Protection of IP Rights in Abuse of Dominance Cases: Is it needed?

BY MOHIT KAR, A fourth-year student At mnlu, aurangabad

On 20th February, 2020, The Ministry of Corporate Affairs came up with the Draft Competition (Amendment) Bill, 2020 (“the Bill”) on recommendations of the Competition Law Review Committee (“CLRC”). The Bill, amongst other changes, has proposed for addition of Section 4A to widen the scope of protection accorded to Intellectual Property (“IP”) holders in Abuse of Dominance (“AoD”) cases. Section 4A acts as an exception to Section 3 (prohibiting anti-competitive agreements) and Section 4 (cases of AoD) and allows the IP holders the rights to safeguard themselves from infringement and impose reasonable restrictions to protect their rights under existing IP statutes. It is pertinent to note that a similar provision is already in existence in the form Section 3(5) of the Competition Act and the new section merely adds the protection to the AoD cases.

Intersection of Abuse of Dominant Position and protection of Intellectual Property: Jurisprudence in India

The Bombay High Court in the case of Aamir Khan Productions Pvt Ltd v Union of India held that the Competition Commission of India (“CCI”) had the jurisdiction to hear competition cases involving IPR. Subsequent to that decision, the CCI has dealt with a multiple of cases involving competition law and intellectual property. Most of the cases deal with the ‘refusal to license’ issue. In the case of Shri SamsherKataria v. Honda Siel Cars &Ors, the CCI held that the refusal to license the diagnostic tools and spare parts essential in the manufacturing of automobiles constituted an abuse of dominant position. This was the first case CCI took a significant look at the potentialities of competition abuse with the help of IP rights.

In the case of Justickets Pvt. Ltd v. BigTree Internet Pvt. Ltd. & Another, CCI took a cautious approach while dealing with a delayed licensing conundrum. Justickets, an online movie ticket booking website, had alleged that BigTree, another online movie ticket booking portal, along with Vista Entertainment were misusing their dominant position by denying access to Vista’s Application Programming Interface (“API”) whose access was essential for ticket booking portals to smoothly transfer data from their website to Vista screens at theaters. After the DG investigation, CCI found that, although delayed, the access to the API was duly given by BigTree and Vista. CCI held that the delay in licensing was justified and as every business entity has a right to protect itself against threats of reverse engineering and protect its business interest, especially IPR before committing to licensing deals. In quite contrary to its position in the Samsher Kataria case, the CCI took the side of the IP holder in the present case and it was rightfully so. A mere delay in allowing a license cannot be considered as AoD since every party has a right to perform a due diligence and take the stock of the situation before entering into any licensing agreement with the other party.

A key conflict between IP rights and competition law lies in the licensing of Standard Essential Patents (“SEP”). In the case of Telefonaktiebolaget LM Ericsson (PUBL) v. Intex Technologies (India) Ltd, the Delhi High Court while deciding about this conflict laid down certain guidelines for the holders of SEPs and the potential licensees to abide by so as to avoid AoD. This intricate balance between the SEP holder and licensees also exists in the EU to create an equilibrium between the rights of a holder of a patent that is essential for a standard and ensuring that said right does not allow it to hold a dominant position in the market.

Analysis of Section 4A from an EU perspective

As mentioned before, the added protection provided to IP holders that has been suggested by the Bill is not all together new and was previously in existing Section 3(5) of the Competition Act. The proposed section 4A merely extends the protection to cases of AoD under Section 4. Although the provision seems like a blanket protection to IP holders, a key aspect of it lies in the wordings of “reasonable conditions”. It states that the IP holders can make use of their rights under certain restrictions to ensure fair play and promote competition. The CLRC while drafting the provision have stated that the provision should be interpreted in a narrow sense so as to bring it in line with international jurisprudence.

AoD in the EU is regulated under the Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) which states that: “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States”. The EU courts have faced a number of cases on the question of whether use of intellectual property to facilitate market exploitation results in violation of Article 102. In the cases of AB Volvo v Erik Veng (UK) Ltd. and CICRA & Another v. Renault with regards to design rights of automobile parts, the European Court of Justice (“ECJ”) held that refusal to license the design rights could not amount to AoD as it was part of the exclusivity given by IP rights. Further in the case of Parke, Davis and Co. v. Probel, Reese, Beintema-Interpharm and Centrafarmthe ECJ had maintained that use of IPR to gain foothold in a market does not necessarily amount to AoD as there may be a significant amount of substitutes available in the market. However, the ECJ changed its stance moving forward, evidenced in the cases of Radio Telefis Eireann (RTE) & Independent Television Publications Ltd. (ITP)v. Commission and IMS Health GmbH & Co. OHG v. NDC Health GmbH & Co. KG wherein it held that a refusal to license IP rights would constitute AoD only in “exceptional circumstances”. It laid down the exceptional circumstances in a “narrow” sense as: (a) the IP is a necessity to compete in the market; (b) the refusal is no objective justification; (c) the refusal would hand over a secondary market to the IP owner without any competition; (d) the licensee offers to produce such products which is not in the inventory of the IP holder. In a different case involving Microsoft, the European Commission took a different stand and stated that licensing could be made compulsory under the following circumstances: (a) the IP right is a necessity for the competitor to stay viable in the market; (b) the refusal to license would reduce disclosures; (c) there exists a “risk” of elimination of competition in the secondary market; (d) the refusal to supply could end up stifling innovation; (e) the refusal to supply would not be objectively justified as it could lead a lack of balance between the incentives to innovation for the IP holders and the incentives to innovate for the market as a whole. This interpretation in the Microsoft case was very broad. It mandated access to licenses very strictly and led to situations where in the courts would find refusal to license as abusive when in fact they were not.  Such a strict interpretation reduced consumer welfare and led to an overall lack of social welfare.

Given the similarities between Section 4A, the CLRC recommendations and the aforementioned constructions laid down by the ECJ, it is expected that CCI is expected to refer to ECJ cases whenever it is faced with questions related to Section 4A. It would prove beneficial if CCI follows a similar route of the “narrow” construction while dealing with the issue. The CCI would also need to take a similar path when dealing with the SEP licensing cases so as to ensure that the SEP holders do not stifle competition while ensuring that they get the necessary freedom to enforce their IP rights.

Conclusion

The provision of Section 4A is a very adventurous step that has been recommended by the CRLC, given it’s a road not taken by other jurisdictions. It does come with certain flaws as it may lead to lengthy implementations and trials. But on an overall basis, it is quite positive and a move worth welcoming, as it could bring some much-needed clarity to the “conditions” under which the dominant IP holder can enforce its rights. It could also nudge CCI to refer much-appreciated interpretation made by ECJ in its narrow construction with regards to refusal to license cases and could bring about larger welfare for the society.

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