Consentia on Multidisciplinary Research


Intellectual property rights have been referred in Black’s Law Dictionary as intangible rights “protecting commercially valuable products of human intellect”. Such rights confer upon the holder or proprietor exclusive rights against any kind of unauthorized encroachment by third parties. The emerging jurisprudence of intellectual property rights can be broadly classified into two main categories: Industrial property and the other one is Copyright. On the other side, Competition law stands upon premise which stimulates entry of new competitors by removing market barriers. Alike the competition scenario in products or goods market, the present era witnesses the ushering of competition in innovative market. Both the fields of intellectual property law and competition law at the end strive to facilitate both innovation dynamic efficiency and consumer welfare, yet there is a tension in between them which has been of great concern to the legal scholars. Competition law and IPR have different aspects in their fields. If IPR protects an individual’s creativity the competition law is there to check anti market practices. But conflict arises which law will prevail in case of a conflict. If a person creates a patent in his favor and try to regulate market then competition law will not prevail over patent.   The Competition Commission is entrusted with the duty to inquire and investigate whether there has been actual abuse of dominance by the IPR owners at time of licensing arrangements.


 Intellectual property rights have been referred in Black’s Law Dictionary as intangible rights “protecting commercially valuable products of human intellect[1]. Such rights confer upon the holder or proprietor exclusive rights against any kind of unauthorized encroachment by third parties[2]. The emerging jurisprudence of intellectual property rights can be broadly classified into two main categories: Industrial property[3] and the other one is

Copyright[4]. On other side, Competition law stands upon premise stimulates entry of new competitors by removing market barriers. Alike the competition scenario in products or goods market, the present era witnesses the ushering of competition in innovative market[5].

In Intellectual Property Rights there are three widely forms of market – one is in the form of innovation market, new product market and the other is in technology goods[6]. Even though, both the fields of intellectual property law and competition law at the end strive to facilitate both innovation dynamic efficiency[7] and consumer welfare, yet there is a tension in between them has been of great concern to the legal scholars. The dichotomy in between the two is due to “temporary monopoly rights”[8] conferred upon the IPR owners as a form of reward by the Government often leading to abuse of market power. It sheds an adverse impact on the market competition from the two fold angles contrary to the nature of competition law. First, of all the market entrants confronts with unfavourable situations on trying to access to the IPR products or technologies used exclusively by the major firms unreasonably refusing to part with. On the other side, the dominant Multinational Corporations charge excessive amount on the IP related products to recoup the Research and Development Costs making it out of common men’s reach[9].



The Licensing of Intellectual Property Rights constitutes an effective business strategy to permit third parties to exploit the IPR products[10]. Eventually, there are both positive and negative implications of the aspects of licensing. There are various forms of restraints or anti-competitive practices in licensing. Two best devices can be sought out in preventing such practices which are compulsory licenses and parallel importing. In both United States and European Community, there have been well defined Antitrust Guidelines and Block Exemption Rules regarding up to what licensing will be permitted not prejudicially affect the relevant market shares . A developing country like India lacks proper Research and Development Facilities and high market barriers create adversial impact upon the market entrants to access the technology or products from Indian dominant firms or those who having Joint Ventures with overseas companies. The enactment of new Indian Competition Act of 2002 on basis of the Raghavan Committee Report (2000) repealed the Monopolies Restrictive Trade Practices Act of 1969. The provisions of compulsory licensing incorporated in the Patents Act Copyright Act etc have been a welcoming approach. Being the main regulatory body, the Competition Commission of India have the authority to supervise for better coordination between competitive aspects of various forms of IPRs by laying down regulations for curbing any kind of abuse aspired from foreign

jurisdictions .

This paper, thus, attempts to focus into following issues –

  1. To find how far the licensing requirement is needed to curtail anti-competition of IPR by dominant firms.
  2. Analyzing US & EC Licensing Rules.
  3. How to better provide licensing arrangements in Indian Competition Regime at par with US & EC.




The underlying hypothesis on which this paper is based is necessity of Competition Commission to act as the main machinery to bridge the lacunae in harmonizing IPR and competition law.



