Anti competitive practices in contractual obligations

The Competition act of India 2002

COMPETITIVE MARKET

A competitive market is a market with a sufficient number of both buyers and sellers such than no one buyer or seller is able to exercise control over the market or the price. Efficiency is achieved because competition among buyers forces buyers to pay their maximum demand price and competition among sellers forces sellers to charge their minimum supply price for the given quantity exchanged.

 Anti-competitive practices are business or government practices that prevent or reduce competition in a market.

TRIPS Agreement
The TRIPS Agreement requires undisclosed information -- trade secrets or know-how -- to benefit from protection. Article-39 The protection must apply to information that is secret, that has commercial value because it is secret and that has been subject to reasonable steps to keep it secret.

 The Agreement does not require undisclosed information to be treated as a form of property, but it does require that a person lawfully in control of such information must have the possibility of preventing it from being disclosed to, acquired by, or used by others without his or her consent in a manner contrary to honest commercial practices.

Control of anti-competitive practices in contractual licenses

Article 40 of the TRIPS Agreement recognizes that some licensing practices or conditions pertaining to intellectual property rights which restrain competition may have adverse effects on trade and may impede the transfer and dissemination of technology.

Anti competitive practices in India are governed by :A) The Monopolies And Restrictive Trade Practices (MRTP) Act, 1969. B) Protection of undisclosed information-Trade secrets.
Both later on merged in The comp. Act Of India 2002

A) The Monopolies And Restrictive Trade Practices Act (MRTP) , 1969

 Competition laws in India were governed earlier by the Monopolistic Restrictive Trade Practices Act, 1969(MRTP) which was substantially taken from U.K Legislations, particularly the Restrictive Trade Practices Act, 1956 and Resale Prices Act, 1964. This Act established the Monopolistic and Restrictive Trade Practices Commission whose main functions were to control restrictive and monopolistic trade practices of big houses.

 The emphasis under the MRTP Act was in respect of trade practices that adversely affected competition and were subject to the rule of reason whereas under the Competition Act, the anti-competitive agreements and practices are declared void.

 Under the MRTP Act till the cease and desist order was passed by the MRTP Commission, a particular trade practice was not considered void or illegal whereas this is not the case under the present Indian Competition Act 2002.

 For a market economy to function properly, the competition must be free and fair. In a competitive market, all the competitors try to gain consumer confidence and increase its market share by continuously trying to improve the articulation of the exact need of the consumer/user, build in quality in the goods and services, to reduce prices and find more efficient means of production and delivery of the products and services.

 There is a very thin line of difference between acceptable business practices and practices which are considered to be anti-competitive in nature. Firms engaged in anti competitive activities do not build up their business profits to their own advantage but to basically by exploiting their superior monopolistic position in the market based on position in the market to the disadvantage of its competitors or consumers. Such activities usually lead to increase in prices, reduce output, decrease in quality, restrict consumer choices, and create barriers for new entrants etc.

Example : Apple Accused of Anticompetitive Practices in India Over iPhone

Apple Inc. has been accused of engaging in anticompetitive practices in India and is under investigation by the Competition Commission of India (CCI). The investigation comes in response to a complaint lodged with the CCI that accuses Apple of limiting access to the iPhone by only selling it through limited carriers and by only offering the iPad through its own stores. Apple also stands accused of only allowing apps from its iStore, the CCIs new branding for Apples App Store.

 Apple has pleaded in response that it is doing business in India the way it does in every other market, by controlling its product line, retailers that sell its goods, and the customer experience. These practices however are likely and possible run afoul which could possibly run afoul of Indian regulations, specifically section 4 of the Competition Act 2002.

B) Protection of undisclosed information

The Trade secrets

 With the increase in cut throat competition in every field, businesses must ensure that they adequately protect their business processes, technical know-how and confidential information from competitors. Whilst all businesses have some information that is valuable and which they endeavor to keep secret, many of them are they are unaware of how to legally protect such information.

 Just as other intellectual property rights, trade secrets can be extremely valuable to a companys growth and sometimes even critical for its survival. In fact, it is only when some rival contender improperly obtains the trade secrets, the companies come to realize the significance of Trade Secrets.

2. What is a Trade Secret?

A trade secret refers to those valuable data or information relating to the business which are not generally known to the public at large, and which the owner invested reasonably earlier and on a continued basis attempts to keep for these secret and confidential. Trade secrets generally give the business a competitive edge over their rivals. Almost any type of data, processes or information can be referred to as trade secrets so long as it is intended to be and kept a secret, and involves an economic interest of the owner.

