COMPETITION LAW OBSERVER

A blog by Centre for Competition law & Policy, NLU Jodhpur

MONSANTO V. CCI: CLASSIC TALE OF JURISDICTIONAL STRIFE!

MONSANTO V. CCI: CLASSIC TALE OF JURISDICTIONAL STRIFE!

Hrishav Kumar and Anish Gupta

The issue of jurisdictional conflict between the Competition Commission of India (‘CCI’) and the IPR authorities has faced a murky scrimmage for a long time now. The latest instance being the Patents Controller locking horns with the CCI in Monsanto Holdings Private Limited and Others v. Competition Commission of India and Others.. This article will briefly analyse the aforementioned judgement.

Factual Matrix

The dispute arose when the sub-licensees (seed manufacturers) approached the CCI against Mahyco Monsanto Biotech (India) Private Limited’s (‘Monsanto’) conduct in pertinence to the sub-licensing of a patented gene – BT-II technology. The sub-licensees alleged that Monsanto abused its dominant position by charging an exorbitant fee for BT-II Technology and violated section 3(4) of the Competition Act (‘the Act’) by imposing unfair conditions in its sub-licensing agreements. The CCI held that prima facie, Monsanto’s conduct violated section 4 of the Act. and the conditions imposed in the sub-licensing agreements were harsh and unreasonable. Thereby, the CCI passed an order directing the Director General  to investigate the matter. Aggrieved by the decision of the CCI, Monsanto filed a writ petition before the Delhi High Court (‘the Court’), challenging the jurisdiction of the CCI to investigate matters relating to rights of a Patentee granted under the Patents Act, 1970 (‘Patents Act’).

Trip down the Memory Lane: Did Bharti Airtel overrule Ericsson?

Pertinently, the jurisdictional tussle between the Competition Act and the Patents Act was previously dealt by Court in the case of Telefonaktiebolaget LM Ericsson (PUBL) v. CCI (‘Ericsson’), wherein it was held that “the jurisdiction of CCI to entertain complaints for abuse of dominance in respect of Patent rights cannot be ousted.”

However, Monsanto argued that the Supreme Court’s judgment in CCI v. Bharti Airtel Ltd. & Ors. (‘Bharti Airtel’) invalidates the findings of the Court in the Ericsson case. Relying on the aforementioned judgment of the Supreme Court, it argued that the authority to determine the existence of anti-competitive concerns would first lie with the specialized statutory body (‘the patent controller’ in the present case). In fact, only on finding of anti-competitive conduct by such specialized bodies can the CCI be allowed to investigate the matter.

The Court however rejected Monsanto’s argument that the judgment in Bharti Airtel invalidated Ericsson. The Court opined that the CCI’s jurisdiction cannot be ruled out merely due to the presence of a sectoral regulator. The Court further held Bharti Airtel judgment to be inapplicable in the present case as the TRAI’s role as a regulator is more comprehensive when compared to that of the patent controller. Thus, while the TRAI can act both as a regulator and controller, the patent controller does not have the power to regulate the exercise of rights between a patentee and a third party. Further, the Supreme Court in Bharti Airtel had sent the matter back to TRAI since the issue at hand demanded the domain expertise of the TRAI. However, the Supreme Court did not eliminate CCI’s jurisdiction but merely deferred it until TRAI’s recommendations were made.

Competition Act v. Patents Act: Clearing the Air?

Monsanto argued that the Patents Act is a comprehensive legislation and has the exclusive jurisdiction to govern and regulate the matters relating to grant of patents including the abuse of exclusive rights granted to the patent holder. Section 84 of the Patents Act allows the controller to grant a compulsory license on patents in situations where the patentee unjustifiably withholds the grant of a license and the jurisdiction to entertain such matters lies with the Controller, thus excluding the jurisdiction of the CCI. Monsanto further contended that the Controller is empowered to consider factors such as appreciable adverse effect on the competition while determining grant of a compulsory license which is analogous to the functions of the CCI while examining violations of Section 3 and Section 4 of the Act. Moreover, Section 140 of the Patents Act enumerates the circumstances wherein the exercise of the patent right would amount to anti-competitive conduct which further appears similar to the principles embodied within Section 3 and Section 4 of the Act. Monsanto argued that the fact that the legislature did not omit Section 140 of the Patents Act notwithstanding the enactment of the Competition Act indicates that the lawmakers intended for the Patent Controller to continue to examine such issues. Thus, allowing the CCI to investigate matters falling under the domain of the Patent Controller might result in potentially conflicting decisions and abuse of process by individuals.

