Transfer of technology agreements run the risk of falling foul of India’s competition regime say Meenakshi Arora, Harvinder Singh and Sumedha Dutta at HSA Advocates
The rapid evolution of technology can in part be attributed to protection given to innovators through intellectual property (IP) laws, which give IP owners an exclusive legal right to exploit their work. However, there are inherent tensions between IP and competition laws, as the latter strives to keep markets competitive by reducing barriers to trade.
Restraining competition
The transfer of technology and know-how typically occurs through licensing agreements. These agreements normally contain restraining clauses such as tie-in arrangements, grant-back provisions, exclusive supply arrangements and other restrictions, that limit how the licensed technology can be utilized. As a result, licensing arrangements may have a detrimental effect on competition.
Section 3 of the Competition Act, 2002, prohibits anti-competitive agreements that may cause appreciable adverse effects on competition within India. However, an exemption detailed in section 3(5)(i) is granted to ensure that “reasonable conditions” exist for the protection of rights granted under several IP laws, including the Patents Act, 1970, and the Copyright Act, 1957. As a result, technology transfer arrangements that impose “unreasonable conditions” do not fall under this exemption and attract the provisions of the Competition Act.
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Meenakshi Arora is a partner at HSA Advocates and heads its litigation practice. Harvinder Singh is a partner at the firm and Sumedha Dutta is a senior associate – both are with the firm’s corporate M&A practice group. Rohan Dang and Vasav Anantharaman, associates at the firm, contributed to the article.