 For example, a business may have a specified customer list or pricing policy or certain internal business processes that it follows for its day-to-day operations that give it an edge over its competitors. All these are regarded as trade secrets.

 The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) under the auspices of the World Trade Organization (WTO) lays down the following three criteria for regarding any information as undisclosed information (or trade secrets): It must not be generally known or readily accessible by people who normally deal with such type of information It must have commercial value as a secret The lawful owner must take reasonable steps to keep it secret.

 Customer lists, business information, employee details, financial records, data compilations, business plans and strategies, formulae, designs, drawings, algorithms et al, could all amount to trade secrets.

It is important to bear in mind that a trade secret need not be something that is novel nor should it have any real or intrinsic value to be protected. The only important requirement is that it must be a secret, have commercial spin offs and be maintained a secret.

3. Tools to Protect Trade Secrets

Businesses must ensure that they protect their trade secrets from being misappropriated, sabotaged, lost or stolen. Some tools that they can adopt are outlined here in below: Trade Secret Policy Non-disclosure Agreements (NDAs) Employment agreement Adequate Documentation Security Systems

1) Trade Secret Policy

Such a policy is a must for businesses that heavily rely on their trade secrets. A basic step to develop such a policy is to identify and prioritize the business secrets based on their value and sensitivity.

Employees must be informed about the policy and consequences of its breach before they agree to abide by the policy and sign an acknowledgement to that effect that they understand the organizations trade secret policy very well and they will abide by it.

2) Non-disclosure Agreements (NDAs) Businesses can also enter into NDAs with third parties while discussing any business prospects and ventures and while gaining any access to companys inner working as some state holder. In this way, the third parties can be precluded from divulging any trade secrets.

3) Employment agreement Depending upon their needs, businesses should include suitable confidentiality, nondisclosure and non-compete clauses in agreements with employees. These may include the type of information that is likely to be disclosed, the manner in which it should be used and restrictions on disclosure posttermination.

4) Adequate Documentation It is important for businesses to keep a track of the trade secrets that are developed and have sufficient records to show that the trade secret was developed by them and belongs to them. These records would be of evidentiary value in case of a dispute. It would also be useful for such businesses to conduct a trade secret audit at regular intervals to and keep up to date with any changes.

5) Security Systems Access to trade secrets and confidential information may also be restricted to only select personnel who have to undergo regular and proper security checks. In case of an electronic environment, the businesses should use adequate software programs, virus scans, firewalls password protection policy and other security and authentication technologies to safeguard their trade secrets.

4. Trade secret remedy in India

There is no specific law in India that protects trade secrets and confidential information. Nevertheless, Indian courts have upheld trade secret protection on basis of principles of equity, and at times, upon a common law action of breach of confidence, which in effect amounts to a breach of contractual obligation.

 In India it is possible to contractually bind a person not to disclose any information that is revealed to him/her in confidence. In one case, the Delhi High Court has also upheld that a claim that disclosure of information would amount to breach of confidence is not defeated by the fact that other people in the world already knew the information.

 The Supreme Court of India (i.e. the apex court) has also upheld a restrictive clause in an employment contract, which imposed constraints on the employee to not reveal or misuse any trade secrets that he or she has learnt and obtained for his possesion whilst in employment.

 The remedies available to the owner of trade secrets would be to obtain an injunction preventing a third party from disclosing the trade secrets, return of all confidential and proprietary information, and compensation for any losses suffered due to disclosure of trade secrets.

5. Trade secrets and patents

Trade secret protection is the principal alternative to patent protection. Like with patents, the owner of a trade secret can stop others from using his intellectual property. But unlike patents, the owner of a trade secret can only act against those who actually used his information. Someone who independently came up with the same information through R&D and related investments does not infringe on the trade secret protection.

 A patent holder however during the tenure of a patent can stop anyone from making, using or selling the invention, even when the infringer developed the invention completely independently without using any information supplied by the patent holder. A trade secret is secret only up to that time until some one makes it public through ones own independent efforts.

Reference
http://www.wto.org/english/tratop_e/trips_e /intel2_e.htm http://www.wto.org/english/docs_e/legal_e/2 7-trips_04d_e.htm

Thank you