This document discusses the overlap between competition policy and high tech patents in India from a consumer welfare perspective. It notes that while competition law aims to promote competition, intellectual property law grants temporary monopolies through patents. This can create tensions between the two areas of law. The document provides an overview of these issues in India and analyzes how high tech patents, particularly in the pharmaceutical industry, may negatively impact competition and consumer welfare. It argues that competition law and intellectual property law can both promote innovation and consumer welfare when analyzed from the same paradigm with the ultimate goal of increasing consumer welfare.

1. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4)
Vol. 3. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7
OVERLAP OF COMPETITION POLICY AND HIGH TECH PATENTS IN INDIA:
A CONSUMER WELFARE PERSPECTIVE
Kriti Kumar
4
th
Year students of BA LLB(Hons)
Hidayatullah National Law University, Raipur, Chhattisgarh, India
Email: kritikumar.hnlu@gmail.com, Mobile Number: +91 8821841295(Kriti).
Juhi Paliwal
4
th
Year students of BA LLB(Hons)
Hidayatullah National Law University, Raipur, Chhattisgarh, India
Email: juhipaliwal.hnlu@gmail.com, Mobile Number: +919424456925(Juhi).
ABSTRACT
Competition is the essence of every market. It not only promotes consumer sovereignty but also
the economy as a whole. The relevance of competition issues in high tech sector cannot be
overstated. Whereas there is another field of law called Intellectual Property Law which has
similar objective that is more innovation and more efficient technology but it effects competition
negatively. So, there are basically two laws trying to foster same objective but ironically one field
of law is friction in the process of another law in achieving the objective. Within the tech industry,
however, patents can take on two roles- fostering innovation and being used as weapons, both
offensive and defensive. The problem with tech patents is that unlike a mousetrap or a paper clip,
there is not a one-to-one correlation between a patent and a product. Each high-tech product builds
on work that has gone before it, incorporating others’ ideas. “The reality is products are using a lot
of patents they don’t own,” And it is hard to see how this “promotes the progress of science and
the useful arts.” At the same time, one cannot overlook the fact that without incentive which
patent law provides, the driving forces behind the tedious task of inventing something will be have
no foundation. The lower price increases total economic welfare (as opposed to transferring
wealth from producers to consumers) only to the extent that it increases output, whereas the
reduction in cost has the added benefit of freeing resources that can be used elsewhere in the
economy.This study further contributes by providing comprehensive overview to the conjuncture
of Competition Law and High Tech Patents (especially pharmaceutical patents) in India in
protecting the interest of consumers and public welfare in general by surveying much of the recent
legal and economic literature in this regard.
Keywords: Competition Policy, Consumer Welfare, High Tech Patents, Intellectual Property
Law.
_________________
1 The background note “Application of competition law and policy to high tech markets”, prepared by the Office of
Policy Planning US Federal Trade Commission for the OECD Committee on Competition Law and Policy meeting
on 24-26 April 1996, summarizes the main arguments.

