Telefonaktiebolaget LM Ericsson v. Competition Commission of India, 2023 SCC OnLine Del 4078

By: Aakriti Singh, LLB, Amity University Noida

FACTS OF THE CASE

The Competition Act, 2002 (‘Competition Act’) and the Patents Act, 1970 (‘Patents Act’) have objectives that, by their respective nature, are slightly contrary to each other. While the Competition Act has a prime aim at protecting the market against anti-competitive practices, the Patent Act aims at safeguarding the rights that are exclusively granted to the Patent owner for the novel product launched by him/her in the market. This contrast between both the acts, creates a tussle between them, and this was addressed by the Delhi High Court in Telefonaktiebolaget LM Ericsson v. Competition Commission of India, where the court held that the Patents Act, which is a special legislation, shall prevail over the Competition Act over the issue of rights exercised by the patentees. 

Ericsson had sued mobile manufacturer, Micromax, alleging that its mobile phones infringed upon its patent and demanded from Micromax the payment of a royalty. Micromax and Intex, in response, filed a complaint before the Competition Commission of India, stating that Ericsson is abusing its dominant position, and further stating that the company was demanding unfair royalty from them. CCI took a prima facie view that Ericsson might be abusing its dominant position due to its patent ownership, CCI ordered further investigation into the matter. 

Monsanto, on the other hand, held a patent for a technology to produce genetically modified cotton seeds, and this technology was licensed to certain Indian companies who had to pay a non-refundable, recurring fee to Monsanto for using its technology. Indian Companies approached CCI, stating that Monsanto was abusing its dominant position by the virtue of holding the patent for this technology.  

Ericsson and Monsanto both approached Delhi High Court contending that CCI does not have the jurisdiction to decide matters related to patent rights.

The Delhi High Court held that the Commission was not wrong in ordering the investigation on these companies as it had taken only a prima facie view, the court further permitted the antitrust watchdog to continue with this investigation. The companies then approached a Division Bench against this order. 

ISSUES RAISED 

1. Can the Competition Commission of India (CCI) investigate and take action against the actions of a patentee under the Patents Act, 1970, given the provisions of the Competition Act, 2002?
2. Should the Patents Act, being a specialized legislation dealing specifically with patents, take precedence over the Competition Act when there is a conflict between the two statutes?

CONTENTIONS OF THE PARTIES 

SUBMISSIONS BY ERICSSON AND MONSANTO:

To substantiate its position, following was argued by Ericsson:

1. The Competition Commission of India lacks the jurisdiction to investigate the patent licensing activities, as patent licensing does not involve any kind of sale or purchase of goods or services. 
2. The authority to investigate into patent licensing, including any potential anti-competitive practices, falls under the Patent Act’s jurisdiction. 
3. They further contended that the CCI falls short of the necessary machinery and expertise to decide on what could be a fair rate for a patented product. Further, Chapter XVI of the Patent s Act, 1970,  particularly deals with multiple aspects surrounding patents, and the authority to conduct inquiries is vested in the Controller of Patent as per Section 84(4) of the Patents Act, 1970.  
4. The aim of Patents Act, 1970 is to regulate the anti-competitive practices and to prevent any patent rights abuse. Ericsson cited the Competition Commission of India v. Bharti Airtel India which established that the primary authority that is responsible for the jurisdiction in telecommunications matters is the Telecom Regulatory Authority of India (TRAI), until then the Competition Commission of India, cannot exercise its jurisdiction. 

