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Dominant Firms and Intellectual Property Rights: An Analysis

 

The Chinese Electric Vehicle battery manufacturer, CATL (Contemporary Amperex Technology) filed a lawsuit against a smaller firm for violating its intellectual property. The company alleged that China Lithium Battery Technology (CALB) utilized its technology to manufacture batteries. While the lawsuit is yet to be settled, the issue concerns one of the most flourishing sectors in the global economy – electric vehicles. With growing concerns about environmental pollution, various companies have invested huge amounts of resources into manufacturing electric vehicles. In this context, it is interesting to note the interplay between intellectual property law and competition law.

This piece analyzes two possible legal challenges involved in this issue. Firstly, it elaborates on the competition law aspect due to the significant market share of these two companies. This ties into the second legal argument pertaining to intellectual property rights. The difficulty in protecting the R&D of a company is discussed in the face of competition in a lucrative market with dominant rival firms. To begin with, CATL is the biggest Chinese firm involved in designing and manufacturing power batteries for electric vehicles. It has also partnered up with TESLA and filed 637 patents. The company also posits developing innovative technology with numerous ways for ensuring efficient and durable electric vehicles. Thus, it can be argued that CATL is a dominant player in the electric vehicles market. On the other hand, CALB is also an important player in this market, with the 4th largest market share in China. Engaged in the similar business of manufacturing lithium batteries, it claims to conduct independent research for building its components. Therefore, two Chinese firms, with a pertinent market presence are required to come up with innovative solutions and products to retain their market share and claim dominance in the electric vehicles market. In this scenario, protecting their research through intellectual property rights, namely patents, assumes importance.

In the lawsuit filed by CATL, it has alleged that the patent acquired by the company over its batteries, installed in numerous vehicles has been infringed by CALB, which has announced that a comprehensive assessment of its products is carried out to prevent any possibility of infringement. Therefore, the lawsuit leads to two inferences. Firstly, this industry requires constant innovation for sustenance. Therefore, large electric automobile companies have already filed various patents, as visible from the example of CATL. Secondly, this arises as patents are an effective way to protect a range of components, from software for processing data to mechanical devices. However, with an increase in the number of patents and the constant need to adapt for survival in this industry, issues of infringement crop up. While this has not been explicitly stated in the lawsuit, patent infringement in the automobile sector is increasing due to another important factor, passing on trade secrets. Thus, confidential information pertaining to innovative products is shared with rivals, which leads to a mountain load of litigation.

In Indian jurisprudence, the Competition Act, 2002 stipulates a provision for protecting the intellectual property rights of entities. S. 3(5) of the Act entails that if an entity enters into an agreement, as an exclusive distribution mechanism, for protecting its intellectual property, then the Competition law will not be applicable. However, a caveat pertains to the agreement being a ‘reasonable’ means to protect the intellectual property rights of the entity in question.

While countries like China also have a patent law in place, the Court will have to deal with questions of protecting patents of dominant firms, which create significant entry barriers for smaller firms.



By: Anhad Kaur Mehta
(Legal Intern, WCSF)

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