Introduction
From the early beginnings of competition law, a major concern with granting intellectual property rights to authors and creators has always been the possibility of stagnating competition. As granting an exclusive right can lead to having detrimental effects such as abuse of being a monopoly. Both intellectual property law and competition law appear to have contrasting objectives. On the one hand, intellectual property law focuses on the rights of authors by rewarding them through excluding imitation. The objective is to provide for intellectual property right holders to earn fruits of their labour in monetary form for investing creativity, knowledge as well as technology.
While on the other hand competition law seeks to prevent firms and entities from having a dominant position and abusing exclusive rights . Competition Law mainly seeks to promote free and healthy trade and competition and also gives weightage to consumer welfare in the market .
While intellectual property law highlights the importance of innovation, sufficient care must be taken to ensure that while enforcing competition law, that the creation of innovation is not hampered or restricted.
In the High-level Committee Report on Competition Policy and Law, it has been stated that all forms of intellectual property have the potential to raise issues relating to Competition Law. Additionally, it also elaborates that Intellectual Property holders have exhaustive rights over performing commercial as well as productive activities but this does not entail the right to restrict or also does not provide for monopoly powers .
The ways that an IPR holder can curtail healthy and proper competition, is by abusing dominant power by not allowing for licenses, by tying, by allowing anti-competitive agreements and so on.
- WILLIAM M. LANDES AND RICHARD A. POSNER, THE ECONOMIC STRUCTURE OF INTELLECTUAL PROPERTY LAW, Harvard University Press (2003).
- Gary Hewitt, Competition Policy and Intellectual Property Rights, Organization for Economic Co-operation and Development(OECD)- Competition Policy Division (1988).
- Khadijah Mohammed, WIPO-WTO Colloquium Papers, Vol. 10, The Interface between Intellectual Property Rights and Competition Law: Legal Development in Malaysia (2019).
- Report of High Level Committee on Competition Policy and Law, S. V. S. Raghavan Committee, Para. 5.1.7, (2000).
The objective of intellectual property law seeks to create an equilibrium between the interest of the society as well as the exclusive interest of the intellectual property owner. Therefore here the goal is to reach a compromise that is justifiable wherein it provides benefits for the society at large and at the same time must protect the private interest .
Copyright Law, at its heart serves a pro-competitive role, while not in the market for the particular work such as a the specific book, painting, film, book but in the larger market for ideas . The law provides an author with an exclusive right in the author’s own expression to provide for a commodity that is to be sold in the larger market .
However, when one understands the important role that copyright has in the larger market, then it is very clear of how competition law affects a copyright suit .
Unlike the other types of intellectual property, as it is suggested that copyright has a smaller area of protection, individual copyrighted material is generally rarely the source of significant monopoly power However, there have been significant competition law cases wherein copyrights have been involved.
There are different manners in which abuse of copyright happens- by taking certain legal concessions from a licensee, primarily when the copyrighted work is high in demand , other ways include limiting the ability of others to compete, limiting the ability of the licensee to deal with competitors and lastly by making an anti-competitive use of the judicial system .
From the perspective of India
In judicial precedents like the Entertainment Network (India) Limited v. Super Cassette Industries Ltd , with regard to the refusal of licenses, it was observed by the Supreme Court that although the copyright holder has a full monopoly, it is still limited to the extent that if it creates disruption in the smooth functioning of the market, it will be a violation of competition law. The court highlighted that while IPR owners have the right to enjoy the fruits of their labour by means of royalty out of licenses, this is not an absolute right.
It is pertinent to note that a copyright has been held to be only a statutory right under the ambit of the Copyright Act,1957 and not an absolute right .
Furthermore, in the case of Kingfisher v. CCI , it was held by the Bombay High Court, that the Competition Commission of India has the competence to deal with the issues that come before the Copyright Board in India. This has also been stated in the case of Micromax v. Erricson , in which the Competition Commission, observed that it could decide on issues of abuse of dominant position even though the dispute was that of a civil or commercial nature.