Q1. Is it legitimate to dwell upon the idea that licensing will curtail the abuse of intellectual property rights by facilitating in overall competitive culture?


An important concern in establishing the relationship between IPRs and competition is how far the third parties can effectively exploit the protected subject matter granted or non-granted by the IPR owner. There are mainly two categories of licenses –

(a) unilateral or voluntary licenses[11]

(b) Compulsory License[12]

Licenses are considered to be pro- competitive in nature in its three- fold manner helping in reducing transactional costs, preventing in free- riding and facilitating better distribution of the IP protected products.[13] Licenses are anti-competitive as regards to restraints on the basis of licensing pattern. Generally, there are two main forms of restraints:

(a) Horizontal restraints[14]

(b) Vertical restraints[15]

Following are the various forms of both these restraints affecting IPR licensing –

(a)Cross Licensing or Patent Pooling- These are agreements whereby owners of different

Intellectual Property like – patents or know-how agree to license the rights only to one another.

On the other patent pooling are cross-licensing of patent rights transferred directly by the patentee or through the Joint Venture mechanism[16].

(b)Exclusive Licenses or Exclusive Dealings– Under such licenses the licensor grants only to one person restricting the rights to sub-license IP rights to any other licensee. Exclusive dealing on the other hand, arises when the licensee restrains the licensee from selling, distributing or using any rival technologies[17].

(c) Grant Back Clauses – Such licensing conditions imposes the licensee to grant back to the licensor any kind of improvement on the use of IP product depending on factors like – whether the grant back is exclusive or not, whether such prevents from sublicensing, its, duration etc[18].

 (d) Field of Use Restrictions-Such kind of anti- competitive conditions imposes the licensor to limit the licensee’s rights to resell the licensed subject matter for use only in certain fields or to only certain customers to whom the licensor had earlier dictated[19].

(e)Price Fixing within Territorial Allocation– As a rule, mere territorial allocation of any

Intellectual Property Rights is not violative of competition law. However, if the territorial division is for customer allocation coupled with price fixing arrangements, then such licensing arrangements is prohibited by law[20].

(f) Tying Arrangements– In case of IPR licensing unreasonable terms imposed by the IP owners to grant licenses of one product or technology only upon the sell of another product by the same owner[21]. It may take place in the following ways- licenses covering multiple patents or copyrighted materials or tying the sale of two patented goods (one unpatented and one patented) technological tie etc[22].

(g) Royalty Payment beyond expiry of term of Intellectual Property – Under such clauses the licensor coerces licensee to pay the royalty amount even after the term of licensing of IP endangering competition.

There are two solutions to the anti- competitive aspects of licensing, one in the form of parallel importing[23] and the other through compulsory licensing. Article 6 of the Trade Related Aspects of

Intellectual Property Rights recognizes the legitimacy of parallel importing from the country from where it had been licensed based on the principle of exhaustion of rights[24]. However, the present paper is not concerned with the aspects of parallel importing.

It is pertinent to mention here that legitimizing the concept of compulsory licenses has arisen from several International Agreements like World Intellectual Property Organization, Paris Convention for Protection of Industrial Property, Trade Related Aspects of Intellectual Property etc (Article 31)[25]. Doha Declaration allows issuing of compulsory licenses by the developed countries for the manufacture of patented drugs provided they are exported to the least developed countries with per capita income less than US Dollars 745 per year [26].

There have been main provisions[27] of Trade Related Aspects of Intellectual Property Rights (TRIPS) endeavouring to bring a better linkage in the field of innovative competition for promoting economic welfare.




Q2. What inference can be drawn while analyzing US and EC Competition Regime as regards to the licensing arrangements of intellectual Property Rights?


The US and EC Competition Regimes have their glory for having well structured set ofguidelines in relation to licensing of IPRs. Before discussing EC, this paper attempts to discuss USposition.

US Position


The US history reveals jurisprudential debate whether to give rights of intellectual property more predominance over the competition law or vice versa. From 20th Century onwards, under the influence of Chicago School[28], the trend is towards the importance of competition promoting in greater efficiency in innovative market. The “Rule of Reason” Analysis developed in US confers power upon the Courts in upholding legitimacy of licenses after evaluating factors like position of the parties, their present market shares and if the licensing arrangement is permitted whether it would create any adverse effect on market etc. However certain practices are considered per se illegal like that of price fixing with territorial allocation.

