Major Blow to Big Tech: Centre Denies Inclusion of IPR defence in Competition law

Major Blow to Big Tech: Centre Denies Inclusion of IPR defence in Competition law

In a major setback to the Big Tech, the Centre has rejected to accept the recommendation of Parliamentary Standing Committee on Finance to incorporate Intellectual Property Rights (IPR), defence in competition law provisions that deal with abuse of dominance.

The high-tech industries have continuously demanded protection of their IPRs. The current development would mean that tech companies cannot take refuge under IPR to justify their conduct while facing inquiry for any abuse of dominance.

Experts, however, expect the move may discourage innovation in digital markets.

On 24th January, 2023 the Cabinet had approved amendments to the Competition (Amendment) Bill after receiving report from the House panel. The Centre is expected to move these amendments in Parliament this week.

In the existing regime, the IPR exemption is granted in the context of certain anti-competitive agreements. However, similar dispensation is not provided in Section 4 that deals with abuse of dominant position and such pleas are considered by Competition Commission of India (in short CCI) on a case-to-case basis depending upon the reasonableness of the restrictions imposed by IPR holders.

In the report presented by the Standing Committee on Finance headed by BJP MP- Jayant Sinha said in the absence of an explicit defense enshrined in the law, the CCI will not allow any dominant entity to provide for reasonable protection of its IPR, while being investigated for alleged abuse of dominance.

Previously, the Competition Law Reforms Committee (CLRC) had recommended that this defense may be permissible in cases involving dominant position. The current Competition (Amendment) Bill 2022, however, does not address this issue.

As per the CLRC report it recommended that a defense allowing reasonable conditions and restrictions for protecting IPR may be granted in cases of abuse of dominance aligned with the international jurisdictions that is, European Union, US and UK which provide for such exemption.

Although it was mentioned in the CLRC report that reasonable exercise of IPR may be an obvious defense and may not essentially expressly states, it was discussed that a specific defense should be provided under Section 4 to avoid any uncertainty as it is explicitly mentioned in Section 3(5)(i) of the Competition Act that deals with certain other category of anti-competitive conduct.

"As recommended in the CLRC report it would be more desirable for the CCI to specifically take into consideration the rights that a party may have in relation to reasonable exercise of its IPR when dealing with abuse of dominant cases to avoid any uncertainty," the House panel was of the opinion.

The committee, thus, recommended that a similar defence (as currently included under section 3(5) of the Act) be also added under section 4.

The Corporate Affairs Ministry (MCA) in its submission to the panel, was of the view that IPR defence need not be explicitly included for Section 4 since in the era of new age economy, mention of IPR defence explicitly may allow a dominant player to abuse its position of dominance.

Furthermore, CCI, while dealing with cases of abuse of dominant position, practices rule of reason approach and considers objective reasonings offered by the said dominant entities.

Per contra, the government has not accepted the recommendation of CLRC as well as the House panel to exclusively introduce IPR defence in the provision of abuse of dominance in competition law, as per sources.