SUBMISSIONS BY COMPETITION COMMISSION OF INDIA: 

To substantiate its position, following was argued by the Competition Commission of India:

1. The CCI contended that what mechanisms the Patents Act, 1970 lays down are insufficient and that the CCI should be given a green light to investigate into this matter. They relied on the “Aspect Doctrine” to claim that the coexistence of the Competition Act, 2002 and the Patents Act, 1970 does not negate the Commission’s jurisdiction given to it under the Competition Act. 
2. The Commission highlighted that Section 60 of the Competition Act, 2002, which confers special power, exclusively to the Commission to address matters related to anti-competitive behavior. In response to the Airtel case which Ericsson had put forth, the CCI held that, even if we go by that precedent, the CCI remains the sole authority that is empowered to investigate anti-competitive agreements and abuse of dominant position. 
3. Furthermore, the CCI relied on the ruling in Letter Patent Appeal (Telefonaktiebolaget LM Ericsson vs Coopetition Commission of India & Anr.) in which it was held that the commission can take action under the Competition Act, 2002, against Ericsson. The Commission further argued that Section 3(5)(i)(b) and Section 4 of the Competition Act, 2002 explicitly grants the commission the authority to assess whether a condition provided in the patent licensing agreement is unreasonable or not.

RATIONALE

The High Court made the following observations:

1. First, the court determined whether the Competition Act or the Patents Act is regarded as specialized legislation, and which one is seen as a general statute? 

For this, the court drew from the precedents set by the Hon’ble Supreme Court in three landmark cases— Ashoka Marketing Ltd. & Anr vs PNB & Ors, Gobind Ugar Mills Ltd. vs State of Bihar, and Rajasthan vs Binani Cements Ltd & Anr., and the court observed that to determine this question, certain factors needs to be considered:

1. The subject matter in question 
2. The intentions of the statute 
3. Whether the scheme and the relevant provisions of the two statutes provide any indication regarding which law is intended to take precedence, especially when both the statute have a non-obstante clause.

Delhi High Court observed that Chapter XVI of the Patents Act, was introduced after the Competition Act, 2002, and it addressed all matters in relation to unreasonable conditions in licensing agreements, abuse of patentee status, injuries and granting of relief. Based on this, the court found the Patents Act, 1970 to be a comprehensive legislation that specifically targets these issues, as opposed to Competition Act, 2002. Furthermore, the court also made use of two legal maxims— Generalia Specialibus Non Derogant (general laws will not prevail over the special laws) and Lex Posterior Derogate Priori (a later law repeals an earlier law), reaching the conclusion that provisions of the Patents Act, 1970, prevail over the provisions of Competition Act, 2002. 

2. Next question in line was, does the Competition Commission of India possess the required authority to investigate a patentee’s exercise of right under Patents Act,1970? Here, the court disagreed with the arguments put forth by CCI which said that it has the authority to assess whether a condition imposed in a patent licensing agreement is unreasonable, whether it can potentially lead to effects on competition or whether it leads to abuse of dominant position. The court highlighted that the inquiry that CCI held regarding the assertion of patent rights, was very much similar to the examination that the Controller of Patent conducts, under Chapter XVI of the Patents Act, 1970. 
3. The court further held that the Competition Act, 2002 provides for imposing reasonable conditions in agreements concerning the exercise of rights under the Patents Act, however, these reasonable conditions are exempted from examination under Section 3(5)(i)(b) of the Competition Act, 2002.This shows the intent of the legislature to mark the Patents Act, 1970 as the special legislation to deal in matters relating to patent agreements.

JUDGEMENT 

The court ruled that the CCI does not have the jurisdiction over the actions of the patent holder in exercise of his/her rights under the Patents Act. The court reiterated that Chapter CVI of the patents Act, offered a mechanism to tackle unfair licensing conditions and any anti-competitive actions by the patent holders. Finally, the court dismissed the proceeding of CCI against Ericsson and Monsanto. 

