In a prolonged legal debate spanning nearly a decade, the central issue has revolved around which law takes precedence in conflicts between the Competition Act and the Patents Act. Justice Vibhu Bakhru of the Delhi High Court, in two significant disputes in 2016 (Ericsson v. CCI) and 2020 (Monsanto v. CCI), ruled in favour of the Competition Commission of India (CCI), allowing its intervention in patent licensing disputes under Sections 3 and 4 of the Competition Act. However, this stance has recently been reversed in a collective order issued by a division bench of the Delhi High Court in the case of Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India and Anr. The order asserts that, in matters concerning allegations of unreasonable conditions in license agreements, abuse of one’s status as a patentee, the requisite inquiry into these allegations, and ultimately the remedies that can be granted, the Patents Act takes precedence over the Competition Act.
Background
The Competition Commission of India (CCI) initiated distinct investigations against Ericsson in 2014 and Monsanto in 2016. These inquiries stemmed from allegations that both companies had imposed unfair terms and conditions in their patent licensing agreements, potentially violating the provisions against abuse of dominance outlined in the Competition Act, 2002. In response, Ericsson and Monsanto separately contested the investigation orders through writs, contending that the CCI lacked jurisdiction in this matter. They argued that patent rights fell exclusively within the purview of the Controller of Patents as per the Patents Act, 1970. However, Single-judge benches, through separate rulings, affirmed the CCI’s jurisdiction. They relied on Section 60, which grants the CCI exclusive authority over matters pertaining to anti-competitive conduct, and Section 62, which stipulates that the Competition Act complements rather than overrides any other existing law.
Division Bench’s Judgment
The Division Bench of the Delhi High Court, in its evaluation of the challenges brought forth by Ericsson and Monsanto, conducted a thorough comparison between the provisions, objectives, and available remedies under both the Patents Act and the Competition Act. Additionally, it scrutinized the authority and responsibilities vested in the Controller of Patents and the Competition Commission of India (CCI). Ultimately, the Court determined that matters pertaining to patent licensing fall squarely within the exclusive jurisdiction of the Controller of Patents, thereby precluding the jurisdiction of the CCI. The Division Bench drew a significant point of reference from Chapter XVI of the Patents Act, a segment introduced through an amendment in 2003, post the enactment of the Competition Act in 2002. Within this chapter, Section 84 confers authority upon the Controller of Patents to grant a compulsory license for a patent under specific circumstances, such as when public demand remains unmet, the patented invention is not reasonably accessible to the public, or the patented invention has not been put to use in India. Crucially, the Division Bench noted that the nature of the inquiry conducted by the Controller for granting a compulsory license closely mirrors that of the CCI’s under the Competition Act. It was emphasized that Chapter XVI of the Patents Act, being a specialized provision, prevails over the Competition Act for two key reasons: it was enacted subsequent to the Competition Act, and it exclusively addresses matters related to patents. In contrast, the Competition Act serves as a more general statute.
Furthermore, the Division Bench relied on Section 3(5)(i)(b) of the Competition Act, which excludes ‘reasonable conditions’ in patent licensing from scrutiny under Section 3. This exemption was considered indicative of legislative intent, reinforcing the exclusive domain of the Patents Act concerning the reasonableness of licensing terms. Similarly, the Court drew parallels between Section 83(f) of the Patents Act, which prevents patent abuse and practices leading to unreasonable restrictions, and Section 4 of the Competition Act, which prohibits the abuse of a dominant market position. In light of these comprehensive analyses, the Court concluded that Chapter XVI of the Patents Act represents a comprehensive framework capable of addressing anti-competitive behaviour arising from patent-related matters, effectively rendering the Competition Act inapplicable. This judgment is significant as it underscores the supremacy of specialized legislation, enacted subsequently, in matters pertaining to patents over more general statutes, thus providing clarity on the hierarchy of legal authority in such cases.
