In a significant ruling, the Delhi High Court has held that the Patents Act of 1970 prevails over the Competition Act 2002 when it comes to the issue of the exercise of rights by a Patentee under the Patents Act.
A division bench of Justices Najmi Waziri and Vikas Mahajan has, in a common order, quashed antitrust proceedings in the Competition Commission of India (CCI) against agrochemical giant Monsanto and telecom major Ericsson.
The Bench held that the Patents Act of 1970 is a special law, and any issue related to a patentee’s exercise of its patent rights should be addressed exclusively under the patent law rather than the Competition Act of 2002.
Put simply, the Delhi High Court has ruled that CCI lacks jurisdiction and cannot investigate whether a company has abused its dominant position while exercising patent rights. This can only be done by the controller of patents, according to the Delhi High Court.
The Delhi High Court has laid down the law while dealing with a set of appeals and a writ petition filed by agrochemical giant Monsanto, telecom Company Ericsson, as well as CCI.
“In reconciling the two statutes (the Patents Act and the Competition Act), the subject matter that is in focus is not merely anti-competitive agreements and abuse of dominant position, which both the Patents Act (in chapter XVI) and the Competition Act (in sections 3 and 4) deal with. The subject matter that is relevant for the assessment is anti-competitive agreements and abuse of a dominant position by a patentee in exercise of their rights under the Patents Act. On this issue, there is no scope of doubt beyond the pale of doubt that the Patents Act is the special statute and not the Competition Act. It is also a fact that the chapter XVI of the patents act is a subsequent legislation as compared to the competition act,” the court order said.
It may be recalled that Ericsson and Monsanto had preferred appeals in 2016 and 2020, respectively, challenging the CCI’s anti-trust investigations into the allegations that the two companies were indulging in anti-competitive practices and not making their patents reasonably available.
These two companies had questioned the CCI’s powers to conduct such an inquiry under the Competition Act.
WHAT THE COURT SAID
A single judge of the Delhi High Court refused to stay the investigation against Monsanto and Ericsson. This judge held that CCI was not wrong in ordering this investigation, as it has only taken a prima facie view. The anti-trust watchdog was thus permitted to continue investigating them. The companies then approached the division bench about this order.
The two-judge bench however now concluded that any issue pertaining to the exercise of patent law must necessarily be investigated under Patents Act and not from the purview of the competition act.
Samir Gandhi, Co-founder, Axiom5 Law Chambers, said that the Delhi High court’s judgement in the Ericsson case provides much needed clarity on the CCI’s jurisdiction. “Litigants have often had to grapple with being scrutinized for the same conduct under multiple statutes- as in this case between the Patents Act and the Competition Act. The decision also helps clarify the relationship between intellectual property rights and competition law, which can often be at odds with each other”, Gandhi said.
Naval Satarawala Chopra, Partner, Shardul Amarchand Mangaldas, a law firm, said, “The debate on whether the CCI or other sectoral regulators should hold the field while examining allegations of anti-competitive conduct has been heavily litigated in India. The latest ruling by the Division Bench of the Delhi High Court is a significant departure from some of the past decisions where the Courts would rule in the CCI’s favour. This would result in parallel proceedings and risk conflicting findings on the same set of facts. We are happy that after lengthy arguments, the Delhi HC has ultimately followed a pragmatic approach. This decision is likely to give respite to licensors and holders of intellectual property who have been embroiled in competition litigation.”