[This piece has been authored by Saumya Mittal, a student at the Gujarat National Law University.]

 

INTRODUCTION

The inter-relation between Intellectual property rights and Competition Law has always been antithetical and is often considered inconsistent within a legal framework. If one wants to get IP rights, then there’s always a chance of abuse of that dominant position. Similarly, suppose competition laws are to be given precedence over IP rights, in such cases, it might result in a lack of incentive for organisations to invest in research and development, thus proving costly for the economy of India. Fortunately, Indian laws have maintained a good balance between the two to some extent, and the loopholes in the same are expected to be filled by the judgements of the HCs and the SC. One aspect that many people are confused about is the jurisdictional issue of Competition Commission of India and IPR, i.e., whether a matter involving a Patent is to be referred to the jurisdiction of CCI or not. The recent judgement of VIFOR International LTD. vs Competition Commission of India has tried to answer this question concerning Pharmaceutical Companies. The same has been analysed here.

 BRIEF FACTS OF THE CASE-

An enterprise had provided some information regarding VIFOR to the competition tribunal, contending that the former had violated specific provisions of section 19 of the Competition Act. Section 19 deals with the inquiry to be held in certain agreements that may be deemed anti-competitive and also determines whether an enterprise has a dominant position in any market sphere. The Informant chose to remain undisclosed via section 57 of the act. The main contention against VIFOR was that the company was providing the drug- Ferric Carboxymaltose (FCM) at a lower price to public procurers and at a much higher rate to individual consumers. They had allegedly denied licenses to third parties for the manufacturing of the drug, thus abusing its dominant position as a patentee by indulging in discriminatory practices.

On receipt of the information, CCI had asked VIFOR to answer specific questions, to which the petitioner company gave no response. On the extension of the matter, VIFOR challenged the jurisdiction of CCI over the case and consequently filed a writ petition in the High Court of Delhi before CCI could respond to VIFOR.

CONTENTIONS OF THE PETITIONER-

The advocate argued that the competition commission tribunal did not have the requisite jurisdiction to hear the case since the matter dealt with a drug, over which VIFOR had a valid patent. Since FCM was licensed by the petitioner and sold and distributed throughout India, the case dealt with the patent holder rights. Thus, the act relevant to the subject was Patents Act,1970. It was also contended that the Competition Tribunal had asked for commercially sensitive information. If disclosed by the petitioner, it would expose VIFOR to criminal proceedings under Article 271 of the Swiss Criminal Code. The article talks about carrying out unlawful activities on behalf of a foreign state. Since VIFOR is a Switzerland-based pharma company, the petitioner gave the plea of the Swiss criminal Code. Keeping in mind these arguments, it was finally contended that CCI exceeded its jurisdiction by taking cognisance of the anonymous information and acting upon it.

Relevant Provisions of Patents Act,1970 that were cited-

The petitioner referred to sections 90, 102, 107 and other allied provisions of the Patent Act.  Section 90 talks about the terms and agreements of compulsory licenses and the license holder’s rights. Section 102 talks about the acquisition of inventions and patents by the Central Government under certain conditions. Lastly, section 107 talks about defences in suits of infringement. Along with these sections, the petitioner referred to section 3(5) of the Competition Act of India, 2002. According to VIFOR, this section won’t restrict someone who’s preventing the infringement of their IP rights.

CONTENTIONS OF THE RESPONDENT

The CCI argued that apprehension of VIFOR regarding the sharing of its sensitive information was baseless since the petitioner could also go under section 57 of the competition act to ask for the confidentiality of the information it was sharing. It was also argued that even though the matter was related to IPR, still, it was pertaining to anti-competitive agreements, unfair trade practices and misuse of dominant position. Thus, through section 19 of the Competition Act ,2002, CCI was sufficiently authorised to take legal action against VIFOR.

Reliance was placed on the decision of the landmark judgement – Monsanto Holdings vs CCI, 2020^[1]. It was held that the jurisdiction of CCI could not be excluded from the matters dealing with abuse of dominance in patent rights, since there was no conflict between the provisions of the Patent and Competition act.

DECISION HELD BY THE COURT-

The High Court of Delhi held that the jurisdiction of CCI was not excluded merely because the subject matter was related to Patent rights. This was based on the reasoning that the case was also about anti-competitive and unfair trade practices in which the petitioner was involved. If the matter had been purely related to the infringement of IP rights or violation of the Patent Act,1970, section 3(5) of the competition act could have been referred to. The High court also stated that it believed that CCI would duly consider the objections raised by the petitioner regarding the sharing of sensitive information.

RELEVANCE OF SECTION 3(5) OF THE COMPETITION ACT, 2002-

Section 3 of the act talks about the prohibition of anti-competitive agreements. To this provision, there is an exception: Sub-section 5. Sub-section 5 states that nothing in section 3 would restrict any person from imposing reasonable restrictions or praying for an injunction to protect his IP rights. Many perceive this exception to oust CCI’s jurisdiction from IP matters.

JURISDICTIONAL ISSUES OF CCI IN IPR MATTERS-

The apparent dichotomy between the nature of IPR and competition law makes one believe that giving jurisdiction to CCI on IPR matters is almost unthinkable and against the healthy competition. Many others believe that giving jurisdiction to CCI is practically impossible. The ones who have a decent idea about the provisions of the Competition Act believe that Section 3(5) of the act gives absolute exclusion to the matters of IP law from the jurisdiction of the CCI. All these assumptions are faulty in some aspects. Yes, section 3(5) does exclude the jurisdiction of CCI in the matters of IPR but only when the case purely deals with the issue of IPR and has no significant interplay with anti-competitive activities. If it can be inferred that the organisation in question was involved in unfair trade practices involving IP rights, the same can be referred to CCI.  It must be understood that by bringing an IPR matter under the jurisdiction of CCI, the law is not adjudicating on the IPR; it’s adjudicating upon the ‘conduct’ of the IPR holder. The concept of the compulsory license is only there to remedy the anti-competitive practices of a patentee and not to protect the patentee from the misuse of his dominant position.

CONCLUSION

Contending that the present judgement was a landmark in nature and has brought absolute clarity to the question of jurisdiction of CCI in IPR matters, would be an overstatement. Decisions like Monsanto vs CCI and Telefonica vs CCI have already laid down the rule regarding the jurisdiction of CCI, and the present court gave the order on similar lines. But, since it involves a major pharmaceutical company, this order shall have a precedential effect over those pharma companies who, in the name of exercising the rights of a patentee, blatantly abuse their dominant position and charge exorbitant prices for their medicinal drugs. This interpretation of Section 3(5) of the Delhi HC would undoubtedly help curb the anti-competitive practices of pharma companies by bringing them under the purview of the Competition Commission of India.

^[1] 2020 SCC OnLine Del 598