HARMONIZING THE JURISDICTION OF THE COMPETITION COMMISSION OF INDIA FOR PATENT REGULATION BY - PRAKRUTH P HONAGANAHALLI
AUTHORED BY - PRAKRUTH P HONAGANAHALLI
In 2023, the Delhi High Court, in the case
of Telefonaktiebolaget
LM Ericsson (PUBL) v. Competition
Commission of India, held that when a patentee exercises
rights granted under the Patents Act, the Competition Commission of India (CCI)
is barred from scrutinizing the nature and manner of such exercise, under the powers granted
by the Competition Act, 2002. The
two-judge bench of the High Court found that Chapter XVI
of the Patents Act constituted a self-contained code, thus taking precedence
over any proceedings initiated under
the Competition Act.
Recently, in March 2024, the Supreme Court
of India admitted a Special Leave Petition filed by the CCI and issued notices
against the decision of the Delhi High Court, signifying a crucial juncture,
warranting a revisiting of the case's intricacies and implications. The Patent
holders argue that remedies within the Patents Act suffice for addressing
licensing matters, including restrictive conditions and pricing concerns.
Conversely, the Competition Commission of India asserts its authority in cases
of anti-competitive behavior by patentees,
emphasizing its role in safeguarding public and national interests, despite any
overlap with the Patents Act. The
Supreme Court is required to answer if and whether the CCI’s jurisdiction can
be entirely ousted from matters concerning anti-competitive agreements and
abuse of dominant status among patent holders and whether Chapter XVI of the
Patent Act was intended to create an exclusive domain for the Patents Act.
Judgement
The division bench of The Delhi High Court extensively compared
relevant provisions in the
Competition Act and the Patents Act. It reasoned that the investigative powers granted to the
CCI under the Competition Act, concerning anti-competitive agreements, closely
align with those of the Controller of Patents (Controller) under Sections 84(6)
and 84(7) of the Patents Act. Section 84 of the Patents Act outlines conditions
for applying for a compulsory license on a patent. Section 84(6)(iv) requires
the applicant to try to secure the license on reasonable
terms. In this context, the Court applied the principles of generalia specialibus non derogant and lex posterior derogat priori to rule
that the Patents Act should take precedence over the Competition Act, when it concerns the exercise of rights by a patent holder under the Patents Act. Furthermore, the Delhi High
Court recognized that restrictions under Section 83(f) serves a similar purpose
to that of Section 4 of the Competition Act.
Scheme of the Legislations
The compulsory licensing provision is specific to Patent law and aims to balance
the rights of patentees with public interest by
allowing third parties to obtain compulsory licenses in certain circumstances,
under Section 84 of the Patents Act. It is a mechanism to ensure that patented
inventions are adequately commercialized and accessible to the public.
The grant of compulsory licenses under the Patents
Act is subject to various limitations. For instance, the Controller is required to weigh the "reasonable
requirements of the public" against
the rights of the patentee; it
can only grant a compulsory license
after a three-year period. Furthermore, the Controller must also
consider the ability of the applicant to exercise and develop the patent for
the purposes of public advantage. There is also ambiguity about whether the
Controller plays the role of an implementer or regulator, under the Patents Act
scheme.
Whereas Sections 3 and 4 of the Competition
Act have a broader scope and apply to all enterprises and industries. Section 3 prohibits
anti-competitive agreements, such as those that
determine prices, limit production or supply, share
markets or sources,
or result in bid-rigging
or collusive bidding. Section 4 prohibits the abuse of dominant market position
through practices such as imposing unfair conditions or prices, limiting
production or technical development, denying market access, or leveraging
dominance across markets.
Remedies under the Competition Act vary
significantly from those of the Patent Act. Although the CCI does not have the
power to grant compulsory licenses, it is empowered to grant compensation and impose monetary
penalties. Unlike the Controller, it is not subject to any threshold to engage
anti-competitive allegations and has the option to be more purposive
when considering locus standi, as
anyone alleging a violation of Section 3 and Section 4 of the Competition Act may approach
the CCI. Further to enhance its bite, the CCI is
granted the power of investigation under Section 26 and Section 29 with respect
to anti-competitive agreements and combinations, which the Controller does not
have under the Patents Act, despite what is provided for under Section 84 of
the Patents Act. Additionally, Neither Section 77 nor Section 88 enable the
Controller to investigate if patentees have engaged in anticompetitive
practices through the exercise of rights granted by patents. The CCI has also
been granted certain discretionary powers.
For instance, if a patentee is
found to have abused its dominant
position through practices outlined in Section 4(2), the CCI may pass an order
under Section 27(g), directing the informants to apply for a compulsory
license. In cases of suo moto action
by the CCI, it may even apply for a compulsory license itself.