US Antitrust Guidelines of 1995 by Department of Justice and Federal Trade Commission has laid down three main rules which form the crux of the IPR licensing. Further, there have been distinct rules for three forms of markets. In case of goods market, the Safety Zone criteria is that the licensor and licensee should not collectively account for more than 20% of the relevant market. Whereas, in case of technology and innovation markets, to grant exemption of IPR licensing agreements, there must be at least four independent close substitutable products or entities[29].

In US, the doctrine of “essential facilities” first enunciated in the case of US vs. Terminal Railroad

Association of St. Louis, (1912) 224 U.S. 383 was not directly associated with intellectual property rights.

It can be applied only in certain circumstances when there is lack of access of an important aspect or facility urgently needed by any business entity for its participation in the market which would otherwise foreclose the competition. On the other side, it is also correct that an IP firm’s decision to deal or not to deal to its competitors any such facility or IP related product varies and it is for the Federal Trade Commission to scrutinize in the light of the circumstances. Two important cases can be cited-

  1. US v Pilkington where the Court restrained Pilkington, a glass manufacturer from imposing unreasonable conditions into patent know-how agreement with other glass manufacturers.

  1. US v S C Johnson and Sons[30], In this case the Court ordered Bayer AG, a major supplier of pesticides which granted the patented technology by way of licensing only to Johnson in US, to grant access of such also to the small firms accelerating competition.


EC Position

In European Community, the main principle upon which the interface of IPR – competition law stands upon is that Competition law is not concerned with existence but with the exercise of IPRs[31]. In EC Article 81 deals with anti-competitive agreements and subsection 3 of the said Article contains exceptional circumstances where such agreements can be permissible. Article 82 deals with abuse of dominance. Apart from the statutory provisions of the Treaty, there also have been Block Exemption Rules in Research and Development Regulation 2659/2000 and subsequently in IPR licensing Block Exemption 772/200438.

There have been many important IPR licensing cases out of which mainly three cases have been mentioned below –

(a) Volvo Case[32]-In this case, Volvo Company with registered design brought an infringement action against Veng importing former’s design into other states prompting the Court to held that the right of proprietor any protected design to prevent any third parties from selling without authorization can be regarded as an proprietor’ exclusive right and refusal to grant a license does not constitute an abuse of dominance.

(b)Magill Case[33].In this case ECJ imposed a duty upon three Television broadcasters in

United Kingdom and Ireland to license the IPR to a small company named Magill. Likewise in the IMS case, the Commission ordered an undertaking a global leader in data protection on pharmaceutical sales to grant access to copyrighted format to its horizontal competitor.


Maize Seed case (Nungesser v Commission) 19831CMLR 278 , the Court held that an open exclusive license conferred by the licensor to produce maize seeds cannot be regarded as violative of Article 81 of EC Treaty. Similarly in the case of trademarks, the Commission granted individual exemption under Article 81(3) to exclusive trade mark licenses by applying the Block Exemption Rules for vertical agreements[34].

Moreover, dominance by its nature is not unlawful, but on achieving the dominant position a firm has a special responsibility not to indulge itself into any such conduct that hampers the market competition. Prof. Anderman observes that in case of IPRs there are different degrees of dominance which can have significant legal consequences. However, there arises a question when anti competitive restraints can be imposed on a non-dominant enterprise or else when any market power is lawfully acquired or maintained would be able to harm competition through unreasonable conduct in such connection. Holding a dominant position by virtue of IP is not per se unlawful since it grants exclusivity to some extent and does not result in monopoly. The ECJ has stated that, it is important to note that non-dominant firms can charge what markets can bear whereas the dominant firms are only entitled to a fair return.



Q3. How far the licensing arrangements of IPRs in India are carried out?