The aim of the Competition Act 2002, was in line with the economic liberalization of the country that had created an open market policy, and sought to prohibit anti-competitive agreements, the abuse of its dominant position by enterprises .
In the note which was a written contribution from India that was submitted for the OECD Competition Committee Meeting held in 2019, in the matter of licensing of IP Rights, and competition law, there was significant focus on the licensing arrangements in the Indian competitive regime. Under Section 3(4) of the Indian Competition Act 2002, licensing agreements that are usually vertical agreements are covered, and under Section 3(3) of the Act which deals with horizontal agreements.
There is also an exception clause, Section 3(5) which provides for those agreements that have an appreciable adverse effect on competition do not affect the right of the intellectual property holder to impose reasonable restrictions that may be necessary for protecting any of his rights under the statutes. By this, such a holder cannot impose any condition that he deems fit, but if it does come within the ambit of this section, and falls under the rights that come under the Acts pertaining to Intellectual Property, then sections 3(1) to 3(4) are not applicable to such person . Section 4 of the Act, does not permit any unreasonable conditions for protection/ exploitation of intellectual property rights hence an act of licensing/ transfer of IP rights that are barriers in competition or that abuse monopoly would attract the scrutiny of the Competition Commission of India.
Under Section 27 of the Competition Act, the Competition Commission of India also has the authority to penalize Intellectual Property holders who abuse their dominant position.
Therefore, there is sufficient protection for intellectual property holders as well, as seen in the case of FICCI – Multiplex Association of India vs. United Producers/Distributors Forum (UPDF ). FICCI stated that the respondent. UPDF issued a notice which instructed its members to not release films to FICCI members. However, the respondents contended that a feature film in such case, is the subject matter of copyright, which gives copyright owners to do what they wish with the copyrighted matter as they deem fit. Hence, in such a case, it was asserted that the respondents were well within their rights to impose such as reasonable conditions as in Section 3(5) of the Act.
In the case of K Sera Sera Digital Cinemas Limited vs. Pen India Ltd. And Others , the opposite parties who were digital cinema service providers had refused to exhibit their movies through the Informant’s digital service, which was taken as a precaution on order to prevent any loss due to piracy, as there had been an issue of privacy earlier with the informant’s service. Therefore, when there is such a valid reason that makes it necessary for taking such precautionary steps to prevent misuse, then refusal, here is not violative of competition laws.
An International Overview
In the United States of America, the Sherman Act primarily discusses and deals with possession of monopoly, it also distinguishes between the wilful acquisition of power from the growth of the power . Furthermore, it focuses on prohibiting unfair competition by abuse of dominant position.
Since undue enforcement of intellectual property rights can lead to anti-competitive conduct, injunctions are often used to help tackle the situation, however courts in countries such as the United States of America and Europe have been very sceptical of the same because preliminary injunctions can be used to prevent legitimate competition. Therefore, while enforcement measures should protect and preserve the intellectual property holder’s legitimate interests, it must also at the same time prohibit abuses that destroy healthy competition in an unjustified manner .
In the case of A&M Records, Inc. v. Napster, Inc , the court held that while one of the characteristics of copyright includes the right to control development of derivative market by not granting a license for copyright. Such unilateral refusal here could also give possible rise to misuse however, the broad assumption here, is that such desire to exclude is presumed to be a valid justification in business.
In the case of Microsoft , the company was found to be abusing its dominant position in different ways that included work group server services, multimedia player market and PC operating systems by refusing to supply its competitors with information that was necessary for operating PC Windows with other systems, additionally also by tying sale of the Windows Media Player software with the Windows Client PC operating system. Tying here unlike generally was not good, as it can have a risk of foreclosure effect, when both the products ae distinct and depend on customer demand, when it is a lasting practice, and when it is done by a dominant undertaking.
