03 June 2020

CCI can entertain complaint in matters of exercise of patent rights

Relying upon its decision in the case of Telefonaktiebolaget L.M. Ericsson, the Delhi High Court has rejected the contention that the remedies against alleged abuse of any rights by the patentee would fall exclusively within the remedies as provided under the Patents Act and, therefore, the jurisdiction of the Competition Commission of India (CCI) to entertain such disputes is impliedly excluded.

The Court also noted that the Supreme Court in the decision of Bharati Airtel Ltd. 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). It held that the Apex Court’s decision does not support the contention that the Patents Act being a special Act in respect of patents, it excludes the applicability of the Competition Act, in respect of the matters that relate to patents, on account of any implicit repugnancy.

Scope of Section 3(5) of Competition Act

The Single-Judge of the High Court in the case Monsanto Holdings Pvt. Ltd. v. Competition Commission of India also rejected the plea that the patentee could include any condition/obligation in an agreement for restraining infringement of a patent and that examination of such clause including the question whether such clause is reasonable or not, is expressly excluded by virtue of Section 3(5) of the Competition Act. The Court was of the view that right to restrain infringement of IPR granted under the specified statutes (as mentioned in Section 3(5)) is not unqualified.

Noticing that the words “or to impose reasonable conditions” in Section 3(5)(i) are placed between two commas and thus must be interpreted as being placed in parenthesis that explains and qualifies the safe harbor of Section 3(5), it held that the exclusionary provision to restrain infringement cannot be read to mean a right to include unreasonable conditions that far exceed those that are necessary for the purpose.

It held that sub-section (5) of Section 3 does not mean that a patentee would be free to include onerous conditions under the guise of protecting its rights.

Examination by CCI not contingent on findings of statutory regulator

The Court also distinguished the Supreme Court judgement in the case of Bharati Airtel Ltd. while rejecting the plea that Controller of Patents was to first determine whether the agreements were an abuse of the rights under the Patents Act before the CCI could proceed further. It noticed that the role of TRAI as a regulator is materially different from that of a Controller of Patents inasmuch as a Controller does not regulate the exercise of patent rights in a pervasive manner because patents is not an industry.

The Court was of the view that the decision of the Supreme Court in Bharti Airtel Ltd. was not an authority for the proposition that wherever there is a statutory regulator, the complaint must be first brought before the Regulator and examination of a complaint by the CCI is contingent on the findings of the Regulator.

Review of Order under Section 26(1) on merits not permissible

Dismissing the writ petition, the Court in its judgement dated May 20, 2020, also found that there was no reason to interfere with the impugned order passed by the CCI under Section 26(1) of the Competition Act. It held that such an Order is an administrative order and, therefore, unless it is found that the same is arbitrary, unreasonable and fails the Wednesbury test, no interference is warranted. The Court was of the view that a review on merits is impermissible at this stage.

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