TaxTMI 
TaxTMI 
2023 (7) TMI 1614
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.... ASG with Mr. Avinash Sharma, Ms. Monica Benjamin, Ms. Anu Sura, Ms. Akanksha Kapoor and Mr. Siddhant Chaudhary, Advs. for CCI, Mr. Sajan Poovayya, Sr. Advocate with Ms. Saya Choudhary Kapur, Mr. Ashutosh Kumar, Mr. Vivek Ranjan Tiwary, Mr. Vinod Chauhan, Ms. Vrinda Bagaria, Mr. Palash Maheshwari, Mr. Radhika Pareva, Mr. Munesh Sharma, Mr. Anand S. Pathak, Mr. Shashank Gautam, Ms. Sreemoyee Deb, Mr. Rajat Moudgil, Mr. Ravishekhar Nair, Mr. Sahil Khanna, Ms. Raksha Agarwal and Mr. Abhishek Kakker, Advs. For the Respondents : Mr Balbir Singh, ASG with Mr Avinash Sharma, Ms Monica Benjamin, Ms. Anu Sura, Ms. Akanksha Kapoor and Mr. Siddhant Choudhary, Advs. for CCI. Mr. J. Sai Deepak and Mr. Avinash K. Sharma, Advocate for R-2 (INTEX), Mr. N. Venkatraman, ASG with Mr. Samar Bansal, Mr. Madhav Gupta and Mr. Vedant Kapur, Advs for CCI. Mr. Ruchir Mishra and Mr. Mukesh Kr. Tiwari, Advs. for UOI, Mr. Neeraj Kishan Kaul, Sr. Advocate with Ms. Saya Choudhary Kapur, Mr. Ashutosh Kumar, Mr. Vivek Ranjan Tiwary, Mr. Vinod Chauhan, Ms. Vrinda Bagaria, Mr. Palash Maheshwari, Mr. Radhika Pareva, Mr. Sajan Shankar Prasad, Mr. Munesh Sharma, Mr. Swarnil Dey, Mr. Shaurya Pandey, Mr. Anand S. Path....
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....Monsanto against CCI and various informants. The 2020 Judgement relied extensively on the 2016 judgement and dismissed the writ petition, holding that there is no bar in law to the CCI proceeding against Monsanto under the Competition Act for alleged violation of sections 3 or 4 thereof, on the basis of information filed by the informants. The contention of the informants against Monsanto was, as with that against Ericsson that Monsanto is charging excessive royalties and not making its patents available reasonably, which is a violation of sections 3 and/or 4 of the Competition Act. 5. WP(C) 8379/2015 is filed, again, by Ericsson against CCI. In this writ petition, Ericsson challenged letters dated 16.7.2015 and 14.8.2015 issued by the CCI, which letters Ericsson terms as "Notices/Summons". This was in continuation of action being taken by CCI on the information of Micromax as to Ericsson not being fair, reasonable and non-discriminatory in dealing with SEP, thus violation sections 3 and/or 4 of the Competition Act. SUBMISSIONS MADE BY THE PARTIES 6. Extensive submissions have been made by the learned Additional Solicitors General, the Senior Advocates and various counsel ....
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....by the Civil Court by deciding their Fair, Reasonable and Non-Discriminatory ('FRAND') rates. f) The CCI neither has power or machinery nor expertise to decide the rates. Allegations of anti-competitive practice by the patent holder are to be determined under section 84(6) and section 90(1)(ix) of the Patents Act. The CCI has no role to play in this regard. g) Once the field of anti-competitive practice has been occupied under the aforesaid provisions of the Patents Act, there is no scope for the CCI to enter into it. The impugned order of the CCI is without application of mind because it seeks to examine the 'relevant market'. However, the relevant market would be only when there is sale and purchase of goods/services. In this case, there is no sale or purchase but mere licensing of FRAND rates, therefore, it is argued that the CCI's order cannot be sustained. h) The CCI seeks to start an enquiry without even disclosing as to how the market has been affected. It is merely a fishing enquiry into the water that may be too deep for it and, is taboo being beyond its jurisdiction to enter. i) CCI has not disclosed any material nor....
