Interface between Intellectual Property Rights and Competition :

Intellectual Property Law and competition law are both necessary for the efficient operation of the marketplace. Intellectual property laws provide property rights comparable to those of other kinds of private property, thereby providing incentives for owners to invest in creating and developing intellectual property and encouraging the efficient use and dissemination of the property within the marketplace.

Similarly, competition law is intended to enhance consumer welfare by promoting competitive markets and consumer choice. Intellectual property laws are also intended to enhance consumer welfare, as businesses are encouraged to innovate and invest in new technologies leading to improved products and lower prices. Brands enable consumers to choose the products they value, which encourages competition among brand owners. The promotion of a competitive marketplace through the application of competition law is thus consistent with the objectives underlying intellectual property law.

Accordingly, competition and intellectual property law are closely linked, as intellectual property law rewards innovation by granting exclusive rights, the competition law ensures that companies do not restrict freedom to compete or exploit market power with anti-competitive consequences. However, from the traditional point of view, the situation may be different for those companies whose intellectual property assets give them a strong position in a given market to the extent enabling them to restrict the competition in that market. But it is now accepted that, since they do not necessarily, or even very often, create legal or economic monopolies, intellectual property laws do not necessarily clash with competition laws because the goods and services produced using intellectual property compete in the marketplace with other closely-substitutable goods and services.

In most instances, competition and intellectual property laws can be seen as complementary, seeking to promote innovation to the benefit of consumers and the economy. However, in situations where intellectual property owners are in a position to exert substantial market power or to engage in anti-competitive conduct, the conflict between the two becomes apparent. In these instances, owners of intellectual property rights seek to extend the scope of the right beyond that intended by the intellectual property Law. The key issue in such situations therefore, is to find out an appropriate balance between intellectual property and competition laws.

The challenge for competition authorities in such situations is, how to minimize the anti-competitive effects of Intellectual Property Rights while respecting their existence and the societal goals they are meant to promote.

Mention must be made that most competition laws contain exemptions or exceptions designed to ensure that they do not negate rights explicitly granted by respective intellectual property laws. However, the fact that intellectual property laws grant exclusive rights of exploitation does not imply that intellectual property rights are immune from competition law intervention. Competition law is in particular applicable to agreements whereby the owner of intellectual property rights licenses another undertaking to exploit intellectual property rights.