Digital competition law to honour IPRs of Big Tech firms

New Delhi: The proposed new digital competition law meant to ensure fair play in the new age economy will also honour Big Tech firms’ exercise of intellectual property rights (IPRs) in protecting innovations, experts said.

A person informed about discussions in the government said that if “systemically significant digital economy enterprises” can show that protection of their IPRs go against certain obligations cast upon them under the proposed law, then that obligation will not apply to them.

“Use of IPRs will be allowed as a defence with respect to compliance obligations. Tech firms can justify certain conduct flowing from the use of IPRs. The bill is not meant to regulate big players as such; it only seeks to regulate on ex-ante basis so that there is no potential harm to competition. It is meant to ensure a level playing field in the market. It has nothing against big players,” said the person.

Ex-ante approach sets a code of conduct that large firms designated as systemically significant have to follow. The bill mandates the Competition Commission of India (CCI) to draw up the dos and don’ts but firms will have to show that they enjoy an edge in the market due to their patented innovations.

While competition laws seek to ensure competition in the market–and thus, the best possible price and choice of goods and services for consumers–intellectual property rights such as patents grant a limited monopoly to businesses for a period as an incentive for investing heavily in research and development for new technology and products. The two laws have conflicting objectives.

The draft Digital Competition Bill seeks to honour IPRs with an enabling provision in the law which also allows the CCI to accept other factors such as economic viability of operations, prevention of fraud, cybersecurity, requirement of any other law in force and other factors to be prescribed by the regulator as a valid defence when businesses are not able to fulfil the obligations otherwise set under the new law.

Amol Kulkarni, director of research at CUTS International, a non-profit, non-governmental organization working on public interest issues said quoting section 7 of the draft bill that while prescribing the conduct obligations to large digital enterprises, the CCI needs to take into account factors like pre-existing intellectual property rights, which may come in the way of complying with these obligations.

“The Commission has the choice to make conduct obligations in such a way that such IPRs of big tech firms are not infringed, which is a good thing. It should also give an opportunity for the systemically significant digital enterprise to challenge the conduct obligation where it infringes its IPR and seek a review of the obligation,” said Kulkarni. He also said that innovation, however, is a broader thing and that the overall business ecosystem has to facilitate innovation.

Neelambera Sandeepan, partner at law firm Lakshmikumaran & Sridharan Attorneys, said that the bill seeks to ensure that an enterprise being designated as systemically significant doesn’t necessarily mean its pre-existing IPRs will be diluted. “The bill empowers CCI to prescribe other factors that may come in the way of an enterprise’s ability to comply with the obligations otherwise set under this new law. CCI can empower businesses to spend resources on innovation using this flexibility. At the end of the day, Big Tech firms will be leaps and bounds ahead of others in their ability to innovate and find new products and services.”

The existing Competition Act of 2002 allows use of IPRs such as patents, copyright, trademarks, designs and geographical indications as a defence against charges of anti-competitive agreements, but it does not give that flexibility in instances of abuse of dominance.

Kulkarni of CUTS International said that the objective of the proposed digital competition law is to facilitate innovation but it should not result in overreach of any kind.