

INTERNATIONAL OBLIGATION TO APPLY IP LAWS IN INDIA

INTERNATIONAL BODIES/TREATIES:
 Paris Conventions
 WTO (TRIPS)
 WIPO
 Others

IP Laws available in India:

The position of IP in the Constitution: - “Patents, inventions and designs; copyright;
trade-marks and merchandise marks” (Entry 49 of the List I of Schedule VII)

IP laws in India:
 The Patents Act, 1970
 The Designs Act, 2000
 The Trade Marks Act, 1999
 The Copyright Act, 1957
 The Semiconductor Integrated Circuits Layout-Design Act, 2000
 The Geographical Indications of Goods (Registration & Protection)Act, 1999
 Biological Diversity Act, 2002

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  Protection of Plant Varieties and Farmers' Rights Act, 2001

Other IP related laws in India:

 Cable Television Networks (Regulation) Act, 1995 (2002)
 The Wildlife (Protection) Act, 1972 (2002)
 The Information Technology Act, 2000 (2000)
 Drugs and Cosmetics Act, 1940 (1995)
 The Cinematograph Act, 1952 (1984)
 Forest (Conservation) Act, 1980 (1980)
 The Code of Civil Procedure, 1908 (1980)
 Seeds Act 1966 (1966)
 The Customs Act, 1962 (1962)
 The Indian Wireless Telegraph Act, 1933 (1933)
 The Indian Penal Code (1860)
 The Competition Act 2002 (2003)

Concerned Authorities in India-

 Office of the Controller General of Patents, Designs & Trade Marks (O/o
CGPDTM)
 Competition Commission of India (CCI)
 Courts
 Tribunals such as the IPAB, COMPAT etc

COMPETITION COMMISSION OF INDIA (CCI):

Composition and functions: The Competition Commission of India has been

constituted under Section 7 of the Competition Act, 2002 as amended in 2007.

The Competition Commission of India consists of a Chairperson and not less than
two and not more than six other Members. Under Section 18 of the Competition Act,
the functions of the Commission inter-alia are to eliminate practices having adverse
effect on competition, promote and sustain competition, protect the interests of
consumers and ensure freedom of trade carried on by other participants, in markets
in India.

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INQUIRY INTO ABUSE OF DOMINANCE
In exercise of powers vested under section 19 of the Act, the Commission may
inquire into any alleged contravention of section 4 (1) of the Act that proscribes
abuse of dominance. Section 19 (4) gives a detailed list of factors that the
Commission shall consider while inquiring into any allegation of abuse of
dominance. Some of these factors are market share of the enterprise, size and
resources of the enterprise, size and importance of the competitors, dependence of
consumers, entry barriers, and social obligations and costs in the relevant
geographic and product market.

The Commission, on being satisfied that there exists a prima facie case of abuse of
dominance, shall direct the Director General to cause an investigation and furnish a
report. The Commission has the powers vested in a Civil Court under the Code of
Civil Procedure in respect of matters like summoning or enforcing attendance of any
person and examining him on oath, requiring discovery and production of
documents and receiving evidence on affidavit. The Director General, for the
purpose of carrying out investigation, is vested with powers of civil court besides
powers to conduct 'search and seizure'.

POWERS OF THE CCI -

After inquiry the Commission may pass inter- alia any or all of the following orders
under section 27 of the Act:
1) direct the parties to discontinue and not to re-enter such agreement;
2) direct the enterprise concerned to modify the agreement.
3) direct the enterprises concerned to abide by such other orders as the
Commission may pass and comply with the directions, including payment of costs, if
any; and
4) pass such other orders or issue such directions as it may deem fit.
5) can impose such penalty as it may deem fit. The penalty can be up to 10% of the
average turnover for the last three preceding financial years upon each of such
persons or enterprises which are parties to bid-rigging or collusive bidding.
6) Section 28 empowers the Commission to direct division of an enterprise enjoying
dominant position to ensure that such enterprise does not abuse its dominant
position.

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INTERIM ORDER
Under section 33 of the Act, during the pendency of an inquiry into abuse of
dominant position, the Commission may temporarily restrain any party from
continuance with the alleged contravention the offending act until conclusion of the
inquiry or until further orders, without giving notice to such party, where it deems it
necessary.

APPEALS
The Competition Appellate Tribunal (COMPAT) is established under section 53A of
the Act, to hear and dispose of appeals against any direction issued or decision
made or order passed by the Commission under specified sections of the Act.
An appeal has to be filed within 60 days of receipt of the order /direction / decision
of the Commission.

COMPENSATION
A person may move an application to Competition Appellate Tribunal to adjudicate
upon claim for compensation that may arise from the findings of the Commission
(Section 53N).

The Competition Law and policy

The acquisitions and mergers sometime encourage monopoly rights in production,
distribution and marketing of products protected by the IPRS. This would, in turn,
adverse impact on the consumers of the products through higher pricing of products
and restrictions on its multiplication. However, there are provisions of compulsory
licenses under the patent regime to balance such monopoly rights. Further, the
Indian Patent Act as amended so far provides the flexibilities of abridging rights of
inventors who’s primary or intended use, or commercial use or exploitation, of their
invention would be contrary to public order or morality, or causes serious prejudice
to human, animal or plant life or health, or to the environment. The Act is also
notable for its opposition provisions, and for its requirement on the part of a potential
inventor to disclose source, and geographic, origin of the biological material used in
an invention. This clause, which is incorporated in Section 10 of the said Act,
fortifies the ‘previous approval’ principles enshrined in India’s National Biodiversity
Act 2002. Under the Plant varieties and Farmers Rights Act, 2001, the Central
62
Government reserves the right to enforce compulsory licensing of protected
varieties and seeds, in the larger interest of food security, livelihoods and consumer
welfare.

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.

Primarily, competition laws involve the formulation of a set of policies which promote
competition in the local markets and are aimed at preventing anti-competitive
business practices and unwonted government interference. Competition laws are
also framed with the intention of curbing abuse of market power by a dominant
company. Further, competition law aims at eliminating monopolization of the
production process thereby encouraging new firms to enter into the market. The
maximization of consumer welfare and an increase in production value are some of
the main objectives of competition law. On the other hand IP Laws are monopolistic
legal rights granted to the creators and owners of work which are a result of human
intellectual creativity. These can be in varied fields such as industrial, scientific,
literary and art. Intellectual Property Rights (IPR) gives the owners the right to
exclude others from using their invented subjected-matter for a limited period of
time. Further, IPR laws pertaining to copyrights, patents, trademarks, industrial
designs and trade secrets prevent commercial exploitation of the innovation by
others. IP rights grant the owner an advantage over the rest of the industry or

63
sector. When this advantage or dominant position is abused it creates a conflict
between IPR and competition law.

Recently an issue was raised in the Delhi High Court in the case of Hawkins
Cookers43.Hawkins Cookers Limited is the owner of the trademark “Hawkins” and
uses it on several products including pressure cooker gaskets. Murugan
Enterprises, manufacturers, among other things gaskets for pressure cookers and
uses the Hawkins trademark in respect of parts of pressure cookers to establish
compatibility. Murugan Enterprises in its arguments before the court opinioned that
it had its own well-established trademark “Mayur” with a prominent peacock
displayed on its product packaging. The Delhi High Court in this case held that no
reasonable person or purchaser could assume a trade connection between the
“Mayur” brand of gaskets and the “Hawkins” brand of pressure cookers. Further, the
court opined that in this case the Murugan Enterprises neither sought to benefit from
Hawkins’ trademark nor did it try to show a connection between the two. Additionally
the court opined that the defendants’ use of the “Hawkins” mark was only to show
the suitability of the product to be used as an ancillary product in a Hawkins
pressure cooker and that such use would evidently fall within the exception carved
out under Section 30 of the Trademarks Act, 1999. Further, the use of the
trademark in relation to the product is reasonably necessary to indicate the fitness
of the gaskets for the “Hawkins” brand of pressure cookers. In the Hawkins case,
Justice Kaul also pointed out that “The object of filing of the suit thus appears to be
to create a monopoly over such (gaskets) ancillary items so that no third party is
able to sell the same in the market.” The judge also goes on to point out that the use
of the “Hawkins” trademark on the gaskets packaging would have been infringing if
it had been used as a trademark. Since Murugan Enterprise’s use of the “Hawkins”
mark was only indicative and is not being used as a trademark there would be no
question of infringement. The Delhi High Court judgment in the Hawkins case
reflects on the fact that dominant firms cannot be encouraged by courts if they are
found to abuse their dominance by creating a monopoly in the market thereby
affecting the market share of smaller and/or firms who are in direct competition with
such dominant firms.

43
Hawkins Cooker Ltd v. M/s Murugan Enterprises [2008(36) PTC 290(Del)]
64
Additionally under Competition law, the unavailability of substitutes in the market
may establish dominance in the market. Likewise a comparison of market shares
between dominant firm and their competitors is useful in determining dominance as
well as monopoly. Even then, there seems to be a difficulty in determining the
minimum percentage of the market share that could establish dominance and/or
monopoly of a particular firm in the market. Various judgments vis-à-vis dominance
has also not been able to establish a minimum percentage that indicates dominance
of a firm.

Anti-competition laws in order to combat the IPR monopolies often include two
important measures namely compulsory licensing and parallel imports. A
compulsory license is where an IPR holder is authorized by the state to surrender
his exclusive right over the intellectual property, under article 31 of the Trade-
Related aspects of Intellectual Property Rights (TRIPS). Compulsory licenses are
granted under certain circumstance such as in the interest of public health, national
emergencies, nil or inadequate exploitation of a patent in the country, and for an
overall national interest. A parallel import on the other hand includes goods which
are brought into the country without the authorization of the appropriate IP holder
and are placed legitimately into a market.

In addition, 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. Firstly, patent pooling is a restrictive
practice wherein firms of a particular manufacturing industry decide to pool their
patents and agree not to grant licenses to third parties, simultaneously fixing quotas
and prices. Secondly, a clause that restricts competition with respect to research
and development or which prohibits a licensee to use rival technology is considered
anti-competitive under the law. Thirdly, a licensor under the law is prohibited from
fixing the price at which the licensee should sell his goods. The above mentioned
examples are not by any means exhaustive, but are a few illustrations
demonstrating anti-competitive provisions applicable to IPR under the Act.
Furthermore, under Section 27 of the Act, the Competition Commission of India (the
Commission) has the authority to penalize IPR holders who abuse their dominant
position. Further, under Section 4 of the Act the Commission is also authorized to

65
penalize the parties to an anti-competitive agreement, which is in contravention of
Section 3 of the Act.

A constellation of pro-active legislations serves including IPRs to ensure that

competition may not impaired. India’s IPR regimes, whilst affording protection to
innovators do still carry with it the elements for regulating anti-competition.
However, to continuous watch of the concerning laws and policies need to be
needed and stakeholder meeting attracted if required in order to implement the
same in a manner that is sustainable and economically advantageous.

Competition laws involve the formulation of a set of policies which promote

competition in the local markets and are aimed at preventing anti-competitive
business. Competition laws are also framed with the intention of curbing abuse of
market power by a dominant company. Further, competition law aims at eliminating
monopolization of the production process thereby encouraging new firms to enter
into the market. The maximization of consumer welfare and an increase in
production value are some of the main objectives of competition law.

The Competition Act, 2002 (as amended), [the Act], follows the philosophy of
modern competition laws and aims at fostering competition and at protecting Indian
markets against anti-competitive practices by enterprises. The Act prohibits anti-
competitive agreements, abuse of dominant position by enterprises, and regulates
combinations (consisting of mergers, amalgamations and acquisitions) with a view
to ensure that there is no adverse effect on competition in India.

The preamble of the Act which lays out the objectives of the Competition Act and
defines the role and scope of the Commission leaves much thought when
enforcement and implementation are involved.

The preamble: “An Act to provide, keeping in view of the economic development of
the country, for the establishment of a Commission to prevent practices having
adverse effect on competition, to promote and sustain competition in markets, to
protect the interests of consumers and to ensure freedom of trade carried on by
other participants in India …..”

66
The Competition Act 2002 specifically refers also some intellectual property rights
issues. Section 3(5) of the Act states that agreements entered into for imposing
reasonable conditions or restraining infringements of IPRs conferred under
respective IPRs laws would not be actionable under the Act, 2002. The Act, 2002
applies to IPRs in relation to abuse of dominant position and combinations.
Therefore, abuse of dominance due to an IPR is liable for action under the Indian
Competition Act just as IPR-related dealings in combinations leading to an anti-
competitive effect. Thus, the issues involved are technical and multifarious and
need to be dealt with in diverse ways.

