Experts bat for empowering CCI to deal with anti-competitive patent-related matters

CCI

The Supreme Court’s recent dismissal of a Competition Commission of India (CCI)-appeal against the Delhi High Court’s order on a patent-related case, involving Swedish telecom-major Ericsson, has effectively confirmed that patent matters are outside the purview of the anti-trust regulator, say experts. But they say, the CCI must be empowered to intervene—through an amendment in law--if there is a need to do so.

"As the Patents Act, 1970, is focused on protecting innovation and public welfare rather than addressing distortions in market competition, there is a strong and justified case for legislative reform to empower CCI to intervene when patent rights are deployed in an anti-competitive manner," said Ketan Mukhija, Senior Partner, Burgeon Law.

On September 2nd, the apex court dismissed CCI’s appeal against the Delhi High Court’s order (of 2023), which was in favour of Ericsson and a biotech company 'Monsanto' (acquired in 2018 by Bayer). The HC’s order had stated that the anti-trust regulator can’t carry-on its investigations in patent-related matters, as these come under the purview of Patents Act.

The Delhi HC had ruled that the Patents Act, 1970, is a "special law" that takes precedence over the "general law" of the Competition Act, 2002, when the dispute directly concerns the exercise of patent rights. The court reasoned that the Patents Act provides its own mechanism for addressing issues like unreasonable licensing conditions and that the CCI's investigation would duplicate the role of the Controller of Patents.

Experts say that this view was upheld by the Supreme Court on September 2nd. While the Supreme Court's decision was based on the fact that the original complainants had settled their disputes (with Ericsson and Monsanto) and withdrawn their complaints, it effectively confirmed the Delhi High Court's reasoning for this specific case, they say.

Ericsson and Monsanto’s case explained

In 2013, Ericsson was accused by other companies such as Micromax and Intex of imposing unfair and discriminatory conditions for licensing its Standard Essential Patents (SEPs). These are patents for technologies that are crucial for a particular industry standard, such as 2G, 3G, and 4G in telecommunications.

The informants had alleged that Ericsson was abusing its dominant position in the market by charging excessive royalties and not adhering to fair, reasonable, and non-discriminatory terms. This, they argued, was a violation of the Competition Act.

The CCI then initiated an investigation based on these complaints, but Ericsson challenged the regulator’s jurisdiction, in the Delhi High Court in 2015. It argued that any dispute related to patents should be handled by the Controller of Patents under the Patents Act, not the CCI.

Meanwhile, Monsanto — a company known for genetically modified seeds — faced complaints from cotton seed manufacturers in India. The latter alleged that Monsanto was charging an unreasonably high "trait fee" for its patented Bt. cotton technology and imposing unfair conditions in its sub-licensing agreements. They claimed this was an abuse of dominant position and a violation of the Competition Act.

Similar to the Ericsson case, the CCI initiated an investigation. But this was too challenged by the company in the Delhi HC, which argued that CCI has no role to play in this regard.

By 2015, the complainants had settled their cases with Ericsson and Monsanto. And hence, the HC ruled that CCI lacked the jurisdiction to pursue matter any further.

The CCI, however, took the matter to the apex court, and filed a petition, arguing that its mandate under the Competition Act extends to safeguarding competition in markets, regardless of private settlements. But the Supreme Court, dismissed the appeal.

Experts’ take

Experts, feel that the "principle of law", as noted by the SC in the Ericsson matter, holding the sweeping ascendancy of the Patents Act, 1970 over the Competition Act, 2002 in all disputes concerning patent rights, warrants a "substantive re-evaluation".

"A patent monopoly could be wielded as per se immunity against allegations of anti-competitive conduct. It is therefore imperative that this precedent be subjected to judicial review or, in the alternative, that a legislative amendment be introduced to bring in effect a harmonious construction between the two statutes, ensuring the exercise of patent rights does not transgress the pale of fair competition," said Rohit Jain, Managing Partner, Singhania & Co.

Some experts, however, say that the SC has left open the question on CCI’s jurisdiction in matters pertaining to exercise of patent rights and has refrained from interfering with the Delhi High Court’s judgment.

"As a result, parties can still challenge CCI’s jurisdiction in patent related matters...but, a legislative amendment may not effectively address potential regulatory overlaps," said Ravisekhar Nair, Partner, Economic Laws Practice.

Nair adds that the Supreme Court has left the door open for future challenges with any decision on this issue likely to depend on the specific factual context.

FAQs

Q. What is CCI?

The Competition Commission of India (CCI) is a government body that acts as India's chief competition regulator. It was established under the Competition Act, 2002, to promote and maintain fair competition in the market. Its key responsibilities are: preventing anti-competitive agreements, such as cartels and price-fixing; curbing the abuse of a dominant position by large companies; and regulating mergers and acquisitions to ensure they don't create monopolies.

Q. Why did CCI investigate Ericsson?

CCI begun its probe against Ericsson in 2013, when the telecom major was accused by other companies such as Micromax and Intex of imposing unfair and discriminatory conditions for licensing its Standard Essential Patents (SEPs). These are patents for technologies that are crucial for a particular industry standard, such as 2G, 3G, and 4G in telecommunications.  The informants had alleged that Ericsson was abusing its dominant position in the market by charging excessive royalties and not adhering to fair, reasonable, and non-discriminatory terms, which was a violation of Competition Act.