COMPETITION AND INTELLECTUAL PROPERTY INTERFACE:

EVOLUTION OF PRINCIPLES THROUGH CASE LAW IN UNITED

STATES, EUROPEAN UNION, AND INDIA

Abstract

The interface between the Competition Law and Intellectual property (IP) is an aspect which
remains mostly disputable. This interface aims at creating an environment where an effective
and conducive business opportunity can be relied upon. Competition Law promotes
efficiency whereas Intellectual property aims at promoting efficiency. Courts internationally
have been dealing with such disputes, where certain very interesting observations were made.
This paper aims at analysing some of the prominent decisions of the Courts especially in
United States and European Union which sets up the jurisprudence on the inter-relation
between Competition Law and Intellectual Property Laws and the model of the law behind
the interface in these countries. This paper further aims at analysing this interface from the
Indian perspective.

Keywords: Intellectual Property, Competition Law, Licensing

I. INTRODUCTION
II. ANALYSIS OF POSITION PREVALENT IN THE UNITED STATES
III. ANALYSIS OF IP- COMPETITION LAW INTERFACE IN THE
EUROPEAN UNION
IV. ANALYSIS OF THE POSITION PREVALENT IN INDIA
V. SUGGESTIONS
VI. CONCLUSION
 I. INTRODUCTION

The statutory protection attributed to the intellectual property is not only for the reason of
providing incentive but also for providing an economic right assuring financial growth to the
IP holder for using his IP. On the other hand, Competition law aims at maintaining a balance
between different activities such as mergers, monopolies and commercial activities. The
balance is thus maintained resulting into a reliable business friendly environment. The
problem arises when there is an overlap of the two statutes. The former provides for a system
of regulated competition and the later promotes the innovation thereby giving effective room
for competition. The main issue which arise out of their interface is licensing. Intellectual
Property licensing is an area that invites the provision of antitrust law. Licensing agreements
do have an anticompetitive effect which can result into affecting the entry and exit barriers as
well as foreclosure of competition in the relevant market. The paper is an attempt at
conceptualising the conditions prevalent in the United States, European Union and India. It is
imperative to draw a comparison with US and EU because of their authoritative command in
the area of IP and competition law due to their strong establishment in this respect 1. The
number of litigations in this area have been seen to be rising exponentially due to the
technological advancements, especially in the United States and the European Union, and that
being the case, the jurisprudence evolved with time in these two countries by the active
involvement of the court, is remarkably excellent and that is something which a developing
country like India must take note of2. The paper tries to give an analysis of the condition
prevailing in the countries mentioned. The paper will go ahead to also analyze the court’s
decision in due course of time giving the judgements which acts like a guiding principle for
the future cases to come. These guiding principles in both United States and European Union
have been described in this paper. Through these guiding principles, how can we move
forward in the IP-Competition interface, is the matter to be reasoned very carefully which this
paper will try to observe.

1
Michael Wise, "Competition Law and Policy in the European Union", 9 OECD JOURNAL OF COMPETITION LAW
AND POLICY 1 (2007).
2
Abhipsita Kundu & Dipayan Bhattacherjee, "Owners’ Right Versus Owners’ Monopoly: The IPR- Competition
Interface", 3 CNLU LAW JOURNAL 58 (2013).
 II. ANALYSIS OF THE POSITION PREVALENT IN THE UNITED
STATES

The United States (US) has a very strong regime of IP law linked with that of competition
law. The law in the country depends on how the corporation works. The US law grants the IP
holder to use, offer and sell the invention within US and can also import the inventions in US.
With regards to US IP Law, there is also Trade Secret policy 3, which applies to those
information whose economic value depends on not being generally known. Trade secret
protection relies on the rights holder’s efforts to maintain secrecy and has no fixed term. The
US can be said to have one of the strongest IP regulations. Since the economy of US is
primarily based upon the industries which deal with IP, hence, it is tilted towards providing
more room to those who works for the innovation and promotion 4. Competition law in the
United States termed as the US Antitrust Law does not impose any such obligations upon any
of the firms if they refuses to licence unlike the EU. The analogy of US is on the basis that it
can undermine incentives for investment and promotions5.

The Horizon

It was in 2019, US Government targeted biggest tech companies such as Facebook, Amazon,
Apple and Google. The Department of Justice (DOJ) announced broad antitrust review of Big
Tech Companies pushing down shares of all. The DOJ and the Federal Trade Commission
(FTC) reviewed whether the Big Tech Companies had used improper means to acquire
monopoly or excluding promising rivals from contesting their position. The action of DOJ
and FTC do raise some of the valid antitrust question. Are the companies too big to get that
position illegally or it is the US antitrust law which makes the job of companies much easier?
Questions do arise about the law and its enforcement, which certainly creates a broad
perspective of the US law. Let us discuss briefly about the law in US.

There are two agencies which work for the antitrust enforcement and focuses on concerted
action, exclusionary unilateral action, and merger review. These are the DOJ and the FTC.
Further, there are three core antitrust laws, namely the Sherman Act, the Clayton Act and the

3
Trade Secret policy, United States, available at: https://www.uspto.gov/ip-policy/trade-secret-policy (last
visited on October 31, 2019)
4
Eleanor Fox, "Commentary and Panel Discussion on Antitrust , Competition Law And Intellectual Property", 7 INTERNATIONAL INT
POLICY 1 (2002).
5
Antitrust Guidelines for the Licensing of Intellectual Property, U.S. Department Of Justice And Federal Trade
Commission, available at:
https://www.justice.gov/atr/IPguidelines/download (last visited on October 31, 2019)
FTC Act6. The FTC act is solely enforced by the FTC prohibiting unfair method of
Competition and deceptive practices.

