The Division Bench of the Delhi High Court (“Division Bench”) has held that the Patents Act, 1970 (“Patents Act”) will prevail over the Competition Act, 2002, as amended (“Act”) on matters relating to exercise of rights relating to patents by a patentee. The judgment was passed by the Division Bench in a batch matter involving separate Letter Patents Appeals (“LPA”) filed by Telefonaktiebolaget LM Ericsson (“Ericsson”) and Monsanto Holdings Private Limited (“Monsanto”). Ericsson and Monsanto (“Patentees”) had contended in their respective LPAs that CCI cannot exercise jurisdiction over matters pertaining to exercise of rights by patentees.
The matter related to inquiries initiated by the CCI against Ericsson and Monsanto for violation of sections 3 (anti-competitive agreements) and 4 (abuse of dominant position) of the Act. CCI had initiated an inquiry against Ericsson based on the information that Ericsson was imposing unfair and unreasonable conditions for licensing certain standard essential patents granted to it in the field of telecommunications. Similarly, CCI had initiated an inquiry against Monsanto to inquire the allegations of excessive royalties and patents not being made available reasonably by Monsanto, which were in violation of provisions of the Act. Ericsson and Monsanto had challenged the move by the CCI in separate writ petitions before the Delhi High Court wherein the Delhi High court upheld the inquiries on the ground that there is no bar in law for the CCI proceedings. Against the orders of the Delhi High Court, Ericsson and Monsanto appealed in separate LPAs before the Division Bench. As a common question of law was involved in these LPAs, they were clubbed together as batch matters.
Ericsson and Monsanto contended before the Division Bench that CCI cannot exercise jurisdiction and inquire into the matters and actions of a patentee in asserting its rights granted under a patent issued in India. The CCI, on the other hand, contended that only the CCI can consider whether a condition imposed in an agreement licensing a patent is unreasonable, i.e., such a condition would cause an appreciable adverse effect on competition within India or is an abuse of dominant position.
Disagreeing with CCI’s contention, the Division Bench observed that the factors required to be considered by the CCI under Sections 19(3) and 19(4) of the Act in assessing a potential contravention are very similar to those that the Controller General of Patents (“Controller”) is required to consider under Chapter XVI of the Patents Act in matters relating to grant of a compulsory license. The subject matter that is in focus in the matter is not merely anti-competitive agreements and abuse of dominant position, which both the Patents Act (in Chapter XVI) and the Act (in Sections 3 and 4) deal with. The subject matter that is relevant for the assessment is anti-competitive agreements and abuse of dominant position by a patentee in exercise of their rights under the Patents Act.
The Division Bench held that the provision under section 3(5)(i)(b) of the Act exempts imposition of reasonable conditions in an agreement concerning exercise of patent rights from the purview of section 3 is indicative of the legislature’s intent to the exclusive domain of the Patents Act regarding reasonable conditions. Similarly, the language of Section 83(f) of the Patents Act which, inter-alia, provides that the patent right should not be abused by the patentee and that the patentee does not resort to practices that unreasonably restrain trade or adversely affect the international transfer of technology, is compared with the provisions contained in section 4 of the Act.
Further, considering that Chapter XVI of the Patents Act was introduced by an amendment in the year 2003 after the Act was enacted, the Division Bench held that the Chapter XVI is a complete code in itself on all issues pertaining to unreasonable conditions in agreements of licensing of patents, abuse of status as a patentee, inquiry in respect thereof and relief that is to be granted. Based on the above and applying the principle of ‘general law will not override special law’, the Division Bench held that Patents Act will prevail over the Act on the issue of exercise of rights by a patentee under the Patents Act. The Division Bench thus held that Patents Act is a special legislation, whereas the Act is a general legislation pertaining to anti-competitive agreements and abuse of dominant position generally.
The Division Bench therefore quashed the proceedings by the CCI against Ericsson and Monsanto with the reservation that the judgment does not express any opinion on the merits of the claims as to whether Ericsson or Monsanto have, in fact, imposed anti-competitive conditions, or abused their dominant position.
By: Competition Team at Chitale & Chitale Partners
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