In my last 2 posts, I had written
on the interplay between the Competition Act and the Patents Act during the
course of which I had said the following about Section 60 of the Competition
Act:
“What is critical to note is that Section 60 of the
Competition Act states that the Act “shall have effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force”. In other words,
this Act has an overriding effect over all other laws, including the Patents
Act....
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.”
To
this analysis, let me bring in Section 62 of the Competition Act, which reads
as follows:
62. Application of other laws not
barred: The provisions of this Act shall be in addition, and not in derogation
of the provisions of any other law for the time being in force.
Let’s
reproduce Section 60 of the Competition Act to compare the language of both
provisions:
60. Act to have overriding effect:
The provisions of this Act shall have effect notwithstanding anything
inconsistent therewith contained in any other law for the time being in force.
While
on one hand Section 60 proclaims the overriding effect of the Competition Act over
anything that is inconsistent with the Act, Section 62 states that the Act
shall be in addition to, and not in derogation of other laws. What this could
mean is that so long as there is no inconsistency between the Competition Act
and other legislations such as the Patents Act, both statutes shall apply
simultaneously to a situation to which both Acts apply. In the event the other
legislation is inconsistent with the Competition Act, the latter shall prevail.
Therefore,
if “reasonably affordable price” under Section 84 of the Patents Act and “unfair
price” under the Competition Act are not inconsistent with each other, both these
requirements shall apply simultaneously to a patent license or such other
transaction. Simply put, one requirement need not be subsumed in or prevail
over the other. Also, the question as to which of these requirements/statutes
applies first may not be that relevant when both are to be satisfied by the
transaction.
Dear Sir,
ReplyDeleteI am posting a comment just to share that I fail to understand how there can ever be any confusion between these two aspects of Patent and Competition Law.
In my opinion, the fact that "reasonable price" under Patents' Act refers to that available to consumers and is only only of the requirements for grant of a CL, puts it on an altogether different footing from "unfair price" which is a concern for goods/ service providers. Hence on that premise itself the two terms are incomparable.
The tests for establishing both would be separate and both look at different results. While one looks at CL to be given for affordability/availability etc. of a patented product, the other aims towards a balanced market (homogeneity)avoiding dominance of one player.
So, where "unreasonable price" is a "cause" for C. License, the said license be "fair" is what Competition Act demands.
All this I say to the best of my knowledge and understanding. Contradictions are welcome.
Congratulations on the informative posts that you share.
Best Regards,
Sneha Sharma
Dear Sneha,
DeleteThanks for the comment. I was in the process of putting up a follow-up post which would have addressed your query, however let me immediately address it.
On first blush, one would be tempted to agree with you, however the comment seems to proceed on the assumption that “public” under Section 84(1)(b) has to, under all circumstances, be construed as a reference to the “end consumer”, and can never include a service provider. I am not sure such an assumption is warranted because who is the “end consumer” with respect to a given a patent/patented product is an issue that deserves more than a cut-and-dried approach. For instance, if the patent is over a technology that addresses issues relating to base station equipment, who would be the end consumer of the patent? The service provider/telecom operator who owns the base station, or a mobile phone user who consumes the service provided by the base service provider/base station owner? If one were to accept your position, it would mean that no service provider who uses a patented technology can seek a CL citing only Section 84(1)(b).
The short point I am trying to make is that it appears unreasonable to contend that every patented invention is and must be capable of being directly consumed by the end user. This cannot be so because the service which is being made available could be the result of several patent licenses at work, not all of which can be directly consumed by the end user of a service. Consequently, in areas such as the telecom industry, the service provider who is the consumer of the patented invention which is being used to provide a service to an end user, may be treated as “public” under Section 84(1)(b). Therefore, there do exist situations where the service provider can legitimately invoke Section 84(1)(b) of the Patents Act and Section 4(2)(a)(ii) of the Competition Act. In other words, the price at which the patent license is being offered to the service provider must be “reasonably affordable” and “fair”, assuming they are not synonymous.
In the alternative, I would like to draw your attention to Section 84(6)(iv) which suggests that there is necessarily a connection between the terms on which a license to a patent is made available and “reasonably affordable price” under Section 84(1)(b). After all, the price at which the patented technology is being made available to the base station owner could affect the price at which his service is being made available to the mobile phone subscriber. Viewed even through this angle, it is still possible for a service provider to raise Section 4 of the Competition Act stating that the terms of the license and the license fee are unfair, thereby leading to a situation where the price of the service provided to the consumer is not reasonably affordable to the consumer.
Hope this helps resolve your confusion.
Bests,
Sai.
Sneha, I also notice that your comment seems to be based on the premise that since the objects of the statutes are different, there cannot be an overlap with respect to a specific transaction. Could you please explain the basis for this opinion? Isn’t the opinion based on a reductionist approach, when express provisions of the statutes seem to envisage significant intersections? If unfair price is specifically provided for under Section 4(2)(a)(ii) of the Competition Act, would it not include the cost of a patent license? If yes, wouldn’t license fees be equally subject to the rigours of Section 84 of the Patents Act? If yes, why should the so-called objects of the statutes prevent simultaneous application when their express provisions do not exclude such application? The scope of outcomes could vary because of the powers under those statutes, but how does that suggest that in a given situation with respect to the same transaction both statutes are mutually exclusive? I think we should do justice do the language of the provisions instead of proceeding on pre-conceived notions of what they promote or attract.
Deletetypo in the last sentence of the last comment. I meant do justice *to the language of the provisions.
DeleteAnd by the way, a "balanced market" is not a "homogeneous market". In fact, a heterogeneous market is a more competitive market with lesser scope for dominance, which I think is the object of the Competition Act :-)
Delete