The Competition Act, 2002 was enacted in 2002 keeping in view the economic
developments that resulted in opening up of the Indian economy, removal of
controls and consequent economic liberalisation which required that the Indian
economy be enabled to allow competition in the market from within the country and
outside. It was subsequently amended in 2007. The Competition Act, 2002, inter
alia, provides for the following, namely:—
(A) establishment of the Competition Commission of India, which shall be an expert
body and would function as a market regulator for preventing and regulating anti-
competitive practices in the country in accordance with the provisions of the Act and
it would also have advisory and advocacy functions in its role as a regulator which
can also impose a penalty in certain cases specified in the Act;
(B) establishment of the Competition Appellate Tribunal, which shall be a three
member quasi-judicial body headed by a person who is or has been a Judge of the
Supreme Court or the Chief Justice of a High Court to hear and dispose of appeals
against any direction issued or decision made or order passed by the Competition
Commission and to adjudicate claims on compensation and for passing of orders for
the recovery of compensation from any enterprise for any loss or damage suffered
as a result of any contravention of the provisions of the Act.
2. Sub-section (1) of section 66 of the Act provides for repeal of the Monopolies and
Restrictive Trade Practices Act, 1969 (MRTP Act) and dissolution of the Monopolies
and
Restrictive Trade Practices Commission (MRTPC) established thereunder.
However, the MRTPC was allowed to continue under the said sub-section to

67
exercise jurisdiction and powers under the repealed Act for a period of two years
from the date of the commencement of this Act in respect of all cases or
proceedings filed before the commencement of this Act.A number of
recommendations can be made to India and other developing countries, namely:-
- establish or strengthen competition laws in order to control, inter alia, possible
abuses emerging from the acquisition and exercise of IPRs;
- consider the competition implications of various policies and regimes that
determine market entry, such as marketing approval of pharmaceutical and
agrochemical products;
- ensure an adequate coordination among the competition law agency and other
agencies whose decisions may influence market structure and operation, with the
aim of maintaining a competitive environment;
- fully use the flexibilities allowed by the TRIPS Agreement to determine the grounds
for granting compulsory licences to remedy anti-competitive practices relating to
IPRs;
- consider, in particular, the granting of compulsory licences in cases of refusals to
deal;
- conceptualise and apply the essential facilities doctrine as required to address
situations of control of essential technologies, taking into account the relevant
market conditions and public needs;
- develop policies, including guidelines, to prevent and correct abuses in the
acquisition and enforcement of IPRs;
- address situations that may normally lead to anti-competitive conduct such as
“package” and “thicket” patents;
- adopt guidelines for use at the patent offices to prevent the granting of frivolous or
low quality patents, as well as patents containing overly broad claims, which may be
used to unduly restrain legitimate competition and block innovation;
- avoid “linkage” provisions and data exclusivity in order to promote competition in
markets of regulated products;
- Clear provisions on IPR and competition must be implemented at the national level
to take full advantage of the flexibility built into TRIPs, to stem the tide of anti-
competitive arrangements.

Important provisions under Competition Act 2002 including the Penalty provisions -

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Section 3 of the Competition Act 2002 relates to prohibition of anti-competitive
agreements involving IPRs; this section deals with anti- competitive agreements
which cannot be used by IPR holders since they are in conflict with the competition
policies.
(4) 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- (a) tie-in arrangement; (b) exclusive supply agreement; (c) exclusive
distribution agreement; (d) refusal to deal; (e) 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.
(5) nothing contained in this section shall restrict :
(i) 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 :
(a) the Copyright Act, 1957 (14 of 1957) (b) the Patents Act, 1970 (39 of 1970)
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks
Act, 1999 (47 of 1999)
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999
(48 of 1999)
(e) the Designs Act, 2000 (16 of 2000)
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000).

Section 4 of the Competition Act 2002 relates to the cases of “abuse”. The
expression “abuse” in Sec 4 may include:-
 Exclusive licensing;
 Cross licensing;
 Patent pooling;
 Tie-in-arrangements;
 Demand of royalty for know-how even after the expiry of the term;
 Package licensing;
 Restricting sub-licensing;
 Trademarks issues;
 Legal suit (infringement) indemnification;

69
Conditions Compatible with Competition Law -
1. An obligation on the licensor not to licence other undertakings to exploit the
licenced technology in the licenced territory.
2. An obligation on the licensor not to exploit the licenced technology in the licenced
territory himself.
3. An obligation on the Licencee not to manufacture or sell the licenced product in
territories which are licenced to other Licencees.
4. An obligation on the Licencee to use only the licensor's trade mark to distinguish
the licenced product during the term of the agreement.
5. An obligation on the Licencee not to divulge to others, the know-how
communicated by the licensor.
6. An obligation on the Licencee not to grant sub-licences or assign the licence.
7. An obligation on the Licencee not to exploit the licenced know-how or patents
after the termination of the agreement as long as the know-how is secret or the
patents are in force.
8. An obligation on the Licencee to observe minimum quality specifications including
technical specifications for the licenced product.
9. An obligation on the Licencee to inform the licensor of infringement of IP rights.
10. An obligation on the Licencee to restrict his exploitation of the licenced
technology to one or more technical fields of application covered by the technology.
11. An obligation on the Licencee to mark the licenced product with an indication of
the licensor's name or the licenced patent.
12. An obligation on the Licencee not to use the licensor's technology to construct
facilities for third parties.

APPLICABILITY OF COMPETITION LAW ON IPR STATUTES -

In the Competition Act, 2002, section 3(5) thereof in the Chapter relating to
Prohibition of Agreements (Anti –Competitive Agreements) states that:-
“Nothing contained in this section shall restrict -
(I) 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:-

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(a) the Copyright Act, 1957 (14 of 1957)
(b) the Patents Act, 1970 (39 of 1970)
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks
Act, 1999 (47 of 1999)
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999
(48 of 1999)
(e) the Designs Act, 2000 (16 of 2000)
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000).

REASONABLE CONDITIONS
Section 3(5) of the Act declares that “reasonable conditions 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 arrangements 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
IPRs.
For example, a licensing arrangement 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 licensing by parties collectively possessing market power, grant backs and
acquisitions of IPRs. A few such practices are described below -

1. Patent pooling is a restrictive practice, which will not constitute being a part of the
bundle of rights forming part of an IPR. This happens when the firms in a
manufacturing industry decide to pool their patents and agree not to grant licenses
to third parties, at the same time fixing quotas and prices. They may earn supra-
normal profits and keep new entrants out of the market. In particular, if all the

71
technology is locked in a few hands by a pooling agreement, it will be difficult for
outsiders to compete.
2. Tie-in arrangement is yet another such restrictive practice. A licensee may be
required to acquire particular goods (unpatented materials e.g. raw materials) solely
from the patentee, thus foreclosing the opportunities of other producers. There
could be an arrangement forbidding a licensee to compete, or to handle goods
which compete with the patentee's.
3. An agreement may provide that royalty should continue to be paid even after the
patent has expired or that royalties shall be payable in respect of unpatented know-
how as well as the subject matter of the patent.
4. There could be a clause, which restricts competition in R & D or prohibits a
licensee to use rival technology.
5. A licensee may be subjected to a condition not to challenge the validity of IPR in
question.
6. A licensee may require 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.
7. A licensor may fix the prices at which the licensee should sell.
8. The licensee may be restricted territorially or according to categories of
customers.
9. A licensee may be coerced by the licensor to take several licenses in intellectual
property even though the former may not need all of them. This is known as
package licensing which may be regarded as anti-competitive.
10. A condition imposing quality control on the licensed patented product beyond
those necessary for guaranteeing the effectiveness of the licensed patent may be
an anti- competitive practice.
11. Restricting 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. Such a condition is often imposed in the licensing of dual use
technologies.
12. Imposing a trade mark use requirement on the licensee may be prejudicial to
competition, as it could restrict a licensee's freedom to select a trade mark.
13. Indemnification of the licensor to meet expenses and action in infringement
proceedings is likely to be regarded as anti-competitive.

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14. Undue restriction on licensee's business could be anticompetitive.
For instance, the field of use of a drug could be a restriction on the licensee, if it is
stipulated that it be used as medicine only for humans and not animals, even though
it could be used for both.
15. Limiting the maximum amount of use the licensee may make of the patented
invention may affect competition.
16. A condition imposed on the licensee to employ or use staff designated by the
licensor is likely to be regarded as anticompetitive.
The above list is not exhaustive but illustrative.

PENALTY PROVISIONS
The Commission is empowered to inquire into any unreasonable conditions
attached to the IPR agreements and can impose penalty upon each of such right
holder or enterprises which are parties to such agreements or abuse, which shall be
not more than ten percent of the average turnover for the last three preceding
financial years. In case an enterprise is a 'company' its directors/officials who are
guilty are liable to be proceeded against and punished.
In addition, the Commission has the power to pass inter alia any or all of the
following orders (Section 27):
(i) direct the parties to discontinue and not to re-enter such agreement;
(ii) direct the enterprise concerned to modify the agreements;
(iii) direct the enterprises concerned to abide by such other orders as the
Commission may pass and comply with the directions, including payment of costs, if
any; and
(iv) pass such other order or issue such directions as it may deem fit.

In case of abuse of dominant position under section 4 by virtue of an IPR by an

enterprise, in addition to the above penalties, the Commission has the power to
order division of enterprise under section 28.

CONFLICT BETWEEN COMPETITION LAW AND INTELLECTUAL PROPERTY

RIGHTS
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
73
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.

The provisions of the Competition Act, 2002 prohibits the exercise of anti-
competitive agreements by the IPR holders since they are in conflict with the
competition policies. Further the Act authorizes4 the Competition Commission of
India to penalise the IPR holders who misuse their dominant position. Furthermore,
Section 45 of the Act the Commission is also authorized to penalize the parties to
an anti-competitive agreement, which is in contravention of Section 3 of the Act.

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

74
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.44

Conditions not compatible with competition Law -

1. Patent pooling is a restrictive practice, which will not constitute being a part of the
bundle of rights forming part of an IPR. This happens when the firms in a
manufacturing industry decide to pool their patents and agree not to grant licences
to third parties, at the same time fixing quotas and prices. They may earn supra-
competitive profits and keep new entrants out of the market. In particular, if all the
technology is locked in a few hands by a pooling agreement, it will be difficult for
outsiders to compete.
2. Tie-in arrangement is yet another such restrictive practice. A Licencee may be
required to acquire particular goods (unpatented materials e.g. raw materials) solely
from the Patentee, thus foreclosing the opportunities of other producers. There
could be an arrangement forbidding a Licencee to compete or to handle goods,
which compete with the Patentee's.
3. An agreement may provide that royalty should continue to be paid even after the
patent has expired or that royalties shall be payable in respect of unpatented know-
how as well as the subject matter of the patent. This will be regarded as
unreasonable in the context of Competition Law.
4. There could be a clause, which restricts competition in R&D or prohibits a
Licencee to use rival technology. This is likely to be frowned upon by the Regulatory
Authority under Competition Law.
5. A Licencee may be subjected to a condition not to challenge the validity of IPR in
question. This will be regarded as unreasonable from the competition perspective.
6. A Licencee may require to grant back to the licensor any know-how or IPR
acquired and not to grant licences to anyone else. This is not likely to pass the
competition test, as it is likely to augment the market power of the licensor in an
unjustified and anti-competitive manner.
7. A licensor may fix the prices at which the Licencee should sell. This is likely to be

44 CONFLICT BETWEEN COMPETITION LAW AND INTELLECTUAL PROPERTY RIGHTS

http://www.tmpsearchers.com/intellectual-property-rights/174/conflict-between-competition-law-and-intellectual-property-rights/

75
held anti-competitive.
8. A Licencee may be coerced by the licensor to take several licences in intellectual
property even though the former may not need all of them. This is known as
package licensing which is regarded as anti-competitive.
9. A condition imposing quality control on the licenced patented product beyond
those necessary for guaranteeing the effectiveness of the licenced patent is an anti-
competitive practice.
10. Imposing a trade mark use requirement on the Licencee is prejudicial
to competition, as it could restrict a Licencee's freedom to select a trade mark.
11. Indemnification of the licensor to meet expenses and action in infringement
proceedings is likely to attract Competition Law.
12. Undue restriction on Licencee's business could be anti-competitive. For
instance, the field of use of a drug could be a restriction 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.

