In today's dynamic and innovation-driven economy, intellectual property rights (“IPRs”) like patents play a pivotal role in fostering innovation and protecting investments. However, the interplay between patents and competition law often raises complex questions about market fairness and monopolistic practices. The Competition Commission of India (“CCI”), established under the Competition Act, 2002, has emerged as a critical arbiter in cases where market dominance and anti-competitive practices overlap with intellectual property disputes governed by the Patent Act, 1970. This blog delves into the nuanced jurisdiction of the CCI in matters where the mandates of the Competition Act and the Patent Act converge and advocates for the CCI's jurisdiction in matters with overlapping subject matter between the two legislations.
It is well established, not just within India but across the globe with respect to interpretation of statutes, that the doctrine of harmonious construction is to be applied upon consideration of any two distinct laws or statutes.1 The courts in their interpretation are to avoid a clash of even seemingly contradictory provisions and construe them in a way so as to harmonise them.2 It has been noted in Sultana Begum v. Premchand Jain that even in instances wherein it is not viable to reconcile any contradictions, the courts are to engage in interpretation that gives effect to both provisions as much as possible.3 The Competition Act under S. 62 highlights the application of the doctrine and states that the provisions of the act are not in derogation of but rather, in addition to the provisions of any other law in force.4 The statutes under consideration share a common concern of maximising innovation and promoting technical progress for the ultimate benefit of the consumers and are not imbibed with any irreconcilable inconsistency so as to warrant abrogation of one over the other.5
Such harmonious construction will also allow for coexistence of separate legislations and efficient allocation of institutional responsibilities apart from ensuring that the bias of sectoral authorities governing specific subject matters does not result in imposition of obligations that may result in disruption of organic competitive trends in the market and result in economic inefficiencies. The same has also been observed in international jurisprudence in cases like the Government National Mortgage Assn. Case6 and the Shad Johnson Accord wherein disputes were settled upon the utilisation of specialised knowledge of authorities through cooperation. The Apex Court of the USA in F.T.C. v. Actavis Inc. also pointed out that we should not only look at whether an agreement follows patent law but also consider whether it goes against competition rules and fair competition practices.7
The jurisdiction of CCI to entertain and decide cases involving issues related to IPRs is already well recognised.8 The Apex Court in Coal India Ltd v. Competition Commission of India has also recognised that while the actions in consideration could have been challenged in forums other than the CCI such as the Controller General of Patents, the same cannot be the sole ground for denial of access to a party claiming the infringement of the applicable law.9 The court also emphasised on the grand ambit of the CCI's authority and iterated that the CCI could also take suo motu cognisance of such matters. It is well within the CCI's ambit to assert jurisdiction over subjects under the Patent Act given that it does not concern itself with any aspect of the dispute other than for the purposes of ensuring compliance withSection 3 and 4 of the Competition Act which are the specific contraventions that the CCI is empowered to address.10 Even though S. 3(5) explicitly provides for an exemption to IPR from the operation of said section, it is not a blanket exemption and is subject to principles of reasonability11 and that said reasonableness and unreasonableness is to be determined by CCI on the basis of the facts of the case.12 Further, the aforementioned exemption is limited to anti-competitive agreements and does not explicitly extend to instances of abuse of dominant position under S. 4.
Even if any inconsistencies between the laws are found, the provisions of the Competition Act shall prevail given that (a) the non obstante clause i.e. S. 60of the act explicitly states that the act is to have an overriding effect in instances of inconsistent provisions in other laws13 and that Union of India v. G.M. Kokil recognised by the courts to confer such overriding effect,14 (b) that there are no provisions, explicit or implicit, in the Patents Act that exclude the jurisdiction of CCI, and (c) that the Competition Act would prevail also by virtue of it being a later enactment.15
Moreover, in case of an overlap of the provisions of the Competition Act and Patent Act, the Patent authorities can not exclude CCI in the matter. Complete eradication of competition regulation in the market will lead to a havoc and collapse given that various industries requiring intervention basis both laws, for example, telecom industries which tend to be natural monopolies due to the heavy entry barriers. Despite the need for patent regulation in such industries, the CCI should neither be excluded nor be rendered residual. Patent authorities should rely on the CCI on competition-related matters and deal with them only in conformity with the Competition Act. In CCI v M/s Fast Way Transmission Private Limited & Ors.,16 the Supreme Court implicitly accepted the co-existence of CCI's jurisdiction with that of other authorities for the purpose of protecting competition.
The argument that the Patents Act confers powers on the Controller to decide whether the nature of a practice adapted by the patentee would be anti-competitive or not is baseless. S. 84(6) and S. 90(1)(ix) of the Patents Act indicate that the CCI would have a more competent jurisdiction in respect of determination of anti-competitiveness as while the Patent Act mentions the word “anti-competitive”, it fails to define what constitutes to be such a practice. Another issue is that it is silent regarding the forum which would have the appropriate jurisdiction to decide which activity of the patentee would constitute anti-competitive. S. 3 of the Competition Act which prohibits entering into certain agreements that are likely to be deemed anti-competitive by virtue of the possibility of them causing appreciable adverse effect on competition within India. However, there exists no provision of such a wide import in the Patents Act. This section provides a safe harbour to reasonable agreements to protect patent rights. The reasonability of a term or condition enshrined under an agreement and its adherence to the principles under S. 3 of the Competition Act can solely be decided by the CCI in accordance with the stipulations under the Competition Act and not by a Civil Court. Such a power may also not be exercised by the Controller of Patents discharging hid duties in accordance with the Patents Act for he cannot exercise any powers which have not been explicitly conferred on him by virtue of the legislation.
