3 Jun 2020 5:12 AM GMT
Introduction A Single Bench of the High Court of Delhi gave its judgement in Monsanto Holdings Pvt. Ltd. & Ors. v. Competition Commission of India & Ors. on 20th May 2020, dealing with the question of overlap of jurisdiction between the Competition Commission and the Patents Controller. This paper aims to present a critique of the judgement by analysing the core arguments and...
A Single Bench of the High Court of Delhi gave its judgement in Monsanto Holdings Pvt. Ltd. & Ors. v. Competition Commission of India & Ors. on 20th May 2020, dealing with the question of overlap of jurisdiction between the Competition Commission and the Patents Controller. This paper aims to present a critique of the judgement by analysing the core arguments and examining the conflict between Competition Act, 2002. and the Patents Act, 1970.
While one perception regarding intellectual property and competition laws is that they are inherently in conflict with each other, an emerging school of thought favours reconciliation of the two areas of law. The clash is rooted in the reality that while one law grants a degree of exclusivity by limiting access, the other seeks to promote competition and facilitate access to the market. The grant of patents, i.e. an exclusive right for a limited period for the commercial exploitation of a given invention is done with the intent of encouraging the market players to innovate, which enlarges the basket of choices available to consumers.
The brief factual background is such that the Competition Commission passed an order dated 18th February 2016, directing the Director General to commence investigation into allegations of violation of Section 3 & 4 of the Competition Act based on an application filed by the informants under Section 33, holding for there to be a prima facie case. This was in tandem with the amalgamation of three cases filed by the the Department of Agriculture and Cooperation of the State of Telangana, the All India Kisan Sabha and the National Seed Association of India (Cases 1, 3 and 10 of 2016) against Mahyco Monsanto Biotech (India) Limited and Monsanto (US) regarding the terms of licence for their patent – Bacillus thuringiensis (Bt) technology. The petitioners herein, had also impugned a common order under Section 26(1) of the Competition Act dealing with similar allegations in Reference Case 02/2015 and Information Case 107/2015.
The main question of law before the Court in the Monsanto case was whether the Competition Commission had the jurisdiction to entertain a complaint relating to the exercise of rights by a Patent holder under the Patents Act, 1970. While the facts in the two cases were different, a similar question was considered by the same court in Telefonaktiebolaget L.M. Ericsson (PUBL) v. Competition Commission of India & Another [2016 SCC OnLine Del 1951] decided on 30th March 2016. It is pertinent to examine the key findings in this case to address the issues at hand.
In a case with similar considerations pertaining to excessive and restrictive conditions for a patent license, but for a standard essential patent, the petitioners argued before a Single Bench of the High Court of Delhi that the Patents Act was a special act vis-a-vis the Competition Act and therefore, it ought to prevail over the Competition Act, thereby excluding the jurisdiction of the Competition Commission. The Court was considering whether the availability of the remedies for the abusive conduct of the dominant Patent holder under the Patents Act excludes the applicability of the Competition Act or whether such conduct could still be a subject matter of the proceedings under the Competition Act. At paragraph 144, the Court held that both the Competition Act and the Patents Act were special laws, operating in their respective fields. Even though the Court observed that the Patents Act would be a special law and in the instance of irreconcilable differences between the two Acts, it shall prevail over such provisions of the Competition law, it held that there were no such irreconcilable differences between the two laws.
Regarding the nature and scope of the remedies provided by the two enactments, the Court opined the remedy of a compulsory license under the Patents Act to be limited in comparison to the scope of the Competition Act. The Court further held that the nature of remedies under Section 27 of the Competition Act, substantially differed from the remedies available under Section 84 of the Patents Act, observing that the remedies were not mutually exclusive and the grant of one was not repugnant to the other. The reasoning provided, in paragraph 169, for this proposition was that the remedies conferred by the Patent Act were in personam while the orders passed under Section 27 of the Competition Act were in rem. In an attempt to harmonise the provisions of the Competition Act with those of the Patents Act, the Court opined that Section 62 did not whittle down the scope of any other law, and that the effect of Section 60 would be to subject the most vast possible conduct to the rigours of the Competition Act.
