Competition matters; so does IP.

Unsplash - Braden Collum (c)

Competition is vital for a thriving economy and benefits consumers directly. When businesses compete, they are driven to offer lower prices, higher quality products, and a wider variety of goods and services to attract and retain customers. This constant pressure ensures that companies innovate, making their offerings more efficient, effective, and appealing. Without competition, businesses would have less incentive to improve, potentially leading to stagnation, inflated prices, and limited choices for the public.

Beyond consumer benefits, competition fosters innovation and efficiency within businesses themselves. To gain an edge, companies must continuously research new technologies, optimize their processes, and adapt to changing market demands. This dynamic environment encourages growth, rewards merit, and ultimately leads to a more robust and responsive marketplace. Knowing that competition acts as a powerful catalyst for progress, pushing the entire economic system towards greater productivity and value creation. 

In this vein, authors Bednar and Hearn recently published an article "One Canadian economy needs one competition policy" in Policy Options, in which they emphasized the need for competition policy to be a "whole-of-government economic strategy" that unlocks growth and innovation. While it doesn't explicitly detail how intellectual property (IP) fits in, its core arguments implicitly highlight the critical role of IP within a modern competition framework.

Firstly, while the article stresses that competition policy is a "powerful and underutilized market-shaping force that can unlock innovation, growth and productivity”, it is important to note that IP, particularly patents, copyrights, industrial designs, plant breeder rights and trademarks, is fundamentally designed to incentivize innovation by granting creators exclusive rights for a period of time. A well-designed competition policy needs to ensure that these IP rights are not abused to stifle competition, but rather to foster an environment where innovation thrives through fair competition.

The article, secondly, calls for addressing "concentration bottlenecks" and supporting "dynamic domestic industries over passive incumbency." Strong IP rights can, in some cases, contribute to market concentration if they lead to dominant positions (or right to exclude others) that are then leveraged anti-competitively. Competition policy's role is to scrutinize how IP is used to ensure it doesn't create or maintain market power in a way that harms consumers or new entrants. For example, the article mentions "fair access to critical infrastructure, data and emerging digital platforms," which often involve significant intellectual property.

Thirdly, the authors Bednar and Hearn suggest that governments should "require open standards or interoperability in tech contracts; and invest in 'public options' such as open data platforms and public AI models to prevent monopolization." This directly relates to IP.  In certain cases, proprietary IP can be a barrier to interoperability and open standards; however it does give rise to SEP and FRAND, which spelt out relates to standard essential patents and fair, reasonable and non-discriminatory licensing terms.

Competition policy, in this context, would encourage licensing practices or open-source initiatives that prevent IP from being used to create closed ecosystems that stifle competition and limit consumer choice.

Fourthly, the article highlights that "non-compete clauses impede the mobility of millions of workers." While not strictly IP, this touches on contractual restrictions that can be linked to proprietary information or know-how (a form of IP). Though these clauses are generally enforceable, competition policy, according to the authors, can address such clauses if they are deemed anti-competitive and limit labor market dynamism. In the United States the Federal Trade Commission (FTC) is actively working to limit their use and enforceability (press release), but is being challenged in the Courts.

While the article doesn't offer a specific section on IP, its call for a proactive, whole-of-government approach to competition inherently requires a careful balancing act with IP. The goal is to ensure that IP rights serve their intended purpose of promoting innovation without becoming tools for anti-competitive behavior that undermines the very growth and dynamism that competition policy seeks to achieve. Canadian competition authorities, like the Competition Bureau, have specific guidelines for how they approach the interface between competition policy and IP rights, seeking to strike this balance. Paragraph 30 of the Guidelines summarizes it well:

“IP and competition laws are both necessary for the efficient operation of the marketplace. IP laws provide property rights comparable to those for other kinds of private property, thereby providing incentives for owners to invest in creating and developing IP and encouraging the efficient use and dissemination of the property within the marketplace. Applying the Act to conduct associated with IP may prevent anti-competitive conduct that impedes the efficient production and diffusion of goods and technologies and the creation of new products. The promotion of a competitive marketplace through the application of competition laws is consistent with the objectives underlying IP laws.”

Learn more about the role of IP and how it can Strengthen our competitive advantage in a global economy at: www.forpiq.com. Join the wait list.