The Monopolies Restrictive Trade Practices Act of 1969 was an important legislation designed to prevent concentration of monopoly power and to prohibit restrictive or unfair trade practices[35]. The provisions of the Act were not much concerned with intellectual property rights except Section 15 dealt with protection to the patent owners. However, there were important cases[36] dealing with any kind of malpractices in trademark and copyright coming within the purview of the Act. Eventually with changes in global economy, the MRTP Act was replaced by Competition Act of 2002 on the recommendations of the Raghavan Committee 2000. The High Level Committee Report recognized the difference between existence of a IP right and its exercise by stating that any anti-competitive conduct in IPR exercise detrimental to public interest can be assailed under Competition Law[37].

Section 3(5) of Competition Act, 2002[38] imposes “reasonability criteria” to protect the IPR regime. The unreasonable conditions are referred to the various forms of horizontal and vertical restraints prejudicing the competitive growth of economy. Thus, as long as the Intellectual property owner licenses to any third person within the sphere of reasonableness, competition authorities would not bring any action against him. Allied statutory provisions in the Act like Section 4 (abuse of dominance of monopoly) and under Section 27 (Competition Commission to pass any order after inquiry into anti-competitive agreements or abuse of dominance) applies equally to IPR owner.

Now, the paper attempts to analyze in the following, licensing provisions of various forms of IPRs in Indian scenario –

1. Licensing of Patents- The earlier Patents Act of 1970 did not contain provisions relating to compulsory licenses; it was only after the Patents Amendment Act of 2002 under Chapter XVI introduced provisions of compulsory licenses to be issued by the Controller after three years from the date of sealing of the patent on account of fulfilment of any three main conditions. Apparently, some inherent problems in relation to patent licensing are:

  1.  Smaller Indian firms with better access to cheap labour although willing cannot take up the licenses for medicines before the three years expiry of patents. Patent pooling and cross licensing among larger firms or firms having foreign collaboration hinders the market entrants from their effective participation.
  2.  Since patents involves high Research and Development costs and the firms takes longer period to invent medicines or drugs, it sells such to customers at an exorbitant rate .Meanwhile, the per capita income of Indian commoners is not so sound and at times of emergency they cannot avail the drugs. Thus, price control of patented medicines is the need of hour.
  3. The reasonability as to royalty criteria is also another problem. Since the Controller of Patents has the sole authority to determine what amount of royalty is to be charged by the licensor and fixes the sum, the issue comes when the quantum of such creates adverse impact on competition. The most likely outcome is that the licensor forwards unjustified condition upon the license which goes unnoticed and to resolve such the Commission is in duty bound to intervene.
  4. At certain junctures, there seems to be inadequate coordination between Competition Act and Patent Amendment Act; and hence for their harmonious simultaneous existence, the main role must be performed by the Competition Commission of India.

2. Licensing of Copyright –Copyright is the exclusive rights vested on the author or creator for his skill, judgment and labour in literary, artistic, dramatic and musical work[39]. The Copyright Board has the sole authority to grant copyright licenses as soon as any innovative work comes into existence by granting general licenses and compulsory licenses under sections 30 and 31 of the Copyright Act. Still there has been much manipulation by the copyright licensors to hike excessive price in exploiting copyright works by the third parties especially in software, music and broadcasting industries[40].

In the recent controversial case of Microsoft v EC Commission (2004) the three step analysis has been introduced which includes whether the refusal to any copyrighted work is denied by any dominant enterprise, whether such refusal is unjustified and it excludes competition in any secondary market. The issue is that like its Western counterparts, whether Indian Commission would follow this three step analysis or regard the “entirety of the situation” in dealing with any refusal by dominant enterprises. In India scenario, the Commission should after examining any such copyright abuse case, on its merits basis it may either extend the essential facilities doctrine or apply the three step approach of Microsoft[41].

3. Licensing of Trademarks –In the case of licensing or franchising of trademarks, brand management and quality control are the important factors to be maintained by the trademark owner at the time of assigning and franchising[42]. There is apparently problem of exclusive license of trade marks. The positive effect of such exclusive licenses of trademarks is that it helps in protection of piracy and forfeiture from other parties and on the other it forecloses competition. Thus, to prevent any adverse impact upon market competition, duties are to be vested simultaneously upon the Controller to investigate the legitimacy of any trade mark; and also upon Commission to prevent any abuse of dominance by the trademark owner by imposing unreasonable license terms.