The petitioners in Monsanto, contended that Ericsson was no longer good law, in view of Competition Commission of India v. Bharti Airtel Ltd. And Ors.[2019 2 SCC 521] wherein the Supreme Court had held that the Competition Commission could only be permitted to exercise its jurisdiction after the determination of jurisdictional facts by the sectoral regulator, i.e. TRAI.
In Bharti Airtel, a two-judge bench of the Supreme Court considered the ambit of the Completion Commission vis-a-vis the Telecom Regulatory Authority under the TRAI Act, 1997. The Court observed that the Competition Act is a special statute, holding that the CCI had the exclusive jurisdiction to decide whether an agreement had an appreciable adverse effect on competition. The court also opined that in the instance that TRAI returned a finding of anti-competitive conduct within the industry that it regulated, its powers would be limited to those under the TRAI Act. While the Court held that the Competition Commission was. empowered to assess anticompetitive conduct, its powers had to be balanced out with those of the sectoral regulator. Thus the Court held that the sectoral regulator would give its findings regarding the jurisdictional facts in issue and only once such findings point towards anti-competitive conduct would the Competition Act be invoked.
Key Submissions in Monsanto
The principal contention put forth by the petitioners was that the Patents Act exclusively governed and regulated all practices and contracts related to or arising out of the exercise of patent rights, including abuse of patent rights by the patent holder, thus, ousting the jurisdiction of the Competition Commission of India. The petitioners argued that in furtherance of Bharti Airtel, the Controller of Patents was akin to the TRAI Regulator and hence the initial authority to decide the jurisdictional fact must lie with the Controller. The petitioners averred that Bharti Airtel had effectively overruled Ericsson and it was for the Controller to first determine the jurisdictional facts, before the Competition Commission could proceed with the information or the reference filed with it.
The petitioners made an innovative argument by proposing the dissection of Section 3(5)(i) to suggest that it had two limbs. It was contended that the first. limb recognised "the right of any person to retrain any infringement" without any qualification of reasonability, as opposed to the second limb which mentioned the permitted imposition of other 'reasonable' conditions for protecting rights granted under the Patents Act. It was further contended that whether any agreement or any clause unreasonable would be excluded from the purview of the Competition Commission.
The High Court's findings in Monsanto
The High Court, while examining the Supreme Court's judgement in Bharti Airtel reached the conclusion that the said judgement was no authority on the proportion put forth by the petitioners. While it also assessed the the TRAI Act with regard to the judgement, the High Court held that the said judgement was "not an authority for the proposition that whenever there is a statutory regulator, the complaint must be first brought before the Regulator and examination of a complaint by the CCI is contingent on the findings of the Regulator". The key reasoning provided by the court for not upholding this proposition was that the role of the TRAI and the Controller of Patents differed, especially because the considerations in Bharti Airtel's case were more technical, which required domain expertise available only with TRAI. It was only after these technical considerations were determined that the CCI would examine the issue.
The Court, in paragraph 49, interpreted Section 3(5) to suggest that it did not give the patent holder any right to include onerous conditions in the licensing terms. The Court also refused to accept the argument regarding the dissection of Section 3(5) and opined that the latter half of clause (i) of sub-section (1) must be interpreted as being placed in parenthesis, thus, reading the entire sub-section as a whole.
Furthermore, the Court, while accepting that the Controller was regulating the exercise of patent rights, opined the role of the Controller in regulating patents was not as pervasive as that of TRAI in regulating the telecom industry. The Court commented upon. the role performed by TRAI while examining in great detail its powers under Section 11 of the TRAI Act. The Court observed that apart from dealing with questions of licenses and enacting other regulations, TRAI also fixes the tariff for interconnection. The Court reached the conclusion that TRAI's scope of regulation was all pervasive and as the same could not be said about the Patents Controller, they could not be equated.
