18th July 2007
MORNING SESSION: Round table on the interface between competition policy and the exercise of Intellectual Property Rights (IPR)
Moderator: Mr. Vinod Kumar Dhall, Competition Commission of India
Competition policy and the exercise of IPR in Indonesia by Syamsul Maarif, Commissioner, Competition Authority (KPPU):
The implementation of IPR in Indonesia
IPR is one of issues in legal area with strong relations to trade, industry and investment, or overall, to the business.
There is a linkage between IPR and competition policy, which can also be found in their individual goals.
In some cases, IPR Law and business competition law have something in common. On the other hand, business competition law emphasis the importance of creation of competition spirit in order to encourage innovations.
However, towards the implementation, these two laws may contradicts one to another; they have different perspective on conceptual perceived.
Principle and implementation of IPR and business competition law in Indonesia
Business Competition is regulated under the law n°5 year 1999 concerning prohibition of monopolistic practices and unfair business competition, effective since March 2000.
IPR are covered in several laws, particularly the law n°19 year 2002 regarding copyright, effective since 29 July 2002.
These two laws are complementing each other.
However, the law of business competition is relatively new in Indonesia and it still requires socialization in order to improve people awareness on the importance of competition. In Indonesia, Competition Authority (KPPU) has been dealing with several cases, but none of these have a direct relation to IPR application.
KPPU advocacy towards the exercise of IPR
To overcome problems regarding the exercise of IP, currently KPPU is still doing the analysis on various advocacy models and practices to ensure that IPR implementation are still within competition spirit.
Issues and problems
As developing countries, the effectiveness of these two regimes, competition regime and IPR regime, produces positive stimulant for innovations and economic growth in Indonesia.
The weak business competition developed the awareness on the importance of business competition law in Indonesia.
For IPR application, Indonesia is still dealing with its people minimum comprehension on IPR; to their, the IPR are the rights of advanced countries.
In fact, unemployment and public work force are crucial in Indonesia. Non-licensed products create a dilemma: on one side, piracy can not be accepted, but, on the other hand, piracies have created jobs.
The limited buying power also encourages people to buy non-licensed products.
As in IPR implementation, people view that competition law was made in order to create market access and therefore, it only benefits developed countries.
Competitiveness also restricted the implementation of competition law in Indonesia.
Strengthening international cooperation and proposed agenda for UNCTAD
To formulate the rightest model to synchronize IPR and competition laws, it is requested to the UNCTAD to facilitate activities on IPR discussion, particularly through research ,seminar and workshop; international meetings, publications on competition policy and IPR; trainings and technical assistance provision.
Competition policy and the exercise of IPR in Pakistan:
Competition framework:
Monopoly Control Authority (MCA) is a quasi judicial statutory organization. It was established in 1971 under the Monopolies and Restrictive Trade Practices Ordinance (MRTPO).
Nationalization of the private sector from 1972 onwards substantially reduced the scope of this law.
However, since 1990s, when private sector oriented macro economic policies were introduced, the need for an effective competition policy framework has been felt.
Limitations of the MCA:
Limitations faced by the MCA relate generally to inadequate legal and enforcement provisions:
Ø outdated legislation
Ø no deterrence effect in the law
Ø “single-firm” monopolies are not covered by the law
Ø the definition of “undertaking” does not cover the “association of manufacturers” which are the prime suspect in cartel cases
Ø sophisticated instruments such as “dawn raids” or “leniency programs” to secure evidence are not provided by the MRTPO
Ø The MRTPO does not effectively address IPO, which is relatively a recent phenomenon.
Moreover, MCA is facing serious limitations relating to lack of capacity and resources.
Steps to improve competition framework:
The government has developed a framework for competition policy and is enacting a comprehensive competition law as a key “second generation” reform initiative with the assistance of the World Bank and the DFID.
The draft law takes into consideration current economic realities as well as corrects deficiencies in the MRTPO related to definitional aspects, coverage, penalties, and other procedural matters.
IPR in Pakistan:
IPR regime in Pakistan was previously not in compliance with accepted standards and this was detrimental to the:
rapid growth of Pakistan economy
enabling environment for investment attraction
market access requirement of Pakistan’s export led growth strategy
fast track integration with global economy
market expansion for genuine businesses in Pakistan
consumer interest in terms of competitive quality and price
Steps to improve the regime:
Pakistan starts strengthening its IPR regime in by establishing IP Organization (IPO), empowering the Federal Investigation Authority (FIA) and activating Pakistan Customs against IPR violations.
Moreover, enforcement coordination was institutionalised by constituting three regional enforcement committees. Ministry of information technology and IPO-Pakistan are coordinating their respective initiatives to reduce software piracy.
Interface between competition agency and IPO:
IP laws are necessary to preserve incentives for scientific and technological progress. Competition law also promote innovation and economic growth by combating restraints on competitive activity.
