Competition Regulator Can’t Inquire Into Patent Licensing, Says Delhi High Court

The Delhi High Court has ruled that the competition regulator does not have jurisdiction to inquire into the business of licensing patents, as this is a matter solely governed by the Patents Act.

The court said that the Patents Act,1970, takes precedence over the Competition Act, 2002, when it comes to the exercise of rights by a patent holder under the Patents Act.

The case pertained to Competition Commission of India's inquiry against Telefonaktiebolaget LM Ericsson and Monsanto Co. The CCI had alleged that the companies have failed to license their patents reasonably in the fields of telecommunications and agriculture, respectively, and have also been involved in anti-competitive practices. Both companies contested CCI's jurisdiction to initiate such an inquiry.

In 2016, a single-judge bench of the high court had dismissed Ericsson's objections, concluding that there were no legal impediments for the CCI to proceed under the competition law. A 2020 ruling against Monsanto referenced the 2016 decision and arrived at a similar outcome, finally giving rise to the current proceedings.

The CCI had argued that since the Competition Act deals with the abuse of dominant position and deriving its powers from the same, it can consider if a patent licensing agreement is unreasonable. 

Monsanto and Ericsson, on the other hand, submitted that patents are dealt with specifically under the Patents Act, which already has provisions to deal with anti-competitive agreements and abuse of dominant position. And so, proceedings under the Competition Act cannot continue.

The division bench of the high court agreed, noting that while the Competition Act deals with the issue of abuse of dominant position and antitrust practices generally, the Patents Act deals with them specifically in relation to patents. 

Consequently, the court overturned the judgments against Ericsson and Monsanto and invalidated the ongoing CCI proceedings against them.