This article is interesting because it talks about harmonising intellectual property rights with competition laws. At present there are certain provisions that cater to intellectual property rights, but to the best of my knowledge, the Competition Act does not talk about balancing intellectual property rights with fair competition especially with regards to mergers and acquisitions.
If this frame work of harmonisation is implemented, then there will be some sticky issues that may arise such as what is controlling the market unfairly or strategically. In fact the sticky issues will most likely to arise in those mergers and acquisitions where the acquisition of intellectual property “appears” to be a lot but yet not lot. We can call this the traditional grey area where all the disputes arise. For the moment Competition Commission of India (CCI) appears to be on the right track and is taking intellectual property seriously.
One thing that does strike me is that in today’s world intellectual property has gained such significance that it can actually control the whole economy. The era of intangibles is here.
MNCs marrying into India Inc face patent test
30 Jul, 2007, 0432 hrs IST,Gireesh Chandra Prasad, TNN, Economic Times
NEW DELHI: MNCs going in for mergers and acquisitions will soon be required to divest some of their patented technologies to a third-party rival if the intellectual property rights (IPRs) of the combined entity undermine fair competition in the market.
While approving big mergers and acquisitions, the competition regulator will ensure the merged entity does not control the entire range of a particular product category through its combined intellectual property wealth. If the merging entities are the only two companies that have proprietary technology for a product category, they may have to agree to divest the knowhow to a third-party rival.
The guidelines on how to balance competition law with IPR, which the Competition Commission of India (CCI) is evolving, aims to protect consumers from the ill effects of big firms gaining further in size and market share. This is particularly true for MNC pharma companies that want to consolidate to resist the storming generics competition.
The move assumes significance as India recently started issuing patents on finished pharmaceutical products. Also, the merger of local arms of global majors would need CCI’s blessings. In the 1990s, Swiss pharma giants Ciba-Geigy and Sandoz - which merged to form Novartis AG - had to agree to such a condition to get the Federal Trade Commission’s nod for the deal. Novartis has been rumoured to be in talks with its rival at home F Hoffmann La Roche for a possible merger that would result in the largest pharma company in the world. Roche had bagged the first pharmaceutical product patent in India.
CCI will also work with the patents office and the government to ensure rigorous competition principles are followed in the grant of patents and, more importantly, their enforcement. It has identified nine areas where patents are globally abused by owners.
Pooling of competing patents by rival companies through cross-licensing, insisting that any improvement in the patented innovation that a licensee makes should be exclusively granted back to the licenser and condition in the licensing agreement that the licensee will not challenge the validity of the patent are some of the possible abuses that the commission wants to check.
Besides pharma and biotech firms, the move has major implications for telecom companies that often fight in courtrooms over IPR issues. The maker of a leading brand, say a computer operating system, not disclosing how rival companies could make their application software, say for Internet browsing, compatible to the market leader’s operating system is another form of abusing IPR rights. Broadening of patent claims to get monopoly for parts of the finished product other than the invention is yet another form of abuse that CCI would target.
“Competition authorities find problems not in IPR per se, but the way it is enforced by some owners. If conditions introduced in the exercise of rights go beyond the protection of IPR and result in throttling competition, then it defeats the purpose of IPR, that is, incentivising innovation,” CCI member and acting chairman Vinod Dhall told ET. The harmonious enforcement of the two legal systems to complement and strengthen each other’s purpose is needed, he said.
“IPR laws are meant to encourage innovation, not stifle it. Abusing IPR rights can defeat its very purpose and, therefore, competition principles should be kept in mind while exercising such rights,” Mr Dhall said.
No comments:
Post a Comment