In a fairly exhaustive and well reasoned decision, Justice Vibhu Bakhru ordered today that the Competition Commission of India (CCI) can continue its investigation into Ericsson’s alleged anti competitive practices. This investigation pertains to the alleged abusive enforcement of Ericsson’s standard essential patents (SEP) against a host of Indian smartphone manufacturers, such as Micromax and Intex.
Background
As we’d noted in our previous posts on this issue, both Micromax and Intex had complained to the CCI that Ericsson was abusing its dominant position by inter-alia demanding excessive royalties, refusing to disclose licensing terms with other licensees (despite their commitment to FRAND terms), and aggressively enforcing their patents to force parties to effectively settle on unfavourable and inequitable licensing terms. Micromax also alleged that Ericsson had attempted to derail its initial public offer of shares by threatening to mount complaints with SEBI (with a view to forcing it to take a license on Ericsson’s terms).
The CCI in its order dated 16th Jan 2014, examined Ericsson’s conduct and concluded that it prima facie constituted an abuse of dominance. The Director General was then directed to institute an investigation into Ericsson’s practices.
Ericsson then moved the Delhi High Court to prevent this CCI investigation and quash the CCI order. The Delhi High Court however refused. It’s decision (which can be found here and comes after an interim decision that was appealed) introduces the dispute in fairly simple and lucid terms as below:
“Both Micromax and Intex have alleged that Ericsson, which has a large portfolio of Standard Essential Patents (SEPs) in respect of technologies that are used in mobile handsets and network stations, has abused its position of dominance. The information filed by them before the CCI under Section 19 of the Competition Act has persuaded the CCI to pass the impugned orders directing the Director General (DG) CCI to investigate the matter regarding violation of the provisions of the Competition Act.…The substratal dispute between Ericsson and Micromax/Intex relate to Ericsson‘s demand for royalty in respect of SEPs held by Ericsson and which it claims has been infringed by Micromax and Intex.
According to Ericsson, the impugned orders passed by the CCI are without jurisdiction as it lacks the jurisdiction to commence any proceeding in relation to a claim of royalty by a proprietor of a patent (hereafter also referred to as a ‘patentee’). Ericsson contends that any issue regarding a claim for royalty would fall within the scope of Patents Act, 1970 (hereafter the ̳Patents Act‘) and cannot be a subject matter of examination under the Competition Act. This, essentially, is the principal controversy involved in these petitions.”
For more background on these CCI complaints filed by Micromax and Intex, see our earlier SpicyIP posts here and here.
CCI Has Clear Jurisdiction
Justice Bakhru’s decision seems well reasoned on a quick reading. The judge clearly spells out that unlike civil law suits for infringement (and likely determination of royalty rates), a competition commission investigation and finding is not in the nature of a “lis” between parties. And therefore the presence of various law suits between Ericsson and Micromax/Intex do not preclude the jurisdiction of the CCI. In the judges’ words:
“In my view, there is no irreconcilable repugnancy or conflict between the Competition Act and the Patents Act. And, in absence of any irreconcilable conflict between the two legislations, the jurisdiction of CCI to entertain complaints for abuse of dominance in respect of Patent rights cannot be ousted.”
and later:
“A patent holder has a statutory right to file a suit for infringement; but the Competition Act is not concerned with rights of a person or an enterprise but the exercise of such rights…….
Further, the judge also held that Ericsson appears to be in dominant position and there is no reason for the CCI to not conduct an investigation into alleged anti-competitive practices (for the purpose of determining jurisdiction, one has to assume that the allegations made by Micromax and Intex are true). Mere provisions for compulsory licensing etc under the patents act does not oust the jurisdiction of the the CCI and a party could both apply for a compulsory license under the patents act as also initiate a complaint with the CCI alleging that the patentees’ conduct is anti-competitive (see paras 179 onwards for key/critical parts of decision).
In this regard, Ericcson also argued that it was incongruous of Micromax and Intex to challenge the validity of the Ericsson patents and yet mount a competition law complaint, which assumes the validity of those patents. The judge dismissed this argument as one without merit. Holding in pertinent part that there was nothing to prevent a party from both challenging a patent and instituting a competition complaint. And in any case, the proceedings are initiated by the CCI and a private party such as Micromax has really no role after the investigation begins.