4.  Problems with Geographical Indications –There are problems in especially in Indian scenario as to exercise by the IPR owners in licensing geographical indications[43]. It has been contended, that IP value of geographical indications is much understated since it involves traditional knowledge much to lack of awareness of public. Instances are like the ones in Basmati case and turmeric controversy and even in Darjeeling Tea Case[44].


A Clarion Call for a greater Role of Competition Commission of India

The Competition Commission is entrusted with the duty to inquire and investigate whether there has been actual abuse of dominance by the IPR owners at time of licensing arrangements. It must take into account various factors under Sections 19(3) and 19(4) of the Act in assessing the impact of such licensing in relevant product and geographic market. Important concerns like promotion of economic and technical development and better distribution of goods or services similar to Article 81(3) of EC are to be considered. Further, under Article 19(4) the Commission regarding dominance aspects must examine whether the IP firm is a statutory created monopoly, subject matter of IPR and where it is to be applied. In case of non-dominant undertakings, the Commission after investigating that to what extent such entities can impose unreasonable licensing conditions and whether they should be penalized like dominant entities. The CCI must play the role of catalyst in changing the IPR licensing pattern.


It has been witnessed that the approach of Indian Competition Authorities in developing a unique licensing regime is at its rudimentary stage. The need of the hour is a much awaited progressive change. Following are, in a nutshell, some suggestions –

  1. As it is seen that the dominant enterprises both in India along with its western counterpart when they engage in any kind of abuse, the competition authorities on sufficient evidence of such abuse order them to grant the access of IPR related technologies or products to other competitors for stimulating greater competition. The problem is with non-dominant enterprises engaging in anticompetitive licensing practices. In EC jurisdiction, it has been held that such kind of enterprises have been given a lenient outlook till now. In India there is no well defined rule as to how CCI will entertain those cases compelling the need of separate regulations.

  1. Like in US Antitrust Guidelines and EC, Technology transfer Block Exemption Rules differentiating white and blacklisted clauses, necessity of distinct guidelines in India to be met by Notification from Commission. There must be clear demarcation of three sets of markets- goods market, technology goods and Research and Development markets.

  1. The newly formed CAT (Competition Appellate Tribunal) should apply Rule of reason analysis more justifiably in refusal to deal cases by dominant firms. Alike in US and EC the essential facilities doctrine must be extended to various other forms of IPRs.




To conclude is to give strike the right chord between the rights of IP owners and fair market competition. The important attributes of IPR licensing both in terms of commercial exploitation and of public interest should be given a serious consideration for a much fruitful and effective Indian competition policy in the near future.



Bare Acts:

  • Monopolies Restrictive Trade Practices Act , 1969
  • Competition Act , 2002



  • Competition Law in India; Abir Roy and Jayant Kumar Eastern Law House
  • EC and UK Competition Law Commentary, Cases and Materials, Maher M. Dabbah, Cambridge, University Press
  • Competition Law Today, Concepts, Issues, And the Law in Practice edited Vinod Dhall
  • Taxmann’s D P Mittal 2003.

[1] 1IPR under Competition Act, 2002, Divya Bhargava available at (last accessed on 15.4.2013)

[2] EC and UK Competition Law Commentary, Cases and Materials; Maher M. Dabbah, Cambridge University Press,

Chapter 6 Intellectual property rights and competition law, page- 200.

[3] which includes patents, trademarks, industrial designs and geographic indications

[4] Which includes literary works such as novels, poems and plays, films, musical works; and artistic works such as drawings, paintings, photographs and sculptures, and architectural designs Available at (last accessed on 15.4.2013)

[5] Competition Law Today, Concepts, Issues, And the Law in Practice edited Vinod Dhall; Oxford University Press.

[6] Competition Law and Intellectual Property Rights, Valentine Korah Chapter 5, page -131.

[7] The Interface between Competition law and Intellectual Property Rights, Manpreet Kaur , available at (last accessed on 15.4.2013)

[8] Dynamic efficiency is related to making or developing innovative products by giving the incentives or reward to the actual owner or innovator of such products. Competition Law in India; Abir Roy and Jayant Kumar, Eastern Law House, page-22.