In essence, both these laws spur innovation and efficiency, but IPR laws grant monopoly rights whereas competition law regulates the same. Both the law are conflicting in nature as they approach the same issue differently.
Both the IPR regime and the competition regimes are evolving in Pakistan, therefore, to develop appropriate policy, it is important to better understand a variety of practical considerations, what are the practical issues that companies confront on a regular basis, and what are the practical implications of various policy decisions.
IP and Competition Law, by Uwe Schriek, Chief counsel IP corporate issues, Siemens AG:
IPR help Siemens to protect the investments it has made in research and development. But, IPR also cost a lot of money, particularly with global positioning.
In other words, Siemens has to find a balance between the cost of IPR and the benefits they provide for the company: how many monopoly rights are useful for a market and how strong should they be?
Presentation of the theory: “the prisoners’ dilemma”, by Professor Engel, the Director of the Max Planck Institute for research on collective goods and Professor of jurisprudence at the University of Osnabrück, in which he makes use of the “game theory” approach and compares the situation of two innovators, who are in competition with one another.
The prisoners’ dilemma concerns two prisoners who are accused and are being interrogated separately from one another. If one of them confesses and so incriminates his partner and the other says nothing, the confessing prisoner goes unpunished and the non-confessing prisoner one receives the maximum sentence. If they both decide to remain silent, only circumstantial evidence remains, and so both of them receive a minimum sentence. If they both confess to the crime, they receive a medium sentence.
However, if the two cooperate and stay silent, neither can rely upon the other’s silence; therefore, each must consider for himself whether he wishes to cooperate and stay silent or to act in his maximum self-interest to save his own neck.
Professor Engel compares this “prisoners’ dilemma” situation to the position of two innovators each of whom has the choice of whether to invest in research himself or to profit from the other’s research results.
If there is no protection for IP, the person, who profits, is the one who only copies and does not himself invest in research, as long as the other innovator does invest and continues to do so. Even if both innovators, who are competitors, invest, there is a benefit; however, if each innovator relies on the other’s investing, they both lose.
Moreover, in practice, there are more complicated questions, as the following:
What happens if there is cooperation in the planning of the research and development already?
Do meaningful rules exist in respect of an innovation which is open to involvement by a third party?
What part does standardization play in innovation competition?
Ø First, planned technological cooperation in research and development.
Without the possibility of IP protection, the investment in R&D in Siemens could not be as high as is currently the case.
In the case of R&D cooperation, it is essential that relevant provisions relating to the IPR are established at the very start of a project.
Ø Second, the “open source” principle.
Every party involved in an “open source” arrangement profits from the contributions of other participants and in exchange releases its own contributions to the “open source” community. This principle is based on the protection of individual IP and governs the conditions under which the individual must make his rights available to other participating parties in the context of a licence.
Siemens is involved in “open source” projects in some sectors, although it is not attractive for the company to do so in other sectors.
Ø A third area in which Siemens is active and where IP and competition interact with
one another is the area of patent pooling.
Agreeing on standards brings direct benefits for customers in many areas.
Binding rules for dealing with IP are obviously required when such standards are being negotiated.
It is also undisputed by the Courts that the IP owner’s right to exclude other can be pro-competitive under competition law analysis.
However, in the context of standards, the more recent case law clearly shows the limits of an abuse, as soon as the subject-matter of the right is essential for market participation (IMS health case and the decision of the European Court of Justice).
The IP owner may not only exercise his right to exclude, which is generally pro-competitive, but, where the relevant characteristic of the product is indispensable, he may completely foreclose third parties from having access to the relevant market for goods or services by refusing a licence.
However, the experience of Siemens shows that IPR are very rare; in fact, in the vast majority of cases, an IPR gives third parties a great incentive to find competing solutions.
It is apparent that a balance can be achieved in practice between IP and competition protection.
However, the standardization organizations cannot solve the problem of “patent trolls”, who fundamentally refuse any constructive cooperation and who only act as highway robbers obstruct the path of technological development.
AFTERNOON SESSION: Round Table Discussion on Technical Assistance in the Field of Competition and Consumer Protection
The round table was moderated by Ms. Cynthia Zapata, Director, Consumer Protection Authority of Costa Rica.
The floor was first given to Ms. Schimdiger, representing the Swiss State Secretariat of Economic Affairs, who talked about the COMPAL program, providing assistance to five Latin America countries. It assisted the governments in the adoption and implementation of competition laws. More specifically, its purpose was to facilitate the adoption and implementation of competition policy and deepen the application of the law. She stated that the reasons motivating the program were essentially centred on consumers’ protection against entrepreneurial malpractice and she assured that the program was based on market sustainability.
The moderator then welcomed general statements and declarations on the need assessment of capacity building and technical assistance.
