[Exercise of patent rights] Patents Act prevails over Competition Act; CCI cannot probe: Delhi High Court

The Delhi High Court has held that the Patents Act of 1970 prevails over the Competition Act on Competition Act of 2002 when it comes to the issue of exercise of rights by a patentee under the Patents Act. .A Division Bench of Justices Najmi Waziri and 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 of a patent by a patent holder or whether a company, in the exercise of its patent rights, has abused its dominant position.“In reconciling the two statutes [Patents Act and Competition Act], the subject matter that is in focus is not merely anti-competitive agreements and abuse of dominant position, which both the Patents Act (in Chapter XVI) and the Competition Act (in Sections 3 and 4) deal with. The subject matter that is relevant for this assessment is anti-competitive agreements and abuse of dominant position by a patentee in exercise of their rights under the Patents Act. On this issue, there is no scope of doubt beyond the pale of doubt that the Patents Act is the 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 said..Background .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 as well as CCI.Ericsson and Monsanto had preferred appeals in 2016 and 2020 respectively challenging the CCI’s antitrust investigations into the allegations that the two companies were indulging in anti-competitive practices and not making their patents available reasonably. They questioned CCI's powers to conduct such an inquiry at all.The single-judge had decided the case against Ericsson in 2016 holding that there is no legal bar in law to the CCI proceeding under the Competition Act for violation of Sections 3 or 4. The 2020 judgement of the single-judge against Monsanto relied on the 2016 judgement and came to the similar conclusion.In its plea, the CCI challenged a 2015 judgment in writ petition by Ericsson where the single-judge quashed the CCI proceedings based on the settlement between the two parties..Arguments.Monsanto and Ericsson argued that the Patents Act is a special law dealing specifically with patents, and issues of imposition of conditions for licensing patents are provided for under Chapter XVI of the Patents Act, which includes anti-competitive agreements and abuse of dominant position explicitly.They contended that in view of Chapter XVI of the patents Act, there is no reason for the Competition Act, which deals with anti-competitive agreements and abuse of dominant position generally, to override the special law.However, CCI said that the Competition Act is a special law dealing with anticompetitive agreements and abuse of dominant position, and thus some stray provisions in the Patents Act, which deals with patents generally, cannot be understood as overriding the Competition Act, which is, in any event, a subsequent statute.Its counsel cited the provisions of Section 3(5)(i)(b) and Section 4 of the Competition Act and said that these Sections make it abundantly clear that only the CCI can consider whether a condition imposed in an agreement licensing a patent is unreasonable, i.e., such as would cause an appreciable adverse effect on competition within India or an abuse of dominant position..Court’s findings .The Court disagreed with the arguments of CCI and said that Chapter XVI of the Patents Act is 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 that is to be granted.It underlined that the Competition Act is a general legislation pertaining to anti-competitive agreements and abuse of dominant position generally and 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) is particularly instructive of the legislative intent.“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 anticompetitive agreements and abuse of dominant position. However, the Competition Act makes provision for reasonable conditions being imposed in an agreement concerning 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 legislature‘s intendment as to the exclusive domain of the Patents Act regarding reasonable conditions.”.The Court, therefore, 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 through 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 Union of India..[Read Judgment]