Abstract
A division bench of the Delhi High Court vide its judgment dated 13th July 2023 overruled the judgment pronounced by its single-judge bench in 2016, thus declaring matters on the exercise of patent rights by a patentee outside the jurisdiction of the Competition Commission of India (CCI) and upholding the competence of the Controller of Patents under the Patents Act to investigate such matters. Relying on the principle of lex posterior derogate priori i.e., a later legislation takes precedence over an earlier legislation, the judgment has stated that The Patents Act would prevail over The Competition Act. This has reignited the debate on IPR v. Competition and has also raised questions on the jurisdictional issues of the CCI. This case commentary aims to bring forth the conflicting view taken by the court concerning the two legislations, which goes against the regular practice of adopting a harmonious construction of the same.
INTRODUCTION
In July 2023, the Delhi High Court in the case Telefonaktiebolaget LM Ericson v. Competition Commission of India upheld the competence of the Controller of Patents to investigate matters regarding the exercise of patent rights by a patentee under The Patents Act of 1970, declaring such matters to be outside the purview of the Competition Act and thus, of the Competition Commission of India. The judgment was pronounced due to an appeal filed by Ericsson impugning a judgment of a single-judge bench of the Delhi High Court in 2016. The court in its 2016 judgment held that there was no legal bar to CCI proceedings against Ericsson initiated on a complaint of violation of Section 3 and/or 4 of the Competition Act. Ericsson appealed this stance in the present case. While Section 3 prevents enterprises or persons from entering into anti-competitive agreements, Section 4 prohibits abuse of dominant position. Thus, the present appeal raised a question of far-reaching implications – “when a patent is issued in India, and the patentee asserts such rights, can the Competition Commission of India inquire into the actions of such patentee in exercise of its powers under the Competition Act, 2002.”
CONTENTIONS OF THE PARTIES
Both parties made extensive submissions to support their stance. The patentees contended that the complaints regarding the licensing of patents are to be inquired by the Controller of Patents or the Civil Court as per Section 84(7)(c) read with Section(1)(iii)(c) of the Patents Act. These sections empower the Controller/Civil Court to provide remedies in case of abuse of dominance by patent holders by asking for unfair rates. This is done by first determining the Fair, Reasonable and Non-Discriminatory (‘FRAND’) rates. CCI not having the power or machinery to decide such rates has no role to play in this regard. It was contended that if the CCI had any jurisdiction, it could commence only after the proceedings for infringement under the Patents Act were decided. Contending that the legislative intent was that the Patents Act should govern anti-competitive practices and abuse of patents rights, the patentees relied on the judgment in CCI vs Bharti Airtel where it was held that the first authority that ought to exercise jurisdiction in matters related to telecommunication is TRAI, the regulating body of the telecommunication industry, and then the CCI.
On the contrary, the CCI contented that the mere overlap between the Patents Act and the Competition Act does not take away the power vested in the CCI and that the CCI can look into any sort of anti-competitive and abusive behaviour of any market player, including a patentee. It was further contended that the Controller does not have the sufficient mechanism to effectively inquire into the allegations of anti-competitive behaviour of patentees. Moreover, it was argued that the judgment in CCI vs Bharti Airtel would not be applicable in the present case because, unlike TRAI, the Controller of Patents is not a regulator of an industry. Lastly, it was put forward that Section 60 of the Competition Act prohibits raising contentions of anti-competitive agreements and abuse of dominant position before any other statutory authority or Court.
COURT’S INTERPRETATION OF THE RELEVANT PROVISIONS OF THE PATENTS ACT AND THE COMPETITION ACT
Upon examination of the submissions made by the parties, the court upheld the jurisdiction of the Controller of Patents to inquire into the present matter, holding that the CCI’s assessment of a potential violation of Sections 3 and 4 of the Competition Act is not very different from the Controller’s consideration under Section 84(6) and 84(7) of the Patents Act in the exercise of his power to grant a compulsory license.
To arrive at such a conclusion, the Court examined the relevant provisions of both legislations to resolve the “repugnancy” thereof. Reflecting on the powers conferred on the Controller of Patents under Section 84 of the Patents Act, the Court acknowledged that the Controller can grant a ‘compulsory license’ of the patent to an applicant if reasonable requirements of the public are not satisfied with respect to the patented article or if the patented invention is not available to the public at a reasonable price or if the patented invention is not worked in India. Simultaneously reading the relevant provisions of the Competition Act, to draw a comparison later, the Court noted that Section 3 and Section 4 of the Act prohibit anti-competitive agreements and abuse of dominant position. The Court also considered Section 3(5)(i)(b) of the Competition Act, cited by both parties, which states that nothing contained in Section 3 shall “restrict the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under the Patents Act, 1970.” While the patentee (Ericsson) cited this provision to support its claim that a patentee’s rights are protected from the provisions of anti-competitive agreements, the CCI cited it to highlight that only the imposition of “reasonable conditions” required to protect a patentee’s rights are allowed as per the provision. Additionally, the CCI also contended that a logical deduction from this provision would be that only the CCI is authorised to consider if a condition imposed in licensing of a patent is unreasonable, i.e. is likely to cause an appreciable adverse effect on competition within India or an abuse of dominant position. Not concurring with the claims of the CCI, the Court held that the exclusion of reasonable conditions in agreements concerning patents from the purview of the anti-competitive agreements, and, the specific enactment of Chapter XVI in the Patents Act, which talks about the working of patents, compulsory licenses and revocation, through an amendment in 2003 (after the Competition Act was enacted) is an indication of the legislature’s intention that the “field pertaining to patents, unreasonable conditions in agreements of licensing, abuse of status as a patentee, inquiry in respect thereof and relief that is to be granted therefore are all to be governed by the Patents Act.”
ANALYSIS
This judgment drastically steps away from earlier decisions involving similar matters where the jurisdiction of the Competition Commission of India was questioned. Experts in the field believe that this judgment will render some provisions of the Competition Act “a dead letter” and thus, is going to have far-reaching implications. A few aspects of the judgment have been analysed below.
PRESUPPOSING CONFLICT
While the parties were at conflict concerning the application of the two laws, the Court, instead of first attempting to draw a harmonious conclusion from the coinciding provisions contained in the laws, went forward with reading those provisions to resolve the repugnancy between the two statutes, both of which are special laws made by the same legislature. When examined from the perspective of conflict, there are chances of overlooking the idea of a harmonious construction of the provisions. As for the “principle of statutory interpretation”, the fact that the legislature passed the Competition Act in 2002 and inserted the amendments in the Patents Act regarding the working and licensing of patents in 2003, both within the time frame of a year, indicate that the latter was not meant to reduce the former to nothingness. Though the Court at first did not hasten in applying the principle of lex posterior derogat priori, it later concluded its judgment with a reason that Chapter XVI of the Patents Act stood as a complete code in itself and that Chapter XVI of the Patents Act was subsequent legislation as compared to the Competition Act.
There is no doubt that courts are caught in a dilemma due to the enactment of different statutes containing clashing/coinciding provisions at different times, notwithstanding that, the Supreme Court has given clear guidance regarding the application lex posterior derogate priori in the case of Chandra Prakash Tiwari & Ors. v. Shakuntala Shukla & Ors. wherein it was held that repeal by implication must not be favoured and that it is only effected when the provisions of the later enactment are so inconsistent with those of the earlier that the two cannot stand together.
A mere reading of the above-mentioned portion of the judgment makes it clear that unless the enactment passed later is blatantly inconsistent with or averse to the one enacted earlier, there is no need to impose the principle of repeal due to legislative intent.
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