A conflict of laws?
Atty. Johannes R. Bernabe
September 25, 2019
Intellectual property law and competition law have traditionally been seen as at odds with one another. The conflict owes to the premise that intellectual property law is intended to protect the rights of inventors, artists, writers and businesses through the grant of patents, copyright and trademarks in their favor to the exclusion of others. In a very real sense, these intellectual-property rights are in the nature of monopoly rights. If the right holder does not want and refuses to allow or license the use of his patent, copyright or trademark to another person, then the community is deprived of the benefits of the right holder’s creation.
Competition law, on the other hand, frowns upon monopolies. While modern competition disciplines no longer prohibit monopolies per se, authorities are wary of and enforce the law against abuse of monopoly or dominant position. Competition law is concerned with the effective and efficient functioning of markets. As such, one of its inherent aims is to ensure that whatever inputs and technologies are needed for the production of goods and services are not foreclosed, that is, made available to the extent possible to all market participants. The question is, how does a competition authority pursue this goal in the face of intellectual property law that permits right holders to restrict access to their creations?
There are no easy, straightforward answers, and much depends on the context and particular circumstances of each case. The protection of intellectual-property rights is justified in that it promotes dynamic efficiencies by incentivizing innovation. Technological and business innovations allow for the more efficient use of labor and capital, and over time, disrupt the old ways to pave for superior quality and consumer choice. Conventional wisdom has it that inventors and creators are more likely to undertake research and pursue inventive products and processes if they know that their innovation will be credited to them, and that the benefits arising from their ingenuity will be reserved for them.
The Philippine Competition Act is not blind to the benefits of innovation, and provides that where an entity is in a dominant position, the entity is not prohibited from entering into agreements that protect its intellectual-property rights. The PCA further recognizes that conduct which improves the production or distribution of goods or services, or promotes technical and economic progress, while allowing consumers a fair share of the resulting benefit may not necessarily be an abuse of one’s dominant position. These are, of course, without prejudice to the Philippine Competition Commission’s (PCC) ability to pursue measures that would promote fair or more competition.
The PCC has not yet had occasion to directly rule on a controversy where the conduct of an entity in a dominant position is sought to be justified on the basis of intellectual property law. Some experts note that case law in the European Union, from which the relevant provisions of the PCA on abuse of dominant position were adapted, may provide guidance. For instance, it has been ruled in the EU in the Magill case that a refusal to provide basic information, even if protected by copyright, which results in preventing the appearance of a new product, which the copyright owners did not offer and for which there is a potential demand among consumers, constitutes abuse. Similarly, in another case (IMS Health v NDC Health), it was ruled that in balancing the need to protect the economic rights of an intellectual-property rights holder and the need to protect competition, the latter can prevail where the refusal to grant a license prevents the development of a secondary or a neighboring market to the detriment of consumers. The same competition principles were upheld in cases involving Microsoftin cases more recently decided in the EU.
Apart from these decided cases, the Intellectual Property Code of the Philippines explicitly provides that the Intellectual Property Office of the Philippines may grant a compulsory license, i.e., a license to exploit a patented invention, even without the agreement of the patent owner, in favor of any person who has shown his capability to exploit the invention where, among others, an administrative body has determined that the manner of exploitation by the owner of the patent or his licensee is anticompetitive.
The PCC, being the agency mandated with the original and primary jurisdiction in the enforcement and regulation of all competition-related issues, clearly has the authority to determine such anticompetitive conduct. Its findings would then provide the basis for IPOPHL to issue a compulsory license that would rectify the restriction of competition in the market.
While much more can be writ and analyzed to explore the interface between competition and intellectual property law, what is certain and urgent is the need for the PCC and IPOPHL to come together and work on their modus for cooperation.
Commissioner Bernabe served as adviser to the Senate and the House of Representatives in the drafting of, and deliberations on the Philippine Competition Act. A lawyer by profession, he was a senior fellow at the Geneva-based International Centre for Trade and Sustainable Development and served as the Philippines’s lead trade negotiator on select issues at the World Trade Organization, also in Geneva, Switzerland.
(Originally published on Business Mirror’s Competition Matters column on September 25, 2019 here.)