Going on to the Sherman Act, both DOJ and FTC can take action but only DOJ is empowered
to take criminal enforcement action. Where Section 1 of the Sherman Act deals with the
concerted action, Section 2 deals with the unilateral actions. All the concerted action which
results in restraint in trade and which can take place in the form of agreements, contracts,
comes within the ambit of Section 1 of the act. There are agreements of IP Licensing which
are evaluated under the rule of reason but there are also some of the agreements like that of
market allocation, which may invite prohibitions. Section 2 prohibits the monopoly power of
the enterprises through the anticompetitive conduct7.

On the other hand the Clayton Act generally deals with the issues relating to Mergers and
Acquisitions. The act prohibits all the mergers and acquisitions related issue which results in
anti-competitive practices. If there is any sale of Intellectual Property by the right holder of
that IP or there is any transaction of grant or sale of the exclusive rights of the IP, the agency
will definitely apply this act. Also in 2010, the DOJ and the FTC prescribed the Horizontal
Merger Guidelines, and hence any act of merger and acquisition will typically attract the
Guidelines8.

Confluence of Antitrust and Industrialization

Not only in US, but in almost all the major economies of the World, various fields such as
domestic airlines, pharmaceuticals, and telecommunication are dominated by giants. A
balance between efficient economy and consumer welfare must be relied upon. A striking
debate arises on the front -Whether this balance can be maintained by supporting big
companies. To get an answer to this question, we will delve upon the performance of antitrust
in US.

The first Antitrust Law passed in 1890 (Sherman Act) and two more followed in 1914
(Clayton and FTC Act). While the laws primarily aimed at preventing companies from
getting too big, the bigger pictures involved allowing smaller firms to enter and survive in the
6
Sherman Act 1890, Clayton Act 1914, Federal Trade Commission Act 1914, available at:
http://neconomides.stern.nyu.edu/networks/ShermanClaytonFTC_Acts.pdf (last visited on October 31, 2019)
DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS COMPETITION COMMITTEE , "Licensing of IP rights and
7

competition law – Note by the United States" (2019).

8
Horizontal Merger Guidelines, U.S. Department Of Justice And Federal Trade Commission, available at:
https://www.justice.gov/atr/horizontal-merger-guidelines (last visited on October 31, 2019)
market. It comes without any surprise that antitrust law was a result of rapid industrialization
of 19th century in US. It was a timely action by the US to stop the concentration of economic
power in hands of few. Simultaneously, a gradual movement relating to the notion that bigger
business was better for the consumer welfare, matured. As Naomi Lamoreaux said in his
famous book, The Great Merger Movement in American History9, thousands of
manufacturing firms in 1895 merged to only 157 corporations in 1904.

One of the major breakthroughs came with the case of Rockefeller Standard Oil Company vs.
United States10. As per what Eliot Jones wrote in his book, The Trust problem in United
States11, 1921, Standard Oil Co. controlled 91% of total US oil products and 85% of total
sale. Accordingly, in 1906, an antitrust law suit was filed and five years later, SC ordered the
breakup of Standard Oil Co., into dozens of state based oil companies, which was merged
into one. After this, various cases were given the same fate of breaking up, but eventually, the
practice fades, during World War I, due to the “fiduciary” relation of government and big
businesses, giving us a clear cut conclusion that antitrust is nothing, but a baby to the political
will of government and agencies.

United State’s Inclination Towards Corporation

After World War-II, particularly during 1950s and 60s, efforts were made to stop mergers,
where Courts and commission becoming skeptical to such mergers. A case, similar to the
Standard Oil Case came up before this Court. The case of United States vs. American
Telephone and Telegraph Co.12, received the same fate of breaking the company like that of
Standard Oil Company case. But this case, didn’t stop, a thought process that was emerging,
which was of antitrust backlash. It advocated that the big mergers will provide better
efficiency to the market. Probably, the antitrust backlash can be said to have a major role in
the present antitrust in US. It was coupled with the antitrust paradox. Antitrust paradox
eventually has shaped antitrust law in several ways, prominently by focusing on disciplines
on efficiency and articulating its goal as “consumer welfare”. Therefore, what we see is a
“dormant” antitrust law for the last 40 years, where no concerted action had been taken on the
size of companies. The US position resembles itself with that of free market environment,
leading to more investment and letting big mergers to grow on.
9
Naomi R. Lamoreaux, The Great Merger Movement in American Business, 1895–1904 (Cambridge University
Press, Cambridge, 1985)
10
221 US 1(1911)
11
Eliot Jones, The Trust problem in the United States, (Macmillan Company, New York, 1921)
12
552 F.Supp. 131(D.D.C 1983)
The situation can be well ascertained with some graph below which will bring us clarity and
perspective regarding a total leeway towards more growth of IP and innovation, irrespective
of antitrust claims and mergers. The number of companies on stock market in US fell by half
from 1996 to 2016. It was 7322 in 1996 which dropped to 3671 in 2016. (Source: Credit
Suisse13)

If we look on to some key data from 1982 to 2012, market concentration of all industries
increased three fold.

Also from 1996, FTC

itself has challenged fewer and fewer proposed merger which can be well ascertained through
this graph.

