Intellectual Property and Competition Law - IPRsonline.org

More documents

Recommendations

Info

ICTSD Programme on IPRs and Sustainable DevelopmentTechnology MarketsCompetition policy may be applied both tocircumstances surrounding the access to IPprotected technology, as well as to the conditionsunder which that access is eventually conferred.Possible anti-competitive behaviour relating toaccess to technology has received little attentionuntil recently and is of crucial importance fordeveloping countries.Although competition law has usually dealt withmarkets for goods, markets for technologiesexist separately from those for products orservices (Arora et al, 2001) and may be subjectto competition law. Thus, the guidelines onthe applicability of Article 81 of the EC Treatyto horizontal co-operation agreements (2001/C3/02) 14 distinguish between “product markets” and“technology markets” and define the latter as:“When rights to intellectual property aremarketed separately from the productsconcerned to which they relate, the relevanttechnology market has to be defined as well.Technology markets consist of the intellectualproperty that is licensed and its close substitutes,i.e. other technologies which customers coulduse as a substitute (2.2(b)47).”In addition 15 , the Commission Notice - Guidelineson the application of Article 81 of the “EC Treaty totechnology transfer agreements” indicates that:“Technology is an input, which is integrated eitherinto a product or a production process. Technologylicensing can therefore affect competition bothin input markets and in output markets. Forinstance, an agreement between two parties whichsell competing products and which cross licensetechnologies relating to the production of theseproducts may restrict competition on the productmarket concerned. It may also restrict competitionon the market for technology and possibly also onother input markets (para. 20).” 16Similarly, the Anti-trust Guidelines for theLicensing of Intellectual Property issued by theDepartment of Justice and the Federal TradeCommission 17 of 6.4.1995 indicate that:“Technology markets consist of the intellectualproperty that is licensed (the “licensedtechnology”) and its close substitutes – thatis, the technologies or goods that are closeenough substitutes significantly to constrainthe exercise of market power with respect tothe intellectual property that is licensed. Whenrights to intellectual property are marketedseparately from the products in which theyare used, the Agencies may rely on technologymarkets to analyze the competitive effects of alicensing arrangement (para. 3.2.2).”The differentiation between product andtechnology markets means that anti-competitivebehaviour may take place with regard to eitheror both. Competition policy may, in particular,address situations in which IP is used to chargeexcessive prices for or prevent access toprotected technologies.It may be argued that the very purpose of IPRsis to restrict third parties’ use of technologiesand other protected assets and that, therefore,such exclusionary right should be preservedunfettered and exempted from competitionlaw challenges. However, “[T]he fact thatintellectual property laws grant exclusive rightsof exploitation does not imply that intellectualproperty rights are immune from competitionlaw intervention.” 18 Intellectual property rightsare, in effect, not absolute but subject to higherpublic interests. Moreover, IPRs are granted toserve public interests through inventors andcreators and not just to benefit them. 19 Thus, inan important case, the US Supreme Court statedthat “[T]he basic quid pro quo contemplated bythe Constitution and the Congress for grantinga patent monopoly is the benefit derived bythe public from an invention with substantialutility.” 20 Article 7 of the TRIPS Agreement alsostipulates that:“The protection and enforcement of intellectualproperty rights should contribute to thepromotion of technological innovation and tothe transfer and dissemination of technology,to the mutual advantage of producers and users
Carlos M. Correa — Intellectual Property and Competition Lawof technological knowledge and in a mannerconducive to social and economic welfare, andto a balance of rights and obligations.”The critical point is not whether competitionpolicy may interfere with IPRs, but rather whensuch intervention is justified. In the absence ofinternational rules on the matter, countries mayhave different approaches about the situationsin which the exclusivity granted under IPRs maylead to undesirable anti-competitive effects.In fact, the impact of IPRs on the marketsubstantially varies depending upon the legaland socio-economic contexts in which they apply.Thus, the static-dynamic efficiency rationaleapplicable to a developed country does notnecessarily hold in low income countries. Highlevels of IPR protection may have significantnegative distributive consequences in the latterwithout contributing – or even impeding – theirtechnological development (Stiglitz, 1999,p.315). As a result, competition authorities maylegitimately give static efficiency precedenceover dynamic efficiency considerations andchallenge, for instance, situations of excessivepricing emerging from the exercise of IPRs. 21This may be particularly the case in developingand least-developed countries (LDCs) where IPprotection may provide little or no incentive todomestic innovation, while it may only contributemarginally to innovation elsewhere. In thesecases, the present sacrifice of static efficiencyfinds no justification in future gains of dynamicefficiency as domestic innovation is unlikely tooccur and foreign innovation depends on largermarkets in developed countries. 22 Moreover,the static-dynamic efficiency rationale for IP isquestionable in more general terms: “[T]hereis first of all the logical difficulty of acceptingthe concept of injecting a certain amount ofinefficiency into an economic system today topromote only its possible efficiency tomorrow;this is in effect an anomalous passage for theeconomic theory…” (Ramello, 2003, p. 124).Both static and dynamic efficiency may beaffected by the granting and exercise of IPRs. Theexclusionary rights conferred can lead to underutilisationof information and jeopardise thegeneration of subsequent innovation. Cumulativeforms of innovation prevail in most sectors of theeconomy, including in the biomedical field. Sinceinformation is both an output and an input in theproduction process, a conflict arises betweenfirst and second generation innovators, becausethe greater the rights (and hence incentives) ofthe first generation, the greater the costs (andhence the lower the incentives) of the secondgeneration producers: since every generationis both “the first” to future producers and“the second” to prior producers, the conflictis pervasive and sets limits on the extent towhich, even in a dynamic analysis, it is efficientto recognise and enforce rights in informationproducts. As Arrow put it, “precisely to theextent that [property rights in information are]successful, there is an under-utilisation of theinformation” (in Benkler, 2001, p. 271).In fact, competition is not necessarilyincompatible with and, on the contrary, caneffectively lead to dynamic efficiency throughincreased innovation. Competition can be apowerful incentive to introduce product, processor organisational innovations, as noted by theFederal Trade Commission (FTC):“Competition can stimulate innovation.Competition among firms can spur the inventionof new or better products or more efficientprocesses. Firms may race to be the first tomarket an innovative technology. Companiesmay invent lower cost manufacturing processes,thereby increasing their profits and enhancingtheir ability to compete. Competition canprompt firms to identify consumers’ unmetneeds and develop new products or services tosatisfy them (Federal Trade Commission, 2003a,p. 1-2).”Many important innovations are the result ofstiff competition, particularly when differenttechnological options may be pursued. One wellknown example is the case of the semi-conductorsindustry, where IPRs play a marginal role as anincentive for innovation. 23 Many studies alsoindicate that patent protection is not always, oreven usually, the driving force behind researchand development. 24 In the area of software, for
Page 1 and 2: October 2007ICTSD Programme on IPRs
Page 4 and 5: ICTSD Programme on IPRs and Sustain
Page 59 and 60: SELECTED ICTSD ISSUE PAPERSAgricult

Intellectual Property and Competition Law - IPRsonline.org

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?