Similarly, S. 83(f)17 asks to look into abuse of patent rights by patentees and prevent unreasonably restraint of trade by their practices. However, even this section fails to define what would constitute as unreasonable restraint or what forum would be appropriate and have the necessary jurisdiction to decide whether there has been an unreasonable restraint of trade. S. 4 of the Competition Act however, holistically deals with the same.
The remedies outlined under Section 27 of the Competition Act for addressing abuse of dominance and anti-competitive practices differ significantly from those provided under Section 84 of the Patents Act. These remedies are not mutually exclusive; rather, they complement each other, with the grant of one not negating the other. While Section 84 of the Patents Act offers specific remedies tailored to individuals seeking relief, the Competition Commission of India (CCI) under Section 27 issues orders that are broader in scope, applying in rem. Accordingly, it has been noted that “the operative width of the two enactments is different.”[18] Due to the limited nature of the Patent Act's power underS. 84, it will not be enough to correct faulting market forces, which is possible underS. 27 of the Competition Act.
There also exist several foreign cases where the Competition courts have determined matters whose subject matter overlaps between the Competition and Patent Acts. InToronto Real Estate Board (TREB) v. Commissioner of Competition19, the court of appeal in Canada held that anti-competitive conditions imposed to the use of intellectual property will not be immunised from scrutiny under Competition and Patent act. In Parke Davis & Co. v. Probel and Contrafarm,20 the court held that the existence of IPRs does not infringe the competition law but its exercise may. If the agreement solely confers rights to exploit patented inventions in exchange for royalty payments, but when these payments are coupled with terms transcend the purpose of ensuring the existence of the IPRs, it is prohibited under antitrust laws. In United States v. Microsoft Corp21 the court said that IPRs do not confer a privilege to violate the antitrust laws.
Basis Indian jurisprudence and the patterns identified in foreign jurisdictions, it is evident that the CCI must work alongside Patent Authorities to maintain market equilibrium. The CCI's ability to interpret and act on overlaps between competition law and IPRs reinforces its importance as a custodian of fair markets, further cementing its role as a regulatory body in promoting consumer welfare and fostering a competitive economy with the evolution of industry and the growing sophistication of monopolistic tendencies.
Footnotes
1. Shankari Prasad v. Union of India, AIR (1951) SC 455.
2. Commissioner of Income Tax v. Hindustan Bulk Carriers, (2003) 3 SCC 57.
3. Sultana Begum v. Premchand Jain, AIR 1997 SC 1006.
4. The Competition Act, 2002, § 62, No. 12, Acts of Parliament, 2003 (India).
5. Basti Sugar Mills Co. Ltd. v. State of Uttar Pradesh, 2008 SCC OnLine All 367.
6. Board of Trade of City of Chicago v. S.E.C, 677 F.2d 1137 (7th Cir. 1982).
7. FTC v. Actavis, Inc., 570 U.S. 136 (2013).
8. Licensing of IP rights and competition law – Note by India, Directorate for Financial and Enterprise Affairs Competition Committee, Organisation for Economic Cooperation and Development, DAF/COMP/WD(2019)4.
9. Coal India Ltd. v. Competition Commission of India, 2023 SCC OnLine SC 740.
10. Union of India v. Competition Commission of India & Anr.: AIR 2012 (Del.) 66.
11. FICCI Multiplex Association of India Federation House v. United Producers/Distributors Forum [2012. 28 taxmann.com 356 (SC).
12. ABIR ROY, COMPETITION LAW IN INDIA186 (2d ed. Eastern Law House 2014).
13. The Competition Act, 2002, § 60, No. 12, Acts of Parliament, 2003(India).
14. Union of India v. G.M. Kokil: AIR 1984 SC 1022.
15. In Kunter v. Phillips: (1891) 2 Q.B. 267; R.S. Raghunath v. State of Karnataka and Anr.: (1992) 1 SCC 335.
16. CCI v. M/S. Fast Way Transmission Pvt. Ltd. and Others, (2018) 4 SCC 316 (India).
17. The Patents Act, 1970, § 83(f), No. 39, Acts of Parliament, 1960 (India).
18. Telefonaktiebolaget LM Ericsson (PUBL) vs. Competition Commission of India and Ors. 2016 (66) PTC 58 (Del).
19. Toronto Real Estate Board (TREB) v. Commissioner of Competition, CT-2011-003.
20. Parke Davis & Co. v. Probel and Contrafarm, (1968) ECR 55.
21. United States v. Microsoft Corporation, 253 F.3d 34.
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