INTELLECTUAL PROPERT LAWS

ASSIGNMENT

STANDARD ESSENTIAL PATENTS: A JUNCTION FOR

INTELLECTUAL PROPERTY RIGHTS AND COMPETITION LAW

SUBMITTED BY-

S.ANJANI KUMAR
ANANY UPADHYAY

4TH YEAR, 8TH SEMESTER

FACULTY OF LAW.
 Acknowledgment

Exchange of ideas generates new objects to work in a better way. Whenever a

person is helped and co-operated by others, his heart is bound to pay gratitude and
obligation to them.

We would like to thank our IPR laws teacher, SHABANA SHABNAM MA’AM and our
respective PARENTS and Friends for providing us with invaluable support and
guidance which led to the completion and conception of this project.
 STANDARD ESSENTIAL PATENTS: A JUNCTION FOR
INTELLECTUAL PROPERTY RIGHTS AND COMPETITION LAW

Property rights are essential for every civilized society. The conceptual basis for protection of
private property is well-founded in Lockean theory as flowing naturally from mixing labour with
nature, as an incentive for discovery, as essential to person. It is the basis of present economic
systems. Justifications for IP protection are based upon a fundamental difference between
tangible and intangible property. Tangible property can be occupied only at one place at any
given time. Possession of a physical thing is necessarily exclusive. Property rights necessary
include exclusion of others.
ABBREVIATIONS- IPR, CCI, SEPs, FRAAND, SSO
INTRODUCTION
Intangible property does not have excludability. There can be an independent access to it without
interfering with others. If a person gains access to certain information that does not restrict others
from using it, the information may become more prone to un-authorised use. So, an indefinite
number of persons can have access to that information without the control of the creator. This
makes the possession and use of intellectual property non-rivalrous. There are no chances of
exhaustion of intangible information. The use IPR has positive as well as negative aspects. The
positive aspect is that the marginal cost decreases substantially after development. The negative
aspect is that the developer of IPRs will be at loss due to non-rivalrous use and may not be able
to recover costs and earn reasonable profit due to free ride. As other competitors are not required
to incur development cost, they can offer substitutes at lesser prices than the IP owner. Such free
riding will demolish the incentive of IP owners to innovate. Innovation is desired for the welfare
of society and IPRs provide exclusivity for promoting incentives to innovate. Even in a single
form of IP, there can be different conditions. Intellectual property laws (hereinafter referred to as
the “IP laws”) provide exclusivity for a limited period of time in intellectual property rights. In
lieu of grant of IPRs there is dissemination of information in the public domain. New products
can improve economy. There are various theories advocating IPRs. IP creates incentives to
innovate and create. The Indian Constitution provides property rights as constitutional right.
However, it does not expressly provide for any type of intellectual property in it. A patent in
various sectors can have different effects on innovation. For instance, patent system is deemed
essential for innovation in pharmaceutical sector. Intellectual property rights protect technology
markets. IP laws are a collection of legal doctrines that regulate the use of subject matter such as
inventions, arts, insignia, etc. Patent legislation protects eligible inventions with patent grants for
a period of twenty years. Patentee obtains the right to restrict others from making, using, offering
for sale, selling and importing patented invention.1

1. DYNAMIC COMPETITION AND INTELLECTUAL PROPERTY RIGHTS

IP laws provide a basis for the protection of processes and products that could be used to gain
revenues. IP rights help in creating markets. Inadequate protection may lead to a decrease in
returns from intangible property. Intangible property does not get exhausted when a person puts
it to use. It can be used by any number of people without being exhausted. There is very less
economic incentive to create new knowledge. In addition to benefits of innovation and dynamic
efficiency, IP laws share static cost. They restrict imitation and strategies of competitors in a
market. This may affect innovation, technology and competition in a market. The development
of new products may require access to existing art. In cumulative innovation, patents may
sometime block the development of follow on innovation. If innovation is incremental in nature
then IPRs may confer market power on its owner. IP owners may have strategic benefit to block
further innovation to avoid future competition which may lead to absolute dominance in the
market.
Absolute domination over IP may provide immunity against anti-competitive liability under
competition law. Generally, whatever is within the ambit and subject matter of IP laws,
competition law does not consider it as anti-competitive. Anything outside the scope of IP laws
and falling within the “effect based approach of competition law” is subject to scrutiny.
According to this approach three fields can be clearly distinguished: practices within its subject
matter that are legal under competition law; practices outside subject matter but still legal under
competition law and practices outside purview of IP but anticompetitive under competition law.
1.1 IPRs & ITS ASSOCIATED PRACTICES UNDER COMPETITION LAW