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.... that the Patents Act will be subservient to the Competition Act. p) If the CCI is permitted to proceed in the matter, it will render the patentees' rights nugatory. FRAND terms can only by determined by a Civil Court, or by the Controller in exercise of powers under Chapter XVI of the Patents Act, and to such extent, the power of CCI must necessarily be regarded as circumscribed. q) The informants have sufficient remedies available to them under the Patents act, both before Court as well as before the Controller. There is no reason to approach the CCI, other than to initiate vexatious litigation. r) Legislative history shows that the legislature always intended for the Patents Act to govern anti-competitive practices and abuse of patent rights. s) Matters pertaining to violation of FRAND assurances and obligations are not capable of being considered by the CCI. It is a purely contractual dispute between the patentee, licensee and the Standard Setting Organisation. t) If in a matter the Court sets a royalty rate as appropriate or FRAND rate, the CCI admittedly cannot interfere. That being the statutory landscape and legal topography,....
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....he Patents Act is insufficient to enable the Controller to effectively inquire into allegations of anti-competitive or abusive behaviour of patentees. This is an exercise that can effectively considered only by the CCI. d) Legislative history demonstrates the intent of the legislature, that CCI must have power to inquire into allegations of anti- competitive and abusive behaviour of patentees. e) The Competition Act itself, by section 60, prohibits raising contentions of anti-competitive agreements and abuse of dominant position before any other statutory authority/court. f) Bharti Airtel (supra) is inapplicable in the present matters. Controller is not a regulator of an industry and thus Bharti Airtel (supra) will not be relevant for considering the issues in the these cases. g) CCI is the regulator of the market, whereas Controller of Patents is not a regulator but a mere authority to effectively implement the Patents Act. Thus, even by applying the judgement in Bharti Airtel (supra), the CCI is the only authority that can look into questions of anti-competitive agreements and abuse of dominant position by patentees. Section 84(6) of the Patent....
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..... 15. They contend that Chapter XVI of the Patents Act is a complete code in itself as far as use of patents and anti-competitive practices are concerned. They submit that in any event, the legislative intent that the Competition Act should not deal with questions of patents is writ large on a comparison of the Patents Act with the Competition Act. 16. The CCI, supported by the informants, contends to the contrary. Drawing reference to section 62 of the Competition Act, it contends that the CCI is not claiming exclusive power over issues concerning patents and their being worked. It contends that the CCI is established to promote and sustain competition in markets to ensure economic development of the country, and it cannot be prevented from considering the question of whether the working of a patent will affect competition in the market. 17. CCI contends that the Competition Act, Competition is a special enactment as far as competition is concerned; that but for section 62 of the Competition Act, on questions of anti-competitive agreements and abuse of dominant position, the Competition Act will override the Patents Act. Since section 62 of the Competition Act protects ot....
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....g measures to protect public health; (f) that the patent right is not abused by the patentee or person deriving title or interest on patent from the patentee, and the patentee or a person deriving title or interest on patent from the patentee does not resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology; and (g) that patents are granted to make the benefit of the patented invention available at reasonably affordable prices to the public. xxx xxx xxx 84. Compulsory licence: ... (4) The Controller, if satisfied that the reasonable requirements of the public with respect to the patented invention have not been satisfied or that the patented invention is not worked in the territory of India or that the patented invention is not available to the public at a reasonably affordable price, may grant a licence upon such terms as he may deem fit. 85. Revocation of patents by the Controller for non-working: (1) Where, in respect of a patent, a compulsory licence has been granted, the Central Government or any person interested may, ....
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....and the opponent an opportunity to be heard before deciding the case. 88. Powers of Controller in granting compulsory licences: (1) Where the Controller is satisfied on an application made under section 84 that the manufacture, use or sale of materials not protected by the patent is prejudiced by reason of conditions imposed by the patentee upon the grant of licences under the patent, or upon the purchase, hire or use of the patented article or process, he may, subject to the provisions of that section, order the grant of licences under the patent to such customers of the applicant as he thinks fit as well as to the applicant. (2) Where an application under section 84 is made by a person being the holder of a licence under the patent, the Controller may, if he makes an order for the grant of a licence to the applicant, order the existing licence to be cancelled, or may, if he thinks fit, instead of making an order for the grant of a licence to the applicant, order the existing licence to be amended. (3) Where two or more patents are held by the same patentee and an applicant for a compulsory licence establishes that the reasonable requirements of....
