Background
The Supreme Court (“SC”) issued a notice[i] on a special leave petition filed by the Competition Commission of India (“CCI”) on March 1, 2024, against a Division Bench order of the Delhi High Court (“Delhi HC”) passed on July 13, 2023. The impugned order dealt with four appeals and a writ petition filed by Telefonaktiebolaget LM Ericsson (“Ericsson”), CCI, and Monsanto Holdings (P.) Ltd. (“Monsanto”) against previous Delhi HC judgements in Ericsson AB v. CCI (March 30, 2016)[ii], Ericsson AB v. CCI (December 14, 2015)[iii], Monsanto Holdings (P) Ltd. v. CCI (May 20, 2020)[iv], and letters issued by the CCI against Ericsson on July 16, 2015, and August 8, 2015.
Broadly, the judgements and letters involved allegations of charging excessive royalties, not making patents reasonably available and imposing unfair, unreasonable and discriminatory conditions for licensing patents, including standard essential patents. The understanding in these cases was that the CCI can proceed against patentees for violation of Section 3 and/ or Section 4 of the Competition Act, 2002 (“Competition Act”). The impugned order, therefore, considered whether the CCI, under the Competition Act, can inquire into the actions of a patentee, who, in turn, is asserting its rights under the Patents Act, 1970 (“Patents Act”).
Main Contentions of Patentees – Ericsson & Monsanto[v]
The primary contention of the patentees pertained to the pre-existing remedies available in the Patents Act that bestow the power to inquire into matters relating to the licensing of patents with the Controller or civil court. Accordingly, the Patents Act contemplates provisions including restrictive conditions that act as a prohibition to use processes other than those patented and ascertaining reasonably affordable prices.
Chapter XVI and, in particular, Sections 84(6)[vi], 84(7)(c)[vii], 90(1)(ix), 140(1)(iii)(c), and 140(3), provide for sufficient remedies to address any concerns arising out of anti-competitive licensing agreements or abuse of dominant position by a patentee. The conclusion on whether a patent holder has abused its dominance can be reached at by applying the provisions within this legislation. The Competition Act, on the other hand, does not contemplate such a detailed framework, dealing with abuse of patent rights.
The Patentees also argued that licensing of patents is neither a sale nor a purchase of goods/ services because by license, no property, right or title in a patent gets transferred. The Patentees also argued that if there is no sale or purchase of goods/ services, then the CCI would have no jurisdiction to inquire into the business of licensing of a patent because under Section 2(f)(ii) of the Competition Act, CCI can look only into the complaints of a consumer who hires or avails of any service or if the matter relates to the performance of any service and licensing of a patent is not a service nor a hire.
The Patentees also put forward the contention that Section 51(1) of the Patents Act contemplates three modes of dealing with a patent by the patentee. They are sale, lease and license of patents. The matters discussed pertain to licensing of patents and/or whether the same is anti-competitive. The power to inquire into it with the Controller or Civil Court under the provisions of Section 84(7)(c), read with Section 140(1)(iii)(c) of the Patents Act.
Further, the patentees inter alia argued on the application of legislative intendment doctrine, which strongly indicates the legislative intent for Patents Act to govern anti-competitive practices and abuse of patent rights. Additionally, patentees relied on the judgement in CCI v. Bharti Airtel Ltd.[viii]that conferred first authority to exercise jurisdiction on TRAI in matters relating to the telecommunication sector.
CCI[ix] Arguments
The CCI contended that the powers vested with it cannot be compromised owing to a ‘mere’ overlap between the Patents Act and the Competition Act. As long as there exists anti-competitive and abusive behaviour on the part of a patentee, which applies across the market, the Competition Act will be triggered and the CCI will act. This, the CCI claims, is in the interest of the general public and the nation.
CCI also contended that the mechanism under the Patents Act is insufficient to enable the Controller to effectively inquire into allegations of anti-competitive or abusive behavior of patentees and the same can effectively be considered only by the CCI.
Additionally, countering the reliance on CCI v. Bharti Airtel Ltd.,theCCI distinguished the case and argued that the Controller is not a regulator of an industry, but a ‘mere authority to effectively implement the Patents Act’[x] and, thus, cannot be considered relevant for such issues.
Delhi High Court’s reasoning on the conflict between two laws
The Bench, relying on Ashoka Mktg. Ltd. v. Punjab National Bank[xi], noted that for assessing perceived repugnancy between two statues, one should consider the principles of statutory interpretation, and, in this case, the maxims ‘lex posterior derogate priori’, i.e., later laws abrogate earlier laws and ‘generalia specialbus non derogant’, i.e., the general does not derogate from the specific. This is subject to the exception that general laws cannot override a special law. Further, to determine whether a law is general or specific, the principal subject-matter, particular perspective, purpose, policy and intendment[xii] should be taken into account. Therefore, basis this jurisprudence, the court considered: (i) the subject matter, (ii) intendment and (iii) scheme/ relevant provisions of the Acts.
