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.
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.”
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.”
“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.