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.... the fullest extent by the person to whom the licence is granted and with reasonable profit to him; (iii) that the patented articles are made available to the public at reasonably affordable prices; (iv) that the licence granted is a non-exclusive licence; (v) that the right of the licensee is non-assignable; (vi) that the licence is for the balance term of the patent unless a shorter term is consistent with public interest; (vii) that the licence is granted with a predominant purpose of supply in the Indian market and that the licensee may also export the patented product if need be in accordance with the provisions of sub-clause (iii) of clause (a) of sub- section (7) of section 84; (viii) that in the case of semi-conductor technology, the licence granted is to work the invention for public non-commercial use; (ix) that in case the licence is granted to remedy a practice etermined after judicial or administrative process to be anti-competitive, the licensee shall be permitted to export the patented product, if need be. (2) No licence granted by the Controller shall authorise the licensee to import the patente....
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....sub-section (1) that it is necessary in - (i) a circumstance of national emergency; or (ii) a circumstance of extreme urgency; or (iii) a case of public non-commercial use, which may arise or is required, as the case may be, including public health crises, relating to Acquired Immuno Deficiency Syndrome, human immunodeficiency virus, tuberculosis, malaria or other epidemics, he shall not apply any procedure specified in section 87 in relation to that application for grant of licence under this section: Provided that the Controller shall, as soon as may be practicable, inform the patentee of the patent relating to the application for such non-application of section 87. xxx xxx xxx 140. Avoidance of certain restrictive condition :. (1) It shall not be lawful to insert - (i) in any contract for or in relation to the sale or lease of a patented article or an article made by a patented process; or (ii) in a licence to manufacture or use a patented article; or (iii) in a licence to work any process protected by a patent, a condition the effect of which may be -....
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....lease of, or licence to use, a patented article, by which the lessor or licensor reserves to himself or his nominee the right to supply such new parts of the patented article as may be required or to put or keep it in repairs 19. The relevant provisions of the Competition Act are: "Section 2 In this Act, unless the context otherwise requires, - ... (b) "agreement" includes any arrangement or understanding or action in concert, -- (i) whether or not, such arrangement, understanding or action is formal or in writing; or (ii) whether or not such arrangement, understanding or action is intended to be enforceable by legal proceedings; 1[ 2[(ba) "Appellate Tribunal" means the National Company Law Appellate Tribunal referred to in sub-section (1) of section 53A;]] ... (f) "consumer" means any person who - (i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any s....
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....kely to cause an appreciable adverse effect on competition within India. (2) Any agreement entered into in contravention of the provisions contained in sub-section (1) shall be void. (3) Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which - (a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technical development, investment or provision of services; (c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition: Provided that nothing contained in this sub-section shall....
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....es any agreement to limit, restrict or withhold the output or supply of any goods 6[or services] or allocate any area or market for the disposal or sale of the goods 6[or services]; (d) "refusal to deal" includes any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to whom goods 6[or services]; are sold or from whom goods 6[or services] are bought; (e) "resale price maintenance" 7[includes, in case of any agreement to sell goods or provide services, any direct or indirect restriction] that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged. (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 Tra....
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....f competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour; (b) "predatory price" means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors; (c) "group" shall have the same meaning as assigned to it in clause (b) of the Explanation to section 5.] xxx xxx xxx Section 19 Inquiry into certain agreements and dominant position of enterprise. (1) The Commission may inquire into any alleged contravention of the provisions contained in sub-section (1) of section 3 or sub-section (1) of section 4 either on its own motion or on - (a) 1[receipt of any information, in such manner and] accompanied by such fee as may be determined by regulations, from any person, consumer or their association or trade association; or (b) a reference made to it by the Central Government or a State Government or a statutory authority. 2[Provided th....
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....ket structure and size of market; (k) social obligations and social costs; (l) relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition; (m) any other factor which the Commission may consider relevant for the inquiry. (5) For determining whether a market constitutes a "relevant market" for the purposes of this Act, the Commission shall have due regard to the "relevant geographic market" and "relevant product market". (6) The Commission shall, while determining the "relevant geographic market", have due regard to all or any of the following factors, namely :- (a) regulatory trade barriers; (b) local specification requirements; (c) national procurement policies; (d) adequate distribution facilities; (e) transport costs; (f) language; (g) consumer preferences; (h) need for secure or regular supplies or rapid after-sales services. 5[(i) characteristics of goods or nature of services; (j) costs associated with switching ....
