Competition Law Patent

Competition law flexibilities for pharma patents? Vifor v CCI


Image from here

Story so far: Recently, the Delhi High Court was tasked with examining an interesting competition and IP case.

An informant (requesting confidentiality) filed a competition law complaint against Vifor International AG (Vifor) before the Competition Commission of India (CCI). Unfortunately, the facts of the complaint are not clear from the Delhi High Court decision since the complaint was filed seeking confidentiality.

 

Some facts can be gleaned from the arguments of both sides. It appears that Vifor holds patents for a drug used to treat patients with iron deficiency. The informant alleges that Vifor is engaging in anti-competitive practices in the sale and distribution of this drug. The anti-competitive practices alleged are (a) abuse of dominance through price discrimination: Vifor offers this drug to public procurers at a price lower than what it offers to individual consumers. The informant believes that such price discrimination has caused substantial harm to consumers; and (b) refusal to deal: It appears that Vifor may have denied licenses to third parties seeking to either manufacture or import this drug. The informant believes that such conduct is anti-competitive. On this basis, the informant has requested the CCI to investigate the business and conduct of Vifor, the patentee  of the drug in question.

On receiving this complaint, the CCI directed Vifor to respond to the following questions:

(a) details of its patents covering the drug in question – ferric carboxymaltose (FCM),

(b) number of manufacturing / import licenses granted to third parties in India for FCM, along with copies of license agreements,

(c) details of companies that have approached Vifor for a license for FCM,

(d) details of denial of licenses, reasons for denial and criteria followed by Vifor for granting licenses, and

(e) disputes / litigation in India with respect to FCM.

Vifor ignored this order of the CCI and did not respond within the timeline prescribed. Pursuant to an extension provided by the CCI, Vifor replied challenging the jurisdiction of the CCI. Before the CCI decided this issue, Vifor filed a writ petition before the Delhi High Court.

The Delhi High Court dismissed the writ petition. Vifor had clearly jumped the gun. The writ petition was premature since it proceeded on an ‘unfounded apprehension’ that the CCI will refuse to consider the jurisdiction challenge. The apprehension is unfounded since the CCI is bound by law to consider all objections and cannot simply ignore objections that question its very competence.

Ramifications

This decision will have far reaching ramifications for the pharmaceutical sector and for public health. The kind of parties that can bring cases under the Patents Act (e.g. for a compulsory license) are different from those under the Competition Act. Only a prospective licensee can file an application for a compulsory license (see Mathews post here). However, any person, any consumer or trade association can file a complaint under the Competition Act. Further, the CCI can grant broader and more reliefs than the Controller.

Given this, it may be possible for consumers to directly try to reduce prices of drugs (as is being attempted in the Vifor case) rather than wait for a prospective manufacturer (via a compulsory license) to cater to their demands. Can competition law provide patent related flexibilities? If the conduct in question is ‘abusive’ or ‘unreasonable’ (in the sense of competition laws) then, yes. However, it remains to be seen how far these words will be stretched in the context of excessive pricing and refusal to deal when it comes to patentees.

As discussed below, since jurisdictional lines are so blurred,  jurisdictional challenges should matter less. What is important is how the case, on its merits, is argued and decided and what reliefs are finally ordered or rejected.

Conflicting jurisdiction?

As it turns out, a patentee’s conduct can result in action under the Patents Act as well as an action under the Competition Act. In other words, the same act e.g. excessive pricing, denial of licences could result in the patentee facing both patent and anti-competition liability.

This has been decided in two previous Single Judge decisions of the Delhi High Court (Monsanto v CCI and Telefonica v CCI (here and here). In both cases, the petitioners challenged orders passed by the CCI on the ground that the CCI lacked jurisdiction to commence proceedings in relation to claims of excessive royalties/ fees charged by a patentee and other anti-competitive conduct.

After going through the scheme of both the Patents Act and the Competition Act, it was held that jurisdiction of the CCI is not excluded when it comes to examining matters related to patent rights if such matters involve anti-competitive conduct. As per these decisions, both forums may be approached – “mere provisions for compulsory licensing etc under the Patents Act does not oust the jurisdiction of 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.” These decisions have been appealed.

According to these decisions, patent law and competition law approach patentee ‘wrong doing’ from different angles even while addressing the same conduct.

Sectoral regulator argument

An interesting line of argument that is attempted in such cases (as also taken in Vifor) is one along the lines of the Bharti Airtel case. The argument goes like this – since the Controller is a specialised body that handles patent matters, it should have jurisdiction in the first instance to decide ‘jurisdictional facts’. Only after this determination should the CCI proceed with the matter. We have blogged about this argument here.

In the Bharti Airtel case, the main factual basis of the complaint (whether or not the number of ‘Points of Interconnections’ were sufficient) needed to be technically evaluated before the CCI could proceed with examining anti-competitive conduct. The Supreme Court held that this examination would be best done by the TRAI, the domain expert. Therefore, the proceeding before the CCI was differed till the technical aspects (which formed the factual basis on which the complaints before the CCI were founded), were determined.

The court in Monsanto held that the role of the Controller of Patents is very different from the role of the TRAI and other sectoral regulators. The Controller does not regulate a sector. It does not engage in sector wide technical examinations nor does the Controller recommend sectoral policies etc. Therefore, this argument was rejected.

One and done?

Wouldn’t it be more appropriate to make the aggrieved person choose between the two forums? Rather than permit cases, covering the same conduct, to be filed in both forums (whether simultaneously or one after the other)? What does a ‘jurisdictional fact’ in such patent issues even entail?

For instance, once a Controller or court issues a compulsory license or holds a clause in a contract to be void pursuant to Section 140, there may not be anything meaningful left for the CCI to do. The plaintiff would have already succeeded in getting relief. Conversely, if the CCI issues directions requiring a party to cease its abusive behaviour by e.g. lowering prices or dealing with more licensees or holding agreements to be void (guided by Section 140), there will be no meaningful case left to be fought under the Patents Act.

On a related note, as pointed out by Mathews here, the South African competition regulator recently filed a referral to the Competition Tribunal for prosecution of Roche on alleged excessive pricing of its breast cancer treatment drug, Trastuzumab.

Aparajita Lath

Aparajita graduated from the WB National University of Juridical Sciences, Kolkata. She was formerly an editor of the NUJS Law Review. She is a lawyer based in Bangalore. All views expressed by her on the blog are her personal views.

One comment.

  1. S. Diwakar

    Spicy IP is partial only to Delhi High Court and its orders passed. I wonder why there is a complete non-attention to other Courts’ orders even when it is specifically brought to the notice of its in-house contributors. Shame!!

    Reply

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