DEFECTS OF LAW 

Despite the clarity that has been provided by the Delhi High Court several defects and ambiguities remain:

1. Jurisdictional Overlap: The conflict between the Competition Act, 2002 and Patents Act, 1970, is an ongoing jurisdictional overlap that can result in legal uncertainties like we saw in this case. Both the statutes contain non-obstante clauses that presses towards their own supremacy; therefore this leads to a confusion regarding the prevalence of the statues. 
2. Insufficient Coordination Mechanisms: There is a lack of clear mechanisms for coordination between the CCI and the Controller of Patents. This can result in duplicative efforts and conflicting decisions, as vividly seen in this case, where both bodies sough to assert their own jurisdiction. 
3. Complexities in Legal Maxims: In this case we saw reliance on legal maxims such as “Generalia Specialibus Non Derogant” (general laws will not prevail over special laws) and “Lex Posterior Derogate Priori” (a later law repeals an earlier law) adds complexity to the legal analysis. These legal maxims are not as handy when it comes to application, especially in cases where the statutes in questions are enacted to address distinct but overlapping policy concerns. 
4. Extent of Reasonable Conditions: The definition or what constitutes as “Reasonable Conditions” in patent licensing agreements under the competition Act remains vague. This absent elf a clear definition can lead to inconsistencies in interpretation and enforcement by different bodies. 

INFERENCE 

The court’s decision reinforced the principle that specialized legislation, in this case, the patents Act, takes precedence over general laws like the Competition Act, when dealing with specific issues such as the patent rights agreements. However, the case underscores the necessity for a clearer jurisdictional boundary to avoid such conflicts and ensure an efficient and coherent regulatory oversight. 

Given the dynamic nature of market and technology, there is a need for legislative updates to ensure that both the Competition Act as well as the Patents Act can address similar contemporary challenges that it comes across efficiently. 

Judicial decision plays a vital role in clarifying ambiguities of law and setting precedents that guide the practical application of laws, in this case, the reliance of the court on legal principles and maxims provides a framework for future cases involving similar conflicts that arise between specialized laws and general laws. 

This ruling established a clear boundary between the intent and application of both the laws in their relation to patents, while promoting fair market practices is important, constraining the CCI from overreaching in its control of the market is equally important. 

REFERENCES

¹ Anshi Bhatia, Telefonaktiebolaget LM Ericsson v. Competition Commission of India, Metalegal Advocates, Aug. 11, 2023, https://www.metalegal.in/post/telefonaktiebolaget-lm-ericsson-v-competition-commission-of-india (last visited July 17, 2024).

² 2023 SCC OnLine Del 4078

³ Chapter XVI (Working of Patents, Compulsory Licenses and Revocation), The Patents Act, 1970, India Code, https://www.indiacode.nic.in/handle/123456789/1392?sam_handle=123456789/1362 (last visited July 17, 2024).

⁴ Section 84(4) of The Patents Act, 1970, India Code, https://www.indiacode.nic.in/show-data?actid=AC_CEN_11_61_00002_197039_1517807321764&orderno=86#:~:text=(4)%20The%20Controller%2C%20if,reasonably%20affordable%20price%2C%20may%20grant (last visited July 17, 2024).

⁵ Competition Commission of India v. Bharti Airtel India, (2019) 2 SCC 521

⁶ Vikrant Rana, Apalka Bareja & Shantam Sharma, Telefonaktiebolaget LM Ericsson (Publ) v. Competition Commission of India, SSRana.in, https://ssrana.in/articles/telefonaktiebolaget-lm-ericsson-publ-vs-competition-commission-of-india/(last visited July 17, 2024).

⁷ Indian Competition Act, 2002, India Code, available at https://www.indiacode.nic.in/show-data?actid=AC_CEN_22_29_00005_200312_1517807324781&orderno=3 (last visited July 17, 2024).

⁸ Ashoka Marketing Ltd. & Anr vs PNB & Ors, (1990) 4 SCC 406.

⁹ Gobind Ugar Mills Ltd. vs State of Bihar, (1999) 7 SCC 76.

¹⁰ Rajasthan vs Binani Cements Ltd & Anr.(2014) 8 SCC 319.

¹¹Indian Competition Act, 2002, India Code, available at https://www.indiacode.nic.in/show-data?actid=AC_CEN_22_29_00005_200312_1517807324781&orderno=3 (last visited July 17, 2024).