[By Yavipriya Gupta]
The author is a student at Hidayatullah National Law University.
The competition landscape in India is governed primarily under the Competition Act, 2002 (the Act), with the Competition Commission of India (CCI) holding the exclusive jurisdiction to adjudicate upon anti-competitive conduct of business entities, while certain sector-specific regulators bear the responsibility to regulate competition within their respective sectors. Although the authorities share a common objective of protecting and promoting competitive conduct in the market, there lies a significant difference in the approach adopted by the two. This has often led to several jurisdictional conflicts between the two bodies, clearly heralding the need for judicial intervention to resolve this tussle.
On 20 May 2020, the Delhi High Court in Monsanto Holdings Pvt. Ltd. v. Competition Commission of India (Monsanto) decided on one such jurisdictional conflict while examining the applicability of the Supreme Court (SC) judgment in CCI v Bharti Airtel and Others. (Bharti Airtel) to the dispute. It held that a Controller of Patents (Controller) under the Patents Act 1970 (Patents Act) is not a sectoral regulator and hence, cannot exercise jurisdiction in a manner similar to Telecom Regulatory Authority of India (TRAI), as in the Bharti Airtel case. While there exists a multitude of sectoral regulators that often cross path with the CCI, this article seeks to analyze the jurisdictional conflict in the light of Monsanto and its interpretation of the Bharti Airtel case concerning a dispute between the TRAI and the CCI while also exploring the impact of the decision on the jurisdictional tussle between IPR authorities and the CCI.
The matter stems from an order passed by the CCI under section 26(1) of the Act in a dispute relating to the trait fee charged by Monsanto Holdings and its allies as well as the other terms and conditions imposed by it upon the licensees for using their technology to manufacture Bt. Cotton Seeds. The CCI passed an order holding that Monsanto maintains a dominant position in the concerned relevant market and has prima facie abused it, thereby violating section 4 of the Act. The aforesaid order was challenged by Monsanto before the Delhi High Court, primarily on the ground that CCI does not entail jurisdiction to examine the issues raised before it as they relate to the exercise of rights granted under the Patents Act and hence must first be examined by the Controller.
While an earlier decision of the Court in Telefonaktiebolaget L.M. Ericsson v Competition Commission of India & Another (Ericsson) clarified that jurisdiction of the CCI in such an issue is not excluded, Monsanto argued against its application stating that the position of the Controller in the instant case, is similar to the TRAI as the Controller also exercises powers to regulate the grant of patents and exercise of rights under the Patents Act. SC in its decision in Bharti Airtel had observed that the CCI could exercise its jurisdiction only after the TRAI had returned the findings based on which any order could be passed by the CCI. Commensurate with the same, it was contended that SC’s decision essentially overrules Ericsson and without effective findings returned by the Controller, the CCI’s jurisdiction remains ousted.
The Decision of the Court
The court, while repudiating the contentions furthered by Monsanto, upheld the position established in Ericsson. It was observed that the expertise of TRAI in the field of telecommunications is materially different from the expertise that a Controller bears in regard to the grant of patents and exercise of patent rights. Besides, SC’s decision in Bharti Airtel maintains that the CCI has been entrusted with a function to deal with certain specific kinds of anti-competitive conduct and to that extent, its function is distinct from that of TRAI. Hence, it cannot be construed to mean that the jurisdiction of the CCI was ousted by virtue of the telecom industry being regulated by a statutory body.
Bharti Airtel’s Application- A Test for Sectoral Regulators
Before reaching its final decision in the case, the Court took an in-depth view into whether SC’s decision in Bharti Airtel effectively overrules Ericsson, and thus addressed one critical issue that remained hitherto overlooked. Due to the lack of a definite meaning of the term sectoral regulators, there has been a lot of ambiguity in resolving jurisdictional conflicts involving such regulators that might not necessarily be sector-specific, viz. the Controller of Patents in the instant case. The court attempted to resolve the aforementioned ambiguity following an analysis of the role of the controller of patents and that of the TRAI, thereby laying down a standard to be met in order to be considered a sectoral regulator.
Role of the Controller of Patents
It is pertinent to note that in the case of Bharti Airtel, the subject matter of dispute was the non-provisioning of Points of Interconnection (POIs) in the telecom industry, observing which the court in Monsanto held that the subject matter of the disputes therein fell essentially within the domain of TRAI, adding that the same cannot be stated for the Controller in the present case. Despite performing several functions similar to TRAI, the Controller’s role as a regulator was observed to be substantially different due to the absence of a specific industry being regulated by the latter.
