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Monsanto Holdings Pvt. Ltd. & Ors. v. Competition Commission of India & Ors.

Monsanto Holdings Pvt. Ltd. & Ors. v. Competition Commission of India & Ors.

Date of decision: 20th May, 2020 in W.P. (C) No. 1776/2016 and W.P.(C) No. 3556/2017

by the Hon’ble High Court of Delhi at New Delhi

Brief Facts:

  • Petitioners, had developed an advance technology of manufacturing Bt. Cotton seeds which they licensed and sub-licensed further to other seed manufacturing companies in exchange of royalty and trait fee[1].
  • The amount of fees/royalty charged by Petitioners was the subject matter of dispute between the Petitioners and private Respondents.
  • The private Respondents claimed before Competition Commission of India (CCI) that the Petitioners abused their dominant position in the market by conducting unfair practices, charging excessively, discriminating between various seed manufacturers and including unreasonable terms and conditions in the sub-licensing agreements.
  • Vide an order dated 10th February, 2016 by Respondent No. 1 under Section 26 (1) of the Competition Act, 2002 (hereinafter, ‘CA’), CCI had directed Director General to investigate the activities of the Petitioners.
  • The present matter was filed against the said order as well as against another order wherein CCI had issued notice to the Petitioners in an application filed by the informants under Section 33 of the ‘CA’.
  • The major contention of the Petitioners was that CCI exceeded its jurisdiction while passing the Impugned orders on account of patent rights of Petitioners in the Bollgard-II technology[2].

Petitioners’ contentions:

  • CCI does not have any jurisdiction to investigate the issues raised before it as the issue comes under the jurisdiction of the Patents Act, 1970.
  • Remedies against abuse of rights by Patentee fall within Patents Act, 1970 (hereinafter ‘Patents Act’). For CCI to determine that the conduct of Petitioners as anti-competitive, it has to give a finding that the royalty/trait fee charged by Petitioners is unreasonable and excessive and also that the terms of sub-license are also excessive.
  • The above determinations have to be done by Controller of Patents (hereinafter ‘Controller’). Without the said findings by the Controller, CCI would have no jurisdiction to proceed in the matter.
  • In order for CCI to examine/investigate issue of abuse of dominant position/unfair trade practices there has to be a relevant finding by the Controller first. Only then the CCI shall examine the matter further, as held by the Supreme Court in Competition Commission of India v. Bharti Airtel Ltd. And Ors.: Civil Appeal No. 11843/2018 wherein TRAI[3] was made to decide on certain facts before CCI could examine further. The Controller of Patents is akin to TRAI as it regulates grant of Patent.
  • Only remedy when a patentee has unjustifiably withheld the grant of a license is to seek a compulsory license before the Controller. At that stage, Controller is bound to take into account appreciable adverse effect on the competition/market which is similar to exercise done by CCI under ‘CA’.
  • Section 140 of the Patents Act lists the circumstances where exercise of patent rights constitutes anti-competitive conduct and resembles Sections 3 & 4 of ‘CA’.
  • Section 140 (supra) has been retained and not been amended even after enactment of ‘CA’. This indicates that such issues shall be examined by the Controller.
  • Having CCI investigate allegations and issues that come under the jurisdiction of the Patents Act would result in two different bodies simultaneously evaluating the same matters resulting in potentially conflicting decisions.
  • Clauses of the agreement, which are designed to restrain infringement of IPR, including patents, are excluded from the purview of CCI under Section 3 (5)[4] of the ‘CA’. Section 3(5) has two limbs. The first, which provides blanket exclusion in respect of rights to restrain infringement IPR; and second, which relates to other reasonable conditions that may be necessary for protecting the IPR. Thus, any condition imposed in an agreement for restraining infringement of patent is beyond the purview of ‘CA’. What is within the purview of ‘CA’ is a reasonable condition in respect of other conditions and not in respect of agreements to restrain infringement of IPR.

