2020 (5) TMI 747 - HC - Companies Law

Jurisdiction of CCI to examine the issues raised relating to the exercise of rights granted under the Patents Act - Direction to Director General (DG) to investigate the activities of the petitioners and Maharashtra Hybrid Seeds Company (Mahyco) - trait fee charged by MMBL and the other terms and conditions imposed by it for using the technology for manufacturing Bt. Cotton Seeds - HELD THAT - Section 60 of the Competition Act contains a non obstante provision and expressly provides that the provisions of the Competition Act would have effect notwithstanding anything inconsistent contained in any other law for the time being in force. This Court held that although Section 60 of the Competition Act expressly provided that the Competition Act would be given an overriding effect, the same would not whittle down the provisions of the Patents Act. This Court is of the view that Section 62 of the Competition Act which expressly provides that the Competition Act would be in addition to and not in derogation of the provisions of any other law for the time being in force, clearly expresses the legislative intent that the Competition Act is in addition to other laws and not in substitution thereof. This Court next examined the issue whether there was any irreconcilable conflict between the Competition Act and the Patents Act and whether both the enactments could be construed harmoniously. This Court had noticed that Chapter XVI and Section 140 of the Patents Act contained provisions the subject matter of which may be common with the Competition Act. Section 84 of the Patents Act provides for grant of compulsory licenses in certain cases where reasonable requirement of public in respect of patented inventions has not been satisfied. Section 85 of the Patents Act provides for revocation of patents if after expiry of two years from the date of grant of compulsory license, the patented invention has not been worked in the territory of India and the reasonable requirements of public with respect to the patent have not been satisfied. As is apparent from the plain language of sub-section (5) of Section 3 that nothing contained in Section 3 of the Competition Act would restrict the right of a person to restrain any infringement of his IPR or to impose reasonable conditions for protecting them. It recognizes that a person has a right to restrain infringement of IPR granted under the specified statutes and any agreement entered for the aforesaid purpose would fall outside rigors of Section 3 of the Competition Act. However, such rights are not unqualified. Only such agreements that are necessary for protecting any of his rights which have been or may be conferred upon him under the specified statutes are provided the safe harbor under Sub-section (5) of Section 3 of the Competition Act and only to such extent. The question whether an agreement is limited to restraining infringement of patents and includes reasonable conditions that may be necessary to protect such rights granted to a patentee, is required to be determined by the CCI. Subsection (5) of section 3 of the Competition Act does not mean that a patentee would be free to include onerous conditions under the guise of protecting its rights. It is also relevant to note that the role of TRAI as a regulator is materially different from that of a Controller. Telecom services are regulated and controlled and TRAI has a vital role in regulating the industry - The principal function of the Controller under the Patents Act is to examine the application for grant of patents and grant patents if the applicant is entitled to such rights. Although, the Controller also exercises other powers and performs other functions, including issuance of compulsory licenses in given case. But the Controller does not regulate, in a pervasive manner, the exercise of patent rights or the agreements that are entered into by patentees with third parties. The nature of the role performed by a Controller, thus, cannot be equated to that as performed by the TRAI. This Court finds no reason to interfere with the impugned order. It is also relevant to note that an order passed by the CCI under Section 26(1) of the Competition Act is an administrative order and, therefore, unless it is found that the same is arbitrary, unreasonable and fails the wednesbury test, no interference would be warranted. A review on merits is impermissible at this stage, and therefore, this court is refraining from examining the merits of the dispute. The petitioners' challenge to the order dated 18.02.2016 is also not maintainable. By the aforesaid order, the CCI had merely issued notice and afforded the petitioners for an opportunity to be heard before considering the application filed by the informants under Section 33 of the Competition Act. This Court finds no reason whatsoever to interfere with the said order. The petition-W.P.(C) 1776/2916 is unmerited and, therefore, dismissed. All pending applications are also disposed of. Petition dismissed.

Summary

Issues Involved:
1. Jurisdiction of the Competition Commission of India (CCI) to examine issues related to the exercise of patent rights.
2. Alleged abuse of dominant position by MMBL and Monsanto Group.
3. Alleged imposition of unfair conditions in sub-license agreements by MMBL.
4. Alleged discrimination and restrictive practices by MMBL.
5. Applicability of Section 3(5) of the Competition Act concerning agreements to restrain infringement of patent rights.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Competition Commission of India (CCI):
The petitioners challenged the CCI's jurisdiction, arguing that the issues fall exclusively under the Patents Act. They contended that the Patents Act is a comprehensive enactment governing all practices and contracts related to patent rights. They argued that the CCI's jurisdiction is impliedly excluded and that the Controller of Patents should determine the reasonableness of royalty fees and sub-license terms. However, the court upheld the CCI's jurisdiction, stating that the Competition Act is in addition to and not in derogation of other laws, including the Patents Act. The court found no irreconcilable conflict between the two enactments and concluded that the CCI could examine allegations of anti-competitive conduct even in the context of patent rights.

2. Alleged Abuse of Dominant Position by MMBL and Monsanto Group:
The informants alleged that MMBL and Monsanto Group abused their dominant position by charging excessive and unfair prices for Bt. Technology. They claimed that MMBL and Monsanto Group exploited their dominant position, setting prices significantly higher than those that would result from effective competition. The CCI found prima facie merit in these allegations, holding that MMBL's conduct violated Section 4 of the Competition Act. The court did not interfere with the CCI's order directing an investigation, stating that the order was an administrative one and not subject to review on merits at this stage.

3. Alleged Imposition of Unfair Conditions in Sub-license Agreements:
The informants alleged that MMBL imposed unfair conditions in sub-license agreements, violating Section 4(2)(a)(i) of the Competition Act. They pointed out clauses requiring disclosure of negotiations with competitors and destruction of germplasm upon termination of the sub-license. The CCI found these conditions to be prima facie harsh and unreasonable, discouraging seed companies from dealing with competitors and restricting the development of alternate technologies. The court upheld the CCI's order for investigation, emphasizing that the CCI could examine whether the conditions were unreasonable and anti-competitive.

4. Alleged Discrimination and Restrictive Practices by MMBL:
The informants alleged that MMBL discriminated against them by providing Bt. Technology to Monsanto Group companies without unfair conditions, while imposing such conditions on other seed manufacturers. They claimed that this had an appreciable adverse effect on competition in the downstream market of cotton hybrid seeds. The CCI found prima facie merit in these allegations and directed an investigation. The court upheld this decision, reiterating that the CCI had jurisdiction to examine such anti-competitive practices.

5. Applicability of Section 3(5) of the Competition Act:
The petitioners argued that Section 3(5) of the Competition Act excluded the CCI's jurisdiction over agreements restraining patent infringement. They contended that clauses designed to restrain infringement were excluded from the Competition Act's purview. However, the court held that while agreements imposing reasonable conditions to protect patent rights were permissible, anti-competitive agreements with unreasonable conditions were not protected. The court emphasized that the CCI could determine whether the conditions were reasonable and necessary for protecting patent rights.

Conclusion:
The court dismissed the petitions, upholding the CCI's jurisdiction to investigate the alleged anti-competitive practices by MMBL and Monsanto Group. The court found no merit in the petitioners' arguments that the Patents Act excluded the applicability of the Competition Act. It also upheld the CCI's orders directing investigations into the alleged abuse of dominance, imposition of unfair conditions, and discriminatory practices. The court emphasized that the CCI's orders were administrative and not subject to review on merits at this stage.