Peru first took the floor and talked about its experience with the COMPAL program. The representative declared that the program’s first task should be to ensure that the information was well organized to ensure an effective decision making process.
Burkina Faso then addressed the assembly on the current situation of its competition regulatory framework. The representative retraced the existence of trade laws back to 1994, which also included competition and consumer laws. She mentioned the national commission entitled with issues concerning competition laws. Although the commission had received assistance from UNCTAD through staff training, it was constantly faced with the lack of adequate resources. She appealed therefore to the UNCTAD for more technical assistance to allow the commission to continue and improve its work.
Nicaragua then gave an account of the impact of the technical assistance provided by UNCTAD and the COMPAL program. The country received assistance for the project on formulation of the competition legislation. The support helped to convince people on the need of such a law and it was approved in June 2006. Through studies and human resource training, the assistance was also directed toward strengthening the institutional capacity for a better application of the national legislation. And finally, UNCTAD and COMPAL provided operational inputs for the establishment of the competition agency PROCOMPETENCIA.
Ivory Coast also took the floor and highlighted its participation in four regional seminars organized by UNCTAD where it benefited from the participants’ expertise. Unfortunately, the country was faced with an aging administrative workforce, and appealed for support for the training of new administrative agents.
Egypt draw attention to the technical assistance received from UNCTAD for the establishment of its commission of competition laws. The representative expressed interest in the Swiss Competition Authority training program in Latin America, which seemed to be more practical and dealt with the handling of specific cases. He therefore asked whether such a training program could be applied to African and Asian countries. To this, Ms. Schimdiger responded that it was part of the COMPAL program and that it would be further developed to include a bigger share of countries.
Tunisia declared that despite the assistance already provided, there was still need for more. The representative denounced the low involvement of international agencies in assistance programs at country level and asks for a better distribution of aid program at all levels.
Thereafter Ms. Zapata directed the declarations toward the training of competition law handlers.
Costa Rica gave an account of its status concerning competition law, which had been established twelve years ago. Currently, the commission was concentrating its efforts on specific areas and particularly on education. It had decided for the inclusion of competition law in the educational program in an attempt to create a competition culture within the Nation. The commission then signed an agreement with universities to incorporate competition law in their programs. Since then five courses have been designed by experts and will be soon incorporated in the curricular of major universities.
Brazil highlighted its involvement in technical assistance and training in the past four to five years. UNCTAD provided direct training to key technical staffs, who then were allowed to train others. They have been involved in projects in Angola and Mozambique, where they helped in writing the bills of the competition laws. They were also engaged in Jamaica and El Salvador, where they supported the implementation of the then recently approved competition laws. UNCTAD also organized a seminar in Brazil where the issues of technical assistance and programs were linked to development. Last but not least, UNCTAD and Brazil have been collaborating in developing training programs for judges.
Zambia gave an account of the regulatory framework of competition laws at its regional level. The representative mentioned three regional organizations including in their structure competition law, namely COMESA, SADEC and the Eastern African Community. He stressed that for regional laws to work effectively; there was need that the laws be followed at national levels. He also talked about the delivery systems of capacity building systems, which failed because the donor countries used the same system in all regions. He proposed the creation of clusters at regional levels which would serve for the delivery systems and would regroup countries that have similar structures.
Peru gave an account of the activities it undertook as part of the COMPAL program. Training programs have been provided to governmental officers, entrepreneurs and university lecturers. The methodology has been tailored to fit the concerned public, for instance seminars and workshops for officials from Peru and several Latin America countries, but also games for a younger audience. The representative mentioned that these activities had been welcome by the public, who was still asking for more.
Portugal took the floor and spoke on behalf of the Lusophone Competition Network (LCN). The representative highlighted the purpose of the LCN, which aggregated the Lusophone countries all over the world and was based on the realization that competition should play an important role in economic growth and poverty eradication. He stated that the LCN had been working by leveraging bilateral and multilateral competition assistance. Brazil and Portugal were then very active at the bilateral cooperation level while multilateral cooperation was assured by UNCTAD. He also mentioned that the next Lusophone Biannual Meeting on Competition would be hosted by Angola in 2008.
Mauritius stated that the issue of capacity building and technical assistance should be viewed at both the global and the regional levels. At regional levels, countries could be grouped on the basis of legislation to encourage interstate complementary assistance and sharing. And regional groups such as the EU and the USA should also be targeted to provide capacity building and technical assistance.
Morocco stressed the need to strengthen the ability and the culture of competition, which would require innovative ways.
Viet Nam supported the Initiative by Costa Rica to take competition to school programs, which it was also trying to implement.
Finally, on the subject of sustainability of technical assistance programs, El Salvador and Costa Rica shared their experiences and lessons learned. They particularly stressed the importance to work with regulatory and government bodies and to incorporate the education programs with competition and consumer laws.
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