Delhi High Court: Patents Act prevails over Competition Act

Delhi High Court: Patents Act prevails over Competition Act

The Competition Commission of India cannot investigate if a company abused its dominant position while exercising patent rights

The Delhi High Court has held that the Patents Act, 1970 prevails over the Competition Act, 2002 on the issue of exercise of rights by a patentee.

A Division Bench of Justice Najmi Waziri and Justice Vikas Mahajan said that the Competition Commission of India (CCI), established under the Competition Act does not have the jurisdiction to inquire into the business of licensing by a patent holder or a company, in the exercise of its patent rights.

The Court maintained, “In reconciling the two statutes [Patents Act and Competition Act], the matter in focus is not merely anti-competitive agreements and abuse of dominant position, which both the Patents Act (Chapter XVI) and the Competition Act (Sections 3 and 4) deal with. It is relevant for the assessment of anti-competitive agreements and abuse of dominant position by a patentee in the exercise of their rights under the Patents Act. On this issue, there is no doubt that the Patents Act is a special statute and not the Competition Act. It is also a fact that Chapter XVI of the Patents Act is a subsequent legislation as compared to the Competition Act.”

The Court laid down the law while dealing with a set of appeals and a writ petition filed by agrochemical giant Monsanto, telecom company Ericsson, and CCI.

In 2016 and 2020, Ericsson and Monsanto, respectively, challenged the CCI’s anti-trust investigations into the allegations that they were indulging in anti-competitive practices and not making their patents available. They questioned CCI's powers to conduct such an inquiry.

The single Judge had decided the case against Ericsson holding that there was no legal bar on CCI proceeding under the Competition Act for violation of Sections 3 and 4. The 2020 judgment against Monsanto relied on Ericsson’s judgment.

In its plea, the CCI challenged a 2015 judgment in a writ petition by Ericsson, wherein the single Judge quashed the CCI proceedings based on the settlement between the two parties.

Monsanto and Ericsson argued that the Patents Act was a special law dealing with patents. The issues of imposition of conditions for licensing patents were provided for under Chapter XVI, which included anti-competitive agreements and abuse of dominant position. The companies contended there was no reason for the Competition Act to override the special law.

On the other hand, CCI said that some stray provisions in the Patents Act could not be understood as overriding the Competition Act.

It cited that the provisions of Sections 3 and 4 of the Competition Act made it abundantly clear that only the CCI could consider whether a condition imposed in an agreement licensing a patent was unreasonable. That is if it had an adverse effect on competition within India or abuse of dominant position.

However, Justice Waziri and Justice Mahajan disagreed with CCI’s arguments. They reiterated that Chapter XVI of the Patents Act was a complete code on all issues pertaining to unreasonable conditions in agreements of licensing of patents, abuse of status as a patentee, inquiry in respect of the same and relief to be granted.

The Judges stressed that the Competition Act was a general legislation pertaining to anti-competitive agreements and abuse of a dominant position. The inclusion of Section 84(6)(iv) in the Patents Act by way of an amendment (after the Competition Act was passed with Section 3(5)(i)(b)) was particularly instructive of the legislative intent.

The Bench explained, “For deciding an application for compulsory licensing, the Controller of Patents is empowered by the Patents Act to consider the reasonability of conditions imposed in a license agreement. The CCI is empowered under the Competition Act to examine anti-competitive agreements and abuse of dominant position. However, the Competition Act makes provision for reasonable conditions being imposed in an agreement concerning the exercise of rights under the Patents Act. Since such reasonable conditions are exempted from examination under Section 3(5)(i)(b) of the Competition Act, it is indicative of the legislatures’ intendment as to the exclusive domain of the Patents Act regarding reasonable conditions.”

Thus, the Court set aside the judgments passed against Ericsson and Monsanto and quashed the CCI proceedings against them.

Senior Advocates CS Vaidyanathan, Neeraj Kishan Kaul and Sajan Poovayya along with advocates Saya Choudhary Kapur, Ashutosh Kumar, Vivek Ranjan Tiwary, Vinod Chauhan, Vrinda Bagaria, Palash Maheshwari, Radhika Pareva, Munesh Sharma, Anand S Pathak, Shashank Gautam, Sreemoyee Deb, Rajat Moudgil, Ravishekhar Nair, Sahil Khanna, Vinayak Goel, Sajan Shankar Prasad, Swarnil Dey, Shaurya Pandey, Raksh Agarwal and Abhishek Kakker appeared for Ericsson.

Monsanto was represented by Senior Advocates Dr Abhishek Manu Singhvi, CM Lall and Raj Shekhar Rao along with Advocates Adarsh Ramanujan, Bitika Sharma, Aman Sethi, Lakshay Kaushik, Luv Virmani, HS Sandhu, Mansi Sood, Skanda Shekhar and Areeb Amanullah.

Additional Solicitors General N Venkatraman and Balbir Singh with advocates Samar Bansal, Madhav Gupta, Vedant Kapur, Avinash Sharma, Monica Benjamin, Anu Sura, Akanksha Kapoor and Siddhant Choudhary appeared for CCI.

Advocates J Sai Deepak and Avinash K Sharma appeared for Intex.

Advocates Ruchir Mishra and Mukesh Kumar Tiwari represented the Government of India.