On 13 July 2023, a Division Bench of the Delhi High Court by way of a common judgment reversed orders passed by its single judge benches which had upheld the jurisdiction of the Competition Commission of India (CCI) in matters relating to patents.
The CCI had ordered separate investigations against Ericsson (in 2014) and Monsanto (in 2016). The orders emanated from allegations of unfair terms and conditions imposed by Ericsson and Monsanto in licensing their patents amounting to contravention of the abuse of dominance provisions of the Competition Act, 2002 (Competition Act).
By way of separate writs, both Ericsson and Monsanto had challenged the investigation orders. The parties argued CCI's lack of jurisdiction since the matter related to patent rights which happens to be the exclusive domain of the Controller of Patents under the Patents Act, 1970 (Patents Act).
By separate orders again, Single Judge benches upheld the CCI's jurisdiction by placing reliance on Section 60 which confers exclusive jurisdiction to the CCI on matters relating to anti-competitive conduct and Section 62 which states that the Competition Act is in addition to and not in derogation of any other law.
Division Bench's judgment:
The orders were challenged by Ericsson and Monsanto in separate letters patent appeals clubbed before a Division Bench of the Delhi High Court. The Division Bench compared the provisions, purpose and remedies available under the Patents Act and the Competition Act along with the power and duties of the Controller of Patents and the CCI. The Court reached the conclusion that the matters in relation to licensing of patents are within the exclusive jurisdiction of the Controller of Patent which ousts the jurisdiction of the CCI.
The Division Bench categorically relied upon Chapter XVI of the Patents Act which was introduced in 2003 by way of amendment to the Patents Act after the Competition Act was enacted (in 2002). Section 84 of the Patents Act grants power to the Controller of Patents to grant compulsory licence of a patent if (i) the reasonable requirements of the public are not satisfied, or (ii) the patented invention is not available to the public at a reasonable price, or (iii) that the patented invention has not worked in India.
The Division Bench observed that the nature of enquiry to be conducted by the Controller for grant of compulsory licence is similar to that of the CCI under the Competition Act. The Division Bench held that Chapter XVI of the Patents Act is a special provision which overrides the Competition Act since:
- Chapter XVI of the Patents Act was enacted after the
Competition Act, and
- the Patents Act is a special statute dealing exclusively with patents. The Competition Act, on the other hand, is a general statute.
The Division Bench also relied on Section 3(5)(i)(b) of the Competition Act which exempts 'reasonable conditions' in the licensing of a patent to be exempt from scrutiny under Section 3 of the Competition Act, to be indicative of the legislative intention as to the exclusive domain of the Patents Act regarding reasonableness of conditions.
Similarly, the court found Section 83(f) of the Patents Act (which provides for patent rights to not be abused by the patentee and the patentee not to indulge in practices leading to unreasonable restrictions as general conditions for the working of patents) to be similar to Section 4 of the Competition Act (which prohibits abuse of dominant position).
Accordingly, the court was of the view that Chapter XVI of the Patents Act was a complete code equipped to tackle anti-competitive conduct stemming from a patent issue thus ousting the applicability of the Competition Act.
The Division Bench's judgment is in sharp contrast from the practices in mature jurisdictions where the competition authorities routinely investigate competition issues relating to patents such as patent bundling, pay for delay, and non-adherence to commitments to fair, reasonable and non-discriminatory rates. On the other hand, compulsory licensing of patents to meet public good requirements is a unique feature of patent laws in India and certain other developing countries.
Be that as it may, when compared to the remedy of compulsory licensing, the remedies provided under the Competition Act are far and wide. The Competition Act provides power to the CCI to impose monetary penalties, in addition to enforcing behavioral measures. Further, an aggrieved party can also file compensation claims to recover damages.
It is also noteworthy that the Patents Act does not empower the Controller to grant compulsory licence for patents which do not meet the 'reasonable requirements of the public' standard under the Patents Act and yet may constitute an abuse of dominant position under the Competition Act. Accordingly, the judgment seems to have created a vacuum as various competition law remedies for anticompetitive conducts relatable to patents may not be available going forward.
Separately, in the case of CCI vs Bharti Airtel,(2019) 2 SCC 521, (Bharti Airtel), the Supreme Court was faced with a similar issue while adjudicating on the jurisdictional conflict between the Telecom Regulatory Authority of India (TRAI) and the CCI. The Supreme Court held that while TRAI is a specialized body for fact-finding in matters pertaining to telecom, the jurisdiction of the CCI is not ousted, and will begin immediately after the completion of TRAI's fact-finding exercise. Curiously, the Delhi High Court did not provide any reasons to distinguish its conclusions from Bharti Airtel.
In light of the tectonic shift in the position and the ripple effects the judgement can have on other anti-competitive issues that stem from patent and other intellectual property law, it is likely that the CCI will appeal this decision before the Supreme Court of India to harmonise the applicability of various laws, absent which a few provisions of the Competition Act risk being rendered a dead letter.
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