Innovation is the life and blood of modern business. Innovation induces social welfare in important ways and contributes to solving new and old human problems. There is rich literature on a wide array of topics on innovation, intellectual property and competition. The attempt in this short concept note is not to reproduce any of it, but to simply narrate our preliminary thoughts on emerging issues governing innovation, IP and competition that could define our approach to the Centre’s research and activities.
Economic theory places innovation at the core of business activities since it allows firms to leverage the power of differentiation in the marketplace of ideas. Without sufficient legal protection of innovation incentives, market-failure is inevitable due to free-riding. However, IP is only a second-best solution to the problem of free-riding since it leads to a dead-weight loss and thus imposes a social cost on the society. Furthermore, the economics that drives incentive theory in case of patents and copyrights is quite distinct from the underpinnings of trademarks and geographical indications, which are meant to reduce information asymmetries. This certainly has important ramifications for protection and enforcement. Thus, a nuanced approach is necessary in defining the legal and economic determinants of IP. Our approach focuses on a fundamental understanding of the law and economics of innovation, intellectual property and competition.
IP is the foremost regulatory and policy instrument available to governments to correct market failures in innovation. However, it is not the sole instrument as incentives for innovation may also take form of publicly funded R&D, subsidies, tax breaks, prizes etc. in very limited ways. IP is considered superior to other incentive alternatives due to what can be called its core ‘property’ function (exclusion and alienation) that allows firms to appropriate value through free-market pricing. IP is thus a limited exclusivity (unlike a per se monopoly) that allows firms to exercise legal market-power in innovation markets.
Thus, IP produces dynamic efficiency, which is essential for both macro and micro-economic growth and development. However, the architecture of IP law offers certain inbuilt flexibilities by way of limited exceptions (research, experimentation, fair use etc.), exhaustion, and compulsory licences. This is seen as a mechanism to ensure that a balance is achieved between innovation and access in some limited ways. Our approach will focus on how existing safety nets within IP law promote innovation and access to IP protected knowledge, backed by a strong understanding of industry and technology specificity.
Competition law and policy is a mechanism to correct market-failures that may occur due to certain conduct of firms which has anticompetitive effects. It is distinct from other forms of regulation since competition law and policy is exercised ex-post (except pre-merger review). Hence, legal and policy certainty is an absolute pre-requisite in application of competition law and policy. Both IP and competition law strive towards achieving the same ends of innovation and dynamic efficiency. However, there can be some tension in the means by which IP is exercised, especially when firms use IP beyond the rights conveyed by legal exclusivity. Again, it is important to require intervention based on ‘effects’ and not merely on structure, conduct and performance. Although this is a slippery slope, many jurisdictions have evolved jurisprudence that provides necessary guidance on the complex relationship between Innovation, IP and Competition. Our approach will be defined by economic and empirical understanding of the intersection of markets, law and technology/ industry dynamics.
Although the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) does offer a wide latitude of flexibilities, it offers limited guidance on how WTO members must approach the relationship between IP and Competition. This leaves a lot to be desired from a young regulatory jurisdiction like India.
Research outcomes cannot be predetermined, and hence it is futile to attempt to determine any concrete pattern that will emerge and contribute to the current discourse in this area. However, there are four key pillars that broadly define the Centre’s approach to issues governing innovation, IP and competition:
Role and objectives of CIIPC:
The Centre intends to fuel academic and policy-oriented dialogues in vital areas of innovation, IP and competition. Although the focus of the Centre will be largely on technology issues, it will also contribute to research in different non-technology driven areas like trademarks and geographical indications. The role of the CIIPC is essentially focussed on the following four-pronged objectives: