Competition Law Patent

Thoughts on Regulatory Tussles Involving CCI – III


[*Long post]

Earlier posts – Thoughts on Regulatory Tussles Involving CCI – I & Thoughts on Regulatory Tussles Involving CCI – II

[Continuing…..]

Delhi HC judgment on Telefonaktiebolaget LM Ericsson v. Competition Commission of India and Anr

Issues

  • Is there an irreconcilable conflict between the Competition Act and Patents Act? and
  • Is it possible to construe both the Acts harmoniously?

Judgment

 An inconsistency or repugnancy in statutes cannot be readily inferred and any interpretation that leads to such conflict must, as far as possible, be avoided. [ Municipal Council, Palai v. T.J. Joseph: (1964) 2 SCR 87there is a presumption against repeal by implication. It is presumed that the Legislature, while enacting a law, has complete knowledge of the existing laws and, therefore, where an express provision for repeal of an earlier statute is not provided, it must be presumed that the legislature did not intend to repeal the existing statute. Unless it is concluded that the provisions of the two of legislations cannot co-exist, the question of reading the provisions of a statute to have been impliedly repealed does not arise.]

The provisions of the Patents Act, which can be construed as dealing with a subject matter which is common with that of the Competition Act, are essentially provisions of Chapter XVI and Section 140 of the Patents Act. Section 84 of the Patents Act provides for grant of compulsory licences in certain cases where reasonable requirements of public with respect to the patented inventions have not been satisfied or where the patented invention is not available to the public at a reasonably affordable price or where the patented invention is not worked in the territory of India.

Provisions which point at legislative intention towards harmonious interpretation of Competition Act and Patents Act

Provision Content Judgment
Section 21A of the Competition Act (“Reference by Commission”) Enables CCI to make a reference to any statutory authority, which is charged with implementation of any Act, if it proposes to make any decision contrary to the provisions of the Act and an issue in this regard is raised by any party The provisions of Sections 21 and 21A of the Competition Act, read in the aforesaid context, indicate that the intention of the Parliament was not to abrogate any other law but to ensure that even in cases where CCI or other statutory authorities contemplate passing orders, which may be inconsistent with other statutes, the opinion of the concerned authority is taken into account while passing such orders. The plain intention being that none of the statutory provisions are abrogated but only bi-passed in certain cases. These provisions – Sections 21 and 21A of the Competition Act – clearly indicate that the intention of the Parliament was that the

Competition Act co-exist with other regulatory statues and be harmoniously worked in tandem with those statues and as far as possible, statutory orders be passed which are consistent with the concerned statutory enactments including the Competition Act.

 

Section 21 of Competition Act (“Reference by statutory authority”) Statutory orders passed – either by CCI under the Competition Act or by any other statutory authority under any other statute, – be made after the concerned authority has taken into account the opinion of the other statutory authority.

 

Section 90 (1)(ix) of Patents Act (“Terms and conditions of compulsory licences”) Provides that the Controller General of Patents may also permit export of the patented product under a compulsory licence in cases where the licence is issued to remedy a practice that has been determined to be anti-competitive after a judicial or an administrative process. Indicates the legislative intention that the Competition Act and the Patents Act be worked harmoniously. Thus, it is mandated that the Controller take into account any finding of anti-competitive practice, which is returned after a judicial or administrative process including by the CCI under the Competition Act, while settling the terms of a compulsory licence issued to remedy such practice.
Section 3 of the Competition Act (“Anti-competitive agreements”) Prohibits a person, enterprise or association of persons/enterprises

from entering into certain anti-competitive agreements which cause or are likely to cause appreciable adverse effect on competition within India.

There does not appear to be any provision(s) of such wide import under the Patents Act.

Sub-section (5) of Section 3 of the Competition Act expressly provides that Section 3 will not restrict the right of any person to impose reasonable conditions for protecting its right, inter alia, under the Patents Act.

While an agreement which imposes reasonable conditions for protecting Patent Rights is permissible, an anti-competitive agreement which imposes unreasonable conditions will not be afforded the safe harbor of Section 3(5) of the Competition Act and will fall foul of Section 3 of the Competition Act. The question as to whether a condition imposed under the agreement is reasonable or not will be a matter which can only be decided by the CCI under the provisions of the Competition Act. Neither the Controller of Patents discharging his functions in terms of the Patents Act, nor a Civil Court will have any jurisdiction to adjudicate whether an agreement falls foul of Section 3 of the Competition Act. This is so because the Controller of Patents cannot exercise any powers which are not specifically conferred by

the Patents Act and by virtue of Section 61 of the Competition Act, the

jurisdiction of Civil Courts to entertain any suit or proceedings in respect of any matter which the CCI or the COMPAT is empowered to determine, stands expressly excluded. Thus, in so far as the scope of Section 3 of the Competition Act is concerned, there does not appear to be any overlap or inconsistency with the Patents Act.

Section  84(4) & (7) of Patents Act and Section 90 of Patents Act (“Terms and conditions of compulsory licences”) Several of the instances listed out in Section 84 (7) can be construed, in certain circumstances, as an abuse of dominance if grant of patent rights places the right holder in a position of dominance.

Remedy in cases as specified under Section 84(7) of the Patents Act is grant of compulsory licences and a possible revocation of licence thereafter.

 

In terms of Section 84 (4) of the Patents Act, the Controller is empowered to settle the terms on which the compulsory licence is to be granted. Section 90 of the Patents Act provides guidelines to the Controller for settling the terms of a compulsory licence.

 

It is apparent that the only remedy that is available under the Patents Act, to a willing prospective licensee who has been denied a licence on reasonable terms is a compulsory licence under Section 84 of the Act on such terms as may be settled by the Controller.

