COPYRIGHT LICENSING AND COMPETITION: THE INTERFACE BETWEEN

COPYRIGHT AND MARKET COMPETITION

INTRODUCTION

Competition law and its unique and dynamic relation with Intellectual Property Rights has its
own evolving interests, especially in today’s era where there has been a massive boom and
expansion of Intellectual Property Rights, and its protections not just restricted to any area
but has expanded globally. The very essence of Copyright relies not just upon creative works,
but also the “incentives” or “royalties” given to the copyright holders are one of the key
points and also an exclusive power that the holders of copyright as well as the entire
Intellectual Property Rights is based on granting of exclusive power to the holders of
Intellectual Property Rights which is nothing but the “monopoly” right that the holders are
granted with. This monopoly right is both an exception to competition law as well as one of
the primary concerns from the viewpoint of competition law where there can be future
instances or a possibility for violation of competition law due to patents or trademarks or
copyright laws. Although the prime aspect of Intellectual Property Rights is for the purpose
of encouragement in the society for creative works, innovations which are for the consumer
welfare and for such creative work or innovations done by the holders, an incentive a royalty
and a monopoly right is awarded to such Intellectual Property holders, sometimes the
competition commissions has discovered anti-competitive practices as well as abuse of
dominant position to be practiced by such Intellectual Property holders which indeed
becomes a primary concern for competition law. However, to look it from the other side of
the prism, holders of Intellectual Property Rights can protect themselves and can further
propagate innovation, creation, in the market through a healthy competition.

COPYRIGHT AND COMPETITION LAW

The role and goal of the competition law is to foster genuine and impartial competition in the
market for both products and various services. However, the law makers have established that
there shall be no regular competition in copyright law, for the entire duration of the copyright
term i.e., lifetime of the author plus that of 60 years period is in effect since copyright law is a
governmental monopoly grant. After this term gets expired then only the competition law can
come into effect. The concern for competition law arises only when such copyright owners
start practicing anti-competition and abuse of the dominant position in the market.
However, there are instances when copyright owner can abuse his or her dominant position
such as:

a.) Pursue a lower rate from the licensee. As copyright owner holds exclusive rights to
disseminate the copyrighted works, this gives a strong power to negotiate with potential
customers and licensees and can further block competitors out of the market amounting to
anti-competitive practice.

b.) By restricting the licensees by way of tying or other exclusive supply where owners of
copyright might practice unfair practices by limiting other competitors with other products in
the market.

COPYRIGHT AND MONOPOLY

The most apt instrument to deal problems with respect to copyright infringement is the
Monopolies law, or the Anti-trust Law which is often used in United States of America. The
competition in the United States of America is mostly governed by the Sherman Act 1 and the
Clayton Act2 from which the most important provisions are Sections 1 and 2 of the Sherman
Act. These provisions declare that:

§ 1. “Trusts, etc., in restraint of trade illegal; penalty Every contract, combination in the
form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the
several States, or with foreign nations, is declared to be illegal. Every person who shall make
any contract or engage in any combination or conspiracy hereby declared to be illegal shall
be deemed guilty of a felony”3

§ 2. “Monopolizing trade a felony; penalty Every person who shall monopolize, or attempt to
monopolize, or combine or conspire with any other person or persons, to monopolize any
part of the trade or commerce among the several States, or with foreign nations, shall be
deemed guilty of a felony.4

COPYRIGHT AND MARKET

It can be extremely difficult to understand the definition of market with respect to copyright
related issues.

Among the numerous reasons some of the reasons can be mentioned as:
1
Sherman Act, 15 U.S.C. §§ 1-7 (2000 & Supp. 2007)
2
Clayton Act, 15 U.S.C. §§ 12-27 (2000).
3
Ibid 1
4
Ibid 2
i.) Indicating consumer tastes and preferences can be subjective in nature and this cannot be
the measuring scale to determine the demand substitutability.

ii.) It can be challenging to understand the technological distribution with respect to

substitutability especially in the context of media market.

iii.) In some instance including the copyright enforcers can be taken into consideration to
understand the “two-sided markets”. This “two-sided markets” are for instance the newspaper
industry where the readers markets have to be clearly differentiated from the advertising
market.

ANTI – COMPETITIVE AGREEMENT IN COPYRIGHT LICENSING AND IPR

For the promotion of innovation and creativity in intellectual property without affecting the
competitiveness in the market, the Competition Act, 2002 came up with Section 3(5) that
provides an important exemption to the general prohibition on anti-competitive agreements
under Section 3. Hence it can be undoubtedly said that the purpose of this exemption is to
ensure that IPR holders can enforce their rights and prevent infringement without fear of
being accused of engaging in anti-competitive behaviour but it is also pertinent to note that
these exemptions are not absolute in nature and conditions or restrictions imposed by the IPR
holder needs to be “reasonable” and directly related to the protection of the intellectual
property context which grants monopoly rights may also result in practices that are
detrimental to market competition such as the anti- competitive agreement entered between
the parties . Based on the nature of the anti-competitive agreement in the context of licensing
of copyrighted works are classified as follows:

 Horizontal Agreements: Horizontal agreements are such agreements that has been
entered between the parties belonging to or operating in the same level of market. In
the copyright realm, this could involve agreements between multiple copyright
holders or producers to fix licensing fees, control distribution, or divide markets. For
instance, if a group of media companies agrees to charge a uniform rate for licenses,
this could reduce consumer choices and artificially inflate prices, thereby
undermining fair competition.
 Vertical Agreements: Vertical agreements, as the name says, is an agreement entered
between parties hailing from various chains or levels of distributions. These
 agreements may become anti-competitive if they involve exclusivity clauses or tying
arrangements, which limit the licensee's ability to work with other content providers
or access alternative works. A common example is a licensing agreement that requires
a distributor to exclusively sell a particular copyrighted product, thereby preventing
competitors from entering the market.

As far as Copyright licensing is concerned which is a widely used method for intellectual
property rights (IPR) which allows holders to monetize their assets. However, some licensing
practices can raise concerns under competition law. These include:

Exclusive Licensing: When a copyright holder grants an exclusive license to a single entity, it
may limit access for other potential competitors to the licensed work. While not inherently
anti-competitive, exclusive licenses can become an issue if they are used to block competitors
and limit market entry.

Tying Arrangements: Tying occurs when a copyright owner makes the sale or licensing of a
desirable product contingent on the purchase of an unrelated product. For example, a
software company might require customers to obtain a license for specific proprietary
software in order to access another product. This practice can force consumers to make
additional purchases and restrict competition in the market for the tied product.

Patent Pools and Cross-Licensing: Patent pools, where multiple IPR holders aggregate their
rights and offer collective licenses, may also raise anti-competitive concerns. While such
arrangements can promote efficiency by lowering transaction costs and encouraging the
sharing of technology, they can also be misused to fix prices or prevent competitors from
entering the market.

INTERSECTION OF IPR AND COMPETITION LAW THROUGH JUDICIAL

PRECEEDENTS

1. United Producer/Distributors Forum v. Multiplex Owners (2009) 5

In this case, Bollywood film producers and distributors were involved in a dispute
with multiplex owners over revenue-sharing arrangements. Allegations arose that the
producers and distributors were engaging in cartel-like behaviour, reducing the
number of films available to multiplexes. They claimed protection under the Indian

5
(2009) 3 Comp LJ 369 (CCI).
 Copyright Act, 1957. However, after an investigation revealed evidence of cartel
activity, the Competition Commission of India (CCI) ruled that Section 3 of the
Competition Act, which prohibits anti-competitive agreements, had been violated. The
CCI held that competition laws take precedence over copyright regulations in such
cases.

2. K. Sera Sera Digital Cinema Ltd. v. Pen India Ltd.6

This case involved allegations that rival parties formed cartels to monopolize and
control the Indian digital movie market through anti-competitive agreements. The
case exemplifies how competition law intervenes when cartelization practices are
identified, even within the domain of copyright-protected industries.

7
3. IPRS v Rajasthan Patrika Pvt Ltd and IPRS v Music Broadcast Limited
The Bombay High Court addressed the issue of performance rights for music. The
court emphasized that while IPRS, as a copyright society, has the right to collect
royalties for public performances, it must do so without imposing unfair conditions
that restrict competition among music users. This case reinforced the view that
copyright licensing should promote creativity and innovation while maintaining a
competitive market landscape.

These cases collectively emphasize the delicate balance between protecting

intellectual property rights and ensuring competitive market conditions. The
Competition Commission of India (CCI) and the judiciary have consistently upheld
the principle that while copyright holders have legitimate rights to their creations,
these rights must not translate into anti-competitive practices that harm consumer
welfare and stifle competition.

CONCLUSION

The interface between the Competition and Copyright sounds more like a critical and
intricate process. The very essence of copyright is to encourage creativity and

6
CCI Case No. 97 of 2016 (21 June 2017).
7
Comm Appeal(L) NO. 17622 OF 2023
innovation by granting exclusive rights, but this monopoly can sometimes give rise to
competition law issues. Exclusive rights granted to copyright holders, such as the
ability to control licenses, can lead to abuse of dominance and anti-competitive
practices such as cartelization. While intellectual property law provides protection and
incentives to creators, competition law aims to prevent the abuse of these rights
that undermines market competition and consumer welfare. Hence there is a need for
nuance approach where both the regime operates in harmony for promoting
innovation while at the same time protecting competitiveness in the market for the
protection of the interest of the consumers.

REFERENCE

1. https://indiankanoon.org/doc/91660613/
2. https://indiankanoon.org/doc/336324/
3. Https://www.khuranaandkhurana.com/2023/10/12/iprs-ltd-v-rajasthan-patrika-pvt-
ltd-and-iprs-ltd-v-music-broadcast-ltd-an-analysis/