In my last
post
I had shared the first of the 2 posts I had written on the PatLit blog on
competition law and patent litigation. Here’s the second post for the benefit of our readers:
“
In my previous post, I discussed certain
situations under Indian law which could attract both the Patents Act and the Competition Act. Continuing in the same
vein, this post discusses the interaction between the two sets of legislation
in instances of abuse of dominance.
Section 4 of the Competition
Act recognizes abuse of dominance by an “enterprise” or a “group”. Section 2(h)
of the same Act exhaustively defines an “enterprise”, which includes a person,
natural or juristic. As for the definition of a “group”, this is provided for
in the Explanation to Section 5.
In order to establish abuse of
dominance by a patentee, the first ingredient to be established is that the
patentee enjoys a position of dominance in the relevant market. As to what
constitutes “relevant market”, Section 19(5) states that the Competition
Commission of India (CCI) could have regard to either the “relevant geographic
market” or the “relevant product market”.
In assessing whether a
patentee enjoys a dominant position in the relevant market, Section 19(4) of
the Competition Act lists a host of factors which the CCI must have due regard
to. Some of the factors include the market share of the enterprise and the
economic power of the enterprise including commercial advantages over
competitors. Critically, Section 19(4)(g) also recognizes the following factor
to establish the patentee’s dominant position:
“monopoly or dominant
position whether acquired as a result of any statute or by virtue of being a Government
company or a public sector undertaking or otherwise”
The above-underscored portion
is wide enough to include a patent grant which could bestow a monopoly or a
dominant position in the relevant market. Therefore, if an aggrieved party is
able to establish that the existence of a patent on a particular technology has
resulted in the patentee acquiring a position of dominance, that alone is
sufficient to satisfy the first and basic ingredient of Section 4 i.e. position
of dominance of the patentee.
The second ingredient of abuse
of dominant position is dealt with by Section 4(2) of the Competition Act,
which lists a host of situations that could amount to abuse of dominance. For
instance, imposition of an unfair or discriminatory price in purchase or sale
(including predatory price) of goods or services amounts to abuse of dominance.
What is important is that the Act recognizes and distinguishes between “unfair
price”, “discriminatory price” and “predatory price”. Each of these clearly is
capable of having distinct meanings.
Since the interface between
the Patents Act and Competition Act is being discussed, it is important to
understand the position of these legislations on similar or identical or
related issues. For instance, while the Competition Act refers to “unfair
price”, Section 84(1)(b) of the Patents Act (Section 84 being the compulsory
licence provision) refers to a “reasonably affordable price”. How does one
harmonize the interpretations of “unfair price” under the Competition Act and
“reasonably affordable price” under the Patents Act?
Is harmonization necessary
since, as stated in my previous post, Section 60 of the Competition Act states
that the Competition Act shall prevail over all other legislations or provisions
in other legislations which are “inconsistent” with it? Although the Patents
Act may be treated as the “parent legislation” which governs patents and
patentees, Section 60 of the Competition Act ensures that the latter prevails
over the Patents Act.
An exercise in harmonization
is necessary because the overriding effect of Section 60 of the Competition Act
can take effect only when it is established that two provisions are
“inconsistent” i.e. they are in conflict with each other. If, however, harmonization
is possible without distortion of the objects or language of either
legislation, Section 60 must be the option of last resort. So how does one
harmonize “unfair price” with “reasonably affordable price”?
It must be borne in mind that
both “unfair price” and “reasonably affordable price” judge the cost of the
transaction through the prism of the effect of the price on the licensee, as
opposed to the proportionality between the price demanded and the value of the
technology being licensed. In other words, “fairness” of a price may be the
same as its “reasonable affordability”, but it is distinct from “reasonable
price”.
Therefore, it could be said
that both the Patents Act and the Competition Act are in harmony with each
other when they require the cost of a licence to be fair/reasonably affordable.
In fact, so long as there is no conflict between the two requirements, it could
be said that what is “reasonably affordable” under the Patents Act would be
“fair” under the Competition Act.
Having said this, it would be
banal to state that to decide what is unfair or not reasonably affordable, it
may be necessary to first determine what is fair or reasonably affordable,
which probably calls for use of econometrics, and not just wordplay. In
situations like these, the CCI has the power to farm out certain issues, such
as licence fees, for the consideration of and determination by the Controller
General of Patents.
Under Section 21A of the
Competition Act, the CCI could refer the issue of determination of licence fees
to the Controller General of Patents before taking a final call on the issue of
unfair pricing. In the alternative, in certain situations, the CCI may first
record a finding of unfair pricing and then refer the matter to the Controller
General of Patents for determination of a fair price.
The situation discussed in
this post is but one possible scenario. However, the larger point being made
here is that there exists a plethora of options outside of the Patents Act in
patent-related matters, and it would help to consider them in bringing about
the desired outcome, instead of restricting oneself to only the Patents Act.”