Apart from parallel imports another area where the Competition Act has failed to use
the flexibility provided by TRIPs (Trade Related Aspects of Intellectual Property
Rights) is “compulsory licensing.” The agreement vide Article 31 allows compulsory
licensing under certain conditions. One of them is to control anti-competitive
practices by IPR owners.
Most importantly, even the licensee is allowed to export the protected product,
which otherwise is meant predominantly for supply in the domestic market. This
could be highly relevant to certain sectors in India, namely, the pharmaceutical
sector, which would be able to export drugs to countries with national health
emergencies.
Another condition for grant of compulsory licensing and where the competition
authority has a role is in case of “refusal to deal”. An example of how a compulsory
license can be based on “refusal to deal” is provided by a 1995 decision of the
European Court of Justice in the Magill case. The Court held that Radio Telefis
Eireann (RTE) and Independent Television Publications Limited (ITP), who were the
only sources of basic information on programme scheduling, could not rely on
national copyright provisions to refuse to provide that information to third parties.
The Court opined that such a refusal constituted the exercise of an IPR beyond its

76
specific subject matter and, thus, an abuse of a dominant position under Article 86
of the Treaty of Rome.
Even though the US patent law does not provide for compulsory licenses, this is
probably the country with the richest experience in the granting of compulsory
licenses to remedy anti-competitive practices. According to one study more than
100 such licenses have been granted.
The provisions of compulsory licensing should be used with utmost caution else it
would have a negative impact on investment in R&D, evolution of new technologies
etc. But the provisions should not remain unimplemented either, should the need
arise. Interestingly, a statistical study by Scherer relating to 70 companies showed
no negative effect on R&D in companies subject to compulsory licenses but, on the
contrary, showed a marked rise in their R&D relative to those of comparable size
not subject to such licenses.
That said, before any government can act on Article 31 of the TRIPs Agreement to
grant a compulsory license, it has to follow due administrative or judicial process. A
competent authority has first to determine that the anti-competitive practice is
prevalent before the government can grant a license to others. Again the best-suited
authority here would, of course, be the competition authority and hence this needs
to be reflected in the new competition law.
The provision indicates that for the purpose of determining whether enterprise
enjoys a dominant position, the authority would take into account inter alia “technical
advantages enjoyed by the firm, which could include patents, know-how and
copyright.”
Clear provisions on IPR and competition must be implemented at the national level
to take full advantage of the flexibility built into TRIPs, to stem the tide of anti-
competitive arrangements.45

45 Need for clearer norms on IPR in new competition Bill; Published on: The Financial Express, 13 June, 2001; By Pradeep S Mehta & Ujjwal Kumar,

CUTS Centre for International Trade, Economics and Environment

77
NEED FOR CLEARER NORMS:

Constitution of India provides various concern provisions such as –

Article 19. Protection of certain rights regarding freedom of speech, etc.— which
provides freedom to practice any profession, or to carry on any occupation, trade or
business;

Article 301. Freedom of trade commerce and intercourse.— which provides

freedom from laws which go beyond regulations which burdens, restricts or prevents
the trade movements between states and within states;

National Competition Policy (NCP)

Ministry of Corporate Affairs had constituted a Committee under the Chairmanship

of Shri Dhanendra Kumar46, for framing of National Competition Policy47 and
related matters. This Committee has submitted a draft National Competition Policy
is aimed at laying down an overarching policy framework for infusing competition
principles in various policies, statutes and regulations and promoting a competitive
market structure in the economy, thereby striving to achieve maximum economy
efficiency in various spheres, and public welfare.

It is essential to increase the degree of competition between firms in the domestic

market so that there are adequate incentives for raising productivity, improving
efficiency and reducing costs. Competition policy is a broad concept which includes
all such governmental policies that affect the functioning of markets.

“Strong competition policy is not just a luxury to be enjoyed by rich countries, but a
real necessity for those striving to create democratic market economies”48

46 Former Chairperson of Competition Commission of India

47 http://www.mca.gov.in/Ministry/pdf/DraftNationalCompetitionPolicyForIndia-28th_July2011.pdf

48 The Nobel Prize (2001) winner Joseph Stiglitz

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Aim and the objective behind the National Competition Policy (NCP):-
 to unlock fuller growth potential of Indian economy;
 to promote good governance by transparency, accountability through
competing responses;
 to prevent practices having adverse effect on competition;
 to promote and sustain competition in the market;
 to protect the interests of consumers;
 to ensure freedom of trade carried on by participants in markets.
 to develop a broad industrial base to achieve speedy economic self-reliance
and promoting social justice;
 to reduce costs, innovate in processes and products, invest in technology
and better managerial practices and increase;
 to achievement of static, dynamic as also resource/allocative efficiencies,
sustainable economic growth, development, and poverty alleviation;
 to imbibe the principles of competition in various endeavours of the
Government, of course in alignment with the national strategic objectives,
alongwith social, environmental, public safety, and other considerations;

The State exercised control over the direction, pattern and quantum of investments
through Industries (Development & Regulation) Act, 1951, Monopolies and
Restrictive Trade Practices Act, 1969 (MRTP Act) etc.

However, it can be said that “Competition law alone is not sufficient for realizing the
gains from greater competition”. Therefore, a need required to engage in advocacy
with stakeholders, including public institutions, in order to build a culture of
competition that is receptive to and supportive of the new competition regime.

Competition has a two-way linkage with various policies of the Government such as:
fiscal policy, trade policy, investment policy, labour policy, consumer policy,
environment policy, policy on intellectual property rights, sectorial regulatory policies
etc.

Economic theories suggest that if inter brand competition exists, then restrictions on

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intra brand competition should not be capable of restricting competition and the
efficiency enhancing effects of vertical agreements would outweigh any possible
risks. Yet experience reveals that vertical agreements could have anticompetitive
effects which outweigh their pro-competitive effects, and hence they have to be
brought within the purview of antitrust law. Countries are still searching for the
perfect way to regulate vertical agreements.

The Indian Act, which has very recently come into force, has several ambiguities
with respect to vertical restraints. The Indian law is similar to the US law, inasmuch
as there is clear scope for application of the rule of reason to vertical agreements.
However as US experience shows there cannot be a uniform application of the rule
of reason, since different vertical agreements would call for different standards. The
Indian Act also has similarity with EC law in the sense that it lays down several
criteria which can be taken into account for testing ‘adverse effects’ on competition.
However unlike the EC, the competition authority in India is free to take into account
all or any of the mentioned criteria. This is a dangerously open ended provision.

It can be said that one of the main obstacles to economic growth and poverty
reduction in many countries is the policies that distort competition such as-

Anti-competitive Agreements –
These are agreements between entities in respect of production, supply,
distribution, storage, acquisition or control of goods or provisions of services, which
cause or are likely to cause an appreciable effect on competition within India.

Some of the anti-competitive practices/Abusive practices undertaken by dominant

entities are-
 price fixing/ predatory pricing,
 bid rigging or Collusive bidding,
 joint boycotts,
 Limiting and controlling production, supply, markets, technical development,
investment or provisions for services;
 Allocating market/ Market sharing cartel,
 abusive conditions of supply,

80
  Bundling/ leveraging,
 Tying agreement
 Exclusive dealing/exclusive territory
 Price discrimination
 Refusal to deal
 Resale price maintenance/ mark-ups
 Margin squeezing,
 Regulation of combinations etc.

Such an agreement need not be in writing and can be at any stage of production or
sale. It may be a horizontal agreement (eg. Cartels) at the same level of
production/supply or it may be a vertical agreement.

Following are some of the most common examples of anti-competitive agreements:

• Agreement to limit production & supply
• Agreement to allocate markets

Abuse of Dominant Position –

Dominant position means a position of strength enjoyed by an enterprise in the
relevant market in India which allows it to:
Operate independently of competitive forces prevailing in the relevant market; or
Affect its competitors or consumers or the relevant market in its favour.

However, dominance per se is not considered bad by the statute. It's the abuse of
this position of dominance that is prohibited. That statute lays down an exhaustive
list of actions which will be considered to be abuse of dominance. These are:
• Imposing unfair or discriminatory condition or price in purchase or sale of goods or
services; or
• Limiting or restricting:
- Production of goods or provision of services or market therefore;
- Technical or scientific development relating to goods or services to the prejudice of
consumers;
- Indulging in practices which amount to denial of market access;

81
- Making unrelated supplementary obligations a condition precedent for entering into
a contract; and
- Using the dominant position in one relevant market to enter into or protect its
position in another relevant market

The principles laid down under the draft NCP are as following:
 Fair market process;
 Institutional separation between policy making, operations and Regulation;
 Competitive neutrality’;
 Fair pricing and inclusionary behaviour;
 Third party access to ‘essential facilities’;
 Public Policies and programmes to work towards promotion of competition in
the market place;
 National, regional and international co-operation.

Institutional Arrangement to Enforce the NCP:

1. Competition Commission of India;
2. Competition Appellate Tribunal;
3. National Competition Policy Council (proposed)

The annexure-II in the draft NCP, 2011 provides an illustrative list of parameters
which may be considered to limit the competition, which need to be taken in
consideration to formulate the NCP.

As many of the anti-competitive activities in India are contract based and may have
legal validity too as a valid contract. Thus, in view of simultaneous presence of anti-
competitive activities in India and the monopoly rights in IPRs etc suggest a grey
area in the said legal and competition matter. It can be an opportunity to suggest the
legislation to enact the new laws for the same or make amendments in the existing
enactments in order to remove the anomalies.

The legal authority should be given broad powers for restraining anti-competitive
activities and penalizing the precursor of such activities.

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Portuguese Industrial Property Code
Moreover, up until the recent reform of the Portuguese Industrial Property Code in
July 2008, this legislation still provided that trademark registrations could be
annulled if and when the owner of that registration engaged in or could potentially
engage in unfair competition whether intentionally or not. In Portugal, the concept of
unfair competition has been developed in a way which sanctions unfair competitive
behaviour contrary to common practice in commerce and covers conduct causing
economic injury to the market as a whole through a deceptive or wrongful business
practice.
To be characterised as unfair competition, an act must be distinguished from other
specific acts prohibited by law (eg, patent or trademark infringement), but the two
actions are not incompatible if distinct facts exist. In certain conditions, a legal action
against an act of unfair competition can also afford protection to those that cannot
assert IP rights under a patent, design, trademark or copyright. For these reasons
much controversy and legal debate has taken place on whether unfair competition
correctly belongs in the domain of IP law.
It is argued that this legal principle falls within the legal framework of the Industrial
Property Code and is therefore an intrinsic part of IP law. Secondly, it is said that
unfair competition conduct relates to IP Rights given that its subjects are usually
registered owners of trademarks or other IP rights. Others take the view that we are
dealing with two distinct areas of law.
As stated above, the provision regarding the grounds for annulment of trademark
registrations, by including unfair competition as one of the grounds has inevitably
added to this confusion and uncertainty.
Indeed, it has been argued that unfair competition should only be a reaction against
conduct resulting in unfair competition and not a form of extinguishing certain
trademark registrations, particularly since the unfair competition rules operate by
imposing fines.
Fortunately, and as stated above, the provisions of the Industrial Property Code
permitting the annulment of a registered IP right on the basis of unfair competition
were revoked in July 2008.
This means that currently, unfair competition can only be relied upon as a ground
for a refusal to register IP rights and not the annulment of existing ones, although it
may still be auctioned against conduct which violates general rules and customary

83
practices of honesty which may harm the economy and market.

Spain introduced unfair competition legislation in 1991, which is proving to be highly

effective in practice. The Portuguese Industrial Property Code regulates both private
industrial property rights and the principle of unfair competition.

TRIPS Agreement:
The competitive balances sought to be attained by TRIPS are contained in the
objectives and principles. First, Members may, in formulating or amending their
laws, adopt appropriate measures to prevent the abuse of IPRs, restraint of trade or
international transfer of technology. Second, is an interpretive principle in favour of
adopting measures necessary for prevent monopoly abuse by IPR holders and
anticompetitive licensing arrangements, which is put into operation by Article 40 (a
lex-specialis provision to the general provision in Article 8.2), which establishes a
regime for controlling such practices.
Article 40 specifically provides for the possibility of regulating anticompetitive
practices in licensing agreements. This is crucial to ensure the right balance
between competition and the protection of IPRs.
Provisions included in the TRIPS Agreement in connection with unfair competition
are grouped into two categories:
1. undisclosed information such as trade secret, and
2. anti-competitive practices in contractual licenses.

The TRIPS Agreement requires undisclosed information - trade secrets or know-

how - to benefit from protection.
According to Article 39.2, the protection must apply to information that is secret,
which has commercial value because it is secret and that has been subject to
reasonable steps to keep it secret. The Agreement does not require undisclosed
information to be treated as a form of property, but it does require that a person
lawfully in control of such information must have the possibility of preventing it from
being disclosed to, acquired by, or used by others without his or her consent in a
manner contrary to honest commercial practices. “Manner contrary to honest
commercial practices” includes breach of contract, breach of confidence and
inducement to breach, as well as the acquisition of undisclosed information by third
84
parties who knew, or were grossly negligent in failing to know, that such practices
were involved in the acquisition.
The TRIPS Agreement also contains provisions on undisclosed test data and other
data whose submission is required by governments as a condition of approving the
marketing of pharmaceutical or agricultural chemical products which use new
chemical entities. In such a situation the Member government concerned must
protect the data against unfair commercial use. In addition, Members must protect
such data against disclosure, except where necessary to protect the public, or
unless steps are taken to ensure that the data are protected against unfair
commercial use.
Article 40 of the TRIPS Agreement recognizes that some licensing practices or
conditions pertaining to IP rights which restrain competition may have adverse
effects on trade and may impede the transfer and dissemination of technology
(paragraph 1). Member countries may adopt, consistently with the other provisions
of the TRIPS Agreement, appropriate measures to prevent or control practices in
the licensing of IP rights which are abusive and anti-competitive (paragraph 2).
The TRIPS Agreement provides for a mechanism whereby a country seeking to
take action against such practices involving the companies of another Member
country can enter into consultations with that other Member and exchange publicly
available non- confidential information of relevance to the matter in question and of
other information available to that Member, subject to domestic law and to the
conclusion of mutually satisfactory agreements concerning the safeguarding of its
confidentiality by the requesting Member (paragraph 3). Similarly, a country whose
companies are subject to such action in another Member can enter into
consultations with that Member (paragraph 4).

