Interface between IPR and Competition Law

Introduction
There have been many theories of confrontation and reconciliation between intellectual property
rights (IPRs) and Antitrust. The heart of the issue is the quest for coherence. This is difficult to
achieve in the context of extremely complicated legal and economic debates akin to a religious
battlefield with accompanying beliefs rather than rational arguments. Antitrust authorities have
been striving to achieve such coherence for a long time. Countries have an obvious interest in
promoting successful economic entrepreneurs and in providing employment for their citizens;
they may also wish to exercise control over the extent to which it is possible for overseas operators
to invest in the local economy. One practical objection to promoting competition is that it may be
considered to be inimical to the general thrust of such ‘industrial policy’. Admittedly the suggestion
has been made that, in conditions of perfect competition, firms will innovate in order to keep or
attract new custom. However Governments often encourage firms to collaborate where this would
lead to economies of scale or to more effective research and development; and they may adopt a
policy of promoting ‘national champions’ which will be effective as competitors in international
markets. 1

There are circumstances in which the innovator, the entrepreneur and the risk -taker may require
some immunity from competition if they are to indulge in expensive technological projects. This
is recognised in the law of intellectual property rights which provides an incentive to firms to
innovate by preventing the appropriation of commercial ideas which they have developed. 2 A
patentee in the UK is given the exclusive right for 20 years to exploit the subject-matter of his or
her patent. 3 In India, section 48 of the Indian Patents Act provides for the rights of patentee under
the act. The section confers upon the patentee the exclusive right to prevent third parties from the
act of making, using, selling or importing that product in India if the subject matter of the patent
is a product.

Similarly, if the subject matter of the patent is a process, the patentee has the exclusive right to
prevent third parties from the act of using the process for sale, selling the product obtained directly
by that process in India. A similar incentive and/or reward is given to the owners of copyright,
registered designs and analogous rights. 4 This is a recognition of the fact that in some
circumstances competition suppresses innovation and an indication of the vacuity of relentlessly
pursuing the ideal of perfect competition. The relationship between competition law and the law
of intellectual property is a fascinating one, in particular the tension between the desire to keep
markets open and free from monopoly and the need to encourage innovation precisely by granting
monopoly rights; in fact, however, this tension is more apparent than real. 5

1 This can be an important issue in some merger cases: The European Commission is resolutely opposed to the
creation by Member States of ‘national champions’; For interesting discussion of the issue see OECD Roundtable
Competition Policy, Industrial Policy and National Champions (2009), available at www.oecd.org/competition.
2 See generally Cornish, Llewelyn and Aplin Intellectual Property Law: Patents, Copyrights, Trademarks & Allied

Rights (Sweet & Maxwell, 8th ed, 2013).

3 Patents Act of UK 1977, s 25.
4 Copyright, Designs and Patents Act of UK 1988, ss 12, 13A–15A, 191, 216, 269.
5 For an interesting discussion of the differences in approach in the US and the EU, suggesting that the position in

the US can lead to anti-competitive behaviour escaping sanction, see Fox ‘A Tale of Two Jurisdictions and an Orphan
Case: Antitrust, Intellectual Property, and Refusals to Deal’ (2005) 28 Fordham International Law Journal 952; see
also Cornish and Llewellyn Intellectual Property: Patents, Copyrights, Trademarks and Allied Rights (Sweet & Maxwell, 7th ed,
2010).
It is not possible to deal with the substantive law of intellectual property here in detail. 6 For present
purposes the term ‘intellectual property’ includes patents, registered and unregistered designs,
copyrights including computer software, trademarks and analogous rights such as plant breeders’
rights. It should also be taken to include know-how, defined for the purpose of the block
exemption on technology transfer agreements as ‘a package of non-patented practical information,
resulting from experience and testing’: such information must be secret, substantial and identified
in a sufficiently comprehensive manner that it is possible to verify that it is secret and substantial 7;
although not strictly speaking an intellectual property right 8, know-how may be extremely valuable
and may be sold or ‘licensed’ for considerable amounts of money.

Is there an inevitable conflict between Intellectual Property Rights and Competition Law?
The essential characteristic of intellectual property rights is that they confer upon their owners an
exclusive right to behave in a particular way. For example the UK Patents Act 1977 grants the
owner of a patent the right to prevent others from producing the patented goods or applying the
patented process for a period of 20 years; patents may be granted where a
product or process is technically innovative. 9 A patent does not necessarily make the patentee a
monopolist in an economic sense: there may be other products that compete with the subject-
matter of the patent; however the General Court has pointed out that the possession of an
exclusive right ‘normally results in keeping competitors away, since public regulations require them
to respect that exclusive right’. 10 The owner of a registered trade mark can prevent anyone else
applying that name to goods or services where this would be confusing to consumers.