There are three areas of enforcement under the Competition Act 2002: anticompetitive
agreements, abuse of dominance and combinations. In this paper the authors focus on the aspect
of anti-competitive agreements and abuse of dominance. The Competition Act provides a

1
The Patents Act 1970, s 48
statutory basis for the interaction of IP and competition authorities.2 Examination by the
Competition Commission of India (CCI) or IP authorities can take place in cases of cross
licensing, patent pooling, technical standard setting process, working of patents, mergers and
acquisitions, pharmaceutical out of court settlements, enforcement of fraudulently procured
patents, sham IP litigation, tying arrangements, refusal to deal, predatory innovation and market
allocation of IP. Patent authorities require data related to the working of the patent in India from
IP owners.3
In addition to it, in case of competition issues in IP licensing, the register of patents has all
details related to the licensing of the patent. This information may be useful for the CCI to deal
with IP licensing cases. Unlike some countries, the power to grant a compulsory license in
matters related to patents in India vests with the Patent Controller. The CCI does not have any
power in relation to compulsory licensing under the Patent Act 1970. The Patent Controller may
make a reference to CCI for opinion but that is optional. In a hypothetical situation of an anti-
competitive agreement relating to IPRs where reasonableness of an IP activity or an essential
facility with respect to intellectual property rights is doubted, the CCI may make a reference to
the relevant IP authority for its opinion. In this situation statutory authorities are bound to give
opinion. The CCI shall consider the opinion and then return its findings in the matter within 60
days.4
The Bombay High Court ruled that the CCI has jurisdiction to deal with IP cases. It can decide
even constitutional, legal and jurisdictional issues.5 Regarding the jurisdiction of the CCI in IPR
matters, the Competition Act provides an exception to ensure that Section 3(1) of the
Competition Act does not take away or restrict the right to restrain any infringement of IPRs or
the right of any person to impose reasonable conditions for protecting his rights under the IP
laws.6 The Competition Act, 2002 has overriding power over other legislations. However, its
purpose is not to curtail other laws, but to regulate the market.
1.2 PATENT LAW AND ITS REASONABLENESS UNDER COMPETITION ACT
2002

2
The Competition Act 2002, s 21
3
The Patent Act 1970, s 146(2)
4
The Competition Act 2002, s 21(A)
5
Amir Khan (Pvt.) Ltd. v Competition Commission of India 2010 (112) BomLR 3778 (India)
6
The Competition Act 2002, s 3(5)(i)
There are seven principles of the Patent Act 1970 that are based on competition postulates:
objective of patent system is to encourage inventions; patent system increases innovation; patents
do not hamper public health and nutrition; central government can take measures to protect
public health; patent should not be abused by a patentee; patents should not distort competition
and technology transfer; and patents are granted to make patented products available to general
public at affordable prices.7 Right of a patentee is an exclusive right to enjoin others from
unauthorized making, using, offering for sale, selling or importing of patented product or process
for twenty years. Therefore, a patent can determine competitive dynamics in a relevant
technology field during its term. Competitors cannot imitate patented technology until the patent
has expired. But they are free to bring substitutes to market which do not literally infringe claims
of the patent or as under doctrine of equivalence. The CCI does not have any role in grant of
patents because it is the sole prerogative of patent authority. It is less likely that there will be
anti-competitive activity at pre-grant level. The CCI can intervene and impose antitrust liability
in the post grant period of a patent in case the patent is acquired by supplying wrong information,
committing fraud on patent authority etc.8
In relation to patent licensing, there are certain restrictive trade practices expressly declared
invalid under the Patent Act 1970. An inclusive list of restrictive trade practices is provided
under the Patent Act 1970.9 An exclusive supply agreement prohibiting the acquisition of a non-
patented product from any other person is unlawful. Prohibiting use of other non-patented
product or process as a condition of patent licensing is void. Exclusive grant back is another
restrictive trade practice which is prohibited under the Patent Act 1970. Licensor requiring
licensee to abstain from challenge validity of Patent is unlawful. Agreement relating to coercive
package licensing of patent is also unlawful. Section 140 of the Indian Patent Act 1970, is
analogous to Article 40 of TRIPs agreement and the UK Patents Act 1949. 10 This is the one of
the most significant provisions related to competition policy in IP laws. It is adopted based on
the mandate of developing and developed countries on TRIPs. Developing countries wanted the
inclusion of exhaustive restrictive trade practices to be included in TRIPs. However, the

7
Novartis AG v Union of India AIR 2013 SC 1311
8
Walker Process Eqpt., Inc. v Food Machinery Corp. 382 U.S. 172 (1965)
9
The Patent Act 1970, s 140
10
The UK Patents Act 1949, s 57
developed countries wanted to have a general provision with inclusive list of restrictive trade
practices.