In the author’s opinion, a bare perusal of section 140 read with Chapter XVI of the Patents Act may although prima facie indicate that the Controller has an authority to determine whether a term included in a license issued by any party is restrictive or not, a closer analysis suggests that the act does not confer such authority upon the Controller. Hence, such disputes are likely to be decided by a civil court, further indicating the non-uniformity in the functions performed by the Controller and the TRAI.
Functions Performed by TRAI
The court affirmed that the TRAI performed two distinct kinds of functions. The first is essentially recommendatory in nature while the rest of the functions are performed to regulate the specific sector of telecom services. In doing so, the TRAI is often required to form such regulations that render its scope of regulation all-pervasive. A Controller, on the other hand, does not regulate the exercise of rights in such a pervasive manner, due to the aforementioned reason that “patents” is not a specific industry. Another crucial observation made by the court was that the TRAI holds ‘domain expertise’ in certain ‘technical aspects’ within the telecom industry due to which the examination by the CCI ought to be deferred till the technical aspects (which formed the factual basis on which the complaints before the CCI were founded) in the case of Bharti Airtel, were determined. Since no such technical expertise is required by the Controller in the present case, the court pronounced that the decision in Bharti Airtel cannot be relied upon by the petitioners to rule out the position laid down in Ericsson.
Through its ruling, the court has clarified that the Controller of Patents cannot be treated as a sectoral regulator, thereby attempting to settle the existing tussle between the two bodies. However, the uncertainty regarding the appropriate tribunal has persisted long before the matter first surfaced in Aamir Khan Productions Private Limited and Aamir Hussain Khan v. Union of India and later in HT Media Limited v. Super Cassettes Industries Limited. Now, despite having a criterion to distinguish other authorities from sectoral regulators, in patent licensing disputes, conflicting opinions between the IPR authorities and the CCI are likely to continue insofar that the Court fell short of putting in place, a system to avoid such conflicts in the first place.
Furthermore, the reasoning adopted by the court while disregarding Monsanto’s contentions stems from dis-similarities between the functions performed by the Controller and the TRAI which seems fallacious. The conflict essentially ensued between the Controller and the CCI and therefore, in the author’s opinion, the court ought to have assessed the ambit of powers of the Controller as against the CCI, and not TRAI. The Controller may although not be considered a sectoral regulator, however, a thorough perusal of section 84 and section 90 of the Patents Act indicate that abuse of patent rights and imposition of restrictive trade practices have to be given due consideration by the Controller before grant of compulsory licenses, subject to a judicial or administrative process determining such practice. The same can also be derived from Justice N. Rajagopala Ayyangar’s Report on the Revision of the Patents Law, 1959, which provides for the formation of a separate legislation or commission to assess the anti-competitive practices concerning patents, and hitherto absence of any such commission indicates towards the powers of Controller to assess the same.
The court’s ruling in Monsanto has shed the necessary light on what constitutes a sectoral regulator and the same must be taken forward in legislative terms to set up a more concrete and uniformly applicable criteria while resolving such jurisdictional issues. However, the jurisprudence surrounding the scope of powers of the Controller (as well as other IPR authorities) to assess anti-competitive practices continues to remain vague with various conflicting stances in existence. While holding that there exists no irreconcilable conflict between the Patents and the Competition Act, the Court perhaps overlooked the legislative intent behind Chapter XVI of the Patents Act, which clearly establishes the Controller’s jurisdiction in determining anti-competitive practices. As already discussed, the court ought to have taken a more pragmatic approach in assessing the powers of the Controller by analyzing the same in light of the powers of the CCI, following which a mechanism can be devised to avoid such conflicts.
In the instant case, the concerned relevant market is “provision of Bt. Cotton technology in India”, wherein Monsanto holds the patent for grant of said technology. However, in the case of Bharti Airtel, the relevant market of concern was observed to be the “telecommunications market.”
Based on this premise, the court in Monsanto held that the “patents” is not an industry, since several entities belonging to different industries can hold patents and therefore the Controller of Patents did not have an all-pervasive control as compared to TRAI which has exclusive regulatory control in the telecommunications market.