Because intellectual property rights confer exclusive rights upon their owners on the one hand,
whereas competition law strives to keep markets open on the other, it is easy to suppose that there
is an inherent tension between these two areas of law and policy. 11 However it is generally accepted
that this is simplistic and wrong12, a point specifically noted by former Commissioner Almunia in
a speech in 2013. 13 As paragraph 7 of the European Commission’s Guidelines on the application
of Article 101 of the Treaty on the Functioning of the European Union to technology transfer
agreements14 (‘the Technology Transfer Guidelines’ or ‘the Guidelines’) says:

6 For specific discussion of the relationship between intellectual property rights and EU competition law see
Anderman (ed) The Interface Between Intellectual Property Rights and Competition Policy (Cambridge University Press, 2007);
Leslie Antitrust Law and Intellectual Property Rights: Cases and Materials (Oxford University Press, 2010).
7 Regulation 772/2004, Article 1(1)(i); the Regulation is considered at ‘Technology Transfer Agreements: Regulation

772/2004’.
8 Know-how is protected by the law of obligations: See Coates, Kyølbye and Peeperkorn in Faull and Nikpay The EC

Law of Competition (Oxford University Press, 2nd ed, 2007), paras 10.36–10.49.
9 Report for the European Commission on Multi-Party Licensing (Charles River Associates, April 2003), pp 58–59; see

also Hovenkamp, Janis, Lemley and Leslie IP and Antitrust: An Analysis of Antitrust Principles Applied to Intellectual Property
Law (Wolters Kluwer, 2nd ed, 2010).
10 Case T-321/05 AstraZeneca AB v Commission EU:T:2010:266, para 362.
11 Kovacic and Reindl ‘An Interdisciplinary Approach to Improving Competition Policy and Intellectual Property

Policy’ (2005) 28 Fordham International Law Journal 1062; see also Lianos ‘Competition Law and Intellectual Property
Rights: Is the Property Rights’ Approach Right?’, chapter 8 in Cambridge Yearbook of European Legal Studies (Hart
Publishing, 2006, eds Bell and Kilpatrick).
12 See eg Tom and Newberg ‘Antitrust and Intellectual Property: From Separate Spheres to Unified Field’ (1997–98)

66 Antitrust Law Journal 167 on the ‘marked reduction in antitrust hostility toward intellectual property’ in the US in
the last 50 years; see also Kobak ‘Running the Gauntlet: Antitrust and Intellectual Pitfalls on the Two Sides of the
Atlantic’ (1995–96) 64 Antitrust Law Journal 341; Commission’s Evaluation Report on the Transfer of Technology Block
Exemption Regulation No 240/96, December 2001, para 29.
13 See speech by Joaquin Almunia of 9 December 2013, available at www.ec.europa.eu/competition/speeches.
14 OJ [2014] C 89/3.
Indeed, both bodies of law share the same basic objective of promoting consumer welfare and an efficient allocation of
resources. Innovation constitutes an essential and dynamic component of an open and competitive market economy.

Clear statements to the same effect will be found in an invaluable document issued by the
Department of Justice and the Federal Trade Commission in the US in April 2007 entitled Antitrust
Enforcement and Intellectual Property Rights: Promoting Innovation and Competition. 15 It begins with the
following very clear statement:

Over the past several decades, antitrust enforcers and the courts have come to recognize that
intellectual property laws and antitrust laws share the same fundamental goals of enhancing
consumer welfare and promoting innovation. This recognition signalled a significant shift from
the view that prevailed earlier in the twentieth century, when the goals of antitrust and intellectual
property law were viewed as incompatible: intellectual property law’s grant of exclusivity was seen
as creating monopolies that were in tension with antitrust law’s attack on monopoly power. Such
generalizations are relegated to the past. Modern understanding of these two disciplines is that
intellectual property and antitrust laws work in tandem to bring new and better technologies,
products, and services to consumers at lower prices.

The current block exemption in force in the EU for technology transfer agreements, Regulation
772/2004 16, and the accompanying Technology Transfer Guidelines adopt a much less grudging attitude
towards such agreements than used to be the case: indeed recital 5 of the Regulation notes that
such agreements ‘will usually improve economic efficiency and be pro-competitive’; the same point
is made at several points in the Guidelines 17. The complex matter in modern competition policy is
to determine at what point, if at all, the exercise of an intellectual property right could be so harmful
to consumer welfare that competition law should override the position as it would be on the basis
of intellectual property law alone.