Chapter XVI of the Patents Act, 1970
Section 84 of the Patents Act deals with the grants of Compulsory Licenses under various circumstances, subjected to conditions spelt out therein. The Controller, while granting. compulsory licenses, is required to give regard to the general principles enumerated in section 83. These principles highlight the object and purpose for working of patents. The relevant clauses from Section 83 prevent patent holders from enjoying a monopoly for the importation of a patented article, place an obligation on the patent holder to not resort to practices that unreasonably restrain trade, and to make available his patented inventions at reasonable prices. These principles, being the guiding force for the Controller to decide applications under Section 84 for grant of compulsory licenses highlight the Controller's powers to remedy anti-competitive practices. This role is further bolstered by Section 84(7) which deals with the "reasonable requirements of the public", which if not satisfied, would be grounds for granting of a compulsory license by the Controller. Sub-clause (a) of sub-section (7) of section 84, specifically gives regard to consideration of anticompetitive conduct. The relevant clauses are reproduced below –
"(7) For the purposes of this Chapter, the reasonable requirements of the public shall be deemed not to have been satisfied –
(a) if, by reason of the refusal of the patentee to grant a licence or license on reasonable terms,-
(i) an existing trade or industry or the development thereof or the establishment of any new trade or industry in India or the trade or industry in India or the trade or industry of any person or class of persons trading or manufacturing in India is prejudiced; or
(ii) the demand for the patented article has not been met to an adequate extent or on reasonable terms; or
(iii) a market for export of the patented article manufactured in India is not being supplied or developed; or
(iv) the establishment or development of commercial activities in India is prejudiced"
Section 90 deals with the terms and conditions of compulsory licenses. Section 90(1)(ix) provides that the "in settling the terms and conditions of a license under section 84, the Controller shall endeavour to secure" – "that in a case the license is granted to remedy a practice determined after judicial or administrative process to be anti-competitive, the licensee shall be permitted to export the patented product, if need be."
While one view in this regard is that the section does not expressly empower the Controller to assess anti-competitive conduct, a closer reading of section 84 and 90 would shed much needed light on this issue. The specific wording, at the commencement of sub-section (1) of section 90, i.e. – "In settling the terms and conditions of a license under Section 84, the Controller shall endeavour to secure" highlights the active role that the Controller has to play in assessing the anti-competitive conduct, while granting compulsory licenses. Secondly, a plain reading of section 84(7) shows that the reasonable requirements to be considered are "for the purposes of this Chapter" which shows that it is the Controller who must be the one to determine whether a practice is anti-competitive as mentioned in Section 90 (1) (ix). Thirdly, it is stated that a compulsory license may be granted "to remedy a practice determined after judicial or administrative process to be anti-competitive" and since such a remedy lies only with the Controller, the assessment must be naturally carried out by him.
Coming to the nature of the inquiry and the scope of rights of parties, while Section 84(1) states that "any person interested" may make an application to the Controller for the grant of a compulsory license, one view regarding this, akin to that taken by the Court in Monsanto is that this shows the in personam nature of the proceedings. The argument is further fleshed out by suggesting that the proceedings under the Competition Act are of a wider ambit and in rem. A corresponding proposition is that the Controller may lack the infrastructural wherewithal and knowledge expertise to assess the competition dynamics of the market.
Such a proposition may require reconsideration both because of the true nature of the proceedings for grant of compulsory licenses as well as the considerations the Controller is bound to undertake when deciding applications for grant of compulsory licenses. While it is obvious that only a specific interested party may apply for a compulsory license under section 84, the criterion for grant of such a license go far beyond mere in personam considerations. As mentioned above, the Controller. is empowered, and in fact, duty bound to take into account distortion of competition in the market. Thus, even when the license is being granted to few individuals, the considerations being kept in mind by the Controller are wider than the mere rights and liabilities of the individuals involved. While it is correct that Section 93 states that an order for a license operates as a deed between the parties concerned, the assessment carried out by the Patents Controller includes in rem considerations. The Patents Act is clear in stating that whether the terms of a licence are not conducive to the public interest is to be assessed by the Patents Controller. The powers of the Controller extend far beyond mere grant of licence for patents, their registration or their revocation. The Controller is empowered to determine the rights and liabilities of the patent holder qua third parties too. This brings the Controller in a position, much closer to that of the sectoral regulator in the context of telecom matters, i.e. TRAI.
