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By Snigdha Ghose and Jahanvi Raval are 3rd Year students at Gujarat National Law University
Abstract
In the labyrinth of legislative intricacies, , Standard Essential Patent (SEPs) are one of the areas where the jurisdiction of both the Patent and Competition Act overlaps. This article critically analyses the impact of Telefonaktiebolaget LM Ericsson v. Competition Commission of India (CCI) judgment on the ongoing tussle between two statutes.
Introduction
The current topic at hand has been brought into the limelight, yet again, by virtue of a recent Delhi High Court judgment. It deserves a proper understanding and deliberation, especially from an academic point of view. The tussle between these two enactments—Competition Act, 2002, and Patent Act, 1970—has been brought into question time and again. Recently, in the Telefonaktiebolaget LM Ericsson v. CCI Judgment, it was stated that Patents Law takes precedence when protecting a patent’s ownership rights. However, there were multiple other facets that the judgment failed to address with respect to arguments that were brought to the table. We make an attempt to demonstrate how the application of the Competition Law can eclipse the Patent Law when it comes to market orientation.
Legislative Intent
The Chinese philosopher Confucius exclaimed “In history lies all the secrets of statecraft.” One needs to go back to the past and trace the beginnings of any material to get a lucid idea about the intent of its makers. Thus, the first component of comprehension is to go back to the roots of these legislations. The basis of the Competition Act of 2002 and Patents Act of 1970 is the Ayyangar and Raghavan Committee Reports, respectively.
Justice Ayyangar, in Paragraphs 190-203 of his report, has outlined various types of patent abuses. These include:
- abuse of patent rights can lead to non-working imports of patented products
- cause extension of monopolies by placing constraints on the sale, lease, or licensing of patented processes or products.
- highlight that patents are misused to build monopolistic cartels and collude to control production and distribution.
These findings shed light on the potential misuse and negative consequences associated with patent rights. The implementation of compulsory licenses and provisions under Section 104 has been recognised as an effective strategy in addressing the first and second forms of abuse, respectively. The third type of abuse stems from an overabundance of economic power. To effectively combat this issue, he proposes the implementation of distinct legislation and the establishment of a dedicated commission by asserting the following, “I would therefore recommend the appointment of a commission to enquire into its existence of monopolies in the country in the sense in which the term is understood in this field of the law and the prevalence of restrictive trade practices which are detrimental to the interests of the public generally and to suggest measures to remedy the evil if found to exist.”
Therefore, it was perspicuous to assume that this act, owing to its limited scope, was not designed to address the questions related to market distortion. These responsibilities were, in turn, vested in the Competition Act, 2002.
The esteemed ‘S.V.S. Raghavan Committee Report,’ acknowledged that “There is, in some cases, a dichotomy between Intellectual Property Rights & Competition Policy/Law. The former endangers competition, while the latter engenders competition. There is a need to appreciate the distinction between the existence of a right & its exercise. During the exercise of a right, if any anti-competitive trade practice or conduct is visible to the detriment of consumer interest or public interest, it ought to be assailed under the Competition Policy/Law.”
There is no plausible reasoning for excluding monopolies resulting from patents from being subject to the jurisdiction of the Commission in a manner similar to other monopolies with respect to monopolistic and restrictive practices. The report asserted that this law was meant to address any and every problem arising out of market competition that ends up having an adverse effect on the consumers’ varied interests.
Hence, it would not be incorrect to conclude that if there is any overlap between the two legislations in relation to the ownership of the patent holders, the Competition Commission, by virtue of the intent of its makers, is better equipped to deal with the same
Delhi High Court, in its judgement, has stated that the authority Controller under section 84(6) and (7) of the Patents Act is on the same footing as the authority of the Competition Commission under Section 19(3) and (4). The Section 84 (6) (iv) stipulates that the controller should consider whether the applicant in the case has made sufficient efforts to get the licence on reasonable terms. The proviso of this section states that it is not applicable on the grounds where the patentee is using anticompetitive practices. After concluding that both provisions are on the same footing, the court held that in case of overlap between the two, the patent act shall prevail and have exclusive jurisdiction over the subject matter.
The reasoning given in this case is flawed. Firstly, Section 84 (6) (iv) in itself is not the substantive provision regarding anticompetitive use of the patent. It merely provides an exemption in case of the use of anticompetitive practices. Whereas Section 3(5)(i) concerning the anticompetitive agreements states that the section would restrict the right of the patentee to restrain anyone from infringing their right, provided that the conditions imposed were reasonable. The presence of this section concludes that the jurisdiction of the Competition Commission cannot be excluded entirely. The Competition Commission of India has the complete right to determine whether conditions imposed were reasonable or not.
Impact of the judgement of FRAND and SEPS disputes
Another critical concern raised is that if the exclusive jurisdiction is given to the patent law, it would adversely impact licensing SEPs. SEPs are standard to the particular industry and must be adhered to make standard products and to maintain smooth interoperability. It is common practice that SEP should be given on FRAND (fair, reasonable, and non-discriminatory) terms.
If we go by the preamble of the act, the primary objective of the CCI is to protect the interest of the consumers, prevent anticompetitive practices and maintain freedom of trade. The presence of CCI prevents SEP holders from charging an exorbitant amount of royalty rates and protects both parties’ rights in a balanced way. Under Sections 27 and 28, CCI can determine and make sure that SEPs are available on reasonable royalty rates.
The nature of inquiry by CCI differs from that of the controller. The inquiry by the controller is in personam, which means that the patentee may file for compulsory licensee. However, when it comes to CCI, the nature of inquiry is in rem. The commission can also take Suo moto cognition of the matter. The inclusion of CCI provides a broader picture by considering market dynamics, its impact on consumers and the competition in the market. CCI is more equipped with dealing monopolisation of patents and cartelisation.
Another concerning factor is that if exclusive jurisdiction is given to the controller under the Patents Act via Section 84 for the application of compulsory licence, it leads to a conflict. Under Section 84, compulsory licence can only be filed after three years after the patent was granted. The presence of Section 21 provides that other statutory bodies can refer matters to the CCI. It paints a more holistic picture by providing CCI’s role as complementary to the controller rather than in conflict.
Conclusion
If one looks into the legislative intent, it is clear that there was no intention to exclude the CCI from anti-competitive conditions regarding the patent. It will have the adverse impact on the competition in the market if we go by the division bench judgement, although section 84 provides grounds for compulsory licencing when anticompetitive practices are involved, but solely focusing on it and excluding the jurisdiction of CCI would negatively impact the market. This concern becomes all the more prominent when it comes to SEPs because of the presence of consumer interest and the need to prevent market monopoly and cartelisation. The exclusion of CCI would have a detrimental impact on the delicate balance between the need for innovation and maintaining the consumer interest and competition in the market.