Interface between Article 101& Licences of Intellectual Property Rights

A patentee may decide, instead of producing the patented goods or applying the patented process
itself, to grant a licence to another firm enabling it to do so. The same may be true of any other
intellectual property right. There are many reasons why a firm may choose to grant a licence. A
patentee may lack the resources to produce in quantity; it may wish to limit its own production to
a particular geographical area and to grant licences for other territories; or it may wish to apply a
patented process for one purpose and to allow licensees to use it for others. A patentee may wish
to impose various restrictions upon its licensees, for example as to the quantity or quality of goods
that may be produced or the price at which they may be sold; these provisions relate to the
patentee’s own products and so can be restrictive only of intra-technology competition. 18

The argument for controlling restrictions of intra-technology competition in patent licences is

weak. Given that a patentee has an exclusive right to produce and sell the patented goods, it is not
obvious why it should not be able to impose whatever restrictions it chooses upon its licensees;
the ability to do so is a manifestation of the right conferred by statute. Indeed the grant of a licence
can be seen as increasing competition, by introducing a licensee onto the market which, without
the licence, would not be there at all; even if the patentee imposes restrictions of intra-technology
competition, these are likely to be compensated for by the stimulation of intra-technology

15 This document can be accessed at www.ftc.gov.

16 OJ [2004] C 123/11.
17 See eg paras 8, 9, 17 and 146ff; see similarly Technology Transfer Guidelines, paras 8, 9, 17 and 156ff.
18 For discussion of this expression see the Technology Transfer Guidelines, paras 11–12.
competition. 19 However Article 101(1) has been applied to intra-technology restrictions in patent
(and other) licences, in particular where they divide the single market: the ‘single market imperative’
is as influential in this area of EU competition law as it is elsewhere. 20

Some terms in patent licences may affect inter-technology competition: examples are tie-in clauses
requiring a licensee to acquire particular technology or products solely from the patentee and non-
competition clauses forbidding the licensee to compete or to handle technology or products which
compete with the patentee’s: provisions such as these may foreclose the opportunities of other
producers. Objection might be taken to terms which are perceived to be an attempt to extend a
patentee’s monopoly power beyond the protection afforded to it by the law and/or which might
be considered to be oppressive to a person in a weak bargaining position. In a series of decisions
from the early 1970s the Commission applied Article 101(1) to various clauses found in patent
licences, and in particular to territorial restrictions, although in some cases it decided that the
criteria in Article 101(3) were satisfied. 21 The position today is that the mere grant of exclusive
territorial rights to a patent licensee does not necessarily infringe Article 101(1). 22 A relatively
benign treatment is taken towards territorial exclusivity, as is demonstrated by the Technology
Transfer Guidelines. 23

In Consten and Grundig v Commission the Court established that the use of intellectual property rights
could contribute to an infringement where it enabled a distributor to enjoy absolute territorial
protection in its allotted territory. The reason for the strict treatment of the agreement in Consten
and Grundig was that it went beyond the mere grant of exclusive distribution rights in France by
assigning to Consten the GINT trade mark for France and thereby enabling Consten to repel parallel
imports from other Member States. 24 The distinction drawn by the Court of Justice in this case—
between the existence of an intellectual property right on the one hand and its improper exercise
on the other— provided the foundation of much of the law in this area including, in particular,
the exhaustion of rights doctrine.

Intellectual Property Rights & Article 102

The law of intellectual property confers exclusive rights, whereas Article 102 prohibits the abuse
of a dominant position. The question arises whether Article 102 can be applied in such a way as
to limit the exclusive rights given by intellectual property law. The Court of Justice has made clear
that the mere ownership of intellectual property rights cannot be attacked under Article 102 25;
however Article 102 may apply to an improper exercise of such rights 26. Article 8(2) of the WTO

19 Ibid.
20 Ehlermann ‘The Contribution of EC Competition Policy to the Single Market’ (2010) 29 CML Rev 257; See
Commission’s Report on Competition Policy (2009), para 9, available at www.ec.europa.eu.
21 Some of the Commission’s notable decisions on patent licences are Burroughs AG and Deplanque & Fils Agreemen t

OJ [1972] L 13/50; Burroughs AG and Geha-Werke GmbH Contract OJ [1972] L 13/53;

22 Technology Transfer Guidelines, paras 10–18 and paras 156ff; on the position in the US see the DoJ/FTC Antitrust

Guidelines for the Licensing of Intellectual Property of 6 April 1995, available at www.justice.gov/atr; the Guidelines
state at para 2.0 that there is no presumption that intellectual property creates market power, a point with which the
US Supreme Court agreed in Illinois Tool Works Inc v Independent Ink Inc 547 US 28 (2006).
23 The Guidelines also say that licences of intellectual property rights are generally procompetitive; the approach in

the Guidelines, which suggests that terms in licences should be subject to a ‘rule of reason’ standard, was endorsed by
the DoJ/FTC report on Antitrust Enforcement and Intellectual Property Rights of April 2007: see in particular chapter
4 of the report.
24 Technology Transfer Guidelines, paras 189–203.
25 Article 345 TFEU provides that the Treaties ‘shall in no way prejudice the rules in Member States governing the

system of property ownership’.