(Source: above mentioned graphs have been taken from The Hamilton Project, Bookings Institute 14)

13
The Incredible Shrinking Universe of Stocks 2017, Credit Suisse, available at: https://research-doc.credit-
suisse.com/ (last visited on November 2, 2019)
14
The State of Competition and Dynamism: Facts about Concentration, Start-Ups, and Related Policies, 2018,
The Hamilton Project, available at:
https://www.hamiltonproject.org/assets/files/CompetitionFacts_20180611.pdf (last visited on November 2,
2019)
Court’s Decisions in favour of IP claims: Principal Based Approach

The Courts in United States have been tilted more towards promotion of innovation and
providing incentive. The Court’s decisions in its various cases established that it has
generally taken a very lenient view over the IP and competition interface supporting the
competition necessary for having an environment of competitiveness. Dynamic competition
lies at the heart of the industries, where introduction of new and improved products promotes
innovation. Undoubtedly, even being much lenient over the competition, the antitrust law still
protects the market based competition which result in unreasonable restraint of trade and
other conduct.15

One of the most important doctrines that were devised as a result of the Courts’ decisions in
various cases was the Noerr-Pennington Doctrine. This doctrine exempts liability in antitrust
cases over individuals who want to influence the government by their action. The two
prominent cases that led to the formation of this doctrine were Eastern Railroad Presidents
Conference vs. Noerr Motor Freight, Inc.16, and United Mine Workers vs. Pennington 17. In
the former case, the court observed that if there is mere presumption of an attempt to
influence the making of the law, it cannot be treated as anti-competitive. Similarly in the
Pennington case, the court viewed the attempt to influence the government, though anti-
competitive, cannot be entertained under the antitrust law.18

Another aspect which becomes relevant in this interface is the Walker Process Antitrust
Claim, which arose from the case- Walker Process Equipment, Inc. vs Food Machinery and
Chemical Corporation19. It was in this case that the Court for the first time decided regarding
the validity of those patents which were acquired fraudulently. The court observed that there
was a clear case of violation of the antitrust law if there is any action done or enforced
through a patent which is otherwise being obtained through fraudulent measures. The court
while observing the case, gave some measures, which were required to be looked while
dealing with cases involving such facts.
15
Xavier Vives (ed.), COMPETITION POLICY EU FIFTY YEARS FROM TREATY ROME 314 (Oxford University
Press, Oxford, 2009).
16
365 U.S. 127, 135 (1961)
17
381 U.S. 657, 670 (1965)
18
Jarod Bona, “What is Noerr-Pennington Immunity and is this doctrine defence to antitrust case?”, The
Antitrust Attorney Blog, September 02, 2019, available at <https://www.theantitrustattorney.com/what-is-noerr-
pennington-immunity-and-is-this-doctrine-a-defense-to-an-antitrust-case> (last visited on November 4, 2019)
19
382 U.S. 172 (1965)
The Court in its measures laid emphasis on the fact that the Defendant in such cases must
necessarily have obtained the patent fraudulently and had the knowledge of the same.
Further, under any other ordinary circumstances, the Defendant would not have been granted
the patent. Lastly, there is a probability that the Defendant/ patent holder may obtain a
monopoly in the relevant market due to the access to this patent by adopting fraudulent
practices.

Another very interesting concept that comes within the US legal system is the Grant Back
Clause. If the IP holder allows licensing of the IP to a licensor and in the due course of the
process there is some further development in the licensed intellectual property, then it
becomes the prerogative of the licensor, to “grant back” the development to the IP holder.
The two basic principles that we can infer here are- firstly, the licensor who produces the IP
under his own patent can insist upon Grant Back clause so as to get the assurance about the
future access of the patent improvement by the licensee. Secondly, the process of Grant Back
might prove very beneficial for the entire patented system since the entire process of patent is
more useful than its component parts. The question relating to Grant Back was extensively
discussed in the case of Transparent-Wrap Mach. Corp. vs. Stokes & Smith Co20 (commonly
known as Transwrap case) where the Supreme Court held that grant-backs are not unlawful
expansions of patent monopolies and is not a violation of patent law policy, thereby, giving
the decision in favour of IP promotion and innovations.21

Lastly one of the most important principles developed is the Post Expiration Royalty Clause-
a clause which has been disputed ever since its inception. This Clause comes as a
consequence of the provision which entitles the IP holder royalties, even after the expiration
of the stipulated term. This was extensively discussed in the case Brulotte vs. Thys Co22and in
the recent case of Kimble vs. Marvel Entertainment LLC23. The court in both these decisions
took the view that the post expiration royalty clause per se has to be prohibited. These
decisions created a lot of distress among the inventors. This issue was again raised in the
Kimble case where the Court insisted on maintaining the same view as that in Brulotte Case
since the Court was of the view that upon the expiration of the term of the patent, the power

20
329 U.S. 637 (1947)
21
Grant-Back Provision in Patent Licenses, 51 Columbia Law Journal, 238-240 (1951)
22
379 U.S. 29 (1964).
23
133 S. Ct. 2401 (2015).
of the patentee ceases to apply and the patent comes to the public domain. Hence, this type of
agreement would be against the public policy24

Some key takeaways from the above observations can be:

 The movement of the US towards capitalist approach is more or less visible through
the emergence of antitrust backlash coupled with antitrust paradox, where bigger
businesses are considered beneficial for consumer welfare.
 Such type of approach might not be beneficial for Countries like India, due to its
distributive economical approach.
 Court’s leniency towards Competition cases leaves us with a simple inference of
prioritizing IP promotion and development over competition as can be easily inferred
by the data mentioned above.
 The principle based approach such as Grant Back as well as Post Expiration Royalty
developed by the Courts in US should also be adopted by developing countries where
such implementation can be beneficial for innovation and development of IP.