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INTRODUCTION
The conjuncture of Competition Law and High Tech Patents is a topic of discussion among
intellectual elites all over the world. There are different shades to this discussion, one of them
being whether high tech patents negatively affect consumer welfare and thereby hinder
competition? This paper aims to throw light on this area of discussion and will come up with facts
and research which either leans towards the darker side of high tech patents or conclude otherwise.
The paper shows the effect of high tech patents (especially pharmaceutical) on the market,
competition and most importantly, consumer welfare.
Intellectual Property Rights and Competition Law is relatively new field in India. As all other
laws, they are too aimed at consumer welfare. Indian patent law is codified in the Patent Act, 1970
and Competition law in Competition Act 2002. The area of overlap between Patent Law and
Competition Law is provided for in patent act is briefly discussed in both the laws. The question
we are dealing is that are they sufficient to cover issues related to consumer welfare specifically
with regards to pharmaceutical research? This conflict becomes relevant specifically in the area of
pharmaceutical industry because a man’s life is at stake. The national sentiment on this issue is
well captured in an often quoted statement made by Indira Gandhi at the World Health Assembly
in 1982:
The idea of a better ordered world is one in which medical discoveries will be free of patents and
there will be no profiteering from life and death.
PATENT AND ANTITRUST LAWS CONFLICT
There has been a long fought battle between the IP Laws and Competition Law and their
objectives seem to be contradicting each other.
Intellectual Property is the creation of mind. Intellectual Property Rights are the exclusive rights
granted to the inventor/ creator of intellectual property to exclusively to exploit his intellectual
property. The rule dealing with Intellectual Property offers a bundle of rights (economic as well as
moral rights) to the owner of property for a specified period of time. The main objective of IPRs is
to reward the inventor for his invention and at the same time encourage new innovative
products to the market. Throughout the world, members of World Trade Organization (WTO)
follow similar system of granting rights to the creator of intellectual property. Members have
signed Trade Related Agreements on Intellectual Property Agreement (TRIPS) which stipulates
minimum standards of regulation. Member countries have to bring their domestic laws in
conformity with the TRIPS. On the contradictory, till now, no multilateral rules for competition
law exist.
‘Competition’ is not defined in Indian Competition Act but is generally understood to mean the
process of rivalry to attract more customers or enhance profit. In US, some experts have defined
Competition law, as law that promotes or maintains market competition by regulating anti-competitive
conduct by companies
2
. It can be said that the ‘Antitrust Law’ in some jurisdictions
has been enacted with the intention to promote competition in the market and provide a level

3. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4)
Vol. 3. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7
playing field to all market players in the market. It aims to foster competition as an instrument for
accelerating growth through better products and economic efficiencies besides maximizing
consumer welfare by offering better products at lower prices. Innovative products to the market
are an important by-product of increasing competition in the market which gives the seller an early
mover advantage.
IP laws, offers a bundle of rights, which includes right to exclusive selling (often termed as
monopoly) to the IP owner to make good his invention, whereas competition law emphasizes on
increasing competition in the market. There appears a conflict in the objectives of the laws as one
focuses on individual interest while the other on promoting collective interest through increasing
competition.
Now, a question arises whether IP Competition laws are at odds with each other?
Patented innovations takes long time to promote consumer welfare whereas the Competition law
in short span of time promote innovation and competition by restricting anticompetitive practices.
It is true even when the mechanisms supporting the promotion of consumer welfare are
fundamentally different one is public-ordering restrictions on certain competitive behaviours
versus the private-ordering mechanisms that are the natural by-product of securing a property right
in innovation. Patents and other intellectual property rights simply advance competition on a
different axis of analysis than does antitrust law. Whereas, antitrust law seeks to promote
competition mostly on price, patents promote competition by incentivizing new innovation,
product differentiation, manufacturing and process innovations, and influencing consumer tastes.
It is to be understood that competition law is not against monopoly per se; instead the goal is to
prohibit anti-competitive conduct.
The patent laws and competition laws both aim at promoting innovation and competition.
3
As
stated by in a joint report issued by the U.S Justice Department and Federal Trade Commission –
‘that Modern understanding of these two disciplines is that intellectual property and antitrust laws
work in tandem to bring new and better technologies, products, and services to consumers at lower
prices.
The tension between these two areas of the law is best summarized in SCM Corp. v. Xerox Corp
4
.
The conflict between the antitrust and patent laws arises in the methods they embrace that were
designed to achieve reciprocal goals. While the antitrust laws proscribe unreasonable restraints
of competition, the patent laws reward the inventor with a temporary monopoly that insulates him
from competitive exploitation of his patented art.
_______________________
2Taylor, Martyn D. (2006). International competition law: a new dimension for the WTO, published by Cambridge
University Press.
Therefore, the conflict does not lie in the goal they want to achieve but the means they have
adopted.

4. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4)
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Hence, patented innovation and its commercialization should be analyzed under the same
paradigm where the ultimate goal is consumer welfare.5 The relevant area of discussion is the
situations when High Tech patents interfere with consumer welfare and if it affects consumer
welfare negatively then it becomes a concern for effective competition.
THE TRAGEDY OF ANTI COMMONS
Three decades back in Science, Garrett Hardin introduced the metaphor “tragedy of the
Commons” to help explain overpopulation, air pollution, and species extinction. People overuse
resources they own in common because they have no incentive to conserve. The “tragedy of the
commons” metaphor helps explain why people overuse shared resources. However, the recent
proliferation of intellectual property rights in biomedical research indicates a different tragedy, an
“anticommons” in which people underuse scarce resources because too many owners often block
each other. Tragedy of Anticommons property can best be understood as the mirror image of
tragedy of commons property. A resource is prone to overuse in a tragedy of the commons when
too many owners each have a privilege to use a given resource and no one has a right to exclude
another. Whereas, a resource is prone to underuse in a “tragedy of the anticommons property”
when multiple owners each have a right to exclude others from a scarce resource and no one or
very few have an effective privilege of use. In theory, in a world of costless transactions, people
could always avoid commons or anticommons tragedies by trading their rights for fair and
reasonable value. In practice, however, avoiding tragedy requires overcoming transaction costs,
strategic behaviors, and cognitive biases of participants, with implementation more likely within
close-knit communities than among hostile strangers. Once an anti commons emerges, collecting
rights into usable private property is often brutal and slow.
___________________
3 Atari Games Corp. v. Nintendo of America, Inc., 897 F.2d 1572, 1576 (Fed.Cir.1992)
4 645 F.2d 1195, 1203-05 (2d Cir. 1981)
The privatization of biomedical research has created highly fragmented patent rights, (this
phenomenon has been termed as the “tragedy of the anticommons”), which says that the existence

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Vol. 3. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7
of numerous rights holders may restrict access to new technological discoveries and thus
undermine the development and commercialization of innovation and thereby harming
pharmaceutical industry. However, the magnitude of the anticommons problem is highly disputed
in light of little empirical evidence. Patent thickets is another term to explain similar problem that
explains- for the existence of overlapping and fragmented property rights in complex technology
industries that require firms to obtain extensive licenses of complementary patented inputs for
commercializing new technology. These thickets are considered especially dangerous when
combined with the potential risk of hold up of downstream manufacturers, due to the threat
imposed by a patent holder receiving injunctions after huge investments into the production of an
infringing feature have been made. Plus, they argue that the royalty demands of multiple patentees
stacked together may be prohibitively high for the downstream manufacturers.
There are some known limitations to the hypotheses of thickets and hold-up, such as the
presumption that the patent holder has all of the bargaining power in a negotiation.
Due to all of these concerns, the competition authorities have become greatly involved in the
interface between the patent system and competition policy, and have advocated incorporating
careful consideration of the benefits patent rights into antitrust analysis.
PHARMACEUTICAL INDUSTRY AND ANTITRUST LAWS IN INDIA
In 1970, India put into place a range of policies aimed at moving the country towards self
sufficiency in medicines. Then, the national sector was very small, estimated at less than 25% of
the domestic pharmaceutical market (Redwood, 1994). Of the top ten firms by retail sales, only
two were Indian firms and the rest were subsidiaries of multinationals. Much of the country's
pharmaceutical consumption was met by imports. An important part of the policy package was
the passage of the Patents Act 1970 (effective April,1972). It greatly weakened intellectual
property protection in India, particularly for pharmaceutical innovations. Pharmaceutical product
innovations, as well as those for food and agrochemicals, became unpatentable, allowing
innovations patented anywhere else to be freely copied and marketed in India. This scenario was
changed by TRIPs, the intellectual property component of the Uruguay round GATT Treaty,
gave rise to an acrimonious debate where on one side, business interests in the developed world
claimed large losses from the imitation and use of their innovations in low developed countries

6. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4)
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Table No 1: Patent Legislation
Indian Patent Act of 1970. Versus GATT
1. No product patents allowed for Both product and process patents for
pharmaceuticals, food products and pharmaceuticals, food products and
agrochemicals. Only process patents. No agrochemicals, and micro-organisms.
patents for micro-organisms.
2. Process patents for the above have a All patents have a term of at least 20 years
statutory term limit of the shorter of 7 years from filing.
from application or 5 years from granting.
3. Government retains wide powers to No automatic licenses. Compulsory
grant (nonexclusive) compulsory licenses 3 licenses only in cases of national
years after granting. In the case of emergency, for public noncommercial use,
pharmaceuticals, licenses are automatic, i.e. or to remedy a practice found after judicial
with no consideration of local working by review to be anti-competitive. A
the patentee or the ability of the licensee to nonexclusive compulsory license may be
produce. Maximum royalty of 4% of ex- granted only after a license sought on
factory price in bulk form [compared to commercial terms from the patentee and
typical royalty rates of 10-15%]. remuneration should reflect the economic
cost of the license to the patentee.
4. Importation does not fulfill working No discrimination between domestic
requirement. production and importation.
5. In all cases, the burden of proof in an
infringement case falls on the patentee.

7. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4)
Vol. 3. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7
They also believed that establishing strong intellectual property rights would actually benefit
the developing countries by encouraging foreign investment, the transfer of technology and
greater domestic research and development (RD). On the other side, Low Developed
Countries governments strongly opposed this view, worrying about the higher prices that
stronger intellectual property rights would entail and about the harm that their introduction
might cause to new high tech industries. India agreed to this aspect of the treaty much against
her interest, believing it to be harmful to her interests. The national sentiment on this issue is
well captured in an often quoted statement made by Indira Gandhi at the World Health
Assembly in 1982: The idea of a better ordered world is one in which medical discoveries will
be free of patents and there will be no profiteering from life and death.
How much the granting of legal monopoly rights to an inventor enhances his ability to
raise prices above marginal cost? Whatever eventuates, the fact that the industry is very
competitive today means that any monopoly profits obtained by patent-owning firms once
product patents become available can, with reasonable confidence, be attributed to the change in
IPR regime? The competitive nature of pharmaceutical industry prior to TRIPS existence was
successful in keeping the price not much above the marginal cost.
Though the “poor” in India are too poor to consume pharmaceuticals, even under the current
regime. For the 70% or so of the population who currently does not have access to
pharmaceuticals, the introduction of patent protection, and any price effects that may follow, are
irrelevant and it is required for them that government pays for their medical expenses. However,
the middle class and upper middle class seem to be affected by the rise in price and hence
facing a lot of difficulty. This question should be interest to competition authorities as it is
directly related to consumer welfare.
CONCLUSION AND SUGGESTIONS
We notice that Competition Policy has taken and is continuously taking some path breaking steps
to improve competition and provide consumer with a market where they can avail services at
reasonable, just and fair prices. As India being a developing nation, Competition Policy becomes
highly relevant in the economy from consumer welfare perspective. Such law which is aimed at
consumer welfare and promises to deliver the results has given India a lot in this regard.
However, as Patent law affects competition so its overlap becomes important in regards to policy
making of Competition Law with objective of consumer welfare.
We have come to a conclusion that Patent Law and Competition Law both are aimed at
consumer welfare and when the effect of Patent law is consumer welfare then it is not in conflict
with Competition Law and therefore we suggest that though the aim of Patent Law is consumer
welfare but it should not be made an exception to Anti-competitive practices like it is now in
Indian Competition Act. We have highlighted few dark areas of patent regime which are the slow
research and development due to patent thickets (In the heading “Tragedy of Anti Commons”),
Price rise effect of patent regime and its effect on consumers which do not seem to be completely
in line with the objective of consumer welfare. Hence, it is not advisable that Competition
Authorities lays its hands off this field and there is zero or very less intervention to let Patent
regime mindlessly or for an individual interest go against consumer interest in general.
In summary, we recommend from this research work that Competition Policy should be
amended to include provisions to overpower few areas of Patent Law which are harming

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consumer welfare and development of the nation.
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9. Proceeding - Kuala Lumpur International Business, Economics and Law Conference 4 (KLIBEL4)
Vol. 3. 31 May – 1 June 2014. Hotel Putra, Kuala Lumpur, Malaysia. ISBN 978-967-11350-3-7
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