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.... specified by the Commission. 2[(3A) If, after consideration of the report of the Director General referred to in sub-section (3), the Commission is of the opinion that further investigation is required, it may direct the Director General to investigate further into the matter. (3B) The Director General shall, on receipt of direction under sub-section (3A), investigate the matter and submit a supplementary report on his findings within such period as may be specified by the Commission.] (4) The Commission may forward a copy of the report referred to in 3[sub-section (3) and (3B)] to the parties concerned: Provided that in case the investigation is caused to be made based on reference received from the Central Government or the State Government or the statutory authority, the Commission shall forward a copy of the report referred to in 3 [sub-section (3) and (3B)] to the Central Government or the State Government or the statutory authority, as the case may be. (5) If the report of the Director General referred to in 3 [sub- section (3) and (3B)] recommends that there is no contravention of the provisions of this Act, the Commission shall ....
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....may impose upon each producer, seller, distributor, trader or service provider included in that cartel, a penalty of up to three times of its profit for each year of the continuance of such agreement or ten per cent. of its turnover for each year of the continuance of such agreement, whichever is higher.] 2 * * * * * (d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission; (e) direct the enterprises concerned to abide by such other orders as the Commission may pass and comply with the directions, including payment of costs, if any; 3* * * * * (g) pass such other 4[order or issue such directions] as it may deem fit: Provided that while passing orders under this section, if the Commission comes to a finding, that an enterprise in contravention to section 3 or section 4 of the Act is a member of a group as defined in clause (b) of the Explanation to section 5 of the Act, and other members of such a group are also responsible for, or have contributed to, such a contravention, then it may pass orders, under this section, against such members of the group. ....
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....liament pursuant to Entry 49 of the First List in the Seventh Schedule, whereas the Competition Act is enacted pursuant to Entry 21 of the Third List in the Seventh Schedule. Both laws being enacted by the Parliament, the provisions of Article 254 of the Constitution have no relevance in this case. The patentees assert that the Patents Act is a special Act, whereas the CCI and informants contend that the Competition Act is a special Act. Neither of them is wrong. 21. Chapter XVI of the Patents Act, which was introduced by way of an amendment in 2003 after the Competition Act was enacted, is a subsequent enactment, and the contention of the patentees that by application of the maxim lex posterior derogat priori 4 the Patents Act must override the Competition Act appears attractive at first blush. 22. However, the Court would be mindful of the law that has evolved on how perceived repugnancy between two statutes ought to be resolved when both laws appear to be special law, and both laws are made by the same legislature. The locus classicus on this subject, is the Constitution Bench dicta of the Supreme Court in Ashoka Marketing Ltd & Anr. v. PNB & Ors., (1990) 4 SCC 406, where ....
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....a strong indication of statutory meaning that can be overcome by textual indications that point in the other direction. This rule is particularly applicable where the legislature has enacted comprehensive scheme and has deliberately targeted specific problems with specific solutions. A subject- specific provision relating to a specific, defined and descriptable subject is regarded as an exception to and would prevail over a general provision relating to a broad subject. 25. The indication, clearly, is that the Court must not automatically uphold the subsequent law as overriding the earlier law when two statutes are special. So too must the Court not hasten to declare laws as special merely because they deal, overall, with a specific issue/subject. 26. What must be considered is: (i) the subject matter in question, (ii) the intendment of the statutes in respect thereof, as well as (iii) whether the scheme and relevant provisions of the two statutes have any indication apropos which, the legislature felt must override the other, especially when both statutes have a non- obstante clause. We will attempt this exercise below in a three step process. 27. First, we will assess th....
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.... by sections 27 and 28 of the Competition Act to: a) discontinue such agreement/s and/or abuse of dominant position, and to not re-enter such agreement/s; b) impose a penalty; c) modify the agreement by its order; d) direct compliance with any other orders passed, including as to costs; e) direct division of an enterprise enjoying dominant position to obviate the possibility of abuse of such position; and f) pass such further and other orders as it deems fit. 32. Of some significance, also, are the provisions of section 3(5)(i)(b) of the Competition Act, which will be discussed at a more appropriate juncture in this judgement. THE CONTROLLER AND HIS/HER POWERS 33. Chapter XVI of the Patents Act, which was introduced in 2003 by way of an amendment, pertains to, as its title indicates, working of patents, compulsory licenses and revocation. Section 83 sets out certain general principles to which regard must be had in exercising powers conferred by the Chapter, of which some significant principles are: a) patents are granted to encourage inventions and to secure that inventions are worked in India on a commercial ....