Furthermore, Section 92 provides for special provision for compulsory licenses on notification by the Central Government, whereby the Controller is even empowered to bypass the procedure specified in Section 87. While Section 92 may be for the purposes of national emergencies and extreme emergencies, it also includes "a case for public non-commercial use". If a need does arise where the requirement is essential, the Central Government is empowered by the Parliament to take the necessary steps under Section 92 to fulfill such a need. Such a provision highlights the in rem nature of grant of. compulsory licenses.
Coming to Section 90(1) (ix) of the Patents Act, an interpretation of the provision introduced in 2005 to equate the "judicial and administrative process" to that under Sections 3 and 4 of the Competition Act would be misplaced. It would be erroneous to read the Patents Act in a manner to suggest that Section 90(1)(ix) envisages a reference to a forum or body other than the Controller of Patents. Firstly, because there is no such express mention of another body carrying out the adjudicatory process and secondly the implied power must remain with the statutory authority governing the provisions of the Act, at large. It would be factious to suggest that merely because the statute does not explicitly mention the Controller that the given power would lie with another regulator, which at the time of the framing of the Patents Act did not even exist. If at all the body or forum to decide such a controversy had to be one other than the one envisaged in the Patents Act, there should have been an explicit mention that such a function is to be performed by a third party, which is indeed not the case. Thus, though the court has rejected the argument in relation to the dissection of section 3(5), and emphasised that onerous conditions must not be placed by the patent holders, the determination of the reasonability of the said conditions must be made by the Patents Controller.
Section 140 of the Patents Act, 1970
Section 140 of the Patents Act proscribes the insertion of certain restrictive conditions in a contract in relation to sale or lease of a patented article or in a license to manufacture a patented article or to work any process protected by a patent. While the natural position would be to suggest that the Controller has the power to assess whether a condition is restrictive as under Section 140, the section itself does not specify the adjudicating authority to declare the restrictive conditions as unlawful. One approach to extrapolate the meaning of the section is to examine Justice N. Rajagopala Ayyangar's Report of 1959 on the Revision of Patents law (hereinafter "Justice Ayyangar Committee"), which forms the basis of the Patents Act, 1970.
Reliance may be placed on paragraphs 2013, 203, 823 and 824 of Justice Ayyanagar's Report to make a case for the establishment of the Monopolistic and Restrictive Trade Practices Commission to deal with anti-competitive conduct pertaining to patents, a closer look at the report may carve out space for an alternative interpretation of the intent of the drafters. While Justice Ayyanagar recommends the establishment of the MRTP Commission, this is not to deal with the questions of abuse of dominance in the context of patents but for the larger "evil" of monopolisation in the market economy. On the question of extension of patent rights to the extent of granting monopolistic power for the patent holder, reliance must be placed on paragraph 195 of the Report, wherein the solution for such a problem is provided for by Draft Clause 99, which forms the basis of Section 140 of the Patents Act, 1970.
It is pertinent to mention that this clause was derived from Section 57 of the Patents Act, 1949 of the United Kingdom. A slight correction that may be required in reading the Ayyangar Committee report is that it mentions Section 58, whereas the provisions of Section 140 are from Section 57. Section 58 of the 1949 Act (UK) is akin to Section 141 of the 1970 Act of India. The British Parliament, thereafter enacted the Patents Act of 1977 wherein such section 57 was replaced with the new section 44, dealing with "avoidance of certain restrictive conditions" and new section 45 dealing with "determination of parts of certain contracts". It was only with the enactment of the Competition Act of 1998, that the British Parliament, repealed these two sections with effect from 1st March 2000. The purpose of the series of such amendments was, in 1977, as in 1949, to keep such powers with the Patent Controller and with the enactment of the Competition Act, to expressly confer this jurisprudence to the Competition Commission. The transfer of function to regulate anti-competitive restraints in license agreements is to do away with the irreconcilable differences which would otherwise remain.
