In a pathbreaking judgement in Telephonaktiebolaget LM Erricsson Vs Competition Commission of India (CCI) & Othrs (July 2023), the Division Bench of the Delhi High Court has ruled that in matters concerning the exercise of rights by a patent holder under the Patents Act of 1970, the Patents Act takes precedence over the Competition Act of 2002.
The Court observed that a conflict between the Patents Act and the Competition Act arises due to their status as specialized laws enacted by the Parliament, with each party asserting the superiority of their respective act. However, the court must ascertain which act takes precedence by applying principles of statutory interpretation.
The court cited the Ashoka Marketing case, wherein it was established that later laws override earlier ones, except for general laws which cannot supersede special laws. To determine whether a statute is general or special, the court focused on the main subject matter and specific perspective. The court considered the purpose, policy, and intent of both enactments to resolve any inconsistencies.
The court also referred to the Gobind Sugar Mills case, emphasizing that determining whether a statute is general or special should take into consideration the principal subject matter and the intention of the act. Based on these principles, the court needs to evaluate the provisions and structures of both acts, the subject matter of the Competition Commission of India’s (CCI) inquiry, and the legislative intent regarding the exclusive jurisdiction of the inquiry.
Next, the court assessed the nature of the powers vested in the authorities established by the acts, the subject matter of the CCI’s inquiry, and whether the legislature intended for the inquiry to be conducted exclusively under either the Patents Act or the Competition Act, or if neither act supersedes the other.
The DHC observed that the CCI, established under the Competition Act, is a statutory authority responsible for preventing anti-competitive agreements and abuse of dominant position in the market. It has the authority to investigate alleged violations of Sections 3 and 4 of the Competition Act. Section 19(1) grants the CCI the power to investigate alleged violations of Sections 3 or 4, including functions such as assessing adverse effects on competition, determining dominant position, and defining the relevant market, among others. Section 26 outlines the inquiry procedure under Section 19, which includes determining the existence of a prima facie case, directing further investigation if necessary, and conducting hearings for objections. The CCI has the authority to terminate agreements, impose penalties, modify agreements, and issue other appropriate orders.
On the other hand, the Controller of Patents, as defined in Chapter XVI of the Patents Act, holds powers related to patent functioning, compulsory licenses, and revocation. Section 83 establishes general principles for exercising these powers, including promoting commercial-scale utilization of inventions in India and safeguarding public health and nutrition. Section 84 empowers the Controller to grant compulsory licenses if the reasonable requirements of the public are not met, the invention is not available at a reasonable price, or it is not being worked in India. The Controller considers factors such as attempts to obtain a license from the patent holder on reasonable terms.
The Patents Act is a special law governing patents and addressing issues related to licensing, abuse of dominant position, and imposition of conditions. It takes precedence over the Competition Act, a general legislation dealing with anti-competitive agreements.
The court observed:
“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) 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.”
The Division Bench composed of Justice Waziri and Justice Mahajan determined that the CCI lacks the authority to investigate allegations of anti-competitive conditions imposed by patent holders. The court held that the Patents Act exclusively governs these matters, and therefore, the CCI’s proceedings should be nullified.
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