With regard to copyrights, the courts in the United States of America have investigated a refusal by a copyright’s owner to license his/her rights to see whether or not it is reasonable in nature .
Refusal to license is generally presumed to be legal however it has been held that copyright does not confer on the owner immunity on the holder from the laws that are generally applicable, that includes anti-trust or competition laws .
The Supreme Court in the United States of America ruled that a dominant firm that controls infrastructure or assets that other companies require in order to compete, wold have an obligation to make such infrastructure/assets available on non-discriminatory terms .
In the European Union, the European Commission has played a very vigilant and active role in identifying anti-competitive behaviour and tackling with it. The Commission has not defined what fair reasonable and non-discriminatory terms are or in other words called FRAND terms, it has provided for injunctions, in those cases wherein there has been an imposition of licensing terms that do not conform to the FRAND standards that is they are not fair, reasonable and non-discriminatory in nature .
The reason why there are concerns regarding competition law while licensing copyright as Individual Property ownership and refusal to license can constitute an abuse of competition .This was raised in the case of Magill TV Guide wherein, three television companies which were broadcasting in the UK and Ireland refused to license program schedules to a publishing company that was interested in publishing the TV Guide.
Since copyright protection was given to TV Listings under the Irish and UK Law, there was a requirement of License. The ECIJ stated that the refusal to license here prohibited entry of a new product into the market, and stated that compulsory licensing would be an appropriate remedy. It was further added, that where such information was essential to allow competition in the market for TV Listing Magazines, it would be an abuse to prohibit such use. The court emphasized that by status of being an owner of intellectual property, one cannot have a dominant position.
There have also been a number of cases that involve competition law, which have been in regard to copyright collecting societies such as the European Commission taking formal proceedings against Confederation of Societies of Authors and Composers (CISAC) along with its individual members .
In this regard, there have also been cases in other countries against copyright societies such as that in Belgium, wherein, the courts there imposed a compulsory license on two copyright collecting societies favouring cable distributors who were refused the right to transmit by cable, the German cable in Belgium, the court stated that refusing authorisation for reasonable remuneration is abuse .
While the refusal of license does not on its own without any other factor , constitute abuse, additionally by having intellectual property rights, it is not on its own abuse but only when there is arbitrary refusal will it constitute an abuse of dominant position.
One of the most prominent domains, in which copyright and competition law interact has been in cases of software as well as computer programmes. In the case of Google , there was an abuse of dominance by the search engine as it favoured its own content in the search results. This despite the fact, that there were higher ranked rivals which were shown only on page 4 at an average in the search results. The European Commission stated that these practices were detrimental to competition as it inhibited comparison in shopping which was a disadvantage to consumers, while it made gains for the same.
When there has been refusal to permit third party use intellectual property, it has been considered in the context of the essential facilities doctrine, by many countries . This is applicable when a firm that controls an essential facility, denies another firm or entity reasonable access to such product/service. In such cases, the second firm/entity would require such product/service in order to be able to compete with the first firm.
Prescription of Industry standards serve as a remedy in such cases . FRAND Terms as highlighted in cases both in India and abroad, help provide a guide of what is reasonable and fair in nature.
Approaching the court/agency, with the claim is important in such cases . Injunctions are one of the most common remedies granted in the case of abuse of power violating competition law. However other remedies include compulsory licenses that can be used to deal with the problem of anti-competitive practices .
Developing countries can take home lessons of how to deal with the problems arising in the interplay of competition and intellectual property law from already developed countries .
Lastly, it is important from the perspective of the society, that proper and healthy competition is always maintained and is not compromised at any cost. Intellectual Property Rights, in specific reference to copyright in this case are very important for encouraging innovation and motivating creators. However, at no cost, should there be an abuse of power by such owners of copyright that should be permitted. It is especially imperative for developing countries to maintain such a proper balance of both of these laws, so as to ensure stability and progress in both innovation and competition thus laying a proper foundation for development in a country.
