By Vikrant Rana, Apalka Bareja and Shantam Sharma
Introduction
The tussle between the Competition Act, 2002 and the Patent Act, 1970 is a constant source of legal discussion. These laws, although designed for different purposes, frequently clash over the balance between fostering innovation and ensuring fair competition. As companies seek to safeguard their patented inventions while competing in the market, the interplay between these acts is crucial in shaping regulatory dynamics.
Case of Ericsson vs Competition Commission of India
In 2023, the Hon’ble Delhi High Court in Telefonaktiebolaget LM Ericsson (PUBL) vs Competition Commission of India[1], settled the longstanding jurisdictional debate between the Patent Act, 1970[2] and Competition Act, 2002[3].
Brief Facts of the Case
Case stems from a Civil Writ Petition (Telefonaktiebolaget LM Ericsson (PUBL) vs Competition Commission of India)[4]filed by the Ericsson against Competition Commission of India (hereinafter referred to as “CCI”), challenging notices issued by the CCI on 16/07/2015 and 14/08/2015 to Ericsson for allegedly breaching fair, reasonable and non-discriminatory (FRAND) practices in dealing with the Standard Essential Patents (SEPs) and violating Section 3[5] and Section 4[6] of the Competition Act, 2002.
Ericsson Contentions:
To substantiate its position, Ericsson argued that:
- The CCI lacks jurisdiction to investigate the patent licensing activities since they do not involve the sale or purchase of goods/services.
- The authority to investigate patent licensing, including potential anti-competitive practices, falls under the jurisdiction of the Patents Act, 1970.
- Additionally, Ericsson contended that the CCI lacks the required machinery and expertise to decide fair rates for patented products. Chapter XVI (Working of Patents, Compulsory Licenses and Revocation) of the Patent Act, 1970[7] specifically addresses multiple aspects of patents, with the authority to conduct inquiries vested in the Controller of Patent according to Section 84(4) of the Patent Act, 1970[8].
- The legislative aim of the Patent Act, 1970 is to also regulate the anti-competitive practices and the prevention of patent rights abuse. Ericsson cited the CCI vs Bharti Airtel Case[9], which established that the primary authority responsible for jurisdiction in telecommunications matter is Telecom Regulatory Authority of India (TRAI), until then the CCI cannot exercise the jurisdiction.
Competition Commission of India Contentions:
To substantiate its position, CCI argued that:
- The CCI contended that the mechanism provided in the Patents Act, 1970 is inadequate, and the CCI should be allowed to investigate this matter. They relied on the “Aspect Doctrine” to assert that the coexistence of the Patents Act, 1970 and the Competition Act, 2002 does not deny the CCI’s authority under the Competition Act.
- Moreover, they highlighted that Section 60 of the Competition Act, 2002[10] confers special power exclusively to the CCI to address cases involving anti-competitive behavior. Regarding the Airtel decision, they argued that even considering this precedent, the CCI remains the sole authority empowered to investigate anti-competitive agreements and instances of abuse of dominance.
- Additionally, the CCI relied on the ruling in Letter Patent Appeal (Telefonaktiebolaget LM Ericsson vs Competition Commission of India & Anr.)[11], in which it was held that CCI can take action against Ericsson under the Competition Act, 2002. The respondents further argued that the Section 3(5)(i)(b)[12] and Section 4 of the Competition Act, 2002 explicitly grant the CCI the authority to assess whether a condition provided in the patent licensing agreement is unreasonable or not.
Issues considered by the Hon’ble Court and its subsequent findings
- Which statute, the Competition Act or the Patent Act, is considered to be a specialized legislation and which is viewed as a general statute?
- Did the Competition Commission of India possess the authority to investigate a patentee’s exercise of right under the Patents act?
Drawing from the precedents set by the Hon’ble Supreme Court in three landmark cases viz Ashoka Marketing Ltd. & Anr vs PNB & Ors[13], Gobind Ugar Mills Ltd. vs State of Bihar[14], and Rajasthan vs Binani Cements Ltd & Anr[15], the Hon’ble Delhi High Court noted that when determining the priority of two specialized laws, certain factors must be taken into consideration, which are:
(i) The subject matter in question
(ii) The intention of the statutes in respect thereof
(iii) Whether the scheme and pertinent provisions of the two statutes suggest any indication apropos which, the legislature felt must override the other, especially, when both the statutes contain a non-obstante clause.
