Monsanto Judgment: A Step Towards Resolving a Jurisdictional Conundrum
[Yagya and Paridhi are students at Institute of Law, Nirma University, Ahmedabad.]
On 20 May 2020, a single-judge bench of the Delhi High Court in the case of Monsanto Holdings Private Limited and Others v. Competition Commission of India and Others (Monsanto) held that the jurisdiction of Competition Commission of India (CCI) is not excluded from the matters that are essentially based on patents, yet raise significant competition concerns. The said judgment is commensurate with Telefonaktiebolaget Lm Ericsson v Competition Commission of India and Another (Ericsson), another Delhi High Court decision, pronounced in 2016. This article, while discussing the High Court’s response to the noteworthy contentions in Monsanto, will attempt to trace in history, the instances, where these two laws have conflicted with respect to jurisdiction.
The tussle for jurisdiction between the competition and the intellectual property rights (IPR) authorities is longstanding. The ambiguity concerning the appropriate forum first arose in Aamir Khan Productions Private Limited and Aamir Hussain Khan v. Union of India and the Director General Competition Commission of India, before the Bombay High Court, which vaguely remanded the matter for the CCI to decide its jurisdiction. Eventually, the CCI, sustaining its jurisdiction, denied any absolute overriding effect of the Intellectual property laws over the competition law. This was based upon the objective for setting up of CCI, which is to harmoniously interpret the Competition Act 2002 (Competition Act) with the Copyright Act 1957. In the case of HT Media Limited v. Super Cassettes Industries Limited, the issue of jurisdiction arose once again, and after the matter moved back and forth between the CCI and the High Court, the CCI decided the jurisdiction in its own favor (affirmed by the High Court). The CCI cited the inability of the Copyright Board to adjudicate upon cartel, dominance, and abuse of dominance aspects of the matter as a reason for retaining the jurisdiction.
The situation became clear-eyed in the Ericsson case, in which the Delhi High Court delved into great depths and analyzed the situation with an attempt to make this ambiguity concerning the jurisdiction, lucid. The court with regards to the jurisdiction of CCI in the said case observed that any irreconcilable repugnancy or conflict between the Competition Act and the Patents Act 1970 (Patent Act) is absent, and, in absence of such irreconcilable conflict between the two legislations, the jurisdiction of CCI to entertain complaints of abuse of dominance in respect of Patent rights cannot be ousted.
The dispute in the present case of Monsanto arose from an order, passed by the CCI under Section 26(1) of the Competition Act. Under this order, the Director General was directed to investigate the activities of the petitioners. The structure of the Monsanto Group is such that there is a joint venture between Monsanto Holdings Private Limited, a wholly-owned subsidiary of Monsanto and Mahyco Monsanto Biotech (India) Private Limited (MMBL), a company incorporated in India. MMBL sub-licenses the patented technology licensed by Monsanto to various seed manufacturers. The competition claims relate to the trait fee charged by MMBL and other terms and conditions imposed by it for using the technology for manufacturing Bt. Cotton Seeds. The dispute between the parties gave birth to multiple proceedings before different forums. The Delhi High Court dealt with the validity of orders passed by the CCI under Sections 26(1) and 33 of the Competition Act.
The contentions raised in Monsanto were much similar to those raised in Ericsson barring a few. The following sections will scrutinize a few contentions in Monsanto in detail.
Bharti Airtel Parallel
In December 2018, the Apex Court in Competition Commission of India v Bharti Airtel Limited and Others (Bharti Airtel) held that the CCI could exercise its jurisdiction only after the Telecom Regulatory Authority of India (TRAI), being a specialized regulatory body, returns its findings on the jurisdictional aspects, based on which, any order could be passed by the CCI. The judgment was a turning point for CCI as it cropped its power arguably for the first time since its inception. In this regard, the court stated that the jurisdiction of CCI is not barred, but only pushed to a later stage, allowing the TRAI to carry out its exercise first being the specialized sector regulator.
The said judgment was relied upon substantially in Monsanto by the parties contending the jurisdiction of CCI. The petitioners tried to construe the position of the Controller of Patent equivalent to that of TRAI in the telecom industry. On this basis, it was claimed that “the CCI can examine the question whether there has been abuse of dominance or an unfair trade practice only once a finding as to the jurisdictional facts has been returned by the Controller.” Further, it was contended that the concurrent jurisdiction of CCI on the matters within the domain of the Controller can result in two conflicting decisions.
