Decoding IPR

Introduction
Over the last few decades, the global innovation landscape has increasingly shifted toward collaborations among firms, industries and nations. Patent pooling has emerged as a critical facilitator of these partnerships, enabling shared intellectual property to spark new ideas, reduce litigation and enhance access to essential technologies. Widely adopted across sectors such as telecommunications, health and technology, patent pooling has also gained relevance in discussions within India as the country positions itself as a global innovation hub. 

However, the interplay between competition laws and patent regulations poses significant challenges in this context. Patent laws grant holders substantial monopolistic rights over their inventions, while competition laws aim to foster a competitive marketplace, creating an inherent conflict. Striking a balance between these frameworks is essential to prevent the misuse of dominant positions and to ensure patents are used in a pro-competitive manner. As India explores the role of patent pooling and cross-industry collaboration within its legal and regulatory framework, maintaining this equilibrium becomes increasingly crucial.

What is Patent- Pooling
Patent pooling is defined by the United States Patent and Trademark Office as a contract between two or more patent owners that permits or licenses one or more of their patents to one another or other parties. Fundamentally, a company that requires resources for production may acquire a license jointly with two other businesses that each own multiple patents as opposed to independently. Competing patents, complementary patents, essential or non-essential patents, and others may all be included in a patent pool. 

Typically, it involves licensing between them with terms beneficial for patent owners as well as licensees as such terms allow: the overall simplicity in negotiation for each of individual patent licenses.

• Reducing transaction cost.
• Avoiding patent infringement lawsuits.
• Facilitating the use of new technologies across industries.

Patent Pooling under the Patents Act, 1970
In India, the Patents Act, 1970 regulates patents but does not explicitly address patent pooling. However, provisions within the Act indirectly support its formation. Section 68 allows for the assignment or licensing of patents, requiring that all terms, including royalty rates and duration, be documented and agreed upon by the parties involved while Section 69 mandates the registration of assignment or transmission agreements in the patent register. 

Incase, voluntary licensing efforts fail, Section 84 permits compulsory licensing under specific conditions, facilitating the creation of patent pools. Meanwhile, Section 140 outlines prohibited terms in license agreements to prevent restrictive practices. Although the Patents Act does not explicitly mention patent pooling, its framework provides mechanisms that enable and support their development.

India, as a developing nation, is still exploring the relatively new concept of patent pools and patent pools are seen as a promising solution to provide access to multiple innovations across various sectors, including healthcare and the World Health Organization (WHO) has recognized patent pools as an effective tool for facilitating access to life-saving drugs and treatments. Notably, patent pools have been instrumental in diagnosing breast cancer and developing treatments for diseases such as HIV, malaria, and COVID-19. 

Organizations like Unitaid have established initiatives like the Medicines Patent Pool (MPP), a United Nations-backed effort to ensure the availability of essential medicines in developing and underdeveloped countries. MPP achieves this by entering licensing agreements with medicine developers, allowing generic manufacturers to produce and distribute affordable versions of patented medicines in poorer regions. MPP has also developed resources such as MedsPal, an online database providing information on the intellectual property status of essential medicines and COVID-19 vaccines.

Additionally, the WHO, in collaboration with Costa Rica, launched the COVID-19 Technology Access Pool (C-TAP), a voluntary initiative that offers a global platform for developers of COVID-19 vaccines, diagnostics, and health products to share their intellectual property, knowledge, and data with certified manufacturers.

Balancing Competition and Intellectual Property in India
As outlined in Sections 3(3) and 3(4) of the Competition Act, 2002, patent owners who participate in patent pools engage in horizontal or vertical arrangements but the Patents Act of 1970 does not specifically address patent pooling agreements. As a result, the two Acts are in conflict, as Section 68 allows patent transfers, while Section 84 permits compulsory licensing of patents, which can lead to the creation of a patent pool.

Although Section 102 of the Patents Act, 1970 permits the government to establish a patent pool, the Competition Commission of India has identified patent pooling, as a restricted trade activity due to its potential harm to market competition. This creates a regulatory gap regarding patent pooling agreements under both the Competition Act, 2002, and the Patents Act, 1970, particularly in terms of their possible anti-competitive effects.

Patent pooling agreements have the potential to result in a dominant market position. Since Section 4 of the Competition Act, 2002 does not specifically address intellectual property, such arrangements are likely to be considered an abuse of dominance. Patent pooling arrangements may breach Section 4, which prohibits unilateral actions by a dominant entity that result in abuse of market dominance, even though Section 3(5) provides an exception for intellectual property agreements.

Under Section 140 of the Indian Patent Act, a license for producing or using a patented product must not impose any of the following restrictions:

1. Requiring the buyer, lessee, or licensee to purchase only from the seller, lessor, or licensor or their nominees, limiting their ability to purchase from others, or restricting their ability to buy anything other than the patented product or product made using the patented process from other sellers, lessors, or licensors.
2. Prohibiting or limiting the buyer, lessee, or licensee from using a product other than the patented product or a product made using the patented process, if not supplied by the seller, lessor, or licensor or their nominee. 
3. Prohibiting or restricting the buyer, lessee, or licensee’s right to use the product.
4. Revoking exclusive grants, banning infringement lawsuits, or prohibiting coercive package licensing. Given these restrictions under the Indian Patent Act, the Competition Act, 2002 cannot be applied in this context.

The Competition Act, 2002 aims to foster market competition by curbing anti-competitive agreements that could significantly harm Indian markets. This implies that the Competition Commission of India may adopt a more flexible stance on patent pooling, recognizing that such arrangements can enhance efficiency in product manufacturing and distribution, as long as anti-competitive practices like price-fixing, tying agreements and package licensing are avoided.

As noted earlier, patent pools can provide significant economic advantages, and therefore, concerns about their potential to harm competition should be minimized. However, this does not suggest that intentional anti-competitive practices, such as price manipulation unrelated to the pooled patents or market allocation agreements, should be condoned. Limiting the use of a patent license to assign market segments to licensees is not inherently anti-competitive, as such restrictions do not reduce competition that would have existed in the absence of the patent license.

Conclusion
In conclusion, it may be incorrect to assume that Section 3(5) of the Competition Act, 2002 automatically applies to all intellectual property agreements. Section 3(5) provides an exemption for agreements that are directly related to the protection of intellectual property rights (IPRs), such as patents, as long as the restrictions imposed by IP owners are essential to prevent IP infringement. However, patent pools should fall under the jurisdiction of both the Controller of Patents and the Competition Commission of India, with patent holders engaged in anti-competitive practices within the pool being governed by the Competition Act, 2002.

Additionally, Section 3(5) applies only to IPRs granted under Indian law, which creates challenges for patent pools involving foreign patents. Therefore, using Sections 3(1) and 3(4) to assess the Appreciable Adverse Effect on Competition (AAEC) is suggested in such cases. While the Competition Act encourages patent pooling to promote competition, India currently lacks clear guidelines on how to address IP-related issues under this law.

Unlike the Federal Trade Commission (FTC) and the European Commission, which publish clear guidelines, India’s Competition Commission has limited guidance on patent pooling. Without clear regulations, patent pooling may either hinder market competition or reduce its potential economic benefits. To address this uncertainty, clear guidelines for patent pooling are necessary, especially since patent pooling plays a crucial role in improving the availability of pharmaceutical products for lower-income groups in India. Therefore, patent pooling should be supported.