26 See Case 24/67 Parke, Davis & Co v Probel [1968] ECR 55 where the Court of Justice said that ownership of a patent

is not an abuse in itself although ‘the utilisation of the patent could degenerate into an improper exploitation of the
agreement on Trade-Related Aspects of Intellectual Property Rights (the so-called ‘TRIPS
Agreement’) makes the same distinction. A question that has been much debated is the extent to
which the owner of an intellectual property right can be compelled to grant a licence of it to a third
party under Article 102. As a general proposition the owner of an intellectual property right is
entitled to determine how it should be exploited and a compulsory licence should be imposed only
in exceptional circumstances.

In Renault27 and in Volvo v Erik Veng28 third parties wished to be granted licences of the car
manufacturers’ intellectual property rights in order to produce spare parts, and claimed that a
refusal to grant such licences was an abuse of a dominant position under Article 102. The Court
of Justice adopted an orthodox approach to the application of Article 102 to compulsory licensing
and held that, in the absence of EU harmonisation of laws on designs and models, it was a matter
for national law to determine the nature and extent of protection for such matters. In Volvo the
Court stated at paragraph 8 that:
the right of the proprietor of a protected design to prevent third parties from manufacturing and
selling or importing, without its consent, products incorporating the design constitutes the ve ry
subject-matter of its exclusive rights. It follows that an obligation imposed upon the proprietor of
a protected design to grant to third parties, even in return for a reasonable royalty, a licence for
the supply of products incorporating the design would lead to the proprietor thereof being
deprived of the substance of its exclusive right, and that a refusal to grant such a licence cannot in
itself constitute an abuse of a dominant position.

The Court added, however, that a car manufacturer might be guilty of abusing its dominant
position where it refused to supply spare parts to independent repairers in an arbitrary manner,
charged unfair prices for spare parts 29 or decided no longer to produce spare parts for models still
in circulation.

Interface between IPR and Competition Law in India

The roots of Indian law on competition can be traced back to Articles 38 and 39 of the
Constitution which lay down the duty of the State to promote the welfare of the people by securing
and protecting a social order in which social, political and economic justice is prevalent and its
further duty to distribute the ownership and control of material resources of the community in a
way so as to best sub-serve the common good, in addition to ensuring that the economic system
does not result in the concentration of wealth. It is from these duties that the MRTP Act, 1969,
also influenced by US, UK and Canadian legislations, came about. 30

The process of initiating a new competition law in India was started by an Expert Group set up to
study trade and competition policy, following the Singapore Ministerial Declaration of the WTO
in 1996. Noting that competition policy is a prerequisite to economic liberalization, the Expert
Group, in its report submitted to the Ministry of Commerce in January 1999 recommended that a

protection’; the ownership of intellectual property is a factor to be taken into account in assessing whether a firm has
a dominant position.
27 Case 53/87 Consorzio Italiano della Componentistica di Ricambio per Autoveicoli e Maxicar v Régie national des Usines Renault

[1988] ECR 6039.

28 Case 238/87 [1988] ECR 6211; see Korah ‘No Duty to Licence Independent Repairers to Make Spare Parts: the

Renault, Volvo and Bayer Cases’ (1988) 12 EIPR 381; Groves ‘The Use of Registered Designs to Protect Car Body
Panels’ (1989) 10 Business Law Review 117.
29 In Case T-198/98 Micro Leader Business v Commission [1999] ECR II-3989 the General Court held that the

Commission, before rejecting a complaint against Microsoft concerning the exercise of its copyright protection, should
have investigated whether its prices were discriminatory contrary to Article 102(2)(c): ibid, paras 49–59.
30 The Institute of Chartered Accountants of India, Competition Laws and Policies (2004), at 117-118.
fresh competition law be drawn up. In October 1999, the government appointed a High Level
Committee on Competition Policy and Competition Law to draft the new competition law, which
was submitted in November 2000. 31 The resultant Competition Act, 2002 coming into force mere
months before the expiry of the TRIPS compliance period for India can therefore be seen as
India’s fulfilments of its TRIPS obligations. 32 Under Section 3, the Competition Commission is
required to look into agreements which are anticompetitive in nature and those found to be
anticompetitive are declared void.

The Competition Act incorporates a blanket exception for IPRs under Section 3(5) based on the
rationale that IPRs deserve to be cocooned since a failure to do so would disturb the all -important
incentive for innovation, which, itself, would have knock-on effects in terms of a lack of
technological innovation and reflect a lack of quality in goods and services produced. However,
equally, it does draw the line inasmuch as it does not permit unreasonable conditions to be passed
off under the guise of protecting IPRs. 33 Thus in principle, IPR licencing arrangements which
interfere with competitive pricing, quantities or qualities of products would fall foul of competition
law in India.

