In Monsanto Holdings Pvt. Ltd. and Ors. v. Competition Commission of India and Ors.[i], the Single Judge of the Delhi High Court decided two writ petitions (clubbed)[ii] challenging a plethora of orders[iii] passed by the Competition Commission of India (“CCI”) on the ground of lack of jurisdiction of the CCI. While dealing with the issue of jurisdiction of the CCI, the Single Judge held that the Bharti Airtel case[iv] was not applicable while determining the jurisdiction between the Controller of Patents and the CCI, and reaffirmed the principles laid down in Ericsson case[v]. The Single Judge further held that the sub-section (5) of Section 3 of the Competition Act, 2002 (“the Act”) does not enable an IPR Holder, such as a Patentee, to include onerous conditions under the guise of protecting its Intellectual Property Rights.
Facts in brief:
The Petitioners[vi], entities related to the Monsanto Group, filed a writ petition[vii], inter alia, impugning a common order[viii] (“the impugned order”) of the CCI under Section 26(1) of the Act, whereby the CCI had directed the Director General (“DG”) to investigate the activities of the Petitioners and Maharashtra Hybrid Seeds Company (“Mahyco”). The impugned order was passed pursuant to a reference made by the Department of Agriculture, Cooperation and Farmers Welfare, Ministry of Agriculture and Farmers Welfare, Government of India under Section 19(1)(b) of the Act against the petitioners for alleged contravention of Sections 3 and 4 of the Act and in pursuance of information filed under Section 19(1)(a) of the Act by the Informants/Respondents[ix].
In the second writ petition[x], the petitioners impugned four separate orders[xi] passed by the CCI under Section 26(1) of the Act wherein it was held that the substance of the allegations made therein were similar and directed all the matters to be clubbed for the investigation to be conducted in accordance with the impugned order.
Monsanto Company (“Monsanto”), is engaged in developing and commercializing technology for producing genetically modified seeds. Monsanto developed and patented in India a second-generation Bacillus Thuringiensis (“BT”) cotton technology Bollgard-II, which consists of two genes that makes it resistant to bollworms, as Pink Bollworms had become resistant to its previous single-gene technology Bollgard-I. Monsanto has licensed the BT Cotton Technology to its joint venture, Mahyco Monsanto Biotech (India) Pvt. Ltd. (“MMBL”). MMBL, thereafter, sub-licensed it to various seed manufacturers in India including the Informants, wherein consideration for the sub-licensing was in two parts, i.e. a non-refundable part to be paid upfront and a recurring part known as “trait value” which is determined on the basis of the Maximum Retail Price fixed for BT Cotton Seeds. The bone of contention is the trait fee charged by MMBL and related terms and conditions imposed for using the technology for manufacturing BT Cotton Seeds.
The informants alleged that MMBL, Monsanto Group and their affiliates held a dominant position in the upstream market of licensing of BT Cotton Technology to seed manufacturers as well as downstream market for manufacturing BT Cotton Seeds. The informants further alleged that the conditions imposed in the sub-license agreement were harsh, not reasonable for protecting the IPR rights, discouraged the seed companies from dealing with competitors and were restricting scientific development of alternate technologies by the informants. The CCI held the allegations of the informants have prima facie merit and, thus, passed the impugned order under section 26(1) of the Act directing the DG to conduct an investigation in the matter.
Contentions of Petitioner
The Petitioners challenged the impugned order mainly on the jurisdictional ground contending that CCI lacked jurisdiction on issues which were related to the exercise of rights granted under the Patents Act. The Petitioners contended that issues related to practices and contracts arising out of exercise of patent rights should be determined by authorities under the Patents Act, namely, the Controller of Patents (“the Controller”) and, therefore, the jurisdiction of the CCI was impliedly excluded to entertain such disputes.
The Petitioners contended that the decision of the Delhi High Court in Ericsson v CCI[xii] was not a good law in view of the subsequent decision of the Supreme Court in Competition Commission of India v. Bharti Airtel [xiii]. It was argued that to avoid two different bodies, i.e. the CCI and the Controller simultaneously evaluating the same matters resulting in potentially conflicting decisions, the Supreme Court in Bharti Airtel case had harmoniously reconciled the provisions of the Act and the Telecom Regulatory Authority of India Act, 1997 (“TRAI Act”) and held that the CCI could exercise its jurisdiction, to determine whether there has been abuse of dominance or an unfair trade practice, only after the Telecom Regulatory Authority of India (“TRAI”) had returned the findings. It was argued that the decision of Bharti Airtel case was applicable since the position of the Controller in the field of Patents was arguably similar to that of TRAI in the field of the telecom industry.
