The Delhi High Court, through its decision dated 13th July 2023 has shed light on a fundamental question regarding the overlapping portions of patent and competition law in the Indian legal landscape. The key question addressed here was whether or not the Competition Commission of India has the authority to conduct inquiries on the actions of patentees within the scope of the Competition Act of 2002. This crucial question was posed to the Delhi High Court in the form of four appeals as well as a writ petition and has extracted a landmark judgement which deviates from previously adopted views of the courts and has far-reaching ramifications.

This blog seeks to delve into the circumstances under which the CCI was involved and further investigate the role of the authority in the present matter, emphasising the misplaced basis of the reversal of the prior judgment. As we step into the analysis, we make a crucial observation that the powers of the CCI often collide and overlap with the provisions of the Patents Act. Our understanding of the Delhi High Court decision unfolds against this very backdrop of conflicting legal perspectives and the court's attempt to reconcile two separate statutes that deal with completely different facets of the law.

In the sections that follow, we attempt to dissect the decision of the court and scrutinise its reasoning which is based considerably on legislative intent. Moreover, we also assess the potential implications that this decision will have on patent holders and competition practice as a whole.

LEGAL LANDSCAPE

Telefonaktiebolaget LM Ericsson is a global telecommunications firm headquartered in Sweden that possesses numerous patents in telecom infrastructure equipment, some of which are Standard Essential Patents or SEPs. SEPs are essentially patents that protect technology that are required to achieve a 'technical standard' that must be approved and implemented uniformly across multiple countries to enable seamless integration and seamless transmission of voice and data around the world. Several standard-setting groups, such as the European Telecommunication Standard Institute (ETSI), have been established to establish relevant standards. The institute has a Policy that specifies that if an essential IPR relating to a certain technical standard is brought to ETSI's notice, the IPR will be protected.

In the current case, Ericsson attempted but failed to sign a Patent Licencing Agreement (PLA) on FRAND i.e. fair, reasonable and non-discriminatory terms with Intex and Micromax. Ericsson then filed an infringement suit, stating that the products commercialised by Micromax and Intex infringed its patents and that Ericsson was entitled to royalties based on the SEPs it owned.

During the course of the infringement proceedings, the single judge issued an interim order requiring Micromax to pay an interim royalty until the case was resolved. Similarly, an action was launched against Inntex, and the court awarded the same interim order at a

comparable royalty rate. In reaction to the infringement lawsuits, Micromax and Intex lodged grievances with the CCI, contending that Ericsson, through demanding an unjust royalty, abused its dominant

position as per Section 4 of the Competition Act. The CCI, discerning discriminatory practices and a deviation from FRAND terms by Ericsson, issued directives for the Director General (DG) to probe potential breaches of the Competition Act. Discontent with this directive, Ericsson sought recourse by filing a writ petition.

One of Ericsson's primary arguments in the writ petition was that a patentee's royalty claim involving patents falls beyond the scope of the Competition Act. According to Ericsson, situations involving abuse of dominance or dominating position, particularly in the context of patent licencing, should be dealt with under the Patents Act as opposed to the Competition Act. Furthermore, Ericsson contended that the CCI lacked the authority to decide on the reasonableness of royalties related to patented technologies or to hear complaints on the subject, especially since a parallel lawsuit on the same subject was already pending before the court.

Meanwhile, the Commission emphasized Ericsson's dominant position in the GSM market, holding approximately 33,000 patents in GSM and CDMA, making it the largest SEP holder in 2G, 3G, and Edge technology. With no viable alternatives, Ericsson enjoys market dominance. The Commission found Ericsson's charging of royalties based on smartphone cost for the universally used GSM technology prima facie discriminatory and a violation of FRAND terms. Ericsson was accused of abusing its dominance by imposing excessive and unreasonable royalties for its GSM technology.

Ericsson contested the jurisdiction of the Commission in the Delhi High Court, but the Commission defended its authority. Referring to sections 3(5), 4(1), and 4(2) of the Competition Act, the Commission asserted that protection of IPR rights, abuse of dominance by an enterprise, and imposition of unfair conditions on goods' sale and purchase fall within its jurisdiction, validating its involvement in the case.

In response to the writ case, the Delhi High Court ruled that Ericsson is a 'business' and patents are deemed products. The court emphasised that the Patents Act is unique, yet it does not contradict with the Competition Act in any way. It noted that a SEP holder seeking injunctive relief in certain circumstances may be an abuse of dominance. The court argued that the issue of abuse of dominance is under the purview of the Competition Act, and that a civil court cannot rule on it. Furthermore, the court upheld a new licensee's authority to dispute patent validity.

REVERSAL OF JURISDICTION BY THE DELHI HIGH COURT

On July 13, 2023, a Division Bench of the Delhi High Court, through a common judgment, overturned the previous ruling that affirmed the jurisdiction of the Competition Commission of India (CCI) in the dispute. Ericsson and Monsanto jointly challenged the orders through separate letters patent appeals, leading to the reconsideration. 

The Division Bench conducted an in-depth investigation, evaluating the provisions, objectives, and potential remedies under the Patents Act and the Competition Act. It investigated the authority and responsibilities of the Controller of Patents and the CCI. The court's deciding reason was the Controller of Patents' exclusive authority in matters relating to patent licencing, which excluded the CCI's jurisdiction. 

