- Ashwini Chawla
Competition Law and IPR: Case for Further Limiting Scope of Interference under Article 226
[Ashwini is an Advocate, practicing independently primarily in the Delhi High Court.]
The interplay of competition law and intellectual property rights (IPR) continues to remain an unresolved issue. As a result, the holder of a patent may approach the High Court under Article 226 of the Constitution of India (Constitution), even after the Competition Commission of India (CCI) has passed an order under Section 26(1) of the Competition Act 2002 (Competition Act) (thereby causing its Director-General to carry out an investigation). The High Courts are generally circumspect while exercising their jurisdiction under Article 226 of the Constitution in such circumstances and are perhaps even less likely to grant a stay qua an investigation as commenced by the CCI by virtue of an order under Section 26(1) of the Act.
This issue assumes significance in view of the judgment delivered by the Hon’ble High Court of Delhi on 28 July 2022 in the case of Vifor International Limited v. Competition Commission of India (Vifor case). In the facts of that case, the Hon’ble High Court of Delhi declined to exercise its jurisdiction under Article 226 of the Constitution of India. Instead, the Hon’ble High Court came to the conclusion that Vifor International A.G. (Vifor), the holder of a patent against which the CCI had already directed its Director General to initiate an investigation, had approached it at a “pre-mature” stage. Notably, the Hon’ble High Court came to the conclusion that the jurisdiction of the CCI is not completely excluded, even if the subject-matter of the complaint relates to patents. Instead, the same could be said to fall outside its jurisdiction only in limited circumstances wherein a complaint made to the CCI concerns itself “solely or exclusively” with violations of the Patents Act 1970 (Patents Act).
Inherent Contradiction between Competition Law and IPR
At the outset, it needs to be noted that exclusivity is inherent in the grant of a patent under the Patents Act. This could very well give rise to the impression that there exists an inherent contradiction between the provisions of the Competition Act and the Patents Act. In fact, the High-Level Committee chaired by Mr. S.V.S. Raghavan, whose report arguably forms the edifice of the Competition Act, had flagged the issue of IPRs being used to the detriment of the interests of consumers or the general public. Notwithstanding the same, it needs to be noted that the Competition Act contains no provision which specifically deals with or addresses this issue. Instead, a safe harbour is available under Section 3(5) of the Competition Act to inter alia all such agreements which, in the specific context of a patent granted under the Patents Act, either seek to restrain any infringement of rights conferred upon a patentee under the said Act, or impose reasonable conditions as are necessary for protecting all such rights. In the absence of such safe harbour, all such agreements as entered into by the holder of a patent would be treated no differently than any other agreement for the purposes of the Competition Act.
That said, the Hon’ble Delhi High Court (Delhi HC) had, in its judgment in Monsanto Holdings Private Limited and Others v. Competition Commission of India and Others, made it sufficiently clear that the safe harbour as available under Section 3(5) of the Competition Act is not an “unqualified" one and will, therefore, not enable the holder of a patent to impose “onerous conditions” in the guise of protecting its rights.
Patents Act: Ill-equipped to Address Competition Law-related Concerns
The Patents Act is clearly insufficient to address any competition law-related concerns resulting from the exercise of rights conferred thereunder to the holder of a patent. In the event that the holder of a patent is found to be committing an abuse of its rights under the Patents Act, the only remedies which are available are the grant of a ‘compulsory license’ (under Section 84), or revocation of the patent itself (under Section 85). At the outset, the Controller of Patents is precluded from granting a ‘compulsory license’ within the first 3 years immediately following the grant of a patent. Even thereafter, the Controller of Patents may grant a ‘compulsory license’ only on the limited grounds which are specifically enumerated under the Patents Act which, essentially speaking, proscribe the failure of the holder of a patent to satisfy the ‘reasonable requirements’ of the public, or to not ensure the availability of the ‘patented invention’ to the public at a ‘reasonably affordable price’, or the non-working of the ‘patented invention’ within India. Furthermore, a patent may be revoked only on the expiry of a period of at least 2 years ever since the grant of the first ‘compulsory license’ and is, therefore, unlikely to present itself as a remedy for at least the first 5 years following the grant of a patent. It is open to the Central Government to, at any time following the grant of a patent make a ‘declaration’ (under Section 92), thereby casting an obligation upon the Controller of Patents to grant a ‘compulsory license’. However, the Central Government may do so only in certain extremely limited circumstances (i.e., ‘national emergency’, or ‘extreme urgency’, or ‘public non-commercial use’). Be that as it may, what follows is that the various remedies available under the Patents Act not only do not specifically address any competition law related concerns in the exercise of rights by the holder of a patent, but also are intended to come into effect in what could be termed as ‘extraordinary circumstances’.
Interplay between the Competition Act and the Patents Act
The Hon’ble Delhi HC had, in its judgment in Telefonaktiebolaget LM Ericsson v. Competition Commission of India, held that there exists no “irreconcilable conflict” between the Competition Act and the Patents Act, and that the Competition Act is not to the exclusion of the Patents Act, and vice versa. In the facts of that case, the Hon’ble Delhi HC took the view that the jurisdiction of the CCI is not ousted, even if the complaint relates to abuse of dominant position by the holder of a patent. In considerable measure, the Hon’ble Delhi HC took note of the fact that an ‘aggrieved party’ may simultaneously seek the grant of a ‘compulsory license’ under the Patents Act and invoke the remedies as otherwise available to it under Section 27 of the Competition Act. Furthermore, the grant of a ‘compulsory license’ is limited to the ‘aggrieved party’ alone, whereas the various remedies as available under Section 27 of the Competition Act are available in rem. The Hon’ble Delhi HC also took into consideration the operation of Sections 21 and 21A of the Competition Act; whereby it is open to the CCI to consult another statutory authority prior to or after taking a decision, and vice-versa.
It is pertinent to mention that in the facts of that case, the Hon’ble Delhi HC held that it is only the CCI which is empowered to determine as to whether the ‘safe harbour’, as provided for under Section 3(5) of the Competition Act, is attracted or not and the same cannot, in any event, be determined by the Controller of Patents, in as much as it is not specifically empowered to do so under the Patents Act.
Scope of Interference under Article 226 of the Constitution and the Case for Clarity
In view of the foregoing, an authoritative judicial pronouncement which operates so as to further limit the scope of interference by the High Court in the exercise of its jurisdiction under Article 226 of the Constitution, in circumstances such as those in the Vifor case (i.e., the CCI having passed an order under Section 26(1) of the Competition Act against the holder of a patent), is called for. This would also be in consonance with the prevailing judicial view that it is the CCI alone which is empowered and equipped so as to address any competition law related concerns in the exercise of rights by the holder of a patent and to determine whether the safe harbour provided for under Section 3(5) of the Competition Act is attracted or not.