top of page

BALANCING DOMINANCE AND INNOVATION: THE NEED FOR SECTION 4A IN INDIA'S COMPETITION ACT

[Dalima Pushkarna and Kushagra Tolambia are third-year B.A. LL.B (Hons.) students at National Law University, Lucknow]


INTRODUCTION


The realms of Intellectual Property Rights (IPR) and competition law have become increasingly interconnected in India. As the utilization of IPR continues to expand, it has become crucial to strike a balance between protecting innovators and maintaining fair competition in the market.In a recent ruling, the Division Bench of the Delhi High Court unanimously overturned the decision of its single-judge bench in the case of Monsanto Holdings Private Limited & Ors v. CCI. This reversal annulled the antitrust actions initiated by the Competition Commission of India (CCI) against telecom giants Ericsson and Monsanto.


The court gave precedence to the Patent Act of 1970 over the Competition Act of 2002, considering the Patents Act as a separate and independent statute. The court emphasized that the Competition Act should not be used to address matters related to a party's exercise of its patent rights. Furthermore, the court concluded that the CCI lacks the authority to investigate whether a corporation has misused its dominant position while exercising its patent rights. This order of the Hon’ble Court has again sparked the debate on relation between Intellectual Property Rights (IPR) and Competition law. As the utilization of IPR continues to expand in the country, it has become crucial to strike a balance between protecting innovators and maintaining fair competition in the market.


In this piece, the authors analyze and discuss the interplay between IPR rights and Competition law in India, then go on to discuss the present scenario in the country and the need for the insertion of Section 4A in the Act, which will act as a safe harbour provision for IPR holders in the cases of Abuse of Dominant power, and finally discuss the way forward for the Indian Competition regime.


INTERPLAY BETWEEN IPR RIGHTS AND COMPETITION ACT IN INDIA:


Competition law and IPR law are interlinked as IPR law deals with the exclusive rights of the holder considering their intangible assets. In contrast, the other regulates combinations and mergers and protects the market from anti-trust practices. In total, it means IPR law governs the options that a consumer can have in the competitive market and prevents others from copying the innovation and uniqueness of the products. In contrast, Competition law tries to maintain the equilibrium in the market so that no one benefit at the cost of another. Therefore, IPR law and competition law function together to ensure fair competition exists in the market. Though it can be argued that IPR laws go against the very spirit of the competition law, as IPR laws aim to create a monopoly in the market, this theory of interlinking between IPR law and Competition law also finds its support from the Indian judiciary.


From the very beginning, the Indian judiciary has tried to read the IPR Rights and Competition law in harmony. In the case of Entertainment Network (India) Limited v. Super Cassette Industries Ltd., the Hon’ble Supreme Court held that the CCI has jurisdiction to hear the matter, even if the issues revolve around IPR law. Similarly, in a recent decision of Vifor International Ltd. v. CCI, the Hon’ble Delhi High Court observed that the jurisdiction of the CCI is not ousted merely on the reason that the matter relates to a Patent.


Hence, it becomes clear that the intent of the judiciary is to link the IPR Rights and competition regime in India. This view of the judiciary can also be said to find its support from the Competition Act, as IPR Holders are granted immunity under Section 3(5) of the Act.


PRESENT SCENARIO:


In 2018, the process of amending the Competition Act was initiated, and a draft amendment bill was later referred to the Parliamentary standing committee for thorough examination. In December 2022, the committee released its report, which included a suggestion to add Section 4A to the existing competition bill. This proposed provision aimed to give intellectual property rights (IPR) holders the ability to prevent infringement and impose reasonable conditions to safeguard their IPR without facing challenges under Section 4 of the Act, which deals with abuse of dominant power. By implementing this provision, IPR holders could have protected their valuable intellectual assets and retained control over the exploitation of their creations and inventions. It would have allowed them to exercise their rights without the risk of being deemed anti-competitive under Section 4.


However, despite the committee's suggestion, the final draft of the amendments to the Act did not include this provision. As a result, there remains a gap in the protection of IPR holders, leaving them without a specific legal framework to address potential antitrust concerns while safeguarding their intellectual property.


Benefits of introducing Section 4A in the Act:


Under this proposed provision, IPR holders could take necessary measures to restrain themselves from infringing their rights, thereby safeguarding their valuable intellectual property assets. Moreover, they would be able to impose reasonable conditions on using their IPR, enabling them to maintain control over the exploitation of their creations and inventions. With this additional provision, IPR holders would be empowered to exercise their rights without risking their actions being interpreted as anti-competitive conduct under Section 4.


WAY FORWARD:


Jurisdictions all over the world have also acknowledged the need for the protection of the rights of the IPR holders, and the recent judgment of the Delhi High also upheld the principle of protecting the rights of the IPR holders. In this context, the Indian legislature can take inspiration from the much-celebrated Magill case. In this case, the European Court highlighted certain factors; if present, then the IPR holder can be sued for abuse of dominance of power.


Furthermore, it was established in Microsoft Corp. v. Commission that additional criteria might also be pertinent to apply the exceptional circumstances doctrine and that the list of reasons presented in the Magill case needs to be completed. The Microsoft case ruling has broadened the scope of the exceptional circumstance’s doctrine. The courts may now apply it depending on each case's specific facts and circumstances.


Nevertheless, while doing so, India should not give unfettered power to the IPR holders. Instead, some reasonable restrictions along with checks and balances should be established to maintain the smooth functioning of the Markets in India and prevent the IPR holders from misusing their power. Therefore, this power of the IPR holders must be interpreted in a narrower sense.


In the case of Parke, Davis & Co. v. Probel, the European Court of Justice acknowledged that the Act of granting a patent to an inventor does not constitute an unfair competitive practice. However, the court emphasized that the improper utilization of patent rights could disrupt the proper functioning of markets as a whole. Moreover, the court noted that intellectual property rights hold relevance and are considered in cases involving dominant market positions. Further, in the case of IMS Health GmbH & Co. OHG v. NDC Health GmbH & Co. KG, the European Court observed that there are specific circumstances where holders of intellectual property rights may exploit their rights in a way that results in an abuse of their dominant position.


Therefore, drawing inspiration from the Magill case and the Microsoft case, the Indian legislature has the opportunity to design a provision that ensures IPR holders do not possess unchecked power. By incorporating this provision, it is possible to establish a framework that prevents IPR holders from abusing their dominant position and engaging in anti-competitive practices.


CONCLUSION:


With the increasing relevance of IPR in the Indian market and to prevent its abuse, it is therefore of utmost importance to introduce the recommended Section 4A in the Competition Act. The envisioned provision seeks to impose necessary safeguards and limitations on IPR holders, preventing them from utilizing their rights in a manner that stifles competition or unduly restricts market access for others. Doing so ensures a level playing field, promotes innovation, and fosters healthy competition within the Indian market. It will not only prevent the abuse of IPR but also ensure the smooth functioning of the market and foster its growth in the future. Hence, there is a need to introduce a provision that strikes a balance between protecting IPR holders' rights and preventing the misuse of those rights.

88 views0 comments

Comments


bottom of page