III. ANALYSIS OF THE IP- COMPETITION LAW INTERFACE IN

THE EUROPEAN UNION

The main aim of having European Union (EU) is to establish a single market economy. The
achievement of the same might not be an easy task, evaluating the market value of various
corporations. The task of creating a single market has to include a common market for all the
member states which takes in itself free movement of goods, services, capital and people
within the limit of the common market. 25 Gradually when the market size increases, there will
surely be more anti-competitive activities and the market practices will become much more
complex in nature. Given the nature of IP laws being a “national law” in EU, this becomes a
potential problem in treating this interrelation of intellectual property and competition by the
Member States in EU. European Union has previously faced such a situation in the mid 1980s

24
Gracie K. Mills, Jessica L. Roberts, “Brulotte Per Se ban on Post expiration Royalties Remains but Option for
Negotiating Post expiration Payments Exist”, Finnegan, May 2016, available at
<https://www.finnegan.com/en/insights/brulotte-per-se-ban-on-post-expiration-royalties-remains-but.html> (last
visited on November 5, 2019)
25
Korotkyi Tymur, "Legal Regulation of Competition in European Union : theory and practice", 11 Yearbook of
Antitrust and Regulatory Studies 283 (2015).
and 1990s26, to which we find various Court’s decisions which ultimately succeeded in
providing the road ahead. But gradually, the combination of the provisions mentioned in the
Treaty and the Court’s ruling have a substantial effect on managing the interrelationship
between IP rights and Competition law.

Enforcement of Articles 101(1) and 101(3): Analyzing Block exemption

It was the adoption of Treaty of Rome of 1957, through which the European Competition
Rules were first implemented in the EU. Currently the competition rules are implemented
under the Treaty on the Functioning of the European Union 27 (Treaty). Title VII of the Treaty
mentions the ‘Common rules on Competition, taxation and approximation of laws’ 28. A bare
reading of the Title establishes the emphasis that EU has laid on having a strong IP regime on
one side, and equally understanding that there are certain business practices that can have
anticompetitive effects that can be attributed with regards to IP 29. This factor is very
important as it gives us the importance of “Market power” of the enterprise, which has played
a massive role in deciding the court’s decision in various cases such as IMS Health30 or
Magill31, which will be discussed further.

Article 101(1) of the Treaty describes the conditions under which there might be chance that
it could result into distortion or restriction of competition. Clause 3 of the same Article
describes the provisions where Clause 1 will not be applicable giving ample room for the
promotion of IP. This provision provides for the inapplicability of the Clause 1 when it is
proven that the practice results in the promotion of efficiency and allows the consumer to be
benefitted. The analysis of these two provisions provides us with another understanding
where certain exemptions are provided which can be said as a legal certainty for those
entering into the agreement for the IP marketing, known as Block Exemption Regulation 32
(BER). BER arises from the difference of Article 101(1) and 101(3) which makes certain

26
Peter Schwartz, “The Long Boom: A history of the future, 1980-2020”, Wired, January 07, 1997, available
at <https://www.wired.com/1997/07/longboom/> (last visited on July 20, 2020)
27
Treaty on the Functioning of the European Union 1957, European Union, available at: https://eur-
lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A12012E%2FTXT (last visited on October 20, 2019)
28
Common rules on Competition, taxation and approximation of laws 1957, European Union, available at:
https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A12012E107 (last visited on October 20, 2019)
29
Supra note 1 at 5.
30
IMS Health GmbH & Co. OHG v NDC Health GmbH & Co. KG, 2004
31
Magill TV Guide/ITP, BBC and RTE OJ [1989] 4 CMLR 757 [1989] 4 CMLR 757
32
Block Exemption Regulation, European Union, available at:
https://ec.europa.eu/competition/state_aid/legislation/block.html (last visited on October 21, 2019)
agreements outside the scope of Article 101(1) thereby having them into what is known as
“Safe Harbour”.

This BER is considered to be extremely important and relevant for the corporations working
within IP licensing regime. Accordingly the BER takes its validity from Article 101(3) of the
Treaty. The basic framework of BER, in licensing of IP, provides for Technology Transfer
BER, the Vertical BER, the Research and Development BER and the Specialisation BER.
Common understanding says that BER codifies those exemptions which fall under Article
101(3). On one hand, the BER relates itself with the provisions while on the other hand there
are Guidelines that are developed through the case law of the Court of Justice of European
Union. The guidelines, more or less, are dependent upon the enforcement of Article 101(1)
and 101(3) along with the BER. Nevertheless, the agreement outside the purview of BER
does not become anti- competitive.

The question therefore arises-What is the limit of BER? BER itself is not the criteria to make
any activity outside the scope of Article 101(1). It definitely is subject to the Court’s purview.
There can be much confusion on the application of BER, which can make it more restrictive
on those people who create intellectual property. Certain Court’s guidelines, like that of
essential facility doctrine, have adopted a different line, creating an expanded and ambiguous
extension of what constitutes BER. One cannot deny the fact that the interface between
Clause (1) and (3) of Article 101 is necessary to provide for a legitimate protection of the
subject matter of intellectual property rights, and BER essentially balances the provisions.
BER has undergone a lot of changes and development, for the purpose of balancing the IP
rights, on one side, and anti- competitive effects on the other.33

On the other extreme are certain agreements which do not fall within the BER’s ‘safe
harbour’ definition due to which, they are so called “Hardcore Restrictions”. These
restrictions automatically bring the whole agreement outside the purview of the safe harbour.
There also comes up the “excluded restrictions” which also does not get benefitted from the
safe harbour provisions. Therefore, it can be concluded that if there is a basis of presumption
that these activities lies under clause (3) then the safe harbour automatically applies 34.
However, if in any case, the market share threshold crosses the limit, then the safe harbour
33
European Commission, “Commission Regulation (EU) No 1218/2010 of 14 December 2010 on the application
of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialisation
agreements”(December, 2010).
DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS COMPETITION COMMITTEE , "Licensing of IP rights and
34

competition law – Note by the EU" (2019).

ceases to operate and will be counted in the restrictions 35. Conclusively, the undertaking have
the right choose their trading partner which works for the promotion of innovation and
incentives. But on the other hand, if there being any obligation which compels for licensing
in a fair remuneration which might undermine the undertaking’s incentive to invest and
innovate, causing a concerted practices thereby affecting competition, will be prohibited per
se.