2. TECHNOLOGY STANDARDISATION AGREEMENTS

Standardization is an area where there are chances of anti-competitive agreements for protecting
IPRs. Technology standards are technological specifications for development of a new product.
Technology standardization falls within the purview of horizontal agreements. Under the
Competition Act 2002, any agreement between competitors restricting price, quantity or research
and development is anti-competitive and presumed to have appreciable adverse effect on the
competition in market. The CCI has dealt with the issue of licensing of standard essential patents
(SEPs) in Micromax v Ericsson11. Ericsson is the one of the largest essential patent holders in
2G, 3G and 4G standards. Micromax refused to enter into technology licensing agreements for
Ericsson’s standard essential patents with respect to wireless technology standards such as GSM,
EDGE and 3G. Micromax alleged in this case that Ericson has failed to obey its commitment to
license its technology globally at fair, reasonable and non-discriminatory basis.
2.1 NON-DISCLOSURE OF IPs BY STANDARD SETTING ORGANIZATION
MEMBERS

SEPs encompass those patented technologies which have become essential to a standard. Non-
disclosure of essential IP is a predominant competition issue in standard setting process.
According to SSOs’ IP policy, non-disclosure of IP amounts to anti-competitive activity. IP
policies of SSOs should have the strict provisions for non-disclosure of IP. In the standard setting
process, SSOs identify proprietary and non-proprietary technological knowledge available
related to a standard. Non-disclosure of essential IP may discourage motivation of standard
setting and hamper the pro-competitive effects of standards. For instance, in the US, the court
ruled that a refusal to deal with malice is not anti-competitive until there is a probability of
monopolization. Price rise without harming competition is outside the ambit of competition law.
Only exclusionary deception amounts to anti-competitive activity.12

11
CCI Case No. 50/2013
12
Canwood Co. v US Tobacco Co. 290 F. 3d 768
In Dell Computer Corp.13 a similar ruling may be observed. In 1992 Dell became a member of
VESA (a non-profit standard setting organization). It started developing the process of VESA
local bus (VL bus) which was meant for carrying information between a CPU and other
computer devices. Dell approved the standard and certified in writing that this standard does not
violate its intellectual property. However, when VL bus became a commercial success and it was
used in about 1.4 million computers, Dell informed the members of VESA about its patent
infringement. Dell restrained competition in the market because manufacturers decided not to
use VL bus design until the patent issue was resolved. Computer systems using VL system
design were avoided due to the Dell patent issue. It raised the cost of implementation. It
discouraged future participation in the technology developing process. In this case, the FTC
ordered that Dell shall cease and abstain from all efforts to enforce the concerned patent with VL
bus manufacturers. It indicates that where there is evidence of adoption of alternative technology
in case of disclosure of proprietary technology by the members, enforcement action is
appropriate to prevent harm to competition.
Usually, when a standard is developed, alternative technologies compete for inclusion. Once a
technology is chosen and if the standard is successful then it may become an entry barrier to
other technologies. Where there are alternative technologies available then it is likely that one
will be adopted. Therefore, unfair technology selection has the potential of being anti-
competitive. IP owners indulge in unfair practices to include their technology in standard. As in
Allied Tube & Conduit Corp. v Indian Head Inc14, Allied Tube and Conduit Corp. manipulated
the standard setting process by recruiting more than 200 people to vote in its favour during the
standard setting process. So in this way Allied Tube and Conduit Corporation managed to pass
steel pipes standard instead of plastic pipes. There is no doubt that the members of SSOs have
economic benefit in restricting competition. Only unfair selection of technology may amount to
anti-competitive effect. Agreement on a product standard is, after all, implicitly an agreement not
to manufacture, distribute, or purchase certain types of products. Accordingly, private standard-
setting associations have been subject to antitrust law.