Court’s observations:

On the decision passed in Telefonaktiebolaget L.M. Ericsson v. Competition Commission of India & Another: W.P.(C) 464/2014

  • Sections 60 and 62 of ‘CA’ give the ‘CA’ an overriding effect and provide the Act to be in addition to and not in derogation of other Acts. This Court in Telefonaktiebolaget L.M. Ericsson v Competition Commission of India & Another: W.P.(C) 464/2014 provided that Section 60 would not reduce the weight of the Patents Act and Section 62 makes it clear that ‘CA’ is in addition to other laws.
  • In Telefonaktiebolaget (supra) examining the two Acts, the Court observed that orders that can be passed by the CCI under Section 27 of ‘CA’ relating to abuse of dominant position are different from the remedies under provisions pertaining to Compulsory License under the Patents Act.
  • In Telefonaktiebolaget (supra) the Court also observed that under certain circumstances the prospective licensee can approach the Controller for a compulsory license but the same would not be inconsistent with CCI passing an order under Section 27.
  • CCI under Section 20 of the ‘CA’ has a power to make a make a reference to any regulator where in course of proceedings the CCI proposes to take any decision which may be contrary to provisions of any statute, the implementation of which has been entrusted to any statutory authority.
  • Section 21 of the ‘CA’ enables any statutory authority, charged with administration of any statute to make a reference to CCI if it proposes to take any decision, which may be contrary to the provisions of ‘CA’.
  • In Telefonaktiebolaget (supra), this Court concluded that there was no irreconcilable repugnancy or conflict between the ‘CA’ and the Patents Act, and, thus, the jurisdiction of the CCI to investigate complaints regarding abuse of dominance in respect to patent rights could not be excluded.

On Competition Commission of India v. Bharti Airtel Ltd. And Ors.: Civil Appeal No. 11843/2018

  • In the said case, the Supreme Court did not hold that jurisdiction of CCI in respect of matters, regulated by a specialised statutory body were excluded from the applicability of the ‘CA’.
  • Role of TRAI as a regulator is materially different from that of a Controller and is more pervasive.
  • The Bombay High Court decision, upheld by the Supreme Court, after examining the role of TRAI, held that TRAI’s role was different than the role of a Controller and thus Telefonaktiebolaget L.M. Ericsson (supra) was not applicable.

On Interpretation canvassed by Petitioner of Section 3 (5) of the Competition Act, 2002

  • Section 3(5)(i) of the ‘CA’ cannot be broken down in the manner as suggested.
  • The words “or to impose reasonable conditions” are placed between two commas and thus must be interpreted as being placed in parenthesis that explains and qualifies the safe harbour of Section 3(5). Plainly, the exclusionary provision to restrain infringement cannot be read to mean a right to include unreasonable conditions that far exceed those that are necessary, for the aforesaid purpose.
  • While an agreement, which imposes reasonable condition for protecting Intellectual Property Rights is permissible any agreement which imposes unreasonable conditions is impermissible under the ‘CA’.

The Hon’ble Court found no reason to interfere with the Impugned Order of Investigation. The Hon’ble Court further found the said order to be an administrative order and held that unless the same is found to be arbitrary or unreasonable, it shall not be interfered with.

The second order of merely issuing notice was also not interfered with.

[1] Trait fee  means any upfront or annual fee collected by licensee or any affiliated Company in conjunction with net sales as an additional remuneration for the sale of commercial seed that has a particular valuable trait or characteristic. available at: https://www.lawinsider.com/dictionary/trait-fee (last visited on 22nd July, 2020)

[2] Second generation cotton protection technology, which consisted of two genes that made cotton resistant to bollworms.

[3] Telecom Regulatory Authority of India

[4] Section 3 (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-

  1. the Copyright Act, 1957 (14 of 1957);
  2. the Patents Act, 1970 (39 of 1970);
  3. the Trade and Merchandise Marks Act, 1958 (43 of 1958) or the Trade Marks Act, 1999 (47 of 1999);
  4. the Geographical Indications of Goods (Registration and Protection) Act, 1999 (48 of 1999);
  5. the Designs Act, 2000 (16 of 2000);
  6. the Semi-conductor Integrated Circuits Layout-Design Act, 2000 (37 of 2000);

Co-author: Ms. Pragati Pachisia, JCCLC College, Kolkata

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