Research Proposal Ph.D.

(Law)

INTERFACE BETWEEN COMPETITION LAW AND INTELLECTUAL PROPERTY LAW: A STUDY OF UNITED STATES, EUROPEAN UNION AND INDIAN LAW.

Submitted by Silky Mukherjee Ph.D. Candidate Gujarat National Law University Gandhinagar

INTERFACE BETWEEN COMPETITION LAW AND INTELLECTUAL PROPERTY LAW: A STUDY OF UNITED STATES, EUROPEAN UNION AND INDIAN LAW

Introduction
Intellectual property law and Competition law have evolved historically as two separate systems of law. Each has its own legislative goals and each its own methods of achieving those goals. There is a considerable overlap in the goals of the two systems of law because both are aimed at promoting innovation and economic growth. Yet there are also potential conflicts owing to the means used by each system to promote those goals. Intellectual Property laws generally offer a right of exclusive use and exploitation to provide a reward to the innovator, to provide an incentive to other innovators and to bring into the public domain innovative information that might otherwise remain as trade secrets. Competition authorities regulate near monopolies, mergers and commercial agreements with the aim of maintaining effective competition in markets. This regulation occasionally results in limits being placed on the free exercise of the exclusive rights granted by the Intellectual Property laws.

Intellectual property rights (IPRs) are intended to reward the author or innovator with the fruits of his or her labour which has been derived from the Lockes concept of labour. In a sense, the author of intellectual property is given the legal right to exclude others from enjoying the benefits resulting from his work. The justification behind intellectual property rights is that those who invest time and resources for the development of a new technology, system or device should be rewarded with the exclusive right to profit from their investment. Moreover, without the exclusive opportunity to "exploit the invention" through intellectual property rights, there would be no mechanism through which the owner of the intellectual property right could guard against free riders taking advantage of the innovator's research and development.1

Moreover, IPR laws also provide that the protection cannot be for an indefinite period, as after sometime it should be made available to the common masses in their general
1

Meg Buckley, Licensing Intellectual Property: Competition and definitions of abuse of a dominant position in the United States and the European Union, Brooklyn Journal of International Law; 2004, available at http://international.westlaw.com/result/default.29 brook J.Intl L.797, Westlaw Document _08_06_45, (accessed on February 26, 2011)

interest. Even within the IPR period, the intellectual asset may be used without restriction for certain purposes, these not being commercial purposes, for example for the purpose of research and training and educational purposes. Further, in some laws, provision exists for compulsory licensing where under the Indian Patents Act, 1970; a compulsory license may be sought after three years of the sealing of the patent on three grounds:

1. non-satisfaction of reasonable requirements of the public, 2. non-availability of the patented invention at reasonable price, or 3. patented invention not being worked in India.2

Tension arises between IPR and competition law because IPR creates market power, even a monopoly, depending upon the extent of availability of substitute products. IPR restricts competition, while competition law engenders it. Hence, competition law takes care of the unreasonable exercise of market power or the abuse of dominant position obtained as a result of the IPR.3

The Competition Act, 2002 in India recognizes the importance of IPRs such as patents, copyrights, trademarks, geographical indications, industrial designs and integrated circuit designs. While Section 3 of the Competition Act prohibits anti-competitive agreements, Section 3(5) lays down that this prohibition shall not restrict the right of any person to restrain any infringement of or to impose reasonable conditions, as may be necessary for protecting any of his rights enjoyed under the statutes relating to the above mentioned IPRs. This implies that unreasonable conditions imposed by an IPR holder while licensing his IPR would be prohibited under the Competition Act. This provision is not very dissimilar to the laws in other countries.4

Thus competition and intellectual property law are the two different bodies of law having their independent and different area of operation. In this scenario the researcher will study the tension existing between both the laws in United Kingdom and United States of America and India.
2

Vinod Dhall, Essays on Competition Law and Policy, available at http://www.cci.gov.in/images/media/articles/essay_articles_compilation_text29042008new_20080714135044.p df (accessed February 25, 2011). 3 Ibid. 4 Ibid.

Review of Literature
From the early years of the twentieth century, the conflict between the exercise of IPRs and competition policy tended to be exaggerated by judicial and administrative doctrines initially in the U.S.A and later in the European Union5. Intellectual Property Laws generally offer a right of exclusive use and exploitation to provide a reward to the innovator, to provide an incentive to other innovators and to bring into the public domain innovative information that might otherwise remain trade secrets. Competition authorities regulate near monopolies, competition in markets. This regulation occasionally results in limits being placed on the free exercise of the exclusive rights granted by Intellectual Property Laws.6

Intellectual property rights and competition regulation are closely related. The former provides exclusive rights within a designated market to produce and sell a product, service or technology that result from some form of intellectual creation qualifying specific requirements. These inventions and creations are protected by patents, copyrights, trademarks, trade secrets, or sui generis forms of protection7. Thus, IPRs designate boundaries, within which competitors may exercise their rights.