Thus, one may argue, as the petitioners in Monsanto did, that since the Indian legislature did not amend sections 140 and 141 of the Patents Act, the intent was to let the Patent Controller have primacy over such issues. To entertain even the last strain of this argument, that is if one may suggest that there was no positive intent on the part of the Indian Parliament in leaving such a vacuum in the law, its benefit must still be given to the petitioners herein.
While the jurisprudence with regard to Section 140 of the Patents Act is still developing and not much has been said in this regard, the Intellectual Property Appellate Board in paragraph 16 of Enercon (India) Limited v. Aloys Wobben [2013 SCC OnLine IPAB 14] had opined as under —
"…S. 140 says that it is not lawful to insert in a licence to manufacture or use a patented article or to work any process protected by a patent, any condition of prevention to challenges to the validity of a patent. This is the law. This condition will govern all licences which relate to or are in relation to a patented article or a process protected by a patent…"
Thus, the simplistic argument that the Patent Controller must himself determine whether an agreement falls foul of Section 140 gains weight by utilising internal aids for the specific statutory interpretation. Thus, it can be argued that Section 140 must not be read alone, but along with Sections 83 to 92 (especially Sections 84(7)(a) and 90(1)(ix)) to provide it with the necessary context for its practicable application.
Role of a Sectoral Regulator
The High Court has acknowledged that the Patents Controller does regulate patents, their registration, their applications, their revocation and their compulsory licensing. While there are multiple functions performed by the sectoral regulator in Bharti Airtel's case, i.e. TRAI which are akin to the functions performed or to be performed by the Patents Controller, the High Court has opined this the Controller's role does amount to regulation in a 'pervasive manner' and is materially different from that of the regulator of the telecom sector, i.e. TRAI.
A parallel examination of the TRAI's powers with those of the Patent Controller would show that the some similar responsibilities include ensuring compliance of and. regulating terms and conditions of licence, revocation of license and prevention of anti-competitive conduct. While one may agree that TRAI has wider power powers under and that it regulates a whole industry, the standard against which the Patents Controller's powers should be assessed is the CCI and not TRAI. Even if TRAI has a wider ambit of regulatory powers, the test should be whether the Patents Act accords the Controller with ample scope as to perform similar functions which would squarely cover the grievances raised by the Informants before the Competition Commission. As shown above, the Patents Controller is empowered to assess whether anti-competitive conditions have been imposed by the patent holder, and thus its status as sectoral regulator may require reconsideration.
Section 3(5) of the Competition Act, 2002
Section 3 of the Competition Act expressly prohibits any enterprise or group of enterprises or person or association of persons to enter into an agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India. For the purposes of this paper, arguments pertaining to 'enterprise' as under section 2(h) or 'supply of goods or provision of services' will be avoided, though it may be mentioned that the Court in Ericsson while holding patents to be goods, did not examine whether providing licenses of such patents amounted to providing service. Coming to Section 3, an exception to this statutory injunction has been carved out in sub-section (5) whereby it is stated that "nothing contained in this section shall restrict" – "the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under" "the Patents Act, 1970"
While the Petitioners in Monsanto had argued for an interpretation dissecting the sub-section into two, thereby effectively providing the patent holder an unrestrained ability to to impose conditions that it deems fit, the Court rejected such a proposition. The Court has held that Section(3)(5) is not absolute as it provides for "reasonable conditions" imposed for the protection of Intellectual Property Rights.The Court's opinion is in tandem with the Report of the Monopolies Inquiry Commission, 1965, headed by Justice KC Das Gupta, and the recommendations of the High Level Committee on Competition Policy and Law, headed by Shri SVS Raghavan (hereinafter 'Raghavan Committee Report').
At page 170 of the Report of the Monopolies Inquiry Commission, 1965, in the chapter dealing with legislative recommendations, it is observed as under —
"We see no reason why monopolies arising from patents should not be subject to the Commission's jurisdiction in the same manner (as regards monopolistic and restrictive practices and other matters) just as other monopolies are."