It has been deliberated that section 3(5) of the Competition Act does not simply remove the
jurisdiction of the CCI over IPR related cases. The exemption provided under section 3(5) of the
Competition Act provides for two different situations: (i) the right of the party to restrain a third
party from infringing the relevant IPRs; and (ii) right to impose reasonable conditions to protect
the rights conferred under the relevant IPR legislation. The ambit of the exemption has been
deliberated by the CCI in various cases. The term ‘reasonable restriction’ mentioned in section 3(5)
of the Competition Act was discussed in detail by the CCI, in the case of FICCI– Multiplex
Association of India v. United Producers/ Distributors Forum. 34 In the instant case, it was also argued by
the distributors forum that based on section 3(5) of the Competition Act, the producers have the
right to impose reasonable restrictions for protecting rights conferred upon them under the
Copyright Act. The CCI disregarded the contention of the producers’ forum and noted the
following:
Intellectual property laws do not have any absolute overriding effect on the competition law. The
IPR exemption mentioned under section 3(5) only enables the right holder to impose reasonable
conditions, as may be necessary for protecting the rights [emphasis supplied] conferred upon the
IPR holders by the IPR statutes mentioned under section 3(5) of the Competition Act. 35

In the Automobile Spare Parts case 36, the CCI had dealt, in great detail, with the coverage of the
IPR exemption mentioned under section 3(5) of the Competition Act. The facts of the case are
discussed in detail in the chapter on abuse of dominance. With respect to the exemption under
section 3(5) of the Competition Act, the case pertained to an agreement entered into between
OEM (i.e., car manufacturers) and OES for procurement of spare parts by OEMs for both
assembly line and aftermarket requirements.

31 Ibid, at 128-129.
32 R. Dutta, Critical Analysis: Reflection of IP in Competition Law of India (August 11, 2010), available at
http://www.indlawnews.com/display.aspx?4674.
33 S. Jain and S. Tripathy, Intellectual Property and Competition Laws: Jural Correlatives, 12 Journal of Intellectual

Property Rights (2007), at 236-243.

34 Multiplex Association of India v. United Producers/ Distributors Forum Case No. 01/2009.
35 ‘Chapter 5: Intellectual Property and Competition Law’, in Abir Roy , Competition Law in India: A Practical Guide,

(Kluwer Law International 2016) p. 298

36 C-03/2011. This has been affirmed by the Competition Appellate Tribunal subsequently in an order d ated

December 9, 2016, except on the issue concerning quantum of penalty, an explanation of which is not relevant for
the instant discussion.
In Automobile case, CCI clarified that section 3(5) of the Competition Act allows an IPR holder
to impose reasonable conditions to protect his rights which have been conferred or may be
conferred upon him under the relevant IPR statues in India. Therefore, the ambit of the exemption
is clear that the IPR must have been conferred prior to availing of the exemption under section
3(5)of the Competition Act. Based on the documents submitted by the OEMs, the CCI concluded
that the OEMs have not been able to provide documents to substantiate their claim over a
particular type of IPR under the applicable Indian IPR laws. Further, some of the OEMS had
contended that the overseas parent corporation of the OEMs had validly held IPRs, which were
thereafter transferred to the OEMs by means of a validly executed technology transfer agreement.

The CCI, however, noted that the IPR claimed by the parent of the OEMs are territorial in nature
and is vested upon the IPR holder only in a particular jurisdiction. Thus, in the event that the
parent corporation of the OEMs held such IPR rights in the territories where the IPR rights were
originally granted, the said rights cannot be said to be granted to the OEMs operating in India by
entering into a technology transfer agreement, unless the rights have been granted upon the OEMs
which is recognized under the relevant IPR statutes (mentioned in section 3(5) of the Competition
Act) in India. Based on the observations of the CCI, for exemption of section 3(5) of the
Competition Act to be availed of, protection ought to have been granted to the IPR holder or a
process ought to have been initiated for grant of such protection under the relevant IPR statutes
in India. 37

Section 4 of the Competition Act deals with abuse of dominant position; its wording is similar to
Art. 82 of the EC Treaty. 38 It is clear that it is the abuse and not the existence of a dominant position,
which is prohibited by law. It explains what is meant by abuse of dominant position enumerates
the practices which are to be considered abusive. What is noteworthy and relevant to the current
discussion, is that no exception has been created for IPRs. This embodies the principles explained
earlier in the article. Firstly, competition policy makes room for IPRs and frames its policy
accordingly. The exception allows for reasonable conditions to be imposed by the IPR holder to
protect the rights granted by the relevant IP law; this ensures that the IPRs are not frustrated. At
the same time, the exception is only allowed for the purpose of protection of the rights to the
extent granted by the IP law; hence the requirement of reasonableness.