Competition law maximizes social welfare by condemning monopolies while intellectual property law does the same by granting temporary monopolies. The qualification attached to this that the intellectual property law should provide economically meaningful monopolies. Otherwise, competition law which by itself does not condemn the mere possession of monopoly power, but rather certain exercises of or efforts to obtain it, might be allowed to interfere with the monopoly.8

Steven D. Anderman, The Interface between Intellectual Rights and Competition Law (Cambridge University Press: 2009), 7. 6 Steven D. Anderman, The Interface between Intellectual Rights and Competition Law (Cambridge University Press: 2009), 1. 7 Keith E. Maskus, University of Colorado, Boulder Mohamed Lahouel, University of Tunis III, Competition Policy and Intellectual Property Rights in Developing Countries: Interests in Unilateral Initiatives and a WTO Agreement available at http://siteresources.worldbank.org/DEC/Resources/847971251813753820/64157391251814020192/maskus.pdf, (accessed on February 26, 2011). 8 Kumar Jayant and Abir Roy, Competition Law in India ( Kolkata : Eastern Law House, 2008), 176.

In United States v Microsoft9, it has been held that an owner of intellectual property does not have absolute right to use property in any manner without restrictions. It would violate the competition law if a company possesses monopoly power and there is wilful acquisition or maintenance of that power which an enterprise as distinguish from growth or development as a consequence of superior product, business acumen or historic accident10.

The owner has all the rights to exploit the intellectual property rights and also the right to prevent others from so doing. There is no violation of competition law if the owner of the articles (patented or otherwise) seeks to dispose them directly to the consumer or fixes the price by which his agents transfer from him directly to such consumer11.

Moreover, the essential facilities doctrine was enunciated by the United States Supreme Court in United States v Terminal Railroad Association12, wherein they imposed a duty upon firms controlling an essential facility to make that facility available to their rivals. The essential facilities doctrine has profound consequences for intellectual property protection and for competition in markets where firms own important inputs that are protected by patent, copyright, or trade secrets13. Under the Indian Law these could fall within the ambit of Section 4 of the Competition Act 2002 which prohibits abuse of dominance by enterprises.

Further, the potential outcome of Trade Related Aspects of Intellectual Property Rights (TRIPS) that is of particular concern to developing countries is that stronger IPR protection strengthens the market power of Foreign Transnational Corporations, which may lead to reduced sales and higher prices, and which can limit the extent of technology diffusion. In addition enhanced market power may restrict entry and can lower the rate of innovation. Enhanced market power through stronger IPR protection may facilitate other forms of anti-competitive behaviour, including selling practices and licensing restrictions. These include: (a) the cartelization of potential competitors through cross licensing

agreements that fix prices, limit output or divide markets; (b) the use of IPR-based licensing agreements to exclude competitors in particular markets by raising entry barriers through tie9

253 F. 3d 34 (D.C. Cir 2001) U.S v Grinnel Corp. 384 US 563 (1966) 11 United States v. General Electric Company 272 US 476 12 [1912] 224 US 383. 13 Kumar Jayant and Abir Roy, Competition Law in India (Kolkata : Eastern Law House, 2008), 186.
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in sales or restrictions on the use of related technology; (c) the use of IPR protection to predate competitors by threatening or initiating bad faith litigation and opposition proceedings, which may raise market entry barriers particularly for new and small enterprises14.

Raghavan Committee Report on Competition Law in India observes as follows in paragraphs 5.1-7 and 5.1-8: 5.1-7 All forms of intellectual property have the potential to raise competition policy/law problems. Intellectual property provides exclusive rights to the holders to perform a productive or commercial activity, but this does not include the right to exert restrictive or monopoly power in a market or society. Undoubtedly, it is desirable that in the interest of human creativity, which needs to be encouraged and rewarded, intellectual property right needs to be provided. This right enables the holder (creator) to prevent others from using his/her inventions, designs or other creations. But at the same time, there is need to curb and prevent anti-competition behaviour that may surface in the exercise of the intellectual property15. 5.1-8 There is, in some cases, a dichotomy between intellectual property rights and competition policy/law. The former endangers competition while the latter engenders competition. There is a need to appreciate the distinction between the existence of a right and its exercise. During the exercise of a right, if any anti-competitive trade practice or conduct is visible to the detriment of consumer interest or public interest, it ought to be assailed under the competition policy/law16. Finally, competition regulation aims at restricting attempts to extend exploitation of an intellectual asset beyond the boundaries provided by IPRs. Thus, there is an inherent tension between competition laws and IPRs, particularly if competition laws give emphasis to static market access and IPRs emphasize incentives for dynamic competition. Structured properly, however, the two regulatory systems complement each other in striking an appropriate balance between needs for innovation, technology transfer, and information dissemination.17

14

Rod Falvey and Foster Neil, The Role of Intellectual Property and Technology Transfer and Economic Growth: Theory and Evidence, http://www.unido.org/fileadmin/import/60030_05_IPR_rights_in_technology_transfer.pdf (accessed on July 5, 2011). 15 D.P Mittal, Taxmanns Competition Law and Practice (Delhi: Taxmann Allied Services (P.) Ltd, 2008), 216. 16 Ibid. 17 Massimiliano Gangi, Competition Policy and the exercise of Intellectual Property Rights, available at http://www.archivioceradi.luiss.it/documenti/archivioceradi/osservatori/intellettuale/Gangi1.pdf (accessed on February 15, 2011).