The Hon’ble Delhi High Court also held that that Chapter XVI of the Patents Act, 1970[16] was introduced after the enactment of the Competition Act, 2002 and it addresses all matters related to unreasonable conditions in licensing agreements, abuse of patentee status, inquiries into such matter and the relief to be granted. Therefore, the court considered that Patents Act, 1970 to be comprehensive legislation specifically addressing these issues, rather than the Competition Act, 2002. Additionally, the court applied the legal maxims Generalia Specialibus Non Derogant (general laws will not prevail over the special laws) and Lex Posterior Derogate Priori (a later law repeals an earlier law), concluding that the provisions of the Patent Act, 1970 prevail over those of the Competition Act, 2002.
The court disagreed with the CCI’s argument that only it has the authority to assess whether a condition imposed in a patent licensing agreement is unreasonable, whether it has significant effects on competition within India or whether it amounts to abuse of dominant position. The court highlighted that the inquiry proposed by the CCI regarding assertion of patent rights is similar to the examination conducted by the Controller of Patent under Chapter XVI of the Patents Act, 1970.
The court further held that the Competition Act, 2002 allows for imposing reasonable conditions in agreements concerning the exercise of rights under the Patents Act. However, such reasonable conditions are exempted from examination under Section 3(5)(i)(b) of the Competition Act, 2002[17], which showcases the intent of the legislature to designate Patent Act, 1970 as the special legislation for dealing with the matters relating to patent agreement.
Judgement
The Court ruled that the CCI did not have jurisdiction over the actions of a patent holder exercising their rights under the Patents Act. It stressed that Chapter XVI of the Patents Act, 1970[18], offered a thorough structure to tackle unfair licensing conditions and anticompetitive behaviors by patent holders. Consequently, the court dismissed the CCI’s proceedings against Ericsson and Monsanto by the CCI.
Analysis
The case addressed the jurisdictional debate between the Competition Act, 2002 and the Patents Act, 1970 concerning actions taken by patent holders. It shows that the Patent Act, 1970 particularly Chapter XVI, offered a comprehensive framework to regulate patent-related matters. This showcased the intent of the legislature to designate Patent Act, 1970 as the special legislation for dealing with the matters relating to patent agreement.
As adjudged by the Hon’ble Delhi High Court, the patent Act, 1970 is a special law for dealing with all the patent related matters and thereby limiting the jurisdiction of CCI in investigating patent related matters. This judgement thereby reaffirm that Patent Act, 1970 being a special law, shall prevail over the Competition Act, 2002.
Ritvik Kashyap, Intern at S.S. Rana & Co. has assisted in the research of this Article.
[1] 2023 SCC Online Del 4078
[2] Available at: https://www.indiacode.nic.in/handle/123456789/1392?sam_handle=123456789/1362
[3] Available at: https://www.indiacode.nic.in/handle/123456789/2010?sam_handle=123456789/1362#:~:text=An%20Act%20to%20provide%2C%20keeping,trade%20carried%20on%20by%20other
[4]Telefonaktiebolaget LM Ericsson (PUBL) vs Competition Commission of India, 8370/2015
[5]Anti-Competitive Agreements: https://www.indiacode.nic.in/show-data?abv=null&statehandle=null&actid=AC_CEN_22_29_00005_200312_1517807324781&orderno=3&orgactid=AC_CEN_22_29_00005_200312_1517807324781
[6] Abuse of Dominant Position: https://www.indiacode.nic.in/show-data?abv=null&statehandle=null&actid=AC_CEN_22_29_00005_200312_1517807324781&orderno=4&orgactid=AC_CEN_22_29_00005_200312_1517807324781
[7]Chapter XVI (Working of Patents, Compulsory Licenses and Revocation) – https://www.indiacode.nic.in/handle/123456789/1392?sam_handle=123456789/1362
[9](2019) 2 SCC 521
[10]Available at: https://www.indiacode.nic.in/show-data?actid=AC_CEN_19_22_00001_200336_1517807317930§ionId=11212§ionno=60&orderno=60
[11]LPA/247/2016
[12] Available at: https://www.indiacode.nic.in/show-data?actid=AC_CEN_22_29_00005_200312_1517807324781&orderno=3
[13](1990) 4 SCC 406
[14](1999) 7 SCC 76
[15](2014) 8 SCC 319
[16]Chapter XVI (Working of Patents, Compulsory Licenses and Revocation) – https://www.indiacode.nic.in/handle/123456789/1392?sam_handle=123456789/1362
[17]Available at: https://www.indiacode.nic.in/show-data?actid=AC_CEN_22_29_00005_200312_1517807324781&orderno=3
[18]Chapter XVI (Working of Patents, Compulsory Licenses and Revocation) – https://www.indiacode.nic.in/handle/123456789/1392?sam_handle=123456789/1362