The Petitioners contended that the only remedy for unjustifiably withholding the grant of a license by the Patentee was to seek a compulsory license under Section 84 of the Patents Act, and the jurisdiction to entertain it would rest with the Controller. The Petitioners argued that the Controller, while determining whether to grant a compulsory license, is bound to evaluate whether there is any appreciable adverse effect on the competition / market in accordance with Section 140 of the Patents Act. The Petitioners submitted that Section 140 lists out cases where exercise of patents rights constitutes anti-competitive conduct and mirrors the principles of Sections 3 and 4 of the Act. The Petitioners argued that Section 140 of the Patents Act was retained on the statute despite enactment of the Act in 2002 which indicates that the legislative intent did not contemplate the CCI examining such issues and the same were required to be examined by the Controller. The Petitioners also contended that a Patent could be revoked by the Central Government and the Controller in accordance with Section 66 and 85 of the Patents Act respectively in public interest for promotion of healthy competition including cases where a Patentee is found to be abusing his position of dominance.
The Petitioners relied upon the decision of the Supreme Court in Shiva Shakti Sugars v. Shri Renuka Sugar Limited[xiv] to contend that the Court must also look into economic and realistic consequences of CCI’s jurisdiction to examine matters that were within the domain of the Patents Act. It was argued that if the Court were to permit CCI to have jurisdiction in such matters, it may result in significant resource depletion and market disruptions since various parties may abuse the process by proceeding directly to CCI instead of resorting to remedies under the Patents Act.
The Petitioners also contended that by virtue of exclusionary provision of sub-section (5) of Section 3 of the Act, the Petitioners could enter into agreement to restrain any infringement and, thus, the CCI had no jurisdiction to examine such agreements. It was argued that sub-section (5) of Section 3 of the Act had two limbs wherein the first limb provides a blanket exclusion for restraining infringement of Intellectual Property Rights (IPR) and the second limb enables imposition of reasonable conditions for protecting the IPR. It was further argued that the Parliament in its wisdom had used the word ‘reasonable’ only in the second limb and not in first limb. The Petitioners also submitted that the Informants/ Respondents had disguised their complaint alleging violation of Section 4 of the Act whereas their grievances were related to agreements covered under Section 3 of the Act.
Decision of the Court
Applicability of Bharti Airtel’s Case
The Single Judge did not agree with the contention of the Petitioners that it was essential for the specialized regulator i.e. the Patent Controller to first determine whether the agreements entered into by MMBL were an abuse of its rights under the Patents Act before the CCI could proceed further with the information or the reference filed with it. The Single Judge held that the decision of the Supreme Court in Bharti Airtel case, relating to the dispute of non-provisioning of Points of Interconnection (POIs) in telecom industry, was not applicable to the facts of the present case, and therefore Ericsson case had not been overruled.
The Single Judge noted that the nature of functions of TRAI was two-fold i.e. recommendatory and regulatory in nature. The Single Judge noted that the TRAI’s scope of regulation was all pervasive in nature. The Single Judge further noted that there were certain technical aspects relating to the telecom industry where TRAI had domain expertise such as ensuring technical compatibility and effective interconnection between different service providers, as enshrined in Section 11 (b) of the TRAI Act. The Single Judge noted that the question whether the number of POIs were sufficient was clearly required to be technically evaluated and, thus, the Supreme Court held that this would be best done by the TRAI having the domain expertise.
The Single Judge held that while the Controller does exercises powers and functions other than the grant of patents, including issuance of compulsory licenses, the Controller did not regulate the exercise of patent rights or the agreements that are entered into by patentees with third parties in a pervasive manner. The Single Judge reasoned that the patents were not an industry and grant of a Patent merely recognized and conferred an IPR. Thus, it was held that the nature of the role performed by a Controller could not be equated with that performed by the TRAI. The Single Judge held that the decision of the Supreme Court in Bharti Airtel case did not hold that wherever there was a statutory regulator, the complaint must be first brought before the Regulator and examination of a complaint by the CCI was then contingent on the findings of such Regulator.
The Single Judge further noted that in Bharti Airtel case the Supreme Court had upheld the decision of the Bombay High Court, wherein the Bombay High Court itself had expressed its the view that the role of TRAI was different than the role of a Controller of Patents and, therefore, the decision of Ericsson case was not applicable in Bharti Airtel case.
Reasonableness requirement under sub-section (5) of Section 3 of the Act
The Single Judge held that sub-section (5) of Section 3 of the Act does not enable a Patentee to include onerous conditions under the guise of protecting its rights. It was held that right to restrain infringement of IPR under Sub-section (5) of Section 3 of the Act was not an unqualified right and was allowed only to the extent it was “necessary for protecting any of his rights which have been or may be conferred upon him”.
The Single Judge cited sub-section (5) of Section of the Act “… (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— …” and held that Section 3(5)(i) cannot be dissected into two limbs as suggested by the Petitioners. The Single Judge reasoned that the words “or to impose reasonable conditions” were placed between two commas and, thus, must be interpreted as being placed in parenthesis that explains and qualifies the safe harbor of sub-section (5) of Section 3.
Reiteration of pertinent Ericsson Case findings
The Single Judge noted that in Ericsson case,[xv] it was held that there was no irreconcilable repugnancy or conflict between the Act and the Patents Act and, therefore, the jurisdiction of the CCI to entertain complaints regarding abuse of dominance in respect to patent rights could not be excluded. The Single Judge noted that it was previously[xvi] noted that even though there were similarities between provisions of Section 84(7) and 140 of the Patents Act with respect to provisions of the Act, the remedies under Section 27 of the Act are materially different from that of Section 84 and 85 of the Patents Act.
