Navigating Patent Rights and Competition Law: Delhi High Court's Landmark Judgment
The Indian Patents Act, of 1970 is a holistic code dealing with applications for patents, the grant of patents and rights of a patentee as well as the resolution of disputes arising from patent infringement. It further contains provisions concerning the grant of compulsory licensing. While the former provisions foster innovation and research, the latter provisions ensurethese innovations serve the public interest. Only novel inventions can be patented and not discoveries or obvious inventions are patentable under Section 3 of the Patents Act, 1971.
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The competition law on the other hand aims to check misuse of dominant market position and anti-competitive practices to ensure free and fair market practices. Competition rules may at times interfere with patentee's rights and bar them from exploiting their privileges. Certain activities of the patent holder, such as denying licensee to other competitors the effect that they are excluded from the market. It was in light of such situations that question whether the assertion of rights by the patentee results in whether the Competition Commission of India (“CCI”) can examine such rights.
A few companies including Intex, Micromax and iBall contended that Erricson is charging excessive royalties and not making its standard essential patents (“SEP”) available reasonably, which is a violation of Section 3 and Section 4 of the Competition Act, 2002. Similar charges were levelled against Monsanto however, the latter was not dealing with SEP.
The patent holders primarily argued that their patent rights should not be superseded by the Competition Commission of India (“CCI”) under the Competition Act,2002. They emphasised that patent holders have an exclusive right to prevent third parties from using their patented processes or products. Additionally, they pointed out that concerns related to anti-competitive practices and the abuse of a dominant market position have already been addressed within Chapter XVI of the Patents Act. Further, they asserted that the Scheme of Competition Act and Section 3(5)(i)(b) proscribe such exercise of power and the same interferes with the power of controller under the Patents Act.
On the other CCI, argued that even though they do not have exclusive jurisdiction, they are vested with a concurrent jurisdiction under Section 62 of the Competition Act.
The Honourable Court to resolve the perceived repugnancy between two special laws, laid down the following principles after referring to a catena of judgements
What must be considered is (i) the subject matter in question, (ii) the intendment of the statutes in respect thereof, as well as (iii) whether the scheme and relevant provisions of the two statutes have any indication apropos which, the legislature felt must override the other, especially when both statutes have a nonobstante clause. We will attempt this exercise below in a three-step process
The court assessed the following things based on the principles reproduced above
(a) CCI and its Power – It has the power to prohibit anti-competitive agreements and abuse of dominant position. The enquiry can be launched either suo-moto or based on a complaint. The act also prescribes the orders CCI is empowered to pass after launching the enquiry.
(b) Controller and his/her Power – The controller can exercise their powers if the reasonable needs of the public are not met, the patented invention isn't available at a fair price, or if the patented invention isn't being utilized in India.It can grant a compulsory licence if the applicant has made efforts to obtain a licence from the patentee on reasonable terms along with giving due consideration to some other factors.
(c) Nature of Inquiry being conducted by CCI impugned in these proceedings – The court referred to Section 3(5)(i)(b) which reads
5) Nothing contained in this section shall restrict--
(i) 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--
(b) the Patents Act, 1970 (39 of 1970);
While disagreeing with the submissions made by CCI in this regard the court observed that the factors considered for the grant of compulsory license are very similar to factors considered to determine abuse of market position and anti-competitive agreement. The inquiry that CCI proposed to conduct is very similar to one launched by the controller under the Patents Act. Further, the legislative intendment is apparent from the clear language of Section 3(5)(i)(b) and the fact that the 2003 amendment in the patent act introduced Chapter XVI especially Section 84(6)(iv) after the Competition Act act was introduced.
The court further observed
“52. In our opinion, Chapter XVI of the Patents Act 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 therefor.
53. In reconciling the two statutes, 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
55. Therefore, when asessed, by the maxim generalia specialibus non derogant13 or by the maxim lex posterior derogat priori, the Patents Act must prevail over the Competition Act on the issue of exercise of rights by a patentee under the Patents Act. Even assessed by the rigours of Ashoka Marketing (supra), which require the conflict to be resolved by reference to the purpose and policy underlying the two enactments and the clear intendment conveyed by the language of the relevant provisions therein, the Patents Act must necessarily prevail over that of the Competition Act”
Thus the Patents Act is a special statute. The court therefore sustained the 2015 judgement
(d) Finding in this impugned judgements in comprising these statutes Conclusions in paragraphs 172 and 173 of the 2016 Judgment, which claim that there is no overlap between the Patents Act and the Competition Act and that the CCI has independent authority from the Controller, are deemed unsupportable by the honourable high court. This claim is supported by several elements, including Chapter XVI and Section 48 of the Patents Act, which subject a patentee's rights to other provisions of the Act. The 2016 Judgment's assessment of Sections 21 and 21A of the Competition Act is further disputed since, according to this argument, they cannot grant the CCI the authority to exercise functions that are reserved for the Controller under the Patents Act. The Patents Act is believed to have precedence over the Competition Act, which renders Section 21A restrictions irrelevant in this situation. The Competition Act's Sections 21 and 21A are intended to address circumstances in which other laws do not restrict the CCI authority. The 2016 Judgment further erroneously supported its conclusions in paragraph 169 by emphasizing the distinction between the Controller's decisions (in personam) and the CCI's decisions (in rem).
The Honourable High Court has observed that the Patents Act prevails over the Competition Law. It excludes the jurisdiction of the CCCI over disputes arising out of the misuse of patents resulting in unfair market conditions. The CCI does not have the authority to decide the price for licensing or to grant the compulsory. The power to grant a remedy in such cases is vested with the Controller as provided under the Patents Act, 1970. The court has provided a detailed analysis of the issue by using rules of interpretation of statutes. Further, the court pointed out the lacunae in the 2016 and 2020 judgments. However, this decision is directly in conflict with Aamir Khan Production Pvt Ltd vs Union Of India , wherein the Bombay High Court upheld that the CCI has the jurisdiction to hear the matters concerning both Competition Law and Intellectual Property Law provided the latter has a detrimental effect on the competition. A balance must be maintained between the rights flowing from a patent and the Competition Act. The spirit has been encapsulated under Article 5(A)(2) of the Paris Convention and Articles 8.2, 40 and 40.2 of the TRIPS Convention. The apparent contradictions between the two acts must be conclusively resolved by referring the question to the Honourable Supreme Court of India.
Author : Vidushi Soin, in case of any query, contact us at Global Patent Filing or write back us via email at firstname.lastname@example.org.