Analysis
The recent judgment by the Division Bench of the Delhi High Court marks a notable departure from practices observed in more established legal jurisdictions. In mature legal systems, competition authorities routinely investigate a wide range of competition-related issues concerning patents. These include scrutinizing practices such as patent bundling, paying for delay arrangements, and ensuring adherence to commitments for fair, reasonable, and non-discriminatory patent rates. However, the Indian legal landscape diverges significantly due to the unique feature of compulsory licensing of patents to serve the public interest – a distinctive aspect of patent law in India and several other developing nations. Despite this distinctiveness, when we contrast the remedies available under the Patents Act with those provided by the Competition Act, a substantial disparity becomes evident.
The Competition Act equips the Competition Commission of India (CCI) with the authority to impose monetary penalties, in addition to enforcing behavioural measures. Furthermore, parties aggrieved by anticompetitive conduct have the option to file compensation claims to recover damages. This breadth of remedies stands in stark contrast to the more limited scope of remedies available under the Patents Act. One noteworthy aspect is that the Patents Act does not grant the Controller the authority to issue compulsory licenses for patents that may not meet the ‘reasonable requirements of the public’ standard outlined in the Patents Act but could still potentially constitute an abuse of a dominant position under the Competition Act. This creates a potential regulatory gap, where various competition law remedies for anticompetitive conduct related to patents might not be accessible in the future.
Comparisons can be drawn to a previous case, CCI vs. Bharti Airtel, in which the Supreme Court addressed a similar jurisdictional conflict between the Telecom Regulatory Authority of India (TRAI) and the CCI. The Supreme Court clarified that while TRAI specializes in fact-finding within the telecom sector, the jurisdiction of the CCI is not ousted and takes effect immediately following the completion of TRAI’s fact-finding process. Interestingly, the Delhi High Court did not provide specific reasons for differentiating its conclusions from the Bharti Airtel case. Given the substantial shift in legal interpretation and the potential repercussions this judgment might have on anticompetitive issues arising from patents and other aspects of intellectual property law, it is highly likely that the CCI will pursue an appeal before the Supreme Court of India. The aim would be to harmonize the applicability of various laws, as without such harmonization, certain provisions of the Competition Act may face the risk of becoming ineffective or obsolete. This case highlights the complex interplay between specialized and general statutes and the critical need for legal coherence in resolving such jurisdictional conflicts.
Conclusion
The recent judgment by the Division Bench of the Delhi High Court, which clarifies the precedence of the Patents Act over the Competition Act in patent-related disputes, carries significant potential implications for various stakeholders and prompts considerations for the future. First and foremost, this decision has far-reaching implications for innovators, patent holders, competitors, and consumers alike. It provides a clear framework for patentees to assert their rights without infringing upon fair competition in the market. This assurance is crucial for fostering an environment that encourages investment in research and development, ultimately driving innovation. However, while the ruling offers legal clarity, it also highlights potential challenges. By affirming the exclusivity of the Patents Act in patent-related matters, certain competition law remedies for anticompetitive conduct linked to patents may no longer be available. This could potentially lead to a regulatory vacuum in addressing specific anticompetitive practices within the realm of patents. In light of these implications, it becomes imperative to consider potential legislative amendments or clarifications.
Policymakers may seek to fine-tune the legal framework to ensure that it adequately addresses anticompetitive conduct related to patents. This could involve revisiting and potentially amending provisions in both the Patents Act and the Competition Act to achieve a more harmonized and coherent legal framework. Additionally, this judgment invites a broader discussion on the interplay between specialized and general statutes. It reinforces the principle that specialized legislation enacted subsequently holds sway in its specific domain. This principle could serve as a precedent for future cases where conflicts between specialized and general statutes arise. In conclusion, the Division Bench’s judgment has implications that extend beyond the immediate dispute. It offers clarity on the boundaries of competition and patent law, impacting various aspects of innovation, competition, and market dynamics. As legal precedents tend to influence subsequent cases, this decision may shape future interpretations of patent and competition law in India. It is a pivotal moment in the legal landscape, and stakeholders, policymakers, and legal experts will likely closely monitor its ramifications and potential legislative responses in the future.
This article was written by Mr. Aayush Akar & Mr. Dhruv Kalia.
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