Construction of Statutes
In CCI v. Bharti Airtel, the Supreme Court grappled with a similar
jurisdictional dilemma between the Telecom Regulatory Authority of India (TRAI)
and the CCI. The Court recognized CCI's competence in assessing the potential
impact of agreements between telecom operators
on competition. The Supreme Court
affirmed CCI's jurisdiction, stipulating that it should be subsequent to TRAI's
investigative process. However, the Delhi
High Court did not offer
reasons to deviate from the Supreme Court's ruling in CCI v. Bharati Airtel. Consequently, the judgment of the Delhi High
Court creates a void by hindering the application of competition law remedies
in instances of market abuse through patents.
By enabling the applicability of the
Competition Act, practices outlined as constituting an abuse of dominant
position under Section 4(2) could be aligned with Patent law while considering
the grant of compulsory licenses by the Controller. For example, imposition of
unfair or discriminatory conditions or prices [Section
4(2)(a)], limited production or technical
development [Section 4(2)(b)], denial of market access [Section 4(2)(c)], or
leveraged dominant position across markets [Section 4(2)(e)] by the patentee
may be grounds for considering the grant of a compulsory license under the
patent law if read with Section 84 (1)(a) or Section 84(1)(b) of the Patents
Act.
Additionally, when there exists the avenue
of public law recourse to fulfil the objectives of promoting competitive market
practices through the authority of the Competition Commission of India, that offers distinct remedies from that of
the Patents Act, it would be prudent to grant it jurisdiction. Accordingly, it
is important to consider the perspective of the
CCI, that its jurisdiction serves
the broader public
interest. Notwithstanding the above, one of
the key advantages in allowing the jurisdiction of the CCI is that CCI can
regulate without being restricted to issue a compulsory license, provided for
under Section 27 and Section 28 of the Competition Act.
The primary remedies under patent law would
be the issue of a compulsory license or repudiation of the patent, which tends
to be rather disadvantageous. If compulsory licenses are granted for every alleged anti-competitive practice engaged, it would disincentivize
invention, as inventors would have no proper protection under the law. When it
comes to suits for repudiation of
patents, it is difficult to address instances of reverse payment patent
settlements, the legality of which is highly contested. Enabling the CCI to
apply its enforcement mechanisms alongside the Patents Act in addressing
anti-competitive conduct complements the objectives of safety to the interests
of the patentees while also promoting fair competition and ensuring market
efficiency. Furthermore, the role of the Controller
is largely limited and unrequited
when it comes to addressing antitrust and competition issues. It is argued that the functions of the
Controller remain largely administrative in terms of ensuring fulfillment of
compliances for patent grants.
Granting the CCI authority over
patent-related matters comes with its fair criticism. Regulatory overreach, positing that the CCI might interfere with legitimate business
decisions of patent holders, is a major disadvantage. Doubts regarding
the CCI's proficiency in assessing the intricate technical and economic facets
of patent licensing may raise questions about its expertise in this domain.
However, considering that Section 3(5) imposes significant restrictions on the authority
of the CCI, thus acting as a deterrent to any
abuse of process
on the part of informants or the CCI. Several jurisdictions have already
recognized the need to address abuse
by patent holders,
especially when it comes to the issue
of licensing of standard
essential patents, by empowering their competition regulators - the FTC in the United States
and European Commission in the European Union.
For instance, in the case of Federal
Trade Commission v. Qualcomm Incorporated, the Federal Trade
Commission was able to institute antitrust charges against
Qualcomm, for alleged anti competitive practices engaged by Qualcomm with
respect to the issue of licensing of Qualcomm's standard essential patents.
Although the U.S. Court of Appeals for the Ninth Circuit reversed the decision
by the U.S. District Court for the Northern District of California, it still
exemplifies an instance where competition regulators exercise authority over
patent holders. However,
given the framework of the Competition Act, the CCI would be limited to exercising its jurisdiction with respect to Section 4 concerns only.
Conclusion
The case of Telefonaktiebolaget LM Ericsson
(PUBL) v. Competition Commission of India sheds light on the complex
interplay between the Competition Act, 2002, and the Patents
Act, 1970. The Delhi High Court's ruling, emphasizing the primacy of the
Patents Act in matters concerning the exercise
of patent rights,
seems to be misconceived. The comparison between the two legislative frameworks highlights the distinct objectives
and mechanisms inherent in each.
Accordingly, the Supreme Court must seek to
harmonize an interpretation that grants jurisdiction to the Competition
Commission of India, as it offers a pragmatic approach to address instances of
anti-competitive behavior. By leveraging its enforcement mechanisms, the CCI
can ensure fair competition and market efficiency without necessarily resorting
to compulsory licensing. An approach that acknowledges the complementary roles of both laws
is essential to uphold the principles of fair competition and consumer welfare
in the dynamic marketplace.