[9] Supra at note 2.

[10] Supra at note 5.

[11] 10Licensing as a business strategy ,Binny Katra and Tapsi Johri available at (last accessed on 19.4.2013)

[12] where the licensor or the IPR owner deliberately gives his consent to another person or the licensee the right to exploit or use the product or technology.

[13] It is an extra-ordinary situation where the State grants the licensee the right to use the Intellectual property related products or goods without obtaining the consent of the original proprietor.

[14] Supra at note 6, page-191.

[15] Ibid. licensing occurs when the licensor or licensee is actual or potential competitors in a relevant market and by

    means of tacit collusion they create any kind of anti-competitive concerns.

[16] Joel Klein , Speech : Cross- Licensing and Antitrust Law (May 2, 1997) available at (last accessed on 18.4.2013)

[17] Supra at note 11.

[18] Ibid.

[19] Supra at note 6 page-198.


[21] Antitrust Issues in Tying and Bundling of Intellectual Property Rights available at (last accessed on 17.4.2013)


[23]Competition law and Intellectual Property Rights, Atul Dua and Rahul Goel available at

(last accessed on 18. 4. 2013)


[24] Wrongs from a Trademark Right, Patrick Kenny and Patrick McNutt. Available at (last accessed on 18.4.2013)

[25] Compulsory Licensing of pharmaceuticals and TRIPS, available at (last accessed on 18.4.2013)

[26] Intellectual Monopoly and Compulsory Licensing. Available at (last accessed on 18.4.2013)

[27] General Provisions and Basic Principles available at

(last accessed on 14.4.2013)

[28] Supra at note 5


[30] CIV. No. 4089 15 FED. REG. 43, 859, 25 August 1994

[31] Abuse of Dominance in the field of Copyright Law , available at (last accessed on 16.4.2013)

[32] AB Volvo v Erik Veng (UK) Ltd, Case 238/87, [1988] ECR 6211

[33] Radio Telefis Eireann v Commission [1995]1CEC400 ECJ


[35] New Competition Regime in India , Debashree Dutta, available at (last accessed on 18.4.2013)

[36] Vallal Peruman And Dileep Singh Bhuria v. Godfrey Philips (India) 91/92 In UTPE 180/92 – 1994

[37] 5.16- 5.18 of Raghavan Committee Report , Taxmann’s D P Mittal 2003.

[38] Section 3(5) –Nothing contained in this section shall restrict the right of any person to restrain any infringement to impose reasonable conditions , as may be necessary for protecting any of his rights which have been or may be conferred upon him under (a) Copyright Act of 1957, (b) Patent Act 1970, (c) The Trade and Merchandise Act of

1958, (d) The Geographical Indications of Goods Act of 1999, (e) The Designs Act of 2000, (f) The Semiconductor Integrated Circuits Layout Design Act of 2000.

[39] New Intellectual Property Rights Legislations and Regulations for Marketing Activitiy, Professor Dr V.V     Soplevand Mrs Jyoti Gattani. Available at (last accessed on 19.4.2013)

[40] Manju Bharadwaj v. Zee Telefilms And Others- UTPE 148/95, 1996

[41] The Microsoft Judgment and its Implications for Competition Policy towards Dominant Firms in Europe

Christian Ahlborn and Davis. S. Evans .Available at (last accessed on 19.4.2013)

[42] Trademark Licensing and Franchising; Trends in transfer of Rights , Vernika Tomar available at (last accessed on 19.4.2013)

[43] Article 22 of TRIPS Agreement grants basic protection to GI but in Indian there are no means for compulsory registration of GI. The Protection of Geographical Indication in India – Case Study on ‘Darjeeling Tea’ Dr. Sudhir Ravindran Ms. Arya Mathew. Available at (last accessed on 18.4.2013)

[44] Under the Tea Act of 1953 a compulsory licensing arrangement has been incorporated between genuine Darjeeling tea exporters with importers all over the world to sell Darjeeling Tea on payment of annual fee.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s