In several previous posts, we have debated on aspects of the interaction of IP with competition law. These issues are all the more important in Indian intellectual property now, with the coming into force of several provisions of the Competition Act, 2002. The possibility of tensions between IP and competition law seems to have been present in the mind of the legislature, when it made some IP-specific exceptions in Section 3(5) of the Act. Among the important questions which are likely to arise are (i) the treatment of exclusivity agreements and (ii) the likelihood of the (ab)use of intellectual property being categorized as an abuse of dominant position.
A more general question might arise first – are competition law and intellectual property rights necessarily at odds with each other? In “IP and Antitrust” (2007 loose-leaf supplement), Professors Hovenkamp, Janis and Lemley analyse this question. Their analysis, primarily based on US case-law, might be of some interest to our readers, and this post will briefly describe their argument. The next couple of posts in this series will then turn specifically to the Indian Act, and its possible interpretations.
So, then, is IP really in a tussle with competition law? Is the analysis in US v. Westinghouse 648 F.2d 642 (9th Circuit, 1981) that “one body of law creates and protects monopoly power while the other seeks to proscribe it” really true? Or is that statement too simplistic? Professors Hovenkamp, Janis and Lemley argue in favour of the latter. They claim:
“… intellectual property rights do not ipso facto confer monopoly power. While they do permit product differentiation, and sometimes give the owner power over price, there is a vast difference between an exclusive right and the sort of economic monopoly that is the concern of anti-trust law…”
This is an important point – arguing that intellectual property creates a “monopoly” does not automatically mean that it creates the kind of monopoly which competition law is supposed to tackle. As pointed out by the authors:
“… the vast majority of patented products and processes are commercial failures. And even where a patented (or particularly a copyrighted or trademarked) product is successful in the marketplace, it normally competes for the attention of consumers with many other products, some themselves protected by intellectual property rights. To choose just one example, virtually all mystery novels are copyrighted, yet no one could seriously claim that any one mystery novel held a monopoly in a relevant economic market…”
Furthermore (the argument runs), the goal of competition law is not to prohibit monopoly. Instead, the goal is to prohibit anti-competitive conduct – a company that achieves a monopoly without entering into anti-competitive conduct will not violate the principles of competition law at all. In sum, the argument is that there is no tension in the goals being sought by intellectual property rights and competition law (there might however be some tension in the means through which the goals are sought to be achieved). The goals in both cases are the same – “wealth maximization”.
What do our readers think about the supposed conflict between IP and competition law? Further, does IP – as it is structured today – really lead to wealth maximization? The argument that there is no conflict between the two seems to depend on this alleged fact of wealth maximization, which in turn depends on the alleged nexus between IP and the promotion of innovation. This might take us back to the “does-IP-promote-innovation” question, about which we had blogged here
, here and here. Indeed, legal scholarship has advocated the restructuring of IP to actually promote the goals of innovation and scholarship. Professor Balganesh’s Harvard Law Review article is perhaps the latest reformulation, where he advocates a different approach to copyright protection to actually promote creativity. But, that is perhaps the subject-matter for another post…
@Mihir
“[O]ne body of law creates and protects monopoly power while the other seeks to proscribe it”. I believe this statement is true and hardly simplistic, and don’t see why you don’t agree. It’s just that the monopoly granted by IP isn’t the subject of competition law, as you note, but the monopoly granted by IP can be used to contravene the provisions of competition law (in which case IP and competition law wouldn’t be in opposition, only that particular misuse of IP law).
I suggest you take a look at another article by Mark Lemley, Property, Intellectual Property, and Free Riding, as well as a paper by Wendy Gordon, Intellectual Property. Both papers look at the different legal regimes under which what we call “intellectual property” could fit: property, torts, etc. The latter paper concludes that intellectual property is best viewed as monopoly, while the former says that intellectual property should just become “IP”, without over (and overt) reliance on other developed branches of law.
Also check out the book Against Intellectual Monopoly by Boldrin and Levine, in which they look extensively at the relationship between competition and innovation.
Finally, the notion of harm should be re-introduced into copyrights and patents. If I benefit from something without directly harming you, I shouldn’t be penalised for that, especially if that benefit is non-commercial.
Entire books and treatises have been written on your question on IP and innovation. (Like the one by Boldrin and Levine, and this one by Bessen and Meurer (also see this. Also do have a look at Against Monopoly even if you have issues with the political viewpoints of some of the contributors to that blog (as I do).
Pranesh,
Thanks for your comment and the links.
1. I should clarify: the part where I said that the statement was an oversimplification was in fact the argument which is considered in the book I quoted; and the authors (with some qualifications) appear to agree that the statement is an oversimplification unless qualified. It is in this context that they make their argument.
2. On your point of harm being re-introduced; more broadly, on the point of when IP protection should kick in — I will respond to that in a separate post (hopefully in another 2-3 days). There are a couple of responses to the Prof. Balganesh article already on the Harv. L. Rev. Forum. One of the responses seems to argue that what you suggest can possibly be taken care of under fair use. More on this later, and I look forward to your thoughts and the thoughts of our other readers on this…
Thanks again,
Mihir
Patents certainly do not go hand-in-hand with competition. Patent protection favours the innovator and hence gives it the monopoly to exclude others from using the protected IP.
Specifically, in the context of India, where farmers have started feeling the pinch of patent protection, where they are forced to pay high price for the artificial seeds which companies like Dow are selling. India really needs to amend (rather customize) its IPR laws which does not hit the backbone on Indian economy, the agriculture.
Patent Learner
Patent is anti-competition. It does not provide a healthy competitive environment rather gives monopoly to the so-called innovator, whose innovativeness is always a debatable question.
India should look into amending (rather customizing) its IPR laws to safeguard the interests of its people, specifically the farmers who are paying high price for the hybrid-seeds to the company like Dow.
@Mihir
Thanks for pointing out Shyam’s article. I haven’t yet read it. But I glanced through Wendy Gordon’s response to Shyam’s piece. In that she makes the argument I was making even more strongly, and with much greater lucidity. Other than her brief analysis of the Tragedy of the Commons (non-)problem, I strongly agree with pretty much everything else in Part I of her essay.
Alongside Boldrin and Levine’s criticism of the property framework, you might also want to read Lawrence Solum’s blog entries arguing against Eugene Volokh’s “incentives” defence of the property framework of IP. The first entry is a bit weak, but the second entry is worth reading.