On the other hand, such an exception has not been carved in Section 4 for a number of reasons.
Firstly, IPRs may not confer a dominant position in the market; as explained earlier, the legal
monopoly conferred by IPRs may not necessarily lead to an economic monopoly and it is the latter
that the competition law is concerned with. Secondly, even if IPRs do grant a dominant position,
mere existence of market power is not prohibited under s. 4; it needs to amount to an abuse of
dominant position. Competition policy is willing to accept the dominance, if any, that may result
from the exercise of IPRs by the holder; only when this amounts to abuse does competition law
interfere. In the event of such abuse, the fact that the source of market dominance is IPRs is of
no relevance. Therefore s. 4 makes no exception for IPR-sourced market power. 39

The legal tussle between Ericsson and Micromax highlighted the growing interface between
competition law and intellectual property rights law. Since SEP’s are sine quo non to the

37 Supra note 35, pp. 299-300.

38 The Indian competition regime is young; this similarity in law to the EC law would allow the Competition
Commission of India to draw on the EC competition jurisprudence, which is considered one of the most developed
in the world. See Shamnad Basheer, Competition Bill in India: The Nexus with IP, September 22, 2007, available at
http://spicyipindia.blogspot.com/2007/09/competition-bill- in-india-nexus-with-ip.html.
39 See Rahul Dutta, Critical Analysis: Reflection of IP in Competition Law of India, available at
http://www.indlaw.com/display.aspx?4674.
implementation of technologies, it is only but natural that the risk of abuse of dominance exists.
The European Union Treaty prohibits anti-competitive and abusive behaviour under Article 82;
as does the Competition Act of 2002. 40

In both cases, 41 the CCI remarked that Ericsson was a dominant player having 33,000 patents to
its credit, with 400 of them granted in India. The royalty rates charged by Ericsson had no linkage
to the patented product and increased proportionately with the cost of the product, thereby
qualifying as discriminatory (on grounds of patent hold-up as well as royalty stacking). In the Intex
dispute, 42 each user was made to sign a non-disclosure agreement. By virtue of this arrangement,
users were denied to use information pertaining to the royalty rates charged from other users. The
Intex–Ericsson Agreement also barred Intex from approaching Indian courts (which is the
applicable jurisdiction since both parties conduct business in India) and conferred jurisdiction to
Sweden and Singapore. The CCI, therefore, held Ericsson liable for abuse of dominance under
Section 19(1)(a) of the Competition Act, 2002. 43

Refusal to Deal and Compulsory Licensing: Indian Scenario

Section 4 of the Competition Act deals with abuse of dominant position by an enterprise or a
group and one of the abuses of one’s dominant position is to indulge in any practice or practices
that result in denial of market access in any manner. A refusal to licence IP exclusively held by a
dominant enterprise may also be considered as a constructive refusal to supply under the
provisions of the Competition Act and such a refusal may be construed to be an abuse under
section 4 of the Act.

Section 27(g) of the Competition Act empowers the CCI to pass ‘any other order’ as it deems fit
besides imposing a penalty, if it finds that a dominant enterprise has acted in contravention of
section 4 of the Competition Act. The term ‘any other order’ is like an omnibus clause which will
include an order by the CCI issuing compulsory licence, if CCI feels that such order will remedy
the market situation distorted by the dominant enterprise. Competition authorities in matured
antitrust jurisdictions have granted compulsory licences under the competition provisions of their
respective statutes, notwithstanding similar provisions in IP laws. One must note that, mere refusal
to licence IPR will not be considered as abuse. Internationally also, mere refusal to licence IPRs is
not in itself objectionable under the competition laws. However, in exceptional circumstances the
refusal by a dominant company to grant a licence under its IPRs can be considered to be an abuse
under Article 102 Treaty on the Functioning of the European Union (TFEU).

In Magill TV Guide/ITP, BBC and RTE44, variously known as the Magill case or the TV Listings
case. Mr Magill wished to publish the listings of three television companies broadcasting in the
UK and Ireland in a single weekly publication. The European Court of Justice (ECJ) held that the
refusal by copyright holders in the United Kingdom and Ireland to grant licences to third parties
to provide a new comprehensive television listings magazine was abusive under Article 102 TFEU.
The Magill and the IMS45 case(s) established the possibility of a claim to a licence under Article 102
in exceptional circumstances, in particular where the licensee intended to produce a new product
for which there was a potential consumer demand. The potential significance of this approach was

40 Section 4(1) of the Competition Act, 2002.

41 Ericsson Inc v Micromax, CS(OS) 442/2013.
42 Ericsson v Intex, WP(C) 464/2014.
43 Intex v Ericsson, Case No 76/2013, CCI.
44 Magill TV Guide/ITP, BBC and RTE, OJ [1989] L 78/43, [1989] 4 CMLR 757.
45 IMS Health GmbH & Co v NDC Health & Co Case C-418/01 [2004] ECR I-5039, [2004] 4 CMLR 1543; for comment

see Sufrin ‘The IMS Case’ (2004) 3 Competition Law Journal 18.
dramatically revealed in the Commission’s decision in the Microsoft case of 24 March 2004. 46 The
Commission held that Microsoft was dominant in two markets, one for personal computer
operating systems and the other for work group server operating systems. The Commission held
that Microsoft had abused its dominant position by refusing to supply competitors with
interoperability information to enable them to develop and distribute products that would compete
with Microsoft’s on the market for servers.

