Delhi High Court Holds that Competition Authority Lacks Jurisdiction to Determine Reasonable Patent Royalties

As reported by Vicente Zafrilla on the IPKat Blog, last month the High Court of Delhi at New Delhi issued a decision in five joined cases holding that the Competition Commission of India (CCI) lacks jurisdiction to consider whether patent holders Ericsson and Monsanto abused their dominant position by charging excessive royalties, in violation of sections 3 or 4 of India’s Competition Act.  According to the court, sections 83 et seq. of the Patents Act should be read as conferring exclusive jurisdiction on the Controller of Patents to determine when and under what conditions a compulsory license should be granted.  I am no expert on India’s rules regarding statutory interpretation, so I won’t criticize the decision on doctrinal grounds.  Like Mr. Zafrilla, however, I am concerned about the implications of the decision, some of the language of which seems pretty broad:

11. In our opinion, WP(C) 464/2014, 1006/2014, 1776/2016 and 8379/2015 should be allowed on a finding in law that the CCI cannot exercise jurisdiction over actions of an enterprise that are in exercise of their rights as a patentee. This is being discussed below.

 

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50. In our view, the Competition Act is a general legislation pertaining to anti-competitive agreements and abuse of dominant position generally. The inclusion of Section 84(6)(iv)¹¹ in the Patents Act by way of an amendment after the Competition Act was passed with Section 3(5)(i)(b)¹² is particularly instructive of the above legislative intent as regards anti-competitive agreements.

 

51. For deciding an application for compulsory licensing, the Controller is empowered by the Patents Act to consider the reasonability of conditions imposed in a license agreement. The CCI is empowered under the Competition Act to examine anti-competitive agreements and abuse of dominant position. However, the Competition Act makes provision for reasonable conditions being imposed in an agreement concerning exercise of rights under the Patents Act. Since such reasonable conditions are exempted from examination under section 3(5)(i)(b) of the Competition Act, it is indicative of the legislature‘s intendment as to the exclusive domain of the Patents Act regarding reasonable conditions. Similar, in our view, is the situation with the language of Section 83(f) of the Patents Act as compared with that of Section 4 of the Competition Act.

 

52. In our opinion, Chapter XVI of the Patents Act is a complete code in itself on all issues pertaining to unreasonable conditions in agreements of licensing of patents, abuse of status as a patentee, inquiry in respect thereof and relief that is to be granted therefor.

 

¹¹ 84. ***

 

(6) In considering the application filed under this section, the Controller shall take into account,—

 

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(iv) as to whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period as the Controller may deem fit:

Provided that this clause shall not be applicable in case of national emergency or other circumstances of extreme urgency or in case of public non-commercial use or on establishment of a ground of anticompetitive practices adopted by the patentee, but shall not be required to take into account matters subsequent to the making of the application.

 

¹² 3. ***

 

(5) Nothing contained in this section shall restrict—

 

(i) the right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary for protecting any of his rights which have been or may be conferred upon him under—

 

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(b) the Patents Act, 1970 (39 of 1970)

 

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I agree with Mr. Zafrilla that the decision's consequences could be significant, particularly in relation to FRAND-committed SEPs (as in the Ericsson matters, though I assume not the Monsanto matter) which he notes “are inherently relevant to for competition law because” of their tendency toward dominance; moreover, as he notes, “not all the anticompetitive concerns are connected to excessive pricing.”  He also sees a possibility of bifurcation, with the Controller of Patents deciding all cases involving allegations of excessive pricing (which he thinks may increase, as a result of this ruling, contrary to the interests of the patent owners), and CCI retaining jurisdiction over others.