TRIPS and anti-competitive practices-

Appropriate measures, provided that they are consistent with the provisions of this
Agreement, may be needed to prevent the abuse of Intellectual Property Rights by
right holders or the resort to practices which unreasonably restrain trade or
adversely affect the international transfer of technology.

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Article 40 of section 8:
Article 40.1 - Members agree that some licensing practices or conditions pertaining
to intellectual property rights which restrain competition may have adverse effects
on trade and may impede the transfer and dissemination of technology.
Article 40.2 - Nothing in this Agreement shall prevent Members from 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. As provided above, a Member may adopt,
consistently with the other provisions of this Agreement, appropriate measures to
prevent or control such practices, which may include for example exclusive grant-
back conditions, conditions preventing challenges to validity and coercive package
licensing, in the light of the relevant laws and regulations of that Member.

Articles 27 and 31 of TRIPS permits compulsory licensing under conditions of

national emergency or other circumstances of extreme importance or in cases of
public, non-commercial use as embodied under Sections 84 and 92 of the Indian
Patents Act of 1970. The provision of the Indian Patents Act is in line with Article 31
of TRIPS as it allows the use of the patents within certain terms and conditions.

Transfer and dissemination of technology is the central focus of the TRIPS

Agreement’s objectives as articulated in Article 7.

Article 8.2 notes that abuse of intellectual property rights may adversely affect the
international transfer of technology.

Operationalizing these provisions is important because providing developing

countries with access to technologies identified by them as appropriate is an
essential way to accelerate their economic and social development.

Article 66.2: Developed country Members shall provide incentives to enterprises and
institutions in their territories for the purpose of promoting and encouraging
technology transfer to least-developed country Members in order to enable them to
create a sound and viable technological base.

86
Article 66.2 acknowledges that special difficulties may be faced by least developed
countries, and that additional measures over and above the implementation of
Articles 7, 8 and other provisions of the Agreement that promote technology transfer
would be required. It reflects that, unless the price of the technology can be brought
within manageable limits, the high cost of technology will impose a burden on the
local economy of these countries.

Despite the importance of technology transfer, developing countries seem to be

facing increasing barriers to access to technology as a result of a number of factors
including the changing pattern of international economic activity, strengthened
intellectual property rights required by the TRIPS Agreement, and inadequate
counterbalancing policies and measures to promote technology transfer.

Strengthened intellectual property rights required by the TRIPS Agreement may

also inhibit technology transfer. Many prospective technology seekers in developing
countries face serious difficulties in their commercial dealings with technology
holders in developed countries. Stronger intellectual property rights increase the
bargaining power of firms, allowing them to raise royalties and impose more
onerous conditions.

Increasing control over core technologies, the consolidation of patent portfolios, and
increasing vertical and horizontal integration and new strategic alliances allow a
small number of large corporations and countries to dominate the technologies that
are required for the development of many WTO Members, and heighten the barriers
facing these countries when seeking new technologies.

These problems are exacerbated by an absence of policies and measures to

promote technology transfer. There is concern that the provisions of the TRIPS
Agreement that refer to the dissemination and transfer of technology are
inadequate.

Little effort has been made to operationalize Articles 7 and 8, raising questions
about the capacity of the Agreement as currently drafted to promote technology
transfer.

87
Moreover, efforts by developed countries to implement Article 66.2 have been
limited.

While some developed countries have submitted information about national

schemes that may promote technology transfer to least-developed countries, further
information is required to ensure that these meet the requirements of Article 66.2
and are effective.

Together, these factors are widening the gap between technologically rich and poor
countries, with the latter facing increasing barriers to sharing in the benefits of
technological development. They illustrate the need to address in the WTO issues
such as transfer, dissemination and innovation. Previous proposals, made in the
Committee on Trade and Environment and the General Council, have called for
owners to sell environmentally sound technology and products at fair and most
favourable terms and conditions as suggested in the 1992 Rio Declaration, in many
multilateral environmental agreements and in other discussions of sustainable
development. Increased technology transfer on fair commercial rates is also
important in the areas of electronic commerce.

To the extent that intellectual property rules do not promote technology transfer,
WTO Members should consider the establishment of additional mechanisms to
facilitate access by developing and least-developed countries to technologies on a
reasonable basis in order to fully implement the TRIPS Agreement. While
intellectual property rights may occasionally serve as a tool to enhance competition,
strengthened intellectual property rights may have adverse impacts on competitive
markets. WTO Members may wish to examine the implementation of the TRIPS
Agreement to ensure that strengthened intellectual property rights are not having an
adverse effect on competition, especially in developing countries that do not have
established rules and institutions for addressing anti-competitive conduct.

The TRIPS Agreement includes provisions on competition. Article 40 notes,

Members agree that some licensing practices or conditions pertaining to intellectual
property rights which restrain competition may have adverse effects on trade and
may impede the transfer and dissemination of technology.

88
Similarly, Article 8.2 notes that appropriate measures may be required to address
abuses of intellectual property rights.

Intellectual property rights, by nature, restrict competition. In addition, abuses of

intellectual property rights may give rise to problems of cartels, including price fixing,
restrictions on supply, and market and customer divisions. In the international
economy, this tendency is exacerbated by the practice in some industrialized
countries towards granting over-broad patent claims, the acquisition and strategic
use of patent portfolios to prevent competition by similar but non-infringing products,
and the continued blurring of the lines between invention and discovery.

When reviewing the implementation of the TRIPS Agreement, WTO Members

should examine the potential anti-competitive effect of strengthened intellectual
property rights, and ensure that Members retain the right to fully implement Article
40 and take other measures, including those referred to in Article 8.2, to prevent the
abuse of intellectual property rights by right holders. WTO Members, particularly
developing countries, may also wish to consider how to cooperate on a bilateral,
regional or multilateral level to address anti-competitive effects of large international
mergers and acquisitions, especially those that involve consolidation of control over
intellectual property rights. WTO Members should also maintain significant flexibility
to use measures such as compulsory licensing, as permitted by Article 31.

USE WITHOUT AUTHORIZATION OF RIGHTS HOLDER (ARTICLE 31)

Article 31 acknowledges the right of WTO Members to establish as part of their
national legislation an entitlement for third parties and the government to use
patented subject matter without the authorization of the rights holder. Use without
authorization, through compulsory licenses and other measures, is fundamental to
the notion of balance included in the TRIPS Agreement. As part of the Article 71.1
review, WTO Members should assess the implementation of the TRIPS Agreement
with a view to clarifying and extending the provisions Article 31.

Article 31 provides that where the law of a Member allows for other use of the
subject matter of a patent without the authorization of the right holder, including use

89
by the government or third parties authorized by the government, the following
provisions shall be respected.

This is followed by a series of requirements, listed in Article 31(a) to (l), that apply to
the use of compulsory licenses.

Virtually all WTO Members have established procedures permitting use of patented
subject matter without the authorization of the rights holder. In the United States, for
example, literally thousands of uses without authorization have been granted to
address violations of antitrust legislation. Although often used to remedy antitrust
violations, Article 31 does not restrict the grounds upon which a compulsory license
can be granted. Compulsory licensing can be offered in relation to national
emergency, situations of extreme urgency, public non-commercial use, second
patents, and anticompetitive conduct, as noted in Article 31, as well as on other
grounds, including abuses of patents such as refusal to deal, and other cases
affecting the public interest.

Developing countries place great importance on the compulsory licensing provisions

in the TRIPS Agreement. Compulsory licensing provides an important way to secure
the balance of rights and obligations sought by the TRIPS Agreement. It may be
used to accelerate the transfer and dissemination of technology, to safeguard the
supply of essential products to the poor at reasonable rates, and to address the
abuse of intellectual property rights. Compulsory licenses may serve an important
role in encouraging technological innovation by improving access to research
processes and promoting follow-on and incremental research, thereby helping to
ensure the mutual benefit of technology producers and users, as required by Article
7. It may help ensure that patents do not adversely affect access to the drugs
thereby helping to achieve sound public health and nutrition, and promoting the
public interest in sectors of vital importance to socio-economic and technological
development in a manner consistent with the TRIPS Agreement, as required by
Article 8.1. It may also be used to address abuses of intellectual property rights and
practices that restrain trade or affect technology transfer, as suggested in Article
8.2.

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In the TRIPS Agreement, the importance of balancing rights and obligations is
underlined in Article 7. Article 8.2 similarly acknowledges that WTO Members may
need to develop appropriate measures to prevent the abuse of intellectual property
rights by rights holders, or the resort to practices that unreasonable restrain trade or
affect the international transfer of technology.

Empirical evidence on the role of intellectual property protection in promoting

innovation and growth remains inconclusive. Diverging views also persist on the
impacts of intellectual property rights on development prospects. Some point out
that, in a modern economy, the minimum standards laid down in TRIPS will bring
benefits to developing countries by creating the incentive structure necessary for
knowledge generation and diffusion, technology transfer and private investment
flows. Others stress that IP, especially some of its elements, such as the patenting
regime, will adversely affect the pursuit of sustainable development strategies by:
raising the prices of essential drugs to levels that are too high for the poor to afford;
limiting the availability of educational materials for developing country school and
university students; legitimizing the piracy of traditional knowledge; and undermining
the self-reliance of resource-poor farmers.

It continues to be urgent, therefore, to ask how developing countries can use IP

tools to advance their development strategy. What are the key concerns
surrounding the issues of IP for developing countries? What are the specific
difficulties they face in IP negotiations? Is IP directly relevant to sustainable
development and to the achievement of agreed international development goals?
How we can facilitate technological flows among all countries? Do they have the
capacity, especially the least developed among them, to formulate their negotiating
positions and become well informed negotiating partners? These are essential
questions that policy makers need to address in order to design IP laws and policies
that best meet the needs of their people and negotiate effectively in future
agreements.

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ICTSD Programme on Intellectual Property and Sustainable Development

To address some of these questions, the ICTSD Programme on Intellectual

Property and Sustainable Development was launched in July 2000. One central
objective has been to facilitate the emergence of a critical mass of well-informed
stakeholders in developing countries – including decision makers, negotiators but
also the private sector and civil society – who will be able to define their own
sustainable human development objectives in the field of IP and effectively advance
them at the national and international levels.

This study is an additional contribution to the debate on IP and sustainable

development and particularly in responding to the need for increased awareness
and better understanding of the interface between IP and competition policy. An
underlying assumption of work on IP has been the pursuit of a proper balance
between the different interests at stake in designing appropriate regimes compliant
with international commitments. These regimes, as in the case of countries with
strong traditions in IP, are designed taking into account adequate checks and
balances. Competition law and policies are essential components of these checks
and balances.

US Anti-trust Law or Competition law

Anti-trust law is concerned with the preservation of the freedom of competition by
combating restraints on trade and abuses of economic power, while unfair
competition law is concerned with ensuring fairness in competition by forcing all
participants to play according to the same rules. Both laws are equally important,
although in different respects, and supplement each other.

Anti-trust laws or competition laws are to promote a business environment in

support of sound competition for further innovation and economic efficiency.
Agreements between corporations, whether they may or may not include IP
aspects, are likely to discourage further innovation and increase prices of the
products concerned, if such agreements contain arrangements or obligations which
restrict marketing, prevent follow-on improvements of technologies, control the price
of the product and abuse the licensor’s dominant position in the market. Anti-trust
laws or competition laws are intended to correct such restrictive and abusive
92
business practices and activities. To balance anti- trust laws or competition laws on
one hand, and the IP laws on the other requires constant review of all the relevant
laws and case-by-case analysis of contractual agreements.

Anti-trust authorities in some jurisdictions49 tried to codify guidelines for IP licensing

agreements.

These guidelines reflect their different approaches to the issues but often provide
coherent rules. For example, concerning grant back (an arrangement under which
a licensee agrees to extend to the licensor of intellectual property the right to use
the licensee's improvements to the licensed technology), exclusive grant backs are
generally considered anti-competitive. In other words, non-exclusive grant back is
considered pro- competitive and permissive under anti-trust laws and competition
laws, because “non-exclusive grant back arrangements provide a means for the
licensee and the licensor to share risks and reward the licensor for making possible
further innovation based on or informed by the licensed technology, and both
promote innovation in the first place and promote the subsequent licensing of the
results of the innovation.”50

It is a basic principle that in the event of an irreconcilable conflict between measures

to protect fundamental policy considerations (such as protecting human health), and
the rules of the multilateral trading system (such as non-discrimination), the former
should in certain circumstances prevail.