Further, the ECJ in Microsoft v Commission47 confirmed that a refusal by a dominant company to
license its IPR is an abuse under Article 102 TFEU where three conditions are satisfied, namely:
(i) that the refusal is preventing the emergence of a new product for which there is a potential
consumer demand, (ii) that it is unjustified, and (iii) that it is such as to exclude any competition
on a secondary market.

In a few of its decisions, the CCI appears to have endorsed the applicability of the ‘essential facilities
doctrine’ under section 4 of the Act. However, these decisions do not seem to have discussed in
detail, the scope of application of this doctrine. One cannot state with legal certainty that the
‘essential facilities’ doctrine is the only basis on which an entity’s refusal to licence its intellectual
property would amount to an abuse of dominance. While the cases dealt by CCI till now have
been on excessive pricing and discriminatory pricing during licensing, it is possible that in the
foreseeable future, CCI will grapple with the issue where market players refuse to license their
technology, thereby causing appreciable adverse impact on competition in India. There is an
appropriate relief under the relevant IPR statutes in India in this case would be to force the holder
of the technology to license the same, which would be something akin to compulsory license. Such
refusals under the Competition Act, when limited to decisions of a single entity will be examined
under section 4, though where the refusals involve multiple entities, i.e., ‘group boycott’, the
examination may proceed under section 3 of the Competition Act.

As mentioned above, some of the IPR statutes in India provide for provisions relating to
compulsory licensing. For instance, under section 84 of the Indian Patents Act, 1970, the
Controller of Patents has the power to grant compulsory licence, after expiry of three years from
grant of patent, in case the patented invention does not meet the ‘reasonable requirements of the
public’, or is ‘not available to the public at a reasonably affordable price’ or ‘is not worked in the
territory of India’. In 2012, in an order that was upheld on appeal, the Controller of Patents granted
a compulsory licence to Bayer’s patent covering a cancer drug to a generic Indian drug
manufacturer on all three grounds. 48 There can be similar situations under the Competition Act
because the CCI has the power to pass ‘any other order’ under section 27 of the Competition Act
which may include provision for compulsory licensing. However, there is no guidance presently
as to under what conditions will CCI pass an order for compulsory licence.

The Copyright Act, 1957 contains similar provisions, though of a narrower scope. Compulsory
licence may be issued pursuant to section 31(1)(b) of the Copyrights Act, 1957. It may be issued
when the Copyright Board is satisfied that the copyright owners have refused to allow
communication to the public and such refusal is not reasonable. This provision extends only to

46 OJ [2007] L 32/23; see Banasevic, Huby, Pena, Castellot, Sitar and Piffaut ‘Commission adopts Decision in the
Microsoft case’ (2004) (Summer) Competition Policy Newsletter 44–46.
47 Case T-201/04 [2007] ECR II-3601, [2007] 5 CMLR 846; for discussion of the case by Commission offi- cials see

Kramler, Buhr and Wyns ‘The judgment of the Court of First Instance in the Microsoft case’ (2007) 3 Competition Policy
Newsletter 39.
48 Natco Pharma v. Bayer Corporation, Controller of Patents Mumbai, March, 2012 available at:
http://www.ipindia.nic.in/iponew/compulsory_license_12032012.pdf; Bayer Corporation v. Union of India & Ors.,
IPAB, Chennai, available at: http://www.ipab.tn.nic.in/045-2013.htm; see also Abir Roy supra note 35, p 311.
certain type of copyrighted works and not all. Recently, in Music Broadcast Pvt Ltd v.
Phonographic Performance Limited49, the Copyright Board issued compulsory licence to musical
works in favour of the FM radio industry on a revenue sharing model, i.e., 2% of the net
advertisement earnings of each FM radio station would be set aside to pay the music providers.

Interference due to Inadequacy: The Middle Path Way

It has been opined that the need to invoke anti-trust might be avoided if the paradigms of IPRs
are structured and applied with such balance that the interests of the first as well as later innovators
are reconciled. The failure of the legislators in adequately identifying and defining the limits of
property rights, especially with regard to newer technologies necessitates scrutiny by competition
law of the exercise of these rights, to prevent anti-competitive foreclosure. 50

By inference, competition law will be needed only when the property rights are not defined
sufficiently, leading to non-fulfilment of the very objectives of IP law. 51 IPRs create an exception
to free competition, by granting exclusivity, to promote innovation. Therefore, loosely defined,
IPRs increase the scope of protection, without due justification and hence do not promote
innovation; they merely result in rent-seeking behaviour. The purpose of making an exception to
free competition is defeated. In such an event, competition law steps in—to compensate for the
shortcoming of IP law in an attempt to ensure that competitive dynamics are not disturbed by the
ill-defined IPRs. 52 Thus, what is required is for IPRs to be defined in a manner that sufficiently
fulfils its assigned function.