 

The remedies as provided under Section

27 of the Competition Act for abuse of dominant position are materially different from the remedy as available under Section 84 of the Patents Act. It is also apparent that the remedies under the two enactments are not mutually exclusive; in other words grant of one is not destructive of the

other. Thus, it may be open for a prospective licensee to approach the

Controller of Patents for grant of compulsory licence in certain cases. The same is not inconsistent with the CCI passing an appropriate order under Section 27 of the Competition Act.

In certain cases, denial of market access by an enterprise placed in a position of strength in the relevant market may constitute an abuse of dominant position. If an enterprise falls foul of Section 4 and it is so established after due investigation, the CCI is empowered to pass all or any of the orders as indicated under Section 27

Section 4 of Competition Act (“Abuse of dominant position”) & Section 27 of Competition Act (“Orders by Commission after inquiry into agreements or abuse of dominant position”) Section 4 of the Competition Act, which is relevant for the purposes

of these petitions, concerns abuse of dominant position. Sub Section (1) of Section (4) prohibits such abuse and Sub-section (2) of Section 4 provides for what constitutes an abuse of dominant position.

Section 84 of Patents Act (“Compulsory licence”) and Section 19 of the Competition Act (“Inquiry into certain agreements and dominant position of enterprise”) Section 84 of Patents Act deals with issue of compulsory licences. Section 19 deals with inquiry into certain agreements and dominant position of enterprises.

Whereas Section 84 of the Patents Act provides specific remedy to the person seeking relief, the orders passed by CCI are in rem. Thus, the operative width of the two enactments is different. It is not necessary that any particular relief be granted to the person who provides information under Section 19 of the Competition Act; the focus of the Competition Act is to ensure that the offending anti-competitive agreements, conduct and combinations are terminated and such conduct is not repeated.

 

 

Discussion on Section 84(6)(iv) of Patents Act

“(iv) as to whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period as the Controller may deem fit:

Provided that this clause shall not be applicable in case of national emergency or other circumstances of extreme urgency or in case of public non-commercial use or on establishment of a ground of anticompetitive practices adopted by the patentee, but shall not be required to take into account matters subsequent to the making of the application.”

It is apparent from the above that a prospective licensee who applies for a compulsory licence is expected to have made, prior to his application, efforts to obtain a licence on reasonable terms. However, it further specifies that this consideration will not be relevant where the conduct of a patentee is found to be anti-competitive. It was contended that the above-quoted proviso to Section 84(6)(iv) also refers to anti-competitive practices adopted by a patentee and such practices could only be established under the provisions of the Competition Act. According to the Court, “….the aforesaid proviso to Section 84(6)(iv) cannot be read to mean that a patentee’s anti-competitive conduct would have to be first established in proceedings under the Competition Act before the Controller could take that into account. Sub-section (6) of Section 84 only indicates certain factors that would be required to be taken into account by the Controller and the question whether a patentee had adopted anti-competitive practices could also be considered by the Controller.” Further, if CCI has finally found a patentee’s conduct to be anti-competitive and its finding has attained finality, the Controller can also proceed on the said basis and – on the principle akin to issue estoppel – the patentee will be stopped from contending to the contrary.

Patent laws define the contours of certain rights. The anti-trust laws essentially prevent abuse of rights. Seen in this perspective, the prospect of an irreconcilable conflict seems to reduce considerably. There is no irreconcilable repugnancy or conflict between the Competition Act and the Patents Act. 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.

 Comments

In principle, I agree with the tone and tenor of this judgment giving emphasis on harmonious interpretation. However, I am not entirely convinced with the reasoning and conclusion with regard to the bold-italicised portions pertaining to Section 84(6)(iv) of Patents Act mentioned above and not giving primacy to Competition Act. One among the reasons behind the establishment of specialized tribunals is to develop a cogent, vibrant jurisprudence regarding a particular area of law (especially on an area of law which requires high expertise and skill like the Competition Law). The judgment doesn’t duly weigh the same. The judgment assumed that the concerned authority under the Patents Act will have the necessary expertise to adjudge an “anti-competitive” behavior. Doesn’t this violate the purpose behind the enactment? Does the judgment enervate rather than strengthen the Competition Law regulatory framework? A qualitative, policy analysis can answer these concerns. As stated earlier, I prefer legislative wisdom to judicial wisdom here.

Again, I would like to red-flag the method of usage of tools of interpretation here. While the judgment does deal with certain tools of interpretation, I am of the view that the purposive rule of interpretation, which inter alia envisages weighing the pros and cons of consequences of interpretation so as to determine whether the purpose behind the enactment of the statute is served or not, was totally overlooked. Purposive rule of interpretation should have been used wisely vis-a-vis ‘general law v. special law’ and ‘later enactment’ debate. This would have made the reasoning and conclusion more robust and pragmatic. If this tool of interpretation was used, the judgment might have reached at a different conclusion vis-à-vis Section 84(6)(iv) of Patents Act.

Again, as in the earlier post, I am of the view that the quality of drafting of enactments in India has to grow and flourish by leaps and bounds. It is quite intriguing that important issues like the instant one are even left to interpretations and adversarial phases especially when the judiciary is yet to gain adequate experience and expertise in this area of law. Pragmatically speaking, the same issues may again be contested at a different forum with varying outcomes till there is an authoritative ruling from the Supreme Court. One can imagine the confusions it can create. Interestingly, the Government of India is seen talking about ‘Ease of doing Business’ without even talking about enhancing the quality of drafting of enactments. I hope that a time of reckoning will soon arrive.

 

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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.

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