49
US Fair Trade Commission;
http://www.usdoj.gov/atr/public/guidelines/0558.htm

EC Technology Transfer Block Exemptions;

http://www.ipit-update.com/compec04.htm

Japan Fair Trade Commission’s Guidelines for the Use of Intellectual Property
under the Anti-monopoly Act;
http://www.jftc.go.jp/e-page/legislation/ama/070928_IP_Guideline.pdf
50
Unfair Competition, Anti-trust Law and IPR
93
Other National Laws

Most countries with special laws on unfair competition have adopted the same or
similar definitions for their general provision—using such terms as “honest trade
practices” (Belgium and Luxembourg), “the principle of good faith” (Spain and
Switzerland), “professional correctness” (Italy) and “good morals” (Germany,
Greece and Poland).

In the absence of specific legislation, the courts have defined fair competition with
phrases like “the principles of honesty and fair dealing” or “the morals of the
marketplace” (United States of America).

94
 CASE LAWS

Entertainment Network (India) Ltd. v. Super Cassette Industries Ltd.

MANU/SC/ 2179/2008
The Hon’ble Supreme Court in the case observed: When the owner of a copyright or
the copyright society exercises monopoly in it, then the bargaining power of the
owner of a copyright and the proposed licence may not be same. When an offer is
made by an owner of a copyright for grant of licence, the same may not have
anything to do with any term or condition which is wholly alien or foreign therefore.
An unreasonable demand if acceded to, becomes an unconstitutional contract
which for all intent and purport may amount to refusal to allow communication to the
public work recorded in sound recording....

The word “public” must be read to mean public of all parts of India and not only a
particular part thereof. If any other meaning were assigned, the terms “on terms
which the complaints considers reasonable” would lose all significance. The very
fact that refusal to allow communication on terms which the complainant considers
reasonable have been used by the Parliament indicate that unreasonable terms
would amount to refusal. It is in that sense the expression “has refused” cannot be
given a meaning of outright rejection or denial by the copyright owner...
What would be reasonable for one may not be held to be reasonable for the other.
The principle can be determined in a given situation. We wish the statute had been
clear and explicit. But only because it is not, the Courts cannot fold its hands and
express its helplessness.

This scheme shows that a copyright owner has complete freedom to enjoy the fruits
of his labour by earning an agreed fee or royalty through the issuance of licences.
Hence, the owner of a copyright has full freedom to enjoy the fruits of his work by
earning an agreed fee or royalty through the issue of licences. But, this right, to
repeat, is not absolute. It is subject to right of others to obtain compulsory licence as
also the terms on which such licence can be granted.... 51

51 Intellectual Property and Competition Law, P.N. Parashar, Competition Law Reports, Jul. 2010 - Sep. 2010

95
Gramophone Company of India Ltd. v. Super Cassette Industries Ltd.
MANU/DE/1801/2010 (Decided On 01.07.2010)
The Hon’ble High Court of Delhi in this case observed that at the outset, Section 16 of the
Act may be noticed. Section 16 provides that no copyright can be acquired in respect of any
work except in accordance with the provisions of the Act. Therefore, copyright is a statutory
right. Only those rights which the copyright Act creates; to the extent it creates, and subject
to the limitations that the Act imposes, vest in the owner of the copyright in the work,
whether it is a primary work such as a literary, dramatic or musical work, or a derivate work
such as a sound recording or cinematograph film. No right, which the Copyright Act does
not expressly create can be inferred or claimed under the said Act.
It further observed that the rights conferred by Section 14 are “subject to the provisions of
this Act”. Therefore, Section 14 has to be read in the light of, and subject to the other
provisions of the Act. It is seen that the copyright in derivative works viz. cinematograph film
and sound recordings are limited right when compared to the rights in primary works viz.
literary, dramatic or musical works.
If the statute that confers the copyright itself is read down in cases involving purely
commercial work, the provisions of the Competition Act, 2002 cannot be applied/interpreted
in a manner that excludes an anti-competitive agreement which supposedly seeks to
protect any, and all copyrights whether or not conferred by the statute. The exemption
under Section 3(5) of the Competition Act is not a blanket one and must be available to only
such cases where the restrictions imposed are reasonable and necessary for protecting the
rights conferred by the Copyright Act.
There is no tension in the goals sought to be achieved by intellectual property rights and
competition law. In fact to the contrary, the goals in both cases are broadly the same i.e.
wealth maximisation and public interest.
Therefore, an agreement which is anticompetitive in nature is not exempt from Section 3
purely on the ground that it involves protection of intellectual property rights. For the
exemption to be available in a particular case, it is necessary that the consequences of the
anti-competitive conditions be outweighed by the necessity to protect the IP rights involved.
There may on occasion exist, therefore, a fine line between actions protecting the legitimate
interest of a patent owner and antitrust law violations. On the one hand, the patent owner
must be allowed to protect the property right given to him under the patent laws. On the
other hand, a patent owner may not take the property right granted by a patent and use it to
extend his power in the marketplace improperly.52

52 Intellectual Property and Competition Law, P.N. Parashar, Competition Law Reports, Jul. 2010 - Sep. 2010

96
BAYER VS NATCO (Nexavar case)

India's First Compulsory License (CL) Granted in relation to Bayer's patented anti-
cancer drug (Nexavar) by Controller General Kurian who issued the order on 9th
March 2012.
The Compulsory License Order is a thoroughly well researched and logically
reasoned one. After a 3 day hearing, the Controller General (CG) found in favour of
Natco on all counts and issued a license in their favour.
Natco is now free to manufacture and sell a generic version of Nexavar (a
kidney/liver cancer drug that goes by the generic name of Sorafenib Tosylate), but
will have to pay a 6% royalty on the net sales (every quarter) to Bayer. Further, it
can only charge Rs 8800 for a monthly dose (120 tablets) of the drug (in its
compulsory licensing application, Natco committed to sell at this price). In its written
submission, Natco also committed to donating free supplies of the medicines to 600
needy patients each year and this commitment has also been recorded in the
compulsory licence (CL) order.

In order to appreciate the order, one must begin with section 84 of the Indian
Patents Act, which reads as below:
Section 84:
“(1) At any time after the expiration of three years from the date of the 1[grant] of a
patent, any person interested may make an application to the Controller for grant of
compulsory licence on patent on any of the following grounds, namely:— (a) that the
reasonable requirements of the public with respect to the patented invention have
not been satisfied, or (b) that the patented invention is not available to the public at
a reasonably affordable price, or (c) that the patented invention is not worked in the
territory of India.”

The Controller found that all the 3 criteria above were satisfied in this case, namely:
1. that since Bayer supplied the drug to only 2% of the patient population, the
reasonable requirements of the public with respect to the patented drug (Nexavar)
were not met.
2. that Bayers pricing of the drug (2.8 lakhs for a months' supply of the drug) was

97
excessive and did not constitute a "reasonably affordable" price.
3. that Bayer did not sufficiently "work" the patent in India.

Each of these grounds are explicated below:

1. Reasonable Requirements of the Public not being met:
Based on Bayers' own admission, the Controller found that only 2% of the total
number of kidney and liver cancer patients were able to access the drug:
"By his own admission, the Patentee has submitted the number of patients eligible
for Sorafenib is 8842 per year. Hence, the Patentee has made available the drug
only to a little above 2% of the eligible patients. .... Accordingly I hold that the
reasonable requirements of the public with respect to the patented invention have
not been satisfied in this case and consequently a compulsory license be issued to
the Applicant under section 84 of the Act."

In order to make its drug more accessible to the general public, Bayer argued that it
must be given some more time to work the patent. Bayer offered to amend its
existing patient assistance programme (where a patient would have to buy 1 months
drug supply at the regular price (Rs 2.8 lakhs) and would get it free for the
remaining 3 months) such that a patient would only have to pay Rs 30,000 per
month for the drug. In this way, it hoped to match Cipla's pricing and thereby thwart
a compulsory licensing order.

However, the Controller rightly found that this proposed philanthropy, while
noteworthy did not enable Bayer to escape the issuance of a compulsory license.
He noted: "the proposal of the patentee appears to be philanthropic in nature, as
per the submission of the patentee. In the present proceedings, we are not
concerned with philanthropy, which no doubt is appreciable. Such actions cannot be
construed as steps to work the invention on a commercial scale to an adequate
extent."

2. Excessive Pricing:
The Controller found that the price of the drug was not "reasonably affordable" to
the public: "During the last four years, the sales of the drug by the Patentee at a
price of about Rs 2.8 lakhs (for a therapy of one month) constitute a fraction of the

98
requirement of the public. It stands to common logic that a patented article like the
drug in this case was not brought by the public due to only one reason, i.e. its price
was not reasonably affordable to them."
He further countered Bayer's argument that "reasonably affordable" price had to be
construed with reference to the public and the patentee (in other words, the
patentee's R&D costs must be considered): "I am of the view that reasonably
affordable price has to be construed predominantly with reference to the public."

The order also castigates Bayer for adopting a "two faced" stand before the tribunal.
Bayer argued that since Cipla sells cheaper generic versions in the market (at Rs
30,000 per monthly dose of Sorefanib), there was no need for a compulsory license.
The controller rightly dismissed this argument, since Bayer had challenged Cipla's
right to sell the generic version in the market through a patent infringement law suit,
and was now relying on this alleged illegality to ward off a compulsory licensing
order.
Further, it has observed that "The Patentee appears to be indulging in two-
facedness by adopting one stand before this tribunal and another stance before the
Hon'ble High Court of Delhi, in order to defend the indefensible. M/s Cipla is an
alleged infringer, as per the patentee's own submissions, and accordingly cannot
discharge the obligations of Patentee under the Act. The Patentee appears to have
treated M/s Cipla, in this case, as if they are their licensee."

3. Non-working of the Patent:

The Controller found that mere importation of Bayer's drug into India did not amount
to "working" and held in pertinent part that: "I am therefore convinced that 'worked in
the territory of India" means manufactured to a reasonable extent in India."

This part of the decision is likely to prove controversial, since almost 90% of all
pharmaceutical patents are only imported into India. Therefore, under the terms of
this order, all of these drugs are now susceptible to compulsory licenses in India.

The Controller convincingly argues that the Indian patents act endorses a "local"
working provision and that such a provision is compatible with TRIPS and the Paris
Convention.

99
Section 83 of the Act makes clear that patents are not granted only for the purpose
of “importation” of the patented product. In fact, the Act uses the terms "working"
and "importation" quite distinctly throughout the Act, making it evident that "working"
as used in the Act cannot include "importation".

Some argue that a local working provision contravenes the mandate under Article
27 to not “discriminate” between locally produced and imported patented products.
Given the fact that in the WTO Canada case, the panel stated that discrimination
meant “unjustified differentiation”, one could argue that “local working” is a “justified”
differentiation. For one, the Paris Convention clearly stated that “importation” would
not amount to working of a patent, and that if a patent wasn’t worked, this could be
treated as an “abuse”. Secondly, TRIPS is premised on the promise of technology
transfer to developing countries. And a local working provision is geared towards
encouraging such technology transfer. By forcing patentees to “work” their patents
in India, the regime encourages local use/transfer of the said technology. A similar
provision on “local working” in Brazil’s regime was challenged by the US—however,
the case was later withdrawn and there was no ruling.

Royalty Rates
Perhaps the only part of the order that was not as elaborately reasoned out as the
rest of the order was the portion relating to a determination of royalty rates. But this
could stem from the fact that the Controller himself had very less material to go by.
After discussing the not so complete figures submitted by the patentee, he endorsed
the UNDP proposal for 6% royalty rate in cases of good therapeutic value.
He noted: "I have also carefully analysed the royalty practices/guidelines generally
adopted globally. United Nations Development Program (UNDP) specifically
recommended that rates normally be set at 4% and adjusted upwards as much as
2% for products of particular therapeutic value....In the present case, I am satisfied
that anything lesser than 6% would not be just and reasonable given the facts and
circumstances of this case as discussed above. Hence I hereby settle that the
royalty be paid to the patentee in this case shall be 6% of the net sales of the drug
by the licensee.

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Referencing Reports and Academic Submissions-
Lastly, this is one of the very few government orders to attribute and acknowledge
academic contributions and reference material.
The order states: "Present case is the first of its kind in the history of Patents Act,
1970....As such, there is no precedent to guide this tribunal. Relevant persuasive
material has been submitted by both parties. In order to appreciate all the issues
involved..., the hearings went on for three days for a total of eighteen hours.
Reasonable research has also been conducted by the tribunal to study, inter alia,
the provisions of the International Agreements and Conventions on Intellectual
Property Rights as well as laws of other TRIPS member countries to arrive at this
order. This includes the articles published by WHO, UNDP, Mr Carlos M Correa,
University of Buenos Aires and Professor Shamnad Basheer."