The Raghavan Committee Report also deals with application of Competition Law to abusive practices by a patent holder. Excerpts from relevant paragraphs are produced below —
"Intellectual Property provides exclusive rights to the holders to perform a productive or commercial activity, but this does not include the right to exert restrictive or monopoly power in a market or society." (From 5.1.7)
"During the exercise of a right, if any anti-competitive trade practice or conduct is visible to the detriment of consumer interest or public interest, it ought to be assailed under the Competition Policy/Law." (From 5.1.8)
The position taken by the High Court of Delhi at paragraph 172 of Ericsson that while an agreement which imposes reasonable restrictions is permissible and protected from the wrath of the Competition law, any agreement which imposes unreasonable restrictions is not afforded the safe harbour of Section (3)(5), has been reaffirmed in Monsanto at paragraph 48. Such a position, attempting to strike a balance between the protection of intellectual property rights and prevention of anti-competitive conduct has also been taken by the Working Group of the Planning Commission on Competition Policy, 2007, wherein the Committee observed –
"The Competition Act, 2002 does have a specific provision to deal with anti-competitive behaviour arising out of unreasonable restraint imposed by a holder of intellectual property." (From 4.1.13)
Sections 60–62 of the Competition Act, 2002
Section 60 sets out the position of the Competition Act with respect to the laws which are inconsistent with it. An overriding effect has been given to the provisions of the Competition Act over any other laws being in force. While this may lead to the assumption that as Section 84 of the Patents Act is inconsistent with the Competition Act, the latter would prevail over the former, an opposing view has been taken by the Court in Ericsson. Section 62 deals with laws not in conflict with the Competition Act. It expressly provides that the provisions of the Competition Act shall be in addition to, and not in derogation of, the provisions of any other law for the time being in force. Thus, if one assumes that there is an overlap of the two legislations, the remedy under the Patents Act would still be available to the aggrieved party. This view was affirmed by the Court in Ericsson. In Monsanto, the Court has dealt with Sections 60 and 62 in paragraph 43 wherein it has reverted that view taken earlier, that "in addition to and not in derogation" should mean that the Competition Act would not have an overriding effect over the Patents Act.
The Supreme Court has also highlighted the importance of Section 60 of the 2002 Act, in Competition Commission of India v. M/s Fast Way Transmission Pvt. Ltd. and Others [2018 4 SCC 316], wherein at paragraph 7, the Court has opined that –
"…a positive role is given to the Commission to inquire, suo motu, into the dominant position of enterprises, and to prohibit anti competitive agreements. Section 60 then gives the Act overriding effect over other statutes in case of a clash between the Act and such statues to effectuate the policy of the Act, keeping in view the economic development of the country as a whole."
From the extract above, the Competition Act having an overriding effect seems a natural conclusion. While such a view suggests that the Competition Act is the more specific and appropriate legislation to deal with anti-competitive practices, it is settled law that if a special provision is made on a certain matter, that matter is excluded from the general provision. This principle, which is expressed in the maxims Generalia specialibus non derogant and Generalibus specialised derogant, has been upheld by the Supreme Court on several occasions. Thus, the point of consideration in such a determination is the subject matter of the law in question, corresponding to the reasoning provided by the Court in Ericsson in this regard.
Coming to the question of exclusion of jurisdiction of a civil court, the petitioners relied on the judgement of the Supreme Court in Abdul v. Bhawani [AIR 1966 SCC 1718] and contended that a civil court has jurisdiction to decide all questions of civil nature and any provision which seeks to exclude the jurisdiction of a civil court is required to be strictly construed. In response to this proposition, Section 61 of the Competition Act excludes the jurisdiction of civil courts. While the provision expressly states that "no civil court shall have jurisdiction to entertain any suit or in respect of any matter" which the Commission is empowered by the 2002 Act to determine, the jurisdiction of the Controller may still not be ousted. It could be argued that Chapter XV (specifically Section 77) of the Patents Act, merely confers certain powers of the civil court on the Controller but that in turn would not equate the Controller with a civil court, whose jurisdiction would be ousted as under Section 61 of the Competition Act.
