A recent CCI order (here) exposes the many dangers of ex parte interim injunctions in relation to IP matters. JCB was held to be abusing its dominant position as it was misusing judicial processes to curb competition.
Background
Bull Smart Machines Pvt Ltd is a small scale industry engaged in manufacturing low cost loaders, a light construction equipment. Bull Smart filed a complaint before the CCI against JCB, India’s largest manufacturer of construction equipment. It was alleged that JCB was abusing its dominance by misusing judicial processes in order to exclude competition and deny market access to new entrants.
JCB Dominant
In order to establish dominance, the CCI identified the ‘relevant product market’ to be that of ‘backhoe loaders’. According to the commission, the market for backhoe loaders was a distinct market as no two construction/earthmoving equipment (whether heavy or light) could perform the same function and hence were not substitutable. Also, the ‘relevant geographic market’ was identified to be the whole of India. In this market, JCB had 75% market share and was therefore ‘super dominant’. Also, with its vast financial and other resources JCB could easily operate independent of competition. Therefore, the CCI held that prima facie, JCB is a dominant entity in the relevant market.
Abuse of Dominance
Bull Smart contended that JCB was abusing its dominant position by indulging in bad faith litigation. In 2011, Bull Smart participated in ‘Excon 2011 Exhibition’, India’s premier earthmoving machinery exhibition where it exhibited its new product ‘Bull Smart’ which was due to be launched in November 2011. At this exhibition, JCB restrained Bull Smart from displaying, launching, advertising, selling, offering for sale, its products based on an interim ex parte injunction it had obtained from the Delhi HC (here). The injunction was granted to JCB on the allegation that Bull Smart had infringed JCB’s design registration and copyrights of backhoe loaders.
It was contended that JCB obtained this ex parte interim injunction based on misrepresentation of images, design registration numbers and documents:
It is the case of the Informant that JCB obtained the ex-parte ad interim injunction order based on misrepresentation of images/design registration number/documents and bogus numbers, suppression of its pre-existing UK patent, misrepresentation by comparing the wrong angle of the images in the application and reliance upon fraudulent design registrations which were pre-existing in the public domain.
Bull Smart filed for vacation of the ex parte interim injunction, and a consent order was passed whereby the injunction was stayed and JCB sought to inspect ‘Bull Smart’ through their engineers to verify if any of its registered designs were infringed.
Surprisingly, 10 months later JCB withdrew it case and the interim injunction was vacated.
The Commission observed that predation through abuse of judicial processes was a threat to competition, particularly due to its relatively low anti-trust visibility. In view of the allegations projected in the information and as detailed hereinabove, the Commission is of prima facie opinion that JCB by abusing their dominant position in the relevant market sought to stifle competition in the relevant market by denying market access and foreclosing entry of ‘Bull Smart’ in contravention of the provisions of Section 4 of the Act.
While I agree that this could very well be a case of what has been recognized by the European Commission in the AstraZeneca Case, as the “vexatious litigation doctrine”; but there are a few things that strike me particularly as problematic in this case. From what is apparent from the Commission’s Order as I read it, and the Delhi HC Orders, the veracity of documents adduced from either side hasn’t been conclusively established, thereby making the issue of a registration fraud, or wilful misrepresentation sub judice before the HC. Considering that both of these are necessary elements for establishing an abuse, I was wondering whether the CCI, then can make a conclusive finding on a question of fact, which is pending before the Delhi HC? I find a bit of a jurisdictional hurdle here in the Commission’s way?
Thank you for your comment anonymous. Your concerns are valid. But here the CCI only found a ‘prima facie case’ and did not conclusively decide anything. The fact that JCB suddenly withdrew its case after its decision to inspect Bull Smart’s designs etc. may have weighed in favour of Bull Smart and in establishing a ‘prima facie case’.
Also there doesn’t seem to be an apparent jurisdictional conflict between the Del HC and CCI. This is because the CCI is looking into the effect of this behaviour on competition, whereas the Del HC is dealing with the infringement of designs, copyright etc.
But didn’t the Delhi High Court find the problem with the jurisdiction of CCI in the matter? Also, how can CCI examine something which happened at High Court of Delhi ?
Hello Aparajita,
i am one of the victim of the ex-parte order in IP maters where Delhi High Court restrained my company and actually its just because to curb the competition. Can i have your mail id so that will discuss further in this matter.
In order to complete your analysis, please do mention that the order of the CCI is pending adjudication before the Delhi High Court. The Delhi HIgh Court had even stayed the investigation into the matter.
What was the case made out by JCB before the CCI and the Delhi High Court? Reading only Bull Machines’ side of the story does not help us make an informed opinion on the issue.