Conclusion: This is effectively India's first patent compulsory licensing order in the
post TRIPS era.

In many ways, it sets the tone for future cases and will spur many other generics to
resort to this route. To this extent, it will certainly be music to the ears of several
patient groups and NGO's that have been battling pharmaceutical patents and
excessive prices for many years now. Many have been puzzled by the lack of
initiative shown by generic companies in availing of the extremely wide compulsory
licensing grounds articulated in India's patent regime.

Perhaps Natcos' baby step in this regard may pave the way for a giant leap of sorts,
where many more drug patents are subjected to this "stick" so as to help bring down
what are by most standards, highly excessive prices for a country like India. In fact,
given that more than 90% of MNC drugs are imported into India, this order may
pave the way for wholesale compulsory licenses to be issued against a wide
spectrum of drugs in the near future. This interpretation of "working" to mean "local
working" (local manufacture within India) may in fact prove the most controversial
part of the order and may perhaps attract a TRIPS challenge as well.

This order may also prompt other countries, particularly developing countries to
adopt similar provisions and issue similar orders. Lastly, one hopes that it prompts

101
innovator drug companies to engage in more significant differential pricing
schemes and introduce drugs at much cheaper prices in countries with a significant
number of extremely poor patients such as India.

However, this may not be the end of the story for Bayer. It is likely to appeal the
order and will no doubt adopt creative legal strategies to block the Controller's order
from being implemented, as it has done in the past.

Further, it must be noted that both Cipla and Natco have challenged the validity of
Bayer's patent in a separate proceeding before the Delhi High Court (and the IPAB).
If this challenge is successful, then the compulsory license by Natco becomes
infructuous. All generics are then free to manufacture this drug without paying any
royalty to Bayer.53

Hawkins Cookers Limited v. M/s Murugan Enterprises54

The Delhi High Court was of the opinion that dominance of firms could not be
encouraged by Courts if such dominance was abused by the companies by creating
a monopoly in the market with respect to the "trade-marks" thereby affecting the
market share of other firms who are in direct competition with such dominant firms.
Here the Murugan enterprise’s use of the Hawkins trademark to show compatibility
of the gasket is not unlawful.

MAHYCO-MONSANTO CASE
In another case of Mahyco-Monsanto was found guilty of price gouging (pricing
above the market price when no alternative retailer is available) in a Bt-cotton case
filed by the Andhra Pradesh Government and some civil society organisations
before the Monopolies and Restrictive Trade Practices Commission of India.
Mahyco–Monsanto was charging an excessively high royalty fee for its Bt gene,
which made the seed too expensive for the farmers. As there was no competition
due to their IPR on Bt cottonseeds, Mahyco-Monsanto had a monopoly and had
acted arbitrarily.

53 Shamnad Basheer at blog spicyIP

54 Hawkins Cooker Ltd v. M/s Murugan Enterprises [2008(36) PTC 290(Del)]

102
There have been cases such as Mahyco-Monsanto which prove that this subject
deserves more attention than it has received in the past. In that case, Mahyco-
Monsanto was found guilty of price gouging (pricing above the market price when
no alternative retailer is available) in a Bt cotton case filed by the Andhra Pradesh
Government and some civil society organizations before the Monopolies and
Restrictive Trade Practices Commission of India. Mahyco-Monsanto was charging
an excessively high royalty fee for its Bt gene, which made the seed too expensive
for the farmers. As there was no competition due to their IPR on Bt cottonseeds,
Mahyco-Monsanto had a monopoly and had acted arbitrarily.

Vallal Peruman and Another v. Godfrey Phillips (India) Limited. (MRTP

Commission, 1994) and
Manju Bhardwaj v. Zee Telefilms Ltd (MRTP Commission, 1996)

Both the aforementioned judgments clearly said that where a trademark is misused
by manipulation, distortion, contrivances and embellishments so as to mislead the
consumers, he would be exposing himself to an action.

US v. S C Johnson & Sons (c iv. No. 4089 - 59 fed. reg. 43, 859, 25th August,
1994)

Bayer AG was a major global supplier of insecticides except in USA. It developed a

new unique and potent active ingredient for insecticides for household use and
secured a patent for the technology. It licenced the new technology to S C Johnson
& Sons, a dominant market leader in pesticides market, the market share being 50-
60 per cent. The Antitrust Division of the US challenged in the US Court, this
licensing arrangement which reduced incentives of Bayer to compete with Johnson
in manufacture and sale of household insecticides and which further helped
Johnson to increase its dominance in the US market. The Court decided that Bayer
should offer the patented ingredient to other pesticide manufacturers on reasonable
terms. Further, Johnson's competitors were allowed access to active ingredients
that Bayer may introduce later. Through this decision, the court sought the
maintenance of competitive markets while protecting the IPR.

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Radio Telefis Wireann (rte) vs European Commission {c 241 - 242/91p, (1995)
IECR 743, (1995) 4 CMLR 718}

TV stations in UK and Ireland published weekly TV guides covering their

programmes exclusively and claimed copyright protection. Magill TV guide wanted
to publish a comprehensive guide of TV programmes, but was prevented by TV
stations on the ground of copyright infringement. By this prevention, the TV stations
sought to ensure that third parties did not reproduce their programme listing. This
matter went up to the European Court of Justice (ECJ).
ECJ concluded that only those restrictions on freedom of competition inherent in
protection of IPR could be permitted. It observed that refusal to grant a licence in
exercising an Intellectual Property Right would not by itself be an abuse of a
dominant position but would be, where special circumstances existed. The refusal of
the TV stations based on their reliance on copyright provisions prevented the
creation of a new product (Magill's comprehensive guide), for which there was
customer demand. The TV stations by such refusal to deal excluded competition in
the market. This, according to the ECJ constituted an anti-competitive practice
trenching consumer interest.

US v. Pilkington, Civ No. 94-345, 59 Fed. Reg.30604, 1994

Pilkington is a famous well-known British glass manufacturer. It entered into patent

and licensing arrangements with several manufacturers worldwide. The licences
restricted manufacture in specific territories, shipment by each Licencee of glass
outside designated territories and sublicensing and imposition of field-of-use. What
is more, the licences provided for grant backs to Pilkington on improvements done
by the Licencees. Pilkington's patents on float glass process had expired in early
1980's but the Licencees were still subject to the restrictions unless the Licencees
could prove that all of the licenced technologies were publicly known. If the
Licencee was a US company or firm, it was restricted from exporting its eon glass
manufacturing technologies and was also prevented from taking overseas bids. In
this scenario, the over claim on the part of Pilkington came in the way
of competition. In particular, the secret behind its technology was over claimed by

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Pilkington in such a way that it deterred or prevented the Licencees from inventing
around Pilkington's patents. Pilkington, through the restrictive licences limited and
controlled competition in the world market.

Eastman Kodak Co. v. Image Technical Services, 112 S. Ct.2072 (1992)

Kodak tied the service agreement with its printers to exclude the other from the
market who also provided the services for the printers.

Hartford-Empire Co. V. United States

A case came up before the Supreme Court of that country, wherein competitors
indulged in what is known as cross-licensing. They cross licenced their patents in
the field of glass manufacturing equipment. This resulted in the creation of
monopoly. Consequent on acquisition of patents and cross-licensing, pooling acted
as a barrier for others, particularly new entrants. Pooling of patents through cross-
licensing excluded competitors and potential entrants from manufacturing glass
products and vending the same. Competition was restricted and consumer interest
adversely affected. Merging of patents into a pool controlled the market. The Court
noted that more than 90 per cent of the glass containers were on the machinery
licenced under the pooled patents. The Supreme Court ruled that Sherman Act was
violated by the pooling and cross-licensing practice.

Union of India v. Cynamide India Ltd. and Anr.

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.

Director-General (Investigation and Registration) v. Indian Drugs

Manufacturers Association and Anr.

The inquiry related to an increase in the price of drug owing to an agreement

between the manufacturers acting as sellers on the one hand and the chemists and
druggists acting as purchasers on the other for fixing a uniform discount price over
whole-sellers and retailers. The Tribunal held that any agreements between the

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buyer and sellers would not be restrictive practice under the MRTP Act. Although
this is not a case under theCompetition Act.

Director General (Investigation and Registration) v. Parke Davis India Ltd. and
Ors.

It was alleged that a Loan Licence Agreement was entered by Parke Davis with a
Small Scale Unit ("SSU") for manufacturing the impugned formulations with the
purpose of circumventing the need for obtaining prior approval of price fixation
under the Drugs Price Control Order (DPCO). The MRTP Commission held that
Section 2(o) of the MRTP Act was not attracted as the alleged trade practice was
not restrictive and did not have the effect of preventing, distorting or
restricting competition.

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 CHAPTER (VII) ANALYSIS AND INTERPRETATIONS

The interface between IPRs and competition law has evolved several types of
restraints on competition. While no one has sought to contend that licensing
agreements are per se anticompetitive, the focus of these restraints is typically a
licensing agreement which could adversely affect competition by artificially dividing
markets among enterprises and possibly impeding the development of new goods
and services.

More specifically, the phenomenon of exclusive licensing, manifested through

several unilateral market tactics by enterprises such as tie-in arrangements,
exclusive dealing, licensing restrictions (covering grant back clauses, extensions of
IPR terms and field of use restrictions) as well horizontal agreements (like pooling
and cross-licensing by parties collectively possessing market power), have attracted
the attention of competition regulation authorities across the world.

Competition Policy Principles:

Taking into account the needs of and priorities for promoting a healthy competition
culture the principles of the National Competition Policy are:

a. Fair market process: Market regulation procedures should be rule

bound, transparent, fair and non-discriminatory. Public interest tests are
to be used to assess the desirability and proportionality of policies
and regulations, and these would be subject to regular independent
review.

b. Institutional separation between policy making, operations and

regulation i.e. operations in and regulation of a sector should be
independent of the government branch which deals with policy
formulation in the sector and is accountable to the Legislature.

c. ‘Competitive neutrality’, such as adoption of policies which establish a

‘level playing field’ where government businesses compete with private
sector and vice versa.

d. Fair pricing and inclusionary behaviour, particularly of public utilities

and intellectual property rights holders, which could be imbued with
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 monopolistic characteristics and a large part of the consumers could be
excluded.

e. Third party access to ‘essential facilities’, i.e. requiring dominant

infrastructure owners to grant to third parties access (e.g.,
electricity, communications, gas pipe lines, railway tracks etc) to their
infrastructure on agreed terms and conditions and at regulated prices,
aligned with competition principles. Such treatment can be given to
intellectual property rights as well if the IPR concerned possesses
essential infrastructure characteristics.

f. Public Policies and programmes to work towards promotion of

competition in the market place; and
g. National, regional and international co-operation in the field of
competition policy enforcement and advocacy.

Under Competition law, the unavailability of substitutes in the market may establish
dominance in the market. Likewise a comparison of market shares between
dominant firm and their competitors is useful in determining dominance as well as
monopoly. Even then, there seems to be a difficulty in determining the minimum
percentage of the market share that could establish dominance and/or monopoly of
a particular firm in the market. Various judgments vis-à-vis dominance has also not
been able to establish a minimum percentage that indicates dominance of a firm.

Anti-competition laws in order to combat the IPR monopolies often include two
important measures namely compulsory licensing and parallel imports. A
compulsory license is where an IPR holder is authorized by the state to surrender
his exclusive right over the intellectual property, under article 31 of the Trade-
Related aspects of Intellectual Property Rights (TRIP). Compulsory licenses are
granted under certain circumstance such as in the interest of public health, national
emergencies, nil or inadequate exploitation of a patent in the country, and for an
overall national interest. A parallel import on the other hand includes goods which
are brought into the country without the authorization of the appropriate IP holder
and are placed legitimately into a market.

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In addition, 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. Firstly, patent pooling is a restrictive
practice wherein firms of a particular manufacturing industry decide to pool their
patents and agree not to grant licenses to third parties, simultaneously fixing quotas
and prices. Secondly, a clause that restricts competition with respect to research
and development or which prohibits a licensee to use rival technology is considered
anti-competitive under the law. Thirdly, a licensor under the law is prohibited from
fixing the price at which the licensee should sell his goods. The above mentioned
examples are not by any means exhaustive, but are a few illustrations
demonstrating anti-competitive provisions applicable to IPR under the Act.
Furthermore, under Section 27 of the Act, the Competition Commission of India (the
Commission) has the authority to penalize IPR holders who abuse their dominant
position. Further, under Section 4 of the Act the Commission is also authorized to
penalize the parties to an anti-competitive agreement, which is in contravention of
Section 3 of the Act.

It was contended that competition law continues to be a vital means of ensuring

continued innovation and economic growth. Competition policies generally doing
advocacy concerned with anti-competitive practices such as abuse of dominant
position whatever be the source of such practices, including abuse of IPRs.

Intellectual property rights may be protected by unfair competition legislations too.

