Competition Law Patent

Thoughts on Regulatory Tussles Involving CCI – II


[*Long post]

I shall be dealing with the Delhi HC judgment on Telefonaktiebolaget LM Ericsson v. Competition Commission of India and Anr, limited to the issue of Competition Act versus Patents Act. The idea is to simplify the judgment for the benefit of readers and present views where applicable. This is strictly an academic exercise. I shall not be dealing with the facts and other issues since the mandate is limited here.

SpicyIP had already dealt with this judgment before. [here, here and here]. But I intend to go in detail, limited to the given topic. Even though the judgment is old (2016), I am of the view that the judgment is quite relevant in the context of this issue.

Judgment

The Petitioner contended that the Patents Act provides for an adequate mechanism to prevent abuse of patent rights granted under that Act. It was urged that “any issues regarding abuse of patent rights including abuse of dominance as contemplated under Section 4 of the Competition Act, are required to be addressed under the provisions of the Patents Act and, thus, the applicability of the Competition Act in certain matters regarding patents is ousted. It is contended that the Patents Act is a special Act which contains comprehensive provisions relating to grant of patents rights as well as for remedying any abuse thereof; and, on the other hand, the Competition Act is a general law enacted with a view to ensure freedom of trade and to promote and sustain competition in the market.” In short, the Petitioner contended that the Patents Act will prevail over the Competition Act and the CCI will have no jurisdiction to entertain the complaints in question.

Basically, the Petitioner tried to use the legal maxim “Lex specialis derogat legi generali”. It simply means that where two laws govern the same factual situation, a law governing a specific subject matter (lex specialis) overrides a law which only governs general matters (lex generalis). Going by the settled canons of interpretation, an express provision is warranted for invoking the principle. For instance, Indian Penal Code, 1860 is the general law dealing with criminal matters. But Unlawful Activities Prevention Act, 1967 is a special law which overrides Indian Penal Code as far as terrorist-related offences are concerned.

The Court examined various clauses of Sub-section 7 of Section 84 of the Patents Act and came to the conclusion that the Legislature was cognizant that in certain cases, patents rights may be misused – such as where the patentee refuses to grant licences on reasonable terms to the prejudice of trade and/or industry – and, therefore, in conformity with the TRIPS Agreement, it enacted provisions for remedying the same by issuance of compulsory licences.

According to the Court, “Insofar as the allegations contained in the complaints are concerned-that is, demand of excessive licence fee, unreasonable and anti-competitive licensing terms, and breach of FRAND obligations – the Patents Act does provide a remedy by way of compulsory grant of licences. The question is whether provision of such remedies excludes the applicability of the Competition Act to certain abuse of patent rights – such as demand for excessive royalty and imposition of unreasonable terms for grant of patent licences.”

In this regard, the Court reasoned and held as follows:

