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Competition Policy and Intellectual Property Rights

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From a consumer perspective, intellectual property rights (IPRs) involve a tradeoff between short and long run gain. In the short run, consumers would be better off if businesses were free to copy the results of one another’s creative efforts, thus helping ensure that products incorporating IPR are priced close to marginal cost. In the long run, however, consumers would suffer if they had to forego the fruits of activities IPRs are designed to encourage. This tradeoff and other policy issues at the interface of IPR and competition policies were the focus of an OECD Competition Law and Policy Committee Roundtable discussion held in October 1997. There can be instances where IPRs, particularly patents, are overly broad meaning that IPR owners are in a position to unduly restrict "secondary" innovation and/or have little incentive to engage in further innovation. While recognising the significance of this problem, competition agencies are generally reluctant to second guess what IPR policy makers have decided concerning appropriate IPR breadth and have not interfered with IPR holders’ powers to decide unilaterally their pricing and licensing policies. Competition agencies intervene considerably more readily when IPR holders that are actual or potential competitors cross license one another, or when IPR holders adopt licence terms having the effect of increasing the scope or duration of their statutory protection. The basic decision rule in such cases appears to be one of considerable indulgence as long as competition will be greater with the licence, despite its restrictions, than it would be with no licence at all. When this is not the case, competition agencies typically engage in a balancing of the pro and anti-competitive effects of licence restrictions. Many nations’ IPR laws include powers to restrict distribution of goods incorporating IPRs. That can lead to IPRs being used to segment markets internationally. This increasingly debated issue was recognised but not much explored, however, in the roundtable.

Page Count: 72

Document Type: Review Article

Publication date: 2001-09-01

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