Unfair competition rules also deal with know-how by defining as unfair competition
the disclosure or exploitation of industrial or other business secrets obtained lawfully
on the understanding that they would be kept confidential, without the consent of
their owner. The difference between these private rights (IPRs) and unfair
competition has been strengthened and safeguarded consistently over the years.

It seems that the relationship between intellectual property and subject regulating
competition need attention, particularly as a result of the expansion and
strengthening of IP protection at the global scale. While IP law deliberately subjects
intellectual assets to the exclusive control of IPRs owners, competition law seeks to
avoid market barriers and benefit consumers by encouraging competition among a

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multiplicity of suppliers of goods, services and technologies. Such challenges are
particularly complex in developing countries including India, the majority of which
have little or no tradition in the application of competition law and policies. In fact, in
most of these countries IPRs have been expanded and strengthened in the absence
of an operative body of competition law, in contrast to developed countries where
the introduction of higher levels of IP protection has taken place in normative
contexts that provide strong defences against anti-competitive practices.

Thus aims and objectives of IPRs and competition laws are seem to be
complementary to each other, as both aims to encourage innovation, competition
and enhance consumer welfare. It is vitally important to preserve competition in
innovation because competition ensures the best outcome for consumers.

Indian economy after a slew of measures taken post-1991 is on a high growth

path. In the recent years the Indian economy has been one of the strongest
performers in th e wo rld . However, the f ull gro w potential of the economy
remains yet to be realised. Infusion of greater degree of competition can play a
catalytic role in unlocking the fuller growth potential in many critical areas of the
economy, which hitherto has been held back by restriction on competition in
various forms. However, still much is required to be done in several endeavours
of Central and State Government where a well-designed Competition Policy
reflecting a broad consensus of major stakeholders, can play very useful and
effective role. It would be desirable to undertake competition assessment of
existing and proposed public policies that unduly restrict competition and develop
specific and transparent criteria for performing competition assessment, including
the preparation of screening and monitoring mechanism. Greater transparency and
adherence to competition principles in different sectors and activities could
ultimately boost India’s growth and help our country to attain a double digit growth
on an inclusive and sustainable platform. Two decades after the first generation
economic reforms of 1991 perhaps the National Competition Policy can provide the
necessary push to unlock the fuller growth potential of the Indian economy.

The advantages of perfect competition are three-fold:

1. allocative efficiency, which ensures the effective allocation of resources,

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 2. productive efficiency, which ensures that costs of production are kept at a
minimum and
3. dynamic efficiency, which promotes innovative practices.

The achievement of a healthy competition culture promotes an orderly growth and

economic democracy, enhances economic development and enables proper
resource allocation, which is a necessary condition for growth, poverty reduction
and sustainable development.

In sum, a healthy competition culture thus helps to:

• enhance consumer welfare,
• promote fair trading,
• encourage innovation,
• preserve scarce resources,
• contribute to environmental conservation,
• achieve economic efficiency, and
• check concentration of economic power

The political will seems also in favour of building a competition culture in the
economy as the on-going process for the formulation of the National Competition
Policy reflects.

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 CHAPTER (VIII) FINDINGS AND SUGGESTIONS

The 2001-Nobel Prize winner Joseph Stiglitz has rightly said: “Strong competition
policy is not just a luxury to be enjoyed by rich countries, but a real necessity for
those striving to create democratic market economies”.

The limited monopolies granted by IPRs are not per se anticompetitive or

excessively exploitative—they only become anticompetitive when the IPR holder
looks to extend those rights beyond their intended and proper scope.

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.

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.

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The present IP system, international and national levels, should be evaluated in light
of the crucial need for “balances” in the IP system, to enable both innovation and
the meeting of the public interest and development needs.

In recent years, this balance has shifted worldwide too much to the side of IP
holders in both international IP frameworks and in national law or practice of many
countries.

This is of concern particularly for developing countries as the characteristics and

conditions of such countries make them especially susceptible to adverse effects.

The global harmonization of IP laws (towards the standards and practices of

developed countries), especially through the WTO, WIPO and bilateral/regional
agreements, has contributed to the imbalances and the spread of conditions that
make it more difficult for developing countries and their enterprises and institutions
to compete.

Thus, a review of the international IP frameworks is required to determine the

sources of the imbalances, while a review of national frameworks are also required
so that the existing flexibilities can be properly made use of.

Meanwhile, further harmonization initiatives at international level should be reviewed

in light of the need to regain balance.

In conclusion, IP law cannot be designed and applied in isolation from other legal
disciplines, particularly competition law. The “competition policy” approach suggests
that creating and preserving the conditions for competition and market contestability
in the area of IPRs, is not only the task of “competition law” or “antitrust” authorities.
Defining the right balance between competition and IPRs is an objective to be
achieved through a diversity of policies and regimes.

To the extent that the interface is reflected hereby, it is complex and multifaceted.
There are many complementary elements: the IPR system promotes innovation,
which is a key form of competition; on the other hand, competition policy, by

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keeping market open and effective, preserves the primary source of pressure to
innovate and diffuse innovation. But there are also conflicts such as when an IPR
serves to entrench market power. A regulatory balance, therefore, should be
maintained and simplistic approaches should be avoided at all costs.

“Enforcement of competition laws no longer begins with the assumption that

restrictive use of IP is necessarily anti-competitive. Current enforcement instead
starts with three basic assumptions about intellectual property: First, intellectual
property is comparable to other forms of property, so that ownership provides the
same rights and responsibilities; second the existence of intellectual property does
not automatically mean that the owner has market power; and third, the licensing of
IP may often be necessary in order for the owner efficiently to combine
complementary factors of production, and thus may be pro-competitive.”55

A number of recommendations can be made to developing countries such as in

India, namely:
 Top priorities should be accorded in making the Competition Commission
effective and functional
 Areas of MSME interest need to be identified, that could be covered (or taken
on priority) under the Competition Policy regime
 Competition principles need to be embedded in all government policies/
services including industrial policies and public procurement
 establish or strengthen competition laws in order to control, inter alia,
possible abuses emerging from the acquisition and exercise of IPRs
 consider the competition implications of various policies and regimes that
determine market entry, such as marketing approval of pharmaceutical and
agrochemical products
 ensure an adequate coordination among the competition law agency and
other agencies whose decisions may influence market structure and
operation, with the aim of maintaining a competitive environment fully use the
flexibilities allowed by the TRIPS Agreement to determine the grounds for

55
William Baer, Director of the US FTC
114
 granting compulsory licences to remedy anti-competitive practices relating to
IPRs
 consider, in particular, the granting of compulsory licences in cases of
refusals to deal
 conceptualise and apply the essential facilities doctrine as required to
address situations of control of essential technologies, taking into account the
relevant market conditions and public needs
 develop policies, including guidelines, to prevent and correct abuses in the
acquisition and enforcement of IPRs
 address situations that may normally lead to anti-competitive conduct such
as “package” and “thicket” patents
 adopt guidelines for use at the patent offices to prevent the granting of
frivolous or low quality patents, as well as patents containing overly broad
claims, which may be used to unduly restrain legitimate competition and
block innovation
 avoid “linkage” provisions and data exclusivity in order to promote
competition in markets of regulated products.

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 Annexure I:
Genesis of Competition Policy in India

The process of economic reforms which had been initiated in 1980s gathered pace
and momentum in 1990s. The Industrial Policy Statement of 1991 noted that
operating in an over regulated environment was detrimental for competitiveness in
the international economy and technological dynamism. There were major
complementary policy reforms in the financial sector, especially in banking,
stock market and insurance. The same thread ran through other sectoral
reforms like in telecom, civil aviation, manufacturing, and other infrastructure
sectors where public private partnership (PPP) was introduced in a big way.
Alongside, a new competition law was enacted in 2002 and need for a Competition
Policy was also articulated by the Government.

National Competition Policy has been taken up for consideration in different fora
within the Government at different points in time during last two decades.

The Government of India has expressed its intent and views on the need and form
of the National Competition Policy at various occasions. At the time when the
Government of India was considering to bring in a new competition law,
the then Finance Minister, during a debate in Lok Sabha56 in 1999 informed the
House that the Government will come out with a National Competition Policy. Prior
to that, pursuant to WTO’s Singapore Ministerial Declaration in 1996, which
established a Working Group on the Interaction between Trade and Competition to
ostensibly propose the adoption of competition laws by member States, an Expert
Group was established by the Union Ministry of Commerce in October, 1997 to
study the interaction between trade and competition policy in India, including
anticompetitive practices and the effect of mergers and amalgamations on
competition. In its report submitted in January 1999, the Expert Group suggested
enactment of a new competition law and recommended harmonisation of
competition principles, competition policy and objectives, and competition law

56 Lok Sabha (1999), “Further Discussion on the Insurance Regulatory and Development Authority Bill,

1999”, XIII Lok Sabha Debates, Session II (Winter Session), Thursday, December 2, 1999

116
enforcement efforts. This laid the ground for future developments in the direction of
ushering in a National Competition Policy.

A. Raghavan Committee’s Recommendation on National Competition Policy

Following the Government’s resolve to enact a new competition law, a High Level
Committee on Competition Policy and Law (the Raghavan Committee
Report) was set up, which in its report recognised the need for a National
Competition Policy and noted that:

“An effective competition policy promotes the creation of a business environment

which improves static and dynamic efficiencies and leads to efficient resource
allocation, and in which the abuse of market power is prevented mainly through
competition. Where this is not possible, it requires the creation of a suitable
regulatory framework for achieving efficiency. In addition, competition law
prevents artificial entry barriers and facilitates market access and complements
other competition promoting activities. Trade liberalisation alone is not sufficient
to promote competition and there is a need for a separate competition policy.”

B. In 2004, the Common Minimum Programme of the United Progressive

Alliance (UPA), also recognised the need for promotion of competition across
sectors and noted that:

“Indian industry will be given every support to become productive and

competitive. All regulatory institutions will be strengthened to ensure that
competition is free and fair. These institutions will be run professionally.”

C. Standing Committee on Finance (2006-07) Observations

The issue of a National Competition Policy was considered by the Standing

Committee on Finance57 (2006-2007) of the Fourteenth Lok Sabha while

57 Lok Sabha Secretariat (2006), Forty Fourth Report – Competition (Amendment) Bill, 2006, Standing Committee on Finance (2006-2007) , December

2006

117
considering the relevant issues in the context of Competition (Amendment) Bill
2006. The Committee made a reference to the Competition Policy and
recommended the inclusion of ‘state governments’, in addition to central
government, within the ambit of competition policy provisions.

D. CCI Advisory Committee on National Competition Policy (2007)

The Ministry of Corporate Affairs had asked the Competition Commission of India
(CCI) in 2005-06 to draft a ‘Consultation Paper on Competition Policy’.
Accordingly, an Advisory Committee, under the chairmanship of Dr Vijay Kelkar
was set up by the CCI wherein a sub-committee, under the chairmanship of Shri
P. G. Mankad, was also set up to finalise a draft ‘Consultation Paper’. In
the meantime, the Planning Commission Working Group, as referred to in the
following para, submitted its report which was accepted by the Planning
Commission in 2007. In September 2007, the CCI Advisory Committee decided
to adopt the report of the Working Group of the Planning Commission as the
“final draft Consultation Paper on Competition Policy.

E. Planning Commission Discourse on t h e National Competition Policy (2007)

The issue has been discussed at the Planning Commission in the context of
Tenth and Eleventh Plans. During the mid-term appraisal of the Tenth Plan, it
was recognized that there is an urgent need for articulating a National
Competition Policy (NCP) in India, which should fully reflect the national resolve to
accelerate economic growth, improve both the quality of life of the people of the
country, national image and self-esteem. It further noted that NCP would bring
about a competition culture amongst economic entities to maximize economic
efficiency, protect consumer interests and improve international competitiveness.
During the Eleventh Plan, a Working Group on Competition Policy submitted its
report to the Planning Commission. In addition, the Eleventh Plan Document in

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 chapter 11 made a reference to need for a competition policy. The Chapter 1158
notes that:
“To strengthen the forces of competition in the market, both competition law and
competition policy are required. The two complement each other. The competition
law prohibits and penalizes anti-competitive practices by enterprises functioning in
the market; that is, it addresses market failures. Sector regulatory laws mimic
competition in the areas of natural monopolies. Other regulatory laws, such as
those for intellectual property or anti-dumping or even capital markets, too have
an important interface with competition.
The aim of the competition policy is to create a framework of policies and
regulations that will inform other policies to facilitate competitive outcomes in the
market. Competition policy is a critical component of any overall economic policy
framework. Competition policy is intended to promote efficiency and to maximize
consumer/social welfare. It also promotes creation of a business environment,
which improves static and dynamic efficiencies, leads to efficient resource
allocation and consumer welfare, and in which abuse of market power is
prevented/curbed. It also promotes good governance by restricting rent seeking
practices of economic actors.