On its assessment, it observed that the CCI, whilst examining potential violation of Section 3 or Section 4 of the Competition Act, relies on factors outlined in Sections 19(3) & 19(4), which are nearly identical to those considered by the Controller when exercising its power to grant a compulsory license, under Sections 84(6) & 84(7), read with Sections 83 & 89 of the Patents Act. Further, Chapter XVI of the Patents Act was introduced by an amendment in 2003 (“Working of Patents, Compulsory Licenses and Revocation”), which deals with unreasonable licensing agreements, patentee’s abuse of status, etc. Since the amendment was introduced after the Competition Act, it is instructive of the legislative intent relating to anti-competitive agreements.[xiii]
The court, therefore, observed that the Competition Act is a general legislation. Section 3(5)(i)(b) of the Competition Act makes provisions for reasonable conditions being imposed in an agreement concerning a patentee’s exercise of rights, thereby exempting examination of such reasonable conditions, as against Section 84(6)(iv) of the Patents Act, which requires the Controller to consider such conditions. Hence, the legislature intended for the Patents Act to have an exclusive domain on these reasonable conditions.[xiv]
It was concluded that Chapter XVI of the Patents Act, being a subsequent legislation, is a code in itself and is the special statute, relating to licensing agreements and abuse of status-based inquiries.[xv] Hence, on applying the maxims: generalia specialbus non derogant and lex posterior derogate priori, the Patents Act prevails over the Competition Act, on the patentee rights issues. Accordingly, the Delhi HC allowed the appeals and the writ petition.
Issues before the SC
The fundamental issue that will come up before the SC is whether the CCI’s jurisdiction can be ousted completely in relation to matters involving anti-competitive agreements and abuse of dominant status of patentees. It will have to reconsider whether there is a mere overlap between the legislations or whether Chapter XVI, being a subsequent legislation, was particularly intended to create an exclusive domain for the Patents Act. While assessing, the SC will have to engage with the CCI’s submissions on its exercise of jurisdiction being in the interest of the general public and the nation as a whole, insufficient mechanism within the Patents Act to inquire into anti-competitive or abusive behaviour allegations, and the Controller not being a ‘regulator’ but only an authority to implement the Patents Act.
For further information, please contact:
Swati Sharma, Partner, Cyril Amarchand Mangaldas
swati.sharma@cyrilshroff.com
[i] Petition(s) for Special Leave to Appeal (C) No.25026/2023 (Arising out of impugned final judgment and order dated 13-07-2023 in LPA No.150/2020 passed by the High Court of Delhi at New Delhi)
[ii] 2016 SCC OnLine Del 1951
[iii] 2015 SCC OnLine Del 14689
[iv] 2020 SCC OnLine Del 598
[v] Telefonaktiebolaget LM Ericsson (PUBL) v. Competition Commission of India and Anr 2023 SCC OnLine Del 4078[7] (hereinafter,“PUBL v. CCI”)
[vi] 84 (6) In considering the application field under this section, the Controller shall take into account,
(i) the nature of the invention, the time which has elapsed since the sealing of the patent and the measures already taken by the patentee or any licensee to make full use of the invention;
(ii) the ability of the applicant to work the invention to the public advantage;
(iii) the capacity of the applicant to undertake the risk in providing capital and working the invention, if the application were granted;
(iv) as to whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period as the Controller may deem fit:
Provided that this clause shall not be applicable in case of national emergency or other circumstances of extreme urgency or in case of public non-commercial use or on establishment of a ground of anticompetitive practices adopted by the patentee, but shall not be required to take into account matters subsequent to the making of the application.
Explanation.—For the purposes of clause (iv), “reasonable period” shall be construed as a period not ordinarily exceeding a period of six months.
[vii] 84 (7) For the purposes of this Chapter, the reasonable requirements of the public shall be deemed not to have been satisfied —
(c) if the patentee imposes a condition upon the grant of licences under the patent to provide exclusive grant back, prevention to challenges to the validity of patent or coercive package licensing;
[viii] (2019) 2 SCC 521
[ix] PUBL v. CCI [9]
[x] ibid [9(g)]
[xi] (1990) 4 SCC 406
[xii] LIC v. D.G. Bahadur, (1981) 1 SCC 315
[xiii] PUBL v. CCI[50]
[xiv] ibid [51]
[xv] ibid [52, 54]
