The intersection of the Patents Act and the Competition Act has been a subject of debate since long. While patent laws grant inventors exclusive rights to exploit their inventions for a limited period, competition laws aim to promote fair competition and prevent anti-competitive practices. The jurisdictional boundaries between these two frameworks have often been ignored, leading to conflicts and uncertainties.
The dispute originated in a landmark case when two companies, Monsanto, and Ericsson, argued that the authority to investigate anti-competitive licensing of patents lies with either the Controller or the Civil Court as per specific provisions of the Patents Act. Ericsson’s involvement with the Competition Commision of India (CCI) arose from accusations of leveraging its market dominance to establish high licensing rates for its standard-essential patents. In a similar vein, Monsanto faced CCI scrutiny for allegedly imposing elevated royalties on its genetically modified seeds, potentially leading to anti-competitive practices in the agricultural sector. Both companies separately challenged the investigation orders through writs, asserting that the CCI lacked jurisdiction in this matter. However, individual single-judge benches, in separate rulings, affirmed the CCI’s jurisdiction. Their decisions were based on Section 60, granting the CCI exclusive authority over matters related to anti-competitive conduct, and Section 62, specifying that the Competition Act complements rather than overrides any other existing law.
Competition Act vs. Patents Act
The Patents Act serves as specialized legislation overseeing the issuance, management, and enforcement of patents, providing inventors with exclusive rights to exploit their inventions for a finite duration. The parties contended that matters concerning anti-competitive behaviour or the abuse of dominance by patentees should only be examined by the “Controller or Civil Court under the provisions of section 84(7)(c)” (which explicitly outlines situations where reasonable public requirements are considered unsatisfied), r/w “section 140(1)(iii)(c)” (detailing the rights of purchasers, lessees, or licensees to use processes other than the patented process) of the Patents Act. Furthermore, they argue that “allegations of anti-competitive practice by the patent holder should be determined under section 84(6)” (addressing factors considered before granting compulsory licenses) and “section 90(1)(ix)” (permitting licensees to export patented products if a license is granted to remedy anti-competitive practices determined by the Controller) of the Patents Act. Consequently, it was argued that since the domain of anti-competitive practices by patentees is comprehensively addressed by the Patent Act, the CCI does not possess overlapping jurisdiction on this matter.
On the other hand, the Competition Act was formulated to promote fair competition, prevent anti-competitive practices, and safeguard consumer interests, regulates anti-competitive agreements and the misuse of dominant market positions across all sectors. The CCI argued that its jurisdiction becomes applicable when an individual is adversely affected by the anti-competitive and abusive conduct of a patentee. Additionally, it was contended that the mechanism outlined in the Patents Act is inadequate to empower the Controller to thoroughly investigate allegations of anti-competitive or abusive behaviour by patentees.
Rulings
The Division Bench of the Delhi High Court, in its examination of challenges raised by Ericsson and Monsanto, conducted a comprehensive comparison of the provisions, objectives, and available remedies within both the Patents Act and the Competition Act. Additionally, it scrutinized the authority and responsibilities entrusted to the Controller of Patents and the Competition Commission of India (CCI).
The Hon’ble Court concluded that Chapter XVI of the Patents Act constitutes a self-contained framework addressing all issues related to unreasonable conditions in patent licensing agreements, the abuse of patentee status, as well as the inquiry and relief to be granted. Furthermore, the Division Bench referred Section 3(5)(i)(b) of the Competition Act, which excludes the scrutiny of ‘reasonable conditions’ in patent licensing under Section 3. This exemption was considered indicative of legislative intent, emphasizing the exclusive jurisdiction of the Patents Act concerning the reasonableness of licensing terms. Similarly, the Court drew parallels between Section 83(f) of the Patents Act, preventing patent abuse and practices leading to unreasonable restrictions, and Section 4 of the Competition Act, prohibiting the abuse of a dominant market position.
The Division Bench highlighted that the examination process conducted by the Controller for approving a compulsory license closely resembles that of the CCI under the Competition Act. It was stressed that Chapter XVI of the Patents Act, being a specific provision, takes precedence over the Competition Act for two main reasons: it was enacted after the Competition Act, and it solely deals with patent-related matters. In contrast, the Competition Act functions as a broader statute.
Conclusion
The Court’s decision in this case provides valuable clarity regarding the jurisdictional overlap between the Competition Act and the Patents Act in addressing disputes related to patent licensing. Emphasizing the Patents Act as the specialized legislation overseeing the actions of patentees, the Court establishes a distinct authority for investigating anti-competitive practices associated with patents. This verdict not only safeguards the integrity of specialized intellectual property laws but also ensures the judicious application of competition law in situations where disputes revolve around patent rights and licensing practices. Furthermore, the ruling establishes a precedent for forthcoming cases addressing similar issues, providing clear guidance to both the Competition Commission and patentees regarding their respective roles and responsibilities in such disputes. While the ruling enhances legal clarity, it also underscores potential challenges. Affirming the exclusivity of the Patents Act in patent-related matters may result in certain competition law remedies for anti-competitive conduct linked to patents becoming unavailable. This could create a regulatory gap in addressing specific anti-competitive practices within the realm of patents. Notably, the Patents Act does not authorize the Controller to issue compulsory licenses for patents that may not meet the ‘reasonable requirements of the public’ standard outlined in the Patents Act, even if such patents could potentially constitute an abuse of a dominant position under the Competition Act.
This shortfall may restrict accessibility to diverse competition law remedies for anti-competitive behaviour associated with patents in the future. For instance, the jurisdiction of the CCI not only enables the imposition of monetary penalties but also empowers aggrieved parties to pursue claims for compensation and damages. Considering these implications, it becomes essential to contemplate potential legislative amendments or clarifications as they can address and rectify potential misunderstandings that might disturb the delicate equilibrium between patent rights and fair competition.