Given the wide canvas of NCP, a suggestion has been made by the Working
Group on Competition Policy for setting up an institutional arrangement for
monitoring the progress of the implementation of the policy. A small and compact
Competition Policy Council of about 25 members could be set up which would be
advisory, non-statutory and autonomous in its functioning and be headed by an
eminent non-official person and comprising key officials from economic
Ministries/Departments, and non-officials from media, academia and civil society.
The task of the Competition Policy Council would be to review the progress in
the implementation of NCP such as reviews of policies, regulations and practices,
and the competition impact assessment of new laws, regulations and policies.”

58 Extract from Para 11.23 of Chapter 11 of the Policy Document: “Inclusive Growth” as part of the 11th Five Year Plan adopted by the National

Development Council in December, 2007 (http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v1/11th_vol1.pdf)

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 Subsequent to the submission of the Report of the Working Group on
Competition Policy, its recommendations, contained in a document titled ‘Inclusive

Growth, Vol I, as part of the 11th Five Year Plan, were adopted by the
National Development Council in December, 200759.

F. The Second Administrative Reforms Commission (ARC)

Recommendations (2007)

The Second Administrative Reforms Commission (ARC), chaired by Dr M.

Veerappa Moily, recommended that:
“Each Ministry/Department may undertake an immediate exercise to identify
areas where the existing ‘monopoly of functions’ can be tempered with
competition. A similar exercise may be done at the level of State Governments
and local bodies. This exercise may be carried out in a time bound manner,
say in one year, and a road map laid down to reduce ‘monopoly’ of functions. The
approach should be to introduce competition along with a mechanism for
regulation to ensure performance as per prescribed standards so that public
interest is not compromised.
Some Centrally Sponsored schemes could be restructured so as to provide
incentives to states that take steps to promote competition in service delivery.
All new national policies on subjects having large public interface (and
amendments to existing policies on such subjects) should invariably address the
issue of engendering competition.”

G. Committee on National Competition Policy (2011)

Continuing the pursuit of the core philosophy of promotion of competition across

sectors, Ministry of Corporate Affairs, Government of India, vide notification

F.No.5/15/2005-IGC/CS dated 8th June 2011, has now constituted the

Committee on National Competition Policy and Related Matters (C-NCP) for:
 Framing of a National Competition Policy (NCP)

59 Planning Commission (2007), Eleventh Five Year Plan 2007-2012, Vol I – Inclusive Growth.

120
  Strategy for competition advocacy with government and private
sector
 Changes required in Competition Act for fine tuning it and
 Any other matter relation to competition issues

The Committee, after eight meetings, recommended the objectives,

principles, initiatives and measures to be taken by the government.

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 Annexure II:
Illustrative List of Parameters for Undertaking Competition Assessment
An illustrative list of parameters, some of which may be considered while
ascertaining, if government policies or institutions limit competition may include:
 Limits on the number or range of suppliers through
 Granting exclusive rights for a supplier to provide goods or services
 Establishing a license, permit or authorisation process as a requirement of
operation
 Limiting the ability of some types of suppliers to provide a good or service
 Significantly raising cost of entry or exit by a supplier
 Creates a geographical barrier to the ability of companies to supply goods
services or labour, or invest capital
 Creates and fails to address natural barriers, strategic barriers, regulatory
and policy barriers or gender-based barriers
 Limits the ability of suppliers to compete through
 Limiting sellers’ ability to set the prices for goods or services
 Limiting freedom of suppliers to advertise or market their goods or services
 Setting standards for product quality that provide an advantage to some
suppliers over others or that are above the level that some well-informed
customers would choose
 Significantly raising costs of production for some suppliers relative to others
(especially by treating incumbents differently from new entrants)
 Reduces the incentive of suppliers to compete through
 Creating a self-regulatory or co-regulatory regime
 Requiring or encouraging information on supplier outputs, prices, sales or
costs to be published
 Exempting the activity of a particular industry or group of suppliers from the
operation of general competition law
 Limits the choices and information available to customers
 Limiting the ability of consumers to decide from whom they purchase
 Reducing mobility of customers between suppliers of goods or services by
increasing the explicit or implicit costs of changing suppliers
 Fundamentally changing information required by buyers to shop effectively

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 Annexure III:
Anti-competitive Dimensions of Licensing Arrangements
Contractual Main features Associated competition concerns
agreement
Territorial Territorial restraint is an Territorial restraints will be per se
restraint agreement between the licenser unlawful only when they are used as a
and the licencee that the licenser sham to cover a market allocation or
will assign a certain territory to price fixing agreement:
the single agreed licencee –  They can facilitate the
thereby preserving an exclusive implementation of disguised cartel
market for that licencee. arrangements to allocate the
market among colluding firms. For
Territorial restraint agreements instance, competing firms
may cause a reduction in holding a significant proportion of
intrabrand competition but may the
be a necessary condition to total number of patents specific to
enhance inter-brand competition. a particular class of products could
agree on issuing exclusive
licences to a jointly owned
corporation, which would then
divide up the market among the
associated firms through territorial
restraint agreements.
 Territorial restraint agreements
may
also be a direct tool to facilitate
collusion among competing
licensers by making it easier to
monitor downstream violations to
cartel agreements.
Exclusive . Apart from providing exclusive Competition aspects arising from
Dealing rights in a given territory, as in the restrictions on a licencee’s ability to
case of territorial restraints, a deal in competing technologies can
licensing agreement can also be analysed on the basis of:

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 entail commitments by the (i) the duration of the exclusivity;
licencee to deal exclusively with (ii) the rationale for the restriction; and
the licenser. (iii) the degree of foreclosure caused by
. Exclusive dealing arrangements the restriction to rival licensers.
prevent licencees from licensing,
selling, distributing, or . The anti-competitive foreclosure risk
manufacturing products which may be significant when the firms
employ technologies supplied by entering into exclusive dealing
competitors of the licensers. arrangements already hold a large share
. Exclusive dealing agreements of the relevant product market.
do It also depends to a large degree on the
not always have anti-competitive availability of alternative manufacturing
objectives. They may be aimed at capacity for existing or new licensers.
avoiding free riding between
competing licensers, or promoting
the development of the licensed
technologies by both parties.
Tie-in . Conditioning the ability of a . Tie-in is generally deemed per se
licencee to license one or more unlawful if:
items of IP on the licencee’s (i) it involves two separate products or
purchase of another item of IP or services; and
a good or a service has been (ii) the seller has market power in the
held in some cases to constitute tying product and has the ability to extend
illegal tying. this market power in the tied product, due
. Tying requirements may “result to favourable market conditions (high
in entry barriers, etc.);
significant efficiencies and (iii) the arrangement has an adverse
procompetitive benefits”, for effect
instance, when they help to on competition in the relevant market for
guarantee the effectiveness of the tied product; and
the licensed (iv) efficiency justifications for the
technology, to reduce the risk arrangement do not outweigh the anti-
inherent in the licensing of competitive effects.
innovation with uncertain . Tying agreements may facilitate

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 commercial value. horizontal collusion among licensers if the
licensers use them as a device to detect
cheating on a cartel arrangement.
Grantback A grant-back requirement is an . The antitrust consequences of a
agreement by which a licencee grantback
agrees to extend to the licenser depend on a number of factors:
of IP the right to use the (1) whether the grant-back includes
licencee’s improvement to the technology that goes beyond the
licensed technology. originally licensed IP;
Grant-backs can have (2) whether the grant-back is in the form
procompetitive effects, especially of an
if they are non-exclusive. Such assignment, exclusive licence,
agreements provide a means for nonexclusive
the licensee and the licenser to licence or an option;
share risk and reward the licenser (3) the duration of the licencee’s grant-
for facilitating further innovation back
based on or informed by the obligation; (4) the market power of the
licensed technology, thereby parties; (5) whether the parties are
promoting innovation as well as competitors;
the subsequent licensing of the (6) the effect of the grantback on the
result of the innovation. parties’ incentive to innovate; and
(7) whether the grantback promotes
dissemination of improvements
developed by the licencee, etc.
. Grant-backs may also raise competition
concerns as they facilitate undue
enhancement or maintenance of a
dominant position.

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 Annexure III

List of cases

 BAYER VS NATCO (Nexavar case)

 Director General (Investigation and Registration) v. Parke Davis India Ltd.
and Ors.
 Director-General (Investigation and Registration) v. Indian Drugs
Manufacturers Association and Anr.
 Eastman Kodak Co. v. Image Technical Services, 112 S. Ct.2072 (1992)
 Entertainment Network (India) Ltd. v. Super Cassette Industries Ltd.
MANU/SC/ 2179/2008
 Gramophone Company of India Ltd. v. Super Cassette Industries Ltd.
MANU/DE/1801/2010 (Decided On 01.07.2010)
 Hartford-Empire Co. V. United States
 Hawkins Cooker Ltd v. M/s Murugan Enterprises [2008(36) PTC 290(Del)]
 M/S Entertainment Network ... vs M/S Super Cassettes Industries Ltd, 2008
 MAHYCO-MONSANTO CASE
 Manju Bhardwaj v. Zee Telefilms Ltd (MRTP Commission, 1996)
 Music Broadcast Pvt Ltd vs Super Cassette Industries Ltd
 Music Broadcast Pvt. Ltd vs. Phonographic Performance Ltd.
 Music Choice India Pvt. Ltd. - vs- Phonographic Performance Limited
 NATCO v Bayer (Nexavar case)
 Radio Telefis Wireann (rte) vs European Commission {c 241 - 242/91p,
(1995) IECR 743, (1995) 4 CMLR 718}
 Union of India v. Cynamide India Ltd. and Anr.
 US v. Pilkington, Civ No. 94-345, 59 Fed. Reg.30604, 1994
 US v. S C Johnson & Sons (c iv. No. 4089 - 59 fed. reg. 43, 859, 25th
August, 1994)
 Vallal Peruman and Another v. Godfrey Phillips (India) Limited. (MRTP
Commission, 1994)

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 BIBLIOGRAPHY & WEB-LINKS

 Adam Smith, The Wealth of Nations (1776)

 Intellectual property, competition and development by Martin Khor, Third World
Network
 WIPO Summer School Reading Material
 Teaching of Intellectual Property; Chapter 6 Teaching intellectual property, unfair
competition and anti-trust law by Thomas Cottier and Christophe Germann,
Cambridge University Press 2008
 Trade and competition in the primary goods sector: "global problems & solutions",
AU: Frederic Jenny & Pradeep S Mehta; The Financial Express, January 13, 2012
 Journal of Intellectual Property Rights | 16 (3): 258-266 MAY 2011
 The Competition-IP Dichotomy: Emerging Challenges in Technology Transfer
Licenses; Kutty, AA | Chakravarty, S; Kutty
 Intellectual Property Rights and Competition Law: Friends or Foes?, Mihir
Naniwadekar
 WIPO web resources on competition and patents Speech of Mr Vinod Dhall,
Member, Competition Commission of India, CUTS International Conference on
“Moving the Competition Policy Agenda in India”, 31 January-1 February, 2005
 Conflict between competition law and intellectual property rights
 Need for clearer norms on IPR in new competition Bill; Published on: The Financial
Express, 13 June, 2001; By Pradeep S Mehta & Ujjwal Kumar, CUTS Centre for
International Trade, Economics and ENVIRONMENT
 Unfair Competition, Anti-trust Law and IPR
 Several agencies such as the World Trade Organisation (WTO), the World Bank,
UNCTAD etc have attempted to define the terms competition policy.
 WTO (1999), “The Fundamental Principles of Competition Policy: Background Note
by the Secretariat” Working Group on the Interaction between Trade and
Competition Policy WT/WGTCP/W/127
 Intellectual Property and Competition Law, P.N. Parashar, Competition Law
Reports, Jul. 2010 - Sep. 2010

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  Lok Sabha (1999), “Further Discussion on the Insurance Regulatory and
Development Authority Bill, 1999”, XIII Lok Sabha Debates, Session II (Winter
Session), Thursday, December 2, 1999
 Lok Sabha Secretariat (2006), Forty Fourth Report – Competition (Amendment) Bill,
2006, Standing Committee on Finance (2006-2007) , December 2006
 Extract from Para 11.23 of Chapter 11 of the Policy Document: “Inclusive Growth”
as part of the 11th Five Year Plan adopted by the National Development Council in
December, 2007
 Planning Commission (2007), Eleventh Five Year Plan 2007-2012, Vol I – Inclusive
Growth.

WEB-LINKS –
http://spicyipindia.blogspot.in/2009/09/intellectual-property-rights-and.html
http://www.wipo.int/patent-law/en/developments/competition.html
http://www.tmpsearchers.com/intellectual-property-rights/174/conflict-between-
competition-law-and-intellectual-property-rights/
http://www.mca.gov.in/Ministry/pdf/DraftNationalCompetitionPolicyForIndia-
28th_July2011.pdf
http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v1/11th_vol1.pdf
www.google.com
http://en.wikipedia.org/
www.patentoffice.nic.in
http://www.cci.gov.in/
http://www.wipo.int
http://spicyipindia.blogspot.in

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