The Single Judge noted that it was previously[xvii] held that although Section 60 of the Act expressly provided that the Act would be given an overriding effect, the same would not whittle down the provisions of the Patents Act. It also[xviii] noted that Section 62 of the Act, expressly provided that the Act would be in addition to and not in derogation of the provisions of any other law for the time being in force. The Single Judge further noted that[xix] the provisions of Section 21A and 21 of the Act provided an opportunity to CCI and relevant statutory body to make reference to each other to ensure that no decision is taken in contravention of the provisions of relevant statute and the Act respectively. It was, thus, [xx] held that the legislative intent was clearly that the Act is in addition to other statutes and not in substitution thereof.
The Single Judge of the Delhi High Court in the instant Judgement decided the writ petitions and refused to interfere with the impugned order or other related orders by the CCI. The Single Judge refused to look into the merits of the case at this stage. The Court held that it could not interfere with CCI order under Section 26(1) of the Act because review on merits was impermissible at that stage and, therefore, arbitrariness and unreasonableness of the impugned administrative order could not be tested based upon wednesbury test.
The Court has upheld the CCI’s jurisdiction in matters concerning alleged anti-competitive practices for protection of the Patent Rights but at the same time upheld his previous decision clearly holding that the domain of CCI and Patent Controller are distinct and not necessarily in conflict. The analogy of Bharti Airtel case involving role of TRAI was held to be inapplicable to the Patent Controller who does not have a pervasive and regulatory role like TRAI. Importantly, the exclusion under sub-section (5) of Section 3 of the Act, 2002 was held not be giving an unqualified right to the IPR holder.
Another issue that the Court could have examined to decide the jurisdiction of the Patent Controller was interpretation of Section 69(3) of the Patents Act read with Section 140 of the Patents Act, particularly proviso of Section 69(3). Section 69 provides for, inter alia, registration of patent licenses between patentee and licensee or other type of stake holders in a patent while Section 140 lists out principles governing patent licenses. The proviso to Section 69(3) states that in case of any disputes between the parties to a license, the Controller ‘may’ refuse to enter notice of such license in the register of patents until the rights of the parties have been determined by a competent Court.
The interface between competition law and intellectual property laws is perennial and there are bound to be conflicts and overlap of powers of authorities established thereunder. Interestingly though, the unique facts of this case did not seem to suggest a conflict of powers/roles between the CCI and the Patent Controller. The IPR laws such as the Patents Act, are complete codes in themselves and usually provide clear role for authorities established therein, much like the CCI.
[The author is a Consultant in IPR practice in Lakshmikumaran & Sridharan, New Delhi]
[i] Monsanto Holdings Pvt. Ltd. and Ors. v. Competition Commission of India and Ors., 2020 SCC OnLine Del 598, judgement dated 20.05.2020.
[ii] W.P.(C) 1776/2016 and CM Nos. 7606/2016, 12396/2016 & 16685/2016; W.P.(C) 3556/2017 and CM Nos. 15578/2017, 15579/2017 & 35943/2017.
[iii] Order dated 10.02.2016 passed in Reference Case 02/2015 and Information Case 107/2015; order dated 18.02.2016; Common order dated 18.02.2016 passed in Case No.10/2016, Case No. 3/2016 and Ref Case no.1/2016; common order dated 09.06.2016 passed in Case no. 37/2016, Case no.38/206 and Case no.39/2016; Order dated 21.09.2016 in Case no. 36/2016; and Order dated 14.03.2017 in Case no. 88/2016.
[iv] Competition Commission of India v. Bharti Airtel Ltd. And Ors.,Civil Appeal No. 11843/2018, decided on 05.12.2018.
[v] Telefonaktiebolaget L.M. Ericsson v Competition Commission of India & Another, W.P.(C) 464/2014 dated on 30.03.2016.
[vi] Monsanto Holdings Pvt. Ltd., Monsanto Company and Mahyco Monsanto Biotech (India) Pvt. Ltd.
[vii] W.P.(C) 1776/2016.
[viii] Order dated 10.02.2016 passed in Reference Case 02/2015 and Information Case 107/2015.
[ix] Nuziveedu Seeds Ltd. (NSL), Prabhat Agri Biotech Ltd. (PABL) and Pravardhan Seeds Pvt. Ltd. (PSPL).
[x] W.P(C) 3556/2017.
[xi] Common order dated 18.02.2016 passed in Case No.10/2016, Case No. 3/2016 and Ref Case no.1/2016; common order dated 09.06.2016 passed in Case no. 37/2016, Case no.38/206 and Case no.39/2016; Order dated 21.09.2016 in Case no. 36/2016; and Order dated 14.03.2017 in Case no. 88/2016.
[xii] supra note 4.
[xiii] supra note 3.
[xiv] Shiva Shakti Sugars v. Shri Renuka Sugar Limited (2017) 7 SCC 729.
[xv] supra note 4.