2016 (3) TMI 1485 - HC - Law of Competition

Whether the petition is maintainable - Scope of judicial review - Abuse of dominant position - Ericsson is an enterprise under Section 2(h) of the Competition Act 2002 and whether Section 4 of the Act applies to its licensing of patents or not - Jurisdiction of CCI to entertain the complaints of Micromax and Intex under the Competition Act 2002 - Whether the allegations made could be construed as an abuse of dominance? - The disputes being subject matter of suits could not be entertained by CCI - Whether Micromax/Intex could maintain a complaint for abuse of dominance since they had contested Ericsson s claim for infringement? - Whether impugned orders are without jurisdiction as being perverse? Whether the petition is maintainable - Scope of judicial review - HELD THAT - In the facts of the present case the Ericsson has produced communications from the DG which require Ericsson to produce (i) certified copies of all email communication during the period January 2011 to March 2013 by the executives or Ericsson who are or have been related to the discussion/negotiation with Indian companies. The executives include Sh. Harish Sharma Mr. Max Olofsson Mr. Alex Fasell Mr. Chris Houghton and other senior executives from Ericsson global . Ericsson had also placed letter dated 15th June 2015 addressed to the Additional Director General CCI which indicates that the Ericsson had received four probe notices (till 15th June 2015) and was called upon to submit the detailed facts regarding Ownership and Shareholding pattern of Ericsson; copies of audited statements of accounts; details of patents relating to mobile telecom standardisation held by Ericsson; claim-chart mapping with Standards list of SEPs of Ericsson basis for charging licence fees as percentage of final product illustrative rate charged to similarly placed parties; cost incurred etc. Further certain senior employees of Ericsson have also been summoned to record their statement on oath before the DG. Whether the impugned orders passed under Section 26(1) of the Competition Act can be subjected to judicial review under Article 226 of the Constitution of India? - HELD THAT - Indisputably scope of Article 226 of the Constitution of India is very wide. It is also well settled that although the High Court does not sit as an Appellate Court to correct every error but in cases where an authority has acted outside the scope of its jurisdiction the High Court would interfere under exercise of its jurisdiction under Article 226 of the Constitution of India. It is well recognised that the High Court would interfere in orders passed by any authority or subordinate court where (1) there is an error manifest and apparent on the fact of the proceedings such as when it is based on clear misreading or utter disregard of the provisions of law and (2) a grave injustice or gross failure of justice has occasioned thereby. The contention that the present petition is not maintainable is without merit. Jurisdiction of CCI to entertain the complaints of Micromax and Intex under the Competition Act 2002 - HELD THAT - A plain reading of Section 4(1) of the Competition Act indicates that it proscribes any enterprise from abusing its dominant position. Thus for the purposes of Section 4(1) of the Act an enterprise must be the one which is in a dominant position . The expression dominant position is defined under Explanation (a) to Section 4 of the Competition Act to mean a position of strength enjoyed by an enterprise in the relevant market in India which enables it to (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour; It plainly follows that alleged abuse of dominance would have to be considered in the context of the relevant market in which an enterprise is found to be in a dominant position. The question whether Ericsson is an enterprise within the meaning of Section 2(h) of the Competition Act would thus have to be answered by ascertaining whether it is engaged in any activity relating to production supply distribution acquisition or control of articles or goods. Admittedly Ericsson has a large portfolio of patents and is inter alia engaged in developing technologies and acquiring patents. Thus if patents are held to be goods Ericsson would indisputably fall within the definition of enterprise within the meaning of Section 2(h) of the Competition Act since it is admittedly engaged in activities which entail acquisition and control of patents. It is well settled that the provision of any statute must be read in the context of the statute as a whole. A non-obstante clause is a well known legislative device used to give an overriding effect to certain provisions over the others which are inconsistent with those provisions; in the present case Section 60 of the Competition Act expressly provides that the provisions of the Competition Act shall have effect notwithstanding anything inconsistent in any other law. However the said provision must be read in the context of the Competition Act as a whole and the mischief that is sought to be addressed by the Competition Act. A prospective licensee who applies for a compulsory licence is expected to have made prior to his application efforts to obtain a licence on reasonable terms. However it further specifies that this consideration would not be relevant where the conduct of a patentee is found to be anti-competitive - if CCI has finally found a patentee s conduct to be anti-competitive and its finding has attained finality the Controller would also proceed on the said basis and - on the principle akin to issue estoppel - the patentee would be estopped from contending to the contrary - the contention that the jurisdiction of CCI under the Competition Act is ousted in matters relating to patents cannot be accepted. Whether the allegations made could be construed as an abuse of dominance? - HELD THAT - Given the nature of the right that a patentee