Extension of IPR Exemptions under the Indian Competition Law – An Analysis
Intellectual property rights grant the holders of IP a temporary right to exclude others from using that IPR. This economic exclusivity is granted with the purpose of benefitting the owner for their creative efforts and promoting investment in creations. While the grant of IPR may sometimes result in monopoly or even confer market power, such monopolisation and dominant position is not always a case of anti-competition and therefore, needs to be examined with a view of maintaining a balance between intellectual property rights and competition law.
The Indian competition regime explicitly puts an exemption for imposing reasonable conditions in protection of IP rights in relation to anti-competitive agreements under Section 3 of the Competition Act, 2002, however, no such exception is granted for abuse of dominant position under Section 4 of the Act. In July 2019, the Competition Law Review Committee formed by the Government of India recommended inclusion of a similar defence in relation to Section 4 to protect the IP holders on imposing reasonable restrictions for protection of their rights. The Committee made reference to the international jurisprudence and observed the interaction of IPR with abuse of dominance including in the UK (David Whish and Richard Bailey) and the US (Data General Corporation v. Grumman Systems Support Corporation). The European Union majorly suggests that the exercise of intellectual property rights may be held abusive only in exceptional cases (Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission of the European Communities). Such exceptional circumstances may include refusal of granting a license where there is no justification or when refusal results in exclusion of competition from the market.
In the light of the above recommendation, Section 4A has been inserted in the Competition Amendment Bill, 2020 providing for the protection of IPR holders against Section 4 as well empowering them to impose reasonable conditions in protection of their IPR.
IPR, which was once seen in dichotomy with competition law, is now considered as its complementing feature intended to be construed harmoniously to ensure efficient competition in the market and encourage investment in new creations at the same time. There are plethora of Supreme Court judgements which point to the proactive nature of the Indian judiciary towards harmonious application of both the laws in the country (Entertainment network India Limited v. Super cassettes industries Ltd).
While the Competition Act, 2002 already provided for the protection of the IPR holders in cases of anti-competitive agreements, the Amendment Bill, 2020 seeks to extend this protection to Section 4, i.e. abuse of dominance as well. However, given the nascent stage of the competition laws in India, it is yet to be seen how such protection to the IP holders with dominant position will affect the larger competition jurisprudence.
It is pertinent to note that the protection under IPR is not absolute and empowers the holders to impose only reasonable conditions required for protection of their rights. Just like Section 3(5), Section 4A does not intend to give unfettered protection to the IPR holders. Moreover, even when the IP holders have full right over their invention, application of the rights is not absolute in a sense that if the application of these rights impacts the competition in the market, the Competition Commission has complete jurisdiction to examine these complaints and issue directions accordingly (Monsanto Holdings Pvt. Ltd. v. Competition Commission of India).
The Committee, in furtherance of the same, has recommended a narrow construction of Section 4A in light of the international jurisprudence referred while making the suggestion. For instance, in the Magill case (referred by the committee in its report), the ECJ held the refusal of granting a license by a copyright holder over television listings to be an abuse of dominant position as an exceptional circumstance. These circumstances imply a situation wherein “the IPR holder has access to such a facility which is so essential that without it, no business can operate in the relevant market thereby requiring the holder to compulsorily issue a license to others”. The court further opined the conditions in which refusal to grant a license may result in abuse:
1. Refusal prevents the appearance of new product which has potential consumer demand;
2. No justification for refusal;
3. Refusal denies access to basic information which is indispensable for the creation of a new product.
Therefore, it is suggested that application of a similar approach to the factual matrix of a case under abuse of dominant position by IP holders should be adopted in India which would not only protect their rights but also maintain healthy competition in the market.