Jurisdiction of the Competition Commission of India in Patent matters

Monsanto Holdings Pvt. Ltd. and Ors. vs. Competition Commission of India and Ors.[1]

About the Petitioners & the subject matter

The Monsanto Company (hereinafter referred to as “Monsanto”) is engaged in agricultural innovation and is credited to developing and commercializing Bt. Cotton Technology, a single-gene technology for producing seeds that were resistant to bollworms (Bollgard-I) and a second generation cotton technology, which consists of two genes that makes it resistant to bollworms (Bollgard- II), said patented technologies licensed to Mahyco Monsanto Biotech (India) Pvt. Ltd. (hereinafter referred to as 'MMBL'). MMBL, in turn sub-licenses the technology licensed by Monsanto to various seed manufacturers in India.

Competition Commission of India (CCI)’s order

The Department of Agriculture, Cooperation and Farmers Welfare, Ministry of Agriculture and Farmers Welfare, Government of India (hereinafter referred to as the MOA&FW) made a reference[2] under Section 19(1)(b) of the Competition Act before the CCI against MMBL, Monsanto and Monsanto Holdings Pvt. Ltd. (hereinafter referred to as 'MHPL') (collectively, the petitioners herein), alleging contravention of provisions of Sections 3 and 4 of the Competition Act. The reference was made pursuant to information[3] filed under Section 19(1)(a) of the Competition Act by Nuziveedu Seeds Ltd. ('NSL'), Prabhat Agri Biotech Ltd. ('PABL') and Pravardhan Seeds Pvt. Ltd. ('PSPL') (collectively hereinafter referred to as the “Informants”). It is pertinent to note herein that the Informants are also sub-licensees of the patented technology pertaining to Bt. Cotton from MMBL and disputes relating to the terms of the sub-license agreement(s) exist between the said parties.

By way of order[4] dated February 10, 2016, the CCI broadly held and observed as follows:

The conduct of MMBL prima facie appears to be in violation of Section 4 of the Competition Act;

The notification requirements coupled with the stringent termination conditions in the Sub-license agreements are in the nature of refusal to deal and exclusive supply agreements within the meaning of Sections 3(4)(b) and 3(4)(d) of the Competition Act; and

The termination conditions in the Sub-license agreements were excessively harsh and did not appear to be reasonable as may be necessary for protecting any of the IPR rights, as envisaged under Section 3(5) of the Competition Act.

Accordingly, under the provisions of Section 26(1) of the Competition Act, the Commission directed the Director General to conduct an investigation into the matter.

Writ Petition before the Delhi High Court

The above-named petitioners filed the present writ petition before the Delhi High Court against the above-mentioned impugned order of the CCI.

Petitioners’ Contentions

Lack of Jurisdiction of CCI

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; and

The Patents Act is a comprehensive enactment, which exclusively governs and regulates all practices and contracts that relate to or arise out of exercise of patent rights.

Hon’ble Supreme Court’s decision in Competition Commission of India vs. Bharti Airtel Ltd. And Ors.[5]

Controller’s position similar to Telecom Regulatory Authority of India (TRAI) as the Controller also exercises powers to regulate the grant of patents and exercise of rights under the Patents Act; and

CCI can examine the question whether there has been abuse of dominance or an unfair trade practice only once a finding as to the jurisdictional facts has been returned by the Controller;

Provisions of the Patents Act

Section 140 of the Patents Act mirrors the principles that are embodied in Sections 3 and 4 of the Competition Act;

As per Section 66 and 85 of the Patents Act, a patent could be revoked in public interest; and

Hence, in cases where a Patentee is found to be abusing his position of dominance, it would be open for the Controller to revoke the patent in exercise of powers under Section 85 of the Patents Act.

Legislative Intent

Section 140 of the Patents Act was retained despite the enactment of the Competition Act in 2002; and

If the Legislature intended that the determination whether a Patentee had abused his position of dominance was required to be examined by the CCI, the legislature would have suitably amended Section 140 of the Patents Act.

Blanket exclusion by virtue of Section 3(5) of the Competition Act

Clauses of the agreement, which are designed to restrain infringement of IPR including patents are excluded from the purview of the Competition Act and the CCI would have no jurisdiction to examine such agreements.

Decision of the Hon’ble High Court

Telefonaktiebolaget L.M. Ericsson vs. Competition Commission of India & Anr.[6]

The Hon’ble Judge referred to above decision, wherein the Hon’ble Delhi High Court elaborately dealt with the question whether the jurisdiction of the CCI to examine matters, which involve one of the parties exercising rights as a Patentee, is excluded. The Hon’ble Judge discussed various issues as dealt with in the above-mentioned decision and specifically took note of the following findings:

The provisions of the Competition Act clearly indicate that the intention of the Parliament was not to repeal any other statute by enacting the Competition Act but on the contrary the legislative intent was to ensure that the provisions of the Competition Act are implemented in addition to the provisions of other statutes.

There was no irreconcilable repugnancy or 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 of patent rights could not be excluded.

Accordingly, the Hon’ble Judge noted that the above-mentioned decision squarely covers the principal contention advanced on behalf of the petitioners that the CCI has no jurisdiction to entertain any complaint against an enterprise in respect of matters which relate to exercise of its patent rights.

Hon’ble Supreme Court’s decision in Competition Commission of India vs. Bharti Airtel Ltd. And Ors.[7]

Specifically, with respect to the decision of the Apex Court as cited by the Petitioners, the Hon’ble Judge noted as follows:

The Hon’ble Supreme Court in that case did not accept the contention that the jurisdiction of the CCI was ousted by virtue of the telecom industry being regulated by a statutory body (TRAI); and

The Hon’ble Supreme Court did not accept the contention that the jurisdiction of the CCI in respect of matters, which are regulated by a specialised statutory body, were excluded from the applicability of the Competition Act.

Thus, the Hon’ble Judge observed that this decision does not support the Petitioners’ contention that the Patents Act being a special act in respect of patents excludes the applicability of the Competition Act in respect of the matters that relate to patents on account of any implicit repugnancy.

In view of the above, the Hon’ble Judge upholding the jurisdiction of CCI and dismissing the writ petition of the Petitioners, held that an 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[8], no interference would be warranted. Since a review on merits was impermissible at the time of the decision of the Hon’ble Judge, therefore, the Hon’ble Judge refrained from examining the merits of the dispute.

[1] W.P.(C) 1776/2016 and CM Nos. 7606/2016, 12396/2016 & 16685/2016, W.P.(C) 3556/2017 and CM Nos. 15578/2017, 15579/2017 & 35943/2017, W.P.(C) Nos. 1776/2016 & 3556/2017

[2] Reference Case No. 2 of 2015

[3] Case No. 107 of 2015

[4] Reference Case No. 2 of 2015 & Case No. 107 of 2015

[5] Civil Appeal No. 11843/2018

[6] W.P.(C) 464/2014

[7] Civil Appeal No. 11843/2018

[8] As laid down in the case of Associated Provincial Picture Houses Ltd vs. Wednesbury Corporation (1948) 1 KB 223, the Wednesbury unreasonableness refers to a standard of unreasonableness used in assessing an application for judicial review of a public authority's decision. A reasoning or decision is Wednesbury unreasonable (or irrational) if it is so unreasonable that no reasonable person acting reasonably could have made it. The test is a different (and stricter) test than merely showing that the decision was unreasonable.

The article was originally posted on www.lexology.com on June 16, 2020 and can be accessed here.