  • The Patents Act was amended to make it TRIPS compliant. The TRIPS Agreement, as mentioned above, obliges the signatory countries to recognise Intellectual Property Rights but does not disable member countries to enact laws, consistent with the TRIPS Agreement, for restricting and curbing its use in certain cases. Article 8.2 of the TRIPS Agreement expressly permits measures required to prevent abuse of intellectual property rights by right holders. Similarly, Article 31 of the TRIPS Agreement recognises that laws of member states can permit use of patents without authorisation by the rights holder, however, it enjoins the member states to respect certain parameters which are articulated in Article 31 of the TRIPS Agreement.
  • Patents (Amendment) Act, 2002, which introduced Chapter XVI of the Patents Act, came into force at a later date when compared to Competition Act.
  • Competition Act and Patents Act are special acts operating in their respective fields. However, viewed in the aforesaid perspective, the Patents Act will be a special Act vis-à-vis the Competition Act in so far as patents are concerned. The Patents Act is a self contained code. An enactment may be considered as special in relation to one Act and yet be considered as general enactment in relation to another statute. [Applied the ratio in Life Insurance Corporation of India v. D.J. Bahadur: (1981) 1 SCC 315]
  • Chapter XVI of the Patents Act provides for grant of compulsory licences. Further, it provides for revocation of patents in certain cases including in cases where the reasonable requirements of the public as specified under Section 84(7) of the Patents Act have not been satisfied. Section 84(7) of the Patents Act is couched in wide terms and takes within its sweep instances where a refusal by a patentee to grant licence on reasonable terms results in prejudicing the existing trade or industry or any person or class of persons trading or manufacturing in India. Plainly, Section 84(7) includes instances of abuse which are proscribed under Section 4 of the Competition Act. Section 140 of the Patents Act also postulates certain restrictive conditions to be void.
  • Section 62 of the Competition Act which reads as under:- “The provisions of this Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force.” According to the High Court, the intention of the Parliament in enacting the Competition Act was not to curtail or whittle down the full scope of any other law and, therefore, it is expressly stated that the Competition Act will be in addition to, and not in derogation of any other Act.
  • Section 60 of the Competition Act, which provides for the provisions of the said Act to have an effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, must be read harmoniously with Section 62 of the Competition Act and in the context of the subject matter of the Competition Act. As the Competition Act is directed to prohibit certain anti-competitive agreements, abuse of dominant position and formation of combinations which cause or are likely to cause appreciable adverse effect on competition, agreements which may otherwise be lawful and enforceable under the general law – such as the Indian Contract Act, 1872 – may still be anti-competitive and fall foul of Section 3 of the Competition Act. Similarly, a practice or conduct which may be considered as an abuse under Section 4 of the Competition Act may otherwise but for the said provision be legitimate under the general law. Equally, mergers and amalgamations that are permissible under the general law may result in aggregation of market power that may not be permitted under the Competition Act. Section 60 of the Competition Act must be read in the aforesaid context.
  • It is well settled that the provision of any statute must be read in the context of the statute as a whole. A non-obstante clause is a well known legislative device used to give an overriding effect to certain provisions over the others which are inconsistent with those provisions; in the present case, Section 60 of the Competition Act expressly provides that the provisions of the Competition Act shall have effect notwithstanding anything inconsistent in any other law. However, the said provision must be read in the context of the Competition Act as a whole and the mischief that is sought to be addressed by the Competition Act. Thus, Section 60 is enacted only to re-state and emphasize that notwithstanding agreements, arrangements, practices and conduct which may otherwise be legitimate under the general laws, will nonetheless be subject to the rigors of the Competition Act. Section 60 cannot be read to curtail or whittle down the provisions of other statutes; this interpretation will also be in sync with provisions of Section 62 of the Competition Act as indicated above.
  • In any case, in the event of any irreconcilable inconsistency between the two legislations, the later special statute will override the prior general statute, even though the earlier general statute contains a non-obstante clause. [Applied the ratio in Damji Valji Shah and Another v. Life Insurance Corporation of India & Ors.: AIR 1966 SC 135]

Comments:

The judgment doesn’t use the purposive rule of interpretation, which is a vital tool of interpretation (especially considering the nascent stage of Competition Law jurisprudence). Therefore, ‘judicial’ weighing of pros and cons of this determination is totally absent. On the other hand, the judgment unnecessarily dwells into TRIPS Agreement at length and thereby doesn’t give a steady flow of reasoning. If there had been weighing of pros and cons, the judgment would have been stronger and might have arrived at a different conclusion altogether. Competition Act is not just a mere enactment. It is highly technical and in fact, is a confluence of various disciplines. A specialized regulator is set up under the Competition Act. The jurisprudence is slowly and steadily growing. In this regard, what are the pros and cons of this determination where primacy is not given to the Competition Act? Does this determination adhere to the purpose behind this enactment? Will there be any dilution of Competition Law jurisprudence if primacy is not given to Competition Act? Is the existing framework under the Patents Act competent enough to ‘qualitatively’ satisfy this judicial determination? The judgment overlooks these aspects altogether and does not provide any reasoning whatsoever. I suggest due diligence in this regard wherein the above mentioned aspects are duly weighed and analysed. Further, what precludes the Parliament from de-linking or say, expressly de-hyphenating Competition Law aspects from the compulsory licensing provisions under the Patents Act and exclusively arming the CCI with compulsory licensing powers only to the extent of regulation of anti-competitive behavior of exercise of patents? Does it or does it not address possible uncertainties and dilution of standards of Competition Law jurisprudence? I prefer legislative wisdom to judicial wisdom here.

 

Mathews P. George

Mathews P. George

Mathews is a graduate of National University of Juridical Sciences, Kolkata. His interest in intellectual property was kindled when he bagged the second position in his very second year in the prestigious Nani Palkhiwala Essay Competition on Intellectual Property. Winner of almost a dozen essay competitions in his law school days, he was involved in various research and policy initiatives relating to intellectual property. His stint as a student of Prof. Shamnad Basheer further accentuated his interest in intellectual property. Presently, he is associated with Ninan & Mathew Advocates, Cochin, a leading law firm in Kerala. Earlier, he was working as a corporate lawyer with Khaitan & Co., Bangalore.

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