However, such contentions of the petitioner were set aside by the High Court stating that the decision of Bharti Airtel was relating to the specific dispute in that case and the TRAI was vested with the jurisdiction based on its technical compatibility. The Court also differentiated between the roles performed by both, looking at the functions they perform. It was asserted that the scope of regulation of TRAI is pervasive in nature, whereas, the Controller regulates in a not so pervasive manner. To come to this conclusion, the court looked into the provisions of the TRAI and the regulations framed by it.
The petitioner contended that the effect of Ericsson has been nullified by Bharti Airtel because the Apex Court took away the CCI’s jurisdiction, consequently granting it to TRAI. In response to this, the court highlighted that in Bharti Airtel, the Bombay High Court judgment was upheld to the effect that the consideration of the information by the CCI must be deferred. The Bombay High Court expressed in its judgment that the role of TRAI was different from that of a Controller of Patent and, therefore, Ericsson is not applicable in a matter concerning TRAI. The said understanding affirms that the position of Ericsson remains intact and will continue to apply in matters relating to the jurisdictional aspect of IPR and competition laws.
Apart from this, the court relied significantly on the findings of Ericsson to refute the contentions which were similar in both the cases. The court stressed upon the conclusion reached in Ericsson, that the intention of Parliament behind enacting the Competition Act was not to repeal any other law but was to ensure that the provisions of the Competition Act are implemented in addition to the other laws.
Section 3(5) Argument
The petitioner raised an intriguing contention with respect to section 3(5) of the Competition Act when he submitted that the agreement clauses, which are inserted to restrain infringement of IPR, including patents, are excluded from the purview of the Competition Act, and the CCI would have no jurisdiction to examine the same. Section 3(5)(1) has been reproduced below for a better understanding:
“Section 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:
(a) the Copyright Act, 1957 (14 of 1957);
(b) the Patents Act, 1970 (39 of 1970);
(c) the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);
(d) the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
(e) the Designs Act, 2000 (16 of 2000);
(f) the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000).”
The petitioner asserted that Section 3(5)(1) is divided into two parts – first, which provides for a blanket exclusion to IPR laws in respect of rights to restrain infringement; and second, which relates to other reasonable conditions that may be necessary for protecting the IPR. It was contended that the term ‘reasonable’ is only associated with the second part and not in respect of agreements to restrain infringement of IPR. However, the court failed to find any merit in this argument and concluded that the words ‘or to impose reasonable conditions’ are placed between two commas and, therefore, must be interpreted as being placed as an explanation to the safe harbor of Section 3(5), and applies to the entire clause cohesively.
Key Takeaways and Impact of the Judgement
The High Court through this judgment has tried to find a way out of the current quandary revolving around the jurisdiction of the two authorities, for the reason that the CCI has become active in asserting its jurisdiction in anti-competitive aspects arising out of IPR matters. The court while doing so puts forth certain principal standpoints. First, the CCI is well within its jurisdiction when it undertakes the competition issues arising out of the patent matters; second, there exists no irreconcilable conflict between the Competition Act and the Patent Act; and third, the order passed by the CCI under Section 26(1) is an administrative order, hence, it cannot be interfered with, unless the same is found to be arbitrary, unreasonable and against the Wednesbury test. These takeaways are expected to straighten out the jurisprudence related to the interplay of competition law and IPR laws. Further, it can be expected that the litigants will be discouraged from making use of the High Court’s writ jurisdiction in CCI cases, for ulterior motives, or as mere dilatory tactics.
It is pertinent to note that Monsanto and Ericsson judgments will be majorly relied upon by the courts while dealing with such a jurisdiction matter in the future. Yet, the issue will still be tricky for the High Courts to decide due to the absence of any Supreme Court judgment in this regard. Looking at the continuous contestation over the CCI’s Section 26(1) order, the need for the Supreme Court’s view becomes all the more important as the effect of such lengthy proceedings is that it is slowing down the working of CCI substantially. The decision in the Monsanto case is, however, a step towards the triumph in establishing the jurisdiction of CCI, but the CCI will still not be able to look into the merits of the case unless all the pending cases before the High Court and the Supreme Court are disposed-off.