Telefonaktiebolaget LM Ericsson v. Competition Commission of India

Introduction

The objectives of the Competition Act, 2002 (‘Competition Act’) and the Patents Act, 1970 (‘Patents Act’) are, by nature, slightly contrary to each other. While the former aims to protect the market against anti-competitive practices, the latter aims to safeguard the exclusive rights granted to the patent owner for the novel product launched by them in the market. The constant tussle between the two laws has recently been addressed by the Delhi High Court in *Telefonaktiebolaget LM Ericsson v. Competition Commission of India, *wherein it was held that the Patents Act, being a special legislation, prevails over the Competition Act on the issue of exercising rights by a patentee.

Brief facts

The order passed by the Delhi High Court in the aforementioned matter arose out of four appeals and a writ petition filed by Telefonaktiebolaget LM Ericsson (‘Ericsson’) and Monsanto. In these appeals and the writ petition, they challenged the proceedings initiated against them by the Competition Commission of India (‘CCI’). Additionally, the CCI also filed an appeal in the same matter, and a common question across the appeals was whether the CCI, under the powers granted to it by the Competition Act, can investigate a patentee's actions upon obtaining a patent and exercising its rights.

a. Submissions by Ericsson and Monsanto

It was submitted that the Patents Law is a special legislation, and it aptly deals with the provisions related to the imposition of conditions for licensing of patents, anti-competitive agreements, and explicit use of dominant position under Chapter XVI of the Patents Act.

1. The Patents Act guarantees exclusive authority to prevent third parties from utilizing patented processes or products. Ericsson highlighted that the specialized provisions of the Patents Act deal with issues related to anti-competitive agreements and the abuse of dominant market positions, in great detail under Chapter XVI of the Patents Act. Thus, Ericsson strongly opposed CCI's involvement in matters related to the determination of royalty rates or licensing conditions.

2. It was also submitted that the legislative intent to exclude CCI’s intervention is evident, as it is already extensively dealt with under Chapter XVI of the Patents Act, which covers anti-competitive practices. Any action taken by the CCI would not only contravene s. 5(i)(b) of the Competition Act but would also encroach upon the powers of the Controller under the Patents Act.

b. Submissions by CCI

It was submitted by CCI that competition law specifically deals with anti-competitive agreements and abuse of dominant position; hence, the same would not be overridden by isolated provisions of the Patents Act dealing with similar or identical issues.

1. The CCI, while citing s. 62 of the Competition Act asserted that they are claiming exclusive jurisdiction over patent-related issues and their implementation. They emphasized and stated that their primary objective was to foster and maintain competition within markets to ensure the country's economic progress. Therefore, they should be able to assess whether the implementation of a patent might impact competition within the market.

2. CCI further submitted that the Competition Act is a specialized law concerning competition matters. Thus, it takes precedence over the Patents Act in issues involving anti-competitive agreements and the abuse of dominant market positions.

3. While relying upon the provisions under s. 3(5)(i)(b) and s. 4 of the Competition Act, CCI argued that they have absolute authority to determine whether conditions imposed in a patent licensing agreement are unreasonable or amount to an abuse of dominant position, and the same are not overridden by the provisions of the Patents Act.

Held

The High Court made the following observations:-

1. The intent of the legislature became apparent, especially with the 2003 Amendment of the Patents Act, which introduced Chapter XVI, after the enactment of the Competition Act. The introduction of Section 84(6)(iv) in the Patents Act through an amendment after the passage of the Competition Act serves as evidence of the legislative intent regarding anti-competitive agreements. The Act was amended to specifically cater to cases pertaining to patents, unreasonable conditions in licensing agreements, abuse of status as a patentee, and inquiries in this respect, as well as the relief to be granted; therefore, it is to be governed by the Patents Act.

2. Once the clear legislative intent is established, the provisions of s. 21A of the Competition Act would not have any overriding effect on the provisions of the Patents Act.

In light of the above-mentioned observations, the High Court held that Chapter XVI of the Patents Act exhaustively deals with all issues pertaining to unreasonable conditions in agreements of licensing of patents, abuse of status as a patentee, inquiry, and the relief to be granted thereof. Furthermore, the Court also held that the Patents Act is a special piece of legislation, distinct from the Competition Act, and that Chapter XVI of the Patents Act constitutes subsequent legislation in comparison to the Competition Act. The introduction of Section 84(6)(iv) in the Patents Act, following an amendment after the passage of the Competition Act, serves as evidence of the legislative intent regarding anti-competitive agreements.

The court held that Chapter XVI of the Patents Act is a comprehensive legal framework regarding unreasonable conditions in patent licensing agreements, abuse of patentee status, associated inquiries, and relief. The court emphasised that the key issue at hand is not merely anti-competitive agreements and abuse of dominant market positions, which are addressed by both the Patents Act (Chapter XVI) and the Competition Act (ss. 3 and 4). The crucial aspect is anti-competitive agreements and abuse of the dominant position exercised by a patentee under the Patents Act.

Our Analysis

The Delhi High Court's decision in this case sets a significant precedent by resolving the longstanding power struggle between the Patents Act and the Competition Act. By applying the maxim "generalia specialibus non derogant" (general things do not derogate from special things) and "lex posterior derogat priori" (later law prevails over earlier law), the Court has delineated the authority of the Patents Act and Competition Act. The legislative intent, the dominance of the Patents Act in governing patentee conduct, and the specialization of the Competition Act in anti-competitive practices have been emphasized.

This ruling establishes a clear boundary between the applicability of Competition Law and issues related to patents and patentees. While promoting fair market practices is crucial, constraining the CCI's reach to prevent unwarranted control is equally vital. The existence of comprehensive legislation like the Patents Act obviates the need for CCI's intervention in patent-related matters. The judgment aligns the authority of the CCI with the intention of the legislature and maintains a delicate balance between promoting competition and safeguarding patentees' rights.

*Authored by Anshi Bhatia, Advocate at Metalegal Advocates. The views expressed are entirely personal and do not constitute legal opinion. *