Despite the above discussion, it cannot be denied that construction of the interaction between IP
and competition either in terms of the clash between the excluding features of one and the
principle of freedom of the other or in terms of the reassuring prospect of the substantial
converging goals of each would be over-simplistic. Neither of the extremes is entirely true. Each
has a specific goal which cannot be harmonized entirely with that of the other. 53 Analysis of these
intersections of IP and competition rules would be misleading if it attributed to the latter, the direct
role of promoting innovation or to the former, the direct role of promoting competition. The two
disciplines aim at different but synergic objectives; each can indirectly serve the other by fulfilling
its function. The challenge is to design rules both within IP law, i.e. the substantive law of patents,
copyrights, trademarks, and trade secrets as well as outside IP law, i.e. substanti ve competition law
in a manner that promotes dynamic competitive markets.

Conclusion
In fact, the conflict in this field is not bad in itself. Both the legal protection of IPRs, rewarding
good innovation and granting a necessary level of legal certainty, and the antitrust enforcement,
ensuring innovation through, the protection of rivalry, play their role. The legal confrontation is
there to avoid the excesses of each process. When they conflict, one would wish for a decision
based on the merits of the case. The focus should be on the protected good, i.e., innovation.

49 Music Choice India Pvt Ltd v. Phonographic Performance Limited, Copyright Board (Second Order), 2010.
50 Gustavo Ghidini, Intellectual Property and Competition Law: The Innovation Nexus 6 (2006).
51 See generally, Gireesh Chandra Prasad, MNCs Marrying into India Inc. Face Patent Test, 30 July 2007, available at

http://toostep.com/trends/mncs-marrying-into-india-inc-face-patent-test.
52 See generally, Gustavo Ghidini, supra note 42, 111.
53 Mihir Naniwadekar, Intellectual Property Rights and Competition Law: Friends or Foes? September 1 2009, available at

http://spicyipindia.blogspot.com/2009/09/intellectual-prop- erty-rights-and.html, quoting Herbert Hovenkamp et

al., IP and Antitrust: An analysis of Antitrust Principles Applied to Intellectual Property Law (2009).
Preconceived ideas, taboos or per-se rules in this field are not useful. An ad hoc assessment in
conflicting cases is necessary and each market is different in its characteristics.

If, ultimately, we were led to apply a rule of reason, although in some cases with the nuance of the
exception rule, one would expect that the rule be not sans raison. 54 It is obvious that it is not easy
to compare the impact of economic incentives to innovate against anti-competitive effects or make
a qualitative analysis in some scenarios to see if a ‘new’ or ‘better product’ is prevented from
meeting its potential demand by reason of excessive IPR protection. More significantly, it is
likewise not an easy task for the judiciary to review antitrust decisions. But the fact that a task is
difficult does not discharge us from our duties.

There is no doubt that in the modern economy, IP and competition have complementary roles in
the ultimate goal of protection of consumer welfare. IP promotes innovation which in turn
promotes competition in the market. It cannot, however, be ignored that the direct and immediate
goals of these two realms of law do conflict sufficiently to need some mode of reconciliation—a
middle path. This middle path can only be achieved by separating the functioning of the two
spheres from each other. Allowing interference into each other’s domains will lead to a conflict,
which will necessarily have to be resolved by placing one superior to the other. Such a policy
decision can be largely avoided if their operations are kept independent of each other.

IP must deal with the grant and functioning of property rights, while competition law would need
to deal with the manner of exercise of these rights, only with reference to their effect on the market.
The difference between policy decisions and individual case decisions needs to be maintained.
Such separation is essential in order for both areas to be able to efficiently fulfil their goals and in
the long term complement and supplement each other. There is a difference between economic
and legal monopoly which must be maintained. The former falls within the domain of competition
authorities, while the latter with IP authorities. It is not the existence of a dominant position that
threatens competition in a market, but its abuse and competition law must be concerned only with
the latter. When there is abuse of dominant position, it is irrelevant what property right allowed
the enterprise to attain such a position.

This article has relied heavily on European law because it is widely acknowledged to be one of the
most developed competition regimes worldwide. In addition, the similarities in the provisions of
law between the European law and Indian law are no coincidence; it is likely that the Indian
lawmakers have intended heavy reliance on the European position. This makes an understanding
of the European position vital to the nascent Indian competition regime. At this nascent stage of
Indian competition law, the authorities have sufficient practice to rely on. At the same time, an
understanding of the reasons behind the precedents would be most useful in order to ensure that
the same can be tailored to suit the specific needs of the Indian market and the competition
scenario prevailing herein.

54See Ian Eagles, ‘Reconciling Intellectual Property and Competition Policy in a Digitised World’, Communications and
Strategies, no 39 (3rd quarter, 2000, University of Auckland).