In this article, we will take a look at the various anti-competition practices in the field of Intellectual Property Rights, and what are the effects of these practices on the protection of IPR.
Intellectual property refers to an original idea that can be leveraged for the purpose of commercialisation. Intellectual Property Rights refer to the legislative and judiciary rights that protect theft or duplication of such intellectual property, something that only the original creator has a right to commercialise. These are the special rights given to a person who makes inventions or makes some commercial innovation using his or her creativity. These creations are intangible in nature. These rights are exclusively given for a particular period of time to enjoy the benefits of commercialising that innovation or invention. It restricts others from using, copying or stealing this property. IPR or Intellectual Property Rights are legal rights given to the creator that allow him to sue and claim damages if anyone uses it without permission. Here know about the Anti-Competitive Practices In Intellectual Property Rights
Given the competitiveness that exists in the markets, the Competition Act provides a set of rules and regulations promoting competition in the market. The law aims at utmost consumer welfare and promotes innovation and productivity thereby suppressing the market forces made by the dominant forces. IPR can create a monopoly in the market whereas competition law battles against monopoly. IP laws are exceptions to the common rule of the monopoly market under the competitions act. Let us take a look at some of the anti-competition provisions that have been put in place to protect intellectual property in the markets.
Sec 3 of the Competitions Act deals with anti-competitive agreements. These agreements are those agreements which prevent competition and allow domination of one company over another. These agreements are of two types, Horizontal and Vertical Agreements. Horizontal Anti-Competitive agreements [Sec 3(3)] are made between two or more direct Competitors which may affect the competitive economy in the market thereby limiting the rights and interest of the consumer. Vertical agreements [Sec 3(4)] are made between producer and middleman; this hinders the flow of supply in the marketplace affecting the welfare of the consumer. This section prohibits any person or company or enterprise or any legal entity from entering into any agreement which will be the reason for disrupting competition in India.
The exceptions for this section are given in Sec 3(5), which says that the Competitions Act shall restrict the person’s rights by imposing reasonable conditions for protecting his rights mentioned under Copyright Act, Patent Act, Trade Marks Act, Geographical Indications of Goods Act, and Design Act. Also, it won’t interfere in the person’s right in exporting from India as per the agreement. However, it is implied that Sec 3 governs the unreasonable restrictions imposed for exercising IPR. Here the reasonable conditions are not explained and defined under this Act and are open to interpretation of precedents.
Conditions For Anti-Competitive Practices In Intellectual Property Rights
There are certain reasonable conditions that cause anti-competitive practices. They are as follows:
- Patent pooling means entering into an agreement between two or more patent owners to lock up their inventions under one licence. This is to promote healthy competition thereby preventing the market from being exploited. They prevent new entries in the market and secure their profits for the long run. They also help in building imperfect competition which is against the policies of the government and the idea of a free market. This type of patent pooling is majorly done in the electronic sector and pharmaceutical industries.
- Tie-Up Arrangement is one of the restrictive trade practices. Tie in arrangement means there should be an agreement stating that the purchaser of one good agrees to buy some other goods as a condition. The following are essential for tie-in-arrangement. There must be two products so that the seller can tie together. The seller must have sufficient market power, and there must be an exclusive supply and distribution agreement. There should be a licensee to acquire the required goods from the owner who owns the patent. Again this practice restricts competition in the market as the transaction will be carried between a restricted group of people.
- Even after the expiry of the patent period, there are provisions that enforce continuity of paying royalty.
- If the market imposes a certain condition which restricts competition in Research and development or prohibits the licensee from using technology, then automatically the exceptions granted under section would be seized
- Instead of being subjected to this condition, if the licensee is challenged regarding the validity of IPR in question, then raising such questions are Anti-Competitive Practices In Intellectual Property Rights.
- The provisions ensure that the licensee is required to grant back only to the licensor and not to anyone else. If he does so, it increases the market power of the licensor thereby losing the privilege under Sec 3(5)
- If the licensor fixes the price and pushes the licensee to sell at the said price is an Anti-Competitive Practices In Intellectual Property Rights
- The licensee may be restricted to carry out the trade-in certain territory; this practice is considered as Anti-Competitive practices.
- The licensor might have coerced the licensee to apply for more licences even though the licensee doesn’t require it. Such coercion is a restricted trade practice.
- The quality control agreement imposed between the licensee and licensor goes beyond the necessary guarantee. Then the effectiveness of such patent is anti-competitive practices
- If the licensee is restricted to his rights to sell the licensed products and asked to follow the licensor order regarding selling, it is considered as restrictive trade practices
- The restriction imposed by the licensor for the use of the trademark by the licensee is regarded as unfair practices
- If the agreement imposes an undue restriction to the licensee for carrying out the business, then it is restricted trade practices
- Also, if the licensor limits the maximum use of the patented invention, it may affect the licensee competition and immunity.
If any agreement contains any of the above-mentioned criteria, it is considered as Anti-competitive practices and they are exempted from the Sec 3(5) of CA and the privileges will be withdrawn. Sec 27 of the act says that these practices will be enquired by Competition Commission of India. And the holder or licensor will be penalised not less than 10% of average turnover for the last three previous financial years. If the licensor is the company or enterprise, its director is held guilty and will be penalised.
Given that intellectual property is intangible, in its tangible form it is available only on paper or in documentation. So any matter concerning intellectual property must be first referred to an intellectual property expert with ample experience, given that the IPR laws are still ambiguous and evolving. Besides, the expert can also look at the IP from a regulatory standpoint which can help deal with issues such as anti-competition laws and regulations. If you have any other queries with regards to IPR or need any assistance with the same, get in touch with our team of experts and they will ensure that all your concerns are addressed.
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