Patents and Competition Law: Haze over Jurisdictional Issues cleared by The Rays Of Statutory Interpretation

The most significant duty which is vested on the judiciary is the interpretation of the statutes in force. The Legislature in accordance with the procedural Parliamentary rules, formulates and drafts the legislations. The courts on the other hand adjudicate a dispute and deliver justice by interpreting the legislative intent behind the statute. Such interpretation assumes even more significance, wherein the court in order to adjudicate a dispute is required determine the scope of two special enactments touching the same subject matter.

The Ld. Single Judge of Hon’ble High Court of Delhi was put to a similar task as regards to two special legislations namely the Competition Act, 2002 (hereinafter referred to as ‘Competition Act’) and Patents Act, 1970 (hereinafter referred to as ‘Patents Act’).

The moot question before the Ld. Single Judge was whether there is any repugnancy between the said two laws and if yes, then how does it affect the jurisdiction of Competition Commission of India (hereinafter referred to as ‘CCI’) in matters involving anti-competitive practices by the patentees. The answer to the said question required more rigour in the interpretation due to the overlapping yet seemingly contrasting goals of the above-mentioned legislations.

The matter came up before the Ld. Single Judge when Telefonaktiebolaget LM Ericsson (Publ) filed a writ petition under Article 226 of the Constitution. The petitioner in the said writ petition assailed the orders passed by CCI under Section 26(1) of the Competition Act, directing investigation by the Director General against the Petitioner.

The impugned orders were passed pursuant to the information provided by Micromax Informatics Ltd. and Intex Technologies (India) Ltd. under Section 19(1)(a) of the Competition Act. Both the informants had alleged that the Petitioner, which had a large portfolio of Standard Essential Patents (SEPs) in respect of technologies that were used in mobile handsets and network stations, had abused its position of dominance and entered into anti-competitive agreements.

The Petitioner challenged the said orders on the ground that CCI does not have any jurisdiction in matters relating to Patent as the Patents Act in itself is a complete code and relief for the alleged anti-competitive practice cannot be sought outside of it.

The Ld. Single Judge while interpreting the provisions of both the special enactments held in its judgment dated March 30, 2016 that there is no repugnancy or conflict between the two Acts as the Patent Act defines the right of the patentees and the Competition Act prevents abuse of the said rights and accordingly held that CCI will have jurisdiction in cases of anti-competitive practices by the patentees.

However, the above-mentioned judgement was challenged before the Division Bench (hereinafter referred to as “DB”) of the Hon’ble High Court of Delhi and the same has been disposed off by DB’s judgment dated July 13, 2023 titled as Telefonaktiebolaget LM Ericsson (Publ) v. Competition Commission of India & ANR., 2023 DHC :4783-DB

Before dwelling into the judgment of the DB, it is pertinent to note that the objective of CCI, the statutory body established by the Competition Act is to promote competition by keeping a check on anti-competitive agreements and prevent the abuse of the dominant position by an enterprise as enunciated in Section 3 and 4 of the Competition Act respectively.

Whereas, the raison d'etre of the Patents Act is to encourage inventions and ensure a balance between the rights of patentee and the society at large. It is also significant to note that as India is a signatory to the TRIPS agreement, and in furtherance of Article 8.2 of the said agreement, an amendment was made to the Patents Act in the year 2003 and Chapter XVI was added to the Act which provided for restricting anti-competitive practices of the patentees.

The said amended Chapter in the Patent Act provides for “working of patents, compulsory licenses and revocation” by the Controller of Patents, in cases where the patentee abuses its rights and indulges into anti-competitive practices.

The DB in its judgment observed that if the subject matter would have involved general legislations, the subsequently enacted legislation would have overridden the formerly enacted legislation. However, in the present dispute, even though the amendment made to the Patents Act in the year 2003 is a subsequent enactment to the Competition Act of 2002, the doctrine of lex posterior derogat priori (Later law repeals an earlier law) would not be applicable ipso facto, as both the legislations in question are special laws.

In order to ascertain the application of the said doctrine on the said special laws, DB relied on the judgment of the Apex Court in Ashoka Marketing Ltd & Anr. v. PNB & Ors., (1990) 4 SCC 406, and relied on the following considerations:

(i) the subject matter in question
(ii) the intendment of the statute; and
(iii) whether the scheme and relevant provisions have any indications whereby the legislature must feel one should override the other.

Accordingly, the Court examined the subject matter and intendment of the said statutes as has already been briefly discussed above in this article. Thereafter, the Court observed that Section 60 of the Competition Act does provide for an overriding effect on other laws inconsistent with it but then Section 62 provides an important clarification that the Competition Act has to be seen as an addition to the other laws and not in derogation thereof.

Holding the above into account coupled with the fact that Chapter XVI was added into the Patents Act in the year 2003 subsequent to the enactment of Competition Act in the year 2002, the Hon’ble Court held that the principle of lex posterior derogat priori would be applicable and the provisions of Chapter XVI of the Patents Act will prevail in case of conflict.

The DB held that that once there is clear legislative intent that the Patents Act will override the Competition Act, the same cannot be saved by the provisions the Competition Act.

The DB also held that the observation made by the Ld. Single Judge, that there is no overlap between the two enactments is not sustainable and noted that the conflict between the said two legislations is apparent as both deal anti-competitive agreements and allegations of abuse of dominant position.

CONCLUSION:

The Hon’ble Court subsequent to interpreting the legislative intent behind the statutes has cleared the clouds over the jurisdictional issues in matters related to patents, at least for the time being. The Court has recognised that the Patents Act is a “complete code” and it covers 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 thereof. Accordingly, the jurisdiction in relation to the anti-competitive practices lies solely with Controller of Patents in accordance with Chapter XVI of the Patents Act and not with the CCI. 

ABOUT THE AUTHOR

Tejbir Singh is an Associate at Rahul Chaudhry & Partners. He is a 2022 graduate from Faculty of Law, University of Delhi. With an experience of around a year, he is currently engaged in handling IPR litigation matters of the firm.