Patents Act Must Prevail Over Competition Act In Exercise Of Rights By Patentee: Delhi High Court

The Delhi High Court has ruled that the Patents Act, 1970 must prevail over the Competition Act, 2002 on the issue of exercise of rights by a patentee.

“Therefore, when asessed, by the maxim generalia specialibus 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,” a division bench of Justice Najmi Waziri and Justice Vikas Mahajan observed.

The court added that Chapter XVI of the Patents Act is 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 is 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,” it said.

It added: “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 made the observations while dealing with a bunch of appeals moved by multinational entities Ericsson and Monsanto challenging the proceedings initiated against them by CCI. An appeal was also moved by CCI.

The appeals raised a common question 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 on behalf of the two entities that the Patents Act is a special law dealing with patents and that issues of imposition of conditions for licensing patents are provided for under Chapter XVI which includes anti-competitive agreements and abuse of dominant position explicitly.

It was their case that there is no reason for the Competition Act, which deals with anti-competitive agreements and abuse of dominant position, to override the special law.

On the other hand, the CCI took a stand that the Competition Act is a special law dealing with anti- competitive agreements and abuse of dominant position and thus some stray provisions in the Patents Act, which deals otherwise with patents, cannot be understood as overriding the Competition Act which is a subsequent statute.

While allowing the appeals, the bench said: “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.”

Furthermore, it observed that once there is clear legislative intent that the Patents Act will override the Competition Act, the same cannot be saved by the provisions of Section 21A of the Competition Act which deals 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,” the court added.

Title: TELEFONAKTIEBOLAGET LM ERICSSON (PUBL) v. COMPETITION COMMISSION OF INDIA & ANR. and other connected matters

Citation: 2023 LiveLaw (Del) 592

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