IN LPA 247 OF 2016 - DEL HC-Patents Act must prevail over Competition Act on the issue of exercise of rights by a patentee under the Patents Act: Delhi High Court
Justice Najmi Waziri and Justice Vikas Mahajan [13.07.2023]

Read More :TelefonaktiebolagetLm Ericsson (publ) v. Competition Commission of India

Simran Singh

New Delhi, July 17, 2023: The Delhi High Court has allowed a batch of appeals and held that the Patents Act, 1970 would prevail over the Competition Act, 2002 (Competition Act) on the issue of exercise of rights by a patentee.

A division bench comprising of Justice Najmi Waziri and Justice Vikas Mahajan observed that “Therefore, when assessed, by the maxim generaliaspecialibus non derogant or by the maxim lex posterior derogat priori, the Patents Act must prevail over the Competition Act on the issue of exercise of rights by a patentee under the Patents Act."

The Bench stated that “In our view, the Competition Act is a general legislation pertaining to anti-competitive agreements and abuse of dominant position generally. The inclusion of Section 84(6)(iv)11 in the Patents Act by way of an amendment after the Competition Act was passed with Section 3(5)(i)(b)12 is particularly instructive of the above legislative intent as regards anti-competitive agreements.”

The Court further stated that Chapter XVI of the Patents Act was 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 and relief that was to be granted. “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 fact that Chapter XVI of the Patents Act is a subsequent legislation as compared to the Competition Act,”

In the matter at hand, multinational entities like Ericsson and Monsanto challenged the proceedings initiated against them by Competition Commission of India (CCI). The issue for consideration was that “when a patent is issued in India and patentee asserts such rights, can CCI inquire into the actions of such patentee in exercise of its powers under the Competition Act?”

It was submitted that the exercise of a patentee of their rights under the Patents Act could not be overridden by the CCI under the Competition Act since Patents Act assured them the exclusive right to prevent third parties from using their process or product. They contend that the Patents Act itself had detailed provisions by way of Chapter XVI to ensure that there was adequate safeguard against anti-competitive agreements and abuse of dominant position.

It was averred that the Patents Act was a special law dealing with patents and that issues of imposition of conditions for licensing patents were provided for under Chapter XVI which included anti-competitive agreements and abuse of dominant position explicitly. It was contended that there was no reason for the Competition Act, which dealt with anti-competitive agreements and abuse of dominant position, to override the special law.

On the other hand, the CCI stated that it was not claiming exclusive power over issues concerning patents butcontended that the CCI was established to promote and sustain competition in markets to ensure economic development of the country, and it could not be prevented from considering the question of whether the working of a patent would affect competition in the market. It further took a stand that the Competition Act was a special law dealing with anti-competitive agreements and abuse of dominant position and thus some stray provisions in the Patents Act, which dealt otherwise with patents, could not be understood as overriding the Competition Act which was a subsequent statute.

The Court stated that both the Patent Act and the Competition Act were special laws in their respective fields and the Court must not automatically uphold the subsequent law as overriding the earlier law when two statutes werespecial. “So too must the Court not hasten to declare laws as special merely because they deal, overall, with a specific issue/subject.”

The Bench sated that  “The legislative intent is apparent in that the Patents Act—especially as amended by the 2003 Amendment that introduced Chapter XVI after the Competition Act was enacted. It is especially for the field pertaining to patents, unreasonable conditions in agreements of licensing, abuse of status as a patentee, inquiry in respect thereof and relief that is to be granted therefor are all to be governed by the Patents Act.”

The Court stated that the Competition Act was a general legislation pertaining to anti-competitive agreements and abuse of dominant position generally. The inclusion of Section 84(6)(iv)in the Patents Act by way of an amendment after the Competition Act was passed with Section 3(5)(i)(b) was particularly instructive of the above legislative intent as regards anti-competitive agreements.

The Court added that the legislative intent and the subject matter that the two statutes dealt with was the test in ascertaining whether two statutes could coexist. The starting point of the assessment necessarily had to be the subject matter of the statutes. In the present matter, as set out above, the subject matter was an inquiry being conducted by a statutory authority, into allegations of anti-competitive agreements and allegations of abuse of dominant position.

Furthermore, it was observed that once there was clear legislative intent that the Patents Act would override the Competition Act, the same could not be saved by the provisions of Section 21A of the Competition Act which dealt with reference by CCI to the statutory authority.

“While the Competition Act deals with these subjects generally, the Patents Act deals with these subjects specifically in the context of patents. The legislature, in its wisdom, after enacting the Competition Act, amended the Patents Act to introduce Chapter XVI and has chosen to keep the effect of the orders of the Controller in personam. It is not for this Court to comment on the propriety thereof, nor does this persuade us to permit exercise of powers by CCI contrary to legislative intent.”