2.2 ABUSE OF DOMINANCE OF SEPs IN INDIA: A CURIOUS CASE OF

MICROMAX & ERICSSON
13
121 FTC 616 (1996)
14
486 U.S. 492, (1988)
Ericsson alleged that Micromax’s mobile phones infringed its standard essential patents (SEPs)
on mobile phone technologies, including 3G and EDGE. In March 2013, Ericsson sued
Micromax for patent infringement.
Ericsson’s suits were followed by deliberations between the parties (Ericsson and Micromax, and
Ericsson and Intex, independently) and some interim orders by the court. Meanwhile, both
Micromax and Intex pursued a series of other remedies. Intex filed applications for the
revocation of Ericsson’s patents. In addition, Micromax and Intex each filed separate complaints
under India’s Competition Act, 2002 before the CCI, alleging that Ericsson had abused its
dominant position. Micromax and Intex both claimed that Ericsson’s royalty rates were
excessive.
In addition, Micromax also objected to Ericsson’s use of the threat of injunctions and custom
seizures, and claimed that Ericsson’s conduct resulted in a denial of market access for Indian
handset manufacturers. Intex inter alia, alleged that it was forced into a nondisclosure agreement
by Ericsson to negotiate licences without a complete disclosure of its patents by Ericsson. The
CCI, finding a prima facie case in each of the above complaints, ordered the Director General to
undertake an investigation into the allegations made by both Micromax and Intex respectively.
These orders were challenged by Ericsson in the Delhi High Court. It vehemently contended that
its conduct was not anticompetitive since it was only exercising its rights to enforce its patents. It
further argued that the issue was infringement of patent law and hence authorities under the
patent law are apt to deal instead of applicability of competition law. It also alleged that it was
not an ‘enterprise’ under the Competition Act, 2002 and that the CCI was empowered to check
anti-competitive conduct only of ‘enterprises’ and since the disputes between the parties were
already being heard in other proceedings before the court, the CCI could not adjudicate them.
Ericsson opined that since the opposite parties had challenged its ownership of the SEPs, through
revocation of petition applications (filed by Intex), and a denial of infringement claims (by
Micromax), they can’t be allowed now to present a complaint premised on it being the owner of
the same SEPs.
The Delhi High Court15 rejected Ericsson’s arguments and held that the CCI did have the
jurisdiction to examine if Ericsson’s conduct was anticompetitive while observing that it is an

15
Ericsson v Competition Commission of India 2016 SCC OnLine Del 1951
‘enterprise’ under the Competition Act, 2002. However, the court also made it clear that the
CCI’s actions could be subject to judicial review by the High court.
Interestingly, while not adjudicating the issue of Ericsson’s abuse of dominance in this particular
case, the High Court noted that pressuring an implementer to accept non-FRAND terms, would
amount to an abuse of dominance.

CONCLUSION
Refusal to license under competition law and IP laws has different grounds. Compulsory
licensing under IP laws is mainly a remedy for increasing mass production of a product and
reasonable access to public. It is focused as a basic remedy for non-performing entity problem.
In refusal to license cases under competition law, compulsory licensing is the primary duty of
dominant firms only. Refusal to license per se is lawful right of IP owner. In exceptional
circumstances, court can interfere and order for compulsory licensing. Both remedies are suitable
under different circumstances. Compulsory licensing does not have potential to remedy overall
poor access to medicine. However, in individual cases if patent is misused, by excessive pricing,
not accessible to general public then in that case compulsory licensing can be used. Excessive
pricing is not per se anti-competitive. Excessive pricing in a market may be due to good quality
of products and it may attract more firms in the market, hence, resulting into more competition in
market.

BIBLIOGRAPHY

1. V.K.AHUJA – LAW RELATING TO INTELLECTUAL PROPERTY RIGHTS- 3RD EDITION

2. RICHARD WHISH AND DAVID BAILEY- COMPETITION LAW- OXFORD PUBLICATION- 9TH
EDITION
3. INDIAN INSTITUTE OF CORPORATE AFFAIRS- STUDY MATERIAL
4. COMPETITION ACT, 2002
5. PATENT ACT, 1970
6. WEBSITES REFERRED-
 SCC ONLINE
 MANUPATRA
 CCI.GOV.IN
 SCI.GOV.IN
 DELHIHIGHCOURT.NIC.IN