Analyzing the relevant case laws in EU

Critically analyzing the effect of Articles 101 and 102 of the Treaty, we can confer that EU
law have tried to maintain a mid-way for the linking competition and IP. EU knows that the
competition is one of the most effective parts of the market giving prominent space for
innovation and incentive. Just by the protection of Intellectual property, one cannot be given
an upper hand to have monopoly in the market. And in order to have innovation there is the
need to provide independence to the enterprises (or “undertaking”). The Court in several of
its judgments has tried to create a balance between the two Articles, the interpretation of
whose remains mainly disputable36.

Dispute regarding refusal to license the intellectual property has raised the Court’s eyebrows
in various cases. As discussed previously, the important part for the Court to analyse is none
other than the Market Power. In a perfect competitive market where competitors offer the
exact same product, no market power is exercised. The single market system of EU does not
provide for a perfect competitive market. Hence, the Court has to delve into assessing the
market power, as a major breakthrough for noticing the alleged anti- competitive activities.

There are two cases which are essential while understanding the importance of market power.
The first case is Volvo vs. Veng37, where company Volvo being the owner of the design of the
front wings of automobile contended that Veng, being an importer of Volvo spares parts, had
been infringing their exclusive part of the manufacturing and selling it. The Court’s decision
in this case was interesting. The court observed that if in such case, a manufacturer of a
design refused to share the same or grant it to third party, even when there is appropriate
consideration being paid, will not amount to abuse of dominant position. Moreover, it was
observed that the case would have been different if the refusal to deal was resulting into
certain abusive conduct such as arbitrary refusal to supply to specified specific retailers or
35
Thomas H Hefti, "European Union Competition Law", 18 SETON HALL LEGISLATIVE JOURNAL 613 (1994).
36
Enrico Bonadio, "Intellectual property", 1 EUROPEAN JOURNAL OF RISK REGULATION 72 (2010).
37
(1988) EUECJ C-238/87
fixing the price of the parts to high level which is the result of enjoyment of dominant
position and discontinuing the production of the particular part which is in circulation and
stopping it, would affect the market at large.

In another similar case of CICRA vs. Renault38, the Court observed that IP rights will not
result into dominant position until and unless there is an abusive conduct. Court’s observation
revolves around how well the enterprise constitutes its market power. In both these cases, the
Court has concluded essentially that IPR does not per se create dominance or abuse 39. It is the
essential feature of that IPR which constitute abuse and dominance. Interestingly, the Court
in the Magill case gave an answer to this dispute by introducing the Doctrine of Essential
Facility.

Magill40 Case involves the question of refusal to licence program schedule by a broadcasting
agency to a publishing company, interested in publishing television guide. This case was the
result of the introduction of the Doctrine of Essential Facility by the European Court of
Justice. The court observed that this refusal to licence will definitely come under the ambit of
abuse of dominant position as it would result into the prevention of entry of new product in
the market for which there is considerable consumer demand. The refusal will also result into
the exclusion of all competition in the secondary market which may exist or is likely to exist.
The enterprise which requested the licence might have an intention to offer various new
products and services in the market which the IP holder is not offering and to the extent that
product or services have considerable consumer demand41.

There is a difference in two aspects. There will not be an abuse of dominant position only by
the refusal of owner of IP to grant license. The exercise of an exclusive right by the
proprietor, will account for a case of abuse. Clearly, in aforementioned case, the refusal in
question was a product, whose supply was indispensable for carrying on the business. The
Court in the IMS Health42 made similar actions, reiterating as to how the dominant position
will be ascertained. Through this, what the Court has done is to touch upon the outer
periphery of the IP right but not undermining it. It is certainly in a dubious position because
considering the observation of the Magill case and IMS Health case, the Court has restated
the “exceptional circumstances” where the owner of IP is required to grant license. Similar to
38
[1988] ECR 6039
39
Slaughter and May, "An overview of the EU competition rules" (2016).
40
Supra note 31.
41
Supra note 1 at 8.
42
Supra note 30.
the position of BER, this is attributable to a dubious position. Essential facilities are the
watershed between what is permissible and what is not. But this significant market power and
exclusive exploitation of IPR will be a problem. To solve this, there is a need to draw a
distinction between the actual and potential substitute for the IP.

Later on, one of the landmark cases of Microsoft vs. Commission43came up, on the similar
lines of the Magill case and IMS Health case. This case came up as a consequence of a
complaint that was made by Sun Micro system alleging that Microsoft refused to supply it
with interoperability information necessary to interoperate with Microsoft’s dominant PC
operating system. Relying on the decisions in the Volvo case as well as Magill Case, the court
gave the similar observation, that refusal of Microsoft will be abuse of dominant position
since it was necessary for the product to interoperate with windows. This was already
necessary part in the public domain and can affect the consumer demand44.

The interface of IP and competition in EU is certainly stricter towards anti-competitive

practice. But with the BER accompanied by the guidelines of the Court, the impression that
one may carry is that EU is more restrictive for the IP holder. The enforcement of Article 101
(1) and 101(3) does ignite our thought process towards monopoly of “national” IP rights.
Perhaps, this can be attributed towards giving more independence on a country wide basis,
rather than having a centralized system. What really constitutes BER is an unanswered
question that revolves around an IP holder’s mind. The limit of BER and the interface of
Article 101(1) and 101(3) are extremely difficult to get dictated at the national level, making
it too restrictive for the people who want to create IPR.

