April 04, 2016     

 Telefonaktiebolaget LM Ericsson v. Competition Commission of India

 

Delhi High Court: CCI has Jurisdiction to hear Complaint against Ericsson for Patent Rights Abuse

 

In a recent judgment delivered by the Delhi High Court on March 30, 2016 in the case of Telefonaktiebolaget LM Ericsson v. Competition Commission of India (W.P.(C) 464/2014 & CM Nos.911/2014 & 915/2014), it was held that although while passing an order, the Competition Commission of India (hereinafter referred to as the ‘CCI') did not form a prima facie view including one with respect to its jurisdiction to entertain the information/complaint, the Delhi High Court in the present proceedings was not in a position to supplant its views over that of the concerned authority.

 

Brief Facts of the Case

 

The present judgment arose out of petitions filed by Telefonaktiebolaget LM Ericsson (hereinafter referred to as ‘Ericsson’), a company incorporated under the laws of Sweden, against the orders dated November 12, 2013, and January 16, 2014, passed by the CCI under Section 26 (1) of the Competition Act, 2002. The said orders were passed pursuant to information filed by Micromax Informatics Ltd. and Intex Technologies (India) Ltd alleging abuse of dominance by Ericsson with its large portfolio of Standard Essential Patents (hereinafter referred to as ‘SEPs’) and demanding heavy royalties. Ericsson has on the other hand claimed that its patents have been infringed by Micromax and Intex. The information filed by Micromax and Intex led the CCI to pass the aforesaid impugned orders directing the Director General, CCI, to investigate the matter regarding the violation of the provisions of the Competition Act. Thus, aggrieved and holding that the impugned orders passed by CCI are without jurisdiction as the commencement of any proceedings in relation to a claim of royalty by a proprietor of a patent would fall within the scope of Patents Act, 1970, Ericsson filed a petition before the Delhi High Court.

 

Submissions on Behalf of Ericsson  

  • The Patents Act is a special act and contains comprehensive provisions for addressing all the matters including protecting the interests of consumers and general public whereas Competition Act has been enacted as a general law to promote and sustain competition in the market and to prevent practices having an adverse effect on competition

  • Patents Act, specifically Sections 83-90, 92 and 92 A, contains provisions to adequately redress the grievances of any person in respect of non-availability of rights to use a patent on reasonable terms and the Controller General of Patents, Designs and Trade Marks and/or a Civil Court were vested with the function and the power to remedy any grievance relating to a patentee’s demand for excessive or unreasonable royalty by grant of compulsory license and the CCI on the other hand had no jurisdiction to grant such relief.

Decision of the Delhi High Court

 

The central challenge in these petitions is with respect to the jurisdiction of CCI to entertain complaints of Micromax and Intex under the Competition Act. The Delhi High Court, while deciding that the CCI possesses jurisdiction, held the following: 

  1. Ericsson is an enterprise within the meaning of Section 2(h) of the Competition Act as it possesses a large portfolio of patents and engaged in developing technologies and acquiring patents which fall under the wide definition of goods under the Sale of Goods Act, 1930, and movable property under General Clauses Act, 1897. The proceedings initiate by the CCI for violation of Section 4(1) of the Competition Act could not, at the threshold, be held to be without jurisdiction on account of Ericsson not being an enterprise within the meaning of Section 2(h) of the Competition Act.

  2. The remedies provided under Section 27 of the Competition Act for abuse of dominant position are materially different from the remedies as available under Section 84 of the Patents Act. The remedies under the two enactments are not mutually exclusive and grant of one is not destructive of the other.

  3. In the absence of any irreconcilable conflict between the two legislations, the jurisdiction of CCI to entertain complaints for abuse of dominance in respect of patent rights could not be ousted.

  4. The contention that disputes between the parties being the subject matter of pending suits could not be entertained by CCI, is rejected. The proceedings under the Competition Act before the CCI are not in the nature of a private lis and that the proceedings in the suits filed by Ericsson and the proceedings before CCI are not mutually exclusive. It is not necessary that an adverse finding against Ericsson by CCI would necessarily result in the grant of relief as prayed for by Intex or Micromax.

  5. The scope of enquiry before CCI would obviously be limited to whether Ericsson has abused its dominant position and, if so found, CCI may issue orders as contemplated under Section 27 of the Competition Act.

  6. The question whether there is any abuse of dominance is solely within the scope of the Competition Act and a civil court cannot decide whether an enterprise has abused its dominant position and pass orders as are contemplated under Section 27 of the Competition Act.

  7. Merely because certain reliefs sought by Micromax and Intex before CCI are also available in proceedings under the Patents Act also does not exclude the subject matter of the complaints from the scope of the Competition Act. An abuse of dominant position under Section 4 of the Competition Act is not a cause that can be made a subject matter of a suit or proceedings before a civil court.

  8. The CCI cannot be faulted for proceeding on the basis that Ericsson holds the SEP’s that it asserts it holds. At any rate, Ericsson cannot be heard to complain against CCI proceeding on such basis.

In our earlier newsletters titled ‘Patent Infringement War Between Ericsson and Micromax’ in Issue 14 Volume V and available here, ‘iBall - Ericsson Not FRANDS’ in Issue 36 Volume VII and available here, and ‘Jurisdiction of Competition Commission of India to Decide Royalty Rates in Patent Licensing Agreements’ in Issue 08 Volume VI and available here, we had covered how Ericsson has been initiating multiple litigation against several telecommunication companies in India such as Micromax, iBall, Intex, Xiaomi etc. for recovery of royalty in respect of SEPs.

 

In the present case, it was concluded by the Delhi High Court that while it accepts that at the stage of passing an order, the CCI “has to form a prima facie view and this would include a view as to its jurisdiction to entertain the information/complaint, which it has not done’, the Delhi High Court in the present proceedings under Article 226 of the Constitution of India was not in a position to supplant its views over that of the concerned authority. The Delhi High Court, while holding that CCI has clear jurisdiction, also clarified that “nothing stated herein should be construed as an expression of opinion-prima facie-or otherwise on the merits of the allegations and all observations and that all observations are in context of jurisdiction of CCI to pass the impugned orders”.

 

The abovementioned judgment of the Delhi High Court can be accessed here.

      

 

 

 

 

 

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