enjoys it is not easy to reconcile a patent holder s refusal to grant a licence to use his patent as a violation of antitrust laws. The interface between IPR rights and antitrust laws have been a subject matter of debate in various jurisdictions and more particularly in cases where a patentee holds an SEP. In the present case apart from instituting suits for infringement against Micromax and Intex Ericsson has also threatened Micromax with complaints to SEBI apparently while Micromax was contemplating and/or in the process of floating a public offer of its shares. Such threats were undoubtedly made with the object of influencing Micromax to conclude a licensing agreement. It is not necessary for this Court to examine whether in the facts of this case such threats also constitute an abuse of Ericsson s dominant position. Suffice it to state that in certain cases such threats by a proprietor of a SEP who is found to be in a dominant position could be held to be an abuse of dominance. Clearly in certain cases such conduct if it is found was directed in pressuring an implementer to accept non- FRAND terms would amount to an abuse of dominance. The disputes being subject matter of suits could not be entertained by CCI - HELD THAT - The contention that since by virtue of Section 61 of the Competition Act the jurisdiction of the Civil Courts is barred in relation to matters that CCI or COMPAT are empowered to decide and some issues before the CCI and in the suits are common the subject matter would be outside the scope of the Competition Act also cannot be accepted. The question whether there is any abuse of dominance is solely within the scope of the Competition Act and a civil court cannot decide whether an enterprise has abused its dominant position and pass orders as are contemplated under Section 27 of the Competition Act. Merely because a set of facts pleaded in a suit may also be relevant for determination whether Section 4 of the Competition Act has been violated does not mean that a civil court would be adjudicating that issue. Further merely because certain reliefs sought by Micromax and Intex before CCI are also available in proceedings under the Patents Act also does not exclude the subject matter of the complaints from the scope of the Competition Act. An abuse of dominant position under Section 4 of the Competition Act is not a cause that can be made a subject matter of a suit or proceedings before a civil court. Whether Micromax/Intex could maintain a complaint for abuse of dominance since they had contested Ericsson s claim for infringement? - HELD THAT - The expression willing licensee only means a potential licensee who is willing to accept licence of valid patents on FRAND terms. This does not mean that he is willing to accept a licence for invalid patents and he has to waive his rights to challenge the patents in question. Any person notwithstanding that he has entered into a licence agreement for a patent would have a right to challenge the validity of the patents. This is also clear from clause (d) of Section 140(1) of the Patents Act which was introduced with effect from 20th May 2003. The said clause expressly provides that it would not be lawful to insert in any contract in relation to sale or lease of a patented article or in a licence to manufacture or use of patented article or in a licence to work any process protected by a patent a condition the effect of which may be to prevent challenges to validity of a patent. Thus a licensee could always reserve its right to challenge the validity of a patent and cannot be precluded from doing so. A potential licensee could without prejudice to his rights to challenge the validity of patents could take such steps or proceedings which are premised on the patents being valid. The doctrine of election would have no application in this case and it is not necessary for a potential licensee to elect to accept the validity of patents in order to assail its abuse - it would not be necessary for Micromax or Intex to waive their rights to challenge a patent for instituting a complaint which is based on the premise that Ericsson s patents are valid. The CCI cannot be faulted for proceeding on the basis that Ericsson holds the SEP s that it asserts it holds; at any rate Ericsson cannot be heard to complain against CCI proceeding on such basis. Whether impugned orders are without jurisdiction as being perverse? - HELD THAT - The CCI the DG and employees of the CCI are obliged to maintain confidentiality and secrecy of the confidential information provided by Ericsson and must take adequate measures to maintain the same. In a given case of negligence the CCI/DG may not be immune from a claim of loss or damages if they fail to maintain confidentiality/secrecy of the sensitive information provided to them. As regards the conduct of investigation; needless to state that any arbitrary unreasonable capricious or malafide actions would be subjected to judicial review and it would be open for Ericsson to initiate fresh proceedings if the conduct of investigation or any actions of CCI/DG are contrary to the provisions of the Competition Act or fall foul of the constitutional standards required of an authority. Conclusion - i) Ericsson is an enterprise under the Competition Act allowing the CCI to investigate its conduct regarding patent licensing. ii) The Patents Act and the Competition Act operate in their respective spheres without conflict enabling the CCI to address anti-competitive practices in patent licensing. iii) The allegations of excessive royalty demands and unfair licensing terms could constitute abuse of dominance justifying CCI s investigation. iv) The pendency of suits does not bar the CCI from exercising its jurisdiction under the Competition Act. v) The CCI s orders are not perverse and are within its jurisdiction. Petition dismissed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in the judgment include:

Whether Ericsson is an "enterprise" under Section 2(h) of the Competition Act, 2002, and whether Section 4 of the Act applies to its licensing of patents.
Whether the Patents Act, being a special statute, prevails over the Competition Act in matters related to patents, thereby ousting the jurisdiction of the Competition Commission of India (CCI).
Whether the allegations made by Micromax and Intex could constitute an abuse of dominance under the Competition Act.
Whether the disputes being the subject matter of pending suits could be entertained by the CCI.
Whether Micromax and Intex could maintain a complaint for abuse of dominance given their contestation of Ericsson's claim of infringement.
Whether the CCI's orders are perverse and thus without jurisdiction.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Ericsson as an "enterprise" under the Competition Act

Legal Framework: Section 2(h) of the Competition Act defines "enterprise" as any person engaged in activities related to production, storage, supply, distribution, acquisition, or control of goods or services.
Court's Interpretation: The court held that patents are goods under the Sale of Goods Act, 1930, and thus, Ericsson, engaged in acquiring and controlling patents, qualifies as an enterprise.
Conclusion: Ericsson is considered an enterprise under the Competition Act, and the CCI has jurisdiction to investigate its conduct regarding patent licensing.

Issue 2: Patents Act vs. Competition Act

Legal Framework: The Patents Act provides for the grant and regulation of patents, including remedies for abuse of patent rights. The Competition Act aims to prevent practices having an adverse effect on competition.
Court's Interpretation: The court recognized that both Acts operate in their respective fields. However, the Patents Act is a special statute concerning patents, while the Competition Act addresses anti-competitive practices.
Conclusion: There is no irreconcilable conflict between the Acts. The CCI can investigate abuse of dominance in patent licensing without ousting the Patents Act's provisions.

Issue 3: Allegations of abuse of dominance

Legal Framework: Section 4 of the Competition Act prohibits abuse of dominant position.
Court's Interpretation: The court found that the allegations of excessive royalty demands and unfair licensing terms could constitute abuse of dominance, especially given Ericsson's position as an SEP holder.
Conclusion: The allegations could prima facie indicate abuse of dominance, warranting investigation by the CCI.

Issue 4: Pending suits and CCI's jurisdiction

Legal Framework: The Competition Act's proceedings are not private lis but aim to prevent anti-competitive practices.
Court's Interpretation: The court held that the pendency of suits does not bar the CCI from investigating potential abuse of dominance.
Conclusion: The CCI's jurisdiction is not ousted by the pending suits.

Issue 5: Maintainability of complaints by Micromax and Intex

Legal Framework: The Competition Act allows any person to file a complaint regarding anti-competitive practices.
Court's Interpretation: The court held that Micromax and Intex could maintain their complaints despite contesting Ericsson's patent claims in other proceedings.
Conclusion: The complaints are maintainable under the Competition Act.

Issue 6: Perverse orders by the CCI

Legal Framework: Judicial review under Article 226 of the Constitution examines whether orders are perverse or without jurisdiction.
Court's Interpretation: The court found no reason to conclude that the CCI's orders were perverse or without jurisdiction.
Conclusion: The CCI's orders are valid and within jurisdiction.

3. SIGNIFICANT HOLDINGS

The court affirmed that Ericsson is an enterprise under the Competition Act, allowing the CCI to investigate its conduct regarding patent licensing.
The Patents Act and the Competition Act operate in their respective spheres without conflict, enabling the CCI to address anti-competitive practices in patent licensing.
The allegations of excessive royalty demands and unfair licensing terms could constitute abuse of dominance, justifying CCI's investigation.
The pendency of suits does not bar the CCI from exercising its jurisdiction under the Competition Act.
Micromax and Intex's complaints are maintainable despite their contestation of Ericsson's patent claims.
The CCI's orders are not perverse and are within its jurisdiction.

The judgment concludes by dismissing the writ petitions, affirming the CCI's jurisdiction to investigate the allegations against Ericsson, and vacating all interim orders.

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