The judge goes into a fair bit of comparative law drawing on leading decisions of the US and EU (the latest Huawei decision etc). All in all a very comprehensive and adequately reasoned decision. Probably one of the few lucid ones on Indian competition law, albeit on jurisdictional scope. As the judge himself notes at the end:
“It is also necessary to clarify that nothing stated herein should be construed as an expression of opinion – prima facie or otherwise – on the merits of the allegations made by Micromax and Intex; all observations made or views expressed herein are in the context of the jurisdiction of CCI to pass the impugned orders.”
Though I really wish our judges were more brief and succinct. I personally felt that the judgment could have done without a lot of excessive verbiage that more appropriately pertained to a decision on the merits. The judge could have simply stuck to the key jurisdictional issue and ruled that since the conceptual scope of both the regimes (competition regime and the IP enforcement regime through infringement law suits) are distinct, one proceeding does not necessarily bar the other.
We will bring you a more detailed analysis of this decision soon.
Criticism of judgment is a good thing but when the criticism carries a tone of hubris, then it is a disgraceful criticism. Probably the judge being lectured in this post has to deliver judgments on a wide variety of other issues as well which are beyond the scope of this blog!
Indeed! So not only do they get to pick their own (in a cosy cabal of a system), they are also now shielded from any kind of external critique? And gosh: here I thought I lauded the decision to begin with (commending the decision for being well reasoned) and then went on to critique one aspect of it..a rather moderate critique I thought. That we have an excessively long winded decision! Read it and you’ll understand. But then in this world of diminishing attention spans, who has time to read a judgment these days. Particularly when it is more 300 paras long! As they say, one man’s meat is another mans’ poison. And one mans moderate critique is another man’s hubris ridden disgrace!
Its 212 paras long, around first 50 paras are devoted to the history of the case and the contentions of the counsels. So, for a person who is updated on the matter, its actually around 160 paras. Poor judges! When they explain, academics say they are verbose, when the assume, its said that they lost an opportunity to contribute to the jurisprudence.
By not publishing my comment the proponents of free speech have shown that they know censorship also!
Completely agree Shamnad sir.
On a separate note, one of the observations in the judgment is that the licensees are free to approach both forums, which I believe sort of encourages forum shopping.
While I agree that the conceptual scope of both the regimes are separate, is it not true that approaching either forum would essentially grant a party similar reliefs? For example, the CCI is empowered by way of interim reliefs (under Section 33) or a final order (under Section 27) to direct Ericsson to not only cease and desist from the conduct in question, but also to modify the agreements in question (Though this power has been interpreted by the COMPAT as being in the context of Section 3 violations alone), and pass any other orders as it may deem fit.
Not the sort that the COMPAT believes is forum shopping.
(In the past, Justice Singhvi has, and while I do not agree with his reasoning, gone so far as to force appellants to withdraw their statutory appeal from the Competition Appellate Tribunal, on account of writ petitions pending in the Delhi High Court, which essentially challenged the constitutionality of various provisions of the Competition Act. Justice Singhvi’s dubiously tagged this as ‘forum shopping’, as one of the prayers in the Writ Petition, was to set aside the order of the CCI)
Just fishing around for thoughts.
P.S. It is a well reasoned judgment, but my comment is on the effect of the judgment. I agree that the Informant’s role is limited, and it is not an adversarial before the CCI. The objective of the CCI process is not to balance the right of but rather to remove any anticompetitive effects on the market stemming from the party’s conduct.
However, all that said, as an Informant I do stand to obtain similar reliefs, especially given the wide scope of remedial/ penal powers vested upon the CCI by the Competition Act.
P.S. It is a well reasoned judgment, but my comment is on the effect of the judgment. I agree that the Informant’s role is limited, and it is not an adversarial process before the CCI. The objective of the CCI process is not to balance the rights of the licensor and the licensee, but rather to remove any anticompetitive effects on the market stemming from the licensor’s conduct.
However, all that said, as an Informant I do stand to obtain similar reliefs, especially given the wide scope of remedial/ penal powers vested upon the CCI by the Competition Act.