The Division Bench clearly referred to Chapter XVI of the Patents Act, which was enacted in 2003 following the passage of the Competition Act in 2002. Section 84 of the Patents Act grants the Controller of Patents the authority to award compulsory licences under certain situations. The court highlighted the resemblance between the nature of the Controller's investigation and that of the CCI under the Competition Act. It emphasised that, as a specific provision, Chapter XVI takes precedent over the general provisions of the Competition Act. 

In its decision, the court emphasised the legislative intent as well as the time frame of enactment. Chapter XVI of the Patents Act, enacted after the Competition Act, was viewed as a distinct and complete framework addressing just patent-related issues. This, combined with the general nature of the Competition Act, led the court to infer that the Patents Act is unique, notably in its treatment of patents.

Section 3(5)(i)(b) of the Competition Act, which exempts'reasonable conditions' in patent licencing from scrutiny, was cited by the Division Bench as evidence of legislative purpose in favour of the Patents Act. Furthermore, similarities between Section 83(f) of the Patents Act, which addresses patent abuse, and Section 4 of the Competition Act, which prohibits the abuse of dominant position, reinforced the case for the Patents Act' exclusive domain.

Finally, the court determined that Chapter XVI of the Patents Act provided a comprehensive legal framework capable of addressing anti-competitive behaviour originating from patent-related problems. As a result, it determined that the Competition Act does not apply in such cases.

The Delhi High Court's decision has far-reaching repercussions, affirming the precedence of the Patents Act in patent licencing proceedings and setting the legal framework between the Competition Commission and the Controller of Patents.

COMMENT:

The Delhi High Court decision depicts a stark departure from previous stances taken by the courts. The departure from the norm is evident as it abstains from routine investigations conducted by the competition authorities into potentially anti competitive practices and abuse of dominant position specifically about patent-related issues and adherence to the FRAND regulations. While compulsory licensing is provided for

explicitly within the patent laws of India, the remedies under the Competition Act and the overall role of the competition authority i.e. the CCI are much wider and extensive. The powers of the CCI not only allow for the imposition of monetary penalties but also allow aggrieved parties to file claims for compensation as well as damages.

One of the biggest concerns that arise due to the judgement is that the Patents Act's limited provisions for compulsory licensing could potentially render the various provisions provided under competition law for anti-competitive practices unavailable moving forward. Further, there is an absence of certain provisions from the Patents Act,

such as provisions which empower the controller to grant compulsory licences for patents that do not meet the reasonable requirements of the public standard. The non-fulfilment  of such requirements would essentially constitute an abuse of dominant position and remedies for the same are available only under the competition law. Thus, the departure could potentially limit the applicability of such provisions, inadvertently overlooking remedies for anticompetitive practices under the competition law which relate specifically to patents.

The reason the departure is all the more concerning is that the Delhi High Court has not distinguished its conclusions from the ruling of the Supreme Court in the case of CCI vs Bharti Airtel. Thus, this analysis suggests that there is a need to harmonise the laws which at first glance might seem conflicting and contrary to one another, without rendering certain provisions obsolete.

FLAWED INTERPRETATION OF LEGISLATIVE INTENT:

One major issue lies in the misconception that the Controller of Patents has exclusive powers. While the judgement asserts that Chapter XVI of the Patents Act, which was introduced after the Competition Act, is a special provision which overrides the latter, it fails to appreciate the nuanced interplay which exists between the statutes. The misguided contention that the Patents related matters are exclusively governed by the Patents Act is a significant oversimplification of a very complex legal system.

This oversimplification also ignores that the primary objective of introducing Section 84 in Chapter XVI of the Patents Act, was not to establish comprehensive legislation to ensure fair competition but to ensure that the patents could be made more conducive and affordable, especially when it came to the health sector. The section falls short when it comes to addressing matters related to fair and healthy competition and is thus comparatively limited in scope in addressing anti-competitive concerns. The misinterpretation becomes even more blatant when we take a look at international interpretations and practices. Competition authorities, in various other jurisdictions, routinely investigate patent-related competition issues. This misalignment with global practices is a noticeable oversight.

The court has also failed to acknowledge the historical context, specifically of section 90(1)(ix) of the Patents Act, which states: “that in case the licence is granted to remedy a practice determined after judicial or administrative process to be anti-competitive, the licensee shall be permitted to export the patented product, if need be.” This section contradicts the presumption of exclusivity granted to the Patents Act and further indicates that anti-competitive practices can be determined through a broader process which is governed not only by the Patents Act, thus reinforcing the argument that the Competition Act does play a major role in addressing such concerns and the role of CCI thus cannot be ousted claiming that solely the Patents Act governs such matters.

CONCLUSION:

The Ericsson case urges for a more nuanced understanding of the intersection between patent law and competition law. It unravels critical misinterpretations which could potentially disrupt the delicate balance between patent rights and fair competition. The Delhi High Courts decision, in presuming exclusivity in favour of the controller of patents, has oversimplified the intricate legal system, ignoring the historical context as well as contradicting international practice. Further, the misinterpretation of the legislative intent compromises the ability of the CCI to interject in scenarios where the anti-competitive practices need to be addressed at a more comprehensive level. There is a need to navigate these legal intricacies with nuanced understanding and thus a corrective intervention of the Supreme Court is crucial in order to harmonise the laws through careful interpretation and finally put the matter to rest without rendering certain provisions obsolete.

Author : Arushi Tripathi, in case of any query, contact us at Global Patent Filing or write back us via email at support@globalpatentfiling.com.

REFERENCES

1. The Patents Act,1970

2. The Competition Act, 2002

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