Statement of the problem

As discussed above there is a clear conflict between competition law and intellectual property law. Intellectual Property creates monopolies whereas competition law battles monopolies. In the present research, the researcher will study the conflict between Intellectual Property law and the Competition Law and will also try to find out the situation by judicial pronouncements by studying the situation prevalent in United Kingdom and United States and how India can develop and formulate its competition policy by learning a lesson from competition laws prevalent in European Union and United States.

Objectives
To study the convoluted relationship between Intellectual Property law and the Competition law in the major jurisdictions of U.S.A, EU and India. To examine the conflict between Intellectual Property law and the Competition Law. To discover the best possible solution to resolve the conflict between Intellectual Property law and the Competition Law and how India as a developing nation can develop its competition law by taking a lesson from the major trading blocks EU and U.S.A.

Hypothesis
A conflict exists between Intellectual Property Rights and Competition policy in major jurisdictions USA, EU and India.

Scope
The present study deals with the issues and problems existing between intellectual property law and competition law and tries to show how can the individual rights of the potential actors in the commercial market be prevented from being impaired by the competitive behaviour or practices exercised thereby.

Research Methodology
The study involves all the three categories of research methodologies including analytical, descriptive as well as historical. It will involve secondary data such as various Acts, Rules and regulations, Judgements, Articles, Published Reports, Books and Journals.

Tentative Chapters
1. Introduction 2. A general overview of Intellectual Property Law and an overview of Competition Law 3. Interface between Intellectual Property Law and Competition Law 4. Interplay between Intellectual Property and Competition Law- Position in European Union 5. Interplay between Intellectual Property Law and Antitrust Law- Position in United States 6. A Comparative Study of EU and US Competition Law through judicial pronouncements 7. Indias approach to Competition Law 8. Conclusion

Select Bibliography
Secondary Sources

Books: Anderman Steven D., The Interface between Intellectual Rights and Competition Law, (Cambridge University Press: 2009). Copinger & Skone James, Copinger & Skone James on Copyright, (Sweet and Maxwell, 2009). Joelson Mark R., An International Antitrust Primer, A Guide to the Operation of United States, European Union and Other Key Competition Laws in the Global Economy, (Kluwer Law International; 2nd Ed, 2001). Kumar Jayant and Abir Roy Competition Law in India ( Kolkata : Eastern Law House, 2008). Mittal D.P., Taxmanns Competition Law and Practice, (Delhi: Taxmann Allied Services (P.) Ltd, 2008).
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Van Bael & Bellis, Competition Law of the European Community, (Kluwer Law International; 4th Ed., 2005). Vinod Dhall, Competition Law Today: Concepts, Issues and the Law in Practice, (Oxford Press).

Articles: Buckley Meg, Licensing Intellectual Property: Competition and definitions of abuse of a dominant position in the United States and the European Union, Brooklyn Journal of International Law; 2004. Dhall Vinod, Essays on Competition Law and Policy, available at http://www.cci.gov.in/images/media/articles/essay_articles_compilation_text2 9042008new_20080714135044.pdf. Gangi Massimiliano, Competition Policy and the Exercise of Intellectual Property Rights. Keith E. Maskus, University of Colorado, Boulder Mohamed Lahouel, University of Tunis III, Competition Policy and Intellectual Property Rights in Developing Countries: Interests in Unilateral Initiatives and a WTO Agreement. Rod Falvey and Foster Neil, The Role of Intellectual Property and Technology Transfer and Economic Growth: Theory and Evidence.

Websites
http://international.westlaw.com/result/default.29 brook J.Intl L.797, Westlaw Document _08_06_45, (accessed on February 26, 2011). http://www.cci.gov.in/images/media/articles/essay_articles_compilation_text2 9042008new_20080714135044.pdf, (accessed on February 25, 2011). http://siteresources.worldbank.org/DEC/Resources/847971251813753820/6415739-1251814020192/maskus.pdf, (accessed on February 26, 2011). http://www.archivioceradi.luiss.it/documenti/archivioceradi/osservatori/intelle ttuale/Gangi1.pdf, (accessed on February 15, 2011). http://www.unido.org/fileadmin/import/60030_05_IPR_rights_in_technology_ transfer.pdf (accessed on July 5, 2011).

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