Patents Act will prevail over Competition Act over exercise of patentee’s rights, says Delhi HC

A division bench of Justice Najmi Waziri, who is demitting office Friday, and Justice Vikas Mahajan in its July 13 order said that the Competition Commission of India (CCI), established under the Competition Act “cannot exercise jurisdiction over actions of an enterprise that are in exercise of their rights as a patentee”.

“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 therefore. In reconciling the two statutes (Patents Act and Competition Act), the subject matter that is in focus is not merely anti-competitive agreements and abuse of dominant position, which both the Patents Act (in Chapter XVI) and the Competition Act (in Sections 3 and 4) deal with. The subject matter that is relevant for this assessment is anti-competitive agreements and abuse of dominant position by a patentee in the exercise of their rights under the Patents Act,” the bench said.

It said that on this issue there was “no scope of doubt” that the Patents Act is the special statute and not the Competition Act. “Therefore, when assessed, by the maxim (established principle) ‘generalia specialibus non derogant’ (the general law does not detract from the specific law) or by the maxim ‘lex posterior derogat priori’ (a later law repeals the earlier one), the Patents Act must prevail over the Competition Act on the issue of the exercise of rights by a patentee under the Patents Act,” the bench further said.

The high court quashed the proceedings initiated by the CCI while clarifying that the order should not be understood as an opinion on the merits of the claims made by the parties on whether Ericsson or Monsanto have, in fact, imposed anti-competitive conditions, or abused their dominant position.

While allowing the appeals, the bench said, “The legislative intent is apparent in that the Patents Act—especially as amended by the 2003 Amendment that introduced Chapter XVI after the Competition Act was enacted. It is especially for the field pertaining to patents, unreasonable conditions in agreements of licensing, abuse of status as a patentee, inquiry in respect thereof and relief that is to be granted thereof and relief that is to be granted therefore are all to be governed by the Patents Act.”

The court further observed that the “legislative intent and the subject matter that the two statutes deal with” is the test in ascertaining whether two statutes can “coexist”. The bench said that the starting point of this test necessarily has to be the subject matter of the statutes.

“In the present matter, the subject matter is an inquiry being conducted by a statutory authority, into allegations of anti-competitive agreements and allegations of abuse of dominant position. While the Competition Act deals with these subjects generally, the Patents Act deals with these subjects specifically in the context of patents. The legislature, in its wisdom, after enacting the Competition Act, amended the Patents Act to introduce Chapter XVI and has chosen to keep the effect of the orders of the Controller in personam. It is not for this court to comment on the propriety thereof, nor does this persuade us to permit the exercise of powers by CCI contrary to legislative intent,” the bench said.

The high court was hearing a set of pleas filed by agrochemical company Monsanto, telecom company Ericsson, as well as CCI.

Ericsson and Monsanto had filed appeals against the CCI’s “antitrust investigations” into the allegations that the two companies were indulging in anti-competitive practices and not making their patents available reasonably. CCI took the stand that the Competition Act can be triggered by any person who is affected by the anti-competitive and abusive behaviour of a patentee. The CCI said that its decision in such a situation will apply across the market to everyone whereas the scope of the Patents Act is limited to assisting a licensee of a patent, and nothing more.

A single judge of the HC decided the case against Ericsson in 2016 holding that there is no legal bar in law to the CCI proceeding under the Competition Act. In 2020, the HC passed another judgment against Monsanto relying on the 2016 judgment and came to a similar conclusion. The CCI had also filed an appeal against a 2015 order of a single judge of the HC.