Thus, though it could be argued that the Patent Controller's jurisdiction may not be explicitly ousted, this by itself would not remove the jurisdiction of the Competition Commission either. Building from the proposition in Ericsson in this regard, it could be argued that the existence of an infringement suit (and a counterclaim) in a civil court or proceedings before the Controller, would not impinge upon the conduct of the patent holder warranting the exercise of jurisdiction by the Competition Commission. While this may be attributed to possible material differences in the nature of inquiry, conflicting findings from two regulators on a similar question, would be detrimental to public interest, which would in turn require a lucid, precise and final determination of any given controversy.
Coda – Recommendations
A situation where an aggrieved party, first approached the CCI receiving a favourable ruling against the patent holder and then approached the Controller for grant of a compulsory license would not be a desirable outcome. An alternative situation could be where the CCI invoked Section 21A to take into account the views of the Patent Controller in this regard and thereafter reach a final conclusion. The situation may be reversed, wherein the aggrieved party may approach the Controller first and Section 21 may be called into question. Application of Bharti Airtel in this scenario could also be one scenario wherein, the Patents Controller could be granted primacy in determination of jurisdictional facts. Without commenting upon how much weight one regulator's opinion might hold with the other, the reference system envisaged under section 21 and 21A requires a relook and needs to be strengthened. While, providing the Competition Commission and the respective regulators with suo motu powers to make references is envisaged in the 2020 Bill, making Section 21A a mandatory provision would have been a welcome move.
Section 19(4)(g) of the Competition Act provides for an assessment of a dominant position "acquired as a result of a statute" while Section 19(4)(m) provides for "any other factor which the Commission may consider relevant for the inquiry." While such provisions could be used to argue that Section 4 could be invoked to determine whether rights conferred by intellectual property laws amounted to an abuse, it would not be without merit to suggest that rights conferred under section 48 of the Patents Act are not absolute and subject to Section 47 and other reasonable restrictions, which the Patent Controller is himself bound to enforce. Thus, while there is a need for definite determination by Courts, it is imperative that this process is preceded by Parliament providing much needed clarity while drafting laws.
Among the key differences in Ericsson and Monsanto was the nature of the patents, with Ericsson involving standard essential patents while Monsanto did not. Another point of consideration for the Court (and the Commission) could have been (and could be) whether the test for reasonability of conditions would differ in the case of non-SEPs from that of standard essential patents. The application of the essentiality or essential facilities doctrine, as propounded in Oscar Bronner GmbH & Co. KG v. Mediaprint [Case C-7/97] by the European Court of Justice in the reference from the Austrian Court, could be considered by the Competition Commission in this regard.
With the advancement in the development of new technologies and the ever rising filing for the grant of patents, it can be said with certainty that patent law will play a major role in promoting innovation by granting protection for new inventions. Similarly, the development of competition law jurisprudence will prevent anti-competitive forces from impinging upon the market economy. The escalation of jurisdictional conflicts between the Controller of Patents and the Competition Competition is inevitable. While it could be argued that competition laws come into play only when intellectual property rights lead to distortion in markets, it is pertinent to acknowledge that duplication of effort, wastage of time and resources must not lead to the creation of an 'antitrust paradox', so as to manage the market's animal spirits by further causing distortions in the marketplace.
While this is a developing area of law and it is likely that this question will continue to be in consideration for the next few years, one hopes that courts continue to appreciate the economic impact of their decisions, keeping in mind Dr. Justice AK Sikri's advice in Shivashakti Sugars Limited v. Shree Renuka Sugar Limited & Ors. [2017 7 SCC 729]
(Ajay Sabharwal is the President of the Indian Youth Economic Association. Ashish Kumar is an electrical engineer. Both are students at the Faculty of Law, University of Delhi. Views are personal. The article was first published here)