IP Views

The Antitrust Bill and Intellectual Property

May 30, 2008

by: Au Hipol

Introduction on Antitrust Law

Antitrust laws prohibit monopolies and other associations or agreements in restraint of trade for the purpose of encouraging free competition in the market. In the Philippines, Article 186 of the Revised Penal Code is, for the most part, the only legal provision that fulfills the antitrust function. The provision penalizes monopolies and combinations in restraint of trade. Although it punishes a considerable range of acts that stifle free competition, Article 186 could hardly be considered as a comprehensive antitrust law

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Other nations have far more sophisticated antitrust laws that provide greater benefits to the economy. The U.S. Department of Justice demonstrated a high, if not perfect, correlation between a country’s ranking on the effectiveness of its antitrust laws and the country’s ranking in per capita gross national product.

Senate Bill No. 123: The Philippine Antitrust Bill

Senate Bill (S.B.) No. 123 was introduced by Senator Juan Ponce Enrile. The bill, if approved, will be known as the Philippine Antitrust Act. Anticipating its eventual approval, questions are raised on the prospective effects of antitrust legislation in the Philippine society. An area that is expected to be affected is intellectual property protection.

Intellectual property laws and antitrust laws have been said to intersect. While antitrust laws prohibit monopolies, intellectual property laws confer a form of monopoly in the enjoyment of copyrights and patent rights. S.B. No. 123 appears to bear a level of acknowledgment of the IP and antitrust intersection. Section 4 of the bill, which renders unlawful monopolies or attempts to monopolize, has a proviso that states, to wit:

“that nothing contained in this Act shall render unlawful the right of a patent holder or a copyright holder to enjoy the benefit of his or its patent or copyright fully registered in the Philippines or in any foreign country with which the Philippines is a co-signatory to any treaty or convention that protects right to an invention patent or to a copyright, as the case may be.”

Taking Section 4 alone, it seems that S.B. No. 123 would allow the full utilization of copyright and patent as an exception to the prohibition against monopolies. However, Section 6 of the same bill appears to have qualified Section 4 with respect to the sale of patented goods or machinery.

Section 6 prohibits the lease or sale of patented or unpatented goods, machinery or other commodities, where the effect of such lease or sale is to lessen competition or tend to create a monopoly in any line of commerce (emphasis supplied).

S.B. No. 123, in relation to Patent

Protection of patent rights stands to be endangered by the said provision. It must be noted that the objective of patent laws is to grant to the inventor the right to exclude others over his invention for a limited number of years. If the invention happens to be truly exceptional or if it is the first of its kind in the market, then a situation may arise wherein the patent holder gains control in a specific field or line of commerce.

The wording of Section 6 of S.B. No. 123 appears to be broad enough to cover such a situation. This should not be the case.

The Intellectual Property Code of the Philippines secures patent rights to inventors and it grants a monopoly over a patented invention for twenty (20) years. A valid patent gives the public what it did not earlier have. The rationale behind the law in granting the right to exclude others is to reward the inventor for his ingenuity, by allowing him to exclusively reap the value that his invention will fetch in the market. The right to exclude others that results from the enjoyment of patent right does not run counter to public interest, because the public will ultimately benefit from patented goods or inventions.

A patentable invention is defined as any technical solution of a problem in any field of human activity. Hence, the introduction of a new drug for an illness formerly considered as incurable will surely benefit society. On the other hand, antitrust laws deal with the appropriation of what should belong to others. For example, there is a possible abuse on the patent holder in controlling the pricing of his patented goods and other similar acts. Conceivably, the abuse that may be created in the exercise of patent rights is the evil that S.B. No. 123 seeks to redress.

However, R.A. 8293 already has a built-in remedy for such abuses in the form of compulsory licensing , which gives the State the power to interfere with the patent holder’s exercise of rights over his invention. Basically, compulsory licensing obliges the patent owner to allow other manufacturers to produce his patented product or invention in case it is determined that the manner of exploitation by the patent owner or his licensee is anti-competitive. Hence, compulsory licensing is calculated to solve an abuse of monopoly over a patented invention.

It must also be noted that R.A. 8293 provides a term of 20 years for patent protection. Therefore, the public is only subjected to the exclusivity created by patent for a limited period of time. When the term of patent lapses, the exclusivity disappears and all the relevant information to make the good or invention passes to the public domain.

S.B. No. 123, in relation to Copyright

Much has been said about patent, but there are also some issues on the effects of S.B. No. 123 on copyright as well. As stated above, Section 6 limits the full enjoyment of patent right that Section 4 acknowledges. However, Section 4 mentions both patent and copyright. If Section 6 lays down a restriction on the trade of patented goods, then there exists a question on why it does not impose the same restriction on copyrighted works. The section leaves the full enjoyment of copyright as it is.

Copyright, like patent, gives its holder exclusive rights over the subject work. An undue discrimination between patent and copyright appears to have been made, considering that the abuse of rights conferred by copyright also raises antitrust issues. To illustrate, computer software is classified under copyrightable works. Consequently, allegations of software copyright abuse results into an invocation of antitrust laws.

In the United States, Microsoft confronts antitrust lawsuits wherein the company is accused of having levered its legal copyright in the Windows software to restrain trade in a variety of compatible products designed to run on the Windows platform. S.B. No. 123 seems to have overlooked the fact that copyright and antitrust laws also intersect. Such disregard is quite curious, considering that the Intellectual Property Code does not provide compulsory licensing in copyright, unlike in patent law.

As stated above, compulsory licensing serves as the built-in antidote in Philippine patent law to counter an abuse of rights arising from patent right. The same does not exist in Philippine copyright law. The laws of other nations, like the United States and Canada, provide for a compulsory copyright license as an exception to copyright law that may be resorted to by the government to correct a market failure. Hence, between patent and copyright in the Philippines, copyright law is more in need of a supplemental mechanism to avert an abuse of rights.

Paradoxically, S.B. No. 123 could have satisfied such need, and thereby strengthened its purpose, if it focused on placing restrictions on copyright instead of patent.

The Complementariness of Antitrust and Intellectual Property Laws

The interplay between antitrust laws and intellectual property is an extensive subject that gave rise to a bounty of literature in other countries. The possible enactment of S.B. No. 123 raises several questions on how antitrust legislation will change the local setting. The exercise of intellectual property rights, specifically copyright and patent, will be affected if S.B. No. 123 will be turned into law. However, if the Philippine society can take a lesson from other nations that have more experience with antitrust legislation, hopefully, such lesson will be that antitrust and intellectual property laws are not adversaries; they complement each other.

The free competition that antitrust laws aim to bring about encourages people to come up with fresh ideas, products and inventions that will win big in the market and that will serve the society better. Copyright and patent likewise foster the human genius in the hopes that public welfare will be served by the fruits of ingenuity.

Antitrust and intellectual property laws are both aimed at encouraging innovation, industry and competition. From such a perspective, if S.B. No. 123 is enacted, the test will be on how the Philippine Antitrust Act complements the Intellectual Property Code. Hopefully, the final draft of the bill meets the heavy expectations laid upon it.

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