While highlighting that there's no conflict between the Patents Act and the Competition Act, the Delhi High Court has held that the jurisdiction of the CCI to entertain complaints regarding abuse of dominance in respect to patent rights could not be excluded.
The Single Bench of Justice Vibhu Bakhru further noted that the exclusionary clause under section 3(5) of the Competition Act cannot allow the patentee to include onerous conditions under the guise of protecting its rights.
The order has come in a plea moved by Monsanto Pvt Ltd challenging the order passed by the Competition Commission of India under section 26 of the Competition Act, wherein Director General was directed to investigate complaints of abuse of dominant position by Monsanto in the Bt Cotton market.
The dispute between the Petitioner and the informants primarily revolved around the trait fee charged by MMBL and the other terms and conditions imposed by it for using the technology for manufacturing Bt. Cotton Seeds.
MMBL is a company incorporated in India and is part of the Monsanto group. MMBL, in turn sub-licenses the technology licensed by Monsanto to various seed manufacturers in India including the Informants. It is stated that consideration for sub-licensing the said technology is in two parts. The first is a non-refundable fee, which is a required to be paid upfront. The second part is a recurring fee, which is referred to as 'trait value' and is determined on the basis of the Maximum Retail Price (MRP) fixed for Bt. Cotton Seeds.
The fees/royalty charged by MMBL from the Informants, as well as matters related to cancellation of sub-licensing agreements, have been a subject matter of disputes between them.
In the given factual scenario, the informants (Nuziveedu Seeds Ltd. ('NSL'), Prabhat Agri Biotech Ltd. ('PABL') and Pravardhan Seeds Pvt. Ltd. ('PSPL')) had filed Information under section 19(1)(a) of the Competition Act before CCI alleging contravention of the Competition Act. The Informants had accused the Petitioner of abusing its position as the dominant player in the market of Bt Cotton Seeds by charging unreasonably high trait fees.
Order of the Competition Commission of India
CCI held that MMBL held a dominant position in the relevant market of "provision of Bt. Cotton Technology in India" as well as the downstream market of "manufacture and sale of Bt. Cotton seeds in India".
Highlighting the prima facie violation of section 4 of the Competition Act, CCI found the allegations made by the informants to be prima facie merited. It held that the stringent conditions imposed in the Sub-licence agreement(s) discouraged the Seed companies from dealing with competitors and also amounted to restricting development of alternate technologies.
CCI further noted that prima facie, the conditions imposed in the Sub-licence agreements were harsh and not reasonable for protecting the IPR rights. Accordingly, the CCI had passed the order under section 26(1) of the Competition Act directing the DG to conduct an investigation in the matter.
Submissions Made By The Petitioner
The Petitioner argued that the CCI does not have any jurisdiction to examine the issues raised before it as they relate to the exercise of rights granted under the Patents Act.
According to the Petitioner, the remedies against alleged abuse of any rights by the patentee would fall exclusively within the remedies as provided under the Patents Act and, therefore, the jurisdiction of the CCI to entertain such disputes is impliedly excluded.
It was further submitted that a bare perusal of Section 140 of the Patents Act indicates that it mirrors the principles that are embodied in Sections 3 and 4 of the Competition Act. Therefore, in terms of Section 66 and 85 of the Patents Act, a patent could be revoked in public interest.
Petitioner also argued that section 140 of the Patents Act was retained despite the presence of the Competition Act. This shows that the legislative intent did not contemplate the CCI examining such issues and the same were required to be examined by the Controller.
'if it is held that the CCI had jurisdiction to examine matters that were within the domain of the Patents Act, it would result in various parties abusing the same and proceeding directly to CCI instead of resorting to remedies under the Patents Act. This would result in loss of significant resources and cause market disruptions', the Petitioner argued.
The Petitioner further contended that in terms of Section 3(5) of the Competition Act, the Petitioners were well within their right to enter into agreement to restrain any infringement and this aspect was expressly excluded by virtue of Section 3(5) of the Competition Act.
Observations of the Court
On the issue of conflict of laws, the court observed that section 62 of the Competition Act clearly expresses the legislative intent that the Competition Act is in addition to other laws and not in substitution thereof.
The court further highlighted that orders that can be passed by the CCI under Section 27 of the Competition Act in respect of abuse of dominant position by any enterprise are materially different from the remedies that are available under Section 84 of the Patents Act.
In light of this, the court observed, the move of a prospective licensee to approach the Controller for a compulsory license would not be inconsistent with the CCI passing an appropriate order under Section 27 of the Competition Act.
Therefore, the court concluded that there's no conflict between the Competition Act and the Patents Act and, therefore, the jurisdiction of the CCI to entertain complaints regarding abuse of dominance in respect to patent rights could not be excluded.
The court also highlighted that the exclusionary provision under section 3(5) of the Competition Act to restrain infringement cannot be read to mean a right to include unreasonable conditions that far exceed those that are necessary, for the aforesaid purpose.
'Subsection (5) of section 3 of the Competition Act does not mean that a patentee would be free to include onerous conditions under the guise of protecting its rights', the court held.
While refusing to interfere with the merits of the case, the court noted that order passed by the CCI under Section 26(1) of the Competition Act is an administrative order and, therefore, unless it is found that the same is arbitrary, unreasonable and fails the wednesbury test, no interference would be warranted.
Therefore, the court refused to interfere with the orders passed by the Competition Commission of India.
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