Based on the above observation, we can have some key takeaways with regards to the
position in IP-Competition interface:

 The factor of “Market Power” is of an utmost importance for the Court to decide upon
any dispute dealing with the interface.
 It is difficult to give BER a limited/ confined definition. The periphery of BER is even
outside the scope of Article 101(1), to which much reliance is being placed on the
court to observe case by case along with the guidelines developed as precedence.

Case T-201/04, September 17, 2007

43

Raju KD, "Interface between Competition law and Intellectual Property Rights: A Comparative Study of the
44

US, EU and India", 2 INTELLECTUAL PROPERTY RIGHTS OPEN ACCESS (2014).

  Categorising agreements under the head of ‘Safe Harbour’ or alternatively, ‘hardcore
restriction’ or going on the extreme road of ‘excluded restriction’ is to provide a better
understanding of the enforcement of Article 101(1) and 101(3).
 The cases of refusal to deal have been the centre point of the jurisprudence being
developed for this interface.
 The observation made by the Courts have made it extremely clear that IP rights itself
do not lead to abuse of dominance even to the extent that manufacturer refused to
share for consideration.
 Evolution of Doctrine such as Doctrine of Essential Facility can be very beneficial for
jurisdiction like India, as it creates a border line, crossing it will invite repercussions.
 In spite of varieties of regulation, EU still lacks on the front of having a uniform
approach. The dubious position of BER and having number of regulations in itself
creates an ambiguous understanding of the interface which should be avoided by
countries like India.

IV. ANALYSIS OF THE POSITION PREVALENT IN INDIA

Laws relating to Intellectual property and Competition laws in India are still at its nascent
stages. Whereas in the EU and US, there is well-established pattern of legislation, in India,
the situation is substantially different. There might be couple of reason like in India there still
does not have any exposure to the level of corporation and the business, like they do in the
US and EU. The understanding between the IP and Competition law by the court is still under
the developing stage45. Unlike EU and US, India is generally seen to have taken a middle
path. Not too strict, like EU and not as lenient as US either. Indian Courts, in some of its
judgments, as discussed below, have prohibited activities of the IP holder which although
were in compliance with the IP Laws were not following the purpose for which Competition
Law was brought into force. The Indian Courts believe that the IP laws create monopolies
whereas competition law battles the monopolies, which is the general perception of how these
two operates46.

45
Aravind Prasanna, "Intellectual Property Rights And Competition Law: A Satisfactory Compromise In India",
5 INDIAN JOURNAL OF LAW AND PUBILIC POLICY 45 (2018).
DIRECTORATE FOR FINANCIAL AND ENTERPRISE AFFAIRS COMPETITION COMMITTEE , "Licensing of IP rights
46

and competition law – Note by India" (2019).

Reading between the lines

Both IP law and Competition law have complementary goals and thus, seeing the issues of
dominance as well as refusal to deal, conferring absolute right to the IP holder is a bit
difficult task. When there is absence of a uniform approach to this interplay between
Competition law and IP, the establishment of procedures to get followed becomes difficult.

The basic analogy behind the measurement of consumer harm relies especially on three
factors i.e. price, quality and innovation. Indian Courts, in various cases have dealt with all
three factors. A clear analysis of these three factors, inherently gives us two more subject to
deal with namely, abuse of dominant position and the refusal to license. To the author’s
observation, the Indian law is successful in dealing with both areas. Abuse of dominance, are
anti- competitive practices dealing with the economic strength of the enterprise. Why it is
important for us is because of the fact that IP leads to the potential creation of the market
dominance which then distorts fair competition in the market. On the other side, refusal to
license can be anti- competitive, based on the rule of reason.

The whole law revolves around only two sections of the Competition law and these are
Section 3 and 4. However, on its base, the licensing agreements are generally vertical
agreements which are being dealt under Section 3(4) of the Competition Act. The basic
presumption is that the licensee and the licensor are working in the same level of production,
and for this purpose the parties are treated in vertical arrangements. Similarly, Section 3(3) of
the act deals with the horizontal agreements, which are presumed to be in the ambit of per se
prohibition, while Section 3(4) requires the rule of reason prohibition to be analyzed. Section
3(5)(i) of the Act specifically provides for an exemption of agreement falling under Section
3(3) or 3(4) of the Act, in case of imposition of reasonable restrictions for protecting
intellectual property rights conferred under various statutes. But this exemption does not
entail in itself an exemption from Section 4 which talks about the Abuse of Dominant
Position. The exemption needs to get over Section 4 following the test of reasonability.47

The Competition Commission of India (hereinafter, CCI), which is the regulatory quasi-
judicial authority, is free to take up the matter of Competition law, even involving IP related
issues, as was held by Bombay High Court in Aamir Khan Production vs. Union of India48.
CCI can take up the matter in the same way as it takes others not involving IP which is by
47
K. D. Raju, "The inevitable connection between intellectual property and competition law: Emerging
jurisprudence and lessons for India", 18 JOURNAL OF INTELLECTECTUAL PROPERTY RIGHTS 111 (2013).
48
2010(112) Bom LR3778
observing the “relevant market” in which the competition is adversely effected, and more
importantly, the factor of “substitutability”; this has played a major role in EU jurisdiction
with respect to Doctrine of Essential Facility.

Courts observations: Key takeaway and suggestions

Indian Courts have been dealing with a variety of cases, which left unanswered by the bare
reading of both the Acts. In spite of having a quasi-judicial body such as the CCI, to look
after the matters relating to competition laws, a variety of cases land up in Hon’ble High
Courts and the Supreme Court. This question of inclusion of IP under the ambit of
Competition laws was answered in LM Ericsson vs. Competition Commission of India 49
(Ericsson case). The Plaintiffs in this case contended that CCI did not have the power to
entertain any suit which relates to the claim of royalty by the proprietor of the patent. To this
the court asserted that there is difference between the two laws and in case when there is any
anti abuse provision, the Patent Act being the special act will prevail. Therefore, on one side
it was good to approach the Controller of patents but that will not, in any case, undermine the
jurisdiction of CCI. The jurisdiction of CCI, as suggested by the Court is independent of any
matter pending in a court of law and therefore, CCI can continue to investigate abuse of
dominance complaints.

Section 3(5) has given a bare exception on the application of this section over IP, i.e. a
creation of harmony between statutory rights and IP rights. But, as already discussed, if IP
creates dominance, Section 3(5) will not provide an absolute immunity. This issue was
addressed by the CCI in the case of FICCI Multiplex Association of India vs. United
Producers Distribution Forum (UPDF)50, where CCI observed that the IP law do not have a
full overriding effect on the Competition law. The right granted under Section 3(5) comes up
with limitations and does not confer any monopoly rights. A bare reading of the act
inherently states that the limitation of the competition law applicability is only to the extent
of protecting the rights from infringement51.

49
Case W.P. (C) 464/2014 & CM Nos.911/2014 & 915/2014 and W.P.(C) 1006/2014 & CM Nos.2037/2014 &
2040/2014 dated. March 03, 2016
50
Case No 1 of 2009, CCI order dated May 25, 2011, available at :
https://www.cci.gov.in/sites/default/files/FICCIOrder260511_0.pdf (last visited on November 8, 2019)
51
Supra note 46.
The extension of Section 3(5) was discussed in the case of Shamsher Kataria vs.
Honda/Volkswagen/Fiat India and Others52. The case is important because in this case, CCI
explained the necessary factors for the protection under Section 3(5). The facts briefly stated
as follows-the Original Equipment Manufacturer (hereafter, OEM) procured their spare parts
from Original Equipment Suppliers (hereafter, OES). OEMs contended that the OES cannot
market its product since the product manufactured was according to the technical information
and know-how that was provided by OEM and therefore, the real proprietor for the product
was the OEM. CCI while observing the case gave much importance to the extent of the
applicability of the Section 3(5). Whether the IP holder can protect his IP even when the
restriction is not given is the question to be answered. CCI did not find any problem in
allowing OES to market the product it manufactures, contended as IP by OEM. There was no
threat to the IP protection as such. All such products are finished products and selling them in
the open market does not necessarily compromise the IPR of such products. The intellectual
property required by the OESs to manufacture a spare part will be protected contractually
pursuant to the agreement between the OEMs and the OESs and allowing OESs to sell the
finished products in the open market may not affect that agreement as such53.

All these observations also provide us with some important inferences. The Indian Court in a
variety of its decisions, some discussed above, clearly gave its inclination towards consumer
welfare and less on the IP holder side. The situation is opposite to what we observed and is
practiced in US and probably on similar lines as in EU. In Hawkins Cookers Limited vs.
Murgan Enterprises54, the observation of Delhi High Court was against creating monopoly in
the market, under the trademark right. This gives an insight that today, IP as well as
Competition law, even if they are at a nascent stage, are compatible to solve dispute that arise
out of IP- Competition interface. Nevertheless, India being one of the fastest growing
economies in the world can need more comprehensive guidelines, not for the purpose of
dispute resolution but for the benefits of IP creator.

V. SUGGESTIONS

The Competition Act has performed at par in this technological era. CCI has worked
effectively in regulating the market. But one cannot deny the fact that there still seems to be
52
Case No. 03 of 2011, CCI order dated August 25, 2014 available at:
https://www.cci.gov.in/sites/default/files/032011_0.pdf (last visited on November 8, 2019)
53
Indranath Gupta, Vishwas H. Devaiah, et.al. (eds.), COMPLICATIONS AND QUANDARIES IN ICT SECTOR:
STANDARD ESSENTIAL PATENTS AND COMPETITION ISSUES 185 (Springer, Sonipat, 2017).
54
2008 (36) PTC 290 Del
various instances where an overhauling is required. Seeing this, the Ministry of Commerce
set up a committee in 2018 which was called as Competition Law Review Committee 55,
which suggested some of the amendments in the Competition Act and thereby re-defining
some of the functioning of CCI. The Ministry brought the draft Competition Amendment Bill
202056 (Bill) and in its move to create greater transparency, the ministry also invited public
comments over the bill57. While this bill talks about a complete overhaul of CCI and
Competition regime, it does provide us couple of substantial things in the field of IP which
can be subject to criticisms. Nevertheless, reiterating the above discussions in various
jurisdictions, some suggestions could be as follows:

 It is imperative to say that CCI does have a lot of responsibility vested in it. As a
welcome move, this Bill tries to decentralize the functions of CCI for the purpose of
effectiveness in this technological age. This is pertinent to the amendment to Section
8 of the Competition Act, inserting sub-section (1A), which includes the Governing
Board, constituting members of the commission, along with the Secretary in ministry
of Finance as well as Corporate Affairs and four other part time members. Perhaps
this decentralization will help in providing more efficiency to CCI in their work.
 It is imperative to understand how this bill tries to overhaul area concerning IP
regulations. This bill inserts Section 4A to the Competition Act, which gives the right
to the IP holder’s, by increasing the limits of restrain to any infringement arising by
virtue of Section 3 and 4 of the Competition Act. Clause 4A extends the IP holder
right to impose any restriction as may be necessary to protect their rights which will
even be outside the scope of Section 3 and 4 of the Competition Act. While for the IP
holders, this can be said to be a welcome move, but it can have further repercussions.
Excessive protection being given to the IP holder even to the extent of abuse of
dominance (Section 4) can have substantial effects upon the investigation in abuse of
dominance cases.
 The conundrum of Sector Regulation with that of Competition law has a lot to do with
IP. Strategizing IP for an effective and conducive business promotes better outputs.
Issues with regards to abuse of dominance and refusal to license are present in each
55
Report of the Competition Law Review Committee, 2019, India, available at:
http://www.mca.gov.in/Ministry/pdf/ReportCLRC_14082019.pdf (last visited on October 25, 2020)
56
The Competition (Amendment) Bill, 2020, India, available at:
https://www.taxmanagementindia.com/file_folder/folder_5/Draft_Competition_Amendment_Bill_2020.pdf
(last visited on October 25, 2020)
57
Invitations for public comments on the Competition (Amendment) Bill 2020, available at:
https://www.cci.gov.in/node/4992 (last visited on October 25, 2020)
 and every sector, be it Telecom, Healthcare etc. Addressing the issue of sector
regulation will increase and promote the efficiency in the enforcement of IP in
individual sectors, which even the Bill fails to do.
 The categorization of activities under ‘safe harbor’, ‘hardcore restriction’ can be
beneficial in Indian Practice. This categorization will act as a guiding principles to all
those who are entering into the licensing provisions.
 The provisions of BER coupled with various decisions of courts have made their
implementation in European Union very difficult. What limits the BER is a never
ending question. Hence the categorization of various restrictions as mentioned above
must not be in the nature of BER so as to avoid confusions.
 The greater acceptance of Doctrine of Essential Facility in EU is something which
India must rely upon. Technological development is a never ending process and this
will invite various intricacies regarding what all are essential and what not. Hence
having such practice in India will greatly help in addressing the dominancy of firms.
 Guidelines such as the merger guidelines in US58 or Antitrust Guidelines for the
Licensing of Intellectual Property59 can be beneficial for India. The aim is to provide
an effective system where not only an IP holder must know what all can be treated as
anti-competitive and what not but also the authorities can take recourse from. These
guidelines will definitely save the rigorous interpretation of the law, thereby reducing
litigations.
 The refusal to license on grounds which are unreasonable and ought to prioritize one
over the other should invite per se prohibition in the light of above mentioned
guidelines, if taken into practice. This will bring change in the regime of IP-
competition interface in India resulting into less litigation. But it will be interesting to
see how giving more rights to IP holder, as mentioned in the bill, could prohibit the
refusal to license and thereby, balancing the abuse of dominance.

A need for these guidelines can also be felt as a consequence of case such as Singhania and
Partners LLP vs. Microsoft Corporation Pvt. Ltd.60, where CCI dismissed the appeal, for the
same case, where Microsoft was found guilty in EU and US.

58
Supra note 8
59
Supra note 5
60
Case No. 36 of 2010, CCI order dated June 22, 2011, available at:
https://www.cci.gov.in/sites/default/files/SinghaniaMainOrder050711_0.pdf (last visited on November 8, 2019)
 VI. CONCLUSION

The subject and purpose of Intellectual Property laws and the Competition Law are at
different angles, but when it comes to the interface of both these law, the angles merge. We
cannot deny the fact that innovation will tremendously increase seeing the economic
condition and the worth of ease of life. However, law, which is supposed to be dynamic in
nature, has not been able to address adjudication of such issues, as can be seen in the
aforementioned cases. The judiciary, up to its limit, has extended the notion of IP and
Competition so as to have an effective implementation and interpretation of the law in hand.
Certainly, the conditions in all three jurisdictions have proved that the competition law, to a
large extent, is not able to have a complete command over cases involving IP. EU is generally
stricter to those practices which are anti-competitive in nature, giving less scope to the IP
holders’ rights. While US takes a complete opposite stand. US is seen to have taken a lenient
approach on the IP Holders’ rights and it believes that giving some room to the IP will
certainly increase the innovation in the market and thereby encouraging competition 61. EU
has broader criteria to bring an antitrust case. Its position in dealing high tech companies is
much stronger than US and they also came up with much stronger remedies than US. One
promising take away from the above analysis, irrespective of the loopholes, is the position of
EU in setting up the global standards and influencing the way other countries think about
Competition Law. Aggressive implementation of IP law giving less importance to that of
Competition might have threatening result, providing the social welfare clause. This might
result into increase in the cost of procurement of IP, which in the end can increase the total
cost of the production thereby, affecting general public. On the other hand if there is a
reversal of the situation, then there might be chance that no one will entertain to have more
innovations, knowing that they have to licence easily.

Despite being one of the largest economies in the world, India, cannot take the risk of having
a stringent IP regulation vis-a-vis competition law as it might result in the obstruction in the
course of development. In the light of above suggestions, India needs to take up a substantial
stand not undermining the present status of IP. ‘Stricter’ framework will definitely hinder the
process of IP development in India. Hence, taking fruitful measures from both the countries
can have better result. As mentioned, it is highly imperative to see how the Competition
Amendment Bill will take its recourse by giving more rights to IP holders. Nevertheless,
61
Weber Spencer Waller & Noel J Byrne, "Changing View of Intellectual Property and Competition Law in the
European Community and the United States of America", 20 BROOKLYN JOURNAL OF INTERNATIONAL LAW 1
(1993).
Competition Commission of India’s working and the implementation of competition laws is
well within reasonable limit. IP, on the other side, is a booming industry. Nevertheless, the
primary aim must be to get more comprehensive guidelines, taking recourse from US and
EU, so that a broader interpretation of anti-competitive activities can be done.