Anti-Competitive practices in Ipr
ANTI-COMPETITIVE PRACTICES IN IPR
Intellectual property rights are the intellect rights given to persons over the creations of their minds for any innovation or newness. They usually give the creator an exclusive right over the use of his/her creation for a certain period of time. Intellectual property are of various kinds such as patent, copyright, trademark, geographical indications, industrial design and layout design of integrated circuit. In India these property which is intangible in nature is duly recognized by law. This rights are necessary for the protection of the owner of these intellectual property, they can be inventor, author or creator. But there are some anti-competitive practices associated with the intellectual property that tends to exploit market through its power of monopoly and are as follows:
In the Chapter relating to Prohibition of Agreements (Anti –Competitive Agreements) under section 3 (5) 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:
(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).
Further the term reasonable condition is not defined under the act, that would rendered as unreasonable relating to IPR such practices are as follows:
Patent pools can be defined as an agreement between two or more patent owners to license one or more of their patents to one another or to third parties. Often, patent pools are associated with complex technologies that require complementary patents in order to provide efficient technical solutions. Through the agreement patent holder can be excluded from the use of some patent or possibly the bigger entities holding patents may form into one so the competition can be avoided. This type of practices are watched by authorities established specifically to promote healthy competition in the market and to prevent such bad practices which will exploit market.
A device might contain several component and each one is patented by different firm. Problem will arise at a point when one firm wants to use that component unit’s technology which is very hard negotiating with the patent holder company to get the licensee for its utilisation. There is no guarantee that the negotiation will be included positively or achieve what they seek for which sometimes become very tardy process. So to overcome this it is assisted to make one entity from where all the components can be licenced that is a joint venture for sharing the intellectual property rights.
It is majorly done in electronics sector relating to software industry. It reduces product development and market competition, these are differentiated in pharmaceutical sector. Due to patent pooling several patents are brought under single contract due to which abnormalities of litigation is avoided as there is transparency in the transfer of licensee. Pools only include patents that are complementary and necessary for implementing a standard, they furthermore reduce royalty rates for users of the standard by eliminating wasteful multiple marginalization. Patent pool is often regarded as welfare enhancing tool when the patents are complementary. The aim of patent pool is profit oriented as collectively licencing would be cost efficient. The firm’s would then be earning high profits by keeping new competitors outside markets. In short, if all the technology is locked in a few hands by a pooling agreement, it will be difficult for outsiders to compete.
The second such prohibited practice is of tie-in arrangements. It states that the licensees to purchase goods from the patentee itself and not from other producers/manufactures/sellers or there might be condition that patentee will only take goods from licensee only if licensee purchases from patentee or he will not buy goods from any other producer, a type compulsory clause to follow, it can be for even unpatented goods as well which would forbid licensee to compete. In Shri Sonam Sharma vs Apple Inc. Usa & Ors it was held that the distribution arrangement between the impugned parties helped create a market for iPhone in India wherein domestic consumers got an opportunity to purchase a contemporary handset which was otherwise available through the grey market and thus tying arrangement, the anti-competitive concerns in terms of section 3(4) violations does not hold.
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.
There could be a clause, which restricts competition in R & D or prohibits a licensee to use rival technology.
A licensee may be subjected to a condition not to challenge the validity of IPR in question.
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.
A licensor may fix the prices at which the licensee should sell.
The licensee may be restricted territorially or according to categories of customers.
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 called package licensing which may be regarded as anti-competitive.
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.
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.
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.
Indemnification of the licensor to meet expenses and action in infringement proceedings is likely to be regarded as anti-competitive.
Undue restriction on licensee's business could be anti-competitive. For instance, the field of use of a drug could be a restriction on the licensee, 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.
Limiting the maximum amount of use the licensee may make of the patented invention may affect competition.
A condition imposed on the licensee to employ or use staff designated by the licensor is likely to be regarded as anti-competitive.
The above list is not exhaustive but illustrative
Some other practices as anti-competitive under section 3 of competition act 2000 are as follows:
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 IPR 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.
Grant-Back Clause the licensee is required to grant back the developments taken place to the Licensor, it is also referred as licence-back clause.
Acts performed by enterprises which lead to abuse of dominant position which falls within the meaning of S 4 of the Act are as follows:
(a) (I) directly or indirectly, imposes unfair or discriminatory condition in purchase or sale of goods or services; or
(ii) Price in purchase or sale (including predatory price) of goods or services; or
(b) Limits or restricts –
(i) Production of goods or provision of services or market therefor; or
(iii) Technical or scientific development relating to goods or services to the prejudice of consumers; or
(C) In practice(s) leading to denial of market access in any manner; or
(d) Makes conclusion of contracts subject to acceptance by other parties of supplementary obligation which, by their nature or according to commercial usage, have no connection with the subject of such contracts; or
(e) Uses dominant position in one relevant market to enter into, or protect, other relevant market.
Exclusive supply agreement any in any manner the purchaser in the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller or any other person.
Refusal to deal includes any agreement which restricts, or is likely to restrict, by any method, the persons or classes of persons to whom goods are sold or from whom goods are bought." Hindustan Coca Cola Beverages Pvt. Ltd was has contravened the provisions of section 3 (4) of the Act as this agreement has created appreciable effect on competition by creating entry barriers to other entrants in the relevant market and foreclosing competition by driving out the competitors from the relevant market.
The agreements are adversely affecting the competition in the markets. It is not conclusively borne out that the arrangements have either created entry barriers for new entrants or drove existing competitors out of the market, nor is there any appreciable effect on the benefits accruing to the ultimate consumers.