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....ions imposed by patentee results in use of patented articles, or manufacture, use or sale of material not protected by the patent, or establishment or development of any trade or industry in India is prejudiced; d) if conditions such as exclusive grant back, or prevention to challenges to the validity of patent, or coercive package licensing are imposed by the patentee; e) if working of patented invention in India on a commercial scale is being prevented or hindered by importation of the patented article; 37. Section 87 of the Patents Act prescribes the procedure to be followed in considering applications for grant of compulsory license, which require the Controller to give adequate notice to the parties and an opportunity of being heard before deciding the case. 38. Section 88(2) of the Patents Act empowers the Controller, in matters of application by a license-holder, to, when granting compulsory license, either order the existing license to be cancelled, or simply amend the existing license instead of granting a compulsory license. 39. Section 88(3) of the Patents Act empowers the Controller to, when granting a compulsory license for a particular paten....
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....ncludes anti-competitive agreements and abuse of dominant position explicitly. They contend that in view thereof, there is no reason for the Competition Act, which deals with anti-competitive agreements and abuse of dominant position generally, to override the special law. 45. The converse is the stand of the CCI and the informants, to the effect that the Competition Act is a special law dealing with anti- competitive agreements and abuse of dominant position, and thus some stray provisions in the Patents Act, which deals otherwise with patents generally, cannot be understood as overriding the Competition Act, which is, in any event, a subsequent statute. 46. Particular emphasis has been placed on the provisions of Section 3(5)(i)(b) of the Competition Act by both parties. On behalf of the CCI, the provision is cited, to emphasise that what is permitted is only imposition of reasonable conditions as may be necessary to protect rights that may be conferred under the Patents Act. 47. Defending the 2016 Judgement, the CCI contended that the provisions of Section 3(5)(i)(b) and Section 4 of the Competition Act make it abundantly clear that the CCI, and that only the CCI can co....
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.... section 3(5)(i)(b) of the Competition Act, it is indicative of the legislature's intendment as to the exclusive domain of the Patents Act regarding reasonable conditions. Similar, in our view, is the situation with the language of Section 83(f) of the Patents Act as compared with that of Section 4 of the Competition Act. 52. 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 therefor. 53. In reconciling the two statutes, 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 exercise of their rights under the Patents Act. 54. On this issue, there is no scope of doubt beyond the pale of doubt that the Patents Act is the special statute, and not the Competition Act. It is also a fa....
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....t deals with abuse of rights, including patents rights, can also not be sustained. This is because of not just the provisions of Chapter XVI, but also the opening words of section 48 of the Patents Act, which makes the rights of a patentee subject to the other provisions of the Act. 61. In our view, the 2016 Judgement erred in its assessment of the provisions of sections 21 and 21A of the Competition Act. Section 21A whether read on its own or in conjunction with section 62 cannot necessarily empower the CCI to exercise powers that the Controller would otherwise exercise under Chapter XVI of the Patents Act. Once there is clear legislative intent that the Patents Act will override the Competition Act, the same cannot be saved by the provisions of Section 21A of the Competition (Competition) Act. Its sections 21 and 21A are intended to deal with situations where the powers of the Commission are not excluded by other statutes. 62. Mr. N. Venkataraman, the learned Additional Solicitor General placed particular emphasis on the fact that the decisions of the CCI are in rem, while those of the Controller are in personam, to defend the finding of the 2016 Judgement at para. 169 that....
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....ing barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or service for consumers; (i) countervailing buying power; (j) market structure and size of market; (k) social obligations and social costs; (l) relative advantage, by way of the contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition; (m) any other factor which the Commission may consider relevant for the inquiry. 7. (a) regulatory trade barriers; (b) local specification requirements; (c) national procurement policies; (d) adequate distribution facilities; (e) transport costs; (f) language; (g) consumer preferences; (h) need for secure or regular supplies or rapid after-sales services. (i) characteristics of goods or nature of services; (j) costs associated with switching supply or demand to other areas. 8 (a) physical characteristics or end-use of goods or the nature of services; (b) price of goods or service; (c) consumer preferences; ....