Be that as it may, the Court relying on its findings in Ericsson held that there is no irreconcilable conflict between the two statutes but instead highlighted the intention of the legislature to ensure operation of the Competition Act provisions in addition to the provisions of the other statutes. Consequently, the Court observed that although Section 140 of the Patents Act embargoes certain restrictive conditions, that does not exclude the jurisdiction of the CCI to investigate into certain matters emanating from rights granted under the Patents Act.

The Court also made a reference to Section 60 and Section 62 of the Act.  While Section 60 contains a non-obstante clause giving an overriding effect to the Act, Section 62 expressly provides that the Act will function in addition to the other laws in force. Further, the court held that there are material differences between the two enactments since the provisions of Patents Act governs abuse of dominant position by Patentee only while provisions of the Competition Act governs abuse of dominant position by an enterprise. Moreover, in Ericsson, the Court observed that whereas the Patents Act provides specific remedy to a person seeking relief, the orders passed by the CCI are in rem.

Section 3(5) of the Competition Act: Excluding the applicability of Competition Act?

Monsanto argued that Section 3(5) of the Act provides a blanket exemption to the agreement clauses containing restrictive conditions and empowers the patent holders to impose reasonable conditions restraining infringement of patent rights. Thus, the CCI has no jurisdiction to scrutinize the conditions imposed in the patent agreements. To this, the Court held that although Section 3(5) of the Act allows a person to impose reasonable conditions for restraining infringement of his IPR, such rights are not unqualified and the aforementioned “exclusionary provision to restrain infringement cannot be read to mean a right to include unreasonable conditions”. Thus, the Court opined that the question of whether an agreement contains reasonable conditions for the protection of patent rights, can be determined by the CCI. Notably, the findings of the Court appear to be in line with the recommendations of the High Level Committee on Competition Policy and Law (Page 50, ¶ 5.1.6) and the Report of the Monopolies Inquiries Commission, 1965 (Page 165).

Competition Law v. IPR:  The Ageless Conflict of appropriate Jurisdiction!

The jurisdictional tussle between the Indian Competition law and the IP laws first arose in the case of Amir Khan Production v. Union of India.  The Bombay High Court in this case had upheld the CCI’s jurisdiction to determine matters related to compulsory licensing governed under the Copyrights Act, 1957 despite the same enjoying the safe harbour of Section 3(5) of the Competition Act. In HT Media Limited v. Super Cassettes Industries Limited, the opposite party had contended that the CCI does not have the jurisdiction to deal with matters related to the license of rights and the appropriate authority to deal with matters is the Copyright Board. However, the CCI rejecting the above contention held that “the Commission is a market regulator and has the jurisdiction to look at all issues affecting competition in the market.” Later in FICCI Multiplex Association of India v. United Producers Distributors Forum, the CCI held that “Intellectual property laws do not have any absolute overriding effect on the competition law. The extent of the non obstante clause in section 3(5) of the act is not absolute.” Further, the Delhi High Court in Ericsson held that there is nothing in the Patents Act that could oust the jurisdiction of the CCI.

Conclusion: A Welcome Move?

The judgment of the Court appears to be a step in the right direction and falls perfectly in line with the precedents created over the years. Needless to say, it will go a long way in resolving the jurisdictional tussle between the CCI and other sectoral regulators. Further, the judgment may have established a ‘sectoral test’ approach for determining the jurisdiction of the CCI, i.e., when faced with a question pertaining to the jurisdiction of the CCI to investigate into a matter, the courts can take into consideration the following factors:

  • existence of a sectoral or a sector-agnostic statutory regulator,
  • existence of pervasive or comprehensive powers with the authority, and
  • domain expertise of the regulator.

In conclusion, the judgment seems to be a much needed shot in the arm for the CCI as it has confirmed CCI’s exclusive jurisdiction over competition matters.

Hrishav Kumar and Anish Gupta are fourth year students at National University of Study and Research in Law, Ranchi (NUSRL).

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